The Burlingame Voice

Downsize Your Ambitions!

Not to put too much of a damper on the holiday spirit especially when retail sales appear to have been OK, but this piece in the Wall Street Journal over the weekend caught my eye.  It is titled "As Slump Hits Home, Cities Downsize Their Ambitions".  It starts with a vignette from Arizona:

MESA, Ariz. -- The police department in this city of 470,000 has lost about 50 officers, and is hiring lower-paid civilians to do investigative work. The Little League has to pay the city $15 an hour to turn on ball-field lights. The library now closes its main location on Sundays, and city offices are open only four days a week. This holiday season, the city didn't put up festive lights along the downtown streets.

And goes on to note that "months after economists declared the recession over, cities are only now beginning to feel the full brunt of it".  The position being advanced says that property and sales tax slumps follow the general decline (and recovery).

The Voice will take a look at the early indicators of how B'game's finances will look in 2010 as soon as we get the next update, but one can guess that it won't be all peaches and cream for '10.

Little Green Sprouts?

The City issued a press release this week highlighting eight new businesses in town.  The San Mateo County Times article based on the press release notes:

Kent Putnam, who opened the 1-acre Chrysler Jeep Dodge dealership on the corner of California Drive and Peninsula Avenue, said he appreciates the city's help but realizes what it has to gain. The city receives 1 percent of every car sale, which amounts to $300 when Putnam sells a $30,000 car, he said.

"You got to sell a lot of shoes and sweaters to get to 30 grand," Putnam said. "There's not really a lot a city can do, but it's nice to have a supportive local government. However they can help, they do help, which is much-appreciated."

The article-press release goes on to note:

Other new businesses include the Hilton Hotel on Bayshore Boulevard, which replaced the former Sheraton Hotel, a Peter Pan Service Center on Adrian Road and the Medallion Steakhouse on Rollins Road.

New downtown shops are the Zambra Tapas Bar, the Haven home furnishings store, Blooming Vase and Peninsula Beauty. Two of those shops moved from other Bay Area locations.

I suppose it is a start......

Calpers Investigation - Not OPM

The Wall Street Journal has a frontpage article about a Calpers "Pay-to-Play" investigation.  It starts

America's largest public-pension fund, Calpers, revealed that a former board member had reaped more than $50 million in fees for arranging investments that could saddle state taxpayers with hundreds of millions of dollars in losses.

and continues with

Calpers funds the guaranteed pensions of retired state employees from returns on its investments and contributions from local governments.  With its investments tanking, Calpers has requested more money from municipalities.  To pay up, many of these governments will have to cut services or raise taxes.

Unfortunately, this is not "other peoples' money".

Friends with Benefits - Part 3

The benefits that accrue to civil servants have attracted the County civil grand jury's attention.  If you missed Part 2 of our story click here.  Scroll back further for Part 1.

In the August 11 San Mateo Daily Journal, it is reported:

The city of San Mateo disagrees with a civil grand jury finding that staff, unions and city councilmembers all benefit when wage and compensation packages increase for its employees.  Cities must rein in employee costs through tiered benefit systems, renegotiated union contracts and cuts to the number of workers when possible, according to the civil grand jury report.

San Mateo will also not turn to ballot measures as recommended by the civil grand jury to ask voters whether a two-tier retirement and health care benefits system for new hires should be implemented.

“This recommendation will not be implemented,” the city responded. “The City Council believes the ultimate responsibility to establish compensation is appropriately determined by the elected representatives of the community.”

I suppose you would have to read the whole report in hopes of discovering why the San Mateo City Council believes that--and a short news article can't quite get us there.  But we will peel the onion one layer at a time.  It was encouraging to read in the same article that

The city also agrees that days off, salary increases and the ability to accrue and cash out sick leave can be contained.

But once again, it appears you would have to read the full report to understand how they "can be contained".  The "how" is important to Burlingamers since the basic labor negotiating strategy throughout the county is to assert "but City X pays its employees Y dollars".  And the Y spirals each year.  Sometimes the spiral resembles the rest of the economy and sometimes it doesn't.

