Madam President, Madam Vice President, Members of the Council, Citizens of Richmond, I address you today regarding the Fiscal Year 2011 budget for the City of Richmond. As I begin, I'm reminded that it was just one year ago on March 26, that I presented my plan to close what was then a $25 million budget gap. I stated at that time that our theme for the next two years would be "Making Efficient Decisions in Challenging Economic Times."
I want to thank you for the opportunity to work in collaboration with you over this past year in meeting extraordinary financial challenges. It is worth noting that we went through that initial budget cycle without interrupting core services or initiating layoffs. Going forward, it is clear that communication, cooperation, and collaboration are still the strong principles that we must operate under. Our present day challenges call for a coordinated effort to how our government operates.
As you all know, a recession has a domino effect. It is obvious that the fiscal relationship between local governments and the Commonwealth has changed. What's more, local budgets are continuing to trend downward in revenue collections in many areas. Property taxes and sales taxes - two primary sources of revenue -- are relatively flat or decreasing. Expenditures are going up, primarily as a result of inflation, health insurance costs and pension costs.
What is clear to me is that we cannot tax our way out of this, nor can we only cut our way out of these financial challenges. We must implement new strategies that allow the city to weather the storm while positioning us for stronger and more sustainable growth.
The Fiscal Year 2011 general fund approved budget, from last year’s City Council action, was $637 million. With anticipated revenues of only $626 million and expenditure estimates of approximately $660 million, including decreases in state funding, we have a $34 million gap.
Today I am presenting what I call our "economic recovery strategy." This is our budget plan to meet the continuing challenges head-on without compounding our situation or impeding our progress. It is largely an outcome-based plan, which does, when necessary, make the difficult and unpopular decisions that are needed to improve operations.
I want to underscore that we are using sustainable revenue strategies and not just one-time tactics. We want to budget on solid ground; making the necessary sacrifices, streamlining operations and initiating strategic investments. This budget focuses on re-deploying resources and re-programming agency budgets so that we can lay the groundwork for future growth.
While we were not able to fully use an outcome-based budget process this year, we are offering you a sample of the process we'd like to fully engage in years to come. Policy papers included with this budget are related to the following:
1. A Well Managed Government,
2. Family and Individual Economic Stability, and
3. Economic and Community Development
This approach to outcome-based budgets is in line with our effort to grow the city by design and not by default. This is a major change where we budget for outcomes, and not simply line-items of how to spend our money.
Activity under these three anchor issue areas will include:
Tier One - Triple A Bond Strategies
Revenue and Cost Avoidance Strategies
Investment in Children, Youth and Families
Attracting and Retaining Businesses
As well as
Tier One - Triple A
One of the most important indicators of our approach to budgeting and fiscal accountability is the City's bond rating. The City's bond rating is vitally important to our ability to borrow money for important capital projects--and at lower interest rates. Perhaps most importantly, a strong bond rating is a clear signal to businesses that our city is strong financially and a great place to do business.
This budget reflects the good government strategies that are necessary to move the pendulum in the direction of a Tier One - Triple A bond rated city. In this budget, we close the $34 million gap without the quick and easy approach of across–the-board cuts. Instead we are proposing targeted cuts, setting priorities, and re-focusing our efforts.
Last Fall, we met with bond rating agencies in New York City about these very things. We've kept them informed about our strategies and our priorities, and as a result, they have reaffirmed our bond ratings. Such sound financial management has to remain the rubric of our decision-making and we must continue building upon our core strengths. Our outcomes-based budgeting approach will help us in this process.
Again, we must focus on growing our way out of financial problems rather than cutting services or increasing taxes.
Revenue and Cost Avoidance Strategies
We are presenting a structurally sound budget that contains no one time fixes for ongoing issues.
Rather, we are presenting a budget for a well-managed government…a budget that is not balanced on the backs of those most in need or on the backs of City employees.
