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Vancouver’s financial crisis has been developing for years

Structural deficit has dogged city since 2003

By Andrea Damewood
Published: July 18, 2010, 12:00am

Cutting Vancouver’s safety net

The day of big-time layoffs, of losses that really count, has been a long time coming.

Just how Vancouver arrived at a 2011 reality of having to cut 105 jobs, including up to 30 from police and fire, isn’t simple.

Here is a list of answers to frequently asked questions about Vancouver’s budget problems. It was prepared by city spokeswoman Loretta Callahan, who plans to post a longer version of the FAQs below and other information at http://www.cityofvancouver.us/horizons.

How much is the shortfall being forecast for the city of Vancouver in 2011-12?

Using a fiscally conservative outlook, the city is forecasting a $10 million deficit in 2011-12. The city has already reduced the coming deficit by $2.2 million with major restructuring of the organization, including streamlining and consolidating departments and facilities, and flattening management. During the next four months, the city will keep working to further reduce the deficit, including seeking union and employee groups’ help in cutting health care costs by $1.1 million, the equivalent of 11-16 employees. The city is also pursuing a federal grant to provide funding for three years for up to 10 full-time police officer line positions that would otherwise be lost due to layoffs

Why did the city buy the former Columbian building at 415 W. Sixth St. when it will have to lay off people in December? How will the city pay for that building?

Actually, this is a very good time to purchase the building. It saves money. By buying this building and consolidating employees into one facility instead of continuing to pay rising rent on multiple sites, the city expects to reduce its ongoing operating costs by about $1 million in the 2011-12 biennium, and $1 million every year after that. Funding to buy the building comes from dedicated capital funds and existing dollars set aside for rent and maintenance, not from general operating funds for police, fire, street maintenance, parks and recreation, land-use planning and other services. Buying the building actually will put money back into the general budget on an ongoing basis and help support programs and people.

Why doesn’t the city of Vancouver cut wages across the board by 5 percent to 10 percent to address the deficit?

The city cannot unilaterally reduce all employee wages. An estimated two-thirds of the city’s employees are represented by unions. Those contracts are subject to negotiations. In addition, contracts for fire and police unions are also subject to interest arbitration. In interest arbitration, an independent arbitrator makes the decisions, and the city is legally obligated to pay the wages and benefits dictated by the arbitrator. It should be noted that there have been no cost-of-living increases for management, nonunion employees, and all but one union in 2009, several unions in 2010.

If the deficit has been a problem since 2001, why didn’t the city do something before?

The city did. Each year, city leaders have been carefully addressing budget concerns, primarily through cuts but also with some increases in fees and taxes, such as on utilities. What changed was the deep recession, with its unforeseen dramatic economic impact.

Why does the city of Vancouver’s preliminary budget include cuts in fire and police? Why not just cut other areas?

The city plan for 2011-2012 would cut 105 positions citywide to balance the budget. If no positions are cut from that public safety area, the city would have to eliminate 130 of the remaining 310 positions out of the city’s general operating fund. That’s more than a 40 percent cut in those remaining city staff.

Does the city’s preliminary budget call for new taxes?

No. The city plan does not include any tax increases. The city manager is committed to balancing the 2011-12 budget using the city’s existing means.

The city has had a structural deficit — where costs outrun revenue — of about $3 million a year since 2001.

City officials say they’ve known about the problem and have been taking steps; but painstaking union negotiations to lower costs make the ship hard to turn.

Others, including public safety union leaders, have said the city’s been neglecting to pass taxes or take steps that could have helped.

Both agree the recession has made things a lot worse.

Differing views

Vancouver Police Guild President Ryan Martin said it should never have come to this.

“I’m a little disheartened with the state the city’s in, this has been coming for nine almost 10 years,” he said. “And we’ve held the same city manager all that time, who got best performance evaluations even this year? To me, that doesn’t make sense.”

But Vancouver has already done much to try and reverse the downward trend, Assistant City Manager Eric Holmes said.

Here is a list of answers to frequently asked questions about Vancouver's budget problems. It was prepared by city spokeswoman Loretta Callahan, who plans to post a longer version of the FAQs below and other information at http://www.cityofvancouver.us/horizons.

How much is the shortfall being forecast for the city of Vancouver in 2011-12?

Using a fiscally conservative outlook, the city is forecasting a $10 million deficit in 2011-12. The city has already reduced the coming deficit by $2.2 million with major restructuring of the organization, including streamlining and consolidating departments and facilities, and flattening management. During the next four months, the city will keep working to further reduce the deficit, including seeking union and employee groups' help in cutting health care costs by $1.1 million, the equivalent of 11-16 employees. The city is also pursuing a federal grant to provide funding for three years for up to 10 full-time police officer line positions that would otherwise be lost due to layoffs

Why did the city buy the former Columbian building at 415 W. Sixth St. when it will have to lay off people in December? How will the city pay for that building?

