My View: The Whole Tax Set Up Was Odd

Wallet Taxes

Wallet Taxes

In the last several days, we have looked into the impact of the soda tax discussion, but there is one angle we have not yet explored and it was one that became apparent from the start – why was the city exploring the soda tax in conjunction with the revenue measures they were considering for infrastructure needs, namely the parcel tax, Transient Occupancy Tax, and Utility User Tax?

From the start, setting the discussion on the four taxes seemed odd and, in fact, several people prior to the meeting asked me why they would put them all on together. It quickly created the impression that the council was going into a full court press on taxes or, as Bob Dunning would put it, “our esteemed City Council was considering ways of taxing the citizenry.”

Earlier in the week, he quoted a resident who wondered if the city council “sits around in boring meetings all day coming up with ideas on how to get more revenue from the citizens for them to spend.”

By lumping all the revenue measures together, it ignores the fact that, really, the soda tax is more about changing people’s dietary habits (whether you agree or not with the mechanism) than it is creating a revenue stream. Moreover, the revenue was to go more toward health programs than ongoing city needs.

That suggests that council should have separated the question, and considered the soda tax separately while figuring out which of the other taxes were the best way to address our infrastructure and ongoing needs.

The fact that all were placed on the same agenda aided Mayor Dan Wolk in his effort to kill the soda tax. That enabled him to argue, “We’re here tonight because council is concerned about the state of our community assets.” He was then able to lay out three goals of the revenue measure, stating that any revenue measure needs to address infrastructure, needs to have been studied and have public input, and finally needs to be successful at the ballot.

By that token, he argued that soda tax did not meet any of those goals and should be put off. The structure of the agenda item simply facilitated his making that case – coincidence? Probably not.

Beyond the soda tax discussion, however, I am increasingly concerned about the direction of the tax talks. I am generally in agreement that we should not pursue a Utility User Tax (UUT) as a means to create a revenue stream for roads. Councilmember Brett Lee laid out some concerns, but my chief concern is that I fail to see the consumption of utility services as being linked to use of roadways.

I prefer the parcel tax – it is relatively small, it can be bonded, and we can direct how the money is to be spent. If council can’t sell the parcel tax to two-thirds of the citizens as a way to fix our roads, then so be it.

When City Manager Dirk Brazil expressed concerns about lack of direction from council, Councilmember Swanson quickly blurted out, “TOT.” On the surface, TOT or Transient Occupancy Tax makes a lot of sense. After all, it is a tax that doesn’t impact the local residents. It is a tax that most won’t even notice.

On the other hand, unless we are really going to crank up the TOT by 5 to 10 percent, it doesn’t figure to generate a lot of revenue, with each percent increase generating just $130,000. If we are thinking about roads needs, you are talking about even a 10 percent increase only generating another $1.3 million.

The real bang for the buck might come if we can build a few more hotels in addition to the approved Hotel Conference Center on Richards Boulevard, at the site of the current University Park Inn.

Last week the Vanguard analyzed the PKF Consulting study that suggests that the city could add two or three more hotels and produce the kind of revenue they need. The interesting thing is that MRIC (Mace Ranch Innovation Center) is expected to produce about $2 million in revenue at full build out.

When the $2 million number came out, Councilmember Brett Lee called it “a big letdown.”

“Two hundred acres in play with the associated risks involved, when I can go and the city council can approve a hotel on two acres and get $500,000 a year pretty much guaranteed,” he said. “What’s wrong with this picture?” He said, “I need to know more about that.”

But some question the PKF study as being too optimistic about future revenue. The city, for their part, has commissioned a broader study on expected TOT revenue from a rival consulting firm, information that Community Development Director Mike Webb told the Vanguard should be out in mid-to-late January.

The problem now is that the clock is ticking. As Mayor Pro Tem Robb Davis noted on Tuesday, we have until February to put a general tax on the ballot. General taxes can be used for anything in the general fund. They only require a simple majority vote, but they must be placed concurrent with council elections.

If we miss this window, the council would have to wait until June 2018 for the next opportunity for a general tax.

That is one reason that City Manager Dirk Brazil’s pushing back on staff time and workload seemed inappropriate. It is, in fact, crunch time, and they have left all of these major decisions until the end.

We have known that we probably needed a revenue measure since June of 2014 when the council decided to hold off on the parcel tax from a potential November 2014 ballot date to the future. The good news is that they were able to hold a discussion in December without the gun of a deadline held to their head, the bad news is that we may not even be ready with an additional month.

We won’t know the prospects of TOT until the study comes out in January, we don’t have the information requested on the soda tax by Councilmember Lee, and we still have looming shortfalls in funding for infrastructure.

Yes, I agree there is a lot of work happening, but I also, at least from my standpoint, believe that the period of time from July 2014 until this fall was the slowest yearlong period since the Vanguard was launched in 2006.

Council needs to be able to make informed decisions, and the pushback by the city manager seemed to many people, myself included, more about the mayor and his political campaign for the assembly and less about the best interests of the city. That is a little concerning and bears further scrutiny.

—David M. Greenwald reporting

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  • David Greenwald

    Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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10 comments

  1. Second, Nishi developers seem to believe that the EPS (Economic Planning Systems, Inc.) report showing a $78,000 deficit can be rectified with a hotel conference center. In their press release they write that “the Nishi project alternative that includes a hotel will generate a general fund surplus of $416,000 per year, money that can be redirected to vital city services.

