HomeMy WebLinkAbout12/07/2010 05 AFSCME Commitee Cost Saving Measures Memorandum --�� RECEIVED
CITY OF YAKIMA
DEC 0
701 N 1st Street, Suite 102
' C IL � `2 Yakima, WA 98901 nFFICE OF CITY COUNCIL
• (509) 452 7887 FAX (509) 5751
WASHINGTON STATE Affiliated with:
COUNCIL OF COUNTY AND CITY EMPLOYEES American Federation of State, County & Municipal Employees
Washington State Labor Council
AFSCME AFL -CIO
CHRIS DUGOVICH President/Executive Director
MEMORANDUM
DATE December 1, 2010
TO Honorable Mayor Cawley
All City Council Members
FROM. City of Yakima AFSCME Local 1122 Employees
Yvette Lewis, Staff Representative
RE Cost Saving Measures
In response to the heightened budget concerns, the City of Yakima AFSCME Local 1122
employees formed a committee to research cost saving measures and present them to the
City Council. As the daily workforce of the City of Yakima, the employees can often
offer valuable ideas that may not be considered, researched, or might otherwise be
overlooked.
Before getting to the budget - saving suggestions, we would like to be sure and thank you
for the measures that have already been taken. As the City Council, you recently decided
that Council packet deliveries will end, and you will each come to City Hall to obtain
your packet, thereby saving on staff overtime costs for delivery That is a great step in
the right direction and we applaud you for that decision. We have all noticed that the
Council has greatly reduced funding for non -City projects /events Again, a step in the
right direction that deserves attention. You have also approved the use of post cards used
for public notification in the Planning Division, hopefully this will be a huge printing and
postage cost reduction. And lastly, City staff has been willing to empty their own
garbage and vacuum their own office space in light of janitorial shortages, as well as
turning off lights and computers at the end of the day Again, small steps in the right
direction that deserve recognition.
The items listed below are certainly not all of the ideas presented to this committee,
• however, they do have the potential to be a significant impact on the budget. The
"dollars and cents" of the items have been included. Should you wish to have more
Everett Office 3305 Oakes Avenue • P 0 Box 750 • Everett, WA 98206 -0750 • (425) 303 -8818 • FAX (425) 303 -8906 • www council2.com
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information on a particular item, please let us know, and we will assist in every way
possible We have also included a few items that were submitted to the City of Stockton,
California that were also pertinent to the City of Yakima.
We simply ask that you consider the items we are presenting, and after doing so, please
provide us with feedback.
1) Fall Leaf Pick -up 2009 Total = $61,376 54 (Does not include fuel (no
estimate avail ), or brochures for the program (est. cost $2,000 00))
salaries $17,688 00, Maintenance & Operating (M &O) for garbage trucks
$6,858 00, Landfill fees $5,586, biodegradable bags $31,244 54, In 2009.,
there was a $25,000 grant toward this program. No grant money for the
program for 2010, but total expenditures not in as of 11/30/2010
o How about eliminating this program all together?
2) Utility Bills.
• Do not send a first reminder (not mandated) estimated savings
$30,000 /yr
• Institute a fee for late payments. Currently there is only a shut-
off fee of $44 00
• Institute a policy that any existing past due or late payments
must be paid before a new service is started. An "unified" lien
on a property for a Water Utility can be done, with no filing
fees. For 2009, the City wrote off approximately $299,000 in
unpaid utility bills
3) Cell Phones 2010 1 quarter spent $47,823 94
o Can we reduce that? Do people who have desk jobs, and are
not on call, need a cell phone /Blackberry?
4) Temporary Employees For 2010, there were 171 Temporary
Employees that worked for the City of Yakima. As of 10/31/2010, the
YTD total paid was $871,059 43
o Can we evaluate the use of Temporary Employees during times
of layoff and furlough of permanent employees?
5) Eliminate all Special Pay not bargained for: Including "Acting" pay
6) Rebate Visa Cards We can get rebates by using a participating Visa
credit card for purchases that we already make with our vendors
Purchasing has already done the research, and there are 2 rebates
available Volume Rebate and Prompt Payment Rebate For 2009, total
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expenses to vendors was $7,592,252 65 For the Volume Rebate, we could
have received $15,051 64, and for the Prompt Payment Rebate, we could
have received $2,900 00
o See Attached Documentation
7) Car washes for City vehicles 3 vendors for a 2009 YTD total paid of
$16,590 46 Contract term is "until cancelled" As of 11/29/2010 YTD
paid = $12,957 02. Public Works, YPD and the Wastewater Treatment
Plant have car washing facilities.
o Can we re- evaluate the contract and reduce this expense by
finding a way to utilize our own facilities?
