City Manager Delivers Bleak Outlook

Editor’s Note: The following is a letter that was sent out last week to city employees from City Manager Debra Figone. In the letter, Figone explains the current budget crisis. San Jose is expected to have a deficit of $115 million for the next fiscal year. Even if all workers agree to a 10 percent cut in total compensation, Figone writes, almost 620 jobs will still need to be eliminated. The last day on the job for many of these people would be June 25. Figone will be unveiling her proposed budget on May 2.

Dear City Employee –

I am writing to update you on the City’s budget effort, and what you can expect over the next two weeks. As always, my goal is to keep you informed so that you don’t first learn of decisions that affect you by reading about them in the newspaper.

I know that you are aware of our current budget problems, so it will come as little surprise that the budget we will be releasing on May 2nd will include significant workforce impacts. The current projected budget deficit for the next fiscal year now stands at roughly $115 million. Although none of the recommendations will be finalized until the City Council approves a final budget on June 14, I think it is important that you know the magnitude of our situation now. 

While the budget details are still being finalized, I expect the proposals to include program reductions that will require the elimination of more than 400 positions. These are on top of approximately 220 positions already scheduled for elimination as a result of last year’s budget decisions. And we expect more than 230 more employees to be impacted through the bumping and seniority process. In addition, the Proposed Budget will include a set of Tier Two reductions. The Tier Two position eliminations would be triggered to the extent we are unable to achieve the 10% across the board ongoing total compensation reductions (as well as the roll-back of any general wage increases received in 2010-11) as directed by the City Council.

I recognize the magnitude of these numbers and understand the impact this will have on the individuals involved as well as the organization as a whole. I ask that all of us be sensitive to our fellow employees and understanding of what they are experiencing as we begin the process of moving through what will be a very difficult transition.

I am sharing this information now because starting next week we will begin notifying most employees who will be impacted by these recommendations. The one exception to this schedule is that employees who could be impacted through the seniority/bumping process associated with Tier Two eliminations will not receive notification until the second week of May. For those employees being laid off, their last day on the City payroll will be June 25, except for employees represented by the Police Officers’ Association whose last day will be June 30.

These decisions are not taken lightly, but the current state of our revenues and expenditures are such that significant reductions are simply unavoidable. 

Without the cooperation of several employee groups to date, the impacts would have been worse. I want to thank the San Jose Fire Fighters Local 230; the Association of Engineers and Architects, IFPTE Local 21 (AEA); the Association of Maintenance Supervisory Personnel (AMSP); and the City Association of Management Personnel, IFPTE Local 21 (CAMP), who have agreed to a 10% ongoing total compensation reduction, in addition to other reforms. The agreements, along with similar reductions for all employees in Unit 99, were approved Tuesday by the City Council. These concessions have avoided the need for even more recommended reductions.

While work continues on finalizing details of my recommendations, I will be holding a StraightTalk About the Budget meeting at noon next Monday (April 25) to talk about the proposals I expect to be recommending to balance the budget.  This will be an opportunity for you to learn more, ask questions, and get answers. I encourage you to attend, and as always you can get more information through the StraightTalk website on the Intranet.

More discussions will take place before the City Council makes final decisions and adopts a budget in June. While transitions are never easy, it is my hope that we can find long-term budget solutions that will put the City on a fiscally secure footing. Again, I thank you for your understanding and your professionalism as we work through this difficult transition. 

Debra Figone
City Manager

35 Comments

  1. The city’s budget problems have vastly more to do with it’s business practices than employee costs. The only way to resolve the problems the city is facing is to:

    a. stop building housing and especially low-income housing

    b. simplify the business tax/fee structure

    c. go out of its way to change its toxic business practices

    Unfortunately too many people of influence in City Hall, to include the city manager – a de Mattei, i believe – are, themselves influenced by labor and the construction industry and far too many see higher taxes and fees (as opposed to competitive business practices) as solutions to San Jose’s problems.

    • They need to thin out top management. The lower level employees are the ones who run the city. Upper levels collect a lot of money for doing much less work than the “grunts”. They do not need so many managers, with managers managing one or two employees or so many division managers in one department. They need to thin out supervisors and allow each to supervise a higher number of employees. The “wee ones” should be the last to go. They SHOULD start getting rid of excess management.

  2. I’ll be positive another time soon, but this “structural” deficit situation is directly related to thoughtless financial commitments made over the past few years going back at least to Mayor Hammer with City Manager Figone occupying the number two spot in the city manager’s office back then.  Here are three examples anyone could see coming, and many of us did.

    1) The merger of the city library system with the SJSU library system under Library Director Jane Light’s leadership has serious problems that were very predictable.  The city financial side simply cannot keep up with the university financial side, and this will result in more damage to our branches than we anticipate even now.  This would not be a problem had we merged with the county library system, an infinitely more advantageous plan. 

