As we noted yesterday, neither the city manager nor the majority of council members seems to be in the mood to ask for further concessions from employee groups. However, the budget projections are not hopeful in this regard.
As the Vanguard has reported, when taxes sunset after 2020-21, the city goes from being in the black on its budget to being in the deep red. Moreover, that trend is exacerbated if the employees get any sort of ongoing cost-of-living adjustment (COLA). Yesterday we argued for keeping all options on the table, but that is probably not going to happen.
So let’s be realistic in how we evaluate things.
First, it is probably a foregone conclusion that in 2020 the Davis City Council (whatever it should look like in five years), will ask the voters to renew the full one percent tax. We can hem and haw all we want about that, but that is reality and the other reality is that most likely the voters will renew that tax.
The tax was passed by 58 percent of voters and history has shown renewals actually pass at a far higher rate, as people get used to the tax and the city wouldn’t be looking at raising the rates.
Given that, let us focus on fixing existing problems over the next five years.
First, right now we are spending over $4 million a year from the general fund on roads. Next month the council will evaluate a tax for roads and infrastructure. Polling last year at this time showed less than two-thirds support for a parcel tax. There has also been talk about combining roads funding with pools – and now a sports complex.
However, we would oppose that. We believe that the city should address needs first. We also have reason to believe the majority of the council opposes either a sports park or adding pools to a parcel tax.
Second, the city needs to do an honest assessment. As we noted yesterday, the city has cut its full-time equivalent employee positions from 452 to 352 in a few years’ time. Some have argued, see that proves we don’t need those positions. Others believe we have survived in the short-term, but long-term this will create a problem.
Our view is that the city cut those positions rather haphazardly, primarily through attrition, and therefore we need a true analysis as to the whether we can optimally deliver the services we have committed to deliver and whether there are gaps in that service.
Along the same lines, it would behoove us to take a step back and determine whether the services we are providing are ones we can continue to provide as a city.
By way of example, we have some high-end parks and yet we have been reluctant to expand the parks tax to incorporate true costs. Some believe we can cut back on these parks, while others believe they are part of the essential character of the city.
Third, we need to continue to evaluate employee compensation. The city manager seems reluctant to ask for further recessions. Other councilmembers seem to agree but wish to limit the COLA to either no increase or a one-time one percent COLA. Either way, the city is in a precarious position.
We have mentioned the firefighters as an area we can find ways to cut. The firefighters went to impasse in the last round of negotiations. They took a ridiculous 36 percent raise from 2005 to 2009. And their compensation, among the highest in the region, far exceeds that of their police counterparts.
However, while fairness dictates we at least look at fire compensation, logic tells us as a fairly small bargaining unit, the overall compensation level is only going to impact us on the margins.
Finally, we have the issue of economic development. The city making the decision to replace the Chief Innovation Officer, and seemingly over money, has been a negative signal to the region that the city is pulling back rather than doubling down on economic development.
We have already seen one proposed innovation park be paused. That leaves the city with the Mace Ranch Innovation Center as its primary economic development tool. However, we also have the smaller Panatonni Development for 225,000 square feet in South Davis, a proposed Hotel-Conference Center which could generate half a million dollars in annual tax revenue to the city, and also Nishi, which has a small but sizable business park proposal.
One of the concerns has been the chances of the city passing a peripheral innovation park, or even Nishi absent a fiscal crisis. The perception and concern has been fueled by uncritical reports that suggest that the budget future is brightening without analyzing the big picture.
Last November, Mayor Dan Wolk in his “Mayor’s Corner” column told the community, “Recently, the Davis City Council got some unexpected good budget news — we ended the 2013-14 fiscal year with nearly $850,000 in additional revenue.”
He added, “I am more confident than ever regarding the current and future state of our city’s finances.” He wrote, “We are on our way to eliminating our structural deficit. Our general fund deficit — a chronic imbalance between revenues and expenditures — was estimated to be about $1.5 million this fiscal year and was forecast to drop in the coming four years. However, the improved financial picture means we have immediately taken a large bite out of the deficit and are moving toward eliminating it completely.”
In May, the Davis Enterprise ran the article “City budget outlook brightens,” which called the city budget update “boring” and reported, “Revenues are rising with the economy to the tune of $800,000 in unplanned income from taxes and fees.”
And, while the council is “promising no exciting new programs to gobble up the extra cash,” Mayor Dan Wolk has “supported city pool boosters’ request that a new Olympic-size, 50-meter pool be added to the tax measure.” The article adds, “Wolk told The Enterprise he will propose to the rest of the City Council a $25 million sports complex on a 100-acre site along County Road 102 just north of Davis, as part of a potential utility users tax.”
The article implies that the city is now in good fiscal shape. That is bolstered by Dan Wolk’s Thanksgiving declarations and his more recent calls for things like pools and a sports complex, that signal to the typical voter it is business as usual.
However, that is not true. The improved financial picture COUPLED with $3 to $4 million in sales tax revenue from the tax increase may have closed the structural deficit, but the 10-year projections show that that is a mirage. The only reason the structure deficit is gone is that we raised taxes and when those taxes go away, the structural deficit miraculously remerges.
In short, yes, we need the tax measure to be renewed. But we need to be honest with the community and do the kind of long-term reassessment of city government that we have long needed to do. We have five years to make the tax increase unnecessary through careful analysis and good planning. Rather than sit back and wait for the next crisis, we should plan ahead.
—David M. Greenwald reporting