A Roadmap to Recovery: Reforming San Diego City GovernmentCouncilmember Carl DeMaio_563395ea-f870-11e0-9417-4b107a64ea2aTo create a city government we can be proud of again._56339d4c-f870-11e0-9417-4b107a64ea2aTo achieve lasting change ... a comprehensive framework for solving the city’s immediate and long-term financial problems._5633a56c-f870-11e0-9417-4b107a64ea2aAccountability for ResultsCity government should hold all employees accountable for clearperformance goals and continual improvement – and taxpayers shouldreceive an annual “Performance Report Card” on city government._5633ac88-f870-11e0-9417-4b107a64ea2aCommitment 1The Roadmap for Recovery starts with a bold and provenprogram for improving the management and performanceof city departments.To achieve this commitment, our office proposes a “CityManagement Agenda” – a comprehensive and integratedset of management reform modeled after successfulreforms implemented in other government entities – andbest management practices from leading companies andorganizations.In the last 15 years, performance measurement hasbecome a central tenant of “government for results.”Calls for more transparency and accountability in corporateaccounting have been echoed in the governmentsector as well. Performance measurement, strategicplanning, succession planning, process re-engineering,and performance based budgeting are valuable tools in government reform. Governments that embrace these tools aretransforming themselves into more effective, efficient, performance driven organizations.To jumpstart innovation and change at City Hall, the City Management Agenda asks basic questions for each citydepartment:What are our goals and how do we measure success? (Performance Planning and Management)What resources will we need to achieve the goals and what is the cost-per-unit of service? (FinancialManagement and Cost Accounting)How much staffing is absolutely required to provide a city service and how can we recruit, retain, trainand reward a high-performance workforce to provide that service? (Human Capital and Succession Planning)How can the service be provided faster, better, and cheaper using new technologies, managementtechniques or work processes? (Process Redesign and Innovation)What services can be enhanced or provided more efficiently and effectively through vendors, othergovernment agencies, or community organizations? (Contracting and Partnerships)The City Management Agenda fundamentally challenges the current service delivery models utilized within each citydepartment. A willingness to embrace new ways of providing services and conducting business must be injected intothe city bureaucracy.To achieve that, we must change the organizational culture inside city departments. The City Management Agendatargets the current institutional tendency to revert to “the ways things have always been done.” More importantly, ourcity government must be measured on its results.Strategic Plans and Performance MeasuresDevelop Department Strategic Plans and Performance Measures_5633af3a-f870-11e0-9417-4b107a64ea2aReform 1.1Performance measurement reporting on service levels has been suspended in the City budget process. The city has made major changes in its budget and operations – without fully understanding the net impact to service level resultsfor taxpayers.By the beginning of FY 12, each city department should submit a strategic plan to guide its efforts over the next fouryears – with specific, measureable and accountable performance goals and measures for evaluating results in FY 12.Because it is imperative that the plan reflect public input, each city department should hold at least one “PerformanceSummit” in the spring to seek feedback from employees, customers, and stakeholders on priorities, new approachesto operating, and ways to measure and report success.The strategic plan should articulate a clear vision for what the department will look like in four years – and how thedepartment will restructure its operations to achieve that outcome. Each department should select no more than 5-7performance measures – with 2-3 reflecting core outcomes for San Diegans and 3-4 reflecting “transformational”measures relating to improved efficiency, timeliness, quality, or other operational improvements in delivering itsservices.To institutionalize this practice, our office proposes the establishment of a Performance Planning and ManagementOrdinance (PPMO) – establishing a step-by-step process for strategic planning, performance measurement, andperformance reporting inside city government.Performance ContractsRequire “Performance Contracts” with All Department Managers_5633b264-f870-11e0-9417-4b107a64ea2aReform 1.2Each department’s top manager should sign an annual performance contract with performance goals and measuresdriven by the department’s strategic plan. This performance contract should be submitted to the Mayor and should beposted and updated publicly on each department’s website.ERP System and Cost AccountingReview of Implementation of Enterprise Resource Planning (ERP) System –Initiate Full Cost Accounting for Major Services_5633ba20-f870-11e0-9417-4b107a64ea2aReform 1.3The City of San Diego is in the middle of implementing a costly Enterprise Resource Planning (ERP) System. Thegoal of the system is to improve the quality, timeliness, and usefulness of financial information inside each city department.While our office supports implementation of these kinds of systems, it remains to be seen whether this system isbeing properly implemented. City staff reports that the implementation is progressing, but we propose that the auditcommittee evaluates progress implementation independently. (See Memorandum dated November 3, 2010.)Organizations that measure their costs can manage their costs. The ERP system has the potential to support full costaccounting on a “cost-per-unit” basis of service. Full cost accounting lays the groundwork for eventual implementationof “performance-based budgeting” in city departments.To jumpstart full cost accounting, recommend releasing full cost accounting studies on the top 10 city service areas inFY 2012 – with expansion of services undergoing full cost accounting calculations thereafter.City OMBCreate a City “Office of Management and Budget”._5633bd36-f870-11e0-9417-4b107a64ea2aReform 1.4The five elements of the City Management Agenda require integration and coordination. Councilmember DeMaio has long proposed the creation of a single “Office of Management and Budget” to consolidate and coordinate the various management functions of the city. Such a move would not only improve management capabilities, butachieve cost savings as well.The OMB would be headed by a consolidated Chief Performance Management Officer – reflecting a consolidation ofthe current Chief Financial Officer position and the Assistant Chief Operating Officer position. The following functions would be housed within the OMB:* Budget and Performance Management (Merged function of Financial Management, Business Office, and management analyst currently located in individual city departments)* Financial Management (Merged function of Comptroller’s Office and City Treasurer)* Human Resources and Labor Relations* Information Technology (OneSD and Information Technology)* Contracting and Competitive Sourcing (a merged office of Purchasing/Contracting and a portion of the Business Office)In addition to integrating the functions comprising the City Management Agenda, the OMB would house the followingsupport functions that serve all city departments:* Risk Management* City Asset Management (Assumes Fleet and Facilities Management functions are outsourced)* Debt ManagementA number of other important changes would be made in the consolidation of these support functions and the creationof an integrated management office:* Expanded Project Management Capacities: The current City Business Office would be folded into the new OMB. To equip the OMB with internal resources to lead large-scale change management projects, we propose the creation of an unclassified position of “Project Management Leader” to allow the city to hire individuals with advanced project management (PMP) certification.Drawing on support from impacted departments, these individuals would work on priority projects – startingfirst with the Managed Competitions outlined in Commitment #6 of this Roadmap to Recovery.Reduction in Administration Office: The current Administration Office contains functions that – in themiddle of a fiscal crisis – should be curtailed. Functions relating to EMS contract management and EqualOpportunity Contracting would be transferred to the Contracting and Competition directorate in the newOMB.Management AnalystsConsolidate “Management Analysts”_5633c092-f870-11e0-9417-4b107a64ea2aReform 1.5The creation of the OMB model also provides an opportunity to improve how budgets are formulated. We proposecentralizing the development of the Proposed and Annual budgets, quarterly budget monitoring, and development andreporting of performance goals and measures into the new OMB’s “Budget and Performance Management” directorate.As it is structured currently, a substantial amount of duplication occurs between budget analysts currently located inthe Financial Management Office and management analysts located within each individual department.Currently, the Financial Management department provides fiscal services to the Mayor and serves as an internalfiscal consultant to other City departments.1 The responsibilities of Financial Management include preparing theproposed and annual budgets and monitoring the City’s Expenditures and revenue receipts.The Financial Management Department includes 1.00 Department Director, 3.00 Financial Operations Managers,4.00 Supervising Budget Development Analysts, 8.00 Senior Budget Development Analyst, and 12.00 AssociateManagement Analysts.In addition to the Budget Development Analysts in the Financial Management Department, the City has 229.45Management Analysts budgeted in various City Departments.These Management Analysts provide many types of analytical services for the department management to whichthey report. A significant portion of that analytical service involves the development of the Proposed and Annualbudget for their respective department submit to the Financial Management Department, plus monitoring departmentexpenditures throughout the fiscal year. In addition, some do conduct work on performance measures and reports –albeit on an ad-hoc basis.With the recent implementation of the OneSD system, where both the Financial Management Department andDepartment Analysts have access to the same information, the current monitoring process has significant redundancies.This consolidation would require a culture change. The Budget Development Analysts in the Financial ManagementDepartment would be required to expand their current role of “reviewing” information submitted by departments toworking with department managers to develop their budgets and monitor expenditures throughout the fiscal year.While we acknowledge this consolidation could result in an increased workload for the management analysts remainingin individual departments, we believe this increase in workload is acceptable given the City’s current financialsituation. For Fiscal Year 2012 we would suggest emphasizing consolidation of small and midsized departments inthe General Fund, while continuing to focus on the larger departments such as Police, Fire-Rescue and Non-GeneralFund departments in the future.As a result of this consolidation, we believe that a permanent reduction target of 20.00 department analysts couldproduce a savings of $1.5 million to the General Fund.Press Aides and Public Information OfficersReduce Press Aides and Public Information Officers._5633cb28-f870-11e0-9417-4b107a64ea2aReform 1.6The City currently has a total of 19 press and public relations staff by designation. Additional staff and contractors are also involved in public affairs. The Mayor currently has 1.00 Director of Communications, 2.00 Deputy Press Secretaries (1.00 on recent leave of absence working for the Proposition D campaign), and 1.00 Press Assistant handling inquires from the press, overall message and dissemination of information originating from the Office of the Mayor. In addition to these press officers, the City has budgeted 15.00 Public Information Officers in various departments who handle inquires related to the specific department in which they are budgeted. With the exception of police and fire, we propose centralizing the City’s public information services – and consolidating them under the Office of Community and Legislative Services. Enterprise funds would enter into a “Service Level Agreement” for the reimbursement of expenses for this office.In addition to saving money, this reorganization will enhance how the city communicates with the media and thepublic.Employee Performance ReviewsEnhance Employee Performance Reviews; Eliminate “Last Hired, First Fired” Policy in Labor Contracts_5633cea2-f870-11e0-9417-4b107a64ea2aReform 1.7As the City of San Diego makes reductions in staffing, it is important that staff retention decisions are made based onperformance, not tenure. In some cases, the current policy of “last hired, first fired” allows poorer-performing staffmembers to “bump” higher performance staff members during downsizing.In addition, a system of full “Employee Performance Management” should be implemented to serve as a basis for allbonuses and promotions. Currently city employees receive “STEP” increases based on longevity, not performance.That must change. Clear performance goals and measures for each city employee should be established – drawnfrom departmental goals and measures. All rewards – including non-financial rewards such as discretionary leave –should be based strictly on performance.As part of labor negotiations in FY 12 and FY 13 these reforms should be enacted.*Note: Achieving full implementation of this reform may require modification of the City Charter.Recovery Auditing ProgramImplement Recovery Auditing Program_5633d276-f870-11e0-9417-4b107a64ea2aReform 1.8City government processes millions annually in accounts payable. Some of the accounts payable over-charge thecity government. Recovery auditing is the post-payment review of accounts payable with the goal of identifyingoverpayments and recovering funds. In the private sector the use of recovery auditing programs is widespread – andincreasingly government agencies are adopting this auditing program.By the beginning of FY 2012, the City of San Diego should partner with an outside firm to implement recovery auditingon its top 10 payable categories (including information technology, health care, communications, utilities, realestate, etc.)Revenue AuditsExpand Revenue Audits._5633dc26-f870-11e0-9417-4b107a64ea2aReform 1.9Currently accounts receivables are managed by the City Treasurer with only limited auditing on revenues received.Councilmember DeMaio has pushed a proposal to authorize the City Auditor to perform more robust and expansiveaudits on the city’s major revenue sources to ensure the city government is receiving its fair share.Expanding revenue audits under the City Auditor’s direction will achieve efficiencies in operations, and result inincreased revenue collections from accounts through more aggressive auditing techniques and an independentapproach to reviewing receivables.While the City Treasurer will retain custody of records on accounts receivables per the City Charter, the Auditor canbe sub-contracted from the Treasurers’ Office to perform this function.The Mayor and City Council should implement recommendations contained in October 2010 audit of the DelinquentAccounts Program which suggested additional revenues could be achieved from expanded collection efforts andtechniques focused on past due receivables.Annual Performance Report CardPost City Performance Measures Online – Publish Annual PerformanceReport Card._5633e31a-f870-11e0-9417-4b107a64ea2aReform 1.10City taxpayers deserve to know what service levels they receive for their tax dollars. That’s why each departmentshould post their performance goals, measures and targets online at the beginning of the fiscal year – and provide aquarterly update on measured results where practical.At the end of the fiscal year, all performance measures should be reported – comparing targets to actual results. Forany target not met, departmentsshould also provide explanation of how the department will improve its performance in the coming fiscal year.Performance AuditsComplete Performance Audits on 50% of City Budget Expenditures by FY2013._5633e7ca-f870-11e0-9417-4b107a64ea2aReform 1.11Performance Audits examine how well each city department is operating, and suggest ideas for improvement. TheCity Auditor has provided decision-makers with detailed performance audits of the operations of a variety of cityfunctions – including Risk Management, Qualcomm Stadium, Bid-to-Goal and the Center City Development Corporation.As a result, officials are better informed about inefficiencies and areas where additional controls are needed.In the FY 2010 Councilmember DeMaio successfully advanced a proposal to expand the capacity of the City Auditor’sOffice to conduct performance audits of city departments – and to establish a goal of conducting performance auditson at least 50% of city