CITY OF GARY, INDIANA presentation for Relief to the DISTRESS UNIT APPEAL BOARD December 2010 Honorable Rudolph Clay, Mayor

CITY OF GARY AGENDA INTRODUCTION INTRODUCTION RECENT FINANCIAL SITUATIONS RECENT FINANCIAL SITUATIONS PROPOSED BUDGETS REDUCTIONS PROPOSED BUDGETS REDUCTIONS PROPOSED 16-LINE STATEMENTS PROPOSED 16-LINE STATEMENTS SUMMARY SUMMARY CONCLUSION CONCLUSION

INTRODUCTION The City of Gary, Indiana is seeking assistance from the Distressed Unit Appeal Board pursuant to I.C et. seq. Relief from the application of the credit against tax liability established under I.C and as also set forth in H.B. 1001(2008) is sought in order to ensure the continuation of, as far as possible, basic services to the citizens of Gary. The City of Gary, Indiana is seeking assistance from the Distressed Unit Appeal Board pursuant to I.C et. seq. Relief from the application of the credit against tax liability established under I.C and as also set forth in H.B. 1001(2008) is sought in order to ensure the continuation of, as far as possible, basic services to the citizens of Gary. Under the provisions of I.C , the City of Gary would be required to reduce its tax levy in the amount of $30 million in 2009 and $36 million in Using these figures, the City would have to reduce its budget by nearly 57% from its 2008 level. Under the provisions of I.C , the City of Gary would be required to reduce its tax levy in the amount of $30 million in 2009 and $36 million in Using these figures, the City would have to reduce its budget by nearly 57% from its 2008 level.

INTRODUCTION, cont’d Although the City has reduced its levy for 2010 to $48.5M from the $63M 2008 levy, without additional relief for 2010, the city would have to shut down the majority of City operations and would be unable to provide services other than public safety protection. Although the City has reduced its levy for 2010 to $48.5M from the $63M 2008 levy, without additional relief for 2010, the city would have to shut down the majority of City operations and would be unable to provide services other than public safety protection. In order to comply with the requirements of this law as they are currently promulgated, the City hereby provides the Distressed Unit Appeal Board with the financial plan covering a 3 year period as a phase-in of the tax caps established by the law. In order to comply with the requirements of this law as they are currently promulgated, the City hereby provides the Distressed Unit Appeal Board with the financial plan covering a 3 year period as a phase-in of the tax caps established by the law. This plan is submitted with the understanding that as long as the entirety of these cuts is required, whether in 2010 or 2012, the City of Gary faces fiscal devastation that will affect not only its residents, but the surrounding communities and the state as well. This plan is submitted with the understanding that as long as the entirety of these cuts is required, whether in 2010 or 2012, the City of Gary faces fiscal devastation that will affect not only its residents, but the surrounding communities and the state as well.

IC – STATE MANDATED BUDGET LEVY REDUCTIONS Gary Civil City Gary Civil City 2009 Levy Reduction- $30,305, Levy Reduction- $30,305,930 This represents a 48% reduction from the 2008 levy of This represents a 48% reduction from the 2008 levy of $63,684,886 $63,684, Levy Reduction - $36,337, Levy Reduction - $36,337,798 This represents a 57% reduction from the 2008 levy of $63,684,886 This represents a 57% reduction from the 2008 levy of $63,684,886 These reductions represented a pre-1996 Levy

RECENT FINANCIAL SITUATIONS 2009 BUDGET REDUCTIONS Eliminated 365 positions from the 2009 budget between January 1, 2009 and June 15, Reduced Civil City employees from 1,356 to 991. Eliminated 365 positions from the 2009 budget between January 1, 2009 and June 15, Reduced Civil City employees from 1,356 to 991. General Fund eliminated 117 positions, transferred out 17 to other funds, and outsourced 47 positions. General Fund eliminated 117 positions, transferred out 17 to other funds, and outsourced 47 positions. Parks Fund eliminated 106 positions (mostly seasonal and part-time) Parks Fund eliminated 106 positions (mostly seasonal and part-time) Genesis Center eliminated 54 positions from its tax-based fund Genesis Center eliminated 54 positions from its tax-based fund

