City Manager Discovered the High Cost of Moving West : Redondo Beach: William Kirchhoff got a hefty raise and a housing allowance--but he figures he still lost almost $122,000 by leaving Texas.

By KIM KOWSKY

Aug. 28, 1992 12 AM PT

TIMES STAFF WRITER

To lure William E. (Bill) Kirchhoff to the city manager’s job last year, the Redondo Beach City Council dug deep into its coffers to offer him a hefty raise and a $1,200-a-month housing allowance.

Although the salary hike to $123,725 annually made Kirchhoff one of the South Bay’s highest-paid city managers, the veteran administrator was in for a surprise when he began working on his tax returns later in the year.

That was when he discovered that the move had cost him almost $122,000 and that his new salary, though higher than the one he received as city manager of Arlington, Tex., was actually worth less.

The city manager told his cautionary tale in an article that appeared in the August edition of Western City, a monthly publication of the League of California Cities.

“I guess you could say there’s an irony,” said Kirchhoff, who has written extensively about executive compensation issues. “It’s kind of like an accountant who, at the end of the year, didn’t figure his taxes right.”

Kirchhoff’s story is an unusually candid account of why municipal governments in Southern California find it so difficult to recruit people from areas where the cost of living is significantly lower.

As it is, the salaries of private sector employees with similar responsibilities are two to three times more than those earned by city managers, said Roger Storey, a consultant for Shannon Associates, a Sacramento-based municipal government executive search firm. So it’s no wonder that out-of-state city managers are reluctant to make a wallet-draining move to the West Coast.

“What it takes to attract and retain a good city manager really has to do with where they are now,” Storey said.

Kirchhoff said he probably wouldn’t have taken the job if he had realized how costly the move would become. But, he added, he and his family enjoy their lifestyle in Redondo Beach so much that he doesn’t now regret the loss.

The article was published soon after Kirchhoff completed an eventful first year on the job in which he asked city employees to do more with fewer resources.

Kirchhoff, who has been named one of the 11 most recognized public managers in the country and who has a national reputation for his advocacy of corporate-style municipal management, pared nearly $3 million from the city budget by reducing City Hall staffing levels through attrition and by consolidating job responsibilities.

To show solidarity with the staffers, who were not given a raise this year, Kirchhoff took a $5,000-a-year pay cut himself.

“If you ask anyone in the city about what kind of job he has done . . . , he gets high marks all the way through,” Mayor Brad Parton said. “He’s a real, upfront, honest gentleman who has a strong business background and who has helped us get rid of a lot of the excess fat.”

While city officials praise the way Kirchhoff balanced the city’s budget, he said he was less than diligent when it came to analyzing his own finances.

In the article, titled “Moving To the Promised Land: The High Cost of Taking a California City Manager Job,” Kirchhoff tried to explain how he could “miss the mark so badly” on what the new job would cost his family.

His conclusion: “Neither side had enough information when the deal was made.”

When the City Council offered Kirchhoff the job, he told council members he would consider moving if he could net a 10% gain in disposable income and if he could move his family into comparable housing.

The council’s offer of an annual salary of $123,725, along with a housing subsidy and a car, seemed to cover his conditions. As city manager of Arlington, he earned about $112,500 a year.

But one factor both sides failed to fully take into account was that Texas has no state income tax. California’s maximum 9.3% state income tax “wiped out what I believed was a generous salary gain,” Kirchhoff said.

“But where we really got nicked,” he wrote, “was housing.”

The price and cost of financing a house in Redondo Beach were higher than he and his wife, Cindi, expected, he said. But so was the unexpected cost of carrying two mortgages before they were able to sell their Arlington home. After three months on the market, the Arlington house finally sold at a loss of $34,000. To close the deal, the couple had to spend nearly $7,000.

Purchasing a home in Redondo Beach also proved costly.

Because the Kirchhoffs had no equity from the sale of their Texas home, they were forced to cash in savings and an IRA worth $47,000 to come up with a $100,000 down payment.

The taxes and early withdrawal penalties cost them $19,000, and that was before they paid out more than $9,000 in closing fees and $7,000 in redecorating expenses.

The payouts were particularly painful because the couple could no longer count on Cindi Kirchhoff’s earning capacity. In Arlington, she earned $30,000 a year as a registered architect and land planner. But “the plummeting California economy slammed the lid on her job opportunities” here, Kirchhoff said.

According to Kirchhoff’s calculations, the move cost him $48,000 in direct costs and about $68,000 in indirect costs. Add that to his self-imposed $5,000 pay cut, and his total cost of moving to California comes in at $121,000.

Since the article ran, some of Kirchhoff’s colleagues have called to express their amazement that he opened his personal finances to public scrutiny.

But Kirchhoff responded, “We live in a glass house anyway.”

Kirchhoff said he wrote the article--for which he received no compensation--to encourage city officials and public service employees to “hammer out the numbers” before making any career moves. “If both parties haven’t . . . you’re not going to have the kind of positive relationship you’re trying to start off with.”

Not that his own relationship with city officials has suffered any strain, Kirchhoff and City Council members insist.

In an interview this week, Kirchhoff said the council “did everything and more than could be expected” to come up with a compensation package that would satisfy him.

Parton, who read the article before it was published, expressed sympathy for the city manager’s loss.

“For $300,000, a house in Texas probably includes a swimming pool, Jacuzzi, tennis court, the whole bit,” he said. “But for $300,0000 in Redondo Beach, you get a little house with maybe a small patio. We were just fortunate he didn’t . . . want a big pool in his back yard.”

Kirchhoff nevertheless seems genuinely satisfied with his new life. When a former Arlington colleague was offered a position as Newport Beach’s city manager earlier this year, Kirchhoff encouraged him to take the job, saying the lifestyle was worth the loss in earning power.

But the friend, Arlington Deputy City Manager Charles Kiefer, ultimately decided that he couldn’t afford the move.

“Newport Beach is a beautiful city, and it was an excellent professional opportunity,” Kiefer said. “But the bottom line was it wouldn’t work out.”

Costs of William Kirchhoff’s Move DIRECT COSTS

IRA withdrawal costs: $19,045

Cash needed to close deal on new house: 9,280

New house upgrade (bookshelves): 7,000

Cost of selling Texas house: 6,905

Voluntary pay cut: 5,000

Double mortgage costs: 3,948

Non-reimbursed moving costs: 1,200

Interim housing: 1,100

Total: $53,478