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Palo Alto to further debate manager salaries

Original post made on May 7, 2013

Palo Alto's drive to give its group of managers of professionals a 2 percent raise this year hit a speed bump Monday night when the City Council decided that the compensation level of these employees should be studied in greater detail before a final decision is made.

Read the full story here Web Link posted Tuesday, May 7, 2013, 9:28 AM

Comments (25)

Posted by Voter, a resident of Green Acres
on May 7, 2013 at 10:55 am

No raises. In fact, we should be cutting pay to match the increase in benefit costs that we're incurring now that the pension bill for the ridiculous defined benefit pensions we're paying our bureaucrats is coming due.

The better metric to look at would be voluntary turnover. I imagine it's well below the private sector, since most of these bureaucrats are grossly overpaid to begin with.


Posted by Not an issue, a resident of Community Center
on May 7, 2013 at 10:56 am

Can't we use the $40 million from Stanford, that is mentioned in another thread, for the salaries. After all palo alto needs these people and they cannot be replaced, so money should not be an object.
Now, without sarcasm, we should consider no raises or a salary cut-- if they want to leave, the good bye and good riddance and Keene can join them. Enough out of control salaries for incompetents.


Posted by Wayne Martin, a resident of Fairmeadow
on May 7, 2013 at 11:00 am

The compensation question is still not being properly discussed by the City Council, and the public in general. The pensions for government employees needs to be viewed as "deferred salaries", rather than some "benefit" that we don't talk about, or calculate in ay meaningful way.

We all need to fully understand that virtually every government manager making more than $100K/year will likely bring in from $3M-$10M (or more) in retirement--

Using a COLA of only 2%, public safety retirees receive the following payouts:

Total Pension Payouts
Pension
$100K--10-Years: $1.1M | 20-Years: $2.5M | 30-Years: $4.1M
$150K--10-Years: $1.7M | 20-Years: $3.4M | 30-Years: $6.2M
$200K--10-Years: $2.2M | 20-Years: $5.0M | 30-Years: $8.3M

California Police and Fire Department employees are routinely drawing over $100K in the larger cities, with their pensions at 90% of their high salary. Non-public safety employees can retire at up to 82% (or more) of their exit salaries. In another decade, or so, the public sector will totally bankrupt the private sector with their pension demands.

How in the world can this City Council not understand this fact—and be prepared to fold pension payments into the compensation levels offered their employees? The general issue of total employee compensation is laid out in this 8-page paper I wrote opposing the so-called "Business Tax" a couple of years ago--

Beneath The Palo Alto Business Tax:
Web Link

Unless we look at the total compensation of the employees, then these folks will be grossly overpaid during the course of their lifetimes. Clearly pensions are a big problem for not only Palo Alto, but the whole world—since we have allowed our elected officials to buy into the financially disruptive concept of "defined benefits"—two little words that pretty much guarantee to bankrupt any organization offering pensions to its employees.

To solve this growing problem--the City needs to dump its current pension program, it needs to outsource as much of its labor needs as possible, and it needs to shift to more e-government to reduce the need for unnecessary employees, as a beginning of a rethinking of local government. It also needs to build a comprehensive financial model—which would accurately identify all of the long-term costs associated all expenditures, including every compensation increase demanded by its employees.

Currently, it would appear that under the Keene Administration—we are simply flying blind, with little hope of knowing what is over the next hill, much less the next mountain. Given the extremely generous compensation package to this Administrator (and his Assistants)—Palo Alto should expect, and get, more from him.


Posted by Fair is Fair, a resident of Southgate
on May 7, 2013 at 11:01 am

If we eliminate James Keene, Kevin Skelly and a few other management-level people with sub-par performances, there would be enough money to increase the salaries of those who have earned them!


Posted by AR, a resident of Another Palo Alto neighborhood
on May 7, 2013 at 11:10 am

Question to Ms. Price: why not be prudent by waiting until salary data is studied and increases can be done (or not) using solid information as a basis for any increase? Surely increases (if warranted) can be applied retroactively. This is too sensitive an issue to proceed without a thorough analysis of the entire compensation package, of which base salary is a single factor.


Posted by MadamPresident, a resident of Old Palo Alto
on May 7, 2013 at 11:32 am

"Last thing we want to be doing is recruiting folks, investing in them, training them and then having them jump to another city that pays more," Klein said. "And that's a real possibility, especially if we're out of touch with the market."

WHY SHOULD CITY HIRE UNTRAINED PEOPLE??? Why the city hired this guy who does lack simple logic?


Posted by not keen, a resident of Another Palo Alto neighborhood
on May 7, 2013 at 1:00 pm

As David Price asked in the Daily Post yesterday, why is the city council comparing salaries of its staff with salaries of staff in other cities? All of these salaries--in Palo Alto and in other cities--are inflated.

