In a heated discussion, Councilmember Sue Greenwald pressed the Finance Director to explain where the inflated savings figures came from. During the course of that discussion, Councilmember Greenwald demonstrated that the level of savings was actually considerably less in year three than the 3.6 percent trumpeted by city staff.
“The savings from the base year to year three of this contract was only $57,000 which is .82 percent not 4%, 6%. So there’s a lot spin in how we’re presenting this.”
“I really take issue with this $800,000 savings, this is a savings that’s a savings that is over and above your projection.”
As she pressed the issue, Mayor Ruth Asmundson abruptly cut off the debate. The council would then vote by a 3-2 vote against having a 30 day sunshine period or referring the matter to the Finance and Budget Commission as they requested. The Council then voted by the same 3-2 margin to approve the MOU. Councilmembers Greenwald and Lamar Heystek were the dissenting votes on both votes.
The Finance and Budget commission expressed disappointment through their council liaison Lamar Heystek that they were not able to review the MOU at its December meeting. They repeated their expressed desire for more transparency and asked for a 30 day sunshine period prior to formal ratification. However, staff recommended against this approach and council backed them on a 3-2 vote.
One of the key issues has been the reported $800,000 plus in savings, purported to be 4.1% over the course of the three year contract. It finally became clear what that baseline was.
“When we looked at the overall cost of the firefighter MOU and we calculated the savings over the three years compared to the cost of the current contract extended for the same period of time, because we’re not starting from zero at the beginning of the process, that on the one hand the overall cost of the total contract in the third year is the $6,788,000 which is $236,000 or 3.6% less than the $7,444,000 figure that would be the cost of the current contract in 11-12.”
As Sue Greenwald pointed out the real savings in year three is only $57,000 or 0.8 percent less than we are currently paying.
“When we look at the total savings, these very inflated figures that the staff spin has put on it, if you look at the figures that Paul gave me when I asked him, what is the total amount that we’re paying the baseline year of 2008-09 for the current contract? $6,845,000. In year three of our contract year now, fiscal year 11-12, it’s going to be $6,758,000. In year three we’re going to be paying .8 percent less than we do now. Only $57,000 less, I don’t count that an $800,000 savings. It’s an $800,000 savings over a bogus high projection based on past unsustainable contracts. That’s what I call spin.”
The difference in the two figures that Councilmember Greenwald refers to is that she is using what we are currently paying whereas Mr. Navazio is using a baseline that assumes a continuation of the current contract. It remains unclear what annual rate of increase in cost is assumed to be. However, it should be noted the last contract increased salaries by 36% over the course of the four year period, that would mean that Mr. Navazio might have been project somewhere around a 9% annual rate of increase and then baselined the decreases from that.
The bottom line as Councilmember Greenwald correctly pointed out, we are not saving 3.6% in the final year of the MOU, in fact, far less at 0.8%.
The Cafeteria cashout was another a huge issue. This is the policy that allows an employee whose spouse has full health insurance to take cash for the value of the insurance policy. That amount is currently set at around $18,000 per year–that is essentially cash that the city gives an employee in lieu of health insurance. The new contract calls for a small 20% reduction of that to around $15,000.
“The cafeteria cash out is an extraordinary benefit that the city gives that means that if you have a spouse that have coverage, you can take home in cash, what that insurance would have cost you… If we didn’t have this extraordinary benefit that hardly any other public sector agencies have… and if we structured it intelligently, we could pay off our entire unfunded employee retiree liability.”
“The cafeteria cash out is the biggest fiscal disaster facing us and it’s where we could really, if we had wanted to, had made a difference. Unlike almost every other public agency, a worker who lives in Davis, our employees, if they have a spouse, who has coverage, they get to take home currently 100 percent of the cost of their medical and related benefits. So they get to take home cash, it’s about $18,000 in the base year.”
She pointed out this was not even a fair benefit, since some get it and some do not.
“It’s not fair between employees and it’s not standard in public employment.”
We only make token changes in that cash out. She went on to point out that if we reduced the cash out to 25% of the cost, there would remain the incentive to utilize other insurance while at the same time saving the city a lot of money. She estimated that we could save around $3 million a year by such restructuring since the cash out cost is $4 million per year.
“If we took that $3 million a year and put it into a dedicated fund to pay off the unfunded employee liability, we would be able to pay it off.”
Councilmember Heystek had several concerns about the process employed and the lack of ability now to address long-term structural issues.
“This is not about what dollar amount certain employees may or may not deserve. This is about what we as a city can afford to pay and we have a responsibility to get the best deal for the taxpayers and the community as a whole.”
He went on to point out several deficiencies in the process.
“Previously there have been calls for the retaining of an outside negotiator, the city council did not decide to do that. With all due respect to our staff, we have the same administrators making programmatic decisions that affect the bargaining unit as well as make decisions that effect personnel and their compensation. I wish that we would have been one step removed from the process by retaining an outside negotiators who can directly engage the bargaining group so that we can have a truly independent bargaining process.”
The problem as Sue Greenwald later pointed out that the city management was expected to negotiate on contracts with the same people they would later rely on to implement policy and have to work with. This puts staff in an awkward position.
Councilmember Heystek also complained that these discussions in closed session had a strict time limitation placed on them.
“We don’t time or limit the discussions of anything else, but we do limit the discussions of what I feel are decisions that are integral and critical to the financial well-being of the community. If we are not allowed the time to really discuss these issues, then we are not doing the process a favor.”
He then hammered on the issue of personnel costs and the lack of changes that we have made in this system.
“We often talk about dollars, and dollar amounts are important, because there is a target of $1.25 million personnel cost savings. It’s doubtful, as I said last week, that we will meet that target. Under the guise of short term salary reductions, we are dodging the bullet on long-term structural issues. The agreement insulates us from taking action to change the formula for calculating pensions. It is a means for us to avoid serious discussion about what we do with new hires and how they earn their pensions. It’s a way for us to not have a real discussion about medical benefits for folks under the age of 65. It’s another way for us to avoid a real discussion about holiday, about how we compensate managers.
With this particular discussion we also know that the city council has also taken action about the battalion chief’s model. What that amounts to is the lifting of the ceiling for compensation, as we said before and I said during that discussion, we’re going to have musical chairs here where folks will have a clear path moving up the payscale. I’m afraid that’s another way that we’re not accounting for costs.”
For now I will leave my comments brief and have a longer commentary later this week. However, what is clear to me today is that the public got the short end of the stick here. Let us look not at the outcome but the process. The council’s own commission asked for a sunshine period where they could look over the agreement and make a recommendation. That was rejected.
We found out about this contract late on Friday. That gave us essentially four days to evaluate it. To make matters worse, Mayor Asmundson truncated debate as Councilmember Greenwald was asking questions and making her points. The only limited public discussion after months of closed door meetings was cut off by the Mayor. That is outrageous. The people in Davis should be up in arms about this and yet given that this is a fiscal matter rather than a land use issue, very few likely will even notice.
After the level of complaints about the Measure process, this amounts to the exact same lack of public discussion. Will there be lengthy diatribes by a local columnist in another paper? Will it be mentioned at all? The Davis Enterprise beat reporter left halfway through this discussion and never even witnessed the truncation of debate.
The problems that the city faced before this contract, it faces now except it is now worse because we have another three years locked into place whereby changes cannot be made and that should be the greatest outrage of it all except it is not. The real travesty is that the city has been able to spin and manipulate facts and figures to support its position and few have called them on it.
—David M. Greenwald reporting