We spent most of this week focused on the Cannery Park issue. It is a fresher issue. There is much greater public concern about development in Davis than there is about the city’s budget. But the budget is a very serious concern and it is not getting any better.
We face some very difficult choices ahead in terms of the provision of city services. The immediate concern was addressed on Tuesday. The council voted, after some discussion, to bring the emergency reserve back to 15%.
However, others like Mayor Pro Tem Rochelle Swanson argued that this is not the worst we are going to see, and that we keep that emergency reserve.
I tend agree with the council majority who voted to close the gap in the reserve by June, that things will get worse and that as long as we have funding, it is not a true emergency. An emergency is a catastrophe that happens in town that requires immediate cash to deal with, not a budget shortfall that can be plugged by cutting services or personnel.
On the other hand, trying to close the gap at this point in the fiscal year is a bit risky. After all, to cut $300,000 from the budget in April by the end of June, you are essentially cutting $1.2 million on an annual basis in services.
The reason for that is that there are only three months left (or one quarter) in the fiscal year. So if I make $100,000 and you cut my salary, you don’t save $100,000 for this year, you only save $25,000. That means in order to cut $100,000 you have to actually deduct $400,000.
This council has its work cut out for it, though. Leaving aside the issue that we have spent most of our time covering pensions and retirement, the problem is that the last council and the last city manager made a huge mistake in cutting the last budget.
That mistake was they acted like it was a short-term shortfall rather than a long-term structural deficit, in the way they cut money. First, they were more efficient, which is certainly not ever a mistake. Second, though, they decided not to cut services and not to lay people off. So instead, they shuffled the decks, allowing people to retire and transfer and not fill their position.
The problem with that approach is obvious. From a short-term standpoint, you can survive short on personnel. But from a longer term standpoint, you have to figure out what services to cut, and more importantly you have to structure your departments in ways that make sense.
Now, this council is left with the very difficult task of doing several things simultaneously. First, it must balance the short-term budget. Second, it needs to prioritize programs and services. Third, it must restructure the departments.
Another challenge is that while the council budgeted in savings through the Memorandums of Understanding, we would argue that the MOUs signed were insufficient. But leaving that side, the fact that the Davis City Employees Association remains a hold out, with the city locked in a legal battle after declaring impasse, has left the city short on funds and that is where the reserve deficient is coming from.
This is, of course, directly attributable to the fact that the city sent mixed signals to their employees and to the public, arguing that we need to cut, but we’re really not that bad off.
In fact, we were a lot worse off than we let on. We have simply balanced the budget through avoidance.
The chickens, however, are coming home to roost, and predictably the core of the problem from the last council is off, scott-free, up in the county.
This brings us to the point. The citizens of this community do not really know what is about to come down the pike.
But here is what we face:
- Ongoing structural deficits of near $1 million into the out years of the budget
- Growing unfunded retirement health care liabilities
- Growing pension liabilities as CalPERS has now refused to lower the assumed rate of return
- A tripling of water bills over the next five years
- No money for road repair
- A cut back of core city services
And it is that last part that I think could be our salvation. We need to awaken the public to the fact that we are facing a crisis. And it is not at its low point, it is actually going to get a lot worse.
The real estate market remains flat and will remain so for some time. Target has, at best, forestalled future declines in sales tax revenue and, at worst, had no impact on the budget. The prospects for economic development bringing in revenue to the city are bleak.
Voters will be hit with water rate increases and potentially another parcel tax for the schools, and therefore it is questionable that they will even renew the Parks Tax, let alone approve another tax increase.
The council needs to do something drastic, in my opinion, to get the public’s attention. Maybe they need to close a pool. Maybe they need to close a park. Maybe our greenbelts need to go brown or our roads turn to rubble. But it has to be something that the public will feel, otherwise the public will go on believing what the last council said, everything is fine, we will recover.
Stephen Souza on Tuesday argued that recessions do end, times will be good again and we will grow again. Perhaps. But we have no idea what the new world will look like.
We have done a poor job of planning for the worst while hoping for the best. We have simply hoped for the best, and that has proven disastrous.
