Monday, September 30, 2013

Facing Challenges & Seizing Opportunities in the "Decade of Local Government"


The next 10 years will most likely be a defining period for local governments, including your own. In a June 27, 2012, Governing magazine article, ICMA Executive Director Bob O’Neill declared this time as “the next decade [for local government] will be a time in which the fiscal woes of federal and state governments will leave local and regional governments on their own, struggling to balance the need for innovation against the necessity of making tough choices.

“It will also be a decade in which local government will lead the way in developing creative solutions to extraordinary problems. There are a number of reasons to be optimistic about this coming decade of local government.”

Even op-ed columnist David Brooks published an editorial in the June 6 New York Times entitled "The Power Inversion," in which he echoes O’Neill’s observations. Brooks writes, “Washington paralysis is already leading to a power inversion. As the federal government becomes less energetic, city governments become more so.”

Notwithstanding all the extraordinary opportunities ahead, there are also extraordinary challenges that will need to be confronted by all who serve as local government leaders. In a substantial number of communities, the scarcity of available resources is painfully apparent and has visibly impacted managers’ ability not only to preserve and maintain the status quo but also to tackle emerging issues and address the day-to-day needs of residents, businesses, and visitors.

This scarcity can only be made worse by the problems plaguing federal and state agencies that now might be landing at local government’s doorstep.

 

A New Environment


The recession may officially be over according to economists, but unlike the normal ebb and flow of the past, the picture is dramatically different than anything managers have experienced during other economic cycles. Local governments are realizing that they will not simply return to the status quo that existed before the recession.

Managers are coming to grips with an environment in which:
  • Revenues will at best remain flat or continue to decline.
  • Costs associated with energy, fuel, health care, and basic supplies will continue to grow.
  • Taxpayers can't afford to pay more because of the recession’s impact on their own personal finances.
Taxpayers are perhaps expecting local government to provide even more support in meeting their social, physical, environmental, and economic needs, especially with the declining assistance in these same areas from federal and/or state sources.


How does local government seize this incredible opportunity, embracing O’Neill’s decade of local government, but still continue to offer the important, even vital, services required by communities in a responsive and timely fashion?

What can managers do to successfully navigate these challenging waters so that their communities become better, stronger, and more relevant than ever before?

Let’s consider a completely different perspective. In order to achieve success and accept the challenges that are ahead, we must see more clearly how to manage, use, and optimize resources in a much different way than has been done in the past. This new environment demands a new vision of the future.

For managers, resources can appear to be scarce because of our tightly clenched grasp on some commonly held assumptions from which they need to break free. Perhaps there is a different way to see things.

Fiscal Transparency


First and foremost, local governments must be clear and transparent about what truly is their picture
of fiscal health. Communicating that picture simply, clearly, and understandably without volumes of numbers, spreadsheets, tables, and an endless series of charts is frankly a challenge that has plagued managers for years. If managers are going to be able to demonstrate financial reality internally to elected officials and staff, and externally to residents, they have to find better ways to make fiscal situations understandable and transparent to everyone.

Finding creative, clear, and nontechnical ways to demonstrate what the next five to 10 years might look like is a must if people are going to address fiscal concerns. All too often, local governments are unable to make sound, timely decisions regarding investing in new resources, starting new programs, or initiating major capital projects because elected officials, local government managers, and staff members are paralyzed by the uncertainty of whether they actually have enough money to appropriate for these purposes. Developing a long-term financial forecast is key to gaining a better understanding of what the future might hold.

Differentiating between one-time and ongoing revenues and expenditures to clearly understand how finances are aligned and where they might be out of alignment is a critical element in eliminating this uncertainty. Managers understand this principle but rarely make a concerted effort to be deliberate about depicting this separation in financial forecasts or budget documents. The need for this separation is understood but without actually “seeing it,” managers may not be aware of its impact on the ability to manage and maximize resources. Not clearly separating the picture into these two revenue categories may obscure some serious looming fiscal problems.

How many officials, for example, have approved a capital project without considering the implications of the associated ongoing costs? Newly constructed public facilities have sat vacant because of a failure to separately identify and depict the impact of ongoing operational costs.
Adhering to this philosophy of differentiating between one-time and ongoing revenues and expenditures also helps ensure that an organization “spends within its means.” This concept is not just about balancing the budget but allows managers to be clear that ongoing operational expenses are funded through ongoing revenue streams. Using such one-time monies as fund balance or grants to support ongoing operations is an unsustainable practice. “How much do you need?” Isn’t this the question that leads off most local government budget discussions? It’s certainly a far easier question to answer, but shouldn’t the conversation begin with the more difficult and oftentimes nebulous question of “How much do we have?”

Devoting more time to revenue analysis is a critical element in gaining a clearer understanding of 1) what factors truly drive our individual revenue streams; 2) how to develop more meaningful and accurate multiyear forecasts, and, most important; 3) how much is actually available to spend. If managers have more clarity about what factors might impact revenue sources, they can improve their ability to foresee those changes before they happen and react to them before they arrive on the doorstep. By taking a more diagnostic approach, it isn’t terribly difficult to determine where revenues specifically come from and assess what internal or external forces might cause them to grow and shrink.

Click to read the rest of the October 2013 ICMA PM Magazine cover story Embracing the Decade of "Local Government" - How to Face Challenges and Seize Opportunities written by Jon Johnson and Chris Fabian of the Center for Priority Based Budgeting and Cheryl Hilvert of ICMA.

Keep an eye on the CPBB blog for further updates. Sign-up for our social media pages so you stay connected with TEAM CPBB!

 facebook  twitter  LinkedIn

If you're thinking of jumping into the world of Fiscal Health and Wellness through Priority Based Budgeting we would certainly like to be part of your efforts! Contact us to schedule a free webinar and identify the best CPBB service option(s) to meet your organization's particular needs.
 


"DATA VISUALIZATION" for Local Government



Thursday, September 26, 2013

It's a Wrap! CPBB Highlights from the 2013 ICMA Annual Conference


The 99th Annual ICMA Conference held in Boston last week was a supreme success! With thousands of creative, innovative and enthusiastic local government professionals in attendance, the energy was tremendous! Deemed as the largest annual event in the world for local government professionals, the event exceeded all expectations!

