For the past two years, Haddon Heights has cut property taxes. However, the ‘09 cut was our first tax reduction in 56 years! What has happened? We started running the municipality like a business, and we challenged the school district and county to keep their tax levy request low.
We started to see our government as in competition with surrounding towns for their residents and property owners. In other words, we wanted more people to desire Haddon Heights over other towns, therefore driving up demand for our housing and business stock. This, in turn, will increase the value of our taxpaying properties.
We operate very efficiently, provide better services at lower cost, increased revenues, and have reduced property taxes two years in a row. As a result, the quality of life in Haddon Heights has improved.
Municipalities essentially have a monopoly on the services they provide. This monopoly is granted by the state. Monopolies tend to become less efficient and innovative over time because there are no alternative product offerings within the market they serve. Therefore, they have less of an incentive to be efficient and innovative.
If you need help in meeting the 2.0 percent cap, while maintaining the quality of life for your residents, then start governing like a business.
What happens when governments fail to innovate and become more efficient? The current state administration has taken a bold and necessary step to put in place a budget that will make our state more competitive both from a business and residential perspective. Also, the 2 percent tax levy cap and the other 32 toolkit pieces will help guide local taxing entities in creating more efficient and competitive market environments.
With a 2 percent cap, I calculate that the average blended tax increase will be around 1.4 percent. By moving from an average of 3.3 percent to an average of 1.4 percent, taxpayers will save approximately $500 million dollars in 2011. This will require municipalities to start thinking like businesses in competition.
provide better services
at lower cost,
and have reduced
two years in a row.
Below is a “Governing like a Business” framework created for Haddon Heights which is based on practices followed by the best competitive businesses, for example General Electric, #2 of Forbes Global 2,000.
Management Management must question everything. As a newly minted mayor in 2008, I didn’t pretend I had the answers. What I did know was that the residents were not happy with the level of taxes they were paying and the way the government was being run. So I challenged the governing body to start to question everything we did. The answer in many cases was “because it has always been done that way.” This led to applying a business framework to our government operations. We found much inefficiency in management, processes, finance, and marketing.
We also learned that we couldn’t do it alone. We enlisted our suppliers and employees to partner with the governing body to analyze their areas of expertise and responsibility. We asked for recommendations on how they could become more efficient and, in turn, save the municipality money and/or increase service levels. Where vendors couldn’t find a way to be better partners, we replaced them. When employees found savings, enhanced services or increased revenues they were rewarded.
I challenged the county and school district to lower their tax levy request from our borough residents. Our school district and county have responded by meeting my challenges each year.
Financial Use financial analysis intently. The business intelligence extracted from prior year budgeted versus actual, and benchmark data from other municipalities is invaluable. This data is the brains of our governing operations and has provided the ability to set clear, achievable financial goals.
Because it didn’t exist, I ended up creating a financial model made up of a complex series of spreadsheets, formulas and charts in order to give “real time” views into past performance and forward planning. We celebrated every single dollar of savings and new revenues.
We started to save money in the form of cash surplus, which hadn’t been done in the past because of the extraordinary aid requirements. We stopped asking for extraordinary aid the first year in office because we knew it was not a reliable and predictable source of revenue.
On the revenue side, we enhanced existing revenues and created new sources. For example, we ensured that our court system was operating effectively, while reducing crime. We created new revenue sources including recreational programs. We also purchased and retrofitted new buildings to provide facilities for borough use and to provide rental income. We updated permit and other fees to be in line with surrounding communities.
We focused intently on the appropriations side of the equation by using zero-base budgeting. We looked into longer term investments in the form of economic development projects that would return cash and ratables. We also restructured our debt, raised our bond ratings to lower debt cost, and stopped using TANs (Tax Anticipation Notes) due to better management of cash flow. We recently began focusing more intently on our tax collection rate for two reasons. First, to support cash flow and, more importantly, because it lowers reserves for uncollected taxes in the post year.
Operational Manage processes not people. Don’t focus on what people or departments do but how they do it. Data is king again, this time in making operational decisions. Metrics from various points of operations compared to other municipalities and industries outside of government provide insight into what is acceptable and what is not. As part of the “question everything” mandate, our department heads analyzed their operations looking for cost cutting, service enhancements and revenue increases. What we found was that we had too many employees and that we were spending too much money.
We right-sized our public works, administration and finance departments by terminating positions that were not needed. We also retooled some processes, and outsourced some functions to private industry including tree take-down and trash pick-up. We invested in technology to automate processes. We added new software and additional networking capabilities.
We negotiated our union contracts, but also replaced fulltime employees with part-time (shared services) help. Our headcount has dropped 35 percent over the last 30 months. We continue to use temporary employees to support seasonal operations, such as crossing guards and leaf pick up.
We are continuously looking for improvements in our operations, though pockets of opportunity are getting smaller. So don’t discount the small stuff but make certain it is worth the effort.
We stopped asking
for extraordinary aid
the first year in office
because we knew it
was not a reliable
source of revenue.
I am a stickler for what is being purchased and why, and it has paid off. We implemented a $500 and over sign-off by me in addition to the CFO. This may sound extreme to some, but it provides a window for me to understand what is happening in the borough. I am able to see the details of operations that I might not necessarily pick up on from monthly high-level department reports. If you want to understand what is happening in your municipality, I suggest you sign off on all purchases.
Marketing Understand your performance by measuring customer satisfaction. Bottom line, your customers (taxpayers) need to be happy.
We executed a 56 question opinion/ satisfaction survey to all our property owners. We asked the satisfaction level of 20 key services, and then focused our efforts and resources on the bottom third of the lowest rated services. Our goal has been to increase the satisfaction levels of these lowest rated services.
As part of increasing satisfaction we focused on introducing new and enhanced services for our residents. For example, we tripled our leaf pickups, created a bi-monthly newspaper, built a new robust web presence consisting of a new web site, eNewsletter and social media. We increased road patrols and added more community events. We built the first ever community and seniors center for the borough. We also moved our public works, construction and zoning administrative office closer to the center of town so that it is now easier for residents to meet and connect with these services.
All of our efforts have translated to Haddon Heights being known as a community to move to and stay in. Our taxes are under control, we have high quality services and we have built a better quality of life for our residents. We also rebranded Haddon Heights with an updated logo and added the tag-line “The Friendly Community.”
If you need help in meeting the 2.0 percent cap, while maintaining the quality of life for your residents, then start governing like a business. The results might not happen overnight, so you need to get started today. Remember to satisfy your taxpayers, put resources towards their needs, be better than your surrounding communities, be innovative, focus on the revenue side of the equation and keep a sharp eye on all spending.
Article published in New Jersey Municipalities, November 2010