By Dan Carson
Your staff has done a good job providing you with the analyses I personally undertook as well as the conclusions of the Finance and Budget Commission (FBC) in regard to the potential fiscal benefits of the proposed new extended stay hotels you will be considering on Nov. 1.
I intend to testify in behalf of the commission on this subject on Tuesday and of course am available to answer any questions you may have about our collective work. The commission, as your staff reports indicate, found that both projects would provide a net fiscal benefit to the City of Davis in the hundreds of thousands of dollars, plus one-time benefits on the order of $1.9 million per project.
I would note one technical change in my analysis of the Hyatt Hotel which I shared with our commission in September. After receiving additional information from the applicant about its business operations, I modified my analysis to conclude that the Hyatt House project would have a net fiscal benefit to the City of Davis of $650,000 annually, rather than the $700,000 ongoing fiscal benefit I originally estimated, from a reduced level of sales tax receipts.
My estimate of the net fiscal benefit from Marriott of $600,000 annually was unchanged. I also note that because of the sensitivity of the estimates to assumptions about hotel room and occupancy rates, the net fiscal impact of each hotel could be a couple hundred thousands of dollars higher or lower than these estimates.
As you deliberate about these projects, you will have to weigh the potential fiscal benefits to the city against other considerations, such as your land-use policies and the additional set of criteria you have adopted for such projects. The purpose of this memo is to alert you to recent information the commission has received, and my analysis of that data, which indicates why economic development projects such as the hotels are so important to the city. These comments are my personal views and do not necessarily reflect the views of any other commissioner.
The City’s Pension Rates and Costs Will Be Greater Than Projected
At our October 10, 2016, meeting, the commission heard a presentation by Bartel Associates, LLC, assessing, among other matters, how the cost of city contributions to CalPERS in behalf of its active and retired workforce will change in the future.
The presentation by the president of the firm, John Bartel, included 10-year projections of rates and costs of each of the city’s CalPERS plans for miscellaneous, police and fire service employees. His estimates reflect CalPERS actions to address unfunded liabilities in retirement plans that, in his view, are likely to eventually place the plans on a sound financial basis, albeit over a long period of time — perhaps several decades. It should be noted that the consultant’s projections of out-year pension costs are estimates – not actual decisions by CalPERS about what the City of Davis must pay to the retirement system in the future. However, the city has long relied on their work for its budget planning.
Notably, the Bartel firm’s projections of CalPERS contribution rates for the City of Davis are significantly higher than the assumptions that the City of Davis incorporated into its ten-year General Fund forecast it adopted last summer as part of the 2016-17 budget process.
As just one example, the most recent ten-year projections adopted by the city (based on the most recently available actuarial projections the city had from Bartel at the time) had assumed that employer contribution rates to CalPERS for fire and police employees would gradually increase from 35.55% in 2016-17 to 43.25% in 2021-22 and remain level thereafter.
However, Bartel’s updated numbers assume instead that police contribution rates would start at 34.9% in 2016-17 but reach 52.1% by 2025-26, the end of the city’s ten-year projection period.
Contribution rates for fire employees would be 37% in 2016-17 but reach 62.8% by 2025-26. Bartel’s estimates of pension costs also take into account how the city’s payroll of PERS-eligible employees would grow in the future. Specifically, Bartel assumed that these payroll costs would grow each year by 3%. (This growth rate is in line with payroll cost increases budgeted in recent years.)
This increase in payroll costs mainly result from increases in employee pay rates, changes in staffing positions, and merit raises received by employees as they move up the ranks.
Notably, Bartel’s estimates of increases in city payroll costs depart from the most recently adopted set of city fiscal projections, which assumed instead that city payroll would remain flat after recently approved memoranda of understanding with some employee groups were implemented in 2015-16 and 2016-17.
These estimated increases in employer pension contribution rates, combined with the assumption of increased payroll for PERS-eligible employees, mean the cost of putting the city’s CalPERS plans on a path to sustainability would be significant. Bartel estimated the pension cost impact as it relates to all city funding sources – the General Fund plus various enterprise and special funds. In 2017-18, pension costs would increase $845,000 annually.
Over the course of the city’s projection period, from 2016-17 to 2025-26, city pension costs would grow from a total of $9.1 million to almost $16.5 million, or an increase over the period of $7.4 million. I estimate this to be an average annual growth rate of 6.8%. I have attached to this memo a spreadsheet I prepared summarizing the Bartel pension cost estimates.
My Further Analysis of the Bartel Numbers
The Bartel analysis did not break out the specific fiscal impacts of the projected pension cost increases on the General Fund. I have prepared my own estimates of the General Fund cost impacts. I used two different approaches to prepare these estimates.
Under the first approach, I disregarded Bartel’s assumption of 3% annual payroll growth and considered only the impact of changing contribution rates in line with the higher Bartel estimates. I estimated that the higher pension contribution rates would add $425,000 in General Fund costs in 2017-18. By the end of the city’s ten-year projection period, the higher employer contribution rates projected by Bartel would result in about $2 million annually in additional costs to the General Fund.
Under the second approach, I also factored in Bartel’s estimate of 3% annual increases in payroll for the city for PERS-eligible employees. This projection approach suggests the city will face much more significant increases in General Fund costs. Using this second approach, I estimated that the 2017-18 General Fund cost of pensions would be about $635,000 higher than was reflected in the city’s ten-year fiscal forecast that was adopted last summer.
By 2025-26, the end of the projection period, the added costs to the General Fund for higher pension contribution rates would be almost $5 million higher than the city’s original ten-year projection had assumed.
The General Fund impact is higher when the direct added cost of the estimated 3% increase in payroll costs is included. The total cost of payroll and pension contribution rates together could increase General Fund costs by $1.2 million annually in 2017-18. By 2025-26, the end of the city’s projection period, the total cost of payroll and pension contribution rates together could increase General Fund costs by as much as $10.7 million annually, by my estimate.
Conclusion
At the time this analysis was prepared, city staff had not prepared their own updated estimates of the potential fiscal impacts of the information provided by Bartel. Given their past practice, city staff is likely to incorporate the new Bartel numbers into the updated forecast prepared in conjunction with the 2017-18 budget plan you will consider next year.
However, as the City Council is well aware from its past deliberations on the budget, the city clearly faces formidable fiscal challenges both for personnel and infrastructure costs, such as maintaining city roads and bike paths. The new Bartel projections suggest that the increased bill for city pension costs will hit the city in the near-term, and is not just a longer-term problem.
It is unlikely that the current city revenue stream can keep up with these pension and payroll cost increases and other costs the city will face to maintain high quality city services. While it should not be the sole approach the city takes to addressing these fiscal problems, city support for economic development projects, such as the two pending hotel proposals, could generate additional revenue that could help the city meet its future obligations.
I hope you will carefully consider this new information about pension costs as you consider the opportunity to increase city revenues from hotel taxes, sales taxes, and property taxes from the development of two additional hotels.
(This was originally submitted to the Finance and Budget Commission as a memo).
Narrative format is particularly impressive. Dispassionate, succinct balance of pros and cons with relevant issues, while never straying from the necessity and time crisis.
i.e.: dry
What a way to conduct planning. Fail to control costs (something that Sue Greenwald warned about years ago, and was subsequently targeted for it). Then, try to “build our way” out of the problem.
It’s truly inspiring.
I don’t think that’s completely fair. Rochelle is the only councilmember left who was elected in 2010. Everyone else is 2012 or later. All of these problems existed long before any of the current councilmembers came on board. Also you imply that these were “planning” costs when the problem was more rooted in the unchecked power of the firefighters union.
David:
Where did I blame the current council? (Although, I’m still wondering if there’s some method to better-control costs at this point.)
And yes – as a result of past decisions, it has now become a land-use (planning) problem. (If you don’t think so, suggest you ask some of the Rosecreek/Hyatt proposal neighbors.)
I also recall that Sue Greenwald supported use of the Cannery site, for commercial purposes. At the time, I wasn’t convinced that it was the most appropriate use of that site. (However, I also wasn’t fully aware of the burgeoning financial challenges faced by Davis and other cities throughout California.)
Ron – are you a reliable Democrat voter? Have you ever challenged the practice of over compensating government employees before you realized that it was messing with your no-growth arguments? You might need to look in the mirror.
Frankly:
I’ve always been concerned about that. As noted in my response above, I was paying attention when Sue Greenwald brought this up. It is a particular problem among public-safety employees (police, fire, prison guards, etc.), due to high pay, frequent overtime, and overly-generous, early pensions. Seems to me that Republicans often support public safety groups in particular (at the expense of taxpayers), as well.
And, without getting into this too much again, endless residential development (which requires ever-more-costly public services) has contributed to these challenges. When in a hole, the first thing to do is to stop digging.
Ron – the standard sustainable model for development of growing cities is to develop new housing and a corresponding amount of new commercial property – including retail – to support the growth in population. The new housing provides new positive tax revenue for about 15-20 years before it turns net negative lacking housing turn-over and increased costs for city maintenance. However, this is offset by the ongoing net positive tax revenue milking other tax dollars from these residents in the local economy.
The model is broken in Davis because NYMBYs and NOEs have prevented commercial development that would extract more tax dollars from the people living in Davis. I just went to Costco yesterday and spent about $1000. None of that resulting sales tax revenue goes to Davis yet I have lived in Davis for 40 years.
