The two biggest pieces of news of the week intertwine here to form an uncertain future for the city of Davis. On Tuesday night, the council after two hours of discussion directed city staff, just before midnight, to return on February 11 – the last possible date for putting a tax measure on the ballot – with options for revenue measures both in June and November.
The next day, City Manager Steve Pinkerton, who has been the steady and guiding force behind a whole wave of budget cuts, reorganization of city services, and reform, was offered a position in Incline Village along the shores of Lake Tahoe in Nevada. While he has not officially made a decision, everyone at this point has to plan as though there is going to be an interim city manager directing perhaps the most important ten-month stretch in the city’s recent history.
The ramifications of the city manager issue and some of the reasons why he may be inclined to leave will be unknown for the time being. But they add new wrinkles and complications to a situation that was going to be complicated to begin with.
On the tax front, the city is looking at potentially two taxes. One is a three-quarters cent sales tax measure that by state law has to go on the ballot in June, and in order to get on the ballot must be approved on February 11. There is no margin for error. That tax would generate $5.4 million per year and would presumably eat up the stated $5.1 million structural deficit.
There is more flexibility in terms of the parcel tax that the city hopes to use to fund infrastructure needs, most notably the deferred maintenance bill that comes due on roads, parks, pools, and other infrastructure. That tax would require a two-thirds vote.
While there was some discussion of trying to put in on the ballot in June, city staff does not believe that is possible given the complexities of drawing up a parcel tax. One option, however, would be to extend and expand the existing parks tax.
However, city council needs to take a step back and recognize that they need to slow down as much down as possible. The sales tax seems the only reasonable way to balance the budget in the short-term, but everything else needs careful planning.
What council is planning is a tax in June and a tax in November, there is likely to be a business park proposal on the ballot in November, at some point there is a Nishi proposal, and at some point a West Davis Innovation Park proposal. The water initiative will go forward at some time.
In the meantime, the public is already a bit wary. They have stepped up for the school district five times since 2007 with parcel taxes. They agreed to the surface water project and corresponding rate hikes.
We are now going to expect the public to approve two tax measures, one of which will require a 2/3rds vote? That seems a very heavy lift even under the best of circumstances.
For the first time on Tuesday there was some push back.
Doby Fleeman, a respected business leader, expressed his frustrations.
“The reason I feel entitled to be as upset as I am is that for the last five years since 2009, I have been here banging my shoe on this table asking you to pursue revenue opportunities,” Mr. Fleeman stated. “I haven’t seen one smidgen of progress on that. We’ve talked. We’ve assigned task forces on it. We’ve considered.”
Chamber Executive Director Kemble Pope cited a survey of chamber members with more than half having no idea about this public shortfall and another 15 percent were only somewhat aware. Only 14% wanted no further reductions in city services.
“People are willing to feel the pain,” he said, at least referring to chamber members. “A good sixty percent said cut expenditures, keep cutting, we’re willing to give up services. We’re willing to give up programs. I don’t think that you understand truly the desire for the public to actually feel a little more heat rather than take on more and more debt for a bunch of goodies that people don’t think we actually need.”
He said to deal with the structural deficit and short term needs, “but this is, I don’t think, going to fly with the community.”
The fact that the Chamber is pushing back now is an ominous sign, but Mr. Pope is not exactly correct.
The polling questions seem at least a bit problematic. One question is, “Over the past 6 years, the City has reduced expenditures by about $11 million with staffing reductions and employee benefit negotiations. A further reduction in expenditures may affect levels of service and subsidized programs offered by the City. SHOULD THE CITY FURTHER REDUCE EXPENDITURES?”
The problem, as Brett Lee would quickly point out, is that there is no context for the respondents.
He then responded to Kemble Pope and suggested that, of course, the city should try to save money. He then said, “Perhaps next time you do a survey maybe we can ask some specifics. So when faced with a sizable deficit like the one we’re facing, perhaps you can ask your members if they would support closing a fire station and having a corresponding higher response time for various neighborhoods.”
“That’s the type of thing that would be required in order to bridge this deficit,” he continued. “Or perhaps they would be willing to close all of the parks to stop all maintenance on them, close all the pools, and all recreation programs and see what the percentages are.”
