Sunday Commentary: Opposition to Sales Tax Didn’t Do Their Homework

I read the opposition’s argument against the sales tax measure, and I have to say, I liked it much better when it was called by its other name, the opposition to the school parcel tax.  Seriously, I think they actually submitted the same ballot statement they did against the parcel tax and just changed some of the words.

First, the winning argument in Davis is not going to be that people are taxed too much.  That may be a 20 percent argument, which might be a decent start when you’re running against the parcel tax, but, then again, they never actually succeeded in doing that.  The closest they came was Measure A in 2011 when they held the parcel tax to 67 percent of the vote, which means at their best they got 33 percent of support for their position.

You would think that fact alone would cause them to throw out their play book and construct an argument that a town that votes 75 percent for Democratic candidates would be able to get around.

The people who think they are being overtaxed don’t really need much of a reminder that they are overtaxed in order to vote against this initiative.  The people that a 50 percent vote sales tax has to target is the vast majority of the population who don’t believe they are overtaxed, who don’t mind spending the money if it goes for good and responsible purposes.

Therefore the argument that needs to be put forward here is that the city council has mismanaged the city’s finances and that future councils cannot be counted upon to be fiscally responsible.

First they argue that the voters should not approve an increase in sales tax that raises it until 2020 when Measures “passed in 2004 and 2010 are still in force. Why are they not enough?”

It’s not that they ask the wrong question, it’s that they failed to provide the answer.  First, the measures passed in 2004 and 2010 are the same thing – 2010 extended 2004.

But the real problem is that the city turned around in 2005 and gave away the sales tax measure, that was supposed to go to parks and to prevent layoffs to public employees, instead giving that money directly to the firefighters in the form of a 36 percent raise at a time when all the other groups were getting a 15 to 18 percent raise.

Second, when the economy collapsed in 2008, the city had an opportunity to fix its structural deficit – the tens of millions in unfunded liabilities for retiree health and pensions which were produced in health give outs over the previous decade.

But instead of fixing those problems, the council at that time decided to kick the can down the road.  They hid these problems behind phony costs, but left the heavy-lifting for the next round of MOUs.

The next round of MOUs cleaned up the structural problems with OPEB (retiree health care) and PERS (Public Employees’ Retirement System).  It also finished the reforms to the cafeteria cash outs.

But in doing so, the city had to trade off these structural cuts for a 2 percent pay increase.  A large amount of the cost increases are outside of immediate control of the council, but a more aggressive 2009 MOU might have allowed the city to save more then and save more now.

The problem with the current tax measure is that it doesn’t do much to deal with the biggest problem in the hole – infrastructure.  Council, in approving the tax measure, actually cut the amount going to road repair from $2.5 million to $1 million.

The city’s roads are facing cost shortfalls that could explode as high as $600 million, but the council is planning to cover road repairs with a second tax this year – a November parcel tax.

The opponents of the tax increase never discuss issues like pensions, OPEB, cafeteria cash out, employee salary increases, or roads and how past councils failed to address these issues, leading to the current fiscal crisis.

The opposition writes, “The recent fiasco with the City Manager is an example; paying him a salary of $188,000. He left Davis for another City that pays him $13,000 less and now the Council has postponed setting up the salary of the new one pending the result of this election. Not difficult to guess where your money is going.”

This is a non-issue that suggests that the opposition to the sales tax has not done their homework on city fiscal issues.  The city manager’s salary is largely chump change compared to either the $5.1 million present deficit or the amount the city is in the hole on pensions, the soaring health costs and road repairs.

The opposition, which includes Ernie Head, does bring in the water rate increase.  But they miss the real smoking gun that not only has the rate increase put a strain on ratepayer’s finances, but it actually adds quite markedly to the general fund deficit in the out years of the tax and the five-year budget picture.

As we have noted in the past, there are no guarantees down the line that the city council won’t do as they did in 2004 – take the tax increase and turn around and give it to employees in pay increases.  The current council is counting on the fact that the fiscal problems are so severe and the tax is relatively small, to mitigate against that possibility.

However, a fall parcel tax would allow the city to earmark the money for exactly what purposes were needed, while avoiding the politically difficult need for two tax measures.

The argument in favor of the tax also somewhat misses the mark when it states, “This modest increase in our sales tax rate will fund essential community needs that shouldn’t be delayed further, including: Road, sidewalk, bike path, streetlight repairs (and) Parks, landscaping, street tree maintenance.”

It is not that this is a false argument completely, but it fails to acknowledge that $2.3 million of the $3.6 million generated is going to personnel-related costs and that the $2.5 million that was originally to go to road maintenance was stripped down to $1 million when the council reduced the size of the tax increase to half a cent from three-quarters of a cent that was originally proposed.

In other words, most of the specific items cited by council will be put into the November parcel tax, not the June sales tax.

The council members are correct: “Without this measure’s approval, basic services (including police, fire, parks, recreation) will suffer severe cuts, up to 12.5 percent. Davis will become a less safe and less pleasant place to live.”

The all-cuts list will be ugly and disturbing to the public, and city employees in particular.

The city is correct when it states, “The City Council has recently restructured labor contracts for major cost savings and long-term fiscal sustainability, with employees paying significantly more toward their retirement. Davis has decreased its workforce by 22 percent, or 103 full-time employees.”

However, they are misleading when they state, “The longer Davis defers major road repairs, parks maintenance, and water conservation projects, the costlier they become.”

In fact, the decision to reduce the size of the sales tax does exactly what they warn against – defers major road repairs and parks maintenance by at least another six months, greatly adding to their cost.

The bottom line, the city residents deserve to have the facts at their hands when they vote on this sales tax revenue.  The opposition to the sales tax really does not understand the facts at hand while the city council plays up on roads and infrastructure in a tax that really is not going to address those issues.

—David M. Greenwald reporting

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