05-24-09, Response by Bruce Philpott to Hal Weber’s “The Tip of the Budget Iceberg”

Hal, good piece. The city's effort to off set the ever-expanding and uncontrolled employee costs that, as you accurately say are unsustainable, needs more exposure in the budget debate. Glendale residents, taxpayers and business owners need to know how fees, rates, permits and taxes are increasing at a rapid pace, yet under the radar of most. For example, last year the city council approved a policy that permits city staff to impose cost-of-living-adjustments based upon the CPI, up to an amount not to exceed 5%, without any prior approval of the city council, on all fees and permits. The council also adjusted up permits and fees from 30% to 400% during the same 60 day period of July and August, 2008. So if the COLA goes up 4.5% in any given year, the staff will automatically increase the same amount on all fees and permits.  In addition to the huge increases in fees and permits, water rates were increased by 35% (staggered over the next 18 months) and electrical rates were and still are about the highest in the state. New taxes were imposed for fire inspections that were never assessed before on buildings below 75 feet in height.

The city has also siphoned off a huge amount of federal and state money intended for other purposes than to be used to pay city staff, but that is happening today in amounts that exceed seven digits. These monies were intended to serve our very poor and underserved who, through no fault of their own in many cases, have suffered and endured tremendous hardships. It is immoral and should be illegal to have a policy that takes that money away from them to pay already bloated compensation packages for city employees.   

That was last year. This year, with another $10 million shortfall in the general fund budget, the city council, because it can’t think independently of city management and has no experience in municipal budgets, is going to have to find new sources of revenue in addition to cutting some more vacant positions. As expected, because it is in the fire union play book that came out of its think tank in Washington DC, the fire department is advancing the idea to establish a city-wide fire assessment district (they are playing the medical side of services because they know it will sell better than special funding for fire related services) so that the fire union and management will have a source of new revenue, projected at $4.2 million annually, that will not have to be shared with other departments in the general fund budget. The fire union has come to the conclusion that in order for it to have a solid financial foundation, it is going to have to find its own money stream, and not be dependent, as is every other city department, on the general fund.

The only problem is that they will have to create a lot more goodwill in the community to get the voters to approve such a special tax that will be placed on their property tax bill. They had placed their hope on a medical insurance program but the public didn’t buy it.  And, because it is a special tax, it will take, per Prop 218, 66% approval to carry. The good will was started when the union agreed to forego the COLA bump this year. This was a calculated decision on the part of the union before it agreed to waive the COLA, and, of course, the Glendale News-Press happily assisted in marketing the message. But will it be enough to convince the voter to approve the special assessment? They handed out about 5000 plastic fire helmets last year and that creates a lot of good will. They will have to invest in more PR before the city council will put this on the ballot.  It is important for your readers to know that the fire chief, when he announced the possibility of a special fire assessment district, did not do it in a vacuum.  A department head never acts on such a policy issue alone. He had the consent of city management and council before he made the announcement. The council and city manager are good actors though, because they sat there and acted like they heard it for the first time.

On another financial debacle, we can thank retired fire chief Richard Hinz, who in 1998, convinced the city council to approve a medical response and transport system using all sworn Glendale firefighter/paramedics. The agenda report promised the city council that after a mere $2,500,000 in startup costs, the program would create surpluses in the millions of dollars. Hinz was so sure of it that he said he would give a report every year to the city council and let them know how much money the program was making. They would be able to pay back the initial loan “with interest” in several years. Hinz went on, “Net savings to the general fund over five years would total over $2.31 million.” Ten years later, the program has cost Glendale taxpayers in excess of $20 million and it is this program that Chief Scoggins is going to ask the public to increase their property tax assessment for. And, you guessed it, Hinz never sent one updated report to the city council on the financial picture of the program. It was too embarrassing and no one in city management made him accountable.

Another outstanding problem with the budget is that the city council is not sharing with the public any other part of the budget, just the general fund. Because transfers are made each year to “balance” it, the taxpayers and residents need to know the condition of the accounts from which these transfers are being taken. They will be shocked when they discover they have been depleted as a result of the growing transfers and replaced with long term bond debt money, which in turn gets transferred into the general fund bit by bit. The city actually classifies the borrowed money as “revenue” on its ledgers, one of the reasons they claim they are able to “balance” the budget.  The public will also be shocked when they discover that the transfers increased by $10 million in this current fiscal year as compared to the last one, $30 million in transfers this year as compared to $20 million last year. 

Another outstanding problem is the one having to do with the pension obligations, especially those in public safety. Of the numerous respected accounting professionals who have studied the financial conditions of local governments, many are now predicting insolvency and possibly bankruptcy for many. The city of Glendale has many of the indicators leading toward this ultimate condition.  Some cities will conclude in the near future that it may be their only way out of their financial holes because by declaring bankruptcy, they will be able to open the contracts and pensions and renegotiate.  

As long as the city continues to pay out unaffordable compensation packages to special groups of its employees, noting that some are being paid fair and at market rates, revenues will always fall short. The city will continue to cut positions as they become vacant, which is the most unacceptable way of doing it by any public management perspective, and hope that by raising as many fees and taxes as it can, it will somehow struggle through this time in history. They are unwilling to project costs and revenues out to five or more years because they know what the financial reports will say: You are spending beyond your means and are reaching the maximum amount of what you can borrow.

Maybe the voters will become more aware of this and decide to replace the city’s management and council. By that point, there will be a lot of heavy financial lifting on the part of all concerned. While they try and figure out how this happened, hundreds, if not thousands, of retired city employees will be drawing millions in their pensions.

It wasn’t intended to be this way, but when the public was snoozing, the greedy employee unions and politicians formed an unholy alliance and snookered the citizens and taxpayers.  But I also believe those who played a role over the past ten years in creating this unfathomable financial problem could not have realized at the time the consequences that have evolved. 

I have lost hope that this city management team and council have the skills to create the kind of solutions that will not rob the public out of deserved services that they have paid reasonable fees and taxes for. The city is going to lose many traditional services and programs or will be staffed back to small portions unless new leadership is brought aboard.

It might be helpful for the public to know a little about some of the positions that have been paid for by taxpayers over the years. The fire chief recently responded to the city manager about a position that was being proposed to be cut from his operations. Scoggins said, “This position was in a support role for the department and its elimination has no significant impact.” In response to a second vacant position, the fire chief said, “The elimination of . . . this position . . does not cause a significant impact at this time”. These two positions combined have cost Glendale taxpayers $350,000 per year for many years.

One doesn’t have to think long and hard as to why the public mistrusts these folks.

Bruce