Cannery, Its Development Agreement, and the CFD

Former Mayor Joe Krovoza
Former Mayor Joe Krovoza

by Joe Krovoza

As the Community Facilities District (CFD) is considered for the Cannery development, I am pleased add some perspective on the process that led to the project’s approval. I’ll focus on the Development Agreement (DA) with The New Home Company (TNHC), a critical element to our council’s approval in late 2013. The DA mentions the possibility of a CFD, and I served with fellow council member Lucas Frerichs on the sub-committee that worked on the DA.

Others have written on the current status of the CFD and its pros and cons. I’ll add some of what I know from the work of the DA sub-committee and the project’s consideration between spring 2011 and the end of 2013.

As a quick review, in late October 2010, on the request of TNHC, council considered whether the Cannery site should move forward as a residential development. Council approved the request 3-2 with then mayor Don Saylor adding a friendly amendment that 20 percent of the 100 acres be reserved for business uses. I was in the minority with Sue Greenwald on that vote. I wasn’t necessarily convinced as Sue was that the entire site was ideal for business uses, but I did believe our current entitlements for residential housing should be advanced before we designated more lots for housing. Following this vote, staff began work with TNHC for community and council input. I committed to working in good faith to make the project outstanding, and hopefully one that fully embraced Davis’ values and would integrate the Cannery residents with our community.

The first community meetings were held in December 2010 and February 2011, and council provided their input for initial project design in April and June 2011. City commissions considered aspects of the project in their areas of expertise over the next few years. Many community meetings followed, and council considered major sub-elements of the project like its affordable housing requirements, the Universal Design rules recommended by our Senior Citizen Commission, park and ag buffer waivers, energy and sustainability, traffic impacts on Covell Blvd., and traffic circulation for cars, bikes and pedestrians in Cannery and between the Cannery and points beyond. I was interested in all of this, but took a particularly strong interest in the sustainability and traffic elements. The latter being very challenging because the new 500+ homes would essentially have one entry/exit point on Covell, and would otherwise be landlocked on three sides.

As the project neared final approval in the summer and fall of 2013, council appointed a sub-committee of Lucas and me to work with staff on the DA. One way to understand the DA is that it’s the “catch all” or even the “clean up” agreement between a city and developer to memorialize understandings, assumptions and the funding of project elements and amenities not governed by ordinances, environmental documents or other agreements.

An issue handled early on by the DA sub-committee was whether to prepare a pro forma on the development – essentially a basic best estimate of TNHC’s revenue and profit – so we would have some idea of the developer’s capacity to fund amenities the city might request. Initially I heard the staff assessment was that there were not three votes on our council for a pro forma. I was shocked. How could Lucas and I, and staff, be involved in crafting a DA with TNHC and not have some information on the developer’s ability to assist with the final set of project needs? How could our DA sub-committee recommend a DA to our colleagues without some knowledge of the value of the entitlements the city might grant? Then I heard from city manager Steve Pinkerton that a pro forma would be done. Now we could proceed.

Andy Plescia of A. Plescia & Co was hired for the pro forma. Then there were sub-committee meetings that included a check-in on the methodology and process for the pro forma. The pro forma became public as Attachment 2 to the November 12, 2013 Cannery staff report.

Another DA sub-committee issues was that staff, and especially city attorney Harriet Steiner, were insistent that Lucas and I not negotiate with TNHC for the city. Harriet had reasons why the sub-committee directly negotiating wouldn’t be appropriate. I didn’t like hearing this. I liked negotiating, I do it lots at work for UC Davis, and think I do it effectively, and I felt that having worked on the project for a few years I could balance the city-side issues well. Alas, staff handled all direct negotiations with TNHC after discussing key provisions with our sub-committee.

Another DA negotiation issue was keeping track of “gives” council had made to TNHC. The urban buffer requirement had been reduced via the urban farm. Auxiliary dwelling units (ADUs) would count for part of the affordable housing requirement, saving TNHC millions. We allowed less park space too, and greater density. Each of these items potentially meant a greater capacity for the developer to support elements in the DA.

