November 3, 2009 - From the October, 2009 issue

No Time Like the Present: Pasadena City Manager on 2009

The city of Pasadena, which at first seemed relatively insulated from the worst of the current recession, is now dealing with a struggling economy, revenue shortfalls and budget challenges just like many other cities in Southern California. Blessed with a budget reserve to draw upon, City Manager Michael Beck, formerly the Redlands Assistant City Manager, has completed his first year managing Pasadena's city challenges and shares with TPR the insights he has gleaned from budget shortfalls, union negotiations, slowing development, and the need for targeted public investments.


Michael Beck

You arrived in Pasadena in October 2008, just as the worst recession since World War II began to impact the city. Talk about the challenges you faced in your first year on the job.

It's no surprise that the challenges were fiscally related. It was necessary to become very quickly acquainted with the budget and economy of the city-to understand its revenue sources and the city's needs. One thing that was different about Pasadena, compared to where I had come from, was that there weren't very many early signs of the recession in Pasadena. In most cases, development was continuing in a strong fashion. Property taxes and sales taxes were continuing to grow. When the recession finally hit Pasadena, it hit very quickly. Most other jurisdictions in Southern California were seeing a decline as much as a year earlier.

What changes did you and the City Council make to the city's operations in response to reductions in city revenue?

The first thing was to quickly identify and reduce expenditure levels by doing the traditional quick and easy mechanisms like holding positions open and identifying where we were spending resources on expenses that could be curtailed. We immediately opened discussions with all of the labor groups in the city to see if they would be amenable to forgoing their negotiated four percent wage increases. In most cases they had four percent wage increases already in their contracts. Fortunately all of the labor groups-except for one that we are still working with-agreed to forgo their increases for the calendar year 2010. Ultimately, that helped reduce $7.5 million in the city's overall budget and about $4.5 million from the general fund.

Did Pasadena have to use reserves to smooth out the reductions?

Pasadena has been in a fortunate situation. We did have a reserve in excess of 10 percent of the general fund. The policy had previously been 8 percent and we adjusted it to 10 percent because I like to see a 10 percent minimum. We then identified using the additional reserves to smooth out the impacts of the fiscal decline over the next five years. We put together a five-year balanced budget plan that reduced what became, last year, a $20 million structural deficit in the general fund. We balanced it out, over time, to 2014. We were able to do that without making dramatic reductions to the quality of services because we had additional reserves.

Regarding the option of drawing down city budget reserves and of having public sector unions as partners to solve Pasadena's problems-is this good fortune available to the other 88 cities in Los Angeles County?

It was remarkably doable here, primarily because the police and fire groups took a leadership position early on. In many jurisdictions it is the police and firefighters that are late to the table in those negotiations. In Pasadena it was different. It was a pleasant surprise to see the leadership coming from the fire and police departments.

As you start to prepare Pasadena's 2011 budget, how do you expect the local economy to fare between now and the end of June? What are the repercussions for city operations if the recession is not behind us?

I don't know if I would say that the recession is behind us, but I believe that we have hit bottom. We have had, for a couple of months, an increase in median home prices in the city. We have seen the inventory of houses available for sale decline since April. That is a good sign. We are hopefully seeing sales tax hit a bottom. It will not grow dramatically but we should expect to be in a position where it stops the free-fall. When we were chatting with some of the local businesses and restaurants, which Pasadena is known for, they said they were seeing more growth in business during the late spring and early summer than they had otherwise anticipated. We are optimistic that trend will continue.

The big economic recovery isn't going to be like it was in the early part of 2003. This is going to be a slow, multi-year growth away from the bottom of the economic environment, which means we must continue to manage the expenses of the organization (which have been growing at a much faster clip). Both wages and programs are going to have to be much more limited in their growth over the next couple of years.

Are Pasadena's citizens, unions, and other stakeholders in agreement about budget priorities and probable 2011 expenditures?

We spent a lot of time last year sharing the five-year plan so that people could understand the plan's implications. People in labor and the community understand the implications of that. The challenge is going to be in maintaining expenses at a level consistent with revenue growth. In Pasadena we are seeing a $5.5 million decline in revenue this fiscal year in addition to what we have already anticipated. We are going through an additional round of reductions as we speak to make sure that the 2011 fiscal year ends up being consistent with the five-year plan.

In past TPR interviews with Mayor Bill Bogaard of Pasadena, The Planning Report has highlighted a number of new developments and investments that have been made, particularly the so-called smart growth around the Gold Line corridor. Given the current recession, what development do anticipate in the coming years?

The pace of development has certainly slowed. There are some projects that are still in the works that are coming to completion. There are still some new projects being approved. But it is occurring at a much slower pace than it has been over the past three or four years. I expect that pace to continue for the next few years. I don't expect to see the fervor that existed in Pasadena over the last five years to be revisited any time soon.