budgeted expenditures in the next three years.As those performance audits are conducted, the Mayor and City Council should commit to implementing cost-savingideas as fast as possible.De-LayeringExamine Opportunities for “De-Layering” of Middle Management Positions._5633f36e-f870-11e0-9417-4b107a64ea2aReform 1.12Multiple layers of management exist within city departments that should be reviewed. Several city labor unions haveraised the issue – providing for potential agreement on cost saving ideas. As agency strategic plans are developed,and as the Office of Human Resources begins work on Succession Planning, an analysis of levels and layers ofmanagement should be conducted in each city department with a goal of reducing layers – and redeploying as manycity employees to front line service delivery.Fleet TrackingImplement Improved Fleet Tracking Technologies_5633fd8c-f870-11e0-9417-4b107a64ea2aReform 1.13The City recently implemented a pilot program using GPS technology on a select number of city vehicles. The pilotproject revealed ways to achieve taxpayer savings using improved fuel management, employee productivity, andvehicle utilization. Using this pilot as a starting point, city staff should report back how use of these and other technologiesand analysis in all of the city’s fleets can improve management and efficiencies.Personnel DepartmentConsolidate Personnel Department with Human Resources Department._56340228-f870-11e0-9417-4b107a64ea2aReform 1.14The City Charter has established a duplicative Personnel Department under the Civil Service Commission. Since cityemployees are unionized, consideration should be given to make the Civil Service Commission a purely advisory bodywith oversight over personnel practices – and permit the Personnel Department to be consolidated into the Office ofHuman Resources. Implementing these changes would require a Charter Amendment.Employee TrainingImprove Employee Training Programs._5634080e-f870-11e0-9417-4b107a64ea2aReform 1.15In order to improve efficiency and performance, and to bolster staff morale, the City of San Diego must do much moreto train city employees in new management techniques. A new leadership and management academy was recentlylaunched for managers and supervisors in the Utilities Department. This program can be cost-effectively expanded toinclude managers and supervisors from other city departments.The following core training programs should be offered as part of a “Performance Management” curriculum:Project ManagementStrategic Planning and Performance MeasurementChange ManagementTeam Leadership and CommunicationCustomer Service FundamentalsMany of these topics can be deployed using online training programs. Training should target managers and supervisorsfirst, with line employees provided training based on their demonstrated commitment to improved performance intheir current jobs and documented potential for advancement.Performance-based BudgetingAdopt Performance-based Budgeting Ordinance._56341024-f870-11e0-9417-4b107a64ea2aReform 1.16Cities and counties across the country have embraced the concept of “performance budgeting” whereby the budgetprocess begins with the definition of performance results and the executive and legislature work to align availableresources with those results. Once a budget is adopted the executive branch is given flexibility to manage resourcesthroughout the year—provided that those results are achieved. Enhanced performance measures would be put inplace to help define results and track results throughout the year in a transparent way—to the legislature as well as tothe general public.Once the strategic plans, performance measures and full cost accounting systems are implemented, the City Councilshould reform the city’s budget process to require that the Mayor submit an annual performance plan to the CityCouncil no later than January 15 of each year that includes measurable outcome goals and measures for each citydepartment. A listing of major services by program area in each department—complete with workload/outputmeasures—should also be included.No later than February 1, the City Council shall adopt a performance plan by resolution and the Mayor shall prepareand submit a budget that reflects the resources required to each the level of performance expected from each citydepartment. As decisions are made on resources throughout the budget process, the Mayor shall advise the CityCouncil on the impact on performance expectations for each city department. All changes in performance measuresand targets shall be included in the annual budget ordinance passed by the City Council.NOTE: Additional reforms related to contracting and competitive sourcing are dealt with in the section of this plan relating to Commitment 6“Fair and Open Competitive Sourcing.”Risk Management and Public LiabilityImproved Risk Management and Public Liability Savings._56341448-f870-11e0-9417-4b107a64ea2aReform 1.17The Risk Management Department is responsible for the investigation and settlement of all claims against the city forlosses by the public (accidents on city property, improper towing by police department, flooding from broken waterpipes, etc.)Claims against the City cost taxpayers approximately $29 million annually. The City Auditor recently identified ways toimprove the city’s risk management strategies to achieve $800,000 in annual savings city-wide.Among the findings of the Audit report released in August 2010:“During our audit, we found that Risk Management does not analyze systematic risks or follow EnterpriseRisk Management system methodologies or other enhancing practices, nor does it maintain documentedprocesses…We also noted that the City does not have a formalized and documented standardized claimreserving approach, which can result in inconsistent reserving practices….Moreover, we found that the reviewand analysis of the cost and adequacy of insurance coverage and limits is informal and not documented. As aresult, the City risks purchasing unnecessary or insufficient insurance coverage and paying excessive effectivelyand efficiently…”We believe that the Risk Management Department should aggressively implement the 23 recommendations outlinedin the Auditor’s report.Open GovernmentSan Diegans deserve a city government that conducts all business in anopen and transparent manner._563418a8-f870-11e0-9417-4b107a64ea2aCommitment 2“Open Government” means that the public has a right to know whatis going on inside city government – and has a right to play a rolein the decision-making process.It also means accessible government. The city should embracetechnology and customer service innovations that make it easierfor taxpayers to access city services – and provide feedback whereimprovements are needed.Councilmember DeMaio has set a goal of making San Diego citygovernment the most open and transparent city government in thecountry.These proposed reforms are key steps to rebuilding public trust and confidence in local government.Compensation and Labor ContractsPost All City Compensation and Labor Contracts Online._56342078-f870-11e0-9417-4b107a64ea2aReform 2.1Budgeted salaries contained in the annual budget are only a fraction of the total compensation paid to city employees.To provide full disclosure on these matters, the city should publish the total compensation for every classification incity government, providing a range of base salary and maximum specialty pays available for each classification todisplay a potential maximum “base.”Additionally, the city should post online the actual earnings of city positions – with names redacted – for the precedingfiscal year.Finally, all current labor contracts should be posted online in a readily accessible fashion – along with the last 3iterations of the labor contract to allow for easy comparison.This transparency will allow taxpayers to determine whether excessive compensation continues in city government,and better understand the intricacies of city labor costs.City ContractsPost All City Contracts Online._563424a6-f870-11e0-9417-4b107a64ea2aReform 2.2The city has entered into more than $200 million in city contracts – and taxpayers deserve to know who is receivingthese contracts and under what pricing, terms, and work requirements. We propose that all city contracts in excess of$25,000 be posted online on the city’s website, and any contractor that has received in excess of $25,000 cumulativelyfrom the city also be posted with links to all contracts awarded to that contractor. Simply putting a list of thecontracts is not enough - the full text of the scope of work and contract terms should be posted for each contract.Comment and Question SessionsRequest Monthly Public Comment and Question Session with the Mayor._563428a2-f870-11e0-9417-4b107a64ea2aReform 2.3Under the Strong Mayor-Strong Council form of governance the Mayor no longer chairs, nor regularly attends, CityCouncil meetings. It could be argued that the public has limited access or opportunity to bring their issues directlybefore the Mayor, as they did under the Manager-Council form of government.We propose amending the Permanent Rules of Council to include a monthly 30 minute “Question and Comment”Session with the Mayor for members of the public.City Council DocketExpand Access to the City Council Docket._5634309a-f870-11e0-9417-4b107a64ea2aReform 2.4Under the current Permanent Rules of the City Council, it takes four Councilmembers to place an item on the docket if the Council President does not wish to have it docketed. In a truly open government, access to the City Council docket is a fundamental right of every city councilmember.Docket access allows a councilmember to put a legislative idea before the full council for open discussion in publicand a call for a recorded vote.As one of its first acts after the December 6th’s inauguration ceremony, the new City Council should amend its PermanentRules to allow an item to be placed on the Council docket upon request of two City Council members.Call Centers Consolidate All Call Centers in City Government for One-Stop Service – and One “311” Number._5634359a-f870-11e0-9417-4b107a64ea2aReform 2.5We believe that one “311” call number is a common-sense vehicle to improve customer service and reduce call centercosts in the city.The Enterprise Resource Planning (ERP) system has a customer service module that is currently being piloted by theUtilities Department. Once implemented this system can integrate customer information across city departments –e.g. an individual calling in to pay a water bill can be reminded that an outstanding parking ticket is also due.Using ERP as a vehicle, and adding on a project management “ticket” system, we propose consolidating all city callcenters within two years into a single “Citizen Service Center” for taxpayers to request services or transact businesswith the city.City CheckbookPost City Checkbook Online._56343996-f870-11e0-9417-4b107a64ea2aReform 2.6Once the ERP system is fully operational, the City should explore placing its external financial transaction online in asearchable format. Doing so would give taxpayers access to a virtual checkbook of the city government – increasingoversight and transparency.Online TransactionsAchieve Online Access to 95% of Transactions Between City and the Public By FY 2015._563440a8-f870-11e0-9417-4b107a64ea2aReform 2.7The City of San Diego should embrace e-commerce by committing to providing online access to 95% of transactionsonline in the next three years. Transitioning to online service delivery for these activities not only improves service tothe public, but generates cost savings inside city departments.This goal expands one of our proposals to commit to 95% of transactions with small businesses online during thesame time period.Some efforts are already underway. For example, the Police Department is currently working to create an applicationwhich allows businesses to apply, renew, and pay for alarm systems permits online. The Police Department hasindicated that the reduced burden of permitting paperwork will save the department “significant time and money.”Other cities, such as New York City and City of Louisville, Kentucky, have made strides in improving the availability ofinformation and resources for small business owners. Efforts in these cities have included the creation of “one-stop”resources for small business owners that allow users to meet all federal, state, and local requirements through asingle point of contact.NYC Business Express (New York City’s one-stop resource), consolidates all relevant business compliance informationinto a single location. The NYC Business Express Wizard additionally provides automated individualized informationand assistance and the ability to apply for permits online.To jumpstart implementation of this reform, the City should explore public-private partnership opportunities to institutea pilot program to develop an online “one-stop” business resource similar to the NYC Business Express Wizard. Theprogram would assist business owners with less-complicated projects and use phone and appointment services as asupplement for more complicated matters.The program could be instituted in phases, considering only a subset of permit types, regulations, and industries witheach phase. New York City started the wizard at first to only include the restaurant industry, and has worked its way upto providing this service to about twenty different sectors since 2006.Back to Basics - Clean and Safe NeighborhoodsCity government should restructure its operations around a clearmission: to create clean and safe neighborhoods – and utilize newvehicles and partnerships to deliver these services._56344f94-f870-11e0-9417-4b107a64ea2aCommitment 3Our efforts to reorganize city government should not only be judgedfrom a financial perspective, but also evaluated by the extent towhich services to our neighborhoods are improved.Simply pouring more money into the city’s existing processes fordelivering neighborhood services is inadequate. We must alsofundamentally rethink what kinds of neighborhood services toprovide, and how to provide them.By focusing limited financial resources on core neighborhood services – Response Times, Roads, and Recreation –our office believes that the City can succeed under this criteria. The Roadmap to Recovery emphasizes front-lineneighborhood services such as Police, Fire, branch Libraries, Neighborhood Code Compliance, and Park and RecreationPrograms.An example of applying a fresh approach to service delivery can be found in the City’s library system: technologicaladvancements provide opportunities to redefine how library services are provided.While we believe in providing a strong system of branch libraries, we also see opportunities to expand the use oftechnology at each branch to improve service and enhance the role of branch libraries in our communities.Similarly the work done by the Fire Department has changed significantly in the past 25 years – with far more emphasison a daily basis on emergency medical calls vs. fire calls. As a result, our office sees a need to evaluate ourcurrent service delivery model to determine if more efficient ways of deploying a mix of resources dedicated to dailyfire calls versus daily emergency medical calls exist.Thoughtfully examining our current service models with a willingness to consider new ideas may allow the City toimprove core service delivery, but it requires that the assumption that “the way it’s always been done” be set aside inthe city bureaucracy.Fire StationsRestore 3 Priority Fire Stations that Have Been Browned Out._56345494-f870-11e0-9417-4b107a64ea2aReform 3.1As an immediate measure the Roadmap to Recovery proposes to increase Fire Department funding by $3 million forFY 2012. During a presentation to the City Council's Public Safety and Neighborhood Services Committee (PS&NS)on April 7, 2010, the Fire Chief indicated that he had a significant concern with several areas that he felt were particularly"underserved." The Chief elaborated that, "If I could get three [reinstated units], I would put them in those communitieswhere I am really having a hard time now." The Chief identified Rancho Penasquitos, Mira Mesa, PacificBeach and University City as having the greatest need.Instead of restoring fire engines, it is possible that a more cost-effective use of the $3 million would be to use thisfunding to deploy an ambulance at these stations. (For a more expansive explanation on the importance of ambulanceservices, please see Reform 3.5 in this section.)Lifeguard ServicesUtilize Marketing Partnership Revenues to Safeguard Lifeguard Services._56345b4c-f870-11e0-9417-4b107a64ea2aReform 3.2Earlier this year, my office released a white paper entitled “Generating Revenue by Expanding the City’s MarketingPartnerships,” which extensively covered the revenues available to the City from expanding its efforts with marketingpartnerships and strategic, off-site advertising.Based on the findings of this report and discussions at the Budget and Finance Committee, we believe an additional$1 million in revenue can be raised for FY 2012 by expanding the City’s strategic and marketing partnerships.The initial expansion of the Marketing Partnerships that is currently being considered would take place at the City’sbeach areas. In light of this, we believe that the expanded Marketing/Strategic Partnership revenues generated in FY2012 should