My View II: Council Should Be Cautious About Raising Employee Compensation

walletThe rumor this week is that, with the city pushing into the black and restoring its general fund reserve, the council will give city employees a pay increase with the next batch of MOUs.

As the Vanguard noted last week, property tax revenues will generate nearly $900,000 above the level estimated by the budget that was adopted a year ago. Moreover, the voters passed Measure O and that is estimated to bring in $2.7 million for 2014-15, about $578,000 more than was initially budgeted.

That is good news, but unless the city is prepared to rescind the half-cent sales tax, I do not believe the city can now increase employee compensation.

Last February, when the Davis City Council agreed to put a half-cent sales tax measure on the ballot, there was a recommendation to have an advisory measure that would require at least three-quarters of the tax revenue go to infrastructure.

However, the council, after discussing legal difficulties, decided to forgo that advisory language. Instead, this council acknowledged, albeit informally, that the money needed primarily to go to budgetary shortfalls and not compensation increases.

When the city put the sales tax measure on the ballot, they reduced the size down to about $3.6 million, arguing that a second ballot measure, a parcel tax, could be placed on the ballot in November to take care of the roads.

While the city has carved out about $4 million in general funds for road repairs, the parcel tax for infrastructure has thus far not materialized. Polling from last spring showed that the parcel tax at $150 would go down to defeat, and a parcel tax at $100 was only generating 62% support – short of the two-thirds needed.

The council struck down a proposal from Brett Lee to put a $50 parcel tax on the ballot in November. At some point this month, the council is supposed to have a discussion on infrastructure needs, but, while some road repair is funded, the city has not bonded to be able to address the bulk of the roads needs before inflation and deterioration lead to an exponential increase in cost.

Clearly, before the city can agree to new MOUs in June and December as the last round has expired, they need to figure out exactly how much they need.

However, I am now very concerned that the direction that council is moving is towards employee compensation increases.

As I wrote back in February of 2014, “During the run-up to the tax measure, I made it very clear that my support for the tax measure would heavily depend on the degree to which the council could commit that new revenue generated by the sales tax would go to structural shortfalls and deferred maintenance, rather than to increased employee compensation.”

There was, in fact, a history. It goes back to 2004 when the council passed a half-cent sales tax that was supposed to keep parks open and prevent the city from having to lay off city employees.  Somehow, though, the council turned around in 2005 and gave away the store.  The firefighters got a 36 percent salary increase and other bargaining units got 15 to 18 percent.

“The city has limitations on what they can do with a general use tax.  The city cannot bind itself to spend the money a certain way, because that would require that the vote be two-thirds,” I wrote. “One councilmember suggested that times have changed and that the council could not get away with turning around and giving away the store again.  But they seem to forget that, in two years, we will likely have a different council.”

Indeed we do – times have changed and, yes, the economy has improved. But we were told that, while the city council could not bind itself legally on how it would spend the tax money, since it was a general use tax, that the council would commit to not using the tax money to increase employee compensation.

Councilmember Brett Lee, in particular, would make the argument that the tax increase was in fact insufficient to increase compensation, given our funding needs. He argued that the half-cent sales tax and $3.6 million in revenue is small and therefore will preclude it being used for salary increases as it will go to pay for the city’s increasing water bill, PERS contributions and retiree health costs.  The council argued, “There was no point in an advisory measure for the smaller amount.”

However, again, things have improved and now that extra money may well give council the cushion needed to increase employee compensation.

Nearly a year ago, in May, in an op-ed, co-written by councilmembers Lucas Frerichs and Brett Lee among others, they argue, “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.”

Even at the time, some questioned this language. As one commenter put it, “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.”

As we noted at the time, we are concerned that the issue of employee compensation has neither been discussed nor acknowledged by the city. And yet now it seems quite possible that this sales tax measure, sold to the public as necessary to keep vital services afloat and to pay for infrastructure needs, could go to finance the very thing critics feared most – employee compensation increases.

We may yet be able to justify the need to increase employee compensation, but I think the council would be better off either rescinding the sales tax or bringing it back to the voters before they agree to employee compensation increases.

