How is it possible that in one year, the city of Sacramento gave its top executive 64 weeks of paid leave that he could cash out whenever he wanted?
The Sacramento City Council did this for City Manager Howard Chan with little public discussion or pushback from duly elected council members. They did this while letting Chan put his proposed pay raises on the City Council agenda himself, which he did with repeated success.
From 2017 to 2022, Chan’s base salary jumped more than 42%, from $282,060 to $400,652. Top executives like Chan make a lot of money in California; there is no news flash there. The Sacramento City Council had added onto the salary by giving him a year’s worth of pay when he left the job. Then the council allowed him to cash it all in while he was still working.
Sacramento is now facing a budget deficit driven in large part by employee raises of more than 10% that Chan recommended to council members last December. Then in January, he informed his council “bosses” that the city couldn’t afford the raises they had passed on his recommendation.
Opinion
A reasonable person could ask: How do Chan’s salary and perks look in light of his recommendation for unsustainable salary increases for everybody else?
They reveal how almost every member of the nine-person City Council failed to use good judgment in their relationship with Chan.
We expect more from our elected leaders — much more.
Steinberg feared losing Chan
That Chan is widely liked and respected at City Hall only fueled his enrichment, which was funded with taxpayer dollars. Mayor Darrell Steinberg was afraid of losing him, so he and the council kept sweetening Chan’s compensation beyond anything reasonable until pressure from outside City Hall forced the elected officials to finally say no.
It’s hard to speculate how a newly elected mayor taking office in December will handle Chan’s contract, which expires at the end of the calendar year. Steinberg wanted a new mayor to have a voice in hiring whoever would be the city manager. A new mayor also inherits the pay and perks for Chan that ended up creating tensions and fraying relations.
This situation is not normal. The new Sacramento mayor — state Assemblyman Kevin McCarty and public health activist Flojaune Cofer square off in the November runoff — will have to reckon with it when the winner is sworn in this December.
How did Sacramento get here?
Chan formally took over the city manager position in February of 2017. His initial contract gave him a prorated annual salary of $282,060.
A year later, in 2018, the council awarded Chan a modest raise, upping his annual salary to $294,753.
In September 2019, the council awarded Chan a full year’s pay if he were to leave for any reason. He also could suddenly cash out all of his sick leave, his vacation leave or any type of leave. And his pay increased to $308,017.
Chan earned praise and respect for guiding city operations and employees through the most difficult moments of the COVID-19 pandemic when strict shelter-in-place orders afflicted Sacramento’s tax base, created shelter emergencies and forced everyone working for Chan to provide services under strict health mandates meant to keep people safe.
The protest
But things took a turn when the political protests and civil unrest that unfolded across the country in 2020 and 2021 reached the Chan family’s home. A protest in March 2021 triggered a large response by police. Chan seemed rattled by the experience. That incident became statewide news, and a Los Angeles Times story was illustrated with a photo of Chan, worriedly looking out a window. To make sure I appreciated this moment, Chan’s staff sent me the Times article about the ordeal.
“We were worried about him and his family,” Steinberg said. “And I was worried that he could leave, and I thought that would be really negative for the city.”
So in May of 2021, the City Council raised Chan’s salary to $372,700. And with Chan’s contract amended to expire at the end of 2024, the next mayor would have an opening to switch city managers.
Chan had started as a positive, tireless city manager known by some as Howard Chan, Perfect Man. But the higher pay only seemed to fuel a desire for more.
“This one was kind of easy”
On the night of Jan. 25, 2022, the Sacramento City Council did something extraordinary.
At the time, Chan had the contractual ability to pocket a year’s pay, 52 weeks, upon leaving the job. But Chan apparently didn’t want to wait for the huge payout. So the City Council gave him something even better by granting Chan 58 weeks of “management leave,” some 2,320 hours in all. Chan could cash it all out whenever he wanted.
As council actions go, “this one was kind of easy,” then-councilman Jeff Harris said at the time. Nobody pushed back.
Chan and the council weren’t done. Later in the same year, on Nov. 1, the City Council granted Chan another six weeks of leave. That is a total of 64 weeks of paid leave granted to a government employee in a single year, all eligible for cash-out. To make that leave even more valuable, the council granted Chan a 7.5% raise, bumping his salary to more than $400,652.
Only Councilwoman Katie Valenzuela voted no, marking the first dissent in Chan’s contractual history.
“This is a significant amount of money,” she said at the meeting. “Frankly, this would be different if we hadn’t just given our unions who work under the city management team less than half of this percentage increase.”
By 2023, Chan had earned the dubious distinction of being the highest-paid city manager in the state. Howard Chan was now a powerful man.
One time too many
And then last December, he overplayed his hand.
On Dec. 11, the city placed a special meeting on the next day’s council calendar to increase his pay, among other items. Chan sought another 5% pay increase for himself, and another six weeks of extra paid leave on top of his four weeks of vacation and two additional weeks for all top management.
The council approved the raise on Dec. 12, with Valenzuela and Steinberg abstaining.
But it was all for naught. The Bee’s Theresa Clift reported that Chan violated state law by placing a raise for himself on a council agenda with insufficient notice.
A vote was rescheduled for January. But over the holidays, enough fed-up members of the public spoke out, and the majority of council members finally saw fit to stop raising Chan’s compensation. The council also stripped Chan of his power to place his pay on any future agenda.
Meanwhile, Chan appears to have cashed out most of his leave balances. Based on information on an April payroll stub obtained by The Bee via the California Public Records Act, Chan had none of the council-approved management leave balances on that payroll stub, only three days of sick leave and 40.7 hours of vacation available.
Again, these were taxpayer dollars that Chan cashed out after the mayor and other elected officials agreed to pay Chan based on his self-perceived value without asking any tough questions or considering the possible implications.
This was a case study of how to mismanage the compensation of Sacramento’s chief executive. And this should never be repeated. Pay the city manager a fair salary. Avoid the bonus trap. And be better stewards of taxpayer dollars.
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