—David M. Greenwald reporting
“The council needs to do something drastic, in my opinion, to get the public’s attention. Maybe they need to close a pool. Maybe they need to close a park. Maybe our greenbelts need to go brown or our roads turn to rubble. But it has to be something that the public will feel, otherwise the public will go on believing what the last council said, everything is fine, we will recover.”
I always hate this line of thinking. The council’s job is to do the best they can for the city with what they have and not to purposely put in cuts that “our greenbelts need to go brown or our roads turn to rubble” in order for the public to feel it so they’ll come around. If they have to cut then it needs to be done in the most prudent way as to do the least amount of harm to Davis as possible.
[quote]Voters will be hit with water rate increases and potentially another parcel tax for the schools, and therefore it is questionable that they will even renew the Parks Tax, let alone approve another tax increase.[/quote]You’ve convinced me. Given the choice to [b]add[/b] $200 to our tax bill to maintain DJUSD services, or to [b]maintain[/b] the ~ $50 assessment for parks etc., I will choose the latter. You ask City (& UC & State?) to suck up cuts, but apparently DJUSD teachers/administrators/staff should be spared. Fine.
BTW, City reserves goal is ~ 15%. For the schools, it’s ~ 5%.
That’s the state mandated level, I believe the district goes above that, though they have eaten into as well because of the downturn.
rusty49: “I always hate this line of thinking. The council’s job is to do the best they can for the city with what they have and not to purposely put in cuts that “our greenbelts need to go brown or our roads turn to rubble” in order for the public to feel it so they’ll come around. If they have to cut then it needs to be done in the most prudent way as to do the least amount of harm to Davis as possible.”
Nicely said.
dmg: “In fact, we were a lot worse off than we let on. We have simply balanced the budget through avoidance. The chickens, however, are coming home to roost, and predictably the core of the problem from the last council is off, scott-free, up in the county.”
Amen
Hpierce
“given the choice between….” Of course this is not a choice between. These are separate questions and should be considered as such.
One could favor both the new parcel tax to maintain DJUSD services and maintain the parks assessment as I would favor, or one could oppose both. I do not think that linking the issues even to make a rhetorical point does the issue any service.
[quote]I do not think that linking the issues even to make a rhetorical point does the issue any service. [/quote]As David did?
Hpierce:
I don’t believe that linkage of separate tax issues is useful regardless of the author. I think it leads to a mindless ” oh my gosh, we are being over taxed mentality” without consideration of the individual merits and downsides of each proposal.
[i]The council needs to do something drastic, in my opinion, to get the public’s attention. Maybe they need to close a pool. Maybe they need to close a park. Maybe our greenbelts need to go brown or our roads turn to rubble. But it has to be something that the public will feel, otherwise the public will go on believing what the last council said, everything is fine, we will recover.[/i]
In an ideal world (one with zero public employee unions) in recognition of the real, long-term, structural budget shortfalls, the city council would:
– Lead their organization and develop shared goals needed for thriving in tough economic times.
– Make across the board budget cuts to each department.
– Bring in all department heads to inspire them to accomodate this without causing any reduction in service, and if they cannot figure out a way to get this done, please escalate their concerns, but keep in mind that their replacement might have a better solution.
– Tell all city employees: the good news is we are not planning any signficant layoffs, but they we be recieving a reduction in pay and benefit cuts to help balance the budget and put them more in line with the private sector. Those unwilling can resign or will be terminated.
– Tell all the hourly staff there will be no more overtime, but they will be required to work harder.
– Tell all salaried staff they will have to work harder and probably longer hours too.
– Inform residence of the plan… tell the intent is to have have any reduction in services, but that there may be some issues that develop due to the changes being made to save money, so please be patient and let the city know when there are problems so the can be addressed.
[i]
Stephen Souza on Tuesday argued that recessions do end, times will be good again and we will grow again. Perhaps. But we have no idea what the new world will look like.[/i]
This thinking is about all we need to undertand why our public sector “business” in such a fiscal mess. Any successful private company would use this opportunity to become more lean and efficient… to be in a position to be more competive when the economy starts to recover. It seems our council is only interested in protecting the status quo… hoping public outrage over service cuts will causes them to want to tax themselves more again, and again, and again. Unfortunately, this time, the residents are finally tapped out. Blackmailing them with threats of service reductions will only cause anger… not the counted on pull of the heart and self-interest strings.
