M h 25 20141

March 25, 2014

AGENDA

I t d ti & G l f th W t & Effi i Introductions & Goals of the Waste & Efficiency Commission

Snapshot of the City’s Current State

Discussion: Initial Ideas

Next Steps

2

Introducing the Mayor’s Blue Ribbon Commission on Waste & Efficiency in Government

CITY COUNCIL

Waste & Efficiency in Government

BUSINESS LABOR

Howard Shook (Co-Chair) District 7

Yolanda AdreanDi t i t 8

Richard Anderson (Co-Chair) CEO, Delta

Ken AllenInternational Brotherhood of Police Officers

Stephen BordersDistrict 8

Keisha Lance Bottoms, District 11

C.T. Martin

Martin L. FlanaganPresident & CEO, Invesco

William TaggartPresident & CEO, Atlanta Life

Stephen BordersAtlanta Professional Firefighters union

Alan LeeA i F d ti f C.T. Martin

District 10

Mary NorwoodAt Large Post 2

Jo ce Shepa d

Financial Group

Geri ThomasState President of Georgia, Bank of America

American Federation of State, County and Municipal Employees

Gina PagnottaProfessional Association of City Joyce Shepard

District 12

Alex WanDistrict 6

Professional Association of City Employees

Terrance SimonProgressive Firefighters of Atlanta union

Collectively, the Commission is charged with strengthening the City of Atlanta’s fiscal health by identifying efficiencies that support investment in

Atlanta union

3

infrastructure and ensure operational excellence in all parts of the City

Objectives

The Commission is charged with making recommendations to the Mayor that identify savings and efficiencies to put the City on a sustainable CHARGE that identify savings and efficiencies to put the City on a sustainable fiscal path

Recommendations will enable the City to address the infrastructure backlog and ongoing infrastructure maintenance requirements

CHARGE

Efforts will strengthen Atlanta’s position as a leader among cities in finding new ways to ensure a strong financial and operational position

Th t t f Atl t ’ i f t t th t t th Cit ’ The state of Atlanta’s infrastructure poses a threat to the City’s competitiveness as an economic leader in the Southeast and the nation

Addressing the highest priority items must begin immediately; opportunities for savings identified by the Commission are essential to

URGENCY

pp g ymeet annual debt financing requirements of the bond

City Operations and Council are always looking at our operations and hi i l

UNIQUE ROLE ways to save money—this is not unusual

However, the scope of the challenge requires us to step back from incremental cost improvements and consider bolder, structural changes

OF COMMISSION

4

Commission on Waste & Efficiency Timeline

KICK-OFF IDEA COLLECTION IDEA DEVELOPMENT PRIORITIZATION RECOMMENDATIONS

Week ofth

Week of t

April 28th

thWeek of

thWeek of

th

DEVELOPMENT

March 28th

Goals /

April 21st to May 9th May 11th June 24th

Goals / Objectives

Review Current State

Assign Preliminary

Ideas to Working Groups

Idea Development /

Analysis

Initial Prioritizations

of Ideas

Review and Finalize

Recomm-endationsState

Launch Idea Collection

Process

Review Prioritization

Criteria

Prioritize Potential Ideas

Identify FY15 vsFY16 Timing

Develop Phased Approach for

FY15/FY16 Process

Review of

Key Opportunity Themes

And Creation of Sub-groups

Key Budget Dates:

5

y g-Council Break April 7-18-Proposed Budget Book Delivery: April 25-Budget Amendments, Full Council: May 29 (Finance/Exec Committee: May 14)-Budget Amendments, FINAL Input to Full Council: June 16 (Finance/Exec Committee: June 11)

AGENDA

I t d ti & G l f th W t & Effi i Introductions & Goals of the Waste & Efficiency Commission

Snapshot of the City’s Current State

Discussion: Initial Ideas

Next Steps

6

State of Atlanta’s Infrastructure

In the midst of a nationwide economic downturn, the City of Atlanta has been working in a constrained fiscal environment, grappling with strategies to enable us to do more with less

