On Wednesday, I attended a brown bag lunch sponsored by the Davis Downtown, in which they invited a presentation by Jeff Miller and Matt Williams of the Finance and Budget Commission with technical support from Bob Fung.
Here they presented what they are calling their “City of Davis Toto Model.” Early next week, the Vanguard is going to present a video recording of their presentation and broadcast, so right now I’m just going to briefly describe the project to make some broader points.
The idea of the model has built into it the ability to forecast and plan into the future, by allowing us to set a number of policy-based parameters and then be able to project 20 years into the future the impact of each decision.
At the outset of their presentation, they quote Mayor Robb Davis who said at the January 3 State of the City address, “We are not paying for the things that we’ve already purchased, and we are not paying for those things in adequate amounts to make sure they remain for the future.”
The need for the Toto Model is very clear. For years, the Vanguard and other critics have complained that we do not have a true picture of the budget. As the presenters pointed out on Wednesday, the city has significant annual unfunded liabilities that have been caused by pension and retiree health insurance obligations, as well as a backlog of needed repair or replacement for the city’s deteriorating infrastructure.
These are not accounted for in the actual budget and, as the presentation pointed out, “We still have no proposed long term solution to pay for these unfunded liabilities.”
The lack of budgeting these deficiencies has long had serious consequences. I still recall in the 2008 City Council elections the incumbents pointing out that the city had a balanced budget and a 15 percent reserve. Critics pointed to the unsustainable nature of pensions and OPEB (Other Post-Employment Benefits) along with what we called at that time “unmet needs,” or infrastructure deferred maintenance.
It took the Great Recession later that year and several years of delay for the council to get serious about addressing the problems in the city – but those problems underlie our systemic problems even today.
The advantage of this model is it allows for a 20-year time horizon to forecast the impacts of policy decisions. It includes other outcomes like road pavement conditions, bike path conditions, parks and greenbelts conditions, etc. It improves forecasting, they argue, by allowing the city to model alternatives.
The bottom line is this – the sales tax is expected to end in 2021. The current city budget projects a fairly flat revenue model for the next twenty years. But once increased costs for pensions and OPEB are added in, the model shows that the city plunges into a hole that will continue to grow throughout the period.
Giving a COLA (Cost-of-Living Adjustment) of just 1.5 percent per year takes the figure to negative $80 million by 2035. That number gets worse if you add a COLA with pension and retiree medical changes. The number grows to negative $180 million by 2035.
As they pointed out during their presentation, the numbers are actually worse than that, because they don’t account for roughly $200 million needed for parks in the next twenty years. Also, they have not accounted for the various options on the roads.
The city can maintain current levels of road spending, right now at $4 million from the general fund, which would take the PCI (Pavement Condition Index) downward to about 30. They can maintain the current condition, which would take us about $100 million into the hole in 20 years. Or they can achieve the targeted 70 PCI which would take the city closer to $120 million in the hole. Again, this is without adding other factors.
There are three takeaways I had from the discussion on Wednesday.
First, there is no way to avoid the fact that in the next twenty years the city is going to have to make a series of difficult and often painful decisions. Once you account for things like road repair, pensions, OPEB, the probability of pay increases, and parks, the numbers you are dealing with are in the hundreds of millions and right now we have a general fund that is only about $60 million.
Matt Williams quipped that he will continue to use the $655 million figure until someone gives him a better one, but the reality is whatever the precise number is, we are talking hundreds of millions, not tens of millions.
Second, the public is largely unaware of this problem. During the discussion the audience was asked whether they felt the roads were problematic in Davis. Most said no.
But when I met with Mr. Miller, Mr. Williams, and Mr. Fung over on G Street, I pointed to the roadway condition there. There were many seams and deep cracks in the roadway. Each time it rains, water will seep in and continue to undermine the roadbed. At some point, the roadway will give way, creating potholes and grooves.
