Five Labor Agreements Approved

I am pleased to announce that five of the city's bargaining units have now approved the modification to employee compensation. Each and every group voted overwhelmingly to approve the modifications. The groups that have approved our proposal include:

Manteca Professional Firefighters, IAAF Local 1874
Manteca Police Employees Association (non-sworn employees)
Technical and Support Services Bargaining Unit, Carpenters Local #25
Mid-Managers, Sworn and Non-Sworn
Executive Management and City Manager

Each group has agreed to forgo their Cost of Living Adjustments for the next two years (2010 and 2011) and to begin paying a portion of their pension. Each group has additional forms of compensation that they are giving up as well. I'll be posting the details of each agreement shortly.

These agreements mean that these groups (and the City Manager) are going to be earning approximately 20 percent less in 2011 than was originally included in their contract. I can't tell you how much I appreciate the sacrifice that each employee is making to ensure that they we are able to preserve service levels to the community and preserve our co-workers jobs.

I'm hopeful that the Operating Engineers and Police Officers Association will come on board as well. The rest of our employee groups and our local citizens all have been battered by the recession and realize that compensation levels have to change in today's environment. I'm hoping that our last two bargaining units will realize this as well.

Items in the News

I realize that these are trying times for all of city staff. No one likes to lose income, but I guess I feel like I need to keep harping on what we have, and not what we don't have. A number of folks have asked me to try and put more positive news in the blog. I think the positive story is that even with the proposed reductions in salary, we are still in far better shape than the typical San Joaquin County resident.

For example, here is a link to a story in today's Stockton Record (click here) about the county's poverty rate, which has gone up markedly in the past year. Nearly one in four children in our county lives in a household with an income below the poverty line (22,000 per year). In another article (click here), UOP's Business Forecasting Center notes that domestic output in San Joaquin actually dropped last year. The article notes:

The Stockton metro area, essentially San Joaquin County, saw its constant dollar GDP fall 0.3 percent in 2008 to just under $16 billion, ranking it 264th in total economic growth.

And the area's long economic slide deepened this year, said Jeff Michael, director of the Business Forecasting Center at University of the Pacific.

"When you look at this number next year, in '08 to '09, Stockton ... will be more negative," he said Monday.

"What makes it a little bit painful for this area is we're coming off a couple of years of subpar growth in '06 and '07."

The article further reinforces why we shouldn't even considering borrowing funds to plug our budget deficit for this year. We are in the middle of a very deep recession further exacerbated by the fact that we are in the center of the mortgage meltdown. We rode the top of the crest during the housing bubble and we are now drowning in debt with the rest of the Central Valley.

The economic trends are certainly not pointing upward, and our hope that property tax and sales tax remain flat is best case and not near the worse case scenario. An article from yesterday discusses the current state of property tax collections in Calaveras County (click here). It describes the world of "negative supplementals" that we've been warning our employees about.

...Calaveras County since August has been sending out more in refunds than it is receiving in additional taxes for properties that get supplemental assessments midyear due to sales or new construction.

Supplemental assessments are in addition to regular property tax bills and are a way to either bill for the additional taxes or send a refund for the part of a year that a property is under new ownership or has newly completed construction. The supplemental is no longer necessary in subsequent years once a new base value is set for a property.

Acting Calaveras County Assessor Leslie Davis says that the negative revenue from supplemental assessments is an ominous sign that a significant drop in the county's property assessment roll and property tax revenue may be ahead.

While we've got a decent amount of new construction occurring in Manteca, we also have a lot of homes selling at less than their assessed value. This is why we've projected no increase in net property tax collections during the 2009-2010 budget year.

The Bulletin has a good article today (click here) as well about the need to be prudent. How can we possibly expect to borrow to plug our structural budget deficit. There is no way we can take on additional debt when all the economic forecasts clearly demonstrate that we won't have the money to pay back the funds in the future. I have no interest in behaving like the State of California and putting off the inevitable--and then paying a greater price for delaying the pain.

Public Perception

Our proposed salary reductions focus on two areas: COLAs (cost of living adjustments) and pension payments. When meeting with the Budget Advisory Committee early this year, these were the hot spots for the community. In a recessionary economy, most of the committee members found it unconscionable that we were raising our salaries at a time when revenues were taking double digits drops (percentage-wise) and our very generous pension plans were being paid for by the employer.

I've also been posting plenty of articles about the backlash that is spreading across the state regarding our pension benefits. While the hotbed for pension reform has been Orange and San Diego counties, these aren't the only locales seeing heated debate over our employee pensions. Here is an excerpt from an article (click here) out of Redding:

The rising costs and alleged abuses of California's public pension system sparked a lively debate Thursday at a Redding forum — with Redding City Manager Kurt Starman suggesting that major reforms may be achieved only through a statewide ballot initiative.

"If something needs to be done, it needs to be done on at a statewide level so we (cities and counties) can remain competitive" and attract qualified police, firefighters and other professionals, he said.

Such an initiative is in the offing, said Marcia Fritz, a certified public accountant and vice president of the California Foundation for Fiscal Responsibility. Her group advocates pushing back the age of full retirement to 57 for public safety workers and 65 for other employees covered by Calpers, the public employee retirement system. In Redding, police and firefighters can retire as early as age 50.

Pushing back retirement by five years would cut pension costs in half, she said. "People are living longer and should be working longer," she said.

Her group also recommends suspending cost-of-living increases for current retirees and making workers contribute more to their retirement fund. The city of Redding, for example, currently picks up employees' shares of pension costs.

The group mentioned above is just one of several groups gathering signatures for an anti-pension iniative for the 2010 election cycle. The momentum is building to go after our salaries and pension. All you need to do is check out the blogosphere.

While anonymous reader comments always need to be taken with a grain of salt, I think it is instructive when you see anti-labor comments in stories in the San Francisco Chronicle, which has one of the most pro-labor readerships of any paper in the state. For example, check out the comments in the following story regarding the Vallejo bankruptcy (click here). A couple of years ago, it would have been highly unlikely to see such a hostile tone towards public employees, but it is now the norm.

