An Unofficial Look at Santa Clara's Budget Over the Years

Santa Clara's 2011-2012 Capital Improvement Budget is Cautious

2011-05-25T15:03:00.000-07:00

On May 17, the Santa Clara unveiled a cautious capital improvement budget (CIP) for the coming fiscal year. Capital improvements are the infrastructure of the city, as opposed to the ongoing operations of the city. This year the City proposes to spend $16 million less on capital projects than the 2010-2011 fiscal year.

The City currently has $1.2 million in capital projects reserves, $3.8 million less than the targeted $5 million, City Finance Director Gary Ameling told the City Council at the May 17 meeting. However, the City has freed $1.7 million in the CIP budget from closed and reduced projects, Ameling reported.

In addition, many CIP projects will increase Santa Clara services revenues. For example, the current 40 percent expansion of the City's recycled water system – which is almost finished – will bring the 10 new customers that, alone, will increase Santa Clara's recycled water sales by 50 percent.

Of $69 million that the City will spend on capital improvements next year, the 3 top funding sources are charges for services, developer fees, and municipal bond sales. By comparison, last year Santa Clara's top funding sources were charges for services, the ARRA federal economic stimulus program, and RDA bond sales.

Click on the charts below to expand the detail.

Here's how Santa Clara will be investing in capital projects in the coming year:

Here's where that money will come from:

Here's how the 2011-12 capital project budget stacks up against last year's:

Got questions about the Santa Clara budget? Visit the city budget webpage. Not only will you find current and historical budgets and financial reports, the webpage also offers a "City Budget 101" booklet that can be viewed as an online book or downloaded.

The Cuts That Keep on Giving: How Municipal Budget Cuts Add Up to Higher Costs

2010-10-19T07:35:00.000-07:00

As they say, you don't get something for nothing. That remains true even when the subject is cutting government costs. Cutting costs by cutting public services often adds up to higher long-term public costs as well as "hidden" taxes on residents in the form of higher cost-of-living. Because the business of municipal government is public services, city budget cuts almost invariably come down to cuts in services.

One example is New York City during its 1975 financial crisis. A 2006 study in the American Journal of Public Health (AJPH) found that the budget policies and cuts designed to address the city's financial woes crisis contributed to subsequent tuberculosis and HIV epidemics, as well as higher homicide rates. The city ultimately spent over $50 billion to control these synergistic epidemics, estimate the study's authors.

And the savings from New York's budget reductions? About $10 billion.

In other words, reduced services, deteriorating living conditions, and the dismantling of public safety, health and social service infrastructure cost New York $40 billion in additional expenditures over the next two decades.

With Santa Clara currently facing a future of systemic budget deficits and increasing pension and salary costs, city residents can almost certainly expect to see cuts in the city's core services in coming years.

Despite wishful thinking about cutting "waste," in reality municipal cost-cutting equals reduced services, as well as increases in deferred maintenance and capital costs, according to former Santa Clara Director of Street and Automotive Services, Rick Mauck. "It's a case of 'pay me now or pay me later.'

"Reduced public works maintenance results in 'deferred maintenance costs,'" he explains. "This increases indirect costs to the public, and incurs greater future costs to the entire publicly financed system."

Mauck, who was with the Santa Clara Department of Public Works for nearly 30 years, explains in detail how these increased costs and liabilities that are created.

When street maintenance is cut, potholes increase, road surfaces get rougher, and street markings get worn. This, in turn, increases vehicle wear and tear, as well as the number of traffic accidents – all of which drivers and vehicle owners pay for in the forms of higher repair and insurance costs. Poorly maintained sidewalks create tripping hazards and increase the City's liability exposure and insurance costs.

"The deferred costs to repair these roadways later always comes at a higher cost," Mauck continues, "because timely on-going maintenance extends roadway life and costs much less than more significant roadway rebuilding and repair."

Deferring economically justified maintenance and capital improvements to public buildings and infrastructure also ratchets up future costs. The reasons, Mauck says, include "critical failures of equipment and infrastructure – such as gas lines, water mains, electrical power systems, and storm and sewer pipelines and pumping facilities – reduced quality of service, and increased liability."

Even services that seem "cosmetic" in fact make sound economic sense, he says.

"Deferred maintenance for the city's 30,000 trees increases City's liabilities from falling trees and branches. Deferred park maintenance increases litter and graffiti and accelerates landscape degradation – leading to lower use and increased crime. Reduced street sweeping increases litter, and creek and waterway pollution – adding to cleanup costs, and damaging the environment, degrading aesthetics, and reducing property values."

The last packs a double whammy for homeowners – first from lower sale prices, and second from reduced municipal revenues.

Reduced hours at libraries, public pools, and community centers also carries a double hit as residents pay more to replace public services with private ones.

For example, an annual family pass for Santa Clara's public pools is currently $132, and day passes are between $2.25 and $3.50. By contrast, membership at a private pool club runs about $500 – if you can join at all. The end result is a vicious cycle where reduced access in turn reduces use, which in turn reduces taxpayers' willingness to pay for public services and leads to further service reductions.

