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By CLARK MASON
THE PRESS DEMOCRAT
Healdsburg Mayor Gary Plass and fellow Councilman Tom Chambers are on the defensive, sending out a public letter detailing the cost savings the city has achieved over the past several years.
The unusual move was in response to a commentary in the local paper signed by two former mayors and two other prominent citizens who said the City Council doesn’t appear to feel the same sense of urgency in addressing “a financial crisis at hand.”
“Someone needs to rattle the cage and spur some motivational activity,” former Mayor Eric Ziedrich said Friday to explain why he co-authored the opinion piece. The commentary also raised questions about whether a council with three retired public employees can deal effectively with reducing employee costs.
“We hope that the three former Healdsburg public safety employees now serving on the City Council (retired police officers Plass, Susan Jones, and fire captain Steve Babb) will put to rest public concerns about possible divided loyalties by proactively seeking long-term solutions to salary, benefits and retirement for City Employees,” Ziedrich stated.
It also was signed by former Mayor Leah Gold, businessman Mel Amato and former parks and recreation commissioner Bruce Abramson. (Read the commentary by Bob Abramson, Mel Amato, Leah Gold and Eric Ziedrich)
In their response, Plass and Chambers said the City Council has been “working diligently over the past three years to decrease operating expenses and promote sound financial practices,” including reducing the city work force by 18 percent and gaining concessions from employee groups.
As a former police sergeant, Plass said he and his retired public safety colleagues on the council “are on a different track now, representing the community.”
“For people to say you have split loyalties is not valid,” he said.
The back and forth comes as Healdsburg wrestles with an estimated $24 million shortfall in its pension obligations and projections that it will run out of budget reserves in the next two to three years.
It also comes as city administrators are renegotiating contracts with police and fire employees. And the dialogue is a preview of the run-up to November’s election in which Plass, Chambers and Babb are face re-election, and Ziedrich is considering running again for City Council.
Cities, state and county governments are facing similar difficult budget scenarios as a result of the economic downturn and more generous benefits that were granted to public employees over the past decade.
Healdsburg City Council members have made efforts to highlight the problem by holding several recent public meetings to draw attention to burgeoning pensions costs.
The council invited former North Bay Assemblyman Joe Nation, now a Stanford public policy professor and pension critic, to scrutinize and present a report on the outlook for Healdsburg’s retirement programs.
Ziedrich on Friday credited council members with their willingness to discuss the pension deficit and the inroads they’ve made on budget problems.
“While we can commend them for some of the efforts they’ve made, it’s obviously way too little to address the huge shortfall on the horizon,” he said.
Plass said he and Chambers crafted their lengthy letter because “we’re trying to show them the steps we’ve taken, and we’re continuing to move forward.”
The councilmen state that in a recent two-year period, the city reduced employee salaries by $2.1 million, in essence by not granting salary increases and getting employees to contribute more toward their pension and medical plans.
Their letter details other costs savings and mentions some measures the council is considering to increase revenues, such asking voters to approve a half-percent sales tax hike and charging for parking downtown.
Ziedrich and his co-signers wrote that the city needs to do more to address pension retirement formulas, not only for future employees, but current employees as well.
There should be contract renegotiations, they said, so that city employees have to wait until they are older to retire and also receive a smaller percentage of their salary for each year of service.
“The gist of the message is there’s a lot more that needs to be done. Let’s not rest on our laurels,” Ziedrich said.
“We’re working real hard to get the structural deficit in tow,” said Plass. “We also know we’re dealing with people’s lives. It’s not just a bunch of numbers on a piece of paper. We’ll get there.”
You can reach Staff Writer Clark Mason at 521-5214 or clark.mason@pressdemocrat.com.
Read the letter from Healdsburg Mayor Gary Plass and Councilmember Tom Chambers:
April 16, 2012
An Open Letter to the Citizens of Healdsburg:
As members of the City Council we take our fiduciary responsibilities very seriously. We have been working diligently over the past three years to decrease operating expenses and promote sound financial practices. Recent inquiries and events have led us to the realization that we have not been effective in communicating our efforts to the public. The purpose of this letter is to provide clarification and a brief summary of our actions to date.
