The Enterprise reports, “Some in the community praised the move, calling it a bold step in the right direction to set the city on a path to fiscal stability. The savings would be used to fund unmet needs.”
At one point, a fourth fire station was considered an unmet need. But now that is largely a category for infrastructure and road maintenance, and other community maintenance.
This budget only funds about $850,000 in unmet needs. The rest goes toward paying for pensions ($500,000) or fully funding retiree health ($1 million). Neither of these are unmet needs, however, they are unfunded liabilities.
Mayor Joe Krovoza told the Enterprise on Thursday, “It makes sure we are putting money toward the big future needs of the city — unmet road needs and unfunded employee benefits. There are smaller categories of unmet needs, but we are now funding the big-ticket items that pose long-term structural problems for us.”
The Enterprise added, “Specifically, $1 million of the savings would go toward roads and transportation infrastructure and $1.5 million would be used to increase the city’s payments into retiree health care and cushion expected increases in pension costs that would result if CalPERS lowers its annual rate of return, Krovoza said.”
Again, we will nitpick and point out the figure is $850,000, with about $150,000 that has not yet been allotted to any specific expenditure. $150,000 was already allocated to roads through the Tier 2 cuts. This is a technical point, just made for clarification purposes.
The Enterprise continues, “Unmet road repair costs are nearing $20 million, while the city is on the hook for about $50 million in unfunded retiree health costs, he said.”
Rich Rifkin responded to this in a comment, “I suggest all members of the city council take a walk with the road repair crews and see for themselves that all of the streets listed as critical needs really are critical. I suspect part of the repair cost problem is that most peripheral streets rated as ‘critical’ are not in fact in that bad of a condition.”
He is being rather presumptuous here. In fact, I know that at least one councilmember did exactly this, as did the Vanguard last winter as we were evaluating the road conditions.
The Vanguard very much differs with Mr. Rifkin on this point. The road conditions are not good, they would have continued to degrade for a number of years without any funding from outside sources, and while the costs to repair these roads may be modest now, each year, those costs go up.
The $15 to $20 million figure is actually a projection if the city stayed on the current $850,000 a year funding level. In fact, the city was only going to put about $250,000 into road repairs this year, which would have greatly increased those costs.
The article continues, “City staff estimate 20 layoffs if the savings comes entirely from handing out pink slips. The city has 378 full-time employees on its payroll.”
Again we will use Mr. Rifkin as our foil, because he argues, “That is $125,000 per job. That’s an unrealistic number unless a lot of those laid off are in upper management.”
Mr. Rifkin adds, “The labor contracts require that lay-offs for budgetary reasons come from the most junior ranks of employees. My best estimate is that the lowest number of lay-offs to achieve $2.5 million in cash savings in a year’s time would be 25.”
There are several points that need to be made in response to Mr. Rifkin here. First, it is hard to know what the exact figure will be. But we would point out if city employees are 80% of the city expenditures, then 20 is 80% of 25. It would seem likely that they would find some corresponding non-employee cuts to go along with employee layoffs, hence the 20 figure is more realistic.
Part of the problem here is that the article states “If the savings comes entirely from handing out pink slips,” but the city did not base its estimate on that, they based their estimate on if the employees took no concessions – which is an important distinction.
The other critical point is Mr. Rifkin misstates critical details when he argues that “the labor contracts require that lay-offs for budgetary reasons come from the most junior ranks of employees.” The council has the ability to organize departments and eliminate specific positions within those departments. What they cannot do is lay off a senior employee who occupies the same position as a junior employee.
Mr. Rifkin has taken a statement made in the council meeting at face value, when in fact it was an oversimplification. For example, the council could eliminate two planner positions, but they cannot lay off specific employees within those positions. The council could eliminate a deputy city manager position.
In other words, there is nothing that says if the council is to do layoffs that it must be the 25 lowest paid and most junior employees, they can reorganize entire departments.
In fact, as the article indicates, “Two studies are being prepared that will help with the strategic personnel cuts, he [Mayor Krovoza] said. One study, expected within a month, examines the cost savings that would result from consolidating the city and UC Davis fire departments. The second is an organizational study of the Public Works Department.”