8) Vendor Contracts.
a. Senske Contract: Current contract expires 2/22/2015
($33,365 00) for tree trimming and 5/20/2015 ($9,412.30) for
Public Works (PW) /Transit landscape maint. Police contract for
landscape maint. Expires 3/23/2011, contract award amount
$4,846 82 Contract totals = $47,624 12 YTD total paid as of
11/29/2010 is $48,161 62 2009 YTD total paid was $63,010 45
110 • Can we re- evaluate the contract? Can we monitor
the spending more closely?
b Evergreen Services Contract: Current contract expires 5/20/2015
(27,619 13) for PW /Transit Center landscape mamt. YTD total
paid to Evergreen Services as of 11/29/2010 is $18,730 50
• Can we re- evaluate the contract and reduce? Can we
monitor the spending more closely?
c Les Schwab Contract Current contract expires 3/1/2012
($110,192 08), but we have spent $147,189 74 YTD as of
11/29/10 Last year YTD total = $127,781 65
• Can we re- evaluate the contract and reduce? Can we
monitor the spending more closely?
d. Firestone Contract Current contract expires 7/27/2011 ($80,000)
The 2009 YTD amount paid was $136,538 75 As of 11/30/2010,
the YTD amount paid is $156,576 18
• Can we re- evaluate the contract and reduce? Can we
monitor the spending more closely?
9) Take Home Vehicles Several City vehicles are taken home This
• practice costs the city in both fuel and maintenance on the vehicles.
o Can we re- evaluate this practice?
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10) Retirement incentives for those close to retiring
11) Restrict /cut back all travel
Ideas suggested to the City of Stockton, California that may be useful for the City of
Yakima.
• Eliminate City paid lunches /dinners
• If there are any new purchases on the horizon, freeze for now
• Ask all departments to submit a plan for delaying non - essential budget purchases
until the fiscal crisis has ended
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S
4110 4 - PURCHASING PROCESSES
Purchasing Cards
Purchasing cards were developed in the late 1980's as a way to help federal government employees
acquire small dollar goods in an efficient and 'effective manner The concept quickly migrated to the
private sector in the early 1990's. The fundamental goals of a purchasing card program are
• Reduce process cost;
• Increase process efficiency;
• Increase convenience for employees;
• Reduce time need to obtain goods /services; and
• Reduce number of paperwork errors.
As purchasing card programs mature, the organizational goals expand to include
• Obtain better data about spending;
• Increase control over spending;
• Leverage spending to reduce prices, and
• Generate rebates.
Between the 1990's and 2003, purchasing cards evolved from "best practice" to "common practice" for
both public and private sector organizations Since 2003, the focus has been on "controlled growth" of
existing purchasing card spending programs.
Current Purchasing Card Programs
Both the City and the County have limited purchasing card programs, the City has five cardholders, the
•
County has one in Purchasing. Both the City and the County utilize the State of Washington Charge Card
Services Contract with JPMorgan Chase. Table 4 1 compares the City and County purchasing card
programs with the results from the NIGP benchmark survey
Table 41— Conn. arias • P -Card Usa • e at Yakima with Other Public A • encies
ff 'ti.. '�"' 3 ht h rtfi" d+ t .� 1 F"
,' . i 9,,, 4 !f s k ! 1 s r a d - 3% .+y i&Ai r r
`"�` 4,A 1 3 �+1� y "si 1; , � , 'CC Svrtall Ckaliey' t , ' ' 2!'I P `dun --;r's P" i y P3 1 t t" nli
71'%� C . 841 i 01 ';tt�'k, , '1Y�1 „ ?'�. f".P 'Ke s,..; gd S,.{ ''1.°ata t`4 5'; r"S l 4il M 0 air ":P" r t. 1 } a lp fare'
� � >, �, � i� � � ;��.�r,,ediatta �h��,. � � rltit� 14,41e6 n g
Dollar Limit per Transaction i ,$2;319' , $2;000 ,$3 771, i '$2,500, 1 I ' $2,500; "N /A
alAnn
Tot ual.Numb "
erofTransactions , ':- 8;618 " ; 5 ;521 '' "'23;030' 11,136`' `, `�220 "'' `'.,r 400
Total :Aniival':Do11
" ar,Value; , ..' $1;199;659; - `.$1,000;000" "'$7;558;426" $3;050;135.:'. $69,488,` . ,$96,500
Aver 'e Transaotion.Value; ' ' ' ' ,$237 ' $217 ' $535; ,. ' "' $305 >';
� ...,: � $241
, ., '
:� `y.. $3i6 '
Number;,of,Cardliolders ..:, 165 _ 162 :41
'. , ';�:, 2,,: ,300. . ��!;5 ' .' . ., ...1
Avg. Monthly'Spend per Cardholder ' $829 $884 $2,314," '` .. ,$973'; $1,158,`" $8,042
Percent' Purchase Spend via P -Card' , 3 01% 2.35% ' ` 5.02 %i' '3.22% ' ;'' 0.55 %'. ' , L02%
15 Palmer, Richard J and Gupta, Mahendra. 2003 Purchasing Card Benchmark Survey Results. RPMG Research
Corporation, 2003 Pg. 18
16 Palmer and Gupta. 2003 Pg. 38
17 Palmer, Richard J and Gupta, Mahendra. 2005 Purchasing Card Benchmark Survey Results. RPMG Research
Corporation, 2005 Pg. 22.
