Analysis: Rolling the Dice on Measure O

Davis-Mailer-2014b-1It is no secret that we have been concerned about the possibility that Measure O will not pass. While the Measure O proponents are fortunate, with a lack of a realistic opposition (with only nominal opposition from Jose Granda and the folks that have opposed every parcel tax in the last eight years – all of which passed with at least 67% of the vote), they have not run a robust campaign to date.

The op-ed on Sunday signifies the latest fuel on the fire. The op-ed, co-written by councilmembers Lucas Frerichs and Brett Lee among others, says, “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. These include repair of roads, sidewalks, bike paths and street lights; parks and landscaping projects; and water conservation projects.”

We don’t regard this is as the best foot forward by the proponents. If we accept that there is a $5.1 structural imbalance, Measure O would fund about $3.6 million of that once the council decided to reduce the proposed tax from .075 percent down to .05 percent. That effectively stripped out $1.5 million that was ticketed for infrastructure and reduced it down to $1 million.

With about a $1.2 million outstanding deficit, one could argue that no money from Measure O will go to roads.

Thus, the bulk of the revenue would go to increased city employee costs. Of that $2.3 million, $360,000 went to the COLAs given to city employees, $250,000 when the police department filled two vacant positions, another nearly half a million because fire and DCEA failed to agree to terms, and then another $1.24 million “outside city control” going to increased retiree medical costs, PERS costs, leave benefit costs, and health insurance costs.

This analysis led Mark West to argue, “It is difficult to accept anything that these authors have to say when they lead with this piece of fiction. The sales tax increase will predominantly be used to pay for increasing compensation costs, not roads, sidewalks, etc. I am extremely disappointed that two sitting members of the City Council would put their name to this op-ed, as they both clearly know that the statement is at best misleading. This is yet another example of why there is so much distrust between the public and our City’s leadership.”

“What is completely baffling to me is why our leaders don’t think we can accept and understand the truth?” he asks, and we agree.

A few key points before moving on. First, as our “How We Got Here” article last week shows, the biggest problems leading up to this problem were as follows. During good times, 1999 to 2008, we increased salaries and compensation to levels never before seen. We failed to recognize that the benefits were unsustainable once the real estate boom died. And once the economy collapsed, we treated it as temporary, balancing the budget through attrition and deferred maintenance rather than dealing with the core issues.

However, that changed starting in 2010 with the election of Joe Krovoza and Rochelle Swanson. By 2012, no one from the 2004 to 2010 councils remained. So this is a different council, not the council that brought us these problems, and, really, since 2010 the council has made good strides.

We do not fear a return to 2009 policies – we fear that the mistrust engendered by those councils has not abated and anything less than the full and complete truth will be detrimental.

However, the Vanguard had some extensive conversations yesterday and there seems to be a belief, at least by some, that the council will implement the proposed $1.2 million in cuts, most of which is not tied to positions of employment, and that there might be additional money left for roads.

Dan Carson, who co-wrote the piece and sits on the Finance and Budget Commission, argued that our statements yesterday were in error.

He writes, “The fact of the matter is that if Measure O fails, leaving the city with an immediate $2.7 million budget hole in 2014-15 and a $3.6 million gap to fill in subsequent years, all bets are off. The City Council could choose to balance the books with deep cuts entirely to city operations, but it might also choose to scale back road and other maintenance and infrastructure projects. No one can know what will happen for sure, in part because we don’t even know who will be making that decision. Two seats on the City Council are also up for a June 3 vote.”

He adds, “If Measure O fails, the city manager has provided a blueprint of the types of cuts to city operations that he is building into the budget plan that will be finalized in June. And that blueprint makes it clear that the city would have to make difficult reductions in services that every Davis citizen will see.”

He continues, “But those cuts in city operations will not necessarily be the only choices that the City Council could make if Measure O falls short. In January and February, the City Council openly and publicly discussed the possibility that its newly inaugurated road improvement program – money already built into the city budget — might also have to be severely scaled back if it did not have enough revenue to close the structural budget shortfall.”

He writes, “The op-ed piece that ran Sunday fairly and accurately put voters on notice that these important projects are also at risk if Measure O fails.”

Finally Mr. Carson makes the point, “A parcel tax may still need to be considered even if Measure O passes in order to undertake a more ambitious effort to address city deferred maintenance and infrastructure projects. But if Measure O, a simple majority-vote measure, is voted down in June, in my opinion, the new City Council will have to think long and hard about putting a parcel tax requiring two-thirds voter approval before city voters anytime soon.”

While that is a fair review of what happens if Measure O does not pass, we would have preferred that argument being put forward to the public. The Vanguard has the space for such arguments, which we feel would have been more accurate.

We are concerned that the issue of employee compensation has neither been discussed nor acknowledged by the city.

Following Michelle Millet’s comment, where she stated, “We could have gone with, ‘despite that fact that we have laid off 100 employees and renegotiated employee contracts so that employes are paying more towards their retirement and health care coverage employee costs have continued to rise, and while employees are paying more its not enough to cover these increased cost, a lot of which is out of the city’s control. The sales tax will go to cover these costs,'” we believe the following needs to be laid out to the voters:

The city during good times made promises to city employees that were not immediately funded. When the economy collapsed, that left the city with huge unfunded obligations to current employees. The city first attempted to deal with those problems with employee reduction – more than 100 position were eliminated through attrition, deferred maintenance, and finally two sets of restructured contracts.

Despite these changes, costs for pensions, for health care, and for everything has gone up and we have to fill that gap.