There is also a lot of research going into ways to get salaries back in alignment with city revenues. On June 10, I posted a San Mateo County grand jury report about employee salaries (click here). The report was in response to escalating employee compensation costs--which has put every city budget under stress. The report's recommendations were as follows:

-The escalating employee costs can and should be reversed so civic services and infrastructure improvements are not neglected.
-In addition to stop-gap measures, such as temporary wage freezes and furloughs, long- term solutions should be implemented.
-Labor union contracts for newly hired municipal employees should be introduced to reduce the cost to cities of both pension and post-retirement health care plans.\
-For current, as well as newly hired employees, salary increases, total days off, the ability to convert sick leave to cash, and vacation pay must be contained.
-The practice of narrowly basing salaries and compensation packages entirely on those of nearby cities should be reconsidered. Hiring practices should be expanded to include competition with the private sector.
-Where cost-efficiencies can be achieved, services should be contracted out to other cities or private sector firms.
-Cooperation between cities to reduce overlapping functions should be pursued.
-Political barriers to change exist because all those negotiating employee contracts--staff, unions and city council members--benefit when wage and compensation packages increase.
-Barriers to change should be neutralized by providing for increased public involvement and, possibly through ballot measures.

To read the entire report, click here.

The drums are beating on employee compensation. Most citizens are seeing their salaries cut, their pension contributions eliminated and their retirement funds shrinking. They aren't happy about public employee salaries and benefits heading in the opposite direction of economic reality.
The package proposed to staff is merely an attempt to stay ahead of the curve, and to continue to have a well-paid workforce that can provide the necessary services to the public. If we insist on increasing salaries which in turn reduces services to the public--we will be faced with ballot measures that will force dranconian cuts to our compensation.

Enterprise Funds also impacted by Recession

Employees have been asking me why all city funding sources are subject to budget cuts, when most of the discussion has centered around the status of the city's General Fund. This is an excellent question. In fact, I am just as worried (if not more so) about our enterprise and redevelopment funds.


As most of you know, our Solid Waste, Wastewater and Water budgets are wholly dependent on user fees and receive no support from the General Fund. The rates charged for these functions must cover all materials, supplies, labor, debt service, maintenance and capital upgrades. All of the revenue to pay for the operation comes from those who benefit from the operation. These revenues come in the form of user fees. As user fees, we don't put these charges on the tax rolls, these are paid by the owners or tenants of the properties that use the service.

Thus, just like any private sector company, we depend on the users to actually pay their bills each month--and the vast majority do. However, as our rates have increased and our economy has tanked, the number of unpaid bills has increased exponentially. While we work very hard to collect on our debts, the bankruptcy code allows many of our debtors to walk from their bill. As the economy continues to falter and bankruptcies increase, we expect our revenue collections to drop even further.

In addition, the downturn in the economy has created a reduction in the demand for many of our services. Developers are no longer demanding large trash bins and many other commercial users have cut back their consumption. Also, with the many foreclosures, fewer homes are actually needing water and trash service.

The bottom line is that our business enterprises are likely at more risk than the General Fund. In these tough times, we need to make sure that our operation is lean enough to endure major cuts in revenue while still having funds available to make capital improvements. Just like with our other revenue sources, it is very difficult to absorb increasing labor costs at a time when revenue is dropping.

In fact, with private sector compensation dropping, we have to make sure that our enterprise employees aren't costing more than the market can bear. Many of our citizens are already demanding that we look at the cost of contracting out services. If the gap between private and public sector pay continues to grow, it will be very difficult for us to justify rate increases if they are due to rising labor costs.

Highlights from "The Week in Review" (TWIR)

You can access the entire TWIR and previous versions of the TWIR by clicking on the link on the right side of this page.

Community Development
Building Safety Activities: The Building Safety Division conducted a total of 306 inspections during the week.

The division issued 31 building permits – 7 single-family dwellings, 5 commercial remodels, 1 fire sprinkler, 3 Miscellaneous Mechanical, 5 Miscellaneous Plumbing, 2 Patios, 1 photovoltaic, 1 residential addition, 2 residential remodels, 2 roofs, and 2 sign permits.

A total of 36 new project applications were submitted for plan check services, which included 14 single-family dwellings, 1 change to existing plans, 1 commercial canopy, 1 commercial coach, 1 commercial parking lot, 2 commercial remodels, 1 pool master, 2 patios, 1 residential addition, 1 residential garage, 1 residential remodel, 2 signs, 7 solars, and 1 Vapor Recovery System.

Public Works
Central Valley Salt Management: As the accumulation of salts in water supplies continues to negatively impact water quality and quantity throughout the State, a stakeholder-driven effort to develop a salinity management program for the Central Valley was recently created. With the support of the Central Valley Regional Water Quality Control Board, the Central Valley Salinity Alternatives for Long-Term Sustainability initiative, or CV-SALTS, was launched in January 2006. The goal of CV-SALTS is to craft a comprehensive, region-wide, salinity management plan that will allow the Central Valley Regional Water Quality Control Board to accurately and fairly regulate salinity in the Central Valley. Participation in and funding of CV-SALTS allows cities and agencies to influence the development of more cost-effective and reasonable water quality regulations. To this end, Public Works has included an item in the FY09-10 budget for Manteca to join the CV-SALTS initiative at a funding level of $25,000. Current contributors to the CV-SALTS initiative include:
California Association of Sanitation Agencies
California League of Food Processors
Central Valley Clean Water Agencies
City of Fresno
City of Stockton
City of Tracy
Discovery Bay CSD
Iron House Sanitary District
San Joaquin Valley Drainage Authority
The Wine Institute
Western United Dairymen

This funding request will be presented to Council as part of the comprehensive 2009-10 budget package.

Parks and Recreation
BMX Track: Staff continues to work with Anderson 209 to complete the improvements to the starting gate and hill. The forms for the starting gate have been set at a 22.5 percent angle. The approved plans were designed to meet ABA (American Bicycle Association) standards, which call for a minimum 25 percent angle. Staff is working with Anderson 209 and ABA representatives to determine if the existing 22.5 percent angle is acceptable. Anderson 209 has installed the 20 feet of electrical conduit, which will be located beneath the starting gate. The installation of the conduit has been inspected and approved by City inspection personnel.

