One Way to Balance the Davis City Budget

city-budgetby Rob White

(Author’s Note: I spent a lot of time trying to give specific details. Please forgive me if you find any errors in my math or descriptions. It is a lot of information, but I wanted to give the reader as much description as possible.)

There has been a lot of discussion about the City’s budget deficit over the last few years.  In December 2013, the City Manager updated the City Council with a budget projection that the City would have about a $30 million budget shortfall over the next few years. This is not inclusive of several significant deferred infrastructure costs, including substantive deferred road and parks maintenance.

At the January 28th City Council meeting, the Council will be discussing several ways to add short-term revenues to decrease the deficit, including a potential sales or parcel tax. But these revenue sources will not solve the ongoing rise in employee costs due to PERS-imposed increases for pensions and rising health care costs (to name a few). And though the City has had a 22% reduction in staff over the last 5 years, over 80% of the general fund is allocated to staff salary and benefits.

One significant reason why this information has become relevant is because the City Council has been very specific in stating to the City Manager and staff leadership that they want a full accounting of the budget revenue and expense projections so that they can deal with the full budget picture. And over the last year or so staff has been working diligently to identify expenses and uncertainties, which has created a bleaker and bleaker picture of the City budget. Examples of expenses include unfunded liabilities and future costs of infrastructure, and uncertainties include the rate of recovery of the economy.

As the Vanguard has pointed out several times in recent articles, the City has to offer a balanced budget to be adopted by June 2014 for the 2014-2015 fiscal year. Unlike the State and federal governments, the City cannot typically borrow funds unless it has a revenue source to borrow against. Examples of these revenue sources can be sales tax revenues, increment of property values (like with redevelopment), or ongoing fees. And funding is usually created by selling bonds or other similar financial instrument.

It is important to recognize that there are several significant reasons that have aggregately created the situation as to why Davis has not seen some of the rebound that other cities have seen in their revenues. These include:

  • Existing Housing Resale – Davis has a slower rate of property reassessment from resale of the housing inventory at about 2% per year, as compared to most cities in California that have a resale of existing housing stock in the range of 5 to 6% per year. This means that houses purchased in Davis many years ago are still assessed at property values in the $100,000 to $200,000 range (or $1,000 to $2,000 per year), instead of the more recent values of $500,000 to $700,000 (or $5,000 to $7,000 per year). Davis has about 28,000 households, so you can do some pretty easy math to figure out how much revenue would be gained if we had a more traditional housing market. For example, if 500 homes (2% of 28,000) in Davis reset from $200,000 annual property tax basis in any given year to $500,000 per home, those 500 homes go from generating an annual 1% property tax of $1,000,000 (of which the city would get an average of about 18% of that amount, or $180,000) to generating an annual 1% property tax of $2,500,000 (of which the City would get an average of about 18%, or $450,000 annually). In a community where that resale rate is 5%, and using the same base home value change going from $200,000 to $500,000, the annual revenue to the city (using an average of 18% of the 1%) goes from $500,000 annually to $1.25 million. To continue the example, if that difference is compounded for 10 years, you can see that it grows exponentially very quickly, and the property tax revenue deficit increases dramatically over a very short period of time. Using a simplified equation that just takes in to account the annual amounts and no other indexing, you can see that the 2% resale versus the 5% resale (holding all other values similar) is the difference in revenue collection of $14.85 million for a 2% community and $41.25 million for a 5% community for the decade. (Note: I checked my math several times, but if you find a mistake, please let me know). You can quickly see that Davis has missed out on decades of significant increases in revenue from property tax due to the lower than average number of resales as compared to surrounding communities. 
  • Retail Sales Tax – Davis has a significantly smaller amount of retail than compared to nearby communities, including big box and high value retailers. Davisites have made a conscious decision to allow only smaller, neighborhood serving retail and not large shopping centers or big box on the scale or West Sacramento, Woodland and Dixon. And many Davisites shop in these surrounding communities for their larger retail needs at places like Costco and Home Depot. We have embraced this lack of big box and retail centers as a community value, but the outcomes should be noted as one of the drivers for lower revenues. What this means in revenue parlance is that Davis collects about $90 per capita in sales tax annually while similar sized cities like West Sacramento, Walnut Creek and Palo Alto collect about $285, $305, and $450 per capita annually, respectively. (Admittedly, I did my math based on 2010 census numbers and 2013 aggregate sales tax as reported by HdL Companies, so I may be slightly off, but you get the idea). There are many nuances to a discussion point like this and I am sure someone can find an anecdotal example that does not follow the trend, but the point here is not to encourage retail centers or big box in Davis, but to note that it is one of several reasons why our retail sales tax revenues are less than those in similar cities. 
  •  Significant amounts of commercial space in Davis are leased to the university and are exempt from property taxes. At last count, this is about 650,000 square feet of leased space in areas such as South Davis and along Second Street. Using a conservative estimate of assessed valuation of about $100 million for the facilities (this is for demonstration purposes only), there would be an annual loss of property tax revenue to the City of about $180,000. Though this lack of property tax payment is not the ‘fault’ of the university, it is a reality and we need to recognize that being a host city to the university has many benefits and some drawbacks. Lack of property tax due to State of California leased facilities is one of those few drawbacks.

There are obviously other unrealized revenues that are a direct result of specific choices that Davisites have made over the years, which includes permit fees from construction and infrastructure enhancements from development agreements. But this article is not about what was not realized or a lament about how our choices have resulted in reduced revenue opportunities. Davis is a community that holds specific values to be important, including close community, quality of life, and sustainability. So now that we have accounted for some of how we go to this point of reduced revenues, let’s look at future ways to increase our opportunities.

