Discretionary spending for councilmembers raises questions

“Inside City Hall” Column of Inside the City Magazine – July 2013

Back to the Future – Discretionary spending for councilmembers raises questions

By Craig Powell

What was so disappointing about this year’s city budget deliberations was the complete absence of bold thinking, creative solutions or different (hopefully smarter) ways of doing business. It was as if the city’s big push to nail down an arena subsidy deal in March had exhausted its capacity to adopt new solutions to serious city problems. Instead, the city council went “small,” cravenly snatching $391,500 of the city’s general fund to almost double funding for each councilmember’s individual discretionary spending account, increasing funding from $55,000 to $98,500 each—a cash grab made much easier by the $27 million annual sales tax hike voters approved in November (Measure U). Is this what Sacramento voters voted for?

Eye on Sacramento calls them “slush funds,” while Jon Coupal of the Howard Jarvis Taxpayers Association labels them “incumbent protection accounts.” Why? Because councilmembers have a long history of handing out such dollars to influential community groups, burnishing their reputations as politicians (or Santas) who “care” and who can “deliver the goods,” even if the goods in this case come out of the pockets of hardworking (or not working at all) city taxpayers. With two and perhaps three councilmembers preparing primary runs for state assembly next year, these funds give them an opportunity to buy a little goodwill and build positive name ID.

At a council meeting on the city budget last month, North Natomas councilwoman Angelique Ashby fairly bristled at the suggestion that such accounts are slush funds, citing her own use of such funds to buy uniforms for Little Leaguers. “These kids can’t vote,” she exclaimed. But their parents probably do.

The same night, a group of parents from Del Paso Heights flat-out begged the council to fund a Ceasefire anti-gang program in their part of town, similar to one operated by the city in the high-crime neighborhoods of southeast Sacramento. The anti-gang program has had significant success in a number of U.S. cities. While the results in south Sacramento have been mixed, parents and neighborhoods are desperate for the help (and hope) that Ceasefire offers.

So, on the same night the council decided to supercharge their own discretionary funds (on a 6-3 vote, with Kevin McCarty, Jay Schenirer and Allen Warren dissenting), the council rejected the bid for $499,000 of funding for a Ceasefire program in Del Paso Heights. Ashby, the co-architect with Bonnie Pannell of the plan to increase funding for council accounts, told the worried parents to hit up each of the nine councilmembers for money from their accounts to cobble together the money needed for a Ceasefire program. The Del Paso Heights parents were not mollified.

Sacramento Bee reporter Ryan Lillis did a sampling of nearby cities and counties and found that the discretionary funds controlled by Sacramento councilmembers were completely out of whack with the amounts handed over to other elected officials in the region—a major disparity that existed even before our councilmembers chose to raise their individual funding. “Sacramento County, with a general fund budget five times greater than the city’s, sets aside a total of $100,000 for its five supervisors to split,” Lillis found.

City manager John Shirey is projecting that general fund deficits will rise steadily from $12 million next year to $15 million three years hence. But the real fiscal cliff comes in 2019, when the city’s PERS pension bill is expected to increase by $17 million and the Measure U sales tax hike expires, blowing a further $27 million hole in the general fund (not counting any general fund taps that might be required to cover the city’s estimated $250 million of arena bond debt, which the city hopes to pay off with city parking revenue and hotel tax).

Eye on Sacramento, a big critic of the discretionary accounts, issued a statement acknowledging “that many councilmembers have used such funds responsibly and in a manner that provides tangible benefits to the community. But in too many cases they have not. The problem with unaccountable spending by councilmembers is that the ‘bad’ spending by some members undermines public trust in the council as a whole.”

It was not always thus. Twenty years ago, before council discretionary accounts were created, the city council used to parcel out small grants to nonprofit groups through an application process, with councilmembers supporting various grant applications, staff reviewing the proposals and the council as whole, in full view of the public and the media, approving the funding. Eventually, grant recipients were asked to sign contracts and city staff monitored payouts to assure that funds were being used as promised. When the monitoring program began, several grant applicants dropped out of the program, a sign that some nonprofits didn’t wanted to be hassled with city oversight.