Police Department
Motorcycle Competition Honors: Congratulations to the Traffic Team. This weekend the members competed in Vallejo, taking honors in the event. They took top team as well as individual and team trophies for Sgt. Obligacion and Officers Bright and Danipour. All five of our Traffic Officers have placed in the top 10 in each event in which they have competed. Here is their standing in the events this year:
Carson City Sheriff’s Department Extreme Motor Officer Training Challenge: June 26-27
Sgt. Obligacion – 1st Place Individual Event Harley Road King Division
1st Place Team Event Harley Open Division
Officer Bright – 2nd Place Individual Event Harley Road King Division
Oakland Police Department Motorcycle Competition: July 11
Sgt. Obligacion – 2nd Place Individual Event Harley Open Division
Officer Bright – 2nd Place Top Gun Event Open Division

1st Annual Larry Canfield Memorial Police Motor Training and Skills Challenge: August 22
Sgt. Obligacion – 1st Place Individual Event Harley Road King Division
Officer Bright – 3rd Place Individual Event Harley Road King Division

West Coast Harley Davidson Police Motorcycle Competition: Sept. 19
Sgt. Obligacion and Officer Bright – 1st Place Team Event Open Division
Sgt. Obligacion and Officer Danipour – 4th Place Team Event Open DivisionSgt. Obligacion – 2nd Place Individual Event Open Division
Officer Bright – 4th Place Individual Event Open Division

Fire
Significant Incidents:
● Multiple Vehicle Accidents:
- September 18 – Truck 24 responded to an accident on eastbound Highway 120, east of Main Street, to find three vehicles involved. The incident was declared to be non-injury; however, firefighters remained on scene to contain hazardous materials that were leaking from the damaged vehicles.
- September 18 – Engine Company 243 responded to a vehicle accident at Louise Avenue and Elm Street to find two vehicles involved. The parties involved declined medical assistance, and firefighters remained on scene until the roadway was cleared of obstructions.
- September 21 - Truck 24 and Engine Company 242 were dispatched to a vehicle accident on westbound Highway 120 near McKinley Avenue, to find a vehicle down a steep embankment. Firefighters had to use the Stokes basket and a rope rescue system to get the injured patient up the hill for transportation to a local hospital.
● Hazmat Incidents:
- September 21 – Truck 24 responded to a chemical spill on Reading Way, to find antifreeze leaking from a vehicle into the gutter and storm drain. The Streets Division was requested for containment and clean-up.
- September 22 – Two of the department’s hazmat specialists were requested to respond with the San Joaquin County Hazmat Team to assist French Camp Fire Department with a 55-gallon drum of an unknown substance on El Dorado Street. The assignment lasted approximately three hours before the situation was abated.

Fire Prevention: This week’s Fire Prevention activities included: Business Inspections-53, New Construction Inspections-10, Plan Checks-12, and Fire System Checks-7.

Salary Reductions

There seems to be a bit of confusion as to what sort of salary reductions are being made by each bargaining group. There also seems to continue to be confusion about my compensation as well. Whenever there is a reduction in employee pay, I will be the first to take a cut and I will take a cut in excess of our line employees.

Once all of the agreements are finalized, I will put the specific details of each bargaining groups salary cuts on the blog. However, in the interim, I will attempt to summarize the proposed overall impact in pay to each group.

2009:
Employees recevied 4 percent salary increase (COLA) given in labor agreements.
Employees salaries reduced by 3.8 percent via 80 hours of furloughs.
Police Officers received 2 percent salary increase in excess of COLA per their labor agreement.

2010 (proposed):
Employees give up 4 percent salary adjustments (COLA) granted in labor agreements.
Employees give up 6 percent of current salary. Some groups will be paying more PERS and/or giving up some other forms of compensation such as deferred compensation paid by City.

2011 (proposed):
Employees give up 4 percent salary adjustments (COLA) granted in labor agreements.

Thus, by 2011, most groups are earning approximately 18 percent less than they had anticipated earning in 2011. In contrast, the City's General Fund is generating about 40 percent less in revenue than we had anticipated in 2011. The City is also continuing to pay increased costs toward each employee's medical insurance and the City continues to pay ever increasing pension payments to CalPERS.

The Executive Management Group and the City Manager agreed to give up an additional one percent of compensation, thus reducing our pay by about 20 percent.

If there is any confusion on this matter, any employee is welcome at any time to stop by my office and discuss this or any issue with me in person. You can email me or post questions on the blog as well.

SacBee Series Highlights State Budget Dysfunction

The Sacramento dedicated a three part series this week to the state's dysfunctional budget.

Sunday's Article (click here) clearly the lays out the current situation:

"...It's been a mess for much of the past three decades because the combination of an out-of date tax system, reckless spending and fickle voters has made state government extremely vulnerable to the ebbs and flows of the economy..."

Monday's Article (click here) talks about the out of control spending by the legislature. As stated in the article:

..."The way Dave Doerr sees it, California's elected leaders ran for the wrong offices.
"They really ran to be Santa Claus, and made a mistake and filed for the Assembly and the Senate," said Doerr, the senior tax consultant for the California Taxpayers Association.
Doerr's reference is to a penchant of lawmakers and governors over the past three decades to spend whatever money they have on hand - and promise even more - then let succeeding budget drafters fend for themselves..."

Tuesday's Article (click here) talks about the many ideas currently being floated to try and fix the current disconnect between revenues and expenses.

The articles do a great job of explaining how we got here and how difficult it is going to be to solve the situation. In fact, it further reinforces local government's concerns that they are going to come after for more money before the fiscal year is even over.

League of Cities looks to protect local revenues

Here is a news release from the California League of Cities:

On September 18, the General Assembly of the League of California Cities overwhelmingly authorized its board of directors to evaluate and, if feasible, seek voter approval of a November 2010 ballot measure to provide broad constitutional protection of local revenues.

The ballot measure would constitutionally protect against future efforts to divert, borrow, or steal revenues that fund local government services. This measure would go beyond the protections of Prop. 1A and would include the following revenues: property tax, sales tax, local share of gas tax funds, gasoline sales tax funds, redevelopment property tax increment, UUT’s, TOT’s, and business license taxes.

City officials will be asked to devote personal time to gather signatures, raise private funds, and help organize a statewide grassroots coalition to secure this ballot measure. The promotion of ballot measures or participation in ballot measure advocacy activity cannot occur on city time or using city facilities or equipment.

Once again, the state has left us no other options, as they continue to decimate our budgets instead of fixing their own problems. While this won't solve all of our troubles, it should help reduce the ways in which the state can steal our funds. Hopefully, we can force them into a position where they will actually have to reduce state government instead of taking from us.

Highlights from "The Week in Review" (TWIR)

You can access the entire TWIR by clicking on the link on the right side of this page.

