Lorraine Longhi Arizona Republic
(CNT) City News Talk #arizona
Of the six candidates competing for three spots on the Scottsdale City Council in Tuesday’s election, all except one are newcomers to the council.
But one of them has a long history with the city, first as the chief of staff for longtime Mayor Herb Drinkwater, then later as city manager.
John Little, a 25-year former city employee, served as city manager between 2008 and 2009, in the throes of the Great Recession.
Before that, he also served as the executive director for the city’s downtown district, and as the head of the Transportation and Human Resources departments.
Critics this campaign season have contended that the reasons for Little’s departure from the city should raise concerns for voters. He was dismissed in November 2009 after some Scottsdale officials said he was not communicating or cooperating effectively with the city.
The move capped off an acrimonious year between Little and the council, that started with ballooning costs from a retirement incentive program, and ended with a disagreement over the creation of a city treasurer position.
The council wasn’t in agreement on Little’s dismissal, and his contract was narrowly terminated in a 4-3 vote, with Mayor Jim Lane and then-Council members Lisa Borowsky, Bob Littlefield and Tony Nelssen voting to dismiss him.
Little told The Arizona Republic that the decision to terminate his contract came as the city was attempting to find solutions to address a budget deficit larger than any it had ever encountered in the economic downturn.
“We had to come up with solutions really fast,” Little said. “We did the best we could, we made decisions, we communicated those decisions.”
Little’s time as city manager
Little was appointed interim city manager in April 2008 after being recruited by Lane and then-Council member Bob Littlefield. He was later elevated to the permanent post.
Little says it was common for him to be asked to move into different roles during his career with the city, and that he was promoted nine times. “I never applied for a single job,” he said. “I was always asked.”
But just 18 months later, Lane and Littlefield would vote to terminate Little’s contract.
The conflict with council members initially stemmed from a retirement incentive program that Little proposed in January 2009 to cut expenses amid a rising city deficit.
The controversy reached a boiling point in September 2009, when the council asked Little to move the responsibilities of the Financial Services Department from under the City Manager’s Office and over to a newly created City Treasurer’s Office.
Little pushed back, arguing that the move violated the city’s charter. “I took an oath to protect the city charter, and they were asking me to, in my opinion, violate it. And I refused,” he said.
The council ultimately voted on Nov. 2, 2009, to terminate Little’s contract, with Councilmembers Suzanne Klapp, Wayne Ecton and Ron McCullagh dissenting.
The vote ended months of “acrimonious sparring” at City Hall, according to The Republic’s reporting at the time.
“I feel rage, I feel shame and I feel sadness that we’ve come to this action today,” Klapp said at the time. “I think the toxic environment that was alluded to will unfortunately become explosive because of this situation.”
Little, in 2009, said he was let go because of adherence to his personal principles and ethics, but the council members who voted to terminate his contract cited Little’s “unwillingness to compromise” as the reason for his departure.
“You can’t run a city where the city manager believes he can pick and choose which council decisions he is going to implement,” Councilmember Littlefield said at the time. “It has nothing to do with anything else. That’s the bottom line.”
Little’s competitors for a seat on the council in this year’s election have used his involvement in the retirement incentive program to attack his council campaign.
Council candidates Betty Janik and Tom Durham, who are running as a slate, have passed out campaign literature criticizing Little’s tenure as city manager.
In a flyer titled “Little Known Facts,” the two candidates call attention to the fact that Little was fired, citing the reasoning as “crafting a retirement plan with fellow city staffers who personally benefited from it.”
Little told The Republic that the climate at the time was rife with companies laying employees off, furloughing them and taking benefits away during the recession. “People looked at government employees differently back then,” he said. “They said, ‘Why do government employees have this giant safety net?'”
Little recalled some members of the council suggesting at the time that the city simply fire more employees. “I said, I’m not going to do that. That’s not something I will do,” Little said.
