Wednesday, April 15, 2009

Budget Direction Provided - The Clock Is Ticking

I'm experiencing one of those "chicken or egg" moments... I don't know which came first - this darn cold I've been fighting several days or plowing through the staff report for Tuesday's council meeting over the weekend. In any event, digging through all the details of that report and it's numerous attachments is enough to make anyone ill, so that's where I'll place the blame.

I did, indeed, spend a big part of my weekend trying to make sense of the proposals presented. I al
so spent some time chatting with a senior member of the city finance staff late in the week, clarifying some of the questions I had. You can plow through the agenda yourself if you wish, HERE.

Tuesday's meeting was not a surprise - except for the fact that that Eric Bever wasn't in attendance. It didn't make any difference, though. In the case of split votes, Katrina Foley was alone against the other three. With Bever there it would have been four.


The counc
il meeting played to nearly a packed house with, according to trusted sources in attendance, a large number of city employees. This, of course, is understandable - some of their jobs are on the line. As the evening progressed and speakers stood to voice their views it was clear that the firefighters are going to be a tough sell. Current and former leaders of the firefighter's association stood and spoke with passion and implied that the city was not acting honorably - that it had given it's word on which firefighters had based major life plans, a new home, marriage, etc. - and now was trying to back out of the deal.

Foley clearly struck a chord with a majority of the attendees as several of her suggestions and comments brought raucous clapping.

Early in the proceedings our young jailer/mayor Allan Mansoor - who affirmed the ru
mor of his run for Van Tran's Assembly seat today - asked City Attorney Kim Barlow whether his suggestion of the reduction of council members salaries would be considered tonight. He was told that it's on the agenda next week, but wouldn't make any difference anyhow, since any change in council salary can only be considered at the time new council members are seated - in this case 2010. He knows that, but I guess he thinks he needs to make some kind of a meaningless statement. What a grandstanding hypocrite!


During his presentation City Manager Allan Roeder told the council and the rest present in the auditorium that, assuming their budget recommendations are put into place, the city will be at staffing levels he had not seen for more than 20 years. At the beginning of the FY 08/09 city staffing was at 611. The head count if the proposed 10-point plan is adopted will be 545. Those 66 positions lost were the accumulation of the 18 eliminated or held vacant in 11/08; 23 laid off via the 5% budget cuts and an estimated 25 eliminated due to early retirement incentive program.

The upshot of the meeting was that the council directed staff to move forward with the 10-point plan they presented to the council for it's consideration. That was fine and a good place to start. However, it got more complicated after that.

Katrina Foley adamantly insisted that she wanted to come out of this process with a balanced budget that took no jobs. She said she felt it was possible to do that by digging through the details of the attachments for cost reduction opportunities and through greater use of the fund balance. Well, in prior years, she might have been right, but this is a whole new ballgame. The city staff has spent weeks attempting to find ways to come up with a balanced budget without the necessity of cutting jobs. I don't think Foley will find something they've missed. The fund balance will be utilized to fund the 08/09 budget to the tune of more than $15 million, despite very significant adjustments accomplished at the end of December. The current proposal by City Manager Allan Roeder and his staff includes the use of almost $3 million in fund balance, which will leave very little left in the kitty.

As other council members began to cherry-pick specific issues from the various attachments it looked as though the staff will be in for a lot more work than they anticipated, attempting to negotiate with unions where appropriate and blending the individual choices selected by council members into something resembling a viable budget. Time is of the essence, since City Manager Allan Roeder was quite clear - that they WOULD have a balanced budget by the due date of July 1, 2009.

So, here's what the council approved Tuesday night:

1. Reduce department operating budget by an additional 5.0% (resulting in an average reduction of 10% from the prior fiscal year which will require elimination of approximately 23 full-time positions) Est. $6,318,134.

2. Negotiated reduction in employee compensation equating to approximately 5.0% of salary. Est. $3,623,663.

3. Reduction of $1 million dollars in non-reimbursable overtime for Police and Fire Departments. Est. $1,000,000.

4. Negotiated suspension of minimum manning requirements in the Fire department in order to accomplish the aforementioned reduction in overtime.

5. Seek Federal Stimulus funding for ten police officer positions to be eliminated due to Police department budget reductions. Est. $1,052,010.

6. Offer PERS Retirement incentive to create vacancies to (a) reduce the number of per
sonnel that may be laid off as a result of reductions in departmental operating budgets and (b) create additional vacancies needed for budgetary purposes (assumes total of 50 employees opting to retire of which 25 positions would be eliminated). Est. $3,485,000.

7. Suspension or termination of the Retiree Health Savings Plan (Contributions are comprised of 1% by Employer and 1% by Employee). Est. $508,764.

8. Implement various cost recovery programs including resident EMS fees, inspection fees, and Police and Fire Cost Reimbursement Fees. Est. $959,700.

9. Renegotiate/extend the Golf Course Operator's agreement for a greater share of revenues and institute formula adjustments to the greens fees. Est. $244,850.

10. Utilization of undesignated unreserved General Fund fund balance. Est. $2,900,000.

Total estimated budgetary reductions and new revenues amount to $20,092,121.


There's a whole lot of negotiating involved in some of these items. If any of these prove to be unworkable, then cost savings must come from somewhere else. For example, if the employee unions balk at re-opening talks then they effectively shove the city into a corner. They will be left with very few alternatives, and none that come close to meeting budget requirements, except to lay off significant numbers of staff members.

The clock is ticking of this budget mess. The city must have a balanced budget by July 1st. That means a lot of work by the staff to massage and mold the choices presented to them by the council.

One thing is sure - there will be more than a few unhappy city employees by the end of June.



Anonymous rob dickson said...

