With the first quarter behind us, the following three topics are high-value items to consider in Q2 for planning purposes:
The problems associated with aging infrastructure can cripple municipal budgets, but with proper planning, communities can strategically use their revenue when and where it counts most. The most effective way to plan for infrastructure improvements is to create an inventory of assets, public lands and utilities, noting: the present condition; when repairs were last made and how long they are expected to last; the cost and time associated with needed repairs; and average usage. Many states statutorily require this to be performed.
Once you have a complete inventory, use common sense and data science to plan projects. Avoid redundancy and lower costs by planning street projects with local utilities. Address potholes and surface damage by assessing the extent of the damage, the risk to safety and average traffic flow. Align infrastructure planning across all departments. Maintaining centralized oversight of large infrastructure projects and ensuring all staff members adhere to an internal communications plan, decreases risks of redundancy and improves timeline efficiency.
New technology makes it possible to reduce costs, plan effectively and communicate openly. In “The Nexus of the 21st Century: Tech Revolution and Infrastructure Asset Management,” Murat Ulasir, Ph.D., P.E., from Michigan-based OHM Advisors, explains how municipalities are using sensor technology, machine learning, augmented reality and cloud storage to reduce costs, improve efficiency and identify issues associated with infrastructure planning and asset management.
Analyze Pension and Retiree Health Care Plans
While pensions and retiree health care promises aren’t the only cause of municipal fiscal stress, they do add to the burden facing many local governments. Long-term restructuring plans can allow communities currently committing a high percentage of operating revenue to legacy costs to continue to provide critical services and keep the commitments made to current and past employees.
For local units with multiple plans, it helps to develop a heat map by contract group, considering all benefits, and begin to migrate the benefits to an established benchmark during future negotiations. Depending on bargaining unit contract timing or flexibility, benefits offered to new hires should be reconsidered to represent the current fiscal climate and long-term financial forecast. In other words, only promise what you can afford.
Communities that use defined benefit plans might want to consider a move to defined contribution plans. Many communities have already done this for new hires. While they may not sound as attractive to potential hires, job-seeking millennials are not looking at a pension as a deal breaker. Instead, high match 401K-style plans and HSAs are the new normal, and should at least be debated, if not considered wholesale.
As with all planning initiatives, the best place to start is with data. Make sure your actuarial reports accurately reflect reasonable market conditions using the latest GASB pronouncements and perhaps even more conservative assumptions. Changing the rate of return may look ugly today, but checks that won’t cash in the future are a worse alternative and are a clear sign of poor leadership.
Let’s face it, there aren’t enough new candidates entering the public sector to offset the increasing number of people retiring – and it won’t get better anytime soon. Planning for this reality is critical for today’s leaders and can save communities tens of thousands of dollars in contract labor and training costs – and protect against institutional knowledge loss.
According to the Bureau of Labor Statistics, more than one-third of public sector employees will be retiring within the next decade. An exodus of that size in a relatively short period of time would be reason for concern in any industry, but the problem is exacerbated in the public sector by the lack of replacement candidates. Communities who wait to address the issue will be faced with a depleted candidate pool and increased salary and benefit costs.
To increase the candidate pool, communities should build interest in public sector careers by promoting them at high school and nearby college career fairs and taking on paid college interns. Other options for attracting a youthful workforce include offering more flexible schedules and pursuing contractual agreements that incorporate career/succession planning and mentoring programs.
Smart technology is also a great way to protect institutional knowledge, and it comes with the added perk of reducing man-hours, thus generating long-term cost savings. Smart technology not only makes it easier and faster to address current situations and potential problems, but creates an inventory of city information that future employees will be able to easily access and utilize. Having to locate and reverse engineer somebody else’s files is never an easy task – and usually doesn’t work.