Council Optmistic But Cautious Regarding Budget

City Manager Dirk Brazil delivered better than expected budget news on Tuesday.
City Manager Dirk Brazil delivered better than expected budget news on Tuesday.

There were no declarations about the end of the structural deficit on Tuesday night, as City Manager Dirk Brazil gave a brief report on the budget.  Council was pleased with the good news, but the majority on council were clearly concerned with issues such as roads, infrastructure, and unfunded liabilities like OPEB and PERS.

The city manager noted they are “cautiously optimistic” and, given “the unique nature of the number,” they felt it was good to have this as a regular agenda item.  The city unexpectedly ended the last fiscal year with $850,000 in unanticipated revenue – largely property tax, but also some sales tax.  “That’s great news and we wanted to report that to you,” he said.  “For the new fiscal year… things are looking equally good.”

This is even prior to Measure O taking effect in October.  He said, “The reason to bring this forward is not only the unanticipated revenue, but also to reassure you and to reassure the public that we’re not going to go out and spend this immediately.”

Right now, that money will go into the fund balance and to build the reserve back up to 15% – even now it currently sits at only 13.9%.

“The more money we have, the more policy choices we have, the more opportunity we have to do things that we’ve wanted to for a while in the budget,” Mr. Brazil stated.  He noted improvements in the budget at the state level and added, “So I think that the recovery is starting to gather steam.”

“We will keep a cap on the enthusiasm, we’ll be realistic, but just know that I think things are picking up,” he said.

Mayor Dan Wolk quipped, “I’m not going to put a cap on the enthusiasm.”

However, his colleagues tamped down enthusiasm and expectations.

Councilmember Rochelle Swanson noted that we have a lot of unfunded liabilities and maintenance, and “those are things that are still at the top of the priority list.”  She added, “This isn’t yay, yay, now we get back to programs.”  She said, “I just want to make sure the public knows that we’re still very cautiously optimistic.”

Councilmember Lucas Frerichs, “This is a welcome amount of news, but I think that there’s no disagreement among the five of us and the city manager and staff, at sort of keeping our eye on the prize.  It’s a good welcome bit of news, certainly, (but) one quarter or two quarters does not necessarily a trend make.”

Mayor Dan Wolk, however, said, “My impression of this is that this is not just a one-time aberration…  My impression is this has some stickiness to it.  That is before Measure O kicks in.”

The city manager agreed.

 Mayor Pro Tem Robb Davis noted that this was driven by property tax.  He said that we have had increased home sales.  “It’s clear that this is a trend that’s continuing. Of course that’s a cyclical trend, there was a pent-up demand during the recession.”

Robb Davis said that, while the trend may not be leveling out, at least the work of city staff has caught up. Where he wants to explore is where the turnover trend is with housing.  “That’s the driver,” he said.  “My simple interpretation – Cannery hasn’t opened yet, we haven’t built a lot of commercial buildings where we’re getting unsecured property tax or anything like that, so this is home sales.”  He wanted to know the trajectory and where this would take us at the end of the year.

He also spoke about PERS (Public Employees’ Retirement System) and OPEB (Other Post-Employment Benefits).  “The good news is we’re in a place where we’re addressing those long-term liabilities.  The time horizons are long – 30 years- but we’re addressing them,” he said.  “But we’re putting away money in way in which our actuary thinks is a reasonable approach.”

“But,” he said, “the point is that between 2020 and 2021… between OPEB and PERS we’re going to need to be coming up with an additional $4 to $5 million. Additional on top of today. But that’s a hefty piece of money. We are in a situation where we need this money.”

“We have the road backlogs, we have Bob Clarke who is ready to put out a bid on the study of other infrastructure – especially building replacement costs,” he added.  “When we begin to finally internalize those things into our normal budgeting process then we can start breathing a little bit.”

Councilmember Brett Lee said, “I think we need to more explicitly talk about roads.” He noted that we are looking at 20 years, $6 to $8 million a year to stay current, “and that’s not in the current budget projections.” He added, “Even when you include the Measure O funds, that’s nowhere near the $6 to $8 million going forward for 20 years.  We need to talk about that and really have that part built in so that it’s not an afterthought.”