Geoff, I watched the meeting and posted comments on the Pilot, see below:

Lets get serious here, and address reality: NO ONE wants layoffs. Our municipal employees are great, and we need every one of them - police, fire, public services, administration, planning and building, etc. Many have made serving the residents and businesses of Costa Mesa their careers. They should be paid well for a job well done. They should receive good benefits - including retirement benefits. The employees have a vested interest in the health of the city. When times have been good, they have negotiated for, and received, generous raises and increases.

The reality is, however, that these are no longer good economic times, and generous raises and increases in benefits reaped in boom times must be countered with equally significant concessions. Salary reductions, pension contribution changes, schedule adjustments - all should be on the table. The reality is that 73.99% of the budget is pay and benefits, and the majority of savings must come from there. Even when we were dipping into our fund balance, employees got raises and benefits increases. Commenters here blame the Council for layoffs, when across the board concessions by employee unions could save every job.

Why is it acceptable to insist on nailing residents, businesses and visitors with service cuts, delayed maintenance, program reductions/eliminations, slower response times, myriad new taxes/fees, etc. while it is "irresponsible" and "cowardly" to suggest ANY concessions by the very same employees who have enjoyed pay and benefits increases virtually every year? Let's be very clear here - the power to save jobs and keep services at high levels (the ONLY level acceptable) rests ENTIRELY in the hands of the employees and their unions. DO NOT blame the Council for refusing to go into debt to maintain pay and benefits.

Councilmember Foley has clearly demonstrated that she no longer has the best interests of the residents and businesses of Costa Mesa at heart. Councilmember Foley stated clearly and unequivocally that her number one priority is to save jobs - and she was willing to go line by line through the budget eliminating programs and services to do so. She did not seek savings from the 73.99% of the budget impacting employees, but from the 26% directly impacting residents and businesses. She also clearly stated her desire for more revenue and how to get more taxes put on the ballot.

One more time - just to be very clear, as I know that my comments will be misconstrued - I DO NOT WANT LAYOFFS and I RESPECT AND APPRECIATE COSTA MESA EMPLOYEES. It is absolutely wrong to ignore the fact that pay and benefits have gone up, rightfully, in good times, and suggest that employee pay and benefits should be exempt from any adjustment when economic crisis threatens the health of the City and the services and programs the city exists to provide. Not one employee should lose their job, and the employees themselves have the responsibility to ensure that does not happen.

I have to say, Geoff, that while I have disagreed with some of Councilmember Foley's actions in the past - I always thought that she was very savvy and dedicated to making Costa Mesa a better place for everyone. I was sorely disappointed in her entire approach at the meeting. She was only focused on budget repercussions for municipal employees and displayed total disregard for residents, acting as if we all exist to provide revenue to fund city employment. You may have a different take on it, and I am looking forward to your responses to my comments. I know that you are a fiscal conservative.

4/16/2009 12:17:00 PM  
Blogger Chris McEvoy said...

That meeting was packed and there were only a handful of open seats during the whole meeting. I would assume that most of the attendees were city employees. Watching these meetings in person is interesting because you see how the whole room reacts to certain issues. When Council Member Foley was making her points about increasing the TOT and discussing licensing costs the audience was whispering in agreement while the rest of the council was reacting in a different manor.

If I am not mistaken the RRIP and Build Green Programs got eliminated at this meeting.

I like the idea of raising the TOT and TOT should be the 11th item for the budget strategy. This is an excellent way to increase a revenue source for the city. I don’t know if we need to match the county average but any increase would be a great thing for our city. An increase in business license fees is good too, however I think this one would need to be a very minor increase in revenue. Bill Sneen was definitely ahead of his time.

I am selfishly torn on the golf course renegotiation. Our city course can not be beat for the price but we need the income. Based on what the city hopes to add to its revenue from the golf course the operators need to produce an extra $670 per day. This ‘tax’ will fall on someone shoulders.

Our city needs more revenue sources (internalize towing!) and must get more out of the existing ones. We need to also cut spending. This is definitely not going to be easy. Personally I hope ideologies are put aside and solutions are enacted.

There were a few shining moments at the meeting, Council Members Monahan and Foley using their personal business experience in their approaches to our budget shortfall, Council Member Foley making the observation that we will be in the exact same situation next year and stressing that our city needs a long term solution, Council Member Monahan asking the unions to discuss helping out with retirement contributions, Mr. Roeder’s candor about the TOT and finally Council Member Monahan’s Freudian slip.

One last thought, since we are going to use the fund balance this year lets make sure its use echoes for years to come. Here is an idea, have the city offer alternative forms of compensation, such as housing. An example, instead of paying employee X $5,000 a month we pay $2,500 and 1 month of housing. It was mentioned that some city employees are going through foreclosure and if this is the case they will need a place to live so there exists opportunity. I understand that it might take a few years to break even however I would like to see us get the most out of the fund balance.

4/16/2009 02:21:00 PM  
Blogger The Pot Stirrer said...

Rob, thanks for the lengthy tome. This issue is not one resolved quickly - or briefly - as witnessed by the voluminous staff reports and attachments. As I said above, I, too, was disappointed in Foley's handling of the issues. I posted a lengthy comment on the DP blog today - not up yet, though. Still fighting this darn cold, so hard to stay engaged on this.

Chris, I'm sure you had an interesting evening. I saw you bail from a front seat early on. I don't think there's enough steam to generate a citizen initiative for the TOT. The council's sure not going to do it. Even as an "emergency" measure it would take months to process the paperwork for a costly special election.

Here's an idea... let's start charging for the council meetings! Could make a few bucks - it certainly does make for great theater!

Thanks to both of you for participating here in this critical issue.

4/16/2009 03:25:00 PM  

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