If you’ve got it, spend it

The sounds you heard Thursday morning coming from City government offices around Alameda, especially police and fire headquarters, were sighs of relief – followed by shouts of joy.

After another marathon meeting Wednesday, Council made it clear that, with one exception, it had no intention of making any of the cuts identified by Interim City Manager Liz Warmerdam as a way to balance the General Fund budget.  Thus, the sighs.

At the same time, Council made it equally clear that it was perfectly willing, and indeed eager, to start spending down the General Fund reserves to cover operating deficits.  Thus, the shouts.

So if you’re a City department head, you can ditch your “austerity budget” and dust off your wish list.  And if you’re an advocate for an interest group, it’s time to polish up the précis for your pet project.  The line forms to the left.

There may be some, of course, who fret about the effect of unbalanced budgets and diminished reserves on the City’s long-term financial condition.  But let ‘em.  Our politicians have re-written Bill Clinton’s campaign theme song.  For them, the refrain is, Don’t start thinking about tomorrow.

At first glance, the task facing Council didn’t seem especially onerous.  Charged with drafting a two-year budget covering Fiscal Years 2015-16 and 2016-17, Ms. Warmerdam and new Finance Director Elena Adair put together projections showing that General Fund revenues would exceed expenses next year and thus there was no need to reduce operating expenses.  They projected an operating deficit for the following year, but it was all of $1.4 million, a fairly small amount to make up.

So Ms. Warmerdam went to the various City department heads and asked them to work up ideas for cutting their budgets by 1.4% – i.e., less than two pennies per dollar.  In response, they collectively came up with $1,104,879 in expense reductions, just about enough to cover the projected operating deficit.  At the same time, Ms. Warmerdam and Ms. Adair investigated how much the City could save simply by not filling currently vacant positions.  Assuming the positions were left unfilled for a full 18 months, the total savings amounted to $1,507,774 for FY 2015-16 and $1,036,738 for FY 2016-17.

Armed with this information, Ms. Warmerdam presented her “suggestions” – she emphasized they were not “recommendations” – for “closing the gap” between revenue and expenses to Council Wednesday.  Here’s her list of possible cuts:

Across the Board 1.4%

Ms. Warmerdam then went through the list, item-by-item.  And, with one exception, all of the potential cost-saving steps got shot down.

The requests for the biggest cuts, in dollar terms, were directed to the police and fire departments, which will account for 67% of the General Fund budget in 2015.  Police Chief Paul Rolleri proposed – reluctantly – eliminating two “school resource officer” positions and putting the officers back on patrol.  Estimated cost savings:  $360,000.  Fire Chief Doug Long proposed – equally reluctantly – shutting down one of the three ambulances run by the City and sending the two-person crew back to regular duties.  The bus the Chief picked was the one serving Bay Farm Island.  Estimated cost savings:  $408,000.

If we wanted to be cynical, we’d speculate that the police and fire chiefs selected the items to put on the list based on how unpalatable the cut would be to the politicians.  That way, the item might not get cut at all.  In any event, that’s how it played out.

Eliminating two school resource officers?  According to Ms. Warmerdam, this proposal would reduce the police department’s authorized staffing from 88 to 86 sworn officers. Chief Rolleri explained that, if he were forced to trim his department’s head count in order to save money, “my first move” would be to eliminate the SROs rather than to decrease the number of patrol officers.  But he warned that the department already had too few officers on the streets as it is.

Not acceptable, Council declared.  Mayor Trish Spencer, who served on the School Board before her election, described the school resource officers as an “amazing long-term investment,” and her colleagues hastened to concur.  “It’s really important to build these relationships between police and young people,” Councilwoman Marilyn Ezzy Ashcraft said.  “I come from a background as a probation officer, and . . . I understand that.”

Shutting down the ambulance serving Bay Farm Island?  According to Ms. Warmerdam, the savings from this proposal, unlike the one suggested for the police department, would result from lower overtime costs, not fewer authorized personnel.  Chief Long explained that, “although I don’t support having to cut service levels,” this plan “looked like it would work the best for us” because the Bay Farm ambulance had the fewest calls of the three and a private ambulance company could handle the calls if the City’s other two ambulances were otherwise engaged.  But he warned that Bay Farm residents could expect delays in service, especially after the County’s contract with the private operator ended in November 2016.

Also not acceptable, Council declared.  Not surprisingly, Councilman Jim Oddie, who fancies himself the Barrister for Bay Farm (or is it the Hero of Harbor Bay?), led the chorus of opposition.  “How can we tell the folks on Bay Farm,” he asked, rhetorically but disingenuously, “sorry, guys, we want to keep 38% reserves and $30 million in the bank, so you’re not going to have an ambulance, and, by the way, your bridge is going to be shut down during the day so that ambulance that now is going to have to come from the main island is going to be delayed even longer?”