The comparison should be made with people doing the same kind of work in the private sector, whose salaries are more realistic.

Why should we taxpayers be paying city staff inflated salaries?


Posted by Resident, a resident of Another Palo Alto neighborhood
on May 7, 2013 at 3:06 pm

The whole things is farcical. Everybody knows city employees are wildly overcompensated (I like Wayne Martin's term "deferred compensation"), and Mountain View is not about to steal dozens of our people. Mountain View and every other city in California has the same problem we do. Stockton has it worse.

But: The no-spine City Council doesn't want to argue with the City Staff, but they know the every Palo Alto resident is watching them. So they made no decision at all and kicked it to a committee.

For 2014, everybody remember: GAIL PRICE voted to give it away now, without even the Finance Committee wimp-out.

The city takes our money, spends it on themselves, and then asks us for a bond issue.

The only solution is a different council profile in 2014.




Posted by musical, a resident of Palo Verde
on May 7, 2013 at 3:30 pm

Did I see any of you commenters at the Council meeting last night? Or does everyone watch on TV?


Posted by common sense, a resident of Midtown
on May 7, 2013 at 6:48 pm

200 Managers, average salary of $110,000 per manager = $22 million dollars. A 2% raise, will be a 3% raise because of benefits like increased pension contribution. Total comes to $660,000.

Guess that's why the City Manager cut the staffing at Animal Services by to pay for this; plus he froze staffing for 6 police officers.

A the $660,000 to the $120,000 extra the city spent on Natural Gas Honda Civics, the $200,000 on the PR manager, the $200,000 on the "Chief Sustainability Officer", the extra $3 million that wasn't anticipated the city is spending on the California Ave redesign, and not to mention all the extra spent on cleaning up the Mitchell Park Library construction fiasco.

Can anyone see why the streets are in the shape they are in, and why the city can never afford to build a public safety building????


Posted by I don't get it, a resident of Another Palo Alto neighborhood
on May 7, 2013 at 9:15 pm

If we must pay top dollar to get the best staff then why do we
routinely outsource all studies to consultants? Normally if you
maintain a staff you do the studies in-house. If you do not maintain
a staff you hire consultants. The salary surveys need to incorporate
this fact to have any validity.The problems in Palo Alto are far deeper however when you look at what is happening to our City. The staff is ignoring the consultants reports, skewing the results in the interpretation, or hiring the wrong consultants. We are in serious trouble.











Posted by peninsula commuter, a resident of another community
on May 8, 2013 at 8:51 am

Utilities employees (per HR benchmark study) are paid 10 - 12% less than comparable agencies such as PG&E and City of Santa Clara. Yet Palo Alto's electic rates are lower and reliability is higher than surrounding cities. So why should these employees stay with Palo Alto, especially with all the comments here about them being "overpaid" and not working hard?


Posted by lazlo, a resident of Old Palo Alto
on May 8, 2013 at 3:11 pm

...simply amazing! City Manager Keene proposes to award his shadow organization of managers with a 2% increase in salary and benefits for maintaining deficit budgets for the past 10 years. While important decisions on city matters are left to the numerous Blue Ribbon Committees and outsourced consultants, managers earning starting wages of $100,000 and more are held to no standard and provide no leadership to move the city forward. Keene's only management plan is to maintain the status quo of inaction and place blame on his lack of leadership skills onto others. His shadow organization of managers has grown so vastly in the past 5 years that even the Palo Alto Weekly can't or won't print an accurate number of full-time management employees. What a shame!


Posted by Wayne Martin, a resident of Fairmeadow
on May 9, 2013 at 10:10 am

> Yet Palo Alto's electic rates are lower and
> reliability is higher than surrounding cities

Given that Palo Alto does not publish its up-time on its web-site (ie—reliability numbers), nor do any of the commercial sector companies, then how can anyone make a statement like this with any chance of its being proven true? A couple of years ago the whole city of Palo Alto was in the dark for 8+hours. Has this happened to any city serviced by PG&E?

As to the cost of electricity, this is one of all of the utilities that Palo Alto residents are forced to buy from the City-owned Utility. One needs to look at the total package: electricity, gas, water, waste removal, storm drains, street sweeping and UUT before trying to make any cost comparisons between the PAU and other cities/service providers. So far, the PAU has not provided the rate payers this sort of information on at least a semi-annual basis.

We are seeking a big drop in natural gas prices nationally. Anyone got any idea if the PAU has been able to take advantage of these lower prices, passing along savings to the customers. The answer is: "Probably not". PG&E buys on the spot market—Palo Alto seems to buy very expensive gas from Canada. California will soon be a major supplier of natural gas. Wonder how long it will take PAU to understand that fact, buy cheap gas—passing along savings to the customers?

