City Manager Steve Pinkerton has slightly upwardly adjusted city finances since December. He wrote, “On the whole, this updated report shows revenues increasing 8.95 percent while expenditures are increasing at a higher rate (11.29 percent) from FY 2014-15 to FY 2018-19 (Attachments A and B). The City is addressing its shortfall through a combination of increasing fee revenue, reductions/cost controls and a focused economic development strategy compatible with Davis values.”
The city manager, who exits at the end of next week, is asking council to “Direct staff to continue with community outreach to explain the City’s financial condition, options moving ahead and the financial strategy in the context of targeted economic development activities and to place any additional fund balance in the General Fund Reserve.”
The numbers do not change a whole lot, going from a $5.1 million imbalance to a $4.99 million imbalance. Without the new sales tax revenue, “Addressing the $4.99 million structural imbalance would mean a 10.4 percent reduction for General Fund and Internal Service Fund operations (like Police, Fire, Parks and Recreation) or up to 22.6 percent if Safety Services are held harmless.”
Even if the June sales tax measure is approved, there will need to be some adjustments, “The proposed half-percent Sales tax increase is projected to raise $2.7 million in the first year and approximately $3.6 million annually thereafter.”
The city can probably cover that in the short term by cutting out the last $1 million dedicated to roads in hopes that the voters will pass a parcel tax this November to address roads and other infrastructure needs.
City Manager Pinkerton writes, “The recommended reductions contained in this package are NOT reflected in the FY 2014-15 $49.65 million Preliminary General Fund budget.”
He continues, “If the Council directs staff to make the reductions, it will decrease the General Fund and projected structural imbalance by $1,164,027. The new General Fund will be approximately $48,486,588 and the structural imbalance will be approximately $3,826,242.”
He writes, “Staff is not recommending removing additional funds from the FY 2014-15 budget to account for vacancies and operational savings in the upcoming year, because this staff report proposes to reduce expenses by $1,164,027, which is roughly equal to the $1.2 M salary and operational savings that were taken out at the beginning of FY 2013-14. In other words, the savings have been captured through the proposed reductions. Second, since 55 percent of the proposed reductions are vacant positions, there are very few vacant positions in the General Fund and most are in Police and Fire which backfill unfilled positions with overtime.”
Steve Pinkerton further notes, “Attention has been focused on the structural imbalance because it signals that the City is relying on one-time money to balance its budget and that revenues are not keeping pace with expenditures.”
The following points address major changes since the December 2013 estimates:
- Update Revenue and Expenditure Projections: The December projections were based on very preliminary estimates. Two of the largest sources of revenue for the City are Property Tax and Sales Tax. In making projections, staff aims for reasonable estimates. Revenue and expenditure estimates have been adjusted upwards since December, partially as a result of having more information available. At this time, Staff is not comfortable further increasing FY 2014-15 revenues.
- Property Tax. As discussed in December, the City receives the bulk of its property tax in two installments; one in late January and one in May. At the time of the estimate, the first payment had not been received and the increases in Davis tend to be inconsistent as properties do not turn over frequently and there is very little new development. Regardless, in December the projection was increased by $300,000. The April estimate shows Property Taxes increasing by another $534,481 from December. The forecast has been adjusted to increase growth from 2.5 percent to 3.5 percent in out years.
- Sales Tax. Despite a 1.3 percent drop from the same quarter last year in December, Sales Tax revenue was up in the latest quarter. As a result, the April estimate was increased to $10.2 million. In the December estimate, staff acknowledged that it would come in higher but did not increase the estimate because we wanted to see how the other general fund revenues came in over the next several months. Adjusting for one-time bumps in Sales Tax revenue, it has increased 2.8 percent over the past nine years.
- Settlement for Property-Tax Administration Charges to ERAF. In late January, $256,429 was received as a one-time settlement with Yolo County over the calculation of property tax administration dollars. Counties had been applying the property tax administration fee to Educational Research Augmentation Fund (ERAF) and, in 2012, a decision by the California Supreme Court invalidated the practice.
