BALANCE SHEET BLOG – HOLLYWOOD, FL


Financial Troubles in Hollywood
July 20, 2011, 5:00 PM
Filed under: Budget, City Commission, City Staff

Financial Troubles in Hollywood

 My candle burns at both ends. It will not last the night; But ah, my foes, and oh, my friends – It gives a lovely light.
 Edna St. Vincent Millay

Shocking financial revelations about city finances have alarmed Hollywood residents, business owners, and employees alike. The city’s unchecked borrowing and spending that began years ago has run its course:  reserves are long gone and red ink is spread across the budget.   The city’s funds are so low that it no longer has access to the debt markets. Should we have hurricane damage, instead of borrowing money for cleanup costs pending FEMA payback, the city will have to find the funds somewhere in its own budget.  While many other Broward cities have millions of dollars in reserve accounts, Hollywood has saved nothing for a rainy day.

The big question now is whether Hollywood voters will approve restructuring city employee pensions.  A pension referendum is in the works for mid-September unless the unions ratify pension reductions before then, which seems unlikely.  The main problem here is that city commissions for years, right up until this year, have promised employees pension benefits way beyond what the city can afford.  One of the most burdensome is a city guarantee of 6% (in some cases 8%) interest on public safety retiree accounts for 15 years after retirement.

The Interim City Manager pulls no punches.  She says the city will have to “operate under a very different business model moving forward if we don’t accomplish pension reform and savings. Where else can you get a guarantee of 6% return on your money …with the City underwriting the amount even when the market tanks?  We have been solving our financial problems by increasing borrowing rather than cutting costs and we can no longer afford it.”

The “very different business model” would likely entail the outsourcing of basic city services and massive layoffs of employees. The unions have taken the position that the city is using scare tactics to cut salaries and pensions. We’ve been watching city budget decisions for years and have written about these problems many times. In 2009, we noted the investment return on the firefighters pension assets was only .86%.  The city’s contribution that year was $9.1 million, up from $7.6 million the previous year. When the market tanks and pension investments are down, the city is obligated to make up the difference.  Already we have many more firefighter retirees than we do active firefighters.  An arrangement like this is clearly unsustainable.

In short, combined with the economy, our elected officials have brought Hollywood to a financial crisis.  Problems of this magnitude do not spring up over night.  We’ve had a slow build-up, year after year, for at least a decade, with one irresponsible decision following another, the cumulative impact slowly building to today’s crisis point.

Why have our elected officials, with the support of the city manager, year after year continued to approve more and more benefit increases?  For more than a decade, the police and fire unions have worked hard to elect commissioners who would vote for this largesse. Their off-duty members would leaflet the large condo buildings the night before the election, using building access that was not available to candidates they did not support.  While benefit increases were a political calculation for many of our elected officials through the years, others seemed unaware of the fiscal impact of their decisions and not even curious about it.

As we see it, there are four separate areas that need our attention if the city is to move beyond this crisis:  (1) management changes, (2) city elections,  (3) taxpayer rate hikes, and (4) employee salary and benefit cuts.

Management
The long-time budget director and city manager have both left. We have a new Finance Director who is working hard to correct the budget errors of the past.  The search for a new city manager is under way and the Interim City Manager seems determined not to perpetuate errors of the past.  In short, the necessary management changes have occurred or are in the works.

Elections
City elections will be held in November 2012, little more than a year away.  This election will mark the transition to staggered four-year terms, so that in the future only half the commission will be up for election at the same time.  This transition is causing the commissioners from Districts 1, 3, and 5 to have an initial six-year term.

Voters will need to work much harder than in the past to get qualified people elected to public office.  We must be able to count on our commissioners more than ever to set reasonable policies and spend taxpayer money prudently. We can’t continue past practices that have contributed to the present crisis. No longer can we afford a commission that lavishes money on supporters and converts loans to grants.  2012 is the year to work on electing a qualified city commission. This means citizens will have to roll up their sleeves, recruit, and support knowledgeable, high-caliber candidates. No more electorate sitting on the sidelines as so many have done so often in past city elections.

