Commentary: City Should Read Letters Like These…

letter-to-editorI happened to glance at a letter to the editor this morning that says the “city needs to set priorities.”

The letter is short and to the point: “If the city cannot fix potholes in the sun between 8 a.m. and 4 p.m., I’d be hard-pressed to believe it can repair a blown-out transformer at 3 a.m. in the driving rain. Put the money for the study into pothole repair and let the people who know how maintain and repair the gas/electrical infrastructure.”

The letter is very simple.  There are some truths in it, but there are a lot of misconceptions.  By reading letters like these, the city can help focus its messaging that it is going to need going forward, not just on a publicly-owned utility, but on the issue of the road repair.

The first point that needs to be addressed is the issue of potholes.  First, the problem is not that the city cannot fix potholes from a technical perspective.  The city contracts out road repairs, for the most part.  For instance, to deal with potholes, at one point the city had contracted out to International Surfacing Systems (ISS) and attempted to inexpensively use things like chip seal to plug up holes.

The problem right now is not a technical problem, it is a fiscal problem.  The city lacks the funding right now to do broad-based road repair.  They may attempt short-term solutions that could backfire like the 2011 chip seal fiasco, but on a broad level, as we have discussed this week, the city needs an influx of $25 million or more to start upgrading its roads.

Eventually, the city is going to have to pass a parcel tax to do so.  That funding is needed because the city has underfunded road repairs for most of the last decade and a half.

The comments by that letter writer indicate that the city has not been able to convey this message to the public effectively over the last several months.

To reiterate, the writer continues by arguing that if the city cannot fix potholes, “I’d be hard-pressed to believe it can repair a blown-out transformer at 3 a.m. in the driving rain.”

There are two problems drawing the connection here.  First, the writer mistakenly believes that the issues involving the lack of city funding on potholes would carry over to electricity.  Second, the city has allowed the belief that the city’s current employees would run the POU.

This is another failure of messaging.  We do not have a clear sense for how a POU would be run.  The presumption would be that the city would contract out the power system to a company.  Much as the city is going to rely on a private company to run its water supply project, the city would hire SMUD or some comparable group to run its power system.

However, the city’s failure to explain that, or lay out any sort of even a preliminary plan, feeds right into the letters writer’s belief that a POU means that the city’s public works employees would run the electrical grid and be responsible for fixing a blown-out transformer during inclement weather.

There are a number of challenges that a POU would face, however – unlike roads, there is a built in funding source for power, as it is based on ratepayer fees.  As such, a POU would never run out of money like the city’s road repair system.

The letter writer, as stated above, then concludes, “Put the money for the study into pothole repair and let the people who know how maintain and repair the gas/electrical infrastructure.”

It makes for pithy letter, but again, it is completely wrong in terms of diagnosing the problem.  The problem that the city has is not technical expertise on pothole repair.  It is lack of funding.

Second, again, the idea that city employees are going to run the electrical and gas system is wrong.

However, what is clear here is that the city has not properly and adequately explained either to the public.  And that is a messaging issue.

Unfortunately, we are now two months away from the sales tax election.  However, the bigger issues involving the parcel tax and the POU are further down the line.

The first thing that the city needs to figure out – and relatively quickly – is how to educate the public about the problems that the city faces with the roads, how the funding mechanism needs to work and why the public needs to pass the parcel tax.

As we noted last week, it is not clear that the public will support a $150 per year parcel tax.  That should concern the city.  We clearly need to adopt a strategy to explain the problems, how much the problems will increase if we delay even a year or two, and how much it costs to fix the problems.

At the same time, we are in a city crisis.  We have a city manager who will be leaving in a few weeks, we have an interim who has not been formally announced who will be brought in to run the city, and we are facing between one and three new councilmembers between now and January 1, 2015.

While we can respect current city manager Steve Pinkerton’s decision to take his apparent dream-job in Incline Village, from a city perspective, it is hard to picture a worse timing.

Based on these calculations, many have called for a pause on the POU.  The problem is that timing is of the essence, and the city stands to save a tremendous amount of money on its electricity bill at a time when it needs it the most.

But as letters like this show that the city has done a very poor job of explaining all of this to the public.

—David M. Greenwald reporting

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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77 Comments

  1. Tia Will

    “There are a number of challenges that a POU would face, however, unlike roads, there is a built in funding source for power – it’s based on ratepayer fees. As such, a POU would never run out of money like the city’s road repair system.”

    This is a question, not a suggestion or a call to action. Does anyone know why, historically speaking, our road’s have been treated differently and not based on user fees such as toll roads which are maintained appropriately by the people that actually use them ?