- Expenditures. The difference between the December and April estimates are minimal. For the April estimate, staff used a combination of current payroll costs and an analysis of anticipated vacancies through the end of the fiscal year to project the salary and benefits. Water costs are based on estimates and reflective of the unusually dry winter which increased water usage in city parks
- Structural Imbalance. The December $5.1 million structural deficit was calculated by subtracting the revenue growth (projected to be $920,000) from the projected increase in expenditures. The April projection is $85,757 less, or $4.99 million, which is a minimal difference from December.
The preliminary General Fund budget still includes the following:
- An additional $2.5 million for infrastructure. Counting all funds, there is a total of $4.7 million budgeted, including $770,000 in appropriations from the prior year. Of this amount, $3,779,000 is General Fund.
- Utility cost increases of $94,000 and other insurance-fund increases $67,500.
- Maintaining funding of $500,000 for water conservation measures.
- First year of Fleet Replacement and Leave Fund paybacks ($415,000).
- FY 2014-15 labor rates calculated at agreed-upon terms. For example, current Memoranda of Understanding costs increased $360,000; medical insurance/cafeteria went up $321,000; PERS retirement $437,000; and, retiree medical is increasing $180,000. This is offset by employees picking up more costs and changes to retiree health. These changes will save approximately $5.2 million over the term of the labor contract.
- Removal of salary savings ($447,000) and operational savings adjustment ($770,000). Adding back $350,000 of budget savings for unfilled Police Department positions. In FY 2013-14, the department identified salary savings for vacant positions which was used as a reduction.
While the Vanguard believes that the sales tax measure will pass, there is no guarantee. Thus, “the Council will be considering the reduction package which has been updated by departments and include the worst-case scenario of 22.6 percent with public safety held harmless.”
The city manager continues, “In addition, cuts which total $1,164,027 are being recommended for implementation irrespective of the sales tax measure. About 55 percent of the reduction results from eliminating vacant positions or temporary-part time hours. The rest of the savings are from operational cuts and fund shifts. No filled positions have been recommended for elimination.
Summary of cuts:
—David M. Greenwald reporting
The City threatening cuts while in the meantime the $1,000,000 to study the POU, the many $100,000’s for the 5th Street road diet and the $1000 garbage cans are still on the table.
5th Street is paid for out of non-general fund monies. Same with garbage cans. $400,000 for the POU came from the Enterprise Fund. The rest will be paid off in $66,000 increments and could save the general fund and enterprise fund in the long term.
Yes and I pay my house payment with funds from my checking account and not from savings account, what’s the difference?. All this talk about what pocket the funds come out of is all mumbo jumbo.
One difference is that you can move the money in your checking account to or from your savings account ‘at will’… no problem. The same cannot be said for the monies avail. for Fifth Street, the POU, or the cans. BTW I oppose all three of those efforts.
hpierce, I don’t think your statement is quite accurate. General funds borrowed from an enterprise fund are financing the POU. They will be paid back from the general fund to the enterprise fund. It’s 100% discretionary. Is that not so?
-Michael Bisch
I meant to refer to David’s comment, that PART of the POU money (for a portion of the study) was being charged to Enterprise Funds, period. My understanding is the same as yours as to ‘borrowed’ funds from the EF’s must be repaid by the GF. As to the monies expended for Fifth Street and the ‘new’ toters, my understanding is that is NOT GF, so my previous post I stand by, in the main. Also, David said that the EF’s would would be reimbursed over a period of years. Depending on ‘interest’ implied, then that means the CURRENT expenditure is not GF at all.
maybe you should learn about how monies are allocated and the difference between general use monies and restricted funds. it would make you be more educated and others to stop correcting you all of the time. as you can see by hpierce’s response, understanding how monies work does not mean you have to support their uses. it only avoids you conflating money that can be spent on any with money that cannot.
nah… facts generally get in the way of a good rant.
