Sunday Commentary: Why Aren’t Anti-Tax Crusaders Leading the Way on Economic Development?

Mace Ranch Innovation Center
Internal View of Mace Ranch Innovation Center

It is that time in the election cycle, and the Davis City Council is very shortly going to be figuring ways to raise revenue. It may well be multiple measures. The Transient Occupancy Tax (TOT) may only raise about $300,000 at present, but, as Councilmember Lucas Frerichs told the Vanguard, that’s a nice sum of money for a tax that will not impact local residents.

We may also get a parcel tax that deals with either parks or all infrastructure, depending on the size.

I think we made a mistake last month putting the soda tax in with other revenue measures, as I do not see the soda tax as a way to fund existing city needs but rather a way to create programs to deal with vexing issues like childhood obesity and diabetes.

Overall, I think this is a good time to take stock of where we stand. Since about 2008, actually even before the great recession hit, the Vanguard warned the community that our compensation system was unsustainable. Since then and really since July of 2010, the council has been doing a much better job of trying to deal with city finances.

But the fundamentals of the system remain troubling, even as the great recession has receded and economic recovery and revenue growth continue. What has happened since 2008 is that we have cut around 100 employees – most of them through attrition. We have cut back on city services. We have cut take-home pay – in some cases substantially.

However, we pay more per employee today than we did in 2008 and that is largely a function of the fact that our compensation system is unsustainable.

In short, we are paying more for fewer employees and receiving less in the way of city services. Our employees are working harder, taking home less pay, and yet we are paying more for them.

The bottom line is that we are still about $10 million in the hole annually on city infrastructure and, without short-term ways to finance it, our buildings, roads, sidewalks, pools, parks and greenbelts will continue to deteriorate. In short, the great amenities that many of us have come to expect are threatened without funding.

Councilmember Brett Lee may have told the Enterprise this week he’s “not sure” if he will support a tax measure, but it is safe to say that a tax measure is coming.

No sooner does a tax measure get bandied about, but the anti-tax crusaders start to poke their heads out of civic hibernation. Thomas Randall the other day, in a comment on the Enterprise site, stated, “Its time for a change and for the Davis City Council to move away from constantly placing measures for additional taxes on the ballot from election to election which when they are passed continue to raise the cost of living in the city and the residents financially suffer.”

That sounds good, but where has he been during the discussion on economic development?

The city is looking at ways to diversify its revenue. At this point it is unclear whether Nishi is going to generate ongoing revenue, but the city is looking toward things like the hotel conference center and Mace Ranch Innovation Center (MRIC), among other initiatives, to generate the long-term revenue we need.

But where have Thomas Randall and his often-partner in crime Jose Granda been on these vital discussions that could very well help their cause in stopping the endless cycle of tax measures? I have not seen them at all around these issues.

Instead, we get proclamations, “Unfortunately, the socialistically minded city council members who likely make a high income themselves personally are insensative (sic) to the financial needs of average income Davis residents.”

That is certainly not my sense at all. First of all, none of the councilmembers are wealthy. Some of them make decent livings, but several of them have very modest incomes and come from backgrounds that are even more modest.

I talk to most of them very frequently and there is a real concern that the city needs to find more diverse revenue sources – precisely because they believe that, while the community has been extremely generous with supporting schools and parks and sales tax measures in the past, it is not an endless well that can continue to be tapped.

However, Mr. Randall’s statement, “It is time for a voter revolt in the next election against this situation,” describes something very unlikely in liberal Davis.

If either Mr. Randall or Mr. Granda is interested in reducing the number of tax initiatives, the city and also the school district need more consistent revenue sources that they can tap into.

Economic development seems the most logical way that we can move in such a direction. Mace Ranch Innovation Center was estimated by the EPS study to generate around $2 million in net revenue. Some have argued that this is a conservative estimate.

For one thing, the city had previously discussed a potential $1 to $2 per square foot assessment. That proposal alone could increase revenue by $2.5 to $5 million per year. At some point, MRIC will have the kind of fiscal analysis and scrutiny that Nishi has undergone.

The developers have pushed for a mixed-use component of 850 units of housing. When the Vanguard interviewed Councilmember Frerichs, he said he opposes housing on the MRIC site. Having said that, he noted, “I feel somewhat conflicted on that.” He cited that smart growth principles suggest “mixed use is the way to go.” But he said, “This proposal was brought forward as a strictly commercial R&D proposal without housing.” He added, “I think that housing at that site will actually really hurt its chances for approval.”

