It comes as little surprise to the informed observer that Davis’ sales tax per capita is much smaller than that of other comparable communities. Of that sales tax, a large percentage is generated by auto sales – a fact that is deeply ironic, given Davis’ sustainable claims on the environment.
We will have some numbers to illustrate just how bad off we are here later this week, but in the meantime, I want to discuss some implications of this.
While the short-term budget picture has improved, indeed the city right now has about $8.6 million in one-time funds that it is going to put toward paying down some of the city’s liabilities. But, as anyone who has read these pages knows, the city faces ongoing challenges to fund infrastructure maintenance and repair across a range of areas.
The recent news on CalPERS suggests that there will be additional adjustments to profit projections that are likely to add additional millions in costs for pensions.
The city is currently projecting about a 2.6 percent annual revenue growth from this year until 2022 when the sales tax increase is set to expire. Allowing the sales tax increase to expire would reduce the annual revenue base by $5.6 million in 2022-23. This would push the city back into the red by 2022-23.
Those numbers do not allow for the city to add revenue in order to deal with hundreds of millions in deferred maintenance for roads, greenbelts, parks, city buildings, and other infrastructure.
The ongoing question is how to pay for those and other community needs. Right now the city has done well to find about $4 million in general fund money for roads. Most analysts believe that the city needs about twice that annually. There was a time when it appeared that the state might fund at least some of that – but a bipartisan roads package fell through last fall.
The city at this point has not put a revenue measure on the ballot for November. Back in February, there was significant discussion on the type and amount of tax we needed. However, disagreement on the type of tax, the target of that tax, and the amount, convinced the council to push off that discussion for probably two more years.
The council seemed to have little appetite for putting a tax measure up this fall that would compete with the school’s $620 a year parcel tax. Moreover, the Finance and Budget Commission had asked council to forestall any parcel or other tax increases until they could fully analyze the need and cost.
There has been a discussion that ultimately, between the schools and the city, the need for a parcel tax could reach as high as $3000 per year. That would allow the city to collect its $30 million while ratcheting up the school’s take to fund the programs it needs.
Clearly, that number is a non-starter for all but the most wealthy residents. But that’s the point actually.
The question is where does the city get the money it needs to provide at least current levels of service, while funding its pension and OPEB (Other Post-Employment Benefits) liabilities to retired city employees and funding infrastructure projects?
One area where the city thinks it can expand its revenue is in the hotel industry. Already, voters approved a modest increase in the Transient Occupancy Tax (TOT), but that figures to have only a modest impact of perhaps $300,000. That’s nothing to sneeze at but not a game changer.
However, there is a belief that the Embassy Suites Hotel Conference Center could generate $500,000 if the city ever settles the lawsuit. Moreover, the city may look at a second hotel that could also generate additional revenue.
As the Vanguard reported earlier this year and other reports seemed to confirm, there are some questions as to how many rooms the current system can accommodate, and also the belief on the part of some that there is leakage to other cities.
Nevertheless, this is not going to fix our revenue problem, but it may help it at the margins.
When the discussion of innovation centers came up a few years ago, one of the abiding beliefs was that Davis needed to diversify its economy. Its sales tax base is too reliant on auto sales, and that may be a diminishing return market at some point.
Moreover, there is an belief that the community will not support a huge expansion of peripheral retail. There has been general support for the notion of protecting the downtown. Target was the one big box that Davis appears to have considered adding.
Without an expansion of retail, that leaves the innovation park proposals, with the idea that adding commercial space at Nishi and in one or two spots on the periphery might add up to $10 million annually to the revenue.
Others have suggested that we are under-utilizing the downtown and that densification of the downtown could generate additional revenue.
What is clear right now is that Davis is well below average for sales tax revenue. Bringing Davis up to closer to what some other cities bring in per capita will greatly close the gap. That appears to be something that the community can accomplish without throwing down strip malls on ag land.
But, as the city seeks to embark on a General Plan update, part of the vision should be economic and commercial development – where is the city going to get additional sales tax revenue from, how are they going to do it, and what is the city going to look like as a result?
All of that needs to flow from an accurate and honest assessment of our needs and how we can better utilize our strengths.
—David M. Greenwald reporting
As the Vanguard reported earlier this year and other reports seemed to confirm, there are some questions as to how many rooms the current system can accommodate, and also the belief on the part of some that there is leakage to other cities.
There will always be some leakage to Sacramento. But the leakage is significant now, because of the inadequacy of the supply of reasonable quality of the rooms. The Hyatt on campus has done extremely well because of the quality of the asset. If we were to add two or three new hotels with reasonably good locations, the leakage would decrease dramatically. Hopefully, the city council does not get mired down in trying to reduce competition for the existing hotel owners.
Moreover, there is an belief that the community will not support a huge expansion of peripheral retail. There has been general support for the notion of protecting the downtown.
It’s interesting to consider whether or not Davis has succeeded in protecting its downtown. The Davis downtown is transitioning to an entertainment district – driven by high real estate rents and demand for restaurants and entertainment. It seems likely that some service providers will remain along with a few boutique type retailers. Shopping for our day to day needs clothes, school supplies, hardware etc will continue to move to what has become our periphery – Woodland, West Sac and Dixon and of course, the internet.
