Commentary: What Does Seven Million in Budget Cuts Look Like?

DJUSD knows what it is like to try to reduce a $4.5 million deficit because they attempted to do so last year. $4.5 million would have meant at least 114 teacher layoffs, possibly a closed school, definitely some ended programs like music, art, maybe da Vinci High as well--at least as they knew it. But while Davis experienced threats, they never had to go through with it. The May revise came in better than the midyear budget estimates. The Democratic legislature restored funding cuts. Davis used one-time monies from its reserves and got a $1.7 million gift and was able to escape last year largely unfazed.

I say all of that because at its core, $4.5 million in budget cuts would have been devastating. Now imagine $7 million in cuts. That is what Woodland is facing right now. That is what the Woodland School Board did on Thursday night, they voted to reduce expenses by $7 million. That is more than twice the deficit Davis is facing right now.

How does one cut $7 million? The Woodland Daily Democrat hardly gives a vivid description of this. Although apparently the public outcry got them to restore a number of programs including the elementary music program.

"Trustees also allotted $793,773 in funds to restore several programs and positions -- two high school vice principals, zero and seventh period, the Elementary Music Program, a high school librarian, an elementary school counselor and an extra teacher for Pioneer High School's Block Scheduling -- that were set to be cut."

It continues:

"While the elementary music program was restored, the board made several reductions to other programs, school budgets and at the district level.

School sites throughout the district froze open positions and cut 10 percent of discretionary funds, the enrollment center was restructured, elementary vice principal positions were cut, and teachers were reduced along with many other cuts. After much discussion, the board agreed to close both Grafton and Willow Spring Elementary schools."

That's right Woodland voted to close two elementary schools.

"Willow Spring and Grafton elementary schools were hotly debated reductions with many parents speaking in favor of leaving the schools open, to no success.

While Trustees Carol Souza Cole and Rosario Ruiz-Dark said they were not in favor of making these decisions without more information or more community input, other trustees said the schools were already set to be closed and students would get a good education no matter where they went. The board voted 5-2, with Trustees Souza Cole and Ruiz-Dark opposing the recommended cuts."

I will leave it to our friends at the Woodland Journal to work out the rest of the details. I have heard enough. This is not about picking on Woodland. Woodland is not alone. School districts all across the state are having to make veritable Sophie's choices between closing down programs and closing down schools. Many will have to do both.

Davis is quite fortunate in a lot of different ways. Some people have suggested in light of certain decisions that they regret voting for Measure W. Well let's do the math. Without Measure W just add another $2.5 million to the deficit that Davis has. That would put Davis' deficit for next year up over $5 million. Take out the generosity of the Davis residents and their $1.7 million in donations last year. We would be looking at the kind of cuts that Woodland is right now.

In other words, Davis is fortunate. A wealthy school district, in a wealthy community that is generous and supports its schools. That is a great thing.

The horrible thing is that across the state many students are not nearly so lucky. They do not live in communities that can dip into their bank accounts like Davis did last year. Heck, Davis probably could not do it so easily this year as they did last year. The economic crisis has hit home in this state. The unemployment rate is over 10%. Tax receipts are way down. The state is slashing billions from schools. That means millions slashed from local school districts, most of whom do not get parcel tax money to make up the difference.

The result of this is that the relatively wealthy and well off students in places like Davis will get by just fine. Their community will give just enough to avoid the kind of wholesale draconian cuts that Woodland is facing. We will tighten our belts. Our teachers may have to take pay cuts or face a small number of layoffs. But at the core our programs will survive and our students will thrive.

There are people on this blog who seem to take these things for granted. They seem to believe that schools have failed us. They seem to believe that there will be no consequences from cutting billions across the state from schools. I disagree with that assessment. I don't think schools have failed us. I think we've failed our schools. Not in Davis, but across the state of California.

California ranks in the middle of the country in per pupil spending, and that was data from a few years ago before the latest round of cuts. California was below the national average. And those are in absolute dollars, it does not account for the higher cost of living in California compared to many of the states below California in per pupil spending.

There was good breakdown last year in my other publication, the California Progress Report.

“The Census Bureau numbers show that California still spends $652 less per student than the national average, even though their figures on "student spending" include funds from outside the state that never make it into the classroom, which arguably inflate the figures. The Census Bureau estimates lump in payments made into the state retirement system, as well as federal funding beyond what the state spends. But even including those calculations, California's significantly below-average spending on students is abysmal. By comparison, the non-partisan national publication Education Week issued a report showing that California spends $1,900 less than the national average, because it only includes the actual funds spent by each state on each student.”

Also:

"even though we have extremely high costs, housing in particular, our teachers are still paid below the national average on a per pupil basis: $3,479 in California - compared to the national average of $3,811."

The bottom line is that we get what we pay for. If California were near the top of the barrel in terms of students scores, then maybe, just maybe we could justify our lack of spending. But it is not. It is towards the bottom.

For years we are told that the problem is just that we pay too much on administrators. Sorry folks, the district has laid the budget numbers bare. Only a tiny percentage of DJUSD's general fund budget goes to administrators. And that percentage has gone down. Davis has cut out it's Associate Superintendent of Education Position, it has cut to the bone its fiscal office. There is nowhere else to cut. The raised salaries that people are moaning about do not amount to a hill of beans in the scheme of things--and even they are probably coming off the books and then some.

Davis is not alone. Across the state, districts have done the same. This is not pork. Many of these are essential positions and their absence requires other people to do more work for no additional pay. A lot of additional work. For years, teachers have had to purchase educational supplies out of their own pockets. The same teachers who are paid below national average per pupil--which means that we are teaching to more kids than the national average. California teachers teach to about 22 kids whereas their counterparts teach to 15 kids. Think that might make a difference in the service they receive in return?

The sad thing is that all of the numbers I have just shared with you are numbers that existed before we cuts roughly $7 billion from the state's educational budget this year on top of whatever cuts were accrued last year and the lack of COLA for increased costs of living.