During this time we have pursued a fiscal strategy focused on stabilizing City services and increasing efficiencies – since 2007, the city has cut over $125M f om a Gene al F nd b dget of $670M do n to a b dget of $544M hil from a General Fund budget of $670M down to a budget of $544M, while also improving services to Citizens

This strategy comes at a cost, and the City has under-invested in core infrastructure

Th Cit tl h $1 1B i f t t b kl fi i th f ll The City currently has a $1.1B infrastructure backlog; financing the full backlog , would require ~$75M in incremental revenue per year to cover debt service

Additionally the City needs approximately $95M in incremental operatingAdditionally, the City needs approximately $95M in incremental operatingfunds to maintain infrastructure and avoid future backlogs

Forecasted revenue growth of ~1% per year would bring in a total of $30-35Mincremental revenue over the next 3 years, which is insufficient to 3 y ,address core infrastructure issues

Ensuring fiscal stability in future years, requires that the City take dramatic steps to increase efficiencies and change the way we do business

7Source: City of Atlanta CAFR; Office of Budget; 2010 State of the City’s Transportation Infrastructure & Fleet Inventory Report; 2012 Bain Infrastructure Report; Department conversations

The General Fund’s inability to capture City growth is unsustainableunsustainable

Inflation-adjusted revenue and expenditures currently

below 1993 levels

8

Note: GDP, Revenue, and Expenditures all adjusted for inflation based on CPI-U for the metropolitan Atlanta region. Fiscal year change-over occurred in 2006; thus, FY2006 numbers are estimated assuming constant growth from 2005-2007Source: Bureau of Economic Analysis, Bureau of Labor Statistics, City of Atlanta CAFR

The City identified a $1.1B backlog in 2012 that continues to grow due to lack of annual fundingcontinues to grow due to lack of annual funding

TOTAL INFRASTRUCTURE BACKLOG CURRENTLY EXCEEDS $1.1BPRELIMINARY

Funding an Infrastructure Bond to address the full backlog would require

9

Note: $922M in public right of way infrastructure may be reduced by ~30K due to recent investment in bridgesSource: FY13 City of Atlanta Adopted Budget; City of Atlanta Departments; 2010 State of the City’s Transportation Infrastructure & Fleet Inventory Report; 2012 Bain Infrastructure Report

~$75M/year in financing costs

In addition, the City needs ~$95M more per year to prevent future backlogsg

Assumes backlog is addressed; increase below reflects the requirements necessary to

PRELIMINARY

below reflects the requirements necessary to prevent future deferred needs

L d

High-end

Low-end

~$95M steady-state need based on refined 2014

analysis by the f bliDepartment of Public

Works

10Source: 2011 CAFR; Department estimates; 2010 State of the City’s Transportation Infrastructure & Fleet Inventory Report

A tightly prioritized list still requires an immediate need for $250M to address the highest-priority backlog items

EXAMPLE LIST OF INVESTMENT NEEDS FOR FIRST $250M

PROPER EXECUTION OF THE INITIAL INVESTMENTS IS PARAMOUNT

$ g p y g

PRELIMINARY

• Rate all potential projects on a detailed basis, for example:

- Compliance with federal, state, local lawsCompliance with federal, state, local laws

- Safety assessments, age, useful life

- Cost, return on investment, funding /sources

- Alignment with the City’s long-term vision

- Future operations and management costs

- Environmental/sustainability concerns

• For highly ranked projects, refine cost estimates with respective departments with respective departments

• Iterate internally within departments

• Work with City Council, Departments and other key stakeholders to finalize prioritization

• Communicate proactively with the public and focus on positive impact and transparencyBaseline prioritization

11

and transparency

Source: City of Atlanta Departments; 2010 State of the City’s Transportation Infrastructure & Fleet Inventory Report

