Eugene looks at how other cities build their budgets

Presenter: Eugene’s Chief Financial Officer Twylla Miller prepares the City Council for an upcoming workshop to help guide tough decisions on the budget. At the City Council work session May 20, CFO Twylla Miller:

Twylla Miller (Eugene, CFO): We’ve looked at other jurisdictions, and there’s a wide range of approaches related to service priorities and or core and essential services and financial policies of other jurisdictions.

Some cities do not reference service priorities in their financial policies at all. But they do reference them in their council goals and policies and or their strategic plan.

Other jurisdictions talk about essential services in their financial policies, but they don’t define what those are. And then there are a couple of jurisdictions that define essential services as the services defined in ORS 221.760.

And that’s the statute that defines if a city is eligible for state-shared revenue. So the services they list there are: police and fire protection, street construction, maintenance and lighting, sewer, stormwater, water utility, and then planning, zoning, and subdivision control.

Presenter: From a consultant for local governments and utilities, Nancy Hetrick:

Nancy Hetrick (Raftelis): Budget decisions are going to happen. They’re going to happen one way or the other. What we’re suggesting is that making an intentional approach, really thinking through the tools and the methodology that will inform your decision-making, will give everybody more confidence, and increases transparency for the community as well as for Council in how you move forward.

When you have clear criteria, staff and Council will be working from the same starting point. The reasoning behind the decisions will be visible—not just to insiders, those that are working to develop and process the budget—but also to residents who will feel the impact.

Importantly, a framework protects against both arbitrary cuts and arbitrary protections, both sides of the coin, for programs and services. It helps to remove some of the politics out of the individual decisions that will be before you.

And first of all, I want to just make the note that there is no single framework, no single answer to how an organization approaches this work. What we want to do is to help be a resource and to support you all in developing a framework that is going to inform your decision-making, but also really aid staff in the development of recommendations that they can bring before you.

So, a service evaluation framework is really just developing a structured set of criteria that helps a city examine its programs and services consistently. Importantly, it gives council, staff, and the community a shared language for talking about what the city does, why it does it, and also importantly, at what level.

A couple things to keep in mind, that having a framework does not mandate specific cuts to services or creates an opportunity for one-time activity. Really done well, this is a way to evaluate, on an ongoing basis, the budget opportunities and decisions that will serve the city and the community by extension.

Service evaluation frameworks aren’t unique to any one budget method. We heard last time we convened some ideas around maybe rethinking how you are making choices and how you are evaluating your budget options, going to more of a zero-based budgeting structure versus a priority-based budgeting structure or some hybrid thereof.

A framework does not preclude any of those things that can be applied, regardless of the methodology that is being applied. What varies is the emphasis, whether the framework leans towards mandated levels of service, legal authority, or community outcomes. You know, those areas of priority that have been identified by Council and the community.

Presenter: Joining Nancy from the consultant’s firm, Jennifer Teal:

Jennifer Teal (Raftelis): Most communities use a blend of two broad approaches for creating a service evaluation program. The first lens is this legal and authority-based concept. It’s asking whether a city is required to provide the service and by whom: is it by law, by contract, by community expectation, and at what level are we providing that service.

The appeal in a legal or authority-based evaluation framework is that it’s really objective. The criteria are something you can research and understand and document and there isn’t much gray area.

The second lens that you may use in a service evaluation framework is really outcome or priority-based and it’s asking how well a service advances goals that residents and the council care about—those things that might be part of your strategic plan, for example.

Neither one of those alone tells a whole story, which is why most of the communities we’ve looked at and most of what we’re going to share today shows some elements of both, that legal or authority basis and the outcome or priority basis.

Presenter: After reviewing approaches in use at several other cities, Councilor Greg Evans:

Councilor Greg Evans: Because we are talking about budgets, we are talking about service deliveries, there’s a heavy emphasis on a lot of the quantitative measures that you’re ultimately evaluating. Let me ask you this question. How much of a qualitative frame are you looking to integrate into this process?

I would really like to see us do surveys, individual interviews, focus groups, so that we can get a well-rounded perspective of what our residents want, what our staff wants, and how we’re going to be able to integrate those pieces into a final presentation, if you will, or along the line of several iterations in the process.

Presenter: Councilor Eliza Kashinsky:

Councilor Eliza Kashinsky: I think one of the big questions or challenges I see is that we have a number of different services that are using, funded either in full or in part by sort of earmarked or dedicated revenue in some way, and which services are funded that way, sometimes it’s based on, like, is it a service that can pay for itself because it brings in revenue, like parking garages, but it’s also sometimes based on things like the public safety payroll tax or the street bonds, library levies, parks levies, things like that.

And I feel like that really has an impact on how we view those service levels, because we’re like, ‘Well, okay, we can have a higher service level for this thing because we have the money for it.’

And then it’s this other group of things—that we don’t have that dedicated earmark funding for—that tend to take the brunt of the conversation of how do we navigate these service levels.

And so given the existence, of that dedicated earmarked funding, how do we fairly incorporate that into the discussion of priorities? Because, you know, I feel like there are things that might get prioritized because we have the money for them…

I feel like a lot of this is coming up because, like many, many jurisdictions around Oregon is facing sort of a structural problem, where largely due to factors set at the state level and beyond our control, our income is not increasing as fast as our expenses, which is putting us into a very difficult structural imbalance type situation that has been recurring and recurring for years.