The cost of city labor is another factor contributing to the fact that housing grows net negative over time… however, this is a common and standard situation throughout California. It is same, same, same. It is certainly crap that needs to be fixed, but you and others harping on that as the unique Davis problem are just deflecting from the fact that Measure R, NIMBYs and NOE people have caused the fiscal problems we are having by blocking and rejecting all development.
You have the egg on your face as being a flag-bearer of the NOE team.
Frankly:
Agree with some of your points, but not others.
For example, the financial challenges faced by the city do not support your (following) statements:
Again, it’s the unchecked costs ASSOCIATED with residential development that are causing the problem. Allowing even more residential development might temporarily “mask” the problem, as described in your statements. However, unless this “Ponzi scheme” is continued indefinitely, the problem will grow larger, by approving even more residential development.
And again, I recall that “slow-growth” Sue Greewald (in particular) brought up concerns regarding costs for fire personnel, and supported commercial development at the Cannery. (As a result of her concerns, she was essentially targeted.) In spite of Sue’s concerns, I don’t recall a great deal of support from some of the pro-development types who are (now) suddenly so concerned about the city’s finances, and are proposing more development (in general), as a solution.
Also, note that some “slow-growth” types (such as Eileen Samitz, and to a lesser-degree – myself), supported a commercial-only MRIC.
In short, concern for city finances is not defined by whether or not one is “slow-growth”.
Well done Ron. Your use of the expression “contributed to” instead of “created” makes your statement much more consistent with the historical reality. Now if you would have removed the words “ever-more-” you would have removed the last remnants of hyperbole from your comment.
The only way that public services costs will be “ever-more-costly” is id the City does not do anything in the realm of Cost Containment. Given the fact that the recently-published updated Council begin with a strong commitment to Cost Containment the chances of “ever-more” being true are substantially reduced (but in fairness to you, not completely eliminated).
Here is the wording of that first Council Goal. The entire text of the updated Goals can be accessed HERE.
1. Ensure Fiscal Resilience
As per Council direction from the retreat, staff rearranged each of the Tasks into three Objectives:
REVENUE – Ensure fair City tax rates and fees while investigating new and
sustainable sources of revenue to strengthen the economic base and to provide the services desired by the community.
COST CONTAINMENT – Seek increased cost efficiency and containment in service
delivery, while maintaining high quality city services.
TRANSPARENCY – Take actions to enhance and promote fiscal transparency.
Ron said . . . “Again, it’s the unchecked costs ASSOCIATED with residential development that are causing the problem.”
Ron, your words above show that your sojurn with reality was brief. In your statement above, you are unilaterally attributing the unchecked costs to residential development. If you step through the City Budget and analyze the City’s costs you will see that those costs fall into many areas, and only a portion of those costs are “costs associated with residential development.” Unfortunately all of the City’s costs have seen increases, some more than others. The costs of regulatory compliance, which are unrelated to residential development, have seen increases in the hundreds of millions of dollars. Pension increases for the numerous existing employees whose jobs have absolutely nothing to do (either directly or indirectly) with residential development have seen massive increases. The 36% pay increase that was given to Firefighters had nothing to do with residential development. I could go on and on, but you get the picture.
Added residential development has certainly added costs to the City. Additional parks require maintenance. Additional roads require maintenance. Additional police patrols are required. However, the fiscal problem the City has is the result of a broad range of causes, of which added residential development is not even at the top of the list.
The two biggest culprits in the City’s fiscal woes are (1) the failure to control the City’s existing costs for the broad range of services it provides to all the people (not just the residential housing component), and (2) the massive drag on City revenues from the property assessment provisions of Prop 13. Property ownership turnover (both residential and commercial) in Davis is much, much slower than the vast majority of the cities in California. What Prop 13 mandates is that property assessments do not reset to “market value” until and unless there is a sale of the property. Prop 13 also mandates that assessments of properties with no sale are subject to an annual assessment increase of no more than 2%. Prop 8 further mandates that assessments of properties with no sale can actually decrease in times of market value reductions.
That means many Davis homes with market values well over $500,000 have assessed values of less than $100,000 because they have been owned by the same person for so long.
As a result, the long-term fiscal models that have been put together for Davis assume a revenue growth from property taxes of between 2% and 3% per year. If Davis were a normal city with normal housing turnover velocity, that property tax revenue growth would more than likely be between 4% and 6%.
What the above revenue realities mean for Davis is that containing costs between 3% and 4% per year level is not enough. Cost containment needs to be at or below the 2% to 3% growth in revenues.
For a California city with revenue growth between 4% and 6%, containing costs between 3% and 4% per year produces a very healthy bottom-line.
EDIT: Davis actually does have a culprit (3) that most other California cities don’t have. Specifically when UCD either purchases or rents property (land and/or buildings) in the City, that property is removed from the tax rolls and the City (and County) no longer receive property tax revenues from that property. That is commonly referred to as “property tax leakage.”
“Again, it’s the unchecked costs ASSOCIATED with residential development that are causing the problem. ”
ron – you are completely wrong. the costs exploded during a time when residential development decreased to nearly nothing. it’s very clear that you just don’t know what the hell you’re talking about.
DP:
So, costs to service existing residential developments have risen faster than tax revenues. And, your solution is to add even more residential development to “solve” the problem.
Haven’t seen you use the word “hell”, previously. Guess I hit a nerve.
your comment ignores the massive pay increases that created that problem. i have not discussed with you my solution to that.
The exchange between Matt and Ron is a great demonstration of a situation where someone with specific knowledge is attempting to educate a poster who unfortunately has made the active choice not to learn. Fortunately for us, Matt is not writing for Ron’s benefit but for those silent readers watching over their shoulders, who are interested in understanding some of the details of why the City’s fiscal situation is in such a sad state.
The statements from Mark (and to some degree, Matt) are an attempt to disassociate the increasing, unchecked costs to service residential developments from the financial challenges that the city is facing.
ron – you’re embarrassing yourself
Ron wrote:
> Haven’t seen you use the word “hell”, previously.
> Guess I hit a nerve.
If the word “hell” was too much for anyone don’t click the link below, but if you are OK with “locker room” talk the link below has a firefighter (ironically in a “locker room” ) explaining to his private sector friend why we have financial problems.
https://www.youtube.com/watch?v=EmC26RuO26g
Ron wrote:
> What a way to conduct planning. Fail to control costs
> Then, try to “build our way” out of the problem.
It is not an ideal way to “conduct planning” but since the city is legally obligated to make the pension payments we need to figure out a way to get the money.
Would you be happier if we just had a $40/year “we don’t want the Hyatt” tax on every family of four (that increased every year like the $42/year “we don’t want the Marriott” tax we will get next year)…
SouthofDavis:
Point noted, although I’m still wondering if there’s some method to better-address pension and health care costs (short of bankruptcy). However, I suspect that you’re generally correct, regarding the obligations of cities such as Davis.
In general, I’d support council action to put a measure on the ballot to address particular challenges (such as basic maintenance of roads, bike paths, public buildings). Seems like this will be needed, regardless of the fate of the Hyatt (or any other) proposal. Perhaps the council is waiting to see what happens with the school parcel tax.
Hire fewer people.
Lay off more people.
Change collective bargaining agreements for new hires.
Lobby the state to do something about it.
The solution will need to be conversion of all city (government) employees to defined contribution plans. The defined benefit plan for government employees should be killed and buried because of the giant conflict of interest with government employees and the politicians that decide their pay… and because it shifts the complete risk of funding to the taxpayer… and because it is financially unsustainable.
So I am surrounded by neighbors that retired in their 50s. I work in the private sector and will likely not retire to well into my mid to late 60s… except if the economy turns and my taxes are increased to pay for the government retiree pensions… then I will likely have to work into my 70s. And yet the government defined benefit plan method continues to be protected like it is moral. It isn’t moral. It is frankly, theft.
And – it has been largely eliminated (or, at least drastically changed), for federal employees. (A “hybrid” approach, is now used for federal employees, and has been in place for some time.)
https://www.opm.gov/retirement-services/fers-information/
I believe that Tia mentioned that Kaiser uses something similar, as well.
Ron said . . . “In general, I’d support council action to put a measure on the ballot to address particular challenges (such as basic maintenance of roads, bike paths, public buildings). Seems like this will be needed, regardless of the fate of the Hyatt (or any other) proposal. Perhaps the council is waiting to see what happens with the school parcel tax.“
Ron, Council isn’t “waiting.” Council has directed Staff to analyze the fiscal requirements of all the City’s capital infrastructure (such as basic maintenance of roads, bike paths, public buildings, parks, pools), as well as PERS pensions and OPEB retiree healthcare. Those analyses are under way, and initial progress reports for each of those areas have been presented to the Council, the FBC, and Commissions related to the capital infrastructure area. This effort is intended to arm Council with well documented, transparent information that can (1) inform its decision on any possible taxes, and (2) to honor the 12/15/2015 unanimous recommendation of the FBC (text provided below).
That the F& B C is recommending that the Davis City Council not approve any new tax measures or utility rate increases for placement on a ballot measure until such time that:
1. The staff provides a detailed scope of proposed and/or deferred capital infrastructure projects, as well as proposed new services.
— Said scope document shall include specific measurable success metrics for the proposed new services and projects, along with an inventory of the specific costs that will be incurred to provide said proposed services or complete said projects.
— Each deferred capital infrastructure project shall include its expected success metrics, as well as an anticipated budget.
— The scope document will be updated each year as part of the Budget adoption process.
2. The staff provides detailed report/s in conjunction with or as a part of the annual Budget adoption process documents submitted to City Council that reports the specific work done (accomplishments) the prior Fiscal Year on staff proposed services and project/s associated with item #1.
