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Helping municipalities navigate fiscal straits

Joseph Stefko calls it the mascot problem.
It is the resistance many towns and villages show to the idea of sharing services or merging municipalities. In these areas, residents have become entrenched in having their own identities, their own elected officials and even school mascots.
For the Center for Governmental Research Inc., it is a resistance that can hold back the kind of cost-saving mergers and shared services that will be needed in the new and more difficult economy facing these municipalities.
Stefko, who came on as president and CEO at CGR this fall, sees contending with the mascot problem as a microcosm of the work CGR will be doing in the coming years. The non-profit organization partners with municipalities to provide research and analysis to help direct public policy and inform decisions.
Those decisions often will be difficult, Stefko notes, and CGR will need to help these municipalities overcome the resistance many have to embracing a changing future.
"The fiscal and service challenges these places are facing are greater now than almost ever before," says Stefko, 37.
He sees CGR continuing to expand its footprint as it tackles these issues. Founded by George Eastman and once working almost exclusively in Rochester, the non-profit organization has expanded throughout New York and now is doing more work in neighboring states as well.
Leading the organization with 15 employees and total revenue of close to $1.8 million, Stefko says CGR will grow as it expands into other states, with a period of physical growth and staff growth ahead.
It offers expertise that spans economics and public finance, government management, health and human services, and education. It also has skills in program evaluation, strategic planning and facilitation, and census data interpretation.
"The expertise we’ve made here is very transferable to these other places we’re looking at," he says.

Journey to CGR
Stefko came to CGR shortly after he completed SUNY Buffalo with his bachelor’s degree in political science. In 1998, one year after graduation, he joined CGR as a research assistant.
The Orchard Park native stayed with the organization for a year before returning to SUNY Buffalo to earn his master’s degree and his doctorate.
He came back to CGR for two years but again answered a call to bring his fiscal expertise to his hometown. At the time, the city of Buffalo and Buffalo Public Schools were embroiled in budget difficulties, and Stefko took a job with the Buffalo Fiscal Stability Authority.
The financial control authority was responsible for monitoring the budget and fiscal conditions of the city of Buffalo, Buffalo Public Schools and other public agencies, including the Buffalo Municipal Housing Authority. In all the board oversaw more than $1 billion in spending.
Stefko started as principal analyst and deputy director of BFSA before being named acting director in 2007. Under the board’s guidance, Buffalo was able to generate more than $230 million in budgetary savings, improving its credit rating and building its fund reserves.
"We were doing all of the budget analysis in making sure the budget remained balanced, bills were paid timely and also overseeing larger strategies and things like labor negotiations," Stefko says. "We also realized that we had a responsibility to the broader region, and it was important that we had a transparent process that informed the public of what we were doing."
Stefko said the five years he spent there helped sow the seeds for fiscal recovery in Buffalo. As the general economy of the region sank and the recession began, the city and school district were better positioned to withstand the hit, Stefko says.
"In the almost five years I spent with the board, Buffalo made some considerable fiscal progress, and I’m very proud of that," he says.
But when the chance to return to CGR appeared, Stefko says he knew it was a move he needed to take.
He was ready to move back to CGR and to the region his wife is from. The couple are raising their two young children in Penfield, where they pursue many activities together, including golf.
"I didn’t really feel a push from that position as much as I felt a pull from CGR," says Stefko, whose office overlooking the Kodak Tower downtown contains the signs of his connection to his hometown, including the 40 Under Forty award he won in 2005 from Business First of Buffalo newspaper.

