My View II: When Should Employee Compensation Increase?

City Hall

City Hall

Yesterday’s article on potential revenue from new hotels triggered another side discussion on employee compensation. The problem that the council now is going to face is that all revenue measures and all economic development projects not only are going to face traditional concerns over land use issues, but now revenue-based justifications are also going to face skepticism that the fruits of these projects are not going to go to ongoing needs, but rather to the bottom line for city employees.

What was already an uphill battle on some of these projects was just made ten times harder in my view. As I stated yesterday, my growing concern is that these revenue measures really will just feed back to increased employee compensation. That is something that we should not be doing until the city is on better footing fiscally.

That prompted a legitimate question from a reader who asked, “So what is the tipping point for you?  Where does the city specifically have to be, to be ‘on better fiscal footing’ before you are willing to grant city employees COLAs?”

That is admittedly a difficult question to answer. The easier question is why not now.

The answer to why not now is straightforward. First, even the modest three percent COLA (Cost-of-Living Adjustment) for four of the bargaining units costs at least $1.1 million, and probably more when you consider the longer term PERS (Public Employees’ Retirement System) and longevity pay issues. Using the most recent projections from June, that modest budgetary hit actually pushes us into the red within two years.

Second is the fact that council just passed a revenue measure in June 2014. That revenue measure pushes us from the red into the black. And, as projections continue to demonstrate, when the revenue measure expires, we end up back into the red.

Council, in laying out the need for that revenue measure, stressed roads and infrastructure costs along with increased state-imposed costs for labor. They did not tell the voters a portion would go for employee raises. In fact, they discussed putting an advisory measure on the ballot that would have precluded the revenue going to employee compensation.

Finally, council is still debating another revenue measure for infrastructure. In light of the collapse of the oil market, projected inflation has decreased from eight percent and council is using the four percent mark for now, which I think is a bit too low looking at a 20-year horizon. But if that held, the council might be able to get away with spending, instead of $10 million per year, closer to $5 to $7 million.

Of course, there are other infrastructure needs as well, and that probably means the council should put a revenue measure on the ballot – however, it looks like if the council wanted to avoid another revenue measure, they could have used that $1.1 million (that was supposed to go to roads anyway) and bring current road maintenance funds up to $5.1 annually.

The bottom line is that the city had committed the money elsewhere, had other needs, and is looking to ask the public for more revenue at a time when the city budget does not show us in the clear by a long shot.

There are three other considerations as well. First, we saw a tremendous growth in employee compensation from 1998 to 2005. That created a huge strain, not only in terms of salaries but also on pensions and health care, and we need to allow inflation to reduce that strain over time.

Second, while the city has cut, mainly through attrition, about 100 positions, it is my understanding that, per capita, Davis is still on the high end in staffing numbers and it would be instructive to see a staff analysis. I still recall the time when former Councilmember Lamar Heystek walked me through an organizational chart that had 11 layers between the director of Parks and Recreation to the staffer who at that time ran the teen center.

His point to me was that there was a huge layer of middle managers who are tasked with duplicative tasks and responsibilities. Does that still exist? I haven’t seen any kind of audit on this.

Finally, along the same lines, we have often used one comparative, average wages, to show that Davis is not at the top in employee compensation, but, if over-staffing is the case, perhaps the bigger problem isn’t average wages but per capita staff expenditures.

In short, I would like to see the city’s study of needs, an audit on staffing, and an analysis of per capita budget before increasing compensation.

This exercise was intended to show that now is not the time for employee compensation increases, as well as the fact that we still have a lot of questions about budgeting and spending first.

So what would it take for me to support employee compensation? That was the original question. First, we need to have the funding in place to deal with infrastructure needs, whether that is a tax measure or a transfer of general funds from other uses.

Second, we need to understand where we are and therefore we need staffing studies and audits. We need to look at our spending compared to other communities and we need to assess the level of service we want in this community and what that is going to cost.

Finally, we need to ensure that we never again do what happened from 1998 to 2005. That means we need to take steps to keep health care costs and pensions in line. We need to be cognizant of the impact of salaries on future retirement costs, and we need to ensure that increases to total compensation are capped at revenue growth which is more pertinent to inflation.

