More Cuts To City Services Seem Inevitable

citycatOn October 20, the Davis City Council will receive some sort of update on the city’s budget situation.  It is not clear at this time whether that will merely be an informational item or whether it will include additional action items for consideration.

The majority of this story is informed conjecture based on what we do not and what we expect to result from that.

At the end of June, the Council by a 3-2 vote passed a budget.  One of the biggest points of contention was how much of the $3.5 million deficit should be cut from employee compensation.  The staff’s original suggest was to realize around $850,000 in savings from cuts to employee compensation.  Councilmember Lamar Heystek in his alternative budget pushed for around 5% in cuts which figures to $1.575 million, the council ended up approving around $1.25 million, splitting the difference.

However, all of those numbers represented hypothetical placeholders.  The real engine driving budgetary savings would be the employee bargaining.  That is now become problematic.

We now know very little in specific about the employee bargaining process other than there have been no agreements reached with the employee bargaining groups to date.

However, we can infer things are not going very well based on things that Finance Director Paul Navazio suggested two weeks ago at the Finance and Budget Commission meeting.  He suggested that if the employee bargaining process went along much longer, the prospects of the city being able to realize savings from the  process would be greatly diminished.

Much suggests the result will be worse than that, as all indications are at this point that the employee bargaining groups are granting zero in the way of concessions, sensing perhaps the lack of will on the council to make substantive changes. 

Any concessions that do occur will probably be well down the road and the in all likelihood it appears we will have to alter the current budget to make up for at least some of the $1.25 million that will not be available at least at the beginning of this fiscal year and frankly I would be surprised at this point if we came anywhere near this level of savings.

The longterm impacts of this are unknown, but likely to be devastating to the city at a time when we project deficits for at least the next five years and where there is a huge structural gap that is growing over time.  This will be a very key point of contention in June when the sales tax measure is on the ballot for renewal.

The longterm prognosis without serious concessions by employee groups is quite bleak.  The short term prognosis is what we must look at more closely.

The city made up the bulk of the deficit last year through the means of “tier cuts.”  These are cuts in public service whether through the failure to fill open positions, the elimination of positions, or general cut backs in service levels.  One of the things some looked to avoid was cuts to public service.

However, one of the big results of the failure of the employee bargaining to produce is going to be a re-examination of the tier cuts.

If the council is not finding ways to close the budget deficit through cuts to employee compensation then they will have to do so in other means.  That means perhaps an additional $1.25 million in cuts to city services.

But there is more than just that. We also have the impact at the statewide level of raids on local funding.  The city currently believes it can contain the $1.3 million raid on general fund money a loan consolidation plan.  The city would also have to absorb a $3.2 million raid on its redevelopment agency.

More immediate concerns hinge on the local economy.  The city is now banking on $800,000 to $1 million in additional tax revenue from Target which opens on Sunday.  But that money is going to be heavily offset in part by the loss of business in town and perhaps the taking away of money that already goes locally.  Proponents of Target argue that millions leak out of the city each year and having a Target in the city would help the city capture that.

However, at the same time, we need to be very mindful about the local economy that is heavily based on the university and state employment.  We have seen the mess at the state level and the cuts to salaries and positions.  We now see the furloughs that will cut university salaries by as much as ten percent.  What impact will those cuts have on Davis’ economy that has generally been more resistant to economic downturns than other cities.  We simply do not know, but if I had guess, even with the new Target, we are going to see a further decline in the sales tax base in the near future until the situation at the state stabilizes.

The bottom line right now is that the failure of the employee bargaining process will have tremendous short term impacts in terms of the immediate budget and additional cuts to city services as well as long term impacts on the overall city’s fiscal solvency.

The current models of the city show that in the long term the city is insolvent unless we find ways to slow the rate of employee compensation growth and/ or find new means to produce revenue.  To make matters worse, we seem to have a city in denial of that very basic and real fact.

—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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13 Comments

  1. Greg Kuperberg

    [i]Much suggests the result will be worse than that, as all indications are at this point that the employee bargaining groups are granting zero in the way of concessions, sensing perhaps the lack of will on the council to make substantive changes.[/i]

    Sensing the lack of will on the council to make substantive changes? As a group, all that the workers are saying is that they would rather have layoffs than pay cuts. It’s been your position that layoffs are the worst outcome, because the layoffs are the service cuts. If not layoffs, what are the workers supposed to be afraid of?

    Do you object to the labor laws that let a union with a contract in hand make the choice?

  2. For the record

    [quote]Much suggests the result will be worse than that, as all indications are at this point that the employee bargaining groups are granting zero in the way of concessions, sensing perhaps the lack of will on the council to make substantive changes. [/quote]

    This is an untrue statement. Two employees groups have approved interim agreements, whereby they are effectively giving up ~5% in the way of furloughs (which is a pay cut) and paying for increases in the employer’s share of retirement benefit payments. But, these are “inconvenient truths” when you have your ‘points’ to make. The interim agreements were approved at the end of July, but ‘went into effect’ July 1. Employees in these two groups have/are taking 5 furlough days, w/o pay, up to the end of November.