The Center for Priority Based Budgeting was a proud presenter, exhibitor and participant at the conference. The CPBB is proud to be recognized as a partner of ICMA's Center for Management Strategies. In 2012, ICMA established CPBB's Fiscal Health and Wellness through Priority Based Budgeting as a leading practice for local governments.


The CPBB presented Leading Your Organization (and Elected Officials) to Fiscal Health & Wellness through Priority Based Budgeting on Sunday, September 22nd, as part of ICMA's Leadership Institute curriculum. The presentation was sold-out and was enthusiastically received by those in attendance. For those who were unable to attend, please see these links to our full presentation slides:

Additionally, the CPBB exhibited alongside ICMA's Center for Management Strategies (CMS) in the ICMA Pavilion. We were so pleased to exhibit alongside all the other "leading practice" practitioners. We were able to have dozens of fantastic conversations with innovative local government leaders who have and/or are very interested in implementing the CPBB concepts of Fiscal Health and Priority Based Budgeting in their communities. Thanks for all who took the time to stop by and chat with us!

As true believers in the Decade of Local Government, the CPBB was actively promoting the fact that local governments cannot continue to do things the way they always have. Of most interest to us is the concept of the “intended use” of resources based on the results a community desires to achieve, or what we would call “alignment of resources with results” in Priority Based Budgeting.



As we wrote about in 2012 for PM Magazine, Priority Based Budgeting has unveiled a way for local governments to spend within their means by continuously focusing on the results most relevant to their communities and the programs that influence those results to the highest possible degree. The concept involves leveraging each tax dollar so programs with the greatest impact on results are distinguished from programs with a lesser influence. 

In fact, communities that have embraced it have redefined the notion of return on investment—it’s a
“return on results,” a societal return, where each dollar is evaluated in terms of its influence on the community. One dollar spent on a program achieving multiple results is a leveraged dollar – it’s as if it is being spent again and again to achieve the results that the community is in business to achieve. 

(For more on the City of Boulder's Resource Re-allocation Breakthrough we offer this graphic depiction on ICMA’s Center for Management Strategies blog.)

Central to PBB is the idea that all local government organizations can determine the role they're suited to serve best within a community, and amongst all potential service providers within a region - identifying the overlap, the potential for partnerships, consolidated services, and spinning off of services between city, county, school district, non-profit and private sector organizations. The end goal is nothing short of the most efficient use of a community's resources as a whole, to achieve the results of a region – it’s "bang for the buck" for the provision of public services.

Most importantly,  ICMA conference attendees have fully embraced these innovative concepts and are actively implementing Fiscal Health and Wellness through Priority Based Budgeting to the significant benefit of their communities.

Thanks again to ICMA, conference sponsors and exhibitors and all those who attended to make this an amazing and productive event! We already can't wait for the 2014 ICMA Conference and the opportunity to celebrate ICMA's 100th birthday. See you in Charlotte!

Keep an eye on the CPBB blog for further updates. Sign-up for our social media pages so you stay connected with TEAM CPBB!

 facebook  twitter  LinkedIn

If you're thinking of jumping into the world of Fiscal Health and Wellness through Priority Based Budgeting we would certainly like to be part of your efforts! Contact us to schedule a free webinar and identify the best CPBB service option(s) to meet your organization's particular needs.
 


Sunday, September 15, 2013

What's YOUR Local Government Definition of Victory?


In our work at the Center for Priority Based Budgeting, we've been overwhelmed by success stories stemming from partnerships, involving the convergence of results with what any given community wishes to achieve, and sound economic development plans. In fact, one of the key reasons cited by so many of our most recent PBB implementers for initiating the process is their desire to identify the most opportune partnerships, both public-public and public-private partnerships, worth pursuing in support of achieving the community's well defined results. We're so excited about this, it begs the question: at what point does Priority Based Budgeting become, in part, the systematic discovery of Priority Based Partnerships?


What is interesting is that the very term "partnership" lacks the power to truly convey the significance of the solutions that can truly come about; the kinds of solutions we're seeing unfolding as the Metropolitan Revolution gains traction across the country. Sometimes, a "partnership" is the recognition that, in order to achieve a community's intended Results, it's in the best interest of local government to assume the role of "facilitator" rather than leader. Detroit Mayor David Bing was quoted in the New York Times, depicting his view of the role of the City in facilitating partnerships and economic development: "My job is to knock down as many barriers as possible and get out the way."

We are moved by this glimpse of what becomes possible when local government understands the Results it is striving to achieve, it's role in achieving them (even when that role is less prominent), and aligns resources to bolster success. The Decade of Local Government 2.0, and the opportunity to achieve Future City USA status, stands for all of us in local government. The opportunity is upon us!

Your Definition of Victory?

Recently Alan Webber, Founding Editor of Fast Company magazine, delivered the controversial and innovative key note message to kick-off TechFestNW in Portland, Oregon. Webber stated  "In 1993, in the first issue of Fast Company, we published a brilliant essay by Mark Fuller, a former HBS professor, co-founder of Monitor Consulting, and a military strategy expert. The essay was called “Business As War,” and it compared business strategy—or I suppose urban strategy—to military strategy."

"In Mark's essay he raised a provocative question about business strategy, using the context of the
Vietnam War. How was it possible, he asked, for the United States to win every battle in the Vietnam War, and lose the war?

The answer, he said, was that the United States failed to ask the last question first. The last question, whether for a business or a military engagement—or for a city—is, "What's your definition of victory?" 

Or to put it a slightly different way, "What's the point of the exercise?"

If you go to war, and you don't have a clear definition of victory, how do you know how many resources to commit, how to make the case for the conflict with your own people, how long to stay, what "results" you're trying to achieve, or when to leave—or even whether you're winning or losing?

The same is true for a business—or, for that matter, for a city seeking a strategy. You need to be able to answer the question, "What's your definition of victory?" "What's the point of the exercise?" "What are the Results your community seeks to achieve?" so you can begin to know why you are doing what you are doing, and how well you are doing it.

Which is why having a definition of victory—why asking the last question first—establishing the results a community seeks to achieve -- is fundamental to any military engagement, any business strategy or entrepreneurial startup, or any urban planning exercise.

Portland, Oregon: A Case Study


From Webber's keynote address: In 1970 I graduated from college. In the fall, my college roommate and I piled our stuff into my blue four-on-the-floor 1968 Mustang and drove across country to Portland, Oregon. It was late afternoon, early evening when I crossed the Steel Bridge and found a place to park in the run-down warehouse district behind the railroad tracks next to Skid Row. I remember getting out of my car, looking toward the non-too-tall office buildings in what passed for downtown 40-some years ago, and thinking, “Well, here I am. In the big city.” 

