Palo Alto’s debate over the rising costs of employee benefits is about to get much more public.
The City Council on Monday scheduled a public hearing for September to discuss the city’s rising pension and health care costs and to formulate a “benefits strategy” aimed at curbing these costs. The idea was prompted by a colleagues memo from Vice Mayor Greg Scharff, Councilmen Pat Burt and Greg Schmid and Councilwoman Karen Holman, who wrote in the memo that “the cost of employee benefits and pensions has risen dramatically for the City of Palo Alto, reducing the funds available for our community’s necessary and valued services and infrastructure.”
The council members pointed out in the memo that the proportion of dollars paid for benefits to salaries went up from 23 percent in 2002 to 54 percent in 2010. The city projects that benefit costs will exceed salaries by 2022.
In the memo, the council quartet poses 14 questions that will spur a public discussion in September. These include, “How should the costs of pensions be shared between employers and employees?” and “How do we establish fair criteria for retirees’ contributions to health benefits?” Other questions center on such topics as fixed health-benefit contributions and the relationship between labor negotiations and adopting a budget.
Holman said one purpose of this approach is to educate the community about the challenges the city is facing in meeting the rising benefit costs and the legal obstacles that hinder the council’s ability to cut these costs. Holman said many residents underestimate the legal constraints the council faces in making reforms.
She also said the discussion will include consideration of ways to improve employee retention and job satisfaction of city workers.
Scharff said the September discussions will allow the council to discuss publicly the types of issues that normally come up only in closed session, when the council discusses labor negotiations. Those discussions, he said, are typically focused on the particular issues in dispute.
“This is a rare opportunity to think about this in a more holistic approach,” Scharff said.
The council voted 8-0, with Gail Price absent, to schedule a public discussion before the end of September to discuss the questions posed in the memo.
Fire dept- retire at age 55 with 90% of your salary. I’m I the only one that thinks this is crazy?
Initially, those pensions were offered to attract the best and brightest to Palo Alto. City Government never thought there would come a day when the city would have a hard time honoring those commitments.
Going forward, there should be a limit to the amount of compensation; but they’re stuck with their current situation.
Obamacare will push health care costs down, if the Repo party would just quit stalling on the reforms.
> Obamacare will push health care costs down
No, it won’t. It just shifts the costs from “insurance premiums” to taxes on people who, for the most part, are not consumers of health care. The City will be forced to pay these taxes, sooner, or later. So, the cost of benefits will only go up, sooner, or later.
Healthcare is not the issue here, not nearly so much as Pensions.
Never ends, does it? Promise more than you can deliver: the government way. If any private companies had pulled this, the owners and CEOs and Board members would go to jail.
Where do we turn when a government entity, from City to Federal, has ponzi’d us? There is no accountability from the ones who made the “promises”, they are long gone. FDR is long dead, and Social Security is bankrupt. Lyndon Johnson long dead, and Medicare is collapsing. Where are the city officials who made these unsustainable promises?
All we can hope for is modern courageous souls willing to fight the fight, and put up with the endless pushing from people who want what they were promised ( understandably!) but even more so, from people who aren’t willing to change the promises to the future.
Fight the fight with the Fed. Pensions have a tough time if you have a Fed intent upon bringing back to life the financial services industry (services? did I hear services?) by means of six years (08-14, as of now) of ultra low interest rates.
Start Outsourcing. Look again at the city salaries and benefits. They are out of control. Firefighters at total comp over 200K, planning, accounting and other city hall bureaucrats in the 150K range. Street-sweepers and maintenance people at 100K. These don’t even account for the extra $$ our kids will have to kick in when the pension $$ promised to these current government workers are not there because the pension fund didn’t hit its absolutely ridiculous assumed 7.75% annual return. Our local government is a cleptocracy at work. They spent so much enriching their union backers that they now can’t afford basic infrastructure maintenance. This is almost criminally negligent for a city with as much tax revenue as Palo Alto.