Baseline prioritization to be developed with key

stakeholders

Failing infrastructure, both chronic and acute, can significantly hamper Atlanta’s economyg y p y

CHRONIC: General traffic ACUTE: A major bridge ffcongestion costs the city

economy:$313 Million per year

j gfailure could cost the city

economy:$28 Million per week$313 Million per year $28 Million per week

• Wear and tear on roads• Excess fuel consumption• Increased CO2 emissions

Shi i ti

• Lost productivity and increased commute times

• Reduced spending on local b i

12

• Shipping congestion

Source: Texas A&M Transportation Institute; 2011 COA Community Development Plan report; City internal analysis and assumptions

businesses

The City cannot fund this work with current budgets and is projecting budget over-runs in FY14 through FY16is projecting budget over runs in FY14 through FY16

$700

$

$500

$600

$200

$300

$400

$M

M

$-

$100

$

FY 10 FY 11 FY 12 FY 13 FY 14* FY 15* FY 16*

Revenues $552 $559 $556 $532 $537 $545 $552 Expenses $487 $539 $523 $521 $540 $581 $587

$(100)

p $4 7 $539 $5 3 $5 $54 $5 $5 7Surplus/Deficit $65 $20 $33 $11 $(3) $(36) $(35)

Revenues Expenses Surplus/Deficit

13Note: City of Atlanta Published Budget Book, FY10-FY13; FY14 Q2 Budget Update; FY14 Five Year Budget Plan; Department of Finance

General Fund expenses must be streamlined to avoid going into deficit

Atlanta’s tax base does not support infrastructure needs

City of Atlanta Regional Position is not reflected in population tax base

Atlanta receives far less state support than peers

PRELIMINARY

45%

18 000 000

20,000,000

2012 METRO AREA

reflected in population tax base than peers

30%

35%

40%

14,000,000

16,000,000

18,000,000 POPULATION

CITY POPULATION AS % OF METRO POPULATION

20%

25%

30%

8 000 000

10,000,000

12,000,000

10%

15%

4,000,000

6,000,000

8,000,000

0%

5%

0

2,000,000

k C

ity

usto

n

hville

oeni

x

gele

s

cago

elph

ia

enve

r

rtlan

d

Dal

las

osto

n

apol

is

D.C

.

tlant

a

14

New

Yor

k

Hou

Nas Pho

Los

Ang

Chi

c

Phila

de De

Por D B

o

Min

nea

Was

hing

ton,

At

Source: Fiscal Research Center for Georgia State University, Governor’s Adopted FY2013 Budget Report, GA Dept. of Revenue, GA Dept. of Transportation, Bureau of Economic Analysis, GA Dept. of Education, city CAFRs

Property inflation does not automatically increase property tax revenue for the citytax revenue for the city

Atlanta property tax revenue growth forecast 2014 - 2024

Estimated annual rollback Estimated annual rollback $20M - $59M

Estimated property tax revenue $169M; growing at $1 2M each year

N ti d i t th f f t d i f

$1-2M each year

New properties and improvements are the source of forecasted revenue increases for the city State Law requires cities to rollback revenue from property inflation on existing

properties or declare a tax increase

15

p p

This has forced Atlanta to already be one of the most efficient Citiesefficient Cities

General Fund Expenditure per Capita Already Lower than Peer Cities PRELIMINARY

Further improvements will require new operating norms;

16Note: *Capita = daytime population; 2010 most recent year for which all cities’ data is available; average includes peers and Atlanta status quoSource: City CAFRs

Further improvements will require new operating norms; however, these changes will move us from good to best in class

However, despite efficiencies, cost of personnel is trending upwardg p

Following a sharp decline in FY10, headcount and salary expenditures have trended upward