Colorado Springs and Newark Bring New Meaning to "Bring Your Own"

To see what the brave new world of "bare-bones" municipal services looks like, visit Colorado Springs, CO. The tax-averse city – and home to right-wing evangelical media company, Focus on the Family, which describes its objective as "…sharing the Gospel of Jesus Christ with as many people as possible by nurturing and defending the God-ordained institution of the family and promoting biblical truths worldwide" – has slashed services most of us don't think twice about.

A third of the city's streetlights are dark and police helicopters were put up for sale. Firefighters, burglary investigators, and beat cops were laid off. Trashcans are gone from public parks and the city no longer mows public spaces – residents are encouraged to bring their own lawn mowers to the park. Public toilets have been locked for years. During an ice storm last winter, the city didn't have enough sand and salt to keep roads open. Recreation centers, public pools, and museums ran out of funding and shut their doors for good last March.

Even Colorado Springs, however, isn't in such dire condition as Newark, NJ, which last summer stopped supplying toilet paper for City Hall restrooms. But leave it to yankee ingenuity to jump into the breach. Marc Polish, owner of N.J.-based Just Toilet Paper (www.justtoiletpaper.com) will donate a roll to Newark for every order the company receives for holiday-themed toilet paper before Dec. 15.

For more information about Santa Clara's budget, visit santaclaraca.gov (click on "Budget Update"). Printed copies are also available at the Central City Library on Homestead Road.

Stadium Won't Fix What Ails Santa Clara General Fund

2010-10-19T07:24:00.000-07:00

The proposed 49ers stadium won't be a magical fix for Santa Clara's general fund deficit – forecast to reach nearly $5 million this year and grow to over $18 million in 2013-2014.

Both sports industry consultant CS&L International and real estate advisory firm Keyser Marston Assoc. conservatively estimate $700,000 annually in additional revenue for Santa Clara general fund revenue from a 49ers stadium. A more generous estimate is the $2.4 million that San Francisco brings in today in taxes from the football team.

However, regardless of which number you use, even the most optimistic estimates barely makes a dent in the City's growing deficit, shown in the following chart. Regardless of the proposed stadium's merits of in terms of economic growth and civic pride, Santa Clara must look elsewhere for solutions to its budget woes.

Sources: Evaluation of 49ers Economic and Fiscal Benefits Study, Santa Clara City Manager, June 5, 2007; City of Santa Clara Proposed Five-Year Plan, May 18, 2010; " NFL dangles Super Bowl as Santa Clara stadium reward," www.fieldofschemes.com, May 3, 2010.

Doing The Pension Math Part 2: The Magic of Multiplication

2010-10-19T07:16:00.000-07:00

If you've done your homework, you'll remember that last week we talked about how the chickens of CalPERS' (California Public Employees' Retirement System) bad investments flew in to roost in Santa Clara's budget. This week's lesson is on how payout amounts are calculated.

Santa Clara's pensions – like those of most states and cities – are defined benefit plans, and payouts are based on a formula, regardless of contributions and the pension fund's value.

Once city employees are vested – in CalPERS, that's five years – they're entitled to receive a percent – a "multiplier" or "contribution factor" – of their highest pay for each year of employment. Years of Service x Benefit Factor = Percentage of Final Compensation. The monthly pension amount is that result divided by 12. Public safety pensions are capped at 90%.

So far, it's fifth grade arithmetic. But, as they say, the devil is in the details. In this case, it's in the values assigned to these variables, the definition of "high salary," and the magic of multiplication.

Multipliers are, quite simply, any number that the municipality and its bargaining units agree to. They're not tied to anything – say, like the cost of living. Multipliers can be different for different employee groups and contract periods. The current plans date from the flush years of the late 1990s, when the City had a budget surplus. They don't change simply because the City now has a deficit. The terms can only be changed if unions agree to renegotiate the contracts.

In Santa Clara there are two employee groups for the purpose of pension calculations: "safety" employees (police and fire) and "miscellaneous" (everyone else). The benefit factor for public safety employees is 3%, and 2.7% for miscellaneous employees. After five years of employment, public safety employees can retire at 50 with full benefits, while corresponding age is 55 for other City employees.

For the last two years, the average retirement age for Miscellaneous employees was 59½, and for Public Safety employees, just shy of 51, according to Deputy City Manager Carol McCarthy.

The definition of "high salary" is another negotiable item. In Santa Clara', "high salary" is the highest consecutive 12 months' pay. This makes it somewhat harder to game the pension system by simply ratcheting up income the year before retirement with overtime and unused sick and vacation days. Twelve Santa Clara retirees receive pensions that top $150,000, and 122 have pensions over $100,000, according to CalPERS data reported by CaliforniaPensionReform.com. The City's highest pension is $186,343.

While public safety employees are not covered by Social Security – they don't pay into it and are ineligible to receive benefits from it – miscellaneous employees do pay into Social Security and are eligible for benefits when they retire.

However, public employees in the Social Security system are subject to the so-called windfall elimination provision (WEP), which, in its simplest terms, reduces SSA benefits for those with public sector pensions by 10 to 50 percent.* In addition, their CalPERS pensions are also reduced by $133 a month.

*One of the clearest explanations of this taxation arcana can be found atwww.fedsmith.com. For more information, City budgets, financial reports, and Memorandums of Understanding (union contracts) are available online at www.santaclaraca.gov. Visit www.calpers.ca.gov to get information about CalPERS.

