City Council Candidate Question 2: Measures to Increase City Revenue

Candidates Forum on March 12/ Photo by Eunah Cho of Davis Media Access
Candidates Forum on March 12/ Photo by Eunah Cho of Davis Media Access

For the next eight weeks, the Vanguard will be sending the Davis City Council candidates weekly questions.  They have 250 to 350 words.

Question #1: Do you support Measure A (Nishi) – why or why not?

Question #2: While the city’s budget picture has improved, the city is still in need of funding for things like roads, parks, greenbelts, pools, buildings, as well as some unfunded retirement needs – what measures would you support to increase city revenue and why?


WillArnold2016Will Arnold

We have a big hole to get out of, that much is clear. It took many years to get us here, and it will take longer to get us out.

There is no magic solution. We cannot cut our way to sustainability and keep the community we love. Our taxpayers cannot foot the entire bill. No single project will save us.

No tactic will be enough on its own, nor is any approach mutually exclusive of another. Our strategy must be taken as a whole to address our needs. Ignoring one approach for the sake of another is unnecessary and throttles our efforts to achieve fiscal sustainability.

Thankfully, our work to fix this problem is also years in the making.

We’ve cut our budget, though more cuts are likely needed. We’ve found efficiencies, but there are not enough efficiencies in the world to make a sizable dent. We’ve increased taxes repeatedly, and plan to do so again, keeping our fingers crossed that this isn’t the time the taxpayers finally say “no.”

And we’ve talked about prioritizing economic development. We’ve talked about generating revenue from outside of our own pockets. We’ve talked about the opportunity created by our region and UC Davis. We’ve talked about welcoming those who want to invest in our community, create jobs, and stimulate our economy.

We’ve talked for years, come together as a community, and made a plan of action. But we have yet to act.

I believe we will, eventually, take the all-hands-on-deck approach our city needs, one that includes the economic development strategy our citizens and elected leaders have identified.

We will realize that the choice to do nothing is itself a choice, and that a single-minded focus on not wanting our city change has resulted in changes we cannot control and are loathe to address. We will come together in a spirit of compromise, collaboration, and community.

The only remaining question is how long will it take us.


Frerichs-Announce-2016-5Lucas Frerichs

Thankfully, Davis’ budget has greatly improved since the Great Recession. We’ve seen increased consumer spending; leading to greater sales tax revenue. Increasing home values led to additional property tax revenue. Passage of the modest 2014 Measure O sales tax increase also contributed to the improved revenue.

We’ve done a decent job of being fiscally responsible by reigning in spending- although we’ve not done as much as some would have liked. After no raises since 2009, we approved a modest 3% COLA  (over 2 years) to most of our employees last November. Although, we also instituted cuts to benefits in our previous round of negotiations, including reducing cafeteria cash out from $1500 down to $500/month. Our city council is now funding our pension obligations, and we have employees covering a more of their pensions.

We’ve been spending millions of dollars on significantly needed road and bikepath repairs. Newly paved roads include 8th St, L Street, Lake Blvd, Lillard Drive, East Covell, and more are on tap in the years ahead.

The state and federal governments have significantly reduced the amount of money provided for infrastructure, and are partly responsible for the sad state of infrastructure affairs. Davis has been successful in winning government grants, and will likely continue to do so.

Infrastructure costs for the city are immense, yet we are not in a unique position; nearly every local government faces a similar situation.

We’re in the process of getting the full scope/report of the state of our infrastructure needs/city fees structure. We will prioritize and act accordingly, although it takes time.

In the meantime, we need to continue to enhance revenue through economic development, (fostering Davis Roots and small company development). With the news that MRIC is “on hold”, we’ll need to market/develop our vacant commercial parcels and redevelop others to assist in revenue generation.

We’ll need to look at the right mixture of taxes to fund infrastructure needs.

Among other ideas, I’d be supportive of a transportation parcel tax and would look at the viability of how it could shift over time, as transportation mode demands shift.


