The New Jersey Initiative

T HE N EW J ERSEY THE NEW JERSEY INITIATIVE: Building Management Capacity I NITIATIVE in New Jersey Municipalities : Building Management Capacity in New Jersey Municipalities THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Maxwell School of Citizenship and Public Affairs Syracuse University, New York

Eagleton Institute of Politics Rutgers, The State University of New Jersey

Funded by The Pew Charitable Trusts and State of New Jersey Department of Community Affairs

Address inquiries to: The New Jersey Initiative Alan K. Campbell Public Affairs Institute Maxwell School of Citizenship and Public Affairs Syracuse University 306 Eggers Hall Syracuse NY 13244-1090

315-443-9707 315-443-9734 (Fax) www.campbellinstitute.org

ISBN 0-9723595-0-8 To all the dedicated public employees who serve in New Jersey’s 566 municipalities and state government. iv

New Jersey Initiative Project Staff

The Maxwell School of Eagleton Institute of Politics Citizenship and Public Affairs, Rutgers, The State Syracuse University University of New Jersey

Dale Jones Yonghong Wu Ingrid W. Reed Director Financial Management Associate Director Managing for Results Faculty Research Associate New Jersey Government Advisor Expert Jessica Crawford Jon Erickson Dana Michael Harsell Public Relations Coordinator Project Manager Project Manager Human Resources Financial Management Advisor Managing for Results Research Management Senior Research Associate Assistant Lucy Baruch Project Finance and Administration Stuart Bretschneider Tiffany Tanner Information Technology Publication Coordinator Joanne Pfeiffer Management Faculty Expert Financial Management Office Coordinator Senior Research Assistant Sally Coleman Selden Genikwa Williams Human Resources Figen Gungor Project Research Assistant Management Faculty Expert Project Senior Research Assistant Yilin Hou Financial Management Chris Folts Faculty Expert Project Management Research Assistant Connie Bawcum Max Bohnstedt Sharif Nankoe Suzette Denslow Project Management Carol Ebdon Research Assistant Capital Management Project Consultants Paula Acosta Financial Management Amy K. Donahue Research Assistant Public Management Consultant Kingsley Chukwu Melissa Mink Bethany Walawender Human Resources Project Finance and Management Research Administration Assistants

Kelley Coleman Alyssa Colonna Office Coordinator Editor

Willow Jacobson Kari Parsons Human Resources Project Consultant Management Research Associate Chris Bronk Web Site Designer Ora-orn Poocharoen Managing for Results Research Dana Cooke Associate Logo Designer v

New Jersey Initiative Advisory Committee

Loretta Buckelew Assistant to the Deputy Director Division of Local Government Services State of New Jersey

Henry A. Coleman Director Center for Government Services Rutgers, The State University of New Jersey

Jon Erickson Director Master of Public Administration Program Kean University

Michele Tuck-Ponder President Ponder Solutions

William A. Watson Executive Director John S. Watson Institute for Public Policy Thomas Edison State College

John Weingart Associate Director Eagleton Institute of Politics Rutgers, The State University of New Jersey vi

Funders

The New Jersey Initiative acknowledges with gratitude that the project is funded by grants from the following:

The Pew Charitable Trusts

State of New Jersey Department of Community Affairs

The opinions expressed in this report are those of the authors and do not necessarily reflect the views of The Pew Charitable Trusts and the State of New Jersey Department of Community Affairs. The New Jersey Initiative is solely responsible for the content of this report. Table of Contents vii

Table of Contents

List of Tables and Figures ...... ix

List of Appendices ...... xi

Foreword ...... xiii

Acknowledgments ...... xv

Executive Summary ...... xvii 1 Assessing Management Capacity in New Jersey Municipalities ...... 1 The Government Performance Project: Foundation for the New Jersey Initiative ...... 1 The New Jersey Initiative ...... 4 Management Capacity ...... 7 New Jersey Laws Governing Municipal Administration ...... 13 Backgrounds of Municipalities ...... 22 2 Financial Management ...... 33 Financial Management Capacity and Systems ...... 33 Financial Management Environment for New Jersey Municipalities ...... 34 Criteria for Assessing Financial Management ...... 36 Methodology and Data Collection ...... 37 Results: Financial Management in New Jersey Municipalities ...... 38 Summary ...... 54 Recommendations for New Jersey Municipalities and the State of New Jersey ...... 55 3 Capital Management ...... 61 Capital Management Capacity and Systems ...... 61 Capital Management Environment for New Jersey Municipalities ...... 63 Criteria for Assessing Capital Management ...... 64 Methodology and Data Collection ...... 65 Results: Capital Management in New Jersey Municipalities ...... 66 Summary ...... 70 Recommendations for New Jersey Municipalities ...... 71 Recommendations for the State of New Jersey ...... 72 4 Human Resources Management ...... 75 Human Resources Management Capacity and Systems ...... 75 Human Resources Management Environment for New Jersey Municipalities ...... 76 Criteria for Assessing Human Resources Management ...... 80 Methodology and Data Collection ...... 80 Results: Human Resources Management in New Jersey Municipalities ...... 81 Summary ...... 108 Recommendations for New Jersey Municipalities ...... 109 Recommendations for the State of New Jersey ...... 110 viii THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

5 Information Technology Management ...... 113 Information Technology Management Capacity and Systems ...... 113 Information Technology Management Environment for New Jersey Municipalities ...... 114 Criteria for Assessing Information Technology Management ...... 116 Methodology and Data Collection ...... 117 Results: Information Technology Management in New Jersey Municipalities ...... 118 Summary ...... 127 Recommendations for New Jersey Municipalities ...... 127 Recommendations for the State of New Jersey ...... 128 6 Managing for Results ...... 131 Managing for Results Capacity and Systems ...... 133 Managing for Results Environment for New Jersey Municipalities ...... 137 Criteria for Assessing Managing for Results ...... 137 Methodology and Data Collection ...... 139 Results: Managing for Results in New Jersey Municipalities ...... 139 Summary ...... 146 Recommendations for New Jersey Municipalities ...... 147 Recommendations for the State of New Jersey ...... 147 Recommendations for New Jersey Municipalities and the State of New Jersey ...... 148 7 Conclusion: Improving Management Capacity in New Jersey Municipalities ...... 151 Collaborative Approach From Municipalities and the State ...... 151 Vital Reforms ...... 152 Bold Actions ...... 153

Appendices ...... 157

Bibliography ...... 188 List of Tables and Figures ix

List of Tables and Figures Tables

1.1 History of the Government Performance Project ...... 3 1.2 Characteristics of Municipalities in the New Jersey Initiative...... 5 1.3 Forms of Government for New Jersey’s 566 Municipalities...... 21 2.1 Area and Population of the Seven Municipalities ...... 34 2.2 Per Capita Municipal Taxes ...... 35 2.3 Per Capita General Revenue and Appropriations...... 36 2.4 Financial Management Criteria ...... 37 2.5 Background Information on Interviewees ...... 39 2.6 Accuracy of Own-Source Revenue Estimation ...... 43 2.7 Accuracy of General Fund Expenditure Estimation ...... 44 2.8 Total General Revenues Anticipated (R) vs. Total General Expenditures Appropriated (A) ...... 46 2.9 Total General Revenues Realized (R) vs. Total General Appropriations Expended (A) ...... 46 2.10 Total General Fund Revenue (R) vs. Total General Fund Expenditure (A) ...... 47 2.11 Fiscal-Year End General Fund Balance as a Percent of Actual General Fund Expenditure ...... 48 2.12 Revaluation Dates and Assessment Ratios ...... 49 2.13 Overall Property Tax Rates ...... 49 2.14 Number of Days after End of Fiscal Year Audited Annual Financial Statements Were Produced ...... 51 2.15 Federal and State Aid as a Percent of Total General Fund Revenue...... 53 3.1 Capital Management Criteria ...... 65 4.1 Characteristics of Participating Municipalities...... 77 4.2 Number of Employees Covered by Each Union Contract ...... 78 4.3 Human Resources Management Criteria ...... 80 4.4 Role and Structure of Participating Municipalities ...... 82 4.5 Personnel Responsibilities in Fire and Police Departments ...... 83 4.6 Nature of Workforce Planning ...... 84 4.7 Testing and Use of Provisional and Temporary Employees ...... 86 4.8 Residency Requirements ...... 87 4.9 Recruiting Techniques...... 89 4.10 Position Openings, Applications, and Quality of Hires ...... 90 4.11 Training Expenditures, Fiscal Year 2000 ...... 91 4.12 Training Provided by Central Human Resources Unit...... 92 4.13 Training Provided by Departments...... 93 4.14 Training Provided by State Government ...... 94 x THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

4.15 Tuition Reimbursement Based on Contracts and Educational Incentives ...... 96 4.16 Percent Turnover, Municipalities, Fiscal Year 2000 ...... 98 4.17 Percent of Total Turnover from Each Category, Fiscal Year 2000 ...... 98 4.18 Termination and Discipline ...... 99 4.19 Feedback Mechanisms...... 100 4.20 Longevity Pay by Municipality...... 102 4.21 Nonmonetary Rewards ...... 103 4.22 Health Benefits Based on Contracts ...... 104 4.23 Classification Titles ...... 107 4.24 Labor-Management Partnerships ...... 108 5.1 Information Technology Management Criteria ...... 116 5.2 Summary of Data Collection Process ...... 117 5.3 Summary of Consumer Survey Responses from Five New Jersey Municipalities...... 124 5.4 Average Scores on Ease of Gaining Help (7-high, 1-low)...... 125 5.5 Average System Performance Scores by Source of Training ...... 125 6.1 Managing for Results Criteria ...... 138 6.2 Strategic Planning in Municipalities...... 140 6.3 Results Measurement, Use, and Reporting in Municipalities ...... 141 6.4 Examples of Performance Measures in Municipalities...... 143 E.1 Effective Property Tax Rates and Estimated Property Market Value Per Capita 1998-2001 ...... 170 E.2 Revenue Raising Capacity ...... 172

Figure 1.1 A Schematic of Government Management Capacity...... 8 List of Appendices xi

List of Appendices

A Cities Evaluated by the Government Performance Project ...... 157 B Counties Evaluated by the Government Performance Project ...... 158 C Profile of New Jersey Municipalities...... 159 D Contracting and Procurement Practices in New Jersey Municipalities ...... 161 E Revenue Raising Capacity in New Jersey Municipalities ...... 169 F New Jersey Department of Community Affairs ...... 174 G The Maxwell School of Citizenship and Public Affairs at Syracuse University...... 175 H Alan K. Campbell Public Affairs Institute at Syracuse University ...... 177 I Eagleton Institute of Politics at Rutgers, The State University of New Jersey ...... 178 J Biographies ...... 179

Foreword xiii

Foreword

The New Jersey Initiative is an unprecedented learning opportunity for all municipalities in New Jersey, and especially for the seven municipalities participating directly in the project. The New Jersey Initiative generates analyses of five important management system areas: financial management, capital management, human resources management, information technology management, and managing for results. In doing so, the New Jersey Initiative creates a tremendous opportunity for municipalities to more systematically examine their own management systems and how they are integrated, learn from each other, and consider how their allocation of resources to the various systems translates into overall effectiveness and performance potential. The New Jersey Initiative was conducted by a strong partnership between two highly reputable academic institutions: the Alan K. Campbell Public Affairs Institute of the Maxwell School of Citizenship and Public Affairs at Syracuse University and the Eagleton Institute of Politics at Rutgers, The State University of New Jersey. We are proud of how Maxwell and Eagleton pooled their resources to unite as a team to produce high quality research that is objective, valid, constructive, and useful for government leaders, practitioner managers, citizens, and scholars. The Maxwell School contributed the research expertise from its nationally recognized faculty and the Eagleton Institute contributed its expertise on New Jersey politics and government. Together, Maxwell and Eagleton formed a dedicated team to help New Jersey municipalities understand and improve their management capacity in order to achieve greater government performance. During 2001 and 2002, researchers worked closely with seven New Jersey municipalities that participated in the study: Brick Township, Elizabeth City, Franklin Township, Irvington Township, Old Bridge Township, Paterson City, and Trenton City. Our research teams obtained data from the municipalities through surveys and questionnaires, public documents, and interviews of professional managers. We were impressed with the genuine dedi- cation and commitment from the men and women who are in public service in the municipalities. On a sadder note, we extend our condolences to Paterson City on the loss of its director of human resources who unfortunately passed away during the project. Committed to serving the citizenry in their communities, the public managers we engaged constantly seek ways to achieve greater efficiency and effectiveness, be more innovative, and improve management as they face an environment full of challenges. The New Jersey Initiative follows a distinguished predecessor. Our effort is a logical extension of the path-breaking work of the Government Performance Project, which until now focused on large city and county governments and state governments. We are gratified that we applied the Government Performance Project model to smaller municipal-level governments. The New Jersey Initiative is new territory and our knowledge about government management capacity expanded as a result of our journey through the Garden State. The results of the New Jersey Initiative are being made widely available in New Jersey to citizens, elected officials, municipality managers, state government officials, academic insti- xiv THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

tutions, and research centers. We are confident that the New Jersey Initiative can help advance the improvement of management systems in all 566 New Jersey municipalities, as well as in municipalities across the nation. Ultimately, better public sector management systems will lead to stronger government performance.

Dale Jones Director Syracuse, New York

Ingrid W. Reed Associate Director New Brunswick, New Jersey Acknowledgments xv

Acknowledgments

The New Jersey Initiative is indebted to many people who contributed from its genesis to its completion. All deserve much credit and thanks for making the New Jersey Initiative possible. The idea to conduct an assessment of New Jersey municipalities originated with state government leaders. Former New Jersey Governor Christine Todd Whitman and Jane Kenny, former New Jersey Commissioner of Community Affairs, requested the Government Performance Project at The Maxwell School of Syracuse University consider evaluating New Jersey municipalities. Their aim was to find ways for the state to help its municipalities. The project thanks The Pew Charitable Trusts and the state of New Jersey for their generous grants that funded the project. Marc Pfeiffer, Deputy Director of the Division of Local Government Services for the New Jersey Department of Community Affairs, and Loretta Buckelew, Assistant to the Deputy Director, were invaluable in helping the project get started and providing important documents while giving researchers the freedom they needed to conduct objective evaluations. Most importantly, our sincerest thanks go to the seven municipalities that volunteered to participate in the New Jersey Initiative: Brick Township, Elizabeth City, Franklin Township, Irvington Township, Old Bridge Township, Paterson City, and Trenton City. This research project could not have been completed without their cooperation. We greatly appreciate the mayors for granting the project access to their municipalities. Additionally, we thank the dedicated staff of leaders, administrators, and employees at all levels within the municipalities for giving their valuable time to work with us. Moreover, we thank them for being candid in interviews and imparting their experiences and views to researchers. A special thank you goes to members of the New Jersey Advisory Committee. Their extensive practical government experience, policy research experience, familiarity with New Jersey state and local governments, and knowledge of politics in New Jersey were a tremendous asset to the project. We extend our gratitude to them for taking time away from their own important endeavors to provide professional guidance: Loretta Buckelew; Henry Coleman, Director of the Center for Government Services, Rutgers University; Jon Erickson, Director of the Master of Public Administration Program, Kean University; Michele Tuck- Ponder, President of Ponder Solutions; Bill Watson, Executive Director of the John S. Watson Institute for Public Policy, Thomas Edison State College; and John Weingart, Associate Director of the Eagleton Institute of Politics, Rutgers University. Next, we are extremely appreciative and thankful for assistance from the New Jersey State Library in Trenton, local libraries in the seven municipalities, and historical societies throughout the state. The reference staffs of each were always more than helpful and a pleasure to work with. Also, we acknowledge the Newark Star-Ledger for supplying the project with detailed census data for New Jersey. Central to the New Jersey Initiative were the project’s many scholars, consultants, research associates, and research assistants. Organized into five research teams, they were the heart of the project. Faculty experts were Stu Bretschneider, Yilin Hou, Dale Jones, and Sally Coleman Selden. Project consultants were Connie Bawcum, Max Bohnstedt, Suzette Denslow, Amy Donahue, Carol Ebdon, and Kari Parsons. Research associates were Dana Michael Harsell, Willow Jacobson, Ora-orn Poocharoen, and Yonghong Wu. Senior xvi THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

research assistants were Jessica Crawford, Figen Gungor, and Tiffany Tanner and research assistants were Paula Acosta, Kingsley Chukwu, Chris Folts, Melissa Mink, Sharif Nankoe, and Genikwa Williams. We extend our heartfelt thanks and appreciation to each for their extensive contributions. Recognition goes to Figen Gungor for her assistance in the final stage of the project. Additionally, we thank the staffs at the Alan K. Campbell Public Affairs Institute of The Maxwell School at Syracuse University and the Eagleton Institute of Politics at Rutgers University for their wonderful assistance to the project. Bethany Walawender and Kelley Coleman at the Campbell Institute provided fantastic support. Likewise, Lucy Baruch and Joanne Pfeiffer at the Eagleton Institute gave terrific help. Alyssa Colonna served as the editor for manuscript preparation, and we are thankful for her heroic service, which enabled deadlines to be met. Chris Bronk designed and maintained a high quality web site for the project and Dana Cooke designed our project logo. The Syracuse University Publications Office kept us on track to ensure the manuscript was properly prepared. We are especially thankful to Susan Hoxie who was a superb publications coordinator and guided us through the process with her meticulous oversight. Also, our thanks go to Amy McVey and Joye Morrisseau for their skillful work as the publication designers. Finally, we express very special gratitude to our two project managers. Dana Michael Harsell was the perfect project manager for The Maxwell School. We relied on his strong organization and planning abilities, diplomatic skills, and good judgment to navigate us through the year, especially during the final stages. Jon Erickson was an excellent project manager for the Eagleton Institute. We depended on his extensive knowledge of New Jersey government and politics and pivotal role as liaison to the municipalities. We thank them for their highly regarded advice and for being there every time we needed them.

Dale Jones Director

Ingrid W. Reed Associate Director Executive Summary xvii

Executive Summary

Governments at all levels in the United States are engaged in long-term efforts to improve performance and provision of services. Citizens, elected officials, the media, and government leaders and managers expect excellence from government and support reform efforts to achieve it. Indeed, government reinvention and reengineering activities were common- place in the 1990s for federal, state, and local levels of government. The overarching goal in most government reform efforts then and now is to enhance government performance. The New Jersey Initiative is an innovative research effort in the state of New Jersey involving seven municipalities invited to participate in a pilot project that examines municipal management. The study was conducted by Syracuse University’s Maxwell School of Citizenship and Public Affairs and Rutgers University’s Eagleton Institute of Politics during 2001 and 2002 with funding from The Pew Charitable Trusts and the state of New Jersey Department of Community Affairs. The municipalities that participated in the project are Brick Township, Elizabeth City, Franklin Township, Irvington Township, Old Bridge Township, Paterson City, and Trenton City. The purpose of the New Jersey Initiative is to increase understanding of the capacity of management systems that best enable municipal governments to perform well and meet the needs of citizens. Based on the premise that more extensive management capacity precedes better management performance, the New Jersey Initiative assessed management capacity in the following five areas that are critical to delivering improved services at lower costs and achieving high performance in government:

• Financial management • Capital management • Human resources management • Information technology management • Managing for results

The 1993 National Commission on the State and Local Public Service stated, “Yet a growing consensus has emerged among both citizens and public officials that state and local governments need to improve their capacity and performance if we are to meet the challenges of our rapidly changing economic and social systems.” Thus, the New Jersey Initiative is an important effort to identify how New Jersey municipalities can improve their management capacity to result in better performing government and delivery of services to their citizens. The five management areas represent elaborate systems for each municipality. Furthermore, the complex environment in which they operate creates management challenges. Today, municipal managers in New Jersey contend with pressures associated with keeping taxes under control; managing fiscal affairs tightly; maintaining physical infrastruc- tures; hiring, training, and retaining personnel; investing in information technology; and planning for the future. At the same time, they are complying with rules and regulations; responding to security and safety issues related to the aftermath of 9-11 terrorist attacks; dealing with citizen inputs and complaints; working in a political environment; and responding xviii THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

to state policies and requirements. This report shines a light on those complexities. Given the nature of the challenges and constraints these municipalities face, researchers noted impressive strengths in their governance activities. It is important to clarify that this study is about municipal management, not municipal politics. We acknowledge the significance of political factors and recognize they must be considered, but they were not the focus of this study. It is true that municipal management in New Jersey is often affected by politics, as is the case for all government entities. Nevertheless, the New Jersey Initiative was chartered specifically to evaluate the management capacity of municipalities. Researchers found both strengths and weaknesses in each of the management areas. Comprehensive criteria-based analyses of financial management, capital management, human resources management, information technology management, and managing for results are contained in separate chapters of the report. Throughout the process of conducting the study, researchers all too often witnessed an on-going tension driven by state financial management and civil service legal requirements. To some extent, an “us versus them” condition exists which does not always give rise to good governance. This may be partly a reflection of the state’s higher level of oversight of those municipalities in the Distressed Cities Program. Another contributing factor may be that the higher performing municipalities feel frustrated by the “one size fits all” oversight approach. Therefore, the report’s chapters include recommendations for each of the management areas, for the state as well as the municipalities, aimed at improving management capacity in municipalities. Overall, improving management capacity in the seven municipalities in the study, along with other New Jersey municipalities with similar characteristics and conditions, requires a stronger collaborative approach from municipalities and the state, recognition of vital reforms, and bold actions. A major conclusion of the study is that success in improving management capacity will depend on mutually reinforcing actions and greater cooperation by both municipalities and the state. The New Jersey Initiative concludes that municipalities can increase management capacity in two important ways. First, they can take advantage of any existing leeway, such as that made possible by the New Jersey Optional Municipal Charter Law, known as the Faulkner Act, to grant business administrators broad powers and authority to operate and manage municipal affairs. Second, municipal leaders can create an environment that recognizes the value of and rewards management initiative, innovative actions, implementation of best practices from other locales, and prudent risk-taking. For the state level, the project also recommends new approaches to bring improvement to municipal management capacity. First, if the state modifies its oversight relationship with municipalities, it may experience positive results. The current approach emphasizes imposing the state’s view of appropriate performance and regulating to prevent wrongful behavior by municipal officials. Although firm state oversight is well intended and does prevent unwant- ed behavior, it comes with the price of frustrating local government managers. For those municipalities where good performance warrants it, shifting to an approach that gives greater prominence to independent capacity building and trust might lead to higher performing government. Second, the state should work closely with municipalities to find ways to provide regulatory relief where appropriate, generate flexibility for management decision-making, and furnish management tools to local governments. Executive Summary ixx

The New Jersey Initiative concludes that vital reforms are necessary in the following four areas:

Vital Reform Area #1: State regulatory and procedural restraints impede local government management innovation.

Vital Reform Area #2: In its regulatory management oversight role, the state does not sufficiently differentiate among municipalities in terms of their characteristics and performance.

Vital Reform Area #3: Municipalities lack formalized, centralized, and long-term management planning activities.

Vital Reform Area #4: Municipalities do not sufficiently exercise the management prerogatives that are available to them.

In order to build management capacity in New Jersey municipalities, the following bold actions correspond with and are recommended to address the vital reform areas:

Bold Action #1: The state should reduce burdensome and costly restrictions on municipal management activities where appropriate; allow more flexibility and discretion for municipal managers; enhance state mechanisms for providing technical, financial, and other kinds of assistance to municipalities; and create incentives for entrepreneurial management behavior by municipal managers.

Bold Action #2: The state should further its efforts to classify municipalities in multiple categories, apply different strategies to assist the various categories, and customize regulatory treatment to fit the specific needs and circumstances of different municipalities.

Bold Action #3: Municipal councils and mayors should delegate greater authority to business administrators so they can bolster strategic planning; strengthen their management systems; formalize and centralize management oversight activities; and where it is best to do so, integrate management systems across departments.

Bold Action #4: Municipalities should be more innovative in applying management practices, take reasonable risks when implementing new management practices, and ask for guidance and assistance when needed from the state.

Professional managers for the state of New Jersey and its 566 municipalities are considered to be highly qualified. They have a reputation for managing programs well and successfully serving the citizenry despite many challenges. The New Jersey Initiative focuses on how municipalities and the state can reach a higher level of performance by improving management capacity in municipalities. The report presents its findings in a constructive manner. The New Jersey Initiative observes that if the state and its municipalities work together and make the recommended changes, they will build municipal management capacity and strengthen excellence in governance for New Jersey.

ASSESSING MANAGEMENT CAPACITY IN NEW JERSEY MUNICIPALITIES

The Government Performance Project: Foundation for the New Jersey Initiative

THE NEW JERSEY INITIATIVE PROJECT WAS INSPIRED BY the Government Performance Project (GPP). The purpose of the New Jersey Initiative is to provide an in-depth analysis of local government management capacity. The project results provide valuable feedback and recommendations to municipalities in New Jersey as well as the state government. In order to understand the New Jersey Initiative, one must first understand the GPP. The Government Performance Project is believed to be the most comprehensive examination of the effectiveness of core government management activities ever conducted. The central purpose of the GPP is to improve understanding of public sector management and, thereby, assist in strengthening government performance. Since 1996, with grants from The Pew Charitable Trusts, the Maxwell School of Citizenship and Public Affairs at Syracuse University, in partnership with Governing magazine, has analyzed the management capacity of state, city, and county governments across the United States. The national level, multiyear project is administered by the Alan K. Campbell Public Affairs Institute at The Maxwell School. Governing is a nationwide publication that concentrates on state and local governments and annually publishes the results of the GPP in a special February issue. The project assesses the effectiveness of management systems in five key areas. Additionally, the project examines how well those management systems are integrated. The GPP does not focus primarily on performance; it analyzes management capacity, which is the foundation for high performance. Management capacity is further discussed later in this chapter in a section titled “Management Capacity.” An important objective of the project is to communicate its findings to governments at all levels as well as to the public. Additional details about the GPP are available on the project’s web site at www.maxwell.syr.edu/gpp.

Government Performance Project Goals

The overarching purpose of the Government Performance Project is to improve the understanding of government management on the state, city, and county levels, first by facilitating a better intellectual understanding of the dimensions of management in government, and second, by holding government entities publicly accountable for the quality of management in their jurisdictions. The five specific goals of the GPP are as follows:

• To recognize innovations and improvements in government management practices • To generate a dialogue and facilitate a learning process among governments 2 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

• To create a clearinghouse of information related to government management • To inform the public about factors which contribute to effective management in the public sector • To enhance citizen understanding of government management issues and practices

Government Performance Project Management Areas and Criteria

The Government Performance Project conducts criteria-based assessments in five central areas of government management: financial management, capital management, human resources management, information technology management, and managing for results. In the first two years of the project, senior advisory panels consisting of respected public administration scholars and practitioners agreed upon the management areas and developed their criteria. Each of the five management system areas has a set of criteria on which their assessments are based. After the pilot year, the criteria were refined based on direct feedback from governments that were evaluated. Other than fine-tuning some of the wording for the criteria, the criteria have remained the same during the four years of evaluations conducted since 1998. The criteria are listed and discussed in Chapters 2 through 6, which address the findings for each of the management areas, respectively.

Government Performance Project History

Table 1.1 summarizes the history of the Government Performance Project. During the 1996 to 1997 pilot year, the GPP conducted studies in two cities, two counties, four states, and four federal agencies. Pilots were chosen through a process that emphasized diversity in function, size, and location among the federal agencies. During this phase, The Maxwell School developed a methodology that was used and improved upon throughout the duration of the project. The pilot year ended in the fall of 1997. During the late 1997 to early 1998 period, researchers refined their procedures and prepared for subsequent years. In 1998, the project studied and graded government management systems in all 50 states and 15 federal agencies. The state results were published in the February 1999 issue of Governing and the federal results were published in the February 1999 issue of Government Executive magazine, which targets the federal government. In 1999, the GPP assessed the management capacity of the top 35 U.S. cities based on revenues and five federal agencies. Appendix A contains a list of the cities. The city findings were published in the February 2000 issue of Governing and the federal results were published in the March 2000 issue of Government Executive. As of January 2000, federal agency evaluations are being conducted by George Washington University. In 2000, the GPP reevaluated the 50 states and the results were published in the February 2001 issue of Governing. During 2001, the GPP assessed 40 of the largest counties in the U.S. and the findings appeared in the February 2002 issue of Governing. Appendix B identifies the counties by regions. Assessing Management Capacity in New Jersey Municipalities 3

Table 1.1

HISTORY OF THE GOVERNMENT PERFORMANCE PROJECT Year Governments Assessed by the GPP

1996-1997 2 cities, 2 counties, 4 states, and 4 federal agencies

1997-1998 None

1998-1999 50 states and 15 federal agencies

1999-2000 Top 35 U.S. cities based on revenues

2000-2001 50 states

2001-2002 40 of the largest U.S. counties

Government Performance Project Process

The Government Performance Project evaluation process occurs during a one-year cycle that begins in the spring of each year. The project collects and analyzes data from three sources: comprehensive self-report surveys, public documents and web sites, and journalistic interviews with managers and stakeholders. Additionally, the GPP’s procedures include criteria-based assessment, extensive follow-up and validation, statistical checks and comparisons, joint journalist and academic consensus, and constant fine-tuning. Surveys are distributed in March, governments return completed surveys and submit documents by July, analysis occurs during August to November, joint grading sessions between The Maxwell School and Governing magazine take place in November, and grades and results are released the last week in January. Letter grades are used by the GPP because they offer a familiar and easily understandable assessment of a government’s management systems. GPP grades reflect how well governments have created sound management systems that support good decision-making and service delivery. Grades are a summary measure of the capacity or potential to perform. They assess the extent to which governments have created long-term system capacity. The GPP operating assumption is that when overall performance is considered, management systems and the potential they create will be important predictors of which governments do well and why they are able to do so. For the states, cities, and counties examined by the GPP, grades are a useful method for clearly and succinctly communicating that different levels of management capacity do exist across governments and often within governments. The grades thus serve as both a diagnostic and learning tool. Extensive national media coverage occurs when the GPP results are made public. On the day of grades release, national newspapers such as USA Today and the Christian Science Monitor and nearly 300 regional daily newspapers print stories and editorials. Additionally, more than 200 radio and television stations air segments covering the project. Well known national media organizations such as the Associated Press, National Public Radio, ABC Radio, CBS Radio, and CNN Radio generate coverage based on interviews of project leaders. Subsequently, The Maxwell School uses the data collected to conduct scholarly analysis and communicate results in more traditional scholarly outlets, such as journal articles, book chapters, and books. Additionally, Maxwell researchers prepare summaries, learning papers, 4 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

and innovation papers to report various aspects of GPP findings. Furthermore, the Campbell Public Affairs Institute at The Maxwell School continues to build an information and document library.

The New Jersey Initiative

The New Jersey Initiative (NJI) is a pilot project designed to work closely with a select group of New Jersey municipalities to analyze their management capacities. The purpose of the project is to increase understanding of the capacity of management systems that best enable municipal governments to perform well and meet the needs of citizens. In March 2001, the NJI was established through a new grant from The Pew Charitable Trusts with additional financial support from the New Jersey Department of Community The purpose of the Affairs. The NJI is conducted jointly by The Maxwell School’s project is to increase (Appendix G) Alan K. Campbell Public Affairs Institute (Appendix H) understanding of the and the Eagleton Institute of Politics at Rutgers, The State University capacity of manage- of New Jersey (Appendix I). The goal of the NJI is to apply the Government Performance Project model and its methodologies to ment systems that seven urban and suburban municipalities. The NJI analyzes the man- best enable municipal agement capacity of the same five management system areas as the governments to per- GPP – financial management, capital management, human resources form well and meet management, information technology management, and managing the needs of citizens. for results. The 1993 National Commission on the State and Local Public Service stated, “Yet a growing consensus has emerged among both citizens and public officials that state and local governments need to improve their capacity and performance if we are to meet the challenges of our rapidly changing economic and social systems.” Thus, the New Jersey Initiative is an important effort to identify how New Jersey municipalities can improve their management capacity to result in better performing government and delivery of services to their citizens. Researchers interacted much more closely with the New Jersey municipalities than they did with governments across the nation in the GPP. In the summer and fall of 2001, research teams obtained data from municipalities through surveys and questionnaires, public documents, and interviews of professional managers. The original surveys were developed for the GPP and improved upon to make them appropriate for New Jersey municipalities. During the winter months, the researchers analyzed the data and diagnosed the municipalities. Finally, in the spring of 2002, they authored the final report. In order to keep the municipalities informed and to respond to their concerns, the project conducted three seminars during the year. Attendees were usually business administrators, assistant business administrators, or chief financial officers. The first event was an introductory seminar to learn about the project, the second was an interim seminar to engage in discussions about the research process, and the third was a learning seminar to receive the final report and review its findings and recommendations. For the NJI, rather than using grades as for the GPP, the final report identifies areas demonstrating strengths, as well as those in need of improvements, in order to provide a foundation for enhancing the performance of government in the seven municipalities and others with similar characteristics and conditions. The comprehensive approach of the NJI reflects the complexity of government and the Assessing Management Capacity in New Jersey Municipalities 5

political environment in which public management occurs. The NJI collaborative research effort is designed to assist both elected and appointed government officials in improving the capacity of municipalities to serve their communities. More broadly, the NJI provides an opportunity for other municipalities, other levels of government, educational institutions, and non-profit organizations to learn about management systems, how they might be improved, and how they can better meet the needs of those in leadership positions. At the start of the project, a strong consensus was established between The Maxwell School and the Eagleton Institute that letter grades not be used for the New Jersey Initiative. In doing so, Maxwell School researchers were able to provide a more in-depth diagnosis of management capacity in the seven NJI municipalities since fewer governments are evaluated than in the national-level Government Performance Project. The final report provides constructive feedback to the municipalities through a deeper explanation of management capacity in the management system areas than is possible with the use of grades. More specifically, Chapters 2 through 6 contain rich descriptions of the strengths and weaknesses of management systems in the municipalities and recommendations for improving these management systems.

Municipalities in the New Jersey Initiative

New Jersey is the fifth smallest state in the nation with a size of 7,414 square miles; however, it has the ninth-largest population at approximately 8,414,000 according to 2000 census data. Consequently, the state has a disproportionate three percent of the country’s total population. With 1,134 persons per square mile, New Jersey is the most densely populated state. The entire state is incorporated into 566 municipalities with small areas averaging 13 square miles. Table 1.2

CHARACTERISTICS OF MUNICIPALITIES IN THE NEW JERSEY INITIATIVE Municipality Population1 Descriptor2 County

Brick Township 76,119 Developing Suburban Ocean

Elizabeth City 120,568 Urban Union

Franklin Township 50,903 Mature Suburban Somerset

Irvington Township 60,695 Urban Distressed Essex

Old Bridge Township 60,456 Mature Suburban Middlesex

Paterson City 149,222 Urban Distressed Passaic

Trenton City 85,403 Urban Distressed Mercer

1 Source: U.S. Census Bureau, 2000 Census. 2 Source: New Jersey Department of Community Affairs.

The Maxwell School and the Eagleton Institute engaged in a careful and deliberate process to select municipalities for participation in the New Jersey Initiative. That process resulted in the following seven municipalities being invited to participate in the study: Brick 6 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Township, Elizabeth City, Franklin Township, Irvington Township, Old Bridge Township, Paterson City, and Trenton City. Each of the municipalities voluntarily accepted the invitation and cooperated with the project during the evaluation process. Table 1.2 contains general characteristics of the municipalities. The municipalities are among the 25 largest in population relative to all municipalities in New Jersey. Their populations range from approximately 50,000 in Franklin Township to 150,000 in Paterson City, according to 2000 census data. Moreover, three of the municipalities are suburban and four are urban. Furthermore, three of the four urban municipalities are categorized as fiscally distressed according to the New Jersey Department of Community Affairs. Thus, the project included a variety of cities and townships in the study. More details about the municipalities appear in Appendix C.

Criteria for Invitation to Participate

As a starting point, the New Jersey Department of Community Affairs recommended that the NJI focus primarily on urban cities and include several fiscally distressed cities. The Maxwell School, the Eagleton Institute, and the New Jersey Initiative Advisory Committee agreed that a broad set of factors should be considered to ensure some variation among the final set of municipalities. Characteristics identified as important variables included urban or suburban location, county, population, racial demographics, and degree of fiscal stress. Approximately 25 municipalities were considered in the final pool of possible municipalities. The final seven municipalities were recommended to receive an invitation to participate based on a balance of factors to ensure some commonalities and variation among them.

Benefits to New Jersey Municipalities

The municipalities that participated in the New Jersey Initiative gained the opportunity to learn about and improve their own management systems. But much more than that, their participation will enable municipalities all over New Jersey to benefit from the results of the evaluations contained in this report. The Government Performance Project and the New Jersey Initiative are two of the most comprehensive surveys ever conducted of core government management systems. The NJI is derived from the GPP, which is a successful, widely known, highly regarded, and credible national research project. Municipalities that participated in the NJI took advantage of an opportunity to be a part of cutting-edge public management research. Governments today find that they are often held to specific performance standards such as the number of potholes filled per week. Also, governments are often judged by whether or not expenditures match revenues without regard to need, sources of funds, or the adequacy of resources to support management systems. The GPP and NJI focus on the capacity of governments to perform. Without systems in place and those systems coordinated, governments cannot meet the demands placed on them, however worthy they may be. Like the GPP, the NJI seeks to raise the importance of understanding management systems and enhancing the capacity of governments to perform. New Jersey municipalities, like all levels of governments across the nation, are expected to improve their performance. Most of the reform emphasis has been on measures of performance and not on capacity to perform. Common sense tells us, however, that unless capacity is present, measurement of results can be a futile and dispiriting exercise. The NJI examines capacity by analyzing the extent to which government has the right resources in Assessing Management Capacity in New Jersey Municipalities 7

the right place at the right time, whether it has and can use the right information at the right time, and whether the management systems that support both the visions and strategies of leaders are present. Government management capacity is the platform for government performance. Without capacity in place, high performance is not likely to occur. With it in place, both performance and its effective measurement become more likely. The NJI helps participating municipalities learn more about their management system capacities, know where and how to improve management systems, and, hence, increase performance. Furthermore, the NJI can help all of the state’s municipalities understand what consti- tutes good management systems. One of the NJI’s objectives is to draw out lessons about effective management systems and to understand how, and in what contexts, good management matters to strong performance. Consequently, the NJI facilitates the sharing of information and a learning process among New Jersey municipalities.

Management Capacity

This section presents the conceptual framework that describes the key relationships inherent in government performance and forms the analytical basis for the New Jersey Initiative. This framework is presented in two parts. First, we discuss the relationship between management and performance. Then, we define management capacity and describe three key dimensions of capacity that affect a government’s ability to be effective: the major management systems commonly present in governments, the mechanisms by which these systems are integrated, and the role of a focus on results. Much of the discussion presented here is derived from scholarship associated with the Government Performance Project.

Management and Performance

Discussions of performance and reform are integral to contemporary debates about the continuing role of government in society. Thus, rigorous analysis of and prescriptions to improve government performance must be cognizant of the complex issue of how to assess and improve government management. As governments move toward greater emphasis on results, they and their constituents have Therefore, efforts to begun to pursue this very objective throughout the United States and understand a particu- elsewhere, as evidenced by the focus and nature of many modern lar government’s reform initiatives. The idea that reforms should target management management capacity is sensible because the systems created within and across government organizations to manage resources, and to translate them into public logically focus on three services, are substantially influenced by public managers. At the same targets for analysis: time, many critical environmental influences on performance (such the management as politics and elections; legislative mandates; economic, social, and systems, the extent of physical conditions; the media; and citizen views about policy prob- integration, and the lems) are mostly beyond the control of public organizations and their managers. Nonetheless, to understand how to improve public degree to which a performance, the quality of public management must receive prime results focus exists. attention. The model shown in Figure 1.1 represents the linkage between public resources, government management performance (the degree to which a public entity’s administration is 8 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

effective), and overall policy performance (the ultimate results of government action). The model further shows how a government’s performance depends on its management capacity (its ability to acquire, maintain, and deploy its resources effectively). In turn, management capacity is underpinned by four distinct but interrelated component systems: financial management, capital (physical asset) management, human resources management, and information technology management. For most governments and for most policy areas, these systems are likely to be present in some form and are essential to the quality of management, and ultimately to the ability to successfully pursue and support public policy goals. These systems can be integrated in an overall orientation towards achieving results. Thus, management quality is linked to the overall performance of governments. Therefore, efforts to understand a particular government’s management capacity logically focus on three targets for analysis: the management systems, the extent of integration, and the degree to which a results focus exists. The key justification for this approach is the intuitively logical assumption that if public management operates poorly, then the link between resources and results is attenuated, and policy ends cannot be met as effectively as they could be if the public management systems functioned well. In short, governments with more management capacity have the ability to Figure 1.1

A SCHEMATIC OF GOVERNMENT MANAGEMENT CAPACITY

PUBLIC GOVERNMENT POLICY RESOURCES PERFORMANCE RESULTS

MANAGEMENT ENVIRONMENTAL CAPACITY CONTINGENCIES

Managing Human Information for Financial Capital Management Resources Management Technology Results Management Management

Exercise of Leadership

Use of Information

Allocation of Resources

Source: Adapted from Ingraham and Donahue, 2000. Assessing Management Capacity in New Jersey Municipalities 9

perform better than governments with less management capacity, all else equal. Whether governments with more capacity actually perform better than governments with less capacity (in other words, whether their ability to perform is translated into the desired results) depends on the influence of other determinants, such as the political environment or economic conditions. Because assessing capacity ultimately allows us to understand the potential to achieve policy outcomes that is created by the configuration and operation of a government’s management systems, it gets at the heart of government effectiveness; public organizational structures and managerial behavior are drivers of policy outcomes that public administrators control to a large extent. In short, management performance supports policy performance. And capacity supports performance – all else equal, if public organizations have good managers and good management systems, they are more likely to be effective performers. It is important, though, not to construe management capacity as demonstrated performance. It is, rather, a platform for performance – a measure of positive or negative potential. The capacity to perform is the target of our analysis.

Management Capacity Defined

By “capacity” we mean government’s intrinsic ability to marshal, develop, direct, and control its human, physical, and information capital to support the discharge of its policy directions. That is, management capacity concerns the extent to which a government has the right resources in the right place at the right time. A government’s management capacity resides both in its people – public managers – and in what we refer to as “management systems”: administrative structures and processes created to address a government’s financial, human resources, capital, and information technology needs. Capacity is also intertemporal, that is, it depends on the extent to which a government can maintain a reliable and appropriately configured resource base over time, success at which necessitates functions such as strategic planning, performance measurement, and performance monitoring. In addition, capacity encompasses both a public entity’s intrinsic administrative ability (i.e., its innate potential to perform), and its ability to carry out its administrative functions under existing environmental conditions, such as resource constraints and political imperatives. Finally, capacity is not simply structural; rather, it depends on the quality of a government’s management systems and the extent to which they are mutually enabling in support of meeting the government’s overall administrative needs.

Components of management capacity

As we have stated, a government’s management capacity fundamentally depends on three components, each of which we will now describe briefly:

1. The configuration, tasks, procedures, and work processes of a government’s management systems that embody its intrinsic administrative activities 2. The ways in which these management systems are interrelated and orchestrated to form a coherent and cohesive totality 3. The existence of a formal managing for results system that lends a substantial framework to organizational learning processes 10 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Management systems For most governments and for most policy areas, four broad core systems are likely to be present. The characteristics of the systems that underpin government management are sum- marized next:

Financial management. Government financial management systems distribute and manage money for public purposes through processes such as procurement, accounting, cash management, and reporting. Financial management includes both budget allocation and budget execution systems. A financial management system that supports performance must determine the appropriate level of resources, allocate those resources according to strategic priorities, and spend money effectively and accountably. Key components of the effectiveness of the financial management system include the ability to engage in accurate revenue and expenditure forecasting, a long-term focus, the practice of planning for contingencies, awareness of the linkage between cost and performance, appropriate flexibility, and controls that guard against waste, fraud, and abuse. Capital management. Capital management involves planning for, developing, maintaining, and disposing of long-lived resources. This area is particularly salient for state and local governments, where capital spending and stock management demands are typically more frequent than in federal agencies, although many federal agencies have large capital responsibilities. Key components of the effectiveness of the capital management system include active engagement in long-range planning and prioritization of projects, adequate budgetary resources for infrastructure maintenance and repair, and attention to the relationship between the capital and the operating budgets. Human resources management. Government activities are typically highly labor-intensive and, thus, personnel systems, concerned with recruiting, testing, hiring, retaining, motivating, training, and terminating public employees, are a key element of public institutions. Key components of the effectiveness of the human resources management system include the use of coherent rules and procedures, efforts at workforce planning, timely hiring, sufficient professional development programs, and meaningful reward structures and disciplinary actions. Because increased flexibilities in the human resources management process have been a consistent focus of administrative reform, it is also important to consider where in the system and for whom such flexibility occurs. Information technology management. The quality and availability of information is crucial to the ability of managers and policymakers to make decisions and carry out the key functions of resource acquisition and policy implementation. Managing information technology includes the design, acquisition, maintenance, and use of technological systems to collect, analyze, and communicate data. Especially in public institutions responsible for executing complicated programs and interfacing with large, diverse constituencies, information technology performs both primary and integrative functions. It not only responds to information demands particular to specific programs, but also supports the information needs of the other management systems. Key components of the effectiveness of the information technology management system include the timeliness, accuracy, reliability, usefulness, and cost-effectiveness of data and the ability of all personnel to use the information systems.

Integration Good management depends not only on the good performance of each of these systems Assessing Management Capacity in New Jersey Municipalities 11

independently, but particularly on the extent to which these management systems operate according to consistent objectives, are mutually supporting, and are well coordinated. Management systems in combination, not isolation, create effective management capacity. Thus, within the context of government management, the relationships among the management systems and their contribution to management effectiveness are influenced by the degree of integration. In our model, integration is the extent to which the management systems are orchestrated as part of a unified, cohesive whole with shared values, common goals, aligned objectives, and mutually-enabling tasks. Integration is primarily accomplished through three key activities: the exercise of leadership, the use of information, and the strategic allocation of resources. Leadership. Leadership essentially refers to the ability of senior executive, appointed, and career officials to make decisions; to provide guidance and direction; to develop the institution’s mission, vision, and values and communicate them to all its members; and to coordinate the behavior of all organizational components and systems to behave in a manner consistent with the institutional and broader public values in order to achieve the stated mission and ultimately to realize policymakers’ intent. The extent to which coherence across management systems and the capacity to move constructively toward public goals and objectives is achieved depends on leadership at both the political and executive levels. Political leadership provides a critical set of directions, resources, and supports for system creation, configuration, and maintenance. Political leadership generally does not, however, interact specifically or consistently with the management systems. Leadership of these systems is the responsibility of a different set of leaders: those located within the organizations. Use of information. The freedom, consistency, and speed with which managers cause information to flow throughout a government, the attention that managers give data, and the willingness of managers to share knowledge converge to facilitate or thwart the overall integration of the management systems. While the information technology management system, a mechanism concerned with the collection and availability of timely and accurate data, supports the transmission and use of information, it is the interaction of government managers with information that can enable the management systems to operate in concert. Allocation of resources. The decisions managers make about how resources will be garnered and distributed across a government and the activities that facilitate this decision-making process influence the extent to which the management systems are configured to be mutually supporting. The classic example of such activity is the budget process, whereby managers negotiate over how money will be allocated, which fundamentally communicates the collective perception of the government’s goals and priorities. Another example is the location of capable human capital throughout the government. While such processes as recruiting and hiring personnel are the purview of the human resources management system, the place- ment of people at key points of intersection among the management systems affects the degree of cohesion in the system as a whole.

Results focus Another factor that affects how the management systems influence management capacity is the degree to which a formalized system of managing for results is present and in use by the government. This system is itself formally developed as a management system by some governments and can have an important impact on the quality of the other systems. Managing for results is the dominant mechanism by which leaders identify, collect, and use the infor- 12 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

mation necessary to evaluate the institution’s performance in pursuit of key objectives to make decisions and direct institutional actions. Managing for results comprises a set of tools through which organizational learning processes are formalized. It is thus a key tool for leaders seeking to improve the ability of the other systems to support the overall institutional management capacity and ultimately to contribute positively to successful policy outcomes. By our definition, governments that are managed for results focus continually on discov- ering the most effective ways of achieving their objectives, employing these techniques across all management systems, and monitoring agency activity in light of these objectives. Such a results orientation rests on three vital components. The first is the ability to identify clear objectives. The second is a means to assess progress toward those objectives according to accepted criteria or standards, a mechanism often referred to as performance measurement. The third is an established habit of monitoring performance on an ongoing basis. Thus, management capacity is driven not only by the characteristics and degree of integration of the management systems, but also by broader mechanisms for tracking activities and performance relative to overall objectives.

Environmental contingencies

It is important to recognize that a variety of environmental factors affect all components in the government performance system. Local conditions can have a dramatic impact on the character of programs, their outcomes, and policy performance. These factors embody a broad array of influences, including properties of the larger context within which the government operates and properties of the government’s jurisdiction, such as socioeconomic conditions, demographic characteristics, and the physical environment. It is easy to see that environmental factors might affect public management systems. Human resources management, for example, will be influenced by demographic factors such as the size and qualifications of the available labor pool. Capital management likely would be affected by the weather. It is also important to acknowledge that politics and the political environment play an important part in policy content, management effectiveness, and policy performance. The political environment plays a crucial role in determining how good performance is defined. The clarity – or lack thereof – of public goals and objectives is directly connected to the politics of organizational mission and support. The capacity of the organization to marshal resources to attain its goals and objectives is directly related to levels of external political support and understanding. In short, management activities and systems do not exist as ends in themselves, but as one part of the complex performance equation for public organizations. At the same time, management matters in ways that are central to public performance.

