IEUA Fails To Hold The Line On Managerial Salary Increases

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On a 4-to-1 vote this week, the board of the embattled Inland Empire Utilities Agency gave its general manager a salary increase of more than 9 percent, raising the ire and concern of a large cross section of the community and public served by the regional service entity.

As a result of the action, Shivaji Deshmukh will see his salary jump from $311,428 to $340,000, and his total annual compensation, when his annual cost of living adjustment is factored in, go from $420,853.80 to $462,908.57.

At issue in the board’s favorable treatment of Deshmukh is not only pointed disagreements within the community about his performance and the direction of the Inland Empire Utilities Agency, but growing public dismay over the reflexive granting of raises to public employees in general and the management echelon among public employees specifically, creating a widening gulf between the remuneration levels of public and private sector workers.

On display in the matter was the seeming nonchalance of the four members of the utility agency board who supported Deshmukh’s pay increase and the expression of alarm made by the single board member who took a stand against it.

The Inland Empire Utilities Agency has been in existence since its founding on June 6, 1950 as a municipal corporation, then known as the Chino Basin Municipal Water District. Having undergone rebranding as the Inland Empire Utilities Agency, it now takes as its charter treating wastewater and recycling water, converting biosolids and other refuse into compost and generating electrical energy from renewable sources.

While there is little opposition to the agency’s stated goals as pertains to recycling and conserving water, drought management, recycling waste products and generating renewable energy, disputes have manifested, grown and in some cases raged between the Inland Empire Utilities Agency and some or even all of the nine governmental entities within its 242-square mile jurisdiction in western San Bernardino County over the way in which the agency, known by its acronym IEUA, has sought to achieve those ends.

To some extent, those differences have been so pointed that they have resulted in litigation that has entailed substantial expense in terms of legal fees and the expenditure of taxpayer and ratepayer money, begetting questions as to whether the agency’s existence can be justified at all.

Moreover, there is a perception – as in the case of the escalation of Deshmukh’s salary and the agency’s acceptance of rising costs imposed upon itself and the multiple municipalities, agencies and water purveyors it represents with regard to the importation of water into the region – that the Inland Empire Utilities Agency is not fulfilling its role in improving the quality of life of the nearly 935,000 people who live within its jurisdiction but is rather layering further costs and taxes upon them for which they are receiving minimal, or no, benefit.

On February 15, the Inland Empire Utilities Agency took up consideration of giving Deshmukh a salary increase of 9.174 percent, from $311,428 to $340,000.

The raise was proposed by the Inland Empire Utility Agency staff, which is headed by Deshmukh. The staff report, which was apparently jointly authored by Deshmukh, the agency’s general counsel, Jean Cihigoyonetche, and Denise Garzaro, the agency’s secretary and office manager, stated, “The board of directors conducted the annual general manager performance review in closed session on January 18, 2023.” Referencing “a performance award based upon completion of stated goals and objectives over the last year,” the report stated that the “current employment agreement allows for a performance award of up to 10% of base salary. [B]ased upon the general manager’s positive performance review, and a compensation survey of comparable agencies, the board determined that an amendment to the general manager’s employment agreement should be considered. The restated employment agreement submitted herewith provides an increase in base salary to $340,000 per year and an increase in employer contribution to the 457(b) deferred compensation plan to $576.92 per pay period. It is recommended that the board consider and approve a general manager’s performance award in an amount not to exceed 10% of base salary.”

Board President Marco Tule and board members Paul Hofer, Steven Elie and Mike Camacho voted to confer the raise upon Deshmukh, with Board Member Jasmin Hall dissenting.

The vote came amid growing discontent with the Inland Empire Utility Agency among no fewer than seven of the governmental agencies that articulate with it over water, water use and water recycling policy.

As a regional wastewater treatment agency, the IEUA provides sewage utility services to seven contracting agencies under the Chino Basin Regional Sewage Service Contract, those being the cities of Chino, Chino Hills, Fontana, Montclair, Ontario, Upland, and the Cucamonga Valley Water District in the city of Rancho Cucamonga. In addition to the contracting agencies, the Inland Empire Utilities Authority Agency provides wholesale imported water from the Metropolitan Water District to seven retail agencies, those being the cities of Chino, Chino Hills, Ontario, Upland, the Cucamonga Valley Water District, the Fontana Water Company in the city of Fontana, and the Monte Vista Water District in the city of Montclair.

