State of the City Address --January 12, 2012

Good afternoon! It’s an honor to be here with you today and to take part in this wonderful tradition once again.

I’m a big believer in goal setting – and, of course, an important part of setting goals is honestly evaluating your starting point. When I look back over 2011 – my first year as mayor – I’m struck by several things.

First, it was the fastest year of my life!

Second, it was exciting! Whether announcing new jobs, revitalization projects like Whiskey Row and Sheppard Square, or new smart phone apps to better connect residents with city services. We are a city where new, dynamic things – both big and small – are happening, every day!

And third, I’m continually amazed by our outstanding people. We have a good team – and we have a team that knows we can always do better.

A year ago, when I last spoke to you, I discussed the choice that remains before us: Do we dare to be great?

Do we dare to go beyond being average? To stop just comparing Louisville to Louisville? And to aim instead at becoming a national and international leader?

I’m pleased to say that the answer has come back – in so many ways – yes! Yes, we are willing to be great! To challenge ourselves to represent “best in the world” at whatever we do.

Last year, I mentioned that I’d been talking to The Brookings Institution about working with them to develop a regional economic development plan with Lexington. This is a breakthrough idea – working TOGETHER in a concerted, intentional and detailed way.

Now, that project is underway. We were one of 4 regions selected out of the entire nation! The Bluegrass Economic Advancement Movement or BEAM, as it is called, is going to make a big difference for our city, not only by the jobs it helps us create, particularly in advanced manufacturing, and not just by the national reputation it is already helping us build. But ALSO for the spirit of partnership between Louisville and Lexington that our state sorely needs.

We are a city that is thinking and working not just on today’s challenges but those of the future as well.

More evidence of that is the Bloomberg Grant. In this case, we were one of 5 cities selected in America! That’s $4.8 million that is being used to create innovation-delivery teams that are working to create export-oriented jobs and more cost-effective delivery of basic city government services.

Last week, our collective success – business, government and UAW – was recognized when Business Facilities, a national magazine, named Louisville’s Ford investment as America’s #1 Economic Development Deal of 2011! That deal will add about $2 billion, directly and indirectly, to the state GDP, according to an impact study from the Kentucky Cabinet for Economic Development. Great job to all involved!

We’ve also made significant progress on the Ohio River Bridges Project. Working with both state governments, we’ve found ways to cut $1.5 billion from that project, figured out how to split the cost between the two states, and are expecting the final financing plan soon. If all stays on plan, the construction process will start later this year!

Getting that project started, after so many decades of delay – that alone will be a tremendous accomplishment!

Yes! We are on our way to making transformational change – as Louisville redefines itself as a national leader in job creation, innovation, and entrepreneurism.

We conducted a year-long review of our Economic Development Department – found strengths and weaknesses – and this week announced the resulting changes. We know that in today’s world we must focus our limited resources on what should be the core of our economy: the nurturing of existing business, global markets, innovative ideas, effective planning, sustainable systems, and the entrepreneurial spirit that makes all that happen!

And as we’ve made big shifts like these, we’ve also improved many of our basic services to people – from how we alert them to an emergency to how accessible their libraries are!

We are receiving national recognition, both as the largest city in North America to become an “International City of Compassion” but also as a city that is striving hard to build a healthier community.

Our 55,000 Degrees program had a terrific year. We know that education is the engine of job growth, and so it’s great news that two-year college degrees are up by 14 percent, and four-year degrees have risen by 7 percent.

I recently got the good news that our SummerWorks youth employment program is going to partner with JCTC to offer a SummerWorks participant a college scholarship. This means, we’re tying post-secondary education opportunities to the real-world work experience that teens today desperately need.

Nationally, high school students today face the highest unemployment rate for their age group since we’ve started tracking the numbers in the 1940s – and summer jobs don’t just keep kids busy and out of trouble, they give them valuable real world work experience that prepares them for the rest of their life. I ask for all of you to help us in this cause. Can you hire a teen this summer!

All of these accomplishments are a result of teamwork, not only within my administration but with the private sector and Metro Council as well.

One of my 2011 goals was to have a positive working relationship with the Metro Council and model how the executive and legislative branches can work together for the good of its citizenry. We don’t see enough of that in Washington or Frankfort.

I'd like to thank the Council for their good work! I feel we have accomplished the goal of working together - a goal that I will pursue every day that I hold office.

In many, many ways, we are on the right path!

But like all state and municipal governments across the country, we have challenges.

Any organization must be on sound fiscal footing to achieve long-term success. The facts are that your city government’s future is hampered by a structural budget imbalance that simply must be resolved for us to remain fiscally strong.

In the second half of this fiscal year – the next six months – we face a $12 million shortfall. That’s after already cutting $22 million from the budget last spring.