18 Data Source: National Institute of Governmental Purchasing, Inc. 2007 Benchmarking Study (Unpublished).
Data Analysis. Procurement Consulting Services, Inc. Small Cities = Municipalities with population < 100,000
Response Count: 58
410 19 Counties Response Count: 63
City and County of Yakima Joint Administrative Purchasing Assessment
Final Report ' NIGP
Page 18 of 32
The City's :and. Coun "'s -card = ro rams. are si ificantl tirade emiri when coiii e
.h' tY" P P g � Y rp rfor
, g� P ared to their
respective .henchiiiark:averages.
At the= City- of Yakima,_ nearly 77% .of .all purchase 'orders:. are less. than $1,000 and .88% are less than
$2;500 At the County 55% of all purchase orders, including those issued by Public Works, are less than
$1,000 and 89% are less than $2,500 Many of these transactions could.have been processed through an
effective- purchasing card program. An August 2002 study by the National Association of Purchasing
Card Professionals found that the average cost of the traditional purchase order process including
receiving and payment, was $79 73 per transaction: The average cost of a purchasing card .transaction
was $16.28, .a savings of $63 45 per transaction. The 2005 Palmer and Gupta study which. includes
both .public and private sector organizations, shows similar results, with the traditional process cost of
$89.21_, a p -card cost of $21.83 and .a. net. difference of $67.38. Recommendations in this report for
staffing levels in Purchasing are predicated on the productivity gains resulting from instituting effective p-
card programs.
Impediments to P -Cards
The risk of fraud or misuse is one of the greatest impediments to p -card implementation. However, the
perception of misuse has been proven to be far greater than the reality Purchasing card misuse accounts
on average for 0 034% (3 4 "basis points ") or $340 for every $1 million of p -card spending. Improper
purchases account for only one out of every 14,925 transactions. Further, the Palmer and Gupta study
also showed that 80% of the misuse spending occurred in 12% of the organizations, indicating poor
controls in those select few companies.
Effective internal controls will prevent fraud and misuse and quickly identify any potential improper 0
purchases so that they can be rectified. The Consultant recommends the City and County review
"Auditing and Investigating the Internal Control of Government Purchasing Card Programs," published
by the United State General Accounting Office (May 2003), to determine how effective controls can be
established. Periodic internal audits and an annual external audit will also reduce the incidence of
improper purchases. The external audit should be conducted following the guidelines set forth in the
GAO Audit Guide referenced above.
Improving the P -Card Program
There appears to be a high correlation between p -card technology and program success, confirmed by the
2005 Palmer and Gupta report. Virtually all of the high performing p -card organizations NIGP has
reviewed utilize card management software that enables real -time self - management, built -in controls, and
robust reporting capabilities. The current contract includes PaymentNet. The Consultant has not
reviewed the functionality of this system. Implementation of PaymentNet is precluded by the fact that the
state contract with JPMorgan Chase expires October 31, 2009 However, the City and County may have
the option of implementing the new p -card program with U S Bank, including their card management
software, AccessOnline, as early as July 2008.
There may be a perceived conflict between purchasing via a contract and purchasing via a p -card.
However, the best public procurement practice is to actually combine the two, purchasing items on
contract via p -card, preferably using e- procurement. Under this model, centralized purchasing establishes
and administers the contractual relationship with the supplier, while routine transactions are fully
delegated to end users. P -cards facilitate the ability of using departments to order from established
20 Palmer and Gupta. 2005 Pg. 44
21 Palmer and Gupta. 2005 Pg. 119
City and County of Yakima Joint Administrative Purchasing Assessment
Final Report •
P
NIGP
age 19 Of 32 �., ,ara5rro. 47 7.6ma:zm.s2.,..x. =.9A:y,;w;>
• contracts by use of electronic catalog ordering for such commodities as office, janitorial and computer
supplies. Processes that add time and cost, but no value, such as requisitions and purchase orders, can be
eliminated.
e- Pavables
While primarily an accounts payable and not a purchasing function, the City and County should consider
leveraging the p -card program to facilitate e- payables. Several banks are now offering e- payable
solutions that integrate with the organization's financial system. The benefits include improved cash
management, reduction in paper checks and increased rebates.
