When the Davis City Council voted 3-2 Tuesday to move the CFD (Community Facilities District) forward, the vote represented, in my view, two things. First, it was a lost opportunity by the council to gain community assets in exchange for the $12 million in advantages they are giving the developers. Second, and perhaps even more importantly, it can be seen as a signaling device for how the majority on council might treat negotiations over the innovation parks.
Let me begin by clarifying one critical thing. My column on Thursday suggested that things were hidden – and, while it is easy to point to the developer agreement as evidence that there was nothing hidden, my biggest concern was the lack of discussion about the CFD in November 2013 when the room was packed with public commenters, rather than now when most people quite frankly have moved on to other areas of concern.
For me, the biggest problem is first that the costs of CFD will be passed on to the new homeowners twice. First, through the purchase price of the house because, as Robb Davis put it, the demand for housing is so high that it will be a seller’s market and therefore the seller will be able to find buyers who will simply take their asking price.
Then, on the back end, these same homeowners will get hit by the CFD and I believe the evidence is fairly clear that they will be far less likely to support both city and school parcel taxes.
We never really got an answer from the New Homes people as to what would have happened if the council did not support the CFD, but largely I believe that the market is the market, and the housing prices will be dictated by supply and demand rather than costs for facilities and amenities.
The bottom line, however, from my perspective is not that I was necessarily philosophically opposed to a CFD, although I just laid out a case against the CFD from a practical standpoint. Rather, the big error that council made was giving away about $12 million in community assets while getting very little in return.
Remember, Cannery in the early stages was willing to give $2 million for various services. So, clearly, they saw a huge amount to gain from the entitlement of the project.
These services got far more from the Cannery folks than the city did on the current negotiations. This is not a small deal. The CFD was a possibility per the developer agreement but it still required a second (and really a third) vote coming up before becoming actualized.
This $12 million is a benefit that the city council grants to New Homes and the city council has, for whatever reason, decided to give them that benefit and only get $750,000 in return. Robb Davis attempted to increase that benefit to 50-50 but lacked a third vote to make it happen.
In my view, the city council has a number of different duties, but one of them is to maximize community benefits. For example, the city needs a new fire station because the current one located on Fifth Street is getting older – the developers helping the city to build a new fire station would be a benefit that would mitigate some of the impact of additional housing.
One of our readers yesterday was being a bit humorous with potential goofy headlines, but the bottom line really is that either the developer pays for some of these additional amenities or the money comes from elsewhere in the community – the taxpayers or city employees.
To the extent that perhaps the residents will be less likely to support a parcel tax for schools or streets, it could come out of the classroom as well.
From my perspective then, the city gave away a huge community asset worth $12 million to the developers and got very little in return. As one reader stated, “Municipalities and developers ALWAYS tussle over the value created by land use decisions. Why would that be any different with the CFD? The City is creating $12 million or so in value with this decision. Why is the CC gifting it to the developer instead of pocketing the money itself?”
This is the key point, “Keep in mind, the developer is not creating any ADDITIONAL value for the community with the $12 million. The city is the one creating the $12 million with its action. The only action the developer is taking is depositing the $12 million straight into its bank account.”
So for me it is disappointing that the council chose to leave so much potential value to the community on the table. It is not like the Cannery folks were in the position to walk away from the deal. They will make huge amounts of profit here, regardless.
But the bigger issue is how this ends up becoming a signaling event. I had a lot of discussion with people who sat back on the sidelines and watched how this unfolded. They were watching because they believe this offers us a clue about how the council will approach the innovation parks.
I want to be clear – I do not believe for a moment that this decision will doom the parks. However, there are a lot of people like me – inclined to support the innovation parks, wanting to support the parks, but not willing to support the parks for the sake of supporting the parks.
Does the reluctance of the majority on council to drive the tougher bargain on the Cannery CFD reflect their unwillingness to do the same on the innovation parks?
One councilmember remarked to me off the record that the Cannery and Innovation models will be very different by the nature of the projects. The subcommittee of Robb Davis and Rochelle Swanson will obviously work behind the scenes on a lot of this prior to the projects coming forward.
Obviously, while Rochelle Swanson has been an unwavering supporter of both the innovation parks and the Cannery, Robb Davis, also a supporter, is likely to press for more behind the scenes.
Furthermore, one huge difference with Cannery, both in November 2013 and now, is that it only needed three councilmembers’ support. The innovation parks will face the voters and need to get the support of 50 percent. I maintain that the Cannery would have had a very difficult time passing a Measure R vote as it was agreed to in November of 2013.
I have high hopes that we can get an innovation park project to come forward that I can support.
I think we need to think big. This is a community of untapped potential, not just for this community but for the region. The point was made at Jumpstart that in the last decade there have been two Sacramento region companies that have filed for IPO (initial public offering).
One was Marrone Bio Innovations and the other was last week, the Davis-based biotech company, Arcadia Biosciences. They announced that they were filing for $86 million for a proposed initial public offering. In other words, in the entire region, there have been two new companies filing for IPO in the last decade and both came from Davis.
My hope is that Davis can aspire to be mentioned in the same breath as places like Mission Bay, Austin and the Research Triangle Park in North Carolina. I want parks that can serve as crucibles of creativity that inspire innovate thinking that happen at places like Google, Apple and Tesla.
Is that unrealistic? Again, two companies in this region have filed for IPO in the last decade and both are from Davis, before we as a community so much as lifted a finger. I remember back in junior high we had a motivational talk from our counselor and he told us that we should shoot for moon, so if we miss, we end up in the stars.
While we have a tremendous opportunity here, we also are only really going to have one shot at this. I am worried now that we have a council willing to sell short.
Ironically, it was pointed out to me this week that, while I have been foremost among those calling for us to not have competition for the innovation parks, that competition probably is our biggest asset here.
Keeping the three innovation park options alive means that they have to compete with each other – and while the downside of that is the possibility of splitting the vote and back-fighting, it also means they have to attempt to forward the boldest and most innovative project they can get.
The Hines corporation, which is part of the team behind the Davis Innovation Parks, has been the developer behind some very innovative designs, including the recent Facebook Campus.
The bottom line is that we should shoot very high with the innovation parks, as a great park will be a huge asset to this community and a huge draw to new tenants. While the CFD vote was disconcerting, I remain hopeful that we have a net-zero and highly innovative design that can come forward.
What I want to make clear here, however, is that I will not settle for second best or support a second-rate project. I believe a bad project to be worse than no project, and a Measure R defeat is much more likely to come if we attempt to cut corners.
—David M. Greenwald reporting