Effectively Utilizing Your HFA’s Financial Resources KHC 20/20 J Effectively Utilizing Your HFA’s Financial Resources KHC 20/20 J. Kathryn Peters, Executive Director

Impetus for KHC 20/20 KHC 20/20 Vision Statement To strengthen KHC as an innovative housing leader in the state and nation by developing new partnerships, policies, and programs, as well as provide excellence in services by enhancing efficiencies, adding flexibility, increasing communication, and encouraging teamwork.  Goals Affect an organizational framework that reflects current and future program and workforce requirements, including retention and succession planning; provides for efficiency in work flow; and encourages communication across business lines. Ensure all of the job roles for the Corporation are clearly defined through the Job Analysis Questionnaire. Develop and provide a clearly articulated compensation process to begin in FY14 and implement a process for ongoing industry and market comparison of salaries and routine equity adjustments based on ongoing review. Create an ongoing Employee Development Plan for the Corporation. Achieve consistently applied performance evaluation process with a link to compensation (i.e., pay for performance) and a clearly articulated compensation process to begin in FY14 and implement a process with a link to compensation (i.e., pay for performance) and accountability. Review and update procedures in Employee Handbook to encompass all of the above goals. Conduct ongoing training on Human Resources policy and its application for management staff.

KHC’s Corporate Lifecycle Startup Growth Expansion Crisis & Contraction Retool Decline

Cost Breakdown of KHC Benefits FY 2010 $1 in salary = $0.34 for benefits FY 2016 Budgeted $1 in salary = $0.63 for benefits A 55% Increase in Costs KHC Faces Considerable Challenges The State’s unfunded pension liability is the greatest threat to KHC’s long-term sustainability. KHC’s required pension catch-up payments total approximately $3.2 million in additional contributions per year for the next 30+ years, and KHC receives no state funds to pay pension costs. The dramatic increase in the cost of post-retirement benefits means that for every dollar paid to a current employee, an additional 63 cents must be paid for benefits. KHC’s projected benefits load for FY2017 is 72 cents for every dollar in salary. Federal allocations and contracts are at risk. HUD’s HOME Program faces the prospect of federal cuts, and HUD continues to underpay KHC for administering the Housing Choice Voucher Program in 87 counties. KHC’s Project-Based Contract with HUD will be opened to a nationwide re-bid that may attract competitors or alter the net revenue to KHC. Total Cost of Benefits: 2010: $5.1 million (322 FTEs) 2016: $7.9 million (242 FTEs)

Key Elements to the 20/20 Initiative Reorganized/rightsized. Re-framed our mission. Cultivated leadership cohorts. Enhanced & integrated corporate planning. Revamped our approach to compensation.

1. Reorganized & rightsized Reduced supervisory positions 41% (75 to 44). Reduced overall staffing 25% (322 to 242). Closed 2 satellite offices ($700K annual savings). Realignment & consolidation of departments. Utilizing alternatives to FTEs. KHC’s Board led a reorganization in 2013 aimed at helping KHC become a more flexible, nimble, and innovative organization. The reorganization collapsed KHC’s organization chart and reduced supervisory positions 41% from 75 to 44. Staffing levels decreased 25% from a 2010 high of 322 to 242 full-time employees (FTEs). KHC closed its two satellite offices, saving $700,000 in annual operating costs.

2. Re-framed Our Mission Previous Mission: New Mission: As the state housing finance agency, our mission is to lead Kentucky in providing safe, quality, affordable housing. New Mission: We invest in quality housing solutions for families and communities across Kentucky.

3. Cultivated Leadership Cohorts Cultivated leadership and decision-making as teams. KHC is led by an Executive Team, a Leadership Team, and a Management Team. These peer groups were created to grow KHC’s next generation of leaders, to improve collaboration and communication, and to share decision making. The aim was to tear down silos and make decisions as teams. It was slow-going at first!

4. Enhanced and Integrated Corporate Planning Cost vs. Revenue Analysis Strategy and Business Planning Allocation Plan Balanced Operating Budget Enterprise Risk Management Ongoing Reporting and Scorecard Tracking 4. Enhanced and Integrated Corporate Planning Annual Corporate Planning Cost vs. Revenue Analysis and Delivery Cost Report Overarching Strategies Business Planning and Scorecards for Every Department Allocation Planning Operating Budget Enterprise Risk Management Implemented corporate-wide business planning and performance accountability. In addition to overarching corporate strategies, every KHC department has a strategic business plan and performance scorecard that is updated quarterly. Departments’ strategic goals are assigned to staff in KHC’s performance evaluation system and used to measure employee performance. This links all departments to corporate strategy and helps staff and supervisors focus on what matters most. Cost vs. Revenue Analysis: For each department: Analyze the cost of annual operations, attribute overhead and compare to revenue generated. Delivery Cost Report: Shows KHC’s operational costs to deliver each mortgage, rental units, assisted household, etc. Overarching Strategies: Corporate-wide direction, big policy initiatives, etc. Departmental Business Planning& Scorecards: Establish strategic and tactical direction for all departments. Allocation Planning: Determine how resources will be invested across programs. Operating Budget: Develop a balanced budget for operations. Enterprise Risk Management: Identify and mitigate key risks. Corporate planning involves every department. Deputy executive directors approve all final plans. Each department reports quarterly to their deputy. Updates on overarching strategies are provided to the Board of Directors every six months. Business plan goals are built into employees’ performance evaluations each July and evaluated regularly for accountability. This is NOT a one-time correction. This is our new way of doing business.

5. Revamped our approach to compensation Updated job description for EVERY position. Market-based compensation system. Range of ways to reward performance: VIP Certificates. $100-$400 rewards for individuals and teams. Larger bonus for exceptional performers. Corporation-wide bonus based on FY performance. Instituted market-based compensation. KHC ended its internally-focused, point-factor compensation system in favor of a market-based compensation approach. KHC is rolling out a range of pay for performance opportunities that include peer-to-peer awards and rewards for high-performing individuals and teams.

After 3+ Years of KHC 20/20 FY 2016 was our strongest in terms of financial performance since the recession hit KHC. We have held operating costs to 1% below FY 2015. Revenue grew 8% over FY 2015. Several departments have reduced their budget gaps.

KHC has achieved stability… Crisis Stability Sustainable Growth …But our aim is sustainable growth. Now that we are running well, we are prepared to be more outward- & forward-looking.

THANK YOU. J. Kathryn Peters Executive Director Kentucky Housing Corporation 502-564-7630 www.kyhousing.org