Many people in the community are now talking about economic development. This is a broad term with many extrapolated meanings, but in the Davis context we are most assuredly looking at the development of the types of businesses that have some nexus with the research and development stemming from UC Davis. These may be new startups, growing companies, large corporations, or businesses that provide services. They may have come to Davis because the founders went to school at UC Davis, or perhaps they were started in a local garage and have now grown to a size that they need to double or triple in size, adding 100s of new jobs to the local economy.

Whatever the case may be, we know that there are about 80 technology related companies currently operating in and around Davis and that more are asking questions that may lead them to locating here. These companies range in size from a few people to over 130 people (and counting). We also know from recent research by UC Berkeley that for every one high tech job created, there are several additional jobs that are created in the support and services industries. We can see this already by the constant and daily presence in our downtown and other retail centers of people working at companies like DMG Mori, HM Clause, Marrone Bio Innovations, Arcadia Bioscience and Schilling Robotics. They have name badges or clothing with these and many other logos identifying themselves and can be seen visiting our local businesses for food, entertainment, supplies and services.

By supporting local company growth, especially in the tech sector, we see increased sales taxes from retail activity. And we are starting to see increasing rents for commercial space as the amount of available facilities space becomes ever more constrained. This in turn increases the property taxes for higher quality commercial spaces.

A great example of this is the significant impact that DMG Mori Seiki had on local job creation (now over 100), increased sales tax from purchasing of equipment and supplies, and a significant increase in property taxes by taking vacant land and building an office complex and manufacturing facility. This has had a noticeable and positive impact on the City revenues and the facilities were built on about 15 acres of land. The total revenue impact over a three year period was analogous to property taxes from building a subdivision of about 350 to 400 homes.

So imagine if we could accommodate another 15 or 20 DMG Mori companies on about 200 acres, perhaps at the Mace Curve or the area northwest of Sutter Davis Hospital. The City might literally realize millions of dollars of increased annual revenue from just retail sales and property taxes from an innovation park. And then there are the permit fees for initial construction and the ongoing maintenance and building improvements that companies make that generate even more fees. And the schools and the County services and programs would also benefit as they also get a share of the new property taxes… and the County gets sales tax revenue as well. And businesses typically use far less City services than residents, including police and fire and other civic amenities.

Perhaps most intriguing is that the City might be able to negotiate an annual assessment on a per square foot basis that allows us to see ongoing annual revenues that help us to maintain parks, build bicycle lanes, resurface streets and pay for services. Should the community vote to allow an innovation park, the City has a strong view that we should all share in the benefits and that increased land valuation should be a shared opportunity. So imagine a per square foot lease of $1.50 per month that had an assessment of 5%, that would yield 7.5 cents to the City. So a facility of 100,000 square feet would be a monthly lease of $150,000, with an additional $7,500 generated to the City. That is $90,000 per year. On a million square feet, that number grows to $900,000. On 5 million square feet, that number becomes $4.5 million. And if monthly rents grow to $2 per square foot, then both the building owner wins and the City realizes an increased assessment to 10 cents. Or imagine if the assessment is 7.5%.

And an innovation park of 5 million square feet is not unrealistic, especially when buildings are likely to be a mix of one to four stories. For a land area of 200 acres (or 8.712 million square feet) and a building floor area ratio of about .5 (which means for every acre, there is .5 acres of building for single story, or .25 acres of building for two story, etc.) you can see that 5 million square feet is easily achievable with just one and two story buildings. And by building more densely, we can achieve greater sustainability through walkability and greater green spaces, making for a unique and very Davis-like development… and ultimately even more square feet. The only real limitation becomes community desire and infrastructure capacity.

Though there is much more I can extrapolate (and likely will in future articles), the bottom line is that Davisites have at least one opportunity to take control of the revenue future of the City. Without needing to add abundant new retail centers, Davis has the unique opportunity to consider a development type that may result in greater support of technology and research related startups… and therefore, greater support of the university. This in no way means that there shouldn’t be significant dialogue and discussion about the opportunities and constraints, but it does mean that Davisites have the potential to control some part of the budget equation.

I only ask that each person reading this article share these thoughts with friends and family in Davis. Consider your own perspectives and views and get engaged in the discussion about potential innovation park opportunities. What do you like? What would concern you? Where have you been that you have seen best practices and good examples? Any proposal by a land owner for an innovation park will require a citizen vote and extensive work by City staff and the community to ensure that such a proposal meets the Davis standard of sustainability and community character. So getting educated and getting involved now allows that dialogue to occur early enough for it to be robust and effective.

One opportunity for engagement is happening on Monday, January 27th, 2014. The Innovation Park Task Force meets on the 4th Monday of each month (except when on a holiday) from 5:30 to 7 pm in the City Hall Community Chambers. The Task Force meetings will be videotaped and posted to the City’s website on the Innovation Park Task Force webpage (http://city-council.cityofdavis.org/on-going-committees/innovation-park-task-force). Live video broadcast is not planned at this time.

The role of the Innovation Park Task Force will be to discuss policy issues and make recommendations to the City Council. These discussions could include such topics as the types of companies we want to recruit or the types of facilities and amenities that would be desirable in any future innovation park. The discussions will also likely include discussions of the types of revenue and ways that an innovation park might add to the City’s overall economic health.

Once again, staff asks your patience as we work hard to craft an open dialogue, a transparent process and the best opportunity for the greatest input that might lead to success. If an Innovation Park is going to happen in Davis (now or any time in the future) it will require extensive community collaboration and all minds hard at work. I hope you see this discussion as an exciting opportunity to explore our future and hopefully find ways to address our fiscal sustainability while still meeting our community character and values.

Please let me know your thoughts here on the Vanguard or email to me at rwhite@cityofdavis.org.

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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101 Comments

  1. New Davisite

    Interesting analysis and, for the most part, on the mark. I would ask if an analysis of the impact of the university bringing in thousands of employees on a daily basis has been done? Sales tax, shopping and eating in Davis, etc. While they may rent a lot of space that limits the ability to collect taxes, some of that rent does stay here with local owners and other tenants who share space because the university rents space. If you know of a financial impact study, I would be interested in that being included in the analysis.

