Dunning Misunderstands the Need for Local Agencies to Maintain Reserves

The Vanguard has all but stopped responding to Bob Dunning columns from the Enterprise, but his column from Friday is so outrageous, irresponsible, and most importantly just plain ignorant it would be irresponsible not to respond.

The title of the column is "It's Time We Let Go of Our Reservations."

He writes:

"SURPLUS SPENDING - as the economy - locally, nationally, globally (take your pick) - continues to fall off the cliff, it was encouraging to me to intercept an e-mail from Councilman Steve Souza to a local resident bragging about how fat and sassy we are in the City of All Things Right and Relevant - noted Souza: 'Almost all of the cities around us would love to have our financial woes instead of their own. We have a 15.2 percent or $5.35 million reserve.' - wow, 5 million here and 5 million there and pretty soon you have a billion -

But, as nice as a reserve is - and I don't care if we're talking about the city of Davis or the local school district - when you start talking about laying people off instead of dipping into the reserve, your priorities are backward - if we're saving our reserve for a rainy day, I'd like to point out that today is that rainy day - it has arrived - anything we can do to preserve the jobs of city and district employees should be priority one - laying anyone off for fiscal reasons when we have a healthy reserve is contrary to what this town should stand for..."

The first question that comes to mind is whether Mr. Dunning ever does research on his columns, would he like talk to the finance directors from either the school district or the city and ask them about their reserves? Would he talk to Souza himself to ask him about his email?

Here's the best explanation of the city's reserve:

"The City maintains a “reserve” much like an individual or household would keep a savings account accessible for an emergency. The City Council has adopted a policy to have a General Fund reserve equal to 15% of the City’s General Fund revenues. This is a contingency reserve for general operations to help mitigate the effects of unanticipated situations such as recession, man-made or natural disasters, variances in financial forecasting, or costs imposed by other governmental agencies. The City does not use the reserve to fund ongoing services..."

Basically the way you maintain a reserve is you pretend like the money does not exist unless such an emergency situation arises. One reason for that is that city's in general cannot take on debt like the federal government can. So if an actual emergency came up, and the city spend its reserve on say employee salaries, then the city would be in deep trouble.

The city developed this reserve policy back in 2006. According to policy, the reserve acts as a "risk management" tool, it provides a buffer against revenue fluctuations inherent in economic cycles, and most importantly the policy prohibits the use of reserve funds for ongoing operating expenditures.

The key to remember is that the reserve is one-time money. Once you use it, the money is gone.

Dunning's column mentions the school district as well. School districts are required by Ed Code to maintain a fund balance reserve every year. That money cannot be touched at all without severe consequences. The district generally maintains its own reserve above and beyond that much the same way as the City does as a risk management tool and a protection against fluctuations and emergency situations.

In the late 1980s, an increasing number of school districts were facing fiscal insolvency. Laws were enacted that created budget standards and increased fiscal oversight for all local education agencies. One of these standards was that local school districts set aside a certain percentage of their budget as a reserve for economic uncertainties. This reserve provides a cushion against unanticipated fiscal needs that may arise and thus reduces the risk of fiscal insolvency and the associated need to borrow and increase district debt.

Failing to meet the reserve requirement does not have a mandated consequence, however, as we know from other discussions, the County Office of Education oversees the finances of all local school districts. If DJUSD were to eat into its required reserve it would increase the likelihood the county superintendent of education intervening into local school district affairs.

DJUSD carried the state-required 3 percent financial reserve, which is just over $2.1 million. However, they cannot touch that reserve. The district also carries its own one percent contingency reserve which comes to about $650,000.

Interestingly enough, the district discussed this very issue on Thursday and the Davis Enterprise covered it in this morning's paper.

Given the fiscal situation in the state, districts are being given greater flexibility with some of these reserves.

But a key point with these reserves is that they are one-time monies. They will get depleted rather quickly given the nature of the economic crisis. As Bruce Colby put it, last year was a crisis, this year is a crisis, 2010-11 will be a crisis, 2011-12 could be a crisis.

Moreover, in general one has to balance the three-year budget using ongoing revenues, not one-time monies.

As Tim Taylor put it:

"From my perspective, you would spend it in a situation where you have an emergency need, something that would not commit you to ongoing year-after-year obligations."