$420

4 700

4,800

Employee headcount over time

$380

$400

4 400

4,500

4,600

4,700

$340

$360

4 100

4,200

4,300

4,400

FY 09 FY 10 FY 11 FY 12 FY 13 FY 14$300

$320

3,900

4,000

4,100

Headcount 4,668 4,156 4,443 4,552 4,488 4,492 Salaries and Benefits ($MM) $397 $311 $331 $327 $333 $335

H d t S l i d B fit ($MM)

17Source: Department of Human Resources Headcount Report; COA Budget Books

Headcount Salaries and Benefits ($MM)

Given increase in headcount and current state of the healthcare systems, healthcare costs are projected to

ti i i ifi tl f ti l ticontinue growing significantly for retiree populationProjected retiree healthcare costs projected to increase at 4% per year for next 30 years

PRELIMINARY

More than 65% of healthcare costs sit

y

$160

Annual Cash Cost for Retirees ($M)CAGR(FY14-FY44)

with the General Fund

Retiree healthcare t j t d t

$120

$140 4%

costs are projected to grow at 4% per year for the next 30 years

Total cash costs are

$80

$100

Total cash costs are forecast to double in the next 13 years and triple over the next

$40

$60

30 years

$0

$20

2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044

18

Current retirees Current employees Future employees

Note: Rough, initial valuation; should not be relied upon for City or State decisions; nominal values shownSource: Actuarial reports; Segal July 1, 2011 valuation and projection of OPEB plan; Expert interviews

Growing pension costs are also expected to continue, triggering employee cost sharinggg g p y g

With a change in annual required contributions, City anticipates hitting 35% cap on pension funds by 2029

PRELIMINARY

Given current trajectory, City expects to hit 35% cap (and trigger

employee cost sharing) by 2029.Estimate that 50 bps improvement 5 p p

in rate of return delays trigger by 3-5 years; 100 bps improvement

likely avoids trigger altogether

19Note: Rough initial valuation based on Segal valuation as of July, 1, 2012 uses 30 years and 6% discount rate; additional analysis requiredSource: Segal projection of General Employees plan and rough estimate of Fire and Police plans

AGENDA

I t d ti & G l f th W t & Effi i Introductions & Goals of the Waste & Efficiency Commission

Snapshot of the City’s Current State

Discussion: Initial Ideas

Next Steps

20

Collectively, the Mayor has formed this Commission to find ways to address these challengesfind ways to address these challenges

Over the next 3 months, the Commission on Waste & Efficiency will be tasked with recommending a series of opportunities that will be tasked with recommending a series of opportunities that have the potential to: Provide the City with necessary funds to support investment in the

infrastructure backlog and ongoing operating & maintenance expenditures along infrastructure backlog and ongoing operating & maintenance expenditures along with core operations

Create excellence in City operations and position Atlanta as a best-in-class City for operational effectiveness

NS

h ve I

id e II

Longer-Term

Put City on a trajectory for long-term fiscal stability

UIC

K W

IN Short-term

One-time revenue b

Wav Mid-Term

Recurring savings h d

Wav

e Longer Term

Larger recurring savings that may

QU boost/

cost reductionthat do not require upfront investment

savings that may require upfront investment

21

We are asking all Committee members to spend the next 3 weeks collecting ideas for the Commission to consider3 weeks collecting ideas for the Commission to consider

GUIDING PRINCIPLES Questions to Consider

Think big and bold; nothing is off the table

GUIDING PRINCIPLES

How will the recommendation:

I th ffi i f Cit

Questions to Consider

off the table

Generate as many options as possible

F d i i h

Improve the efficiency of City operations?

Generate savings or revenue for the Ci i h h di d l Frame recommendations with a

focus on impact

Maintain focus on public impact

City in the short, medium and long-term?

Be sustained?of recommendations

Ensure mix of short, medium and long-term opportunities

Impact public services and citizens?

Impact City staff?

Enhance the City of Atlanta?

The Blue Ribbon Panel will serve in an advisory capacity, making

Enhance the City of Atlanta?