D.P., it’s all about perception. The public sees it this way too whether you like it or not. The public pay their taxes and see it getting pissed away whether it comes out of the A fund, the B fund or the C fund. To them it’s just more waste while the City is crying poor and threatening more cuts. Maybe you should learn more about how the public perceives it.
it’s about how public money work and most people don’t understand it and yet want to level blame on public officials.
BP, the reality is that you would have something tangible to complain about regardless what the Water and Wastewater Enterprise Funds decided to do regarding electrical power.
Alternative #1 … Look at the annual expenses projected for Calendar Year 2018 and see that your electrical power bill will be in the vicinity of $6 million for that year, and at least that much every year thereafter … and then decide to do absolutely nothing to try and bring down that $6 million annual cost … just pass it on to the ratepayers.
Alternative #2 … Look at the annual expenses projected for Calendar Year 2018 and see that your electrical power bill will be in the vicinity of $6 million for that year, and at least that much every year thereafter … and then decide to try and reduce those costs … and then authorize paying for an analysis of what steps need to be taken to effect the savings.
It is your wet dream … damned if they do and damned if they don’t.
In one regard, it matters a great deal out of which pot the money comes from, but in another it does not matter at all. All three expenditures listed are completely discretionary since no one has forced us to make those decisions. In each case, the City chose to go forward with spending the money in spite of the fiscal crisis we currently are in. In that regard, the original complaint is valid. In addition, all three required staff time to implement, and the funds to cover the compensation of those employees more than likely came from the General Fund. The time spent on those efforts was also time taken away from other, perhaps more worthy actions. How much further down the path of economic development might we be if the City had invested the staff time into the process of generating new revenues, rather than using it in support of spending more tax money (regardless of source).
It appears that some of this staff time was spent on bringing in a significant amount of money, especially related to the 5th Street project.
I’m unclear why this fact is not highlighted more in discussion regarding the expense of these types of projects. Am I missing something?
What BP and Frankly and others would say you are missing Michelle is that the “significant amount of money” was from non-local governmental sources, and as such was taken out of Davis taxpayers’ pockets, only in a different way. Their argument would be that through state and federal taxes we are paying for the very monies that we are receiving.
At least that is my sense of what they would argue.
As I asked below, how much staff time was spent applying for the funding. Are you confident that we are talking about a net positive benefit to the City considering all the costs of compensation and administrative overhead? Remember, you have to factor in all the costs of applying for grants thatwe don’t get, as well as the ones that we receive. Do we receive more money in grants then we spend applying for them?
To clarfy, approxiately 2/3 of the funding for the 5th street project came from outside grant money.
The downtown garbage cans were also partially funded by grants.
Information regarding the funding for the 5th Street Project:
In 2010 the City was awarded $836,000 in federal grants (SACOG Community Design Grant) to design and construct the project. The original project scope that resulted in the SACOG grant award was estimated to have a construction cost of approximately $1 million.
The City was also awarded $200,000 in the Highway Safety Improvement Program (HSIP) grant funds in 2012 to provide for pedestrian safety improvements, including ADA ramp upgrades, street lights and marked crosswalks. The $200,000 HSIP grant is specifically earmarked for the enhancements not included in the original grant.
Michelle, which account are the city’s matching funds coming from?
-Michael Bisch
Is this a rhetorical or trick question?
I don’t know the answer but I could probably figure it, although I’m sure you have easier access to the people who know the answer off the top of their head then I do.
http://city-council.cityofdavis.org/media/default/documents/pdf/citycouncil/councilmeetings/agendas/20120612/packet/06-fifth-street-corridor-improvements.pdf
The City applied for a Community Design Grant from the Sacramento Area Council of Governments. SACOG has approved a grant in the amount of $836,000 for the Federal Fiscal Year 2014, for the initial phase of the project. The grant was approved with a minimum local match of $175,604 for the initial phase, which would come from sources such as Roadway Impact Fees or CDBG. The grant and local match comprise the total programmed funding of $1,011,604, including design/engineering services of $124,000.
Don’t know for 100% sure, but at the 85% level, believe the city share came from some combination of Roadway Impact fee and/or RDA. Neither are truly GF.