In fact, what I quickly learned—what I would have already known if I’d grown up in an actual big city or gone to college in one—was that Portland was far from a big city. Portland in 1970 was more like the rest of America in the 1950s. It was a backwater town—some would even say a jerkwater town. But to use those words is not to be unkind or even harshly judgmental. If Portland in 1970 was America in the 1950s, there were a lot of things to like about it. In its conservative, slow-to-change way, Portland had managed to avoid many of the faddish traps and trendy disasters that faster-moving, more dynamic cities had already succumbed to.

The best and brightest of America’s prestigious urban planners, transportation experts, economic development gurus, and social engineers had already laid waste to most of the country’s big cities. Urban renewal had been used as a tool to bulldoze slums, displace minorities, and erect sterile single-use zones that in many cases reflected an architectural style best described as “Mussolini modern.” Everyone who counted knew that freeways were the wave of the future—that massive concrete channels needed to be carved through old and uninteresting city neighborhoods to make it faster, easier, and more convenient for former city dwellers—the ones with money and choice—to make the morning commute from the sprawling suburbs to the rapidly rotting urban core—and back again at night. All that old housing stock, all those old neighborhoods, what difference did they make? They were the past.

As were downtowns. In keeping with the best thinking of the best minds, downtowns had been zoned off by function. So there was a government center, where federal, state, and local government buildings were clustered together. There was the financial district, where high-end office space was grouped. The performing arts deserved their own buildings all in the same area, as did the shopping district, the hotel and hospitality area—and so on. All of those zones contributed to a sense of order—and an overwhelming sense of sterility, a profound lack of diversity and a total absence of the energy engendered by mixed uses. Not that it mattered all that much, since downtowns operated more or less like bathtubs, filling up in the morning rush hour, emptying out in the evening rush hour, and then remaining silent, empty and deserted until the next morning brought the next wave of commuters. And again, since everyone knew, absolutely knew, that suburban shopping malls and office parks were the future, what difference did it make if the old downtowns, once the heart of cities, gradually shriveled up and died?

The '70's

Now the good news for Portland in 1970 was that the city leaders were so conservative, so slow, so
sclerotic, they’d managed to miss almost all of these carefully planned catastrophes. In that sense, Portland was like that amazing house that lucky homebuyers sometimes stumble into. The place has been owned by the same couple for 30 years, and while they haven’t done anything to improve it, they also haven’t done anything to ruin it. At least not quite yet. Because as I quickly learned after I’d been in town for a year or so, Portland was at an inflection point. While nothing had been done yet to sentence Portland to the same fate as almost every other American city—and in particular, the country’s sprawling Western cities—there were a series of looming decisions and simmering crises that Portlanders were about to face. And how those inescapable choices got made would determine the face and the fate of the city for years, for decades to come.

Now if this were a different group in a different city, I’d do my best to draw out the drama of Portland at its moment of decision. How do you revitalize a city where the mayor and city council averages more than 70 years of age—and makes their decisions over private lunches in a private room in the Congress Hotel before acting out political kabuki in the public council sessions? How do you even begin to clean up the air in a city that violates Federal clean air standards three days out of five? How do you kill not one freeway—the ill-named Mt. Hood Freeway that never actually was designed to go to Mt. Hood—but an entire freeway map designed for the city after World War II by legendary New York master builder Robert Moses? A freeway map that described Portland as a mini-LA, a shell of a city with one out of every 10 houses either bulldozed to make way for a freeway or sitting directly adjacent to one? How do you convince downtown merchants that it is in their own best interests to rip up the two most popular streets and install an untested, unproven transit mall? Or impose an absolute lid on the number of downtown parking spaces—when everybody knows that unlimited free parking at suburban shopping malls would mean the demise of downtown? How do you convince the Port of Portland that its plan to extend a runway into the Columbia River isn’t a bad idea only because of its impact on that historic river. It’s also a bad idea because of the impact on the neighborhoods in Northeast Portland of thousands of additional cars streaming through their streets to get to the expanded airport—with no thought of mass transit as an option?

Portland’s vaunted livability was preserved, and today, 40 years later, it is easily America’s favorite big-little city with an unparalleled quality of life, great coffee, artisanal restaurants, more breweries per capita than any city on earth, and its own cult TV show. It is known far and wide as the place young people come to retire.

Portland as an Urban Startup

Except that’s not quite how—or more importantly—why it happened. The real story has a much more direct bearing on this gathering—and on what you do next on Portland’s behalf as a result of this gathering. Make no mistake. Portland in 2013 is at a “what’s next?” moment, much as it was in 1970. Except in 1970 we were trying to save Portland from urban ruin. In 2013 you have the opportunity to propel Portland to urban greatness.


The first thing you need to know about Portland circa 1970 was that it was an urban version of an entrepreneurial startup. We didn’t know it at the time. And the language of entrepreneurship wasn’t part of the public conversation the way it is today. But that’s what it was. What we were advancing back then was an alternative business model for a city—even though nobody at the time had heard of business models.

But think about it: What Portland did in the 1970s was to zig when everyone else zagged. We didn’t try to be more like Seattle or more like San Francisco. We tried to be more like Portland—the best Portland we could imagine and then implement.

To do that, we disrupted the status quo. We challenged conventional wisdom. We advanced an alternative theory of the case—as they say in business school—one that ran counter to the way every other American city was developing at the time. We were an urban Apple: Portland dared to “think different.”

What's Next?

Which leads me to the first question that I’d like to offer as a topic for your ongoing conversation and debate—a “what’s next?” question for the Portlanders of today: What’s Portland’s current business model? What’s the theory of the case going forward? What’s your version of Portland 2.0? 

The second thing you need to know about Portland in the 1970s is that livability was never the goal. True, it was always a component of a well-integrated urban strategy. But it was always a building block, an essential Portland attribute and a deeply held Oregon value. But it wasn’t the definition of victory for the city. It was an input for creating the Portland strategy, but it was never the sole output.

So if livability was an input, not a final goal, what was the point of the exercise 40 years ago in Portland, the definition of victory? The answer was something we called the "population strategy.”

