In December of 2012, the Davis City Council voted 5-0 to impose the last, best, and final offer on the Davis firefighters. That action marked the end of the second round of new contracts since the recession hit in September of 2008.
Unfortunately, while progress was made on a whole range of fronts with this round of agreements, the city is actually moving in the wrong direction on revenue.
We estimate the city saved about $336,000 annually just with the fire contract. Add to that a savings of between $88,202 and $231,544 for the shared management agreement with UC Davis, and another $443,663 by reducing staffing from 12 firefighters to 11, the city managed to achieve perhaps three-quarters of a million last year just through savings from fire.
But, as we argued in December, those cuts do not go nearly far enough. The real savings can come if the city were able to further reduce the 25% disparity in compensation between the city of Davis firefighters and UC Davis firefighters. That would not only reduce the $175,000 total compensation by 25%, it would enable the two departments to merge.
It is this kind of thinking that we may be forced to employ, because, unfortunately, the budget situation is not getting better, it is getting worse.
In his December budget update, City Manager Steve Pinkerton presented data showing that the city was moving into a $5 million annual deficit and if the city did not act, that number would increase to nearly $7 million.
Over the next five fiscal years, the city manager projects we will go from a positive $3.68 million fund balance to a negative $28.43 million by the end of fiscal year 2017-18. That is about a $32 million budget gap.
As we have noted many times, most recently in yesterday’s article on pensions, the city made a series of decisions from 1999 until 2005 that laid the ground work for the current fiscal dilemma.
The city of Davis, like most municipalities, moved to enhanced benefits in 1999. At the time, CalPERS funding was superfunded, and cities and local and state governments were not having to pay money into the fund. The investments left over from the dot-com boom of the 1990s were funding pensions without any additional input.
At that time, the city went to 3% at 50 for public safety employees and eventually all other employees would receive 2.5% at 55. The mistake Davis made, like all other communities, was that it made the changes retroactive. Meaning a public safety employee who had worked from 1980 to 1999 making the previous pension formula, was suddenly getting 3% of their salary going to their pensions, rather than the percentage that was being paid into their pension accounts.
That created an immediate unfunded liability – as does the fact that employees receive their pensions based on their final salary, rather than an average salary over the course of their employment.
Davis also created a very generous retiree health benefit. The city did not realize until the new GASB (Government Accounting Standards Board) accounting practices, that it was failing to fully fund its retiree health care.
The round of MOUs in the middle part of the 2000s decade saw double-digit increases across the board, most notably a 36% aggregate pay increase for firefighters from 2005 ending in 2009.
The city survived these mistakes at the time by passing a half-cent sales tax in 2004 and on the wave of double-digit property tax increases.
By 2008, those paying attention were warning that the city was headed for troubled times with their pension and unfunded health insurance liabilities.
As we noted yesterday, during the period of 2008 until 2011, the city engaged in further fiscal mismanagement. City leaders dealt with only short-term budget needs, the 2009 MOU process failed to address key structural problems, and the budgets were balanced through attrition of employees and the designation of wide categories of infrastructure needs as unmet needs.
The city survived that time by adopting two policies. First, they reduced primarily by attrition. So if an employee retired or transferred to another city, the city reduced costs by simply eliminating that position.
Second, the city survived essentially by putting entire categories of needs into an unmet needs category. We have spent a great deal of time and energy discussing the roads issue, but roads are not alone in the benign neglect category.
The problem with this policy is that the recession and fiscal downturn lasted too long. Roads are crumbling and other infrastructure needs have arisen. Because we delayed maintenance, the costs for road repairs has gone up tremendously and the city is actually in far worse shape now than they were in the heart of the recession because of this fiscal mismanagement.
This is particularly important for our current fiscal problem.
Some interesting data emerged in the City Manager’s budget. From the 2008/09 fiscal year until the present 2013-14 fiscal year, the city has in aggregate reduced the general fund budget by $5.8 million and $9.7 million in all funds. To do that, it has reduced its workforce by 103.25 FTE (full-time employees).
In 2007-08 right before the recession hit, the city had 464 FTE. This year that number is 361. That is fewer employees than the city had in 1996-1997.
Those numbers are both critical because it suggests that the city will have difficulty closing the budget gap by simply laying off more employees. The city is in a bind now, in part because the 2009 MOUs failed to deal with the problem and the 2012-13 MOUs, while addressing the structural problem, could only go so far in terms of total compensation and salary reductions.