Caption: Figures 1 and 2 illustrate some results of the pension arithmetic for both of Santa Clara's employee groups. These numbers are estimates, because actual pension amounts are ultimately determined by CalPERS, and can include other CalPERS offers and choices and made by employees.

Sept. 1, 2010: Doing the Pension Math Part One - How CalPERS Adds to City Deficit Woes

2010-08-28T16:11:00.000-07:00

By Carolyn Schuk

Big jumps in payments into the California Public Employees’ Retirement System (CalPERS) system is one of the factors driving Santa Clara's "systemic" budget deficit over the next five years.

Santa Clara's CalPERS pension fund contributions will double

over the next five years, both in absolute terms and as a percent of

the City's revenue. As a percent of the City's operating budget, it

grows more slowly

Started in 1932, the California Public Employees' Retirement System (CalPERS) manages pension, disability and retirement medical benefits for California's public employees. The largest public pension fund in the United States, CalPERS manages about $180 billion in assets.

All of Santa Clara's permanent full-time and part-time employees must participate in CalPERS, and contribute either 8 percent – Miscellaneous plan – or 11.25 percent – Public Safety plan – of their salaries to the fund. The City contributes the remaining amounts needed to pay the promised benefits, based on CalPERS calculations. Contribution rates are set by state law and can only be changed with contract changes.

Because CalPERS is a "defined benefit" plan, benefits are determined by a formula based on salary and years of service – regardless of fund value. The other type of pension is a "defined contribution" plan, such as a 401K. These plans calculate benefits based on the value of individual accounts at retirement. Defined contribution plans have largely replaced defined benefit pensions in the private sector.

CalPERS expects its payouts to rise dramatically in the next few years for several reasons. First, the giant fund is coping with $68 billion in investment losses over the last two fiscal years. At the same time baby boomers are nearing retirement, workers are retiring younger, are living longer and are making more money. As a result, CalPERS payouts are likely to exceed projected contributions and earnings, and employers must cover their commitments.

In 2010-2011, the City's contribution for the Miscellaneous and Safety plans are 18 percent and 27 percent, respectively. By 2016, the City's budget forecasts those contributions to grow, respectively, to 28 percent and 42 percent.

That adds up to a growing piece of the budget pie. In 2009-2010, Santa Clara's CalPERS contribution was $17 million. It's projected to double – both absolutely and as a percentage of the City's budget – to $34 million by 2015-2016.

One short-term step that the City is taking is to refinance its CalPERS liability for 30 years at a lower interest rate, which will save $225,000, according to City Finance Director Gary Ameling. However, while this lowers the City's annual costs, like refinancing a mortgage, the clock starts ticking again for a new 30-year term.

he City's budget is available online and at the Central City Library.

Aug. 26, 2010: Some Santa Clara Pay Scales Surpass Those in New York City

2010-08-28T15:51:00.000-07:00

By Carolyn Schuk

As the largest single metropolitan area in the U.S., New York City garners more attention than any other. And as municipal pay scales remain a leading topic on the news, many cities are comparing their payrolls to New York's.

Santa Clara is no exception.

However, in many respects Santa Clara and New York City are poles apart – and not just geographically.

First off, New York's population is about 70 times larger than Santa Clara – 8,392,000 compared to 119,000. So while NYC's equivalent of a City Attorney earns less than Santa Clara's, New York has more than 150 attorneys on its payroll to share the workload.

Add to that the municipal baggage of 400 years of history in the form of added layers of municipal structures such as borough governments; the need for which is unclear in the modern world.

Further, New York operates its schools and colleges directly, as well as its own residential garbage collection – making the ratio of city employees to residents seem higher. So it's not all apples-to-apples comparisons.

Despite these caveats, though, Santa Clarans can be proud of operating significantly more efficiently than NYC. Even removing the NYC department of education's over 170,000 employees from the calculus, New York's ratio of municipal employees to residents is 1:35, while Santa Clara's is 1:119.

Maybe New York City's employees are due for a raise. Widespread public

attention to municipal salaries following the Bell, CA scandal, has

highlighted that many employees of the country's largest city make less

than their counterparts in small cities such as Santa Clara.

When it comes to pay scales, however, a look at some NYC salaries reveals that despite the exponential increased complexity of managing a city of New York's size, that city's employees make less on the whole than Santa Clara city employees.

For example, NYC's police commissioner supervises a force of about 35,000, but makes 25 percent less than Santa Clara's police chief. On the other hand, Santa Clara's Streets Supervisor makes only two-thirds of New York's Sanitation Department Supervisor.

When it comes to the biggest single paycheck, New York City wins hands down, however. Last year one NYC Educational Administrator representative to the Council of School Supervisors & Administrators (CSA, Local 1 AFL-CIO) topped the chart, earning a grand total of $311,907. When it comes to base pay, though, NYC's most highly paid position is Chancellor of Education, with a $250,000 salary. Santa Clara's, on the other hand, is its City Manager at $285,000.

