When City Manager Eric Levitt presented his revised Fiscal Year 2020-21 budget last week, the staff report made his priorities clear: “First, the approach to the budget is to limit layoffs. . . . We anticipate bringing back part-time employees . . . [and] are presenting a budget that does not lay-off any full-time employees at this time. . . .”
That’s good news, to be sure, for those who work for the City of Alameda (and the unions that represent them). Our municipal employees are certainly better off than many other workers throughout the state: 2.3 million Californians lost their jobs last month, and, as the Los Angeles Times reported Friday, “employment experts fear that many of the job losses could be permanent.”
It remains to be seen, however, whether Alamedans anxious about the City’s finances will have cause to applaud Mr. Levitt’s approach of maintaining full employment for City workers while looking for cost reductions elsewhere.
The City Manager’s proposed budget projects an operating loss of approximately $2 million next year, which will be covered by withdrawing funds from the so-called General Fund “reserve.” The amount of the deficit does not seem like a lot compared to other Bay Area cities, but it is only the first trickle of red ink on the City’s books: the five-year forecast predicts operating losses of $5.9 million in FY 2021‑22; $9.9 million in
FY 2022‑23, and $12 million in FY 2023‑24, which will exhaust the “reserve” and draw down the balance in the General Fund to a mere $3 million by the end of the period.
In coming up with the budget, Mr. Levitt appears to have wielded a scalpel rather than an ax (or even a meat cleaver). He proposes a net reduction of $1.8 million in General Fund expenditures from the amount approved by Council in June 2019. This figure, however, encompasses both cost savings and new spending, and the details are interesting.
For example, Mr. Levitt proposes to save $784,669 by “reducing facility replacement charges.” We couldn’t find this exact number in the original FY 2020‑21 budget, but presumably it represents a chunk of the $2.4 million budgeted to be spent out of the General Fund for capital improvements. We don’t know which projects will be foregone, but the anti-automobile, pro-bicycle crowd need not worry: Mr. Levitt also is proposing to increase – by $200,000 – the amount spent on “traffic calming.”
Looking at the other proposed cost reductions. the fire department and the recreation and parks department, as is often the case, occupy the opposite ends of the spectrum.
The sole cost savings from the fire department on Mr. Levitt’s recommended list consists of $848,000 in “vacancy savings.” According to Mr. Levitt, the “vacancies” to which he refers have resulted “mainly” from “retirements and turnover.” Presumably, the “savings” consist of the salary and benefits the City won’t have to pay the departed employees.
Of course, unless the City imposes a hiring freeze – and Mr. Levitt does not even hint at one – a “vacancy” in an authorized position can be filled with a new hire, and, if that occurs, the “savings” will disappear. In the meantime, the fire department can maintain staffing at its current level by paying overtime to existing employees – which offsets the benefit of any “vacancy savings.” We’ll have to wait until FY 2020‑21 is over to know whether the department actually spent less than the originally budgeted amount on personnel.
At the same time, Mr. Levitt is recommending seven items of new fire-department spending totaling $637,500. More than two-thirds of this amount – $477,000 – will go to keep a division chief and a firefighter on the City payroll even though the grant that had been funding the positions expired in February 2020 and they were supposed to have been “deemed eliminated from the Fire Department’s authorized staffing” upon expiration of the grant.
The funding in question came from Alameda County and enabled the City to set up a “community paramedicine” program in July 2014. Originally, the grant paid the full salary and benefits of a division chief and two firefighters, but the City reduced the staffing to one firefighter – while retaining the division chief position – and began picking up part of the tab in February 2019.
Now, Mr. Levitt proposes to use money from the General Fund to pay the remaining firefighter for another six months – and the division chief for the entire year – to keep the program alive “while we see if new legislation will be passed.” During the pandemic, the City Manager told us, the program “has been valuable.”
