Jun 21 2012

OPINION: The Glass is Broken

A response from the Chair of the 2011 Municipal Tax Review Committee to a recent Piedmont Post Opinion from Council Member Jeff Wieler –
In his last two “Piedmontage” columns in the Piedmont Post, Councilmember Jeff Wieler argues that the City has solved the problem of employee benefit costs and that City finances are in good shape.  He criticizes those who see the issue otherwise as “glass half-empty” types.  Sadly, Jeff is ignoring some critical facts:

•       The new City budget is up by $389,000, and 94% of that growth is due to increases in the cost of employee benefits.  Overall, benefit costs are up by 6%, but 12% for the police.  Benefits are at an all-time 26% of the total City budget.  Every $100 of salary is accompanied by almost $60 of benefits.

•       The recent report by the City’s Budget Advisory and Financial Planning Committee estimates that the unfunded liability for employee future benefits is about $40 million, which is twice the City’s annual budget.  This comes to about $400,000 for every current City employee, an amount that would shatter Jeff’s metaphorical glass.  Or about $10,000 for every household in town.

Jeff asserts that the City did not go to the current high benefits until 2008.  In reality, the City committed to them in 2003 and proposed to double the parcel tax in 2004 to cover the costs.  That doubling [of the parcel tax] was turned down by voters, but the benefit commitments went ahead anyway.

Jeff also asserts that critics of excessive benefits want City employees to work for nothing, which is absolute nonsense.  But given that Piedmont’s benefits are among the richest in the state, it is not unreasonable to expect employees to cover future cost increases.

Jeff’s point is that the City has done all it can to control benefits and we need to renew the parcel tax to keep the City budget healthy.  Then, predictably, he asserts that failure of the parcel tax vote will cost the City its 3-minute ambulance response time.  I’m not arguing against the parcel tax, but it has nothing to do with the 3-minute response – that is entirely a function of City geography, boundaries and the location of the fire station.

But one could conclude that if the City truly controlled its benefit costs, it might be able to reduce the parcel tax.  That’s a glass half-full I could drink to.

Michael Rancer
2011 Municipal Tax Review Committee


Editors Note:  The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.

One Response to “OPINION: The Glass is Broken”

  1. Michael raises a fundamental point about the status of city finances. That is, when the city’s unfunded retirement liabilities are factored in, the glass is indeed broken. This $40M liability is not accounted for in our annual budget and is going unaddressed. What concessions have been achieved in recent contract negotiations were only intended to freeze the growth rate of that liability and as Micahel points out, even that was not achieved. Since payroll and benefits account for over 70% of the city budget, savings in these areas will have the greatest impact on that liability. And as for “working for nothing”, the median household income in Piedmont is $160K (with many two-income households) and Alameda County $70K so the city’s current pay scale is above average. I don’t think we need compare private and public sector retirement plans. The city has taken a small first step to control benefits and will need to do much more, with or without the parcel tax.

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