“This thinking is about all we need to undertand why our public sector “business” in such a fiscal mess. Any successful private company would use this opportunity to become more lean and efficient… to be in a position to be more competive when the economy starts to recover. It seems our council is only interested in protecting the status quo… hoping public outrage over service cuts will causes them to want to tax themselves more again, and again, and again. Unfortunately, this time, the residents are finally tapped out. Blackmailing them with threats of service reductions will only cause anger… not the counted on pull of the heart and self-interest strings.”
The problem is that this is not a private sector business whose job it is to make money for its own or its shareholders. It’s a public sector body whose job it is to provide services for the public. In that sense becoming efficient is not its optimal goal but rather the goal is to be able to maintain its level of service while remaining solvent.
David: On the first point, I agree with that difference. I see it as a fundamental flaw in the public-sector business model because there is no natural incentive for the organization to continuously improve efficiency; the thing that is required to prevent its evil twin sister – bureaucratic bloat – from dominating. Remaining solvent simply requires outflows to not exceed inflows with enough cash on hand to pay the bills. You can decrease outflows simply by cutting services, but you can generally always find ways to do more with less.
Thanks for the clarification on the second point. You and I are on the same page in that thinking. However, it has been a common political marketing tactic to use the fear of cut services to inspire support for tax increases, or to block policies to balance the budget.
JB: “- Tell all city employees: the good news is we are not planning any signficant layoffs, but they we be recieving a reduction in pay and benefit cuts to help balance the budget and put them more in line with the private sector. Those unwilling can resign or will be terminated.”
THis sounds great, but can it be legally done, since the contracts are already in place for what the rate of compensation will be? Can you just tell public employees their rate of pay is going to be reduced? Or is your thinking that employees will be threatened w massive layoffs if they don’t make salary concessions?
[i]”THis sounds great, but can it be legally done?”[/i]
Elaine, I am not an attorney, and I don’t have any HR experience with unions. I assume it would be very problematic if not impossible. That is why I am in favor of municipal bankruptcy to invalidate all the labor contracts so they can be renegotiated. I suspect that is where we are headed for most CA cities.
The “accept wage concessions” approach has worked to some degree with the Davis teachers’ union: accepting a reduction in order to prevent layoffs. However, it has not always worked; and frankly, I see it more as a strategic, rather than empathetic move (re: weighing how the public opinion would play out in each case.)
It is well understood by private-sector managers that systems of people have a tendency to grow bureaucracy and inefficiencies. It is also a well accepted practice to reorganize, merge, sell, buy… to take advantage of the opportunity to shed accumulated bureaucracy and inefficiencies.
Experienced, skilled workers, if allowed to, will create their own shell of protections. Managers of skilled workers cannot spend the time to dig into every detail of responsibility to prove or disprove the need for certain tasks and activities. The only effective way to root out system inefficiency is to infuse competition for doing things faster-better-cheaper. For example, require employees to reapply for their jobs after a change… or have an ongoing performance management process that measures results and constantly weeds out lower performers. Unions demand a seniority system that prevents this type of competition and/or constant filtering of talent; it prevents management from being able to crack the shell of performance mediocrity that no new employee is rewarded for exceeding.
For some reason that I cannot understand, we have a web of additional media and political protection for public-sector employees that does not exist for the private-sector comprised of “at will” employers, and “right to work” employees. For example, a teacher or coach that does not get along with a principle or a principle that does not get along with her school board is somehow a bigger concern than any other private-sector employee that does not get along with his manager or board. There are labor laws to protect both employees from discrimination, but for some reason this is not enough for a public-sector employee.
A job should not be a right, it is an earned privilege. And, the cream will always eventually rise to the top when the self-correcting mechanism of free competition is unleashed. Otherwise we need to “re-engineer” the bureaucracy when we get the chance… to force the existing employees to learn new tricks, or send them away to another employer where they can hopefully reinvigorate their career.
[quote]For example, a teacher or coach that does not get along with a principle or a principle that does not get along with her school board is somehow a bigger concern[/quote]teachers that do not get along with the district’s principles is a serious issue… much better if they have differences with their principal.