Thank you for having me here today. I always appreciate the opportunity to speak with you all to discuss the future of our city. I know you’re working hard every day – as we are in the executive branch – to be good stewards of the taxpayers’ money, and to work toward an even better future for our city.
My goal is for Louisville to aim to be the best in the world at everything we do – whether we’re starting a community service movement such as Give A Day, growing jobs, delivering social services, or producing one of our many great festivals.
We always aim to be the best.
The same goes for city government. This is one of the best cities in the world and it deserves the best city government in the world: best at economic development, best at public safety, the best at meeting the needs of our citizens! That also means meeting our financial challenges in the best way possible – in a prudent and thoughtful manner that improves core services while also making strategic investments that have long-term impacts!
Today, I am going to discuss two important aspects of our finances:
1- First, I will share with you our approach to improving our daily performance and comment on how those improvements and other actions will help address the structural imbalance in the budget.
2- Second, I am going to share with you the details of the FY13 budget, and how it addresses the current needs of our community.
So let’s look at the first area:
We have a budget challenge – it’s simple to articulate but difficult to solve. Our expenses are greater than our revenues. My goal, my focus – since the day I took office 17 months ago – is to bring the city budget into structural balance.
We’re not unique. Cities all over the country are facing similar financial challenges – some are teetering on the edge of bankruptcy. Some are slashing police forces and closing firehouses. That is not the way to build a healthy, prosperous city! Our goal is to take prudent, rational steps NOW so we don’t face a financial crisis.
We are making targeted, thoughtful changes to the structure of the budget, while at the same time improving the efficiencies and effectiveness of our service delivery.
In the private sector, I have had a lot of experience in using data, problem-solving, and teamwork to transform organizations into best of class. These successes were achieved through an unrelenting focus on continuous improvement and innovation. In today’s rapidly-changing world, all organizations have to keep up with best practices to remain viable.
Government is no different. So, we have established a process that embeds continuous improvement as a core city government value. We call that process LouieStat – short for Louisville Statistics.
LouieStat is a detail-oriented, systematic approach to implementing improvement department-by-department – and it’s already paying dividends.
Let’s take overtime as an example. A study my office completed last December showed that nearly 60 percent of our overtime expense is unscheduled – an unacceptable amount.
We convened a cross-functional team of internal experts – comprised of people across many city departments – to examine this problem and provide information to the LouieStat teams that were already underway. The result? The budget I am proposing today reduces overtime by $3.1 million. That is a structural improvement. We will reap this savings every year going forward.
Let’s look at another example. During our Public Works LouieStat meetings, we noticed what appeared to be a high number of worker’s comp claims. We began to ask questions – why are the claims so high and why do people remain off the job for so long?
Through LouieStat’s problem-solving approach, we will be implementing a pilot alternative-duty program so people return to work earlier when recovering from lost-worktime accidents, even if they aren’t ready to do their regular job. Rather than lose that worker entirely, we’ll have them do what they can safely. That makes sense. Instead of paying people to sit at home, we pay them to be working. In fact, in other workplaces, returning people to work seems to help them heal and return to their regular job more quickly. An employee at work tends to stay at work. An employee at home tends to stay at home.
These examples clearly demonstrate that as we move through every department of government, LouieStat will not only improve city services, but will help solve the structural cost imbalance at the same time. And of course, everything we’re doing is informed by the recommendations of the Merger 2.0 Task Force.
LouieStat is not our only cost reduction effort. As you know, 70 percent of our total budget is personnel cost, and of that cost about 75 percent is determined by union contracts. Our contracts with unions must reflect the financial realities we face. Last week, we announced an important step in that direction through new EMS and Corrections contracts, particularly as it relates to overtime. As is the practice in the private sector, our workers will now get overtime only if they actually WORK more than 40 hours a week. Sick time and vacation time won’t count. With the new overtime language – and some other changes regarding pay increases – we’ll have reduced the rate of government growth by $3.5 million.
That’s progress! We’ll be looking for similar language in other contracts, because we need these types of agreements for the fiscal health of the city.
