Had the council not postponed its March 7 meeting until March 14, the council would have been taking up a discussion on revenue measures this week. On several previous occasions, the council has discussed but failed to come to agreement on the appropriate revenue measure.
That means that, while the council put the successful half-cent sales tax on the ballot for June 2014, they did not put a parcel tax or other general revenue tax on the ballot in November 2014 or June 2016.
Dan Carson, a member of the Finance and Budget Commission, laid out an analytical framework to approach the next tax measure.
One point offered by that commission is the need for “an analytical assessment of the city’s overall General Fund condition” as the “the primary factor used to determine the size of a new tax proposal.”
In his piece he notes, “Both a commission subcommittee and a consultant retained by city staff are currently developing long-term revenue and expenditure projections intended to recognize now-unfunded liabilities for employee compensation and infrastructure costs and to identify the funding gap that remains.”
He makes four other critical points, noting the need for a well-crafted package “to more fully meet the city’s critical infrastructure needs.” He said that there needs to be “reasonable assurances to voters that the new revenues would be spent as proposed.”
He also references the need for a “fairer taxation” and finally the need for the tax measure to grow in order to keep up with inflation.
Of these, I am most concerned with the notion that the voters have some assurance that the revenues will be spent as proposed.
There is a good deal of history here. In 2004, the council passed a half-cent sales tax that was supposed to keep parks open and prevent the city from having to lay off city employees. Somehow, though, the council turned around in 2005 and gave away the store. The firefighters got a 36 percent salary increase and other bargaining units got 15 to 18 percent.
But of course that was a different era, but in December 2015, the council voted to provide four bargaining units with a 3 percent COLA (Cost-of-Living Adjustment) without even pulling the item from the consent calendar. This coming about 18 months after the voters had approved a tax increase to close the general fund’s structural deficit.
The city has limitations on what they can do with a general use tax. The city cannot bind itself to spend the money a certain way, because that would require that the vote be two-thirds.
The council, in 2014, opted not to bind itself to any sort of spending commitment. At the time, it said it would put a parcel tax on the ballot to cover infrastructure needs – something that never materialized.
So the issue of spending the tax money as promised is not a small and immaterial issue.
A second issue – one that Mr. Carson does not raise in his piece – I think is just as important.
Our analysis of the budget and what we have seen from the model developed by the Project Toto team suggests we need a three-pronged approach to closing what is a much larger budget hole than it appears on paper.
Basically, we need first a cost-containment strategy, second an economic development component, and third a revenue measure.
Some will argue that, if we are going to ask the voters to pony up more money, we need to have an economic development strategy in place. Toward this end the city council has already approved three additional hotels for the city.
But two of those are on hold due to litigation and one settled but at a sizable reduction in the size of a hotel conference center. I find comments by attorney Patrick Soluri (representing Holiday Inn Express & Suites owner Roshan Patel in opposition to the proposed Hyatt House hotel) troubling, suggesting that the council has abandoned sound land-use policy in order to chase tax revenue.
The city also continues to look toward an innovation center that might bring substantial additional revenue.
But the biggest thing that the council needs to do is cost containment.
Critics can point to cities with far more in the way of per capita retail sales and revenue who are still struggling fiscally because they have not contained their costs. Without a firm commitment to cost containment any revenue measure and any economic development revenue increase will be eaten away by cost increases for employee compensation.
A year ago in February 2016, Robb Davis put forward a seven point plan for cost containment.
But, even if we hold the line of new spending, we face challenges. In December 2016, Mayor Robb Davis told the Vanguard: “The most updated analysis by the City-contracted actuary indicates that even if employee salaries do not grow at all over the next five years, our required pension contributions across all employee groups (police, fire and miscellaneous) will grow by over $4.8 million per year compared to today.”
He added that “while it is true that we are ‘keeping up’ as things stand currently, the cost of ‘keeping up’ continues to grow and that crowds out funding for other projects our community needs to maintain the level of service citizens expect.
