City Manager’s Memo on Cuts Misses the Point

This first part will focus on a memorandum by City Manager Bill Emlen that pretty much proves he is missing the point.  There is some serious denial going on in this city and it begins with the city manager.  He writes:

“Much has been written about employee salaries and benefits and how they contribute to the current budget challenges. There is no doubt that salaries and benefits afforded local government employees have significantly increased over the past few decades. The City of Davis employees are no exception; our compensation package is generally competitive with comparable local government entities. Conversely, the data and information provided at our October compensation workshop show that overall salaries and personnel costs are well within the range provided in similar cities in our region. Furthermore, our overall staffing levels are within the norms for similar cities and in fact the range of services we provide is actually more extensive than many cities. Moreover, the City currently employs fewer positions per capita than we did in 1991-92. The reality is that sans the current historic economic crisis, there likely would not be the focus we are seeing on City salaries and overall compensation.”

This is an absolutely extraordinary paragraph that defends unsustainable processes and policies.  The city manager here is essentially saying that there is nothing broke with this system that we will have to fix.  The problem is entirely caused by the current economic criss.  So we do not have a pension problem.  We do not have an unfunded mandate problem.  We do not have $13 million in unmet needs.  And the current system of escalation in salaries is not problematic to our long term fiscal health.  We and other cities are completely justified in the current employee compensation process and policies of used comparative cities as baselines for compensation.

To me there is no more proof needed that Bill Emlen does not get it.  Moreover, he along with Paul Navazio and the HR Director Melissa Chaney presumably are the ones carrying out the negotiations on behalf of the taxpayers.  I am sorry, I was skeptical before, this is the last straw.  This man has no business negotiating on behalf of the city.  This is appalling.

He continues:

“None of this obviates the need to take a hard look at our organization.  There are compensation issues and there are structural organizational issues that should be reviewed. The fact that we compare favorably with other cities with more severe budget challenges does not mean we do not have our own challenges. There clearly are aspects of our compensation system that need to be re-looked at as relatively benign benefits approved over the years with relatively small up front costs have compounded over many years and now have significant effects.”

This paragraph seems at odds with the previous paragraph.  He just told us that we are completely justified absent the economic crisis for our salary structure.  Now he’s talking about compensation issues and structural organizational problems.  Which is it Bill?

I am glad you are exploring all of these things now that we are in crisis, but people like Sue Greenwald have been warning you about this for years and up until the last paragraph you were defending your policies.

The City Manager asked the city to address each of these five points plus an additional six points.  I will make a few comments on each myself.

“1. Do not use the reserves to balance the fiscal year 09/10 budget.”

I agree.  The city should preserve its one time monies to the best of its ability.  If this were going to be short-lived then it might make sense, a multi-year downturn would eat up that reserve very quickly.

“2. Concur with the tiered reduction approach with possible adjustments as determined by Council discussion.”

Like Councilmember Lamar Heystek, I disagree with this approach.  Mr. Heystek called it nickle and diming the tax payers.  I agree.  We need to get to the core issues and look at them.  I am not interested in looking at these approaches without addressing the serious core issues involving staffing and compensation which accounts for most of the general fund.

“3.  Ask staff to begin transitioning to a more performance-based programmatic budget with groundwork in this year’s budget and a more complete transition in the following fiscal year.”

Fine.  Probably should have done this awhile ago.

“4.  That labor negotiations include a discussion about acceptance of mandatory furloughs.  The $400,000 in savings that could be achieved by using non-public safety furloughs on a one day a month schedule would not be factored into the fiscal year 09/10 reduction list,    but would serve as a contingency, and would be implemented only if revenue were to fall short of current projections, or the State budget crisis has unexpected and negative effects on the City budget.”