    1. realchangz

      To your point, Davis certainly wouldn’t be much today if it weren’t for the robust economic contributions and investments of the University and its thousands of employees who have made their homes, grown their families, and remain so active in our community. All of that dynamic, however, is already incorporated into the economic outcomes that we have today. Unless I am mistaken, the challenges and opportunities identified by Rob White are intended to address where can we – as a community and including the university as a key ingredient – go from here.

  2. Jim Frame

    “the City might be able to negotiate an annual assessment”

    Are there examples of other jurisdictions in which this has been done? It seems to me that the only incentive for a developer to agree to such a thing is to sell the Measure R vote, since any assessment would come right out of profits. I’d also be concerned that once the project was approved and built, the developer (or the lot buyers, in a for-sale subdivision scenario) might try to annul the assessment as an improper tax, since there would seem to be little if any nexus between the assessment and services provided to the assessed property.

    1. Matt Williams

      ” It seems to me that the only incentive for a developer to agree to such a thing is to sell the Measure R vote …”

      Jim, I’m inclined to believe that “selling the Measure R vote” is a huge incentive. We need go no further back in time than the recent Cannery discussions (which didn’t even have a vote of the citizens, only a vote of the five Council members) to see just how huge an incentive getting entitlements approved is. There will be no profits at all if entitlements do not exist.

        1. Matt Williams

          That is a chicken/egg argument B. Nice. Under the logic you are using all profits associated with land use in Davis are premature. Therefore, no one in their right mind will ever propose any land use that is outside the City Limits … and as a result we will never have any Innovation Park and will continue to lose companies like Bayer AgraQuest, Schilling Robotics, Marrone Bio Innovations, and HM Clause. Those losses will be rather impactful to our tax revenues in a decidedly negative way.

          There comes a time when you have to choose a course, put your hands on the tiller, and stay the course. In basketball the expression is “never up, never in.”

    2. Rob White

      Jim – there are examples, and we would use the development agreement process (likely) as the tool. Our work will be to address exactly your points, but we are working with some very good land use and real estate professionals on this and I am confident we will get whatever is agreed to solidified in a way that the voters can be assured of the perpetuity of the agreement.

  3. Tia Will

    Your article is much appreciated.
    My thanks for addressing actual numbers in your statement of anticipated benefit. I do have a question.

    “This has had a noticeable and positive impact on the City revenues and the facilities were built on about 15 acres of land. The total revenue impact over a three year period was analogous to property taxes from building a subdivision of about 350 to 400 homes.”

    You provided a lot of substantive information in the form of projected numbers, but did not include the actual revenue generated over this three year period nor a comparison of the cost of this business to the community over the same time interval. ( Unless I missed it. I must admit that my eyes tend to glaze over as I read the numbers that I have requested). It is always in a direct comparison of the costs and benefits that I find the most value.

    1. realchangz

      Tia,
      As always you make very good points and ask very valid questions. I think Rob White has provided us with a nice overview of the challenges ahead and some constructive notions and options for how we might navigate our way to increased revenues with strictly relying upon more and higher taxes on our residents.

      More importantly, however, Rob is charged with a wide range of responsibilities that go well beyond the type of analysis you are requesting. The Finance and Budget Commission has asked some of these same questions. Unfortunately, the city does not currently have an economic model to accurately assess all of the next costs and extended economic benefits associated with this class or category of occupant.

      Part of the challenge for Rob and the Task Force will be finding the financial means and resources to engage the type of studies and findings you are requesting. Hopefully the Council will see the wisdom of such investments if we they are serious about proceeding ahead with further exploration of alternative revenue options beyond those involving more taxes.

    2. Rob White

      Tia – I did not give you exact numbers, and that stems from the inability to share specific tax data (state law). What I can say is that the one time revenue and ongoing sales and property tax revenues are well in excess of services consumed. In general terms, commercial and manufacturing usually contribute about 2 to 3 times the amount of direct revenue than they consume in services. I will try to make this a topic for an upcoming article.

  4. B. Nice

    Thanks Rob. I really appreciate you laying this information out in a factual straight forward manner. Hopefully it will lead to productive dialog that moves us toward solutions.

  5. B. Nice

    “This means that houses purchased in Davis many years ago are still assessed at property values in the $100,000 to $200,000 range (or $1,000 to $2,000 per year), instead of the more recent values of $500,000 to $700,000 (or $5,000 to $7,000 per year)”

    A few years ago our house, which has lost significant value since we bought it, was reassessed at it’s lower value and our property taxes were adjusted to reflect this.

        1. Rob White

          The County can bring property tax assessments back in line with previous amounts if values recover, but can not go above your original purchase price base assessment plus any CPI increases previously accrued (this is the 2% increase per year on the 1% that is sometimes referenced). You can learn more from the County assessor’s website.

  6. Robb Davis

    Two quick questions Rob (and others). First, thanks for laying this out.

    1. The lost property tax on University leases, is that unsecured property tax or all property tax? I would like to understand these losses better. For example, if the University ends a lease what happens?

    2. (To realchangz point), didn’t the city have a new fiscal model developed (per ITF recommendations) by a consultant and applied to Cannery? I realize that is a housing development but I had understood that a new fiscal model had been used and that it could be applied to other developments. I may have this all wrong but am curious about this.

    Thanks

      1. Mr. Toad

        Apparently Cannery generates higher property tax as a legacy of the property tax split negotiated between the county and the city when the Hunt-Wesson Cannery was annexed back in the 60’s. Perhaps the County would be eager enough to generate new revenue from the annexation of land from a new business park on the edge of Davis that we can negotiate keeping a larger portion of the tax receipts to entice the voters of Davis into saying yes to an annexation vote. Anyone that could help negotiate a favorable split to help the city’s finances would deserve accolades. I would think that with all the money we have sent to the county because of the pass through they would want to play ball.

