Commentary: Council, Community with a Big Decision To Make

Tonight the Davis City Council will not make the final decision on what to do about a revenue measure, but the decision they make tonight will clearly inform their final decision coming right at the deadline.

I was reading a letter just published in the local paper and realized that the city continues to do a poor job of articulating in clear and no uncertain terms why it is that they are seeking the revenue measure or measures.

The letter says to “build a budget on needs, not wants.”  The discussion combines the school district’s ask that may be coming down the line with the city’s ask.

They write: “Davis school district teachers are seeking higher wages. The Davis City Council wants to decide options to raise more revenue with a possible tax to close an annual budget shortfall. Next on the list is the state seeking more revenue. Where does it stop?”

The letter mainly focuses on the school board, but I think in both cases the issues are relatively similar.  Both the city and school district’s budgets have been stretched for a long time (2008 is
a decade ago now).  You can make reasonable complaints about the management of money, but both government entities made decisions on how to keep things afloat.

For the district, those decisions focused on the preservation of schools and programs while maintaining its teacher-student ratio to the best of their ability.

For the city, they first cut through temporary furloughs and did not replace employees who left or retired.  They then balanced their budget through deferring maintenance.  Finally, they had a brief period of structural reform.

Can we complain about the choices the city has made?  We have over the years.  One of the first things the Vanguard did in 2007-2009 was point out that the compensation system was unsustainable.  In fact, we were warning this in the spring of 2008, six months before the economy of the US collapsed.

Second, we spent a good amount of time going over past mistakes, from the creation of four on an engine to the implementation of three percent at 50 to the bait and switch of the 2004 sales tax increase and the double-digit pay increase from 2005 to 2009.

Third, we pushed for structural reform.  We pushed the council to make structural changes to the budget.  To be more honest and upfront about the impact of unmet needs and deferred maintenance.  To create a two-tiered system to fix pensions and retiree medical.

Should we have gone further?  We got a lot of the reforms we needed in the 2012-2015 MOUs.  We would have preferred not to have had the COLAs that came in the last MOU, but that three percent increase represents the only pay increase that the employees have received since the 2009 MOUs expired.

That means, in real dollars, employees are taking home substantially less in 2018 than they were in 2008 when this started.

But that is only half the picture.  As Robb Davis pointed out, now two years ago, “Staff numbers have been cut by over 100 in the past decade (453 to 352).”  However, while the “vast majority of staff in the city has seen the amount of their take-home check decrease over the past five years,” the overall “cost of compensating staff has increased from just over $100,000 to over $150,000 per employee in the same decade.”

That is one of the problems that we face.  Robb Davis also pointed out that “because we have cut staff in a non-strategic way (via attrition), it is not even clear whether we are staffed appropriately to provide city services. We have a highly professional and responsive workforce—with workers taking on many new tasks due to cuts—but because employee costs represent the majority of General Fund expenses we must find ways to contain compensation.”

But in the meantime, we have another problem and that is that we are currently deferring about $8 million in costs each year on infrastructure – parks, roads, greenbelts, sidewalks, and city buildings.

We don’t have eight million dollars to legitimately cut from the general fund budget.  So we have a choice.  It is not a good choice or a pleasant choice, but it is a choice.

We can continue to defer maintenance.  Right now, the city council has scraped together about $4 million a year to pay for roads.  But we have deferred maintenance elsewhere as well.  These are not immediate bills, but as we defer maintenance, the costs will go up over time.  Or we can bite the bullet and tax ourselves now, create the funding stream to reduce our deferred maintenance and close our functional deficit.

At the last meeting, the council started leaning toward a middle ground.  Instead of biting off the entire $8 million right now, they are looking at maybe $4 million in funding.

For that plan to work, the council is going to need to be religious about cost-containment and finding ways toward economic development.  As Mayor Pro Tem Brett Lee put it, “We have to find a way to make the city’s finances sustainable.”

The city council has actually done a fairly good job of managing costs.  Right now Bob Leland projects that costs will only increase by about two percent.  That’s at most keeping pace with inflation.  The problem, as we have pointed out, is we lag on the revenue side – especially on per capita retail revenue, where we trail virtually every other city in the region and every other comparative community.

“We’re not there,” he said.  “There does need to be some economic development but on the revenue side, for tax measures.”

The proposal he put forward last week aims at about $4 of the $8 million this go around.

For Brett Lee, the key to the approach is the need not to bite off everything at once.

“I’m not sure we need to eliminate the shortfall in one go in terms of a revenue measure.  The question is of course, what percent,” he said.  “I’m sort of thinking a reasonable approach is to cut that gap by half.”

That would mean taxes that generate about $4 million of the $8 million gap between current funding and what is needed for basic levels of full funding.

Mayor Pro Tem Lee is looking at the combination of cost containment and economic development, as well as the revenue from legal cannabis, to further cut that gap and then tackle the rest in a second go-around, possibly in 2020.

He said going to a $250 parcel tax: “That seems like a big ask and there seem to be other ways to address that gap.”

His conception would be to do a $90 parks tax with an inflator and a ten-year term, with a two percent tax on electricity, cable and gas.  That would generate $1.4 million from the UUT and $2.6 million from parks.

Will his colleagues go along with that?  We’ll find out tonight.  Will the community?  We’ll find out in June.  But these are core city needs, not luxuries.  The question is whether the council can communicate to the community how bad the situation really is.

—David M. Greenwald reporting