City Staff Projects Positive Economic Impact for Cannery

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Cannery-Park-Land-Plan-Feb-2013

Model Heavily Dependent on Water and Personnel Costs Being Properly Addressed – On Monday the city’s Finance and Budget Commission will receive the preliminary analysis of the Cannery Fiscal Model.  Staff writes, “The Cannery development is the first project to have its fiscal impacts modeled with the City’s updated Fiscal Impact model. The fiscal model attempts to create a reasonable representation of the General Fund impacts of new development.”

While acknowledging that “there is no way for a model to completely predict the future,” city staff concludes “on balance, this project would be expected to generate a positive net general fund balance at buildout.”

That forecast comes with considerable caveat: “Sensitivity analysis shows that this condition holds true under each of the alternative assumptions used in that analysis, however the cumulative impact over the 15 years of the model can vary considerably, from a positive $796,000 to a negative $849,000.”

Staff writes, “Identified one-time revenues from this project total nearly $15 million, $3.8 million of which is discretionary monies (construction tax). Other mitigations or one time revenues that may be included as part of a development agreement are not known at this time.”

The Cannery project proposes a mix of different land uses that consist of low, medium, and high density residential uses; a mixed-use business park component; drainage detention areas; open spaces including greenbelts, agricultural buffers, an urban farm; parks; and a homeowner association neighborhood center on approximately 100 acres of land located at 1111 East Covell Boulevard, within the incorporated boundary of the City of Davis.

The project site is the former location of the Hunt-Wesson tomato cannery.  The residential component of the Project consists of 547 residential dwelling units plus an additional 40 accessory dwelling units. A 15.1-acre neighborhood mixed-use site is planned along The Cannery’s frontage with East Covell Boulevard.

The initial development assumptions are included in the graphic below.

Cannery-Fiscal-Analysis-2

Staff writes, “The initial assessed values of the homes ranged from $388,917 to $799,800. Non-residential properties were valued at $150 per square foot for retail development and $250 per square foot for Office/Service Commercial. The assumed valuation for Multi-Family housing is $248,000 per unit. This does not include the affordable housing element of 60 multi-family units which is assumed to be tax exempt.

“The model was also run with two distinct absorption schedules. The first was the schedule provided by the developer which had complete absorption of the project over three years. The summary sheet can be seen in Attachment 1. A second absorption schedule, covering a period of six years was provided by staff in the Community Development and Sustainability Department. The complete run of this scenario is found in Attachment 2 and is the basis of the data in this staff report. While the numbers vary widely in the years leading up to full buildout, the post buildout years are relatively similar.”

“The Cannery development is in an area of the City where the property tax share is 21.115%. This is significantly higher than the citywide average of just under 17%,” city staff writes. “The baseline model run shows a positive General Fund balance at buildout (year 6) of approximately $68,000.”

“Inherent in the model is the escalating costs that increase at a rate roughly twice that of revenues,” staff cautions. “The result of this disparity is that the positive general fund balance shown at buildout diminishes over time and goes negative in year ten (10) of the model. The condition where costs are rising more rapidly than revenues is a dilemma throughout the State in cities and counties and is representative of a problem that is not inherent to any particular development or project. Most jurisdictions have been making and will continue to make adjustments that either reduce cost inflation or enhance revenues to deal with this fiscal challenge.”

ckick image to enlarge:

Cannery-Fiscal-Analysis-1

The model is extremely sensitive to certain changes in the assumptions.  While all variations show a positive General Fund balance at buildout, staff notes, “the assumption driving the most pronounced change to the output is an adjustment to personnel cost inflation.”

Just a one percent increase in the personnel cost inflator changes the cumulative impact over 15 years to go from a positive $77,000 to a negative $849,000.

In addition, “The adjustment that resulted in the most positive increase to the balance is the removal of the City maintenance of the greenbelt ($796,000). A one percent increase in annual assessed value appreciations showed a positive cumulative balance of $545,000.”

In short, the entire fiscal impact model is dependent on two critical variables – the city keeping personnel costs as projected over the next fifteen years and the city removing maintenance of the greenbelt (which is probably a water factor as much as anything else).

“When looking at the overall balances from the model run most scenarios show positive fifteen- year cumulative impacts,” the city writes. “Those showing negative results are those that either exacerbate the variance between cost and revenue inflation (increasing personnel inflation) or reduce overall revenues (lower property tax appreciation).”

They add, “The cost to revenue imbalance that is currently present in the City drives the increasing negative net General Fund balance shown in the model and is emblematic of current economic conditions that the City is actively working to address.”

Staff also notes that there are a number of one-time revenues generated by the project, the largest are at the outset are construction tax revenue and development impact fees.

