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

2. CITY OF GARY AGENDA INTRODUCTION INTRODUCTION RECENT FINANCIAL SITUATIONS RECENT FINANCIAL SITUATIONS PROPOSED BUDGETS 2010 PROPOSED BUDGETS 2010 SUMMARY SUMMARY CONCLUSION CONCLUSION

3. INTRODUCTION The City of Gary, Indiana is seeking assistance from the Distressed Unit Appeal Board pursuant to I.C. 6-1.1-20.3-6 et. seq. Relief from the application of the credit against tax liability established under I.C. 6-1.1-20.6 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. 6-1.1-20.3-6 et. seq. Relief from the application of the credit against tax liability established under I.C. 6-1.1-20.6 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. 6-1.1-20.6, the City of Gary would be required to reduce its tax levy in the amount of $30 million in 2009 and $36 million in 2010. Using these figures, the City would have to reduce its budget by nearly 57% from its 2008 level. Under the provisions of I.C. 6-1.1-20.6, the City of Gary would be required to reduce its tax levy in the amount of $30 million in 2009 and $36 million in 2010. Using these figures, the City would have to reduce its budget by nearly 57% from its 2008 level.

4. INTRODUCTION, cont’d Although the City has reduced its levy for 2010 to $45M 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 $45M 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 a continuation of its 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 a continuation of its 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.

5. IC 6-1.1-20.6– STATE MANDATED BUDGET 2009 -2010 LEVY REDUCTIONS Gary Civil City Gary Civil City 2009 Levy Reduction- $30,305,930 2009 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 $63,684,886 2010 Levy Reduction - $36,337,798 2010 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 represent pre-1996 Budgets

6. RECENT FINANCIAL SITUATIONS 2009 BUDGET REDUCTIONS Eliminated 365 positions from the 2009 budget between January 1, 2009 and June 15, 2009. Reduced Civil City employees from 1,356 to 991. Eliminated 365 positions from the 2009 budget between January 1, 2009 and June 15, 2009. 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

7. 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 ) Departments Changes Included: Departments Changes Included: Consolidated Health Dept. and Community Services Consolidated Health Dept. and Community Services Eliminated Status of Women Dept. (except Commissioners) Eliminated Status of Women Dept. (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 Mayor’s Dept, City Operations, and Public Information Consolidated Mayor’s 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

8. CITY OF GARY FINANCIAL LEVY REDUCTION PLAN 2010-2012 OBJECTIVE: To petition DUAB according to IC 6-1.1- 20.6, and reduce Civil City property tax levy by $36M between years 2010-2012, at a phase-in rate, which would allow the City to: Maintain maximum efficiency allowable in public service from reduced gradual levels of property tax revenues. Maintain maximum efficiency allowable in public service from reduced gradual levels of property tax revenues. Spur economic development to increase a declining property tax base. Spur economic development to increase a declining property tax base. Obtain additional grant funding for pertinent services. Obtain additional grant funding for pertinent services.

9. CITY OF GARY 2010-2012 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

10. YEAR 2009 PROPOSED and IMPLEMENTED REDUCTIONS FOR 2009 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)

11. YEAR 2009 PROPOSED and IMPLEMENTED REDUCTIONS FOR 2009 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) Reorganize insurance plan to reduce percentage of employer’s portion and increase funds available to cover self-insurance medical claims (In process) Reorganize insurance plan to reduce percentage of employer’s portion and increase funds available to cover self-insurance medical claims (In process) Negotiating with Fire Department Union to reduce clothing allowance, change sick leave requirements, change holiday compensation. (In process) Negotiating with Fire Department Union to reduce clothing allowance, change sick leave requirements, change holiday compensation. (In process) Negotiating with Teamsters to remove payouts of sick days upon termination. (In process) Negotiating with Teamsters to remove payouts of sick days upon termination. (In process) Negotiating with Police and Fire to pay 100% of medical insurance employee premiums (same as civilian), instead of 25% of medical insurance employee premiums (In process) Negotiating with Police and Fire to pay 100% of medical insurance employee premiums (same as civilian), instead of 25% of medical insurance employee premiums (In process)

12. YEAR 2009, Continued PROPOSED and IMPLEMENTED REDUCTIONS FOR 2009 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)

13. YEAR 2009, Continued PROPOSED and IMPLEMENTED REDUCTIONS FOR 2009 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)

14. Year 2009, Continued PROPOSED and IMPLEMENTED REDUCTIONS FOR 2009 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 31 2010 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 31 2010 to increase revenues for licenses and permits. (Yes, in process)