He added, “We may not be able to fully fund it, but at least have it explicitly listed so that it’s not an afterthought.”

In June, the voters approved Measure O, which increased the sales tax by one-half cent. The Vanguard recently learned that roads are being funded at roughly $3.9 million in ongoing money, but council will need to decide relatively soon if they wish to put a parcel tax measure on the ballot for the spring.

—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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42 Comments

  1. sisterhood

    Dear Mr. Davis,

    Where can one research the current balance of the previous DACHA home trust fund? Is there enough money in that fund to replace all the roofs and water heaters in those homes, since they are all the same age and will need repairs and replacement at approximately the same time?

    Thank you.

    1. South of Davis

      Odds are the DACHA “trust fund” is now just like the Social Security “trust fund” and it an IOU in a file somewhere (I have never heard of a public housing entity that has an actual “cash” reserve account).

  2. Frankly

    Mayor Dan Wolk quipped, “I’m not going to put a cap on the enthusiasm.”
    Mayor Dan Wolk, however said, “My impression of this is that this is not just a one-time aberration…  My impression is this has some stickiness to it.  That is before Measure O kicks in.”

    The City Manager agreed.

    Well, I can see where this is heading.

    Mayor Pro Tem Robb Davis noted that this was driven by property tax.  He said that we have had increased home sales.  “It’s clear that this is a trend that’s continuing.  Of course that’s a cyclical trend, there was a pent-up demand during the recession.”

    Robb Davis said that while trend may not be leveling out, that at least the work of city staff has caught up.  Where he wants to explore is where the turnover trend is with housing.  “That’s the driver,” he said.  “My simple interpretation – Cannery hasn’t opened yet, we haven’t built a lot of commercial buildings where we’re getting unsecured property tax or anything like that, so this is home sales.”  He wanted to know the trajectory and where this would take us at the end of the year.

    It is simple.  The confluence of low interest rates and high Davis property values that are back to pre-recession levels are causing more Davis home-owners to cash out or move up or move out.

    But this is not a sustainable trend.  When rates increase… and they will soon based on Yellen comments… the trend will stop.  And yes we will have some increase in property tax revenue streams because of the turn-over, but that will start to be offset by the drop in average turn-over as more Davisites stay put because the rate increase prices them out of any move.

    At first hint that any council member is moving to use this “good news” to increase any city employee compensation or to hire more city staff, we should all scream bloody murder.

    Has Davis even considered impeachment of CC members?  Let me go on record that I will fund the campaign if and when we see any moves to give away more money to city labor.
     

    1. hpierce

      A few questions for clarification, Frankly:

      “increase any employee compensation”… does that mean all medical, dental, PERS assessments to the employer be fully absorbed by the employees? Does that mean no salary adjustments if/when inflation is a factor again? Does that mean a suspension of all merit increases as employees would normally advance within their salary range?  All of the above?

      “hire more city staff”… does that mean no net increase of city positions held, or does that mean as employees retire/move on that those positions remain frozen/unfilled?

      I’m just looking to understand what you are saying.

       

      1. Frankly

        We are over-compensation all city staff, so until we get to parity with the general labor market, we should not be giving city employees another dime.  That includes all pay and benefits.  So yes, increases to benefits will have to be funded by increase employee contributions.

        Now, with the changes made to the pension benefits, we are getting closer to parity.  However, when considering the value of healthcare, pension and OPEB combined with base pay rates, we are still paying more than we need to for attracting and retaining quality labor.

        We can add staff to compensate for increased population or new developments (like innovation parks), but each new hire needs to be justified and funded by the new developments… not by the temporary increases in tax revenues from routine economic cycles and a static state of economic development.

         

        1. Davis Progressive

          “We are over-compensation all city staff, so until we get to parity with the general labor market, we should not be giving city employees another dime.”

          the problem is their comparison model is not the general labor market but to other cities.  we’re never going to win this one.