    1. realchangz

      Rob,

      It is my understanding that the consultants to the Cannery project did incorporate some additional new component to their costing model (Bob Blyth would obviously know better) but there was neither the magnitude of commercial/industrial/R&E impact (due to the size of the “commercial” component) that would have justified a more thorough and complex economic modeling program.

      That said, one would hope that the Cannery model is better equipped than the city’s previous economic models to identify the “direct cost” and “direct revenues” associated with the commercial component. What was clearly not included in the original scope of the new assignment was a model which would incorporate the secondary economic benefits associated with the types of large scale commercial development that might accrue to an large-scale Innovation Business Park and its ancillary economic impacts on the local economy.

      Perhaps with Nishi, the city will be in position to demand a more sophisticated model that has the potential to incorporate the secondary benefits of increased technology employment within the community. Even that model, which is likely to focus on the economic impacts of an Innovation & Research Center (or whatever it is being called) may not rise to the threshold where it would necessarily need to be reflect the potential economic multipliers that would accompany a full-scale Innovation Business Park (like the 200 acres which Rob White addresses).

      So, the question remains, when will we have it calendared by the city council to declare their support for the investment necessary to produce a professionally compiled economic modeling program sufficient to incorporate the many symbiotic and complimentary impacts – at scale – that would be associated with the arrival of a cluster of mid-sized world class technology employers to the community?

    2. Rob White

      The property tax loss I estimated is just real property. University equipment would be exempt from an unsecured property tax as well, so unless there was a commercial company, there would be no assessment. On your point about the fiscal model, yes we have developed on for city use and this was done for the Cannery. It will need modifications to be used for a tech park, but the basics are there. One thing to remember is that on average, commercial

      1. Rob White

        (Continued) …. Is that commercial usually pays more than they receive in services. Sometimes as much as two to three times as much. I will try to do a future article on this topic.

  7. Rich Rifkin

    “Significant amounts of commercial space in Davis are leased to the university and are exempt from property taxes.”

    In addition to UCD’s exemption, large senior facilities, like the URC and Atria are owned as non-profits and pay no property taxes. Same, of course, with projects like Eleanor Roosevelt Circle. (I am not sure if the new Carlton* Plaza is organized as a 501(c)(3) or 23701(d).) Additionally, medical facilities like Sutter Hospital in West Davis and Kaiser Clinic in South Davis are exempt from property taxes (because those corporations operate as non-profits).

    *The website for Carlton Senior Living says the company is family owned, but does not say if it is “for profit” or a “non-profit.” The downside of being a non-profit is that it becomes much harder to raise capital for investment. However, almost all medical companies, like Kaiser, organize for tax reasons as non-profits, because this allows them to own a lot of land (and pay no taxes on that land) and to own a lot of very expensive machinery (and pay no taxes on that machinery). They can also take their excess earnings and invest that money tax free, and then, when necessary, invest it in new facilities and properties. To reward their investors, they make them employees and pay them huge salaries.

    1. Frankly

      Rich – Good point about non-profits also being exempt from property taxes. Some are, but not all. Which then raises another problem with Davis residents’ propensity to favor non-profit business.

      FYI, I am a 501(c)(4) and I pay property taxes.

      1. Alan Miller

        >Davis residents’ propensity to favor non-profit business.

        I think this is largely a naivety of what a non-profit really is, a misunderstanding that spreads well beyond Davis. Somehow, wrongly, non-profits have been seen as having little halos floating over their buildings and their employees heads.

        In fact, many are nothing more than self-perpetuating employment machines who raise money for their employees to have jobs, and/or for-profit businesses that make no book profit but pay fine employee salaries, or money laundering machines for funneling money from corporations to businesses that support the corporation but cannot be supported directly, or funneling campaign money for the non-profit to do campaigning for the government entity or corporation that cannot, or pyramid schemes that hire young naive young people to stand on street corners to raise them money without paying the idealistic young people any salary and small cut if they do raise money, or have a nice name and a nice brochure but don’t actually do anything for the cause because if they ever solved the problem their reason for existing would cease to exist . . . well, you get the picture.

        Wake up, people, many non-profits are as evil or more evil than that most hated of labels, corporations!

        1. Frankly

          Alan Miller – I think your objectivity is being smothered by your left-leaning dogma. For every “bad” corporation you can cite, there are hundreds doing great things for communities and society. At least you do point out that they provide jobs.

          Just had a conversation with one of my employees telling me that rich Republicans like to hoard money. Another sign of too much left-leaning dogma.

          I corrected her and told her that rich Democrats tend to hoard money, but rich Republicans tend to spend it. Rich Democrats tend to wear Birkenstocks, drive a Prius and do everything they can to appear not rich… including hoarding their money… except for vacations. Rich Democrats take a lot of vacations… but mostly in other countries. Which, by the way, prevents locals from seeing how rich they are. Rich Republicans tend to buy nice and expensive things with their money and invest to make more money. And because they do, they do more to directly contribute to the health of the economy that provides jobs. But they also become targets for the envious and jealous because of the displays of their wealth. Rich republicans take fewer vacations because they are busy working to make more money. And since they hang around town more often, those afflicted with debilitating leftist dogma will have their envy and jealousy more often inflamed by their displays of wealth.

          1. B. Nice

            I was curious about this, here is what I found:

            “Real and personal property owned and operated by certain nonprofit organizations can be exempted from local property taxation through a program jointly administered by the Board of Equalization and county assessors’ offices in California. This exemption, known as the Welfare Exemption, is available to qualifying organizations that have income- tax- exempt status under Internal Revenue Code section 501(c)(3) or 23701(d) of the Revenue and Taxation Code and are organized and operated exclusively for religious, charitable, scientific or hospital purposes.”