Recommendations
4 1 City and County - Develop strategy and plan to optimize utilization of p- cards. [Short term,
internal /external]
4.2 City and County - Select and implement card management software. [Medium term, internal]
4.3 County - Develop p -card policy and manual, City - Revise p -card policy and manual as necessary to
include card management software; City and County - Re- engineer business processes as applicable.
[Medium term, internal]
4 4 City and County - Integrate the use of p -cards with term contracts. [Medium term, internal]
4.5 City and County - Explore the use of e- payables. [Medium term, internal]
4 6 City and County - Conduct periodic external audits of p -card program. [Long term, external]
Ill Spend Analysis
Currently neither the City nor County conducts any form of spend analysis — the process of aggregating,
cleansing, and analyzing organizational purchasing data to identify opportunities for reducing costs. This
is both a business process issue and an information technology issue. To effectively perform spend
analysis, a commodity coding system such as the NIGP Commodity /Service Code needs to be integrated
into the purchasing module. More information on commodity codes is provided in the Information
Technology section of this report. In a recent study, the Aberdeen Group reports that public sector
organizations can reduce total spending by 2% to 15% through spend analysis. Without conducting a
comprehensive spend management analysis, the Consultant is unable to develop accurate estimates of the
potential savings. It would be reasonable to assume that the City would probably be on the low end of the
estimated range, and the County on the high end. Any savings accrued via spend analysis would be
"hard," directly attributable to various expense line items. It should be noted that absent a comprehensive
spend management analysis, it will take several years to internally collect the data to fully achieve the
projected savings.
Recommendation.
4 7 City and County - Implement spend analysis to reduce costs and improve operational performance.
[Long term, internal]
22 Minahan, Tim A. et al. Supply Management in the Public Sector Aberdeen Group and Government Procurement
• News. May 2004
City and County of Yakima Joint Administrative Purchasing Assessment
Final Report .IG.
Page 20 of 32
4— Purchasnyvam, ,sla,re
Vendor
Number Company Paid in 2009 2010 YTD
Vendors Over $200,000
11809 Layne Christensen Company $ 1,382,847.39 $ -
3299 Yakima Visitors & Cony Bureau $ 1,316,307 18 $ 1,310,819 80
11082 Al Tri City Taxi $ 984,011.50 $ 894,137 83
11266 Granite Northwest $ 758,124 85 $ 588,425 90
3021 Western Peterbilt $ 582,373 78 $ 576,534 90
2601 Wells Fargo lnsur (ACORDIA) $ 423,715 14 $ 443,701 02
11042 Dixon & Lee Attorneys at Law $ 360,083.34 $ 378,083 30
4863 Columbia Ford $ 494,895 97 $ 167,540 0.7
Total $ 6,302,359 15 $ 4,359,242.82
Vendors Under $200,000
8273 Columbia Asphalt and Gravel $ 123,495 51 $ 79,799 02
4470 Owen Equipment (BEN -KO- MATIC) $ 29,223 68 $ 30,395 21
2189 Lyon Law Offices $ 378,994 32 $ 7,828 20
4026 Special Asphalt Products $ 132,321.37 $ 94,706 62
10403 CXT Incorporated $ - $ 109,024 48
9401 KAR -GOR Inc $ 40,064 30 $. 34,151 17
1763 Central Pre -Mix Concrete $ 4,083 25 $ 16,368 09
4252 Office Solutions NW $ 207,690 75 $ 151,276 54
2087 Janitors Closet $ 95,556.36
11790 Waxie $ - $ 160,000 00
10587 WCP Solutions $ 85,885 68 $ 65,591 69
7495 Meyer, Fluegge & Tenney $ 51,630 34 $ 89,928 57
11802 Yakima Collision Repair $ 13,166 29 $ 11,265 56
5260 Schwab Trires Les $ 127,781 65 $ 147,189 74
Total $ 1,289,893.50 $ 997,524.89
Total $ 7,592,252.65 $ 5,356,767 71
Volume Rebate $ 15,051 64 $ 10,619 79
quarterly spent (total /4) * 00793
Prompt Payment Rebate
(60 -# days to pay) /(60* 006* ave inv amt)
scenerio - 2 days, $500,000 inv $ 2,900 00 $ 2,900 00
* ** based on top 100 vendors, by number of invoices (15,325), there is a potential
transaction savings of $972,371.25 based on a NAPCP study (please see attachment)