3. The staff provides detailed report/s in conjunction with or as a part of the annual Budget adoption process documents submitted to City Council that defines where the revenues collected from any new tax/increased tax measure(s) spent on services and/or projects other than the services and/or projects associated with item #1.
And, Ron, your narrative is extremely false/misleading see,
http://transparentcalifornia.com/salaries/search/?q=Syvanen
Sue Greenwald’s husband…see,
http://transparentcalifornia.com/pensions/search/?q=Syvanen
see…
http://capitalandmain.com/uc-retirement-plan-under-threat-0609
The truth will set you free Ron, if you are willing to truly work at it… your ‘revered’ Greenwald not only benefits from a public retirement system, but specifically one that is more poorly funded than PERS… consider what that will mean to tuitions or the State’s General fund… she just didn’t think Davis taxpayers should bear such costs, nor should their employees have benefits matching those of her/her spouse… for many years, the UC system paid NOTHING (employee, nor employer), expecting taxpayers to pick up the obligations.
The “H” word comes to mind…
Have tried to ‘moderate’ myself, but too late (self-reported, as did not intend to bring a spouse into this)…. But, Ron, if my comment is deleted, I agree with that decision… actually, support it… but it is all facts… Sue Greenwald was not as she might appear…
She benefits from a weaker funded government pension program than PERS… So, there is a bit of hypocrasy involved… if you support that, fine…
Oh… and i’ve heard (not verified) that Sue gets full retiree medical from her time on the CC…
If retiree medical is provided to any employee, it has to be provided to all, including CC members. There was a question of ‘vesting’ that suggested that you had to serve 5 years, but my understanding is that was done away with a few years back. Sue was on the CC for more than 5 years so in her case, it wouldn’t matter.
Yes Mark, but Sue argued for denying it completely to 25-30-35 year employees, but insisted on it for herself… no “H” there?
That does it. Because of this reduction in projected city revenue, I have changed my mind and no longer support the Hyatt House project.
The pension problems is most likely worse than we are being told.
I just read the article linked below that explains how it is easy to make the shortfalls look smaller by “plugging in a bigger annual return number”:
http://www.businessinsider.com/government-pension-problems-2016-11
See, https://www.cato.org/research/social-securitys-financial-crisis…
Yes, the pension problem, whether it is public employees, GM (and other private employers who walked away from their obligations/promises) employees, SS recipients, Medicare, MediCal, SSI, etc. are problems…
A couple of attachments to this post were forwarded to me for Dan Carson.
Links:
http://davismerchants.org/vanguard/General%20Fund%20Pension%20Estimates.png
http://davismerchants.org/vanguard/Bartel%20estimates.png
Thanks, Don. These are the attachments that went along with the memo in case any other data nerds like me are out there and want to see them. Also one minor point: this memo was shared with my FBC colleagues but it was addressed and sent to the City Council.
Would actually be more interesting if the cost was divided by the employees/retirees affected…
And, here’s “Exhibit A”, regarding a cost that can be controlled. (Especially for police/fire personnel, who are already making plenty.) I also hope that pension/health care costs for public safety employees in particular have been addressed, for new employees. New employees must contribute a greater share, toward these costs. (My apologies if this has already been addressed.)
you really need to do more research before typing stuff. increased health costs are one of the biggest drives in increased compensation even as pay has been relatively flat over the last decade.
DP: I’d suggest you read the article above, which is the source of the quoted statement. (I added the word “projected”.)
Not disagreeing about increasing health care costs, though.
Ron said . . . “Not disagreeing about increasing health care costs, though.”
Ron, your statement above appears to be moving away from your previously stated position that “it’s the unchecked costs ASSOCIATED with residential development that are causing the problem.”
Is that appearance correct, or does your statement “In fact, I’d argue that “pro-development” types caused the financial challenges faced by the city” apply to the nationwide increase in health care costs as well?
Matt:
You’re reading too much into that statement.
Ron that is an interesting comment. Do you care to elaborate?
I now see that I didn’t answer your question.
No, I don’t think that the local “pro-development types” caused the nationwide increase in health care costs.
Are they causing the City of Davis’ increases in health care costs?
Matt:
The basic need for city employees is primarily to serve existing residents. (In other words, the existing level of development.)
Once those employees exist (to serve existing residents/residences), the city is at risk for cost increases for those employees (including rising health care costs, if the city assumes that risk).
Since the existing level of residential development does not support the cost of services, the discrepancy would increase if more residential development is added. (As mentioned earlier, the problem would be temporarily “masked”, until costs for new development eventually exceeds tax revenues collected.) And, there is nothing permanent in place to prevent this.
You are obfuscating again Ron.
The basic need for city employees is not primarily to serve existing residents. There are may other demographic groups and organizations that require services. To name just a few . . . Businesses and their employees require services. Governments and their employees require services. Non-Profits and their employees require services. Visitors require services. Commuters require services.
I suspect that if we checked the exhaustive data on Davis compiled by Matt Kowta and his team at Bay Area Economics, we will find that the number of non-residents who require services from the City of Davis exceeds the number of residents who require services from the City of Davis.
Matt:
If we had a city exclusively limited to non-residential endeavors (e.g., businesses), I suspect that we wouldn’t be facing financial challenges (at least not at the same level). There also wouldn’t be as much need for some of the activites that you just mentioned (e.g., governments and their employees).
Also – wouldn’t visitors (hopefully) generate TOT, for example? Isn’t the result from visitors expected to be “net positive” for the city, which is a primary justification for the pursuit of hotels?
Also – what “commuters”, other than those working at (net positive) businesses?
Matt wrote:
> There are may other demographic groups
> and organizations that require services.
It looks like Matt forgot college students who will require police services if they leave campus and get stabbed in a bar or raped on the railroad tracks and EMS services if they get so drunk on picnic day that they fall and hit their head and die…
It is interesting that many of the people who complain that residential development in Davis does not fund ALL of the related costs are the ones that pushing for residential development on campus that pays for NONE of the related costs …
SoD, I lumped the on-campus students, and you, and all the folks in El Macero and Patwin into the Visitors category.
Good get though.
I do realize and acknowledge that UC Davis is pushing some of their costs/impacts onto the city.
But, wouldn’t some of the same “visitors” that SouthofDavis and Matt describe also contribute to businesses in Davis (e.g., bars, restaurants, stores, etc.). (As they do, now.)
Rich Rifkin frequently writes about city budget issues in his Davis Enterprise columns: http://www.davisenterprise.com/forum/opinion-columns/rich-rifkin-the-cost-of-benefits-to-city-workers-is-bankrupting-us/
Ron said . . . “If we had a city exclusively limited to non-residential endeavors (e.g., businesses), I suspect that we wouldn’t be facing financial challenges (at least not at the same level).”
That completely depends on both the type and tenure of the businesses Ron. Property Taxes for commercial buildings are subject to the same assessment issues from Prop 13 as residences are. I’m pretty sure that most of the Downtown properties have had the same owners for decades. Further, there is a “loophole” in Prop 13 that allows corporate owners of properties to avoid reassessment when their properties transfer to new ownership.
With that said, what taxes do non-resident employees of local businesses pay to the City?
Bottom-line, unless the non-residential endeavors generated lots of business-to-business sales taxes, I think the financial challenges (on the revenue side) would be worse.
Ron said . . . ” There also wouldn’t be as much need for some of the activities that you just mentioned (e.g., governments and their employees).”
That’s an interesting point Ron. What activities would go away in a non-residential city?
Ron said . . . “Also – wouldn’t visitors (hopefully) generate TOT, for example? Isn’t the result from visitors expected to be “net positive” for the city, which is a primary justification for the pursuit of hotels?”
The answer to your question is illuminated by the number of daily visitors to Davis now. We have a total of 506 rooms at Davis hotels. Let’s be generous and say two people per room. How does 1,012 daily visitors paying TOT compare to the number of daily visitors not paying TOT?
Ron said . . . “Also – what “commuters”, other than those working at (net positive) businesses?”
If you look at the monthly Fire Department call statistics you will find a substantial number of service calls solely focused on commuters. Probably a few Police Department calls as well.
Don wrote:
> Rich Rifkin frequently writes about city budget
> issues in his Davis Enterprise columns:
Rich wrote about the 2015-16 return for CalPERS:
“Despite the fact that the stock market is now trading at all-time highs, CalPERS earned just 0.6 percent on its investments”
“The S&P 500 closed at 2,098.86 on June 30 2016. One year earlier it sold for 2,077.42.”
I just looked at the S&P today and it closed at 2085.18 DOWN from the end of the last CalPERS fiscal year end.
Ron… have you never heard of the City of Bell, CA? City of Industry, CA?
http://transparentcalifornia.com/salaries/2015/city-of-industry/
hpierce:
Holy cow! Regarding the City of Industry, point noted – that even cities with very little residential development can waste money. Oh well, I guess the City of Industry is at least wealthy enough to compensate its employees in an overly-generous manner. Without industry, perhaps it wouldn’t be able to even accomplish that. (Not sure of the overall financial status of that city.)
