Yesterday’s column on the decision of May 12, 2010, to push forward with a small one-year rate hike, and leave the heavy lifting for future councils, got me wondering what the best and the worst decisions of the council in the last six years (since the Vanguard started on July 30, 2006) were.
That eliminates two of the worst decisions – one that actually led to the formation of the Vanguard in July of 2006 and the other being Covell Village. Two quick points on the rules for inclusion. First, these are council decisions, which eliminates worst moments such as the Sue Greenwald-Ruth Asmundson fight or Stephen Souza shouting that they are the deciders.
We will start with the five worst council decisions and end with the five best council decisions.
Five Worst Council Decisions
5. Withholding of the Davis Fire Report – If audacity were the only criteria here, this would undoubtedly rank a lot higher than just number five on this list.
The council in December of 2008 voted not to read the entire Davis Fire Report as commissioned by the city.
In June of 2008, the Yolo County Grand Jury issued a scathing report of the conduct of Davis Firefighters and, in particular, the union. Immediately after damaging publicity, the city hired Police Ombudsman Bob Aaronson to investigate the findings of the grand jury, but when his report was completed, the council opted to only view a redacted report and release only the city manager’s summary.
The Vanguard recently sued the city for a full release, and settled for a less-redacted version that revealed a hostile work environment and preferential hiring. The 3-2 decision by the elected body not to read the report themselves is among the worst in the last six years.
4. Target – The voters narrowly approved this in November 2006. It was promised that the new store would provide $600,000 in sales tax revenue and prevent sales tax leakage. It is difficult to know for sure, but it appears to have maybe partially fixed leakage, but it likely has not produced anywhere near that figure in net revenue.
The two stats, though, that have to alarm are the 9 percent drop in monthly shopping trips to the Davis downtown and the 21 percent drop in shopping trips to neighborhood shopping centers, as well as the continued and accelerated trend away from retail in the core.
The city wanted to diversify sales tax, the city wanted to stop leakage; the question was whether Target was the way to do it, and given the state of things right now, the answer appears to be no.
3. 2009 Budget – The city fiscal situation deteriorated and council for the first time had to reckon with the fact that they had created an unsustainable compensation system. Ahead of the 2009 MOU process was a critical budget battle.
Paul Navazio’s budget proposal was overly-optimistic, calling for actual revenue growth in the out years and only a modest General Fund savings of $850,000 from labor negotiations with the bargaining units.
Councilmember Lamar Heystek tried to fix these problems with the budget by developing an alternative budget framework that took more conservative growth assumptions, and asked for deeper cuts.
Mayor Pro Tem Don Saylor would later criticize Councilmember Heystek, saying he preferred to use Mr. Navazio’s “real numbers” rather than “making them up.” He would later deride his colleague, calling his maneuver a stunt. The reality is that, despite that criticism, Mr. Heystek’s numbers proved to be more correct than the city’s finance director’s numbers.
Unfortunately, the council adopted a budget that largely resembled the original proposal by Mr. Navazio. The MOUs would fail to achieve even that modest level of savings, as we will see shortly.
2. September 6, 2011 – This is the only entry from the new council and you can make the case it should be number one. Perhaps the only reason that it is not number one is that, unlike the other items on here, three months later the council rescinded their vote. The council passed by a 4-1 vote the surface water project with projected rate hikes that were reported to be at 14% per year, but as it turned out, that would only be the case if the ratepayer reduced consumption by 20%.
Dan Wolk admitted to Davis Enterprise columnist Bob Dunning that he did not recognize this fact when he cast his vote. Rochelle Swanson and Dan Wolk had pushed for a one-year rate hike to allow them to study future options, but when they could not get a third vote, they joined the majority. Ms. Swanson in December acknowledged regret that they had not stuck to their guns.
The action triggered a referendum signature drive that achieved enough signatures to place a referendum on the ballot that would have asked the voters to nullify or ratify the September 6 action. On December 6, 2011, the Council reversed course and set us on the current course for a March 2013 vote, after the Water Advisory Committee will have spent one year studying the proposal and Davis’ options.
1. 2009 MOUs – Faced with a structural deficit, huge unfunded liabilities in retiree health, and pensions that threatened to spiral out of control, the city had an early chance to set the city in the right direction. However, they had an overly-modest $850,000 in savings goal, and, despite spun numbers that calculated savings not by using the actual 2009 salaries as a baseline but rather by using projected future salaries as the baseline, the council failed to achieve their goals.
The council left the heavy lifting on this issue, as they did with the water, to the current council.
Worse yet, they could not even get DCEA (Davis City Employees Association) to agree to their modest concessions and imposed impasse. Unfortunately, they did not follow proper procedure and the Public Employment Relations Board (PERB) overturned the impasse and denied the city upon appeal. This prompted the current city manager to have to lay off DCEA employees.