Palo Alto government compensation: http://www.paloaltoonline.com/media/reports/1331139371.pdf
The solution:
1. Start outsourcing. The savings will be huge and our children will be off the hook for the gold plated pensions our current bureaucrats enjoy. Plus, the private sector fires underperformers. A city worker, in contrast, has little to fear even if he’s lazy or underperforming. Just look at the planning department — they chronically underperformed, so instead of replacing them with people up to the job, the city just hired more bureaucrats.
2. Impose market rate compensation on the union workers who are not outsourced. Nobody is entitled to be paid more than the value they deliver. If they refuse to agree to structural benefit changes, simply lower base salaries 50% to account for the out of market benefits.
3. Vote out Price, Sheppard, and the other politicians that have been bought and paid for by the special interests (public unions).
No, don’t outsource. You’d have a bunch of paupers – you don’t want that. Fight the Fed instead.
“Sound and fury, signifying nothing.”
Nothing concrete will ever get done by the Palo Alto City Council.
Ernesto –
You wrote: “the pension fund didn’t hit its absolutely ridiculous assumed 7.75% annual return”.
While the returns on the pension funds have been disappointing this year and last, the 3 year average return is still 13.5% for the 3-year period ending March 31.
7.75% is maybe not so ridiculous given a longer term perspective, which is really the only way to view a long-term investment such as a retirement fund.
I completely agree with Ernesto USMC. I also want to highlight a couple one thought and add a few more:
1.) We need to remove from office asap politicians like Price and Shepherd who prioritize the funding they receive from the unions over their duty to ensure the citizens taxes are properly managed
2.) No government union employees should receive any pension pay out until minimum age of 67. They can work others jobs after they retire from government work.
3.) Government unions should not be recognized for collective bargaining purposes
If the retirees are receiving large pensions, they can pay for most of their health care cost.
Start reducing the benefits. When people stop applying for jobs, then you know you have gone too far.
As cost of benefits rise, the number of employees has to fall.
“It just shifts the costs from “insurance premiums” to taxes on people who, for the most part, are not consumers of health care. “
4 claims in that rather odd statement? Care to back it up?
Agree w/Taxpayer and Ernesto USMC. Also glad to hear that discussion is being proposed. I expect, though, that the discussion will be tense b/c the realities are stark and there are few (if any)indicators to suggest that those responsible for creating this mess understand what “we can’t afford that” really means. THINK TWICE before voting for any incumbent or former office holder looking to return to the bureacratic fold.
Wrong target. Why do you want to destroy people like you instead of those who got you into this mess?
But there you have it–the USA.
Defined benefit retirement packages for public employees are simply a way of looting the taxpayers of the future. They should be banned.
I would like to see a state constitutional amendment that barred any public employee from receiving more than the median compensation across all citizens of the state.
“4 claims in that rather odd statement? Care to back it up?”
I’m not the original poster, but what he/she said is true. The only way to make Obamacare work is force people who wouldn’t otherwise buy healthcare insurance (i.e. young, healthy people) to even out the risk pool so that they can subsidize the cost of insuring older and/or less healthy individuals.
It is indeed people who don’t need healthcare subsidizing the big consumers of it. It continues the moral hazard of the current system and doesn’t fix the problem.
The best way to hold down costs is to have less city employees.
We need to merge police, fire, libraries and as much else as possible within the county to keep the number of duplicate administrators and department chiefs down. Duplicating mini departments all over the county makes little sense any more. We need the people who do the work and fulfill the services to be well paid and content in their jobs, but we don’t need offices full of people in every city throughout the county.
It is time to revamp and merge services. We no longer need “too many chiefs and not enough indians”.
to usa, celebrate your birthday if you can, when your citizens hate one another so much and love the financial sector (the only one to get a decent living out of defined contribution pensions).
Ernesto is absolutely correct. How do we prevent the city from going down the path of convincing citizens of the “limitations” that would prevent it from doing anything real along the lines that Ernesto has proposed? How can proposals such as Ernesto’s make their way for discussion on a formal basis?