We need to do a full analysis, but it appears on the surface that $32 million in deficit may actually be a low number.
It appears that the roads funding is not included in the $32 million. The council made the decision last spring that they could no longer fully fund the roads and keep the Pavement Condition Index (PCI) at its current level. So they are prioritizing funding for major roadways and willing to reluctantly accept a lower level of maintenance for residential streets.
We are also concerned about the millions in deferred maintenance that we have for the city parks. We have not seen that report yet but that could end up adding additional money to the deficit. The city made the decision in 2012 to keep the parks tax at the current $49 level even though, at that time, they knew needs would far exceed it.
There are also concerns that there are millions in infrastructure needs for buildings and structures. We also have had to close at least one pool due to maintenance costs, and the city may need to close others if money does not come available.
Finally, while not in the general fund, we have sewer and water infrastructure maintenance that needs to be addressed.
As we have discussed, in the short term the city will put a tax revenue measure on the ballot. In the longer term, the city is looking at economic development strategies to increase the tax base. But by the time that kicks in the city may be in far more hurt than we have ever anticipated.
As we noted on Tuesday, all of this occurs at a time when we face the potential loss of the city manager, who has finally helped to put the city back on more certain fiscal footing, and at a time when there figure to be two or three councilmembers turning over in city hall.
The city of Davis has managed to avoid bankruptcy, but at a huge future cost in potential city services and unfunded maintenance.
—David M. Greenwald reporting
You want to balance the budget with pay cuts and outsourcing and you wonder why so many public officials object to the combined fire agreement.
“As we have discussed, in the short term the city will put a tax revenue measure on the ballot. In the longer term, the city is looking at economic development strategies to increase the tax base. But by the time that kicks in the city may be in far more hurt than we have ever anticipated.”
Yes, that’s precisely what I said, balance the budget with pay cuts and outsourcing.
Wow, you are out there on the edge of right wing Neverland.
I once read an article about Ron Dellums and why he decided to become chair of the armed services committee. He did it because he wanted to free up money for the types of social spending programs that he championed. And so he became an expert on the budget for military weapons, so respected during his prime that even people who disagreed with him, acknowledged his expertise.
That left an impression on me that we if want money for schools, social services, then we need to be budget hawks on the left, and we cannot allow public monies to be sunk into enriching already well-paid public employees. I”m not talking about the average state employee who makes $25,000 a year, but people who are making $175,000 in total comp – and retiring at the age of 50 with pensions in the six figures. We can’t afford that and still fund our schools and provide services to the needy.
So yeah, you can criticize my approach, but I’m no right winger.
IMO, David is just more evolved on this topic than you are Toad. He is demonstrating that he is doing the math and reasoning that seems to escape most people with a liberal-progressive world view. These folks want money for social justice while they also defending the extreme deficit spending on non-essential stuff and gross over-compensation of government employees. Those two are in direct competition with each other.
If you think about the current partisanship in all levels of government, it really comes down to this conflict. The left is demanding that we maintain the rich gravy train of government employee payola while also demanding that we increase social spending. The left is pushing a class war demanding that there are enough rich people that should give up more to fund both of these demands. The simple fact is that there are not enough rich people to loot more from, and doing is killing the middle class and it also has negative consequences that perpetuate the very problems we need to solve.
The opportunity for cooperation and collaboration in this country begins and ends with the need to cut the spending on non essential things… namely the number of government employees and their pay and benefits. The left could say they want $50 our of every $100 cut to be pumped back into social programs and the right would probably agree. But instead, the left just demands another $50 with $35 going to the government employees and $15 to more social programs.
David gets it. I don’t think that you get it.
One has to wonder if my amphibian brain has more gray matter than both of you in your dogmatic and never ending attacks on our public servants. There are problems but there are many solutions. My problem is that I disagree with you and David on your preferred solutions although I have more respect for you Frankly because you don’t pretend to be something you are not, a liberal.
“you don’t pretend to be something you are not, a liberal.”
Really, Toad?
“There are problems but there are many solutions.”
I for one would love to hear your solutions Toad. How do you propose we close the budget gap without further cuts in employee compensation?