“I think I could stand in front of the Safeway and ask people if they want a more efficient city government, I think I’d be surprised if I got many noes,” he added. “I think on the other hand if I asked people if they were willing to pay more to maintain the current level of city services, such as fire and police, I think they would be supportive.”
That is the problem that the city has. Mr. Pope was critical of the city’s use of a focus group, which included about 14 residents, one of whom was my wife, and while they clearly back the spending measures, it is clear that the public is not engaged on this issue.
Once again, the city has waited until the last moment to discuss revenue measures, it has failed to engage the public and now is throwing it to council at the last possible second for approval.
There is no doubt in my mind that we need to pass the sales tax measure and bridge the gap, but everything else should wait for reasoned discussion and outreach.
The city found that difficult to do even when it was in the capable hands of Mr. Pinkerton. Now it looks increasingly likely it will have to go the next part with an interim city manager and that is even more problematic.
The final piece of this is that the skepticism expressed by many who spoke on Tuesday, including myself, will only increase.
As I noted during my public comment time, it was 2004 when the council pushed through the half-cent sales tax under the guise of reduced city services and then just a year later turned around and gave that additional revenue to city employees for salary and compensation increases.
The council rightly noted on Tuesday that they could not confine how a general revenue tax measure is spent.
“I understand in general a sales tax goes into the general fund and it becomes general revenue and there’s no way for us to earmark that, correct?” Councilmember Swanson asked.
City Attorney Harriet Steiner responded, “There is no way for you to legally earmark that. You can place before the voters, a companion measure, a separate advisory measure where the voters indicate their desire for the council to use the funds raised by the sales tax for certain purposes. That would be a non-binding statement of intent by the voters and many cities do that.”
Councilmember Swanson replied, “I think that would be helpful because I agree with some of the folks in the audience that people are saying this community does really well when there’s something tangible that we know that we are trying to preserve.”
But a non-binding measure can only go so far. After all, what is the citizen’s recourse if they pass the tax and the new council turns around and gives the increases to the firefighters again? What do the citizens do, sue the city? No, it’s an advisory vote, which means non-binding.
Recall their politicians? Good luck getting the 20% of the voters signatures and then successfully removing them from office. Repeal the tax? Same problem.
It is notable that when I asked Sheila Allen, one of the council candidates, whether she would be willing to preclude an employee salary or compensation increase, she was unwilling to make that commitment. She told the Vanguard, “I’m not going to make a campaign statement that if you increase this tax every penny of it will go towards services, but no penny will go to the employees.”
This is not to pick on Ms. Allen as her position from the standpoint of a public official is perfectly reasonable, but it illustrates the lack of assurance that voters will have. In short, we are left with pound and pray. We have to have faith in our a council, a council that may well have just run off our capable city manager because of the prodding of one of the public employees’ unions. Not a good place to start with faith.
So we are left in a horrible position: the cuts approach will leave us without city services and faith alone is not going to sustain the budget anymore. Normally I would say, good luck Mr. Pinkerton and enjoy the skiing, the problem of course is that we don’t seem to have any more snow either.
—David M. Greenwald reporting
David – What makes you state that at some point the Council is considering a “West Davis Innovation Park proposal”? Why specifically West Davis? Are they not considering other sites for a Innovation Park?
” a council that may well have just run off our capable city manager because of the prodding of one of the public employees’ unions. Not a good place to start with faith.”
This opinion has been expressed a number of times. I really feel that unless substantiation is provided that this occurred, it perhaps has been expressed enough in an election season.
I have plenty of substantiation that it occurred, what I don’t have is people telling it to me on the record.
I totally believe you David, there will always be those that choose to bury their heads in the sand.
Well that it is a problem David, since whether or not people believe this will largely depend on whether their ideology and or like or dislike for various candidates leads them to want to believe it. This reminds me of assertions made by a previous council member who frequently claimed that her “expert sources” who did not wish to be identified were giving her information that others did not want to believe.
David, the point Tia is making is a good one. You have alerted all of us to the smoke. We have all taken note of the smoke. If things start blazing, then reprt on the flames, but for now you may want to hold back any more stories about smoke.
