Redwood City announced it will eliminate the position of deputy city manager, and the person who holds that position, Magda Gonzalez, will be laid off effective sometime in February. Gonzalez has held the position since 2001 with a salary last year of $179,714.
The deputy city manager’s functions include being the primary staff assistant to the city manager; identifying, analyzing, proposing and implementing solutions to operational problems and staff and budgetary issues; preparing reports and studies as requested by the city manager; working with departments to analyze and revise operating procedures; coordinating interdepartmental, intergovernmental and civic activities; directing special projects; supervising city manager office staff and acting on behalf of the city manager in his absence.
Gonzalez was also responsible for the direct supervision of the communications director and clerical staff. There is no decision on which, if any, of those positions will be eliminated.
"There is no direct word yet on that, but a thorough analysis will be made,” said Mayor Jeff Ira.
The position elimination is another step in a city staff and department reorganization that has included the retirement of city manager Peter Ingram, two demotions in the Planning and Economic Development Department management and the hiring of a new economic development coordinator.
The city has also retained the services of Management Partners Inc. to study the city organization and make recommendations on changes.
"At the direction of the council, [interim city manager] Bob [Bell] started examining where we can make cuts in the city and still provide effective services,” Ira said.
It is a budget-cut position elimination, which Bell said he advised department heads of last week.
"We have had to eliminate a lot of positions the last few years and we recently were notified our PERS rates are going up more than we even projected,” he said, referring to Public Employee Retirement System rates that are the payroll contributions paid by cities, counties, school districts and state agencies to cover their employees’ pension and health care benefits. "We are now making some cuts again to mitigate further erosion of our fiscal health.”
During the Chamber of Commerce-sponsored State of the City address last Thursday, Vice Mayor Alicia Aguirre said, during fiscal year 2010-11, the city cut $6.15 million, resulting in a 7.5 percent decrease from the previous year’s budget. Even with those cuts, Redwood City is in the red $9.5 million.
According to Ira, he and Bell have been working to determine where they could make "$3 million in cuts from city employees’ salaries, retirement funds and contributions.” He went on to say that employee benefits are "bankrupting cities and states.”
A month ago, "we were hit with $725,000 in PERS, and more are coming in February,” said Ira.
In the fiscal year 2010-11 budget, nearly 80 percent of the city’s operating costs were related to employees who provide services to the community. Personnel costs have outpaced inflation and city revenues. Even as the city reduces its workforce, personnel costs continue to rise.
Public employee pensions are a significant cost driver for the city. When the stock market was doing well, investment gains helped buy down the costs of pensions. During that time, CalPERS, the state pension fund with which the city contracts, made actuarial assumptions about investment returns that didn’t hold true. That, coupled with the economic collapse of 2008, exacerbated an already costly pension obligation and resulted in exponential increases to the city’s pension obligation.
Another factor contributing to increased personnel costs is the escalating price of health care. The cost of retiree medical expenses is approximately $2.5 million per year and will likely grow.
The "$725,000 is in addition to what we were already expecting; that is the reason for the mid-year budget cuts,” said Bell.
As head of the Human Resources Department, Bell was able to reduce the level of employees in that department from 12 full-time positions to six and still maintained the same level of service.
In the June 2010 City Manager Department’s budget report from Gonzalez to the City Council, she recommended "elimination of the assistant city manager position.” The position was filled on an alternating basis by department heads as assigned when the city manager was not available.
That position’s assignments were then given to Gonzalez and the executive team members, with further "backfilling” of tasks by other city manager office staff, thus assuring that core services were maintained.
"The city must now create a structurally sound budget. That means we must balance our ongoing revenues and expenditures without further use of reserves or more cuts and layoffs of city employees,” Ira said. "To do this, the city must partner with its five labor groups over the course of contract negotiations and look for long-term solutions to escalating personnel costs.
"[We will be] working with the unions, not wanting to cut employees. There will be no across-the-board cuts, and we will not be cutting service levels. That is where the line is drawn in the sand.”
The city has received cooperation from employee unions, according to Bell.
"They are engaged in the process and are very willing to look at different solutions and proposals to tackle the budget and they are taking back that information to their groups,” said Bell. "At the end of February we will know where they are and we will be able to make decisions on that.”
In the meantime, Bell will be evaluating each department and looking at ways to, he said, "streamline administration costs and see if restructuring is needed in any department and go from there.”
"I have a ton of respect for Magda and she has done a great job for the city,” Bell said about the elimination of the deputy city manager position. "It (the position elimination) is the right thing for our community at this time. It was a tough call but it had to be made.”