Under the proposed FY 2020‑21 budget, the recreation and parks department won’t fare quite as well: Not only will the annual transfer from the General Fund to the Recreation Fund (which pays for, among other things, operation of the Mastick Senior Center) be cut by $200,000, the funds allocated for “playground replacement” will drop by $250,000 and the funds for “park maintenance” by $175,000. Ironically, just last June Council approved a request from the department to increase spending from the General Fund on playground replacement in FY 2020‑21 by $250,000 and on park maintenance replacement by an equal amount. What City Hall has given, City Hall can – and at least as it pertains to the parks, usually does – take away.
On the other hand, the revised FY 2020‑21 budget for the recreation and parks department includes $300,000 for “emergency repair projects” – which, given the other cuts, may come in handy.
Mr. Levitt’s approach of maintaining full employment while looking elsewhere for cost reductions isn’t a unique way of dealing with the fiscal impact of the coronavirus crisis. Indeed, it is consistent with the requirement in the federal Paycheck Protection Program that, for a “loan” to be forgiven, an employer must keep its entire staff on the payroll for eight weeks and spend at least 75% of the amount received for wages and benefits.
But it isn’t the only approach the City Manager might have taken.
One time-honored strategy used by public-sector employers (and others) to deal with the impact of declining revenues is known colloquially as “LIFO” – i.e., cut payroll expenses by laying off workers in order of seniority; the most recently hired are the first to be let go.
The LIFO strategy has its critics, but we thought it would be instructive to see how it would have worked for the City of Alameda. Human Resources Director Nancy Bronstein was kind enough to provide us with a list of all of the new positions authorized by Council since December 2018. We then got the compensation associated with each position from the “fiscal impact” section of the relevant staff reports. (Where the staff report gave a range, we picked a mid-point between high and low.)
Here’s the result:
For the sake of completeness, we should also probably add to this list the two occasions on which Council voted to pay a third party out of the General Fund to provide services to Alameda residents using the third party’s own employees: $500,000 appropriated in November 2018 for Centro Legal de la Raza to furnish legal services to tenants for three years, and $100,000 appropriated in December 2019 for Alameda Family Services to offer mental-health services to high-school students for a year.
Now, our point is not that Mr. Levitt should have chosen a LIFO strategy as the way to deal with the fiscal impact of the coronavirus crisis. Unlike the self-proclaimed experts in the White House – and on the dais in Council chambers – we don’t claim to know everything. Rather, we simply want to point out the fiscal result such a strategy would have produced for the City: annual savings of about $3.5 million in personnel costs alone.
Looking at the chart brings to mind two other strategies used by businesses in tough economic times that Mr. Levitt might have proposed for the City of Alameda.
One is to cut back on the number of highly compensated managerial employees. Just as a shareholder in a private enterprise may ask, “How many executive vice presidents do we really need to run our business?”, an Alameda taxpayer may very well ask, “How many division chiefs does the fire department really need to protect the public?”
As the chart shows, Council approved adding a new division chief’s position in March 2019. That brought the total of senior managers to seven for a department authorized to employ 81 firefighters (including fire apparatus operators) with 22 captains already authorized to supervise them. According to Public Information Officer Sarah Henry, the department now has an Acting Chief; a Deputy Fire Chief of Operations; an Interim Deputy Fire Chief of Support Service EMS; a Division Chief/Fire Marshal; and three Shift Division Chiefs. (The fire chief’s position is described as “Acting” because Fire Chief Edmond Rodriguez has been on an indefinite “non-COVID-19-related” medical leave since the week of March 23.)
Last year, the fire department’s senior management team was paid a total of $1,897,709 in salary and benefits. Since then, there have been changes in the identity of the persons holding the top jobs – former Alameda firefighters’ union president Jeff Delbono is now Deputy Chief of Operations – but we can’t help but wonder what Bernie Sanders or Elizabeth Warren would have to say about this concentration of compensation in the upper tier. In any event, is it really necessary to have a division chief to supervise the one firefighter in the community paramedicine program and another division chief to supervise the two firefighters in the fire-prevention bureau (which also has its own captain)?
