New Year’s Day is a time of rebirth, where we remember the past year and prepare for the new world ahead. We like to think of it as a blank slate, but I’m always cognizant of the U2 song from now over 30 years ago, “All is quiet on New Year’s Day… A world in white gets underway… Nothing changes on New Year’s Day.”
I have shared with many individually some of my concerns going forward. I am going to lay out those concerns here.
The first concern I have is on the fire issue. In 2013, the city council pushed through several reforms including boundary drop, increased response time goals, staffing reductions and the shared management agreement with UC Davis. The last two were approved on 3-2 votes.
However, there was tremendous struggle to get the last two changes through. Not only were they 3-2 votes, but the firefighters’ union pulled out all of the stops from walking precincts to forming an astroturf group, Friends of the Davis Firefighters, to picketing city hall to trying to get the city manager fired (which ultimately led the city manager to leave) to getting ten elected officials to co-sign separate letters opposing shared management.
Going into 2015, we know the following. First, we know that the firefighters have engaged in work slowdowns in response to these changes and the installation of UC Davis Fire Chief Nathan Trauernicht, in charge of the shared management services Along the same lines, Davis firefighters’ union president Bobby Weist, along with statewide California Professional Firefighters President Lou Paulson, attempted to pressure UC Davis to end the agreement.
The critical date will be July 1. That is the date after which the agreement rolls to December 31, 2016, if no one opts out of the agreement. On the city side, there are at least three strong votes to continue the agreement. However, it appears the union is attempting to play hardball to convince UC Davis to end the agreement on their end.
With concerns about employee morale and firefighter morale being at epic lows, it will be interesting to see how the new city manager attempts to remedy the situation – will he shore up support for Mr. Trauernicht or will the efforts to improve morale seek to undermine it and return the city of Davis fire to the command of a city-only chief?
This figures to be a very intriguing but mostly behind-the-scenes battle this year.
It took the Vanguard a number of years to get the public and the council’s attention on road situations. For years, the Vanguard warned that road repairs were under-funded and would drive down the quality of the roads. Finally, in 2011, the council budgeted $1 million in general fund dollars into road repairs.
By 2013, the city hired consultants from Nichols who estimated that the city faced at least $154 million in deferred maintenance on roads, figures that would more than triple if the city did not act. The council after considerable discussion finally opted for a modified plan that would call on the city to spent $25 million in two years up front and then another $3 million per year – but even that level of spending was only expected to slow down the rate of pavement deterioration.
To get that money, the council was to put a measure on the ballot for a parcel tax that the city would bond against. After much discussion, however, there is no parcel tax planned for the ballot and the city is still figuring out the terms, amount, and what would be funded by such a tax.
In the meantime, the council has been able to secure about $4 million per year in general fund money for roads – a huge accomplishment. In addition, Dan Carson, a member of the Finance and Budget Commission, believes that the “inflation assumptions contained in the Nichols report significantly overstate the costs the city would incur in the future to fix its streets and bike paths.”
Updating the cost projection model that Nichols used, Mr. Carson finds that “the original Nichols report overestimated what it had identified as the ‘budget needs’ for the road and bike path work by as much as a third.”
He argues, “Rather than facing a $154 million bill to do the needed work, the ‘budget needs’ may be as low as $103 million, or more than $50 million less than estimated by Nichols.”
The Vanguard does not necessarily disagree with Mr. Carson, although we argue that evaluating what will happen with asphalt prices over a 20-year-period based on two years of data is problematic.
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At the end of the day, whether the true cost is $100 million or $150 million, or more realistically somewhere in between, those are big numbers that we do not have. Our concern is that, with revised projections, the council’s urgency to pass the needed parcel tax will decline and the public’s desire to increase taxes will dissipate.
In the meantime, with the renewal of winter rains and winter weather this year, we are seeing a large number of potholes and other cracks in the pavement – conditions are rapidly worsening.
