When the city polled residents, the vast majority of those residents were willing to back a renewal on the city’s sales tax measure, but at the same time most did not seem to recognize just how bad the city’s fiscal status is.
But while in one sense the city declaring a fiscal emergency is less an admission of a problem and more of a pro-forma declaration by the city in order to keep the sales tax on schedule and not produce a three-month lag – underlying that declaration is an acknowledgment of just how bad things are.
It seems ironic that it took a quirk in the state law to get the council to declare the obvious, and probably reluctantly so – the city of Davis is in a fiscal emergency.
The reality is that because the city is being forced to go to district elections and move the election to November, the council faces a dilemma. In order to keep the election a general election, it must coincide with the normal council election schedule, which would move from March to November.
However, if they put the sales tax renewal on the ballot due to other quirks in the state law – the 110-day period for example – there would be about a three-month gap in funding, which would cost the city about $2.2 million.
The city’s staff report did not explain what constitutes an actual fiscal emergency, but does explain it takes a unanimous vote from council to declare one.
My first point here is that the city probably could avoid declaring a fiscal emergency if it really wanted to do so. The city can put a measure for taxes on the ballot any time it wants – it just can’t have a general tax that can be passed by a simple majority when it does so.
But why the need to do that in this case? After all, the sales tax renewal is polling between 71 and 77 support. If it receives that, the tax measure would pass even in an election where two-thirds of the vote is required to pass it. This is what happened with the parks tax renewal.
My second point is that if the city really is bent on putting this on the March ballot for a majority vote, why not at least attempt to get more tax revenue? After all, going to 1.5 percent rather than 1 percent would increase the tax revenue by over $4 million. That would make up for the loss of the roads tax and get the city far closer to what it actually needs – about $10 million to close the long-term budget shortfall.
I understand being risk averse, but it strikes me that the city here is almost afraid of its own shadow – as if unwilling to take even the slightest risk even when the polling suggests it should be able to get away with, by either going to a two-thirds vote in March or keeping a majority vote while expanding the tax.
As I have pointed out previously, since 2014, the city has wasted one opportunity after another to close this deficit, either by failing to put a tax measure on the ballot (2014 and 2016) or putting two on at the same time without running a robust campaign (2018). The result is, the city has done very little to solve the gap.
The reality is that the city does have a fiscal emergency and, in a way, we can argue it is worse than they are willing to admit.
The case the city makes is a simple and straightforward one. The delay in implementation of the sales tax, just for three months, would lead to a loss of $2.2 million anticipated to be collected from January 1 to March 31 of 2021.
According to staff’s analysis, this “would require the City Council to determine how to reprioritize among critical city services, reducing or cutting numerous City programs including public safety (Police and Fire); maintenance of city roads, sidewalks, bike paths and parks; and community programs, such as recreation for youth and seniors.”
The fiscal emergency here then is the one-time loss of tax revenue over a three-month period.
It seems rather unfortunate that the city makes absolutely no mention of the ongoing $10 million annual shortfall in the budget. It makes no mention of the fact that the city is about $200 million short of what it needs to provide for basic infrastructure needs over the next two decades.
It seems to me that this would be an excellent opportunity to level with the public – particularly since the council is going to impose a permanent tax on the community, if 50 percent approve. Particularly since at some point over the next 20 years they will have to come back and ask for more. Particularly since they will be asking the voters at some point to approve economic development projects like ARC (Aggie Research Campus).
But perhaps the most astonishing part of this is that $2.2 million really does represent an emergency. The emergency, however, is not necessarily the funding gap. The emergency is that if the city really does have a $2.2 million funding need, it does not have the funds.
I was thinking that, while the city lists the need to reduce or cut city programs starting with police and fire, the reality is that the city could probably take from infrastructure needs to plug that one-time gap.
And it probably can.
According to the city manager, the city has about $3.7 million in the Operations and Maintenance program budget. This is primarily for general street maintenance, sweeping, striping, traffic signals, and street lights. They also have about $5.8 million in the 8250 budget, which is the general transportation infrastructure program. There is some carryover there.
The city also has a variety of CIPs (capital improvement projects) that are focused on road improvements. That total is therefore about $11.7 million.
So, in a heartbeat, they could probably put off some of these projects for another year to cover the $11.2 million gap. Remember as well, we are not talking about this year’s budget but rather the 2020-21 budget, in which they could reallocate $2.2 million for roads toward the immediate shortfall.
Given that declaring a fiscal emergency does not seem to carry with it any negative consequences, it seems to make more sense to go ahead and do that.
From my perspective, there really is a fiscal emergency here – but it is not the loss of $2.2 million that can be cushioned or even avoided by taking another approach. It is that the city really does lack the flexibility in an emergency to make a $2.2 million unexpected cost without crippling city services, and it is the long term fiscal challenges that the city still has not adequately addressed.
Finally, if the city does do this, they better use it as a teaching moment for the community, because the polling shows that most people do not know the fiscal challenges we really face.
—-David M. Greenwald reporting