My thoughts on a resident's "Plan For A Fiscal Responsibility Review for Pepper Pike"

Late last Tuesday evening (8/17/10), I received an email from a resident that had an attached letter and explicitly asked for a response to the information in the attached letter.  The attachment included ideas related to what the letter termed a "plan for a fiscal responsibility review for Pepper Pike."  I spent the next day reviewing the letter and placing my responses into the letter.  The resulting response document, which I sent back to the resident late in the afternoon of 8/18/10, is the bulk of this blog post. 

I consider this to be a dialogue, not any kind of definitive thing, but rather a continuation of the conversation that I would say the resident's document seeks to begin. I am as eager if not more so (as many of you know) to move forward with as many actionable ideas as possible, in as timely and responsible a way as possible. I encourage you to leave comments here, email or call me to keep that going.

As a side note, earlier this week, a different resident asked me if I felt that residents getting involved was a pain (this wasn't the first time I've been asked this!).  I smiled, paused and then said that I don't think anyone invites resident input more than I do and I take all-comers. I view it as my job as a Member of Council, elected by the voters, to integrate all input.  Much like prosecutors do not get to pick the victim, I do not get to pick the residents.  I am, however, grateful in particular for every single resident who takes the effort to voice their opinion.  No one has to agree with me, and I do not feel bound to agree with any one resident. I was not elected to agree with any one resident.  I was elected to serve the City which is composed of nearly 6,000 different individuals.

Here is what I sent back to the resident as well as to my Council colleagues, Mayor Akers and the City's finance director.

*** PRELIM NOTE FROM JILL: The red font reflects my way of highlighting the key points as if in an outline format. The text in purple font reflect my questions, comments, concerns.  Thank you very much for the time you’ve put into this.  There’s no question that if my request to do a community survey had been approved, we’d be well on our way to have a great deal of this information but with still many more questions to be answered.  To have resident support to pursue this kind of review is instrumental in getting it done, in my opinion. So again, thank you on that count. I am an editor who knows few bounds so please know that none of my commenting in red or purple is personal or with any agenda other than to clarify, improve upon, tighten and operationalize what you’ve included here.  The most major omission I see that I would want you to think about as you read my comments is a definitional section.  There are a number of terms in here that will need to be defined so that we have common understanding – because I believe that is in fact where we – as a city – are struggling.  What you mean and what another resident thinks of as “basic fire service” may not be the same, truly.  We have got to spell it out.  This takes time, but it is necessary and will prevent wiggling later on.  Anyway – that’s just one example – there are others throughout.

When resources are plentiful few organizations are able to consistently maintain focus on cost discipline and cost effectiveness. So it has been with Pepper Pike in recent years. But sustainable improvement to Pepper pike’s financial condition is not achievable with ad hoc or piecemeal quick fixes but instead only with a more comprehensive review of what Pepper Pike is and what it can be in a new and permanent era of limited resources.

So this letter outlines a plan for a fiscal responsibility review for Pepper Pike. I am not so ambitious to propose that I have the answers but, having been through fiscal crises before, I do think I have the right questions. If approached objectively and systematically this plan will:
1.     inform us whether [PP has an inherent revenue problem or only issues of planning, management & execution], and  
2.     to what extent, Pepper Pike has an inherent revenue problem [or only issues of planning, management and execution.]
VERY VERY likely that it is ALL these things given what residents desire, prefer.  To assume that we HAVE been overpaying and HAVE been spending more than we NEEDED to is not a place to start – but maybe you need to list out YOUR assumptions behind this plan’s mission.

At its heart, the City is the equivalent of a service business -- providing to its citizens, inexchange for taxes, a bundle of services. So we should start with this -- a bottoms up review of
1.     what services are being delivered by the City,  
2.   who is delivering those services and  
3.     how those services are being delivered.
 To be successful such a review must be
1.     done with fresh eyes,
2.     a willingness to challenge every historic assumption and  
3.     a refusal to accept “because we have always done it that way” as an appropriate rationale. [how is this different from #2]
The review must be done with [no entrenched biases except one – this is actually three objectives, not sure it’s a bias --] a firm objective of determining:  
(i) which services residents value and to what extent i.e., rank order of the services 
(ii) which services residents are willing to pay for and how much, esp. relative to each other;  
(iii) where do (i) and (ii) overlap and  
(ii) the most cost effective manner of delivering those services that residents value enough to consent to pay for them at the level they’re willing to pay for them that the City can afford.
In the business world such reviews are not a matter of choice but are instead a matter of survival. Private sector companies rarely have the option of simply raising prices (increasing taxes) – so they must operate efficiently and deliver good value. If they don’t, their competitors will. While there are many differences between City government and private business, when it comes to cost effective delivery of services the City can learn some important lessons from the business world. 

