Commentary: Council Should Reconsider Type of Revenue Measure It Pursues

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Parks

Politics in many ways is the art of the possible, and sometimes the more ideal solution must give way to the more pragmatic solution.  You could argue that, in an ideal world, the city of Davis would be well on its way to bringing online commercial development which could be a new source of revenue generation for the city.  And you can argue that the city has been irresponsible in the salaries and benefits they have given out – particularly past councils.

But we are where we are now, and large scale additional cuts seem impractical at best and harmful to city services at worst.  Our commercial development aspirations have been at best delayed by land use battles and financing uncertainties, and that leaves, as a short-term and immediate option, a new revenue measure.

Likewise, if I could put my ideal revenue measure on the ballot it might be a more progressive tax than a parcel tax, but the advantage we have with a two-thirds parcel tax is that, unlike the school district, it is actually visiting per unit, so that rental units are assessed at the same rate as single-family homes, and, more importantly for me, we have a good deal of control over how that money is spent.

For a parcel tax, each dollar must be allocated at the time it goes on the ballot.  Whereas for a general tax, there can be advisory measures, but there is no way to ensure that the council/city spends the money as they promise to do.  Famously now is the example of the 2004 sales tax, passed by the voters who were told the money was needed for public safety and parks, only to have council turn around and give it to city staff in a massive pay increase from 2005 to 2009.

However, in the face of potential organized opposition, attempting to gain two-thirds of the vote seems at the very least a tall task.  A much more modest sales tax increase in 2014 with an
immediate $5 million structural deficit only yielded 50 percent of support.  That measure didn’t even have real opposition.

Perhaps if the council made a concerted effort to lay out their proposal and the budget reality that the city faces, the community might step up to support a two-thirds tax, but that would be rolling the dice.

Back in December, Mayor Pro Tem Brett Lee attempted to open the door again to the Utility User Tax (UUT).

He said, “We have to find a way to make the city’s finances sustainable.

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

If the city has an $8 million annual deficit, Mayor Pro Tem Lee said, “I would like to see half that gap made up with economic development and the other half made up with taxes of some sort.

“There is a fair amount of skepticism in the public,” he said, alluding to the public comments that expressed such skepticism, and noted that “the public doesn’t trust us to do the right thing.”

Mayor Pro Tem Lee said, “I think the fundamental issue is the transparency and the trust. So I’m leaning away from a specific two-thirds required parcel tax. I think we really should address the fundamental issue which is really trust in government and transparency.”

He noted that the last tax that passed was the sales tax and it only passed at 58 percent back in 2014. And he added, “The community’s temperature is probably a little less open at this point.”

He argued that his “thinking has shifted a bit” and he believes the UUT has some pluses and is “a reasonable way to go.”

At that time, he seemed alone in his thinking.  But, given the potential threat of opposition, the general tax might be the best way to go.

Ironically, the decision to go to a general tax would move the city further away from concerns raised by some potential opponents of the tax.

One objection: “There is no fixed binding plan for cost reduction and containment. Are we supposed to trust the City to do it later if they get the tax revenue? There’s no plan to have a fixed list of exactly what the city would spend this new revenue on, and, Why don’t you write about these glaring deficiencies in their planning?”

The irony of course is that the city would have a good deal more ability to commit to certain spending for a special parcel tax – that would require them to commit to spending the money on specific policies.  They could then have a parcel tax oversight committee, just like the school district, made up of citizens that would be able to monitor the spending.

Or perhaps the city could just utilize the Finance and Budget Commission, which currently operates in that capacity already.

If opponents want “a fixed list of exactly what the city would spend this new revenue on…,” the best thing they can do is have a special tax on the ballot.  With a general tax, there is no fixed list.

The problem that we face is simple – the voters in a contested election probably are not going to support a $250 parcel tax and reach the two-thirds threshold.  So now we go, from the more ideal policy, back to the realm of the art of the possible.

Council has a lot of decisions to weigh tonight.  But one that needs to be laid out very clearly is what the cost of failure is, when they could reasonably try again, and whether the advantages of a special tax outweigh the risk of attempting to get to a two-thirds majority support for the tax.

—David M. Greenwald reporting



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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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16 thoughts on “Commentary: Council Should Reconsider Type of Revenue Measure It Pursues”

  1. Keith O

    After the giveaways of the last two general fund tax measures I think the council would face the wrath of the community if they were to try to go that route again.

        1. David Greenwald

          No that’s separating the two revenues measures.  Clearly in 2004 they got a sales tax passed and then gave away a massive pay increase the next year.  What happened after 2014 was quite different and it’s important to differentiate the two, even though I believe the council shouldn’t have given that 3 percent COLA, it was still just one pay increase since 2009.

          1. David Greenwald Post author

            They gave away all of the general fund gain from the 2004 tax increase and then some. The same is not true for the last sales tax measure.

        2. Keith O

          But they did give away a sizable chunk of that sales tax revenue.

          David, here’s what you wrote in Dec. 2015 after the raise was given:

          According to the city manager’s view, “The 3% over two years agreed to between management and the employee groups that is before the City Council Tuesdaynight for consideration is an incremental move to improve overall compensation for our employees after a very difficult few years.”
          But that brings us back to Councilmember Lamar Heystek’s comment that the issue is not what employees deserve, it is about what the city can afford to pay – and be responsible into the future.
          Right now this deal looks completely irresponsible. The Vanguard on Monday showed city projections for how even a modest $1.1 million increase to employee compensation will impact the budget down the line.

          https://www.davisvanguard.org/2015/12/commentary-council-passes-mous-without-a-word/

          1. David Greenwald Post author

            You said they gave away “much/most” of the general funds, they did not. They clearly gave some.

        3. Keith O

          David also wrote in the above article:

          While some councilmembers may maintain that these issues were discussed during their closed session meetings, we never got to hear them publicly justify this raise that not only adds $1.1 million to the budget but also adds between 5 and 8 percent to the city’s contributions to CalPERS (California Public Employees’ Retirement System).

          The 2014 sales tax measure generates $3.6 million.  So with the $1.1 million in raises  plus the addition to contributions we gave away about a third of that tax when if I remember right we were told those funds wouldn’t be used for compensation.

          Vanguard readers, if you would like a better take on the sales tax general fund giveaway read the comments in this article.  Very enlightening.

          https://www.davisvanguard.org/2015/12/commentary-council-passes-mous-without-a-word/

  2. Jeff M

    I agree with Rich Rifkin that, at the very least, city employee total compensation should be keyed to the general consumer price index.   In other words, pay increases cannot ever exceed the rate of inflation.

    The fact is that city employee total compensation has far exceeded the rate of inflation over the last 20 years.

    So holding wages fixed for a few years is justified.

    One problem with this approach is that there are signs that Trump and the GOP are causing the economy to grow again after the previous eight years of “you didn’t build that” job-less-pseudo-recovery; and inflation concerns look to be real again instead of the fed’s legacy hand wringing that substituted for it over the last two administrations.

    Benefit costs are bad mojo for employers… employees generally take them for granted and focus on their take-home pay.  This is especially true when inflation hits and impacts immediate lifestyles.  But until the last 20 years, government work was were you accepted lower take-home pay for greater job security and greater benefits.  We need to return to that.

  3. Jeff M

    I plan to be very active in time and money campaigning against any new tax measures.

    City leadership and Davis voters remind me of my kids that did not understand logical consequences until they were applied.  The logical consequences for failing to effectively deal with too high city employee compensation, and to also the failure to champion and approve recent peripheral commercial and residential development projects, is city financial decline.

    And this is not a new problem.  The city has lacked adequate tax-generating commercial property for 30 years during the same time that city employee compensation has increased beyond the rate of inflation.  The budget pressure has been building for that long.   We are not living within our means both because we pay too much for city labor, and because we don’t have enough tax-revenue-generating business… not because our taxes are too low.

  4. Ken A

    It has been closer to 30 years since those in government (both the tax, spend and borrowers on the left and the tax cut, spend and borrowers on the right) learned that they can use the cash flow for pay and benefit increases for themselves (and pay back campaign donors) and pay for everything else with loans, bonds and real estate taxes and let the kids deal with the problems down the road while they deal with what to buy with their six figure pensions (starting at age 50 for most in public safety).

    http://www.mybudget360.com/wp-content/uploads/2012/03/fed-public-debt.png

     

    1. Howard P

      Just hope all understand that since 2001, a lot of that debt is from military actions and acquisitions of materiel/equipment…. social services costs… not just (or, even near) government pay nor benefits… the poster’s language is technically correct, but implies that the vast majority is from government employee compensation… not factual.  Technically correct, but given the topic, more than a bit misleading.

      A chart that separated that out might well be illuminating… but folk choose to present “facts” with their spin… human nature.

      1. Ken A

        The biggest part of the debt is for medical care that just keeps going up and up, but the military waste is not far behind (I spent some time with an Army Colonel that married in to the family over the holidays).

        The point I was trying to make was that from 1957 to 1987 (a period of time when my both grandfathers worked in the public sector for low pay and good job security) all levels of government were not borrowing as much, living within their means (and saving for capital items so we had heat and AC in most public schools).  It was closer to 30 years ago (rather than 20 years when almost every CA fire department would get over a thousand qualified applications for “each” position if they allowed that many people to apply) when things shifter from “lower than average pay” to “higher than average pay” (still with the great job security)…

        P.S. I’m betting that DJUSD does not have a HVAC capx fund in a lockbox where a percentage of the cost of new HVAC units for each building are funded each year and I’m ready for an “emergency” tax down the road when we have an “unexpected” problem and a 20 year old AC unit (that Mark Blake told the school district would last 20 years) dies on a 100 degree day…

        https://www.nytimes.com/2018/01/04/us/baltimore-schools-winter-heating.html

         

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