The population strategy was a product of some world-class detective work by David Yaden, who, at the time, was Portland’s premier pollster. Both going door-to-door to conduct interviews and looking deeply at data on emerging demographic trends, David discovered that Portland was at risk of becoming a city with its middle missing—that is, if political, economic, and social trends were to continue, Portland would end up as a city with very old people and very young people—and very few people in the middle.

Why did that matter? Because the people in the middle—the middle-income, employed families with children—are the people who provide the glue that holds a healthy city together. They’re the people who volunteer to be Cub Scout and Brownie leaders, soccer coaches and PTA presidents. They get involved in their neighborhoods. They keep eyes on the street. They turn out to vote. If a city is fundamentally about more choice for more people, they are the people who enable and amplify—and often pay for—more choice for more people.

With David’s analysis, we had our definition of victory—we knew what we were solving for in the
equation that was Portland. Our definition of victory was, how do we retain and attract middle-income families with children? How do we get them to vote with their feet? How do we get them to stay in the city, to cast their vote for the city? Livability would absolutely help influence their choice. But so would good schools. And quality jobs in convenient locations for the residents of Portland’s neighborhoods. So would safer, calmer streets, and sidewalks with lower levels of stranger-to-stranger street crime. And better parks with more choices for recreation inside the city.

Here’s the deal—for business entrepreneurs or urban strategists: Once you know your definition of victory, then you can begin to connect the elements of your strategy into a coherent, internally consistent whole. But until you have answered that fundamental question, until you know the definition of victory, you really have no strategy. You have an assortment of programs, a loose collection of policy initiatives—but no clear strategy.

PDX's Definition of Victory?

So the second “what’s next?” question for Portlanders today is: What is your definition of victory? Forty years after the design of the population strategy, simply continuing with that original goal seems an unlikely answer—especially at a time when, from all appearances, the success of that strategy has, inevitably, caused a new problem: the displacement of poorer Portlanders to the inner rings of the suburbs. So perhaps a new goal needs to be about re-balancing the city, about economic and social equity for all Portlanders, if this is to be a great city.

A second question that needs to be addressed also comes, I believe, from that misreading of livability as a goal rather than an input. Making livability and environmental sustainability a hallmark of the Portland story has tended to obscure the key role that jobs and economic development always played in that original strategy. From the beginning, it was always clear that the environment and the economy were inextricably linked. Two sides of one coin. Far from being mutually exclusive, a healthy economy combined with a healthy environment would make the Portland strategy work—at every step of the way. In fact, I don’t think it would be wrong to say that the livability agenda was only possible because of a pragmatic business strategy.

Take the Mt. Hood Freeway. It could only be killed once it became clear that neither the money for the freeway nor the construction jobs associated with it would be lost—only transferred to light rail and surface street improvements across the entire metropolitan region. When that transfer became possible, the Mt. Hood Freeway became both a business deal and an environmental deal.

The Downtown Plan became real not when it was adopted by the City Council—there’d been too many doorstop-sized plans passed over the years. It became a living, breathing vision for downtown when the mayor and his team made a pilgrimage to Seattle, sat down with the Nordstrom family and offered them a package deal that resulted in the first new department store built in downtown Portland in decades—and on the exact block where the plan called for such an investment from the private sector. That business deal gave the plan credibility—and allowed the rest of the plan to move forward.

Today, issues of livability seem to overshadow issues of economic viability. And that raises another “what’s next?” question for Portland: Where is the pragmatic economic vision that will support and sustain, in pure business terms, the city’s treasured quality of life initiatives? Will that economic agenda come from a vibrant tech community? Will it emerge from hackathons and creative apps? Will it come from small and medium size businesses that need help to reach critical mass? How can Portland afford to pay the bills that are part of a genuinely sustainable strategy?

How Do You Overthrow a Successful City? 

How do you overcome the complacency that comes with success? How do you resist the temptation
to believe the hype that success always engenders? What does it take to disrupt yourself when the rest of the world is celebrating your success? How will you overthrow a successful city? How will you take the heritage of Portland as it is now, and do the hard disruptive, urban entrepreneurial work to take this good, livable city and take it forward to make it a great world-class city?

That’s the ultimate “what’s next?” question that stands before the Portlanders of today. And it’s a much harder, and a much easier, task than the one we faced 40 years ago. It’s harder because success is such a seductive trap. Success breeds its own kind of complacency. It’s why so many old and successful companies stop innovating, loose their creative spark—and stop asking challenging questions in the service of disruptive answers.

The success of the original Portland strategy should lower the barriers to experimentation; you have a sound basis from which to try new things—knowing that the fundamentals are in place, the values are sound and the underlying framework makes sense. Portland works. And now the question is how to make it work even better, for even more people, in even more ways.

And you have more tools with which to work. Forty years ago, infrastructure investment was more or less limited to the hardware of the city—housing stock, transit lines, parks. Today, you have the software of the city with which to experiment—social media, the rise of the sharing economy and the evolution of the city not as a bunch of buildings, but as a platform, an operating system.

And you have the benefit of perspective—a way of looking at and evaluating the two largest issues confronting the whole country: the challenge of fixing public education and the need to address the growing gap between the rich and the poor—our current national crisis of the missing middle, the middle class.

You have something almost no other city in the country has: the social and political capital with which to work, to grow, to build, to create—yes, to disrupt—your way to greatness. When you look at the cities of America, Portland is truly unique. There is no other city in this country that could boast of its livability—and then go beyond that to aspire to genuine greatness.

That’s the “what’s next” question for Portland today.

That’s the “what’s next” opportunity for Portland—and you—to embrace.

 

The Implications

For many of us who have heard this argument before, and who have reasoned tirelessly either for it, or against it, we must still be able to ponder the implications – what are the best and most applicable concepts of the business world that might actually help us in local government management? Of most interest to us is the concept of the “intended use” of resources based on the results a community desires to achieve, or what we would call “alignment of resources with results” in Priority Based Budgeting.


As we wrote about in 2012 for PM Magazine, Priority Based Budgeting has unveiled a way for local governments to spend within their means by continuously focusing on the results most relevant to their communities and the programs that influence those results to the highest possible degree. The concept involves leveraging each tax dollar so programs with the greatest impact on results are distinguished from programs with a lesser influence. 

In fact, communities that have embraced it have redefined the notion of return on investment—it’s a
“return on results,” a societal return, where each dollar is evaluated in terms of its influence on the community. One dollar spent on a program achieving multiple results is a leveraged dollar – it’s as if it is being spent again and again to achieve the results that the community is in business to achieve. 

