Sustainability + Resilience

Transcription

1 Sustainability + Resilience Fredericton s Journey By Tina Tapley

2 The City of Fredericton, New Brunswick, has managed to not only see its way successfully through the economic turbulence of the last seven years, but to achieve a solid and stable financial footing. City officials understood the severity of Fredericton s infrastructure deficit in 2009 and created a long-term financial plan that provides the foundation for a sustainable future. Smart financial planning and budgeting have allowed Fredericton to overcome problems that have continued to plague other municipalities. The city s financial stewardship role includes three main responsibilities: 1) balance the annual budget; 2) create and manage financial sustainability, which involves the creation of a long-term financial plan; 3) maximize the value citizens and customers receive for the money spent. Taxpayer dollars should be turned into results that are valued by the community. ADDRESSING THE CITY S CHALLENGES From the outset of this undertaking, the city s goals were to move toward sustainability and, from there, the resiliency to withstand tougher financial times while gaining the flexibility needed to balance growth during financial boom periods. At all times, the city focused its efforts on ensuring that money was being spent on the right things at the right time, while remaining affordable to the taxpayer and avoiding waste. Existing service delivery needs had to be met without compromising the future financial stability or the future growth of the city. The initial steps, back in 2008, were undertaken to comply with new accounting standards set forth by the Public Sector Accounting Board (PSAB). PSAB set forth independent accounting standards that were used to help determine the current state (and future state) of assets available to municipalities. The City of Fredericton was the first municipality in New Brunswick to comply with the standards, using the pay-as-you-go asset information to determine the city s infrastructure deficit and its long-term infrastructure funding plan. This information fed into a city financial health assessment and became the groundwork used in creating a long-term Smart financial planning and budgeting have allowed Fredericton to overcome problems that have continued to plague other municipalities. financial plan. Strategies were then formed to improve asset management in the future. The city created a financial forecasting model in 2009 as part of a long-term financial plan, and it used the model to help determine the infrastructure deficit. The long-term financial plan and infrastructure funding plan were then presented to the city council, which adopted them in A 2012 corporate restructuring included the first staff layoffs in Fredericton s history, part of a workforce reduction strategy to bring personnel levels back to a sustainable level. Immediately after the reorganization, the city started implementing Lean Six Sigma principles. Fredericton s tax base began to decrease, and between 2013 and 2015, the city s Provincial Community Funding Grant was cut by 75 percent, resulting in a loss of 4.5 percent in total revenue. Municipal costs were quickly outpacing revenue, resulting in an unparalleled fiscal operating gap. The city s lack of a long-term financial plan had enabled unsustainable personnel growth during the previous economically robust years. This situation was compounded by high arbitrated settlements from public safety wage contracts. The city also faced a $1.38 million infrastructure deficit and the largest pension deficit in its history: $57 million. The city has been able to increase its yearly savings nearly three- to four-fold between 2012 and Just between 2012 and 2013, yearly savings grew from $562,985 to $2,079,952 because of efficiencies achieved through Lean Six Sigma and budgeting changes through the city s budgeting results program, which began in LONG-TERM FINANCIAL PLANNING The city has met its challenges by putting strategies and tools in place that filter decision making through the lens of long-term sustainability. The commitment city leadership has displayed to ensuring a sustainable community has required fortitude, perseverance, and some short-term sacrifice, as well as patience from the mayor, city council, and city staff. October 2015 Government Finance Review 31

3 1. Defects that require rework and corrections. 2. Overprocessing (e.g., checking on tasks that should simply be done the first time). 3. Waiting (the idle time created when employees wait for invoices, copiers, or materials). 4. Underusing employee talent and ideas. 5. Transport (moving anything, including documents and customers, to different offices or desks when it isn t necessary). 6. Excess inventory, or backlog (e.g., the sum of all tasks that are waiting to be processed). 7. Excess motion (e.g., tasks that require employees to walk from one department to another). 8. Overproduction (e.g., producing reports that are longer and more elaborate than the user needs). Creating a long-term financial plan required the city to set parameters for each individual spending bucket, including operations and infrastructure reinvestment. As part of creating the financial plan, the city also determined parameters for funding and financing (including the project types best suited for debt financing); debt affordability and management; and capital prioritization and investment (including pay-as-you-go capital spending). It also considered other external funding sources. The financial plan also helped in managing both citizen and council expectations, and monitoring and measuring affordability. Finally, the plan helped forecast and consider what-if scenarios to guide budgetary decision making. The city s long-term financial plan takes an extended perspective on accountability. This emphasis is complemented by asset management, which helps focus accountability efforts on optimal use of assets for delivering services. The new budgeting process provides community outcomes and service-based level of accountability. LEAN SIX SIGMA Lean Six Sigma is all about streamlining and reengineering processes to make them more efficient. This methodology is based on improving processes collaboratively through the systematic removal of waste. Waste comprises eight areas: Cutting the waste out of government processes streamlines day-to-day activities, which leads to cost savings and improved customer service. Staff members can focus on activities that add value, which is obviously a better use of their time. Successfully implementing Lean Six Sigma created a cultural shift throughout the city a shift from working in the business to working on the business. This continuous improvement mindset is now ingrained in how staff views their day-to-day functions. Another tremendous benefit of Lean Six Sigma is the fact that employees at all levels in the organization feel more engaged and empowered because they are suggesting and implementing ways to improve the processes they do every day. Becoming more satisfied with their work not only helps them better accomplish their tasks but also helps them brainstorm ways of becoming more efficient. Continuous improvement has become a core value of the City of Fredericton. BUDGETING CHANGES Being accountable for decisions and actions is one of the primary motivators for improvement, a principle the city put to the test in its budgetary plan. Layoffs and workforce reductions were an inevitable part of the process, unfortunately. Once decision makers understood the fiscal operating gap, personnel costs, which had ballooned during the previous decade, needed to be right-sized as quickly as possible. A corporate restructuring was completed in 2012 with some 32 Government Finance Review October 2015

