1. 2008-09 Budget Strategy Presented by Mayor Don Ness To the Duluth City Council June 9, 2008

2. Todays Presentation Introduction – Mayor Ness Sample list of proposed budget strategies – Mayor Ness Budget principles – Lisa Potswald Operational restructuring – Lisa Potswald Income statements – Mayor Ness What are our next steps – Mayor Ness

3. Proposed Budget Strategies Eliminate or hold open 33 positions Close Human Rights Office Eliminate DEDA general fund subsidy Eliminate Office of Sustainability Turn over Zoo operations to Zoological Society Close Fire hall Eliminate Engine 3 Fire Rig Combine Parks & Library Departments Reduce Aquarium Subsidy by $100k

4. Proposed Budget Strategies - Continued Close Washington Pool Eliminate City Run Adult Leagues Reduce fuel consumption by 15% Reduce size of rolling stock fleet CD, WD, PACT all pay rent & expenses Eliminate Fun Wagon service – sell asset Close 1/3 of Community / Recreation Buildings HIF funds used to support SSO Issue

5. Proposed Budget Strategies - Continued Eliminate support for Sister Cities, Grandmas Marathon, Beargrease and Inline Marathon Transition to pay as you go for capital equipment Transfer responsibility for Senior Nutrition Program Implement Administrative Fine System Eliminate Staff support for many City Boards and Commissions Reform Civil Service Process Retiree Health Care / Medicare

6. Budget Principles

7. Principle #1: Fiscal Discipline ComponentStatus 1. Control over total expenditures Line item analysis of each departments budget as compared to prior years Analysis of affect of cost drivers; adjustment as needed 2. Capture revenueExamine best practices in other municipalities and adopt as appropriate 3. Transparent and accountable allocations Examination of all budgets for consistency and accountability

8. Principle #2: Effective Resource Allocation ComponentStatus 1. Improve linkage between policy, planning and expenditures Redeploying resources from lower to higher priorities 2. Determination of priorities 3. Longer than 1 year timeframe Multi-year realistic budget information and ceilings

9. Principle #3: Efficiency ComponentStatus 1. Deliver services at the lowest possible cost Implementation of efficiency measures and benchmarking 2. Transition from top- down bureaucratic to citizen-focused services Improved citizen input and service realignment

10. Operational Restructuring

11. Restructuring and Reform City government can no longer afford to provide services that could effectively be accomplished by other organizations/individuals. The goal today is to present a plan for restructuring and controlling costs, not just listing cuts The next step will be to develop comprehensive plans for implementing change.

12. Prerequisites for Restructuring PrerequisiteStatus, budget process 1. An accessible and comprehensive management information system New World update: position control, employee benefits, E-suite; other finance system enhancements 2. Improved budget processes and accountability Budget realignment; full allocation and hard budget constraints by 2010

13. Prerequisites continued PrerequisiteStatus 3. Implementation of program budgeting Identification of programs and performance measurements to take place in 2008 4. Development of real performance measurement capacity 5. Removal of impediments to reform Civil Service reform

14. Prerequisites continued PrerequisiteStatus 6. Implementation of customer-driven outlook Develop plan for customer surveys and focus groups in 2009 7. Clear definition of goalsBusiness planning process and work with Council on business plans for 2009 8. Better reporting to policy-makers 9. Stakeholder participation and buy-in Much more work needed with employees and public to identify priorities

15. Income Statements

16. Income Statement - Reserve 2008 Beginning Fund Balance $1,086,000 Current Year Changes Sale of Steam District II $2,500,000 Other one time revenues 500,000 2008 Estimated Ending Balance $4,086,000 * *Meets 5% minimum fund balance target; long term goal is to have 7% to 10% in the General Fund undesignated, unreserved fund balance.

17. Income Statement – Operational Deficit 2008 General Fund Operational Deficit $4,420,000* Recommended Budget Strategies Positions held Vacant $1,403,000 Impact Neutral Revenue $363,000 Revenue Increases$330,000 Eliminated Subsidies$100,000 Eliminated Outside Agency Support$680,000 Efficiencies/Managerial Changes$187,000 Eliminated Services/Activities $435,000 Total of Strategies $3,498,000 Current 2008 Operational Deficit $(922,000) *Includes Fund Balance Restoration of $1 Million

18. 2008 Total General Fund Impact Restore Reserve$3,000,000 Operational Strategies$3,498,000 Remaining Deficit$ 922,000 Total Recovery by Years End $7,420,000

19. Income Statement – 2009 Initial 2009 General Fund Operational Deficit $8,360,000 2008 Permanent Fixes $3,379,000 Current 2009 Operating Deficit $4,981,000 Recommended Budget Strategies Neutral Revenue Efficiencies $750,000 Revenue Increases $750,000 Recovery of Cost for Services $200,000 Eliminated Outside Agency Support $300,000 Efficiencies/Managerial Changes $2,000,000 Eliminated Services/Activities $1,000,000 Total of Strategies $5,000,000

20. Additional Strategies Lists developed from ideas provided by the administration, staff, union representatives and the public Expense reduction/revenue enhancement list Eliminated services/task list Operational efficiencies/managerial improvements list

21. Next Steps

22. Budget resolution will be presented on June 19 Develop and implement plans regarding each of the recommendations Work with community groups to clarify implications for 2008 and beyond Educate the public regarding service reductions and process changes

23. Questions?