Although Interim City Manager John Danielson had made clear in early May that job and service cuts were almost certain as he tried to erase a projected budget shortfall in fiscal year 2011-12, the scale of the planned cuts took many staff members and the community by surprise. Two former mayors, Malcolm Dudley and Jim Janz, wrote an open letter (See Page 19) urging the City Council to survey the community on its willingness to pay more in parcel taxes before taking the drastic measures planned by the town.
Mr. Danielson told the Almanac that notices to employees were "intent to lay off," and that the town is taking seriously this week's talks with the union. But, he added, 12 percent in employee concessions "would amount to about $165,000 ... and I have an $856,000 shortfall" to address.
Because requests for proposals (RFPs) to provide services have only recently been issued, Mr. Danielson said he can't say how much outsourcing the building department and public works department — which includes street and park maintenance — will cost the town. But based on his past experience, he estimated that contract services would cost between 70 percent and 80 percent of what the town pays for services provided by in-house staff.
Cuts in services are likely to reduce town spending beyond employee costs, he said. And the town will look at cost savings in its largest division — the police department — as it reviews health and pension contributions for those employees, he said.
At a special May 9 meeting, the City Council gave Mr. Danielson the green light to do what he believes needs to be done to balance the budget. There have been no public meetings where specific options on which staff positions or public services might be eliminated were discussed.
Peter Finn of Teamsters Local 856, which represents the employees, said they are offering compensation concessions "to help the town deal with the budget challenges while maintaining services the citizens of Atherton expect."
Although a number of public agencies have, over the last few years, asked employee unions to reopen contract talks in an effort to gain money-saving concessions, Atherton did not do so, Mr. Finn said. "Is this really about money for the city manager, in terms of solving the budget problem, or is it philosophical, because he's (in favor of) outsourcing? That's an open question."
Parcel tax increase?
In their open letter, Mr. Dudley and Mr. Janz acknowledged that there may be some cost savings with outsourcing services, "but there are many offsetting disadvantages."
Mr. Dudley told the Almanac that he surveyed a number of cities that have outsourced some services, and learned that sometimes anticipated savings didn't materialize, or they were less than expected.
He noted that, after the 1978 passage of state Proposition 13, the town surveyed residents about whether they wanted to see their services reduced or to pay more in taxes; 85 percent responded that they would support higher taxes.
If the town raised the current annual parcel tax by $350, he said, it could deal with the budget shortfall. The current parcel tax is $750 per year.
"Just $30 a month (per household) solves the problem," Mr. Dudley said, and would allow the town to avoid "this wholesale firing of people."
"I just cannot believe we can be this insensitive (in a matter) this important," he said. "I think of our employees as our family. ... How can we treat people in such a way? That never was a part of the character of this community."
Although he said that not all outsourcing is bad, having staff in house in many situations is better. In addition to the "institutional memory" current employees possess, "these are people who care about the town — they care about us."
In a letter to City Council members, Diane Aiello, the wife of building inspector Joseph Aiello, pleaded with the council to "reconsider and not let my husband go from his position. ... If you let him go, our family will be devastated both financially and medically."
The couple and their three children live in Paradise, California, and during the workweek Mr. Aiello lives in "a small trailer, on the outskirts of Atherton in a not so nice neighborhood," Ms. Aiello wrote. The depressed economy and real estate market have prevented the family from moving, and "any kind of job is hard to come by" in the area, she said.
Mr. Aiello, who has worked for the town for nearly three years, spoke to the council at its May 18 meeting, reflecting the uncertainty among the staff that had grown over the months of bleak budget discussions. He warned that outsourcing may in the end cost the town more, and noted that the building department, "when it's run correctly," is supposed to pay for itself with revenue generated by fees.
So if the department is self-sustaining, why is it being outsourced? Mr. Danielson said that during slow times, "building departments tend to lose money. In good times, they hope to break even or better."
Mr. Aiello said that, except for a "brief pause" in November 2008, the department has been extremely busy, and as a result, plan-check and building inspection fees "should have been covering costs."
In fiscal year 2009-10, the building department generated about $901,500 in revenue, but cost the town about $1.2 million, according to finance director Louise Ho.
In the current fiscal year, the department has brought in about $1.3 million as of May 31, she said. Projected costs through June 30 are about $1.5 million.
The department has had a reserve of more than $1 million since June 30, 2010, Ms. Ho said.
One explanation for costs exceeding revenue might be that the town arborist and code-enforcement services are attached to the building department, an unusual situation. Neither service is revenue-generating, unlike services typically provided by cities' building departments.
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