City Budget Plan A Tax and Spend Mirage

If you read the Davis Enterprise’s Wednesday addition you would have seen a small and scant article depicting the discussion from Tuesday Night on the City’s Budget. This article glossed over some very serious concerns with the city’s fiscal situation to paint a fairly rosy picture. The picture fails to inform the public of the magnitude of the fiscal problems facing the city or the fact that the city council majority’s plan to deal with these problems is in essence their own version of tax and spend while at the same time they ignore serious structural problems with the current budget.

City Finance Director Paul Navazio is recommending that the city consider three separate tax increases.

First he wants a public safety tax on the ballot sometime in 2009. Now City Councilmember Stephen Souza wants that on the ballot by November 2008 and made an impassioned plea as to why we need to fund police and fire immediately, however, that did not seem feasible to Mr. Navazio .

Second, Mr. Navazio wants a new sales tax on the ballot–asking for a renewal of the sales tax and an additional quarter-cent increase to pay for street and road maintenance. This would be placed before the voters in 2010.

Finally he wants to replace the parks tax with an increase in the municipal services tax in June of 2011.

So, the Davis voters will be looking at three new taxes over the next four years.

Mayor Sue Greenwald warned that seniors and others on fixed incomes are already stressed by the sales tax system, this increase could potentially put them at risk while really not adding much in additional revenue to the city.

However the most alarming statement came from Councilmember Don Saylor who proclaimed the end of the structural deficit.

“Today we really can look at the structural deficit as we refer to so often as something within our grasp. The numbers are so small that they will be taken care of by small increases in the economic development plans that are already underway.”

Councilmember Lamar Heystek remains very concerned about the structural deficit and is reluctant to support new taxes without a demonstration up front that we have improved things with current funds before we ask for additional funds.

The bottom line is that we really have not even dealt with the issue of a structural deficit.

According to Mayor Sue Greenwald

“We have a structural deficit, we haven’t really done anything to improve it, we’ve just changed our accounting principals, made them less conservative. But that also means it’s going to be more sensitive to downturns in the real estate market and other potentially recessionary phenomena.”

In fact the problem is far worse than that. She continued:

“We have not only not reduced it [structural deficit] but we’ve also made ourselves more vulnerable to our PERS contributions.”

If a problem occurs our payments may go up greatly increasing our structural deficit

We have also not begun to account our unfunded liability which would take $4.2 million a year to pay off.

The 800 pound gorilla, according to the Mayor, is the combined water and sewer capital improvement costs; current projections place costs around $335 million. What this means is that the tax increases in the next four years being proposed by council will be in a way dwarfed by the “fee” increases we will have to pay over the next 20 years in order to simultaneously expend money on a new water supply system and a sewer capital improvement system.

As one councilmember explained to me, we have not even really dealt with the structural deficit that is really looming–that of unfunded mandates in terms of employee retirement pensions. These are not even included on the books. So to suggest that we have solved our structural deficit is very misleading. We have not even touched on the real problems.

All of these tax increases are basically what is necessary to maintain current level of service with perhaps a small increase in police and fire with the public safety tax. None of these will deal with the ballooning entitlements we are handing out to city employees upon retirement. These are lifetime benefits that we are handing out and they are right now not even on the books. That does not mean that the problem is gone. It is simply a matter that this council is trying to get reelected and push off this problem to future councils and future generations.

To me that is the heart of fiscal irresponsibility. And, when the city’s budget director says:

“Our revenue and expenditures are getting pretty well balanced.”

And when the city’s only newspaper agrees with it and does not dispute that information:

“The city has slowly and diligently chipped away at that budget gap, bringing its spending plan more stability and reliability.”

We are not being well-served and we are really not aware of the burdens that are headed our way down the road.

—Doug Paul Davis reporting

Author

  • David Greenwald

    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.

Categories:

Budget/Fiscal

148 comments

  1. It is time for the public to ask for a town hall meeting on these issues. Funding lifetime health benefits for employees and not having this reflected on the books is completely irresponsible.

    Where is the accountability and the transparency?

    We do have to hold the council and city manager accountable, however, I would like to hear what they have to say.

  2. It is time for the public to ask for a town hall meeting on these issues. Funding lifetime health benefits for employees and not having this reflected on the books is completely irresponsible.

    Where is the accountability and the transparency?

    We do have to hold the council and city manager accountable, however, I would like to hear what they have to say.

  3. It is time for the public to ask for a town hall meeting on these issues. Funding lifetime health benefits for employees and not having this reflected on the books is completely irresponsible.

    Where is the accountability and the transparency?

    We do have to hold the council and city manager accountable, however, I would like to hear what they have to say.

  4. It is time for the public to ask for a town hall meeting on these issues. Funding lifetime health benefits for employees and not having this reflected on the books is completely irresponsible.

    Where is the accountability and the transparency?

    We do have to hold the council and city manager accountable, however, I would like to hear what they have to say.

  5. DPD – thanks for a great article on this.

    We already pay a lot of extra taxes, as is, and it upsets me to learn that Navazio is promoting 3 new tax increases, not including the fee increases that will occur due to the updates for the water and sewer system.

