Two years ago, as we first began to earnestly plan for the possibility of innovation parks and economic development as a way to help alleviate the city’s revenue shortfalls, I argued that in order for the public to support either the short term mechanisms for revenue – at that time, the sales tax and then a parcel tax for infrastructure – or, in the long term, we needed to lay a foundation for the public that the city was in need of revenue.
Polling, even in the spring of 2014 when the city was facing a $5 million structural deficit, showed that most people thought the city’s fiscal position was in fair to good shape. The public was clearly communicating to the council and city staff that there was a miscommunication between the city and public about our fiscal reality.
If anything, that communication gap has grown rather than shrunk.
One problem is that the city has simply not communicated to the public the extent of our fiscal reality.
In a late December column, Mayor Dan Wolk argued that Davis was having a “Davis Renaissance.”
The mayor wrote, “Our budget is balanced and resilient. Due to improved revenues and cost-cutting efforts, our budget is balanced with a healthy 15-percent reserve. Better yet, it is a fiscally resilient one in that we are paying what we need to be for our pension and retiree health obligations and are making substantial investments in our infrastructure… Yes, there are still long-term challenges. But we are doing very well.”
Not everyone bought into that view and Mayor Pro Tem Robb Davis responded in a Vanguard column a week later, “Dan is correct: we are paying what we need to on retiree medical and pensions, but the costs of these continue to grow more quickly than revenue growth. He is also right that there ARE long-term challenges. But they are not just long-term. They are here now.”
The most devastating part of the mayor pro tem’s response is the fact that, while staff numbers have been cut by over 100, from 453 to 352, since 2008, “The cost of compensating staff has increased from just over $100,000 to over $150,000 per employee in the same decade.”
He wrote, “In sum: total and per employee costs to the City have increased even while employees take home less AND we have 100 fewer employees.”
That was January 3, less than three months ago. A month later, the council would punt on an infrastructure tax for the June ballot. The council has a narrow window to put something on the ballot that could generate revenue for the city without requiring a two-thirds vote.
However, the council could not agree on what to spend the money on or the mechanism to deliver that spending.
Mayor Dan Wolk continued to push for a parks tax at the $50 level (over and above the current $49 parcel tax). He pushed for the Rainbow City Rehabilitation ($300,000), the Community Pool renovation ($2 million), Playfield Park turf replacement ($400,000), stating, “I think these are things that are clear needs in our community that we have difficulty funding outside of some additional revenue.”
“We could do a significant amount of good for parks and this is funding that… is one time,” he stated.
Councilmember Rochelle Swanson said that she could not support just the parks tax as outlined. She suggested the possibility of a $100 parks and infrastructure tax which also would replace Measure D, absorbing what’s in the current parks tax. She said this would recognize that “we should have asked for more before (than the current $49).”
She added, “Some of the things that were listed (in the parks list of needs), I don’t feel they’re the top top priority.”
Councilmember Swanson added that what she is hearing is that people want the core infrastructure, while other things are important. It was suggested that a parks tax could free up other money in the general fund for roads. But Ms. Swanson said, “I can’t support that, because I don’t think it will pass.” She noted, “As hard as we have worked, there’s still a trust factor there and I think we’ve worked hard to earn it, but even a set of advisory, I think we’d be better off on the flip then to do it that way.”
Mayor Wolk pushed back, “To focus on the roads piece… we’re doing quite a bit on roads now. Certainly we have to do more, but we’re putting $4 million into roads every year.” Never mind that the city needs at least twice that amount for roads.
Tax revenues should be looked at as short-term bridges for funding and revenue. In the long term, the city needs to expand its tax revenue through economic development. However, that strategy, as we have written this week, appears to be in danger.
Rochelle Swanson noted that Mace Ranch Innovation Center could net $2.2 million annually according to the EPS Consulting report, with the potential for as much as $6 million a year with a one-time $10 million fee.