2009 RECENT FINANCIAL SITUATION Reduced General Fund from 29 departments to 22 departments (of which 1 dept. is unfunded and 1 consists only of commissioners ) Departmental Changes Included: Departmental Changes Included: Consolidated Health Dept. and Community Services Consolidated Health Dept. and Community Services Eliminated Status of Women Dept. Staff (except Commissioners) Eliminated Status of Women Dept. Staff (except Commissioners) Outsourced Sanitation Department (moved street employees from General Fund-General Services Dept. to Motor Vehicle Highway Fund) Outsourced Sanitation Department (moved street employees from General Fund-General Services Dept. to Motor Vehicle Highway Fund) Consolidated Mayors’ Dept, City Operations, and Public Information Consolidated Mayors’ Dept, City Operations, and Public Information Transferred Jail Services to County Transferred Jail Services to County Consolidated General Services and Demolition Consolidated General Services and Demolition Consolidated Finance and Human Resources Consolidated Finance and Human Resources Consolidated Building, Planning, and Public Works Consolidated Building, Planning, and Public Works Did not fund Labor Relations Dept. for 2009 Did not fund Labor Relations Dept. for 2009

YEAR 2009 PROPOSED REDUCTIONS Versus IMPLEMENTED REDUCTIONS PERSONNEL: Reduce workforce by 148 positions through the following means (Actual reduction is 365) PERSONNEL: Reduce workforce by 148 positions through the following means (Actual reduction is 365) Consolidate Health and Community Services Departments (Yes) Consolidate Health and Community Services Departments (Yes) Consolidate Public Info and Chief of Staff Departments (Yes) Consolidate Public Info and Chief of Staff Departments (Yes) Outsource Sanitation Services (Yes) Outsource Sanitation Services (Yes) Transfer City Jail Services to the County (Yes) Transfer City Jail Services to the County (Yes) Transfer employees to Grant, where allowable (Yes) Transfer employees to Grant, where allowable (Yes) Transfer majority of street dept. employees from Gen Fund to Motor Vehicle HWY (Yes) Transfer majority of street dept. employees from Gen Fund to Motor Vehicle HWY (Yes) Down-sized staff in several other departments of tax-based funds (Yes) Down-sized staff in several other departments of tax-based funds (Yes) Close 6 Park Pavilions (Yes) Close 6 Park Pavilions (Yes)

YEAR 2009 PROPOSED REDUCTIONS versus IMPLEMENTED REDUCTIONS PERSONNEL, continued Close 4 of 8 Pools for summer usage, reducing summer Park part-time staff significantly (Yes) Close 4 of 8 Pools for summer usage, reducing summer Park part-time staff significantly (Yes) Complete an analysis of medical insurance coverage and reorganize insurance plan to increase employees’ contribution accordingly, to more adequately cover self-insurance medical claims expenses (In final process) Complete an analysis of medical insurance coverage and reorganize insurance plan to increase employees’ contribution accordingly, to more adequately cover self-insurance medical claims expenses (In final process) Reduce Clothing Allowance and negotiate with Fire and Police Department Unions changes in sick leave requirements and holiday compensation. (In process) Reduce Clothing Allowance and negotiate with Fire and Police Department Unions changes in sick leave requirements and holiday compensation. (In process) Negotiating with Teamsters union to remove payouts of sick days upon termination. (In process) Negotiating with Teamsters union to remove payouts of sick days upon termination. (In process) Make changes to Police, Fire, and ASCME unions premiums to pay 100% of medical insurance employee premiums, instead of 25% discount for public safety and $30.00 discount for ASCME (In process) Make changes to Police, Fire, and ASCME unions premiums to pay 100% of medical insurance employee premiums, instead of 25% discount for public safety and $30.00 discount for ASCME (In process)

