Commentary: A Troubling Vote on the CFD

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Mayor Pro Tem Robb Davis is an impassioned plea for one councilmember to change their mind
Mayor Pro Tem Robb Davis makes an impassioned plea for one councilmember to change their mind

Yesterday I was joking with people that it was like old times on the Vanguard – contentious, huge numbers of comments. But, really, for the first time since 2010, it felt like old times on the Davis City Council, in that the vote was 3-2, and it never felt like there was a reasonable chance to swing the vote.

For the most part it was civil enough. However, it felt like the council came in at a 3-2 split, remained a 3-2 split throughout, and there was never an illusion that the final outcome was anything but a 3-2 split.

The odd part of the vote was that I have a very distinct impression that the Davis City Council did not reflect the views of the majority of the citizens of Davis. Can I prove that today? No. I don’t have polling. It is simply an impression based on my years of experience doing this.

I have heard a dismissive view that this was simply that the people opposed to the Cannery CFD (Community Facilities District) were simply the usual suspects who oppose growth and who were opposed to the Cannery.

But the public comment last night undermines that hypothesis. The people who spoke out against the CFD included people like Jim Kidd, Mike Berry, and Ron Glick, who are people who in general would be considered strong supporters of development. Add to those voices like Jeff Boone and Michael Bisch, and you have a core of very pro-development people taking umbrage at the CFD.

As Michael Bisch put it, “All business owners I know have expressed skepticism regarding this CFD  being in the best interest of the community. We are all entirely perplexed by the CC action in this regard.  It is entirely a political drama having nothing to do with business, which is why the official Chamber position on the issue is so confounding.”

What you did not see a lot of on Tuesday night were the core anti-growth people – although Ken Wagstaff spoke, people like Dick and Rachel Livingston and Rodney Robinson were in the audience, and Michael Harrington came early. However, speaking out was a much more mixed group of people.

Overall, I was simply not persuaded by the facts as to the need for the CFD. The remainder of this piece will go through this point by point.

Councilmember Rochelle Swanson early in the proceedings made the point that “the last council already negotiated the goodies that were in the Development Agreement… that’s done, we’re not opening the DA. That’s a misunderstanding in the community, now isn’t the time to go after more goodies.”

She is certainly entitled to her view on this. But, from my perspective, the moment the developer ASKED for the CFD, it meant that negotiations were back open. They wanted to get something that was not guaranteed, to use Robb Davis’ words, in the developer agreement (DA), so therefore the city was entirely within its rights to ask for something in return.

Undermining her position is the fact that the city did in fact get something – the $750,000 from the developer and, moreover, anything about $11.8 million, the city would split 50-50. So it seems that the city did get something in return, and the question was not should they get something in return, but how much would be fair?

Second, we have the long and drawn out debate over the impact of the CFD potentially on future parcel taxes. Councilmember Lucas Frerichs acknowledged sending out an email which went back to 1999 and showed that there isn’t a huge impact of the Mace Ranch CFD on their voting on parcel taxes.

Brett Lee, however, dove further into the data, showing that on the last four tax votes, Mace Ranch was significantly and in some cases dramatically less likely to vote for a tax than the rest of the city. And on several cases failed to achieve passing status.

A poster accused Brett Lee of “cherry picking,” but selecting the four most recent contests is not cherry picking. Cherry picking would be randomly selecting the four results that most made his point. The four most recent represents a trend.

For me, it was bad analysis to select 1999 results as indicative of future outcomes. The problem you have is that, up until 2008, the school parcel tax was $100 a year. It was largely a non-issue and most elections ended up between 70 and 75 percent support.

But that changed in the years starting in 2008. The school board clearly had the community behind them in 2008 as they put a new parcel tax forward as a solution to school closings.

But by 2011, this was starting to wear thin. Measure A nearly did not pass. Measure C was a straight renewal and passed relatively easily. But Measure E was another expansion and, even during a general election, was fairly reasonably contested. And, of course, the city sales tax passed citywide but fell well short of two-thirds (which it fortunately did not need).