The City’s share could have been spent on other priorities. There was nothing forcing us to go forward with the project.
It’s my understanding that the project costs $1.9 million.
“The city will pay for part of the $1.9 million project through a Sacramento Area Council of Governments grant, worth $836,000. About $800,000 will come from Davis’ transportation and transportation roads funds, $200,000 from a Highway Safety Improvement Program grant and $50,000 from Community Development Block Grant funds.”
http://www.davisenterprise.com/local-news/city/fifth-street-road-diet-construction-underway/
No argument. On the Fifth Street road diet, my opinion is $0 was the appropriate expense.
hpierce and anyone else who cares to comment, there were some very interesting comments posted in the Enterprise over the weekend (see http://www.davisenterprise.com/forum/letters/result-a-transportation-problem/ ). I would be really interested in hearing your thoughts on the scenarios the commenter has laid out.
Scenario #1
Scenario #2
Scenario #3
Those scenarios prompted the following question from a poster named Scott.
… and the following reply
Thoughts?
The entire concept of these ‘scenarios’ is completely bogus Matt. The car following is always responsible for not running into the back of the car in front of it, regardless of what roadway they are on. How many lanes there are in the roadway, whether or not there are lights involved, nor the presence of traffic flowing in the opposite direction alleve the responsibility of the driver in the following car to not run into the car in front of it.
The problem in all the so called scenarios is the failure of a driver, not the roadway.
I see the so called road diet failing in two significant ways. The first is when there are more cars wanting to turn left than can be accommodated by the left turn pocket. In this case the cars wanting to turn left will block the through lane and bring flow to a complete stop until the left turn pocket is cleared. The same is true when a car turning right is prevented from pulling into the bike lane (or simply fails to do so) while waiting to turn right. Again the entire roadway will be blocked until the car is able to make the turn. Both situations are currently an issue, but unless both occur at the same time at the same intersection, through traffic continues to flow.
Instead of wasting money on this experiment, the smarter move would have been to simply ban bicycles on Fifth Street between B street and the railroad tracks.
Mark, I hear you with respect to accident risk. I thought the original comments focused too much on that aspect, but where the Enterprise comments rang true for me had to do with the fact that an alert driver who avoids a rear end collision still ends up at a dead stop in the left lane of 5th Street when there is a car in the left lane waiting to make a left turn. I’ve gotten to the point where I will not drive in the left lane of 5th Street during “normal” driving hours because it reminds me of the Long Island Expressway and/or the Schuylkill Expressway, both of which are affectionately referred to as “distressways” by East Coasters who know them. If I make the mistake of driving in the left lane of 5th Street, I am guaranteed to come to a full stop at G Street behind left turning cars, and then again at F Street behind left turning cars. Things progressively get a bit better at E Street and D Street and C Street, as the number of cars turning left at those streets is significantly less than at G and F. Where things get dicey is when I want to turn left on F Street. I ride in the right lane through G Street and have to quickly duck into left lane just after I pass G Street. I always worry about sideswiping left lane cars that are in my blind spot.
So the issue isn’t accidents for me. I do agree with you that the Enterprise poster over states that issue, but rather the stop and go nature of travel in the left lane of 5th Street.
Matt… I’ll reply to you “off-line”… missed the Davis Emptyprise part, but will follow your link, and respond. Hints: I tend to agree with Mark’s first three paragraphs… but reject his last, vehemently, as it runs counter to good traffic engineering principles and design, and (oh, by the way) State law
I figured it would violate State Law or some such, but that just points out that State Law doesn’t always conform to common sense.
CalRecycle is distributing $10,500,000 to eligible cities and counties specifically for beverage container recycling and litter cleanup activities.
In 2012-2013 the city received $17,666 in Grant funds, in 2013-2014 they received $17,402.
How much staff time was used to apply for, and comply with the requirements of the grant? It doesn’t take many staff hours to spend $17,000.