Bottom line here is that using reserves is not going to solve our fiscal problems, and it could make them worse as time goes on. Bob Dunning needs a better understanding of the fiscal policies, rules, regulations, and economic crisis before he makes such irresponsible statements.

Getting back to his column, there is another key point that needs to be addressed.

Here he quotes Councilmember Stephen Souza:

"Almost all of the cities around us would love to have our financial woes instead of their own. We have a 15.2 percent or $5.35 million reserve."

Davis is in better condition that a lot of other cities but it has very little to do with the reserve. I would and have argued that our fiscal policies are just as bad as many other cities--if not worse. And we are going to have to deal with that. Having that reserve just means we can weather an immediate crisis better than other cities. We still have an ongoing structural deficit. We still have an ongoing problem of unmet needs. We still need to fix our unfunded mandates. We still have to fix the pension system. We still have to reign in employee salaries at the top end of the scale.

However, the bottom line is the city of Davis has been hit less hard than other cities with the foreclosure crisis. It has been hit less hard than other cities because its property values have not plummeted as others have. We rely less on sales tax revenues than other cities as well, so while the declining economy is producing a tax revenue fall off, it is not to the point where cities like Roseville who are facing eight figure budget deficits.

The bottom line is that while we have a deficit for the next few years of at least 3 million and as much as five million (and notice if we used the reserves to fix that, they'd be gone after next year), we can probably survive short term by adjusting our spending and tightening our belts.

That is not to suggest that we do not have bigger issues. It is just to suggest at this point the economic crisis is not devastating us like it is many other cities or even Yolo County.

So yes, Councilmember Souza has good reason to express optimism, but it is not because of our reserves. Our reserves would be depleted very quickly in this crisis, if that was their intent.

Dunning has a large amount of influence in this community and his column is undoubtedly the most widely read feature in the Davis Enterprise. With that influence requires a degree of responsibility to research and understand the issues on which he has opined. In this regard, he has failed in his duties by suggesting the city or the school district are being irresponsible by maintaining fund reserves. In both cases, maintaining reserves is either required by law, required by city policy, and necessary and prudent for these entities to whether the uncertainty of such a downturn. It would be the height of irresponsibility for them to use these reserves in an effort to avoid making tough decisions in the coming year.

---David M. Greenwald reporting

Read My Lips... No New Taxes?

City Needs To Solve Its Fiscal Problems First Before Going to the Taxpayers for a Renewal of Existing Taxes

At the risk of sounding somewhat well... Republican, there is something to this at least from the standpoint of local government. It is really not that I am opposed to new taxes, it is that there needs to be some incentive for the city to negotiate hard this with the various bargaining units. Let us back up a few steps first here.

The city is facing an interesting dilemma. There is a long term structural problem facing the city with the scope of city contracts and the nature of pensions. There is a shorter term problem with the city's budget that has less to do with the long term structural problem than it does a short-term revenue problem resulting primarily from the recession and the loss of tax revenue.

If done correctly, the city can use the short term problem to give them the leverage to fix the longer term problem. However, that remains one gigantic "if." The temptation is going to be for the bargaining units to attempt simply to hold off on the tough decisions until the economy improves. So many of them will likely push to simply extend the current contract. The city must fight hard against that urge.

At last week's city council meeting, it became clear that neither the council nor city staff wanted to raise or impose any new taxes in the near future to solve the city's growing problem of unmet needs. While I agree with that approach, it does not solve the city's problems either in the short term or the long term.

Instead they have suggested that they will simply place the current taxes back on the ballot. That would include an extension of the Parks Tax, which is a parcel tax requiring two-thirds vote and an extension of the half-cent sales tax.

In order to get the sales tax on the ballot for a vote in June of 2010, they would need to have it ready by January 2010. To me that gives the city nearly one year to get their house in order. Because if they do not get their house in order, for the first time in my life I will not only oppose a new tax (which I did previously with the Parks tax), but I will actively work against the tax. I will get a group of citizens together, we will walk precincts, we will raise money, and we will run a campaign opposing a new sales tax.

In other words, the city will have to run a tax against organized and financed opposition.

Honestly, I do not want to do this for a variety of reasons. First and foremost, despite rumors to the contrary, I simply have better things to do with my time. Moreover, I actually believe there are vital services that the city offers and will not be able to do if they do not have that tax revenue. Frankly the services I would least like to see cut will be the ones that go if the tax revenue disappears.

