The Strategic Financial Evaluation Report by Executive Partners, Inc., known for short as the EPI report, was issued in May 2009. The consultants were called in because DeKalb had found itself in serious financial trouble beginning in late 2007.
The city tends to blame the economy, and it is true that the crash of the housing market and high unemployment have led to declining property and sales tax revenues. It’s also true that DeKalb has advanced spectacularly bad policies over the years — such as those allowing an accumulation of a $29 million liability for post-employment benefits — that will continue to cause pain over and above “the economy” for some time to come. Additionally, DeKalb’s adaptation to new financial realities has proven much less nimble than one might have hoped.
Here are the main factors at play in our ongoing financial troubles, according to EPI:
Stable/falling revenues due to the recent economic trends
Increasing unit labor costs due to contractual obligations and City policies
Increasing non-labor costs due to general economics
Slow economic development progress
Tax policies that are very susceptible to economic swings
Little to no financial reserves combined with no long-range financial planning
Specific recommendations (e.g., a formal debt policy) to address these issues have rarely and barely been addressed, and, as we’ve seen in the case of the suggestion to hire a procurement manager, have even been subverted.
However, the council has a unique opportunity to get a handle on personnel costs because the city is in negotiations with all three unions right now.
This is a chance for the reset that’s required to correct unsustainable hikes in compensation, including fixing Step raises to fit the times — or perhaps even implementing the merit-based system that EPI recommends.
2 comments
Comment by Mac McIntyre on July 3, 2011 at 5:22 pm
Excellent work.
Bad policy is rampant in the Barb City. A platonic relationship system allowed a million dollar plus a year self insured workman’s comp line item go unchallenged. In order of priority; Jobs, Wages… Perks: Thy may discuss wage freezes and layoffs but thou shall not lay thy hands on the IT Dept’s pants budget. They allowed Management to become a back door collective bargaining unit indirectly represented by the municipal unions. Internal equity. Delphi for Dummies.
The Finance Advisory Committee, of which I’m one, was created to address long term financial goals. After the EPI report was filed we’ve been called to action only at 11th Hour FY Budget Time. I think progress has been made although clearly not enough. I like to think that I’ve contributed something of value so I’ve got to think the committee and council have done so likewise. Bluntly put we’ve been steered away from our original long term purpose.
Progress has been made so its worth the fight. Work with the assets we have and try to build on those assets in the 2013 elections. And (hint, hint) redistricting is an asset as long as it is not allowed to be partisan.
And that’s where the Chumbolone cockroaches scare me. :roll:
Comment by yinn on July 5, 2011 at 1:33 pm
I agree, Mac. Progress has been made, and it’s been through the efforts of EPI, FAC members such as yourself and Mike Peddle, and one or two enlightened members of the city council.
The biggest contributions are of information that had never seen the light of day before; if not for EPI and FAC, for example, would we know even today about the post-employment benefit liability, or would it have remained a secret until an unpleasant implosion? Same with Workers Comp and excess liability coverage: when otherwise would those have been addressed?
Also, I still remember the meeting where the light bulb went on in my head and I realized for the first time the extent that management is treated like a collective bargaining unit. This gives them a protection they neither need nor deserve, and gives the unfortunate impression of collusion over negotiated raises and other benefits.
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