It may be that this is simply an issue that resonates only for the “Vanguard 10,” but it is difficult to judge as the MOU (Memorandum of Understanding) issue has received scant attention outside of the Vanguard. However, we have already seen how the issue could impact both a potential soda tax and a utility user tax (UUT).
The city council has not yet decided if it will place a tax measure on the ballot to fund road maintenance and what type of tax it would be. The issue is scheduled to come before the council next Tuesday.
The Vanguard readers are already skeptical of a potential utility user tax or a soda tax. Some, of course, are opposed to all new taxes, but others are concerned about whether the council would turn around and use taxes in ways that the voters are not intending.
One of the problems, as the Vanguard has pointed out, is that any general tax goes into the general fund. That means, while the council can bill the tax as going for roads or potential children’s health programs, nothing would prevent the council from taking part or even all of the tax to give to employee compensation.
The problem is even worse than that. The council could pass a parcel tax, which can be specified as a specific fund tax, use all of the money as designated on roads, but utilize funding to transfer all or part of the existing $4 million for roads to other needs, such as… employee compensation.
In yesterday’s article, Bob Fung of Civenergy, in comments, notes that one thing Dan Carson, Elaine Roberts Musser and John Munn “discuss is a possible companion advisory measure that provides for a way to monitor the spending of UUT revenues.”
The problem with this approach came up last week as we recounted the winter 2014 sales tax discussion, where the council ultimately opted against an advisory vote for a number of reasons, particularly the difficulty of specifying the uses but also reasoning “that times had changed and the council could not get away with giving away the store again.
One councilmember suggested that the half-cent sales tax and $3.6 million in revenue is small and therefore will preclude it being used for salary increases as it will go to pay for the city’s increasing water bill, PERS (Public Employees’ Retirement System) contributions and retiree health costs. The argument was, “There was no point in an advisory measure for the smaller amount.”
Moreover, an advisory would not prevent the council from backfilling existing general fund expenditures that are going to pay for roads now and freeing up existing uses for other priorities.
Others questioned whether the revenue generated from the sales tax passed in June 2014 was “specifically spent on employee compensation.”
The evidence there seems overwhelming. In June of 2014, Measure O was put on the ballot to close what was projected as a $5.1 structural imbalance. That imbalance reflected about $3.55 million in infrastructure and other resource needs, $1 million in personnel related increases including the 2% COLA (Cost-of-Living Adjustment) in the previous MOUs, as well adjustments in the salary savings projections, and then $1.2 million increased costs in OPEB (Other Post-Employment Benefits), PERS, Medical Leave, and Medical Insurance.
By last December, city budget projections showed stronger than expected sales and property tax revenues closed part of the structural deficit. But as the revenue projections from last spring show, even with the sales tax in full effect, which means the whole projected $3.6 million in revenues, the city is only projecting to do slightly better than break even on revenues versus expenditures in 2015-16, 2016-17, etc.
By 2018-19, the city projected about a $1.1 million surplus ASSUMING all things remaining equal. Plugging in a one-percent annual COLA puts the city very slightly in the red the next few years before squeaking into the black in 2018-19 by $100,000.
Both projection tables show the city plunging into the red in 2021-22 when the sales tax measure expires.
What does this tell us? It tells us that, at least on paper, the city is using the $3.6 million in expected revenue to pay for the additional $1.1 million that the new MOU provides.
I don’t see any way to avoid the implication that the sales tax money in part is going to pay for increases to employee compensation.
However, one reader posits the issue as this: “The sales tax revenue was spent on roads, street lights, just as promised. The question that should be asked is: Where is the money going to come from to pay for the COLAs?”
For that reader, “Councilmember Swanson has answered that question according to her view: more economic development, increase in city fees, proposed new tax (parcel or UUT). Another CC member is thinking about increasing the TOT (transit occupancy tax, i.e. hotel fees). She did not say the sales tax increase funding would pay for the COLAs. And secondly, it has yet to be determined if the sales tax set to be expired will be renewed or not. So in my opinion it is an incorrect statement to say that the sales tax increase will be spent on the COLAs in light of all of the above info I just gave.”
