What Happened?
In less than four years, Mayor Carolyn Kirk and her management team turned a $3.8 million free cash deficit into a $4.8 million surplus. After taking office in 2008 in the midst of the recession, the Mayor was re-elected with 74% of the vote.
How They Did It
With free cash falling since 2002 and other cities of similar circumstances in Massachusetts either receiving bailouts or entering receivership, Gloucester, a city of 30,000 people and a $91 million budget, was facing a dire situation. Mayor Kirk, her CFO and the management began a surgical turnaround:
- Created a form of “net-zero” budgeting where every PO over $100 now had to be approved by the Mayor. This essentially forced each department to reconsider every purchase request it was making. For example, when the police wanted to purchase a typical years worth of bullets, the Mayor cut that request, recognizing that barely any bullets had been used in previous years.
- Restructured the waste and recycling contract. Previously, stickers were purchased by households discarding waste. The new contract would utilize waste metering, which immediately led to $1 million in annual savings as households had more rigid guidelines to follow. Weekly recycling was also added (up from biweekly). Tipping fees and tonnage decreased by 21% and 30% respectively. Special items were no longer allowed to be disposed of without stickers, which led to increased sales of 125%
- E-government initiatives and changes in working hours enabled an early retirement program to be created as fewer staff was required. Using an intelligent method of early retirement, basically giving the final quarter of the year off, the city had already accounted for salary and benefits, requiring no further budget-busting costs. 10%, or 25 people in the workforce took the early retirement package.
- Hired a new CPA firm to go back to 2007 and reconstruct the city’s finances. Quickly they discovered $1.2 million in receivables due from the state had not been submitted for payment. Weekly finance meetings focused on bad accounts and the CFO began working directly with homeowners who were facing tax liens due to unpaid taxes.
- Implemented new software that all departments were required to use. Budgets not submitted within the new software would not be accepted. As a result, budget compliance was 100%.
- Department heads are responsible for writing all grants, with the city raking in $17.5 million over the last five years.
Use of Resolution
Faced with mounting healthcare costs, the Mayor embarked on a strategic process that ended up requiring all city officials and union chiefs to sign a resolution agreeing to a budget that included significant changes to employee health plans that had not previously been accepted by labor.
She presented a budget that showed dramatic cuts to a number of key city services, and when citizens overwhelmingly rejected that budget, she crafted a resolution that included increases in health insurance deductibles that would offset the need to cut any city services. As a result, all city officials were willing to sign the resolution, with the union chiefs following suit.
It’s a Mentality
“Buy-in from your team is the most critical element,” said Mayor Kirk. “Everyone in city hall is excited about the job they’ve done to get us back from the brink. For a task that difficult, while one person can start the change, without the entire team on board, it would’ve been impossible.”