Christine Daniel
City Manager Christine Daniel speaking at a City Council meeting earlier this year. Photo: Emilie Raguso

Isabelle Gaston, president of the North East Berkeley Association, recently did an email interview with Christine Daniel, Berkeley’s City Manager, about the financial health of Berkeley for NEBA’s newsletter. Gaston provided the interview for reprinting on Berkeleyside. It has been edited to conform to Berkeleyside style:  

Gaston: How would you characterize the overall financial health of the city? 

Daniel: The City of Berkeley weathered the financial downturn better than many jurisdictions. While reductions in staffing were felt throughout the city organization and resources for a variety of programs were reduced or eliminated due to decreased funding from sources such as the state and federal governments, Berkeley property values remained relatively stable compared to values in the region, and sales taxes, while suffering a decline in FY 2010, have recovered.  However, property transfer taxes suffered a significant decline which affected the city’s ability to invest in infrastructure maintenance. Those revenues are now beginning to recover, but are not yet at pre-recession levels. 

Gaston: What new tax and bond measures will you recommend to council for the 2014 ballot?

Daniel: Discussion of ballot measures always includes involvement by city commissions as well as the City Council and may include a community survey sometime in 2014 to assess the community’s interests. There are a number of issues that merit attention and I’m sure we will be discussing them throughout this year.

Gaston: Prior to your becoming City Manager — and even before the Great Recession — your predecessor often remarked that city employee pension and health care costs were unsustainable; however, no policy was ever implemented to address these escalating costs to taxpayers and the “can has been kicked down the road” for almost a decade now. What specific steps are you taking to work with the city unions to address the unfunded and underfunded liabilities of approximately $376 million, and will recurring expenditure reductions of at least 2% become the new normal to offset the city’s structural deficit apparently due to these liabilities (in 2014 and 2015 of $3 and $4 million, respectively).

Daniel: We have an ongoing dialogue with our labor groups about the city’s budget and financial situation. While I cannot address specific elements of ongoing negotiations, we are committed to a dialogue with all labor groups that includes addressing these costs. The state legislature’s approval last year of the Public Employees Pension Reform Act has already impacted the long-term pension costs to some degree by its changes to the pension benefit formula for new hires into the pension system. With regard to the 2% reduction referenced in the question, that General Fund reduction was taken in FY 14. Assuming revenue and cost projections remain as estimated in the budget, there is no further General Fund reduction proposed for FY 15.

Gaston: Health care premiums have increased, on average, 9.26% per year over the last ten years and yet city employees do not make any contribution to their health care premiums (medical or dental). That is, the taxpayers pay their entire premium. What are your thoughts on this policy and is this something that is on the table when negotiating with the city unions?

Daniel: We are very aware of the increase in health care costs and will be working with our labor groups to address the situation and decrease overall costs to the city.

Caption here
Projected cost of future payments to CalPERS by the City of Berkeley. The fastest growth in cost is for the city’s non-safety workers.
Projected cost of future payments to CalPERS by the City of Berkeley. The fastest growth in cost is for the city’s non-safety workers.

Gaston: Regarding pensions, the city pays not only 100% of the “employer share” but 100% of the “employee share” of retirement costs of civilian (non-sworn) employees. With structural deficits and dwindling city services, many taxpayers are increasingly concerned about offering such generous benefits. What are your thoughts on this policy?

Daniel: As with your question regarding health care costs, we are also very aware of the increase in retirement benefit costs and have provided information about that issue in a number of work sessions over the past few years. The next opportunity will be this fall, likely November, when we will have new pension rates for FY 15 that result from changes in the actuarial approach adopted by CalPERS last spring This is also something we will be discussing with our labor groups at the appropriate time.

Gaston: Why did you (or your staff) recommend to council that some property taxes should increase by >5% (PIG or Personal Income Growth) rather than 2.3% (the Consumer Price Index)? Is this reasonable given the fact that many residents are on fixed incomes and struggling to keep up with the cost of living, and that the average wage growth was only 1% in 2013 in the Bay Area (source State Employment Development Department).

Daniel: Parcel tax revenues support important programs and services for the community, such as the Library system and the City’s parks. Three of the measures offer the option of increasing the tax rate by the Personal Income Growth rate: the Library tax, the Emergency Services for the Disabled tax and the Fire Protection and Emergency response tax. The draft budget assumed an increase of 2% in the parcel tax revenues. The application of the Personal Income Growth rate to these three measures added revenue in FY 14 beyond the original projection for each program as follows Library $471,050; Emergency Services for the Disabled $30,434; and Fire Protection and Emergency Services $121,570.

Gaston: According to the budget (p. 69), community agencies will receive approximately $500,000 less in FY2014 than they did in 2011. In contrast, in FY2014 your office will receive an increase of $300,00, the Auditor’s department will receive an increase of $300,000, the City Attorney’s department will receive an increase of $300,000, and the Finance department will receive an increase of $400,000. What factors did you use to make this decision of cutting the budget of community agencies and given that new employees are not being hired in these departments that received an increase of $300,000 or more, how is this money being spent?