Value of the Model

Governments are not, in reality, ideal types and thus will not fit neatly into the conceptual framework we have presented. Nonetheless, our framework can help develop ideas about a government’s potential for performance, and can help to communicate these ideas to a broad and diverse audience. There are several sets of stakeholders concerned with government effectiveness, and therefore sound analyses of government management capacity, such as that undertaken in the New Jersey Initiative, may simultaneously serve multiple purposes. Citizens seek clear, understandable explanations of what their governments do and how well they work. Assessing Management Capacity in New Jersey Municipalities 13

At the same time, elected officials demand information about how effectively and efficiently public resources are employed in providing public goods and services. And policy analysts would like to be able to incorporate reliable, valid, and accurate measures of public bureaucracies into models of policy systems in order to account for the role of public management in policy implementation. This diversity of interests suggests the need for a model and an analytic approach that is at once general and parsimonious. That is, to be able to accommodate the multitude of purposes to which it is likely to be put, any study of government management must capture a complex web of relationships, but must also permit variation to be identified along specific, meaningful dimensions. This is the goal of analyses such as this one.

New Jersey Laws Governing Municipal Administration

State of New Jersey laws create a distinctive legal and administrative environment for all the state’s municipal and county governments. It is important to consider these laws when evaluating the municipalities’ performance. This section highlights some of the most significant laws that affect financial management, capital management, human resources management, information technology management, and managing for results practices in municipalities. Additionally, a discussion of the important Faulkner Act is included.

Financial Management and Capital Management

Financial and capital management are key components of the analysis of New Jersey municipal governments. The following section is not a detailed account of local finance laws or administrative procedures in this regard (for a more detailed account, see Benecke, 2001; New Jersey Administrative Code, Title 5; and New Jersey Statutes Annotated, Title 40 and 40A). However, it provides an overview of financial and capital law. Capital management is an organic part of the long-term planning of financial management.

Unique features of New Jersey and its municipalities

Incorporation of the entire state The entire state of New Jersey is incorporated into 566 municipalities with historic, fixed boundaries. The relatively small size of the state and the large number of incorporated municipalities result in most New Jersey municipalities being small in area and small in comparison with municipalities in other states. While New Jersey is mainly a fully developed urbanized state with the highest population density in the United States, even Newark, the largest municipality with 275,000 residents, is relatively small in comparison to other major cities in the country. The state includes a number of rural municipalities mainly in the south and the northwest that are reminders of why New Jersey is called the Garden State. The complete incorporation of the entire state has led to some noteworthy phenomena. These municipalities cannot grow by annexation. When municipalities require more land for development or an increase in the population in their tax base, they are unable to grow out- ward, a tactic employed by many – especially Western – municipal governments (although consolidation may be an option for New Jersey municipalities). The fixed boundaries limit the expansion of the municipalities and exacerbate some urban problems that are common 14 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

nationwide. Many such problems are like chain reactions. For instance, rapid rise in land price usually reduces the attractiveness of urban areas to businesses, which prevents the cities from gaining more commercial property tax payers and more quality jobs that can increase the tax base. This loss of revenue leads to deterioration of public safety, public education, and the overall quality of life in the urban centers. The migration of the middle- and upper- class from urban centers to the suburban municipalities may further erode the urban municipal tax base and put the cities into a downward spiral. To reverse this situation, state and urban municipalities have worked out additional measures like tax abatements and urban enterprise zones to attract and retain businesses.

Political state New Jersey is characterized as a very political state (Salmore and Salmore, 1993). Every legislative district delegation represents multiple municipalities and delegations are interested in keeping their constituent political officials and citizens content. To the extent that politics is a part of local government administration generally, and to a lesser extent to financial management practices, it is especially pronounced in New Jersey. Indeed, during the interview process, some local officials typified local politics and political dynamics as the “life of the state.” The level of political influence in day-to-day government varies from municipality to municipality, and the extensiveness it plays in New Jersey is not seen as often in other states. Thus, professional financial administrators are often involved in juggling political imperatives and desired financial management initiatives. While the outcome can often be positive, there are occasions where political imperatives do not mesh well with sound financial management.

Property tax as almost the only own-source revenue New Jersey municipalities rely on local property taxes to raise their local revenue. Local governments have few other taxing authorities or options. Even in recent years when fees have become an increasingly stable source of local revenue nationwide, the fees collected remain a very small portion due to restrictions from state laws, in comparison with local governments in other states. In this sense, their economic base is fixed. Thus, elected officials are very sensitive to changes in property taxes from year to year. Property taxes are often the primary issue in local government elections and elected officials historically take whatever action they can to keep property taxes under control, particularly in election years. The ability of New Jersey municipalities to attract new development in order to add value to their tax base varies greatly. In addition to economic conditions, the availability of land is a major factor in economic growth. Many municipalities that are historic villages or older cities have little flexibility for attracting new development. One option is to redevelop older districts into ones with higher population density, but this option is often unpopular with existing communities. Cities seek development of brownfields, which may be costly because of the need to clean up sites before reuse. In those municipalities that have open land, there often is resistance to more development because of the potential for increasing school enrollment and thereby school costs. Therefore, preference is given to office and commercial development that can increase the ratable base. Assessing Management Capacity in New Jersey Municipalities 15

Centralized environment for financial and capital management

Apart from the features mentioned in the above section, New Jersey displays the following characteristics in the environment for municipal financial and capital management.

Paradox of home rule The entire state has long been totally incorporated into 566 municipalities (two very small municipalities in northwest New Jersey recently consolidated) and it has a strong tradition of home rule that permeates policymaking at both the local and state levels. Municipalities are strictly creatures of the state with authority and power delegated to them by the state. However, the sentiment of home rule is often in conflict with the strong state control of municipal finances and the countless ways that municipalities are constrained by state laws.

Strong state oversight of local financial management It is not an exaggeration to say that the management of local government finance is highly regulated in the state of New Jersey. Controlling and checking are a cornerstone of this centralized approach. The Division of Local Government Services (DLGS) in the New Jersey Department of Community Affairs is the It is not an exaggera- center of financial controls and checks. The DLGS is akin to the par- tion to say that the ent of a large family. With a small staff relative to the number of management of local municipalities and the help of detailed local finance laws, the DLGS government finance is exerts itself to regulate and control the financial management of the 566 municipal governments. highly regulated in the The highly centralized controlling and checking started with state of New Jersey. reason. In the 1930s, local fiscal decisions were at the sole discretion of local officials. Some municipalities went bankrupt, triggering calls for reform and tight controls. Today, New Jersey has one of the most elaborate local financial law systems in the country. Assurances of solvency lie at the center of the control system. This acts as a reliable measure against risk, but may also prove to be too restrictive to the discretionary authority of front-line managers.

Detailed local finance laws and regulations

New Jersey has one of the most elaborate local finance law systems among the 50 states. The major source of these laws stem from New Jersey Statutes Annotated (NJSA) Title 40 and Title 40A. The most significant ones include:

• Local Budget Law (NJSA 40A:4-1 et seq.) • Local Fiscal Affairs Law (NJSA 40A:5-1 et seq.) • Local Bonds Law (NJSA 40A:2-1 et seq.) • Local Public Contracts Law (NJSA 40A:11-1 et seq.) • Local Lands and Buildings Law (NJSA 40A:12-1 et seq.) • New Jersey Administrative Code (NJAC 5:30-1 et seq.) 16 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

These laws cover almost every detail of municipal financial and capital management. Some of the most important areas are briefly discussed below.

Obligatory annual budget approval Among the 50 state governments, only New Jersey requires its municipalities to annually submit their budget to the state government for review and approval. This required procedure has been in place since the 1930s. The Division of Local Government Services dates back to 1917. Its mission is to ensure that municipalities are financially solvent. The state approval process started around the time of the Great Depression when fiscal decisions were the exclusive authority of local officials and a number of municipalities went bankrupt. Now the state uses the budget approval procedure as a state oversight system to prevent similar problems from happening again. According to a state official, “solvency is the underlying core of the oversight system.”

Temporary budget At the beginning of the fiscal year, a temporary budget is adopted by each municipality, which is supposed to last three months. During these three months, the unaudited financial statement of the municipality is developed to give local officials and DLGS a clear picture of the revenue and property tax collection rate of the previous fiscal year. Then the budget for the new fiscal year is adopted, including appropriation for the reserves for uncollected taxes.

Annual audit and reporting As part of the controlling and checking system, annual audits and financial statements are required of each municipality by DLGS. This measure has played a very beneficial role in improving municipal financial and capital management, and in preventing and identifying fraud and scandals.

Capital budget With very high population densities, New Jersey municipalities have a high level of responsibility for infrastructure construction and maintenance. Accordingly, a capital budget is a required item for each municipality annually.

Cash basis of accounting To prevent over-estimation of revenue by local officials and to prevent insolvency, the state stipulates the cash basis of accounting (which is now called modified cash basis) in municipal budgets. That is, in revenue estimation, municipalities are allowed to recognize only cash receipts. This excludes anything they might collect in the 60 days after the end of the fiscal year or promises of what may come in. If revenue is estimated from a new source, adequate justification must be presented to prove that the new source is valid and the expected revenue can be guaranteed.

Tax collection and reserve for uncollected taxes The municipal tax collector functions as the tax collector for county, municipal, and school property taxes, as well as any special districts. The school districts and county governments Assessing Management Capacity in New Jersey Municipalities 17

are entitled to and guaranteed 100 percent of their tax levy, no matter what happens at the municipal level. Thus, if the tax collection rate is low, then the municipal government suf- fers from the shortfall, rather than schools or the county. To guarantee the levy for school districts and the county (in theory also for the municipality), the state has an elaborate system of calculating a tax collection rate for each municipality, which is then used to calculate a “reserve for uncollected taxes” – the amount of money for assumed uncollected taxes. If the anticipated collection rate is 95 percent, but the collector collects 97 percent, then the municipality keeps the difference. Ultimately, the difference becomes “a reward” for the municipality based on its tax collection ability. On the other hand, if tax appeals are filed and the court grants tax refunds, the municipality bears full liability. Therefore, the tax collection rate may be used as a key indicator of a municipality’s financial condition. However, this system may have the unintended consequence of triggering political games. For example, elected officials facing an election year may predict a low collection rate, but actually target a high collection rate. Thus, they can keep the surplus to appropriate in the following year to help keep property taxes down and make an appealing campaign slogan.

Restricted investment and debt limit Also, out of “safety” considerations, the state does not normally allow municipalities to invest for periods longer than 13 months. Short-term investment (cash management) is restricted to only the most reliable instruments like certificates of deposit and U.S. government-backed securities, although the state cash management program does provide a venue for relatively high returns at low risks. Net debt level is limited to 3.5 percent of the three- year average equalized valuation.

Cap law The 1990 Local Government Cap Law (PL 1990, C. 89 and 95) regulates the expenditure side of municipal finance. The actual annual appropriations cannot increase by over 5 percent (or the municipal price deflation rate, whichever is lower) over the previous year’s final appropriations (40A:4-45.3). For municipalities where population growth is very high (common in some suburban municipalities in recent years), this cap may present some problem in meeting the service demands of a growing population. The municipal government may have the tax base and revenue, but it is prevented from spending beyond the fixed cap.

No contingency funds The elaborate New Jersey local finance laws do not allow municipalities to set up rainy day funds or other purpose-specific contingency funds. The single most important tool local governments can employ to attend to emergency expenditures is through emergency appropriations (40A:4-46 seq.). If a municipal government has adequate resources and sound financial management, and has accumulated surpluses, they can handle emergencies more easily. Otherwise, emergency appropriations are their only option and the expenditure comes out of the next year’s budget. 18 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

State aid programs Due to the heavy reliance on property tax as the primary source of funding for local governments, each year the state budget provides financial assistance to municipalities as budget revenue to offset the need for property taxes. Initially based on a series of formulas, the program has evolved over the years to one that is primarily a hold-harmless program, at approximately $1.8 billion, and subject to cost-of-living increases, when state revenues are available to fund it. In addition to the fixed amounts, the state provides aid to municipalities facing short- and long-term financial stress. The “Extraordinary Aid” program is targeted to most non-urban municipalities that have year-to-year fiscal stresses that result in significant property tax hikes. The Distressed Cities program targets the most fiscally stressed municipalities with structural fiscal difficulties, usually brought on by declining ratable based on increased costs, and often exacerbated by inept fiscal management. Unlike the Extraordinary Aid program, the Distressed Cities program includes the assignment of state fiscal and management experts to work with the recipients to improve their operations. The state’s goal is to work with the community to bring them back to fiscal health and to minimize the dependency on this form of discretionary aid. In both programs, the DLGS carefully examines municipal budgets, recent cost pressures, actions municipalities have taken to help themselves, and the impact of budgets of other taxing districts (school and county) to determine the amount of aid awarded under the programs. Given that the programs rely on reviews of the proposed budgets and state funding award decisions, municipalities in these programs may experience late adoption of their budgets.

State supervision program Municipalities are prohibited from declaring bankruptcy without approval by the Local Finance Board of the DLGS. Whenever a municipality is in financial chaos, the state will assume supervisory role to improve operations. Such cases are very rare, averaging only one every three or four years. The DLGS has faced a number of significant challenges and has met them with considerable success in forestalling municipal bankruptcies and insolvencies. In recent years, these problems have mainly stemmed from management issues, such as a lack of attention to details, a vacancy of the tax collector, low tax collection rates, uncontrolled expenditures, and unattended labor contracts. Thus, the state supervision program is one that improves local financial management though it may not eradicate the problem.

Successes and Challenges of Centralization

This centralized, hands-on approach towards municipal financial management has been successful in many aspects but not so in others. One success includes the DLGS training of local financial officials, which aims to improve actual performance through raising the expertise of managers. An example is the Certified Municipal Finance Officers program. The state realizes that the small size of municipalities is one cause of inefficiency. A new state aid program has been designed to encourage sharing of services between municipalities. One example is joint insurance funds. Another innovation is the qualified bond program, through which local entities can enjoy the higher bond rating of the state government. When the municipal bond rating is less desirable to investors, the municipalities can obtain a double A rating when issuing new bonds by Assessing Management Capacity in New Jersey Municipalities 19

entering into the qualified bond program upon approval by the Local Finance Board. The mechanism behind the improved bond rating is that the state will guarantee payment to bond holders by taking money from state aid to the issuing municipality. Perhaps the greatest success story of centralization is that state control and intervention in times of crisis have effectively eliminated municipal bankruptcy. Local officials admitted during the interview process that municipal assets are not at risk if municipal governments observe state rules. However, failures also exist. New Jersey’s 566 municipalities can be described in many different ways, including (but not limited to) urban versus suburban and rural, mature versus developing, distressed versus wealthy, large versus small, and so on. This diversity may inhibit the ability of the DLGS to equitably administer uniform local finance laws across these 566 municipal governments. Some municipalities follow these laws superbly, whereas others avoid restrictions and circumvent them from time to time (debt limit and expenditure caps are examples). Additionally, some officials believe that the fiscal year adjustment in the 1990s was “a negative innovation” whose adverse effects are still felt by the municipalities. New Jersey municipalities have been operating under such an elaborate system of local financial controls.

Human Resources Management

This section defines the primary laws that govern New Jersey municipal human resources functions. These laws include statutes concerning the civil service system, the administrative code, New Jersey labor laws, and federal regulations. The state exercises the most influence over local human resources functions when a municipality adopts Title 11A, thereby participating in the state’s civil service and merit system. The adoption of Title 11A by a municipality entitles non-confidential, permanent employees to specific tenure provisions. Under Title 11A, employees holding municipal positions and job titles included in the state career or classified service cannot be disciplined or discharged without due process. Title 4A of the New Jersey Administrative Code grants New Jersey’s Department of Personnel (DOP) the authority to oversee specific human resources functions and has a significant impact on municipal human resources management. Under Title 4A, the state DOP is granted the authority to oversee most of the recruiting and hiring processes of New Jersey municipalities, which includes posting competitive positions, collecting applications, examining applicants, and certifying candidates. Title 4A also authorizes the DOP to act as an auditor of municipal human resource management processes, such as ensuring that payroll records are in compliance with Title 4A. Labor laws also exert influence over municipal human resources management. The state of New Jersey’s Employer-Employee Relations Act of 1968 allows municipal employees to select an association to be its exclusive collective bargaining representative. Collective bargaining negotiations are permitted for employment conditions that do not significantly interfere with the exercise of management prerogatives pertaining to the formulation of government policy (78 NJ 54 1978, 67). Mandatory bargaining items required under law include, but are not limited to, pay rates, insurance benefits, drug testing, holidays, vacations, and pensions. Finally, all human resources management practices and procedures must remain consistent with existing federal laws and legal precedents. These laws, which include Title VII of the 20 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Civil Rights Acts, the Occupational Safety and Health Act, the Age Discrimination Act of 1967, Americans with Disabilities Act of 1990, and the Civil Rights Act of 1991, play an integral role in many human resources management functions. Regulatory agencies, such as the Equal Employment Opportunity Commission, also possess the authority to issue guidelines that impact New Jersey’s personnel practices.

Information Technology Management and Managing for Results

Unlike state laws that govern municipalities in financial management, capital management, and human resources management, there are no specific laws aimed at information technology management and managing for results activities in the municipalities. The state has no statutory requirements for information technology strategic planning, infrastructure, data management, personnel recruitment and training, or systems management and maintenance. However, New Jersey Local Public Contracts Law (NJSA 40A: 11) does pertain to the procurement of computer and telecommunication systems and information technology services. Additionally, there is no state legislation covering managing for results strategic planning, performance measurement, data use, or communication of results. More information is contained in Chapter 5 in the section titled “Information Technology Management Environment for New Jersey Municipalities” and in Chapter 6 in the section called “Managing for Results Environment for New Jersey Municipalities.”

The Faulkner Act and Management Leadership

All of the municipal governments in the New Jersey Initiative operate under the 1950 New Jersey Optional Municipal Charter Law, more commonly known as the Faulkner Act. The Faulkner Act was established to “professionalize municipal government by separating executive and legislative functions and giving the executive stronger powers” (Salmore and Salmore, 1993, 206). Today, 127 of New Jersey’s 566 municipalities have adopted a form of government under one of the Faulkner Act’s four optional plans: mayor-council, council-manager, small municipality, and mayor-council-administrator. Table 1.3 summarizes the number of municipalities operating under various forms of government in New Jersey. For the Faulkner Act plans, municipalities can select different options for “the timing of elections (general elections or regular municipal election), the size of the council (five, seven, or nine), partisan or nonpartisan elections, concurrent or staggered terms for officeholders, and wards or at-large seats” (Salmore and Salmore, 1993, 206). Assessing Management Capacity in New Jersey Municipalities 21

Table 1.3

FORMS OF GOVERNMENT FOR NEW JERSEY’S 566 MUNICIPALITIES Number Number Modern Number Number of of Form of of Traditional Munici- Progressive Munici- (Faulkner Munici- Other Munici- Form palities Form palities Act of 1950) palities Form palities

Borough 218 Council- 7 Mayor-Council 65 Special 17 Manager Charters Act of 1923

City 11 Commission 32 Council- 41 Manager

Town 7 Small 20 Municipality

Township 146 Mayor- 1 Council- Administrator

Village 1

Total 383 39 127 17

Source: New Jersey State League of Municipalities.

Brick, Elizabeth, Irvington, Old Bridge, Paterson, and Trenton operate under the mayor- council plan, commonly referred to as the “strong mayor” form. The lone exception, Franklin, uses the council-manager plan. From the standpoint of municipal administration and management, it is significant that both of these plans clearly stipulate a management leader position. A business administrator is in charge of management activities under the mayor-council plan:

A municipality operating under the mayor-council plan shall have a department of administration, headed by the business administrator…who can function much like a “prime minister” or “chief of staff” under the mayor…(Wolfe, 1994, 11-12)

Furthermore, the Faulkner Act enumerates five duties for the business administrator in the mayor-council form of government: preparation of the budget, administration of a centralized purchasing system, administration of a sound personnel system, other duties as prescribed by the council, and supervision of other departments. The council-manager plan calls for a manager who is “the chief executive and administrative official of the municipality” and “appoints and removes all department heads…” (Wolfe, 1994, 16). The Faulkner Act specifies that the manager have policy-making functions that include recommending expedient measures, contractual functions such as negotiating contracts, fiscal functions that include preparing the budget, and ministerial functions that consist of submitting annual reports to the council. 22 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Backgrounds of Municipalities

Brick Township

Brick Township is steeped in a history marked by change. Throughout the nineteenth and early twentieth centuries, Brick Township was a community based on industries such as timber harvesting, iron works, and various types of mills. The importance of industry to this early community is exemplified by the fact that the township was named for Joseph P. Brick, a prominent nineteenth century industrialist. In order to sustain Brick, many residents also engaged in agricultural activities. Overall, this period was one of Due to vacationing only minor growth, and Brick’s citizens had little interaction with visitors, Brick outsiders. However, this drastically changed in the 1950s with the Township’s population creation of the Garden State Parkway, which traverses the length of the state. increases significantly The Parkway affected every town along its length, and Brick during the summer Township was no different. This new accessibility combined with months, and the Brick’s border on the coast made the township an attractive vacation relatively small town’s destination for many wealthy New York and Philadelphia residents. service base must During the past 50 years, Brick underwent extraordinary growth, from slightly over 4,000 residents in 1950 to over 76,000 residents accommodate the in 2000. These changes in size drastically altered the nature of the needs of a much larger community – not just in its infrastructure and governmental sys- population. tems, but also in its entire culture. With the influx of new residents, came the realization that prosperity would no longer come from industry and agriculture, but instead with a service workforce that would cater to vacationers and suburbanites, many of whom commute to other areas. Due to vacationing visitors, Brick Township’s population increases significantly during the summer months, and the relatively small town’s service base must accommodate the needs of a much larger population. While Brick benefits from the infusion of vacation dollars into its economy, the local government must also deal with a large group of people who place demands on the community, but who may not necessarily identify with the community in a traditional way. Reconciling this tension is no simple task and requires direction from the local government. One particularly clear example of these effects on government services is with law enforcement. The influx of vacationers during the summer months marks a period of increased drug use and trafficking problems. Public safety issues require Brick’s government to divert much needed resources to law enforcement to address drug related matters. Throughout the 1990s, 60 officers joined the Brick Township Police Department to strengthen its operations. Like so many other municipalities throughout New Jersey and the United States, Brick is dealing with the difficult issue of balancing growth and the interests of its current residents. While new residents enhance the community and bring new revenue to Brick, they also con- sume land. In order to reduce some of the ill effects of population increases, the municipal government seeks to acquire many of the undeveloped lands in the township. Since 1994, the township has acted to preserve an estimated one thousand acres in various tracts. The desire to maintain open lands is supported by the voters of Brick Township. Indeed, one ref- Assessing Management Capacity in New Jersey Municipalities 23

erendum to raise taxes to support land acquisition was passed with 75 percent of voters in support. Brick Township is undergoing a major shift in one particular demographic category – the proportion of senior citizens living in the area is increasing. In order to better serve these citizens, the municipality develops various new programs such as senior surf fishing, Tai Chi, and ballroom dancing. One initiative, “Project Icebox,” was created to provide more information to seniors regarding health and prescription drugs (Brick Township, 2001). Despite the challenges of being a vacation community, Brick Township relies on and appreciates its vacationers as an economic resource. The community’s SummerFest, a free concert series, makes Brick a major attraction for residents of Ocean and Monmouth Counties, as well as many vacationers from throughout the state. Brick is a community with a high quality of living that manages challenges from both growth and seasonal tourism. With its growing special events programs, Brick Township is truly one of the premier places to live or visit in New Jersey. The Township of Brick has a mayor-council form of government. The seven council members and the mayor are directly elected in a partisan election. The four-year terms are staggered for the council members. The incumbent mayor was first elected in 1994 and is now serving his third term. Currently, the council consists of six Democrats and one Republican. Elections are competitive and the council has had representatives of both parties. The Democratic majority in Brick is unusual in Ocean County and in the Tenth Legislative District because both have traditionally voted predominantly for Republicans.

Elizabeth City

Elizabeth City is the fourth largest city in New Jersey, with a population of over 120,000. Like other small cities situated on or near the East Coast, Elizabeth played a role in Colonial history, experienced periods of growth during the nineteenth and early twentieth centuries, and then underwent a general decline after the Great Depression. The city, now home to approximately 2,245 businesses, seems to be on the rise now (Elizabeth City, 2000). This is due in part to the fact that the municipal government’s priorities are restoration of existing property and encouragement of commercial growth. Elizabeth was destined to become a city of industry. Located on In response, Elizabeth a large transportation hub that includes rail, sea, road, and air con- City, often working veyances, Elizabeth occupies prime business real estate. The city’s with state and federal transportation hub and its proximity to New York City transformed Elizabeth into a center of industrial growth throughout the mid- agencies, has taken nineteenth century. Specifically, Elizabeth began to expand with the initiatives to overcome establishment of the Central Railroad in the 1830s, and the “most the effects of prosperous years, from 1873 to 1929, were enhanced by rail connec- economic decline. tions to materials and markets” (Elizabeth City, 2000, 15). Today, Elizabeth is still a major stop on the northeast corridor of the New Jersey Transit Line between Trenton and New York City. The decline of the railroads and the general decline of American industrial sectors changed Elizabeth. The city no longer enjoys the industrial and corporate growth that characterized its economy for so many years. In response, Elizabeth City, often working with state and federal agencies, has taken initiatives to overcome the effects of economic decline. One such project is the establishment of Urban Enterprise Zones. Under this federal pro- 24 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

gram, potential retailers in designated areas can qualify for low-cost financing and a 50 percent reduction in sales tax for certain items. Other benefits of locating in these areas include exemption from sales tax on business related goods, employee tax credits, rebates of unemployment taxes, and utility rate incentives (Elizabeth City, 2000). These zones are administered by The Elizabeth Development Company (EDC), a non-profit company charged with attracting business development. Through these efforts, the EDC “helped put more than 11,000 people to work” (Elizabeth City, 2000, 7). Since Elizabeth has a long history as an industrial city, undeveloped areas are quite scarce. Rather than developing the few remaining open areas, the municipal government seeks to restore brownfields. These areas are sites that once contained medium or light industrial plants that are now abandoned. Furthermore, Elizabeth was selected for a Federal Brownfields Pilot Program (Costello, 2001). One of the largest and most well-known brown- field projects is the Jersey Gardens Mall located near the New Jersey Turnpike. Developed by Glimcher Realty Trust at a cost of about $350 million, the mall is built on a former landfill that contained a variety of pollutants, including combustible gases. Using practical technical applications such as a complex ventilation system, Glimcher Realty created a safe 98-acre shopping complex that is estimated to bring in an additional 5,000 jobs to the area and $5 million in revenue for the city through ratable property taxes. An innovative component of the Jersey Gardens project was the addition of the Retail Skills Center into the mall complex. This job training facility was created out of a public-private partnership between Glimcher, the city, the Union County government and other agencies to prepare new employees to work at the mall. This initiative was intended to ensure the new mall not only provided jobs to the community, but the citizens of Elizabeth City would be able to fill them. The federal government is encouraging growth in Elizabeth. Specifically, the City of Elizabeth was awarded a $28.9 million HOPE VI grant to “re-create public housing” according to the U.S. Department of Housing and Urban Development. Using these funds along with private investment, the municipal government started the Family Self-Sufficiency Program to provide job skill training and other services to local residents. Elizabeth City has demonstrated it is a resilient community that stands ready for an economic revival. A visit to Elizabeth City reveals that the community is indeed headed in the right direction. Elizabeth City has a partisan form of government comprised of a directly elected mayor and nine council members. Six are elected from wards and three are elected at-large. The mayor has led the city since the early 1990s. He and the council members are Democrats, although Elizabeth has experienced competitive races in local government elections. The mayor has a reputation for forging close relationships with Union County, of which Elizabeth is the county seat, and working in collaboration with a Democratic county administration on economic development initiatives.

Franklin Township

Although Franklin Township and its neighborhoods are unique in many ways, they are also typical of many small towns throughout the United States. Like so many other communities, Franklin Township has the difficult and often contrary task of encouraging development while retaining the area’s rich traditions and resources. Indeed, William Brahms, the township’s current historian, writes in Franklin Township, Somerset County, New Jersey: A History Assessing Management Capacity in New Jersey Municipalities 25

that Franklin’s “governing body has been faced with the responsibility of maintaining a deli- cate balance between preserving the status quo and permitting growth” (1998, vii). Franklin Township shifted from a largely agrarian economy to a mixed economy, consisting of both farming and light industry. Throughout the seventeenth, eighteenth, and nineteenth centuries, Franklin Township consisted of many small and medium sized farms clustered around small villages and sustained by the markets created by nearby Philadelphia and New York City. Brahms (1998) outlines three distinct stages of agricultural development throughout Franklin Township’s history: Pre-World War I, Interim Period, and Post-World War II. Each phase brought with it greater technological innovations and increased knowledge of farming techniques. However, these times of growth also put strains on small farmers who could no longer make a living without large amounts of capital investment. Other encroachments on farmers’ land were residents who sought to escape the cities and find soli- tude in more rural areas. This phenomenon, termed “the biggest dilemma of the century,” created a need for planned development Franklin Township in Franklin Township (Brahms, 1998, 187). experienced a Agriculture has not been the only area addressed by Franklin population growth rate Township’s municipal government and planning committees of nearly 19 percent throughout the years. Business and light industry bring many important benefits to communities – primarily employment and rat- between 1990 and ables (taxable land). One area primed for economic development 2000 bringing the was the region surrounding the newly built Interstate 287. The population to Somerset Valley Industrial Campus (SVIC) was created in 1962 by a approximately 50,900. Philadelphia real estate developer (Brahms, 1998). This project set the stage for industrial growth for the next four decades resulting in more than 1,400 businesses and 34,000 jobs (Franklin Township, 1999). While these new corporations obviously bring revenue and jobs to Franklin Township, development often has detrimental effects on the local environment. Like so many other citizens across the nation, the people of Franklin Township began to have serious concerns about the effects of businesses and housing on the environment in the early 1970s. Franklin created a Conservation Commission to “preserve for the present and future the relatively undisturbed woodland and wetland areas” of the township (Franklin News Record, 1970). After 1975, all master plans released by the township designated environ- mentally sensitive areas. The state of New Jersey encourages planned development and protection of natural areas. Two examples are the Delaware and Raritan (D&R) Canal and the Six Mile Reservoir located in Franklin Township. The D&R Canal was created in 1832 during a period of industrial growth in American history. By connecting the Delaware River with the Raritan Canal, commerce increased between the cities of Philadelphia and New York, with New Jersey profiting from the transfers. Franklin Township was one community along the D&R Canal that benefited. Although the Canal closed to industrial traffic in 1932, it remained an influence in Franklin Township as a water source for industrial procedures. The Canal is a source of leisure activities as it provides “biking, hiking, jogging, camping, fishing, canoeing, nature walks, horseback riding, and picnicking” (Brahms, 1998, 229) since it was declared the Delaware and Raritan Canal State Park. The preservation of the Six Mile Run Reservoir is a more recent development for Franklin Township. In 1989, the state transferred management of the land from the New Jersey Division of Water Resources to the New Jersey Division of Parks and Forestry. 26 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Currently, the Six Mile Run Reservoir, like the D&R Canal, is a state park that provides preservation of land and recreational opportunities. Franklin Township has had its share of political conflict. The majority of these issues have arisen out of a desire to reap the benefits of industrial and residential growth while minimizing its detriments. Franklin Township experienced a population growth rate of nearly 19 percent between 1990 and 2000 bringing the population to approximately 50,900. Thus, the township must deal with both growth issues and preserving its history. Franklin Township in Somerset County (there are other Franklin Townships in New Jersey) has the council-manager form of government. All nine council members run in partisan elections in November. Five run from wards and the other four run at-large. The mayor who presides at council meetings is elected annually among the council members. The township manager who is selected by the council is the chief operating officer. Currently, the mayor is a Democrat and the other eight members of the council are evenly divided between the two parties. Somerset County is a traditional Republican stronghold within the Seventeenth Legislative District. However, Middlesex County, where Democrats predominate, is also in that district.

Irvington Township

With a population of almost 60,700 persons, Irvington Township is one of the most densely populated communities in the state. Situated near four major highways – the Garden State Parkway, New Jersey Turnpike, and Routes 78 and 280 – it is the gateway to suburban Essex County. Since it was settled in 1692, the identity of the town has evolved from West Farms, a small rural village, to a sizeable middle-class suburb named Irvington. In 1874, the state of New Jersey officially approved legislation Irvington Township creating the Village of Irvington, and it was then that Irvington seeks to improve local became an independent municipality with its own mayor and vil- conditions by clearing lage trustees (Siegel, n.d.). By 1900, Irvington was no longer a abandoned buildings, country village but a flourishing middle-class suburb of Newark. constructing new Attempts were made to join Irvington with Newark through laws approved in Trenton in 1903 and 1908; however, the local voters of housing and schools, Irvington repeatedly rejected the idea (Siegel, n.d.). and establishing an Irvington’s building boom that replaced farms and fields with Urban Enterprise Zone urban structures ended in 1930, and the municipality’s population to attract business. has remained static since then (Siegel, n.d.). Following World War II, hard times hit Irvington when the Garden State Parkway was constructed (Irvington Township, 2001). The new parkway, replacing Oraton Parkway, passes through previously quiet neighborhoods and affected the township’s appeal. The wealthy families of Irvington that had occupied the beautiful Victorian row houses moved to the out- lying areas. African Americans, Jews, and immigrants from Eastern Europe and Italy moved in to work in Irvington. Poverty in the downtown area, racial unrest, and disinvestment characterized Irvington’s problems in the 1960s, leading to a heightened crime rate and riots (Irvington Township, 2001). Disinvestment continued throughout the 1970s and 1980s, and matters only wors- ened with the closing of factories. The high crime further pushed out residents and businesses. In the period from 1989 to 1997, per capita income declined in Irvington (New Jersey Future, 2001b). Irvington’s council projects the town’s recent deficit to be around $5.8 Assessing Management Capacity in New Jersey Municipalities 27

million (Reda, 2002). Today, the township is lined by vacant homes, and the crime rate continues to be high. Inadequate funding for public improvement projects prevents redevelopment of many areas. The cost of demolishing and clearing the land of structures is often worth more than the land itself. Several essential redevelopment projects were therefore not carried out (New Jersey Future, 2001a). Today, the citizens of Irvington have united and have begun to respond to these problems, despite the challenges of local government politics and some cases of corruption. Although the crime rate remains high, the township decided to hire additional police officers in the hope that safety would improve. In addition, Irvington Township seeks to improve local conditions by clearing abandoned buildings, constructing new housing and schools, and establishing an Urban Enterprise Zone to attract business. By sustaining these efforts, the citizens of Irvington can successfully overcome these challenges. The municipal government in Irvington Township, Essex County, is non-partisan. Four of the seven council members are elected at-large and three from wards at an election held in mid-May. The council elects its own president who presides over meetings. The mayor, as chief executive, is responsible for the preparation of the budget and the enforcement of ordinances. While not required to attend council meetings, the mayor has the right to speak but cannot vote. During the New Jersey Initiative, the mayor was under federal indictment and announced that she would not seek re-election. Relations between the mayor and the council, as reported in the newspapers, are contentious with disagreements about how the municipality should be staffed.

Old Bridge Township

Old Bridge Township, situated along the Garden State Parkway, is one of the fastest growing municipalities in New Jersey during the past 30 years (Cheslow, 2000). Yet the recent population increase does not reflect the overall history of this suburban community. Instead, Old Bridge, or Madison Township as it was called prior to 1976, was a small, rural community that was very static throughout the eighteenth, nineteenth, and early twentieth centuries. In this way, Old Bridge Township is typical of many of the small towns throughout New Jersey. Similar to these other areas, the township has persevered through a great deal of change throughout the twentieth century. The English gained control of New Jersey from the Dutch in 1664. From roughly this period until 1869, Old Bridge was part of South Amboy Township until it separated and formed its own township called Madison. From this point until the early part of the 1900s, the people of Old Bridge engaged in agricultural and industrial work. Specifically, large amounts of clay and lumber made Old Bridge an excellent location for pottery and timber industries. After the building of a railroad track through the area in 1833, heavier industries began to prosper in the area as well. Such businesses included shipbuilding, brick-building, and eventually, muni- tions production. Despite the growth of these industries, Old Bridge remained a largely agricultural community well into the twentieth century. This changed during the 1950s through the 1990s. A variety of factors, including the development of infrastructure like the New Jersey Turnpike and urban flight from cities such as New York and Philadelphia, caused significant population increases in Old Bridge. Between 1880 and 1950, the population grew slowly from 1,662 residents to 7,365 residents. However, the population grew to 22,772 by 1960, to 51,406 by 1980, and to 60,456 by 2000. Clearly, large influxes of people require new infrastructure, sewage systems, schools and other public 28 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

services. The township’s goal is to allow development at a rate that current systems can adapt to. During 1990 to 2000, voters rejected the school budget for the township eight times. While Old Bridge has a strong education system, a community that is distrustful of tax increases often frustrates school officials’ plans. This disapproval of tax increases manifested itself in the rejection of a proposal to add a penny to the municipal tax rate to create a trust fund for open space acquisition (Haydon, 2000). On the other hand, some initiatives to purchase undeveloped land for recreational use are being implemented throughout suburban communities in New Jersey. Old Bridge is unique in that it was one of the first to begin this effort in 1987. The government of Old Bridge Township is careful to monitor the growth of certain industries that could prove harmful to the community. Some municipalities are tempted by the potentially large revenue sources created by commercial properties, but Old Bridge officials are careful regarding new businesses joining the community. The township population, largely made up of commuters who work in other areas, holds a cau- Old Bridge Township tious attitude towards commercial growth. is typical of many of While the existence of commuters relieves some of the pressure the small towns to create jobs in the area, they can also deprive a community of any particular identity. The municipal government has also made throughout New attempts to address this issue, with projects like the Municipal Jersey. Similar to these Complex, a building that contains municipal offices and service facili- other areas, the town- ties. Old Bridge has many pre-Colonial roots, but since large portions ship has persevered of the township developed during the past 50 years, Old Bridge is still seeking its identity. through a great deal Old Bridge Township is a municipality that has seen its share of of change throughout challenges. Growth rates are now steady, property values are largely the twentieth century. on the rise, and the township is still two-thirds undeveloped. The municipal government could strongly encourage commercial growth to increase revenues, but it instead chooses to take a slow measured route towards change. The Township of Old Bridge directly elects a mayor and nine members of council, six of whom are elected from wards and three are elected at-large. The election is partisan and the current council is made up of seven Democrats and two Republicans. The mayor is a Republican who has served since 1992 and has been re-elected three times. The local elections are competitive and the council has had a bi-partisan make-up in the recent past. Middlesex County, where Old Bridge is located, is regarded as a Democratic county. However, the Thirteenth Legislative District that includes Old Bridge is roughly half Democratic and half Republican with Republican candidates recently successful in elections for state offices.

Paterson City

Over 200 years old and located within the heart of New Jersey in Passaic County, Paterson City is steeped in our nation’s history. Since the late eighteenth century, the Passaic River has powered the mills and factories of the city, and as industries boomed in Paterson, people came from everywhere in search of opportunities and a better life. As a result, the City of Paterson is often referred to as “America’s cradle of the Industrial Revolution” (Scarcia, 2001, 1). Originally, Paterson was part of Acquackanonk Township in Essex County, and in 1831, it was formally put on the map as a township (Shriner, 1919). In 1851, Paterson Township was Assessing Management Capacity in New Jersey Municipalities 29

officially changed to a city. The change from township to city marked the beginning of the legacy for which Paterson is known. Paterson became known as “The Silk City” for processing and manufacturing 75 percent of American silk in the first half of the 1900s (Einreinhofer, 1999). Additionally, textile and paper industries flourished. Paterson also produced the Colt revolver, repeating rifles, the first locomotive in America, the submarine, and the radial air- craft engine (Scarcia, 2001). Today Paterson City is still an industrial city, but the prosperity generated by the Industrial Revolution came to an end long ago. The major decrease in business took place in the middle of the twentieth century. The industrial decline that impacted Paterson followed the pattern of other northern textile cities. The manufacturing sector and other industries declined significantly, leading to the loss of jobs in Paterson (U.S. House of Representatives, 1999). While New Jersey today has an unemployment rate of six percent, Paterson’s unemployment rate hovers around nine percent. It was estimated in 1999 that Passaic County would be the slowest growing county in New Jersey in terms of creating new employment opportunities for the next five years (U.S. House of Representatives, 1999). However, much is being done to revitalize the city. One belief is that technology will improve the future of Paterson. The city recently received an $11 million E-rate grant to help the school system conform to federal and state technology mandates (Scarcia, 2001). A high- speed fiber-optic network linking 42 school buildings was installed as part of the grant. Since its creation in 1994, Paterson’s Urban Enterprise Zone includes about 351 businesses providing 9,117 full-time jobs. About 2,290 of these full-time jobs are new (Scarcia, 2001). At present, Paterson is also part of the Historically Under-utilized Business Zone (HUBZone) program. Beginning in 1997, the HUBZone stimulates economic growth by offering federal contracting opportunities to small businesses. The city continues to look for ways to expand and improve its HUBZone program (U.S. House of Representatives, 1999). Furthermore, the Paterson Economic Development Corporation has been aggressively pushing to relocate companies to the city. Since 1993, with financing of over $70 million, more than 80 companies have been assisted with expansion or relocation to the city. The Economic Development Corporation continues to look for incentives that make Paterson more attractive to the business community (U.S. House of Representatives, 1999). While recession and the flight of industry over the past 40 years have hit Paterson hard, the city is striving to turn its economy around and find strength in diversity. The city has a great transportation network important for manufacturing, warehousing, and distribution. With its new citywide network, Paterson’s future might include high-quality communications (Scarcia, 2001). By building upon these strengths, the community may bring back the prosperity characterizing the history of Paterson. The City of Paterson operates under a mayor-council form of gov- Today Paterson City ernment. The mayor is directly elected citywide, as are three of the is still an industrial nine members of the council. The other six council members are elect- city, but the ed from wards. The elections are non-partisan and take place in May. prosperity generated However, partisanship has been an open issue in municipal politics. Eight council members are Democrats and one is a Republican. The by the Industrial current mayor, a Republican, does not have strong ties to the Passaic Revolution came to County Republican Party. He was first elected to the council in 1974 as an end long ago. a Democrat and changed his allegiance to the Republican Party in 1980. The council appointed him mayor in January 1997 when the then-mayor was elected to represent Ninth District of New Jersey in Congress. The current mayor ran unopposed in 30 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

1998 for mayor and when elected, was the first African American to assume that position. During the New Jersey Initiative, he ran for re-election while under indictment by the federal government for alleged illegal practices related to the awarding of contracts and lost the election in May 2002.

Trenton City

Trenton City, the state capitol of New Jersey, has a rich and important historical legacy dating back to the days of early Colonial settlement, the Revolutionary War, and continuing into the nineteenth century as an industrial powerhouse (Trenton Online, n.d.). Located in central New Jersey on the Delaware River, the City of Trenton is located in Mercer County, and is bor- dered by Hamilton, Ewing, and Lawrence Townships. The city was settled around 1680 when a mill was built at the falls by the Delaware River. From this mill and others that followed, one of the country’s most important manufacturing centers with diversified industries developed (Sines, 1929). In 1719, the name was officially changed from “The Falls” to “Trenton” (Key to the City, n.d.). By 1790, Trenton was designated the state capitol. By the middle of the nineteenth century, Trenton was one of America’s foremost industrial cities. The city’s location on the Delaware River and the Raritan Canal, and near the Camden and Amboy railroads, provided important transportation routes. These routes fur- thered Trenton’s iron and steel industries, as well as pottery and ceramics businesses. Later in the nineteenth century, Trenton became a major manufacturing center for rubber products. Trenton’s famous slogan “Trenton Makes, the World Takes” was created in 1911 during a decade in which the city did in fact make many products. The city produced everything from the strong steel cabling used to hold the world’s longest suspension Trenton City, the state bridges to the anvils on which the nation’s steel was forged capitol of New Jersey, (Blackwell, n.d.). Trenton also produced rubber, pottery, cars, wall plaster, farm tools, mattresses, watches, bricks, linoleum, and cigars. has a rich and impor- This legacy ended with industrial decline after World War II. tant historical legacy. Since then, the city has been struggling to revitalize. As for Trenton’s old slogan, the city does not produce as much as it used to. The wire plant shut down years ago, as did the car, tool, watch, and cigar factories. A few manufacturing plants have stayed, but the bulk of Trenton’s jobs are provided by the state government, and service industries such as health (Blackwell, n.d.). In the 1990s, the task of revitalizing Trenton has brought together the government, business, education, and non-profit sectors (Trenton City, 2001). The city collaborated with the county to revitalize its Waterfront area. Trenton has also been aggressively pursuing the cleanup of old industrial areas through brownfields projects (Trenton City, 2001). A directly elected mayor and a seven-member council govern the City of Trenton. Four of the members are elected from wards and three are elected at-large. The current mayor has served since 1990 and was re-elected again in the non-partisan elections in May 2002. Under the mayor-council form of government, the mayor serves as chief executive officer and is not a member of the council. The current administration has had cordial working relationships with the council. Trenton, as both Mercer County seat and state capitol, has forged collabora- tions with those levels of government to engage in joint economic development efforts. It has done so with considerable success even though the mayor, a Democrat who ran as an independent in May 2002, did not share party allegiances with the Republican county executive or Republican governor for eight years. Assessing Management Capacity in New Jersey Municipalities 31

FINANCIAL MANAGEMENT

THIS CHAPTER FOCUSES ON THE FINANCIAL MANAGEMENT of the seven municipalities in the New Jersey Initiative study (where data are drawn from surveys, the chapter covers only the five municipalities that responded to the survey). Financial management (FM), a key component of the management system for governments at all levels, enjoys a history as long as government itself. A government must levy taxes to operate and use tax money to fund public functions with strict management through budgeting and appropriating, checking and controlling, and reporting and auditing. These aspects form the basic components of governmental financial management. In recent times, an increasing pool of financial tools has become more accessible to and widely adopted by governments. Long- and short-term investment, debt management, and risk/contingency control are all indispensable parts of a modern FM system. A sea of literature has accumulated on each of these issues. However, this chapter is not a theoretical inquiry; instead, it examines FM at the municipality level. An assessment of the financial management capacities of participating municipalities is reported in this chapter. The chapter starts by elaborating on the concepts of capacity and performance. It follows by addressing the financial management environment for New Jersey municipalities. Then, the chapter presents the criteria for assessing financial management followed by a description of the study’s research methodology. Next, the core section of the chapter discusses the results of the assessment. This section first examines the professional qualifications of financial managers, referred to as the “people factor.” The second part reviews the financial management infrastructure. The third part amplifies on results according to the criteria. Following this, a summary is presented. Finally, the chapter concludes with a section that identifies the study’s major findings and offers recommendations for New Jersey municipalities and the state of New Jersey. Contracting and procurement, an increasingly large and independent part of financial management, is discussed in Appendix D. For those interested in more extensive analysis, municipalities’ revenue raising capacity is addressed in Appendix E.

Financial Management Capacity and Systems

Like the Government Performance Project, the New Jersey Initiative approaches the assessment of government management with an emphasis on a government’s capacity, rather than its current performance. More specifically, the NJI examines the extent to which a government entity possesses a high, medium, or low capacity to manage its intrinsic functions and resources, rather than how well or poorly the entity is performing at the time of the examination. Although capacity and performance are correlated, they are far from the same. Specifically, a government with high management capacity at the time of assessment should be improving its performance if it had less-than-satisfactory performance in the past. 34 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Moreover, if the high capacity had been in place long before the assessment, the government’s performance should be at least above the average level. A government with low management capacity may have poor performance at the time of assessment; if the low capacity had existed long before the assessment, the government’s performance may well be in a decline. Thus, an examination of a government’s management capacity may be able to predict the direction of actual performance. Stated simply, one could ask, “Is the government’s performance improving or declining?” A government with medium-level management capacity may experience its performance going either way. An upgrade from low to high capacity is a definite sign of performance improvement, whereas a change from high to low capacity may indicate a decline in overall government performance. The questions in the financial management survey administered to municipalities primarily cover capacity measures and sometimes deal with performance indicators. Capacity measures examine the presence of management policies and rules, oversight bodies, and best practices. Performance indicators are required in some significant areas such as structural balance and fiscal year-end surpluses, so that a municipality’s capacity measures can be checked against its actual performance. The relationship between capacity measures and performance indicators can be described in the following manner: the presence of sound capacity measures predicts above-average performance indicators. However, the presence of above-average performance indicators does not necessarily mean that sound capacity measures are in place, because the current level of performance indicators may be a random effect of various conditions.