Running a top-notch, well managed organization grounded in accountability and strong financial management means that we will have an operation that --
Serves the community
Runs the business efficiently
Manages resources appropriately
Through the diligent work of our leadership team and financial professionals, I am presenting a budget that does not call for furloughs, that will not require an increase in heath benefit premiums, and that fixes some long-term standing operational problems. This budget also holds the line on our non-departmental allocations, and includes investment in our infrastructure.
Our Fiscal Year 2011 plan includes:
Instituting semi-annual real estate tax collections
Implementing a comprehensive tax revenue compliance plan (to improve collections)
Completing the MUNIS system implementation
Holding education funding level at FY 2010 levels
Jointly purchasing health benefits with Richmond Public Schools
No reductions in police or fire services
Limited and targeted layoffs (we have only 11 layoffs in this budget)
Increasing annual funding for pension liabilities
Restructuring the Broad Street Community Development Authority (CDA)
Updating the City's debt management policy
These actions save or generate a total of $10.5 million.
Semi-annual real estate tax collections is an approach that will lessen the burden on taxpayers. Instead of requiring one lump sum payment, the amount due will be split into two payments - due five months apart. Our present method of collecting one annual payment – and at the end of the budget year - is no way to run a business. This would be like a family getting paychecks once a year – in December.
The City's cash flow is a problem, and we have to borrow mid-year, every year just to meet payroll and the costs of normal operations.
Spreading the payments out will result in a saving of $1.7 million, ongoing every year, because we will no longer have to borrow money and pay interest on those funds. This is a strategic move for our city -- saving $1.7 million a year, every year, equates to the cost of an elementary school in 15 years for example.
These are the kind of well-managed government decisions we must continue to make.
Improving our tax collection strategies is expected to result in revenues of approximately $2.7 million.
Jointly purchasing health benefits with the School system puts us in the enviable position of not having to increase health insurance premium payments for workers. It also provides savings to our budget as a result of moderating inflationary increases. We expect to save more than $3 million from this partnership with schools.
This budget also assumes that the Schools’ print shop will be combined with the City's, and that grounds maintenance will be performed jointly.
And we have already begun discussion in other areas where we can work together with the school systems, like fleet maintenance, procurement and possibly combined financial systems.
These are some of the benefits of being able to work together with schools.
Additionally, we save another $2.5 million by restructuring the Broad Street Community Development Authority. This is because we can assume their assets and refinance their debt at a more favorable rate.
You'll see more action steps and outcomes for a well-managed government in our budget document.
Investment in Children, Youth and Families
In this budget we invest in the health and stability of our families by developing a strategy that will lead to increased quality early learning opportunities for children from birth through age 5. We believe that all children can learn and must be ready to learn when they enter school. We must set a strategy that allows us to begin reaching our children before they enter school.
We also take an intentional approach to youth development to ensure that our young people can develop into healthy adults. We strive to create meaningful work opportunities for young people through our Summer Works Initiative and we promote a focus on healthy youth as they grow into young adulthood.
I want to point out that the seed money that we put in this budget for our Summer Works Initiative is existing funding re-programmed to establish a comprehensive approach to engaging our youth. We are going to need the support of the business community, and our faith-based and non-profit partners to fully succeed with this effort.
Keeping young people on the right track and helping them develop into future leaders is a strategic investment for our City. If a youth ends up in detention, we pay in excess of $7,000 per month to detain that youth. This summer program is only asking for an investment of twelve hundred dollars for an eight week period; and the return on that investment will ultimately save our City money, but more importantly, save a life.
It is important to note that we do not forget our elders and residents who have disabilities; their needs will remain paramount in our planning for a better life for all Richmonders.
Also, we recognize that the non-profit sector is a critical partner in providing services to the community. Many organizations enhance the quality of life in the City of Richmond and the region. Because of the importance of these organizations, we are holding funding at 2010 levels for our Non-Departmental organizations.
We will, however, begin instituting performance measures to ensure that the City is receiving the intended return on investment of taxpayer dollars. Just as we are doing with our City operations, we must also assess the goals and outcomes of the outside organizations we fund.
We also believe that greater collaboration may be called for among and between the funded entities. Tools and guidelines will be developed so that future funding decisions can be more easily anticipated, and organizations can work with us on our growth-by-design strategies.
