Phoenix Mayor Candidate Wes Gullett on Cutting Costs and Why We Shouldn’t Expand the Light Rail

This Monday I interviewed Wes Gullett, who is running for Mayor of the City of Phoenix and is currently a partner at First Strategic, a strategic communications and public affairs company. This interview with Mr. Gullett is the fourth in my series of interviews with the major mayoral candidates. To get an in-depth view of where the different candidates stand on issues like public transit, historic preservation and further growth in Phoenix read the Blooming Rock interviews with Claude Mattox, Greg Stanton and Peggy Neely too.

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I’ll be posting the interview with Mr. Gullett in 2 parts. Today’s post addresses Mr. Gullett’s position on cutting costs at the City and on why he thinks we shouldn’t expand the Light Rail.

The north-bound Washington Light Rail Station. Photo from Wikipedia.

Blooming Rock: You talked on Thursday at the debate that we need to cut costs at the City. How do you propose that we do that?

Wes Gullett: There are a variety of ways to find efficiencies. We’ve got to look at using technology better.

We also have to look at the contracts we have with our employees and make sure that they’re competitive with the private sector. Right now they’re not.

In the past, we set up our contracts with our employees to try and keep our employees from going to the private sector. Today, there’s not a private sector employee that wouldn’t want a job in the City because the City jobs are a lot better.

The only problem with that is that the tax payers have to pay for those jobs. The City is not a for-profit company and the people who have to pay for it are the taxpayers.

So to keep the employee contracts that we had, we instituted a food tax. And I don’t think the food tax is appropriate.

I think it is taxing exactly the wrong people, the poorest people for something that they have to have. We need to get rid of the food tax as soon as possible.

How do we do that? Seventy percent of our general fund budget goes to employee costs, so that’s where we have to look at saving money. We’ve done a good job of eliminating positions that were on the payroll that were unnecessary.

So on paper it looks like the City’s staff is smaller than it’s ever been. So the people who’re actually in the jobs, we need to make sure that they’re competitive with the private sector and they’re not.

I’ll give you an example – healthcare benefits in the private sector if you have a family and you’re paying a healthcare premium, cost between $600-800 a month, at the City it’s $250 a month. That’s a significant difference.

It’s much better to work for the City where you only have to pay $250 a month.  Healthcare costs are driving the increase in the cost of the budget.

What we’ve got to do is share those increases with both the employees and the tax payers. Right now it’s a one-way street.

The taxpayers are the ones picking up the increases. And I think we need to have City employees participate in that as well.

There’s a benefit that City employee managers get. It’s a 6%-9% compensation fund that they don’t have to pay anything into.

So it’s a 6%-9% benefit that the tax payers pay managers to keep them. That program, in totality, costs about $20 million.

I think we need to cut that in half. And then test the market and see if we start losing our managers or not.

But we don’t have any idea because it’s not a competitive marketplace right now. We’re not losing our managers but I don’t think that there’s a big demand outside.

So economics, supply and demand are the drivers. We need to cut our costs.

If we cut that program in half, now this is a program that they don’t have to pay anything into, (we would save money). They could pay into it and keep the benefit, but they don’t, it’s just a City gift to them, to keep them there.

If we cut that in half to 3%, instead of 6-9%, we would save $10 million.

Blooming Rock: So do you think that if we cut some of these programs, we could retain more employees at the City? Because I know that the City has gotten rid of a lot of their employees.

Wes Gullett: We haven’t gotten rid of our employees, we’ve gotten rid of 37 out of 14,500. We’ve laid off 37 out of 14,500.

Blooming Rock: Really?

Wes Gullett: We’ve cut positions that were unfilled.

Blooming Rock: But City employees seem to be over-extended.

Wes Gullett: So we need to take those savings and invest in technology that will help them work more efficiently. The police department is working on a crime-reporting system that’s 20 years old. One of the things that I want to do with my cost savings is invest in technology that will save us money in the long run.

The police department is about 55% of the budget. We need to be investing in ways to make the police department more efficient.

But I’m not talking about cutting services, I’m talking about cutting costs. We need to enhance the services that we provide like police protection by having better technology and having better managers.

In the water department, for example, there’s six employees for every manager. I think that every manager could have 8 employees. That’s an arbitrary thing, but I think that we need to press on that and that way we can save money.

Here’s what happened after 2008 when the market crashed, the credit crunch happened, and the recession began. Everybody had to work harder to make the same amount of money.

And if the City staff are stressed and overworked, join the club! Everybody is stressed and overworked! That’s the way the economy works.

In the private sector, we didn’t have the ability to raise our prices. The City raised the prices. They cut services and they raised their prices. If they were in the private sector, their clients would have gone away. They would have gone to somebody else, but they can’t in this example.

Blooming Rock: So you’re saying that the City really has to model itself after the private sector.

Wes Gullett: I’d like to see many more business practices at the City. We have to, the world has changed.

Blooming Rock: What do you think would happen if we didn’t do that, if the City went on with business as usual?

Wes Gullett: Their system’s not sustainable. What will happen is that costs will continue to rise, we won’t be able to fix those costs by borrowing more money and having more gimmicks, and we’ll be forced to raise prices again.

If we raise prices, we start down a spiral that ends us up like Detroit.

Blooming Rock: That’s pretty dire.

Wes Gullett: Yes, it is. And I believe that, that you have to react in this marketplace.

Because we’re in a global market, we’re competing as a community, not only in our own Maricopa County region, we’re also competing in our Southwestern United States region.

And our competitors are places like Denver, Salt Lake City, Dallas, Austin, Orange County, San Diego, and Los Angeles. What we have to do is make sure we’re not the highest cost place to do business and we’re being beaten by Texas right now.

Eighty-five percent of the jobs that have been created in this recession in America have been created in Texas.

Blooming Rock: Why is that?

Wes Gullett: Because of cost! They have low cost and stable government. Right now we’re in a cost-competitive marketplace in terms of housing. We weren’t before. We are now because the market crashed. But our cost lines for the City are going up.

Blooming Rock: Like what costs?

Wes Gullett: We raised water rates 100% in 10 years. That line is going up in a dramatic way.

Blooming Rock: Our water rates are pretty low though compared to other cities. I pay like $5 for water every month, the rest of my water bill is sewer and trash and other stuff.

Wes Gullett: When you have a competitive advantage, you don’t want to dissipate it based on the ability to raise prices.

Now, compared to our competitor cities we’re trying to compete with, our water rates are about even. But we have no plan to cut costs. So we keep raising the prices. And then we become less competitive.

They don’t look at raw cost, they look at trends. So if the trend lines are going in the wrong direction, (it’s not good).

We’re increasing the cost of food, we’re increasing the cost of water, the fundamentals.  If we’re willing to increase the cost of fundamentals, like food and water, we’re willing to increase the cost one everything.

And it makes these business people very nervous when they’re talking about relocating a plant for 30 years.

Blooming Rock: I wanted to talk with you about the Light Rail. You said we shouldn’t really invest any more into Light Rail until it shows a better return on investment. Can you talk about that a little bit more?

Wes Gullett: It is outrageous that the City Council has not done a better job of planning for Light Rail. We had the commitment for Light Rail started 10 years ago. Construction occurred, we built it, now it’s running.

But we haven’t done the basics of the planning process. And that’s the Station Area Plan.

We have transit-oriented development overlay on the entire system. But they’re no specific plans on the Station Areas or that engagement with the neighborhood about what you want, what we can do and what you’re willing to take in terms of density.

That planning process is just now beginning. It’s ten years too late. We should have been doing that planning prior to construction so that people had the idea of what was actually possible, what they could expect once they got through the hardships of the construction process.

Until we can do that, until we can do an effective job of planning for what we already have, we shouldn’t be expanding it. Because what’s the point? Half of the people believe that Light Rail is a loser.

Blooming Rock: Really?

Wes Gullett: Oh yeah. And they’re mad about it and don’t think we should have it at all. And half of the people think it’s great.

Let’s take advantage, from an economic standpoint, of what we have and make sure we have a commitment to doing that and do it the right way before we sink more money into it.

Because if we’re sinking money into it, to be a transportation system, it benefits us in a lot of ways that people don’t understand.

It benefits us from a pollution credit point of view, it benefits us from all kinds of federal regulations, it gets us points that are hard to quantify in terms of value. The monetary value is huge to that.

But the return on investment (isn’t there yet), and I’ll give you an example. In Boston, they’re revitalizing a subway corridor and at each station area, they have a redevelopment district and those redevelopment districts are developing the tools to create small business opportunities and vitality at each one of those stations.