There is a perception among at least some and in a few cases all of the city council, district board or company board members in Chino, Chino Hills, Ontario, Upland, Rancho Cucamonga, Fontana and Montclair that the Inland Empire Utility Agency in its dealings with the Metropolitan Water District has not sought the best financial terms available at least theoretically, given the volumes being purchased by the San Bernardino County entities collectively. Some believe that the 935,000 people living within the IEUA’s jurisdiction are being ill-served by Deshmukh’s unwillingness to press the Metropolitan Water District on behalf of Chino, Chino Hills, Ontario, Upland, the Cucamonga Valley Water District, the Fontana Water Company and the Monte Vista Water District.

At the same time, the Inland Empire Utility Agency is leveraging recycled water among a number of local communities as part of its function, and has pursued a policy of controlling the methodology and means of recycling, controlling that function and through its relationships with multiple entities including the State of California, making it difficult for the individual cities to utilize their own recycled water. While virtually all of the cities and water organizations are unhappy with the circumstance, the City of Ontario, which has the most revenue of any municipality in San Bernardino County, has sued the Inland Empire Utility Agency over the matter. Fontana officials, meanwhile, are contemplating some form of action against IEUA, either legal or procedural, over the issue.

For that reason alone, many residents thought it was ill-advised for Tule, Hofer, Elie and Camacho to give Deshmukh the 9.174 percent raise.

Some of those and others thought it was poor form for the board majority to allow themselves to be swayed by a recommendation from Deshmukh in which he had a personal financial stake. Some have suggested that in making the recommendation, Deshmukh had involved himself in a conflict of interest that bore criminal implication.

Beyond that, the board’s consideration and granting of the raise came within a long-prevailing atmosphere in which compensation increases for top echelon administrators and managers within public agencies have become routine and virtually automatic. Simultaneously, an examination of statistics shows, the salaries of public employees in general and public administrators specifically have been increasing at rates that outrun those generally provided to workers in the private sector going back for nearly a decade. Public sector jobs provide automatic annual raises that are in keeping with inflation and/or the consumer price index. Those automatic raises are augmented by periodic contract renewals or renegotiations, usually done on a two-year, three-year or four-year basis in which further raises are given, similar to what Deshmukh experienced this week. In general, the availability of salary and benefit increases in the public sector compares favorably to what most but perhaps not all employees in the private sector experience, that being that most of those who do not work for the government can expect raises of no more or little more than the rise in the consumer price index. Meanwhile, public sector employees in California have consistently seen pay increases that outrun inflation.

A commonly perceived circumstance in Southern California is that higher echelon public administrators – department heads, city managers, school superintendents and agency managers – are seeing salary and benefit increases that are well above the pace of the increase provided not just to private sector employees but also public sector employees of a lower station. The seeming ubiquity of this phenomenon has resulted in an upward spiraling of what is being paid to the top people in government and in governmental agencies at the local level in Southern California.

Government reform advocates have decried what they characterize as an “incestuous” boosting of salaries that comes about when one city manager or school district superintendent, agency executive director or district general manager is hired or promoted and a few months later another top administrator is due for a review, at which time the increased salary of the previously referenced top administrator is taken into consideration, triggering a boost in the pay provided to the administrator under consideration. Weeks or months later, a top administrator elsewhere comes up for review and the process is repeated, using the baseline created by the most recent recipient of such a raise. This vicious cycle of salary and benefit increases continues on, ad infinitum, those who have expressed concern about the rising financial cost of government say.

A common refrain among city council members or board members is that the city manager or general manager they employ is so talented, so good at what she or he does, that she or he is indispensable to that organization’s operation, such that the governmental entity in question cannot afford to lose her or him to another agency. This mantra is repeated across agency after agency, to the point that those who occupy governmental administrative suites, virtually wherever they are and whoever they are, have grown accustomed to routine raises. To many, this means that raises are expected and they are not necessarily earned.

Moreover, a phenomenon has ensued by which the talent and value of an outgoing member of a particular management suite is automatically imputed to his or her successor. Commonly, an individual manager with a very impressive set of credentials – consisting of impeccable education, licenses and anywhere from a decade-and-a-half to a quarter of a century or more experience – will leave his or her post, either through retirement or being lured away by another agency, only to be replaced by a manager with a lesser degree of experience and accumulated skill who is nevertheless given a salary, benefits, perquisites and total compensation equal to that of his/her predecessor.

