Analysis: Measure O and Fiscal Sustainability


walletOn Tuesday night, Measure O passed and passed easily, with 58 percent of the vote. Measure O was never about fiscal sustainability, it was about fiscal survivability. Measure O is the bridge to allow the city the time it needs to put its books in order.

In this term, the passage of Measure O allows the city to do exactly that. Had Measure O failed, the city would have gone into, most likely, 25 percent cut mode for everything but police and fire.

That means city employees can breathe a sign of relief. As Rob White posted on Wednesday, “I can share that the mood in City Hall today is one of relief. There is a palatable positive attitude change. Why? Because many of the people I sit near and work with daily now have a little more certainty in their lives about the future (at least for now) due to the passage of Measure O.”

He would add, “Staff are noting that the majority of voters believed in them and are energized to prove that the money will be well spent. This is very different than a few days ago when it was a lot of breath-holding and stress. Many now admit that they were certain they were losing their jobs.”

That was not a healthy atmosphere for city employees and it would not have been a healthy atmosphere for our city, in terms of the amenities that make this community a unique community.

Had Measure O gone down, it is almost certain that we would not have seen the parcel tax to repair the roads, keep parks open and even do basic maintenance on city-owned buildings.

Parcel Tax

Going forward, it is critical to remember that Measure O is only a bridge. The city still is going to cut $1.2 million this budget cycle. The city still faces $5 to $8 million in funding for road repairs. The city faces untold amounts for parks and buildings.

As newly-elected Robb Davis put it, Measure O’s passing “gives us breathing room even though cuts are going to come into the budget. It gives us breathing room to start working and to keep working on the economic development piece. The bottom line is it doesn’t do anything to deal with the major backlogs that we face.”

He said as a result they will have to decide “if, and the amount that, they come back to the voters” in November. While he did not commit to a parcel tax, he did say that someone would have to show him a viable alternative to deal with the significant infrastructure backlogs in the short-term, without putting it off for five years.

“I think we have to make a case to the voters that this is critical to the situation of the city,” he added.

Measure O will keep the doors open, but the parcel tax is of necessity. The opponents of Measure O, such as they were, warned the electorate that if Measure O passed, there was more on the way. This was as though there was some secret conspiracy abound, whereas the council has been open and up front.

However, the parcel tax will not sail through with little to know in the campaign. Measure O was fortunate that there was no real opposition other than the opponents to every tax who really did not understand the fiscal situation or the precarious nature of the city’s position, even on Measure O.

While Measure O passed handily, it is important to note that it fell well shy of the two-thirds majority a parcel tax will need. The two previous taxes passed with 68 and 70 percent of the vote. So these should be causes for warning.

But despite claims from some in the community, I do not see an alternative to the parcel tax.

That means that the city needs to start today making the case for a parcel tax – not in July, not in August and certainly not in September.

They have to hire a campaign consultant, raise real money, and run a real campaign this time.

And they have to be prepared that someone with more know-how and resources than Jose Granda and Thomas Randall will step up as opposition.

City Manager

Critical to this task is hiring a good city manager who can provide leadership and guidance. The city lost such a manager when Steve Pinkerton left at the end of April. That has left a leadership void.

Gene Rogers has so far not shown anything. Given what we have gotten to date, and the amount of money we are spending, it might have been better had the city chosen an internal option.

But, going forward, the city needs to figure out what the going rate is for a city manager for a community of this size with this amount of activity and be prepared to step up and pay more to get the right person for the job. We have seen first-hand how critical it is to get the right city manager. This is not an area where we should be cutting corners or symbolically cutting costs.

Economic Development

We have discussed this at length over the last year to eighteen months, but the plain fact of the matter is that the city does not have the tax base it needs to support the services it wants and the community demands.

We therefore have to make a critical choice. We either have to be willing to pay much more in taxes, get by with much fewer services, or be willing to develop our economy.

There are multiple areas where the city can expand its economic base. We are looking at a Hotel Conference Center on Richards where the University Park Inn and Caffe Italia reside, that could bring in half a million in revenue.

Last week, we saw preliminary designs for Nishi. The developers and consultants believe that the innovation park portion of the development can generate 1600 to 1700 jobs. However, in order for this to happen, voters would have to approve the development in a Measure R vote and there were many community concerns raised about circulation and traffic impacts.

The city announced yesterday (as we reported in another article) that SGC has approved grant of nearly $600,000 for the City of Davis Downtown University Gateway District Plan. This SGC grant will help fund analyses and environmental review for the Nishi Gateway project, along with transportation, water/wastewater, and open space plans for the Downtown University Gateway District.