Fire
Reorganization: The Fire Department Reorganization became effective September 16, 2009. This move eliminated three Division Chief positions and named three Shift Commanders to oversee suppression activity. Those now serving in the position of Shift Commander are Randy May, Kyle Shipherd, and Bob Davis. This reorganization was part of the department’s cost savings plan to eliminate $1.7 million from the City’s General Fund.

Emergency Incidents: We had a total of 105 incidents this week which included 4 that were fire related: 1-Structure Fire, 2-Vehicle Fires, and 1-Grass Fire. Dollar loss for the week was estimated at $2,200. The remaining calls this week were: EMS-58, Vehicle Accidents-11, Service Calls-13, and Other Emergencies-19.

Public Works
Cost Savings at the WQCF: Over 18 million gallons of treated effluent water was reused on city farmland this week. This land is leased to a farmer who grows forage crops. Land application of the effluent provides significant savings to the city because this water does not require tertiary filtration or ultraviolet disinfection. This saves significant amounts of energy and costs to the City. In addition to this, staff have been working to reduce the cost of disposing of bio-solids or sludge.

Typically the City disposes of an average of 14-bins of centrifuge dried sludge to the landfill each week. Over the summer, staff has been experimenting with placing the centrifuge dried sludge into drying beds to further reduce the moisture and weight before shipping to the landfill. This "enhanced" on-site drying operation reduced the moisture content during this week sufficiently to reduce the off haul down to two sludge bins. While this does mean some additional handling of the sludge, this is more than offset in the reduced hauling and disposal costs. A substantial landfill cost savings will be realized due to the additional efforts employed to reduce moisture content from the centrifuge sludge.

Landscape Funding: Staff received word this week that SJCOG was successful in obtaining the funding for the landscape of the two 99/120 interchanges. This means that the City will be able to proceed with the irrigation project that was already bid, and has been awaiting award since July. City staff will then work with SJCOG and Caltrans to deliver the second project which will install all the landscaping at both interchanges.

Community Development
San Joaquin County Enterprise Zone: Community Development has received notification from the State that the expanded San Joaquin County Enterprise Zone (including the City of Manteca) has been approved. This approval is retroactive to June 22, 2008. We are still awaiting word on our application for the Targeted Employment Area designation.

B.R. Funsten: Major construction for the B.R. Funsten industrial warehouse/office expansion at South Main and Industrial Park Drive is underway. The project is on schedule, with a completion date of December 1.

More on the California Economy

Wednesday's news was filled with lots of stories on the latest California Economic Forecast. The SacBee (click here for link) notes that the recession will end this year, but according to the two major economic forecasts:

"...the cutbacks in state and local government, along with the continuing fallout from the mortgage meltdown, will make 2010 feel like another year of recession..."

The story goes on to note that at least 24,000 government jobs have been eliminated with many more to come.

The article in the San Francisco Chronicle (click here for link) focuses on the longer view, and notes that this recession could mark a fundamental change in consumer behavior. It points out:

"...Both forecasts characterized California as the epicenter of back-to-back consumption binges fueled by the dot-com boom and the housing bubble, and argued that now the state faces big adjustments as it recovers from ills that have long plagued the U.S. economy.

"Consumers have been on a spending binge ever since 1995," said Jon Haveman with Beacon Economics, as soaring 401(k)s and, later, inflated home prices made Americans feel so wealthy they stopped saving money.

"California is different from the rest of the United States in the magnitude of all this," said Jerry Nickelsburg with UCLA Anderson, as people here exemplified the bad American habit of borrowing to spend.

"Now the easy-money days are over, the inflated asset values are gone, the home equity boom is over and people are going to have to save more, which means less consumption and slower growth," Nickelsburg said..."

The article goes on to point out:
"...Ed Leamer, director of the UCLA Anderson Forecast, said consumers usually roar back from recessions with spending that lifts production and fuels hiring, but he thinks that is unlikely during this recovery because Americans have been living beyond their means for too long - borrowing too much and importing more than the country sells abroad.

"We need to turn our shopping malls into factories," Leamer said "Our economy over the next decade is going to have to build more of the stuff we buy."

Haveman said the painful adjustments now under way should eventually benefit California and the Bay Area, which lead in technology, biotechnology, clean energy and other cutting-edge industries..."

While this may be good news for our economy in the long run, it could create additional challenges for local governments (such as Manteca) that are heavily dependent on consumer spending to fuel our local budgets via sales tax.

Economic Outlook

Due to budget constraints, I was not able to attend the Annual International City Managers Conference this week. Luckily, the Ventura City Manager is there and was gracious enough to share one of the keynote addresses from one of the titans in the economic world, Dr. Alice Rivlin. I believe the theme of her speech is one to consider as we project our city budget fortunes into the future. Here's Rick Cole's post on her presentation:

"Positive, but disappointing growth for years to come"

Dr. Alice Rivlin was the last Director of Management and Budget to have balanced the Federal Budget, so her opinions come highly regarded. The former Vice Chair of the Federal Reserve spoke at this morning's general session of the ICMA conference here in Montreal.

She traced, with the benefits of hindsight, the now familiar sources of the global economic reckoning from outright greed and corruption to the larger problem of "overborrowing and overspending." On that foundation, she discounted the chances of a second dip ("possible, but not very likely") and inflation ("inflation happens when demand is high and the labor market is tight -- we should be so lucky.") But she ruefully acknowledged that "if I'm right, you are going to have continuing tough times" because the prospects are for "positive, but disappointing growth for several years to come."

"It's not going to be good for shopping centers, commercial property and new housing," she predicted, especially in regions (and at the edge of regions) where too much suburban sprawl occurred in the last boom. Consumers are simply tapped out and will need to pay down debt before they can resume spending.

To Rivlin, the greatest threats ahead are "looming Federal budget deficits" that are "the product of making too generous promises combined with uncontrolled per capita costs on medical care." This mismatch between our appetite and our ability to pay for it forces us to continue to borrow from other countries, particularly China and Japan. "We can't go on doing that," she noted dryly. "We're going to have to cut entitlement spending and raise taxes." Both are politically difficult, but necessary for the two parties to compromise on.

Turning attention to local government, she joked, "If you wanted an easy job, you wouldn't have gone into this line of work." Because local government revenues will recover even more slowly than the sluggish economy, there will continue to be a clash between citizen expectations and willingness to pay. The only bright side of this squeeze will be that it will be easier to win political backing for difficult, but overdue, efficiencies. There will simply be "no choice" about making even painful changes.