The bottom line is that the voters in Davis have seen parcel taxes go from about $100 a year in 2007 to $500. Now you throw on water rate increases, a city parcel tax potentially, and then a CFD of $1000 to $3000 a year, and suddenly voters might not be so keen on passing the next parcel tax.

Councilmember Lucas Frerichs countered that we do not know that the CFD was the reason for these votes. I agree with that point. We know that the voters in Mace Ranch are somewhat more conservative than other parts of the city.

We also know that the dynamics we are setting up in Cannery might create a similar mix – 2000 square foot home averages pushing prices to at least $650,000 and in most cases over $700,000. Those are not going to be young families with kids and are likely to be more conservative and older voters who are less likely to support the parcel tax.

The next point was that this discussion devolved into the discussion of the impact of Prop. 13 on city amenities. Prop. 13, of course, passed in the late 1970s. It is true that the city does not have the resources these days to build this kind of infrastructure into the project, but, at the same time, it seems that if developers stand to make a tidy profit off the project, some of that profit should go toward the types of amenities the new subdivision needs.

This discussion was disappointing because on Tuesday morning the Vanguard showed the fiscal analysis from November 2013 that showed that, even without the CFD and with the cost of the infrastructure and amenities, the developers stood to make at least a 10-12 percent profit. Moreover, by our calculations, the analysis underestimated profits because the average home was projected to sell at about $270 per square foot rather than the likely more accurate $300 per square foot, if not $325 or higher.

Councilmember Swanson said, “It comes down to what did we ask of them.” She stated, “We’re not just some community, it’s our community. Necessity in Davis is different from necessity in Elk Grove, Rocklin, Roseville ‒ not to pick on those communities, or Woodland, but they’re different.”

Ms. Swanson is correct, but she is forgetting something very important. We may be asking more in Davis, but developers and home builders in those communities that she mentioned are also not getting $300 to $325 per square feet. The cost of building homes is roughly the same across the region, but in Davis they can sell those homes for much more profit, so why should we not demand more?

The question that Mayor Pro Tem Robb Davis posed was that, given that New Homes agreed to the deal with no guarantees about a CFD, they obviously believed they could make the finances work – and the fiscal analysis done by A. Plescia and Company bears that out – “what changed?”

Rochelle Swanson and Lucas Frerichs implied that there was an impasse in the development agreement subcommittee between Mayor Joe Krovoza and Councilmember Frerichs. Therefore, they changed the “shall” to “may.”

There was a lot of disagreement on this and someone who was there told me that Councilmember Frerich’s recollection was not the same as their own. I was not there in the room, but there is clear dispute on this point.

Finally we get back to the argument by Mayor Dan Wolk, saying, “There is no free lunch. The residents are going to pay for this one way or the other. CFDs are part and parcel to this post-Prop. 13 world where it’s a funding tool for infrastructure.”

Actually, there is a free lunch. The free lunch is for the developers getting another $11.8 million on top of their 10 to 12 percent profit margin which is probably closer to 15 to 20 percent when the real estate market fires up fully in two to three years.

We spent a lot of time on whether the demand curve is sufficient to enable residents to save money upfront when they have to pay on the backside. I suspect the supply and demand situation is such that The New Homes Company is going to be able to sell those units for whatever the market can bear.

There have been some people in this debate who are clearly against a CFD on principle. I note that Winters, for instance, voted against theirs on the issue of fairness.

I am probably closer to Robb Davis and Brett Lee here. I am not necessarily opposed to a CFD, but I am opposed to this CFD. I do not think the community got enough in return for the gift of public funds they gave New Homes.

New Homes already stood to make what at least one respected realtor in this town called “a very fat deal,” and that was before we knew about the CFD. That comes from the citizens of this community. So what do we get for that? And for me, we do not get nearly enough.