The links below point to letters sent to the Palo Alto City Council outlining ideas for the use of technology by the PAU, and the City itself, that would reduce the cost-of-services, and increase the service quality delivered to residents, over time–
http://www.scribd.com/doc/93403966/Ideas-Submitted-To-The-City-of-Palo-Alto-CA-About-Use-of-Technology
http://www.scribd.com/doc/94582553/Technology-Ideas-Submitted-To-The-City-of-Palo-Alto-CA-II
To date, no one from the City has responded, although I did notice that one of the ideas that I had previously suggested to the PAU seems to have been implemented.
Public libraries generally consume about 5% of the General Fund for most cities. The actual cost is actually higher, when all of the cost of land, and facilities is considered, but these costs are generally hidden in capital budgets, or simply forgotten by government accounting systems that make no effort to track the total costs of all of the services/functions of government.
The following two links point to short papers that look at the total costs of providing libraries, using various estimates for the hidden costs, and the cost of storing e-books, which offer society the opportunity to rewrite the cost/benefit of providing e-books over p-books in the future.
Hidden Costs of Bay Area Libraries:
http://www.scribd.com/doc/58116815/Hidden-Cost-Of-San-Francisco-Bay-Area-Public-Libraries-And-Thoughts-About-Regionalization
E-Book Storage Costs—With Implications For Rethinking Public Libraries:
http://www.scribd.com/doc/58194643/e-Book-Storage-Devices-With-Implications-For-Rethinking-Public-Libraries
e-books track what you’re doing–we don’t want any more of that if we can help it.
Place a ballot measure, and let Palo Altans decide if they would like to keep the status quo, or they would like to trim the fat, just like Mayor Reed and the San Joseans did.
> e-books track what you’re doing–we don’t want any more of
> that if we can help it.
And just who is we? E-books are about shifting from public financing to private financing. People should not be expecting the public to pay for their entertainment.
There are all sorts of “e-books”. Downloads in .pdf format do not involve much tracking. There is every reason to believe that Federal law will eventually emerge to reduce this tracking to a minimum.
While this “tracking” of personal use may be true–so what? At the moment, there is tracking on all aspects of WEB use.
The issue here is just how much public money is being poured down the black hole of special interest groups–such as those who use the library to avoid renting videos/audios. Palo Alto, and other libraries here in the Silicon Valley, has reported that video/audio circulation is between 40% and 50% of the total library circulation. Given that we are seeing the Palo Alto library cluster now costing over 7M a year, with this cost jumping to about $9M-$10M when the Measure N bonds are added to the total costs of operating this facility–the issue of “tracking” becomes difficult to measure against the vast outlay of this sort of money.
Yes, merge those departments! Send a librarian out to manage firefighting and a utility person can run the baseball fields. Nuts to that. There have to be people who know what they’re doing in each phase of city government. Cut back to a necessary minimum, but merging them all is crazy.
As for outsourcing, Ernesto, who ya gonna call when you have a gas leak, or water is lifting up the street? Or your house is on fire? Sunnyvale? Maybe San Francisco? Contractors just don’t have the same response time, and we all know that when a Palo Alto resident wants action, they want it NOW.
Stretch
My point is not crazy like you suggest, but my wording may be ambiguous.
Merge all police departments within northern SC County, likewise fire, libraries, etc.
It’s still not feasible to have one chief of police for the whole county. One fire chief. One head librarian. Might as well have one big agency, one HR, one city hall. Where would they put it? Each city has different needs, regulations and policies. What you are asking for would mean a total upheaval of all the city governments and chaos. Rebellion would ensue, as well as confusion resentment and, well – chaos.
A bit of chaos is far preferable to the rampant fraud, corruption, and abuse of the common citizen that we find ourselves saddled with today.
A bit of chaos? Surely you jest. I hope you’re not referring to all city workers when you say “fraud, corruption and abuse” They would be the ones subjected to chaos as well as the citizenry. A bit of chaos, says the man whose town has no utilities, has maybe one library and probably wouldn’t like to be combined with the whole of San Mateo county when it comes to services.