Five Best Council Decisions
5. Truth in Budgeting – One of the reasons the budget became such a problem was that the previous council created the illusion of a balanced budget while placing unmet needs, much of it deferred maintenance, into a separate category which was tracked off budget. This meant the council majority could tout their balanced budget with a 15 percent reserve.
It also meant that, for example, in the area of road repair, the city was $15 to $20 million behind in maintenance – not only a deficit but one that would grow if not corrected. In addition to dealing with the actual spending needs, last year the council agreed to track these unmet needs within the budget so that the budget would be a more accurate reflection of its budgetary reality.
4. New Senior Staff – The council was handed the opportunity to remake city hall when, in late 2010, City Manager Bill Emlen suddenly announced his resignation to take a position in Solano County. Instead of hiring within, the city of Davis has brought in a new city manager who in turn has hired external employees to run both the public works side and the fiscal side of the city. It remains to be seen how those hires will work out, but in a city which badly needed a culture change, this was a good move to re-look at every aspect of how the city provides services and how it pays for those service.
3. Independent Labor Negotiator – One of the most illustrative aspects of what went wrong in 2009 is illustrated by the fact that Human Resources Director Melissa Chaney actually sat at the management table as the city negotiated not only her bargaining unit’s MOU but also her husband’s. The city council in 2009 refused to hire an outside negotiator, they made modest goals, and failed to meet them. This time, the city has hired an outside negotiator.
The negotiations have dragged on and we won’t know the outcome of this for some time. But by removing it from local management, it removes one hindrance to tough negotiations where the management has the job of negotiating contracts with workers that they rely on to get crucial tasks done in the city.
2. Water Advisory Committee – We have criticized it and will continue to do so. But there is no doubt that they have done their job of thoroughly reviewing and revising the water project. Our only regret is that they came into being at the end of 2011, rather than the middle of 2010 when they might have had enough time to completely rework the trajectory of the surface water project. As it is, we will have a better and stronger project than we would have had without them.
1. 2011 Budget – $2.5 million in labor cuts – The new council stunned the city when it proposed and then passed a budget that would have cut $2.5 million in labor and transfer those savings to shore up road maintenance and unfunded liabilities. They did so on a 3-2 vote in the face of 150 angry employees. As it turns out, they did not have the city staff or the time to implement these cuts last year. However, this has set the stage for the new MOU process, where the city is seeking to save $4 million.
As we note, these never got implemented. However, they sent the clear message that this council meant business, and set the city on the path toward fixing pensions, cafeteria cash outs and unfunded liabilities. As the 2009 budget was emblematic of the failed MOU process, the 2011 budget should be emblematic of the success of this council in fixing the fiscal problems.
—David M. Greenwald reporting
Worst #4, Target: This wasn’t a council decision. It was a decision by the voters.
Worst #2, September 6, 2011: Had Greenwald joined with Swanson and Wolk, this wouldn’t be on your list. Krovoza and Souza were on one end, Greenwald on the opposite, with Swanson and Wolk in the middle. Greenwald refused to budge, the vote went the exact opposite of what she was advocating for. This vote was indicative of her tenure.
-Michael Bisch
Michael: Actually council made the decision in June of 2006 to approve the zoning change for Target but put the matter before the voters as an advisory vote. It was council’s decision backed by a bare majority of voters.
To be accurate, your disagrement appears to be with the council’s decision to put the project to a general vote. You would have rather seen the council simply deny the project, is that not so?
-Michael Bisch
That is correct. I would have preferred the council to have worked with local business to develop the described needs that Target supposedly met.
Yesterday I defended Sue Greenwald because I don’t think it’s fair laying blame on someone without a pivotal vote who is in the minority. However, the 4-1 vote is very misleading. Sue could have been the third vote. She was stubborn and refused to be. That’s on her. So yesterday I defended Sue, today I criticize her.
# 1, 2011 Budget? I don’t think we have seen any substantial cuts, have we?
Why would you pick something that the CC, again, has not enforced or achieved ?
Mike: Simple, they stared down a room full of public employees to do it, they followed it up with the 2012 budget and the MOU battle with a paid negotiator. It’s a snapshot. If it ends up that nothing comes of it, 2011 Budget goes down in importance.
I think it will take a lot more stores opening in Davis besides just Target to get the majority of shoppers to shop here instead of going elsewhere.
[i]The two stats, though, that have to alarm are the 9 percent drop in monthly shopping trips to the Davis downtown and the 21 percent drop in shopping trips to neighborhood shopping centers, as well as the continued and accelerated trend away from retail in the core.
