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New police raises will cost Garden Grove more than twice as much – at least $3.4 million extra – than officials disclosed when it was approved in April, city staff confirmed in response to a Voice of OC analysis.
When the raises came to a City Council vote in April, officials publicly estimated it would cost $3.1 million over the next three years. But that did not include each year’s raise in the subsequent years of the estimate.
When the full cost is accounted for, the actual estimate is $6.4 million over the next three years.
“The first year’s cost, we don’t add that in every year because come July 1, it gets absorbed and that becomes the new base,” Jayne Lee, a manager with the city’s human resources department that prepared the staff report, said in a phone interview.
Asked if the total cost of the contract over the next three years would include the prior years’ increases, Lee said, “you’re correct to say that.” That complete amount is $6.4 million.
The method the city used to calculate the costs – and the $3.4 million undercount – resulted from negotiations with the police union, which is how the city determines how to calculate the financial impact of the raises.
The financial impact method “depends on what [the City] Council looks for, and what we agree to when we’re in negotiations” with the union, Lee said.
“Once we all agree on that methodology, then we apply it consistently. So sometimes the unions want to see a lot [of fiscal impact],” and other times that they’re not getting a lot, Lee said.
“This time, this is the methodology of calculating the compensation.”
For the past several years, Garden Grove has been spending millions more than it brings in each year.
“The city has struggled with structural deficit for over a decade,” the city’s finance director, Patricia Song, said at the city’s annual budget hearing on Tuesday. The most recent shortfall is $4.2 million, for the fiscal year that ended Sunday.
To make ends meet this year, the city drew more than $1 million from its reserves and delayed maintenance projects. A new sales tax is expected to bring in an extra $19 million per year to the city starting next year.
But with expenses, especially labor costs, growing faster than revenues, the city projects it will be back into deficits in less than three years.
“It is crucial for us to strengthen our financial sustainability right now while we can. Sustainability means fiscal discipline,” Song said.
At least one other element is missing from Garden Grove’s estimate.
Unlike other cities like Santa Ana, Garden Grove’s did not include the extra taxpayer costs for pensions from the raises.
Asked why, Lee said the pension cost impact had not been calculated when the City Council approved the raises, and that staff views those impacts as part of the city’s separate budget process that takes place in June.
“The growing unfunded pension liability is a concern, and is draining a lot of resources of the city,” Song, the finance director, said at the budget hearing.
The raises, which City Council members unanimously approved in April, grow each year like most public employee raises, with a 2.5 percent bump to base pay starting July 1, then another 2.5 percent bump a year later, and a 4 percent bump to longtime officers the following year, plus an extra $1,200 per year in credit for the department’s cafeteria that final year.
But the staff report shows the financial impact as virtually the same in years one and two – $1.1 million each – and then a reduction in year three to $812,000.
The Garden Grove staff report, unlike Santa Ana’s, also did not break down the cost from increasing benefits like the extra 4 percent salary bump for longtime officers and expanding cafeteria benefits.
Asked why, Lee said it hasn’t been Garden Grove’s practice to include that information in staff reports.
“We go to closed session to talk about a lot of those things, and so we don’t put that back into the staff report. We try to keep our staff report a little bit more clear and concise, in where it’s important” like base salary, she said.
The Garden Grove agenda also deviated from Santa Ana and the county government in not including a so-called “red line” contract that shows how the new proposed contract changes the existing contract. Without it, residents have to go line by line through dozens of pages to see where they differ.
Asked why it’s not posted, Lee said, “We normally don’t post that. We work it out with our [police union] and then that’s it.”
Garden Grove’s police contract also was changed since the City Council approval in April, and the city has not disclosed the ways it’s changed.
The council’s action on April 9 authorized the city’s human resources director “to agree to any final language revisions agreed to by the parties” that are not “financial changes.”
The contract was changed after the City Council approved it and did not come back to the council for approval, though the full final contract is posted online, Lee said.
“Hardly any changes are made. A lot of times, we don’t attach the final [contract to the public agenda] because it’s not ready,” Lee said.
Asked for a list of changes between what the council approved in public and the final contract, Lee said one wasn’t available.
“I don’t think it exists,” she said.
Nick Gerda covers county government and Santa Ana for Voice of OC. You can contact him at email@example.com.