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City revenues fell faster than expected

Original post made on Nov 3, 2009

City of Menlo Park revenues have sloughed off during the economic recession even more than initially anticipated, a recent budget report revealed.

Read the full story here Web Link posted Tuesday, November 3, 2009, 12:37 AM

Comments (16)

Posted by Old Timer, a resident of Menlo Park: Sharon Heights
on Nov 3, 2009 at 10:12 am

One wonders how many "accounting errors" are included in this report.


Posted by WhoRUpeople, a resident of another community
on Nov 5, 2009 at 10:50 am

Why would anyone "continue to rely on a 2006 report" projecting revenue from any source? Accepting that the subject report was well done and accurate-in 2006 looking forward-the economy radically changed for the worse in 2008! Not many predicted it, none that I know of as early as 2006, but the City continues to rely on revenue predictions made back then? Not smart.


Posted by E. Moritz, a resident of Menlo Park: Central Menlo Park
on Nov 5, 2009 at 1:03 pm

Thank you Mr. Howell for digging out this financial information and informing the citizens.

Let's hope the City Manager has seen fit to provide it to the members of the City Council as they negotiate with the SEIU and other employee groups. Given that the City Manager is the only "authorized representative" to DIRECTLY negotiate these contracts (he receives direction and authorization from the City Council) let's also hope he informs the folks across the bargaining table of the changing financial fortune of Menlo Park. False expectations based on out-dated information do no party any good.

I also have to agree with WhoRUpeople. City staff owes the members of the City Council (and the citizens) more accurate and contemporary information. 2006 was in a different time in a galaxy far, far away.

Again, thank you.


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Nov 5, 2009 at 3:14 pm

This was predicted in a Guest Opinion in the Palo Alto Weekly almost a year ago:

Spectrum - Friday, December 5, 2008


Guest Opinion: Economic 'perfect storm' is brewing for local agencies

by Peter Carpenter

For many years I have been directly involved in local government agencies or in federal programs designed to support local and state agencies.

Never in that period have I seen such financial storm clouds as now appear on the horizon of local governments.

For the last eight years I have had the privilege and the responsibility of serving the citizens as an elected director of the Menlo Park Fire Protection District (which serves Menlo Park, East Palo Alto, Atherton and parts of San Mateo County) — one of the finest fire districts in the country.

Previously, I served as a Planning Commissioner in Palo Alto and, many years ago, as the federal official in the Office of Management and Budget who was responsible for coordinating all federal assistance to state and local governments.

With falling property values yielding less property-tax revenues, falling consumer and business spending yielding less sales taxes, increased retirement costs (because CalPERS has suffered significant loss of capital in the current financial downturn), continued demands for well-above-average salary increases by public employees, and the governor declaring a financial emergency, local governments in California are facing a Perfect Storm.

Unless local governments act promptly to respond to these dramatic changes we will see more of them joining Vacaville and Rio Vista in being forced into bankruptcy.

Housing prices and hence property taxes will be depressed for at least another two years — just about everywhere except the Palo Alto area, it seems.

And if a lot of the current homeowners request reassessments the decreases will be dramatic.

Similarly consumer and business spending are forecast to be depressed for the next two years.

And CalPERS, which is obligated to continue to pay out fixed-benefit retirement payments and which has seen huge losses in its capital, can only turn to local governments to make up the difference.

And local governments have no choice but to pay what CalPERS will demand.

And while this is all happening local-government unions are continuing to ask for significant increases in both salaries and benefits.

The total labor costs for most local governments are between 60 and 80 percent of their total budgets. While California's local governments are blessed with very talented and capable employees, the current process of salary-and-benefit negotiation has gotten out of hand.

Local-government employee unions insist that the standard for setting their pay be that they be above the average of other public employees. But if everybody is above average then the average goes up very quickly.

While we have many superb employees working for local government, those employees should not expect to receive salaries and benefits that are inconsistent with those of the citizens whom they serve or that will bankrupt their employers.

And in most cases those inflationary-spiral labor agreements are being approved in secret without any public input or scrutiny.

As an elected member of the Board of Directors of one of the finest fire districts, what do I think should be done to respond to this Perfect Storm?

First, local governments need to recognize that there is a crisis and act now.

Second, they need to involve their citizens in a careful look at each of their programs to determine which programs are no longer affordable — however nice or special they might have been in better times, or even how worthy any single program might be.

Third, they need to plan now for hiring freezes, elimination of overtime, reduction in services, layoffs, renegotiated labor agreements and, in the extreme, bankruptcy.

Fourth, they should consider accelerating essential capital-improvement projects (the operative word is essential), as construction costs during this downturn will be substantially less than if the projects are delayed until the recovery begins.

Finally, they need to move the review and approval of new labor agreements out from behind the current wall of secrecy from which the public is excluded.

Once new labor agreements have been agreed upon by the negotiators then those agreements should be simultaneously submitted to both the union members and to the public that will bear the costs well before the city councils and special district boards meet in public session to vote on those agreements.

The Perfect Storm can be weathered but not by sunbathing on the deck.

