To: Mayor Rivera and City Council Members
From: Stephen Bartolin, Jr.
Date: November 16, 2009
Subject: City Budget
I understand you voted to take $580,000 out of the CVB’s share of the Tourism Budget. I completely understand the financial pressures the City has right now and the tough decisions that must be made. I am not sure this is the most effective idea, however, for two reasons:
• It doesn’t really put much of a dent in the overall problem.
• I can say with a good fact basis that cutting tourism funding will only dig the hole deeper.
This was proven, in no uncertain terms, when the State of Colorado did this. It cost them many millions more than they saved.
With that said it is unfair to make that comment and not offer some solutions. It doesn’t appear to be a popular solution to cut police and fire or not replace street lamps or water parks or close the museum or require temporary furloughs. It appears to be making people angrier. People seem to want a more comprehensive and long lasting solution.
The Gazette article a few Sunday’s ago brought some clarity when it broke down the city revenues and expenses by area. I was surprised that public safety was only a $114M of the overall $226M in expenses.
I am sure there are efficiencies to be gained in public safety, but there is a lot to work with outside of that.
Please understand the constructive manner in which these comments are intended. A good way to look at it is as a business problem. Say you are the new CEO of a $226M a year business that is going to run $30+M in the red next year. The easy answer is to raise the rates and increase revenue, but the marketplace won’t support that (in this case, the taxpayers).
That leaves only one alternative. Deal with the expense side. A basic analysis of the expenses is that you have a 70% overall payroll cost, $161M payroll for 1805 employees which equals $89,196 per employee and benefit and pension plans that are not only “Cadillac” but more “Ferrari” when compared to what is being offered in the private sector.
Looking at it this way, the solutions become more obvious:
• Restructure and reorganize how the City is run and figure out how to do it with approximately 1550 employees versus 1805 employees.
• Restructure the starting wages for both salary and hourly personnel across the board.
• Contract out everything that is practical with sharply negotiated pricing which gets you out from under the overtime, benefit and pension costs paid to City employees.
• Restructure your benefit and retirement plans to something more comparable to what is available in the private sector.
More specifically:
• 70% payroll cost - No matter what business you are in, for profit or non-profit, the game is pretty much over if you are running a 70% payroll cost. We do approximately half the revenue the City does and we run a 30% payroll cost with 1800 plus employees, near the same number as the City.
• Per employee cost of $89,196 - It is doubtful you can find any private employer for 500 or more people in the state of Colorado or practically the nation that has a per employee payroll cost that high. Our per employee cost is $24,460, which includes seasonal and part-time people which we use a great deal as there are no benefit costs associated with these.
• The number of people it takes to get things done.
i. The Gazette reported that the City has 81 people in its IT Department and is reducing it to 69. We have some ultra-sophisticated and integrated systems and a large PC network. In addition, we provide 24-hour IT customer service to all of our guests. We do this with 9 people
ii. I was told that the Utilities Department has over 30 people in Communications plus employs the services of an outside PR agency. We have 1 person in PR and we have to compete for our business across the nation.
iii. The Gazette also reported that Utilities has approximately 60 people in Human Resources. We have 13. Yet we have over 1800 employees compared to their 1300.
• Examine the number of salaried positions - of our 1800 plus employees we have 144 salaried positions. I have no idea how many the City has but it would be interesting to know.
• The Gazette reported that the City has 67 positions paying $100,000 or more. We have 13.
• Restructure starting wages for hourly and salaried positions - every year we do a wage survey among major employers as well as other hospitality employers in the city for comparison purposes. For all like positions and in almost every single case the City had the highest starting wage over any of the other private sector companies we surveyed.
• Restructure the health insurance program to one comparable to what is being offered in the private sector and examine the costs shared by the employee.
• Move retirement age to 60 no matter how many years of service - both for collection of benefits and for medical insurance.
• Once a retiree reaches age 65 move them to Medicare and off the City plan.
• The weight of the pension plan is crushing the City financially. If the private sector cannot afford plans likes this how can the taxpayers? It has to be dealt with. It occurs to me Police Officers and Firefighters who risk their lives for this community should be excluded from the ideas being advanced.
Police and Fire support staff should be treated like all other City employees. Develop a generous matching 401K plan and have people take responsibility for their own retirement planning. A friend of mine’s wife works in the IT Department of one of the City entities (she is paid $120K a year - she is not the department head or the director).
Our Director in IT makes $90K a year. This lady is 49 years old and plans to retire next year at 50. She will receive 80% of her salary with annual cost of living increases and full medical package for the next 30+ years. Who can afford this?
