The staff report is expected out today and council will be forced to act quickly at the meeting on Tuesday to get a revenue measure on the ballot. The city is currently facing a $5 million structural deficit for the coming fiscal year 2014-15 and a $32 million deficit over the next five years.
That does not include the shortfalls on pavement maintenance and other deferred maintenance on infrastructure.
On Tuesday, Mayor Joe Krovoza at the State of the City address said, “We are looking at some sort of revenue measure that he said “will come to the council actually next Tuesday night.”
“The lead idea is probably a half cent sales tax increase that we could put on our June 3 election,” he said. “It could be a parcel tax. We’ll consider that as well.”
But the critical point by Mayor Krovoza was this: “If it were a half-cent sales tax that the council were to adopt, that might bring somewhere between $3.5 and $3.7 million a year into our general fund. That is quite frankly still not enough to meet this structural deficit.”
“So even with a revenue measure, we probably have to have a further belt tightening at the city,” he added.
The city may be looking to do this in two steps, with a half-cent sales tax that could cover 68 percent of the projected short-fall this year. The budget would likely have to include short-term cuts or finding ways to borrow for some of the infrastructure needs that would go in the budget.
The city is then said to be thinking of a second revenue measure in the fall. A parcel tax at $100 per year per parcel could generate somewhere around $2.75 to $3 million per year; at $200 it could generate $5.5 million.
However, a parcel tax, unlike a sales tax would trigger a two-thirds vote. Given the parcel taxes already passed by the school district, adding to about $400 or so per year, given the water rate increases, it may be problematic for the city to rely on a strategy to generate money through taxes that produce two-thirds majorities.
The Vanguard believes that in the short-term the city is going to have to balance its budget through a combination of spending cuts and revenue increases.
The city has already reduced its workforce by over 100 employees since its peak employment levels in 2007-08. Those were accomplished mainly through attrition and reorganization.
There are concerns that additional cuts would negatively impact city services that are already stressed by reduced employee numbers.
At the same time, there appears to be considerable pushback to the idea of simply raising tax to cover for past mistakes.
Critics argue that this simply places a band aid on the problems with no guarantees that policies that led to the city’s economic crisis will end.
In the short term, however, the city is required by law to balance the budget. There is no way to make the kinds of changes to the city’s revenue stream other than through taxation in the short term.
In the longer term, a comprehensive approach seems reasonable. That means investing in economic development. The city is looking at a potential business park East of Mace Blvd. That project requires a vote of the people and that means that the city must engage the public and gain their trust and support.
In other writings, the Vanguard has suggested that we need guarantees in order for the voters to be willing to support revenue measures and a business park.
We can cite the 2004 half-cent sales tax that was put on the ballot, ostensibly to prevent cuts to city services like parks, police and fire. However, the new revenue went to increased employee compensation in the 2005-2006 rounds of MOUs. Those increases greatly stressed the city’s budget as the economy went south just a few years later.
The city needs to guarantee that the revenue generated by the tax measures will go to balancing the budget and infrastructure needs, rather than to increase employee compensation. The city needs to look into ways to limit the amount of increase in employee compensation to cost of living increases and the consumer price index.
The city also needs to commit to economic development – however, that comes with the necessity of a vote of the people.
The Vanguard has already heard discussion linking economic development to the need for additional retail and housing. We can state this right now – any effort to link economic development to retail or housing will doom the business park proposal.
It may be a tough task to pass the business park east of Mace, but the city and developer will need to work hard to ensure that, as a condition of passage, additional lands in that area are tied to conservation easements and 2 to 1 ag mitigation measures.
Without these assurances, it is difficult to foresee that the voters would approve a business park measure. Without additional economic development, the city will have to rely on taxation and hope for a new real estate boom to balance its budget and provide for the service needs in the community.
—David M. Greenwald reporting
Doesn’t borrowing money to get ahead of the road problem encumber those funds and address your concern about the money being spent elsewhere?
