It was not even a year ago that we continued to accuse the city of being in denial about the extent of the fiscal dilemma it faced. Remarkably, the budget that then-interim City Manager Paul Navazio brought forward last spring continued to have no provisions for dealing with pensions or retiree health, little to no money for road repair and infrastructure, and despite this, projected future years to be in the black.
While we believe the city council gets it now, and certainly the 3-2 vote on the budget last June should have set in motion real reform, a series of events threatens to blow up the best laid plans of mouse and men.
This week City Manager Steve Pinkerton, who recently “celebrated” his six-month anniversary on the job, told the Vanguard that much relies on the outcome of the latest round of bargaining units. But even that process belies the nature of the problem. The city finally has taken the advice of so many of its critics and hired an outside negotiator. However, sources tell us the most likely outcome will be impasse with several of the units including, most critically, the firefighters.
We had every reason to believe that we would be much further along at this point. We believe a combination of a comedy of errors, the bringing in of new personnel, and uncontrollable factors threatens to undo what should have been clear progress.
The hiring of the new city manager and the focus on water (by necessity) in early September has contributed to this problem. It does not help that city staff, charged with coming back by the end of September with a way to reduce personnel costs by $2.5 while minimizing the laying off of staff, largely dragged their feet for a variety of reasons.
It was just over a month ago that the Vanguard reported that the city was not on track to come close to realizing full savings on employee compensation.
September’s deadline turned into a late November budget session which outlined ways in which the city could approach the cuts. But it appears, as time has gone on, that the $2.5 million goal will be more about the next round of labor negotiations rather than the stick that drives these labor negotiations.
The council was set to be briefed on the mid-year budget last week, but that did not happen. The March 6 meeting, much like the September 6 and December 6 meetings, did not go as planned.
In November the city proposed proceeding on a track that would yield $2.5 million in annual savings and at the same time address current needs, from the perspective of an all-funds budget rather than simply general fund savings. This would also ensure that, going forward, the budget includes full funding of street maintenance at a minimum of $1 million, full funding of Other Post Employment Benefits (OPEB) required contributions, and a set-aside for potential increases in CalPERS (California Public Employees’ Retirement System) contribution rates.
In February, Paul Navazio, the city’s finance director, told the Vanguard that through various mid-year re-organizations and reductions, they are expected to realize an annualized savings of $1.7 million from the all-funds budget, with the general fund savings that are expected to be around $400,000.
But instead of making progress, we are going backwards.
This week, the Vanguard reported that as of January 31, the City of Davis – UC Davis fire merger, which was supposed to save the city millions of dollars, has stalled.
This week we reported on a letter from January 12, 2012, from UC Davis Vice Chancellor John Meyer that says, “Both of our agencies remain committed to a unified fire department to serve our shared community. However, I believe that we have reached a point of limited progress and that for a variety of reasons, most particularly the City’s pending negotiations with its firefighters, we should pause this process as described below and then reconvene in the 2012-13 fiscal year.”
We have not made an issue out of this, but we do find it remarkable that a letter was sent out on January 12, the merger effectively ended January 31, and the only reason we found out about was two months later in a public records act request.
Where is the transparency in this city?
The bottom line problem is that, while the merger continues to make good fiscal sense, the Vanguard has been aware for some time that a gap exists between the compensation for the City of Davis firefighters and UC Davis firefighters.
Most critically, Vice Chancellor Meyer cites what he calls a “significant compensation disparity” as a major issue.
“I am deeply concerned about the significant compensation disparity highlighted in the CityGate report,” he writes. “The report suggests that UC Davis will increase its compensation in support of consolidation efforts. I believe such action would not be sustainable by UC Davis and should not be assumed in future planning.”
Worse yet is what we have heard from sources that, not only is there a huge gap in compensation, the City of Davis firefighters treat their counterparts as though they were inferior. More than one source told us that, instead of participating in joint training, Union President and Captain Bobby Weist allowed his men to play video games.
Back in June, we were promised the latest CityGate report on fire staffing. Nine months later we have still not seen it. We were told at that time that we would have an assessment on the practicality of reducing fire staffing from the current four members per engine to the three members per engine, that 85% of departments around the state use.
