Commentary: Heat Turned Up on the CFD

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Cannery-Park

A few weeks ago, despite heavily-commented and well-read articles on the Vanguard, a city councilmember told the Vanguard they weren’t sure that many people cared about the CFD (Community Facilities District). It will be interesting to see if that changes, particularly after Bob Dunning’s entry into the fray on Tuesday.

While Mr. Dunning gets a lot wrong in his column, particularly his misunderstanding and mockery of the urban farm concept, he does a reasonable job of laying out problems with the CFD.

He also notes, “The Cannery didn’t require a Measure J vote or a Measure R vote or a Measure ABCDEFG vote, but if Davis had an ordinance requiring citizen approval to convert a large abandoned cannery into a bigger-than-average housing development, this thing would have been rejected hands down, as other projects in town have been.”

There is a lot of truth in that comment. The council approved the measure on a 3-2 vote. While the barrier to collecting the signatures to have a referendum proved too high, and the Cannery developers dissipated opposition with some of the deals they cut at the end, had the matter been a Measure R vote, I firmly believe that the developers would have given far more and it may well have gone down to defeat in its current form.

Mr. Dunning continues, “Thankfully, our beloved City Council has a plan to make all these Johnny-come-latelys at least pay for the havoc they will wreak on our poor town.”

The Johnny-come-latelys appear to be new residents moving into the Cannery.

He continues, “It’s cleverly disguised as something called a ‘Community Facilities District,’ which sounds positively benign until you start peeling the onion.” The CFD, “would collect fees from future residents of The Cannery to fund amenities in that neighborhood.”

He writes, “Talk about taxation without representation, those folks aren’t even living here yet and we’ve already figured out a way to pick their pockets.”

Taxed is not the correct word, assessed is more accurate, but the point is largely the same. Mr. Dunning notes that “future Cannery residents could be taxed between $904 and $3,233 a year for those amenities.”

Mr. Dunning then points out, from Councilmember Brett Lee, while the CFD “must be approved by the voters of the area affected, but as is typically the case, the land being considered to have a CFD placed on it doesn’t have any residents and thus no voters. In this case, it is the landowner or landowners who get to decide if they want a CFD placed on the development. So, in the example of The Cannery, there is one voter — The Cannery owner. It is an election with one vote.”

Mr. Dunning retorts, “The result, no doubt, will be unanimous.” “’Voters overwhelmingly approve Cannery CFD’ will read the next day’s headline.”

He argues that this plan is not fair and is “morally bankrupt.”

As we noted on Monday, this week Councilmember Lucas Frerichs, in an interview with the local paper, said that “refusing a CFD would come at a price, such as amenities and infrastructure not being built for years, as the developer waits for money from future home sales.”

Moreover, he reiterated that “a CFD was part of the talk throughout the discussion of The Cannery’s development agreement.”

He told the paper, “What I don’t want to see is what happened when Mace Ranch was built.”

He also said that “the CFD money doesn’t come from the city general fund, would not be paid by the entire community and would be paid for by future Cannery residents one way or another — either through higher-priced homes or through a CFD.”

He added, “With an anticipated $11.8 million sale, the city would receive $750,000 from the developer. For any amount above $11.8 million, Frerichs said, there would be a 50/50 split, resulting in potentially millions of dollars for the city.”

However, Brett Lee in a recent op-ed that appeared in the Vanguard, stated, “There is no free lunch. The future residents of the development are the ones who bear the burden of the assessment.”

“Personally, I have to wonder why the city is being asked to be inserted into this transaction, which I believe fundamentally is a transaction between two private parties,” the councilmember writes. “If The Cannery developers need to charge a premium for the homes they build due to the amenities and infrastructure they have agreed to provide in the development agreement, so be it. Let the purchase price of the home reflect and fund these items.”

He continues, “I am uncomfortable having the city create a vastly unequal taxation patchwork where some residents are paying in excess of $2,000 more in taxes/fees a year than their nearby neighbors with homes with the same assessed values.”

“In addition, I am not comfortable with the city issuing nearly $12 million in bonds and becoming financially liable for the repayment of them,” Councilmember Lee concludes.

Mayor Pro Tem Robb Davis noted that this is “a highly inelastic demand function” where “TNHC is essentially a price setter in this market.” He argues, “In such a market they very well may be able to set a home price and not have to reduce it if a CFD is included. In other words, unlike in a competitive market, they will not have to reduce the price by the full amount of the CFD.”

He argues, “Given the foregoing, I believe that home buyers moving into the Cannery face the risk of overpaying for the infrastructure there.”

The key question now is whether this renewed push and focus on the CFD will push the council to reconsider their vote this Tuesday. The CFD has only been advanced to staff for drafting, and council still needs to consider the final CFD.