Attracting and Retaining Businesses
Our City has one of the highest poverty rates in the state – at 27%. Yet we know that the only way we are going to have a great region is to ensure that its core is strong and healthy. The City of Richmond is this regions core.
We have to take a long term view on how we strengthen our core and position ourselves for future growth. We cannot continue to do the same things and expect anything other than the same results. It is time to set things in motion that will bring about real change.
Economic development is an essential component of any community's vitality and well-being. To ensure a sound quality of life for local residents, we must pursue a comprehensive set of programs that will build upon the city's competitive advantages to create and retain jobs, stimulate investment in neighborhoods and businesses, and generate the revenues necessary to fund vital municipal services.
We are embracing economic development as a core, foundational service.
Steps that I have taken along these lines have already been evident in the reorganization that was initiated last fall. By combining two integral functions, our Department of Economic and Community Development is positioned to operate in a more comprehensive fashion. We have already taken strategic steps like the GRTC Cary Street Property acquisition plan and the Combined Economic Development Study (CEDS) - a citywide planning process.
In this budget, we invest in both retaining and attracting businesses through a plan to develop commercial corridors as catalysts for economic and neighborhood development. These corridors include Nine Mile Road/25th Street in the East End, Jefferson Davis Highway on the Southside, the Boulevard at the edges of the Fan and Museum Districts, Hull Street in the Manchester area, and Brookland Park Boulevard on the Northside.
We will provide tools that will help us grow small and minority-owned businesses, as well as other Richmond based under-utilized enterprises. I propose to fully fund existing business development programs for the first time in several years. I also propose to establish new funding mechanisms, like a revolving loan fund, to support entrepreneurship and business development for local enterprises.
These changes will help our City and region recover from this economic downturn, and emerge strong and more vibrant.
Infrastructure Investment (CIP)
Lastly, I want to emphasize the importance of addressing the infrastructure needs of the city. During economic downturns, governments often make the mistake of cutting corners with maintenance, and not investing in infrastructure.
I do not intend to make that mistake.
For fiscal year 2011, our Capital Improvement Plan (CIP) totals $90.2 million. The CIP five-year plan totals some $351.62 million and includes few new projects.
We provide an additional $11.1 million for improvements to roadways, which includes paving, sidewalks, trees and bridges. We have more than doubled the amount of money in the budget for these types of projects and you will see a visible difference. In fiscal 2011 alone, we plan to pave over 150 lane miles of road in our City.
We have also budgeted for improvements to major arterials such as Broad Street, Midlothian Turnpike, Hull Street, Belvidere and Jefferson Davis Highway.
In addition, this budget continues our commitment to the construction or renovation of four schools. We will break ground on two elementary schools this calendar year.
School projects have been maintained at a total of $150 million. While this is less than revised figures discussed last fall, strategies to keep costs down have decreased estimates, back in line with earlier amounts.
I want to close out by noting that this budget is only the first step. We've set an internal objective of achieving at least another $3 million in additional operating budget savings by January 1, 2011. We are continuing to mine for ideas and opportunities, including those ideas that are being processed through our Common Cents program and through management reviews and audits.
What is clear to me is that we have an opportunity to work together in building a better Richmond. We have an opportunity to change the way city government delivers its services. If we work together, and look for the best ideas and strategies, lead with courage and integrity, I believe we can make this time of economic challenge work for us and not against us. I believe we can continue to succeed at "Making Efficient Decisions in Challenging Economic Times."
Members of my team are here to discuss in more detail any area of the budget that you may wish to explore. I want to take a moment to commend my team on their hard work in developing this budget, especially Chief Administrative Officer Byron Marshall, Deputy CAOs Marcus Jones, Chris Beschler, Peter Chapman, and Carolyn Graham, and Budget Director Rayford Harris. Their hard work is reflected in the document before you today.
I look forward to any questions that you may have tonight as well as to working with you in the coming weeks as we finalize our budget for Fiscal Year 2011.