A Proposal: A New Tax for a Concession
Wednesday, Feb. 25, 2009 | It may not seem like it, but for the past several years, we've been quite lucky.
 | | | | "The employees agree to trim some of the most controversial benefits they enjoy and the city, led by its mayor, agree to consider a major increase in fees in order to lessen or eliminate the likelihood that the government will need to lay off thousands." | |
The city of San Diego has been sick for a long time but we're only now starting to break out in hives.
Trash litters Sunset Cliffs. Perhaps one of the most beautiful areas of San Diego is now peppered with containers and waste the city used to clean up.
The litter is a rash indicating a more serious infection within.
A mania in the housing market -- and the property and sales taxes it generated -- hid the symptoms of this chronic condition. But just as we began a housing frenzy here before most other regions did, now we're part of a small group of regions leading the nation through the correction.
Our cities are crumbling. Chula Vista, once boastful and confident, even derisive of its neighbors, is now as close to bankruptcy as a municipality can get. The county, its officials once heady and condescending, are now warning of dire, destructive long-term fiscal woe.
And then there's the city of San Diego. During the recent boom times, the city, unlike its neighbors, actually cut services and let its facilities deteriorate. Even with soaring revenues, City Hall was simply not set up to take in near the amount of money it was set up to spend. We were protected from the effects of this imbalance by the most artificial if not fraudulent expansion of the economy we've ever witnessed.
And now, with the correction of that cycle taking us back to 2001 with brutal efficiency, San Diego residents are about to suffer the real symptoms of our budget's illness. The rash breaking out in Sunset Cliffs is nothing compared to what will upset us as the city comes to terms with a $54 million shortfall this year and an even larger one in 2010.
As we grapple with this reality, we're often told to look at this from one of two points of view: that of the taxpayers or that of the public employees. Either San Diegans are being ripped off by greedy city employees or San Diegans are cheap, unwilling to pay for the services they demand. Both of these are bitter, unhelpful perspectives right now that are unfortunately often repeated.
If you are one of those perpetuating either of these views, San Diego needs you to put it aside for a minute. We are not two separate groups with mutually exclusive interests no matter what some people -- including leaders of both sides -- might say. Public employees benefit when a city runs effectively and delivers its very valuable services efficiently. And taxpayers benefit when public employees are treated with respect and compensated appropriately.
It is time we sit down at the table and come up with a deal that both respects the service of city workers and pays heed to the frustration taxpayers justifiably feel.
And let's go ahead and accept that San Diego taxpayers are understandably frustrated. We've watched scandal after scandal pass by as special interests lavished themselves at the public trough. We've seen people award themselves bonuses with tax dollars without even asking for approval. Developers have been subsidized by the millions while at the same time changing and morphing their plans away from what it was that justified their large subsidies.
We see city officials, upon retirement, collecting million-dollar disbursements from a public organization that is as close to broke as it can be. We find ourselves bribing city employees to stay on the job five years past their "retirement age" and then we find out we're paying them a guaranteed 7.75 percent return on the pensions they're accumulating at the same time they're being paid a regular salary.
We find collection agents from the city calling us in the middle of the day because five years ago we did some work for a company as a side job and, though we paid taxes, we never coughed up a "business license fee" to the city. We're spending millions to build new libraries at the same time we cut the hours at old libraries to the point where you need a spreadsheet to figure out when you'll be able to go to visit your local branch.
This is insanity.
Most infuriating of all, though, we've watched the city's budget grow at the same time services have been cut. How is this possible?
Until now, when we've faced these questions, we have had to deal with this tug-of-war between taxpayer advocates and employee unions. Nobody -- not the mayor, not anyone else posing as a leader in this town -- nobody has attempted to forge a compromise between these two forces.
On the one hand, we're told all we must do is cut benefits of city employees and all would be OK. On the other hand we're told we're too cheap, to increase our taxes and then all would be OK.
The fact is, if you advocate only one of these routes, we'll never go down either. We need to package these two forces and I, for one, am tired of waiting for people (on the City Council or in the Mayor's Office ) to do it.
Let's start with this: The business community and taxpayers need to show they are willing to consider increases to the city's revenue sources. Public employees and city officials would do themselves and everyone a favor to admit that the laundry list of complaints about wasted money and extraordinary employee benefits are legitimate frustrations.
If we could take those two simple steps, there are a few conclusions we can all make. We can provide public employees a respectable compensation system -- one that serves as a model and competitive standard in the marketplace -- and one that at the same time makes the city more efficient.
How? The employees need to agree to trim some of the most controversial benefits they enjoy. The city, led by its mayor, needs to support an increase in fees in order to lessen or eliminate the likelihood that the government will need to lay off thousands of workers.
