Long-Term Financial Planning: Building The Case

Advanced Tools for Finance Officers:Long Term Financial Planning

Building the Case for LTFP in

Your Government and

Engaging the Players

Topics

Why Financial Planning Engaging Elected Officials LTFP and the CEO/CAO Employees The Public

Why use Long-Term Financial Planning?

Bring financial perspective to planning Stimulate long-term and big-picture thinking Anticipate issues Create discipline Establish early warning indicators Take into account local conditions Develop long-term strategies for financial health Prioritize services Build trust with citizens

Case Study: Coral Springs, FL

Approaching Build-Out Fiscal Impact Model

High density development Population Tipping Point

Small town management model not appropriate for large urban city

Impact of 1.35% Petition

$35,411,380$33,221,630

$30,880,000

$22,165,702

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

FY 2007 FY 2008 FY 2009 FY 2010

Some Long-Term Strategies

Economic development Service delivery alternatives New revenue sources

Citizens with a Great Deal or Fair Amount of Trust in Government

Federal State Local

2005 53% 67% 70% 1998 65% 80% 77%

Choice Works Finding

“We are prepared to pay more in taxes if that is necessary to realize the future we want, but

only if steps are taken to increase accountability and trust.”

Business Perception of Property Taxes

0

10

20

30

40

50

60

2004 2005 2006 2007 2008

Too high

High but quality ofservices is high

Taxes/service leveljust right

Trust Creates Loyalty

82

76

8890 89

65

70

75

80

85

90

95

2004 2005 2006 2007 2008

% V

ery

Lik

ely

Would you recommend the City to Friends and Family?

Engaging the Players

Elected Officials CEO / CAO Employees Public

Elected Officials

THE key players. Elected officials have the last word on the how

much the organizations taxes and spends and what it spends on.

You need their buy-in to effectively use long-term financial planning.

Getting Buy-In

Elected officials’ main contribution to financial planning is a long-term vision and a set of priorities. Have a strategic planning process that elected

officials participate in. The strategic plan should be a precursor to the

planning process. The financial plan should account for the costs of

the strategic plan.

Planning Process

Identify Critical Issues

Analyze Critical Issues

Analyze Financial Trends & Develop Forecast

Gap & Debt Analysis

Prepare LTFP

Implement and Monitor

Council Strategic Planning

Making It Standard

Financial planning should be central to how the government is governed and managed—not just a one-time event or a staff tool. Link financial planning to budgeting – make the

plan real. Give elected officials the chance to provide input

on important financial issues.

Collaborative & Visionary Process

Identify & Confirm Critical Issues

Analyze Critical Issues

Analyze Financial Trends & Develop Forecast

Gap & Debt Analysis

Prepare LTFP

Implement and Monitor

Council Strategic Planning

Implement through budget Financial Strategy Workshop

Deliberate on & approve critical assumptions

Keeping Track

Elected officials must take leadership, maintain fiscal discipline, and stick to the strategies, despite pressure to expand programs, reduce taxes, etc. Update financial forecasts regularly Develop a “dashboard” or “scorecard” of

key financial indicators

Dashboard

Financial Scorecard

Indicator 08 07 06 05 04 03 02 01 00 99

Revenues Per Capita

F F/C F/C W W F F F F F

Property Tax Revenues

F F F F F F F F F F

Property Values F F F F F F F F F F

Elastic Revenues W F/C F F F F F F F F

Sales Tax Revenues F F F F F F F F F F

License & Permit Revenues

W F F/C F F F F F F F

Strategic Scorecard

TrendFYs 2003/042-Yr Actual

FYs 2005/062-Yr Goal

FY 2005Year End

FY 20061st Qtr

FY 20062nd Qtr

1 a Moody Aaa Aaa Aaa Aaa Aaa Aaa Fitch AAA AAA AAA AAA AAA AAA S&P AAA AAA AAA AAA AAA AAA

2 Commercial square footage development initiated within the Downtown CRA a 140,000 210,000 0 0 0

3 Percent of plan reviews completed within 15 days a >98% 95% 97.80% 98.20% 91.50% 48.90% H

4 Non-residential value as a percent of total taxable value* a 23.10% 23% 22.10% N/A 21.20% —

5 Residents' value rating (City Survey) a 70% 70% 77% N/A 74% —

6 Percentage increase of operating millage rate a 0% 0% 0% 0% — —

7 Estimated rate of return for the City in economic development incentives c $163.37 $225 268.41 N/A N/A N/A

a = annual

c = cumulative 2 3 1 H

1 Total Measures 7

FY2006 3rd Quarter Results*While the City does not expect to meet the two-year goal of "23% non-residential as percent of total taxable value", the City has seen impressive growth in the non-residential tax base. The increase for the 2005 tax year was $143.4 million, following a $91.8 million increase in 2004. Growth in the residential tax base has overshadowed non-residential growth.

Met or Exceeded Goal

On Target to Meet

Hurricane Wilma Impacted

Goal Not Met

Financial Health & Economic Development

FY 20063rd Qtr

Maintain City bond ratings Moody Aaa, Fitch AAA, S&P AAA

Link to Budget

The link between the financial plan and the budget is crucial. Elected official’s policies developed through planning should be reflected in the budget. Engage elected officials on understanding and

approving critical forecast assumptions. Make the transfer of these assumptions to the

budget transparent.

Stay Strategic

Elected officials must be able to step back and adopt a strategic mindset. Involve elected officials in approving financial

policies. Keep them apprised of compliance with the

financial policies. Address truly “strategic” issues in the plan as well

as hot-button operational issues .

CEO Buy-In

Organizational management Ensuring stability Budgeting process CFO relationship

Organizational Management

More rigorous test for undertaking new programs and services.

Shared priorities. Focus on forward-looking indicators.

Ensuring Stability

UpwardLegitimacy &

politicalsustainability

OutwardSubstantive value

produced forconstituents

DownwardOperationalfeasibility

Financial planningsolidifies one corner

of the “strategictriangle”

A strategy must align all three perspectives ofthe “strategic triangle” to create public value

Budgeting Process

Reduced conflict during budget process Greater elected official confidence Greater alignment between submissions and

funding realities

CFO Relationship

CFO becomes a strategic partner Provide more strategic intervention CFO becomes more involved in helping

departments create value Result of Global Study

80% see improved decision-making as highest priority for improving financial operations

Improving transparency & integration of financial information was second

Employees

Employees can get excited about LTFP as a career opportunity.

Employees can… Analyze financial position. Analyze and strategize on critical issues. Help develop financial strategies.

The Public

Use the media Surveys

Citizen satisfaction, prioritization, or specific issue. Community Meetings Committees

“Blue ribbon” Standing

Reports

Summary

Financial Planning can be a tool for building trust with the public.

Elected officials can best be engaged by integrating financial planning with service delivery policy.

Financial planning can help transform the finance officer into a strategic partner.

Consider a “value rating” or other global indicator of citizen satisfaction.

Coral Springs’ Value Rating

Which statement best describes how you feel about the taxes you pay to the City of Coral Springs? Taxes are high, but the City is providing more services at a

higher quality than I expect. Taxes are just right for the amount and quality of city

services that I am receiving. Taxes are too low for the amount and quality of city

services that I am receiving. Taxes are too high for the quality of services that I am

receiving.