(For more on the City of Boulder's Resource Re-allocation Breakthrough we offer this graphic depiction on ICMA’s Center for Management Strategies blog.)

Central to PBB is the idea that all local government organizations can determine the role they're suited to serve best within a community, and amongst all potential service providers within a region - identifying the overlap, the potential for partnerships, consolidated services, and spinning off of services between city, county, school district, non-profit and private sector organizations. The end goal is nothing short of the most efficient use of a community's resources as a whole, to achieve the results of a region – it’s "bang for the buck" for the provision of public services.


Keep an eye on the CPBB blog for further updates. Sign-up for our social media pages so you stay connected with TEAM CPBB!

 facebook  twitter  LinkedIn

If you're thinking of jumping into the world of Fiscal Health and Wellness through Priority Based Budgeting we would certainly like to be part of your efforts! Contact us to schedule a free webinar and identify the best CPBB service option(s) to meet your organization's particular needs.
 


Friday, September 6, 2013

Opportunity Detroit! Future City USA?



Perhaps no other US city is in a position to more dramatically reshape their future than the City of Detroit. A city that has been shrinking and deteriorating for the better part of the last six decades is exhibiting signs of a turnaround. A city better known for violent crime, failure of government leadership, urban decay and massive financial challenges is showing signs of life. Detroit has held the sway of the media due to its bankruptcy filing earlier this year: the largest municipal bankruptcy filing in American history.

But recently, Detroit has become a media darling for an entirely different reason. A massive resurgence in downtown Detroit, driven by billions in public and private investment and a vibrancy and optimism in citizens new and old. The Center for Priority Based Budgeting investigated this undeniable burst of enthusiasm and growth and came away convinced that indeed an economic revolution is happening in Detroit. But can it be sustained, will the investment reach Detroit's neighborhoods and what does Detroit's future really look like? With this in mind, the Center for Priority Based Budgeting has once again immersed itself in the trenches of this issue, and gone straight into perhaps the most interesting experiment in economic development we could imagine: the complete economic redevelopment of a City.

Our first article, focusing on the neighborhoods of the City of Detroit, Reversing the Trend: Might Corktown Hold the Key to a Greater Detroit Neighborhood Resurgence?, provided background context on the city's challenges and how entrepreneurship is playing a driving role in reshaping the downtown core and, slowly, the inner city neighborhoods. Our second article, Detroit: Bankrupt, but Not Broken, cast a spotlight on city governance through an interview with Nolan Finely of the Detroit Free Press. This article will focus more on Detroit's burgeoning entrepreneurial start-up and tech sector, and how this explosion of new business development is having a transformative effect on the city.

The Rise of the Creative Class

Amanda Lewan represents the new wave of Detroit entrepreneurs. She grew up in Michigan and attended Michigan State University obtaining a creative writing degree. Upon graduation, she attended Wayne State University and obtained a Masters in Creative Writing. While attending Wayne State she became part of a team that created Michipreneur, a 9-month old start-up company with a focus on covering the Detroit tech and start-up scene. It used to be typical of many Michigan college graduates to plan on leaving the city and state upon graduating. But now more and more college graduates are staying and jumping into Detroit's burgeoning start-up scene, and Amanda decided to stay and assume the Editor and Community Manager post of Michipreneur. Amanda adds, "I thought for sure I would leave, but was inspired to stay."

Amanda's enthusiasm for the Detroit tech and start-up scene doesn't end at Michipreneur. Through her involvement in the entrepreneurial scene, she met Bamboo Detroit co-founders Dave Anderson, Mike Ferlito and Brian Davis and now holds the title of Bamboo "Boss" (aka Communications and Social Media Manager). The Bamboo Detroit motto is "what can we do for Detroit?" Bamboo is primarily a collaborate entrepreneurial workspace located in downtown Detroit, but is driven by a mission to further inspire the spirit in the next generation of Detroit based entrepreneurs.

And Amanda doesn't stop there. She's also the Communications Resident at D:hive Detroit.  D:hive is a physical store front in Detroit’s central business district that connects current and new citizens with the tools and resources needed to live, work, engage or start a project in the city. It is a one-stop resource center where one can find a place to live and learn how to start a new business all in one location. Through the D:hive Build program, start-up entrepreneurs can obtain all the resources they need to successfully launch a business and, if they're lucky, may be "awarded two months of rent-free retail space on the 1200 block of Woodward Ave. to test their brick-and-mortar potential in a prime location downtown" through the sister D:hive Pilot program. D:hive is an initiative funded by the Hudson Webber Foundation and managed by an Advisory Council consisting of individuals from the private, public and non-profit sectors of the community.


D:hive, along with Bizdom, the Detroit Economic Growth Corporation, InsYght, and TechTown are co-developers of the BizGrid. The BizGrid is advertised as "a physical infographic designed to help Detroit entrepreneurs navigate the landscape of organizations providing business assistance within the city." This resource rich mega-group of public and private organizations, collectively known as part of the Detroit Business Support Network, is attracting, guiding, mentoring, supporting and launching a tsunami of entrepreneurs across the city. And with the expanding support infrastructure in place for future entrepreneurs, expect more and more start-ups to be attracted to and launched from Detroit.

According to a recent study, 63 percent of recent college graduates are remaining in Michigan, up from 51 percent in 2007. If Detroit can continue to attract outside talent, while retaining and nurturing enthusiastic, educated and entrepreneurial local graduates like Amanda Lewan, start-ups like Bamboo Detroit and the D:hive resource center can expect more and more attention.

The Circus Has Not Left Town

Grand Circus is another innovative tech start-up that launched downtown in February 2013. Taking their name from Detroit's historic Grand Circus Park (which is directly across the street from their Broderick Tower headquarters), Grand Circus is "a training institute in the heart of downtown Detroit on a mission to elevate the tech community. We offer training, co-working, and event hosting — all under the same tent." Their true niche, according to Grand Circus Director of Marketing & Communications Kelly LaPierre, is a "flipped classroom model that provides training with a purpose in support of the thriving tech community."

Kelly is another member of the growing class of Detroit natives who are focused on remaining committed to the city. She graduated from the University of Michigan and went on to obtain her MBA from Harvard. Kelly's expertise is in the competitiveness of cities and she returned to Detroit, as she said, "to bring a positive light to the city, prove people wrong and contribute to the growing tech scene."

