Case Study

Metropolitan Government of Louisville-Jefferson County, KY
Post Merger Advisory Services

Following authorization by the Commonwealth of Kentucky and the voters of the City of Louisville and Jefferson County, the City and County governments merged into a single general-purpose government - the Metropolitan Government of Louisville-Jefferson County ("Metro") - overnight creating the nation's 16th largest city.

At the start of the merger process, the City and County each had separate debt, credit ratings, police forces, labor contracts, and assets to manage. Having already advised the incoming Administration of Mayor Jerry Abramson during the prior year on potential financial management improvements, PFM has been engaged since 2003 to support Metro's efforts to make merger a success in the following areas:

• Debt Strategy & Capital Improvement Planning. PFM has supported the Deputy Mayor and Chief Financial Officer in analyzing all aspects of the Metro Government's post-merger debt, identifying opportunities for savings, as well as recommend a fund balance police and the optimal size, composition, and funding sources for its Capital Improvement Plan. PFM has advised the Metro Government on its credit communication strategy and presentation to the rating agencies. Before the merger, the City of Louisville had a rating of Aa3 from Moody's and AA- from Standard & Poor's; the County had a rating of Aa2/AA. Standard & Poor's upgraded the Metro Government's rating to AA. The presentation to Fitch resulted in a rating of AA+. PFM has since advised the Metro Government and Metro's Parking Authority on the most cost-effective means to issue debt to finance the Mayor's infrastructure maintenance initiative, resulting in a successful $30 million debt issuance for Metro-wide capital maintenance program. Standard & Poor's recently placed a "positive outlook" on Metro's AA rating. The Louisville Water Company has since engaged PFM to support the development of its capital planning, revenue transfer, and credit rating initiatives.
  
  
• Investment Management. The Administration has asked PFM to help it analyze the Metro Government's cash management practices, and develop a strategy for increasing investment returns, moderating risk, strengthening reporting and internal controls, reducing the costs of banking services, and providing training to in-house staff. Benefits of this work have already been realized, with a banking services Request For Proposal process resulting in over $800,000 in savings from reduced fees over the five-year term of the contract. Since this engagement, Jefferson County Schools has hired PFM to conduct a similar banking services RFP process. The Metro Government has engaged PFM to manage actively $70 million of its assets.
  
  
• Labor Strategy. Facing the challenge of combining City and County operating departments has many challenges. None is more difficult than collective bargaining, with differing wages, benefits, work rules, and job classifications. PFM has undertaken comprehensive assessment of the compensation, work practices, and other aspects of the Metro Government's Police (sworn and civilians), Corrections, Emergency Medical Services, and Emergency Communications operations. This analysis supports the Administration's development of a negotiation strategy for each bargaining unit, with strategy components tied to fiscal and service delivery objectives. Metro achieved a significant win in its bargaining with its Police union, with sworn officers accepting raises of 0%, 2%, and 2% over the next three years, plus agreeing to contribute to medical benefits for the first time, achieving millions in savings compared to prior contracts.