When the Davis City Council in November of 2013 approved the Cannery Project by a vote of 3-2, they did so with a host of agreements and commitments by the developers.
Under the development agreement, commitments previously made by the applicant to the public and Commissions included:
- Water line easement along Covell Boulevard Frontage (subject to fee credit)
- Well expansion property (0.39 acres) adjacent to existing well site (subject to fee credit)
- Intersection improvements at Covell and J Street
- Grade-separated bike/ped path at southwest corner of site
- Implementation of sustainability plan (modified to include Zero Net Electricity on 25% of the first 100 single-family detached homes, as a modification to the previous sustainability proposal of 25 KWH extra PV in the first 100 units)
- Implementation of affordable housing plan
- All park, greenbelt, and drainage improvements as described (subject to fee credit)
- Urban farm infrastructure
- Well and back-up water supply system for park, greenbelt, and farm irrigation (subject to fee credit)
- HOA clubhouse access available to all subscribing residents
Additional obligations by the Developer:
- Initial contribution of $615,000 and further commitments of $6,717 per market-priced ownership unit, estimated to generate $3.725 million for transportation infrastructure and other projects, in addition to project commitments for improvements for J Street, L Street, and (if necessary) Oak Tree Plaza driveway intersection improvements
- $2,000,000 for Community Park and community-wide improvements, with the possibility of up to an additional $1,600,000 pending the outcome of the future water connection study.
- Operating funds of $100,000 for each of the first three years to support the urban farm.
- $100,000 for community greenhouse gas reduction programs
- $75,000 for civic arts programs
- Commitment to sell 30 parcels to small builders and owner-builders (see discussion page 16)
- Phased development reflecting City growth policies (see discussion page 16)
- Commitment to conduct demolition, site preparation, and grading over at least fifty percent of the site within five years of the effective date of the Development Agreement, or the term of the agreement will be reduced from twenty down to fifteen years.
The original development agreement has provisions that would allow the developer to request formation of a Community Facilities District (CFD) for services or to finance infrastructure.
Under the law, “Developers and City may form a Community Facilities District… for the purpose of financing the construction and/ or acquisition of public infrastructure and facilities within the Project area or for the provision of services.”
Article II, Section 1100, continues, “If requested by Developers, City may determine whether to form one or more Project CFD(s) for the purpose of providing services or financing the acquisition or construction of some or all of the improvements and facilities eligible for CFD financing within and associated with the Project, including those improvements which will mitigate impacts of the Project upon areas inside and outside of the Project with a useful life of 5 years or longer, and will be owned, operated or maintained by the City or another public agency as authorized under Government Code 53111…”
According to City of Davis Community Development and Planning Director Mike Webb, “We anticipate that the developer will be submitting a request for the City to consider creating a CFD for the project for financing of certain infrastructure components. As of now we do not have a formal request submitted for consideration. If one is submitted staff would evaluate the request and schedule the matter for City Council consideration and direction.”
This is not a small matter. Under the development agreement, the staff calculated in November 2013 that “the Development Agreement could accommodate $4 – $4.5 million in benefits to the City under current assumptions.” They continue, “The funds from the Development Agreement, combined with the project-specific obligations and the transportation impact fees, will generate approximately $11 million for transportation and circulation improvements on and around the Covell Boulevard corridor as well as a minimum of $2,475,000 in other non-transportation related community enhancements. This will provide the resources to implement key transportation improvements that will serve The Cannery and enhance the existing network, such as improvements to the H Street tunnel and funds to implement a second grade separated crossing of Covell Boulevard.”
According to the analysis from Andrew Plescia of Plescia and Company, dated October 24, 2013, “The proposed residential ownership units (463) are estimated to generate approximately $251.4 million in net sales income or approximately an overall blended average of $543,000 per unit. The Project includes a large variety of residential ownership product / unit types with a wide range of unit sale prices from the high $300,000s to the high $700,000s with the median unit sales price (not including the affordable units) being approximately $479,500.”
Creating a CFD would create a Mello-Roos that would pass the costs of construction and city services onto the residents, increasing the overall cost for those residents to purchase a home.
Right now the estimated development cost is $218.4 million with net sale proceeds of $251.4 million. That generates an estimated return on investment of $28.9 million. If the city were to implement the Mello-Roos, somewhere around $14 million will transfer from the developers to the new residents, which could produce about a 50% increase in profit for the developers.
While Mr. Webb told the Vanguard that the possibility of CFD was contained in the developer’s agreement, from our search of the November 12, 2013 agenda item, the issue does not appear to have arisen at that time.
One of the critical issues that the city will have to weigh is this balancing between the profit margin for the developers and affordability for the new residents.
—David M. Greenwald reporting