We indeed balanced our budget temporarily through huge real cuts (not simply slowing down the increases to programs, but actual cuts) and tax increases, but we did at a huge cost. Go to Woodland and you can see the very human cost it is going to take.

Remember that this is the childhood of those kids. This is their education. This is their future.

One final note: Somebody had the audacity of accusing me of being a Republican yesterday because I favor fiscal responsibility in the city of Davis and will not support new taxes without an assurance of accountability and responsible new contracts for upper level city employees. What these individual apparently do not get is that we do not have the money and resources anymore to be living the way we did in the 1990s or even the 2000s. We have to pick and choose what programs to support. For me, education has to be THE priority. Everything else has to come second.

The priorities in the city of Davis are out of whack. We are sitting on a $13 million deficit of unmet needs. That's road repairs and infrastructure upgrades. If we do not get our public employee compensation and pension system under control, we cannot keep up with the things that we really need to put money into.

Sorry but there is really not one pot of money for schools and one pot for the city. It is but one pot of money and we have to make tough choices.

A liberal in these times has to be fiscally responsible because there is no money to just throw around anymore.

---David M. Greenwald reporting

Heystek Joins Vanguard's Call Against New Taxes without Reform

Back on February 3, the Vanguard made a bit of splash by invoking the spirit of Bush I circa 1988, saying "Read My Lips... No New Taxes."

In truth, despite how it sounded, it was not a declaration against taxes, or even new taxes. It was suggestion that Davis gets its fiscal house in order.

The city of Davis faces both a rare crisis and a rare opportunity. Right now, the city faces in the short term an economic downturn which has led to a loss of tax revenue. This situation calls for short-term budget cuts. However, the city has longer term structural deficit problems, it's facing a crisis of unmet needs, it's facing a problem of runaway top employee salaries, a pension problem, and an unfunded liability problem.

Those problems existed before the current economic crisis, but ironically the current economic crisis gives us a glimmer of an opportunity to get our fiscal house in order.

This economic crisis has already caused the city of Davis to scale back on its original plans to fix the longer term problem with new taxation. Instead, they are looking to manage the economic situation by renewing the current taxes.

As the Vanguard wrote on February 3, it has become

"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."

The Vanguard took the position that even this renewal of taxes would be opposed unless the city gets their fiscal house in order in part through restructuring employee contracts and pensions.

At Tuesday night's Davis City Council Townhall Meeting, the Vanguard's call was heeded by Councilmember Lamar Heystek. In January, a similar townhall meeting drew 30 members of the public, at least. This time the meeting was poorly attended. Just three members of the public attended as opposed to huge amounts of city staff including all of the department heads.

Councilmember Heystek told the council and city staff that he would oppose the renewal of the new taxes unless the city dealt with the fiscal problem and new employee contracts in a responsible manner.

His announcement seemed to stun city staff who immediately took notice. The City Council is not directly involved in employee negotiations, although they do approve the final contracts. However, Mr. Heystek believed it was the only leverage he had.

Two of his concerns are asking city employees to take more responsibility for their post-employment benefits. In addition, the city should re-examine the method by which we deliver services such as fire.

The Vanguard earlier this week demonstrated that the city's costs for fire are disproportionate to our service calls. A situation the begs for a restructuring of fire staffing. The Vanguard is fully committed to insure that there is no loss of service or response time, but believes alternative and less costly models can and should be applied to improve our fiscal responsibility.

Right now that appears to be several changes the city can make to the structure of contracts that would contain city costs:

1. Hold the line on top employee salaries
2. Short term hold the line on all employee salaries during the economic crisis, in the future bring them up only as far as inflation takes us.
3. Restructure the pension system by increasing employee contributions especially at the top end and moving it from "pay as you go" to full funding.
4. Look into cost containment for health coverage

All of these would need to be done with collective bargaining agreement. The alternative to restructuring the pension system would be to create a two-tiered system. The bargaining units could make the decision as to which is more beneficial.

Now that Councilmember Heystek has pressed for the city to engage in strong negotiations, hopefully other members of council will follow. Councilmember Sue Greenwald has long been outspoken in terms of wanting to reign in the contracts and pensions of the highest paid employees and upper-management.

Once again it is important to emphasize that this is not an effort to put down either the average city employee or employee unions. The job of an employee union is to get the best possible contract for their respective bargaining unit. It is the job of the city however to be an effective counter to that weight. They represent the interests of the voters and the taxpayers. When one particular unit uses their political muscle and resources to elect favorable councilmembers while the other units do not engage in overt politicking the system begins to breakdown.

As we saw with the Grand Jury report in January, the impact of throwing $30,000 or more into a political race can be decisive in the actions a council is willing to take. Even the Mayor who has been outspoken in favor of fiscal responsibility wilted under the pressure of her backers back in January.

This will thus be a long and difficult fight, but Councilmember Heystek's actions on Tuesday put the city staff on notice that business as usual will result in a less than unanimous endorsement of their current policies.

The Vanguard urges other members of the council particularly Mayor Asmundson to quickly follow suit.

---David M. Greenwald reporting

Davis Finds Itself in Growing Fiscal Hole

The city of Davis now faces a large and growing budget deficit. Due to the continued decline of the economic conditions in Davis, the current year's budget deficit is projected to grow from the November estimate of $1.54 million to $2.37 million. Next year the budget deficit will range from between $3 million to $3.6 million depending on the city's negotiations with the employee bargaining units.

From the city staff report for Tuesday's City Council meeting:

"Despite the potential to manage the FY2008/09 budget through aggressive cost containment measures, the budget outlook for FY2009/10 and the out-years of the five-year forecast pose significant and growing challenges. The baseline General Fund forecast for FY2009/10 now reflects a $3.6 million deficit under our original expenditure forecast assumptions, and a $3.0 million deficit assuming no changes in personnel costs beyond those provided for in current labor contracts."

Part of the cost containment strategy calls for most departments to develop a 7 to 10 percent budget reduction scenario with pulbic safety developing 3 to 5 percent reduction scenarios. The city hopes that this would provide up to $3.1 million in budget reductions.

