Palo Alto’s in a money sink hole

What happened?

It’s 2017. Silicon Valley is thriving and the home of Hewlett Packard, Google, Facebook, and many business success stories, the City of Palo Alto California, is unable to balance its books and fund all its obligations.

The City recently announced a possible deficit of $ 4 – 6 Million Dollars. And that’s not all. Unfunded pension liabilities rose 14.8% in ONE year to $43,700,000 for a Total of $338,000,000. $43,700,000 is more than City Sales tax revenue ($31.8 million)More than Property tax revenue ($39.1 million)
More than Hotel Tax revenue ( $ 22 Million) but only 31% of what’s needed to pay retired city employees next year!

What else?

In 2009, the general fund budget was around $140 million. This year it is $193 million. The budget is around 33% larger than 7 years ago. What did the extra $53 million per year provide the residents of Palo Alto? Police department staffing is less. Street sweeping was moved from General Fund to utilities We got a Chief Public Relations Exec, a Chief Green Exec, a 2nd Assistant City Manager to do the work of the City Manager, a remodeled city hall lobby (palace), a design competition to build a bike bridge over Highway 101 (the design was too expensive to build and rejected).

What else did we get during this recent ‘recovery?’ A bigger pension liability. CALPERS lost billions of dollars again last year and we (and every other city in California) make up that pension deficit. What is our unfunded liability to CalPers?

Nobody talks about that much.

The City Council expanded office space for years. Now the city’s day time population increases by 3 x as workers pour in during the day and leave at night, contributing little towards the City’s needs. City residents are essentially subsidizing developer projects.

Has the City Government tried to do some good things ? Yes. They tried. City spent about $ 6,000,000 on the Cal Ave. “redesign” which narrowed a busy street from 4 lanes to 2 wiping out some old time tenants. Change is good so long as it doesn’t wipe ‘you’ out. The city built the unused, unwanted and unsafe Jordan School ‘bike lane.’ Created the ‘Road Diet’ for Charleston Avenue which also intensified traffic.

The City sought to retain its valuable and talented employees with increased salaries and benefits (which make up 61 percent of the General Fund). The City says salaries are expected to continue their growth, fueled in part by efforts to “align local salaries with the regional marketplace.”

In other words, unionized and executive city salaries can only go up because we only compare our city to other cities where salaries only go up. There is no competition. Government employees complain that they are so talented that they are worth more than people in private enterprise, even though Government jobs are secure, without competition, with little fear of lay offs and include guaranteed pensions, medical, etc.

In the real working world it’s now widely acknowledged that people will have 10 or 12 real jobs in their lifetimes, spread over 3 or 4 industries. While a Palo Alto City employee will work for just one employer, the city, without fear of job loss, with little stress, for 20-40 years and retire with a guaranteed pension and medical plan. Who gets that in the business world? No one. And the City Pension Liability is titanic.

Solutions:

Put a City Org Chart on line with employee compensation. Transparency. (As wages and benefits increased, access to this information decreased.) What a surprise. Stop giving away fire equipment to Mexico for pennies on the Dollar. Lay off the staff who do “real work” and outsource their jobs to private companies via a competitive bid process that encourages efficiency. Keep a small number of sharp managers who can effectively monitor and negotiate with the hired contractors thus reduce expenses 25%+. Downsize the remaining ‘dead wood.’ End the city’s obsession with the Agenda 21 ‘bike first culture.’
Instead, fund police, fire, roads, parks and infrastructure.

Remember, Palo Alto is not Amsterdam. Forget emotional vanity plans, projects and resolutions like Israel divestment, the 5K Save the Breasts run. Close the zoo, close the children’s theatre, close the museum. Let kids exercise their minds and dream up their own fun.

Outsource Animal Services (as most cities do). Drop the Ten Million Dollar Bike Bridge (we already have a bike bridge). Leave the $ 65 Million Dollar Buena Vista Trailer Park Rescue alone. Do we need to build a brand new slum, or subsidize an old one? Fire the Useless Security Guards on the railroad tracks, especially the ones caught masturbating or sleeping on duty.

Dump the Anaerobic digestion plants at the library. Let weeds grow. Stop wasting council meeting time on bizarre ideas to save the planet, save the decrepit post office, or save the creek flea.

End Mental health support fiascos that bolster children’s self esteem while eliminating their self control. No hidden pay offs or raises to City Administrators, Executives like City Manager Jim Keene who is currently paid more than the Governor and nearly as much as the President of the United States. No more Home Loans or sweetheart deals for City employees.
And most important, No more hideous, expensive public art. Plant trees (that don’t need much pruning).

Any of these ‘solutions’ would be a financial leap out of the spending hole we’re in. But first, we need a City Council that is willing to admit that it can’t make everybody happy. As bizarre as it may sound now, the planets will mis-align again. God wound up the celestial clock with certain markers that come due. Markets go up.

And Markets crap out. People may tire of Fakebook and Internet porno and Amazon junk and the next i-What. The ‘Valley,’ always faster, cooler, newer may just wear us all out with too many versions, upgrades, releases that just fall flat. Sales for the Quarter, the Year, just not enough. And Whoosh. Down it all may go. For a bit. Maybe a long bit.

So we may ‘hope for change,’ that the City will tighten up before the bubble pops. But who’s kidding who? Nobody’s watching the store. Most people are too busy just trying to keep their job, meet the next Quarter’s numbers, house payments, car payments. Whose got time to watch Public Servants, some of whom are eager for higher office and willing to do anything that might buy a vote.

If the City won’t think ahead now, when times are flush, where will we get the money when things turn up ‘snake eyes’ faster than an Uber or Lyft. The time to panic, is before everyone panics. That could be, right now.

Mick Wells

Former wall street investment banker. Now general Contractor - Palo Alto, Ca 94306 Carpentry/Electric/Plumbing/Concrete/Tile/Paint/Repair/Remodel 

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