          2. Rich Rifkin

            BN: That is correct. However, my understanding is that includes senior facilities for housing which have a healthcare component. In other words, it is not just pure hospitals. I know that the URC, for example, is organized as Section 501(c)(3) tax exempt corporation. The URC of Davis is owned by an Oregon company called Pacific Retirement Services, Inc.

          3. Alan Miller

            F,

            Swing and a miss, hit the catcher in the head with the bat.

            I didn’t cite a single corporation as bad, and did not say corporations, as such, were bad. My point was that many people automatically cite corporations as “bad” while automatically citing non-profits as “good”. There is nothing inherently bad about either one, nor does either one get a granted halo. Halos are earned.

            Left-leaning dogma? No Birkenstocks, no Prius, vacationed strictly in the U.S. for the last 30 years. Not even a Democrat.

            The catcher died of a concussion. Someone notify the family.

      2. B. Nice

        I was curious about this, here is what I found:

        “Real and personal property owned and operated by certain nonprofit organizations can be exempted from local property taxation through a program jointly administered by the Board of Equalization and county assessors’ offices in California. This exemption, known as the Welfare Exemption, is available to qualifying organizations that have income- tax- exempt status under Internal Revenue Code section 501(c)(3) or 23701(d) of the Revenue and Taxation Code and are organized and operated exclusively for religious, charitable, scientific or hospital purposes.”

    2. B. Nice

      So are you saying that the Kaiser in Davis does not pay property taxes? I thought each independent Permanente Medical Group operated as a separate for-profit partnership.

      1. B. Nice

        “Kaiser Clinic in South Davis are exempt from property taxes (because those corporations operate as non-profits).”

        From wikipedia:” Permanente Medical Groups are physician-owned organizations, which provide and arrange for medical care for Kaiser Foundation Health Plan members in each respective region. The medical groups are for-profit partnerships or professional corporations and receive nearly all of their funding from Kaiser Foundation Health Plans.”

        Are for-profit membership groups exempt from property taxes?

        1. Frankly

          Here is how it works. It is the HMO thing.

          There is a mother ship company that runs as a non-profit. The mother ship is basically an insurance company. It sells insurance to companies and individuals. It then creates a “network” of providers. These providers are the medical groups of private doctors that can be organized in a variety of business structure choices. And yes, they can be for-profit.

          In addition, the mother ship operates a network of hospitals and medical centers that are non-profits.

          Kaiser is a bit different in that the medical groups are more like franchises… funded by Kaiser and controlled by Kaiser. This enables Kaiser to deliver a more integrated and comprehensive level of care to Kaiser patients.

          Other HMOs just focus on insurance and contracted provider networks. They don’t have much or any controlling interest in the medical groups.

          I think the Kaiser facility on Cowell is one of the non-profit medical centers.

  8. Frankly

    Good job Rob!

    Ya’ll should flog yourself if you didn’t opine to keep the Mace 391 property as a business park. It was a decision of politics over fiscal responsibility. And that, my friends, is exactly the source of all of our financial problems… politics over fiscal responsibility. I will be sure to keep bringing this up as the fiscal pain continues to build and people become more and more unable to deny it.

    Without needing to add abundant new retail centers, Davis has the unique opportunity to consider a development type that may result in greater support of technology and research related startups

    Great… we bring in all these new businesses with good jobs, and the employees have limited places to shop so they head out of town to add to our sales tax leakage.

    WTH is wrong with people in this town that look at more retail as analogous the black plague!? Most people consider new retail as an amenity. With all due respect, I think the people denying the positives of more retail are stuck on stupid.

    1. realchangz

      Frankly,

      I guess it’s fair to say that Davis retailers are stupid – you know, operating in a business model that doesn’t qualify for the many generous and sundry tax subsidies available to many businesses. Likewise, I guess its valid to criticize retailers as stupid for not being able to operate as non-profits (even though many are) and having to pay property taxes as such. Or maybe retailers are stupid because they have to collect sales taxes from their customers every time they want to make a purchase. Maybe our retailers should be entitled with the same benefits accorded to the various categories of service provides who enjoy our city services, streets and sidewalks and aren’t required to coerce any taxes from their clients to help pay their fair share of the city’s expenses.

      Ii guess it’s fair to say that retailers are stupid because, like Best Buy, they are finding it increasingly difficult to compete with online retailers like Amazon who generate hardly a pittance in sales tax and NEVER A DIME BACK TO THE COMMUNITY OF THE PURCHASER.

      I don’t know what kind of business model in which you compete, but it does seem a little harsh to classify somebody (i.e. a retailer) as stupid simply because they are concerned about the equality of the playing field and how they hope to compete in the ever changing world in which we live.

      1. Frankly

        realchangz, you missed my point. I was not criticizing the retailers… although I think some of the downtown merchants are fond of preventing retail competition.

        My complaint was for those residents that have this aversion to any significant growth in retail. They put the term “Big Box” in a category similar to other pejorative labels like “KKK”, “Nazi” & even for some people “Israel”.

    2. Davis Progressive

      perhaps it’s because people like the way our community is and would prefer it not look like woodland, west sac, or natomas with wall to wall strip malls and national chains.

      1. Frankly

        Development hyperbole. You are making that “sprawl” alarmist argument.

        I agree that assessment of city aesthetics is a subjective thing. But are you going to tell me that there are zero shopping centers that you find attractive?

        1. Biddlin

          I am unaware of a single ascetic household in Davis. For the most part, the resident’s seem to exhibit hedonistic values, tempered by secular humanism.

          I wouldn’t waste time assessing them either. lol
          ;>)/

    3. Jim Frame

      “With all due respect, I think the people denying the positives of more retail are stuck on stupid.”