Raise taxes and grow but don’t raise compensation for those already on the payroll while renegotiating contracts for the beneficiaries to contribute more to their pensions and roll back benefits for new hires.
I appreciate that you support a rational approach.
But I don’t think you understand the extent of the long-term fiscal situation. I also don’t see how you can justify pay and benefits that are obviously too high compared to market rates for equitable jobs in the private sector.
I see the need for continued cuts as being justified by financial, ethical and moral reasons. That is not to say that it makes me happy knowing how it feels to be on the receiving end of cuts.
I think I have a pretty good handle on things. In fact I think I’m being more realistic than David. Where you Frankly and I disagree is in our approach to solving the problem.
If you think you’re being more realistic than me, show me a plan to balance the budget this year.
Mr Toad – I just want to summarize to make sure I am clear (and would value a chance to talk to you about this at some point): You propose (vis-a-vis city employee compensation):
1. “Don’t raise total compensation for those already on the payroll.” To me this means freeze total comp. Another way of saying this is “achieve a growth rate of zero” in terms of employee comp. In real dollars I assume?
2. “Negotiate so that employees contribute more to their pensions.” Would you include health care in that? What about the cafeteria plan? How does this suggestion fit with the first one?
3. “Roll back benefits for new hires.” I think this is clear but I think there may also (at this point) be limits on what the city can do (If I understand Rich Rifkin’s writing on this).
I am very interested in hearing specific ideas for dealing with employee compensation in these times. So thanks for putting this forward. The built in trajectory of growth due to health care and pensions leaves us very constrained. Pinkerton’s presentation made it clear that the main drivers of our fiscal woes (beyond street and infrastructure backlogs) is pensions, retiree medical, cafeteria (though it is being reduced) and water costs.
I would value a chat… Of course I am only talking about comp here. You also mentioned taxes and “grow”. Thanks
robbbike@me.com
Don’t raise it for those making money at the top end of the market for their job category. Over time inflation, if the Federal Reserve manages things correctly and prevents deflation, will eat away the premium and bring things in line. I’d like to ditch the healthcare cash out although people claim the city has minimized its liabilities in this regard although I would try to squeeze more out until I saw the numbers actually reflect that we have made it the minimum. As for not raising taxes or growing then the only possibility is to cut or borrow. Borrowing for operating costs is fiscally imprudent even with interest rates low (borrowing at low rates for infrastructure is actually smart). I’m saddened by your unwillingness to address forthrightly the fiscal situation Robb. The no growth no tax position may be popular with an element of the voting population but it means cuts in services, debt for future generations, or balancing the budget on the backs of people who work for a living.
Mr Toad: I am a little taken aback by your comment: “I’m saddened by your unwillingness to address forthrightly the fiscal situation Robb.” I am very happy to address the situation forthrightly. Where do you want me to begin? My question to you about employee compensation was based on the fact that here on the Vanguard you often are a voice in support of public employees and so when you talk about what might be done I think it is worth listening.
But back to your “sadness”… Our situation is much more dire than suggested by Pinkerton’s December 17th presentation. David has captured the key questions/issues here and in other columns. I have been following the discussion on street repair backlog for almost one year and that issue alone leads me to believe we need an additional $6 million or more per year if we are to maintain an acceptable PCI. Beyond that I do not have the numbers on other maintenance backlogs but fear they may add additional millions.
I will support a sales tax increase of half a cent but believe even though we are likely to need it for a long time, we should renew it in two years. That builds accountability about how it is spent. My understanding is that the first half cent tax increase we voted comes due in 2016. I realize there is a cost to putting this on the ballot. I also realize there is a problem of trust with how CC will use the money.
But that tax is projected by staff to yield “only” 3.4 million (or 3.6 I do not have the numbers in front of me). So, will we need it AND a parcel tax? I assume we will. I would support it.
As far as “growth”. I fully support densification of our downtown and believe that is part of the solution to growing revenue. However, I am on a steep learning curve about what is necessary to redevelop and densify downtown in a post-RDA world. I think the downtown is one key but here is no magic bullet out there.
The other “growth” area concerns the peripheral innovation parks. I am open and anxiously await the plans that are in the works. I support exploring opportunities at all three sites recommended by the task force. I mean, you certainly read the op-ed Brett and Michael and I wrote–whatever happens at these sites I expect the city to lay out clearly what it wants and needs and then negotiate with owners to achieve our ends.