While Grand Circus officially launched in February, classes begin in late September. Classes cross multiple disciplines with training focused primarily on technology, business and design. Grand Circus purposefully created a broad curriculum that allows for flexible, customized training to suit a variety of schedules. Additionally, their 3-storey (15,000 square foot) space will also host events and approximately 50 co-working spaces available on a flexible as needed basis.

Detroit sorely needs more training and educational opportunities, especially in skilled industries like the tech sector. Grand Circus appears well positioned to help fill this void.

The Wizard Behind the Curtain

How is this happening? How can a city known more for blight and bankruptcy become one of America's hottest tech start-up communities? The individual most responsible for this resurgence is Mr. Dan Gilbert.

Gilbert is a Detroit native and the chairman and founder of Quicken Loans. Quicken Loans moved its headquarters and 1,700 of its team members to downtown Detroit in August 2010, where Gilbert and the company are helping lead a revitalization of Detroit’s urban core. Gilbert's corporate umbrella entity is Rock Ventures. Quicken Loans is the flagship of Rock Ventures. Gilbert is also a General Partner of Detroit Venture Partners, which seemingly has its hand in the vast majority of Detroit tech start-ups. And his real estate holding company, Bedrock Real Estate Services, is purchasing and renovating properties, building apartments and wooing corporate tenants.

In 2011, Gilbert's Rock Ventures group purchased several buildings in downtown Detroit, including
the historic Madison Theatre Building, Chase Tower and Two Detroit Center (parking garage), Dime Building (renamed Chrysler House), First National Building and three smaller buildings on Woodward Avenue. In 2012, Rock Ventures, the umbrella entity formed to provide operational coordination, guidance and integration of Gilbert’s portfolio of companies, investments and real estate, purchased the former Federal Reserve Bank of Chicago Detroit Branch Building, One Woodward Avenue, 1201 Woodward (Kresge Building), and five smaller buildings on Woodward Avenue and Broadway Street, totaling 630,000 square feet of commercial space in downtown Detroit. In 2013, Rock Ventures purchased the 1001 Woodward office tower and several smaller buildings in the downtown area.

Rock Ventures' downtown Detroit real estate investments include more than 30 properties (buildings and/or store fronts) totaling 7.6 million square feet. Four million square feet is commercial space; another 3.6 million square feet is parking (10,096 parking spaces). Quicken Loans and its family of companies employ more than 10,000 team members, with 8,000 now working in Downtown Detroit.

In March 2013, Rock Ventures, joined by the Downtown Detroit Partnership (DDP) and Detroit Economic Growth Corporation, kicked the Opportunity Detroit plan into light-speed by unveiling a visionary placemaking and retail plan for Detroit’s urban core. At the cornerstone of this plan is Rock Ventures’ Central Business District property empire.

Over 85 small companies have already moved into Gilbert owned property in the last 33 months. Rock Ventures keeps a detailed, up to date list of new tenants here. Many of these new start-ups are funded by Gilbert's Detroit Venture Partners. And with the Gilbert inspired Live Downtown Incentive Program, more and more people are calling downtown Detroit home.

Build It and They Will Come

Following Gilbert's lead, other entrepreneurs are getting into the game. The non-profit Hatch Detroit, inspired by a mission of "Crowd Entrepreneurship" (where average citizens have a role in voting for the type of retail they want in their community), are "supporting the creation of cool, unique retail spaces." Through a series of contests, emerging entrepreneurs can pitch their start-up ideas and the winner is selected through a community vote. This years winner is Batch Brewing, a small batch brewery that will use their $50,000 prize money to open a new brewery in Corktown.


And no discussion revolving around Detroit's start-up economy is complete without including the Gilbert owned M@dison Building, ground zero for the city's tech community. A 50,000-square-foot building that once housed Detroit's first major movie theater, the M@dison Building opened last January and has become an epicenter of the city's tech scene, hosting a bustling mix of about 300 entrepreneurs, investors, and developers, including Twitter. Several startups that began within the M@dison have grown so much they have begun to move into buildings in other parts of the city.

And newer organizations like the Green Garage coworking space and Crowd 313, a University of Michigan organization that connects university students with Detroit's business and cultural scenes, are expanding on the M@dison Building's groundwork to attract and keep more young talent in the city. According to Michipreneur, who tracks monthly start-up investment statistics, tens of millions of private and public start-up funding is flowing into the state every month (see July 2013 and August 2013 investments summaries). Detroit's entrepreneurial start-up scene is clearly gaining real and significant traction.

Future City USA?

There can be no doubt that real and tangible economic change and development is occurring
downtown Detroit and through Mid-town. Led by Dan Gilbert's vision, billion dollar investment and creation of a new economic ecosystem in the city, two square miles of downtown Detroit is being completely transformed. Long dormant buildings are being redeveloped and repurposed into tech focused hives of start-up creativity, ground-level retail is attracting new boutiques, restaurants, coffee shops and taverns. New lofts and apartments are attracting current and new residents to Live Downtown Detroit for the first time in decades, including city and state college graduates who are no longer fleeing the state in large numbers. And while many argue that these developments are too narrowly focused on roughly two square miles of downtown Detroit, the CPBB argues that these social and economic trends are enormously promising, powerful, and if successful downtown, may create the tipping point to incrementally initiate change in Detroit's neighborhoods.


Priority Based Partnerships and Priority Based Economic Development

In our work at the Center for Priority Based Budgeting, we've been overwhelmed by success stories stemming from partnerships. In fact, one of the key reasons cited by so many of our most recent PBB implementers for initiating the process is their desire to identify the most opportune partnerships, both public-public and public-private partnerships, worth pursuing. We're so excited about this, it begs the question: at what point does Priority Based Budgeting become, in part, the systematic discovery of Priority Based Partnerships?

What is interesting is that the very term "partnership" lacks the power to truly convey the significance of the solutions that can truly come about; the kinds of solutions we're seeing unfolding in the City of Detroit. Sometimes a "partnership" is the recognition that, in order to achieve a community's intended Results, it's in the best interest of local government to assume the role of "facilitator" rather than leader. Detroit Mayor David Bing was quoted in the New York Times, depicting his view of the role of the City in facilitating partnerships and economic development: "My job is to knock down as many barriers as possible and get out the way."

