During the last few years the city has consistently failed to make the hard decisions needed to manage its finances. The proposed new city budget released on Friday is more of the same. What follows are just a few examples of how the latest city budget proposal for 2025-2027 digs the city ever deeper into an embarrassing financial morass.
Having 10.3% and 10.2% reserves for the city’s General Fund for the next two budget years — as the new city budget plan proposes — might suffice in better times. Property and sales taxes are historically stable revenue sources for Davis and other California cities that can enable them to survive troubled times. But a 10% reserve is inadequate for the next two fiscal years given the treacherous economic circumstances the city is in. And coming are the all but certain massive state and federal funding cuts for local government programs.
In earlier budget discussions, City Council’s direction to staff was to get the city’s General Fund reserve back to 15% over the next 2-3 years. That plan is now dead. No specific proposal to get there is being offered — just a vague statement that new revenues or budget reductions will have to be found somewhere. This dire circumstance should trigger immediate action to put the General Fund reserve back on track to 15% in 2-3 years.
Don’t count on that happening, though. Even as these budgetary dangers loom, another item on the Council’s consent agenda for Tuesday would make things worse: the ratification of a very rich and unwise employee contract with the Davis City Employees Association (DCEA). One that will probably set the stage for another wave of contracts for other city employee groups.
The ill-timed proposal before Council would award DCEA with cost-of-living adjustments (COLAs) that, starting in 2026, would provide its members with a minimum 2% pay raise. It would start even if growth in the cost of living in that particular year were flat, and even if city revenues were declining in a recession. The proposed DCEA contract additionally provides all DCEA members $1000 and 5.5% pay raises in July 2025. This would be regardless of whether those compensation increases are actually needed to keep the city competitive in hiring for particular job categories.
Some similar provisions are included in another proposed action by Council on Tuesday night. These arrangements would award extra one-time cash, as well as initial pay increases ranging up to 8%, and future COLAs for high-ranking city executives who are not represented by labor groups. These packages build on, and compound, the fiscal damage caused by a Council decision last year to agree to deals with city labor groups. Those packages pay many city staff members the average of other local agencies, instead of the prior practice of generally paying about 5% below other local agencies. These exorbitant deals will trigger big future increases in retirement benefits and will cost city taxpayers millions of dollars.
This continuation of excessive spending on city labor contracts by the Council comes as the new budget plan gives up on efforts to catch up on huge past financial commitments to pay for health benefits for retired city staff. Apparently, this huge unfunded liability will continue to be ignored.
What Council should be doing under the current dire fiscal circumstances is to put the DCEA and the deal for city executive brass on ice. Hold off on making deals with any other of its labor groups, and negotiate a pay freeze on all staff positions for a year. While it must bargain in good faith, state law does not require elected officials to approve pay increases the taxpayers clearly cannot afford and that put the city in financial peril.
While the city is going overboard in its deals with city labor groups, this new city budget proposal once again underfunds the priority of many Davis citizens — fixing roads and bike paths. The budget proposal allocates $8.5 million per year for the next two years, when $14 million per year is needed, with no commitment that funding levels will ever increase in the future. This is in direct contradiction to what the City Council recently requested, which was to front load more funding for roads and bike paths from Measure Q funds. The City Council made clear backloading funds 5 years down the road was unacceptable.
This failure to invest in the upkeep of basic city infrastructure would cause pavement conditions to seriously deteriorate. Over time it would add tens of millions of dollars to the already massive city backlog for such projects. That’s because it costs exponentially more to rebuild broken city roads than to maintain them properly.
This aspect of the new budget proposal is thus a fiscal time bomb. It also breaks the promises made to voters who approved Measure Q last November. Repeated assurances were made in the ballot language that the roads and bike paths would finally be fixed. If this bait and switch holds, we cannot imagine how any future tax measure in Davis would ever have a prayer of passage.
The forthcoming Council discussions on the budget could easily bury the city even deeper in red ink. The budget report is strangely silent on the fate of proposals being pushed by Mayor Vaitla. He is asking for a new down payment assistance program for homebuyers, and for an expensive and duplicative community navigation program for the homeless. Will these and other new spending proposals the city cannot afford be added out of the blue at the last minute? Don’t bet against it.
Missing from the budget package released Friday is information on how city finances will fare in the long run due to the unwise spending decisions that have been made.
The city staff report on the budget says that such a long term forecast will be provided soon. However, in the past, the Council promised the forecast would be used as a tool to make major budgetary decisions. Its absence from the city staff report this Tuesday suggests the forecast will instead be used after-the-fact, to document the impact of the bad decisions it will have already made.