True.
COSTCO, Home Depot and Frys are the three legs of my retail shopping. None in Davis.
Agree quielo.
Last week I sent my office manager to buy a bunch of organic chicken breasts for a our company BBQ. She when to all the stores in Davis and could only buy eight (that was all we had in town apparently). She drive to Costco on my suggestion and there were many dozens of organic chicken breasts.
Davis is a low-shopping-service city. But the old folks seem to like it that way.
Yes, and you can add Walmart, Best Buy, and Lowes to that list.
Costco, Home Depot and Walmart for my family. For groceries we do our big shop locally at Safeway or SaveMart.
For us it’s more of a price savings quest. I’ll shop locally at Nugget and Ace but only for a few needed items as their prices are so much higher.
Lowes is one I should probably go to more however when I go to COSTCO HD is around the corner and I have little reason to go to West Sac. No Walmart for me. BTW much as I like the farmer’s market in Davis the one on Sunday morning in Sac is where I do my real shopping.
David Smith said . . . “Shopping for our day to day needs clothes, school supplies, hardware etc will continue to move to what has become our periphery – Woodland, West Sac and Dixon and of course, the internet.”
My personal opinion is that Woodland, West Sac and Dixon are becoming, and will continue to become, a diminishing factor in the retail purchases of Davis residents. The real elephant in the room is the Internet, where currently the local portion of Sales Tax is not collected and forwarded to either Yolo County or the City of Davis on (almost) all transactions.
One of the highest priorities for our City Council and City Manager should be to be doing everything they can to work with the State Board of Equalization to ensure that Internet retailers collect and forward on to the State of California (for further distribution to the local jurisdictions) the full amount of sales tax due based on the delivery location of the retail purchase. If that is accomplished, the sales tax leakage will be significantly reduced, and the City’s Revenues from sales taxes will address their debilitating and continuing decline.
Matt, I totally agree with you. Amazon recently rolled out Prime Now and Prime Fresh, allowing you to do even grocery shopping from online. As technology continues to develop, this is a trend that is not likely to stop or reverse. Focusing on the tax issue is the right move in my opinion.
Why is the sales tax revenue so low? Because shopping in brick-and-mortar Davis is a scavenger hunt. The situation will only get worse as the effects of the Brinley property sale play out.
I see the Brinley sale as a huge opportunity to reshape the downtown, with more retail and entertainment options and the expansion of residential above.
Mark – I don’t see this happening. The rents are going up and retailers are leaving. There might be more pizza-restaurants and bars. Maybe some more office space.
The problem with the high real estate costs due to the lack of inventory is that rents don’t allow business to pencil out given the increasing customer demographic of students and older core area residence that tend to clutch their dollars.
Yes there is an opportunity to reshape the downtown, but more entertainment and less retail.
Related to this Brinley sale, the new landlords just hit the existing tenants with a huge CAM bill… basically making them pay for common area improvements that will be needed to attract replacement tenants that would justify the higher rent costs.
The Davis downtown is in trouble.
In the short-term, you are probably right. In the long-term, most of those buildings should be redeveloped and expanded upwards, which is something the new owners have experience doing. Like I said, this is an opportunity to create something better, but I have no doubt that our community’s ‘no on everything’ mindset will come to the fore and we will waste time and money arguing about protecting the ‘historic’ structures instead.
Mark, the problem that Davis faces is that the demographic cohort of Davis that is responsible for the lion’s share of retail purchases (I do not include purchases of groceries and consumables as retail purchases), the 25-54 year olds who head working families, is declining precipitously in Davis. Consumers who are 55 and over are looking to shed “things” rather than acquire them. Consumers who are 25 and younger seek out discount stores for their clothing purchases and/or purchase their clothes and other items on the Internet. Bottom-line the demand base for boutique retail purchases in Davis is shrinking, and that is not going to calculate well inthe supply/demand models of any of the national/regional retailers who might consider Davis. The results of their modeling will more than likely say “Pick another location!”
You are conflating issues, Matt. Redeveloping the Brinley parcels to multi-story mixed use (high-density residential over commercial) provides an opportunity to improve the downtown commercial environment while also creating core area living space. The demographic shift that we have experienced does not change the value of redeveloping the downtown parcels, but the redevelopment may help reverse the demographic shift by allowing some to sell their larger homes (opening the space to young families) and move downtown. It won’t be enough by itself, but it could be one of many ‘small steps.’
Mark, I don’t disagree with that redevelopment strategy at all. Residential over commercial for those properties makes a huge amount of sense. I support it wholeheartedly.
With that said, I fully expect the first floor commercial in the redeveloped buildings will be selling services, not retail goods.
“There has been a discussion that ultimately, between the schools and the city, the need for a parcel tax could reach as high as $3000 per year.”
We either need to decrease the cost of operating the City or start paying what we are spending in full now. Delaying this is only going to make things harder in the future. For years Chicago overspent on city services and their school system and didn’t have enough revenue to pay for it. They are now increasing their property taxes 10%+ per year to try and stay out of bankruptcy court. They also have a credit rating one level above junk so borrowing for projects is extremely expensive.
