City of Portsmouth, NH FY 2011 Budget Issues and Recommendations. Association of Portsmouth Taxpayers Updated May 8, 2010

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1 City of Portsmouth, NH FY 2011 Budget Issues and Recommendations Updated May 8, 2010

2 FY 2011 Budget Issues and Recommendations Association Mission... Slide 3 Top Areas of Concern Department Overviews and Recommended Actions School Department Fire Department Police Department Municipal Department Additional Recommendations For More Information

3 Our Mission The Association is a nonpartisan organization dedicated to advocating for the Portsmouth, NH community its taxpayers and all residents. We believe that tightly controlled spending is necessary - regardless of current economic conditions to keep Portsmouth affordable, reduce waste and deliver better value to its taxpayers. The Association has conducted a review of the proposed FY 2011 city budget and is available to discuss any of the following recommendations in greater detail. 3

4 Top Areas of Concern - 1 Too many public employees City departments are overstaffed - there is one city employee for every 20.6 residents. The Association has identified reductions that can be made without impacting critical services. Associated compensation costs are excessive and escalating City employees receive compensation packages that are in many cases excessive far beyond comparable jobs in the private sector. These costs cannot be justified in any economy and warrant immediate review. The state is pushing an ever-increasing percentage of these pension costs to the local taxpayer, and as a result other community wants and needs cannot be funded. Total city employee compensation is not reported in a straightforward manner, making it difficult to clearly see costs being carried by the taxpayer. Salaries, along with all additional benefits (retirement, medical benefits, paid vacation, sick time, etc.) should be reported as a total employee compensation package in order to more accurately inform the taxpayer. 4

5 The Top Areas of Concern - 2 City Council is making FY 2011 budget decisions without understanding tax implications of major projects still pending. The Council failed to set aside funds - estimated at $50 million to $137 million - to fund a necessary upgrade to the existing water treatment plant, or a new plant. As a result, the taxpayer can soon expect dramatic water bill increases - $2,000 per year or more. Other major projects are still pending. Taxpayers have the right to know their total tax and fee obligations before final approval of the operating budget. As city tax rates continue to increase, taxpayers are also absorbing mounting taxes and fees at the state and federal level, creating an unsustainable tax burden. The local business climate is also suffering. A difficult economy, combined with high city taxes and fees, has already forced many business closures. Portsmouth has become unaffordable for many, prompting them to leave the city. 5

6 Current Situation City Manager John Bohenko proposed an $87,803,155 budget, and property tax increase of $1.28/thousand. City Council recommends 96% of the FY 2010 budget, also resulting in a property tax increase. The recommends 90% of the FY 2010 budget a 10% decrease - resulting in a property tax decrease. 6

7 Actual Portsmouth Budget without County Tax 81,000,000 Budget 71,000,000 Budget if restrained to inflation 61,000,000 51,000,000 41,000,000 95/96 96/97 97/98 98/99 99/00 00/01 01/'02 02/03 03/'04 04/05 05/06 06/07 07/08 08/09 09/10 Portsmouth population decreased steadily during this time frame, and from was down 21%. (US Census, 7

8 Budget Increases Are Outpacing Inflation Total Percentage Increases, Without County Tax FY UP 95% 8

9 School Department Overview 1 A school budget of $37,258,943 has been submitted, reflecting a 2.8% increase over FY2010. Portsmouth s cost per pupil is far above the national average. Including all funding sources (e.g. federal and state) proposed FY 2011 spending is $17,658 per student versus an estimated $16,760 in FY If special education funding is removed from this calculation, spending per student is still $13,253 in FY2010, with a proposed increase to $14,461 in FY2011. This is compared with $9,725 in total costs for the highly regarded Montessori school in Stratham, NH and $9,850 for the Tidewater Waldorf school in Eliot, ME. Teacher compensation is the major cost driver, and staffing levels warrant review. The 2011 School Budget document states that average class size is 18 students. However, other studentteacher and student-employee ratios provide additional insight, and indicate possible over-staffing. Total number of teachers including those not paid through the General Fund is 283, so the total student - total teacher ratio is actually 9.28:1. Total full-time employees (FTE) in the school department is based on available information, and we believe it is actually higher. However, even using that figure, the total student FTE ratio is less than 7:1. 04/25/10 9