      Is there respect in your posts somewhere? I can’t seem to find any.

      1. Frankly

        There is a regular article in the Davis Enterprise about all the retail comings and goings. I hear from a lot of people how they like the article and how excited they get when a new restaurant or store opens up. These are some of the same people that tell me they are against retail expansion.

        Little Winters brings in about 70% of Davis’s sales tax revenue.

        Maybe “stupid” is too strong of a word. How about “confused”?

  9. Mr. Toad

    I don’t think he was saying retailers are stupid he was saying those opposed to retail are stupid. Now if a retailer wants to oppose competition I think the retailer is smart. If consumers allow that to happen we are dumb. Although I think there are limits. Personally I draw the line at keeping Walmart out.

    1. David Greenwald

      It just seems like the use of terms like “stupid” or “dumb” doesn’t lend itself to fruitful discussion.

      I think there are different, competing visions for the future and each one has trade offs. Whatever we decide should be based on the direction from the community rather than dictated by an active segment or an interested minority.

      1. growth issue

        “Whatever we decide should be based on the direction from the community rather than dictated by an active segment or an interested minority.”

        I’m going to remember you said that when you back the NRC and that “active segment or an interested minority” that push their agendas of plastic bags, fireplace smoke and whatever new is coming down the pike on the rest (majority) of us.

        1. David Greenwald

          The problem you have is I don’t see the NRC as the propagator of those policies. Many of them came out of the Climate Action work and are based broadly around the state. At the same time, I don’t see mass opposition to those environmental policies like we see to land use policies.

          1. growth issue

            No, the real answer is just because you happen to agree with the NRC’s policies you back letting an “interested minority” dictate to the rest of us.

          2. David Greenwald

            Sorry, I don’t see it that way because the NRC has no actual power to do anything other than recommend policies to council. Council chooses whether to support or oppose those policies.

          3. B. Nice

            No real power? I’m out!

            Seriously though from what I understand committees make recommendations, staff makes recommendations, and council decides. Since voters pick council members they are the ones with the power.

          4. David Greenwald

            That’s my point, this idea that there is some fringe group dictating policy is ludicrous. They are blaming the wrong people.

          5. B. Nice

            I think the perceived power of our towns commissions are inflated by some. As you stated it seems like a lot of what the NRC does is look into ways Davis can reach mandates set by the state. For example the state mandated 75% waste diversion rate.

    2. realchangz

      Personally, I don’t think there are a lot of stupid people in this town. What some recognize and others may not is that most actions have reactions. In some instances there is the reality of a zero-sum game – small retailers feel that when category killers arrive just as surely as Best Buy feels it when 30% of all retail shifts to the “online mall”.

      Rob is clear when he observes (above) “There are many nuisances to a discussion point like this” when talking about the virtues of more “abundant” retail in a community. Yes, there are sometimes ‘inconvenient” consequences when these types of changes occur. And, just as Tia calls for a more thorough understanding, analysis and explanation of the impacts and consequences of an influx of larger technology employers, so too it is important to have a very thorough and detailed model at work when calculating the purported sales tax “leakage” of a given community. To date, and as in the case of the multifaceted economic models for business parks, those models have not been brought into the conversation.

      To some degree, this dilemma over goes back to the fundamental issue and question of “What is Davis’ role in the regional economy. What is our brand? What are most compelling “value propositions” for the region? I would argue that from a regional perspective, that Davis’ competitive advantage should continued to be viewed as a REGIONAL TECHNOLOGY EMPLOYEMENT HUB and all that that implies – ON THE CONDITION THAT WE FIND A WAY TO MANAGE THAT IDENTIFY ON TERMS THAT ARE ACCEPTABLE, AND DESIRABLE, AND SERVE TO ENHANCE THE DAVIS THAT WE KNOW TODAY.

      As a sidenote, I’m just guessing, but I’d imagine we would find our retail options and sales tax collections to increase accordingly.

      1. David Greenwald

        I’m happy to look into ways Davis can become a regional technology hub, I’m less interested in expanding our retail. I think we can expand our brand as a high tech incubator and not lose our identity or character. I’m much less confident that we can build additional shopping centers and do the same.

          1. David Greenwald

            I enjoy living in a town that doesn’t resemble any-town USA with chain store strip malls. When we went to add Target, I would have loved to have seen local business people put together our own, locally owned and run store that provided similar amenities. Finally, I’m reluctant to expand beyond our current borders and if the proposed business park does not sufficiently mitigate against future development east of Mace, I’ll be inclined to oppose it.

            Bottom line for me, if we wish to add retail into existing space, then that’s fine, but adding retail on existing farmland is a non-starter for me.

          2. Frankly

            How do you add retail into existing space? That does not make any sense. If your population grows, don’t you need to allocate some equitable ratio of land to new retail? Otherwise you continue to shrink your retail to population ratio.

            And when Davis already starts with an extreme deficit of retail to population, it starts to look like we are a bit stupid about it.

          3. realchangz

            Frankly,

            Appreciate your example of Winters, but little ole Corning, CA makes it look like a piker too. (see table below from the 2013 California Retail Survey)

            Exactly what is it that is creating the “retail sales” in these various communities?

