BILTMORE AREA PARTNERSHIP LUNCHEON
TUESDAY, SEPTEMBER 28, 2010

SPEAKER: Councilman Sal DiCiccio
SUBJECT: Update

I would like to talk about the budget issues. I am going to explain to you why and how we got here and what we can do to change things. I am going to lay out for you what is happening and why I don't think it is in the best interest of Phoenix, our businesses and communities and the long term direction we are going in. If you look at what has happened in the last 7 years in the city of Phoenix, as a matter of fact in the last 7 months, the city has imposed and raised taxes of a hundred million dollars. Small businesses fees are now paying over 7 million dollars more a year, even though we have been talking about even though we have been talking about retracting the amount of employees we have here. The reason this is all occurring is, - look at your water bill for example it is outrageous and if you own a business it is even worse. Your water bill has gone up 40% in the last 5 years. I had a conversation with the City Manager just this week about shifting employees. If you look at what is happening in the city of Phoenix, literally you are shifting the responsibility of solving the budget crisis on the shoulders of the public. You and your families are there to solve it, even though you look at what is happening within our own families, a lot of us in our community are just a paycheck away from losing our home or losing our businesses. We see a lot of things happening in our economy right now. You would expect the same things to be happening in city government. It is not happening.

Do not believe everything the government tells you. Our main motivation is to protect ourselves-that is what government is about. If you look at all the fee increases, all the tax increases, everything that has been occurring in Phoenix in the last 7 months, it has all been about protecting our employees. Our average cost per employee is $100,000/year and we have over 14,000 employees in the city of Phoenix. It is an unsustainable amount of money in order to compensate your employees. When I talk about average cost it includes health benefits, pension, the whole shebang. This includes police, fire, and all the way down to the janitors. There is only one of two ways to solve that. One, you cut your expenses which means you really have to ask for a real reduction in salaries from your employees, because it has grown dramatically in the last 5 years. Or, you go to the public and say you are going to raise more fees, more taxes, and your water rate. That is the path the city has chosen. It is a lot easier to literally to come to you and ask you for more money or demand more money because government is the only one who can do this. Businesses have to find ways of reducing their expenses when this happens. The city has chosen the path of least resistance. You may say you don't want to do this, but the employees of the city of phoenix literally run the show. You think we live in a right to work state. If you look at government employees over the years, they have been able to negotiate these incredible packages for themselves. In the past 5 years city employees expenses were raised $270 million. The average city employee is now making $17,000 more a year than five years ago. It is unsustainable. Our number once cost in Phoenix is employee cost. If we don't address the cost of labor, then we are constantly going to be coming to you and asking you for more money. You heard we went through massive layoffs in the city. It is not true. The amount of employees let go as of February of this year were 15. You heard 1500 were let go. In reality they were empty positions in the city of Phoenix, and not actual people. You heard we had a 3.2% cut in pay. In fact, the majority of city employees got a raise this year. 3.2 cut was in their expected pay raise. On July 7, we had a vote on step increases, or raises the employees would get over the next two years. I was only one on the Council to vote against it as I didn't think it was right at this time especially when everyone else is taking cuts in their own salaries and incomes.

Your property tax: The city is going to come to you in a year or two and tell you that they are going to have to raise your property tax and it is all related to the vote on July 7. We have two levels of taxes secondary and primary. Primary pays for your day to day operations and secondary pays for your mortgage and long term bond. We have to raise taxes to compensate for primary fund. If you voted for it, forget about getting reelected. So what happened about a month later is that the city of Phoenix took about 18.9 million dollars from that fund by lowering that rate and raising the primary rate. Basically took18.9 million dollars that year, out of that fund and moved it into operations. We are going to have to make up that money somehow. Everything we do relates to our labor costs. It is our number one cost. If we are not willing to address the cost of labor we are going to have a problem. You will hear we made majors cuts in departments, but what happened is that the employees in these departments were shifted to other departments. Primarily water. Now, we have to pay higher rates on our water to compensate for that.

We are looking at some good changes, but it is all low hanging fruit. If you really want to address the costs and really want to find a way to really restructure operations, you have to go for the whole tree. That means you have to enter into discussions that make people uncomfortable on the other side of the room. My job is to represent you, so it doesn't make me popular in the council when I want to go in and make changes that will put us in a better position in the city of Phoenix. This is not going to be done by me alone. I can only get the information out, so I need your help. One, you have to vote and get your neighbors and family members to vote. Two, when you get this information you have to pass it on. You have to create a discussion on this subject. The only way we are going to create change in Phoenix is when you decide you want it done. We need to speak in a language you understand which means transparency, have to fix things internally, and we have to look at a better place for the city of Phoenix to do business. We have to let the private sector do what they do best. We are not going to get out of this mess if we continue on the same path.

Questions:

1) Meeting/working with Unions? I meet with them all the time. They asked me if I was willing to work with them and I said yes, as long as you are willing to make changes otherwise we are going to keep on the same path here. You just can't keep raising fees and taxes you have to make changes. If you want to get reelected you don't do these things. Most of the people who turn out for the elections are public service employees. That is dominating a lot of the elections. Politicians protect the employees and the employees protect the politicians.