Lee-Brett-HSBrett Lee

The clumsy approach would be to use a parcel tax to address the entire shortfall.  But equally clumsy would be to pin our revenue “hopes” on a single, massive development.

A balanced approach would be to do three things:

  • add some additional revenue generators
  • increase the success of our existing businesses
  • find ways to cut costs and minimize expenses

Item 1 is in progress.  We recently approved a new hotel conference center and we are close to approving a new extended stay hotel.  These two projects alone are expected to yield in short order about $3.6 million in additional city revenue each year (see the hotel revenue study).  Should the voters approve the Nishi Project, we would gain another $1-$2 million per year.

Item 2 is not as complex as it seems.  Davis’ internet connectivity is slow and expensive.  By having the city invest some upfront money in fiber optic technology/infrastructure (DavisGig), the city would not only recoup its investment it would allow existing businesses to be better able to compete in the marketplace.  I was recently involved in a site selection process for my company and we were evaluating two potential sites – one had fiber optic, the other traditional broadband – any guess as to which we selected as a finalist?  In today’s world and even more so in tomorrow’s world slow connectivity is a deal breaker. Sadly Davis currently is in the slow/expensive category.  In addition, the CCE partnership should help lower electricity costs for our businesses.

And of course not all solutions needed are high tech –  there is the need to provide for greater zoning simplicity as well as improved parking management/capacity for our downtown.

Item 3 is a work in progress and will be for many years.  We have an ability / obligation to make our city services more efficient.  As an example, for our fire service we moved from 4 on an engine to 3.  By having a deeper look at service calls (type/time/location) we can maintain service and cut costs further by strategically planning our fire house locations and staffing/response models.


IMG-23Matt Williams

This second Vanguard question focuses on how to extract additional dollars from the taxpayers.  The problem with that focus is that it doesn’t answer the much more fundamental question, “Are we spending our money efficiently and effectively?”

Rather than starting with questions about raising money, we should begin with a focus on cost containment, which should quickly start by conducting a full staffing analysis (building on John Meyer’s April 2015 “Organizational review of general operations” study), to determine a systematic match between service delivery needs and staffing.

Finance and Budget Commission discussions have also strongly expressed the belief that a thorough Business Process Re-engineering engagement is necessary in addition to the staffing analysis.  Staffing poorly designed, inefficient, ineffective service delivery processes makes no sense.  Einstein said it perfectly, “Insanity: doing the same thing over and over again and expecting different results.”

Once we have a good understanding of our spending needs, then matching appropriate funding sources to those needs can be accomplished with appropriate accountability metrics and milestones incorporated into the annual Budget process.

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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20 Comments

  1. davisite4

    Will Arnold totally dodges the question.  On the other hand, Matt Williams misunderstands it (generating revenue doesn’t have to be about extracting more money from taxpayers, i.e., more taxes).  I would have thought that he would know that and that he would answer the question.  Be efficient, yes.  Then what?

    Brett’s and Lucas’s answers are good.

    It’s hard to see three good candidates here.

    1. The Pugilist

      Will didn’t totally dodge the question – he acknowledged the problem, but in the end didn’t offer specific measures to address it.

      I don’t think Matt Williams misunderstand it.  He is arguing that first we have to get a handle on spending needs before we spend.  He probably should offer a longer piece that fleshes out the second part of the question.

      Brett’s answer was good.  Lucas’ goes too much into Dan Wolk land.

      He writes, “Infrastructure costs for the city are immense, yet we are not in a unique position; nearly every local government faces a similar situation.”

      This is the establishment defense of our problems – we are not in a unique position.  Except that we don’t have a road map out of it and Lucas doesn’t offer us a guide.

      1. davisite4

        Will acknowledged the problem?  Geez, wow.  So what?  Any person who has been paying attention knows that there is a problem.  The question presupposes that there is a problem.  The question is, what are you going to do about the problem?  I can’t vote for someone who doesn’t let me know where they stand.

        You might not like Lucas’s answer, but he does give one:

        We’re in the process of getting the full scope/report of the state of our infrastructure needs/city fees structure. We will prioritize and act accordingly, although it takes time.
         