The transient occupancy tax is easy money for the City so we should be working to capture as much as possible. The Hyatt on campus has done quite well both because of its location and its quality, but we do not receive any TOT from that facility because it is on the University’s property. We need more quality hotels in Davis and should not be waiting for the Embassy Suites to break ground before moving forward. There are at least two quality projects in the planning process, and both should be approved quickly.
Downtown is no longer a major retail center, so we need to rethink the zoning restrictions we put in place around town for the purpose of protecting downtown retail. If we want to increase the diversity and quantity of sales tax revenues, we need to allow for more retail opportunities in our neighborhood centers and on the periphery.
The City should not be in the business of protecting existing businesses and property owners from competition, whether we are talking about hotels or retail.
FWIW, my mother-in-law stayed there once and won’t go back because she found the accommodations sterile and cheesy.
Sterile, perhaps a bit, but cheesy? All of the appointments I saw were pretty high-end. The designers also took accessibility into account, something one doesn’t find in the city of Davis, so much. The staff and service are 5 star.
What the City of Davis lacks is robust business to business sales tax revenue, which comes from manufacturing and selling to other businesses. This doesn’t create traffic, except for workers arriving and leaving work, that retail has and creates higher paying jobs for the community. Retail jobs tend to be low paid, so depending on retail sales tax only is not good for the community. The community turns into a bedroom community for other cities with higher paying manufacturing, research, government and other higher paying jobs. The University provides jobs with higher wages, but hides the poor fiscal health of the City due to a lack of large manufacturing or research businesses that would generate not only decent jobs, but sales tax revenue. Expanding housing is the only way to counter that – keeping people who work at the University in town and spending their wages here and paying City and School taxes here, rather than taking their wages to neighboring communities. However, rising housing prices and limited housing inventory will drive people away. We will all have to pay ever increasing property and school taxes to make up for this lack of revenue.
This is exactly what we were looking to expand with the proposals for economic development. Increasing business to business sales tax, and also increased property taxes for unsecured property (manufacturing equipment). A large manufacturing facility, such as Mori Saki or Schilling Robotics, likely pay as much or more in property taxes on their manufacturing and business equipment, as they do on the value of their land and buildings.
Yes, that’s why MRIC if properly built out and assessed would have likely generated $10 million plus in revenue.
And Mace 391… $100 million plus in dollars to the city.
Don, please don’t take the bait.
Yeah – that’s worked “real well” so far. Maybe if the city just keeps expanding its housing supply, that will “solve” the city’s financial challenges.
Never mind that housing is a money-loser for cities, over the long term. (The very reason that the city faces financial challenges.) By all means, when you’re in a hole – keep digging!
Why do (some) development-types keep trying to “sneak” this false statement into the discussion? Maybe if it’s repeated often enough, some will believe it?
Why do anti-development-types keep trying to “sneak” this false statement into the discussion? Maybe if it’s repeated often enough, some will believe it?
As has been repeated many times, and Ron conveniently ignores, there is nothing inherent in residential developments that make them ‘money-losers’ for cities. Failing to control the rate of growth of the city’s costs is what creates the money-losing situation, whether we are talking about revenue increases through development or tax increases. When the rate of cost growth exceeds the rate of revenue growth, cities lose money. In the case of Davis, the primary cause of cost inflation for City services is the rate of growth of total compensation for city employees.
That’s b.s., and I strongly suspect that you know this.
However, you correctly point out that there are two factors: 1) revenue (taxes), and 2) cost (city services).
Proposition 13 limits revenue. However, there is no method to permanently control costs.
The result is that housing is consistently a money loser (not just in Davis).
Before Matt chimes in again, I realize that he believes that he has some ideas to address this problem. However, since it’s a problem throughout California, I believe that it will be difficult to “solve”. (Even if costs are better-controlled, housing is not going to be a “money-maker”.)
In the meantime, it seems that you and others will advocate that we “keep digging” further into a hole.
Sure there is, it is called being fiscally responsible. Just because many cities in California (not just Davis) have agreed to provide public employees with grossly unsustainable compensation benefits does not mean that there is a requirement to continue doing so. Acting like we cannot do anything about cost increases is what is total B.S., Ron. All you are doing with your repeated false statement is providing justification for the City Council to continue failing in their fiduciary responsibility. Stop supporting failure and start working to solve the problems.
Ron, I don’t have time to respond in detail right now, but your statement above is wrong, dead wrong. There is absolutely no reason why “there is no method to permanently control costs.”
I will respond in detail later today.
And, all that you (and some others are doing) is attempting to spread the outright lie that additional housing will “solve” the city’s financial challenges. (Yeah, it doesn’t work with 67,000 residents. Maybe it will work with 80,000, 90,000, 100,000 . . .)
I find it particularly disappointing that given your stated interest regarding the financial status of the city, you continue to spread this lie.
And Matt – I see that you can’t resist sharing your ideas. Perhaps you do have some ideas to control costs. But, it’s important to clarify the difference between controlling costs, vs. actually claiming that additional housing will be a financial “savior” for Davis (as some continue to claim, despite evidence to the contrary).
This and the fact that residential development is generally a net positive revenue maker for a city for the first decade or more, but then moved to negative territory as the property tax revenue as a percentage of market value of the property declines from a slowing in home ownership turn-over… while the city labor costs continue to escalate at many times the rate of inflation.