“Something must give,” he said. “Thus, I am less sanguine than our City staff. In fact, it is not clear to me at this point how we are going to cover everything over the next five years, given that we are not even covering critical infrastructure backlogs now.”
Simply raising tax revenue is not enough. That revenue will easily be crowded out by increased costs to provide current levels of service and current levels of compensation.
That task becomes more difficult when the council agrees to COLAs and other pay increases.
That is going to be the big challenge. The Vanguard fully supports a new revenue measure, but there must be with it a commitment to contain costs, otherwise the new revenue won’t be going to pay down the $655 million gap, it will go to keeping up with current costs and commitments.
—David M. Greenwald reporting
David,
Thanks for publishing my analysis piece in the Vanguard yesterday. I completely agree with your point that cost containment is an important part of the city’s fiscal strategy going forward, and said so in the piece:
“Any analysis should also account for the additional revenues the city could receive from economic development efforts, potential financial help from UC Davis to mitigate the impacts of the new long-range campus plan, cost savings from making city government more efficient, and non-tax revenues from the lease or sale of surplus city assets. New taxes should be the last resort to fill any remaining funding gap.”
A number of the ideas included in Mayor Davis’ cost containment strategy, a commendable effort we support, originated with me and other members of the commission, and we some time ago appointed a subcommittee that is to help develop some of our own ideas on how to make city government more efficient. But obviously we have a lot more work to accomplish because, as you accurately point out, employee compensation and infrastructure costs we must bear in the future are a significant challenge.
I tried to edit out the junk at the start of the above post, but was unable to do so. Don or David?
[moderator] Got it. Please also see Mark West’s note.
Dan- The ‘junk’ is hidden formatting codes from our word processor. If you are going to write your comment offline and cut and paste into the ‘post comment’ box, you need to pass your text through a basic text editor first, which will strip the commands from your comment. Either write the comment in the text editor originally or cut and paste to the text editor prior to posting to the site.
Thank you Mark
Ditto… haven’t had that problem yet, but now I know how to avoid it… appreciated, Mark…
Why does this not surprise me? (Also, can you tell us which cities you’re referring to, along with a comparison of their per capita retail sales and revenue, and their unfunded liabilities?)
I’ve already posted the link more than once to you from last August or September when we did the analysis of sales tax revenue.
My apologies.
How about once more (especially since you brought it up, in the article)? Perhaps others would be interested, who didn’t read/see your earlier response.
Actually, a “link” is different than posting entire charts/graphs (e.g., in previous articles), which compared Davis “unfavorably” with other local cities. Perhaps the choice to do so (or not) depends upon the point you’re trying to make.
https://davisvanguard.org/2016/08/analysis-davis-lags-per-capita-retail-sales/
David:
Thanks. Now I realize why I “missed it”, despite seeing your referenced article previously. The article focused on cities with higher per capita retail sales, but did not provide information regarding the struggles that these cities are also facing (e.g., regarding unfunded liabilities).
But all you have to do is google a few of these cities and you see that a city like San Luis Obispo (which I know well) has a much higher tax take and yet is facing structural deficits:
https://calcoastnews.com/2017/03/calpers-move-leaves-slo-multi-million-dollar-shortfalls/
Here is the graphic Ron.
Reposting links is a skill you may want to use the next time the issue of conflict of interest comes up.
Matt:
Are you purposefully misconstruing my question?
In other words, David hasn’t provided details regarding the financial struggles that such cities are facing, DESPITE higher per capita sales.
Perhaps this point doesn’t “fit the agenda”, of those who are pushing for more development to solve financial challenges (despite still-uncontrolled costs, throughout the region and state).
Also – thanks for your suggestion, but I know how to post links.
I would suggest that Don delete your comment, regarding conflicts of interest.
Ron, I posted the graphic so that all the Vanguard readers who are reluctant to click on links will have instant access to the table’s contents. Nothing more, nothing less. I was surprised that David didn’t post it as a graphic.
O.K., Matt. Whatever you say. Perhaps your remark (above) regarding “reposting” should have been directed to David.