Enron-style Gimmicks

City governments are banding together to start playing hardball with the State.  Here is an excerpt from the message that went out on B'game's listserve today demonstrating the tougher tone:

The Legislature is expected to vote on a budget package on July 23 that will put cities at grave risk. The plan, put together by the Governor and legislative leadership earlier this week, attempts to close California's $26.3 billion deficit with what can only be described as Enron-style accounting gimmicks.

The budget provisions include unconstitutional grabs of local gas tax and redevelopment funds as well as a Proposition 1A loan of property taxes to give the appearance of a balanced budget.. The League has not seen actual budget language yet. However, all indications suggest that the current budget proposal:

Recklessly borrows $1.9 billion of local property taxes

Illegally takes $2 billion of local gas tax (HUTA) funds

Illegally takes $1.7 billion of local redevelopment funds

These "budget solutions" are nothing more than illegal and reckless Enron style accounting gimmickry that threatens vital city services to the tune of $5.4 billion.

California is at a crossroads. The Legislature needs to enact an honest, balanced state budget that respects the will of the people, not a budget full of bad debt and illegal gimmicks.

For Burlingame specifically, the impact is about $1.8 million of property taxes being "borrowed" and perhaps repaid on 2011.  The second impact is about $800,000 of gas taxes taken over the next two years.  In a city budget where $60,000 for crossing guards raised holy hell, the reason for the hardball tactics is clear.  The gas taxes go to pay for road improvements.  You can scroll down to see where new asphalt is (was?) planned for B'game.  I'm not sure all improvements are worthwhile like these kinds:

 

but most are clearly good for the community and our cars' axles.  The city asks you to call Leland Yee (916) 651-4008 and Jerry Hill (916) 319-2019.

Friends with Benefits - Part 2

The San Mateo Civil Grand Jury report on public employee costs lists six recommendations for city councils.  Let's just list the first two for now:

1.  Create a two-tier healthcare and retirement system:

Move retirement heathcare plans to HSAs, increase retirement benefit age from 50 or 55 to 60, base pensions on the average of the last three to five years and make provisions for increasing employee contributions

2.  Renegotiate union contracts to modify existing employees' benefits and put new employees in the new tiered plan

Eliminate cash payouts for accumulated sick leave (known as "use it or lose it" in the real world), reduce vacation time and reduce personal days.

The editorial in today's Daily Post goes a bit further.  They write:

Here are some ways this problem could be solved.

 

• Pass a state ballot proposition that rolls back the pay of state and local public sector workers to what the Census Bureau says is the private sector rate of pay for the same job.  Of course public employee unions would scream, but if it were enacted, would anybody quit their jobs?  If they did, it wouldn’t be hard to find replacements with unemployment at 11 percent statewide. 

• Cap all public sector pay until private sector salaries increase to public sector levels.  The problem with this approach, however, is that it would take years to see any benefits, while the shortfall facing the state is more immediate. 

What is your preference bloggers?

Friends with Benefits

Those of you who missed the San Mateo Daily Journal article last week on the Civil Grand Jury's report on city civil servants' pay and benefits might find these bits of information interesting.

If you use Table 8 to calculate the ratio of Full Time Equivalent Employees (commonly known as FTEs in the real world) per 1,000 people of the population in each city, you will find:

• Burlingame:  9.1 FTEs/1000

• Millbrae:       6.4 FTEs/1000

• San Mateo    6.3 FTEs/1000

There might be reasons for the higher levels in Burlingame.  For instance, it is possible that Burlingame provides some services to other cities for which they repay the costs, so the number itself is not the whole story.  You need the revenue side as well.

Another interesting comparison comes out of Table 5 which lists Other Post Employment Benefits, Where Known.  This is an update to the 2007-08 Grand Jury report, so it is not exactly hot off the presses.  Nonetheless, we find that estimated liabilities are:

• Burlingame:      $66.3 million or $140K per employee or retiree

• Millbrae:           $0

• San Mateo:       $20 million or $21.7K per employee or retiree

You have to ask the question, "Is Millbrae's liability really zero, or is that just an unknown?".  If it is zero, then why is is zero?  If San Mateo's liability is one-seventh of Burlingame's when they have 95% more eligible employees and retirees, what caused that difference?  We know from the other comparisons in the report that the basic pay and benefit packages aren't that different from each other.