In addition, we need to make sure we can afford the increased compensation. The biggest problem right now is that the proposed compensation cost increases are larger than our revenue surplus and so we are pushing ourselves from the black to the red.

We need to be able to afford those increases and build in a margin of error, just in case revenues come up short with projections.

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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29 Comments

  1. SODA

    Good article. An additional concern is what the CC will do with the remaining bargaining units when they come up. I have little faith that they will be able to show restraint. The same or more increases may well prevail which puts us farther behind. When do they come up; did I read they were not in negotiation currently?

    To me the clock was set on this round when Dirk stated there would be no cuts months ago.

      1. Tia Will

        how is the city going to prevent the fire firefighters from getting the same longevity pay hikes as the police officers?’

        Maybe by pointing out that they already received a disparate increase in compensation previously ?

  2. Tia Will

    I also think that this was a very good article. I especially appreciate your being more specific regarding the factors you see as needing to be in place prior to compensation increases. I am unsure about one point that you made and believe that we may be in disagreement on this point.

    Second, we need to understand where we are and therefore we need to staffing studies and audits. We need to look at our spending compared to other communities and we need to assess the level of service we want in this community and what that is going to cost.”

    My point for needed clarification is, who is the “we” that needs to understand ? If the” we” is the CC and CM, then do you know that they have not seen the type of information ( staffing studies and audits with comparison to other communities) that you are calling for ?  Or are you saying that all of this information needs to be made available to the entire community prior to the leaders making any decision at all about compensation?

    If you believe that the city leaders need to have considered all this information, and should be willing to share their thought processes about the information, then we would be in agreement. If you are stating essentially that all citizens need to be provided with all of the details prior to any decision by the CC, then I would not agree. To me, this is why we elect representatives in the first place. If we will obstinately refuse to believe in the good will behind their decision making, then we should change to a direct democratic vote on all measures and skip the whole ” I don’t trust them argument”. I doubt many of us would recommend such a dramatic change.

     

    1. David Greenwald

      Local governance is a community based process. The final decision makers are the city council hear, but those city councilmembers are of us, represent us, and are elected by us. So when I say “we” I mean the collective community.

      In terms of your question, you are drilling down far deeper than was intended in my use of pronoun. I wasn’t attempting to set a deeper bar than we already have.

      1. Tia Will

        David

        The final decision makers are the city council hear, but those city councilmembers are of us, represent us, and are elected by us. So when I say “we” I mean the collective community.”

        So would you agree with the statement that if the CC were to be open about their reasoning with each presenting their rationale behind a decision that they have made, that you would accept the process even if you might disagree with the decision reached ?  If so, I am both clear, and in agreement.

  3. hpierce

    There were audits done, department by department, over periods of years.  Think the most recent was PW, maybe 6-7 years ago.  The most recent for each department, should still be available.  All by outside “consultants”.

    My understanding, based on conversations with those who experienced the audits, was they were of limited value… they are inherently NOT ‘clinical’, and rely on ‘self-reporting’, and the biases/past experiences  of the consultant team.

    John Meyer also did a limited review in the recent past.  Perhaps that could be looked at too.  That one was ‘pro bono’, but the advantage/disadvantage was that Meyer had worked for the city for years (he exceeded the median ‘life-expectancy’ for CM’s), worked for UCD, and for a firm (name escapes me) that provided management services and “head-hunter” support.  Roger Storey, one of the best CM’s the City has had, also was associated with that firm.

  4. Misanthrop

    How soon you forget the bigger problem about the last sales tax increase, it expires rather quickly. It was more like bridge financing until the economy could pick up more steam and Davis could get some economic growth. Now that growth seems stalled and with the Vanguard’s constant whining over a small increase in compensation sowing mistrust of City leadership and fiduciary prudence you argue we might not get the growth we need to balance the books. If you are correct and we fail to get the growth in income the city needs the conservative media of the Davis Vanguard will take no responsibility for any part of the failure of the community to right the local ship of state.

    Its too bad that you didn’t take an alternative path of arguing that the public servants were worthy of a small cola but that the growth imperative had not yet been fulfilled. Reminding your readers that the last sales tax increase was for a short term increase until we could build some projects and pushing the city to get moving on economic development.