The framework does a a very good job of helping us make better decision-making about how do we craft a budget that’s going to do the best we can to meet the city’s needs. I’m not sure how it gets at that base structural problem beyond just continuously reducing service because we’re still going to end up in that space where, you know, property tax revenue is going up 3.5% per year and PERS is going up 8 million percent per year or however much it’s going up.

Presenter: Twylla Miller:

Twylla Miller: Thank you, Councilor. I think of this as a kind of a continuum of work. So one of the puzzle pieces is strategies. So developing strategies. And strategies can mean a range of things. It can mean new revenue. It can mean reductions. It can mean efficiencies. It can mean longer-term things like economic development and other levers—tax reform, those things.

So I really think of this as short, mid, and long. So this is really, again, part of this foundational long-range financial planning process where we’re going to come back to kind of fall, winter, next summer. You know, we’ll continue to have some of those short-, mid-, and long-term strategy conversations, both at Council, there’s going to be other pieces coming, kind of the TAG 2.0 with certain pieces of the work.

And so I think there’ll be a range of things that’ll weave through. So this foundational piece is one part of that larger picture, because you’re correct. This gives us a framework to make decisions as we kind of look into the next cycle. But there’s larger elements at play here that we’ll also have to discuss.

Presenter: Mayor Kaarin Knudson:

Kaarin Knudson (Eugene, mayor): I’m just curious if, you know, in looking at sort of where we’re starting from, if you feel like we are beginning, because we don’t yet have agreement on shared language and really what we mean, if it’s kind of like, we are really sort of at the beginning of this or we’ve maybe done this informally but not given ourselves the benefit of this type of structure.

Presenter: Twylla Miller:

Twylla Miller: Thank you, Mayor. I think it might be a combination in that as we’ve had various conversations, we have talked about core or other pieces.

But as an organization, I think going through a process like this is very helpful to really think through once we have the definitions, we’ll be able to answer those questions, both that council has raised and others in the community have raised about what is essential, what is core, what is mandated.

We haven’t had a good framework or language to really articulate. That is an organization to the community, so I think it will help us be transparent and clear.

Presenter: Councilor Randy Groves:

Councilor Randy Groves: I’ve said it before and I will say it again: I also would like to see (if it’s not this time, at some point) have us go through a zero-based budgeting exercise. What I’ve watched all my years with the city and now as an elected official, we always seem to nibble at the edges.

And I think if we start from the bottom with everybody at zero and build up based on a lens, I think that would help us get to a point. Because whatever we try to reduce in this community, we have so many voices. Not very many of them line up with each other. You know, everybody has an opinion or five.

It’s important that we listen, but at the same time, we’ll drive ourselves nuts trying to work through this if we’re hearing every single voice. So I think we need to find a way that we are able to process this in an effective manner that provides the absolute best we can for our community.

Presenter: Councilor Matt Keating:

Councilor Matt Keating: I can’t believe I’m saying this, but I would advocate for more of a STAR voting style, you know, five tier, allowing for, like, A, B, C, D, or F kind of grading system in that I don’t recognize that that three-pronged approach would really be informative to Council.

My question is: Who provides the information ranging from equity impact to both the process and the outcome and the environmental and sustainability piece? Are we left as policymakers to be the ones who determine those pieces for our respective departments?

Or, similar to LCC’s process, flashing back to my time as a board member at Lane (Community College), there was a program review process. And that program review process, while not directly tethered to the budgetary process, clearly informed board members as to the quantitative and qualitative health of the respective programs.

So who provides the information? And did any of them have a scoring rubric outside of just that ‘below standard / at standard / above standard’ matrix.

Presenter: Councilor Jennifer Yeh:

Councilor Jennifer Yeh: Basing it on industry benchmarks is great and all, but I’m interested in whether what we are providing is meeting the need in our community—which may be different from other communities.

And that would be more of a staff perspective. Like: ‘Is this program that is doing this thing, are you finding that you can’t get to all the things you’re being asked to do with what you have? Or are you able to, you know, meet the need with what you have?’ Or just getting a sense of that.

So I think that would be helpful along with the industry benchmarks. I would like that.

Presenter: Councilor Mike Clark:

Councilor Mike Clark: I’m interested to know if there will be a kind of formatting for evaluating strategy for meeting service needs. In other words, we may all agree on an outcome but have very different ideas on the appropriate way to reach it. So is there an evaluation tool for the strategy for meeting an outcome? That’s another piece of it for me. So thank you.

Presenter: The Council will also be asked to review the city’s financial policies. Twylla Miller:

Twylla Miller: The Council’s role is to provide a high-level policy direction and to adopt the policy framework. The goal with the new long-range financial planning process is to have a regular review cycle with Council and the Budget Committee and to be intentional about highlighting policies where appropriate as part of Council discussions and related actions.

So staff will be reviewing those and bring a range of considerations back to Council and Budget Committee in the fall.

Presenter: The City Council gets a look at a tool some other cities are using to guide their budget process. And Councilor Matt Keating sheepishly endorses the simplicity of STAR voting.

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