Staff Recommends a June Sales Tax, November Parcel Tax on Ballot

walletStaff is looking for feedback on Tuesday regarding two revenue proposals that would call for placing a measure on the June 2014 ballot that would increase “the local half-cent transaction and use (sales) tax by three-quarters-cent for a maximum of ten years to address City structural deficit.”

Council would then place “an additional measure on the November 2014 ballot for an approximately $150/parcel tax to address infrastructure (paving, park capital improvements to reduce water consumption, etc) and recreation amenities (50 meter pool, acquisition of Nugget Fields, etc.).”

Any measure that goes on the June ballot would require the council to act on February 11 on specific language – this represents the last possible date for inclusion on the June 2014 ballot.  The sales tax measure is a majority rule vote, while the parcel tax requires a two-thirds majority vote of the citizens of Davis to pass.

Staff notes that even with a projected revenue increase of $900,000, they are projecting a $5.1 million shortfall for the upcoming 2014-15 fiscal year.

City staff lay out the shortfall due to a numbers of factors including $2 million on debt service for infrastructure with an additional $505,000 for contracts for street maintenance.   The removal of other resource savings accounts for $770,00, while the utility increases for water this year only come to $94,000.  Fleet replacement is $110,000 while insurance claims are $67,500.

Employee wages and benefits come to $2.3 million in total.  That includes $1 million in wage increase including a 2% COLA increase.  Benefits come to $1.2 million with retiree medical at $180,000, PERS at $437,000, leave benefit at $305,000 and medical insurance at $321,000.

Mayor Pro Tem Dan Wolk and Councilmember Brett Lee have been working with a focus group of community members discussing the city’s financial situation.  Staff writes, “The focus group provided thoughtful input to the subcommittee, as well as insight regarding the fiscal opportunities and challenges to address the budget shortfall. The participants recognized that the City has made significant cuts over the past several years, is currently engaging seriously in economic development efforts to bring in new revenue sources and needs to make a choice of additional, drastic cuts to service or identifying immediate revenue sources.”

“The group was generally supportive of the City pursuing tax measures as part of a larger and comprehensive fiscal strategy. The group indicated that the City needed to explain why revenue is needed, what will be done to ensure that revenue will be used in the most efficient manner possible and that other means of long-term revenue measures (economic development) will be pursued,” staff continued.

Over six years’ time, staff has been reduced by 103 positions with overall general fund cuts totaling $5.8 million.  In addition, staff calculates that employee cost-sharing and concession have reduced costs by another $5.2 million over the contract period, for a total of $11 in General Fund savings.

It should be noted these are not cuts per se, but rather, as staff indicates, “if none of these measures had been taken, the General Fund would be at roughly $53 million instead of $42 million.”

Staff argues, “Given cuts already made and efficiencies achieved, the next round of cuts that would be necessary to address the continuing $5.1 million General Fund shortfall would result in significant changes to current service delivery levels.”

“While the City is working with the business community on ways to rapidly increase revenue through accelerated economic development, this process takes time to yield results at levels that can address the structural deficit,” they reason. “Because economic development requires considerable focus and leveraging of networks and partnerships, it is expected that it will likely require five to ten years to (achieve) substantial results.”

“Specific focus will be given to facilitating the growth of technology and manufacturing business and collaboration with industry that may lead to an innovation and tech park,” staff continues.

Based on this analysis, staff is recommending that council consider a two-part revenue solution.

First, they recommend a three-quarters cent sales tax increase to increase the current sales tax from one-half percent to one-and-one-quarter percent, or an overall total of 8.75%.

Staff expects the new tax would generate approximately $5.4 million.

Staff notes, “A Council election is the only ballot where a general purpose tax is allowed without making a finding of an emergency, so this June is the only opportunity to consider this option until June 2016”

The sales tax would require a simple majority vote.

Staff writes, “The tax would pay to close the City’s structural deficit and would be for a maximum of 10 years, with a possibility of an earlier sunset if economic development activities yielded advanced success in addressing the structural deficit, or with the possibility of any ‘excess’ funds going to replenish the General Fund reserve levels.”