Finance and Budget Commission Chair Johannes Troost suggested we go to a 15% across-the-board cut including public safety, I’m tempted to look at that.  To me furloughs are not the way to go.  I would look toward salary cuts first if we can get them rather than reduction in service.  He argued that the way we do business has to change, this is not going to be a short-termed crisis, this is a change in the way we do business.  Councilmember Heystek argued that we have to change the fundamental way that we provide city services.

“5. To stay proactive in addressing the long term retiree medical liability, continue to build in a general fund contribution beyond strictly “pay as you go”. My recommendation for this year would be $500,000. Last year’s contribution was $450,000, while the baseline budget for FY2009/10 increased the General Fund set-aside to $600,000.  Re-allocate the resulting $100,000 savings to a new general fund account for roadway and sidewalk maintenance, and adding an additional $150,000.00 in general fund dollars would provide $250,000 for streets and sidewalks. This is essentially establishing a baseline general fund account for roadway maintenance to be augmented by outside funds we receive on an irregular basis. Our goal is to build up this fund in the next few budgets to a more substantive level.”

I think we have to go well beyond this.  $250,000 for streets and sidewalks is pennies.  As a concept this is okay, but I think we really need to move beyond this.

In addition, he had six suggestions to the tiered reduction proposals.

“1. Further minimize impacts of reductions on law enforcement. Pursue COPS funding under the Federal Stimulus package to retain the Police Officer positions that are on the cut list. Consider additional tier of reductions to retain the positions if the COPS funds fail to materialize.”

I am not convinced that cuts and reductions to law enforcement are a good way to balance the budget.  We really need to look at what we are doing first rather than the dollar bottom line.

“2. Determine that complete closure of the Fire business office is impractical. It is currently a tier 4 Fire Department cut. As an alternative, direct staff to look at reorganization opportunities and changes in operational assumptions that would reduce costs, particularly in overtime. Also look for sufficient cost reductions to retain the two firefighter positions that are tier 3 and tier 4 reductions. Retain current levels of firefighters, even if there are changes to the operational model.”

I don’t think closing the fire business office is practical.  There are certainly ways to save much more money in the fire department.  More on this later this week.

“3. Ask staff to reduce and restructure the Community Development Department. If feasible, transfer personnel to other departments with position vacancies that have less or no General fund support. Also, consider transferring one Building Inspector to the Public Works Department where there is a vacant Inspector position. This will facilitate balance to the Building Inspection fund.”

Possibly, just do not know.

“4. Authorize administrative staff to pursue retirement incentives for up to 5 positions with focus on middle management positions. Ongoing savings of over $500,000 could be achievable. Incentives would not include the PERS golden handshake, which is too costly and constraining on future organizational changes.”

Everyone from Mayor Pro Tem Saylor to Councilmember Greenwald had questions about this.  I think this is the wrong way to go.  We really need to be careful who we are asking to retire and why.  I just do not see this is as a huge savings.  I certainly do not see an ongoing savings of half a million as possible.

“5. Some but not all positions on the reduction list are current vacancies. Even for those vacant positions not on the reduction lists, hold off on filling the vacant positions upon adopting this budget until at least mid-year 09/10 to further assess the City’s financial situation at that time, and our ability to sustain filling those positions.”

This makes sense, assuming that we are not struggling with their vacancies.

“6. In order to ensure that we end the current year with a General Fund reserve level consistent with our 15% policy requirement, direct staff to return to the Council with specific recommendations on implementing some of the baseline and tier one budget-balancing measures in this fiscal year.”

I am not crazy about this approach.  I would like see some of the more serious issues rather than the nickle and dime proposals dealt with.

It took a crisis for the city to start looking seriously as the way to do business.  But I do not think the city is really looking at the way we do business.  We simply are looking at a bunch of cuts and hoping it all adds up to enough savings to balance the books.  To me that is the wrong approach.  We need to look at what is broken and actually change the way we do business rather than simply doing less business on the surface.

We will look at some of the proposals in much greater depth later in the week.  In the meantime, here is what the City Manager proposed.

—David M. Greenwald reporting