Before you vote, yes or no, on the City Council’s proposal to increase the sales tax in Davis another half-cent — from 8 percent to 8.5 percent — you should know where your money is going.
The city figures the larger levy will generate $3.61 million per year. Most of that will go to higher compensation for its current employees and to cover unfunded expenses for retirees.
The tax increase is first needed to pay for fatter salaries given away by the current City Council. The increase also will cover the growing costs of pensions, including the underfunded amounts going to those who’ve already retired. The increase will help the city afford Cadillac medical plans given to employees and their families; more of your money will be spent to fund the post-retirement medical premiums of current employees and their families; and the added tax will maintain the city’s commitment to pay the unfunded medical expenses of retirees and their families.
The salary hikes built into the current labor deals are small compared with the big increases Davis gave its employees from 2000 to 2010. The firefighters, for example, got a 36 percent pay hike from 2005 to 2009. That was only four years after a massive salary jump and the giveaway of a new, unaffordable pension plan worth millions of dollars more for every public safety employee.
Yet small as they were, the recent raises were irresponsible and unnecessary. Davis did not have the money for them, no other cities were bidding away our workforce and the salary spikes have made the fiscal crisis of the city even worse.
Take, for example, the sworn police officer who was paid $100,000 in 2012. He got a 2 percent raise the first day of the year in 2013. (Non-sworn police employees were given an extra 3 percent.) That cop was given another 2 percent raise on Jan. 1 of this year. And he will get a 1 percent raise come New Year’s Day, 2015.
Added together, the city will pay him an extra $11,120 and it will cost an additional $2,855 to fund his lavish pension. (It would be more, but cops in Davis cover 3 percent of employer funding in addition to the 9 percent taken from them for the employee share.)
An extra $13,975 over three years does not sound like much. But if you multiply that by 62 sworn police officers (including the chief and other brass), we are talking about a giveaway that will cost the taxpayers approximately $866,450 over the term of the contract. And that is just for sworn cops. Every signed labor agreement includes bumps in pay and new pension expenses we cannot afford.
A bigger hit to the city than increased salaries is the growing expense for retiree medical benefits (known as OPEB). Before the 2009-10 fiscal year, the city never funded this expense. Now, once a person retires from the city of Davis, the city will write a check each month to CalPERS to cover whatever it costs for medical insurance for the retiree, his spouse and his child. If he lives deep into old age, taxpayers in Davis will be on the hook for decades.
For the past five years, Davis has been pre-funding its OPEB expense for future retirees. This fiscal year, the funded amount will be $3.74 million. The city owes $2. 22 million for the OPEB of its current retirees. Our full bill for 2013-14 is $5.97 million.
The city is projecting a small increase in 2014-15 to $6.16 million. It’s a mystery to me why, when the city’s medical expenses are rising 10.9 percent per year, anyone would project just a 3.25 percent annual increase. But that is the number they gave me.
Pension funding costs for the city this year will be $6.6 million. For 2014-15, the projected expense is $7.08 million, a $480,000 (7.3 percent) increase.
As large as that sounds, it’s worth noting that in 2011-12, Davis paid $7.38 million to fund its employees’ pensions. One difference is that employees are now paying $659,000 more than they were three years ago. The other difference is that over the past six years, the city has steadily decreased its workforce by 103 full-time employees.
The great crisis in pension costs is ahead of us. Employer rates in 2020 will be double what they are today. If nothing changes, the residents of Davis will pay $13.2 million per year to let city employees retire young and flush with cash.
I am not ready yet to endorse a yes or a no vote on the sales tax increase. I am aware that, if it is voted down, services in Davis (including police, fire and parks) will be severely cut back. Our town will be a less pleasant place to live.
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.
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?
Until the City Council comes clean, I cannot endorse a yes vote.
— Rich Rifkin is a Davis resident; his column is published every other week. Reach him at [email protected]