(By way of comparison, the Livermore-Pleasanton fire department serves a population of 171,385 compared to the 77,624 people in Alameda, and it has 121 full-time employees compared to AFD’s 117. Its senior management consists of a chief and three deputies, whose aggregate salary and benefits in 2018 were $1,275,995.)
Our alert readers also may have spotted the six new firefighters whose hiring was authorized in the FY 2019-20 budget at an annual cost of $1,147,035. These are the firefighters who will staff the new ambulance – number four in the City’s fleet – approved at the same time.
According to the recent staff report, “The fourth ambulance will be delayed in going
on-line,” but the cost implications of that delay are unclear. The City has bought the ambulance, Mr. Levitt told us, and it appears that it also has hired the six new firefighters, but they’re performing other duties. In any event, the list of recommendations does not identify any cost savings directly resulting from keeping the fourth ambulance out of service.
As the chart shows, the fire department isn’t the only department whose head count has increased since the current Council took over in December 2018. The City also has added a chief assistant City attorney, a (regular) assistant City attorney, and a paralegal to the City Attorney’s Office. There are now six in‑house lawyers – four with the title of assistant City Attorney and two with the title of deputy City Attorney – reporting to Chief Assistant City Attorney Michael Roush and City Attorney Yibin Shen.
We asked Mr. Shen about the division of labor among his six-attorney staff. He told us that, “While each attorney has specific assignments, they are also able to cross support each other.” At present, he said, one attorney is assigned to Prosecution; one to Risk Management and Finance; one to Land Use and Transportation; one to Real Estate, Economic Development, Base Reuse and Public Works; one to Fire, Police, Building & Safety, Code Enforcement, Rent and certain Litigation, and one to Litigation, Public Records, Human Resources, Information Technology, Library and AMP.
Now, as it happens, we do know something about small-law-firm management (although our partner, Jim Hughes, would dispute how much), so we appreciate that a firm may strive to assemble a team of “Super Lawyers” with their own distinct specialties. At the same time, we also are aware that one strategy used by law firms experiencing a decline in revenue is to trim personnel costs by combining practice areas so that one lawyer can do the work of two. We don’t know whether such a consolidation would work in Mr. Shen’s shop, but it apparently wasn’t one of the steps proposed to cut General Fund expenses.
Of all the approaches we’ve discussed thus far, the one chosen by Mr. Levitt of maintaining full employment while looking elsewhere for cost reductions is surely the most politically palatable. But if any of our readers wants to look at another alternative that has absolutely no chance of happening in Alameda, we suggest getting on the City of Hayward website and reading the story headlined, “Hayward firefighters, City Manager and Council members give up pay increases, agree to cuts amid COVID-19 revenue declines.” Yes, it’s true: the Hayward firefighters, fire department managers, and city manager agreed last week to give up two percent salary increases they were scheduled to receive on July 1, saving the city a combined $487,215 in FY 2020‑21. (The mayor and councilmembers agreed to take similar cuts.)
Alameda firefighters just got their latest pay hike – 3.88 percent – on January 1, 2020. Anyone want to bet that IAFF Local 689 members will follow the lead of their Hayward brethren and turn down the raise?
We didn’t think so.
Revised FY 2020-21 budget: 2020-05-20 staff report re mid-cycle update; 2020-05-20 Ex. 1 to staff report – FY 2020-21 General Fund Budget Summary; 2020-05-20 Ex. 3 to staff report – General Fund 5-Year Forecast; 2020-05-20 Ex. 4 to staff report – City Manager Recommended Budget Adjustments
Capital improvement program: 2019-06-18 Ex. 3 to staff report – Capital Improvement Program
Rec/park FY 2020-21 budget: 2019-10-08 staff report to Rec-Park Comm re budget
New personnel: 2019-03-05 staff report re new fee schedule & division chief; 2019-03-19 staff report re FY 2018-19 budget; 2019-06-18 Ex. 5 to staff report – Recommended Workforce Changes; 2019-09-03 staff report re new CAO positions; 2019-10-01 staff report re new CAO position; 2020-01-07 staff report re recreation assistant; 2020-03-03 staff report re mid-cycle update