In March 2004, the voters of Davis approved the passage of a one-half cent local transaction and use (sales) tax that was scheduled to sunset on December 31, 2010, but the voters, in June 2010, renewed it.
The tax was originally proposed as a means to address historical structural budget shortfalls, as well as provide funding for a variety of expanded service demands.
In the argument in favor of Measure P on the ballot, the signers that included Lois Wolk (Assemblywoman), Helen Thomson (Supervisor) and then-Mayor Susie Boyd argued that “The City faces increasing costs. We will face higher expenditures if we are to provide the additional police protection and meet park and recreation and open space commitments we have made to our citizens.”
They continued, “Without Measure P revenue, given the uncertain state support to the General Fund, we would be faced with very deep service cuts in police, fire, and parks.”
That was the rhetoric; the reality is that the money would go largely to increased salaries, particularly for fire who, in April 2006, were retroactively given an annual increase in compensation of 8.46% per year, amounting to 36% compounded over the course of their four-year contract.
While the city sold the public that this would pay for additional protection for police, it actually went for increased salaries, and fire got by far the largest increases in salaries.
It was also billed as a way to meet park and recreation commitments; in fact, the city put another parks parcel tax on the ballot just two years later because we had used the entire sum to pay for employee compensation.
In a 2010 Vanguard analysis, we found that the city’s expenditures increased nearly 33% over a five-year period from 03-04 to 07-08. The sales tax accounted for about 30% of that increase, while the rest of that increase was fueled by the real estate boom.
That was then. We flash forward now to 2013, almost 2014. The city has taken tremendous steps to put the fiscal house in order. We have cut non-core services, reduced the number employees to the lowest level in nearly 20 years, and we have now agreed to or imposed new contracts on all city employees that reduce city commitments on pensions, retiree health and cafeteria cash outs.
Despite this progress, the city remains on the brink. Health care costs continue to skyrocket and the city’s commitment to pensions will increase due to changes to PERS (Public Employees’ Retirement System) policies.
Years of neglect on infrastructure repairs such as water and roads will increase costs greatly for the city.
The prognosis is bad – we are looking at a $5.1 million shortfall in the general fund this year, and that number will increase to $7 million shortly.
As City Manager Steve Pinkerton noted this week, “Davis is justly proud of the amenities it offers to residents. However, expenditures continue to grow faster than revenues, despite all the changes the City has made to date.”
He argues, “Largely these increases are outside the City’s control. This funding gap makes it difficult to continue to provide the current level of services to residents.”
“The bottom line is that, absent some new revenue or one-time funds, the City will be making reductions again and efforts to maintain critical infrastructure will result in difficult choices,” the city manager writes. “This is a matter which needs to be addressed, since the overall trend is that the City has been drawing down on its carryover balances to make ends meet and those funds are projected to be depleted within the next several of years.”
As the city manager explained on Tuesday night, without new cash, the city would have to cut about 12 percent across the board against departments that in many cases have been slashed to the bone.
He told council, “We’d have far fewer recreation programs, less service at the permit center, browning out of fire stations, crime prevention programs would go away, tree trimming would be certainly greatly at risk again.”
52 more employees would have to be laid off since, in many cases, “there’s nothing left to cut.”
As we noted yesterday, economic development is a long-term solution, as the city manager estimates that such revenue is at least five years out and is contingent on voter-approved land use policies.
Some of these problems – perhaps most – are self-inflicted. The city council for years failed to invest in new roadway repairs allowing the pavement index to decrease and driving up the costs for roadway improvements. While the city has looked to grants and council cut spending there, that still will add millions in expenses over the next 20 years – something that the Vanguard had been warning for several years before the new council finally stepped up.
In addition, the water project is adding millions to the budget by increasing the city’s own costs for purchasing water to keep greenbelts and parks green. The city may look toward alternative vegetation that requires less water, but for now that is a $3 million expense.
Adding to that complication is the fact that voters have currently approved the new water project that figures to double if not triple water rates in the next five years. The voters approved a small but not sufficient parks tax in 2012. They renewed the previous half cent sales tax. And finally, while these are district expenses, you also have the more than $400 in yearly parcel tax to the school district.
One of the key questions that the city must face is whether they have done enough to earn the trust of the voters again to pass another sales tax or parcel tax to generate the $5 to $7 million that will keep the city going.