Taxpayers
An urgent need to raise Hollywood’s fund balance before the city’s credit is further downgraded has propelled the commission to propose hefty tax and fee hikes for the fiscal year that begins October 1, 2011.  Although not finally approved, and subject to mandatory public hearings in September, the proposal is to raise the millage to 7.4479 (9% increase over last year).  Combined with the 2004 General Obligation Bond levy of .4449, our total Hollywood tax rate would be 7.8928.  This will be one of the very highest in Broward County. In addition, the city will raise the annual fire fee from $159 to $189. The proposed millage increase plus the fire fee increase represent 11% more than last year. Without question, residents and businesses will pay significantly more.

Employees
Even harder hit than residents are the city employees. They have already received pay cuts ranging from 7.5% to 12.5%.  These lower salaries will be the “new normal” for the foreseeable future. In addition, as mentioned above, the commission is poised to freeze employee pensions as of September 30, 2011 and offer reduced pension benefits thereafter.  If the unions don’t agree to the pension changes, the city can implement them only with voter approval in the September special referendum.

What Next?
All concerned taxpayers should pay attention to what city government is saying and doing in the days and weeks ahead. Union negotiations are expected to intensify and we hope they can be successful.  If not, we will have the pension referendum.   From burning the candle at both ends for a decade, we’re down to a pile of hot wax.


17 Comments

Concerned Citizen,

Let me be clear, I am NOT saying that such government employees as police and firefighters don’t deserve a good salary and benefits. I think the dangerous work done by both groups (and others, such as EMTs) is deserving of good pay and benefits.

When I made my comments, I was chiefly thinking of other governmental employees whose main hazard is avoiding the same paper cuts as those endured by private office workers.

That said, my point remains that, when revenue decreases, cuts must be made in the budget. That’s all. Perhaps you think those cuts should be made in other areas of the city’s budget. That’s okay with me, we are all entitled to our opinion on what is important. Note, however, that if that is the way you feel, you are actually agreeing with my central point, reductions must be made in expenditures when reductions are incurred in revenue.

I would also note that it is the citizenry who pay the bills, not the politicians or union leaders, yet the politicians, who are elected to represent us, are completely bought by union campaign contributions (or threats of political retribution). If your friend is a police officer, he should be ashamed of this unholy system that his union uses to extort pay increases and larger benefits. It is unseemly at best and entirely corrupt at worst. It is also why a large number of citizens who might otherwise be well disposed towards the police, firefighters, EMTs, etc. instead view their contract negotiations, and the grasping, threatening ways of their union bosses, with suspicion and disdain.

Finally, let me make clear that I don’t envy the pay and benefits of public employees. I made my choice to work in private industry and have no regrets. No, I simply question the ability to pay them when we don’t have the money. Raising taxes and fees to make up the difference is only adding to the pain for the privately employed majority who are living on reduced incomes or, worse, unemployment. None of this makes me happy. We are all having to contend with what may well be a fundamental “reset” of our salary and benefit expectations and it isn’t fun for anyone.

Comment by Thomas A. Hall

Mr. Hall, you make some interesting points. However I must disagree with comparing private sector benefits and pay with Public Safety benefits and pay. I realize that many people are guilty of this, not just you. Yes, it is true the private sector has suffered with the downturn in the economy. However, when the economy was booming and peoples? 401k’s were doubling, I was telling my police friends: I can’t believe you risk your lives for a pension?. This of course I said while my stocks were soaring. He explained to me that it was the tortoise vs. the hare. It was a slow and steady defined benefit plan while I had the possibility to make a lot more with my stocks and funds. Now that the economy is doing poorly, the slow and steady buildup to retirement doesn’t look too bad.
Now the public is envious and doesn’t want public servants getting more than them.

There are many other points that my friends bring up when I ask them how they get the benefits they get. It has adjusted my attitude in regards to these police and fire benefits?.
Here are the reasons as explained to me by some officers for decent pensions and salary:

-While they don’t get shot at all the time they never know what or where treats come from. The stress and ‘adrenaline dumps’ have a negative effect on their lifespan which is statistically shorter. There are apparently foot pursuits and car chases weekly in cities such as Hollywood which cause these adrenaline spikes and dumps. Then the numerous injuries sustained from hopping fences, fighting with criminals etc…
Most private sector employees, including myself might sporadically get a paper cut or some carpal tunnel syndrome.

