Doug Willmore

Quote of the day

2012-01-16T11:16:00.000-08:00

"Our lives begin to end the day we become silent about the things that matter." Martin Luther King, Jr.

Taking care of the basics

2012-01-08T08:54:00.000-08:00

This recent story in the Washington Post caught my eye. It’s shocking, but wasn’t surprising to me. Did you know that a recent EPA report to Congress estimated that 850 billion gallons of storm water mixed with raw sewage pour into U.S. waters every year simply because of overflows? And, an additional 3 billion to 10 billion gallons of raw sewage spill accidentally every year.

The United States, for far too long, in my opinion, has ignored its infrastructure. Truly basic infrastructure like water and sewer lines. The basic things we depend on to always work.

So, how is El Segundo doing? Thanks to our great Public Works Director, Stephanie Katsouleous, and her staff, and thanks to a vigilant City Council always looking ahead, we’re doing pretty well. But, not well enough.

First a little primer:

Water

El Segundo has more than 65 miles of water main lines under 52 miles of roadways. The City also maintains two reservoirs and one elevated tank for a combined total capacity of nine million gallons. The average life expectancy of water pipes made of ductile iron is about 75 years for pipes installed after WWII and about 100-120 years for those installed before WWII due to change in how the pipes were forged. Given the approximate age and miles of water pipe in El Segundo, we estimate that ½ miles of pipe needs to be replaced every year to ensure operable condition, at a projected cost in today’s dollars of about $700,000 per mile. We’re actually doing pretty well compared to many communities – but we still have not funded enough and we have deferred maintenance. Deferred maintenance is actually a kind of debt – a debt that is unseen and not on the balance sheet. It will always come due at some point. It’s like the saying from the TV commercial of long ago, “Pay me now or pay me later.” Usually, the longer we wait, the more it costs, and the greater the negative impact.

Sewer

El Segundo has more than 56 miles of sewer main lines, most of which lie west of Sepulveda Blvd. and eight sewer lift (pump) stations. Assessing the condition of the City’s sewer system is far easier than assessing the water distribution systems because sewer pipes are not under pressure and thus can be easily inspected during operation. While much of El Segundo’s wastewater lines were installed post WWII and are nearing or have exceeded their life expectancy, the system is in relatively good condition for its age. Additionally, new technologies such as lining materials and pipe bursting replacement have brought down the overall cost of repairing sewer mains, which historically were more expensive than water main replacement due to the deeper excavation required. A typical sewer excavation replacement project will average about $1 million per mile. Alternative, non-excavation approaches can reduce that cost by as much as 40% or more.

The City recently completed a Closed Circuit Television (CCTV) inspection project of its lines to accurately assess the integrity of the entire sewer infrastructure. The video inspections are performed on average every ten years and its results are the basis for establishing the highest repair and replacement priorities for the next 10 year period. Given the overall approximate age, condition and miles of sewer pipe in El Segundo, we estimate that no more than one mile of pipe would need to be replaced every year to ensure operable condition, at an averaged projected cost in today’s dollars of about $600,000 -$1,000,000 per mile depending on the replacement method chosen.

So, we should be funding about $1.2M per year to replace old water and sewer pipe. This doesn’t include regular maintenance and operations. It’s easy to push expenses like this down the road. Cities, counties, states, and much of the country have put these costs off for years. And, that’s how, as a country, we end up putting billions of gallons of raw sewage into our waterways every year.

Civic Dialogue

2011-12-29T11:35:00.000-08:00

I've been thinking a lot about the last Council meeting of the year on December 20. The meeting where Chevron tax rates were at the forefront and where some temperatures ran hot.

The dialogue can be good for the community. We can re-examine old beliefs and either decide to make some changes or we can re-affirm our long held beliefs after a thorough examination and have the confidence that we are on the right path.

However, the dialogue, if misguided, can also be harmful to the community. If we demonize those with different opinions rather than being open to new thoughts and new opinions; if we personalize our messages rather than expressing rational messages....well, then, we can create bad feelings and bad policies.