Daniel: We were able to keep the FY 14 and FY 15 General Fund allocation for community agencies at the same level as it was in FY 12 and FY 13, approximately $4.43 million per year. You are correct that some departmental budgets, including Police and Fire, did increase over that same period, primarily for the reasons you note in the questions above related to pension and health care costs.

Measure M will provide more funds for improving streets, but it still will fall short of the need. Photo: Tracey Taylor
Measure M provides funds for improving streets, but it still will fall short of the need. Photo: Tracey Taylor

Gaston: Berkeley’s streets are in terrible condition and getting worse. Not surprisingly. Berkeley citizens overwhelmingly voted “Yes” for the $30 million Measure M bond in 2012. However, there is concern that few streets will actually get paved because so many are in “failed” condition. In fact, the City Auditor stated that it would cost $65 million to simply upgrade all the streets in Berkeley to an “average’ rating. Furthermore, it appears that a significant amount of the money may be spent on green infrastructure such as permeable paving and that desperately needed paving of major streets in District 6, like Wildcat Canyon, will be delayed for some time. Can you assure residents of District 5 and 6 that we will see substantive improvement of our streets?

Daniel: We are extremely grateful to the community for their support of the revenue measure during the last election. The revenues resulting from that bond measure will supplement annual General Fund allocations and regional funding that the city receives for street repair and repaying. City staff has been working closely with the Public Works Commission to develop an expenditure plan for Measure M funds that will address both requirements of the measure: street repaying and the installation of green infrastructure where appropriate.

Gaston: Berkeley was once known as a very pedestrian-friendly city; however, many residents believe that it has become less so. Drivers on Shattuck in North Berkeley regularly exceed speeds of 25 miles per hour and yet there are no police in sight giving speeding tickets. What is the city doing to address this problem and why are the proposed revenues for moving violations in 2014 anticipated to be $70,000 less than in 2013 ($300,000 versus $230,000, respectively)?

Daniel: The Berkeley Police Department regularly conducts enforcement operations in areas of reported speeding. Additionally, the Transportation Division of the Public Works Department works on projects to change the physical environment of the streets to address these issues Recent projects include the “road diet” on The Alameda, as well as bulb-outs on Solano Avenue. In addition, the City recently received grants from the Alameda County Transportation Commission to construct changes to the Hearst Avenue corridor, as well as to reconfigure Shattuck Avenue in the Downtown area. Actual revenue in FY 13 for moving violations was approximately $250,000; we anticipate about the same revenue from that source in FY 14.

Gaston: According to the city’s website, the city’s residential street lighting policy is currently on hold. Why is this the policy of the city and when will it be lifted?

Daniel: The street light assessment raises approximately $1.35 million each year. That voter approved assessment has not been increased for many years. Unfortunately, the revenues resulting from the assessment are insufficient to support the costs of maintaining the city’s street lights. For that reason, the General Fund supplements the street light program with approximately $670,000 each year in order to maintain the existing inventory of street lights. Consequently, there has been a moratorium on additional lighting for a number of years. However, this fall staff will present the Council with the outcome of an analysis of converting the City’s entire street light inventory to LED lights. The goal of that project is to achieve cost savings sufficient to invest in additional lighting over time. (The City Council approved the LED conversion this week.)

Gaston: Citizen budget watchdog groups are proposing that the city adopt a Fiscal Action Plan to guide the city’s financial decisions over the next 20 or so years and provide a roadmap and timetable, with community buy-in, for decreasing unfunded liabilities, rebuilding infrastructure, and re-ordering the City’s budget in line with financial realities. Do you support this idea and think it could/should be adopted?

Daniel: As requested by the City Council, we presented a report on February 19, 2013 that analyzed a number of factors regarding the City’s long-term financial obligations.

Additionally, we regularly provide financial information to the council, including projected revenues, analyses of impacts of changes in pension and health care rates, as well as the funding status of the city’s retiree medical plans and workers’ compensation plan. Aligning resources with community priorities is an ongoing project that must take into account an array of variables and we look forward to continuing that conversation with the council and the community.

Gaston: Do you think the Fire Department’s 48/96 work schedule (two days on for 48 hours straight and four days off or a total of 10 working days per month) is serving the community in terms of quality of emergency medical response, efficiency and cost of fire department manpower?

Daniel: When the new schedule was implemented, a number of metrics were established to evaluate the impacts of the schedule and address the issues raised by your question. We provide that analysis to the City Council and a copy of the most recent report is available here.

Gaston: When will salaries, overtime, and overall compensation for city employees be available on-line as virtually every other city is in the Bay Area?

Daniel: The city’s salary schedule is available on the city’s website and we provide information regarding compensation to the State Controller the same as that provided by other cities in California.

Daniel will be giving a State of the City speech at a free NEBA meeting at 7 p.m. on Nov. 7 at Northbrae Community Church.  

Berkeley council looks to IT to transform city operations (05.22.13)
City asks residents to brainstorm Measure M spending (04.23.13)
Ambitious public works program falls short of need (03.21.13)
Pensions, infrastructure key Berkeley budget liabilities (02.20.13)
Budget: Spending cuts needed to avoid shortfall (01.28.13)

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