While Steve Pinkerton told the Vanguard, “Hopefully we’ll have a new contract [in three or four months],” our sources indicate that the only way that will occur is if we go to impasse and who knows what we can really accomplish through impasse.
Staff and council believe new laws will make it easier to impose impasse, but last November it was a Public Employment Relations Board ruling that ordered the city to rescind its unilateral action, and restore the status quo prior to the date of the violation, which we believe with back pay could cost the city another $700,000 to $800,000.
PERB ordered the city to make the employees whole for their “losses.”
They write: “It is also appropriate, that the City be ordered to make bargaining unit employees whole for any losses they may have suffered due to the City’s unlawful unilateral action, along with interest at the rate of 7 percent per annum until such time as they are restored to their former position prior to May 25, 2010.”
“The City has also interfered with the rights of employees to be represented by DCEA [Davis City Employees’ Association],” PERB ruled. “It is also appropriate that the City be ordered to post a notice incorporating the terms of the order at all locations in the City where notices to public employees are customarily posted for employees represented by DCEA. Posting such a notice, signed by the authorized agent of the City, will provide employees with notice that the City has acted in an unlawful manner, is being required to cease and desist from such activity, and will comply with the order.”
That was a huge blow to the city and was entirely on the back of staff and the city attorney for the failure to utilize the proper process.
Finally, in addition to the largely self-perpetuated blows the city has suffered, comes the largely-unavoided blow if CalPERS follows the advice of its chief actuary and reduces its expected returns from 7.75 to 7.25 percent.
That will impose about a $2 million all-funds hit on the city and perhaps as much as $1 million on the general fund.
Back in June of last year, there was a lot of talk that the $2.5 million in personnel cuts was premature. There is an element of truth to that. But it misses two essential points.
First, as we have seen in the series of setbacks the city has suffered, it is not easy to cut funding and do the right thing. Certainly, from the PERB ruling to the budget debacle to the failed merger of fire, the city has had to absorb hit after hit.
Second, even though CalPERS refused to lower their ARR last year, we knew this had to be coming. The idea was to plan ahead, and now the city is going to have to scramble, perhaps for several million.
We think it is incredibly foolish of the city to put all of the eggs in the basket of the new memorandums of understanding.. We see $7 to $10 million in budget hits coming up, and the next round of MOUs cannot possibly get us there.
That is why the last round of MOUs was such a failure and why we needed that $2.5 million when we did to move in the right direction.
The only good news is that the city council gets it. The city manager gets it. But to date, neither have solved it. It is a much bigger problem and it is much more complicated that anyone, I think, fully appreciated.
Unfortunately, the city employees are the ones who still do not get it. It does not help that the leader at this point is Bobby Weist, who, as president of the statewide firefighters’ organization, is under the microscope not to bow to the pressure of the city. And that will set up a battle worth watching.
The council election is the main ticket this spring, but the real fight will be behind closed doors and out of sight to the public.
—David M. Greenwald reporting
David
“that the $2.5 million goal will be more about the next round of labor negotiations rather than the stick that drives these labor negotiations.”
I don’t understand this comment. Can you rephrase or clarify ?
Last June the council by 3-2 vote authorized cutting labor compensation by $2.5 million. At the time, I had hoped it would be the stick sent by council to help them in their negotiations in addition to clearing up money for roads and OPEB and PERS.
Instead, the $2.5 million will have to be the fruit of the next round of labor bargaining to end in June of this year.
Need to up the savings needed, David, to cover the costs being incurred to remodel City Offices… those costs were not even on the radar in September…
Very disappointing. This CC needs to address the savings and budget more often for the public. It appears to have fallen off their radar.
A six month assessment of city manager?
He does not seem very proactive at meetings. What have we seen so far? Yes a lot on plate, but yes a lot on plate.
David raises an important principle pertaining to cash flow. Instituting cost savings or revenue increases 6 months are not as valuable as instituting the same savings and revenue increases right now. The missed cash increase opportunity can never be recaptured. The lack of urgency in public policy has always perplexed me.
