In my previous blog I outlined the cast of characters, what actions were to be investigated and the city hall atmosphere when these actions were taken. In this article we’ll look at what was done and how it was done. Before that, there is the why. The “why” is based upon assumption. Some of the actions were taken as early as 2008. The city was on the precipice of a great National Recession. City revenues were declining. The city was facing a budget shortfall of over $14M. Rather than provide direction to city council to begin to make the necessary cuts, including employee terminations, management staff tried to avoid the cuts with other strategies. They were protecting their turf and the jobs of many employees. They thought they were not only staving off inevitable employee cuts but that their strategy would buy the necessary time needed to weather the recession. Their options were limited and they chose actions that produced disastrous consequences when discovered five years later, in 2013.
What did they do? When did they do it? How did they do it? They set their sights on an Early Retirement Program (ERP). They touted that it would result in cost savings in excess of $5M.
What they failed to take into account was how much this program would cost to implement – a price tag of $6.1M. The program was far more popular than they anticipated and 55 employees, many of them middle to upper management representing upper pay ranges and serious money, took advantage of it. Costs started to balloon. $1.34M in retirement incentive costs; $1.36 in vacation and sick day payouts; but worst of all, the Arizona State Retirement System slapped on a penalty of $2.75M. How could they have not seen it coming? Scottsdale tried the same ERP in 2009 and incurred millions of dollars in penalties. The State Retirement Laws had changed in 2004. Why was no one in then City Attorney Craig Tindall’s office aware of the changes in the law? Why did no one in the city attorney’s office review current law on the use of ERPs when Alma Carmicle first proposed the idea in the fall of 2008? Ignorance is not a legitimate answer, especially at the time of ERP’s publicly advertised implementation in 2009. The city attorney’s office should have been all over it.
Unfortunately, the report does not answer those questions. It merely paints a picture of what was done. Even when staff realized that there were penalties associated with using ERP, the assumptions staff provided to and used with the State Retirement System representatives were woefully under reported. Now staff, in desperation, had to find the money to cover the ERP expenses and the state assessed penalties.
They turned to the Workmens Compensation Trust Fund (WCTF) and the Risk Management Trust Fund (RMTF) as sources to fund the ERP. Then to compound their actions they used a “premium holiday” concept which involved withholding the city’s portion of payment to the Employee Benefits Trust Fund (EBTF) eradicating its stability as well. They withheld $83 thousand per month for a total of $1M/year in both 2008-09 and 2011-12 from the EBTF. The trust funds, especially the WCTF, began to experience shortages. Over a period of two years (2010-2012) $2.6M was transferred from RMTF to the WCTF. All the while they publicly assured city council and the general public that cost savings from the Employee Retirement Program was being generated.
That brings us to Art Lynch’s retirement as Assistant City Manager in October of 2009 and the use of his consulting firm, SRJ Consulting. Mr. Lynch was part of Mr. Beasley’s “inner circle” of trusted advisers. One could assume that Mr. Beasley wanted to make sure his friend was financially comfortable before he, Beasley, retired. So began a series of highly questionable actions performed by Mr. Beasley. Employees, in order to be eligible for the ERP, had to meet a deadline of March, 2009. Mr. Lynch did not retire until October, 2009. By placing Mr. Lynch in the ERP it added another $121,000 to the State penalty. Mr. Beasley approved Mr. Lynch’s participation in the ERP and in fact, granted Mr. Lynch an extension to accomplish that objective. Mr. Beasley also approved an additional $25,000 in deferred compensation to Mr. Lynch. The day after Mr. Lynch’s retirement, he returned to duty as SRJ Consulting, with a contract that never went out to public bid. As a consultant, over several years, SRJ Consulting received nearly a million dollars. These maneuvers cost the city an additional half million dollars. This information is available on pages 23-24 of the external audit report.
It was generally assumed that Ms. Alma Carmicle was also a member of Mr. Beasley’s “inner circle” and a trusted adviser to him. Some people might view Ms. Carmicle’s job arrangement as an example of “power corrupts and absolute power corrupts absolutely.” In the summer of 2010 Ms. Carmicle moved permanently to Mississippi and Mr. Beasley approved her job retention via telecommuting. This accommodation lasted until her retirement in February of 2012. The rationale for allowing her to stay on as a full time employee through the use of telecommunication was that Mr. Beasley felt that she was needed to negotiate the public safety Memoranda of Understanding (generally recognized as union contracts). Mr. Beasley certainly led me to believe that he was heading up the MOU negotiations. From October of 2011 until her retirement in February of 2012 Ms. Carmicle participated in 26 MOU meetings/telephone calls lasting a total of 13 hours and 55 minutes. During those four months Ms. Carmicle managed to give the City of Glendale almost 14 hours of her time, talent and expertise. Yet she was paid as a full time employee. All of her other duties as Human Resource Director had been absorbed by Mr. Brown, the Assistant Director. During this time Ms. Carmicle received her full salary and car and phone allowances estimated to be about $140,000. This information is available on page 25 of the external audit report. Was it blatant cronyism in the cases of Lynch and Carmicle? You decide.
These were the major issues of the external audit: city nonpayment to the Employees Benefit Trust Fund as “premium holidays” so that those funds could be used else where as needed; transfers from and between the Risk Management Trust Fund and the Workmens Compensation Trust Fund to cover the costs incurred in the Employee Retirement Program; and the unusual job arrangements for Mr. Lynch and Ms. Carmicle.
Ms. Goke and Mr. Bolton are the latest to fall. They have been placed on leave by the new City Manager Brenda Fischer and Candace Macleod, the City Auditor, has been appointed as Interim Executive Finance Director. The bodies are starting to pile up…Skeete, Schurhammer, Goke and Bolton. I am sad on one hand because these are people I admired and respected professionally. I knew and liked some of them personally. I sought their advice and counsel on city matters for years. Did they hide other information from me when I went to them on city issues? They destroyed any semblance of trust and abdicated their fiduciary responsibilities to the city. I am outraged that they could sit before us at budget workshops and hide the truth. Yet they are just the fall guys. They did not make the final decision to implement the ERP program – City Manager Beasley did, presumably after consulting with his “inner circle” of trusted advisers. The four on leave (and others) were directed to make the program work and later told what they could and could not say about the results of the program. They could have but chose not to, blow the whistle. In that atmosphere at that time they may have felt they had no choice. Does that make them less responsible and accountable for their participation? No, of course not. Yet they are not the lead actors in this sordid drama. Some of those who refused to be interviewed were the decision makers and should be held accountable. Will there be criminal or civil action against the major players? I am not an attorney and could not begin to guess. Remember, I am but a lowly mushroom.
Next up…results, repercussions and much more.
©Joyce Clark, 2013
FAIR USE NOTICE
This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to:http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.