In July of 2008, the City Council approved an 83 unit single-family residential development on the corner of Fifth Street and Alhambra. To date, much like most other recently approved developments, there has been no building permits pulled nor construction that has begun.
However, for reasons not completely clear, on May 12, there was an emergency hearing of the Planning Commission where suddenly the Verona project was brought back with major changes. Because of the nature of the Planning Commission meeting, there were two members absent, in addition, there were already two vacancies, which means that the final vote to move this to council occurred with just four commissioners by a 3-1 vote.
The proposed changes mean that the number of market rate units increase to 66 from 45, and the number of affordable units decrease from 38, including 21 at the low/ moderate level to just 17 at the low/ moderate level. The city staff report claims that the number of required low/ moderate units was originally miscalculate.
However, that is not the only change.
“Staff believes that the project revisions requested by the applicant would be consistent with ordinances currently in place and would be supportable, These include eliminating the middle income unit requirement; deferring payment of water and sewer connection fees to certificate of occupancy; and inclusion of greenhouse gas reduction plan. Staff notes that while the Greenhouse Gas Reduction Target Policy was not in place at the time the project was approved in 2008, the Development Agreement requires that the project comply with all ordinances in place at the time of approval. Any change to the project under a new application would constitute a new approval. The applicant recognizes this and has submitted a GHG emission reduction proposal for the project.”
However, there are several significant other changes. First the applicant is requesting and was granted the supplemental residential fees required under the Development Agreement be eliminated. Those fees come in at $12,000 per market rate unit and $6000 per middle income unit, for a total of $690,000 that the city would have been collecting in impact fees.
While the city claims they are out $690,000, it is actually a bit more because they are not counting the loss of $6000 per middle income affordable. That would place the figure at closer to $80,000.
The water/ sewer connection fee collection process was changed in the consent item that we discussed on Tuesday that was passed by a 3-2 vote on Tuesday night by the council majority. It defers collection of payments from the creation of the final map to the issuance of certification of occupancy for each unit. It may not seem like a big deal, but it means that if the units do not sell, the city rather than the developer ends up holding the risk.
Moreover, the new proposal that was approved by the planning commission would eliminate the acre set aside for parkland. “Under the existing approvals the developer would dedicate 1.087 acres of parkland to the city and pay $100,000 to install the parkland improvements and $10,000 for park construction and design drawings. Staff is recommending that the city reject the 1.087 acre parkland dedication and instead require park in-lieu fees (Quimby fees) for the Verona Subdivision development.”
The staff claims that when the project was original approved, the “provide buffering between the new residential development and the passive habitat portion of Mace Ranch Park supporting burrowing owls that were still active on the park site. Ordinarily, staff would not have recommended parkland dedication for this site due to the small size of the development and its proximity to existing parkland.”
Now the staff claims the area is no longer a nesting ground for the owls and therefore the park is not needed. “With the renegotiation of the Development Agreement, staff is recommending to eliminate the parkland dedication. The burrowing owls that once existed on the passive portion of Mace Ranch Park are no longer present and staff no longer believes it is necessary to have the buffer from the new residential development.”
The Parks and Rec Commission reviewed this and apparently voted 3-2 to approve the elimination of parkland dedication.
Commentary
It further illustrates the problem of extending entitlements which the council passed on Tuesday night, again by a 3-2 vote by the council majority. The developers not only have pushed the process through and sat on their entitlements but it is costing the city money for them to do so, hundreds of thousands now in impact fees. And yet, Stephen Souza got up there and said it was no cost to the city.
That brings us to the next point, why was this an emergency meeting, when it is still unlikely that the developers will begin development any time in the near future. Why rush this through with only four commissioners? Why now?
The only logical answer to me is that they are attempting to get approval before a new council, which may be far less willing to do business in this manner, changes the game.
Furthermore, based on the Council resolution passed on April 27, these suggested changes should be required to go to the Finance and Budget Commission, however, the word we are getting is that this will be heard next week before that commission would hear it.
Amazingly the city is so desperate to continue to receive $3 million annually in revenue from the extension of the sales tax and yet has little problem gifting the developers nearly $ 1 million.
It appears this is business as usual for the outgoing council. It appears we might see a few of these rush jobs as the council and staff fear that new members might change the dynamics and the way the city does business.