Davis could in fact continue to build more housing developments at a pace that we benefit from net positive revenue even while failing to do much to control city labor costs.
Additional revenue has to found somewhere – build new housing to even temporarily increase revenue, increase taxes for the existing property owners, increase cost for city services, or attract manufacturing that will increase sales tax revenue beyond the cost of infrastructure. Can you suggest others?
Or we can reduce expenses – reduce city services, fire people, close little used streets and abandon them, close pools and parks, etc.
Ron – Please show where I, or anyone else for that matter, has claimed here that building more housing will ‘solve’ all of the City’s financial challenges. The only person who I recall ever making such a claim is you, when you were falsely attributing the statement to others.
Building more housing will directly address the City’s housing shortage. If we control the rate of cost inflation for City services, building more housing will not worsen the City’s fiscal crisis, and may be part of a long-term fiscal solution. The ‘lie’ that you choose to repeat, is that housing is always a net negative for cities. It is not, but failure to control costs is.
We can convert all city employee defined benefit pensions to defined contribution plans. And we should do this soon as CalPers is going to keep under-performing their returns estimates and coming to the cities to contribute more.
frankly, what you describe here is called a pyramid scheme. You always need more new investors in ever increasing quantities to cover the cost of the old, then one day you can’t find enough new investors and the whole thing collapses. Not a great way to plan for the future of a city.
I was reluctant to point that out, given Frankly’s honesty regarding the issue. But, that’s exactly what it is (and pretty much describes the financial “plan” of many cities, to date).
ryankelly seems to advocate the same thing, when he said “Additional revenue has to found somewhere – build new housing to even temporarily increase revenue . . . ”
I’m not sure if ryankelly is “playing games” with his statements and subsequent “explanations” regarding his meaning.
I largely agree with this. I wasn’t so much advocating for it, just pointing out that there is a way for cities to generate net positive revenue from housing if they keep building new housing.
You could make the case that a change to reduce the expense of city labor, for example reducing retirement benefits for new hires, would take some time to result in real savings, and if we build housing now those savings would extend the period that the housing would return net positive revenue to the city… and possibly if the costs of city labor where reduced to market rates for similar labor, housing would be a long-term net positive.
The reason housing ends up being net negative is the $150,000 per year cost per employee for city labor. That is way above what it should be. What if it was $100,000 per employee? What if the city was a flatter organization with self-managing teams and many fewer managers?
Ron, You are only looking at housing only one way. You are using a much repeated, but never clarified statement about the cost of housing to the City. Why do you think Eileen Samitz keeps pushing for housing in Davis, but only on the UCD campus? It keeps people with good University wages in Davis, but without the costs of servicing the development. She seems to agree that keeping people who work at UCD in or very near Davis is good, even if they don’t pay for city or school taxes. Mike Harrington takes the stance that people living elsewhere, but commuting to Davis and bringing their children to be educated in Davis schools is preferable (back filling with out of town kids to make up for our declining enrollment is what he called it) to increasing housing inventory to keep workers and families in town and contributing to the cost of schools and city infrastructure.
You also zero’d in on the only part of my comment that apparently sets off alarms for you. Do you agree or disagree that we lack revenue from sales taxes and need more lucrative sources from manufacturing and research that would generate business to business sales taxes and higher paying jobs?
I understand that a lot of the reason that Eileen supports building on campus is because the University will assume the bulk of the long-term costs and responsibilities. (The same costs/responsibilities that have contributed to the financial challenges that the city is now facing, on behalf of the city’s current 67,000 residents.) Other advantages include an easier/safer “commute” for students, and less impact on the city’s infrastructure.
I have no particular concerns regarding your other comments. However, I find it particularly galling whenever someone tries to sneak in the argument that housing is a long-term financial benefit for the city (when evidence shows the opposite is true, and not just in Davis).
However, this development on campus will impact the City, but not generate any revenue to offset the cost of that impact.
Are you really trying to keep this argument going?
Housing is a long-term money-loser, for the city. Twist that however you want.
Ron, I believe that this is a conversation that definitely needs to continue. Housing in and near Davis will have an impact on the city of Davis. Increasing enrollment at UCD, even if students, faculty and staff live out of town, will have an impact on Davis. We have to face issues head on and consider all impacts of action and non-action.
Refer to ryankelly’s statement, quoted above (and defended by you). ryankelly was advocating more housing to sales tax revenue and taxes for schools (while disregarding the fact that additional housing is a long-term money-loser, for the city). Development-types keep trying to sneak in this argument, in broader discussions regarding the city’s finances.
(Regarding schools, they exist to serve the community – not the other way around.) And, there’s the problem that apartment complexes (regardless of the number of units) pay the same amount to school districts as a single-family home.
Ron – you need to work on your reading comprehension skills. Ryan was advocating for more businesses generating sales tax (which I supported and added my comments on unsecured property taxes). His comments on housing are directly attached to his negative assessment of our current dependence on University employment.
He is not advocating for more housing, he is saying that building more housing is our only defense if we choose to remain overly dependent on University jobs. He clearly wants to move away from that dependence on the University by expanding business development. Please read and understand what he says, not what your own prejudices lead you to believe he means. Your false attributions do not improve the conversation.
