On the statewide front, Judge Christopher Klein approved the plan that Stockton put together to repay its creditors and solve its bankruptcy without the reduction of pensions. Writes the Sac Bee this morning, “That undercut, at least for now, his own groundbreaking decision on Oct. 1 that Stockton could reduce its payments to the California Public Employees’ Retirement System if it wanted to do so.”
However, the editorial board adds, “The victory may be fleeting. There can be no denying that CalPERS and cities across California still face a huge pension problem.
“Pension payments by local governments in California have almost tripled in the last decade – from $6.4 billion in 2003 to $17.5 billion in 2013, according to the state Controller’s Office. Scarier still for taxpayers, the unfunded liabilities of cities and counties mushroomed from $6 billion to $198 billion,” they write.
They add, “When those bills eventually come due, some combination of higher taxes, reduced services and lower benefits will almost certainly be unavoidable. While Stockton may be an extreme case, it is certainly not alone in paying the burden of too-generous pension promises.”
On the local front, that news combined with new information makes the situation, going forward, murky.
Davis voters in June passed a sales tax that in part will cover increases in employee compensation costs (I say costs because the costs are going up, even as the benefits themselves actually go down), including adjustments by CalPERS to reduce their expected annual rate of return.
Going forward, the city was able to negotiate with five of the seven bargaining units to create a second tier for new employees. This follows the guidelines established by the state in a law signed by Governor Jerry Brown last year.
However, one of the most critical bargaining units, the firefighters, went to impasse and the city was not able to impose a second tier on new employees. That didn’t seem like a huge problem at the time, except that the city has now suddenly hired five new firefighters who will come in under the old rules – rather than the reduced pension formula of 2.7 percent at 55 in place of the 3 percent at 50 that current employees receive. CORRECTION: Based on the law passed last year, all employees new to PERS are subject to the new PERS benefits. However, because of impasse, the new hires are not subject to the new retiree medical benefits.
The city’s fiscal position is improving, but the next six to eighteen months will be critical as the city makes key decisions on employee compensation, a parcel tax and eventually economic development in the form of innovation parks.
The city deserves credit for its ability to carve out about $3.9 million in ongoing money for roads. City staff has since verified that $3,930,000 of the $4,700,000 initially budgeted for 2014-15 is ongoing. This includes the $3 million in General Fund resources, $130,000 in monies from the Construction Tax Fund, and $800,000 from development impact fees that the city council has added to the base budget for transportation infrastructure rehabilitation purposes over the course of 2013-14 and 2014-15.
There is a $3 million ongoing augmentation that has been added to the General Fund base and would continue through the five-year period.
The city previously determined that it would create a plan that would pay about $25 million up front ($15 million in year one and $10 million in year two, and obtained through a parcel tax) and then $2 to $4 million per year after that for pavement maintenance.
While the city has not put forth a parcel tax yet, in September, Michael Mitchell, the Principal Civil Engineer noted, “City Staff have allocated $4.7 million to a paving program (Capital Improvement Project 8250). While this amount is less than the $15 million mentioned above for the first year, it is better than the $1 million previously allocated.”
There are questions already as to how much money per year is even useful as there are practical limits to the amount of construction that can occur in the city at the same time.
The council is planning a retreat for November, where it will work on its priorities. It is conceivable that some of that discussion will focus on the amount and timing of the parcel tax.
Back in June, Councilmember Brett Lee was alone in pushing for a $50 a year parcel tax on roads only.
He said, “I think a parcel tax in the neighborhood of $50 a year over 30 years, would generate about $20 million according to Mark Northcross, $20 million allows us to frontload the road repairs and make a very significant investment.”
He argued that, at $50, it is small enough to leave room for further community discussion about a future comprehensive package of “nice to haves” to come before the council in the spring.
Polling shows that the parcel tax would likely fail at $150 per year and is currently failing at $100 per year, but did not test $50 per year.
The swimming community and Mayor Dan Wolk have put forward the idea of going beyond just roads. Said Dan Wolk in June, “I brought up this idea last time of this Renew Davis concept that we need to think beyond simply our roads into other critical infrastructure that really form the lifeblood of this community.”
One thing that might be helpful would be to get a real sense – and sooner rather than later – of what the city’s needs and obligations are. We know we have park maintenance, pool upgrades, and city buildings badly in need of investment. The question is whether the city has the resources to address all issues, and when and how they should attempt to do that.
With the news that the city has allocated nearly four million per year for roads, I would be reluctant to support a new parcel tax unless there are guarantees that the current allocation of funding remains going to infrastructure rather than allowing the parcel tax to free up funding for increased employee compensation.
—David M. Greenwald reporting