And let's not forget the 82% pensions that PAU employees get—which are lavish, when calculated over a 30+year retirement. From my previous posting, anyone at the PAU who retires at 30 years, and lives thirty more years, will very likely see $4M, or more, depending on their exit salaries. PG&E doesn't offer this lavish pension "benefit", now does it. Well, how many rational people will walk away from 4+M for a few extra dollars in their weekly salary?

When the pension, and retirement health care benefits as fully calculated, and put on the table—the PAU employees are well compensated.


Posted by Free economy, a resident of Old Palo Alto
on May 9, 2013 at 7:58 pm

There are plenty of workers willing to work for less. Voters, let's exercise our rights and vote to replace management ! And No more Bonds!


Posted by Ex Utility employee, a resident of another community
on May 9, 2013 at 11:08 pm

Wayne Wayne Wayne,

Master of the leading or should I say misleading questions.

"Given that Palo Alto does not publish its up-time on its web-site (ie—reliability numbers), nor do any of the commercial sector companies, then how can anyone make a statement like this with any chance of its being proven true?"
Lot's of info here:
Web Link


And Electric rates haven't gone up in 5 years:
Web Link
Second lowest in the state!


"We are seeking a big drop in natural gas prices nationally. Anyone got any idea if the PAU has been able to take advantage of these lower prices, passing along savings to the customers. The answer is: "Probably not"."
Gas prices are set to go down this year BTW

" A couple of years ago the whole city of Palo Alto was in the dark for 8+hours. Has this happened to any city serviced by PG&E?"
You obviously have never lived in a PG&E area. Plus to bring up an extremely freak event as a plane taking down PG&E lines an if it's normal is well, normal for you.

The UUT is a huge benefit to the City. The founders of the Utility decided it would be better to keep all of the monies in Palo Alto rather than paid to some corporate giant.

You love to rant about the projected pension payout. One number you never mention is how much has been paid into the pension over the 30 years. It's not as if someone retires that "CalPers" has to start from zero and pay out your $4+M figure. Their pension will be paid out of the investment income from 30 years of deposits. I hate to shout at you way up on your Palo Alto pedestal but over here at PG&E we think Palo Alto's pay is a joke. You are way behind in the market and it's obvious when you look at how many of your employees have left for PG&E, Santa Clara, Roseville, Lodi, Contractors, and private consulting firms.


Posted by Wayne Martin, a resident of Fairmeadow
on May 10, 2013 at 8:02 am

> Plenty of information here--
Web Link

This is the Auditor's Services/Accomplishment report. It has not, historically, provided any data about PAU services reliability. And it is very, very, unlikely to provide any information about PG&E system reliability. Without accurate reliability data from both entities—it is impossible to compare the service reliabilities of the two organizations.

By-and-large, the American power grid is very stable. Industry sources report that it demonstrates 99.999% uptime. If people in PG&E country have problems with reliability—they can complain to the CAPUC. We here in Palo Alto, can not complain to the PUC about the PAU, however.

> You obviously have never lived in a PG&E area.

What exactly are you trying to say? Reliability is measured in "up-time minutes" (for the most part). Can you provide any details (such as PG&E downtime minutes) to back up this vague, and otherwise, meaningless statement?

PG&E is a statewide service provider—covering tens of thousands of square miles. The PAU's area of responsibility is 25 square mines. There is simply no meaningful way to compare the two organizations.

> Plus to bring up an extremely freak event as a plane
> taking down PG&E lines an if it's normal is well, normal for you.

Palo Alto's electricity is provided by a single high-tension line, which provides a 100% likelihood of failure during events like: a plane/helicopter strike, fires, terrorism, and earthquakes, worker errors. There have been (we're told) at least two studies over the years about the vulnerability of this high-tension feed from the PG&E source into Palo Alto. If memory serves, the reports concluded that it might cost upwards of $40M to "underground" this feed. The PAU seemed not to elevate a decision as to whether, or not, to spend this sort of money on creating a "secure" access to the PG&E transmission system to the City Council. Nor were there any other primary feeds into the city from other sources installed—giving us at least two primary feeds into our redistribution grid.
The responsibility for providing reliable service lies solely on the PAU and the City Council. There is, for the most part, no oversight of the Utility by the CAPUC.

> The UUT is a huge benefit to the City.

The UUT exacts over $11M out of the rate payers, which goes into the City's General Fund—where it disappears, quickly, into who knows where. The original purpose of the UUT was to pay for the lease of the Cubberley Center—which has grown from about $4M to about $6M over the years. There was never any claim that the UUT would be used to pay salary/benefits for City employees—but that's what's happened. It is very difficult to see that it is a "great benefit" to the City.

> The founders of the Utility decided it would be better to
> keep all of the monies in Palo Alto rather than paid
> to some corporate giant.