        In the meantime, we need to continue to enhance revenue through economic development, (fostering Davis Roots and small company development). With the news that MRIC is “on hold”, we’ll need to market/develop our vacant commercial parcels and redevelop others to assist in revenue generation.
         
        We’ll need to look at the right mixture of taxes to fund infrastructure needs.
         
        Among other ideas, I’d be supportive of a transportation parcel tax and would look at the viability of how it could shift over time, as transportation mode demands shift.

    2. Matt Williams

      davisite4 said . . . “generating revenue doesn’t have to be about extracting more money from taxpayers, i.e., more taxes)”

      davisite4, if you review the city’s annual Budget and Financial Statement (CAFR) documents, you will see that there are a very limited number of revenue sources for the City.  Here is a listing of those categories from Table 5: Revenues in the General Fund For the Year Ended June 30, 2015 and 2014

      Property Tax $12,156,824 22.5%
      Sales Tax $13,302,816 24.7%
      Real Property Transfer $367,464 0.7%
      Municipal Services $2,770,291 5.1%
      Business License $1,735,021 3.2%
      Construction Tax $562,206 1.0%
      Franchise Tax $743,175 1.4%
      Transient Occupancy Tax $1,319,909 2.4%
      Motor Vehicle In-Lieu $5,496,622 10.2%

      For the 2015 Fiscal Year the Total General Fund Revenues were $53,910,547, with $38,454,328 coming from the taxes listed above, and the remaining $15,456,219 from the non-tax categories below.

      Licenses and Permits $0 0.0%
      Fines and Forfeitures $661,160 1.2%
      Use of Money and Property $1,255,693 2.3%
      Intergovernmental $780,343 1.4%
      Charges for current services $9,303,663 17.3%
      Admin fee – Enterprise Fund $2,329,522 4.3%
      Other $1,125,838 2.1%

      When you look at those 16 categories, which category will see a significant revenue increase from “fostering Davis Roots and small company development“?  Which category will see a significant revenue increase from “market(ing)/develop(ing) our vacant commercial parcels and redevelop(ing) others“?

      Those are steps that our community absolutely needs to take in order to enhance the economic vitality and resiliency of the community, but their impact on “the city’s budget picture […] the funding for things like roads, parks, greenbelts, pools, buildings, as well as some unfunded retirement needs” is both minimal and time dependent.  Our City Budget issues are immediate and significant.  

      We can’t continue to conduct the City’s business with an “out of sight, out of mind” perspective.  We can not continue to tout the level of our General Fund reserve, while at the same time not acknowledging the massive number of dollars that was accumulating outside the boundaries of the formal budget document. We simply have not been honest with ourselves, and pointing fingers at the Feds and the State does not change our fiscal reality a single penny.

      The problem is ours.  We need to face it.

      The City needs to Pay Its Bills just like every individual Davis household does. We need to live within our means. We can’t continue to hide our deferred maintenance costs off the books. Hiding from our financial obligations doesn’t work in our personal lives. Pretending it works in our city government is both foolish and wrong.

      The process of paying your overdue bills does not start with adding money to your pocket and starting to spend that money at the first opportunity that presents itself.  It starts with a clear understanding of what you owe, so that the money you spend can/will be on the highest priority items.

      1. hpierce

        So… the fees paid for building permits, planning applications, map checks/inspection fees… where are those in your categories, Matt?  Meant as an honest question…

        1. Matt Williams

          hpierce, the categories come directly from page 17 of the City’s Comprehensive Annual Financial Report (see LINK)  Page 14 explains the Revenue categories as follows, with the bolded sentences apparently providing an answer to your question.