Actually, this is a very good time to purchase the building. It saves money. By buying this building and consolidating employees into one facility instead of continuing to pay rising rent on multiple sites, the city expects to reduce its ongoing operating costs by about $1 million in the 2011-12 biennium, and $1 million every year after that. Funding to buy the building comes from dedicated capital funds and existing dollars set aside for rent and maintenance, not from general operating funds for police, fire, street maintenance, parks and recreation, land-use planning and other services. Buying the building actually will put money back into the general budget on an ongoing basis and help support programs and people.

Why doesn't the city of Vancouver cut wages across the board by 5 percent to 10 percent to address the deficit?

The city cannot unilaterally reduce all employee wages. An estimated two-thirds of the city's employees are represented by unions. Those contracts are subject to negotiations. In addition, contracts for fire and police unions are also subject to interest arbitration. In interest arbitration, an independent arbitrator makes the decisions, and the city is legally obligated to pay the wages and benefits dictated by the arbitrator. It should be noted that there have been no cost-of-living increases for management, nonunion employees, and all but one union in 2009, several unions in 2010.

If the deficit has been a problem since 2001, why didn't the city do something before?

The city did. Each year, city leaders have been carefully addressing budget concerns, primarily through cuts but also with some increases in fees and taxes, such as on utilities. What changed was the deep recession, with its unforeseen dramatic economic impact.

Why does the city of Vancouver's preliminary budget include cuts in fire and police? Why not just cut other areas?

The city plan for 2011-2012 would cut 105 positions citywide to balance the budget. If no positions are cut from that public safety area, the city would have to eliminate 130 of the remaining 310 positions out of the city's general operating fund. That's more than a 40 percent cut in those remaining city staff.

Does the city's preliminary budget call for new taxes?

No. The city plan does not include any tax increases. The city manager is committed to balancing the 2011-12 budget using the city's existing means.

“Every biennium, we’ve reduced services and cut positions,” Holmes said. “This isn’t something that we’ve not addressed.”

This year, the city manager combined several departments, flattening the organization. Most unions and all nonunion employees have agreed to no cost-of-living raises, and many employees also pay for 5 percent to 15 percent of their dependents’ health care premiums.

And although buying a new City Hall will add to Vancouver’s capital debt, the move is expected to save $1 million a year from the general fund, which covers most operating costs.

Vancouver is also reopening negotiations with all its unions to reduce health care costs by $1.1 million.

The city says union negotiations hamstring much of its ability to act quickly. About 70 percent of the city’s employees are unionized, and unilateral pay or benefit cuts of any size can’t be done without consent of the unions.

And under law, public safety unions cannot strike, so when teams reach an impasse, a state-appointed arbitrator decides the contract based on wages and benefits given at comparable agencies.

That’s something that may have to change, Mayor Tim Leavitt said.

“We are at a point where traditional steps, traditional behaviors in how we address compensation issues with our unions needs to be revisited,” Leavitt said.

The city is in contract talks with several of its civilian unions and the firefighters union; many of the specific details of what the city is asking for cannot be discussed.

However, Firefighters Union President Mark Johnston would say they have discussed taking pay cuts, but are “not prepared to unilaterally offer that up at this time.”

Martin said Vancouver needs to change things, but they’re going about it in the wrong way.

“They need to listen to employees at line level about where to cut costs and reduce inefficiencies,” Martin said. “At some point, there needs to be a complete restructuring. We need to rip the Band-Aid off, expose the flesh, clean it and rebuild. We need to start building from the bottom up.”

No new taxes

That new structure isn’t going to be built on any new taxes — at least this year.

The city council decided against any new levies or taxes until 2011 at the earliest. (A $20 car license fee, that would bring $2.8 million in 2011, may still be on the table).

Johnston said that just because the city council won’t raise taxes, like the discontinued business and occupation tax, doesn’t mean workers should accept big cuts.

“I don’t think it’s necessary to balance those policy issues on the back of the firefighters and police officers in the community,” Johnston said. “I don’t know if the business community pays their fair share of taxes in Vancouver.”

However, there’s next to no political will to reimpose the B&O, which would bring in nearly $10 million next year — almost the size of the deficit. Bringing it back has been discussed several times in the past decade, with the council choosing against the action.

“In the business community, many of whom are living on the edge right now, many would come unglued,” Leavitt said.

There is a movement afoot that may see many city services jumping ship from the general fund. Talks are under way about forming a regional fire authority, a metropolitan parks district and even a special transportation district. Martin said he wouldn’t be shocked to see a merger with the Clark County Sheriff’s Office some day.

Changing to a more ála carte set of taxes gives people a chance to see and say exactly where their money is going, Councilor Jack Burkman said. But forming those new districts will still have new tax dollars tied to them, he said.

Whatever the decision is, he said the city needs to get to work figuring out what it’s going to do soon. The business model for the city, he said, is broken.

“Either you eliminate the services you offer and/or you start having a conversation about what services you value and how you want to pay market rate for them,” he said. “This is the time of really tough choices.”

Andrea Damewood: 360-735-4542 or andrea.damewood@columbian.com.

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