Tuesday, February 21, 2012

City Manager Salary Breakdown

With continued scrutiny over what is being paid to City Manager, Paul Arevalo, it is important to understand three things: City/population averages, pension pitfalls and reporting of salary.  Mr. Arevalo fell into his position in 1999, after serving the city as Assistant City Manager, a move more times than not taken by a City when a Manager leaves office.  Due to the lack of qualified candidates in California, it places cities into corners where at times have to find the right candidate who understands the intricacies of the environment to make a smooth transition.  By now means is replacing a City Manager an easy task.  Some California cities have spent over $50,000 with the search taking up to a year.  Most municipalities cannot afford the time.  Time is money, and with my evaluation of West Hollywood’s City Manager, nothing is truer.

In 2010, the State Controller released new salary reporting requirements to California cities, directing them to clearly identify elected officials' and public employees' compensation.  The authority to collect this information is granted under Government Code sections 12463 and 53892.  Through this resource, we now have access and more transparency within local government. 

WeHo’s Warranted Wages?

Should Arevalo, a hired official, receive a salary, close to $300,000, not to mention his generous pension, comprehensive health and life insurance packages, car and phone allowances and other perks unrecorded or disclosed?  High-paid city employees have become focus on local government salaries and pension packages.  Attention is drawn to the highest positions in West Hollywood, which are City Manager ($295,870), Assistant City Manager ($223,688), Directors of Human Services ($214,319), Director of Public Information & Prosecution Services ($202,912) and Director of Public Works ($201,258). 

Again, each of these high-paid positions comes with a healthy “package” associated with their employment and retirement.  For example, in 2010 Mr. Arevalo was paid an additional $23,651 in Pension Contribution, $13,692 deferred Compensation, $14,522 in health care provisions, 6,100 in car allowance and a “defined benefit” pension formula of 2.7%@55 where at age 55 Mr. Arevalo would collect 2.7% of his wages times the years of employment to gouge the city more.   He has hit over 20 years of employment with the city.

We are seeing more and more cities reducing the pension formula percentage from 2 to 2.5 percent along with increasing the year of retirement from 55 to 67.  Until changes are made in West Hollywood, the course is equally daunting in evaluating the performance along with the salary of Mr. Arevalo.  It is a hefty price tag for someone who has created more litigation on behalf of the city in the last few years to double the costs for the City Attorney and Legal Services.    With the litigation scent in the air, the direction my nose goes towards is lack of proper management. 
Troubling West Hollywood Legal Services for increased litigation in the past few years.
As a standard, we shall review 2010 findings due to the most accurate U.S. Census.  The Pacific Coast states and California average base salary for city managers is $144,806 with an average population of 25,000 to 49,999.  For a community size of 50,000 to 100,000 residents, the salary is a slightly higher $150,522.

2010 Figures:
City                          Population    City Manager Salary    Salary/Pop.
Culver City                  43,000              $293,478                    9.15
Palm Springs              48,000              $211,000                     4.39
Pasadena                  151,000              $270,937                    1.79
Santa Monica              97,000              $300,814                    3.10 
West Hollywood          34,000              $295,870                    8.70

Problems with Pensions 

Even Pasadena where Mr. Arevalo resides has seen their City Management salaries and pension packages reviewed and reduced due to the costs associated with the pension assets falling short of the obligations to retirees.  Palm Springs has had to reassess their City Manager position and salary.  The latest scrutiny is coming from Sana Diego with pension overhaul becoming a political hot button drawing eyes nationally.  Bell was only the beginning of the outrageous.  Now, municipalities are evaluating wages and pension plans to figure out a way to fix the shortfalls.  If adjustments are not made, the greater the risk for failure in pay-outs.  In the case of Arevalo and his clan in City Hall, we are looking at a very sizable sum.  As example, Arevalo is given a 'Defined Plan" pension formula of 2.7%@55.  

(2010 Salary  x  2.7%)   x   Yrs of Employ   =   “Defined Plan” Pension Payout
($295,870   x   2.7%)   x   23Yrs   =   $159,770

Not too shabby for a guy who also has deep relations with major developers in the area.

At the state level, Governor Jerry Brown has put forth a pension reform plan changing retirement ages from 55 to 67, replacing current “defined benefit” pensions with a hybrid program also including a 401(K)-like contribution component, prohibiting retroactive pension increases, requiring all employees to contribute 50 percent or more of their pensions, along with other points.  Pensions are the new dirty word for local governments as they have become more and more liable with time.  Questions of will there be money 25-35 years down the road with the course currently taken are being evaluated along with the value associated with a City Manager and Assistant City Manager, as well as City Attorneys? 

With corporate salary climbing having been kept to a minimum in the last few decades, it seems very odd a city with 34,000 people should be paying outrageously high salaries for it’s city employees.  The City’s job descriptions are much too vacant to warrant the six figure salaries and pensions being doled out.  Is a man who is responsible for millions of dollars of escalation of costs over the Master Plan and litigation expenses, along with not able to wrangle simple budgets and costs associated with event planning, as seen in the Christopher Street Report that had no financials to speak of in front of City Council recently. 

It is the thriving businesses and tax dollars generated along with area homeowners that deserve the championing of sorts.  While we are at it, we should probably recognize all those individuals who received the $10 million dollars worth of parking fines, meter fines and camera citations.  Each year, this line seems to grow larger and larger.  These folks are the ones truly responsible for the way the city is moving, not Arevalo. 

For a guy who continually nods off during Council meetings, I personally think he and others are over paid.  At the end of the day in 2010, Arevalo walks away with a total of $513,605 ($353,835 + $159,770 Pension after age 55).  

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