You can find out about every penny of every expenditure in New York State and City at www.seethroughny.net. To find out more about Santa Clara's budget and expenses, visit the City's website. Printed copies of the City Budget are also available for review at the Central City Library. Carolyn Schuk can be reached at cschuk@earthlink.net.

Aug. 18, 2010: Comparing City Pay Scales with Private Business Shows City Employees Earn More

2010-08-28T15:40:00.000-07:00

By Carolyn Schuk

A comparison of 30 City of Santa Clara salaries to those of private businesses appears to validate a Santa Clara County Civil Grand Jury finding that municipal salaries are "artificially high and out of sync with market trends."

The Weekly compared 30 Santa Clara city salaries with those

for similar private sector job titles at the compensation comparison

site, Salary.com.

U.S. census data backs up that assertion, reporting that median pay for workers in the public sector is almost $6,000 higher than that for workers in the private sector.

The Grand Jury's 2010 study, "Cities Must Rein In Unsustainable Employee Costs" analyzed 15 South Bay cities and found consistently increasing employee compensation in the face of plummeting revenues and declining city services.

"Salary and wage increases do not reflect changes in economic conditions," the report said. "Even with minimal inflation, yearly COLAs [cost of living increases] are granted with little bearing on the actual increase in cost of living or market conditions." Cities typically peg their compensation packages to other local municipalities, the report continued, are resistant to comparing themselves with private businesses.

Certainly, in some cases public-private comparisons are impossible. Fore example, private businesses don't have police chiefs. However, private businesses do have Information Technology, Accounting, Public Relations, Engineering and Human Resources departments.

The Weekly looked at City 30 job titles and compared municipal salaries with national ranges for private business, using data from the 2010-2011 City Budget and the compensation research company Salary.com.

We found that 20 of the selected salaries (two thirds) Santa Clara is paying higher salaries than three quarters of private businesses across the U.S. – in other words, topping the 75th percentile. The range spanned from slightly more to 251 percent higher than the 75th percentile average.

However, these findings weren't universal. For example, the City's top website executive comes in slightly higher than industry's 25th percentile for the same job. And At $34,606, a Santa Clara street maintenance foreperson trails even the lowest 10 percent of construction coordinators in private industry.

The Weekly's findings also show:

The City's Accounting Manager earns $142,985, while only 10 percent of corporate accounting division managers make more than 100,653.
The City Librarian earns $186,685, while 90 percent of university library directors earn $118,619 or less.
90 percent of corporate executive assistants are paid $61,754 or less, while the executive assistant to Santa Clara's City Manager earns $101,993.

City salaries are listed in the annual city budget, starting at page 60.

Aug. 11, 2010: City Salaries – Hefty Increases Dominate, With Notable Exceptions of Library, Finance, Police, Streets

2010-08-28T15:12:00.000-07:00

By Carolyn Schuk

The growth of public sector compensation has been a hot news topic ever since Bell California's exorbitant city salaries made the headlines. Santa Clara offers its own, albeit more modest, laboratory of how the dynamics of civil service pay can take on independent life of its own, driven by politics and detached from the economic and revenue realities.

Santa Clara's Top 25 Salaries in 2010-2011

Santa Clara's pay scale tips the balance on the generous side. While 12 City employees make over $200,000 and 128 make over $100,000, fewer than 10 are paid less than $50,000. The City's lowest paying job? City Council Member, followed by Mayor.

While workers in the private sector saw average merit and base pay increases of 2 to 3 percent, 83 percent of city workers will receive raises of 5 percent or more this year – with 27 percent taking home more than 10 percent in salary increases. In fact, the average City raise in the coming fiscal year is about 11 percent – almost twice the 4 to 6 percent negotiated in Memorandums of Understanding Further, 19 of the city's top 25 highest-paid positions taking home raises higher than 5 percent this year.

Although the City's top earners aren't taking home the largest percentage increases, 14 of them will receive five-digit increases in the coming fiscal year. Topping the list are the Assistant City Attorney, the Director of Information Technology, and the Director of Planning and Inspection, whose salaries will increase more than $20,000 this year.

Santa Clara's Lowest Salaries 2010-2011

However, not every city department grew its salary budget this year. Notable exceptions to the trend include the city's Police, Streets, and Finance departments as well as the City Library. SCPD's overall salary budget dropped by over $1.2 million, with pay for the City's police officers declining an average of 4 percent. Salary for the City Attorney –the position is currently open – was cut about $32,000.

All of the City's salaries are listed in the annual operating budget, starting at page 60. It's advisable to print the pages out because the salary information isn't in a concise format.

Aug. 4, 2010: City Compensation Agreements Can't Be Changed at Will

2010-08-28T13:32:00.000-07:00

By Carolyn Schuk

Most would agree that Santa Clara residents receive high quality city services. One reason is that most city services are delivered by city employees – giving the City full control over delivery. Reflecting this, employee compensation accounts for nearly 80 percent of the City's operating budget – a percentage that has been consistent throughout the years.

With the city's budget in a tailspin, some are questioning the pay scales and benefit packages – which unquestionably drive Santa Clara's budget and, with it, a growing deficit.
Santa Clara is hardly alone. Across the U.S., cities and states face deficits driven by benefit and pay increases won by public employees during boom times.

