2. Introduction Historical Overview FY 2011 Budget Challenge Business Continuity Reserve Challenge Grant Concept Case Studies Questions/Discussion

3. City of Arlington Facts 370,000 population 2,500 employees Politics Council-Manager form of Government Strategic location - DFW metroplex Approaching build-out Entertainment district Growing university partnership

4. City of Arlington Facts $380M Operating Budget; $198M General Fund Budget – 79% of GF Revenues from three sources AV 37% Sales Tax 24% Franchise Fees 18% AV Tax Rate $0.6480 since 2004 – Split between GF ($.433) and Debt ($.215) Sales Tax Rate 8% – 6.25% State, 1.75% City City portion includes voter approved.50 for Street Maintenance and.25 for Cowboy Stadium

5. Budget Balancing History Past Approaches to Budget Deficits in Arlington Hiring freeze Travel/ Training freeze Reduce hours at libraries, recreation centers Equal % cut across all City departments Cut programs and personnel associated Department consolidation Increase employee contributions for health insurance Revenue enhancement opportunities Fee increases

6. Budget Balancing History Building Economic Crisis – Several years of budget cuts – FY 2009 Cut 18 positions to balance budget; cut 16 more mid-year Revenues $5M under budget by 1 st Quarter $14M deficit forecasted – FY 2010 Sales tax decline AV decline Cut 22 positions, COPS grant funded 34 officers $4M in program cuts Proposed pay cuts, pension benefit reductions, furloughs Council direction: reserves/vacancy savings

7. FY2011 Budget Challenge FY 2011 budget development – First significant decline in AV (-5.7%) – Projected deficit $10.3M Loss of $7.4 million in AV revenue Absorb recurring costs associated with COPS grant (addl. $750k per year) Public safety costs associated with Viridian Development Pension costs – addressing underfunding Pay back $1.5M of pension benefits paid for with reserves in FY10 The long range forecast over the next three fiscal years included a growing deficit up to $15.4 million by FY 2014

8. FY2011 Budget Challenge (cont.) Not all bad news Increased economic activity associated with stadium Stable to improving sales tax Surplus in One Time Revenues – City’s location on the Barnett Shale – Substantial revenues, from leases and extraction payments from the Natural Gas companies – Significant revenue but with limitations

9. A Business Continuity Reserve Strategic use of one-time funds Needed because: – A balanced budget is required annually – Service requirements are continuous – Short term approaches to economic slowdowns cause disruption

10. Challenge Grant Concept Authorized use of one-time dollars for continuing operations on a conditional basis Additional time to transition operations, implement revenues or find other solutions Funds are provided for specific positions and programs for a limited period of time Funds were derived from the natural gas revenues, as well as surpluses in other funds

11. Challenge Grant Policy New “Challenge Grant” account created for each department Budget for programs/positions approved for Challenge Grants transferred Expenditures tracked throughout year Dissolved in FY2012, department budget reduced New budget request to continue

12. Challenge Grant Process – The process provided fair evaluation of positions and programs through review with Departments and the City Manager’s Office – Each Department Director had the opportunity to defend their Challenge Grant requests – Departments had one or two fiscal years to identify savings or revenue in their budgets to maintain positions or programs for the following year.

13. Communication with Employees and Options City Manager provided presentation to all employees in person or via internet Managers informed affected employees Employees had priority to interview for open positions in the City not on the Challenge Grant

14. FY 2011 Balanced Budget Budget cuts + Challenge Grants: Cut $2M in expenses including 33 positions $4.8 million in Challenge Grants Approved in FY11

15. Case Studies

16. Challenge Grant: Police Department Proposed Challenge Grants – Burglar Alarm Response – 15,000 annual calls for service, 99+% are false – Represents workload of 21 officers – Future savings from contracted service Vehicle Burglary Response Minor Accident Response $1,794,013 (FY 11 adopted savings)

17. Challenge Grant: Alarm Response Politically sensitive Cuts to public safety unpopular with Council Request for RFP denied Alterative fees proposed – Jail fee – Panic alarm fee – Increased commercial burglar alarm permit fee

18. Challenge Grant: Library Reduction in Library hours by 20% – Significant reduction at smaller branches – 27 – 54 hours per week – Savings mostly from eliminating part-time positions Reduction in book budget – Periodicals, homework help, annual book replacements

19. Challenge Grant: Library Reformulated Challenge Grant in FY 2011 Economy meant citizens needed services more than ever Avoided reduction in service hours and materials Reorganization and aggressive volunteer recruitment Community partnerships Book budget model

20. What Would You Do?

21. Implications and Lessons Learned

22. Implications of Process Changing a Culture and How to Deliver Services – Harder than we thought – Mixed Success – Served it’s purpose Positive and Negative Implications – The process was innovative and provided a systemic way to balance the budget – Employee morale was affected for those on the Challenge Grant – Some proposals unpopular with Council – Bought time

23. Planned Outcome Long-term the City planned to use Challenge Grants in FY12; solve imbalance in FY13

24. Final Outcome Cost reductions, process improvements, revenue enhancements and slow growth allowed the City to balance the FY2012 budget without utilizing Challenge Grants

25. Questions

26. Contact Us Mike Finley, Assistant Director of Fiscal Services mike.finley@arlingtontx.gov 817-459-6345 Kathleen Depweg, Budget Officer Kathleen.depweg@arlingtontx.gov 817-459-6202 Kim Probasco, Sr. Performance Analyst Kim.probasco@arlingtontx.gov 817-459-6382