In Washington D.C., Wilson Boulevard, which was like 7^th Street, (full of) strip malls, is now one of the most economic(ally vibrant) corridors in the country because of the metro. And (that’s because of) the planning that went into that, in making sure that the density was clustered around the station, and the small businesses boomed.

I’ll give you a local example – 7th Avenue and Camelback. From Central Avenue west, along Light Rail, all the way to 19^th Avenue is a wasteland. We have a Target, a big box store, on 7^th Avenue, right at the Light Rail station, that’s empty with a 5-acre parking lot.

We need to engage the community, the two historic neighborhoods, on the south side and on the north side in a process to plan for density and development at that Station Area.

And if we can build a multi-use project and attract investment into that abandoned Target store, we can set a center for the redevelopment of that whole line that is already zoned for multi-family with a bunch of run-down apartments, and we could attract new investment dollars, and that’s what I’m talking about in terms of a return.

My idea for that corner is a Pike Place-type marketplace, something we don’t have here. We have the Downtown Public Market but I’m talking about creating a place where tourists can go so that they can jump on Light Rail Downtown at the Convention Center and they can ride up to this place, just like Pike Place in Seattle.

Pike Place in Seattle, WA. Photo by the author.

Every big city has one, in Philadelphia, they have the Reading (Terminal) Market, in Washington DC they have Eastern Market. They are these places that create a sense of place.

I also believe that we can tear up that big giant parking spot and put in a massive 5-acre urban garden. And that urban garden can then serve our community, all the new restaurants, all the people who want to buy local, and it can be commercial or it can be community(-driven).

But we can have a place that you can actually begin that. So you get off Light Rail, you walk through this community garden and go to the marketplace.

We have everything brought in there, we don’t need the parking because we got Light Rail and we’ve got a huge park and ride facility across the street. If we’re attracting investment, we can also develop shade structures and other things that make it a unique walking experience from the park and ride.

That’s what I’m talking about, and who knows, maybe on top of that marketplace is multi-family market-rate apartments or affordable apartments. Maybe it’s zoned for multi-family all through that area right now.

And then you’ve got abandoned Beef Eaters, abandoned shops all along there that have never recovered from Light Rail and now it’s been 3 years since the construction.

Blooming Rock: But don’t you think Light Rail would really benefit from further connectivity to other places?

Wes Gullett: Look, we have to be grown-ups about this. If we’re not willing to do the hard work on the billion dollars we’ve already invested, we shouldn’t be allowed to invest more money until we’re grown-up about it and do the tough things which is engaging the neighborhoods, having that conversation, doing the appropriate planning.

Yes, the answer is yes, it would be great to be connected. It would be great to have it serve south Central Avenue, it would be great to have it go to Metro Center, it would be great to have it go out to the stadium on the West side, that would be great.

In a world where we could go to the tree and get the money off of it, it would be great. But the money tree is dead, died 2008!

So today, we’ve got to be smarter and think about where that money’s coming from. And how we’re going to invest it in the future.

But we’ve got to take advantage of the things we’ve already done. And that’s what everybody is doing. Everybody’s looking inside and saying ok, I’ve invested in these things, what are my strengths? What are my core strengths and how do I utilize those to grow the pie?

Blooming Rock: I agree that we should be doing a better job with the station area planning. But don’t you think it would be beneficial to be doing both simultaneously, do the extensions and do the existing Light Rail planning?

Wes Gullett: We can’t afford it. If you show me where we can get the money, I’d say yes. But until you can show me the money, (I don’t think we can do it).

What Greg Stanton says is that we’ve got to do these things, but he has no idea where the money will come from. It’s easy to get people fired up and say we’ve got to do this, but it’s harder to figure out where the money’s going to come from.

If there are federal funds that will do it, great! But there’s a local match that’s required. What I don’t want to do is having the City of Phoenix go in alone.

There are too many demands, we’ve got to worry about additional borrowing. Even if we’re getting money at 3%, it’s still 3%. So we’ve got to be careful about our exposure in borrowing more money in an environment where we don’t know how we’re going to pay it back.

Let’s do the work to figure out how we’re going to pay it back and then let’s invest it in the future. You ride Light Rail like I did Saturday night and you go by a lot of stuff that’s underutilized and we don’t have a plan to utilize it. That’s my concern.

Tune in tomorrow for Part II of my interview with Mr.Gullett!

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