Here are some further notes from the city staff report:

"As of February 1, the City has documented a current vacancy list of 21 regular full time and 1 (75%) regular part time positions. These vacancies represent a 4.7% shortfall in our current work force, in relation to our 464.25 budgeted Full Time Equivalent permanent positions."

Revenues are project to end the year at $2.37 million below the adjusted revenue budget.

"Property Tax revenues now reflect approximately 2% growth in assessed real property valuations and reflect reassessments by the Yolo County Assessor’s Office, as well as a slowdown in the rate of turnover of property in general."

Sales tax has taken a big hit.

"Sales Tax receipts through the first half of FY 2008/2009 indicate a decrease from FY2008/2009 results. While we had originally predicted 2.5% growth in this revenue, we are now estimating a decrease of 7.8%."

The news gets worse when you look at Automotive and Restaurant figures.

"Our core categories of Automotive and Restaurant, which together account for approximately 60% of direct Sales Tax collections, reflect decline of 14.6% compared to the same period last year."

Transient Occupancy tax has also declined.

"Transient Occupancy Tax receipts for the first two quarters of the fiscal year indicate a 10% decline from FY2007-08 results due to a 3.5% decline in tax receipts from hotel operators, and the closure of one business. This results in a reduction of $133,000 from our original budget estimate."

Department revenue is also down.

"Departmental revenue estimates are being reduced due to declining Public Works inspection activity and declining participation in recreation programs. Community Development revenue is increased due to billable planning activity for private developments. Combined departmental revenue estimates have been decreased by roughly $150,000 for the current year."

The Vanguard has made much of the overtime expenditures by the city. The staff report notes that the total overtime budget for the current fiscal year is $1.38 million which represents 2.6% of the human resources budget.

The staff report also looks at the excess fund balance over the 15% reserve target.



The good news is that the excess fund balance for last year was $723,325, however, the current budget situation will deplete most of that even with the budget cuts. By they are now projecting an $86,705 fund balance at the end of this year.

Commentary

We have discussed the issue of unmet needs multiple times here. The bottom line, the city has to take steps to make the city budget sustainable in the short term by cutting costs and in the long term by negotiating fiscally responsible deals with the city's bargaining units. All of the key bargaining units have the contracts up. The city cannot simply rollover the existing contracts in hopes that they can buy time until the next cycle when the economic outlook could be more favorable. There are structural issues that must be addressed.

The city has to hold the line on the top salaries. It needs to allow inflation to bring them back toward a more manageable level. It also needs to deal with the runaway train of retirement pensions. The current CalPERS situation is going to force some of this because CalPERS is going to forced increased contributions from cities that need to be taken up by employees.

The bottom line is that the city of Davis like the other cities in California has increased its employee salaries at an unsustainable rate during this decade. We are now about to pay the price for this rate of increase. We have the opportunity to fix that if we are proactive and act now. We are not in the calamitous situation that other cities find themselves in. But we could get there if we do not fix things now.

---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

City Needs to Press For Restructuring City Employee Contracts During Economic Crisis

Last night the Davis Enterprise had an interesting article on the status of city countrols for the department heads. The city has put on hold the new contract for department heads.

'We just decided to put it on hold while we deal with the budget issues,' said Human Resources Administrator Melissa Chaney. 'There's nothing pending right now.'

That means the seven people heading up the city's departments are operating under the old contract signed in 2005. Under that contract, the city budgets about $1,478,000 for salaries, health benefits, unemployment, workman's compensation and other items for the city's top employees.

'Right now, we're just trying to figure out where we are with the budget and what ramifications are with the current budget and the current fiscal situation,' Chaney said.

More interesting is that several of the bargaining units in Davis have to renegotiate their contracts this year. The city is facing a $1.5 million shortfall this year and up to $3 or $4 million for next year.

The retirement benefit issue has been a heavy topic of conversation on the Vanguard in recent months. The Enterprise article mentions Antioch has gone to a two-tier system which has dropped the formula from 2.7% at 55 for current employees to 2.5% at 55.

The other possibility is that the employees themselves are asked to contribute more to their retirement than they presently do. That is probably going to have to occur as the CalPers system which had been superfunded during the early part of this decade is now running in a deep hole with the struggles of the markets and other problems.

The two-tier system is generally strongly opposed to by public employee unions, so increased contributions for all might be the way to go.

One pressure that the current city management staff and the council are going to have to fight is going to be the pressure placed on them by the bargaining groups to simply extend the current contracts for a few years until fiscal times are better. That would enable employee groups to wait out the current economic downturn and essentially punt on the tough issues.

Instead the city needs to take advantage of this crisis to fix the structural problems with the compensation system--particularly retirement pensions.

The city is going to need to be tough in negotiations this time because there are not only current bargaining issues of a looming budget deficit for the city, but there are structural problems that will end up further stressing the city's fiscal condition.

As the Vanguard reported last summer, employee salaries rose 50% from 2000 to 2008. Total compensation to employees went from $27 million to $49 million over that period. However, retirement pensions fueled by the increase of the pensions to 3% at 50 for public safety have risen nearly six fold over that time. It is that factor that will further strain the city, especially as it has employees retire at 50 and 55 meaning the city may end up paying pensions for decades after retirement.

Is the city prepared to drag out these negotiations until they solve the problems in the contracts?

Looming ominously is a quote from HR Administrator Melissa Chaney:

"We haven't sat down with any of the bargaining groups. We would probably be looking at sitting down with them at this time of year, we just haven't done it yet."

One of the big questions is the extent to which the bargaining process can have transparency. Bargaining itself occurs behind closed doors. However, the city is looking into ways to make the process more transparent.

Under past conditions, the bargaining took place behind closed doors, a contract agreement was reached and the item was placed on the consent calendar for approval by the city council. That means that unless someone pulled the item off the consent calendar there would be no public discussion of the contract and the only time the council saw it would be at the end of the process.

Some possible changes include a status report to the council on the bargaining process given through out negotiations. Having a public presentation at some point along the way about the contract. Requiring the council to approve contracts like they do city ordinances--a full public hearing on the first reading and then a second reading.

One of the important ideas here is to sufficiently put public scrutiny into the process that both sides realize and recognize they have to defend the contract that they have arrived at. What has happened in the past is that the agreement is made behind closed doors and then the city staff become de facto advocates for the contract. That has produced some extraordinarily generous contracts over the last eight years and has allowed city employees to reap huge benefits at the expense of taxpayers and other projects.

The city in addition to the budget deficit in the general fund also is running about $13 million short on a variety of projects--often repairs and infrastructure upgrades--they have referred to these as unmet needs. Part of the reason for the unmet needs is an increasing portion of the general fund goes to city employees.

The city is facing very serious issues and it will be vital that the public be engaged in this process as they are really the only oversight the city has on contracts to public employees. The Vanguard will continue to press for ways to make this process more open and transparent in hopes that the interests of the taxpayers and citizens of Davis are represented in the process.

---David M. Greenwald reporting

City Now Facing Crisis of "Unmet Needs"

The Davis Enterprise on Monday ran a story entitled, "When to tax?" The general thrust of the story is two-fold. First, the city has a growing deficit of $1.2 million followed by as much as $3 million the next year.

On the other hand, the city has a long list of "unmet needs."

The city staff report for tonight's budget workshop says:

"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."

The general idea at this point, and it was shared by Finance Director and Assistant City Manager Paul Navazio, is that the city recognizes at this time that hey cannot ask for additional revenues. Last year they were proposing and exploring a number of new taxes to deal with some of the growing list of unmet needs. However, that is largely off the table now.

The staff report reads:

"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."

In other words, right now the city will be focusing on renewing rather than expanding the existing revenue base. That puts a tremendous strain on city resources and city services. One of the keys will be the round of negotiations that the city has to engage in this year with most of the city employees' bargaining units.

There will be a tremendous pressure on the city and the bargaining units to simply punt on these negotiations. Meaning that they would simply negotiate the same agreement as before and extend the current contract. The hope by the employees would be that in a year or two the economy will have improved and then they can negotiate a better contract.

However, many recognize that the current trajectory is not sustainable. At some point we will have fuller discussion of the retirement system, but the strain on PERS may necessitate changes in who funds the retirement pensions and the breakdown of employee payments to employer payments into PERS.

The city at this time would be better holding fast to the negotiations and go to the mat for changes even if that process takes two years and requires a de facto rather than a de jure extension of the current contract.

From our standpoint the biggest problem right now are the growing list of unmet needs. The growing list was concerning last year. The fact at that point was that the city separated this list of needs from the budget, meaning that it appeared we had a fund balance with a reserve. But that fund balance was an illusion. It belied the fact that the city lacked the resources to meet these needs.

These needs include infrastructure upgrade and repair, basic road maintenance, and a whole host of other short and long term needs. Allowing these to go unaddressed means more cost down the line.

Now the city finds itself in an operating budget deficit that will grow to large proportions in the next two fiscal years. The city cannot rely on the taxpayers to pay more during these very difficult economic times. So the city is in a real jam.

The city has really put itself into a tight place by being overly generous with salary increases and retirement pensions that occurred during better economic times. The city lacks the revenue now to be able to address serious needs and they also recognize that the taxpayers lack the resources and probably the inclination to vote for tax increases during these challenging fiscal times.

Where does that leave the city? We will have to watch as the council tries to grapple with these kinds of issues. It would have helped if a year ago, the council had been more upfront about the tenuous nature of the city's fiscal situation it was touting during the council elections of 2008.

The Vanguard has been warning about this impending problem for some time. The council is just now considering looking into it.

---David M. Greenwald reporting

Analysis: Further Examining Davis' Financial Situation

One of the issues came up last week with regards to the Budget discussion, was that of sales tax revenue. As a result, I wanted to look at total revenue for Davis per capita in comparison to other cities in region.

Assistant City Manager Paul Navazio provided me with that data, the only downside to it is that it is 2006 data from the State Controller's report. The upside is that it has a pretty good list of comparison cities, so it provides a pretty good picture and frankly I am not certain that much has changed in terms of rank order.



As one can see from the first slide here, the city of Davis is near the bottom in general fund revenue of the comparison cities. What is interesting is that cities like Vacaville, Chico, and Fairfield that have tremendously expanded their sales tax base in recent years by building a number of strip malls with big box stores, are almost identical in terms of general fund revenue (granted we are not looking at sales tax alone). Councilmember Greenwald's point is not far off that Vacaville does not have a tremendous difference.

Some have suggested that if we simply had a larger tax base, we would be in better financial shape right now. The problem is that larger tax base would mean more expenditures by the city. And once the economy reduces the revenue, the cities have found themselves in a deficit. And yes, I understand that cities should exercise greater degrees of fiscal responsibility, but the fact is they do not. Cities with greater revenue in fact are facing larger problems with the economic downturn.



The second point is really what I was trying to get at last week. Yes, Davis has lower sales tax revenues that other locales, but Davis is actually in a lot better shape that many other cities in terms of budget deficit.

Part of the reason for that is that more general fund revenue also means more general fund expenditures.

Now the expenditure data comes with a large caveat as Paul Navazio explained in his email to me. Basically no two cities are identical for purposes of this type of comparison. Some cities, for example, provide library services, paramedic transport, public health, etc. Very few cities operate there own water and sewer utility, whereas Roseville operates its own electric utility, some cities operate their own Housing Authority, etc. Navazio removed capital program expenditures, that will reduce the expenditures for some cities, for some reason Roseville is coming to mind, but it enables us to better gauge spending on comparable terms.

Based on these data, I make two more general points. First, with regards to city employee salaries--and the biggest concern there is going to be both retirement and rising health costs. Davis has seen as we have presented in the past a meteoric rise in employee salaries over just the eight years in this decade. 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 have not kept up. That is a big concern.

Part of that has been driven by the need to compete with neighboring communities for quality employees. That is indeed a concern and it is one that we need to take into consideration. In fact, as Paul Navazio showed in October, Davis is in fact in better condition than it's neighbors in terms of city salaries. The problem is that we have still seen a large rise.