We are moved by this glimpse of what becomes possible when local government understands the Results it is striving to achieve, it's role in achieving them (even when that role is less prominent), and aligns resources to bolster success. Future City USA stands not just for Detroit, but for all of us in local government. The opportunity is upon us!


Keep an eye on the CPBB blog for further updates. Sign-up for our social media pages so you stay connected with TEAM CPBB!

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If you're thinking of jumping into the world of Fiscal Health and Wellness through Priority Based Budgeting we would certainly like to be part of your efforts! Contact us to schedule a free webinar and identify the best CPBB service option(s) to meet your organization's particular needs.
 


Wednesday, September 4, 2013

Detroit - Bankrupt, but Not Broken: A CPBB Exclusive Interview with Nolan Finley of the Detroit News


  
For anyone with an interest in what it takes to truly stimulate and develop a successful local economy, nowhere could be more interesting than the recently bankrupt City of Detroit. The Center for Priority Based Budgeting is in the business of helping local government explore their role in successful economic development, understanding better where public sector investment could inspire a greater private sector contribution and better influence economic health (and clarifying where the role of government might end).

It’s not an easy issue, and yet it is one of the most important issues of our time. In our work facilitating the identification of community priorities, economic development and job creation are clearly among the very top in every place we've applied the Priority Based Budgeting process. From the City of Edmonton, Alberta (where they espouse the necessity of a “Diverse Economy”) to the Town of Cary, North Carolina (“Economic Vitality and Development”) to Lehigh County, Pennsylvania (“Economic Health”), what we do in government to strengthen the local economy could not be of more critical importance.

With this in mind, the Center for Priority Based Budgeting has once again immersed itself in the trenches of this issue, and gone straight into perhaps the most interesting experiment in economic development we could imagine: the re-birth of a City.

Our first article focusing on the City of Detroit, Reversing the Trend: Might Corktown Hold the Key to a Greater Detroit Neighborhood Resurgence?, provided background context on the city's challenges and how entrepreneurship is playing a driving role in reshaping the downtown core and, slowly, the inner city neighborhoods. This article will focus more on city leadership and, from the opinion of one of the city's civic leaders, what must change to get Detroit up and running efficiently and effectively.

Nolan Finley Weighs In

Nolan Finley, Detroit News
The CPBB had an opportunity to discuss the future of Detroit with Nolan Finley, the Editorial Page Editor of the Detroit News. Nolan has held this position for over 13 years and as such directs the expression of the newspaper's editorial position on various local and national issues. Nolan Finley joined The Detroit News staff as a copy boy in 1976 while he was still a student. He navigated the positions of reporter, deputy managing editor, business editor, city editor and opinion leader to eventually become the editorial page editor, a position he has held since 2000. In 2012, Nolan was inducted into the Michigan Journalism Hall of Fame.

The CPBB reached out to Nolan after reading his recent Bankrupt, but Not Broken series of articles on Detroit. The article series includes: Everything Must Change in Detroit, Leadership is Key to Detroit's Revival, and Can Detroiters Govern Their Own City. These honest and introspective articles focus on subjects that the CPBB finds integral to the success of local governments nation wide. These principles include ensuring the fiscal health of a city, focusing on public/private partnerships, competent city leadership, planned economic development and efficient delivery of the highest priority (what some might call "core") city services. These are all must have's for any city and as Nolan clearly articulates none were working prior to the bankruptcy filing and the installation of a Detroit Emergency Manager.

Nolan is blunt, and cautiously optimistic, about the direction of Detroit. The "systemic failure in city
governance" directly led to the bankruptcy filing, which is "the biggest local news story" in the city's history. The city "must get city services back on track" and initiate sustaining reforms that lead back to "good government practices."

With that said, Nolan took a step back to outline the missteps and negligence that led to Detroit's bankruptcy. "The City of Detroit has ignored warnings about pension obligation issues for the last 30 years. The City has had a hard time deciding whether they are a service provider or an employment provider. The city has more public employees than most major cities in the US." A quick fact check reveals that Nolan is correct on both counts.

According to the Bill Johnson Group (Detroit Missed Pension Reform Opportunities), there have been decades of opportunities, miscalculations and squandered opportunities in the city's efforts to address and renegotiate the swelling pension obligations. "History, however, shows this looming crisis might have been averted if the employees unions and pensioners had shown more flexibility forty years ago in restructuring city pension benefits. Instead, the intractable opposition demanded the city stay on a dead end course to default." The article closes by stating "The bottom line is this: City government is now unable to fully fund the system. The refusal of the council and city workers to get out of the way of Detroit’s entry into the modern pension era comes with dire consequences that could have been avoided. Bankruptcy may now be the best equalizer for their imprudence and collective bad judgment." Indeed, Detroit has now entered an era of active bankruptcy.

An Opportunity for Shared Services

Besides bankruptcy, Detroit has gained significant media attention for how the city delivers core services. In particular, the Detroit Police Department (DPD) has been called out for not responding quickly to citizen emergencies. Nolan states, "The city must drastically improve community policing and restore civic confidence in the DPD. This is critical to improve the city's reputation and to ensure the safety of its citizens." The NY Times recently reported "The Detroit police’s average response time to calls for the highest-priority crimes this year was 58 minutes, officials now overseeing the city say. The department’s recent rate of solving cases was 8.7 percent, far lower, the officials acknowledge, than clearance rates in cities like Pittsburgh, Milwaukee and St. Louis." Nolan adds "30-60 minutes to respond to a call is unacceptable."

Additionally, the city is challenged with maintaining and providing other highly relevant ("core") services such as emergency medical services, street lighting, street maintenance and snow removal. Nolan states that the "City needs to commit to solid and dependable core service provisions and look for opportunities to contract and/or privatize services where it makes sense." The city has been, and continues to look for, alternative service provisions. Recently, Emergency Manager Kevyn Orr suggested that the city may privatize or contract out garbage/recycling and parking garages/meters. The city is already working on a plan for the Detroit Water and Sewerage Department (DWSD) to turn into a new, larger regional authority: the Metropolitan Area Water and Sewer Authority (MAWSA). The conversation will allow MAWSA to restructure debt by issuing new lower interest bonds while paying the city a fee for providing this service.

