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Monday, August 04, 2008

Vanguard Report: City of Davis Employee Salaries Rise Far Faster Than Tax Revenue

Through a public records request to the City of Davis, the Vanguard has obtained data that show from fiscal year 2000-01 through 2007-08 that city employee salaries rose far faster than the city's tax revenue.

Total compensation to city employees rose from just over $27 million in 2000-01 to just under $50 million in 2007-08, which is an increase of $21.7 million over an eight year period. At the same time, tax revenues only increased by $6.2 million from $18.3 million to $25.2 million.

While employee salaries increased by 50% of this time period, benefits nearly doubled, and retirement pensions increased by over five fold. Retirement pensions rose from $900,000 in 2000-01 to $5.8 million.

A large amount of these increases have come to upper management within the city rather than the rank and file employees. On Tuesday the Vanguard plans to breakdown the city's 100K Club--those city employees who earned over $100,000 in 2007, almost all of whom are upper level management employees for the city of Davis.

These numbers call into question the city's long term fiscal health. While the council majority of Mayor Ruth Asmundson, and Councilmembers Stephen Souza and Don Saylor have maintained that they have balanced the budget with the requisite reserves, critics have pointed out that this comes from an unusually large amount of unmet needs. These, unmet city needs, such as road repairs and other projects have been put on hold and will likely cost the city more in the future.

To this point, the council majority has dismissed criticism that the fiscal climate is not nearly as rosy as it appears.

During the last city council election Councilmembers Stephen Souza and Don Saylor repeatedly claimed that the city had a balanced budget with a 15% reserve each year of their tenure. At the same time, the council has tacitly acknowledged the problem with discussions of possible sales tax increases, 911 service call tax, and possibly a public safety tax in addition to the recently passed Parks Tax from 2006.

Councilmember Lamar Heystek told the Vanguard:
"It is clear that year after year, tax revenue is becoming less and less sufficient to address rapidly growing employee expenses. In order for the City to improve its financial picture, we must take steps to control the costs of our highest-paid personnel so that the disparity between tax revenue and employee expenses does not continue to escalate."
One possible implication painted by this budget picture is that the city use employee salaries and their impact on the budget as rationale to find new ways to generate revenue in order to balance the budget.

As mentioned previously, new taxes are already being weighed by the council. However, for those concerned about the specter of new growth pressures, this might be part of the impetus behind the increased employee salaries. The city will look to generate additional revenue and that means possibly additional commercial development and more likely additional housing in an attempt to get short-term gains from development deals and longer-term gains from an increased tax-base. However, as previously pointed out, that only goes so far. With additional housing, comes also the additional need for services, which figure to be ever-the-more-costly with the high price of employees and their benefits and pensions.

This sets the stage for a potential tax-hike coupled with the need for more business. But there is a note of caution here as well. The new Target store for instance, is projected to bring in a rather lucrative $600,000; however, this is a drop in the barrel compared to the huge totals for salaries and pensions that the city is facing in the future.

Even more ominous, is the fact that many of the employees' contracts are up in 2009. As we shall see on Tuesday, a large number of those contracts go to public safety employees, in particular firefighters who donated huge amounts to Stephen Souza and Don Saylor's reelection campaigns. That likely means that Stephen Souza and Don Saylor will be in no position to say, “no” to future lucrative contracts.

Stay tuned this week for upcoming reports on the City of Davis' fiscal state of affairs.

---Doug Paul Davis reporting