Cannery Petitions City to Create CFD; Council Learns History of CFDs in Davis

Last week, the Vanguard reported that the Cannery developers, New Homes, were seeking to potentially create a Community Facilities District (CFD, or Mello-Roos district, as the 1982 law is more commonly known) 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.”

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.”

The Vanguard learned last night at the city’s workshop on CFDs that Cannery has now officially petitioned the city, requesting “that the Council institute proceedings pursuant to the Act to establish a CFD over the Land to be designated as ‘City of Davis Community Facilities District No. 2014-01.'”

The Cannery developers are seeking that a special election be held which would authorize the issuance of the bonds, establishing that appropriations limited to the CFD “be consolidated into single elections and that the elections be conducted by the city and its officials…”

According to the presentation last night, the election requires a two-thirds vote.

“Generally, project infrastructure proposed for CFD financing includes backbone infrastructure in compliance with City Goals and Policies, including, but not limited to, public roadways, storm drainage, sanitary sewer, water, parks and open space, and electrical/lighting,” the petition reads. “The bond authorization for the Community Facilities District should be established in the amount of $17,000,000, however, this figure is a not-to-exceed maximum developed for legal purposes. It is expected that the CFD, via one (1), or perhaps two (2) bond issuances in 2015 and beyond, will likely not generate more than $15,000,000 in gross proceeds.”

“The types of facilities proposed to be financed by CFD No. 2014-01 are street improvements, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, sewers, storm drains, monuments, utilities, public parks, greenbelts and recreation facilities, detention pond, soft costs, rights-of-way and easements necessary for any of such facilities,” the petitioners note. They propose the following:

Offsite Infrastructure: J Street Intersection Improvements; L Street Traffic Signal; Covell Boulevard Frontage Improvements; Offsite Bike Trail; Oak Tree Plaza Improvements

Infrastructure Phase 1: EVA Road; Detention Basin; Storm Drain Pump Station; Agricultural Well; Market Avenue; Cannery Avenue; Cannery Loop; Roundabout

Infrastructure Phase 2: Cannery Loop

Landscaping: Parks; Greenbelts

Urban Farm: Barn; Farmhouse; Landscaping

MPFP (Major Projects Financing Plan) had been intended to fund long-term capital needs for the city. It did not fund specific improvements required for new development. Five different CFDs were formed because the MPFP allocated capital costs differently among different parts of the city.

The city’s Financial Advisor Mark Northcross, in his presentation, noted that there were taxpayer concerns that led to changes in 1999 as to how the city handles CFDs. At that time, $44 million in bonds were originally authorized, but only $16.855 million of that were actually issued.

Council would terminate the remaining authorized bonds with the 1999 bond issue infrastructure funding, and they also terminated the two percent inflator.

“$44 million in bonds were originally authorized for the MPFP CFD Program back in 1990, only $17 million were actually issued, the remaining authorization was terminated,” Mr. Northcross stated. “That was done because of taxpayer concerns. That was the factor behind that, it was all people coming to the podium talking about their taxes.”

A typical Mello-Roos district has an inflator that allows assessment to go up by two percent a year, and “that piece was eliminated in 1999 by previous council in response to taxpayers and homeowners.”

The result is that the actual percent of taxes being levied is a fraction of what was authorized “and that was by intent.” Mr. Northcross continued, “Not the original plan, we were supposed to be levying $44 million in improvements in Davis, we didn’t do that. We instead did things to lower the taxes on homeowners.”

Mr. Northcross posed two critical policy questions that council should consider for a Cannery CFD – should the council wish to proceed with a CFD. First, should the taxes in the Cannery be at the same level as other CFD taxes in Davis? Second, should there be a two percent inflator for taxes at the Cannery?

Mark Northcross noted that at Mace Ranch the CFD was about $700 per house. In the Cannery, “my guess is, it’s going to be a minimum $1500 per house, that’s twice as high as any other tax in Davis. By any standards of other cities in California that’s very reasonable, BUT, it’s going to be a lot more than any other house in Davis that’s paying a CFD.”

“If we’re going to cross that bridge, we need to be conscious that we’re doing it,” he stated.

Later Mr. Northcross noted that the other fairness question “came down to why are we who bought homes in the newer parts of Davis going to be paying for $44 million in public improvements and not the rest of the community. Why is it landing on us?”

“The MPFP had reasons for that, but the reasons did not carry weight on the fairness question with the residents of all the new CFD areas,” he added. The past council, he said, “split the baby” by reducing the amount to $17 million and eliminating the inflator, thus finding other ways to finance improvements.

Harriet Steiner noted that originally the CFDs were to finance new infrastructure – for example the Mace overpass, as well as the fire station (that was never built). She said, “I think after those improvements there was a fair amount of disgruntlement on the part of the (residents)… because this is all new development.”