Before assigning blame, it's important to understand why negotiation processes and compensation agreements themselves constrain City flexibility. One reason is that they don't factor in Santa Clara's second major budget driver: revenues. And that almost guarantees deficits in an economic downturn.

Another reason is public compensation agreements' ironclad nature. Wages, hours and employment terms and conditions are spelled out in contracts – Memorandums of Understanding (MOUs) – between the City and employee bargaining units (unions).

While the City Manager's office develops the detail of job classifications and pay schedules, it's the City Council's responsibility to approve and implement them (City Charter, Section 1104). Further, state law (California Government Code, Secs. 3500-3510) – including the George Brown Act of 1961 and later the Meyers-Milias-Brown Act of 1968 (MMBA) – governs City relations with employees, with the exceptions of temporary employees and the City Manager, City Attorney, City Clerk, and Police Chief.

As directed by the City Council, the City Manager directs the City negotiating team and can make recommendations to the Council in closed session. The City charter and state law also specify the negotiation process, called "Meet and Confer." Agreements take effect after being first ratified by bargaining group members, and then approved by the City Council during a regularly scheduled meeting.

Once an MOU is approved –"zipped" – it can only be opened for discussion – "unzipped" – by mutual agreement of the City and bargaining unit. The City can leave jobs vacant – a hiring "freeze" – and cut positions, but neither party can make changes to the contract unilaterally. The City's annual budget must reflect existing contracts.

Santa Clara's contracts with its 10 bargaining units

were written between 2006 and 2008 and expire at

different dates between 2010 and 2012.

Currently, Santa Clara has contracts with 10 bargaining units. These were written between 2006 and 2008 – before the late 2008 economic bust – and expire at different dates between 2010 and 2012.

In recent years, Santa Clara has cut about 10 jobs and left more than 100 positions unfilled – about 15 percent of the City's total staffing. This is reflected in the 2010-2011 City Budget. The City has also reduced overtime as well as the numbers and hours of temporary workers. Some programs have been reduced – for example, library hours – while others are distributing additional sharing work among employees.

And benefit cuts for future City employees are on under consideration. Last April, the City Manager requested City Council direction on a Local Government Policy Statement on Retirement Benefits. Developed by the City Manager Associations of Santa Clara and San Mateo Counties, this would reduce future costs – principally state pension fund (CalPERS) contributions. With City Council approval, the City Manager can call for bargaining unit discussions on the proposed changes.

"City employees are aware of the severe financial problems being faced by Santa Clara," says Deputy City Manager Carol McCarthy. "While some programs have been reduced during these budget difficulties, many programs and services continue with the work being shared among the remaining employees. All the while, the City and its employees are still trying to maintain, as much as possible, the services that our residents and businesses enjoy."

In what may point to the future of public sector compensation, this month the League of California Cities announced it was working with state legislators to increase public accessibility to city, county and state salary information, and is drafting city administrator compensation guidelines.

You can get more information online about the City budget and MOUs.

July 28, 2010: Santa Clara Citizens Advisory Committee Questions City Salary and Benefit Increases

2010-08-28T13:26:00.000-07:00

By Carolyn Schuk

As cities and states across the nation face acute budget crises, attention invariably turns to the largest item in public budgets: public employee compensation costs.

For example, Business Insider (www.businessinsider.com) has been making journalistic hay recently with titles such as "The 899 NY State Employees Who Earn More Than [Gov.] David Paterson," "Maywood, CA Lays Off All City Employees, Dismantles Police Department," and "If You Thought New York Was Bad, Check Out The Ridiculous Public Sector Pensions In Illinois."

Santa Clara is no exception to the national conversation.

At the June 18, 2010 City Council meeting the Santa Clara Citizens Advisory Committee (CAC) objected to the salary and benefits increases included in the City's 2010-2011 budget, saying in a public statement that they were "not justifiable," and asking the City Council "not to pass this current budget until it can be proven that the necessary money exists to pay for these salary increases."

The CAC further recommended that the City's retirement plans be "restructured into a 401K type plan with City matching funds ranging from a minimum of 0% up to a maximum of 2% of individual employee contributions" – the common practice in private industry. In addition, "during any fiscal year in which the City experiences a deficit, the …City [should] refrain from matching employee contributions…and the retirement age of all employees be changed to 65."

The definition of "justifiable" is central to the question. And one measure of that is how public sector compensation stacks up against the private sector.

Last spring, USA Today reported that federal pay scales are outpacing private industry, according to the U.S. Bureau of Labor Statistics (BLS). Including health, pension and other benefits, USA Today's analysis showed that federal workers in 2008 received total compensation of about $101,000, compared with roughly $70,000 private sector total compensation for the same jobs.

The BLS's statistics show the same difference at the state and local levels as well. In its June 2010 Employer Costs for Employee Compensation (ECEC) survey shows that average total compensation in the private sector is roughly $28 per hour worked in March 2010, while total compensation for State and local government workers averaged just shy of $40 per hour worked.

Another basis of comparison is the amount of salary increases.

Santa Clara city employees, on average, will receive 5 percent raises in the coming year. By contrast, global human resources association WorldatWork reports that nearly 54 percent of U.S. businesses froze wages in 2009. Of these, about half say pay freezes will continue in 2010. Of Bay Area companies that are giving raises this year, job search website SimplyHired reports that increases will be 2 percent or less.