There are other revenues included as part of the development agreement, but unknown at the present time.

Staff writes, “Construction tax is calculated on a per square foot basis. The actual total square feet of residential is not known at this time and was estimated. The assumed construction tax revenue is approximately $3.8 million. Impact fees across all categories total $10.4 million and park in-lieu fees are roughly $700,000.”

In the end, the fiscal model shows a precarious situation.  Yes, the fiscal plan pans out right now if the city holds the line on personnel costs and deals with the water costs – but those are heavily influential assumptions that threaten to dwarf any other revenue projections.

However, looking at both short-term city-wide budget forecasts as well as projected water costs, one quickly recognizes that if the city fails to hold the line on personnel costs and fails to deal with water costs for the greenbelt, Cannery is the least of the city’s concerns.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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26 thoughts on “City Staff Projects Positive Economic Impact for Cannery”

  1. medwoman

    Mr.Toad

    [quote]The Cannery will not cause your property values to drop.[/quote]

    Nor will this component of the project help those that need help with housing as commonly argued as the need by those in favor of this project. These homes are in the range of what can be afforded by highly educated, highly skilled and well paid individuals in the upper income brackets.
    These are not the folks who are needing our help. I simply do not believe that we need more homes in this price range in Davis. Want, maybe. Need……no.

  2. Mr.Toad

    “I simply do not believe that we need more homes in this price range in Davis.”

    Market economies are dynamic. The only way to reduce housing prices is to add supply. The lack of new supply has caused prices to be twice as high as surrounding communities. Adding this amount of supply is not enough to change the dynamics so those that are concerned about their personal equity position need not worry. If you really want to add lower cost housing you need to build much more housing than this. If you are just looking for an excuse to not build any housing you present the perfect model, restrict supply, then complain that building a few houses won’t fix the supply imbalance your policy choices created. Its a beat the devil kind of argument.

  3. Jim Frame

    [quote]Sorry but do not understand the issue of ‘personnel costs’ ; what does that mean exactly? sounds like city personnel…[/quote]

    If the cost of staff compensation (salaries, medical, retirement) over the projection timeline rises faster than the rate of tax receipts from the project, then the balance tips toward the negative side.

  4. Jim Frame

    There’ll be an incremental increase in demand for staff due to the additional facilities to be served, but I assume that’s accounted for in the projection. What the projection can’t control is the relative rate of inflation between tax receipts and staff costs. If staff compensation rates rise at a rate faster than that of tax receipts, then the projection will be correspondingly inaccurate.

  5. JustSaying

    “These are not the folks who are needing our help.”

    You’re correct–they don’t need our help. And, they don’t want our help. They just want to live with us in Davis.

    I can’t imagine any new housing being built in Davis that will come in much under $388,917 or its equivalent in future years, barring a recession and considering the dificulties and extra expenses that go with developing here. Too bad, but that’s the way it is.

    I might like to buy a place in San Francisco, but I can’t afford to and nobody’s volunteering to help me either.

  6. medwoman

    [quote]You’re correct–they don’t need our help. And, they don’t want our help. They just want to live with us in Davis.
    [/quote]

    And that is fine, and is their right. However, I would rather see us helping to provide housing for those who cannot meet this price.

  7. Michael Harrington

    City water staff kept the numbers for the surface water project away from the Finance and Budget Commission.

    I’m just wondering if the same thing happened with Cannery?

    Also, the asumptions that the City can keep costs down for city workers dealing with the impacts of the Cannery, and keeping down the costs of potable water …. well, if you believe them, may I sell you some water wells 25 miles west of the Golden Gate?

    That economic report for the Cannery is just so much hocus-pocus: they started with a number that would show “positive”, and worked backwards with the spreadsheets to make sure that the input numbers and assumptions produced the “favorable” results desired. Saw all this with Covell Village too … if memory serves.

  8. JustSaying

    “And that is fine, and is their right. However, I would rather see us helping to provide housing for those who cannot meet this price.”

    Fine, but how can we do this? I say build the houses, and they will come. Some will come with their own money. If there’s a way to help those who can’t afford to buy in Davis on their own, all the better for our community.

    Given what happened to all of the folks who were helped by banks who gave them mortgages they couldn’t afford, the demise of state program funding, the sad general economy and the collapse of a Davis’ well-intentioned affordable housing project, I suspect it’ll be many years before many poor people will get help from anyone other than their well-to-do relatives.

  9. JustSaying

    “That economic report for the Cannery is just so much hocus-pocus….”

    But, is it accurate, Michael? If you don’t think it is, the least you can do is out where you think it fails.