What the Vanguard has suggested in the past is that instead of looking to 2.5 million square feet of R&D space, look at a far denser project at 4 million. The thinking there is that most of the initial infrastructure costs are going to be similar, whether it’s 2.5 million or 4 million, but the property tax and potential sales tax and assessment will generate additional revenue for the city.

These are questions the community will undoubtedly have to sort out, but they represent the way forward to avoid the endless tax cycle. Rather than a futile and empty threat of a tax revolt in liberal Davis, why not help plan for the future – a future that could avoid many of these tax measures, if they indeed generate the type of revenues we hope and need?

—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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23 Comments

  1. Tia Will

    David

    I think we made a mistake last month putting the soda tax in with other revenue measures, as I do not see the soda tax as a way to fund existing city needs but rather a way to create programs to deal with vexing issues like childhood obesity and diabetes.”

    I think that you inadvertently but very dramatically demonstrated what I see as an erroneous point of view. Your statement implies that preventing childhood obesity and diabetes are not “existing city needs”. I see this very differently. I see a healthy citizenry as the primary individual and community need. Without a healthy citizenry as the base, we are spending millions and millions of dollars on health care costs that would have been available for other purposes ( such as our roads and other infrastructure) had it not been used to treat preventable diseases. And yes, I know that the funding source is not the same, but the money coming out of our individual wallets is the same whether it is being spent on our health care costs or taxes for road and park maintenance.

     

    1. David Greenwald

      I see it as essential and part of the conversation that is not happening in Davis – especially “the other Davis.” BUT, I do think it is a separate discussion and really needs to be from the core governance issues.

      1. Tia Will

        I do think it is a separate discussion and really needs to be from the core governance issues.”

        Here we will simply have to agree to disagree, as I see community health as a “core governance issue”.

        1. Don Shor

          The level of government that generally deals with community health issues is the county. At that level it is a core governance issue. There are various departments existing at the county level whose primary mission is public health. Establishing agencies at the city level would probably duplicate effective programs that are already in place. To a more limited extent, there are health-related programs at the school district level. Again, no need to duplicate those. If the city enacted a tax on soda, the most efficient thing to do with the funds would be to disperse them to existing agencies for programs targeted at obesity and diabetes and other diet-related health issues.

        2. Matt Williams

          I concur with Don, and wonder why the sugary beverage tax supporters haven’t attempted to add this tax at the County level.  That seems to be the logical place for both the tax (to impact all the County’s residents) and the funds expenditures.

      1. Tia Will

        hpierce

        how can avoided health care costs be applied to infrastructure fixes?  Just not getting the mechanism…”

        I am not suggesting a direct mechanism. What I am suggesting is that less money spent on medical costs overall translates into more money available to spend on other items. A dollar not spent on someone’s ER visit for diabetes related infection ( choosing just one example of an acute problem directly related to a chronic illness) is a dollar available to be spent on infrastructure, or defense, or homeland security, or public education, or whatever else happens to be of importance to you.

  2. Barack Palin

    What the Vanguard has suggested in the past is that instead of looking to 2.5 million square feet of R&D space, look at a far denser project at 4 million. The thinking there is that most of the initial infrastructure costs are going to be similar, whether it’s 2.5 million or 4 million, but the property tax and potential sales tax and assessment will generate additional revenue for the city.

    I’m all for it.

    1. Matt Williams

      What the Vanguard has suggested in the past is that instead of looking to 2.5 million square feet of R&D space, look at a far denser project at 4 million. The thinking there is that most of the initial infrastructure costs are going to be similar, whether it’s 2.5 million or 4 million, but the property tax and potential sales tax and assessment will generate additional revenue for the city.

      That kind of approach would be consistent with Chuck Marohn’s “Smart Towns” presentation at Council Chambers Friday morning.

      1. Jim Frame

        What the Vanguard has suggested in the past is that instead of looking to 2.5 million square feet of R&D space, look at a far denser project at 4 million. 

         

        When I asked about a similar concept at the last public forum for MRIC– going from a FAR of 0.5 to a FAR of 0.82, all R&D space — the project consultant said that the region can’t absorb that much R&D space.  This response seems to fly in the face of everything else we’ve been told about the demand for innovation centers.  As a result, I view the current MRIC proposal with a great deal of skepticism, particularly the “need” to incorporate housing into the plan.

        1. Matt Williams

          Jim, it will be interesting to see whether “housing version” means a distinct and identifiable “housing area” within the plan.