I doubt the business park will be paired with other development exactly for the reason you state. Of course not providing the additional infrastructure means it will be harder for people who grow up here to live here without parental support, higher taxes for residents because of continued sales tax revenue leakage, higher living costs for residents through reduced competition and longer commutes for workers living in other communities increasing our carbon footprint.
Interesting that UCD was just ranked top ten globally for sustainability. I guess we are lucky that one of the variables wasn’t based on GHG emissions from a commuting workforce banished to nearby communities by the imbalance of a restricted housing market in one community and an oversupply in others.
“Doesn’t borrowing money to get ahead of the road problem encumber those funds and address your concern about the money being spent elsewhere?”
We still have to make payments on the debt and that will be in the millions.
“I doubt the business park will be paired with other development exactly for the reason you state.”
It has to go further than just not pairing it.
“I guess we are lucky that one of the variables wasn’t based on GHG emissions from a commuting workforce banished to nearby communities by the imbalance of a restricted housing market in one community and an oversupply in others.”
As I mentioned yesterday there is an imbalance of jobs-housing, but a lot of that is due to outflow – people leaving the city to work elsewhere and the hope is by bringing in high quality jobs, we can address that. More globally we need a better transportation system so that we don’t have to drive to work. I know a lot of people who use the Capitol Corridor train rather than a car. Dan Wolk is a prime example of that.
“We still have to make payments on the debt and that will be in the millions.”
Exactly and that will keep pressure on the City budget and preclude the money from going to city workers for a long time and sadly until inflation erodes the purchasing power of these workers.
“It has to go further than just not pairing it.”
Why?
“…people leaving the city to work elsewhere and the hope is by bringing in high quality jobs, we can address that.”
Its doubtful that people who live here and commute are going to move out. As Rob White pointed out Davis has a lower than average home turnover rate. So if we build a business part without adding infrastructure it means higher rents and housing prices or longer commutes. Also are you saying that people who don’t work in Davis shouldn’t live here?
“More globally we need a better transportation system so that we don’t have to drive to work.”
Yes but even so they are commuting to work. The best thing to do both for personal and environmental health is provide housing and infrastructure so that people can afford to live where the jobs are and have short commutes.
“sadly until inflation erodes the purchasing power of these workers”
That’s really the key to getting the budget back into a sustainable range. We simply increased salaries and compensation too rapidly last decade.
“Its doubtful that people who live here and commute are going to move out.”
But people who live here, may get jobs here if they are available.
“Yes but even so they are commuting to work.”
Commuting to work is not by itself bad for the environment. Use Dan Wolk as a convenient example, he bikes down to the train station, hops on the Capitol Corridor train and arrives at his work. The train runs regardless of whether he is on it, he makes no net impact on the environment. In fact, I who live on the periphery in Davis and drive to downtown to work make a bigger impact than he does working out of town.
It will be interesting if the council uses the usual threats of laying off cops, firefighters, closing libraries, etc. to push their new tax agenda.
Davis already has one of the lowest police-per-capita numbers of any comparable city.
I heard mention that we could close a fire station and not be outside the norm for a lot of cities in terms of fire safety per capita, but then the question is would the citizens like that move and support it. The other things like libraries, art centers, senior centers, pools, etc.. yes, there are other amenities that the Davis voters are going to weigh in on as the tax measures come up. A lot of cities in CA have cut this type of thing out of their city budget and either private funding mechanisms had to step in, or the services end.
We visited a public pool in Ventura where clearly public funding mechanisms had step in. They had sign that said things like, this diving pool was brought to you by Kaiser Permenante.
Yes, those evil corporations that step in and fund these services. What are they up to? Maybe they are injecting chemicals in the water that get people sick to generate new business for their hospitals and medical groups. 😉
Kaiser’s advertising at the pool promoted, active living, the benefits of exercise, and healthy food choices. I thought it was great.
Though. if the city was getting money from a soda company who was trying to push their product on kids I would have problem.
If we had more business, we would have more private funding options.
that’s always the argument.
Are you saying they should cover up any potential negative impacts that service cuts could result in?
yes. public officials can never justify tax increases, don’t you know that?