That certainly resonated with our challenges in Ventura. Having cut $11 million from this year's budget, we will either have to live with reduced services or pay more for years to come. The "recovery" predicted for the end of the year simply won't come strongly or quickly enough. "Living within your means" is not easy. But the alternative of "overborrowing" to finance "overspending" has been spectacularly discredited at both the Federal and State levels. We must and will take a different, more sustainable, route.

Locally, the University of Pacific released their latest economic forecast for the central valley. They forecast an end to the recession late this year, and believe unemployment rates will begin to drop off by the end of next year. Read more about the forecast here.

Comparison Cities

I've been spending a lot of my nights and weekends reviewing the budgets of other area cities. What I found most interesting was the huge disparities in general fund income among cities, but the uniformity of salaries among cities. I also added in the 2005 Uniform Crime Rates to give you an idea of this variance among the cities as well.

In the chart below, the eight cities listed directly below Manteca are those which have been used in the past for salary surveys. I also listed some additional cities which are similar to Manteca in size and budget--which should probably be considered in future salary surveys as well.



Thus, you can see that ability to pay and other factors such as crime rates have had little or no impact on public safety salaries--or many other city salaries as well. In fact, the two lowest cities on the chart (Turlock and Manteca) offer some of the best pay packages for miscellaneous employees. You also have to question why cities with so little in common with Manteca were used for salary surveys? Tight labor markets--particularly for public safety workers have a lot to do with it.

It was the perfect storm for public safety workers over the past decade. Increased retirement packages created a wave of retirements in public safety at a time when there was a dearth of workers entering the job market. In addition, psychological exams and other pre-requisites were further shrinking the pool of potential applicants. Finally, there was a growing public sentiment to increase the ratio of officers in each community--cities such as Manteca and Stockton were not able to raise funds for parks maintenance but were able to pass tax measures for public safety--mostly due to the political skills of our fire fighters. On top of all this was a boom in jobs which led to an overall increase in wages in all job types.

The result was that cities with paltry revenues were required to pay on an equal par to much wealthier cities--and these cities were then included in the salary study of every poorer city. This put a tremendous strain on the budgets of have-not cities such as Manteca, but the real estate bubble created a short term windfall in revenue.

Unfortunately, the economic bubble has burst and cities such as Manteca and Turlock have to find a way to keep up service levels without going deeper into debt. In the short run, both staffing reductions and salary concessions are necessary to balance the budget. In the long run, we'll likely get bailed out by both economics and demographics. Economically, both high and low revenue cities are seeing major drops in their income. Even the wealthiest cities are reducing their workforces. This will reduce the overall demand for public safety workers. Demographically, there are now far more people entering the workforce than a decade ago as all the kids of the baby boomers are reaching adulthood.

We are now looking at a complete reversal in the supply-demand balance in the job market. Not only do we have an ever increasing unemployment rate, but we have a huge wave of folks entering the job market. Under these conditions, wages always drop in real terms and labor agreements become better connected to the economic conditions of the employer.

Obviously, these trends take time to ripple through the workforce--particularly through government. However, given the tenuous budget situation of every city in the state, it is likely that economic adjustments will happen a lot faster than in past recessions.

City Council Headliners

Consent Calendar items of interest on Tuesday night's Council agenda:
-Adopt resolution granting another designated period for two years additional service credit for Miscellaneous and Safety employees through CalPERS.
-Approve a modified City Council meeting schedule for December 2009 and January 2010.

Non-Consent Calendar items of interest:
-Receive/file a report on the proposed budget and organizational update for the Public Works Department.
-Consider approving an option agreement with San Joaquin County for the purchase of property for the construction of a future South County Administraton Complex.
-Receive a report and consider SSJID's request to support the District's plan to provide retail electric distribution service.

A copy of the full agenda packet is available at the following link on the City's website:
http://www.ci.manteca.ca.us/CityClerk/agendas

Traffic Level of Service (LOS)

LOS is the three letter word that has created untold costs for just about every real estate project in the state. Mitigating perceived traffic congestion (often for just 15-30 minutes per day) has forced many projects to build huge intersections, widen huge swaths of roads, and forced our cities to be even more car-centric -- which was not an easy task. During the real estate boom, developers had enough play in their budgets to pay for these often excessive road improvements--but those days are gone -- possibly forever.

At this week's California Planning Conference, they presented some examples of cities that have begun to rebel against the never ending race to pave over every inch of our communities. Here in Manteca, I've been pushing back against LOS as well. We are currently updating our traffic standards to reflect economic realities (i.e. we can't afford to pave everything over) and my desire to see neighborhoods where the pedestrian can co-exist with the pavement. At the county level, the Lodi City Manager and I have convinced COG to convene a series of meetings to discuss the future role of LOS in all of our communities. Given the limited resources we have countywide for roads in the future, we need to make sure that every community in the county is taking a cost-effective approach towards managing future traffic issues.

While I wasn't able to attend this conference, here's an excellent blog post from Urban Planning author (and Ventura City Councilman) Bill Fulton about the presentation at this week's conference:

Cal APA Conference: Life After LOS

It's always been a mystery to me why traffic modeling -- and traffic mitigation -- is such a big part of analysis done under the California Environmental Quality Act. After all, traffic in and of itself is not an environmental impact, any more than building a building is an environmental impact. It may cause certain environmental impacts -- air pollution, for example, depending on the fuels used -- but there's nothing inherently damaging environmentally about traffic Nevertheless, CEQA traffic analysis has always focused on identifying -- and alleviating -- traffic congestion.

After careful environmental review, cities and counties have concluded -- many thousands of times -- that the solution to the environmental problem created by traffic is build wider roads in order to accommodate more traffic.

Those days may be waning, however. As panelists at the California APA conference in Squaw Valley pointed out today, new policies in many jurisidictions are bringing the "Level of Service" approach to both CEQA analysis and General Plans to an end. Even within the confines of CEQA, these jurisdictions are finding ways to place other priorities ahead of -- or at least alongside of -- alleviation of traffic congestion. "In the future, we're going to have fewer public resources for transportation," said Ron Milan of Fehr & Peers, "And we're going to have more objectives for our transportation system."

In particular, the panelists said, alleviating traffic congestion doesn't always jibe with the goal of reducing greenhouse gas emissions -- which is suddenly a major goal of state policy and an important consideration in CEQA. And as Paul Shigley reported in these pages not long ago, proposed changes to the CEQA Guidelines may discourage the use of the LOS approach.
The APA panel presented cutting-edge techniques from both San Jose and San Francisco. Though the approaches are different, they show how local governments can end-run the LOS approach.