How recognition of a CFD was handled in the DA is now in question. From my perspective, as staff and the sub-committee assessed dollars for use in the DA, funds from a possible CFD simply weren’t discussed. There might have been several reasons for this. I was clear to staff that I wasn’t interested in a CFD because it looked like we could fund the amenities without one. Perhaps staff never really considered a CFD, or perhaps they were considering such but never raised the issue with me. All I know is that I was never involved in any discussion with staff, Lucas (the only councilmember I could speak with due to the Brown Act) or publicly. It just didn’t come up. There wasn’t even the theoretical: “hey Joe, if you’d consider a CFD, then we might generate this much money and do these additional things.” Maybe the CFD was an issue between staff and TNHC, but if so, I wasn’t part of that.   Similarly, the fine grain issue of the DA saying “shall” versus “may” regarding a CFD wasn’t discussed, at least not with me.

My view is that any mention of a CFD in the DA was just boilerplate language, not any signal a CFD was anticipated at the time of project approval.

As we worked on the DA, I was very concerned with a rumor that TNHC had promised $2 million to Capitol Corridor Ventures (CCV), led by local resident Dave Morris, to support local business start-ups. CCV hadn’t been designated by the city for funds from Cannery, CCV wasn’t working in any formal way with UC Davis, and the city’s main project to aid local start-ups in partnership with UC Davis is Davis Roots. Yet somehow CCV was on the cusp of receiving millions from TNHC if council approved Cannery. I certainly didn’t want TNHC to tell council they couldn’t fund more in the DA because they had already promised CCV $2 million outside the DA.

What did the pro forma conclude might come from the developer for the DA? The staff concluded in the November 12 staff report that “the Development Agreement could accommodate $4 – $4.5 million in benefits to the City under current assumptions.” It was very hard for me to accept this. Admittedly, the DA wasn’t the only way dollars would flow from TNHC for city projects. Traffic and other impact fees would be paid. For example, transportation funding from the DA plus other traffic impact fees was estimated to total $11 million. That said, everything in the pro forma seemed very conservative to me. Most notable was the assumption of $270/sq.ft. for the houses. If that went to $300/sq.ft., which was the price at the time, there would be another $21 million in revenue. And the pro forma assumed a 10 percent contingency, which on $250 million (conservative) in revenue would be $25 million. So very superficially, it seemed to me there was a $25-46 million dollar question about TNHC revenue. Given this, I was very skeptical of the staff’s assessment of $4 – $4.5 million from TNHC for the DA, and there just wasn’t any reason for a CFD.

Now to the DA itself. Lots of items were at issue. First and foremost were things already worked out with TNHC. Staff led here in telling Lucas and me what was fair and could be properly assumed for the DA. The November 12, 2013 staff report on page 2 summarizes what made it in – easements for the new water project, urban farm operating expenses, dollars for community arts and sustainability, and a requirement for zero net electricity for 25 percent of the first 100 homes. Then there were what I considered the truly big items: recognition of the modified affordable housing provisions that would TNHC millions, transportation funding of $3.725 million above traffic mitigation fees required by ordinance, and $2 million for Community Park improvements, in part because we had relaxed the park requirements on the Cannery side.

In all of this, my biggest issue was no secret. I wanted firm, firm guarantees of high-quality, grade separated bike and pedestrian crossings at the SE and SW corners of the project. The SE should safely connect Cannery residents to the Oak Shade shopping center and all points southeast. A SW crossing would connect to Community Park, the library and schools, and all points southwest. I raised this issue at every Council meeting that addressed Cannery. For fun, I went back and looked at old minutes and, sure enough, excellent bike and pedestrian connectivity is always mentioned.

