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.