Davis council approves budget, deferring millions in repair and development costs
Davis’ latest budget update moved the city closer to financial health, but a staff report showed the tens of millions of dollars needed to finish construction and capital improvement projects the city will not fund this year.
“Conclusions from the long-term forecast are that our financial position is weak, but it’s not critical,” Davis Finance Director Alberto Preciado said.
Davis leaders discussed the recommended 2026-27 budget at a City Council meeting Tuesday. The council voted unanimously to adopt the mid-cycle budget update — totaling $254.1 million across all city funds — and set the city’s appropriations limit for next year.
The update lowered expected revenue by $200,000 and spending by $600,000. The city revised its revenue projections because revenue from the city’s 10% cannabis tax has not met expectations. The city now expects reduced consumer spending across the board, likely due to economic uncertainty.
“Davis actually ranks lower than similarly sized California cities in sales tax per capita,” Preciado said.
The city ranks 368th out of California’s 483 cities, placing Davis in the 23rd percentile, he said. If Davis brought in the median amount for a California city, it would have about $6.7 million in additional revenue.
Davis also trailed its peers in property tax revenue because the city has long-established policies to limit economic and population growth, Preciado said.
“There is not a good or bad for that decision,” he said. “However, there is a trade-off to every decision made and the trade-off in this case has been to position us a little bit lower than our similarly sized cities in that respect.”
The updated $97.2 million general fund budget allows the city to maintain a $13.3 million reserve, or 13.7% of expenditures, bringing the city closer to its 15% reserve target.
One way Davis increased its general fund reserve was by pausing ongoing city projects, but deferring costs can worsen future budget shortfalls, especially for paving and sewer maintenance, where repair costs increase as damage worsens.
The city is about $20.7 million short of funds needed to complete construction projects that are already underway. The city has also paused $3.75 million in capital improvement projects, including playground replacements, fire station improvements and traffic-calming upgrades.
Davis completed a pavement management plan last year that estimated it would have about $84.7 million to spend on pavement over 10 years, but the plan left the city about $25 million short of what officials estimated was needed. The city has since revised that plan to only spend about $49 million in ten years, which more than doubled the shortfall to about $60 million over ten years.
The city also is considering changes that would shift some sidewalk repair costs to adjacent property owners.
The cost for a simple base repair or crack seal, for example, is roughly $6.25 a square yard. As the crack or divot worsens, it may require a new layer of asphalt costing as much as $76 per square yard. If the damage becomes severe enough, repairs could exceed $122 per square yard for an imperfection that could have been fixed for $6 if addressed sooner, according to a staff report.
“This is a fiscal time bomb,” former city councilmember Dan Carson said in an interview.
City sidewalks are another major portion of repair needs. Staff estimate that it would cost about $3.5 million over five years to address the sidewalk repair backlog. The city can manage about $1 million over five years, which would mean limiting other programs like pothole maintenance.
Another major expense for the city is a backlog of city tree maintenance.
City staff estimate that it would cost $1.5 million to address the backlog. The additional funding would allow one or two additional crews to work on city trees. Last year, a Yolo County jury awarded $24 million to the family of a woman killed by a falling tree branch in a Davis park.
