Yesterday by virtue of the fact that the Vanguard is a member of the Davis Chamber of Commerce, we received an invitation to the January 5, 2010 speech by Bill Emlen highlighting the state of the city. Sounds like a neat idea for the Chamber, but unfortunately, they have asked an individual to give a speech who is in absolute denial about the condition of the city that he oversees.
While it is true that Mr. Emlen will likely acknowledge some of the challenges that Davis faces, he will also downplay the severity of a number of problems.
It gets worse from there. Because we are now halfway through the middle of the year, a $400,000 shortfall in employee compensation cuts actually means we need to find $800,000 in budget cuts to offset it.
In the past week, the cost savings supplied by the fire contracts were trumpeted by the city as being a fair share of that $1.25 million. It sounds good, but fails to meet reality. And it fails in several different ways.
First, the city has trumpeted the fact the contract saves it $800,000 over the course of the contract. But even that figure is nuanced. The City’s Finance Director last week admitted that the baseline assumes a continuation of the current contract–a current contract that produced a 36% increase in salary over a four year period. So the savings is not from current spending levels, but rather from that baseline.
In real dollars, Councilmember Greenwald figured that it would save the city in year three, $57,000 or 0.8%. That year the forecast is that the city have around a $2.78 million deficit from this year’s baseline. So in a year where the deficit will be nearly bad as this year’s, we are deriving only $57,000 in savings.
And yet we are calling this a fairshare for the most heavily compensated bargaining group in the city.
Moreover, the short-term budget problems do not deal with long-term structural problems. We know what Mr. Emlen will say about this since he issued this statement in a press release:
“It addresses some of the structural issues the City Council has voiced during the negotiation process and provides for immediate and clear cost savings. These negotiations have not been easy, but from the beginning of the process it was clear the firefighters were willing to work collaboratively with the City to help address the budget challenges we anticipate over the next couple of years.”
Councilmember Lamar Heystek told the Vanguard last week a very different story with regards to long term structural issues:
“The biggest problem that I have with the contract is that it does very little to address our structural challenges in any meaningful way and it sets the tone for the contracts that we are poised to consider and adopt in the very near future. The time was now for structural change. I really believe that the moment was now and we’re not nearly where we should be or where we need to be.”
He continued,
“What concerns me is that were rushing to recover some savings. As I said in my remarks, it is important to have dollar savings. I can certainly understand the urgency with which other councilmembers are willing to get something nailed down ASAP. But, if that’s your singular goal of saving as much money in the current fiscal year as possible, then I think that’s penny wise and pound foolish. Why would we save a few dollars when the real issue is how are we going to save on a systematic basis in the future.”
We can put this on the Chamber of Commerce leadership as well. Where have they been on these vital discussions?
On Monday, we looked for the first time at another department, the planning department, and found that the city employs 14 planners, which struck as a lot of employees in a city that has grown very little over the past half decade and has voted heavily against to two peripheral housing developments by a very large margin. We estimate that the annual spending for those 14 employees comes to roughly $1.6 million in total compensation. This would seem to be an area where the city could make short-term reductions.
We also have the bait and switch savings derived from the Battalion Chief model the city is planning to implement. Here they have mixed in savings from reserve staffing and cuts to other positions in order to make it appear to offset $400,000 in additional expenditures for the new leadership model. The kicker here is that a lot of those cuts that they purport to find have been proposed cuts elsewhere, so the city is in essence simply shifting cuts around to make it look like the new model will produce a cash savings.
The bottom line, if it were I that were reporting on the state of the city, I would start with the fiscal climate–falling sales and property tax revenues, cuts in services, and the failure to utilize the collective bargaining process to sufficiently cut costs for the short-term or deal with the long term structural issues. It is too bad that the Chamber does not have an opportunity for the minority position response. We could have Councilmember Sue Greenwald or Lamar Heystek set the record straight.
It will be interesting to watch the speech on January 5 and to see what Bill Emlen says and how he spins the failures under his watch. We have not even mentioned planning and other management issues.
—David M. Greenwald reporting
Make sure to ask him why he has not taken a pay cut himself .
May I make a suggestion? Provide your own “state of the city” report that hits the highlights, and copy a stack of them to be picked-up by people at the speech…
Gunrock has a good idea.
Since Bill, or someone very much like him, reads this every day, they then have the choice, either address the real issues, or look stupid when everyone can read while they eat their salad that he is just making things up…
[quote] The city has now acknowledged [s]they[/s] [b]it[/b] will fall perhaps as much as $400,000 short of that goal. … Because we are now halfway through the middle of the year, a $400,000 shortfall in employee compensation cuts actually means we need to find $800,000 in budget cuts to offset it.[/quote] Are you sure of that math? I thought the City had planned to have $1.25 million in labor cost savings for the fiscal year 2009-2010, but will instead only achieve savings of $850,000. As such, the cuts needed to make up that difference should be $400,000. I don’t understand why you think it is double that.