Ron, I think you have mistakenly stated that I was “advocating ” more housing. What I was advocating was more manufacturing and research businesses to generate much needed sales tax revenue that wouldn’t have the traffic and low wage jobs of retail. Without robust business to business sales tax sources, cities will fall back on expanding housing to generate temporary revenue, which has its own issues. This was an observation, not advocacy.
The reason to build more housing is not to resolve fiscal issues for a city, but to meet the housing demands of workers (and, in the case of Davis, students).
ryankelly:
Please review your own comments above, in which you said, “Expanding housing is the only way to counter that . . .”
Seems like you’re saying something totally different, now.
Got to run, for now.
Ron, You tell me ways that cities (cities in general, not Davis) generate revenue, if they don’t have sales tax revenue sources. I will not take any idea as advocacy on your part.
I feel opposition to building any and all housing in Davis is making any sort of reasonable conversation about possible solutions turn into an argument. Even a discussion of when and why cities pick a solution is not permitable. I suggest that people stop fearing the possibility of reaching a different understanding of the problem we as a community are having, if that is what is happening..
Mark:
I suppose it could be read that way. Perhaps you and ryankelly do agree that “falling back on housing” is not a solution. (However, given your past comments, you’ll probably understand why I’m doubtful.)
In any case, how would you interpret these other comments from ryankelly on this page, such as:
“However, this development on campus will impact the City, but not generate any revenue to offset the cost of that impact.” (I interpret this as a comment against housing on campus.)
“Additional revenue has to found somewhere – build new housing to even temporarily increase revenue . . . ”
Would you or ryankelly like to further interpret these comments, as well?
Have to run, for now.
I didn’t realize that I had the “power” to determine what is permitted. But, I will continue to point out that housing is a long-term money loser for cities (especially if/when someone tries to sneak in the argument that it’s a financial “solution”, instead).
Not really. It is something to consider. Just that.
But, I will continue to point out that housing is a long-term money loser for cities (especially if/when someone tries to sneak in the argument that it’s a financial “solution”, instead).
Ron- you’ve been pretty clear about your thoughts regarding the financial impact of housing on cities in CA. I have a couple of questions for you:
1. Given that CA population continues to grow, how is it that the cities in the state are going to stay solvent? Is “no more housing in any city” the right answer?
2. I don’t think you’ve stated this outright, but I read into your comments that you believe adding housing/population is less sustainable financially than holding population/housing flat or allowing population to decline. Am I accurately understanding your view?
Adam Smith said . . . “I don’t think you’ve stated this outright, but I read into your comments that you believe adding housing/population is less sustainable financially than holding population/housing flat or allowing population to decline. Am I accurately understanding your view?”
Adam, your question to Ron is very thought provoking. Based on the established Davis demographic trend patterns shown when comparing the 2000 Census to the 2010 Census, Davis could expect the following population cohort changes if the aggregate Davis population is held steady at 65,622.
— Ages 0-19 would decline from 15,317 persons to 12,690 (from 23.3% of the total to 19.3%).
— Ages 20-24 would increase from 17,200 persons to 18,869 (from 26.2% of the total to 28.8%).
— Ages 25-54 would decline from 21,630 persons to 17,707 (from 33.0% of the total to 27.0%).
— Ages 55 and over would increase from 11,475 persons to 16,356 (from 17.5% of the total to 24.9%).
Bottom-line #1, a shrinking pool of students for DJUSD and a shrinking pool of working families with healthy appetites for retail purchases.
Bottom-line #2, a burgeoning pool of seniors with attendant increased demand for both public transportation services and specialized senior amenities.
So how do we become financially sustainable? Some argue that growth is either unpalatable or non sustainable financially. Implicit in that proposition is that no growth is sustainable. While the no growth group jumps at the opportunity to state that residential growth is a net cost over time, they offer no evidence that no growth is sustainable. If we can’t grow our population, can’t add retail growth and can’t add business/industrial growth in any meaningful way, its very unclear as to how we grow the economic base, and in turn, municipal revenues. I am unaware of any city, state, county or country that is sustainable if there is no fundamental growth in the economic activities that generate revenue for the entity.
Ron said . . . “And Matt – I see that you can’t resist sharing your ideas. Perhaps you do have some ideas to control costs. But, it’s important to clarify the difference between controlling costs, vs. actually claiming that additional housing will be a financial “savior” for Davis (as some continue to claim, despite evidence to the contrary).”
First, they are not my ideas. They are the ideas of every member of the Finance and Budget Commission, as well as numerous members of both the Davis community at large and the greater California community at large.
Second, I don’t remember anyone saying that housing will be “the financial savior” of Davis. The immediate goal is to practice Cost Containment as an Element of Fiscal Resilience so that the unbroken upward march of City costs is arrested, and then through programs of efficiency and effectiveness and accountability is reversed. I challenge you to find one single place where I (or anyone else) have identified housing as a net positive contributor to the long-term City Budget, let alone as its “financial savior.”