But, the tradition of El Segundo is so much more than that. If we remember that we can disagree without being disagreeable; if we remember that different opinions and different thinking can produce better solutions; and, if we remember that we all have far more in common than we have in difference....well, then the future of El Segundo remains extremely bright....irregardless of what decisions are made in the short term regarding the City's tax structure and who bears the burden.

While this important civic dialogue continues on into 2012, the dialogue itself can and should contribute to a vibrant and healthy and prosperous 2012 for El Segundo and our citizens and businesses.

Have a great New Year.

Slow, but steady progress

2011-11-08T10:10:00.000-08:00

The economy is looking up. There is still lots of pain and frustration and misfortune out there. But, the US economy is inching back from the abyss of October 2008, when we were on the precipice of falling into a worldwide depression. Many economists say that we are starting year 3 of a 10 year recovery. Where we are now after the greatest economic downturn since the Great Depression more than 70 years ago:

Source: http://andrewsullivan.thedailybeast.com/2011/11/a-glacial-recovery.html

"A year ago the unemployment rate was 9.7 percent. During this time, non-farm jobs have grown at an average monthly rate of 152,000 while civilian employment has grown at a rate of 140,000 per month. In other words, we don’t need 150,000 jobs per month just to keep the unemployment rate steady. Because of the aging of the labor force, 150,000 jobs per month is more than enough to push down the jobless rate.

Very quietly, without fanfare, private-sector payrolls have grown by 1.8 million in the past year, while the work week has lengthened and hourly cash wages are up 1.8 percent.
Total hours worked are up 1.7 percent in the past year. A 9 percent unemployment rate means the labor market is still far from operating at its full potential, but it is moving in the right direction as are other data. October chain store sales were up 3.7 percent versus a year ago, according to the International Council of Shopping Centers. This includes luxury department store sales (up 4.5 percent) and wholesale clubs, excluding fuel (up 7 percent). Meanwhile, compared to a year ago, core railcar loadings are up 5.8 percent, steel production is up 10.3 percent, and hotel occupancy rates are up 6.8 percent.

Again, there are no signs of recession. Instead, plenty of signs of continued growth," - Bob Stein, The National Review.

A budget wrap-up

2011-11-07T17:01:00.000-08:00

The 2011-12 budget that the City Council recently passed put the City on firm financial footing. In a snapshot, this is what our budget did:

The City closed a $10.8M budget gap by eliminating almost 50 positions through attrition and early retirements, by selling vehicles, by continuing to streamline operations, and by asking for and receiving almost $3M in wage concessions from employees.

Even with eliminating 50 positions, there are no significant service level cuts – mainly because of employees willingness to reinvent how they do their work, to streamline operations, and to find ways to work even more efficiently and effectively.

The budget is structurally balanced. That means that ongoing revenues are matched with ongoing expenses. For the first time in 10 years, the City is a pay-as-you-go City for all of its operational expenses. This is a significant achievement that not many cities in California can boast of. Many cities are using one-time money to help fill the budget gaps they face. El Segundo isn’t.

El Segundo’s cash reserves are at the highest level recommended by the Government Finance Officer’s Association and recommended by rating agencies Fitch, Moody’s, and Standard and Poor’s. A few vocal citizens talk about “bankrupting the city” and “going broke”. My Dad always told me that while everyone is entitled to their own opinion, everyone is not entitled to their own set of facts. And the facts are that the City is now in solid financial shape. We owe this to the sound financial decisions of the City Council, to the hard work of our companies in our City that produce over 90% of our revenue, and to the huge sacrifices of our employees. Everyone associated with the City of El Segundo – residents, business owners, City employees, the almost 75,000 employees who travel into our city to work for our businesses every day – should acknowledge themselves for their contribution to making this happen.

This budget also frees up one time capital infrastructure money for the long planned and anticipated improvements to the Plunge and for the long planned and anticipated new aquatic center. The City Council will take up discussion on these projects in January 2012.

The Fire Department reduced staffing by over $1M dollars annually and then further stepped up by agreeing to reduce overall compensation by 9% across the board that equaled another $1M in annual savings to the City.

The Police Department reduced overall compensation by 9.6% across the board that equaled approximately $1.2M in annual savings to the City.

All other employee groups took cuts averaging 5% - 7% of total compensation and which totaled almost $800K in annual savings to the City.