Fair question. Yet suspect that data (inc. salary, retirement, medical, etc.) is not readily available for any given grant, even with a PRA request. Some (not many) grants provide for funds to manage/report by staff, not any that I’ve been aware of, reimburse for application.
I suspect that the answer is not readily available even to the Finance/Accounting Department due to the antiquated accounting system that the City uses. We don’t really know how we spend our money, or how much it costs us to supply specific services. Fixing that problem by implementing cost accounting should be the first step in any attempt at fiscal reform.
My point is that when people complain about cost I rarely hear them mention that revenue in the form of grant money is also being brought it. Money that the city would not have had to spend on other things.
The crisis in our general fund is not due to the money spent on the garbage cans or the POU. It’s because we have let our total labor costs inflate with no consideration of how fast or slow our city’s revenues were growing.
That said, David’s point that the money for those things comes from other sources than the general fund is largely irrelevant in this case and in all cases. The truth of the matter is that these funds are almost all very fungible. An expense may be charged to the general fund or another fund, more-less at whim. It was the case until quite recently that all employee comp costs came out of the general fund. Now a greater and greater share comes from the enterprise fund (mainly for public works) or some other fund. For example, the civic arts fund used to only pay for arts projects. Now it is used to pay the salary, benefits, OPEB and pension of the city employee who administers the city’s arts programs. It could also work the other way. What is now an arts expense could suddenly be made a GF expense. The only real distinction can be where each fund’s money comes from. It hardly matters what the money is going for.
It would be useful to know which funds are actually restricted and which are more discretionary.
Yes, but even “restricted” seems to be a loose term. I recall you were opposed to the RDA, Don, but I don’t remember if you were one who was especially critical of the projects the DRDA was spending money on. The programs were supposed to be, under state law, for low-income housing and also for blight removal. However, in Davis at least, we spent a lot of the RDA money buying buildings that the city owned. For example, for a number of years, the RDA owned the Teen Center at 3rd & B. That was ultimately a cash infusion into the City’s budget. But later the City bought the building back, and now rents it out (for $1) to the Bicycling Hall of Fame. Other cities used RDA money for pro sports stadiums and so on. That is partly how the new 49ers facility was built by Santa Clara.
If you look at the municipal code language which describes what, for example, the arts money is supposed to go for, it appears to be “restricted” to arts projects and also things like children’s arts education programs, etc.* That is what it always was used for. But then, when the budget problems post-2008 became more severe, they decided that the arts fund could pay the city’s labor costs, as long as that labor was administering arts projects.
—————
*Here is the code:
15.06.030 (b) The city council may make appropriations for works of art to be selected and implemented by the commission in connection with construction projects as provided in Sections 15.06.040, 15.06.050 and 15.06.060, and may also provide for the appropriation of funds to the “municipal arts fund” established in Section 15.06.060 for works of art to be selected and implemented by the commission as provided in Sections 15.06.040, 15.06.050 and 15.06.060.
The code also describes what the civic arts commission is supposed to do:
15.06.040 Commission authority.
To carry out its responsibilities hereunder, the commission shall:
(a) At least annually, make recommendations to the city council on the expenditure of funds in the municipal arts fund;
(b) Determine a method or methods of recommending the selection and commissioning of artists with respect to the design, execution and placement of works of art for which appropriations have been made, and pursuant to such method or methods, recommend to the city council selection of artists by contract for such purposes;
(c) Recommend to the city council the specific location and/or amounts to be expended on works of art;
(d) Require that any proposed work of art requiring extraordinary operation or maintenance expenses be brought to the city council’s attention;
(e) Recommend the placement of works of art consistent with the provisions of Section 15.06.050;
(f) Prior to payment for works of art, review such works to report on the conformity of the finished work with the approved plans or other documents describing the work of art to be carried out. (Ord. 720 § 4)
Here is the language which establishes the fund:
15.06.060 Establishment of municipal arts fund.
There is established a special fund designated “municipal arts fund” into which funds appropriated as contemplated by Section 15.06.030(b) shall be deposited. Each disbursement from such fund or from other appropriations for works of art shall be authorized by the city council. (Ord. 720 § 6)
Notice the code repeatedly refers to works of art. It does not refer to the pension costs of city employees who oversee the arts.