It is worth noting that when you regularly repeat your mantra about housing, you are “indicating a bias of some type, as well as a “direction.” perhaps you should schedule yourself to attend the monthly Finance and Budget Commission meetings on the second Monday of the month at 7:00 PM in Council Chambers. I believe it will help you balance out that bias.
I realize that you have never said this. However, if you look back at the comments made by some pro-development types (including some subtle statements made today), you’ll see that some imply that housing developments are part of the financial “solution” (despite all evidence to the contrary, to date).
Unlike some, I’ve never denied that I have a bias/direction. Also unlike some, I don’t make false statements that housing developments will have a positive long-term effect on the city’s finances. (I’m not including you in that allegation.)
It’s simply a fact that housing developments have been a financial drain on the city’s finances, over the long term. If you’d like to call that my “mantra”, I’ll leave that up to you. (Perhaps you’d prefer using the term “personal crusade”?) 🙂
I support anyone’s efforts to ensure that new housing development pays its own costs over the long term. (I think it’s a tall order, given the history of development in Davis and elsewhere.) However, have you ever considered that perhaps many residents in the city don’t want overly-large scale infill, or peripheral residential development at this time? (Even if it’s somehow net-neutral?)
O.K. – I’ve really got to do something else, for awhile. Thanks for your consideration.
This comment demonstrates a fundamental problem in David’s thinking on this topic. The way forward for addressing the City’s fiscal problems is to combine the benefits of a number of small revenue increases (and similar sized cost reductions) with a few larger economic development projects. Many small steps will get us further than waiting for the benefits of one large silver bullet project. Increasing the rate of TOT, adding 2-3 (or more) hotels, removing size limitations and zoning restrictions for retail businesses in neighborhood centers, are just a few examples of the small steps that we can and should be making. Yes, we need to expand our business development space, adding 100’s of acres over the next 30-50 years, but we should also be implementing the smaller changes at the same time so we can begin reaping the benefits. It doesn’t just ‘help on the margins,’ it solves the problem.
Agreed Mark. The silver bullet may or may not exist, but I’m pretty sure it will take much longer to figure out, approve and develop than we have.
David Greenwald said . . . “While the short-term budget picture has improved, indeed the city right now has about $8.6 million in one-time funds that it is going to put toward paying down some of the city’s liabilities.”
David, the $8.6 million of one-time funds is not a reflection of an improved short-term budget picture. In fact the short-term budget picture is just as challenged, or even more challenged, than it was 12-24 months ago.
For the most part the $8.6 million is due to an FBC and Staff recommended change to the City’s General Fund Reserve Policies, which freed up previously restricted dollars so that instead of sitting fallow, accomplishing nothing, they can work for the citizens. That is indeed a good thing, but it will occur once and then disappear.
David Greenwald said . . . “Right now the city has done well to find about $4 million in general fund money for roads.”
David, your statement above is also an over reach. Back in 2013 when City Manager Steve Pinkerton presented his arguments to Council for the Sales Tax increase that ultimately was approved bythe voters in Measure O, Pinkerton’s presentation made it explicitly clear that the $4 million for roads was in the then-current Budget regardless of whether the Sales Tax increase was moved forward or not. Pinkerton very clearly laid out what the cuts were going to have to be if the Sales Tax increase was not approved by first the Council and then the voters, and those cuts did not include any reduction in the $4 million for roads.
So the City hasn’t “found” anything. The City has simply maintained that same $4 million baseline spending level on roads each year since the Pinkerton 2013 presentation.
David Greenwald said . . . “Moreover, the Finance and Budget Commission had asked council to forestall any parcel or other tax increases until they could fully analyze the need and cost.”
Again off the mark. The Finance and Budget Commission very clearly said that our City government needs to take steps to implement a Culture of Accountability. Analysis of need and cost is only the first step in implementing such a culture. Much more important is a clear matching of specific revenues to (A) specific costs and (B) specific results. Further, the FBC stated that each year’s annual Budget needed to (1) provide that clear matching as part of its forward-looking Budget, and (2) provide an open, transparent assessment of how efficient and effective the prior Budget year’s activities were in maximizing Revenues, minimizing Costs and maximizing Results within each program and/or capital investment project. The forestalling was not limited to any parcel or other tax increases. It also included any parcel or other tax renewals or extensions.
To bring up an old argument, if the city were to say raise the minimum wage, a few things would happen. One, more spending at the bottom of the economy, increasing consumption of goods like eating out etc, which the city assuredly would benefit from. Two, if the inevitable price increases occur, so much the better for the city, higher prices for consumer services mean higher sales tax revenue for the city. A study commissioned by the city of Sacramento showed that a significant increase in the minimum wage would give the city a large economic windfall in the millions of dollars per year in the form of increased sales tax revenue.
If that were true, why did that not happen in Seattle when they raised their minimum wage? Studies show that the average income of workers went up by $5.54 per week, at best. Also, unemployment in Seattle increased. I don’t think higher unemployment and a slight increase in income is going to dig the city out of the hole they are in.
So I actually have figures that contradict these assertions of yours. Unemployment in King county is 3%.
King County did not increase their minimum wage, the City of Seattle did in April of 2015 when the city’s unemployment rate was 3.3%. Unemployment then went up to 4.5%, but is now 4.1%, higher than before minimum wage was increased. So .8% higher unemployment to get $5 per week more spending money. Not a good financial tradeoff.