        2. hpierce

          Ok, Frankly, am I to understand that absent new population, you are OK replacing positions, in kind (same cost), if vacancies arise?

          Thank you for responding to the bulk of my questions.  One I am unclear on is, do you want to see employees ineligible for ‘merit increases’ within their currently approved salary ranges?

        3. Frankly

          hpierce – Yes, certainly replace key vacancies.  And I am okay with merit increases.  But all within a static compensation budget.

          That is how we roll in the private sector.  We budget and then we work within the budget.  The budget should include some merit increases for employees advancing in their demonstrated capability and added responsibility.  With a labor pool the size of Davis, there should be turn-over (younger new employees coming in at lower comp) to offset the rise in compensation from merit increases.

          For the overall compensation budget to increase, it would either need to be based on tangible justification of increased need and the funding sources identified.  Or a mark-to-market of the full regional labor market indicates certain roles are under-compensated and upward adjustments much be made.

          I absolutely disagree with DP that the labor and compensation market for public sector employees is other public sector employees.  Only 5% of total employees are public sector employees.  With the exception of safety, there is little that is unique or more complicated than is comparable jobs in the private sector.  It is the this demand that public sector labor is a “closed-loop” community that only competes within itself is a source of the problem with over compensation.  This isn’t the NFL where there is only a select and limited talent that can do the job.  In fact, historically the public sector employee gave up the stress of higher performance expectations for greater job security.  So in this respect the public sector employee should actually receive lower average compensation for a comparable job.

        4. hpierce

          Frankly… to your post of 11:40… thank you for that… be aware that in professional categories, the City has acquired many of their best hires, particularly in the last 8 years, from the private sector.  Salary was (sometimes considerably) less, but benefits and particularly retirement benefits, and less volatility to the economy (job security) were the lures.

          I actually agree with you on the concept that it is not like the NFL.

          Gotta’ ask… did you ever apply for a position in the public sector?  And if they are so damned overcompensated, why not?  Seems like it would have been a good ‘business’ move for you…

        5. Frankly

          Gotta’ ask… did you ever apply for a position in the public sector?  And if they are so damned overcompensated, why not?  Seems like it would have been a good ‘business’ move for you…

          Funny story.  At one point in my career a couple of decades ago I applied for a senior IT management position at UCD.  About half way through the interview, one of the four very casually-dressed interviewers paused and asked, “why the hell do you think you want to work here?”  I responded that I live in Davis and would like the commute better, and I also believed I could make a difference.  He said “you would probably be very frustrated working for UCD because change happens slowly if ever.”   Then the others joined in to basically talk me out of EVER working for UCD.

          I left the large corporate grind after 21 years and started my own consulting company that I ran for 5 years before taking my current gig.  During that time I had state agency contract work.  I learned quite a bit about government employment and work cultures during that time.  The reason I was hired as a contractor was to facilitate the work on complex cross-functional projects that none of the employees would do.  The reason that none of the employees would do the work was because they had developed expert skills in work avoidance… spending more time on CYA than anything else.  And these were/are all smart people.

          I could never work for any organization that accepted performance mediocrity and slow progress.  I thrive in the stress of getting things done and constantly improving along the way.  Lacking that ability I would be even more stressed.   I know I am in a good position when my peers and my employees are working well together but competing and generating conflict on a regular basis.

          Work cultures develop their own normal.  The problem from the inside is that you don’t have anything to compare it with.  Everything is relative to your experience.  And since public sector employee tend to never quit or get fired working for that one organization is generally all they every know.   Several times in my career I have been assigned responsibility to form teams to work around the broken work cultures to implement organizational change, and also to repair broken work cultures.  It is exhausting but satisfying to turn around a work culture of performance mediocrity to peak performance with a customer-focus.  And most of the time I was also challenged to do more with less every year.

        6. South of Davis

          hpierce asks:

          > Gotta’ ask… did you ever apply for a position

          > in the public sector?  

