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ONE-ON-ONE - October 2004
by Ed G. Lane
'When It's All Said and Done, Louisville Will Be on the Cutting Edge'
Louisville Mayor Jerry Abramson discusses how the city's merged government is working – and what lies ahead
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Jerry Abramson
Jerry Abramson is the longest-serving mayor in the history of Louisville and the first mayor of the merged city-county government.
In 2003, Abramson was named one of the “Public Officials of the Year” by Governing magazine and this year was named Kentucky’s best civic leader/politician for the fourth time by Kentucky Monthly magazine.
During his time as mayor, Abramson has led the $700 million expansion of Louisville International Airport, revitalized the city’s waterfront and expanded the local economy by recruiting the international headquarters for Tricon Global Restaurants, Presbyterian Church (USA) and UPS Air Hub 2000.
Abramson holds degrees from Indiana University, Georgetown University, and was a partner at Greenebaum, Doll & McDonald prior to his election. |
Ed Lane: Our last interview was on January 17, 2003 during your second week as mayor of Louisville’s new merged government. Twenty-one months have passed. How is Louisville doing?
Jerry Abramson: The merger has been very exciting. It’s been extremely challenging. The change that’s going on in local government is taking more time than I had hoped, but Louisville’s employees are working very hard. The consolidation of departments, the change of culture, the change of systems – like communications, personnel and financial management – is similar to what two corporations that are merging would be going through. In some areas, Louisville is ahead of schedule, in others we’re not as far along as I had hoped.
We’ve had some successes. A couple of companies have been quoted in the local newspaper as saying that working with one government, one leader, and having the ability for decisions to be made in one room has helped them in their ultimate decision to invest in our community. The most recent example was Citigroup’s decision to expand its operations in Louisville. That saved 500 jobs and will add 1,600 new jobs to those 500 for a new 2,000-plus job company in town. Citigroup felt it was a lot easier in working with a single government. You sum it up; I think things are going well. We’re looking around the country for best practices as we restructure departments and service delivery systems. When it’s all said and done, Louisville will be on the cutting edge of what’s going on in local governments throughout America.
EL: In 2003, you were concerned about revenue trends. Is revenue for the metro government increasing adequately?
JA: In that first year, we actually had less revenue in our new merged government than the old city and old county combined had had the year before. So did many communities in this country. All of this is a result of the down economy. Louisville had the good fortune of being able to use the merger as a way to manage through a difficult situation. We did not have to raise taxes or decrease any services. In fact, I think we enhanced some. We did eliminate over 750 positions in the merged government.
EL: How did Louisville eliminate 750 positions?
JA: Most of the jobs eliminated (about 600) were funded but not filled. So, after the merger we not only didn’t fill them, we also de-funded them. Then, in the second fiscal year, around 15 positions were eliminated because our analysis indicated the right number of employees for the delivery of services.
EL: So, where do you see Louisville’s revenues going?
JA: Right now it does look like the economy is turning. People in this country have talked about Wall Street doing exceptionally well, but Main Street not feeling it as of yet. In the last six months, Main Street Louisville has begun to receive an enhanced revenue stream. We built this year’s budget with a two percent increase in revenues projected. If we’re lucky, we may be conservative and there may be additional revenues beyond that if the economy is more positive in the future.
EL: Do you think there is a possibility of reducing employment taxes anytime in the future?
JA: Not at this point in time because of two reasons. One, there are a lot of start-up costs. If you would take the old mayor’s and the old county judge’s budgets (pre-merged) and compare that cost to what we’re paying now for the merged government, Louisville saved about $700,000. But, Louisville had to buy PeopleSoft because one government used that software, the other didn’t. That cost $400,000. Louisville had to get new shields for the police officers of the metro government and to re-mark the Louisville Metro police cars, etc. Those kinds of items create start-up costs. So, the dollars we save on the one hand end up funding a new Oracle state-of-the-art financial management system that cost Louisville close to $3 million.
Number two, there are many areas of our community that need capital investments. Once we cover our start-up costs, there are some park areas that need to be enhanced, a significant number of farm-to-market roads that need to be widened, and we’ve got bridges that are becoming unsafe, etc.
EL: What surprises did you experience during the government’s reorganization?
JA: Managing a consolidated department that is represented by two unions – so that two people doing the same work have different pay, work rules, and days off – is extremely difficult. The way the statute reads, all collective bargaining contracts are in effect until they expire. In these cases, the manager – unless the two unions are willing to allow an election to occur – has to manage a very difficult situation.