Here’s a Wiki link that I briefly reviewed, which states that the city was incorporated on June 18, 1957 to prevent surrounding cities from annexing industrial land for tax revenue.
https://en.wikipedia.org/wiki/City_of_Industry,_California
Looks like the city’s financial dealings were subject to an audit, as well. According to the article below, “The Los Angeles County district attorney’s office has also opened an investigation into the financial dealings between the city and companies run by the former mayor.”
http://www.latimes.com/local/lanow/la-me-ln-controller-industry-investigation-20150507-story.html
Glad to assist in your learning curve, Ron… mixed bag… Davis is not Bell, and should never be City of Industry… have a great weekend…
Ron said . . . “But, wouldn’t some of the same “visitors” that SouthofDavis and Matt describe also contribute to businesses in Davis (e.g., bars, restaurants, stores, etc.). (As they do, now.)”
They absolutely contribute revenues to those Davis businesses, but the City only receives revenue if the business that the visitor transacts is subject to sales tax (or after November 6th marijuana tax).
In many, many cases you have visitors who come, stay, and leave without completing a single transaction of any kind.
Ok… city employees (hired after Jan 1 3013 @ 2% @ 62, and per MOU’s (at least PASEA’s))
the problem with frankly’s view is it does absolutely nothing for the current shortfalls to swap out defined benefits for defined contributions.
I disagree DP. Frankly’s view would shift the “investment market risk” from the City to either the employee or the employee’s agent (in this case PERS).
Right now when the return PERS gets on its investments underperforms the market PERS simply turns to the City (and all the other jurisdictions) and says “You have to make up the difference.” For example, during this last 12-month period (7/1/15 through 6/30/16) PERS achieved a 0.61% Return On Investment. That means there is a 6.89% shortfall that PERS will be looking to Davis and the other jurisdictions to make up.
PERS does recognize that asking for more money is politically charged, so it doesn’t do so lightly, and as a result they will probably wait to see if they can “play catch up” with above 7.5% returns in the 7/1/16 through 6/30/17 period. The only problem with that is that PERS’ return for the 7/1/14 through 6/30/15 period were only 2.4%, so the 6.89% 15/16 shortfall compounds on top of the 5.1% 14/15 shortfall.
In Frankly’s view those shortfalls would not be the responsibility of the City, but rather the employee and/or the employee’s agent.
no it wouldn’t because you can only shift the system on new employees, not existing employees.
DP wrote:
> you can only shift the system on new
> employees, not existing employees.
The more new employees that go to a defined contribution plan the sooner everyone will find out the the current defined benefit plan is a Ponzi scheme that depends on exponential growth in new employees to pay what was promised by the politicians (of both parties) to get money and votes…
http://www.pensiontsunami.com/
Actually, the shift could be made if employees agreed… no reason they should, though, but they could…
And, consider Measure H… CalSTRS is in worse shape than CalPERS… I strongly believe there will be another DJUSD measure, during the life of Measure H, to deal with that and “sunshine” salary/benefit enhancements, in addition to the CalSTRS thing, to “help” teachers, administrators, other staff, and of course it will be “for the kids’ sake”…
But the chances for anything like that for City ‘needs’? No chance.
With the likely passage of H, any City parcel tax is DOA.
DP… that should also apply to UC State County and any publically funded system folk… if you are consistent…
Thus, should also apply to SS and Medicare… SS & Medicare are basically ‘defined benefit’…
Matt:
I started reading your responses above, and then noticed this statement:
So, unchecked costs to protect residential developments from fires have nothing to do with residential development? Seems like a strange thing to say.
the number of firefighters have decreased while their pay has gone up. also chief duty of firefighters is emergency medical calls NOT fires
DP, I actually disagree with your point. The majority of medical calls are to residences. Not all medical calls but most of them.
Wrong… otherwise we’d call them EMT’s… a good area to look to privatization… Davis was not incorporated to deal with medical issues… it was founded, in large part, to prevent and fight fires…
It has morphed, but you could pay qualified folk a lot less on the EMT side…
Ron, your point would be valid for a normal CPI increase in Firefighter pay (for the three year period at the time of the raise it was 5% — 1.67% per year), but the remaining 31% raise had nothing to do with residential development, and as a result your point has one part validity and six parts non-validity. In major league baseball a batting average of 140 will get you demoted to the minor leagues.
And, of course, that has “nothing to do with residential development”, either. No – there’s no residents in residential developments. (Except during housing market crashes, of course.)
this is pointless, you don’t know what you’re talking about.
In this case, yes he does.
That is a true statement! [DP’s]… with the new state codes over the years, increased sprinklering of buildings, etc., fire suppression is de minimus… Fire Marshals, and their staffs will remain critical to see that the codes are enforced…
Matt: “Bottom-line, unless the non-residential endeavors generated lots of business-to-business sales taxes, I think the financial challenges (on the revenue side) would be worse.”
Sounds like you’re arguing against commercial development, in terms of its impact on city finances. Is that your intention?
No. I am a firm believer in a mixed/diversified economy. You are the person who swung the pendulum all the way to the non-residential extreme. I’m just showing you how thin the ice is that you have chosen to skate on.
Matt:
I’m not sure at this point, but I think that you initiated the conversation between us regarding residential vs. commercial development, which led to the theoretical example discussed above. Based on your quote, it seems that you were stating that commercial endeavors (assuming that they don’t generate lots of business-to-business sales taxes) would result in a worse financial picture for the city than residential development.
Are you backing off of that statement, now? Or, are you actually arguing against more commercial development, because it loses money for the city?
Again, here’s your original quote:
And, here’s your follow-up statement (which doesn’t really address the question I asked, above):
No Ron, it was you who initiated the conversation between us regarding residential vs. commercial development. Here is your quote, including time stamp.
As I have said over and over and over again, fiscal challenges we face have nothing to do with development (either residential or commercial). If we halted development today (taking it down to zero percent growth), the ever increasing red ink would continue to grow.
As Davis Progressive pointed out in his/her comment at 12:15 this afternoon, the period of highest cost growth for the City happened in a period when development activity had dipped from a high of 250 new building permits in 2005 down to 27 in 2008, 27 in 2009 and 21 in 2010.
Hmm. And yet, you’ve repeatedly acknowledged that costs associated with housing developments eventually exceed revenues collected (at least for houses priced under $600K or so). And in fact, that’s what’s happening today, as a result of previous developments (coupled with a failure to control costs associated with those developments). (Despite what you and Davis Progressive are stating, I have not mentioned the rate of recent residential development, which, of course, dipped during the housing crash.)
Again, would you care to explain the statement, below? (This is the third time I’ve asked if you’d care to clarify, so perhaps you’re avoiding it?) And again, you were comparing such commercial development with residential development, in terms of the financial impact of the city:
Also, if such commercial endeavors are even worse (financially) for the city than housing developments, how can the city raise more revenue (other than TOT, raising taxes, etc.)?
Actually Ron I have answered that question twice, and here is my answer a third time, No. I am a firm believer in a mixed/diversified economy.
You put forward the hypothetical possibility of a non-residential city (swinging the pendulum out to its full extreme, as you have done many times in the past in many different conversations), and my response, “Bottom-line, unless the non-residential endeavors generated lots of business-to-business sales taxes, I think the financial challenges (on the revenue side) would be worse.” that you have quoted in your question related to your hypothetical scenario and that hypothetical scenario alone.
Ron said . . . “Hmm. And yet, you’ve repeatedly acknowledged that costs associated with housing developments eventually exceed revenues collected (at least for houses priced under $600K or so).”
That is indeed the effect that is the result of the underlying root cause, the failure of the City to control all its costs . . . its costs associated with commercial enterprises, its costs associated with policing, its costs associated with regulatory compliance, its costs of pension benefits, its costs of health care.
You keep describing an effect as if it is a cause. I suggest you might want to take a course at UCD on Root Cause Analysis.
Ron said . . . “And in fact, that’s what’s happening today, as a result of previous developments”
You have shown no evidence how previous developments have resulted in the City’s increase in health care costs, or pension costs, or regulatory compliance, or policing, or services to the commercial sector of the Davis economy, or services to the nonprofit sector of the Davis economy. All you have shared with us is your opinion that previous developments are the cause of the City’s fiscal woes. Show us some evidence that supports your opinion.
If you look at the City Budget, expenses fall into ten broad categories
— City Attorney – would exist with or without previous developments
— City Council – would exist with or without previous developments
— City Manager’s Office – would exist with or without previous developments
— Administrative Services – would exist with or without previous developments
— Community Dev. & Sustainability – would probably be smaller without previous developments, but it is very small when compared to the other Budget areas
— Community Services – would exist with or without previous developments
— Parks & Open Space Management – would exist with or without previous developments, but be somewhat smaller
— Fire – would have all three firehouses and the same staffing with or without previous developments
— Police – would exist with or without previous developments, but be somewhat smaller
— Public Works – would exist with or without previous developments, but be somewhat smaller
With the above said, here’s two questions for you. (Question 1) When you look at the following Davis population history, where do you draw the line in defining the term “previous developments”?
Historical population
Census _ Pop _ 10-year Percent change
1880 ____ 441 _ —
1890 ____ 547 _ 24.0%
1920 ____ 939 _ 19.7%
1930 __ 1,243 _ 32.4%
1940 __ 1,672 _ 34.5%
1950 __ 3,554 _ 112.6%
1960 __ 8,910 _ 150.7%
1970 _ 23,488 _ 163.6%
1980 _ 36,640 _ 56.0%
1990 _ 46,209 _ 26.1%
2000 _ 60,308 _ 30.5%
2010 _ 65,622 _ 8.8%
(Question 2) At what point in Davis’ history did costs begin to get out of control?
I look forward to hearing your answer.
Would you care to elaborate, regarding the reason(s) that your statement would (only) apply to my hypothetical scenario alone?