Now we have talk about Nishi and the Innovation Parks getting a CFD. I think talk of a CFD could be fatal to a Measure R vote – I suggest the council tread really lightly here.

—David M. Greenwald reporting

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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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32 thoughts on “Commentary: A Troubling Vote on the CFD”

  1. DT Businessman

    “Add to those voices like Jeff Boone and Michael Bisch, and you have a core of very pro-development people taking umbrage at the CFD.”

    I’m not pro-development. I’m pro social, environmental and economic sustainability. Development can be a tool to further or undermine those 3 goals.  It depends on the project.

     

    -Michael

  2. DT Businessman

    Further clarification. The quote attributed to me in the article is out of context. I was taking umbrage at Tia Will’s business bashing wherein she lumped businessmen and women in with developers while insinuating that the business sector supports this CFD.

     

    -Michael

  3. David Greenwald Post author
      Posted From Ron Glick

    Both Matt Williams and David Greenwald have misrepresented my views on the CFD and I would like to correct the record. I am not opposed to the CFD at Cannery I do however believe the amount of money that New Homes is asking to bond is too large because it will impact the ability to pass parcel taxes in the future. As I said the other night the City Council already doesn’t have the 2/3 support to place a parcel tax on the ballot to fix the roads. A large additional assessment on the future residents of the Cannery will not be conducive to garnering their support to repair our aging infrastructure through additional taxes.

    Much has been made about reading the tea leaves on the history of parcel taxes but by being selective both sides can make their case. Its only when you run a regression through all the data that the trend can be scene and that long term trend is down. The CFD as large as proposed by New Homes will not reverse that trend.

    The Vanguard analysis of the vote on Tuesday night has been terribly flawed. So far you have failed to report how Council Member Swanson’s amendment moved the needle on the end result. Her amendment killed the idea that the CFD should be a profit center for the city turning back the bait being offered by New Homes to split with the city any over allotment in the sale of the bonds. Her amendment also directs staff to negotiate the smallest possible amount of debt to be encumbered by the future owners. So it turns out that the CC voted correctly and came down exactly in the same place as my position. Instead of praising Swanson for taking a principled and nuanced approach the Vanguard does its usual hatchet job on what you call the council majority as if having three votes is some sort of cabal when you don’t like an outcome.

    Finally the Vanguard totally has missed the important question raised by Mike Berry during public comment. Why are the rental and commercial properties being exempted from the Cannery CFD? I think this is important because spreading the cost out over more owners will reduce the individual tax burden. Secondly, Who is going to own those properties because if New Homes is going to retain ownership of these properties are they trying to exempt themselves from taxes they are trying to place on the future home buyers of the Cannery. These are important questions that have been completely overlooked in the discussion so far.

    i would hope that in the future before you try to state what my position is on something you would fact check your story before publication.

    Thank you for allowing me to clarify my position,
    Ron Glick

    1. dlemongello

      Questioning of staff revealed that it was in error that commercial and what was referred to as “mixed use” were exempt. Commercial is charged on a square foot basis, it was I believe $0.26 per Sq. Ft. And mixed use was not included because it may not be built (which sounded strange so maybe I misunderstood) but will pay towards the CFD if it is built. Only the affordable housing units are exempt.

      1. Alan Miller

        “Only the affordable housing units are exempt.”

        Creating a larger gap in which “rich” are skimmed to pay for “poor”; “lower-middle-class”, as usual, left in gap created in which there is little housing stock for them to live.  Of course, all the labels are BS because “poor” could have off-the-books income, “rich” could have tax-shelters.

        “Affordable” housing should be banished along with minimum wage, redevelopment funding, and affirmative action.  Take government out of it.

    2. hpierce

      David… I believe Mr Glick (and by extension, Mr Berry) are incorrect, as it relates to “exempted” properties.  Unless the “rental” units are designated as “affordable housing”, I suspect they are not exempt.  I don’t believe the commercial properties are exempt, buth theur rte strutu3 iffernt,nbing set per sqare foout.