But that argument did not seem convincing to the core of the Vanguard 10, the ten or so regular commenters. Instead, as Mark West put, the city spent the sales tax money “to buy something frivolous.” He added, “It is completely reprehensible that the City Council would spend this money without knowing in advance how they will pay for it. Revenue first, expenses second, not the other way around.”
For the Vanguard 10, at least, any talk about a soda tax or UUT, or other revenue measure, is going to tap into the question of trust that the council will not simply turn around and use it for other purposes.
The city unfortunately has a history of playing bait and switch with taxes. In 2004, Measure P was put on the ballot as the original half-cent sales tax.
In the argument on the ballot in favor of Measure P, the signers, which included Lois Wolk (Assemblymember), Helen Thomson (Supervisor) and then-Mayor Susie Boyd, argued: “The City faces increasing costs. We will face higher expenditures if we are to provide the additional police protection and meet park and recreation and open space commitments we have made to our citizens.
“Without Measure P revenue,” they argued, “given the uncertain state support to the General Fund, we would be faced with very deep service cuts in police, fire, and parks.”
However, a 2010 Vanguard study found that the money would end up going largely to increased salaries, particularly for fire, who in April 2006 were retroactively given an annual increase in compensation of 8.46 percent per year – or 34 percent over the course of their four-year contract.
While the city sold the public that the measure would pay for additional protection for police, it actually went for increased salaries, and fire got by far the largest increases in salaries. And while it was billed as a way to meet park and recreation commitments, in fact, we had to pass a parks parcel tax just two years later because we had used the entire sum to pay for employee compensation.
The question then is how can the council credibly commit that it is going to spend tax money as promised rather than turn around and spend it on other priorities? The ability to raise the taxes might hinge on that calculation.
—David M. Greenwald reporting
Thank you. It’s just a shell game but it all comes out of the same pot.
Unfortunately, if that happened, some will still say the parcel tax isn’t paying for employee raises when in fact that’s exactly where it slyly went.
This sort of thing is called “supplantation”, and is certainly a huge concern if there were to be any proposed tax. In the Civenergy discussion on the UUT, this issue is thoroughly discussed, and potential solutions offered.
UUT is unfair. Those already burdened with ever rising energy costs will get hit with an additional cost (tax) while those that have solar and much lower to no energy costs will be able to avoid much of the UUT.
all taxes are unfair. the stronger argument – especially in davis – is the misuse of tax money, not that taxes are unfair.
Tell that to the people who will paying much higher taxes than their neighbor who has solar. This will be a hot button issue if a UUT is ever brought forward.
BP, I was at a meeting a little over a week ago and one of the people from Davis was describing Davis to the people who were not from Davis. His description was that Davis is “a highly constrained community.”
One of the out-of-towners said, “That’s an interesting turn of phrase. Do you mean that Davis is tied up in knots?”
The Davisite replied, “Yes you could say that, as long as you use the correct spelling.”
“What is the correct spelling?” was the immediate reply.
And the answer was equally swift, “A K is not needed in the spelling. Davis is tied up in NOTS.“
Apropos of that comment, we know you are NOT in favor of a Utility User Tax. What alternative do you propose? Or are you simply going to stand on your NOT?
To Barack Palin: Take a look at your utility bills. Figure out what percentage is electricity. Figure out what a 5% tax on that would be and come up with a dollar amount. What I think you will find is the tax amount will be relatively small to the overall bill.
The other problem I see with your argument is that in solar bills, there is a true-up bill at the end of each year, which I assume will be taxed, which makes solar not as much savings as one would think. I am not sure exactly how it compares, but it would be interesting to find out.