I’m familiar with root causes, and have experience analyzing them professionally. Perhaps you’d like to explain why you’ve already repeatedly acknowledged that the costs to provide services for residential developments eventually exceeds revenues collected (for units that cost less than $600K or so), and then go on to state these costs are somehow unrelated to residential developments.
I suggest you might want to take a course at UCD on logic.
Last one out, don’t forget to turn off the lights. And if you’re going to keep at it all night, there’s a coffeemaker in the hall.
Also, there is no basis for (some) of your statements regarding the need for city services, assuming that there were no housing developments in Davis. I’d suggest that you explain your logic, for each category that you mentioned.
To further support your statements, perhaps you could also include an analysis of the costs that Davis would incur for each category, assuming that there were no housing developments in Davis. You would then need to compare that with the amount of revenue collected, from the remaining businesses.
Of course, the city would be much physically smaller, if housing developments were not included in your analysis. (Fewer roads, fewer buildings, less need for police/fire, no need for schools, etc.)
And again, this is based on your position that the cost for services is somehow unrelated to residential development.
Don: “Last one out, don’t forget to turn off the lights. And if you’re going to keep at it all night, there’s a coffeemaker in the hall.”
That is hilarious. It’s a war of attrition, once again. (And, I suspect that Matt will stay up later than me.)
I hope someone’s at least entertained by this nonsense.
Ron said . . .“Would you care to elaborate, regarding the reason(s) that your statement would (only) apply to my hypothetical scenario alone?”
The reason is simple. My answer was a vry specific/limited answer to the very specific/limited question you posed. If you care to ask a global question, I will be glad to give you a global answer.
Bottom-line, a narrow economy that is 100% non-residential faces challenges that a mixed economy does not face. One example challenge is that 100% of the people working for or interacting with the commercial businesses in the economy will all commute into the jurisdiction, consuming services while providing no revenues for the jurisdiction other than sales taxes. A second challenge that a 100% non-residential economy will face is that retail businesses (the biggest generators of sales taxes) will not locate there because of the total absence of resident customers for their retail goods.
Ron said . . . “I’m familiar with root causes, and have experience analyzing them professionally. Perhaps you’d like to explain why you’ve already repeatedly acknowledged that the costs to provide services for residential developments eventually exceeds revenues collected (for units that cost less than $600K or so),”
I have repeatedly acknowledged that that EFFECT of a failure of the Davis City government to contain costs. The root cause of that effect has always been a failure of cost containment.
Ron said . . . “and then go on to state these costs are somehow unrelated to residential developments.”
Where have I ever said that the costs are unrelated to residential developments? What I very specifically said was, “The basic need for city employees is not primarily to serve existing residents. There are may other demographic groups and organizations that require services. To name just a few . . . Businesses and their employees require services. Governments and their employees require services. Non-Profits and their employees require services. Visitors require services. Commuters require services.”
Ron said . . . “Also, there is no basis for (some) of your statements regarding the need for city services, assuming that there were no housing developments in Davis. I’d suggest that you explain your logic, for each category that you mentioned.”
You are a very selective reader Ron. Go back and reread my post. I very specifically asked you for input (in order to give an answer that matches your definition of the line of demarcation between the period of Davis history that is prior to “previous developments” and the period of Davis history that is after to “previous developments” (Question 1) When you look at the following Davis population history, where do you draw the line in defining the term “previous developments”?
So Ron, where do you draw that line?
While you are at it you can answer the second question I posed to you, (Question 2) At what point in Davis’ history did costs begin to get out of control?
Keep the cards and letters coming.
Matt:
If you choose to own a car, and it needs services (with no method in place to contain service costs over time), what is the root cause of having fewer dollars in your pocket, over time? (The choice to own a car, or the increasing cost of services for that car?)
If you then get a larger car (requiring more costly services), what is the root cause of having fewer dollars in your pocket, over time? Is it the choice to get a larger car, or the increased cost of services for that larger car?
hpierce brought up the example of the City of Industry, which is almost entirely non-residential (see comments above). (I hadn’t known about this, prior to tonight.) hpierce also noted that employees are paid quite generously, there. (Too generously, one can argue. I also noted that the city was subject to an audit.)
In any case, how is it that the City of Industry can afford to do this? (I already noted that I don’t know the overall financial health of that city. However, it seems unlikely that a city such as Davis would be able to afford such actions in the first place.)
And, since you’re suggesting a “balance” (between residential and business development), what do you envision that balance to be? How would you measure it? And what, specifically, are you advocating (other than hotels) to generate more revenue?
Also, since city council membership is temporary, and priorities change over time, how would you address the challenge of ensuring that costs do not exceed revenue, over time?
Ron said . . . “If you choose to own a car, and it needs services (with no method in place to contain service costs over time), what is the root cause of having fewer dollars in your pocket, over time? (The choice to own a car, or the increasing cost of services for that car?)”
Your analogy fails because of the quantity of cars owned. The units of service are per person, so a correct analogy would be the ownership and service of a fleet of 65,622 cars. You then compare the costs of service between 65,622 cars and 60,308 cars, or alternatively 65,622 cars and 46,209 cars, or alternatively 65,622 cars and 36,640 cars.
Car maintenance has three major components (1) capital expense for the infrastructure needed to perform the maintenance services, (2) labor expense for the service personnel, and (3) the consumables/parts expense.
Economies of scale apply to all three of those components differently. There is very little economy of scale for (3). At a certain critical mass the average consumables/parts costs per car are the same. Therefore those are costs that will indeed decrease if you choose to go down from 65,622 cars to one of the lower numbers.
There definitely is economy of scale for (2). A perfect example is the cost of fire services. The firefighter staffing complement at 65,622 in 2010 is actually less than it was at 60,308 in 2000 and probably comparable to the firefighter staffing complement that existed at 47,209 in 1990. In addition the 2.40 FTEs of support staff is virtually identical at all three levels.
There is substantial economy of scale with respect to (1) capital expense for the infrastructure. In 1990 Davis had the same three fire stations that it had in 2010. The third fire station was built in the 80’s and the first and second fire stations were built in the 60’s. The number of fire trucks in each station has been at the current complement since 1990. Bottom-line the history of the DFD tells us that capital costs are the same at 47.209 as they are at 65,622.
Now, with respect to the root causes of the substantial increase in Fire services cost, the #1 reason is the rate of increase of hourly pay that massively exceeded the CPI increases for the same period. The #2 reason is the increase of Pension expenses far beyond the CPI increases. The #3 reason is the increase of healthcare expenses far beyond the CPI increases. The #4 reason is the increase in the number of residents served.
Ron said . . . “In any case, how is it that the City of Industry can afford to do this?”
I have no idea how they can afford it, or if they actually can afford it. That is homework/legwork you will have to do for yourself.
Ron said . . . “And, since you’re suggesting a “balance” (between residential and business development), what do you envision that balance to be? How would you measure it?”
That balance will be different for every city. There is no silver bullet. Bottom-line, the right balance is one that puts the specific jurisdiction in a position to pay its bills and provide the services desired (and valued) by its residents, businesses, nonprofits, NGOs, visitors and commuters.
Ron said . . . “Also, since city council membership is temporary, and priorities change over time, how would you address the challenge of ensuring that costs do not exceed revenue, over time?”
You create a culture of accountability, the components of which will include (but not be limited to) the following:
Cost Containment as an Element of Fiscal Resilience
1a. Undertake a full staffing analysis to determine match between service delivery needs and staffing.
1b. FBC discussions have not only embraced a staffing analysis (building on John Meyer’s study last year), but we have also discussed the belief that a thorough Business Process Re-engineering engagement is necessary as well. Staffing poorly designed, inefficient, ineffective service delivery processes makes no sense. Einstein said it perfectly, “Insanity: doing the same thing over and over again and expecting different results.”
2. Based on 1, consider best ways to provide services going forward with focus on
— Training workers to take on multiple tasks (as is happening already)
— Consideration of targeted and appropriate outsourcing of services
3. Examine all means to further reduce growth in compensation costs including analysis of OPEB options (as other CA cities are doing).
4. Create more transparent and accessible accounting systems that enable a more precise estimation of costs of specific services—building on work done by the Fee Study consultants.
5. Promote a more aggressive analysis with the County and other cities, via LAFCo, of shared bidding, service, and consulting options to reduce duplication and obtain scale efficiencies.
6. Determine what current city programs might be candidates for reduction or elimination and which we want/must keep.
7. Determine what current city infrastructure we could/should shed (buildings, properties) to reduce expenditures related to them.
Though not a cost containment item, we should also receive an analysis of all non-enterprise fund balances to determine if/how we can use these funds to meet current needs.
Ron, these latest questions of yours become superfluous if you actually answer the question you have been consistently ducking since I posed it to you early in this conversation. To make it easy for you here it is one more time. I’ve also included the second question that you have consistently ducked.
(Question 1) When you look at the following Davis population history, where do you draw the line in defining the term “previous developments”?
Historical population
Census _ Pop _ 10-year Percent change
1880 ____ 441 _ —
1890 ____ 547 _ 24.0%
1920 ____ 939 _ 19.7%
1930 __ 1,243 _ 32.4%
1940 __ 1,672 _ 34.5%
1950 __ 3,554 _ 112.6%
1960 __ 8,910 _ 150.7%
1970 _ 23,488 _ 163.6%
1980 _ 36,640 _ 56.0%
1990 _ 46,209 _ 26.1%
2000 _ 60,308 _ 30.5%
2010 _ 65,622 _ 8.8%
(Question 2) At what point in Davis’ history did costs begin to get out of control?