Paul explained during one of the budget “workshops” that in order to realize an additional $400,000 in savings (and I’m rounding up obviously) halfway through the fiscal year, they would have to make the equivalent of double the cuts.
Let’s make it simple. Position X makes $100,000 in salary. If we cut that position now, we only save $50,000 for the fiscal year. So we have to cut two $100,000 to get $100,000 in savings for the fiscal year. Hence the calculation.
Just like the FF’s are getting a 6% paycut, but it’s only over the second half of the year, so from an annual basis it’s only a 3% cut.
In Davis (like most cities and counties in California, as well as the state government itself) we face two budgetary problems: one is short-term, caused in large part by the economic downturn; the second is long-term, caused (largely) by irresponsible labor contracts which a) inflated salaries and benefits at an unsustainable rate and b) promised very expensive retirement packages which the city has no way to pay for if it hopes to continue to provide a normal and expected quantity and quality of city services, including proper police and fire protection.
No one (save perhaps Sue Greenwald) has been more outspoken over the years in trying to change the direction of the contracts to solve the long-term budgetary problems than I have. However, I have somewhat of a different take on the short-term situation than you, David:
My view is that [i]we should cut into the general fund reserve.[/i] The main reason you have a reserve fund is to avoid painful cuts during recessions. Our ongoing expenses (should) tend to be predictable and more-less in a straight line. However, the city’s revenues do rise and fall based on the state of the economy. When they rise, we should build up our reserve. And when they fall, we should spend it.
We are in a recession, one which won’t last forever, and now is the time to use some of that money. Bridging the short-term crisis in finance does not preclude making changes affecting how we approach the long-term. The only caution we should have with spending down the reserve now is that we don’t know how long the economic crisis will last. But the notion that in a recession we should not use that money makes little sense to me. I am of course not saying we should spend down the reserve to avoid making long-term changes.
But (most) long-term changes that are necessary can only be achieved by changing our contracts. Unfortunately, Ruth and Don and Stephen failed miserably in making the changes we need in the fire contract; and thus they have hamstrung the city for at least the next three years.
By the way … for those who are not familiar with the city’s reserve funds, I should note that the city over the last couple of years HAS BEEN spending it down somewhat. I don’t recall the exact numbers, but I think it shrunk from $6 million or so to about half of that.
[quote]Paul explained during one of the budget “workshops” that in order to realize an additional $400,000 in savings (and I’m rounding up obviously) halfway through the fiscal year, they would have to make the equivalent of double the cuts. [/quote] You may be right. I don’t know. However, I think you are mistakenly double-counting.
I think Navazio and Emlen are saying they would need to make another $400,000 in cuts this fiscal year (09-10) in order to reach the $1.25 million. That is, they have achieved an $825,000 savings. (No doubt, that $825,000 number may be wrong.)
I view the reserve differently than you. I think you keep the reserve for an emergency. If we use the reserve, then it’s gone and we still have to cut in year three. The budget projects deficits for five years out. Even using only a portion of the reserve each time would exhaust it fairly quickly.
Now my notion was that we could deal with both at once deal with short and long term through contract negotiations. After all, that is where the money is spent on personnel compensation. What they are doing now is basically planning to run the city short-handed for five years, that’s absurd.
So I guess, I’m saying you’re solution is better than the one that the city has implemented.
Rich: on the current year, the only way they can make cuts to get to $400,000 when they’ve spent the full amount the first part of the fiscal year is to double them. In fact, this is probably where they would be wise to use the reserve.
[quote]I view the reserve differently than you. I think you keep the reserve for an emergency. [/quote] What’s an example of “an emergency” that would require 15% of the general fund budget?
I gave this some thought and couldn’t think of anything which is all that plausible. If a city building is lost to a fire, we do have fire insurance. Very few city buildings* are not seismically sound. Davis (in the last 141 years, since the first streets were laid out) has never had a devastating earthquake. (Winters, however, had one.) We don’t have hurricanes or tornados. I don’t think we need to plan ahead for Monticello Dam to collapse. … While it is plausible that some city-infrastructure which is not insured could suffer a catastrophic failure — say a major sewage line collapses and a street needs to be repaired — we don’t really need all that much in the general fund reserve to cover that kind of repair in the short-run.
The mistake with using the general fund reserve is to eat it down in order to put off making changes we need to make over the long run. (That is what I think the city did in 2007 and 2008, because of the terrible contracts the council approved in 2005.) That only makes the changes necessary more painful when they come.
*I don’t know of any city-owned buildings which are likely to be destroyed by an earthquake.
In case anyone thinks the ACLU is a reasonable organization — it is not — you might want to read my latest blog ([url]http://lexicondaily.blogspot.com/2009/12/everything-does-not-happen-for-reason.html[/url]), which deals with yet another case of what happens when you allow “civil liberties” to trump common sense.
P.S. If you are a (thin-skinned) born-again Christian, you might find my piece offensive and should probably not read it.