• Whatever measures are decided on should be carried right across to Utilities. They operate like their own private fiefdom. When I look at our water bill going from $580,000 in 2008 to $2.5M by 2018 certainly the same operating efficiencies applied to the City should be applied there. Possibly it makes sense for Memorial Hospital as well.
• Capital Expenses - the article did not indicate how much the City spends annually in capital expenses, but I am sure it is many millions of dollars. Our staff is always amazed at the new fleets of vehicles you see in use, i.e. when the Stormwater Enterprise was established everyone was outfitted with fully optioned F-350 trucks. You see them all over town. We maintain vehicles well and run them until they don’t run anymore. We have many with over 200,000 miles. We also buy well maintained used trucks, shuttle, vans, etc., many of which have been in service 10 years now. I understand the Police Department just spent $3M on new portable telephones when the present system was operating fine. In this economy could that have been postponed for another year or two?
• Go to zero based budgeting for operating and capital expenses immediately before capital budgets for 2010 are approved.
We know the arguments you’ll get: that we are only in the mid-pay range of other cities - won’t be able to hire and recruit - etc. etc. - baloney - I showed you a number of comparisons to our business with staffing levels, number of people at 6 figures or more, number of salaried people, average cost per employee and benefits per employee, etc. between The BROADMOOR and the City - we are not comparing some third rate organization. The BROADMOOR is recognized nationwide as a world class organization and we compete in a world every day where the best is just good enough. We are able to recruit top professionals in all the key positions and get creative with how we staff and operate our business.
It probably would not be effective to turn these suggestions over to somebody within the City and have them develop and implement the necessary solutions. You’ll have to bring in a firm from the outside to do it under Council’s direction or you can put together a panel of CEO’s within the community to analyze this and I am sure they would have many more points to offer. I would be happy to facilitate such a group and host a lunch discussion. I mentioned it to Bill Hybl and he said he would be happy to offer input as well and participate. A more comprehensive approach is what will provide a viable long term solution. I predict that if Council were to take this on and restructure with real reform and solve problems you would earn the respect and admiration of the entire community. In fact, this could be a national success story.
The Gazette reported that the City has 67 positions paying $100,000 or more.
What are the jobs that are paying more than $100K a year? Is that just salary, or salary plus all pension and healthcare costs? Of course, the problem with major layoffs is that it also increases unemployment. What is the employment picture in the region now?
The biggest problem with Mr. Bartolin's letter is that he seems to think that there is a fundamental equivalence between the operation of a luxury hotel, and the operation of a large municipal government.
Mr. Bartolin is a smart fellow, and he runs a first-class operation at the Broadmoor ... but it helps to recognize that the Broadmoor is only a couple of hundred acres in extent, and he has the luxury of relying on all of those services that the city provides for him. Easy for him to say ... it'll be a lot harder for him to do.
Just for instance, take his discussion of IT staffing. The IT needs of the Broadmoor Hotel are essentially those of an office complex. The IT needs of a city include not only the office needs common to the Broadmoor, but also connectivity with police and fire departments (including 911 and mobile units, with all that entails); connectivity with maintence crews; websites for city services; connectivity with other government entities; and so on. It's an entirely different ballgame.
Thanks for posting Bartolin’s letter - it was referred to in the other thread about ColoSprings but I didn’t go search for it. As is usual in most letters, it is all about who’s ox is gored. In Bartolin’s case, it was a cut to the Convention and Visitor’s Bureau (CVB) budget. I will commend his letter for being thorough beyond the discussion of his gored ox. He does make a good point on the CVB that those dollars are designed to bring new dollars to the community and the tax base.
That letter is AWESOME!!!
One of the best posts I have seen on FR! City governments think we are all so stupid. They threaten to close the libraries (gasp), cut the number of firefighters (horrors) and limit the number of police patrols (OMG)! Next comes the garbage and utility services. They think we don’t wonder about the PR associates and janitors assistants that could just as well be let go.
Nicely done.
I hope that has been put forth in plenty of places such that anyone paying attention to this issue will see it.
And that's just the Utilities Dept. How many "spokespersons", public relations staff does the mayor have? The Council? Each department head? I'd love to see the total headcount for those jobs.
Every time I hear this canard about firing cops and firefighters, I want to yell at them: "Eliminate your public relations departments, then we'll believe you're getting serious!".
Here we have all these public workers who tell us they're worth those extravagant salaries...but they can't write their own press release? Or speech? The fact is, IF YOU'RE TELLING THE TRUTH, you don't need someone to write spin for you.