I want to applaud the Teamsters Local Union #783 and FOP Lodge #77 for negotiating in good faith and being realistic about what is possible with the fiscal challenges our city faces. Thank you!
Another major category that we must improve is our health-care expenses. With rapidly rising costs, we must closely examine our health-insurance plans – they are top of the line when compared to both private and other public plans. There are some changes we can make – changes that will still leave families with very good, above-average plans – but that will save our taxpayers millions of dollars a year.
So reducing overtime and addressing contract issues – including health insurance – those are two big steps to bring structural balance to the budget.
We also need to consider the size of our 5,500 full-time workforce. LouieStat, training, and technology help us increase our productivity. Every year, about 200 employees leave or retire. A smart replacement policy would allow us to use that natural turnover as a multi-million dollar opportunity to reduce structural expenses.
Since I took office, we’ve already been thoughtful about when – or if – we fill open positions. After 17 months, we’ve reduced the size of government by about 100 people, largely through attrition. This is a start, but I have asked Chief Financial Officer Steve Rowland to put together a team and develop a strategic plan for using attrition to help eliminate the structural budget imbalance.
Other promising cost reduction news came last week. We could realize a potential savings of up to $25 million a year to ratepayers by combining some services or by completely consolidating the Louisville Water Company and MSD. While these are not Metro Agencies, our financial futures are intertwined and we expect cost reductions from a closer collaboration with Public Works. These savings would be realized in the mid- or long-term, but they are promising areas for cost reduction and better customer service.
I’m also doing my part – eliminating the mayor’s discretionary fund, as I also did six months ago during mid-year adjustments of the current budget.
I’m sharing all this with you, because I want you to hear some of the actions we’ve taken as part of an intentional, ongoing process of sound fiscal management: LouieStat, more realistic union contracts, a strategic approach to attrition, and constantly looking for other opportunities – big and small.
The good news is that we have sharp tools at our disposal – methods to restore fiscal balance without cutting into the level of service our citizens expect. My team is working every day to make sure we use those tools to their best effect.
We’ve made strong, impressive progress. In 17 months, we’ve reduced the $25 million structural gap by about 40 percent!
So let’s talk about this year’s budget. My team put together this budget with an eye toward our five goals:
1) Deliver excellent city services,
2) Deal with the systemic budget issues,
3) Take job creation to the next level,
4) Invest in people and neighborhoods, and
5) Create plans for a vibrant future.
All is not doom and gloom. This is a balanced budget, with no new taxes for our citizens and no layoffs or furloughs for our employees. In fact, I’m proud to announce that, for the first time in my administration, our non-union personnel will get a 2 percent cost-of-living raise.
We’ll even replenish $3 million to the Rainy Day fund. Good fiscal practice -- for government, businesses, and for families -- is to have one to two months expenses set aside for unanticipated needs. This repayment will mean that, even with withdrawals, we should close Fiscal Year 13 with more than $57 million in the Rainy Day Fund – assuming no additional surprises. That’s more than enough cash to operate the government for six weeks. That’s consistent with our fund policy and an important signal to our creditors and our rating agencies. In fact, when metropolitan CFO’s met in Chicago last month, it was obvious that we were in the top tier when it came to having an adequate ending fund balance.
This budget continues to fund external charitable agencies at the same rate I proposed last year and the same rate since merger – and continues to fund, also at the same level, indigent health care at University Hospital. We are committed to indigent care and to being an active participant in finding solutions to the long term needs of indigent care and the challenges that University Hospital faces.
Last week we were reminded of the immense challenges in keeping an entire city feeling safe and secure.
Public safety remains the biggest chunk of our budget – at $304 million, it’s nearly two-thirds of our General Fund spending. That’s as it should be. Keeping our citizens safe is a core mission – and a labor-intensive, 24-hour mission at that. We’re investing in the future of public safety in this budget, with three new police recruit classes – that’s 96 new officers! – and one recruit class for firefighters.
