Thursday, April 24, 2014
YOLO COUNTY NEWS
99 CENTS

City should consider outsourcing more jobs

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From page A6 | February 04, 2014 | 5 Comments

The issue: Rising labor costs are unsustainable
Without a large tax increase or steep cuts in parks, police and fire, the Davis general fund is headed toward bankruptcy. New revenues coming in cannot keep up with higher and higher labor costs.

ON JULY 1 of this year, the general fund reserve will be down to $3.7 million. Before mid-2015, the money will run out and the fund will owe another $1.4 million.
The numbers are projected to only get worse in the years ahead. The general fund will be negative $28.4 million at the end of 2018-19.
Before the residents of Davis are asked to raise their taxes in order to stave off a catastrophe, the city should consider all options to stem the growth of employee compensation.

RECOMMENDATION: The Davis City Council needs to direct the city manager to produce a comprehensive outsourcing report before it contemplates any tax hikes on Feb. 11.
Every city function that can be outsourced needs to be identified. The council needs to know how much money the city could save by privatizing various services each year for the next five years. And then the council needs to decide the best way to proceed.
Since the 1990s, Davis has had a highly successful outsourcing program with park and greenbelt maintenance. Roughly half of that function citywide is done by private contractors.
The private landscaping crews are paid as well as city workers doing the same jobs. However, the contract employees don’t come with outlandish pensions or unending retiree medical expenses.
In July 2012, the city privatized its tree maintenance services. Outsourcing that function has saved hundreds of thousands of dollars, and the contractor, West Coast Arborists, does a better job. Now, city trees are being pruned more often for less money.

WHY LABOR COSTS are unaffordable: In addition to high salaries, overtime and excessive amounts of paid time off, the price of medical plans for employees and retirees has been rising at an astronomical rate for more than a decade. Over the past six years the cost of funding workers’ pensions has blown up, and through 2020 these problems will get much worse.
From 2002 to 2014, medical expenses for the city of Davis increased an average of 10.3 percent per year compounded. The Kaiser Family Plan is now 3.2 times as costly per month as it was 12 years ago.
The agreed-upon reduction of medical cash-outs will save the city some money moving forward for employees without spouses and dependents on their plans. That won’t, however, affect the ballooning problem of retiree medical costs.
In 2009-10, CalPERS charged Davis 12.542 percent of a non-safety employee’s salary to fund the employer share of his pension. That bill this year is 21.128 percent. CalPERS projects it will be 32 percent in 2019-20. That means for a $100,000 clerk, the city will owe another $32,000 per year to fund his pension.
For police and fire, the story is worse. In 2009-10, CalPERS charged Davis 22.755 percent of a safety employee’s salary to fund the employer share of his pension. That bill this year is 27.832 percent. CalPERS projects it will be 55 percent in 2019-20. For a $100,000-per-year cop, the city will owe $55,000 more to fund his pension.

A QUESTION OF FAIRNESS: If Davis does not consider more affordable ways to provide services, but instead raises taxes on all of us to avert a calamity, it will be asking a lot of residents who don’t have such luxurious pensions or gold-plated medical plans to get by with less. Is that fair?

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Discussion | 5 comments

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  • February 04, 2014 - 6:13 am

    The best Our View editorial ever. Why should I and other residents keep having to pay more and more taxes to keep some of these outrageous public employee salaries, perks and pensions going? We're hurting, in many cases just getting by, and we're being asked to pay more taxes so a $175,000/yr. fireman can keep their goodies? Outsource them all if it saves money.

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  • Jim LeonardFebruary 04, 2014 - 6:46 am

    It's so easy to transfer responsibility to someone else. Labor costs and treatment of workers is then moot. The trouble is: if you have ethical standards, you will have to monitor the hired business and replace it if those standards are not met. Workers still need to pay for their rent and food and THAT problem does not go away. Furthermore, businesses are always looking to make a profit and have been shown to not only treat workers less well than public entities but to deliver lower quality service than the public entities as a means of increasing them. The Veterans Administration's health service is a good counter example to the claim you can always get more for less from the private sector; the VA delivers the same or better medical care for much less money. I am critical of Davis' promiscuous misuse of public funds but think if Davis outsources its functions it will make mistakes in outsourcing.

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  • Rich RifkinFebruary 04, 2014 - 5:03 pm

    "It's so easy to transfer responsibility to someone else." .......... In all likelihood, that is exactly what the City Council will do by not outsourcing. It is going to transfer the responsibility to pay for the very costly benefits given to city employees onto residents of Davis who, for the most part, don't receive benefits anywhere close in cost to those given to city employees. Defending a tax hike to pay for retirement plans worth $4 million or more in NPV is defending a reverse Robin Hood plan: It's stealing from the poor to keep the rich going. I'm not sure if Jim Leonard, who normally espouses a more leftist view, is really in favor of the reverse Robin Hood program Davis has.

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  • Greg JohnsonFebruary 04, 2014 - 8:39 am

    The pension issue is a symptom of government incompetence. They make promises today with no idea of how they are going to keep them in the future. To politicians, that is a problem for someone else. That is the reason why we are facing these crises now. Social Security and Medicare are the same story. If Davis, a very wealthy city, is in this kind of mess, it doesn't bode well for most of California. Most of the 80 corridor and the central valley cities will probably go bankrupt in the next 20 years. What a mess!

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  • Davis G'maFebruary 04, 2014 - 1:13 pm

    We have to outsource because of the generous salaries, pensions and benefits that were agreed upon over the past couple of decades. In today's Sac Bee there is an article about TransparentCalifornia.com. I looked up a few well-known names. Holy cats! It's time to stop requiring tax payers to support city, county, state, federal and university employees for life (and after, if they die leaving a spouse eligible to keep receiving their pension) . Outsourcing is happening all over the state, possibly the country. Davis is not in a unique situation. I do worry about the thought of Davis creating their own energy company. Isn't that the opposite of hiring PG&E to supply energy to residents?

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