There… tell me what I am missing. The point is we need to be intentional, we need to stay focused for a LONG time and we need to be disciplined. There is no magic bullet and I am willing to put EVERYTHING on the table–including more cuts.
The situation is dire.
Does anyone know if there exists — and if so, where to find — a primer on city staff compensation parameters? For those of us not well-versed in the ways of public agency HR, it’d be useful to know which aspects of compensation can be adjusted, which can’t (short of bankruptcy), and what rules govern those adjustments. I’m envisioning some sort of chart that breaks out the various compensation components and describes their characteristics.
“roll back benefits for new hires.”
Why should new hires take on more of the burden then the people who have already benefited from our excess largess? If our benefits package is too rich, it is too rich for all employees and should be changed across the board.
Our fiscal problems are massive, and the solution needs to be all encompassing. All options should be on the table and everybody should expect to share the pain.
Two reasons, first they are already vested, although they can contribute more to their pensions, but the law doesn’t allow you to roll back their pensions.
Second its easier to give new people less than take away what older people have.
While our problems are large they are not unmanageable if everybody gave some we could easily get a handle on things but David’s continuous attacks on the Firefighters doesn’t add a constructive element to the discussion.
Easily managed? No. We don’t even know how deep the hole is, although it is certainly far deeper than the City has acknowledged so far.
This is going to be painful for all, and freezing total compensation will not be sufficient. If we are unable to negotiate significant reductions in pensions and health care benefits than I expect that many more jobs will need to be outsourced. Especially when the only other option is bankruptcy.
The problem is that over 20 years, you can cut spending, but over the near term, it doesn’t solve the immediate deficit.
dogmatic and never ending attacks on our public servants.
David’s continuous attacks on the Firefighters
I think using the word “attack” when used against people that believe we must cut pay and benefits is quite dogmatic. How is that an “attack”?
You seem prone to protect the pay and benefits of existing government workers at the expense of a lot of other things… including the financial well-being of private sector workers that have already been cut and reduced while their tax bill has increased. And young people that would enter the workforce with even fewer benefits because their older coworkers were protected from impacts.
Why so many crocodile tears for that public sector worker? Are they the heroes and the private sector workers less valuable and less worthy of your protection?
Frankly:
“I think using the word “attack” when used against people that believe we must cut pay and benefits is quite dogmatic. How is that an “attack”?”
At least Toad didn’t say the ever tiresome liberal talking point “WAR ON” public workers.
David Greenwald dined with Roger Ayles and the Koch brothers in Manhattan’s Russian Tea Room. They enjoyed fine wine, caviar, creme brulee, discussed stock options, and the agenda for the next ALEC meeting. Spread the rumor!
I think they drank scotch and smoked cigars too!
David didn’t know it but I voted in the booth next to him and looked over and saw him coloring in the Mitt Romney box. I swear it’s true. (-;
I think he changed his mind and wrote in “Rand Paul”.
Honestly though, Toad’s claim that David is not a liberal-progressive is pretty funny.
I think we should just separate fiscal issues from ideology. At some point it just comes down to math.
Frankly
You seem to think that there are so many highly paid public workers that they are the cause of the inability to proved assistance for the schools and necessary social programs, and yet you maintain that there are not enough rich to help support these programs. My suggestion would be that everyone who makes over “X” amount whether from private or public sources should be taxed more highly. I fail to see why the source of your income whether private or public, should be the determinant of how much you have to contribute to the well being of all.
If you grant us highly paid private workers taxpayer guaranteed 60-90% final salary retirement with COLA increases plus medical then I am with you on the additional tax. Otherwise I will need the money to fund my own retirement as well as several public workers retirement.
David, in the short run (near term) outsourcing only results in a positive impact on the Budget if the fees charged by the outsourcing vendor are lower than the amount paid out to the employees replaced. Such short run savings rarely happen because the costs of employee severance eat up any pay differential between the City employees and the outsourcing company employees. Where outsourcing pays dividends is when the severance costs are completed, and the savings in the post employment benefits begin to dominate the differntial.
David wrote;
> In 2007-08 right before the recession hit, the city had 464 FTE.
> This year that number is 361.
I don’t know if it is just me, but I have not noticed any difference in town with almost 25% less employees.