The city has launched an RFEI (request for expressions of interest) for proposals for business parks. We are expecting an application from Mace 200 and perhaps one from the Northwest Quadrant. These are speculative at this point without an application.

There are other possibilities, as well. We have areas in the downtown that can be redeveloped, the city is eyeing, long term, the possibility of rail relocation, redevelopment of the PG&E and corp-yards along Fifth Street, and potentially Interland at some point down the line.

Collective Bargaining

During the campaign there were repeated criticisms of the city for failing to maximize its collective bargaining position. Our belief is that, while it is possible that the city could have extracted more from city employees, getting a contract in place for five of the seven bargaining units by December of 2012 was to the advantage of the city.

Had the city attempted to extract more, we would have seen additional holdouts, impasse with more groups, and that would have had not only severe political costs, but fiscal costs. As it was, the hold out of fire and DCEA ended up adding a quarter to a half-million to the deficit. But moreover, it would have further poisoned relations between the city and its employees and made moving forward more difficult.

Measure O now gives us a bridge to June 30, 2015 when five of the contracts expire. And if the city wishes to be bold, it can remember that fire and DCEA are working without contracts now and nothing is there to stop the city from making further cuts in those areas.

But for any of this to really go forward, we need leadership. If Dan Wolk ends up not winning the Assembly seat he will be mayor for the next two years. How engaged will he be? And when and who will the city find to be the next city manager? The answers to those questions are critical for putting together these pieces of the puzzle.

—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.

Related posts

23 thoughts on “Analysis: Measure O and Fiscal Sustainability”

  1. Michelle Millet

    While Measure O passed handily, it is important to note that if fell well shy of two-thirds majority a parcel tax will need. The two previous taxes passed with 68 and 70 percent of the vote. So these should be causes for warning

    While it is true that there was no real opposition, it is also true that there was not much of Yes on O campaign either, except for some mailers, a few ads, and a booth at the Farmers Market on and off for 5 weeks that Brett staffed.

    I got to talk to a lot of people both working on Robb’s campaign and helping with the Measure O booth. While there was some resistance to the idea of a tax increase for the most part when people were given the opportunity to better understand the fiscal situation of the city, how we got here, what changes the city has made to address the problem, and what the consequences would be if Measure O failed they usually came around to supporting the it.

    I predict the same will be true for a parcel tax. I only hope that IMO the somewhat misleading information contained in the Yes on O material does not hurt the chances of the parcel tax passing. I would have preferred this material been more transparent regarding the rising cost of employee compensation. From my experience people respond better when they are given an honest account of the situation. This is challenging to do but I think if the city can figure out a way to then voters will approve a parcel tax in the fall.

    1. South of Davis

      Michelle wrote:

      > From my experience people respond better when they
      > are given an honest account of the situation.

      I can tell you are new to politics…

      People don’t respond well to:

      “vote for higher taxes so we can avoid cuts to programs non one cares about and pay the people that work at these programs who less hours than you and make more money than you even MORE money”

      They respond well to:

      “vote for higher taxes so we can avoid cuts to cops and firefighters and closing parks”

      P.S. I have never heard of a government entity giving an “honest account of the situation” and they ALWAYS talk about cuts to cops and firefighters…

      1. Michelle Millet

        My experiences over the past few months have led me to a different conclusion. I participated in and observed numerous (to many to count) conversations where the fiscal situation of the city was laid out clearly and honestly to people. Many who opposed the sales tax in at the beginning of the conversation came away willing to support it.

        The problem is that it took a conversation, not a glossy flyer.

    2. Barack Palin

      “I only hope that IMO the somewhat misleading information contained in the Yes on O material does not hurt the chances of the parcel tax passing.”

      That’s really laughable because we all know the city never puts out misleading information or threats of dire cuts that they never really planned on doing anyway.

  2. Good Government

    I’m glad measure O passed. I will also likely be supporting the parcel tax measure this fall. Especially if it is for road/bike path/greenbelt improvement. There’s hardly a more worthwhile municipal endeavor.

  3. Frankly

    I purchased my modest home that I have lived in for 25 years for $198,000. I have done very minimal improvements to it since then but the county assessor seems to think I have raised the prop-13 assessment value to about $300,000. My annual property tax bill is $4,020.

    $3,008 of my bill is the standard assessment.

    $1,011 is for all the special assessments that Davis has layered on.

