Sunday May 4

Staff compares Palo Alto, Vallejo budgets

Report finds failing housing market hurt the East Bay city

By Melanie Carroll / Daily News Staff Writer

As Vallejo appears heading toward bankruptcy, Palo Alto's finance committee is slated to compare its financial picture with that in the East Bay city in what may be offered up as a cautionary tale.

The Solano County city employs 463 full-time employees, while Palo Alto has 508 workers, not including employees in the library and community services departments, according to a report from City Manager Frank Benest.

The analysis shows that while Palo Alto employs more people, Vallejo spends proportionally more on salaries and benefits. The East Bay city that's home to Six Flags Marine World and more than 121,000 residents spends 78 percent of its budget to pay employees and their benefits; 73 percent of the total budget goes toward public safety.

Despite weeks of negotiations with police and fire unions, Vallejo officials failed to reach any agreements aimed at alleviating the city's budget woes.

"Fortunately, the city of Palo Alto is fairly far removed from the extreme fiscal conditions Vallejo faces," the report finds.

Palo Alto expects to spend 65 percent of its 2007-2008 budget on paying its employees and benefits; 52 percent of the total budget is earmarked for public safety costs.

Former Palo Alto Mayor Bern Beecham said Vallejo's budget was largely consumed by police and fire costs, and that the union offered little flexibility in the matter - a significant contributing factor to the city's likely bankruptcy. To illustrate costs between the cites, a firefighter in Vallejo has a starting salary of $80,300 while the Palo Alto counterpart would make $63,900 during the first year before overtime, according to the report.

While Palo Alto relies on property tax to provide 15 percent of its annual budget, Vallejo counts on the same tax to provide 23 percent. When the housing market went south in Vallejo, the city felt the pinch.

"Vallejo had a lot of trouble with housing," Beecham said. "We have always been fortunate to have Stanford Shopping Center," which helps provide additional tax revenue, he said.

Vallejo provides its employees and their families with health care benefits through the California Public Employees' Retirement System, and offers "the most expensive plan available and which Palo Alto has discontinued," according to finance committee report, which concludes that the East Bay city seems unlikely to change its benefit structure.

Both cities do offer similar retirement benefits, according to the report. For example, in law enforcement, both cities allow a police officer at age 50 the option to retire with 3 percent of his salary multiplied by the number of years of service; a 50 year-old officer with 30 years under his belt can receive up to 90 percent of his salary during each year of retirement.

Council Member Pat Burt said he hopes the city will discuss these and other benefits with its unions to come up with alternative compensation packages that could include higher salaries while offering smaller retirement benefit packages.


E-mail Melanie Carroll at mcarroll@dailynewsgroup.com.