    2) The unnecessary and duplicitous campaign to erect a new City Hall that will cost us approximately $1B, while repair and enlargement of the old City Hall might have cost us $180M and opened up a lot of new office space on the old City Hall campus. 

    3) The stunning abuse of the state statute allowing San Jose to create a Redevelopment Agency.  Because it is a mixture of state and municipal management, with a huge conflict of interest (city council members act as board members of RDA to make deals between city and RDA), it will take years before all the RDA abuses come to light, but eventually we will gasp at the outrageous land-buying and bond-selling we have been misled into owning as taxpayers. 

    It’s like the first major criminal conviction for mortgage-related fraud…it takes years for everything to come out.

    Don’t think for a second that lay-offs will solve the problems caused by irresponsible spending commitments.  It is entirely possible that some bonds (established by city council-RDA joint agency agreements, not votes by residents) will have to be paid off by judicially-ordered levies on our homes of $900 to $1800 individually for several years on top of what we pay today.

    • Dale,

      Regarding your statement, “..judicially-ordered levies on our homes of $900 to $1800,” please tell us more about how this can be.

    • Someone has to be the ultimate guarantor for paying back bonds.  A good review can be found in Wikipedia at:

      http://en.wikipedia.org/wiki/Municipal_bonds

      “The risk (“security”) of a municipal bond is a measure of how likely the issuer is to make all payments, on time and in full, as promised in the agreement between the issuer and bond holder (the “bond documents”).  Different types of bonds are secured by various types of repayment sources, based on the promises made in the bond documents:  General obligation bonds promise to repay based on the full faith and credit of the issuer; these bonds are typically considered the most secure type of municipal bond, and therefore carry the lowest interest rate.  Revenue bonds promise repayment from a specified stream of future income, such as income generated by a water utility from payments by customers.  Assessment bonds promise repayment based on property tax assessments of properties located within the issuer’s boundaries.”

      While the ultimate guarantor can be different properties, revenue streams, or taxes, many bonds are ultimately guaranteed by the full faith and credit of property owners.

      Thus were the City of San Jose to continue its steep trajectory downward, some bond holders could take the matter to court and collect from property owners.  Consider this from the same Wikipedia article:

      “Municipal bonds have traditionally had very low rates of default as they are backed either by revenue from public utilities (revenue bonds), or state and local government power to tax (general obligation bonds).  However, sharp drops in property valuations resulting from the 2009 mortgage crisis have led to strained state and local finances, potentially leading to municipal defaults.  For example, Harrisburg, PA, when faced with falling revenues, skipped several bond payments on a municipal waste to energy incinerator and did not budget more than $68m for obligations related to this public utility.  The prospect of Chapter 9 municipal bankruptcy was raised by the Controller of Harrisburg, although it was opposed by Harrisburg’s mayor.”

      To determine which of the various bonds might have to be paid back by property owners, one has to go through each of the bond issuer’s statements, and its continuing disclosures of “notices of defaults, rating downgrades, events of taxability, etc.”

    • Think I’ll abandon this charade of a city before they do anything that radical.  Santa Clara, Campbell, Morgan Hill… lots of nice places to live in peace.

  3. The big question:

    If the city did not build city hall would we be having these layoffs?

    If so, then it is clear that the city cares more about its image as being the leadership of the 10th largest city rather than managing/providing services for its residents.

    The crib is already disassembled and ready for pick-up. Thanks

    • Actually Sarge… if the city didn’t use police, fire and code enforcement to clear out downtown there would still be a tax base and the high rise condos would sell.

      Instead downtown is a boring, dirty, empty mess with no value to San Jose.  And the condo towers which could have been a great boost are gross slums.

  4. It is foolhardy to believe that we can keep cutting services/employees and that we’ll then pull out of this tailspin.

    The elephant in the room is pension obligations.  Currently just under 4900 folks collect about $200 million in pensions.  That number goes up by $50 million next year.  So, next year, one-quarter of the entire General Fund will be spent on keepin 4900 people fat and happy, while the rest of us suck wind.

    If, as many claim, you cannot cut current pensions because they are a vested property right that cannot be changed unilaerally, then the city must face the fact that it’s screwed unless it declares bankruptcy.  The bankruptcy court can void all those agreements, and reduce them to sustainable levels.

    The mayor and council and city manager are fiddling while Rome burns.  Stop the bleeding.  Your bandaids aren’t working, nor can they. File bankruptcy and start over again.

    4900 current pensioners are holding the other 940,000 of us hostage.

    • Johnmichael,

      The problem with you is you have a brain and use it.  Such clear smart thinking has no place in todays world!  Didn’t you get the tweet on this?