be allocated to protecting cuts to lifeguard services in those beach areas.Non-Core ProgramsTemporarily Reduce Funding for Non-Core Programs – To Safeguard CoreNeighborhood Services._56345f34-f870-11e0-9417-4b107a64ea2aReform 3.3In the middle of a financial crisis, the City must make tough decisions and prioritize. The city has several programsthat are worthy, but not core services. As such, until cost savings related to many of the long-term reforms in thisRoadmap to Recovery can be implemented, some temporary suspensions of funding and programs will benecessary…particularly if core neighborhood services such as police and fire are to be maintained.Arts and CultureReduction in Arts and Culture._56346308-f870-11e0-9417-4b107a64ea2aReform 3.3.1The City of San Diego Commission for Arts and Culture is responsible for making all recommendations pertaining toarts and culture for City funding through its two significant allocation programs. The two allocation programs, OrganizationalSupport Program (OSP) and Creative Communities San Diego (CCSD), support 111 non-profit organizations.The Fiscal Year 2011 Annual Budget includes $6.2 million for the OSP and CCSD, $832,680 for Arts and CultureProgram Administration, and $220,000 for Mayor/Council Allocations. Funding for these programs comes from the Transient Occupancy Tax (TOT), a tax levied on individuals who stayovernight in the city's hotels, motels and other lodging establishments. Municipal Code Sections 35.0128 – 35.0133and Council Policy 100-03 govern the use of these taxes to promote the city, including support for San Diego's artsand culture programs and services.Importantly, Municipal Code Section 35.0128 Subsection A that states:“Two-thirds (2/3) of all revenues collected by the City and remaining after payment of one-sixth (1/6) of thecosts incurred in the administration of Chapter 3, Article 5, Division 1 shall be deposited in the Transient OccupancyTax Fund and used solely for the purpose of promoting the City. However, if the City Manager determinesthat anticipated revenues in any fiscal year will be insufficient to maintain existing City Services, the City Manager may ask the City Council to temporarily suspend compliance with thissubsection (a) for the upcoming fiscal year. A majority vote of the City Council can temporarilysuspend compliance with this subsection (a) for that fiscal year. “Given the City’s $72 million budget deficit and the public’s clear concern over public safety cuts, we believe that thenecessary determination can be made by the Mayor and City Council.As a result, we propose a 25% reduction to city Arts and Culture grants ($6.2 million) and the reorganization of theadministration of this grant program.However, our office proposes that the current approach is reformed to focus on fewer, but larger awards that aregeared toward attaining specific outcomes rather than spreading out a larger quantity of smaller fund amounts. Thiswould resemble the model utilized by the City’s Tourism Marketing District (TMD) and the process awarding CommunityDevelopment Block Grants.Finally, as the City moves forward in revamping its Arts & Culture award process, the current staffing model should beexamined for potential efficiencies as well. IF CBDG and TMD grants can be given out with fewer staff, so should Artsand Culture funding.Recognizing that these proposed reductions to the non-profit organizations can be difficult, the City’s immediatefinancial situation necessitates these cuts. As additional structural reforms are implemented, the City may be able toconsider restoring some of this funding.Alternate funding may be available to these organizations using the CDBG and TMD process.Storm WaterReduction of Storm Water._5634679a-f870-11e0-9417-4b107a64ea2aReform 3.3.2We recommend a consideration of a reduction to the Storm Water Department for FY 2012. While the issue of reducingcontract authorizations for the Storm Water Department has been discussed at some length at the NaturalResources & Culture Committee, we attribute Storm Water Budget cuts in part to ongoing efforts by the City and other“co-permittees” of the municipal storm water permit to receive compensation from the State for unfunded mandates.Medical ServicesComplete Performance Audit of San Diego Medical Services Enterprise._56346b82-f870-11e0-9417-4b107a64ea2aReform 3.4Emergency Medical Services in the City of San Diego are provided through a partnership of the City's Fire-RescueDepartment and San Diego Medical Services Enterprise (SDMSE). SDMSE provides ambulance services for the Cityof San Diego and in return has the authority to charge individual users for their service. As SDMSE is able to recoverfull costs through user chargers, ambulance services are provided without subsidization from the City.We also strongly support a comprehensive performance audit of the SDMSE function of the city to ensure that propermanagement and financial gain-sharing is occurring under our partnership with Rural-Metro. This performance auditmay provide recommendations on ways taxpayers can achieve greater cost savings and financial benefits from thispartnership. The Mayor and City Council should be ready to aggressively implement recommendations from theperformance audit upon its completion.Public SafetyForm Task Force on Public Safety Service Delivery and Staffing Optimization_56346f6a-f870-11e0-9417-4b107a64ea2aReform 3.5The Mayor and City Council should form a task force comprised of outside experts to critically and comprehensivelylook at the current staffing models and service process utilized in the Fire/Rescue Department and the Police Department.For example, cities and counties across the country have addressed the ramifications of rising EMS demand byreducing use of fire engines for EMS and shifting additional resources to dedicated EMS provision, by utilizing thepractice of priority dispatching, increasing their and EMS vehicle fleet diversification.The purpose of the task force would be examine the following questions:Could the City of San Diego increase response times and achieve cost efficiencies by expanding the use ofambulances versus fire trucks for responses to EMS calls?Could the City of San Diego make greater use of priority dispatching and utilizing other kinds of vehicles forresponses?Could the City of San Diego benefit from creating cross-trained Public Safety Officers, perhaps starting withtargeted areas such as downtown or the beach communities?The Task Force we recommend creating should be comprised of independent, outside experts that can offer a freshperspective on these and other options for improving public safety services in the city. Some of the issues we recommendexploring further are discussed below.Ambulance and Fire Truck and Deployment[Consider alternative] Ambulances vs. Fire Trucks and Deployment Models (Fighting Fires vs. Medical Emergencies)._563473ac-f870-11e0-9417-4b107a64ea2aReform 3.5.1Between FY 1980 and FY 2005, the number of emergency medical incidents reported to the City exhibited afour-fold increase. During the same period, the number of fires reported to the City actually decreased1.Between FY 2006 and FY 2009, the City Fire-Rescue Department responded to an average of 3,802 calls for fire peryear, compared to 89,896 for EMS2. This means during this period, the Fire-Rescue Department handled 23.64 EMScalls for every fire.In FY 2010, 85.64% of calls handled by the City's Fire-Rescue Department were for EMS, while the remaining 14.36%consisted of fires and other types of calls3.Basic Life Support (BLS) care, provided by Emergency Medical Technicians (EMT's), is basic medical care andtransport of non-critical medical patients. Advanced Life Support (ALS) care, provided by Paramedics, is the level ofmedical care and transport necessary for more critical patients. Both Fire-Rescue fire engines and SDMSE ambulancesprovide BLS and ALS care, however only SDMSE ambulances can provide for medical transport.County of San Diego Emergency Medical Services Treatment Protocols/Policies, Section P-801, requires that the Cityrespond to all ALS incidents with a minimum of two paramedics. However, because the city has adopted a policy thatall City Fire-Rescue engines are staffed with three EMT's and one paramedic, while SDMSE ambulances are staffedwith one EMT and one paramedic,4 the City dispatches both a fire engine and ambulance to all ALS incidents.As a result of this service-delivery model and staffing structure, the city sends four EMS personnel to all incidents,thus making those resources unavailable for all other calls. In contrast, a system primarily dependent upon ambulances(rather than fire trucks and ambulances), could send two or four EMS personnel to a call depending on severity,thus providing the potential for two EMS personnel to remain available for other, perhaps more critical, incidents.The need for a thoughtful review of current fire engine staffing is not a trivial issue. Under the City's current Memorandumof Understanding (MOU) with its firefighters, the cost of maintaining a level of staffing above that which is legallyrequired by the County is significant.To maintain the minimum legally required staffing (under the current cost structure), the City would need to pay onlythe sum of the four firefighters’ base salaries plus a premium of 8.5% of base pay to one EMT (omitting overtime andother considerations). To maintain its current staffing levels, the City must pay the sum of the four firefighters’ basesalaries plus an 8.5% premium to three EMT's and a 13.5% premium to one paramedic (again omitting overtime and other considerations). Thus, approximately speaking5, the current EMS delivery method increases engine-staffingcosts by 7.5%.Public Safety Cross-Training_563477c6-f870-11e0-9417-4b107a64ea2aReform 3.5.2Cross-training public safety officers allows them to meet multiple public safety needs. Some cities have createdpositions – and in some cases entire departments – that use staff with policing, fire fighting and EMS capabilities.Citywide deployment of cross-trained public safety officers may not be cost-efficient, however several communitiesmay find this model advantageous during specific time periods or for specific kinds of response calls. For example, itis our understanding that a significant number of calls relate to homeless individuals downtown – creating a potentialopportunity for cost savings reforms through alternative service delivery models.Event PermittingReform City Special Event Permitting._56347bb8-f870-11e0-9417-4b107a64ea2aReform 3.5.3San Diego is home to numerous special events – many of which require police and fire staffing charged at discouraginglyhigh rates. To reduce costs and strain on resources in the police and fire departments for special event staffing,the City should consider models used in San Jose to provide more cost certainty to event organizers. We discuss thisissues in detail in our report, “Open for Business: Action Plan to Make San Diego the Most Friendly City in Americanfor Small Business.6“City HallCancel New City Hall Project – Lock In Affordable Lease Rates._56348018-f870-11e0-9417-4b107a64ea2aReform 3.6We have adamantly opposed building a new City Hall in the middle of a financial crisis, particularly given the opportunitiesavailable in the local commercial real estate market. We have advocated for attempting to lock-in lower leaserates for city office space during the market downturn, but also think other alternatives should be explored.These alternatives include:Link the discussion of city office space needs with efforts to shrink the size of the city’s workforce throughrestructuring and managed competition.Rather than adding costs to the City’s budget for repairing the existing City Administration Building, the Cityshould explore cost savings available moving city operations into three or four locations around the city. Thecity should be taking advantage of historically low lease and purchase rates by locking in cost savings todayfor long-term benefit.This model would consolidate city staff into four locations organized around 3-4 business lines.- Economic Development and Support Services: Planning, Development Services, Office of SmallBusiness- Public safety and Neighborhood Services: Parks, Libraries, Recreation, Police, Fire, etc.- Infrastructure and Utilities: Streets, General Services, Water, Wastewater, etc.To contribute to neighborhood revitalization and achieve cost efficiencies on office space and parking, wepropose selecting a distressed community for at least one of these 3-4 functions.Tap technology to integrate city staff – using Skype, teleconferencing and other technologies, city staff can bedistributed into 3 or 4 locations easily without impacting performance and communication capability.Any savings achieved from this plan for securing more cost-effective office space should be used to provide neighborhoodservicesAdditional ReformsIn addition to the issues discussed above, Councilmember DeMaio plans to explore [the following reforms]._56348428-f870-11e0-9417-4b107a64ea2aReform 3.7Maintenance Assessment DistrictsExpanded Maintenance Assessment Districts to Provide Enhanced Service with Local Control._56348842-f870-11e0-9417-4b107a64ea2aReform 3.7.1Library System of the Future Ideas to Create the “Library System of the Future” – with an emphasis on expanded access to databases, electronic books, and partnerships with local schools._56348d7e-f870-11e0-9417-4b107a64ea2aReform 3.7.2Parks and Recreation PartnershipsExpanding public-private partnerships for parks and recreation programs._563491e8-f870-11e0-9417-4b107a64ea2aReform 3.7.3Community Volunteer CorpsCreation of a city-wide Community Volunteer Corps modeled after San Diego’s successful “Urban Corps” program._5634965c-f870-11e0-9417-4b107a64ea2aReform 3.7.4Comprehensive Pension ReformCity employees should receive a reliable retirement allowance that is nobetter and no worse than the average San Diego taxpayer – and cityemployees should assume a fair share of the risks and costs of thesebenefits._56349b48-f870-11e0-9417-4b107a64ea2aCommitment 4Until the city reforms its pension liability, no tax increase will be bigenough…no service cut will be deep enough…to satisfy theskyrocketing debt service on the city’s pension system.Like a bankruptcy reorganization plan, the Roadmap to Recovery iscommitted to restructuring and reducing our net liabilities in thepension system through reform of benefits for both existing and newcity employees.The reforms outlined in this Roadmap to Recovery are designed toreduce the long-term debt service on the pension liability and bringthe city’s long-term operating costs back down to sustainable levels.Specifically, the Roadmap to Reform is designed to produce a 20%reduction in the largest retirement cost faced by the city: the annualcity payment for the defined benefit pension plan - and a reductionof one third of the cost of all retirement benefits.When added together with reforms to other discretionary retirementbenefits, the Roadmap to Reform not only achieves savings in theFY 2012 budget – but most importantly produces hundreds ofmillions of dollars in savings over the next 10-15 years.All reforms outlined in this plan are legal – and have a welldocumentedand proven basis for implementation.Modeling of Financial Impacts from Reforming RetirementBenefitsAnalysis of the impact of retiree health care comes from actuarialdata provided by the Buck Consultants for the “Joint Study”conducted by the city with input from the labor unions - as well asthe city’s 5-year Financial Outlook.To model the financial impacts of a variety of pension reforms,Councilmember DeMaio’s office obtained the services of a professionalactuarial firm – Sheffer Consulting Actuaries, Inc.It should be noted that the pension payments utilized in the Mayor’sFive Year Outlook do not reflect the General Fund portion of theprojections provided by the SDCERS actuary.1 Our office hasinquired as to the methodology utilized to obtain these pensionprojections on numerous occasions (e.g. budget hearing questioning,committee meeting questioning, written memoranda2 and follow-up e-mail) but has not received an official explanationto date. As a result, the Roadmap to Reform uses the analysis provided by our actuary. The Five Year Outlook published in April of 2010 assumed a pay freeze in each year of the Outlook. Since we can onlyspeculate that the pay freeze partially or wholly accounted for the variation between SDCERS and Five Year Outlookpension projections, we substitute the projections provided by our actuary for the projected pension payments in theFive Year Outlook to estimate baseline savings beginning in FY 2013.Salary FreezeRealize Savings from General Salary Freeze._56349fd0-f870-11e0-9417-4b107a64ea2aReform 4.1As further explained in the long-term section of this Commitment, freezing payroll – particularly pensionable payroll –can have a significant impact on the City’s annual pension payment. Recent experience has shown that the City canlower its annual pension costs by holding the line on salary increases. However, as the Independent Budget Analyst(IBA) has noted,“For FY 2011, the pension system actuary…estimated the ARC reduction due to a one-year salary freeze to beapproximately $8.6 million. This is less than the FY 2010 estimation of $12.0 million. The reason for the difference is that the City is only