22

recommendations to the Mayor that will ensure the appropriate mix of short and long-term efficiency opportunities

In addition to Commission ideas, we will be soliciting input from the publicinput from the public

Efficiency.Commission@atlantaga.gov inbox is Efficiency.Commission@atlantaga.gov inbox is live and accepting ideas from the public, staff members and Commission membersTh i b ill b it d b th M ’ Offi d The inbox will be monitored by the Mayor’s Office and ideas will be collected and shared with the Commission

The City will also be hosting a public hearing to collect ideas from the public

23

AGENDA

I t d ti & G l f th W t & Effi i Introductions & Goals of the Waste & Efficiency Commission

Snapshot of the City’s Current State

Discussion: Initial Ideas

Next Steps

24

Next steps

Review City of Atlanta Fiscal Fact Book to identify potential areas of opportunity

Discuss Commission charge with stakeholders and gather ideas

Submit ideas via Efficiency.Commission@atlantaga.gov

S d i ill b h d l d f W k f A il t Second meeting will be scheduled for Week of April 21st : City staff will follow-up with date, time, logistics

25

Appendix

26

Implementation & Referendum Timeline

JULY 2014City assesses Commission

d i l Realize benefits

f “ i k i ”recommendations; releases Efficiency Plan laying out timeline and implementation roadmap

AUGUST 2014L h i k i

from “quick wins”

Launch Wave I initiatives

FALL 2015

FY17: Realize “run rate” benefits from implemented

Q1/Q2 2015 Q1/Q2 2016 Q1/Q2 2017Q2 2014

Launch quick win program (FY15 budget)

Issue Bond recommendations

Q3/Q4 2014 Q3/Q4 2015 Q3/Q4 2016

MAY 2014 MARCH 2015

Bond Referendum

Wave I Initiatives Submitted in FY16

Wave I Initiatives Implemented; initial savings realized

Incorporate Wave II

Bond announced

JUNE 2014Commisionrecommendations

Budget Plan Initiatives in FY17 Budget

submitted to Mayor

JUNE 2014CoA FY15 Budget Established

27

Community outreach and engagement for the Infrastructure Bond will take place in a separate, parallel effort

INFRASTRUCTURE BACKLOG

28

Deferred capital projects and infrastructure investments exceed $1B todayexceed $1B today

BACKLOG* CONSISTS PRIMARILY OF DEFERRED INFRASTRUCTURE

BACKLOG FOR PUBLIC WORKS GROWS EXPONENTIALLY

PRELIMINARY

$3.2B deficit in 2027 if City does not address backlog or

DEFERRED INFRASTRUCTURE GROWS EXPONENTIALLY

does not address backlog or annual maintenance need

The CoA must address the infrastructure backlog before the need exceeds f

29

reasonable funding capacity*$922M in public right of way infrastructure may be reduced by ~30K due to recent investment in bridgesSource: FY13 City of Atlanta Adopted Budget; City of Atlanta Departments; 2010 State of the City’s Transportation Infrastructure & Fleet Inventory Report; 2012 Bain Infrastructure Report

Right-of-way has a backlog of ~$922M* as of 2010

PRELIMINARY

30

* $922M in public right of way infrastructure may be reduced by ~30K due to recent investment in bridgesSource: 2010 State of the City’s Transportation Infrastructure & Fleet Inventory Report; Bain analysis

Atlanta must double public works budget in order to meet peer city average per centerline mile

$100K

FY2010 public works expenditures per centerline mile

meet peer city average per centerline milePRELIMINARY

80

$100K

77

60$28M increase in public works

40 38 37

29 Average = $27K

2012 10 9

30

Miam

i

Denver

St.Lo

uis

Atlanta

-

teady

state

Atlanta

-

statu

squo

Kansas

City

Charlotte

Clevela

nd

31

ste s

Note: Seattle public works expenditure data not available; centerline mile is agnostic of road width—it effectively measures distance of yellow centerline; 2010 most recent year for which all cities’ data is available; average includes peers and Atlanta status quo

Source: City CAFRs

Transportation & transit: Atlanta’s traffic is frustrating and time-consuming for metro area residentsconsuming for metro area residents

ATLANTA’S TRAFFIC IS HIGHLY UNPREDICTABLE

…AND CONGESTION RESULTS IN THE LONGEST AVERAGE COMMUTE

PRELIMINARY

Buffer index(The extra time built into planned trip,as percent of typical travel time)

Mean travel time to work (minutes)

UNPREDICTABLE… LONGEST AVERAGE COMMUTE

Atla

nta

Atla

nta

New

Yor

k

New

Yor

k

Nor

folk

New

Yor

k

New

Hav

en

Hou

ston

Pitt

sbur

gh

A A N N N N N H P

32Source: Texas A&M Transportation Institute (2012); US Census 2010

REVENUES AND EXPENSES

33

Atlanta’s State and local tax burden is slightly higher than averagethan average

PRELIMINARY

34

Note: Excludes Cincinnati, Cleveland, Miami, Pittsburgh, Sacramento, St. Louis, and Tampa due to lack of comparable data; sales tax based on information from 2010 Consumer Expenditure Survey; property tax based on estimated home values at the $50,000 income level

Source: Bureau of Labor Statistics, U.S. Census, “Tax Rates and Tax Burdens in the District of Columbia—A Nationwide Comparison”

Atlanta’s recovery from the recession is close to peer city averageaverage

EMPLOYMENT RATE OUTPUT (GDP)

PRELIMINARY

Growth in employment rate since recession peak

EMPLOYMENT RATE OUTPUT (GDP)

Growth in GDP since recession trough

35Source: Brookings Institution

City of Atlanta is a net exporter to State of Georgia and receives far less state support than peersfar less state support than peers

COA receives only ~70¢for each d ll it t ib t t t t

Atlanta receives far less state support th

PRELIMINARY

dollar it contributes to state than peers

36

Note: *Methodology based on research by Andrew Young School of Policy Studies at Georgia State University, Atlanta based on Fulton County due to data availability; **FY2010 most recent year for which all peer data is available

Source: Fiscal Research Center for Georgia State University, Governor’s Adopted FY2013 Budget Report, GA Dept. of Revenue, GA Dept. of Transportation, Bureau of Economic Analysis, GA Dept. of Education, city CAFRs

Revenues in peer cities have grown in line with or above regional inflationregional inflation

DENVER MINNEAPOLIS

CAGR (’02-’12)

1.8%0.5%

CAGR (’02-’12)

3.0%3.0%

0.4%3.0%1.6%

37

Note: GDP represents metro region for Denver and Minneapolis. Inflation adjusted using CPI-U for Denver and Minneapolis metro regions.Source: Bureau of Economic Analysis, Bureau of Labor Statistics, City CAFRs

Employee healthcare costs are growing rapidly

$16 000 $140 000 000 Total medical and dental

PRELIMINARY

$14,000

$16,000

$120,000,000

$140,000,000 Total medical and dental expenses faced by the City and City employees have grown by 3.4% a year in recent years.

$10,000

$12,000

$80,000,000

$100,000,000 This is a $22M increase

between 2008 ($101M) and 2014 ($123.5M).

The total cost per employee

$6,000

$8,000

$60,000,000

The total cost per employee has grown even more quickly, rising from $10,500 in 2008 to $14,600 in 2014.

$2,000

$4,000

$20,000,000

$40,000,000 The pace of growth in medical and dental expenses is much faster than City revenues or employee earnings can continue to sustain

$-$0

2008 2009 2010 2011 2012 2013 2014

Annual Total Medical/Dental Expense Expense per Employee

continue to sustain.

38

Annual Total Medical/Dental Expense Expense per Employee