New landscape
Stefko came back to CGR in 2008, becoming director of public finance. After four years he was named vice president, taking over in February to direct the organization’s public finance and government restructuring engagements.
In August CGR announced a leadership change, with president and CEO Kent Gardner taking the position of chief research officer and Stefko moving into Gardner’s role.
This work involved Stefko in issues related to consolidation, budgeting, service delivery and management of fiscal distress. For many of these municipalities, such uncomfortable solutions are necessary to address a dramatically changed economic landscape.
"We’re seeing communities across the country ask some difficult questions about the sustainability of their service delivery frameworks," he says. "There are more efficient ways to provide services to their residents, and our capacity is to help navigate those questions and inform the decisions they make."
Many of these municipalities have begun sharing services, which Stefko says has occurred on a scale unnoticed by many residents.
"A lot of them don’t even realize how much this kind of thing is already going on," he says.
Some municipalities have looked to larger-scale consolidations, and CGR has helped lead the push. The largest of these is in Princeton, N.J., where in 2011 voters in the township and the borough approved a consolidation.
In the first significant local government merger in New Jersey in more than 60 years, Stefko has a leading role. He is the project manager for the merger, one that will go into effect in less than a month.
"We’re expecting to see a savings of about $2 million next year, and by the time the consolidation is fully implemented they’ll be saving about $4 million a year," he says.
Stefko played an important role in gaining consensus in Princeton, says Robert Bruschi, administrator of the Princeton borough.
"He led a process that came to a good conclusion, and it wasn’t just because of his expertise in this area but because he was able to show what the benefits would be," says Bruschi, who was in the midst of moving his office to a new, consolidated location. "He’s a great communicator."
After the successful merger, Princeton is bringing Stefko and CGR back for one more project, Bruschi notes. Stefko will return after the beginning of the year to help the governing board look at strategic planning.
Though it worked in New Jersey, the idea of wholesale mergers is still a difficult sell to many residents across the region, Stefko notes, and he recognizes this level of action is not right for every municipality.
It comes back to the mascot problem, Stefko says.
"In many places there’s still a bit of fear about consolidation issues, and it goes beyond how much you can save in taxes," he notes.
But as shared services agreements grow more common, the resistance is beginning to fade, Stefko says.
"I think the stigma has gone away a bit, and many places will now at the very least talk about what they can share," he says. "The more dialogue you see like that, the more shared services will become common and the more these municipalities start to address the problems in a different way."

Growing CGR
Because the economic conditions facing municipalities are largely the same regardless of location, Stefko sees opportunities for CGR growth.
The groundwork for future expansion has been laid within the last five years, as CGR began working in areas beyond Upstate New York. Eight years ago less than 1 percent of the organization’s revenue came from work outside New York, but today that portion is close to 10 percent.
By 2015, revenue from outside New York should reach 25 percent of CGR’s total income, Stefko says.
"It’s an interesting change for CGR," Stefko says. "For much of its history, this was a very Rochester-centric organization, as we formed important policy questions, and then gradually grew to include more of upstate New York."
As that footprint extended into places like Massachusetts and Cleveland in the past five years, Stefko and officials at CGR came to see how well the expertise gained here transferred to other communities.
"We’ve found that all areas are dealing with the same issues of taxes and fiscal stability," he says. "Rochester will always be our home, but there’s a real opportunity to take the knowledge we’ve gained here and put it to use in other states."
As the organization grows its presence in other states, Stefko says, it will need to add two to three employees each year. The organization is working on a three-year strategic plan that will map out the specifics of this growth. Stefko sees it as a pivotal period for the organization as it builds its reputation in these new settings.
"As strong and recognized of a brand as we are in New York, we think we can be just as strong in those other states," Stefko says.
Gardner says that aside from his extensive experience, Stefko also helps raise the profile of CGR, an important advantage as the organization expands.
"His experience is valuable not just in knowledge but in the credibility factor he brings for us," Gardner says. "He can help as we go into new places and can show them the work he did in Buffalo."
Working in Buffalo also gave Stefko a leg up on the fiscal issues facing the rest of the state and entire region, Gardner adds.
"One city official was just telling me how they look up the Thruway to Buffalo to see the fiscal challenges we will all be facing 10 years ahead," Gardner said. "For whatever reason, Buffalo tends to be ahead of the curve in facing those issues, and Joe has been there."
As new relationships in other states grow stronger, CGR could look to establish a permanent presence there, though Stefko notes this is not in any immediate plans.
"We could definitely see opening up an office in a place like New Jersey, where a local presence could make sense because of the work we do," Stefko says.
In the meantime, Stefko plans to keep CGR focused on its work of helping municipalities address the mounting fiscal challenges.
"We’re lucky to have an organization where everyone, from the staff on down to the board, is so committed to the work we do," Stefko says. "We have a chance to help them do some very important work, and that’s exciting."

Joseph Stefko
Position: President and CEO, Center for Governmental Research Inc.
Age: 37
Education: B.A. in political science, 1997; M.A. in political science, 1999; Ph.D. in political science, 2002; SUNY Buffalo
Family: Wife Julie; son Miles, 8; daughter Mia, 6
Residence: Penfield
Activities: Golf, spending time with family
Quote: "We’ve found that all areas are dealing with the same issues of taxes and fiscal stability. Rochester will always be our home, but there’s a real opportunity to take the knowledge we’ve gained here and put it to use in other states."

12/14/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.


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