For more information about Santa Clara's budget, visit the City's website. Compensation agreements with Santa Clara's 12 bargaining units (public employee unions) are also available online.

July 14, 2010: County Report Finds Municipal Employee Compensation Out of Line with Economy, Cost of Living, Municipal Revenues

2010-08-28T13:20:00.000-07:00

By Carolyn Schuk

Once upon a time, public sector workers earned far less than employees in private businesses. In return, civil service employees received generous benefits. A 2010 study by the Santa Clara County Civil Grand Jury, "Cities Must Rein In Unsustainable Employee Costs," finds that today's public sector wages and benefits have grown "dramatically" over the last decade, and total municipal compensation "is out of sync with private industry and…unsustainable."

Between 2000 and 2010, the median salary and benefit package for regular

municipal employees in Santa Clara County cities grew between 32% and 93% –

averaging 61%.

The Grand Jury surveyed 15 South Bay cities and found consistently increasing compensation, even though revenues and services are declining across the board. Although the economy has plummeted, compensation – wages, health care benefits, vacation, holiday and sick leave are all growing at substantially faster rates than the local economy and municipal general fund revenues, according to the report.

Between 2000 and 2010, the median salary and benefit package for

municipal public safety employees in Santa Clara County cities grew an average

of 41%. Figures for 2000-2001 not available.

Between 2000-2009 the Bay Area's Consumer Price Index increased of 27 percent – averaging 2.7 percent annually. By comparison, during the same period the median total compensation – salary and benefits – for regular (non-public safety) municipal employees increased 37 percent (to $113,704 from $71,379). Public safety employees (police and fire) registered 41 gains in total compensation (to $173,714 from $102,646).

Communities cannot sustain these costs, the report says, and local elected governments need to bite the politically unpalatable bullet of containing them. The Grand Jury's recommendations include:

Reduce costs by contracting with private businesses, and partnering or consolidating with other cities, special districts or the County for services.
End the practice of approving contracts with public employee bargaining units – unions – by a single motion and vote as part of the consent calendar. *
Subject negotiations with employee bargaining units to public scrutiny and approval by conducting well-advertised public hearings both before and after negotiations, specifically reporting the terms of each contract.
Cities that have binding arbitration agreements (specifically San Jose) should open those negotiations to the public and their Councils should ask voters to repeal binding arbitration measures.

Read the entire report here.

*A "consent calendar" is an umbrella agenda item that groups routine agreements and resolutions together for a single motion and vote. As the name implies, there is a generally agreement on these items.

June 9, 2010: City's Pension Fund Costs to Double Between 2010 and 2015

2010-08-28T12:54:00.000-07:00

By Carolyn Schuk

One of the reasons for Santa Clara's "systemic" budget deficit over the next five years is a big jump in payments into the California Public Employees’ Retirement System (CalPERS) system.

The U.S.'s largest public pension fund, CalPERS administers pensions for 1.6 million active and retired California public employees. The fund manages about $180 billion in assets. Because CalPERS is a "defined benefit" plan, benefits are determined by a defined formula based on salary and years of service – regardless of fund value.

(This is in contrast to "defined contribution" plans – such as 401Ks –, which calculate the benefit, based on the value of individual accounts at retirement. Defined contribution plans have largely replaced defined benefit pensions in private businesses).

California's public employee pension system CalPERS experienced

huge investment losses between 2007 and 2009, contributing to financial

pressure from higher pensions paid for longer terms.

CalPERS expects its payouts to rise dramatically in the next few years, according to Santa Clara Director of Finance Gary Ameling. First, the giant fund is coping with $68 billion in investment losses over the last two fiscal years, shown in Figure 1. "Normally those [losses] get smoothed over 15 years," Ameling explains.

However, at the same time that baby boomers are nearing retirement, workers are retiring younger, living longer and making more money. The result is that CalPERS forecasts payouts will exceed projected contributions and earnings. Employers have to cover these "unfunded" commitments.

Santa Clara's CalPERS costs will almost

double in the next 5 years.

Santa Clara's CalPERS costs will grow modestly this coming year, but take big jumps in 2011-12, 2012-13, and 2013-14 – growing a total of $16 million between 2010 and 2015, as Figure 2 shows. Both absolutely and as a percentage of the City's budget, CalPERS contributions will almost double during that period.

One short-term step that the City is taking is to refinance its CalPERS liability for 30 years at a lower interest rate, which will save $225,000, according to Ameling. However, while this lowers the City's annual costs, like refinancing a mortgage, the clock starts ticking again for a new 30-year term.

June 30, 2010: Salaries and Benefits Drive Growing City Budget

2010-08-28T11:41:00.000-07:00

By Carolyn Schuk

By now anyone who hasn't been in a coma knows that Santa Clara's budget is headed for record deficits for the foreseeable future. In fact this percentage hasn't changed significantly in the last five years – and it isn't projected to change much over the next five.

But although salaries and benefits make up close to 80 percent of Santa Clara's operating budget, this alone isn't what's driving the City's financial woes. The City has a systemic deficit tax revenue isn't growing in tandem with expenses.

