Op-Ed | Council Should Act Now to Fix the Deep Fiscal Mess It Has Created

A newly published long-range financial forecast for the city brings dire warnings of shortfalls and outright deficits over the next few years. Below, we outline tough but fiscally responsible actions the Davis City Council should immediately take to rein in this serious fiscal mess, substantially of the City Council’s own making.

The May 27, 2025 analysis prepared by the Baker Tilly Advisory Group in collaboration with city staff found the city faces budget shortfalls of roughly $3 million each of the next two fiscal years. They estimate this would leave the city with a bare-bones General Fund reserve, in a period when the risks of recession and inflation are dramatically rising nationally because of severe funding withdrawals in Washington DC and Sacramento. 

Second, absent some painful but unavoidable decisions, the analysis found that the city will likely be completely financially underwater within five years, with annual spending exceeding annual revenues.  In other words, we are rapidly moving from having inadequate reserves to having no reserves at all, as well as serious deficits projected to grow to $5 million annually. Even these numbers may be a bit optimistic. The forecast assumes 2.5 percent annual growth in city pay even though newly signed contracts allow up to 4 percent pay growth for many workers supported from the General Fund.

Few Davis residents likely know about this serious financial predicament. The forecast report was released to little fanfare and sparse news coverage in a Council workshop held in the late afternoon at the Senior Center, instead of the City Council’s usual meeting in the evening in Council Chambers. As this is written, no city press release has been issued to highlight these grim developments. 

What even fewer Davis residents know is that, in a series of little-noticed actions in May, the Council adopted a new set of labor agreements with employee groups. At the last minute it added collective costs to the General Fund of $3.2 million a year (plus another $547,000 in one-time costs), baking it into the new budget plan now pending before them. Some staff will get $1,000 bonuses and upfront pay raises ranging from 7% to 10%. 

These lucrative contracts, which generally also include automatic cost-of-living adjustments over several subsequent years ranging from 2% to 4% annually, came on top of the rich deal the Council gave the employee groups last year. It generally moved all City of Davis employees to the median compensation level of selected public employees in the region. 

These excessive labor agreements, along with other fiscal problems the city is experiencing, appear to leave no money to implement the promises made to the community in the successful campaign last November to pass the Measure Q sales tax increase. The ballot language indicated the new sales tax revenue would go towards repairing roads and bike paths, but instead it is being spent on lavish employee compensation. This situation is shaping up as the biggest financial bait and switch in Davis city history.

For example, the pending budget plan allocates about $8.5 million to fix roads and bike paths, approximately the same amount as in past years. Yet $14 million is needed to catch up to past underfunding of this basic infrastructure. The likely result is the backlog of projects will escalate by $50 million or more over the next decade, according to Caltrans calculations.  In addition, the pending budget fails to address a huge unfunded liability to pay for health benefits for retired city employees.  It also fails to return the city General Fund reserve to 15% to stabilize city revenues.

Council received some pretty terrible advice from city staff on page 6 of the new forecast report, which told them to adopt the proposed budget essentially unchanged. Then the City Council is supposed to “use the next 12 months to evaluate budget reduction options, and implement these reductions starting July 1, 2026, versus trying to make rushed judgments before July 1, 2025.”

Apparently, it’s perfectly okay with city staff to jam millions in new employee contract costs into the budget at the last minute in May, weeks before the budget is to be finalized. But apparently it is not OK to implement actions to fix the fiscal mess for at least another year!  City staff can’t have it both ways!

Such advice is really horrible and fiscally irresponsible.  It often takes a long time to implement the kind of changes, like staff layoffs and program reforms, to actually achieve the savings that you need to make to balance a city budget.  Wait a year for action and you will be waiting as much as two years for savings.

Moreover, the budget is not a “sacred” document written in stone.  Every year the city amends its budget plan dozens of times.  It can and should start amending this budget to implement savings before it goes into print, and can and should continue to amend it the minute the Council gets back from its summer recess.