    • So we should just turn our backs on those that made San Jose into the safest city? These employees helped bring new business to the area, raised property values and made it a safe place to raise a family. In addition to what previous employees did, what message is it going to send to current and future employees? Work hard so we can screw you later! That fact of the matter is the pension system was just fine until the crash. When the economy bounces back everyone will forget about retirements for city employees and focus on their stocks and bonus checks.

      • Wrong!  The pension system is fine only for the 4900 who get it.

        In the labor-dominated era, with Ron, Joe & Cindy carrying labor’s water, huge promises were made that no rational person could believe were sustainable in the long run.  And they gave us The Taj Gonzal, as well.

        Retirees have benefited from that ever since.  Now it is proven that that model cannot succeeed in all conditions.  Sadly, and I mean that, some of those foolish promises need to be broken.  I’d rather that were not necessary, but clearly, except to you and those 4900, it is necessary.  Those 4900 current retirees are screwing the remaining 940,000 residents of this city.

        Our roads suck, cops and firefighters will be laid off despite their givebacks, library hours are down, buildings built that remain unoccupied since there’s no more money, the parks look like shit.  All to keep the foolish promises to 4900 people.

        So let’s see, Sarge, do we “screw” 4900 folks with a pension rollback, or do the remaining 940,000 of us take it up the butt to keep the foolish, unsustainable promises made to those 4900?

    • I challenge Chuck Reed and the city to file bankruptcy.  The truth is, I don’t think they can prove they are worthy of chapter 11. I have heard Chuck Reed say in several interviews that they “are not a candidate for bankruptcy.” If I am correct, the bond rating for the city is AAA.  A very high rating, indeed.  Not sure a bankruptcy judge would allow this, but I invite the city to do it.  I would LOVE for all the books to be opened.

  5. ” While the budget details are still being finalized, I expect the proposals to include program reductions that will require the elimination of more than 400 positions. These are on top of approximately 220 positions already scheduled for elimination as a result of last year’s budget decisions. And we expect more than 230 more employees to be impacted through the bumping and seniority process.”

    In plain English speech what does that mean – how many will be laid off ? 

    City Hall has lost trust and creditability with resident and city employees by not speaking in plain English about budget numbers so that everyone understands what is going to happen in clear non confusing terms

    City Hall told Council and residents in 2009-10 that 600-750 city positions had been eliminated in the 5-8 year period prior and it was implied these were layoffs but not a single person was laid since empty or vacant positions were eliminated or people left to retire and positions were not filled

    For many months after Council budget meeting, some Council members, residents and city employees thought 600-750 was number of layoffs and many were rightfully upset, felt mislead and lost trust in City Hall budget numbers.

    So how many people will be actually laid off ( lose their jobs ) not transferred to another city job ( bump another job ), take planned or early retirement but actually lose their jobs like the 45 fire officers did last year ?

    Looks like “more than 230 more employees to be impacted through the bumping and seniority process.” possible will be laid off

    Is this right layoff number or what is the layoff number ?

  6. Oh! Those poor wives and children of City employees! Maybe I can help. Call me and I will tell Ben Bernanke to print an extra $200 million or so to tide you over.
    Best Wishes!
    Barack

  7. NOV 2010 deficit was $70mil.  DEC2010 deficit was $90mil. JAN 2011 deficit was $110mil.  FEB 2011 deficit drops to $105mil and holds steady there through MARCH.  Now in late April the number jumps to $115mil???

    What the f#*k? Over.  Hey all you private sector know-it-alls I have a question for you:  What would happen to your financial guys and girls if their estimates over a 5 month period swayed wildly by 45MILLION DOLLARS???  The city’s analysts underestimated the deficit by 62%!!!! and all you can do is blame employees???  Get real!

    • > analysts underestimated the deficit by 62%!!!! and all you can do is blame employees???  Get real!

      Well, actually, I’m not blaming employees; I’m blaming unions.  They’re not the same thing.

      To borrow a phrase: “Get real!”

      Employees DO exist whether there are unions or not.  And employees are NOT blamed where there are no unions.

      But, if YOU think that employees and unions are the same thing, then OK:  I AM blaming employees.

      • Um sorry, but I’m not getting how you blame the unions/employees for the up and down deficit estimations (changing from month to month).  Please explain, thanks.

      • Uhhhhh ok, all you can do is blame the unions when the City’s (the employer’s)  financial gurus underestimate the projected deficit by “62%” – it is really a 64% mistake in the City’s part but why quible…

        I think the point is that the city itself doesn’t really know what its own financial situation is. That isn’t the unions fault, the employees fault, your fault or my fault ( as long as you or I aren’t the ones coming up with these grossly inaccurate deficit estimates) or the man in the moons fault!  I don’t care what the unions negotiated salary and benifit package is. If the City cane provide a simple estimate for the projected deficit then it indicates that.there is an unacceptable level of incompetence at work on the part of a government entity that takes a significant amount of my hard earned money (your’s too???) in the form of taxes. The unions bear zero amount of blame for this.

