What began as a public comment that I delivered before the Davis City Council grew into a bit of discussion about possibilities. The city is poised to place an of extension half-cent sales tax measure on the ballot in June. That measure would continue the generation of three million in tax revenue to the city. However, people like me have come out against the sales tax in part because it was used to help expand city employee compensation over the last five years rather than expand services.
Moreover, as I argued last night, while the city of Davis faces a long-term fiscal crisis that has serious ramifications, the short term forecast is not bad. As City Manager Bill Emlen pointed out, even the bad news from last night, falling short of revenue projections measures in the hundreds of thousands rather than the millions.
It hit home yesterday morning as I wrote an article on the range of cuts faced by the county health department—we are talking about getting rid of preventative medical care, we are talking about putting children and this entire community in grave health risk, we are talking about cutting vaccination services, and we are talking about cutting services to the most at risk people. And frankly that’s just a million dollars in one department. That’s a third of the revenue that the half-cent sales tax generates.
This will be the third year in a row that our schools face cuts, people have talked about the fact that we are dropping our numbers back twelve years. We are cutting classes and increasing class size. Again the youngest and most vulnerable are at the greatest risk.
If somehow we could transfer the $3 million we receive annually to the schools, that would drop the 100 layoffs expected in half. The schools are going to be looking for a way to find revenue this fall, placing a tax measure on the ballot this spring may make that much more difficult.
I called for a countywide discussion of spending priorities because more and more there are not separate entities of the city, the county, and the schools, rather there is one community and one shared interest. Certainly the city of Davis has spending priorities, but perhaps taken in total, we might sacrifice some of our luxuries in Davis to help the schools or the counties with their far greater short-term fiscal problems.
I was then told that there may be a way for the city to pass on sales tax revenue to the schools or the county.
The school district cannot directly levy a sales tax. However, sales tax revenue would provide two huge advantages if it could be done working with the city.
First, the parcel tax is one of the most regressive taxes there is. It levies a set amount per parcel regardless of the value of the property. Thus the owner of a million dollar home pays the same parcel tax as the owner of a small condo.
Second, unlike the parcel tax, the sales tax only requires a majority vote.
Several members of council were intrigued with the notion of shared revenue and possible shared costs with the schools. Mayor Pro Tem Don Saylor in his remarks closing the budget workshop, suggested the city-school two-by-two as a mechanism to discuss the possibility of revenue sharing and also cost-sharing, specifically the cost to maintain grounds. He also mentioned that the county was looking for a way to levy a sales tax and this might be something that could be approached through them.
Harriet Steiner however suggested that this would be a complicated matter to actually achieve.
“Clearly where public agencies share functions, you can enter into agreements where you share the costs in a way that makes most sense to the agencies that are sharing the cost. As far as the school district and the county go, depending on what it is that the agencies agree think is necessary, it may be possible to share some costs, other places it may not be. I think it’s a fact driven issue. I don’t think there’s any authority for the city to just turn around and just hand tax revenue that was collected by the cities to another public agency with no strings attached to it. But I think there are ways to help participate with other agencies in the right set of circumstances that would help both agencies.”
This discussion was an interesting evolution, my original idea was simply that perhaps the city could forgo asking for the renewal of the tax in the hopes that it would make it easier for the county or the school district to pass their own revenue enhancement measures.
It appears from state law, that the only way a school could utilize sales tax money would be at the county-level and by two-thirds vote, however, it is not clear if an entity could pass on that money. We know for instance that the city passes redevelopment money from property taxes directly to the county in exchange for land-use control on the Davis periphery. What would prevent other forms of passing money through to the county or the school district? By the same token, what would prevent the city from passing through a larger portion of its redevelopment money to the county–that is money that the county receives apparently goes to its general fund? Is the city only allowed to pass-through redevelopment money?
General Budget Discussion
The working assumption will be that Target will provide a net boost to tax revenue. That remains to be seen. Moreover, given statewide cuts and university furloughs, it is quite possible that sales tax revenues will continue to slide due to the local base having less money to spend.
In their extensive remarks, both Councilmembers Lamar Heystek and Sue Greenwald hit on key issues that the council will have to grapple with.
Councilmember Heystek expressed concern about the nickel and dime approach to budget cutting.
“Last year when we went through our budget balancing exercise, I believe that the council engaged in a nickel and dime exercise. One of the proposed cuts was to the Golden Hart Awards. We just had, thank goodness, the Golden Hart Awards presentation tonight. That cut would have saved the city a whopping $2000. I don’t believe that we as city councilmembers should go through another nickel and dime exercise.”
He urged the council to find ways to fundamentally change the way we do business. City Manager Bill Emlen indicated that there was going to be a wholesale reorganization effort underway. Councilmember Heystek was very interested to see what the city planned to do in terms of those efforts. He questioned whether such efforts in the past, such as splitting a department to make two departments really achieved cost-savings.