freezing general salary increases, and not the step increases that are received byclassified personnel.”Recognizing the issue raised by the IBA that is referenced above, we have also asked our actuary to estimate theimpact of the pay freeze for the FY 2012 pension payment to account for the step increases that have occurred. OurGeneral Fund estimate of the pay freeze impact is a savings of $8.1 million from the baseline projection in the Five YearOutlook.Retirement Offset ContributionsEliminate Retirement Offset Contributions._5634a46c-f870-11e0-9417-4b107a64ea2aReform 4.2The city’s pension system was established on the contributory plan – wherein the employer (e.g. taxpayers) makes acontribution and city employees are supposed to make a substantially equal contribution for the normal cost of theirpensions. Unfortunately, there are several areas where the spirit, of not the law, of “substantially equal” requirement arenot being followed.Within the budget, Retirement Offset Contributions “represent the amount of City employees’ retirement contributionsthat the City pays” for the employee3. The Roadmap to Recovery requires that the City end the practice of “picking up”any portion of employee pension contributions in addition to the employer contribution.While the City Council recently eliminated the offset for elected officials and unclassified/unrepresented employees4,employees represented by the Municipal Employees Association (MEA) and Teamsters 911 still receive a retirementoffset contribution.5The Roadmap to Reform plan eliminates the offset entirely for all City employees to help move City employees closer topaying the Charter-required share of the cost of their retirement. This is projected to achieve a General Fund savings of$4.8 million based on the Adopted FY 2011 Budget ($7.9 million citywide).The City Attorney has opined that eliminating the offset through the “Meet and Confer” process is legal, and recentprecedent exists for doing so.6 Furthermore, the City will be negotiating new MEA and Teamsters labor contracts totake effect in FY 2012.SDCERS RatesContinue Savings Achieved from Revised SDCERS Rates for “SubstantiallyEqual” Contributions._5634a96c-f870-11e0-9417-4b107a64ea2aReform 4.3As our office and the City Attorney’s office have raised the issue of challenging how the city achieves compliance with the Charter requirement of charging city employees a “substantially equal” share of the cost of a normal pension allowance, SDCERS has already taken some action that have resulted in benefits to city taxpayers.In fact, the City’s actuarial valuation results of June 30, 2009 were adjusted to reflect the Board’s decision to adopt new employee contribution rates at its May 28, 2010 meeting. This resulted in a $2.6 million reduction in the FY 2011 ARC.7.Some on the City Council raised the possibility of “giving back” these gains; we do not support giving back these taxpayer savings. We expect additional savings in the FY 2012 budget from these modifications to contribution rates made by SDCERS, but are intentionally not scoring those savings pending further analysis of SDCERS methodologyand its impact on FY 2012.The Budget and Finance Committee should request this analysis as soon as possible so savings can be booked intothe FY 2012 budget solution.Service CreditsIncorporate Reform of Rates Charged for Purchase of Service Credits Into FY 2012 Budget._5634ae12-f870-11e0-9417-4b107a64ea2aReform 4.4Over the years city employees have been provided the opportunity to purchase additional service credits. After a legaljudgment in favor of the City, SDCERS is in the process of correcting the practice described below, which incorrectlyresulted in the City picking up the cost associated with employee purchases of service credits at prices below whatthey should have been.On this issue, the city’s Municipal Code section 24.1312 requires that:“provides that an employee cost to purchase…[a] PSC must be the amount the Board determines to be boththe employee and the employer (plan sponsor) cost for that service, SDCERS was not permitted by law todelay implementation of the new rates once it determined a new rate [in 2003]. The City ended up paying forthe underfunding through it Unfunded Accrued Liability (UAL). As a result, the affected PSC contracts werenot legally authorized…because SDCERS had no legal authority to continue to offer the old rates once it haddetermined that the new higher rates were required to comply with the Municipal Code. SDCERS is prohibitedfrom requiring the City to make up the underfunded amount by including it in the City’s UAL, and from permittingretirement benefits to be paid to members based upon contracts issued using the legally unauthorizedrules.” 7In anticipation of savings from this legal ruling, the City underpaid the FY 2011 ARC by $4 million. This underpaymentof the pension payment was not brought before the City Council, nor is the methodology (thus, appropriateness) usedfor calculating the $4 million underpayment known.There are two issues to consider surrounding this underpayment:1) If the underpayment is accurate, the City will have $4 million of appropriated funds from FY 2011 to carryover to FY 2012, assuming that the funds are not needed to bridge any FY 2011 budget gaps that may arise.2) If the underpayment resulted in the City remitting an ARC payment that was too low, the City is accruingcompound interest on that underpayment of 7.75% annually. Further, if SDCERS investment experience isfavorable, the opportunity cost of not making the full pension payment increases.Note: The proportion of the $4 million underpayment made to SDCERS that is attributable to the General Fund isunknown.Given the financial condition that the City finds itself in and the potential for accruing interest owed to the pensionsystem that would otherwise not be owed under a July 1 full payment scenario, we recommend that this issue beresolved as soon as possible at the Budget and Finance Committee.Investment ReturnsImpact of Improved Investment Returns on Annual Pension Payment._5634b344-f870-11e0-9417-4b107a64ea2aReform 4.5It is our understanding that the pension plan administered by SDCERS exceeded the assumed rate of return for theyear ending June 30, 2010. The precise magnitude of the impact will not be known until the actuarial valuation iscomplete at the end of calendar year 2010, however. The Five Year Outlook assumes that the FY 2012 pensionpayment is the result of all actuarial assumptions being achieved. Therefore, any positive net impact due to experiencegains will lower the ARC payment in comparison to the projected payment in the Five Year Outlook, in turnlowering the FY 2012 deficit.Cost NeutralityComplete DROP Cost Neutrality Study and Implement Necessary Reforms._5634b8ee-f870-11e0-9417-4b107a64ea2aReform 4.6One of the conditions in Prop D was the completion of a cost neutrality onthe “Deferred Retirement Option Plan” (DROP) program. As part of thecreation of DROP, the program was supposed to be implemented in a strictly“cost neutral” manner. Unfortunately significant questions remain onwhether that has occurred over the life of this controversial program.By July 1, 2011, the Mayor and City Council should complete the DROPstudy and implement any necessary reforms and adjustment to the DROPprogram or salaries of DROP participants to ensure full cost neutrality.Retiree Health Care LiabilityReform Retiree Health Care Liability._5634be3e-f870-11e0-9417-4b107a64ea2aReform 4.7In general, city employees hired before July 2005 are slated to receive freetaxpayer funded health care coverage for life. This benefit has not beenproperly funded by the city as an employer or city employees - resulting in amassive unfunded liability.The actuarial valuation for the City’s retiree health care liability at June 30,2009 revealed a funded ratio of only 3.05%, and an Unfunded ActuarialAccrued Liability (UAAL) of $1,317,880,746.8Worse, city taxpayers face an ever-escalating liability due to the fact the citycontinues the practice of intentionally underfunding the cost of this benefitpackage. In FY 2011, the city’s annual required contribution to service thecurrent cost and future debt of this liability was over $120 million, yet the cityonly budgeted $57 million for this expense.The Roadmap to Reform comprehensively reforms this debt facing taxpayers– and generates significant savings for taxpayers starting in FY 2012.Under the Roadmap to Recovery, we propose that the City implement “Option 12” modeled by Buck Consultants for the“Joint Study” conducted by the Joint Committee on Retiree Health.This option freezes the City’s retiree health contribution at $0 for current employees, while leaving the benefitunchanged for employees already retired.Reforming retiree health care benefits in this manner is appropriate for two reasons. First, as already well documented,city employees impacted by this change can expect pension benefits “that are generous by any standard applied.”9Those pension payouts can be used by these individuals to pay increased costs for health care.Second, this reform has already been implemented for new employees. Safety Members hired after July 1, 2005,currently have no retiree health benefit. General Members hired after July 1, 2009 receive a modest defined contributionhealth care plan.Without Retiree Health Care Reform, City Fiscal Outlook Is Bleak -- The unfunded portion of the City’s annual retiree health care payment represents part of the City’s structural deficit,even if it is not acknowledged in the official deficit figure.As a result, any reform of the retiree health care liability up to a level that reduces full annual costs (the ARC) tocurrently funded levels does not produce any real budgetary savings, per se. Such reform would significantly reducewhat has been a relatively unrecognized component of the City’s structural deficit, but does not help to balance theCity’s recognized budget deficit.Past and current practice of underfunding the retiree medical benefit has perpetuated a generational inequity amongtaxpayers. By not adequately ”pre-funding” retiree medical costs in previous years, the practice has forced today’staxpayer to foot the bill for the costs associated with providing yesterday’s taxpayer with services.The Joint Study explains this past practice, noting that:“The City followed the custom of most other public entities in paying for retiree health benefits on an annual“pay-as-you-go” (PAYGO) basis…The PAYGO expense is the actual cost of providing retiree health benefits toall eligible retirees each year and does not include any amount to “pre-fund” the cost of paying this benefit infuture years.”While the City began to pay expenses in addition to PAYGO costs (“pre-funding”) in 2008, dealing with the unfundedliability associated with retiree health care has proven to be an unsustainable and massive drain on the City’sfinances, to the detriment of today’s taxpayer. 10The Joint Study also depicts the detrimental impact that the retiree health care liability has on a sizeable portion of theCity’s workforce, noting that “…unions must also understand that the current retiree health benefit will preclude orsubstantially limit the City’s ability to increase employee wages or benefits for the foreseeable future.” (Emphasisadded)Budgetary Impact of Reforming Retiree Health Care -- The reduction in General Fund retiree-health care expenses (thus, savings) in the General Fund can be seen in thecharts below. The charts progress from the scenario projected in the Five Year Financial Outlook to a freeze ofbenefits at $4,000 per year, $1,000 per year, and $0.In the “Status Quo” chart, the General Fund retiree health care payment is underfunded significantly in each yearprojected in the Outlook. The charts progressively show the budgetary savings available from reducing the benefit atvarious increments.[Charts omitted.]To recap, eliminating the benefit for current employees provides the following benefits to the City financially:* It represents a legal means to reduce overall retirement packages afforded to current City employees tomore sustainable levels in a way that is different from the City’s ability to affect pension benefits.* It achieves significant annual General Fund budget savings.* It reduces one of the somewhat unrecognized components of the City’s structural budget deficit by an evengreater amount.* It helps to undue a generational inequity imposed on taxpayers because the benefit was not fundedadequately in the past.* It helps to eliminate a generational inequity currently imposed on approximately one-fifth of the City’s workforce (more than one-fourth of police and fire employees) by removing a significant impediment to the City’sability to increase salaries for the foreseeable future.Pensionable PayReduce and Freeze “Pensionable Pay” for Five Years._5634c398-f870-11e0-9417-4b107a64ea2aReform 4.8While the City is limited in its options to change pension benefits for existing employees, it does have control overannual salaries and wages through the negotiating process. The City Attorney has opined: 12“As a general rule, the terms and conditions of public employment are governed by statute or ordinancerather than by contract, and employment benefits, including compensation, may be modified or reduced aslong as the City complies with any applicable procedural requirements.”We obtained a model of a “hard” pay freeze – one that assumes that payroll is held constant in each year. It is importantto note that the City has maintained the practice of awarding “step” increases as called for under PersonnelRegulations.13 As explained in Reform 4.1, the City can achieve over $8 million in savings in FY 2012 from the priorgeneral salary freezes.While the City could propose temporarily freeze step salary increases in negotiations, such a proposal could be moredifficult to attain in the “Meet and Confer” process than other labor cost savings (for example, a general salary freezeor reduction) because of legal issues created by Charter section 130 (additional information provided in the “StepIncrease Freeze” section below). As a result, in our FY 2012 recommendations, we focus on general salary cuts andvarious options for cost savings with special pays.The graph to the right shows the range of estimated impacts from implementing an indefinite pay freeze. We are notsuggesting that pay be frozen through FY 2024, but provide the analysis to display the ability the City has through afreeze to impact its annual pension payments.The “General Freeze” is an estimate that accounts for step increases, while the “Hard Freeze” shows the estimatedimpact to City pension payments from holding pensionable payroll at a truly frozen level.Special PaysExplore Changing Pensionable Status of Special Pays._5634c96a-f870-11e0-9417-4b107a64ea2aReform 4.9To enhance the freeze and/or reduction in “pensionable pay,” and perhaps achieve even better savings than representedin the bar graph above, the City can also seek to negotiate the “pensionable” status of a number of “specialtypays.”Our office has identified at least $13 million in special pays that are currently considered pensionable that may belegal candidates for conversion to “non-pensionable” status in the coming year.In these cases, the City may have an opportunity to reduce pensionable payroll (thus achieving actuarial savings longterm in the pension system.)Our office has inquired as to the legal ability of the City to pursue such a strategy, and it is our understanding that themajority of special pays can be either eliminated or restructured in such a way as to reduce the number that have“pensionable” status.The Roadmap for Reform calls on the City to explore the potential for pensionable status reform of special pays, andwe recommend the city labor negotiating team tackle at least 10 special pays prior to commencement of FY 2012,including all Bilingual Pays (Excluding Police), Hose Repair Pay, Ladder Repair Pay, and Dispatch Cert Pay.