Political skill, courage needed for local government consolidation to save money

And even then, some expenses of local government are beyond the reach of the most fearless budget cutters.

Take, for example, the nearly $1.5 million that Vanderburgh County budgeted to pay 31 probation officers this year. The probation officers are county employees, but their pay scale is set by the Judicial Conference of Indiana, the state judiciary's policy setting body. State law requires the county to comply and forbids it to reduce salaries that are above the minimums.

The Indiana Code does not, however, require the county to employ 31 probation officers.

How pivotal a role the cost savings issue plays in this year's consolidation referendum campaign depends on who you ask. If merging city and county governments won't save money and might even cost money, anti-consolidation activists ask, why should voters approve it on Nov. 6? Consolidation supporters say merger will, indeed, save money, but that's just one of the benefits and, perhaps, not even the most important one.

Personnel costs are where a consolidated government would find significant cost savings, according to one of Indiana's leading public sector consultants.

"You can nickel and dime, save a little bit here — paper clips and office supplies and equipment — but the bulk of the costs is in people," said Kent Irwin, president of Muncie-based consulting firm Waggoner, Irwin, Scheele & Associates. "It's employees' salaries and their benefits, so that's what has to be evaluated to arrive at any kind of savings."

The city controller's office estimates employee salaries, benefits and related taxes consumed at least 60 percent of the total $225 million-plus that city government spent in 2011. A slightly smaller percentage of the $104.5 million spent by county government was devoted to personnel, according to the county auditor's office.

But using consolidation to significantly reduce personnel costs would be fraught with complications.

About 850 of city government's roughly 1,200 full-time employees are unionized with collective bargaining agreements. Some 180 of county government's roughly 800 full-time employees also are unionized with collective bargaining.

"You're going to have to get some agreement from them, and take-backs are not easy to come by," said Irwin, whose firm has worked for Evansville city and Vanderburgh County governments. "You've got to move carefully through that process. Otherwise, you'll end up with a bunch of lawsuits, and you'll be hiring more lawyers."

The local government employees who are not unionized are still part of Vanderburgh County's political landscape, Irwin said, and eliminating their jobs is a choice elected officials typically are loathe to make. That would take courage.

A consolidated government could rely on employee attrition to cut payroll, as local governments are doing now.

"That has to be prefaced by, 'You know, we're not closing down the jail,' so there's going to be certain jobs that are going to be exempted from these kinds of hiring freezes or attrition attempts just because of the nature of the jobs," Irwin said. "You have to have people there."

The right question?

Ed Hafer Jr., has heard the barbs of consolidation opponents who demand to be shown the cost savings in the Plan of Reorganization as adopted by the County Commissioners and the City Council last year.

Hafer was sitting in the audience at a July 26 United Neighborhoods of Evansville forum when County Treasurer Rick Davis ticked off a list of current big-ticket expenses not affected by consolidation — 286 city police officers and 109 sheriff's deputies, 274 city firefighters, hundreds of civilian law enforcement employees and $2 million in township dollars devoted to fire protection in areas outside the city.

"Where is the savings?" Davis pointedly asked that night. "I'm not believing it."

But Hafer, a member of the committee formed in 2010 to craft a consolidation proposal and a leading voice in pro-consolidation group, Yes! for Unification, wonders if that is the right question.

He said city residents and those outside the city could ask instead whether a consolidated government would save time and energy and wasted effort by taxpayer-funded public servants. They could ask whether a merger eliminates direct city-county competition for economic development, which can drive up the costs to local taxpayers.

They could ask whether it is fair that maintaining two local governments in one community leaves some residents paying fees and taxes set by elected officials for whom they cannot vote — or individuals appointed by those officials. They could ask whether it makes sense to have different kinds of smoking bans in the city and areas outside the city, as has been the case in Vanderburgh County in recent years.

How is efficiency served, Hafer asked, by having the Evansville-Vanderburgh County Area Plan Commission administer a city zoning ordinance and a county zoning ordinance separately for two sets of governmental officials?

"I'm all for cost savings, but the biggest thing is just to have a better government that's more responsive to the people and simple," said Hafer, who was chairman of the Evansville-Vanderburgh County Reorganization Committee's finance and tax subcommittee. "Through unification we take the executive and the legislative and the fiscal bodies of the city and the county and combine them into a mayor and a Common Council. It's going to be more efficient. It's going to be more clear to people what we're doing. It's going to be more accountable and more transparent."

Davis is right that significant chunks of current local government spending would remain untouched in a consolidated government.

Of the $225 million-plus city government spent in 2011, $30.2 million went to police department operations and $24.5 million for fire department operations. Of the $104.5 million spent by county government, more than $15 million went to sheriff's office, jail and community correction center operations. In a consolidated government, changes in the structure of the Evansville Police Department and the Vanderburgh County Sheriff's Office are prohibited until 2024.

Of the combined $330 million spent by city and county governments last year, roughly $90 million was derived from property taxes. The remainder came from revenue sources such as water and sewer rate payments, Casino Aztar riverboat admission taxes and other non-property tax revenue that a consolidated government likely would not want to reduce.

Crunching numbers

Appeals to good government notwithstanding, consolidation advocates do argue that merging two local governments into one would save taxpayer money. They point to an analysis provided them at their request by Indianapolis-based public accounting and consulting firm Crowe Horwath. The analysis pegs $781,579 in savings to elements of the reorganization plan.