All employees are contributing at least 33% of their share of their pension plan and were not given any pay increases to do so. It is coming out of their own pocket. Again, I don’t know of any City or County in California that say that they have achieved this. While I recognize that our employees probably don’t see this as an "achievement", I do think they recognize that it is a growing trend, and I salute them for leading the way.

It says a lot about our employees that they willingly stepped to the plate and took significant pay cuts to structurally balance our budget. Our employees did more than really any other City or County in California that I have heard of. By far. As a result they have created a foundation. A foundation for growth, for an even better community, and for a more prosperous economy.

How do you pay for a City government?

2011-10-14T15:43:00.000-07:00

Every City is unique, and certainly El Segundo is very unique, given our large day-time population and relatively smaller resident population. So, where does the money come from that actually pays for City operations, i.e., our police and fire services, parks maintenance, maintaining our sidewalks and streets, etc.? You can see from the following graphs, what the breakdown on revenue is for our General Fund. Property Taxes, the primary tax on residents accounts for 12% of our General Fund. Residential property taxes (as compared to Commercial) account for 20% of that 12%, or 2.4% of all of the General Fund.

Click on the graph(s) to enlarge view.

General Fund Revenues Breakdown

Property Tax Breakdown

I’ve gotten a number of questions from residents regarding what portion of the City’s budget is paid for by their property taxes, and they are shocked to find out that it is only 2.4%. That’s not a misprint. Two point four percent. Thanks to our larger corporate partners like Continental Development Corporation, Chevron, Boeing, Raytheon, Northrop Grumman, DirecTV, The Aerospace Corporation, Mattel, and others, the residential property tax share of the general fund of El Segundo is one of the lowest in all of California.

Yet, as my Dad used to always ask me growing up, “now that you know this, what do you know?” In other words, what good does the above information do for you now that you have it?

Well, I guess that probably depends on the individual. But, for me, I always like dealing with what’s so. Reality empowers us. Treating guesses, opinions, and ungrounded assessments as “the truth” really gets us in trouble. Dealing with what’s so is actually quite liberating. So, when I see that our residential property taxes actually contribute only 2.4% of our General Fund, I then ask myself, “where does the other 97.6% come from?” And, you can see from the graphs, that the large portion of our General Fund revenue comes from our businesses. Residential property taxes stopped paying a big portion of the bills around here a very long time ago.

When we see that our businesses create the large majority of our General Fund, I ask myself the question, “how do we help them create more business?” In other words, how do we feed the Golden Goose? Not in a way that detracts from our wonderful city, but in ways that build our city; that contributes to our city; that beautifies our city; that greens our city. However, when we live with the misguided notion that the taxes on our homes pay for most of the bills, then we can become resigned, resentful, and defensive.

Eric Helt once said that, “We live in the gap between our resignation and our expectations rather than the gap between our current reality and our vision.”

Starting with reality can actually give us an entirely new vision for the future.

Don’t forget where we’ve come from and who we are….

2011-10-13T14:31:00.000-07:00

It is easy for any of us to be caught up in the bad news; in the difficulty of growing our economy in the face of continued bad news; in the gloom and doom of it all. Yet, I assert that if El Segundo remembers who we are and where we came from, that it is virtually impossible to get into the “hunker down” mentality that I wrote about earlier. El Segundo has literally changed the world. Literally. Let me remind you of some of our accomplishments:

The first aircraft to fly at twice the speed of sound -- the Douglas D-558-II Skyrocket -- was built in El Segundo in 1953 in what is now Building 202 on the Northrop Grumman site on Aviation Boulevard.

Northrop Grumman moved into its current facility on Aviation Boulevard in the late 1970s to begin producing the main fuselage section of the F/A-18 Hornet jet fighter for Navy carrier decks. Today the Northrop Grumman assembly line has delivered more than 2,000 of those fuselage shipsets and is still going strong.

Hughes Space and Communications made history in 60’s, when their team of scientists designed and built the 1^stgeosynchronous satellite, which launched the satellite industry.

Boeing’s El Segundo facility produced the1^st spacecraft to penetrate Jupiter’s atmosphere.

Boeing’s El Segundo facility produced the 1^st spacecraft to make a fully controlled soft landing on the moon.

