Marty: On the budget, don’t fudge it (and a 10-point plan)

Pen and paper

Note: If you are not in the mood for the “How did we get here?” portion of this subject, go directly to my 10-point recommended budget/economic outline below this column.

No one in county or city government can reasonably claim that the crippling budget problems snuck up on them – they have seen them coming for years. Unfortunately, they succumbed to human nature and political expediency by putting off all the tough decisions until their backs and our backs were to the wall.

Now the city has presented an austerity budget that has three purposes. First is to do the absolute minimum of planning. The second is to forestall any ideas that they oppose politically – such as consolidation, overhead reduction, and pension/benefit reform. The third is to scare the bejesus out of the residents so they will approve a 10-year sales tax extension without asking too many questions about the last five years. My best estimate is the new tax will cost more than $40 million over a decade. That’s too long and – worse – there is no plan on how to use it.

The city council says that the austerity budget is not written in stone, but it’s hard to believe that the entire thing did not offer a single alternative to closing up shop – only visions of a filthy, boring, crime-filled city burning to the ground for lack of sanitation, recreation, police and fire protection. Those scare tactics worked before – why not try them again?

The county initially took the right steps, albeit significantly late, and then faltered. They appointed an ad-hoc Budget Committee that could operate in private and work up a comprehensive program of reform recommendations, analysis, and offsetting options without all the vested interests breathing fire down their necks. They could then move to budget hearings and present their work to the board and the public as a solid foundation for discussion and decision-making, but that never happened. I cannot say if they were overwhelmed by the scope of the problem or did not want to suffer the pushback that was sure to come from every party, but they produced nothing on the toughest – and most costly – issues. They barely nibbled at the edges of the others often taking from Peter to pay Paul.

Actions have consequences, but so does inaction and now we are facing tough decisions with a dwindling shot clock. Solutions are available, but we cannot seem to generate the will to adopt them in a thoughtful manner. There are simply too many split loyalties, petty jealousies, personal conflicts and political interests. Put it on our collective tombstone: Here lies San Benito county and Hollister – victims of self-inflicted wounds.

Government budgets and jobs exist only to serve the public interest. The government has to be willing to reduce the cost of services if they want more money in tough times. Likewise, if the employees are unwilling to make significant concessions to get the unit costs down, then massive layoffs are in the offering. The public is not off the hook – if they want more services than a truly frugal budget can supply they will have to pay for them though fees, taxes, or a combination of both; you can’t get something for nothing.

Attached online is an outline of my recommended budget/economic plan outline for the county and the cities. Implement these recommendations jointly to whatever degree the law allows. One final note, when you write me please don’t tell me what other people, work groups, or interests should give up. Tell me what you’re willing to give up.

Marty Richman’s recommended 10-point budget/economic plan outline

These recommendations are a comprehensive all-up plan; if a major item is added, excluded, or significantly modified, then something will have to change to take its place. It requires multi-jurisdictional cooperation to benefit all; it also contains some strategic and tactical advice.

1. Taxes:

a. The city should withdraw any sales tax extension legislation.

b. The county should enact a countywide emergency sales tax rates effective on Measure T expiration, for various areas to get everyone in the county to 8.25 percent, the Hollister rate, and transfer the portions above basic 7.25 percent generated in the cities and other specified areas back to them, and keep the rest. Assuming Measure T expires, Hollister, Idria, New Idria, Tres Pinos and San Benito County would get one-percent back. San Juan Bautista would get 0.25 percent – they are currently at 8 percent. If they dropped their local rate back to 7.25 percent, they get one-percent back.

c. The tax should run for five years from the Measure T expiration. All entities need the funds and it is silly for the county to offer a lower tax rate when most of the county’s population is in one city. Having one sales tax rate makes it easier for the merchants and fairer. The shorter five-year tax term will force all entities do something about our economic condition.

d. A portion of each entity’s sales tax should be dedicated to offset a PROPORTION of use-based cost for the library, animal shelter, and recreation, which are countywide benefits.

e. Even if given the opportunity, Hollister must shun renewal of the RDA, $75 million in debt is enough and we did not get adequate economic stimulation to cover the cost and long-term hit to the tax base. We have to restore the tax rolls; it will take decades, but we have to start.

2. Fees:

a. The users of the library, animal shelter and recreation and other specialized services will also have to pay something or more for the services – the “free” in free library will have to go.

b. Use more volunteers at the library, animal shelter and recreation. Those volunteers and their organizations will be given discounts for the services. In 2010, it cost the city more than $158,000 for temporary Parks and Rec. help.

c. Within 3 years, we must have a long-term plan to make all of them self-supporting with the users paying the biggest share.

3. Identify and divest unneeded/excess assets:

a. Stop holding land and any other assents for which there are no real plans – sell them.

b. Not only do we get a one-time boost from the asset sales, but we also get the real estate properties back on the tax rolls where they belong and, perhaps, some economic activity at those locations.

