Getting the Nishi Discussion Out of the Rabbit Hole: Part 1 of 2 (air quality, finances)

by Matt Williams and Colin Walsh

The Davis Vanguard’s article of May 9, 2018 (“Commentary: Enough with the Weird Red Herrings”) is a disservice to the Davis Community. Instead of addressing the main body of the CivEnergy Measure J Forum (held on May 6 with video below), the Vanguard article goes down a rabbit hole of answers given in response to audience questions.

Let’s start with the basics. As was stated at the CivEnergy forum, there are three main reasons to vote against this project: 1) bad air quality, 2) financial impact, and 3) lack of integrity in the process.  Today we will address reasons 1) and 2).  Tomorrow we will address reason 3).  Colin Walsh has prepared the Air Quality discussion and Matt Williams has prepared the Financial Impact discussion.

Air quality:  Discuss air quality at the Nishi site.

Prominent scientists have raised significant concerns about the air quality on the Nishi property.

  • The experts cite the narrowing of the freeway and excessive braking as a source of hazardous fine heavy metal particulates as well as the exhaust from both the railroad and the freeway. They further explain that the elevated freeway and elevated rail line work together to form a bowl that helps hold the particulates and other pollutants in a more concentrated area. The experts state that the Nishi property is not appropriate for housing because of the health hazards resulting from exposure to the on-site pollutants.
  • A preliminary study was done at a site near Nishi that suggests there is merit to the experts’ claim and the project’s Environmental Impact Report (EIR) declares there are “significant and unavoidable” impacts. The developers have one scientist who disagrees, without any supporting evidence from the Nishi site (and who has consistently failed to address or even mention the evidence from the Nishi site).
  • Thomas Cahill (Professsor of Physics and Atmospheric Sciences at UC Davis) and others raised the alarm about the air quality issues over 3 years ago and recommended onsite testing, but neither the developer nor the City have ever performed that testing to determine what the pollution levels actually are on the Nishi property.
  • It is irresponsible to build housing on the Nishi property without properly addressing the air quality concerns– starting with proper on-site testing to evaluate the problem.
  • These tests would only cost about $30,000, far less than the hundreds of thousands the developer will spend on the political pressure to approve the development.

Financial: What is the impact of the Nishi development on City of Davis finances?

The Nishi 2018 project (also known as Nishi 2.0) project will likely cost the City of Davis and Davis taxpayers many millions of dollars over the coming years(over 1.5 million dollars every two years).

  • Consider an analogy between a homeowner’s relationship to their house and the City’s relationship to Nishi. The fiscal analysis performed by the City for Nishi 2018 is analogous to a homeowner who only plans for for the immediate “cash payments” for the mortgage, the annual property taxes, insurance payments, utility payments, monthly bills, but …
      1. — No dollars for replacement of the roof when it succumbs to weather/heat/sunlight and needs to be replaced
      1. — No dollars for repair/replacement of the driveway when it cracks and develops holes
      1. — No dollars for plumbing or electrical problems
      1. — No dollars for removing the big tree that’s rotten and leaning towards the house
      1. — No dollars for painting the interior/exterior of the house
      1. — No dollars for replacing the carpets/flooring
      1. — No dollars for a new HVAC system
      1. — No dollars to repair a cracked foundation
  1. In other words, the City’s Nishi 2018 process has discarded/eliminated the realistic assessment of Full Life-Cycle costs. That is fiscally irresponsible.
  2. There is absolutely no cost to the City associated with being honest and transparent with its citizens and taxpayers. The City, and specifically staff, saw value in reporting to Council both the Cash Accounting margin ($1.4 million per year) and the Full Life Cycle Costing margin ($500,000 per year) for Nishi 2016.  That was a job well done, and they used high quality resources from the City’s economic consultant EPS to do so.
  3. In Nishi 2018 the $1.4 million a year Cash Accounting margin has shrunk by 90% from $1.4 million down to $143,000. That is clear evidence that supports the“this 2018 Nishi project is inferior to the 2016 Nishi project”comments made by the Council members from the dais in February.
  4. Including the $900,000 annual saving for capital infrastructure repair/replacement recommended by the City’s economic consultant the annual $143,000 surplus reported by the Finance and Budget Commission becomes a $757,000 annual deficit. That is fiscally unsound.
  5. As published in the City Budget, Davis has an $8 million per year shortfall in the City Budget because we have ignored and deferred full life cycle costs year-after year-after-year.
  6. We can choose to ignore the professional opinion of the City’s economic consultants, but if we do we will be walking down the same road that past Councils walked when they ignored staff’s professional advice about the requirements of capital infrastructure maintenance and deferred that maintenance.  The result of that short-sighted, politically-driven thinking is the current dilapidated state of our roads and the $8 million per year Budget shortfall reported by Bob Leland and confirmed by City Council as part of Chapter 4 of the City’s FY 2017-18 Budget.
  7. Einstein’s definition of Insanity is “Doing the same thing over and over again and expecting different results.”