Boeing El Segundo facility provided the 1^st Magellan spacecraft now taking detailed images of Venus’ surface.

In fact, Boeing’s El Segundo facility is responsible for 41 of the 60 GPS satellites that entered the service since the U.S. government constellations’ inception in the 1970’s.

NASA spacecrafts carry Raytheon climate and weather monitoring sensors. Data provided by the sensors, which will fly in a polar orbit aboard NASA's NPOESS Preparatory Project spacecraft, provide advanced forecasting imagery as part of the next-generation U.S. weather satellite system.

The satellites designed and built in El Segundo are the timekeeper for the Financial Industry - ATMs to Wall Street stock trades and are time-stamped (clocks accurate to one-billionth of a second).

These satellites enable cargo companies to track shipments; guide firefighters to hot spots; help pet owners find lost dogs; help the National Weather Service monitor future weather patterns; and provide cellular service to all of our phones.

In fact, according to Satellite News, “There’s a good chance the next satellite that makes your life easier, safer and more entertaining, will be conceived of, designed and built in El Segundo.”

El Segundo – its residents and its businesses – have changed the world. Far more dramatically than most of us realize. We are innovative, creative, persistent, and visionary. We can do anything we commit ourselves to. Anything.

Thank you, Steve Jobs

2011-10-12T13:55:00.000-07:00

“Here’s to the crazy one’s. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can praise them, disagree with them, quote them, disbelieve them, glorify them or vilify them. About the only thing you can’t do is ignore them. Because they change things. They invent. They imagine. They heal. They explore. They create. They inspire. They push the human race forward. Maybe they have to be crazy. How else can you stare at an empty canvas and see a work of art? Or sit in silence and hear a song that’s never been written? Or gaze at a red planet and see a laboratory on wheels? We make tools for these kinds of people. Because while some see them as crazy ones, we see genius. And it’s the people who are crazy enough to think they can change the world, who actually do.” – Steve Jobs/Apple

“The key to immortality is to first live a life worth remembering.” – Bruce Lee.

We have to build our way out

2011-09-13T17:59:00.000-07:00

In this terrible economy -- the worst recession since the Great Depression -- the City of El Segundo has a choice. While we don't get to necessarily choose the national economic events that happen around us, we do get to choose how we are going to act in the face of those events. So, while unemployment continues to languish (and most economists think that it will for several more years or more), while the "recovery" continues to be sluggish or tepid at best, while wages continue to stagnate or recede, we, as a City, can determine who we are going to be in the face of the circumstances. Who are we?

You see, like many other cities across

America

, we could continue to use one-time money to pay for ongoing expenses while we continue to "hope" that the economy gets better. And, like many other cities, we could continue to kind of hunker down while waiting for things to get better in three or four or more years. You can see actually see how others are dealing with the recession: the context is one of inevitability -- that we have no choice but to wait it out while we talk about how tough things are. I spoke with a major business owner here in El Segundo this last week about some possible new profit and growth ideas that the City could help him with, and the negativity and cynicism and closed mindedness that was there for him was palpable. The “hunkering down” and waiting for better times was dominating his thinking, his actions, and ultimately what possibilities that he was able to even “see”.

I think we can choose a different path -- a path based in what's possible, not in what's inevitable. Albert Einstein once said that, "In the heart of difficulty lies opportunity." As a City, we actually have an opportunity. We have an opportunity -- if we create it and stand for it -- to come out of this recession stronger than when we went into it. What actions would we take, if we decided that we, as a City, were going to face this recession head on and actually build our way out of it, rather than complaining about it and waiting for it to pass?

Well, the first action we would take is to adopt a structurally balanced budget -- as the City Council is doing. Because to act effectively we need a strong base. And, a structurally balanced budget gives the City a very strong base.

However, inside of a structurally balanced budget, we would also invest in the future. We would invest in affordable and important infrastructure -- while construction costs are low -- so that we "buy" significant facilities and improvements at cheaper than normal prices. Swimming pools, roads, sidewalks, recreation facilities -- all can be constructed in today's economy for up to 20% less than in good times. And they make the quality of life here in El Segundo better. They give us a better future. The construction of such projects also help fuel the local economy. What projects? How many? What is affordable? Those are decisions still to be made by the City Council. But, it is important that we look at this “down” economy as one that holds opportunities for our City, and not just one the holds limitations. If we don’t look for opportunities, we’ll never see them.