It is important to begin by stating that a combination of factors has led to our fiscal challenges. National and state economic conditions have impacted local spending resulting in decreased sales tax and transient occupancy tax (TOT) revenues. Property values have decreased leading to a corresponding decrease in property tax receipts. Perhaps the most notable blow to our revenues is the state “raids” that have redirected revenues away from city coffers, most recently the dissolution of redevelopment agencies. All of these dynamics, coupled with inflation, have affected the budget.
Not all operating funds have shortfalls. The Enterprise funds, including Community Services, Water, Sewer and Electric are balanced. While not meeting recommended capital replacement and reserve requirements, it is anticipated the pending utility rate increases will ensure the health of these funds over the next four years. The current strength of these funds is a direct result of the Council’s implementation of rigorous financial planning.
The general fund is most problematic, primarily due to its revenue sources and the issues cited above. A deficit is projected for the current and upcoming fiscal years. However, we are moving forward with a comprehensive strategy that we believe will strengthen the City’s financial position. This strategy includes a combination of revenue enhancements and budget reductions designed to ensure funding for the City’s core services. Examples of the application of our strategy follow.
Past actions of the City Council
1. Staff reductions. Through a combination of attrition, layoffs and the elimination of vacant positions the City’s workforce has been reduced by 18%. The City has gone from 137 full time and 20 part time positions to 113 full time positions and 16 part time positions today. Additional layoffs are anticipated for the FY 12/13 budget.
2. Employee concessions. There have been no cost of living raises for civilian employees since 2007 MEA and Mid-management members and 2008 for IBEW members. In FY 09/10 the City Council successfully negotiated new contracts with three bargaining units and management staff to reduce benefits. All non-safety employees are paying the 8% employee share of the PERS contribution. In addition, these same employees are contributing 10% toward their medical premiums and have six unpaid furlough days per year. Savings from the contract effective dates through the end of this fiscal year are estimated at $651,459.
Police members have not had a cost of living adjustment since 2008. In 2010 police association employees began paying 8% of the 9% employee share of the PERS contribution, providing an estimated savings to date in excess of $110,000. Fire employees are contributing 2% of the 9% employee share of the PERS contribution.
Audited numbers FY 08/09 compared to FY 10/11 depict a total savings in employee salaries and benefits of $2,158,575.
3. Operational modifications. Staff has been creative in cutting operational expenses and maximizing miscellaneous receipts. Budgets for services and supplies have been reduced through a variety of mechanisms: centralized purchasing, reuse and recycling of materials, reduction of inventory and renegotiated contracts with suppliers and consultants. Surplus vehicles and equipment have been auctioned, generating sales proceeds and reducing overall fleet maintenance costs.
4. Revenue. The City Council authorized an audit of TOT receipts. Audit results indicate substantial compliance, but did reveal some calculation errors. While one case remains outstanding, the resolved cases have recovered over $143,000.
Current actions of the City Council
1. EPMC benefit elimination. With the bulk of City’s employees paying the employee PERS contribution, the City is able to eliminate a retirement benefit called Employer Paid Member Contribution. Staff is expected to complete the meet and confer process within the next month which will allow the City Council to adopt resolutions revising the benefit in June. The expected savings moving into FY 12/13 is $241,034.
2. Employee negotiations. The City is currently engaged in negotiations with Police and Fire units. The content of these discussions will not be disclosed to maintain the integrity of the bargaining process. That said, the City Council cannot disregard the importance of parity among all units and good financial management.
3. Shared/Contract services. For the past year staff has been evaluating opportunities to contract for services with other government agencies. These contractual relationships could result in Healdsburg utilizing another agency for services or, conversely Healdsburg providing services on a fee basis to others. In addition, staff is comparing the cost of providing services internally versus contracting with the private sector. Prior to making a decision it is critical to look at the quality and timeliness of service. Present considerations include: fleet maintenance, building maintenance, laboratory testing and IT.
4. Pension Side Fund. On April 2nd the City Council authorized the finance director to proceed with a refinancing of the pension side fund. This will save the City approximately $918,930 over 11 years.
5. Fire department. On April 9th the City Council directed staff to spend the next year looking at alternate models to provide fire suppression and prevention services. Among the options identified for contemplation: contract services, a fire district, and a joint powers authority.