Here is our ten-point plan to restore some fiscal sanity to the City of Davis:

– Make some immediate cuts and changes in spending in the upcoming June 17 budget hearing, such as redirecting funding for proposed new programs and positions, toward increasing spending for roads and bike paths. Show voters you really are serious about putting the city’s fiscal house in order.  The failure to fix the streets and bike paths is a fiscal time bomb that must be addressed now because the failure to carry out simple maintenance often escalates into far more expensive repair and replacement costs later. New programs, like a $1 million a year housing downpayment assistance program, should never be considered in a dire fiscal environment like this.

– Immediately instruct city staff to come back to Council in September with a resolution it can adopt at that time to initiate a 10% cut in staff positions supported from the General Fund, including police and fire. That plan should exclude from elimination positions that (a) are supported with grant funding, (b) generate sufficient revenue to offset their cost, and (c ) Public Works positions needed to run the city’s pavement maintenance program. Staffing that is not supported from the General Fund would be unaffected.

– Immediately instruct the city’s negotiators to inform the labor groups that it will consider restoring reduced positions.  But only if the bargaining units for General Fund-supported positions promptly agree to a one-year pay freeze and suspension of one-time bonuses provided in these lucrative and completely unaffordable new contracts that were just approved for 2025-26. Otherwise that unit’s cuts in positions would stand as approved. 

– Direct your staff to detail the programmatic and fiscal impacts to city services that will result from these actions as soon as possible, but no later than December.  It may take some time for some city managers to figure out how to reorganize and reduce their operations and programs to adjust to the staffing reductions.

– Direct city staff to create a standing item, as the first item of business of each regular council meeting (after the consent agenda), for staff and Council members to discuss the specific near-term and longer-term actions needed to address the city’s budget crisis. The city manager should provide an opening report at each meeting on staff’s progress in researching and implementing budget solutions. Everyone’s good ideas for cutting government costs and generating new revenues should be considered – with one exception.  

– The mayor’s recent crusade for a parcel or bond measure to pay for road repair should be soundly rejected. Davis voters were repeatedly promised (including in official ballot arguments signed by the mayor and other Council members) that the problem of deteriorating roads and bike paths would be addressed by Measure Q, only to be double-crossed in this new budget plan. Citizens quite rightfully will never support another tax measure for the purpose of pavement management with the necessary two-thirds “yes” vote. The real reason for putting a measure tied to roads on the ballot, and letting it lose, may be to provide yet another cynical excuse for doing nothing to address this critical public infrastructure need. 

– The Fiscal Commission should be invited to participate in a joint public workshop with the Council to discuss the budget crisis and potential solutions. It should also be allowed to participate in a more limited way in regular council budget discussions of this matter. 

– A serious problem with lack of transparency in the recent budget process needs to be addressed.  Earlier this year, the Council created two budget subcommittees, one studying funding for roadwork and the other funding for all other spending proposals.  However, no reports from either subcommittee were ever released to the public.  The findings and completed work of both subcommittees, and the response from and communications about them with city staff, should be released promptly to the public. 

– The council should also economize, sending the message to labor groups that it will accept sacrifices to help clean up the current fiscal mess and that they should do the same.  Accordingly, all health and retirement benefits provided to city council members should be eliminated to the extent allowed by law, as well as all allowances for travel and reimbursement of the expenses of Councilmembers.  Council paychecks would remain the same as they are now, as state law prohibits any changes in pay in the middle of council terms.  

– The Council soon faces a critical decision– hiring a new City Manager to replace Mike Webb, who left in the spring to become Yolo County Chief Administrative Officer.  State law says that in general law cities like Davis, the city manager is in charge of city operations.  While the elected City Council sets policy, their appointed city manager is by law responsible and accountable to the people of the City of Davis. The next city manager should promise to resign, loudly and publicly, if Council does not heed their advice to operate this city in a fiscally responsible manner.

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. 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.

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