    • Financial models are all subject to flaws based on their respective assumptions. Yes on Nishi is arguing that there is a “right” number.  The truth is that every number is going to be “wrong.”  Therefore, the wise decision-making approach (using solid Critical Thinking principles) is to calculate multiple scenarios to “bracket” the likely outcome.   Balanced, informative fiscal analysis includes several scenarios. That is what staff and the city’s economic consultant EPS and the FBC provided Council with in the 2016 Staff Report which said:

    “The Commissioners did not agree on the amount of benefit the City would receive. The final motion to conclude $1,400,000 of annual benefit passed on a 5-1-1 vote; dissenters agreed that the benefits would be positive, but suggested numbers in the $500,000 range.”

    • Unfortunately that has not happened this time around. As a result, we are in the position where we have to make a rushed and under-informed decision.  The 2016 consideration of the fiscal impact of Nishi was open, transparent, thorough and balanced.  Staff made sure to convey BOTH the majority decision of the FBC (by a 5-1-1 vote) and the voice of the dissenters (which included EPS).  The 5-2 vote of the FBC in 2018 closer than the January 2016 FBC vote tally, and if I had not been out of the country that night the vote would have been an even closer 4-3.  For reasons that only they can explain, the City chose to suppress any mention of the dissenting opinions in reporting to both the Planning Commission and City Council.  They also chose not to illuminate the 90% plunge in the “Cash Accounting” annual surplus from $1.4 million in 2016 to $143,000 in 2018.
    • Bottom-line, the Nishi numbers don’t add up … honesty and transparency is missing.


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About The Author

Disclaimer: the views expressed by guest writers are strictly those of the author and may not reflect the views of the Vanguard, its editor, or its editorial board.

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26 thoughts on “Getting the Nishi Discussion Out of the Rabbit Hole: Part 1 of 2 (air quality, finances)”

  1. David Greenwald

    From Ron Glick:

    Colin the title uses the plural “Scientists” but the article only states one by name. Who are the others and what have they argued?
    Matt, using your analogy, lots of people don’t regularly set aside money for repairs. Instead they get home equity loans or refinance. Since the Nishi development agreement with the city places the costs for the maintenance and repairs of the site infrastructure on the developers instead of the city why does it matter how they go about financing replacement costs decades into the future?
    1. Matt Williams

      Ron’s question about home equity loans and refinancing is excellent.

      If a California City wants to borrow money, it needs to show the lender (either a bank or the people purchasing bonds) that it has a revenue stream that can be dedicated to paying the annual debt service (mortgage for a homeowner).  Since there is no such existing revenue stream for the City, the City will need to find a new revenue source.  The easiest (and most frequent) method is to levy an additional tax on the City’s taxpayers … its residents and businesses.

      When I discussed my analogy with several local realtors, each of them said that home buyers rarely budget for maintenance and repairs of the site infrastructure because they fully expect to be getting annual raises from their employer, and/or promotions to higher paying jobs.  A City does not have the luxury of expecting increased revenues from raises and/or promotions.

      Regarding refinancing, a City needs to have mortgage-able capital assets in order to refinance.  Right now Davis’ capital assets are either crumbling (roads), in a state of deferred maintenance (buildings), or already fully mortgaged (water and wastewater funds).

      Financing by a City is much more expensive than mortgage financing by a homeowner.  Take the financing of The Cannery CFD for example.  It cost the City $2 million in closing and reserve costs in order to realize $8 million cash.  That was 20% closing costs … and the interest rate was 6%.  Compare that to a mortgage where the closing costs are between 1% and 2% and the interest rate is approximately 4%.

      1. Ken A

        Matt is correct that a city “does not have the luxury of expecting increased revenues from raises and/or promotions.” but on average gets about a 5% increase in property tax revenue every year (the 2% increase on all property + the much bigger bumps for property that is sold or improved), and gets more sales tax and TOT tax revenue almost every year.  I’m wondering if Matt can point out a single town near a top 100 college in America that is getting less property tax, sales tax or TOT tax revenue than five years ago.

        1. Matt Williams

          Chapter 4 of the 2017-18 City Budget … the Financial Forecast chapter … presents a less robust picture for Property Tax on page 4.2:

          Property Tax – The State Constitution sets the base property tax rate at 1% of assessed value. Property values are limited to 2% growth except when property is transferred or newly constructed. The City receives approximately 18% of the property tax generated in Davis. Property tax growth is determined by the Proposition 13 inflator, changes in ownership, and new construction. It is assumed that 96% of existing parcels will grow at the 2% inflator, that 4% of parcels will change ownership and increase an average of 40%, and that new construction will occur as projected by the Community Development Department. A total of 960 new housing units, mostly multi – family, are projected to be permitted over the next three years, plus $68 million in non – residential new construction, most of which involves three new hotels . Future growth assumes 40 housing units and $10 million non – residential growth annually. The compound annual growth rate (CAGR) of the property tax from FY 16/17 through FY 35/36, in cluding recessions, is 3.7%.