    As I recall, the City has a history of predicting budget deficits, some of which never materialized. That being said, with the downturn in the housing market and the economy in general, I don’t doubt that Davis revenues will take a hit. So, if we assume that the City is correct in its forecasts, the question is, “what do we do now?”

    Further increasing the sales tax is crazy – our sales tax, at 7.75% is already at the highest tax level in yolo county:

    http://www.boe.ca.gov/cgi-bin/rates.cgi?LETTER=Y&LIST=COUNTY

    Increasing the sales tax will not only hurt local businesses, but it will also hurt those who can least afford it, as it’s a regressive tax.

    I think Davis needs to really look at its budget and figure out where it can make cuts, rather than just asking the taxpayers to fork over more money. In the face of years of so-called budget deficits, has Davis ever really made any actual cuts? For instance, (1) city workers make far more than state workers do – why not have a freeze on salaries? (2) Why not ask the city to figure out ways to do the same services for less? I don’t believe that this has been a priority of the city in the last few years. (3) Is the city maximizing its receipt of state and federal grants? (4) Are there are services that the city currently provides that are nice to have, but not really essential? For example, the City routinely spends thousands of dollars on magazine ads promoting the City of Davis…is this really necessary? Does it really bring in business to the City? I doubt it.

    My basic point is that it appears city staff automatically asks for tax hikes rather than look for ways to cut their own budget. Davis residents have been generous in the past by approving tax measures. Now is the time to stand up and force the City to become leaner and more efficient.

  6. DPD – thanks for a great article on this.

    We already pay a lot of extra taxes, as is, and it upsets me to learn that Navazio is promoting 3 new tax increases, not including the fee increases that will occur due to the updates for the water and sewer system.

    As I recall, the City has a history of predicting budget deficits, some of which never materialized. That being said, with the downturn in the housing market and the economy in general, I don’t doubt that Davis revenues will take a hit. So, if we assume that the City is correct in its forecasts, the question is, “what do we do now?”

    Further increasing the sales tax is crazy – our sales tax, at 7.75% is already at the highest tax level in yolo county:

    http://www.boe.ca.gov/cgi-bin/rates.cgi?LETTER=Y&LIST=COUNTY

    Increasing the sales tax will not only hurt local businesses, but it will also hurt those who can least afford it, as it’s a regressive tax.

    I think Davis needs to really look at its budget and figure out where it can make cuts, rather than just asking the taxpayers to fork over more money. In the face of years of so-called budget deficits, has Davis ever really made any actual cuts? For instance, (1) city workers make far more than state workers do – why not have a freeze on salaries? (2) Why not ask the city to figure out ways to do the same services for less? I don’t believe that this has been a priority of the city in the last few years. (3) Is the city maximizing its receipt of state and federal grants? (4) Are there are services that the city currently provides that are nice to have, but not really essential? For example, the City routinely spends thousands of dollars on magazine ads promoting the City of Davis…is this really necessary? Does it really bring in business to the City? I doubt it.

    My basic point is that it appears city staff automatically asks for tax hikes rather than look for ways to cut their own budget. Davis residents have been generous in the past by approving tax measures. Now is the time to stand up and force the City to become leaner and more efficient.

  7. DPD – thanks for a great article on this.

    We already pay a lot of extra taxes, as is, and it upsets me to learn that Navazio is promoting 3 new tax increases, not including the fee increases that will occur due to the updates for the water and sewer system.

    As I recall, the City has a history of predicting budget deficits, some of which never materialized. That being said, with the downturn in the housing market and the economy in general, I don’t doubt that Davis revenues will take a hit. So, if we assume that the City is correct in its forecasts, the question is, “what do we do now?”

    Further increasing the sales tax is crazy – our sales tax, at 7.75% is already at the highest tax level in yolo county:

    http://www.boe.ca.gov/cgi-bin/rates.cgi?LETTER=Y&LIST=COUNTY

    Increasing the sales tax will not only hurt local businesses, but it will also hurt those who can least afford it, as it’s a regressive tax.

    I think Davis needs to really look at its budget and figure out where it can make cuts, rather than just asking the taxpayers to fork over more money. In the face of years of so-called budget deficits, has Davis ever really made any actual cuts? For instance, (1) city workers make far more than state workers do – why not have a freeze on salaries? (2) Why not ask the city to figure out ways to do the same services for less? I don’t believe that this has been a priority of the city in the last few years. (3) Is the city maximizing its receipt of state and federal grants? (4) Are there are services that the city currently provides that are nice to have, but not really essential? For example, the City routinely spends thousands of dollars on magazine ads promoting the City of Davis…is this really necessary? Does it really bring in business to the City? I doubt it.

    My basic point is that it appears city staff automatically asks for tax hikes rather than look for ways to cut their own budget. Davis residents have been generous in the past by approving tax measures. Now is the time to stand up and force the City to become leaner and more efficient.