  8. > Call me and I will tell Ben Bernanke to print an extra $200 million or so to tide you over.

    Wow!  That’s what I call “hope and change” not to mention “thinking outside the box”.

    I’m wondering:  would it be possible to print an extra $2 trillion and just eliminate the income tax entirely?

    And, if you printed an extra $15 trillion, we could pay off the national debt, too.

    You ARE a great president, Mr. Obama!

  9. I suppose this means its a bad time to try and start my career in public administration in San Jose?

    Maybe there’s a federal job somewhere I can apply to.

  10. Ok, so just do what we did in 1995 … unable to purchase a home unless we both took full time jobs and ignored our two elementary kids … we simply pulled out, moved to Texas … bought a home for 191k that would have been 550k in the Capital of Silicon Valley, pay 9k in property taxes per annum and have no State income tax …. After 16 years … and watching many California license plates come to Austin and San Antonio … all I can say is y’all come.  California is beautiful, but y’all don’t get it … the city leaders that is … truly sad!

  11. Hey Debbie,

    We all heard the same crap from you last year around this time. You and the rest of your Admin. “desk jockeys” are still trying to balance the budget primarily off the backs and livlihoods of the average City employee. You folks sit in that overpriced “ivory tower” in your well aportioned offices ( by the way honey, how much did that fancy bookself of yours actually cost the taxpayers??)  and destroy the lives of hundreds of city workers while your salary alone is a years salary for at least 3 or 4 average city employees.
    You do realize that the budget could be balanced a lot quicker if some of the City’s overpaid “suits” wound up on the chopping block. But that just wouldn’t be right, would it debbie dear.
    Soon all you City “chiefs” will have no “indians” to do the REAL work, how handy are you with a mop and broom sweetie? Your time is coming…………

  12. “Soon all you City “chiefs” will have no “indians” to do the REAL work, how handy are you with a mop and broom sweetie?”

    She will be just fine.  Janitors were outsourced at a 75% savings!  So the toilets and waste cans are just fine!

  13. Troubles started when Redevelopment was allowed to expand and gobble up far too much area that would’ve otherwise fed the General Fund.  They over-mortaged those areas, and that’s why our City finds itself “under water” in more ways than one. 

    Our City leaders cast blame everywhere except upon themselves.  Chuck Reed was the head of the Planning Commission in the ‘80’s, when many disastrous decisions were first made.  He, like many of our mayors, were groomed for the job without the benefit of having to work outside of city government.  They just don’t know what it’s like to live and work without having a “dome” overhead. 

    Cuts need to be made from the top, and as a previous post once suggested – the empty floors of City Hall should be leased out.

  14. Mr. Jeffie,

    Nice post, this knobby kneed city administrator has no clue as to the real peril Her, Chuck Reed and Council have put the tax paying citizens and workers of San Jose. 

    Lil “Debbie” Figone, knows she is doing wrong but could care less.  As long as she makes her $300K chip a year she is okay with anything. 

    The crime rate will rise, the pot holes will go unfilled, the streetlights will stay burned out, floors will go un-mopped.  Yes, the city will bring in the “scab workers” that Mayor Reed had promised his Rotary friends who own businesses that would cover some of the city functions that were once done by proud city employees. 

    As for you young up and comers in the City “you kids” are next, that “Children of the Corn” act will only get you so far before the Grown Up’s come hunting for your job too. 

    Pete Constant, Who made you the EXPERT in Law Enforcement?  You “WERE” a Cop at one time and from many of your ex-partners that I have talked to, you were not a very good one. 

    Please fess up and get off disability, we all know your faking it.  The camera never lies.  I hear the WWE is looking for another Wrestler “Constano the Lier.” 

    Old Frank

  15. “Janitor Bob”, how does it feel to be an underpaid SCAB????? It’s bottom feeders like you that are making the possibility of a working man earning a liveable wage a thing of the past. You and your kind kiss the hind quarters of the “suits” who treat you like garbage and know you will still clean their toilets…..Read the post from Old Frank M. and take some notes… Figone thinks of you contract people as dispensible,when she needs more money you will be gone too. WAKE UP Bobbie you’re cutting your own throat.

  16. Sell the damn police sub station that will NEVER BE STAFFED due to the lack of officers.  You built it with 92 million and it sits moth balled / EMPTY.  And forget about buying up land for a downtown ball park nobody wants or will approve.