The stakes are high, as Mr. Pinkerton noted at the meeting: “We would cease doing all the things that makes us a city instead of an unincorporated area.”
But many will have long memories as the city cried poverty in 2004 and then turned around and greatly increased employee compensation.
—David M. Greenwald reporting
You discount the importance of economic development. In my mind good faith efforts means taking steps to generate more revenue even if it takes time to reach fruition from growth otherwise tax increases or service cuts are the only other solution. Perhaps the people of Davis will step up once again but if one of the most anti-growth advocates and her husband, one of the most anti-tax advocates both get their way the future of the city will be dim.
Well said.
If you read my column with this one: https://davisvanguard.org/my-view-speaking-to-all-davis-on-business-park-development-matters/ – I don’t see how you can reach the conclusion that I discount the importance of economic development.
Very good piece. The Vanguard’s reporting is increasing in quality… even when coming from a perspective I disagree with.
However, I agree with this perspective.
The question is one of trust. The city and the voters give us every reason to NOT trust that temporary revenue measures from tax increases and bonds (debt) will do anything other than release the red-ink pressure that currently curtails spending.
The clear view is that we are in a state of denial over our structural problems and fixated on getting our short-term fix.
This is not a surprise when you consider how the American psyche has changed over the years. Once a country with a population understanding the need for discipline, delayed gratification, hard work, persistence, perseverance; and having a mindset that favored growth and development… we became infested with the spoiled offspring of the Greatest Generation plagued with a lack of understanding and a mindset of me-first instant gratification, and demands for “pills” that make them feel good even while their lives fall apart from not doing the right things.
We are addicted to debt and deficit spending.
And for many addicts, they need to hit bottom before they will admit to their addiction and commit to a cure.
Temporary tax increases and more debt are “pills” that don’t fix the addiction problem. They will only acerbate and perpetuate our structural financial imbalance. They will make us feel good today, while just adding more to the horrendous burdens we keep heaping onto our children. It is more kicking of the can down the road.
We adults effed up, and now we need to take our REAL curing medicine.
And in Davis, that medicine is to admit that we have been living way beyond our means… demanding amenities without the means to pay for them. We need to accept that the way of life we have been demanding is unsustainable, and put the city on a course of long-term financial sustainability.
We need to cut more while we grow our economy. The pain of the cuts will make us feel terrible… but we deserve it.
There are situations when taking pills allows the user to get to place where they can start addressing and solving the underlying issues causing their problems. Something, that without the use of medication, they may not have found the strength to do.
I’m okay with a “pill” (short term tax increase) as long as it is used in conjunction with other treatment options.
We are already addicted to the “pill”, and that addiction has become or more pressing health problem. Taking more pills will not solve our problems. It will just cause us to increase and perpetuate our addiction.
Just look at how difficult it is to get people to understand and accept the problems of deficits and unsustainable government spending. The minute there is no immediate risk that their pet programs and benefits are at risk, they go back into the state of denial that problems exist.
The Great Recessions was basically a reset to economic reality. We had been living a lie based on inflated real estate equity that also inflated the financial markets. We had been living beyond our means. Now everyone has to take a haircut. Private sector workers were forced to take theirs early on. They are still taking it. Companies not bailed out by the government had to take theirs. Public sector workers are only beginning to be forced to take theirs while kicking and screaming. What is left? The remaining job to reset public sector workers back to economic reality… and resetting the public demanding their amenities and services back to economic reality.
Nobody WANTS to take a haircut. And give them a reason to reject having to accept one, and they will.
We either cut, or we grow our economy to pay for what we don’t want to cut.
Raising taxes and new bond debt perpetuates living the lie and it leads to more denial and less urgency devoted to getting us back to economic reality.
At the risk of extending this medical analogy too far, I would offer the following thought.
If an individual is on a high blood pressure medication or “pill” which is necessary to prevent cardiovascular problems, I would not recommend that they simply not purchase more pills even if I know that the high blood pressure is caused by years of overeating, poor diet and lack of exercise. These bad habits will take years to reverse and the condition exists now.
As a prudent doctor, what I will propose is an exercise, dietary and overall lifestyle change coupled with continuing the medication in hopes of being able to wean off the mediation over time as the changing habits improve overall health.
For the city, I would recommend a short term tax increase coupled with a well defined plan,
yes, with projected numbers for how much revenue is likely to be generated over how much time ( just as I would set weight loss and exercise targets) in addition to projections of what cuts will be necessary if targets are not met. Simply saying that “development is good” just trust me is no more effective than telling a patient to “just change your habits” when what is needed is a well defined “road map” for change with markers of success.
