Davis City Council Special Meeting: Budget, Long-Range Forecast, and CIP Review – May 28, 2025
Davis City Council Special Meeting: Budget, Long-Range Forecast, and CIP Review – May 28, 2025
On May 28, 2025, the Davis City Council held a special workshop at the Davis Senior Center (Valente Room) to continue discussing the proposed FY 2025/26 and FY 2026/27 biennial budget received by the Council on May 20. The agenda is dated May 27, 2025, 3:30 P.M., while the provided meeting timestamp is 2025-05-28 11:30:00+00:00; this summary uses the provided timestamp date. Consultant Bob Leland of Baker Tilly presented the 20-year forecast, and staff presented the Capital Improvement Program (CIP) list. No formal budget vote was taken; the Council provided feedback and requested additional analysis.
Agenda Approval
- The agenda was approved unanimously, 5-0.
Public Comments & Testimony
- Elaine Roberts Musser said the city’s tight finances follow years of councils avoiding fiscal reality; she opposed accounting devices, further deferral of road and bikeway maintenance, and shifting tree and sidewalk responsibilities to homeowners. She supported using Measure Q sales tax revenue for pavement maintenance, restoring the general fund reserve to 15%, and paying down unfunded retiree health liabilities.
- A resident who identified as a homeowner, walker, jogger, and driver said street conditions are becoming dangerous and urged immediate repair, arguing that delaying pavement work for five years would create an unmitigated disaster and cost far more later.
- A speaker representing the Community Action Network, identified as TV, encouraged the Council not to strip social services and to collaborate with DJUSD, UC Davis, and community partners through talent sharing, public-private partnerships, and joint grant applications to address the $2.8 million budget gap.
- Holmes Holk asked what two areas of further budget review staff had referenced and what residents should do to prepare.
Discussion: Long Range Financial Forecast
- Bob Leland presented a 20-year forecast showing that even with Measure Q, the proposed budget contains a $3.2 million built-in shortfall in FY 2025/26, a $2.8 million shortfall in FY 2026/27, and an average shortfall of about $2.3 million through FY 2034/35. Without Measure Q, the city would face nearly a $15 million annual shortfall, a fund balance that never recovers, and much deeper fiscal distress.
- Measure Q is projected to add $11.2 million when fully received in FY 2026/27, but the forecast still leaves expenditures above revenues.
- Leland attributed the worsened outlook to six categories: personnel costs up $1.3 million, pension costs up $2.4 million, internal service charges and vehicle replacement up $2.4 million, insurance up $2.2 million, professional services up $0.7 million from the prior forecast, and other operations plus lower expense credits adding about $2.9 million. Professional services grew from about $2 million in FY 2021/22 to $6-7 million in recent years, with about $6 million proposed in the next two years; some of that growth was one-time ARPA spending.
- Key assumptions included 2.5% cost-of-living adjustments plus 0.25% net step/turnover, vacancy rates around 4.7% in FY 2025/26 falling to 4%, continuation of FY 2026/27 staffing, no fourth fire station or new service expansions, 2.5% non-personnel inflation, a $3 million annual general fund contribution to streets and bikeways, moderate recessions every seven years beginning July 1, 2026, and $12 million in assigned ARPA reserves excluded from available balance.
- Risks and uncertainties included higher-than-budgeted vacancies, better or worse CalPERS returns, adverse impacts on UC Davis and higher education from federal and state budget actions, restrictive federal policies, pessimistic consumer sentiment, and continued insurance cost increases.
- Leland recommended adopting the proposed budget but treating FY 2026/27 as temporary; avoiding hasty permanent cuts; slowing position filling; not adding new ongoing expenditures; and updating the model as information develops.
- Councilmembers noted that without cuts the reserve would remain flat at about 10%, and a sustained $3 million annual reduction could return the reserve to the 15% target in about three years. They asked for additional scenarios using four- or five-year timelines.
- Some councilmembers said spending reductions alone were insufficient. One cited the failed 2018 transportation parcel tax, which received 57% support but fell short of the required supermajority, and resident survey results showing 79% satisfaction with city services, 65% trust in the city to manage tax dollars, and 79% support for raising taxes to maintain services. Another councilmember warned against cutting affordable housing or homelessness programs because residents consistently rank those as top concerns.
Discussion: Capital Improvement Program
- Staff described the CIP process: a late-fall call for projects, prioritized lists from asset groups, project budget sheets, funding source allocations, and reprioritization with finance and the city manager.
- More than 60 projects requested new or additional funding for the biennium; only the green-highlighted projects were proposed for funding in the next budget cycle. Roughly 50 active capital projects are continuing.
- Unfunded or partially funded requests included design-phase projects requiring local grant matches, stormwater compliance work, transportation projects, water projects, and annual projects such as facility roof replacement, ADA improvements, street structures, street lights, and traffic signals.