And lastly, in general I am a fiscal conservative, and have voted against many of the taxes the city has implemented over the years. Generally I did so because I did not think the City Council at the time was acting in a responsible manner and just didn’t make their case. I believe the last two City Councils have been much better at sorting out the fiscal problems with the city, so I am a bit less wary, and did support the sales tax increase. Would I support a UUT or parcel tax? Only if I was certain 1) it would be spent on existing infrastructure maintenance and repair; 2) supplantation was unlikely because certain protections were put in place to prevent it. I think both 1 & 2 can be achieved with a UUT or parcel tax, BUT it must be coupled with a push towards serious economic development for long term fiscal sustainability.
BP, what kind of tax structure is fair in your opinion?
I have a very different view on taxation than what is being portrayed as the view of the Vanguard 10.
We do not get to specify what taxes are spent on in general. I am a pacifist. I believe that killing except in direct self defense is morally wrong. And yet I continue to pay taxes knowing that some of “my money” is being spent on pursuits that I perceive to be not only “frivolous” but immoral. So why do I do this ? It is because I am not ( yet at any rate) willing to give up my rights and duties of citizenship over this issue. I have limited but real ability to change governmental policies when I vote. I do not have the power to pick and choose which endeavors my taxes will be used for, but I do have the ability to choose who who will represent me in making those choices.
“the city spent the sales tax money “to buy something frivolous.”
“Frivolous” like “immoral” is in the eye of the beholder. Unlike many of the Vanguard 10, I do not begrudge those that I see as providing me with desired services an increase in compensation. I have voted, and will vote again to have on the City Council individuals who I believe will best represent my interests. What I will not do is to shoot myself in the foot by not voting for increases in taxes which will necessarily limit the funding of services I want as well as for some I could happily live without.
henry david thoreau you aren’t
“henry david thoreau you aren’t”
Sorry to be dense….but clarification of comment requested.
when the us went to war, thoreau protested by withholding taxes, he was subsequently jailed for his act of civil disobedience.
When I starting working in government several years ago, a fiscally conservative and socially liberal friend who had been there awhile said, “The only time good things happen around here is when money is tight; when they have a flush budget, no one lifts a finger.” I have found this to play out often in government. It seems counter-intuitive, and obviously you can’t starve essential programs to death, but there is truth in the statement.
Alan
“and obviously you can’t starve essential programs to death”
One problem I see with this approach is that there is no universal agreement on which programs are essential. I recognize that I am an outlier, but I honestly see public health issues as more “essential” than the quality of our roads. So whose “essential” do we use as the basis for which programs should not be “starved”. In my opinion, that is a large reason that we vote for candidates that we believe are mostly closely aligned to what we each consider “essential”.
Is that not the basis and heart of a representative democracy ? Or are you advocating for an alternative form of local government ?
Another excellent point. For instance, one huge issue that comes up over and over again is whether the swimming pools in this city are considered “essential”. Some say “no”, some say “yes”. Some think a new sports park is essential, altho I suspect that argument is a nonstarter.
Well, I tried.
I take umbrage at the ‘Vanguard 10’! I believe there are at least 5 more..
i think he’s trying reverse empowerment
SODA
“Umbrage” ! What a lovely choice of word.
I’m sure Don will release the stats.
Looking only at recent events: 1) the brouhaha over improper use of Open Space funds, 2) Council’s performance in conveniently overlooking obvious deficiencies and approving the MND for the Conference Center in the dead of summer without any Commission review, and 3) approving the MOU on Consent Calendar without public discussion, this Council and Staff cannot credibly make any such representations to the public that I would believe.
And there are a number of other issues that I am aware of about which commitments have been made privately to various citizens which were not upheld. This causes me to doubt the sincerity of this Council and Staff and the degree of respect they hold for the public. Seems to me they feel they were elected “Rulers” instead of “Leaders”
I was co-chair or Treasurer for Measures, D, I, and O (the last 3 big money issues in Davis) and was an unabashed supporter of our local government. No more. Not only would I not support any tax measure that did not specify EXACTLY what the money would be used for, I would probably actively campaign against it because I have no faith the money would otherwise be used as promised.