And actually the fire report looks at more than just savings from the consolidation of the two fire departments, as it also evaluates whether the city should go from four firefighters per engine to three.
The article indicates that the city is not counting on employee concessions, according to the Mayor. The labor unions would need to voluntarily reopen their contracts prior to June of 2012. But that is not likely to occur.
Councilmember Greenwald “prefers working within the framework of labor negotiations. By rushing to save $2.5 million this fiscal year, the city is taking a big chance at having to lay off employees, she said.”
The Enterprise adds, “She said a better approach is for the council to first have city staff detail the pros and cons of the various reductions that could be implemented to save $2.5 million. Armed with that information, the city would be in a position to negotiate new labor contracts for long-term savings, she said.”
Furthermore, Councilmember Greenwald indicated that “she is concerned that the council majority’s strategy will result in layoffs, which would mean a less structurally sound institution — not long-term solutions.”
“Krovoza disagrees. He said addressing the structural problems now is the best way to minimize future service-level reductions,” the Enterprise reports.
“We believe that if we can get there sooner, we should,” Mayor Krovoza told the Enterprise. “The longer we wait, the bigger the numbers and the more the personnel cuts. … Sure, one can pay their credit card bill next year, but it will cost more.”
This is the critical point of contention between the majority on the council who supported the personnel cuts now, and the minority who want it as part of the framework for the next round of MOUs.
One of the problems I see with the wait until the MOUs approach, is that, while it does address some of the structural problems in the city, it will not address all of them.
First of all, part of the problem I see in the city is that during these budget cuts we have never prioritized programs. We need to figure out what services the city has to provide and what services that could be either eliminated or privatized to for-profit companies and businesses or non-profit community groups.
Moreover, we need to analyze the provision of services. For instance, we currently rely on four person fire engine units when 80% of communities rely on three people. We could save $1.25 million by going to three. On the other hand, there are some drawbacks to doing so.
However, some like Fire Chief Bill Weisgerber think that the strategy reduces the level of services.
He recently told the Vanguard, “The idea of going from 4-person to 3-person engine companies is seemingly a ‘cost-savings’ strategy.”
“However,” he argued, “the issue is more accurately one of a how many firefighters are needed to respond in time for both the rapid treatment of life-threatening medical emergencies (before permanent or fatal harm occurs) and the control and extinguishment of fires (at the earliest stages, before small fires become large).”
Third, there is a crucial question that has gone unaddressed. Back in January when the council was receiving information about the status of unfunded liabilities, Councilmember Sue Greenwald cited the $7 million figure as the increased costs of pensions and retiree health by 2015. That figure was not rebutted by the City Manager Paul Navazio.
If that number is correct, even $2.5 million in the MOU would not be sufficient to bridge the gap. So, while it could be argued that putting the personnel cuts off until it can be incorporated in the MOU, unless the MOU deals with the $7 million level in cuts, we will have to do this exercise again in two years.
The way I see it, we can get to the $2.5 million cut level through reorganization and hopefully a concession from the top brass in the city: department heads and the managers. That may require some layoffs, but we are acting as though we cannot ever lay people off to improve the efficiency of the city government, and that frankly is not a tenable position.
But even after the $2.5 million in cuts, we will need another $5 million in reduction of costs to offset expected increases in the cost of pensions and retiree health.
That is what can be incorporated into the next round of MOUs, with the council making it clear that whatever cannot be achieved through labor concessions will be achieved through further reducing city services and thus the labor pool.
As Mr. Krovoza told the Enterprise, “It is a difficult time, but the city is actually doing what it can to ensure it ‘can meet all of its promises to employees.’ ”
“I think it is easier when we are being frank and honest about the city’s situation,” he said. “We are all in this together. No one is playing with the numbers, (and) the City Council is respecting the facts and we are pleased that staff is starting to do the same.
Yes this will be tough. Some people will lose their jobs. They have to when you are dealing with a cut along the magnitude of $7 million – if that number is correct and by my calculations, it might actually be a best-case scenario.
It makes no sense not to move now toward righting that ship.