The point is that no one has provided details regarding the financial challenges that other cities are facing, DESPITE higher per capita retail sales (due to still-uncontrolled costs, affecting the entire region and state).
I actually answered the hard part of your question. Then all you have to do is google some of these cities as I did with San Luis Obispo: https://calcoastnews.com/2017/03/calpers-move-leaves-slo-multi-million-dollar-shortfalls/
I’m not your admin assistant. You can look some of this stuff up yourself.
Ron said . . . “The point is that no one has provided details regarding the financial challenges that other cities are facing, DESPITE higher per capita retail sales.”
That is a true statement Ron.
“No one” includes you. Please help us all understand those details better by posting some of them yourself. You may want to channel Acts 20:35.
Indeed, you’re not. You’re also not providing a “complete picture”, as a journalist. And, it’s not “up to me” to do so for you, or your publication. (If you’re not already motivated to do so on your own, I doubt that I’ll have much influence.)
Apparently, it’s difficult for you (and some of the other “commenters”) to even acknowledge a basic point, let alone present it.
O.K., by me.
Ron, if you go back through your comments in this thread, other than complaining about David’s journalistic integrity, you haven’t clearly stated any “point” for anyone to acknowledge. Perhaps people would acknowledge such a point if you would state the point clearly,with a brief explanation about why you think the point is important.
Ron said . . . “The point is that no one has provided details regarding the financial challenges that other cities are facing, DESPITE higher per capita retail sales.”
Matt: “That is a true statement Ron.”
“No one” includes yourself. So you are binging up an argument for which you have presented no facts, and for which no other poster in the vanguard has presented facts. What you have started is a discussion based 100% on imaginary flights of fancy.
Matt:
I might take credit as being the only one to think of this, but John D. has brought up a related point, below.
Are we suddenly not allowed to bring up points that haven’t been presented, previously? Do we have to have the “answers”, when we do so?
Your pointed statements to be are bordering on absurd (if they haven’t already reached that level).
It’s pretty clear to me (these past few days) that you’re building up a grudge, against me. How about just letting that go? (We can both try harder, to treat each other with respect – if you’re willing.) Let’s start, now.
Ron said . . . “Are we suddenly not allowed to bring up points that haven’t been presented, previously? Do we have to have the “answers”, when we do so?”
No none has said anyone can not bring up points, Ron. Anyone can bring up any point they feel is relevant. Tia’s principle of “presenting a point of view that may not have been fully considered previously” applies in spades.
The reasonable, and well reasoned, expectation is that any person making a point be prepared to provide documentation of the factual validity of their point. To date you have not provided any factual support for your point about the City’s undermining its ability to meet future RHNA “fair share” allocations.
Don:
I think you’re getting confused. The RHNA “fair share” discussion (which, for some reason Don is allowing – even though it’s off-topic) was discussed in a different article, today.
Back to ‘cost-containment’ … that might mean different things to different people…
It might mean “roll-back” of existing compensation… it might mean a zero sum game, where any funds for new hires has to be offset by roll-backs elsewhere, or eliminating merit increases unless there were roll-backs elsewhere… it might mean staying with actual inflation, including medical… it might mean total compensation floats with inflation, with higher increases in medical completely absorbed by employees… it might mean ????????????
‘Cost containment’ is a “squishy” term…
The general concepts makes perfect sense… but it is a vague term.
‘
Ex. what would “development containment” or “fee/tax containment” look like? Interesting concepts…
In this case, I’m talking about containing costs so that revenue increases won’t be eaten up by cost increases.
I think this is the most important point. If our costs continue to rise at a rate greater than our revenues (current situation), it does not matter how much revenue we bring in, or what approach is used, as it will never be enough. Any increase will ultimately be surpassed by the rising costs. I don’t see the answer as putting an absolute cap on costs, but rather to slow the rate that costs increase such that the rate that revenues increase is greater. It would be better, however, if we actually reduced costs as that will make it easier to ‘catch up’ to our unfunded obligations, but slowing the rate of increase would work eventually.