I disagree with almost everything you have said here. But your last comment does resonate, and I think will be the sticking point for most voters – for any proposed new tax, whether it be a UUT or parcel tax, there must be some sort of mechanism to assure voters the funding will be spent on what is promised.
Alan Pryor said … “Looking only at recent events: 1) the brouhaha over improper use of Open Space funds,”
While I agree wholeheartedly with the sentiments that Alan has expressed in his whole comment, it is worth drilling down into the Open Space funds portion. The Open Space funds story illuminates a different way that the City does damage to the level of trust the citizens/residents have for the City government. Once a full and transparent accounting of the Open Space funds was completed (it took over 6 months to get there), it became clear that there was no actual “improper use,” but that didn’t change the fact that by its lack of transparency and responsiveness to botyh citizens and the members of the Open Space and Habitat Commission (OSHC), the City created an appearance of improper use. At the November meeting of the OHSC, one of the OHSC members turned to Tracie Reynolds, the new Staff Liaison to the OSHC (who has been incredibly responsive and transparent and thorough in her short time with the City), and said “Thank you so much for this accounting Tracie! We have been asking for an accounting like this for over five years and somehow our requests went unanswered.” By being non-responsive and/or non-transparent, the City feeds the general level of distrust of government. Given the national satisfaction level (see quote below from last week’s most recent polling), we need to do better on the local level. Otherwise “distrust” will be the best word to describe Davis … and that will be sad.
I have gone to local city meetings, where citizens have actually conceded to city staff they did not read literature sent to them, do not read the newspaper, but were incensed they were were not informed of something the city intended to do. Far too often citizens don’t pay attention to/do not stay informed about things like budgets, increase in fees and tax measures until it has gone a long way down the road to being decided by the city.
Good point Anon. Paying attention doesn’t happen with anywhere near as much frequency as is ideal.
Will the sneaky approval of the MOUs impact revenue measures going forward? Yes. It brings up the 2005 debacle and stolen money. Never again.
“Yes. It brings up the 2005 debacle and stolen money. Never again.”
And I would argue that this is a very good reason for choosing carefully when voting for your next City Council members. I see it as a very poor reason to not vote for proposed taxes across the board regardless of their respective merits.
I’ll bet the voters thought they chose wisely this time. As for giving our sales tax money to employee raises it turns out……Rinse….repeat….
barack makes a good point here – i mean in the last election the voters elected robb davis, the only one to vote no, and they elected rochelle – who seemed to have a solid background on taxes and finance. i voted for her over munn on social and environmental issues, obviously that was a mistake. the bigger problem was the year before when wolk, frerichs and lee got elected. i wanted sue and souza out, but it came with a cost.
the bigger problem seems to be the lack of real choice for council.
BP
“As for giving our sales tax money to employee raises it turns out……Rinse….repeat….”
Well you and will just have to agree to disagree that what occurred this time was identical to what happened at the time the firefighters got their huge raise.
On this point, I agree with you Tia. Very different situations.
Sounds fungy to me.
“For the Vanguard 10, at least, any talk about a soda tax or UUT, or other revenue measure, is going to tap into the question of trust that the council will not simply turn around and use it for other purposes.
The city unfortunately has a history of playing bait and switch with taxes. In 2004, Measure P was put on the ballot as the original half-cent sales tax.”
First, I do not equate this or the immediate past City Councils with previous City Councils as far back as 2004 (why stop there, let’s go back to when the city was established?). At least this and the immediate past City Council have tried to tackle the budgetary problems this city has, setting aside money for roads, supporting significant potential economic development, approved a new surface water project to address ever changing federal and state regulatory requirements. It is very difficult to unravel fiscal damage that was done by previous City Councils, where inconvenient fiscal problems were dumped in the “unmet need” category and the budget declared “balanced”. Let’s give credit where credit is due rather than beating the current City Council over the head as if they have done nothing right.
