In the Wake of the Bell Scandal, State Controller to Require Disclosure of Top Salaries

It took an expose by the Los Angeles Times to reveal that the city manager had received a salary of $800,000.  In addition to that the Mayor and Council got an obscure measure on the ballot that allowed council members to pay themselves any amount of money.  They received $90,000 and $100,000 a year as part-time councilmembers.

“Until recently, the city manager in Bell was being paid almost $800,000 per year in total compensation, or roughly twice as much as the president of the United States. The police chief made more than $400,000. Each member of the city council was being paid six figures. Over time, the citizens of Bell were bilked out of many millions of dollars, paying city officials outlandish sums,” Conor Friedersdorft points out in his essay, Why Every City Needs A Beat Reporter, in Forbes.com.  “But no one knew!”

The people who lived in the town did not know about the high salaries because they never had a watchdog reporter or even a beat reporter covering city hall.  “It may be hard to believe, but had its residents banded together five years ago to hire a top-notch beat reporter, even paying him the handsome salary of $200,000 per year, the return on their value would’ve been immense,” Mr. Friedersdorft writes. 

While we might romanticize about a society where we can still have local newspapers and watchdogs, perhaps the more realistic approach is simply a matter of government transparency.  And that is where Controller Chiang’s proposal comes into play.

“The absence of transparency is a breeding ground for waste, fraud, and abuse of taxpayer dollars,” said Chiang. “A single website with accessible information will make sure that excessive pay is no longer able to escape public scrutiny and accountability.”

The new reporting requirements come after the City of Bell reportedly spent $1.6 million annually on just three city employees, and nearly $100,000 for each part-time City Councilmember. At the request of the City of Bell’s Interim City Administrative Officer, the Controller ordered an audit of Bell’s finances last week, a release from the Controller’s office Tuesday stated.

According to that release, under current law, local governments are required to transmit summary information about their revenues and expenditures to the State Controller’s office. Payroll information is included in the total amount listed for each category of program, such as public protection, health and welfare, and governing body. The data is compiled and used to produce annual reports for the Legislature. The Controller’s new rules require cities and counties to provide the salaries for each classification of elected official, such as mayor and supervisor, and public employee, such as city manager and county administrator.

City and counties generally are required to provide the information to the Controller by mid-October of each year. The Controller’s website will be updated annually to reflect the most recent data received. Local governments who fail to report timely could face a penalty of up to $5,000.

Kevin Roderick, founding editor of LA Observed, said “We’ve heard of all this lately because of some good, solid reporting by the Los Angeles Times. The paper sent reporters in to see what was happening in Bell and hasn’t let up, running story after story and throwing fuel on a much-needed citizen uprising there.”

Mr. Roderick added, “But before you get all inspired and warm inside about a triumph of gutty journalism, think about this. The rip-off artists that run the city of Bell got away with their scheme this long largely because the LA Times reduced and finally abandoned its local coverage in cities like Bell.”

One of the key questions though is really how many other Bells are out there and this proposal by the Controller gets to the heart of the matter.  Regular reporting would do wonders. Making these reports accessible to the public and in the form where they can compare their cities to other similar cities would do even more.

On Friday, the Sacramento Bee reported, “City administrators from around the state scrambled Thursday to get ahead of the unfolding salary scandal in the Los Angeles suburb of Bell.”

There is growing anger overall over salaries. That itself is an issue we have covered at least since 2008. The City of Davis does not have any salary above about $155,000, which is quite unusual.  The Bee has a chart of City Manager salaries.  It includes 18 cities and counties.  Davis is fourth lowest on that list. Ten of the entities had top executives making over $200,000.  That includes West Sacramento at just over $200,000.  The City of Sacramento’s City Manager makes just over $210,000, Roseville is about $240,000 and Sacramento County CAO is making just under $300,000 while Yolo County’s is making just under $200,000.

As we know, salaries are not the end of the story.  What Davis lacks in pure salaries it makes up in benefits and retirement benefits.  The problems that cities like Davis face are not purely from compensation but rather from the lack of funding for very lucrative retirement benefits. Thus the city’s PERS obligations and unfunded health benefit liabilities threaten, at the very least, severely to constrain future spending, if not produce worse problems down the line.

The Bee reported Friday that the Bell scandal is focusing attention and anger on city salaries and finances that have long been a problem, apparently just off the public’s radar.

“For city managers, it’s kind of like the Rodney King beating,” said Winters City Manager John Donlevy, who is on the city manager executive committee of the League of California Cities, in the Bee article.  “It had to be one of the most reprehensible things done. City managers are charged with being the fiduciary of the public trust. Cities have to live within their means and I don’t care how good (they are), nobody should be paid close to a million dollars.”

“The scandal in the city of 37,000 comes at a vulnerable time for California cities. Trust in public officials has eroded, particularly when the discussion turns to those with high salaries. In addition, as cities and counties use layoffs and wage concessions to balance their budgets, labor unions are accusing public agencies of protecting bloated management staffs at the expense of the rank and file,” the Bee reported.

“And local officials, pleading poverty, have spent the last year complaining that the state is balancing its budget on their backs by taking redevelopment money and other funding,” the article continued.  “Complicating matters is the calendar: In just over three months, many local governments will ask voters to raise taxes and fees to bolster public services in the wake of cutbacks.”

Chris McKenzie, the executive director of the League of California Cities, told the Bee that Bell is merely one jurisdiction among thousands.  Maybe it is, but part of the problem here is that, while Bell is the extreme example, things were and have been moving in that direction.

The Bee quotes Santa Clarita’s city manager, wondering out loud how there were not questions asked long before the salary become $800,000.  The problem goes back to the breakdown of transparency.

But I do think that cities are in a bit of denial that their policies contributed to the problems. What seems to have happened is that the city manager was in place for a long time, and had an automatic escalator clause in his contract. That means each year, he got a 12% raise and his underlings likewise got raises themselves. 

12% is obviously an extreme example, but what we have seen is an arms race. Cities are competing against each other and salaries have exploded in every jurisdiction in the last decade. We need to figure out what a good sustainable level is for government salaries, whether they be city, county, state or federal.  We need to look at pensions and other benefits as well. 

We have gotten out of whack everywhere, and Bell is simply the elephant that no one could ignore. Cities can look at Bell and take solace that their own salaries by comparison are not so bad.  But maybe that is the problem, and how we got Bell in the first place.

—David M. Greenwald reporting