          And an even less robust view for all General Fund revenues;

          The following chart shows the historical and forecasted levels of the property tax, sales tax, other taxes (including the TOT) and fees/other revenue. The compound annual growth rate (CAGR) for all revenues is 2.6%, including recession impacts.   
          http://www.davisvanguard.org/wp-content/uploads/2018/05/Screen-Shot-2018-05-14-at-3.38.41-PM.png

      2. Richard McCann

        ” A City does not have the luxury of expecting increased revenues from raises and/or promotions.” That’s generally not true. Most cities see rising economic growth with increased tax revenues. In fact, due to the portfolio effect of many residents with incomes, this is more, not less, assured than a single homeowner. So this analogy does not hold.

    2. Matt Williams

      Regarding Ron Glick’s first question about “scientists” other than Cahill, one answer comes from the scientists who signed the No on Nishi ballot argument and rebuttal, which can be accessed at http://documents.cityofdavis.org/Media/Default/Documents/PDF/CMO/City-Clerk/Election/2018-Jun/Measures/Measure-J-Argument-Against-web.pdf and http://documents.cityofdavis.org/Media/Default/Documents/PDF/CMO/City-Clerk/Election/2018-Jun/Measures/Measure-J-Rebuttal-to-Argument-in-Favor.pdf

  2. Ron

    It should be noted that Commisioner Ray Salomon’s model, which resulted in a $5.65 million cumulative deficit at the end of 15 years, is not necessarily focused upon replacement costs.  And, it compares the model that the city used (in which there was no basis for the 75% “across-the-board” allocation), vs. the more refined calculations that Ray put forth.  For example:

    5) FIRE DEPARTMENT: Cost allocation updated based on analysis of the 4,787 calls categorized in the annual report. Based on this analysis, 88.4% of department general fund costs were allocated to the project.

    The initial model allocated 75% of department costs to the project although no analysis supporting this allocation was included in the model.

    Since the revenue from Public Safety and Prop 172 taxes, and general fund fees was included in the fiscal summary, the corresponding costs were added for consistency.

    6) POLICE DEPARTMENT: Cost allocation updated based on analysis of officer assignments from the annual report. Based on this analysis (Tab #6), 94.7% of department general fund costs were allocated to the project.

    This less than full allocation reflects the effect of fewer cars per person (and thus proportionally lower police traffic enforcement costs) in the Nishi project due to the limited parking on or near the site.

    The initial model allocated 75% of department costs to the project although no analysis supporting this allocation was included in the model.

    http://documents.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/Finance-And-Budget-Commission/Agendas/20180312/07C-Solomon-Updated-Fiscal-Models.pdf

     

     

    1. Matt Williams

      Building on Ron’s Fire and Police point, it is worth quoting EPS from their February 4, 2016 Technical Memo “Davis Innovation Centers: Response to Finance and Budget Committee Questions and Concerns – Nish”

      Additional Considerations
      Public Service Costs

      EPS utilized standard industry methods to compute the expenditures for both the Annual Fire and Police expenditures. In response to concerns over the level of public service cost associated with the project, EPS conducted interviews the Chief of Police, Darren Pytel and Assistant Fire Chief, Rick Martinez.

      Chief Pytel indicated that the estimates made by EPS were reasonable and appropriate particularly given concerns of difficulties in enforcement within the area due to constrained access. Similarly, Assistant Chief Martinez advised against running any scenarios with reduced Fire Department costs due to a need for increased labor resulting from the population and employment growth attributed to the project. Based on these interviews, EPS did not construct any additional sensitivity scenarios to reflect lower public service costs.

       

      1. Howard P

        Nuances lost in the selective quotes… evident you are “all in” in opposition to the current Nishi proposal… fine… just marked my VBM ballot in favor of the proposal… you convinced me…

        BTW, still friends…

      2. David Greenwald

        I’m not a believer that 2000 beds at Nishi are going to result in a huge increase for either police or fire.  Fire’s biggest use is for emergency medical calls, college students are low users of such services.  You may have some part calls in Nishi – although without nearby neighbors maybe not.  I’m skeptical that in real dollars this is going to add much cost.

        1. Matt Williams

          David, my suggestion is that you would be much better served by reaching out to David Zehnder of EPS, and to Police Chief Pytel and Assistant Fire Chief Martinez.  They are the primary (first-person) sources of the information you are expressing frustration about.  If you have a valid argument, it is with them.  By calling me into question, all you are doing is shooting the messenger.  That is especially true since the message (and its three sources) is so directly available to you.