6. Revenue. The City Council hired a consultant to conduct a ballot feasibility study to measure the community’s support for a potential half-cent sales tax increase. The potential ballot measure is under Council consideration. Other ideas for revenue generation being explored are: paid parking, assessment districts, fee increases and aggressive economic development programs.
7. Second tier. The City has obtained PERS valuations for a second tier to reduce retirement benefits for new employees. As proposed, the second tier would provide a 2% at 60 formula for miscellaneous employees and a 2% at 55 formula for safety employees. It also eliminates the “single highest year” provision in favor of calculating retirement benefits on a three-year average. The second tier cannot be implemented without going through the collective bargaining process.
Future actions of the City Council
A primary focus of the City Council moving into the future is pension reform. The pension elements that can be controlled locally (retirement formula, single highest year, etc.) are being addressed. Because PERS rules, regulations and retirement options are legislated by the state government, efforts must focus on all-encompassing reform at the state level. This is a goal that will not be accomplished without considerable determination. It will require a process focused on legislative action and transformation. This Council is committed to pushing the reform agenda forward.
In conclusion, be assured the City Council will continue to move the City toward financial sustainability. The decisions made to date have been unanimous. They represent the convictions of all five council members, regardless of political orientation, employment status and reelection bids. We are dedicated to Healdsburg and will continue to work cooperatively and responsibly for the benefit of all.
Mayor Gary Plass
Councilmember Tom Chambers
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Heather, you have made an excellent constructive suggestion.
Side perks for the group of “executive”
dept. heads should be dealt with.
Did you know that along with the pay raises, the administrative leave award hours were increased by 25 % this year to 100 hrs.
Did you know that the Auto Allowances were made “PERSable” (that means that the City pays extra on top of that so that the auto allowance becomes yet an added pension benefit).–under the Brown reform plan, this is considered a pension “spiking method”. Do the executives for a small town of 10,000 really have such stressful jobs that these extras are required. Extras that add to the City debt obligation down the road when no one notices ?
Plenty of blame to go around. But it will take all of us to fix it and some discussion deeper than “you’re a 3 year old.
http://www.nationalaffairs.com/publications/detail/who-killed-california
I know the LA Times did a story statewide concerning cities and what councils are paid and it showed that the combined pay and Health benefits package for each council member totalled $25k. About $12.5K for pay and $12.5K for health benefits. This is for part time work that people campaign and spend money to get elected to do.
My suggestion would be that our council lead by example and not take any pay except for true expenses and at least give up their helath benefits. I know the city doesn’t give their part time employees benefits so why should the council get them, that doesn’t seem fair at all. So that will save $125,000 a year right there and set a good example (remember a little league coach, scout master or other community volunteers do not get paid so why should they).
As for the Department Heads I would strongly suggest the Council look at doing away with “Administrative leave”. In the private sector you get Vacation and Sick Leave. The department heads use the Administrative leave as another source of income. Also I would make sure to limit the ability to cash out to only Vacation time. You could also get rid of car allowances for department heads, most of the work is done within town, so why get an auto allowance. If you travel out of Healdsburg get milage like everyone else does or use one of the city’s vehicles.
By doing away with Administrative leave and Auto Allowances the city could probably save another chunck of change.
Again if the Council, former Council, and department heads want to talk about structural problems with the City’s budget I would say look at the top first, lead by example and remember why you ran or took the job, to serve the community.
Defend Mitt Romney?
What part of the word ‘ unsustainable’ do they not understand ?
What part of ‘fiscal crisis’ do they not understand ?
Is there any sanity in local politics ?
I am befuddled.
Let’s get real here. Negotiate with ranks and file ? Did you know that council quitely gave their so called executives from each department, brand new automatic step increases to their pay range adding an extra 15 to 20 percent over their current 140,000 dollar (ave. salary)
Did you know that in leiu of taking away the EPMC pension benefit, that they just added it back on backdoor by tacking on an extra pay step to these new salary ranges ? These executives supervise far less employees than an average manager at a real company, yet they are given some interesting side perks.
“Republicans can be defined as people who think they’re smart, but sadly are not.”