Matt:
I haven’t answered your question, because I consider it to be pointless (and superfluous, as you’ve described my questions to you – to which you’ve also declined to respond).
Perhaps we should (finally) end this thread.
Ron, you consider it pointless to answer the question, “At what point in Davis’ history did costs begin to get out of control?”
Why do you consider that question pointless?
Ron, in another part of this discussion you are actively engaging hpierce and South of Davis in specific discussions of specific developments. That is active discussion by oy of the very question I posed to you, which you have here deemed as “pointless.” You apear to be talking out of both sides of your mouth simultaneously.
The purpose of the question I posed to you was to avoid a dispersed discussion of each individual development, and instead have you draw a line in the historical growth of Davis whereby you deal with the devlopments as a group, determining all the ones after the date you choose as “unnecessary” (my choice of word) and all those before that date as “core” (again my choice of word).
Once you have given a clear answer to the question, I will be able to give you a clear answer, in your terms, to the important question you posed about how “previous developments” affect the City’s costs.
That was the “point” of the question . . . to properly address your statement “Also, there is no basis for (some) of your statements regarding the need for city services, assuming that there were no housing developments in Davis. I’d suggest that you explain your logic, for each category that you mentioned.“
Matt:
I see that you’re not ready to take my suggestion to end this thread. Seems like there’s not much value in it, at this point.
The communications between me and you, vs. me and the others you mentioned are like comparing “apples to oranges”. (Different, but partially-related topics.)
And no – you are the one who is attempting to “draw a line” regarding dates of developments. I’m not sure why you’re attempting to do so (nor do I care much, at this point).
Ron, I have never labeled any of your questions superfluous, and I attempt to answer each one you pose. Sometimes you don’t like the answer I give, but unless I have missed seeing the question entirely due to an absence from the blog, I answer each question you pose to me. If you have a question that you believe is unanswered, please reask it and I will very gladly answer it.
There is one question of yours for which an answer from me is pending. Specifically, “I’d suggest that you explain your logic, for each category that you mentioned.”
Answering that question requires input from you regarding your definition of your term “previous developments.” Thus far you have been unwilling to provide an answer, so the following questions will help us approach that question from a different angle.
— Does Old East Davis fall into your definition of “previous developments”
— Does Old North Davis fall into your definition of “previous developments”
— Does Davis Manor fall into your definition of “previous developments”
— Does Rancho Yolo fall into your definition of “previous developments”
— Does Aggie Village fall into your definition of “previous developments”
— Does Elmwood fall into your definition of “previous developments”
— Does Oeste fall into your definition of “previous developments”
— Does Slide Hill fall into your definition of “previous developments”
— Does Covell Farms fall into your definition of “previous developments”
Those are all easy questions. Armed with them I can give you a clear answer to your question, “I’d suggest that you explain your logic, for each category that you mentioned.”
The ball’s in your court.
Matt:
Regarding “superfluous”, you did state the following:
Regarding the “cut-off” points that you’re suggesting for individual developments (or a particular time frame), I’d suggest that you proceed with your own criteria, for that. (Or perhaps you could present several different scenarios, asuming that you’d like to present something, further.) However, I’d also suggest that it would not be easy (or accurate) to accurately calculate costs and revenues for a “hypothetical Davis”, based on elimination of some, or all existing residential developments (regardless of which developments you choose to eliminate in your calculations). (This is one of the reasons that I think this is rather pointless.) However, if you do choose to proceed with some type of hypothetical model, I’ll probably at least look at it, at some point.
Ron, did you see the word “if” in my statement? Replace the word “superfluous” with “unnecessary” and reread the statement.
Your unwillingness to answer the simple yes/no questions I posed to you shows a lack of commitment to your cause on your part. Either that or you are afraid that answering those questions will somehow put you at a disadvantage.
Given that impediment to your participation I will give you below my answers to those questions. Let me know if you disagree with any of the answers I’ve provided below.
— Does Old East Davis fall into your definition of “previous developments” No it does not.
— Does Old North Davis fall into your definition of “previous developments” No it does not.
— Does Davis Manor fall into your definition of “previous developments” No it does not.
— Does Rancho Yolo fall into your definition of “previous developments” No it does not.
— Does Aggie Village fall into your definition of “previous developments” No it does not.
— Does Elmwood fall into your definition of “previous developments” No it does not.
— Does Oeste fall into your definition of “previous developments” No it does not.
— Does Slide Hill fall into your definition of “previous developments” No it does not.
— Does Covell Farms fall into your definition of “previous developments” No it does not.
West Davis Manor and Evergreen would not be “previous developments” in my opinion.
What say you?
Matt:
I’m not “afraid”, just weary of responding to an exercise that seems rather pointless (and would likely lead to more back-and-forth communications, which don’t end up proving very much).
For example, I questioned your assumptions regarding “incremental” costs (which I believe was one of the cost categories that you presented) based upon the actual city of Davis – let alone a hypothetical situation. (You haven’t even responded to that.)
And again, it’s pretty difficult to determine costs and revenues accurately, based upon a hypothetical Davis (with some, or all residential development eliminated). For one thing, the size of the city would be much physically smaller.
I’m “tagging out”, shortly. Not sure if I’ll respond much more, today.
I suspect that you will never give up, no matter how many times I respond. So, it’s likely that you’ll have the last word (which seems to be important to you), at some point.
Not sure why you’re mentioning this. If visitors stay at a hotel in the city, they will pay TOT. Would you care to elaborate?
The answer to that question is very straightforward.
You said, “wouldn’t visitors (hopefully) generate TOT, for example? Isn’t the result from visitors expected to be “net positive” for the city, which is a primary justification for the pursuit of hotels?”
At 100% occupancy of the hotels, 506 visitors a day would generate TOT. If the daily count of visitors is 10,120 then only 5% of each day’s visitors will produce TOT revenues for the City. Making an assignation to visitors as a whole from a 5% sample is a leap of faith . . . at best.
Note, I chose 10,120 and 100$ occupancy because it made the math illustration easier, but the actual visitor count is probably double or triple that and the occupancy is less than 100%. So the actual sample calculation is probably considerably less than 5%.
Here are some of the major contributors to whatever the actual visitor number is:
— According to the Bay Area Economics (BAE) report presented to the Housing Element Steering Committee (HESC), in 2000 there were 19,362 workers employed in Davis, 7,702 of which come to their Davis jobs from outside Davis.
— Again according to the BAE report to the HESC, there were 11,483 UCD Faculty and Staff, 5,846 of whom lived in Davis and 5,637 of whom come to their UCD jobs from outside Davis.
— UCD Admissions reported that 47,500 “prospective students and associated visitors” for the 2010-2011 academic year,
— UCD Event Planning (and HVS) reported 421,719 attendees at 918 events for the 2010-2011 academic year.
Thanks, Matt. But, I’m not sure how/why you’re making the comparison between visitors who stay overnight in a hotel, vs. visitors who are just in town for the day (and/or are assuming that hotels are at 100% occupancy).
In other words, I don’t recall making an argument, here.
Again you are asking a very easy question.
You said that visitors generate TOT. Your exact words were “wouldn’t visitors (hopefully) generate TOT”
I was showing you that at best less than one out of 20 visitors generate TOT.
I was also showing you that you made a sweeping generalization about the universe of visitors based on a statistically insignificant sample.
Matt:
Thanks. I believe that you hadn’t defined what you meant by “visitor”, at the time of your original statement, and that you clarified it somewhat later. There was no “sweeping generalization” intended.
Might these figures tell us that we either had too many firefighters (and/or too many support staff, fire stations, trucks) in the 1980s – 1990s, if they can provide the same level of service to the larger city, today? (Assuming that there were no other changes, such as a decreased possibility of fires, better firefighting techniques, equipment, etc.) Also, assuming that the capital investments were not made at that time in advance of expected future development.
Might pigs fly? Anything is possible. However, the location of the three fire stations was mandated by geography (and best practices response times) rather than the amount of population. The placement of the East Station on Mace in 1964 and the West Station on Arlington in 1985 was well thought out, and meant that as Davis built out its empty lots no incremental infrastructure expenses had to be incurred. So for capital infrastructure, the answer to your “might” question is “No.”
Support staffing is 2.4 FTEs for the 7-day, 24 hour operation. 2.4 FTEs is about as low as you can go.
I do not have any specific details about historical Firefighter staffing levels to be able to give you an informed answer to that part of your question. That is homework/legwork that you will need to do yourself. Of course, if you don’t see enough value in that part of your question, you won’t do the homework/legwork. We will all look forward to your decision on that.
Regarding fire fighting techniques, in 2014-2015 there were 31 calls for structural fires, 29 vehicle fires, 56 grass fires, 43 cooking, chimney and trash fires . . . 159 calls in total for fires out of 4,787 total calls, so any improvement in fire fighting techniques only would have affected 3% of the total calls.
BTW, you still owe me answers to the two questions.
Assuming that what you wrote is correct, this means that the incremental costs were paid “up front” – not that they didn’t exist (which is exactly the point I was suggesting). (Also, your response disregards the sprawling development that has occurred since that time.)
And yet, you are the one who presented this entire argument regarding firefighters as an example of “economies of scale”.
Matt wrote:
> The placement of the East Station on Mace in 1964 and the
> West Station on Arlington in 1985 was well thought out, a
Then Ron wrote:
> your response disregards the sprawling development
> that has occurred since that time.