Harriet Steiner would add that, when the council approved the Cannery project, the developers wanted this financing mechanism and would make the request. She added, “It was probably equally clear that it wasn’t something that the staff… was necessarily in favor of.”

The workshop’s purpose was only to inform the council of how CFDs work and the history of CFDs in the city of Davis. They will have to ultimately decide whether they should put the matter before the voters at a later point in time.

—David M. Greenwald reporting

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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41 Comments

  1. SODA

    Forgive my being uninformed but:

    1. Was there indication this would happen when the Cannery was being debated?

    2. Does it need to go before the voters?

    3. Would it have been a deal breaker ?

    4. Will the extra $ be added to the ‘affordable housing’?

    5. Did we assume the developer would absorb these infrastructure costs?

     

    Thanks.

    1. Davis Progressive

      from watching the meeting and reading this article, it seems like the city knew about it, it goes before the voters, it needs a two-thirds vote, but the city is not going to support it.  the developer promised things and now wants the new residents to cover those commitment costs.  that’s pretty shady to me.

      1. Frankly

        Why would the city vote against a CFD if it didn’t have any financial impact to them?  The new buyers of property in the Cannery development can make their own choice… to buy or not to buy.

        1. Davis Progressive

          did you read the article? did you live here in 1999?  i did.  it became a huge issue.  council and staff don’t want a repeat of that. there was a huge fairness issue raised then and council changed their policy.

        2. Frankly

          Yes – I have lived here since 1974… I dislike that “I bought knowing full well that I had to pay Mello-Roos but know I want to complain that it is not fair.”

          The problem is all this trying to legislate fairness.

      2. South of Davis

        DP wrote:

        > the developer promised things and now wants the new residents

        > to cover those commitment costs.  that’s pretty shady to me.

        I still don’t get why anyone (who is not thinking about buying a new home in the Cannery) cares about this at all?

        If Subway promised the city two bike racks and an electric charging station in front of a new location would is be “shady” if they charged $5.10 for a foot long to pay for the extra cost of doing business in Davis?

        1. Davis Progressive

          “I still don’t get why anyone (who is not thinking about buying a new home in the Cannery) cares about this at all?”

          we’re all voting on it.  for me personally there is a fairness issue.  the city council sold low as it was on cannery, extracted relatively little and now the developers want to turn around and put it on the residents there.

        2. Tia Will

          1.  I still don’t get why anyone (who is not thinking about buying a new home in the Cannery) cares about this at all?”
          2. The problem is all this trying to legislate fairness.”
          3. To no one’s surprise, I see this quite differently.
          4. Changing the zoning of The Cannery site was very controversial in the first place. Add to that the fact that the project only passed on a 3-2 vote should indicate that this was not a nearly unanimously agreed upon project. It was sold to many as very innovative and with all kinds of
          5. features that many felt made it more palatable. Now the developer is trying to change the agreement after the fact. This to me is highly dishonest. It has nothing to do with “legislating fairness” and every thing to do with ethical business practices instead of a bait and switch.
      3. hpierce

        Are you a “progressive”, or a Know-Nothing?  All developer CFD votes have only been by the land owners who would be assessed.  And it is an assessment, paid by the “tax bill”, but technically, is not a tax.

  2. WesC

    All costs of the project including infrastructure improvements should be passed on to the buyer in one way or another.  I think it is reasonable and  preferable to have the residents who will be purchasing and living in the Cannery neighborhood pay for the infrastructure improvements that will directly benefit their investment rather than have everyone else in town foot the bill.

    1. Barack Palin

      I agree, how about all the other people that are already paying Mello-Roos?  Is it fair to them that they still have to pay while we give others a pass and should we also now give them a pass?

      1. Davis Progressive

        well if you watched the discussion last night you would realize – no one is paying the full mello roos assessment and even after the 1999 changes, mace ranch is paying the most of any.  so i think those facts kill your argument.

        1. Barack Palin

          no one is paying the full mello roos assessment and even after the 1999 changes, mace ranch is paying the most of any. so i think those facts kill your argument.

          How does that kill my argument?  We still have people that are now paying some form of Mello-Roos, so are they/we now to vote to give someone else a pass?

        2. Barack Palin

          DP, where did I ever say I was paying, I may be but I don’t see any mello-roos on my tax bill?  You brought up Mace Ranch residents, I don’t live in Mace Ranch.   I don’t think it’s fair that others have to pay that tax and then we turn around and give another new community a break.  Like Frankly said, they don’t have to buy there if they are against paying a mello-roos.  And since when are liberals against any new taxes?  Back at you.