Also, inside of a structurally balanced budget, we would invest in economic development. Why would we do that now when the economy is so sluggish? Because, now there are opportunities that aren't as apparent in good times. Companies are moving, consolidating, looking for select opportunities -- and El Segundo can put itself in the center of many of those conversations. We can choose to work to outperform and outgrow our region economically. Is there a guarantee that we will be successful? No. But, the only guarantee comes if we don't attempt to grow. Then we are guaranteed to stagger and stumble along with most other cities and communities, and the national economy. When we commit to growing we create new possibilities. When we succumb to the inevitability of how bad it is, we are left with no possibilities.

Finally, inside of a structurally balanced budget, I would say that we would also invest in green technology. Why? So that when we emerge from the recession, we had actually taken the opportunity to build a more sustainable, more competitive, more livable City that creates a better future for all of our families and current and future residents and business in the City. Why wouldn't we invest in greener energy sources if it didn't cost us a dime more? Why wouldn't we invest in electric vehicle charging stations, and solar installations, and smart meters, and so on, if they paid for themselves and they created a better City for all of us?

Creating a new place to stand -- moving from "hunkering down" to "building a better future" also gives our employees a new future -- not only in being able to work in a more exciting, more enjoyable workplace. But, also in actually creating new projects, new initiatives, higher standards, more revenue, and more opportunities. A new future for a city creates a new future for employees and the new future for employees creates a new future for a city.

While current economic events certainly don't favor being reckless (being reckless is rarely advisable!), the future almost always favors the bold. As William Shakespeare wrote in Julius Caesar:

"There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures."

We have a rare opportunity to choose now to emerge from this recession stronger and better than when we went into it.

Quote of the Day

2011-08-31T17:29:00.000-07:00

“If we have no peace, it is because we have forgotten we belong to each other.”

-- Mother Theresa

A tribute to Steve Jobs

2011-08-26T07:56:00.000-07:00

Wednesday’s announcement that Steve Jobs was resigning as CEO of Apple (by all reports amidst very poor health), was sad indeed. When you look at how he has impacted all of our lives, our communities, and literally the entire world economy…it is staggering. I, personally, like many others, have not purchased a CD in years – everything is on my iPod. Music – great music – is available anytime anywhere with more ease than ever. I, again like many others, rarely buy a physical book anymore. Rather, I purchase all my books from iBooks and Amazon (using the Kindle app for iPad). The iPad is changing the publishing industry right before our very eyes. The iPad is changing public safety, health care, and a whole host of other professions and industries. All this from a college dropout working with a buddy in a tiny garage…who then got fired from the company he founded…who then returned to save the company from near bankruptcy and ultimately created the most valuable company in the world. Yes, that’s right; Apple is literally the most valuable company in the world in terms of market cap – with a market cap of roughly $340B. Included in that is Apple’s reported $75B+ of cash.

But, the most amazing thing to me is how he did it. Steve Jobs did it by focusing on making a difference and making an impact, not on making money. He did it by focusing on what he was passionate about. He did it by taking a stand for what he thought was vital and important. He did it by being absolutely committed to learning. When he returned to Apple in 1997, he was not the same person who had been fired five years previously. He had grown.

Some famous Jobisms:

“The journey is the reward.”

“I want to put a dent in the universe.”

“Do you want to spend the rest of your life selling colored sugar water, or do you want a chance to change the world?” (when making a pitch to John Sculley to hire Sculley away from Pepsi).

While many choose to focus on Jobs' innovation, his vision, his creative genius, I tend to think his more subtle and yet more powerful legacy is the organization he created and the values upon which he created it. He created an organization grounded in passion; grounded in making a difference; grounded in change; grounded in commitment. All great organizations share similar attributes. The fact that Steve Jobs did it starting in a garage and then building the most valuable company in the world while “putting a dent in the universe” is all the more remarkable. Yet, his success proves something that my brother Jeff told me almost 20 years ago: the source of powerful action is always a commitment to something great.

