UPDATE: Healdsburg 'Open Letter' Was to Rebut Criticism

NOTE: This story was updated on Sunday, April 22, to add an explanation, as detailed in a Press Democrat article, for sending out the "Open letter from the city of Healdsburg"  last week.

The "Open Letter" was originally published in its entirely on Healdsburg Patch and is repeated below.

(Ed. note): As you may have heard, Healdsburg is facing a budget deficit and a pension fund shortfall.

The city has already cut 30 positions over the last few years and has asked staff to pay more into their own benefits costs. Utility rates are also going up.

Additional planned actions are a proposed half-cent sales tax increase measure on the November ballot, and a possible installation of parking meters in the downtown streets.

A public workshop on the parking proposals has been set for 6 p.m. on Thursday, May 10, at

Mayor Gary Plass and City Councilman Tom Chambers have submitted an "Open Letter to the Citizens of Healdsburg" to offer background and a status report of the city's situation and what steps are being taken to remedy it.

According to an article in Sunday's Press Democrat, the reason for the "Open Letter" was to rebut criticism about the city's approach to cutting pension costs contained in a letter to the editor of the

To read the Press Democrat story, click here.

Here is the original "Open Letter:"

An Open Letter to the Citizens of Healdsburg:

 As members of the City Council, we take our fiduciary responsibilities very seriously. We have been working diligently over the past three years to decrease operating expenses and promote sound financial practices. 

Recent inquiries and events have led us to the realization that we have not been effective in communicating our efforts to the public.  The purpose of this letter is to provide clarification and a brief summary of our actions to date.

It is important to begin by stating that a combination of factors has led to our fiscal challenges.  National and state economic conditions have impacted local spending resulting in decreased sales tax and transient occupancy tax (TOT) revenues. 

Property values have decreased leading to a corresponding decrease in property tax receipts.  Perhaps the most notable blow to our revenues is the state “raids” that have redirected revenues away from city coffers, most recently the dissolution of redevelopment agencies.  All of these dynamics, coupled with inflation, have affected the budget.

 Not all operating funds have shortfalls.  The Enterprise funds, including Community Services, Water, Sewer and Electric are balanced. 

While not meeting recommended capital replacement and reserve requirements, it is anticipated the pending utility rate increases will ensure the health of these funds over the next four years.  The current strength of these funds is a direct result of the Council’s implementation of rigorous financial planning.

 The general fund is most problematic, primarily due to its revenue sources and the issues cited above.  A deficit is projected for the current and upcoming fiscal years.  However, we are moving forward with a comprehensive strategy that we believe will strengthen the City’s financial position. 

This strategy includes a combination of revenue enhancements and budget reductions designed to ensure funding for the City’s core services.  Examples of the application of our strategy follow.

 Past actions of the City Council

1. Staff reductions.  Through a combination of attrition, layoffs and the elimination of vacant positions the City’s workforce has been reduced by 18%.  The City has gone from 137 full time and 20 part time positions to 113 full time positions and 16 part time positions today.  Additional layoffs are anticipated for the FY 12/13 budget.
2. Employee concessions.  There have been no cost of living raises for civilian employees since 2007 MEA and Mid-management members and 2008 for IBEW members.  In FY 09/10 the City Council successfully negotiated new contracts with three bargaining units and management staff to reduce benefits.  All non-safety employees are paying the 8% employee share of the PERS contribution.  In addition, these same employees are contributing 10% toward their medical premiums and have six unpaid furlough days per year.  Savings from the contract effective dates through the end of this fiscal year are estimated at $651,459.

 Police members have not had a cost of living adjustment since 2008. In 2010 police association employees began paying 8% of the 9% employee share of the PERS contribution, providing an estimated savings to date in excess of $110,000.  Fire employees are contributing 2% of the 9% employee share of the PERS contribution.

 Audited numbers FY 08/09 compared to FY 10/11 depict a total savings in employee salaries and benefits of $2,158,575.

3. Operational modifications.  Staff has been creative in cutting operational expenses and maximizing miscellaneous receipts.  Budgets for services and supplies have been reduced through a variety of mechanisms:  centralized purchasing, reuse and recycling of materials, reduction of inventory and renegotiated contracts with suppliers and consultants.  

Surplus vehicles and equipment have been auctioned, generating sales proceeds and reducing overall fleet maintenance costs.

 4. Revenue.  The City Council authorized an audit of TOT receipts.  Audit results indicate substantial compliance, but did reveal some calculation errors. While one case remains outstanding, the resolved cases have recovered over $143,000.

Current actions of the City Council

1. EPMC benefit elimination.  With the bulk of City’s employees paying the employee PERS contribution, the City is able to eliminate a retirement benefit called Employer Paid Member Contribution. Staff is expected to complete the meet and confer process within the next month which will allow the City Council to adopt resolutions revising the benefit in June.  The expected savings moving into FY 12/13 is $241,034.
2. Employee negotiations.  The City is currently engaged in negotiations with Police and Fire units.  The content of these discussions will not be disclosed to maintain the integrity of the bargaining process.  That said, the City Council cannot disregard the importance of parity among all units and good financial management.

 3. Shared/Contract services.  For the past year staff has been evaluating opportunities to contract for services with other government agencies.  These contractual relationships could result in Healdsburg utilizing another agency for services or, conversely Healdsburg providing services on a fee basis to others.  

In addition, staff is comparing the cost of providing services internally versus contracting with the private sector. Prior to making a decision it is critical to look at the quality and timeliness of service. Present considerations include:  fleet maintenance, building maintenance, laboratory testing and IT.

  4. Pension Side Fund.  On April 2 the City Council authorized the finance director to proceed with a refinancing of the pension side fund.  This will save the City approximately $918,930 over 11 years.

  5. Fire department.  On April 9 the City Council directed staff to spend the next year looking at alternate models to provide fire suppression and prevention services.  Among the options identified for contemplation: contract services, a fire district, and a joint powers authority.

  6. Revenue.  The City Council hired a consultant to conduct a ballot feasibility study to measure the community’s support for a potential half-cent sales tax increase.  The potential ballot measure is under Council consideration. Other ideas for revenue generation being explored are:  paid parking, assessment districts, fee increases and aggressive economic development programs.

  7. Second tier.  The City has obtained PERS valuations for a second tier to reduce retirement benefits for new employees.  As proposed, the second tier would provide a 2% at 60 formula for miscellaneous employees and a 2% at 55 formula for safety employees.  It also eliminates the “single highest year” provision in favor of calculating retirement benefits on a three-year average.  The second tier cannot be implemented without going through the collective bargaining process.

Future actions of the City Council

A primary focus of the City Council moving into the future is pension reform.  The pension elements that can be controlled locally (retirement formula, single highest year, etc.) are being addressed. 

Because PERS rules, regulations and retirement options are legislated by the state government, efforts must focus on all-encompassing reform at the state level. This is a goal that will not be accomplished without considerable determination. It will require a process focused on legislative action and transformation.  This Council is committed to pushing the reform agenda forward.

 In conclusion, be assured the City Council will continue to move the City toward financial sustainability. 

The decisions made to date have been unanimous. They represent the convictions of all five council members, regardless of political orientation, employment status and reelection bids. 

We are dedicated to Healdsburg and will continue to work cooperatively and responsibly for the benefit of all. 

Mayor Gary Plass

Councilmember Tom Chambers