Consideration and Approval of Contract:  Sole Source License and Hosting Agreement with Resource Exploration, LLC in the amount not to exceed $165,000 for consulting and software service for the implementation of Priority Based Budgeting.

1. Approve the Sole Source License and Hosting Agreement with Resource Exploration, LLC for Priority Based Budgeting for an amount not to exceed $165,000.00; and
2. Authorize the City Manager to execute the necessary documents.

The Sole Source License and Hosting Agreement with Resource Exploration, LLC (ResourceX) will provide consulting and software services to implement Priority Based Budgeting for the City of Flagstaff.  This is one of the steps the City will take to move toward a High Performing Government.  ResourceX is the only company that provides a Priority Based Budgeting software solution.  The initial implementation cost will be $50,000 plus applicable taxes for the first year.  The contract is for a five-year period with annual software renewal costs of $25,000 plus applicable taxes.  Additional training costs or software features may be considered in the implementation year.

The initial cost of implementing the program will be $50,000 to which includes the use of the software for the online Priority Based Budgeting platform, on-site regional training, and 150 hours of support. Funding has been designated in the Fiscal Year 2019 and 2020 budget under account number 001-09-402-1314-1-4206.

This software solution will be used during the annual budget process.  Decisions made during the budget process support Council Goals, Regional Plan and Team Flagstaff Strategic Plans.

At the January 16, 2019, Council Budget Retreat, staff presented the topic of High Performing Government.  This included consideration for changing budget processes to a priority-based system. 
At the April 2019 Council Budget Retreat, staff presented a budget which included funding for Priority Based Budgeting.

1. Approve the License and Hosting Agreement with Resource Exploration, LLC for software and consulting services for a term of five years; or
2. Amend the License and Hosting Agreement with Resources Exploration, LLC at Council Direction; or
3. Do not approve the License and Hosting Agreement with Resource Exploration, LLC for software and consulting services.

The City of Flagstaff currently uses a Base Budgeting approach for the annual budgeting process.  This approach allows Divisions to begin each budget cycle with a base budget consisting of ongoing resources for personnel, contracts and commodities.  Then each Division submits requests for increased funding for their programs and services that will maintain or enhance the service levels they provide. 

There are several other methodologies for budgeting that are used by cities across the United States.  Some of these include Budgeting for Outcomes, Performance Based Budgeting, Zero Based Budgeting, and Priority Based Budgeting.  Over the last several years, staff has been considering options for changing our budget process at the City.  Most recently staff attended training opportunities related to Priority Based Budgeting.  

Priority Based Budgeting was developed by a company named the Center for Priority Based Budgeting and worked with serval cities, the Government Finance Officers' Association (GFOA), and Alliance for Innovation to develop a budgeting solution.  GFOA has since recognized Priority Based Budgeting as a best practice for local governments.  The company ResourceX was founded to grow the Priority Based Budgeting community using unique tools that enable more organizations to adopt this best practice.

Priority Based Budgeting is a leading best practice in local government and a powerful lever for change. ResourceX provides the software solution and powerful analytic tools to implement a Priority Based Budget using data and evidence to transparently and exponentially improve results for citizens and the community.

The underlying philosophy of priority-driven budgeting is about how a government entity should invest resources to meet its stated objectives. It helps us to better articulate why the services we offer exist, what is the price we pay for them, and, consequently, what value they offer citizens. The principles associated with this philosophy of budgeting are: to prioritize services, do the important things well, look at and evaluate past patterns of spending, spend within the organization's means, know the true cost of doing business, provide transparency of community priorities, provide transparency of service impacts and to be accountable for the results.  
 

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Changing the City's budget process to a Priority Based Budget allows the City to prioritize programs and deliver services to the community based on those priorities.  Resources may be reallocated to programs to better serve the community.

Inform: By awarding the License and Hosting Agreement to ResourceX the City is informing the community it is seeking a new budgeting approach.
Involve:  Staff will involve community members in the process of ranking and prioritizing the programs and services provided by the City.