City Continues to Hide the Real Costs and Real Deficit Through Deferred Maintenance –
City Manager Bill Emlen acknowledged the problem, “There’s lots of concern about the sidewalks and the bike paths. Realistically, it’s going to be hard to address them.”
“The cost to maintain or repair roads exponentially increases as time goes on,” the report continued.
Sue Greenwald was rightly critical not only of the shortcomings in street maintenance funds but in the accounting process, “Citizens consider sidewalk maintenance, roads and bikeways essential services, so we can’t just redefine it away and say we have a balanced budget. We call them unmet needs, but they’re really part of the deficit. I consider that semantic.”
Meanwhile, Davis Enterprise Columnist Rich Rifkin rightly sounded the alarm, pointing out the folly of ignoring large unfunded capital projects. “By drastically reducing spending on capital projects, the all funds budget appears to be in surplus,” he wrote. “And counting just ongoing expenses and income, the general fund is sort of balanced. The city expects general fund revenues of $39.7 million and plans to spend roughly that next year. However, that “balanced budget” is misleading.”
All of this could have been written following Tuesday’s meeting, but it was not. It was from June 1, 2008. That is right, two years ago. We were sounding the alarm in the Vanguard on the issue of unmet needs, unfunded street maintenance projects, and hidden deficits.
On Tuesday acting public works director Bob Clarke gave a report on the public works department. “In addition to the staffing cuts,” he reported, “our approximately $1 million a year road maintenance budget is down to $250,000 next year, which won’t buy us much pavement out in the field next year.”
“Some thing you’ll see immediately, some things won’t be apparent immediately but they will be impacts. Recovering from some of them will take awhile,” he said. “Much as my analogy would be if we don’t maintain our streets when we can do it cost effectively eventually they will fall apart and the cost to repair them will be much much more significant.”
Mr. Clarke then referred to the above conversation from 2008. “In 2008 I came to the council and gave you an update on our maintenance effort, at the time we had an identified road maintenance backlog of over $5 million and we presented a number of scenarios about ways of getting at that backlog or at least trying to prevent it from growing.”
At that time however, the road maintenance budget was about $800,000 per year. At that rate, Mr. Clarke said, “the backlog would continue to grow slowly, but surely.” The needs according to the best estimates from the city are about $2 million per year. We were never funding at that level. Mr. Clarke said, at $800,000 per year, in a five year period, the backlog would increase to about $11 million.
Remarkably Bob Clarke then told council, even as he did not quite complete the circle about how fast the backlog would occur funding at $250,000 as opposed to $800,000, “I don’t want to paint a gloom and doom picture. The world won’t end. We can survive with reduced budgets for awhile.”
He did say, “What you are going to start seeing more and more of, if this continues much longer, is what I call a patch-work quilt of pavement. Where we’re fixing potholes, doing patches at the worst point, because we don’t have enough money to overlay an entire block or a segment of road.”
He then stated the obvious, “That isn’t the most cost-effective way to maintain our street system.”
Well if Mr. Clarke does not want to sound the alarm and paint the gloom and doom I will. The part he left out to council is the $250,000 they have this year is the last money that they have. Paul Navazio told me after this year, they have no money budgeted for street maintenance. That’s right zero. They would have to start dipping into general fund monies to address ongoing needs in that area. In the meantime, the backlog will continue to grow except not at $1.2 million per year as it had previously, but at $1.75 million per year if not faster.
This threatens to become a danger not just for motorists but bicyclists and pedestrians. The city was circumspect on the prospect of facing liability for the increased likelihood of accidents, but it is a distinct possibility.
We talk all of the time about public safety, we hear the song and dance every year whether it is fire protection or law enforcement, but how is road Maintenance not public safety at its most basic level.
I will get into the issue later, but two years ago, Rich Rifkin was correct that the city was using smoke and mirrors to make it appear that the budget was balanced, when in fact, the city was simply putting off costs of things such as road maintenance because it lacked the funding. They stuck their deficit into an unfunded liability and did not count that accruing deficit as part of their operating budget.
Since then the economy has gotten worse and the city has been forced to reckon with all sorts of problems that had been ignored up until that point.
The problem is, that the city is still playing the same game, they are still hiding the ball and the real figures. At some point these bills will come due because the patch work of road repairs will decay to the point where we have to spend money from the general fund, but there is no budgeting in the general fund for it.
So what is being sold as a small surplus in the out year under very rosy projections does not account for deferred maintenance to streets and other infrastructures, it does not account for paying off the unfunded retirement health liability, it does not seem to account for increased costs for pensions.
The real question that voters must ask, is what else is being hidden from them. The disturbing thing for me is that while Bob Clarke is letting part of the rabbit out of the bag, he is not being fully forthcoming with what the real impact is. What will our streets look like in three years, Iin five years, if we do not find funding for road maintenance? We are lucky we found SACOG money to fix a real problem on Fifth Street, but unfortunately that might be the least of our problems.
Final point, and this cannot be stressed enough, the city will blame the economy on these problems and in some sense that is true. We have not had to use general fund money for road maintenance in the past. But what really happened is that over the course of the last decade we were growing at 10% per year in property tax revenue and we also added $3 million from the half-cent sales tax measure that is on the ballot in June for renewal.
We made the assumption for some reason that these tax revenues represented an ongoing source of general fund money and we used every bit of it to fund increases to employee compensation. Now with the contraction and probably normalizing of the real estate bubble, we are stuck with those salaries for the most part because the bargaining groups understandably do not want to part with their salaries and benefits.
The result is that the city is now at its lowest staffing level in 12 years. Someone the other day took issue with me categorizing the situation as cutting city services to the bone. How else can that be described? What are the most basic of city services? Water, sewer, public safety, and road maintenance. water and sewer we are looking at a 23% hike next year in the costs. Part of that will be too offset an expected capital project, but the other part of that we learned on Tuesday is simply to pay for city staff.
We are using redevelopment money to fund police in the downtown area, but other aspects are being cut. Fire is largely untouched except that they are shuffling money around to be able to add $400,000 for a battalion chief model.
And we know that road maintenance is probably backlogged by $7.5 to $8 million by now and going up fast.
So yes, city services, the mandatory ones are being cut to the bones. They have dealt with current deficits with a net reduction of 60 employees, again taking us to pre-1999 levels of staffing. In addition to fewer employees, we have furlough days where the public is not getting city services in a lot of departments. And yet, what has hardly been touched are employee compensation.
We are cut to the bone, any additional cuts are really going to be felt and not just just in deferred maintenance where the costs won’t be apparent for a few years.
The worst news is that the budget is probably still too rosy. Last year Paul Navazio projected neutral growth and Lamar Heystek argued we would lose revenue and Mr. Heystek was correct. The current budget is still projecting growth in the out-years, that is ludicrous, which means we will have to find a way to cut more services in the future if those projection do not hold. To make matters worse, we did not plan for zero growth in our employee bargaining agreements, they have small but real increases in the out-year that we will have to fund.
The bottom line is that the city needs to change the way it has done business and it cannot do that as long as this current council runs the city the way it has.
—David M. Greenwald reporting