    FIVE education-related assessments for a total of $841.44

    The parks tax of $49.00

    Measure O (that fund used to kill tax revenue growing economic development) $24

    Library tax of $97.16

    By this supplemental tax lineup it is clear that you Davis tax and spend liberals and irresponsible CC are out of control.

    Dear Davis City Council:

    You keep taking money from my family to perpetuate the bloat of city government and our school’s administrative labor while grossly over-compensating city employees. Just stop. Do the damn job you were elected to do. Everyone has to learn to live within their means.

    If you want to fund road and infrastructure maintenance then develop the damn economy so Davis brings in enough revenue from business activity. Davis generates less than 40% of the business tax revenue than does the average city in CA, and 25% of any comparable city. That has proven to be unsustainable. Stop with the farmland moat around the city and start moving URGENTLY to develop business parks.

    And lightly, but sternly, flog yourselves for voting to allowing Mace 391 to disappear as a SIGNIFICANT revenue generator for the city that would have solved our road and infrastructure maintenance problems. Never do anything like that again… it was grossly irresponsible given our city’s true financial circumstances.

    1. Frankly

      I just remembered… the increase from about $200k to $300k about equals the 2% statutory increase limit over 25 years.

      But Davis’s taxes increase my property tax bill by 34%.

      And not those tax and spend people are telling me they need to hike it again.

      And later they will come back again, and again, and again.

      And meanwhile my 53-year old retired firefighter neighbor takes off for his second European vacation in as many years complements of all of us that cannot retire because of our tax burden to make his life oh so happy.

      1. Don Shor

        I wonder what your 53-year old neighbor’s house is valued at. Given that the median home value in Davis is about $530K right now, there’s a lot of people paying much higher property tax than you are. But we’re all paying the same special assessments.

        1. Frankly

          Well I am paying much more Davis property taxes than you are.

          My neighbor was there before I was. The point is that I am funding his extra special good life provide him from his union-Democrat connection… at the expense of my opportunity for a good life. Never been to Europe myself. Never could afford the cost or else the time.

          The people that are paying higher property taxes than I am made their choice to buy-up or they have been living here fewer years or they have not owned their home as long as I have. In any case, there is not a problem of fairness other than manufactured by the looters.

          1. Don Shor

            I think this election demonstrates that the “union-Democrat” nexus is fraying. Davis is overwhelmingly registered Democrat, but didn’t elect the union-backed candidate to the council. And the union-backed candidate, Dan Wolk, didn’t do as well in Davis as Joe Krovoza did. So while I agree that there was a union-Democrat majority dominating the council for some time, and that majority set the stage for our current fiscal problems, it is clear that Davis voters no longer vote as the unions wish they would. And, evidently, neither do 4th Assembly District voters.

          2. Frankly

            I agree with this, but two points:

            1. If we don’t work to turn back the clock on pay and benefits… primarily retirement benefits… we fail to leverage this break from the union-Democrat connection.

            2. If we don’t succeed in turning back the clock, given the magnitude of the growing gap in sustainability, it won’t matter that the union-Democrat connection is broken because the damage has been done and the perpetual motion of it will continue to eat up the funds that should be otherwise spent on infrastructure and programs.

            The issue is action… or a lack of it. Words are nice but they are not helping us pay our bills.

            Tax increases are a bailout for the misdeeds of our past leaders combined with a lack of appropriate action from our current leaders.

          3. Tia Will


            “The point is that I am funding his extra special good life provide him from his union-Democrat connection… at the expense of my opportunity for a good life. Never been to Europe myself. Never could afford the cost or else the time”

            I am really unclear about your point here. You have stated in many posts, many times that if an individual is not satisfied with his/her income or lifestyle, they can always quit and get another job. Given this oft stated position ( with which by the way I have never agreed), I am hard pressed to understand how you feel that someone else’s “good life” is “at the expense of yours”.

          4. Frankly

            Come on Tia.

            I am paying 100% for my kid’s college education.

            I am paying 100% for all my family’s food, clothing, housing, healthcare, etc., etc., etc.,

            And I am totally SLAMMED with taxes.

            And part of the reason I am totally slammed with taxes, and have folks like you demanding that I even pay more so we don’t cut services, chase POUs and bike certifications, and maintain our roads… is that there are a growing number of lucky-lottery-winning-public-sector-retirees-in-their-young-50s-pulling-in-inflation-adjusted-six-figures-and-100%-healthcare-coverage-for-as-long-as-they-continue-to-live.

            If you don’t make enough money, assuming a robust growing economy and jobs and a quality and accessible education system, you can work to make more.

