Hermosa Beach approves annual budget
by Ryan McDonald
The Hermosa Beach City Council approved the final budget for 2019-20 at its Tuesday night meeting, which included appropriating money for new positions that staff said are needed to meet growing demands on the city’s employees.
Councilmembers voted 4-1 to approve a budget with expenditures just north of $40 million. The city is in the black, and continues to put aside money for the its “rainy day” contingency fund, which now stands at more than $6 million.
The lone no vote came from Councilmember Hany Fangary, who said he was concerned about the long-term costs associated with creating new positions, including a deputy city manager and a police services officer. But the majority was convinced both that the city could handle the costs associated with the new positions, and that they were necessary for the city to address ongoing needs and future goals.
“Times change, expectations change, challenges change. Staffing needs to respond,” Councilmember Justin Massey said.
The new positions, particularly the deputy city manager, became a point of controversy late last month following a study session for the budget, during which City Manager Suja Lowenthal unveiled a proposal to create an assistant city manager position. The position would have had a total compensation, including both salary and benefits, of up to $219,000. But it was incorrectly reported that the $219,000 figure included only salary, with benefits presumptively pushing total compensation higher still, and some residents recoiled.
According to the most recently available public employee compensation data, more than half a dozen current Hermosa employees cost the city at least $219,000 per year. Almost all of them, however, are police officers whose compensation includes not just salary and benefits, but extensive overtime. Coincidentally, Lowenthal, hired as city manager last summer, earns a salary of $219,000, which is in line with the amount received by Tom Bakaly, Hermosa’s last city manager to serve a full year in office.
Fangary and some residents brought up the example of neighboring Manhattan Beach, where, in 2016, then City Manager Mark Danaj lobbied the council to create an assistant city manager position. He brought on his former colleague Nadine Nadler, and later convinced the council to float a $2.3 million low-interest “bridge loan” to Nadler so that she could relocate from the Bay area and buy a home. By January 2018, Manhattan’s City Council composition had changed, in an election driven by concern over excessive employee compensation, Nadler was gone, and Danaj had been fired.
Lowenthal said that, in the weeks following the budget meeting, she met with community members and took another look at staffing. For the budget proposed to the council Tuesday, she submitted a revised request for a deputy city manager, rather than the assistant position. Under procedures for setting salaries for municipal employees, which are based on ranges from comparable cities, the deputy city manager would earn a salary of between $123,312 and $142,764.
The council did not automatically embrace the more affordable option. Mayor Stacey Armato had previously questioned the cost of the added administrative position, and appeared split over how to vote. At one point, she joined Mayor pro tem Mary Campbell in asking whether it would be possible to delay a vote on the position for six months until the mid-year budget review. (Like other cities, Hermosa arranges its budget around a fiscal year, beginning in July, rather than a calendar year.)
“If we could wait until the mid-year budget, I think the optics of it are better. You would have been here over a year, and would have fully fleshed out everything in the city,” Armato said to Lowenthal.
Lowenthal said her recommendation for an added administrative position was consistent with those of her predecessors Bakaly and Sergio Gonzalez, and was made more urgent by mounting tasks that have gone unmet by past administrations and councils.
“Could it possibly wait? I think it’s similar to our deferred maintenance that we have been struggling with. Sure, we can wait for anything. But then we pay for the consequences. In all honesty, if I thought it could wait, I would have brought it forward to you at mid-year,” Lowenthal said.
The debate over Hermosa’s budget mirrors a larger one going on throughout California over public employee compensation. In particular, there is growing concern over whether pensions and post-retirement healthcare benefits, which have all but vanished in the private sector but remain a critical part of enticing people to work in government, represent a long-term threat to municipal finances.
Finance Director Viki Copeland said she was confident that the city would be able to handle the added salaries and retirement obligations the new positions entailed, and is also setting aside money for future pension obligations. And Lowenthal addressed some of the concerns brought up by the Manhattan example by saying that the deputy city manager position would be selected through an open recruitment process. But she also evinced resentment at the notion that work in the public sector is less challenging.
“There is something about a very high profile public service role that is almost up for grabs. Individuals are certain they know far more about what it would take to run this city. And if that were the case, if it were that easy, I think we wouldn’t see the challenges that we see across cities, at least in California,” Lowenthal said.
The budget debate reflected deeper disagreements over exactly how many of those challenges it was appropriate for city government to meet, an issue unlikely to be settled with a single City Council vote. Not coincidentally, the most strident opponents of the added positions tend to have more limited view of the things on which Hermosa needed to be spending its money, while the council’s current majority evidently sees a wider slate of needs.
“As a city, we not only have operational challenges, the day-to-day stuff that the acting Chief of Police handles, that Community Development Department handles, that the Public Works Department handles, but we have significant organizational challenges, in terms of structure, in terms how work gets done, in terms of how our department heads deliver on the expectations of our residents,” Massey said.