Staff also recommends a November parcel tax for approximately $150 per parcel. that would generate approximately $4.1 million.

Staff writes, “This tax requires a 2/3 majority and would be targeted to address infrastructure needs such as roads; recreation amenities such as repairs and/or enhancements to existing pools, purchase of Nugget Fields from the Davis Joint Unified School District, etc.; money-saving irrigation expenditures and other potential enhancements to the community. This tax would be proposed for potentially longer term so that financing could be tied to the tax.”

In alternative, staff writes that the city could propose a general obligation bond that would address the capital needs, but “the types of expenditures allowed with this type of financing are more limited, and maintenance costs would not be able to be funded via the measure. In addition, the tax would have to be imposed for a 25-30 year term.”

—David M. Greenwald reporting

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  • David Greenwald

    Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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Breaking News Budget/Fiscal City of Davis Elections

56 comments

  1. Only if the one of the school parcel taxes are allowed to expire, would it welcome a parcel tax. The school taxes were supposed to be temporary and only for a set number of years to get them through tough times until the State started restoring funding. I am disturbed that the School Board is behaving like the taxes are now permanent.

    1. The school taxes are temporary – they have an expiration date and the voters determine whether or not to extend them. Twice in 2012, the 70-75 percent of the voters approved extensions and additional parcel tax measures for the schools, those all expire at the same time. So I don’t really understand how you can argue that the school board is behaving like those taxes are permanent – they didn’t put a 10 year tax or a permanent tax before the voters, they put a four year tax.

      1. Oh please, in this town they’re permanent. I just read a recent article where they’re talking up school parcel taxes again even though the state funding has been somewhat restored.

        1. Permanent means that you don’t have to go to the voters and ask them to re-approve. You may be right, that in this town, the voters will continue to do so, but then that’s their choice.

      2. growth issue is absolutely correct. The temporary emergency schools parcel taxes will never be allowed to expire. I suspect we will be told that the school district is “planning” or “considering” letting the parcel taxes expire as a means to get a little more support for the city sales tax and parcel tax. When time to renew the schools tax arrives we will be told that without renewal, critical programs will be cut, massive teacher layoffs will occur and irreparable damage will be done to the students.

        1. From Friday’s Enterprise:

          “And Davis eventually will have to ponder the future of local parcel tax funding, which is a significant portion of the district’s budget. The two school parcel taxes currently in force won’t expire this year, but next year the board probably will be thinking about what sort of parcel tax renewal to put before local voters.

          Trustee Susan Lovenburg asked Colby about the district’s facilities and maintenance needs. “Our buildings are old,” Colby said. “We’ve been behind (on long-term maintenance) even before the state budget crisis, and we haven’t had a (voter-approved facilities) bond in a long time.” (The last school facilities bond was approved in May 2000.)”

        2. Regardless of the arguments that are used, usually the same from both sides,
          “the kids education is at risk” from the proponents, and” we are all ready taxed enough” from the opposition, the final determination is made by the voters upon expiration of the tax just as David says. Isn’t that how a democratic voting system is supposed to work ?

        3. “The temporary emergency schools parcel taxes will never be allowed to expire.”

          It’s not a matter of them being allowed to expire or not. They come with an expiration date.

          A new parcel tax could be proposed, but it would go on the ballot, where voters decide by a 2/3 majority if it should be “allowed” to pass.

    1. OK… it was “exacted” from the developer, via the development agreement for Wildhorse, for a school site… except the school district never intended to place a school there. They wanted an “asset” that when the time was right, in a very slow growth environment, they could parley it to a developer for a very large amount of money. That time has not arrived yet (see also, the Grande site).

      In exchange, the City gave up “goodies” the city would have gotten otherwise. If the District were to sell it, I’m sure they’d want the value of SFR land. A parcel tax to fund the purchase of the land from the city would be a de facto BIG gift to DJUSD.