Often, we focus on the actions that someone took without recognizing the commitment or the stand behind the action. Richard Pascale, in Managing on the Edge, distinguished something very powerful:

“Think about something you did that was great. The very remarkable quality of the human mind is that, after we have made that great accomplishment, we create an explanation, so we tell our children or our subordinates why we did it or how we did it. So, we come up with a formula that describes how we got something we accomplished. Unfortunately, that formula is just an interpretation, and the thing that’s missing is that when you did it, you didn’t know the formula. You just took a stand and you did whatever you had to do. So, the how-to books and the great man books give people a formula that is missing the most important critical ingredient that the great people had, which was they took a stand for something and did whatever had to happen.”

That is Steve Jobs. He took a stand for putting a dent in the universe and did whatever had to happen. What a contribution. But, above all, what an example. An example for everyone in any organization anywhere no matter their position. Something we will be working on at the City of El Segundo in the coming months is what our stand is individually and collectively. If each of us are able to create, or re-create, or return to, the inspiring passion and stand and commitment we have for our work and our city, and stay present to that day by day, and week by week, the City of El Segundo will never be the same. We’ll be able to look back after five years and ten years and say, “Wow! Look at what we did.”

Finally, I ask that you take a few minutes to watch Steve’s inspiring commencement speech given to Stanford graduates in 2005.

Making Choices

2011-08-25T14:35:00.000-07:00

I asked students in the last several Public Finance classes I taught in the MPA program at the University of Utah, to engage in a short, but thought provoking exercise. A non-partisan group, The Committee for a Responsible Federal Budget (CRFB), formed after the Peterson-Pew Commission on Budget Reform. CRFB developed a really informative and useful online exercise that gives anyone a chance to take a stab at stabilizing the federal budget. But, to do so, you have to make choices. CRFB’s exercise does a good job of explaining each and every policy choice. Many of my students – mid-career professionals -- couldn’t get to the level that we needed to get to. It was an exercise that opened their eyes – once you strip the rhetoric away, the ideology away, and the partisanship away, the choices and tradeoffs were extremely difficult for them.

I invite you to take some time and work through CRFB’s budget simulator, and see how you do.

http://crfb.org/stabilizethedebt/

The choices we face in El Segundo, while not as complex as the federal budget, are no less difficult. There are no easy choices, or painless choices. There are some who feel that they are taxed too much, and some who feel they are paid too little, and some who feel that services should be expanded – and a whole host of opinions and feelings in between. All are real; all are important; and all are legitimate. But, the tough choices still have to be made. So far, the City Council, I believe, has walked this fine line deftly and successfully, of making the tough choices and doing so fairly and equitably, and doing so with the best long-term interests of the City in mind. They welcome your input, as do I.

If you’re able, please come to the City’s next Strategic Planning Session at the Library in the Friend of the Library conference room on August 31 at 7:30am.

Education for the 21st Century

2011-08-15T15:34:00.000-07:00

Here is Sir Ken Robinson brilliantly speaking about our urgent need to reform our education system. Now, more then ever, California and all of our school districts need this message. California used to be the 5^th largest economy in the world a short time ago, and now is the 8^th. Education is the key to maintaining our leadership in the world economy and improving our communities and quality of life. But, it’s also a different kind of education and maybe not what we’ve known in the past that will be the key to maintaining our economic leadership in the world.

“In a time of great change, it is the learners who inherit the future. The learned find themselves equipped to live in a world that no longer exists.“ – Eric Hoffer

Watch Sir Ken Robinson's Video on TED

More structural changes for our economy

2011-08-15T15:26:00.000-07:00

Wow. The US Postal Service is looking to lay off 120,000 employees. That’s not a misprint: 120,000. Our whole economy is undergoing a massive restructuring right before our eyes. Some of it out of financial necessity, but some of it out of increased efficiency and productivity. Nevertheless, it’s extremely painful for many, and certainly dislocating for as many more.

There was a time, that the USPS was seen as the ticket into the middle class for a whole host of families and workers and the jobs were as stable as any in

America

. No longer. The proposed cuts would equal 20% of the USPS workforce. In doing so, the USPS is seeking to end layoff protections in collective bargaining contracts and also remove 480,000 retired USPS employees and all 600,000 current USPS employees from the Federal Employees Health Program and place them in a reduced cost Postal Service health program.