On the other hand, we need changes and we need to give the city leverage to make those changes. Right now the residents of the city of Davis, many of them do not realize the peril that their city is in. Although as I talk to more and more people at Farmer's Market, it becomes clear that many are aware of these problems.

The city needs to negotiate hard on behalf on the citizens to fix these structural problems that loom.

First, it needs to be made clear, city employees are not the targets of this. The real concern is the rise of top-end salaries. If you look at the list of 100K jobs for the city of Davis, most of them are public safety employees and most of those are in exactly one department--fire.

The city needs to hold the line on the top end salaries. City Manager Bill Emlen showed good faith by not taking a raise, we need a wage freeze across the board for top end employees.

Second, we need to change the way we finance our pensions. We get another opportunity here with the problems that PERS is facing and the fact that city's are going to need to cover a higher percentage of the yearly contributions because the fund is running a deficit due to drops in the Stock Market and some bad investments.

The city needs employees, especially those on the top end, particularly those getting 2.5% at 55 and 3% at 50 to contribute to their retirement pensions. If we do that, we do not need a two-tier system that most public employees and their unions deem unfair. And if we do that, the city will face much less risk in the future from the rising costs of these pensions.

Third, and this falls mainly on the fire department, we need to change the way we deliver these services. We are one of the few municipalities that uses four-men teams to fight fires. And we don't often fight fires. The vast majority of the calls are for medical emergencies. Why are we sending in four-men fire fighting teams for medical emergencies? If you ask the fire department, in part, it's because if they get another call, they need all of their equipment and manpower. But the result of this practice is inefficiencies and a waste of money.

I'm not going to try to come up with the answer. That is for the fire department and city staff to do. However, that is a lot of money for not as much service as we are led to believe.

In addition, there has long been a push for a fourth fire station. That is something that we can look into when we fix the staffing situation. I think an innovative approach here can save the city money and also enable the fire department to get the tools they think they need to be effective.

But in order to be effective these other things have to be solved first. We have a window of opportunity. Everyone is going to have to give this year. We have a chance to fix some of these problems because of the unfortunate situation with the economy.

If the city knows that the public will not support a tax measure without fixing our fiscal health, the city will have the leverage it needs to get a more favorable agreement from the various bargaining groups.

Once again, I want to reiterate this. People have used this opportunity to attack all city employees. The majority of city employees are making $60K or less--which is not a whole lot given the cost of living in this city. The problems are really on the top end. In better times, I would be absolutely supportive of the average city employee getting a pay raise. Unfortunately these are not good times. However, these employees are not part of the larger structural problem. They do not deserve to be attacked or disparaged in this process.

The bottom line again is that the city has the opportunity to hold the line and fix some of its longer term fiscal problems as it tries to deal with its shorter term budget deficit. Hopefully they will use this time wisely.

---David M. Greenwald reporting

City's Budget Hole Grows--Unmet Needs Will Go Unaddressed

A year ago the city basically identified around $13 million in what it called unmet needs. These were needed projects in a variety of departments that the city needed to undertake but lacked the available money to pay for them. As the Vanguard has mentioned previously, some of these are quite basic road repairs and other vital services.

Right now the city is projecting a growing budget deficit for the foreseeable future. It begins at close to $1.5 million for the current fiscal year and doubles to $3 million next year.



As Finance Director Paul Navazio stated on Tuesday night, the city is going to have to first address the structural and immediate budget problems. That means that these unmet needs will continue to be unmet needs into the foreseeable future.

From the staff report:

"While the growing list of unmet needs – both one-time and recurring – remains a significant concern, current economic and budgetary realities suggest that emphasis should be placed on securing existing revenues over seeking new revenue sources that could, potentially, jeopardize revenues relied upon to provide existing City services."

Right now the city is focusing on addressing existing revenues. They do not believe they will be able to in this climate get the voters to approve tax increases. Therefore the priority at this point is on renewing the existing tax measures--namely the parks tax and the half cent sales tax. One alternative would instead of the renewal of the parcel tax for the parks, combine the the parks measure with an additional quarter cent sales tax to produce the $1.5 million the parks tax is currently generating.

From the staff report:

"At this time, staff is suggesting that the highest priority related to future ballot measures should be the renewal of the ½ Sales Tax (Measure P), approved by the voters in June 2004, with a 6-year sunset provision. This measure currently provides roughly $3 million in General Fund revenues to the City.