DT Businessman (aka Michael Bisch, Davis Commercial Properties, DDBA Co-Prez)
Hpierce: I looked into that issue two months ago, the cost of the remodel is $156K while the cost savings from the re-orginazation in excess of $450,000 (General Fund), and in excess of $1.7 million in All Funds savings. So that’s not even close.
Excellent analysis of the situation dmg, and sobering. It does not appear Davis is as well off as everyone would like to think. The upcoming labor negotiations should be interesting…
Excellent summary of stuff that seems “off the radar” most of the time in spite the critical importance of these items. It suggests that our city council hasn’t yet figured out how to avoid being led around by the nose–to the ultimate disadvantage of Davis taxpayers–by a city staff leadership corps that continues on its unresponsive, selfish way.
Whose figures are the cost savings? How will they be measured as actualized? The re-model is not about $… it’s apparently about “power”… re-org could same money independent of the re-model. Oh, and re-org = layoffs, demotions, and not filling positions vacated by attrition. How does the re-model affect those?
[s]same[/s] [b]save[/b]
The figures were from the city manager in terms of the cost-savings though we did go through the math, I have it in my notes somewhere.
The remodel is about a number of factors but it’s hard to argue it’s about power. As I understand it, the key features are the merging of redundant positions, the re-locating of personnel into city hall, plus the need for more efficient council space for work and meetings in city hall.
Whether you believe that the remodal will really yield the projected savings, which I agree we should treat with suspicion, the cost of the remodel is not going to have a huge impact on the overall budget problems.
[i]”David raises an important principle pertaining to cash flow. Instituting cost savings or revenue increases 6 months are not as valuable as instituting the same savings and revenue increases right now. The missed cash increase opportunity can never be recaptured. The lack of urgency in public policy has always perplexed me.”[/i]
Michael, yes, the old “penny saved is penny earned” principle. I think the lack of urgency has to do with the lack of connection with the understanding for how hard one has to work to earn the penny. And the lack of appreciation for the pinciple of cashflow is due to the lack of political consequences for running up public debt.
The trajectory for this is a time in the future when all we will be able to afford is the payments on our debts.
The other party of perplexing fiscal behavior are the unions. They continually break the darwinistic rules of self preservation. Without controls providing forced restraint, they would completely consume their host. The trends for those not sufficiently restrained are to eventually look for the next government bailout.
Elaine: [i]…Excellent analysis of the situation dmg, and sobering. It does not appear Davis is as well off as everyone would like to think. The upcoming labor negotiations should be interesting…[/i]
Business is really simple at its most fundemental level: you must make more than you spend.
With respect to city business, there is that other overlooked variable of revenue. How do we make more sustained revenue to feed the beast? While we argue the cuts needed to balance the books, we should also be focused on the economic development plans to ensure stronger sustained revenue increases going forward. From my perspective, it is clear that Davis is living beyond its means. There is a cost for so much statism and NIMBYism and the resulting lack of sophistication in our city services to plan, attract, retain and nurture private business that pays the bills.
I think what you all are perceiving as lack of urgency is simply the time it takes for the process to play out. If this is headed for an impasse, that is obviously not an ideal outcome for anybody. But once it happens I gather that a series of events are set in motion. Looking at similar situations with municipal governments around the country, the question is where the first labor strike will occur and how local unions will react to fiscal realities.
Speaking of badly managed City assests and loss of income to the City.
There are ten empty DACHA homes.
The earliest empty DACHA home has now been empty since August of 2009.
While NP guided the Co-op that home earned a monthly income of $1,650.
I doubt that home will be occupied by May 1st, 2012.
So just on one of the ten empty homes the City has lost $54,450.
The ten empty homes last year cost the City about $200,000 in lost income when you count the utility bills, insurance etc now being paid by the City.
What a waste of mismanaged assets,
David Thompson, Neighborhood Partners, LLC.
David,
Please correct me if I am misreading the situation. It seems to me that at least part of the problem that the city is having in managing these assets is litigation in which you and Luke are participants. It would seem to me that if your concern is with regard to the benefit of the citizens of Davis and their resources, settling this dispute out of court and allowing all potential litigants to move on with managing their assets might be the most prudent course of action. Unless of course, anyone stands to benefit by delay and a court settlement.
