The Davis Enterprise in their Sunday editorial laid out their case for short-term fixes for Davis’ structural problem.
The paper writes, “On Dec. 17, Davis City Manager Steve Pinkerton made it clear in his budget presentation that the city is still looking at a catastrophe, despite reforms in employee contracts and a reduction of 103.25 full-time-equivalent jobs from the payroll since 2008-09. The city’s deficits are structural and will get worse.”
“Revenues are growing at 10.33 percent over five years while expenditures are increasing 13.45 percent over the same period,” Mr. Pinkerton reported.
The paper continues, “The general fund will run a deficit of $2.5 million this fiscal year. The fund began with a $6.2 million reserve. Revenues look to be $42 million; expenses $44.5 million. The year-end general fund balance will fall to $3.7 million.”
By next year, as the Vanguard’s regular readers know: “In 2014-15, Pinkerton reports that the deficit will climb to $5.1 million. The fund will begin with $3.7 million reserve and it will finish $1.4 million in debt.”
“With expenses annually outstripping revenues, Davis is on pace to have a negative general fund balance of $28.4 million by the end of the 2018-19 fiscal year,” they continue.
Having laid out the numbers the paper then comments on how the City arrived at this point, “The fountainhead of most of the city’s fiscal problems is within its labor contracts. Salaries grew too fast for more than a decade, Davis failed to control its medical benefit costs and funding pensions keeps consuming more and more of the city’s budget.”
The paper continues, “The squander was hidden for years by the real estate bubble, the reckless termination of road maintenance, the decision to not fund retiree health care benefits and misguided policies by CalPERS that made the city’s pension costs appear to be affordable.”
“Davis also suffers from its weak business base. Sales tax revenues per capita in Davis for the past five years have averaged just $82. Woodland took in $120, Dixon $205 and West Sacramento $215,” they note. “Additionally, the new higher water rates are going to cost the city $2.1 million over the next five years.”
“Even with 103 fewer full-time workers, a modestly growing economy and new housing on the way, the fiscal crisis faced by the city of Davis is in full view,” they write.
The editorial then explores some possible solution steps it believes the City should take, “Davis needs to rework its labor deals, so that salaries, benefits and pensions are explicitly tied to revenue growth. However, all of its signed contracts run through the end of 2015, and the general fund reserve will be exhausted before then,” they write.
This is a critical point – the city screwed up in 2009 by not enacting the structural changes it needed at the time. At the time, Councilmember Stephen Souza defended the cuts, arguing for incrementalism when he said, “This is the first contract that is the beginning of the turning of this aircraft carrier. And it takes a long time to turn an aircraft carrier around – for anyone who has ever been on one, it doesn’t happen overnight. Doesn’t happen quickly, it takes awhile.”
Unfortunately, that decision left the city to finish the structural reforms in the 2012-13 MOUs and meant that the city could not complete the type of changes laid out above.
The Enterprise editorial continues, “Facilitating innovative industry to locate here will help the city’s long-term revenue stream. But even if the council had not just last month rejected a business park east of Mace Boulevard, the revenues would come too late to stem the city’s bleeding red ink.”
The City Manager, Steve Pinkerton, “has presented three options for raising new money right away: a $135 parcel tax to generate $3.68 million per year; an ad valorem property tax estimated to bring in $3.64 million annually; or an increase in the sales tax rate by a half-cent to garner $3.61 million a year.”
“Without new funds very soon, Davis will begin laying off 52 more employees. That means drastic cuts in every department, including police, fire, public works and parks,” the Enterprise concludes.
The Enterprise stops short of specifically advocating for any of the possible measures they have described. Instead the editorial argues for a course we have often recommended when they say, “Before a specific course is decided upon, Pinkerton and his staff need to engage and inform the people of Davis. They need to ring the bells in every neighborhood, letting the public know what lies ahead. Our community’s future depends on wise decision-making now.”
But that needs to start with the Enterprise itself. While the Enterprise has periodically laid out the case of economic crisis on its editorial pages, it has not translated that into its coverage on economic issues.
The public needs to read front page stories that lay out the city’s economic crisis and it needs to do so soon.
—David M. Greenwald reporting
I agree with you wholeheartedly. That’s the reason I call it the “city’s newsletter”. Between their non-coverage of real issues and the amount of stories from outside writers (read UC and AP), their reporting of serious issues relevant to citizens of Davis is quite lacking (not criticizing the local sports or arts coverage). Keep up the good work!