However, one thing is clear, if I am a neighbor, the city has little to no credibility in enforcing agreements that are made. That might be the most concerning aspect of all of this.
—David M. Greenwald reporting
I feel for the neighbors. To me this only strengthens the feeling against sales tax measure. If city is willing to push this through and ‘lose’ this much, why give more. That and the ridiculous supervisory top down glut of staff titles which were identified from Org Charts at Budget Workshop last week.
Its all about supply and demand and diminishing returns. Since prices are down the developers can’t make the project work economically with all the additional marginal costs historically demanded by the city. You recently raised the question of why none of the projects approved recently have moved forward, now you know the answer.
The only sad part is that they drove the owls out with the other development in the area as predicted so now they can finish off the habitat.
this is a great argument for just firing the development staff and letting the developers just do what they want, it would save everyone a lot of money and eliminate the whole kabuki dance of pretending that staff works for the public.
I am voting agains the sales tax- any money to the clowns downtown is a mistake.
How long do we have to wait after Saylor takes his seat on the Board of Supervisors to launch a recall election drive?? There is no doubt about the reason for this item, as well as the extension of the unused entitlements discussed here recently, being brought forward for a decision just weeks before a change in the political complexion of our Council. The collusion between city manager Emlen(former Davis Planning and Development Director) with the current Council majority,under the direction of Don Saylor is transparent. The next Council first priority should be to bring Emlen “to heel” or remove him as City Manager.
“Furthermore, based on the Council resolution passed on April 27, these suggested changes should be required to go to the Finance and Budget Commission, however, the word we are getting is that this will be heard next week before that commission would hear it.”
And how do citizens make sure City Staff follows the City Council’s requirement that these changes be reviewed by the Finance & Budget Commission? If the CC majority fails to enforce its own rules, City Staff can continue to operate with impunity, and totally ignore commissions in the political process. And by the way, City Manager Bill Emlen promised he was going to do a better job to include commission review as part of the development process… LOL
“Amazingly the city is so desperate to continue to receive $3 million annually in revenue from the extension of the sales tax and yet has little problem gifting the developers nearly $ 1 million.”
And we should extend the sales tax, so the city can make even more concessions to developers? Really?
“….developers can’t make the project work economically”
Our developers have always touted the mantra that the justification for their outrageous profit margins is that they assume significant financial risk with their enterprises… Baloney! If the market presents a significant risk that cannot be adequately neutralized by “political” means,
they will not build. We will, no doubt, hear this developer refrain again in the future when,hopefully, our Council demands a larger share of developer “profits”.
“It’s all about supply and demand and diminishing returns. Since prices are down the developers can’t make the project work economically with all the additional marginal costs historically demanded by the city.”
That would make sense if the developers of this project were actually building out their approved units, now. But they aren’t, and it’s reasonable to assume they will only when the prices in Davis return to their peak or near-peak levels. At those prices, the project works economically.
I don’t know that the changes approved by the DPC are right or wrong. I’m not making a judgment on that. But I don’t think the city’s fees and so on should be waived because of the argument you make. It’s not as if we have a shortage of single-family housing, but these fees are standing in the way of it being constructed. When the economy rebounds and prices pick up, then this kind of project will again make ecnomic sense and we will need it.
This seals my no vote for the sales tax renewal.
“When the economy rebounds and prices pick up,”
Hilarious, and when do you expect that to happen? Let’s see foreclosures are up, prices are down, tax incentives and low interest rates have taken forward demand, we’re in the fourth year of the slump with no end in sight, the federal reserve isn’t making the banks mark their real estate assets to market because they would all be insolvent if they did, the banks are sitting on years and years worth of shadow inventory as a result, there are almost 80 homes currently in some stage of foreclosure in Davis and perhaps a thousand in Yolo County, not to mention Solano County and Sacramento County where 44% of mortgages are under water and you are casually predicting a rebound.
People in the business of building houses are trying to deal with the reality of the market as it exists in the real world not some fantasy Keynesain timeline where we are all dead.
http://www.ritholtz.com/blog/2010/05/whalen-housing-recovery-government-subsidy/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+TheBigPicture+(The+Big+Picture)
Try the link for a little reality
http://housingdoom.com/2010/05/19/so-why-all-the-new-houses/
or this one
[b]ME:[/b] [i] “[u]When[/u] the economy rebounds and prices pick up, then this kind of project will again make ecnomic sense and we will need it.”[/i]
[b]TOAD:[/b] [i] “… you are casually predicting a rebound.”[/i]
I never predicted when the economy would rebound. I haven’t suggested a date. I can tell you I know (for certain) exactly what needs to happen to make the economy pick up and head toward full employemnt: the unsold housing inventory* (including foreclosed units and to-be foreclosed units) needs to be fully absorbed. When that happens, I don’t know. But it will happen. All recessions eventually end.