We estimated that the condition of G St. was probably around a 50 – a failing grade. My guess is that for, most people, they see G St. as okay – there aren’t potholes and their cars are not bouncing like on Olive Drive.
The problem is twofold. First, as the roadway conditions continue to deteriorate – costs go up exponentially. Second, once cracks start to form, water can cause roadways to fail.
Then there is a third problem. The general attitude is that these problems are structural and not specific to Davis. Certainly with respect to things like pensions, earning forecasts and health care costs, that may be the case.
But, as I pointed out, Davis made a series of decisions that, coupled with things like economic collapse and reduced pension earnings, have magnified the problem.
The Davis City Council made the choice to increase pension formulas. They made the decision to give out huge pay increases in 2004 and 2005. They made the decision to attempt to balance the budget with furloughs and attrition. They made the decision not to address the structural problems of the budget in 2009 labor negotiations.
Bob Clarke was warning the city about road conditions as early as 2009 (and perhaps earlier). The city made the choice not to fund road repair in 2008, 2009, 2010. I had to meet with then-Mayor Joe Krovoza and Mayor Pro Tem Rochelle Swanson in 2011 to get them to add $1 million to the budget for roads – even then, the money was not actually included.
We didn’t start actually doing road repairs until 2015. We finally tackled structural issues in the budget starting in 2011, but we still had to get through the 2012 labor negotiations to implement many of these things.
In 2011, council passed a motion requiring the city to account for unfunded liabilities and unmet needs in the budget – that still has never been implemented.
The bottom line is that in 2008 the great recession happened, it would take three years to get serious about the budget and another several to start addressing these problems.
Those are conscious decisions by council, not Davis being the victim of circumstance.
We will have more on this next week.
—David M. Greenwald reporting
“Second, the public is largely unaware of this problem. During the discussion the audience was asked whether they felt the roads were problematic in Davis. Most said no.”
I think that there is another possibility. This may not be unawareness or ignorance. It may be a difference in how one values different aspects of our lives. As someone who grew up at the intersection of two unpaved streets without discernible ill effect, I do not see the condition of the roads as being as critical as you see them to be. This does not mean that I am unaware of the issue but rather that I simply do not see the roads as “problematic” which was the question that you say was asked.
My view is that people not seeing potholes are overestimating the condition of the road and underestimating the costs of replacement.
I’ve let your comment go about unpaved roads before, but I am assuming that your unpaved roads were rural with little traffic, I don’t think we can utilize that approach with thousands or tens of thousands of car trips a day. I know what rural dirt roads look like as I frequently use them when I go hiking or photographing, I can only imagine what they would look like being torn up with thousands of trips.
Here you are very correct David… potholes, unless a singularity due to a specific problem, is a strong indication that things have REALLY deteriorated… the steep slope of the pavement condition curve… the key, based on the way roads have been/are designed, is keeping moisture out of the subgrade (underlying soils)… when a pothole develops (except as a singularity, such as a leaking water service), that means the subgrade is wet, and has “failed”… putting stuff in the void helps not… it requires a “dig-out”, removal or treatment of the underlying soil, which is very expensive, per SF, compared to just keeping the water out…
Gravel roads (unpaved) is a doubly ‘stupid’ idea… given much of Davis soils… first, the gravel permits water to get into the soil, second, the gravel migrates down into clay soils when they are saturated. Gravel roads, if crushed rock is used (interlocking of the aggregate) can work on well drained soils… we don’t have those thru much of Davis… perhaps it was different where Tia grew up… perhaps they were very pervious, “strong, even when wet” soils…
“Gravel roads (unpaved) is a doubly ‘stupid’ idea”
Yes, but imagine how much ‘fun’ we could have riding in the upper deck of a Unitrans double decker…(I hear they are also fun to ride your bike on).
Yeah… if the Unitrans buses weren’t mired up to their axles… gravel+clay soils+buses = quagmire… unless soil fabric was used and the gravel was something like 5-6 feet deep (assuming the ‘gravel’ was crushed rock)… even then I’d recommend “oiling” the road every fall… [more refined petroleum products]
1. What does ‘toto’ stand for?
2. “the sales tax is expected to end in 2021″ — I don’t think anybody believes that.