Financial Management Environment for New Jersey Municipalities

As noted in Chapter 1, New Jersey is densely populated. Therefore, the governance of New

Table 2.1

AREA AND POPULATION OF THE SEVEN MUNICIPALITIES Population Density (Persons per Area Population square mile)

Square 1990-2000 Miles 1990 2000 % Change 2000 Irvington 3.0 61,018 60,695 -0.53 20,528 Paterson 8.4 140,891 149,222 5.91 17,675 Trenton 7.7 88,675 85,403 -3.69 11,154 Elizabeth 12.2 110,002 120,568 9.60 9,866 Brick 26.2 66,473 76,119 14.51 2,902 Old Bridge 38.1 56,475 60,456 7.05 1,587 Franklin 46.8 42,780 50,903 18.99 1,088 Total for all 566 NJ Municipalities 7,417.3 7,730,188 8,414,350 8.85 1,134

Source: 2001 New Jersey Legislative District Data Book. Financial Management 35

Jersey municipalities is the governance of urban areas. According to much literature, governance is more difficult in urbanized municipalities (for examples, see Chapman, 1999; Ladd, 1992; and Rubin, 1982). The seven municipalities in this study fall into two categories – urban and suburban. Area and population statistics for the municipalities appear in Table 2.1. Urban municipalities include Irvington, Paterson, Trenton, and Elizabeth. They have smaller land areas than the average land area for New Jersey municipalities, but their population densities range from nine to 18 times higher than the state average. Suburban municipalities include Brick, Old Bridge, and Franklin. This group averages only one to three times the average population density. The urban-suburban divide is illustrated by the fact that densely populated urban areas typically require more financial resources to provide the same level of public services as their less densely populated or suburban counterparts. Indeed, “the effects of rapid population growth on current spending and service levels as well as on capital outlays suggest that rapid population growth places a fiscal burden on established residents” (Ladd, 1992, 293). Therefore, per capita resource levels cannot truthfully reflect the fiscal stress of urban municipalities and do not adequately reveal the difficulty of urban governance. This is why the label “distressed,” defined and assigned to municipalities by the state, is applied more to urban than suburban municipalities (for example, see Erickson and Regan, 2000). Table 2.2 shows that the per capita municipal tax level is generally higher in distressed urban municipalities than in suburban municipalities. Even with higher per capita taxes, however, the urban areas face financial difficulties and great challenges, as is the case with Table 2.2

Irvington (see Appendix E). PER CAPITA MUNICIPAL TAXES Municipal Tax Realized** Municipality Category* 1998 2000 Irvington Urban-Distressed $515 $568 Paterson Urban-Distressed $488 $486 Trenton Urban-Distressed $420 $438 Elizabeth Urban $376 $388 Brick Suburban-Developing $399 $418 Old Bridge Suburban-Mature $383 $304 Franklin Suburban-Mature $368 $374

*Classification of the municipalities into urban, urban-distressed, suburban-developing, and suburban-mature categories is based on information provided by the New Jersey Department of Community Affairs. **All figures in this chapter are in current dollars. Figures are taken from audited Annual Financial Statements of the municipalities unless otherwise indicated.

The realized per capita taxes shown in Table 2.2 indicate a heavier tax burden in the urban areas. The urban-suburban divide is widened when realized per capita general revenue and general appropriations expended are also taken into account, as presented in Table 2.3. These totals reveal the actual amount of resources needed to provide roughly the same level of services among municipalities. Because of the variation between them, the urban and suburban municipalities are examined separately in this chapter. One municipal official 36 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

succinctly stated in an interview, “There is not just one New Jersey; there are at least two, even three, New Jerseys.” This comment reflects the existence of substantial gaps between municipalities in terms of their degree of urbanization or sub-urbanization, population density, and wealth.

Table 2.3

PER CAPITA GENERAL REVENUE AND APPROPRIATIONS

General Revenue General Appropriations Realised Expended Municipality Category 1998 2000 1998 2000 Irvington Urban-Distressed 1,055 1,253 1,095 1,171

Paterson Urban-Distressed 1,041 1,063 1,012 1,013

Trenton Urban-Distressed 1,569 1,622 1,487 1,561

Elizabeth Urban 1,279 1,153 1,218 1,081

Brick Suburban-Developing 685 716 633 645

Old Bridge Suburban-Mature 809 727 687 639

Franklin Suburban-Mature 723 695 657 703

Source: Municipal Annual Financial Statements, 1998 and 2000.

The suburban municipalities have low fiscal stress indexes (see Erickson and Regan, 2000), per capita municipal taxes, realized general revenue, and general appropriations expended. This is because, compared to urban areas, suburban areas do not need as much money to provide a given level of public services. Urban areas require more resources (property taxes, state aids, and grants) for the same level of services.

Criteria for Assessing Financial Management

Analysis in this chapter follows four criteria of financial management: a multiyear perspective on budgeting; mechanisms to preserve stability and fiscal health; provision of financial information to policymakers, managers, and citizens; and control over financial operations. These criteria are further divided into sub-criteria that are targeted towards key areas of financial management. The criteria and sub-criteria appear in Table 2.4 and are based on those established by the Government Performance Project. Financial Management 37

Table 2.4

FINANCIAL MANAGEMENT CRITERIA

1 Government has a multiyear perspective on budgeting. • Government produces meaningful current revenue and expenditure estimates. • Government produces meaningful future revenue and expenditure forecasts. • Government can gauge the future fiscal impact of financial decisions.

2 Government has mechanisms that preserve stability and fiscal health. • Government’s budget reflects a structural balance between ongoing revenues and expenditures. • Government uses counter-cyclical or contingency planning devices effectively. • Government appropriately manages long-term liabilities, including pension funds. • Government appropriately uses and manages debt. • Government’s investment and cash management practices appropriately balance return and solvency.

3 Sufficient financial information is available to policymakers, managers, and citizens. • Government produces accurate, reliable, and thorough financial reports. • Useful financial data is available to government managers. • Government communicates budgetary and financial data to citizens. • Government produces financial reports in a timely manner. • Government is able to gauge the cost of delivering programs or services. • Government budget is adopted on time.

4 Government has appropriate control over financial operations. • Government balances sufficient control over expenditures with sufficient managerial flexibility. • Government effectively manages procurement, including contracts for delivery of goods and services. • Government has recovery plans and programs to support business continuation after a disaster.

Methodology and Data Collection

The financial management survey and interview process included seven municipalities that vary greatly in size, population density, availability of resources, and management styles. Four of the municipalities under study are considered urban, and three are considered suburban. This study uses both quantitative and qualitative research methods to study the financial management capacity in these municipal governments. When current and/or historical finance figures are available, they are used to comprehensively examine related aspects of financial management. Conversely, qualitative information from the interview process provides insights into the successes and challenges of municipal financial management. For most of the analysis, the authors find that a combination of the two research methods yields the most valid results. The assessment framework used in this study is an extension of the one used in the Government Performance Project, which has been adapted to fit the realities of municipal government administration. The GPP framework is a set of criteria-based assessment tools. 38 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

The New Jersey Initiative further serves to test and improve the GPP model with its application to the municipal level of government. Data documents used in this study include the audited Annual Financial Statements (AFS), Annual Municipal Budgets (AMB), and Annual Debt Statements (ADS) of the seven municipalities for fiscal years 1996 to 2000. These documents were compared to the municipalities’ Official Statements (OS) for data verification purposes whenever OS were provided. Five of the seven municipalities provided an entire set of these documents. However, documents from Franklin and Irvington were not complete sets. The Division of Local Government Services (DLGS) of the New Jersey Department of Community Affairs (DCA) provided additional data for the years 1996 to 2000, which enabled the authors to broaden their view to more New Jersey municipal governments. However, the scope of this study does not allow a detailed comparative study. Additionally, since New Jersey has not yet adopted the Generally Accepted Accounting Principles (GAAP) for governmental financial reporting, practical standardized comparisons among New Jersey municipal governments and municipal governments in other states are not possible. The analysis of these seven municipalities is based on a 30-page survey that the municipal governments received during summer 2001. Five of the seven municipalities completed and returned the surveys. For the two municipalities that did not respond to the surveys, researchers collected information from them through interviews and available documents. Interviews were conducted with at least one local official in each municipality. Interviewees included, but were not limited to, the chief financial officer, business administrator, purchasing agent, and chief budget officer. The interviews helped clarify some answers provided in the financial management survey and obtain additional information not addressed in the survey. Upon completion of the interview process, the authors met with a DLGS official and his aides, who further briefed the researchers on the history, environment, and status quo of New Jersey municipal financial management. The bottom-up interview method (from municipal to state officials) provided the researchers with deeper knowledge than would have been available otherwise. Another important source of background/environmental information is the local finance laws stipulated by the state government that establish the parameters of municipal financial management. Relevant laws are addressed in the “New Jersey Laws Governing Municipal Administration” section of Chapter 1. All local officials operate within the constraints of the laws. Therefore, to understand the management of local financial affairs, it is necessary to have a basic familiarity with this legal structure.

Results: Financial Management in New Jersey Municipalities The People Factor

In general, the New Jersey municipal governments in this study employ well-qualified, professional people for their key financial management positions. Among the financial executives interviewed, virtually all of the business administrators (BAs), their assistants, chief financial officers (CFOs), directors of finance, and controllers are well educated and profes- sionally trained (see Table 2.5). Typically, these public servants hold degrees in accounting, public administration, or business administration and are certified public accountants (CPAs) or certified municipal financial officers (CMFOs), as required by the state’s finance law. Many Financial Management 39

of them are veterans in local government, having advanced from rank-in-file public servants. Every official has served in his or her municipality, or one like it, for many years. Additionally, these public servants have spent almost their whole careers in the state of New Jersey. Throughout the interview process, these officials revealed profound, in-depth knowledge about New Jersey laws, local affairs, local ...officials revealed financial management, and local politics. More importantly, they all profound, in-depth expressed sincere commitment to their jobs and devotion to excellence, although they occasionally communicated a few concerns and knowledge about New minor complaints. Jersey laws, local Some of these financial officers had years of experience in the affairs, local financial private sector as financial managers for corporations or commercial management, and banks before they made a career switch to local government, bringing their private-sector experience and expertise into local local politics. government financial management. Two chief financial officers have backgrounds in information technology and noted that they brought a financial management “revolution” to their positions and their municipalities. They have been personally responsible for the rapid technological progress in their departments.

Table 2.5

BACKGROUND INFORMATION ON INTERVIEWEES Current Year of Years in Position Start Local Gov’t Experience Education Business Administrator 1987 24 NA NA Business Administrator 1988 NA NA Accounting, MBA Assistant BA 1996 28 Purchasing agent Public administration Assistant BA 1998 21 Finance director/CFO Accounting, MBA for 8 years Financial Director (CFO) 1995 17 2 years on Wall Street Accounting CFO NA 15 20 years corporate CPA CFO NA NA Many years corporate CPA CFO NA 21 Different townships Accounting, computer CFO NA 15 3 years in DCA NA Controller NA 19 Accountant, CPA assistant controller Controller NA 22 Every job in department NA Budget Officer NA 10 22 years in NA commercial banks

Source: Interviews with New Jersey municipal financial officials. NA = Not available. 40 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

The authors applaud these municipalities for attracting and retaining such an experienced and professional staff. Successful local financial management can be partly attributed to the efforts of these qualified and devoted professionals. Although inadequacies and challenges are identified in the following sections, it should be kept in mind that these occurred in the New Jersey municipal management environment – outside the control of any single municipal government. In fact, the high-quality people factor no doubt will help the municipalities solve the challenges they face.

Financial Management Infrastructure

Financial management infrastructure includes institutional arrangements and physical facilities. The institutional framework consists of laws and rules, which help restrict the change and variance the people factor causes. The physical infrastructure refers to the technology in use. A system that utilizes up-to-date technology will provide state-of-the-art tools for management, whereas inadequate investment in these facilities may actually inhibit sound financial management. This infrastructure also comprises the financial reporting and auditing systems.

Elaborate local finance laws The state government of New Jersey maintains a very elaborate system of local finance laws that cover almost every detail of municipal financial management. Some of these laws include Local Budget Law (NJSA 40A:4), Local Fiscal Affairs Law (NJSA 40A:5), Local Bonds Law (NJSA 40A:2), and Local Public Contracts Law (NJSA 40A:11). This highly regulated state-rule, hands-on system has given rise to some unique characteristics of local financial management. Specifically, the highly regulated nature is clearly manifested in budget approval procedures, investment guidelines, and reporting and auditing procedures.

State-controlled municipal budget approval is oriented toward insolvency prevention The state uses the mechanism of obligatory annual budget approval as an oversight system to prevent the reoccurrence of insolvency that arose from the Great Depression (see the section titled “New Jersey Laws Governing Municipal Administration” in Chapter 1). Municipalities receive state aid figures after they finish compiling their budgets. State aid makes up a fairly large portion of municipal budgets; for example, in fiscal year 2000, according to the Department of Community Affairs, the average city received 32.95 percent of its total general revenue from state and federal aid. However, the exact amount of state discretionary aid that municipalities will receive is not announced until long after the fiscal year begins. To help offset this delay, municipalities often develop preliminary figures and use a temporary budget in accordance with local finance law. By local budget law, municipal governments must prepare a budget, submit it to their council for approval/adoption, and seek final approval from the state. However, because the figures for state discretionary aid are often late, most of the municipal financial officers complain that it is senseless to pass a budget only to amend it later. Consequently, the municipal budgeting process has lost much of its planning function, and revenue and expenditure estimation also becomes much more difficult. Local finance laws do not allow the creation of contingency funds at the municipal level; emergency expenditures must be dealt with through emergency appropriations (NJSA 40A:4- Financial Management 41

46 seq.). Thus, municipal governments with sound financial management that have accumulated surpluses during periods of stability are more adequately prepared to address unforeseen emergency expenditures, whereas municipalities that are not adequately prepared must pay for this debt over the course of the next budgetary cycle.

State restrictions on investment, debt, and expenditure increases prevent default The state does not allow its municipalities to invest for periods exceeding 13 months. Short- term investment (cash management) is restricted to the most reliable instruments, such as certificates of deposit and federally guaranteed obligations. Net debt level is limited to 3.5 percent of three-year average equalized valuation. Some local officials call these “sound guidelines to follow,” but a few others claim they are “too restrictive…binding the hands of managers.” The 5 percent cap on annual appropriations increases by the 1990 Local Government Cap Law restricts local officials’ ability to meet the service demands of new residents in rapidly expanding communities (usually in more wealthy suburban areas). Although the tax base and revenue sources are readily available, municipal governments are prevented from spending beyond the fixed cap. However, local officials have found ways to circumvent such limits, for example, through the use of lease rental agreements and pooled bonds. State officials are also aware that such “flexibilities” exist.

State provision for annual reporting and auditing ensures compliance The Division of Local Government Services requires each municipality to compile annual financial statements and conduct annual audits. This measure ensures compliance with state standards of municipal financial and capital management and enhances a municipality’s ability to prevent and identify fraud and scandals.

Technology infrastructure The use of technology in financial management varies greatly among the municipalities. This imbalance has little correlation with the municipalities’ fiscal conditions, but instead relates to the personal background or orientation of their chief financial officers and business administrators. A fiscally distressed city may improve its use of information technology because its finance director has attended to shortcomings in this area, while a fairly wealthy municipality may overlook the use of technology in financial management. In comparison to its detailed finance laws, the state has not done enough to promote computerization in local financial management, even though continuing education in information technology is part of the required Certified Municipal Finance Officers program. The above examples illustrate the environment in which municipal financial management operates. The successes, of which financial reporting and auditing are examples, partly draw from the overall framework stipulated by the state government. Conversely, the municipalities cannot be held entirely accountable for their shortcomings. Indeed, municipalities should have faired much better in some areas, for example, with the application of information technology. There are also areas where local governments possess little room for discretion and innovation. For example, local officials can do little to improve the budget process without revising the state finance law. 42 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Financial Management Assessment According to Criteria

This section presents an assessment of financial management in the municipalities according to the criteria and sub-criteria listed in Table 2.4.

Criterion 1: Multiyear perspective on budgeting Academic literature and professional organizations have widely advocated that public budgeting should extend beyond the current fiscal year or the current budget cycle to cover multiple years (for example, see GFOA, 2000; and Forsythe, 1993). The enhanced vision from multiyear budgeting may bring more stability and smoothness into financial operations, and thus into the provision of local public services. This criterion is now widely accepted at the state level (see NACSLB, 1998; GFOA, 1999). The Government Finance Officer Association (GFOA) also strongly recommends this as a best practice. For example the statute of the state of Washington explicitly endorses multiple-year budgeting: “The current budgetary system of Washington lacks stability. It encourages crisis budgeting and results in cutbacks during lean years and overspending during surplus years” (Revised Code of Washington, Title 43, Ch. 43.135.045). The multiyear perspective works best within a supportive legal and administrative environment and in accordance with the local fiscal tradition. New Jersey local finance laws provide specific stipulations on current estimation and future forecasts of revenues and expenditures. The four most significant are:

• Revenue and expenditure estimations are on a cash basis. (NJLBL 40A-4-2) • Estimation of miscellaneous revenues is capped at the amount actually realized in cash from the same source in the preceding fiscal year. (NJLBL 40A:4-26) • Such limitations, percentages, and estimates provide that there will be sufficient cash collected to meet all debt service requirements and necessary operations of the local unit and to make any mandatory payments during the fiscal year. (NJLBL 40A-4-2) • Expenditure increases are limited to 5 percent or the index rate, whichever is less, over the previous year’s final appropriations. (NJLBL 40:68A-43)

Against this background, municipalities conduct estimation and forecasting in varying manners.

Current revenue and expenditure estimates In all five municipalities that responded to the survey, the business administrator, chief financial officer, and finance department analysts make revenue and expenditure estimations. Only cities, not townships, resort to a consensus process with their council. The estimation methods they use are fairly simple, as opposed to the complicated models that are often seen at higher levels of government. One city and one township use the zero-based budgeting method. Two other cities rely on rough estimates (based on recent history and personal expertise). Revenue estimates serve as a cap to spending in two cities and one township. In these municipalities, the estimates are updated either monthly or quarterly. One municipality updates bi-weekly or as information is available. These updates, however, are not usually formally adopted. Financial Management 43

Future revenue and expenditure forecasts Three municipalities claim they forecast for three years into the future. Such forecasts, however, are for internal use and often for reference only. For example, in a municipality that provided detailed three-year information, some departments overspent their budgets for three consecutive years. In general, the completed survey responses indicate that the municipalities currently are not committed to forecasting, which was confirmed in the interviews – many local officials do not consider forecasts applicable to the New Jersey context.

Revenue estimation accuracy A rule of thumb for revenue estimation accuracy states that a 5 percent accuracy rate is acceptable, and 2 percent is excellent. Within New Jersey, the accuracy rate of municipal current-year own-source general fund (current fund) revenue estimation is high (low variance) for the three cities: Trenton has a variance of 3.74 percent, and Elizabeth and Paterson have a variance of about 2 percent (see Table 2.6). Since these are five-year or nine-year averages, they are remarkable achievements. A fair contribution to such estimation accuracy, it must be noted, comes from the state oversight system that emphasizes fiscal discipline against revenue over-estimation. In comparison, two townships (Old Bridge and Brick) have excessively high variances between 12 and 14 percent. However, a closer look reveals that these variances are often the result of actual revenues being larger than the estimations. Thus, the townships’ conservative practices – not pure errors in estimation – cause their low estimation accuracy. In other words, financial officers in the two townships underestimate revenue for a cushion to provide extra room in operation, a shield against political overspending, and a device to save for unexpected one-time expenses (note that New Jersey local finance law does not allow creation of contingency funds for unexpected expenditures). Over the course of the interviews, financial officers of the townships were candid about this practice.

Table 2.6

ACCURACY OF OWN-SOURCE REVENUE ESTIMATION Multiyear Average Variance Paterson (FY1992-2000) 1.70% Elizabeth (FY1996-2000) 2.14% Trenton (FY1992-2000) 3.74% Old Bridge (FY1996-2000) 12.00% Brick (FY1996-2000) 13.49% Franklin NA Irvington NA

Source: Municipalities’ Annual Financial Statements, fiscal years 1992-2000. NA = Not available.

Expenditure estimation accuracy All five municipalities that completed the survey did very well in their estimation of current- year general fund expenditure, with a multiyear average variance below 5 percent and the best two below 1 percent (see Table 2.7). If there is fiscal conservatism in Brick and Old 44 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 2.7

ACCURACY OF GENERAL FUND EXPENDITURE ESTIMATION Multiyear Average Variance Brick (FY1996-2000) 0.33% Paterson (FY1992-2000) 0.98% Elizabeth (FY1996-2000) 2.14% Old Bridge (FY1996-2000) 3.26% Trenton (FY1992-2000) 3.99% Franklin NA Irvington NA

Source: Municipalities’ Annual Financial Statements, fiscal years 1992-2000. NA = Not available.

Bridge’s revenue estimations, then the variance in their expenditure estimation is a more truthful reflection of their estimation accuracy. Brick, Elizabeth, Old Bridge, and Trenton have never spent more than their estimates. Conversely, Paterson has, although this number was very small.

Possible contributors to high estimation accuracy In assessing financial management capacity, the authors are interested in identifying the factors that contribute to such high accuracy rates. At the state level, where high accuracy is expected, a special office with professional staffers commonly utilizes elaborate econometric models. Given the lack of specialized staffing in these municipalities, the relatively small size of the finance office, and the comparatively unsophisticated estimation methods and available technology, the high accuracy rate must be attributable to other factors. The detailed legal and administrative stipulations from the state and the number of qualified and experienced professionals holding key financial positions are among these factors.

Department overspending Based on available information, few departments overspend their budgets. This may indicate that either departmental budgets are well compiled, or the business administrator and the finance departments exercise effective control of daily operations. The practice of over-budgeting may also explain the low incidence of overspending. For example, in Old Bridge, the “tradition” has been to over-budget to increase operational flexibility while practicing a policy of strict spending in reality.

Spending on police and fire overtime Survey responses and interviews reveal that spending on police and fire is a common, long- standing, high-cost item in municipal budgets. However, emergency services spending is more complicated than simple financial management, requires workforce planning, and is related to urbanization. During the interviews, many participants described how recent contract negotiations with fire and police unions benefited the financial management needs of their municipal governments. However, contract negotiations may do little to curtail police and fire over- Financial Management 45

spending. Although creative negotiations can generate some short-term fiscal savings, they might hurt the morale of the emergency service employees and/or cause higher turnover rates, leading to more serious problems.

Financial impacts of budget decisions All five municipalities estimate the financial impact of employee wage increases by extend- ing the base contract out three to four years (or the length of the contract) for municipal employees. Four municipalities also estimate the liabilities of accrued vacation and sick leave; but this basically only covers the current year.

Financial impact of legislation Only three municipalities assess the financial impacts of potential laws before they are introduced to the legislative body. The administration and finance departments usually conduct these assessments, which usually measure the impact for two to three years into the future.

Pension liabilities Only two municipalities estimate pension liabilities: Trenton conducts three-year estimations, and Elizabeth conducts estimations on an as applicable basis. In both these cities, the Department of Administration makes these estimates, with the chief financial officer and the personnel director actively involved. In New Jersey, the state government administers the pension system. Each year, municipalities contribute their share for their employees. In the past few years, the strong economy and robust stock market have helped to over-fund the pension system. As a result, the municipalities have benefited from reduced contributions in fiscal years 2000 and 2001. However, officials in cities that receive “fiscal distress aid” complain that the state deducts these amounts from their overall state aid packages. The state side argues that the aid is used for balancing the municipal budget; when the pension surplus occurs, these amounts should be deducted.

Criterion 2: Presence of mechanisms that preserve stability and fiscal health Government Performance Project survey data from the past fours years show that state, metropolitan, and large county governments have adopted mechanisms to preserve stability and fiscal health. This study operates on the underlying assumption that similar mechanisms are also utilized at the municipal level. The presence of such devices helps improve management capacity because they promote the strategic use of available resources, leading to smoother operations.

Structural balance An examination of structural balances helps reveal the extent to which municipalities keep their expenditures within their revenue range. This includes the balance between total general revenues anticipated and total general expenditures appropriated. Table 2.8 reveals that appropriations were often larger than anticipated revenues in fiscal years 1996 through 2000, resulting in continued imbalances. The anticipated revenues were larger or equal to the amounts appropriated in only 10 of 25 cases (excluding anticipated balances and reserves for uncollected taxes). 46 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 2.8

TOTAL GENERAL REVENUES ANTICIPATED (R) VS. TOTAL GENERAL EXPENDITURES APPROPRIATED (A)* FY1996 FY1997 FY1998 FY1999 FY2000

Brick R > A R > A R < A R > A R < A

Elizabeth R < A R < A R < A R > A R > A

Old Bridge R < A R < A R < A R < A R < A

Paterson R < A R < A R < A R < A R > A

Trenton R < A R > A R > A R > A R > A

Franklin Not available

Irvington Not available

*Excluding anticipated surpluses and reserves for uncollected taxes. Source: Municipalities’ Annual Financial Statements, fiscal years 1996-2000.

However, since some municipalities exercise “self-restraint” in revenue estimation (underestimation) and “protective” appropriation (over-appropriation), the comparison between anticipated revenue and appropriations may be misleading. A more accurate structural examination compares the realized total general revenue with the actual expended total general appropriations, as shown in Table 2.9. The picture is remarkably different from that in Table 2.8. In 23 of the 25 observations, the municipalities’ expended appropriations were less than or equal to their realized general revenues.

Table 2.9

TOTAL GENERAL REVENUES REALIZED (R) VS. TOTAL GENERAL APPROPRIATIONS EXPENDED (A) FY1996 FY1997 FY1998 FY1999 FY2000

Brick R > A R > A R > A R > A R > A

Elizabeth R < A R > A R > A R > A R > A

Old Bridge R > A R > A R > A R > A R > A

Paterson R < A R > A R > A R > A R > A

Trenton R > A R > A R > A R > A R > A

Franklin Not available

Irvington Not available

Source: Municipalities’ Annual Financial Statements, fiscal years 1996-2000. Financial Management 47

This finding confirms that these municipalities systematically underestimate revenues and overestimate expenditures to afford themselves more room for protection against unexpected events. It also suggests that the financial officers in both fiscally distressed and wealthier municipalities exercise fairly adequate fiscal discipline to keep their governments in structural balance. A tabulation of the comparison between general fund revenues and expenditures (in New Jersey, the “general fund” is called “current fund”) reaches similar results with realized revenue and expended appropriations. These results further confirm the above findings (see Table 2.10).

Table 2.10

TOTAL GENERAL FUND REVENUE (R) VS. TOTAL GENERAL FUND EXPENDITURE (A) FY1996 FY1997 FY1998 FY1999 FY2000

Brick R > A R > A R > A R > A R > A

Elizabeth R < A R > A R > A R > A R > A

Old Bridge R > A R > A R > A R > A R > A

Paterson R < A R > A R > A R > A R > A

Trenton R > A R < A R > A R > A R < A

Franklin Not available

Irvington Not available

Source: Municipalities’ Annual Financial Statements, fiscal years 1996-2000.

Counter-cyclical devices New Jersey State government does not allow its municipalities to set up rainy day funds. Thus, the primary counter-cyclical device is the fiscal year-end general fund balance, which is a natural by-product of maintaining structural balances during sustained periods of economic prosperity, as examined above. (Another contingency device available to the municipalities is an emergency appropriation, which transfers to the next fiscal year’s expenditures.) Table 2.11 shows the amount of general fund year-end balances from 1996 to 2000. In spite of its highly politicized environment, Brick typically maintains the balance at a very high level (16 to 22 percent). Old Bridge keeps its balance between 3.4 percent and 5.6 percent, a level widely accepted as safe. Elizabeth has steadily increased its balance to 5 percent, while Paterson’s balance fluctuates a little, but is not considered high. The general trend for these three municipalities has been a steady increase. However, Trenton’s balance level declined from 1996 to 2000, which proves problematic for the municipality during times of economic downturn. 48 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 2.11

FISCAL-YEAR END GENERAL FUND BALANCE AS A PERCENT OF ACTUAL GENERAL FUND EXPENDITURE FY1996 FY1997 FY1998 FY1999 FY2000

Brick 21.27% 15.77% 21.84% 21.60% 15.97%

Elizabeth 0.26% 2.13% 3.80% 2.95% 5.23%

Old Bridge 4.11% 5.62% 3.39% 3.67% 5.16%

Paterson 0.36% 3.44% 4.66% 4.83% 3.33%

Trenton 8.44% 7.37% 6.83% 5.48% 3.04%

Franklin Not available

Irvington Not available

Source: Municipalities’ Annual Financial Statements, fiscal years 1996-2000.

Property tax valuation Property tax is the major source of revenue for New Jersey local governments. Thus, regular and up-to-date revaluation is crucial to local jurisdictions’ long-term fiscal stability and fiscal health. Property tax valuation is a function of the municipal governments. Brick, Old Bridge, and Trenton updated their property valuation in the early 1990s (see Table 2.12). However, Elizabeth and Paterson have not updated their property valuation since 1976 and 1972, respectively. Although their ratios of assessed value to market value were 100 percent and 98 percent, respectively, at the time of revaluation, these assessment ratios dropped to 25.3 percent and 18.89 percent, respectively, in 2000 (Irvington experienced the same problem). The interview process revealed that these two municipalities hold a differ- Regular and up-to-date ent attitude toward revaluation than the other municipalities in this revaluation is crucial study. Their financial management leaders stated that they “would to local jurisdictions’ not do it” because of the political troubles involved. Out-dated valua- long-term fiscal stabil- tion, however, may cause undesirable vertical and horizontal inequalities (for example, see Fisher, 1996; and Bahl and Linn, 1992). ity and fiscal health. Unfortunately, the data required to estimate the impact of reassessment delay on effective tax rates were unavailable. Antiquated valuation has pushed up the nominal tax rates, as shown in Table 2.13. Trenton performed its revaluation partly in an effort to correct inequality and partly to increase municipal revenue. Before the 1992 revaluation, the true value of state property in Trenton was unknown. As a result, Trenton was unable to collect its fair share of property taxes from the state government. The revaluation granted the city some financial equity, though not to the full extent. Financial Management 49

Table 2.12

REVALUATION DATES AND ASSESSMENT RATIOS Most Recent Assessment Ratio Assessment Ratio Revaluation at Revaluation in 2000

Brick 1991 100.00% 87.47% Elizabeth 1976 100.00% 25.30% Old Bridge 1990 98.66% 88.67% Paterson 1972 98.00% 18.89% Trenton 1992 100.56% 100.56% Franklin NA NA 97.53% Irvington NA NA 21.12%

Source: Survey responses, for year of revaluation and assessment ratios; Department of Community Affairs, for 2000 assessment ratios. NA = Not available. Table 2.13

OVERALL PROPERTY TAX RATES 1996 1997 1998 1999 2000

Brick 2.32 2.32 2.41 2.48 2.53

Elizabeth 9.65 10.49 10.69 10.76 10.79

Old Bridge 2.99 2.95 2.95 2.92 2.79

Paterson 10.17 11.65 12.06 11.92 11.81

Trenton 1.75 1.86 1.94 2.00 2.06

Franklin NA NA NA NA NA

Irvington NA NA NA NA NA

Source: Municipalities’ Annual Financial Statements, 1996-2000. NA = Not available.

Debt management State finance laws stipulate strict debt limits (3.5 percent of the average of the prior three- years’ equalized assessed valuation for municipalities [NJLBL 40A:2-6]). This may help explain the lack of strong capacity measures in debt management among these five municipalities.

• Only Brick and Elizabeth have adopted debt management policies. Debt management in the other three municipalities is informal. • The nature of their debt oversight bodies is problematic. The three municipalities that have some form of debt oversight body list their council, chief financial officer, and business administrator as its members. In this sense, they do not really have a functional oversight body. 50 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

• The municipal governments have not adopted a debt capacity model; instead, they rely on a capital investment plan. Only one municipal government mentions a debt affordability guideline – 10 percent of its budget as debt service.

On the positive side:

• Sale of debt is competitive whenever necessary and possible. • All five municipalities hire financial advisors, mostly appointed by the council. • Municipal governments have minimal exposure to third-party credit providers, besides insurers.

Cash management Local finance laws impose specific stipulations. While some of the provisions are effectively in force, others are not. For example, the law stipulates that each local unit should adopt a cash management plan and deposit and/or invest its funds pursuant to that plan (NJLFAL 40A:5- 14). Municipal governments pool cash for investments with inter-funds or sweep accounts, but not every municipal government has adopted a cash management plan. Under New Jersey law, municipal governments may invest only in liquid financial instruments that mature in one year or less. These instruments may include, but are not limited to, certificates of deposit, federally guaranteed obligations, and New Jersey cash management funds. Some municipal officials who were interviewed said this law’s specificity is a constraint. The finance law requires municipalities to use competitive pricing or multi-quotes to get the highest return. However, no formal oversight body exists to monitor short-term investment in any of the five municipalities. Perhaps this results from the context of the New Jersey financial environment, which regards cash management more as part of daily operations than as a means to short-term investment earnings. The lack of reporting requirements in these municipal governments’ investment policies also suggests this. Only Elizabeth and Old Bridge require regular (monthly) reporting of cash management performance.

Criterion 3: Availability of sufficient financial information to policymakers, managers, and citizens It is critical for government entities to make available sufficient and reliable information in a timely manner. For policymakers, this is the very basis of formulating the right policy on the right issue at the right time. It allows managers to implement policies, handle managerial issues in the proper manner, and control costs within a reasonable range. Although access to adequate and sufficient information does not guarantee appropriate policy design or effective management, lack of pertinent information can undermine such desirable practices. The ability to collect and disseminate sufficient and reliable information requires a physical management infrastructure – investment in and employment of information technology. Research suggests that using technology can substantially improve the speed and quality of management information production (Heintze and Bretschneider, 2000, 801). The connection between information flow and financial management is particularly crucial in three areas: (1) financial reporting, as a proxy for providing information to policymakers; (2) availability of financial information to managers on an as-needed basis to boost managerial efficiency; and (3) timely budget adoption as a proxy for good financial planning. The remainder of this section discusses these three areas in the five New Jersey municipalities. Financial Management 51

Financial reporting The municipalities are legally required to produce and audit annual financial statements. Each municipality has two versions of its annual statements: un-audited and audited. These, along with debt statements, budgets, and other related documents, would provide policymakers with timely, accurate, and adequate information if they could be compiled and published within a short period of time. A commonly accepted time frame stipulates publication no later than six months after the close of the fiscal year (GFAO, 2000, 9). The state of New Jersey requires a 180-day time frame for submission of audited financial reports.

Table 2.14

NUMBER OF DAYS AFTER END OF FISCAL YEAR AUDITED ANNUAL FINANCIAL STATEMENTS WERE PRODUCED* FY1996 FY1997 FY1998 FY1999 FY2000

Brick** 227 296 105 315 200

Elizabeth*** 180 184 311 275 NA

Old Bridge*** 156 163 120 162 138

Paterson*** 199 290 189 314 195

Trenton*** 110 121 114 117 119

Franklin Not available

Irvington Not available

*When the dates of publication reported in the survey responses differed from the dates in the actual audited Annual Financial Statements, the dates in the actual statements were used for calculation. **Dates as signed by independent auditor in Annual Reports of Audit, fiscal years 1996-2000. ***Dates as signed by independent auditor in Annual Financial Statements, fiscal years 1996-2000.

Based on the dates of the independent auditors’ signatures in the audited Annual Financial Statements, it appears that compilation and publication of annual financial reports can be a lengthy process in these municipalities (see Table 2.14). However, Trenton and Old Bridge stand out as exemplary – during the five years examined, they published their financial reports in less than six months. The speed of compilation seems to bear little relationship to the per capita wealth of these municipalities, as Trenton and Old Bridge represent both ends of the wealth spectrum. However, their speed does appear to reflect the achievements of using information technology in daily finance operations. More interestingly, the current chief financial officers in these two municipalities reported bringing in an IT “revolution” into their respective departments.

Availability of financial information to managers The five municipalities vary widely in how they provide financial information to departmental and frontline managers: 52 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

• Building technological networks (intranets) requires substantial resources and has been possible in the wealthier municipalities. Two municipalities (Brick and Old Bridge) give managers access to online financial information. Old Bridge has the capability of providing managers with online financial reports in real time, through its intranet. The remaining three municipalities have not been able to provide this function. • Placing financial documents online has been increasingly popular at higher levels of government. Currently, none of these five municipalities utilize this capability. • All five municipalities provide their managers with financial documents upon request. One township sends such documents to each department head.

Providing financial information to managers is not just a technical issue, nor does it depend on the municipal government’s ability to afford the physical structure. It may also be deeply rooted in the municipal government’s management philosophy or style. During an interview, one business administrator bluntly stated that his municipality does not give managers such information, and to explain why, used the police department as an example: “If we tell him they have so much money allocated to their department, they will spend it immediately.” Cost accounting is a very practical tool for providing managers with efficiency and performance measures. However, its implementation is resource intensive and requires specialized technical training for the users. Cost accounting has not been used widely or extensively in these five municipalities.

• Activity-based accounting: Three of the five municipal governments do not use it at all; one uses it periodically; another uses it only occasionally. • Unit costs calculation: Three of the five municipalities do not use it at all. • Allocation of indirect costs: Brick and Trenton use it to some extent; the other three do not. • Purpose of cost analysis: Brick is a model, using it for many purposes; Trenton uses it for budget preparation.

Timely budget adoption Budgets can serve as a master plan for the coming fiscal year, as guidelines in policy implementation, and as a visible tool for oversight and assessment. These three functions are possible when the budget is compiled and adopted in a favorable fashion that allows administrators to take full advantage of it. One of the preconditions is timely adoption. However, the interview process and survey results suggest that adopting the budget in a timely fashion may not be a priority in New Jersey municipal financial management.

Budget delay New Jersey municipalities can use one of two fiscal years – the calendar fiscal year that runs from January 1 to December 31, or the state fiscal year that runs from July 1 to June 30. Brick Township operates under the calendar fiscal year, while the other four municipal governments operate under the state fiscal year. The introduction and adoption of municipal budgets follow a timetable that starts after Financial Management 53

the beginning of the fiscal year. New Jersey’s budget adoption model differs from other states in that it does not permit adoption of municipal budgets prior to the beginning of the fiscal year. The reason for this is to ensure municipal solvency by correcting possible over-estimation of revenues. The extent of any lateness/delay, however, varies greatly among municipalities. The longest delay in the past five fiscal New Jersey’s budget years was 294 days, much beyond the legally allowed limit; the adoption model shortest was 41 days, very much within the legal limit. In relative differs from other terms, Brick, Old Bridge, and Trenton faired best, with delays of 68, states in that it does 82, and 97 days, respectively. Elizabeth and Paterson had delays of about five to 10 months. not permit adoption New Jersey Local Budget Law allows budget adoption 78 days of municipal budgets into the fiscal year for municipalities using the calendar fiscal year prior to the beginning and 81 days for municipalities using the state fiscal year (see NJLBL of the fiscal year. 40:A 4-10, paragraph 2). However, municipal budget adoption often goes beyond this allowance. Some interview participants attributed late budget adoption in their municipalities to the delayed disbursement of state aid (which often occurs late into the new fiscal year). One participant told the interview team, “We’d rather submit [the budget] to our council late than have the council adopt an unreliable budget and later amend it, because you have to go through the process again, which makes no sense.”

Table 2.15

FEDERAL AND STATE AID AS A PERCENT OF TOTAL GENERAL FUND REVENUE* FY1996 FY1997 FY1998 FY1999 FY2000

Brick 19.93% 17.82% 16.10% 16.76% 13.95%

Elizabeth 27.81% 26.68% 24.91% 24.98% 23.84%

Old Bridge 20.55% 19.94% 17.43% 18.05% 19.61%

Paterson 40.43% 37.20% 38.55% 39.81% NA

Trenton 49.11% 48.14% 45.45% 45.26% 43.72%

Franklin NA NA NA NA NA

Irvington NA NA NA NA NA

*Figures used are actual revenues. NA = Not available. Source: Municipal survey responses.

However, this explanation may not always account for late budget adoptions. A statistical examination of the data does not provide strong evidence of a positive relationship between late budget adoption and the delayed disbursement of federal and state aid against total general fund revenue (see Table 2.15). The correlation between the number of days late and the ratio of federal/state aid against general revenue is only 0.28, which means the two are not closely connected. Data for Elizabeth and Paterson support this argument, while data for 54 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Trenton do not. Therefore, it is reasonable to assume that some other unknown factors contribute to the late adoption of municipal budgets. One factor may be the date discretionary state aids are announced, for those municipalities that depend on such aids.

Criterion 4: Appropriate control over financial operations and managerial flexibility Appropriate checks and controls are key components to public financial management. Since government entities are entrusted with tax dollars, they cannot be too cautious. However, checks and controls are not enough to improve management capacity and operational efficiency. Managers must be allowed to exercise an appropriate degree of managerial flexibility. Survey responses indicate that all five municipalities exercise tight control over financial operations, as required by New Jersey local finance law. For example, any budgetary line item transfer requires a two-thirds vote of the governing body. Surprise cash counts are sometimes conducted (Trenton), encumbrance is commonly used to guard against municipal overspending, and centralized purchasing is common to avoid corruption. However, allowing appropriate managerial flexibility has not received adequate attention. Departments are not allowed to retain any savings they have realized, as is done in some states. If allowed, it would create an incentive to promote operational efficiency. The balance between control and managerial flexibility remains an issue worthy of further exploration by elected municipal and state government officials.

Summary

The study’s examination of financial management in the selected municipalities reveals many success stories as well as challenges. Some contributors to success include: (1) a whole set of local finance laws covering all aspects of local financial management, (2) oversight by the state government and a hands-on approach by the DLGS to assist with local finance troubles (the state of New Jersey has very successfully eliminated municipal bankruptcies in the past decades), and (3) a qualified financial management force that is innovative in handling local management difficulties. In general, the municipalities have made concerted efforts to improve financial management through wider use of information technologies. Paterson has shifted from “manual” to “computerized” financial management; other municipalities have implemented online requi- sition and real-time financial reporting. An exemplar is Old Bridge, where the CFO’s background in IT played a role in transplanting information technologies into the municipality’s daily financial management operations. Additionally, Brick Township and Old Bridge Township streamlined their tax collection processes through the application of bar code technologies. These municipalities are also seeking alternative revenue sources, including the aggres- sive pursuit of grant programs. Other municipalities are exploring ways to reduce costs and improve efficiency by sharing services and expanding private-public partnerships. Meanwhile, challenges cry for solutions. Some inadequacies in management capacity include: (1) the absence of management policies in key areas, (2) inadequate investment in management infrastructure, and (3) politicization of local affairs, to name a few. For urban municipalities, inadequacy of resources remains a problem. Trenton, for example, has had a long history of under-assessing state-owned property. Due to an inequitable formula, state-owned property has been under-valuated for three decades. In addition, for at Financial Management 55

least 15 years, the state did not fully fund Trenton’s payment in lieu of tax (PILOT) program. Annual funding dipped to as low as 20 percent of the formula. As a result, Trenton increasingly relies on one-time revenues to cover recurring expenditures. The lack of stabilization devices also worries municipal finance managers. For example, the fairly wealthy Brick Township faces an expanding demand for services, so maintaining fiscal stability and avoiding tax-rate spikes is a great challenge. Brick has built up large general fund surpluses, but its leaders have seen the need for better, more formal stabilization devices. Deciding how to best shift the focus of state supervision in order to facilitate smoother and more efficient operations is difficult at best. The reliance on the centralized and highly regulated approach to handle the challenges discussed above has proven insufficient and ineffective. The state government must figure out how to balance decentralized operation by local governments with centralized oversight by the DLGS. These successes and challenges may not be unique to these five jurisdictions. The study’s overall findings may bear statewide implications. To solve the local problems requires combined efforts at both the local and state levels; attempts by either of the two alone would be inadequate – but New Jersey has never lacked the courage and creativity to renew and rein- vent itself to become more successful than ever before. The final section of this chapter focuses on findings and recommendations in the following six areas: budgeting, property valuation, tax collection, cash management, debt limitations, and expenditure cap law. The recommendations are targeted toward the municipalities and the state government.

Recommendations for New Jersey Municipalities and the State of New Jersey

Finding 1: Absence of Long-Term Perspective on Budgeting

The authors conclude that these New Jersey municipalities lack a long-term financial perspective. As discussed below, current institutional arrangements directly affect budgetary perspectives and planning practices:

Budgets are for current year only Current local finance laws and practices discourage timely adoption of annual municipal budgets; in fact, budgets must often be adopted after the fiscal year starts. State aid figures for the current year are not announced until long after the fiscal year starts, let alone for future years. According to one interviewee, those that follow the best practices, such as adopting their budgets on time, “get penalized.” This penalty occurs because if a municipality adopts its budget early and the state legislature adopts a new state aid program, the municipality cannot bring the new aid into its budget.

Limited financial planning Financial planning requires expertise, resources, and political will. The lack of political will in these New Jersey municipalities represents a formidable barrier to municipal financial planning that is even greater than the lack of sufficient professional staff. Governing bodies tend to focus on what they are doing in the current year. Thus, the state government needs to 56 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

help shift the municipal governments’ emphasis from default prevention to multiyear budgeting and planning.

Recommendation for New Jersey municipalities Financial planning is expensive in terms of time and resources, but it is a necessary component of sound financial management. All municipal governments and their legislative bodies should devote adequate expertise and resources to this function.

Recommendations for the state of New Jersey The state government/legislature may need to revise local finance laws such that:

• Municipal budgets can serve as tools for financial planning and guidance, not just for supervision. • The local finance laws allow, encourage, and require multiyear budgeting, or at least multiyear perspectives on budgets, and long-term financial planning.

Finding 2: Outdated Property Valuation

Tax assessment in New Jersey works in a top-down fashion. The State Division of Taxation sets the rules; county taxation boards hold administrative responsibilities; and certified municipal tax assessors, who are appointed by the mayor or governing body but report to the county taxation board, conduct assessments. In many counties, taxation boards order municipalities to revaluate if the assessment ratio of properties falls below a certain percentage of the true/market value, usually at 75 percent (Benecke, 2001, I-20). Unlike its strict enforcement of budget laws, New Jersey state government has “allowed” municipalities to neglect their revaluation responsibility. Many urban municipalities do not want to revaluate. During an interview, one municipal official emphasized that the municipality simply “would not do it [due to the political risks involved].” Antiquated valuation of property causes inequity in taxation. For example, similar houses are subject to different tax amounts, while people who own properties with vastly disparate market values may end up paying the same amount of taxes. In addition, belated revaluations have also inflated nominal property tax rates. Most importantly, because property taxes are the major own-source revenue for municipal governments, outdated valuation has cost the cities valuable financial resources.

Recommendation for New Jersey municipalities Regular revaluation should be done in spite of the costs and time it demands. The monetary benefits that result from timely valuation far outweigh the required financial and manpower input. The equity and social justice regular revaluation provides far outweigh the political pressures against it. Revaluation can lower the nominal tax rate and bring in needed resources.

Recommendations for the state of New Jersey The state should enforce its regulations more seriously. Administrative, even legal, actions should be taken to force municipalities to revaluate properties, particularly in those municipalities where revaluations have not occurred for decades, when assessment ratios have fallen Financial Management 57

below the acceptable level. Alternatively, responsibility for revaluation can be redirected to the county government. Occasional cases of legal action have occurred in New Jersey to enforce revaluation.

Finding 3: Low Rate of Tax Collection in Some Urban Municipalities

By state law, property tax is the municipalities’ major own-source revenue. Municipal governments bear the responsibility of collecting taxes for school districts, counties, and special districts and guarantee them 100 percent of their tax shares. To ensure that they will satisfy this guarantee, each year the municipalities must appropriate unspendable reserves for uncollected taxes. Therefore, high property tax collection rates are key to their fiscal condition. However, collection rates in some urban municipalities are only around 85 percent, which is far too low to maintain financial vitality.

Recommendations for New Jersey municipalities There are many reasons for the municipalities’ low tax collection rates, and a detailed discussion is beyond the scope of this report. Nevertheless, continuous improvement of management systems is the key to achieving better collection rates. Innovative measures are helpful. Tax sale, as some of the municipalities use, may be a method for other municipalities to consider. However, each municipality must consider its own circumstances when deciding whether to apply methods that have proven successful elsewhere.

Recommendation for the state of New Jersey It may be extremely difficult for the state to help raise the tax collection rate; nevertheless, it should investigate feasible ways of doing so.

Finding 4: Inadequate Cash Management

New Jersey is very conservative with municipal investments. Municipalities are prohibited from making long-term investments. In the words of one state official, “municipalities do not have the need for long-term cash management [because they are so small].” Even cash management is restricted. The state does not allow municipalities to make any investments with maturities longer than 360 days, limiting not only the length, but also the instruments of investment (to go beyond this limit, explicit case-by-case approval from the State Division of Investment is required). The rationale behind this restriction is fund safety. A state official and two local CFOs proudly claim, “If you follow our rules your principal will never, ever be at risk.” This policy has been successful in preventing investment failures, but a strong short- term investment function has already become an indispensable part of financial management. How to switch from cash management to short-term investment and implement it in a proper way remains to be solved by state as well as local officials.

Recommendation for New Jersey municipalities Short-term investment is a new task for municipal financial officials. It is strategically wise to endorse the relatively new management concept of short-term investment and practice it as early as the legal structure allows. It will prove very rewarding, especially when municipalities have more resources under their control. 58 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Recommendation for the state of New Jersey It may be necessary to revise current restrictions in order to give municipal officials more room for managerial flexibility without sacrificing fiscal discipline or loosening protection against high market risks or scandals.

Finding 5: Municipalities Are Circumventing Current Debt Limitations

The municipal debt limit set by the state is 3.5 percent of the average of the equalized assessed valuation of the past three years; but this limit is no longer effective, because some municipalities enter into lease-rental agreements with county authorities. Such circumvention reveals at least two points. First, the state’s centralized approach is not entirely effective in its imposition of the debt limit. The limit disregards differences between municipalities such as urban versus suburban and fast developing versus stabilized (in terms of population, as shown in the population change between 1998 and 2000, Table 2.1). Thus, the limit has effectively bound many local officials’ managerial flexibility. Second, local officials are savvy enough to create clever ways of coping with the service demands of rapidly increasing populations. Thus, it is necessary for the state to review this debt limit, or set different limits for different categories of municipalities.

