Philosophically Divided Council Votes to Implement CFD

Cannery-undercrossingIn the end the decision on the CFD (Community Facilities District) came down to philosophy, with both Rochelle Swanson and Lucas Frerichs arguing the need for the timing on the funding to be more immediate in order for the Cannery put the proposed infrastructure in place.

Lucas Frerichs also noted that when the citizens had concerns that the CFD was too much money, when the issue came up in March, that staff went back to work with the applicant to make it smaller. “It came back significantly smaller,” Councilmember Frerichs said.

Councilmember Brett Lee, who along with Mayor Pro Tem Robb Davis remained in opposition to the CFD, expressed appreciation to the New Home Company for lowering the cost of the CFD and said he believes this will be a “nice place to live” for the community. However, he argued, he could not support the CFD because he “thinks its bad public policy.”

Ron Glick during public comment noted, “The agenda says you’re still going to bond $17 million.” He continued, even if it is $8 million, “I still think $8 million is too big. They’re pulling forward stuff that’s going to be completed this year.”

He countered the argument that the CFD would facilitate the building of these amenities, noting that they will be completed regardless. “These are amenities that they need to market their houses,” he pointed out. “I don’t know why you’re putting it on the future homeowners.”

The staff report notes that the $17 million figure represented “the initial bond size expected when the CFD proceedings started, however, the reduction of the special taxes will result in a bond issue of $10,100,000, which will produce proceeds available for improvements of $8,000,000.”

The attorney that the city brought in from Best, Best & Krieger explained, “The bond amount is set at a maximum of $17 million, however the special taxes have been reduced so that they are calculated to only support a maximum bond issue of $10 million which would yield net proceeds of only $8 million for construction of facilities.”

So, she explained, you can authorize the higher bond amount, but without the special taxes in place, you cannot really achieve that. “It won’t support that high of a bond issue,” she said. They kept that amount in there to keep it consistent, but she said the important factor is the reduction in the special taxes.

Mayor Pro Tem Robb Davis said, “I’ve opposed this CFD from the beginning. The main reason… is that we had an agreement to do the project without recourse, so I’ve never really been understanding why it’s needed to accomplish what was agreed to without it.”

He noted the memo from the Plescia Company which had the pro forma on the fiscal analysis for the project back in November 2013. The city asked for this analysis so that it “knew the ballpark of the asks of what (the developer) could do for community enhancement funds.” The conclusion, he read, “the extend of the overall site development improvements off-and on-site appears to be financially supportable while still yielding a positive net land value for the project.”

There was no CFD expected in the Plescia report – “CFD was not mentioned, it was not a funding source.” In addition, the per square footage cost of housing has gone up substantially since that report in November 2013.

“Plescia said to us as a city – New Home Company is going to do fine – there’s a lot of cost, but they’re going to be able to sell homes,” he said. “The Council used those findings to negotiate some extra community enhancement funds. New Home Company agreed to those community enhancement funds.”

“I still don’t understand why the New Home Company needs this CFD to cover their costs. The infrastructure that we’re approving tonight, $6 million is already in place – they found a way to finance it. It’s already in place. $6 million of the $8 million is already in place according to Bob Clarke,” he said.

Mayor Pro Tem Davis proposed a substitute motion that would finance that remaining $2 million. It was seconded by Brett Lee, but, not surprisingly it was defeated 3-2.

Councilmember Rochelle Swanson said, “For me it’s about timing. Consistently it’s about timing.” She said at some point we have just “agree to disagree” as to the history.

“I know there are some who want to believe there are nefarious reasons, or some kind of plot or conspiracy as to who we represent, all I can do is speak for myself, it does come down to consistency,” she added. “I think it would be honest if people were just able to state it’s not about there’s ever going to be a number that’s right. There’s a disagreement about to whether it should be there. I can respect both sides of that.”