In November, the city and, in particular, Mayor Dan Wolk were pumping the “unexpected good budget news,” as the city ended up with nearly $850,000 in additional revenue.
The mayor wrote, “Like other communities, we were hit hard by the Great Recession, which resulted in cuts in city services, difficult concessions from our employees, and a painful 24 percent workforce reduction. But with the strength in our property and sales tax revenue — mirrored at the state and regional levels — I believe our community has begun to emerge from the downturn.”
“We are on our way to eliminating our structural deficit,” the mayor continued. “Our general fund deficit — a chronic imbalance between revenues and expenditures — was estimated to be about $1.5 million this fiscal year and was forecast to drop in the coming four years. However, the improved financial picture means we have immediately taken a large bite out of the deficit and are moving toward eliminating it completely.”
While this is good news, there are concerns. For example, Mayor Pro Tem Robb Davis expressed concern that these were more one-time numbers due to “pent-up demand during the recession.”
He also spoke about PERS (Public Employees’ Retirement System) and OPEB (Other Post-Employment Benefits). “The good news is we’re in a place where we’re addressing those long-term liabilities. The time horizons are long – 30 years – but we’re addressing them,” he said. “But we’re putting away money in a way in which our actuary thinks is a reasonable approach.”
“But,” he said, “the point is that between 2020 and 2021… between OPEB and PERS we’re going to need to be coming up with an additional $4 to $5 million. Additional on top of today. But that’s a hefty piece of money. We are in a situation where we need this money.”
“We have the road backlogs, we have Bob Clarke who is ready to put out a bid on the study of other infrastructure – especially building replacement costs,” he added. “When we begin to finally internalize those things into our normal budgeting process then we can start breathing a little bit.”
As I mentioned in yesterday’s preview article, we are facing renewed employee negotiations and, after being able to gain critical concessions in 2012, we are now concerned that improved economic conditions will put pressure on city hall – already cognizant of low employee morale – to use these numbers as justification to increase employee compensation at a time when the city’s structural deficit does not adequately reflect the city’s fiscal condition.
Finally, as we have noted 2014 was a banner year on the economic development front. We have discussed innovation parks, but 2014 saw the emergence of a vibrant start up culture embodied by the efforts of the Davis Downtown and Jumpstart Davis. As Mayor Wolk and Mayor Pro Tem Davis write, “We continue to be excited about a variety of grassroots efforts — Davis Roots and Jumpstart Davis, for example — that encourage and foster an innovation and startup culture in our community.”
Chief Innovation Officer Rob White also trumpeted the efforts of the Davis Downtown and other community leaders who helped launch “the creation of the Jumpstart Davis monthly networking events and the soon-to-be-opened downtown co-working space are adding resources for entrepreneurs and startups.”
But 2015 is fraught with pitfalls. Staff projects two innovation parks plus Nishi could go on the ballot by Spring 2016. But the Vanguard believes that putting park against park is asking for trouble. Will there be a process to determine who goes first? How will the city deal with expected push-back on traffic and housing impacts? 2015 will be a key year in determining how this process unfolds, and by this time next year we could be three or four months away from a public vote.
Moreover, one of our concerns is that the perception that the city is no longer in fiscal crisis will lesson the public’s appetite for economic development and building on the periphery. We believe strongly that the city’s finances remain fragile and we are vulnerable to future downturns without stable revenue sources.
We are again at an interesting crossroads in time, as we have the chance to move forward or the chance to backslide into business as usual in 2015. Will 2015 be the year we took the decisive step forward or the year we wiped out four years of progress? Stay tuned to the Vanguard for further details.
In the meantime, Happy New Year!
—David M. Greenwald reporting
Maybe I could be more tactful, but…
Since the Firefighter Union got rid of the City Manager they disliked, wouldn’t their morale be up instead of down?
I always love how these “consultants” project figures based on ignorance. They have no records? This City paid no bills for asphalt for over 50 years?
