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Casting New Budget Solutions for Chula Vista

As published in the San Diego Daily Transcript

by Vince Vasquez

Thursday, May 14, 2009

Last week, voters in Chula Vista overwhelmingly rejected Proposition A, a local ballot measure that would have raised the city’s sales tax rate to match the highest in the county. This victory for taxpayers is bittersweet, as elected officials must now consider painful solutions to close a projected $19.97 million budget gap in the coming weeks. Rather than disenfranchise residents with reduced public services, stronger leadership is needed to advance sustainable, structural fiscal reforms at City Hall.

According to public documents, Chula Vista's budget gap in Fiscal Year 2010 is projected at $19.97 million, which will continue for the next five fiscal years. Dwindling tax revenue from our nation's sagging economy is only part of the reason. After five rounds of budget reductions in the last two years, slashing $38 million and 21% of the city workforce, it's apparent that Chula Vista’s fiscal problem is systemic, not a result of fluctuations in tax revenue and development growth. Government spending has outpaced revenues over the last seven fiscal years, draining reserves while increases in wages and benefits were negotiated for a growing public employee workforce, all taking a dramatic toll on public retirement expenses. Between 2002 and 2007, Chula Vista's annual pension costs have increased by 400%, bringing the city to its knees in the worst market decline of recent memory. According to the City Manager's Office, 57% of the projected budget gap next fiscal year is caused by new expenditures, notably the “rapidly rising personnel costs” that the city negotiated with the four public employee unions, an issue which must be addressed to achieve a lasting fiscal recovery.

Tougher leadership in this area is clearly warranted. Earlier this year, city negotiators seeking concessions from labor unions this year came away with little more than a two year, $7.6 million reprieve from guaranteed salary increases. In exchange for eliminating the 4% pay hikes for 2009 and 2010, members of the Chula Vista Western Council of Engineers and Chula Vista Employees Association received two-year extensions on their lucrative labor contracts. However, the Chula Vista Police Officers Association and International Association of Fire Fighters Local 2180 are only delaying their respective 7% and 8% salary increases until after 2010, while also receiving three-year contract extensions, an additional $400,000 a year retire medical benefit, as well as new labor rights which may make taxpayers liable for even higher costs down the road. Rather than continue to give away the store, a new focus must be placed upon changing the way business is done at City Hall.

One member of the City Council echoes this call. Deputy Mayor John McCann demonstrated strong leadership with his alternate budget balancing proposal this January, which touted new savings from expanding cellular tower leases on city property, selling surplus public land, and eliminating travel subsidies and the notorious city car allowance for elected officials. With key additional reforms, such as eliminating the city’s early retirement program, a hiring freeze on municipal workers, and cutting an additional 30 positions in the public workforce, McCann sets his total potential savings at $20.3 million in Fiscal Year 2010. Though building political consensus among the labor-backed Democratic majority of the City Council may prove to be difficult, McCann’s ideas can produce real taxpayer savings in the immediate future, giving some breathing room before larger, structural changes can be made to draw down labor costs.

One major reform which must be on the table for future fiscal years is “managed competition,” the policy process that allows private parties and government agencies to compete for the right to deliver public services. For more than thirty years, the managed competition process has been adopted by local, state and federal lawmakers, streamlining operations and protecting taxpayers. When competitive bidding is used, studies show that service quality improves, costs are lowered by 10% to 25%, and innovation is encouraged in the workplace. Competitive bidding also encourages healthy government reform; by introducing competitive forces into government agencies, municipalities undergo significant internal cost-cutting and management overhauls that they likely otherwise wouldn’t. The competitive bidding process has proven to be a real financial solution for cash-strapped municipalities; as the San Diego Union-Tribune reported, the San Diego County Board of Supervisors plan on conducting managed competition reviews in the coming months, to reduce their record budget shortfall in an equitable way.

As the current language of the City Charter does not allow for managed competition to take place, a change that would require a vote from the public. Citizens in Chula Vista should collect signatures for a ballot measures to give voters the opportunity to cast their opinion on approving competitive bidding, especially considering that a victory at the ballot box could save the city millions of dollars. A preliminary analysis of eight city services reveals that taxpayers could save more than $8.8 million each year through managed competition. Lawmakers can work to ensure that the bidding process is fair and open, and that service contracts have high measures for accountability and incentives for good performance; to earn the public’s trust, these provisions should be written into the text of a ballot proposition.

Changes to the city’s pension and benefits system must also be implemented, as pension and labor costs are only expected to soar in the coming years. Chula Vista taxpayers pick up the entire pension tab for city workers, a costly practiced that is not followed in other cities, such as San Diego. An additional ballot initiative to reform pension benefits, such as extending the retirement age for future city workers, eliminating special fringe perks, and requiring new hires to pay into their pension system is a necessary and prudent measure. San Diego Mayor Jerry Sanders showed exceptional strength, shrewdness and courage in achieving $43 million in budget savings from labor concessions this year, a result of the five city union deals which were either amicably negotiated in private or implemented with unanimous support from the Democratic-majority City Council. By sounding the drum now and making the public case for labor cost reform, Mayor Cheryl Cox and the Chula Vista Council will be able to produce the same powerful results at a time of extreme fiscal constraints.

Moving forward, Mayor and the City Council would be remiss to indulge in the temptation for more budgetary smoke and mirrors; previous attempts to surreptitiously raise the utility user’s tax and business license fee grew the ire of residents and businesses, and Proposition A was rejected, as it would have unfairly generated enough revenue to allow city officials to ignore mounting labor costs. With more than 20,000 South Bay residents expressing their disapproval for the fiscal mismanagement at City Hall on Election Day, a renewed focus on rebuilding the public trust and confidence must be made by the Mayor and the Council. If tax increases are unacceptable to the populace, then elected officials should return to the voters with ballot-box budget solutions they will find more palatable.