The city wanted to diversify sales tax, the city wanted to stop leakage; the question was whether Target was the way to do it, and given the state of things right now, the answer appears to be no.[/i]
Other than the number of shopping trips, there is no data which supports or proves your theory. There has been a significant economic downturn during this period, which may explain the shopping trip data. There is no proof that Target has not contributed 600,000 in net new taxes. This has been discussed numerous times on this forum, and the generally agreed upon answer has been – we don’t have the data to prove any assertion regarding taxes from Target. Here the Vanguard joins Fox and MSNBC in its lack of interest in disseminating facts.
Based on sales tax figures from mid-year updates in the city budgets, annual city sales tax revenues went from
$7.9 million in the 2008-9 fiscal year to
$8.1 million in the 2010-11 fiscal year.
Target opened mid-point in that two-year period (the city’s fiscal year is July – June; Target opened in October 2009, when the recession was ending). This two-year period represents the first full year in which we can assess the impact of Target’s operations. They were projecting $600,000 in annual sales tax revenues for the city, and the increase we see is $200,000.
Where did the other $400,000 go? Sales lost from other retailers? Target failing to meet its projections? Retail in California recovered in 2010, and state retail figures were steadily rising during the latter part of that two-year period. Was the recession continuing to affect Davis retailers more than other parts of the state? We have information from Paul Navazio in the Enterprise 3/15/12 that auto sales had “seen a modest but steady rise since the first quarter of 2010.”
We don’t have data from specific stores or sectors because they aren’t available. So we have to use total tax intake. [b]Target was supposed to increase total tax intake by $600K.[/b]
If [b]the net increase in sales tax was $200K[/b]. Assuming the revenue from Target was $600K, [b]what happened to the other $400K?[/b]
Target took business from local retailers, and brought in revenues that were going elsewhere (leaking). Based on these numbers, the majority of their business was at the expense of local retailers. As expected and predicted.
The economy bottomed out in 2008-9. Retailers statewide were experiencing slow sales growth, but it was growing. Assuming that Target met their projections (we don’t know, so let’s just assume) then the other $400K was at the expense of local retailers. The $200K would more or less represent the amount Target increased sales locally that were leaking.
So if you’re Alphabet Moon, and your sales dropped 25% in 2008-9, you would have expected those sales to be returning to normal by about 2010-11. They didn’t return to normal. Why?
What we can guess from these numbers is the difference in sales tax revenues that we got from Target compared to what was expected. The effect of the recession was largely over when Target opened in October 2009. Retail sales statewide were flat, but not continuing to decline.
The impact on specific stores depends on how much their product mix competed directly with Target. Since retailers rarely divulge sales and tax figures, we have to surmise from these net tax numbers. My guess, if I could see the sector data, would be that we would see shifts from Board of Equalization categories in (for example) office supplies, sporting goods, pet supplies, toys, electronics, and housewares, as they are purchased at general merchandisers (Target) instead of businesses that report in those categories. You can guess which local stores are in those categories.
Target is a category-killer across several retail sectors. So the impact would be uneven on retailers. They had zero impact on my store, because they closed their garden departments (and barely competed in that category anyway), and my sales are back to 2009 levels this year. But I seriously doubt that retailers in the categories I just listed are back at 2009 levels.
So the voters arguably traded a net increase of $200K for a net loss to local businesses of $400K. Some of us can weather that, others can’t. Who is affected depends on many factors, particularly the degree of overlap in their product mix, the profit margin, and their other expenses.
[quote]My guess, if I could see the sector data, would be that we would see shifts from Board of Equalization categories in (for example) office supplies, sporting goods, pet supplies, toys, electronics, and housewares, as they are purchased at general merchandisers (Target) instead of businesses that report in those categories. [/quote]
That would be consistent with the traffic studies cited by David. The retailers are our neighborhood shopping centers include an office supply store at one, and sporting goods and pet supply stores at another. I would expect those have lost substantial business to Target.
In that same time period Trader Joe’s and Forever 21 opened. Both would have had some impact on existing stores, but also reduced sales tax leakage in their categories. So with the slow increase in auto sales and addition of these new retailers, along with Target, we would expect sales tax revenues to have increased more than they did.
Don wrote:
> If the net increase in sales tax was $200K.
> Assuming the revenue from Target was $600K,
> what happened to the other $400K?
La Mesa RV (that sells a lot of RVs for over $100K was closed for over a year around then and the place next to La Mesa RV that sold expensive Victory motorcycles and Jet skis and ATVs also closed.
> Target took business from local retailers
I have not seen the RV, motorcycle, jet ski or ATV section in Target but feel free to blame Target for “taking the business” and causing those retailers to close (fortunatly La Mesa RV has opened again).
La Mesa RV would presumably have been factored into the auto sales tax category above, which had had “seen a modest but steady rise since the first quarter of 2010.”
A quick review of press releases shows that La Mesa reopened in April 2009, so they would have been a factor in the $200K increases in sales tax revenues in the period above.