Last week the Davis Enterprise surprisingly called for greater transparency in the salary contract process. They in fact, questioned the practice of using recent labor agreements from other nearby communities as benchmarks to help determine Davis' wages and benefits in an effort to remain competitive.

"Unfortunately, some of our neighbors have been overly generous and, like lemmings, we have followed them over the cliff's edge."

That's actually a pretty good description and so I respectfully have to disagree with the conclusions the city made back in October that simply because we are somewhat better off than our neighbors is not a rationale to continue the same policies that will lead more cities to bankruptcy such as Vallejo has faced.

A final point, I want to make here is that I actually agree that we should expand our sales tax revenue. I see that as a longer term solution to the city's budget. That is a prime reason I now oppose residential development on a 100 acre parcel of land that is currently zone for light industrial uses. It is the largest remaining parcel within the city limits so zoned and it would be a mistake to take that out of the market.

One of the things we are learning is that the Lewis Properties much like the owners of Westlake, never really marketed the property for business uses. The result is that while they claim there has been no interest, they have not actually tested that theory, and in fact, if that site were to be marketed there seems to evidence that there is some considerable interest just as there are grocers who apparently want to come to Westlake.

While there are considerable differences between Davis and San Luis Obispo, one of the things I have looked at is their model for economic development. In terms of residential development, San Luis Obispo has almost not grown since 1990. I think the population in 1990 was around 42,000 and now it's around 44,000. What they have done is develop their economic base. I would like to see some of that in Davis.

As I have stated in the past, I am generally opposed to the kind of big box retail companies like Target or Wal Mart. In part, I think they are inefficient producers of tax revenue, often taking more resources out of a location than they bring in. Moreover, from a long term perspective, their policies are not sustainable. We need to move in a different direction.

I think as Councilmembers Sue Greenwald and Stephen Souza expressed pretty eloquently at the previous council meeting during the discussion on Lewis-Cannery, there is a huge and growing green technology industry. Davis is primly situated to take advantage of that. As Councilmember Greenwald suggested, we have missed out on past booms such as the dot.com one. We should not miss out on the green technology boom.

I would also like to see us expand some into retail, but I would prefer smaller and more sustainable types of business other than big box.

If we are smart and innovative, we can make a lot of the kinds of changes that we want without sacrificing the character of our community. Obviously there are some on this blog who do not give a darn about that and in fact want to get rid of that. One wonders why they have chosen to live if here if they dispise it so much. However, I think these people are in the very small minority of the populace in Davis who have repeatedly voted to continue relatively slow growth and strongly environmental principles. Many of these people are the same who derided Measure W and we found out that those people were in the very small minority of Davis residents. For much of Davis, the challenge is how to expand our base without sacrificing what makes Davis, Davis. How do we grow without becoming like Fairfield and Vacaville.

---David M. Greenwald reporting

Illustrating the Budget Woes For Davis

Last week the Vanguard covered the city's "Budget Workshop" where Assistant City Manager Paul Navazio presented the bleak forecast for Davis due in large part to the economic downturn that has impacted Davis in ways that Davis often does not see.

The Vanguard ran an article: "City of Davis Stares Down a Budget Deficit". At that time, the PowerPoint presentation was not available. However, Paul Navazio has kindly provided his PowerPoint slides, some of which will be posted here to illustrate the budget projections and where Davis falls short from the predicted.

---David M. Greenwald reporting

City of Davis Stares Down A Budget Deficit

At last night's Davis City Council Meeting, the city of Davis was presented data by Finance Director Paul Navazio that paints an increasingly bleak face on the city's fiscal situation. Once thought to be relatively immune to the rise and fall of the economy, the current economic crisis goes deep enough that Davis faces a $1.2 million budget deficit for this year and a $3 million budget deficit for next year.

The culprit is lower-than-expected property and sales tax revenues. For instance, the city expected a 6.5 percent growth in property taxes but they have only seen a 3 percent growth. Moreover, and just as devastating is what happened on the sales tax side where the city typically assumes a 2 percent annual sales tax growth but instead is looking at a 5 percent decrease in revenue from sales tax primarily coming from auto sales, gas, and restaurants.

A few weeks ago we reported that the city of Davis was looking for immediate cost containment which included a five-fold strategy of a hiring freeze, closer scrutiny of overtime, travel and training control, tighter control of contracts, and a limitation of non-essential spending.

The budget forecast for the next five years looks bleak for the city. With the $1.2 million debt for 2008-09 increasing to $3 million next year, $3.8 million in 2010-11, $4.49 million in 2011-12 and $5 million for 2012-13. Part of the problem is that the structural deficit that some have claimed the city resolved, has asserted itself.

The current year sees the need for continued cost containment measures with the balance of the gap being bridged through the use of the General Fund reserves.

Next year becomes critical with the need for expenditure reductions, service reductions, revenue enhancement, and state budget contingencies.

Navazio believes that the once time cost savings could save up to $900,000 which would require the city to eat up to $330,000 from their reserves. That seems rather optimistic on the face of it.

Unfortunately, the city did not provide PowerPoint slides (we believe that this would have been a great slide to show) but basically, police and fire make up about half of the general fund budget. The city is talking about a 5 to 7 percent reduction across the board in departmental budgets. A five percent reduction would save $2.2 million and a seven percent reduction would save $3 million. Of that between $400,000 to $600,000 would come from fire and $700,000 to $1 million would come from police.

The alternative would be for the city council, city manager's office, community development, community services, parks, and public works to take a 7 to 9 percent cut and allow police and fire to only take a three percent cut. The rationale for this is protecting public safety. That would place fire at a $263K cut and police at a $436K cut.

But again this really understates the budget hit we are facing. Last year we identified up to $13 million in unmet needs. These unmet needs were taken off the books so they were not considered part of the deficit and it appeared that the city of Davis had a balanced budget. These again include key infrastructure needs and repair work.

Because of the immediate crisis, they did not spend much time on the long-range financial plan update.