          In my opinion there should be no “housing area” within the plan, but rather the housing should be closely integrated into the R&D areas, so that it is very clear to the housing market that the housing is live/work. Given the young post doctorate (PhD) education that is likely to be overwhelmingly present in the workforce of these innovation companies, any supply of single family detached homes will be a mismatch to the onsite demand. Rental rather than ownership should predominate as well.   Studio apartments and/or one-bedroom flats should be the most numerous floor plans . . . catering to the young professionals, and simultaneously being a mismatch to both students and young families with children who don’t have actual jobs in MRIC.

          Building denser, higher FAR, more integrated live/work structures will be very consistent with the principles that Chuck Marohn laid out on Friday morning in Council Chambers.  The live work housing can be the “gap fillers” between employers that make MRIC a solid positive addition to the fabric of Davis rather than one more peripheral development.

          JMHO

        2. Matt Williams

          Frankly said . . . “Parking and traffic flow would seem to limit the FAR.”

          I disagree Frankly.  If MRIC services its tenants and their employees with closely integrated live/work housing, then parking and traffic flow will not be as significant issues as they will be if employees are commuting into their jobs.

          Frankly siad . . . “And we have core area people that seems to dislike tall buildings.”

          With this gratuitous comment, you are allowing the exception to make the rule.  You are wiser than that.

        1. Barack Palin

          Matt, since you asked I will not vote for any candidate that doesn’t directly spell out their intentions to keep city employee compensation under control or is for social engineering types of taxes like a soda tax.

  3. Tia Will

    These are questions the community will undoubtedly have to sort out, but they represent the way forward to avoid the endless tax cycle. Rather than a futile and empty threat of a tax revolt in liberal Davis, why not help plan for the future – a future that could avoid many of these tax measures, if they indeed generate the type of revenues we hope and need?”

    I apologize for possibly derailing the conversation from the central point of your article. I will attempt to make amends. I agree that those who have strong feelings about taxation vs other means of revenue generation should be willing to actively engage on an ongoing basis rather than simply lobbing “tax revolt” rhetoric episodically.

    I also had thoughts about your referencing “the endless tax cycle”. We choose to live in a community. The reality of this decision, whether or not one likes it, is that we will have to pay some taxes in order to support the community amenities that we have chosen, either directly through our votes, or indirectly through our elected ( voted in) leaders. To imply that we will not have to make tax renewal decisions or from time to time assess new taxes on ourselves is to deny the structure of our society.  Obviously we will need less in incoming taxes if we develop other revenue streams, but I think that there is a tendency to ignore the “if” in your sentence “if they indeed generate the type of revenues we hope and need.”  There are no guarantees as was actually alluded to by a pro growth poster here in one response to me that it is unrealistic to demand projected numbers since they are not necessarily reliable or accurate. This kind of thinking ignores that just as there is an “endless tax cycle” there is also an endless business “boom and bust” cycle which makes rosy projects about future city revenues an uncertainty…..not a given.

  4. Tia Will

    The level of government that generally deals with community health issues is the county. At that level it is a core governance issue.”

    I agree that this statement is true. I do not believe that this is the way that the problems must be addressed. We get to define what we see as “core” governance issues. I would like to see us broaden our approach. And as best I can tell, so would those who operate at the county level and would like to see more participation and coordination from those at other levels of government.

    1. Mark West

      Tia:

      The City does not have enough money to pay for all the services we are currently providing.  What services do you think the City should cut in order to take on the health issues that you propose?

      1. Tia Will

        What services do you think the City should cut in order to take on the health issues that you propose?”

        None.

        I am a little surprised by the question since I have come out in favor of the soda tax which I would like to see used for this purpose. I would also support a parks tax, and/or a parcel tax. I strongly believe that we should be willing to pay for what we want. The means of doing so should be decided democratically, which is why I am calling for a vote on the matter.

        Secondly, not all “participation”  costs in terms of money. Some involves the use of time. In a previous post, in response to a comment expressing the belief that there was nothing that an individual could do, I outlined a number of volunteer activities that, in aggregate ,could make a large difference. I believe that our city council could act was leaders in promoting voluntary participation on the part of our citizens.

  5. Tia Will

    Another thought on potential funding ( or sponsoring) of a position to work on the community health issue. We have a wealth of talent readily available on campus. Currently some of these students work as interns on various county projects. I would propose that the city could also offer an internship position in healthy living education within the city and or a coordination of volunteers to educate in healthy living strategies.

    For those who don’t believe that the tax will raise much money, perhaps such a small scale endeavor combining university credit, a small stipend and volunteerism would be a modest approach which would raise awareness which is one of the major goals of the tax from my point of view.

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