EL: Is there one good thing you did not anticipate that popped up out of nowhere?
JA: Louisville went to Wall Street and made a presentation to the bond rating agencies – Moody’s, Standard and Poor’s, and Fitch. We explained how we had restructured our new budget, what I was doing with union contracts and cost cutting. Louisville received a higher rating as a merged government than either the former city or former county had. That was a surprise.
EL: How much money is in Louisville’s “rainy day” fund for emergencies?
JA: Sixty-three million dollars. You will find that our “rainy day” fund is comparable to other similarly situated cities. Our cash reserves place Louisville somewhere in the middle of the group of cities to which we benchmark Louisville.
As for bond ratings, the size of Louisville’s fund showed a conscious conservative effort to set aside funds in case of emergency. It was good business practice to be able to have cash available if, God forbid, something catastrophic would occur.
EL: The metro government upgraded its financial controls for Louisville during the merger. How helpful has the new accounting system been in helping you manage and control the operation of the government?
JA: It’s the state-of-the-art public sector Oracle system that gives Louisville far more capabilities than we have thus far begun to fully use. The old city and the old county had different financial management systems. For that first six months, we had to run both systems. After July 1 of 2003, we began to focus on the new Oracle financial management system. It has given Larry Hayes, my deputy mayor for finance administration, and his team in the finance and budget office, an expanded amount of information to be able to track and to hold folks in departments accountable on a much more current basis than we had ever had before.
EL: How detailed are your financial reports?
JA: Our budgets are based on programs. Our finance department has a far greater ability to see what’s coming and to manage revenue and expenses.
EL: Does the accounting system provide activity-based cost accounting?
JA: Louisville’s new financial management system is now letting us truly do a full analysis using a “cost accounting” approach. We’ve never had the capability to do that. In certain areas we’re finding, in fact, we can privatize and outsource and save money. In other areas, we find that it’s cheaper if services are provided by city employees.
EL: Has Louisville begun outsourcing some non-essential services to private business?
JA: We have in some areas. A perfect example was in my first budget. I proposed to outsource facilities cleaning. In the old county they had outsourced cleaning; in the old city they had not. Our cost accounting analysis found it was less expensive to outsource. So it was like, “Aha! We need to outsource all cleaning.” The “aha” was stymied by a teamster contract in the old city that said the employees could not be laid off until the conclusion of the contract in 2005. So, I have half of Louisville’s facilities being outsourced and half being done by in-house. Ultimately, of course, we will be totally outsourced.
We have outsourced spare auto parts. NAPA is doing all of our fleet management after a contract bid. We used to do all those parts in-house.
Louisville used a consultant to analyze our banking arrangements. Seven different banks were doing business with Louisville and/or Jefferson County. The merged government bid these bank services and saved $1 million over the five-year contract. One of the banks that won offered free checking to all of our employees, a lower interest rate for those employees making under $40,000 a year, and other benefits that were very helpful to our employee base.
Republic won the payroll and day-to-day banking arrangements. Bank One received the overnight cash management contract.
Louisville saved about $3.5 million by self-insuring its health care plan with the appropriate umbrella. These are just a few examples of the progress we are making.
EL: How many employees do you have now?
JA: Around 6,300 employees. We have 367 square miles with 700,000 people. The merged government eliminated about 10 percent of the workforce, primarily through attrition.
EL: Do you see any other opportunities coming up where you can outsource?
JA: Each time Louisville comes to a crossroads and has the opportunity to either use city employees or private business to provide services, we run the numbers (cost analysis) both ways.
EL: Is Louisville’s new accounting system the key to outsourcing because now the city’s managers can determine the actual cost of providing a service?
JA: That’s exactly right. For example, inside the urban service district, Louisville sweeps streets with our own crews. Three times a year we will sweep suburban streets on the main corridors. We’re privatizing this and going out for bid.
EL: In the public safety sector, how has the merger affected the number of sworn officers, EMS personnel, firefighters and correctional officers servicing the Louisville community?
 JA: In terms of police officers, we consolidated our city and county on day one into the Louisville Metro Police Department. Based on the philosophy of the police chief, former centralized units, like the “street crimes unit” or the “narcotics unit” have been decentralized. Louisville has about 80 additional police officers on the street today.
The chief’s budget this year included two more police classes plus we are hiring civilians to start taking non-emergency police reports. Louisville’s police cars are outfitted with mobile data terminals, MDTs. An officer coming on duty can review his MDT and find out what’s happened during the last 24-hours since he or she was on the beat. We had a data entry backlog because we just didn’t have enough people. By using civilians to manage the MDT data, we have increased the efficiency of our metro police. That was the police. In terms of fire, the suburban fire departments have begun to consolidate.