She noted that at Cap-to-Cap that there was excitement over the Cannery and its coming forward as a positive project that people can be excited about. However, they did not understand the flap over the CFD “just because it’s so commonplace today.”

Councilmember Swanson added, “Timing really is important.”

Councilmember Frerichs said, “(The CFD) absolutely was part of the developer agreement. It was a part of those conversations all along with the entire council, particularly the former subcommittee of both myself and former Mayor Joe Krovoza.”

Community members certainly had some concerns that “the CFD is too much money,” he said. “We directed staff to go back and work with the developer and applicant to make it smaller. It came back significantly smaller. Some folks disagree with those numbers – that it’s too much.”

He showed the chart that compared the original rates to the new rates. These show that at the top end with a 32 percent reduction of fees, the smallest homes under 2011 square feet, they are cut from 40 percent to nearly 50 percent reduction.

He called this a significant change responsive to the concerns of residents in the city.

The councilmember said he voted against the substitute motion because with only $2 million bonded for, he was not sure of its feasibility. “I’m not sure how feasible it is and worth it to actually go forward,” he said.

Councilmember Brett Lee added that “I do appreciate the willingness of New Home to work with the city and reduce those amounts – that has not gone without notice.” However, he added, “I’m not supportive of the CFD, I think it’s bad public policy.”

The vote once again was 3-2 on the CFD itself. The council took several votes. First, the property owners had to vote to approve the CFD – which they did and that was counted by City Clerk Zoe Mirabile. She counted the four ballots.

The council voted 3-1-1 on that vote, with Brett Lee abstaining, noting that the clerk has the ability to count the four votes and he did not want to imply that the election was not properly held or the ballots were miscounted.

The final vote was 5-0 to modify the developer agreement so that a 3rd bicycle access point in the west could be considered eligible for funding.

—David M. Greenwald reporting

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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21 Comments

  1. Joe Krovoza

     

    I just posted this on yesterday’s piece, but now I see this one, so I’ll update just a bit and post here too.
    For starters, I didn’t receive any funding from New Home, ConAgra or any of their associates for my Assembly run.  I believe the Cannary was/is a good project on balance and I was pleased to work constructively with New Home and George Phillips on many of the elements over a period of years leading to its adoption.  Ultimately, I did not cast my vote for the project, believing very strongly that two grade-separated crossings (at the SW and SE of the project) could easily have been funded by the project, and are essential for bike/ped/car safety and our city’s culture and GHG reduction goals.  The pro forma on the project showed then, and suggests even more today, that there is plenty of room to fund the crossings.  I was forthright about my desire for the crossings from the very first hearings on project elements.  As to the CFD being part of the DA, there’s a provision in the DA allowing such that’s clearly being exercised now.  I was opposed to a CFD seeing no need given the pro forma, and it wasn’t discussed with me seriously in any forum leading up to project approval or during the Council’s two November 2013 deliberations on the project.  Lucas and I were the sub-committee and active on the DA, but staff and our former CM were even more intricately involved.  That’s all I can add.

    1. Alan Miller

      I rarely ask direct questions on this forum, but . . .

      Joe, what are your thoughts on the dutch junctions rather than undercrossings, the claims the undercrossings are not fundable due to extreme underground conditions, the thought that we can do several dutch junctions along Covell for the price of a single undercrossing, the claim that the trail down to the H-Street tunnel will be narrow and unpleasant, and the council vote to make eligible for funding a west access for bike crossing (over the railroad I presume), and will this take the place of an H-Street connection (even though it serves a much smaller and completely different transportation circulation).

    2. #me

      [I posted this on the previous CFD thread and am reposting it here because it responds to the double post by Krovoza.]

      Some David Greenwald quotes from the article …

      “… one of the biggest concerns that “good government” people have is the corrupting influence of money in the system. Whether The New Home Company actually bought influence with Mr. Wolk, let alone his vote, seems questionable. But the average citizen doesn’t have the access to that kind of money.”

