A year ago we fired a majority of our non-police staff on the premise that we faced a budget deficit of $856,000. We were told that revenues had declined reflecting lower real estate values. Having served on the council for 24 years, where we balanced budgets every year, and at the same time recognized the value, dedication and loyalty of our outstanding employees, I felt something fundamentally had gone wrong. In order to understand the issues I made a thorough analysis of our financial statements and found that contrary to what we had been told, our secured property tax revenues had not declined, they had actually been increasing at an annual rate of 3.18 percent.
Next I analyzed our operating expenses and found that they had been increasing at the very modest annual rate of 1.28 percent. With operating revenues increasing at three times the rate of increase for operating expenses, it was clear that something else was at play. What I found was that we were understating building department revenues by some $400,000, resulting in overstating our budget deficit by that amount. The interim city manager did not disclose this discrepancy to the council until two days after my op-ed appeared in the Almanac's July 20, 2011 edition.
Our employees were fired based upon faulty information. Some of these employees had worked loyally for the town for more than 20 years. This is not how any employer should treat their employees. This lack of respect for employees impacts the morale of every other employee.
Now one year later the town has passed a resolution reducing the salary and benefits for the remaining non-police employees. Again this action is based upon faulty data and assumptions. It was reported to the Almanac that we faced an unfunded retirement deficit of $14 million. At the council meeting it was suggested that we might face deficits of $20 million or $30 million, thus creating a need for the town to severely reduce employee salaries and benefits.
One council member implied that the real target is our police department, as that represents some 50 percent of our budget. The council is obviously considering substantially reducing police salaries and benefits, which would surely drive some of our most qualified and dedicated police officers to seek employment with other agencies.
In my research, including reviewing the work of Nicolay Consulting, CalPERS and Moodys, I have learned that the most realistic unfunded liability for Atherton is $7,599,453, which is made up of retiree coverage and active projected needs .The active projected needs number ($2.5 million) was based on 2010 census data where it included building and public works staff. They are no longer with us so that number will be significantly reduced (likely by as much as two-thirds). Nicolay Consulting will be doing a "Refresh" in January for a more accurate — and substantially lower number.
Without the parcel tax revenue, the town has a projected deficit in 2012-13 of $600,540. The parcel tax is a key component of the town's revenue stream. Rather than cutting salaries and benefits to eliminate this deficit it would be far better for the town to adopt a small increase in our parcel tax. We need to focus on paying our employees a fair and competitive salary and benefit package so that we can maintain quality service.