Exactly the kind of reasonable, civil, sober comment liberals always call for when they are losing an argument.
Perhaps we could define Democrats as children who have passed the age of majority.
The Healdsburg City Council appears to have approved “Refinance Pension Side Fund”, this is a new phrase for a “Pension Obligation Bond.” The difference between a pension fund’s assets and liabilities; what is in the bank and what is needed to cover past service for actives and retirees; is known as an unfunded liability.
Healdsburg’s present unfunded liability to Calpers is $6.6 Million that has to be paid back over the next thirty years at the “target rate” of 7.75%. A Pension Obligation Bond is a very risky gamble whereas Healdsburg will pay-off the “soft debt” to Calpers with a “hard debt”, money borrowed from Wall Street at 6% interest with the hope that this money given Calpers will outperform the market.
The Center for State & Local Government Excellence has a well balanced report on the risks of POB’s at:
http://slge.org/publications/pension-obligation-bonds-financial-crisis-exposes-risks
The State of California has tried to do POB’s for their Calpers obligation but it was found unconstitutional because they would have to have the debt approved by voters. Local Governments have found a loophole allowing them to bury themselves with bond debt to pay for pension obligations. Sonoma County presently has the highest per capita bond debt of all 58 counties in the state with $600 Million in POB’s.
Healdsburg should ask Supervisors McGuire and Rabbit what they think about POB’s and I think they would say don’t do it.
I would support state legislation denying local government the ability to issue POB’s. Many local governments are on the same conveyor belt to insolvency and it will be a lot easier to shed soft debt over the hard bond debts if bankruptcy occurs.
http://www.tomlynchforassembly.com
So, uh, Bear.
Tell us again how you attained your expertise that supposedly puts all others to shame?
Was it your retired public employee status?
Oh, wait. You claimed you “had more degrees” than others on this board.
Did you see the news item two days ago where the vast majority of public employees had degrees in PSYCHOLOGY ???
AHHHhhhhhhhh ha ha ha ha ha ha ha ha ha.
And for those of you not understanding the joke, the govt gives more $$$$ to its public employees who have “degrees”….
Ahhhhh ha h aha ha ha ha ha ha ha.
The fox guarding the henhouse.What a joke.
“retired police officers Plass, Susan Jones, and fire captain Steve Babb”
Any we wonder why our budget problems still exists. When we remove public employees from the oversight and replace with people who have no interest in the government run system these people retired from, we’ll get back on track and fix the problems. Until this time occurs, we’ll continue to feed the massive wasteful spending on government programs and projects.
What people fail to acknowledge it is that government isn’t the solution, they’re the reason we’re in this economic mess in the first place.
All of this is symptomatic of a broken pension system and retired public employees elected to local government where they are making decisions on millions of pension dollars in Healdsburg and in too many other cities in Sonoma County and California.
They have studies, reviews, discussions, handwringing, but little else. They strike deals with public employee unions that do next to nothing to stop the bleeding and reduce the deficits. They brag that they have turned the corner and this latest fix will help.
The problem is all of this is too late and too little. The answer is Healdsburg will have to abandon the PERS system.
Will this happen? No not when three of the five council members are retired public safety. This goes to the heart of the problem. Former public employees elected to city councils making decisions on millions of dollars in pensions that directly impact them and their own retirements.
The whole system needs a fundamental, radical change if any fiscal control is to be regained.
How much are their council members making and department heads? I’m willing to bet their council members are making $300,000 per year and the department heads are making that much as well or near to it. No one at the top should be making over $100,000 a year in the gov’t. No one.
That would SOLVE the budget crisis instead of taking it OUT of the salaries and pensions of the much lower paid workforce.
Small time tea partiers waging war on the current Council and public employees.
Republican economic and regulatory policies brought on this disaster, and now the dimwits responsible are trying to use their own disaster for political gain. Even in a small but nice place like Healdsburg.
How contemptible!
But let’s look at the upside. Since none of these critics have a memory that extends beyond 3 years, they are clearly ineligible to hold public office, as 3-year-olds can’t run for Council.
Even better, this applies to all republican candidates for president or any congressional office.
Republicans can be defined as people who think they’re smart, but sadly are not.