-There’s the PROBABLE not POSSIBLE exposure to diseases. MRSA, TB, HIV, HEP A, B, C are everywhere in criminal society. Prostitutes, drug users/dealer, homeless, and just plain scum have these diseases. Officers/Firefighters don’t always have the time or chance to put on a pair of gloves and a mask, unlike workers in a controlled medical environment such as a hospital who almost always have the ability to put on protective equipment. Ask a couple Police/Fire personnel if they or someone they personally know has been exposed to a disease recently. Chances are the answer is yes. After these exposures, the personnel must be put on drug regiments and cocktail to help or prevent the disease, sometimes up to a year, unless of course it’s fatal.

-There is no pay/benefit for being on call. There are many different jobs/duties within the police/fire departments that require employees to be on call 24 hours a day for weeks or months on end for special situations. Some examples are: SWAT, special Detectives, Hostage Negotiations, Dive Team, Traffic Homicide, HAZMAT, Recovery Teams etc?
People in these positions have to put their private life on hold to a certain extent while on call; No out of county trips, drinking, driving with other people etc?
-Working holidays, weekends, shift work and hurricanes. While I am with my family on holidays, there are always many cops working. It doesnt matter the holiday or what time of day (3 am) there are cops and firefighters away from their families protecting us. Yes, I know there are private sector jobs that work weekends and holidays. But when is the last time a private sector employee was called out on Thanksgiving to deal with a crime scene of a family murdered and then had to go notify the rest of the family? Yes, I know that many businesses try to open after hurricanes and get employees back to work. But the Police/Fire personnel are there before, during, and after the Hurricane. Most of them go to a 12 or 24 hour shift during these times; And many of them away from protecting their own families and homes.

-Putting 9.25-9.5% into their pension. Most private sector employees put like 4-6% into a 401k and the companies match. Each officer puts in almost double than most private sector employees.

Back to the point, while private sector cuts back as business goes down. Business in public safety is going up! There is more crime and calls for fire rescue service. More people are turning to crime as the economy gets worse. More people are using fire rescue as a personal doctor or chauffer service to get to the hospital. They are busier than ever and their job is more dangerous than ever. This is not a time to cut public safety. That should actually be a top priority for every city. The city of Hollywood is not a business. It is a government that has the responsibility to provide its’ residents with public safety services. Everyone keeps saying that taxes aren’t the answer. They may not be the only answer but they are definitely a part of it. When everyone’s house values were climbing along with their taxes no one was complaining about it. Now that values are dropping people want to pay the tax amounts they were paying in 2001! That is not possible. Cities have grown during the past 10 years and need more money to sustain all the services. Instead the City of Hollywood is saying: Ok, everyone wants the same police protection and fire service and pretty parks and art centers and amphitheatres, and wireless systems that don’t work, and pretty water towers so instead of making the residents pay their share, we will take it from the employees’ paychecks! This is crazy. The amount being cut from the average employee’s pay EACH WEEK is more than my taxes would go up for A YEAR! How is that fair? When I bought my house, I knew taxes go up yearly, and I anticipated it because I want the services that came with the taxes. YOU CAN’T HAVE the same level of services for less money! So, the City of Hollywood is in effect, making the employees PAY from their paychecks for the services the residents receive!

We have to curb the frivolous spending by the Commission i.e. Water Towers, business grants, CRA, amphitheatres, new parks, wireless systems etc…The city didn’t need all these luxuries. What’s the point of a big screen TV when you don’t have electricity?

We shouldn’t punish the hard working, dedicated employees who chose the city of Hollywood to work at.

Comment by Concerned Citizen

The whole room heard her say it. I stand by what I heard and wrote.

Comment by Charlotte Greenbarg

Ah, the trolls speak…and, of course, lack the courage to be identified by name. Everything I said was true, and remains true in spite of the angry speculation posted by “just the facts.” However, out of respect for the forum, I went to the shrm.org site as suggested. What I learned is that the national average pay increase last year was 2.5 percent and is projected to be 3 percent this year. Since wages dropped in most of South Florida (excepting health care) by far more over the last three years, these slight raises will not even return wage earners to their pre-2007 salaries, much less represent an actual raise in pay. Worse yet, national averages do not reflect the unique effects of the economic downturn on our local economy. As someone said, the salary bar has been reset at a new, lower reality.

Interestingly, at the conclusion of the shrm.org article, there was a text box noting that economists are downgrading their estimates for growth through the second half of this year to between 1.5 and 2 percent. With this kind of “growth,” wages and jobs are going to be depressed for some considerable time to come since we need 3 percent or greater growth just to keep up with the growth in worker population.