I think DACHA is off-topic here, please.
DACHA is extremely off-topic, particularly given Mr Thompson’s “interests”. Mr Thompson probably doesn’t care… moderator… please remove Mr Thompson’s, Medwoman’s most recent and this post of mine. Suggest we don’t ‘enable’ inappropriate behaviour.
Don: Because $400,000+ in payments to Harriet for DACHA legal advice or $200,000 in lost rental income are too small to matter in the overall scheme (like $150,000 in city hall remodel costs)? All wasted city assets ought to be considered, no matter the source or the magnitude.
What has happened with the suit or appeal from last tr’s impasse?
David….it has been said before in the this blog. The merger between the two fire departments was never intended to save millions. Initially there would have been some savings and as time went on those savings would increase with efficiency. There would have been a higher level of service with less duplication. The real winners would be the Davis and Campus communities getting the best, most effective and efficient service!
I don’t recall whether it has been said or not, but I don’t agree that it was never intended to save millions. The idea was that there is a duplicative upper management positions that would be merged together. I’m not say that there would not other factors in it, but I firmly believe that budgetary concerns were at the forefront of this. Unfortunately it appears that the same forces that have led us to the point where we are presently were instrumental in undoing the potential for change and savings.
Apologies to all. Was pulled off track and would not object to removal of my comment.
The heading for today’s column is
“Despite the Best of Intentions City Budget Suffers a Series of Blows”
The column covers the City Budget and a range of topics such as water, employee contracts, merging of fire departments,and the PERB ruling which Davis describes
“That was a huge blow to the city and was entirely on the back of staff and the city attorney for the failure to utilize the proper process.”
and then hpeirce adds in:
“Need to up the savings needed, David, to cover the costs being incurred to remodel City Offices… those costs were not even on the radar in September…”
Well the City Attorney and City staff are guilty of imrproper process in the DACHA debacle just as the PBR.
There is certainly an ongoing theme with the City Attorney and City staff.
Nothing NP or TPCF has done has any relationship to ten empty homes with the first one being empty since August, 2009. NP recomended to the City very early on that they should rent out all the homes.
Counting the loss of income and costs of all the homes since August of 2009 we are looking at lost income of about $400,000.
Under present housing staff and the City Attorney the City has a hard time managing assets.
Just over a year ago the Council had to take about $600,000 out of its RDA account and give it to the state to make up for losses due to the failed housing project on Fifth Street.
I think the City needs an Audit Commission that rotates its focus on a different department every year.
Regretfully, the Council has no independent entity to turn to for an impartial voice.
Until then, the City Attorney and City staff lead the Council by the nose.
David Thompson, Neighborhood Partners,
And what alternative does Mr. Thompson suggest? One where he makes even more money. Seems too self serving a critic to be unbiased if you ask me.
Actually, I like the idea of an Audit Commission, headed by a qualified CPA in governmental accounting.
Jeff: [i]”There is a cost for so much statism and NIMBYism and the resulting lack of sophistication in our city services to plan, attract, retain and nurture private business that pays the bills.”[/i]
I am curious which other communities have found a balance of sales tax/property tax revenues that has helped them avoid the sort of fiscal situation that Davis finds itself in.
Given the requirements of the Brown Act, our city council members are incredibly dependent on the quality of completed staff work. The council gets little time to evaluate and discuss important issues amongst themselves. I presume Davis would be more on top of things and get things done in a more timely way and with better subsequent decision-making if the city staff leaders would be more dedicated their employer. Too much half-ass report work shows too late to the council chambers. Time for our new city manager to take control.
[quote]With respect to city business, there is that other overlooked variable of revenue. How do we make more sustained revenue to feed the beast? While we argue the cuts needed to balance the books, we should also be focused on the economic development plans to ensure stronger sustained revenue increases going forward. From my perspective, it is clear that Davis is living beyond its means. [/quote]
Absolutely agree.
