Commentary: City Fumbles Tax Issue, But Tax Remains Only Viable Way Forward

On Tuesday, the Davis City Council will vote to put a new tax measure on the ballot for June.  Two things are clear at this point in time: the city fumbled the ball in waiting until January to engage the public and waiting until the last possible moment to put the measure on the ballot.  Second, even supporters of the tax measure are doing so very reluctantly.

In his interview with the Vanguard, published on Wednesday, candidate Robb Davis told the Vanguard he is “regretfully supporting sales tax.”  He thinks sales taxes are “regressive” and wants any tax we approve “to come with accountability actions.”  He thinks a parcel tax will be required due to the roads backlog.  He wants to make sure that we are not adding infrastructure, but rather maintaining existing infrastructure, and believes that in addition there are further cuts that are necessary.

In an interview to be published on Friday, candidate Daniel Parrella used very similar terms to describe his reluctant support for the tax measure, particularly given his belief that young people are already being priced out of Davis due to high taxes and other cost of living issues.

At the same time, we have not seen a viable alternative.  One commenter suggested that we balance the city budget first and then talk about new taxes as backfill if needed for the long term, but given the necessary timelines and rules governing tax measures, that does not seem viable.

The question would be how to balance the budget without adding revenue.

In response to Tuesday’s criticism of the Davis Enterprise editorial’s outsourcing proposal, Rich Rifkin responds that our critique suggests that the Enterprise claims, “we can solve the entire budget problem with outsourcing.”  He argues, “It says no such thing. It simply says that there may be functions now being done in-house which could be done out-of-house more cheaply (and better in some cases), and these need to be explored as part of the solution.”

He adds, “As things now stand, the Council is set to raise taxes on Feb 11 without having exhausted all avenues for saving money without reducing levels of service. If outsourcing could save a little money, maybe the tax hike would not have to be so high.”

We do not disagree with that critique.  In addition to failing to engage the public until mid-January at best, the council also failed to put other measures on the table.  That said, the council has also made it clear that they have little appetite for additional cuts.

Outsourcing means laying off employees.  Saving any substantial chunk of money by recouping the amount the city spends on pensions and OPEB probably involves laying off 50 to 100 employees.

As a short term solution, you are asking for both organizational and political trouble by laying off a large number of employees and replacing them with outsourced labor.

At the same time, such a move would wrongly focus most of the blame on the employees, when in fact the past city management, city council and even the public are culpable in past mistakes.

“If Davis does not consider more affordable ways to provide services, but instead raises taxes on all of us to avert a calamity, it will be asking a lot of residents who don’t have such luxurious pensions or gold-plated medical plans to get by with less. Is that fair?” the Enterprise asks.

In our view, the voters of Davis were sleeping for about a decade as the pay and benefits were pushed out of balance.  The result is that, for the last seven years, we have asked city staff to take on more tasks with fewer employees and less pay.

In the end, if Mr. Rifkin only believes we can save some money by outsourcing, then the difference between the city adding a three-quarters cent sales tax versus a half-cent sales tax is probably minimal.

We support the notion of looking into all ways to save money, and it’s a reason we support the city examining the possibility of a POU as a way to save money.

That said, at this point, we see no way to avoid at least the June tax measure, without concrete alternatives.

This was illustrated well in the Brett Lee – Kemble Pope exchange.

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.”

Elsewhere we have pointed out the flaws of Mr. Pope’s survey which seems leading at best and suggestive, if not outright directive, at worst.

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.”

So if the answer is don’t tax, we need to make that decision by Tuesday.  We then have about four months, maybe five to find $5.1 million in cuts.

As Rich Rifkin wrote, “There is no legal reason we could not outsource the fire service, placing all of it under the umbrella of the UCDFD.”

That is very true and elsewhere we figured out the city might be able to save about $3.25 million if the firefighters were compensated at the same rate as their UC Davis counterparts.

“If the DFD were closed and the UCDFD took over all 4 stations in town, Chief Trauernicht could hire a new staff for the other 3 stations. DFD employees who were interested could apply,” Mr. Rifkin wrote.

“Because the DFD union has chosen not to sign a contract with the City of Davis, this is a particularly auspicious time to merge the departments under the UCDFD umbrella. Of course, doing this would be a political challenge. But if we had the will, it could be done. And it would save the general fund millions and millions of dollars over the next several years.”

Mr. Rifkin understates the political challenge.  Merely proposed shared management resulted in two letters from other public officials in protest.  Laying off all of the firefighters in the city and having UC Davis hire replacements would be mutiny, recall, and perhaps revolution.

I jest only slightly here.  There is just no way that we can do that kind of action.  It is the kind of talk for barrooms, not council daises.

That brings us back to the need for a sales tax.

There is a practical reason for that, as well.  June 2014 is the only time they can do a sales tax increase.  A sales tax increase is the only revenue measure the city can pass that only requires a simple majority.  Waiting until the city balances the budget forces the city into the parcel tax – two-thirds majority route, that is just not practical to suggest.

I have asked this question before, and I will ask it again – does anyone have an alternative suggestion? You might want to come up with it before Tuesday.

One poster suggested that that is the job of the council to figure out, that we voted for them to deal with “these budget things.”  The truth is the council has figured it out and if the public wishes for them to change their mind, they have to come forward with a VIABLE alternative solution.

I have seen no viable solutions that avoid a sales tax measure in June.  I see some suggestions for ways that we might be able to reduce future taxes, but none that avoid a sales tax.

So to be clear, I fully support cost savings measures.  I would love to find enough savings to avoid a separate November election, but for all practical purposes, some of which are self-inflicted and the city will have to explain themselves there, I see no way to move forward without a sales tax increase in June.

—David M. Greenwald reporting

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