YEAR 2009, Continued PROPOSED REDUCTIONS versus IMPLEMENTED REDUCTIONS OPERATIONS : OPERATIONS : Participation in Fuel Hedging program co-authored by Crowe Chizek (IACT) and funded through Indiana Bond Bank. Allows 1st and 2nd class cities to lock in gasoline prices, which helps to reduce risk from escalating gasoline prices. (Yes) Participation in Fuel Hedging program co-authored by Crowe Chizek (IACT) and funded through Indiana Bond Bank. Allows 1st and 2nd class cities to lock in gasoline prices, which helps to reduce risk from escalating gasoline prices. (Yes) Work with Indiana American Water to identify meters no longer needed, or meters that can be down-sized to reduce water bills. (In process) Work with Indiana American Water to identify meters no longer needed, or meters that can be down-sized to reduce water bills. (In process) Exploring new vendor to lock in natural gas prices at a rate lower than current provider for NIPSCO (In-process) Exploring new vendor to lock in natural gas prices at a rate lower than current provider for NIPSCO (In-process)

YEAR 2009, Continued PROPOSED REDUCTIONS versus IMPLEMENTED REDUCTIONS OPERATIONS, continued Work with Crystal Clean to purchase used oil from oil changes provided by Vehicle Maintenance (In process) Work with Crystal Clean to purchase used oil from oil changes provided by Vehicle Maintenance (In process) Transfer the payment of $1.1M in Water Hydrant Fees to the community (Yes) Transfer the payment of $1.1M in Water Hydrant Fees to the community (Yes) Negotiated a better Cell Phone and land lines plan resulting in approx. $30,000 savings per month. (Yes) Negotiated a better Cell Phone and land lines plan resulting in approx. $30,000 savings per month. (Yes)

Year 2009, Continued PROPOSED REDUCTIONS versus IMPLEMENTED REDUCTIONS REVENUES: REVENUES: Increase fees for City Services in most departments (Yes) Increase fees for City Services in most departments (Yes) GSD established a Garbage Collection Fee in conjunction with outsourcing saving approx. $3.3M to the City (Yes) GSD established a Garbage Collection Fee in conjunction with outsourcing saving approx. $3.3M to the City (Yes) Selected a new EMS Billing Service (that has currently increased collections) to assist in financially retaining EMS (Yes) Selected a new EMS Billing Service (that has currently increased collections) to assist in financially retaining EMS (Yes) Working (in 2009) with USX Public Safety Director to engage their grant writer to write grants effective for 2010 City of Gary Public Safety overtime and equipment. (Yes, but no results yet) Working (in 2009) with USX Public Safety Director to engage their grant writer to write grants effective for 2010 City of Gary Public Safety overtime and equipment. (Yes, but no results yet) Advertise new rates for licenses and permits- December 2009; send follow-up letter to businesses operating without business licenses by January to increase revenues for licenses and permits. (Yes, in process) Advertise new rates for licenses and permits- December 2009; send follow-up letter to businesses operating without business licenses by January to increase revenues for licenses and permits. (Yes, in process)

CITY OF GARY FINANCIAL LEVY REDUCTION PLAN OBJECTIVE: To petition DUAB according to IC , and reduce Civil City property tax levy by $36M between years , at a phase-in rate, which would allow the City to: Maintain maximum efficiency allowable in public service from gradual reduced levels of property tax revenues. Maintain maximum efficiency allowable in public service from gradual reduced levels of property tax revenues. Spur economic development to increase tax revenues from a declining property tax base. Spur economic development to increase tax revenues from a declining property tax base. Obtain additional grant funding for pertinent services. Obtain additional grant funding for pertinent services.