Next year – the fiscal year starting July 1 – we expect to face a shortfall again. This time, it will be $20 to $30 million. About $2.5 million every single month!

We are required both by good business practice – but also by law – to balance our budget every year.

We have a significant financial challenge staring right at us.

Through programs like BEAM and by concentrating economic development efforts on our four strongest economic sectors – advanced manufacturing, food and beverage, value-added logistics and lifelong wellness and aging care – we’re working as hard as we can to grow the tax base and expand the revenue side.

But that won’t happen soon enough to solve the material budget shortfall we have.

Additionally, we’ve run out of the sorts of one-time windfalls – sales of surplus property is one example – that we’ve relied on in the past to get by.

Now, my team and I must make fundamental, tough decisions about how city government can and should spend money. We cannot keep spending at the current rate – not with our current tax and revenue structure.

I commit to you that Louisville will not end up like Birmingham, Las Vegas, or Detroit – cities that have declared bankruptcy or are teetering on the edge of bankruptcy because tough decisions weren’t made years ago.

What are the solutions?

I’ll be meeting with department directors right after this speech to start developing our options – and certainly I’ll involve Metro Council. But I do want to share with you how I’m thinking about the task at hand.

First of all, I believe every organization can always work smarter and more efficiently.

We have a reputation for being a well-run city, but we know that “good” is never “good enough” – and, furthermore, what was “good enough” five years ago could be “barely adequate” today. We live in a rapidly changing world where constant improvement is possible, necessary and expected.

I’m excited about several steps we’re taking. We have been working on this financial problem from the first day of my administration.

This year we are adding a data-driven management tool called Louiestat, a measurement system that will help city employees make better decisions and help citizens get online information about the city more easily. That’s empowerment and accountability!

But make no mistake: To balance this budget, we must find MILLIONS of dollars to cut – not over years, but within months.

That means we must ask ourselves tough questions.

How do we reduce overtime, currently running at $22.7 million a year?

Another question: Can we continue to fund pension programs and health care plans the same way and at the same level we now fund them? Can we afford the generous sick leave plan that we currently have? These public programs are way out of line compared to private programs.

We have to look at everything! We will be smart about our decisions. AND, we will need everyone’s help to solve these problems.

Another tough question: Each year, we support non-government agencies. These are arts groups and social service organizations which do great work, no question about it. I love the work they do and the difference they make in this community.

Some of these groups provide services at less than what it would cost if the government did it. But we now have to ask if some of these grants are core government services?

I didn’t become a public servant because I get a kick out of delivering bad news to anyone or in asking tough questions about the financing of programs that we know do a lot of good.

But I also did not become a public servant to serve as an “enabler,” someone who helps our city limp along, “making do”, and kicking the can down the street, while our financial foundation crumbles.

The time for action figuratively and literally is now!

The good news is: We’re on it!

Last quarter, when my team and I completed our goals for 2012, we included fixing the structural budget problem as one of our top five goals. You can see these on the last page of my annual report that is on your table.

Let’s look at the four other goals for 2012.

First – the most basic – we will deliver excellent city services. Even as we make cuts, we remain dedicated to being the best municipal government in the United States. The goal is that direct services to citizens will be preserved.

Second, we’re going to take job creation to the next level. We did amazing work in 2011 – as the Ford deal epitomized. It was good news that the unemployment rate for Louisville released last week was down to 8.8 percent last week – a big step in the right direction compared to 11.1 percent last January.

But we know that as long as there are people still struggling, still looking for a job or needing a BETTER job, then our work is not done. Job growth is our passion.

Third, we will continue investing in our people and our neighborhoods. We have a beautiful city. From Bardstown Road to Southern Parkway – we have neighborhoods, industries, and entrepreneurial ideas that are uniquely Louisville and give our city real authenticity.

We must make sure that flavor remains fresh, by incorporating every part of our city, including our growing international community. We must celebrate inclusion - where every citizen has a chance to win!

And fourth, while we take care of our day-to-day challenges, we’re going to create plans for a vibrant future. We’ll begin planning a comprehensive 25-year “city vision” in 2012.

Solving the budget problem, along with those four goals – are our blueprint for the next 12 months.

A few months ago, Pulitzer Prize winning author Thomas Friedman noted that our country faces a choice. We can either have a hard decade or a bad century.

Louisville is in the same shape. We can either take charge of our problems now, or they will dominate us for a very long time to come.

Our choice is clear.

Our people are strong.

We have a wonderful city with a growing reputation for lifelong learning, entrepreneurship, job creation, health, hospitality and compassion - and for addressing challenges and getting things done!

Our record of accomplishment is great and growing. With prudent action now, and making the tough financial decisions that need to be made – while all the time growing – I know we can build the bright future that our people deserve!

Thank you!