            Eleven years of sales data Over 800 charts, plus rankings & analytical indices for each local market

            Retail Sales Per Capita Rankings

            City Rank Per Capita Retail Sales
            1 INDUSTRY $3,090,510
            2 SAND CITY $543,043
            3 VERNON $514,726
            4 COLMA $342,928
            5 IRWINDALE $83,630
            6 SIGNAL HILL $71,221
            7 EMERYVILLE $51,612
            8 COMMERCE $51,018
            9 BEVERLY HILLS $50,964
            10 SONORA $44,150
            11 CORTE MADERA $43,737
            12 CARMEL $42,990
            13 BISHOP $35,823
            14 CAPITOLA $34,907
            15 CORNING $34,477
            16 CERRITOS $34,020
            17 CULVER CITY $33,456
            18 BIG BEAR LAKE $29,387
            19 EL SEGUNDO $29,204
            20 COSTA MESA $29,029
            21 SANTA FE SPRINGS $28,357
            22 BREA $28,123
            23 GRASS VALLEY $28,083
            24 WESTLAKE VILLAGE $27,675
            25 WEST HOLLYWOOD $27,229
            26 LA PALMA $26,674
            27 DEL MAR $26,138
            28 BARSTOW $25,831
            29 PISMO BEACH $25,808
            30 AUBURN $25,565
            31 WEED $25,528
            32 BUELLTON $25,237
            33 ROSEVILLE $25,137
            34 SANTA MONICA $24,292
            35 PALM DESERT $24,174
            36 WILLITS $24,131
            37 EUREKA $23,237
            38 YOUNTVILLE $22,800
            39 DUBLIN $22,570
            40 MONTCLAIR $21,965
            41 SAN LUIS OBISPO $21,883
            42 PLACERVILLE $21,381
            43 UKIAH $21,293
            44 WALNUT CREEK $21,156
            45 BUENA PARK $20,891
            46 GILROY $20,846
            47 ST. HELENA $20,788
            48 NEWPORT BEACH $20,785
            49 LAKEPORT $20,583
            50 ONTARIO $20,407
            CALIFORNIA $9,499

            The 2013 Edition of the California Retail Survey includes in-depth data & analysis of all 58 counties & 480 cities

            552 Pages 8 1/2 X 11

          4. Frankly

            Thanks for this realchangz.

            You can also find some basic information in the US census. I have the CA Retail Survey from 2011. I just ordered the new one.

            Davis is so far outside the box that we appear to be sick.

          5. B. Nice

            Maybe some of the benefits that come along with this “sickness” are why so many of us choose to live here.

          6. Mr. Toad

            You’ve said stuff like that before that we are going to need to cut and you challenge others on how to do it but then you oppose doing what needs to be done through growth so by deduction if you don’t want growth you limit the choices and end up back at cutting.

            I’ll speak for myself I’ll pay more in taxes but would prefer we increase revenue through growth, possibly deferring some bills by stretching them out with borrowing and cutting more as a last resort. How would you prioritize our options?

          7. David Greenwald

            We are going to need to cut. The revenue measures that the council is going to decide on next week will not be sufficient to balance the budget.

            That is a separate issue from the longer term issue where I think we need to look into business park which can generate tax revenue, but I’m not to support new retail on peripheral lands and I don’t think the majority of Davis will either.

          8. Mr. Toad

            Yes so by eliminating growth you require austerity although we could raise taxes more. i think the people who are opposed to growth should pay for the lifestyle they demand instead of balancing the budget on the backs of public servants.

          9. David Greenwald

            Again, willing to consider a business park. But I think you forget that growth itself doesn’t add net revenue. Additional housing adds additional services. The cities that grew more, fared less well during the recession.

  10. B. Nice

    “Most people consider new retail as an amenity. With all due respect, I think the people denying the positives of more retail are stuck on stupid.”

    There are plenty of towns filled with people who consider retail an amenity. I want to live in a town where people’s top priority isn’t convenient lumber or electronics. What I find stupid is people trying to change the things about Davis that so many of us stupid people value, when plenty of other options exist. Go to Walnut Creek or Palo Alto you will find plenty of people who value retail there. Leave us “stuck on stupid” people be, there are very few place left for us to live.

    1. Mr. Toad

      Fine but if you don’t want to grow tax receipts to the city how would you balance the budget? There are only so many ways to do it. If you don’t want to grow the economy do you want to cut, borrow or tax?

        1. Mr. Toad

          Yes. So you want a business park but not the rest of the infrastructure to support it. How many jobs do you think it will generate? Where will those people live and shop?

          1. David Greenwald

            My discussion last summer with the Director of the Chamber and Rob White suggested to me that we did not need additional housing to support the business park, that we have a shortage of jobs for professionals and that many individuals who currently live in Davis commute out of town due to that jobs-housing imbalance. I will not support a business park as a ploy to open the door to other development.

          2. Frankly

            A business park and the addition of employees will unavoidably put pressure on housing. But they are mutually exclusive growth decisions. I worked in Sacramento for 22 years while living in Davis. It is generally not a problem commute for people to live in Sacramento and work in Davis.

            What I am hearing from you David is that you are in support of adding a high tech business park or maybe two over a period of time. You are fine with a sales tax increase and a new parcel tax. But you will not support any new retail centers or housing development.

            As I understand, new housing can provide short-term inflows, but in about 15 years or so, housing developments start costing a city more than they generate. So, in terms a long-term fiscal sustainability solution, new housing more of a problem than a solution.

            But retail is a solution.

            So in essence, you are in favor of cutting the livelihoods of city workers and probably impact residents with greater tax rate increases in the future just so you don’t have to be “impacted?” by any new retail development.

            I have to agree with Toad on this one… I think you are showing shades of becoming a mean old conservative dude.

          3. B. Nice

            “So in essence, you are in favor of cutting the livelihoods of city workers and probably impact residents with greater tax rate increases in the future just so you don’t have to be “impacted?” by any new retail development.”

            And your willing to compromise quality of life to save a few bucks on taxes.

            My statement is an oversimplification of the issue, but so is yours.

          4. Frankly

            I don’t see it.

            Failing to bring in enough revenue will absolutely and definitively result in he city needed to cut more workers and worker pay and benefits, plus increase taxes.

            Adding retail does not absolutely and definitively reduce the quality of life. That is completely subjective… to some it would absolutely increase the quality of life… both because they like having more places to shop, eat and drink, and because the revenue helps fund additional city amenities.