10 School Department Overview 2 There is opposition to increasing the student-teacher ratio, but two points deserve attention: There is no published research linking class size to student achievement. Outstanding student performance is observed in districts and countries where the ratio is much higher than in Portsmouth. Teachers are well paid, with average annual compensation (including benefits) of $82,000 year, and summers off. This far exceeds full-time salary levels in the private sector. Despite very high spending, Portsmouth is a District in Need of Improvement. Portsmouth Middle School and all three elementary schools Little Harbour, Dondero and New Franklin have failed to achieve the federal standard of Adequate Yearly Progress (AYP) AYP Report 04/25/10 10

11 School Department Spending Trend 36,100,000 31,825,000 27,550,000 School School if restrained to inflation 23,275,000 19,000,000 95/96 97/98 99/00 01/'02 03/'04 05/06 07/08 09/10 11

12 School Department Recommendations Immediate Actions FY 2011 Budget Teacher compensation is the major cost driver and requires immediate evaluation. City Council should direct the negotiator to immediately open salary negotiations. Salary reductions are imperative, and long overdue. Clarify the number of teachers, related professionals, and their roles. Evaluate staffing levels in each area and determine if resources can be allocated more cost-effectively e.g. using paraprofessionals rather than teachers to provide reading instruction, tutoring. Administrative staff numbers are high; consolidate positions where possible and eliminate non-essential jobs. Explore charging student fees for participation in sports and other extra-curricular activities that require paid coaches and sponsors. Establish a fund to help students who wish to participate but cannot afford it. Evaluate student transportation costs. Large passenger buses operate daily, usually well below capacity. Many districts are consolidating bus routes and extending walking distances to save costs, spare the environment - and encourage much-needed exercise! Explore ongoing school infrastructure costs and consider alternatives such as VOIP to cut telephone costs. Longer Term Revisit status of the new middle school and review impact against current and forecasted financial pressures. 12

13 Fire Department Overview Since 1996, the Fire Department budget has increased by over 100%, 50% higher than inflation for the same period. Fire Department personnel are well paid, averaging over $67,000 (not including benefits). Note that the average HOUSEHOLD income in Portsmouth is only $63,000. Of the 60+ Fire Department employees, 17 make in excess of $80,000 per year 6 make from $99,000 to $118,000 Over $1,000,000 is paid annually for overtime, stipends and other payments on top of published salaries. Fire Department union benefits include: Medical insurance valued at more than $15,000 per employee. A generous retirement structure that exceeds what is typically offered in the private sector. In addition, Fire Department schedules give some firefighters enough time to take on second jobs. Cost-saving measures such as part-time fire personnel have not been implemented. 13

14 Fire Department Spending Trend 8,000,000 7,000,000 6,000,000 5,000,000 Fire Fire if restrained to inflation 4,000,000 3,000,000 95/96 97/98 99/00 01/'02 03/'04 05/06 07/08 09/10 14

15 Fire Department Recommendations Immediate Actions FY 2011 Budget Assess opportunities to use part-time and volunteer personnel. Implement a hiring freeze and do not replace retiring personnel. Re-assess need for the fire boat and associated costs. Longer-Term Actions Align salaries and overtime with local private sector benchmarks. Renegotiate the retirement program to align with private sector programs. Align medical benefits with private sector programs in which costs are shared with employees. 15

16 Police Department - 1 Overview Since 1996, the Police Department budget has increased more than 85% due to escalating staffing levels and costly compensation packages that cannot be justified. Portsmouth has 3.2 sworn officers per 1,000 residents in the FY 2011 budget proposal, and 4.4 Police Department employees per 1,000 residents. According to the Department of Justice (Crime in the United States, 2008), New England cities of comparable size average only 1.8 sworn officers and 2.2 employees per 1,000 residents. Portsmouth Police Department spending is driven by a policing model called Community Policing. It is one of the most labor-intensive and therefore expensive methods of policing. As a result, department positions grew from 61 in 1985 to an all-time-high of 95 today even though Portsmouth population decreased during that period. Former Mayor Steve Marchand recognized that the Police Department was overstaffed based on an analysis of need-based Calls for Service data. After many blocked attempts, the Association just recently gained access (by paying a fee for this public information) to current calls data and is now running an updated analysis. 16