Negotiated salaries and pensions drive Santa Clara's budget,

while the largest share of the City revenue comes from sales

and hotel taxes – both of which depend on the local economy.

Revenues declined steadily between 2006 and 2010. While last year saw modest growth, another drop is expected in the coming year, followed by slow growth in subsequent years. However, salaries and benefits have grown every year – except for the current one (2010-2011) during which a significant number of vacant jobs have been eliminated.

City salaries and benefits are negotiated by a variety of unions – employee bargaining units. Made in very different economic times, the City's current negotiated agreements – Memorandums of Understanding, MOUs – will increase City salaries come January by about four percent. In addition, the City's required contribution to the CalPERS pension fund will grow significantly over the coming five years.

City Manager Jennifer Sparacino told the City Council earlier this month that she has met with some of the city employee groups who "have indicated that they are willing" to discuss salaries for 2011.

Barring a near-miraculous increase in sales and hotel tax revenue (which fund most of the City's operating budget), the only way to address the City's systemic deficit is by reducing salaries and benefits or reducing services.

With the median pay for workers in the public sector already almost $6,000 higher than that for workers in the private sector, according to U.S. census data quoted by the New York Times recently – $45,124 vs. $39,877 – some say that further salary increases are indefensible.

"In light of the City Manager's projected deficit of $20 million, of which $5 million is still unaccounted for, it is imprudent to give these increases when there is no guarantee that the $5 million can be made up given the current economic climate," City resident Brian Lowery told the City Council at the June 15 meeting.

"If the city persists in going ahead with these [salary] increases, I see a collision with economic reality…and the reality will be that the City will be forced to make painful, unintended layoffs," Lowery continued. "In time, realized tax revenues from the stadium will alleviate pressure on the General Fund, but …gains…will not occur until 2014-2015.

"It is unfair of the city to ask for volunteer efforts on the part of its citizens," Lowery concluded, "when it is unwilling to make the financial choices it needs to keep our city solvent."

For more information about Santa Clara's budget, visit the City website. The Central City library also has copies of the 500+ page City budget.

May 26, 2010: Santa Clara's 2010-2011 Capital Improvement Budget Fares Better Than Operations Budget

2010-08-28T11:05:00.000-07:00

By Carolyn Schuk

Santa Clara's capital improvement budget (CIP) for the coming fiscal year is better news than the city's operating budget. That's because capital investments – a community's physical infrastructure, such as sewers, buildings, and parks – are funded in different ways than its day-to-day operating expenses – for example, heating and staffing those buildings.

While maintenance and improvements in Santa Clara's "enterprise" departments – departments that collect revenue, such as the city's municipal electric utility – fund much of their capital investment with revenue, major capital investments are largely funded by Redevelopment Agency (RDA) bonds, federal grants, and state, county and regional taxes and grants.

But these funds aren't interchangeable. Federal Housing and Urban Development grants for affordable housing programs can't be used to pay police officers. And bonds that are sold to build libraries can't be used to build a road instead.

In the coming fiscal year, Santa Clara will spend about $77,000,000 on new capital projects. The top three sources of funding for these projects are: RDA bonds, the American Recovery and Reinvestment Act (ARRA, the federal economic stimulus program), and RDA property taxes. None of the money comes from the City's operating fund.

City officials have been working hard to bring ARRA grants to the City, according to Santa Clara Director of Public Works Rajeev Batra, and have been successful in bringing the City about $18 million so far in federal stimulus funds for "shovel-ready" projects.

Of roughly $77 million that the City will spend on capital improvements next year, the 3 top funding sources are
RDA bonds, the ARRA federal economic stimulus program,
and RDA property taxes.

Santa Clara 2010-2011 Capital Improvement Projects

The city has eight significant projects on the drawing board for the coming fiscal year. Here's the list, showing the budget amount and where it's coming from.

New Tasman Ave. parking structure: about $42 million; funded by RDA bonds
The new Northside branch library: roughly $20 million, funded by RDA bonds and tax income.
A new sewer main on Walsh Ave: $8 million, funded by RDA bonds.
A 40 percent expansion of Santa Clara's recycled water system: $10.1 million funded by (ARRA, federal stimulus program).
South-of-Forest streets resurfacing: $1.3 million, funded by Prop 42 traffic congestion relief funds and gas taxes.
San Tomas Aquino Trail Extension: $767,000, funded principally by county and regional grants, with about 25 percent coming from the City.
Public facilities lighting retrofits and energy efficiency programs: $1.2 million funded by ARRA.
Affordable housing, community development, public service and energy conservation programs: about $12 million funded by grants from the US Dept. of Housing and Urban Development (HUD) and RDA tax income.

For more information visit the Santa Clara City website.

April 28, 2010: Santa Clara Revenues Down, Deficit Doubles

2010-08-28T10:45:00.000-07:00

By Carolyn Schuk

The City of Santa Clara is in a world of financial hurt. The City Manager's midyear budget review shows this year's total tax revenues – roughly 60 percent of the city's operating budget – down nearly 7 percent from last year.