We have an obligation to the safety of all those people who are working to keep us safe. We’ll spend $900,000 – the first of three payments – to buy improved breathing apparatuses for firefighters. And we’ll spend more than $200,000 on a body scanner at Corrections, because we owe it to our employees and nonviolent inmates to keep contraband out of that facility.
We’re also making shrewd investments in infrastructure and the future growth of our community.
· Job creation is important to growing revenue and maintaining the health of neighborhoods. The budget includes $1.4 million in a small business revolving loan fund to help grow jobs.
And of course, important new road construction projects, such as those planned at U of L’s Belknap campus, on the Dixie Corridor, East Market, and Crittenden Drive, will create both construction jobs in the short term and a better economic climate in the future. The Ohio River Bridges Project will be the best example of that. The Bridges Project will spark a massive influx of engineering and construction jobs – a shot-in-the arm to our economy.
In west Louisville, one factor limiting job creation is the lack of large parcels of available land. This budget sets aside $500,000 for land assembly to be used for economic development.
· Having the best city services means having well-maintained park facilities for our citizens. The Mary T. Meagher Aquatic Center is a vital, year-round health center for our community – one of the most heavily used facilities in our Parks system. But the HVAC system is near the point of collapse. Fourteen years old and damaged by chlorine, it’s only operating at 50 percent of its capacity and it was 30 percent undersized to begin with. If that system fails, this popular facility would have to close. This budget includes $1.5 million to replace that system. We’ll keep that facility open, get a more sustainable, energy-efficient system and better manage the air quality in the facility! Great news for our swimmers!
· We know that we need a thriving retail section of downtown to support residential life, downtown workers and out-of-town guests – in fact the top question asked by downtown visitors is “where can I shop?” South Fourth Street - the historic shopping center of our city - is the most likely place for downtown retail to “take-off” and it’s beginning to get some lift. We’ll be investing $500,000 there, paying for better lighting – an important safety issue – as well as sidewalk and other improvements. Growth there will have the added benefit of generating new downtown tax dollars that will be added to the arena TIF.
The South Fourth Street project is just part of our effort to take care of our streets and sidewalks. We also have allotted $500,000 for street improvements and more than $250,000 for sidewalk repair across the city.
Bike lanes are also vital for the health and safety of our community – and being a bike-friendly city is a talent-recruitment tool as well. We’re including bike lanes in the widening of Cooper Chapel from Smyrna Road to Preston Highway and are constantly seeking opportunities to add bike lanes during repaving projects.
Finally – the biggest investment in this new budget – will go to a cause that is important to many of us. We know that libraries are a vital part of a community of life-long learners. I know many of you are concerned, as I am, about the growing digital divide. Some people don’t have access to online job listings that the rest of us take for granted. Some students don’t have the tools they need at home to complete their schoolwork. The library is the great equalizer that makes sure everyone has a chance!
That’s why this budget funds the construction of the Southwest Regional Library!
Our commitment to libraries and their role in life-longing learning is obvious – from the recent renovations at the Shawnee branch, the ongoing renovations at the Western branch, and the opening of the new Fairdale Library.
We must outlearn our competitor cities!
I promised voters during my campaign that we would build the Southwest Library in my first term. I know many of you, Metro Council members, also promised, after the 2007 library referendum failed, to find ways to complete key library projects. Last year, we took the first step, together, when we funded the Southwest Library construction plans. Now it’s time for us, as a community, to make that plan a reality. Thank you for your partnership!
We have a responsible plan for funding the library. The Library Foundation has committed to raising $3.5 million for this project. In this budget, I propose issuing a 20-year bond to pay for the remaining $9.5 million. This is the only bond project I’ve proposed – in this budget and since I’ve taken office. It’s a responsible and exciting use of bonding money, for a one-time investment that has real, long-term value to our community. This is about life-long learning and who we need to be as a city!
We also remain committed to build the other regional libraries, in Okolona and in the Northeast, as soon as possible. Let’s work together and keep this commitment to the community and to the future!