Mr Davis and Mr Wolk seems to think this is their money, and the crying about pension liabilities, taking the money for other needs, seems to be cooking the books and leverage rather than honest assessments of costs and honest dealing with employees? Mr Clarke seems to be returning the City to responsible accounting? It is a risky game, and many communities are playing it, and then getting caught. Davis proposes these Big Ideas, hoping one will be the windfall they need to years of irresponsible accounting and spending money they don’t have, just like the State.
“They have no records? This City paid no bills for asphalt for over 50 years?”
Roadway asphalt is a byproduct of refining crude oil. Are you so omniscient that you could predict the price of crude oil over the last 12 months, much less the last 12 years?
If so, you are truly psychic. Wanna be my stock advisor?
Nichols has a strong reputation in pavement engineering, particularly in their Reno office. I can’t comment on the validity of their City of Davis analysis — it’s outside my area of expertise, and I haven’t seen it anyway — but any intimation that it was put together by a firm that doesn’t know how to do this is off-base.
Disclosure: Nichols has been a client of mine for over 10 years, and my firm is on the team for the City of Davis project. More importantly, I’ve known and worked with the principals in the Sacramento office for over 20 years under various corporate names, and they’ve always run high-quality operations.
Thank you, Mr Frame..
hpierce, this is why you might let the City off the hook when they have cost overruns? What else do they forget to put out there?
Then the City borrows money to make it cost twice as much, just like the State.
My anecdote: Years ago my dad, a General Contractor, used to bid jobs with itemized lists of doors, specs, windows, floor, etc. Another company came in and underbid him $10K for the same building so he lost the bid. When the building was done, they did a walk through and – No Floor! After that he never lost a bid.
If you wonder why I ask questions, start with that one, and when tax money is involved or “consultants” and contracts that cost the City more money or run way over estimates, I get annoyed. They should eat it when this happens, except some of them would merely walk away from the job. This kind of blackmail should disqualify them from ever working in the state again.
Having said that, I also realize the “change order” can kill any timetables or specifications of any job. That is wrong too. Planning falls apart when a plan gets changed in the middle of the project.
Nichols seems to be more competent than to only give two years of data for possible costs, which as hpierce says, should cost less now than ever before since oil is down 50%? But I would still err on the higher numbers. I have done it before and was right. Never lowball these things. That only fosters distrust and disgust.
Oddly enough, when some in Davis began pushing the idea that we need to fix our roads sooner rather than later–a notion I strongly agree with–they contended that if we wait the price of oil is only going to go up and therefore asphalt prices will be higher down the road. Fortunately, they were dead wrong in this respect.
I recall David Greenwald as being the prime advocate for the “price of asphalt will only go up” theory. He used that to contend “we have to act now” on road repairs.
In one of his editorials earlier this year he wrote: “First of all, the costs of asphalt have increased eight-fold since 1999. That means that the costs are increasing much faster than the pace of ordinary inflation.”
I never checked his math on that before now. Turns out he was ill-informed about asphalt inflation. Not only is the “eight-fold” claim total bull, but it makes no sense. Why would a commodity made from crude oil inflate many times faster than crude oil inflated over that period.
What I discovered was that in 1999 in California, asphalt sold for $39.83/ton. In February of this year, when Greenwald made his bogus “eight-fold” claim, the price of asphalt in California was $103.56/ton. That represents a 6.58% annualized rate of inflation, with prices having climbed 2.6 times over the full 15 years.
That is double the general rate of inflation over that period in California. However, oil prices (and asphalt prices) were in real dollars at an all-time historical low in 1999 and they were very high at the beginning of this year, and therefore the two end points Greenwald picked distort the picture.
