Davis, CA – A reader was recently surprised by my piece on the fiscal situation for Davis. They frankly shouldn’t be – I haven’t changed my views on the city’s fiscal situation in over a decade.
I have simply de-emphasized my focus on the fiscal because I think housing issues are so much more urgent and important.
The fact that the city council prioritized the revenue measure over housing continues to mystify me.
Why? Well for one thing, it’s fairly easy to band-aid the fiscal. Let’s be honest here – the revenue measure is a sales tax increase that the other communities in Yolo County are trying to do, it will have a negligible impact on people’s personal pocketbooks, and it will produce $11 million. Oh and it only needs a 50 percent plus one vote.
As these things go, that’s pretty painless.
I wrote on Sunday that the anti-tax folks have a strong point here – in the end I just don’t think it’s going to convince enough people to say no to make a difference. But hey, might as well raise the issue.
From my perspective, the bigger problem is that the impact of this tax is a lot lower than it actually should be. Again, same tax increase, West Sacramento is anticipating about $20 million annually while Davis is anticipating $11 million.
$11 million is good and important for the city’s bottom line, but don’t let it obscure the fact that the differential is there due in large part to the failure of the community to embrace economic development over the last 25 years.
That’s an astounding failure in a community that ten years ago was ripe for tech transfer from the university as the host city for a quickly growing world class university.
But the cost of that failure is somewhat constrained. You can philosophically argue that we are bleeding the taxpayers due to our fiscal mismanagement of the city. But at the end of the day, in the last 25 years, the city of Davis has only increased its sales tax by one percent and it might become two percent if this passes.
Let’s say you spend $10,000 a year in the city on sales of taxable goods. At one percent, you are talking $100 per year in extra taxes. At two percent, you are talking about $200. It all adds up you will respond – yes, in 25 years you will have paid $5000 extra dollars. That’s assuming you paid $250,000 in sales taxable purchases over that time. In other words, with these taxes you will spend $255 rather than $250K – over 25 years mind you.
Don’t get me wrong, the city is losing a lot by failing to take advantage of their proximity to the university on economic development. Having tech moving to Sacramento rather than Davis means a loss of jobs and taxes for the city.
But those losses are relatively mitigated. The tax impact is modest, and while I would prefer the city to have taken roads more seriously a long time ago, we’re still kind of surviving even in a lot of roads are in bad condition.
Housing on the other hand is a much larger potential problem.
Renters are already paying for this. Most renters are probably paying $500 to $1000 more per month now than they did a decade ago. That means over 12 months, you are talking about $6000 to $12000 PER YEAR more. Compare that briefly to the expected sales tax impact and add in the fact that these are hitting people who are most vulnerable in our community.
Next, consider what it takes to purchase an actual home where the median home price is around $900K. Not only are you pricing a huge percentage of people out of this community, those who enter the community are going to be hamstrung with large monthly mortgage payments.
Finally there is the impact on the schools. We are facing long term declining enrollment. In other columns I have explained why this is so harmful.
Here the only point I will make is that we have attempted to remedy some of the cost differential through the parcel tax. In 2007, we had a parcel tax of about $100. Now it’s about $1000. Think about it this way – if you own a home in Davis, you are going to pay twice the amount of taxes on a parcel tax increase than if Measure Q passes.
The fiscal problems of the city are something we can and should address. But the housing crisis has the potential (and is already) to completely transform this community in ways that I don’t think we really anticipated in the year 2000.
That’s why I see housing as the far bigger crisis than the city’s fiscal challenges.
A smart piece – but must everything be a crisis?
“but must everything be a crisis?”
LOL, on the Vanguard it “must”.
Alan: “That’s why I see housing as the far bigger crisis than the city’s fiscal challenges.”