Often accompanying the periodic job performance reviews given to these top managers, if the review is a positive or at least not a negative one, are raises or bonuses. Nevertheless, the validity or integrity of those job performance reviews is subject to question or outright controversion. It is noteworthy that those reviews take place during closed sessions – in secret, behind closed doors outside the sight or earshot of the public, with no realistic opportunity for the public or anyone other than the board and one or two or three public agency employees who are very likely answerable to the person being reviewed to offer their views of the top administrator’s performance or to provide anything that might go beyond what the board considers or which might contradict the official survey of the administrator’s performance. This is exacerbated by the consideration that a largely apathetic and unengaged public is offered a very short window on even so much as knowing that the board is going to conduct such a performance evaluation. The time between the public being informed in what is a pretty obscure venue that a governmental agency is about to confer a raise on that agency’s administrators or top administrator can be as little as three days and is virtually never more than five days.

Board Member Hall, who represents Fontana and parts of Rialto along with those cities’ areas of influence and Bloomington, was the lone vote against giving Deshmukh the raise he had recommended for himself.

“As the representative of my constituents, the vast majority of whom are working at jobs which barely provide them and their families wages that are ten percent of what Shivaji is making, I just can’t with a clear conscience agree to something like that,” she said. “I am not criticizing his performance. An individual has a right to take a job and be well remunerated for what he does, but when we do this with taxpayer dollars, that creates a major concern in my eyes.

“If you look at staff, particularly those who are at the higher end of the pay scale, our salary range is out of control,” Hall continued. “It is a problem with the IEUA and it is a problem with other agencies. When the salary of one administrator or general manger goes up, the salary of the managers of all of the other districts go up. They look at what others are paying and they have to offer something like it to get a general manager to work for their agency.”

Hall said, “I am a taxpayer as well as an elected steward of taxpayer dollars. It doesn’t seem that the public has an opportunity to make itself heard on the issue of what we are paying our governmental employees. The board makes its decision not through the eyes of the public it represents or with the input of those who have put us into office by electing us. We are viewing the performance of staff and our manager on the basis of what staff is telling us. Staff writes the reports on everything relating to the agency, including whether staff members, or, as in this case, the general manager, deserves a raise and how much of a raise. That is not the right thing or the only thing for us to be basing our decisions on. Either Shivaji wrote that report and recommendation or staff wrote it. Staff reports to him. He is our general manager. He does a competent job for the most part. He does a lot, but because of the comparables in the formula we are using, we are seeing this out of control salary escalation. We have this situation and I am at a loss to understand why we have to keep doing this. Can’t we pull back and make an assessment?  For three decades or more we have used comparables to determine how much we are going to pay our people in government and there doesn’t seem to be any way we can say, ‘Stop it.’”

Hall said the Inland Empire Utilities Agency Board of Directors, like its counterparts heading other agencies, was illogically and reflexively paying anyone who comes into top management positions with those entities the same amount of money as those who previously held the same position, whether the new hire had credentials equal to the person being replaced or not.

“You will see a general manager with 30 years’ or even 40 years’ experience and a lifetime of expertise retire and in some cases what happens is you bring in someone else, sometimes someone who is way younger and less experienced with a limited track record, less than five years as a general manager or assistant general manager somewhere else or maybe even as  little as three years’ experience, but the newly hired general manager is given a salary right at or even over $300,000 per year. That is not sensible. You ask why it is being done and you don’t get an answer or a satisfactory answer. I don’t know what to do except to express my opinion.”

The Sentinel asked Inland Empire Utilities Board President Marco Tule what the rationale for giving Deshmukh a 9.1745 percent raise at this time was and if that raise truly reflected Deshmukh’s value to the agency. The Sentinel followed up to ask whether in Tule’s estimation giving Deshmukh an annual raise that matches the escalation in the consumer price index would be a sufficient show of appreciation toward him. Similarly, the Sentinel asked Tule if he considered Deshmukh to be indispensable to the Inland Empire Utility Agency’s operations and if he thought Deshmukh to be irreplaceable.

The Sentinel sought from Tule whether he was concerned that granting Deshmukh the raise he requested was going to perpetuate the upward spiral in top administrator compensation that is the general trend within government in Southern California. Additionally, the Sentinel asked Tule if he considered the staff report relating to, and positive recommendation for granting, the salary increase, originating as it did either with Deshmukh or with a staff member or staff members quite close to him who in any event must answer to him as one of his employees to represent a conflict of interest. The Sentinel asked Tule about his personal comfort level in voting to grant the general manager a 9.1745 percent salary raise, given that in doing so he and his board colleagues were acceding to a recommendation made by someone who stands to personally financially benefit from the action being recommended.