    1. Jim Frame

      Does anyone know why, historically speaking, our road’s have been treated differently and not based on user fees such as toll roads which are maintained appropriately by the people that actually use them ?

      I think the reason is metering — assigning cost based on actual usage. Statewide we do this on a vehicle license basis, with large commercial vehicles paying more (maybe not enough more, but more) based on the notion that their weight causes more wear on the infrastructure than do private cars. Toll roads do it by controlling access. Citywide, I don’t see any simple means of determining who uses the roads and how much, so the city makes the assumption that all property owners use them equally and distributes the cost evenly across the property tax base.

      1. Rich RifkinWDE 73

        Jim, I think another big difference on a statewide basis is the state gas tax. That is what pays for most repairs and maintenance of state roads. By contrast, we don’t have a local gas tax, which in effect would be a user fee for local roads.

        I also think it’s worth asking the question why local roads in California have fallen into such a poor state of repair in the last 10-15 years?

        Obviously, a large component of that is the tripling of the total compensation costs in real, inflation adjusted dollars of municipal workers since the mid-1990s. Property tax money which used to repair roads now largely goes to pay for multi-million dollar retirement deals for 50 year old firefighters and cops and it pays for 40 years of OPEB for 55 year old retired desk workers.

        However, there is another significant component of the destruction of local roads: ERAF. Since 1992-93, the state has taken $120 billion away from local governments that used to pay for infrastructure repairs. No cities or counties have replaced that lost income. And so, they have managed their operating budgets, but have done so in part by allowing their assets to deteriorate. It is just now, in the last few years, that every city and county notices what 20 years of neglect has amounted to.

        1. Rich RifkinWDE 73

          Another quick note on ERAF: But for it, local governments would have an additional $7 billion this year. Not all of that, of course, would go to road repairs. But a lot would. And if a lot more had gone to repairs since the mid-1990s, the cost of keeping up now would likely be within reach of cities and counties to keep up, just using the money that is stolen from them from ERAF.

      2. fyi

        It’s all about priorities. We don’t need new taxes, fees, tolls, etc. We need to rein in spending and be responsible. We are taxed for this and taxed for that, taxed for the other–but the return on that “investment” is pitiful. yes, the state steals money, borrows from one pot, robs Peter to pay Paul, etc. That is why we need to restrain it at all levels. Government/beurocracy does not have our best interests at heart.

    2. David Greenwald

      I don’t have the specific answer, but I can wager a guy. For years the reason we did not use general fund money on roads is that the state and federal governments funneled enough money to maintain our roads. My guess that the reason we have not had a user fee is because historically we haven’t needed to pursue a local funding mechanism for roads.

    3. Mark West

      We do not pay taxes based on our ‘use’ of public assets (Roads, parks, pathways, libraries, etc.) but for our ‘access’ to them. The fact that one taxpayer uses the parks more often than another is not material as long as both have equal access.

      1. Tia Will

        Yes, I am well aware that this is how we have traditionally done things. I am just questioning whether this is the best solution going forward. As Rich has pointed out, the means for road maintenance has varied in the past. It would look to me as though it might be time for those more knowledgeable than me ( which is almost everyone) in city planning and financing to take a fresh look at options if this has not already been done.

  2. Jim Frame

    we have an interim who has not been formally announced who will be brought in to run the city

    I guess I missed this. Who has been informally announced as CM?

    1. David Greenwald

      There has been no announcement. I have heard that they have selected one of the finalists. I was originally told it would be announced last week.

  3. Barack Palin

    David, you took the letter too literally, I think the letter writer’s point is that since the city can’t handle what’s now on its plate why are they adding more to it.

    1. David Greenwald

      Whether I took the letter too literally, the point I make here is still valid. The reason the city cannot repair roads is primarily a funding problem that they have a specific plan to remedy. The POU would come with its own funding mechanism and thus the point made in the letter still doesn’t hold – literal or symbolic.

      1. South of Davis

        David wrote:

        > The reason the city cannot repair roads is primarily a funding problem

        It is not just a “funding problem” it is a problem (that should be criminal) where most (but not all) government entities get things like roads, schools and fire stations built for free by developers but do not budget every year to fund the reserves that we know will be needed to re-pave the roads, remodel the classrooms or put a new roof on the fire stations.

        It would be foolish to expect that Davis would run a POU any differently (not spending a penny to fund reserves then coming to the city with an “emergency” $5K a year parcel tax if you want to keep the electricity flowing)…

          1. Mark West

            I think those functions should be contracted out as well. The question should not be CAN the City run these, but SHOULD the City do so.