(NOTE: For a more exhaustive discussion on special pays, see Commitment 5: Reform City Salaries and Labor Contracts.)Affordable Pension PlansTransition to Affordable Pension Plans._5634ced8-f870-11e0-9417-4b107a64ea2aReform 4.10The current level of pension benefits are not only unaffordable to city taxpayers, but may be also unaffordable to cityemployees – in the event that city employees are required to pay a fair share of the cost of the benefits.That’s why the Roadmap to Recovery proposes the establishment of additional pension tiers and options for cityemployees:Defined Contribution PlanThe city should immediately provide a simple 401(k) plan to all new hires and offer existing employees the ability to“freeze” their current pension benefit levels by leaving the system and enrolling in the 401(k) plan immediately.DB-DC Hybrid PlansThe General classification employees already have a hybrid pension plan that is more affordable. Police Officershave a lower tier defined benefit plan, but it is still quite costly. Under Prop D Firefighters were expected to receive aplan similar to the one created for POA. The Roadmap to Reform believes a more affordable hybrid plan should beoffered to Police and Fire employees.In addition to creating these more affordable hybrid plans for new employees, the city should adopt the policy to allowall existing employees to downgrade from higher tier to these lower tiers.Implementation of this policy will have to await final approval from the Internal Revenue Service.We also obtained an actuarial analysis of a potential “opt-out” program, where City employees would leave the currentsystem and opt into a hybrid, where a Defined Benefit reduced by 50% was packaged with a 5% defined contributionmatch.Different take-up rates for public safety and general employees were assumed, with the potential savings from such aprogram under three different take-up scenarios shown on the next page: [Charts omitted]SPSP Waiver ProcessContinue SPSP Waiver Process._5634d414-f870-11e0-9417-4b107a64ea2aReform 4.11Beginning in FY 2013, we recommend inplementing a SPSP waiver or commensurate compensation reduction forremaining bargaining units with the benefit.Total Net Compensation ModelAdopt Total Net Compensation Model for Each Classification._5634da5e-f870-11e0-9417-4b107a64ea2aReform 4.12Once “pensionable pay” is reduced and capped for the five year period, and in preparation for the “opt-out” pensionreform plan, The City should explore whether an amendment Charter Section 130 is needed in order to adopt a “netcompensation” model for city employee classifications.A total sum of compensation for each city classification would be provided, along with a standard “benefits allowance”that provides for all fringe benefits (including pension costs).Employees in the higher pension benefit level will see less take-home pay than employees in lower, more affordablepension benefit levels.The net compensation model is not only designed to provide greater financial incentives to city employees to voluntarily“opt-out” of higher pension tiers, but is also explicitly designed to address the Generational Inequity that hasbeen created within the city workforce where some city employees receive greater compensation with higher benefitsat the expense of other employees with lower benefit packages.Pension Investment RisksExplore Benefit from Requiring City Employees to Share Equally in Pension Investment Risks. _5634e008-f870-11e0-9417-4b107a64ea2aReform 4.13The analysis shows that the City stands to gain potentially gain from a sharing of investment losses.This reform – known as “Sub-Equal for Investment Gains/Losses” – was originally raised by the Pension ReformCommittee in 2004 and has been raised consistently by our office. In spring of 2010, City Attorney Jan Goldsmith,with the support of the City Council, brought suit against SDCERS over this issue.SDCERS has “argued that in a defined benefit plan the employer is generally responsible for the unfunded actuarialaccrued liability.” However, in her Tentative Ruling, Judge Joan M. Lewis has stated that “[i]n this case, the City’sCharter and, specifically, Section 143 contains language requiring the City to contribute only an amount ‘substantiallyequal’ to that required of the employees for normal retirement allowances, as certified by the actuary, but shall not berequired to contribute in excess of that amount, except in case of financial liabilities accruing under any new retirementplan or revised retirement plan because of past service of the employees.”As such, she “reject[ed] the argument that as a matter of law and with what is before [the Court] at this time, the Citymust entirely fund the UAL.”We obtained an actuarial model of various investment return assumptions, as well as the impact of sharing investmentlosses/gains between the City and employees, beginning July 1, 2001. We obtained this modeling due to the legalactions being currently pursued by the City to force SDCERS to apply “substantially equal” contributions to investmentexperience.It is important to note that the possibility that City employees were not contributing adequately (adequately is usedhere to refer to contributions as required by the Charter) to the pension system was raised as early as 2004 in thePension Reform Committee “Final Report.”16 Some of the initial progress that has been made resulted in an approximate$2 million reduction in the City’s ARC payment paid on July 1, 2010 as determined by the revised June 30, 2009actuarial valuation, which followed the SDCERS Board adoption of new contribution rates at its May 28, 2010 meeting.17While the ultimate resolution of this case is still to be determined, the notion that investment losses are not the entireresponsibility of the City due to the City Charter has not been dismissed. Given the remaining uncertainty, however,we do not apply any potential savings from investment gain/loss sharing to the FY 2012 budget.Nevertheless, as the City seeks to reduce its long-term pension costs to free up finite General Fund revenues forservice provision, this looming possibility may help to bolster the viability of the options explored further below due tothe increased negotiating leverage gained as a result of the potential Charter-required increase in contribution ratesfor City employees.Negotiated SettlementSeek “Negotiated Settlement” on Pension Reform from City Labor Unions Using City Charter Section 143.1_5634e5bc-f870-11e0-9417-4b107a64ea2aReform 4.14While this office has on multiple occasions suggested that an amendment to the City Charter section 143.1-employeevote requirement be explored 18,19 , this Charter section may also provide a unique opportunity to reduce the City’spension liability.As familiarly triggered, the section provides members of the retirement system with an effective veto power overchanges to benefit levels, despite the outcome of the “Meet and Confer” process.Charter section 143.1 states, in part,that:“No ordinance amending the retirement system which affects the benefits of any employee under such retirement system shall be adopted without the approval of a majority vote of the members of said system.”In addition to the de facto veto power over benefit changes granted to system members, this provision may provide aunique legal mechanism for changing the benefits of existing employees – a pension reform typically viewed as “offthe table” due to the nature of vested benefits. 20As the fiduciary counsel for SDCERS has pointed out 21,“One of the premises of vested rights is that the contractual right is determined based on the terms of thecontract at the time that the person began working. And in the case of that contract has included since 1954,the benefit vote provision section 143.1. Therefore, the vested rights to particular retirement benefits that areprovided with and in the City of San Diego (the SDCERS plan) are all subject to the possibility of modificationon the appropriate vote as to the members...What we addressed in our analysis is simply the active members’rights to take away from themselves a benefit that was previously granted.”We reference this Charter provision to remind city labor unions that, according to SDCERS counsel, they can alwaysutilize this provision to offer their own pension reform plan using Charter Section 143.1.Downsizing and CompetitionAchieve Pension Savings from Downsizing and Managed Competition._5634ec38-f870-11e0-9417-4b107a64ea2aReform 4.15Fiscal reforms implemented to balance the FY 12 budget will also pay dividends when it comes to the city’s long-termpension costs. To capture those savings, we obtained an actuarial analysis of the impact of a reduction-in-force forthe general membership group of employees.Given the City’s apparent forthcoming efforts to subject functions to managed competition, as well as the City’s legalability to directly outsource service functions outside of the process set forth in the Managed Competition Guide 22,23 ,the impact to the City’s annual pension payment from reducing the number of employees is important to understandand quantify.The impact of 10%, 20% and 30% reductions-in-force, each equally phased-in over three years, is displayed in thetables at the end of this section.This reduction in force only applies to non-public safety members, and is intended to show the impact that the Citycan expect to its pension payment from various degrees of workforce downsizing.Share-in-SavingsImplement a Pension Reform “Share-in-Savings” Program for City Employees._5634f200-f870-11e0-9417-4b107a64ea2aReform 4.16The Roadmap to Recovery recognizes that salary freezes are a major part of the financial recovery process – andthose freezes will impact our city employees. To provide gain-sharing for city employees – and to offset years ofsalary freezes – the Roadmap proposes the creation of a “Share-in-Savings” pool to provide non-pensionablebonuses to city employees based on documented savings from pension reform.Beginning in FY 15, the gain-sharing program would offer a performance-based, non-pensionable pay bonus. Thisbonus would be equal to 50% of the pension savings achieved in the FY 2015 ARC. These savings would be requiredto be attributable solely to cost savings from reforms (e.g. not from potential actuarial gains due to investment experience).To provide proper accountability and oversight, the SDCERS actuary and City Auditor would be responsible forcertifying that the savings attributable to the freeze in that year’s payment were, in fact, the result of the pay freezereforms. The employee bonuses would be available for distribution among City employees through a measurementmethodology to-be-determined in negotiations that would reward exceptional performance.In our Five Year forecast, we begin to share the reform gains with employees through this system in FY 2015.Reform City Salaries and Labor ContractsCity labor contracts should be reformed and compensation for cityemployees should be benchmarked to the local labor market._5634f7c8-f870-11e0-9417-4b107a64ea2aCommitment 5Over the years, salaries and benefits awarded to City employeeshave been steadily increased –even during times of fiscal crisis forthe City.Among the problems with the current system of city labor contracts:Salary increases are not based on merit, but collectivebargaining and longevity.City labor contracts now have a byzantine structure of requirements that limit the discretion of city management to hold workers accountable for results.Overly-generous vacation policies are enabling city employees to bank significant leave balances – andreceive annual cash payouts for accumulated leaveBase salaries do not tell full story of city employee compensation – with a complicated and opaque set of“specialty” pays added on to base salaries for city employees in each unionAs San Diego taxpayers have seen pay freezes, pay cuts, and job losses, city employees have actually fared quitewell by comparison. Our indicator of this fact is the growth of the number of city employees earning over $100,000 incity government over the past decade – and in particular since the economy has soured. The city’s labor costs must be reformed – to bring total compensation packages for city employees down to levelscommensurate with San Diego’s local labor market. Put simply, city employees should receive no more, and no lessin compensation for the same kind of work done in the private sector or non-profit sector locally.Salary Reduction and FreezeImplement a 2% General Salary Reduction (Non-Public Safety) – and Freeze Base Salaries for Five Years._5634fe8a-f870-11e0-9417-4b107a64ea2aReform 5.1Many government agencies have implemented furlough programs. In the past, some city labor unions have proposedexpanded furloughs in lieu of salary reductions. It should be noted that furloughs might result in impact to servicelevels depending on how they are implemented. Worse, as is the case with the MEA furlough program, furloughsallow for special assignment pays to be calculated based on a full base rate before subtracting pay for the mandatoryfurlough, and also does not reduce the amount of SDCERS pensionable compensation.3To achieve balance in FY 2012 without expanding furloughs, the Roadmap to Reform includes general salary reductionsof 2% for MEA, DCAA and all Unclassified/Unrepresented employees from the status quo, or baseline. This isestimated to produce General Fund savings of $3.9 million for MEA and DCAA, plus any savings from a 2% salaryreduction to unrepresented employees.The five-year freeze in salaries is consistent with the Mayor’s proposed financial forecast. More importantly, asoutlined in Commitment 4 on Pension Reform, a five-year base salary freeze is absolutely essential to reducinglong-term pension costs in city government - by freezing “pensionable pay” for city employees.NOTE: We recommend that any reduction taken here should be taken as the city’s starting position in labor negotiations with Police and Local127 in FY 13.Special PaysReform “Special Pays” Throughout the City’s Budget._56350646-f870-11e0-9417-4b107a64ea2aReform 5.2In addition to base compensation (salaries and wages), the City of San Diego includes additional compensationcomponents in the FY 2011 General Fund budget, many of which are considered “special pays.”Over the years, the labor unions have used “special pays” to spike take-home earnings of city employees - andincrease “pensionable pay”. The result has been a costly system that lacks true transparency on city employeecompensation levels. Worse, the myriad of special pays has resulted in numerous accounting headaches – particularlyin the transition to the new ERP system.In this section, the Roadmap tackles the elimination of some “special pays” to achieve FY 2012 budget savings andexplores changing the methodology under which they are calculated.As a general principle, our office does not agree with the use of special pays as a salary increase for all affectedemployees because it reduces transparency and potentially creates a false notion of a “pay freeze,” when in factincreases in special pays may be occurring. Furthermore, we also believe that special pays cease to be “special”when they are provided to essentially all employees covered under a labor contract.Instead, we believe that “special pays” should be reserved for activities that go well beyond basic job requirements(e.g. “bomb squad” pay).Currently, many special pays are calculated as a percentage of base pay, as opposed to a flat dollar amount. This hasthe impact of triggering an increase in the cost of special pays to the City whenever a general salary increase isenacted. The City can guard itself against these cost increases in the future by negotiating a change in the currentcalculation methodology for some special pays to a flat dollar amount.* We must note that data segregated into bargaining unit and General Fund was not available to our office. As a result, we can only estimate the financial impact of these reductions based on very limtedinformation. We attempted to obtain the data from the Office of the Independent Budget Analysis, but the city’s financial system could not correctly provide the necessary information.While eliminating these pays may in some cases be warranted, there may be other cases where the City finds itprudent to provide special pay.The table below provides a summary of the various reform options the City can pursue regarding the various specialtypays currently provided under labor contracts.EMTSuspend EMT 8.5% Special Pay: ($4.83 million)_56350d12-f870-11e0-9417-4b107a64ea2aReform 5.2.1Our office has previously opined on the cost savings available from eliminating a specialty pay provided to essentiallyall firefighters for holding an EMT certificate -- even though an EMT certificate is a basic requirement of the job.Particularly when the City finds itself in serious financial difficulties and has browned-out fire stations, we do notbelieve that providing a special pay of 8.5% of base salary for a basic requirement of all applicants for a position withthe Fire Department is warranted.As the IBA has noted, 86% of calls responded to by the Fire Department are medical in nature4. This data suggeststhat medical response is overwhelmingly the primary function of City firefighters, which justifies a continuation of thepractice of requiring an EMT certificate as a basic job qualification.It is our understanding that eliminating the EMT specialty pay will reduce pensionable payroll, as this special pay isconsidered “base earnings” in the addendum submitted to SDCERS each year along with the Salary Ordinance.Therefore, we expect actuarial savings to result, providing pension experience gains.Fire Administrative AssignmentEliminate Fire Administrative Assignment Pay: ($719,348)_56351712-f870-11e0-9417-4b107a64ea2aReform 5.2.2The City currently provides a 15% special pay for administrative assignment, or “desk pay” under its current laborcontract with the Fire Department. We propose eliminating this special pay to achieve a savings of $719,348.As in the case of EMT special pay, Administrative Assignment pay is also considered “pensionable.” Eliminating thispay is expected to result in actuarial gains beyond the immediate budget impact.Master Degree LibraryMaster Degree Library Pay: ($262,397)_56351ed8-f870-11e0-9417-4b107a64ea2aReform 5.2.3We recommend elimination of the 5% Master Degree Library pay in upcoming labor negotiations with MEA due to theCity’s financial condition and criteria we have previously stated for special pays.MEA SpecialtyAdditional MEA Specialty Pays_5635261c-f870-11e0-9417-4b107a64ea2aReform 5.2.4In addition to the Master Degree Library Pay, the MEA labor contract lists a number of additional pays and reimbursementrates that should be reviewed and trimmed. The Roadmap establishes a hard target for reduction of $1.5 millionfrom the MEA contract through special pay reform.Terminal LeaveEnd Terminal Leave._56352ff4-f870-11e0-9417-4b107a64ea2aReform 5.3 The City Council has voted once to eliminate Terminal Leave, which allowed employees separating from City employmentto accrue service time, benefits and additional leave with any unused leave they had accrued prior to separation.The annual savings of this reform have been estimated with a range of $120,000 - $1.2 million, although the CityCouncil must vote once more to codify the elimination of this benefit. This reform will also generate long-termtaxpayer savings by preventing city employees from using Terminal Leave to increasing their pensions by paddingtheir years of service.Management Leave and Vehicle AllowancesReform Management Leave and Management Vehicle Allowances._56353756-f870-11e0-9417-4b107a64ea2aReform 5.4Given the gravity of the city’s financial challenges, the City should immediately suspend management leave and allmanagement vehicle allowances.Holiday and Leave PoliciesReform Holiday and Leave Policies._56353e54-f870-11e0-9417-4b107a64ea2aReform 5.5City employees are provided with extremely generous holiday and personal leave benefits – which cost taxpayerswhen overtime is incurred and when this leave time is cashed out by employees.Maximum Accumulation of LeaveOn a go forward basis, city employees should not be allowed to accumulate more than 240 hours of leave time._5635482c-f870-11e0-9417-4b107a64ea2aReform 5.5.1General city employees should receive no more than 120 hours of leave time per year.Pay In LieuReform and Cap on “Pay In Lieu” Amounts._56354fb6-f870-11e0-9417-4b107a64ea2aReform 5.5.2Some city labor contracts allow employees to receive “pay in lieu of leave” amounts each fiscal year. In FY 10,according to preliminary close out reports, more than $6.1 million in General Fund payouts occurred due to this policy.