JMHO
Well on Monday a representative for Binning came forward and mentioned a proposal. That proposal will have tech park and housing.
this is depressing, but a fairly accurate analysis. without pinkerton as city manager i will not be inclined to support even the sales tax measure.
Given these changed circumstances, a sales tax increase should not be on the June ballot.
The problem is that would preclude a sales tax until 2016 because state law requires it to be on the same ballot with the city council candidates unless an emergency is declared.
Emergency declared by whom?
I believe the City Council would have do it, I’m not sure of the consequences of doing so. However, the city clearly seems to be trying to avoid that scenario.
David is right. It would have to be the Davis City Council. It’s actually a formal “declaration of fiscal emergency.” It is short of filing for bankruptcy. But it is a legal process, and it allows a City to modify its contracts. However, if they tried that, the employees would sue, and most times courts have sided against California cities and counties which have declared an emergency.
For more, see this: http://www.publiclawgroup.com/wp-content/uploads/2011/12/Declarations-of-Fiscal-Emergency.pdf
I am really, really surprised to read this from you Don.
Here is one problem I have with this.
As I understand, Pinkerton is well liked and respected with most of the city staff… except for some in the departments he has cut. And of course the firefighters.
The management revolving door is already a big problem for city staff. It really drags down morale to have to deal with so much turnover in leadership.
And now you are basically advocating we cut our way to a statutory requirement that our general fund be balanced. And this is another sucker-punch to the gut of those staff impacted by the loss of their leader.
I think I understand why you advocate for this. And I think your argument has merit. But I don’t think the voters will really want and accept the type of cuts that will be required to balance the budget. That is Brett Lee’s comment. So I think we have to go forward with a sales tax increase.
I am disgusted that we have to. But I think we have to.
I would have to have much greater confidence that the budget restraint that Pinkerton has implemented would be continued. The easiest argument against a sales tax increase would be that the new council would simply use the funds to undo the budget cuts and increase employee pay. A brand new city council and brand new city manager would not be able to provide assurance that they will continue the balanced economic strategy that is being put in place now.
I guess I’d advocate now for the lowest feasible amount and the shortest renewal interval possible. My trust in the council has dropped dramatically.
It is like herding cats.
I had some work done on my office patio.
I paid the electrician before the final inspection with complete.
I am now paying another electrician to fix the problems… since the first one will not return my calls after having been paid.
I think this is similar to the problem you are alluding to… if the city passes the sale tax measures, there will be no more incentive for them to support cutting and moving forward with business parks.
That was my original position too… that I didn’t want any sales tax increase unless and until we had done everything else.
But here we are.
I feel like I have been manipulated into a corner with no choice but to vote to approve the tax increase.
But here are the tea leaves that give me a sense that we are probably going to be fine.
Dan Wolk is moving on. He politicking is toward the Assembly which is a bastion of liberal Dem activity and thinking. I think he is preparing himself for that next step using his current platform.
We have Rob White.
Brett Lee is clearly an economic development supporter.
The business community is engaged. So are a number of other residents that would otherwise not be or would be pursuing other things.
The population is tired of tax increases.
The over-compensation of some city staff is better known and understood by the voters.
I am checking these things off to make myself feel better about supporting the tax increases.
Having Pinkerton onboard was another check, but I think there are still enough checks to provide me enough sense that we are not going to go backwards again.
I understand the argument Don and trust is key. Because a sales tax is a general tax it cannot be “restricted” (as Harriet Steiner made clear) but I think there are three things we could do to try to build trust:
1) Develop (as suggested) an additional ballot advisory item about how the revenue should be spent to accompany the sales tax increase.
2) Task the Finance and Budget Commission to work with staff to produce an annual “scorecard” that lays out clearly how the city is doing in relation to the advisory item.
3) Limit the sales tax increase to just two years and have it expire with the current half cent tax.
Of these the third may be the most difficult because this CC (rightly) wants to send the message that we will need these increases (barring some unseen and dramatic change in City fortunes) for a longer period. Thus it may be confusing to say that AND place only a two year increase on the ballot. And, there is also the cost of placing this on the ballot (not sure how much that is). But, if we did that it would increase the sense of accountability of the next council and require that during the next CC election (2016) use of the tax would be a campaign issue. If the need is still there in 2016 (assumed), then the entire amount could be voted on again.
We need to face the fiscal challenges while trying to build accountability and trust. I believe the above is a way to do both. I don’t think we can wait until 2016 and the cuts required to achieve a balanced budget may well include public safety cuts — which is a non-starter, I believe.
A commitment from all current members to grow total compensation no faster than city revenues would also be a huge step. This is going to be hard but we have to think not only about revenue and expenditure levels but also growth trajectories. If we do not get revenue and cost growth RATES in line we will not solve our challenges.
I like it.
I agree. Also, let the record show that Frankly is persuading me to support a tax increase!
Yes – irony (is that even strong enough a word?) noted
I actually lost consciousness for a few moments, thought I was in some weird dream state and then woke up to find that the words in the comment section had not changed.
Strange days…
I see we have a bunch of funny guys posting today!
Yes.
Just so you know, I have been taking a lot more showers (with a low-flow shower head of course) because I have been feeling a bit more unclean since I started advocating for tax increases.
Sounds good, but I accept the arguments you offer AGAINST your third idea. If we know we need the sales tax increase for more than two years, let’s just lay it out there along with your first idea (the additional, advisory ballot).
Our default position for officials we elect should be one of trust. If we’re clear in our wishes (via an advisory ballot), we can toss out those who fail to follow them. There’s no need to set up an expensive serious of ballot measures that some will take as a bait-and-switch strategy.
Please explain your thinking behind the “grow total compensation no faster than city revenues” commitment concept. It seems that we should be cutting back on total compensation.
If we’re $30-million in deficit attributable to compensation growing far faster than inflation or city revenues, it would seem that such a reduction in allowable compensation growth just would keep stealing from other needs and keep us in an unsustainable fiscal position.
iPad – A few quick thoughts
1. I think we need to lay out the argument that we will likely need the sales tax increase for longer than two years AND explain why we are asking for only two years.
2. The deficit is not all attributable to compensation. A significant amount is due to maintenance backlogs. Further, note that I am talking about “total compensation.” Because we are now making sure we budget for PERS and OPEB increases in an honest and realistic way even holding the line on growth may imply requiring further employee contributions to these funds. I am not suggesting that in the future compensation rate changes should go in lockstep with revenue rate changes but agreements that allow costs to grow faster than revenues will not be sustainable.
But the deferred maintenance backlogs occurred in large part because the city didn’t roll back compensation in 2009.
Robb, there is a significant challenge (note I did not say problem) with your point 2. That challenge is that for the most part (probably the overwhelmingl part) steps to address the maintenance backlogs are not included in the reported budget deficit. Those “missing” amounts are:
75-80% of the streets pavement costs ($8 million per year)
100% of the buildings and structures costs (unknown amount in the millions)
An unknown % of the pools capital repairs and maintenance costs (unknown amount in the millions)
An unknown % of the parks capital repairs and maintenance costs (unknown amount in the millions). Missing are the proactive steps to repipe one or more of the intermediate aquifer wells in order to reduce irrigation costs for both City Parks and School District schools.
Bottom-line, what we don’t currently know about truly can hurt us.
I concur and don’t want to downplay that Matt. I was trying to focus on compensation issues here and have talked about the backlog issue before and will going forward.
The “no faster than city revenues” criterion is, by itself, inadequate. The policy should also state “and no faster than the CPI” or some other standard (and reasonable) inflation metric. If the only limit is the rate of revenue growth and the city gets its economic development plans in gear, that will open the door to another round of unreasonable compensation increases. We need to keep that genie in the bottle if we’re ever going to get out of the mess we’re in.