The largest cost savings at $442,693 is the elimination of the full-time city clerk position and the replacement of seven County Council members, nine City Council members and three county commissioners with a single 15-member Common Council. The number includes operational — but not personnel — savings from consolidating some of the city clerk office's administrative functions into other offices.

The number was arrived at by compiling salaries and benefits for the 20 current elected officials using 2011 budget figures. That figure came in at $906,393. Projecting that the new consolidated government would spend $45,346 on each of the new 15 Common Council members, Crowe Horwath estimated $226,203 in savings on elected officials.

Crowe Horwath then added another $216,490 in projected savings from the city clerk's office consolidation to arrive at $442,693.

Consolidation opponents have argued that members of the new Common Council would want to receive something similar to the $59,408 that a county commissioner gets in salary and benefits. They also point to the reorganization plan's stipulation that the first mayor of a consolidated government will receive the combined salaries of the mayor of Evansville and a county commissioner.

But the reorganization plan limits the compensation of the first Common Council members to "an amount equal to the greater of the salary paid to the City Council or the salary paid to the County Council immediately prior to the Effective Date (of consolidation)."

County Council members receive $44,785 in salary and benefits. City Council members receive $36,796.

Crowe Horwath also projects a savings of $98,886 in reduced payments for legal services because with fewer bodies of elected officials would come fewer attorneys to advise them.

Finally, Crowe Horwath projects a savings of $240,000 because with no city offices to fill in off-year elections, there would be no need to stage the elections.

Consolidation advocates argue their $781,579 savings would swell by millions of dollars in operating efficiencies that would be identified and affected — appropriately, the advocates say — by a merged government's elected officials.

Hafer pointed to a section of the reorganization plan stating that, "The City Engineer and County Engineer shall be combined into one office and there shall be one office of Engineer for the Combined Government. The office of Engineer and the County Highway Garage shall be combined into the Division of Transportation Services, resulting in a Department of Transportation Services in the Combined Government."

"What it doesn't state is savings that might be achieved through consolidation of jobs and positions, through elimination of equipment, combined buying powers, things like that," he said.

Transitional costs

Opponents of consolidation counter by arguing that merger would cost more in "transitional costs," not less, by making local government bigger and more cumbersome.

"Transitional costs include the costs of merging city and county functions, of salary and fringe benefit equalization, of additional facilities, additional equipment, and additional physical and administrative infrastructure," states a new posting on the website of Citizens Opposed to Reorganization in Evansville.

There is some reason to believe that unions representing city and county government employees might seek to "equalize" their differing pay scales to the highest of two numbers.

Two years ago, when merging the city police department and the county sheriff's office was still on the table, Fraternal Order of Police Lodge 73 served notice that in a reorganized government, it would insist on pay and benefits equalization that "averages up" to the higher pay.

Paying some law enforcement officers less than other officers of similar rank and seniority would cause an immediate morale problem, local FOP officials said then.

Teamsters Local 215 President Chuck Whobrey, whose union represents about half of city government's 850 unionized employees plus some county employees, is noncommittal about salary and benefits equalization.

"Anybody is always going to want more, obviously. That goes without saying," Whobrey said.

Some city and county government employee contracts are similar, Whobrey said, "but there certainly are some differences."

"You just have to work through putting those contracts into one, and, yeah, you certainly wouldn't wind up with different pay systems but you'd certainly have to resolve those issues," he said. "That's just, quite candidly, what happens in the collective bargaining process. You work through the various issues that you have to, to get some consistency."

City Controller Russ Lloyd Jr., who has crafted budgets in both city and county governments, says it is unlikely that elected officials in a merged government would agree to equalize personnel costs to the highest numbers.

"You'd be talking about multi millions of dollars," said Lloyd, the city's chief financial officer and a former member of the budget-writing County Council.

"I would propose just freezing all the salaries at the current pay rate, but then you might want to implement a new salary structure for new hires," Lloyd said. "You could work toward integrating those over time."

Lloyd, a former Evansville mayor, also took issue with the notion that consolidation would require more facilities and equipment. He said it is more likely that an inventory and assessment of needs would demonstrate the two local governments have too much equipment and too many facilities between them.

Lloyd pointed to the Vanderburgh County Highway Department's garage on N. St. Joseph Ave., and the Evansville Division of Transportation and Services' garage on Waterworks Road. A consolidated government could sell those structures and acquire a single larger building in a more central location to house a merged operation.

"You may have surplus equipment, duplication of equipment that you could sell off," he said.

Consolidation could actually make money for the new merged government, Lloyd said.

Caution

If consolidation comes to pass, cutting costs will require a reasonably sophisticated understanding of public sector services, Irwin said.

"It's not like we're making widgets here. You're providing services, and the demand for service is what drives the amount of, the numbers of the workforce that you need to provide that service," Irwin said. "It's hard to predict how many lawsuits you're going to get in the next 10 years, so how many lawyers do we really need, and when do we need them?

"How you do that, that's the challenge in terms of getting down to the basic delivery of service and what are the performance measures that you're going to implement to affect any cost savings. You can't sit on high and say, 'We'll just lop this off.' Well, what are the implications? How's that going to work?"

At its closing the Plan of Reorganization recommends that within five years of taking office, a consolidated government should initiate a comprehensive efficiency study. Irwin advises a comprehensive review of all departments and agencies.

"Make the evaluation based upon facts," he said.