Thinking big with a modest $7.5 million

Posted: August 21, 2011

Bill Green

is an at-large Philadelphia

councilman

The Pennsylvania Intergovernmental Cooperation Authority, Philadelphia's fiscal watchdog, is due to receive $7.5 million from the settlement of a municipal-bond bid-rigging case. PICA plans simply to turn the settlement over to the city's general fund, whereupon it will likely be frittered away on routine operations.

In the context of the city's $3.5 billion budget, $7.5 million doesn't seem like much. But that shouldn't stop us from thinking boldly and creatively about how to maximize the return to city taxpayers.

In fact, with just this relatively small amount of unexpected revenue, we could deliver long-term value for citizens in four ways:

Invest $3.5 million to restart the city's Productivity Bank: During the 1990s, PICA seeded a $20 million revolving loan fund known as the Productivity Bank for city initiatives to reduce costs, increase revenue, and improve services. Initially, Productivity Bank loans were limited to projects with expected returns of 2-to-1 or better. That is, they had to reduce costs or increase revenue by at least twice the loan amount during the five-year repayment window. That ensured funding would be available for new projects, and it forced city departments to think creatively and aggressively about opportunities for innovation and savings.

During its 17-year run, the Productivity Bank leveraged $20 million to generate more than $100 million in savings and revenue for the city - an enviable return on investment even in the private sector.

Mayor John F. Street's administration relaxed the program's repayment requirement, and the Nutter administration drained the balance of the account in 2009. The city should use a portion of the bid-rigging settlement to reinstate this successful effort to encourage government innovation.

Use $1 million to staff the Mayor's Task Force on City-owned Facilities: Philadelphia's tired pattern of raising taxes and cutting services to make ends meet has failed to solve its core fiscal challenges. We need to join other major cities in monetizing nonessential public assets to help us deal with our long-term fiscal challenges.

The proceeds of any asset sales should be used to shore up the city's troubled pension system. For each $500 million invested in the system, we could save $50 million a year in general-fund spending. That's an almost perpetual annual return of 10 percent.

The recent formation of the Mayor's Task Force on City-owned Facilities - a concept the mayor and I have been discussing for more than a year - presents a golden opportunity to determine which city assets are crucial to city functions and services, and which should be leased or sold. Like the federal Defense Base Closure and Realignment Commission, the city task force will need technical expertise and professional staff. It must have sufficient resources to pursue its work effectively, efficiently, and, let's hope, in less time than the two years the mayor proposed.

Spend another $1 million to accelerate the remapping of the city under the new zoning code: After close to four years of collaborative, intensive work, Philadelphia is on the cusp of adopting a new zoning code that befits a 21st-century city, balances community and development interests, and sends a clear message that the city is open for business. However, the often-overlooked but crucial second step in the zoning-reform process - the remapping of every parcel of land in the city using the new code - will determine its impact at the neighborhood level.

The Nutter administration anticipates this citywide remapping will take five years. Many neighborhood groups believe this is far too long, and I agree. Unless we move more quickly, residents will suffer the unintentional consequences of "automatic conversion" - the changes in permissible uses and standards that will occur as soon as the new code becomes law.

With sufficient resources, the citywide remapping could be accomplished in one year instead of five. That would give residents a say in how their neighborhoods are zoned before any inappropriate development takes hold, and it would provide clarity and certainty for developers, helping to spur new construction, create jobs, and make the city grow.

Dedicate the remaining $2 million to an analysis of service delivery and outcome-based budgeting: The city is poised to spend $120 million on technology upgrades over the next six years. This is sorely needed, as many of the city's systems are decades out of date and on the brink of failure. But to deliver a meaningful return to citizens, we must use this opportunity to transform the way the government operates.

Rather than simply replacing old systems with new ones, we need to examine each step in our delivery of services to citizens - our so-called workflow. Only by documenting and analyzing the city's current performance can we use technology to eliminate needless steps, boost productivity, and save the city money. (I measure the potential savings in the hundreds of millions.) This will ensure that we buy new technology responsibly, implement it wisely, and generate some savings during the Nutter administration.

Furthermore, as PICA noted repeatedly in its analysis of the city's five-year financial plan, Philadelphia needs to start linking spending with results. We have to tie the resources the city spends to the goals it sets and the outcomes it achieves - or doesn't. We should build on successful outcome-tracking enabled by the federal stimulus and apply it across city government before next year's budget process begins.


Bill Green can be reached at bill.green@phila.gov.

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