In San Francisco, the city came to the conclusion that using LOS was in conflict with its "Transit First" strategy and simply didn't measure the most important environmental impacts of driving -- which, in San Francisco's case, is particulates. "WE have to reallocate our limited right of way to other things," said Rachel Hiatt of the San Francisco County Transportation Agency. "We will degrade auto LOS in the short term as we implement our 'Transit First' policy."

In San Jose, the city took a different approach. Planners identified three job centers where transit is likely to be the primary transportation investment in the future, including Downtown, North San Jose, and Edenvale. Downtown was exempted from the LOS standard. In North San Jose and Edenvale, a master environmental impact report was completed that contained an override option for not hitting the LOS standard at 23 "protected intersections".

The rest of the city still uses an LOS standard, partly in deference to suburban-style neighborhoods and surrounding communities. "The City Council amended the General Plan to be more flexible in places where we wanted to do smart growth," said planner Hans Larsen.
Milam from Fehr & Peers also showed how an alternative approach can be used on specific project -- thought probably not in all locations.

As an example, he pointed to a intersection analysis his firm did which concluded, initially, that the intersection in question had to be greatly widened. Upon further examination, however, the firm and the city concluded that the problem was not cars but other -- that the slow-downs were created by the need to accommodate the large amount of pedestrian and bicycle traffic at the intersection. So a ped/bike overpass preserved the intersection in its current configuration.

Not everybody can be Davis or San Francisco or maybe even San Jose. But everybody can think about what they're really trying to achieve with their traffic standards -- and ditch the LOS if it's appropriate.

House Sizes Shrinking

I found this post on a USC professor's real estate blog interesting. It talks about the disconnect between median income and housing size. As I look at the homes we are building out here in the central valley, I'm very concerned that we are over consuming housing--which in the long run diverts dollars from other parts of our economy. I'm worried that our retail sales will suffer in the long run as many of our homeowners will be forced to put a disproportionate amount of their income into maintaining homes they can't really afford in the long run--particularly after the kids leave home.

In addition, large homes on large lots typically means more miles of roads, water lines, sewer lines and storm drains to maintain. At an time when we seem to be getting less income per household instead of more, this is a disturbing trend. We need to look at what size home and housing subdivision is sustainable for both the city and the residents. In any case, here is the post:


One thing that has led me to believe that the housing market in Southern California is largely at bottom is the fact that many houses are selling at less than replacement cost. While such a discrepancy can exist for a long time in places with declining population, replacement cost is a pretty sound fundamental for determining the minimum sustainable house price in areas with growth.

The report on median incomes released yesterday, though, suggests to me a flaw with my line of reasoning. While the average new house has grown about 20 percent in size over the past ten years, median household incomes have actually fallen a bit. If house size is a proxy for house quality (and we have good statistical evidence to think that it is), then house quality has outstripped the ability of people to pay for it.

When comparing market prices to replacement cost, we really need to think about depreciated replacement cost. Depreciation comes in three flavors: physical, functional and economic. Physical depreciation happens because things wear out as they age--it is what Congress is thinking of when it allows depreciation deductions for investment property and plant and equipment.

Functional depreciation happens when a component of a capital asset does not perform its function well by current standards. Think of a furnace that uses lots of energy, and could be replaced by something more efficient. It is possible that it could work as a furnace for years, but it still would be best replaced by something more efficient.

Finally, there is economic depreciation, which happens when the demand for something (like Detroit real estate) disappears. It is possible that large houses have incurred economic depreciation because people lack sufficient income to afford them. If this is true, values can fall below original construction cost and stay there for some time.

Such considerations do not, of course, apply to reasonably well located, modest homes--I continue to believe that 1500 square foot houses in the San Fernando Valley and the central part of the San Gabriel Valley are reasonably priced now. But the market for larger houses may be troubled for some time yet to come.One other implication: builders should construct smaller houses in the years to come. This vindicates a prediction I once made. Unfortunately, I made it in 1990.

Highlights from "The Week in Review" (TWIR)

You can access the entire TWIR by clicking on the link on the right side of this page.

Fire Department:
Long Term Mutual Aid: Fire personnel on long-term mutual aid to the Station Fire in Los Angeles returned to the City on the evening of September 9. Their Strike Team, which consisted of various agencies from San Joaquin County, was deployed for a total of 12 days to battle the wildfires that have devastated the Los Angeles area.

Emergency Incidents: We had a total of 95 incidents this week, which included 7 that were fire related: 1-Structure Fire, 5-Vehicle Fires and 1-Dumpster Fire. Dollar loss for the week was estimated at $14,800. The remaining calls this week were: EMS-46, Vehicle Accidents-7, Service Calls-19, and Other Emergencies-16.

Public Works:

WQCF Phase 3 Project – Schedule C: Construction has begun on the final stage of this upgrade and expansion project. The Schedule C project involves constructing a new mechanical dewatering building, installing a new centrifuge dewatering system, relocating the existing centrifuge into the new mechanical dewatering building, and constructing a sludge blending tank, locker room, and maintenance building. The contractor completed potholing (locating) the existing underground utilities, and has installed approximately 25% of the new underground pipeline utilities. This is the final phase of the overall Phase 3 expansion project.

Airport Way Water Main Project: Construction of the Airport Way Water Main between Yosemite Avenue and Crom Street has been completed. This project involved installing 2,600 feet of 12-inch diameter pipe, five fire hydrants and 21 water service stubs. By filling a gap in the existing water distribution system, this project increased system reliability and service pressures throughout the area.

WQCF Perimeter Fence Project: Installation of 6,000 feet of perimeter fence around the WQCF property has been completed. The automatic gates and swing gates are scheduled to be completed by mid-October.

Austin Road Water Main Project: Approximately 12,500 feet of 24-inch, 5,400 feet of 12-inch, and 1,200 feet of 16-inch diameter pipe has been delivered on site at the corner of Louise Avenue and Austin Road.

Lincoln Avenue Water Main Project: Approximately 3,800 feet of 12-inch diameter pipe has been installed in Lincoln Avenue, Alameda Street and Dawn Drive. In addition, the contractor has connected approximately 50% of the existing 69 water service connections to this new 12-inch diameter pipe.