Have you actually read the history of the founding of the Utility? The electrical service company that was operating in Palo Alto a hundred years ago was hardly a "corporate giant"—it was more of a shoe-string operation. It is true that the claims of those promoting the Utility was to drive the for-profit electrical service provider out of town, but it's not clear that the monies retained have been used as nobly as the Stanford professors promoting municipal ownership would have envisioned.


Posted by Wayne Martin, a resident of Fairmeadow
on May 10, 2013 at 8:19 am

> One number you never mention is how much has
> been paid into the pension over the 30 years

This is a difficult number to provide with accuracy—since there are about 2500 public sector agencies in California, each with its own pension plan. Some agencies require that employees contribute to their pension accounts, others don't. Which the pension crisis looming so clearly now—most public agencies have begun to request that employees contribute.

But let's make an estimate, using a 30-year timeline, for an "average" employee that works for thirty years, and is asked to pay 8% of his/her salary:

Initial Salary: $35,000
Working Years: 30
Yearly Salary Increase: 3.65
Last Year's Salary: 102,600
Yearly Pension Contribution: 8%
30-Year Pension Contribution: $156,372

So, the answer to the "Ex-Utility Employee's" question is that for someone who has worked for 30 years, ending his/her career with an exit salary of $100K, he/she will have contributed about $156K that will result in a $4M pension payout.

We would need to look at individual agencies to refine this datapoint. But hopefully, everyone gets the picture—that government sector employees are getting something like a 24:1 multiplier on their pension contributions.


Posted by jill, a resident of Barron Park
on May 10, 2013 at 11:58 am

What's another 2% raise, they're all morally bankrupt and corrupt.


Posted by musical, a resident of Palo Verde
on May 10, 2013 at 1:12 pm

Just for fun I looked at my own private sector Federal pension (Social Security). If this were my full retirement year, and I earned the maximum in each of the last 35 years, I would have paid in $119K, and also earned another $119K for my employee to put in for me.

Indexed to current dollars using the FICA multipliers would make that $187K plus $187K. If I'm 66 my annual benefit would start at $30,588. So if I lived another 25 years I'd get out about twice the indexed amount that went in.

Just something for comparison to Wayne's calculation.

I should also note that the Social Security benefit is progressive, in that those who earn less will get out a larger percentage of what went in.


Posted by musical, a resident of Palo Verde
on May 10, 2013 at 1:27 pm

1st para should have been -- for my EMPLOYER to put in for me. The company doesn't print the matching money, employees must earn it.


Posted by peninsula commuter, a resident of another community
on May 10, 2013 at 6:49 pm

Wayne,

You can find the PG&E and Palo Alto Utilities reliability numbers in the minutes of the April 2010 Utilities Advisory Committee meeting. This is the one I know of, and since UAC keeps track of these numbers ( it's a Utilities Management benchmark ), I'm sure the updated numbers are included in more recent UAC meetings. (FYI - Palo Alto's minutes per customer per year of outage time are about 50% lower than PG&E).

As for the HR Utility manager benchmark study - look on the HR website and/or Council minutes - this study has been updated every year for at least six years, and the 10 - 12% differential remains.
No sweat for me, I left Palo Alto to work in the utility consulting field where experience and expertise are appreciated and rewarded.

As for electric rates - a quick check of your bill (assuming you're a Palo Alto resident) vs. the rates published on PG&E's web site will show you the difference. For residential electric rates, Palo Alto is lower overall.


Posted by peninsula commuter, a resident of another community
on May 10, 2013 at 10:10 pm

Additional clarification for you Wayne - Palo Alto is served by THREE transmission lines, not one. The three lines run in the same corridor next to the airport, that's why one plane crash in February 2010 took out all three lines and blacked out the City. PA Utilities is not "doing nothing", this issue has been raised by CPAU with PG&E, CAISO and the CPUC and ALL (with CPAU involvement) are working out a solution. These projects don't happen overnight, it typically takes 4 - 6 years due to planning and permits (including public hearings).
You don't get this level of PG&E and CAISO involvement with "morally bankrupt and corrupt" City employees. But keep up the obtuse criticism folks - PG&E, Santa Clara and Consultants are all looking to hire experienced Utility employees from other utilities.


Posted by PG&E, a resident of another community
on May 14, 2013 at 8:57 am

Another very qualified Palo Alto utility employee turned in resignation papers this week. We will welcome his with open arms and better pay.

Thanks


Posted by peninsula commuter, a resident of another community
on May 16, 2013 at 4:25 pm

I'll vouch for "PG&E's" comment. In addition to still offering a retirement pension, they also offer a 401K plan for employees with a 60 cents per employee dollar Company contribution (non-management employees) and 75 cents per dollar contribution (management employees). Their employee training/education benefits are also very generous. Fully competitive with Palo Alto's benefit package, at a higher salary in many cases.

They are very focused on improving their gas & electric reliability, and it takes qualified utility employees to accomplish that.


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