The mayor, as always, is the most important person in this discussion. I watched, in 2004, a tax on hotel-rooms stays (a tax on visitors to the city, no less) go down in flames even though it was supported by every single interest group imaginable. It was opposed only by the mayor and hotelier Doug Manchester and it failed.
This mayor is stronger than that mayor. He can forge a better path.
He should ask that the city's labor unions do five simple things: 1) Agree to eliminate DROP entirely. 2) Agree to make the city's retirement age for all employees to 55. 3) Change the status quo so that employees, when they retire, get a health-care benefit but not guaranteed full coverage. In other words, the city and workers will contribute to a trust, like the county government set up. When employees retire, they'll be eligible to receive regular payments to help them meet their health care needs in the future. 4) Agree to a full furlough of 12 days for the next two years to weather the crisis. 5) Agree to eliminate two employee holidays over the year.
These are perfectly reasonable concessions to make during an economic crisis. City employees can still count on a fantastic pension -- this is in addition to their other retirement plan, which is similar to a 401k, and which would remain in place. The furloughs would be tough to swallow but they can be managed and eliminated when the economy improves. The city offers 11 paid holidays for the year. Nine is plenty.
Only the furloughs would have a direct effect on the take-home pay that employees collect. The other reforms protect the city and taxpayers from long-term liabilities that can balloon uncontrollably.
The first reform -- dropping DROP -- combined with the second could save the city up to an estimated $22 million a year within three years. It would be a powerful, symbolic reform, as well that will help diffuse the burgeoning hostility between taxpayers and public employees. Limiting the health care liabilities the city is supposedly on the hook for until a retiree dies would be a long-term savings necessary to stabilize the structural imbalance of the city's budget. The last reforms -- the holidays and furloughs -- could save up to $17 million, according to the Mayor's Office.
The argument -- and the unions will bring it -- that the city actually saves money from DROP is bogus. DROP allows someone to "retire" from city service and yet continue working for five years. Proponents say that it keeps experienced people on the job past their retirement age and saves the city from having to recruit new employees to fill those roles.
But this "savings" is a joke. It's predicated on an artificially low retirement age. Right now, public safety employees can retire at age 50. You don't have to bribe people to work until they are 55. Working until you are 55 is a perfectly reasonable expectation.
Changing the retiree health care obligations will help contain one of the most frightening liabilities looming on our horizon. The county, for however much trouble I give them about their pension burdens, expertly navigated this minefield last year and was able to save itself perhaps a billion dollars at the same time it protected a benefit for employees well into the future.
And cutting holidays? Instituting furloughs? These are tough times. When you face a problem or a crisis, the worst part is always the uncertainty of just how bad it will get. If you know what you're going to deal with, you can prepare yourself appropriately. This is a chance for employees to be able to know exactly how bad it is going to get and steel themselves.
All told the savings would be as high as $40 million in two years. These reforms preserve a compensation system for our public employees of which we can be proud and contain our long-term liabilities to something we can visualize.
If we're able to implement these changes, the mayor should support imposing a fee on our trash pick-up service. If we charge enough for the city to recoup what it costs to pick up trash (a $10-$12 fee per resident, per month) we can raise up to $40 million or more.
This will go a long way to righting a city currently taking on water it is ill prepared to pump out. Combined with continued cost-cutting measures and fierce focus on efficiency, along with a reallocation of priorities for downtown redevelopment funds, this packaged plan will bring the city to a situation in which it can not only survive but continue to invest in its dilapidated infrastructure.
With these reforms and concessions, we can stabilize a city government suffering from a chronic structural deficit.
If the mayor gets employee concessions like this, but refuses to support a trash fee, he does not deserve to lead this city. The voters and community leaders would respond to his leadership.
If the employees refuse to go along with even this minimal correction of their compensation system, we should immediately hire bankruptcy experts and consider laying off anyone who is not integrally involved in performing one of the five major things a city absolutely must do: 1) protect and rescue us from fires and other catastrophes; 2) serve and protect us when we're victims of crimes or when criminals target us; 3) bring us water; 4) clean public areas and dispose of trash and sewage; and 5) provide us adequate roads and transit.
We have to do these five things or else our health is in danger.
In addition, we have collectively chosen to add other duties to our city government. We want parks, libraries, recreation centers, convention centers, stadiums, code-compliance officers and Rock and Roll Marathons.
We have decided year after year that we still want these additional amenities.
Unless we can make a deal like the one above, all of these city services are threatened. This includes the services we all need to stay clean, healthy and safe.
We have to admit that City Hall is sick and gather in the doctor's office together to decide on a rational treatment.
This is a simple and fair give and take by both taxpayers and city employees. Whenever we finally recover from this malaise, we will remember the good will both parties displayed when times were tough and we'll be able to share the joy of living in a well managed city long into the future.
Please contact Scott Lewis (scott.lewis@voiceofsandiego.org) directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.
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