Council Makes the Tough Call But This is a Bittersweet Day At Best – It was not quite as dramatic as the scene three weeks ago when the Davis City Council voted in a contested 3-2 vote to reduce fire staffing – an issue we have been touting for five years now. Instead, it was a 5-0 vote with little fanfare, relatively late in the evening but not absurdly so, and that fixed a vexing problem we have been covering since February of 2009 – roads.
Those who do not want to read about the past, avert your eyes, because we need to ask this critical question – what if the council had acted with the vigor and resolve we saw from this council on Tuesday night in dealing with the pavement issue head on back in 2009, when Bob Clarke first sounded the alarm on the issue – back when it was believed we could deal with the problem by pumping in a mere few million per year?
Instead, the council pushed the problem down the road, ignoring the issue of lack of funding in 2009 and 2010 It was not until 2011, with a new council, that we finally started taking this impending crisis seriously. Even then, it was not enough, $1 million was a drop in the ocean, and so when the report came out in February of 2013, we were stunned at the number of $444 million.
The sad thing is that we are too late. The problem is so vexing now that the only way to properly handle it is to take out $25 million in bonds and pump in a couple of million a year thereafter for the next 30 years. And in so doing, we can keep our average road at a PCI (Pavement Condition Index) of 60, which seems like something I learned in school as a D-grade.
No longer can we strive as a community for a PCI of 70. That is too expensive and too ambitious. The best we can hope for is that the main roads in town can be kept at 68. Think about that for a while, let that sink in.
One commenter noted, “Under current city management, seems like there is nothing they won’t borrow for, and kick the can down the road.”
This is the exact opposite of that. The math is clear. Pavement inflation rate has been about 8 percent, and the interest rate on bonds may be one-quarter of that. Obviously, it makes more sense to take out the $25 million we will spend now and pay it off over time, rather than pay for the inflation.
Add to that every year the city fails to act, more roads deteriorate, costing more as they drop into categories in need of more extensive repair which can cause the cost to double or triple. City staff estimated between the 8% inflation rate and the increase in cost for deferring maintenance, each year of delay could produce 30 percent increase per year in total costs.
Factoring those costs against the interest on bonds would seem like a no-brainer.
Councilmember Rochelle Swanson said, “We’re spending this money whether we’re doing it on interest rate or whether or not we are doing it because we’re running in a backlog.”
In short, the council had no choice but to make the move and do it this way.
This was not the ideal funding scheme, however.
Ideally, the council would want to pursue Scenario A, where the basic concept was to frontload the vast majority of the paving projects over the next few years.
By spending most of the money in this scenario in the first six years, City Manager Pinkerton argued that costs were far less impacted by the 8% inflation factor for construction.
“The reason I kept it at $2 million is I knew that the $83 million number where you’re looking at $6 to $7 million a year wasn’t realistic, but we feel comfortable that within our budget we think we can handle two million particularly it doesn’t necessarily have to all be general fund,” the city manager said. “I think this was a very conservative estimate looking at maybe three percent of the general fund going towards roads.”
We have been over this ground before, but it bears repeating. In September of 2008, the economy collapsed. The warning signs on pensions had been emerging for several years prior and the rate of growth in compensation was unsustainable.
Still, in early 2009, the council had an opportunity to get in front on this issue. First, the city had to cut spending because of the exploding structural deficit. Second, the city was facing its previous round of MOUs.
The city would survive the downturn through attrition and cuts to service hours, and most importantly the non-payment of maintenance on infrastructure.
The city would go several years with essentially no spending on road repair, other than the few dollars that would trickle through from the stimulus.
In the meantime, the 2009 MOUs failed to adequately fix the structural problems and so, in order to balance the budget, the city simply did not pay for things that it did not immediately have to. For years there was a running balance of unmet needs, but the city management underestimated the amount needed for road repair by severalfold.
That ended with the new council. But even with the new council, it has taken several years to figure out just how bad things are. The city brought in consultants last fall to analyze the road conditions and, using more sophisticated techniques, they were able to reassess the deferred maintenance component.
The good news in all of this is that we have a council willing to tackle the tough issues and find innovative solutions. However, in this case, in some ways it was too late.
We now have the worst-case scenario – as Rochelle Swanson put it on Tuesday, it was not that long ago when we used to bond up for “cool” projects, now “we’re talking about bonding up for something that is the very core piece of our fiscal responsibility. It’s basic basic basic infrastructure.”
“I don’t think anybody’s really thrilled about the big numbers,” she said. “This is kind of what happens.”
So we have to spend huge amounts of money upfront to prevent spending even larger amounts of money on the backend. And what we are doing is essentially just enough not to fall further behind.
In a city like Davis, that is a sad realization. It is the legacy of mismanagement by past councils that has left us at the point where we are spending $25 million in the next two years to avoid our roads failing and to keep our roads at a PCI of 63.