- Councilmembers emphasized the public safety importance of the H Street tunnel for children biking to school. Staff plan to separate the H Street scope so tunnel and bikeway work can proceed first, with pavement work deferred until after pump station work; the pump station project may be debt-financed through stormwater rates. A temporary pavement overlay was discussed but cost roughly $500,000 and was not considered justified before reconstruction.
- A councilmember referenced a possible $24 million Cool Pavement grant, while another thought it was $50 million; staff said the application is one of 3,200 under federal review, with about 10% reviewed so far, and funds must be obligated by the end of the federal fiscal year.
- In response to a question about the police station generator, staff said the existing generator is at risk of failure and supports dispatch, so replacement is proceeding; the design was adjusted to allow future battery integration, and replacement will meet Tier 4 emissions and efficiency standards.
Key Outcomes
- The Council approved the agenda 5-0 and took no final action on the budget, CIP, or long-range forecast.
- Staff were asked to return on June 3 with program-level cost information for major general fund programs, CIP funding source details, funding restrictions, and implications of leaving projects unfunded.
- The Council requested reserve modeling for reaching the 15% general fund reserve in three, four, and five years, including the annual spending reductions each scenario would require.
- Staff were also asked to identify staff priorities among unfunded or partially funded CIP projects and to explain where funding could or could not be swapped between projects.
- The Council requested that future long-range forecast presentations occur earlier in the budget cycle, roughly six to eight months before budget deliberations.
- The Interim City Manager noted that urban forestry and homelessness will receive deeper policy discussions, and the biennial budget is expected to be adopted by the end of June.
Meeting Transcript
Thank you all for coming and turned it over to our city manager to get us started. So thank you everybody for coming. This is in a workshop format. I would note that the acoustics in here are a little different than what we're used to, and we don't have the microphones. So if when you're talking, even though you're talking to each other, if you could please speak up so that everybody can hear if that includes the owl which is reporting and the clerk as well. So the um the agenda is pretty straightforward. It is really a conversation that is solely solely for the uh sports of discussing the budget. We do have two particular presentations to provide additional information for you. One is our long forecast, and then the other is uh our CIP or capital and projects updates. And so those will both be um provided by um Bob Heeland and then one of my um I think what we can do is go ahead and start the URL call and then um approval of the agenda and then we can sort of formally introduce um we can look into the long range presentation. Did you uh want to do public comment before or after? You don't want a general public comment or the agenda after of things we've provided, but yeah, we can do that. So roll calls. Okay. And then we build the agenda. Is there a motion to approve the agenda? So the second uh we'll be with the Vice Mayor Neville on the first and second. Awesome. Okay. Uh chapter to the discussion, all those maybe say aye. And maybe it's saying we should pass as five and zero agenda. Okay, so we'll move straight into the long range forecast conversation. Um so we have with us today Bob Lee Lind, who is senior advisor with Baker City. We have contracted with Bob for um a number of years to provide us with a long-range forecast. Um he's developed a model that he has tweaked and um massaged over the years that I think it's fairly impressive. Um and it provides us with a lot of good talking points and information about planning going forward. It's a 20-year model. And what of you been doing about 10 years? So it's it's been a useful tool. And it's not something that most communities use. Um so it's fairly fairly unique. Uh Bob, in addition to being our consultant on this, also happens to be a long-time community member, and so he fully understands the issues that are in the community and uh a lot of the policy discussions that we're having. So we kind of get a two for the price of one. Much appreciated. Um what he is going to provide today is information um on the long-range forecast that is based on all the information that we were putting together, collecting, and uh putting into the proposed two-year budget. So one of the challenges that we have is that a lot of this information we're just getting by putting it into the budget. So you get the budget and you get the long-range forecast at roughly the same time. Um which makes it sometimes makes it a little bit of a difficult uh conversation to have because we've already put out a proposed budget and then you're getting this long-range forecast. Um so I would remind you that our our budget, our two-year budget, is as I said, last meeting is a living document. Um it evolves and is you know, we might council needs to approve it by the end of June, but it will continue to evolve and change over the next two years. Um, I think what I'll do is just I'll leave it to you to go through your information. He has an overview, um, but he also has all the details you could ever want in terms of uh the background information. So if there's something that you presents that you want to know more about, um probably has a slide for that. So feel free to ask whatever questions that you have. Uh probably easiest to have you go through the presentation first and then come back to questions. Um and it's really this is for you to decide how you know how long you want to spend on having these conversations and what you think what you want to talk about with. There are printed copies of the presentation of the staff and then throughout the public staff about that, and then population all care as well. I think you can grab my phone, but I don't think there's kind of link. Sorry, so with that, I don't know to you. And okay, thank you.
openpublica.com