Any cost savings that can be achieved from this exercise can, in turn, be a resource for reinvestment in City services.  Really? Not a return to the residents in some way?  Where is the part of this that provides for the fiscal solvency of the city, i.e., having a surplus of any size? Is that to be considered a “service” or no? Where do you see this review taking overhead into account/cost and at what level (i.e., I know you’ve indicated to the newspapers that you think the share of the revenue going to personnel is too high – do you have guidelines for that? I think it would be mandatory to investigate that in this review).

The following is an outline of steps I read this more as questions to be asked and answered that should be undertaken:

1. Services.  
1.     Do residents want and value (and are they willing to pay for) all of the services now being delivered by the City?  

2.     Is the City staffed, equipped and paying for things that few residents value or that few utilize? Be careful with the “few utilize” – demographics change, that’s part of why we are where we are with the cost being borne disproportionate to the services available and the raw numbers of individuals who may use something – does that raw number alone (utilization) make it something worth eliminating?

These are fundamental questions that must be the foundation for a fiscal responsibility review. New services (and costs) are not an option (because why?) and thus analysis requires an inventory of the activities/services now being provided by  
i.     each City Department and, in some cases,  
ii.     by individual City employees.

While few would argue with the need and value of well delivered core City services [this is NOT a normed phrase and we know this based on the different ways in which people view the “extras” police do for us as well as services like rear-yard pick up – some DO see those as core, and as part of something being delivered well – clearly we know that not all residents feel the same way – so we must get a common set of definitions for these phrases, they are NOT common at this point, in my opinion] like basic again, what is basic? We must spell it out for everyone so we have a common understanding when people are being surveyed police and fire, there may be other City services that could be eliminated or reduced with little or no loss in value to City residents.

Unless this activity survey is undertaken, there is no basis on which to judge whether there are many or no services that can be eliminated. Everything else in this review plan is driven by getting this “valued services” question right.

[Before Review Recommendation – or is this really a demand/ultimatum?]
One “service” that could and should be eliminated immediately is any plan now or in the future to proceed with the Master Plan municipal campus and new police station. Whatever circumstance may have existed to justify or pay for this Plan, that circumstance is now gone and will not return. Must apply your analysis to this assertion: on what basis are you saying that the circumstances are now gone and will not return?
1.     As a commitment to fiscal responsibility the Mayor and Council should publically and permanently terminate the Master Plan and,  
2.     to show a firm commitment to this termination, sell (at the right time) the excess land with the proceeds put into a rainy day fund.

Please explain why these two recommendations is not subject to 1) the objective and systematic approach you recommend for the review of everything else and 2) the results of what the review you’re recommending in #1 might imply.

2. Regionalism / Outsourcing. 

With an understanding of what services the City should be providing [I would argue strongly that what residents desire and are willing to pay for may or may not be the same as what the city should be providing nor would it include necessarily what we are mandated by state or other law to provide that, again, residents would rather – I am sure in some instances! – pay for],  the next question is who should provide those services:  
1.     City employees,  
2.     Outside contractors or  
3.     a regionalism cooperative. Would need to be defined

For some City services where there is a high level of value derived from or would this be better phrased as “where there is a high demand for” or “great need for”? (i) face to face resident familiarity/interaction, (ii) a high degree of professional skill and (iii) the need for accumulated City knowledge, then in order to maintain a high degree of control and quality, City employees may be the best choice to perform these services. Call these “Core” services.  Hmm – not sure – there seem to me to be plenty of services for which these things would be true but that could be provided at a cost savings if NOT provided for by city employees. I’m not sure I agree with how you are defining “core” – you are using “core” to denote the place of origin for who provides the service, as opposed to the desire/need for the service? Again, if that’s right, and you/we want to stick with that, then for sure we would need to define that outright. The garbage situation in particular really contradicts this, Jim – Bob Girardi has told us that we could save $500K by privatizing that and not having the City do that.  Are you, instead of how I first read this, saying rather that it’s okay to place the degree of control and quality desired over and above the cost?  Can you say more about this or re-tool it maybe? 

