This afternoon Mayor Dan Wolk will delivering the State of the City Address to the Davis Chamber of Commerce. We may have already been given a sneak preview of the speech with his December 27 column, although perhaps Mayor Pro Tem Robb Davis’ response will cause the mayor to modify his approach.
Early Monday, in response to the mayor pro tem’s column, one reader suggested that we are “having the wrong discussion.” The reader noted, “Both Robb and Dan recognize that we need additional funding, [it’s] simply a matter of tone. The question should be how to fund what the city needs and the answer most of the Vanguard sycophants argue for is austerity.”
While I believe the Vanguard and its readers have engaged in a multilevel discussion, I disagree that the conversation we are having is wrong or that we should simply be discussing how to fund what the city needs.
The Finance and Budget Commission in November and December urged the council not to approve new tax measures or utility rate increases until the city took better accounting of its “multi-year projections of underlying city revenues and expenditures” and the scope of its “funding needs for deferred maintenance and capital improvement projects that are supported, at least in part, from the General Fund.”
As some have put it, too many are viewing this as a funding problem and looking for additional revenue through either tax measures, hotels or economic development, while at its core, at least from the FBC’s perspective, “the most pressing issue for the City of Davis is being honest about our costs” and taking steps to address and control those costs.
While I tend to agree with the Finance and Budget Commission’s point in principle, the reality of timing and other considerations forces us to take a more practical approach.
We do need to get a handle on our costs. Unfortunately we have had two years from the time the city council first acted to put the sales tax measure on the June 2014 ballot to assess infrastructure costs and needs. That the FBC in November and December is still calling for a “complete list of funding needs for deferred maintenance and capital improvements projects” simply illustrates the depth of our problems.
But, on the other hand, Robb Davis wrote on Sunday, “In a December 15 report to Council, City staff demonstrated that we are under spending on critical infrastructure and programs by over $10 million on an annual (ongoing) basis.”
I take Robb Davis’ words to mean all infrastructure, not simply roads, “including bike paths, streets, sidewalks, park structures, pools, tennis courts, traffic signals, our urban forest, playgrounds, irrigation systems and city building maintenance.”
He adds for emphasis, “Let me repeat: a $10 million shortfall each and every year—on a current $50 million General Fund budget.”
To me when the number is $10 million, we need to act now. The council only has a short window to put an infrastructure revenue measure on the ballot for June and I think they need to. I would prefer a parcel tax that is more general than the parks tax being floated by the mayor and some others.
Those who believe we should not pass a tax until we have a firm handle on our financial situation have a point, but the downside is that further delay means further deferring maintenance, which of course continues to increase costs down the line.
Two years ago, former City Manager Steve Pinkerton engaged the community in some forums on the city’s financial situation at that time. He argued at that time that the city really did not have a spending problem, it had a revenue problem.
While he had a good point, the problem is that we had a spending problem that led to us having a revenue problem. Starting about 1998, there were a series of decisions that put us in this position – everything from increases in pensions during the time of superfunded pension plans, changes in retiree health care benefits without adequate accounting practices, and, then starting in 2004, massive increases to employee compensation.
When the economy was doing well our pensions were funded to the point that the city was not having to pay into the pension plans, and our roads were funded through state and federal grants, but as the economy turned south these practices put us in fiscal peril.
By 2008, just before the financial markets collapsed, it was clear that these fiscal practices were unsustainable. The Vanguard has been warning for some time of the impending problems with the city finances, and, unfortunately, while we are doing better than we were in 2009 or even 2014, we are still not on solid foundation.
It is not that we face impending fiscal doom. Rather the problems are more subtle. The result of unfunded OPEB (Other Post-Employment Benefits) liabilities is that we are now putting millions in to fund the health care costs of present and future retirees. The result of unfunded pension liabilities is that we are now spending millions to fund those pensions.
The result of deferred maintenance on roads is that we have not only diverted $4 million in general fund monies to roads and other infrastructure, but we are needing perhaps an additional $10 million a year to meet current deficits.
All of these factors do not mean fiscal doom, but they do take money that could go to things like swimming pools and sports parks, or that could go to city services.
As Robb Davis put it, over the last decade we have cut staffing, mainly through attrition, by 100 employees, the take home pay of employees has decreased but the total cost for compensating staff “has increased from just over $100,000 to over $150,000 per employee in the same decade.”
In short, the fiscal crisis we face is not bankruptcy but rather that we are paying more and getting less for it.
My solution is that we need to work on both ends of the equation. We need to continue to restructure government so that the vital city services can be most efficiently delivered to the community. We need to look at ways to contain both short and long term costs.
Finally, we need not to spend money we don’t have. The problem with the MOU situation is not that $1.3 million is going to make or break the budget, but it is that much more money we need to find in order to make ends meet.
At the same time, we clearly need to increase revenues. I am more pessimistic about the prospects for economic development than I was a year ago. I think we have backslid on economic development and the prospects for an innovation park.
I support a revenue measure that will help us meet our infrastructure needs, but I remain pessimistic, as none of the current proposals on the table seem adequate to address general and basic infrastructure needs.
My biggest criticism of the mayor and perhaps the city council as a whole here is that, instead of making the case for why we need the voters to pass a revenue measure, we have the mayor and others trumpeting a “Davis Renaissance” that I just don’t see. That is not going to get the public to vote for a revenue measure, it is going to convince them that everything is okay.
So what I would like to see from the mayor today is for him to make a case for why the voters should lay out another $10 million a year so that we can meet our current needs in the city.
—David M. Greenwald reporting