As we noted yesterday, neither the city manager nor the majority of council members seems to be in the mood to ask for further concessions from employee groups. However, the budget projections are not hopeful in this regard.
As the Vanguard has reported, when taxes sunset after 2020-21, the city goes from being in the black on its budget to being in the deep red. Moreover, that trend is exacerbated if the employees get any sort of ongoing cost-of-living adjustment (COLA). Yesterday we argued for keeping all options on the table, but that is probably not going to happen.
So let’s be realistic in how we evaluate things.
First, it is probably a foregone conclusion that in 2020 the Davis City Council (whatever it should look like in five years), will ask the voters to renew the full one percent tax. We can hem and haw all we want about that, but that is reality and the other reality is that most likely the voters will renew that tax.
The tax was passed by 58 percent of voters and history has shown renewals actually pass at a far higher rate, as people get used to the tax and the city wouldn’t be looking at raising the rates.
Given that, let us focus on fixing existing problems over the next five years.
First, right now we are spending over $4 million a year from the general fund on roads. Next month the council will evaluate a tax for roads and infrastructure. Polling last year at this time showed less than two-thirds support for a parcel tax. There has also been talk about combining roads funding with pools – and now a sports complex.
However, we would oppose that. We believe that the city should address needs first. We also have reason to believe the majority of the council opposes either a sports park or adding pools to a parcel tax.
Second, the city needs to do an honest assessment. As we noted yesterday, the city has cut its full-time equivalent employee positions from 452 to 352 in a few years’ time. Some have argued, see that proves we don’t need those positions. Others believe we have survived in the short-term, but long-term this will create a problem.
Our view is that the city cut those positions rather haphazardly, primarily through attrition, and therefore we need a true analysis as to the whether we can optimally deliver the services we have committed to deliver and whether there are gaps in that service.
Along the same lines, it would behoove us to take a step back and determine whether the services we are providing are ones we can continue to provide as a city.
By way of example, we have some high-end parks and yet we have been reluctant to expand the parks tax to incorporate true costs. Some believe we can cut back on these parks, while others believe they are part of the essential character of the city.
Third, we need to continue to evaluate employee compensation. The city manager seems reluctant to ask for further recessions. Other councilmembers seem to agree but wish to limit the COLA to either no increase or a one-time one percent COLA. Either way, the city is in a precarious position.
We have mentioned the firefighters as an area we can find ways to cut. The firefighters went to impasse in the last round of negotiations. They took a ridiculous 36 percent raise from 2005 to 2009. And their compensation, among the highest in the region, far exceeds that of their police counterparts.
However, while fairness dictates we at least look at fire compensation, logic tells us as a fairly small bargaining unit, the overall compensation level is only going to impact us on the margins.
Finally, we have the issue of economic development. The city making the decision to replace the Chief Innovation Officer, and seemingly over money, has been a negative signal to the region that the city is pulling back rather than doubling down on economic development.
We have already seen one proposed innovation park be paused. That leaves the city with the Mace Ranch Innovation Center as its primary economic development tool. However, we also have the smaller Panatonni Development for 225,000 square feet in South Davis, a proposed Hotel-Conference Center which could generate half a million dollars in annual tax revenue to the city, and also Nishi, which has a small but sizable business park proposal.
One of the concerns has been the chances of the city passing a peripheral innovation park, or even Nishi absent a fiscal crisis. The perception and concern has been fueled by uncritical reports that suggest that the budget future is brightening without analyzing the big picture.
Last November, Mayor Dan Wolk in his “Mayor’s Corner” column told the community, “Recently, the Davis City Council got some unexpected good budget news — we ended the 2013-14 fiscal year with nearly $850,000 in additional revenue.”
He added, “I am more confident than ever regarding the current and future state of our city’s finances.” He wrote, “We are on our way to eliminating our structural deficit. 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.”
In May, the Davis Enterprise ran the article “City budget outlook brightens,” which called the city budget update “boring” and reported, “Revenues are rising with the economy to the tune of $800,000 in unplanned income from taxes and fees.”
And, while the council is “promising no exciting new programs to gobble up the extra cash,” Mayor Dan Wolk has “supported city pool boosters’ request that a new Olympic-size, 50-meter pool be added to the tax measure.” The article adds, “Wolk told The Enterprise he will propose to the rest of the City Council a $25 million sports complex on a 100-acre site along County Road 102 just north of Davis, as part of a potential utility users tax.”
The article implies that the city is now in good fiscal shape. That is bolstered by Dan Wolk’s Thanksgiving declarations and his more recent calls for things like pools and a sports complex, that signal to the typical voter it is business as usual.
However, that is not true. The improved financial picture COUPLED with $3 to $4 million in sales tax revenue from the tax increase may have closed the structural deficit, but the 10-year projections show that that is a mirage. The only reason the structure deficit is gone is that we raised taxes and when those taxes go away, the structural deficit miraculously remerges.
In short, yes, we need the tax measure to be renewed. But we need to be honest with the community and do the kind of long-term reassessment of city government that we have long needed to do. We have five years to make the tax increase unnecessary through careful analysis and good planning. Rather than sit back and wait for the next crisis, we should plan ahead.
—David M. Greenwald reporting
As I noted in the city budget post from yesterday, the following data point says it all:
go to: http://factfinder.census.gov/faces/nav/jsf/pages/index.xhtml
Type in Davis, CA
Select Income on the left side of page.