She recognized the need for revenue, stating, “It’s not hyperbole, if this doesn’t pass in November, I’m going to be a big cheerleader to bring back a really big parcel tax, either that or we’re going to start closing things.”
“That’s not being a scare tactic, that’s being real,” she said. “We have a huge infrastructure problem. We need organic revenue. It’s why I agreed to run for council in the first place and why I agreed to run for a second term.”
If anything, the amount of money that the city needs has been understated.
Last week, Matt Williams, a candidate for the city council, put a number to the city’s infrastructure needs: $655 million.
As Matt Williams noted in his answer to his own question last week, he broke down how the $655 million was calculated. $200 million of that is for roads over 20 years. $352 million is buildings and parks. $114 million is for retiree pensions and health benefits.
He said that we are doing better on retiree health benefits and pensions, “but that’s only $114 million of the $655 million.” We have a parks tax, but the parks tax is “leaving us with $315 million worth of capital infrastructure maintenance that we’re going to have to do to the parks surfaces and buildings.”
He said, “These reports came from staff. They came in the last 120 days. We really do have to understand, what we have promised to ourselves.”
From our perspective, the mayor at least pumped up the city’s financial success and downplayed the coming money crunch, even as council was preparing but failing to act on a revenue measure. The community seems reluctant to support new development and it is touch and go at best if either Nishi with its modest 325,000 square feet of R&D space, or MRIC with its larger 300,000-plus square feet, can gain approval of the voters when they come before them in June and presumably November.
The city needs to make the case to the public about the enormity of the unfunded needs and liabilities of the city, and yet this has received scant attention.
As Matt Williams asks, “Given that we have a $50 million annual General Fund budget, what are the important steps/decisions that Council and Staff need to make in order to address this $30 million per year funding shortfall?”
Again, why has this received so little attention?
—David M. Greenwald reporting
“Given that we have a $50 million annual General Fund budget, what are the important steps/decisions that Council and Staff need to make in order to address this $30 million per year funding shortfall?”
“Again, why has this received so little attention?”
I think that the answer to the second question is much easier than is the answer to the first. I think city finances receive so little attention for the simple reason that most people are more focused on their personal lives and believe that we have elected officials and city staff to deal with the issues we prefer not to deal with ourselves.
So what steps should our elected officials take. I am going to throw out some of my thoughts ( sorry for the redundancy with my previous post on another thread where I commented before reading this article) on some steps that could be taken. Someone else will have to generate the numbers ( due to my math deficiencies) and let me know how close they anticipate my suggestion would get us to filing that $ 33 million per year projected shortfall. As you all know, my thoughts will be based on my value of paying for what we want ourselves and not expecting some future neighbor or business owner or our own children to pay for our expenditures. I welcome the thoughts of those who believe that future growth should be relied upon to pay our way.
1. Let the voters decide on the taxes. How many times have we heard ” I don’t want to put that on the ballot because I don’t think it will pass”. I say be honest about the short fall, be honest about the full cost to repair/ replace/ add, whatever it is that we want. Make the best pitch for the tax that you can and let the voters decide. So what specific taxes would I suggest : Parcel at $100, parks, extension of sales tax, soda tax, increase in cigarette and alcohol taxes.
2. Paid downtown parking from 8 am to 6 pm ( I am sure someone with better numeric skills than I could check on rates charged in comparable cities and apply that to our parking situation to arrive at a realistic anticipated income number).
3. Think outside the box. If this is not already happening, start Go Fund Me type campaigns for various city needs. I would be very willing to chip in for my major interests which involve health and wellness infrastructure needs including our greenbelts, sidewalks, play structures ( think Rainbow City) and public pools. Others I am sure are more concerned about our roads. This could be offered either as purely volunteer contributions or as a small percentage of our parcel tax which could be designated for a specific need, or both.
4. As a symbolic gesture at the upper administrative level, perhaps our upper tier in terms of compensation folks would be willing to lead by donating some small portion of their compensation to designated funding so as to lead by example.