      “There is no legal conflict of interest here. However, the appearance of conflict is troubling. We want to make sure that our public officials are considering all interests, whether they have money or can deliver voting blocs or whether they are simply individuals with modest means.”

      “… when we see a public official receiving $8600 in donations from a company that has business before the city, we have to at least pause.”

      “These are questions that we have to ask.”

      I didn’t receive any funding from New Home, ConAgra or any of their associates for my Assembly run.  Joe Krovoza

      Joe Krovoza has chosen to both insinuate moral superiority over his opponent in the Assembly race and actively insert himself into the CFD debate on this and previous threads, so I think it is fair to apply the same high-minded principles articulated by David Greenwald above to the former mayor.  Because Krovoza is also a member of the Vanguard team, I’m sure Greenwald is also concerned that members of his organization are above reproach.

      During the campaign, Krovoza routinely stressed that he played a key role in delivering the surface water project. So is there any evidence of the corrupting influence of money?  Is there even an appearance of conflict of interest that we should find troubling?  Do we need to at least pause and consider the potential influence of any future campaign contributions?  Are these questions that we have to ask, as we did with Dan Wolk and the CFD?

      According to the California Secretary of State website, Krovoza received $10,250 from the Tsakopoulos family for his Assembly race. Note that this sum does not include any bundled funds that may or may not have been coordinated by the Tsakopoulos organization.  According to the 12/4/2013 Davis Enterprise, Davis and Woodland will pay the Tsakopoulos group $2,600,000 per year for 24 years beginning in 2016 (with a 2% per year inflation adjustment) for surface water from the Sacramento River.  By my calculation that works out to just under $80,000,000.

      Here’s a link to a picture of Krovoza and the Tsakopoulos team just 8 days before the campaign money started to come in.

      http://www.davisenterprise.com/media-post/conaway-ranch-water-project-photos/attachment/conawayw/

      I’m not saying there was a quid pro quo. I’m not saying there was a conflict of interest. I’m not saying that Krovoza put his political agenda ahead of the interests of his constituents. I don’t even agree with Greenwald that “these are questions we have to ask.”

      I’m just pointing out the hypocrisy.

    1. hpierce

      Yeah… part of that is to recover city costs to date to create the CFD [attorneys, bond counsel, staff], plus costs of selling the bonds, city costs for staff to administer, document reimbursement requests from the developer, and continue to process payments, etc. for 30 years.  Most of those costs would be the same if the bond issue was for 10 million, or 17 million, or 100 million. So the 20% figure can be misleading.  But it IS $2 million. That’s what I tried to tell folks months ago (I didn’t know the actual %-age or dollar amount).

      For those who favored the CFD, this is another thing you can explain to the future residents.  Why 20% of their assessments don’t even cover the actual costs that they could have rolled into their mortgage.  The only question I’m not sure of, given the developer’s and CC action, was this consensual sex, or…

       

      1. Davis Progressive

        thank you for that additional information hpierce.  so we are bonding $10 million to get $8 million when the developers have already put up the initial $6 million for infrastructure.  yeah this makes even less sense than it did last week.

        1. hpierce

          I tried to alert folk.  I talked directly to Robb even before the first vote.  he listened, but I think he was already inclined to oppose the CFD, so i can’t claim I did anything with him other than confirm his inclination.  I’ll admit that I didn’t have (so didn’t share) ‘hard numbers’.  So, for the folk that didn’t listen, didn’t communicate with the CC, enjoy the CFD and its implications.  On your hands, not mine.

          Will never vote for Lucas again.  In both considerations, he babbled, and didn’t have the spine/ability to really cogently explain his votes.  If he had just been elected in ’14, might see if I could get support for a recall, but not worth it.  Hope his term and Davis CC career ends next June.

          Just my opinion, but know it is shared by a number of people I’ve talked to.

          1. Don Shor

            I really wish there was a simple explanation for this thing. I’m mystified by it.