When the DA came out in the November 19, 2013 staff report, the guarantees for two good, grade separated bike and pedestrian crossings seemed very weak. The November 12, 2013 staff report made clear reference twice to transportation dollars funding a SE crossing, but the November 19, 2013 staff report and DA didn’t guarantee good crossings. I saw this as backpedaling. Even with at least $11 million in transportation dollars from the DA and traffic impact funds, fingers were still being crossed that we’d have quality grade separated crossings for bikes and peds across Covell. Thus, at the November 19 meeting, I sought more dollars in the DA to guarantee both crossings, and a commitment that the poor alternative at the SW would be removed as an option. The council majority for the project didn’t adopt my request, and the Cannery development was approved 3-2.  Brett Lee and I were the dissenting votes.

Today, it’s very disappointing to me that the SE grade separated crossing has been abandoned by TNHC and the city. I believe that’s bad faith. At the SW, the decent option of using the H Street tunnel is moving slowly, and might still happen, but if not, the truly mediocre option of using the south side of Covell may become the only bikeway into town that doesn’t have to coexist with cars on Covell Blvd.

And what of that $2 million for Capitol Corridor Ventures? First, TNHC confirmed that they had promised CCV $2 million outside of the DA. Then Dave Morris came to council on November 19 and presented a press release stating $600,000 of CCV’s $2 million would go to community business start-up groups – with $250,000 to Davis Roots, $100,000 to Hacker Lab, and $250,000 to the Davis Wet Lab Incubator Challenge Fund. At this writing, Davis Roots has a partial payment, but nothing has gone to Hacker Lab or the Wet Lab Challenge. TNHC and the Council must ensure that the CCV funds are allocated as publicly promised.

Regarding the CFD, I will close with these observations.

  • It could be that a CFD was discussed with others, but it wasn’t with me.
  • If staff and TNHC had wanted to guarantee the bike and pedestrian crossings, or any other project amenity, they could have pitched a CF to our sub-committee or the council majority for the project. They didn’t.
  • Clearly, I have a view on the need for a CFD. I am pleased our council approved a deal for the Cannery that didn’t burden future residents with a CFD. There wasn’t a need then, and I don’t see any new circumstances now.
  • One can make a theoretical case that CFD or no CFD everything comes from the bottom line of the developer – the idea being if there is a CFD, people won’t pay as much for the homes, and if there isn’t a CFD then the prospective buyers will pay more, but then the developer has to use the added profit for the DA.  Personally, I don’t believe any market is so pure, with all buyers having and using perfect information for rational decision-making.  We have the entire field of Behavioral Economics (the Freakonomics books, and the book Predictably Irrational) to explain why many markets aren’t really, well… markets.  But even assuming the Davis housing market exists in a world of perfect information, and the buyers are all rational consumers, then why do the CFD?  Just don’t do anything and let the price cover the costs.
  • If there is an argument for a CFD, it might be that the CFD funds will accelerate the construction of amenities. If “amenity acceleration” really is important to the initial Cannery residents, then have them come to the city and request a CFD. It’s their money, and their neighborhood. But if the timing of DA elements was fine for TNHC, our council and city staff in November 2013, what’s the problem now? If the houses do sell like hotcakes, who says we need a CFD to speed things up?
  • If the city does add CFD costs for all Cannery residents, will every homeowner receive a kind of “CFD rebate” when the final homes are built whose profit would have been used to fund the last batch of community benefits?

One’s word is one’s word. The DA agreement was made in late 2013 and at that time there was no public or private (that I knew of) signaling by city staff, or council, or TNHC, that a CFD would be need. If there was a foreseeable need for a CFD, then that was the time for all to forthrightly raise the question and resolve it.

Was the pro forma not conservative enough? Is TNHC so strapped now that a CFD is needed to keep the project moving? I believe the pro forma was too conservative and funds were there then, and are there now, for other amenities and two good, grade separated crossings of Covell. I hope others with more expertise will take a hard look at the pro forma, and I hope TNHC will come to understand what a great benefit the good crossings will be for safety, traffic reduction for cars on Covell, and home values.