So, bloggers, who wants to dig in and add to my take on it?

Can the State Take City Money?

With all but the legislators' pay raise Propositions going down in flames on Tuesday, the next round of maneuvering has begun.  Today's Wall Street Journal (page A3 in the printed edition) notes:

SAN FRANCISCO -- California Gov. Arnold Schwarzenegger, in his efforts to find funds to balance the state budget, has proposed borrowing $2 billion from municipal governments over the next fiscal year, a tactic that is rankling local officials up and down the state.

Mr. Schwarzenegger is invoking a 2004 law that lets the state demand loans of 8% of property-tax revenue from cities, counties and special districts. Under the law, the state must repay the municipalities with interest within three years.

Administrators of already cash-strapped cities and counties said the loans would force even deeper cuts in services. Fewer cops and fire engines would be on the streets, they said, and parks and libraries would be closed more often. And some local governments would be forced to lay off workers to keep their budgets out of the red, they said.

Mr. Schwarzenegger's proposal "suggests that financing state government and state-government services are more important than these basic community services," said Chris McKenzie, executive director of the League of California Cities. "I think it's something most of the public would disagree with."

The San Mateo Daily Journal published estimates of how much money we are talking about on May 14th.  The potential loss for Burlingame is $1,170,257.  From the city web site, a link titled "Budget Update" starts with

As you are probably aware, the City of Burlingame, like many agencies, is having a challenging budget year that will continue into the 2009-2010 fiscal year which begins in July 2009. The City’s revenues have steeply declined over the last 6 months. Hotel taxes paid by individuals who rent rooms are down 11% and general sales taxes show a 15% decline. In January 2008 the City Council adjusted the current budget to remove $2.3 million of expenditures in order to balance 2008 revenues and expenditures. The shortfall for 2009-2010 is expected to be larger, namely $4.27 million.

This is an issue that is not going to be resolved quickly.  Who has constructive suggestions?

Storm Drain Ballot

Storm drains It's about the libraries (Daily Journal) Editor, If there were a hole in your roof you would fix it. It wouldn't be optional. You would pay for it from your vacation budget, or you would cut back on dining out, or you would dip into your retirement funds (for those lucky enough to have any left these days!) to make the necessary repairs. The same is true with the city's storm drains. It isn't optional whether we fix the 80-year-old crumbling system of pipes and culverts that we have in the city. The only choice is how we pay for the repairs. We could decide to make the repairs in as short a time as possible by raising the necessary $35 million or we could try to cut $3 million-$4 million a year from our libraries, our street cleaning, our fire and police departments and make piecemeal repairs over the next 30 years. In the end we know that the latter is far more expensive. To me it's easy: We can't afford to reduce our library services anymore. We have already cut back hours, reduced the amount that is spent on new books, magazines and reference materials. There is no more to give from that pot. Storm drains may not seem to be the thing that makes our town special but the libraries certainly are And not voting for the passage of the storm drain measure is the equivalent of voting to reduce our library services even more. We can't afford that as a community so I encourage everyone to vote in support of the Storm Drain measure. It's about the libraries. Stephen Hamilton, Burlingame The letter writer is the president of the Burlingame Library Foundation. *** Lorne and Richard's letter given below is also included in the Daily Journal today.

- Written by Fiona

Storm Drain Endorsements

Burlingame's storm drain measure, which asks property owners to help pay for a complete overhaul of the city's 80-year-old storm drain system, has been endorsed by U.S. Rep. Jackie Speier, D-San Mateo, state Assemblyman Jerry Hill, D-San Mateo, county Supervisors Mark Church and Rich Gordon, former county supervisor John Ward, Burlingame Elementary School District Board of Trustees and the two Burlingame residents who serve as trustees for the San Mateo Union High School District. The San Mateo County Times and The Daily Journal also have endorsed the measure. To see the complete list of endorsements and learn more about the storm drain measure, go to www.protectburlingame.org. Ballots have been mailed to all property owners in Burlingame. They must be returned to Burlingame City Hall no later than May 5 at 8 p.m. Property owners who have not received a ballot should contact City Clerk Mary Ellen Kearney at mkearney@burlingame.org or call City Hall at 558-7200 (source: Daily Journal)

- Written by Fiona