—David M. Greenwald reporting
[i]”Rich Rifkin responded to this in a comment, “I suggest all members of the city council take a walk with the road repair crews and see for themselves that all of the streets listed as critical needs really are critical. … He is being rather presumptuous here.”[/i]
Of the roads listed by the city as most critical, one is a section of my street. Let me be blunt: there is nothing wrong with it. My guess is that a keen look at all the streets on the “most critical” list would find others. If saying that is ‘presumptuous,’ I plead Casey Anthony.
[i]” But we would point out if city employees are 80% of the city expenditures, then 20 is 80% of 25. It would seem likely that they would find some corresponding non-employee cuts to go along with employee layoffs, hence the 20 figure is more realistic.”[/i]
You do know that what you said above makes no sense at all? I am going to have to give you the benefit of the doubt and presume you were not in your right mind when you wrote that.
The question is: in order to save $2.5 million in cash out for labor costs, how many jobs would have to be cut? It’s entirely irrelevant that 20 is 25% of 80. What is relevant is how much we now spend in cash on each job which will be deleted from the city payroll. If the average is $125,000, then it will be 20 jobs. If the average is $100,000, then it will be 25 jobs.
Because our contracts require we protect the most senior employees from layoffs due to budget reasons, the jobs cut first will be the most junior, the ones which pay the least. So for example, we will fire a Building Maintenance Worker 1, who makes less than a Bldg Maint. Wrkr 2.
[quote]“I think it is easier when we are being frank and honest about the city’s situation,” he said. “We are all in this together. No one is playing with the numbers, (and) the City Council is respecting the facts and we are pleased that staff is starting to do the same.
[/quote]
City Staff, City Council and citizens all understand what is at stake here – there is no whitewashing the seriousness of the situation. It is incumbent on everyone to let the process put in place play itself out, and allow City Staff and the City Council the opportunity to work on formulating creative solutions… no one figures this will be an easy or perfect process… but it is a positive step in the right direction for all concerned…
[quote]So for example, we will fire a Building Maintenance Worker 1, who makes less than a Bldg Maint. Wrkr 2. [/quote]Get informed… “firing” is something you do to someone who has violated their employment ‘contract’ with the city… stealing, failure to meet performance stands, drunk on the job, etc. “Layoff”, on the other hand, is eliminating a budgeted position that is occupied. Layoffs are done by job class, not tenure. So, if it was determined that a MW 2 position was to be eliminated, under the “tenure” rules, the occupant of that position would be given a choice – accept the layoff, or ‘bump’ the MW 1, and accept the lower salary.
ERM
“…but it is a positive step in the right direction for all concerned”.
While I am in agreement with your overall point about the seriousness of the situation and the need to act in the best interests of the city overall, I doubt either of us would agree that it was a positive step if it were our job that was being eliminated. The only reason that I belabor this point is because at the two council meetings that I have attended where this iissue was addressed, council members have made comments that imply that we are all in the “same boat” and will “all suffer”which is patently not true and to me at least sounds more than a little patronizing . I can only imagine how I would feel if I were facing a layoff.
Please note that I am not making an argument for less responsible fiscal management, but rather for caution in the choice of words.
To medwoman: I completely agree that any layoffs will be hurtful to the person laid off. However, it will be far more hurtful if the city does not grapple with its fiscal mess, or there will be no benefits at all for employees down the road. This has actually happened in some places – a city has run out of money altogether, and cannot pay pensions. Retired persons are left with nothing, and everyone has been laid off.
Secondly, we should not assume that huge numbers of Davis city employees are going to get laid off. The City Council is saying to City Staff – tell us how we can get to a fiscally responsible position with a minimal amount of layoffs – show us how to do it – you are the experts in how to run the city. The process has to be given a fighting chance to work. IMHO, there are naysayers out there who may even be well intentioned, that are sabotaging the process. To what good purpose? The die has been cast – let the process play out…
And just to be on record, my preference is for as few layoffs as possible… I encourage city staff to get very creative but remain within the bounds given them by the CC…
[i]”Layoffs are done by job class, not tenure.”[/i]
From the police contract: “the layoff guidelines would be implemented [b]based on time[/b] in rank and grade.”