I think this section would be helped greatly by you giving more examples of what you see as being in these two different categories. I think they classifications need some work – I think I know what you’re getting at, but I don’t think these explanations really get at it clearly.  I mean, Dispatch might be able to fall into this first category – and yet it’s the one that many see as the first thing to outsource, right?  I just think this needs a lot more discussion/refining.

But there are other City services where these criteria don’t exist or don’t drive value to residents. Call these non-core services. Cutting grass is as an example. For many non-core services the decision whether too use City employees versus outside contractors should be made purely based on cost. Cutting grass is a commodity service with hundreds of outside contractors fully equipped (trucks and mowers) and seasonally staffed and ready and able to do the same job as City employees. Given City compensation levels (more about this later) there is little doubt that outsourcing grass cutting would be cost effective. Grass cutting is just one example of a non-core service and cannot be considered in isolation. But it is an example of a City service that, together with other non-core services, may present considerable cost saving opportunities with no loss in service value to City residents. Yeah – see – I’m not sure why garbage wouldn’t fall under this, in the way you describe grass-cutting, except that we know that many residents would never consider garbage to not be a “Core” service, unless we’re re-defining Core for them – and they’re the taxpayers so they should, as I read you saying throughout this document, have a very big say in this.

For some non-core City services straight outsourcing may not be available or desirable. In these cases regionalism initiatives may provide cost savings opportunities. As you are aware, regionalism is the sharing of municipal resources with the goal of providing citizens with equivalent (or near equivalent) services at a lower over all cost.  Hmm-are you confident in this definition? I think of it more in terms of optimizing utilization for maximum service delivery and cost efficiency.

Using Chagrin Falls dispatch services is a great example of a regionalism opportunity that could provide hundreds of thousands of savings to the City while maintaining virtually equivalent service. I think this has been the main point over which residents disagree, based on their service delivery desires. For over forty years Chagrin Falls has successfully provided dispatch services for Hunting Valley, Moreland Hills, Orange, Bentleyville, South Russell, and Chagrin Falls Township. One must ask why would the elected officials of Hunting Valley, Moreland Hills and the other cities have continued, for over 40 years, you wrote that twice you know :) to use Chagrin Falls dispatch if they were not getting great service at a lower cost? This where you go off the rails re: the sincerity in proposing that we find out what our residents value and the extent to which they value those services: every community can be different in this idea of what is “getting great service at a lower cost” – you are, for better or worse, neutralizing the reality that many of residents see themselves as privilege and prepared to demand what such a lifestyle, in their opinion, can afford them.  To ignore how that affects WHAT a City must provide (NOT what we pay for it) would be ill-advised, in my opinion.  Pepper Pike you mean Pepper Pike residents, elected officials, both, whom? desperately needs to make a conceptual leap and free itself of this ancient and worn-out notion that it must do for itself what others can do better. Again, here I feel that you are imposing what you believe without realizing that our City is in fact made up of residents, and no small or insignificant number, who do not feel as you have just asserted. For the record, I agree with you but I also KNOW that we have residents who do not agree with this. That does NOT mean that the elected officials are not and should not be bound to and committed to serious, difficult change, but just as the revenue-raising tool that failed on the ballot did not respect certain segments of our community, the push into demonstrating to residents how it is that we CAN give up control without giving up quality service (however that gets defined) is a challenge of leadership, planning and respect.

In some (perhaps many) cases there will be no definitive bright line between core and non-coreservices and there may be trade offs of value vs. service vs. cost. But with the information provided by the activity survey it would be helpful if you title that step “Activity Survey” or something, because no where in there do you actually call it that under Step # 1, we can and should, after careful consideration, classify services into core and noncore and then consider, for each non-core service, whether cost savings can be achieved through whole or partial outsourcing or regionalism. Just for moving forward’s sake, who would you see doing this consideration – are you envisioning the Council, a committee, a combination – what mechanism do you think has the best chance to do this well and with legitimacy?

3. Staffing Levels. Steps #1 and #2 above give us guidance as to those services which should be delivered by City employees rather than outside contractors or through regionalism cooperatives. So the next question is how many City employee positions are needed to provide the expected services that will be performed by City employees.  

I’m just curious – have you had a chance to implement any such things?  Sharing the process you went through, length of time, etc. would be really helpful. I actually had to centralize the intake departments for a large mental health agency into one and it took almost a full year of constant work with a group of about 10-15 individuals from a broad array of positions at the agency. 