He also expressed concern that past budgets were too rosy in their revenue projections.
“What I heard tonight is very promising. I want to support a budget in my last year as councilmember that provides for a cushion. Even though we might project a flat revenue, we would want to account for more savings just in case. I don’t think that’s being overly pessimistic, I think it makes sense.”
He reminded the staff why we have the budget problem we do.
“The past is prologue. I would remind the staff that there are two fundamental reasons why we are staring down an $800,000 deficit at the end of this year. It’s because we did not reach our nominal contract savings target of $1.25 million when I had called for a 5% savings of at least $1.57 million to the general fund. We also had unrealistic sales tax projections… I’d also point out we haven’t reach a salary savings factor because we have so many positions held vacant in de-funded positions that we can reap the required savings.”
Councilmember Greenwald hit on the city’s unfunded liability.
“We have not dealt with our retiree unfunded health liability and we could have. There’s a fairly easy fix. Staff gave us the impression tonight that we have our retiree unfunded health liability under control. But it turns out under a little bit more questioning that that means we will have to spend $4.2 million more over thirty years than we’re spending today to pay it off.”
She continued by arguing that if we restructure the cafeteria cash out. The cafeteria cash out pays out in cash roughly the same amount per year as the unfunded liability will end up costing us. The current plan allows for an employee whose spouse receives their own health benefits to cash out the full amount in cash, to the tune of $18,000 per year. While other cities provide some incentive for such employees, most of them give around $500 per month, the city of Davis gives their employees nearly three times that amount.
Her suggestion is to cut the benefit by 75% which would still give an incentive for employees to use their spouses health insurance and take the savings of $2 to $3 million and put it in a special fund to pay down the unfunded health liability.
“I think it’s quite possible that we might cut this down that unfunded liability contribution with the changes we’ve made, to the point where we really could pay it off completely with savings from the cafeteria cash out. I think we really need to think about what’s good for our employees in the long run, because in the long run we all sink or swim together.”
What remains fairly clear at this point is that in the long run, the city is facing fiscal crisis. In the short term, the challenges that it faces pale in comparison to what the school district and the county are facing and we can no longer to afford to think about these entities as separate but rather they are all interrelated. We need to prioritize spending from the agencies not on a piecemail basis but rather by asking our community to decide what their priorities are. We may have come to a point where we cannot have great parks, great schools, and medical coverage for the uninsured. We need to choose which of these are our priorities and spend accordingly.
—David M. Greenwald reporting
The working assumption will be that Target will provide a net boost to tax revenue.
Based on the average sales of Target stores, we would expect sales tax revenue from 4th quarter sales at Target to be around $100,000. It could range as low as $50K and as high as $150K, depending on whether this store is average and whether they met their projections. So then the question will be what happened at other non-auto retailers Q409. The Board of Equalization reports 4th Quarter sales tax in June, so we won’t know until then what the impacts of Target, the ongoing recession, and the state budget crisis have been.
Based on publicly available information, Target would probably generate about $400 – 600K in annual sales tax revenue if it proves to be a typical store (depending on what percentage of their sales are groceries, most of which are non-taxable). Loss of sales tax revenue from other retailers around town will offset that somewhat. The unknown now is by how much. We have just lost four longtime downtown retailers. Irrespective of the cause for each business closure, the city has lost their ongoing sales tax revenues.
What David Greenwald proposes is nothing short of what is known — and practiced in hundreds of communities in Latin America and some others in the UK, Canada, and a very few in the US — as “Participatory Budgeting.” For more read “What is PB?” and the “History of PB?” at http://www.participatorybudgeting.org/
The current fiscal crisis for Davis, the school district and the county cries out for a new model of real community discussion and involvement in the policy and financial decisions that affect our lives and community well-being.
Participatory Budgeting is a practice that involves community members, selected by a variety of methods, in many cases selected from neighborhood groups, who together deliberate, arrive at budget priorities and policy decisions that are then discussed and implemented by municipal and county authorities for the good of the whole. It is an open, transparent and fully democratic process that empowers people, the locus of governing authority, and engages them in the process of self-governance. It mitigates against the influence of any one sector of special interest on elected officials and the budget, or anyone sector capturing line-items in the budget that might harm the interests of another group and the community at-large.
David has made a bold proposal that actually has been implemented and has a history of success….let’s try it in Davis and Yolo County. We are all in this together…why not work together – but in a bold new way that, in fact, other communities have found to be successful.