I wonder what the 103 people not working for the city today actually did?
“I don’t know if it is just me, but I have not noticed any difference in town with almost 25% less employees.”
I guess it depends on what you are looking to do in town? It’s very noticeable to me in small ways. However, the question is not how 464 to 361 looks, but whether we can get down more without seriously impacting services.
I don’t see it either SOD. In fact the trees on my street were all nicely trimmed by the outsourced crew and they did a great job.
“This is going to be painful for all, and freezing total compensation will not be sufficient.”
That is why we need a tax increase.
Davis has always been willing to pay its people well and let the growth of the University provide the economic engine to accommodate its fiscal needs. However in the last decade we gave too much away in our employment contracts while at the same time stifled economic growth the community needed to pay for the services. Now the chickens are coming home to roost but if you only listened to the conservatives on this site you would think that the citizens paying up isn’t a solution. Well its part of the solution as is growing our economy and cutting expenses. As for growth the less of it you have the more you need to cut or the more you need to raise taxes.
My problem with David today is two fold. First he sees cutting as the primary way to skin the cat when there are many ways to achieve the reduction in expenses. Second his personal animus towards the firefighters makes his thinly veiled schadenfreude transparently so distasteful. Even Frankly showed more compassion about the potential cuts than David.
“That is why we need a tax increase.”
No, we need a comprehensive approach. We need tax increases, spending cuts, reductions in total compensation, economic development and possibly even a change in our form of government. We will need all of it to meet this challenge, and arguing about one aspect in isolation is a path to failure.
Well said Mark. Very well said.
“You seem prone to protect the pay and benefits of existing government workers at the expense of a lot of other things…”
Its not me. There is a large body of law about how you can do this. That limits how we can go about getting ourselves out of the box.
“Honestly though, Toad’s claim that David is not a liberal-progressive is pretty funny.”
Progressives in Davis have always been conservatives. The whole point of abandoning the use of liberal and instead using progressive came about when conservatives were in ascendance in the 1980’s. The two labels are quite different. I am a liberal. I believe that we should pay our taxes and our workers good wages. Progressives in Davis have a different agenda.
So, let me understand… You are a fake liberal if you opine that we are over-paying certain government employees? Is that it?
I would not fixate on this, but as you know I am prone to categorization. If David is not a liberal I am not sure I know what a liberal is.
Agreed, you probably don’t.
Nice intellectual response Toad.
My definition of a liberal is a person that gravitates more to government as the solution for social and economic problems and opportunities. They are prone to routine assessments of fairness and demand equality for all even if this means lower average quality for all. They are more highly sensitized toward words and thoughts rather than actions. They have an affinity for victims and the underdog, and a natural distrust and dislike of alpha personalities… that can be overcome in some cases. They desire order and rules, and structure where outcomes can be better controlled and predicted. They tend to prefer the assuredness of strength in numbers rather than the risks of individual success or failure inherent in individual choice and individual competition. They tend to be more risk averse and emotionally impacted about money. They are generally individually insecure about money… even if they have lots of it. They tend to be driven to “save” others through direct intervention… believing that nobody should be in need. And if they live too far above the fray of need, they are racked with guilt and driven to find ways to atone.
And social justice is their primary political calling… everything else is secondary and tied to this impulse to achieve a desired level of social justice.
Carter was/is a liberal. Clinton was/is not a liberal.
Liberals don’t demand equality, they simply favor government action to promote social welfare. Your psychoanalysis is, as usual, facile and unsubstantiated by anything, merely reflecting your biases. I don’t see liberals as “desiring order and rules” any more or less than conservatives. Social liberalism as practiced in the US (as opposed to traditional liberalism of Europe) favors market economies that are regulated to prevent abuses and gross economic disparities. Liberals favor a strong safety net. Social justice is not primary, it’s just important. The differences between Carter and Clinton were not that significant, and both were considered center-left at the time.
Frankly
Given that you have referred to both Obama and myself as socialists in the past, I think it is a fair statement that you do not understand terms to use the left end of the political spectrum.
Or perhaps you understand very well, but like to throw what you consider derogatory terms around for dramatic effect ; )
Tia – your common recommendation that we pay everyone the same wage with some differentiation based on level of effort is way down deep into socialist orthodoxy. You also often talk about your desire for cooperation versus competition. Again, that is a socialist view. Lastly, you absolutely gravitate toward the view that we should provide for the basic needs of all people… and I see your definition of “basic needs” being relative to what others have. Again, this is a classic socialist viewpoint.
