INSIDE THE 2013 BUDGET NUMBERS IN HUDSON: The Promise of Merger Realized or Forfeited?

S. David Worhatch Published:

Let’s go inside the numbers of the 2013 budget approved by City Council on December 19, 2012.

The City of Hudson, Ohio, will spend over $71,000,000 in 2013.

(Source: http://oh-hudson.civicplus.com/archives/51/Council%20Mtg%20Agenda12-19-12%20Revised.pdf.)

Most of that figure consists of unavoidable expenses, such as debt service costs and specialty funds or the costs of operating our electric, water, and sewer utilities. After taking away the net operating funds set aside for such purposes, we are left with $28,392,260 in general fund and special revenue fund resources to operate the city government.

Hudson Township and the City of Hudson Village merged in 1994.

The “promise” of the Hudson Merger Commission in 1993 was that efficiencies would be achieved over time, as a combined local government would eliminate duplication and overlapping of services then provided by two different co-existing forms of government.

The 2013 budget for the City of Hudson, Ohio, marks the 20th budget for what the proponents of merger euphemistically called “One Hudson.”

Have we made any progress in eliminating duplication and overlapping while providing services more efficiently, as promised, after merger?

The total budget for the four-and-one-half square-mile City of Hudson Village in 1993 was $18,039,139, of which $11,750,000 was dedicated to the electric utility, leaving $6,289,139 for all other city government services.

The budget for the 20½-square-mile Hudson Township in 1993 was $4,588,979.

Each government operated in the black in 1992, i.e., total expenditures did not exceed total revenues.

Combined, the non-electric utility operating budget of the two local governments therefore was $10,878,118.

Apples-to-apples, after eliminating electric utility-related expenditures, the 2013 budget for the City of Hudson, Ohio, is projected at $28,392,260 -- or 261% of 1994 levels -- and assumes an operating DEFICIT of a little over $1,000,000.

At the time merger took effect, there were 47 full-time city employees who were paid a total of $2,010,575 and 31 full-time township employees who were paid a total of $1,270,742. That’s a total of 78 full-time local government workers earning, with benefits, a total of $3,281,317. By contrast, assuming no revision to the projected payroll for the proposed 2013 budget (City Council is planning on approving yet another across-the-board hike in non-union wages on January 16, 2013), the city will have 152 full-time employees earning in the aggregate, with benefits, a total of $15,169,064.

So what do those figures mean in relative terms?

Total full-time employees of “One Hudson” are now nearly DOUBLE the pre-merger census, i.e., 152 versus 78 – a full 95% increase in total full-time headcount since January 1, 1994, the date the merger took effect.

The total payroll impact on “One Hudson,” apples-to-apples, is even more remarkable. Total compensation, with benefits, paid to city workers in 2013 is projected at FIVE TIMES what the two local governments were paying a workforce of HALF the size! When expressed in these terms, that means that the effective impact on Hudson’s taxpayers of a doubling of the workforce has meant a TENFOLD increase in aggregate per-capita compensation remitted. Hudson’s population has not increased tenfold, or even fivefold, since merger took effect. But by just about any measure, our city government has!

Council members should ask themselves whether that sort of growth in local public sector employment (a) was wise and (b) should not be arrested.

Viewed a bit differently, one might inquire into the per-capita average increase in total compensation, including benefits, from January 1, 1994, the date merger took effect, to January 1, 2013, the date the proposed 2013 budget, if not revised, will take effect. Those figures, in my view, are shocking.

The Consumer Price Index – Urban (CPI-U) for the Cleveland-Akron Standard Met-ropolitan Statistical Area in January 1994 was 142.400.

(Source: http://www.bls.gov/ro5/cpiclevhistorical.pdf.)

In September 2012 (the latest reliable data available), the CPI-U stood at 216.851, an increase in the CPI-U over the intervening 18¾ years of 74.451. This means that inflation in our area averaged about 3.971% a year since merger took effect in Hudson.

To understand the significance of the per-capita average increase in total compensation, including benefits, to be paid to all full-time city employees beginning January 1, 2013, a comparison with the annual rate of inflation since January 1, 1994, is in order so the as-sessment may be expressed in real terms.

If aggregate payroll for full-time local government workers in Hudson, with benefits, in 1994 is assumed to include the ENTIRE $3,281,317 non-electric utility payroll of the two political subdivisions, the combined payroll cost taxpayers about $42,068 per employee at the time merger took effect.