Secondly, priority should be given to options for renewing or replacing the Parks Maintenance Tax (Measure G), which was re-authorized by the voters in June 2006, with a 6-year sunset provision. This measure provides roughly $1.3 million in dedicated funding in support of park maintenance activities. In the past, some concerns have been expressed over the appropriateness of assessing this tax on the basis of a flat $49 tax on parcels within the City. Staff has previously been directed to explore alternative funding mechanisms, to the point where the text of Measure G provides that the measure would be repealed in the event that the City secures an alternative means of funding parks maintenance activities."

What is driving this is the basic reality of the situation for the city. The taxpayers in Davis have already been asked to pass two parcel taxes for the school district and one for the library. They will be asked to pass another parcel tax by the school district in either late 2011 or early 2012.

The city does not want to be competing against the school district for tax funds. Right now they are simply looking to renew what they have. That would mean a June 2010 ballot measure to renew the sales tax or possibly fold Measure G into the sales tax.

The problem here is obvious but unavoidable given the city's lack of addressing the unmet need problem previously. The assessment of Navazio and the city is exactly right--the public is not going to approve the slew of tax measures that it proposed a year ago.

In December of 2007, the city was considering a public safety tax placed on the ballot sometime in 2009. At that time, Councilmember Souza even pushed for it by November 2008.

Second, they suggested a new sales tax on the ballot in 2010 with a quarter-cent increase. At that time it would not have subsumed the park tax but rather would have paid for street and road maintenance.

Finally in he called for a replacement of the park tax with an increase in the municipal services taxes.

Now the dilemma. Many will undoubtedly be pleased to hear that these taxes are essentially off the table. However, the downside is twofold.

First, the city is going to have to find a way to cut millions from the budget over the next several years.



Second, the city while cutting millions from the budget over the next several years, needs to find a way to chew into what is now $8.74 million of one-time unmet needs (including nearly $6 million for the fire department which I assume still includes possibly a fourth fire station and a new engine) and $7.35 million in recurring unmet needs, that one is more spread across the board.

In December of 2007 Councilmember Don Saylor said:

"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 Saylor was wrong. He did not foresee the magnitude of course of the economic crisis bearing down upon us. But he did not recognize that our failure to appropriately deal with the unmet needs would become a crisis just over a year later. The problem was that everyone assumed or at least three councilmembers at time assumed that we could simply tax ourselves out of our hole. Now that is no longer a possibility.

In the meantime, no one dealt with the longer term structural problem namely unchecked employee salaries, and this is not a general statement about employees. There are specific areas that are particularly problematic.

It turns out in December of 2007, that then-Mayor Sue Greenwald was the one who was correct.

"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."

She continued:

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

Mayor Greenwald turned out to be exactly correct and the current Mayor Pro Tem was overly optimistic.

The system has imploded. We have seen our vulnerability to the real estate market downturns and for the first time really to a major recession. There is no light at the end of the tunnel. The unmet needs are still unmet and now there is no immediate plans to meet them.

It will be interesting to watch the impact on this community when the city has to cutback on vital city services. We have already seen push back on the issue of parks and recreation--and frankly that was mere pennies compared to what awaits us.

---David M. Greenwald reporting

Davis Firefighters to Unleash Another Round of Spending

Yesterday, I found more literature from the Davis Firefighters on my door step. In addition to an apparent reissuing of the brochure from earlier this month, it appears they will be using a fire helmet shaped door hanger to spread the word around Davis in the last week before the election.

Last week, they filed paperwork with the city clerk's office to show that they had already spent $6700 on their independent expenditure campaign. This was on top of the over $12,000 they had already spent on direct contributions to their three endorsed candidates. This week, it appears they have thrown in at least another $7000, which would push their expenditure campaign over $25,000 in an effort to secure their highly lucrative contracts.

Davis resident Tim Townsend summed up the city's fiscal situation in a letter to the editor of the Davis Enterprise last week:

"The Bee wrote about it, Rifkin riffed on it, the Davis Vanguard blogged about it and The Enterprise finally covered it. Are Davis voters going to get it? The city of Vallejo, 45 minutes west on Interstate 80, is likely going bankrupt — the largest California city to ever have done so. But why?