The first priority is the renewal of the half-cent sales tax which generates roughly $3 million per year in June of 2010. The second priority is to replace the parks tax, perhaps by 2011, since it sunsets in June of 2012. Finally they need to look at additional revenue options as well. One of their concerns to look at funding options prior to the sunset of the DJUSD parcel taxes.

There should also be a reminder that some proposed taxes do not include a variety of fee increases. The big ones are going to be water and sewer due to the capital improvement projects.

City Manager's Memo

On December 5, 2008, Bill Emlen sent out an updated memo to all city employees on the city's budget situation.

Here are a couple of key points the City Manager brings up.

"We have worked with individual departments on cost cutting measures including a hiring freeze, and reductions in various travel, training, overtime, and contractual service expenditures. Individually, these actions are relatively small but cumulatively they can add up to something substantive. They are important first steps, but it is clear that more work needs to be done. We are still determining how much savings were accomplished with these initial efforts. As I noted, current estimates are that revenues will likely be down about 1.5 million dollars this year."

Furthermore:

"In terms of our budget, we are now projecting that next fiscal year’s shortfall could be in the 2.5 to 3 million dollar range. Add to that the uncertainty over the potential impacts the State budget crisis will have on local government, and you get a sense of the potential challenge we will face with the FY 09-10 budget."

One of the strategies is to retain as much budget reserve as possible.

"Our initial goal is to retain as much of our current budget reserve as we can going into the next fiscal year. To accomplish this, we will need to continue to find ways to reduce expenditures this year. If we are successful, it does not necessarily solve the problem we face in 2009-10, but it does provide some flexibility to cushion some of the budget impacts we are likely to face, particularly if State shifts of local funds become part of the equation. That said, the type of deficits projected by our current budget forecasts make it unlikely we can balance the budget without reductions, and they may be significant."

Here is the red flag:

"In our budget instructions for next year, we are asking departments to develop reduction scenarios in the 5-10 percent range. This information will then be evaluated on a City-wide context considering such factors as equitable impacts among departments, Council priorities and extent of use of budget reserve."

Most of this backs up what was said at the city council meeting, but it underscores the severity of the problem. Council wants to look at recently allocated expenditures and evaluate program priorities.

The unfortunate aspect of this crisis is that even if they cut five to ten percent of their budget, that will just get them by until 2010. The long-range problem is that the budget deficits will increase rather than decrease after 2010. Complicating things are the impracticality of revenue enhancements from new commercial ventures at this point plus a tough credit market precludes other revenue enhancement that is not related to tax increases.

The city of Davis is far better off than other cities or even the state at this point, but the severity of the current crisis compounded with the questionable past accounting practices with $13 million in what is really some sort of deficit stored as unmet needs puts the city in a quandary in terms of how to continue to provide a high level of services to the public.

---David M. Greenwald reporting

City Manager's Memo Warns That City Projects Revenue Shortfall

Davis has always been more insulated to economic downturns than surrounding communities and to some extent that remains true. However, according to an internal memo from City Manager Bill Emlen that is starting to change. Given declines in property values and reduced levels of consumer spending (both of which make up the majority of the City's revenue's), the city is projecting to end the current 2008/09 fiscal year in a $1.5 million deficit.

Moreover, they are concerned longer term, about the severity of the stock market decline and its impact on CalPERS contribution rates.

Moreover the city manager warns that while the immediate concern is impact on the City's General Fund, economic conditions suggest that other city funds could be impacted.

The city manager calls for establishing at least five cost-controls measures for the remainder of this fiscal year.

While these are obviously needed steps, there are several points that really need to be made.

First, while the city remained on paper in the black prior to this economic downturn, the city was actually absorbing a deficit in terms of the the services that it was providing. As such, revenue shortfalls were absorbed into unmet needs--things that the city really should have been spending money on like road repairs and infrastructure upgrades, that they could not afford. Obviously the situation has worsened since the last evaluation, but it seems that the city could have been doing some of these things all along.

For example, the city manager asks for all departments to "closely monitor overtime use." Overtime has been an issue for some time, why would they not have been closely monitoring overtime in the past?

Along the same lines, if the city was unable to meet some critical needs, why not place more limits on non-essential travel and training prior to this? The same can be said for discretionary spending.

Why wouldn't you want all new contracts to be approved by the City Manager in advance of commitment under normal circumstance?

What I want to know is how much money they would expect to save through these cost-cutting mechanisms. My guess is this is probably more symbolic than anything else, on the other hand, my concern is why not implement this sooner.

Again two reasons to really questions this. First, the unmet needs problems of previous budgets. Second, it is not like this current budget crisis should have caught the city unaware.

After all, the city was prepared at one point to take a $3 million hit through the state budget. However, what finally materialized was a $760,000 hit to the redevelopment agency rather than the general fund.

What is also interesting is the timing of this memo which came out on Monday. On Thursday, the city council will have a special closed session meeting negotiating the city's new contract with department heads and the assistant city manager. This group received an 18% increase in salary in their previous contract with various colas built in over the course of the three year period. Thus someone making $100,000 a year to start the contract would be making $118,000 at the end of the contract.

Will this announcement about the budget troubles along with previous concerns about the out-of-control growth in city salaries lead to a more prudent contract from the city council?

That is going to be a key question because right now we are cutting back on unmet needs even before this critical economic downturn. Will the city continue to increase the pay to already well-off city employees or will they put our resources into maintaining the parks, repairing our roads, and continuing to provide transportation for various citizens?

In the meantime, the state budget picture if anything looks even more bleak than a few months ago. The city needs to prepare to take a huge hit, however, the real question is what they have been doing up until now to prepare? To me this memo suggests that the first steps are only just now being taken.

The memo closes on the standard note basically saying our situation may not be good, but we are in better shape than others.

"One final note worth considering is that while we are facing budget difficulties, our situation is not nearly as severe as those being experienced in many jurisdictions throughout the state. Through proactive actions now, I believe we can further soften the budgetary impacts of the economic downturn on our city."

This would have been a great memo perhaps six months, now it seems to be a little too late as the first canary appears to be at the very least in critical condition.