Sam, my mathematical brain is having a hard time wrapping itself around your “$5 per week more spending money: statement. When I divide your $5.00 by the 40 hours that is the standard work week, I get an hourly wage raise of 12.5 cents. Did 12.5 cents per hour really produce an unemployment rise from 3.3% to 4.5% for the City of Seattle?
https://www.washingtonpost.com/news/wonk/wp/2016/07/29/study-raising-the-minimum-wage-did-little-for-workers-earnings-in-seattle/
No, the rise in wage from $9.47 to $11 per hour decreased the number of jobs and lowered hours to compensate for the increase in wages having no real effect on income.
Sam, the article you provided the link to (thanks for that) appears to indicate that the businesses hit by wage increases were unable to raise the prices of their products and/or services. and that the full brunt of the cost of the wage increase is felt by reducing the hours of minimum wage workers and/or laying off those workers. Is that a realistic assumption?
For example, is it realistic to assume that McDonalds is going to keep the cost of its menu items the same while reducing its costs by shortening staff?
In the short run that can happen. The problem is that if McDonalds in Seattle raise their prices then consumers have the option to visit another McDonalds outside the city, see In and Out example below, and their sales will decrease. So the first option would be to cut other costs first. As the wage continues to increase they will have to increase prices and pray that the sales don’t drop to a point that they have to close the store. A good example of this is Oakland’s Chinatown. They were known for very inexpensive food, but when the minimum wage was increased, prices increased, sales dropped and a good number of them closed. So some people are making more money and some people are making no money. The net effect is minimal.
It looks like when everything is factored in, higher hourly pay vrs. loss of hours and loss of jobs that the minimum wage hike actually hurt lower income workers in Seattle. Isn’t that what many of us warned about?
Sam, if the “value and quality proposition” of your restaurant is “inexpensive food” then I agree with you that there is more vulnerability. The customers will spend their money at a different Oakland restaurant where the “value and quality proposition” is not so single-threaded. That is the nature of free market competition. Each restaurant puts together a vision for itself, and the wise ones don’t set themselves up to be that precariously vulnerable.
With that said, from a community perspective the lost revenues of the “inexpensive food” restaurant turn into gained revenues for the “value price/quality” restaurant down the street. The economic “in’s” and “out’s” in aggregate offset one another.
Regarding your drive to Woodland example, that only works (1) if the diner places no (or very little) value on their time, and (2) if the diner chooses to ignore the transportation costs. Given my average purchase at In-N-Out, the cost of gas to drive to Woodland would be more than the amount of money I would save. When I factor in the value of my time, detouring to the In-N-Out in Woodland rather than paying higher prices in Davis is both illogical and fiscally irresponsible.
I suspect any restaurant worth its salt will conduct a “price elasticity of demand” study rather than jerk their knee.
BP said . . . “It looks like when everything is factored in, higher hourly pay vs. loss of hours and loss of jobs that the minimum wage hike actually hurt lower income workers in Seattle. Isn’t that what many of us warned about?”
BP, you have missed your calling. You clearly have a talent for picking cherries.
“Given my average purchase at In-N-Out, the cost of gas to drive to Woodland would be more than the amount of money I would save. When I factor in the value of my time, detouring to the In-N-Out in Woodland rather than paying higher prices in Davis is both illogical and fiscally irresponsible.”
In my experience it depends on where you are in Davis. If you are by Northstar Park it’s likely equal time given the delay at Richards and the smaller lines and better service at Woodland. I suspect that the Davis location depends more on UC Davis students who are more difficult to manage.
BTW how come nobody ever discusses traffic at the Richards underpass?
LOL, don’t we all.
quielo said . . . “BTW how come nobody ever discusses traffic at the Richards underpass?”
You jest.
Trivia Quiz of the Day … Where did Chess Pie get its name?
The story is that a woman from the Deep South made the dessert for her husband, and he asked her what it was. The response from the woman in a thick southern drawl was “It’s jes’ pie.” The “jes” got misunderstood by the man as “chess” and hence the name was born.
Matt- That is true, places that currently charge higher prices can better absorb higher wages. However, as for Chinatown, those stores closed and nothing has opened up to replace them, so those jobs have not been replaced. Also, people with limited funds have lost a place to eat.
It is not exactly a binary that you will eat at either higher priced Davis In and Out or lower priced Woodland In and Out, because otherwise you are correct, someone living in south Davis would be crazy to drive 40 min round trip to save $10. People will change their habits and pick up dinner in West Sacramento on their drive home from work or people that usually eat at Burgers and Brew will go to In and Out and the people that went to In and Out will make their own burgers at home and people who stopped in Davis on their way back from Tahoe to the Bay Area will drive to Vacaville as prices rise. Its not like In and Out or Burgers and Brew will be a ghost town the day they raise their prices, but sales will drop and they run the risk of having to close.
I suspect any restaurant worth its salt will conduct a “price elasticity of demand” study rather than jerk their knee.
Forgot to mention that the process of businesses closing in Chinatown was not instant when the minimum wage was raised. Some places made it a few months, others a full year. One place is even closed on Wednesdays to try and stay profitable.