It’s just another big adjustment in a long line of labor and economic adjustments that the

economy is in the midst of. The loss of 120,000 jobs will be another shock for our economy, both nationally, and locally, and they are jobs that are not likely to come back. And, for public employees everywhere it’s another sign that we live in a new reality that we will need to adjust to. The especially painful part is that the adjustments need to happen rapidly and not slowly.

Read it at The Daily Beast

Read it at The Washington Post

The Best Way Out Is Usually Through

2011-08-04T10:50:00.000-07:00

My Dad used to always tell me that the good was the enemy of the better and that to a certain extent, we always have to risk what we’ve attained to be able to go after what we can become. Or, as Pablo Picasso said it, “Every act of creation is first an act of destruction.”

In some ways, I guess we could say that progress would be especially nice if its pathway was smooth and without any bumps or challenges. Yet, all of us know, that it doesn’t usually work that way. As we all know, progress, especially significant progress, usually requires hard work….sacrifice….commitment…..dedication. And it usually requires a break from some things in the past. It just seems to be the way that it goes. The hard work, the sacrifice, the commitment, the dedication – all are the attributes that have the journey and reaching the goal be ultimately satisfying. After all, if a structurally balanced budget was easy, every government would have one. As early American patriot Thomas Paine put it, “the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly.”

So, the financial and budgetary challenges that the world faces, that the United States faces, that California faces, and that El Segundo faces are immense. They are especially immense because they exist inside an expectation and a commitment to continue to provide quality services. In government, it’s not as if we can just cut, cut, cut without regards to the consequences. We still need a safe community, and good school, and nice parks, and so on. So, the question really is “how do we deliver outcomes to the citizens with the revenue they have made available?” We are ultimately responsible for providing outcomes that the citizens want and need and are willing to pay for. In doing that, it’s critical (and I’ve always been committed to it) to provide a great environment to work, with challenging meaningful work, and with the best compensation possible.

Unfortunately, sometimes providing the best compensation possible to employees and providing outcomes to citizens become opposing goals. Usually, they align, but every once in awhile, they unfortunately do not. Compensating employees fairly and competitively is a critical piece to being able to produce outcomes. However, I am looking at a conflict between the best employee compensation possible and citizen outcomes right now. Why?

Well, El Segundo actually spends almost 85% of its general fund revenue on employee compensation. Unfortunately, that is just way too much. Most cities in good shape (i.e., producing the best possible outcomes to citizens) spend around 70% on employee compensation and ideally you would even get below that. Why? Because every city has infrastructure needs, both repairing existing infrastructure and building new infrastructure. And because every city wants or needs to invest in other services or initiatives, whether they be economic or environmental or educational – that don’t involve compensating employees. You just can’t find any city that has been able to sustain it’s core infrastructure and continue to grow and improve while investing 85% of it’s general fund revenue in compensation. It’s just really not possible.

So, unfortunately, we are negotiating with our six labor unions right now and asking every City employee to reduce their overall compensation. It’s not fun – especially for the great employees considering taking less money home every two weeks. We’re asking them to do this not just to fill a budget gap that we have, but also because we cannot sustain a great city if we are paying 85% of our general fund revenue to employee compensation. We have to spend revenue on other needs and initiatives to be able to deliver outcomes to citizens. It is one of those times when producing great outcomes and the best employee compensation possible just don’t line up. As Jim Collins found in his bestselling book, Good to Great, confronting the “brutal facts” is usually the first step to progress. It’s vital that we just face what’s so, what’s real – the brutal facts, if you will. And spending 85% of our general fund revenue on employee compensation just can’t work. It’s a brutal fact that we have to confront and deal with. As employees who care about the city, as managers who care about our employees, and as citizens who want outcomes.

As we have sat down with every employee group, I’ve been incredibly impressed by their commitment to do what’s best for the city, and I remain confident that we can get to where we need to be – filling the City’s budget shortfall so that we produce a structurally balanced budget, while at the same time being able to start to change the balance of our spending to be able to invest in the other numerous infrastructure needs that the City has. But, I also recognize, appreciate, and value the sacrifice that we are asking employees to make.

