Mayor Lays Out City Challenges in State of the City Address

While it was a new format and there were some differences of opinion, Mayor Robb Davis laid out a challenging view of the city’s fiscal situation in the State of the City address at the Davis Chamber Luncheon.  Assistant City Managers Mike Webb and Kelly Stachowicz touched on a variety of themes as well, and City Manager Dirk Brazil finished the presentation.

Mayor Davis laid it out squarely and unequivocally: “Our greatest weakness as a city right now is our inability to fund the maintenance of our infrastructure.  That is true for our roads.  That is true for our parks.  That is true for our pools.  That is true for just about every city building.

“It’s not that we’re not putting any money into those things,” he explained.  “It’s that we’re not putting sufficient money into it, year on year, to really maintain the things that we already have.”

Over the last fifteen years, the mayor said that our general fund revenue “has grown nominally by 95 percent – that’s a median growth of about 4.2 percent per year.  Meanwhile, general fund expenditures have grown by 92 percent.”  That’s a median (growth) of about 3.9 percent per year.

“On the face of it, it appears that revenue has more than kept pace with expenditures,” the mayor continued.  “However, when we dig into the expenditures or rather what we’re not spending money on, we see that the picture is not at all positive.

“Essentially we have balanced the budget over the years by not including many infrastructure projects that really should be covered,” the mayor stated.  He cited studies that say we should be putting $8 million per year into street and bike path maintenance.  “We’re putting about half of that in this past year.”

He cited other studies for parks and city buildings that find our five-year funding needs at $33.5 million.  “Most of that is money that we’re not spending today,” he said.  That money doesn’t include everything – “we’re not paying for the maintenance of the things we have already purchased.

“Even though our revenue growth is healthy at this time,” he said,  “we continue to not be able to fund at the level required to be able to attain adequately what we’ve already put money into in the past.

“The greatest threat we face today… has to do with expected increases to pension contributions,” the mayor said.  He explained that CalPERS (California Public Employees’ Retirement System) for many years has assumed their return on investment would be about 7.5 percent every year over a 30-year window.

“The average over the last 20 years has never exceeded 7 percent,” he said.

For us that means the investment returns expected to pay the city’s retirees “are not achieving the levels necessary to provide that.”  That means, “We have to pony up the money in order to achieve the goal.”

In five years, “we will need to have in our hands an approximate additional $5 million every year,” he said.  With CalPERS’ announcement of lowering their expected rate of return, “I think the picture’s clear, that $5 million a year is going to go higher.”

Assistant City Manager Kelly Stachowicz explained that, “for the most part, we’re doing okay with our annual budget.”  Our revenues have met our expenditures, and so “our short-term picture is not a bad one.”

However, while there is good news short-term, the long-term financial planning sees three areas of concern.  The first is the city’s pension liability.  We have retiree health or OPEB (Other Post-Employment Benefits).  And then we have infrastructure needs.

“All three of these areas are areas where… we are not putting in enough money each year to be able to completely pay off these liabilities,” Ms. Stachowicz explained.  “We have made progress with OPEB.” Davis is one of the few cities fully-funding OPEB moving forward, “but we still have most of our credit bill, if you will, to pay off.”

On infrastructure, “we are putting more – about $4 million a year into the infrastructure particularly for transportation, but our needs are more than $4 million per year.”

She said some of these issues like pensions are outside the control of the city, but she said, “We are aware of them and this particular council is not shying away from them.  So that’s a positive.”

Ms. Stachowicz explained that when the budget ended at the end of June, we had “extra money,” about $8.5 million in the city’s general fund.  City staff came to council for direction as to how to spend this money.

“Many councils would say ‘oh we want to do all of these pet projects,’ ‘we want to do things that are maybe super politically exciting,” she said.  “Our council said that we want to do the responsible thing and spend the majority of the money paying for things going for our infrastructure and reducing OPEB costs.”

She saw this as the council being aware of our infrastructure and unfunded liability needs and putting money  towards addressing those.

When Robb Davis started his talk, he mentioned that the city of Davis had a weak mayor system, otherwise known as a strong city manager system.  City Manager Dirk Brazil quipped, “I still crack up about that strong city manager stuff… in Davis it’s a little different when you have a council that’s as talented as this.”  He said other than department head appointments, “it’s a pretty collaborative effort.”

Mr. Brazil emphasized a lot of the positive things that happened in 2016.  He noted the investment of Mark Friedman in Interland as an example “that Davis is a community that people can do business in and they want to do business in here and we are more than willing to help them achieve whatever goal it is they want to achieve.

“I’m always accused of being overly optimistic and, generally speaking, that is the case,” he said.  “But we do have some challenges and you’ve heard them.”

He said, “The question isn’t so much what the future looks like – it’s really clear what’s out there.”

He acknowledged that “we have to talk about a revenue measure.”  He added, “We have to talk about what do we do about programs that perhaps don’t make sense anymore.”  He said that the mayor presented him a list of cost-containment programs last February.