Community Development:
B.R. Funsten: All grading and foundation work for the B.R. Funsten industrial warehouse/office expansion project has been completed, and work has begun on the framing of the warehouse itself. The project, located at South Main and Industrial Park Drive, is on schedule, with a project completion date of December 1.

Parks and Recreation:
Tidewater Bikeway/Moffat Boulevard Tree Irrigation Installation Project: The contractor for this project started work this week. Parks staff has kept in close communication with the contractor, which allowed for the quick start on the project. The project will be completed in time for the volunteer tree planting event scheduled for October 11 – at which time 250 new trees will be planted along the bikeway.

Layoff Notices

Today, 248 city of Manteca employees will be receiving a notice that they may be laid off from their job in 30 days. While only 40-50 employees could potentially lose their jobs, our employment rules require me to send a notice to every employee who could possibly lose their job. This was an incredibly difficult decision, by far the toughest thing I've had to do in my 30 years in local government. However, the current economic malaise left me no other options.

The good news is that each employee bargaining unit has the opportunity to retain their employees. The actual decision is not up to me, it is up to each bargaining unit to decide if losing a small percentage of their take home pay is more important than their co-workers job. As I was quoted as saying in the Sun Post, we don't have a staffing problem, we have a salary problem. I'm proud of the fact that our employees efficiently operate this city with far fewer employees than many similar cities. I don't want to lose any of our employees because it is going to create a real burden on those who are left. Our constituents expect the same level of service whether we have 375 employees or 325 employees.--and I'm going to demand that our managers continue to provide equivalent service with less staff.

We have a salary problem partly because we have a challenging revenue problem--and partly because our salaries have begun to closely mirror bay area wages instead of valley wages. Trying to pay bay area wages with valley revenues is not an economic model that can be sustained--we generate about one-third as much revenue per capita when compared to our east bay brethren. Even when comparing us to valley cities, we don't have a very diverse revenue base.

Many cities have utilities taxes and/or electric utilities, parks maintained by landscape maintenance districts and a diverse economic base with lots of commercial offices, retail and industrial space. While we are beginning to diversify our economic base, we've got a long way to go. Our city is heavily dependent on property tax and sales tax. I've chronicled in this blog many times the troubling trends for these two revenue sources--and these trends aren't going to change any time soon!

Let's not kid ourselves, the economic fortunes of the northern San Joaquin Valley are not going to change in the near future. We are still seeing massive numbers of foreclosures--San Joaquin County is back to being the number one foreclosure market in the country (click here for latest data). Our unemployment rate is heading towards an unthinkable 20 percent with the closing of the NUUMI plant in Fremont. With jobs continuing to disappear, the economy can only continue to decline. As the economy continues to decline, property values will continue to drop and retail sales will continue to suffer. The only reason it hasn't been worse is due to the federal stimulus package. Without a second stimulus package, many government and private sector jobs will go away.

In the face of the worst economic calamity since the great depression, I'm mystified that many of our employees can't accept the fact that compensation has to be reduced. I would challenge any of our employees to find any private company in San Joaquin County that hasn't reduced total compensation to their employees. And if you can find one, I'm sure there are 999 others that have reduced compensation--and I'm sure they've reduced it far more than what I'm requesting of our employees.

As I noted in Tuesday's blog, our workers have been well compensated over the past 15 years--receiving wage increases at nearly twice the rate of the average resident--and have received an enhanced retirement to boot. During better economic times, our employees were able to share in our increased economic strength. In tough times, our employees need to share in the pain and suffering as well. Frankly, we don't have any choice. Unlike the federal government, we can't print our own money. At the end of the day, we have to balance the budget.

Labor

Over the past 15 years, median family income in San Joaquin County has increased a total of 58%, which averages out to about a 3% increase each year. As you can see from the chart at the bottom of the blog, there were very few years where income jumped more than 4%.

Conversely, most Manteca city government salaries have increased over 100 percent during the same time period. To perform the salary analysis, staff reviewed the salary history of employees who have been in the exact same job title since 12/01/1994. It then narrowed the list down to employees who were at the top of the salary range, and therefore only received increases via cost of living adjustments or salary surveys.

In addition, while salaries jumped over 100 percent on average, post-retirement income has increased by nearly 180 percent for miscellaneous employees and well over 200 percent for public safety employees. That is due to the enhanced retirement plans approved earlier this decade. While employees gave up a small cost of living adjustment to receive the enhanced retirement, the City's cost to fund enhanced retirement plans has increased 300 to 400 percent since that time. In the past, the city paid from 0% to 10% on top of each employees salary into a retirement fund. The city now pays around 16% for non-safety and 26% for safety employees.

Thus, public employee salaries have increased far more quickly than the community as a whole, and post-retirement benefits (which are often non-existent outside of government) have grown exponentially as has the cost to maintain these enhanced retirement plans.

In our current environment of declining revenues, this is simply unsustainable. The salary concessions we are asking for are nominal compared to the generous labor agreements that our employees have received over the past 15 years.

Here are some examples from each labor bargaining unit which demonstrate how public sector benefits have grown since 1994:

White Collar Miscellaneous Employees:
Income growth over past 15 years: 100.91%
Increase in post-retirement income: 171.23%

Blue Collar Employees:
Income growth over past 15 years: 78.5%
Increase in post-retirement income: 140.98%

Middle Management:
Income growth over past 15 years: 109.21%
Increase in post-retirement income: 182.44%

Civilian Police Staff:
Income growth over past 15 years: 93.78%
Increase in post-retirement income: 161.61%

Police Officer:
Income growth over past 15 years: 106.01%
Increase in post-retirement income: 209.01%

Fire Fighter:
Income growth over past 15 years: 114.71%
Increase in post-retirement income: 222.06%


HUD Median Family Income
San Joaquin County

Median % Increase
1994 $40,200
1995 $40,200 0.0%
1996 $41,500 3.2%
1997 $42,600 2.7%
1998 $43,700 2.6%
1999 $44,300 1.4%
2000 $45,400 2.5%
2001 $46,900 3.3%
2002 $47,500 1.3%
2003 $50,600 6.5%
2004 $55,100 8.9%
2005 $55,300 0.4%
2006 $57,100 3.3%
2007 $60,300 5.6%
2008 $61,300 1.7%
2009 $63,600 3.8%

Increase 1994-present: 58%
Annual Increase: 3.1%
Increase 2001-present: 36%
Annual Increase: 3.85%
Increase 2005-present: 15%
Annual Increase: 2.93%

Highlights from "The Week in Review"

To read the entire "The Week in Review", click on the link on the right side of this page.