Will CCV and TNHC keep their end of the deal to provide $600,000 for local business start-up projects? And who’s watching over the other $1.4 million to CCV that came from the council’s Cannery approval?

This is my perspective. Others were certainly more involved than I was in other parts of the Cannery process. Yet as mayor and a member of the DA sub-committee, and having been on the council during the entire development of the project, I did gain quite a thorough understanding of what took place. I hope this informs further thinking as the project moves forward.

About The Author

Disclaimer: the views expressed by guest writers are strictly those of the author and may not reflect the views of the Vanguard, its editor, or its editorial board.

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29 Comments

  1. Joachim

    “Today, it’s very disappointing to me that the SE grade separated crossing has been abandoned by TNHC and the city. I believe that’s bad faith. ”

    Why did the city abandon a second grade separated crossing?

  2. Frankly

    Several thoughts from reading this…

    – First, thanks to Joe for writing it and clearing up a bunch of conjecture and guesses about how we got to where we are.

    – Related to this I had a question… why do we need to wait for our ex-mayor to explain things?  Why not more transparency up front and during the process?

    – This is the first I have heard that an assessment of the pro forma supported the CFD and possibly the rejection of the second at grade crossing.  If the assessment is too conservative as suspected… and the rationale for why it is too conservative given the likely price of the homes… then we are giving away the store so to speak.

    – Again, after reading this, my concern that staff lacks the skills and experience and resources to be effective on the city’s side of the negotiating table is reenforced.

    – The developer “rebate” idea… I think that is a very good one.  If pro forma project financials are difficult to nail down… and they are… then it would make sense to take a conservative approach… which we seem to have done.  So let’s assume that we agree to a CFD to back the upfront bond/loan to fund the infrastructure/amenities… why not include in the DA a final audited accounting in which the developer will pay down that bond/loan for profit over some guaranteed return?

    One last point…

    I don’t believe any market is so pure, with all buyers having and using perfect information for rational decision-making.

    I refuse to accept this “buyers will be victims” narrative.   Truth-In-Lending laws for residential AND commercial real estate are such that a buyer would have to actively and purposely ignore the copious information provided them during the mortgage financing process and at close of escrow.   And in consideration of this point that the borrower is going to pay for the Cannery infrastructure and amenities one way or the other… I think the CFD is not a problem because of the Mello Roos.  The market will price the homes at a price that the market will bear… and the mortgage financing will include what the total monthly payments will because the regulatory requirements for credit determination of repayment ability.

    The MAIN issue here for the CFD is the bad taste in consideration of the city’s ability to negotiate hard and firm for the city’s best interest for future developments.  I think the lesson learned is that we need to strengthen that team.  And we also need much greater transparency for the politics that influence the negotiating position of the city.

     

    1. Davis Progressive

      “Again, after reading this, my concern that staff lacks the skills and experience and resources to be effective on the city’s side of the negotiating table is reenforced.”

      at least the first part of your comments were very good.  but here’s something i think is missing – i don’t think the problem here was staff but rather the council.  the three were not willing to push this thing to its natural conclusion and therefore we ended up giving away the store.

    2. SODA

      Surprisingly I agree with much of Frankly’s comments and thank him and Joe for continuing the dialogue. I wish Joe had entered the discussion earlier with this historical perspective as it MIGHT have influenced last Tuesday’s outcome. I too am interested in hearing about ‘the impasse’ which I believe was introduced by Lucas and would ask him to add his subcommittee recollection to Joe’s.

      I am particularly surprised to hear about the proforma  which I don’t think has been brought up before.  If conservative why wouldn’t the majority have used this for their cause?

  3. Jim Frame

    The MAIN issue here for the CFD is the bad taste in consideration of the city’s ability to negotiate hard and firm for the city’s best interest for future developments.  I think the lesson learned is that we need to strengthen that team.

    There may be more to it than that.  Even when staff is knowledgeable enough and capable enough to negotiate hard on behalf of the citizens, a majority of the council may not want them to negotiate too hard.  Staff members aren’t stupid, they know that bucking the political majority can make their professional lives more difficult, and possibly even put their jobs in jeopardy.