          I’ve answered this before that while I have never applied for a (full time) public sector job not a day goes by when I don’t regret it since every month I hear about another “retired” friend under 55 (even some under 50) that are getting pensions of OVER $15K/month (PLUS full healthcare, dental and vision) for their family while it looks like I’ll be working full time in to my 80’s…

    2. hpierce

      BTW, Frankly, I think the correct term, in the municipal/state world, is “recall”, not “impeachment”.  Appears you are obsessed with a Republican view of what should happen to the President.  Impeachment is done by Congress.  Recall is done by the people.  Gray Davis was not impeached.  He was recalled.  I will fund a dictionary for you.  Just ask.

      Even on the federal level, impeachment is a judicial process, entailing charges of “high crimes and misdemeanors”.

      Sounds like you are having a bad day, and need to ‘share’.

      1. Frankly

        I would rather keel haul the over-spenders… but a recall would suffice.

        I am dealing with my company health care insurance renewal today… so yes, you can say that I am having a bad day and I am highly sensitized on the subject of fiscally irresponsible politicians.

        1. hpierce

          Good.  You have the opportunity to set a standard, and share that with the City, as a ‘model’.  You can recommend to ensure that your employees (and yourself) fully absorb any additional costs to their healthcare, require that they fully pay for all medical benefits, or opt for a plan that costs the company the same, but increases deductibles for the employees.  That will help to improve you company’s ‘bottom line’, reduce the cost to your clients, and/or increase dividends to the shareholders, if any.  After all,  even if  jobs are still scarce, and if an employee doesn’t like the reduction of benefits, or increased costs to them, they can always move on and find another position.  That would be consistent with your stated positions regarding those in the public sector.  Taxpayers are “clients/shareholders” and we need to do everything we can to reduce their costs.  I understand your logic.

          Everyone should know that those in the private sector are brighter, more productive, more effective than those in the public sector.  Keep the faith.  Expound on it.

          Please consider letting us know how your recommendations/decisions work out for you and your company.  Good education for all.

          TFIC

        2. hpierce

          “keel haul”… interesting comment.  That would involve tying someone up with ropes (bondage), submersing them in salt water (yeah, they could drown, but they offended), and dragging them across barnacles, flaying their flesh (again, in salt water), and then probably doing it again. Nice.  Are you in your company’s HR?  Wonder what you would do if an employee was chronically tardy by 10 minutes.  Discipline such as a poor evaluation, would be too mild, dismissal/firing (or, ‘recall’) inadequate.  Need a ‘pound of flesh’.  Thinking, by you words, and what they imply, am getting to understand you.

          I sincerely hope, for your sake, if you believe in God/supreme being, that you not receive as you would give.  You deserve better.

        3. hpierce

          To BP:  Ok.

          To my obviously deluded mind, I was trying to clarify what was meant by another poster. My Bad. I apologize. I’ll try to be more like you when I post. I stupidly tried to be civil.

        4. Barack Palin

          Thank you Don Shor, in the words of another poster on here:

          Don: two things:

          [compliment] Thank you for posting when you did. Saved me (by a few seconds) from a scathing (intended, at least) post I was about to make to each of them. Which would also have been “off-topic”.

          [suggestion for improvement] “I would like to suggest…” Nope. You did “suggest”. ‘Would’, and ‘like’ are extraneous modifiers. Perhaps it would have been better to be even more direct. As in, “knock it off”, or “please cease”.

          What happened to the concept of “work and play well with others”, or its corollary, “debate and opine well with others”?

        5. Frankly

          hpierce – apparently I hit a nerve with you.  Note that had to reduce staff this year because of a down market and red ink.  So telling the remaining employees they will have to contribute more to the increase in their healthcare costs was understood and accepted given the alternative.

          Note too that many of my employees are Davis liberals that voted for Obama and thought Obamacare was a great idea.  I guess they are fine paying more out of pocket so that they can subsidize other’s healthcare.

          I don’t see the same consideration from public sector labor because they know the government can go back to the tax-payer ATM to get more cash… or more likely their paid-for political operatives can deficit spend and then hide the numbers.