Any successful outsourcing or regionalism initiatives will open up opportunities to reorganize services that will be performed by City employees.  

[Questions to ask:] 
1.     Are there opportunities to combine positions, particularly between departments? 
2.     Are there better work practices, more efficient scheduling or other ideas to reduce staffing requirements?  
3.     What have other cities done to increase efficiencies? 
4.     What is the “right” number of police officers for the City?
I don’t know the answer (and perhaps this work has been done) but there are a number of criteria that could be used: geographic size of the City; number of houses; concentration of commercial businesses, crime rate, etc. But without comparable data and/or a study of best practices from others, the City is relying on historical anecdote or guessing about the “right” level of staffing. 

The same applies to other departments and functions: What is the right number of fire, service or administrative personnel? The City needs to look internally to answer some of these questions but also look externally to bench mark its performance and practices variation on the same theme but still a variation not before mentioned I think in comparison to those of other municipalities. 

4. Full Time vs. Part Time. After completing the steps above, the next step for City employee positions is to determine the mix between full and part time. While there is a need to maintain a core of full time employees, some City functions could be performed by less expensive part time workers. Part time City workers are far less expensive than full time – generally lower wages and no benefits. On a limited basis the City has successfully used part time workers to provide a number of services. For example, all weekend shifts in the fire department are staffed with part time fireman. But it appears there may be more opportunities to use part time workers. This step requires a final plan as to the optimal mix of full versus part-time employees. Can you say more about how that optimal mix is determined? For example, what are the criteria for judging whether a position should be part-time v. full-time? 

5. Salaries and Wages. The City should set employee compensation at a level that will attract and retain well qualified employees – but not in excess of that. While I understand peer comparisons have been done for police and fire, this does not appear to have been done for all City workers. The City need to benchmark its compensation practices, on a comprehensive and position by position basis, with market competitive compensation (government and non- government as appropriate) for comparable positions. As a result of lock step pay raises and other practices it would appear that a number of City positions are receiving pay and benefits well above market comparables. Such a review will also determine whether there are other City positions that have below market compensation that should be adjusted to remain competitive. Again, can you say more about the criteria that should be used to make this analysis? 

The wages for any position must of course reflect the City’s the total compensation package  including all benefit programs, such as pension and health care, which are the equivalent of cash compensation. I’d suggest making sure that in here, or somewhere, there is a recognition of unfunded mandates for which a municipal entity is responsible. Which is equivalet of cash compensation – pension and/or health care?

6. Health Care. Heath care benefits cost the City about $19,000 per employee for family coverage in comparison to the Ohio average (2009) of $12,000 per employee for family coverage. In July, on the record, I asked for this number for this fiscal year and Prashant said that the number is around 13,000 I believe. It has come down considerably. Pepper Pike employees contribute only about 8% of the cost of City provided health care in comparison to the Ohio average of 27% Is that Ohio public employees?. The City’s contribution rates should be raised to more closely approximate private employer contributions. Increasing employee contributionsdoes more than simply save premium costs for the City it also lowers overall medical costs by giving employees an incentive to be better consumers of heath care services. When employees, through deductibles and co-pays, are paying for a portion of their own health care costs they are smarter shoppers for health care – which in turn lowers costs. Wouldn’t’ this all feed in to/be determined in part but what we discover through #5?

7. Overtime. In 2009 Pepper Pike paid over $539,000 in overtime pay. I believe the figure for 2010 is half that but Prashant can tell us for sure. This is an amount that requires significant management attention. The City urgently needs a detailed analysis, on an incident by incident basis During the oversight meetings, I have in fact highlighted lines that seem curious, but could you please define incident by incident? Do you mean each time it was requested or do you mean each time the amount seems high – both – what?, of the causes of this level of overtime. Based on this analysis, the City should reconsider staffing, scheduling, and work practice changes to reduce overtime costs. The City must also put in place explicit guidelines specifying when overtime is permitted. Again – while this may be needed (and in fact I cannot imagine under what circumstances it wouldn’t be!!) doesn’t it also rely upon some of the previous items you’ve recommended be reviewed and analayzed re: service provision? In other words, service provision done right may have some component of overtime – the issue is determining what role if any OT has IN our provision of service, yes?