          The City’s governmental activities rely on several sources of revenue to finance ongoing operations. Taxes ($35.6 million), Operating Grants & Contributions ($12.6 million), and Charges for Services ($15.0 million) comprise the largest sources of revenue. Operating Grants & Contributions include revenues such as gas tax revenue passed through fromthe State for maintenance of the streets, Federal and State Child Care grants, HOME Federal Grant funding for the housing program, and HUD/CDBG Federal Grant funding. Charges for Services are revenues that arise from charges to customers who purchase, use, or directly benefit from goods or services. Examples of the types of services that fall under this category include building permits, business licenses, and park and recreation fees. Also included in Charges for Service is an internal administrative overhead charge to departments within the city for services provided to them by the City Manager’s, City Attorney’s and City Clerk’s offices, Human Resources, and Finance services.

           

  2. Frankly

    I like Matt’s approach.  It is certainly not going to make him any friends with most city employees.  It is also a politically dangerous position because Davis is a “company town” and that company is government.   But he is absolutely correct.

    Unfortunately, it will be next to impossible to get anything of value done.  It will be next to impossible because the of the proven effective political attacks will happen to quickly capitalize on victim mentality for any government employee to lose pay or benefits or lose their job.   And that narrative will be promulgated by the more senior highly-compensated employees… and their friends in politics… most whom are also government or government-sponsored employees themselves.

    There is a rape going on all around us and we are either oblivious to it, or we are served well by it and so we just ignore it.  That rape is the looting of private-sector wage earners to fund all the millionaire retirement benefits of our bloated and top-heavy city (and state) government.

    The very first thing we can and should do other than a Business Process Re-engineering and Six Sigma effort to extract the highest possible value of service from our city business… is to cut the damn retirement benefits to something more in line with the averages for the private sector.   That means no retirement at age 50 or 55 or 57 (60 for safety and physical labor jobs and 65 for the rest), all pensions capped at 60% of the average last five years of pay, and no full-paid Cadillac healthcare plans at retirement.   If city employees want to retire early and have better retiree healthcare plans, they can do what every other worker in the private sector has to do…  save and invest for it.

    By making these changes (to what is reasonable based on the entire cross-section of workers), and some more economic development, we would return our budget to balanced and start on the path to eventually solve our unfunded liability problems.

    1. Barack Palin

      Frankly, I agree with everything you wrote here.

      It will be next to impossible because the of the proven effective political narrative to quickly capitalize on victim mentality for any government employee to lose pay or benefits or lose their job.

      Maybe us taxpayers should band together and play the victim, because when you come right down to it we’re the true victims in all of this.

       

      1. Tia Will

        BP

        Maybe us taxpayers should band together and play the victim, because when you come right down to it we’re the true victims in all of this.”

        Oh please…..victims !  While this may or may not be true of you since I have no idea who you are, it is no more true of Frankly than it is of me.  I am no one’s victim, and neither is he.

        1. Barack Palin

          Baloney, many homeowners and others in Davis are indeed the victims when many of us are living on far less than city employees and city retirees.  We are victims when the city comes knocking on our door for more taxes in order to to keep the high pay and benefits of active and retired public employees funded.

      2. sisterhood

        Frankly & BP fail to understand that one cannot cut a government employee’s salary after their union has negotiated a contract for that salary and other benefits.

        Re: vicmhood, I believe you might  be a little jealous of the great benefit package that strong unions to acquire. I believe neither of you would do the hard work that government employees do every day. You have never worked for government yet you pretend to understand it. I have worked in both the private & public sector.  Public service was way more difficult and stressful.

        If you want to go after new hires and their benefits, that may be possible. But you’ll never be able to touch existing contracts.

        Thank you for paying your state taxes. I am enjoying a wonderfully rich retirement.

    2. The Pugilist

      There seemed like a brief time when everyone was on the same page, but between things improving somewhat and the influx of new leadership with ulterior motives, the reform agenda is collapsing.

    3. Mark West

      How can you solve a problem if you won’t acknowledge that the problem exists?  Matt’s approach is clearly looking to solve the $30-35 million deficit in unfunded expenses in our annual budget. You have to know how and why you are spending the money before you can understand how much revenue you need to cover the necessary expenses.

      All we get from Lucas is a promise of more of the same policies that created the mess in the first place.  Ignore the problems, say everything is ‘greatly improved’ but that we just need to raise taxes a little bit to keep the parks and pools open, then give the money to employees. Kick the can further down the road so that it becomes someone else’s problem.