     

    There are more ways than the one in your vision to deal with our fiscal issues. It sad that you continuously preach austerity instead of realization of the many economic opportunities that are available to this community.

    1. David Greenwald

      You’re entitled to your view – my view is that there are things that I would like to see money spent on, there are programs I would like to see us implement and I would like to support the Soda Tax, if money will go to low income children and children’s health programs, but if we end up spending it on employee compensation, if we end up spending money that was supposed to go to roads on employee compensation, then we are not going to have it for other needs.

    2. Anon

      To Misanthrope: Thank you for your commentary, and I completely agree.  In fact I would argue that the Vanguard has created an issue (MOU process) for its own ends.  Very unfortunate in the bigger picture.

    3. Matt Williams

      Misanthrop said . . . “Its too bad that you didn’t take an alternative path of arguing that the public servants were worthy of a small cola but that the growth imperative had not yet been fulfilled. Reminding your readers that the last sales tax increase was for a short term increase until we could build some projects and pushing the city to get moving on economic development.”

      The bolded argument by Misanthrop needs some context, because it is presented in a vacuum.

      The chart below shows two different groups of public servants . . . the City of Davis employees and the DJUSD employees over a 7-year period from 2006-2007 through 2013-2014.  In addition it shows the same period for Social Security.  The three values in the farthest right column show that during that 7-year period the Total Compensation of City of Davis employees rose 42.5%, while the Total Compensation of DJUSD employees rose only 4.0% and the Total Compensation of Social Security recipients rose 15.7%.

      One of the many questions that those comparative numbers ask is, “Have the City of Davis employees already gotten their current period COLA in the form of substantially above-market raises over the past 7 years?”
      matt

      1. SODA

        Thanks Matt and thanks for sharing today at the forum. When and whom brought this to light? it was unclear if the CCmen there were aware of these facts. Is the CM?

        1. Matt Williams

          SODA, as part of the mission/activities of the Transparency subcommittee of the Finance & Budget Commission (FBC), Jeff Miller, the Chair of the FBC began compiling the Salaries and Benefits (Total Compensation) data about a month ago.  He reached out to Finance Department staff and fellow FBC members Dan Carson and me to validate the info with an eye to sharing it with the FBC members as part of our ongoing Commission processes.

          It wasn’t until after the MOU decision that the information “was brought to light” and, as I noted in my comment at the forum, that was in “reactive” mode.  I strongly believe the information could have been used by the Council and staff to make a more objective and informed decision during the MOU negotiations.  I also feel, as I noted in the forum, that the information could have been usefully used  to the employee groups in formulating their negotiating positions.

          The information comparing the Davis employees’ 42.5%  aggregate raise info to the equivalent period Social Security raise of  15.7% “was brought to light” here in the Vanguard late last week.  The DJUSD information was added this week working in collaboration with Jan Hart and Bruce Colby.

          Jim Frame asked … “Matt, what’s the source for this document?  And does it have further breakdowns by bargaining group or other classifications?”

          The source of the City information is the annual Budget documents provided by Finance Department staff back to FY 2001-2002.  The source of the DJUSD expenditures information is the following website: http://www.ed-data.org/district/Yolo/Davis-Joint-Unified  The source of the DJUSD employees count data comes from the following steps:

           
          1.       Go to the District’s website (1) Board of Education, (2) Meeting Agendas, (3) Choose either Current or Archived Agendas 
           
          2.       Once you have chosen the year you are interested in, you can go to the second meeting date in March of the school year and find:
           
          3.       Certification of Second Interim Financial Report 
           
          4.       You will need to scroll through the document until you find:
           
          5.       Criteria and Standards Review, which is towards the end of the document
           
          6.       Scroll down to Supplemental Information – S8 –Status of Labor Agreements and you will find the FTE totals
           

        1. Don Shor

          Once again there is a single-year anomaly that makes a substantial difference in the comparison. I doubt that DJUSD employees took a 10% pay cut in 2012-13. So in the absence of a clear explanation from Bruce Colby about that particular data point, I’d guess that DJUSD employees actually came in at somewhat higher than 4%.
          DJUSD pay anomaly

          1. Don Shor

            2006-7 to 2011-12 shows a 10.6% increase.
            2013-14 is a 4.6% increase over 2012-13.
            I am reasonably certain there was not a 10.1% decrease in pay between 2011-12 and 2012-13. Obviously there was some change in the basis of the calculations that year. Assuming an actual 0% increase that year (unlikely, but for the sake of argument), it is likely that DJUSD has had about a 14 – 15% increase over the total period.