“I don’t see any way to avoid the implication that the sales tax money in part is going to pay for increases to employee compensation.
However, one reader posits the issue as this: “The sales tax revenue was spent on roads, street lights, just as promised. The question that should be asked is: Where is the money going to come from to pay for the COLAs?”
Did not the City Council set aside funds, including sales tax revenue, to be spent on roads and street lights, and have not in fact the roads been improved and street lights repaired? Have the COLAs been paid out as of yet? NO. Then there is no way that I can see that it is accurate to say for certain the sales tax funding was/will be spent on COLAs. It is accurate to ask where the money is going to come from to pay for the COLAs. And Council member Swanson has suggested a number of possibilities. However, those possibilities suggested are all speculative – haven’t come to fruition as of yet, as Don Shor has accurately noted.
However, it is equally speculative on the Vanguard’s part to assume its commenters represent a majority view on the COLA issue or on whether any of Councilmember’s Swanson’s suggested solutions will come to pass. In reading the comments of posters on the Vanguard, I don’t get a general consensus on whether there is support for the COLAs or not. Some Vanguard commenters seem to think there should be no COLAs until the city’s budget is truly balanced (no debts, all infrastructure repaired/maintained, RPI is 72, there is healthy reserve for all repairs/maintenance/emergencies, i.e. from a practical standpoint no COLAs ever). Others seem to have no real problem with the COLA, just the “process” by which they were approved, even tho the process was perfectly legal under the Brown Act.
In short, it appears to me the Vanguard is creating news (SALES TAX BEING SPENT ON COLAS IN SNEAKY PROCESS – PLACED ON CONSENT CALENDAR WITH NO OPPORTUNITY FOR PUBLIC COMMENT – COUNCILMEMBERS FAIL TO JUSTIFY THEIR VOTE ) rather than getting to the heart of the issue, which is how are the COLAs going to be paid for? Which means the more meaningful discussion for me are the issues of whether I as a voter would be willing to approve new taxes and in what form. Should it be a UUT, either general or specific, a parcel tax, and for what purpose – roads, bike and ped paths, city buildings, pools, new infrastructure? Should a new tax be coupled with an increase in TOT, increase in city fees, more cuts in personnel, more cuts in services, more outsourcing of services, tougher labor negotiations or some combination thereof?
From what I have seen, you are the only one saying this, by trying to put words into other people’s mouths.
You are absolutely right, this is the heart of the issue. The problem here is that the City Council did not answer this question in advance of spending the money. There simply is no excuse or justification that will correct that basic failure of their fiduciary responsibility.
exactly mark. exactly.
Mark, that is only the heart of the issue if the issue has only one heart. For me this is a both/and situation … an issue that has TWO HEARTS.
“SALES TAX BEING SPENT ON COLAS IN SNEAKY PROCESS – PLACED ON CONSENT CALENDAR WITH NO OPPORTUNITY FOR PUBLIC COMMENT – COUNCILMEMBERS FAIL TO JUSTIFY THEIR VOTE ”
no one has argued any of this. i don’t think the process was intentionally sneaky, it just wasn’t transparent. there was opportunity for public comment – no one has claim otherwise – however, the council has not on the record shared their view of city finances.
the heart of the issue isn’t how the cola’s are going to be paid for, it’s why did we give out cola’s in a time where the city’s budget is barely balanced on paper and why didn’t the council plan in advance how to fund the increases to the budget.
Anon said … “Did not the City Council set aside funds, including sales tax revenue, to be spent on roads and street lights, and have not in fact the roads been improved and street lights repaired?”
