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