—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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22 thoughts on “Commentary: Heat Turned Up on the CFD”

  1. SODA

    I am glad the issue of the CFD has garnered more attention especially outside the DV and the Enterprise coverage and Dunning columns have helped to bring it more to the general public’s attention.  I hope the majority has heard the community and will reconsider their vote. Thanks to Lucas for his opinions in the Enterprise article; I wish Dan and Rochelle would share their views on their vote; they have been very quiet.

    Correct me if I am wrong, but the New Home developer DID agree to up front infrastructure in the development agreement and that was before any CFD was decided. Remember for whatever reason the CFD was a “may’ not a ‘will’.  So the argument that in order to not repeat a Mace Ranch situation, we have to agree to the CFD, I think is disingenuous.  It would be good to hear Joe’s take on the issue.

    1. hpierce

      Unfortunately, SODA, although you are absolutely correct on the “may/shall” language, am more and more convinced there were “wink-winks”, “secret handshakes”, or verbal representations between the former CM (St Pinkerton), CC members (Lucas?), and/or key city staff, assuring the developer it was “in the bag” (‘carpet bag’?).  If true, that was disingenious (sp?).  And reprehensible.

      1. hpierce

        BTW, in saying that, I’m NOT meaning to imply that there was anything ‘illegal”. Am just saying, on a scale of 1- 100 of the “ethic/judgement” scale (100 being highest ethics/judgement) what occurred was 75% or lower.

        1. Davis Progressive

          i think we end up distracting from the point by going the ethics route.  it’s clear that the council could consider a cfd but were not obliged to grant it.  it’s clear that determinations were made in deciding to grant the cfd.  to date, i think robb and brett have the stronger argument however and i’m disappointed that while lucas may have been interviewed by the enterprise, he hasn’t submitted an op-ed, nor have dan or rochelle.

  2. hpierce

    The “discomfort” is appropriate.  For Lucas, in particular.  Only one of the “gang of three” (not really, but had to go there) is potentially, in my opinion, a swing vote.  Only one of the three can stop the train before it leaves the station.  I hope one of them “persons-up”, and moves for reconsideration.  However, for political reasons, I suspect that ain’t a ‘happening thing’.  Lucas, enjoy what’s left of your term.  If you go for this, suspect you’ll be a “one-term wonder”.  Grow a backbone.  I, for one, (actually my spouse is pretty much in agreement with me on this one, so make that two) will not vote again (we did before) for any of the 3 members currently in support of the CFD, if it is implemented. It’s just ‘wrong’.

    When Mace Ranch was being developed, so were areas in the west and north, and south parts of town.  After comparing what we’d pay for a home in one of the other areas (pretty much an apples-to-apples comparison), and talking with a very knowledgeable “finance guy”, I discovered that instead of paying ~ $125/SF elsewhere, I’d be paying ~$100/SF in Mace Ranch, and that over the 30 year time frame of a mortgage/assessment, it would be a “push” or a slight advantage to buy in Mace Ranch.  Since the Mace Ranch development was within a short distance from where we had lived for 14 years (and we loved the neighborhood), we bought in Mace Ranch.  I still do not regret that decision.

    There is not a large, competitive, atmosphere today, as there was in the early ’90’s.  Am convinced that a prospective HO will pay the same for a home in The Cannery whether there is a CFD or not.  They’ll just pay for the financed infrastructure ~ twice.  And, at a higher interest rate than if the costs were in their mortgage.  And, the assessment may or not (most likely, NOT, technically) qualify as deductible on State/Federal taxes.

    The assessments we pay for the ‘developer CFD’ has not affected our votes on subsequent parcel taxes for school, City purposes.  BUT, I did the math.  I suspect I’m in the “5%” (if not the dreaded 1%).  If an assessment shows up on the “property tax billing”, suspect that 95% of the homeowners will view the assessment as a tax, and behave based on that view.

    Am thinking the train has indeed left the station, at least to the only three who could stop it.  More is the pity.  In the future, they should feel fully accountable for the dominoes that I believe will fall.  Am feeling like my hands are “clean”.  I’ve laid out the problems, risks, but as I am confident I’ll never buy in The Cannery, it’s really not all that important to me, as long as I raise the warning flags, which I believe I have.

     

     

    1. Davis Progressive

      the train has not left the station.  this council caves at the slightest indication of pushback.  all there needs to be is a few good people who show up on tuesday.  if it’s the three that showed up last time, forget it.