One answer, per The Enterprise: "Many officials and residents attribute Vallejo's fiscal troubles to overly generous pay and benefits to the city's police and firefighters."

Davis firefighters and their union have contributed nearly $30,000 to the campaigns of Don Saylor, Steve Souza and Sydney Vergis for City Council. Saylor and Souza have already voted to sweeten our firefighters' retirements to way beyond fair! Only our mayor, Sue Greenwald, had the courage to say "No!" We need candidates who will hold the line against fiscally irresponsible spending, or we may end up in Vallejo's shoes."

The city of Vallejo has made worldwide headlines with their fiscal plight that has led them to file for bankruptcy. Even in the face of bankruptcy, they could not get the public safety unions to back off salary demands.

As the San Jose Mercury news reported on Saturday:

"The Vallejo City Council unanimously agreed to begin bankruptcy filings after months of failed negotiations between city and public employee union negotiators. Several meetings between city and union negotiators after the May 6 vote didn't break the stalemate."

Davis Enterprise Columnist Rich Rifkin deserves much credit in uncovering the current state of contracts for firefighters. Rich Rifkin's research and article from December of 2007 is very informative and instructive.

"Last year (2006-07), the city spent $124,183 more than it took in. This year the deficit is $146,376. And next year the shortfall is projected to be $349,464. Yet during that time, the city's revenues will have increased by more than $2.1 million.

No segment of Davis' labor force is gorging at the trough more voraciously than the Fire Department. Every one of our full-time firefighters in 2006-07 cost us more than $100,000 in salary, benefits and other expenses. The average was $147,488.

For every $100 in regular salary we gave them, we paid out an additional $29 in overtime. And that was not, according to what Davis City Manager Bill Emlen told me in a phone conversation, "unusual. "

He goes on to warn the public that these practices are unsustainable and the worst aspect of it from the standpoint of fiscal responsibility is the retirement age of 50 and 3% at 50 pension.

"When the new contract was signed the following year, Local 3494 agreed to a 36 percent increase in salaries over four years. Their $100 checks paid off. They also got a fat retirement deal, called 3 percent at 50.

What that means is that a firefighter can retire at age 50 and for every year he worked he gets 3 percent of his final salary to start his retirement. A firefighter who puts in 30 years gets 90 percent of his final salary. And because many firefighters finish as battalion chiefs and captains, those final salaries are especially lucrative."

As Rich Rifkin points out, this year's election is particularly important to the fire department because their current contract expires in 2009.

Moreover in his December article, Rich Rifkin gave us the example of firefighter H.

"Added together, the total cash out for this one firefighter was $213,741. Yet that figure is not all-inclusive. The city estimates that H's unfunded liability for his retiree medical benefits will cost the city an additional $7,417. So to pay this one person, the final bill in 2006-07 was $221,158. "

Due to the lucrative overtime, many of these firefighters actually receive more combined money and benefits than the City Manager, Police Chief, and Fire Chief.

As Dave Hart, President of one of the California State Employees Association posted on the Vanguard in response to the May 4, 2008 article on the fire fighters:

"3% at 50 is in my opinion an unsustainable pension benefit. It threatens to undermine the pension system for everyone else in public service."

The fire fighters are now fighting to keep what they have, even as it does damage to the city's fiscal situation.

Now no one doubts the importance of the job the fire fighters do. In fact, no one believes that they should not be paid well for doing it. What many question is the current system which pays heavy overtime to Captains, with pay and benefits pushing their compensation to over $175,000 to $200,000 per year, and the lucrative retirement which pays them as much as 90% of their ending salary which is often artificially pushed up to that of a Battalion Chief.

Davis' fiscal situation is much stronger than that of Vallejo, but Vallejo is still a lesson to be learned. The council majority right now plans to pay for its unmet needs including pensions and health benefits through tax increases. But the system is in danger of becoming more and more top heavy, with more of the resources going to pay for people who often retire at the age of 50. And as we saw in Vallejo, these public safety unions are not willing to step forward even in the face of city bankruptcy. No wonder they are the single largest contributor to the Davis City Council races.

---Doug Paul Davis reporting

Commentary: View of Budget Depends on Perspective and Assumptions

Is Davis' budget balanced? Has the structural deficit been reduced or even eliminated?