  3. Jeff M

    Let’s start with the basics. As was stated at the CivEnergy forum, there are three main reasons to vote against this project: 1) bad air quality, 2) financial impact, and 3) lack of integrity in the process.

    1 – Bad air quality is a lie.   So let’s just cross that one off the list as fear based propaganda from the Davis NIMBY set.

    3 – The lack of integrity is an ironic argument coming from those opposing the project as they clearly lack integrity for #1.    But from a perspective of what every other community in the state goes through to get a project like this built, the criticism of lack of integrity in the Davis process is a real knee-slapper.  It is also a typical rhetorical and strategic device for those that want to defeat a decision… to claim that there was never a robust enough analysis and report completed.

    2 – Dubious.   Very dubious.  Frankly, math can be used to make a case for or against anything.  However, it really does not make any difference if the city will lose money on this because the Davis NIBMYs have defeated all other peripheral development and thus now housing has become a social justice agenda.  At some point the resistance just runs out of fake arguments.

    1. Matt Williams

      Jeff, I appreciate the candidness of your comment.  Given all the one-to-one conversations you and I have had about proactive fiscal responsibility (mostly the lack of it) from our City government, I would look forward to sitting down with you and discussing the Nishi fiscal math.   Using Howard’s expression “all in,”  I would not be “all in” if the City were more forthcoming.  The Nishi fiscal problems are fixable, but the City appears to be afraid of fixing them.  You and I both know that that is a recurring theme over the past several decades.  I look forward to hearing your thoughts when the Integrity portion of the article is published tomorrow.

       

      1. Alan Miller

        > I would look forward to sitting down with you and discussing the Nishi fiscal math.

        Now’s there’s an afternoon that will stay in your fondest memories forever.

  4. David Greenwald

    From Colin Walsh:
     If you where to look at the ballot statement you would find the following scientists oppose Nishi. There are more, but these 4 signed the ballot statements.

    John Troidl, MBA, PhD, Health and Public Health Specialist
    Thomas A. Cahill – Professor Physics/Atmospheric Sciences, UC Davis
    Ralph Propper – President, Environmental Council of Sacramento (ECOS); Air Pollution Research Specialist (Emeritus), California Air Resources Board (CARB)
    Charles K. Whitcomb – MD, Professor of Medicine/Cardiology, UC Davis School of Medicine

    1. Matt Williams

      David, my position on air quality has always been crystal clear … specifically, that if the health risks associated with the Nishi site are appropriately mitigated, then housing on the site needs to be maximized.

      We have a serious student housing problem in Davis.  The Nishi developers proposing 2,200 student beds when they could be proposing between 5,200 and 7,000 student beds (leaving 3,000 students without available housing/shelter) is a massive waste of an opportunity.

      I have been told by CEQA experts that a technical update of the 2016 Nishi EIR to cover a 5,200 bed project would have taken no more than 6 months.  If that is true, then a Nishi project that removes over 5,000 UCD students from the mini-dorm conversion marketplace, could have been on the November 2018 Ballot.

      I do not pretend to be an expert on the epidemiological aspects of air quality mitigation.  I leave that to the health experts in that field.

      1. Charles Salocks

        The following is in response to Mr. Williams’ comment and the second bullet of the original article:
        Data from the “preliminary study” (Barnes, 2015) were used to calculate the concentration of diesel particulate matter (DPM) cited in the draft EIR for Nishi (0.57 micrograms per cubic meter).  It’s presented in Appendix C, on the first page of a section titled “Diesel PM Risk Estimates.”
         
        The California ambient average DPM concentration (0.58 micrograms per cubic meter) is provided as a footnote at the end of a California Air Resources Board fact sheet, “Summary: Diesel Particulate Matter Health Impacts” (2016).  The web address is 
        https://www.arb.ca.gov/research/diesel/diesel-health_summ.htm
         
        For all practical purposes, these two concentration estimates are identical.  DPM is an indicator of overall traffic-related particulate emissions.  Therefore, these data indicate that the air quality measured at Nishi typifies the average air quality across the state.

  5. Alan Miller

    > if the health risks associated with the Nishi site are appropriately mitigated

    Less people driving to Davis.  Problem appropriately mitigated — POOF!

    And I’m a scientist!  Gotsum me BS dee-gree at YOU SEE DEE!

    And oddly, I spew less BS than I have read above.

    If you doubt me — you can’t — I’m a scientist!

    1. Matt Williams

      Alan, 5,200 less people driving to Davis.  Problem appropriately mitigated — POOF!      2,200 less people driving to Davis.  Problem sub-optimally mitigated.  — PUFF!

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