    2. I’m not really that familiar with the issue, but my guess is that it relates to the fact the city currently leases the property from the school district and uses the fields to accommodate about 2500 youth soccer players between AYSO and Davis Youth Soccer. The last agreement has the city leasing the field and paying $35,000 per year in maintenance. The District has declared it surplus property and wants to sell it at some point along with Grande once real estate values return to an acceptable level. The city would then have to purchase the property, I presume, or find another location for sports facilities (which would also cost money). All this is a guess based on what I was able to find.

        1. And it should be noted that it was the City that made the developer donate the property because it supposedly was needed for school district use. Is that correct?

          Purchasing the property won’t change the $35,000 cost of maintaining it. Why not a long-term, $1-a-year lease?

          P.S.–What is the “true story” that is not “of record”? Sounds intriging.

          1. Thanks, didn’t see your earlier response. So, it’s not just developers who run scams in this town? Seems as though the school district, of all parties, should be acting in good faith when negotiating re. developments.

          2. One would think… previous superintendent and executive staff, previous board. Don’t think any of the DJUSD involved are still with the district. But history is history, regarding the Nugget fields site.

          3. So, we might now have to pay a $150/yr. parcel tax for 10 years to in part buy Nugget Fields from DJUSD which could’ve just as easily have been given to the city instead of DJUSD? Am I right in my observation?

  2. “’While the City is working with the business community on ways to rapidly increase revenue through accelerated economic development, this process takes time to yield results at levels that can address the structural deficit,’ they reason. ‘Because economic development requires considerable focus and leveraging of networks and partnerships, it is expected that it will likely require five to ten years to (achieve) substantial results.'”

    This “reasoning” makes all kinds of odd assumptions and wishful thinking.

    That no one in the City/business partnership has tried this in the past couple decades. That we live in a community which would support, even tolerate, “accelerated economic development.” That the give-away of our Mace property (with a partnership in place) doesn’t prove that the no-growth/slow-growth faction still can stop even low hanging fruit proposals that make economic sense. That even spending a quarter-million dollars a year focusing on this kind of accelerated development is going to change the community’s entrenched resistance and achieve many millions in a permanent annual revenue increase.

    And, we seem to have written off any focus on the action other than tax increases that would bring immediate results: “additional, drastic cuts to service.” If we’ve build up services with unsustainable staffing costs, we need to decide what services we can do without for the next 10 years or so.

  3. The City has so far refused to honestly address the total deficit, and now they propose a new parcel tax in part to purchase more amenities, when we cannot afford to maintain the ones we already have.

    We need a complete and honest appraisal of our financial situation and a comprehensive plan for solving the total deficit. This proposal is simply a continuation of the same bankrupt approach that has put us in the precarious position we are in today.

    1. “The City has so far refused to honestly address the total deficit”

      How so? The city is providing a 10 year funding mechanism that will address the debt and the city’s infrastructure needs. The city is also planning to put forth an economic development proposal. I’m not saying I agree with everything that they are proposing, but I would like to understand better what you mean here.

      1. This part of Mark’s comment seems very clear and quite accurate:

        “This proposal is simply a continuation of the same bankrupt approach that has put us in the precarious position we are in today.”

      2. David: Where is the full assessment of the deferred maintenance costs for our infrastructure? They are ignoring most of the road needs, and all of the parks, the buildings, pools etc. That seems to be fine with you since you continue to downplay those obligations as well.

        When we see the total bill, and not just the few pieces CC and Staff want us to see, we will be able to make informed decisions on a comprehensive approach to solve the problem. Until then, we will only be continuing with a process that hides the critical decisions from the public in the hope that we won’t question the gravy train currently pouring public funds into the pockets of City employees.

        We need to stop playing these games and instead make a full, transparent and honest assessment and then get our fiscal house in order.

        1. “Where is the full assessment of the deferred maintenance costs for our infrastructure? They are ignoring most of the road needs, and all of the parks, the buildings, pools etc. That seems to be fine with you since you continue to downplay those obligations as well. ”

          Really? That seems fine with you? I was the one blowing the whistle on this stuff when I was the only one talking. I ran multiple pieces in the last week stating that we are understating the deficit at $5 million. I don’t know how you can possibly conclude what you have.