2010 LEVY REDUCTION Reduced 2010 levy by $9M From Personnel Reductions From Personnel Reductions From Operation expenses (such as grants and subsidies, and professional services) From Operation expenses (such as grants and subsidies, and professional services) Elimination of Excess Levy Elimination of Excess Levy

ANALYSIS OF MAJOR 2010 BUDGET EXPENSES Police and Fire Budgets are 48% of Total 2010 Budget Police and Fire Budgets are 48% of Total 2010 Budget Civilian Budget us 30% of Total 2010 Budget Civilian Budget us 30% of Total 2010 Budget Medical Insurance, TAW Interest, and Utilities are 22 % of Total 2010 Budget Medical Insurance, TAW Interest, and Utilities are 22 % of Total 2010 Budget

CITY OF GARY 2009 AND 2010 LEVY COMPARISON 2009 DUAB APPROVED 2010 DUAB PROPOSED GENERAL FUND $ 54,215,164.42GENERAL FUND $ 45,951, PARKS FUND $ 1,360,708.75PARKS FUND $ 1,166, GENESIS CTR FUND $ 1,097,450.04GENESIS CTR FUND $ 388, CUM CAPITAL DEVELOPMENT $ 114,053.48CUM CAPITAL DEVELOPMENT $ 90, DEBT SERVICE FUND $ 876,611.00DEBT SERVICE FUND $ 875, FIRE PENSION FUND $ -FIRE PENSION FUND $ 85, POLICE PENSION FUND $ -POLICE PENSION FUND $ 10, TOTAL FUNDS LEVY $ 57,663, TOTAL FUNDS LEVY $ 48,568, TOTAL LEVY REDUCTION$9,095,810.69

CITY OF GARY BUDGET PROPOSAL BUDGET REDUCTION CONSIDERATIONS: BUDGET REDUCTION CONSIDERATIONS: High Priority on public safety staffing High Priority on public safety staffing Services that other units of government are required by law to offer the same service Services that other units of government are required by law to offer the same service Services the City of Gary is required to offer the community under law Services the City of Gary is required to offer the community under law Services that can be consolidated Services that can be consolidated Services that can be outsourced at cost representing a reduction from current spending levels Services that can be outsourced at cost representing a reduction from current spending levels Services that could be offered for a reasonable fee to the public Services that could be offered for a reasonable fee to the public PFM fiscal monitor recommendations PFM fiscal monitor recommendations

YEAR INITIATIVES IMPLEMENTED IN 2009

YEAR 2010 PERSONNEL: Reduce workforce by 62 positions through the following means (Accelerated reductions in 2009 to include projected 2010 reductions of 222 positions) PERSONNEL: Reduce workforce by 62 positions through the following means (Accelerated reductions in 2009 to include projected 2010 reductions of 222 positions) Consolidated the Building and Planning Departments (Both Depts. consolidated with Public Works in 2009) Consolidated the Building and Planning Departments (Both Depts. consolidated with Public Works in 2009) Consolidated General Services and Demolition Services (Yes, consolidated in 2009) Consolidated General Services and Demolition Services (Yes, consolidated in 2009) Eliminated an additional 6 positions for 2010(Yes) Purchase excess insurance for worker’s compensation (in process)

YEAR 2010 Many of the following 2010 initiatives will begin implementation in 2010, however, the full effect of savings will not be realized until 2011

Year 2010 PERSONNEL Eliminate Board Compensation Eliminate Board Compensation Implementation of furlough days and salary reductions Implementation of furlough days and salary reductions Further reductions in overtime Further reductions in overtime Elimination of additional Civilian positions as Identified by PFM Elimination of additional Civilian positions as Identified by PFM Reduce Fire Department staffing by 57 employees Reduce Fire Department staffing by 57 employees Eliminate 3 Special Police positions Eliminate 3 Special Police positions Reduce clothing allowances to $ for Police and Fire employees, and negotiate to eliminate 90-day severance pay outs for retirees, and other costly incentive compensation. Reduce clothing allowances to $ for Police and Fire employees, and negotiate to eliminate 90-day severance pay outs for retirees, and other costly incentive compensation. Implement new rates for employee health insurance to cover rising health insurance cost to the City Implement new rates for employee health insurance to cover rising health insurance cost to the City Employ Chief Operating Officer to direct day to day operations Employ Chief Operating Officer to direct day to day operations Employ two accountants to assist Director in implementing new processes, and expanding current processes Employ two accountants to assist Director in implementing new processes, and expanding current processes Create Economic Development Department Create Economic Development Department Increased Unemployment and Workman’s Comp’s percentages from 2% to 4% Increased Unemployment and Workman’s Comp’s percentages from 2% to 4%