Jim – I just want to be clear that I view the idea of “compensation growth no faster than revenue growth” as a heuristic device to make the point that growth RATES of costs and revenues (and the trajectories they trace) are important. It is not just that we have raised revenue in an absolute sense in year X (as we would under a tax increase) but also that after such a raise rates of growth, if not brought in line, will lead to future imbalances. This is especially true for expenditure categories that make up a substantial part of the budget (according to the 2013/14 budget forecast: “Salary and benefit costs make up 78% of the discretionary General Fund budget.”). Just do a quick spreadsheet simulation of the following: total revenue of 40 million in year one and a balanced budget with 78% of expenditures in compensation and 22% in other. Then grow revenue by 2.5% per year and all non-compensation costs at 2.5% per year. Then grow compensation by 2.75% per year. Go out 5 years or 10. I know most of the folks on here are numerate so I am not trying to talk down to anyone but the results of such a simulation are important and illustrate why I am using the idea keeping rates of growth in line.
Obviously, appropriate decision making about compensation will also be based on the need to do other things like build up a reserve and deal with maintenance backlogs.
Oh the quote in my previous post is from the 2013/14 budget (Forecast section). I did not make the number up.
Jim and Robb, I don’t even think Jim’s approach goes far enough. In addition to the constraints you two have laid out, I believe that we need a “hockey stick approach” where the expectation is very clearly set that for a period of time (2-3 years minimum) all increases will in effect follow along the 0% trajectory of the flat “blade” of the hockey stick, and only follow your restricted path “up the handle of the hockey stick” after that period of 0% growth is completed.
Perhaps it should be framed as “limited to revenue growth, or CPI, whichever is less”, so we can guarantee that city employees will have their takehome pay be reduced by med insuance costs exceeding either, and while we are at it, we should strive to have Social Secuity and Medicare rates increased to fully fund them, and have all public AND private sector employees absorb that cost, rather than the employers.
I’d like to see SS and Medicare fully funded, but there’s no clear political path toward getting there. The budget aspects of the problem seem to be dwarfed by the ideological divide, and until we can get the two parties to agree on an approach, we’ll continue to muddle along with an uncertain outcome.
But Medicare isn’t the same as employee health care. Private-sector employees may be somewhat insulated against health care cost increases, but that insulation is becoming increasingly thin as business are unable to keep up with the rate of increase. Businesses have no choice but to figure those increases into their total compensation calculations, either by raising compensation costs (rare nowadays), reducing coverage, or requiring a larger share of employee contribution. The piper gets paid, one way or the other.
For those of us who are self-employed, there is no insulation at all – the choice is between reducing coverage or increasing the payout. I currently pay over $22k per year for my family of 3. I get to deduct a bit of that on my tax return, but that’s pretty cold comfort.
If someone can articulate a reason that city employees should be protected from health care cost increases when private sector employees have no such protection, I’m willing to listen to it.
Oh my gosh. Robb has articulated a plan that Don, Frankly and I can all agree to. Will miracles never cease ?
With those words Don has issued the clarion call of the June 2014 election. In alphabetical order:
Daniel why should the citizens of Davis trust you in this time when our trust has been abrogated?
Robb why should the citizens of Davis trust you in this time when our trust has been abrogated?
Rochelle why should the citizens of Davis trust you in this time when our trust has been abrogated?
Sheila why should the citizens of Davis trust you in this time when our trust has been abrogated?
Maybe this should be included in the pro-tax literature.
Given the choice between a tax hike and a catastrophic cut in city services, I favor the tax hike. However, I think the City has to be honest and admit this: The reason we need a tax hike of $30 million is because they are increasing total compensation to employees by $30 million MORE than there are revenues to cover those increases in compensation.
In other words, had the City simply raised compensation rates to its employees only at the rate its income is growing (about 2.5% per year), there would be no need for this $30 million tax hike.
To be clear, there is a secondary problem involved: Water rates will cost the City an extra $2 million over the next 5 years. As such, the tax hike will have to be $32 million, with $30 million going to excess increases in employee comp.
Another question is, after 5 years, and no restraint on employee compensation, how much higher will Davis have to raise its tax rates?
No “restraint” over the last 5 years? Do you really mean no major ‘roll-backs’ over the last 5 years?
It’s the next 5 years. I did not look back. Of course in the past there was a terrible lack of restraint. But our crisis is because there is no restraint in the coming 5 years. As a result, employee comp is going to go up by $30 million more than present revenue growth can cover.
I’m skeptical that city government will be strong enough to continue on the somewhat modest path we’ve pursued recently without the leadership of Krovoza and Pinkerton.