  8. DPD – thanks for a great article on this.

    We already pay a lot of extra taxes, as is, and it upsets me to learn that Navazio is promoting 3 new tax increases, not including the fee increases that will occur due to the updates for the water and sewer system.

    As I recall, the City has a history of predicting budget deficits, some of which never materialized. That being said, with the downturn in the housing market and the economy in general, I don’t doubt that Davis revenues will take a hit. So, if we assume that the City is correct in its forecasts, the question is, “what do we do now?”

    Further increasing the sales tax is crazy – our sales tax, at 7.75% is already at the highest tax level in yolo county:

    http://www.boe.ca.gov/cgi-bin/rates.cgi?LETTER=Y&LIST=COUNTY

    Increasing the sales tax will not only hurt local businesses, but it will also hurt those who can least afford it, as it’s a regressive tax.

    I think Davis needs to really look at its budget and figure out where it can make cuts, rather than just asking the taxpayers to fork over more money. In the face of years of so-called budget deficits, has Davis ever really made any actual cuts? For instance, (1) city workers make far more than state workers do – why not have a freeze on salaries? (2) Why not ask the city to figure out ways to do the same services for less? I don’t believe that this has been a priority of the city in the last few years. (3) Is the city maximizing its receipt of state and federal grants? (4) Are there are services that the city currently provides that are nice to have, but not really essential? For example, the City routinely spends thousands of dollars on magazine ads promoting the City of Davis…is this really necessary? Does it really bring in business to the City? I doubt it.

    My basic point is that it appears city staff automatically asks for tax hikes rather than look for ways to cut their own budget. Davis residents have been generous in the past by approving tax measures. Now is the time to stand up and force the City to become leaner and more efficient.

  9. Unless there is a cooperation, by those salaried by the city, that changes are necessary as Davis’ financial belt is tightened, we will be heading down the path to privatization of most city services/functions. We cannot rely on ambitious short-sighted Council members whose only interest is accumulating support for their future attempt at higher office.

  10. Unless there is a cooperation, by those salaried by the city, that changes are necessary as Davis’ financial belt is tightened, we will be heading down the path to privatization of most city services/functions. We cannot rely on ambitious short-sighted Council members whose only interest is accumulating support for their future attempt at higher office.

  11. Unless there is a cooperation, by those salaried by the city, that changes are necessary as Davis’ financial belt is tightened, we will be heading down the path to privatization of most city services/functions. We cannot rely on ambitious short-sighted Council members whose only interest is accumulating support for their future attempt at higher office.

  12. Unless there is a cooperation, by those salaried by the city, that changes are necessary as Davis’ financial belt is tightened, we will be heading down the path to privatization of most city services/functions. We cannot rely on ambitious short-sighted Council members whose only interest is accumulating support for their future attempt at higher office.

  13. Davis Republican–

    You are right on. But it’s worse than you think. See what they did not tell the public (and DPD did) is that they have already locked away much of the budget for non-discretion spending. So you have worker contracts and pensions that are already locked into place–for life for city workers.

    So you have parks, public safety, and employees that account for basically all of the real spending in the city–Souza admitted this a few months ago at a council meeting. They just passed a parks tax last year. We are seeing the payout for that already. They are talking about a public safety tax. So where are you going to cut the budget?

    At some point there is going to be a tax revolt in this town and I think the council knows it, but they know they can also forestall that until a future council is in place.

  14. Davis Republican–

    You are right on. But it’s worse than you think. See what they did not tell the public (and DPD did) is that they have already locked away much of the budget for non-discretion spending. So you have worker contracts and pensions that are already locked into place–for life for city workers.

    So you have parks, public safety, and employees that account for basically all of the real spending in the city–Souza admitted this a few months ago at a council meeting. They just passed a parks tax last year. We are seeing the payout for that already. They are talking about a public safety tax. So where are you going to cut the budget?

    At some point there is going to be a tax revolt in this town and I think the council knows it, but they know they can also forestall that until a future council is in place.

  15. Davis Republican–

    You are right on. But it’s worse than you think. See what they did not tell the public (and DPD did) is that they have already locked away much of the budget for non-discretion spending. So you have worker contracts and pensions that are already locked into place–for life for city workers.

    So you have parks, public safety, and employees that account for basically all of the real spending in the city–Souza admitted this a few months ago at a council meeting. They just passed a parks tax last year. We are seeing the payout for that already. They are talking about a public safety tax. So where are you going to cut the budget?

    At some point there is going to be a tax revolt in this town and I think the council knows it, but they know they can also forestall that until a future council is in place.

  16. Davis Republican–

    You are right on. But it’s worse than you think. See what they did not tell the public (and DPD did) is that they have already locked away much of the budget for non-discretion spending. So you have worker contracts and pensions that are already locked into place–for life for city workers.

    So you have parks, public safety, and employees that account for basically all of the real spending in the city–Souza admitted this a few months ago at a council meeting. They just passed a parks tax last year. We are seeing the payout for that already. They are talking about a public safety tax. So where are you going to cut the budget?

    At some point there is going to be a tax revolt in this town and I think the council knows it, but they know they can also forestall that until a future council is in place.