Analysis: Emlen and Navazio’s Commentary Papers Over Key Problems For City

Mr. Emlen and Mr. Navazio write, “The recession has resulted in a decline in tax revenues available to support public services, ranging from public safety to education, social services and basic infrastructure.”  However, the striking feature of the most serious problems in the city, is that they are of our own creation.

Moreover, as Mr. Emlen and Mr. Navazio are perfectly willing to brag of cost-reductions of nearly $3.5 million, they fail to note that in the first budget they fell nearly a million short of balance and had instead to rely on the city’s reserve to buffer the shortfall.  That failure has led to the need for a second round of cuts and a major restructuring of city government.

However, at the same time, the city has failed to address either root cause of the fiscal collapse–exploding employee benefits, or dealt with the long term structural problems that may ultimately lead to a far greater crisis that a $3.5 million current year general fund budget deficit.

Writes Mr. Emlen and Mr. Navazio:

“Expenditure growth in recent decades also has contributed to the city’s ongoing budget challenges as the city added staffing in priority service areas, such as public safety, and strived – through past labor contracts – to adjust compensation levels, which had fallen well behind those of comparable cities in the region. “

There are two essential problems with this narrative.  First, they fail to acknowledge that the goal of keeping up with comparable cities in the region is at the root of the fiscal crisis not just in Davis but statewide.  Cities are bidding against themselves. 

A related problem is that when Davis increased its compensation levels, in some cases by 34% over a four year period, it triggered other cities to increase their compensation level in response.  Why?  Because by their metrics, an increase in Davis led to them having to keep up with Davis. 

Quickly one can see the cyclical nature of this problem and the only reason it is under control at the moment is the short-term budget deficits.  Had the real estate market and economy continued to boom, we would have seen another round of explosive benefits growth in Davis.

“Despite the growth in personnel costs, the city – at its 2008 peak – had fewer employees per capita than it did in 1990…”

Which sounds good until one recognizes that the growth in personnel costs is due almost entirely to increased salaries rather than increased numbers of employees and therefore city taxpayers are paying far more for a lower level of service over the past twenty years.

“Recently, a number of organizational changes have been made or are under consideration by the City Council to save dollars and retain services. One example is the proposed change in management of Fire Department operations through use of battalion chiefs, a commonly used model in communities of our size…  Earlier proposals had potential costs of several hundred thousands of dollars while the most recent versions show potential for net budgetary savings through additional restructuring, retirements and other cuts. “

This statement comes pretty close to being considered an actual lie.  As we have shown on multiple occasions, the math does not support the fact that the battalion chief model has saved the city money.  What the city has had to do is cut a number of other positions in the fire department – positions that they would have cut anyway under budget saving guises and then implemented the battalion chief model at considerable additional cost – $400,000 – to the taxpayer.

Moreover, given the nature of the fiscal condition, the city could have banked a several hundred thousand dollar savings and retained the current system that was working very well.  Not one person has complained about the level of service provided by the fire department.  The only complaint is about the cost of compensation to the city and the political influence of the union.

“A final decision to implement likely will hinge on the ability to manage potential overtime costs and compatibility with a potential merger with the UC Davis Fire Department, which if successful, also may generate some savings.”

While the Vanguard is fully supportive of a merger between the UC Davis Fire Department and the City’s Fire Department, the word we get is that is not going to happen in the short-term. 

In the meantime, the city is likely to expend $400,000 in additional spending on a battalion chief model which is offset by cuts the city was going to make otherwise.

The City Manager and Finance Director continue:

“Even as the city works to address immediate budget challenges, long-term fiscal stability also requires that we continue to address a number of significant long-term budget issues. Chief among these are projected increases in the cost of employee retirement benefits, unfunded liabilities related to retiree medical benefits, and the need to more adequately fund maintenance and replacement costs for our streets, bike paths, pools and other community facilities.

The city has begun to put a plan in place that addresses these costs, and next year’s budget proposal furthers these efforts.”

This is news to me.  If the city has begun to put a plan in place that addresses these costs, I have yet to see it. 

The city largely failed to even address these issues in their last round of employee contracts.  I fail to see any plan in place other than the hope that somehow they can address pensions outside of contracts – and the chance of that happening is somewhere between slim and none.

“The most recent labor contracts provide the city with both short-term cost savings and varying degrees of protection from escalating benefit costs into the future.”

The contract talks with PASEA provide the city with some protection against benefits costs into the future, but they do so in a tradeoff that gives the employees salary now in exchange for increased employee contributions to their benefits.  The biggest hit that will occur on the pension side is for public safety, and the employee contract does nothing to alleviate that problem.

“Even as we hope for an economic rebound, it is unlikely that we will again see the level of sustained property tax growth that characterized the past decade. Going forward, we must continue efforts to build a budget around a sustainable tax base and realistic community expectations. “

This we can agree upon, but we have to fix the long-term structural problems in order to real this goal.  The current MOUs did little to fix the long-term structural problems.  Instead it puts them off for three years as the potential crisis builds and the city begins building an unfunded pension liability.

“Our community will be best served by a municipal government where city staff, our elected representatives, the media, our commissions/citizen committees and the general public can advance an open and honest discussion of important policy choices in these challenging times. “

We agree fully with this statement.  We find it unfortunate that the city manager and finance directors have chosen to paint the budget picture in the best possible light.  Anyone reading their commentary would believe that the city faces challenges but we have the problem well in hand.  The reality is that nothing could be further from the truth.  We have balanced our short-term budget deficit, largely through the elimination of vacant positions and decreases to service.

We have not dealt with any of the root causes – the exploding personnel costs and we have not dealt with any of the long-term problems that could make the current budget deficit look like a Sunday school picnic.

You want an open and honest discussion?  Start by telling the public the truth without whitewashing it.

—David M. Greenwald reporting