Monday Morning Thoughts: Are Davis Residents Heeding the Warnings?

The Vanguard has spent ten years warning the community about the shortcomings of the budget.  In a lot of ways, we are the frog in boiling water.

As the aphorism goes, if you put a frog into a pot of boiling water, it will simply hop out.  However, if you put the frog in a pot of cold water and slowly increase the temperature, it will cook before it recognizes it’s in trouble.

In Davis, even during the Great Recession, we have not suffered immediate catastrophic failure.  Instead, we are slowly cooking to death at a rate that is almost imperceptible.  But, unlike during the recession when everyone recognized the danger, the danger signs now are subtle.  We have survived by not paying for unmet needs – infrastructure and not getting hit by the unfunded liability bubble.

In this sense, Dan Carson’s warning is spot on: “Every Davis resident should read budget forecast.”

Mr. Carson points us to the 20-year fiscal forecast of city revenues and expenditures written by fiscal consultant Bob Leland.

The key to his point: “The forecast finds that the city, on average, faces a $7.8 million a year General Fund gap to keep the conditions of roads, parks, and vital services from deteriorating below the high standards that Davis taxpayers expect and deserve.”

He continues, “The annual funding gap starts at a smaller number in the early years but builds over time, making a compelling case that changes are needed to put our finances on a sustainable track.”

So what is the answer?

Mr. Carson writes, “No one is suggesting this problem be solved solely with new taxes. But, for purposes of comparison, the size of such a financial gap, the document notes, is the equivalent of a fully penny of sales tax, or a 6 percent tax on utilities, or a $270 parcel tax. In other words, such a problem is challenging, but probably manageable with early and meaningful actions to close the gap.”

Mr. Carson concludes with support for the Finance and Budget Commission’s recommendations that the City Council use the model and financial forecast “as the starting point for drafting a comprehensive financial strategy, one that might also need to be updated periodically, to address the city’s financial challenges.”

He writes, “We believe a mix of strategies – cost containment, leveraging of surplus city assets, economic development, and other actions – should be considered alongside new tax measures in such a plan.”

In a letter to the Davis Enterprise, Elaine Roberts Musser took his conclusions one step further.  She wrote, “I agree that a parcel tax is inevitable, but it is crucial to couple it with economic development.”

She writes, “Unfortunately, citizens don’t seem particularly inclined to approve economic development, as evidenced by the defeat of the Nishi Gateway project. In my opinion, Davisites are shooting themselves in the proverbial foot, if they continue to defeat all peripheral economic development.”

But there is another problem that Rich Rifkin notes in his comment to Ms. Roberts Musser’s piece.  He cites the need for cost-containment, and argues, “Clearly the Davis City Council does not believe this. Every year the cost (per hour) of total compensation paid to city employees goes up 2 times or more as fast as revenues can sustainably grow. That is the City Council’s policy.”

He writes, “The result is that we are paying more and more in taxes in order to get less and less in services — meaning fewer police on duty, worse roads and sidewalks, trees that are not well maintained, and all other forms of publicly owned infrastructure (buildings, vehicles, tools, etc.) are falling further into disrepair.”

For Mr. Rifkin, “If we pass a parcel tax, and we don’t stop the unsustainable cost of hourly total compensation paid to city employees, our City Council will continue to allow Davis to crumble.”

This is a problem we saw back in 2015, when the city granted five bargaining units a COLA and a problem that Matt Williams alluded to in his comments on Tuesday in regards to the fire contract.

Mr. Williams noted that Bob Leland projected just a two percent annual percentage increase for total compensation costs, not three percent.

“So we are actually going above, with the highest paid employees in the city, what is in the budget forecast.,” Mr. Williams warned the council.  “If you think that through, how are you going to hit your two percent target, which you put in writing not much more than sixty days ago and ratified yourselves, with the highest paid people being paid three percent?  That means that the lowest paid people are going to have increases that are going to be less than two percent.”

Giving this to the top paid group, he argued: “This is not progressive, this is not wise fiscally, this is the first shot of your campaign for the next tax increase.  It isn’t transparent.  It isn’t honest.”

There are two sides to the story and, from the position of Mayor Robb Davis, he may not have been thrilled with the contract, but he pointed out that this was the cost of getting rid of bad decisions from the past.

“I would invite members of the public to understand that these negotiations also enabled us to correct some things specifically in the firefighters’ contract that were problematic over the long term for our city.  Unfortunately we can’t impose those things.  We have to negotiate them which means we have to have some ability to give and take,” he said.

“Does that make us happy?” he said.  “No.”

But Mr. Rifkin’s point is important – we can talk about taxes, which I still believe we have to pass.  We can talk about economic development, and Elaine Roberts Musser is spot on here.  But Rich Rifkin is also correct – without cost-containment even new revenue will be eaten up with increased compensation.

—David M. Greenwald reporting



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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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2 thoughts on “Monday Morning Thoughts: Are Davis Residents Heeding the Warnings?”

  1. Tia Will

    Two thoughts on this article

    “This is not progressive, this is not wise fiscally, this is the first shot of your campaign for the next tax increase.  It isn’t transparent.  It isn’t honest.”

    1. While I agree with Matt Williams that this increase is not progressive and may or may not be optimal fiscally, I strongly disagree that it is not transparent and not honest. What more “transparency” and “honesty” can be expected that an outright statement of the plan and an explanation thereof. While it is reasonable to disagree with the decision, I do not believe it reasonable to impugn the intentions and methods of the council.

    2. I agree with Elaine Musser, Rich Rifkin, and David. The economic stability of Davis will be dependent on a three pronged approach as has long been discussed. Increased taxes, economic development, and fiscal prudence. All three will be needed as part of a short term, intermediate and long term plan for the city. I would like to see a comprehensive plan as opposed to taking the separate components on piecemeal with advocates fighting over each each of the components in isolation.

  2. R Fung

    Tia,

    wrt to your comment about “a comprehensive plan”.  I think everybody agrees that there should be one.  The 2017-2018 forecast actually contains the outline of a plan through its assumptions (employee annual salary raises, number of new employees per year etc.).   Alot of thinking and tradeoffs went into these realistic assumptions which is different from previous forecasts where for example no salary raises were assumed for the forecast period.   The current forecast as David points out has a average shortfall of $7.8M.  On page 4-9, several options for mitigating the shortfall are given.   Because of the forecast basically represents the default plan, I believe it  should be the focus when discussing decisions/events like the Firefighter MOU.   How does this agreement effect the long term forecast?  In discussion of revenue options on July 11 CC, Kelly S showed charts of what would happen if the $49 parks parcel tax was not renewed and a chart if it was.  The charts came from the forecast model.   IMHO, thats what should have happened with the Firefighter MOU.

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