Sam, the jobs were replaced . . . at competing and/or new restaurants elsewhere in the city.
Regarding your final point, my suspicion is that the count of individual sales will (possibly) drop, but it is unlikely that sales revenues will drop. That is what the Price Elasticity of Demand curve is all about.
Regarding your 4:40 post, that sounds like a faulty business model for that whole segment. The food must have been incredibly inexpensive. Either that or there are other issues.
Sam, the jobs were replaced . . . at competing and/or new restaurants elsewhere in the city.
I have seen a study, but from driving around downtown Oakland I have not seen new restaurants opening up to replace the ones that have closed. That is what it looks like happened in Seattle. Unemployment increased as places closed and less new places opened. Then those that still had jobs had their hours cut making the actual impact of the rise in wage negligible.
Even if revenue stays the same unless you are able to cut hours of labor the added cost is going to diminish profits. If profits go negative eventually you will have to close.
Sam, let’s agree to disagree. I think you are vastly oversimplifying the situation, and I believe you are ignoring the additional buying power that the workers with icreased wages will have. The points that you are making are inconsistent with the marketing and finance courses taught in any MBA program.
The Seattle study said the average worker ended up with -$5 to +$5 more per week. So in the case of Seattle the buying power has not increased much if at all.
Yes, I am oversimplifying the situation to make things easy for people to understand. I am also using observation of a very small sample size, the roads I drive in Downtown Oakland. Who knows, there could be an area with a ton of new places I do not know about. Hardly scientific.
I wouldn’t say that I disagree with what you are saying, except maybe in our opinions of the level of increase in buying power.
As for contradicting MBA classes, I think the difference here is mandating a rise in costs in a small defined area (a city) vs. prices rising state or nationwide.
Still enjoyed the discussion. Thanks
Not necessarily as the geographic unit is too small to provide a barrier against people going outside the city limit to save money. The In-N-Out in Woodland already produces better food than the one in Davis (according to my children who are the ultimate arbiters), if it was also cheaper it might provide significant competition as people north of the train trackers would have an additional incentive to go there. Policy issues like that need to have a broader reach.
I am in favor of raising the minimum raise however.
quielo said . . . “The In-N-Out in Woodland already produces better food than the one in Davis (according to my children who are the ultimate arbiters),”
The above statement makes no sense given the quality control standards of the In-N-Out corporation. However, perception is reality.
How many children participated in the survey you reference?
Three kids and numerous visits. They always prefer to go to Woodland.
I have a sneaky suspicion that there is more to your trio’s pattern of choice than just the food.
“I have a sneaky suspicion that there is more to your trio’s pattern of choice than just the food.” Not sure about that. They have been to 20 or so outlets in several states so they have a pretty broad sample. The least favorite is the one in Placerville with the reversed bathrooms. They find that confusing. They think the best food is at the outlet next to LAX and will ask for that one if we are anywhere south of Stockton.
quielo said . . . “reversed bathrooms . . . ”
Like I said, something other than the food. Sounds like Conrad Birdie needs to visit Placerville.
Justice4All – can you please provide a link to the Sacramento study you referenced? Thanks
It appears that section of the Sacramento City website has been taken down. I would be happy to forward you a copy though. You can send me an email at s_raycraft@yahoo.com and ill send it your way. Its actually pretty interesting if youre in to this kind of thing.
California’s $10-an-hour minimum wage will increase to $10.50 in January 2017, then to $11 on Jan. 1, 2018. The minimum wage will then go up by a dollar in each of the following years until it reaches $15 in 2022, after which it will continue to rise each year by up to 3.5 percent to account for inflation.
Businesses with 25 or fewer employees get an extra year to raise their wage, so that workers will be paid $15 by 2023.
I completely agree that it is an argument against new housing on campus, and it is one that I happen to agree with. When we add new residents to the area, there is an increase in costs for services to the City. Even when those new people live on campus, they still increase the costs for the City when they drive on the streets, use the parks, shop in the stores and enjoy the nightlife downtown, etc. When the new housing is in the City, the increased costs are offset by new revenues from fees and taxes. In contrast, new housing on campus brings in no new revenues to offset the costs. Consequently, new housing on campus will always have a negative fiscal impact on the City. As to the quality of life arguments, I see the exact same impact on the community whether those new residents are in the City, on campus, or in the county just outside the City limits. We are adding new residents to town regardless of where their housing is located in our immediate vicinity.
Mark, I don’t think it is either a choice of one or the other. UCD should provide some, maybe most for the next period of time, and the City should add some. But only because there is an underserved demand for places to live by people employed in Davis or attending school. it is unrealistic to block all new development in the City and expect no impact from housing on campus. I agree that housing is not the solution to our fiscal woes. Economic development zoned for research and manufacturing that is not nibbled away by other uses is needed.
Honestly I don’t think the University would be very keen on building more houses on campus. They just don’t have the incentive. And I think DG is very right that they may not have the capabilities to move very fast, and this will be exacerbated by the leave of our current Chancellor.
Perhaps the city shouldn’t be overly concerned with the increased enrollment. If the students can’t find proper housing, they will complain to the University and that’s when the University would gain real incentive.