Meanwhile, we’ll also be spending $75,000 on E-books, an immensely popular new feature at the library. This is the path of the future!
These are all investments in making Louisville the city we know we can and should be. But they may be raising a question in many of your minds: How are we going to pay for all this?
Well, first of all, general fund revenue has grown by about 2.7 percent, producing $13.6 million in new revenue.
Second, my team is always looking for ways to better utilize our assets – while maintaining control of them. Accordingly, we’ll be selling two downtown surface parking lots for approximately $10 million to PARC – that’s where those assets belong. These are the so-called Mud lot, and the City Hall lot. Employees will still be able to park where they always have, but PARC will now own and manage the lots.
We’re also going to collect nearly $4 million from PARC that has been outstanding since they purchased some county parking facilities when the city and county merged.
We also gave extra consideration to investments were we could get matches from private money, as we’re doing with the library.
- We talk all the time about the importance of summer jobs for young people – what it means to their pocketbook and to their resume and, most importantly, to their vision of how work can improve their life! This year, the $1 million plus SummerWorks program is being funded mostly with private money my team has raised. The city is contributing $100,000. Anytime, we can get 9-to-1 leverage on a worthwhile project – we’re excited.
- The Louisville Loop is a tremendous part of the future of our city – something that our great, great grandchildren will thank us for! The plan has always been to connect the loop to Jefferson Memorial Forest, the nation’s largest city-owned forest. For many people who use the Loop, Jefferson Forest – with its challenging, fun trails and great facilities – will be the diamond on the ring! This budget provides $450,000 that – with a one-to-one match of private money – will buy 82-acres of land and make it possible to connect the forest to the loop. That’s an opportunity we can’t pass up!
- It’s very important to maintain the development momentum we have downtown and we are always looking for innovative solutions that highlight our unique architecture and history. For these reasons, we’ll be putting $500,000 into the new Heritage Conservation Fund, which will be matched dollar for dollar in new private money through a challenge pledge. This Fund will not only help ensure the Whiskey Row project is completed, but will create a new national model for financing historic preservation. This model will also benefit preservation efforts in other parts of the city and county.
- We know we have to make vibrant plans for the future of our built environment – that’s one of the goals for this year. We’re going to develop a $600,000 plan with just $100,000 of city money. Another example of the private sector giving us a good boost toward an important goal! Creating a plan for a revitalization strategy for west Louisville is also part of this effort.
Of course, one of our most exciting public-private projects is our Innovation Delivery Team. You remember that last year, Bloomberg Philanthropies committed to a $4.8 million grant – with a 3-to-1 match requirement– that would allow us to look at ways to dramatically transform government services. Next week, we’ll be announcing the exciting initiatives the Innovation Delivery Team has come up with over the past 5 months. But I can give you one example today.
Every smart city is becoming increasingly environmentally focused. This budget provides $400,000 toward an important and exciting sustainability project around recycling.
We’ll buy 55-gallon recycling bins for two public-works routes. That will make it easier for residents to recycle more. Selling material to recyclers is better financially than paying to dump it at the landfill, with the added benefit of a more sustainable future.
So here is where we stand today: With great determination, we are steadily whittling away at the structural imbalance, while we continuously improve and make strategic investments.
Everyone is doing their part – whether it’s employers stepping up to help with SummerWorks, union leaders being realistic about what is financially possible, or metro employees who are choosing to embrace change with joy and excitement.
I often read Thomas Friedman. In a column just this week he noted we are ending a 50-year period in which government at all levels grew and expanded. He said that a nation, state or city might be able to get bigger without a plan. But a plan becomes vital when you are trying to reduce the scope and budget of government.
Otherwise you end up with short-sighted fixes, cuts that get you through the year, but leave you crippled when it comes to long-term development. He concluded by noting that those who don’t invest in the future, will not do well in the future.
The budget I’m presenting you today represents reasonable steps toward a leaner, but well-planned government. And it invests in the future that we all know is coming – faster than ever.
This budget moves us forward, helping us become what we all know we can be: a national leader in efficiency, effectiveness and excellence!