Anon, it isn’t clear whether the Council did set aside funds from the Sales Tax for roads this year. There has been a considerable amount of street work done this year, but the funding sources for the bulk of that work has been from non-Sales Tax sources. Several million dollars of the roads maintenance funding for the year was already in place prior to the passage of Measure O in June of 2014. In addition to that already-in-place funding, substantial additional roads repair funding has come from PG&E (Olive Drive), several SACOG grants (Mace Boulevard and L Street), and the WDCWA local piping project (Covell)
From a Staff communication I received “In the current FY budget, the City has allocated almost $4M in local funds.” Looking back at Steve Pinkerton’s February 11, 2014 Revenue Measure presentation to Council (see ) and the accompanying Staff Report (see )
Putting those two pieces of information together it appears that there haven’t been any Sales Tax funds set aside for roads this year. $4 million of roads funding before Measure O and $4 million of roads funding after Measure O.
In addition to that accounting reality, it is interesting to look at the Measure O pamphlet published by the City that detailed what the negative consequences would be if Measure O did not pass. A cutback in road funding is conspicuously absent from the pamplet’s list.
My board of directors would fire me after explaining to them the source of funds that I used to give employee raises as being based on a bunch of ideas for dubious future revenue increases.
This situation and the explanation from CM Swanson underlines the primary problem with government in general, it is a complete lack of accountability for financial matters.
I am reading up on the concept of Social Accountability for local government.
For me, this decision by the CC underlines a broader problem for the practice of spending money we don’t have. We have plenty of evidence that even politicians that we see as being objective and fiscally conservative fall down this same rabbit hole of irresponsible spending. So the conclusion needs to be that we implement better accountability controls. We need citizen-sponsored measures that require every dollar of spending to be connected to an existing secured revenue source.
Re Social Accountability
OMG! Frankly and I see eye-to-eye…perhaps for the first time since the fluoridation debate (or debacle, depending on your viewpoint).
You know you can make good salad dressing out of oil of water if you shake it enough!
Oops. Forgot the acid and salt.
DP
“when the us went to war, thoreau protested by withholding taxes, he was subsequently jailed for his act of civil disobedience.”
Then you are truly correct. That is more personal integrity than I can muster.
what integrity? there were no national income taxes in Thoreau’s day… what taxes did Thoreau pay (or refuse to pay) that funded the ‘Mexican War’?
It was a poll tax and he apparently spent only a night in jail, fwiw.
I did not follow up on the veracity of the Thoreau story as put forth by DP at 10:29. My point was that I, although I am a pacifist, am unwilling to put myself legally and/or financially at risk by not paying taxes although I do find the concept tempting. Thus the personal admission of lack of integrity in this area.
Mark West: “The problem here is that the City Council did not answer this question in advance of spending the money. There simply is no excuse or justification that will correct that basic failure of their fiduciary responsibility.”
What do you mean by “answer in advance”? Do you mean propose a tax for road repairs and have it approved by voters, for instance, PRIOR TO APPROVING COLAs?
Anon: ““SALES TAX BEING SPENT ON COLAS IN SNEAKY PROCESS – PLACED ON CONSENT CALENDAR WITH NO OPPORTUNITY FOR PUBLIC COMMENT – COUNCILMEMBERS FAIL TO JUSTIFY THEIR VOTE ”
DP: “no one has argued any of this. i don’t think the process was intentionally sneaky, it just wasn’t transparent. there was opportunity for public comment – no one has claim otherwise – however, the council has not on the record shared their view of city finances.
the heart of the issue isn’t how the cola’s are going to be paid for, it’s why did we give out cola’s in a time where the city’s budget is barely balanced on paper and why didn’t the council plan in advance how to fund the increases to the budget.”
SALES TAX BEING SPENT ON COLAS IN NONTRANSPARENT PROCESS – PLACED ON CONSENT CALENDAR – COUNCILMEMBERS FAIL TO JUSTIFY THEIR VOTE – Sounds like making up bad news to me!
What do you mean by “the City Council must plan in advance how to fund increases in the budget”? See question to Mark West above.