—David M. Greenwald reporting
Update: this version added the discussion of the 30% annual cost increase for inaction
Any article that starts with, if only we had spent more money in 2009, has a memory hole so deep that it resembles a black hole where no light can escape. If only we had spent a few million dollars more you could have bought a million shares of Wells Fargo when it went down to 3 bucks a share. Yes, the banks were failing, the economy was losing jobs by the millions, home values were under water, foreclosures were rampant and tax receipts were shrinking. Your memory seems to operate in a vacuum.
[quote]dealing with the pavement issue head on back in 2009 when Bob Clarke [u][b]first[/b][/u] sounded the alarm on the issue, back when it was believed we could deal with the problem by pumping in a mere few million per year.[/quote]David, you are a “newbie”. This issue has been identified and brought to CC since the mid-1980’s. It isn’t ‘glamorous’ for the political CC. In more “flush” economic times, road maintenance had Gas Tax and state/federal funding available to help fund this activity. GT was generally General Fund. A lot of $ was assigned to “social” programs.
In the last few years HR and City Mgr’s office decimated the road crew personnel… the folks who were able to at least apply band-aids until the more extensive maintenance could take place (to keep the problem from getting worse).
To tie “the problem” to [quote]The warning signs on pensions had been emerging for several years prior and the rate of growth in compensation was unsustainable.[/quote], is both disingenuous, and uninformed. That quoted ‘reason’ didn’t ‘help’, but was and is NOT the “root cause”.
“Your memory seems to operate in a vacuum. “
No vacuum, I just don’t lock myself into to apologizisms like you. Two years later, the council was able to find $1 million extra to spend on roads. Had the council in the 2009 MOUs prioritized this spending, they could have found probably $3 million a year to pump into roads. Would have made a difference? I’d like to have taken that chance.
“David, you are a “newbie”. “
Guilty your honor. Not only am I newbie, but I spent my first ten years in this community in graduate school.
That said, I disagree with you on pensions, had we put money that we ultimately gave for compensation and bolster the road maintenance fund, I think it would have made a substantial difference.
Mr. Toad: I added in one critical element, based on city estimates, each year that we fail to act, adds about 30 percent in costs. Could we have bonded roads back in 2009? I don’t know. Should we have made roads a higher priority than we did not just in 2009 but for the last 13 years, absolutely. That’s a measurable quality of life reduction we are taking here and you seem fine with it.
i have a friend who lost a house in Davis to foreclosure in 2009-2010. He said he wasn’t worried about it damaging his credit that was otherwise okay. I asked him why?
He told me “if any body asks I’ll say 2009 happened.”
maybe we can put that as signs on our potholes
“Could we have bonded roads back in 2009? I don’t know.”
Possibly at much higher rates if you could find someone who would lend you the money. Don’t forget that the companies that guarantee bonds were looking at bankruptcy. Warren Buffet bought Assured Guarantee, in a distress sale around that time, a company that had veered off its traditional model of insuring municipal bonds and started covering home loans. Lehman, Wahington Mutual,Wachovia and Indy Mac disappeared. Citi, B of A and AIG needed hundreds of billions from the Feds. The solvency of money market funds was at risk. Fannie Mae and Freddie Mac were broke and got bailed out by the Government. The credit markets were frozen. Mortgage lenders stock prices were going towards zero.
It is possible that Davis could have tapped the credit markets back then but you would need to ask those in a position to know.
I’m not apologizing for anyone. I didn’t read past the notion of if we had spent millions in 2009 because the premise is laughable. It shows a complete lack of historical context.
Let me think: now Dan and Joe should be praised for tackling the road problem with vigor and resolve so in their Assembly campaigns they can speak about making hard, bold choices; that they are just the leaders we need for today?
credit where credit is due and blame where blame is due. they deserve credit here.
Mr.Toad wrote:
> i have a friend who lost a house in Davis to foreclosure
and
> I’m not apologizing for anyone.
Then why didn’t you write:
“i have a friend that stopped making the payments he agreed to make and a lender took his home back through foreclosure”?
Your friend’s home wasn’t “lost” it was taken because he didn’t make the payments.
Okay i could have said it that way too, its not important to the story. The no apology line was in response to David’s remark.
David, thanks for the “Update” Editor’s Note. Indicating significant changes in stories this way is great. And it keeps your older readers from worrying that their memories are failing when the story we originally read seems to have transformed on second reading in important ways. Good practice.
[quote]had we put money that we ultimately gave for compensation and bolster the road maintenance fund, I think it would have made a substantial difference. [/quote]True. My point was, that the money was used to protect ‘social services’, and increase compensation for them, and the PW warnings of not funding street maintenance was ignored, as it was not ‘glamorous’.
Had the warnings 20 years earlier been addressed, maybe the funds for both reasonable street/pathway maintenance AND reasonable increases in compensation for general employees [particularly those knowledgeable in street maintenance issues], AND protection of street maintenance employees (to keep things in ‘check’, a point you conveniently ignored in your response), thereby mitigating deterioration, maybe we wouldn’t be looking at the current “choices”.
BTW, 20 years earlier than 2009!