5. And how about us as private citizens? Perhaps we could publicly pledge or set up matches for a certain amount to fund our preferred infrastructure repairs or projects. Say $100 over the course of one year with those of us who are more affluent chipping in for those who are genuinely strapped ? A very small cost per individual could raise around $ 7 million and we would know where the money was going since it would be predesignated by us..
These are just a few thoughts off the top of my head. There are many creative posters out there. Criticisms of the ideas are welcomed since this is just a brainstorming exercise. But Instead of just lobbing criticisms, how about adding ideas. Then someone ( ahem …Matt, or Don or Mark ? ) with good mathematical skills could project how much money each idea would likely generate and we can keep building.
It’s very easy to criticize our city council. Maybe we should think in terms of helping them out.
The scholarly voters of Davis decided that they wanted to hamstring their representatives, so that virtually every aspect of the business of running the city could be scrutinized and micromanaged by the engaged and informed public, to insure clean and transparent government, since , apparently, your politicians can be bought so cheaply. However, the road to hell is paved with good intentions. Just like when the folks who show up at council meetings to bitch about the Parks budget and claim “Volunteers can do the work!” they are no where to be found when the flower beds need weeding. The no growth on any terms but mine(and mine are no growth) folks like this arrangement for keeping the housing supply low, property values high and the outsiders, out, but still want good roads and street lights and parks and pools for their kids and grand kids and a few like Dr. Will say they are willing to pay more for those amenities, but don’t state the limit of their largess or have any realistic idea of the cost to just to patch, much less improve the infrastructure. With the system designed for political gridlock, all this talk of development is just a dark comedic diversion.
It is really funny how we in Davis take the complex route to arrive at the same destination.
Years ago I made a list of all the California cities we could compare too. Then I looked at their budgets. And there was a clear and simple point that our $50 million general fund budget was significantly lower than any other comparable city.
Next I took a stab at determining the cause for this. In other words, the delta analysis… what else was different.
It was not the rate of taxation… Davis already had a local sales tax. We had some of the highest property taxes. Davis does have a lower number of more expensive single-family homes as a percentage of all homes (in other words, we have a higher percentage of rental properties) and this impacts our residential property tax revenue. But since Davis has inflated home values from the decades of no-growth and high housing demand, we are okay in the residential property tax comparison.
It was not our spending. Certainly we spend too much on city employee total compensation (pay and benefits combined), but the simple fact is that this is a ubiquitous problem in the state. In fact, it is a ubiquitous problem whenever and where ever public sector employees are allowed to unionize and collectively bargain for pay increases. There is a natural conflict of interest between the power of organized public sector labor and politicians that grant them raises. This is a much bigger problem and the day of reckoning to fix it is still years away unfortunately.
It wasn’t our resident demand for services. Davis expects parks and bike-paths and city services and city programs… no different than do the residents of these other comparable cities. Some had taken to charging more fees for their city services, but then there were generally service enhancements that these fees funded.
The only material difference between Davis and these other communities was the amount of general fund revenue derived from the local economy.
For example, the college town of Palo Alto has a general fund budget of $150 million even though the population of the city is about 5% less than the number of people living in Davis. That is three-times the size of Davis’s $50 million general fund budget. Palo Alto has twice the number of local businesses (firms) than does Davis (10,175 to 5,263). Lastly, Palo Alto also has retail sales per capita of $26,751 compared to Davis at $7,752.
Santa Cruz has a $75 million general fund budget, 7,166 firms and $15,118 in sales per capita.
Santa Barbara has a $125 million general fund budget, 14,000 firms and $20,269 per capita in sales.
Note that the number of firms and the sales tax revenue numbers are from the 2007 US census. It shows a comparison that is likely more skewed today.
These differences were all we really needed to make the case that Davis needs to allow more commercial development… both in redevelopment of existing property and peripherally. We could have made that determination at least two years ago and started working on getting the innovation parks on an earlier ballot. However, we get stuck in analysis paralysis and eventually come to the same conclusion. I guess it is better late than never.