I think everyone is on to the fact that temporary taxes are never temporary.
They are temporary in the sense that they expire and need a new vote to approve them.
Your semantics are correct, be we all know we’ll be paying those extra sales taxes forever.
It would have been more accurate to say that “the sales tax cannot be depended on, as it sunsets, and will go away if not renewed/replaced by a vote…”… and I disagree with Keith… can cite several exceptions, but have other things to accomplish in the next few days…
My view is that it’s important to see what happens if the sales tax were allowed to expire and that we should never count on the voters to approve something. (Alternative wording: we should never assume that they will).
David, your 8:07 post…
Survival training is predicated on, “prepare for the worst (no new/sustained revenue), expect the best”… a long way of saying I agree with the concept that the ‘no continuation of sales tax enhancement’ should be part of the calculus, as should continuation at the same rate… an increase in the enhancement rate should NOT be part of the calculus…
“What does ‘toto’ stand for?”
“The model illuminates the reality behind the curtain,”
3 stars! Like!
Don asks an interesting question, “What does Toto stand for?” It means different things to different people. For Jeff Miller it is a reference to the culminating scene in the Wizard of Oz when Dorothy’s dog Toto pulls back the curtain and completely exposes the Wizard, and the charade was at an end.
When I did a test run of the Team Toto presentation to one Davis resident, she thought Toto referred to the Japanese plumbing fixtures company.
My son thought Toto referred to the Grammy-winning rock band that sang “Africa” and “Rosanna.”
So we now begin each presentation briefly explain what Toto means … although for some people here in Davis, the metaphor that the City’s budget is in the toilet does have some resonance to it
Matt, Jeff and Bob
First I am very appreciative of your attempts to lay out a prospective, fact based model for community consideration. I do have a question.
Was this model primarily based on the road usage patterns of today, or did you make allowances for the projected change in usage based on the pattern of less private car ownership and on line as opposed to in store purchasing favored by the millennials ? I think that this is very important in considering a 20 year time line by which time many of us who grew up in a culture that was basically enthralled with the private automobile will no longer be purchasing cars and/or driving.
Good point, I think it’s also very important to consider the possibility that we might have flying cars someday too.
See comment elsewhere… a baseline analysis should assume “no change” in behavior as to motor vehicles… but were it not for buses, moving van, delivery trucks, there pavement would be fine… if you reduced private motor vehicle traffic 90%, the pavement would actually get worse (unintuitive, but true)… AC pavement needs a certain amount of the smaller wheel loads to stay ‘fresh’… otherwise it oxidizes FASTER, and then when higher wheel-load traffic uses it, it fractures, letting water into the subgrade… perhaps we should ban all buses, delivery trucks, moving vans from Davis streets…
[BTW Tia, buses are the worst loads as to pavement degradation…]
Tia asked . . . “Was this model primarily based on the road usage patterns of today, or did you make allowances for the projected change in usage based on the pattern of less private car ownership and on line as opposed to in store purchasing favored by the millennials?”
Tia’s question gets to a key issue that Brian Horsfield got to in the Q&A at the end of our presentation a week ago to the Davis Progressive Business Exchange. His question was, “In Davis where almost everyone questions the validity of almost everything, how are you going to handle the criticism that the Team Toto numbers are suspect, and subject to the biases of the Team Toto members?”
The key to answering both Tia and Brian is that all of the data in the Toto model has been provided by subject experts from the relevant portions of the City’s management structure in written reports presented to the public and Council. The pension and retiree medical numbers have been provided by City financial staff, the City’s actuarial consultant, and in several cases audited by the City’s Auditors prior to being published in the City’s Annual Financial Report (CAFR). The Buildings and Structures and Parks numbers have been provided by the City’s public works and parks staff and Kitchell Capital Expenditure Managers, Inc..