Following up to this post by Rich Rifkin responding to Don Shor’s post “It would be useful to know which funds are actually restricted and which are more discretionary.
I have been dumbfounded learning how city finance actual works in practice. As Rich points out there appears to be nothing preventing inter fund transfers and mingling of funding sources.
I tend to think big about problems before I get to work on the details. There are smart people like Matt Williams that take the opposite approach… diving in to the complex data minutia to eventually shed light on the whole.
But my big-picture view at this point is that much of our fiscal budget problems are due to lack of financial management rigor, lack of adequate internal controls and lack of rigor in annual financial audit and reporting.
And all of this comes down to a lack of adequate governance related to our city finances.
Government has all the rules and enforcement weapons to force rigorous standards on business. GAAP, FASB, SEC, FDIC, etc., etc., etc., But the very same government that applies so much oversight to the movement of other people’s money, barely dots any i’s or crosses any t’s for its own financial activity.
The city has a finance and budget commission. Going forward I suggest that we raise the profile and financial management skills of this group to operate like a board of directors overseeing the financial management of the city reporting to the Council and also to the citizens directly. The city’s annual financial auditor should report to this commission and the Council at the same time.
It is also apparent to me that the city needs to acquire a cost-accounting system for budgeting and forecasting. This may require an investment in a complete new accounting system. Frankly, I think the city can probably do better running on Quickbooks than what it is using today. Nevertheless, I see there is a great opportunity to improve the financial management capability of our city by upgrading our accounting system to one that supports tracking and reporting of inflows and outflows related to meaningful cost centers. For example, when we ask how much our parks cost, today it requires a detailed analysis of expense transactions coming from multiple accounts. There is nothing in place that automatically codes each transaction so that we can immediately report on the true cost of our parks. This is cost accounting and the city needs it badly.
But then to prevent the slight of hand movement of money that city leaders have done over the years, we need much stronger citizen oversight. And the existence of more rigorous citizen oversight will do a lot to help increase accountability for city leaders to perform well protecting our scarce city treasure.
“The entire concept of these ‘scenarios’ is completely bogus Matt. The car following is always responsible for not running into the back of the car in front of it ”
This statement is of course true as far as it goes. What it ignores is that the conditions around us may make it more or less likely for an accident to occur. While not absolving the individual of responsibility, the concept here is that the design of the road does play a role in accident prevention just as road maintenance may play a role in accident prevention as in the previous post about a little boy riding his bicycle and the pot hole.
The argument that Mark is using could be extrapolated beyond what he is proposing to never make any safety related changes in our roads. Why put up traffic lights when it is the individual drivers responsibility to look four ways when they are crossing an intersection ? Why put in road calming features since it is the responsibility of the individual driver to drive at a safe speed in a residential area ?
I am not speaking out in favor of the specific 5th street changes. I have no idea whether or not they serve the community better than the existing system. But sometimes, reading these posts and seeing expressions like
“pissing away” our money, it would seem that the commenters think that all the city staff and council members are doing is sitting around dreaming up ways to rob the commenter. What is also not being considered is that everyone of these projects came about because some group brought an observation, concern, complaint or desire for some kind of change before the city.
The city is roundly criticized for not taking action on items that commenters here find important. I would put forward the idea that each of the projects here was of significant importance to some members of the community or it would not have made it through the process.
Your thoughts mirror mine Tia. Rejecting change just because it is change would appear to comment us to the repeating of the same results we have gotten to date. In many cases that is a good outcome. In others, not so much.
“I would put forward the idea that each of the projects here was of significant importance to some members of the community or it would not have made it through the process.”
And I would argue that the City Council and Staff should know how to prioritize, especially during a fiscal crisis. Spending millions to experiment with traffic flows on Fifth Street should not be a priority, regardless of the number of loud proponents.