Highlights from the City of Gary Fiscal Monitor Report-2009


City of Gary Report of the Fiscal Monitor
December 11, 2009
Public Financial Management
Two Logan Square
18th & Arch Streets, Suite 1600
Philadelphia, PA 19103
215 567 6100
Dean Kaplan
Managing Director


The City still has a high number of departments and agencies for a government of its size, and has overlapping functions in different departments. [p.4]

Gary has long directly offered services where there are qualified private sector providers, often in order to ensure the employment of local residents.  The City’s method for providing some of these services has proven ineffective.  For example, the Fire Department has established parallel car and truck maintenance operations to maintain their vehicles because the Department will not rely on the City’s own Department of Motor Vehicle Maintenance.  While the report was being prepared, the Department of General Services indicated a similar desire.  Demolition crews are paid full-time but often sit idle. [p.4]

Gary has had ongoing difficulties meeting existing monitoring and reporting requirements.  The fiscal monitor found multiple examples of annually recurring audit exceptions, requirements to repay federal funds, and missed grant opportunities. [p.5]

... [D]epartments are headed by well-intentioned but under-qualified managers. [p.5]

Most department managers do not have any extensive written records or documentation of policies and practices, or tools for budget implementation and monitoring. [p.7]

[I]t is not possible to establish conclusively whether the revenues received and expenditures made in a given year are related to that year’s budget or to prior year bills and revenues. [p.8]

In the baseline projections shown throughout this report, there is a presumed wage freeze for all employees for FY2010 through FY2014.  In many cases this continues a wage freeze in place before FY2010.  As dramatic an assumption as this is, it still leaves the City with a multimillion dollar structural deficit as soon as FY2011, absent other corrective action. [p19]

City employees receive leave benefits that exceed public sector benchmarks.  City of Gary employees also receive more holidays relative to local and State employees. [p.29]

Long delays in the City’s payment of PPO claims have resulted in some area health care providers refusing to see employees who are covered by that plan, and in some instances, left a negative mark on individual employees’ credit histories. [p.30]

The City should no longer offer retiree health benefits to newly hired public safety employees.  Retiree health coverage represents a large and rapidly growing financial obligation that the City cannot afford in light of its current fiscal condition. [p.38]

In tandem with workforce reductions in other areas, the City should consider implementing an across-the-board five percent base salary reduction for non-represented employees with a base salary of more than $50,000. [p.41]

The Clerk’s office does not have data on the total amount of uncollected fines and fees owed to the City, either in aggregate or by age of the delinquency.  While the Clerk does have outside counsel, it has not to date referred delinquent accounts for collection. [p.53]

Court data suggest that approximately half of all cases in City Court are disposed of by failure to appear or make payment.  Assuming that uncollected fines and fees in a given year are equal to the amount actually collected, that suggests that there are approximately $950,000 in uncollected fines and fees per year (based on the amount collected over the last two years). [p.53]

In 2007, the City Court disposed of 18,751 cases: 7,456 (39.7%) cases were disposed of by a defendant’s failure to appear in court or to pay fines. [p.57]

By comparison, all town and city courts statewide closed 13.8% of cases as failure to appear and, in all Lake County courts (excluding Gary City Court), failure to appear accounted for 20.8% [p.60]

Financial reports as currently prepared have the following weaknesses:  The City does not provide balance sheet information.  Fund balance is one of the fundamental measures of financial position for governmental entities; it is a measure of the City’s available resources, taking into account items other than just cash.  Absent this information, the City does not have a complete picture of its financial position. [p.68]

The City’s financial statements do not make clear the actual financial position of the City. [p.70]

The City’s accounting for property taxes, as well as limited information received from the County, makes it extremely difficult to establish what portion of current year property taxes are received on time. [p.70]

The City has no investment policy and no real strategy regarding investments.  While the City’s cash position is limited, it should nonetheless seek to maximize its earnings. [p.73]

Currently, the City has no budget office or budget staff. [p.74]

Over the course of this analysis, the Fiscal Monitor noted the City could not readily produce basic personnel information, including headcount and health plan enrollment. [p.79]

