It was a divide along similar lines to the divide on the initial Cannery vote, with council narrowly approving a motion made by Councilmember Rochelle Swanson and seconded by Lucas Frerichs to direct staff and the city’s CFD consultant team to proceed with the next steps in forming a Community Facilities District for the Cannery Project.
According to estimates, the infrastructure and park development costs for the CFD come to $18.1 million, with an additional $750,000 for an improvement of community benefit to be determined by the city. Included in that would be the Cannery Farm, Farmhouse, Parks and Greenbelts, and $6.2 million in Community Enhancement Contributions.
Mayor Dan Wolk, in supporting the motion and providing the deciding vote, said, “There is no free lunch.” He said, “The homeowners are going to pay for infrastructure one way or another.”
However, Mayor Pro Tem Robb, while agreeing there is “no free lunch,” said he is “worried that people don’t pay for it more than once.” He argued that the reality is that, in this housing market, the demand is inelastic, and that “people won’t be able to bid down” the purchase price of their housing to accommodate the Mello-Roos.
There were several concerns expressed by Brett Lee and Robb Davis in opposition.
Brett Lee argued, “My concern here is that the residents here would be unwilling to support parcel tax measures in the future, the lion share typically going to support the schools.”
He added, “I also have a problem with the 40-year time horizon, it sets up a troublesome public policy dynamic to have a subset of the population paying essentially twice the number of taxes compared to the neighbors.” Councilmember Lee was concerned that such a tax could last up to 40 years.
Councilmember Lee noted that, in basic negotiations, there is a proposal and a counter-proposal. However, he said, “It seems like the dynamics with us is that there is a proposal and we either accept it or we don’t.” He wants to see more give and take and come to something that would be a more workable solution.
“I think it’s important that we wear our city of Davis hats while we are up here,” the councilmember argued. “This first pass proposal is a good first pass proposal, but I view it as a first pass proposal. I’m troubled by the 40-year time frame.”
He would add that there is an issue with the amount and the time frame. But, moreover, he argued there is “nothing new for Davis” as “all of these infrastructure items have already been agreed to.” “There is nothing really in addition for the residents of Davis,” he said.
We have a big list of needs, but the CFD doesn’t provide for any of these other than perhaps the $750,000.
Mayor Pro Tem Davis asked Ashley Feeney, the applicant from New Homes, “What happens if we don’t approve the CFD?”
Mr. Feeney never answered the question directly, but responded that the CFD “has always been carved out as a section in the development agreement.” He argued, “It’s critical that we have that financing in place,” as well as important that they accelerate certain infrastructure requirements.
“It’s very critical to us that it’s funded, it’s something that’s called out in the developer agreement,” he added. “We’ve always been clear that it’s something we’ve been relying upon.”
Mayor Pro Tem Robb Davis said that the proposal is about bringing certain infrastructure forward in time. This is all contained within the developer agreement that it must be done, he said.
He argued that, while the individuals who move in within the five years will benefit from the infrastructure being built early, he said, “I’m actually concerned about the people who come in later, by the time they move in ten years from now, they’re still paying the tax, but the amenities are already all in place.”
“We’re basically asking a whole slew of homeowners to pay for bringing forward amenities that would have already been brought forward before they ever moved in there,” he said.
“That gives me pause,” he said. “A strong message I’ve been getting since I ran for office, and since I’ve been in office, is, our taxes are too high.” He called the CFD an artifact of Prop 13, “the most bizarre thing that I’ve seen in my life, it’s like I’m on a different planet here.”
The mayor pro tem said that people are saying don’t raise my taxes, and “yet we’re building in potentially a 30-year commitment that we can’t actually define the benefit that we gain from that. That should give us all pause, I think.”
“It’s not that people are just saying don’t raise my taxes, they’re saying, what are we getting for this?” he continued.
Mayor Pro Tem Davis also put it to Ashley Feeney, the applicant from New Homes. He asked if the CFD was so critical to finishing this project, why it wasn’t assured that it was part of the developer agreement.
Mr. Feeney would respond, “Certainly we’ve always been very clear that we intended to do… and something that we’re relying on.” He then put it conversely, “If it wasn’t an option, then why was it there in the first place?”
He added, “The Developer Agreement foresaw that it would be asked for. It didn’t say ‘will,’ it did say ‘may.’” He acknowledged he would have preferred to have it say “will” but he didn’t think it would be a huge issue, and he said in most communities this is a five-minute discussion.
Mayor Pro Tem Davis would add that we have to look at this particular housing market when we analyze the impact of the CFD. “It is highly constrained and has been for a long time because of decisions we made as a community,” he stated. He called it “a monopolistic pricing opportunity.”
He questioned whether it would reduce the full price of the CFD. “It’s a highly inelastic demand curve,” he argued. “You can basically charge what you want, up to a limit.” He added, “It means you will not be required to reduce the cost by the full amount of the CFD.”
In the end, however, there were three votes to go forward with the CFD.
Councilmember Rochelle Swanson said that this was a long discussion that pushed the developers to put the amenities upfront and make them be real, not window dressing. “I think frankly for integrity from a public body, that when we ask for a really high level of services, and we ask for amenities, and we ask for accelerated time lines, then we have to do the other half of the equation,” she said.
“For me it’s about integrity and consistency,” she said.
Councilmember Lucas Frerichs said he is “not totally sold that this is the exact right direction to go in, but I’m going to give it the benefit of the doubt.” He went on to call the assertion that this was a bait and switch, at best, unfair as well as untrue.
He said that there has certainly been a notion in the community that the CFD was not part of the conversation at all. It was something that came after the fact.
“I take umbrage with that, it was something that was actually part and parcel to the entire process. It’s in the developer agreement,” Mr. Frerichs.
Mayor Wolk supported the motion and argued, “There is no free lunch, homeowners are going to pay for the infrastructure one way or another.” They either pay upfront through the housing prices or on the back end through the CFD.
“The CFD assists the community,” he said, allowing New Homes to build the infrastructure. While Davis has had its own issues with CFDs, this is part of the Prop 13 aftermath and the “fiscalization of land use in California, in light of Prop 13.”
“You need development to essentially pay for itself and that means that the homeowners are going to have to pay,” he said. “That’s the reality.”
Further, he argued that the city is getting $750,000 in additional funding that will come from the CFD to pay for whatever the council wants.
“Yes, the way it was worded in the development agreement was ambiguous. It wasn’t a requirement,” the mayor stated. “I’ve always felt that it was a part of the project.”
As noted before, a key dispute was the “free lunch” argument and Robb Davis countered that the realities of the housing market mean that people will not be able to bid down their housing price in such a competitive market and, therefore, they will pay for their amenities twice.
Lucas Frerichs argued that if the opposition was unhappy with aspects of the CFD, that rather than voting against it, they should amend it.
Councilmember Brett Lee attempted to amend it to ask the city staff to develop a list of projects that could be funded under the CFD, and use the bonds to apply the funding to real projects outside of the immediate Cannery area. However, neither Rochelle Swanson nor Lucas Frerichs were supportive of the friendly amendment.
The CFD passed by a 3-2 vote, with Robb Davis and Brett Lee in dissent.
—David M. Greenwald reporting