2) Right to work state? Over 90% of the City employees are unionized. They had collective bargaining. I was part of that in the 90'sand it worked well, but it has had a major shift in the past 5 years. This year with the economy the way it is, you would have thought it would be easy to go to an employee and ask that they take a 10% cut and no pay raise. The city didn't do that. The average compensation for a federal employee is $123,000. How does this work? It doesn't.

3) Compare services with other entities? You have to be able to compare your services with other entities. How do you know you are the best unless you have two or three others to compare to. As an example, we spent $34 million a year repairing automobiles. We have close to 200 employees in the City of Phoenix and that is what they do. We have primarily Chevys in the city, so couldn't we get bids from other Chevy dealers? How do we know that we are getting the best service and best value unless we have something to compare it to? We don't, so we have to be able to do that. We should look at contracting out some of our largest strategic areas, not police and fire though. We should look at the private sector. Parks as an example on the National level are mostly privatized. We should give the public an option. Nothing wrong with taking a look at that. We should look at public and private sectors being treated the same. The disparity between the public sector employee at $100,000 and private sector employee at $57,000 is about $43,000. We should look at public and government employees making the same as private sector employees. Do I think it will happen - not with the current system we have in place now.

4) 44th Street and Camelback project? On the northwest corner of 44th St. and Camelback, which had been a very controversial project, we have pulled individuals from basically a mile out. Compiled a committee of people who lived next to the property, who lived a ½ mile to a mile and half away. It impacts an entire community when you have something that is 17 acres. You have to have a well rounded view of what is going on. I asked the owners two things. One, don't start off at 100 ft, but start off at something you consider realistic. They came back with 56 feet, which is the normal commercial office zoning anyway in Phoenix. Right now they are allowed 36 feet. London Center can go up to 70 feet. We asked the owners of the property who are from Dallas to come into every meeting. They have been coming in every week to meet with people. I think the meetings are going well, do I think everyone is going to be happy out of that- No. But at the end of the day, do I think we are going to end up with a great product, I do. I think so, because if you get enough people in a room working things out, they are going to figure it out. Did we have some people in there that decided they didn't want to be precipratory? That's okay as people always have a choice. We have two choices. One, we could have gone with the process that is in place right now and that is going to like the Village Planning Committee, go the planning hearing office, to the planning commission to the City Council, or, and they can still do that, they can go through my process where individuals can come and talk to the property owner once a week, or they can do both of them. We have given people an opportunity to meet with property owners on a regular basis.

5) Why are you supporting a zoning effort at this moment that is going to give them entitlements, when you know that it is not going to resolve the final development plan-why not wait until your group is done and then go forward with the zoning? One, I am not supportive of anything yet until it is done. Am I inclined to try and get something done in that corner, yes. You have buildings that are C Class buildings-something has to be done. Do I feel that there is just a lot of personal animosity that has built up between certain neighbors and the owners of the property-yes. It is my job to get past that and try and find out something that can be done better. The current stipulation change that you are looking at right now is to go from 36 feet to 56 feet. 56 feet is what is normal in the city of Phoenix. They want to be able to do that. At the end of the day it comes down to is this going to be commercial use or multipurpose use. I would like to see a mixed use personally. Knowing what I know right now, the zoning change right now would be virtually impossible because there are so many people fighting on both ends of this thing. A Commercial office is a natural move, because there is already a commercial office there and they are basically asking for a stipulation change to allow them to have a little more height. I don't know what is going to happen with the zoning change, but I do know that people tend to fight these things. But I do know that this is a logical first step.

6) Why not rezone and change entitlement when economy gets better? 1) Do I believe a million square feet will be built there-no I don't. Because of the discussion groups, I think the size of the building will be brought down.

2) The common debate that goes on is whether or not is building or allowing zoning to occur a mile or two miles away will hurt your area or not. Does everything that happens have to happen in downtown Phoenix for there to be any growth, any type of development or any type of new business being created an where else? I think property owners have a right to figure out what happens in their area. I do know that that corner needs to have something done-it is a challenged corner and cannot continue to look the way it does today. It looks crummy and needs to look better. We need to do better there on that corner. It is a C building and no one wants to be in that building, so it needs to be an A-it will be better for the neighborhood.

7) Height & working with area? 56 feet is normal for any CO zoning. Looking at other properties along Camelback Rd they are clearly next to 17 acres. Do I believe that the neighborhood that is surrounding that really wants to work with the owners of that property. No Why, people came to the meetings and immediately walked out and I also wanted to use this area as a test case for the new law that made it easier to rehab buildings and they didn't want to work with me. I feel the city needs to move in a direction and if people want to come on board or not, that is their choice.

8) How many years till economy changes? We are putting things into place so that in 4 to 5 years when the economy changed they are ready to go. We may have to come back and redo things when the economy gets better, but we are getting things in place.