From ‘problem child’ to city on the rise: Springfield’s finance chief pens cautionary tale

SPRINGFIELD — In 2004, the conventional wisdom for Bay State municipalities seeking advice in financial matters was simple: “Don’t do what Springfield did.”

Today, Springfield has rebounded from the dark days of near-bankruptcy to a model of financial stability and much of the credit goes to the city’s willingness – sparked by state intervention – to face a harsh economic reality and change its ways.

“We get lots of calls from other cities that want to know how we did it,” said Timothy J. Plante, Springfield’s chief administrative finance officer. Plante was initially hired 14 years ago as an accountant in the city’s auditor’s office when the city was operating under the thumb of the Springfield Finance Control Board appointed by then-Gov. W. Mitt Romney.

Once facing a $41 million deficit, Springfield is now on the rise, closing out its 2021 fiscal year on June 30 with an $8 million surplus – a feat all the more remarkable following the stress of governing in the midst of the COVID-19 global pandemic.

Just how the city did it is outlined in a seven-chapter, 70-page book, “Springfield Resurgent,” authored by Plante and published by Lowell-based UKG Inc. The book sells for $17.95 and is available locally and through Amazon. Proceeds go to the Springfield Promise program, a fund for graduating seniors from city schools.

The book is both a primer and a cautionary tale of how to install strong, sustainable fiscal practices – one that offers proof that “any city can shape its future using technology, automation, workforce management and analytics,” said Chris Carmona, risk manager for the city of Fairfield, California, in his review of the publication.

Mayor Domenic J. Sarno, who penned the introduction to the book, praised his award-winning financial team, led by Plante, for helping the city upgrade its credit rating, recover from a devastating tornado and spark more than $3 billion in economic development over the last several years.

“I don’t think the public realizes how far we’ve come,” Sarno said. “You have to have your fiscal house in order to do economic development projects that improve the city’s quality of life.” The mayor adds that its strong financial position has allowed the city to build new schools, parks and libraries while maintaining core services from police and fire to pothole repair and snow removal.

“We’ve invested $700 million alone in new school construction or rehabilitation,” Sarno said.

The road to solvency and fiscal strength was neither short nor easy, as Plante details in the book – and in a recent article “Against All Odds: How Springfield Massachusetts Built a Fiscally Sustainable Future, featured in the August issue of Government Finance Review, a publication of the Government Finance Officers Association.

“While the city prepared and submitted balanced budgets to the state, its account balances were negative,” Plante wrote in the magazine article. “There is no nice way to explain this away – it was extraordinary malfeasance.”

The city’s problems began, according to Plante, back in the 1980s with the passage of Proposition 2½, a state law that limited the city from raising taxes more than 2½% of assessed property values each year. Under that constraint, core municipal services – including, police, fire and school budgets – were cut.

For years, the city had based its budget on 100% of its real estate and property revenue but managed to collect only 92% of that figure – an unsustainable model that led to millions of dollars in lost tax revenues and a financial reckoning.

The tax-limiting legislation exacerbated other problems – including a downturn in the city’s manufacturing base – that had been brewing for decades. In addition to external pressures, the city was using antiquated, paper-based financial practices that led to mistakes and, in some cases, fraud.

“While the city prepared and submitted balanced budgets to the state, its account balances were negative,” Plante wrote. “There is no nice way to explain this away – it was extraordinary malfeasance.”

The control board arrived in 2004 for its five-year assignment to “exercise near-absolute power” over all financial and personnel matters, including labor contracts. With payroll, accounting for 70% of the city’s $442 million budget, hiring freezes and other unpopular measures were put in place.

In return for its tough-love approach toward Springfield – Romney once called the city commonwealth’s “problem child” – the state gave Springfield a $52 million no-interest loan to cover the city’s $41 million shortfall.

The control board’s first order of business was to harness the “tech revolution” to modernize those antiquated paper-based forms of record keeping. “Springfield needed systems to collect, store, track and analyze city data – and it had none,” Plante said.

Sarno’s leadership in the city’s resurgence began with the control board’s arrival. As City Council president at the time, Sarno had an automatic membership on the panel when it selected a financial management software program called Munis, which remains in place today.

The program integrates all of the city’s core accounting functions including general ledger, payroll, accounts payable, accounts receivable, contract management, tracking and more.

Before implementing the Munis system, Plante’s team worked off-site full-time to interview people from every department to build process maps showing the steps needed to complete basic tasks with the goal of streamlining and automating those tasks to make the city’s finance department much more cost-effective and efficient.

Members of Plante’s team created a simple scenario – a principal seeking to order some pencils for the school’s classroom to – to illustrate “how far Springfield had lost its way.”

They found that the pencil-purchasing required more than 30 separate steps and could take as long as six months to complete, requiring 18 different approvals. The paper-based purchase authorizations weren’t unique to a particular school; the procedures were a system-wide problem and a waste of money and resources.

In July 2007, the Munis system went live, providing the finance department with data it desperately needed to right the city’s fiscal policies.

“We could aggregate purchases, determine economic order quantities, negotiate volume discounts from suppliers,” Plante said, adding, “For the city, it was nothing short of revolutionary.”

Paper-driven processes and paper-reliant systems often lead to mistakes – and instances of fraud, the reformers discovered.

In one instance, $2.5 million in back taxes were owed by bar owners stretching back six of seven years, with one owner owing $700,000. The resulting severe cash-flow problems made it difficult to meet weekly payroll for city employees or to pay vendors on time.

There were other consequences as well.

Crime on city streets was four times the national average, schools were underperforming, pensions were underfunded, property values dropped and businesses fled downtown for other locations.

Patrick Roach, who was hired as a financial accountant in the city auditor’s office in 2005, and Plante became close allies in the quest to right the city’s fiscal ship.

“Thinking back on the things we witnessed in those early days it was like being a new sheriff and walking into a lawless Wild West town,” Plante said.

In the Department of Elder Affairs, for example, Roach found a drawer packed with dozens of envelopes containing cash. “I couldn’t believe my eyes,” he recalled. “In the safe they stored stacks of checks – all signed, but with no payee written on them.”

When the department needed funds to rent a bus to take seniors on a day trip or for some other purpose, they would fill in a payee on one of the checks. “I don’t think this was some kind of scam they were running for their personal benefit,” Roach said. “It was just the way things were done.”

Financial practices in the School Department, with its $300 million budget, were no better, Plante discovered.

School finances were run by a single controller, “who couldn’t possibly keep up with the challenges,” he said, noting, that by contrast, a $30 million portion of school grant funds was managed by five accountants. “Archaic systems prevented us from seeing the waste, fraud, abuse and other unfortunate lapses, that beneath the surface, were so prevalent.”

School activity accounts had zero controls. “Money for a carpentry project somehow ended up in Rhode Island, for example,” he said in citing an example.

Plante and Roach also learned about a school janitor who would leave a door ajar each Friday night, using a pipe as a doorstop. “When the automatically armed alarm would sound later that night, the janitor would return to work, remove the pipe and, subsequently, collect the minimum of two hours of overtime pay.”

The new system led to reforms.

Soon, back property taxes began to roll in as the city pursued and collected on liens. “The city could now see the vacancies, the savings and surpluses, enabling it to redirect the money to where it could be best used,” Plante said.

Within the first year, the city generated more than $30 million in free cash. “Soon, we were sitting on $50 million in the bank, which we accumulated simply because we had the data to control our spending,” Plante said.

Sarno was elected as mayor in 2008. In 2009, at the urging of the mayor and the control board, the city deployed an automated workforce management system from UKG (formerly Kronos Incorporated), which shed light on a lot of “murky areas,” including time-card fraud among school staffers, the book notes.

For example, some employees would punch into their shift at a school near their home and then commute to the school where they actually worked, Plante said.

Capturing data from the UKG system allowed the city to reduce time-card and sick-time abuse in the schools and across the city.

The Fire Department lowered its overtime by 11%, the budget for substitute teachers quickly decreased by more than $1 million as teacher and paraprofessional attendance rates improved.

The Springfield Finance Control Board returned control to local leaders in the summer of 2009. The city paid back the entire multimillion state loan ahead of schedule (minus $5.2 million in city expenditures and an $8.7 million spend-down trust allocated to the Springfield Promise program.)

As a result of the financial reforms it has implemented, Springfield is arguably fiscally stronger than it has been in decades.

That strength was apparent in the aftermath of the June 1, 2011, EF3 tornado that struck the region, uprooting trees and destroying properties for a loss of $428 million. If the city hadn’t already endured a trial-by-fire financial reckoning, the tornado could have been a knockout blow, according to Plante.

Instead, the city was in a position to hire a consultant who was familiar with the recovery after Hurricane Katrina ravaged New Orleans to help the city realize the most cost-effective way to replace facilities and repair them.

For example, the original damage for the state armory in Springfield was $4.5 million, but the estimate for a full replacement of the building was $18 million, which the Federal Emergency Management Agency agreed to pay, Plante noted in the magazine article.

The city was also able to take advantage of a FEMA program that allowed it to reallocate recovery funds to other projects making goals that had been languishing on the city’s to-do list suddenly feasible. In the end the city paid just 13% of a $97 million rebuilding effort.

In the last decade, the city has created new middle-class jobs and attracted new residents, its schools are regaining vibrancy as graduate rates and college acceptance rates increase and new and effective contracts with first responders are making Springfield safer, city leaders say.

Springfield has weathered the latest threat of a global pandemic with an $8 million surplus.

While “Springfield Resurgent” ends on an optimistic note, Plante notes that there are still challenges ahead. “But those of us in a position to shape the future of our city remain steadfast in our belief that we have the tools, the people and the data to rise to the occasion,” he added.

Book publisher UKG urged officials in Springfield to write “Resurgent Springfield.”

In the foreword to the book UKG chief financial officer John Butler writes, “Springfield’s proverbial ‘road to recovery’ is a guidepost for state and local leaders. It implores America’s cities and metro area to follow the money, get to the root cause, and put digital systems and data-based policies that can prevent future financial neglect.”

At a fundamental level, Butler said UKG believes that great organizations are powered by great people, and the city of Springfield did something together from which every city in America can learn.

Word is beginning to get out that the book is a must-read for community leaders and citizens of Springfield as well as cities and towns across the region.

Dianne Fuller Doherty, founder of the Women’s Fund of Western Massachusetts and longtime community activist, for one, has been buying copies and sharing them with anyone she meets.

“The book gives us hope for the great – too often discounted city that we all love,” Doherty said. “Our incredible human resources, higher education, and strategic geographic location all combine to position us so well for continuing positive economic development. As the book so aptly points out, we as a community have successful faced many and diverse challenges, head-on, and now is our time to blossom.”

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