Budget/Fiscal

Last year the new Davis City Council was handed a chance to really start over when Bill Emlen suddenly announced he was headed to Solano County.  Publicly, the council and the public were quick to heap praise on Bill Emlen.

At the same time, most with familiarity with City Hall understand that Mr. Emlen was a man of profound limitations, who greatly contributed to the current pending crisis through a series of mistakes where he first underestimated the nature of the problems. He then failed to take proper leadership in rectifying the problems, not only of the pensions and unfunded liabilities, not only the missed opportunities with the fire department Grand Jury report and the last round of labor contracts, but also the consistently overly-rosy budget projections.

On Tuesday night it was good to see the Davis City Council take seriously the notion that they must do more to alert the public to the impending tripling of their water rates than simply follow the Prop. 218 statute.

Full transparency requires more than the pro forma Prop 218 notice.  However, the city remains decidedly old school in their approach to outreach and communications.  A modern communications strategy by the city could reach as much as one-third of the public with the click of a mouse.

Nearly three months after first raising the issue, the City of Davis is going forward with its Proposition 218 Notice which will include proposed five-year utility rates for water and sanitary sewer, and one-year rates for sanitation to be effective on the December 2011 utility bill.

Originally, the city had scheduled the new rates to occur in the summer during peak use and originally the city was going to notice just one meeting.

As one commentator noted yesterday, there was actually pleasant surprise to see city staff and the City Council actually start to grapple with the city’s very real budgetary problems.

I join in that, but I have an overall mixed view of the proposals, which is a huge step up from my decidedly completely negative view previously.

For some reason, the city likes to begin its budget discussions by presenting the new budget to the city council at the council meeting.  This means that the city council members and the public are not prepared to discuss the budget fully at that point in time.

This was not strictly business as usual, as the city takes steps to move the budget towards the reality we face, even as I think it is still somewhat sugarcoating the numbers.  Paul Navazio admitted that he had not pushed the numbers through to address fully the issues of unfunded liabilities in the pensions and retirement health.

The City of Davis faces a very serious budget situation with a confluence of events: a real estate downturn, a recession and upcoming bills for city retiree health care and pensions are finally forcing the city to get serious about budget reduction.

If an article in the Davis Enterprise posted on Saturday is at all accurate, it shows the extent to which the city has not taken this crisis seriously.

The City of Davis clearly needed to be called to task when the language of the city’s contract with Zipcar was not consistent with the rhetoric from the city about the contract.  That was a huge problem of public trust.  But let us not pretend that Zipcar is a budgetary problem for the city.

First of all, the contract was always small, and came from developer impact fees rather than the general fund.  Could people argue that developer impact fees could and should be better spent?  Of course.  But I also think we need to keep our eye on the real problems facing this city.

Decisions made by the Davis City Council in the past will be coming home to roost.  And the danger is that the city not only threatens its own fiscal house, but may indirectly imperil the school district’s as well.

Starting May 17, the council is scheduled to receive formal introduction of the City Manager’s FY2011/12 Proposed Budget.  The city has not released the budget as of yet, so we cannot start reviewing the numbers.

I stumbled upon an interesting letter to the editor from earlier this week.  It is from a local business owner who ended up supporting Measure A because it will enable Davis schools “to continue to offer top-notch instruction and programs.”

In addition to comments that are posted for public consumption, Vanguard articles also inspire private emails commenting about the articles.  Some of these are complimentary, some ask for follow-ups or to provide additional information, and some are just angry.

Sadly, I was only one of two members of the public who were in attendance, when city staff made their presentation about water rate increases to the City Council on Tuesday, April 12, 2010.  According to the city staff report:

“Water rates are proposed to increase 28% next year to evenly ramp up to a target average single family residential rate of nearly $110 per month. This target rate is the currently project average amount of revenue needed from single family residents to provide the cash flow to maintain current levels of operations and maintenance on our existing water system and to provide sufficient revenue to pay for the bonds necessary to build the surface water project by 2016…

Two weeks ago, the City of Davis held a budget workshop in which the council learned that the reserve gap had expanded to around 340 thousand dollars.  As a result, council voted to direct the city to close the gap by the end of June.