Under the rein of former city manager Bill Edgar (during his first stint as city manager from 1993 to 1999, not his more recent interim gig), the city’s grant program was abandoned and councilmembers gave themselves direct control over pools of cash.

There is one question, however, that no one seems to be asking: Are discretionary spending accounts for councilmembers legal? Under the Sacramento city charter, the city council is given exclusive power to spend city funds. Is the city council’s assignment of spending power to individual councilmembers an illegal delegation of the council’s spending power under the city charter? Perhaps. It’s an interesting legal question that may receive increasing scrutiny, particularly in a town of almost 20,000 lawyers, many of whom are underemployed. (Woe unto us all.)

Meanwhile, the council approved a more expensive spending plan for Measure U tax receipts over the budget objections of the city manager. Councilmembers were (understandably) frustrated by the relatively paltry number of new cops that Shirey’s plan for spending Measure U money would buy and approved additional cop hiring that would spend more than projected future Measure U revenues, setting up the city to overspend future Measure U revenues (“deficit by design”).

Why did the city manager lowball the hiring of new cops in his proposed budget, given the $27 million flood of fresh tax revenue under Measure U? He did it to maintain pressure on the Sacramento Police Officers Association to agree to a new labor contract that would require its members to contribute the full “employee’s share” of their own PERS pensions, amounting to 9 percent of salary. Unlike other city employees, city cops currently pay nothing toward their pensions. The city pays both the 30 percent employer’s share and the 9 percent employee’s share of pension costs. If the city is successful in securing the 9 percent pension contribution from cops, it would hire an additional 56 sworn officers under Shirey’s budget plan.

But the negotiations with the SPOA are not going so well. A one-day session with an impartial mediator in mid-June did not lead to a deal, leaving the city council with what was thought to be two options: Stick with the city manager’s plan to keep the pressure on the SPOA by going slow on the hiring of new cops or force the city’s contract dispute with the SPOA into “winner-take-all” binding arbitration. The council majority, knowing that negotiations with the SPOA were going nowhere fast, opted for a third choice: Hire additional cops now even if the action puts the city on a glide path to future deficits in Measure U spending. Did the council’s move undercut the city manager’s negotiation posture with the SPOA by taking pressure off city cops to contribute toward their own pension costs? Almost certainly.

So city costs will be higher, the city now faces a projected Measure U spending deficit, city cops still don’t contribute a dime toward their own pensions and city leaders once again flinched before forcing the politically juiced SPOA into binding arbitration while knee-capping the city manager’s negotiating posture with Sacramento’s most powerful union. The council also broke two of its earlier Measure U promises: not to use Measure U money to fill structural deficits (half of this year’s $8.9 million deficit was filled with Measure U funds) and to set aside some Measure U funds in a reserve to lessen the impact of Measure U’s expiration in six years. (Zero was set aside.) The good news is that the city will have an increased number of cops on the beat next year, but at a much heavier than necessary cost to taxpayers.

While city councilmembers focused on overspending Measure U money and enlarging their discretionary accounts, they missed the chance to adopt solutions to problems that just aren’t going away, such as:

  • The city’s $440 million unfunded liability for retiree heath costs, which is increasing at a pace of $30 million annually (an annual expense that is not considered part of the general fund deficit under the city’s obsolete cash basis of accounting).
  • Controlling the city’s rapidly rising costs of providing health care for current city employees. (Several U.S. cities are considering shifting health coverage for its employees to Obamacare’s public exchange option to reduce costs.)
  • Inefficiencies in the operation of the city’s tradition-bound fire department, including high overtime costs, excessive staffing of fire vehicles and a failure to fully adapt to its new dominant role: handling city ambulance calls. (The city, in its entire history, has never hired a fire chief from outside of its own fire department.)
  • Assessing opportunities to improve services and lower costs by outsourcing basic park maintenance (following up on last year’s move to outsource all city golf course maintenance) or allowing private trash firms to compete for residential garbage service, a move proposed by the Fresno city council with the hope of lowering garbage rates while increasing city franchise revenues, but recently killed by a close referendum vote backed by city unions.

Then there is the issue of the ongoing building moratorium in flood-prone Natomas that is strangling growth and job creation in the area. The downtown railyards project is pretty much stalled, as is the endlessly delayed Docks project to develop Sacramento’s waterfront. Meanwhile, West Sacramento races ahead to develop its Sacramento River waterfront.