Pasadena's unique urban identity and character is what enables it to compete successfully within the region. The city is well known as a quality community for which there is high demand from residential, business, and research institutions. It is critical that we figure out a way to maintain and embrace the historical and architecture significance of the community. At the same time, we need to ensure that Pasadena continues to evolve as a community to meet the changing demands of the public. In the central district-the downtown area-many of the urban residential developments that have occurred within the last ten years will ultimately be a huge success for the city. It has added a vibrancy and population density in downtown that will enable Old Pasadena, South Lake, and the Playhouse District to be successful in the long-term as we get additional competition from surrounding communities for entertainment and other opportunities.

Earlier this year the Pasadena celebrated the completion of a $130 million expansion of the Pasadena Convention Center. How has the new facility been reviewed and how successful has the center been in attracting conventions?

The Convention Center is exceeding revenue projections for this year and doing well. The response from site selectors and participants has been extremely positive. There are less bookings in the future than we would like to have because of the reductions in corporate travel, but as the economy picks up we expect to see that pick up as well. One of the great advantages that Pasadena has that others don't is that we are looked at, within the industry, as a serious location. When businesses are being more skeptical or critical of the locations where they are having their training events, Pasadena is not viewed as a junket; it is viewed as a serious location.

The Governor recently vetoed legislation regarding the 710 connector surface route. What are your thoughts on how the 710 Freeway might be completed?

We are disappointed about the Governor's veto. We ultimately disagree with his assessment that the legislation would result in many of the houses being sold at below market values. We didn't see how the legislation had any impact or any change associated with the value of those homes. The surface route has already been deemed unacceptable by the federal government and certainly there will need to be federal funding associated with the project. The legislation simply stated that if a connection is to occur, it will need to be a tunnel consistent with the federal highway program. We were surprised and disappointed that it was vetoed because it made it consistent with what already exists on the federal side.

Probably more importantly, it extended the ten-year limit on negotiations between CalTrans and local jurisdictions. That ten-year period has expired and this legislation would have extended it to another ten years, meaning that CalTrans would be obligated to negotiate and come to an agreement with the communities that would be directly impacted by the freeway extension. Without the legislation that extension did not occur.

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Changing corridors and modes, what are your expectations for Metro extending the Gold Line?

The Gold Line is ready to go. The Authority could start the construction in 2010 if the funding is available. The extension to Azusa is absolutely critical as well as the ultimate extension to Ontario Airport and the mid-extension to Montclair. Until we get the extension to Azusa and Montclair, the Gold Line will not realize its true ridership potential. So many of the commuters that will utilize the Gold Line to get to either Pasadena or L.A., coming from the San Gabriel Valley or the Inland Empire, have already committed themselves via their personal car. It will be much more advantageous for the commuter to board the Gold Line closer to where they live then to expect them to get out of their cars in Pasadena to finish the rest of their route into L.A., or to other jurisdictions along the route, on the Gold Line.

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In late 2007, Pasadena voters rejected the effort to bring an NFL team to the Rose Bowl to fund capital improvements and provide some long-term fiscal stability for the facility. Is the city developing an alternative plan to ensure the future of the facility and its capacity to provide a positive experience for the fans that attend events at the Rose Bowl?

We're working on a revised plan that improves the fan experience and many of the safety features of the structure, as well as restores the historic significance and architecture that is associated with the Rose Bowl.

The funding plan is focused on the increased revenue capabilities associated with improving the experience. In other words, some of the challenges associated with the ingress and egress of the facility limits the amount of concessions that can be sold. Improving concessions and other accessibility issues for the fans will help create revenue. We are also looking at clubs, lounges, and other premium opportunities that will exist within the stadium to provide additional revenue to offset the cost of the upgrade. Probably the most important component is the fact that the upgrades, instead of being $300 million as it was as an NFL plan, have been modified to a more reasonable $160 million plan.

What is the status of this new Rose Bowl plan?

We are doing preliminary drawings as well as meeting with our financial partners-the Tournament of Roses and UCLA-and doing the financial feasibility of the pricing models and the demand for some of the new fan experiences that we are contemplating.

Finally, have you chosen the professional architects, planners and engineers for the Rose Bowl?

Under the director of our Stadium Architect, Margo Mavridis, the architectural and engineering team includes:

• Janet Marie Smith formerly with SBER Services, LLC (Struever Brothers Eccles & Rouse) (Architect)

• Charles Izzo, D'Agostino Izzo Quirk Architects, Inc. (Architect)

• Ronnie Younts, Ashton Design (Architect)

• Peyton Hall, Historic Resources Group (Historic Preservation);

• Bruce Gibbons, Thornton Tomasetti (Structural Engineer)

• William Larwood and Dawn MacFadyen, Syska Hennessy Group (Mechanical/Electrical/Plumbing)

• Patrick Wong, W2 Design (Civil)

• David Murray, Earth Systems (Soils)

• Nord Eriksson, EPT Design (Landscape)

• Michael Cawlina and Don Hancock, Bernards (Cost Estimation & Constructability)

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