The Sentinel also sought to explore with Tule whether he was concerned about the escalating cost of governance and the degree to which higher and higher percentages of governmental entities’ budgets are being devoted to or eaten up by paying employee salaries and providing those employees with benefits. The Sentinel asked Tule if he believed this increase in personnel costs was leading to a circumstance in which an insufficient amount of money is being left in public agency budgets for funding for capital improvements, the maintenance/refurbishing/renewal of infrastructure and the construction of new infrastructure. The Sentinel asked Tule if he felt that those who had elected him expected him to hold the line on ever larger public employee paychecks and generous benefits and if he had any trepidation with regard to the runaway costs of governance.

Speaking directly to the Sentinel, Tule said he did not understand the questions.

Tule did say that the Inland Empire Utility Agency had met its legal obligation to give more than 72 hours of advance notice of the board’s contemplated action to provide Deshmukh with the raise.

In a setting outside the public forum, Tule remarked that the practice of providing governmental management employees with regular raises that outrun what is typically offered to private sector employees had been long established and accepted as part of governmental culture before he was elected to public office and he sees no reason to alter that pattern while he is serving in the capacity of an elected official.

Letter To IEUA President Marco Tule, Who Did Not Respond

February 14, 2023

President Tule…
      This is Mark Gutglueck with the San Bernardino Sentinel. We spoke briefly today, and I am following up on that call with regard to the substance I raised.
      Tomorrow, February 15, the IEUA Board is set to consider giving Mr. Deshmukh a salary bump of just under 10 percent, from $311,428 to $340,000.
      This comes within a long-prevailing atmosphere in which compensation increases for top echelon administrators and managers within public agencies have become routine and virtually automatic. Simultaneously, an examination of statistics shows, the salaries of public employees in general and public administrators specifically have been increasing at rates that outrun those generally provided to workers in the private sector.
      It goes without saying that public sector jobs provide automatic annual raises that are in keeping with inflation and/or the consumer price index and that those automatic raises are augmented by periodic contract renewals or renegotiations, usually done on a two-year, three-year or four-year basis in which further raises are given. In general, this compares favorably to what most but perhaps not all employees in the private sector experience, that being that most who do not work for the government can expect raises of no more or little more than the rise in the consumer price index.