        3. hpierce

          Of couse Wildhorse is in a City-wide CFD.  And they paid lower impact fees as a result.  Push.

          This is about a developer CFD.  Only Mace Ranch has one of those.

      1. South of Davis

        DP:

        It is silly to think that the “developer”will pay for anything when the choice is either “higher home prices up front” or “lower home prices up front + higher tax bills”.

        You would think that DP (and other Progressives) would want the CFD since lower prices up front means that people with lower incomes can buy (and the lower the income the more “Progressive” the voter)…

        P.S. It costs more to rent restaurant space in an airport than in a mall food court and big companies just pass it on to customers selling $1.50 cups of coffee for ~$3.00, $5 foot longs for ~$10 and $0.99 Cheeseburgers for ~$2.00…

         

         

    1. hpierce

      Damn time you “clarified”.  Lots of folks posting earlier who either suffer from RC inversion, nd/or lack of situational awareness.

      Of course only the property owner(s) affected by paying the assessment (technically,  NOT a tax) vote.  Scares me that those who had questions about this are able to vote at all.  I guess they want representation without taxation.

  3. Alan Miller

    The picture.  The article reference picture of the terrible idea of running the bike path “up-the-hump” to Covell as the developer still wants.  Instead of H Street tunnel.  Is user that picture on purpose?  That, I hope, is not an idea that will be tolerated/funded.

  4. DavisBurns

    As I understand Mel-roos, if the developer pays, the houses cost more and the residents have a larger mortgage resulting in financing the additional cost 30 years which is very expensive (but the banks are happy).  If it is added to their tax bill under mel-roos, the residents look at their tax bill and think it is really high and feel they shouldn’t have to haver a higher tax bill than others in the city (yes we know why but this is how people think).  The problem down the road is when residents are asked to pass new property taxes, the ones with the higher taxes due to Mel-roos are more likely to vote no so it impacts the rest of the city when we want to raise money for infrastructure or schools.

    In both cases the developer doesn’t pay those costs so when they sell us a project with an urban farm for instance, it is presented as an amenity the developer provided but it’s really an amenity the residents pay for.  If we just remember, the developer doesn’t give anything away, we will never believe in the fairy takes they spin to the public.

    1. Frankly

      Nice nuance, but missing a bunch of other considerations.  If a person is paying a higher mortgage because the developed paid for all the amenities and infrastructure and had to pass on the cost to the buyer, then the buyer will look at his mortgage bill and decide he cannot afford a new parcel tax and vote no.

      Money is money.

      1. South of Davis

        Frankly wrote:

        > Money is money.

        For you maybe, but for most people it is not (why do you think the government makes employers pay half of the social security tax)?

  5. Michael Harrington

    There was a lot of anger in Mace Ranch over those extra Mello Roos taxes.

     

    This issue should have been decided before the CC voted to approve the project.  Of course later the developer is going to want the parcels to fund all the good stuff that the developer promised, freeing up huge amounts of money as new profits.

    1. hpierce

      Freeing up more profits?  More like improving cash flow, but yes, I guess that means more ‘profit’, but only a stupid person would think that they could sell lots at the same price as an identical lot/house without the assessment, unless they assumed the buyers would be stupid.  Mace Ranch was a “push” for nearly all purchasers, but when you see your annual tax bill (including the CFD assessment), the normal (particularly if you are aRepublican) instinct is to want it both ways… lower purchase price, and someone else picking up the slack by eliminating the assessment that you “bought into”.

  6. Gunrocik

    As was noted in the last discussion on CFDs  a week or two ago–a CFD is just cost shifting for the buyer.  They will qualify for a lower home mortgage because of their higher tax payment.  It is cost neutral to the buyer in nearly  every instance.  For the developer it typically helps with cash flow as they can use low interest bond funds for a portion of their development instead of high cost risk capital that they would prefer to use on their next project.

    The real downside to a CFD/Mello Roos for Davis is very simple.  Even though the purchaser paid less up front, they don’t think about that after a year or two or seeing higher tax bills due to the CFD.  Thus, they feel like their taxes are too high because they forgot about the up front discount on the house.

    And when these folks vote on parcel taxes, they are more likely to vote no because they have a higher tax bill even though they have a correspondingly lower mortgage.  Just look at how Mace voted on school parcel taxes, you can look it up on the Registrar of Voters site.

     

    1. South of Davis

      Thanks for another great post (now I know why DP and Medwoman don’t want the CFD).

      I really didn’t get why anyone not buying a home in the Cannery would care.

      1. Tia Will

        now I know why DP and Medwoman don’t want the CFD”

        Really ?  Then why don’t you, as someone more aware of medwoman’s thoughts than she is ,enlighten us on her thought process because there is certainly nothing that has been posted there that explains it to me.

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