          1. DG: “The city is providing a 10 year funding mechanism that will address the debt and the city’s infrastructure needs.”

            “I don’t know how you can possibly conclude what you have.”

            Three things…your obsessive advocacy of the short-term fix, your repeated publishing of the obviously false $5 million deficit figure, and your argument immediately above mine where you state that the City has presented a 10 year plan that will “address the debt and the city’s infrastructure needs’ even though it is obvious that the plan does neither.

            We need a long-term solution, not more of these short-term fixes.

          2. I’m starting to feel like Don here on the other thread, I’ve consistently stated that we need (A) a short term fix because WE HAVE TO BALANCE THE CURRENT YEAR BUDGET. (B) We need assurances that the taxes will not go back to employee salary increase. (C) A commitment to a long term strategy.

            I publish the $5 million figure because that is what the city provided. Clearly the city sees the need for about $10 million per year, so that’s closer to the correct figure – but that’s the first time we have seen a figure.

            “We need a long-term solution, not more of these short-term fixes.”

            We need both actually.

          3. Now, I’m getting confused. Which figure is correct? Davis, are you revising the $5-million upwards to $10-million? How did this big change happen?

          4. I’m saying add up the numbers, look at the costs not included in the $5 million and hte real deficit is more than $5 million.

          5. “We need both actually.”

            No. A valid long-term comprehensive solution by definition will have to incorporate the necessary short-term fixes. The opposite however is not true. There is nothing about the proposed short-term fix that indicates a commitment to a comprehensive solution.

            Focusing on the short-term fix as you, Don and others have done, lets the City off the hook for dealing with the complete issue. As I have said before, that is just a continuation of the same process that got us into this mess in the first place; a series of short-term fixes that gets us through the crisis of the day.

            We need to stop thinking short-term. We need to come up with a comprehensive solution, not just the easy one that makes people feel good for the moment.

            The CC and Staff have 4 months to demonstrate that they are going to aggressively and thoroughly work for a comprehensive solution. If they don’t, then I expect the opposition to the tax measures will become formidable.

          6. Focusing on the short-term fix as you, Don and others have done, lets the City off the hook for dealing with the complete issue.

            Since you have inexplicably named me in this regard, I will simply repeat that this is a misrepresentation of my position on fiscal issues and economic development.

          7. When your actions match your words Don, I will have no reason to question the sincerity of your statements. As it is, your position on economic development has changed so many times in the past two years I don’t know which version to believe.

          8. That is also not true, Mark. You continue to misrepresent my positions. I don’t know why you do it and disparage me. I have not changed my position. I have been very clear. So you can quit this nonsense and perhaps stick to the issues.

    2. So Mark are you completely discounting all the work that has been done over the past few years in terms of:

      1) The efforts of Davis Roots in local business promotion

      2) The hiring of Rob White whose perspective is quite different from mine, but who approaches differing values with
      respect instead of disdain

      3) The hiring of Mr. Pinkerton with his more proactive fiscal approach

      4) The Cap to Cap trip

      5) The general change in tone of the council in terms of willingness to partner with UCD in terms of items of
      mutual interest and cost sharing

      6) Council members showing interest in a business park as part of the long term strategy for the city.
      And I am sure that there is much more that I am missing.

      To Imply that ” this proposal” taken in isolation and out of the context of the full range of change and state that
      it is “simply a continuation of the same bankrupt approach” is to focus on one aspect of an integrated approach and ignore all the rest of the overall strategy being developed.

      1. Tia: What exactly has the City done with regards to economic development in the past 10 years? 5 Years? The past year? The answer to all three questions is, talk about it.

        So far the only significant decision that has been made regarding economic development was to give away a prime asset.

        There has been a great deal of talk, but the only action has been in the wrong direction. We have not cut compensation, we only slowed the growth of it. We have not invested in economic development, we have only talked about it. We have not addressed our critical needs, we have just hidden them from the public and then proposed raising taxes to continue overcompensating City employees.