      1. David Greenwald Post author

        Not sure what happened to your last sentence. According to the analysis it applies to 463 residential units plus the commercial units.

        1. hpierce

          Wow, neither do I know what happened to that sentence!  Will reconstruct : ” …  but their (non-res) rate structure is different (from the non-except SF/ MF residential property), being set by square foot of building.”

  4. Davis Progressive

    it’s clear that there is a lot of nuance here, the main point was that the people speaking in opposition to either this cfd or the cfd in general were not simply the anti-growth people.  i thought the overall discussion was poorly done and i think david’s commentary really lays that bare.

  5. Tia Will

    I would like to clarify my position in view of an apparent misunderstanding of my position on the CFD. My stance is not antibusiness. I clearly stated in a previous post that the developer had every right to ask for as much as they could get. My problem is not with the developer, or with any other business. It is with the process and lack of transparency with which this was handled in the contract and with whose best interests were being considered by the CC majority.

    For me, there was no lack of integrity on the part of the developer. They gave what they felt they needed to to gain approval, I suspect no more and no less. My problem is with those on the CC who seem to me to be more concerned with the benefits to the developer than they are with the benefits and potential detriments to the community overall whom they are elected to serve. I have stated clearly that I believe that they likely perceived their actions as for the best. One of them has assured me directly that this was so. I just happen to disagree. I disagree that this was an open transparent process. I disagree that the word “may” can be in any way interpreted as “will”. I disagree that not feeling that the Cannery was a good fit for the city of Davis and not feeling that the CFD was an open an transparent process makes me anti business.

    I do not believe, nor have I ever stated that the “business community” which in my opinion in Davis does not speak with a unified voice, marches in lockstep on this issue. There have been some in business who have spoken in favor of the CFD and some who have spoken against it. Believing that some members of the CC favor business in general and developers specifically says nothing at all about what members of those groups may think about the CFD. My comments on this subject have been limited to how I see the actions of the CC, not how I see business in general ( on which I have no comprehensive  view at all since I think various things about different types of businesses) nor how I see any particular business.

  6. Frankly

    Ms. Swanson is correct, but she is forgetting something very important. We may be asking more in Davis, but developers and home builders in those communities that she mentioned are also not getting $300 to $325 per square feet. The cost of building homes is roughly the same across the region, but in Davis they can sell those homes for much more profit, so why should we not demand more?

    Although I side in opposition to this CFD, this point is a half-baked comparison.  Do these other communities have 2-1 open space mitigation requirements?  Do they have similar less developer-lucrative affordable housing requirements?  Do they have requirements to include less developer-lucrative commercial properties?  You are making the case base on gross sales, not net returns. What is the net return for an equivalent development in Elk Grove?

    Let’s assume that net return for the Cannery is 20%.   The next step is to determine the annual rate of return and compare that to other investment opportunities.   And if you consider that the developer started this project to propose several years ago and the project will not be completed for at least two years, that annual rate of return starts to look much less impressive.  The Developer should maybe consider just putting his capital into the stock market and take a long vacation.

    It is possible that the CFD was expected to be accepted by the three CC members that voted for it and that the developer needed it to help keep the project feasible in consideration of ALL the things that Davis demands, and the term of the developers capital investment in the project relative to other competing investments for that same capital.  It is possible that there was a valid financial justification for the developer to get $11.25MM upfront to help with the funding of the project.  And considering that the new owners would end up paying the tab one way or the other, this “developer profiting from the CFD” is really a bogus argument for why the CFD was a bad deal.  The CFD was a bad deal for other reasons.

    Finally we get back to the argument by Mayor Dan Wolk, saying, “There is no free lunch. The residents are going to pay for this one way or the other. CFDs are part and parcel to this post-Prop. 13 world where it’s a funding tool for infrastructure.”

    Good to read that Dan agrees that the residents are going to pay for their goodies one way or the other.

