Sacramento spent $275,000 on a study of how to save money. Where are the results?

The City of Sacramento paid $275,000 on a study. One that would give them recommendations on how they can waste less money and increase revenue.

The primary goal was to get an independent assessment of the city’s current and projected financial status in order to identify opportunities for cost savings and additional revenue.

To do this, the consulting team conducted an extensive review of documents and data, interviews, focus groups with city departments and research about best practices in six other large cities in California, Colorado, Arizona and Minnesota. The city’s upcoming financial challenges will include how the current financial standing is distorted by safety nets, deferred payments, and most recently the infusion of CARES Act funds to respond to COVID-19. Even prior to the coronavirus pandemic there was a high level of uncertainty in predicting how the city’s income might change, including a recession, construction costs, growth in property taxes and changes to the cost of living.

The city’s study, published March 3, outlines similar concerns, and paints a bleak picture for Sacramento’s economic future.

Sacramento has some unique uncertainties. These include the degree to which Measure U funds are used for existing programs or new initiatives, the potential loss of the enterprise tax, and the fate of the Children’s Fund Initiative on the March 2020 ballot. With this set of economic and spending assumptions, there is an average annual shortfall in the General Fund of approximately $13 million per year in Fiscal Years 2019-20 through 2027-28. This would result in the available General Fund balance being exhausted in FY 2024-25.

To translate? We’d be out of money – as a city – in about 5 years.

The study also found that Sacramento is simply not keeping up on its most essential services, such as keeping our streets and public facilities up to the standard that residents deserve. Some of the city’s deficiencies stem from unfunded deferred maintenance. Furthermore, Management Partners concluded: “the City has a substantial and increasing backlog of deferred maintenance, as identified by staff. Conservatively, the City is not spending the $30 million a year that it should be on maintenance for streets, facilities, parks and swimming.”

The assessment notes that a potential funding source for these unmet services could be Measure U tax dollars, since our most under-invested communities have the greatest need for updated streets, parks and public facilities. However, this is unlikely. The plans for any type of inclusive economic development have been aborted by the economic disruption associated with COVID-19.

Let’s also not forget that an overwhelming share of the old Measure U budget was going to the police prior to the pandemic, and now that the pandemic has hit, even more is considered to be funneled into policing. Experts are still unsure of the exact impact this economic downturn will have on city revenue and any potential city funds that were remaining for inclusive economic development have withered away.

The audit highlights inefficiencies in how the police and fire departments budget overtime costs. In addition to consuming the majority of the city’s general fund budget, the study notes that “97 percent of unplanned overtime expenses are attributable to the Police and Fire,” concluding that, “changing the way overtime is budgeted and expended in public safety is especially critical.”

The study further notes, “overtime increased about 264 percent in the six years between FY 2011-12 and FY 2017-18, an unsustainable 44 percent per year.” Public safety functions already represent roughly half of the city’s General Fund expenditures. The growing overtime costs in these departments pose an even larger burden on the budget and limit the resources available to fund other vital program.

While the Police Department appears to be more effective at controlling overtime costs, expenditures in FY 2017-18 were still at 348 percent above the overtime budget. The Fire Department’s overtime expenditures during the same period were 483 percent above the overtime budget.

The resulting inefficiencies not only minimize investments in other areas of the city that would stand to benefit from capital injection, but it also creates unrealized losses due the missed opportunities in those areas. Additionally, overtime inefficiencies reduce officer productivity, as increased physical, mental and emotional stress is compounded due to budgeting inefficiencies. This is also supported within the audit: “our experience is that excessive overtime has a particularly negative impact on the public safety workforce resulting in fatigue, on-duty injuries, and increased incidents of sick leave.”

When the Measure U sales tax was renewed in 2018 it was increased from a half cent to a full cent. The campaign promise was that the second half cent would be spent on inclusive economic development. The other promise was that funding for the entities supported by the original Measure U in 2012 – fire, police, and Youth, Parks and Community Enrichment (YPCE) – would remain stable.

However, in the first year of the new Measure U tax, inclusive economic development received only 5 percent of the funds, while funding increased significantly for YPCE, fire and the police. One reason why the funding for the police is so high has to do with the associated pension costs that have been unsustainable for the past decade and will continue to be a burden, which is also highlighted within the efficiency assessment.

I wonder what the opportunity costs to economic development and potentially revenue generation is being lost because of the amount of inefficiencies associated with the police. The assessment ends with a list of 39 recommendations made to the City to improve these inefficiencies, however there has been no acknowledgment by the City Council to implement them. It seems as if they would rather make cuts to important social services while promoting losses in productivity and underinvestment.

The questions we must ask are: why are we willing to not invest enough in social programs without first using the recommendations we paid for to save money? Why can the police and fire take money promised to the people, but it never works the other way around?

As a city, a community and individuals – we are faced with some very serious times to come. We can only hope that our city politicians, and city at large, make the correct decisions for the people they represent.