Just when you thought it couldn't get any worse, it gets worse. So today's lesson is called "Expenses vs. Investments 101."
In a business, expenses tied to maintaining the viability of the enterprise are commonly referred to as "overhead." Overhead can include expenses, such as rent, insurance or salaries and benefits.
In a restaurant, for example, wages and benefits for busboys are expenses, as are the wages and benefits for a server in the eatery.
In that restaurant, however, there may be a server who is particularly adept at upgrading guest entrée orders or inducing add-ons, such as appetizers or beverages. Because that person directly generates revenue, or even unanticipated revenue, he or she is not an expense beyond his or her wages. This server is also an asset. Similarly, the commissioned salesperson who sells products or services at profitable levels beyond his or her compensation package is also an asset.
Should business decline, the busboy is more likely to be eliminated before the server because he lacks the skills and assets of the server who generates revenue.
Now let's try to transfer this simple business concept to city government.
Public and private enterprises often have someone in the organization who's responsible for securing incremental revenue, that is, revenue generated in addition to the usual or customary methods, such as taxes or tuitions. This person, whose title may be "grant administrator" or "grant application specialist," is responsible for filing the required paperwork and managing the application processes of grant monies through the final approval in order to improve the level of service of that enterprise.
In the case of the municipality, a grant manager or administrator could help apply for and manage the process of funding for new police or fire equipment, playground enhancements for the Department of Parks and Recreation, school improvements or even telecommunications. In many cases, various department heads work independently to get transportation and other grants.
But a good grant administrator will generate revenue for projects in numbers many times his or her salary and will contribute greatly to the safety and improvement of the city.
Recently, the Costa Mesa City Council voted to eliminate positions in one of its desperate moves to balance the budget it has mismanaged for several years. Flying well under the radar of those staff cuts was the position of grant administrator. Over the past nine years, the grant administrator position in the city of Costa Mesa has generated more than $5 million in revenue.
Specifically, the grant administrator position generated the following grant revenue over the past nine years:
•15 grants for public services totaling $3,048,807
•23 grants for the Police Department totaling $723,173
•50 grants for the Fire Department totaling $989,216
•2 grants for schools totaling $366,970
•21 miscellaneous other grants totaling $209,678
So for an expense that is a fraction of the $5 million received via successful grant applications, Costa Mesa residents got a healthy return on investment, one that any business would love.
Yet the City Council cut the grant administrator position.
The key question is: "Why?" Why on Earth would a City Council, even one as clearly over its head with the current budget crisis, choose to eliminate a position that was making money, just like that server in the restaurant?
But wait, there's more. In an attempt to ensure that we understand her position on the staff cuts, Councilwoman Katrina Foley said none the positions would be eliminated "if it were my call."
And Foley admitted at the council meeting of June 22 that "in many cases some of these actually create income for the city."
The motion to adopt the new budget that includes the elimination of the grant administrator was approved 4-1, with Foley dissenting.
So, there you have it. The council knew that at least one position generated incremental revenue yet still voted 4-1 to eliminate it.
And here's a footnote: The total value of the positions reduced in the new budget is — drum roll, please — $5 million, or slightly less than the amount of revenue generated by the grant administrator over the past nine years.
Now in fairness, it's important to note that various city departments have applied for transportation, parks and other grants, and will keep doing so. A city official said Friday that Costa Mesa will continue to go after every available grant.
But, in my view, the city has lost a key point person. Let's hope it doesn't lose any funding.