Little emphasized that he did not personally benefit from the retirement incentive program when his contract with the city ended.
What was the retirement incentive program?
In January 2009, the city launched the retirement incentive program as the city attempted to cut operating costs in the wake of an estimated $65 million deficit. Little also moved to reduce city expenses through layoffs, a hiring freeze, eliminating vacant positions and eliminating merit pay increases.
The bulk of an organization’s costs are labor related, so Little said he had to find ways to structurally downsize the city in the face of such a large deficit. “My strategy for that was the retirement incentive program,” he said.
The program offered employees one week of pay for every year of service. Council members said they were told that the program would cost between $3 million and $5 million.
But Little said at the time that those numbers were provided to the council as an estimate, and that the council and the Budget Review Commission had been updated several times on the program’s progress.
Ultimately, more employees than anticipated took advantage of the program, including police officers, planners, librarians, park managers and even some of the city’s top administrators, including two assistant city managers, the heads of the transportation and community services departments.
The program came under fire by council members, upset over the growing cost of the program. Council critics chastised Little for failing to communicate with them, while also maintaining that Little should have capped the payouts of the program.
An Arizona Republic review of the six largest Valley cities that offered retirement incentives found at the time that Scottsdale was the only city that did not cap program costs.
Without those caps, the unlimited payouts allowed three employees to leave with $100,000 apiece, on top of receiving six-figure increases to their pension benefits.
Of the 100 who retired in Scottsdale, 56 received pension spikes, The Republic reported.
Council members also were upset that some of the employees who helped craft the program ultimately took advantage of the benefits themselves.
At the final tally, city officials estimated the program cost the city $9 million, plus another $4 million in vacation and medical benefits.
Scottsdale would also have to pay the Arizona State Retirement System $5.2 million in “unfunded liability,” or money that the city owed the system for allowing employees to retire early. That liability could have been reduced with incentive caps.
Little said the program was the first of its kind and came at a time where the city was facing the largest budget deficit in its history.
“No public sector city that I was aware of … had ever instituted a early retirement incentive program for employees before,” Little said. “We were in rarefied earth. We were in a place the city had never been before.”
Little said it was made clear to council members that the city had no idea how many employees would take the city up on the retirement program.
At the time, The Republic’s Scottsdale editorial board praised Little for acknowledging city staffers with respect and dignity.
“Did that lead to parts of the incentive package being too generous? Yes,” the editorial read. “Just because it can’t be quantified doesn’t mean those small gestures don’t create a more efficient workforce. Keeping employees happy is another way to work for the taxpayers.”
An audit by the City Auditor Sharron Walker later found that the projected savings for the program were ultimately achieved.
Audit finds savings achieved, but some protocols not followed
In an audit released in June 2010, seven months after Little’s dismissal, Walker found that the retirement program and other measures implemented by Little had reduced the city’s payroll by $13.2 million: $8.7 million from the retirement program and $4.5 million from layoffs.
“The structural payroll savings from eliminated positions, which totaled approximately $13 million, can carry forward into future years until positions are replaced or salaries increased,” Walker found.
But the audit also found that key factors that could have impacted the program’s costs had not been presented to the council.
If city officials had advised the council of an option to pay retirement incentive after the employee’s retirement effective date, the city could have reduced its $5.2 million payment to the ASRS by more than $4.8 million, the audit found.
While the audit found that the actual costs of the program exceeded anticipated costs by $582,784 due to salary increases, the resulting savings to the city were $3.8 million more than had been projected.
At the time, Little said he was looking at the issue from a leadership perspective.
“It’s a tremendous challenge to reduce the budget and not impact service to customers,” he said. “When we’re done, I need to have people believe what they are doing is important and trusting this organization.”
On Tuesday, Little maintained that the experience remains a proud moment for him in the course of his career with the city.
“I remember just feeling like I needed to stand my ground on my principles,” he said. “I think overall it has helped communicate that I am somebody that has principles and I will stand up for them.”