    Elected officials with higher office in mind know that they need future campaign contributions, and a developer who profits handsomely as a result of developer agreement details is a prime source of same.

    I’d be interested in hearing hpierce’s take on the extent to which these considerations influence the documents that arrive at the dais for a vote.

  4. dlemongello

    Frankly said

    “– The developer “rebate” idea… I think that is a very good one.  If pro forma project financials are difficult to nail down… and they are… then it would make sense to take a conservative approach… which we seem to have done.  So let’s assume that we agree to a CFD to back the upfront bond/loan to fund the infrastructure/amenities… why not include in the DA a final audited accounting in which the developer will pay down that bond/loan for profit over some guaranteed return?”

    This makes complete sense, I have been trying to convey this concept but do not know exactly how it can be done. But the point is if the main reason for the CFD is to not have to wait for revenue to build up from home sales before amenities can go in, then sure, finance them and when the revenues come in from home sales, pay them back rather than walking away with them as extra profit and having the Cannery homeowners pay twice.

    1. hpierce

      ‘…and when the revenues come in from home sales, pay them back rather than walking away with them as extra profit and having the Cannery homeowners pay twice.”  If you even think, for the briefest moment, this has a scintilla of  chance of happening, there is a transportation structure, spanning the East River, connecting Manhattan to Brooklyn I’d like you to consider investing in.  Just so happens I’m the only California agent authorized to offer this investment opportunity.

  5. David L Johnson

    Quoted text: “Another DA sub-committee issues was that staff, and especially city attorney Harriet Steiner, were insistent that Lucas and I not negotiate with TNHC for the city. Harriet had reasons why the sub-committee directly negotiating wouldn’t be appropriate.”

    I would like to know the exact legal reason why Ms. Steiner did not want Joe or Lucas to negotiate with the developer. Was Steiner’s reasoning simply a policy call or is there an obscure legal provision that precludes it.  Without more information, Steiner’s insistence sounds weak.

    From a policy standpoint, I would want city council members to negotiate because they have more clout and when it came time for the vote, the two members would have a better grasp of details. [It looks like stuff got lost in translation, CFD = “boilerplate language?”]

    And, yeah, what was the impasse?

    1. Jim Frame

      From a policy standpoint, I would want city council members to negotiate because they have more clout and when it came time for the vote, the two members would have a better grasp of details.

      This approach also entails the risk of a sweetheart deal between the developer and the politicians.  It’s based on the quaint notion that elected officials will always place the interests of the citizenry above their own.  This is too frequently not the case (e.g. the mid-2000s firefighter contract).

  6. Joe Krovoza

    Re “the impasse,” I don’t know what that might have been.  Since the CFD wasn’t an issue for the DA sub-committee, I can’t imagine that’s it.  Maybe it was that I thought the pro forma showed much more room for us to solve/guarantee the grade separated undercrossings at the SW and SE?  Sorry, I am at a loss.

    Joachim, If three council members decide they want good grade separated crossings, it will get done — maybe even using CFD funds.  (Yikes, did I just say that?)  The SE crossing has been abandoned apparently because there isn’t enough support on council for it.  It’s a pretty simply yes/no given so much at play for Cannery and transportation improvements slated for Covell.  Look in the November 12, 2013 staff report to see how it’s assumed — but not locked down for sure for sure.  There are plenty of ways to get the SE done.  There will always be reasons of utilities, or rights-of-way, or whatever, that make things like this hard.  But the landowner on the north is willing to help, and the city and developer have plenty of tools.  We have a great undercrossing at Covell & Alhambra.  We have one under I-80, for goodness sakes and it’s a life-changer for South Davis residents, connecting them to downtown and campus car-free.  There are PG&E utility issues for some SE options, but I understand that many easements granted to PG&E must give way if there is a city need.  So there’s a way, if there’s the will.