How do those cities rank with respect to unfunded liabilities?
Good question. That would take some research. I am guessing that they don’t have the same problems with unfunded infrastructure maintenance liabilities because they have tended to have a larger general fund budget that allowed them to keep up. But I am guessing that all or most have similar problems with unfunded city employee retirement benefits.
Frankly
“The only material difference between Davis and these other communities was the amount of general fund revenue derived from the local economy.”
And I think that you are probably accurate in your assessment as written. The major difference that I can see in our points of view is the word “material”. You have stated many times that you see “material good or harm” as basically all that matters. On this point, we disagree. There are many other values that mean more to me than simply “the material” viewed only in terms of economic gain.
Having lived near or in two of your example communities, Santa Barbara and Palo Alto, and in many other communities, I can tell you another major difference. Davis has a larger population of individuals who do take on the activist role in what they see as their best interest than do these other communities. This doubtless has both good and bad aspects, but is a differentiating factor in how we approach our community goals. And many of these “activist groups” do not have as their highest priority “material’ gain as you seem to define it preferring instead to focus on health, safety, and environmental concerns as their “greatest good”.
I don’t know that Davis has more activists except for the fact that we have more students… and students tend to be more idealistic and energetic to agitate for cause. But in the non-student population we have more residents that agitate to block change. I think I covered that point.
“Material” is a term that means tangible and significant. Almost every criteria that belongs in decision support can be quantified. Even the emotional trauma experienced by the population prone to being change-averse can be quantified. And after all these things are quantified, we should be able to pick those that are material, and those that are more trivial… and then make a decision based on the greater good.
Frankly
“And after all these things are quantified, we should be able to pick those that are material, and those that are more trivial… and then make a decision based on the greater good.”
I think the way that you chose to respond reinforces my point. You have divided what is measurable into “those that are material” and “those that are more trivial”.
It has occurred to me that one source of disagreement between us may be our disparate use of the word “material”. I found two definitions that are relevant to this point.
1)”denoting or consisting of physical objects rather than the mind or spirit.”
2) “important; essential; relevant.”
When you post stressing the word “material” if you are using it to mean “important, essential or relevant” then our differences in opinion on many issues may not be as great as they seem. If on the other hand you are using it to mean definition # 1 especially in economic terms, then we truly are worlds apart in what we value most.
It is primarily the second definition.
It is a business term… used a lot in the finance and banking world. I hire very detailed people that will fixate on something that does not balance… and I am constantly challenging them on the materiality of the thing they are fixated on. For example, say we are underwriting a loan and the tax return of the borrower does not correctly state the same income that his business tax return shows that he received. I have employees that if allowed to follow their emotional impulses would jump into a forensic effort to figure out the discrepancy. However, if we take the worst case scenario that the borrower made a mistake or even if the IRS wanted to fine him for unreported income, and we use that worst case scenario and the credit is still acceptable by our underwriting standards, then the pursuit of that forensic investigation would be a waste of time and effort because it is not material to the loan underwriting process.
Now it might be material in consideration of the character of the borrower. So we might simply ask about the discrepancy to get a read if there is something to be concerned about. For example a material risk that this borrower might lie about his true financial picture for personal gain.
However, if the discrepancy is small, then even this risk would be immaterial.
I have used the term “material harm” to denote harm that might be different than what should be identified as someone’s inflamed sensitivities. If I say something to you that hurts your feelings it is likely immaterial harm because you should be able to get over it and move on. If you cannot, than might very well be your problem not me causing you material harm with my words. Now if I hit you hard or violently, or steal from you or otherwise deny you something of value that you had a reasonable right to expect, then it would be material harm.
The term “material” and “reasonable” are siblings.
Material should also include measurable. Because if you cannot measure something there is no way you can objectively weigh its importance in decision criteria. Generally the people that through out criteria that are impossible to measure (immaterial) are people with a hidden agenda to insure the decision is a no.