Heystek Opposes Sales Tax Extensions Without Financial System Overhaul

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lamar_heystekOn Tuesday, the Vanguard reiterated its opposition to the renewal of the city’s half-cent sales tax that first approved back in 2004.  At Tuesday night’s Davis City Council meeting, Councilmember Lamar Heystek also reitreated his opposition to the sales tax extension that the City Council is currently considering placing on the June 2010 ballot unless the city’s financial system is fundamentally overhauled.

He cited among his reasons a lack of priority that the personnel cost savings target of 1.25 million dollars has taken in city negotiations that he believes will fall well short of that type of savings and will occur so late in the fiscal year that any cost savings realized with be mitigated in impact on the budget shortfall.

Said Mr. Heystek:

“At this moment in time, I’m not currently in favor of the extension of the existing sales tax override if our financial system isn’t fundamentally overhauled. “

He concluded by saying:

“I don’t feel that after this round of negotiations we’ll be at a place where we want to be and making our target.  For that reason I don’t feel we can do this at this time.”

Here are his full comments at considerable length:

I want to make some statements on the primary question that is before tonight which is about staff is seeking council input or feedback on the presentation of the extension of the sales tax override on next year’s ballot.  I want to preface my comments saying that as a council candidate in 2004, one of all candidates who supported Measure P, I believe Councilmember Greenwald, Councilmember Souza, and the Mayor Pro Tem stood for election at that time.  We all supported Measure P, it was about people, parks, and programs, that’s what I remember.

As we all know the city is continuing to face issues with regards to employee compensation.  The council is still negotiating, we’re still trying to reach a target of $1.25 million in personnel cost savings.   But I think we’re going to be far off from that.  We’re poised to miss that modest personnel costs savings target of $1.25 million because I believe there are two reasons.

One, we have not made our target a cornerstone of our negotiations.  It has not been, I feel, a principle that we want to uphold to reach in the midst of our negotiations and I don’t believe we negotiated soon enough.  I think we’re in a situation where I think we’re already halfway into the current fiscal year and we’re not going to nearly reap the benefit of negotiating with our labor partners here.

So the current sales tax override sunsets in 2010 and that means that any sales tax measure that we present to the voters should be considered as a new tax.  We may consider it an extension, just as we talked about Measure J, the extension of that, but we are presenting a new measure to the voters and any extension of the current sales tax should be considered a new measure.

At this moment in time, I’m not currently in favor of the extension of the existing sales tax override if our financial system isn’t fundamentally overhauled.   Some people might say it’s easy for me to take such a position at this time because I’m right about to leave the council.  Some people won’t necessarily take the position that I’m hold now seriously because I won’t be on the council deal with what possibly would amount to a $3 million budget shortfall.

I don’t want the members of the community to think it’s merely a city council problem.  I know there may not be many members of the public to think about what a $3 million shortfall might be, but it is a community problem and I remain a member of the community even after I step down off the council.  I wouldn’t necessarily oppose this extension of the sales tax lightly because it does help to pay for the general fund supported programs that I feel are very important and are near and dear to my heart.  In fact I consider myself a strong advocate for such programs and services.

We cannot simply ask citizens to continue funding, what I consider, an unsustainable model for the sake of buying time.  The time is now to make structural changes to our budget and to our compensation model.  I feel that asking the voters to continue to fund that model is not the right thing to do.  It is a very difficult thing for me to say because on the one hand I’m here asking for support to keep programs and services whole and on the other, possibly takings away from the budget several million dollars that would support programs like that.

I do this because I feel that it is the only leverage that I have with my colleagues and with the community to highlight the problem that we have.  To not just say that we need to extend the sales measure because we need to do it, that’s critical.  I just don’t think that’s enough.  We’re going to come to renewal of the parks’ tax and we’re going to say that that’s critical too and it may be.  But unless we do something to prove to the voters that we deserve their continued support in a supplemental fashion, when they’re already paying the municipal services tax, when they’re for the public safety charge on their utility bills, when they’re already paying in other ways in this community.  In fact, this is a community that passed school revenue enhancement measures twice, in two Novembers.

I think this is a very generous community.  It’s not about what we can afford to give as citizens.  I think it comes to, what are we going to do to be accountable and what are we going to do to prove that we deserve this community’s support even if it is a half-cent on every dollar spent in retail, restaurants, and services.

So unless we do something that shows that we’re moving significantly in a direction to do some structural change, I don’t know that I can lend my support.  Some say that our approach to fiscal change should be incremental and I don’t necessarily disagree with that.  I agree that change needs to be incremental.  But we’re poised to not be as deliberate as we need to be.

I don’t feel that after this round of negotiations we’ll be at a place where we want to be and making our target.  For that reason I don’t feel we can do this at this time, and I suspect that there will be a majority that will want to go along with this, which is fine, but I hope that we do something to evidence the fact that we are making structural change in the future.

—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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4 thoughts on “Heystek Opposes Sales Tax Extensions Without Financial System Overhaul”

  1. Phil

    Heystek’s position is principled and make sense to me. We should expect that if there is a huge shortfall, a typical tactic in many cities is to cut back on services people notice (e.g., libraries) in order to encourage people to vote for a tax. However, until the public is really aware of this issue there will be little pressure brought to bear.

    OK–I am now sounding like a broken record here, but we need a new City Council which will take responsibility here. Slow growth and fiscal responsibility is what we need–this is not necessarilly a partisan issue here. (In the very distant past Republicans favored fiscal responsibility, but after Reagan dramatically increased the size of government and increased our deficit and after W’s gross fiscal irresponsibility they can no longer make that claim.)

    I also find it ironic that the folks who favor the most rapid growth in Davis also seem to be least concerned about the budget. What’s the connection? Campaign finance–developers and, unfortunately, some of our unions, donate generously to CC people who support their positions, even if they are against the public interest.