17 Police Department - 2 Overview Compensation for Police Department officers far exceeds the average HOUSEHOLD income in Portsmouth - $63,000 - and includes benefits unheard of in the private sector. Actual 2009 W-2 s reflect officer take-home pay up to $119,519. In 2009, 13 officers earned more than $80,000; two were paid for unused sick time. In addition, 8 earned between $90,787 to $218,161; two were paid for unused sick time. Chief Magnant s earnings of $218,161 included accumulated sick pay taken as cash. Additional observations support our over-staffing concerns: Portsmouth routinely dispatches multiple officers to routine calls, such as burglary reports. Staffing rota are inefficient, resulting in frequent and copious overtime charges. Portsmouth spends police efforts investigating crimes well outside its jurisdiction, such as possibly criminal Internet content, and using the Internet to ask criminals such as prostitutes and drug dealers to come into Portsmouth to be arrested. Serious crimes should be investigated, but when they are entirely outside of Portsmouth's jurisdiction, the Portsmouth Police should not be involved. 17

18 Police Department Spending Trend Budget Budget if restrained to inflation 18

19 Police Department Recommendations Immediate Actions FY 2011 Budget Activities that can be handled by volunteers should be cut as paid union positions. Crossing guards are a good start; other positions should be aggressively identified, such as youth advocate. Staffing rota can be adjusted so that officers can actually go off duty at the end of their shifts, and so that adequate vacation coverage is built into the schedule. Police staffing can be significantly cut by ending extra jurisdictional investigations, implementing more efficient detective practices, and increasing overall operational efficiency. Longer-Term Actions A zero-based budget approach should be used to assess the actual policing needs of Portsmouth and to rebuild the Police Department accordingly. 19

20 Municipal Department Overview The city submitted a $15,636,233 budget for Many cuts are currently under consideration, but they must go further in order to reverse excessive spending in this area over a number of years. The indoor pool is the focus of much discussion this year. It has been heavily subsidized by the city and serves a small percentage of Portsmouth residents. Recommendations The Association is most concerned with over-staffing and the related compensation costs; additional focus on this area is imperative. Cost-effective, creative staffing solutions should be explored in order to reduce costs, such as: Outsourcing some services to local businesses Engaging non-profits and volunteer resources Asking retirees to contribute some time to support city activities Seeking students and graduates eager to gain work experience as interns. The indoor pool is an a asset to the community, but must be self-sustaining. Ideally the facility will be turned over to a non-profit or private organization. 20

21 Municipal Department Spending Trend 17,250,000 14,500,000 11,750,000 Municipal (net of revenues) Municipal if restrained to inflation 9,000,000 95/96 97/98 99/00 01/'02 03/'04 05/06 07/08 09/10 21

22 The Additional Recommendations - 1 City Council should immediately request that each city department revise FY 2011 plans to reflect a budget equal to 90% of FY 2010 budgets a 10% decrease. Immediately open salary negotiations for any pending city contracts. Traditional retirement packages should be replaced going forward by 401(k) accounts aligned with local private sector benefits. Review the Citywide Overtime Audit, a report prepared by Matrix Consulting Group in 2006 at a cost of $60,000. A number of actionable recommendations designed to reduce costs were included in this report, and they should be acted upon if savings can be realized. 22

23 The Additional Recommendations - 2 Before approving the FY 2011 Operating Budget, City Council should inform taxpayers of their total estimated tax obligations including not only property tax increases, but also additional taxes and fees pending for the water treatment plant and other major projects. Adopt a zero-based budgeting approach to ensure all spending is clearly aligned with department objectives and resource requirements. This eliminates ongoing incremental increases that as we ve seen can dramatically escalate spending without delivering incremental results. 23

24 The Additional Recommendations - 3 Establish a spending cap that will control spending and increase focus on delivering high-priority, cost-effective services that best serve the community. This is particularly important in a time of declining, uncertain sources of revenue. Review transparency issues encountered during this budget process. In many cases, the Association was not provided with requested data required for an objective, effective budget review. 24

25 For More Information Bill St. Laurent President Telephone: