By David M. Greenwald
Davis, CA – It has been more than a decade since we first laid out the case that the city of Davis, mainly through their own policies, put the city at grave fiscal risk—they raised salaries too much and too fast in a series of MOUs from 2005 to 2009, and they enhanced pension benefits in the early 2000s without considering how to backfill the unfunded liabilities they created.
When the great recession hit, those fiscal decisions were exposed. And for a brief period of time, the city council actually attempted to rein in spending and shore up unfunded pension and retiree medical liabilities.
One thing that has become clear over the last decade as we analyzed it, is that Davis, which still has a funding shortfall, brings in far less in the way of sales tax than most comparable cities its size. That’s a big reason why a decade ago Davis made plans to develop an innovation center which could generate new revenue in property and sales tax to help bridge that gap.
One point I have made an innumerable number of times over the last decade is that it’s not enough to simply add revenue—because if you add spending either through employee compensation increases or new programs and staffing, you wipe out the gains you make from economic development or new taxes very quickly.
It doesn’t seem like council is mindful of that lesson and the need for cost containment, and the council’s lack of commitment to it definitely frustrated some past councilmembers, including former Mayor Robb Davis.
Case in point is the ladder truck discussion. Staff and council actually believed that the better strategy for staffing the new ladder truck would be adding six new firefighters and about $1.3 million in annual spending.
However, staff recognized that that was probably not the fiscally prudent course.
Councilmember Will Arnold went so far as to oppose Option 3, arguing that we needed to add additional staffing and that he was not comfortable.
“I’m really concerned about going with this Option 3,” said Councilmember Will Arnold. “I think it sort of on paper looks like it’s saving money, but it has a lot of these potential negative effects.”
Dan Carson felt this motion was “fiscally responsible and it strikes a balance.”
He noted, “Part of the reason we are out to rezone downtown is so that it becomes the economic powerhouse for this community that we want as well as a place for infill housing that will be environmentally sustainable.”
The finances here are problematic. $700,000 in ongoing additional costs. Council believes that they can use grants to cover the first three years, but after year 3 the costs will shift to general fund. They have a plan to pay for it? Not really. It’s more like hoping something will come up.
I call that … pound and pray.
There are times that you really need to make additional expenditures and then find a way to fund them. But is this one of those times?
In the Fitch & Associates Standards of Cover report, they found “it is recommended that the City of Davis invest in their own ladder truck.”
The report added, “A community the size of the city of Davis with the complexity of risk should not be without consistent ladder truck service or depend on an apparatus from distant communities when the UC Davis apparatus is unavailable.”
But how many communities the size of Davis have a 40,000-person campus next door with a fire department with their own ladder truck?
The city of Davis needed the truck approximately 115 times in 2020, though it’s not clear how many times for an actual fire—and it’s not clear how times the city needed a ladder truck, but it was unavailable.
Other numbers have suggested the number of times that the ladder truck has been dispatched and remained on site is more like once a month.
From the start, this seemed like a solution in search of a problem—that the consultant report failed to take into account the actual realities in Davis and the council prioritized a nice-to-have over a need-to-have.
Councilmember Carson’s reference to an economic powerhouse in the downtown is more wishful thinking. I am a strong proponent of the downtown better utilizing space by going above the one- and two-story core. I am also a believer that more mixed use is a way to further revitalize the downtown.
But we have to be cognizant of the economic analysis which suggests that mass densification in the downtown is likely not financially feasible, given high land and construction costs in the city.
Without redevelopment money, we may see the occasional deep pocketed company be able to redevelop, like we saw with University Mall, but for the most part I think it’s going to be few and far between.
The best avenue for economic development is still the potential DiSC project, but it faces an uncertain future with a vote potentially in June. Moreover, while that project might generate $3 to $4 million in revenue, between increasing employee compensation, pensions and retiree medical and now new programs, most of that money has already been eaten up before the project has even been approved.