    Not true that Prop-13 has anything to do with this point… unless we are also going to include the killing of RDAs to raid its cookie jar to give to the teachers union and the lack of discretionary funds in the state and local budget due to the bloat, over payments and over committed benefits of government employees for keeping their Democrat political operatives in power.

    I think the parcel tax concern isn’t real… in fact it is a bit demeaning and disrespectful to voters to infer that they would not just vote for a parcel tax on the merits of what it was to be used for, and would instead vote it down just because they were pissed about their Mello Roos.

    The main issue here is the lack of city government transparency and lack of city government demonstrated business-savvy in negotiations and decision making, and the diminished voter trust that develops as a result of it.

    1. Davis Progressive

      first, frankly you make some good points here.

      i think it would be interesting to way to various requirements against the inflated rate of return.  did cannery have a 2 to 1 mitigation?  i don’t recall that.  i think that’s only a measure r requirement.  someone correct me if i’m wrong.

      i really disagree on the parcel tax issue.  the voters will vote on the merits of what it is used for, but to pretend like cost isn’t a factor is a strangely naive argument from someone who i don’t generally consider naive.

      1. Frankly

        On the parcel tax concern.  Certainly a person will consider what he can or cannot afford when voting for a parcel tax.  But then go back the point that the Cannery buyers will pay for their goodies one way or the other.  So CFD or no CFD, the assessment of “what I think I can or cannot afford” is going to be the same.

        Families that can afford a $650,000 home are going to be financially sophisticated enough that they can and will make their decisions based on their family financial situation… not just a determination of the amount of property tax they are paying or not.

        The main reason that a school parcel tax will fail is that too much of what we are giving the schools is going into the pockets of the employees of the system and not enough is going to the benefit of the students.

  7. Alan Miller

    “I would like to clarify my position in view of an apparent misunderstanding of my position on the CFD.”

    “I’m not pro-development. I’m pro social, environmental and economic sustainability.”

    “The quote attributed to me in the article is out of context.”

    “Both Matt Williams and David Greenwald have misrepresented my views”

    There seems to be an epidemic at the Van Guard of late of assumptions being made about what people said, or meant, and using the incorrect assumptions to make a point.  When this occurred with me, I simply commented “[expletive deleted] you”, but of course my expletive was deleted.

    I think it’s time that sources were checked before people’s names are used when  meanings are assumed, even if you are really-really-really-really sure you think you know what they meant — because obviously from the above quotes you do not.  So, like, call or email first.

    Better yet, just make your point and leave assumptions about what you think other people meant out of it.

    BTW, while I find it most egregious when it is done by the Van Guard himself, many commenters do it as well. It is best not done, as one’s own politics colors what one believes others are saying.

    1. Matt Williams

      Alan, I repectfully disagree. If an assertion is made about a person’s position, then yes I agree with you. However, leaving a broad and factually incorrect assertion like the one Anon made stand unaddressed is damaging in and of its own right. Given the fact that a video recording of the individual public comments was available, stating, with an appropriate disclaimer, what one heard said in the public comment is appropriate in my opinion. Ron Glick’s words from the podium were pretty straightforward. With typical Glick fervor and theatricality, Ron stated in the first 10 seconds of his public comment “… you’re sticking it to the people …” later he said “… but, it’s too big …” followed a bit later with “… they [New Home Company] need to put down more money …” and “… it’s too much. You’re going to kill our community.” followed by “It’s too big. It’s too much money.” I apologize to Ron if I either misunderstood or misrepresented those words.

      Rochelle’s motion over an hour later was the first inkling that Ron’s dream of a smaller CFD was anywhere on the radar. Ron’s position now, which he clearly stated earlier in this thread is one of hope … hope that the CFD will achieve his definition of small … and that new position of his is significantly different and much more nuanced from what he said from the podium.

