When the city of Davis faced a $5 million a year structural deficit in 2014, the council voted to put a half-cent sales tax on the ballot and the voters, in June of 2014, approved it by a healthy margin (58-41), but by less than two-thirds of the vote. While this measure required a simple majority, the margin of the vote impacted the thinking of the council.
The original plan was to put a second revenue measure on the ballot to deal with infrastructure needs. However, they faced a combination of the election result and polling that showed a parcel tax – which would need two-thirds of the vote to win – would fall short.
The polling done by the Godbe Research company found that less than half would support a $149 per year parcel tax for the November 2014 ballot. That number increased to 58 percent at the $99 level.
At the time, Councilmember Brett Lee pushed for a $50 per year parcel tax that he thought might prevail. He also warned that the council not conflate “need to have” with “nice to have.” Part of the problem was that some on council were pushing for new swimming pools at the same time that the council needed funding for critical infrastructure.
In hindsight, had the council pushed for a $50 parcel tax that would have generated $1.4 million in annual revenue – certainly far less than the city needed at the time – it would be better than the $0 they have been receiving.
Two years later, the city did not do more polling. However, council was unable to put a parcel tax or tax revenue measure on the ballot in 2016 either. There were three problems. First, no one could agree on the type of tax. Second, no one could agree on what the tax measure should fund – with debates over the need for park maintenance tax increase versus the need to increase revenue for roads and other infrastructure.
There was a third disagreement over whether the city should seek a general tax or a special tax.
State law permits a general tax only during the general municipal election – in other words, only in June of even years when councilmembers face election or reelection. The advantage of a general tax is that it only requires a simple majority. However, the disadvantage is that the funds cannot be specified for any particular purpose.
For budget hawks and reformers, that has always been a bone of contention.
This concern goes back to 2004 and the original sales tax measure, Measure P.
In the argument in favor of Measure P on the ballot, the signers who included Lois Wolk (Assemblymember), Helen Thomson (Supervisor) and then-Mayor Susie Boyd, argued: “The City faces increasing costs. We will face higher expenditures if we are to provide the additional police protection and meet park and recreation and open space commitments we have made to our citizens.
“Without Measure P revenue,” they argued, “given the uncertain state support to the General Fund, we would be faced with very deep service cuts in police, fire, and parks.”
In the city’s newsletter sent out in the winter of 2004, they claimed the money would go into the city’s General Fund and be considered “discretionary” revenue. They mentioned public safety and 
emergency services, street maintenance, parks and recreation, and neighborhood and community services.
The proponents argued, “The city faces increased costs to run city programs and services. Needs in the city have grown with the population. Programs, parks and other services have been added. As with other local businesses and organizations, basic program costs, including staff costs, have increased. The city has absorbed many of these increased costs into existing budgets, but this process cannot be sustained indefinitely.”
In 2004, city officials argued that if Measure P did not pass, “[i]t will be difficult to maintain the current level of services, programs and staffing.” They continued, “Building of parks and greenbelts, as outlined in the adopted General Plan (e.g., Mace Ranch), and anticipated by city of Davis residents, may have to be deferred.”
The result, of course, was that the voters would approve Measure P. The voters approved the measure 68.5 to 31.4 percent.
The city then turned around and put that money to employee compensation increases. In 2004, the firefighters agreed to a new MOU which gave them a 36 percent pay increase. All of the other bargaining units in the city would receive between a 15 and 20 percent pay increase.
One way to safeguard against such a blatant bait and switch would be going to a special tax – which would require two-thirds vote.
Then again, the council will argue it is a different time. We have a much better sense of the budget needs. And the council has an active commission – the Finance and Budget Commission – which would probably sound the alarm at any effort to roll a tax into an employee compensation increase. Not to mention the fact that the Vanguard would have a field day.
Still, the lessons of the last two cycles are stark. Even a low level tax would have generated millions of dollars in revenue that would go into the system.
Right now the city faces a roughly $7.8 million shortfall, not in its immediate budget but rather in terms of the needs for roads, infrastructure, parks, and unfunded liabilities.
Questions remain. Can the council agree on the type of tax? Will they agree on what it should go for? Will they agree on the amount?
And, assuming that the council does all of that – will the voters approve it? It is worth noting that the voters have been willing to, at the 68 to 72 percent level, approve renewals and new taxes for the school district – and yet the voters balked at a $150 a year parcel tax (at least in polling) for the city.
Does the city need to do more to educate the public on its needs and why it needs the tax revenue to continue to provide services like police, fire, and – oh yes, our roads, parks, greenbelts and bike paths?
—David M. Greenwald reporting
What is the status of employee contracts with the various labor groups?
The status is that the city is in contract negotiations. DCEA hasn’t agreed to a new contract since 2006 I believe and Fire since 2009.
In addition to the ones David cited, I understand Police, PASEA, and General Management Employee MOU’s expired 10 days ago. Not to mention ‘Executive Management’, and CM, where I am unclear as to status.
Basically, everybody covered by an MOU.
They probably should resolve all of those contract situations before they go to the voters asking for more money.
Agreed. I hope it comes up in the discussion at CC. At minimum an acknowledgment and hopefully more fully.
Resolve?
One, three, five, ten year ‘resolution’? Life of the provisions of any revenue proposal?
Parameters… zero based as to City costs (current dollars) [employees absorb any increases to medical/dental insurance, and increases to PERS rates, general inflation]? 5%, 10% give-backs as to total comp? Now would be a good time for folk to weigh in, rather than later…
Am seeing two solid votes for,
Indefinitely. Or at least the next 10 years. Until ALL the backlog of ‘unfunded liability’ is cleared from the books.
Fiscally, that would be the most ‘prudent’ action.
I don’t really care as to the exact duration or details. They need to go to the voters with contracts in place for all employee groups.
Well, unless the contracts are for 3+ years, and given Mark West’s points, and a revenue measure a year off, effective 6 months later, can’t see your concern going away…
But your basic point is noted, and likely valid.
Or, perhaps Don, are you ready to go the next step and support/advocate to have all MOU’s go to a vote of the people? That’s sorta’ what we did to constrain the CC approval of development involving re-zones from Ag or annexations… different, but also similar in concept…
No. I think the contracts need to be in place for all employee groups before any revenue measure goes before the voters.
Not sure how feasible that would be.
Does the FBC review contracts/MOUs and have the power to change them? If not, then how does having an ‘active’ FBC prevent the CC from spending the new revenues on compensation?
How successful was our ‘active’ FBC in preventing the most recent $1 million pay increases?
If you look at the long range plan they have already planned for 2 percent compensation growth, which is consistent with what the previous contracts received.
We have an $8 million annual deficit (at least). How can we afford any pay increases?
Your claim was that an ‘active’ FBC would help prevent the CC from misspending any new tax revenues, but that claim is clearly bogus based solely on the most recent MOU’s. If the CC wants to put the money towards compensation, there is nothing preventing them from doing so.
No one seemed to protest when I brought this point up a few months ago. The $8 million includes the 2% employee increase in the projections.
“employees absorb any increases to medical/dental insurance”
I am making no advocacy for any particular process at this time, but do want to point out that this may be a very big ask at a time when there is so much uncertainty about medical insurance.
That’s the point, Tia… folk want certainty in a time of uncertainty… if the City does not take the risk of increased compensation costs, employees will need to.
Simple.
The City does not have the resources for increased compensation without making the fiscal hole bigger and deeper. Simple reality. If we want to raise compensation, we need to reduce expenses somewhere else to compensate. It should be a discussion about priorities, not one assuming an endless supply of tax dollars to spend.
How are you defining raised compensation. 2% is more of a cost of living adjustment than a raised compensation.
Look at the GF budget… reduction of expenses means reduction of staff, reduction of staff compensation, reduction in street/park/maintenance ‘catch-up’…
You seem to confirm your vote for zero increase in staff compensation, and for external costs such as medical/dental, and PERS contribution rates, to be absorbed by the employees. I think your point is clear, as I don’t believe you recommend digging our capital replacement/repair hole deeper.
I define it, as most do, as total comp, not salaries… 2% does not cover medical/dental/PERS increases traditionally paid by the City, and you (David) have said,
Just have to assume you thought the 2% was too high.
Zero total comp increases (additional city expenditures) means salaries remain constant, as does # of personnel, and all externals such as PERS contributions and medical/dental premium increases are absorbed by employees (less TH pay).
How are you defining raised compensation, David?
I believe Mark has been very clear. Additional costs of compensating employees… in total.
I’m looking at total expenditures, which in my mind have to be reduced if we are going to take a comprehensive approach to our fiscal problems. We aren’t going to negotiate reductions in compensation for existing staff, at least not to a level that will make a significant difference to the budget. Therefore, the best option is to reduce total compensation by cutting the number of City employees through outsourcing of services. Short-term costs may rise depending on the outsourcing contracts, but those negatives should be compensated by long-term savings in future retiree costs.
When you are in a stuck at the bottom of a hole you can’t climb out of, stop digging.
Your 12:15 post intrigues me Mark… the City is already out-sourcing much parks/greenbelt/landscape/tree trimming functions. Also much sophisticated traffic engineer, capital improvement design, pavement evaluation functions…
Which other ones?
Utility billing
water/sewer/storm system operation/maintenance
general accounting/finance
public information/inquiries
development review
building inspection
permitting, in general
Can you be a bit more concrete in areas that you think are ripe for out-sourcing? Or just a buzz-word/philosophical concept?
I think the City should have a City Manager (and support staff), City Attorney, a police department and as many outsourcing contract managers as are needed. Every other City function should be considered for outsourcing. The reality, however, will be that there are no reasonable alternatives for some services. If an alternative exists, it should be seriously evaluated (why again, do we do our own fleet maintenance?).
I would normally include fire and emergency medical services with the City employees, but the system here in Davis has been so damaged by the power of the fire union that the only logical approach I see is to shut down the entire department.
We can’t get rid of all City employees, but cutting 10-20% would be a reasonable start towards balancing the budget long-term. It would also demonstrate that the City is serious about cost cutting, and help justify interim tax measures.
Mark…
First off, fleet maintenance makes sense (the one you specifically mentioned), if cost effective… a car is a car, a fire engine is a fire engine (and specialized). No argument there.
Fire and emergency services, won’t touch, as to opinion, as it is complicated, and am not familiar with what that might look like. Since there is a private EMS/ambulance system in place, would welcome a discussion of whether there are duplicative services there… response times are critical… also, private EMS folk charge about 15 X for services as even the best medical insurance allows. That’s a concern. They charge the individual… that would need to be addressed.
There are many functions where I’d not want to outsource… development review, building permits (although the inspection side could be fair game, if the contract was written well). Except for routine operations, would not want to outsource utility maintenance… too big a learning curve. We already have outsourced stuff (my previous post on subject) and that has mixed reviews as to performance.
We have for a long time decreased the City’s ability to deal with street/bikepath repair/maintenance early, with bandaids/preventative measures, and that is a huge part of the crisis we’re facing in pavement management backlog… currently, and for ~ 20 years, the City has a good mix of outside and in-house efforts. The problem there is primarily what didn’t happen as to funding in the past, despite both in-house and ‘outsourced’ study and recommendations to CC. And lack of in-house resources as a ‘first strike’ to nip problems in the bud.
Functions that require a well-grounded knowledge of City ordinances, ‘history’, and judgement are not appropriate to outsource, in my view.
In short, out-sourcing is not a panacea… yet, it should be a tool in the toolbox, if effective both from performance and financial criteria.
If the City were serious about outsourcing, one of the current managers of these operations would likely set up a new business to bid on the contract. Hence, no learning curve.
As you have correctly pointed out, contract writing and management become the critical skills, which may require hiring a different City Attorney with more experience in those areas. Not necessarily a bad side effect…
Fleet maintenance is a no brainer. There is no reason for the City to be paying a pension for an auto mechanic, no matter how talented. In the case of more specialized equipment (fire), while I never independently confirmed this information, someone who should know told me a couple of years ago that every jurisdiction in the area other than Davis used the same contract service provider in West Sacramento. Why do we need our own in-house staff?
Mark… how do you seem not to understand that we are in agreement re: fleet maintenance?
Why do you assume that a public service manager would want to start their own business? [Utilities] Just weird…
Each business (existing or new) would periodically have to bid for providing any service… high risk for a “start-up”… you appear to don’t know stuff from Shinola, relating to utilities… if a company took over sewer collections/maintenance, would not their profits be best served (under a 5-10 year contract) to minimize investments in maintenance/replacement of capital improvements? This has been the result in many (if not most) jurisdictions that travelled that road… philosophy is fine… reality is real.
I understood that just fine. You are not the only reader here, and some of the others are likely less enlightened than you so repetition has benefits (for some readers…not so much).
Because they would otherwise lose their job. Not so weird. Happens all the time (but maybe not in sewage).
Sure, but maybe there is someone out there who made the decision ten years ago in a different city and now has a decade of experience doing what we need?
Readily admit it is not my area of expertise. You appear to be a jerk sometimes. Doesn’t prevent me from learning from you.
It all comes down to how the contract is written, something we both said in different ways. No reason that utilities won’t work much the same way (in general) as other services. Not claiming I should be the one to write the contract.
And the reality is that the City is mostly broke and needs to consider all ways to save money including looking at every service function to determine if it could be covered through outsourcing. Not all services will have a reasonable outside alternative, but many will, and those should be implemented whenever possible. My preference would be to kill CALPERS and OPEB for new hires, but so far the City has been unable to negotiate that change (and probably never will). That leaves outsourcing as our best option.
David greenwald said . . . “Then again, the council will argue it is a different time. We have a much better sense of the budget needs. And the council has an active commission – the Finance and Budget Commission – which would probably sound the alarm at any effort to roll a tax into an employee compensation increase.”
There are a lot of flaws (fatal flaws) in David’s assertion. We do have a much better sense of the budget needs; however, I personally believe we still do not have an adequate sense of the budget needs.
The Finance and Budget Commission stated very clearly:
That is a pretty loudly sounded alarm, but the question is whether the Council is listening to that alarm. Every dollar of additional compensation given to employees means a dollar reduction in either services to the businesses and people of Davis or maintenance of the City’s rapidly deteriorating infrastructure. A full assessment of the tradeoffs associated with decisions needs to be completed
For example, the Fire Department budget is being presented to the FBC tonight at 7:00 at Council Chambers. The PowerPoint can be accessed at http://documents.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/Finance-And-Budget-Commission/Agendas/20170710/Item-7-A-FIRE-BUDGET-PwrPt-and-Expenditures.pdf That PowerPoint shows 41.4 FTEs in 2016-17 and 43.4 FTEs in 2017-18. It also shows Salaries and Benefits expenses of $8,285,725 in 2016-17 and $8,888,373 in 2017-18 in 2017-18. That is $200,138 per FTE in 2016-17 and $204,801 per FTE in FY 2017-18.
Further, those Salaries and Benefits numbers do not (to the best of my knowledge) include the increased costs to the City for pension (CalPERS) and retiree medical (OPEB).
The “active commission” has been sounding the alarm on CalPERS and OPEB for over two years, with only small progress to show for it.
Should note what I said was “the council will argue” not that’s the absolute truth.
Understood David … and many Davis residents “will argue” that the $190,000 increase of Firefighter Pension costs from $880,000 in 2016-17 to $1,070,000 is a $4,500 per year “raise” for each of the 41.4 Fire Department FTEs, which becomes close to a $9,000 per year “raise” when you consider the increase in annual OPEB costs.
Not sure why anyone would even consider granting a “cost of living” raise, especially when pension/medical costs continue to rise. Matt and others are correct, here. Having cities continue to assume all of the costs and risks of rising pensions/medical benefits IS a “raise” (which also cannot be entirely predicted), and is not sustainable. Why would anyone in their right might also consider any additional “cost-of living” raises, at this time? (Especially since much of the “increase in cost of living” is already being covered by the city, itself?)
As previously noted, many other cities and counties in California are dealing with the same issue (as is the state, itself). I suspect that the ultimate “solution” will look much the same – in cities across California. (Not sure what that solution is, yet.)