    4. Tia Will

      Frankly

      There is a rape going on all around us and we are either oblivious to it, or we are served well by it and so we just ignore it.  That rape is the looting of private-sector wage earners to fund all the millionaire retirement benefits of our bloated and top-heavy city (and state) government.”

      Now that is certainly an interesting comment from an admirer of Ayn Rand who was a staunch defender of rape as long as the rapist was an entrepreneur from the private sector whose strongest claim to fame was not giving a damn about anyone but himself. And this was true of both her real life idol and her fictional protagonist. Nice twist to turn portray the government as the culprit.

      1. Frankly

        Yer so funny.

        And reliable in your ideological bent.

        An entrepreneur has to put her own money at risk, and then work 60 hour weeks without time off for years and than some become successful and hire people helping them care for their families and then maybe one or two also become entrepreneurs and do the same.  But the customers of the entrepreneur and the employees of the entrepreneur have freedom of choice.  The entrepreneur has to deliver value in both or she will not attract and retain either.  And she will fail.  And all the while she is regulated and taxed to the hilt.

        Contrast to the government employee paid more than others and with millionaire retirements benefits.  That employee works fewer hours a year…. much less that 40 per week.  She does not have to worry about delivering value to her customers or employees.  They are all captive.  Her business is not overseen by any other higher power.  She looks forward to that end of career paid vacation that starts at age 55.

        And she unionizes and her union pays for the campaigns of politicians that go take more away from the entrepreneur and her employees (looting) to direct to her.  She gets those politicians to protect her millionaire retirement benefits as she and her other union members start to realize that the gravy train must end… that it is all unsustainable.

        But in the meantime, she works hard to get her paid for politicians to loot more… to levy even higher and higher taxes so she can grow her end of career paid vacation benefits to as high as possible before it all comes crashing down on the next generation.

         

  3. Michael Harrington

    Frankly I generally agree with you

    No new taxes until those steps that Matt outlined are accomplished

    Lucas thinks Measure O money helps ? What, do what he and three other CC members did:  a sneaky raise over Thanksgiving Weekend giving millions of it away in employee raises ?

  4. Michael Harrington

    Matt:  I think your approach is spot on, and addresses the main issue I see for the next couple of years:  city  governance.  Please leave some signs

  5. dlemongello

    Matt’s approach of looking at where the spending is going, assessing what value  it is producing for us, and then altering that (if appropriate) to increase value for what is spent, is critical.  It’s an elaborate way of saying don’t waste money.  The hardest issue I think are the obligations we are already locked into, those expenditures, as far as I understand it, can not be changed, it can only be changed going forward by not making similar commitments.  As for infrastructure costs, those funds need to be efficiently and effectively spent, and giveaways to developers has to stop.

    1. Matt Williams

      dlemongello said . . . “As for infrastructure costs, those funds need to be efficiently and effectively spent, and giveaways to developers has to stop.”

      The Finance and Budget Commission has weighed in on the issue of “funds need to be efficiently and effectively spent.” 

      The FBC is recommending that the Davis City Council not approve any new tax measures or utility rate increases for placement on a ballot measure until such time that staff provides a detailed scope document of any and all proposed and/or deferred capital infrastructure projects.

      Said scope document shall include specific measurable success metrics for the proposed new services and projects, along with an inventory of the specific costs that will be incurred to provide said proposed services or complete said projects. 

      Each capital infrastructure project shall include its expected success metrics, as well as an anticipated budget. 

      The scope document will be updated each year as part of the Budget adoption process.

      Unfortunately, the Council chose to ignore the FBC recommendation in its second consideration of the Transient Occupancy Tax (TOT) when it approved the TOT for the June 7th ballot.

      It is worth noting that in the first consideration of the TOT, Brett Lee voted against further consideration of the TOT during Council’s first consideration, noting that the spending plan for the tax revenues was not consistent with the FBC recommendation.

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