“At the time, Councilmember Stephen Souza defended the cuts, arguing for incrementalism, “This is the first contract that is the beginning of the turning of this aircraft carrier. And it takes a long time to turn an aircraft carrier around – for anyone who has ever been on one, it doesn’t happen overnight. Doesn’t happen quickly, it takes awhile.””
http://www.youtube.com/watch?v=b5twHu8XSkw
“With expenses annually outstripping revenues, Davis is on pace to have a negative general fund balance of $28.4 million by the end of the 2018-19 fiscal year,” they continue.”
This works out to about $110 per person per year over 4 years. Obviously this is not that much money. Generating the sales tax per person that is captured in Dixon would get us there. Although Dixon is only about 1/4 our size my guess is the high sales tax capture comes from them exploiting their location along I-80. So just increasing our retail sector could go a long way to raising the money we need. If we put in a Best Buy and a Lowe’s and an Apple Store in addition to businesses travelers need we would probably be a long way to improving our balance sheet enough to make ends meet. Interesting these are categories that are either missing or in need of competition to provide better consumer choice in our community.
If we put in a Best Buy and a Lowe’s and an Apple Store…
And since none of those are going to happen, you might want to join a conversation about revenue options that are likely instead.
“Although Dixon is only about 1/4 our size my guess is the high sales tax capture comes from them exploiting their location along I-80.”
I’d bet a great percentage of Dixon’s sales tax revenues comes from its Wal-Mart (which is bigger than the Wal-Mart in Woodland on E. Main St.). Also, Dixon has more manufacturing, which Davis lacks. That sector pays business-to-business sales tax and it pays much more in property tax on its equipment.
Unfortunately, as the Mace 391 case shows, the people of Davis don’t want a business park here. They want “open space.” And due to a deep-seated prejudice of almost all Davis activists, there is a strong bias against Wal-Mart, mostly because it caters to lower-income shoppers, and lower-income shoppers have no value to Davis’s activists. So we will never have either one.
WalMart is welcome to build one of their new small footprint stores in one of the existing shopping centers in Davis. They’re doing two of them in Woodland. They wouldn’t even need a variance, since they could be within the store size limit.
http://www.forbes.com/sites/lydiadishman/2013/03/06/why-walmart-is-betting-big-on-small-stores/
http://www.dailydemocrat.com/ci_23046054/second-wal-mart-neighborhood-market-coming-west-woodland
I’m willing to bet that the amount of sales tax paid to Woodland by the new mini-Wal Mart at the County Fair Mall over the next 10 years will be MUCH less than the amount Dixon gets from its mega Wal-Mart.
Even if Davis would approve a mini-Wal Mart, I doubt with so many Davis shoppers now going to their stores in Dixon and Woodland, Wal-Mart would locate here. If they did, I am certain that the very loud group which opposes Wal-Mart no matter what (including David Greenwald) would loudly protest its locating here. Oddly, far fewer anti-big box types hate Target. The only difference I can see is that Target serves a higher income clientele, where Wal-Mart caters to poorer people, and the activists in Davis see themselves as “above” that crowd.
Probably Rich, but Don is right, there would not be much we could do to stop it if they moved into existing space like they did in Woodland.
Since their ‘neighborhood market’ stores are focused on groceries, you are probably correct that the sales tax generated per square food is likely lower than from one of their superstores. But as to opening here — they are opening two of these stores in Woodland, where they already have a regular WalMart. So evidently they don’t mind competing with themselves within some markets.
More likely they wouldn’t locate in Davis because there is no place where they could open a big store in the type of facility they prefer, and the store size limit keeps them out. Nonetheless, if they wanted to open one of their new smaller stores in Oeste Manor or Farmtown, there would be nothing stopping them.
WalMart has never shied away from fighting anti-WalMart activists to locate in a city they want to open in.
There is no reason for these things not to happen and even less reason to not engage in an honest discussion of why they should.
If you’re talking about the first retailers you listed, it is because their standard store sizes and probable locations would abrogate the General Plan in a massive way. Changing the General Plan that substantially would require a complete revision, which requires public hearing, community meetings, review by several commissions, and city council action. It would certainly generate substantial opposition, including the local business community (myself included).
So it is exceedingly unlikely that any retail location that includes a retailer >40,000 sq ft is going to happen anywhere in or near Davis. The smaller versions, as noted, can occur without any action required by the city council.
Thus, if you wish to actually discuss ways to improve the city’s financial situation, I urge you to focus on what is doable, likely, and could occur in the near- to mid- term.
I’m all for raising taxes in the short term especially to provide the space to make the changes that needed in the best interest of the community in the long term.
Hell with Walmart, I want a Home Depot or Lowes, and a Macys within a smaller version of this…
http://www.simon.com/mall/stanford-shopping-center
I love the small footprint Macys in Kahlua Oahu. Davis would benefit from that.
