Budget time bomb

 

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Personnel costs makes up most of the City's General Fund expenses, and by 2018,PERS plus health insurance costs will make up about half of the personnel budget.  PERS costs are tied to staff income levels and are going up at an alarming rate.  If the city does NOTHING to address staffing this year, PERS increases will have the same impact as adding 10.5 new employees (7-8 without counting COLA increases) or $1.1M - $1.3M in 2017-18.

There are several ways the City Manager has outlined to make up for PERS cost increases in the short term - use money previously spent on WEB building operations (about $1 M), and carry-over department reserves.  Later on, the end of the East End Redevelopment District (downtown urban renewal district) plus increased property taxes from new development will add to revenue sources.  But these funds are also needed for increasing infrastructure needs that have been deferred and will cost more if not taken care of sonner rather than later.

Current and anticipated needs are roadway maintenance, storm water infrastructure, bridge replacements, sewer line replacements, upgrades to the Tryon Creek Wastewater Treatment Plant, park facilities maintenance, public building repairs for City Hall, and more.  This does not include new facilities like pathways, nor the maintenance for them.  How long will the City dance on the line between deferred maintenance and ballooning personnel costs -- before doing now what will need to be done later?

Citizens and their elected officials are having to make hard decisions about how to parcel out limited funds: Make staffing cuts;  or  Outsource as many operational functions as possible;  or  Continue to defer capital expenses;  or  Reduce staff, services and programs;  or  Require employees to pay a higher percentage of their benefits;  or  Increase taxes and fees.  

It will likely take a combination of tactics to do the job, but infrastructure maintenance cannot continue to be sacrificed, and taxes and fees cannot be raised without seriously harming a large number of residents on limited or fixed incomes.

There are significant philosophical hurdles to cross, generally breaking down between one's (in)ability to manage the rising cost of living here, and the desire to have government supply the non-essential programs we have come to expect.  Respecting the the former is the hallmark of a compassionate society.  Citizen-organized NGOs may be able to take up some slack.

For a discussion on staffing levels, read the USC post of May 7, 2014, "Do you know the numbers?"

While the City Manager and Budget Committee fussed about on how many percentage points of staff reduction are being made year to year (watch Budget Committee Meeting of 3/17/16), the goal remains at 9 FTE per 1,000 residents.  There has been a slight reduction from 2013-2014, but not enough to help.  From blog post noted above, compare 9 FTE/1,000 to other similar-sized cities' average of 5.77 FTE/1,000.  Lake Oswego also has a higher cost for benefits and rate of salary increases than state and county employees and private industry.  Data suggests we have room to improve, and several ways to do it.  The City Manager is aware of the problems and along with Council, will hopefully attack it with gusto.  

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He who does not economize will have to agonize.

-- Confucius

Comments from online survey, April 2013:
Gerry Good, Evergreen

Given the projected cost increases in personnel costs and PERS, it is imperative that some servicesneed to be outsourced to reduce their cost yet there is appears to be no plan to evaluate and assess how when this may be done.
The future is clear. Costs continue to rise and will outpace revenue growth. Simple mathematics tellus that the situation cannot continue. Therefore, we must begin to reduce head count and the "load" of benefits it costs the city. Families cannot continue to outspend their resources. Why should the city? For example, a logical first step might be park maintenance. There are certainly firms who would bid on that work. Keep a supervisor to make sure the contractor does the work as per the contract. Same for vehicle maintenance and perhaps even building maintenance. Start with the "commodity" type services and use them for a year; then move on to more complicated areas.

The other topic that bears study is a financial strategy for the City. Is it really the prudent thing to use full faith and credit bonds for the water project? Perhaps revenue bonds would be better so that full faith will be available for future needs? Have we really thought through all this with the use of bond counsel? Yes, full faith and credit may be 0.5% cheaper for the water project but will it cost the City more or even limit our borrowing in the future? That 
needs to be clearly thought through. 

Chart below is from March 17, 2016 Budget Meeting materials: