Yesterday’s Sunday Commentary breaks down the school district’s long term fiscal picture – and based on that I conclude that, long term, we are in trouble trying to resolve the school district’s finances. We might be able to, through a parcel tax in 2020, forestall immediate problems, but without structural changes to how districts are financed and without commitment from the state, we are probably fighting a losing battle.
Ironically, while the city’s fiscal picture remains vexing, I do believe it is more solvable long term than the school district’s. That is not to paint a rosy picture locally.
We figure that, over a 20-year period, the city is probably over $200 million behind on infrastructure ranging from roads to parks. The city has managed to balance its budget over the last ten years by removing such spending from consideration and greatly slowing the growth of the budget.
But there is going to be pressure on the city to increase compensation which has largely been flat for the last decade. And we have had the benefit of a decade worth of positive economic growth that most experts believe will end at some point in the relatively near future.
The challenge for the city will be how to close that gap and manage future downturns in the economy.
The good news is, while that will be a major challenge, it is doable.
We need to look at this in terms of three planks: cost containment, tax increases, and revenue generation.
On cost containment. I disagree with those who don’t believe we have done it over the last ten years. Have we done enough? Probably not. I’ll grant that. But following the recession, we reduced our workforce by nearly a quarter and we have kept it that way for the best part of a decade.
While we have not completely capped spending increases, we have greatly reduced them over the decade of 2000 to 2009.
On the other hand, I don’t believe the right solution is to reduce spending further by $10 million a year. That will cut deeply into city services and cause the city to have to close parks and greenbelts, 
and probably leave streets and bike paths in disrepair.
I don’t view cost containment as a tool that we are going to use to directly balance the total budget. Instead, I believe it has to be used to slow the growth enough to allow revenue growth to close the gap.
That’s a big difference from what we did 2000 to 2008, when basically the city was growing revenue in double-digits each year but increasing spending even faster.
Second, long term we are not going be able to tax our way to solving the budget problem. But taxes are an important tool. A modest TOT (Transient Occupancy Tax) tax increase, for example, has increased our TOT take to $2.5 million before we have opened two new major hotels in town. The new hotels coming on line with the expansion of the University Park Inn is projected to generate another $1.4 million in the next three years.
The one percent sales tax is up for renewal – that accounts for between $7 and $8 million in annual revenue.
The one measure that the city does need to undertake is the roads tax. In 2018, that measure failed by garnering 57 percent of the vote and needing 66.7 percent. That would add about $3 million to the annual roads needs.
Finally, economic development needs to be looked at to bridge the rest of that gap.
I think the first point that should be made here is that economic development is not all about ARC (Aggie Research Campus, formerly MRIC or Mace Ranch Innovation Center). That’s an important piece, but it’s not the whole picture.
The city has added several cannabis dispensaries and already they are projected to add about half a million to the tax rolls. That is without having the stores all open and/or the industry mature.
Second, as mentioned, the two new hotels and the expansion of the University Park Inn are expected to add about $1.4 million in TOT over the next three years.
Then you have the Downtown Plan which could add tax revenue from sales, property and economic development. You have the potential expansion of Sierra Energy as well as the University Research Park.
But we need ARC for a number of important reasons to close this circle and complete the picture.
When the city did an analysis of available commercial space, they found about 125 vacant acres in the city. But when we looked at the availability of that land, we found about 50 acres truly available, most of it small. There is only the one 14-acre site around Cowell and it is not clear that that would be developed any time soon.
Forget adding sites – just as big a threat is losing key properties. AgraQuest/Bayer left Davis in 2013 because we lacked available land for their growth needs. The same may happen with Schilling Robotics. Others may leave as well.
That means a loss of current revenue plus the loss of potential increased future revenue generated by growth.
People worry that ARC is big and could lead to sprawl. But the reality is this. First, ARC would come in at roughly 200 acres. It would most likely solve our economic development needs for the next 20 to 50 years. It does so on land surrounded by conservation easements.
It is not going to lead to sprawl because the land around is locked into conservation easements.
Estimates for revenue are going to vary. I have seen $2 million a year on the low end. I could see with CFDs (Community Facilities Districts) and other revenue generation, easily in the $5 to $10 million range.
If you couple that revenue generation with cost containment that holds our growth in city costs to the rate of inflation, the renewal of parks and sales tax, and the addition of a roads tax, I think you end up in a place where we can manage our budget, maintain our services and pay for our infrastructure in a way that doesn’t irreparably alter this community.
It is a simple calculation, and yet, this is what we are likely to debate over the coming six months to a year.
—David M. Greenwald reporting
Driving down 505 Saturday I noticed new houses being built north of Genentech and the Kaiser Hospital there. This is the future. You build the economic infrastructure and the housing nearby to limit commute distances for the workers.
One thing you left out and that I don’t think has gotten enough attention is how much money the city spends on needless high priced consultants. My guess is its a million dollars or more a year on consultants. How much of that is needless is anyone’s guess.
What is worse than a government worker?
Answer: A consulting firm that lives off government contracts.
“Fight the Real Enemy!” —
Sinéad O’Connor
City: Doomed
Schools: Super Doomed
Answer: Run . . . to Canada
Or, the ARC! Like Noah, Ramos will save the City with an ARC. And God said unto Ramos, gather the Innovative Businesses, two-by-two. Then wait for the levy on the Yolo Causeway to crack near I-80. And then the real question: will the ARC then float?
But seriously, folks: Has anyone calculated that, if the ARC will “most likely solve our economic development needs for the next 20 to 50 years”, are there any numbers that show that the ARC in any way has the potential to un-doom both the City and the School District? “Meant as a serious question” — to quote another common commenter.
Given how schools are funded, the answer is most likely no. There is direct nexus between local property taxes and school funding.
OK, schools super doomed.
Any idea how much potential ARC has in closing the budgetary gap with the City? I am just wondering how much the touted ‘economic development’ could really have in ‘solving’ this. Not doubting, just wondering the potential.
Depends on what moves in there. Could be half to three quarters.
OK, that is significant . . .
I assume you mean,
There is direct nexus between local
propertyparcel taxes, and local school funding.Locally generated general property taxes has little to no nexus to local school funding… the basic property tax generated in Davis could triple, but additional use of the increment, that the State passes on to Davis schools, would probably be de minimus.
As I understand it… might be wrong…
And consequently there is a direct nexus between school funding and an expansion in the number of parcels in town, as would be expected with the development of a new subdivision. Residential development would increase revenues for the District, and as there is already a surplus of school facilities in town, we could add significant new population growth without requiring new school construction.
De minimus Mark… what would generate more revenues, that were significant, is more school-age kids… parcel taxes pale in comparison to ADA, a point David and others have repeatedly pointed out.
If new development did not add more school age kids, the additional parcel taxes would help to only a limited extent…
Bill – Would you expect the percentage of households in town with children to change after the new construction? If not, then the new housing would create both new parcel taxes and a similar percentage expansion in the ADA. Not de minimus.
A housing prices increase, wages/and salaries lagging, yes
that is exactly what I’d expect… look at historical trends, over the last 15-20 years… not saying none, but am saying it is reasonable to assume the percentages will go down in new development alone, and with the community aging, that will reinforce that trend significantly in existing residential development.
If we are discussing more 5-10,000sf McMansions or another senior-only development, I might agree with you. If instead, we were to build a neighborhood of 1500-2500sf rowhouses situated near a neighborhood park we might induce an entirely different outcome.
Mark… understood… but,
Name any that have been proposed/built in Davis, meeting that idyllic model, in the last 25 years… we don’t build any residential… we can facilitate, but good luck forcing that… there’s probably a good reason it has not been proposed… or built. Called market
And your SF # is interesting… I was raised in a 850 SF detached house… we did most of the raising of our family in a 1350 SF 3 bd/2 ba house…
Your premise of “if”, sure sounds quixotic. Too many obvious flaws…
Unless you have a legacy game, SimCity…
Bill – I think your premise is simply wrong and that if we build more of the same housing that is currently ‘typical’ of Davis that the percentage of school-age children will be roughly unchanged. What will directly impact that however is a failure to build sufficient apartments to meet the housing demand of students and young workers, much as we have witnessed in town the past two decades.
I too was raised in a small house (950sf) with three siblings, but I have no desire to return to those days. I was however quite comfortable living in an 1800 sf two-story rowhouse in Baltimore with our two young kids and see that form of living as being appropriate for the market here. The problem is that nearly everywhere you look in California are communities filled with sprawling ranch homes – since buildable land for housing was relatively plentiful at the time the communities were planned. We do not have to continue with that approach, and we should not if we are interested in being conscientious to the environment while also providing opportunities for appropriate housing for all residents of the region. Changing our approach to zoning in order to incentivize the building of smaller, attached, homes with greater densities is in my view the appropriate way forward.
There’s nothing “new” regarding sprawling developments alongside of freeways. That’s why traffic conditions “are what they are”, today. And, getting worse.
Soon, 505 will no longer be the “go to” freeway, for those looking for a bypass around I-80.
The powers that be are also working on mucking-up the previously lightly-used Highway 113, including but not limited to this development:
http://woodlandresearchpark.org/
And since I-80 is already a parking lot much of the time, a lot of traffic to/from MRIC would go right through town. (For those who aren’t backing up the freeway ramps, at I-80.)
Ron… you are aware that 505 @ 4 lanes, wasn’t built to achieve LOS A for motorists using 5 and 80, right? Same for 113.
Think.
Your point?
I can tell you that 505 is being used to avoid traffic on I-80. Seems that you agree it’s being used in ways it wasn’t designed for.
Were any of these freeways (anywhere) “designed” for the type of sprawl that’s occurring (as developers take advantage of the access they provide – until they’re choked with traffic, and beyond)?
Or, for the cell-phone applications which search out ways to bypass traffic in areas where freeways are already backed up?
Again, what was your point in responding to my comment, in the first place?
As noted repeatedly – the proposed, new parcel tax is solely intended to raise teacher’s salaries. It has nothing to do with the school district’s fiscal picture.
You’re certainly entitled to your opinion. But you stated it as fact.
Are you stating that it’s not a fact?
I’m disagreeing with you characterization that it’s not a fiscal issue.
Ron Oertel: “As noted repeatedly – the proposed, new parcel tax is solely intended to raise teacher’s salaries. It has nothing to do with the school district’s fiscal picture.”
Probably in the short term it’s not as apparent, but definitely in the longer term it has a lot more to do with the district’s fiscal picture.
Higher salaries attract a larger talent pool of teachers willing to stay. It’s better to have teachers with long term commitment and experience. The longer they stay, the likelier they are to sustain institutional memory and develop relationships and connections with the community. Long term it makes the district more attractive to families and students to enroll and to stay. In a fiscal environment, more students = more money from the state. It also becomes a factor for attracting and keeping a sustainable city population.