(Note: As the Comptroller’s Office reconciles and completes its close out under the ERP system, these numbers willbe finalized.)For all labor contracts the City should mandate that any future leave time accrued can only be paid out upon terminationof employment. If the City Attorney determines that this policy change can immediately be applied to currentleave time accrued, then that reform should be explored, taking into account potential management impacts.“Floating” HolidayReduction in City-Wide “Floating” Holiday._56355718-f870-11e0-9417-4b107a64ea2aReform 5.5.3Given the generous leave policies up to this point have allowed many city employees to accrue significant leavebalances, the “floating holiday” policy should be suspended for all labor unions, starting with contracts up in FY 12 andcompleting this reform in FY 13.Fire Union ContractReview Leave Policies in Fire Union Contract._56356122-f870-11e0-9417-4b107a64ea2aReform 5.5.4The City should examine the appropriateness of reducing holiday and personal leave allowances for fire fighters giventhe unique work schedule they have.“Share-in-Savings” BonusesCross-Cut Reform: Provide for “Share-in-Savings” Bonuses for City Employees in FY 15 and 16._5635688e-f870-11e0-9417-4b107a64ea2aReform 5.6As outlined in the preceding section on reducing and freezing “pensionable pay” to achieve reform, we propose thatcity employees be eligible for compensation increases in the last two years of the five year financial recovery planperiod – provided that savings from reduced pension payments are achieved through the enactment of reforms.Policies on how those savings will be distributed to employees will be a subject of “meet and confer” with a not-toexceedcap on payouts determined by savings attributed to the reforms.It is anticipated that savings generated through pension reform will allow employees during the last two years of thisfinancial recovery process to “catch up” on compensation increases.Step IncreasesReform How Step Increases Are Provided._5635700e-f870-11e0-9417-4b107a64ea2aReform 5.7Under Personal Regulations of the civil service system at the City of San Diego, nearly 2,000 salary increases aregranted each year, as “merit,” or “step” increases. Some of these increases are triggered by service time rendered bya City employee at a particular position.For example, Personnel Regulations outline that “[e]xcept as otherwise provided in current Management policies orcurrent ratified memoranda of understanding, full-time salaried employees are considered for normal one-stepincreases upon completion of” various amounts of service time5.Summary statistics regarding these salary increases for the past two fiscal years and through October 5th of FY 2011are provided in the table below.As the table on the left shows, the longevity-based “merit” or “step” increases have cost the City approximately $5.5million annually (citywide) over the past two fiscal years8. This is important to note because while the City has notprovided general salary increases in its recent labor contracts, payroll has still increased due to these merit increases.In upcoming labor negotiations, the City could propose to suspend these step increases in an effort to obtain a true, or“hard” pay freeze.However, the City’s ability to impose a step increase suspension in the event that its labor unions do not agree to suchterms is more legally complex because of potential issues and requirements of the City Charter.As a result, we do not score any savings from suspension of step increases into our solutions. However, we dorecommend that addressing these automatic pay raises be included as part of the City’s long-term strategy for resolvingits structural deficit. As a long-term goal, Charter Section 130 should be amended to ensure the City can control itsentire payroll, which is an important method the City has to control annual pension costs.Compensation Reductions Common in Private SectorAs part of our solution to the FY 2012 budget deficit and the solution to the long-term pension crisis, the Roadmap toRecovery proposes to make some reductions in city employee compensation – ranging from a reduction of 5% forsome employees to as much as 8.5%.According the National Bureau of Economic Research, in December 2007 the United States economy entered one ofits largest and longest recessions in recent history. The affects of the recession permeated nearly every industry andregion in the country, including San Diego.Since 2007, San Diego County has experienced business closures, rising unemployment, and falling wages. Thefollowing presents a snapshot of how this recent recession has impacted San Diego's private economy.Reductions in Employment9Between March 2007 and March 2010, private employment in the San Diego County shrank from 1,095,301 to1,004,005, a reduction of 91,296 jobs (8.34% of all private jobs in the County). A large portion of these job lossescame during the period corresponding to the City's FY 2009 (July 2008 – June 2009). During this period privateemployment in San Diego County shrank by 77,764 jobs (7.04% of all private jobs). In January 2010, employment inSan Diego County totaled only 997,279, the lowest total during any month since January 2001, despite a 4.58%10increase in the County's population over this period.Average Private Sector Wages Decreased by 13.39%11Total wages paid by the private sector decreased by $1.83 million or 13.39% between the first quarter of 2007 and thefirst quarter of 2010. Wages paid in the first quarter of 2010 were the lowest total wages of any corresponding periodduring the past decade.12 While total annual private wages in 2009 were at their lowest since 2003. Average annualprivate wages per employee were $48,5805 in 2007. By 2009, annual private wages per employee dropped $557(1.15%) to $48,023.Fair and Open Competitive BiddingTo achieve efficiencies in city operations and implement the will of thevoters, open and fair competitive bidding on city services should beconducted on a regular basis._56357acc-f870-11e0-9417-4b107a64ea2aCommitment 6San Diego voters overwhelmingly approved Prop C in 2006 to requirethe city to use competitive bidding to achieve taxpayer savings.Unfortunately, now more than four years later, not one single servicehas been subjected to competitive bidding under Prop C – withmillions in cost savings forgone as a result.At its most basic level, competitive bidding of services is a powerfultool for improving quality and saving money when properly implemented.Competition in services involves the examination of anactivity of an agency to determine whether the activity should continueto be carried out within the agency or should be purchased from anoutside entity. Put simply, should the agency “make” or “buy” thisactivity.Yet in a larger sense, competition goes beyond the decision to “make”or “buy” to examine such considerations such as:Whether an activity is needed in the first placeWhether an activity should be “re-engineered” to be moreefficientWhether an activity should be “sourced” differently, eitherthrough another staff unit, another agency, a non-profit organization, a program partner, or a private-sector vendor.The issue of improving “performance” should dominate the threeconsiderations above—with the concept of “competition” driving theprocess to ensure the best sourcing solution is adopted by the agency.However, true “competition” can only be achieved when multipleplayers are competing under a fair and transparent process whereperformance results expected from the activity in question are clear.The Roadmap to Recovery not only seeks to jumpstart competitivebidding of city services, but challenges the city to improve contractmanagement and oversight.The Roadmap also embraces the notion of “Strategic Sourcing”whereby the purchases by city departments are viewed collectively –with opportunities for savings achieved at a city-wide level. Finally theRoadmap examines ways the city can contract or lease out its existingassets to private operators to produce savings and/or new incomestreams to provide General Fund services.Strategic SourcingUsing “Strategic Sourcing” to Reduce Contracts for Consulting Services and Supplies._5635829c-f870-11e0-9417-4b107a64ea2aReform 6.1The City of San Diego has a myriad of contracts with outside firms for consulting services, support services, and the provision of commodities and goods. After excluding contracts forpublic works projects, the City spends more than $132 million annually on contracts for supplies and services.“Strategic Sourcing” refers to efforts on the part of organizations to examine the entirety of their contracts andprocurements of services, goods and commodities to carefully evaluate ways to reduce expenses through reducedpurchases, securing of bulk rates and discounts, and enhance the depth and management of relationships withsuppliers.The Roadmap to Recovery believes an immediate easy target of a 5% reduction in Contracts and Supplies can andshould be implemented for the General Fund. Our plan excludes Police and Fire from these cuts, bringing the GeneralFund total 5% reduction from $5.3 million down to a proposed reduction of $4.2 million1.Competitive BiddingComplete Competitive Bidding (Using Managed Competition or Direct Outsourcing) on 11 Functions in FY 2012._56358a6c-f870-11e0-9417-4b107a64ea2aReform 6.2 With the passage of the Managed Competition Guide, the City took a step toward implementing Proposition C fromNovember of 2006, which called for the competitive bidding for providing City services between the private sector andCity employees.Unfortunately, our office does not believe that the adopted version of the Managed Competition Guide represents fairand open competition as called for by voters.This opposition is attributable to the exclusion of retirement costs on top of a 10% bid advantage for City employeesbuilt-in to cost comparisons and the opportunity for delays due to excessive “meet and confer” requirements. TheGuide also excludes the cost of under-funded retiree health care benefits and pension liabilities – and excludes thepotential savings from outsourcing on these two costly budget line-items.Given the risk of reduced private sector bid interest created by the adopted version of the Managed CompetitionGuide, the ability of the City to pursue competitive bidding outside of the current Guide is important. As the CityAttorney has opined2:“The City may outsource work performed by City employees in complance with the City Charter and statecollective bargaining laws… Charter section 117(c) provides broad authority to contract out the work ofclassified, civil service employees when the Mayor determined, subject to City Council approval, City servicescan be provided more economically and efficiently by independent contractors.”The Managed Competition Guide also states that the City3:“…reserves its rights regarding any alternate process permitted under Charter section 117(c) to determinewhen city services can be provided more economically and efficiently by an independent contractor than bypersons employed in the Classified Service while maintaining service quality and protecting the public interest.”If the Managed Competition Guide fails to produce adequate savings from fair and open competition, the City mayhave to utilize a Direct Outsourcing Process outside of the Guide, as described above.Provided that competitions are conducted on a fair and level playing field, when the City put the Help Desk functionfrom the Data Processing Corporation out for competitive bidding it achieved a commendable 47% cost savings onthe function.Our savings estimates assume an average of 15% cost savings from current budgeted levels – discounted fromnational cost savings models due to the use of pre-existing contract services and payments in some of the functionsexamined.Our cost savings methodology is derived from data in the City’s adopted budget, reports published by the Office of theIndependent Budget Analyst and savings estimates provided by the Mayor’s office in relation to estimates for theProposition D (2010) fiscal impact analysis. The savings are also within the savings ranges estimated for the City ofSan Diego by independent research4.Furthermore, we have discounted our cost saving estimates for FY 12 to assume an implementation timeline ofapproximately 12-14 months -- meaning that savings begin to accrue half-way through FY 12.Finally, the benefits to the City of implementing competitive bidding for services is not limited to direct cost savings(including reduction-in-force pension impacts). It also has the potential to serve as a key component of further pensionreform efforts by providing active employees with the incentive to lower their cost structure in order to remain competitive.In fact, our budgetary savings estimates outlined below do not take into account any savings to the City’s pensionpayment resulting from a potential reduction in force due to competitive bidding. (To this point, our actuarial analysisprojects savings of $1.2 million for the first year of a general membership 10% reduction-in-force, phased-in over 3years. Further detail is provided in the Pension Commitment of this Roadmap.)Time is of the essence in making competitive bidding work for taxpayers in the FY 2012 budget. As such, by no laterthan December 15, the City Council should authorize the Mayor to proceed forward with competitive bidding on all ofthe functions outlined in this Roadmap – and delegate the development of Statements of Work to the Mayor.To comply with the current Managed Competition Guide, the City Council should receive an informational report onthe SOW’s and provide feedback if necessary for the Mayor to incorporate as he sees fit. Between May 1 andSeptember 1, 2011 the results of the competitions should be presented to the City Council for approval.Transition of the functions that are outsourced should occur no later than January 1, 2012.In addition to the functions above, the City may also want to consider initiating competitions on the following functionsin FY 12 should time permit:* Swimming pool maintenance* Book binding and technical services (library)* Traffic operations support* Parking meter maintenanceData Processing CorpExamine Selling Off Data Processing Corp._5635955c-f870-11e0-9417-4b107a64ea2aReform 6.3To enhance the value of competitive sourcing for city information technology, the city may want to consider selling theData Processing Corporation. Under this process the city would award DPC a contract for its information technologyservices – provided that the cost is reduced by at least 15% to hit the assumed savings levels in the Roadmap toReform. DPC would then have a long-term revenue stream (in addition to capital equipment and a valuable workforce)that could be potentially sold to a private firm.This two-step process not only achieves savings on an annualized basis for taxpayers by virtue of lower informationtechnology expenses, but would provide the City with a one-time, up front cash payment for the value of the DPCasset. This vehicle should be examined for feasibility before final decisions are made regarding the award of additionalinformation technology contracts.LandfillDivestiture of the Landfill._56359e62-f870-11e0-9417-4b107a64ea2aReform 6.4The City’s landfill is a valuable asset – and cost savings can be achieved by transferring that asset to private operators.However, the deal must be structured in a way that