Highlights of the Pontiac Turnaround Success

BeingĀ the Emergency Financial Manager in Pontiac for 15 months was a very challenging but highly successful experience. Our team, including our Managing Director, Geni Giannotti, and the city’s staff proved that, even in an extremely difficult political environment, we could quickly generate two years of surplus after many years of deficits. It consumed all of our time but it gave us an opportunity to make a major positive impact on a large community. We clearly demonstrated that our proven turnaround techniques will work even though Pontiac, as is the case with many other cities and schools, has suffered through years of rapidly declining revenues, had already cut to the bone, and was demoralized.

Fred Leeb also won the Turnaround of the Year Award from the Turnaround Management Association in 2008.

Fred Leeb will be discussing turnaround issues for the PNC Roundtable show with Ric DeVore, the Regional President, Detroit and Southeast Michigan of PNC Bank and Paul W. Smith on WJR radio (760 AM). The show will be available beginning on Tuesday, October 26th by going to the WJR website and clicking on PNC Roundtable in the podcast dropdown menu (or click here for the PNC Roundtable). Please listen in.

PNC Roundtable – October 2010


Highlights of the Pontiac Turnaround Success

Pulling Yourself Up by the Bootstraps
By Fred Leeb
fredleebwbeardcentered While I was in Pontiac for 15 months, we teamed up with the city’s staff to generate over $115 million in benefits to the city and thereby eliminated the need for mass layoffs during my tenure.

I believe that I am the only turnaround consultant in the state who can say that he has run a medium-sized city successfully, improving financial results from a long history of deficits to two years of surplus. Though many problems remain, because there were too many to be rectified in such a short time period, we did succeed in beginning to get the city back on track. This turnaround success was built on 20 years of turnaround experience in my own firm and in two of the best firms in the country, AlixPartners and PriceWaterhouseCoopers.

We were able to achieve many tangible improvements, such as:

1) Negotiating lower cost union agreements (e.g., finalized new contracts with six city unions–including AFSCME, Teamsters, Police, Fire to obtain their contributions of 20% towards their health care costs and reduced the insurance cost even further for new hires)

2) Upgrading Pontiac’s bond ratings from CCC to B and moving the financial outlook from “negative watch” to “stable”.

3) Generating a surplus (e.g., achieved a surplus of $1.4 million in FY09 and $3.0 million in the nine months ended March 31, 2010) for the first time in many years in one of the State’s most difficult financial environments; obtained a clean audit opinion in FY09.

4) Identifying and dealing with assets that have generated inadequate returns and stopping the bleeding (e.g., sold the Silverdome saving $2.4 million/year in maintenance cost and sold other assets where the deals had not progressed in many months or even years)

5) Hiring professional outside managers to be responsible for critical operations in order to reduce risk, eliminate future cash bleeding and improve service to the community (e.g., outsourced the management of the Pontiac wastewater and drinking water facilities, the golf course and the outdoor event venues)

6) Reopening major contracts with outside vendors to reduce ongoing costs (e.g., garbage collection and major equipment leases)

7) Collaborating with other organizations to share cost and operate more efficiently (e.g., obtaining interns to help in critical functions, working with the Michigan Prisoner Release Initiative to supply free labor to maintain parks and vacant lots)

8) Negotiating sophisticated new agreements to attract new business (e.g., successfully finalized a tax-free Renaissance Zone for the new Michigan Motion Picture studios)

Please call us now at 248-514-3262 to begin discussions on how we may able to help your organization.