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Monday, May 19, 2008

Council Candidates Differ on City Budget and Fiscal Situation

To their credit the Davis Enterprise is running a series of questions and answers from the city council candidates. They limit the responses to 100 words each but print the responses verbatim. This is a good way for the public to get a sense about where the candidates sit on seven topics.

Aside from the issue of growth, one of the more interesting points of divide is on the budget.

The claim made by Stephen Souza, Don Saylor, and Sydney Vergis is largely that the budget is balanced, we have a 15% reserve. We have unmet needs though in the future that will require additional taxes. They would also like to expand the economic base of the city.

The claim raised by Sue Greenwald, Cecilia Escamilla-Greenwald (my wife) and Rob Roy is that unmet needs constitute part of the budget deficit.

Sue Greenwald raised the point that the problem is more on the expenditure side than the revenue side.
"Our revenues have increased a healthy 60 percent in seven years. Our problem is that expenditures have risen faster."
For her the solution is:
"We should emphasize controlling expenses by phasing in certain large capital improvement projects and controlling salary/benefit costs of management and highest-paid employees."
Cecilia is also concerned about placing much of the burden on the tax and ratepayers of Davis.
"Davis residents face several new taxes in the future on top of large rate hikes for water. The voters just approved new parcel taxes for the library and the schools. With the schools facing a budget crisis, voters may have to approve another parcel tax. We need to look toward other ways to balance our budget."
Everyone would like to see additional revenues. It is not even clear that six candidates differ that much on the type of revenue. For example, although Don Saylor supported Target, he has said at candidate's forums that he thinks that is sufficient to meet the retail needs of the city.

On the other hand, and more problematically, Mr. Saylor has suggested that there are "long-term labor contracts in place." In fact, nearly all of the labor contracts expire next year including the fire contract. His statement is simply untrue.

At the recent meeting as cited in the Davis Enterprise:
"Labor negotiations will reopen during the 2009-10 fiscal year, [City Budget Director Paul]Navazio said"
Conversations during the budget meeting last week, underscore the very tenuous nature of the "balanced" budget claims.
"The city funded benefits under a pay-as-you-go method until last fiscal year, when it added an extra $500,000 to the payment. To fully fund the program, which would save millions in the long run, the city would have to pay in about $4 million per year, Navazio said.

'Given the level of benefits and the cost of benefits, we need to be setting aside 6 percent of our employee salaries, and that percentage is pretty high compared to other cities,' Navazio said. 'That's also a reflection of the city's benefits, which are pretty high, and how that's packaged.'

'We have got to find the means to fund that,' Councilman Stephen Souza said.

'We are fully intending to deal with it, we're just not dealing with it fully in this fiscal year,' Navazio said."
We have balanced the budget on paper. However, the amount of unmet needs faced by this city is growing. We are talking about things that really need to be done. We simply lack the revenue to do them. Moreover, the employee benefit system looks like a train wreck waiting to happen.

As Sue Greenwald remarked at the meeting the other night:
"We're not in better shape than we've been in years. That's just not true. We are locked into a 3% at 50 retirement for the next 70 years for public safety employees and now 2.5% at 55, early retirement for all miscellaneous employees. That's got to affect our longterm budget situation. We have a $42 million post-retirement, unfunded employee retiree health liability. That's huge. That's coming due in only 15 or 20 years..."
And once again, the number of taxes and fees that the citizens of Davis will be asked to pick up in the next few years is actually rather staggering.

---Doug Paul Davis reporting