David and Mark… if you’ve talking about ‘not making the hole bigger’, got it… but the fact is we’re in a sizeable hole already… if you want to fill that hole, you need dirt (revenue, or reduction in current costs) from somewhere…
The question is where you get the dirt from, I’m suggesting we get the dirt from increase revenue and contain costs to avoid continuing to dig.
One point to keep in mind is that anybody can spend more than they should, and more than they can “truly afford”. For those communities, other than Davis, who may be spending at levels beyond their “means” should be of no surprise to anyone.
Sadly, public sector accounting and reporting standards – which are structured to obscure fully loaded current period cost-accounting (i.e. non reporting of deferred roadway maintenance investment and underfunding of pension and OPEB benefits to make their “outgoing expenditures look better”) – are the norm rather than the exception.
Bottom line, a true comparison with these other communities (with higher per capita sales and commercial property taxes) might turn up some evidence that Davis is already at or near the minimum per capita spending for most of its programs. Who knows? It seems that part of the analysis similarly has not been put forward. It might be enlightening. It also might highlight where Davis is already doing a relatively good job at “cost containment” in many program areas. Conversely, it might also highlight areas where we are spending in excess of the norm.
But one thing is for sure, we simply don’t have anywhere near enough data to effectively “understand” where we might have opportunity or need for new “community level” revenue and cost containment opportunities. Where are we overperforming? Where are we underperforming?
But perhaps more to the point, does anybody really care about these two points? Or, is it simply an exercise in absolute ability to reduce our costs on the one hand or the capacity to absorb yet higher taxes on the other?
Perhaps a description and introduction for “Project Toto”, Part II? 🙂
Where are we overperforming? Where are we underperforming?
Perhaps you would care to opine. If not, then what is your purpose/objective with the comments you offer on the Vanguard?
John D.
Your questions are valid and reasonable, and are not ones that have come up previously. No disrespect intended.
I was making a sarcastic, smart-a** comment, trying to be funny. But, I think there’s some truth behind it, in that it’s difficult to encourage citizens to care or understand the challenges (as was noted on the Vanguard, regarding Project Toto). Especially since day-to-day challenges are currently being met, as well as the nature of the challenges (e.g., no local control regarding CALPERS, road maintenance funds that have been cut-off by the state – for all communities).
I still believe that some of these challenges will be addressed by the state. (For example, there’s some proposals to tax motorists more directly, for road maintenance statewide.)
Ron, two serious questions …
(1) If the increased gas taxes are passed are there any assurances that the gas tax money will be coming to Davis?
(2) Given (A) the high incidence of electric and hybrid vehicles in Davis, (B) the aggressive steps Davis is taking to increase that proportion of electric and hybrid vehicles, and (C) the much greater than average mode share for bicycle transportation, is a gasoline tax increase going to result in an upward trend in gas tax collections in Davis?
Matt:
I understand that proposals include a fee that would be imposed upon all vehicles (including electric vehicles).
Your friend Robb Davis posted some information recently, regarding current proposals that the state is actively considering.
I can find this information for you later this evening, if you’d like. Don’t have time right now.
But, the trend is to move away from the gas tax, since vehicles get better mileage, these days. (It’s not hard to find these proposals.) For example, a fee based upon annual miles traveled.
Ultimately, I’m not sure that funds would be distributed (by the state) in the same manner that they’re collected. (In other words, a community with a lot of bicycles might still receive a significant funding allotment.)
It should be noted that Matt’s commentary on Davis’ unique demographic characteristics (is gas taxes) and their potential for unforeseen fiscal consequences to the local community are not confined to this issue alone.
David recently wrote of his visit to the Facebook campus in Menlo Park. He described his observations and impressions and likened certain aspect to the same features one comes to find on a university campus.
From what I recall of this article, however, David did not go the further step in describing some of the key practical differences between this type of campus and the typical university campus. Some of these differences might include the following:
1) Unlike most state university campuses, which are located in separate, adjoining tax jurisdictions) the Facebook campus is physically located within the City of Menlo Park. All sales taxes paid or collected on the Facebook campus go directly to the coffers of the City of Menlo Park.