The Corporation Counsel reports that many of the judgments and claims against the City are for nonpayment by other City departments.  In other words, departments who lack funds to make payments on a contract stop paying and the eventual judgment then comes out of the Law Department budget.  The Law Department reports that there are approximately 75 pending cases in litigation against the City. [p.82]

The Law Department’s current outside counsel budget – not including the budget for outside counsel of other departments -- could support staff and benefits for between three and four additional full time attorneys and support staff. [p.84]

Within the City’s General Fund, the Health Department has 11 full-time positions in addition to the seven Commissioners. [p.87]

The Gary Health Department operates as the de-facto health department for most of northern Lake County.  Services offered to non-residents include immunizations, sexually transmitted disease (STD) testing and screening, well child and prenatal care, and testing for communicable diseases. [p.90]

The Gary Health Department provides critical public health services to some of Lake County’s neediest populations.  The current fiscal crisis in Gary, however, threatens the City’s fiscal solvency and requires the Gary community to rethink these services. [p.91]

The Health the Commissioner is still paid a full-time salary even though he works on a part-time schedule. [p.94]

The Gary Human Relations Commission is driven by the number of EEOC and HUD complaints filed annually.  Most cases handled by the EEOC Division are from clients who live in neighboring municipalities. [p.99]

Given the declining caseload and availability of service at other levels of government, the City should consider eliminating the Gary Human Relations Commission. [p.101]

The Gary Fire Department is "top-heavy," with a disproportionate number of sworn personnel receiving compensation at the captain and battalion chief pay grades.  Meanwhile, multiple parties including collective bargaining unit representatives and management recognize that employee morale is low, in no small part as a result of a multi-year wage freeze, staffing reductions, and poorly-maintained fire stations. [p.114]

Fire stations are obsolete, in disrepair, and in need of significant renovation. [p.114]

Emergency Medical Services runs an operating deficit in excess of $2 million annually. [p.115]

The City of Gary has more than twice as many firefighters per 1,000 residents than other US cities with population between 50,000 and 99,999.  The NFPA reports that the median number of firefighters per 1,000 residents in cities in the Midwest region of the United States is 1.16, versus 2.83 for the City of Gary. [p.115]

The City also has nearly twice as many fire stations per 1,000 residents compared to U.S. cities with a population between 50,000 and 99,999 residents.  With more firefighters and stations per capita, the number of pieces of apparatus within the Department’s fleet is also higher than U.S. cities of similar size. [p.116]

Each Gary firefighter averages just under two-and-a-half months of leave, while each EMS employee averages nearly three months of leave annually. [p.123]

The City has more firefighters per capita than other municipalities of its size but still struggles to fully staff operations without relying on expensive overtime due to high leave usage.  The City also has more stations and apparatus than other municipalities its size. [p.126]

The City should be able to operate out of nine stations – one for the airport plus eight other engine companies with one engine in reserve).  The Fire Chief, in consultation with his operational supervisors and the Administration, should identify the five stations for closure. [p.127]

In the absence of active monitoring of leave usage (with a few notable exceptions), the practice has evolved where public safety empoyee sick leave has become virtually indistinguishable from personal leave.  Against this backdrop, a handful of employees have become chronic abusers of sick leave. [p.131]

The City of Gary pays the salaries of five uniform personnel – one Division chief ($53,927), one Battalion Chief ($47,776) and three Captains ($45,501 each).  Once benefit costs are included, the total personnel costs associated with fleet maintenance reach $333,000 for FY2010.  The Department schedules these five employees on 24-hour shifts – despite the fact they do not participate in fire suppression activities – in case a vehicle needs to be towed after normal working hours.  The Department could have the same coverage by paying an employee to be "on call" instead of physically on site at the fire garage or by contracting with a private towing company. [p.134]

At the time of publication, the City of Gary is owed approximately $1.52 million in outstanding EMS revenue, of which more than 50 percent represents accounts receivable that are more than 60 days old.  The City of Gary has not taken meaningful steps to secure any portion of this large outstanding obligation.  The City of Gary lacks internal capacity to actively pursue these obligations. [p.139]

The Gary Police Department has higher staffing level than the average across other municipalities.  The only city with a higher staffing level is East Chicago.  In 2008, Gary had 7.8 more police staff per 10,000 residents than the average for comparable cities. [p.147]

The Gary Police Department has six all terrain vehicles (ATVs) and one helicopter which is currently grounded due to a lack of operating funds. [p.149]

Gary’s murder rate is 91.2 percent higher than similarly sized cities nationally. [p.153]

Over the past seven years, the Gary Police has had a total of five Police Chiefs and one interim Chief.  The longest tenure for any of the six chiefs was four years, between 2002 and 2006.  Since then, the Department has had a new chief every year, including three in 2008. [p.155]

The Supportive Services unit has four special police positions in the FY2010 budget.  One is assigned to code enforcement and three are assigned to security for the Mayor.  A sworn officer is also assigned to his security detail.  If the City eliminated the three special police positions or replaced them with non-compensated reserve officers, the projected savings would be $120,000 in FY2010 and $627,000 over five years. [p.160]

The City conducted a traffic study in 2000 that determined that 43 of its 140 traffic lights should be removed and replaced by stop signs.  The Division has replaced the lights at 17 intersections so far but has been limited in implementing this initiative because of limited funding. [p.185]

In Gary, it is estimated that street lighting alone is responsible for approximately $1.0 million in annual energy bills.  If these costs were shifted to residential and commercial property owners on a fee basis, it would provide an equal amount of General Fund capacity to support other desired programs. [p.187]

The City’s infrastructure is old and, in some cases, in need of significant repair.  Some streets are in very poor condition and are frequently subject to potholes, cave-ins and other problems. [p.194]

One major impediment to operational efficiency is the poor condition of the Department of General Services fleet.  Most of the vehicles were acquired in 1989 and are being used beyond their recommended life cycle, resulting in frequent breakdowns and malfunctions that require lengthy, costly repairs.  For example, approximately six of 14 city plow trucks are operational at any one time during snow plowing season.  As of October 2009, none of Streets’ four street sweepers were operational. [p.194]

General Services has 11 sanitation trucks sitting idle at a lot at 1100 Madison Street.  After the City privatized trash collection in 2009, it mothballed – but did not relinquish – its fleet of sanitation trucks. The Department has retained this fleet in case it needs to resume trash collection services.  After the City resolves the remaining issues related to the 2009 privatization, it should sell these vehicles. [p.197]

Available data suggests that the City of Gary has too many vehicles.  For example, the City of Gary has a ratio of approximately 34.2 passenger vehicles for each full-time employee. The City of Washington, DC, by contrast, had a ratio of 6.2 passenger vehicles for each full-time employee prior to a recent vehicle reduction effort. [p.208]

Abuse of take-home vehicle privileges:  Take-home vehicles are seen as an entitlement, and not issued according to the demands of an individual’s job function.  The number of take-home vehicles and their use is not tracked by any City department. [p.208]

Insufficient data monitoring:  As mentioned previously, vehicle inventory is not tracked.  Further, fundamental measures of vehicle condition and mechanic performance are not monitored, including whether a vehicle is operational, mileage, age of vehicles, whether a vehicle is overdue for scheduled preventative maintenance, fleet-wide downtime ratios, scheduled repair ratio, comeback rates, and average cost per mile. [p.208]

Eliminate Take-Home Vehicle Privileges
Effective immediately, the City should end the practice of assigning passenger vehicles to individuals.  All take-home vehicles should be turned into the Department of Motor Vehicle Maintenance (see VM04 for more detail).  Instead of assigning vehicles to individuals, the City should assign vehicles to an office or a geographic location.  Where there is a high concentration of City employees (e.g. city hall, fire and police department headquarters), the City may establish a motor pool.