City of Santa Clara Tax Revenue and Budget Deficit: The chart shows

actual 2008-2009 city revenue, budgeted 2009-2010 revenue, and

the adjusted 2009-2010 revenue forecast. Declining sales and transient

occupancy (hotel) taxes account for the largest share of the drop in

City tax revenues. Correspondingly, Santa Clara's structural budget

deficit is rising; requiring the City to use its emergency reserve funds

to make up the difference.

As a result, the City's budget gap will increase by $8.5 million to a total of $13.5 million for the year – even after a $2.1 million reduction in City expenses. This will leave Santa Clara with only $2.5 million in its emergency reserves at the same time the City is likely to face an even larger deficit for the 2010-2011 fiscal year, City Manager Jennifer Sparacino told the City Council at its April 20 meeting. "I've worked for the city for the last 30 years and the situation is by far the worst I've ever seen."

The largest hits to Santa Clara's revenues come from declining sales and hotel taxes, down 14 and 18 percent respectively. "We have some ideas [about addressing the deficit]," Sparacino explained, saying that City staff was "working on a plan to take Santa Clara's structural* deficit and get where we need to be.

"At the next City Council meeting we'll be presenting budget principles [for 2010-2011]," she continued. "And on May 11, [we plan] to start [budget] study sessions. The Council's study sessions will be online. We plan to get more information out about our budget plans to the community…and the business community."

Sparacino emphasized that 'buying local' can make a difference. "It's very important that people buy in Santa Clara," she said. "An important source of sales tax is business-to-business sales – when businesses sell to other businesses in the City."

Two big concerns for the City's budget are the planned new Northside library and improvements needed by the International Swim Center. "The Northside library is funded for capital construction. Our problem is trying to run it once it's built," Sparacino said, recommending against starting the project in the current circumstances.

"The international swim center – that's a huge hurdle," she continued. "I don't see that capital fund growing. I think we have to build up our emergency reserves before our capital reserves. I don't see that project going forward for the next five years."

Both of these building projects have been repeatedly postponed. "I remember that we were approving 17 percent raises for city staff while we were postponing…the Northside library and the International Swim Center," observed Santa Clara resident Kevin Parks.

"If all we're worried about is staffing, why don't we be heroic? Just the raises for the City Manager and the City Clerk…. would be enough to staff the Northside library. I would be willing to volunteer at the library for free, if I could see the city staff step up."

While City employees are covered by a variety of agreements (Memorandums of Understanding, MOUs, most city employees received raises of about 5 percent in 2009 and 2010.

Read the City Manager's budget report here. The entire Santa Clara city budget can be found here. For more information, call the City's budget department at (408) 615-2340.

* A structural deficit is chronic and long-term, as opposed to a "cyclical" deficit caused by economic conditions. Structural deficits require explicit and direct government action to reduce spending (including entitlements), and increase the tax base or tax rates.

May 4, 2010: Proposed Budget Principles Aim to Bring Santa Clara Accounts into Balance

2010-08-28T10:31:00.000-07:00

By Carolyn Schuk

Taking up from the April 20 City Council meeting discussion about Santa Clara's 2010-2011 budget, at last week's Council meeting City Manager Jennifer Sparacino introduced principles to guide the budgeting effort.

These include:

Developing a three-year strategy to eliminate the City's structural deficit and bring revenues and expenditures into ongoing balance.
Reducing headcount and permanent staff positions through attrition and retirements as much as possible, with layoffs only as a last resort
Raising some city fees to the full cost of providing services when individuals and individual businesses are the sole beneficiaries.

Santa Clara's actual tax revenues for 2009-2010

dropped by about $10 million, doubling the

City's budget deficit. Current estimates predict a

$55 million in total capital and operating

deficits between 2010-2011 and 2014-2015.

(Sources: City of Santa Clara Annual Budget 2009-2010,

June 9, 2009; Santa Clara City Manager's

2010-2011 budget status report, April 15, 2010.)

The City Manager's report to the Council noted that because Santa Clara's general fund and capital project reserves "are at historically low levels," using the City's emergency reserves "does not provide a viable solution to the revenue/expenditure gap." For information about Santa Clara's city budget, visit the City's website.

May 19, 2010: More Red Ink Forecast for Santa Clara City Budget - May 19, 2010

2010-08-28T09:51:00.000-07:00

By Carolyn Schuk

Santa Clara's operating budget deficit for 2009-2010 will reach $15 million, the City Manager reported to the City Council on May 11. This is more than twice the deficit that was forecast when the budget was finalized in July 2009.

Santa Clara's operating budget has

gone from a surplus of nearly $8 million

in 2007-2008 to an alarming $20

million deficit forecast for 2010-2011.

The increased deficit will exhaust the city's reserve fund. The City Manager's office currently forecasts an even larger – $20 million – deficit for 2010-2011. As a result, cuts in city programs and services are almost certain.

The deficit results from a combination of sharp declines in sales and hotel tax revenues in recent years and growing operating expenses as a result of new programs and increasing compensation costs over the last decade.

Besides hoping that things get better, there is one concrete thing residents can do to help the City's bottom line. "We are very much encouraging people to 'shop Santa Clara,'" says Deputy City Manager Carol McCarthy. "Have your friends stay in Santa Clara hotels when they come to visit."

To see the whole grim budget picture, visit santaclara.gov.