Peter Carpenter is a longtime resident of the Midpeninsula who currently is a member of the Board of Directors of the Menlo Park Fire Protection District. He can be e-mailed at peterfcarpenter@gmail.com.


Posted by Garfield, a resident of Menlo Park: Downtown
on Nov 5, 2009 at 4:21 pm

I think we need a new city manager. Mr. Rojas manipulates the council and staff's agenda too easily.


Posted by anonymous, a resident of Menlo Park: Central Menlo Park
on Nov 5, 2009 at 4:32 pm

I think it is time to cut back on employees and employee salaries-they represent the bulk of the city's budget expenditures.


Posted by All Hail Peter!, a resident of Menlo Park: other
on Nov 5, 2009 at 6:34 pm

[Post removed; personal attacks violate terms of use]


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Nov 5, 2009 at 7:48 pm

It is fascinating how anonymous posters are so incapable of providing facts with regards to the subject matter of the article in question.

Attack the messenger if you wish but the discussion would be significantly better if you address the subject matter:

In this case "City revenues fell faster than expected" with a reprint of a Guest Opinion published 11 months ago that predicted exactly that event.

It is a very interesting form of democracy where ad hominem attacks are the sole response to facts.


Posted by truth, a resident of Menlo Park: Belle Haven
on Nov 6, 2009 at 11:44 am

Peter, if you are claiming to be the only one who predicted revenues to be down, then may I introduce you to Al Gore, investor of the Internet?

Your ego is far ahead of your accomplishment. I heard from no less than all council members, staff, school trustees and superintendents that this city was to see severe revenue declines.

You simply tried to say property value would be down and you tried to draw your ideological union hate speech with the obvious prediction.

Please spare us the ego back patting. We all saw revenue decline in our future a year ago...I mean wow...


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Nov 6, 2009 at 12:33 pm

My key point a year ago was NOT the prediction of a drop in revenues but that these steps be taken:

First, local governments need to recognize that there is a crisis and act now.

Second, they need to involve their citizens in a careful look at each of their programs to determine which programs are no longer affordable — however nice or special they might have been in better times, or even how worthy any single program might be.

Third, they need to plan now for hiring freezes, elimination of overtime, reduction in services, layoffs, renegotiated labor agreements and, in the extreme, bankruptcy.

Fourth, they should consider accelerating essential capital-improvement projects (the operative word is essential), as construction costs during this downturn will be substantially less than if the projects are delayed until the recovery begins.

Finally, they need to move the review and approval of new labor agreements out from behind the current wall of secrecy from which the public is excluded.

Once new labor agreements have been agreed upon by the negotiators then those agreements should be simultaneously submitted to both the union members and to the public that will bear the costs well before the city councils and special district boards meet in public session to vote on those agreements.

I suggest that not much progress has been made beyond step one and that it is time to do the hard work of steps 2-5.

Peter


Posted by Joanna, a resident of Menlo Park: Downtown
on Nov 6, 2009 at 12:59 pm

Rojas needs to be fired and many staff members need a deep pay cut.


Posted by Been there, a resident of Menlo Park: Downtown
on Nov 6, 2009 at 2:56 pm

When revenue projections are off and inaccurate, one can only look to the person or persons who made the predictions. Someone in the City budgeting office is in over their head. Paying top wages for mediocre performance is going the wrong way.


Posted by Old Timer, a resident of Menlo Park: Sharon Heights
on Nov 8, 2009 at 11:30 pm

Thank you, Been. If the data is inaccurate then so are the conclusions.


Posted by Henry Riggs, a resident of Menlo Park: Suburban Park/Lorelei Manor/Flood Park Triangle
on Nov 10, 2009 at 12:38 am

Regrettably we knew this was coming. I shared a McKinsey economic report with two Council members last Spring and spoke at the Council hearing prior to the Sergeants raises. Peter Carpenter researched and wrote earlier as well. We need to have this effort in house.


Posted by Carol Nichols, a resident of Menlo Park: Central Menlo Park
on Nov 10, 2009 at 8:01 am

It is interesting that I have heard nothing about the City Executives taking a pay cut or pay freeze? I've heard that both Labor Unions are willing to do that for 2 years. Seems to me that the leaders of the organization who make the most money should be setting the example for others to follow. Lead by example.


Posted by truth, a resident of Menlo Park: Belle Haven
on Nov 10, 2009 at 9:32 am

Henry passed on a McKinsey report. Great value. That should have solved all of our problems. C'mon city leaders, do what McKinsey says to do. And because I found the report, I knew this was coming.

To this day, I have yet to see the bottom drop out on Menlo Park. Sorry folks, revenues are down across the country so your corporate experience and your McKinsey reports aren't exactly awakening moments.

And on the grand scale, find me ten cities in the state doing better than Menlo Park.

This is the same petty Menlo Park stuff. Burn the village reaction. Take no prisoners and panic. Panic about Derry. Panic about offleash dogs. Kill the unions or save the unions. Same garbage.

Just hidden behind multi-million dollar consultant reports.


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