Like most things it seems in Davis, the answer to that question depends on who you ask and how they factor in their budget assumptions. If you ask Paul Navazio the city's finance director and assistant city manager, he would tell you that the city has closed up its structural deficit, has a balanced budget, but also has a large amount of unmet needs. If you ask Sue Greenwald--part of the unmet needs are the budget deficit. We have merely papered over the deficit and the looming fiscal crisis with fancy work, heavily dependent on budget assumptions and elaborate models.

For Don Saylor, the city of Davis is making use of extraordinary planning to be this fiscally responsible that we do not have a budget deficit in a time of economic downturn across the state.

In his closing comments for example he said:

"This framework of budget balance for us includes a 15 percent reserve, that's really pretty uncanny."

He cites the number of jurisdictions whether it the schools, the university, the county and other cities that are making huge budget cuts. But not the city of Davis.

He does acknowledge that we have unmet needs that will exceed our revenues, but argues that this is based on the choices that we have made as a city.

"We see that the service demands of our city will exceed the revenues available and that's partly because of our own choices. Our sales tax revenue of $9 million per year is based on per capita collections of about $93... We're in the bottom third of sale tax collections. If we simply were at the state average we would bring in another $6 million. I'm not suggesting that we be at the state average, because that's not who we are. But minor changes in different pieces of our economic strategy will make a tremendous difference in the revenue picture for our city."

This seems to be an acknowledgment by Don Saylor that there is some kind of deficit. Also he argues both that we are in better fiscal shape than our neighbors and better fiscal shape than we have been in the past. Ironically, the reason we are in better fiscal shape than our neighbors is that our revenue sources so far have largely been immune to the economic downturn. The impact of the housing slump in Davis, in a market somewhat cut off from the rest of the state, has been far lower. Because we have a tight business market, we have weathered that better. And we do not heavily rely on state money as both the university and school does. The policies that Don Saylor and his council majority will explore will actually make us more vulnerable rather than less to economic downturns.

Stephen Souza likewise cites the fiscal health of the city. In 2004-05, Souza argues we had over a $2 million general fund deficit and we had to use reserves to balance the budget. This year it was $800K and we did not have to use reserves. He argued both that we need to celebrate what we have done but also that there is still work to do.

"We've been able to through a very logical process identified what are the amounts of money that would get us to a point where the people's assets are going to be taken care of and replaced and the services that we have all enjoyed will not only be at the levels of today, but they'll be better tomorrow. I think that's incumbent upon us to do that also. We've looked at economic redevelopment and we've done some of that. We've looked at cost recovery, we're going to more of that. We've looked at fee augmentation and we have to do more of that. We've talked about for a long time recovering some of the costs of the 911 service, maybe that's a path we go... We've look at some tax measures, and I think we're going to have to ask the public, do you want better... [services than you have today]. We're also going to have to ask the question beyond the $2.9 million for public works, about public safety, we want a fourth fire station, do we want more police officers on the roadways? If we want those things, it will be our choice as citizens of this community to determine after we put forward this information if want these services or we don't want these services."

The question and the point that Stephen Souza does not put forward is whether we can get to these kinds of services--if we need them--by tightening our belts, becoming more fiscally prudent in the decisions that we make.

That's really where Sue Greenwald begins.

"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..."

According to the Mayor all of these will impact our budget and how much sidewalk and other maintenance we can do.

"We have postponed a number of projects and we have to remember that we have hanging over our heads first off the school fiscal crisis, if we keep taxing residents it is going to be harder for the schools to raise the funds they need... Passing the sales tax and the parcel tax, that just keeps us afloat, that does not get us anywhere... We're asking for those to be renewed at the same time we need more taxes for the schools."

Furthermore, we have not taken into account $365 million in sewer and surface water projects. These projects will add over $1000 per year to the utility fees for residents and the Mayor thinks that will be closer to $2000. Are we going to be able to renew the sales and parks taxes to stay even to the revenues we have today? This does not even touch the unfunded needs that we have today. These renewals are merely what we need in order to stay even.

Contrary to the claims by Souza and Saylor, Sue Greenwald pointed out:

"We've always had a five year budget, in fact, when Carl was around we had a seven year budget forecast."