Stretch’s arguments against oursourcing are typical of those made by inefficient government bureaucrats arguing in favor of the status quo, right down to the fear-mongering (“what happens when your house is on fire?”) Efficiency and effect will INCREASE dramatically through consolidation or outsourcing.
Outsourcing will result in at the very least equal service for much reduced cost. More likely, it will result in better service for much reduced cost because any workers who underperform can be held accountable (unlike the public sector).
With outsourced public servants making only market rate, there can be many more of them on the job, or the same number for reduced cost, or some combination thereof.
The current situation of overpaying our government workers results in much worse services. How is having one un-fireable fireman making 200K better than two at 100K?
Put down your weapons…please. OK,
Please ask ask what is reasonable?
Palo Alto employees are not all city management earning 140,000-260,000 a year.
$60,000 a year is sustainability for a family of three as of four years ago!
What is the baseline? #1 City of Palo Alto employees do not receive contributions to Social Security. Why? because in the past it was far cheaper for the city. Cal Pers still has excellent returns and can only be supported by the continuation of some level of retirees. Cal Pers has been an excellent investment/return for the state and re-knowned as one of the largest and best investment organizations in the country.
How much of city services are people willing to pay for directly? 3% increase is paltry. The services for those who cannot pay could be supplied by grants. SO Save the animal shelter, the zoo, the multiple libraries and the theatre.
Note, Do puppies and kitties have more respect than employees? Or maybe we just understand function and return better with puppies and kitties. What is a reasonable cost or funding directly form their supporters? As a city, we cut family services outreach, but approved postponing the puppy and kitty issue to see about funding the animal shelter. Note I love puppies and kitties.
The costs mentioned in this article and these comments fail to identify the City of Palo Alto utility employees that are now grossly underpaid. The field service representatives earn 20% less than East Bay Municipal District, the Inspection staff earns 20% less. The electrical linemen earn 20% less than Santa Clara, The estimators make 25% below the estimatiors at East Bay Utility.
People need to support their families. How little do you honestly think the employees can survive on? Aren’t you already there?
And if you want to capitalize on Stockton’s bankruptcy shame on you.
Palo Alto continues to bucket millions – 6 million in auto, 6 million saved in fiber, 20% increase in income since last year. Building an art center and new libraries…AND 48 of the top real estate professionals in the nation in Palo Alto and Menlo Park?
The savings on hiring more people at the top wages and creating new high end positions for them? Why not hire experienced professionals from the outside to manage?
Yes we do need “a look see” – but not for many of the reasons you believe. Because you accept and receive press releases like full range facts.
Gouge employees?? Then what do you intend to do with all those poverty stricken elderly without liveable pensions? And what is the point of driving out employees earlier?
It is painful to even work for Palo Alto with the extremes of misinformation to those “overpaid” – Why do Mt View, Santa Clara, and Sunnyvale not media/press release roast their employees continually?
The threat to contract out is ridiculous..obviously you have never had to work directly with lowest bidders before.
I know I often wonder what it would be like to work in a city with citizens and management that honors it’s employees for their performance and productivity. And if management does not speak about their employees value…why is that?
How about cut the CITY MANAGER’s pay and benefits. LETS SEE he lives in an OVER 2 MILLION dollar house, has a CAR allowance, uses taxpayer’s money to RENOVATE his house AND makes over 200k a year. Stop blaming the worker bees and look up the pedestool.
FUNNY how he preaches cuts for everyone as he sits in his office on top of city hall sipping a margarita on the city’s dime!!!!!!!!!!!!!!!!!!
E&N, if you find yourself undervalued and underpaid, you’re free to change employers. It’s a free country.
We in the private sector deal with this all the time. Why do government employees feel like they’re so entitled?
What’s this in my hand? Oh, the world’s smallest violin.
Certainly government workers should receive what they deserve. The problem is that in many cases they receive multiples of that, as a direct result of political corruption.
Toady,
I took your advice and voted with my feet. I now work someplace where I feel like an asset instead of a liability. Leaving the City was the best career move I ever made. I’m making much more money and getting more satisfaction. I like to read these blogs to confirm my decision to leave. City Hall is destroying the Utilities department.