The roads and bike paths numbers have been provided by the City’s public works staff and Nichols Consulting Engineers. Neither the Toto team, nor the Finance and Budget Commission have the subject matter expertise to “make allowances for the projected change in usage based on the pattern of less private car ownership.” We rely on those subject matter experts. So, I will forward your question on to Mike Mitchell and Bob Clarke at Public Works, who will get together with Nichols Consulting Engineers and provide us with an informed answer.
Tia’s and Brian’s questions also get to the heart of an issue that arose when I first performed the simple mathematical task of adding up the $76.2 million ($53.4 plus $22.8) in the CAFR for pensions, and the $61.8 million in the CAFR for OPEB, and the $200 million for the roads and bike paths recommended approach to Council by Public Works, and the $37.7 million for Buildings reported by Public Works to Council, and the $317.5 million ($315.7 plus $1.8) reported by Parks and Public Works to Council. Keith O labeled that math as “fear mongering.” Tia felt the total was misleading because it covered a 20-year time frame. Mayor Davis wanted the $315.5 million reduced because Parks staff was working on an alternative scenario.
Bottomline, when subject matter experts weigh in with alternative numbers, the Toto model can quickly add an additional scenario to represent another alternative … in the case of Tia’s question, a reduced reliance on automobiles alternative. The subject matter expert variables of each scenario then interact with all the other financial variables and show the impact over a 20-year timeframe of the alternative … both free standing and in comparison with the other alternatives.
The condition of roads is certainly very subjective, and much (much) more so depending on how one needs or wants to get around. During the meeting that question was asked about “problematic”, but it was about the streets – and separately a question was asked about paths (Greenbelts). I suggested that a better question was in two parts: First, if the route someone liked to use, was forced to use and so on was acceptable, and second… how they traveled that route. The Toto Model had a sample projection about quality of streets and Greenbelts, but this doesn’t seem to clearly take into account that most if not all streets are used by both cars and bikes (and Greenbelts are of course also for pedestrians, skaters, etc.) In this matter Toto should be integrated with the goals for a feeling of safety and related in the Beyond Platinum Plan (2014 City of Davis bicycle plan).
I get around mostly by bike but also use carshare a couple times a month. I was happy to get more information about why the streets are the way they are — when the questions above were asked a not new thought came to mind, but which I kept quiet about: That if more people driving cars were chronically confronted by potholes which could cause them to lose control or worse, with a much larger vehicle right behind them – a situation which I am sure is experienced by many people on bikes – they would demand that the streets were declared an official disaster area, and eligible for emergency funding.
That is an untrue statement as to PCI. A falsehood… an “alt-fact”… I have surveyed and evaluated pavement conditions, and my conclusions were very close to at least two other professionally trained engineers who reviewed my data, methods, estimations. There are definite protocols, measurements, analysis tools (software) generally accepted to determine PCI… it is an inexact science, but it is a science, and with informed judgement applied, it’s pretty damn consistent…
Subjective safety or subjectively is a huge piece of this, as a complement to scientific methods. What feels safe for me when driving or especially cycling might be completely different for a newbie to cars or bikes. People don’t have smartphone apps which provide real time information on the road they’re travelling on — they feel if it’s safe, desirable, etc. and combined with more objective analysis – which often follows the subjectivity products such as citizen complaints – completing the view.
Todd, I’m not sure I understand your point. What do you mean when you say “subjective safety”? How is “subjective safety” included in the calculation of Pavement Condition Index (PCI)?
Very true. On a bike, you can hit a crack or hole and spill, one that a car wouldn’t even notice. There are some bike paths in town that are so broken up by roots they are almost unusable. Bike city my a**.
And the basis of your estimation(s)? What observations/measurements were taken? What software was used? What is your various experiences in being trained and evaluated in making the measurements/observations?
Or, was it a “guesstimation” with no true engineering/professional analysis? [an “alt-estimate”?]