There are also rumbles that the city’s planned upgrade of our water and sewer infrastructure, to be financed with the issuance of $2 billion of city revenue bonds over the next 15 years, is starting to cost more than originally projected. Will the city stick with its original financing plan, borrow even more or shift sooner than expected to a lower cost, pay-as-you-go financing plan?

These are big questions involving big, important issues. With all of these big issues facing us, what are the priorities of our city government? Current city staffing offers us a clue. Since becoming city manager almost two years ago, Shirey has cut the number of assistant city managers who directly report to him from four to just one, John Dangberg. Dangberg has but one job assignment: overseeing the building of a new downtown arena.

Craig Powell is a local attorney, businessman, community activist and president of Eye on Sacramento, a civic watchdog and policy group. Powell also chaired the campaign opposing Measure U. He can be reached at craig@eyeonsacramento.org or 718-3030. To read EOS’s report on the arena proposal, go to eyeonsacramento.org.

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Eye on Sacramento’s Statement to the Sacramento City Council Regarding the City Budget

Eye on Sacramento’s Statement to the Sacramento
City Council Regarding the City Budget

June 11, 2013

Good evening. I’m Craig Powell, President of Eye on Sacramento. It’s been awhile since we’ve appeared before you.

EOS, like much of city management, has been busy with the arena proposal. We issued a detailed report on the arena deal and city financing plan on March 26th. We’re busy working on Phase II of our arena report, which includes (1) analyzing the feasibility, cost, risk and legality of your arena financing plan; (2) examining the extent of the city’s understatement of taxpayer subsidies devoted to the arena; (3) assessing the likelihood, cost and financial responsibility for freeway improvement costs; and (4) examining the claims of arena supporters that recently constructed arenas have transformed the downtowns of cities that have built them.

You started off the year strong on budgetary matters. You approved a set of prudent principles to guide how you spend Measure U funds. You agreed not to use Measure U funds to close structural deficits. You agreed to reserve some Measure U funds to ease the impact of the abrupt end of Measure U in 2019.

Since those promising early days, it appears that you have experienced a fiscal personality change. You are breaking faith with your Measure U spending principles left and right. You are poised to use Measure U revenues to cover half of next year’s structural deficit, in direct violation of your clear pledge not to do so. You are poised to break your promise to create a Measure U reserve to ease the impact of Measure U’s expiration.

There’s more. You are poised to ignore your own city manager’s prudent advice to base your Measure U spending decisions on careful projections of future revenues, not revenues you hope and pray the city will achieve in the future. You’re starting to act like the imprudent homeowners who overextended themselves buying more house than they could afford because they just knew that property values would always go up. If you base spending decisions on overinflated estimates of future revenues you’ll put us right back in the same box that helped devastate city budgets and city services over the past five years. This time, however, you will doing so in the face of a stern warning from Mr. Shirey of a coming fiscal cliff. You are about to return to the bad old days of reckless city spending.

City of Sacramento non-existent whistle-blower hotline largely window dressing.

Inside City Hall  Published on Wednesday, 30 Oct | Print | Email

Whistle-blower Hotline   What’s that number again?

By Craig Powell

On Oct. 11, just as absentee voters were beginning to cast their ballots on Measure U, the proposal to increase the city sales tax, city officials issued a breathless press release announcing the “launch” of a whistle-blower hotline that city employees could use to report waste, fraud and abuse in city government. The Sacramento Bee dutifully ran a story the next day reporting that the city has “launched a whistle-blower program” that “will include a 24-hour hotline for city employees.” Even Channel 13 news covered the “launch.”

But there was a rather glaring omission in the city’s press release and the resulting media coverage: No one actually reported the hotline’s phone number. Why? Because there is no whistle-blower hotline and, according to city auditor Jorge Oseguera in statements to Eye on Sacramento’s Erik Smitt, there likely won’t be one until early next year.

Why are city officials touting the launch of a whistle-blower hotline before it actually exists? To divert the public’s attention from criticism the city council has been drawing for its multiple failures to fund such a hotline since it was first proposed by Oseguera back in February. That’s when Oseguera reported to the city council that a robust hotline program could save the city as much as 5 percent of the city budget—potentially $30 million per year in savings—based on his survey of the savings realized by other cities that have robust hotline programs.

Oseguera told the council that he needed $220,000 in investigative resources to do essential follow-up on calls to the hotline without hamstringing his current staff of busy auditors. Did the council fund the $220,000 for the hotline program when it came before the council in March? Nope. Councilmembers kicked the can down the road, saying that they would consider funding the hotline as part of the council’s budget deliberations in May and June. But the city manager failed to include funding for the hotline in his proposed city budget in May, and the city council failed to fund it in the city budget they approved in June.

On Aug. 15, Oseguera reported to Smitt, Eye on Sacramento’s assistant policy director, that no funding had been authorized for a hotline, even though The Bee reported that city manager John Shirey claimed he was moving forward with the hotline back in June. If he was, he sure didn’t share any of his funding plans with Oseguera any time before Aug. 15.

After growing criticism at public forums and in the pages of this publication of the council’s repeated failures to fund the hotline proposal, Shirey decided to investigate city waste and fraud on a shoestring, asking Oseguera to line up a third-party vendor to operate what is essentially a voicemail line for the hotline at an annual cost of $15,000, but providing zero additional resources to Oseguera to investigate calls to the hotline.

Shirey’s approach to the whistle-blower hotline is akin to a police department announcing the establishment of a 911 number for police emergencies, then not hiring any actual police officers to respond to frantic calls from the public for help.

In the past year, the city council spent close to $1 million on arena consultants on an arena deal that went nowhere, more than $200,000 to hold an election on a charter review commission that no one asked for and about $750,000 on five police union leaders who perform no actual police work while collecting sizable city paychecks. But the council balked at the idea of spending $220,000 to eliminate as much as $30 million in wasteful, fraudulent and abusive city spending, ignoring its own auditor’s recommendation.

Just how bad of a business decision did the city council make in refusing to fund a serious whistle-blower hotline? Let’s assume that the auditor’s projected $30 million in potential annual savings is overstated by a factor of three and that actual savings from a robust hotline would amount to only 1.5 percent of current city spending, or $10 million annually. Savings of that amount would produce a stratospheric 4,545 percent annual return on a city expenditure of just $220,000, making it perhaps the best investment in city history.

If the council had funded a robust hotline in February, when Oseguera first proposed it, and the city had the hotline and associated investigative resources in place and operational by April 1, the city would have already saved $7 million through Nov. 1 of this year (based, mind you, on a more conservative $10 million annual savings projection), roughly equal in amount to next year’s projected deficit in the city’s general fund.

City officials’ announcement of the still-nonexistent hotline was largely window dressing, designed to provide political cover for a council bent on imposing $28 million in higher sales taxes on Sacramento residents and businesses while recklessly blowing off the best idea yet for eliminating up to $30 million annually in wasteful, fraudulent and abusive city spending. City officials’ failure to take timely and responsible action on the hotline proposal is a pretty stark and compelling example of their continuing lack of seriousness in reducing waste, fraud and abuse in city spending.

Voters may want to consider city officials’ clear lack of concern with how our city taxes are spent as they decide whether they want to increase the city’s sales tax rate from 7.75 percent to 8.25 percent, making it the highest sales tax rate in the region.

Eye On Sacramento files complaint with Grand Jury, Secretary of State and Attorney General

On July 24, 2012, the Sacramento city council passed resolutions which placed on the November 6, 2012 general election ballot a local measure to increase the city’s sales tax rate from 7.75% to 8.25% (see ES). The measure was designated Measure U. A week later (on July 31, 2012), the city council directed three of its members, Steve Cohn, Darrel Fong and Kevin McCarty, to author and submit a ballot argument supporting Measure U. At the same time, the city council directed Mayor Kevin Johnson to author and submit a ballot argument opposing Measure U (see ES).

By designating council members to write both the pro and con arguments on Measure U, the city council monopolized the ballot arguments on Measure U, shutting private citizens and organizations out of the process of submitting ballot arguments.  read more …

Summary of the City of Sacramento’s Ten Serious Measure U Ballot Irregularities

As of September 5, 2012, Eye on Sacramento had identified ten serious ballot irregularities with respect to Measure U for which City of Sacramento officials, elected and appointed, were culpable, either by instigating the irregularity or by failing to perform legally assigned duties to prevent their occurrence or to halt their continuation. The ten serious ballot irregularities are summarized below:

1. The City Council Abused Its Power By Taking Control of Both the Pro and Con Arguments on Measure U.

2. Mayor Johnson Failed to File a Con Ballot Argument As Assigned by the Council, Sandbagging Others Who Were Drafting Con Ballot Arguments.

3. The City Clerk Abused Her Discretion By Refusing To Briefly and Equitably Extend Her Deadline for Submission of Ballot Arguments Opposing Measure U.

4. Three City Councilman Violated the Law by Substituting Shills to “Author” the Argument Opposing Measure U.

5. The City Clerk and the City Attorney Failed to Enforce the Council Resolution and the City Clerk’s Own “Guidelines for Preparation of Ballot Arguments” by Failing to Disqualify the Pro Argument for Clear Non-Compliance With Applicable Rules.

6. Three City Councilman Used Legally Ineligible Ballot Co-Authors as Shills for Their Pro Argument: the Police Chief and Fire Chief.

7. The City Clerk and the City Attorney Wrongfully Refused to Disqualify the Police and Fire Chiefs as Co-Authors of the Pro Argument, Despite Citizen’s Complaint.

8. The City Attorney Authored a False and Misleading Ballot Title and Ballot Summary for Measure U.

9. The Pro Argument Submitted by Three Council Members (Via Five Shills) Contains Numerous False and Misleading Statements in Violation of State Law.

10. The False and Misleading Pro Argument Was Approved Without Objection by the City Clerk and the City Attorney.

D1341  pdf document

Why I Sued the City … Fair elections matter in Sacramento

The folks who volunteer with the local government watchdog group I head up, Eye on Sacramento, spend most of their time examining and then trying to illuminate the behavior of city government that should be of concern to the public. They also spend time studying troubling city problems and suggesting sensible solutions to  them. For example, this past spring we began a transparency project that drafted 10 reforms that would make city government more open to citizens if adopted by the city council.  This month, we are forming a city pools task force of community members, pool industry experts and others who will try to hammer out solutions to keep city pools open permanently.

But our core job is to act as a watchdog of city government and barking loudly when things go amiss.  Barking is usually enough, but on rare occasions, a good watchdog really has to do more than bark. It has to bite. Recently, Eye on Sacramento bit back, suing the city to prevent an injustice that threatens to keep city voters from seeing a ballot argument opposing Measure U, the city council’s proposal to increase city taxes by one half of 1 percent.  read more …

City of Sacramento Sales Tax Increase, Measure U (November 2012)

  • Citizen law suit filed against City of Sacramento 

    Petition for Writ of Mandate – City of Sacramento Measure U – Tax Increase

    … The writ sought by Petitioners will rectify an egregious and extraordinary confluence of actions and dereliction of duties by the City, its City Council and its Mayor which have combined, whether by design or mere neglect of officially assigned responsibilities, to effectively deprive Petitioners of their right and opportunity to place arguments against Measure U before Sacramento voters and, more critically, to deprive Sacramento voters of their fundamental right to see and consider the arguments of both proponents and opponents of Measure U instead of having available to them only the arguments of proponents of Measure U …

Petition for Writ of Mandate – City of Sacramento Measure U – Tax Increase

VERIFIED PETITION FOR WRIT OF MANDATE

Exhibit A – Argument Against Measure U

DECLARATION OF CRAIG K. POWELL IN SUPPORT OF VERIFIED PETITION FOR WRIT OF MANDATE

Exhibit Powell-1 Mayor to write argument against Sacramento sales tax hike

Exhibit Powell-2 Selection of Argument Authors …

Exhibit Powell-3 Mayor Johnson’s Ballot Argument Against Measure U

Exhibit Powell-4 Mayor Johnson fails to write argument against tax measure

DECLARATION OF DENNIS NEUFELD IN SUPPORT OF VERIFIED PETITION FOR WRIT OF MANDATE

Exhibit Neufeld-1 E-mail from Dennis Neufeld

Exhibit Neufeld-2 E-mail exchanges between Dennis Neufeld and Assistant City Clerk Stephanie Mizuno