Exact numbers regarding the number of take-home vehicles are unavailable, but the Police Department reports 102 (presumably including patrol vehicles), the Fire Department reports "approximately" nine, and the Department of General Services reports four.  Additionally, all department heads are issued a take-home vehicle. [p.211]

The Transport Division has seven vans but only two transport officers.  Five vans should be relinquished. [p.212]

The City currently has no vehicle use policy.  Many City employees drive city-owned vehicles for personal use, resulting in increased vehicle acquisition and maintenance costs to the City. [p.217]

A number of Gary parks are in very poor condition.  Even with less park acreage per capita than regional and national comparison cities, Gary currently does not have the resources necessary to maintain all of its parks.[p.224]

Over the last few years, the Golf Course, Marquette Park Pavilion, and the Fitness Center have cost the City more to operate than they generate in revenue. [p.225]

Eliminate property tax subsidy to the South Gleason Golf Course  FY2010 Impact: $117,000 Five Year Impact: $1,137,000
Like the Fitness Center, the South Gleason Golf Course should generate enough revenue to cover its cost of operations.  In fact, some municipal golf courses generate a net "profit" that can be reinvested in other City priorities.  In comparison, South Gleason has operated at a loss in recent years, with the City’s property tax levy picking up the difference.  Given the City’s financial distress, it will have to recover all of the costs associated with running the Golf Course or reduce operations to the level that the revenues will support.  Some strategies for achieving this balance include: 

Increase fees and any membership charges to improve revenue generation.  Higher fees may reduce the customer base depending on the demand for the service and the availability of other alternatives.

Reduce services to the level supported by existing revenues.

Pursue private management and operation of the Center.

Close the course and sell it to a private owner. [p.228]

The Genesis Center often competes with hotels and private banquet facilities regionally that are, in some cases, more modern (the facility was last renovated was 10 years ago) and more conveniently located.  Not having a hotel in close proximity also puts the facility at a competitive disadvantage for events it might otherwise attract. [p.235]

There are several scenarios for Genesis Center operations after elimination of the property tax subsidy:

Increased rates and reduced services -  After establishing the full cost of running events and maintaining the Center, rates could be increased and operating costs and services aligned to cover the costs of the types of events the Center is most likely to host, without property tax subsidy.

Privatize operations - Transferring operations of the Genesis Center to an outside firm or nonprofit would allow continued events at the facility while eliminating the need for a property tax subsidy.  One model would use a local non-profit operator such as the South Shore Convention & Visitors Authority. Another would bring in an experienced international facility operator such as SMG, an option suggested at the Fiscal Monitor’s public meeting.  In either case, the new operator would be required to run the Genesis Center without support from the property tax or other City sources.

Close the Center - If the City cannot reduce operations costs to the level supported by user fees and charges, or cannot find an outside operator, the Center would have to be closed to eliminate the impact on tax revenues. [p.236]

With few employees and limited programs, and in light of overall financial constraints, the Youth Service Bureau cannot continue as a stand alone department.  By transferring the operations of the Youth Service Bureau back to the Department of Public Parks, the Bureau can take advantage of the youth-based clientele that the Department of Public Parks has already established and vice versa.  In 2007 alone, the Department of Public Parks provided nearly eight times the number of programs provided by the Youth Service Bureau. [p.238]

Gary has demonstrated interest in and financial commitment to economic development through substantial investment in redevelopment, participation in the Regional Development Authority, and allocation of resources to other agencies related to the revitalization of the City.  The City also has an Economic Development Commission (EDC) tasked with business and employment development.  However, the City eliminated the Economic Development division (though it retained the Economic Development Commission) [p.240]

The City has invested $5.4 million in redevelopment since 2005.  However, the Redevelopment Department has not maximized the use of these funds and their other sources through leveraging existing intellectual resources because there is little coordination with local planning and development agencies including the City’s Planning Department and regional entities.  More striking, however, is the lack of professional redevelopment expertise in the Department to drive economic and community development projects from within. [p.248]

Unfortunately, while the current redevelopment staff is dedicated and hard working, they do not possess the requisite experience, knowledge or expertise to perform these tasks at the highest levels. [p.249]

In addition, Redevelopment has spent a considerable amount of time and money purchasing properties in designated areas for redevelopment.  Those acquisitions, while in targeted areas, have not been identified as part of a broader development strategy but rather stand as spot development projects that often fail to come to fruition. [p.249]

In the last five years the Department has spent $2.5 million to demolish 256 structures. [p.249]

RETURN TO:  Gary Page

RETURN TO:  Home/Directory

Created 19 Dec 2009 -  13:36:17

© 2009, G. David Yaros.  All rights reserved.