Staff is looking for feedback on Tuesday regarding two revenue proposals that would call for placing a measure on the June 2014 ballot that would increase “the local half-cent transaction and use (sales) tax by three-quarters-cent for a maximum of ten years to address City structural deficit.”
Council would then place “an additional measure on the November 2014 ballot for an approximately $150/parcel tax to address infrastructure (paving, park capital improvements to reduce water consumption, etc) and recreation amenities (50 meter pool, acquisition of Nugget Fields, etc.).”
Any measure that goes on the June ballot would require the council to act on February 11 on specific language – this represents the last possible date for inclusion on the June 2014 ballot. The sales tax measure is a majority rule vote, while the parcel tax requires a two-thirds majority vote of the citizens of Davis to pass.
Staff notes that even with a projected revenue increase of $900,000, they are projecting a $5.1 million shortfall for the upcoming 2014-15 fiscal year.
City staff lay out the shortfall due to a numbers of factors including $2 million on debt service for infrastructure with an additional $505,000 for contracts for street maintenance. The removal of other resource savings accounts for $770,00, while the utility increases for water this year only come to $94,000. Fleet replacement is $110,000 while insurance claims are $67,500.
Employee wages and benefits come to $2.3 million in total. That includes $1 million in wage increase including a 2% COLA increase. Benefits come to $1.2 million with retiree medical at $180,000, PERS at $437,000, leave benefit at $305,000 and medical insurance at $321,000.
Mayor Pro Tem Dan Wolk and Councilmember Brett Lee have been working with a focus group of community members discussing the city’s financial situation. Staff writes, “The focus group provided thoughtful input to the subcommittee, as well as insight regarding the fiscal opportunities and challenges to address the budget shortfall. The participants recognized that the City has made significant cuts over the past several years, is currently engaging seriously in economic development efforts to bring in new revenue sources and needs to make a choice of additional, drastic cuts to service or identifying immediate revenue sources.”
“The group was generally supportive of the City pursuing tax measures as part of a larger and comprehensive fiscal strategy. The group indicated that the City needed to explain why revenue is needed, what will be done to ensure that revenue will be used in the most efficient manner possible and that other means of long-term revenue measures (economic development) will be pursued,” staff continued.
Over six years’ time, staff has been reduced by 103 positions with overall general fund cuts totaling $5.8 million. In addition, staff calculates that employee cost-sharing and concession have reduced costs by another $5.2 million over the contract period, for a total of $11 in General Fund savings.
It should be noted these are not cuts per se, but rather, as staff indicates, “if none of these measures had been taken, the General Fund would be at roughly $53 million instead of $42 million.”
Staff argues, “Given cuts already made and efficiencies achieved, the next round of cuts that would be necessary to address the continuing $5.1 million General Fund shortfall would result in significant changes to current service delivery levels.”
“While the City is working with the business community on ways to rapidly increase revenue through accelerated economic development, this process takes time to yield results at levels that can address the structural deficit,” they reason. “Because economic development requires considerable focus and leveraging of networks and partnerships, it is expected that it will likely require five to ten years to (achieve) substantial results.”
“Specific focus will be given to facilitating the growth of technology and manufacturing business and collaboration with industry that may lead to an innovation and tech park,” staff continues.
Based on this analysis, staff is recommending that council consider a two-part revenue solution.
First, they recommend a three-quarters cent sales tax increase to increase the current sales tax from one-half percent to one-and-one-quarter percent, or an overall total of 8.75%.
Staff expects the new tax would generate approximately $5.4 million.
Staff notes, “A Council election is the only ballot where a general purpose tax is allowed without making a finding of an emergency, so this June is the only opportunity to consider this option until June 2016”
The sales tax would require a simple majority vote.
Staff writes, “The tax would pay to close the City’s structural deficit and would be for a maximum of 10 years, with a possibility of an earlier sunset if economic development activities yielded advanced success in addressing the structural deficit, or with the possibility of any ‘excess’ funds going to replenish the General Fund reserve levels.”
Staff also recommends a November parcel tax for approximately $150 per parcel. that would generate approximately $4.1 million.
Staff writes, “This tax requires a 2/3 majority and would be targeted to address infrastructure needs such as roads; recreation amenities such as repairs and/or enhancements to existing pools, purchase of Nugget Fields from the Davis Joint Unified School District, etc.; money-saving irrigation expenditures and other potential enhancements to the community. This tax would be proposed for potentially longer term so that financing could be tied to the tax.”
In alternative, staff writes that the city could propose a general obligation bond that would address the capital needs, but “the types of expenditures allowed with this type of financing are more limited, and maintenance costs would not be able to be funded via the measure. In addition, the tax would have to be imposed for a 25-30 year term.”
—David M. Greenwald reporting