    2. excaliburr

      As a potential returnee to Davis and someone with some interest in the project (though this last minute “oh, by the way” on the CFD is leaving a sour taste in my mouth), I did a little research last week on the deductibility of CFD fees. Technically, the FTB doesn’t consider Mello-Roos an ad valorem tax so it, as well as the school, library, and other parcel tax supplemental amounts are not deductible. But in recent years FTB appears to have given up on trying to enforce this, partly because property tax bills don’t specify what’s deductible and what isn’t. (My former Davis home didn’t incur Mello-Roos, but I didn’t realize I wasn’t supposed to be deducting the hefty school tax or the park and library taxes, so I did – for years.)

      http://www.sfgate.com/business/article/Calif-drops-property-tax-deduction-campaign-3486711.php

       

    3. Michelle Millet

      The assessments we pay for the ‘developer CFD’ has not affected our votes on subsequent parcel taxes for school, City purposes.  BUT, I did the math.  I suspect I’m in the “5%” (if not the dreaded 1%).  If an assessment shows up on the “property tax billing”, suspect that 95% of the homeowners will view the assessment as atax, and behave based on that view.

      Dave Ryan included some sobering numbers in his recent article regarding how Mace Ranch residents (who pay the highest amount of property taxes due to CFD’S)  voted when being asked to raise taxes/fees.
       

      1. hpierce

        Yes.  That confirms my opinions expressed.

        A caveat though… Ryan said some “stupid”/ill-informed/over-generalized things… Ex.  he quotes tax rates for various areas of town… EL WRONGO!  First, CFD assessments are not taxes; Second,they are not ‘ad-valorem’; Third, at best they were “averages” , but that was not said; Fourth, the assessments are the same whether a Mace Ranch resident bought in 1994, or 2014.  The ‘taxes’ (dollar amount) ARE NOT.

        Because of Prop 13, the percentage of “taxes” that go to the CFD (developer; the City-wide and DJUSD ones are a different matter, although neither of those are “ad valorem, either), are much higher (percentage) for “old-timers”, than for the “newbies”.

        Ryan is not anywhere near a good “reporter”.  Not much thought/research, IMHO.  The word “hack” flits through my mind.  Given what he is probably paid, salary or ‘column-inch’, I’ll endeavor not to pick on him,too much.  Suspect that if the Emptyprize and Vanguard had to pay their “reporters” minimum wage (instead of classifying them as interns/volunteers/salaried/independent contractors), they would both disappear.

  3. Anon

    had the matter been a Measure R vote, I firmly believe that the developers would have given far more and it may well have gone down to defeat in its current form.

    And you KNOW this how?

    There is not a large, competitive, atmosphere today, as there was in the early ’90’s.  Am convinced that a prospective HO will pay the same for a home in The Cannery whether there is a CFD or not.  They’ll just pay for the financed infrastructure ~ twice.

    And you KNOW this how?

    It is amazing to me how much sheer speculation is touted as “certainty”…

    1. Don Shor

      “…had the matter been a Measure R vote, I firmly believe that the developers would have given far more and it may well have gone down to defeat in its current form.”

      And you KNOW this how?

      Davis voters have been pretty clear in recent years about housing growth. “Know” it? No. But it’s a reasonable prediction based on past behavior. Do you think the voters have shifted by 20 – 30 percentage points on housing growth issues since Wildhorse Ranch?

      1. Davis Progressive

        that’s my take as well.  we don’t know things like this for sure, but if whr was going to go down 75-25, this project at five times the size and half the amenities (jk) was not likely to pass.

        1. Michelle Millet

          had the matter been a Measure R vote, I firmly believe that the developers would have given far more and it may well have gone down to defeat in its current form

          Not to mince words but  someone saying they “believe” something is not the same as saying they “know” something.

        2. hpierce

          Michelle… agreed re: mincing words… I don’t KNOW anything about political issues, that’s why (I think) I generally say something like ‘methinks’, IMO, etc.

  4. Don Shor

    I recall reading previously that the infrastructure for the ‘urban farm’ at The Cannery is going to cost about $3 million+ and is being paid by the developer. Presumably that is part of what is being covered by the CFD. Somebody please correct me if I’m wrong: about 25% of this, which will be additional cost to homeowners, is for developing the urban farm?

    1. Michelle Millet

      There was some question about whether the urban farm costs could be covered by funds collected through a CFD, because it is going to be run by a non-public entity. I believe Harriet said they were looking in to this.

      My question, and Robb brought this up as well during deliberation, is why a urban farm cost $3 million?

      1. Davis Progressive

        the question is what kind of infrastructure do they have to bring in.  do they have to connect to different services?  does it include improvements to the site?

        1. hpierce

          My understanding is that the ‘farm’ needs to be served by the same basic infrastructure as any other lot.  Except there should be less of a need for sanitary sewer connections (minor need), water connection is not significantly expensive, drainage (given obvious lack of impervious area) is minor.  Have no idea how they are apportioning the cost of the adjacent road.  Then there is the “barn” feature.  Have no idea of the cost of that.  One of the structures going up is a “welcome center/sales office”.  I sincerely hope that cost is not included, but don’t know.  Have heard that there may be costs to either import good topsoil, or treat/augment/enhance the condition of the existing soils.  Not enough info to even begin to quantify that.  The $3 million seems EXTREMELY high, in any event.  Even if you assume a subsidy for operations/maintenance for a few years.

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