Concerns Grow About the Budget Deadline and Lack of Urgency by City Staff

Back in June, the Davis City Council by a narrow 3-2 vote passed its budget, which reflects 2.5 million dollars in personnel cuts to be due by September 30.

Mayor Joe Krovoza, clearly unhappy with the proximity of the deadline to the first discussion, asked that they at least begin talks on September 20, which itself is problematic since Councilmember Dan Wolk will not be in attendance that evening.

This is just the latest trend that continues our concerns about the process and the deadline.

On Wednesday, speaking on Vanguard Radio, Joe Krovoza reiterated his commitment on the budget and toward budget savings by the September self-imposed deadline, “It’s been my assessment… that over the last couple of years we have been nickel and diming extremely valuable programs that fit into the vibe and values of our community and not looking at the larger structural problems of the budget.”

“When we passed our balanced budget at the end of June, which we’re now operating under as of July, we said we’re going to go out and find $2.5 million worth of personnel cuts by September 30,” the Mayor continued.  “I believe that that is doable, I have every intent of getting there.  I will make no vote that backs off of that.”

“What’s very important, the necessity of those cuts is for us to be able to keep the promises that we have made both to our employees and I think to our citizens with respect to service delivery,” he said.

He said that currently the city is promising retirement benefits to its employees somewhere to the extent of $60 million, perhaps $70 million, that are unfunded and “that we can’t pay for.”

“So we have to bring that into line,” he added, “We’ve got somewhere in the neighborhood of $20 million worth of pent-up road repairs in this city as you well know and our plan right now, in the current year’s budget, in the budget, is not to do anything about that and let it ride for another year.”

“So the goal is to find $2.5 million personnel cuts and put $1.5 million of it toward getting where we need to be covering our costs toward retiree health care and spend the other million on the road side of things – and that’s just the start,” he said. “I mean that to be a clear expression of this council’s intent to take care now what we need to take care of now so we’re not pushing things off to the future.”

One of the big concerns is the fire staffing report, which we believed could become the basis for nearly half of the $2.5 million in cuts. It still has not come to the council, making it highly unlikely they could act on its recommendations, even if it should advise the city to do what 85% of other communities have done, to have three-person fire engines, which would save the city at least one million per year.

On Wednesday evening, clearly, Mayor Krovoza was not happy with this revelation.

“I heard that a draft of the staffing report was going to be to us in early July and a final would come in August,” the Mayor told Vanguard Radio, and “we don’t have it yet.”

“I’m very concerned that the company that is doing it for us, CityGate, is not performing,” the Mayor continued.

“What will be a shame is if we have to move forward and make some decisions in that area that appear to be rash, but if we’re not getting the reports that we want, that kind of maybe paint a better picture of exactly how we should go forward, I think it puts us in that position,” he said.

That position is faced with the unpleasant possibility of 20 to 25 layoffs, something the Mayor told Vanguard Radio was a direction that he did not want to go, but he and the council may be left with no clear choice.

The water issue coming down at around the same time has clearly been part of the problem.  But it seems that budget issues have simply not been the priority by city staff that they should have been.

It was only last week that the city had a sparsely-attended budget outreach meeting.

Mayor Pro Tem Rochelle Swanson last week told the Vanguard that the city has made some progress toward finding $2.5 million in personnel cuts.

“I believe that we are getting some draft information that is going to be coming to us – so as far as the timeline that we spoke about in that meeting that we made those decisions – I believe we are on track for that,” she said.  “I can only speak for myself in that I anticipate where there’s a need to be able to have some flexibility because at the end of the day, the most important thing is that we’re making some good solid choices.”

At the same time, what is also clear is that fear and a lack of understanding by many of the city employee groups is making reaching a consensus difficult.

In our Sunday commentary, we responded to some criticism, possibly from city employees, that clearly failed to grasp the reasoning behind the council’s policy.

The presumed city employees believed that the council needed to pass their balanced budget with a 15% reserve, and that was the limit of what they were required to do.  The problem, as we point out in response, is that may work for this year, but council has to take a series of actions between now and 2015 to prevent real fiscal hardships.

The issue of street repair seems really misunderstood.

“Essentially the council is seeking this 2.5 million not because the city is in danger of going bankrupt, not even because it’s in danger of going into the red for that matter (remember that the budget is balanced and there’s a 15% reserve) – no, it is seeking it because they want to fix some potholes and they want to set aside some money they’re not certain they’re going to need, when they’re going to need it, or how much they’re going to need.”

As we noted on Sunday, we are not really talking about fixing potholes here.  What we are talking about is finding a funding source to keep the deferred maintenance on streets and roadways to a manageable level.

The city has a pavement rating right now that puts it at 71.  Not great, but not horrible.  For the last several years, the city has been funding it through non-general fund sources at around $800,000.

Two years ago Bob Clarke, now the Interim Director of Public Works, projected that if we continued to fund the road repairs at $800,000 we were developing about a $350,000 per year gap between funding levels and what we needed to maintain roadways at the 71 rating level, which is not a great rating to begin with.

Continuing to fund it at the $800,000 level would result in the pavement rating dropping to 68.

This past year, the one-time, non-general fund sources completely dried up.  The city had no money for road repair in its budget.

Even funding it at historic levels would put us in danger of amassing unmet needs in the form of deferred maintenance on roadways at somewhere between $15 and $20 million.

That is a word that needs to scare people – deferred maintenance – because every time you defer maintenance, the costs go up, not down, to finance it in the future.

What was the projected spending for road repair this year?  $0.  That’s where Tier 2 came into play. Tier 2 put about $125,000 into the road repair fund coupled with $100,000 that the city dug up.  Something, but still taking us into a place of real danger.

So about $800,000 or so of that $2.5 million goes to shore up the road maintenance in the city and ensure that we do not fall further behind where we already are.  That money could come back if the city is eventually able to find grants or other sources for road work, but it is not as though this were a decision that the council didn’t put much thought into.  In fact, they had been discussing it for a full six months prior to the eventual decision.

So the idea is misguided that we are taking money from employees to spend on fixing potholes, which are not only a nuisance but will cost the city more money in maintenance for vehicles over time.

For a while, the city has attempted to cap costs by using things such as chip seal as a temporary bridge to save money.  But as we learned, you get what you pay for.

As the city put it in a press release, “Chip seals such as this are used in place of asphalt overlays because it is a relatively inexpensive way to extend the life of a street needing remediation. The process seals the street to minimize intrusion of water into the surface and can extend the useful life of a street for up to ten years.”

After much complaining, the city is finally admitting what apparently many people knew eight months ago, that this experiment has been an abysmal failure.  The city has now announced that it is working to address the problems with double chip seal on streets.

Keeping roadways in working order is not some luxury.  And deferring maintenance necessarily means you pay more in the long run.  We cannot continue to operate a city budget by deferring costs to a later point in time.

To a large extent, that is what has happened with the water project and rate increases, and that is what is happening with OPEB (Other Post-Employment Benefits) and with PERS (Public Employees’ Retirement System).  The $2.5 million in personnel adjustments is just the first step among many toward fiscal sustainability and responsibility.

—David M. Greenwald reporting