  3. ol timer

    A fundamental issue is that we are a city-manager run city. This presents conflict-of-interest issues from top to bottom throughout the system. Revenue for salary increases, career resumes that are enhanced by managing the development and city business of Davis as a larger and more complex system, job security, all present conflict-of-interest problems that can only be controlled if our Council representatives are vigilant in protecting the interests of those who elected them. A first good step would be to elect representatives who are more interested(and have the ability, energy and passion) in serving their constituents than advancing their own political careers. Add a little money for a staff person for each Council member and we may be able to begin to get a handle on this.

  4. Furloughs

    Furloughs are the worst possible solution. They are strictly a bandaid, they don’t deal with any of the long term issue. Moreover, they are services cuts to the public.

  5. Mike Hart

    I would prefer that the negotiations were held in the open. There is nothing confidential, personal etc. in these discussions. The unions are negotiating on behalf of a group and the results will be made public and we have to pay for them. Rather than speculate about intentions and positions, I would like to hear exactly what is being said.

  6. concerned

    SOME city employees have approved interim contracts, and are taking furlough days – the fourth Friday of each month, non-safety city offices are CLOSED for unpaid furlough.

    Not all city employees are over or high paid managers, etc. There are many workers who barely live paycheck to paycheck. There are many that live in low income rentals. These are the folks who are already being furloughed.

  7. Get Real

    There is lots of inefficiency in our city government and plenty of room to cut costs and reduce personnel. People I know who work for the city have told me horrific stories of waste in CIty Hall. There is plenty of room to save much money without reducing services to the public. But it will involve laying off unproductive employees, and this will not win friends for whomever proposes it.

    The alternative is to continue down the path where the city is being run for the benefits of its employees, rather than for its citizens.

    Whether we have reached the point where labor law and local politics makes it impossible to make city government run efficiently is a question that I don’t have the answer to, but we will learn soon.

  8. Tax Renewal Time Coming Up!

    Saylor is a big reason why the employee pay packages are so high. But he is skating off to the Sup seat. The progressives have no challenger.

    A number of us are just sitting here watching … if the CC does not fix the imbalance, then I think we will join others in campaigns against the next tax renewals Of course, Saylor will be GONE, and not held accountable for the disaster in city finances that he will be leaving behind.

    DPD: it would help all of us get started thinking about what is coming up if you did a good piece on the various taxes, what is coming up for renewal.

    I know that the sale tax renewal is 51%, so that is harder than the parcel taxes.

    I am sick and tired of my tax money being used by the CC majority to fund their political careers via the firefighters.

  9. Bear-ack!

    City street crew out until midnight the other night and can anyone here tell me a time they saw a trew crew out “working” anywhere near that hour?? And speaking of cutting costs, who authorized them to be out at that hour because it had to be a true emergency to be on OT and who declared it an emergency?? I know the PD used to blow through the OT budget for the whole year(in some divisions) in less than 6 months–yep, same ol’ same ol’….the problem is that I’m not itchin’ to renew/refresh ANY taxes this time around. Hear me 23 Russell?? Doubt it….Hey, Roseville CC dumped their CM the other night–can we duplicate their effort here?? Pleeeeeeeeze!

  10. Im With You

    “I know the PD used to blow through the OT budget for the whole year(in some divisions) in less than 6 months–yep, same ol’ same ol’….the problem is that I’m not itchin’ to renew/refresh ANY taxes this time around. Hear me 23 Russell?? Doubt it….Hey, Roseville CC dumped their CM the other night–can we duplicate their effort here?? Pleeeeeeeeze!”

    I’m with you. Let’s dump the city manager. And no renewal of taxes unless the labor negotitions are tough and fair to citizens.

  11. Its the CC, not the City Manager

    It’s the CC majority, not the City Manager, who approves the gold plated packages for the fire fighters and some senior staff. So dont dump on Bill Emlen. He is caught in the middle.

  12. Now I get It about those taxes

    Curious as to what is coming up in the way of taxes.

    Looked at the City Budget Workshop link: http://cityofdavis.org/finance/pdf/2008-Budget-Workshop.pdf

    The sales tax increase of 1/2% expires in June 2010. Funds the city’s General Fund up to about $3 million per year. Simple majority vote wins the renewal. Tough to stop it, but possible.

    These are the funds that the CC majority are throwing away on unsustainable pay packages. In other words, when the sales tax increase tax was adopted, the CC majority turned around and spent on their political friends’ pay packages. Saylor is funding his political career using taxpayer money to fund the firefighters who support his campaigns.

    Meanwhile, city services to the taxpayers are being cut way back in order to keep those high compensation packages.

    The Parks Parcel Tax is up for renewal in 2012. Needs 2/3rds super majority. If the pay situation is not resolved by then, the Parks Tax maybe should be taken down, and force the CC to take some money from the firefighters and put into the parks.

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