          2. South of Davis

            David wrote:

            > So here’s a question: why do you believe the city can run
            > the surface water and wastewater projects but not the POU?

            I’m sure the city will be able to pull off running the water project, but I don’t have high expectations since our city (with under 3% vacancy) had about 50% the Twin Pines homes sitting empty for YEARS and the city owned (and thus NO property tax or school parcel taxes paid) Pacifico Student Apartment at 1752 Drew Circle that has been about 50% empty for close to a DECADE. The city “can” run things, but they are not “good” at running things (since they spend more time trying to “kick back to supporters” than “doing a good job”)…

        1. David Greenwald

          They tripled the water rates because of the infrastructure to build the water supply project. If the city has to build the infrastructure for the POU, obviously it won’t pencil out and they’d have to nix the deal.

  4. Tia Will

    “historically we haven’t needed to pursue a local funding mechanism for roads.”

    And, it would seem that we need such a mechanism now. I have already come out in favor of a parcel tax for this purpose, however, I cannot help but wonder if there might not be some more innovative approach ( at least as far as our community is concerned) that shifts the costs to the actual users rather than pretending that we all use the roads and greenbelts equally.

    1. Barack Palin

      Yes, greenbelts and let’s add parks since not everyone uses them. We can fence in our parks and charge admission and since our bike and walking paths are crumbling we can set up toll booths at all their entrances.

    2. Barack Palin

      Come to think of it I don’t have any children in the Davis public school system. Let’s shift that cost to the actual user’s families instead of pretending that we all use the schools equally.

  5. SODA

    “This is another failure of messaging. We do not have a clear sense for how a POU would be run. The presumption would be that the city would contract out the power system to a company. ”

    Yes, I must have missed the msg also. I thought with the drive to hire a project manager and hearing the Palo Alto expert talk last week, the CC was thinking of running it by the city.

    1. David Greenwald

      The city made it clear that all actions right now are towards planning not towards approving and implementing the actual POU. So a project manager would not be hired to run the POU at this time.

        1. David Greenwald

          All I said is that the project manager is not being hired to run the POU at this time. I agree with you and Mark that the project manager would be hired to coordinate the study and planning.

  6. South of Davis

    Tia wrote:

    > This is a question, not a suggestion or a call to action. Does anyone
    > know why, historically speaking, our road’s have been treated differently
    > and not based on user fees such as toll roads which are maintained
    > appropriately by the people that actually use them ?

    California has the highest gas taxes in the nation at over $0.70/gallon. A typical SUV driver that drives 15,000 miles a year pays $700 a year in gas taxes. So that means that our house pays ~$1,400/year, the house next door (with two kids and 4 SUVs including a little Ford Escape that uses less gas) pays ~$2,500 and the on the other side with a SUV and a Honda Minivan is paying ~$1,200/year.

    The reason we can’t maintain the roads with three homes averaging $1,700/year in gas taxes is that the state takes the cash and spends it on other stuff. The Golden Gate Bridge (that just announced tolls are going to $8) brings in a ton of cash that they spend to run a bus and ferry system (anyone that has ever operated a boat in salt water knows that nothing sucks money faster than a big boat in salt water and that is without paying union wages).

  7. South of Davis

    Davis wrote:

    > Much as the city is going to rely on a private company to run its
    > water supply project, the city would hire SMUD or some comparable
    > group to run its power system.

    Since you can’t just run a Craig’s List ad to find a team to run a utility wouldn’t it be a good idea to:

    1. See if SMUD wants to run a utility in Davis and ask what they would charge
    and
    2. See if PG&E wants to sell their assets and see what they would charge

    BEFORE spending a million to “study” the PUD.

    This is as stupid as me deciding that I’m going to spend one million of my own money to “study” a new business that will open at 23 Russell and be run by Warren Buffett without FIRST:

    1. See if Warren Buffet wants to run my business in Davis and ask what he would charge
    and
    2. See if Davis wants to sell city hall and see what they would charge

    Is there any way to get a list of the people getting paid the $1 million to “study” the PUD since this just sounds like another way to kick back taxpayer money to friends.

      1. South of Davis

        David wrote:

        > They can’t do a Craig’s list ad, but they can do a RFQ/ RFP

        So why not do it NOW (and have at least one real number to plug in to the model)?

        BEFORE I told my kids we were going to get rid of PG&E and “save 20% per month” I would get a quote from a solar company to see what the actual cost would be to go “off the grid”.

          1. Barack Palin

            If a dollar now spent on road repairs saves multiples of dollars spent later on road repairs one can surmise how many millions could’ve been saved instead of funneling the money into studying the POU.