She goes on:

"Carl was the one who about six months after we passed 3% at 50 back in 2000, he came in with his face ashen, he held up this projection and he said, we're going to be having huge deficits. I didn't realize this. He was very upset, he was looking at the seven year forecast. Well we were bailed out by the housing and real estate bubble, and the housing bubble and we've been bailed out. That's over, those days are gone."

Mayor Greenwald said we are fortunate however that we have citizens willing to shoulder the load, but will they continue to as the load gets heavier and she is concerned about the 800 pound gorilla in the room in the form of the water projects that will add another $365 million over a period of time to our costs.

I think the most interesting aspect of the budget discussion is that really Don Saylor and Stephen Souza are looking at very much the same things as Mayor Sue Greenwald, but coming to very different conclusions about our fiscal health. One of the critical questions is that of unmet needs--does their existence constitute a deficit?

The other serious problem is that of retirement benefits to employees. I think Sue Greenwald has recognized from an early period of time that the benefits that we are giving out are unsustainable. They are going to eat up a larger and larger portion of the budget and as a result we will have to struggle to find ways to meet those costs in addition to the regular costs to do business in the city. We are putting a lot of strain on the very generous taxpayers of Davis. In addition to the taxes the city will be asking residents to pay just to maintain the level of revenue we currently have, residents as the Mayor points out will be asked to pass another school parcel tax, we will ask residents to pay a higher level for water. $1000 per year at minimum means that your water bill will INCREASE by nearly $100 per month. If it is closer to $2000, you may be paying an additional $150 to $200 per month for water. That's a lot of money especially for people on fixed incomes, but really for all of us.

The cost of living in Davis is about to go up. The question about the fiscal health of the system is an open question and depends on the budget assumptions and your perspective.

---Doug Paul Davis reporting

Commentary: Fire Fighters Spend $25,000 to $30,000 in City Council Campaign to support Saylor, Souza, and Vergis

Saturday afternoon I opened my door and leaning against my door was a manila envelope with my wife's name on it (Cecilia Escamilla-Greenwald for those who do not know). It seemed a bit odd, so I opened it up. It was not sealed, but rather closed with a clasp. In it, was an 8 1/2 by 11, full color, glossy, on heavy cardstock flier done by the Davis Firefighters supporting their chosen three candidates for the Davis City Council.

The whole thing seemed a bit odd to me, but I really did not know whether it was a friend or foe who left it on our doorstep. That is until I spoke later with both Rob Roy and Sue Greenwald and they both had the same experience. At this point there was little doubt in my mind that the fire department had actually left the flier on my doorstep.

The Davis firefighters have already directly contributed nearly $12,000 to their three endorsed candidates. Davis Enterprise columnist Rich Rifkin deserves great credit in doing a lot of the legwork on this issue. While Vanguard regulars know that Mr. Rifkin is often in disagreement with the Vanguard on a good many issues, we also share a bit of common ground on the issue of the budget. It was his piece from April 16, 2008 that laid out exactly how much the firefighters were spending on this race.

"In a recent front-page story in The Enterprise, Claire St. John reported that "38 people identifying themselves as city of Davis firefighters" gave $100 each (the maximum allowed by law) to City Council candidate Sydney Vergis. Of the $8,450, that Vergis has raised for her campaign, 45 percent of that came from this one group.

What that story didn't mention is that the Davis firefighters have also contributed heavily to the re-election campaigns of incumbents Don Saylor and Stephen Souza. In Souza's case, 39 gave him the maximum. Saylor received $4,200 from members of Local 3494."

He goes on to add:

" In addition to the $11,900 firefighters have directly contributed to candidates, the political action committee of Local 3494 has raised $11,536 from its membership. Presumably, that money will be spent to help elect the candidates favorable to the union. "

It is pretty clear that Mr. Rifkin was rather prophetic on this point, because this mailer has to be a $10,000 to $15,000 mailer... AT LEAST. So basically the firefighters are giving $25,000 to $30,000 to their three endorsed candidates.

We can argue over influence peddling, but there is a very clear agenda here by the firefighters. They already know that councilmembers like Sue Greenwald and Lamar Heystek have opposed efforts to add things like a fourth fire station and that they have been a strong advocate of holding the line on salaries and pensions for management level employees.

Rich Rifkin's research and article from December of 2007 is very informative and instructive.

"Last year (2006-07), the city spent $124,183 more than it took in. This year the deficit is $146,376. And next year the shortfall is projected to be $349,464. Yet during that time, the city's revenues will have increased by more than $2.1 million.

