Volsky on “The Tale of Two Budgets”

GEORGE VOLSKY

The Tale of Two Budgets

The discussion of Coral Gables’ 2011-2012 budget  offers an excellent opportunity to compare that document with the one submitted for the City Commission’s approval and the taxpayers’ comments exactly ten years ago.  The idea for the budgetary comparison – with an analysis of the differences – is not mine. It was suggested by Charles Zwick, a Harvard economics PhD,  who knows more about budgets than anyone in this city and probably  anyone in Florida.

Dr. Zwick, who has lived in Coral Gables for 42 years, has complimented City Manager Patrick Salerno for his 2011-2012 budget, observing that the manager still faces many obstacles in fine tuning the city’s administration, strengthening its  finances and settling  two major problems, the pensions and the Biltmore.  This, not  incidentally, was what Salerno later told the commission at its budget workshop, where he made a very cautiously optimistic review of the city’s overall condition. In a  de-emphasis  of the previous administration’s growth strategy, Salerno postulated that improvement of the city’s neighborhoods – that is the residential character of Coral Gables – was his top priority. Significantly, the commission, at least its majority, agreed.

(Charlie, as Dr. Zwick is called affectionately by friends, was the Director of the U.S. Budget Office under President Johnson,  the post that at the time was “the most immediate” to the presidency. In the midst of the Vietnam war, Charlie balanced the nation’s budget, an unprecedented accomplishment.  To do it he had total support of LBJ, possibly the most imposing man to occupy the White House. Like all his predecessors, the bigger-than-life Texan strove for compromise, but basically on his own terms. Political bosses, even as influential as the House Speaker, wouldn’t dream of walking out on him, a lese-majesty that would bring Olympian wrath and retribution on their heads.  One Johnson telephone call, reportedly laced with countless M.F., made a popular and well-connected U.S. senator resign in less than 24 hours.)

But back to our budgets.  First, it has to be noted that the population of Coral Gables, unlike that of Miami-Dade County,  has increased little in the last decade. According to the U.S. Census, it was 42,000 in 2001 and 46,000 in 2010, a growth of 1 percent a year. (Not a few of the 46,000 Gablesites live here only part of the time.)

Second, according to the opinion of scores of residents, city services have neither improved nor deteriorated in the last 10 years, even though we are paying more for them.

That said, it does overlook the city’s past  major failures. Some people still bitterly complain that the Public Service department’s gross inattention to tree pruning resulted in widespread power outages and traffic interruptions during the last two hurricanes. Appropriately, in the city’s new organization chart Public Service has become a division of another department, signaling the exit of  its much criticized and overpaid director.

But while during the last 10 years the number of employees  has decreased only slightly – from 834 to 791 today – the city’s  budget has increased dramatically.  Ten years ago, the budget’s total was $92.2 million, now it is $145 million.  With an almost identical millage rate (5.841, vs. 5.869), property owners today pay  practically twice as much as they did ten years ago, $66.1 million vs. $34.9 million in 2001.

In investment earnings, the city collected $2.3 million in 2001, and expects to receive only $85,000 next fiscal year. The Biltmore Hotel management paid the city $1.8 million in 2001, now it “refuses” to pay $1.9 million for the hotel and $884,000 for golf operations. On the other hand,  in 2001 the city didn’t charge for “fire     protection;” now it expects to receive $1.9 million  from this new charge to taxpayers.

In 2001, when Don Slesnick & David Brow team took ver City Hall, the city had 19 departments, in 2011-2012 it will have 14. Ten years ago, the city financial rating by Standard & Poor’s was AAA and Moody’s was Aaa. The current budget does not mention the rating, which was lowered while S&B coterie was in charge.

Thus Coral Gables residents, who receive municipal services similar to those of 10 years ago, contribute substantially more in taxes to the city – resident owners because their houses or renting properties have been up-valued by the county, and everybody because many services are no longer free and the cost of others has escalated. The question therefore is where does all that money goes?

The simple answer – to pay for the city’s highly remunerative salaries and benefits (including car allowances to undeserving employees) and  thus for its high operating expenses. In 2001-2002 salaries were budgeted at $44.4  million, in 2011-2012 they will be $57.8 million. Adding FICA and fringe benefits, the totals for “personal services” were, respectively, $56.3 million in 2001 and will be  $95.5 million in 2012.  And “operating expenses”  that were $21 million ten years ago will be $29 million in the coming FY.

For example, in 10 years the cost of maintaining the city commission almost doubled although the number of persons remained constant-  five commissioners  and two staffers – from $271, 526  to $527,655. (The mayor’s salary of $25,810 grew to $34,736.) The same happened at our legal office where expenses grew in ten years from $327,577 to $727,039. Moreover, under the former city attorney Elizabeth Hernandez outside “legal services” catapulted from $270,000 to $795,000 as the city has become more litigious.  (Craig Leen, the new city attorney, has promised to substantially cut that expense by taking on personally a number of cases, rather than outsourcing them as the court-averse “Loophole Liz” habitually did.)

Another even more egregious example of waste growth  is the Historic Resources department. In 2001, its budget was $432,932, in 2012 it will be $998,710.  Ten years ago, the salaries for the department’s three employees totaled $151,038. Today , HR director, Dona Spain, who in effect was  downgraded last April from the position of assistant city manager (reportedly for non-performance), is making $151,262, not counting benefits. The department’s benefits which in 2001 added 31 percent to salaries escalated to 51 percent in the current budget. Spain’s aide, Assistant Preservation Officer Kara Kautz makes $96,531, and the third  employees,who possibly know about the department more that her two bosses, earns $45,452.  With two Historic Resource   generals (both also pocketing hefty car allowances) and one corporal saying daily “yes madam,”  that department  epitomizes dysfunction that still lurks in City Hall (in HR case on the second floor of the controversial Museum), which one hopes will be eradicated by Salerno and the commission. Like many experts, I believe HR should be folded into the professional Economic Sustainability department with the appropriate salary and personnel adjustments.

I know that Pat Salerno is trying to do reduce the city administration  and to professionalize it But says it is going to take time.  Many people and I advise that it be done quickly, by a radical surgical incision, because the toxic fat in City Hall corrodes the morale of hard working, conscientious  employees, and the time is of the essence. After all as we speak, in Miami-Dade County Mayor Carlos Gimenez is cutting 50 departments to 25.

Charlie Zwick also believes in decisive surgery. He quotes Admiral Hyman Rickover, the “Father of the Nuclear Navy”  and one of America’s most prominent savants on management philosophy. Rickover, Charlie says,  strongly postulated that superfluous government entities must be uprooted, because if only downsized they will, like weeds, grow again.

Ten years ago, Dr. Zwick and many thoughtful friends perceived the unnecessary growth of Coral Gables bureaucracy, and its growing unproductive cost.  We warned residents (I, in countless Gazette columns) that the mismanagement – or worse – of the previous administration would result in irreparable damage to the city finances. Few  believed us or expressed serious concern.  For ten years, until last April, it seemed that the unsavory  had been taken for granted.

About Stephen McGaughey
Economist and international consultant in economic development programs

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