Jim Keene releases total comp numbers to the press for everyone at the City but himself. Where’s the mention of the $40k he gets above his salary towards his retirement? Lalo Perez is just Keene’s puppet.
Toady, I hate to knock you off your pedestal but Palo Alto’s pay is the laughing stalk of all local utilities. The City hired a lineman last year who lasted 6 months until he quit because he could make much more elsewhere.
Ernesto, are you still in the marine’s? I was in the Navy but I don’t sign my name USN. Your representation of Calpers is laughable. I could hand pick years where they had better than 20% return. You can’t sensationalize a bad year and cry we’re all doomed. The contribution is high now but projections are they will drop.
Wayne, I read your letters and they had a few decent suggestions. I have to question the robotic street sweepers and lawn misers.
Outsourcing, well you get what you pay for. That is such a 1%’er thing to suggest.
A city is not a private club. It should be accountable.
The crass comments about “go elsewhere” do not acknowledge employee performance and the entirety of my comments.
People shouldn’t be gouged opportunistically. AND why is it Sunnyvale, Mt View and Santa Clara can pay their employees fairly and treat them decently…? What does that say about the management of Palo Alto?
Performance as future projections? What about now?
The reflection of a salary of 160,000-260,000 a year are not examples of vast majority of employees performing work on a daily basis who are grossly underpaid (previously mentioned) yet not acknowledged for their sacrifice…
Your comments are anot acknowledging an equitable or accountable way of evaluating productivity.
City employees should have the same as people in the private sector (taxpayers paying for the city employees). NO pensions — just 401(k)s. NO employer-paid medical benefits — you wait for Medicare or find your own insurance.
Also, the city managers negotiating with the unions have a conflict of interest, because they get the same kind of benefits, so they are never going to do away with those unaffordable benefits. An outside neutral party needs to do the negotiating.
Palo Alto contributed to Cal Pers retirement to save money and not have to contribute to social security.
City of Palo Alto employees do not gain social security.
401 K private business get social security.
Cal Pers had great returns this year. The problem was that there was no cost smoothing in the past for good times or bad.
Something Cal Pers must address.
On a neutral negotiator? We would welcome a neutral party…but isn’t that “arbitration”?
The citizens turned down arbitration
because it was politicized by the city managements lawyer, at the time, as something along the lines of
“The citizens… don’t get to pick the arbitrator and that isn’t democratic?” when in reality an arbitrator would be more likely to fully analyze both sides. Now why would we want that?
So the citizens get bamboozled again by not reading between the lines.
No arbitrator…no open analysis of city.
So when you read about the city, it’s finances, it’s innovation. Think realtor, developer, and management of politics. Certainly not facts, accountability, or analysis.
It’s interesting to note that the city workers and their defenders (the ones with their pensions backstopped by the taxpayers) are the ones on here arguing that the CALPERS rate of return is sound, and trying to shout down the taxpayers who are on the hook to backstop CALPERS if it falls short. These same workers are the ones who are smugly entitled to having all risk to their retirement funds put on the taxpaying public.
7.75 may have been tenable when treasuries were in the 5% range. With treasuries at near zero yield, CALPERS has to turn to increasingly risky investments to keep chasing 7.75. And if they screw up, simply demand the taxpayers backfill the trough.
I for one have had enough. The 70% of voters in conservative San Diego and liberal San Jose certainly seem to agree as well.
And citing social security is bogus — it’s ~30K per year at 67 when firefighters in PA are retiring with pensions over 100K in the early 50s. How about the city caps pension payouts at social security levels, and supplements the retirement with a 401k contribution. If its good enough for the private sector, it’s more than adequate for the public sector.
You ungrateful private sector types should quit complaining about what we got and mind your own business. How would you like having your salaries and benefits posted online??? Yes we make a lot but this is an expensive place to live and retire. Get over it already. I’m sick of all the jealous haters blaming us for everything.
Holistic approach? How about public flogging?
There are certain times when the higher road should take precedent, and that could be that we actually look at city finances and cost of living. And be reasonable.