      With the above said, almost all positions statements are a snapshot in time. New information can come to light at almost any moment in complex situations like this one. I learned new information Thursday afternoon from Bruce Colby at the City-DJUSD 2×2 that looks like it will adjust my position on the CFD a bit. So, paraphrasing your quote above, even if you are really-really-really-really sure you know what they meant — and you have confirmed it by a call or email, new information can change that reality at the drop of a hat.

      1. Matt Williams

        I received an e-mail from Ron Glick this morning regarding my comment above. He ended his e-mail with “… you should have apologized.” So, in order to be crystal clear, I wish to repeat the last sentence of the second paragraph of my comment above … “I apologize to Ron if I either misunderstood or misrepresented those words.”

  8. LadyNewkBahm

    I saw the video I think Robb Davis came across as heavy-handed. I think it takes blanks for him to tell rochelle to change her vote when one considers that robb is the least experienced memeber of the body and not part of this particular process the way rochelle has been. Maybe robb should change his.

    1. Davis Progressive

      sometimes you need to be heavy-handed to drive a point across.  i prefer that very much to the feux consensus that we saw for a few years.  let’s stop pretending there aren’t important divisions in our beliefs.  you want civility, go to church.  this was mostly good dialogue.

      1. Michelle Millet

        When someone goes after a speaker, and focuses on how they said something, rather then what they said,  its usually because they have spoken an inconvieant truth.

    2. Michelle Millet

      To be fair, Robb wasn’t part of the council when the New Homes Company was unofficially promised a CFD. Did he not get that memo that he is supposed to unquestionable go along with these behind the scene hand shake deals?

    1. Frankly

      If Robb was heavy-handed, then he certainly must have had a very strong opinion.  He is the least heavy-handed person I know.  I think though if he hadn’t put a strong effort into the attempt to get that third vote, some of us would have been commenting that he was too passive.  At least he should be able to sleep well at night knowing that he gave it the ol’ college try. Brett too.

      Hopefully there are no hurt feelings on the CC and they move on to the next item of business.  God knows there are a lot of them.

      1. Michelle Millet

        Are you kidding Robb is heavy handed all the time. One time I tried to steal his bike light (he has a really good one), and he said, “hey give that back” and then he waited like half a second before he said, “please”.  Seriously, you DONT want to mess with guy.

      1. LadyNewkBahm

        being a ball hog. Dan said he wanted to say something else but didn’t have time. Robb was taking it all. Technically that is not “filibustering” –  just hog the ball so nobody else gets it. if you cant filibuster in the way they do in the senate, you do the next best thing, you take the ball and don’t give it to anyone else for the remainder of the time.

        1. Davis Progressive

          that’s just a load of crap.  dan could have said whatever he wanted, he had the time, no one would have stopped him.  he realized he didn’t need to because he had three votes.

        2. Michelle Millet

          Yeah that sounds like Robb. I hear he steals balls from kids at the park all the time, and won’t give them back.

          Want to have a serious conversation? Why don’t we focus on WHAT Robb said, rather then how long it took him to say it. Or is it easier to attribute false motives to his actions, rather then have a legitimate discussion on the points he raised?

  9. LadyNewkBahm

    dan knows what davis would have done because he was already doing it. if he started to say something, davis would have taken like a half hour to try to pick apart his statement. don’t call it filibustering call it what you want- a stalling tactic. if the hour drags on long enough, we have to then table the issue for future discussion. by that time, the no cannery people will have sufficiently mobilized forces. dan rochelle and lucas didn’t play that game.

  10. Tia Will

    we have to then table the issue for future discussion. by that time, the no cannery people will have sufficiently mobilized forces. dan rochelle and lucas didn’t play that game.”

    There was no game to be played, and no “no cannery people to mobilize”. You are completely ignoring the fact that many of the speakers against the CFD were not anti Cannery. But more tellingly, you offer no evidence that any amount of “mobilized forces” would have changed any of the three majority votes. Without these two factors, you have no game, just an attempt at a more in depth conversation in which Dan most certainly could have participated to his hearts content. He holds the gavel.

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