If you want to play games with statistics, as Greenwald did in his February editorial, just pick an unusual point in the past, like July 2008, when crude oil sold for $143.26/bbl, as your starting point and today’s price, $53.27/bbl, as your ending point. You can then argue that oil inflation has been running at -14.12% compounded each year on average for the last 6.5 years. Never mind that if you picked March 2009 as your starting point, when oil sold for $53.27/bbl, you would say our crude oil inflation rate for the last 5.7 years was 0.00%. Both are true. But both are designed to tell a partisan story, not to shed light.
Guess I’m stupid, and just don’t understand, when you replied,
“hpierce, this is why you might let the City off the hook when they have cost overruns? What else do they forget to put out there?”
when I responded to your ” The Vanguard does not necessarily disagree with Mr. Carson, although we argue that evaluating what will happen with asphalt prices over a 20-year-period based on two years of data is problematic.
I always love how these “consultants” project figures based on ignorance. They have no records? This City paid no bills for asphalt for over 50 years?”
Then you say, “But I would still err on the higher numbers. I have done it before and was right. Never lowball these things. That only fosters distrust and disgust.”
I did not take Nichols to task. You did. I, like you (implied in the last quote), believe in “expect the worst, hope for the best”. Good survival mantra.
It appears you have issues with consultants not being omniscient, government in general (your personal anecdote) or me. Suspect the latter is(at least) true, as you indicated I was defending the City. I was not. Nor was I excoriating it. I was questioning your ‘proof’ of incompetence/malfeasance by the City and/or its consultant.
You also said,
“If you wonder why I ask questions, start with that one, and when tax money is involved or “consultants” and contracts that cost the City more money or run way over estimates, I get annoyed. They should eat it when this happens, except some of them would merely walk away from the job. This kind of blackmail should disqualify them from ever working in the state again.”
Ok… so if it costs us half the cost that the consultant opined, “they should eat it”, pay the city damages in that amount (so City gets all the repairs essentially for free… COOL!), and should be banned from ANY work in the ENTIRE State, when the “transgression” occurred in Davis?
That must be one helluva New Years Day hangover!
Okay, here is now I see the year 2015 shaping up:
1. The firefighters don’t have a tinkers da_n chance of changing the current shared arrangement between UCD and the city. UCD has made it clear they are not budging from the shared arrangement concept; city leaders would be committing political suicide to change a system that is working much better than the old system and saving the city money to boot, the pressure being brought to bear from the firefighters notwithstanding.
2. Road and other infrastructure repair is definitely worrisome. Pulling these needs out of the “unmet need” category and fully integrating them into the actual budget is not going to happen. Instead citizens will be asked to foot the bill for these unmet needs by approving a short-term parcel tax. It is not clear to me whether Davisites will be willing or not to approve such a parcel tax. I think citizens might approve a modest parcel tax of $50-$100 to fix roads, but I very much doubt citizens would approve an extensive $200-$300 parcel tax that includes fixing pools and buildings.
3. Well planned and suitable innovation parks appear to be a very promising long-term solution to the city’s ongoing fiscal problems, assuming that suffiicient tax revenue was generated from them to offset the challenges they will present. Citizens are poised and ready for such a solution, even those generally not in favor of much growth. It is an idea whose time has come. There will be problems to work out, for certain, but there seems to be a collective will to have the necessary discussions and collaboration with developers to make this work. And if the innovation parks generate enough tax revenue, it is possible it could address the city’s fiscal issues with regard to OPEB/PERS and other various fiscal needs.
Does the public have access to consultant’s reports for the city?
DB, here it is. It is overall an excellent report. However, it is clear that the authors were trying to sell the idea how important it is to act now (in 2013). And that led them to massaging the statistics by choosing start and end points which tried to make waiting longer seem more worrisome than it was. Nonetheless, I generally agree with the conclusion that our roads are a serious problem and the sooner we get started tackling it the better off we will be in the long run.
http://public-works.cityofdavis.org/Media/PublicWorks/Documents/PDF/PW/Engineering/Pavement-Management-Report%20.pdf
there it is page 27 – the consultants use the 1999 to 2012 timeline that you accused david of cherrypicking. interesting.