Are salaries paid to some of Santa Clara’s recent hires out of line or are they merely compensating for an uncompetitive benefits package as compared with other Silicon Valley cities?
Santa Clara City Manager Deanna Santana denies that the salaries paid to recent hires are excessive and says that they are necessary to compensate for an uncompetitive benefits package as compared with other Silicon Valley cities.
Last week, Santana disputed this newspaper’s Jan. 8 piece about new hires, promotions and salaries, which highlighted hefty salary raises given to former Santana colleagues from Sunnyvale, San José and Manhattan Beach. At the Jan. 14 City Council meeting she said the article “shows a misunderstanding of public sector compensation” and makes “apples to oranges” comparisons.
Santana doesn’t dispute that these hires received sizable raises to come to Santa Clara; nor that these raises were larger than those given to other new hires and internally promoted employees.
The article, Santana said, “incorrectly uses salary, only, to get to …conclusions that disparaged …the City as an employer in … one of the most competitive environments to attract and retain employees …Compensation is far more complex.”
That complexity, Santana explained, includes comparisons of cities’ salary ranges and management levels. “The article fails to realize that even when Santa Clara employees are at their maximum compensation they are … below the midpoint in other agencies.”
Most important, Santana said, is the benefits differential. For example, finance director positions in Santa Clara and Sunnyvale have similar salary ranges. But, she explained, the Sunnyvale employee pays $10,700 for benefits and Sunnyvale pays $135,000, while the Santa Clara employee pays $40,000 and Santa Clara pays $122,000.
“The value of those differences between the employer-paid benefits and the employee-paid benefits needs to be brought in before you … make an offer,” she said.
How Santa Clara Ranks in Compensation
Looking at actual compensation data reported to the California State Controller (publicpay.ca.gov) doesn’t seem to show that Santa Clara’s benefit package is substandard.
In 2018, Santa Clara was 8th out of 482 cities in average benefits at $33,099. Sunnyvale was 5th at $35,432. San José was 64th at $20,003 — less than the California average. Manhattan Beach was #181 at $14,142.
Data for 2017, however, offers some support for the City Manager’s position: Sunnyvale was #10 while Santa Clara was #29. However, San José was #106 and Manhattan Beach was #207 — in no way competitive.
It’s certainly true, however, that the experienced professionals that Santa Clara needs are going to be at the top of the compensation curve, not the middle. That’s the level that should show the compensation differential.
But a comparison of six top executive level municipal jobs in Santa Clara, Sunnyvale, Manhattan Beach, Milpitas, Pleasanton, and San José — City Manager, Assistant City Manager and Directors of Finance, Human Resources and Public Works — shows Santa Clara at or near the top for total compensation.*
In 2017 — prior to Santana’s arrival — Santa Clara was number one in total compensation for Assistant City Manager and Director of Public Works and number two for every other position.
Sunnyvale topped 2017’s total compensation list for Directors of Finance and Human Resources and took third place for most of the other positions. San José topped the list for City Manager compensation and second place for Assistant City Manager. Milpitas was number one for Fire Chief compensation.
Pleasanton was in second place for Director of Public Works and third for Human Resources Director, but otherwise was fifth or last. Manhattan Beach was in second place for its Director of Public Works but in fifth place for almost all of the other positions.
Solving the Right Problem
If City Hall’s conclusion is that Santa Clara’s benefits are uncompetitive, one solution would be improving the benefits package. This turns out be what the City has done by boosting salaries, although it’s not immediately obvious.
The one benefit that depends completely on salary is pension. Pension contributions are a percentage of salary. More important, pension calculations use the lifetime highest average salary up to the IRS pensionable limit of $285,000.**
This can add up to thousands more every month in retirement — which can be as early as 55. These pension boosts are real money that Santa Clara is responsible for. One such employee has already left after only one year for a job at half the salary in a neighboring city.
This year Santa Clara will pay nearly $45 million into the CalPERS pension system — 25 percent of the City’s $199 million salaries and benefits budget, according to Santa Clara’s 2020-21 budget. The current 10-year plan forecasts that, by 2029, the City’s CalPERS payments will double to $92 million — 31 percent of $295 million in salary and benefit expenditures.
City Hall’s current strategy for attracting experienced employees will add to the bill Santa Clarans will have to pay long after these employees are gone.
Compensation information sources: publicpay.ca.gov, transparentcalifornia.com, sanjoseca.gov. Santa Clara budget and forecast information: santaclaraca.gov.
* The six cities were chosen for comparison because many of the largest raises went to employees hired from those cities.
**Santana has also noted that because Santa Clara participates in Social Security, employees pay additional taxes. Employer payments into Social Security are not included in benefits calculation, but enabling retirees to collect full Social Security is arguably an additional benefit not enjoyed by most other public employees.
Raising the income of staff to offset the staff’s higher benefit costs will bankrupt the City of Santa Clara. This is due to the long term unfunded pension costs associated with higher incomes compared to the relatively short term medical costs associated with the same employees (i.e. the City will pay retired employees until they die but the City will only pay for the employees’ medical benefits until which time the employees retire and these figures will diverge more as people live longer). Therefore, those the City has recently hired or promoted into key management positions are going to personally benefit at the expense of the City. The question is, how much are they going to personally contribute to the City over the course of their careers and will that offset their true long terms costs? Time will tell.
Something that was not addressed in this piece are some of the lesser known benefits afforded to key public sector leaders. Those include 0% home loans, vehicle allowances, and other benefits not afforded to line staff and benefits that are not often spoken about.
Lastly, it is not the higher incomes or larger benefit packages that should alarm the residents of Santa Clara. It is the fact that a disproportionate number of the City’s recent recipients of higher incomes and larger benefit packages are former associates of the current City Manager. I say this because I find it hard to believe that in a region with roughly 10 million people, the current City Manager already knew the best of the best and they were all poised to make the move to the City of Santa Clara.
Matt is spot on:
“Lastly, it is not the higher incomes or larger benefit packages that should alarm the residents of Santa Clara. It is the fact that a disproportionate number of the City’s recent recipients of higher incomes and larger benefit packages are former associates of the current City Manager. I say this because I find it hard to believe that in a region with roughly 10 million people, the current City Manager already knew the best of the best and they were all poised to make the move to the City of Santa Clara.”
Using Transparentcalifornia.com and creating a spreadsheet we can see that 138 Managers made 32% of the base pay for the entire City leaving the other 68% to almost 1,000 employees. (I have left out Police and Fire employees because I cannot put a price on saving a life.) When you look at 138 people making over $25 million annually in 2018, those numbers rose due to raises and such in 2019, you have to wonder what their ACTUAL worth is. They manage people, people who actually work tirelessly for, as stated by the City Manager, crap benefits and terrible pay compared to similar agencies.
When people speak of inequality they usually cant put a face to it. Luckily for us all of these paychecks are visible to the public so we can see what is going on and do not have to listen to lies. The city tells the employees it is constantly broke and cant help them with benefits, then turns and spends ridiculous amounts of money on the people who say we have to save money. Due to CalPERS these people will continue to drain massive checks from the City for years to come.
No wonder for the first time in 10 years more people quit than retired.