At Tuesday’s Davis City Council meeting, City Manager Steve Pinkerton said, “I don’t think we have as much a spending problem here as we do a revenue challenge in the future.”
He has a point. The projected revenue growth is still sluggish into the future. From 2013 to the 2017-18 budget, a four year budget period, the city manager is only projecting just over 8% in revenue growth. That’s about 2 percent per year.
On the other hand, he projects a 20 percent expenditure growth, or 5 percent per year.
There are really three culprits here. The first is that the city is expecting to spend about $3.8 million a year toward roads, out of the general fund. As the city manager rightly argued, “As we all know the future is now.”
“We have an uphill battle in the future if we want to balance our budget and address our unmet needs,” City Manager Pinkerton told the council on Tuesday. “It’s frankly not incredibly difficult to balance the budget if you’re putting off costs into the future.”
The city is clearly making the right decision here because they know if they do not invest money into roads, the costs will go up even more in the future.
That is indirectly a byproduct of past spending decisions where the council decided to defer maintenance on roads, rather than cut expenditures for employee compensation following the huge compensation increases of the early and middle portions of last decade.
Along similar lines, the exploding costs that we have been warning about with PERS (Public Employees’ Retirement System) will finally really hit.
The result is that PERS rates will jump from 23% of payroll to 31% of payroll in the next five years for miscellaneous employees, and 29 to 39 percent of payroll for public safety.
By the end of 2018-19, more than half of what we pay to employees will be essentially going for retirement, whether it is pensions or medical.
The final piece to the problem is that the water project will add at least $2 million to city expenses. While the roads costs and PERS costs were handed down to this council, the water costs are a self-inflicted wound.
While there may have been some tangential discussion of general fund impacts when Michael Harrington filed his lawsuit alleging non-payment of the city’s water use, there was never, from what I can see, a full accounting of the impact of the water rates on the general fund budget.
Put it this way – if the city had shown the above graphic and said, this is what our general fund picture will look like and a good percentage of that red is attributable to the water project, would Measure I have passed?
The city goes from having about a $3.71 million positive fund balance at the end of this fiscal year to a negative $15 million fund balance.
Supporters of the water project often argued that we have to do this to ensure that future generations have a safe and reliable water supply. They cited the historically low construction costs as reasons to do this now.
But many opponents questioned the timing of the proposal. They noted we were undertaking huge capital expenditures during the end of a recession when the economy is still sluggish. It is quite possible that the rate hikes in five or ten years would have been much more easily absorbed by city coffers and the ratepayers.
There are a number of ways to address this issue. The message on Tuesday seemed to be that no one wanted to continue to slash city services – which is understandable, given that in 2007-08 we had 464 positions and now we have just 361.
City Manager Pinkerton indicated that we had too many employees back in the pre-recession days, but have slightly less than optimal now.
But if we do not want to further cuts to services and personnel, we have limited avenues. We believe the city is right to address the issue of roads now, even though the temptation is probably to attempt to save money there. Money not spent now will be a lot of money needed to spend in the future.
The city could save a lot on water if they brown some of the greenbelts, and go to more native vegetation. The city manager had a plan that might reduce future costs from the projected $2 million down to $600,000 – the amount we are currently spending.
Saving $1.4 million would certainly help the situation.
But the city still needs to find new revenue. The city has decided to invest in economic development. But that path is not going to produce revenue overnight. And as we saw with the Mace Curve discussion, there is no reason to believe that the public is going to be on board with huge land use policy changes.
That leaves us with the idea of new taxes and fees. That is not on the table this year, to the lament of at least one councilmember that the Vanguard spoke to on Wednesday.
There is a complaint from some quarters that the council has been quick to expend money on key projects, without prioritizing new revenue generation.
Given the history of the community, with distrust at the moment for council, the water rate hikes and continued high parcel taxes for schools, it is unclear that the city can count on revenue from the citizens to bail out past councils from critical errors with regard to employee compensation.
In another discussion on Tuesday night, Police Chief Landy Black, while cautious in his interpretation of data, noted that if current trends persist, the city will have a huge surge in property crimes this year. At the same time, he noted that, between the murder investigation and FamiliesFirst, the city police’s resources were stretched to the breaking point. One more critical incident at that time might have been the straw to break the camel’s back.
But right now the city has to find ways to keep up service levels with even fewer resources than last year.
So, while it may be correct that the water projects proponents are saying that we will ensure a reliable water supply into the future, it may be at substantial cost to both the present and future.
To me it remains an open question as to whether Measure I would have passed with these numbers laid out on the board. What is clear is that there is a lot of work to be done, and two of the biggest proponents of the water project are moving on and leaving this problem to future councils.