        2. Matt Williams

          Don, the data is what the data is.  I agree with you that both the 2011-2012 and 2012-2013 numbers appear unusual.  We don’t have enough information to determine any underlying causes. I will contact Bruce Colby early Monday morning to pose the question to him about those years, and I’m sure he will provide a clarification.

          The table below shows the calculated Total Compensation per Employee FTE for the years from 2006-07 through 2013-2014.  The most anomalous year compared to the $69,926 average over that period is 2011-2012, but until we hear from Bruce, all we can do is speculate.

          2006-2007  $67,516 $(2,410)
          2007-2008  $68,862  $(1,064)
          2008-2009  $69,683  $(243)
          2009-2010  $69,663  $(263)
          2010-2011  $71,687  $1,761
          2011-2012  $74,688  $4,762
          2012-2013  $67,110 $(2,816)
          2013-2014  $70,197 $271
          Average  $69,926

          It is also interesting to look at the total enrollment figures for that same period.  At 8,459 students 2010-2011 shows an approximately 100 student lower value than the five years immediately around it (2008-2009, 2009-2010, 2011-2012, 2012-2013, and 2013-2014).

          2006-2007  8,606
          2007-2008  8,449
          2008-2009  8,534
          2009-2010  8,526
          2010-2011  8,459
          2011-2012  8,543
          2012-2013  8,549
          2013-2014  8,526

           

  5. Topcat

    As I stated yesterday, my growing concern is that these revenue measures really will just feed back to increased employee compensation.

    Yes, I’m afraid that this is exactly what is happening.

  6. Anon

    First, we need to have the funding in place to deal with infrastructure needs, whether that is a tax measure or a transfer of general funds from other uses.

    What does “to deal with infrastructure needs” mean?  Does that include fixing pools, because some don’t see that as a necessary requirement?  How good must the roads be before you feel infrastructure needs have been met, RPI of 72 or exactly what? Because, bottom line (pun intended), infrastructure needs are a bottomless pit (pun intended)!

    Council, in laying out the need for that revenue measure, stressed roads and infrastructure costs along with increased state-imposed costs for labor. They did not tell the voters a portion would go for employee raises.”

    I will repeat, I don’t think this is the correct way of stating the issue.  The sales tax revenue went into the general fund, roads and streetlights were repaired.  You cannot specifically say with any accuracy that the sales tax revenue will be used for employee raises.  The more accurate question is: how will the COLAs be paid for?

    1. Jim Frame

      The more accurate question is: how will the COLAs be paid for?

      It’s a question now, because the COLAs were voted in before the question “Should we provide any COLAs at this point?” was ever asked by the CC, let alone answered in a competent manner.

  7. Matt Williams

    Don poses a question that I asked myself during the data gathering process … And I triple checked the DJUSD source data. The expenditures are drone the State of California website that reports what all the individual school districts have filed with the State, so that value has every appearance of accuracy. The Employee FTE values are reported with the same numbers on thee separate reports provided by Staff to the Schpol Board. So they also appear to be right as well.

    With that said, the 4.0% value is unaffected by that mid-stream datapoint. It is the comparison of the final and the first values

  8. TrueBlueDevil

    Frankly, are you reading this article?

    I figure you might be able to give me an answer to a tricky question. Since the city endlessly drags its feet on 1 (let alone 2) Innovation Parks, kicked out its Chief Innovation Officer in a political move, drags its feet on other matters, raises the colas, hasn’t addressed the long-term costs of pensions or revenues needed for fixing roads and such; what would the monthly parcel tax need to be to pay for this Utopian Dream the city Fathers and Mothers refuse to handle?

    $200 per month?

    $300 per month?

    Gracias.

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