I worked in government for nearly 15 years before entering the private business world and, by observation, can confidently state that every small business owner, and most of their employees, that I’ve known works twice as hard as the busiest government employees. It is true that in a growing economy, the business owner also reaps the blessings of that hard work, but it is the small business owners who provide the jobs and taxes that support the government workers in their more secure positions. When the businesses hit hard times, they cannot pay as much as they once did in taxes and fees. Ergo, the funds for government worker’s jobs dry up and the “guarantees” given them by union-bought-and-paid-for politicians suddenly can’t be honored.

This is exactly what is happening in Hollywood. One need merely look at the empty storefronts and boarded up houses to understand that businesses are suffering, jobs are being lost, and with them, incomes are being reduced. This has to affect the revenues of the city. As revenue decreases, cuts in spending have to be made. The single largest cost to the city is, I presume, labor. There is no way around the fact that less income for the city means less money to be spent on city employees.

Ad hominem attacks cannot obscure these facts of life in the real world.

Comment by Thomas A. Hall

Charlotte, you are incorrect. No one stood up and said they will retire at 52 at the HCCA meeting. The new current retirement age at Hollywood is as follows:
Age 65 with 7 years of service
Age 62 with 25 years of service
Like “Fed Up” already said, that is with an employee contribution of 9% of their paycheck.

Mr Thomas A. Hall, your salary and income “facts” are incorrect. From the highly regarded website http://www.shrm.org “Most U.S. Employers Expect to Give Pay Raises in 2011”. If your pay was reduced by 40 percent, that means you probably got fired for incompetence and had to work at McDonalds since you lack a college degree.

Everyone complains about gloom and doom yet the stock market continues to rise. Good people are getting good jobs. The only people complaining Mr Hall are people like you. Go back to college and get a degree, then, an only then, will we hire you.

Just the facts please.

Comment by Just the Facts

Discussions of the “fairness” of pay cuts for city employees drive me crazy. I appreciate the service of the code enforcement officers, police and firefighters and, especially, the new guys handling water and sewer service (After years of dealing with complacent incompetents, it’s great to meet with guys who have a clue on how to fix the ongoing drainage issues). However, everyone I know in private industry has worked for anywhere between 10 percent and 100 percent less than they did in 2007. My own income has dropped by 40 percent in that time. How is it that government employees expect not to be affected by this drop in income by those whom they serve and who pay the taxes on which they feed?

Several of my friends have lost everything: homes, cars, pensions and investments. Families have split up under the stress of these losses, yet public employees assume that they are not to be affected by these same financial forces? How, exactly, do they justify such foolish thinking?

This is a buyers market. If they don’t want to agree to the necessary belt tightening, there are many others who would welcome the opportunity to have their jobs, I’m sure. Even with, say, a 15-percent reduction in pay and a smaller benefits/pension package, I suspect these jobs look like a dream for many of the unemployed here in South Florida.

Finally, in the specific case of police officers and firefighters, nearly every one I’ve ever known worked extra details funded by businesses or, in the case of firefighters, operated a second business of their own on their many days off between shifts. Perhaps these opportunities for salary supplementation have been reduced during these tight economic times, but these city employees have historically gained a great deal of financial benefit through these “extracurricular” means–a benefit afforded to them by virtue of their chosen profession and unavailable to others. They would be wise to remember this when determining their future course.

Comment by Thomas A. Hall

At the HCCA meeting on Monday, the audience reacted predictably when a city employee complained that she’d have to work until she was 52. That statement and that attitude illustrate how wide the gulf is between some public employees and reality.

Comment by Charlotte Greenbarg

Sara, why do you delete any posting that doesn’t agree with your “political” views? Is this an non-biased blog site or do you just post the things that YOU agree with? It is clear and evident that you are anti-City of Hollywood and against the Hollywood employees. We are fed up with the way we are constantly bashed about our so-called high salaries and pensions. We make LESS than Broward County workers. Also. what is NEVER mentioned in these blogs is that we contribute 9% or our pay to our pension. Funny how that is never mentioned. So please Sara, go ahead and delete this message because you don’t agree with it. There is no foul language in this blog, yet you’ll delete it anyway. Fair and balanced you are not!