---David M. Greenwald reporting

Lessons to Be Learned From Vallejo's Bankruptcy

Some have openly wondered why the sudden focus on the salaries of public employees in both Davis as well as in the county. In truth, it is a combination of factors that stem from the alarm of what happened in Vallejo to the burning question: can it happen here. Over the course of the summer, we have looked at this question from a variety of different angles. Perhaps most concerning was the seeming lack of concern from two of the victors in last spring's Davis City Council election about the looming and impending problem of Davis' fiscal stability.

These candidates argue that Davis has a balanced budget and it has a 15% reserve. At the same time, we see signs that all is not quite as well. The reports about the city's unmet needs is alarming. Basic repairs are being left undone which means that when they finally are tackled, their costs will likely have gone up. A simple view of the budget picture is that employees salaries have gone up far faster than tax revenues. The amount city has spent on pensions have increased five-fold over the course of just this decade. The city council at every budget workshop has looked toward the creation of new taxes. And finally, the most extreme cost to residents may be a water rate hike that was so explosive the Mayor would not even let a councilmember complete her questioning of a consultant.

With all that as context, we now look at Vallejo briefly as a guideline. Vallejo is not where we are right now, a clear view of that will emerge in a minute. The question is whether Vallejo is where we are going to end up. As we look at this analysis, I think the picture will become very clear as to why we have spent so much time looking at the issue of Davis' fiscal situation this summer.

The 100K of Vallejo

The Woodland Journal has provided us with these figures from a public records request they made from the city of Vallejo.

As you look at these salaries, remember that Vallejo is not even twice the size of Davis. It has a population of 116,000. The median income of Vallejo is $47,000 whereas Davis' is $65,000. The median housing price is also considerably less than Davis at $344,000. That is the context behind these numbers that show rather than 61 city employees in Davis making over $100,000 per year, a stunning, 292 city employees in Vallejo making over $100,000 per year.

• 100K Club of Vallejo--Click here to see the full list

Of this list, public safety and in Vallejo's case both police and fire, absolutely dominate the list. Of the 292 city employees making over $100,000 per year, 246 are in public safety--148 police and 98 fire.

As the pie chart shows, over half of the employees are in police and another 35% are in fire.

In addition to overtime, there were also payouts for holiday pay that are not shown on the chart above. It is not clear what holiday pay entails but in some cases it is a huge amount of money. The top wage earner received $232,000 for holiday pay, the second highest wage earner received nearly $200,000 for it.

Lessons to be learned

Some will take from this demonstration some solace that Davis is not in the condition that Vallejo was before filing for bankruptcy. That is 100% correct. However, the concern is that Davis like many cities in California is heading in that direction. The tale of Vallejo is a cautionary one for the rest of California cities to avoid their pitfalls.

Peter Scheer is the executive director of the California First Amendment Coalition. He was a guest on Vanguard Radio back in June.

In May, he wrote a column on how Vallejo's bankruptcy might have been avoided that appeared in the Huffington Post.

Mr. Scheer writes:

"To the familiar litany of causes--falling sales tax revenue, the home mortgage crisis leading to collapsing home prices and lower real estate taxes--there needs to be added one more: Too much government secrecy."

He continues:

Vallejo is broke, and other cities and counties may be close behind, because their personnel costs--salary and benefits for current employees and retirees--are higher than they can afford. While decisions at the state level are partly to blame, ultimate responsibility for the mismatch of revenue and expenses rests with local elected officials who, meeting in secret, have managed to avoid public discussion of the true cost and fiscal impact of the pay deals that they have approved.

If no one is watching, it's easy for public officials to give generous pay and benefit increases without having a clue how to pay for them. That's not so easy to do in a public session, where voters demand to know how much taxes will have to be raised, and how much other expenses cut, in order to make good on the promised increases in compensation. Such resistance is called political accountability, and it obviously depends on public access to the meetings in which elected representatives make their decisions.

Although in theory legislative bodies in California must operate in the "sunshine," the Brown Act, the state's open-meetings law, carves out a huge exception for negotiations with public employee unions. The combined effect of this exception, and separate provisions of the labor code, is to close the door, pull down the shades and turn off the lights on virtually all decisions relating to employee compensation and other terms of union contracts ("collective bargaining agreements").

Negotiating positions are determined in secret, negotiations themselves are conducted in secret, and negotiated contracts are ratified in secret. By the time the public gets to see the compensation provisions of a new union contract, it is already a done deal--indeed, any effort to change the terms likely would be a breach of the contract.

This cozy arrangement is very much in the unions' interest, since transparency would risk public opposition, and very much in politicians' interest, since they get to be generous with public funds without having to be responsible for them. Only one party is screwed: the public.

Finally a cautionary tale for public employee unions across California:

"For unions, bankruptcy court is a potentially costly defeat. The judge has the power not only to protect the city from its creditors, but also to void the union contract and, in that way, force city employees to accept a pay package in keeping with the city's capacity to pay.

The union has none of the leverage with the judge that it had with Vallejo's elected officials. It can't lobby the judge or give him campaign contributions, obviously. Having overplayed its hand, the union now finds itself in the uncomfortable position of having to justify, in a public forum, its claims to the city's limited, and declining, resources."

I agree with Peter Scheer 100%. There is familiarity in the Vallejo situation to our current situation. We are not where Vallejo is. Hopefully we can learn from these lessons. However, there is zero doubt in my mind that we are heading there. All of the trends are pointing to this.

Finally though this is a story about transparency. People have criticized the Vanguard for perhaps focusing too much attention on the firefighters of Davis. Honestly, I have nothing against the firefighters. On a personal level, I like their union chief. I enjoyed myself last summer when I did a ride-along with the department. I learned a lot and they were extremely accommodating to me. This is not personal. This is about public policy and from that standpoint, the city must step in because if Davis goes bankrupt, the firefighters stand to lose as much as anyone else.

People have also criticized the Vanguard for reporting on government practices when there was no clear problem. What I think they fail to recognize is that we need to know what is going on with our government regardless of whether they are behaving appropriately or misusing public funds. Both are important to report on, to know about, and to follow.