4. Reduce personnel costs:

a. General Fund personnel costs are 65 percent to 75 percent of the budget problem, reducing them has to be a major part of the solution or nothing works.

b. Both the city and county CalPERS employees must agree to pay the entire employees’ share of CalPERS retirement to be phased in over a short period. There is simply no reason for the taxpayers to pick up any of the employees’ share the best retirement systems in the world – period. Using the June 2010 payroll figures that change would save $1.5 million a year at the county and $620,000 at the city.

c. All the entities must also phase in a limit to healthcare costs because they are much too expensive. Look into buying plans together to get a better deal for everyone. All the savings realized should go to reducing furloughs and hiring added staff to beef up essential services at second-tier retirement rates. A 10 percent reduction would save $130,000 at the city and up to $280,000 at the county.

d. Ruthlessly get rid of the expensive and unnecessary overtime. There is something very wrong with a system that eats up every surplus dollar with increased overtime and has managers saying, “It’s cheaper to pay overtime than hire someone.” How about, “It’s cheaper not to hire someone or pay overtime by better management.”

e. If the county has not already done so, get rid of OPEB (other post-employment benefits) – especially lifetime healthcare – for new hires. There will be no savings on current retirees or employees, but it stops the bleeding for future hires.

f. Reduce standby pay and multiple overhead charges by having entities cover for each other. After all, it is “standby.”

g. Eliminate costly and unnecessary benefits, cars taken a long way home, excessive cell phones or expensive plans, excessive vacation accruals – that saves $1 million in debt, car allowances that do not make economic sense, modify overly generous uniform allowances, and similar items. We are down to asking, do you want the allowance or do you want the job?

5. Administrative costs:

a. Consolidate wherever possible; implement cost-saving mutual agreements, share equipment, implement geographic, rather than jurisdictional, coverage.

b. Consolidate the parks and recreation departments and other services with identical functions. Yes, it takes hard work to make them fit, but we get a long-term benefit, more services for a reduced cost and lower overhead rates.

c. Save the public money by reducing franchise fees and overhead charged back to special funds – reduce rates accordingly. For the taxpayers it’s all about the bottom line. If the sewer, water or trash rates go down then the sales tax hurts less.

6. Hold the line on General Government Expenditures

a. Hollister’s current budget projections include a $1.2 million – 70 percent – increase in General Government expenditures in FY 2012-2013. That simply cannot happen considering the projected revenue stream.

b. San Benito County also needs to hold the line in this area.

7. Reserves:

a. In addition to prudent reserves, each entity should take 10 percent of the sales tax increment annually and create a special reserve/opportunity fund to be used to help fund economic proposals that have an immediate or very short-term payback to the entity.

b. Fund portions not spent will provide an added safety net.

8. Economic Development:

a. Stop concentrating on killing the commute – look at the pay differentials and economic realities – it is not going to happen.

b. Pick the low-hanging fruit, which is our huge under performance is retail sales, accommodations and lodging, food services, entertainment, tourism and events; all those things that generate economic activity. Increase local and imported discretionary spending; build it and they will come.

c. Run you own stimulus program, start using some of those funds designated for everything from wildlife preservation to storm drainage to improve our infrastructure and attractiveness.

d. Make some sense of impact fees, traffic diverted from shopping in Gilroy does not increase local traffic impacts; it actually reduces them. Build things at critical intersections and high-traffic areas.

e. Speed up the planning process, especially for commercial development – stores, services, etc.

f. Stop trying to build so much affordable housing, it does not pencil out and never will. We have built plenty in the city; team with the county on future projects. Too much low-end housing has only added to our economic woes.

g. Go up-market. Upscale housing and retirement communities pay more taxes and need fewer services.

h. Make sure all new developments have a mechanism to pay for their operating costs because that is the long-term budget killer.

i. Make good business decisions; do not do something just because it has a short-term gain if it is going to have a long-term cost.

j. Don’t build public works like fire stations unless you know how you will pay to staff them.

k. Gather real information on how the county and its cities work economically so we can make better decisions. Fight for what we need such as the expanded Highway 156 improvement.

l. Get Gavilan College and other public agencies to do more than just use money – they are already too good at that. They need to get in the money-raising and economic stimulus business.

9. Get help:

a. Go for grants and other federal and state programs.

b. Pressure our representatives; do not be too isolated or proud to ask for their help even from their staff people. Insist on a fair share from Sacramento and Washington.

10. Get in everybody’s business:

a. If the schools have problems, or we have gang issues, or the water or sewer lines keep breaking no one s going to want to put commercial development or businesses here. Everything is affecting the quality of life and public services needs attention – are to going to run agencies like AMBAG and COG, or are they going to run us?

b. Set measurement systems and goals. Hold frequent program mini-reviews and receive short reports on key projects; where are we on schedule, budget, funding, etc.?

c. Look to the taxpayer’s total costs, not just the cost imposed by each political entity. Get rid of the silo mentality of “that’s mine and that’s yours” – it is all ours.

I hope that is enough to get started.

Marty Richman is a Hollister resident. His column runs Tuesdays.

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