This week, council unanimously supported a motion that would close that gap considerably.

Last year, the city dipped into it’s vaunted 15 percent reserve to cover one-time shortfalls created by a combination of lower than expected budget revenues and the impasse with the Davis City Employees Association.  At the time, the shortfall was supposed to be closed by this year’s budget.

But instead, in October, there was still around a 40 thousand dollar shortfall.  At that time, the council had asked the city manager to work toward closing that gap.

We spent most of this week focused on the Cannery Park issue.  It is a fresher issue.  There is much greater public concern about development in Davis than there is about the city’s budget.  But the budget is a very serious concern and it is not getting any better.

We face some very difficult choices ahead in terms of the provision of city services.  The immediate concern was addressed on Tuesday.  The council voted, after some discussion, to bring the emergency reserve back to 15%.

At Tuesday’s City Council meeting, during the portion of the agenda where council would approve changes to the appointments that councilmembers would serve on commission liasons, committees and other interjurisdictional bodies, changes were considered, based on the appointment of Dan Wolk to the Davis City Council at the end of February.

Councilmember Sue Greenwald opposes the current direction of the city’s water policies and has been seeking to get appointed to serve on the Joint Water JPA body that currently Mayor Joe Krovoza and Councilmember Stephen Souza sit on.

In 2009, Councilmember Lamar Heystek created an alternative budget to that presented by Finance Director Paul Navazio.  It called for fewer cuts from core services and greater savings from the upcoming employee bargaining session, but also a downwardly revised revenue projection.

While Mr. Heystek succeeded in gaining some modifications, it turned out that the revenue projections that he proposed were much closer to accurate than those of Paul Navazio.  Moreover, the city council failed to negotiate MOUs (Memorandums of Understanding) with the bargaining groups that were sufficient to meet the needs of the council.

There are so many different kinds of problems that the water proposal faces right now, it makes sense to pause and take some time to lay each of them out in turn.  While it is tempting to put all of this on the past councils or all of this on city staff, it seems there is a measure of shared blame here combined with inevitable fall-out from policies by the previous city manager.

It is there where I begin because this is a somewhat new point.  But part of the problem here is that when Bill Emlen chose to cut staff, he did so through attrition and not rehiring.  The result is that Bob Clarke, who was the city engineer, is not just the acting Public Works Director, but he also has to do Sue Gedestad’s previous job of Operations Administrator.

The Vanguard received an anonymous letter purporting to be from a member of city staff.  Along with this note was a letter from Alan Pryor to Interim Public Works Director Bob Clarke dated March 1, 2011.  The anonymous letter claimed Mr. Pryor’s letter was sent to the council and also the Natural Resources Commission.

According to the letter “not everyone in Davis is going to get the “good” water.”  Writes the anonymous author, “He [Mr. Pryor] explained that some people in West and South Davis will still only get well water, yet pay twice as much while the rich folks in Mace Ranch get all the good, low TDS [total dissolved solids] water for their yards and homes.”

The City of Davis will see its water rates triple in the next five years, barring something highly unusual and difficult to achieve – a successful Prop. 218 water challenge.

In November of 1996, Proposition 218 ostensibly required the local government to have a vote of affected property owners, for any proposed or new assessment before it could be levied.

Given the road work that is either planned or has occurred on Second, Third, and Fifth Streets thanks largely to grant funding, it might seem inconceivable that Davis roadways are reaching critical levels of maintenance.  But that is exactly what we face.

According to a report last week, the city has a baseline funding shortfall of $1.62 million.  The city has relied heavily on one-time funding over the past two years from Proposition 1B and Federal Stimulus funding.  However, that money is gone and those funding sources are gone with them.

They will not say it publicly, perhaps they are too polite, perhaps they know no one will really care.  But they all know.  Some have said it privately.  The bottom line is that previous councils have left a huge mess that the current council now has to clean up.

This could be an article about employee compensation and the fact that during the last decade, salaries rose dramatically, spurned on by a booming real estate market and double figure increases in property tax revenues on a yearly basis.  That coupled with increases in the pension formulas to 3% at 50 for safety employees and 2.5% at 55 for miscellaneous employees have left the city in a huge bind that it will have to undig itself from.