benefits taxpayers today and protects taxpayers tomorrow.To work the deal must provide the following elements:A fair lease payment to the city for the use of the landfill,An exceptional bargain for the dumping of General Fund solid waste,Adequate financing for proper environmental compliance costsThe City has contracted with an outside consulting firm to help manage the bid process, evaluate proposals, andstructure the deal terms. For FY 12, the Roadmap includes the lowest-end of anticipated financial benefits to taxpayersfrom this deal.Strategic SourcingExpanding Use of “Strategic Sourcing”._5635a68c-f870-11e0-9417-4b107a64ea2aReform 6.5 Outside of the immediate cost savings to the FY 12 budget, the Roadmap to Reform urges the Mayor and CityCouncil to direct staff in FY 2012 to initiate the long-term use of “Strategic Sourcing” analysis to reduce contractexpenditures and improve contract performance. A number of outside vendors provide strategic sourcing analyticservices – and the city should consider engaging one using a no-risk “share-in-savings” contract to achieve additionalcost savings.Finally, in FY 2012 the City should approach other regional governments – including the county government, schooldistricts, water districts, etc. – and explore the idea of creating a county-wide procurement vehicle for commonservices. Similar to the GSA and DOD supply schedules used by the Federal Government, San Diego taxpayers maysee improved buying power and better rates if this vehicle is created.Fixed-Price and Performance-Based ContractsExpanding Use of “Fixed-Price” and “Performance-based” Contracts._5635b154-f870-11e0-9417-4b107a64ea2aReform 6.6Another powerful reform that can save government money and improve program results is to implement“performance-based contracting (PBC)” for as many contracts as possible. Performance-based contracting is thesoliciting of bids based on what results government wants accomplished, rather than what activities it wants of results.This is a significant change. By compensating a contractor for results rather than effort or activity, the transactionbecomes more efficient for both the vendor and government. The vendor has the freedom and flexibility to do whatthey do best (produce the service) without micromanagement on activities from government. If it takes 10 hours or 10months to deliver the service to government consistent with the quality standards of the contract, the payment is thesame. And if the contractor does not perform the service according to the quality standards, it must re-do its workuntil the job is done. Period.The contract is structured under a “fixed price” for each service purchase and no payment until performance isdelivered. As a consequence of this payment method, transaction costs are reduced for both government and thevendor as paperwork and auditing requirements are streamlined. And of course, the focus on performance is likely toimprove chances that government gets quality service.This scenario stands in stark contrast to the preferred contracts used by government today: “cost-reimburse,” “timeand materials,” and “fee-for-service” contracts. Under these contracting vehicles, government pays every time acontractor “works” on a project—encouraging a contractor to drag on the contract for as long as possible and takeevery opportunity to engage in an authorized activity under the contract.As each and every city contract comes up for renewal, city departments should explore any and all ways to make newcontracts “performance-based.”The city might want to consider a variety of other innovative contracting vehicles. Not all of these vehicles are appropriatefor every service provided by government, but should at least be given consideration to see if a good fit can bemade:Share-in-Savings Contracts: As referenced in the reorganization chapter, share-in-savings contracts limitthe liability of government by paying contractors through the cost savings realized from a particular service.For example, the city might want to convert many information technology into share-in-savings contractswhereby the vendor provides the information technology services for free, but collects a percentage of thecost savings to the government from use of the technology.Fee-Based Service Delivery: Under this model, firms would be allowed to design a better process fordelivering a city service (such as a license). The firm would then “sell” the service to the market at a fee. Ifthe service provided was not faster and better, the market would not pay. However, if the firm could providebetter services, then it would generate revenue. The city would still offer the service, but at a reduced staffingneed.Reverse Auctioning Online: The city can tap the power of the internet to procure many goods and servicesusing online auctions similar to those seen on eBay. Here’s how it works: suppose the city wanted to printnew letterhead for a department. A city department could advertise for a bid for new letterhead over theInternet with a set time period for submission of bids. The “current” bid price would fall as each vendorsubmitted a new, lower bid to win the contract.Jobs-Friendly PoliciesCity government should be a help – not a hindrance – to job creationand retention in our region through small businesses assistanceprograms and development programs targeting four core sectors(Tourism, Defense, High Tech, and Clean Tech)_5635b97e-f870-11e0-9417-4b107a64ea2aCommitment 7The condition of our local economy is interrelated with the City’sability to restore its financial health. The city’s top three revenuescome from sales tax, property tax, and hotel (TOT) tax.The recession had weakened revenues from sales tax and hoteltaxes – as individuals and businesses throughout the country restricttheir spending and travel. Further, the downturn in the housingmarket has impacted the City Outlook on property tax revenues.The Roadmap to Reform emphasizes a strategy for adopting jobsfriendlypolicies to encourage the creation and retention of jobs in our region. The City should approach everydecision with some basic questions in mind:Does this policy make our market more or less attractive to private investment?Since time is money, and uncertainty creates risk, does this policy or process take longer than it should compared to other jurisdictions?Does this policy or process impose more burdens on families and businesses – increasing the cost of living oroperating a business in the city?Unfortunately, the City Council has adopted or signaled its intention to adopt several “job killing” policies.The downtown Planned District Ordinance (PDO) would chase away investment in hotels – significantly undercutting our potential for increased hotel tax revenue.A proposed hindrance (arguably a de facto ban) on “big box” stores threatens to chase some of the largestgenerators of sales tax revenues outside the city limits – transferring large sources of sales tax generation toneighboring jurisdictions.Instead of increasing tax rates and fees (e.g. fighting for more share of a static-sized pie), the City should examineways to help foster economic growth (e.g. receiving more revenues from our existing share of an ever-growingeconomic pie).Small Business Action PlanImplement the “Open for Business” Small Business Action Plan._5635c1ee-f870-11e0-9417-4b107a64ea2aReform 7.1In June, our office published an “Open for Business” Small Business Action Plan containing eight separate reformsthat would make city government friendlier for small businesses. Some of the reforms have been incorporated intoother sections of the Roadmap to Recovery – such as Achieving 95% of transactions for small businesses onlinewithin five years and expanding city contracting opportunities.Among the other reforms recommended:Business Improvement DistrictsStrengthen and Expand Business Improvement Districts._5635cdba-f870-11e0-9417-4b107a64ea2aReform 7.1.1Business Improvement Districts should become the primary vehicle for technical assistance and issue advocacy for San Diego’s small businesses. To achieve this, the City should actively work to expand BusinessImprovement Districts to cover a larger portion of the city – and should explore the potential of BIDs to provide value-added services to specific industry segments.Office of Small BusinessRedefine the Role of the City’s Office of Small Business._5635d666-f870-11e0-9417-4b107a64ea2aReform 7.1.2The Office of Small Business should be transformed from a “paper pushing” operation to a “problem solving”hub. To achieve this, the current focus of the office of administering the finances of the City’s BIDs should bechanged to use “performance-based contracts” to alleviate administrative burdens for City and BID staff alike.A representative from each department with “high touch points” with small businesses (such as DevelopmentServices Department) should be partnered with remaining OSB staff to create a true “one stop center” forsmall business assistance.Small Business Enhancement Program GrantsConsolidate Small Business Enhancement Program Grants._5635df08-f870-11e0-9417-4b107a64ea2aReform 7.1.3The Small Business Enhancement Program (SBEP) grants are spread too thin, jeopardizing their ability tohave a meaningful impact on services to small businesses. As such, the City should use a reformed processfor achieving outcome-driven grant allocations. The recently reformed process for Community DevelopmentBlock Grants represents a model that could be explored for consolidating limited SBEP grants to achievemore meaningful outcomes for small businesses.Special Event Permitting and ManagementStreamline Special Event Permitting and Management._5635ea7a-f870-11e0-9417-4b107a64ea2aReform 7.1.4Given the strategic importance of the tourism industry to San Diego and the role special events play in smallbusiness promotion, the City should overhaul its processes and costs for special events conducted within thecity. The process should be modified to include practices that promote the transparency of City operationsand allow for the waiver of City service cost-recovery fees for special event organizers.Taxes and FeesResist Tax and Fee Increases._5635face-f870-11e0-9417-4b107a64ea2aReform 7.1.5Higher taxes and fees increase the operating costs of small businesses. Over the past two years a numberof fees have increased – most notably water rates and permit fees.The city’s so-called “full cost recovery” policy is a worthy one, but only if the city’s operating costs (salaries,pension benefits, staffing levels) are in line with competitive industry benchmarks. The city can hardly makethe case that it is operating at peak efficiency, which is why there are ample opportunities to contain or reducecurrent fee levels for a variety of costs incurred by small businesses.By implementing the pension and labor cost reforms we outline, the Mayor and City Council can actually offerfee relief to businesses in San Diego, helping to reduce operating costs. The full plan can be accessed athttp://www.sandiego.gov/citycouncil/cd5/news/.Tourism Management DistrictExtension of the Tourism Management District._56360406-f870-11e0-9417-4b107a64ea2aReform 7.2In 2007, the Tourism Management District was created to promote San Diego tourism through aggressive marketingof our city. The TMD is privately funded through self-assessments on hotels. The TMD resulted in immediate costsavings to the city as the cost of funding ConVis was transferred from the General Fund to the TMD.At an April City Council meeting, Councilmember DeMaio challenged the TMD Board to return to the city council witha long-range strategic plan outlining what marketing, infrastructure, hotel development, and other programs would beneeded to achieve an increase in net hotel tax revenue to the city of $300 million by FY 2016.TMD is approaching its sunset date – and action should be taken in FY 2012 to extend the TMD by an additional tenyears. As part of the decision to extend the life of the TMD, city leaders should also consider potential investmentsand programs that can help grow San Diego’s tourism industry, in-turn spiking revenues to the city’s General Fund.Sector-Specific Economic Growth PlansIn addition to the long-range plan being developed for the tourism industry, our office suggests that sector-specific economic growth plans should be developed for the following three industry clusters:* Defense* Clean tech* Bio Tech_56360fc8-f870-11e0-9417-4b107a64ea2aCross-Cutting IssuesIn addition to pursuing strategies that are industry-specific, three important cross-cutting issues must be addressed toensure the success of our regional economy for all industries. Councilmember DeMaio will be releasing proposals onthe following key issues:* Producing a Workforce with 21st Century Skills* Workforce Housing* Sustainable Operations (Water and Energy)_5636195a-f870-11e0-9417-4b107a64ea2aRebuilding City InfrastructureAfter years of neglecting maintenance of our streets, sidewalks andpublic facilities, city government must commit dedicated financing forand improved management of city infrastructure._56362238-f870-11e0-9417-4b107a64ea2aCommitment 8Over the years as the City of San Diego’s financial problems haveworsened, the city has neglected to properly maintain its assets andneighborhood infrastructure, resulting in a deferred maintenancebacklog.The impact to our quality of life has been significant. In a 2007 survey,only 38% of the City of San Diego roads were found to be in an“acceptable” condition.Underfunding maintenance today only shifts (and increases) costs totaxpayers in the future. Deferring maintenance on neighborhoodinfrastructure creates future liabilities and costs when the backlog isfinally confronted from a budgetary standpoint. The growth in costoccurs because of accelerated asset deterioration resulting from a lack of maintenance. In turn, this can cause shorterasset lifecycles and the need for total replacement or capital repair.The city’s infrastructure liability should be treated as seriously as our pension liability – with a rigorous financialassessment and monitoring. More importantly, the City must begin to shift its budget resources from labor costs backto infrastructure investments.Infrastructure DeficitBegin Proper Accounting of and Budgeting for Infrastructure Deficit._56362e4a-f870-11e0-9417-4b107a64ea2aReform 8.1The city’s backlog of infrastructure needs has been estimated at over $1 billion, but this calculation is misleading as itexcludes assets such as sidewalks. (The city excludes items such as sidewalks in order to avoid the legal responsibilityof addressing the problems immediately.1)Furthermore, the city has yet to address deferred maintenance from a comprehensive financial liability perspective.Assuming that asset deterioration impacts maintenance cost, foregoing maintenance (much like underfundingpayments to pension systems) causes an increase in costs or the need to replace assets earlier than the end ofexpected lifespan (borrowing money to do so). The end result is an overall more expensive strategy for taxpayers.2, 3Perhaps more importantly, the city has yet to identify the quantitative year-over-year trend of this liability. Given thatasset deterioration (and the associated cost) functions much like interest from a budgetary perspective, the growthrate of this liability must be identified in order to ensure a sufficient budgetary allocation to at least keep the liabilityfrom growing year over year 4.It is important to note that the City Council has already expressed its desire to approach the deferred maintenancebacklog from this perspective. On February 22, 2010, the City Council adopted eleven guiding principles to “guide thedevelopment of a comprehensive plan over the next several months to eliminate the City’s structural budget deficit.”Principle #11 states that the City should:“Develop a plan to fund deferred capital infrastructure and maintenance needs to reduce the current backlog,identify the level of funding necessary to prevent the problem from growing larger, and reduce the potential ofincreasing costs…”We believe that the when the City applies a strategic and data-driven approach toward the level of funding allocatedfor regular and deferred maintenance, long-term maintenance costs will be minimized due to the maximization ofasset lifecycles through proper upkeep, providing taxpayers with the best possible value. In order to accomplish thisgoal, however, the required level of funding and the impact of inadequately funding ongoing and “catch-up” costs mustfirst be understood.Streets DepartmentCreate a Single “Streets Department” for Improved Infrastructure Management._5636375a-f870-11e0-9417-4b107a64ea2aReform 8.2The Roadmap to Reform endorses the idea to consolidate all functions relating to the maintenance of city streets intoone single department. Currently the functions with responsibilities for city streets are scattered across severaloffices. This challenge has been identified in a City Auditor report – and a consolidation in now underway. 