They are going to have to do those things without new revenue.
Looks like a $.0075 or $.01 sales tax for the June election, and then a $150 parcel tax in the November election… both with a 10 year term, and then a citizens initiative for a 200 acre business park in the November election. The idea is a 10-year or less tax increase revenue replacement from economic development. If the revenue replacement comes in early, the tax increases can be repealed by council or by a 50%+1 citizens’ initiative.
The parcel tax should back a $50MM bond that would be used for roads, water conservation (something that helps the general fund), pools and other infrastructure needs. The number being used is $9MM not $5MM due to the infrastructure maintenance and replacement needs.
At least this is the latest that I have heard about. And I support it with some caveats. One of those caveats is that any revenue above and beyond what is needed to balance the general fund and the list of needed (repeat “needed”) goes to the rainy-day fund and that there is absolutely ZERO increase in city employee compensation or staffing. And related to that, the city should continue to pursue continued opportunity for expense reduction with process improvement, automation and outsourcing.
Another caveat for me is commitments from all current and prospective council members and most of the key leaders of the slow and no-growth community that they will not campaign or vote against the business park initiative.
Housing (Mr. Toad) and retail development (Mr. Frank Ly) are hot-button emotional issues that will probably need to be tabled unless we want to risk exciting opposition of those irrational fearful of change they cannot even define.
Housing doesn’t pencil out as a plus for the city coffers.
Actually, Mark West makes a good argument against this point. One of the reasons that housing developments do not pencil out as net revenue generators is the high per-unit labor costs for ongoing city infrastructure maintenance of that development. If we lower the cost per unit of labor then we certainly can get to a point that the property tax and other related tax revenue from additional residential units is a net positive revenue provider. However, the amount of revenue long term would de minimis compared business development revenue.
That is only true because we do not control staff compensation growth (particularly pensions and health insurance). If we control total compensation, housing pencils out just fine.
Have we not done enough yet to control compensation to make this pencil out?
In a word, “No.”
Mark wrote:
> That is only true because we do not control staff compensation
> growth (particularly pensions and health insurance).
I don’t see any way to control costs other than reducing the cash to government since government workers will ALWAYS try and get more compensation for themselves and their friends (and get bigger pensions with more health care)…
while that may or may not be true, i don’t see it changing any time soon. houses are not a net revenue generator.
i think a ten year term and a bond keeps pressure on the City to not spend the money on longer term labor commitments. i don’t think you are going to see a business park tied to other development, i have no intention to ever stop talking about the unintended consequences and costs of perpetuating the current paradigm. If people say no they can live with the consequences of their actions. i will vote yes and urge others to do so. Those that oppose will need to make their case to the public for the resulting cuts.
I was being a bit sarcastic. I won’t stop talking about retail development either.
I thought maybe you were still sick and were writing during some fever induced illusion state.
Frankly
I find myself in agreement with much of your post. But then, you state:
“Another caveat for me is commitments from all current and prospective council members and most of the key leaders of the slow and no-growth community that they will not campaign or vote against the business park initiative.”
This would be like asking someone to sign a blank check and just trust you. I hope that all members of the community, not just prospective council members and slow growth leaders would take an objective view of the pros and cons of the specific business park proposal and decide on its specific merits and costs, not some generalized pre agreement stating that they had to support any proposal called a business park.
And unfortunately, you do not seem to have been able to avoid, in your last paragraph the temptation to call others irrational simply because they do not share your point of view.
What is happening to the millions we borrowed in the panic during the redevelopment program closedown? How much interest are we paying on that as yet unused cash and from where are the interest payments coming? Is there a possibility we can use the cash for something useful now that we’re stuck with the loans?
it’s not money that can be used on general fund projects. there may be a few small benefits, but i’ve also heard all that money is gone just about.
Spent on what?
I think it had to pay back the RDA bonds previously funded by property tax shares.
You’d be dreamin. State has the proceeds. We’ve got the debt in all of its full glory.
City Fathers & Mothers simply have to stop spending. Can’t have everything, yet Davis seemingly wants to.