[b]TOAD:[/b] [i]”People in the business of building houses are trying to deal with the reality of the market as it exists in the real world not some fantasy Keynesian timeline where we are all dead.”[/i]
What the hell is a Keynsian timeline?
As someone who has developed a lot of properties, I can tell you what “people in the business of building houses” need to happen: they need real housing demand to rise. Yet as your lengthy litany of languor – “foreclosures are up, prices are down, fourth year of the slump, banks would be insolvent, years worth of shadow inventory, etc.” – suggests, buyers are not demanding enough housing to absorb all of the existing inventory.
So regardless of various city impact fees, no sensible developer is going to build until there are sufficient buyers in the market. Right now, there are some buyers out there, but not enough to justify additional housing inventory.
*Excess inventory is what causes every recession. And every recession ends when that inventory is absorbed. In the U.S., because housing is such a large part of our economy, our recessions are often triggered by overbuilt housing markets. In other large economies, like Japan, a recession can result from other inventories, such as consumer durables, being overbuilt.
Keynes: “in the long run we are all dead”
I guess you are talking about that sort of time frame. The developers probably figure that although prices have come down everywhere they have come down less in Davis because of supply constraints and if they can get out from under all the marginal costs imposed when the market was hot they can still make the project pencil out, make some money, put some people to work, build some houses and add to the housing stock. My guess is they know what they are doing. As for excess inventory, the best way to clear inventory is by reducing prices. You reduce the price enough you clear the inventory. The obvious reply is why add to inventory while the answer is less obvious, Prices are not going back up in a timeframe that anyone can deal with so if the city insists on all these extra costs based on the economics of the housing bubble none of the projects approved will ever get built while we are still alive.
Mr. Toad: ” Prices are not going back up in a timeframe that anyone can deal with so if the city insists on all these extra costs based on the economics of the housing bubble none of the projects approved will ever get built while we are still alive.”
So we should give away the city story now, so that when the market picks back up, the developer gets a windfall? Your logic escapes me…
To me, Toad’s point is all the more reason not to do anything, let the entitlements expire, and let developers come forward with a new proposal in which they would have a year to commence construction.
DGM: “To me, Toad’s point is all the more reason not to do anything, let the entitlements expire, and let developers come forward with a new proposal in which they would have a year to commence construction. At that time we can evaluate the market, costs, impacts and figure out a fair arrangement.”
I’m in total agreement with you on this one…
We can’t build enough to satisfy demand when the market is hot and we can’t afford to build when the market is cold. You nimby’s are just too much. So when should we ever build?
Toad: Apparently you missed a key point here, there are about 300 to 500 units that are entitled but not built and haven’t been built. It’s not the “NIMBY’S” as you derogatorily call them that are determining when we should build, it’s the developers.
Mr. Toad doesn’t ever want to apply the brakes. Mr. Toad just keeps hitting the gas. You can’t go fast enough for Mr. Toad. Mr. Toad always wants to go for a Wild Ride ([url]http://en.wikipedia.org/wiki/Mr._Toad’s_Wild_Ride[/url]).
[quote]There was panic in the parlours and howling in the halls,
There was crying in the cow-sheds and shrieking in the stalls,
When the Toad- came- home!
When the Toad- came- home!
There was smashing in of window and crashing in of door,
There was chivvying of weasels that fainted on the floor,
When the Toad-came home!
Bang! go the drums!
The trumpeters are tooting and the soldiers are saluting,
And the cannon they are shooting and the motor-cars are hooting,
As the- Hero- comes!
Shout- Hoo-ray!
And let each one of the crowd try and shout it very loud,
In honour of an animal of whom you’re justly proud,
For it’s Toad’s- great- day![/quote]
I didn’t miss anything. The developers could afford the projects to be larded up when the margins were bigger but can’t make them work now so they want to rework the deals. If you demand no changes these projects will never get built because prices won’t go up for a long time as the links I posted above show.