Michael Coleman, a Davis resident and longtime California municipal finance adviser, told the Davis Finance Commission that cities need clearer long-range forecasts and explicit reserve policies to avoid fiscal distress.

Coleman gave a primer on local revenue types and voter thresholds and presented a 14-measure financial-health diagnostic the commission can use to assess solvency, service levels and management risk. "Property tax revenue is very stable," Coleman said, adding that "who pays is a big thing" when designing revenue instruments.

Why it matters: Davis, like many California cities, faces pressures from rising labor costs, infrastructure needs and changes in sales-tax sourcing from online commerce. Coleman told commissioners that a mix of reliable revenues, up-to-date cost-allocation practices and cautious use of one-time development receipts reduce the chance of long-term imbalance.

Coleman explained differences among general taxes, special taxes and fees under state law and noted several legal touchstones raised in the presentation including Proposition 13, Proposition 218 and Proposition 26. He also referenced the U.S. Supreme Court decision in South Dakota v. Wayfair as central to how online sales tax sourcing now functions.

The presentation covered practical budget tools: multi-year forecasting, a formal reserve policy calibrated to local risk, and a cost-allocation plan that ensures enterprise funds are not subsidizing general services. Coleman described typical causes of municipal fiscal failure — unsustainable compensation commitments, risky financing like poorly timed pension-obligation bonds, overreliance on one-time land-development revenues, and "toxic" internal relationships — and urged vigilance on each.

Commissioners asked technical and local questions about how Davis compares to peer university towns and about the city's exposure to litigation-related payouts and infrastructure liabilities. Coleman recommended coordination with regional partners, careful labor-negotiation strategies and maintaining replacement and internal-service funds to avoid surprise shortfalls.

Staff said the consultant provided a slide PDF and that auditors are close to completing FY 2023 work; the city expects to finish its ACRA financials "by early February" and then allow "about a month" for the single-audit to follow. Coleman said the city's recruitment for a new finance director may conclude before the next meeting.