        When we actually start doing something different, then I will give them credit for changing the approach. Until then we are simply following the same road towards insolvency.

  4. By all reports, the city staff and council seem to have a very narrow bandwidth when it comes to a discussion of increasing revenues from taxation.

    Specifically, what has been the result of any conversations regarding the potential to increase our transient occupancy tax in concert with any sales tax increase?

    Secondly, and as posted in previous discussion, what is the potential for the levying of an equivalent local taxation component on providers of local services who are operating in the city of Davis? Other than tradition, is there some reason the city couldn’t discussion options for a “super transient” occupancy tax to help our many service providers collect what amounts to “their fair share” contributions for the local service amenities they enjoy through use of our city sidewalks, lighting, street maintenance, safety services and so on.

    In our increasingly services based economy, is there any reason we are not requiring “tax collector status” of our many service providers? From what I understand, our state government has already beat us to the punch when it comes to taxation of medical facilities with its bed tax.

    Or then, given what is now in the realm of 30% of retail sales having migrated to the “internet mall”, how, about Davis paves the way in passing a resolution declaring that: “Henceforth, all internet transactions delivered to an address in the City of Davis would hereafter be subject to a local sales tax equivalent to the then current sales tax imposed on its brick and mortar retailers”.

    Come on folks, this is Davis. Is there some reason that our intelligence goes on PAUSE at the doors to Council Chambers and City Hall? What is our Chief Innovation Office doing to make these exciting revenue opportunities into reality?

  5. “Staff writes, “This tax requires a 2/3 majority and would be targeted to address infrastructure needs…money-saving irrigation expenditures…””

    So the city wants a parcel tax so us citizens can pay to build a new irrigation system, which will not be attached to the new expensive water system, thus increasing our water bills further? Do I have this right?

    1. Interesting point but isn’t something along that line to be expected? When Harrington and company found this one cause of action that had legitimacy the notion that the city would find a workaround or funding shift to keep the parks green was obvious. All Harrington did was put a shell game into motion since we are the city we pay for the water it uses one way or another.

        1. I thought the city and the citizens were one and the same but the city sure doesn’t act that way. The city sized this water project to handle most of the expected water volume and then decides to opt out (along with DJUSD). We are now paying for more capacity than we need with fewer ratepayers to pay for it. And they want more of our money to pay for that privilege. Obviously this is saving the city money at the expense of ratepayers or they wouldn’t be doing it. Sounds like a good No on Parcel Tax XYZ bullet point.

  6. “We need a complete and honest appraisal of our financial situation and a comprehensive plan for solving the total deficit. This proposal is simply a continuation of the same bankrupt approach that has put us in the precarious position we are in today.”

    I believe the city is laying out a complete and honest appraisal that addresses not only the short-term needs but a long-term plan as well. Some of the challenges we face short and long term include:

    1) Deteriorating roads;

    2) Pools that have not been maintained and are falling apart. Like a vehicle that does not get taken in for maintenance and will eventually fall apart our pools are at the point of needing an overhaul or complete replacement because they have deteriorated so much;

    3) Laying out a plan for economic development that FOCUSES on smart development bringing in technology as opposed to big box stores.

    I will be interested to see what is proposed for the long-term.

    I recall some past council members stating that the budget was okay and we were strong when in fact we were not. I did not win my bid for city council; however, I was honest with the Sacramento Bee editorial board when I told them that our roadways, our pools and infrastructure needs had not been addressed and that we needed to look at unfunded liabilities. I believe this is one of the reasons that I earned the endorsement of the Bee.

    No, I am not running for city council I just recall that council members Souza and Saylor said we were in good fiscal standing when in fact we were not in good fiscal standing.

    I truly appreciate the discussions and the hard work that this council has done to address these problems. I say we give them a chance to make their case.

  7. I hate tax increases. I think we are all taxed too much already. I hate the lack of accountability in government at all levels for favoring politics over doing the right things. I hate the selfishness in the pursuit of wealth through political connection, and those that continue to support it or turn a blind eye to it to satiate their own selfishness or ego pursuits. I hate that we adults keep kicking the can down the road to our children. I hate that the media continues to lie or ignore the truth. I hate that so many of our young people are failing to launch due to all of the previous.

