I thought it was an interesting comment that former Assemblymember and County Supervisor Helen Thomson made with regards to the proposed soda tax: “I’m a Democrat and I happen to like taxes. I think they have a purpose. We are a democratic society and taxes can do good things for people.”
I’m a Democrat too, and probably a more liberal one than Ms. Thomson, but I was raised mainly in the post-Prop 13 world and I think we need to be exceedingly careful about when and how and for what purpose we propose raising taxes.
I will point out that the Vanguard floated the idea of a soda tax on December 16 of 2014. However, and unfortunately, given that it would be a general tax in the city of Davis, I am now hesitant to support a general tax right now, in part because we cannot control how it is spent.
While I support the idea of using the money as a veritable sin tax, and, as a sufferer of diabetes, I support the need to fight against childhood obesity and diabetes, I think people who do not have it do not fully appreciate how devastating a disease it is.
My problem is that there is nothing that can prevent the city from taking the money from the soda tax and using it on employee compensation.
I now have a similar concern on a tax for roads and infrastructure. The city report from this week shows, despite lower projected inflation for asphalt, we will still need about $10 million per year annually for pavement projects, while we currently budget $4 million.
One idea floated has been the Utility User Tax. The advantage of that tax over a parcel tax is that the city would need only a majority vote of the voters to pass it. A parcel tax would require a two-thirds vote. The main advantage of the parcel tax, however, would be that the voters would have far greater certainty that the money would be spent as advertised.
The city unfortunately has a history of playing bait and switch with taxes. In 2004, Measure P was put on the ballot as the original half-cent sales tax.
In the argument on the ballot in favor of Measure P, the signers, which included Lois Wolk (Assemblymember), Helen Thomson (Supervisor) and then-Mayor Susie Boyd, argued: “The City faces increasing costs. We will face higher expenditures if we are to provide the additional police protection and meet park and recreation and open space commitments we have made to our citizens.
“Without Measure P revenue,” they argued, “given the uncertain state support to the General Fund, we would be faced with very deep service cuts in police, fire, and parks.”
However, a 2010 Vanguard study found that the money would end up going largely to increased salaries, particularly for fire, who in April 2006 were retroactively given an annual increase in compensation of 8.46 percent per year – or 34 percent over the course of their four-year contract.
While the city sold the public that the measure would pay for additional protection for police, it actually went for increased salaries, and fire got by far the largest increases in salaries. And while it was billed as a way to meet park and recreation commitments, in fact, we had to pass a parks parcel tax just two years later because we had used the entire sum to pay for employee compensation.
To a much lesser extent, we had the same thing happen with the revenue from the last sales tax.
In the discussion about the sales tax in the winter of 2014, the city council was talked out of doing an advisory measure to guide its spending. As we noted in a commentary in February 2014, there was the expressed belief that times had changed and the council could not get away with giving away the store again.
One councilmember suggested 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 (Public Employees’ Retirement System) contributions and retiree health costs. The argument was, “There was no point in an advisory measure for the smaller amount.”
And yet, here we are. While a 3 percent COLA (Cost-of-Living Adjustment) is hardly giving away the store, it does push us closer to the red by 2019. Mostly, it illustrates that, while the intentions were probably sincere in February 2014, times change and so do priorities.
Going forward, there are questions about how much support a Utility User Tax actually has. Some have gone so far as to suggest that the Utility User Tax is off the table. The official word from the city is that, while it is not off the table, it is getting mixed reactions with no clear consensus as to what people will or will not support.
But even a parcel tax right now would present risks. The city is currently spending somewhere around $3 million in general fund money on roads – pass a parcel tax and it is at least possible that the parcel tax could be used on roads but free up the $3 million from the general fund to go to employee compensation.
That is a similar concern which we now have with the proposed soda tax – the money that could be sold on programs for children’s health could instead effectively go to supplement employee compensation.
Some will say – why are you so opposed to using money for employee compensation increases? While a complex answer, my concern remains that we are already over-extended on salaries and we are not really in the clear on revenues or the budget sustainability.
Costs continue to escalate for pensions. The city revenue picture is murky at best, and innovation parks, if they get passed by the voters – a huge if at this point – only provide marginal relief. And at some point, perhaps soon, an economic downturn could push us deep into the red.
In short, we expanded salaries and benefits way too far for us to sustain from 1998 until 2006, and, as a result, we are vulnerable to rising costs and fluctuations in the economy that could put us right back on the brink.
And instead of building reserves and hoping to generate new revenue to secure our position, we are leaking money back to employee compensation under the guise that they took a hit from 2009 to the present while ignoring their huge explosion in wages and benefits from 1998 to 2006.
If the numbers are right, we are talking about somewhere between a 7 and 11 percent hit for employee groups. On the other hand, we saw far larger increases the previous decade – again, beyond the point where they were sustainable.
In the end, the council has about $150 million just in unfunded roads, and that doesn’t include the backlog for other infrastructure. Instead of making sure that we have secured funding for those needs, we have agreed to a COLA for employee groups.
And, without agreeing on a tax structure for roads, now we are floating the idea of a soda tax. As I said, I support the soda tax in concept, but unless we secure our own finances, I am reluctant to support a new tax.
—David M. Greenwald reporting