  8. Mark West

    “The presumption would be that the city would contract out the power system to a company. ”

    I don’t think that is a valid presumption. The comments that have come from the CC and Staff so far indicate that the presumption is for City employees to run the POU. Why else would the Staff have selected Palo Alto for the presentation to the CC, with the clear statement that their operations were handled by Palo Alto City employees. I think there is at least a significant faction involved who see this as a means to expand the public payroll and budget. Imagine all the toys they can think to buy with all that money flowing into the City’s accounts.

    If the intent was to have the operations contracted out to another entity, that fact should have been front and center in every presentation and document related to the proposed POU.

    1. David Greenwald

      “The comments that have come from the CC and Staff so far indicate that the presumption is for City employees to run the POU. ”

      Which comments?

      1. Mark West

        My interpretation of what has been said. So far I have not heard a single person from the City Staff or CC state publicly that the intent is to contract this out. Choosing Palo Alto as the model to emulate was very telling to me.

          1. Mark West

            Does it really matter whether they call it an ‘example’ or a ‘model.’ They had a choice to make about what they wanted to emphasize and they chose a City run agency. This really isn’t rocket science David, they made the choice based on the story they were trying to sell.

          2. David Greenwald

            Yes it matters in that the example was to show how a POU could work, a model would be the specific proposed version that they would recommend to Davis.

          3. Mark West

            Of course, but we are talking about the message that is being presented to the public, not the formal proposal that will be presented down the line. Your commentary is about the message isn’t it?

            Using Palo Alto as the example presents a story of the City operating the POU with City employees. That message is dead in the water in Davis. Whether it was a model, or an example doesn’t really matter as it was a poorly thought out message either way.

          4. Michelle Millet

            The problem with using Palo Alto as a model is that they formed their POU 100 years ago, and they have some of their own sources for energy.

          5. Michelle Millet

            I think they chose them because someone from Palo Alto was willing to come to Davis on a Tuesday night and give a presentation.

          6. Matt Williams

            Mark and Michelle, the universe of “examples” is rather limited. As I watched the Palo Alto presentation, the fact that it was a public utility that covered water and wastewater and stormwater as well as electricity made for an additional “apples and oranges” dimension, since the administrative and compliance costs for Palo Alto have to cover all four of those very different services.

            Michelle is probably right. Willingness to come may hve been the biggest factor in selecting Palo Alto as the example.

  9. Frankly

    The presumption would be that the city would contract out the power system to a company.

    I suggest PG&E be the company.

    Otherwise, I can just see it now…

    Due to state and federal energy regulatory changes designed to reduce greenhouse gasses, the city of Davis must undertake expensive improvements to its electricity and natural gas distribution infrastructure. To fund these changes, the city will implement a new enhanced consumption-based rate structure.

      1. Matt Williams

        BP, the reason that rates are doubling between now and 2018 has nothing to do with the rates. The reason is that the annual costs of running the water system are going from $13 million per year in 2011 to $26 million per year in 2018. In any water system, the rates are only a tool to generate the revenue needed to cover the costs.

  10. hpierce

    Again, need clarification… as I recall (perhaps imperfectly) SMUD is electric only… is the City proposal electric only, or electric and natural gas?

      1. South of Davis

        Barack Palin wrote:

        > electric only

        I does not sound very “green” to double the number heavy diesel of trucks and tractors in town (since we will have one entire fleet working on the gas lines & meters and another entire fleet working on the electric lines & meters).

        P.S. Tesla does not make an electric backhoe or bucket truck…

          1. South of Davis

            Matt wrote:

            > SoD, don’t we have that now?

            No we don’t, if you need to turn on the gas and electric in a vacant home they just send one truck. PG&E has some specialized electric only and gas only trucks, but for the most part they send one truck for gas and electric issues at Davis homes and business.

          2. Matt Williams

            Thanks for the clarification. However, what you haven’t addressed is how often a truck goes out with both an electric issue and a gas issue for the same account. I would imagine that that is less than 5% of the calls … probably less than 1% of the calls. In the 15 years that I have lived in Davis, I can never remember a day where we had simultaneous gas and electric issues.

            My sense is that you are manufacturing an issue where there is no issue at all.

  11. Mark West

    I think the best use of the POU proposal would be to complete the analysis and start the process of implementation, including negotiating with SMUD or another agency to operate it. At that point, before spending the tens of millions in court costs that will be required to see it to completion, we go back to PG&E and say “lets make a deal.” My target would be the PG&E corporate yards at L and Second, opening that land up for redevelopment.