    And I hate bailouts.

    And these tax increases are bailouts.

    But I don’t think we have a choice unless we want the city to go bankrupt.

    And unless we make these tax increases absolutely temporary, and pin them to an economic development plan that will provide the replacement revenue so the taxes can be expired, I will put all my energy into making the tax increase measures fail.

    I would like to stop looking backwards at all the poor leadership, lies, greed, and politics over reason… and instead look forward with some optimism that we have all learned many lessons that would back a transformation to effective leadership, honesty, and fiscal sanity that takes us to long term budget sustainability. I think part of the reason that we lacked these things is that we were drunk on a false sense of financial security due to the rise of real estate and stock values previous to 2008. Once this all crashed, and after the failures of the Hope and Change promises, I think most of us now get it. And those that are still stuck on ignorant, or that are unwilling to shed their win-at-politics-wealth-and-ego-pursuits-at-all-costs, are too few in numbers to continue to make trouble and prevent the corrections needed.

    The recent Hoover Institution Golden State Poll returned some alarming results that flies in the face of the message from the Governor in his State of the State address last week.

    From the report:

    Economic growth (71% list as “top priority”), job creation (70%), and balancing the state budget (64%) topped California’s list of the most important issues for state government; Californians placed the lowest priority on dealing with global warming (23% list as “top priority”), strengthening gun laws (22%), and continuing the state’s high-speed rail project (10%).

    -and-

    When asked whether things in California overall are better or worse than one year ago, Californians were more likely to see the state as worse off (39%) than better off (28%).

    -and-

    Lanhee Chen, another Hoover research fellow and an investigator on the Hoover Golden State Poll, commented, “It’s striking that a majority, by a four-to-one margin, of self-reported political Independents don’t think California’s government offers a good model for other states to follow.”

    -and, lastly-

    Californians have not changed their views on the economic recovery since the first survey in September. Thirty-four percent of Californians said their families were worse off, financially, than a year ago, compared to 33 percent in September. Fifty percent of employed Californians are not confident of being able to find a new job in California in the next six months that pays as well as the one they currently have. This is down just five points from September.

    One question… how is Davis contributing to a better California? Are we positive leaders, or are we destined to be on the list of Cities unable to effectively mange our own affairs similar to the how the State operates?

    1. IMO, we’re contributing to a “better” California by having our property tax and other traditional revenue sources siphoned off to support state expenditures, particularly SoCal.

        1. Well (pun intended) until we are drawing from surface water, we are supplying drainage and treated sanitary sewer water to the river from our wells… gratis.

    2. “And I hate bailouts.”

      In that context then, and seeing that “our generation” has generally been the “adult in the room” presiding over the past two decades of unfunded overspending, should it not be the responsibility of “our generation” to make good on that debt? It seems like the alternative is to expect our children and theirs to absorb not only their own costs of governances, but also to bear the responsibility for legacy debts which were not of their doing.

      Would that our generation bear the moniker of “The Greatest Debtor Generation”?

      1. I tend to view tax increases to fund shortfalls resulting from previous failures in fiscal responsibility as kicking the can down the road. With tax increases, we are in fact taking more from people… including young people that did not have any hand in causing the problems.

        There is just no denying that tax increases result in reductions in economic activity and fewer jobs. That is also kicking the can down the road.

        1. Interesting perspective about “taking”… considering many city employees DO live in the community, and they are likely saving for the next generation who don’t have the opportunities they had. Zero sum game? Probably not, but a significant loss of ‘take-home’ pay for city employees will take money out of spending in the private sector, reduce taxes paid by those employees, and make it more likely that they will have less to bequeath to their progeny.

          Not saying you’re wrong, just pointing out that it may not be as simple as it seems.

  8. A couple of charts could be helpful in a story like this. Admittedly I haven’t been focusing on this stuff so I’m just trying to understand the basics. So the general fund is 42 million or so. How much of that is employee pay and benefits?

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