The pandemic was officially only days old when the Manteca City Council embraced a plan advanced by Interim City Manager Miranda Lutzow that will create 16 new city positions — mostly management level jobs — that will cost taxpayers $1.8 million in the first full year they are filled.
The action was taken as the council was essentially “quarantined” from the public behind closed doors thanks to Gov. Gavin Newsom suspending parts of the Brown Act that is designed to assure public transparency. It also happened the week that Newsom essentially ordered large segments of the economy to shut down to try and slow the spread of the coronavirus that had already claimed the life of a Manteca woman.
Two days after the council action, the California Public Employee Retirement System (CalPERS) reported a $67 billion loss in market value since January bringing their portfolio down to $335 billion.
Before the coronavirus, the city’s pension costs due to unfunded liability were on target to hit $25.2 million annually by 2025 — that’s almost 60 percent of the city’s current $42 million general fund budget — compared to the annual contribution of $11.6 million in 2017.
The CalPERS investment portfolio hit means cities such as Manteca will see pension costs go up even higher.
Lutzow’s approach to city staffing is in sharp contrast to how Steve Pinkerton who had been recently hired to work as city manager responded to the initial clear signs that the housing crisis in 2008 was sending the country into recession.
The council had authorized a number of positions but Pinkerton as the day-to-day manager of the city refrained from filling. Included were 83 positions for police officers. Five of the officer positions were left unfilled as Pinkerton — who was hired on the strength of his economic development credentials — read the economic winds and shifted his emphasis to keep city expenses under control as signs popped up daily that municipal revenues would start decreasing.
Within a year’s time the bottom had fallen out. Pinkerton, hired by the council primarily to pump up the city’s ability to lure “well paying” private sector jobs, became the architect of the successful plan that prevented Manteca from heading into bankruptcy as Stockton ended up doing.
Given personnel costs between salary, benefits, and retirement constitute between 80 and 85 percent of the general fund budget, the only way to avoid a projected $17 million deficit in three or so years was to reduce labor costs.
Most bargaining groups accepted what was basically a 20 percent drop in compensation to save as many jobs as possible. The police bargaining unit declined prompting the city to lay-off 12 officers. Then after the next four officers retired and the positions weren’t filled, the number of sworn positions was reduced to 56 officers.
Pinkerton, by refraining from hiring, was able to limited police officer layoffs to 12 instead of 17. He also kept other employee layoffs at a minimum.
Pinkerton’s approach of applying the brakes whenever a sign of an economic downturn arises was dismissed by Mayor Ben Cantu in a letter to the Bulletin as “the past management style of placing a greater priority in planning for ‘doom’ at the financial sacrifice of everything else.”
The desire by the council majority to change the direction the city is taking is why the plan to hire 16 more positions at City Hall was presented to the council in the midst of an unprecedented economic shutdown that had Congress scrambling to approve a $2 trillion financial plan to avoid a financial collapse.
The council has said they will review funding before they give Lutzow the final green light to fill the 16 positions in the upcoming budget that needs to be in place by July 1 just other three months from now.
That budget, however, will not reflect any impact the economic freeze will have on municipal revenues such as sales tax as those numbers for January through March are not made available until later in the summer. And even though supermarket sales are extremely brisk, unprepared food items are not taxable. And even though Manteca has a robust appetite for dining out which is taxable, the closure of dining rooms have cut significantly into restaurant business.
Sales tax receipts in the second quarter for April through June will be hit even harder as more and more people are cut off from paychecks. Even if the economic shutdown ends by the pandemic shelter in place order being possibly lifted by the end of April, people who have gone weeks without paychecks aren’t likely to return to pre-pandemic spending on taxable commodities for months.
The city based on drastic reduction in driving in a community where commuting 60 plus miles one way to work is the norm will see a huge drop in gasoline sales. That will reduce the flow of not just the local share of gas tax but also the local share of sales tax into city coffers.
It is against that backdrop Lutzow is preparing her first municipal budget ever. She is doing so without a financial director on board plus without being updated on the impact of CalPERS obligations that are a given to grow significantly in the coming years. Adding more permanent positions especially when they are higher paid positions will add significantly to taxpayer obligations.
Lutzow was hired in mid-July of 2019 by then City Manager Tim Ogden to work as human resources director. Then just two months later she was made acting city manager. Six month later she was the primary architect of a 5-year staff expansion plan the council wanted to improve the delivery of projects and the efficiency of city services.
The need to address pension costs was touched on briefly at the last City Council meeting when Councilman Dave Breitenbucher disagreed with the mayor who advocated using “excess reserves” that depending upon how it is defined could be $10 million to spend toward the library and other needs. Breitenbucher believed it would be more prudent in the long run to ease the burden placed on taxpayers and to assure the city’s solvency to pay down the unfunded pension liability.
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