I’m pretty sure the Davis city limit was Putah Creek in 1964 (I’m not exactly sure when “new” Willowbank stopped being “South of Davis”) and the southern border is now Montgomery (about 1,200 feet or four football fields of “sprawling development” in 52 years. The northern border of town is still ~2,000 feet north of the West Davis fire station exactly where it was in 1985 (zero northern “sprawl” in 30+ years)…
South of Davis:
You’ve pasted part of my statement (which wasn’t entirely focused on “sprawling development”). I was responding to Matt, regarding incremental costs.
But, since you brought it up, what about the other two directions (east, and west)?
South Davis was not annexed until 1968… the NORTH fork of Putah Creek was the boundary of that annexation…other portions of South Davis were annexed later… portions of South Davis were built prior to the annexation… you can still find COY cast into some MH covers on the older streets…
SouthofDavis:
Also, would Wildhorse (an admittedly attractive development, for the most part) be considered east, or north of your point of reference?
Ron, you again ask a question that is a baited hook… I’ll bite…
Pretty much all of Covell Park Northstar was ‘annexed’ before/~ 1985-6 … the northerly boundary of Wildhorse roughly coincides with that of the northerly boundary of Covell Park Northstar (including the Covell Drain). The property known now as Wildhorse was master-planned (and concept abandoned) prior to 1975…
Aspen and Evergreen lie south of Covell… filling in a ‘void’ south of the City northerly limits at that time… much of the area north of Covell, between Sycamore and the easterly edge of Cannery (formerly, Hunts/Hunt-Wesson, etc.) had already been developed…
Your point? Please learn more about the history of Davis before you question others’ accounts of history/perspective… friendly suggestion… you may gain credibility…
hpierce:
It seems that you’re making some incorrect assumptions, regarding my motive in questioning South of Davis. His initial response only seemed to address north and south “sprawl”. (That’s all I was pointing out.) And, I didn’t know what he considered Wildhorse to be.
It’s really not all that important, anyway. This arose as a result of his response to me, in which I was primarily asking about incremental costs.
hpierce wrote:
> South Davis was not annexed until 1968
Any idea if the current “city” fire station on Mace was first built as a “county” fire station to serve “old” Willowbank and El Macero? I didn’t find the answer with a Google search but I did find out that the city of Davis Fire Department calls the area “South of Davis” the “NoMans Land Fire Protection District”…
P.S. As a rule I have been trying to ignore posts and questions from Ron and Grok…
South of Davis… if it’s important, can check on FS #3 (Mace) Monday… architecture, etc. tells me ~ circa ’71-72… would have to check, but suspect Fifth St station (HQ) responded for El Macero and no-man’s land until it was evident that City was annexing, then the ‘powers’ decided to build and staff the station… but that’s just an educated guess, as I did not come to Davis until ’72 (yeah, a “newbie”), and didn’t venture to South Davis until 73-74… as I recall, it was there then…
Error… see… http://cityofdavis.org/city-hall/fire-department/about-dfd/stations, according to which that station was built in ’64…
hpierce wrote:
> according to which that station was built in ’64
That is why I wondered if the “county” first built and staffed the Mace station or the city annexed part of South Davis before 1968 since I can’t think of many “cities” that build and staff fire stations outside of the actual city limit.
so much truly out of date “statistics” and superfluous nonsense here again… really, statistics of Davis from 2000? are you kidding me…
only had time to skim as there is so much garbage amongst the few pearls in the article and comments…
another typical, yet odd, contribution by a developer, right? ( is that who the OP is?) didn’t see the intro anywhere easily viewable…
Even if it is true that pension and other benefits have skyrocketed and a hotel project may contribute funds to the city budget, this hardly proves that having this particular hotel built is important, nor that any new taxes will be used to alleviate any such shortfalls either.
The city’s issues have only been exacerbated by rampant overbuilding and too many new bodies in this town – many of the persons who likely would not have moved here if not for recruitment by developers to fill empty and unnecessary beds of the kinds that Davis persons will not qualify for – either on the “affordable” (yet not affordable) or on the flip side of “too expensive”…
More and more transplants to Davis do not ride their bikes unlike the cohorts which have arrived in earlier years, and many in the 25% affordable group also need more services than the groups which moved here to go to university or accept a job offer.
Finally, those who figured out ( and listened to the developer ads in the Bay Area) that one can get way better for way cheaper than SF and environs, are now clogging up 80 as they race to their jobs at all hours of the day and night….clogging up Davis’s main arteries even more…as they head out of town to work, eat lunch and shop…
while driving up the housing prices here ….
and not paying their fair share either towards the jump in services their presence is now creating either…
Marina: Agree with most of what you’re stating, here.
I understand that Dan Carson (the author of the article) is on the city’s Finance and Budget committee with Matt. I believe that he has previously submitted articles (and “extra” analyses – beyond what the committee states) regarding proposed developments. (For example, with Nishi.)
Dan’s analyses seem to be quite optimistic, in general.
Dan’s analysis is always overly optimistic. But on the other hand, his analysis here is correct – we need to find revenue because of a combination of too high of wages/ benefits and too little revenue
Chamber Fan:
Pleasantly surprised to see that you agree, regarding Dan’s optimism. And, by “optimism”, I’m referring to his apparent views regarding development (in general) as a solution to the challenges faced by this city.
Ron, I too agree that Dan’s analysis typically is optimistic. There are seven members of the Finance and Budget Commission and Dan is usually the most optimistic of the seven in his analyses. When the Commission makes a decision it is the voice of all seven, not the voice of one.
Dan had a long career doing analyses in Legislative Analyst Office in Sacramento. That job entailed analyzing the proposals that were brought to him. He is doing the same here in Davis. You may not like the fact that the development proposals are being brought forward, but Dan is not the person bringing them forward. He is simply one of the many people analyzing them, nothing more, nothing less. Further, he does his analysis as a volunteer in the interests of the community he loves.
With that said, here’s a question for both you and Marina (given her comments above). What solutions do you propose for getting Davis’ financial condition back to health?
Based on your statements and questions above, can you remind me of the reason that some are touting increased commercial development as a solution to the city’s budget challenges? (Meant as an honest question to you.) I realize that you made these statements based upon a theoretical question, but the larger question still applies.
Ron, where have you seen me touting increased commercial development as a solution to the city’s budget challenges? That is a figment of your imagination.
Throughout this extended conversation I have been focusing on (1) your fallacious argument that “pro-development types” are responsible for the hourly wage increases that City employees have received, the increased regulatory compliance costs, the increased pension costs and the increased healthcare costs . . . and (2) on your fallacious argument that the aggregate combination of Davis’ unnaturally high rate of cost inflation exceeding Davis’ unnaturally low rate of tax revenue inflation is a fiscal cause. It is not. Both the inputs to that aggregate combination are changeable. The failure of the Davis City government to control costs is a cause. The low turnover rate of real estate combined with the impact of Prop 13 on tax revenues is a cause. Your argument is simply an effect that is dependent on maintaining the status quo of the two underlying causes.
Matt:
My statement noted that “some” are touting commercial development as a solution to the city’s budget challenges. (The statements that I was attributing to you consist of an actual quotation, from you. And, those statements seem actually seem to conflict with the views of some, touting commercial development as a solution. I was inviting you to comment on that.)
You’re attributing some comments to me that I did not actually state.
I’d suggest that we just leave it at that.
It isn’t that some are touting commercial development as a solution to the city’s budget challenges as much as it is that the city has far too little commercial development to support its need for tax revenue. And this point is supported simply by comparing Davis to EVERY other comparable city in California.
Ron, have you ever heard the saying “if it sounds to good to be true, then it likely isn’t”?
Davis being able to have sustainable finances with less than half the comparable commercial property and related taxable commercial activity is the lie.
Frankly:
I was hoping that you’d respond, as well.
Please look at Matt’s comments (quotation above – in my comment at 8:25 a.m.), and state whether or not you agree with him. (Meant as an honest question.)
Frankly, when you answer Ron’s question keep in mind that he had placed on the table the following hypothetical scenario of a city that was 100% non-residential.
Also, when you answer could you clarify what you mean by “related taxable commercial activity.”
Tax revenue to a city requires a healthy local economy. A healthy local economy generates tax revenue from the businesses that operate within the city, and their business transactions.
Someone buys a home and raises a family within a city. The home is taxed through property taxes. That family consumes products and services that are also taxed. But Davis has a local economy that is less than half per capita than is the average comparable city.
Some cities grow their local economy larger than what the local population needs and attract consumers from out of the area to generate tax revenue.
Davis is the only city in its population class that does the opposite. It constrains development to BELOW what its population needs and sends those residents to other cities more than happy to milk away those tax dollars.
Davis would not be sustainable as only having commercial property, and no city can be sustainable only having residential property. What is needed is balance. Davis is out of balance. It needs to get back to balance but the NIMBYs are preventing it.
Frankly:
Thank you for your response.
Here is the specific comment I was wondering about from Matt:
Looking at this from a non-hypothetical point of view (without suggesting that Davis operate like the City of Industry, which has very few residents). Which types of businesses have relatively few “business-to-business” sales, resulting in few taxes collected for municipalities?
Frankly wrote:
> Davis would not be sustainable as only having commercial property
The City of Industry in Southern California is 92% Industrial (hence the name) and 8% Commercial and does fine (with over 80,000 people driving in most days to work there).
> and no city can be sustainable only having residential property.
Hillsborough on the Peninsula is 100% residential and has been doing better than 99% of the world since they split from Burlingame about 100 years ago (I would say it is “sustainable”). Ross in Marin has been a 99% residential (unlike Hillsborough it has a Post Office) since it also incorporated about 100 years ago and it is also real “sustainable” …
Has housing.