The other items on Ms. Warmerdam’s list – except for the “disaster preparedness” position in the City Manager’s office – met a similar fate.  And when she broached the possibility of saving money by not filling vacancies, Council again put the kibosh on the idea.

From information supplied by the department heads, Ms. Warmerdam compiled a list of all of the vacant positions in the City’s various departments.  Her analysis showed that, over the next two fiscal years, the City could save $609,336 by not filling three vacant firefighter positions and $1,282,768 by not filling four vacant police officer positions.  Here’s her chart:

Current Vacancies

Chief Long had laid the groundwork for torpedoing this strategy earlier in the evening.  The Chief posited a “required” staffing level for the fire department that he said was necessary “to provide the level of service we are providing now.”  If there aren’t enough firefighters on the job to meet this “requirement,” the current work force has to work overtime.  Pressed by Vice Mayor Frank Matarrese, Chief Long conceded that the cost of hitting the “required” number by paying overtime was less than the cost of hiring new firefighters.  But overtime carries a “very heavy burden,” the Chief insisted.  “You end up with more injuries, especially long-term injuries, which actually cost us more in the long run.”

Thus prepared, the politicians easily got Ms. Warmerdam and Ms. Adair to concede that, at least for the fire department, the savings resulting from not filling vacancies would be offset in part by increased overtime costs (with the attendant risk, according to Chief Long, of greater disability payments).  Seizing upon this concession, Councilman Oddie promptly branded the proposal for not filling vacancies “phantom savings.”

When Mayor Spencer nevertheless asked for more information comparing overtime and hiring costs, Vice Mayor Matarrese and Councilwoman Ashcraft had heard enough.  Ms. Ashcraft admonished her colleagues not to “make decisions . . . by every last dollar and cents amount, digging deep into the weeds.”  Instead, they should follow the advice of former Mayor Marie Gilmore to “make your cuts as far away from the service to people as you can.”

By the end of the meeting, everyone, even Mayor Spencer, had rejected the idea of saving money by not filling vacancies.  Ms. Warmerdam and Ms. Adair could have taken their carefully prepared analysis, crumpled it up, and pitched it out of the window.

But Council wasn’t content simply to dismiss Ms. Warmerdam’s suggestions for balancing the budget by reducing expenses.  The politicians also saw no problem with drawing down the General Fund reserves to cover the operating deficit, and even to reverse the effects of past economies.

Councilwoman Ashcraft led the charge to the takeout window.  “It may be time to reconsider having such high reserves,” she said early in the meeting.  “It’s good to be prudent, but there is a cost to that prudence.”  By the end of the evening, she had become, if anything, less restrained.  “It’s time to ease up a little on the purse strings,” she said.  “Not only do we not need to make the departments cut so much, we definitely need to fill the needs that we heard about. . . .”

And so began the run on the bank.  Predictably, Councilman Oddie agreed with Ms. Ashcraft that there was no reason to keep General Fund reserves at their current level.  His support for taking money out of the reserves garnered support from Councilman Daysog – as long as the money was used to “assist the kids.”  “I realize we’re always wary of taking on costs that will continue down the road, with regard to any revenue stream,” Mr. Daysog said, “but from the vantage point of the public, these are costs people want.”

Perhaps most surprisingly, Vice Mayor Matarrese and Mayor Spencer, who had campaigned on platforms of fiscal restraint, went right along with their colleagues.  “I do think the $30.8 million that is in the fund balance is an indication that we’ve squeezed and that money really does need to be put back into the system,” Mr. Matarrese said.  Added the Mayor:  “We have to look at spending more of the reserves, at least at this point in time, and correcting some of the burdens that the employees have been bearing over time.”

When it came time to summarize the discussion, Ms. Warmerdam delivered the understatement of the evening:  “What I have heard clearly,” she said, was that “there may be some appetite for using some of the reserves in this next year.”

Call us cheap if you want, or even insensitive, but we find it troubling that Council is so ready and willing to start depleting reserves, whatever the current General Fund “unassigned balance” is, to cover operating deficits.  As the last two fiscal years demonstrate, budget forecasts are inherently uncertain.  Sure, you can describe former Finance Director Fred Marsh as “conservative,” but the reason the actual operating results beat Mr. Marsh’s projections is not that he wrapped his crystal ball in protective gauze but that the economy delivered around $11 million more in revenues to the City than he had foreseen.