Year 2010 OPERATIONS: Additional privatization and departmental consolidation Consolidation of Services for the Dept. of General and Demolition Services with the Department of Public Works Consolidation of Services for the Dept. of General and Demolition Services with the Department of Public Works Transfer Code Enforcement to Building Department Transfer Code Enforcement to Building Department Cross Train Inspectors in Building Department Cross Train Inspectors in Building Department Consolidate the Fire and Police Commission administration Consolidate the Fire and Police Commission administration Transfer Animal Control to the County Transfer Animal Control to the County Transfer 911 Dispatch to the County Transfer 911 Dispatch to the County Privatize Traffic Control Operations Privatize Traffic Control Operations Outsource Vehicle Maintenance Outsource Vehicle Maintenance Privatize balance of Trash Collection Privatize balance of Trash Collection Implement vehicle reduction and take-home vehicle reduction policies Implement vehicle reduction and take-home vehicle reduction policies

YEAR 2010 OPERATIONS: Reduce Fuel sites and fuel pumps in operation Reduce Fuel sites and fuel pumps in operation Establish a semi-annual Citizen’s Report to include updates of the City’s financial position and other areas of interest to the public. Establish a semi-annual Citizen’s Report to include updates of the City’s financial position and other areas of interest to the public. Increase accountability for judgments, claims, and settlements Increase accountability for judgments, claims, and settlements Additional reductions in travel expenses Additional reductions in travel expenses Move Health Community Services to City Hall, reducing utilities, and lease payments. (Moving Maternal Child Care Services from Methodist Hospital to the Community Health Center to eliminate leasing expenses of $40,000; will maintain telephone expense) Move Health Community Services to City Hall, reducing utilities, and lease payments. (Moving Maternal Child Care Services from Methodist Hospital to the Community Health Center to eliminate leasing expenses of $40,000; will maintain telephone expense) Eliminate Grants and Subsidies from the tax-based funds, except for Grant matches. Eliminate Grants and Subsidies from the tax-based funds, except for Grant matches. Close some Fire Stations Close some Fire Stations Re-establish the modified accural method of accounting Re-establish the modified accural method of accounting

YEAR 2010, CONTINUED REVENUES: REVENUES: Realize grant revenue for City of Gary Public Safety overtime and equipment as a collaborative effort between USX and City of Gary. (Not yet, however, obtained COPS grant for 11 officers for 4 years with no retention requirement.) Realize grant revenue for City of Gary Public Safety overtime and equipment as a collaborative effort between USX and City of Gary. (Not yet, however, obtained COPS grant for 11 officers for 4 years with no retention requirement.) Incorporate more effective procedures for licenses renewal and inspections, to encourage more business owners to purchase and renew their licenses and permits Incorporate more effective procedures for licenses renewal and inspections, to encourage more business owners to purchase and renew their licenses and permits Incorporating other revenue generating mechanisms for EMS, such as transport services, and accurate and timely filing of reports transport services, more aggressive collections. (Conversing with Methodist Hosp. regarding City of Gary EMS transport services becoming a priority over other private ambulance service companies). Incorporating other revenue generating mechanisms for EMS, such as transport services, and accurate and timely filing of reports transport services, more aggressive collections. (Conversing with Methodist Hosp. regarding City of Gary EMS transport services becoming a priority over other private ambulance service companies). Sale of lots and vacant land (On-going, seeking to accelerate the amount sold in a given period of time) Sale of lots and vacant land (On-going, seeking to accelerate the amount sold in a given period of time) Sale of other assets, such as garbage trucks Sale of other assets, such as garbage trucks