Obama too has made it clear in so many of his speeches, presentations and actions that he favors a greater redistributive economy. From those that do/can, to those that don’t/can’t. What can be more socialist than that?
Socialism is not redistribution. It is public ownership of the means of production and cooperative management of the economy (see pretty much any dictionary). Obama, in redistributing money via taxation and government spending, is no more socialist than Bush, Clinton, Bush, Reagan, Ford, or Nixon. If Obama is a socialist, then so are all of them.
We have a mixed economy. Government provides services, and for that government taxes people. Some of those services are social welfare, some are defense, etc. Your definition of “socialism” is inaccurate. Surprisingly, I suspect you know that.
A great article on what it means to be a liberal today including this paragraph:
“Like Kennedy, Miller is an unabashed champion of the labor movement. “You can chart the decline of the wage base and middle-class family incomes with the decline of unions,” he told me on Wednesday. “It doesn’t mean the unions were always right, but it does mean they were very effective on behalf of the middle class.’ ”
http://www.realclearpolitics.com/articles/2014/01/16/the_lost_art_of_tough_liberalism_121253.html
There was a time when liberal, Democratic, and union support were in sync. It all arose from the coalition that elected FDR and carried the Democratic Party forward for a generation after that. It began to split apart in about 1968. Humphrey was the candidate of the old farm/labor coalition. Eugene McCarthy united the anti-war element, who saw the labor unions as corrupt, conservative and pro-war.
By the time Jimmy Carter was racking up victories on his way to the nomination in 1976, the unions realized that he was not strongly pro-labor and moved desperately to block him. They organized and supported an ABC movement: Anybody But Carter. Among the beneficiaries of their financial and grassroots support was native-son candidate Jerry Brown, part of a strategy to deny Carter the nomination on the first ballot and throw it into an open convention.
Labor and the reform-minded Democrats coexisted uneasily for a couple of years, but labor supported Teddy Kennedy’s bid against Carter in 1980. Their influence waned, and with Clinton’s move toward the middle-road DLC the unions had less and less influence.
Now Democrat, liberal, and pro-union are not synonymous. Many who are registered Democrats don’t feel any great affection toward unions. We are much less likely than in the past to have union members in the family, or to have any relationship to the formerly unionized industries. Really, the last vestige of union influence on the Democratic party is the public employee unions.
I’m quite sure Frankly thinks Carter and Bill Clinton were liberals. But he probably doesn’t understand that union leaders viewed them both as insufficiently pro-labor, and thus insufficiently liberal. Mr. Toad seems to come from the old school of Democratic liberalism.
A rather truncated history.
I’m not a student of labor history, but here’s the impression I have: In the early nineteenth century management blatantly exploited labor, which gave rise to unions, which nourished a pro-union middle class. But in the latter half of the century the big unions had acquired enough power to push so hard against management that middle-class sentiment began to change. Americans like to root for the underdog, but now it wasn’t always clear who held that position. Coupled with the corruption and mob control of some unions, middle-class apathy toward unions began to rise. The economic crises of the 1970s led to Reagan and the rise of right-wing economic policies, which substantially turned back the labor agenda. Union membership was on the decline, and with it the support of the middle class.
But the face of unionization is changing. More unions are reaching into the lower class to organize traditionally exploited workers like janitors and hotel staff. These efforts resonate much more strongly with middle class members, even those with no recent family connection to a collective bargaining unit. The underdogs are in the fight again, and this could substantially change the middle class perception of organized labor.
I don’t object to public-sector unions; I believe workers should have the right to organize as they see fit and negotiate with their employer. However, those negotiations have to be conducted as equal parties. In a small public agency setting, that means that the agency *must* engage an outside negotiator to represent it. Management staff cannot effectively negotiate with the same small cadre of people with whom they have to work every day.
As far as I know, the recent round of city contract negotiations is the first — or at least the first in many years — in which an outside negotiator was brought in. And the results are telling.
Robb said: “I would value a chat… Of course I am only talking about comp here. You also mentioned taxes and “grow”. Thanks”
My statement about forthrightness was related to you only talking about “comp.” Only talking about comp doesn’t solve the problem.