His summary, though, was: “We have a lot of good things going on, I still think the future is bright.  We do have some very large issues… that we have to work through.”

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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11 thoughts on “Mayor Lays Out City Challenges in State of the City Address”

  1. David Greenwald Post author

    As a side note, we have been reaching out to community members to do monthly columns.  Mayor Robb Davis is agreeable to doing a series, but wanted some feedback – six topic areas – that people were interested in his discussing.  So if you have suggestions, let us know.  Thanks.

    1. Tia Will

      Robb and David

      Surprise !

      Given our mayor’s background, I would like to see a piece summarizing his thoughts on  the interface between public health and city well being, both in terms of fiscal, and societal impacts. Also useful would be his thoughts on the most appropriate roles of city and county in improving public health.

  2. Tia Will

    “The question isn’t so much what the future looks like – it’s really clear what’s out there.”

    As an optimist myself, I fully appreciate Mr. Brazil’s optimistic attitude. I would, however, have liked to hear more specifics about the list of cost containment items provided by Mayor Davis, or with regard to revenue measures or which programs “don’t make sense any more”.

    While the future may look clear to Mr. Brazil, it is certainly less than clear to me. This forum would have seemed to me to be an excellent place to start making clear to the citizens, in specific terms,  what is clear to him.

  3. Tia Will

    Maybe, since you beat me to the punch on topics. As you will see, I was putting in my favorite even as you were posting. I have a feeling that between us, we could keep the Mayor quite busy.

    I would hope, as I suggested on a previous thread, that some of our other city leaders might also step up with articles of interest to them.

  4. Mark West

    “He [Mr. Brazil] said that the mayor presented him a list of cost-containment programs last February.”

    The Mayor gave him a list 11 months ago, what did he do with it? How many (if any) of the items on that list have been implemented?

     

    “She [Kelly Stachowicz] said some of these issues like pensions are outside the control of the city”

    What CALPERS does is outside the control of the City, but the pensions are completely within our control, and consequently, entirely our responsibility. We did not have to offer the pension benefits (or OPEB) in the first place, and though we cannot change the benefits already promised to current and former employees, there is nothing preventing the City from changing the pension benefits for new employees. It is a complete ‘cop out’ to claim that pensions are outside our control.

     

    1. David Greenwald Post author

      Mark: The pensions “were” entirely within our control, but they aren’t now. Changes would have to be agreed to by bargaining units. Also changing for new employees is only going to have a marginal impact for the foreseeable future

      1. Mark West

        There are always trade-offs David. We don’t have to stay in CALPERS at all if we so choose. Saying there is nothing to be done is bogus. We always have options, with the most obvious to stop over-paying and over-promising. The ‘sunshine’ pumping from the City’s staff is particularly annoying, as it is in their interests to convince everyone that things are fine and we can afford another round of ‘small’ compensation increases.

        Where is the cost containment?  Where is the staffing study that was requested a year ago, to see if we have the right personnel in place for the necessary services? Where is a plan to seriously look at outsourcing services? We have a problem that was developed over several years and will take several more years to correct, and a marginal short-term change may provide a huge long-term benefit. We have to start somewhere, but it seems to me that this CM and his staff are standing pat and that you, David, support that approach.

        1. David Greenwald Post author

          I’ve not opined here on the approach they’ve taken other than to relate my understanding that changes in the pensions requires a collective bargaining agreement by the employees and it cannot be imposed on them (note that the two bargaining groups who had contracts imposed did not have changes to their pensions).

  5. Dianne Tobias

    My read of the article is that there seems to be a disconnect between our City Manager staff and Mayor about the ‘state of the city’s’ fiscal health. This reminds me of a similar disconnect in an Enterprise article about finances before the holidays with the Mayor laying out issues and the staff saying there are a few problems but we are in good shape, paraphrasing my memory of Kelly Stachowitz’s comments in the DE.

    David outlined his 7 steps in yesterday’s article and one was Public Education meaning educating the public about the critical for improvement in our city’s  fiscal health.

    This panel’s summary seems like it would confuse the public,not educate them….A less informed citizen would I am sure rather believe ‘all is ok’ than the reality our Mayor is describing.  I would hope the staff starting with the CM would align themselves more with the Mayor and be proactive in the outreach as Steve Pinkerton was. So far I only see elected leaders; no matter how strong/weak our city manager government might be, there is a real need for the CM to engage with the public. Interested to hear feedback…and be kind since this is my first critical post after ‘coming out’ from the anonymous underbrush…..

  6. Tia Will

    Good morning Dianne,

    I agree completely with you. While our city manager and assistant city manager did not come out and contradict Mayor Davis, they were careful to phrase their comments so as to focus ( or avoid focusing) on the immediate short term financial situation while avoiding any detail regarding long term obligations and risk. I second your call for greater engagement and more details rather than rosy generalizations from our city managers. It can be done. We have seen it in the past as you pointed out.

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