[quote]Please correct me if I am misreading the situation. It seems to me that at least part of the problem that the city is having in managing these assets is litigation in which you and Luke are participants. It would seem to me that if your concern is with regard to the benefit of the citizens of Davis and their resources, settling this dispute out of court and allowing all potential litigants to move on with managing their assets might be the most prudent course of action. Unless of course, anyone stands to benefit by delay and a court settlement.[/quote]
Right on the money (pun intended!)!!
David,
You of all people should know better than to take any government staff or officials word as to the cost of a project. How often has any project come in at or under the initially projected cost? Perhaps you should follow up on this because I’ve been told by a number of people that currently the cost of the move has easily doubled and when all is said and done that figure could actually approach $500,000. And as far as the anticipated cost savings go, I guess we’ll just have to wait and see but don’t be surprised if the initial projection was grossly overinflated. And lets be honest here, this move had less to do with cost savings and more to do with the new City Manager wanting to make a early mark on his tenure and score a quick merit badge, and it also doesn’t hurt that he’s managed to make himself much more inaccessible to the general public in doing so. Have you bothered to really scrutinize the efficiency of the end product?
I also hear that he is pushing to have the city’s accounting software system completely replaced simply because he’s had experience with it in Manteca and he doesn’t like it – even though he’s not going to be the one using it. I’ve been told that the cost of this will easily be over a million while really achieving nothing as far as cost savings.
I won’t even argue the point that these things need to be done, rather I’ll gladly argue the point as to if they need to be done right now. Seems to me, when times are tough your priorities need to be adjusted.
David,
You say the employees don’t get it but I think that they do. I think that what they don’t get is how the city and the council can:
– continue hoarding an almost $5 million reserve (council)
– vote themselves a 36% budget increase (council)
– give the new city manager a significant compensation increase of the previous CM (council)
– spend money on a reorganization (city manager driven, council approved)
and then go to their employees and request that they make concessions that will effectively drive their compensation levels below those of similar cities in the area who are facing the same economic troubles or worse. The council is in fact trying to make the city employees shoulder the burden of their failure. Failure to bring in enough new retail growth to the city, and too often discouraging it. This “slow growth” model is more of a “no growth” model. Relying on sales tax revenues primarily from auto sales probably wasn’t such a smart idea either (brings to mind the anecdote of putting all your eggs in one basket). The city claims it doesn’t have the money but it just looks like the money is being spent elsewhere. Council would rather spend it on other things besides fairly compensating their employees. I mean, if other cities can maintain a certain level of compensation then Davis should be able to as well. There’s also a report in the Sac Bee that revenues last quarter were up and showed the largest increase in the last 4 quarters.
http://www.sacbee.com/2012/02/06/4241806/local-cities-report-sales-taxes.html
I sympathize with with the city staff because my employer has had a freeze on pay raises for awhile now, our share of our health coverage has increased dramatically while our coverage has decreased, and there have been a number of layoffs, yet I have it from a very reliable source that the CEO got a big bonus check for achieving the cost cutting goal that was set before him by the Board of Directors. It’s the little people that the city is going to target, because the little people are easy targets.
To complicate matters even further there is now significant disparity amongst the bargaining units. You’ve suggested that the other bargaining units will be emboldened by the DCEA PERB ruling but I’d argue that angered is a more accurate term. In the interest of fairness sacrifices should be made across all the groups but now one group is going to get that back with interest and I believe that the department heads still have yet to make any concessions.
You’ve often been very critical of Stephen Sousa when it comes to city health benefits I’ve been told he has declined them because he receives them from another source. Other council members however are taking those benefits and are either double-dipping (double coverage) or they are opting out of the health benefits offered by their job or there spouse’s job thereby either saving the cost of that coverage or actually cashing out on it. Souza also once asked if council should forego their stipens.
It’s too bad Council couldn’t come up with a way to survey or poll Davis residents to find out what businesses we go out of town to shop at and then use that information as a guidline for what kind of business they need to attract. You couldn’t argue that current Davis retailers would suffer or that the tax revenue generated would merely be a shift because residents were spending that money in Woodland, or Dixon, or West Sac etc. And it would be a win for Davis residents because we would no longer have to travel out of town to shop at those businesses.