—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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  1. Topcat

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

    Is it possible for the public to get a listing of the current City of Davis Employee compensation (including benefits)?  Perhaps this would help the taxpayers to evaluate whether the City Employees really need more.

    1. hpierce

      Folk who are interested, should go to the site Topcat posted, then look to the right, and using the drop-down menu look at “Top 10 Dept Avg Wages”, & “Top 10 Dept Avg Ret & Ben”.  It is obvious some animals are more equal than others.  Not all city employees are compensated alike.  I think folk should keep this in mind in this discussion.  but that’s just me.

      Also interesting to note you can find info on some Yolo county school districts on the same site, but not DJUSD.

      1. hpierce

        BTW, Topcat, thank you for posting the link… there is much to explore there, particularly if you scroll down and look at specific job classifications.  It has some ‘flaws’ related to how it reports info, but it is a pretty darn good bird’s eye view.

        1. hpierce

          Thank you for those links.  Was not aware of that.

          Just followed those links. Nowhere (the old one) near as informative as the one Topcat gave (cities), but understand the schools one is a “work in progress”. Will be interested to see how the new one will develop.

        2. wdf1

          hpierce: Just followed those links. Nowhere (the old one) near as informative as the one Topcat gave (cities), but understand the schools one is a “work in progress”. Will be interested to see how the new one will develop.

          You’re welcome, and point taken.  I have a hunch that DJUSD info will eventually show up at Betty Yee’s site.

          In some ways the old K-12 database gives more contextual info than Betty Yee’s site if you know where to look.

    1. SODA

      Thanks for pulling the history and quotes David. And reminding everyone including CC especially what was said and what we believed at the time.

      Indeed my first reading of  John Meyer’s report sounded like a commercial for increasing employee wages. Not so much after more careful reading but ……

    2. Topcat

      …I think most of Davis agrees with what David wrote.

      Yes, and I think that most Davis taxpayers realize that City employees are generously compensated when you consider their total compensation including benefits.

      1. Davis Progressive

        i don’t even know that they intend to do a parcel tax at this point, but if they are going to give a raise even if it’s very nominal like a cola, i think they should at least consider rolling back the sales tax or ending it.

  2. Frankly

    This article exemplifies the reason I support the Vanguard.  I think the previous MO of the Davis political machine was to say what was needed to pass the thing, and then do whatever later… because people generally are not paying attention and the Enterprise isn’t gonna ruffle feathers bringing up the lies.

    But here we are reminded of what our politicians said as they were again dipping into our pockets to help bail out the previous decades of overspending.  I would like to think we might learn the lesson this time if again that money is directed to fill the pockets of the union members.  I would like to think that we are on to them now, and that the Vanguard is helping remind us of the commitments to voters so that we hold the politicians to those commitments.

    However, I think until and unless voters actually do something in response to the ongoing break of commitments for prudent handling of our limited dollars, the politicians will likely keep doing what they have always done… overspend.

    1. Davis Progressive

      “However, I think until and unless voters actually do something in response to the ongoing break of commitments for prudent handling of our limited dollars, the politicians will likely keep doing what they have always done… overspend.”

      think you’re probably right, i think we should attempt at least to pull back on the sales tax.

    2. Topcat

      However, I think until and unless voters actually do something in response to the ongoing break of commitments for prudent handling of our limited dollars, the politicians will likely keep doing what they have always done… overspend.

      Perhaps the way to get the politicians attention is to say “NO” to the proposed industrial park(s)?

      1. Frankly

        The problem with that approach is that we will end up cutting city services and then the politicians will come back demanding more tax increases by leveraging the demand of the voting public that services be restored.  That is the playbook.  In fact, I think we are seeing a managed approach to road repair to both demonstrate that the city has the money to maintain the roads but not so much that tax increases slide off the table.

        No, the only way to deal with this is head on.

        The way I would do this is to demand a “total compensation” report for each city employee or paid politician.  This would be an annual reporting requirement that lists every employee and paid politician by name and calculates the dollar value of all pay and all benefits, and includes vested retirement age and the net present value of retirement benefits assuming retirement at fully vested retirement age through life expectancy.

