The Vanguard has a new home, please update your bookmarks to

Wednesday, October 15, 2008

City Council Workshop Examines City Employee Salaries

Last night, the city of Davis held an Employee Compensation Workshop which walked the Davis City Council through the current city employee contract environment and make comparisons between the employee compensation plans for Davis in comparison with other communities.

A few general observations for and then I will get into some specific findings and criticisms of those findings and the presentation.

First, it was interesting but at several points, City Finance Director Paul Navazio clearly paid homage to the Vanguard and efforts by the Vanguard. At one point he made reference to what he described as the attention the arbitrary salary designation of $100,000 has drawn. Although interestingly enough, he cited the amount of employees who drew that compensation without factoring in overtime.

Later he alluded to the call for more transparency and correctly offered up efforts and workshops such as this as a means to provide the public with more transparency and accountability.

At the same time, and as we will see when we get into more detail, he infers that Davis' city compensation is considerably less than comparable cities (how comparable these other cities are can be subject to some dispute as we will see). And suggests at one point that one goal might be to bring up the salaries closer to market rate, although at the same time he suggested that was an illusive and moving target. Other data certainly called into question any suggestion that Davis needs to raise the rate of compensation in most categories.

Overall, I think it was a good and informative presentation that itself took nearly two hours and the entire session lasted well over three hours and well past midnight.

I am going to now go through some of the specific findings and make some comments about them. I will stress that I cannot do this presentation justice and that if you are interested in the topic, I recommend you watch a recording of the council meeting either on streaming video or a replay on Channel 16.

First, he broke down each designation by salary, health, retirement, and other compensation. So you come up with a total compensation package for a department head being around $200,000, $162,000 for a division manager, etc. There are a couple of interesting notes here.

First, there is no factoring in of overtime for either police and fire. We know that the average overtime for a firefighter for instance is something on the neighborhood of $30,000. The average overtime for a police officer is considerably less than that. So that will bump up the total compensation package for public safety officers.

A second problem was raised by Councilmember Sue Greenwald last night. That is that the typical fire fighter described here is step 1. However, as we learned when Councilmember Greenwald asked this of Paul Navazio, there are only 8 firefighters in step one but 22 firefighters in step 2, so why is step 1 considered "typical?" In other words, the designation understates the actual compensation that a typical Davis firefighter is receiving. That said, the difference between step 1 and step 2 is only about $4000 per year.

Then as we have discussed the retirement benefits plan. Conceivably with a 3% at 50, someone could receive between 75% and 90% of their highest base salary. I think the last chart really understates the amount that such employees can make.

And that does not include the additional retirement health benefits.

Here is a key finding. You will notice a very different recruitment environment for police officers versus firefighters. And that is something that is worth exploring. A key point here though is that Davis firefighters have always had at least 100 qualified applicants. There has not been a recruitment or retention problem in this regard.

The same is true for general employees, the city has generally identified between 12 and 30 qualified applicants and has rarely had trouble filling the positions.

Here is where there has been a problem. The specialized fields--information technology, engineers, and management positions. The city receives few qualfied candidates and the ability to draw those candidates is more impacted by the position's relation to the market compensation. In other words, many of these positions people could get jobs in the private sector and make more or they could make more in other jurisdictions.

However, for the most part, the city of Davis does not have trouble filling its positions for fire and for general employees. There seems to be more difficulty with police and with some of the specialized fields.

It is interesting that in most comparisons last night, Paul Navazio used the all-funds metric which put employee compensation at around 40% as opposed to just looking at the general fund, where employee compensation runs at 74%. I am not certain of the rationale for all-funds over general fund. For instance, in a school district you would look at general fund.

Here you have the comparison of employees salaries to the total salary over time. Again, it is a comparison between all-funds rather than the general fund. It shows a relatively steady ratio, but this graphic missed the explosion of growth in salaries in this decade where salaries more than double in the last eight years or so. A general criticism for a lot of these graphs is that by going back to 1990 rather than 2000, you miss some of the explosion of salaries.

Here again if you start at 2000-01, you see a huge growth in total personnel costs since that year.

This slide shows that if the city fully funded retirement benefits the amount of payment would go way up until about 2022, or the next 14 years, however after that point, the city would save a huge amount of money over the costs to pay-as-you go, which is what they do now.

Now we get into some of the comparative data, and this is where it starts to get problematic. I am not sure how comparable these cities really are. But the data shows that Davis have relatively low salaries and percentage of the all funds budget compared to these other cities, several of which are much larger than Davis.

Where Davis gets helped in these comparisons is first the relatively low cost for the city manager, which is somewhat misleading to use the city manager to office assistant as a metric. City Manager in most cases is the not the highest compensated employee. Councilmember Heystek joked that Bill Emlen would use this as a bargaining chip, but there is something to that. The relatively low compensation to the city manager definitely helps the ratio.

But here again we are stuck one several points. First, most cities have experienced large growth of public sector employee salaries. Davis is not alone and is not exemplorary in that position. The question is really whether Davis can afford to continue the growth in employee compensation that we saw in the last decade. And also whether Davis needs to--and it appears from the retention and recruitment rates that in most areas it does not. So these types of comparisons miss two key points.

One, Davis does not need to be at the top of the market to attract quality candidates to most positions.

Two, everyone is going to be struggling if the public sector salaries continue to increase. The fact that Davis is relatively modest in this regard does not mean we should increase our salaries, it means if we can hold the line on salaries, we will be in better position than these other cities.

This is a critical time, as you can see, almost every position except for the department heads is coming up for renewal in the next two years. Will we continue to give huge and generous salary increases or will we begin to hold the line.

That is the key. Now Mayor Pro Tem Don Saylor used his time to make this point--he reflected on the relatively low percentage of pay and the very high satisfaction rating given to the city by residents in an opinion survey from last year. He suggested this reflected an exemplary job on both ends.

I disagree with his interpretation of the survey data. In fact, I wonder if the survey data is all that meaningful. I suspect that most people do not have a lot of direct experience with city services. People know this: they live in a middle class to upper middle class community. That means most people are well off or relatively comfortable. There is not a lot of poverty, crime, there are not huge glaring problems with infrastructure, though there are certainly some problems that come up. So most people probably do not think or experience directly city services.

Now if we do not address some of the unmet needs of this city, those ratings will go down. We do put good money into parks and they reflect that.

Those who have more direct dealings with city employees have a more mixed view. I would certainly be more critical of certain aspects of the city and the management of the city based on my more extensive dealings. So it is tempting to read a lot into that, but I am not sure we should.

The fire department provides generally good service but fire calls are rare. The police provide generally good service, there has been a segment of the population that has some complaints about it, but that is a relatively small percentage, and so most people would rate it high, but again, we have a relatively low crime city.

In other words, given those characteristics I am not surprised to see high rates of satisfaction, I would guess in similar communities to Davis, you would see similar rates of satisfaction.

For me though, the focus on employee compensation has to do with resources and not job performance. The idea that we can keep up with the market or that we should does not strike me as a wise move. As it is, I think public employee salaries--particularly high end salaries have grown too rapidly in the last decade.

I would have like to have seen a segmented graphic showing the growth of the different types of employees' salaries over the last decade. I think that would be very telling.

Again, the key will be the city's ability to slow down growth of salaries because retirement cannot be reduced, salaries cannot be reduced either, all we can do is slow down the rate of growth and let inflation bring back salaries into a more manageable range.

---Doug Paul Davis reporting