15. 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) Eliminated the Civil Defense Department (No, renamed dept) Eliminated the Civil Defense Department (No, renamed dept) Dissolve Labor Relations Department (No, did not fund) Dissolve Labor Relations Department (No, did not fund) Transfer Health Dept. Health services to County; maintain Community Services) (No, exploring other alternatives) Transfer Health Dept. Health services to County; maintain Community Services) (No, exploring other alternatives) 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 *Subject to fiscal monitor recommendation

16. 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) Reduction of Excess Levy Reduction of Excess Levy

17. ANALYSIS OF MAJOR BUDGET EXPENSES Police and Fire Budgets are 48% of Total 2010 Budget Police and Fire Budgets are 48% of Total 2010 Budget Civilian Budget is 30% of Total 2010 Budget Civilian Budget is 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

18. YEAR 2010 OPERATIONS: OPERATIONS: Adjust costs that should be charged to other funds that have been traditionally charged to the General Fund (Yes, still Adjust costs that should be charged to other funds that have been traditionally charged to the General Fund (Yes, still in process) 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) Negotiate with Police to reduce clothing allowances, 90- day severance pay outs for retirees, and other costly compensation. (In Process) Negotiate with Police to reduce clothing allowances, 90- day severance pay outs for retirees, and other costly compensation. (In Process) Eliminate Grants and Subsidies from the tax-based funds, except for Grant matches. (Yes) Eliminate Grants and Subsidies from the tax-based funds, except for Grant matches. (Yes) *Subject to fiscal monitor recommendation

19. 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 (In process) Incorporate more effective procedures for licenses renewal and inspections, to encourage more business owners to purchase and renew their licenses and permits (In process) Incorporating other revenue generating mechanisms for EMS, such as transport services, and accurate and timely filing of reports transport services (Conversing with Methodist Hosp. regarding such services from City of Gary EMS becoming a Incorporating other revenue generating mechanisms for EMS, such as transport services, and accurate and timely filing of reports transport services (Conversing with Methodist Hosp. regarding such services from City of Gary EMS 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) *Subject to fiscal monitor recommendation

20. YEAR 2011 PERSONNEL: Reduced workforce by 161 positions by the following means: PERSONNEL: Reduced workforce by 161 positions by the following means: Eliminate all Maintenance II and Park Maintenance positions. Contract out services. Eliminate all Maintenance II and Park Maintenance positions. Contract out services. Eliminate 35 patrolmen positions Eliminate 35 patrolmen positions Eliminate 28 Communication Operator positions, and transfer dispatch to County. Eliminate 28 Communication Operator positions, and transfer dispatch to County. Eliminate 34 Firefighter positions Eliminate 34 Firefighter positions Outsource Vehicle Maintenance Outsource Vehicle Maintenance Various other departmental positions eliminated Various other departmental positions eliminated *Subject to fiscal monitor recommendation

21. YEAR 2011, CONTINUED OPERATIONS: OPERATIONS: Reduce Salary related benefits from eliminated positions Reduce Salary related benefits from eliminated positions Reduce cost of repair parts and repairs to equipment Reduce cost of repair parts and repairs to equipment Reduce interest related to TAW Reduce interest related to TAW Reduce insurance cost in premiums and claims Reduce insurance cost in premiums and claims REVENUES: REVENUES: Reductions in outstanding loans, thereby reducing revenues needed to off set this expense Reductions in outstanding loans, thereby reducing revenues needed to off set this expense *Subject to fiscal monitor recommendation

22. YEAR 2012 OPERATIONS OPERATIONS Reduced cost of leasing copiers, printers, etc. as a result of staff reductions in 2010-2011 Reduced cost of leasing copiers, printers, etc. as a result of staff reductions in 2010-2011 REVENUES: REVENUES: Increased revenues from additional Grants Increased revenues from additional Grants Assumes passage of 1% option income tax, or some other local tax, or some other legislative actions to increase revenue Assumes passage of 1% option income tax, or some other local tax, or some other legislative actions to increase revenue *Subject to fiscal monitor recommendation

23. BUDGET AND LEVY COMPARISON

24. 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 2012 Assist in legislation that will mandate compliance to budget certification and property tax distribution 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 distribution 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.

25. 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 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 Allow 2 nd class cities to adopt a Local Option City Income Tax, Allow 2 nd class cities to adopt a Local Option City Income Tax, Revise IC 6-1.1-20.6 to recognize and address the fact that urban government has challenges that are different from suburban government. Current levels of Circuit Breaker Caps, and the withdrawal of PTRC’s jeopardizes governmental units ability to provide safe cities and efficient services. Revise IC 6-1.1-20.6 to recognize and address the fact that urban government has challenges that are different from suburban government. Current levels of Circuit Breaker Caps, and the withdrawal of PTRC’s jeopardizes governmental units ability to provide safe cities and efficient services.

26. 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.

27. ANY QUESTIONS?