First many here have the road thing all wrong. We have deferred maintenance for too long but we don’t need to pay for bringing up the roads all at once today. We can float a bond at low rates, bring the roads up to acceptable condition and pay it off over the life of the repairs or even longer if we can afford smaller costs by not letting the roads get so bad again.. By the way even though David forever wants to beat a dead horse on mistakes made by previous councils why is it that deferring maintenance on crumbling roads while loaning road money for open space gas gotten a pass by most of you on this site?
A sales tax increase therefore of $3.4 million gets us a long way towards solvency. Increasing our revenue stream by a few million dollars a year through economic development should get us to the finish line. Especially if we hold the line on costs. But densification of downtown alone isn’t enough economic development. Also tapping the pass through agreement could save us lots of money. David says it can’t be done but I haven’t heard that from the city itself.
What is interesting here is we are in many ways all saying the same thing that we need to put as many things on the table as possible. While many of you claim I’m an ardent supporter of local public unions and want to protect them its more about my realism on the issue. City employees have all taken hits, some willingly, some kicking and screaming the whole way down. Perhaps there is more to cut there but the ink is barely dry on the last two contracts that were imposed and you guys already want more. On top of that unwinding the pension mess is a complicated legal issue. Like it or not its a tough cat to skin. Changing the rules for new hires is easy to do and that is why I suggested we go that way. Also if we get the employees to add more to their pensions it reduces the drain on other resources without reducing existing pension obligations.
Strip away the bitterness and put everything possible on the table and our problems are solvable but the ongoing hateful and inflammatory rhetoric against city employees only serves to make everyone dig in and doesn’t move us forward. Failure is not an option, it means bankruptcy for the city or reduced services through lay offs. Does anyone want to go down those rutted roads?
You have spent so much time croaking Toad that you don’t seem to have had enough time to keep up on your reading. Matt has been laying out the numbers and borrowing the money to fix the roads will add something on the order of $5 Million per year in finance costs over and above the $8 million per year in principal repayment, and both of those numbers will be added to the total deficit bill. As I understand it, that level of investment doesn’t make the roads any better, it just keeps them from getting worse.
On top of that, we still don’t know what the numbers will be for maintenance on the buildings, parks, pools, and whatever else the CC and our highly compensated City Staff have ‘forgotten’ to maintain over the past several years. Simply put, the sales tax increase is a small portion of the total needed, not a ‘long way’ to the answer as you have proclaimed. As I said before, we need a comprehensive plan, and if some of the needed changes are ‘a tough cat to skin’ as you put it, then perhaps we should get to work skinning.
I never said it did Toad (re: talking only about comp). I was merely trying to make sure I understood your perspective. I never said you were an “ardent protector of unions”. I did say you often speak on behalf of public employees and I value your opinion on that score. I was asking for no more than to understand your position so I could learn from it. I was only talking about comp because I wanted to focus on that, not because I think that is the only thing that should be on the table.
And I agree — we need to put as many things on the table as possible. Period. But I also agree with Mark–I think you may be underestimating the costs of the street maintenance backlog.
Mr. Toad croaked . . .
“First many here have the road thing all wrong. We have deferred maintenance for too long but we don’t need to pay for bringing up the roads all at once today. We can float a bond at low rates, bring the roads up to acceptable condition and pay it off over the life of the repairs or even longer if we can afford smaller costs by not letting the roads get so bad again.. By the way even though David forever wants to beat a dead horse on mistakes made by previous councils why is it that deferring maintenance on crumbling roads while loaning road money for open space gas gotten a pass by most of you on this site?”
Oh Toad, I can’t believe you went the bond route. Let me share some cold, hard numbers with you. 1) in order to keep the streets at the current pavement Condition Index (PCI) value in the low to mid 60’s (which is less than ideal), we will need to spend $213 million over the next 20 years . . . over $10 million per year, just to keep the roads at their current suboptimal level. That’s the bad news, and the reason we are in this highly compromised position is because of thinking BY PAST CITY COUNCILS similar to what you have (in part) proposed, “Let’s just delay a little. We’ll be okay.”
That is the bad news, but there is some good news. The current Budget presented by the City Manager on 12/17 has a run rate of streets maintenance that amounts to $49 million of that $213 million, so the incremental spending for streets is only $164 million for the 20 years … only an incremental $8 million per year.