6Furthermore, the City Auditor has released a report on one of the three main components of the city’s acknowledgeddeferred maintenance backlog: streets 7. The Auditor’s report highlights many aspects of the city’s street maintenanceand repair operations requiring improvement, concluding that the strategy employed by the city could cause the “costsof maintaining streets [to] greatly increase over the long term should deferred maintenance needs not be stronglyaddressed.” The audit also documents that opportunities for improvement exist within the streets division that wouldallow for the most efficient use of budgeted funds for the maintenance and deferred maintenance related to streets.By the end of FY 12, the Mayor and City Council should insist upon full implementation of the recommendationsidentified by the City Auditor to improve management of city street repairs and maintenance.Spending CapAdopt a Five Year Spending Cap With An Infrastructure Financing Reserve._56364150-f870-11e0-9417-4b107a64ea2aReform 8.3The Roadmap to Recovery provides a five-year fiscal forecast projecting revenues and expenditures in the City’sGeneral Fund. If the economy recovers, any increased revenues received above the forecast contained in the currentbudget package should be set aside into the reserve account to be spent exclusively on repairing San Diego’s infrastructure.To instill spending discipline, and to lockbox funds for repairing neighborhood infrastructure in this manner, the followingballot measure should be placed before the voters at the next election:Section XXX: Infrastructure Financing Lock BoxThere is hereby created an Infrastructure Financing “Lock Box” Fund in the General Fund for the purpose ofreducing the deferred maintenance liability in city infrastructure.Beginning with FY 2012 and continuing through FY 2016, any increase in General Fund revenues above 2%per annum shall be deposited in the Infrastructure Financing “Lock Box” Fund for the purpose of rebuildingcore city infrastructure.In expending funds from this Infrastructure Financing “Lock Box” Fund, the Mayor and City Council shall makeevery effort to leverage funds to facilitate the maximum level of investment in infrastructure. In selectingprojects to be funded from the “Lock Box” Fund, the Mayor and Council shall give priority to repair of streets,sidewalks, and public facilities.The City Auditor shall verify that the appropriate amount of funds are deposited annually into this reserveaccount and shall audit the use of the funds to ensure funds are used solely for infrastructure repair andimprovement.Regional Government SolutionsFunding and delivery of some city functions should be consolidatedbetween the City and the county government, Port of San Diego, andRedevelopment Agency._56364dda-f870-11e0-9417-4b107a64ea2aCommitment 9San Diego taxpayers are the shareholders of all local governmententities – such as the city government, school district, County government,Port and Redevelopment Agency. Taxpayers also stand tobenefit from a collaborative effort among these agencies to producethe most efficient and integrated services possible.We believe that there are numerous opportunities for improvedcoordination and collaboration across government entities around theSan Diego region.Centre City Development CorporationSeek to Improve General Fund Benefits from Centre City Development Corporation (CCDC)._56365780-f870-11e0-9417-4b107a64ea2aReform 9.1The City has been successful in protecting the General Fund by transferring annual Petco Park debt service to CCDC.We believe that additional opportunities exist for holding the redevelopment agency and CCDC accountable forserving the public interest.Recent actions taken by the State have raised the cap for the downtown redevelopment area. Unfortunately, this capincrease carries risks for San Diego taxpayers. The City Council had originally approached a cap increase with theexpress desire to build in mechanisms to protect the General Fund from lost revenues.The City can take action to help ensure that the cap increase does not negatively impact the General Fund due to lostproperty taxes. It is not enough protection to taxpayers simply to say the cap increase will facilitate economic development– and in turn generate hotel tax and sales tax revenues for the General Fund. Those revenues are not part ofthe cap deal – property taxes are.In FY 2012, the Mayor and City Council should adopt the following reforms:Petco ParkRequire that all remaining debt payments for Petco Park be assumed and paid entirely by the Redevelopment Agency._56366158-f870-11e0-9417-4b107a64ea2aReform 9.1.1Currently, five years of debt payments have been approved (FY 2009 – FY 2013).This decision would make the debt payment arrangement permanent and will provide major General Fundbenefit beginning in FY 2014 – reducing General Fund expenses by $11.3 million in that year.1Convention CenterCommit to exploring all legal avenues to transferring remaining debt service for the Convention Center from the General Fund to the Redevelopment Agency._56366ec8-f870-11e0-9417-4b107a64ea2aReform 9.1.2While CCDC was not directlyinvolved in the Convention Center, the case can easily be made that this asset generates property taxrevenues by supporting existing and proposed hotels in the CCDC project area. Despite legal hurdles, thepossibility has been raised that expanding the Convention Center may provide a means to consolidateoutstanding debt on the facility and transfer it to CCDC.The City currently contributes approximately $9.2 million toward the debt service for the Phase 2 ConventionCenter expansion of the Convention Center. The Unified Port of San Diego currently contributes $4.5 millionannually, for a total debt service payment of $13.7 million per year that will not be retired until April of 2028.However, the Port’s contribution is scheduled to expire, and the entire debt service burden will be the responsibilityof the City beginning in FY 2015. As a result, the successful outcome of this decision could providemajor General Fund benefit of at least $9.2 million annually, and up to $13.7 million annually beginning in FY2015.Community Development Block Grant (CDBG) DebtRepayment of Community Development Block Grant (CDBG) Debt._56367882-f870-11e0-9417-4b107a64ea2aReform 9.1.3The City will receive a total repayment of $78.8 million, made over a 10-year period from CDBG loan repayments from the redevelopment agency. These payments will be treated as program income to the City’sCDBG program, and include several other conditions.3While CDBG monies can be used to support a variety of General Fund expenses, it should be recognizedthat transferring these payments can be complicated due to restrictions imposed by the U.S. Department ofHousing and Urban Development (HUD).Non-CDBG Agency DebtRepayment of Non-CDBG Agency Debt._56368232-f870-11e0-9417-4b107a64ea2aReform 9.1.4The Redevelopment Agency “currently holds approximately $40.2 million in non-CDBG long-term debt to theCity, including principle and interest.”4 Given the downtown redevelopment area’s recent cap increase, werecommend that a repayment plan for this debt to be considered by the City Council at a date in the nearfuture, as a significant opportunity for generating an additional General Fund revenue stream may exist.Support for Convention CenterPush the Port District to Continue $4 Million in Support for Convention Center._56368f70-f870-11e0-9417-4b107a64ea2aReform 9.2We are concerned that the proportionate share of revenues generated by the Port District from properties locatedinside the City of San Diego may not match the proportionate value received by San Diego city taxpayers.As mentioned above, the Port currently provides a $4.5 million payment to assist the city with debt service on theConvention Center, which is set to expire in FY 2014. The Port derives significant benefit from the Convention Center– including parking revenues beneath the Center and lease rates from hotels supported by the Convention Center.In FY 2012, city leaders should aggressively pursue an agreement to continue the $4.5 million payment from the Portfor the Convention Center debt service. If debt service is transferred to the Redevelopment Agency as planned, thiscontribution payment should be considered for use in supporting the operating costs of the Convention Center –which currently are subsidized by the General Fund at approximately $4 million annually.Additional Reforms in DevelopmentExplore additional ideas for transforming how local government entities worktogether to serve taxpayers._56369916-f870-11e0-9417-4b107a64ea2aWe believe that a number of additional ideas should be explored for transforming how local government entities worktogether to serve taxpayers more efficiently and effectively. These include:Exploring the pros and cons of dissolving the Port of San Diego – with responsibility of Port functions withinthe City of San Diego reverting to city government, along with all the lease revenues for those properties tobe used exclusively for the benefit city taxpayersConsolidating the Harbor Police with the San Diego police department and lifeguard serviceTransferring prosecution of misdemeanor crimes from the City Attorney’s Office to the District AttorneyConsolidation of support functions between the county and the city (e.g. auto maintenance, facilities management,energy supplies, contracting vehicles, etc.)Lead by ExampleCity politicians should lead by example by reforming their own perks ofoffice and their own pensions._5636a2a8-f870-11e0-9417-4b107a64ea2aCommitment 10401(k) Plan for PoliticiansClose the Defined Benefit Plan for Politicians and Establish a 401(k) Plan_5636b00e-f870-11e0-9417-4b107a64ea2aReform 10.1 Elected officials currently receive the richest retirement multiplier ofany city employee classification.While we have previously proposed overhauling the current pensionand contribution subsidy provided to elected officials, we proposethe following amendment to the Municipal Code be made as part ofthis plan:§24.1708 Elected Officer Retirement Plan Effective December 1, 2010Any Elected Officer who takes office after December 1,2010 shall not be eligible to enroll in the retirementsystem provided for in Sections 24.1701 through 24.1707.Any Elected Officer who takes office after December 1,2010 shall only receive a retirement allowance in theform of an employer contribution to match up to 7% of the annual base salary of that Elected Officer. For any yearwhen the City of San Diego makes payments on behalf of Elected Officers into the federal Social Security system, thematch shall be capped at no more than 3% of the annual base salary of the Elected Officer.Taxpayer SubsidyEliminate Taxpayer Subsidy of Politicians’ Pensions._5636b9b4-f870-11e0-9417-4b107a64ea2aReform 10.2 While the “offset” for elected officials has been eliminated, this reform falls short of requiring city politicians to pay anequal share toward the cost of their pension benefits.As recently as 2002, the Municipal Code section §24.1704 has been clarified to “cap” the pension contributions ofelected officials. This cap causes the contribution determined by the retirement system (SDCERS) to be calculated atrates lower for elected officials than for other city employees – generating an additional subsidy.Mayoral and City Council BudgetsCut Mayoral and City Council Budgets by 10%._5636c364-f870-11e0-9417-4b107a64ea2aReform 10.3 The City of San Diego currently funds 126 budgeted positions to cover all operations of the City Council and Mayor.These positions include elected officials, policy advisors, community representatives and administrative staff. Thesepositions are divided across several departments including individual Council Districts, Community and LegislativeServices, the Office of the Independent Budget Analyst (IBA), and Council Administration.While the FY 2011 Proposed Budget required a corrective action to City Council office budgets, the FY 2011 AdoptedBudget still understates Council budgeted expenditures by adding “revenue” to Council budgets, entitled “Adjustmentto Approved Levels.” This analysis accounts for these adjustments, showing budgeted expenditures of $16.2 millionto fund these departments.1, 2, 3Comparison of the City of San Diego to other major U.S. cities shows that several appropriate significantly less toCouncil and Mayoral operations than the City of San Diego. Consequently, we believe the City can save at least$1.38 million (8.5 %) of this funding through careful examination of current budgets and operational efficiencies.Given the severity of current budgetary circumstances, however we recommend a 10% savings target spread acrossthese departments.When including the budget adjustment for fringe, City Council related expenditures are budgeted to increase by $1.85million (17.08%) over FY 2010 budget levels.The Mayoral budget is comprised of the Office of the Mayor and the Community and Legislative Services Department.The FY 2011 budget for Community and Legislative Services represents an increase of $241,220 (7.80%) over FY2010 budget levels.City Council Districts/Community and Legislative ServicesDuring the initial stages of the implementation of the City of San Diego's Mayor-Council form of government, Cityleaders were careful to maintain the balance of power between the City's redefined executive and legislative branchesby creating the Office of the Independent Budget Analyst and securing comparatively equal funding for Mayor andCouncil supportive staff. By doing so, they solidified the system of checks and balances established by the Mayor-Council governance form. For this reason, we find that in the absence of strong reasoning to the contrary, all cuts toMayoral or Council supportive staff should be made in equal proportions. Consequently, we recommend that thebudgets of City Council Districts and Community and Legislative Services should each be cut by at least 8.6%.City Council AdministrationThe City Council currently maintains six Committees for the purpose of evaluating specific issues within the City:Rules Committee, Natural Resources and Culture Committee, Public Safety and Neighborhood Services Committee,Land Use and Housing Committee, Budget and Finance Committee, and Audit Committee.Formation and operation of Committees are governed by Article 2, Division 1, Rule 6 of the City's Administrative code.Rule 6.6 outlines the use of committee consultants and legislative analysts by a Committee and its members.Although committee consultants and legislative analysts are distinct and separate positions, their assignment ofresponsibilities under Rule 6.6 involves similar tasks.Committee consultants are provided by the Council Administration Division and are tasked with the administrativeduties associated with the operations of a specific Committee. In addition to administrative duties, committee consultants“shall, when directed by the committee chair, prepare an objective informational analysis addressing both thepolicy and fiscal considerations of any matter that is reviewed by the committee.” Legislative analysts are provided bythe Office of the Independent Budget Analyst and “may be assigned to provide policy analysis and reports on legislationinitiated by the Council, provide policy related research and analysis on legislation initiated by the Mayor andindependent departments, and conduct any special studies as requested by a majority of the Council.”As both committee consultants and legislative analysts have been tasked with the responsibility of providing policyanalysis for the Council, the operations of Council Committees could be made more efficient by consolidating theseresponsibilities into one position. If all policy analysis responsibilities were assigned to legislative analysts, committeeconsultants would have a greater capacity to address administrative duties. Under the current provisions of Rule 6.6,each Committee must be assigned a committee consultant; however should the capacity of committee consultants toaddress administrative duties be increased; a single committee consultant could serve multiple Committees with alimited impact to service quality. Requiring each committee consultant to serve two Committees as opposed to onecould allow the City to reduce its staffing needs in this area by 50%. The Council Administration Division's currentbudget for committee consultants is $458,355; therefore, a 50% reduction in staffing could result in approximatesavings of $229,178.Office of the Independent Budget AnalystReassignment of committee consultant duties to IBA staff will likely place an increased burden on this office. Recognizingthis, we recommend that the IBA budget be reduced by a significantly smaller proportion (4.7%) than otherMayoral and Council supportive departments. This smaller reduction is offset by a comparatively larger reduction(11.9%) to the Council Administration budget.Proposed 10% CutHowever, given the severe budgetary issues currently faced by the City, we are recommending an additional$234,758 in budget cuts to obtain a full 10% budget reduction, but in the same proportion to the recommended cuts atthe 8.55% level.9th City Council DistrictCreate 9th City Council District in “Budget Neutral” Manner._5636d05c-f870-11e0-9417-4b107a64ea2aReform 10.4In June 2010, voters overwhelmingly approved the Strong Mayor-Strong Council form of government and created a9th City Council seat. Councilmember DeMaio has proposed that the cost of the 9th City Council district office be“budget neutral” – with commensurate reductions in other Council budgets to accommodate for the cost of an addedCouncil office. This change would occur in the FY 13 budget.2011-10-16http://www.carldemaio.com/files/roadmaptorecovery.pdfOwenAmburOwen.Ambur@verizon.net