    A good crossing at the SW would go under the RR tracks just north of Covell.  That’s the one I always liked that money could certainly make happen.  Simple?  NO.  Doable?  Certainly.  If TNHC had $2 million for CCV that wasn’t even a council priority, it can find a way to make a good SW crossing happen now.

    Re these two crossings, my personal test was always this: You live in the Cannery.  It’s 9:00 pm in July.  Your family needs milk for the AM.  If you send your child by bike to get a quart of milk at Nugget, then you are really living in Davis.  If you get in the car and drive to Nugget because you don’t want your child crossing Covell at-grade at dusk, then we failed.  If there’s a SE grade separation, I bet you send you child for the milk — maybe even ride with them, enjoy the trip, and stop to talk to some neighbors to or from.

    1. Michelle Millet

      Ironically, because of great bike connectivity (an above grade crossing over I-80, and below grade crossings under 5th and Lillard),  I think it is safer for my kids to ride bikes from our house in South Davis to Birch Lane, then it is for kids coming from Wildhorse who have to cross Covell.

      The crossing at Covell and Birch Lane is totally sketchy for bikes. First the crossing is really close to Pole Line, so some cars are still accelerating from stopping at that light when they reach Birch Lane. There are 2 cross walks, one for bikes and one for pedestrians. There is a crossing guard but he/she only stands in the pedestrian crosswalk, so the bikes are on their own. Plus there is a slight grade on the street so bikes have to go up hill a little from a stop, which for experienced riders isn’t so much of a problem, but it causes problem for newer riders. (aka the kids).

      I was disappointed to learn that the grade seperated crossing at Covell had been nixed, they make a big difference. I honestly would probably not let my kids cross Covell on bikes alone without one.

  7. TrueBlueDevil

    1. Who nixed the second crossing? This seems like a big deal, especially given the limited access to the development.

    2. Who approved the $2M to CCV, and should the city give credit to the developer for shipping community funds sideways to a 3rd party who may or may not be accountable?

    3. Mr. Krovoza or others, is my estimate here close on possible project profits?

    I have a friend who is a developer in another desirable Northern California community, and ten years back he ran through the numbers with me. At the end of the discussion I summarized what I thought were the main costs: 1/3 for land, 1/3 for building the house, and 1/3 for profit. He agreed. This means in his scenario, say 10 years ago, he was profiting $250,000 a home.

    Even at $200,000 profit per house, we’re talking $100M in potential profits total for The Cannery. Is this close?

    I have no problem with profit, the developer takes the risks, finances the development, if all the windows need to be replaced in 5 years or the roofs fail, the developer is on the hook. But Davis isn’t Vallejo. There is a limited supply, and likely the biggest issue was getting through the planning process, and now it looks like the citizens are shafted on basic amenities (a 2nd connection) as well as shafted on the back-end with new fees for new homeowners.

    1. Davis Progressive

      “Who nixed the second crossing? ”

      it seems to have happened de facto. there does not to seem to be any kind of public vote or official decision.

      1. TrueBlueDevil

        It just happened? Did it get deleted along with Hillary’s 30,000 personal email messages? (Humor)

        Someone, or some body, made a decision to remove it.

    2. Michelle Millet

      Who approved the $2M to CCV (Capitol Corridor Ventures) and should the city give credit to the developer for shipping community funds sideways to. 3rd party who may or may not be accountable.

      This was a private transaction between the New Homes Company and CCD, so my guess is approval came someone high up in the New Homes chain of command. (i.e. it was not subject to council approval).

  8. Adam Smith

    TNLC, as developer,  will only profit on the land sale portion.  Any profits from the homes will be earned by the builders.  You can look at the pro formas to gain an understanding of TNLC cost basis (purchase price plus infrastructure costs) plus their indirect costs (staff and consultants plus things like $ 2 million to be paid to Capital Corridor Ventures).    For the revenue,  find what TNLC is asking for lot – builders will be purchasing them in bulk – and multiply by the number of lots.    Be sure to account for all the different lot types in working up your number.   Subtract the costs from the revenue and presto – you’ve derived the profit.