        With this reported, I think the average voter will be more likely outraged with any new demand for pay or benefit increases.

        How many signatures do I need to collect to get this on a city ballot?  I bet the city employee unions and bargaining units would pull out all the stops to defeat it, and that would also help shed light on scheme.


        1. hpierce

          I don’t agree with your degree of reporting, but guess I understand it to a point… but NAMES?  If you really want to go there, why not addresses, phone numbers and SSN’s?  Gotta help the private sector folk get every opportunity for identity theft (and/or telemarketers), right?  And yes, to an extent it has already happened from info from the ‘transparent california’ data.

          1. Don Shor

            Well, they’re already there on that site that was linked. But I think that what we really need is to assess how well the city council is giving oversight in general as to total costs, and how well the city manager is implementing those policies.

        2. Jim Frame

          This would be an annual reporting requirement that lists every employee and paid politician by name 


          I don’t think that names are necessary, and may even be prohibited by law in the case of peace officers. Department and job title would be sufficient.  The point isn’t to expose the finances of individuals, it’s to ensure that the public knows how much it’s paying its employees.

        3. hpierce

          I do not disagree with you Jim, but some of the other details Frankly wanted, will be pretty complex research, [“… includes vested retirement age and the net present value of retirement benefits assuming retirement at fully vested retirement age through life expectancy…”] but if the citizens want that level, fine.  They just need to spend the resources to do it.

        4. hpierce

          Don, with all due respect, “DUH”… I wrote, “…it has already happened from info from the ‘transparent california’ data.”  Which I am familiar with, and it has not only the names of current employees, it has names of retirees, and their survivors, if the retiree has passed.  Just because Pakistan and India have “the bomb”, I’m thinking we don’t have to give one to anyone who wants a ‘copy’.  Frankly, Frankly was wanting (it appears) Davis to proliferate a level of information that unfortunately (IMO) is already ‘out there’.

        5. Frankly

          Names are necessary.  These are employees of government… that body that is supposed to be by the people and for the people.  There should be complete transparency.  There is absolutely no justified reason to hide the compensation of any employee of the government.

          You can already get some of this information.


        6. Don Shor

          It is unclear to me what you would wish to do with this information. It is the council’s job to give direction as to the budget and the position of the city at negotiations. It is the city manager’s job to implement that direction. Of what use is it to have all these names and salaries, already public knowledge, as the council and the city manager go about their duties? If the council approves pay increases, fully aware of the possible impact on peripheral business parks, parcel taxes, and sales tax, then they will have to face the voters with those ramifications.

      2. Frankly

        I expect the average city employee gross compensation to be $175k per year, and the average net present value of their retirement benefits to be $1.5 million.

        Yes we need to name them.  We need to name them because of the tremendous cost.  We taxpayers need to take a more active interest in city labor.  We need to know what we are spending on each employee.  We wring our hands over a Bearcat when each employee cost several times as much.

        Nonprofits and public-traded companies have to disclose the names and pay of their boards, executive manaement and key employees.  There is no justification for governement, the enetity that ironically decided this rule for non-profits and public-traded companies, to get away from similar disclosures.

        1. hpierce

          In response to your earlier question about how many signatures you need for getting a referendum/initiative on the city ballot… think it is 5% of the voters in the last general election.  City clerk and/or county clerk can confirm and help you with that.  Go for it.  Unless you get someone else to do it for you (cowardice?) you’ll have to use your real name, but that’s all about ‘transparency’, isn’t it?  You may be correct that the FD union (the only one in the City) might spend money to oppose it.  I strongly doubt non-safety employees would put up money.  Let’s see if you are right about how Davis citizens feel about your proposal… “put up, or… “

  3. Gunrocik

    As noted in this article:  which I believe was also referenced in a Vanguard article — pension rate increases are going to be taking a significant hit on our city budget for many years to come.  Combined with ever increasing medical costs — our employee costs are going to be increasing every year whether our employees get a raise in their salaries or not.

    Thus, there is no question our employees are going to be getting increases in their total compensation every year — do we continue to raise their salaries as well?