Then click on “Selected Economic Characteristics”
Then go down to “class of worker” .
You will see that 42% of all employed Davis residents work in the public sector.
Given the preponderance of two income households in town — many of which have at least one public sector worker — it is highly likely that well over half the households in town have a government worker.
In addition, it is likely that a high percentage of our retiree population has a public sector pension.
I would also guess that public sector employees vote at a higher rate than the population as a whole.
The City definitely has a leg up to get tax measures approved — especially sales taxes and utility taxes — which only require simple majority.
However, the ongoing tax burden from the City and School District for sales taxes, parcel taxes and CFDs are getting pretty stiff in our community. I don’t think there is much chance of getting a super majority for anything other than our existing parcel taxes. The only way our roads get paid for is from the resources already in place or from new revenue sources such as an Innovation Park.
If we transfer those dollars to our employees, we are going to see a continuing deterioration of our roads and facilities — and the longer we wait, the more overwhelming the bill–and the less likely it will ever get done.
Unfortunately, with a Mayor focused on placating the labor unions in return for their support for his next campaign–and a Mayor more worried about the Soccer mom vote than jobs and money from an innovation park, and with his operative running the City — the outlook is bleak.
This is Stockton circa 2005. Davis is on the same path. First, think that revenues are going to never decrease, continue to increase employee costs creating an ongoing obligation, build some new soccer fields and pools, and then file for bankruptcy.
“Those who cannot remember history are condemned to repeat it” George Santayana
This is actually Davis circa 2005.
The citizens passed a new sales tax and the pro-labor wing of the Council transferred it directly to the Fire Union with the scraps left over for the rest of the employees.
True story… maybe 10% of employees reaping 90% of revenue infusion.
that’s where i’ve seen this headed since they hired dirk. the only question is how long it takes to get there.
Yes, It’s my understanding that bankruptcy is the only way for the City to get out of the onerous labor contracts. Perhaps that would not be a bad thing?
Bankruptcy is an option, but a very expensive one. Stockton’s projected legal costs are over $40 million:
http://www.recordnet.com/article/20141028/NEWS/141029525
If you want to know how it got so expensive, go to this link:
http://stockton.granicus.com/MetaViewer.php?view_id=48&clip_id=3612&meta_id=309898
And then check out exhibit A — lead attorney billable rates of up to $925 per hour.
By the way, I believe that their lead attorney, Marc Levinson lives in El Macero, so at least the Stockton Bankruptcy contributed a little bit to the Davis economy.
It would be a lot cheaper if we could address our labor issues at the ballot box.
“First, it is probably a foregone conclusion that in 2020 the Davis City Council (whatever it should look like in five years), will ask the voters to renew the full one percent tax. We can hem and haw all we want about that, but that is reality and the other reality is that most likely the voters will renew that tax.”
I strongly disagree that voters are likely to renew the full one percent sales tax increase – if they get the feeling that the City Council is not going to support long term fiscal sustainability solutions in economic development like innovation parks; is going to build new facilities like sports parks at the same time it cannot pay to maintain current infrastructure; and will hand city employees raises at a time when the city cannot afford long term funding of current employee benefits. I would say the City Council needs to tread very carefully if it wants support for continuing the one percent sales tax increase.
anon, i think you make good points that the city leaders need to keep in mind. there is not going to be a continued blank check. i still think in davis, it’s going to be hard to not get a renewal on a tax measure but i think the strategies outlined here are important and the city should be working to make a tax measure unnecessary. i’m not anti-tax, but i would prefer to use tax money for things like schools rather than basic city government.
First, why is the default discussion more taxes, when we have yet to see a fully itemized list of costs for roads, parks, and other critical infrastructure for the next 10-20 years. I feel like these politicians are playing a Manhattan street shell game with us.
Is Wolk really so tone deaf that he wants to add a $25-million-dollar pollution-and-traffic-causing, can’t-bike-or-walk-or-bus-there vanity-sports complex? Is he playing his fiddle while Rome slowly burns?
A previous post on another thread had it right – everything should be on the table, and if the budget looks this bad, which appears likely, more cuts are needed. This is what leaders are supposed to do, be fiscally prudent.
We’ve yet to hear why the City Manager gave a highly rated innovation proponent a year’s severance in a time of fiscal restraint.
“why is the default discussion more taxes” – first of all it’s not. the default discussion is keeping the same amount of taxes as we have now by renewing the measure on the books.
roads are probably not going to impact the general fund that much.
that said, i mainly support this column that we need to look at other alternatives first.
I would go with a “slidiing scale” COLA starting at -35% for Mr.Brazil and the “firefighters” to maybe +5% for the lowest compensated city workers with a cost-neutral result. I’m sure the “firefighters” in particular would support this in solidarity with their brother workers. Mr. Brazil I’m sure would endorse this approach both as an humane manager and as a self interested Davis eesident.
Going to be real hard for our City Manager to play hardball in labor negotiations when he received a $50,000 raise over his previous salary and a $30,000 increase over the previous CM’s salary.
The minute the Council approved his salary — our labor negotiations were DOA.
The $30,000 increase in CM salary is going to cost the taxpayers millions in increased salaries for the balance of the workforce.
A real City Manager would have never done that — but we don’t have a CM anymore — we have a “Wolk for next office” campaign manager running the City.