Make no mistake, Davis is in dire shape financially. Without a tax increase in 2014, the general fund reserve will run out of money early next year.
Come July 1, the account should have about $3.7 million left in reserve. That’s $2.5 million less than it had on July 1, 2013. The city projects the 2014-15 budget to be $5.1 million in the red.
Short of Davis gutting services (including public safety and parks), it appears that the fund’s balance will fall to zero by late March 2015.
Yet knowing the dreadful outcome of our failing to vote for higher taxes, I am still not sure it’s the right thing to do.
In my March 5 column, I requested that the leaders of Davis do two things if they want my endorsement of their proposal to raise the sales tax in Davis from 8 to 8.5 percent.
I wrote: “What I would like, if they want a yes vote, is for the people on the Davis City Council to explain two things: Tell us what mistakes they and past councils made that got us in this predicament, and what exactly they will do to fix the problem they have identified.”
My concern was, “If they don’t understand what they did to put us in this crisis and they don’t know how to prevent it from recurring or getting worse, why should we trust them with even more tax money?”
Fortunately, they read this column and they responded. Unfortunately, their response was deficient and inaccurate.
If you got a city services bill this month, you received their reply to my column in the mail. It was part of an insert titled, “Bringing the city budget to you.”
That document includes a paragraph with the heading, “How did the city get to this point?”
Their answer begins, “The city implemented several cost-saving initiatives over the past five years. The city cut $11 million from the general fund, reduced its workforce by 22 percent and now requires employees to contribute toward their health care and retirement.”
That’s nice propaganda. However, that’s really a reply to the question, “How did we put off bankruptcy up to now?” You would not know why Davis is in a crisis reading that.
They continue: “Despite these efforts, costs are rising faster than revenues in the following areas:
“Necessary repairs to fix streets and aging infrastructure; increases in water costs for irrigating city parks and public facilities; and costs largely outside city control such as PERS health insurance, retirements and retiree medical costs and other state-mandated related costs.”
In other words, the city leaders blame everyone but themselves for the catastrophe.
Their claim regarding street repairs is largely off-base. It’s true that our public infrastructure is in a terrible state of disrepair. But Davis is going to use very little money from Measure O — the half-percent sales tax increase — to fix our crumbling streets. It’s going to use that money to shore up the general fund — almost all of which goes to city employees, past and present.
Their second claim regarding irrigation costs is true. However, that represents an increase of only about $400,000 per year, as a result of a choice this City Council itself made. The yearly hole in the general fund budget is 12.75 times greater.
Their third claim regarding costs “outside city control” is mostly false.
Yes, the rates CalPERS charges for health insurance have been going up at an unsustainable rate: about 10.7 percent per year for the past 10 years. However, the city has control over how much it spends on employee health care and pensions. It decides those in its labor deals. The council seems afraid to admit its mistakes, here.
Despite my repeated admonitions to the city to control its costs by requiring that total labor expenses go up no faster than revenues grow, the council has ignored my counsel on this for a decade. That ignorance on their behalf is what got us here.
The one part of their third claim that probably is true regards retirees. Until 2009, Davis did not fund retiree health care. It simply built up a massive liability (now $57 million). They did this so, on a cash-flow basis, total labor costs appeared to be less than they were. Now, because of higher prices charged by PERS, the city is paying a lot more for the current bills of its past retirees.
Earlier this year, the city of San Diego won a court case allowing it to require its retirees to pay these cost increases. I asked City Manager Steve Pinkerton if Davis could do that as well. He told me he doesn’t think we can, because he thinks our lifetime benefits are “vested,” where the appellate court said they are not in San Diego.
The crisis Davis is now in has been building for years. It’s not a consequence of the Great Recession. It’s the result of many unsustainable labor deals, including the ones agreed to by the current members of the Davis City Council.
They cannot undo what they or past leaders in our city did. However, if this group will at least publicly recognize what Davis needs to do differently from now on, the public should trust them with more tax money.
— Rich Rifkin is a Davis resident; his column is published every other week. Reach him at [email protected]