I also think an REI or some other large sporting good retailer would do well here, and Big 5 would still be fine.
I would also like for Jennifer Anderson to redevelop G street with a nice downtown hotel like the Napa Andaz http://www.napa.andaz.hyatt.com/en/hotel/home.html?src=agn_mls_adz_lclb_gplaces_apcrn and the Napa Oxbow market http://oxbowpublicmarket.com/. Include a bunch of first floor retail shop space. Then move their hardware and lumber to a peripheral location and expand it… instead of a Lowes or Home Depot. And keep a smaller housewares and hardware boutique store in with the revitalization of G street.
She would rake in the cash from these moves and the entire downtown would benefit.
I’m guessing your tongue is fully in cheek. Why would Davis Ace, owning their site, with nice prop 13 tax rates, move to a new building/site, pay for a new building and utilities to serve, and either pay rent or greatly up their property taxes?
The city can give them a deal for the agreement to support the revitalization.
but they, as business folks, would want a profit, and perhaps then some. I knew Don Anderson, and Jennifer is definitely his daughter. Not a great option to move either Davis Ace or Hibbert out of the “core”.
Tongue was a bit in cheek.
We already have a Big 5.
In my case because they pay sub-living wage rates and are anti-union.
Rich
“And due to a deep-seated prejudice of almost all Davis activists, there is a strong bias against Wal-Mart, mostly because it caters to lower-income shoppers, and lower-income shoppers have no value to Davis’s activists.”
It is not a prejudice to dislike the model of a company that pays such low wages that many workers have to rely on the generosity of fellow workers, or depend on public assistance to support their families. I have no bias against the people who shop at Wal Marts, just as I have no bias against people such as myself, who shop at the SPCA located in the neighborhood I have chosen to live in. It is possible to not want a Wal Mart based on an inherent dislike of their business model, not the people who shop there. From your comments it would seem that you, like Frankly, have already decided ( should I say prejudged ? ) what others must believe if they do not agree with you.
Last I checked, Wal-Mart pays the same wages that Target pays for the same jobs. And most small retailers also pay those same wages for those same jobs. The slight advantages a giant big box chain offers is that, because of scale, its managers make more than managers of small stores make; and due to the size of the chain, there are opportunities to advance to regional management positions unavailable for those working in independent retail. Otherwise, all stores which cater to lower income buyers and compete on price pay low wages. Your prejudice has led you down the wrong path.
And yet, CostCo pays employees substantially more, has better benefits, makes much higher profit per employee.
Costco caters to a higher income clientele than Wal-Mart, and it offers a very small selection of merchandise in huge quantities which does not meet the needs of many shoppers, including many who shop at Wal-Mart. Costco employees, also, tend to have much more work experience when they begin there. As a result, they are more productive (and probably smarter). Walmart tends to give a job opportunity to a lot of people who don’t have a lot of skills or experience. But once their better people get skills and experience, they either moved on to a better, higher paying position in Walmart, or they leave for an employer who values their skills and experience.
I want to be clear that I am not saying Costco is a bad business model. It’s a great business. And it is great for its workers and its customers. But there is a reason most low-price retailers don’t use that same model for pay or for merchandise selection. Each successful company has to find its niche and attract and hold customers based on that. Walmart and Costco serve different niches.
You are making the assumption that I am speaking solely with regard to WalMart. I would say the same about any company that is not willing to pay its workers a wage that allows those worker to support themselves and their families. It is our social structure and our blind trust in “the market” that I hold at fault for the current number of our citizens that we accept living in poverty. Wal Mart only stands out because of the very transparent amassed wealth of the founders as compared with those they do not choose to provide a living wage. It is a symptom, not a cause.
Enterprise: “all of its signed contracts run through the end of 2015, and the general fund reserve will be exhausted before then,” they write.”
Greenwald: “This is a critical point – the city screwed up in 2009 by not enacting the structural changes it needed at the time.”
I don’t agree completely with David Greenwald’s rejoinder.
Of course its true that the 2009 contracts (which, if memory serves, were approved on a 3-2 vote 6-9 months after the 2005 contracts expired) FAILED to enact the total comp reforms I have been calling for over many years. But DG completely ignores the fact that the current City Council also failed to listen to me, and it approved contracts which ignore the imbalance between total comp growth and total revenue growth. That cannot be blamed on Stephen Souza. That is the fault of Krovoza, Wolk, Swanson, Frerichs and Lee.
The only reason* the fiscal situation is so dire over the next 5 years is because THIS COUNCIL approved contracts that they knew would increase total compensation at an unsustainable rate. If they did not want this to happen, they would not have given salary increases to all employees every year of the current contracts. And they would have required that any increase in the costs of the medical benefit, OPEB or pension funding over 2% per year would have to come out of salaries.