      A commonly perceived circumstance in Southern California is that higher echelon public administrators – department heads, city managers, school superintendents and agency managers – are seeing salary and benefit increases that run well above the pace of the increase provided not just to private sector employees but also public sector employees of a lower station. The seeming ubiquity of this phenomenon has resulted in an upward spiraling of what is being paid to the top people in government and in governmental agencies at the local level in Southern California. Essentially, there is an incestuous boosting of salaries that comes about when one city manager/superintendent/executive director/general manager is hired or promoted and a few months later another top administrator is due for a review, at which time the increased salary of the previously referenced top administrator is taken into consideration, triggering a boost in the administrator under consideration being given a raise. Weeks or months later, a top administrator elsewhere comes up for review and the process is repeated. This vicious cycle of salary and benefit increases continues on, ad infinitum.
      A common refrain among board members such as yourself is “Our general manager is so talented, so good at what he does that he is indispensable to our operation. We cannot afford to lose him to another agency.” This mantra is repeated across agency after agency, to the point that those who occupy the administrative suite, virtually wherever they are and whoever they are, have grown accustomed to routine raises. Raises are expected and they are not necessarily earned.
     Moreover, a phenomenon has ensued by which the talent and value of an outgoing member of the management suite is automatically imputed to his/her successor. One commonly sees an individual manager with a very impressive set of credentials – consisting of impeccable education, licenses and two decades or a quarter of a century or more experience – leave, either through retirement or being lured away by another agency, only to be replaced by a manager of a lesser degree of experience and accumulated skill who is nevertheless given a salary, benefits, perquisites and total compensation equal to that of his/her predecessor.
      Often accompanying the periodic job performance reviews given to these top managers, if the review is a positive or at least not a negative one, are raises or bonuses. Nevertheless, the validity or integrity of those job performance reviews is subject to question or outright controversion. It is noteworthy that those reviews take place during closed sessions – in secret, behind closed doors outside the sight or earshot of the public, with no realistic opportunity for the public or anyone other than the board and one or two or three public agency employees who are very likely answerable to the person being reviewed to offer their views of the top administrator’s performance or to offer anything that might go beyond what the board considers or which might contradict the official survey of the administrator’s performance. This is exacerbated by the consideration that a largely apathetic and unengaged public is offered a very short window on even so much as knowing that the board is going to conduct such a performance evaluation. The time between the public being informed in what is a pretty obscure venue that a governmental agency is about to confer a raise on that agency’s administrators or top administrator can be as little as three days and is virtually never more than five days.
    Please, President Tule, do not misconstrue my questions as a personal or professional attack on Mr. Deshmukh, who comes across to me as competent administrator and manager who is doing a more than acceptable job in leading the Inland Empire Utility Agency. My questions are intended to apply in a situation in which I perceive the unquestioning acceptance of the primacy of governmental agency administrators/managers prevails in both a general and specific sense. I make reference to Mr. Deshmukh because in this instance he is the one upon whom a substantial pay increase is about to be conferred. It certainly appears that this common case of deferential assumption has taken place generally throughout the culture of local government in Southern California has also occurred in the Inland Empire Utility Agency and among the members of the Inland Empire Utility Agency board, at least insofar as your general manager goes.
       What is the rationale for giving Mr. Deshmukh a 9.1745 percent raise at this time?
        Does the 9.1745 percent raise truly reflect his value to the agency?
        Why, in your estimation, would giving Mr. Deshmukh an annual raise that matches the escalation in the consumer price index not be a sufficient show of appreciation toward him?
        Do you consider Mr. Deshmukh indispensable? As far as the Inland Empire Utility Agency goes, is he simply irreplaceable?
        Are you at all concerned that granting this raise to Mr. Deshmukh is going to perpetuate the upward spiral in top administrator compensation that is the general trend within government in Southern California at present?
        The staff report relating to this item originated either with Mr. Deshmukh or with a staff member or staff members quite close to him who in any event must answer to him as one of his employees. The staff report contains a recommendation that the board, and I quote, “consider and approve” granting him the 9.1745 percent salary raise. By voting to approve this item, you and your board colleagues will be acceding to a recommendation made by someone who stands to personally financially benefit from the action being recommended. Are you comfortable with that?
        Are you at all concerned with the escalating cost of governance?
        While the Inland Empire Utility Authority is a different breed of cat from municipalities or fire agencies/fire districts, perhaps you are aware that a huge issue with municipalities is the cost of personnel. While the percentage of cities’ budgets devoted to paying employee salaries and benefits and attendant costs varies, it is common for a municipality to expend in excess of 85 percent of its income on personnel. I have seen that spending ratio exceed 92 percent in a few instances and in one case reach 94 percent. This circumstance leaves precious little funding for capital improvements, the maintenance/refurbishing/renewal of infrastructure and the construction of new infrastructure. Some people who examine the function of government and local government in Southern California in particular have remarked or otherwise reached the conclusion that governmental spending is out of balance, with too much revenue being eaten up by employee costs and not enough money going toward tangible physical items to improve the lives of those who are bearing those costs, those being the citizens and taxpayers. They feel that elected officials have consistently failed by refusing to hold the line on ever larger public employee paychecks and generous benefits. My question to you, President Tule, is do you have any concern about the runaway costs of governance?
     Do you see tomorrow’s vote as an opportunity to hold that line? What would you say to one of your constituents who feels you are being too generous to Mr. Deshmukh? Do you reject such a suggestion out of hand?
     Have you had any discussions with Mr. Deshmukh about the issue of escalating personnel costs? Does he feel that the IEUA’s effectiveness is being undercut by inadequate funding for programs because revenue is being eaten up by paying for staff? Has he ever hinted that he would be willing to bite the bullet in terms of accepting the plateauing of his salary and benefits to serve as an example to those below him that they too might remain satisfied with their public sector salaries and benefits which for the most part exceed what is paid to those in the private sector doing comparable work?
    In addition to his salary, Mr. Deshmukh received in 2021, $63,033.50 in add-ons and perquisites and another $46,392.30 in benefits. In this way, Mr. Deshmukh is already making in excess of $419,000 in total annual compensation defrayed by taxpayers. Do you think it reasonable that he should be satisfied with the amount of money he is already making?
   As a member of the Inland Empire Utility Agency board, to whom do you feel you owe your first loyalty: the constituents who voted both for and against you or the agency staff?
    These are the issues I wanted to discuss with you today when I called. I appreciate whatever time and effort you can make in responding to these questions before I set pen to paper for the article I intend to put into the Sentinel.
               Thank you.
                                            …Mark Gutglueck
                                                (951) 567 1936

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