Fire:
Long-Term Mutual Aid: The City once again has an Engine Company on a long-term mutual aid assignment – this time to the Station Fire in Los Angeles. The company was part of a Multiple-Agency Strike Team from San Joaquin County that left for Southern California on Saturday afternoon, August 29. Division Chief Randy May was assigned as the Strike Team Leader, along with Captain Steve Santos, Engineer Mike Hohn, Firefighter Armando Blanco and Firefighter Brad Schemper assigned to the Engine Company. Their initial assignment was to provide structure protection for homes in the path of the wildfire. They are expected to remain on this assignment throughout the weekend.

Public Works:
Development Engineering and Construction Inspection: This past week, the Engineering staff issued seven encroachment permits and provided oversight on the following current projects:

Lincoln Avenue Water Main Replacement Project – Ongoing inspection of new water mains along Alameda Street, east of Lincoln Avenue.

Airport Road Water Main Project – Final inspection.

Union Road Widening Project – Met with Landscape Contractor to direct the removal of weeds. Staff is preparing a final punch list for project completion.

BMX Park – Inspection of conduit installation and compaction testing.

Terra Bella Subdivision – Investigation of irrigation damage to drainage basin. Results reported to the developer’s Superintendent and the adjacent property owner.

M2 Surface Water Blending Pipeline Project – Preparing final punch list for project completion.

CVS Pharmacy – Completed final inspection and signed off project as complete.

Austin Road Water main project – Approximately 20,000 feet of water main pipe delivered to site. The contractor, Knife River, is prepared to begin as soon as County encroachment permit is issued.

Well 20 Filter Project – Submittals have been made to the Project Construction Manager.

Tidewater Bike Path Tree and Irrigation Project – Encroachment permit issued and construction started in installation of irrigation water line along the south side of the Tidewater Bike Path.

Union Ranch Unit 4A – Improvements complete.

Storm Water Pollution Prevention Plan (SWPPP) Monthly Inspections – Staff completed California Regional Water Quality Control Board mandated monthly inspections of 24 ongoing construction projects within Manteca.

Parks and Recreation:
Partnerships with Local Sport Non-profits:
Staff is working with The Stockton Monarcas Futbol Club to accommodate a tournament on September 26 and 27. The tournament could potentially bring in more than 100 teams into the Manteca community.

Parks and Recreation staff met with Manteca Little League and Manteca Youth Softball Association to review their 2009-2010 Facility Use Agreements.

Northern California Senior Softball Tournament will be held at Northgate Complex on September 26 and 27.

Future Starts 2000’s held a Manteca USTA-sanctioned NTRP Tournament August 21-23 at the Union Road tennis courts. The tournament brought in almost $200 to the Parks and Recreation Department. Future Stars 2000’s next tournament is scheduled for September 19-20.

Tough Budget Times mean Tough Decisions (Part 2)

Since not all of you follow the Police Chief's blog, I thought it would be appropriate to pass on the his latest post regarding our current labor situation:

Wednesday, September 2, 2009

At last night's City Council Meeting there was a closed personnel session regarding the labor issues including the possible layoffs. While I cannot share the discussions that took place during the meeting I can say that the closed session has been continued to this Friday afternoon for further discussion. No decisions regarding layoff notices will be made until after that meeting. Prior to the closed session, Sgt. Chris Mraz spoke very eloquently to the Council as a private citizen regarding the importance of public safety in the community. That took a lot of courage and I appreciate Sgt. Mraz for having the courage of his convictions.

There was some concern yesterday regarding the timing of my speaking to the members of the MPEA who might receive layoff notices. When I first got the job as your Chief I promised myself that I would not be one of those people who gives someone bad news by dropping a memo in their box at 4:55 on a Friday as I was heading for the parking lot. I feel that every person here deserves the respect of looking them in the eye and giving them to opportunity to ask questions about how the situation affects them. The first time a person hears about the possibility of getting something as serious as a layoff notice should not be when they see it in their mail box. The decision was made on Monday to issue layoff notices to MPEA as well as MPOA members on Wednesday morning after the Council meeting. That afternoon I began to speak to the different work groups in the MPEA to tell them that it was likely that many of them would receive the notices. This did not mean that layoffs were inevitable or that their positions would be the ones that were cut if that it came to that. I answered their questions if they had any. The timing was unfortunate that it was prior to your association meeting but I had less than two days to speak to everyone. This was not done to try to influence anyone but to show some respect to those who would be affected. There is no question that I would rather see both the associations reach an agreement with the City because I loathe the thought of losing any of our people. However, I believe that all you are intelligent and honorable people and will vote as your conscience and circumstances guide you.

These are trying times. We have never experienced anything like this as a Department. I know that everyone feels strongly about the issues we now face and not everyone agrees on what course to take. Now is not the time to be angry with each other. You may have to agree to disagree on what should be done. Another person's circumstances may not be the same as yours and will drive their decisions. We need to respect each other. We will get through this.

Tough Budget Times mean tough decisions

Staff will be meeting with the City Council in closed session tonight to discuss the impact of labor costs on our current financial situation. I'll try to give you a good overview in the next couple of posts where we stand financially:

2008-2009 Budget
Furloughs, early retirements and vacancies reduced expenditures by approximately $3.7 million.
Revenues were $700,000 below original estimates
Overall, about $3 million savings over original budget
Previous year budget savings of about $2 million

2009-2010 Budget
Year to Year Revenue decrease of about $2.5 million
Some operations have already been shifted out of General Fund
Beginning Budget Gap of $7 million
Proposing to carry over previous year savings ($3 million) to close portion of gap
Leaves about $4 million gap to reduce (15 percent of General Fund)

The good news is that what was a $14 million gap is now down to $4 million. The bad news is that we've already done just about everything we possibly can to close that gap. The only remaining alternatives are to reduce our service levels by reducing our staffing level, or seeing if our employees are willing to give back some of the cash gained from labor contracts that were negotiated in a very different economic climate.

I realize that it is hard to accept the fact that reductions in pay are needed to keep our jobs intact. However, for any of you that have family working in the private sector, this shouldn't be surprising at all. Huge cuts in pay and benefits are the norm right now in the private sector. We've been very fortunate in the public sector.