The problem with your analogy Tia is that it downplays the seriousness of our financial problems. Your patient doesn’t just have high blood pressure, he has an aneurysm that is about ready to burst and is hemorrhaging from a self inflicted gun shot wound to his foot. The patient needs a more serious and complete treatment plan immediately, not just another little pill.
‘Raising taxes and new bond debt perpetuates living the lie and it leads to more denial and less urgency devoted to getting us back to economic reality.”
I see your point, and I agree that this is a potential outcome of tax increases when they are made in a vacuum. But, I don’t think this outcome is as likely when they are used in conjunction with plans to increase economic growth in other ways.
I don’t think the City has a good history of either using the tax increases as intended, or of keeping them short-term. The only long term answer to our problem is economic development, something that we have actively discouraged for the past couple of decades. I agree with Frankly, that a short-term tax increase by itself will be counter productive to solving our long-term problems. I think if we are going to see an increase in the sales tax, which I think is necessary in the short-term, the implementation of that tax should be conditional on concrete steps towards economic development. In my mind those steps should include the annexation of sufficient land for the development of a significant business park and more flexible zoning of existing commercial space to allow for retail growth.
“I agree with Frankly, that a short-term tax increase by itself will be counter productive to solving our long-term problems”
Frankly is opposed to any tax increases, even ones that are made in conjunction with other long terms economic growth plans.
“I think if we are going to see an increase in the sales tax, which I think is necessary in the short-term, the implementation of that tax should be conditional on concrete steps towards economic development.”
Making approval of a Measure R vote and a tax increase dependent on each other. That would be an interesting ballot initiative.
Or it could be 2 initiatives but they would both have to pass in order for either to be in enacted, that could make for some interesting bed fellows….
Frankly’s rhetoric is always worse than his bite.
Raising the sales tax is a ‘stop gap’ measure to allow us to save some services from being cut while we put in place a long-term solution. It would simply be foolish for anyone to agree to implement the ‘stop gap’ effort without a commitment for a long-term solution already being in place. Increasing the sales tax without committing to economic development is just pushing the hard decisions down the road for someone else to deal with. The responsible approach is to deal with our problems now. Put the long-term solution into action first, then I believe even Frankly will agree that using a stop gap measure to ease the pain is justified.
I agree with you Mark. At the same time, the city is a bit hamstrung here. The city can commit to long term economic development all it wants, but without voter approval, it will be stuck. In terms of a timeline – taxes will be on the ballot in some form in June, the tracts of land east of Mace at the earliest in November. So how do you hold the city to their provisions?
The City has already shown (as you reported) that they won’t necessarily spend the new tax money on what they say they will in advance. “So how do you hold the City to their provisions?”
There is no reason to pass new taxes if we are not going to go forward with economic development as that is just putting off the more difficult decisions. We need to start the development projects now by moving forward with annexation of all the three parcels identified by the Innovation Park Task Force. That would be a meaningful investment in our future, and one that could be used to justify additional short-term taxes.
The City has already shown that the tax first approach doesn’t work.
I don’t disagree. The question at this point is whether you trust the current city government to move forward in a responsible manner.
I would be less unsupportive of a temporary tax measure to fund short-term and temporary obligations, but not as a solution to long-term structural financial deficits.
So, a long-term solution should be the priority, and the short-term solution needs to be subordinate to that.
“They renewed the previous half cent sales tax. And finally, while these are district expenses, you also have the more than $400 in yearly parcel tax to the school district.”
I think the schools parcel tax total is closer to about $800/year.
I think at the very least the city should be honest and admit that there will be nothing “temporary” about any additional tax.
If a sunset provision is added to any tax legislation then by definition it is temporary.
Correct, temporary for taxes means that it has to be renewed at some point, not that the agency won’t seek to renew it.
WesC
“I think at the very least the city should be honest and admit that there will be nothing “temporary” about any additional tax.”
Fully agree with you WesC. Look at how many “temporary” taxes that magically got renewed already in Davis. Once the city or our schools get a taste of a tax they never give it up. Anyone who believes that this tax would really be temporary sounds gullible [edit]
Okay, if by “magic” you mean a renewal initiative getting put on the ballot and approved by a 2/3 majority.
Again correct.
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