As most reading this know, Measure O would increase the sales tax in Davis by one-half cent from 8 percent to 8.5 percent for the next six years. As the authors note, “This modest increase in our sales tax rate will go into the city’s general fund to help pay for essential community needs that will be far more costly if further delayed.”
While the authors write, “These include repair of roads, sidewalks, bike paths and street lights; parks and landscaping projects; and water conservation projects,” most of the sales tax will go to cover increased pension and health care costs to employees, and most of the infrastructure needs would have to be covered with a separate parcel tax.
Whether that parcel tax even occurs is dependent on how the sales tax measure performs. Lucas Frerichs, during the long-range calendar discussion, suggested that the decision to put a parcel tax on the ballot has not been made yet.
The authors continue, “Revenue from this modest increase will provide a crucial $3.6 million per year toward our current $5.1 million structural budget deficit. Even with the passage of this increase, the 2014-15-budget plan now being drafted includes an additional $1.2 million in budget reductions, with likely further cuts yet to be determined.”
However, the city did lay out a potential cut list if Measure O passes and a larger one if Measure O does not pass.
As the authors note, “Without Measure O’s approval, much more severe cuts will be unavoidable. Basic services (including police, fire, parks and recreation) will suffer very severe reductions of up to 12.5 percent across the board, or 25 percent if public safety programs are left intact. There is no question that Davis will become a less safe and less pleasant place to live if Measure O fails to pass.”
The city council has been criticized in recent years for failing to deal with the structural deficits. Indeed, a key factor in the article, “How We Got Here,” was the council’s reluctance to take an aggressive approach, both before the economic collapse and after.
Nevertheless, as our analysis last week noted, since 2010, the city council has gotten more serious.
The authors note, “The current City Council recently restructured all employee labor contracts for major cost savings and long-term fiscal sustainability. City employees are paying significantly more toward their retirement. The savings from the restructured contracts will amount to approximately $7 million over their duration.”
They continue, “The city of Davis also has reduced its workforce by 22 percent, or 103 full-time employees — going from a high of 464 employees in 2008 down to 361 in 2014 — to help address the city’s serious fiscal problems.”
They add, “The cuts made by the City Council over the past several years total approximately $11 million in savings and have brought our spending much more in line with our revenues. But the longer the city defers major road repairs, parks maintenance and water conservation projects, these essential activities will become much more costly in the future.”
What concerns me in this argument is the following: (1) as the council candidates acknowledged last week, while city employees are fewer in number and are picking up more of their costs, the costs to employ those employees has gone up to provide them with similar levels of benefits; (2) Measure O really does not deal with major road repairs or parks maintenance – it allows the city to pay for the increased costs of providing those benefits to the employees.
This issue is not really addressed to the public and it will be detrimental if the city moves toward a parcel tax.
The other side of the coin is the economic development plan.
“We recognize that increased sales taxes are only a temporary (yet necessary) solution,” they write. “The City Council and the city are focused on generating new revenue from new sources. As a longer-term solution to the city’s current challenges, Davis is aggressively moving forward with economic development to generate additional revenue.”
“How are we doing this?” they ask. They respond: “We have increased collaboration with UC Davis and regional research institutions to provide a highly trained workforce and increased entrepreneurship in this city. We have worked to promote existing technology and innovation companies locally (e.g., Marrone Bio Innovations, FMC Schilling Robotics, HM Clause, Arcadia Biosciences). We also have helped companies locate in Davis (e.g., DMG Mori-Seiki, Expression Systems, BioConsortia and Agrinos).”
They continue, “The city has developed strategies for increased investment for business accelerators and research facilities in conjunction with UCD and local entrepreneur organizations. This includes our ongoing support of Davis Roots, which just graduated its second class of startup companies, including Barobo and Fishrock Laboratories, and introduced its incoming third class.”
Additionally, they add, “Perhaps most importantly, we have worked to identify areas for continued growth of existing companies to keep businesses here in Davis. There is also a movement afoot for the potential development and creation of an innovation center — not simply a typical business park — where homegrown companies can expand, and we will further foster our innovation economy.”
But this doesn’t paint a full picture. They fail to mention, at the same time, the council was slow to act on some of these challenges. The failure to plan for growth of businesses led, last summer, to the loss of AgraQuest and the failure of Mace 391, of which both Lucas Frerichs and Brett Lee would vote against.
While it is natural to put one’s best foot forward in these articles, the failure to acknowledge failures will lead to questions by the more observant public.
They close with a strong argument that ameliorates concern that Davis will tax itself out of competitive business situations through increased taxes.
They write, “Many cities have implemented similar local sales tax measures: Sacramento’s sales tax is 8.5 percent; San Francisco and Berkeley have higher rates. The Great Recession of the past several years has resulted in major declines in local sales tax revenue. Also, the state of California’s ongoing shift of responsibilities to local governments, concurrent with shifting property tax revenues away from cities through the abolition of redevelopment agencies, makes it crucial and necessary to increase local funding for core city functions through a temporary sales tax increase.”
They accurately note, “Of all the choices for raising revenue, a small increase in sales tax puts the least amount of pain on our residents’ wallets, because visitors to Davis also will be contributing when they shop here. A half-percent sales tax increase amounts to just 50 cents on a $100 purchase.”
“It should be noted that, despite some arguments to the contrary, Measure O will not push Davis consumers to make major purchases — such as autos, for example — outside the city. Under state law, such purchases are taxed according to one’s hometown tax rate, not the rate where the purchase is made,” they conclude. “This modest sales tax increase will have little effect on the local Davis business climate, while greatly helping to maintain the high quality of life we enjoy here in Davis.”
Overall, it is a decent argument. Missing from it is a history of how we got to this point, although they do write about the changes they have implemented. The most problematic area is that they have conflated Measure O with the parcel tax in terms of what it funds.
Measure O primarily covers increased labor costs while the parcel tax would primarily deal with roads, parks and other infrastructure issues. We believe this will make it far more difficult for the city to pass a parcel tax. Already, Lucas Frerichs seems to be moving away from that anyway, but if that’s the case, how do infrastructure needs get met?
—David M. Greenwald reporting