The PASEA contract: “Nothing in this section shall prohibit the CITY from laying off employees pursuant to the CITY’s layoff procedure.”
I searched the municipal code (Chapter 29) and elsewhere in city docs on-line and could not find “the city’s lay-off procedure.” I found a few references to “personnel rules,” but online they are not laid out.
From the Management contract: “In the event of layoffs, CITY shall endeavor to provide as much notice as reasonably practicable to affected EMPLOYEES attempting to do the best for EMPLOYEES realizing it takes as much as four to six months to find a new position.”
From the fire contract: “Lay-off Procedures: Refer to the City of Davis Personnel Rules.”
Rich:
My point above was that with a layoff of employees, comes some other non-personnel cost cuts, or at least that is how the city came up with the 20 figure.
HPierce is correct, if you eliminate the Police Lt. position, the person who is in that position could option for a demotion. But the city can eliminate a position. Your comments in the DE and elsewhere imply that they cannot.
The main point that needs to be reemphasized is that we can in fact determine which positions to eliminate.
The other key point that seems to be lost is that $2.5 million is not the end of the crisis, it’s only a third of the way to what Sue Greenwald projected back in January and city manager Paul Navazio either agreed with her or at least did not give an alternative figure.
“Of the roads listed by the city as most critical, one is a section of my street. Let me be blunt: there is nothing wrong with it. My guess is that a keen look at all the streets on the “most critical” list would find others.”
You could be correct however it is pretty dangerous methodologically to infer anything from a sample size of one. I know my evaluation which I am going to repeat soon with a camera showed otherwise. I know at least one councilmember who arrived at the same conclusion.
Rich:
Is this really what it’s come to? After many years of enjoying our well managed community, you are so p.o.’d that you want to kick the Eichorn, Traverso, Brooks, Fabiani, Pelz, Doneen, Cano, rice bowls down Cornell dr.? You Go MAN!!
[i]”After many years of enjoying our well managed community, you are so p.o.’d that …”[/i]
I am not p.o’d. Not at all.
[quote]The main point that needs to be reemphasized is that we can in fact determine which positions to eliminate.–David Greenwald[/quote]David, I was told that this is not the case, but I am still awaiting a more complete explanation from staff regarding our constraints.
At the state level, but I just read that the CA State Senate just approved SB 14 and SB 15. Seems promising.
[quote]First, SB 14 would add Section 9147.8 to the Government Code to read as follows:
“9147.8.(a) Within one year of the effective date of the act that added this section, the Joint Sunset Review Committee shall adopt a process, schedule, and deadline for reviewing the performance of all programs at least once every 10 years. The schedule shall provide for reviewing programs with expenditures that total one-third or more of total expenditures by July 1, 2015, and that total two-thirds of total expenditures by January 1, 2018. For purposes of this section, “expenditures” include all funds as reflected in the Budget Bill submitted by the Governor, and statutory exemptions, deductions, credits, or exclusions from taxes or fees that would otherwise apply. For purposes of this act, “expenditures” also shall include the revenue and expenditures of state departments that are not reflected in the Budget Bill. The process established by the committee to review the performance of public programs shall reflect the principles of performance-based budgeting and shall include the participation of the Senate Committee on Budget and Fiscal Review and the Assembly Committee on Budget.”
Second, SB 503 calls for data gathering and analysis for any new tax credit added after 2011. Specifically, such a new credit must “contain all of the following:
(a) Specific goals, purposes, and objectives that the tax credit will achieve.
(b) Detailed performance indicators for the Legislature to use when measuring whether the tax credit meets the goals, purposes, and objectives stated in the bill.
(c) Data collection requirements to enable the Legislature to determine whether the tax credit is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives. The requirements shall include the specific data and baseline measurements to be collected and remitted in each year the credit is effective for the Legislature to measure the change in performance indicators, and the specific taxpayers, state agencies, or other entities required to collect and remit data.
(d) A requirement that the tax credit shall cease to be operative seven taxable years after its effective date, and as of January 1 of the year following the end of the operative period is repealed.”[/quote]