  10. JustSaying

    All well and good, Don, but who are you thinking will do this? And, are you positive you want a bunch of mobile home parks in Davis? Not in anyone’s back yard. That’s one of the reasons we have building codes, to keep out this kind of development. Is there anyplace in the city limits with zoning that would permit mobile home parks?

    I’m not confident that even duplexes and quadplexes would be affordable for the folks medwoman wants us to be helping into home ownership, but they’d certainly be good starter housing for anyone. And, if you mean condos when you say apartments, let’s see how affordable the new Mission building prices out. Could be a solution for neighborhoods that want 50-foot-high buildings built next door.

  11. Don Shor

    Wow. So, no mobile home parks, duplexes and quads won’t be affordable, and no apartments — just condos?
    No, I mean apartment buildings such as we have in various parts of town already, duplexes such as we have in many parts of town already, quadriplexes such as we have in some parts of town already, and I see no reason that having more mobile home parks would be a problem anywhere. Rancho Yolo is very attractive — or do you think otherwise?
    I have no idea who will do it. The city controls the density.

  12. medwoman

    JustSaying

    [quote]medwoman wants us to be helping into home ownership[/quote]

    This is not what I said. I do not see home ownership as necessarily a desirable goal for everyone. I do see secure housing as a desirable goal for everyone. These are certainly not the same thing. As a child of the 50’s,
    I grew up with the “American dream” of doing better economically than my parents had done and thoroughly believing that everyone should own their own home. I no longer believe that more is necessarily better, or that everyone comes equipped with either the desire or the capability of owning their own home.

  13. Ginger

    medwoman: [quote]Nor will this component of the project help those that need help with housing as commonly argued as the need by those in favor of this project. These homes are in the range of what can be afforded by highly educated, highly skilled and well paid individuals in the upper income brackets. [/quote] But I also remember you saying that you didn’t want home prices to drop, because there are some people for whom the equity in their homes are their entire retirement plan. So you’re taking the stand both against prices dropping and against them NOT dropping.

    BTW, many highly educated and/or highly skilled people are not well paid (I happen to have a string of letters after my name some of which are not dissimilar to your own…I intentionally chose a path of low pay) and there are plenty of people who are well paid who aren’t highly educated. Some of that Davis Bias at work perhaps? 😉

    JustSaying[quote]I might like to buy a place in San Francisco, but I can’t afford to and nobody’s volunteering to help me either.[/quote]YUP. Is this development’s mission to help people who currently can’t afford a home the means to live in Davis?

    Even if it were, I we’ve also heard that it is too far away from downtown so it is “automobile dependent.” And it is not innovative enough. Not green enough, etc.

    DS [quote] So, no mobile home parks, duplexes and quads won’t be affordable, and no apartments — just condos? [/quote] I won’t speak for JustSaying, but when I read your post I had a similar train of thought. Many here are talking about the affordability of home ownership in Davis. When you brought up:

    [quote]building lower-cost, higher-density housing, aka apartments, duplexes, quadplexes, and mobile home parks[/quote] I wondered if you were venturing into rental territory as well.

    If Davis wants to attract families to rent here, one way to do it IMO is create far more affordable places for students to rent…maybe like West Village?

    Speaking of innovation, a friend gave me a head’s up that West Villiage made national news [url]http://video.foxnews.com/v/2649731250001/colleges-offering-luxury-dorm-rooms/[/url] (I KNOW GASP FOX NEWS…but honestly it’s worth the watch if you haven’t seen what that place looks like on the inside).

    Build more places like that to lure students from homes in the residential areas, more homes will open up for families to rent, and theoretically they might become more affordable as well.

  14. Ginger

    Medwoman- again, sorry that I do seem very often to hone in on your comments. Hope I don’t come across as trolly. I just feel interested in carrying on THAT conversation. I must find you very interesting! 🙂

  15. Don Shor

    [quote]I wondered if you were venturing into rental territory as well.

    If Davis wants to attract families to rent here, one way to do it IMO is create far more affordable places for students to rent…maybe like West Village?
    [/quote]
    More rental property, yes. All kinds.

  16. JustSaying

    Sorry, medwoman and Don, it seemed clear we were in the midst of talking about the price of buying cannery housing and Davis housing in general–in response to Mr.Toad’s initial comment–and I assumed you were continuing along the same line.

    Obviously, my comments reflect my apparent misunderstanding.

    So, to clarify, yes I question whether duplexes, quads and condos drop Davis housing costs to the level where we’re helping poor people get into home ownership unless there’s some source of subsidy funding. But, as I said, more of them would be a good way to gain entry into the Davis market.

    And, correct, I’m not the least bit interested in adding mobile home parks to Davis, definitely not in my part of town. You’re the first one I’ve heard propose adding mobile home parks to our community. We have at least one too many at this point. If you’re serious, however, it would be interesting to hear your sales pitch.