    If we do, there will be very little money for anything else.

    However, when you have a Mayor and at least one Councilmember (Frerichs) owned by the labor unions — and a City Manager owned by the Mayor and his mom’s chief of staff — there will be a lot of pressure to raise wages.

    It will come down to whether or not the two above can bully Rochelle into voting with them again — just as they coerced her into supporting the former Wolk machine staffer as City Manager.

    And by the way, I believe the raises are a done deal.  How do you raise the City Manager pay by 15 percent and then tell the unions with a straight face that they don’t get the same thing?



    1. hpierce

      BTW, a CALPERS retiree, as we discussed this topic, indicated that the COLA retirees got in basic allowance starting in May, is 1.6% for the coming year.  Based on inflation. Info, no opinion.

  4. Don Shor

    Some information that would be useful, perhaps for each year of the period about 2010 to 2015 (covering the Pinkerton staff reductions):

    Total FTE’s

    Total payroll

    Cost of benefits

    Cost of PERS etc

    My recollection is that, in spite of a significant reduction in number of employees, the total   employment costs have not actually declined.


    1. hpierce

      “the Pinkerton staff reductions”… do you mean the reductions that Pinkerton did deliberately/by action or not filling vacancies, or the ones that just happened to occur during his tenure?  Big difference.

      1. Don Shor

        I don’t see any difference in terms of assessing the cost curve, which is what I’m getting at. How much was staff reduced, how much has the cost of staff changed? That’s the key.

      2. Doby Fleeman

        hpierce and Don,

        In relation to public sector accounting, in its treatment of costs associated with deferred compensation and benefits, this is but one of the very difficult concepts for most non-accountants to grasp.  Mind you, I’m not suggesting that either of you are non-accounts, but here is problem.

        When the employer isn’t required to record ALL of the current and future-period expense provisions of an employee – during their current year of employment – then any required adjustments to those future period “disbursements” become “costs” of some future budget, under some future city manager and some future set of taxpayers.

        The most obvious example is found in “Other Post Employment Benefits Category” where most agencies haven’t actually set aside any funding to support future benefits to be received by future health benefit recipients.  In other words, the budgets in effect during their working years didn’t reflect any of those future expenses to cover those promises – so the employer was getting off “on the cheap” so to speak.

        What we seeing now, with our current budgets, are the “re-entry” effects of those “prior period” promises intruding on the expenditures side of our current budget cycle.   What is now taking place are a lot of “catch up contributions”.   The components of these catch-up payments with pensions and medical involved effects of 1) modified multipliers and final year income spiking (where appropriate matching contributions during the previous 29 years of employment hadn’t anticipated such formula modifications in their calculations) , 2) overly optimistic, long terms assumptions about return on investments, 3) outdated assumptions about retiree life expectancy, and 4) underestimation of inflation trajectory in the case of employee medical.

        So now, in 2015, we find that departmental staffing has been cut and that total hours have been cut, and yet the total “cost of services” has not dropped accordingly.  And, as the city’s actuary, Robb Davis and others have pointed out in related posts going back over the past year, the city can continue to expect these “legacy expenses” to burden the current budget in the form of additional, increasing pension and post employment healthcare contributions – where such “contributions” are now being recorded as “expenses of the current period budget” – even though these services related to such expenses were rendered many years before.

        Hope that helps.













        1. hpierce

          Doby, you’ll not get an argument from me, as I am not an accounting person, but I know enough to realize that PERS and City Finance should have done most, if not all, the analysis you suggest.  The question is, how do we proceed.  New employees, both safety and not, have lower pension formulas.  By State law…


        2. Doby Fleeman


          Far be from me to know how best to resolve the issue.  The only model I know is from the private sector.

          In the scenario you describe there are several very viable solutions that would likely come to the fore:

          1) Conversion to a Defined Contribution program for new hires to the system.  This could be combined with a straight-up salary increase in recognition of the reduced risk to the employer and the taxpayer of chronic underfunding so typical of defined benefit plans.  It could be a flexible option with a standard salary plus benefits formula that could be modified, at the employees option, to receive an even larger “current take home pay” with a lower 401K contribution, or visa versa depending on personal needs and preferences of the employee.