          My keel hauling comment was certainly not meant to take literally, just to make a point that I am tired of politicians over-spending on compensation.  I have the crap taxed out of me and my government employed neighbors are all retiring in their 50s in the prime of health and traveling the world thanks to their Cadillac pension and healthcare benefits.  It is absurd.

          But I was thinking of keel hauling the politicians. I don’t blame the employees for demanding as much as they can get.

        6. hpierce

          BP & Don:  Guess you both opine that I have been “uncivil”.  BP quotes me, to try to discredit what I wrote, following Don’s ‘lead’ about wanting discourse on this site to be “civil”.  I don’t see where I was uncivil.  I did challenge ‘another poster’ as to what they meant by what they said, and when they responded, I thanked them and used their words to further clarify how that could be carried out in real situations.

          I have not attacked any poster today personally, but I suppose questioning a poster’s logic/words is uncivil.  Perhaps a new definition of “uncivil” should be include ‘questioning any post written by conservatives’ (or ‘progressives’, which seem to be surprisingly similar on some topics).  Of this I am apparently, guilty.  I guess hyprocricy is Ok, though.  Bye.

        7. Barack Palin

          Yes Frankly, it was just a figure of speech, some of us got it and didn’t take it literally.  I wonder sometimes if you hit a nerve with some posters because they are or used to be public workers.  I agree with you about the spending and the backlash of Obamacare on everyone’s medical benefits.  My premiums and deductibles have gone up, my yearly out of pocket has doubled and instead of being covered 100% on hospital stays it’s now only 90%.  I’ve had Kaiser for 35 years and last year, the 1st for Obamacare, was the first time my yearly out of pocket and hospital stay surcharge has gone up and gone up drastically since I had Kaiser.  One hospital stay for either my wife or I and I’ll most likely have to come up with the $6000.

        8. hpierce

          Frankly, as to your 1:18 post… Am pretty sure this will be deleted, as “uncivil”, but appreciate your subject post.  You provided the information/clarification I asked for.  I hear you say that you have reduced staff, the compensation they receive for “doing more with less” and your expectation is that the public sector should do the same.  You say that your employees understand and accept this, presumably because if they didn’t, they or a co-worker would be laid off/fired.

          It seems in the “bad times”, public sector folks should suffer at least as much as private sector folks, in your opinion/view.  If we get to “better times”, I assume you’d feel that the private sector folks should have their boats “float” again.  And the public sector folks should just be glad their submerged boats don’t sink out of sight.

          My apologies for the un-civility of this post (darn, forgot to trash the President, democrats or liberals! How rude of me!).  I’ll strive to be more like you and BP if I ever post again.

           

           

        9. Frankly

          hpierce – no offense taken.  Really.  I appreciate the passion in dialog.

          I have a bonus program that I have used for much of my career that includes a profit-sharing component as well as other pay for performance.

          At the beginning of the year, for all my non-commissioned staff, I budget 10% of total base compensation as a bonus pool.  Then at the end of the year we complete our financial audit to determine net excess (profit in non-profit terms)… and a percentage of this goes into another non-commission bonus pool.  Then at the end of the year we do the performance evaluations and I allocate the total of the pool to all non-commissioned employees as a percentage of their annual base compensation weighted by their performance grade.  In a year where we make no net excess, the bottom end employee might get a 4 or 5% bonus, while the top end performer might get a 15% bonus.

          Then in a year where we make a lot of money (has not happened for a while) the employees might get as much as another 15% on top of the performance bonus.  We also adjust the 401k contribution based on company financial performance.

          For the city, I would be fine setting expense goals and having a bonus pool that gives 50% of the savings back to employees.

          And by the way, a big part of my annual performance bonus is keyed to me managing within budget.

        10. South of Davis

          BP wrote:

          > Yes Frankly, it was just a figure of speech,

          > some of us got it and didn’t take it literally.  