            But how do I reduce my tax bill? What personal control do I have over that other than to work hard to defeat tax and spend liberals at the polls?

          5. Don Shor

            But how do I reduce my tax bill? What personal control do I have over that other than to work hard to defeat tax and spend liberals at the polls?

            Well, gee, all you have to do is move. I mean, there’s lots of inexpensive housing in West Sac, and Woodland, and Dixon.

          6. Frankly

            Well, gee, all you have to do is move. I mean there is lots of inexpensive housing in West Sac, and Woodland and Dixon.

            That will only get me away from Davis taxes… the looters still own the state and the federal government.

            But you are asking me to shrug. Of course I am taking the business with me… and the next one and the next one.

            Oops. There goes yet another producer of tax revenue and jobs. What will the looters do when all those producers leave. Who to loot from then?

          7. Don Shor

            I’m sure your commercial space will fill up very quickly when you go. I hear there’s huge pent-up demand for business space in Davis.

          8. Frankly

            I’m sure your commercial space will fill up very quickly when you go. I hear there’s huge pent-up demand for business space in Davis.

            Ahh… looter-producer replacement strategy. Kinda’ like vampires getting a fresh victim.

            But I think I might just stay a bit longer with my wooden stakes and silver bullets.

        2. Rich RifkinWDE 73

          “But we’re all paying the same special assessments.”

          I believe this is not quite true. Aside from seniors who can get a pass on some of these, there are a few neighborhoods with stiff Mello-Roos fees which we don’t pay in my older neighborhood. Of course, the price of a home with higher assessments should sell for less, all else held equal.

          So someone who, for example, bought a house in Mace Ranch would have paid several thousand dollars less for the same quality of a house in a neighborhood without those fees. In that respect, the developer paid the Net Present Value of the Mello-Roos fees when he sold his various lots. Yet no one should tear up for Frank Ramos or other Davis developers who lost a bit on how much they could sell their land for. The reality is that in one way or another our politics in Davis handed them an uneconomic profit when their “farm land” was converted to residential status.

          1. Tia Will


            “If you don’t make enough money, assuming a robust growing economy and jobs and a quality and accessible education system, you can work to make more.”

            This is the first time that I can recall you modifying your “you can always work to make more” theme with the qualifier “assuming a robust growing economy and jobs…..”. Previously you, have left this part out of your analysis, at least explicitly. Yes, if we were in a situation where the economy was always expanding at a brisk pace, you and I might agree on this point. However, we both know that the business cycle has downturns as well as up turns and so it is not possible for those who do not make as much as you and I to even meet all their families basic needs such as food, housing and medicine even at the best job available to them. And yet, you have stated many times in the past that that is just a matter of choice on their part.
            I am still not seeing how you think that is different from how you have described your own limitations.

          2. Frankly

            No – I have not left that part out. I have commented that the Democrats in control of our national and state politics are doing everything they can to wreck the economy, to destroy industrialization, and to ensure there are never going to be an adequate supply of jobs.

            Ironic isn’t it that the same people demanding these policies are also demanding tax increases because of the growing needy.

            Here is what Democrats do for a person’s ability to go out and create a comfortable economic life:

            The Blue-State Path to Inequality
            States that emphasize redistribution above growth have a wider gap between lower and higher incomes.

            For those in Washington obsessed with reducing income inequality, the standard prescription involves raising taxes on the well-to-do, increasing the minimum wage, and generally expanding government benefits—the policies characterizing liberal, blue-state governance. If only America took a more “progressive” approach, the thinking goes, leaving behind conservative, red-state priorities like keeping taxes low and encouraging business, fairness would sprout across the land.

            Among the problems with that view, one is particularly surprising: The income gap between rich and poor tends to be wider in blue states than in red states. Our state-by-state analysis finds that the more liberal states whose policies are supposed to promote fairness have a bigger gap between higher and lower incomes than do states that have more conservative, pro-growth policies.

            The Gini coefficient, a standard measure of income inequality, calculates the ratio of income at the top of the income scale relative to the income of those at the bottom. The higher the ratio, the more inequality. A Gini coefficient of zero means perfect equality of income and a Gini coefficient of one represents perfect inequality, such as if one person has all the income.

            The measure has some obvious flaws: If everyone is doing better but some get richer at a faster pace, the Gini coefficient will increase, and so rising prosperity and economic progress will look like retrogression. Still we used it in our analysis, since it is the favorite measure among advocates of greater equality and the stick used to beat free markets. Conveniently, the U.S. Census Bureau annually calculates the Gini coefficient for the 50 states and the District of Columbia.