    1. TrueBlueDevil

      OK, a little more complicated than I anticipated. My friend (a builder) typically builds smaller developments, 3 or 5 homes, 12 homes, so he acts as the builder / general contractor I gather is a more accurate description. He already owns the land. He draws up the plans, hires the subs, solicits bids, and pitches in where needed.

      I guess a better breakout is what the builders make, and what the developer makes. There still looks to be a plenty of money on the table.

      As an aside, I’ve heard that rezoning land is one of the most profitable ventures one can achieve. That may be where Benvenuti made a ton of money when he rezoned agricultural land as part of a deal to bring the Sacramento Kings here.

      1. hpierce

        You’ve got that RIGHT, as far as I can tell.  Mace Ranch Investors/RAMCO/Buzz Oates did not even build ONE housing unit for sale.  They got the entitlements, built the “backbone” infrastructure, then sold the bulk of Mace Ranch to others to fully develop.  Buzz Oates et al. did retain and build some of the Commercial/Industrial projects.  Their (‘developers’) forte was getting the entitlements, not building the ‘product’.

  9. Joe Krovoza

    TrueBlueDevil,  I am not the one to analyze the pro forma.  I had an outstanding independent real estate expert do so for me back then and they said A. Plescia had done a very good job, but there was tons of uncertainty, the land cost wasn’t known, and nothing had been calculated on the cost side.  A fresh look would require use of updated assumptions like current cost/sq.ft., new estimated size of the homes, number of homes, etc.  To Adam Smith’s comment, a modest number of the lots are going to be sold to local builders.  The main known landowner was ConAgra, who sold the land to TNHC — probably TNHC had an option pending them getting the entitlements.  I don’t know if the land cost to TNHC is known now.  I believe TNHC will be the builder, or certainly the lead contractor, for the vast majority of the homes.  The main affordable housing complex will be handled by a third party.

    What I can say about the DA costs v. the pro forma’s analysis v. possible revenue from a CFD is that the magnitude of the numbers don’t make sense to me.  Staff thought the pro forma pointed to $4-4.5 million coming from TNHC for the DA.  Setting aside how the pro forma suggests that number, and whether that was a reasonable amount before or after the allocation for CCV, the CFD is being talked about for $10-12 million.  A CFD that’s 2.5 to 3x more than what the city was aiming to ask TNHC for initially?  I can’t figure that out — and now are we assuming a seemingly very large CFD amount before even one house has been built.  Maybe in six months the market will be hot, or not?  The contingency in the pro forma is assumed at 10 percent.  Say that’s on $250 million to be very, very conservative.  Then the contingency alone in the pro forma ($25 million) is double the CFD level and 6x what staff thought TNHC could do in the DA.  I just can’t make the orders of magnitude make sense.

    I just don’t understand how any solid company would sign a DA that could lead to such radical needs already, and with the housing market looking better and interest rates still low.  UC Davis is growing; demand is getting stronger.  What if the city’s DA calculations were off, could we go to TNHC and say “would you mind finding us $10 million to handle some of the Covell road improvements?  We messed up on our assumptions.”

    1. SODA

      Hey Joe,

      I believe there was an Enterprise story in the last few months indicating that New Homes had granted a large number of homes to a So Ca builder; don’t remember the name but it was a familiar one. I remarked then on the DV; does the city have a say in the choice of builder or is that all the developer’s choice?

        1. SODA

          Thanks hpierce!   You come through again.  City has NO say?  So after months of back and forth on the DA, the developer can choose any builder they want?  What if (not saying in this case, do not know except Shea is large and wonder how ‘special’ the houses will be) the developer chooses a low end poor quality builder; no say from city?  Thanks in advance.

        2. hpierce

          Although no expert, from what I understand, Shea Homes is pretty good.  The “market” will dictate, I believe, that any of the builders who would be successful in the Davis ‘market’ would have to be at least one std deviation above the mean.

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