EL: How many stations do you have?
JA: Louisville has 22 firehouses in the urban service district and 18 or 19 fire districts. We started with 21 fire districts out in the suburbs. Two of them merged. Now five are merging, so that will bring it down to 15.
So what I do, I have a chief of the chiefs, out in the suburbs (the old county). He comes to our once-a-week public safety meetings and represents the suburban fire districts. The chief of the old city represents the urban fire district.
EL: What has been Louisville’s success in recruiting leaders to manage its government operations?
JA: I’ve been very fortunate locally to recruit former state, county and city leaders to come out of retirement and help me get this new government off the ground. I’ve also been able to attract local private sector folks.
What I’ve been most excited about – because Louisville is “one government” – I get the former Atlanta health director. He comes here because he got tired of the bickering between Fulton County and Atlanta. Louisville was able to attract the police chief from Greensboro, North Carolina. The No. 2 manager of the fire/EMS in New York City (post-9/11) is an emergency medical physician and will be the CEO of the newly merged Louisville Metro EMS. He accepted the position, as he said, because Louisville’s EMS is like a slab of clay ready to be sculpted into a new state-of-the-art service. So, how could he not step out and try to put his imprint on this new agency?
EL: What new areas of business activity are boosting Louisville’s local economy? I made a couple of notes here: Louisville’s got the Frazier Arms Museum, Fourth Street Live!, the Marriott, the Frazier Rehab Center.
JA: That’s just the downtown. We’ve spent as much time in the suburbs as we’ve spent in downtown from the point of view that we’ve created a program called COOL, which stands for Corridors Of Opportunities in Louisville. COOL investigates our major corridors – like Brownsville Road, Shelbyville Road, Bardstown Road, Lexington Road, Preston Highway, Dixie Highway. COOL works with adjacent neighborhoods to determine the type of neighborhood commercial businesses that would support their quality of life. So for example, out Dixie Highway, Brian Wood of Lexington bought the Dixie Manor. We assessed and surveyed the businesses up and down that trade corridor and people said they needed a Staples. So we talked to him and Staples shows up as a part of that location.
In that same area there was a great interest in family restaurants. Our COOL Program folks began contacting locally owned family restaurants and two of them opened up out there, Wick’s Pizza and Mark’s Feed Store.
We’ve been doing the same thing on the other radials trying to get commercial investment in old stores that were vacant.
EL: How closely does your administration work with Greater Louisville Inc. (GLI)?
JA: I’m on the executive board of GLI. I go to the executive board meetings, and Metro Louisville pays GLI a little over a $1 million to be our expansion and attraction arm for economic development. GLI’s professionals who work in economic development, from Joe Reagan (chief operating officer of GLI) down, have business cards they give out. It has the GLI logo and the Metro Louisville logo. I’m constantly calling, meeting with prospective new business as well as expanded business opportunities.
EL: How critical is the public-private relationship to Louisville’s future economic prosperity?
JA: One of the real success stories in Louisville, in terms of our success in economic development, is that the government and GLI have been able to work so closely together and to show success both in terms of expansion as well as attraction.
EL: The Fletcher administration and Louisville’s Congresswoman Ann Northup were both very instrumental in getting the new bridge system moving forward. How significant will the new bridges be to Louisville’s future?
JA: It’s at the top of the list. Now that the airport’s been expanded, when you’re talking about transportation, you’re talking about economic growth, you’ve got to have that access – north/south – and we’ve got one incredible bottle neck at “spaghetti junction.” More often than not, each and every day there’s an average of one accident at “spaghetti junction.” Louisville’s got to relieve that pressure. The congresswoman has done a superb job of being the team leader to get Washington engaged in a financially big way. Governor Patton and Governor Fletcher, on this side of the river, as well as the governors that have been in office in Indiana, have done an excellent job.
EL: Louisville’s Metro Council has selected Kelly Downard, a Republican, as its leader. How would you describe your working relationship with the council?
JA: It’s been great. Kelly has been a longtime friend. I try, in all of my actions, to be focused on what’s best for the community. All of my presentations to council members have been what I believe is best for the community. I have not in any way, form or fashion tried to divide the council by political party. In fact, I am a proponent of non-partisan elections and would have preferred that to have occurred rather than the Democrat/Republican, and I said that way, way back. Truth be known, there is no Democrat or Republican way to run a city. There’s a business approach, there’s a sensitivity needed to handle the issues that affect those less fortunate, on quality of life, and on job creation, it’s a focus on supporting the education system. Fiorello La Guardia once said, “There’s no liberal or conservative way to run a city. You fill pot holes, put out fires, catch criminals, enhance neighborhoods.” The ideological differences that exist between Republicans and Democrats are far more on the national level than they are in local cities throughout America.
EL: How interested is Louisville in recruiting a major league sports franchise?
JA: In terms of today’s agenda, I’d say it’s not on the agenda.
EL: Under the leadership of President James Ramsey, the University of Louisville seems to be prospering. How do you assess U of L’s progress and impact on Louisville?
JA: Dr. Ramsey has reached back into the community and reconnected the university and the city. That has given us the opportunity to strengthen our partnerships. For example, in the area of life science companies and biotech companies where the research is done at the university’s medical school, then we work together. I’m the chair, he’s the vice-chair of the Louisville Medical Development Corporation, where we then try to transfer that research into businesses, investment, jobs. Jim Ramsey has done an outstanding job as leader of the university, but from a mayor’s perspective he has rekindled that partnership that has really given us the opportunity to add one plus one and equal three.
EL: During our last interview, you were concerned about how well Louisville’s employees would adapt to “one big change” as you described the merger. Are most of the major personnel and reorganizational issues behind you or are there some lingering items?
JA: I would be less than honest if I didn’t say that changing the culture has been one of the most difficult issues. It’s human nature that people like to talk about change, but they don’t particularly want it to affect them. What Louisville is trying to do is just that: to bring about significant change in the culture. Some people have embraced change and it’s been really exciting, but there are still some employees who push back. Many have retired. It’s getting better. Everyday is a little better than the day before.
EL: The operation of jails is a major expense for local government. What is the outlook for Louisville’s detention centers, the number of prisoners, and new method to contain costs?
JA: Louisville did a national search to head up our corrections. We got the No. 2 guy in the Illinois state penitentiary system. He has literally created a new esprit de corps within the men and women in the corrections department. Corrections is no longer seen as a way to become a police officer; it’s beginning to be more and more focused as a career.
Louisville has difficulties in terms of the number of prisoners at any given time. We’re working with the state to move their prisoners to the state penitentiaries. They were leaving their prisoners in our jail a little longer than we thought was appropriate. We’re working with the judges. We’ve got several alternative sentencing options to correction incarceration. Our youth detention center has been working exceptionally well and is not close to being filled – fortunately.
EL: What other cost areas in local government are escalating rapidly?
JA: Health care and benefits.
The state continues to require cities to place more money in the state-managed employee pension funds because of the down economy and a lower return on investments. Louisville has been required to put in additional millions of dollars in both of my budgets beyond the norm to ensure that the pension funds are actuarially sound.
EL: This fiscal year, Louisville budgeted around $25 million to repair its real estate and local roads. Did the new Louisville inherit some deferred maintenance during the reorganization?
JA: What we found was that over the last 15 to 20 years, there was a lot of deferred maintenance in both the city and county. As a result, we are spending money in hopes to be able to catch up, from fixing firehouses, pavilions, golf course clubhouses, sidewalks, guardrails, etc.
EL: Louisville is consolidating its building permit, inspections and zoning into one central location to streamline governmental approvals for development. How did this idea come about and what has been the response from business?
JA: It hasn’t gone into effect yet, so it’s difficult to tell you what the response in fact is. What the response to the announcement is, “it’s about darn time.” Until we had consolidated city/county government, we were really unable to do this. Some people call it a “one-stop shop.” I call it a “one-start shop” because that’s where the developer, the contractor, the guy that’s going to build the garage, [everyone involved in] a multi-million dollar subdivision or commercial development can come and around one table is every agency from which he or she needs a sign-off. Rather than running from department to department, from the fire department to the water company, from the sewer district to the works department for roads – they’re all there. It should open on or around November 1, and we’re excited about it.
EL: How are you innovating change in Louisville?
JA: Louisville has this historic moment in time. We’re looking around the country, finding the best practices and then tailoring the best practice to what is special about our hometown.
Louisville does an awful lot of research with the U.S. Conference of Mayors and the National League of Cities, finding out best practices; and then following-up through telephone, e-mail or ultimately bringing somebody here to talk with us about it.
We’re the first city our size in 30 years to merge. We’ve had over 40 cities come to Louisville to look and kick the tires. Merger is the future in this country.
Ed G. Lane is chief executive of Lane Consultants Inc. and publisher
of The Lane Report.
edlane@lanereport.com
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