Noted sociologist Abraham Maslow once said that “the best way out is usually through.” While the negotiations that we are currently going through are hard and will be hard, the only way out is through. Kicking the can down the road and avoiding the problems we face just won’t get us anywhere meaningful. Kicking the can down the road is one of the methods that has gotten the United States and California in the financial situation that we’re in. I remain confident that the City of El Segundo, and its employees can emerge stronger and more sustainable, and with a brighter future as a result of facing the brutal facts and dealing with them.

Structurally Balanced Budget

2011-07-28T17:10:00.000-07:00

If we don't change our direction, we are likely to end up where we are headed.

Chinese Proverb

Given the United States’ (and the world’s) economic woes, given California’s constant budget struggles, and given the current budget debate – or some could say debacle – in Washington, DC, public budgets, deficits, and spending, are on the front pages these days, and they are significant concern to many citizens. I think from what I’ve heard from many citizens in El Segundo, we’re no different. Residents are concerned about El Segundo being able to close it’s budget gap while still providing quality services.

One of the most challenging tasks I face is to eliminate our structural deficit. Eliminating the City’s structural deficit is a strong commitment of the City Council, and it is a commitment that I share.

A structural deficit exists when ongoing spending is greater than ongoing income. You see, even with a balanced budget, El Segundo has a structural deficit. A structural deficit occurs when ongoing revenues are less than ongoing spending. The structural deficit represents the gap between the amount of revenue raised and the amount of money needed to continue existing services. As you can see in the chart below, El Segundo has carried a structural deficit for the last 10 years.

City of El Segundo 10-Year Budget History

There are several ways the City can find itself with a structural deficit, yet still have a balanced budget. One common way is to use one-time revenues to support ongoing costs. For example, an annual budget might transfer money from a segregated fund to the General Fund, or delay a payment from one year to the next year in order to keep the budget in balance. An annual budget might also draw down existing fund balances to pay for ongoing expenses (like using your personal savings account to pay the mortgage). Structural deficits also grow when a government adopts long-term increases in compensation plans that haven’t been paid for or planned for.

The problem is that although some sources of revenue are one-time, spending almost never is. Supporting ongoing services with one-time revenue sources will work for a while, but it will almost always lead to a structural deficit and long-term difficulties.

While it is difficult, it is the commitment of the El Segundo City Council to adopt a structurally balanced budget for 2011-12. It is my commitment, and my staff’s commitment to give them a plan and options on how to do that while still maintaining service levels. It’s not magic, but it will require shared sacrifice, innovation, and commitment. And when it is adopted this fall, it will be one of the few structurally balanced budgets in all of California.

Our next Strategic Planning session with the City Council is on August 31 at 7:30 am at the Friends of the Library Room at the El Segundo Library. I hope to see you there, and I would love to hear of any budget ideas you may want to pass our way.

Welcome

2011-07-27T10:10:00.001-07:00

Welcome. Beginning today, I will be joining the ranks of bloggers. I have a goal of finding productive ways of providing more opportunities for conversation and dialogue on City issues, and on issues that impact our City.

Rick Cole, the City Manager of Ventura, has really led all of us with a great blog for the last 5 years, and I’m going to use his guidelines for what belongs in a civic forum. Comment submissions will be moderated based on the following comment policy:

Stay on topic. Comments should relate to the topic being discussed in the original post.
Keep it clean. Comments should not contain profanity, racial slurs or any other derogatory terms.
Don't make it personal. Comments should not contain personal or defamatory attacks.
You don't have to agree with me. Reasonable arguments for opposing views are encouraged.
I don't have to agree with you. A posted comment is the opinion of the poster only, and publication of a comment does not imply endorsement or agreement by myself or the City of El Segundo.
No campaigning. This blog is not the place to endorse candidates or a particular stance on a currently active ballot measure.
This comment policy may be revised at any time.
I reserve the right to prohibit comment submissions from individuals who repeatedly submit comments that violate this policy.
Your submission of a comment constitutes your acceptance of this comment policy.

I look forward to hearing your comments and feedback.