            According to 2012 Census Bureau data (the latest available figures), the District of Columbia, New York, Connecticut, Mississippi and Louisiana have the highest measure of income inequality of all the states; Wyoming, Alaska, Utah, Hawaii and New Hampshire have the lowest Gini coefficients. The three places that are most unequal—Washington, D.C., New York and Connecticut—are dominated by liberal policies and politicians. Four of the five states with the lowest Gini coefficients—Wyoming, Alaska, Utah and New Hampshire—are generally red states.

            In the Northeast, the state with the lowest Gini coefficient is New Hampshire (.430), which has no income tax and a lower overall state tax burden than that of its much more liberal neighbors Massachusetts (Gini coefficient .480) and Vermont (.439). Texas is often regarded as an unregulated Wild West of winner-take-all-capitalism, while California is held up as the model of progressive government. Yet Texas has a lower Gini coefficient (.477) and a lower poverty rate (20.5%) than California (Gini coefficient .482, poverty rate 25.8%).

            Do the 19 states with minimum wages above the $7.25 federal minimum have lower income inequality? Sorry, no. States with a super minimum wage like Connecticut ($8.70), California ($8), New York ($8) and Vermont ($8.73) have significantly wider gaps between rich and poor than those states that don’t.

            What about welfare benefits? A Cato Institute report, “The Work Versus Welfare Trade-Off: 2013,” measured the value of all welfare benefits by state in 2012. In general, the higher the benefit package, the higher the Gini coefficient. States with high income-tax rates aren’t any more equal than states with no income tax. The Gini coefficient measures pretax, not after-tax income, and it does not count most sources of noncash welfare benefits. Still, there is little evidence over time that progressive policies reduce income inequality.

            To be clear, our findings do not show that state redistributionist policies cause more income inequality. But they do suggest that raising tax rates or the minimum wage fail to achieve greater equality and may make income gaps wider.

            Here is why we believe these income redistribution policies fail. The two of us have spent more than 25 years examining why some states grow much faster than others. The conclusion is nearly inescapable that liberal policy prescriptions—especially high income-tax rates and the lack of a right-to-work law—make states less prosperous because they chase away workers, businesses and capital.

            Northeastern states and now California are being economically bled to death by their pro-growth rivals, especially in the South. Toyota didn’t leave California for Texas for the weather. The latest IRS report on interstate migration provides further confirmation: The states that lost the most taxpayers (as a percent of their population) were Illinois, New York, Rhode Island and New Jersey.

            When politicians get fixated on closing income gaps rather than creating an overall climate conducive to prosperity, middle- and lower-income groups suffer most and income inequality rises. The past five years are a case in point. Though a raft of President Obama’s policies—such as expanding the earned-income tax credit and food stamps, and extending unemployment benefits—have been designed to more fairly distribute wealth, inequality has unambiguously risen on his watch. Those at the top have seen gains, especially from the booming stock market, while middle-class real incomes have fallen by about $1,800 since the recovery started in June 2009.

            This is a reversal from the 1980s and ’90s when almost all income groups enjoyed gains. The Gini coefficient for the United States has risen in each of the last three years and was higher in 2012 (.476) than when George W. Bush left office (.469 in 2008), though Mr. Bush was denounced for economic policies, especially on taxes, that allegedly favored “the rich.”

            Our view is that John F. Kennedy had it right that a rising tide lifts all boats. It would be better for low- and middle-income Americans if growth and not equality became the driving policy goal in the states and in Washington, D.C.

            Mr. Moore is chief economist at the Heritage Foundation. Mr. Vedder, a professor of economics at Ohio University, is the co-author with Lowell Gallaway of “Out of Work: Unemployment and Government in Twentieth-Century America” (New York University, updated edition 1997).


  4. TrueBlueDevil

    Now that one hurdle is cleared, I think the city should just come out with the numerous new taxes they want all at once so that citizens can make an informed decision.

    Road Tax – to repair the streets they took off the books and don’t know how to fund Just make it a 10-year tax and see the response to repair / rebuild ALL of the roads.

    Global Warming Tax – to put solar panels on city hall, etc. It will take 7 years before they save any energy, and they have to be replaced at year ten, but what the heck. Let her fly.

    Open Space Tax – needed to produce funds because the city rarely allows any businesses to relocate here, depriving the city of needed revenues.

    Please feel free to add your own new tax measures.

Leave a Reply

X Close

Newsletter Sign-Up

X Close

Monthly Subscriber Sign-Up

Enter the maximum amount you want to pay each month
Sign up for