    According to city projections, the Nishi project proposal with an onsite hotel is estimated to create between 1,500 to 1,800 jobs, $315 million to $385 million in economic output, and $89 million to $107 million in labor income (wages).”

    from: https://davisvanguard.org/2015/11/my-view-examining-the-preference-for-nishi/

    “Two hundred acres in play with the associated risks involved, when I can go and the city council can approve a hotel on two acres and get $500,000 a year pretty much guaranteed,” he said. “What’s wrong with this picture?” He said, “I need to know more about that.”

    The Nishi developers need a Hotel-Conference Center to “generate” $416K. Mr Lee can just snap his fingers and get $500? Why isn’t Davis swimming in Hotels?

    Another question is the estimate above by the City, which says 1500-1800 jobs? At the $89 Mil level that is still $23 or more per hour.. Really?

    We need to check their Math and high sky projections. If this was the Developer saying this, it would be understandable. But the city is supposed to have more integrity.

    1. Miwok said . . . “Another question is the estimate above by the City, which says 1500-1800 jobs? At the $89 Mil level that is still $23 or more per hour.. Really?”

      I came up with $59,000 per job ($89 million divided by 1,500 jobs, or $107 million divided by 1,800 jobs).   As a salaried job in the Innovation Incubation part of the project’s businesses, $59,000 is not a particularly high  number.  As a full-time job in the Hotel with 2,080 paid hours (40 hours per week times 52 weeks) $23 or more per hour is indeed high.  The combination of the low paid and high paid jobs makes the numbers provided believeable, if not a bit low.

       

       

  2. my chief concern is that I fail to see the consumption of utility services as being linked to use of roadways.”

    So if linkage of a tax to the use of a resource is desirable, as I believe it is, why do we not consider charging for parking downtown, or the use of selective toll roads. Perhaps with no charge for those who choose to use public transportation or walk ?

    On the surface, TOT or Transient Occupancy Tax makes a lot of sense. After all, it is a tax that doesn’t impact the local residents. It is a tax that most won’t even notice.”

    I certainly would not automatically reject increasing the TOT. I do however, have some difficulty with the concept of the use of a tax that “doesn’t impact the local residents”. The problem that I have with this is that it is based on the premise that we have no obligation to pay for what we want, but are willing to pass the cost of our own wants on to others. I see this was very closely related to the concept that if we just keep growing, new businesses and/or new residents, they will pay for what we have chosen. Not a responsible attitude in my opinion.

  3. On the surface, TOT or Transient Occupancy Tax makes a lot of sense. After all, it is a tax that doesn’t impact the local residents. It is a tax that most won’t even notice.

    On the contrary, the tax would be most noticed by people planning big events such as conferences and classes for people from out of town.  This will tend to sway their decision against planning these events in Davis.

    1. Not really. First of all, Davis is about in the middle. Second, if you are talking about a one to two percent increase, you’re talking $1 to $4 on most rooms. That’s not going to deter anyone from staying here.

    2.  

      Some useful information about TOT history in San Francisco

      At its introduction in 1961, the Hotel Room Tax rate was 6.00 percent, and has increased incrementally to the current rate of 14.00 percent, established in August 1996.

      Hotel Room Tax Rate History    Effective Dates Rate

      August 1961 through June 1978 ______ 6.00%

      July 1978 through June 1980 ________ 8.00%

      July 1980 through December 1986 ___ 9.75%

      January 1987 through August 1993 __ 11.00%

      August 1993 through July 1996 _____ 12.00%

      August 1996 to date ______________ 14.00%

      Sacramento is currently 12%.  Woodland is 10%.  I don’t see either of those rates to be sufficient incentive to move a UC Davis centric convention (big event) to a location that is geographically removed from UC Davis.
       

  4. The City’s and the citizens concerns about raising taxes and not about reviewing costs seem overly narrow to me. Some things commonly known about how City Hall has used the money it has gotten: fees to pay for water meters were supposed to have been stopped once the meters were paid for but continued nevertheless, money that was earmarked for (roads?) was redirected to an energy study, and the building at the corner of B and 3rd streets is rented to the Bicycle Museum for $1.00 per year, much less than the $96,000.00 it would otherwise fetch in the commercial market.

    Now, City Hall has drastically increased employee incomes without an apparent review of what they are doing. Or reviewing the projects the City Council has committed us citizens to without much citizen involvement. Why is planning staff reviewing projects (such as Trackside) when they are outside the planning guidelines? Also, why did the City Council commit to the “innovation park” track, which so far has cost the City a considerable amount (and is projected to produce only a slight amount of income) without finding out if that track was one the citizens really wanted to be on (likely, not).

    Yet the assertion that the City needs more money continues to be made.

    This is an absurd situation. We need to know the costs involved with the production of government and then maybe we can choose to give the City what it wants, increase it, or deny the request. For us to have the information we need, however, requires honesty and openness on the City’s part; so far I’m skeptical as to whether the City Council or the City staff have the ability to be open and honest with us citizens; too bad, we deserve the respect.

  5. Jim

    we deserve the respect”

    Respect must be earned. In my eyes, every single project that the city has put forward, has had the backing of some portion of our population. Some I approve, some not so much so, but we do not have agreement here, even on how to define and prioritize the issues.

    While I completely agree with your call for openness and honesty, I do not believe that the projects are “theirs” as a city council, but rather what has been brought to them by the citizens, businessmen, and developers each hoping to advance their own interests. Perhaps if we as individuals want to be treated with respect by our leaders, we should demonstrate respect for the interests of those our activities will affect and be open and honest as well. It seems to me that the majority of the time, it is our behavior that we see reflected from our leadership. We do see openness and honesty from some….not so much from others….just like the community they represent.

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