    1. hpierce

      Confused… are you saying we should take over the electric system, and in exchange, PG&E gives us their corp yard?

      However, you raise a good point… if the City acquires the electric system, we should also acquire the CorpYard, less the natural gas facilities on the site.

      1. Mark West

        No, I am saying let’s put ourselves in position to take over the electrical system, then negotiate a better deal by giving up the POU. It is called leverage, but to make it work you have to be convincing that you are able and willing to go forward with the implementation of public power. I think the only way we get sufficient buy-in by the public is to commit upfront to having the POU operated by an outside contractor and not by City employees.

          1. hpierce

            If you look at how many electrician positions have been kept unfilled by “attrition”, the state of maintenance of the city’s traffic signals, the number of pump/lift stations that require electrical maintenance, the seeming feeling that public employees should have lower salaries, lower benefits, etc., my knee-jerk response to the question “would the City be able to run an electric utility” is ‘what are you smoking’?

            We have seen losses in personnel in street maintenance, striping/signs, water, sanitary sewer, drainage, electrical/signals, yet the maintenance burden has not changed.

            Am thinking the City will be lucky to keep up with current (pun intended) obligations, without taking on others. And this from someone who supported switching to SMUD when we had the chance. Still hope we get another ‘at-bat’ on that idea.

  12. Michelle Millet

    The proposal was to hire a project manager now to handle the planning of the POU.

    There was a motion on floor at the last council meeting to hire a project manager. Brett Lee took a strong against voting on the motion until more information could be presented to council regarding city’s that have made the move from an IOU to a POU.

    Here is a link to a piece on it: http://www.davisvanguard.org/vote-on-pou-delayed-lee-pushes-for-more-information/

  13. Rich RifkinWDE 73

    Regarding a local electric company: I personally would be more inclined to support it if the city set up the parameters for what it was looking for–in terms of rates, power sources, public input and so on–and then it contracted with a private company, the way we do with Davis Waste Removal, to run it as a local monopoly.

    The obvious risk of having it being owned and operated by the City is that the ratepayers are going to get stuck paying hundreds of millions of dollars extra to cover the new city employees’ pensions and OPEB.

  14. Fremontia

    PG&E sucks, they blew up a bunch of people by not maintaing their gas lines, they built a nuclear power plant backwards near an earthquake fault, they pushed through a half baked electricity reform to get out from under their stranded assets resulting in gaming of the system that cost Californians literally billions of dollars. I do want to the linemen, the guys who keep the lights on, under all circumstances are not the problem. Its the corporate level “never sweats” in San Francisco who make all these decisions that I disdain. I say get rid of PG&E its the epitome of what I disdain about the octopus.

    1. hpierce

      You are truly clueless about history, how any public utility is maintained (when the public doesn’t want ANY additional cost), and you seem to be very angry at anything “public”. I feel no need to correct your views.

      Hope you get over whatever is going on.

  15. DT Businessman

    I want to make sure I understand the history correctly. Joint venturing with Woodland to hire a private party to provide water is a good idea. Joint venturing with Woodland to treat our waste water is a bad idea. Acquiring PGE’s electricity grid, but outsourcing the operation thereof is a great idea. What part of this is consistent?

    -Michael Bisch

  16. Fremontia

    Michael, history is stuff that already happened.

    I don’t know about all the minutia of this deal but I do know PG&E has a long history of upending efforts of communities trying to get out from under their yoke and extracting exorbitant rates for electricity. The electric rates Davis pays PG&E are near the highest in the nation. When you think that their hydro plants are so old that they are all paid off its no wonder they can pay a 4.1% dividend. The stranded assets that were bleeding the company all got off loaded through the failed reform that we are still paying for with high electric rates.

    This is all playbook stuff for them. Communities all over Northern California are trying to form public utilities in PG&E territory. PG&E is fighting in every jurisdiction as it has for decades. The economics of public power vests PG&E always pencils out everywhere but PG&E has so much cash flow that a small community like Davis never knows what hits them.

    Here’s a little history for you:

    https://truth-out.org/opinion/item/22576-the-breaking-of-a-power-monopoly-community-choice

  17. DT Businessman

    Freemontia, you missed the point. Waste water was the outlier especially when even the naysayers admitted it would save Davis ratepayers 10s of millions of dollars.

    -Michael Bisch

  18. Fremontia

    Only one e. Fremontia is in bloom right now at the arboretum. Big yellow flowers. Named after the first Republican nominee for President John C Fremont.

    I haven’t followed the wastewater thing. Its a nasty business.

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