      2. Matt Williams

        Jacques Franco and I spoke to Mark Northcross last night during the break after the item, and when Jacques asked Mark essentially the same question Doby asked, two additional items Mark included over and above hpierce’s list were 1) interest payments during the build-out period and 2) creation of a mandatory reserve fund to protect the lenders in case of default (not likely in Davis, but still considered in the process).  The reason for 1) is that until a unit is built on an individual lot and subsequently sold there is no revenue stream from the payment of annual Mello-Roos fee on that lot.  Nonetheless interest payments are due and payable during that period.

        1. hpierce

          Thanks for the “assist” Matt.  It’s been too long, and forgot the two you mentioned.

          Actually, have been trying to forget the MR CFD.

      3. Jim Frame

        $6 million of the $8 million is already in place according to Bob Clarke,” he said.

        So 3 councilmembers voted to saddle about 500 future homeowners with carrying costs on $8M *plus* a whopping $2M in overhead so that they can get $2M in “amenities” a few months sooner than would otherwise occur?  This doesn’t even pass the laugh test.

        1. Frankly

          I think you point out the absurdity except for the fact that the homeowners would pay one way or the other.  I don’t see this as having any net increase in total costs.  And you can make the case that there are more payment options with the CFD than just having the cost tacked onto the purchase price.  The $2MM in fees/admin costs for the bond issue, etc..  now that is a material cost delta.  Also the fact that the city is not getting $750k.

      4. Topcat

        So 3 councilmembers voted to saddle about 500 future homeowners with carrying costs on $8M *plus* a whopping $2M in overhead so that they can get $2M in “amenities” a few months sooner than would otherwise occur?  This doesn’t even pass the laugh test.

        Yes, that’s what it looks like.  That’s Davis politics for you!

  2. Topcat

    The attorney that the city brought in from Best, Best & Krieger explained, “The bond amount is set at a maximum of $17 million, however the special taxes have been reduced so that they are calculated to only support a maximum bond issue of $10 million which would yield net proceeds of only $8 million for construction of facilities.”

    So the bond issue is $10 million and the net proceeds for construction are $8 million.  Someone is getting rich off that lost $2 million and someone else is getting fleeced.  Does anyone see something wrong here?

      1. hpierce

        You just might be confusing the $2MM set aside for parks, and the $2MM for non-construction CFD costs… it is understandable, as the two #’s match.  $6 MM has been authorized for payment of work to date, $2 MM for future payments, and $2 MM to cover City costs to cover “admin” costs of the CFD.  As to the latter, see my earlier post on this.  It doesn’t mean the latter costs will be incurred, and, if not, the $ will go to repay/prepay the bonds.

    1. hpierce

      Nobody is “getting rich”.  That was a somewhat foolish thing to say,  as that number was chosen to make sure that ALL city expenses are covered, without hitting up the GF.  If the number is high, and the expenses lower, the money won’t be spent, and that will end up lowering the assessments, and/or shortening the length of the bond payments.

      What was done was setting a “cap”.  Read the staff report, listen to the video.  The City only gets one chance to set the “upper bounds”, and that is what CC did.  Or would you prefer that the city “low-balled” it, and then you and I could pay more/have reduced services to make up the “costs”?

      I really regret that the CC voted for the CFD, but given that malodorous decision, they did execute properly.

  3. SODA

    What exactly DID happen to the $750K that was supposed to come to the city as a result of the CFD. I heard no mention last night. Was it swallowed up when the CFD total was decreased?

    I see a lot ‘wrong’ as topcat mentioned in the whole thing. I thought the majority again had vague reasons, Dan had none and it seemed although they tried hard, Robb and Brett were left beating that old dead horse…..

    1. Matt Williams

      SODA, yes it was “swallowed.”  When the net bond proceeds to New Home Company went down they dropped below the qualifying level for the payment of the $750,000 to the City. So, no payment will be made.

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