8. Sick Time. The City provides sick time benefits that include the right to accumulate sick time (and be paid for it) in excess of what is required by the State. Is this practice required to attract and retain qualified employees? Prashant has reported in our oversight committee meetings that sick time polices and monitoring could be better managed to prevent abuse. Better management of this policy should in turn assist with overtime costs. I assume you would want this item evaluated as above also re: overall service provision, overall comparables of what public employees get and what we can afford and the value etc., yes?

9. Longevity Pay . In 2009 the City spent $157,000 in longevity pay. What justifies this practice? Is this a critical component to retaining all employees? I again assume you would want this item evaluated as prior items re: overall service provision, overall comparables of what public employees get and what we can afford and the value etc., yes?

10. Perquisites. A position by position review should be done of all other employment perquisites (cars, bonuses, etc.) with the same question being asked --- are these market competitive and required to attract and retain qualified employees?

I am well aware that as a municipality the City has statuary, contractual and other factors that limit complete freedom of action and will slow the pace of change. I am also aware that there is a tremendous human element overlaying any restructuring of City management and staffing. Any agreed upon restructuring cannot and need not be implemented all at once, but over time. But the review plan outlined in this letter will give the City a projected “end state” -- a goal to attain over a period of time that will optimize cost effective delivery of City services. I differ on this a bit from you in this statement: A city’s projected “end state” should be a City that people like living in or want to live in.  There’s no value to having optimized cost effective delivery of City services if people reject and do not like how that gets accomplished and the community it produces. I see Pepper Pike’s challenge as combining the answers to your questions outlined throughout this document with a respectful, clear understanding of who lives here and who, as we move into the future, may live here.  I could, of course, be wrong in this and so, if residents are indicating that ALL they are interested in is in fact just the optimization of cost effective delivery of services, well then, that too is something to which the elected officials must respond to.  I believe we are where we are in terms of financial turmoil precisely because we are not in balance in terms of the “end state” you identify and the “end state” I identify. Once settled upon it should be revisited every few years to reflect changing circumstances.

For the most part, the decisions to be made as a result of this review are in the hands of management – the Mayor and Council. Because it is likely that most citizens generally desire to continue with the broad categories of basic City services, the cost savings from this review will generally (but not exclusively) focus on how (not what) services are delivered. It is my view that as long as a quality service is delivered, the vast majority of resident are indifferent as to how that service is delivered. I believe getting answers to the first set of questions you ask in this document are intended to answer this more precisely.

Any resident survey on “how” a service might be delivered differently is unlikely to be meaningful without full facts, pros /cons, cost analysis and tradeoffs (taxes vs. other services vs. less services vs. outsource, etc.) across the entire bundle of City services. Without a full weighing of all these considerations a resident survey response will not be meaningful, particularly if the survey question is isolated to a single service. As I wrote you previously, I’ve worked with someone from Gallup in framing a resident survey but can you say more spefically what you personally consider to be the totality of facts, pros/cons, cost analysis and tradeoffs across the entire bundle of City services?  I’ve been reviewing community surveys since late January and they vary enormously in terms of what they include and omit. I would really like to get a better idea of what you envision when you think of this survey tool.

Unless a resident survey is designed to be outcome determinative (based on how the question is asked and the information provided) the only fair question, for example, on Chagrin Falls dispatch goes like this: “Is it OK with you if the City continues to deliver the same service but does so in a different way that will save the City money?” For me, and I think most residents, the answer is self apparent. Yeah – see – if you ask a question in a way that the answer is self-apparent then that is NOT the way you want to word it, Jim. That would be leading.  A survey should produce responses that can help us rank residents preferences and tolerances. I would never, as a survey writer, write a question as you have proposed.  And if asked in a robocall, that would be considered a push poll, which is actually considered unethical by many.  I do not think that’s what we are shooting for.

Before returning to the voters to ask for more money, we need to be able to tell the voters that the City has done everything it can to be cost effective. And that means working toward a comprehensive review and action plan of the type outlined above. Just to be clear: so you define “has done everything it can to be cost effective” as “working toward a comprehensive review and action plan” that incorporates the kinds of questions (with answers of course!) you describe in this document? To be objective and productive, such a review should be lead by individuals outside of City Hall with business management experience.  I would not support a group that includes people only involved in business management. There are groups like the Cuyahoga County Planning Commission which routinely assists communities and regions in surveys of all types.

Several other residents and I -- all with extensive business management experience -- would volunteer our time to engage in this review. Several have offered themselves up before and I’m sure they would still be interested.

Thank you for your time and attention in reviewing this letter.

I would greatly appreciate a response.


Jim LeMay

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