Friday, July 27, 2007 | When staff from the Independent Budget Analyst’s Office combed through the San Diego Redevelopment Agency’s budget proposals in May, it found something that raised a red flag: a reported 30 percent increase in salaries at the Southeastern Economic Development Corp.
“This increase in salaries appears to be excessive,” wrote fiscal analyst Lisa Celaya in a report to the City Council, which was set to consider SEDC’s budget.
But, days after the report was released, SEDC President Carolyn Smith testified to the council that the IBA report was incorrect. The salary increase was only 4 percent, she said, ticking off a long list of other increased costs that had incorrectly been counted toward that 30 percent: added positions, unused employee vacation hours that are cashed out; a wellness policy that allows employees who aren’t sick all year to take one week of paid sick leave; and funds for unanticipated payments of separation agreements with employees.
The council seemed satisfied. It shook off concerns about the raises and approved the redevelopment group’s budget.
However, SEDC’s pay increase wasn’t so simple. An analysis of SEDC’s budget shows that pay for its 14 full-time employees have the potential to jump significantly higher than the 4 percent represented by Smith during the presentation to council.
Beyond the across-the-board boost, employees are also in line for two other pay increases that weren’t counted as “salary” in the budget because they are given out in one-time payments. SEDC gives a 4 percent cost-of-living increase to employees as a lump sum. It also awards a merit increase that, if distributed equally, would give employees an extra 5.5 percent of their pay.
“I would say at a bottom line it looks like they’ve budgeted for as much as 13.5 percent per employee, although some could get more than that, some could get less than that,” said the city of San Diego’s chief financial officer, Jay Goldstone.
Figures obtained from SEDC show that the merit raises and cost-of-living increases total an additional $88,140 — or more than $6,000 per employee, on average.
In a written response to questions, SEDC said it defines salary as the “fixed compensation paid for regular services.” SEDC said it doesn’t count cost-of-living increases under “salary” because it “doesn’t change the fixed amount of an employee’s salary” and that it didn’t count merit increases because they are “not automatic.”
SEDC says the agency instead gives its merit increases and cost-of-living increases in lump sums; therefore, they don’t impact an employee’s base salary. In SEDC’s own budget, however, all those costs are included under the “salary” line item.
“I don’t believe that they gave a total picture,” Goldstone said of SEDC’s budget explanation.
When asked why Smith’s presentation didn’t offer the details of the merit or cost-of-living increase to the City Council, SEDC replied: “The city council received all the relevant information including the proposed budget, the corresponding memorandum to the Independent Budget Analyst as well as the detailed SEDC memorandum.”
In all, the merit and cost-of-living increases make up more than 30 percent of SEDC’s total salary increase, while the 4 percent base raise cited by Smith accounts for 12 percent.
Two council members presented with the analysis said they were concerned by the findings.
“These explanations are not working for me,” said Councilwoman Donna Frye. “There needs to be consequences when people do not tell the truth, when people do not tell the full story.”
Council President Scott Peters said he didn’t know enough about the details to comment specifically, but said, “I think we’re concerned.” He said the council has made it clear that it doesn’t want to give “big raises.”
Peters said he was anxious for the results of a performance audit — which evaluates an organization’s use of its resources — of SEDC, which was requested by Councilman Tony Young during May’s budget hearings. Young didn’t respond to numerous requests for comment for this story.
A spokesman for Mayor Jerry Sanders, who has made budget transparency a key talking point in his administration, said the Mayor’s Office will now solicit a comprehensive audit of SEDC’s operations in light of voiceofsandiego.org‘s budget analysis.
Goldstone said the budgets of redevelopment agencies have traditionally been wrapped into the mayor’s budget proposal with limited analysis. He said that will change next year.
Overall, salaries in the SEDC budget appear to have increased by 26.9 percent.
The 4 percent raise noted by Smith is forecasted to cost about $33,000. The cost-of-living increases and merit increases are expected to cost $40,100 and $48,040, respectively.
Additionally, SEDC’s requests for other additional funding don’t appear to be supported by history.
Although SEDC paid no money out in separation payments in fiscal year 2007, it requested and received $45,000 for such payments to terminated employees in 2008.
And the agency requested increasing its budget for in-lieu payments and compensated sick days by 148 percent and 206 percent, respectively, above what it spent last year. Last year, for example, it paid $26,000 in in-lieu payments for such things as unused vacation time and sick days. For 2008, it has budgeted to spend $64,500 on the payments despite adding only one and a half positions.
The other increase in staffing expenses is the one-and-a-half new positions, a clerk messenger and the manager of projects and development. They are budgeted at $28,000 and $100,000 a year, respectively. Both figures are the most that’s allowed under the new position’s salary ranges.
The average employees’ salary range increased 11 percent on the low end and 14.5 percent on the high end, according to calculations based on figures in the SEDC budget. It isn’t possible to discern the 2007 or 2008 salaries for specific employees in the SEDC budget because the organization lists only the salary range. (Each position at the city has a salary range — the actual employee is paid somewhere between the low and the high on that range. Only salaries for “high-profile” positions are specifically disclosed.)
For example, Smith’s salary increased from a range of $130,000 to $160,000 to a range of $145,000 to $180,000 — an overall bump of between 11.5 percent and 12.5 percent. And the finance director’s salary range jumped up from between $75,000 and $95,000 to a range of $95,000 and $180,000. That’s an increase of 26 percent.
SEDC said that while the salary ranges increased, the actual salaries did indeed only increase by 4 percent. Salary ranges hadn’t been increased in three fiscal years, according to SEDC. It initially refused to prove the specific salary data for the two positions to voiceofsandiego.org, and when pressed only provided the current year’s salary — $158,000 — for Smith.
SEDC is a government agency that administers redevelopment in southeastern San Diego on behalf of the city of San Diego, using tax revenue to entice the development of industry and housing. While the City Council ultimately must approve all actions taken by the SEDC board, it has little authority over the day-to-day operations of the organization.
The Centre City Development Corp., a similar organization that oversees the city’s downtown redevelopment, said, like SEDC, that it was offering a 4 percent salary increase.
In total, CCDC’s salary costs rose 8 percent in the 2008 budget proposal. And after the approximate costs of four new positions are removed, CCDC’s staff saw a salary increase of about 4 percent. And each position’s salary range increased by about 4 percent, with a few exceptions.
In contrast, the salary range boosts vary greatly in SEDC. Some positions are awarded increases of 20 percent to 26 percent. One position received a decrease of 10.5 percent.
The City Council rejected proposed salary increases for employees of both CCDC and SEDC last year, citing a budget crunch that had left it unable to give raises to its other employee groups. The two redevelopment agencies are set up as nonprofit corporations and are therefore free from much of the city’s pay and labor structure.
This year, a motion to reject the pay increases failed.
Attempts to interview SEDC officials regarding their budget since it was heard in mid-May were unsuccessful. Following numerous phone calls and e-mails, voiceofsandiego.org was instructed to turn in its questions and information requests in writing, which it did May 22.
SEDC refused to answer those questions until voiceofsandiego.org informed the organization that it appeared to be in violation of the California Public Records Act, which requires government agencies to respond to requests within 10 days. Following the letter informing SEDC of the legal issues, it scheduled a phone interview for June 14.
Instead, during the time in which the interview was scheduled, it simply faxed over a partial response to the May 22 inquiry.