YEAR PERSONNEL: PERSONNEL: Outsource Golf Course, if not self sufficient Outsource Golf Course, if not self sufficient Outsource Genesis Center, if not self sufficient Outsource Genesis Center, if not self sufficient Outsource Hudson Campbell, if not self sufficient Outsource Hudson Campbell, if not self sufficient Continued Implementation of furlough days and reduction in pay for civilian employees Continued Implementation of furlough days and reduction in pay for civilian employees OPERATIONS: OPERATIONS: Reduce interest related to TAW Reduce interest related to TAW Reduce outstanding loans Reduce outstanding loans Reduce cost of leasing copiers, printers, etc. as a result of staff reductions in Reduce cost of leasing copiers, printers, etc. as a result of staff reductions in REVENUES: REVENUES: Shift Sanitary District levy to General Fund in 2011 Shift Sanitary District levy to General Fund in 2011 Increased revenues from additional Grants Increased revenues from additional Grants

YEAR 2013 and and 2014 are the final stages for imple-mentation of initiatives from 2011 and and 2014 are the final stages for imple-mentation of initiatives from 2011 and and 2014 will address the USS settlement that has been negotiated for property tax credits in the amount of $8M to be paid over 4 years 2013 and 2014 will address the USS settlement that has been negotiated for property tax credits in the amount of $8M to be paid over 4 years 2013 and 2014 will provide for implementation of the NSP grant and other economic development programs that would increase the property tax base 2013 and 2014 will provide for implementation of the NSP grant and other economic development programs that would increase the property tax base

SUMMARY How Can DUAB Help? How Can DUAB Help? Increase Circuit Breaker Caps for City of Gary Increase Circuit Breaker Caps for City of Gary at a phase in rate through 2014 Assist in legislation that will mandate compliance to budget certification and property tax distributions with already established deadlines. This will eliminate critical cash flow issues compounded by the property tax caps, and low percentage of property tax collection rates. Assist in legislation that will mandate compliance to budget certification and property tax distributions with already established deadlines. This will eliminate critical cash flow issues compounded by the property tax caps, and low percentage of property tax collection rates.

SUMMARY How Can Legislators Help? How Can Legislators Help? Reconsider the Property Tax Cap percentages for large industry by increased caps Reconsider the Property Tax Cap percentages for large industry by increased caps Find a common denominator between local and state assessment of real property for large industry, so that all tax paying segments pay their fair share. On-site assessments must be performed, as opposed to predominant software calculations. Find a common denominator between local and state assessment of real property for large industry, so that all tax paying segments pay their fair share. On-site assessments must be performed, as opposed to predominant software calculations. Allow 2 nd class cities to adopt a Local Option City Income Tax and impose gasoline taxes Allow 2 nd class cities to adopt a Local Option City Income Tax and impose gasoline taxes Continue to provide distributions from the Welfare Excess Fund to assist entities with Public Safety. Funds should be limited to entities with Police, Fire, and EMS department, however, for maximum effect. Continue to provide distributions from the Welfare Excess Fund to assist entities with Public Safety. Funds should be limited to entities with Police, Fire, and EMS department, however, for maximum effect.

SUMMARY How Can Legislators Help?, continued How Can Legislators Help?, continued Reduce frequency of “assessment by trending” to every other year in order to eliminate backup and encourage timeliness in property tax rates and distribution. It is quite possible that the enormous additional interest for TAWs, created by delays, will cost more than the increase revenue realize from more frequent trending assessment. In the case of HB1001, the financial harm due to the delays could be irreconcilable. Reduce frequency of “assessment by trending” to every other year in order to eliminate backup and encourage timeliness in property tax rates and distribution. It is quite possible that the enormous additional interest for TAWs, created by delays, will cost more than the increase revenue realize from more frequent trending assessment. In the case of HB1001, the financial harm due to the delays could be irreconcilable.

ANY QUESTIONS?