This tax measure represents a short-term fix. And then we have to deal with the issue of revenue from increasing our tax base, which, if you read our other analysis, is a much more complicated fix than people want to believe.

We fear that sugar-coating this stuff leads to more distrust and we have to have an open and honest dialogue here. Unfortunately, we have what we have always had here – a rush job sales tax campaign, mixed into a city council and water rate campaign, with no community discussion. It may pass, but we will be no better off than we were.

—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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12 Comments

  1. Dan Carson

    Your column today asserts that, because the size of the sales tax measure put before voters was reduced from three-quarters cent to a half-cent, “one could argue that no money from Measure O will go to roads.” You can argue that, but it would be misleading your readers as to the potential consequences of the failure of Measure O.

    As I pointed out in your pages yesterday, the base budget prepared by the city manager includes the $2.5 million for a road improvement program consistent with the policy of the current City Council. Your readers can see so for themselves in the footnotes to the five-year forecast presented to the City Council at its meeting on December 17, 2013. (See Attachment B, page 1 at http://administrative-services.cityofdavis.org/Media/Default/Documents/PDF/Finance/2013-2014-Budget/Budget-Preview/11A-2013-2014-Midyear-Budget-and-2014-2015-Preview.pdf) This did not change after the council set the size of the sales tax measure at one-half cent.

    If Measure O fails, leaving a $2.7 million hole in the 2014-15 budget and a $3.6 million gap in city finances in the ensuing years, that infrastructure money is surely at risk. These important projects could be scaled back if cutbacks to city operations alone didn’t resolve the gap. We don’t know what will happen for sure, in part because two City Council seats are also on the June ballot. Depending upon who is elected, the approach to closing such a gap could be very different.

    On your other main point, everyone acknowledges that dramatic increases in costs for pensions and other health benefits are a major parts of the city’s structural budget shortfall. That has been a main component of every city presentation to the community on the current fiscal problems. Nobody is “sugar-coating” anything. But, as our Sunday op-ed piece in the Davis Enterprise noted, the current City Council has taken important steps to contain these costs, both by reducing the size of city government and by negotiating bigger employee contributions to pensions and health benefits.

    I would appreciate it if you could clarify your position on Measure O. Initially, you stated your opposition to the sales tax measure. Then you reversed course after a few days and said you supported it. However you have closed today’s column with an assertion that “we will be no better off than we were” even if Measure O is approved – another clearly erroneous assertion, given the huge negative consequences for city services and road improvements if it fails. Are you opposing the measure once again? If you are still supporting it, that does not seem to square with your closing statement.

    1. David Greenwald

      My position is that I support Measure O but believe it achieves only a small piece of what we need to accomplish this year in conjunctions with (1) Parcel tax for roads and parks, (2) Economic Development, and (3) continued talks with employees groups that will lead up to next year’s resumption of collective bargaining as the current contracts expire in just a year (believe it or not).

      1. Dan Carson

        Those other elements you mention — a parcel tax, economic development, and continued fiscal constraint in bargaining with employee groups — are all very important. But your assertion in your column that “we will be no better off than we were” if Measure O passes doesn’t hold water. It is an important piece of getting the city’s fiscal house back in order.

        1. David Greenwald

          That was a sloppy finish, I meant that in terms of advancing the discourse and understanding of the community about the magnitude of the problem we face. As it stands now, if we push forward a parcel tax this fall, many people’s reaction will be “wtf, didn’t we fix that with the sales tax vote in June”?

    2. Mark West

      “$2.5 million for a road improvement program consistent with the policy of the current City Council.”

      How much is budgeted is interesting, but more so how much was actually spent. How much money did the City spend on road improvement in the previous year? Did that amount spent match that amount that was budgeted for the year? If not, why not?

      The budgeted numbers are only of interest if there is a matching expenditure to indicate that the funds were actually used for the budgeted item, and not simply acting as a place holder from some other unidentified expected expense.

  2. Davis Progressive

    i was troubled with the op-ed for the reasons that mark west laid out yesterday. it seemed a lot like bait and switch and the counter-argument by carson seems peripheral – if measure o goes down, roads will go with it.

  3. Sam

    Yes, if measure O goes down then the City will be unable to pay for the roads. Then in November if the parcel tax goes down the City will be unable to pay for the roads. Next year will be the same thing. That is because it is hard to get the public to vote for additional taxes by telling them that “for years the actuaries have been decreasing life expectancy and increasing projected future returns to decrease required pension payments so that the pensions promised to public employees seemed affordable. Now that PERS is about 55% funded and due to changes in accounting rules the City of Davis is going to need a LOT more money each year to operate at its current level.” That message just does not sell.

    1. Davis Progressive

      so we expected the voters in the second most educated town in america to buy anything less than the truth, the whole truth, and nothing but the truth?

  4. Frankly

    If Measure O passes it will absolutely will not be enough. Then we have a parcel tax measure in November, and that too will not be enough.

    So, other than the obvious point of inadequacy, what else is missing from this discussion?

    1. South of Davis

      Frankly wrote:

      > If Measure O passes it will absolutely will not be enough.
      > Then we have a parcel tax measure in November, and
      > that too will not be enough.

      As anyone who has boiled a frog knows you need to turn up the heat SLOWLY…

      Maybe another business tax after the parcel tax, than citywide parking permits with an annual fee for the stickers, then even more paid parking downtown and…

      P.S. I just heard from an ACE hardware employee yesterday that the city is planning to charge to park in the G Street lot next to ACE

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