And with a competitive council candidate refusing to agree to use additional tax money the way the public might earmark it, my first reaction is to go with catastrophic staff cuts and rebuild when we can afford to.
But, if we do vote on higher sales tax and/or another parcel tax, I support Councilmember Swanson’s proposal to include a strongly worded advisory measure. While a violation won’t get us into a courtroom, it would put council members on notice that efforts at revisionist history or excuses for non compliance won’t keep them from being voted out in the next election.
One thing I hadn’t thought about when I wrote this morning is that by passing the advisory measure, it will give the councilmembers the ability to tell city employees, hey this is the clear expressed will of the people.
Excellent sensitivity to that political aspect. Will it also keep us from adding more employees at the same unsustainable compensation levels? Remember, Lucas originally said we should wait for budget talks before they decided on three vs. four. The new tax(es) might give him an argument to return to four on a truck.
Then it would be up to us as citizens to stand up strongly to the City Council and firefighters and insist that staffing be based on evidence of risk/benefit ratio, and not some warmer and fuzzy feeling that 4 on an engine makes us automatically “safer”.
Done and done. My discouragement comes from how the decision now is being subjected to unsupported scare comments and the CM and FC subjected to unsupported humiliation comments.
To put Tia’s quote above into perspective. The risk benefit ratio that applies to the Marina Circle discussion from Tuesday night is, “Were the two minutes betwen the arrival of the first fire engine and the arrival of the second fire engine worth $1.15 million?”
The provenance of that question is the following Overtime Hours graphic that was part of Chief Nathan Trauernicht’s presentation.
When I listened to the presentation, the calculator in my brain started working overtime because I felt that the fiscal benefit of the staffing change was understated. From 1/7/2013 through 7/7/2013 the total OT was 10,251.57 hours, of which 514.5 was for State Forest Fire Strike Team OT, leaving a net attributable to local fire operations of 9,737 hours. During the same period there was a total of 8,494.7 hours of combined sick and vacation time that needed to be covered. Netting the 9,737 by the 8,494.7 (since the primary driver of OT is covering for missing employees) we get a net OT amount of 1,243.3 hours due to non-vaction/sick reasons.
Looking at the 7/8/2013 through 1/5/2014 period the total OT was 9,295.3 hours, of which 1,403.23 was for State Forest Fire Strike Team OT, leaving a net attributable to local fire operations of 7,892.07 hours. During the same period there was a total of 9,915 hours of combined sick and vacation time that needed to be covered. Netting the 7,892.07 by the 9,915 (since the primary driver of OT is covering for missing employees) we get a net OT amount of minus 2,022.93 hours due to non-vaction/sick reasons.
That means that non-vacation/sick operations of the fire department was able to be more efficient under the new configuration by over 3,266 hours for the six moth period (6,532 hours if annualized). That is an overtime efficiency improvement of 3.14 FTEs over and above the 1 FTE per 8 hour shift saved by the staffing change. If a firefighter FTE costs $150,000 thne the 3 FTES saved on engine staffing equates to $450,000 saved in salary and benefits, and the 3.14 FTEs of overtime (at a time and a half pay rate) represents another $700,000 saved. $1.15 million saved in total.
I understand your skepticism iPadGuy, but I think Brett Lee is just as capable of leading the next chapter as Joe has been. I also believe that Rochelle is capable.
Most of all I know Robb Davis is capable. Building healthcare systems in West Africa could only happen through a disciplined dedication to fiscal restraint coupled with a creative understanding of how to get better outcomes from more and more constrained resources.
She told the Vanguard, “I’m not going to make a campaign statement that if you increase this tax every penny of it will go towards services, but no penny will go to the employees.”
David, you do understand that, other than the $2 million for water, all of the tax hike is going to the employees’ compensation?
Our entire operational fiscal problem (outside water) is that medical, OPEB and pension funding costs are going up faster than revenues. All of those expenses are a part of employee compensation.
So anyone who says they would support a tax increase but not an increase in employee compensation is being disingenuous or simply does not understand the nature of the problem we face.
The only way advisory language would have any importance at all is if it said, “total compensation will be frozen for the period of this tax.” The City Council will never do that.