          There is no viable argument that can explain away the past, systemic abuses of both accounting rules and actuarial principles.  Why should the employer, the employee or the taxpayer be held hostage any further to a system which is so obviously uncontrollable?

          2) Offer Employer Matching Contributions as additional incentive to encourage additional contributions that an employee might wish to contribute, of their own volition, towards a greater investment in their 401K style retirement investment.  As with the CalPERS administered pension accounts, these accounts could likewise be managed by a CalPERS agency using the same, sound investment principles as for employee pensions assets.

          3) As an additional perk of participating in agency employment, allow all qualifying retirees to continue participating, at their own post-employment expense, in an agency negotiated health insurance/healthcare program.  This would be a clear benefit versus what is typically available to the average, retired civilian in the open marketplace.


          The real point here is for the employer, the taxpayer, and taxpayers as yet unborn to get out of the business of guaranteeing against “all risk” – particularly when none is in the insurance business, and none is calling the shots regarding the investments being made.  Going forward, it’s simply not in cards to expect such a system to continue – its not fair to anyone, and most of all its not fair to the employees who have put their full faith and trust in the system.

        3. Doby Fleeman


          Yes, in private sector, both employee and employer continue to contribute to SS & Medicare.  Not sure how those programs are incorporated into the various levels of public sector employment.

          Likewise, I’m not sure about the nature of your underlying question, but once again, given the actuarial status of these accounts, we should all fully expect changes in the near term that will make all Social Security and Medicare benefits subject to means testing.

          Clearly, the programs will continue to exist, but the funding for their continuation will necessarily rely upon a  combination of burdensome contributions by future generations of younger workers, aggressive and appropriate means testing of benefits for high income retirees,  and continued expansion by the Federal Reserve of the money supply.

          My preference, call it for what it is – unsustainable – and let’s move on to a more transparent model for our future generations.  Simple fact is, nobody escapes the pain when things have gotten this far out of control.


        4. hpierce

          To your 9:54 post… transitions will be tricky… if someone is vested in PERS, and doesn’t want to give up the employer contribution, they’d have to have a lot SS credits to get any SS benefits (no matter what they pay into SS) as any SS benefits are reduced, dollar for dollar by any public pension they receive.  Not clear if that also applies to a 401/403 plan contributed to their employer, but don’t think so.  So, if a public sector employee retires, and then chooses a second career that is subject to SS taxes, they make a non-deductible ‘charity’ donation to SS.  Thank you Ronald Reagan and Republicans.

          No, Doby, no hidden hook in my earlier question… if someone is just starting out, a combination of SS & 401/403 might work.  Retroactivity would be where a problem would lie.  For a new employee, your overall layout of a plan, on the face of it seems reasonable.  Your post seemed clear that it was prospective, not retroactive, and I have no problem with that.

    2. Gunrocik

      Pages 5, 6, and 7 on this power point on the City’s website:

      provide you a pretty good summary of the staffing reductions.  You can see on page 5 that expenditures (which is primarily employee compensation) continued to go up despite a $5.8 million reduction  in labor costs via elimination of 103 positions over a five year period.

  5. Gunrocik

    Here is a very good independent site for public pay:

    The City is on here, but DJUSD has avoided it so far.

    If you check out Davis salaries for 2013, you will see that Fire Union Activist Joe Tenney did quite well on the overtime front, as did a number of other fire staff.  Raising their salaries will only help that overtime get even more lucrative!

    1. hpierce

      The Fire Department issues are different than (I think) any other City employees… because of the shift setup, paid hours are available for sleeping are “on-the-job”, understanding that there may be ‘call-outs’… the practice appears to be that shopping for food, and mealtimes are “on the clock”.  There is “stand-by pay” for some City maintenance folk, but that is much more constrained, and those employees have much less OT, as a %-age.  Look at the info on the Topcat and “transparentcalifornia” sites, and you’ll easily see where the major compensation problems are.