          I think EVERYONE “got it” (other than hpierce who was worried that Frankly would actually kidnap an “over spender”  “keel haul” them on his schooner next time he sails to the Pacific in the deep water channel on his way to look for plastic bags from Davis on their way to the Farralon Marine Sanctuary)…

        11. hpierce

          [Responding to BP, 1:31 post from yesterday]  Yeah, know your think I’m a moron, but I knew it (keel hauling) was an alliteration [not a ‘figure of speech’], and I too was using metaphors to indicate that Frankly’s degree of “passion” was pretty strong.  Guess I’m just not as intelligent nor sophisticated as you.  My apologies for trying to express myself.

          BTW, the plastic bag referent was “cute”, but I’ve used my own bags for years, and OPPOSED Davis’ ban on the plastic bags.

    3. Davis Progressive

      “The confluence of low interest rates and high Davis property values that are back to pre-recession levels are causing more Davis home-owners to cash out or move up or move out.”

      no just a bunch of people who couldn’t sell their houses when the real estate market tanked were able to do so.

      i assume you know its called recall not impeachment.

      1. Barack Palin

        no just a bunch of people who couldn’t sell their houses when the real estate market tanked were able to do so.

        Agree, either sellers are seeing they can once again cash out at the highs that we had around 2005 or they are finally back to break even and want to get out.

  3. Anon

    “Councilmember Brett Lee said, “I think we need to more explicitly talk about roads.”  He noted that we are looking at 20 years, $6 to $8 million a year to stay current, “and that’s not in the current budget projections.”  He added, “Even when you include the Measure O funds, that’s nowhere near the $6 to $8 million going forward for 20 years.  We need to talk about that and really have that part built in so that it’s not an afterthought.”
    He added, “We may not be able to fully fund it, but at least have it explicitly listed so that it’s not an afterthought.”

    Spot on!

  4. Gunrocik

    I think you can interpret “Shallow Dan’s” comments very simply:  “This is great!  I can now justify throwing a bone to my friends in labor.  If I don’t get them some money, I have no chance against Mariko in 2016.”

    Looks like we’ve got two more years of higher office hopes negatively impacting our Council deliberations.  And now Dan has someone that Craig Reynolds can choreograph on a weekly basis to make sure the City Council deliberations don’t negatively impact Dan’s senate run.

    1. Davis Progressive

      dan has already been setting up a payroll increase, this just pushes it further.  interestingly i’m not even sure lucas is on board with that, but i’m sure bobby will change his mind.

  5. Anon

    “I think you can interpret “Shallow Dan’s” comments very simply:  “This is great!  I can now justify throwing a bone to my friends in labor.  If I don’t get them some money, I have no chance against Mariko in 2016.””

    Let’s give the man Dan a chance.  Actions speak louder than words.  Only time will tell if your assessment about Mayor Wolk is correct.  However, I would not presuppose anything.  Dan has to know taxpayers would not be happy if there is a decision to raise city employee compensation at the same time potholes go unaddressed.  How would that look to the voter?

    1. Barack Palin

      I think it’s good that us taxpayers get out in front of this and let our council know that it won’t be stood for before higher compensation is dealt out and then it’s too late.

      1. Davis Progressive

        there is a real serious risk here with contracts and labor negotiations that statements by wolk and carson are going to poison the waters here.  giving dan a chance and only time will tell – we don’t have time to tell right now.  we won’t have more data in six months that will allow such a decision.

  6. Anon

    Just as an aside, I felt hpierce’s comments were perfectly acceptable, and there was an excellent back and forth between Frankly and hpierce, that hit upon a few profound points.  Each had a valid viewpoint.  IMO (which is strictly my opinion) the moderator had no basis upon which to interfere, especially because the moderator himself (Don Shor) has slipped up and been pretty uncivil in a previous post in another article.  I am not okay with name calling or personal attacks, but I am fine with discussions that hit at logic – it is what this blog is best at IMO!

    1. Frankly

      I didn’t have a problem with what hpierce wrote… but then I don’t have any problem with most of what is written… even stuff the moderator takes down.  I think others are looking for fairness in what is moderated and what is not.  But I side with the less moderated is more principle.

      When I use provocative language I expect passionate response.

      One thing though… infer that I am racist or sexist or anti-gay or uncaring… and I will take it personally and probably ask the writer to step outside.

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