Nolan cited Cobo Hall as a "shining example of a newly regionalized effort" to provide city services. In September 2009, Cobo Hall, Detroit's convention center, was placed under the authority of a new Detroit Regional Convention Facility Authority (DRCFA) after suffering years of city mismanagement. Since then, according to the Detroit Free Press, "Under regional management, Cobo is thriving. Conventions are up, a $279-million renovation is well underway, and the North American International Auto Show, Cobo's most important annual tenant, is recommitted to the facility for the long haul. Even more important, Cobo now stands as a shining example of what can happen in southeast Michigan when cooperation, rather than parochial rivalries and nepotism, frame the discussion about issues of public interest." While Detroit's bankruptcy allows for an historic opportunity to eliminate debt and restructure service delivery, Nolan states "Orr will eliminate debt and focus on restructuring service delivery, but these practices must be instilled and provided consistently by future elected city leaders."

The Next Generation

While Detroit remains under emergency management for the foreseeable future, a non-partisan primary election was held on August 6th to determine the next Mayor of Detroit. The incumbent Mayor, David Bing, chose to retire rather than seek re-election which brought forth an open field of candidates to become the next Mayor of Detroit. Of the fifteen contenders who were official candidates on the ballot, two emerged as front-runners for the election: Mike Duggan, former CEO of the Detroit Medical Center and Assistant Wayne County Prosecutor, and Benny Napolean, Wayne County Sheriff and former Detroit Chief of Police.

Before voting could begin, controversy erupted with candidate Duggan being eliminated from the ballot due to a technicality revolving around his status as a bonafide resident of the City of Detroit. After the Election Commission decision was upheld by the Michigan Court of Appeals on June 18th, Duggan officially bowed out of the race. Yet just ten days later, Duggan declared his candidacy again as a write-in candidate on the ballot and ultimately won a plurality of the votes, defeating his closest competitor, Benny Napolean, by a margin of over 15%. Duggan will now face Napolean in the general mayoral election in November of this year.

 
Nolan states that the election was "remarkable in the environment of active emergency management." The next Mayor of Detroit will inherit an environment of active emergency management and thus will hold no authority until power is transitioned back to elected officials. Nolan added that Duggan "ran on a turnaround message" and indicated enthusiasm that the turnout produced "48,000 write-in votes and multiple good council candidates."

While Detroit's bankruptcy and dramatic primary elections have dominated media headlines, the resurgence of Detroit, led by significant private sector investment in the downtown core, have begun stealing the headlines. The significant private sector investment is led by Quicken Loans founder Dan Gilbert. While much has been written about Detroit's resurgence, Nolan remains cautiously optimistic. Nolan states "private sector investment to date (Gilbert, etc.) is effectively an act of alturism. While great for the city they can likely achieve greater service efficiencies and profits by headquartering elsewhere." Nolan added he'd also like to see "the private sector contribute more to the development and cultivation of political leadership." With private sector investment clearly changing the finances and landscape of downtown Detroit, and a mayoral election to be held later this year, the opportunity for the private sector and a new generation of political leadership to come together and carry out a new vision for Detroit appears promising.

The Hard Work 

The City of Detroit has truly entered a complicated and challenging environment. Driven by a complex mix of unprecedented bankruptcy, emergency management, challenges delivering the most highly-relevant or "core" services to the citizens, poor fiscal health, and controversial upcoming elections, while simultaneously experiencing enormous private sector investment in the city, a growing start-up culture, near zero residential vacancy rates and epic enthusiasm and optimism by citizens and others across the nation, the CPBB asked Nolan how Detroit can successfully move forward and thrive.

According to Nolan Finley, the following must be addressed in order for the City of Detroit to truly enter a new period of resurgence:
  • Stop the blight- "We must eliminate abandoned buildings in the non-functioning neighborhoods. We have 70,000 plus vacant structures. We must not allow this issue to get worse. We have to consolidate the population into existing functional communities and address abandoned land."
  • Expand public/private investment into neighborhoods- "There is currently no plan to expand private sector investment into the neighborhoods."
  • Reduce violence and murder- "30-60 minutes to respond to a call is unacceptable. We must get down to NYC levels and restore confidence in the DPD."
  • Attract businesses that current citizens are capable of working for- "Very few new employees are actually from Detroit. We need to attract employers that include call centers and low-skilled manufacturing to boost employment until the education system is fixed."
  • Provide education opportunities to citizens and vastly improve the education system- "We need to improve the quality of education so we have well-trained grads who are employable. This includes closing schools that are isolated and no longer serving the community. We need to look to the private sector/charter schools for assistance."
  • Balanced budgets- "Detroit can govern itself, but we must hold city leaders accountable and do business differently."
Bankrupt, but Not Broken

We've all become so accustomed to hearing the reasons why cities like Detroit are facing such challenges that we can probably recite them. As Stephen Goldsmith wrote in The Red Ink Tsunami: Why Old Ideas Can’t Fix the New Government Perma-Crisis, “ for a variety of reasons today’s budget deficits are different. Government at all levels now faces an inescapable reality – the promises of public services exceed our ability to pay for them – and will do so regardless of when the recession ends. The steady increase in the quantity and cost of public services, coupled with the needs of an aging population and public pension costs, have produced a long term, structural deficit."

But what's so interesting about Detroit, the largest municipal bankruptcy in history, is that we're starting to hear a consistent drum beat about the kinds of solutions that appear to be working.
  • Focusing limited resources on the Results that matter (safety, economic vitality, health among others that we heard) ensuring that the most highly-relevant, "core" services are being offered effectively and efficiently
  • Doggedly pursuing public-public and public-private partnerships, in order to recognize that the results of a community can be achieved even when local government is simply a partner, and not necessarily the sole service provider
  • Ensuring long-term "Fiscal Health" to the degree that financial decisions are made transparently and with accountability to the Results most relevant to the community
These are the very cornerstones of our work at the Center for Priority Based Budgeting! We too are beating this same drum! 

Detroit may indeed by bankrupt, but it is far from broken. With these insights, Detroit, just like every other financially challenged local government across the Country, has every opportunity to rise again. 

Thanks to Nolan Finley and the Detroit News for your time and insight.

Keep an eye on the CPBB blog for further updates. Sign-up for our social media pages so you stay connected with TEAM CPBB!

 facebook  twitter  LinkedIn

If you're thinking of jumping into the world of Fiscal Health and Wellness through Priority Based Budgeting we would certainly like to be part of your efforts! Contact us to schedule a free webinar and identify the best CPBB service option(s) to meet your organization's particular needs.