The first City Council hearing specifically on the 2004-2005 budget began yesterday with a standing ovation by City Council members after Interim City Manager Leveron Bryant and Finance Director Pat Samsell announced a balanced budget and the end of layoffs as we know them.

Perhaps we owed ourselves a brief moment of bliss in the midst of an otherwise gloomy fiscal outlook. After the self-congratulations dwindled, the gory details of a City with perhaps years of pain ahead began to emerge.

While it may have been technically accurate to state that 2004-2005 anticipated revenues of $96.8 million were adequate to fund $96.8 of expenses, there remained a “total cumulative deficit” projected to be $28.8 million, climbing to $39.2 million in two more years.

And next years projection shows a $6 million structural shortfall, even with a continuation of the current reduced staff and reduced level of services.

Several events could, however, have significant impacts. Cost sharing by public employee unions could reduce future deficits by some $5 million. And some Council members are counting the ½% sales tax on the November ballot as if it is a fait accompli.

It remains unclear what part of that cumulative deficit is simply internal fund imbalances that have already been absorbed and what part is real money that will have to ultimately be written off and booked as an unrecoverable expense.

It was anticipated that the undefined cumulative deficit would be addressed by one-time real state sales of unknown magnitude and timing.

Of substantial interest were a number of unusually candid revelations by management and staff that shed some light on the roots of the current fiscal crisis.

Risk Manager Shari Deutsch reminded the City Council that decades of abuse of Workers Compensation by City employees had become culturally ingrained in the City, leaving Richmond with one of the worst records in California. “Workers Compensation abuse has become an entitlement,” she said, “with employees using the system to augment their vacations.” She said that such abuse is costing the City millions of dollars a year.

Councilmember Jim Rogers asked if high workers compensation costs for Police and Fire were a function of the unusually tough environment in Richmond. Deutsch responded in the negative, explaining that while true “on-the-job” injuries were comparable to other cities similar to Richmond, it was the “stationhouse” injuries that were driving Richmond’s costs to the top.

Some relief may, however, be on the way. Bryant and Samsell announced that, for the first time, workers compensation costs would be distributed into departmental budgets based on the history of use. This would give managers, and ultimately employees, an incentive to recognize and reduce abuse. As a result of a suggestion by Winston & Strawn, the City is also seeking an outside Workers Compensation administrator with the capacity to stay on top of all claims. In the past, said Deutsch, many claims were paid off without investigations simply because no one had time to process them.

In another frank revelation, Samsell acknowledged that the SAP system was falling way short. He said that preparation of the budget was particularly difficult, with much of it having to be done by hand because of SAP’s inoperative budget module. For the first time ever, a management level City official confirmed what the rank and file have been saying for years – that the SAP system purchased for the City was designed for private enterprise and not for government and simply is not doing the job. Samsell said the time had come to ether scrap the system for something cheaper or invest in the government version with appropriate aplications.

SAP is referred to as ERP software, meaning Enterprise Resource Planning, or integrating all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.

Historically, top management has not only defended the SAP purchase but has touted the purchase as the key to Richmond’s future. Several puff pieces initiated by vendors have featured former City Manager Isiah Turner, former Finance Director Anna Vega and current IT Manager Sue Hartman. In one article from “Solbourne at Work Success Story,” Turner is quoted “The integration of SAP, ESRI and the permitting system completes the City’s vision of improved services for the whole community,” and Vega chimes in “Solbourne’s in-depth knowledge of the SAP applications as well as their extensive public sector experience were key contributors to the success of this project.” The article can be found at http://www.solbourne.com/case_studies/government/govt/City_of_Richmond.pdf.

In an article “Out of the Shadows” in Government Technology, IT Manager Sue Hartman gushes: “"The biggest thing I’ve seen is the empowerment of the users," said Sue Hartman, Richmond’s IT director. ”They depended on IT and finance to run their reports and support them in their processes. This has truly given the process back to them. They know how to get their information and analyze it. They are much more efficient because of that." For that article, see

http://www.govtech.net/magazine/story.php?id=5334&issue=07:2001.

When the Planning Department budget was presented by Director Barry Cromartie, he complained that his department was still unable to use SAP to implement the cost recovery plan with which he had been charged. He said that they continue to limp along with improvised Excel spreadsheets and manual record keeping. He said the City had lost at least $1 million this past year because of the SAP failure, and proposed adding two new positions to manage and implement cost recovery efforts in the CED Group.

During the IT budget presentation by Sue Hartman, she even acknowledged, for the first time, the magnitude of the shortfalls of the SAP system and agreed that the City should consider either buying the government version or switching to another system. She could not, however, project what the cost would be for either alternative or what the schedule and procedure should be for moving on it.

Finally, the City Council asked Acting City Attorney Everett Jenkins to look into the possibility of legal action against SAP and consultants involved in its implementation.