At the very least, taxpayers need to start deciding where their money is going to go – by making the effort to vote “yes” or “no” on proposed tax renewals/increases CAREFULLY. Prior to now, citizens have had a tendency to buy into whatever rhetoric local Davis politicians put out there to justify the need for instituting/continuing/increasing various special local taxes. Taxpayers do not have unlimited funds, expecially in the current grim economic climate – and need to start discerning where their priorities lie and vote accordingly.
Indeed, Elaine, and that is exactly why I am struggling with whether or not I will vote to renew or increase our local sales tax. Until now, I have voted for every parcel tax, for every local assessment, and for the local sales tax. But the clear unwillingness of the council majority to meet their savings goals on employee costs has me considering a “no” vote on a local tax for the first time since I moved to Davis in 1974.
I do not support David Greenwald’s proposal. City finances are on a collision course with reality. The decisions that have been made, including the ones that I disagree with, have be been made by a democratically elected council. This means that the voters are party to these decisions, and the voters should be willing to pay the price if they care about the city.
Again, most people who disagree with these decisions have not been willing to run for council, and with a dearth of candidates, there has been no hope for different decisions. So again, my view is that I am supporting the city sales tax override as is even if this council should have had made what are in my personal opinion wiser decisions.
Since there is not enough money to go around, the sharing of revenues between jurisdictions would result in the expenditure infinite dollars in staff time, and infinite arguing between jurisdictions. Last night we saw the gridlock that occurred on the telecommunications commission when different groups with equal standing are trying to distribute one pot of money.
If the voters are sufficiently angry at the city, and if they are not angry at the school district, and if they don’t care about a drastic decline in city services, then they will defeat the city tax and pass the school tax. Or the other way around. The voters will decide.
We have a completely different system than European countries on so many levels that I do not think we can look to Europe for modeling a detail like structuring local supplementary taxes. Voters have tended to pass taxes when they have been in smaller amounts and people know what they are going towards.
The way the county works, the social services and court and jail services provided by the county have been supported primarily by the state, and we should continue to pressure the state to change its tax formula to supply the county with more funds. Since the county gets less scrutiny than the city, we are less aware of the counties inefficiencies and poor decisions.
While I think Sue, you have a point there, I think a lot of what you describe is already occurring. The city is going to hog up a certain amount of tax dollars this spring with the extension of the sales tax. I know you supported it and I am opposing it at this time as it simply rewards the fiscal irresponsibility you have been fihgting against while at the same time taking money out of the system that could go for higher priority costs. Now, if the city is willing to consider cost-sharing, I’m willing to consider supporting the tax.
The state is certainly not a solution as long as government is fractured as it is and structurally bound with the two-thirds.
I should emphasize that even in the short run, we ARE in massive trouble if we don’t renew the sales tax. Without looking back at the figures, I would estimate that we will run through our entire reserve in about 18 months if the sales tax is not renewed, and will be in a serious deficit spending situation. And we have already made the obvious cut-backs — there is no low-lying fruit left.
The county health department serves the whole county of Yolo; it makes no sense to support it with a city of Davis tax. If Yolo county citizens want to support a supplementary Yolo county tax, then Yolo county citizens can put a Yolo county supplementary tax the ballot that would collect revenue from all of the citizens of Yolo county. No doubt a lot of Yolo County citizens from Davis would support that.
“We have a completely different system than European countries on so many levels that I do not think we can look to Europe for modeling a detail like structuring local supplementary taxes. “
I completely agree with this. We have adopted a representative from of government for good reason. Our city is too large and too complex and with too many competing interests to be well served by budget decision by citizen committee. Besides, I’m not aware of many government budget success stories coming out of Europe these days.
I also agree with Sue’s point about the need for new council blood willing to deal with these structural fiscal problems. However, my sense is that most smart and qualified people know better than to waste time on this mission. David’s suggestion is an indication of the type of thinking that still prevails in this city… that we can find creative solutions to delay the pain another year in the blind hope some future miracle occurs (e.g., we vote to tax ourselves more, or the economy rebounds). His is a reasonable question, but is only another desperation move for accepting only a temporary fix.
I am reminded of the story of the guy being interviewed after he just jumped off the Empire State Building… for about the first eight seconds he said he felt fine and so didn’t need to be saved.
For a council majority willing and able to deal directly with the real structural problems, assuming a majority could be developed through elections, I think it would be literally and figuratively death by a thousand progressive cuts. At some point the citizen-focus will shift to the ninth second, and then we should see some new blood running for council.
Sue: Yes, the current and looming shortfalls are why I am not certain about voting for the sales tax. I don’t want to make the mistake of cutting off my nose to spite my own face.
Egad, I wrote “for” when I meant “against.” Here is what I was trying to say: Sue: Yes, the current and looming shortfalls are why I am not certain about voting against the sales tax. I don’t want to make the mistake of cutting off my nose to spite my own face.