Moreover, while I applaud this Council for getting some relief from medical cash-outs, they failed to address most of the problem of OPEB medical costs. They could have, for example, required anyone who retires under 65 to pay all** of the cost of his retiree medical plan until he reaches age 65. They also could have dropped spousal coverage for retirees. What private company gives its employees luxurious pensions and pays lifetime medical benefits for all of its retirees, who retire young, AND covers the medical costs for a spouse and a child after the worker retires? Does the REDWOOD BARN give this sort of thing to its employees? After all, its employees of small businesses in Davis who are being asked to pay more in taxes so city workers can keep these benefits which THIS COUNCIL never addressed.
*Rising water costs also account for a small share of the problem over the next 5 years.
**CalPERS requires the employer to pay a minimal amount for its retirees’ medical plans. Last I checked, it was about 3%. The other 97% could be charged to the retiree, until he reaches normal retirement age, 65. This one reform would end about 80% of our OPEB problem.
“But DG completely ignores the fact that the current City Council also failed to listen to me, and it approved contracts which ignore the imbalance between total comp growth and total revenue growth. That cannot be blamed on Stephen Souza. That is the fault of Krovoza, Wolk, Swanson, Frerichs and Lee.”
I think the current council went as far as they could given where the past council left them. Had the past council dealt with the structural issues as they should have in 2009, the current council could do as you suggest. Without that, they had too far to go in one contract. Just my opinion.
Your argument is illogical, unless you are saying that the labor groups themselves would not agree to sustainable reforms in the last round.
But then, if that is the case, why would they have agreed to sustainable reforms in 2009? It’s not as if revenues into the City of Davis suddenly increased between 2009 and 2011.
And let’s just say the labor groups would not play ball and would not sign deals which were sustainable in 2011. The best option in that case would be to impose deals the city could afford on all workers. That route would have lowered morale. But it would not have put us in the severe crisis of 2015.
I just get the sense that you are better friends with the current council, and you disliked the 2009 majority. As a result, you are putting all the blame on the 2009 group, when the current group failed us as well, and locked us into the bad deals we now have.
Unlike pensions, it might be legally possible to retroactively cut the retiree medical. Do you advocate this?
Absolutely. It is unheard of elsewhere to pay for the retiree medical costs for life for a worker, his wife and his kid, when the retiree medical plan is a Cadillac plan. And it is also unheard of in the real world that every worker can retire fully healthy as young as 50 or 55 (or younger with “air time”) and get the taxpayers to cover his medical expenses for a decade to 15 years before he reaches ordinary retirement age.
I don’t advocate taking away benefits from those who were injured and cannot work any longer for good reason. But I advocate stopping a system which encourages youthful retirement and gives retirees benefits that the taxpayers footing the bill don’t get.
Rich,
Your comments go directly to the heart of an issue which I have long pondered – namely, the rumor that City Councilmembers can themselves become eligible beneficiaries of the OPEB program following two terms on council.
If the rumor is true, if Councilmembers do indeed become eligible to receive this benefit (namely, lifetime coverage following retirement) following two terms on City Council, how can we deny the essential conflict of interest every time they are expected to confront, address, amend or modify this hugely generous and unfunded benefit? More importantly, how can we reasonably expect them to display an unbiased point of view as an overseer of this program on behalf of the taxpayers of Davis?
Just to be clear, I would have no problem with Councilmembers receiving a higher level of direct compensation in the place of a deferred, unfunded and non-transparent benefit.
Perhaps, Mr. Rifkin, you can help to confirm or deny this damaging rumor and help clear the air on this important issue.
No rumor, fact. Yet I can’t get DG to obtain and publish the CC MOU.
Maybe I should do a FOIA act request, and start my own blog.
So, it seems you’re suggesting the height of hypocrisy regarding the Vanguard’s position on the issue of transparency?
What’s the issue, either it is a condition of conflict or its not? Why not clear the air, address how the dilemma is to be resolved, and move on. Whether they will acknowledge it or not, this is pretty big deal – seeing as how the FPPC’s Form 700 disclosure requirements categorically exempt candidates from reporting this type of information relating to public sector service compensation – thereby insuring that the public has no idea.
I thought we posted that info when the council increased their salary, no?
Which council voted in this policy? Was there any public discussion of the conflict this would impose upon Council in terms of fiscal oversight and admistration? How did the vote break down?
Maybe I missed that, but CC compensation does not appear to be on the City web-site, although all other employees’ salaries, benefits are.
I’m interested in a full (transparent) disclosure of: