Rob Douglas: City staff costs jump

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Rob Douglas

Rob Douglas' column appears Fridays in the Steamboat Today. He can be reached at rdouglas@SteamboatToday.com.

Find more columns by Douglas here.

If you were listening closely Tuesday, you heard alarm bells emanating from Citizens Hall in Steamboat Springs. The alarm was triggered by a report presented to the Steamboat Springs City Council showing that city employee costs may soon consume more than 90 cents of every sales tax dollar collected by the city.

In spite of questions raised by the report that should have caused the city’s elected fiduciaries to hit the pause button before granting raises to city workers, a bare majority of the council — Kenny Reisman, Walter Magill, Kevin Kaminski and Sonja Macys — authorized more than $1 million in “compression” raises during the next 18 months. And, on July 3, the council might authorize “market” raises that will add millions more to employee compensation during the next five years.

This was done even though starting next year the city will begin to draw down its reserve fund in order to cover millions of dollars in Iron Horse Inn debt payments and transfers to the capital projects fund during the next several years.

Let’s back up a moment.

During the past three years, the City Council as well as the city’s management team and employees have done a good job of maintaining services while building the city’s financial reserves in order to be prepared for the possibility of an extended period of minimal economic growth or another recession — possibilities that now are probabilities given a deteriorating global economy.

Truth be told, because of a series of irresponsible, profligate city councils that never saw an Iron Horse they wouldn’t mount, spending was out of control long before the onset of the recession. The spending binges of those previous councils cemented financial burdens that already have reduced the economic freedom of Steamboat. Fortunately, those spending junkies were cast into the shadows of the Great Recession with the bootprints of voters on their buttocks.

With a few exceptions, those spendthrifts were replaced by fiscally prudent council members who cast out the old management team and brought in a new team that can read a spreadsheet. Since those changes, our little micropolitan has been doing better than most across the nation.

However, since the Frankensteinian recession may yet rise again, this is no time for the council and management team to go wobbly by increasing employee compensation before examining why increases in employee costs are outpacing sales tax revenue and what steps — if any — need to be taken to address this reality.

In 1992, 65 percent of city sales tax revenue was needed to cover employee costs (sales tax revenue makes up approximately 70 percent of all city revenue and was chosen by the management team as the yardstick to measure employee costs). By 2011, it was 86 percent. If the council authorizes the full employee compensation package that the management team has recommended, upwards of 92 percent of sales tax revenue will be consumed by employee costs starting next year.

By way of partial explanation, the management team pointed out that workers compensation insurance jumped 40 percent last year. The council also was reminded that city employees pay nothing toward their health and dental insurance and can cover their family for $200 per month.

Still, even though rising insurance costs, the shift to a paid fire department, and reduced sales tax revenue during the recession probably are at the heart of employee costs rising faster than city revenue during the past decade, a full inquiry as to why those costs are just a hop, skip and a jump from equaling total sales tax revenue is warranted — especially because the management team admitted they were not prepared to supply a detailed answer last Tuesday.

That is why the City Council — even faced with a room full of city employees hanging on their every word — should have deferred any decision to increase employee outlays until they have a complete handle on why employee costs are consuming a larger and larger portion of available funds. Instead, the majority of the council that voted to release funds for compression raises acted rashly, emotionally and unwisely.

Before that error is compounded by authorizing additional millions in raises, the council must ensure that escalating employee costs will not consume revenue to the degree that the economic future of the city is endangered by the use of reserves that may yet be needed if a deteriorating global economy comes sweeping down Rabbit Ears Pass.

Since 1998, Douglas has been a commentator on local, state and national politics in Washington, D.C., Maryland and Colorado. To reach Rob Douglas, email rdouglas@SteamboatToday.com.

Comments

Scott Wedel 1 year, 10 months ago

D*** right!

Salary surveys are the biggest scam because they achieve their objective of their masters to justify pay increases for city employees. There have been studies examining these salary surveys showing how two places can both look at each other's pay scale and both find that their employees are underpaid. Their various correction factors for things like population, cost of living and so on will almost always result in a determination that their employees are underpaid.

Just as with the private sector, the most accurate measure of the competitiveness of an organization's pay structure and benefits is a comparison between the salary and skill set of those that leave vs the skill set of job applicants and their salary demands. I see no evidence that SB has been unable to hire qualified applicants into open job positions.

Also, we hardly need a global crisis to hurt local sales tax revenues. One good forest fire could instantly send SB tourists going elsewhere.

We also have the longer term threat of the unsustainable airline subsidy program that is expected to also have ever escalating costs. What is supposed to happen in a few years when we are already spending millions on airline subsidies and facing fewer and fewer seats?

It is depre4ssing to see the difference in how private companies are reorganizing to be efficient while government has done so little to change.

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cindy constantine 1 year, 10 months ago

Right on, Rob and Scott!! Many small business owners are still struggling to keep their doors open and are trying to keep from laying off any more employees. These same business owners and their employees pay their own insurance costs and fund their own retirement plans. The "gauge" should not be based on what other municipalities pay their employees, but the ability to hire qualified individuals to replace the "disgruntled and underpaid" city workers. Every citizen in this town has friends and neighbors who are under or unemployed. With the recent sale of Timberland (Smartwool) to a larger manufacturer, there are some very qualified people from the accounting department now looking for jobs as their positions were returned to the new "home office." Shame on Council for NOT looking out for your constituency!!

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Scott Wedel 1 year, 10 months ago

BTW, remember that lame budget allocation game put up by city staff earlier this year? The one that let citizens to try to balance the city budget by deciding what should get full funding vs no funding? I do not recall there being an option for a million for compression pay increases. I wonder how many people would have made that a priority over all of the other options.

Oh well, might as well also call this the 2014 city layoff and pay freeze act.

And my previous private company comments was not about whether or not local businesses are doing well. Whether or not private sector companies are doing well does is not a measuring stick on whether city pay scale is appropriate. I was trying to focus on how private companies are reorganizing to lower their costs. That HR and finance depts are getting much smaller as they utilize tools to automate more. And a private sector mentality would ask Planning how the rules can be modified to have the same net result, but be easier to process with less staff time. And how organizational structure in the private sector keeps getting flatter with fewer and fewer managers supervising more and more people. City should be reorganized to remove management responsibility for at least 25% of current managers.

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cindy constantine 1 year, 10 months ago

You are right of course, Scott--it should not really matter how the private sector is doing as regards the compensation for public workers, but it does send a disturbing message. To pay for the compression and annual pay increases with unreliable tourist revenue, is Council sending a message that new revenue sources will have to be looked at soon--ie property tax increases? That is what this decision is setting us up for with continued uncertainty at the national level. And I am not saying the City employees do not work hard and may have earned a "cost-of-living" pay adjustment. But you are correct when stating it should come from internal restructuring vs. spending existing reserves. Yesterdays bone-headed move by the Fed to artificially keep interest rates low is one more example that we better hunker down for a long term painful fall--pay now or pay big-time in the future. And if the locals are marginally getting by, who will be generating sales tax dollars during the shoulder seasons if not the locals?

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rhys jones 1 year, 10 months ago

The smug bastards are little more than sanctioned thieves. I can't wait for the day the whole tent collapses, as the Chinese will run things much more efficiently.

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Scott Wedel 1 year, 10 months ago

In the real world of economics, employees in a sizable organization like City of SB do not "earn" pay raises as a group. Individuals earn pay raises by getting promoted. A job description has several levels so a person can be hired and then after learning the job then can be promoted to a higher pay grade while still doing the same job, but now at a higher skill level.

I have looked at the materials created by staff to support a pay increase. Their entire argument is based upon their comparisons to other cities. They made no attempt to argue that positions are going unfilled. Nor did they argue that people have remained because they believe they were promised compression pay increases would occur in 2012.

The question not asked is why has City of SB been able to retain and attract competent city staff despite persistently underpaying them (if the salary survey is to be believed)?

The chart on the number of full time positions vs city population is particularly meaningless. Not sure if they were arguing that city was bloated in the past. Or if having fewer employees means city staff is now wasting less time than before. Absolutely no hint that there is worthwhile work not being done due to a lack of staff.

Overall, the salary survey presented none of the information that should matter (able to retain and attract qualified staff, or important projects waiting for staff able to work on them) and presented lots of information that does not matter.

A leading CEO like Larry Ellison would take a salary survey like that and tell the authors that they convinced him that they think they would be better paid elsewhere and so he is considering this to be their letter of resignations. And be escorted to the street.

Overall the salary survey was far more of an emotional appeal to a sense of fairness (generosity?) towards city employees and extremely thin on data suggesting the city faces problems unless salaries are increased.

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Fred Duckels 1 year, 10 months ago

With much of the revenue going to payroll, my concern for a long time has been the retirement and benefit cost of this workforce. Across the country this legacy cost is the gorilla in the room Government in any capacity requires trimming with an axe daily.

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cindy constantine 1 year, 10 months ago

It does not matter how you "spin" the data--working for the city, county or the feds is still one of the best paying, safest gigs in the community for your long term financial well-being even if a raise was not part of the equation.

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jerry carlton 1 year, 10 months ago

I tried for 12 years to get a year round city, county, or school district job. Closest I ever got was a seasonal job driving city bus. I wonder if I was trying for 12 years because those were the best paying jobs with the best benefits in the county?

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Steve Lewis 1 year, 10 months ago

Rob did well to mention the extra factors bearing on the payroll costs, like the paid fire fighters. A better column, on a complicated issue. But his partisan bashing continues.

Perhaps it's conservative principles that will keep the Iron Horse the go-to whipping boy. The recession made 90% of us look fiscally incompetent, but hey, that's the government overreaching, making a mistake, and our tax money paying for it.

Private sector mistakes made in the same months won't cost Rob or me a dime. But they also matter, and they cost others a lot. The next time the Iron Horse bill rubs your principles the wrong way, take a stroll to the now vacant lot downstream from the Rabbit Ears motel. That would be “Riverwalk”, where 39 mobile homes and the 100 residents of them were evicted in 2006 to accommodate new condos. Innocent neighbors we “cast into the shadows of the Great Recession with the bootprint of Green Courte Partners on their buttocks”.

I supported the city’s Iron Horse purchase. And voted as a planning commissioner for Greene Courte’s Riverwalk evictions. The bigger mistake? These were not villains; they were investors and officials faced with entirely different circumstances.

Hindsight and post crash critique is easy. Too easy.

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