By contrast, the projected aggregate 2013 payroll, with benefits, for the 132 full-time employees of the city who are not part of the electric utility’s distribution budget is projected at $12,504,167, or about $97,309 per employee.

Any taxpayer in Hudson must pause to consider the full implications of this figure. It means that the AVERAGE base compensation rate for EVERY non-electric utility full-time employee of the City of Hudson, Ohio, in 2013 will be $67,110 before tacking on benefits! And the pool of employees in that mix includes rank-and-file maintenance crew members, clerical employees, and administrative support personnel ... not just department heads, managers, and licensed professionals.

That’s an astounding 131.31% increase in per-employee compensation for our non-electric utility full-time staff . . . NEARLY TWICE THE RATE OF INFLATION OVER 19 YEARS! So we now have DOUBLE the number of employees earning compensation at DOUBLE the rate of inflation!

The question for City Council, of course, is whether the results of DOUBLING the size the public sector workforce servicing “One Hudson” at QUADRUPLE the effective pre-merger impact on the taxpayer is wise or sustainable for the long haul.

I reviewed the report of the Safety and Personnel Subcommittee of the Hudson Merger Commission. With the notable exceptions of two departments, the conclusion reached by commission members was that the needs of the city post-merger would be met “without increasing headcount.”

Granted, there have been changes and innovations that have justified expansion of the city’s workforce from 78 full-timers in 1994 ... and some of those changes were mandated when merger rendered the 20½ square miles of Hudson Township ineligible for continued road and storm water engineering and maintenance by the County Engineer. But where has the rest of the growth occurred?

City “Administration” (the City Manager and his staff) is up 121.43%. Engineering and Roads personnel are up 120.00%. Other Maintenance staff members are up 400.00%. There are SIXTEEN jobs that exist today that were not even on the books in 1994. And all other full-time employees of the city are up 103.57%.

So to recap, our city workforce has increased since January 1, 1994, at the average rate of 4.99% each and every one of the last 19 years ... total inflation-adjusted compensation paid to the full-time workforce for the city has DOUBLED on a per-employee basis in that same period of time ... all at a time when inflation rates have averaged less than 4% per year.

Let’s look at the numbers even more closely.

If City Council were to save but ten percent (10%) on the non-utility payroll line items alone, taxpayers would realize savings of $1,516,906 each year, or TRIPLE what the City Engineer says he needs in extra funds to fix our roads and avoid even more costly long-term road reconstruction costs on an annual basis over the next five years.

Do we really need to SUBSIDIZE our golf course operations to the tune of $80,000 to $100,000 a year out of funds originally approved by the voters for the exclusive use of Hudson’s parks?

Should we continue shoveling $75,000 more into the unproductive TecHudson business “incubator” project when $50,000 of that amount just goes to pay rent and we’ve not seen much by way of concrete results for the $250,000 we’ve already invested over the pre-vious three years?

Do we really need to be paying the Station Manager of our local access cable television station $128,000, with benefits, this year when the Executive Director of a similar station on our borders is paid 46% LESS for managing a staff FIVE TIMES as large as our own in servicing 2.25 TIMES MORE subscribing households ... particularly when City Council projects a DEFICIT of $35,000 or more for the station in 2013? Paying him a “market” rate salary therefore would save us about $40,000.

I’m not on City Council (though I used to be). So I don’t have the kind of time our seven elected council members should have, collectively, to look at each and every budget line item with a fine-tooth comb and find extra opportunities for savings.

Yet, with just these four items, I’ve found opportunities to save or reallocate a total of $1,731,906 in 2013 alone. This would wipe out the projected DEFICIT of a little over $1,000,000 and leave us with over $700,000 to cover other things or reduce the taxes collected from Hudson residents and businesses.

City Council is faced with critical choices in shaping Hudson’s future. Road maintenance and reconstruction projects no longer can be put off without pushing to future members of City Council the task of finding ways to fund much more expensive wholesale road reconstruction projects. Services that city residents have come to associate with living in Hudson are in jeopardy unless ways to economize are found soon. The alternative of hiking revenues through tax increases or road improvement assessments, of course, should be distasteful for every elected official, but would become necessary as the hidden costs of deferring projects are redeemed in the future.

City Council members should act decisively NOW and exercise the leadership role that our city’s charter reserves exclusively for this community’s elected local legislative leaders. The long-term consequences of continuing to act as if they were but honorary members of a board of trustees are just too troubling to imagine.

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