Recommendation for the state of New Jersey Municipalities are better classified if they are placed into multiple categories for debt limits. For example, rapidly growing municipalities facing increasing service demands and larger tax bases should be allowed to apply a higher debt limit than the 3.5 percent applicable to all municipalities.

Finding 6: Expenditure Cap Law Binds Municipalities

The expenditure cap law for municipalities (no more than 5 percent above last year’s expenditure or the index rate, whichever is lower) has impeded their ability to meet the demands of the increasing number of residents, especially for fast-growing municipalities. Similar to Finding 5, the universal application of this law cannot adequately address the individual contexts of New Jersey municipal governments. In this sense, reviewing the cap is already an urgent task for the state legislature.

Recommendation for the state of New Jersey Similar to Finding 5, the state should categorize municipalities according to their varying taxing capacities and service needs. Although they may be troublesome to implement, multiple cap treatments are necessary to give municipalities more flexibility in satisfying taxpayers’ service demands. Financial Management 59

CAPITAL MANAGEMENT

CAPITAL MANAGEMENT OVERSEES THE INFRASTRUCTURE AND EQUIPMENT of government, which includes the land, buildings, facilities, and equipment used to provide public services. Government entities should have a clear set of policies and procedures to govern their capital management activities. Managers establish and implement rules and regulations to control the acquisition, maintenance, protection, and disposal of the government’s physical plant and property. Capital management has grown in scope and complexity as relat- When governments ed technologies have evolved; record-keeping and maintenance plans face competing can be much more sophisticated and useful now than they were in demands for finite the past. Professional capital management must measure the reliability, efficiency, and effectiveness of applicable processes and dollars, capital needs requirements and determine whether they are resulting in desired are often the easiest outcomes. expenditures to defer. Desired outcomes are measured in part by citizen perception and satisfaction. Do constituents enjoy the facilities and services they want, and do these facilities appear to be available and in good repair? Even though professional accountability is not always visible to citizens, the quality and upkeep of the physical plant often is. While this assessment focuses on New Jersey, the broader national context may be instructive. Across the nation, a number of reports have concluded that capital spending has not kept pace with infrastructure needs, and the maintenance of capital assets has been inadequate (see, for example, Choate and Walters, 1981). This points to the problem of scarce resources. When governments face competing demands for finite dollars, capital needs are often the easiest expenditures to defer. Rarely does the public cry for “preventive maintenance.” That being said, one of the goals of this type of study is to assess how well local governments are setting the stage for proper management of public assets – through planning, ongoing assessment, and frank dialogues with residents and elected officials.

Capital Management Capacity and Systems

Capital management varies widely among localities. They differ in everything from how they define a capital asset to the type of planning they do (e.g., number of years considered, analysis method used) and the capital financing methods they use (Bunch, 1996). However, there is general agreement on the components that are important for a good capital management system. For several reasons, capital planning should extend over a longer horizon than annual (or even biennial) operating budgets. First, especially for new public facilities, planning, bidding, and construction phases take longer than a single fiscal year to complete. Second, the 62 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

magnitude of capital costs requires extensive evaluation to determine the method of payment – outright cash, a sinking fund, or financing. Third, the cost of providing services (or the benefits accrued from a public facility) should be attributed to the time period during which the services or benefits are enjoyed. Thus, even a one-time cash payment for a public facility has a multi-year impact. Long-term capital planning enables a government to better budget its scarce resources over a span of time.

A capital budget provides a mechanism to smooth out peaks and valleys, regularize construction activity in an effort to avoid local bottlenecks that can delay projects and inflate their cost, avoid excessive drains on the tax base when projects must be paid for, and balance spending with the resources available within political, economic, and legal tax and debt limits. (Mikesell, 1999, 226)

Capital needs and service demands often exceed available resources, so municipalities need to rank competing capital requests and determine which projects they will include in the budget. A capital improvements plan (CIP) is a vehicle for ranking capital needs that allows managers to evaluate and compare projects. According to Roland Calia (2001), this approach can force inclusion of additional information into the process, it improves justification of decisions, and it may increase objectivity. The CIP can also be coordinated with the community’s strategic plan, which establishes a community vision and helps with priority setting (Halachmi and Sekwat, 1997). One study by Millar (1988) suggests the use of 11 evaluation criteria, including: fiscal impact; health and safety effects; community economic effects; environmental, aesthetic, and social effects; disruption and inconvenience caused; distributional effects; feasibility; implications of deferring the project; amount of uncertainty and risk; effects on interjurisdic- tional relationships; and relationship to other capital projects. The role of citizens in the governance process has received increasing emphasis. Public participation in budgeting processes not only helps determine service needs, but also edu- cates citizens in the complexities and costs of government services and increases their trust in government (Ebdon, forthcoming). Traditional methods of public involvement typically include public hearings during meetings of the governing body and voter approval of bond referenda. Other positive methods of public participation include: decentralizing public hearings throughout the community, conducting public opinion surveys, providing greater access and input to public databases, and including citizen members on capital planning committees (MacManus, 1996). Capital management does not end with the completion of a capital improvements plan – implementing capital projects is crucial. The goal of the implementation phase is to ensure timely and efficient performance, within cost. This can be achieved through proper goal setting, the establishment of appropriate performance objectives, and adequate oversight of the project to completion (U.S. General Accounting Office, 1998). Asset maintenance is also a critical component of capital management. Routine and preventive maintenance saves money in the long run. For example, routine preventive maintenance has been found to reduce infrastructure’s life-cycle costs by 75 to 90 percent in some cases (See Dornan, 2000). Some have argued that the under-investment in maintenance has been exacerbated by Capital Management 63

current capital budgeting methods that fail to adequately demonstrate maintenance needs (Pagano, 1984). In an attempt to address this issue, in Statement No. 34, the Governmental Accounting Standards Board (GASB) approved new financial reporting standards that will require state and local governments to report the value of their infrastructure assets in annual financial statements. They must also record depreciation expense for all capital assets, unless the government adequately assesses maintenance needs with an asset management system. For many jurisdictions, this will require significant changes in how assets are tracked and managed (See, Kravchuk and Voorhees, 2001). Decision-making will not be improved merely by the existence of a capital improvements plan or good information regarding asset needs. The information must be used as a fundamental part of the decision-making process for budgeting decisions. Bond-rating agencies consider management practices, in addition to a formal capital improvements plan, when determining credit ratings. For these reasons, professional organizations and scholars emphasize the importance of capital management practices. While a locality’s size, the scope of its capital asset responsibilities, its financial capacity, and state and local legal requirements can all affect how it performs capital management, several aspects are considered crucial in all governments. In its recent study of “best practices” in capital management, the U.S. General Accounting Office identified five principles for success:

1. Organizational goals need to be linked to the capital decision-making process. 2. A long-term capital plan should be developed using an analytical approach with project ranking based on established criteria 3. Total life cycle costs should be considered in the planning and selection process 4. Project management techniques should be used to prevent project delays and cost overruns 5. Performance assessment should be ongoing (U.S. General Accounting Office, 1998)

These principles essentially coincide with the criteria used in the current study to evaluate the New Jersey municipalities.

Capital Management Environment for New Jersey Municipalities

Relative to other states, New Jersey has a very high degree of control over capital and financial management in local governments. New Jersey has an elaborate body of local finance law. Apparently, this level of state control over capital management was developed in an effort to eliminate and prevent corruption – both perceived and real – in local government. From the local governments’ perspective, this orientation has resulted in a highly regulated and rigid environment that is focused more on procedural compliance than upon efficient and effective capital management. While the state may not consider itself unduly invasive or demanding, local governments share a different point of view. While both levels of government agree on the goals, they disagree on the best way to accomplish them. The state of New Jersey regulates the following (this list is not intended to be exhaustive, but rather an overview of major regulations): 64 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

1. Formats for the budget, capital improvements plan, and financial reporting documents 2. Format for the six-year capital expenditure plan 3. Standard definition of what can be financed with debt, the proportion of a capital project that can be financed with debt, and the time period for repayment of debt 4. Approval authority of the budgetary process 5. Licensure of local finance, procurement (optional), financial officers, municipal clerks, tax collectors, and public works managers

During the course of this project, local officials commented negatively about the state’s ability to use its professional licensure regulation to enforce these requirements. If a local officer believed that a minor variance from a state regulation would be proper and beneficial to the community, he would be reluctant to act on that belief, because his individual professional licensure is at stake. This is the double-edged sword of state regulation: if it is weak, it allows for abuse; if it is overly strong, it hinders good, creative management that can respond to unique needs. A number of constraints have hindered local governments’ capital management efforts. Some of these are externally imposed, such as regulatory or statutory constraints, but most seem to be self-imposed. Further, most of the restrictions seem to be based in practice rather than in written regulation. The form of local government home rule in New Jersey is predominately the council- mayor form, which arguably results in a weak central administrative function. This produces decentralized operating departments with no strong central authority vested in the business administrator, whose function is restricted to operating the central administrative functions of the municipality. In this form, the business administrator, who serves at the pleasure of the mayor, runs the central administrative functions, but may have limited authority to manage departments. Thus, establishment of locality-wide priorities or accountability is often missing. It is also important to note that capital management is closely related to general financial management. Thus, some of the issues raised in Chapter 2, “Financial Management,” also affect capital management. For example, New Jersey’s local governments rely heavily on the property tax, which is widely unpopular. Additionally, the annual rate of expenditure growth is limited, and net debt cannot exceed 3.5 percent of the value of real estate (a three- year average equalized value). Consequently, these constraints greatly inhibit capital expenditure decisions.

Criteria for Assessing Capital Management

Three major criteria were used to evaluate capital management in the seven New Jersey municipalities. These criteria were originally developed for use in the Government Performance Project. They reflect the components that are generally considered crucial for a successful capital management system (see Table 3.1). Capital Management 65

Table 3.1

CAPITAL MANAGEMENT CRITERIA

1 Municipality conducts a thorough capital planning process through: • Formal capital improvement plans that coordinate and prioritize capital activities • Active participation by the public in identifying and prioritizing capital needs • A multiyear linkage between operating and capital budgeting • A multiyear linkage between strategic planning and capital budgeting • Sufficient data to support analysis

2 Municipality monitors and evaluates projects throughout the implementation process.

3 Municipality ensures the adequate and appropriate maintenance of capital assets by: • Having accurate data on current assets • Having sufficient data to plan maintenance adequately • Funding maintenance adequately • Conducting sufficient preventive maintenance to avoid major emergency repairs

A long-term, comprehensive capital improvements plan (CIP) is necessary to ensure that resources are utilized in the best manner to effectively meet the community’s needs. Those community needs should be identified in a strategic planning process. The CIP requires good information on the total costs and benefits of projects, as well as a process for systematically prioritizing requests. Once the plan has been adopted, mechanisms must be in place to monitor projects as they are implemented. Finally, capital assets must be well maintained to provide good service and to avoid premature replacement or other consequences of deferred maintenance. Appropriate maintenance requires adequate funding, as well as the correct data on inventories and the condition of assets.

Methodology and Data Collection

The capital management research team adopted the Government Performance Project capital management survey as its guide for data collection from the seven municipalities. The team developed a questionnaire to solicit introductory information and a structured interview protocol to obtain follow-up data from municipality officials. Furthermore, documents provided a third source of data. The data collection process began with a 10-question written questionnaire that was mailed to each municipality. The questions focused on the capital management processes that are in place, the financial procedures used, and who performs which functions. The questionnaires were returned to the research team by mail or at the beginning of on-site visits for interviews. Interviews were the primary method of data collection for the capital management assessment. Researchers conducted on-site interviews with persons selected by the jurisdiction. Interviewees included the mayor, business administrator, deputy administrator, chief financial officer, budget analyst, and retired municipality officials. At the jurisdiction’s discretion, between one and three officials were interviewed in each municipality in a single meeting. The team developed and used a structured interview protocol, with questions designed to determine how well the municipalities meet the criteria identified in the previ- 66 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

ous section. Interview teams consisted of one or two Maxwell School researchers and sometimes one or two members of the project advisory committee. Researchers recorded written notes during the interviews, which team members and municipality representatives reviewed at the conclusion of the interviews. In addition, a team member interviewed two representatives of the New Jersey Department of Community Affairs. This interview session followed the interviews of municipality officials and was used to confirm the state’s role relative to local capital management practices. There were no extensive document reviews. However, research team members reviewed copies of the state-mandated six-year plan, budget, and debt statements when they were available. Each researcher compared reports and notes with each other. Then, data from the questionnaires, interviews, and document reviews were compiled into a standard format. Then the team developed a set of findings and recommendations for improvements for both the local governments and the state of New Jersey.

Results: Capital Management in New Jersey Municipalities

There are many similarities in capital management among the seven communities. Therefore, this section is organized around the three criteria used to evaluate capital management, rather than by jurisdiction. However, the first subsection provides a brief description of each municipality’s capital assets and functions.

Capital Assets

The four townships studied (Brick, Franklin, Irvington, and Old Bridge) are responsible for all normal municipal services and facilities except schools, libraries, water and sewer utilities, and fire, which are fiscally independent. Facilities and equipment generally include parks and recreation, administrative buildings, an auto fleet for police and administrative purposes, construction equipment, and senior citizen buses. These four municipalities are responsible for the roads within the townships that the state or county does not maintain. The townships also perform some unique activities. For example, Brick is responsible for a dam and a closed landfill, has an extensive oceanfront that requires specialized maintenance activities for the beaches and bulkheads, and is currently constructing the largest sports complex in New Jersey. Three cities were included in the study: Elizabeth, Paterson, and Trenton. In addition to performing the same activities as the townships, the cities are also responsible for fire, sewer and water services and facilities (except Paterson, which has an independent water system). Elizabeth has a long-term contract for the operation and maintenance of its water distribution system and is currently developing a similar arrangement for the sewer collection network; water and sewer treatment services are provided through contractual arrangements with independent entities. Paterson collects and transmits sewage to a regional plant. In Paterson, a parking authority operates the parking structure, while the city maintains and enforces the parking meters. Trenton also has a parking authority for parking structures, and the city operates the parking meters, surface lots, and on-street parking. Capital Management 67

Capital Planning

Ideally, a government will prepare a long-term comprehensive capital plan that is updated on a regular basis (e.g., annually). In order to best meet the needs and vision of the community, this plan will be linked to the organization’s strategic plan. Capital project requests will be prioritized systematically and evaluated based on information related to needs and total costs and benefits. Citizen input will be Facility and sought actively in the development of the capital plan, and the plan infrastructure needs will be readable and available for public use. appear to be based As noted earlier, municipalities in New Jersey are required to have a six-year capital improvements plan, with the annual capital often on individual expenditures included in the annual budget. Each of the seven judgment of needs municipalities prepares this plan. In general, however, for several rea- and priorities rather sons, their planning processes do not meet the standards for good than on data capital management systems. In each of the seven municipalities, operating departments derived from system- annually submit capital requests for their service areas. In some atic analyses. cases, such as Brick, consulting engineers also submit project requests. Most of the municipalities appear to use vehicle replacement schedules based on age, mileage, and repair history; heavy equipment replacement is also regularly programmed in some places, such as Elizabeth, but not in others. Conversely, facility and infrastructure needs appear to be based often on individual judgment of needs and priorities rather than on data derived from systematic inventories, condition assessments, life-cycle costing, or cost-benefit analyses. The project review process tends to be similar across municipalities. Generally, the business administrator coordinates the process and develops the proposed plan. Brick has a finance committee, comprised of the business administrator, chief financial officer, and purchasing agent, which reviews the requests and submits a recommended capital plan to the mayor. Old Bridge also has a capital expenditure committee to manage the capital process and formulate recommendations to elected officials. Franklin Township has employed a CIP manager and utilizes a CIP committee. None of the municipalities appears to use any type of formalized evaluation system to prioritize capital needs. In addition, there is no evidence that their capital plans are coordinated with community-wide strategic plans. Brick’s master plan has a good inventory of capital needs that could serve as a guide to developing the capital program, but the plan has not been updated since 1988. None of the communities hold pubic hearings other than a required public hearing prior to the council’s adoption of the plan and bond ordinance. There is little or no formal opportunity for citizen input into the capital plan, and no mechanisms exist to encourage or accommodate public input or review during the development stage. In addition, there is little indication that council members are involved in developing the plan, aside from informal consultation in specific instances. While the municipalities do meet the letter of the state requirement for a six-year capital plan, this does not match what is generally considered to be the definition of a complete plan. Their capital plans are simply lists of projects with past and projected expenditures. The plans do not include detailed project descriptions and justifications, descriptions of the planning process, overall summaries of the plan, or glossaries of terms that would make them informative, user-friendly documents for the public. In addition, it is not clear that 68 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

long-term planning is taken seriously. In one municipality, for example, several major capital items that were funded in one year were not mentioned at all in the six-year plan that was adopted the previous year. This is an indication of poor planning. There is large variation in the fiscal stress the jurisdictions experience; but, with the exception of Trenton and Irvington, the jurisdictions have the capacity to do what would be required to adequately meet capital management needs. The team reviewed the jurisdictions’ debt burdens and concluded that all but two have debt capacity to raise construction funding for new capital assets. There is not the perceived demand that would justify the tax burden upon the public or the administrative burden upon the local government. Trenton has a debt capacity problem because much of the property is state owned and, thus, tax exempt. Irvington requires state support just to balance its operating budget. Its real shortage is in maintenance funding, which is more a problem of political will to appropriate than a problem of capacity. Maintenance is not a priority in local government, and the weak central administrative function cannot force departments to do more planning and funding than they do now.

Project Management

This criterion requires governments to monitor the implementation of capital projects, with the ultimate objectives of reducing cost overruns and delays and improving performance. Success in this area necessitates regular reporting by the municipality and use of a well-developed tracking system. Project management practices vary somewhat among the seven municipalities in this study. Brick Township has opted to contract out its engineering services rather than fund in- house engineering expertise. The firms it contracts, in coordination with the responsible municipal agency, oversee implementation of capital projects. The municipality’s purchasing agent also has a major responsibility for implementing the capital plan; major building repairs and renovations are within his administrative purview. The purchasing agent is also responsible for procuring construction and consulting contracts and monitoring their execution in concert with the responsible line department. In Elizabeth, the assistant public works director is responsible for tracking capital projects and managing the consulting architects and engineers. There is no indication of a computerized tracking system for project implementation in this municipality. In Franklin Township, the township manager directs a CIP committee, which is charged with tracking township projects. A CIP manager, recently hired by the administration, produces and updates project progress reports, and the finance department produces budget compliance reports. Both reports are provided on a monthly basis. No project management software is used. Due to its fiscal stress, Irvington Township is unable to fund either routine maintenance or the acquisition of new capital assets. The municipality implements only emergency capital projects, and the responsible departments track these. No project management reports are produced or used outside the responsible departments. Project management software is not used. In Old Bridge, a CIP committee tracks capital projects using monthly reports that the departments generate and defend. These include project progress reports, produced by the responsible departments, and budget compliance reports, generated by the finance department. The business administrator and chief financial officer track budget compliance. Capital Management 69

In Paterson, the responsible departments monitor and track projects. No project management reports are produced or used outside the departments, and project management software is not used. Capital projects in Trenton are also monitored and tracked by the responsible departments, but the budget department monitors some strategically important projects. Both project progress and budget compliance reports are provided on a monthly basis, but no project management reports are produced or used outside the responsible departments. Overall, there are variations in who monitors projects and whether regular tracking reports are prepared and distributed. In several of the jurisdictions, monitoring is entirely conducted within the departments responsible for projects, with little or no reporting outside the departments. Franklin and Old Bridge are examples of communities that appear to have good processes that require monthly reporting of both project status and budget compliance to a CIP committee. Using project management software would enhance this function, but it appears to be relatively unused by these seven communities.

Asset Maintenance

To maintain service levels, it is crucial to keep capital assets in good condition. Deferring capital maintenance can result in excessive long-term costs and require replacement sooner than would be necessary with adequate preventive maintenance. Appropriate maintenance requires: (1) keeping inventories up-to-date, so the municipality knows its assets’ age and maintenance history, and (2) performing condition assessments on a regular basis and including data on the cost of maintaining assets in good condition. For the most part, useful data for asset maintenance are not available in these municipalities. Municipalities use fixed asset inventories for accounting purposes, but they do not use them for maintenance purposes, although Elizabeth does use inventory information to determine public safety vehicle replacement schedules. In addition, they do not do regular condition assessments, nor do they keep or report ongoing records of asset condition outside the responsible departments. Automated systems are not used to track information about conditions and maintenance. Trenton is an exception. The municipality has installed an automated transportation system to inventory and monitor lane miles and structural conditions and to project street maintenance needs. Trenton is in the process of installing a similar system for buildings and other public facilities. The municipalities fund maintenance needs differently. Irvington’s severe fiscal stress has affected its ability to fund capital maintenance. Its equipment is old, outdated, and in poor repair, but no regular maintenance is scheduled; maintenance is funded only on an emergency basis. Despite these problems, the buildings and streets in Irvington appear to be in fairly good condition. The facilities and roads in Old Bridge have also had significant maintenance needs, but the municipality officials interviewed for this study said they believe they have overcome the major problems—Old Bridge is funding the remaining needs systematically from a dedicated level of funding in the annual operating budget. In Elizabeth, routine facility maintenance appears to be fairly good. The public safety fleet is replaced routinely; no fire truck is more than 10 years old, and no ambulance is older than five years. Interviewees noted, however, that fire stations and recreation centers have unmet maintenance needs. In Trenton as well, some assets need reconstruction, but facilities and streets seem to be structurally sound. 70 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Paterson appears to have no major unmet maintenance needs at the present time. Brick has also done an excellent job of maintaining its capital assets. Interviewees note that the municipality is widely recognized for its beaches and recreation facilities. Brick’s capital improvement plan has also funded building improvements systematically, to enhance energy efficiency and replace aging systems such as HVAC and roofs.

Summary

Overall, the research team found no egregious current problems related to capital management in these communities (with the exception of Irvington, whose fiscal difficulties are impairing the municipality’s ability to maintain capital assets). For the most part, the jurisdictions appear to have the capital assets they need to provide community services. They exert some long-term planning efforts, due to the state’s requirement for a six-year capital plan. It appears that no major project management issues have resulted in extensive cost overruns or schedule delays. Levels of unfunded maintenance needs vary across the jurisdictions, but for the most part appear to be manageable. However, none of these seven municipalities has what would be considered a good capital management system. They have four major weaknesses:

Data systems. There are few good, centralized, standardized information systems in place that would allow these municipalities to use data to make rational decisions regarding capital projects and maintenance needs. Condition assessments are not conducted regularly, and inventory systems are maintained strictly for accounting purposes, rather than being useful for capital planning. These governments are not required by state law to meet generally accepted accounting principles. However, the use of these principles is considered important in areas such as bond ratings. If these municipalities attempt to implement the reporting requirements of GASB Statement 34 – which mandates enhanced financial reporting relating to capital assets – they may face difficulties. Capital project prioritization. For the most part in these municipalities, departments and business administrators make capital planning decisions based on their individual judgment and experience. There is little comprehensive evaluation of projects based on prioritization criteria, analysis, and connection to an overall community strategic plan. Citizen input and communication. Citizen input is not included in the planning process in any formalized way, other than through the required public hearings on the capital plans. In addition, plans are not written in a way that encourages public understanding of the capital process and plan details. Centralization. In these seven municipalities, capital planning, project management, and asset maintenance occur at a decentralized level, within individual departments. Effective capital management requires some degree of centralization to ensure compliance with the citywide vision, standardization of information, and oversight. Franklin Township is the exception here, as it has hired a capital improvements manager, created a capital management committee, and is moving towards a more centralized structure. Capital Management 71

Recommendations for New Jersey Municipalities

Based on the weaknesses identified above, the capital management team offers seven recommendations it believes would improve capital management in these communities. These ideas have been used successfully in other jurisdictions and are considered to be “best practices” in this area.

Data Systems 1. Implement a centralized fixed asset inventory system providing a statement of condition and maintenance history. This will provide a context and place in which to keep records on the condition of assets and a basis upon which to define new capital and maintenance needs. 2. Develop a regular program/schedule for condition assessments of buildings, equipment, and infrastructure. Again, fairly current information is required to determine maintenance priorities.

Capital Project Prioritization 3. Develop or update an organization-wide strategic plan and link it to the capital plan. It is difficult to make good long-term capital decisions in a vacuum, without understanding how projects fit into the vision for the community. 4. Develop a comprehensive set of criteria to evaluate the importance and urgency of all capital improvement and maintenance requests.

Citizen Input and Communication 5. Establish a formal mechanism to obtain citizen input on the capital needs of the community in advance of preparing the capital plan. The public participation process could include such strategies as (1) conducting public meetings, (2) distributing a community survey, and/or (3) including citizen representatives on committees to evaluate capital project requests. 6. Modify the capital budget document to provide more useful information about the projects, what they entail, how they will impact the community, and why they are a priority. While the current format meets the state requirement, listing projects by name is not adequate for facilitating community input. This basic plan should be sup- plemented with a more informative, citizen-oriented document that explains the capital planning process, the project evaluation criteria, and summary details for each project, including funding over the six-year period.

Centralization 7. Create a central capital improvement management committee composed of key administrative officials. This committee should develop criteria for project evaluation, implement standards for information systems and formats, prioritize requests based on these criteria, monitor the progress of capital projects, and review summaries of condition assessment reports. 72 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Recommendations for the State of New Jersey

Capital management researchers make the following three recommendations for the state of New Jersey:

1. These municipalities follow state regulations related to capital management. However, they rarely go beyond these requirements, to improve the efficiency and effectiveness of this function. Part of the reluctance to enhance capital management appears to be a strong belief on the part of local administrators that they are highly constrained by the state. For example: • The state licenses local finance and public works managers (among others). A number of the interviewees noted that state officials can take away their license. This fear of losing a license to work in one’s chosen profession may restrict local officials in their efforts to move beyond the minimum state requirements for capital management. This fear is acknowledged by the state and is used to require conformance with procedures that meet the state’s needs. • These municipalities share a common complaint about the rigidity of procurement statutes. The state attempted to address this rigidity by amending the New Jersey State Code to give localities more flexibility. However, local officials continue to view the “low bid” process as the only safe way to procure capital projects, even though the code now provides for alternative methods. • Local officials emphasize their strict application of the state code and statutes. This can impede the ability to use innovative methods that are used successfully in other states, and can lead to inappropriate decisions. For example, the statutory definition of debt seems to guide discussions of capital financing, rather than objective reviews of the best form of financing for the individual situation. Local managers form questions such as, “How can we comply with the State Code if we do this?” rather than “How do we do this and also comply with the State Code?” The response to the first is, “We probably can’t, so we won’t do it.” Conversely, a response to the second question would be, “What additional procedural steps will we need to build into the work program when we do this?”

This perception of the state as a heavy-handed regulator and watchdog that focuses on preventing corruption seems to discourage local officials from improving management practices. We recommend that the state recognize local government as a valid level of governance designed to and capable of acting with considerable degrees of independence and to work more closely with local administrators to understand their concerns and needs. The state could then convert its relationship with local government from one of fear and mistrust to one where the state is seen as providing valuable help and guidance to localities.

2. Despite great differences in localities across the country, there are a number of components that are commonly considered crucial for a good capital management system. These New Jersey municipalities are weak in many of these areas. There are a number of examples of governments that have adopted “best practices” that can serve as models for New Jersey. The state should abandon the perception that local governments in Capital Management 73

New Jersey are somehow unique and that practices considered best practices elsewhere in the country are not appropriate in New Jersey. The state should encourage the municipalities to adopt these practices. For example, the current mandatory format for the capital budget and six-year plan is limited as a public policy or management tool; state acceptance of a more comprehensive document would be useful. In addition, the state should adopt a role of fostering independent growth and development on the part of local government officials instead of dictating procedures. They might, for example, consider providing technical This perception of the and/or financial assistance for the development of strategic state as a heavy-handed plans and data management systems. regulator and watchdog that focuses on prevent- 3. The relatively low assessed values restrict the amount of tax ing corruption seems to revenue available for pay-as-you-go capital funding because discourage local offi- of the very high tax rates required to pay for current operations and debt obligations. The municipalities are uniformly cials from improving unwilling to conduct revaluations. The state would be well management practices. served to enact a “roll back” statute similar to the statutes enacted in some states in the 1980s to offset the impact of inflation. These statutes require the reduction of property tax rates to offset increases in assessments. The state could enforce the uniform assessment by removing responsible local officials who do not comply or by doing the reassessment itself. Other states offer precedent for this improvement, which would ensure more uniform and accurate property assessment.

HUMAN RESOURCES MANAGEMENT

HUMAN RESOURCES MANAGEMENT (HRM) IS AN ESSENTIAL COMPONENT of any management system, as it guides and influences the behaviors of the most important asset of a municipality – its employees (Ingraham, Selden, and Moynihan, 2000; Ulrich, 1997a, 1997b). Human resource management refers to the policies, systems, and practices that influence employees’ behaviors, attitudes, and performance. HRM practices include determining human resource needs (workforce planning), attracting prospective employees (recruiting), choosing employees (selection), teaching employees how to perform in current positions and in future positions (training and development), rewarding employees (recognition and compensation), evaluating their performance (performance management), and creating a positive work environment (employee relations). A growing body of research has focused on assessing the effectiveness of human resource management systems, and this project is founded on a recent and significant study in this area, the Government Performance Project (GPP) (Pfeffer, 1997; Selden, 2001; Yeung, 1997). A broad group of practitioners and scholars considered to be experts in human resource management was convened and asked to identify what they considered to be the most significant elements of HRM, based on the literature of the field, their experience, and their own research. Through an iterative series of meetings and written feedback, the group reached a high degree of consensus about what mattered most to successful management of human resources and converted these findings into evaluation criteria. This set of criteria guides this study of New Jersey municipalities. These criteria are consistent with GAO’s Model for Strategic Human Capital Management (U.S. GAO, 2002) and its human capital checklist (U.S. GAO, 2001).

Human Resources Management Capacity and Systems

This study uses the following GPP criteria to characterize sound human resources management capacity and systems in municipalities: workforce planning; hiring a skilled workforce; retaining a skilled workforce; motivating the workforce through meaningful reward, evaluation structures, and disciplinary procedures; and workforce structure.

Conducting strategic analysis of present and future human resource needs. This criterion hinges on the extent to which a municipality is aware of and addresses its personnel capacity over time, particularly the sophistication with which the government conducts strategic analysis of present and future human resource needs and availability. It includes the extent and nature of planning tools, such as strategic planning, performance measurement, and information technology. 76 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Hiring a skilled workforce. This criterion addresses the extent to which the municipality is able to obtain the employees it needs. To accomplish this, a government must be able to conduct effective recruiting efforts and to hire appropriately skilled and qualified employees in a timely manner. Retaining a skilled workforce. This criterion concerns the municipality’s ability to maintain an appropriately skilled workforce by conducting or providing training to develop and maintain employee skills, by retaining skilled and experienced employees, by disciplining poor performers, and by terminating employees who cannot or will not meet performance standards. Motivating the workforce to perform effectively in support of the municipality’s goals. This criterion focuses on whether a municipality is able to encourage employees to perform effectively in support of the local government’s goals. Effective motivation typically rests on the use of appropriate cash and non-cash rewards and incentives, an effective performance appraisal system, and sound mechanisms that facilitate employee feedback. Structuring the workforce. This criterion captures the degree to which the municipality’s human resources structure supports its ability to achieve its workforce goals. This includes having a coherent and appropriately sized classifications system reinforced by personnel policies that are flexible in terms of promotion and compensation. This includes the relationship between unions and management, and how the human resource processes are structured due to these interactions.

Human Resources Management Environment in New Jersey Municipalities

Four primary forces influence human resource management in New Jersey municipalities: the state, unions, the municipality, and the federal government. The most direct influence the state of New Jersey has over the day-to-day operations of a municipal personnel system occurs when a municipality participates in the state’s civil service or Four primary forces merit system by adopting Title 11A. Municipal positions and job influence human titles included in the state career or classified service subject to the resource management tenure provisions of Title 11A. In 2000, 65,959 municipal employees in New Jersey participated in the state merit system (NJ, DOP 2000, 50). Five of the seven municipalities studied participate in the state merit system (see municipalities: Table 4.1). Our analysis, however, excludes Paterson because the the state, unions, the director of more than 20 years with sole HRM responsibility died municipality, and the during this study. As a result, we did not pursue collecting additional federal government. data in this location. Participating municipalities are governed by Title 4A, which standardizes and grants the state of New Jersey’s Department of Personnel (DOP) the authority to oversee the following municipal human resource management processes and functions:

• Classification and reclassification • Posting competitive positions • Collecting applications • Examination process Human Resources Management 77

• Certifying applicants • Discipline • Appeals • Veterans preference

Table 4.1 CHARACTERISTICS OF PARTICIPATING MUNICIPALITIES Brick Elizabeth Franklin Irvington Old Bridge Trenton

Participates in state civil service Yes Yes No Yes No Yes

Total number of employees* 467 1,510 722 600** 716 1639

Percent of employees unionized 95% 90% 96% 90% 80% 95%

Number of union contracts 5 14 6 6 6 6

* Total employees includes classified (or union), unclassified (nonunion), elected, and temporary/seasonal. ** Estimate provided by local Business Administrator.

In addition to overseeing the aforementioned processes, the DOP assumes two additional roles. First, it functions as the auditor of municipal HRM systems that are part of the state system. For example, it may audit a municipality’s payroll records to ensure that it is in compliance with Title 4A (NJSA 4a: 1-4.1 and 4a: 3-4.1). Second, it collects from the participating municipalities relevant information such as residency requirements and compensation plans for monitoring and reporting purposes. The state also influences human resource arrangements by the laws and regulations it adopts, such as recognizing bargaining units, setting specific benefits levels, and establishing veterans’ preferences. Issues are only negotiable between unions and municipalities to the extent that statute or regulation does not govern them. For example, if a state regulation provides for 15 days of sick leave, it is illegal for a union or municipality participating in the state civil service to negotiate fewer than 15 days of sick leave. Thus, state regulations may provide minimum and maximum points for contract negotiations. In addition, case law based on disputes that have arisen provides a legal basis for interpretation of state and municipal regulations. In 1968, the state adopted the New Jersey Employer-Employee Relations Act, which allows a majority of employees, including municipal employees, in a negotiating unit to select an association to be its exclusive representative in collective negotiations (Mastriani, 1998). Negotiation is required only for conditions of employment that do not significantly interfere with the exercise of inherent management prerogatives pertaining to the determina- tion of government policy (78 NJ 54 1978, 67). Labor laws establish categories of items that are subject to bargaining, classifying them as mandatory, permissible, or illegal bargaining topics. Mandatory bargaining items are required under law (Carrell and Heavrin, 2001), and they include the following (Carrell and Heavrin, 2001):

• Rates of pay • Pensions • Wages • Insurance benefits 78 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

• Overtime pay • Meals and discounts • Shift pay differentials • Employee security • Severance pay • Job performance • Hours of employment • Union security • Holidays • Management-union relationship • Vacations • Drug testing

The conditions most often negotiated between municipalities in this study and unions include wages, hours, overtime, benefits, and grievance and disciplinary procedures. What is negotiated may change over time. The New Jersey Public Employee Relations Commission (PERC) has a scope of negotiation procedures that must be followed in order to determine additional subjects unions or municipalities will negotiate. Sick leave, vacation, and holiday leaves differed between contracts in many of the municipalities. In Old Bridge and Elizabeth, however, once a municipality settles with one union, that settlement becomes the standard utilized for other unions. As shown in Table 4.2, Elizabeth has the most complex labor environment because it must negotiate with 14 unions.

NUMBER OF EMPLOYEES COVERED BY EACH UNION CONTRACT Municipality Union Name No. of Employees

Brick Crossing Guards 18 Policemen’s Benevolent Association (PBA) 86 Police Superior Officers Association (Police SOA) 25 Teamsters Local 469 28 Transport Workers Union of America AFL-CIO 223

Elizabeth City Hall Maintenance Association 16 City Hall Supervisors Association 60 City Yard Supervisors 13 City Yard Workers 107 Emergency Medical Benevolent Association (EMBA) 25 Fire Superior Officers Association (Fire SOA) 52 Firemen’s Mutual Benevolent Association (FMBA) 208 New Jersey Civil Service Association/City Hall Employees 232 Police Mechanics and Electricians Association 25 Police SOA 69 PBA 279 Public Health Nurses Association 12 Recreation Department Supervisors Association 6 Recreation Maintenance Workers Association 22

table continued on next page Human Resources Management 79

NUMBER OF EMPLOYEES COVERED BY EACH UNION CONTRACT (CONT.) Municipality Union Name No. of Employees

Franklin AFSCME Blue Collar Supervisors 11 American Federation of State, County, and Municipal Employees (AFSCME) 27 Franklin Township Supervisory Officers Association 22 International Union of Production, Clerical, and Public Employees 45 International Union of Production, Clerical, and Public Employees (2nd) 63 PBA 75

Irvington Fire SOA No data available FMBA No data available International Brotherhood of Electrical Workers (IBEW) No data available International Union of Service Employees Local 617–Crossing guards 44 PBA 129 Police SOA 47

Old Bridge Crossing Guard’s Association 35 Dispatcher’s Union 14 Municipal Employees Supervisors Association 5 PBA 74 Police SOA 28 Public Works & Sanitation Union: United Service Workers of America 25 Teamsters Local No. 469 Non-professionals 65 Teamsters Local No. 469 Professionals 25

Trenton American Federation of State, County, and Municipal Employees 789 FMBA 200 PBA 292 Supervisory Employees, AFL-CIO 80 Trenton Fire Officers Association 72 Trenton Supervisor Officers’ Association 78

Municipal governments also influence how their systems operate by developing and passing their own laws, rules, and regulations, such as residency requirements. There is great variation in legal provisions depending upon the particular local context and whether the municipality participates in the state merit system. For example, one municipality has a local personnel system that covers all non-union employees. Its policies cover classification, compensation, recruitment, selection, appointment, benefits, and training. All human resource management policies and practices must conform to existing federal laws, regulations, and legal precedents. Laws such as Title VII of the Civil Rights Act, the Occupational Safety and Health Act, the Age Discrimination Act of 1967, the Americans with Disabilities Act of 1990, and the Civil Rights Act of 1991 govern many HRM activities. Regulatory agencies, such as the Equal Employment Opportunity Commission, also impact personnel practices in municipalities through their authority to issue guidelines, investigate complaints, and broker resolutions. 80 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Criteria for Assessing Human Resources Management

Human resources management capacity in each municipality was evaluated against five criteria, which were adapted from the Government Performance Project methodology to fit the municipal context. Table 4.3 summarizes these five criteria of HRM and lists the specific sub- criteria used under each.

Table 4.3

HUMAN RESOURCES MANAGEMENT CRITERIA 1 Municipality conducts strategic analysis of present and future human resource needs. • Municipality has sufficient data about its workforce to support analysis. • Municipality plans ahead to meet its future workforce needs.

2 Municipality is able to obtain the employees it needs. • Municipality hires employees in a timely manner. • Municipality managers have appropriate discretion in the hiring process. • Municipality conducts effective recruiting efforts. • Municipality hires appropriately skilled and qualified employees.

3 Municipality is able to maintain an appropriately skilled workforce. • Municipality conducts appropriate training to develop and maintain employee skills. • Municipality is able to retain skilled and experienced employees. • Municipality is able to discipline employees. • Municipality is able to terminate employees.

4 Municipality is able to motivate employees to perform effectively in support of the municipality’s goals. • Municipality is able to reward superior performance through pay and other cash and non-cash incentives. • Municipality is able to evaluate the performance of its employees effectively. • Sufficient opportunity for employee feedback exists.

5 Municipality has a human resource management structure that supports its ability to achieve its workforce goals. • Municipality’s classifications system is coherent and of the appropriate size. • Municipality personnel policies permit appropriate flexibility in the civil service and pay structures. • Municipality’s human resources goals and policies are communicated to employees. • Municipality is able to maintain productive labor-management relations.

Methodology and Data Collection

This study used a structured, comparative case study design and multiple data collection methods. The data collection strategy was five-fold. First, in June 2001, each municipality completed a 69-question survey. Second, in July 2001, researchers conducted in-depth, semi- structured interviews with the person or persons responsible for human resource management in each municipality. Third, the following documentation was collected and analyzed: Human Resources Management 81

• Human resource management regulation, policies, procedures, and laws • HRM strategic and workforce plans • Training catalogue • Compensation schedules • Organization chart • Annual reports

Fourth, researchers conducted follow-up phone interviews with the same officials in January and February 2002 to clarify any questions in the initial analysis of the interview, survey, and documents. Fifth, each municipality’s web page was reviewed. Initial interviews were conducted with all seven participating municipalities. Surveys and documents were collected and web analyses and follow-up interviews were conducted with six of the seven municipalities.

Results: Human Resources Management in New Jersey Municipalities

This section is divided into two components. The first discusses the role and structure of the human resource management offices, and the second identifies key findings with respect to the five HRM criteria.

Structure and Role of the Human Resources Management Office

The role of the HRM office has been changing in the field from a preoccupation with policing the merit system and municipal rules to a broader human resources focus that emphasizes collaboration and partnership in helping leaders and managers achieve governmental and agency goals (Selden, Ingraham, Jacobson, ...these New Jersey 2001; U.S. GAO, 2002). In shedding this image, however, HR depart- municipalities ments still need to ensure that required routine work, such as main- continue to adhere taining records, is done well. While HRM has been largely an adminis- to a more traditional trative function in public organizations, its role has changed to incor- model of personnel porate many other facets, including strategic planning, conflict resolution, and change management (Mello, 2000). management. This study suggests that these New Jersey municipalities continue to adhere to a more traditional model of personnel management (see Table 4.4). In most of the municipalities, human resource management is considered a support function that is separate and subordinate to the municipality’s planning activities. In these municipalities, the personnel office is largely process- and compliance-oriented. Many of its responsibilities involve administration of employee benefits, processing forms with the state Department of Personnel, and working with union representatives. Payroll tends to be handled separately by a different division. 82 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 4.4 ROLE AND STRUCTURE OF PARTICIPATING MUNICIPALITIES Municipality No. of Role of HRM Division Structure of HRM Function HR Staff

Brick 4 Emerging, because division Division within the was just established Department of Administration, Finance, and Public Affairs

Elizabeth 4 Functions in custodial role Division within Administration because most HRM responsibilities Department are delegated to the departments

Franklin 2 Provides quality human resource Personnel Department, headed service to all employees in by the assistant township manager support of the municipality

Irvington 3 Currently under reform Responsibility of Office of Business Administration

Old Bridge 2 Provides appropriate training Division within Department and development for all employees of Administration, but called the to enhance skills and abilities Human Resource Management Department

Trenton 7 Works as consultant to each Division within Department department with ultimate of Administration responsibility for many of the HR functions

In two of the offices examined, the role of the HRM division has expanded in an attempt to move from “rules to tools” (U.S. GAO, 2002, 6). The HR offices in these two municipalities, Trenton and Elizabeth, have adopted a formal mission statement for HRM, redefined their relationships with departments, and are seeking to help the municipalities and their employees reach their goals. Since 2000, Franklin has been working to transform employees’ perceptions about human resource management so they see it as a resource. Its approach is simple: communication. The HRM department has opened up processes by explaining to both departments and individual employees the rationale underlying its decisions. For example, the department sends out letters of acknowledgement stating any actions that were taken. As shown in Table 4.4, Trenton has redefined its role to that of an HRM consultant to departments. Because police and paid fire are often the largest departments in a municipality, most have staff with designated personnel responsibilities (see Table 4.5). Typically, these staff members are responsible for coordinating and overseeing hiring decisions, training, and discipline. Recruitment responsibilities belong to the central HRM department and the DOP. Human Resources Management 83

Table 4.5

PERSONNEL RESPONSIBILITIES IN FIRE AND POLICE DEPARTMENTS Municipality Personnel-Related Function Performed in Police and Fire Departments

Brick • The police internal affairs division conducts all background screenings, interviews, tests, etc. of potential hires. The department makes hiring decisions, and the town personnel division follows its recommendations. The department provides the personnel division with background information and documentation for position removals and disciplinary actions. • The fire department is voluntary.

Elizabeth • Because of the department’s, police, fire, and public works have their own personnel administrators who maintain their own records and manage non-civil service HRM-related processes. The police captain is referred to as the personnel officer, and the fire department has an administrative officer. The personnel and administrator officers interact with the personnel division regularly.

Franklin • The police department maintains its own records, oversees it disciplinary and termination processes, coordinates most of its training, interviews job applicants, and makes hiring decisions. The department is not involved in active recruiting. • The fire department is voluntary.

Irvington • The only task the police and fire departments handle is the new-hire form. All other responsibilities rest with the Office of Business Administration.

Old Bridge • The police department oversees its testing, training, and disciplinary processes. • The fire department is voluntary.

Trenton • The police department has three deputy police chiefs, each with personnel responsibilities for one of the following groups: civilians, uniformed officers, and detectives. • The fire department has a deputy chief who is responsible for personnel. The personnel responsibilities include disciplinary issues, personal and sick, training, scheduling, and review of payroll. Hiring is a collaborative effort between the fire department, the HRM division, and the DOP.

None of the municipalities studied conducts formal, strategic planning within the HRM function. A few municipalities, such as Franklin, have done some planning at the municipal level. Based on a popular typology, the integration between HRM and the strategic planning process is classified as administrative in all the municipalities, because HRM divisions engage in administrative work that is not explicitly linked to a municipality’s strategic goals (Bennett, Ketchen, and Schultz, 1998; Golden and Ramanujam, 1985). 84 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

HRM Criteria

Criterion 1: Conducting strategic analysis of present and future human resource needs Workforce planning is “a strategy and set of procedures by which the state’s future personnel needs are assessed, enabling agencies to ascertain their need for and availability of human resources to meet their objectives” (Selden, 2001). Workforce planning gives the HRM division and managers a strategic basis for making human resource decisions and allows them to predict and prepare for change, while providing strategies addressing current and future workforce issues. Valid, up-to-date data are critical to assessing a municipality’s workforce requirements and heightening a municipality’s ability to address human resource issues before they become problems. Finding 1a: Municipalities focus little systemic, centralized effort on planning for future workforce needs and labor availability. As shown in Table 4.6, none of the municipalities conduct centralized, formalized workforce planning. Three municipalities engage in informal workforce planning, two require departments to develop their own workforce plans, and one does not currently conduct workforce planning. For example, in one setting, workforce planning is conducted by the business administrator, who knows all the employees and anticipates retirements. Based on this knowledge, he develops an informal plan. In another municipality, the responsibility of workforce planning is pushed to the department directors, who have manpower coordinators to oversee this process and who serve as contacts to the central personnel office. One municipality recognized its limits of using informal planning and plans to hire a consultant to address succession planning when resources become available. Table 4.6

NATURE OF WORKFORCE PLANNING Brick Informal municipal-wide workforce plan

Elizabeth Departments required to develop their own

Franklin Informal municipal-wide workforce plan

Irvington Departments required to develop their own

Old Bridge Does not conduct workforce plan

Trenton Informal municipal-wide workforce plan

Finding 1b: The availability of data and an infrastructure to support data access and analysis are severely limited in the municipalities. A few municipalities are in the process of updating their HRM information technology systems. Trenton’s new system, for example, will be able to generate data that can be used for workforce planning. Most municipalities separate the functions of personnel and payroll and developed technologies to support each of these functions independently. In most instances, the information technology systems do not interface. Franklin recently addressed part of this problem by moving its payroll system to Automatic Data Processing Inc. (ADP). Although this system is operated and maintained by Human Resources Management 85

the finance department, the HRM department is able to access and utilize payroll data. Currently, many of Franklin’s other HRM records are retained in a separate system. In one municipality, the personnel records are maintained in hard copy; that is, they are not automated. In addition, the web is underutilized as a communications tool by municipalities to disseminate HRM-related information to existing or prospective employees. Three municipalities have no HRM information posted on their web page. Of the three remaining municipalities, one provides the name of the key personnel officer, but does not list an e-mail address. Another lists the job descriptions of open positions, provides and accepts job applications online, and provides HRM contact information. The final municipality, Trenton, provides a thorough and comprehensive description of the division’s role and responsibilities, as well as providing downloadable employment and internship applications.

Criterion 2: Hiring a skilled workforce The recruiting function represents one of the important elements of hiring a skilled workforce. Effective recruiting practices can have a significant, positive impact on a department’s ability to achieve its goals, whereas poorly designed and executed recruiting strategies will have both short-term and long-term negative effects (Ulrich, 1997a). Recruiting involves all of the various activities aimed at attracting candidates to work in the municipality, such as recruitment planning, internal and external recruiting efforts, and special programs, such as internships. The selection process typically involves processing applicants until selection decisions are made and the municipality employs the individuals. While an effective recruiting process will bring an adequate supply of qualified candidates, an effective selection process will identify the best candidates from a pool of applicants. Selection involves screen- ing methods, tests, interviews, decision-making, and employment processing. Finding 2a: Clear distinctions in the selection processes emerged between civil service and noncivil service municipalities: civil service municipalities appoint employees provisionally and utilize more testing. For municipalities participating in civil service, the state is granted primary responsibility for the function of recruiting and for much of the selection process. The state posts job announcements, administers exams when needed, and generates certified lists from which municipalities select their candidates. This process can be completed quickly if an existing and current certified list exists, or it could take considerable time if a test has to be called. In these instances, municipalities may elect to advertise the position locally and hire someone provisionally for up to one year, while they wait for the DOP to test and certify applicants. Individuals hired provisionally can then compete for the permanent position advertised by the DOP. According to the municipalities, the goal is that provisional employees will become permanent. However, provisional employees can be eliminated from the competition if they do not have an examination score ranked in the top three. All municipalities participating in the civil service hire provisional employees for at least some positions (see Table 4.7). 86 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 4.7 TESTING AND USE OF PROVISIONAL AND TEMPORARY EMPLOYEES CIVIL SERVICE NONCIVIL SERVICE

Brick Elizabeth Irvington Trenton Franklin Old Bridge

Percent of jobs that require testing 90% 50% 90% 95% 40% 23%*

Require certified list for jobs with tests Yes Yes Yes Yes No No

Testing delays hiring Rarely Sometimes Often Always Sometimes Rarely

Percentage of employees who are provisional 8.60% No data 5.80% 5.20% 0.00% 0.00% available

Percentage of employees who are temporary 1.35% 18.74% No data 0.00% 51.39% 35.06% or seasonal available

*Old Bridge only tests police and clerical workers. This percentage was estimated by dividing the number of police and clerical positions by the total number of employees.