Comment by Fed Up Employee

The part about the “Hollywood WiFi”- I know that many employees and management who work in IT were strong opponents to the system, predicting it would NEVER work. Its the people in charge who pushed it forward i.e. City Commission and Manager. Secondly, we need to stop comparing Private Sector Jobs to Public Safety Jobs. When is the last time a private sector employee had to work every holiday, weekend, HURRICANE, get called out at 3 AM, get exposed to toxic fumes, MRSA, HIV, TB, have to go on a drug cocktail because of an exposure to those diseases, or not know if they will be going home at the end of their shift? That is what Police/Firefighters DO! It’s not all bullets and fires, it’s the other things, including a 12 year shorter life expectancy than average. ALL of them signed up with this in mind and they did it with the promise of a good NOT LAVISH retirement for the shortened life they will have.

So now, the employees suffer because the elected officials and city manager went overboard on $30? Million for the Arts Park/Theatre, $15 million NON-Working Wifi (including the new wireless water meters that still need to be read by meter readers,, $700,000 water tower paint job and non working clock, how many other wasteful projects are we forgetting?

Wait to see what caliber of employee, Police Officer, Firefighter you hire with the lowest benefits/salary in Broward County. You will get the ones that COULD NOT get hire elsewhere so you must lower your standards. That happened before….they were called the Miami River Cops.

Comment by Concerned Citizen

The capital markets have spoken – that’s where the rubber meets the road. It’s happening the world over – governments are being reigned in. Hopefully it is not too late.

Larry Legg, CPA

Comment by Lawrence Legg

Regarding electing a qualified Mayor and Commission in 2012 that will serve the City in a responsible fiscal manner, the electorate is handicapped by a districting system that allows the voters a choice of only two of seven on the City Commission (Mayor and their own district Commissioner). As a member of the recent Charter Review Committee, I and a minority of my collegues tried to get a Charter amendment that would have kept the districting model but allowed for voting at large for ALL candidates. This Charter modification failed so now we are stuck with the same parochial districting system in Hollywood. Voters should still look closely at all district races in 2012 and find a way to support those candidates that will bring fiscal responsibilty to the City even if we can’t vote for them.

Comment by Terry Cantrell

Pete Brewer’s comment speaks to a financial reality the city soft-pedals, which is that CRAs soak up tax dollars that otherwise would replenish the general fund. Speaking of: Is there an update on the ‘debt relief’ requested by that white elephant project a/k/a the Holocaust Documentation Center downtown? Is the city going to throw more good money after bad, call it CRA funds, and deny it impacts tax revenues?

Comment by Anonymous

The mismanagement of the city of Hollywood is shocking. What is even more shocking is that some of the people who sat on the commission and were responsible for the present financial plight of the city are still there and now are supposed to vote on measures to rectify the sorry state that they helped create. I believe it is time for the present commission to resign, or be forced to resign, and a new commission be elcted.

Comment by Paul Klein

James, you fail to acknowledge that many of these city employees are also Hollywood residents. We have endured a double hit. This challenging period will be successfully navigated and survived if we work together to ensure the employees and residents receive a fair and equal deal in this negotiation.

Comment by b wilk

The only way this City can survive is either do away with the CRA’s or at least shrink the boundaries of the Beach CRA which has millions to spend on special pet projects. The Beach CRA has added recently the Palms and the Trump Towers so losing a few million to the City would not hurt their bond rating!!

Comment by Pete Brewer

We are a city of 144,000 people in 59,000 households. The median household income is below $11,000 while the per capita income is about $22,000, which means there is very high income disparity among our residents.

To say “Even harder hit than residents are the city employees. They have already received pay cuts ranging from 7.5% to 12.5%” should be tempered with the realities of the economy in which we live. Many if not most residents have had significant “income adjustments” in recent years, some since Wilma, through job loss, capital loss, slow markets, low returns, and fraud. City-employee incomes have advanced during these years with much greater job-security than in the private sector.

While I commiserate with the plight of City employees, we should recognize that they are now being asked to relinquish gains which the most of the City never enjoyed.

Comment by James Bullock

Excellent analysis, as always. It remains to be seen if the unions will agree to the changes, or if money will have to be spent on an election, and then, whether the citizens will trouble themselves to vote.

The real danger in a demoralized, disgusted electorate is the loss of everything that makes a city liveable and makes a democracy viable.

Comment by Charlotte Greenbarg




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