Why should I as an employee take these huge cuts and top city managemnt does not?
Why should the employees at the bottom take these huge cuts and the citizens care more about the cats and dogs?
The city council knows that it can easily enrage the vocal sector of the public to do their worst to the employees. It’s that kind of political climate. Hurray for you.
City worker: Your ironic post was great! The employers who pay the employees should stop complaining about the cost! Love it! A bit subtle, I think, but great,nonetheless. Sort of like Homeland Security complaining that people who want limited central government are “terrorists”. heehee
Next year’s budget (2012-2013) is around $5 million more than the current year’s budget. For a $5 million increase in budget, we see the city council slashing services, like the animal shelter, and traffic enforcement. These cuts in service, along with the $5 million budget increase are being used to increase the compensation (salary + benefits) of selected employees, as well as fund some pet projects. Look at the salary data, and you will see than over 400 employees earn more than $100,000 per year; and benefits add another 50% in compensation.
So don’t be fooled by all the “spinning” be done; the city operating budget is growing; the city has more money to spend than they did last year; they are just choosing to spend it on enriching selected employees, rather than maintain current services. We have an election coming up with 4 council members up for election. We need some new council members who will force some financial discipline, and be able to force some compensation cuts to those selected city employees who continue to grow their compensation at the cost of existing services.
Vallejo
Stockton
Mammoth Lakes
San Jose*
San Diego*
Palo Alto?
These comments are hilarious.
City Worker – “How would you like having your salaries and benefits posted online??? “
E&N – “Why should I as an employee take these huge cuts and top city management (SIC) does not?”
A mentor of mind told me once, if you don’t like where you are, “change your attitude or change your location.” Sound advice for a few folks here.
The system should be set up so that you start your retirement at the same age you would have gotten social security. Paying from age 50 to 62 is crazy. How many employees qualify for added compensation from being hurt on the job their last year before retiring is also something that needs looked at…what a line of bs. Check out how many firemen/policemen do this.
Why nine council members? Look at cities the same size as PA in the nation and you wont find councils that size. It has lead to a disfunctional leadership. Nothing gets done. We have one of the worst El Camino business strips between Menlo Park and Santa Clara. If you want too solve the pension situation you cant have a leadership structure that is designed in the current PA log jam. Look at any department in the city and you will eventually find the same overloaded design flaws. Amend the city charter through a city wide vote to get back a functional government. Start with a smaller council.
It’s good to see that the tax paying private sector is getting tired of funding such lavish salaries and benefits for the government unions. The votes in San Jose and San Diego don’t lie. The fact of the public sector feels entitled to retirement benefits far greater than the taxpayers to pay them is beyond aggravating.
Politicians who continue to sell themselves to public-sector unions need to be held accountable. Paying government workers twice what the market sats they’re worth is asinine. How can the council plead poor when we’re paying six figures for hundreds of city bureaucrats and even more for their pensions. I agree it’s time to outsource.
“The fact of the public sector feels entitled to retirement benefits far greater than the taxpayers to pay them is beyond aggravating. “
I think it’s more about honoring previously agreed upon contracts. How is it different than the bonuses given to the Wall Street bankers that had to be “honored” even when the firms were taking government bailouts?
There is the entitlement I speak of. honoring everything that was promised to the special-interest unions, even though the promises were made by politicians on their payroll is just fine, but given the current state of massive overcompensation in the public sector, the way forward is simple: outsource anything and everything and let the market decide what services are worth, not union backed politicians.
Where was this devotion to honoring previous agreements back when CALPERS lobbied for and received huge retroactive pension increases, promising their bought and paid for politicians that it wouldn’t cost the taxpayers a dime. Now that that has proven patently false, the very same logic merits a huge retroactive correction.
No one seems to be upset the healthcare industry is causing these costs? You blame the people that put the contracts in place, but most of the council members were around time and time again when the contracts were re-ratified. They make me sick. I will not vote for any incumbent any longer.
If I know I am going to retire soon, and don’t save any money to pay for it, who should I blame?