Four Upland residents with extensive financial management and business management experience have called upon the Upland City Council to move ahead with city employee pension reform and workforce reductions.
All four expressed the view that if the city does not make meaningful, substantial and immediate inroads on the amount of money it is shelling out to cover the cost of employing nonproductive personnel as well as the pensions of workers no longer employed by the city, it will in the next three to four years be forced to declare bankruptcy.
Bob Nelson, a certified public accountant and former chief financial officer for Star Medical who has taught cost and management accounting at Chaffey College, was chosen as a member of the city of Upland’s financial advisory task force last fall.  At that time he warned of the city’s growing unfunded pension liability and called for various steps to redress the situation, including imposing a hiring freeze on city staff, which he said would prevent the city from incurring any further future pensioners while efforts to rein in pension costs are ongoing. The full task force, however, rejected that suggestion.
This week, on April 14, Nelson came before the city council, using the four minutes allotted to anyone wishing to speak on items of civic import during the public comment portion of the meeting.
Nelson noted that the council was scheduled, later that evening, to approve a 19.2 percent sewer rate increase after setting in motion last month a 22 percent water rate increase. He noted that the city manager has signaled his intent to set aside a reserve fund equal to 28 percent of the city’s $39.6 million general fund.
While Nelson said the effort to set aside reserves was laudable, he expressed skepticism that the money to fill that reserve fund could be produced.
“Where is this cash cow coming from?” he asked. “We have this sewer rate increase, then water rate increases. Next, you will be considering a sales tax increase of one half of one percent. Where does it stop?”
Nelson warned that any new revenues the city takes in will be immediately eaten up by increased pension costs as more city employees retire.
“The city’s deficit is driven in large part by its pension obligation,” he told the Sentinel after the meeting. “The city needs to transition its pension system from one that provides defined benefits to one based on employee contributions. The present system is a house of cards that is going to collapse. The city is already dangerously close to a death spiral. If something is not done very rapidly, the only way out will be bankruptcy.”
At the April 14 meeting, Warren Bowers, who has lived in Upland for over 40 years and previously was the director of manufacturing engineering with an aerospace company and as such was responsible for transitioning the company’s projects from the engineering phase to the manufacturing phase and for and all of the company’s manufacturing start-up budgets, told the city council  he did not believe its management team had come to terms with the immensity of the financial tidal wave that is about to hit the city as a consequence  of mushrooming pension costs and that management does not have the will to stanch the future red ink by insisting that the generous pensions provided to city employees in the past be cut back or rescinded. “I know we have a financial crisis,” Bauer said. “I think we also have a management crisis. By management crisis, I mean we have a cultural problem in top management that runs the day-to-day operations of this city. I have a distinct impression they are not active, I should say proactive, in looking at all of the cost reduction options. I do not think they are motivated. Something has to be done about it. If that means you as a council must change top management, that is what you should do. We can’t have this same culture. We can’t have a rubber stamp. We can’t increase taxes. If you aren’t willing to make the hard calls, then let someone who is willing to do it take your seat.”
Bauer was followed by Larry Kinley, a 20-year Upland resident who worked for Bank of America for 42 years, the last 15 of which he was a manager in the problem loan administration dealing with borrowers with financial difficulties.
“The last CPA audit stated the city has suffered substantial recurring losses that raise substantial doubt about the city’s ability to continue as a going concern,” Kinley said. “Yet, when the CPA firm was here in person to review their report, no one person asked, ‘What is the cause of the recurring losses?’”
Kinley noted that when the CPA audit was passed along to the mayor and council by the city manager and the city’s administrative services director, the transmittal letter made no mention of the dire financial straits the city finds itself in. “The cover letter completely ignored the statement about the city’s ability to continue as a going concern,” Kinley said. “This is akin to presenting a financial statement to your bank listing your assets but failing to list the liabilities.  How in the world do you tolerate biased and slanted communications from your subordinates?”
Kinley requested that the council come face-to-face with its pension crisis publicly by including an agenda item for its April 28 meeting “so that the citizens can hear from the city council what its members perceive as the cause of the city’s problem and their ideas for a permanent correction.” Kinley said he wanted the council to “freely express their thoughts because this will help the citizens decide the competency level of those in office and who to vote for in the next election.”
Less than a week before Monday’s meeting, another city resident, Bill Cary, who is a processing account manager with Tetra Pak Incorporated, on April 9 sent a letter to the mayor and city council in which he expressed grave concern about city finances.
“As Upland continues to move ever so much closer to bankruptcy, it is not very evident to the citizens of Upland what you are doing to stem the tide. Someone came up with the less than brilliant idea to raise the city sales tax to cover the shortfall in revenue. This is not getting to the root of the problem and you are once again asking the citizens of Upland to pay for the mistakes that our managing city council, be it past or present, created on their own. We put our faith in you to manage and make the tough decisions. Now it’s time to do just that.  Before you can ask the citizens to bail you out, it would be best to ensure you have our house in order and can make the tough choices if necessary.  The list of total compensation from police, fire and city top staff amounts to over $18 million. Police and fire alone accounted for over $15 million of this total. In the private sector, if we run into difficult times, we have been asked to take a cut in pay and even though we didn’t like it, we knew it was the only way to preserve our jobs for the future.”
Cary continued, “If police, fire and city staff were to take a 10 percent cut in total compensation it would provide almost $2 million in savings. I know the police and fire unions will scream bloody murder and say they have already given too much. These groups need to understand that they are not helping to come to a solution because they are the problem. By running a search of salaries from other cities in California, as well as large cities throughout the country, it is evident that Upland pays a lot more than all cities listed.”
Cary said excessive pay to city employees in Upland was not limited to the police and fire departments.
“We have a deputy public works director, Acquanetta Warren, who makes $163,000 a year total compensation and she is the mayor of Fontana. Where is her allegiance directed to? Was there no one in the city of Upland who could handle the job? And why is her salary that high? For that matter, why does the public works director make $230,000 a year? It seems to me that we don’t have the money to fix or repair our streets and sidewalks.  We really don’t need either of these two individuals, at least not at these salaries. Almost $400,000 for two managers whose department doesn’t have any money to do anything is ludicrous.”
Cary concluded, “I work for a privately held company and my compensation is based on how well I do. I am paid on a commission basis and if we don’t sell we don’t get paid. If we continue to not sell we will be replaced.  When someone reduces your pay based on the company’s performance, you learn real quick how to make the tough decisions.”
In 2013-2014 the city’s pension costs stand at $6.2 million. The most reliable figures currently available show the city will incur an additional $1.5 million in pension costs next year, 2014-15, escalating to $7.7 million the annual amount city pays  into the public employees’ retirement system.