In three of the municipalities participating in civil service, at least 90 percent of positions require testing (see Table 4.7). The percentage of jobs that require testing is significantly higher across the civil service municipalities than in the noncivil service settings. Franklin, for example, requires testing for only 40 percent of its positions. The testing and certification process in the noncivil service municipalities is considerably less bureaucratic than in the civil service municipalities. However, considering the perception of whether testing delays hiring, no clear difference is evident between civil service and noncivil service municipalities. The data vary; several municipalities believe testing delays hiring, and others perceive that it does not (see Table 4.7). This finding may be related to the methods municipalities have adopted to get around the state hiring system. One municipality circumvents the state hiring system by bringing in new hires as “clerk,” “clerk typist,” or “laborer” because these positions do not require competitive testing. The local government pays these new hires on the upper end of the scale to make the position more attractive and indicates to new hires that their “titles will catch up with their pay.” After 90 days, individuals holding these positions gain permanent status, and they can move up through the promotional system to acquire appropriate titles. Municipalities participating in the civil service are significantly less likely to utilize temporary workers than the two non-participating municipalities. Finding 2b: Most selection processes are centralized, with responsibility being granted to the state, municipal administration, or central HR staff. The recruiting and selection processes of municipalities participating in the state civil service are centralized under the auspices of the DOP. However, the process of hiring provisional employees or positions that do not require competitive testing may be either centralized or decentralized within the municipal government. In Irvington, the responsibility for hiring rests with the central administration; in Brick, it falls to the central HR staff; and in Trenton and Elizabeth, it is shared between the Human Resources Management 87

central HR staff and departments. In the two noncivil service municipalities, the approach differs. Old Bridge centralizes its hiring process, with central administration and the central HR staff sharing authority. Franklin, on the other hand, operates a decentralized system with responsibilities beyond application processing and recruiting being given to the departments. Several municipalities noted that the DOP’s rules and regulations constrain their ability to place employees they deem qualified into the most appropriate job title and pay category. One government noted that the testing requirement discourages many private-sector individuals from applying for a municipal position, and this is compounded by the lack of competitive salaries. Another constraint several municipalities mentioned was the additional points that accrue to applicants because of veterans’ preferences. For municipalities operating under the state civil service system, it is difficult to innovate in the selection process because it is controlled by the state. Finding 2c: Residency requirements constrain the selection process. Residency requirements are established primarily at the local level. Civil service residency requirements for police and fire are the exception. The state requires that applicants for the police and fire departments maintain residency in the municipality from the point of application to appointment. According to one municipality, this process often takes between 18 and 24 months. Several municipalities require employees to be residents during their appointment or risk losing their job (see Table 4.8). Trenton requires that employees live in the city 15 years. In an effort to meet residency requirements and to fill positions with quality candidates, Trenton has adopted an internship program. College students who are permanent residents of Trenton are competi- tively selected to participate in a 10-week Leadership Intern Program. The objective is that interns will join the Trenton workforce when they graduate from college.

Table 4.8

RESIDENCY REQUIREMENTS Municipality Municipal Employees Police Fire

Brick Must be bona fide residents of Brick Must be residents of Brick from N/A at the time of appointment. If a the announced closing date of qualified applicant is not found, a the DOP exam up to the date nonresident may be hired, but he/she of appointment. must establish residence within one calendar year.

Elizabeth Must be a resident from time Must be residents and maintain residency of appointment throughout from announced closing date of the DOP employment, regardless of tenure exam up to the date of appointment. or civil service status. Exceptions: the head of any department may permit any officer or employee to maintain employment if he/she must move for reasons of: health, if nature of employment requires residence outside the municipality, or if specialized talents are required, such as professionals (engineers, attorneys, etc.)

table continued on next page 88 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

RESIDENCY REQUIREMENTS (CONT.)

Municipality Municipal Employees Police Fire Franklin Employees must establish residency within one year from date of N/A appointment. Exceptions: lack of adequate facilities or housing; lack of affordable housing; undue financial, transportation, or health hardship. For these exceptions to apply, the employee must live within a 20-minute drive or 5 air miles from main municipal office, and the employee must be married and the head of a family, the unmarried head of a household, or contributing 20 percent or more to the family income. The township manager must approve each exception.

Irvington All applicants, employees, and officers The director of the fire department must be bona fide residents of the and/or the director of the police township. They must maintain department classifies qualified applicants residency, or be subject to removal in four groups: residents of the or discharge.If qualified residents are municipality, other residents of not available,the township may hire the county in which the municipality applicants with preferences as follows: is situated, other residents of the state, other residents in the county in which and all other qualified applicants. the municipality is situated, other Hiring preference is given in this order. residents of counties contiguous to It applies to initial appointments, the county in which the municipality but not to promotional appointments. is situated, other residentsof the state, Special police officers must be residents and all other applicants. These of the municipality, provided that the residency and preference requirements residency requirement may be waived do not apply to special talent where the applicant for renewal of positions. Residency preferences also appointment had been a special police apply in promotional decisions. officer and resident for at least 10 years.

Old Bridge No residency requirement Residency preferences are N/A applied during hiring, but there is no requirement after the appointment. The mayor must first appoint qualified residents of Old Bridge, then Middlesex County, and then New Jersey before hiring non-residents. To obtain residency status, the applicant must have lived in Old Bridge for two years at time of appointment.

Trenton Applicants do not have to be Fire and police are not covered by residents of Trenton to apply for a the municipality’s ordinance. job, although the municipality The state’s requirements supercede prefers to hire its residents. When the ordinance. Applicants must be offered a position, nonresidents must residents and maintain residency sign an affidavit that they will move from announced closing date of to Trenton within 90 days. Employees the DOP exam to the date must maintain 15 years of residency of appointment. there, and then they can move outside the municipality. Human Resources Management 89

Finding 2d: Recruiting efforts and innovations are limited. As shown in Table 4.9, the municipalities use various techniques to recruit talent at the local level. Brick, for example, indicated that it does not conduct much formalized recruiting, because it receives hundreds of applications each year. Of the 27 recruiting techniques researchers asked about, the range of techniques employed by the municipalities varied from three to 10, with an average across the sample of 5.5. As Table 4.9 shows, all municipalities advertise in the local newspaper, and all but one indicated in their survey responses that they post job openings online. However, as discussed earlier, an analysis of the web pages suggests that only three municipalities post job openings online. Some use trade publications and professional associations to disseminate information about job opportunities. Trenton is the most active recruiter in the sample; it accesses candidates in different ways, such as external job fairs, college site visits, and through recruitment firms. Table 4.9 RECRUITING TECHNIQUES Recruiting Techniques Brick Elizabeth Franklin Irvington Old Bridge Trenton External job fairs No No No No No Yes Internal job fairs Yes No No No No No Virtual job fairs No No No No No No Local newspapers Yes Yes Yes Yes Yes Yes National job fairs No No No No No No Online job posting No Yes Yes Yes Yes Yes Job bulletin No Yes No Yes No No Trade publications No No Yes No Yes Yes Professional associations No No Yes Yes Yes Yes Paying travel for interviews No No No No No Yes Satellite offices No No No No No No Professional recruitment firms No No No No No Yes Full-time recruiters No No No No No No Online resume banks No No No No No No Commercial Internet sites No No No No No No 24-hour telephone job line No No No No No No Open houses No No No No No No College site visits No No No No No Yes On-site interviews Yes No No Yes No No Letter campaigns No No No No No No Direct hires No Yes No No No No Walk-in job counseling No No No No No No Radio advertisements No No No No No No Postings in community centers No No No No No Yes Television advertising No Yes No Yes Yes No Relocation expenses No No No No No No 90 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Finding 2e: Perceptions of the quality of hires do not vary between civil service and noncivil service municipalities. Although the recruiting and selection processes differ between civil service and noncivil service municipalities, the perceptions of the quality of hires in FY 2000 do not. As shown in Table 4.10, across the sample, municipalities assessed the quality of their hires in FY 2000 as either a 7 or 8 on a 1 (terrible) to 10 (outstanding) scale. Table 4.10 POSITION OPENINGS, APPLICATIONS, AND QUALITY OF HIRES CIVIL SERVICE NONCIVIL SERVICE

Brick Elizabeth Irvington Trenton Franklin Old Bridge

Position openings, FY 2000 18 117 30 130 29 20

Job applications, FY 2000 200 800 60 750 400 No data available

Ratio of applications/positions 11.11 6.83 2.00 5.77 13.79 —-

Quality of hires Scale: 1 (poor) – 10 (excellent) 87 8 778

Criterion 3: Retaining and training a skilled workforce Training and development are important HR functions that contribute to a municipality’s ability to meet citizens’ needs and to help achieve a local government’s goals. Moreover, they demonstrate the municipality’s level of commitment to HRM by investing in programs that can assist individuals and departments in meeting performance needs. The scope of training programs may vary and include technical, legal, procedural, supervisory, and managerial dimensions. Training staff is often involved in program design, development, delivery, and evaluation. Development programs are more oriented toward the employees’ career development, as well as developing employees to help the municipality meet its future needs. Several suggested payoffs of training and development are increased employee Training and develop- satisfaction, less turnover, and developing needed employee skills ment are important (Ulrich, 1997b). HR functions that One of the challenges of examining training and development in this set of municipalities is that programs are delivered at the three contribute to a levels of state, central HR office, and department. Another impedi- municipality’s ability ment is that expenditures are not necessarily tracked and coordinated to meet citizens’ at all levels. needs and to help Finding 3a: Employees’ career opportunities are typically limited to their current department. Based upon the interviews, it appeared extremely achieve a local difficult for employees in most municipalities to move from one government’s goals. department to another. The reasons several municipalities cited were career ladders and salary structure. An individual may perceive a new position as a promotion and therefore expect a pay raise, but in reality the salary range associated with the new position may be below the rate he or she is currently paid. This creates a barrier to movement. Human Resources Management 91

Finding 3b: Training efforts are limited beyond those required for state certification. Training efforts are limited beyond those required for state certification. In all but two municipalities, the HR staff identified training as a weakness. One municipality noted that it provides almost no training beyond that absolutely required for state certifications, because it does not appropriate adequate funding for training. There is no uniformity of training across departments. If an employee wants training, he or she must seek permission from the department director. In another municipality, employees can view the state’s training catalogue and request at the department level to attend one of the state-sponsored sessions. The department then has the discretion to determine whether it can fund the request from its budget. Expenditures in the area of training are difficult to capture for the sample and were not retrievable in one municipality. In three municipalities, data were not available from the central human resource office initially, because each department requests and allocates its own training dollars. In Elizabeth, the data were not available because the information originates and remains in the departments; there is no central training in the municipality. Departments in Elizabeth are responsible for setting aside money for training. Because the size of the municipality heavily influences training expenditures, it is better to examine expenditures per manager and per employee to compare training across municipalities. As shown in Table 4.11, Brick spends the most on training per manager. Old Bridge spends the most on training per employee. The latter finding is not surprising, because the central mission of Old Bridge’s HRM division is to provide for adequate training and development for all employees (see Table 4.4). Irvington, which spends the least on training per employee, noted that the state requires special certifications for some positions, such as for purchasing agents, and employees pay for the training they need for certification from their own personal resources. Elizabeth, on the other hand, pays for this type of training for its employees. Table 4.11 TRAINING EXPENDITURES, FISCAL YEAR 2000 Recruiting Techniques Brick Elizabeth Franklin Irvington Old Bridge Trenton

Total training $79,760 Data not $85,614 $15,000 $83,071 $115,000 expenditures available

Training expenditures $177 Data not $228* $25* $300 $100 per employee available

Training expenditures $1,100 Data not Data not Data not Data not $300 per manager available available available available

*Estimated by dividing total training expenditures by total number of employees.

Two municipalities, Trenton and Franklin, have increased their commitment to training. Both municipalities have brought in consultants and invested more resources in staff development. Both have focused on supervisor training. One offers monthly seminars for managers on important and pressing topics, such as diversity. The other noted that because the government has been restructuring, it wants its less experienced managers to be well trained. Both utilize courses offered by different entities at the state level, such as the DOP and Department of Labor. Finding 3c: State government most often provides supervisory and management training, and the central HRM division most often provides computer training and orientation. As shown in Tables 92 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

4.12, 4.13, and 4.14, the types of training courses provided by different entities – central HRM, departments, and the state – varies. In Elizabeth and Franklin, the central HR office provides training in only four areas, whereas in Trenton, it provides courses in 15 areas. According to the surveys, no departmental training is provided in Elizabeth, Irvington, and Old Bridge. Brick utilizes the state to provide a diverse array of training in 17 areas; the two noncivil service municipalities utilize the state least often. As Table 4.12 illustrates, the central HR division most frequently provides training for computers; new employees; sexual harassment; and discipline, grievance, and termination procedures. As shown in Table 4.13, the most prevalent offering at the department level is diversity training. Table 4.14 highlights that municipalities utilize the state most frequently for training managers and supervisors. Many of the civil service municipalities access training courses offered by the DOP, and others, such as Franklin, send employees to training courses administered by the Department of Labor. Table 4.12 TRAINING PROVIDED BY CENTRAL HUMAN RESOURCES UNIT Training Provided Centrally Brick Elizabeth Franklin Irvington Old Bridge Trenton Performance management No No No No No Yes Tuition assistance No Yes No Yes No Yes Certified public manager Yes No No No No No program Computer training Yes Yes Yes Yes Yes Yes Management training Yes No No No No Yes Supervisory training Yes No Yes No No Yes Diversity/EEO training No No No No No Yes Sexual harassment Yes Yes Yes No Yes Yes Communication No No No No No Yes Conflict resolution No No No No No Yes Teamwork No No No No No No Total Quality Management No No No No No No (TQM) Leadership No No No No No No New employee orientation Yes Yes Yes No Yes Yes Technical (including No No No No No No apprenticeships) Customer service No No No Yes No Yes Basic skills: language, math, No No No No No No literacy, etc. First aid and CPR No No No No No No

table continued on next page Human Resources Management 93

TRAINING PROVIDED BY CENTRAL HUMAN RESOURCES UNIT (CONT.) Training Provided Centrally Brick Elizabeth Franklin Irvington Old Bridge Trenton Recruiting process No No No Yes No Yes Testing process No No No No No No Compensation administration No No No Yes Yes No Performance appraisals No No No No Yes Yes process Discipline process No No No Yes Yes Yes Grievance process No No No Yes Yes Yes

Termination process No No No Yes Yes Yes Reward policies and procedures No No No No No Yes General personnel policies No No No No Yes Yes Labor relations No No No No Yes Yes Employee benefits Yes No No Yes Yes Yes Other No No No No No No

Table 4.13 TRAINING PROVIDED BY DEPARTMENTS Training Provided by Departments Brick Elizabeth Franklin Irvington Old Bridge Trenton

Performance management Yes No No No No No Tuition assistance No No No No No No Certified public manager program No No No No No No Computer training Yes No Yes No No No Management training No No No No No No Supervisory training No No No No No Yes Diversity/EEO training Yes No Yes No No Yes Sexual harassment No No No No No Yes Communication No No No No No No Conflict resolution No No No No No Yes Teamwork No No No No No No Total Quality Management No No No No No No (TQM)

table continued on next page 94 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

TRAINING PROVIDED BY DEPARTMENTS (CONT.) Training Provided by Departments Brick Elizabeth Franklin Irvington Old Bridge Trenton

Leadership No No No No No Yes New employee orientation Yes No No No No No Technical (including No No No No No No apprenticeships) Customer service No No No No No Yes Basic skills: language, math, No No No No No No literacy, etc. First aid and CPR Yes No No No No Yes Recruiting process No No No No No No Testing process No No No No No No Compensation administration No No No No No No Performance appraisals No No No No No No process Discipline process No No No No No No Grievance process No No No No No No Termination process No No No No No No Reward policies and No No No No No No procedures General personnel policies No No No No No No Labor relations Yes No No No No No Employee benefits No No No No No No Other No No No No No No

Table 4.14 TRAINING PROVIDED BY STATE GOVERNMENT Training Provided by State Government Brick Elizabeth Franklin Irvington Old Bridge Trenton

Performance management Yes No No No No No Tuition assistance No No No No No No Certified public manager Yes Yes No No Yes Yes program Computer training No Yes No No No Yes Management training Yes Yes No Yes No Yes

table continued on next page Human Resources Management 95

TRAINING PROVIDED BY STATE GOVERNMENT (CONT.) Training Provided by State Government Brick Elizabeth Franklin Irvington Old Bridge Trenton

Supervisory training Yes Yes Yes No No Yes Diversity/EEO training Yes No Yes No Yes No Sexual harassment Yes Yes Yes Yes No No Communication Yes Yes No No No Yes Conflict resolution Yes Yes No No No No Teamwork Yes No No No No Yes Total Quality Management No No No No No No (TQM) Leadership Yes No No No No Yes New employee orientation No No No No No No Technical (including No No No No No No apprenticeships) Customer service No No Yes No No No Basic skills: language, math, No No No No No No literacy, etc. First aid and CPR No No No No No No Recruiting process Yes No No No No No Testing process Yes Yes No Yes No Yes Compensation administration Yes Yes No No No Yes Performance appraisals No No No No No No process Discipline process Yes Yes No No No Yes Grievance process Yes Yes No No No Yes Termination process Yes Yes No No No Yes Reward policies and No No No No No No procedures General personnel policies Yes Yes No Yes No No Labor relations No No No Yes No Yes Employee benefits No Yes No No No Yes Other No No No No No No 96 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Finding 3e: Education incentives are provided to employees; tuition reimbursements and increased pay offered by many municipalities. All but one municipality provides tuition reimbursement to at least some of its employees. Table 4.15 presents the tuition reimbursement policies contained in the union contracts. In Brick, tuition reimbursement is provided to all union employees, but the parameters of the policies differ by contract. In Brick, Franklin, Old Bridge, and Trenton, some labor contracts provide for increased pay when an employee receives a particular degree. This is most often included in the PBA and Police SOA contracts. For example, in Old Bridge, employees are paid $600 per year upon completion of an associate’s degree, $600 for a bachelor’s degree, and $1,200 for a master’s degree. Table 4.15

TUITION REIMBURSEMENT BASED ON CONTRACTS AND EDUCATIONAL INCENTIVES Municipality Provisions within Contracts

Brick • PBA Local and Police SOA – pays 60 percent for courses when an A or B is earned and 40 percent when a C is earned. The per-semester maximum is $500 for undergraduate and $650 for graduate-level coursework in fields relating to law enforcement or public administration. Employees are paid $400 per year for an associate’s degree, $600 for a bachelor’s degree, and $1,200 for a master’s degree. • Teamsters Local 469 – reimburses employees enrolled in job-related courses for the cost of tuition, not to exceed $30 per hour (subject to the approval of the township administrator). The union also reimburses for job-related licenses, such as a CDL. • Transport Workers Union of American AFL-CIO – pays for job-related courses, not to exceed $50 per credit hour, and also pays for all licenses and job-related certificates.

Elizabeth • Tuition reimbursement is not mentioned in nine contracts. • Police SOA – provides reimbursement for job-related courses. • New Jersey Civil Service Association – employees enrolled in an associate’s or a bachelor’s degree program as a matriculated student in a government/employment-related discipline shall be reimbursed as follows: grade of B or better – 100 percent, grade of C – 75 percent, grades lower than a C – no reimbursement. • Fire SOA and FMBA – employees taking fire science courses shall be reimbursed for the cost of tuition for grades of C or better. Every effort will be made to adjust employees’ schedules in order for them to take advantage of available courses.

table continued on next page Human Resources Management 97

TUITION REIMBURSEMENT BASED ON CONTRACTS AND EDUCATIONAL INCENTIVES (CONT.) Municipality Provisions within Contracts

Franklin • Tuition reimbursement is not mentioned in one contract. • Franklin Township Supervisory Officers Association – reimburses for degrees in a related field when a grade of C or higher is achieved (paid at in-state tuition rate). Allocates $30 for books. • American Federation of State, County, and Municipal Employees (AFSCME) – employees shall be reimbursed for all professional-related licenses and professional organization memberships. • AFSCME Blue Collar Supervisors – reimbursement provided for all professional job-related licenses and professional organization memberships with the approval of the township manager shall not be unreasonably denied. An annual stipend of $1,500 is paid to members who have obtained a bachelor’s or an associate’s degree from an accredited college or university, and/or to those who have obtained certification as a public works manager. • PBA of Franklin Township – pays reimbursements for degrees in a related field when a grade of C or higher is achieved (paid at in-state tuition rate).

Irvington • There are no tuition reimbursement provisions in any of the contracts.

Old Bridge • Tuition reimbursement is not mentioned in four contracts. • Teamsters Local No. 469 – reimbursements are paid with prior written approval from the township administrator. • PBA – after successful completion of a probationary period, each police officer shall receive $10 annually per semester credit accrued toward an associate’s or bachelor’s degree. Employees are paid $600 per year upon completion of an associate’s degree, $600 for a bachelor’s degree, and $1,200 for a master’s degree.

Trenton • Tuition reimbursement is not mentioned in four contracts. • American Federation of State, County, and Municipal Employees (AFL-CIO) and Supervisory Employees, AFL-CIO – reimburse for approved courses with a grade of C or better. • PBA, SOA, FMBA, and Trenton FOA – provide biweekly payment for advanced education: $200 for an associate’s degree or 64 credits toward a bachelor’s degree; $400 for a bachelor’s degree, and $600 for a master’s degree.

Finding 3f: Turnover is low. Compared to the states, large cities, and large counties surveyed in 1999, 2000, and 2001 (Government Performance Project, 2002; Selden and Moynihan, 2000), turnover in this sample of municipalities is low (Selden and Moynihan, 2000). As shown in Table 4.16, total turnover ranged from approximately 2.4 percent to 7.5 percent. Trenton experienced the most turnover in the sample, with about 74.4 percent of that turnover stemming from retirements (see Tables 4.16 and 4.17). In three of the municipalities, the largest attrition in FY 2000 was attributed to retirement, and in two of the municipalities, it was due to voluntary decisions to leave the government (see Table 4.17). 98 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 4.16 PERCENT TURNOVER, MUNICIPALITIES, FISCAL YEAR 2000 Brick Elizabeth Franklin Irvington Old Bridge Trenton Average

Voluntary Turnover 0.87% 1.72% 1.99% Data not 1.50% 0.80% 1.38% available

Involuntary Turnover 0.44% 0.79% 0.57% Data not 0.20% 1.11% 0.62% available

Retirement 1.09% 1.26% 0.57% Data not 2.58% 5.55% 2.21% available

Total Turnover 2.40% 3.77% 3.13% 4.17% 4.28% 7.46% 4.20%

Table 4.17 PERCENT OF TOTAL TURNOVER, FROM EACH CATEGORY, FISCAL YEAR 2000 Brick Elizabeth Franklin Irvington Old Bridge Trenton Average

Voluntary Turnover 36.25% 45.62% 63.58% Data not 35.05% 10.72% 32.86% available

Involuntary Turnover 18.33% 20.95% 18.21% Data not 4.67% 14.88% 14.76% available

Retirement 45.42% 33.42% 18.21% Data not 60.28% 74.40% 52.62% available

Total Turnover 100% 100% 100% 100% 100% 100%

Finding 3g: Disciplinary processes are labor-intensive and inflexible. The disciplinary policies of the civil service municipalities are established according to state law and further defined based on union contracts. According to the interviews, the discipline and termination processes within the police departments are often more complicated because of the role of the internal affairs division. Across the sample, specific policies vary slightly by contract in all but one municipality. Most municipalities in the sample agreed that it is difficult to terminate employees, particularly for performance-related issues. The reasons cited include:

• Managers are not consistent in applying the discipline policy • Managers provide little documentation of performance problems • Lack of formal or accurate performance evaluation of employees • Managers are not prepared to work the discipline and termination systems

In Franklin, it takes more than 270 days, on average, to terminate an employee for performance problems (see Table 4.18). This is because when there is a performance problem, the municipality has to “start from the ground up,” because little documentation exists. The HRM division in one municipality is training supervisors on how to flag behavioral and performance-related problems before they escalate to severe problems. Human Resources Management 99

Table 4.18 TERMINATION AND DISCIPLINE Time to Terminate Time to Terminate Number of for Performance for Behavior Responsibility Employees Municipality Problems (days) Problems (days) for Termination Terminated in 2000

Brick 30-120 30-120 Appointing 5 authority

Elizabeth 30-120 30-120 Appointing 12 authority

Franklin More than 270 30-120 Appointing 2 authority

Irvington 30-120 30-120 Direct supervisor, Data not with approval available

Old Bridge Employees rarely Employees rarely Appointing 0 terminated terminated authority

Trenton 30-120 30-120 Appointing 14* authority

*Mean of estimate provided by the Division of Personnel.

Municipalities are doing a good job of retaining their employees, but they are faced with the challenge of determining whether they are retaining individuals who perform poorly or outstandingly. While training efforts are mixed, many of the municipalities are encouraging education through their tuition reimbursement programs and education incentive pay, factors that may contribute to their ability to retain workers.

Criterion 4: Motivating the workforce to perform effectively in support of the municipality’s goals Direct compensation represents a powerful tool for improving performance, and if used appropriately, it can enhance individual job satisfaction and motivation (Brown, 2001). Direct pay includes the traditional base salary, merit increases, bonuses, incentive pay, and competency and skill pay. In addition, maintaining a competitive salary package enables municipalities to attract, retain, and motivate a skilled workforce. Subsequent pay increases may be determined on the basis of changes in cost of living, years with the municipality, acquisition of new skill or degree, or some measure of performance. Moreover, municipal pay practices indicate to employees what is valued and rewarded. In addition to direct pay, many employers offer benefits to attract, retain, and motivate employees. The scope and impact of government regulation on benefits typically exceed that on direct compensation. Law mandates some benefits, such as unemployment, and other benefits, such as retirement, are subject to significant regulation. Benefits are a major expense for most employers, with costs increasing annually (Martocchio, 2001). A recent study indicates that New Jersey local governments offer competitive and comprehensive benefits packages (Roberts, 2001). 100 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Finding 4a: There is little formal opportunity to provide performance-related feedback to employees, and little effort to solicit feedback from employees. As illustrated in Table 4.19, no performance evaluations are required in four of the six municipalities studied, and none of the municipalities has an employee suggestion program or conducts formal employee surveys. One municipality, when asked how they assessed poor employee performance, responded, by “examining the attendance records;” those with excessive absences represent poor performers. Trenton is currently planning to hire a consultant to revamp its performance appraisal process and has provided for this change in at least one contract. Irvington has plans underway to develop a performance evaluation manual, with one department currently conducting a pilot performance evaluation. A review of the contracts shows that there are a few efforts underway in Brick and Trenton to work with unions to develop performance evaluation processes. In Old Bridge, the Teamsters Local No. 469 contract explicates the terms of the evaluation process that is employed.

Table 4.19 FEEDBACK MECHANISMS Frequency Provisions for Formal Formal Performance EmployeeEmployee Performance Evaluations in Suggestion Survey Evaluation Union Contract Program Conducted

Brick No formal PBA Local and Police SOA – Unions agree evaluation to develop with management a mutually No No required agreeable evaluation system that may be used for all future salary increase plans.

Elizabeth No formal evaluation Not mentioned No No required

Franklin No formal evaluation Not mentioned No No required

Irvington No formal evaluation Not mentioned No No required

Old Bridge Annually Teamsters Local No. 469 – Employees evaluated at least annually by an evaluator Yes Yes designated by the business administrator. Employee must be given a copy of his/her evaluation, and he/she signs the official file copy before it is placed into the employee’s personnel file. Each employee has the right to attach a response to his/her evaluation within 14 working days of receipt. If an employee is doing unsatisfactory work, he/she shall be notified, counseled, and

table continued on next page Human Resources Management 101

FEEDBACK MECHANISMS (CONT.) Frequency Provisions for Formal Formal Performance EmployeeEmployee Performance Evaluations in Suggestion Survey Evaluation Union Contract Program Conducted

Old Bridge adequate time to improve. Reevaluation (cont.) shall be conducted in three months. (This does not apply to probationary employees.)

Trenton Semi- Trenton FOA and Trenton Supervisor annually Officers’ Association – agreed to develop a No No performance evaluation system. American Federation of State, County, and Municipal Employees, AFL-CIO – agreed to work with union to devise ways to recognize and reward employees.

Finding 4b: There is no effort to link performance and rewards. Most municipalities provide for cost of living adjustments, annual step increases, and longevity pay. Brick recently replaced the annual step increases with an annual bonus, but the bonus was not contingent upon performance. In reviewing the contracts, there were no provisions for explicitly linking performance and pay. However, Trenton’s American Federation of State, County, and Municipal Employees, AFL-CIO contract included an agreement to work on identifying ways to recognize and reward employees. Finding 4c: Reward systems encourage employee longevity. All participating governments give longevity pay, and longevity pay is negotiated in all union contracts (see Table 4.20). Longevity pay functions as a bonus to employees by supplementing their base salary. Upon meeting an anniversary date, a percentage or dollar amount is added to an employee’s base salary until his or her next anniversary date. Upon reaching the next anniversary date, the bonus amount is adjusted to the new percent or amount. As shown in Table 4.20, most contracts use percentages to award longevity pay, except for Franklin. In most of its contracts, Franklin negotiated a flat amount that did not change in magnitude as base salary increased. Longevity pay varied between some contracts within a municipality, except in Irvington and Old Bridge. In these two municipalities, the longevity pay policy is the same for all employees, regardless of their bargaining unit. 102 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 4.20 LONGEVITY PAY BY MUNICIPALITY Brick Elizabeth Transport and EMTs, Fire SOA, Firemen, Other PBA Teamsters Police, SOA, PBA Contracts 5 years 3.5% 1.0% 2.0% 2.0% 8 years 4.0% 4.0% 10 years 5.0% 3.0% 4.0% 11/12 years 6.0% 6.0% 15 years 7.0% 5.0% 6.0% 16 years 11.5% 8.0% 20 years 7.0% 8.0% 10.0% 24/25 years 9.0% 10.0% 12.0% 29+ years 10.0% Franklin PBA and International Union 2, International SOA AFSCME and AFSCME Blue Collar Union 5 years 2.5% $1,500 $530 8 years $680 10 years 4.5% $2,500 11/12 years $845 $695 15 years 5.5% $3,500 16 years $1,010 $860 20 years 6.5% $5,000 $1,175 $1,025 24/25 years 8.5% 29+ years Irvington Old Bridge Trenton FMBA, Fire SOA, Municiple Employees PBA Police SOA and Supervisors 5 years 2.0% 2.5% 2.0% 2.0% 2.0% 8 years 10 years 4.0% 5.0% 4.0% 4.0% 4.0% 11/12 years 15 years 6.0% 7.5% 7.5% 8.0% 7.5% 16 years 20 years 8.0% 10.0% 9.0% 10.0% 9.5% 24/25 years 12.5% 10.5% 12.0% 11.0% 29+ years 10.0% 15.0% 11.0% 13.0% 11.5%

Finding 4d: There is little use of nonmonetary rewards to recognize outstanding performers. According to the survey results, the only municipality that uses an array of nonmonetary techniques to recognize performance is Trenton (see Table 4.21). Franklin noted in its initial Human Resources Management 103

interview that it has formed a committee for employee recognition. The municipality has done many things to recognize employee performance and to foster a community, such as sponsor a trip to a minor league baseball game and have a Fourth of July ice cream social. All but one municipality gave commendation awards to spotlight employee achievements. One municipality lamented that it hosted an annual employee awards dinner in the past, but a prior administration perceived the event as a frivolous expense and therefore eliminated it.

Table 4.21 NONMONETARY REWARDS Non-Monetary Rewards Brick Elizabeth Franklin Irvington Old Bridge Trenton Job flexibility related Never Never Never Rarely Never Some to performance Time flexibility related Never Never Never Rarely Never Never to performance Performance recognition Never Never Never Some Never Often program Public service No Never Some Never Never Often recognition week response Employee of the month Never Never No Never Never Some response Commendation awards Often Never Some Some Some Often Mayor or chief Never Never No Never Some Often executive officer’s award response

Finding 4e: Municipalities offer excellent benefits. In almost all municipalities studied, employers paid 100 percent of health insurance premiums for employees and their dependents during employment and retirement after 25 years of service. In Brick, during the first five years of service, the municipality pays premiums for only the employee. After that point, it provides health insurance for the employee and his/her dependents at no cost to the employee. Irvington pays health insurance premiums only for employees covered by the International Union of Service Employees contract and hired after July 1, 1999. As shown in Table 4.22, the provisions for dental, vision, and prescription coverage differ. In some places, dental premiums are fully covered by the municipality, and in others, the employer and employee split the premiums. One municipality noted that health-related benefits are extremely expensive because costs are going up a million dollars each year. The challenge municipalities face is that once benefits are offered, they tend to become institutionalized and almost obligatory, making it difficult to renegotiate the parameters. 104 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 4.22 HEALTH BENEFITS BASED ON CONTRACTS Contract Provisions Brick PBA Local and • Traditional HMO coverage as included within the New Jersey State Health PBA SOA Local Benefits Plan, including $100 deductible per year major medical coverage for each employee and their family • Options for non-traditional plans available • Prescription plan: $10, $5 (non-generic), $2 (generic) • Vision reimbursement of $200 per year per family Teamsters Local 469 • Provided with Traditional, New Jersey Plus and HMOs and $1,000,000 and Transport Major Medical Coverage for each employee and their family. Workers Union of • New employees receive paid health benefits for the first five years of America AFL-CIO employment for themselves only. After five years of employment, the municipality provides family coverage at no cost to the employee. • Prescription plan: $5 (non-generic co-pay), $2 (generic co-pay) Dental plan: fully paid plan with subsequent increases; 80 percent paid by employer, 20 percent paid by employee Elizabeth • All employees and eligible family members entitled to full coverage of Blue Cross and Blue Shield hospitalization plans • Prescription drug plan premiums paid by the municipality. • Dental plan premiums paid by the municipality. Franklin • Divides into Category A (hired before 01/01/00) and Category B (hired after 01/01/00) • Category A: medical (100 percent), prescription and dental (100 percent); vision ($150 reimbursement per family); Category B: same, but prescription and dental 80 percent/20 percent • Covers spouses and dependents Irvington International Union • The municipality shall continue to provide health benefit coverage at the of Service existing level for the Irvington School Traffic Guards presently employed. Employees • The municipality provides benefits to the employee only, for any employee hired after July 1, 1999. Electrical Workers Irvington continues to provide each employee covered by this agreement and his/her eligible dependents with a fully paid plan of health care insurance, including major medical coverage, with benefits equal to or better than those currently provided. Police SOA • Irvington provides, at its expense, the health and dental insurance coverage presently in effect for each employee and his/her dependents in accordance with applicable resolution and ordinances. • After retirement, insurance coverage continues for the employee and his/her spouse only. • Dental is not included after retirement. table continued on next page Human Resources Management 105

HEALTH BENEFITS BASED ON CONTRACTS (CONT.) Contract Provisions Irvington (cont.) PBA • Irvington provides, at its expense, the health and dental insurance coverage presently in effect for each employee and his/her dependents in accordance with applicable resolution and ordinances. • Retirement benefits apply only if the employee has accrued 25 years of service. • Dental is not included after retirement. Firemen’s Mutual • Irvington provides, at its expense, the health and dental insurance Benevolent coverage presently in effect for each employee and his/her dependents in Association & SOA accordance with applicable resolution and ordinances. • After retirement, insurance coverage shall continue for the employee and his/her spouse only. • Dental is not included after retirement. Old Bridge Teamsters Local • Old Bridge pays the sum of $735 per month per employee in the No. 469 bargaining unit who is receiving benefits from the Teamsters Local 469 Health and Welfare Fund. • The fund is responsible for providing all health benefits to those bargaining unit employees who are not in an HMO and are eligible to participate. • The HMO programs shall be modified to provide for a $5 co-payment for each physician visit. • Old Bridge pays $135.85 per bargaining unit employee enrolled in the HMO for the purpose of providing dental, vision, and prescription drug benefits. • Upon retirement, any employee who has completed 25 years of employment with Old Bridge can retain all medical insurance benefits as provided by the municipality. Policemen’s All employees and their spouses and children shall be covered under the Benevolent existing Garden State Hospitalization and Connecticut General Life Association Insurance Company Plan, a prescription drug plan covering 100 percent, and a dental plan covering 80 percent of a Class A and B services, with a maximum of $2,000 for orthodontics. Municipal • All employees, their spouses, and their children shall be covered under Employees the existing plan or a plan that gives equal or better coverage, which Supervisors includes long-term disability. Association, Public • All employees and dependents are covered by a $5 co-pay (non-generic) Works and and $2 (generic) prescription plan and a no co-pay for mail-order Sanitation Union, prescriptions of 90-day duration or over. United Service • Dental plan: covers 80 percent of Class A and Class B services with a Workers of America, maximum of $1,000 per year for each member and a maximum of $2,000 and Dispatcher’s for orthodontics; employer pays 100 percent of the cost of the premiums Union of such plans. Employers shall also have the ability to offer an HMO as an alternative choice to the traditional dental plan. • Vision plan: $200 per year, per family • Upon retirement, any employee with 25 years of experience has the option or retaining all the health/medical insurance benefits, with 100 percent of the premium paid by Old Bridge table continued on next page 106 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

HEALTH BENEFITS BASED ON CONTRACTS (CONT.) Contract Provisions Old Bridge (cont.) Crossing Guard’s All employees shall have the right to joint P.E.R.S. School crossing guards Association will be fully covered by the employer in the same manner as full-time employees for workmen’s compensation. Trenton Policemen’s • Employer pays at no cost to the employee full Blue Cross/Blue Shield Benevolent • All new employees covered by HMO offered by Trenton; after five years, Association and SOA can opt for BC/BS plan (if still offered), but employee will pay any increase (BC/BS). in cost • Prescription plan: $5 co-pay (non-generic) and no co-pay for generic drugs (prescription plan available to retirees) • Vision care reimbursement • Dental: split cost between employee and employer FMBA, FOA, and • Employer pays all health insurance premiums for employee and AFL-CIO Municipal dependents. and Supervisory • Prescription plan: $5 co-pay (non-generic) and no co-pay for generic drugs Employees (prescription plan available to retirees) • Vision care reimbursement • Dental: split cost between employee and employer

In the municipalities in this study, compensation and benefits packages are designed to encourage employees to stay with a municipality by rewarding individuals who have been working longer and by offering health benefits to those who spend their careers with a municipality. The turnover figures as presented in the previous section appear to support the success of these endeavors. Most of the individuals leaving these municipalities are retiring. Little information is available about the level of performance of those working in the municipalities or their levels of motivation and satisfaction. Managers appear to have few, if any, tools to entice employees to perform. The criteria that underlie the existing compensation systems are not aimed at linking performance and pay. When municipality representatives were asked what obstacles inhibited rewarding superior performance of employees, their dominant answers were the Department of Personnel and union contracts.

Criterion 5: Structuring the workforce Finding 5a: The classification systems are a source of frustration. A consistent concern expressed by most of the civil service municipalities was the state classification system. One municipality commented that it wished it could find a way out of civil service so that it could have more flexibility to manage personnel the way they need to be managed and to give them the titles they ought to have. The DOP is responsible for classifying new positions; reclassifying existing positions through job analysis and establishing, consolidating, and abol- ishing job titles; and notifying all affected persons of changes in the state classification system (NJSA 4A: 3-3.3). All the civil service municipalities adopt titles locally before requesting use from the Department of Personnel. The salary structure, however, is established locally. Most of the municipalities have designated at least one individual to interface with the DOP on classification issues. A review of the contracts reveals that relatively few provisions beyond Human Resources Management 107

salary are discussed regarding the classification system. In a few contracts, municipalities are stipulated to pay employees the higher wage when an individual is working out of title on a temporary assignment. Compared to other municipalities participating in civil service, Irvington uses significantly fewer titles (see Table 4.23). Recently, the municipality reviewed its titles and found a number of them that did not correspond with state titles. As a result, it has audited its classification titles and is making corrections as necessary to ensure compliance with the state’s system. For example, in the police department, Irvington uses only five titles for 220 employees, and in the fire department, it uses four titles for 130 employees. Franklin, one of the noncivil service systems, operates multiple classification systems, because each union contract has its own system. However, the HR department has full discretion over job classes, job bands, job titles, and job descriptions. The municipality negotiates salaries with the union; the municipality’s goal is to keep its employees’ salaries at market value. All classification systems except the police and public works are broad-banded. These two systems use traditional grade and step increases. Franklin noted that the bands have created some challenges, because there are many people within a band doing different jobs and getting different pay. Some employees have complained, because someone doing a job classified under the same title, such as administrative aid, is earning more money. Therefore, the municipality is doing job analyses for titles in order to create different levels.

Table 4.23 CLASSIFICATION TITLES No. of Titles Ratio of Titles to Employees Brick 104 0.22 Elizabeth 207 0.14 Franklin 114 0.30 Irvington 40 0.07 Old Bridge 50 0.07 Trenton 420 0.26

Finding 5b: Labor-management partnerships are starting to be utilized. In the field of public labor-management relations, there is a movement to foster more productive working relationships between labor and management so the bargaining processes can move from conflict- and position-oriented relationships toward collaboration and partnership (U.S. OPM, 2000). One approach used is to form relationships that involve employees and their union representatives as full partners to identify problems and craft solutions to better serve citizen and municipal needs. Table 4.24 displays the labor-management partnerships the municipalities use. Trenton has formed 11 partnerships, and Irvington and Old Bridge have developed no formal partnerships with unions. 108 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table 4.24 LABOR-MANAGEMENT PARTNERSHIPS Labor-Management Partnerships Brick Elizabeth Franklin Irvington Old Bridge Trenton Physical work environment Yes No No No No Yes Health and safety issues Yes Yes Yes No No Yes Family-friendly policies Yes No No No No No Career development Yes No No No No Yes Reorganization No Yes Yes No No Yes Privatization No Yes No No No No Customer service No No No No No Yes Productivity Yes No No No No Yes Reengineering No No Yes No No No Budget/Staffing levels No No No No No Yes Technology utilization No No No No No Yes Procurement No No No No No Yes Outcomes/Goals No No No No No Yes Strategic planning No No No No No No HR reform efforts No No No No No Yes

Summary

Personnel management is complex in New Jersey municipalities. Within each municipality, there are multiple personnel systems influenced by many different stakeholders. The objectives of a municipality’s human resource management system are to have adequate systems and data that allow them to plan for the future, to get the right people Most municipalities to come to work for them, and once employees are hired, get their best work and retain them. There are challenges to almost all of these objec- need to pursue tives. In some of these municipalities, it is difficult to identify and reforms, especially develop superior performance because they do not control the selection at the state level, to process, they have not adequately designed or funded their training give HRM and man- and development programs, they do not provide meaningful performance feedback, and they do not reward superior performance. agers additional Most municipalities need to pursue reforms, especially at the state tools and flexibili- level, to give HRM and managers additional tools and flexibilities to ties to hire, manage, hire, manage, and retain staff. But, these municipalities need not wait and retain staff. for reform to modernize their human capital approaches. Many municipalities could employ technologies that would reduce workload on existing HRM staff, freeing them to develop more strategic human resource management policies and practices. Recent enhancements in HR software packages can assist HRM in the trans- formation from transactions to strategic human resources management (Frost, 2002). This study did not find processes that enable HRM divisions to become strategic partners with other entities in the government. Currently, most of the HRM strategies in these munici- Human Resources Management 109

palities are realized – those emerging from past practice – as opposed to strategic – those planned for future action (Mintzberg, 1989). In other words, the municipalities engage in relatively no long-term planning in the area of HRM. The HRM choices and policies are not designed to enable a municipality to achieve its vision or to give it a competitive advantage, but are a result of incremental changes that have occurred during political, legal, and managerial processes, such as contract negotiations, legal decisions, and policy adoptions. As part of an ongoing self-study, HRM departments should ask themselves the following set of questions:

• Do the HRM policies and procedures support the municipality’s strategic direction? • Does the organizational structure of the HRM division fit with the HRM policies and procedures? • Does the performance (including pay) system fit the structure of the municipality? • Is the municipality developing leaders with skills needed to meet the strategic direction? • Has our internal communication with employees been developed to support and communicate the strategic vision?

Recommendations for New Jersey Municipalities

Municipal leaders are in a position to advance and update their HRM systems and functions at the municipal and HRM department levels. To this end, the researchers offer the following 10 recommendations for the municipal and HRM department levels, respectively:

Municipal-Level Recommendations

M1: At the municipal level, implement a strategic planning process that includes HRM M2: At the municipal level, adopt technologies that support HRM and that interface with the payroll and other municipal information systems M3: At the municipal level, develop meaningful performance evaluation systems M4: At the municipal level, develop formal systems that link employee performance and recognition M5: At the municipal level, administer an annual employee survey M6: At the municipal level, update job classification titles and job descriptions

Human Resources Management Department-Level Recommendations

H1: In the HRM department, develop a formal mission statement H2: In the HRM department, engage in regular self-studies about the roles and responsibilities of the HRM staff H3: In the HRM department, collect HRM-related data – especially HRM outcomes – that can be used to assess departmental performance and applied in the planning process H4: In the HRM department, better utilize the World Wide Web as a communications tool 110 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Recommendations for the State of New Jersey

The state of New Jersey can take actions to assist leaders in all 566 municipalities in advancing and updating their HRM systems and functions. The authors offer the following three recommendations:

S1: At the state level, delegate more authority in the hiring process to the municipalities S2: At the state level, increase the number of candidates that localities can select (eliminate the “Rule of X (3)”) S3: At the state level, reduce the number of job titles and the number of titles that require testing Human Resources Management 111

INFORMATION TECHNOLOGY MANAGEMENT

THIS CHAPTER REPORTS ON INFORMATION TECHNOLOGY MANAGEMENT in local government. Of all the various management subsystems found in local government today, information technology management is becoming an increasingly important component. More and more, modern approaches to financial and human resource management require an underlying information system basis. Imagine running an accounting system or personnel process without information technology. At the very least, all modern offices, regardless of sector or function, require information technology to automate document generation and production. Consequently, information technology (IT) has become central to public management, but at the same time, has become increasingly difficult to manage. Currently, the major cutting-edge issues in information technology management focus on the emerging concept of e-government. E-government, like many earlier information technology innovations such as decision support systems, is being propelled mostly by advocates for change who believe the new web-based tech- ...the major cutting- nology will lead to more efficient management processes. edge issues in infor- Unfortunately, also like its predecessors, claims for the potential bene- mation technology fits of e-government far outstrip the reality. Most of the recent empirical work suggests that web-based applications will develop more slow- management focus on ly than expected and will more than likely be constrained by existing the emerging concept political and organizational institutions, as opposed to revolutionizing of e-government. those institutions (West, 2001). This chapter begins with a brief description of IT management capacity subsystems. Next, this inquiry considers the state context for information management in New Jersey as confronted by the seven local governments studied. Then it defines the criteria associated with measuring local governments’ information management capacity, and describes the data collection process. The penultimate section of this chapter presents results by summarizing the condition of IT management capacity in the seven municipalities. The chapter concludes with a summary and a set of recommendations for the municipalities and the state of New Jersey.

Information Technology Management Capacity and Systems

The concept of IT management capacity can be divided into six key subsystems: IT planning capacity, capital procurement and maintenance capacity, application development or procurement capacity, data management capacity, IT human resources management capacity, and systems management and maintenance capacity. Information Technology planning capacity reflects a jurisdiction’s ability to develop a formal IT plan and maintain a regular process of re-evaluation and re-planning. This particular 114 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

process should have links to all the core support areas (i.e., budgeting, financial management, human resources, and general planning), as well as strong links to the political leadership of the jurisdiction, in order to provide agencies guidance on priorities. While departments may have their own IT planning processes, this particular capacity requires some centralized direction and control. Capital procurement and maintenance capacity refers to a jurisdiction’s ability to obtain as well as maintain and/or replace the IT system’s capital infrastructure. For all the jurisdictions studied and for most other local governments, this infrastructure includes some form of centralized computing capacity, sufficient online storage capacity, telecommunications capacities (e.g., network wiring and Ethernet cards, modems, wireless transmission systems, etc.), input and output devices (e.g., scanners, printers, plotters, and terminals), and office desktop systems. In all the local districts, personal desktop computers were typically evident and clearly reflect a major capital component of the IT infrastructure. Application development or procurement capacity refers to the ability to either create or purchase the necessary software for agency and enterprise-wide IT. All the jurisdictions studied typically rely on the market to provide standard office desktop software for e-mail, word processing, and other applications. Most jurisdictions use both in-house developed and purchased application solutions. For in-house development, systems analysis capacity, programming capacity, and maintenance capacity (including documentation and training) are requirements for good IT management. Good purchasing and contract management capacity are necessary for procurement-based application development. Data management capacity refers to the ability to enter, retrieve, and manage data. It also considers the extent to which data is managed as a shared enterprise-wide resource, based on database management or some other integrative approach to organizing, retrieving, and sharing data. Information Technology human resources management capacity refers to the ability to hire and retain the necessary human resources to manage IT, train end-users in its use or applications, and provide sufficient levels of technical support and help functions to end-users. Systems management and maintenance capacity refers to the ability to manage the overall IT function. It includes the ability to operate and maintain the network systems that support office automation, including dial-in and e-mail capacity. Operation and maintenance of all hardware equipment and management of the production runs of enterprise-wide software, such as payroll, are also important components of this category.

Information Technology Management Environment for New Jersey Municipalities

As is true for all local governments, the New Jersey municipalities sit within a complex web of relationships with other levels of government. The most relevant of these are the local special districts, the counties, the state, and the historically separate public safety function within the municipal government. In each of these cases, the specific relationship observed depends heavily on local history. For example, several of the seven municipalities upgraded or enhanced parts of their IT infrastructure along with capital enhancement in the local school districts. This was only possible because of a history of cooperation between the local government and the schools. In another case, local library system enhancements were viewed as having inappropriate levels of security, making them incompatible with the local government systems. Information Technology Management 115

This view was also tied, in part, to a recent history of conflict between the two groups over access to financial resources (i.e., tax rates). In a third case, the local government turned over to the county complete control and responsibility for social welfare data maintenance to the county. The municipality decided to let the county provide this information-based service because it felt that converting its homegrown system to one that met all the state requirements for data exchange would be too costly. These disparate examples suggest that the relationship between a local government and other governmental units can act as a facilitator or as a constraint. To establish the context in New Jersey, the next sections focus on the relationships among different levels of government.

State Government

There are three ways in which state action affects local government IT management: mandates, grants, and technical assistance. Clearly, mandates, while they have some limited potential to benefit local governments, are predominantly constraints, while grants and technical support are clearly benefits. The effect of the constraints and value of the benefits are partially linked to the size and level of IT management in New Jersey local government. As governmental units get larger and IT management capacity increases, state-level mandates become more restrictive and the value of technical support declines. Generally, grants always provide some benefits, though many of the granting programs are aimed to support municipalities at the lowest levels of IT. All seven municipalities in the study face state government mandates that constrain IT capacity by requiring specific standards. The major benefit they receive from the state comes in the form of capital grants for upgrading infrastructure and as cost discounts for bulk purchases.

Special Districts and County Governments

Special districts and counties can provide support in the form of services or capital, but their additional service demands or mandates can also be constraints. While historical contexts tend to frame each municipality’s situation, good management requires the capacity to adjust and modify these relationships. One of the major IT capacity issues is that of obtaining and maintaining the capital infrastructure of the IT system. In this area, several of the local governments have partnered with other overlapping jurisdictions to piggyback either capital grants or capital financing projects. This clearly seems to be a sign of enhanced IT management capacity. A second observation relates to operational management of IT systems and the municipalities’ relationships with other governments. The nature of these relationships varies, but always falls between the two extremes of providing services to other units and delegating the provision of services to other units. Municipalities could execute the latter extreme by formally contracting out the services or simply handing over entire responsibilities or roles. None of the seven municipalities provides services to other jurisdictions, but it is possible. However, one municipality tried to develop a system for tracking welfare payments to municipal residents and found the state-level constraints and requirements problematic. Ultimately, the municipality decided to let the county handle all data collection and verification of welfare payments. This case illustrates both the constraining effects of state requirements (and federal reporting requirements) and workload balancing across jurisdictional boarders.

Police Services

Police services are clearly an internal element of all these municipalities with direct political 116 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

accountability to the municipally elected officials. Nevertheless, historically, and for several reasons, information systems in law enforcement have developed somewhat separately. One of the important historical forces leading to the quasi-independence of public safety information systems is the need for incident data and criminal histories to be integrated across jurisdictions and among state and federal law enforcement agencies. A long history of federal grant programs, including the Local Law Enforcement Act (LLEA), has also helped state and local governments implement information systems that are compatible across levels of government. Finally, the higher level of security associated with public safety also facilitates the quasi-independence of its information systems. In all the municipalities studied, police and public safety maintain their own information systems with separate technical staff and typically their own planning processes, although in some of the study’s municipalities they are coordinated with IT planning for the general government.

Criteria for Assessing Information Technology Management

Information technology management capacity in each municipality was evaluated against six key criteria, which were partially adapted from the Government Performance Project methodology. They reflect the subsystems that are generally considered crucial for proper information technology management. Table 5.1 summarizes these six criteria of IT management and lists the specific sub-criteria used under each.

Table 5.1

INFORMATION TECHNOLOGY MANAGEMENT CRITERIA 1 Municipality conducts strategic analysis of present and future IT needs • Municipality is able to replace network hardware when necessary • Municipality is able to replace desktop systems when necessary

2 Municipality obtains IT infrastructure as needed • Municipality is able to replace network hardware when necessary • Municipality is able to replace desktop systems when necessary

3 Municipality obtains software applications as needed • Municipality is able to develop and implement its own software • Municipality is able to efficiently purchase appropriate software in a timely fashion

4 Municipality adequately stores and retrieves data • Municipality maintains adequate data for analysis and decision-making • Municipality views and manages data as an enterprise-wide resource • Municipality integrates data across functions for analysis and decision-making

5 Municipality obtains and retains adequate IT human resources • Municipality locates and hires adequate IT staff • Municipality retains and develops IT staff • Municipality trains non-IT staff in use of IT systems and applications

6 Municipality reliably operates and maintains IT systems • Municipality maintains reliable operations of IT network. • Municipality has effective disaster and recovery procedures • Municipality effectively manages vendor-provided IT services Information Technology Management 117

Methodology and Data Collection

In order to understand how the New Jersey municipalities perform in each of the sub-areas of IT management capacity, this study employed a three-part data collection strategy. The first step was to identify those individuals and organizational units with major responsibilities for IT management. Once this was accomplished, a semi-structured interview protocol was developed to elicit the major approaches to IT management each of the municipalities uses. On-site interviews were then conducted at each municipality. As part of the interview process, two additional data collection efforts were initiated. At the end of each interview, the interviewer asked to obtain formal documents related to planning, hardware and software inventories, policies and procedures, and network architecture. The interviewer also provided a set of survey instruments to be distributed to individuals throughout the municipality who use information technology applications in their daily work, as consumers of IT services. Table 5.2 summarizes the data collection efforts by municipality. The original data collection plan identified four types of documentation the research team hoped to find in each municipality: a planning document, an inventory of hardware and software used by the municipality, a network architecture plan, and a list of IT management policies and procedures. The table illustrates that most of the municipalities lack formal planning documents or enterprise-wide policy and procedure manuals. For example, an interviewer found that the IT department in one municipality was working on developing a policy and procedure manual, but the interviewer had difficulty finding examples of such manuals from its other depart-

Table 5.2 SUMMARY OF DATA COLLECTION PROCESS Inventory of Network Policies Planning Hardware Architecture and Municipality Interviewed Document and Software Plan Procedures Surveys Brick Township IT Director X X 2 Elizabeth City Consultant X X 23 Franklin Director Network 1 Township+ Services Irvington Business Township+ Administrator and IT Staff Old Bridge Business Director X 9 Township of Finance and Network Director Paterson City* Director of Data Processing Trenton Cityº Assist. Business X X X X 10 Administrator

X Indicates that formal documents were available and provided to the study team. +During the interviews in Franklin and Irvington, the interviewer was shown evidence of system architecture diagrams and inventories of hardware and software, but never received hard copies of that material. * The IT manager was concerned that he did not have the formal authority to provide the interviewer with detailed lists of hardware, software, and system architecture, though clear evidence was provided that these documents exist. º The planning material provided by Trenton was a PowerPoint presentation developed by a team led by the assistant business administrator. 118 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

ments. Few of these departments have complete and systematic manuals; rather they rely on a series of separate documents and memos to provide procedure and policy guidance.

Results: Information Technology Management in New Jersey Municipalities

This section of the chapter summarizes the various approaches the New Jersey municipalities use for planning, capital procurement and maintenance, applications development, data management, human resources management, and system maintenance components of IT management capacity. Under each of these topics, general strategies are identified, along with the various strengths and weaknesses of each.

Information Technology Planning Capacity

It is important to recognize that the capital infrastructure for local government IT systems requires some formal planning similar to capital planning associated with capital budgets. The planning process for IT is often ad-hoc and episodic, like capital planning in general at the local government level. One municipality that admitted having no formal planning process for IT had, nevertheless, successfully upgraded the hardware infrastructure for its network, including a new telephone system. Certainly the successful upgrade required some planning, but it was not done as part of a routinized, on-going planning process for IT. Based on their interviews, researchers found that three municipalities have no formal IT planning process at all; one municipality had used formal planning to prepare and implement a large-scale capital upgrade to its network, but currently ties IT planning to the annual budget process; one municipality characterizes its planning process as top-down, based on general directions for IT coming from the business and assistant business administrators but developed through a team effort which also made effective use of capital budgeting to plan for IT capital issues; one municipality claims to have a five-year plan that is revised annually, but implementation remains tied to the budget process; one identified the use of a multiyear plan implemented via monthly committee meetings, one municipality indicated it had two planning processes – one to manage plans for public safety, and the other to manage IT plans for the general government. Not surprisingly, at some point, most planning turns to implementation, and even the municipalities that claimed to have no formal planning process have some minimal IT planning embedded in their budget processes. There are two salient dimensions that emerge from these data. The first is the extent to which the process includes multiple units and actors when something other than budgetary- based planning exists. The trade-off here is an old one. Involving more actors requires increased coordination and transaction costs, but should lead to a better matching of plans and needs. On the other hand, involving fewer actors reduces the cost of planning, but this can result in poorer matching of plans to needs (March and Simon, 1958, 24-29). In governments with new administrative leadership (i.e., newly hired business administrators), the use of a more top-down-directed planning process might be beneficial in the beginning. The second dimension to the IT planning process is time. The time dimension includes the plan’s horizon (i.e., five years ahead) and the frequency of updates and coordination. Once again, a trade-off is evident; plans with longer horizons and less frequent updating and coordination activities are more likely to become outdated. On the other hand, shorter time Information Technology Management 119

horizons and/or more frequent updating and coordination activities require commitment of more resources to planning and result in higher transaction costs. In general, those municipalities with any type of planning process are further along in the development of their information systems and exhibit greater IT capacity. In the municipality that used a multiyear plan for its recent network upgrade but currently ties planning to the budget process, some additional IT planning capacity exists, since the budget director also provides a long-term vision for IT by following a top-down approach. On the other hand, the municipality utilizing a five-year plan with monthly updates and implementation subject to the budget process does not seem to have more capacity than municipalities using other forms of planning. The critical factor for capacity is either someone at the top providing some longer-term vision or direction or the existence of a more formal multiyear process.

Capital Procurement and Maintenance Capacity

There are two parts to capital procurement and maintenance capacity: the major large-scale procurement and the replacement process. All seven municipalities were clear about these two distinctions. They had all gone through some sort of major network update process in the past five or six years and, as noted earlier, had varying ties to planning while going through that update. For large-scale capital purchases such as upgrading networks, municipalities used three distinct strategies. One municipality pooled a capital bond with the local school board to fund a one-time upgrade of the core network system. At least two other municipalities indicated they use bonds on occasion to finance network infrastructure upgrades. Two other strategies employed by municipal governments are the use of grants from federal and state governments (particularly for specific uses such as police or traffic systems), and internal funding of one-time operating budget expenditures. The strategies for handling replacement of individual machines, usually used for desktop office applications, typically revolve around the budget process, with some form of administrative oversight. Based on the interviews, two municipalities had set up a four- or five-year cycle in which they planned to replace 25 percent of the desktop systems funded through the IT unit each year, and in the fifth year replace the network infrastructure. One of these municipalities was in its second or third year of the cycle when a new incoming mayor made IT a priority by establishing a new independent unit with a large capital budget. The remaining five municipalities handle the replacement of desktop systems through decentralized requests by departments, with implementation through the standard budget process. In these situations, some centralized IT management group or unit usually controls the procurement process through use of a state vendor list, blanket procurement contracts, hardware standards, and direct control of ordering equipment. Upgrading the core infrastructure remains problematical for all these local governments. However, all but one municipality had successfully upgraded their network hardware some time in the past five years, and all successfully provide office automation and desktop application in at least one location, with most municipalities actually running sophisticated local and wide-area networks (LANs and WANs). Even in the municipality that successfully updated its infrastructure two years before this project through a joint bond issue, it is clear that few of these municipalities have long-term planning capacity oriented towards the next major cycle of infrastructure updating. In general, the municipalities with effective planning processes have some capacity to prepare for the next round of capital purchasing and updat- 120 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

ing (see discussion of IT planning capacity, under the “Information Technology Management Capacity and Systems” heading above). The general story here is probably not much different than that of most local governments’ capital management. Good managers actively scan the environment for short-term opportunities, usually in the form of grants, while trying to identify when IT infrastructure upgrades will be needed two or three years ahead. The municipalities’ successful infrastructure upgrades attest to their high-quality leadership in the present, but they lack the institutionalization and capacity necessary to systematically replicate those successes in the future. Municipal government managers’ management of the hardware replacement process is better. The general approach – handling replacement through the budget process with IT management oversight – provides adequate institutional capacity. However, functional departmental managers, with the exception of public safety, often do not make IT a priority, which leads to some problems. One municipality has established a central replacement fund; this has some benefits, but also some hidden costs. The principle benefit is that all departments can expect uniform treatment and do not have to trade off IT needs with functional needs. The problem with this approach is that the IT department’s budgeting of resources, like all government budgets, is subject to environmental pressures. The central replacement fund was initiated when a new mayor made IT a priority – but what happens when priorities change? Early scholarship on public management information systems suggests that political cycles cause government planning and implementation for IT to look different than processes found in business (Bozeman and Bretschneider, 1986). During one interview, a long-time manager noted that his municipality could not use a fixed replacement cycle internally funded by the IT unit due to the uncertainty of the political process.

Application Development and Procurement Capacity

Applications are IT solutions to problems. Given the current technology, applications are appropriate at a number of different levels. Payroll applications tend to be government-wide, as are human resource systems. Most major applications, though, tend to involve individual functional departments or subunits of a department. Some applications There are two operate at a micro level, supporting the activity of individuals. For example, most desktop applications, such as word processing and e- approaches to mail, function at the individual level. At the same time, some of the obtaining and tools that are readily available for the desktop environment can be and implementing are used to develop broader applications. For example, one municipali- applications: build ty uses Microsoft Access, a desktop database tool, to develop numerous them using internal applications at both the enterprise level and the department level. There are two approaches to obtaining and implementing applica- staff or purchase tions: build them using internal staff or purchase them from vendors. them from vendors. All the municipalities purchased their operating system software for their networks and desktop applications, which typically use Microsoft Office products. While there is some variation across the seven municipalities, all office systems include word processing and e-mail, and most also include a spreadsheet tool and access to the Internet. Office systems have dramatically increased IT management capacity by providing all general managers with the ability to manage data and develop their own applications through the use of IT. This capacity is enhanced or constrained by the extent to which the IT technical staff provides support through tutorials, online help, and training the Information Technology Management 121

end-user community. This aspect of IT management capacity will be discussed in the human resources section below. At the department and overall governmental unit levels, the interview process revealed that only three municipalities maintain significant internal capacity to generate their own software applications. Most commonly, the municipalities rely on vendors to provide applications. As they do for hardware, they use the budget process to monitor and control this procurement process at the department level. The nature of IT control over software purchases varies. Typically, the IT department ensures that applications are technically compatible with the hardware and operating system software that will run the applications. There is little evidence that some form of cost-benefit analysis or benchmarking is also required, although the IT managers who were interviewed did seem to be current with the latest array of software products. Those municipalities with internal capacity to generate applications typically rely on end-use tools such as Access, Excel, and SQL Server. These three municipalities have successfully used this capacity to augment their application development, and hence their overall IT management capacity. In general, though, the governments’ dominant approach was to use vendors rather than develop applications internally. The make-versus-buy issue for applications involves a very important set of trade-offs. Maintaining the internal capacity to write software, even with end-use tools, results in significant overhead costs. Human resource expenditures are the principle cost components, including but not limited to recruitment, training, salary, and turnover. While these are typical human resource costs for any internally provided activity, they tend to be higher for IT because of the high-demand and low-supply characteristics of the IT labor market, even in the post-dot-com business environment. There are also maintenance and training costs assumed directly by the government when it produces the application (Selden, Ingraham, and Jacobson, 2001). Some of these costs are mitigated by the use of newer application development tools like Microsoft Access. The benefits tend to outweigh the costs for these three governments that generate their own software applications. The principle benefits are a quick turnaround time for development and enhanced flexibility. Also, applications can be tailored to the municipalities’ specific needs, so they do not have to work with more complex systems designed to handle any type of situation. Another advantage is the IT unit’s enhanced capacity to provide help and support for individual applications and small applications developed in the office environment. In one municipality, this capacity has also enabled the integration of data across departments and applications into a rudimentary database that could act as a shared, government-wide resource.

Data Management Capacity

There are two extreme models for managing data. The older and still most common in local government involves organizing data around specific uses or applications. This approach tends to link data to the institutions and organizational units that generate and use it. For example, data used to assess property taxes would most likely be maintained by the finance or taxation unit. At the same time, data on parking violations, citizen complaints, or emergency dispatch would be maintained separately by the relevant municipal agencies. This situation leads to a great deal of data redundancy – more than one agency collects and maintains the same data (i.e., a citizen’s name, phone number, and address), which increases processing and management costs and reduces data sharing. 122 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

The standard solution to this situation is the alternative model for data management, called the “database management system”. Under this approach, all data are integrated into one set of interconnected files managed by an independent, usually IT-related unit. Then applications are developed that simply retrieve the relevant data element appropriate to their intended use on an as needed basis. This approach minimizes redundancy and reduces barriers to data sharing, thus integrating data to create an enterprise-wide resource. Using geographic information systems (GIS) is another technical IT approach that attempts to create integration across multiple applications. GIS uses cartographic information as a unifying mechanism. All other applications tie data about citizens, property, services, etc., to geographic locations. Applications are then thought of in terms of maps. In one municipality using GIS technology, several older applications were integrated by coding data such as fire alarms, citizen complaints, and fire station locations to map coordinates. Various maps that included road network and political district boundaries were then generated. In all the municipalities, the main orientation to data management is through applications for specific uses and users. Four municipalities have begun thinking about more integrative approaches, which could enhance their data management capacity. Three of these municipalities identified GIS as the approach they are pursuing, and one, which is also interested in GIS, has moved toward establishing a partial database approach to data integration. One of the municipalities focusing on GIS has made significant progress and demonstrated several GIS applications that integrated data across multiple uses. Yet even in this context – while the municipality was successfully implementing GIS applications – each new use of GIS required its own data files and requirements and was not directly integrated with previous applications. The municipality that has taken the database approach began with property tax data based on land parcels, but extended it to individuals living in the district; thus, it focused on citizens as the unit. The municipality augmented standard assessment data for multi-family units to include citizens, and used this citizen model as the base for several new applications. For example, when people apply for a dog license, they are identified in the citizen database. The dog license data is then integrated with other applications, like property taxes, which are also tied to the citizen database. Clearly, integrative approaches such as database management and GIS have great potential to enhance a municipality’s IT management capacity. Unfortunately, there are major problems in implementing these approaches. It is not surprising that GIS is currently viewed as the favored approach in most of the municipalities. This is partly because the New Jersey State government is providing strong incentives for local governments to adopt GIS, primarily in the context of property tax management. Tax mapping is viewed as a natural GIS application, and it is the primary application identified in all four municipalities that mentioned GIS. While GIS software is readily available, it requires a rather high level of sophistication to administer. It is not a final application like general ledger software, but rather an application development tool that requires some investment in staff and application development by the municipality itself. As noted earlier, the idea of having some application development capacity is useful, but due to the level of technical sophistication it requires, this capacity is more expensive than other forms of application development (i.e., Microsoft Access programming). Both GIS and database systems also require a significant organizational commitment of specialized resources and a commitment to organizational change. For example, using a database requires individual units to relinquish some of their control over data. Information Technology Management 123

Information Technology Human Resources Management Capacity

There are two major components of IT human resources management capacity – hiring and retaining IT staff and training other staff on various applications. All of the municipalities have technical staff in place to maintain operation of the IT infrastructure. One municipality has contracted out infrastructure operations, but also has some IT staff of its own. The municipalities with internal capacity to develop their own applications have more staff than those without that capacity. In one of those municipalities, the driving force is a consultant who also teaches IT at a local college. This relationship helps provide the municipality with programming staff. As the consultant noted, “I hire my own students, and then when they move on to better jobs, I hire some new ones.” In general, though, programming and systems analysis staff are more expensive than operational staff. This helps to explain why only three of the seven municipalities have these people. Most of the IT staff that work in all the municipalities came with the requisite skills and certification. Only one municipality sent IT staff for additional training at the municipality’s expense. The use of standardized office automation products reduces the need for training. During the interviews, most of the municipalities indicated that the use of Microsoft Office and/or Lotus SmartSuite helped lower the demand for end-user training. Indeed, many existing staff and new hires have experience with these applications, the software has extensive tutorial and help features, and there are many privately available sources for self-training (i.e., professional books and adult education classes). Nevertheless, the almost complete diffusion of office automation tools in these municipalities generates a very large demand for training, and more significantly, for help with specific questions and issues. All of the interviewees identified demands for help and training as almost infinite. Several municipalities are planning to develop Internet training modules and documents to help manage this demand, but all continue to recognize it as a major problem. One municipality identified it as the single major constraint. Training is handled in several different ways. In municipalities where IT applications are developed internally, both the IT departments and the functional departments that use the applications have training responsibilities. As noted earlier, most of the municipalities rely exclusively on vendor-provided software, and municipalities that develop applications internally also often buy software from vendors. Consequently, vendors are used heavily in the provision of training. Several municipalities indicated that vendor-provided training is inadequate and often requires unexpected add-on costs. Table 5.3 summarizes the results from the IT consumer survey. Although five municipalities provided some responses, only one municipality generated enough data for any reliable statistical analysis, so the summary pools the data from all five municipalities. Analysis of differences across the three municipalities with nine or more survey responses suggests there are no real differences. The typical IT user works with their computer application an average of more than four hours per day. The 45 respondents use more than 20 different applications, ranging from office applications to general complaint and service request systems that directly interface with citizens, to internal management systems like general ledger systems. More than 78 percent of the respondents received formal training in the application they use, and training averaged about five hours. Twelve of the respondents indicated formal training of a full day or more, and half of them had training that took more than five days. As noted earlier, training was provided mainly from three sources: the municipal IT department, functional agencies, and vendors. 124 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

While this survey indicates that the IT department was the most common provider of training, it is important to note that the sample is heavily weighted by municipalities that develop their own applications internally. When surveys from those municipalities are removed from the sample, the breakdown of training providers shifts away from the IT department to functional units and vendors, with functional departments offering 44 percent of the training, IT departments offering 19 percent, and vendors offering 37 percent. In the original sample of 45 cases, there were only minor differences in how respondents rated training. Based on a seven-point scale, where one was the lowest and seven the highest, employees who received training from a functional department rated it 5.6 on average, employees who received training from the IT department rated it 6.0 on average, and those who received training from vendors rated it only 5.2 on average. The overall average, as reported in Table 5.3, was 5.6. None of these differences is significant, but IT department training was rated the highest, and vendor training the lowest. These results are compatible with the information obtained from the interviews. The survey also asked respondents how easy or difficult it is, after being trained, to get assistance while working with an application. “Access to individuals” was rated as good or better than “training,” “system-provided help” was not, and only about half of the respondents indicated that there was a reference manual available. Table 5.3 SUMMARY OF CONSUMER SURVEY RESPONSES FROM FIVE NEW JERSEY MUNICIPALITIES Consumer Survey Questions N Mean St. Dev. How much time do you spend per day using this IT application? 44 4.4 hours 1.91 Did you receive formal training? 45 78%-Yes 17% How much training did you receive?* 30 5 hours 3.5 Who provided the training? Personnel Department 1 Functional Department 10 IT Department 15 Vendor 10 How would you rate your training? (7-high, 1-low) 36 5.64 1.05 How easy is it to get help from the application? 45 4.84 1.24 How easy is it to get help from people about the application? 45 5.78 1.35 Do you have access to a manual for help with the application? 45 51%-Yes 25% (7-high, 1-low)

*Six respondents indicated their training lasted more than five days.

Table 5.4 summarizes end-users’ average ratings of ease of access to help from the system they used the most and ease of access to help from other people, typically in their department or from the IT department, based on their source of training. The differences reported in Table 5.4 are statistically significant, indicating that they are not due solely to sampling variation or Information Technology Management 125

random chance. These results suggest that the nature and quality of initial training clearly influence individuals’ capacity to help themselves when using IT applications, and training by those who developed the software (IT department staff or vendors) is clearly the best strategy for generating more capacity.

Table 5.4 AVERAGE SCORES ON EASE OF GAINING HELP (7-HIGH, 1-LOW) No Functional IT Source of Help Training Department Department Vendor

Help from system 4.3 4.3 5.2 5.3

Help from people 4.8 5.5 6.3 5.9

Another issue is the extent to which training influences performance. This is a complex issue, but Table 5.5 attempts to look at this by relating end-users’ source of training to how they assess various performance characteristics of the applications they work with. While the differences in Table 5.5 are all statistically significant (they are not due to sampling variation or random chance), we must be cautious in interpreting the results. First, these ratings are perceptually based and do not control for many other factors, such as the substantive nature of the applications, the end-users’ prior exposure to IT systems, and other factors. Nevertheless, end-users with no training gave systematically lower performance ratings. If these results are correct, they clearly highlight the potential value of training in enhancing IT capacity. This is especially important because prior work, as well as the data gleaned from interviews, suggests that application training is always under-funded (Caudle et. al., 1989; Fletcher et. al., 1992).

Table 5.5 AVERAGE SYSTEM PERFORMANCE SCORES BY SOURCE OF TRAINING System No Functional IT Performance Training Department Department Vendor

Reliability 4.7 5.8 6.1 5.9

Usefulness 4.6 6.3 6.5 5.7

Timeliness 4.6 6.1 6.4 5.8

Quality 5.0 5.8 6.4 5.7

Systems Management and Maintenance Capacity

Five of the municipalities have full responsibility for running their systems and applications. One of these five municipalities estimated that it took approximately 20 percent of its resources to keep the system up and running. In that municipality, there is tension between 126 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

the IT unit and the police department, which has a long history of running an independent IT system. Most of the municipalities noted that police systems typically have their own applications, equipment, and IT professional staff and run semi-autonomously from the general government systems. Despite this, most of the general government IT management provided some level of support to police systems, such as emergency response planning and system backups. Municipalities with good leadership and adequate IT management capacity include some form of coordination between the general government systems and public safety, usually through planning activities. The three basic models for operations found in the municipalities are client server systems, departmental computing, and contracted services. All the municipalities use both client server approaches and departmental systems approaches to some extent. Most municipalities use a client server approach to manage operations of the office automation systems. In those municipalities with significant internal application development capacity, client server approaches, where centrally provided software are accessed locally through a network, are also used to provide application to various agencies. As noted above, There is a strong the most common application of departmental computing systems is in correlation between public safety systems, although other departments, such as engineering those municipalities (e.g., GIS systems) and finance, are also able to maintain their own with strong IT machine and/or applications. Two municipalities contract out for central data processing and maintenance activities, although they also leadership and have their own WAN for office automation. One of these two munici- internal application palities has excellent leadership but is still struggling with infrastructure development issues. In both of these municipalities, all or part of the payroll data capacity... processing application is contracted out. Another important part of operating IT systems and applications is handling data entry. The nature of the software application and the uses of the data typically determine who will be responsible for the data entry process. In most cases, individuals and organizational units that are most likely to use the data perform the data entry. Most data entry is done in a decentralized manner. Even some enterprise-wide applications such as human resource and financial applications tend to rely on data entry by those agencies rather than a central IT group. There is a strong correlation between those municipalities with strong IT leadership and internal application development capacity, where internal applications development capacity includes capacity to run and maintain their locally developed IT applications. The most common source of IT leadership in these municipalities typically emanated from business administrators or financial directors. In four municipalities, IT is directly responsible to either business administration or finance, and two of them were relatively well-off with regard to IT capacity. In three municipalities, IT is more independent and self-standing, with IT professionals providing leadership. At least two of these municipalities have strong programs, while the third is in a more developmental state. This suggests that both of these leadership arrangements can be successful. Information Technology Management 127

Summary

Information technology management capacity is determined by many factors – some directly under management’s control and some not. While political variables have been systematically excluded because they are outside the domain of this study, they clearly have a large impact on overall IT management capacity (Bozeman and Bretschneider, 1986; Kraemer and Dedrick, 1997). Similarly, a municipality’s economic and historic environment also plays a large role in determining IT management capacity. Consequently, this study has purposely tried to avoid characterizing a municipality as having either good or bad IT management or IT management capacity. Instead, it has opted to identify the various institutional and managerial approaches used within these municipalities for dealing with the six different sub-components of IT management. From this analysis, several important lessons may be gleaned. Any lesson’s particular relevance to a specific situation requires careful consideration of many other factors; and, as noted above, those factors are often not completely under the control of management. Nevertheless, some points seem to correlate well with situations in which high levels of IT management capacity are present.

Recommendations for New Jersey Municipalities

The following is a list of the recommendations for these seven New Jersey municipalities; additionally, they may have application for other New Jersey municipal governments in similar circumstances.

1. Take advantage of county government as a possible service provider, particularly for specific data management functions. This type of cooperation can be used to reduce cost, as well as build cooperative capacity for other purposes such as planning and capital purchasing (see Recommendation 3). 2. Develop and maintain a formal multiyear IT planning process with specific components related to capital planning for IT infrastructure. 3. Take advantage of capital pooling with the county or special jurisdictions, especially schools and libraries when they purchase IT hardware. 4. Develop some internal capacity to generate applications; but it should not be the only vehicle for application development. Sole reliance on vendors for software dramatically reduces a municipality’s IT management capacity. 5. Develop and maintain a strong internal IT capacity to evaluate vendor provided software to ensure compatibility with network hardware, software, and load requirements. 6. Develop an integrative approach to data management, which treats data as an enterprise-wide resource via database management systems and/or GIS. 7. Offer more IT training and have it provided by IT staff and vendors. Training for the use of IT applications is even more important than is typically thought. 8. Training can be augmented through use of local adult education programs, community colleges, and universities. 128 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Recommendations for the State of New Jersey

The following set of recommendations is relevant to the role of the state.

1. The state should develop different strategies for local governments with different levels of IT management capacity. While most of the existing grant and technical assistance programs aim to support municipalities with little or no IT management capacity, the state does not provide much support for municipalities that already have significant capacity. 2. For municipalities with various state agencies, the state needs to consider data exchange mechanisms that are less restrictive and permit more flexible responses by municipalities. 3. While GIS is the more common approach to data management integration – in part because of state-level support – it is a more expensive approach, which requires specialized hardware and software. Therefore, the state should help support the development of database management systems to integrate data, such as those developed by Old Bridge in expanding property tax system files to citizen-level data. Information Technology Management 129

MANAGING FOR RESULTS

AT ALL LEVELS OF GOVERNMENT, LEADERS AND MANAGERS FACE THE CHALLENGES of increasing demand for efficient and effective delivery of services, growing expectations for data documenting program performance, continuing resource limitations, and escalating demand for accountability. Performance-based management, also known as managing for results (MFR), measures and reports the extent of the achievement of program goals and uses measures to improve program performance. The emphasis is on results. Performance measurement is a method of assessing the progress of public programs in achieving the results or outcomes that citizens, clients, customers, or stakeholders expect. Simply put, managing for results tells people how well public programs are doing, and it is an important aspect of accountability in government. Government performance and accountability are the subjects of a spirited public debate. Given the prominence and ubiquity of performance demands, many government entities have turned to performance measurement systems in an effort to improve their efficiency and effectiveness. Although measurement systems linked to government performance date back at least 100 years (Moynihan and Ingraham, 2001), today’s sys- Given the prominence tems have grown in sophistication and relevancy. Technological and ubiquity of advances have made performance measures easier to collect and performance demands, interpret (Kamensky and Abramson, 2001). Managing for results is a process rather than a single technique and is characterized by its many government emphasis on strategic planning, data collection, performance meas- entities have turned to urement, and public dissemination of results to stakeholders. performance measure- Indeed, Moynihan and Ingraham (2001) note that these factors help ment systems in an elevate MFR beyond previous performance-oriented reform efforts effort to improve their such as management by objective (MBO), performance-based budgeting (PBB), and zero-based budgeting (ZBB). efficiency and A review of the MFR literature reveals a wide variety of defini- effectiveness. tions for MFR systems. For instance, a U.S. General Accounting Office (GAO) report links high-performing government organizations to “the dynamic and complementary process of setting a strategic direction, defining annual goals and measures, and reporting on performance” (1999, 7). Broadly defined, MFR is a customer-oriented process that facilitates benefit maximization to customers of government services while minimizing negative consequences (Hatry, 1999). More specifically, Ingraham and Donahue define MFR as:

The dominant mechanism by which leaders identify, collect, and use the information necessary to evaluate the institution’s performance in pursuit of key objectives to make decisions and direct institutional actions. Managing for results comprises a set of tools 132 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

through which organizational learning processes are formalized. It is thus an important management subsystem and a key tool for leaders seeking to improve the ability of the other subsystems to support the overall institutional management capacity and to contribute to successful policy outcomes. (2000, 303)

The most visible MFR system in place today is the statutory framework established by the Government Performance and Results Act (GPRA) of 1993 (Public Law 103-62), which legally requires virtually every federal agency to practice MFR. Statutory requirements also exist at the state level; 33 states have passed legislation that require their agencies to practice strategic planning, performance reporting, performance management, performance budgeting, or any combination of them (Liner et al., 2001). For state and local levels of government that are not bound by statutory performance measurement requirements, many must adhere to administrative requirements established by executive orders, or by a central or oversight agency (Melkers and Willoughby, 1998a; Ingraham and Moynihan, 2001). One widely cited justification for government organizations to practice MFR is simply to institutionalize a mechanism to help meet the performance standards citizen-stakeholders expect from government. Another is to increase stakeholder trust in government. Indeed, empirical evidence suggests that a relationship exists between stakeholders’ perception of government performance and their level of trust in that government (Kamensky and Abramson, 2001; Kohut, 1998). Moreover, performance measurement systems are considered a necessary component of effective governance, since performance measures enable citizens and public officials to evaluate the connection between policy options and their outcomes (Moore et. al, 2001). Additional benefits of MFR systems include program evaluation, contracted and in-house service comparisons, and improved public communications (Moore et. al., 2001). Managing for results systems also help inform realistic performance targets by enabling government agencies to evaluate their present performance against the past (Ammons, 1995). Ultimately, the sophistication of a government’s MFR system is important because the government’s capacity to properly manage its administrative infrastructure is linked to the quality of its policy outputs. Managing for results is most prominent at the federal and state levels of government and has sporadic success at the municipal level. However, a review of the managing for results literature reveals that MFR use and acceptance is expanding on the local level. Lessons and best practices from federal and state MFR systems are trickling down to lower levels of government, and active involvement from professional associations and organizations such as the International City/County Management Association (ICMA), The Urban Institute, and the National Academy of Public Administration (NAPA) is helping to facilitate its implementation (Nathan, 2001; Melkers and Willoughby, 2001). Evidence also suggests that local governments can implement results-based systems more easily now by borrowing and assimilating MFR programs from any number of existing models (Walters, 1997). However, robust MFR systems at the municipal level remain the exception, not the rule. Recent research by Poister and Streib (1999) suggests that less than 40 percent of all U.S. municipal governments practice some meaningful variation of performance measurement in their management and decision-making processes. Furthermore, performance measurement systems were found more frequently in municipal jurisdictions with populations larger than 100,000 and in jurisdictions with council-manager forms of government rather than council- mayor types. While a minority of municipal-level governments operates exceptional, well Managing for Results 133

functioning, or improving MFR systems, David Ammons rightly argues, “most have a long way to go” (1995, 26).

Managing for Results Capacity and Systems

Municipal governments that are moving toward any MFR or performance measurement system need to assess the bounds of their managerial capacity. Management capacity is the “government’s intrinsic ability to marshal, develop, direct, and control its human, physical, and information capital to support the discharge of its policy directions” (Ingraham and Donahue, 2000, 294). This capacity resides in the administrative structures designed to oversee the government’s financial, capital, human resources, and information technology functions (Ingraham and Donahue, 2000). Since government functions are dynamic, capacity also depends on the long-term maintenance of the government’s resource base through performance measurement, performance monitoring, and strategic planning efforts. Moreover, capacity is also affected by government’s ability to function under various environmental conditions, including resource constraints and political contexts. Since a link exists between the quality of a government’s management capacity and the quality of its policy outputs, an effective MFR system can help government leaders maximize their available resources (Ingraham and Donahue, 2000). To summarize this argument further, managing for results systems play an integral part in building managerial capacity, acting somewhat like a lynchpin holding together, coordinating, and directing the government’s underlying financial, capital, human resources, and information technology functions. Once the link between management capacity, administrative institutions, and policy outputs is better understood, leaders can better marshal government resources in directions consistent with high performance government. Managing for results systems are made up of a series of essential components. They are strategic planning, data collection, performance measurement, verification, and continuous feedback. Furthermore, they can be viewed as stages of the MFR process. The remainder of this section will address these key stages.

Strategic Planning

Effective strategic planning is the backbone of a well-tuned MFR system. A recent GAO (1999) report notes that performance plans should link long-term goals to daily operations, and answer three core questions: does the agency have a clear understanding of intended performance? Does the agency have the proper balance of strategies and resources? Will the performance information be credible? Additionally, strategic plans must also contain “a mission and goals statement and a description of the indicators used to measure output and outcome” (Melkers and Willoughby, 1998b, 2). Governments and their departments should craft long-term strategic plans that are consistent with their missions, objectives, and goals and develop yearly strategic plans in support of the long-term plan. Since long-term strategic plans often extend beyond the incumbency of a given administration, planners must resist the temptation to incorporate broad, ambiguous goals into the framework. The strategic planning process should also provide clear goals and expectations for public managers and employees. Feedback from performance measurement systems allows public managers and employees to monitor and link their progress to established goals and expecta- 134 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

tions (Aristigueta, 1999) and to compare their present performance against their past performance. Effective strategic planning must establish valid and attainable goals, and leaders charged with the planning process must not set the bar so low that the government, its departments, or programs can meet performance targets with little or no effort. Effective planning also requires public managers to link performance goals to their daily operations (Kamensky and Abramson, 2001). Although fledgling MFR programs may lack sufficient data to adequately inform their initial strategic plans, the process of collecting, verifying, and refining performance measurements will inform the planning process in subsequent years. The effect is also cumulative – analytical capacity increases as government offices continue to amass and properly utilize performance data. However, since the planning process is so closely linked with the measurement process, effective strategic planning must also incorporate high-quality data into the process.

Data Collection

When developing data collection systems, many government entities must first overcome underdeveloped analytical experience and insufficient resources. Budget and personnel constraints, lack of institutional expertise, and simple day-to-day management tasks often frustrate sustained data collection efforts. Moreover, well-intentioned data collection efforts may become an exercise in futility as enthusiasm for performance measurement systems wanes, degenerating into data collection just for the sake of collecting data. Data can come from many sources, including “existing records, time logs, citizen/client surveys, trained observer ratings, and specially designed data collection processes” (Ammons, 1995, 22-23). Some public services lend themselves readily to measurement, while others do not. For instance, many municipalities that do not have institutionalized MFR systems already measure trash collection, since the sanitation department’s “mission is unambiguous, resources are clearly identifiable, the output is readily measurable, and criteria can be derived for directly indicating quality” (Rosen, 1995, 58). Deciding which data to collect to inform the planning and measurement process is a formidable task. Generating valid, relevant, and reliable data is crucial to the overall MFR process (Poister, 1995). Care should be taken to collect data for measurement outcomes in addition to simple workload outputs. It is also worth noting that not every government outcome can be measured readily in quantitative terms, and sometimes pinpointing the data for accurate measurements may defy reasonable costs. Since data collection and processing expend the largest portion of an MFR system’s resource base (Poister, 1995), leaders must balance these costs with the expected benefits. When data are cost prohibitive or difficult to pin- point, Osborne and Gaebler (1995) suggest using the best proxies or surrogates available in the measurement process. Rosen concurs, “not every kind of service can be readily measured, but many, if not most, can be – with a little imagination and confidence. The methodology exists” (1995, 58). When acceptable proxies or surrogates cannot be found, the omission of data must be identified (Hatry, 1999). Constantly evaluating and verifying data can help improve and refine the measurement process over time. If performance measures are found that do not accurately represent the content of the government’s, department’s, or program’s outcomes, they can be adjusted accordingly. Another alternative is to collect and process qualitative data, since managers can receive “valuable insight by spending time observing the program, agency, or provider; talking with workers; and listening to customers” (Osborne and Gaebler, 1995, 40). Managing for Results 135

Performance Measurement

Performance measures are simply “quantitative statements that provide information on some aspect of public services,” and function as quantitative indicators of goal attainment over a specified period of time (Moynihan, 2001, 13). Like the data collection process, developing metrics that accurately measure what they are intended to measure is challenging (Poister, 1995). Ammons (1995) provides a criteria-based approach to performance measurement and suggests that well-developed performance measures are valid, reliable, understandable, timely, resistant to perverse behavior (such as deliberate attempts to circumvent or “beat” the performance measure system), comprehensive, non-redundant, sensitive to data collection costs, and focused on controllable facets of performance. Additionally, performance measures are most successful when front-line employees and supervisors assist in their development (Ammons, 1995) and stakeholder input is included during the planning process (Rosen, 1995; Theurer, 1998). Performance measurement systems report many forms of information. Within the context of public services, there is a strong distinction between outputs and outcomes (Hatry, 1999). Output measures reflect program activities or actions that program personnel have completed. Examples are the tons of refuse collected, the miles of roads paved, and the number of parking tickets issued. Outcome measures refer to events associated with progress toward achievement of goals and objectives, for example the percentage of households that participate in recycling programs, the number of road miles not requiring servicing within 24 months of repaving, and the percentage of parking violators that are not repeat offenders. Governments that operate performance measurement systems tend to overemphasize the collection and use of output statistics (Ammons, 1995). This is not surprising, because often they are easy to collect and interpret, and in many instances output measurement collection predates any formalized performance measurement or MFR program. Managers must also strike a balance between resource allocation and developing a sufficient number of performance measures. Too few measures may not reflect all of the organization’s goals adequately, and consequently the organization might favor some goals at the expense of others (Osborne and Gaebler, 1995). Conversely, too many measures may squan- der organizational resources by confusing organizational priorities, overloading employees and managers with paperwork and other details, and inhibiting the feedback process (Osborne and Gaebler, 1995). Ultimately, the measurement process must be closely linked to the strategic planning process. This linkage creates a cyclical relationship, with each process informing and contributing to the other. As data collection and measurement undergo continuous refinement, knowledge of agency performance increases. As this knowledge informs the planning process, performance targets and goals are refined and improved. Ultimately, this process of continuous refinement translates into improved policy and service delivery:

A well designed measurement system enables agency managers to assess the fairness of a program, and make appropriate adjustments. A good performance measurement system will help officials demonstrate to the public and to its policymakers that services are delivered fairly – and this will build trust. (Hatry, 1999, 4)

Verification

Data and measurement verification is a necessary and underutilized component of the man- 136 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

aging for results process. In a recent Governmental Accounting Standards Board (GASB) performance measurements survey of state and local levels of government (2001), 69.9 percent of respondents (n= 489) reported that data verification is performed by the same agency or department that develops the measures, 21.5 percent indicated that internal auditors verify the data, while only 2.2 percent reported that verification is handled by external or non- governmental entities. Since an MFR system is only as good as its ability to properly measure performance, questions of quality, relevancy, and accuracy are of utmost importance. Thus, public managers should take care to incorporate verification mechanisms into the overall MFR process. Hatry (1999) suggests that agency and program managers retain the primary responsibility for quality assessment, with only periodic reviews by independent auditors.

Continuous Feedback

Continuous feedback is the process of disseminating complete performance information to citizen stakeholders and other interested parties, and then applying lessons from the results back into the strategic planning and decision-making processes. With feedback, leaders and managers are equipped to make better policy decisions, which leads to improved outcomes. A breakdown in the feedback process could hinder the benefits of an MFR system. Indeed, Fountain (1996) rightly argues, “Unless the data are used to inform decision-making and change operations, they are of little consequence.” In this context, continuous feedback becomes a self-correcting mechanism by creating opportunities to refine and improve the MFR process from the planning stage to the decision-making stage. Perhaps the greatest benefit of continuous feedback is an increase in accountability. However, accountability is dependent on complete, accurate, and timely analysis of performance information. It is well known that incomplete information makes government accountability very difficult to enforce (Przeworski, 1999). Public managers are confronted often with the decision to either disseminate or withhold performance failures. When performance goals are not met, performance reports should explain why and also include planned actions to achieve goals in subsequent reporting periods (Hatry, 1999). While it may be tempting or politically convenient to omit failures from performance reports, this action undermines decision-makers’ ability to build on their success and learn from their failure. Hatry provides an anecdotal panacea for public managers faced with the undesirable circumstance of reporting performance that is below expectations: a city police chief in such a situation reportedly stated, “If the data looks good, I will take the credit. If the data looks bad, I will ask for more money” (1999, 153). Another benefit of continuous feedback is increased trust in government. Several scholars have linked the open and accountable culture created by MFR systems to an increased level of stakeholder trust (Kamensky and Abramson, 2001; Thomas, 2001). Theurer suggests that feedback to and from stakeholders fosters an increased sense of community between governments and their stakeholders:

The involvement of stakeholders in identifying outcomes also raises the awareness that government cannot achieve most outcomes by acting alone; success requires multiple organizations collaborating together. By engaging stakeholders outside the government, organizations can acknowledge and redefine their roles in the community and help establish collaborative agreements. (1998, 22) Managing for Results 137

Managing for Results Environment for New Jersey Municipalities

During the 1990s, significant progress was made among the states in the movement toward managing for results. By the end of 1999, according to the National Conference of State Legislatures, 33 states had “broad governing for results legislation.” New Jersey is one of the 17 states without such legislation for its state government. Consequently, the state has no statutory requirements for agency strategic planning, performance measurement and reporting, citizen involvement in MFR, and provisions for employee and agency incentives for achieving desired results. Despite the lack of legislation requiring managing for results for state agencies, the executive branch is committed to performance management activities. The New Jersey State Plan and related planning documents contain overarching goals and performance measures. For example, the State Development and Redevelopment Plan prepared by the State Planning Commission establishes a vision and identifies goals and strategies for guiding all levels of government toward achieving the goals of the State Planning Act of 1986. Additionally, Executive Order Number 96 signed by Governor Whitman on May 20, 1999, requires state departments and agencies to “pursue…policies which comport with the 11 sustainability goals” in the Sustainable State Report. This benchmarking report, subtitled “Living With the Future in Mind,” was completed by New Jersey Future in partnership with the Office of the Governor and was adopted as a state plan with the executive order. The report contains indicators to measure progress toward the goals. Specifically, the order encourages departments and agencies to establish practices, exchange information, and report progress toward reaching sustainability goals. Another example of executive branch commitment to MFR is the inclusion in the governor’s budget of considerable performance measures. Based on its evaluation of state MFR systems, the Government Performance Project reported in 2001 that New Jersey’s managing for results efforts ranked approximately in the middle among all 50 states. Thus, the state government deserves some credit; however, there is considerable opportunity to enhance its performance management orientation. Although the planning documents establish a vision and contain goals, as they should, a significant weakness is that performance measures are primarily output, not outcome, measures. The budget has plenty of performance measures; however, many of them are either inputs or costs per transaction. Since MFR efforts at the state level are not extensive, it is not surprising that the state has no requirements for performance management levied upon its municipalities. In fact, the NJI is not aware of any state statutes, policies, regulations, documents, guidance, or training materials that reflect a requirement or expectation for municipalities to engage in MFR activities. Thus, any MFR efforts by local municipal governments are practiced under the authority of local administrative requirements. Consequently, the environment in New Jersey is one where conditions are ripe for elevating MFR.

Criteria for Assessing Managing for Results

Managing for results systems in each municipality were evaluated against four criteria adapted from the Government Performance Project. The criteria – extent of strategic planning, extent of performance measures, use of performance data, and communication of results – 138 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

were used by the GPP during the past four years to assess MFR system capacity in state, large city, and county governments across the United States. A panel of distinguished elected and career public officials, academics, and management experts that consulted with the GPP determined the criteria. Table 6.1 lists the four MFR criteria and sub-criteria for two of them.

Table 6.1

MANAGING FOR RESULTS CRITERIA 1 Municipality engages in results-oriented, strategic planning • Strategic objectives are identified and provide a clear purpose • Municipality leadership effectively communicates strategic objectives to all employees • Municipality plans are responsive to input from citizens and other stakeholders, including employees • Agency plans are coordinated with central municipality plans

2 Municipality develops indicators and evaluative data that can measure progress toward results and accomplishments • Municipality can ensure that data are valid and accurate

3 Municipality leaders and managers use results data for policymaking, management, and evaluation of progress

4 Municipality clearly communicates the results of its activities to stakeholders

A municipality with a sound managing for results system satisfies the following basic prerequisites:

Engages in results-oriented, strategic planning. The first criterion relates to the municipality knowing where it wants to be and how it intends to get there. Strategic planning articulates the preferred direction of the municipality and its departments. The essential elements of strategic planning are vision and mission statements, goals, objectives, and action plans. The mission is the fundamental public purpose and reason for existence. Goals are broad, desired outcomes for the municipality and its programs. Objectives are measurable targets for the end results that a service or program is expected to accomplish in a specified time period. Develops indicators and evaluative data that can measure progress toward results and accomplishments. The second criterion concentrates on measures or indicators of the degree of success in achieving objectives. Commonly referred to as performance measurement, it is the periodic measurement of program inputs, outputs, or outcomes. The usual types of measures are input measures, output (or workload) measures, outcome (or effectiveness) measures, efficiency (or unit-cost) measures, and productivity (or cost-effectiveness) measures. It is important for municipalities to understand the difference between output and outcome measures. Outputs refer to the number of units produced, services provided, events completed, or people served. On the other hand, outcomes are measures of the extent to which a program or service has achieved its goals and objectives or desired impact. For example, the number of visits to residences by the municipality animal control officer is an output indicator. The percentage of out-of-compliance pet owners that became compliant within one month of being cited is an outcome indicator. Uses results data for policymaking, management, and evaluation of progress. The third criteri- Managing for Results 139

on centers on the use of performance information (or results data) by municipality managers, the mayor, council members, and other key stakeholders affected by or interested in programs. Performance information should be used to manage programs in ways that achieve goals and objectives and inform policy decisions. Communicates the results of its activities to stakeholders. The fourth criterion addresses the reporting of performance data and the extent of progress toward goal accomplishment. Communication of results to stakeholders can occur in a variety of forms.

Methodology and Data Collection

The managing for results research team used a multiple-case design to produce an in-depth understanding of MFR systems and associated complexities in the municipalities. Additionally, the research methodology consisted of multiple data collection methods and analysis to yield consistently and accurately derived findings. Data from each municipality were acquired from three sources: a questionnaire, public documents, and interviews. First, the questionnaire was an open-ended, 10-question instrument that was a modified version of the Government Performance Project MFR survey. Questions centered on the four criteria listed in Table 6.1. Questionnaires were administered in August 2001, and four municipalities completed and submitted them. Second, documents from all the municipalities were obtained and analyzed during the September to December 2001 period. Documents consisted of strategic plans, annual reports, reports to citizens, budgets, memoranda, monthly activity reports, summary data sheets, and speeches. Third, researchers conducted in- depth, open-ended, semi-structured interviews with business administrators or public information coordinators in each municipality in September 2001. The interviews allowed researchers to follow up on answers provided in the questionnaires or to obtain answers from the municipalities that did not complete a questionnaire. Two researchers conducted the interviews, interview protocols were followed for consistency, probing was used to obtain additional information from respondents, interviews were tape-recorded, and transcripts were prepared by an experienced transcriber. The interviews lasted approximately two hours each. Both researchers analyzed the surveys, documents, and interviews using a coding process to determine how well the municipalities satisfied the MFR criteria, to conduct cross- case comparisons, and to generate themes and patterns from the data.

Results: Managing for Results in New Jersey Municipalities

Analysis of data from the seven municipalities revealed three major themes regarding the state of managing for results in the municipal- Analysis of data from ities. First, in general, all of the municipalities lack a formalized, the seven municipali- municipality-wide MFR system. Second, two of the municipalities, ties revealed three Franklin and Trenton, have rudimentary MFR systems. The other major themes five municipalities – Brick, Elizabeth, Irvington, Old Bridge, and Paterson – show evidence that they are conducting some “MFR-like” regarding the state of elements. Third, all the municipalities experience constraints on managing for results in MFR implementation. The key findings are addressed in the subsec- the municipalities. tions that follow. Despite the underdeveloped MFR systems existing 140 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

in the study’s municipalities, all can advance their MFR systems if certain steps are taken. Recommendations for New Jersey municipalities and the state of New Jersey are made in the final sections of this chapter.

Extent of Managing for Results Systems

Managing for results systems in the municipalities are at a beginning stage. The two most advanced are Trenton, with a basic MFR system, and Franklin, with a developing MFR system. The other five municipalities do not have developed MFR systems, per se. But, of those five, Brick shows the most evidence that it has fundamentals of MFR in place. Moreover, Irvington is shifting its culture to prepare for the possibility of an MFR system. Elizabeth developed a strategic planning document in 1994, as part of an application for the Federal Enterprise Community Program administered by the U.S. Department of Housing and Urban Development. The municipality completed the goals contained therein, and the authors are not aware of any updates to the plan. It is not a strategic planning document in the sense of managing for results; however, it could serve as a valuable starting point for future MFR efforts in Elizabeth. Additionally, Elizabeth, Old Bridge, and Paterson have some MFR elements, such as communication mechanisms, that could be used for MFR system purposes. Table 6.2 shows the extent of strategic planning in the municipalities. This table summarizes the status of the municipalities for the first criterion. Table 6.3 reports the extent of results measurement, use, and reporting in the municipalities. These factors correspond with the second, third, and fourth criteria, respectively, used to assess MFR systems. The remainder of this section presents the researchers’ findings, which are based upon evidence available in documents and questionnaires that buttressed interview data.

Table 6.2

STRATEGIC PLANNING IN MUNICIPALITIES Status of Department Vision, Mission Managing for Municipality-Wide Strategic Statements, Results System Strategic Plan Plans Goals, Objectives Brick Evidence of None None Vision fundamentals Elizabeth None 1994 Strategic Plan developed as None Vision part of the application requirements for the Enterprise Community Program of the U.S. Department of Housing and Urban Development (plan now defunct) Franklin Developing None None Vision, mission statements, and some goals and accomplishments for departments Irvington Shifting Recently revised Irvington master None Vision, culture to plan shows evidence of strategic municipality prepare for planning goals MFR

table continued on next page Managing for Results 141

STRATEGIC PLANNING IN MUNICIPALITIES (CONT.) Status of Department Vision, Mission Managing for Municipality-Wide Strategic Statements, Results System Strategic Plan Plans Goals, Objectives Old Bridge None None None Vision Paterson None None None Vision Trenton Basic No formal plan; comprised of 10 Vision, mission department missions, goals, depart- statements, objectives, and action plans ments; goals, objectives, Policing accomplishments, 2000 is the and planned most formal actions for most departments

Table 6.3

RESULTS MEASUREMENT, USE, AND REPORTING IN MUNICIPALITIES Types of Use of Communication Performance Results of Measures Data Results Brick Baseline, Police Dept. annual report Township annual input, output report Elizabeth None Informal None Franklin Baseline, Health Administration annual report None input, output Irvington None Informal (Fire Dept. annual report) None Old Bridge None Informal Mayor memoranda, Friday memoranda, Mayor State of the Township speeches, Outlook newsletters Paterson None Informal 1998 Blueprint Report Trenton Baseline, Police Dept. weekly CompStat report, City annual report, benchmarking, department monthly output reports, Mayor State of the input, output monthly cabinet meetings, department City Address annual reports, to allocate resources, to improve efficiency and effectiveness

Criterion 1: Strategic planning

Finding 1a: Leadership vision exists in all the municipalities. A positive finding is that evidence from multiple sources confirms that leadership vision is prevalent in all the municipalities. Researchers found vision statements clearly published in strategic planning documents from Irvington and Trenton. According to the November 2001 Irvington Master Plan, the township seeks to revitalize itself. Trenton’s many planning and reporting documents refer to improving quality of life and increasing opportunities for its citizens. Paterson articulated a vision with goals for community revival in its July 1998 report titled, A Blueprint for Change: A Report to the Citizens of Paterson. Brick leaders stated that their primary focus is on provid- 142 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

ing the best services possible and achieving the best value for taxpayer dollars. Old Bridge officials emphasize making the township a “great place to live” and tout its professional management and strong financial condition as pillars of the community. Elizabeth centers its attention on continued economic development for the benefit of the city. Finally, Franklin is committed to further advancement of its progressive management practices so that “real performance improvements” occur in all public service deliveries. Finding 1b: None of the municipalities has a formal, unified, stand-alone, comprehensive municipality-wide strategic plan. Trenton and Irvington do have documents that serve as strategic plans to provide direction for their municipalities. Although Trenton does not have a separate formal strategic plan, it considers its strategic plan to be comprised of all the departments’ goals, objectives, and action plans. This bottom-up approach to strategic planning does enable Trenton to manage strategically. The Irvington Master Plan serves as Irvington’s strategic plan. The new master plan was updated during 1999 to 2001 and replaced the previous one completed in 1979. The Master Plan was prepared by a task force comprised of the business administrator and department heads; an advisory committee made up of council members, planning board members, and community members; and a consulting firm. Two public meetings were held to obtain input from citizens, which is an important dimension of strategic planning. The master plan is primarily a land-use document, but it also provides coordinated direction in other areas for the township administration. It identifies 13 goals, and some of them address such diverse activities as increasing employment opportunities, providing affordable housing, ensuring public facilities meet the needs of citizens, and strengthening schools as neighborhood centers. Although every municipality is required to have a master plan in place, it is unclear to what extent other municipal governments have incorporated strategic planning and performance measurement elements into their respective master plans. Finding 1c: Department-level strategic plans are rare. Trenton is the only municipality that requires its departments to have strategic plans. Trenton’s 10 departments with strategic plans are administration; finance; fire; health and human services; housing and development; inspections; law; police; public works; and recreation, natural resources, and culture. The departments’ strategic plans include mission statements, goals, objectives, accomplishments, and planned actions, although some departments are not as comprehensive as others. The police department produces the most formal department strategic plan. Its impressive plan, called Policing 2000: A Plan of Excellence for the Trenton Police Department, contains a vision statement, a mission statement, guiding principles, and plans of action by organizational divisions. Since 1999, Franklin has required its departments to develop mission statements. Additionally, some Franklin departments have progressed further and annually establish goals and state accomplishments. In Irvington, although the Irvington Master Plan contains goals for the municipality, there are no department strategic plans.

Criterion 2: Performance measures Finding 2: Performance measures are basic. Overall, the state of performance measures is at a basic level. Only Trenton uses performance measures to a significant extent. Output measures are observable in three municipalities – Brick, Franklin, and Trenton – and outcome measures are not visible in any of the municipalities. Furthermore, performance targets are extremely rare. The only efficiency measure found was a set of statistics from the Franklin human resources department tracking the average cost per workers compensation case by fiscal year. Only Trenton reflected benchmarking as a routine tool. Trenton uses performance indicators throughout its departments and, therefore, has the most robust set of measures in the study. Managing for Results 143

For Trenton, baseline data, input measures, and output measures are reported regularly to the business administrator and eventually are published in the city’s annual report to the public. The Trenton police department employs the nationally available CompStat Report software program to track its activity data. Franklin is methodically implementing performance measurement in its departments. The township manager has introduced performance measurements into the budgeting process and is steering the administration toward greater use of performance measures across the board. Performance measures appear in various Franklin internal documents on a small scale and in an informal pattern. Like Franklin, Brick also has baseline data, input measures, and output measures. Table 6.4 includes examples of performance data in Brick, Franklin, and Trenton. Readily apparent is the greater prevalence of performance measures in police and fire departments. This is not surprising, given the high levels of performance expectations and resources bud- geted for these departments. For the other four municipalities, documents made available to researchers did not include sufficient performance measures to classify the municipality as having measures. Some of those documents did list department actions, but they were primarily lists of dates and completed events with extremely few quantitative measures. Based on conversations with business administrators or their representatives in Elizabeth, Irvington, Old Bridge, and Paterson, researchers are convinced that performance data of various kinds does exist within units throughout those municipalities. Data is normally present in existing records or acquired by a designed data collection process. Missing, though, is a formalized,

Table 6.4 EXAMPLES OF PERFORMANCE MEASURES IN MUNICIPALITIES Baseline Data Input Measures Output Measures Brick Brick Police 2000 Annual Police Dept. Investigative Brick 2000-2001 Annual Report: Report: Division: Personnel Dept. of Public Works Juveniles arrested • 1 captain • 24,055 tons recyclables collected • 473 in 1998 • 2 sergeants Office of the Municipal Clerk • 397 in 1999 • 11 detectives • 5,400 licenses and permits issued • 350 in 2000 • 2 secretaries Tax Assessor’s Office • 2,500 field inspections conducted Franklin 2001 Fire Dept. Township Fleet Totals: Health Administration 2001 Annual Activity Report: Smoke • 23 school buses Service Report: detector inspections • 48 snow plows • 74 diabetes risk assessments • 53 in January 2000 • 7 ambulances • 480 food establishments • 107 in July 2000 inspected • 70 in January 2001 • 504 dogs vaccinated in free clinics Trenton Trenton Police Dept. Trenton Police Dept. Trenton 2000 Annual Report: CompStat Report, 2001 Brochure: Dept. of Housing and Development Aug. 27 – Sept. 2, 2001: Personnel • 20 buildings rehabilitated Citywide aggravated assault: • 370 sworn officers • 52 units of family rental housing • 10 current week • 137 civilian members constructed • 20 previous week • 38 single-family homeownership • 50.0% decrease units constructed Citywide theft: • 2,042 year-to-date in 2000 • 1,989 year-to-date in 2001 • 2.6% decrease 144 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

systematic, and visible way of collecting, tracking, and displaying the data to the highest levels of the municipality.

Criterion 3: Use of performance data

Finding 3: Use of performance data is minimal. For performance data to be of value, they must be used. Performance data are put to proper use when leaders and managers use the information to make policy and management decisions that improve program goal accomplishment. Consistent with the second finding for performance measures, Trenton best uses performance data, Brick and Franklin use data minimally and informally, and the remaining four municipalities do not use data in any transparent manner. In Trenton’s case, the use of performance measures occurs regularly in monthly and annual reports and meetings to make trade-off decisions, allocate resources, and improve the efficiency and effectiveness of program delivery. In Franklin, decentralized use happens within departments, and its use is being reported to higher management levels. For Brick, the police department is leading the way in terms of using performance data, while other departments show few signs of using it. Therefore, only Trenton uses performance measures systematically municipality-wide. As mentioned in Finding 2, performance data exist, albeit spontaneously at lower levels, in Elizabeth, Irvington, Old Bridge, and Paterson. Furthermore, managers in these places are, in fact, informally using data to guide their decision-making. Unfortunately, this non-systematic method deprives the municipalities of the fullest benefits possible from a functioning managing for results system.

Criterion 4: Communication of results Finding 4: Communication with stakeholders occurs through a number of means; however, municipalities generally do not communicate results information. Comprehensive performance reporting of successes and failures often faces stiff resistance from government leaders, and the political perils of publicized performance reports may be especially heightened at the municipal level. Every municipality in the study has a variety of avenues to communicate with the public and other stakeholders. These include statements, news releases, and reports; speeches, newsletters, and memoranda; meetings and events; and radio, television, and newspapers. Criterion 4 of a properly executed MFR system is that the information being reported is results information. This means that the reporting should include performance targets, performance measures, and the extent of progress toward goal accomplishment. Ideally, “good” and “bad” results or “positive” and “negative” results should be reported. Too often, governments avoid fully communicating results, because of the potential consequences of bad news. The seven municipalities assessed showed very little trace of communicating results information in the sense described here. Not surprisingly, performance reporting in the seven municipalities is typically limited to just administrative success stories. Brick has a well-tuned public relations operation that dis- tributes daily press releases. Other municipalities send out statistics with the yearly tax bill, and some even utilize public access television and the Internet to disseminate information. Some municipalities submit relatively large amounts of performance data to the council, yet it is unclear if this data are publicly available. Most participants expressed a cautious tone when asked about complete disclosure of performance information, and stated that performance information simply was not demanded or expected by their stakeholders. One participant remarked, “Certainly we don’t communicate a whole lot if we’re not doing well…We don’t make announcements like, ‘Mayor’s goals not met.’” Managing for Results 145

Constraints on Managing for Results Implementation

Noteworthy managing for results writings draw attention to the relatively underdeveloped status of municipal-level MFR systems nationwide (Ammons, 1995; Coe, 1999; Poister and Streib, 1999). Unlike at the federal and state levels of government, few statutory requirements exist for compulsory MFR at the municipal level. Thus, calls for voluntary or adminis- tratively required MFR systems may encounter strong resistance from local officials. Some of this resistance stems from the perception that establishing a viable MFR system may tax available resources, threaten the status quo, or increase demands on the development or ongoing administration of an organization (Ammons, 1995). Resistance toward MFR system implementation may be more pronounced on the municipal level where political accountability is less diffuse. Since municipal governments often have fewer discretionary resources to divert toward MFR processes, the establishment of MFR systems at this level may be politicized much more than at other levels of government. The New Jersey Initiative analysis revealed that these seven New Jersey municipalities are fairly representative of most small municipalities in terms of the lack of sophistication in their MFR systems implementation. The analysis also identified several internal and external constraints that inhibit current and perhaps future efforts to implement an MFR system. Perhaps the most visible constraint within these seven municipalities is the lack of developed institutional systems to gather, process, use, and apply performance data. Although this is typical of most municipal governments with similar-sized populations, underdeveloped analytical systems inhibit public managers’ ability to systematically assess and evaluate government outcomes. Developing this analytical capacity in New Jersey municipalities faces many obstacles; foremost are those related to personnel resources. Civil service system constraints also frustrate some municipal leaders’ ability to recruit and hire highly qualified candidates; thus, key positions are often filled from within (Brick and Franklin do not have a civil service system in place). Hiring and salary constraints often force municipal governments to contract out for the expertise it needs to run programs – often at great expense. An interviewee remarked that employees who have the requisite level of expertise simply cannot devote time to performance measurement, since they must spend their time on daily operations and “putting out fires.” The “fiscally distressed” status of three of the seven municipal governments under study further exacerbates their inability to divert resources needed for results-based management systems. For these three financially troubled municipalities, the New Jersey State Department of Community Affairs must approve all new hires and pay increases. One participant remarked that more than two-thirds of his municipality’s expenditures are allocated for emergency services expenses. Police expenses alone account for between 8 and 28 percent of the total general current expenses for these municipalities (Municipal Analysis Services, 2001). Another respondent noted that planning ahead is very difficult, because the municipalities do not know how much money they will receive from the state in any given year. Lack of resources is a common argument against the implementation of performance measurement systems. However, Ammons (1995) suggests that when a sincere commitment to MFR exists, the resources diverted from existing services are not wasted. Rather, these resources are used to improve the efficiency and equity of services and to better manage the government entity’s already scarce resource base. Participants acknowledged that their use of MFR systems was limited and that they believed their municipality was on par with other New Jersey municipalities statewide. Most participants said they thought their municipalities were doing well, given their budget constraints. 146 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Simple bureaucratic inertia is another internal factor that inhibits MFR systems implementation. It is widely written that bureaucratic organizations tend to resist organizational change (Tracy, 1995). These seven municipal governments are no exception, which is evidenced by several anecdotes gleaned from the interviews. One business administrator claimed success when he was able to get most of his department heads to report rudimentary performance measures, although he described the accomplishment was “like pulling teeth.” Another participant shared that some of his staff still use old DOS software applications in their day-to-day operations, instead of the readily available modernized software systems that were recently installed. Another interviewee said he felt that his municipality’s widespread low employee morale undermined its ability to achieve results in the long term. Most business administrators or their representatives expressed frustration that they could not carry out increased results-based management efforts. One participant identified the statutory prohibition of contracts for municipal business administrators as another constraint. Managing for results oversight must reside somewhere, and MFR responsibilities should reside in the business administrator’s office. However, absence of a contract effectively places the business administrator’s primary focus on achieving results for the mayor and not necessarily for other stakeholders. One respondent remarked that when one serves at the pleasure of an executive figure, one cannot necessarily take the good government (MFR) route. Tracy (1995) writes that union contracts can inhibit results management initiatives. This may be especially pronounced in these seven New Jersey municipalities, which negotiate any- where from three (Brick) to 14 (Elizabeth) separate labor contracts on a regular basis (typically every three to five years). One participant remarked that her administration inherited union contracts that contain language hostile to simple employee performance appraisals, let alone department performance appraisals. Franklin, which has incorporated several fledgling steps toward MFR, did so at a time when many union contracts had come up for renewal. Trenton also began a program of aggressively negotiating union contracts for up to five years at a time. This practice allows managers to plan ahead more easily, since they already know what expenses to allocate for personnel. Finally, the interview process revealed politics as a major constraint on managing for results in these seven municipalities. Participants tended to characterize New Jersey governments as among the most political in the nation and expressed frustration over the fierce political climate they confront in municipal government.

Summary

Overall, the state of managing for results in the seven municipalities Overall, the state of can be characterized as the very early development stage. Trenton has a managing for basic MFR system operating across its departments and up its chain of results in the seven command. Franklin is currently developing an MFR system and is tak- municipalities can ing the right approach – going slowly and methodically to ensure department buy-in and long-term success. Brick has some fundamental be characterized as elements in some departments. Irvington is heading in the right direc- the very early tion, with an updated Master Plan and culture change as high priorities development stage. first, so that MFR might be able to take root later. Elizabeth, Old Bridge, and Paterson have the potential to build upon their management processes and establish MFR systems. Leadership in each municipality resonates a vision for better government and a better community for its citizens. Managing for Results 147

The major shortcomings are the lack of municipality-wide strategic plans, rare department-level strategic plans, basic performance measures, widespread informal use of performance data, and minimal reporting of performance results. Despite these weaknesses, the evidence points to the existence of seeds of MFR in each of the municipalities. All are conducting low-level MFR, although some may not be fully aware of it, procedures are not formalized, or they may not call it managing for results. The findings for these municipalities are probably representative of most other New Jersey municipalities.

Recommendations for New Jersey Municipalities

The seven municipalities assessed by the New Jersey Initiative can advance their managing for results systems, if actions are taken. These findings apply to municipalities in the state that are in similar circumstances, and they may be generalized to New Jersey municipalities statewide. To this end, the authors offer the following recommendations.

1. Council members, mayors, business administrators, department heads, and managers should learn about practices of the most advanced managing for results systems located in: a. Trenton City, Franklin Township, and other municipalities in New Jersey b. Cities recognized as leaders in MFR, such as Charlotte, North Carolina; Portland, Oregon; and Sunnyvale, California (Ammons, 2001) c. Cities with MFR systems ranked the highest by the Government Performance Project in 2000: Phoenix, Arizona; Austin, Texas; Indianapolis, Indiana; Milwaukee, Wisconsin; and San Diego, California (Barrett and Greene, 2000) 2. Councils and mayors should give sufficient discretionary administrative power to business administrators so they can implement managing for results systems. The Faulkner Act permits business administrators to “have the power…to prescribe standards and rules of all departments, to prescribe standards and rules of administrative practice and procedure,” and this power is “potentially very broad, if the mayor and council want [it] to be” (Wolfe, 1994, 12). 3. Business administrators, department heads, and managers should implement managing for results systems that are best suited for their municipality. 4. Performance goals should be clearly linked to departments, programs, and personnel in municipal budgets and other public documents. 5. Appropriate municipality officials should encourage the New Jersey State League of Municipalities, State of New Jersey Department of Community Affairs, and New Jersey Legislature to increase attention to performance-based management.

Recommendations for the State of New Jersey

The state of New Jersey is in a position to further advance managing for results systems for its 566 municipalities. The authors make the following recommendations.

1. Executive branch leaders should learn about practices of the most advanced managing for results systems located in: 148 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

a. States recognized for their long-term experience with MFR, such as Florida, North Carolina, Minnesota, Oregon, and Texas (Liner et al., 2001) b. States with MFR systems ranked the highest by the Government Performance Project in 2001: Iowa, Missouri, Texas, Virginia, Washington, Florida, Kentucky, Louisiana, Michigan, and Utah (Barrett and Greene, 2001) 2. With the leadership of the governor, the executive branch should increase managing for results activities in state government agencies and departments. 3. The Department of Community Affairs should encourage and assist the state’s municipalities with implementing managing for results systems. Assistance should be given based on the needs of municipalities according to different categories of municipalities. 4. The New Jersey Legislature should perform the following actions: a. Consult with the National Conference of State Legislatures (NCSL) about how legislation in the states can improve managing for results (or “governing for results”) activities in state government and about the role of the legislature in the managing for results process. b. Consult with any of the 33 states that have managing for results legislation and learn how their legislation calls for strategic planning, performance measurement, performance reporting, and performance budgeting. c. Pass legislation addressing managing for results that best serves New Jersey and its citizens.

Recommendations for New Jersey Municipalities and the State of New Jersey

Leaders in municipal and state governments are in the position to cooperate and actively work toward the application of managing for results initiatives. In this spirit of cooperation, the authors recommend the following.

1. Council members, mayors, business administrators, department heads, managers, and state officials should learn: a. The principles and methods of performance-based management b. The principles and methods of performance measurement c. The primary lessons from the federal government’s efforts to implement the Government Performance and Results Act (GPRA) of 1993 2. Business administrators, department heads, managers, and state officials should seek guidance and assistance from professional associations and organizations such as the following: a. American Society for Public Administration (ASPA) Center for Accountability and Performance (CAP) b. Governmental Accounting Standards Board (GASB) c. Government Finance Officers Association (GFOA) Managing for Results 149

d. International City/County Management Association (ICMA) Center for Performance Measurement e. National Academy of Public Administration (NAPA) Center for Improving Government Performance 3. Council members, mayors, business administrators, department heads, managers, and state officials should consider the incremental approach to managing for results that the federal government used to implement the Government Performance and Results Act of 1993. Many of the lessons learned from the federal government’s successes and failures can benefit the municipal level of government. 4. State and municipal governments should hire external auditors for periodic reviews of performance results. This makes the feedback process more effective, helps to fine tune measurements, and creates a disincentive to simply “go through the motions.”

CONCLUSION: IMPROVING MANAGEMENT CAPACITY IN NEW JERSEY MUNICIPALITIES

THE RESULTS OF THE ASSESSMENT OF MANAGEMENT SYSTEMS in seven New Jersey municipalities invited to participate in the New Jersey Initiative – Brick Township, Elizabeth City, Franklin Township, Irvington Township, Old Bridge Township, Paterson City, and Trenton City – indicate that commendable management practices are ongoing. Clearly, professional managers in these municipalities and their teams of supporting employees are steadfastly making government work for their citizens. Researchers witnessed first-hand in these municipalities extremely dedicated and resourceful public servants. Still, the findings of our evaluation of management systems in these municipalities also point to the need for reforms. Improving management capacity in the areas of financial management, capital management, human resources management, information technology management, and managing for results is necessary and will require significant commitment to change. More specifically, Expanding management improving management capacity in these and other New Jersey capacity will result municipalities calls for a stronger collaborative approach from municipalities and the state, recognition of vital reforms, and bold directly in revitalized, actions. Going beyond mere adjustments and achieving higher higher-performing, and management performance will require new ways of doing business. more responsive There are no quick and easy fixes. government. Yet we firmly believe that the state and its municipalities can make the recommended changes that will lead to more effective governance. Every day the state of New Jersey and its many local governments affect and shape the lives of all New Jersey citizens. Furthermore, these governments are engaged daily in delivering essential services to New Jersey residents. Expanding management capacity will result directly in revitalized, higher-performing, and more responsive government.

Collaborative Approach From Municipalities and the State

An incontrovertible conclusion of this study is that any success in improving management capacity depends on synergetic actions by both municipalities and the state. At the state level, change must come from both executive and legislative branches. It is time to build upon a collaborative approach by municipalities and the state. Both levels of government are currently cooperating in many ways to govern for the benefit of New Jersey. But a new era 152 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

means a renewal of bilateral efforts must be undertaken. Of course, many other interests play roles in the governing process. Although we focus on the state and municipalities, we acknowledge that entities such as labor unions, citizen groups, interest groups, and the media will have to be considered. At the municipal level, many communities across the state are endowed with highly qualified and professional managers. These business administrators, chief financial officers, and department-level directors have impressive credentials and experience. Competent managers contribute great effort, work within the laws and boundaries of their authority, and get the business of government done well. Our findings suggest that municipalities can do their work in ways that would increase management capacity. First, municipalities should take advantage of the latitude provided under their charter, such as the New Jersey Optional Municipal Charter Law, known as the Faulkner Act, that permits councils and mayors to grant business administrators broad powers and authority to operate and manage municipal affairs. With the appropriate level of authority they need, business administrators are able to exercise their management skills and strengthen management systems. Second, municipal leaders can create an environment that recognizes the value of and rewards management initiative, innovative actions, implementation of best practices from other locales, and prudent risk-taking. At the state level, professional policy-makers are extremely knowledgeable, experienced in the inner workings of local government, and committed to improving government. These highly proficient policy-makers rightfully seek to execute the applicable laws, provide guidance to municipalities, and protect the public’s interest. Like municipalities, the state can make meaningful contributions that will go a long way to improve municipal management capacity. First, the state may experience positive results if it modifies its oversight relationship with municipalities. The current approach emphasizes imposing the state’s view of appropriate performance and regulating to prevent wrongful behavior by municipal officials. For those municipalities where good performance warrants it, shifting to an approach that gives greater prominence to independent capacity building and trust might lead to higher performing government. Second, the state should work with municipalities to find ways to provide regulatory relief where appropriate, generate flexibility for management decision- making, and furnish management tools to local governments.

Vital Reforms

Comprehensive explanations, findings, and recommendations for the management areas of financial management, capital management, human resources management, information technology management, and managing for results appear in The recommendations Chapters 2 through 6, respectively. For each area, specific recommen- for municipalities are dations are made for the state of New Jersey and the municipalities also applicable to studied. The recommendations for municipalities are also applicable to other New Jersey municipalities with similar characteristics and other New Jersey conditions. Overall, four major findings – where vital reforms are municipalities with necessary – emerge from across all management areas: similar characteristics and conditions. Vital Reform Area #1: State regulatory and procedural restraints impede local government management innovation. Conclusion: Improving Management Capacity in New Jersey Municipalities 153

Vital Reform Area #2: In its regulatory management oversight role, the state does not sufficiently differentiate among municipalities in terms of their characteristics and performance. Vital Reform Area #3: Municipalities lack formalized, centralized, and long-term management planning activities. Vital Reform Area #4: Municipalities do not sufficiently exercise the management prerogatives that are available to them.

Bold Actions

Vital reforms require bold actions. In order to reform management systems in New Jersey municipalities, the following expedient measures are recommended for the state of New Jersey, the municipalities assessed, and other New Jersey municipalities with comparable character and conditions. The recommended bold actions correspond with and are aimed at addressing the vital reform areas. For example, the first bold action is targeted toward resolv- ing the first vital reform area.

Bold Action #1: The state should reduce burdensome and costly restrictions on municipal management activities where appropriate; allow more flexibility and discretion for municipal managers; enhance state mechanisms for providing technical, financial, and other kinds of assistance to municipalities; and create incentives for entrepreneurial management behavior by municipal managers. Bold Action #2: The state should further its efforts to classify municipalities in multiple categories, apply different strategies to assist the various categories, and customize regulatory treatment to fit the specific needs and circumstances of different municipalities. Bold Action #3: Municipal councils and mayors should delegate greater authority to business administrators so they can bolster strategic planning; strengthen their management systems; formalize and centralize management oversight activities; and where it is best to do so, integrate management systems across departments. Bold Action #4: Municipalities should be more innovative in applying management practices, take reasonable risks when implementing new management practices, and ask for guidance and assistance when needed from the state.

Supporting evidence, examples, and deeper analysis that logically lead to the vital reform areas and recommended bold actions are found in the report’s earlier chapters. Readers are encouraged to read Chapters 2 through 6 for greater specificity and a fuller understanding of the management areas. The state of New Jersey and its 566 municipalities have the same goals – make democracy function as it was designed to and deliver public services in the most effective, efficient, consistent, and equitable means to citizens. Governments across the nation at all levels are seeking ways to strengthen their capacity to achieve better government performance. The seven New Jersey municipalities that volunteered for the New Jersey Initiative are commended for having the foresight and courage to participate. Our findings and recommended bold actions sharply call attention to the state and local governments taking steps to build management capacity together. Building municipal management in New Jersey can be accomplished 154 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

through a shared effort. We strongly encourage the state and its municipalities to keep the momentum going toward higher levels of effective government. New Jersey government leaders and citizens always have faced challenges with resoluteness. A future of excellence in governance awaits New Jersey. Conclusion: Improving Management Capacity in New Jersey Municipalities 155

Appendices 157

Appendix A

CITIES EVALUATED BY THE GOVERNMENT PERFORMANCE PROJECT

DURING 1999, THE GOVERNMENT PERFORMANCE PROJECT ASSESSED the 35 largest cities in the U.S. based on revenues, and the results were published by Governing magazine in its February 2000 issue. The following are the cities, listed in order of highest to lowest revenues, that were evaluated:

1. New York, NY 19. Austin, TX 2. Los Angeles, CA 20. Seattle, WA 3. Washington, DC 21. Indianapolis, IN 4. Chicago, IL 22. Honolulu, HI 5. Philadelphia, PA 23. San Jose, CA 6. San Francisco, CA 24. Minneapolis, MN 7. Detroit, MI 25. Atlanta, GA 8. Baltimore, MD 26. Anchorage, AK 9. Boston, MA 27. Richmond, VA 10. Memphis, TN 28. Long Beach, CA 11. Houston, TX 29. Cleveland, OH 12. Nashville and Davidson County, TN 30. Milwaukee, WI 13. San Antonio, TX 31. Virginia Beach, VA 14. Jacksonville, FL 32. Columbus, OH 15. San Diego, CA 33. New Orleans, LA 16. Dallas, TX 34. Kansas City, MO 17. Denver, CO 35. Buffalo, NY 18. Phoenix, AZ 158 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Appendix B

COUNTIES EVALUATED BY THE GOVERNMENT PERFORMANCE PROJECT

DURING 2001, THE GOVERNMENT PERFORMANCE PROJECT ASSESSED 40 of the largest counties across the U.S., and the results were published by Governing magazine in its February 2002 issue. The counties were selected based on geographic location in four regions according to the U.S. Census Bureau and revenue size. The numbers of counties by region are 12 in the West, eight in the Midwest, 10 in the South, and 10 in the Northeast. Four states include 22 of the 40 counties with nine counties from California, five counties from New York, four counties from Florida, and four counties from Maryland. The following table identifies the 40 counties that were evaluated:

West Region Midwest Region South Region Northeast Region Alameda, CA Cook, IL Broward, FL Allegheny, PA Clark, NV Cuyahoga, OH Dallas, TX Anne Arundel, MD Contra Costa, CA Franklin, OH Fairfax, VA Baltimore, MD King, WA Hamilton, OH Fulton, GA Erie, NY Los Angeles, CA Hennepin, MN Harris, TX Monroe, NY Maricopa, AZ Milwaukee, WI Hillsborough, FL Montgomery, MD Orange, CA Oakland, MI Mecklenburg, NC Nassau, NY Riverside, CA Wayne, MI Miami-Dade, FL Prince Georges, MD Sacramento, CA Palm Beach, FL Suffolk, NY San Bernardino, CA Shelby, TN Westchester, NY San Diego, CA Santa Clara, CA Appendices 159

Appendix C

PROFILE OF NEW JERSEY MUNICIPALITIES

PANEL A Population Growth Area Rate Municipality (County) Official Web Sites (Sq. Miles) 1990 2000 (%) Brick Twp. (Ocean) www.twp.brick.nj.us 26.2 66,473 76,119 14.5 Elizabeth City (Union) www.elizabethnj.org 12.2 110,002 120,568 9.6 Franklin Twp. (Somerset) www.twp.franklin.nj.us 46.8 42,780 50,903 19.0 Irvington Twp. (Essex) www.irvington.net 3.0 61,018 60,695 -0.5 Old Bridge Twp. (Middlesex) www.oldbridge.com 38.1 56,475 60,456 7.1 Paterson City (Passaic) www.patcity.com 8.4 140,891 149,222 5.9 Trenton City (Mercer) www.ci.trenton.nj.us 7.7 88,675 85,403 -3.7

Race/EthnicityRace/Ethnicity 2000 2000 (%(% ofof Population)Population) Density Black or (Persons Per Sq. Mile) African Hispanic or Municipality (County) 1990 2000 White American Latino Other Brick Twp. (Ocean) 2,529 2,902 95.8 1.0 3.8 2.2 Elizabeth City (Union) 8,943 9,866 55.8 20.0 49.5 18.3 Franklin Twp. (Somerset) 915 1,088 55.1 26.0 8.1 16.5 Irvington Twp. (Essex) 20,339 20,528 9.0 81.7 8.4 5.1 Old Bridge Twp. (Middlesex) 1,486 1,587 79.5 5.3 7.6 12.9 Paterson City (Passaic) 16,693 17,675 30.8 32.9 50.1 30.2 Trenton City (Mercer) 11,516 11,154 32.6 52.1 21.5 12.2

panel continued on next page 160 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

PANEL A (CONT.) Age in 2000 (Years) Under 65 and Median Municipality (County) 5 5-24 25-64 over Age Brick Twp. (Ocean) 6.2 24.0 52.7 17.1 39.4 Elizabeth City (Union) 7.7 29.4 52.9 10.0 32.6 Franklin Twp. (Somerset) 7.3 22.1 59.1 11.5 36.1 Irvington Twp. (Essex) 8.1 30.7 53.8 7.4 31.5 Old Bridge Twp. (Middlesex) 7.0 25.9 56.7 10.4 36.5 Paterson City (Passaic) 8.4 32.6 50.8 8.2 30.5 Trenton City (Mercer) 7.6 30.1 50.8 11.5 32.2

PANEL B Housing Income/Tax Unemploy- (%) Payer ment Rate Total Housing 2000 (1998$) (%) (Units) Owner Renter Municipality (County) 1998 2000 1990 2000 Occupied Occupied Brick Twp. (Ocean) 18,636 3.7 24,965 29,511 83.4 16.6 Elizabeth City (Union) 12,766 6.5 39,101 40,482 29.7 70.3 Franklin Twp. (Somerset) 26,439 1.9 17,080 19,355 72.0 28.0 Irvington Twp. (Essex) 12,752 5.3 22,188 22,032 29.7 70.3 Old Bridge Twp. (Middlesex) 21,948 2.7 19,984 21,438 69.4 30.6 Paterson City (Passaic) 10,827 7.8 43,946 44,710 31.5 68.5 Trenton City (Mercer) 12,662 6.5 30,744 29,437 45.5 54.5

Total Total Revenues* Total Taxes* Employees (2000 $ (2000 $ Examined** Thousands) Thousands) Municipality (County) 2001 2001 2001 Fiscal Category** Brick Twp. (Ocean) 458 58,240 24,348 Suburban-Developing Elizabeth City (Union) 1,448 140,444 49,254 Urban Franklin Twp. (Somerset) 280 39,603 18,783 Suburban-Mature Irvington Twp. (Essex) 1,848 138,161 42,414 Urban-Distressed Old Bridge Twp. (Middlesex) 4,00 38,294 22,927 Suburban-Mature Paterson City (Passaic) 1,680 156,008 67,445 Urban-Distressed Trenton City (Mercer) 3,862 321,088 76,381 Urban-Distressed

Source: U.S. Census Data 1990 and 2000; New Jersey Legislative District Data Book, 2000 and 2001, Center for Government Services of Rutgers University. * Municipal Analysis Services, Inc. **Classification provided by New Jersey Department of Community Affairs. Appendices 161

Appendix D

CONTRACTING AND PROCUREMENT PRACTICES IN NEW JERSEY MUNICIPALITIES

SOUND CONTRACTING AND PROCUREMENT PRACTICES ARE AN INTEGRAL PART of a healthy financial management system, since these practices profoundly affect expenditures and cash flow. Additionally, many policy questions and implications arise with respect to sources of supply and contracting out of services. Well-managed purchasing systems offer opportunities to control, even reduce, expenditures through inventory management and timely payments (Aronson and Schwartz, 1996). Using data collected from a survey distributed to seven New Jersey municipalities in June 2001 as part of the New Jersey Initiative study, this appendix examines the state of contracting and procurement in five of these municipalities (two municipalities did not complete the survey) and makes comparisons against best practices in the field. While the municipalities studied vary in size, location, and fiscal health, examining the contracting and procurement practices in each provides valuable insights into the overall state of financial management in these municipalities. Because New Jersey State law dictates many of the contracting and procurement procedures the municipalities must follow, an analysis of the municipalities would not be complete without considering the legal context in which they operate. Therefore, New Jersey “Local Public Contracts Law” (NJSA 40A:11-1 et seq.) will also be referenced when necessary.

Centralization Versus Decentralization

One of the difficult trade-offs that is regularly identified in examinations of contracting and procurement is between flexibility and oversight. This tension is frequently revealed when discussing centralization versus decentralization in contracting and procurement decision- making. Centralized purchasing responsibility, which gives little discretion to lower-level managers and employees, has several distinct advantages. It allows for more control over expenditures, better oversight to ensure that improper actions are not taking place, less duplica- tion, and bulk purchasing to reduce overall costs. While problems can arise when purchasing is decentralized, this type of system can be advantageous in some instances. For example, if a department is highly specialized and requires materials or services that are unique to its activities, it is often practical to allow that department to make its own procurement decisions. It may be necessary, however, to implement standard procedures and policies that ensure the procurement process results in cost-efficient purchases (Reed and Swain, 1997). 162 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Contracting

Privatization remains a buzzword at all levels of government. The impetus for privatization efforts stems from various forces, including fiscal constraints, pressure from citizens for a more cost-effective government, and a movement toward smaller government (Bartle and LaCourse Korosec, 2001). Savas argues that privatization is the best tool to address these concerns, because it is “the key to both limited and better government” (1987, 288). While privatization can take various forms, the most common form is contracting – competition among private bidders to perform government activities. One of the benefits of contracting is the government’s ability to maintain management and policy control over the type and quality of services it provides. Another variation of privatization – managed competition – permits government agencies to prepare work proposals and submit bids to compete with private bidders. The government may then award the contract to an agency or to a private entity. This policy is desirable, because it allows municipalities to find the most cost- effective means of service provision, whether it is public or private (United States General Accounting Office, 1997). Municipalities in New Jersey are permitted to perform some version of managed competition. New Jersey law states that nothing shall prevent agency employees from making recommendations in order to reduce costs in lieu of awarding competitive contracts. If these recommendations are agreed to and implemented, all other proposals could be rejected. Contracting is a complex issue, and the following sections discuss specific areas of importance within contracting, including formal bidding requirements, contract approval, contracting incidence and reasons for contracting, monitoring, tracking and assessing contracts, and training issues.

Formal Bidding Requirements

New Jersey Local Public Contracts Law establishes the bid threshold for municipalities at $17,500 (or up to $25,000 for those employing qualified purchasing agents). However, municipalities may opt to set a lower threshold for the receipt of formal bids or the solicita- tion of competitive quotes. Currently, Brick, Old Bridge, and Paterson follow the state guidelines, while Elizabeth and Trenton have set the bid threshold at $17,500, regardless of whether purchasers are qualified to approve purchases up to $25,000. Recently, new rules have been adopted which permit all municipalities to increase their bid threshold to $25,000 if they have a qualified purchasing agent as designated by the state of New Jersey Department of Community Affairs. At the time of this report, Trenton had begun the process to do so. While the state of New Jersey sets the bid threshold, no legal provision dictates a maximum percentage of operating expenditures for services that can be contracted out. Therefore, this percentage varies among the municipalities. Brick has the highest percentage, 38 percent. Old Bridge contracts out 25 percent of its services and Trenton’s contracts total 15 percent of its operating expenditures for services. Elizabeth could not provide an exact figure, but estimates that its contracted services equal 10 to 20 percent of total operating expenditures in this area. Although it appears from Paterson’s response that the municipality does, in fact, contract out for services, it did not provide an estimate of the percentage of operating expenditures for services it contracts out. Appendices 163

Contract Approval

The people who are authorized to approve contracts that require public bidding are different than those who are authorized to approve contracts that do not require it. New Jersey Public Contracting Law mandates that contracts requiring public bidding may be awarded only by resolution of the governing body, but some municipalities have additional requirements. Brick, Elizabeth, and Paterson simply follow state guidelines, but contracts in Old Bridge and Trenton must pass other approvals as well. According to Trenton’s survey response, in addition to the city legislative body, the mayor and legal department also must approve contracts. Old Bridge officials stated that the mayor or chief elected official and chief administrative officials must also approve contracts that require formal bidding. These municipal governments demonstrate varying degrees of control over determining which person or entity is required to approve contracts that do not require bidding. Elizabeth and Paterson demonstrate the most stringent requirements. In Elizabeth, the purchasing agent, in conjunction with the city council, approves contracts that do not require bidding. The purchasing agent in Paterson has a bit more freedom, with the ability to approve contracts under $2,500. For all contracts between $2,500 and $17,500, the purchasing agent simply acts as a liaison on the administration’s behalf, to make recommendations to the municipal council, which approves the contracts. In Brick, the governing body passes a blanket resolution each year to allow the purchasing agent to act on its behalf to approve contracts that do not require formal bidding, and in Old Bridge, the business administrator and chief financial officer have this power. Although it was not entirely clear from Trenton’s survey responses which entity can approve contracts, they suggest that the purchasing agent has this ability after two quotes have been solicited.

Contracting Incidence and Reasons for Contracting

The municipalities rely on contracting in varying degrees across many different services. All of the municipalities that were surveyed cited public works and utility services as functions that rely heavily on contracting, but similarities among the municipalities end there. Three municipalities report that they rely heavily on contracting for general government services. Two of the three often use contractors for transportation and other services, such as management information systems, janitorial, and security services. The other municipality uses contractors extensively in each of the following areas: health, human services, and social welfare; public safety and corrections; and parks and recreation services. In evaluating whether or not to contract out a service, the municipalities consider several different factors. Three municipalities base this decision on available skills. For example, Elizabeth and Paterson contract out services that city employees cannot perform, and Brick evaluates manpower, expertise, and equipment needs in its decision to contract out. Old Bridge considers a variety of elements, such as cost, service, and type and quality of service. Trenton, however, does not establish any formal criteria for deciding whether or not a service should be contracted out; it is simply a departmental or administrative decision.

Monitoring, Tracking, and Assessing Contracts

All of the municipalities reported a number of factors they consider when assessing bids. However, New Jersey State law mandates awarding contracts to the lowest responsible bidder after public advertising for bids and bidding is completed. It is likely that the municipalities 164 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

simply confused public bidding with competitive contracting. Competitive contracting in New Jersey is defined as a method of contracting for specialized goods and services in which: the municipality solicits formal proposals from vendors; the purchasing agent, council, or administrator evaluates the proposals; and the governing body awards the contract based on these proposals. The law provides that competitive contracts can be used in lieu of public bidding for the procurement of a number of specific specialized goods and services with prices that exceed the bid threshold. Competitive contracts are to be awarded based on an evaluation and ranking, which includes technical, management, and cost-related criteria and may include weighting the criteria, which cannot unfairly or illegally discriminate against or exclude otherwise-capable vendors. The municipalities consider several aspects when they assess competitive contracts, and reported that they analyze the price, quality or performance standards for the product or service, and producers’ qualifications when assessing bids. Four municipalities added that assurances of timely delivery and producers’ performance records are also factors they consider. One municipality considered bidders’ proximity to the area and whether the businesses are small or owned by women or minorities. However, this practice may violate state law, which states that no specifications may “require that any bidder be a resident of, or that the bidder’s place of business be located in, the municipality or county in which the contract will be awarded or performed, unless the physical proximity of the bidder is requisite to the efficient and economical performance of the contract” (New Jersey Local Public Contracts Law, 19). The law also states that specifications may not “discriminate on the basis of race, religion, sex, national origin, creed, color, ancestry, age, marital status, affectional or sexual orientation, familial status, [or] liability for service in the armed forces of the United States” (19). The municipalities indicated that they monitor and track contracts through two different mechanisms. In four municipalities, the operating department and a central municipality office oversee contracts, which is the preferable method for oversight and efficiency purposes. In one municipality, however, contracts are monitored only at the department level. Each municipality reported using slightly different methods to ensure that contractors comply with the terms of a bid. Brick uses a punch list, which various professionals and qualified employees review before the municipality makes the final payment and releases bonds. The township also conducts periodic site visits and inspections during the contract period. Elizabeth and Paterson both require performance bonds with contracts, but Paterson also utilizes performance complaint forms to ensure performance is consistent with specification requirements. Old Bridge uses performance bonds, punch lists, both regular and unan- nounced site visits, and periodic contractor meetings to ensure that contractors are in compliance. In addition, the engineering staff and director must sign off on a project prior to the release of performance bonds, and final bond payment requires the approval of the governing body. In contrast to this comprehensive system, Trenton does not have any formal measures in place to ensure compliance. In a study conducted by Susan MacManus, slow payment emerged as the most frequently cited complaint among businesses working with the government (Aronson and Schwartz, 1996). With this consideration, analysis of the survey responses suggests that there may be a number of frustrated contractors in the state of New Jersey, since none of the municipalities surveyed indicated that they have a formal policy regarding timely payment standards. All of these governments should consider adopting a formal policy that provides for paying contractors within 30 to 60 days of a project’s completion, provided that the quality of the work is acceptable. Appendices 165

Training Issues

The municipalities were asked to detail mandatory and optional sources of training about contract oversight that are available to managers in charge of this function. Only one municipality indicated that it has formal training requirements for managers with purchasing responsibilities. However, four municipalities offer optional training opportunities with varying availability. Another municipality did not provide any specific information about mandatory or optional training for contract management.

