Back in July, the Vanguard argued that the “Council Did Right Thing on Compensation.” As we wrote on July 19, 2014: “The council has clearly waded into perilous waters by increasing the salary component of the city manager’s total compensation, but it is not clear to me that they had much choice. It doesn’t take a lot of imagination to read through the lines that if they are asking for the increase in the salary compensation level at this stage of the process, they otherwise were not going to get the city manager candidates they wanted.”
“The data here speak for themselves,” the Vanguard commentary continued. “Davis is at the very bottom in the region in terms of salary. The consultants recommended a range of salaries that put Davis between the mean and the 75th percentile.”
There was the convincing chart which showed the city of Davis at the bottom:
Based on that staff report, the council voted to “establish a salary range of the City Manager position up to a range of $217,200 to $241,300, with appointment to be made within the range based upon the qualifications and employment history of the individual appointed to the position,” and “establish a limit of up to 10% for additional monetary benefits (in addition to health/dental and PERS retirement benefits), to be negotiable.”
As the staff report noted, “Working with the guidance of the Recruiter, staff conducted a labor market analysis of certain cities within an approximate 60 mile radius of Davis to determine the city’s competitiveness in the marketplace. Based on the survey information it is evident that the city’s medical/dental and retirement benefits are comparable to other cities in the region. The area where Davis is clearly not competitive is salary and additional cash-related benefits (i.e. deferred compensation, PERS pickup and auto allowance).”
But that staff report only told part of the story. It failed to capture what had happened with city manager compensation since 2009.
A quick glance at seven of our regional neighbors shows that Woodland was the only other city besides Davis to increase its city manager salary since 2009. Woodland increased the salary following the hire of Paul Navazio, from $181,135 to $191,760, just over a $10,000 raise or a six percent increase. Davis’ increase is nearly three times that.
The cities of Lincoln, Rancho Cordova, Rocklin, and Roseville all reduced their salaries by more than eight percent.
Is that a huge problem? It could be. Unlike a lot of other cities, the city of Davis is not out of fiscal crisis yet. We just had to pass a sales tax increase to close what had been a $5 million structural deficit, but as our readers are well aware, that is the tip of the iceberg. First, the structural deficit is expected to continue to increase, even with the sales tax, up until 2018.
Moreover, the city faces huge infrastructure costs to repair things like roads, bike paths, greenbelts, parks, sidewalks, and pools. One of the first new tasks of the city manager will be to assess the fiscal situation and help the council arrive at a course of action on a potential parcel tax or other revenue measure.
Furthermore, the city in the next 12 to 18 months will be looking at getting voter approval on innovation parks, which the city hopes will generate new tax revenue into the future.
The city is now going to have to explain to voters how they are in fiscal crisis and yet can afford to pay the next city manager $217,200 in salary, a 16 percent increase over the previous city manager. Moreover, in this case, we are hiring a local resident who was previously making $166,000 at his current place of employment as the Assistant County Administrator for Yolo County.
Mayor Dan Wolk back in July noted that “[this is] during a time of budget crunch and we are getting concessions from our existing employees,” and he believed that was an important point.
Nevertheless, in the end, he agreed with the consultant. “I will support this,” he stated. “Having a really good city manager can make a huge difference. It is clear from the data that we are significantly below… other cities.”
“To get good people, salary is a critical part of that,” he continued. “Even though we’re in a period of tighter budget, even though we’re in a period where we’re making concessions… I think that it’s important that we have a good city manager at the helm.”
He said he hoped that the city employees would understand that a greater salary would give the city someone who can be a good city manager and be very good on employee morale issues.
But will they understand? The current round of Collective Bargaining Agreements expires in 2015, either in June or December depending on the bargaining unit. Given the city’s fiscal situation, it is more likely than not that the city will have to ask the employees to take another round of cuts, particularly since the voters will have been asked to pass two taxes and innovation parks to fund city government.
The Davis City Employees Association (DCEA) has fought the city in each round, going to impasse twice – once prevailing in front of an administrative law judge. In 2013, they went to impasse again, along with the firefighters’ union.
The city was unable to reach agreement with DCEA and a unanimous council voted to impose the last, best and final offer. The result was that the cafeteria cash out went from $1738.44 per month to a maximum of $500 per month, and the employee PERS (Public Employees’ Retirement System) contribution went from 0% to a full 8%. Because the contract was imposed, they are on a yearly contract, and the city was unable to impose a second tier like they did with the five bargaining units that agreed to those terms.
A typical DCEA salary might be the Parks Maintenance Worker, who earns $49,034.34 per year (Source). While the salary was ultimately not touched in the imposition, the position effectively took as high as a $19,000 per year pay cut, as the cafeteria cash out was reduced drastically, and now such an employee has to pay nearly $4000 for PERS benefits.
Remember, DCEA employees had the highest rate of taking the cafeteria cash out and the highest rate of taking the full benefit.
So, while the lowest paid workers in the city effectively received a 27 percent pay cut through imposition, and now may be asked to take on additional concessions – or lose their jobs as nine of the employees did in June of 2012, the new city manager – who makes more than four times their salary – is personally getting a $60,000 raise (more than the Park Maintenance Employee’s total compensation).
Steve Pinkerton often told me that had he taken a salary increase when he was hired, it would have been impossible to get the rank and file to take concessions.
It may be impossible now, anyway. One of the lessons that we can learn from DCEA is that you benefit from not agreeing to terms. So, while five bargaining units took concessions by December 2012, DCEA and fire held out and received an extra year of salary at the previous rate, and because DCEA held out in 2010 and prevailed in 2011, they received 2009 rates through the end of 2013 while the other bargaining units had conceded to cuts twice.
We have yet to see the numbers, but it seems that the new salary puts the city in a difficult spot, both politically in terms of passing a parcel tax and fiscally in terms of getting employees to agree to new rounds of concessions.
If the council attempts to avoid the problem by holding the compensation at current levels, they risk a backlash that could threaten the possibility of passing the parcel tax.
The city faces a huge political mess here and, in part, this is on city staff and their consultants in failing to provide the city council with full information on what is happening with salaries across the region.
—David M. Greenwald reporting