Suspect it is easier for a trained engineer to do a credible fiscal analysis, than for a fiscal person to do a credible engineering analysis… sorry, just a time proven, informed, prejudice of mine…
I’m not an engineer and not trying to be one. I understand your point. My point was illustrative and rhetorical.
David Greenwald said . . . “Matt Williams quipped that he will continue to use the $655 million figure until someone gives him a better one, but the reality is whatever the precise number is, we are talking hundreds of millions, not tens of millions.”
David’s quote above is not what I said. The reality is that Staff provided the four components of the $655 million figure:
— $53.4 million in non-Safety Pension liability (provided by City financial staff and the City’s Auditors on page 83 of the City’s Annual Financial Report (CAFR))
— $22.8 million in Safety Pension liability (provided by City financial staff and the City’s Auditors on page 85 of the City’s Annual Financial Report (CAFR))
— $61.8 million in Retiree Medical (OPEB) liability (provided by City financial staff and the City’s Auditors on page 93 of the City’s Annual Financial Report (CAFR))
— $200 million in Roads and Bike Paths capital maintenance (provided by Mike Mitchell and Bob Clarke from the City’s public works staff and Nichols Consulting Engineers)
— $37.7 million in Buildings and Structures capital maintenance (provided by Glen Stone and Stan Gryczko from the City’s public works staff and Kitchell Capital Expenditure Managers, Inc.)
— $315.7 million in Parks capital maintenance (provided by Dale Sumersille, Parks and Communities Services Director and Kitchell Capital Expenditure Managers, Inc.)
— $1.8 million in Parks Structures capital maintenance (provided by Dale Sumersille, Parks and Communities Services Director and Kitchell Capital Expenditure Managers, Inc.)
All of those “figures” are provided by subject experts from the relevant portions of the City’s management structure in written reports presented to the public and Council. It isn’t (as David has said) a matter of someone giving me a better number. It is a matter of the City’s subject matter experts giving the public and Council more current numbers.
Finance Staff and the City’s Actuary provided more current numbers on the pension and OPEB liabilities in October and November.
Dale Sumersille and Martin Jones, Parks Facilities Manager, are working hard to provide with a lower dollar alternative to their $315.7 million figure provided to Council on 5/3/2016. Dale and Martin are not “someone.” They are subject matter experts that all of Davis’ citizens should listen to. When the subject matter experts weigh in, the component “figures” will change and a new total will replace the $655 million that was the most current total when I first reported it to the voters.
David, Howard, and Mark
I am certainly glad to see that you guys had such a good time with the creation of your straw men arguments this morning.
First, I did not today, and have not ever argued that we should have gravel or any form of unpaved street in Davis. I have said on a number of occasions that the streets are not my personal highest priority. I have also said that I do not see them as a crisis and explained why. That word to me implies life or death urgency which I do not believe is the case with our streets.
As regards today’s post, it was in specific response to David’s assertion that people are “unaware” of the situation of our roads. All I was doing was to point out that the question as posed would not allow that conclusion as some might share my priorities and thus not identify the roads specifically as a major problem, not because they do not want the roads or were not aware of the situation, but because other items are higher on their list.
Part of my context was that Yolo County has actually identified, as a policy, that some roads that they cannot afford to maintain will be allowed to go to gravel roads… you seemed to extol, or reminisce about unpaved roads in previous threads/topics…
My grandparents had a gravel alley at the rear of their lot… worked fine, but took a lot of maintenance by the borough …
Think it’s you making straw-man arguments…
A great way to make pathways with motor vehicle-sized dimensions that will “go to gravel” usable for mobility is to keep part of them smooth for a bi-directional bicycle path useful for electric-assist bicycles – meaning wide enough, because head-on collisions between two bikes going 20 to 25 mph is not fun. And not multi-use and meandering like many Greenbelts.
This kind of infrastructure – though more commonly parallel to 40 to 50 mph speed limit secondary roads and 70 mph highways – is what the Netherlands is building out in order to save money in comparison to expanding those “carpaths”.