Viewpoint - June 15, 2011

Guest opinion: Mayor, councilman make case for Atherton layoffs

by Jim Dobbie and Jerry Carlson

On June 8 the Almanac published an article by two former Atherton mayors and an editorial regarding the proposed layoffs of some town employees.

The town has been discussing the matter of our current cost structure for delivering services to our residents for many months and has determined it is not financially stable. The matter of outsourcing park maintenance was first proposed more than one and a half years ago.

The council tasked Interim City Manager John Danielson to come up with a financial plan beginning with our fiscal year 2011-2012 budget in line with our revenues. Continuing the trend of dipping into our general fund reserves cannot be sustained and the prospect of an $850,000 gap between revenues and operating costs is unacceptable. We believe if the above authors (the former mayors) had taken the time to do their homework with John Danielson, their perspective of the situation we are facing would have been more accurate.

Employee compensation costs amount to approximately 80 per cent of the town's budget. The projection in cost increases from current pension and health care plan costs for retired (lifetime benefits) are projected to grow and become an even larger portion of the budget in the future.

The public should be aware that the investment assumption being made by CalPERS, the public employee pension fund, is betting on a 7.75 percent average return on their investments, which we believe is far higher than will be realized. What this will mean when CalPERS makes a realistic adjustment is that the amount assessed to local governments will increase significantly and will have to be paid out of town reserves unless something changes.

Here are some examples of our employee total annual compensation, including retiree medical costs:

Office specialist, $117,199; public works maintenance worker, $114,320; building inspector/plan checker, $152,977; and park events manager, $136,437. This compensation is far more than the private sector would pay.

Let's address the claim about the loss of institutional knowledge. We think that claim is overblown. The contract employees that we have today in the Building Department and the Public Works Department have received numerous compliments from residents impressed with their professionalism and knowledge.

In the past our residents have generously voted for a parcel tax, mainly to support the police and fund capital improvements. To ask our residents to support another parcel tax to keep what many residents believe are overcompensated employees would be irresponsible and unlikely to pass.

We have a structural financial problem that has to be addressed. Our short-term deficit for this year is over $800,000 but that is not taking into account other potential liabilities. We could have up to a $600,000 payment to two trash companies. We have pending lawsuits, which, depending on the courts, could add much more.

Recent government accounting changes mandating that local governments recognize their long-term liabilities for retiree medical costs has added emphasis to the urgency to address our compensation issue. In the past, only the cash being paid out in the current year for retiree costs was included in the budget and the growing future liability had been ignored. But it is a real obligation that the local agency cannot ignore.

Recent articles about Vallejo and other cities demonstrate that many local governments are technically bankrupt or close to it. By taking actions now, we can change the course and manage our town in a responsible fiscal manner, which is our fiduciary responsibility as council members.

We also need to be honest about the town's budget beyond employee compensation. If we designate virtually all of the town's money to pay employee salaries and retirement, where does the money come from for street repairs, fuel, maintenance tasks, and so on?

We have no information technology, human resources or risk management departments. The City Hall buildings, including the police department, have damaged roofs that leak in the winter and our electrical wiring and phone systems need complete renovation.

Of course layoffs are a terribly sad and heart-wrenching situation but sometimes they are part of doing business. The town has looked at our finances from every angle, weighed the risks and rewards, and found few alternatives.

We cannot allow ourselves to fall into the same trap as other agencies. Stockton intends to lay off 100 employees and Costa Mesa has reduced employees by 50 percent. Bankruptcy is a real possibility for Antioch and San Diego. We must be better stewards of our town than to allow long-term financial instability.

We must address cash flow. We have been depleting our reserves at an alarming rate. Our situation is difficult but not impossible if we take a solid financial stance and plan for long-term financial stability.

The "bottom line" of the plan that John Danielson has laid out for us is to achieve a much more efficient and cost-effective town government, where residents believe they are receiving fair value for the quantity and level of town services that they pay for.

Jim Dobbie is mayor of Atherton and Jerry Carlson is a city council member.


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