          5. B. Nice

            I’m not against retail. I’m against certain types of retail moving into Davis. If I wanted to live in a town that offered the convienance of big box stores and strip malls I’d move to one, and pay a lot less for house in the process.

          6. Mark West

            Housing only becomes a net negative long-term because we have failed to control the growth of payroll and associated costs of City staff. Negotiate controls on total compensation and the over expansion of staff and housing remains net positive for the long-term.

          7. Frankly

            That is a good point and one that has been made before but I forgot about it. Bottom line, if we become more lean in our city operations, the new fiscal impact for additional services will be less, and therefore more development will pencil out as net positive in revenue generation.

            This is the “per unit” cost thing. If you reduce the cost per unit of service, you can make the service venture profitable when it was not before.

            But it seems any argument to bring in more housing causes a rise of defiance from the no-growthers.

          8. B. Nice

            Again there are plenty of towns uninhabited by defiant, nasty, economy ruining, small lot causing, slow growers. My guess is that some of the things you value about this town, and some of the reasons you choose to live here, are a result of the actions of this group of people you have so much distain for.

          9. Mr. Toad

            I guess where i differ with all of you is I think we need to put everything on the table; taxes, economic development, cost containment (which we have already done to some extent), borrowing and do some of each. Anyone who says anything is off the table is in fact saying that the burden should fall in other places. If you say development of one type or another is out then you need to pay up. City employees have already given at the office. They may need to give more but what have you given David, be nice and Frankly? If you have nothing to put on the table don’t ask for anything in return.

          10. B. Nice

            Of course some things are off the table. While I’m more then willingly to put taxes, economic development, and cost containment on the table, there are parameters I would set for each of these. I’m open to a $500/year parcel tax, but not a $5000/year one. I’m open to economic development but I think we all agree we wouldn’t want a noisy polluting factory regardless of what type of revenue it generated. If more cost containment steps are necessary, fine, but I’m not going to suggest we close our swimming pools.

            Extreme examples yes, but I use them to prove the point that there are things none of us are willing to put on the table.

          11. Mr. Toad

            Well a $500 dollar a parcel assessment would get us a long way along to our goal of a balanced budget. I’m sure with that amount of money we could forego some other alternatives. As for things everyone will agree are off the table there is no point in raising those issues. Its the things where there are constituencies that matter.

          12. Matt Williams

            I disagree 100% Toad. We need to be transparently and brutally honest with ourselves. Otherwise we are simply sweeping problems under the rug. If we don’t know the length and breadth and depth of the problem, then any contemplated solutions will be considered in a partial vacuum.

            Why is it that you want to disguise just how significant the problem is? That desire to disguise is a consistent theme in your posts.

          13. David Greenwald

            A $500 parcel tax is way more than the city actually needs. A $200 parcel tax would produce about $5 million in revenue. But I think Matt raises a critical point on sweeping the problem under the rug and there is no guarantee you could pass a two-thirds vote requirement.

          14. Matt Williams

            It is my understanding based on a recent meeting with a City employee that we are already closing swimming pools.

            “The Davis Community Pool is located on 201 West 14th Street behind the Veterans Memorial Theater. As of January 2012 the pool is closed down due to budgetary constraints. It currently has a sign denoting the pool is decommissioned / unsafe for use (probably just because it is not being maintained at the moment, not that there is anything wrong with it).”

          15. Matt Williams

            This I agree with 100% Toad. Why is it that you want this kind of robust approach on the solution(s) side of the ledger, but not the problem(s) side?

  11. SouthofDavis

    Rob wrote:

    > Existing Housing Resale – Davis has a slower rate of property
    > reassessment from resale of the housing inventory at about 2 %
    > per year, as compared to most cities in California that have a
    > resale of existing housing stock in the range of 5 to 6% per year.

    Where did you get this data 5-6% turnover sounds real high (and WAY higher than the entire nine county bay area and every bay area city I looked at over the past 5 years). I’ve got to think that if anything most of rural California would probably have even lower turnover than the urban mostly urban bay area.

    > This means that houses purchased in Davis many years ago are still
    > assessed at property values in the $100,000 to $200,000 range
    > (or $1,000 to $2,000 per year), instead of the more recent values of
    > $500,000 to $700,000 (or $5,000 to $7,000 per year).

    Remember even today (in RE Bubble 2.0) that more than half of the homes for sale in Davis (37 out of the 62 homes for sale when I just looked on Realtor.com) are still under $500K (and many of the people paying $1,000 to $2,000 a year are condo owners that bought in the past year at full market value).

    1. Rob White

      Fair points. My numbers are obviously generalities over a multi-decade approach. But the framework is valid and show that a slower turn-over in Davis than similar communities during a similar time period results in signifcant losses in revenue as compounded over time (in my ‘type’ case, a decade was used).

    1. Matt Williams

      The magnitude and the specifics of the problem.

      For instance, why after spending $213 million on roads over the next 20 years (as outlined in the 12/10 Staff Report to Council) do we see the deferred maintenance backlog rise from its current $21 million to $129 million? That $108 million is headed under your rug.

      1. Mr. Toad

        That is a good question. But I’m not sweeping it under the rug. I say put it all out there and have an honest discussion about what it all costs and all the possible answers. Excluding anything puts extra pressure on everything else.

  12. Alan Miller

    F,

    Swing and a miss, hit the catcher in the head with the bat.

    I didn’t cite a single corporation as bad, and did not say corporations, as such, were bad. My point was that many people automatically cite corporations as “bad” while automatically citing non-profits as “good”. There is nothing inherently bad about either one, nor does either one get a granted halo. Halos are earned.

    Left-leaning dogma? No Birkenstocks, no Prius, vacationed strictly in the U.S. for the last 30 years. Not even a Democrat.

    The catcher died of a concussion. Someone notify the family.

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