4 lay-offs. Then the city implemented a workforce reduction strategy with the goal of reducing personnel costs by 8 percent but only through attrition (retirements) and the chief administrative officer committed to making sure there would be no future layoffs. Of course, the workforce couldn t simply be cut without affecting service delivery; the processes had to be made more efficient, creating human resource capacity. The city achieved a 6 percent reduction (42 positions) from 2013 to 2015, primarily through its implementation of Lean Six Sigma principles. Taxpayer dollars should be turned into results that are valued by the community. Each unique goal was based on the same basic principles. They all had to be: 1) fact- and evidence-driven; 2) customerand citizen-focused; 3) sustainable; and 4) focused on spending the right money on the right things at the right time. Budgeting for results is all about ensuring that this vision can be achieved by aligning services with the intended results. Doing so involves more than simple budgeting; it also requires a long-term vision for the community. Day-to-day processes must be linked with services that are, in turn, aligned with the results the community wants. The city s goal is to become more effective at achieving the vision the community wants for itself. Budget costs must be aligned with each result area by determining the cost of services tied to each result. Exhibit 1 outlines the way Fredericton structured the basic steps in the budgeting for results process, beginning with citizen Exhibit 1: Fredericton s Version of the Budgeting for Results Process Citizen Feedback Staff Update Results Document with Standing Committee Changes Feed into Budget Process and Staff Align Services with the Results Eight Critical Result Areas Staff Provide Service Performance Updates to Standing Committee Council Reviews Budget by Result and Directs Funds Align Budget Costs Results Documents Used by Council to Determine Focus, Priority Areas Cost Services in Each Area Incorporate Results Document in Standing Committees October 2015 Government Finance Review 33

5 feedback about how the government is doing in various service areas. Council standing committees in each area incorporate the information into results documents, the core element that guides the city s longterm strategy. Throughout their day-to-day operations, staff members collect service performance measures and provide service performance updates to a council standing committee, which adds feedback and input from senior staff. Eight result focus areas come from this input: corporate governance, civic engagement, economic vitality, environmental stewardship, livable community, mobility, public safety, and sustainable infrastructure. The city council uses the results documents to determine what areas it will focus on when setting priorities for the next 12 to 18 months and to review the budget and direct funding. Ultimately, this process culminates in eight requests for results one from each of the result focus areas an invaluable part of the budgeting for results program. The city s goals were to move toward sustainability and, from there, the resiliency to withstand tougher financial times while gaining the flexibility needed to balance growth during financial boom periods. Five elements go into this request: 1) a description of the key outcomes and results that the community wants to achieve; 2) a list of all relevant policies, studies, and strategic plans; 3) a demonstration of the factors that make up the key components in determining the desired outcome; 4) a list of key indicators that measure what success is and explain to both the council and community how well the city is achieving the program result; and 5) a description of priorities and strategies that can be used to develop services, along with goals and criteria for each. Exhibit 2 provides an example of how budgeting for results might work. The intended result is at the top statement: I want my city to have safe, accessible options for movement of goods and people in and around my community. In a practical sense, this means that the focus should be on a public transportation system that is safe and usable for the largest possible number of people, and also sustainable over a long period of time. 34 Government Finance Review October 2015

6 Exhibit 2: Budgeting for Results Mobility Example I Want My City to Have Safe, Accessible Options for Movement of Goods and People in and Around My Community Maintain and Enhance Pedestrian and Active Transportation System Maintain and Enhance Vehicle Movement Systems Provide Public Transportation Options Coordinate and Control Outreach Provide a Safe and Efficient Network of Sidewalks, Trails, Paths, and Bike Lanes Provide a Safe and Efficient Roadway Network Provide a Public Transit System Coordinate with External Stakeholders Promote Transit Snow and Ice Control Snow and Ice Control Provide Paratransit Control Interruptions to Networks Encourage User Groups Identify and Address Deficiences and Gaps in Connectivity Manage Parking Regulate Taxis Control Access Encourage Active Transportation Control Traffic Air Access Integrate Design Communication Address Deficiencies Enforcement Traffic and Pedestrian Safety Roadway Illumination Contributing Factors: Mobility October 2015 Government Finance Review 35