Peter Scheer hits the nail on the head in his column. We need transparency in government and for the public to be aware of what the contract are and what the consequences of these contract will be not only this year but down the line. And we have the same problem here that existed in Vallejo. A particular public employee union has tremendous leverage over the current council because of the work they did on behalf of two councilmembers this last cycle to see that they were reelected. The amount of money put in by that union was far more than any other single interest.

As Mr. Scheer points out, when the bankruptcy court comes in, the union will not have the kind of leverage over the judge that they had over the city and the judge has the power to void contracts. I would hate to see Davis come down to that and we can avoid with fiscal responsibility in the next four years. This is crucial time, because the contracts are coming due and negotiations will begin soon. The public needs to watch this situation very closely to ensure that their interests and not just the interests of the public employees unions are represented in the process.

---Doug Paul Davis reporting

Closing the Circle: Examining City Employee Contributions in 2008 City Council Elections

In my field of study, Political Science, researchers often work with intricate and complex mathematical models to determine the link between campaign contributions and public policy. The search for influence was often muddled by preexisting partisan and philosophical ties between interest groups and public policy makers. Part of the complexity also arises from the large number of contrary interests pressing policy makers in seemingly opposite directions. In some ways, the pattern in local politics seems much more simple.

As Rich Rifkin pointed out in several columns leading up to the 2008 city council election, there is really only one group of public employees that was active in the council elections--the firefighters. Indeed in our examination of the Form 460 (Campaign Statements from the City Council Candidates), we find only a few very small contributions from city employees who are not firefighters. A Davis Police Officer and head of the Davis Police Officer Association made small contributions to incumbents Stephen Souza and Don Saylor, and the union itself made only a $100 contribution to candidate Sydney Vergis.

Compare that to the enormity of the contributions from the Davis Professional Firefighters Local 3494 and you see any influence is quickly dwarfed.

In the chart below you will see contributions by Local 3494 members cross-referenced with their 100K Club ranking. In the image below you only see top 20 members of the 100K Club. If you click on the link below you can see the entire list along with their city of residence. Thanks to Rich Rifkin for help with some of the data, along with yet another public records request from the city of Davis.

• CLICK HERE for the full list of Campaign Contributions by Local 3494 Members

The direct contributions total $12,000 to exactly three candidates--Incumbents Stephen Souza and Don Saylor and challenger Sydney Vergis. They are contributed in increments of $100 per Davis campaign finance regulations that limit individual contributions to $100 per person, per campaign cycle. The members of the Local 3494 union have found a way to bundle the money in an effort to increase their influence. This is part of the complaint against them in the Yolo County Grand Jury report.

As we know however from the campaign, direct contributions are not the end of the story. Independent Expenditure Committees in Davis must report their activity in the California Form 496 and their committee is required to fill out Form 450. Unlike direct contributions, there is no limitation in terms of their spending activities. Thus as we know, the Davis Firefighters launched two different IEs in favor of their preferred candidates. According to their filing from May 12, 2008, the Davis Firefighters spent $6070.46 on the Print and Design of the brochure featured in the link above. For the entire six month period ending on June 30, 2008, they report $8245.63 which includes expenditures on a door hanger they report as $373.03 per candidate.

The combination of direct contributions and independent expenditures totals over $20,000 for the period. A reported spending that actually seems a bit on the low side.

Nevertheless, this expenditure is in fact unique for city employees in Davis. No other group of employees have organized in this manner to attempt to influence the city council election outcome. And from past elections, we know that this is not unique.

The question now comes to what exactly this influence buys the Davis Professional Firefighters. Here we revisit our findings from the 100K Club of Davis article.

As we see from these charts, the Davis Firefighters emerge as the "top dawgs" in terms of both base salary and salary plus overtime...



The first chart shows that the Davis Fire Department makes the highest average base salary of any Davis city department outpacing the City Manager's Office by a good $15,000 and outpacing their fellow public safety department, the police, by over $20,000.



However, that advantage increases tremendously when overtime salaries are factored in. Even, given the fact that roughly 17% of the overtime salaries are reimbursed by the state of California, these statistics show that by far, the Davis Firefighters are the best paid workers in the city. And again, it is not even close.



Here you can see their overall slice of the pie, just looking at base salaries.

And what we discovered yesterday is that even with respect to other locales in the county, the city of Davis' employee scales are skewed.



Where does that leave us? Unfortunately it leaves us right where we started--an unsustainable situation for the city of Davis where the rising cost of employee salaries are threatening to throw the city's budget out of whack.



So we end this circle where we began--the Davis tax revenue has not kept up with the rising cost of employee salaries. We spent a good deal of time this spring talking about pensions--the cost of pensions for the city of Davis was just $900,000 in 2000-01, this year it's almost $6 million. And the bubble of retirements with the current 3% at 50 arrangement have not hit yet.

What is the cost of these rising expenditures, one needs to look no further than the front page of yesterday's Davis Enterprise for the answer. In there was an article about the inability to repair some of the Davis bikeways because the city lacks the funding. This by itself is a safety hazard. People talk about the fact that the fire department is responsible for protecting lives--there is no doubt that is true, even if the actual number of fires is fairly low compared to other service calls. However, as I have stated before it is unclear to me that we are less safe paying folks a strong wage of say $70,000 compared to a wage of $109K. It is less clear to me that we are more safe now, unable to pay for crucial road and other infrastructure repairs than we would be paying the firefighters a bit less, and keeping the overtime under control.

What the city calls unmet needs is really a budget deficit. It is a deficit between what the city needs to spend and what it can spend. And unmet needs are insidious. Failure to make repairs now, means more expensive repairs later. Failure to make repairs now means possible safety concerns down the line. The pattern here is quite clear. The residents of Davis who are concerned about taxation, need to watch this much more closely. The residents here concerned about quality of services need to watch this more closely as well. At some point, the city will need to figure out a way to finance this and it means taxation, development, and possibly cutback on services.

Stay tuned to future Vanguard articles as we explore other aspects of the city council finance records.

---Doug Paul Davis reporting