      1. Gunrocik

        The Fire Department definitely gets to live in their own world — especially when it comes to working the system to maximize overtime.  Since there are minimum staffing levels, if someone can’t show up, then we the taxpayers get to pay someone else time and a half to cover their shift.  And since we have about 5-10 fires per YEAR, we certainly need to cover every shift with a full staff at every station. (sarcasm intended)

        And it isn’t just sick time and vacation that requires us to cover a shift — if the union boss takes excessive time off for both their local and statewide union responsibilities, we pay the price for that as well.

        For example, take a look at the 2012 and 2013 pay for union boss Weist:

        As you can see, it looks like Weist took a lot of time off without pay in 2013 since he was paid $31,000 less in salary.  But it is likely that the union paid the difference, so it is very likely he didn’t acutally earn less.

        On the other hand, his absence likely meant more overtime for other Fire Captains.  For example, his number two guy in the union Joe Tenney — he coincidentally had a lot more overtime in Weist’s absence:

        There were likely others who gained additional overtime as well…but I can tell you one group that didn’t benefit from his activities:  The taxpayers.

        And the example above is why it is great this database includes names of the employees.


  6. Matt Williams

    The rumor this week is that, with the city pushing into the black and restoring its general fund reserve, the council will give city employees a pay increase with the next batch of MOUs.

    The City is nowhere close to “pushing into the black.”  The City will not be in the black until it fixes its crumbling community infrastructure … and that is going to have a price tag of well over $100 million.  Don’t get me wrong, it is a good thing that the General Fund reserve is being restored, but in 2014-2014 Adopted Budget the General Fund only accounts for $48,137,877 of the $289,410,481 amount that is the All Funds Total. For 2014-2015 the General Fund expenditures only amounted to one-sixth (16.6%) of the Total Budget.

    To make matters worse the $289 million total does not include any of the $100 million in deferred capital infrastructure maintenance.

    Further, as has been recently discussed here in the Vanguard and by members of the City Council, there is a whole new round of significantly increased “PERS” and “OPEB” payment contributions coming down the road for inclusion in next year’s and subsequent year’s budgets. If I remember correctly the amount of those increases is expected to be in the range of $3.5 million to $5 million dollars a year.

    In my opinion, the people putting forward the rumor that the “City is pushing into the black” are conveniently overlooking accrued future liabilities such as infrastructure maintenance, PERS and OPEB.  At best that is unrealistic.  At worst it is delusional.

    1. hpierce

      Please remember, Matt, that it is not JUST the general fund that has “reserves”.  In my opinion, each fund should have a 15-20% reserve for “when stuff happens”.  Nothing incorrect with your post, per se, but the GF doesn’t need to have reserves for water/sewer/other funds.  Not if those funds are properly managed.

      And, pension and OPEB obligations should derive from the funds that employed the folk involved… not from GF, unless that was the source of their wages.

      1. Matt Williams

        That is correct hpierce. There are six major fund areas in the City of Davis’ Budget,

        — The General Fund ($48,137,877 in the 2014-15 Adopted Budget)
        — The Special Revenue Fund ($19,821,418 in the 2014-15 Adopted Budget)
        — Capital Project Fund ($3,730,739 in the 2014-15 Adopted Budget)
        — Debt Service Fund ($2,663,012 in the 2014-15 Adopted Budget)
        — The Proprietary/Enterprise Fund ($211,351,425 in the 2014-15 Adopted Budget)
        — The Redevelopment Agency (RDA) Obligation Fund ($3,706,000 in the $2014-15 Adopted Budget)

        Each of those six fund areas has its own reserve requirements.

        More important than the selective display of fund balance levels in the Budget, is the fact that some of those selectively displayed numbers only tell part of the story. For instance, the vast majority of the $100 million plus of deferred capital infrastructure maintenance is neither reflected in the Capital Project Fund nor the General Fund. If the deferred capital infrastructure maintenance amount were accurately reflected, the Capital Project Fund expenditures for 2014-15 would not change, but the reserve for that fund coming into the current fiscal year would go from a $27,430,931 positive balance to a deficit in the range of $73 million, because that is how deep the hole is that we have dug for ourselves. That is some serious red ink.

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