How does debt service affect that $8 million per year if you issue infrastructure bonds at 5% interest rate (if they were revenue bonds the rate would be lower)? The answer is that the $8 million per year pay-as-you-go capital expenditure transforms into a $13 million per year debt service payment stream for 20 years. Which do you want to pay $8 million per year or $13 million per year?
Just say “no” to using debt to maintain the streets.
Mr. Toad also croaked . . .
“A sales tax increase therefore of $3.4 million gets us a long way towards solvency. Increasing our revenue stream by a few million dollars a year through economic development should get us to the finish line. Especially if we hold the line on costs. But densification of downtown alone isn’t enough economic development. Also tapping the pass through agreement could save us lots of money. David says it can’t be done but I haven’t heard that from the city itself.”
Oops, another misconception. Based on the Budget presented by the City Manager on 12/17 the five-year General Fund deficit is $31 million … an average of over $6 million per year. Add the incremental $8 million per year for the streets maintenance and you are at a number just north of $14 million as “the finish line.” The last time I checked my math, $3.4 million plus “a few million dollars a year through economic development” falls quite a bit short of $14 million.
The reality is that we are going to have to have a serious “come to Yahweh” discussion with ourselves about both taxes and economic development.
so let us get this straight:
toad has not put forward a plan
toad’s simple suggestion is bs and doesn’t provide near enough revenue
toad instead attacks david and suggests he’s a fake liberal
toad’s definition of liberal is very narrow and means uncoditional support of all public employees no matter how much money they make?
did i get it mostly right so far?
Who has put a plan forward?
You say revenue bonds would be cheaper. Woodland just got a loan for their water project at 1.5%. I didn’t say that borrowing was optimal but until we can get things under control it needs to be part of the solution just like everything else. Also Matt what happens if you stretch out the payments? As for revenue didn’t Pinkerton take the prudent route of using current revenue numbers to project into the future? With state furloughs ended and more retail near Target, car sales up and the housing market recovering the numbers presented by Pinkerton likely understated revenue going forward. With development at Nishi, Cannery and an innovation park in the pipeline hopefully we will have more revenue coming in during the out years. Perhaps adding a parcel tax will be needed too. I wish we could put in a carbon tax to help with the roads but I don’t think its possible. Even the largest numbers only add up to a per capita amount of how much annually? Surely fiscal prudence could help on the other side and I think its clear that for city employees that have already taken a hit things aren’t going to get better any time soon and, sadly I might add, will likely get worse going forward for present and future employees with them paying in more while receiving benefits of less value. Ultimately, if push comes to shove and Davis taxpayers refuse to raise taxes, we can expect more reductions in staff at the city and continued deterioration of infrastructure.
While I will admit that I don’t know all the numbers am I missing something? Is there a rock I left unturned?
My problem is three fold. First all the hand wringing about how bad it is as if you can have decades of anti-growth policies without raising taxes. I want to challenge all the no growth advocates in town to pay up for the lifestyle they have demanded. Second the demonization of public employees and their unions coupled with the bitter and indifferent desire to settle scores of the past while trumpeting austerity and rubbing workers noses in it is just simply not helpful in getting people to accept the fiscal realities they face. Tackling pension obligations for vested rights is the hardest nut to crack for legal reasons. We must be creative in how we address this conundrum. Greater contributions from those on the payroll and reduced benefits for new hires are two pieces of a comprehensive solution that must be negotiated with employees and those negotiations will not be easy. Unilaterally cutting what people have been promised will not work because the courts have told us its not possible without bankruptcy. Demonizing people you need to negotiate with doesn’t help you close a deal.
Finally, the constant rehashing of mistakes made at the local level as if we are somehow unique is tiresome. Let’s remember the same mistakes were made throughout all levels of government in California and stop the nitpicking. If you want to talk about those examples in order to prevent similar mistakes in the future it would be one thing but i think we know how we got here so the question is how do we get out of this mess. Groundhog Day style articles suggest the need for a therapist rather than illumination of any new information. Still, unwinding the excesses of those mistakes is not easy because, we have already experienced two huge economic shocks since those mistakes were made, first with the dot com bust and second with the housing bust. This history provides context but acting like its about putting points on a scoreboard only makes the task at hand harder especially when that hand has to reach into peoples pockets.