Cities spared pain of layoffs

While Sacramento already has delivered pink slips to two dozen employees – and hundreds more may soon join them in the unemployment line – the cities of Elk Grove, Rancho Cordova and Citrus Heights aren't sweating layoffs.

That's because they didn't form large city work forces after they incorporated – they hired out.

Established over the last decade, the three cities adopted a different model than traditional cities: paying firms – not city workers – to handle city services.

Joe Chinn, Rancho Cordova assistant city manager, said contractors give the city short-term labor without long-term labor costs.

"It gives us that great flexibility," he said.

Or, as Elk Grove Councilman Michael Leary said, if there's scaling back to do, it's not Elk Grove's problem.

"If these were all city workers, we'd have to be laying them off," he said.

In Leary's city, if you want to add an awning to your home, the permit is handled by a company named Interwest.

Pacific Municipal Consulting will tell you if your condo project meets city zoning.

And Elk Grove turns to MCE Corp. to fix potholes.

As the housing and construction markets have dried up – and tax revenue along with them – Sacramento's projected deficit has grown to nearly $60 million over the next fiscal year. The city has responded by laying off workers who process building permits, draft city plans and perform housing inspections. Buyouts of other workers are in the mix.

Local officials agree that when budgets get crunched by slowed taxes and a souring economy, contract cities are at an advantage.

Elk Grove – which has grown from 60,000 to more than 136,000 residents this decade – isn't immune from the economic downturn. Home construction is at a crawl. The city has a rash of foreclosed homes. Sales tax revenue is down, and the city recently projected a $2 million deficit.

Even so, it has no plans to lay off any of its 274 workers. It will close the gap by using one-time resources, and save through what Mayor Gary Davis calls a "lean and mean" reorganization of city departments.

Davis says the city's contracts – with firms handling public works, planning and engineering – are making the city's slide into tighter times more tolerable.

The question is whether that emphasis on contracts is about to change.

In Elk Grove, contracts haven't been widely popular – and residents have called on the city to hire staff.

When the housing market was at full throttle, Planning Commissioner Paul Lindsay urged in 2005 that the planning director be a city employee, not a contractor, because of the job's expanding authority.

A report reviewing the city's reliance on the contract work force and its responsiveness to local businesses is due soon.

Davis says he sees advantages to keeping some "hybrid" of contract services and city employees.

"I think greater accountability would come with a certain number of employees being in-house," Davis said. "You're always going to need certain positions whether you're processing 2,000 permits or 200 permits."

The issue, he said, is how to establish a model that reacts easily to the economic cycle but still provides "the level of services that meets the needs of businesses trying to locate in the community."

Elk Grove resident Phillip Stark said department leaders should be in-house staff, not contractors.

"You have to have leadership accountable to the people," Stark said. "They need to be local folk."

Bill Camp, president of the Sacramento Labor Council, said overreliance is "not healthy for us as taxpayers or the people who do business with the city."

Taxpayers don't always benefit from the lowest possible bidder, and businesses suffer from inconsistency in government operations. "You don't know what their interpretation (of local rules) is going to be," Camp said.

And contractual employees can earn more than municipal workers.

For example, under Elk Grove's contract with Pacific Municipal Consulting (PMC), the company pays senior planners $90 an hour and senior economists $100 an hour. By comparison, a government senior planner with Sacramento County gets $64.38 an hour (benefits included), and an economist gets between $53 and $66 an hour.

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