But what goes around comes around.  If the economy stalls or even changes course and heads downward, the actual operating results for the next five years may turn out to be even worse than Mr. Marsh’s successor, Ms. Adair, has projected (and, remember, the forecast is for deficits totaling $14.3 million from FY 2016-17 through FY 2019-20).  Should that happen, Council will rue the day it decided to start spending the funds it once held in reserve.

But our problem goes deeper than that.  If the politicians are unwilling even to prune the budget in the short run, how can they ever be counted on to make fundamental changes that might have a positive long-term impact on the City’s financial condition?

For a few minutes Wednesday, it looked like Council, or at least Vice Mayor Matarrese, was about to suggest taking a hard look at reducing expenses by improving the efficiency with which the City – and the fire department in particular – delivered services.

After getting Chief Long to confirm that 72% of the fire calls were for medical assistance, Mr. Matarrese wondered why it was necessary to staff every one of the three ambulances with two fully trained – and fully compensated – firefighters.  Couldn’t “civilian” paramedics perform at least some of these tasks?  As the Vice Mayor saw it, this was part of the larger question of whether a “different structure” would enable the fire department to cut costs “based on how our equipment is staffed, how equipment is deployed, and how we have positions defined within the department.”

In fact, as the Vice Mayor probably knew (since he was sitting on Council at the time), a national consulting firm engaged by the City had addressed precisely this question back in 2009.  Among other things, the consultants recommended “restructuring” the department to reduce the number of firefighters to 78, with a chief, two deputy chiefs, and five captains, for a total of 86.  “The restructuring would allow the department to meet tactical benchmarks such as NFPA 1710 (which calls for 15 on a structure fire), with at least six personnel in reserve at a 21-person-minimum staffing schedule,” the consultants concluded.  “Since the calls for service show the heaviest demand during the day hours, two full-structure fires could be handled and an ambulance kept available.”

The firefighters’ union immediately trashed the report, and after the union-backed Gilmore-Tam-Bonta slate got elected a year later, the Council majority simply ignored the consultant’s recommendation.  Nevertheless, at Wednesday’s meeting Chief Long smoothly made the case for the status quo. “I think City gets the most bang for their buck by having firefighters on their ambulances,” the Chief said. “What you get is those quick response times.”  (We have to confess that we don’t see the connection.  Do firefighters drive faster than civilian ambulance operators?)

Likewise, the staffing level deemed “required” by Chief Long represented the “bare minimum” to get the job done.  “If we go any lower than that,” he said, “I don’t think we’ll be able to adequately protect the City.”  He added:  “If we start reducing our fire companies, we’re going to limit our ability to fight fires. . . .  If we don’t have enough people there quickly, so that we can make that initial attack, the fires are going to get bigger.  We’re gonna have larger fire losses.”

No one on Council challenged these assertions.  How could they?  It would be like George Bush refusing to take the word of his CIA director that there was a “slam dunk case” that Saddam Hussein had weapons of mass destruction.  Nor is it likely that Mr. Matarrese will return to the issue in the future.  If, by the end of the meeting, he was disinclined to take even such a small step as shutting down one of three ambulances, why would he ever bring up again the possibility of more comprehensive changes?

So that’s the way it went Wednesday, and, we suspect, the way it will continue to go until Council adopts another budget with a series of annual operating deficits and draws against reserves.  Amidst all the sighs of relief and shouts of joy, it was only a still small voice that could be heard to utter, “Oh, damn, they’ve gone and done it again.”

Sources:

May 6, 2015 staff presentation: 2015-05-06 staff presentation (revised)

ICMA report: ICMA Report

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Budget, City Council, Firefighters and tagged , , , , , , , , , , . Bookmark the permalink.

6 Responses to If you’ve got it, spend it

  1. Denise Lai says:

    AFD should consider keeping the 3rd ambulance and shutting down the unnecessary fire station that they are about to build! And too bad the AFD killed the $1M grant for disaster preparedness….it’s all boils down to the AFD and this damn fire station on pacific that should be closed down, shouldn’t be staffed, and which they are not only replacing but expanding. If we didn’t have that shiny new building in the pipeline (who voted for that?!), then we could do many of the things that are needed without compromising emergency medical field services! dammit.

  2. Denise Lai says:

    Additionally, it’s insane to cut back on medical services’ capabilities when the fire agency’s predominant work is field-medical response!

  3. notmayberry says:

    That ICMA report is very readable. Thanks for posting it. Does anyone know how many of the recommendations were followed? E.g.: apparently the local fire hydrants were not being maintained. I would like to know if the one nearest my house works.

  4. Lisa says:

    I’m curious to know which one of the proposed cost saving cuts did the council NOT reject?

  5. Lisa says:

    Thank you!

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