    Finally, since we’re now talking about all types of housing, I agree we need lots of apartments for our students and other transients.

  17. Don Shor

    [quote]And, correct, I’m not the least bit interested in adding mobile home parks to Davis, definitely not in my part of town. You’re the first one I’ve heard propose adding mobile home parks to our community. We have at least one too many at this point. If you’re serious, however, it would be interesting to hear your sales pitch. [/quote]
    What a very strange thing to say.
    I have, and always have had, many good customers in Rancho Yolo. It’s a very attractive little community, affordable for independent seniors, with nice yards and many avid gardeners. One of my employees began the process of building equity by purchasing a house trailer in a South Davis mobile home park. At least two have lived in Slatters Court over the years, as one of the few very affordable housing options locally. Mobile home parks make excellent affordable housing.
    In the duplex/quadplex line, the subdivision called La Buena Vida is just north of Green Meadows on Road 102 northeast of town. It is a series of quadriplex buildings laid out on a roundabout pattern, with large green lawns in a very park-like setting. Great place for kids and young families. There are lots of duplexes in East Davis. They make very good investment rental properties, and provide affordable rental housing for young families, groups of students, and young adults who work locally.
    “…definitely not in my part of town…”? What kind of prejudice do I see here? What makes a mobile home park undesirable, and an apartment building acceptable?

  18. Jim Frame

    [quote]What makes a mobile home park undesirable, and an apartment building acceptable?[/quote]

    I agree that Rancho Yolo is a nice-looking community. I’ve done some work there over the years and really appreciated the mature trees and overall sense of the space.

    However, mobile home parks present a tricky situation for the mobile home owners. They have a very large investment in the house; the cost of purchase and installation is big by almost any standard. At the same time, they’re renters, paying monthly for the right to use the lot on which their home is installed. The cost and logistics of moving an installed mobile home is also big, so the homeowners are much more vulnerable to changes in park management practice (e.g. increased rents, decreased maintenance) than are apartment dwellers, who can pick up and move to another apartment complex with relative ease. Aside from pure market forces (supply and demand), I don’t know if this situation is easily regulated.

    Recall that the Rancho Yolo folks have had some serious run-ins with the park management over the years, and even tried to take the park into some sort of co-op arrangement. (I don’t recall how that turned out, but I have a sense that it didn’t succeed.) I also remember a similar situation at a park in Woodland, in which the tenants felt they were being severely mistreated by management, with little ability to rectify the problem.

    So, while I don’t have any objection to the concept of adding a reasonable number of well-designed and well-run mobile home parks into Davis, I’d need to know more about the degree to which fair treatment of the residents can be enforced before I’d be able to endorse approval of same.

  19. Mr.Toad

    Don you get mad when repeatedly called no growth whether or not you are in denial. In a similar vein I find it tiresome to repeatedly need to remind you that new apartments are not competitive with older housing because of new building codes that increase the cost of their construction. Look no further than West Village for pricing comps. As for mobile home parks it seems to me Dixon is a much better fit.

  20. Don Shor

    New apartments will be more expensive than old apartments, obviously. That is not an argument against building more new apartments. I don’t know what the vacancy rate is at West Village. Do you? If it’s too expensive, people won’t live there. I don’t think they’re having any trouble filling the place up.
    [quote]As for mobile home parks it seems to me Dixon is a much better fit.[/quote]
    Why?

  21. JustSaying

    “What a strange thing to say…What kind of prejudice do I see here? What makes a mobile home park undesirable, and an apartment building acceptable?”

    I’d much rather see development of a quality apartment building in Davis than a quality mobile home park, primarily because of the quality of the construction involved.

    The higher design standards and building codes make permanent buildings a better addition to a community than that a big lot with a bunch of rolling stock–regardless of the landscaping involved.

    Apartment construction also allows for far more people in the same space than a collection of single-family, single-story double wides.

    Furthermore, the outbuildings, decks and porches that get tacked on to the “mobile” homes contribute little to the the quality and ambience of the neighborhood.

    Jim Frame pointed out one of the serious issues regarding park life. My mother spent many years in an over-55 park, the last few realistically worried that, when she was ready to move, the landlord would not allow allow the building to remain. So, the home that she purchased in place would end up with no equity and the costs of demolishing in order for her landlord to put a newer building on the lot.

    There are many examples of park owners clearing their entire property one lease at a time in order to sell it for more valuable development opportunities. The whole trailer park model trades some of the perceived advantages for management’s ability to raise rates and take other actions on quite immobile tenants who have few options to move somewhere else.

    I’m curious where you think would be a good place to construct a trailer park in Davis and why it would be better than putting an apartment on the same spot.

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