—David M. Greenwald reporting
Of course, why limit this post-evaluation to Measure I. We could develop the same type of economic impact chart for every significant decision, much the way Congress does BEFORE they vote. Then, it might be an open question whether we’d have moved ahead firefighter benefits or measures G, R, J or DACHA or planting grass in parks or many other city initiatives. And the biggest proponents of these actions have moved on…or died.
[quote]if they brown some of the greenbelts, and go to more native vegetation. [/quote]
Pet peeve of mine. More drought-tolerant vegetation, not necessarily native. The majority of plant choices for low water plantings will, in fact, be non-native.
JustSaying: You ask why limit the evaluation to Measure I – I didn’t. I focused on the three major contributors of the deficit and determined that in the present we had control over only one of the factors – the timing of the water project.
I think Don’s point is good one that could be explored, my pet peeve here is that we didn’t have access to the charge before making the water decision (along with the roads and fire decisions).
The good news is that given that chart, it’s highly unlikely that any council will restore the 12th firefighter on a shift.
I have already been told second-hand (for what that’s worth; might be worth confirming) that serious landscape water reductions are already being implemented. That is why I wondered on the previous thread what the basis is for the water rate cost in the budget: is it projected based on current usage, or some percentage conservation already being done?
“Put it this way – if the city had shown the above graphic and said, this is what our general fund picture will look like and a good percentage of that red is attributable to the water project, would Measure I have passed?”
I’m just responding to the observation above. What would and wouldn’t pass if we knew the future costs of every proposal faced by Davis voters and councils. A projected price tag for everything might be enlightening, including proposals to stop development.
Don: it’s a good question. The closest I can answer it is it seems that Pinkerton believes he can reduce consumption but has not implemented that yet.
Just Saying: that’s fair. But to me this is fairly immediate and not necessarily advertised in any of the election material that I have seen as a byproduct of passing the policy.
To answer your question: Measure I passed by a comfortable margin, and it would have been very easy to answer the cost issue. It would have been dishonest for “the city” to attribute a deficit to one specific cost item. The cost issue, and the city paying its bills, was raised by the opponents and answered.
it wasn’t an insurmountable margin. i paid close attention on these pages to the debate. i don’t think the cost issue was addressed other than the non-payment. i was floored to see the current deficit and i might have had second thoughts on my reluctant yes vote had i known this before i mailed in my ballot.
[quote]Pet peeve of mine. More drought-tolerant vegetation, not necessarily native. The majority of plant choices for low water plantings will, in fact, be non-native.[/quote]
Could be, but not necessarily so. Anyway seems like if the point is to save money, don’t do any planting or choosing, just stop watering. What thrives is what you get, and a lot of that is native I believe.
Well to me it is quite fine for a place to look like it does.
The city could drastically reduce watering on the non-turf areas and most plants, native or otherwise, would retain acceptable appearance. Not optimal, but acceptable. The problem is the lawn areas. Most are planted in tall fescue, which is a clumping grass that is seeded at high density. If the watering is reduced by 50% or more, it will thin out. Open areas will get invaded by weeds, not native plants. That would likely lead to greater herbicide usage, or just a lot of very weedy areas.
If they do this systematically, then areas could be sprayed with herbicides to kill the turf and then the areas could be mulched heavily. That would require massive amounts of mulch, so there is a near-term cost (I doubt the city generates enough landscape debris to grind for that purpose; they’d have to buy stuff).
So if the city manager just orders water to be curtailed, and it isn’t implemented in a sensible and well-planned manner, there will be a lot of weedy areas, a lot of dead turf, and then some maintenance costs that weren’t budgeted. But if the city manager asks his landscape crews and some experts for guidance, the watering could be reduced considerably with little loss of appearance or usefulness of the city’s greenbelts and parks.
[quote]i was floored to see the current deficit and i might have had second thoughts on my reluctant yes vote had i known this before i mailed in my ballot.[/quote]
If the opponents had made a significant issue of the budget impact, we would have simply pointed out that the costs were going to rise regardless. No responsible parties were advocating that nothing be done. All understood that either wells had to be replaced, or we were going to one of the surface water options. All of those had up-front costs, and the increase in rates was going to be necessary regardless of which option was chosen. Your ‘no’ vote would not have reduced the deficit; the only question would be how much and when the costs would be incurred. We’d be drilling more deep wells right now if the surface project hadn’t passed.
It’s a pretty tough position to defend, “I was aware the cost of water was going to double, but unaware that the doubling was going to impact the budget.”
-Michael Bisch
“Would Measure I Have Passed Had the Public Known the True Budget Impact?”
We will never know.