    Next year will not be kind to many cities in the central valley and I believe a number of cities will go bankrupt by the next fiscal year (2010-2011). Davis is not in that bad a shape, but we still need to be concerned.

    Benefit growth has been rampant in Davis and nationwide. CALPERS is a disaster and those of us who have pensions with the funds should be concerned. CALPERS targets for growth in their portfolio are unrealistic based on historical averages (and if we are in a “new normal” economy with lower growth it may be reasonable to expect slower growth in stock prices as well).

    But I’m straying here; we should support Lamar on this one.

  2. Rich Rifkin

    [quote]CALPERS is a disaster and those of us who have pensions with the funds should be concerned. [/quote] There was an interesting story ([url]http://www.lodinews.com/articles/2009/12/05/news/1_pensions_091205.txt[/url]) out of Lodi a few days ago regarding municipal pension reform. The idea is that comparable and neighboring agencies ought to act in unison — as opposed to each acting on its own — to reform their pension plans. The reason to do this as a group is so one irresponsible agency does not ratchet up the plans for all the comp cities, counties, etc. If every agency offered the same CalPERS formula, the unions could no longer play one agency off of another, as they have done ever since Grey Davis decided to destroy California by selling out to the prison guards and the CHP unions.

    Here are some quotes from the Lodi News-Sentinel: [quote] City managers in San Joaquin County have joined together to take action on pension reform. … “It has become a retirement race between the entities. It’s just too expensive to keep that up,” Lodi City Manager Blair King said. … Throughout the county, cities increased pension plans because up until now it has been possible and affordable to do so, Tracy City Manager Leon Churchill said. But with the market crashing, the California Public Employees’ Retirement System took a serious loss, which raised concerns about the state’s pension plans being sustainable. This prompted San Joaquin city managers to meet and discuss possible solutions. “The consensus is that the pension issue has reached a point where it is at a critical stage. Local governments are examining all its costs of doing business, and what’s on the horizon is pension costs,” Churchill said. In the document, city managers recommended all cities and the county change their pensions plans to 2.5 percent at 55 for public safety employees, and 2 percent at 60 for miscellaneous employees. Right now, Lodi’s retirement system is 3 percent at 50 for public safety employees, and 2 percent at 55 for miscellaneous employees. Any changes to the pension system would have to be negotiated with each union, and changes would only apply to new employees. [/quote] Not surprisingly, the firefighters are vigorously fighting this plan. You should know that the Davis firefighters’ union is not unique. They are ALL very aggressive and very politicized; and cities up and down our state have kowtowed to their demands for the last 10-15 years. Every fire department has its own Bobby Weist.

  3. Phil

    Rich

    This is quite interesting. Unfortunately all solutions I have seen (including the suggestions you quote) involve grandfathering in CALPERS benefits. It would be extremely difficult to do otherwsie, and adjustments to the current system make sense, but ultimately more will be required.

    As with everything else, politicians will likely not react until there is a crisis and sound options are limited. For what it is worth I think in 10-20 years CALPERS benefits will be capped or means tested somehow. Many folks make six figure incomes from CALPERS. That is not sustainable. I believe Dan Walters mentioned a couple of weeks ago in his column in the SacBee that CALPERS pension obligation (many are unfunded) and medical insurance represent by far the largest future obligations for the State as well as for City governments. This is a ticking timebomb.

    I hope Davis gets its fiscal house in order sooner rather than later. We could potentially lead here as well. Sustainability applies to fiscal issues as well as environmnetal ones.

  4. Rich Rifkin

    [quote]Unfortunately all solutions I have seen (including the suggestions you quote) involve grandfathering in CALPERS benefits. [/quote] The reason is because the state law does not allow lowering the benefits for those in the system*. There is, however, a conservative group called “California Foundation for Fiscal Responsibility” which is trying to change the state law. I have no idea if they have any hope of succeeding. They have composed an intiative which would lower pensions for new employees and (I think) many employees currently in the PERS’ system. This is from their summary ([url]http://www.californiapensionreform.com/old/initiative_summary.htm[/url]) of what the initiative would do: [quote] The formulas used to calculate pension payments are as follows:

    [b]Police Officers and Firefighters -[/b] 2.2% x highest ave salary x years of service @55
    [b]Other Safety -[/b] 1.8% x highest ave salary x years of service @60
    [b]All other Non-Social Security -[/b] 1.5% highest ave salary x years of service @SS Age
    [b]All other Social Security -[/b] 1.0% highest ave salary x years of service @SS Age

    Pension funds would use an average of the highest consecutive five years of base wages, excluding all other additions such as overtime pay, bonus pay, severance pay or payouts for unused vacation or sick days**.

    No retroactive increases in pension or retiree health benefits may be granted to any employee (including current employees). … Public agencies are required to make full payments to their pension and retiree health care funds each year, regardless of their funding status. Money may not be taken out of pension or retiree health care funds for any purpose other than providing the benefits for which they were established. These protections apply to all funds, including those set aside for current public employees. [/quote] ———–

    *A few years back, Melissa Cheney, the human resources director for the City of Davis, told me it was also illegal to have a two-tiered system. If she had been right, then it would have been impossible to get out of the near-term mess we are in over the long-term. Fortunately, Melissa was misinformed. A number of cities in California are now instituting two-tiered systems.

    **It is common now for firefighters and cops (who are generally young and healthy for most of their careers) to build up YEARS of unused sick leave and vacation time. (The City of Davis has some limits which restrict such build-ups.) Thus, a firefighter or cop can retire at age 47 or 48 and qualify for an age 50 retirement, because he is credited forward with all of those years of unused sick leave and vacation time. That is what one provision of this initiative would prohibit.

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