No segment of Davis' labor force is gorging at the trough more voraciously than the Fire Department. Every one of our full-time firefighters in 2006-07 cost us more than $100,000 in salary, benefits and other expenses. The average was $147,488.

For every $100 in regular salary we gave them, we paid out an additional $29 in overtime. And that was not, according to what Davis City Manager Bill Emlen told me in a phone conversation, unusual. "

He goes on to warn the public that these practices are unsustainable and the worst aspect of it from the standpoint of fiscal responsibility is the retirement age of 50 and 3% at 50 pension.

"When the new contract was signed the following year, Local 3494 agreed to a 36 percent increase in salaries over four years. Their $100 checks paid off. They also got a fat retirement deal, called 3 percent at 50.

What that means is that a firefighter can retire at age 50 and for every year he worked he gets 3 percent of his final salary to start his retirement. A firefighter who puts in 30 years gets 90 percent of his final salary. And because many firefighters finish as battalion chiefs and captains, those final salaries are especially lucrative."

As Rich Rifkin points out, this year's election is particularly important to the fire department because their current contract expires in 2009.

Moreover in his December article, Rich Rifkin gave us the example of firefighter H.

"Added together, the total cash out for this one firefighter was $213,741. Yet that figure is not all-inclusive. The city estimates that H's unfunded liability for his retiree medical benefits will cost the city an additional $7,417. So to pay this one person, the final bill in 2006-07 was $221,158. "

Due to the lucrative overtime, many of these firefighters actually receive more combined money and benefits than the City Manager, Police Chief, and Fire Chief.

I also read some of the angry responses to Rich Rifkin's two columns criticizing the salary structure and campaign tactics of the firefighters. I think there are three key points that need to be raised:

First, I have the utmost appreciation for what the firefighters do. I have been rescued by fire fighters from various situations twice in my life. In addition, I went on a ride along with the fire department in Davis last summer it was one of those hundred degree days and in addition to sweating out several pounds in the heavy suit, I was knocked around pretty good by the fire hoses. And folks if you have not met me I am a pretty big guy.

Second, there is an argument that comes from some of the councilmembers supporting these kind of wage structures that asks how much a life is worth as though the expenditure of $250,000 were justified by the important job they perform. The problem with that argument is that it assumes an infinite city budget. However, the budget is not infinite and at some point it may become zero-sum as resources become tighter and the public becomes less willing to continue to pay increasing taxes. How much of a jeopardy is it, if we cannot afford proper maintenance of our streets, proper upkeep of our infrastructure, if we put the public at risk because money that should go to other things instead goes to the firefighters personal salaries and benefits (firefighters making over $150,000 in these wages to begin with)--how many lives would be in jeopardy then? Why is fiscal responsibility suddenly going to put lives in danger?

And the third point follows from the second and that is the serious damage that we are doing to the fiscal stability of this city caused not only by the immediate costs of pay and benefits, but also the structural problems of having lucrative retirement plans like 3% at 50 extended to other public employees. I do not wish to balance our budget on the backs of those making 60,000 but we have to hold the line at those making 150,000 to 250,000, do we not?

Lest we believe that this is a fabricated danger, we have the example of the city of Vallejo which is bankrupt.

"The fiscal crisis, which comes more than three years after the state took over the city's debt-ridden public schools, is a result of snowballing police and firefighter salaries and overtime expenses coupled with plummeting tax revenue from the weak housing market, officials say. (San Francisco Chronicle February 21, 2008)."

Meanwhile in Sacramento last week, the Bee reported:

"Despite facing major deficits and worker layoffs, the city of Sacramento is on the verge of approving nearly $15 million in additional pay for firefighters and paramedics over the next two years. (April 28, 2008)."

It would appear that Davis is hardly alone in facing both the problem and the pressure of firefighters for ever-increasing shares of the city budget, even amid severe budget strains. Davis over the course of the next few years will be facing a variety of new taxes, despite claims of balanced-budget, in order to meet to ever-increasing unmet needs of spiraling salaries and pensions to those city employees who are making among the most in salaries to begin with.

It is thus unsurprising that the firefighters have put so much time and effort into the latest city council campaign. It is up to the voters of Davis to determine what to do with this information and this influence peddling.

---Doug Paul Davis reporting

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