Elaine Roberts Musser is an attorney who has served on county and city commissions as well as various task forces. She was given the award of Davis Citizen of the Year in 2014.
Dan Carson is a former Davis City Council member and city commissioner with a 45-year career in journalism and state and local government service.
“The budget report is strangely silent on the fate of proposals being pushed by Mayor Vaitla. He is asking for a new down payment assistance program for homebuyers, and for an expensive and duplicative community navigation program for the homeless. Will these and other new spending proposals the city cannot afford be added out of the blue at the last minute? Don’t bet against it.”
Honestly don’t know how these types keep getting elected. Is Davis so full of “social justice do-gooders” that basic city responsibilities are overlooked? Is this a result of being a “college town” – big on social justice – but not so much on budgets?
The other strange thing I’ve noticed is that the only time that the local growth activists “worry” about the fiscal health of the city is when some development proposal comes along promising to fix it – despite historically making things worse.
Are you new to Davis? It’s like observing that people like their guns in Texas.
BTW, that’s a pretty disparaging comment – even if you don’t agree with someone. There are always competing interesting in local politics.
“Social justice do-gooders” is somehow worse than “NIMBY” – which you yourself have used multiple times? Or a whole vocabulary of terms worse than that which have appeared on here?
And no – I’m not new to Davis or the area.
But the basic function of city government doesn’t seem to be “functioning”.
“More-importantly”, however, were there any groups left out of “fill-in-the-blank month” during the last council meeting – which took at least a half-hour or so of pure self-congratulatory b.s.? (I can think of one, but it’s not worth going into.) In any case, it seems that’s what the council actually “enjoys” doing.
Yes that was a sarcastic question.
But I mean: “But the basic function of city government doesn’t seem to be “functioning”.”
That seems hyperbolic. A basic function of city government would be things like police and fire, parks, infrastructure, etc. There are places where those are not functioning. This is not one of them. I’m not trying to argue that things are great – I think there are real problems, but those are more the cost of housing, long term fiscal viability, economic health, tax revenues and such – but it’s not accurate to say what you said.
More accurate: “While Davis city government continues to operate on a day-to-day level, its ability to tackle long-term challenges—particularly around housing, affordability, and growth—often feels gridlocked or stymied by political inertia and outdated voter restrictions.”
Like I said, the only time the growth activists care about fiscal health of a city is when they can point to lack of endless growth as the “cause”. (Despite direct evidence that the exact opposite is true – which becomes more apparent when the Ponzi scheme is slowed.)
My third comment.
David Greenwald said … “While Davis city government continues to operate on a day-to-day level, its ability to tackle long-term challenges—particularly around housing, affordability, and growth—often feels gridlocked”
That is not a half bad description David … and the gridlock is self-imposed. A perfect case in point is the recent Fiscal Analysis of Village Farms presented to the Fiscal Commission by Matt Kowta of BAE Anslytics.
The last thing the City needs is a project that costs the City more than it generates in revenue. That kind of project would be (1) a self-inflicted wound, and (2) a significant addition to the gridlock David references. However, Matt Kowta in his presentation explained that the only way that Village farms could get to break even for the developers was for the City to pay 68% of the costs for the new Fire Station (which the developers have included in their proposal even though the City doesn’t need a 4th Fire Station. Layering all those costs on the City makes the annual costs greater than the annual revenues.
Further, when Matt Kowta was asked who would pay for the repairs and maintenance of the roads and bike paths and other capital infrastructure, Kowta replied the City would be on the hook for those costs. He went on to assure the Commission that City Staff had assured him that “repair and maintenance funds are in the tax revenues” but as Elaine Roberts Musser and Dan Carson have so clearly shown us that funds like that are in very short supply. “somewhere between slim and none, and slim has left the building” is an old expression that does a good job of describing roadway maintenance dollars in the Coty’s budget … both for this fiscal year AND for the Village Farms project.
Our fair City of Davis is digging a hole (dare I say a pothole) so deep for itself that pretty soon it will reach China.
““More-importantly”, however, were there any groups left out of “fill-in-the-blank month” during the last council meeting – which took at least a half-hour or so of pure self-congratulatory b.s.? (I can think of one, but it’s not worth going into.) In any case, it seems that’s what the council actually “enjoys” doing.”
One group that seems to be left out of budget discussions are voters. Voters were promised, according to the Measure Q ballot language, that funds from this sales tax increase measure would be used for maintaining and repairing the city’s roads and bike paths. Yet the staff report doesn’t mention any Measure Q funds for that purpose. And here comes Mayor Vaitla proposing another tax just to fix our roads – a pretty good indication he has no intention of spending any Measure Q funds as promised. When Measure Q promises are not kept, does he really think citizens will have any appetite to approve another tax measure because the city chooses not to get its fiscal house in order?
Great points Elaine. The voters need to take notice and respond accordingly.
“It’s like observing that people like their guns in Texas.”
“Liking guns” isn’t a budget issue.
That wasn’t the point
It was my point
“Honestly don’t know how these types keep getting elected. Is Davis so full of “social justice do-gooders” that basic city responsibilities are overlooked? Is this a result of being a “college town” – big on social justice – but not so much on budgets?”
Maintaining and repairing infrastructure is not “sexy” if you will, but a crucial issue that needs to be addressed sooner rather than later. The longer infrastructure repair is put off, the more expensive it is to maintain and fix. “Caltrans estimates every dollar spent on preventive maintenance today averts as much as $10 in repairs later”. Social justice, on the other hand, has a nice ring to it. “Let’s help the poor and downtrodden” sounds a whole lot more politically attractive than “Let’s fix our city’s potholes”. But the reality is at some point the unwillingness to fix those potholes will get so bad there will be no choice but to repair them or people can’t get to work. But those necessary repairs will be at an exponentially higher cost. That higher cost represents money that cannot now be spent on the “poor and downtrodden”. What is the old saying: “An ounce of prevention is worth a pound of cure.”
David Greenwald said that Ron O’s comment that “the basic function of city government doesn’t seem to be functioning” was/is hyperbolic.
Elaine Roberts-Musser correctly observes that “Maintaining and repairing infrastructure is not “sexy” if you will, but a crucial issue that needs to be addressed sooner rather than later.”
Maintaining the City’s roads and capital infrastructure is absolutely one of the basic functions of government, and our City streets continue to crumble under us.
Another basic function of gover is to manage and report the City’s finances. Here too the coy is failing miserably.
— the City’s 2021-2022 Audited Financial Statement is now more than two years overdue
— the City’s 2022-2023 Audited Financial Statement is now more than one year overdue
— the City’s 2023-2024 Audited Financial Statement is more than 4 months overdue.
— The City is out of compliance with both State and Federal laws with all three of those Financial Statements.
— As a result the new Budget being considered tomorrow night by Council is a structure built on a foundation of sand.
And there is no end of these problems in sight.
In personal communication to me which wouldn’t have come if I hadn’t requested it, the City has indicated, “ At this point, I am hesitant to give you an estimated completion date,” and then went on to say, “I have asked staff to provide you with additional information, including an anticipated release date and confirmation that the audit will include an unqualified, or “clean” opinion.” That was more than 45 days ago and I have yet to receive that additional information from staff.
So Davi, the evidence clearly shows that Ron o’s comment was definitely NOT hyperbole.
“Another basic function of gover is to manage and report the City’s finances. Here too the city is failing miserably.
— the City’s 2021-2022 Audited Financial Statement is now more than two years overdue
— the City’s 2022-2023 Audited Financial Statement is now more than one year overdue
— the City’s 2023-2024 Audited Financial Statement is more than 4 months overdue.
— The City is out of compliance with both State and Federal laws with all three of those Financial Statements.”
Geeeeeeeeze – this is unacceptable! Thank you Matt, for keeping on this.
“So David, the evidence clearly shows that Ron O’s comment was definitely NOT hyperbole.” No, Ron O’s comment is most definitely not hyperbole.
“So David, the evidence clearly shows that Ron O’s comment was definitely NOT hyperbole.” No, Ron O’s comment is most definitely not hyperbole.”
I third that Ron’s comment wasn’t hyperbole.
The down payment assistance program was talked about at the Interfaith Housing Forum before the new sales tax was voted on but because it was a general tax increase the City couldn’t commit to any particular line item before the election because that is to be determined through the budget process. The City Council was given a blank check by the voters. That is how it works with a general tax increase. There is a legitimate budget debate to be had about how the CC spends the new tax dollars but this discussion about breaking promises is disingenuous. In my conversations with the City about the tax increase the city was pretty clear that nothing was written in stone.
Disingenuous? I don’t think so. The ballot language was clear. The allocations are absent in the budget. Trust has been violated.