7 Each key area (shown in red) includes the factors that play a role in achieving the desired result (shown in green). For example: To help with community outreach, it is important to consider communication, pedestrian safety, and the promotion of transit. Exhibit 3 breaks this example down further. Strategic objectives can be determined from the first key area, maintaining and enhancing pedestrian and active transportation systems. Considering the factors that contribute to this, the following objectives might result: studying pedestrian and active transportation gaps, making key connections that can make the active transportation network more comprehensive; Exhibit 3: Strategic Objectives Maintain and Enhance Pedestrian and Active Transportation System Provide a Safe and Efficient Network of Sidewalks, Trails, Paths, and Bike Lanes Snow and Ice Control Identify and Address Deficiences and Gaps in Connectivity Contributing Objectives: Mobility Strategic Objectives Maintain and Enhance Pedestrian and Active Transportations System 1. Perform pedestrian and active transportation gap survey. 2. Make key connections in the network in order to provide a comprehensive active transportation network. 3. Include environmental and recreation corridors with parks, bikeways, and on-street facilities that work together. At all times, the city focused its efforts on ensuring that money was being spent on the right things at the right time, while remaining affordable to the taxpayer and avoiding waste. including recreational corridors with streets, bikeways, and parks, and creating a more complete network. This leads to service offers, which include five primary outcomes: 1) a description of how the service links with the request for results and what outcomes are being achieved; 2) a service agreement, which describes exactly how the service will be provided, including a measurable level of output; 3) service performance measures, which helps demonstrate the Lean Six Sigma efforts and improvements that are being made; 4) a budget request for this service, which details the revenue and expenses involved in providing it; and 5) a results summary, which provides the top-down view of how the activities and output associated with the service achieves results, and which measures are used to monitor performance. Exhibit 4 shows what a results summary looks like, linking day-to-day activities and their output to results in the community. Ultimately, the final budget presentation is meant to be a collection of service agreements that guarantee outcomes that result in value for the citizens. This is a big cultural shift from the way the city traditionally budgeted, and it requires vastly different information from what is typically seen in the budget approval process, including the cost of providing these services to the public (e.g., direct operating costs, corporate overhead costs, internal service costs, and assets used to deliver services) and the net direct revenue. CONCLUSIONS Fredericton adapted many GFOA best practices to its specific circumstances, creating a methodology that works well for the city and provides a clear vision. In addition, every successful change was made possible by consistent communication, education, commitment, and buy-in from the mayor and council, and city staff. Combining Lean Six Sigma and budgeting for results has been essential to creating financial sustainability and resiliency. On the one hand, Lean Six Sigma provides the tools necessary to streamline processes, which make services 36 Government Finance Review October 2015

8 Exhibit 4: Results Summary Narrative Summary Performance Indicators Reporting on Past Results Assumptions/Risks Strategic Alignment Safe, Accessable Options Percent of residents for Movement of People who use alternative 3% 1% 1.5% 1.8% 2.5% and Goods modes of transportation Maintain and Enhance Active Transportation System Service Agreement Provide a safe and efficient Kilometers of bike Residents are willing to network of sidewalks, trails, lanes, sidewalks, use AT network as an paths, and bike lanes and trails maintained alternative mode of 400 kilometers transportation Identify gaps in connectivity Number of safety Sufficient capital funding and address safety deficiencies issues and network to make new connections gaps identified and address safety issues Service Performance Focus on intersections Number of traffic Police enforcement and that have the highest and pedestrian/ public education that number of collisions cyclist collisions changes driver behavior Sweep bike lane for dirt Complaints on 15 Residents feel safe and fix potholes bike lane quality using bike lanes Repaint faded pavement Quality of pavement Crosswalk facilities and markings at crosswalks markings bike lanes are the right and bike lanes type and design more efficient. On the other hand, budgeting for results captures the vision that the services strive to achieve. Neither process would be as effective without the other. If a service doesn t contribute to achieving an outcome that s valued by the community, then the most streamlined and efficient processes within that service will not change the fact that money is being spent on the wrong service, and the community is therefore not receiving the value it should. Likewise, no matter how good the government s vision may be for services, affordable results can t be achieved without efficient processes. Fredericton has been able to attain its financial goals and maintain a Fredericton adapted many GFOA best practices to its specific circumstances, creating a methodology that works well for the city and provides a clear vision. level of financial sustainability and accountability, leading to resiliency during the tougher financial times. The city now has a firm financial foundation to handle whatever may come in the future, proving that challenges can be overcome through passion, vision, and leadership. y TINA TAPLEY is director of finance and city treasurer for the City of Fredericton, New Brunswick. Before going to the city in 1998, she was in private practice with the chartered accounting firms Pricewaterhouse Coopers and Grant Thornton. Tapley is a member of GFOA s Committee on Canadian Issues. October 2015 Government Finance Review 37