According to the US Census Hillsborough City has 1,240 firms in the city of 11,451 people… which is 9.2 residents per firm. So they are not 100% residential. They do not report their retail sales, I am guessing that they are an incorporated city. I am also guessing that it is at least as high as Davis and probably more so.
Davis has a population of 67,666 and 4,462 firms which is one firm per 15.16 residents. Dave only generates $7062 in retail sales per capita.
Interesting too that Hillsborough has a median household income of $250,000+ and a population density of 1,789 per per square mile.
Meanwhile Davis has median household income of $57,454 and a population density of 6,637 people per square mile.
You could not have picked a more dissimilar city for your example.
Ross does not show up. I don’t think it is a city.
Ron:
re: optimism of Dan Carson
I believe you misunderstand my comment. My comment is that in general Dan Carson is too optimistic, that’s not limited to the point you are making regarding development solving problems.
However, you have a much bigger problem. Not only do you misunderstad the nature of Davis’ revenue problem but you are trying to limit possible solutions.
Matt WIlliams:
Is it fair to say that there was not a major subdivision added between 2000 and 2008 (and up until this year in fact)? Is it also fair to say that payroll doubled from 2000 to 2008?
Ahh… another baited question… ignores the definition(s) of “major”, what “payroll” is (salary, benefits, unfunded obligations, etc.?) and whether the definition of ‘payroll’ includes reduction/growth of staff levels, etc…
Will not rise to that “bait”… pretty sure you have your “own” ‘answers’, factual or not, “spun” or not…
Promises, promises. 🙂
(I’ve heard that before from Matt, as well. Seems that he’s changed his mind.)
Note that I accidentally “reported” South of Davis’ comment, as I was attempting to reply.
I should clarify – Matt didn’t state this regarding Grok, to my knowledge.
Maybe we should have two “separate” Vanguards, with one reserved for pro-development types, so that they can more easily disregard challenges. (I’m not necessarily addressing this to Matt, however. Actually, it might be best to have a third Vanguard, for him.) 🙂
Interesting comment Ron. To the best of my knowledge I’ve never said I’ve been trying to ignore any of your posts. Do you have an example?
If anything I have been actively engaging your posts, especially when they contain fallacious reasoning, which I’ve challenged you to justify.
Ron, you wouldn’t be weary if you answered the very simple questions I’ve posed to you. Your weariness comes from all the effort you are putting into dodging the questions.
I answered your firefighter question in the original assumptions I laid out in describing the three categories of firefighting costs.
Here is what I said. Once you have reread it if you have any further questions, just ask.
Car maintenance has three major components (1) capital expense for the infrastructure needed to perform the maintenance services, (2) labor expense for the service personnel, and (3) the consumables/parts expense.
Economies of scale apply to all three of those components differently. There is very little economy of scale for (3). At a certain critical mass the average consumables/parts costs per car are the same. Therefore those are costs that will indeed decrease if you choose to go down from 65,622 cars to one of the lower numbers.
There definitely is economy of scale for (2). A perfect example is the cost of fire services. The firefighter staffing complement at 65,622 in 2010 is actually less than it was at 60,308 in 2000 and probably comparable to the firefighter staffing complement that existed at 47,209 in 1990. In addition the 2.40 FTEs of support staff is virtually identical at all three levels.
There is substantial economy of scale with respect to (1) capital expense for the infrastructure. In 1990 Davis had the same three fire stations that it had in 2010. The third fire station was built in the 80’s and the first and second fire stations were built in the 60’s. The number of fire trucks in each station has been at the current complement since 1990. Bottom-line the history of the DFD tells us that capital costs are the same at 47.209 as they are at 65,622.
Now, with respect to the root causes of the substantial increase in Fire services cost, the #1 reason is the rate of increase of hourly pay that massively exceeded the CPI increases for the same period. The #2 reason is the increase of Pension expenses far beyond the CPI increases. The #3 reason is the increase of healthcare expenses far beyond the CPI increases. The #4 reason is the increase in the number of residents served.
Matt: I already responded to this, above.
I agree – you definitely don’t ignore my posts (despite your earlier statement to do so). (I recall such a statement about a month or two ago.) Of course, it appears that we often don’t agree, regarding “fallacious reasoning”.
And again, I really have to “tag out”, soon. So, you’ll have the last word, for now at least.
Ron said . . . “Of course, it appears that we often don’t agree, regarding “fallacious reasoning.”
I think Will Arnold referred to that as the Lebowski Effect on Tuesday night. The difference between our respective reasoning processes is that you work hard to qualify your reasoning on feelings and I work hard to quantify my reasoning on data. Chocolate and vanilla.
Matt:
I took a quick break, to respond.
Sometimes, you confuse your models with “data” or “fact”, as was pointed out to you by someone else (who usually doesn’t support my statements).
I think you’re mistaken, regarding my “feelings”, and ability to analyze data.
Again, if there’s some point that you’re trying to make, it shouldn’t require my participation in your underlying assumptions. If you’re interested, go ahead and plug in any assumptions you’d like into your model, and I’ll probably look at it later.
Also – still haven’t seen a response, regarding incremental costs related to firefighting (above). (Comment made at 8:08 a.m.)
Ron said . . . “Also – still haven’t seen a response, regarding incremental costs related to firefighting (above). (Comment made at 8:08 a.m.)”
Ron, here is the third answer to your question. Please acknowledge that you have seen it and read it.
“… three major components (1) capital expense for the infrastructure needed to perform the maintenance services, (2) labor expense for the service personnel, and (3) the consumables/parts expense.
Economies of scale apply to all three of those components differently.
There definitely is economy of scale for (2). A perfect example is the cost of fire services. The firefighter staffing complement at 65,622 in 2010 is actually less than it was at 60,308 in 2000 and probably comparable to the firefighter staffing complement that existed at 47,209 in 1990. In addition the 2.40 FTEs of support staff is virtually identical at all three levels.”
Matt:
I see your response, but I don’t think you read mine (from 8:08 a.m., copied below):
Assuming that what you wrote is correct, this means that the incremental costs were paid “up front” – not that they didn’t exist (which is exactly the point I was suggesting). (Also, your response disregards the sprawling development that has occurred since that time.)
And yet, you are the one who presented this entire argument regarding firefighters as an example of “economies of scale”.
On a related note (and considering your model), let’s just assume for the sake of argument that we’re considering all previous residential developments. (Note that I do understand that the city would incur costs, even without residential developments.) I’ll try look at it and analyze your model, later (assuming you’re still interested in presenting it).
Ron said . . . “I see your response, but I don’t think you read mine (from 8:08 a.m., copied below):”
Ron, have read your 8:08 post three or four times. There is no question anywhere in it. Nary a question mark as punctuation.
Ron said . . . “On a related note (and considering your model), let’s just assume for the sake of argument that we’re considering all previous residential developments. (Note that I do understand that the city would incur costs, even without residential developments.) I’ll try look at it and analyze your model, later (assuming you’re still interested in presenting it).”
So you are saying that there would be no Old East Davis, no Old North Davis, no B and University neighborhood, no Aggie Village, no Elmwood, no Oeste Manor, no Slide Hill, no Davis Manor, no Rancho Yolo, no West Davis Manor, no Evergreen. What portion of the city would be left? In fact since there would be no customers for Downtown, would there even be a Downtown? In that model you are absolutely right the revenues and expenses would be much less. In fact they would be non-existent.
Bottom-line, your proposal is intellectually lazy. It projects the appearance that you don’t take your own ideas seriously.
Ball’s in your court.
then Matt, start going back a little further for SOME of your data, and come to present time on the other data……
and I know you can differentiate the wheat from the chaff so to speak….Will is full of chaff having grown up around developers and investors 🙂
somehow when the younger Wolk wasn’t getting some issues you were….on the fluoridation issue…
I really don’t feel like retyping all of the solutions have already proposed on this topic..on many a related thread.
As I tell David we need a better search function….as many things are missed or scrubbed and then it is a waste of time to retype… right?
Marina said . . . “then Matt, start going back a little further for SOME of your data, and come to present time on the other data”
Marina, the US Census is only done once every 10 years, so 2010 is the most recent official population source. Population numbers between those decade markers are guesstimates at best. In my opinion (I know you don’t like that disclaimer, but Grok and Ron do like the use of those words for clarity), the current population of the City of Davis is well over 70,000 due to conversions of SFRs into mini-dorms and “double-ups” in student apartment bedrooms. However, the California Department of Finance reports Davis’ population as an estimated 66,757 residents on Jan. 1, 2015.
If we use the Department of Finance number then the 65,622 value in the 2010 Census becomes 66,757.
Regarding going back further, for population I went back to 1880. Is that not far enough back? What other data do you want me to go back further?
I will be glad to dig for more data if you let me know for what you believe I should be digging.
Historical population
Census _ Pop _ 10-year Percent change
1880 ____ 441 _ —
1890 ____ 547 _ 24.0%
1920 ____ 939 _ 19.7%
1930 __ 1,243 _ 32.4%
1940 __ 1,672 _ 34.5%
1950 __ 3,554 _ 112.6%
1960 __ 8,910 _ 150.7%
1970 _ 23,488 _ 163.6%
1980 _ 36,640 _ 56.0%
1990 _ 46,209 _ 26.1%
2000 _ 60,308 _ 30.5%
2010 _ 65,622 _ 8.8%
only a few minutes before I board….more later…