Procurement

Reed and Swain suggest that the goal of any public purchasing system is to obtain the most appropriate and highest quality good or service for the lowest cost. This requires several key elements; among the most important of these are clearly defined responsibilities of the various aspects of purchasing within an organization, methods for procuring goods and services, written specifications, requirements for vendors and contractors, ethical standards for behavior, internal controls, and inventory management. Reed and Swain further advise that written policies and procedures, adopted by the organization’s policy-making body, should explain these elements clearly. This section of the appendix examines topics related to these key elements, such as bidding policies, approval of purchases, monitoring purchases, managerial flexibility, challenges and problems in purchasing, and improvements and innovations in this area (Reed and Swain, 1997).

Bidding Policies

A formal procurement policy is a necessary element for a successful purchasing system. In its Model Procurement code, the American Bar Association has detailed several items that should be included in a procurement policy. These include clarity, consistency, provision for public confidence, fair and equitable treatment of vendors, increased economy and maximiz- ing of purchase values, fostering of competition, and safeguards to ensure quality and integrity (Reed and Swain, 1997). While the survey did not solicit details about the contents of each municipality’s procurement policy, it did ask the respondents to indicate whether a formal procurement policy exists in their municipality. Only two municipalities indicated that they have a procurement manual, and another cited NJSA 40A:5-1 et seq Local Fiscal Affairs Law as its procurement policy. Since legal jargon can be difficult to interpret, all municipalities should consider pro- ducing a procurement manual for distribution. Although the bid threshold established by the state of New Jersey is $17,500, or $25,000 for qualified purchasing agents, a municipality’s governing body can elect to set a lower threshold if it so chooses. All municipalities indicated that they have a formal process for obtaining bids or quotes for goods and all but one operates using the state-recommended bid threshold of $17,500. One municipality indicated that quotes up to $1,000 could be made without initiating formal bidding. If this is accurate, it is far too restrictive and should be revised. 166 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Approval of Purchases

As with contracting, the individuals or entities authorized to approve purchases requiring formal bids differ from those that are authorized to approve purchases not requiring formal bids. In purchasing, yet another person or entity may have the authority to approve purchases that are defined as “small.” Although New Jersey law requires the governing body of a municipality to approve purchases that require formal bids, only three municipalities indicated that they follow this guideline. For purchases that do not require formal bids, each municipality requires different levels of approval, which suggests varying degrees of control over the purchasing function. Brick’s centralized purchasing office approves purchases that do not require formal bids. In Elizabeth, the purchasing agent/business administrator approves such purchases and in Old Bridge, they are approved by the department head and chief financial officer. Paterson has an extraordinarily restrictive system, wherein the purchasing agent can approve purchases under $2,500, but must obtain council approval for purchases greater than that amount. In Trenton, a supervisor, division head, and department director must approve purchases that do not require formal bids. One of the four key characteristics of a successful procurement process, as set forth by the National Commission on the State and Local Public Service, is a single-signature policy for managers on small purchases (Aronson and Schwartz, 375). However, New Jersey State law prohibits this because the chief financial officer of a municipality must certify the availability of funds before a purchase can be made. As a result, managers must get approval for all purchases, whether for $10 or $10,000.

Monitoring Purchases

Three municipalities give procurement oversight responsibility to one office, but the other two distribute this power among three entities. According to Bartle and LaCourse Korosec, “where three or more agencies are involved, it is possible that too many cooks might spoil the soup” (2001, 14). Therefore, unless responsibilities are clearly delineated among the agencies, Elizabeth and Trenton should consider streamlining their oversight processes. Each municipality employs slightly different methods to ensure that contractors comply with the terms of purchasing contracts. In Brick, prior to payment, the receiving department and the department head for the office that received the service or item must sign off on the contract’s completion. Elizabeth and Paterson each require performance bonds. While bonding requirements are important “as both incentive to the supplier and protection to the agency, they can reduce the number of potential bidders” (Reed and Swain, 1997, 191). Public organizations should avoid adopting bonding requirements so strict that they reduce competition. In Trenton, the department requesting the service or product must verify and approve these purchases.

Managerial Flexibility

The issue of centralization and decentralization in procurement illustrates the tension between oversight measures and managerial flexibility. Even in a centralized system, some decision-making power should be diffused to managers to maximize efficiency. However, an analysis of the survey responses suggested that none of the municipalities actually provide Appendices 167

managers the sole authority to make small purchases. An important demonstration of managerial flexibility is special authority for purchasing in the case of emergencies. New Jersey Public Contracting Law provides such authority for emergencies affecting public health, safety, or welfare that require the immediate delivery of goods or the performance of services. Based on the survey responses, it appears that all but one of the municipalities is aware of this clause and provide for such measures in their procurement practices.

Challenges and Problems in Purchasing

Only three municipalities cited challenges or problems facing their procurement systems. The following are the individual challenges cited by each of those municipalities:

• “Departments are not familiar with existing and updated laws.” • “Purchasing agents’ purchasing authority should be increased from $17,500 to $25,000 to reduce cost and improve efficiency.” • “Divisions should prepare more blanket orders, thus reducing the number of purchase orders printed.”

Improvements and Innovations

Brick cited two important innovations: cooperative purchasing and the preparation of purchasing policies for contractors and vendors. Cooperative purchasing is an arrangement between cities, counties, and school districts to pool their bids for goods and services. Indeed, Aronson and Schwartz extol the benefits of cooperative purchasing: “although it may be time consuming and sometimes costly to get started, cooperative purchasing has compelling advantages for smaller local governments, including more buying power, more accurate and comprehensive specifications, and better vendor service” (1996, 370). To attract more vendors—especially small businesses, which are often owned by women and minorities—Aronson and Schwartz (1996) suggest that local governments need to provide them with more information about the procurement process. Governments should include information about the opportunities, the requirements, vendor mailing lists, doing business with government, obtaining help from the purchasing agency, and simplifying or speeding up paperwork. Brick’s new manual, entitled Doing Business with Brick, is a positive step toward informing vendors and thereby broadening the vendor pool. Other municipalities also cited improvements and innovations. Elizabeth implemented “ED1 ordering” and Trenton began the Local Business Enterprise program. Paterson noted that an audit conducted by the New Jersey Division of Local Government Services did not reveal any need for improvement beyond increasing the purchasing agent’s purchasing power.

Conclusions and Recommendations

Although the tension between centralization and decentralization is clearly evident in the municipalities, there is little they can do to affect this since New Jersey State law mandates many of the constraints that promote a high degree of centralization. However, in some cases, the municipalities have imposed additional restrictions, such as requiring entities other than 168 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

the governing body to approve contracts that exceed the bid threshold, or by requiring entities other than the purchasing office (or another centralized office) to approve contracts under the bid threshold. In other instances, oversight measures did not appear to be stringent enough. For example, none of the municipalities has a formalized policy dictating when contractors should be paid. The municipalities should strive to balance oversight measures with managerial flexibility by providing managers with reasonable limits on purchases requiring higher-level approval, a single-signature policy on small purchases, and the ability to use master contracts. Another concern that should be addressed is the lack of formal training requirements regarding contracting and procurement procedures in the municipalities. Agencies need to increase their awareness and understanding of the laws that guide the contracting and procurement processes, so they can navigate these rules more effectively. With this, the overall system would see gains in efficiency. The fact that the municipal governments indicated that they are moving away from price as the sole measure of a proposal’s merits in competitive contracting illustrates a positive trend in this area. Much of the literature on contracting and procurement notes that value analysis (VA) is becoming an increasingly important tool for local governments. This enables governments to evaluate goods and services in terms of their full cost and requirements for performance, quality, and durability, rather than simply choosing the lowest price. Proper utilization of VA can promote better decision-making by managers and save substantial resources. The state of New Jersey should consider modifying the law that mandates awarding competitive bids to the “lowest responsible bidder.” This would enable municipalities to utilize VA on all contracts and purchases, which could ultimately result in significant savings (see Aronson and Schwartz, 1996). Appendices 169

Appendix E

REVENUE RAISING CAPACITY IN NEW JERSEY MUNICIPALITIES

INADEQUACY OF RESOURCES IS A CONTINUOUS PROBLEM for New Jersey municipalities, especially in urban areas, as was mentioned in Chapter 2, “Financial Management.” The inadequacy of resources results from insufficient revenues, excessive expenditures, or both. This appendix focuses on the revenue side of the equation by estimating the potential to raise new revenues, or revenue raising capacity (RRC), for five New Jersey municipalities. This estimation follows the Representative Tax System Methodology developed by the U.S. Advisory Commission on Intergovernmental Relations (ACIR). Municipal governments’ RRC is determined by a combination of residents’ capacity of payment and municipalities’ capacity to pass the tax burden to non-residents. Revenue raising capacity is an important determinant of municipal fiscal health, which is defined as a municipal government’s ability to deliver public services to its residents at a reasonable tax rate. In other words, fiscal health is the balance between a municipal government’s ability to raise revenue and the amount it must spend to obtain the level of services requested by its constituents. Notice that a municipality’s fiscal health can diverge from its residents’ economic health for economic reasons, such as extensive service responsibilities, or institutional reasons such as an inability to tax commuters’ income (Ladd and Yinger, 1989). Although a further analysis of New Jersey municipalities’ fiscal health is pertinent and desirable,1 this appendix focuses only on their potential to raise new revenues. Based on the assumption that there is substantial heterogeneity between the economic and fiscal structures of urban and suburban areas, this analysis applies the following classifications (provided by the New Jersey Department of Community Affairs) for five municipalities for which data were available. Elizabeth City, Paterson City, and Trenton City are classified as urban municipalities, while Brick Township and Old Bridge Township are considered suburban (this differentiation is consistent with the one proposed by Díaz and Green for the Wisconsin case, 2001). This appendix discusses the revenue raising capacity in these jurisdictions.

Revenue Raising Capacity

Revenue raising capacity is the measure of how much revenue a municipality has the potential to raise with a given tax rate, usually defined as the average rate of a set of municipalities. Revenue collected is an incomplete measure of municipalities’ capacity to raise revenue, because it does not account for their potential to collect additional revenues. Consequently, RRC is a combination of residents’ capacity of payment and municipalities’ capacity to shift the tax burden to non-residents.2 The RRC is not related to the revenue that municipalities actually collect; instead RRC is dependent upon the municipality’s decisions regarding tax base and rates. 170 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

An index of fiscal capacity presented in this appendix measures the relative ability of different municipalities to raise revenue. In order to compare the relative revenue raising capacity of a group of municipalities, the revenue that each municipality would raise if they all used the same revenue sources and imposed the same rate have to be estimated (Georgia State University, 1996, 3). Because property tax is the most important own-source of revenue for municipalities in New Jersey, this analysis considers revenue raising capacity related only to property taxes. As Clark states, “under the Representative Tax System (RTS), the tax base for a given tax should be calculated with reference to the revenues that each province would raise if it had an average rate of tax” (Clark, 1997, 28). Consequently, property values, and effective property tax rates are the key variables used to analyze municipal governments’ RRC and fiscal conditions. Effective property tax rates are defined as the total revenues for the tax as a share of the total tax base. Table E.1 presents information about effective property tax rates and estimated property market values per capita between 1998 and 2001. To correct for variation in assessing practices, a RRC calculation should be based on market values instead of assessed values. Numbers were adjusted for inflation and the rate of growth was estimated between 1998 and 2001. On average, effective property tax rates in all New Jersey municipalities grew from 3.27 to 3.47 percent during the past four years. As shown in Table E.1, the rates differ significantly among the municipalities. Suburban areas exhibit a substantially smaller average tax rate than urban municipalities. Between 1998 and 2001, suburban areas had an average tax rate of 2.70 percent, while the rate in urban areas averaged 11.96 percent. In addition, the average rate of growth observed in the effective property tax rate was greater for urban (6.91 percent) than for suburban areas (3.36 percent).

Table E.1

EFFECTIVE PROPERTY TAX RATES AND ESTIMATED PROPERTY MARKET VALUE PER CAPITA 1998-2001 Effective Property Tax Rate of Estimated Property Market Rate of Rate (%) Growth Value Per Capita (2000 Dollars) Growth 1998 1999 2000 2001 (%) 1998 1999 2000 2001 (%) Suburban Brick 2.41 2.48 2.53 2.61 8.30 127,361 135,674 140,024 132,675 4.17 Old Bridge 2.94 2.92 2.78 2.93 -0.34 50,370 49,914 49,197 46,019 -8.64 Average 2.68 2.70 2.66 2.77 3.36 88,866 92,794 94,611 89,347 0.54 Urban Elizabeth 10.68 10.76 10.78 12.23 14.51 7,961 7,825 7,409 6,366 -20.04 Paterson 20.86 20.87 20.86 21.47 2.92 2,472 2,341 2,218 2,077 -15.98 Trenton 3.62 3.68 3.75 3.88 7.18 12,427 12,300 11,946 11,226 -9.66 Average 11.72 11.77 11.80 12.53 6.91 7,620 7,489 7,191 6,556 -13.96 All New Jersey 3.27 3.32 3.39 3.47 6.12 Municipalities Source: Author’s calculations based on data from the New Jersey Division of Taxation, Department of Treasury, U.S. Census 1990-2000, and Sahr (2002). Appendices 171

Estimated property market values per capita exhibit the opposite situation. Suburban areas registered higher estimated property market values per capita than urban municipalities. Between 1998 and 2001, the average estimated property market value per capita in suburban municipalities was $91,404 compared to an average market value of $7,214 in urban areas. By 2001, the municipality with the highest estimated property market value per capita was Brick ($132,675), while the lowest was Paterson ($2,077). In the four-year period between 1998 and 2001, estimated property market values per capita in suburban municipalities were nearly 13 times larger than in urban areas. Estimated property market values per capita in suburban municipalities are significantly higher than in urban municipalities. The estimated property market values per capita decrease in real terms for four of the five municipalities. This trend is more pronounced in urban municipalities, which intensifies the gap between urban and suburban areas. The Representative Tax System developed by the U.S. Advisory Commission on Intergovernmental Relations in the early 1960s (for further discussion, see U.S. ACIR 1962, 1986, and 1988) provides a method of calculating RRC based on the average effective tax rate of a group of municipal governments and the current property market value per capita (this is the most widely used method, according to Clark, 1997). The relationship is defined by the following equation:

RRC = Average Effective Tax Rate X Estimated Property Market Value Per Capita

This equation highlights two points. First, RRC is a function of factors that are beyond municipal governments’ control, because they cannot affect the average state tax rate. Second, the level of the population’s wealth affects a municipality’s RRC. The RRC is not related to the revenue that municipalities actually collect. The municipal governments’ RRC ranking is calculated in four steps. First, the average effective tax rate was estimated using effective tax rates for the 566 New Jersey municipalities. Second, RRC values were then estimated using the above equation. Third, the RRC is standardized based on the group average. Finally, these municipalities are ranked in descend- ing order according to their RRC index. Table E.2 presents the revenue raising capacity indices for five municipalities in New Jersey at a given tax rate. A municipality with an index of 100 has as much revenue raising capacity as the sample average. A municipality with an index of 40 can only raise 40 percent as much as a municipality with an index of 100. For example, the RRC index of 28 for Trenton in 2001 means that given the revenue structure and rates, the revenue raised per capita would be 72 percent less than the sample’s average. Alternatively, the index value of 116 for Old Bridge in 2001 means that the revenue raised per capita that could be raised in this township is 16 percent higher than in the average district. The wide variation in the index (ranging from 5 to 334) evidences the substantial variation in RRC among these five New Jersey municipalities. As shown in Table E.2, the results are generally consistent across years. This suggests a significant and stable difference between urban and suburban municipalities’ RRC. Suburban municipalities rank in the first two positions for all four years, while urban municipalities rank last. In each year, suburban municipalities’ RRC is approximately 12 to 13 times larger than their urban counterparts. 172 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Table E.2

REVENUE RAISING CAPACITY RRC 1998 RRC 1999 RRC 2000 RRC 2001 RRC Index Rank RRC Index Rank RRC Index Rank RRC Index Rank Suburban Brick Township 317 1 326 1 332 1 334 1 Old Bridge Township 126 2 120 2 117 2 116 2 Average 221.50 223.00 224.50 225.00 Urban Elizabeth City 20 4 19 4 18 4 16 4 Paterson City 65655555 Trenton City 31 3 30 3 28 3 28 3 Average 19.00 18.33 17.00 16.33

Source: Author’s calculations based on data from the New Jersey Division of Taxation, Department of Treasury, U.S. Census 1990-2000, and Sahr (2002).

Conclusions

The analysis of these five New Jersey municipalities suggests the existence of significant differences between urban and suburban municipalities, mainly regarding their economic revenue raising capacity. Based on their estimated property market values per capita, suburban areas tend to be wealthier. They also exhibit lower effective property tax rates than urban areas. According to the estimates presented, the RRC is larger and has been growing faster in suburban municipalities than in urban municipalities. This difference can be explained by the growth rate of assessed values per capita, property market values (as measures of wealth distributions between urban and suburban municipalities), and the higher tax rates imposed by urban municipal governments. Although RRC is an incomplete measure of municipal governments’ fiscal health, it is an important indicator of their capacity to raise revenues. Municipal governments in New Jersey deal frequently with problems related to inadequate resources. Thus, understanding the potential amount of revenues that municipalities can collect is important when local officials are designing and evaluating mechanisms to raise new revenues. Appendices 173

Notes

1 Fiscal stress is not a new concern for New Jersey municipalities and state authorities. As a matter of fact, state financial laws have mechanisms in place to deal with this reality. New Jersey financial officials have utilized estimates of fiscal stress for many years. In the New Jersey context, previous works in this area include the Municipal Distress Index (MDI) and the Erickson and Regan (2000) fiscal stress index. The MDI “ranks New Jersey municipalities according to eight separate indicators that measure diverse aspects of social, economic, physical, and fiscal conditions of each locality” (New Jersey Office of State Planning, 1997, 1). The Erickson and Regan index measures fiscal stress, defined as a “condition in which a municipality must levy a higher than average property tax rate in order to provide the average level of public services” (2000, 1). These two approaches, however, fail to consider that New Jersey municipalities are quite diverse; analyses and measures of fiscal stress should account for that diversity. 2 An alternative measure of RRC developed by Ladd and Yinger (1989) takes into consideration the percentage of taxes that can be shifted to non-residents according to property distribution and use. Although this measure is more accurate than the one used in this appendix, the data required were not available. 174 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Appendix F

NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS

THE NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS is a broad-based agency that provides technical, advisory, and financial assistance to communities and individuals. The Department administers a wide range of functions and programs such as housing assistance, building safety standards, safety in the workplace, local government financial assistance and oversight, and services to the disadvantaged and other groups with unique needs. The Department of Community Affairs also houses the Division of Local Government Services (DLGS), which serves as an advocate for local government interests and provides them with technical and financial assistance in budgeting, financial reporting, joint services, purchasing, and management issues. Additional functions of the Division include the review and approval of all municipal, county, and fire district budgets, and the review of many local government financial actions. The Division of Local Government Services is also responsible for the financial integrity of all local government units and guides the conduct of local government officials. Appendices 175

Appendix G

THE MAXWELL SCHOOL OF CITIZENSHIP AND PUBLIC AFFAIRS AT SYRACUSE UNIVERSITY

THE MAXWELL SCHOOL OF SYRACUSE UNIVERSITY IS DEDICATED TO EDUCATION for citizenship, professional training in public and international affairs, and teaching and scholarship across the full range of social sciences at both the undergraduate and graduate levels. Founded in 1924, The Maxwell School was the first university-based school of public affairs in the United States. It has remained a leader in the field throughout its history and has consistently been ranked first in the nation among some 250 graduate programs in public affairs by U.S. News and World Report. Maxwell has more than 140 full-time faculty members teaching and conducting research in the following ten departments: anthropology, economics, geography, history, international relations, political science, public administration, public affairs, social science, and sociology. It also houses numerous multidisciplinary research and graduate training centers, including the Center for Policy Research, the Global Affairs Institute, the Alan K. Campbell Public Affairs Institute, the Center for Environmental Policy and Administration, and the Program on the Analysis and Resolution of Conflicts. The Maxwell School enrolls over 700 students each year at the graduate level, and functions as the social science division of Syracuse University’s College of Arts and Sciences at the undergraduate level. Maxwell’s focus on interdisciplinary research is unmatched in academia. Additionally, the Maxwell curriculum and its emphasis on theory and practice offer its students a solid foundation to pursue first-tier positions in academia, government and the private sector. More than 7,000 Maxwell graduate alumni hold positions of responsibility with national and subnational governments, in international organizations, on college and university facul- ties, and in nonprofit and private organizations in the United States and abroad. Currently, seven Maxwell Ph.D.’s are president of a U.S. college or university. Some 500 of these alumni have held high-level positions in Washington, D.C., or abroad during the past decade, including secretary of the Department of Health and Human Services, deputy secretary of the Department of Defense, member of the Federal Trade Commission, secretary of the Department of the Navy, foreign minister of Jordan, director general of the International 176 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Organization for Migration, U.S. ambassador to Argentina, and executive director of the African Development Bank. In December 2001, Sean O’Keefe (1978 M.P.A.) was confirmed by the U.S. Senate to serve as Administrator of NASA. Appendices 177

Appendix H

ALAN K. CAMPBELL PUBLIC AFFAIRS INSTITUTE AT SYRACUSE UNIVERSITY

THE AIM OF THE ALAN K. CAMPBELL PUBLIC AFFAIRS INSTITUTE is to promote better understanding of contemporary challenges in democratic governance. The Campbell Institute examines how public organizations can be designed to achieve their purposes more effectively. The Institute explores the relationship between governments and citizens, to understand how governing institutions can be made more responsive to the needs of citizens and respectful of their rights. The Institute studies the ideal of citizenship, its evolution, and the conditions under which it thrives. These questions have always been central to the mission of The Maxwell School at Syracuse University. Today, these questions are made more complicated – and more pressing – by the realities of profound social, economic, and technological change. The Campbell Institute pursues its objective in four ways. Faculty and doctoral students affiliated with the Institute are engaged in research on a wide range of topics relating to democratic governance. The Institute’s faculty also undertake projects that connect research to practice. From 1996 to 2002, the Institute was home to the Government Performance Project, an effort to assess the managerial capabilities of state, county, and city governments. The New Jersey Initiative, undertaken during 2001 to 2002, made a similar review of New Jersey municipalities. The Institute also builds broader networks with scholars and policymakers interested in problems of democratic governance. It hosts symposia and talks on current issues. A recent conference examined the performance of public organizations in response to the September 11, 2001 terror attacks. The Institute is a co-sponsor of the prestigious State of Democracy Lecture Series and Environmental Speakers Series. The work of the Institute is made widely available through print and web-based publications. The Institute’s associates present results from their research in working papers that are published on its web site (http://www.campbellinstitute.org). The Institute sometimes produces larger works, such as its 2002 book, Governance and Public Security. The Institute is named in honor of Alan K. Campbell, Dean of the Maxwell School from 1969 to 1976. “Scotty” Campbell had a distinguished career in academia, state and federal government, and the private sector. Through its work, the Institute honors his lifelong commitment to effective government, full and equal citizen participation, and incisive, policy- relevant research. 178 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Appendix I

EAGLETON INSTITUTE OF POLITICS AT RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY

THE EAGLETON INSTITUTE OF POLITICS AT RUTGERS, The State University of New Jersey, explores state and national politics through research, education, and public service, linking the study of politics with its day-to-day practice. The Institute focuses attention on how contemporary political systems work, how they change, and how they might work better. Eagleton’s faculty, centers, and programs specialize in the study of state legislatures; public opinion polling and survey research; women’s participation in politics; race and politics; campaigns, elections, and political parties; civic education and engagement; and New Jersey politics. The Institute includes the Center for American Women and Politics (CAWP) and the Center for Public Interest Polling (CPIP), both established in the early 1970s. The Eagleton New Jersey Project coordinates, strengthens, and expands Eagleton’s varied efforts to assist individual governments and organizations in shaping New Jersey’s political and policy agenda. Launched in the fall of 1995, the project provides a focus for Eagleton’s presence in the state and its efforts to increase awareness and understanding of New Jersey politics. For Rutgers University graduate and undergraduate students, Eagleton offers a range of education programs, including an undergraduate certificate, graduate fellowships, research assistantships and internships, and opportunities to interact with political practitioners. The Institute also convenes conferences and other forums for the general public. In addition, Eagleton undertakes projects to enhance political understanding and involvement, often in collaboration with politicians, government agencies, the media, non-profit groups, and other academic institutions. The Eagleton Institute was established in 1956 with a bequest from Florence Peshine Eagleton, a founder of New Jersey’s League of Women Voters. Appendices 179

Appendix J

BIOGRAPHIES

Paula Acosta – Financial Management Research Assistant, is an M.P.A. candidate at Syracuse University. Prior to her studies at The Maxwell School, Ms. Acosta worked at the Center for Studies of Economic Development at Universidad de los Andes in Colombia. She completed an M.A. in political science from Universidad de los Andes, a specialized degree in negotiation and international affairs, and a B.S. in industrial engineering from the same institution.

Connie Bawcum – Capital Management Project Consultant, is a local government practitioner with over 25 years experience. From 1991 to 2001, Ms. Bawcum served as deputy city manager for Richmond, Virginia. Richmond is a full-service city government with a population of 200,000, 4500 employees, and an annual budget of over $800 million. From 1980 to 1990, she worked for Prince William County, a rapidly growing suburb of Washington D.C. She served as deputy county executive, finance director, and budget director during her tenure there. Prior experience includes positions with the City of Knoxville, Tennessee and the Knoxville-Knox County Metropolitan Planning Commission. Ms. Bawcum has served as the president of the Virginia Local Government Managers Association, on the advisory committee for the Virginia Institute of Government, Richmond Ambulance Authority, Local Initiatives Support Corporation, and the Carpenter Center for the Performing Arts. She is currently engaging in public management consulting as a principal with B & W Partners. Ms. Bawcum received both Master’s and Bachelor’s degrees in public administration from the University of Tennessee.

Max Bohnstedt – Capital Management Project Consultant, is principal of a consulting practice providing financial advisory services. Mr. Bohnstedt also serves as an external resource in capital planning and budgeting, project management for structuring and issuing appropriate financing instruments, and debt management practices. He began his professional career with the Quaker Oats Company, rising through positions in production, operating staff, and financial control departments. Assignments varied from packaging foreman to corporate manager of cost accounting and included management responsibilities for production, ware- house operation, planning and operations analysis, and cost control at both the plant and corporate levels. Mr. Bohnstedt became a fellow in the National Program for Educational Leadership, a self-directed study of school administration culminating in an internship as director of Multiyear Planning with the Oak Ridge, Tennessee schools. He exited the fellowship as an associate superintendent and chief financial officer of the school district of Greenville County, South Carolina with responsibility for budgeting, accounting, treasury, data processing, purchasing, warehousing, food service, and federal projects. Mr. Bohnstedt served as finance director and chief financial officer of Broward County, Florida; Montgomery County, Maryland; and the City of Richmond, Virginia. He was responsible for 180 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

the administration of treasury, accounting and reporting, capital financing, revenue collection, procurement, debt management, and risk and insurance management, self-insurance, and official records functions. Mr. Bohnstedt retired in 1999 as the deputy manager for administration for Richmond, Virginia. He received a B.S. in industrial education from Purdue University in 1959 and an M.B.A. from Northwestern University in 1971.

Stuart Bretschneider – Information Technology Management Faculty Expert, is a professor of public administration with The Maxwell School at Syracuse University. Upon arriving to The Maxwell School in 1982, and with the aid of a grant from the Andrew Mellon Foundation, Dr. Bretschneider integrated computer and information management into the school’s public administration curriculum. He also served on the National Association of Schools of Public Affairs and Administration’s ad-hoc committee for computer education in public administration. The final committee report, which he helped author, includes many of Dr. Bretschneider’s curriculum innovations. He is director of the Center for Technology and Information Policy at The Maxwell School that has functioned in the past with the L.C. Smith School of Engineering’s Institute for Energy Research, in which Dr. Bretschneider also serves as a senior research associate. His current research interests include public management information systems, technology assessment and forecasting, public sector financial forecasting, decision-making in public organizations, and applied statistics. The National Science Foundation, the states of Kentucky and New Jersey, and the Mellon Foundation have supported Dr. Bretschneider’s research. He has published over twenty-five articles in journals such as Management Science, Information Systems Review, Decision Sciences, Public Administration Review, International Journal of Forecasting, and Evaluation Review. A director and past president of the International Institute of Forecasting, Dr. Bretschneider also serves as an associate editor for the International Journal of Forecasting. Dr. Bretschneider is currently the managing editor for the Journal of Public Administration Research and Theory. He is a member of the Institutes of Management, American Society for Public Administration, and the International Institute of Forecasting. He has also consulted for the U.S. General Accounting Office, the states of New York, Ohio, and Kentucky, and several Fortune 500 companies including AT&T. Dr. Bretschneider received his Ph.D. in public administration from the College of Administrative Sciences at The Ohio State University in 1980.

Loretta Buckelew – Advisory Committee Member, has been with the New Jersey Department of Community Affairs, Division of Local Government Services, since 2000 as the assistant to the deputy director of the division. Ms. Buckelew has assisted the deputy director in legislative matters, the application and administration of the Local Public Contracts Law, and various other laws and programs. Prior to working with the Department of Community Affairs, Ms. Buckelew worked as a municipal clerk/registrar for the Township of Long Hill and deputy municipal clerk for the Township of Maplewood. She received an M.P.A. from Kean University and a B.A. in political science/criminal justice. Ms. Buckelew is also a registered municipal clerk as designated by the New Jersey Department of Community Affairs and a certified municipal registrar as designated by Rutgers, The State University of New Jersey.

Jessica Crawford – Public Relations Coordinator and Human Resources Management Senior Research Assistant, is currently the project manager for the Government Performance Project at The Maxwell School at Syracuse University. Prior to serving as project manager, Ms. Crawford also served as the project coordinator and as a research assistant for the Project. She Appendices 181

completed her M.P.A. at The Maxwell School and B.A. at Syracuse University, majoring in economics and policy studies.

Henry A. Coleman – Advisory Committee Member, has served as an instructor and assistant professor in the economics department at Tufts University in addition to serving adjunct faculty appointments at American University, the University of Maryland, and George Mason University. Mr. Coleman was in the Office of Policy Development and Research in the U.S. Department of Housing and Urban Development as a Brookings Institution economic policy fellow and visiting scholar. He was also employed as a senior economist in the Office of the Chief Economist at the U.S. General Accounting Office. Mr. Coleman served as the executive director of the New Jersey State and Local Expenditure and Revenue Policy Commission. He was also employed as the assistant director for operations and research in the Office of State Planning, a component of the New Jersey Department of Treasury. Mr. Coleman also served as a policy adviser on fiscal, budget, and housing issues in Governor Florio’s Office of Management and Planning. Immediately prior to assuming his current responsibilities, he served as the director of government finance research at the U.S. Advisory Commission on Intergovernmental Relations. Since the fall of 1992, Mr. Coleman has served as the director of the Center for Government Services, a component of the Edward J. Bloustein School of Planning and Public Policy at Rutgers, The State University of New Jersey. Currently, he also serves as a faculty member in the Bloustein School’s department of public policy. Mr. Coleman completed his Ph.D. in economics at Princeton University and B.A. in economics at Morehouse College.

Alyssa Colonna – Editor, has edited forthcoming books on environmental conflict resolution and governance and public security, and reviews learning papers, survey instruments, web site postings, and official correspondence for the Government Performance Project and other initiatives for the Alan K. Campbell Public Affairs Institute at The Maxwell School. Ms. Colonna, from Nazareth, Pennsylvania is dually enrolled in the S.I. Newhouse School of Public Communications and the School of Management at Syracuse University, pursuing a Bachelor’s degree in broadcast journalism and finance. She was inducted in April 2002 to the Beta Gamma Sigma honor society for the Association to Advance Collegiate Schools of Business, International (AACSB). Ms. Colonna has also worked as a reporter for The Express- Times newspaper in Easton, Pennsylvania, and as a news intern for WFMZ-TV Channel 69 in Allentown, Pennsylvania.

Suzette Denslow – Capital Management Project Consultant, is the legislative director for Governor Mark Warner of Virginia. Prior to this post, Ms. Denslow was legislative liaison for the Virginia Community College System; Arlington County, Virginia; and the Virginia Association of Counties during the Virginia General Assembly sessions. She also served as a senior consultant to the National Academy of Public Administration. In 1993, Ms. Denslow was appointed deputy director of the Virginia Municipal League, and then became the executive director of the Tennessee Municipal League in 1998. She was deputy secretary of education in the cabinet of Virginia Governor L. Douglas Wilder from 1990 to 1993. She spent the first decade of her career in budget and research positions for the Virginia cities of Charlottesville and Richmond, and also for the Joint Legislative Audit and Review Commission. 182 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

Amy Donahue – Public Management Consultant, is assistant professor of public administration and political science at the University of Connecticut. Dr. Donahue teaches graduate courses in policy analysis, statistics, and public organizations and management. Her research interests focus on analysis of productive efficiency in the provision of public services, particularly the influence of managerial decision processes on public production technologies, organizational outputs, policy outcomes, and cost efficiency in the emergency services. She is author of work related to the relationship of management and performance in government, and has published articles in the Journal of Public Administration Research and Theory and Public Administration Review. Dr. Donahue has been a senior research associate with the Alan K. Campbell Public Affairs Institute, where she still serves as a consultant for the Government Performance Project. She also has 18 years of training and experience in a variety of emergency service fields. Before embarking on her career in academia, she worked as a 911 communications center manager in Fairbanks, Alaska. She also served as a fire-training officer for a combination fire department in Alaska and taught in the Fire Science Program at the University of Alaska. Dr. Donahue served as a captain in the United States Army Medical Service Corps, where she was assigned to the 6th Infantry Division. Dr. Donahue holds her Ph.D. and M.A. in public administration from Syracuse University. She earned her B.A. in geological and geophysical sciences from Princeton University.

Carol Ebdon – Capital Management Project Consultant, is assistant professor of public administration with the University of Nebraska at Omaha. Her research is primarily in the area of state and local budgeting and finance. Dr. Ebdon is currently studying capital management practices in state and local governments, local governments, local government revenue diver- sification, and the use of citizen participation in the city budget process. She has published in the following journals: Public Budgeting and Finance, Public Budgeting, Accounting and Financial Management, Public Productivity and Management Review, International Journal of Public Administration, and the Journal of Public Affairs Education. Dr. Ebdon formerly worked in financial management positions for the City of Rochester, New York, including deputy city treasurer and director of accounting. She completed her Ph.D. at the University at Albany, State University of New York, her M.P.A. at the University of Toledo, and her B.A. at John Carroll University.

Jon Erickson – Advisory Committee Member, is an associate professor and director of the Master of Public Administration Program at Kean University. In addition to teaching and conducting research in the areas of public finance and environmental policy, Dr. Erickson is a member of the Highland Park Borough Council. He graduated with a Ph.D. in urban planning and policy development from Rutgers University and holds a B.A. (Honors) and a Master of Urban Planning from the University of Oregon.

Chris Folts – Project Management Research Assistant, has interned at the Department of Justice and a trade association in Washington D.C. Mr. Folts’ research interests include the effects of technology on local and federal levels of government. He is a candidate for an M.P.A. at The Maxwell School at Syracuse University. Mr. Folts received a B.A. in government and politics with a minor in history from the University of Maryland.

Figen Gungor – Project Senior Research Assistant, is currently working as an adjunct professor of political science at Hofstra University and as a business consultant with National Document Management. While a graduate student at The Maxwell School, she worked as a Appendices 183

research assistant with the Government Performance Project, focusing on an evaluation of state government web sites. She will be starting the Professional Development Program at the U.S. General Accounting Office in the summer of 2002. Ms. Gungor received her M.P.A. from The Maxwell School and completed her B.A. in political science and sociology at Hofstra University.

Dana Michael Harsell – Project Manager and Managing for Results Research Associate, is a doctoral candidate in political science at The Maxwell School at Syracuse University. His sub- fields are American government and public administration, and his research interests include administrative state reform, public management, and political psychology. Mr. Harsell teaches courses in political psychology and American government. His Master’s thesis was a comparative analysis of organizational cultures and their role in fostering total quality management initiatives in a private sector company and the United States Postal Service. Currently, his research activities include work with the Government Performance Project and the New Jersey Initiative. His dissertation research examines how tensions between career civil service managers and political appointees influence the implementation of the Government Performance and Results Act of 1993. Mr. Harsell earned his B.A. in political science and psychology in 1995 and his M.A. in political science in 1997, both from the University of Montana.

Yilin Hou – Financial Management Faculty Expert, is a long-term contributor to the Government Performance Project, particularly in the area of financial management. He served as a research associate, then as a coordinator, and most recently as a faculty expert in the area of financial management. Dr. Hou conducted research and analysis for both state evaluation projects with the Government Performance Project. His areas of research include public management and public finance and budgeting. Dr. Hou earned his Ph.D. and M.A. in public administration from The Maxwell School.

Willow Jacobson - Human Resources Management Research Associate, is a doctoral candidate at The Maxwell School, pursuing a degree in public administration. She currently works on the Government Performance Project and the New Jersey Initiative at the Alan K. Campbell Public Affairs Institute at The Maxwell School in the area of human resources management. Previously, she has worked with community collaboratives and state government. Ms. Jacobson’s academic focus is on organizational theory and human resources management. She has several publications in the area of human resources management and performance. Ms. Jacobson’s publications appear in Public Administration Review, Review of Public Personnel Administration, and Public Personnel Management. She has presented work at numerous academic conferences and professional organizations. Her dissertation focuses on work motivation and receptivity to organizational change in the federal government. Ms. Jacobson earned a B.S. from the University of Oregon in planning, public policy and management and an M.A. from the University of Oregon in public policy and management.

Dale Jones – Director and Managing for Results Faculty Expert, is an associate professor of public administration with The Maxwell School at Syracuse University. Dr. Jones is director of the Government Performance Project and teaches courses in public sector leadership and management and organizational theory. In addition to his book, Downsizing the Federal Government: The Management of Public Sector Workforce Reductions, publications include articles 184 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

in The American Review of Public Administration, Public Integrity Annual, and other journals. Prior to joining The Maxwell School, Dr. Jones held a faculty position at the U.S. Air Force Academy and was an adjunct faculty member with the University of Colorado Graduate School of Public Affairs. He completed a military career as an officer in the U.S. Air Force. During his career, Dr. Jones served at the Organization of the Joint Chiefs of Staff at the Pentagon and was a certified acquisition program manager. He is a principal with the Council for Excellence in Government and has lectured at the Federal Executive Institute. Previously, he was president of the Southern Colorado Chapter of the American Society for Public Administration. He completed his Ph.D. in public administration from Syracuse University, an M.A. in public policy from George Washington University, an M.B.A. in management from Wright State University, and a B.S. in aeronautical engineering from the U.S. Air Force Academy and is a graduate of the Defense Systems Management College.

Melissa Mink – Human Resources Management Research Assistant, is bound for Boston, Massachusetts, where she is beginning a career as an analyst in the Professional Development Program at the U.S. General Accounting Office. She also served as a human resources management research assistant for the Government Performance Project. Ms. Mink is currently a candidate for an M.P.A. at The Maxwell School. She earned a B.A. in communication studies from The College of New Jersey.

Sharif R. Nankoe – Project Management Research Assistant, is a native of the Netherlands, and the son of Surinamese immigrants. He has worked as a teacher in Kyoto, Japan, and traveled throughout Southeast Asia. Currently, Mr. Nankoe is a graduate student in public administration and international relations at The Maxwell School, with a focus on policy analysis and international law and organization. He earned his B.A. from Ithaca College, New York, with a double major in history and political science.

Kari Parsons – Project Consultant, is a principal of Parsons Consulting, a private consulting practice specializing in urban policy and planning, economic and community development, and public administration. Ms. Parsons’ clients include the Government Performance Project and the Orange County Community Indicator Project (California), which tracks economic, environmental, and social trends as a basis for developing policy strategies for maintaining long-term regional sustainability. Ms. Parsons is also working in strategic and neighborhood planning for a local non-profit community development organization. She began her career working in the non-profit environmental field as an administrator for the National Audubon Society. She later transitioned to regional policy planning and public administration as a manager in the Strategic and Intergovernmental Affairs Division of the Orange County Executive Office. Her Master’s thesis addressed the role and influence of regional governance nationwide, with particular emphasis on actors on Orange County, California. Ms. Parsons is currently pursuing professional certification in economic development from the Council for Urban Economic Development. She received her B.A. in philosophy from Whitman College in 1993 and her M.A. in urban and regional planning from the University of California at Irvine in 1999.

Michele Tuck-Ponder – Advisory Committee Member, has an extensive background in politics, government, media relations, and public policy. A former mayor of Princeton Township, New Appendices 185

Jersey, she has also served as assistant counsel to Governor Jim Florio, assistant director of the New Jersey Division on Women and New Jersey Division on Civil Rights, director of development and public affairs at Robert Wood Johnson Medical School, and congressional aide to former U.S. Representative Louis Stokes and Senator Frank Lautenberg. She recently completed a community builder fellowship with the U.S. Department of Housing and Urban Development in Camden, New Jersey. Ms. Tuck-Ponder’s public affairs practice is focused on promoting new ideas, new partnerships, and new energy amongst government, non-profits, and private sector entities. Utilizing her diverse experience, she has a proven capacity to bring people together to address important issues that impact communities, states, and the nation. Her prospective clients are municipalities, organizations, boards and commissions, corporations, and other entities seeking guidance in solving problems or responding to statutory or societal needs. Ms. Tuck-Ponder has a special interest in addressing issues involving affirmative action, civil rights, women’s issues, local government affairs, community and economic development, and citizen outreach and communication. Her expertise includes draft- ing legislation, regulations, policy papers, procedural guidelines, proposals, and articles suit- able for publication. She serves as President of the Delaware-Raritan Girl Scout Council and on the boards of directors of the National Conference on Community and Justice, the New Jersey Association on Corrections, the Regional Planning Partnership, the Sharing Network, and the Center for Non-Profits. She is a Leadership New Jersey fellow (class of 1995), and has co-authored two books published by Random House. She is a graduate of the Medill School of Journalism at Northwestern University and the University of Pennsylvania Law School.

Ora-orn Poocharoen – Managing for Results Research Associate, is a doctoral student at The Maxwell School pursuing a degree in public administration. Her research interests include government reforms, comparative public administration, and public administration in developing countries. Her Bachelor’s thesis examined the role of international non-governmental organizations in international regime formations, with an emphasis on women’s issues. Ms. Poocharoen’s Master’s thesis was a case study of the development of civil society in Thailand. She is currently working as a research associate for the Government Performance Project and the New Jersey Initiative at the Alan K. Campbell Public Affairs Institute in the area of managing for results. A native Thai, Ms. Poocharoen resided in Japan for seven years, where she earned a Bachelor of Law from Hitotsubashi University in international relations and a Master of Law from University of Tokyo in political science.

Ingrid W. Reed – Associate Director and New Jersey Government Advisor, is currently director of the Eagleton New Jersey Project, an initiative designed to reinforce and expand the contributions of Rutgers’ Eagleton Institute of Politics to the governance and politics of its home state. Among its initiatives are programs on better campaign activity, welfare reform, government and information technology, and state planning and governance. Ms. Reed’s work has increasingly focused on improving New Jersey election campaigns. She is the co-author of the report, Not Bad But Not Enough, with Professor Gerald Pomper, with recommendations from the 1998 New Jersey congressional campaigns. Ms. Reed and Mr. Pomper are currently completing a study of the 2000 congressional campaigns. Before joining the Eagleton Institute, Ms. Reed served as assistant dean of Princeton University’s Woodrow Wilson School of Public and International Affairs where she also directed the Rockefeller Public Service Awards Program, and as vice president for public affairs and corporate secretary of the Rockefeller University in New York City. In her public service activities, Ms. Reed has a wide 186 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

range of experiences in state politics and planning, governance, and community affairs. She has chaired the Capital City (Trenton) Redevelopment Corporation, a state agency, since it began in 1988. She is a founder and board member of New Jersey Future, the organization advocating the implementation of the State Development and Redevelopment Act, and she serves on the board of the New Jersey Conservation Foundation and on the Regional Plan Association, New Jersey Committee. During the 1980s, Ms. Reed chaired the Mercer County Planning Board. She was elected to the board of the Community Foundation of New Jersey in April 2000. She also serves as vice-chair of the Sandra Starr Foundation, a Princeton foundation that encourages local elected and appointed officials to communicate across municipal boundaries. Ms. Reed is a member of the board of the Institute of Public Administration. In 1993, she was elected a fellow of the National Academy of Public Administration and in 1998-1999 served on its special panel on Civic Trust and Citizen Responsibility. She is a graduate of the University of Pennsylvania.

Sally Coleman Selden – Human Resources Management Faculty Expert, is associate professor of management at Lynchburg College, Virginia. Previously, she was an assistant professor of public administration with The Maxwell School at Syracuse University, an assistant professor of political science at the University of Oklahoma, and a research associate and instructor at the University of Georgia. Dr. Selden also worked as program evaluator for the U.S. General Accounting Office. She was given the Leonard D. White Award for the most outstanding dissertation in the field of public administration from the American Political Science Association in 1996. Her fields of interest encompass public management and human resources management. She served as the human resources management faculty expert for the Government Performance Project. Together with Dr. Patricia Ingraham, Dr. Selden recently convened a meeting of top-level federal decision makers to establish an agenda for civil service reform in the federal government. She is author of The Promise of Representative Bureaucracy: Diversity and Responsiveness in a Government Agency. Her articles have appeared in American Journal of Political Science, American Review of Public Administration, Review of Public Personnel Administration, Journal of Public Administration Education, Public Administration Review, and Journal of Public Administration Research and Theory. Dr. Selden received her M.P.A. and B.A. from the University of Virginia and her D.P.A. from the University of Georgia.

Tiffany Tanner – Publication Coordinator and Financial Management Senior Research Assistant, is beginning a career as an analyst in the Strategic Issues Division of the U.S. General Accounting Office. While completing her graduate studies at The Maxwell School, she served as a research assistant in the area of capital management for the Government Performance Project. Ms. Tanner earned her M.P.A. from The Maxwell School and a B.A. in communication studies from The College of New Jersey.

William Watson – Advisory Committee Member, is executive director of the John S. Watson Institute for Public Policy at Thomas Edison State College in Trenton, New Jersey. The Watson Institute is designed to provide practical and useful policy assistance for decision- makers and partner organizations on a wide range of issues. Its current list of partnerships and activities include the New Jersey Urban Mayors Association, City of Trenton, Children’s Futures, Center for the Urban Environment, Newark Environmental Coalition, Healthcare Information Networks and Technologies, Leadership Trenton, and the Trenton Education Initiative. Mr. Watson continues to devote his efforts to the development and implementa- Appendices 187

tion of public policy with a focus on urban issues. He also organizes, plans, and directs research projects on public policy topics for the Institute. In 1987, Mr. Watson became deputy director for the State of New Jersey, Department of the Public Advocate, Division of Citizen Complaints and Dispute Resolution. At this post he distinguished himself as a leader in the development of policy and legislative initiatives. In 1990, Mr. Watson successfully managed the campaign of Trenton, New Jersey Mayor Douglas Palmer and continued his service to the public as deputy mayor/chief of staff for the City of Trenton, New Jersey until May 1995. Mr. Watson serves as chairman of the board of trustees of St. Francis Medical Center, secretary/treasurer of the Lafayette Yard Community Development Corporation, member of the Trenton branch of the NAACP, commissioner of the Trenton Parking Authority, member of the Mercer County Council on Alcoholism and Drug Addiction, member of the Trenton YMCA Foundation Board, member of the Cadwalader Park Master Plan Advisory Board, member of the New Jersey Council of Academic Advisors, and member of the New Jersey African American Political Alliance.

John Weingart – Advisory Committee Member, is the associate director of the Eagleton Institute since February 2000. Previously, he served in New Jersey state government for 24 years during the administrations of two democratic and two republican governors (Governor Byrne through Governor Whitman). His posts included assistant commissioner of the New Jersey Department of Environmental Protection, director of the Department of Environmental Protection’s Division of Coastal Resources, and executive director of the state’s Low-Level Radioactive Waste Disposal Facility Siting Board. Mr. Weingart’s book based on the latter experience, Waste is a Terrible Thing to Mind: Risk, Radiation, and Distrust of Government, was published in March 2001 by the Center for Analysis of Public Issues.

Genikwa Williams – Project Research Assistant, is a former print journalist and lifelong New Jersey resident. Since coming to Rutgers University, Ms. Williams has participated in graduate fellowship programs at both the Eagleton Institute of Politics (September 2000 to May 2001) and Johnson & Johnson, where she is one of three fellows in the corporate communications department. Additionally, she received the prestigious Ralph Bunche Fellowship award to study at the university and was one of a dozen students chosen to represent the university at a regional student-leadership conference held in February 2002 in Delaware. She received her B.A. in English from the University of Delaware and is currently pursuing an M.A. in communications at Rutgers, The State University of New Jersey.

Yonghong Wu – Financial Management Research Associate, is a doctoral student in public administration with The Maxwell School at Syracuse University. He worked as an administrator at Tsinghua University before pursuing doctoral studies in public administration in the United States. Mr. Wu’s current research interests include budgeting and finance issues in developing countries, international diffusion of health policy, and technology spillover issues within the context of globalization. He received a B.A. in physics and an M.A. in education from Tsinghua University in the People’s Republic of China. 188 THE NEW JERSEY INITIATIVE: Building Management Capacity in New Jersey Municipalities

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