2) Attendees at the Facebook campus are generally being paid for their efforts rather than paying.
3) Attendees at the Facebook campus often attend five days a week, and once they arrive, are generally there for most of the day, meaning:
a. Their morning lattes and break snacks are purchased on campus and taxed accordingly;
b. Their lunches and sometimes dinners are purchased on campus and taxed accordingly;
c. Their vehicles (for those who do not arrive by public transit or UBER) are parked on campus (whether they pay for the privilege or not), but they are not otherwise impacting the parking in Downtown Menlo Park;
d. Because so many of these attendees are commuting from somewhere, a high percentage of them use their vehicles and make local, taxable purchases of fuel on a weekly basis (compared with university campus where cars are actively discouraged and often not affordable to the attendees).
4) Unlike most state university campuses, which are located in separate, adjoining tax jurisdictions) the Facebook campus is physically located within the City of Menlo Park. All property paid by Facebook are eligible, at least in some measure, as potential, additional revenues to help support ongoing municipal services provided by the City of Menlo Park.
5) As important business members of the local community, Facebook provides a myriad of internship and research opportunities to attendees of local universities, colleges and high schools. Whether viewed as educational enrichment opportunities, or as supplemental resources for research opportunities, or as direct sources of supplemental funding for new research initiatives or as supporters of community development and enrichment programs – without these additional resources provided by Facebook, or former Sun Computers, or some other private sector campus-styled employer – the community of Menlo Park would be correspondingly less well funded to meet the expectations of its other local businesses, residents, and the community’s many local public and private institutions.
This aspect of the community fiscal conversation is presented solely as a hypothetical example (not to be taken literally and not to suggest that Davis could ever become Menlo Park), and is intended solely to highlight and emphasize key fiscal consequences resulting from geographical, jurisdictional and institutional rules governing collection and distribution of contemporary sales taxes and local commercial property taxes).
Looking at the numbers objectively, suggestions that municipal revenues available to the City of Davis might be disproportionately inhibited by the convergence of these unique and inter-related circumstances do not seem too far a reach.
John makes very good points, and if I were not exhausted from dealing with Ron’s ignorance about the specifics and processes associated with SACOG RHNA, I would join John in a constructive dialogue about the points he has raised.
Perhaps tomorrow.
Right back at you. I am truly sorry that some might not understand that you apparently have no real interest in respectful, fact-based dialogue. Mostly misstatements, personal attacks, etc. I am also sorry that you seem to be carrying some kind of grudge against me. Again, I’d suggest that we try to put that behind us. I’m willing to try.
You’re willing to cite facts?[and I mean “cite” or at least show credible SME authority] If you are, we can have a fact-based, with interpretations/opinions on those facts, dialogue… until then…
Others have… can’t remember you doing so, but might have missed it…edited
[moderator] edited due to other comments being pulled
As a famous line from “cool hand luke” would imply, “what we have here is a failure to communicate” (just opining, [not a fact, Ron, as I suspect you’d challenge me on not being fact-based])
Suggest we all, including me, ‘cool jets’, “mellow”, chill , whatever…
Yet, that said, opinions should be SME, fact-based and/or citable to be credible to the larger audience [IMHO] in order to be taken seriously by others. Perhaps opinions that are not, should be acknowledged as “venting”… [IMHO]
Facts, and knowledge associated, are just that. They can be refuted by the same tokens… but not by “feelings”… [IMHO]
Can’t move the football forward with Wednesday, Monday morning quarterbacking…
g’nite, all…
Agreed. And, what I’ve been trying to suggest to Matt. I’m willing to try.
The fan cooling in my jets is fully operational. All the temperature gauges register in the normal operating range.
Ron, I don’t know what you could possibly have “reported.” You may want to check out John 8:32.
I’ve pulled a bunch of comments. You all need to work out your issues privately.
Thanks, Don. Appreciated.