Commentary: Can the Council Push For Better Projects?

Mace Ranch Innovation Center
Nishi Artist Rendering
Nishi artist rendering

In some ways, I’m sure I will hear from various councilmembers that this is an unfair question. That the developers are private interests and they should have the right to put their project on the ballot and if those projects cannot gain a majority, then they will lose.

However, I am concerned that, while both innovation projects have good aspects and considerable merit, they have shortcomings that could prove fatal in what one can only surmise will be contested elections for approval via a Measure R vote. The council approval process represents the first chance to improve the projects and hopefully the council, recognizing the importance of the projects, will push the developers for small but important improvements.

Our analysis yesterday on Nishi was basically that the project appears to try to do too much – it tries to provide rental housing, workforce housing, and R&D (research and development) space all on a 47-acre property. That seems a tough task at the relatively low density they are proposing.

I rarely agree with Mark West, but I think he hit the nail on the head in a comment late yesterday afternoon when he said, “The current Nishi proposal is a missed opportunity.  Rather than looking at it as a stand alone project, it should be developed as one leg of a two pronged expansion of the downtown, with the 3rd street corridor extending to L street as the other prong. At the Nishi end, there should be high density student housing, the proposed commercial space, and an extensive retail component with at least 10x more space than what is currently proposed.  Creating a small ‘village’ like the USC development that David cites is a good way of thinking about how the project could be improved, by creating a ‘University’ focused extension of the downtown.”

While I am not sure I agree on the Trackside proposal, I do think he had a point when he said that “this is Davis, so instead of planning for a vibrant and growing downtown, we will settle for more of the same low density housing and commercial space, with no significant expansion of retail. We don’t want to threaten the downtown land owners or the large apartment landlords in town after all.”

Yesterday I made the point that if Nishi and the city fix the Richards Boulevard traffic congestion – a point that I am dismayed has not been adequately raised in the staff report on the Hotel Conference – Nishi probably passes. But, after reading more comments yesterday, I am less certain of that.

As one person keeps asking me via text message – why do we even need Nishi? The answer is simple. The city, as Don Shor keeps pointing out, is thousands of beds short for college students. Nishi seems like a good location to put those beds – or at least some of them. Moreover, the city needs space for R&D. Third, the city needs more workforce housing. And finally the city needs more retail.

The advantage of Nishi is that building there does not expand the city’s boundaries. Nishi is already surrounded. It is not sprawl inducing. It follows the concept of smart growth, putting people potentially near their place of work or school.

It is not a perfect location, but it is pretty close to that. My only real concern is that, given its small size, we cannot try to do everything there and certainly not at such low density. I’d like to see the council really challenge the developer here to think bigger.

On the Mace Ranch Innovation Center, the Vanguard readers had a long discussion over whether the $2.2 million in fiscal impact to the city at buildout was too conservative a number. It may be too conservative and there are reasons to believe that is the case, but my point on Saturday was that we should be able to generate a better number than that, even using conservative assessments.

The EPS report’s analysis “excludes the ongoing operations and maintenance of Project facilities that are proposed to be funded through private sources (e.g., lighting and landscape district; Mello-Ross community facilities district [CFD] for services).”

The city has looked into a CFD of $.50 per square foot on top of the rest of the fees and taxes. That would generate over a million in revenue. The advantage of taxing built-out space is that they do not have to pay the tax until something gets put up.

Right now they are projecting 2.7 million in non-residential square feet. That includes office, flex, manufacturing, and industrial commercial, as well as a hotel and public space. Factoring out the hotel and public space, we are looking at about 2.5 million in taxable square footage.

There are mixed views on the viability of the CFD, but, as one person told the Vanguard, given the increase in the value of the land once it gets entitled and annexed, the city should have the right to share in that windfall.

Finally, we ought to consider, instead of a 2.5 million square foot development, what happens to revenue at 4 million square feet. From the city’s perspective, the majority of the costs – roads, infrastructure, etc., are not all that different at 2.5 million square feet versus 4 million square feet.

But the added jobs, additional property taxes due to increased property values, and additional square footage along with construction costs and other fees would be a tremendous improvement.

If we are going to pave over 200 acres on the other side of Mace, it should be a game-changer for the city’s finances and, for me at least, the $2.2 million, even if that represents a low estimate, is not enough.

Why do we need Mace? Because the costs of the city to supply the services we need are going to continue to rise and if we want the city to be able to provide services – including police, fire, parks, roads, greenbelts, swimming pools and other recreation – we need to have a better financing mechanism than we have.

The bottom line here is that, if we are truly projecting a $2.2 million revenue in 20 years, then I think the voters are going to be reluctant to support this project. The city needs to think about ways to generate the additional revenue and model it so we can see the likelihood of success.

We need the council to take the lead here – we have good starting places on both Mace and Nishi, but we need to be able to improve upon them if we hope they can succeed at the polls.

—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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23 Comments

  1. Davis Progressive

    given the council’s lack of fortitude on cannery, i think we can see that the council majority on this issue is not going to push for project improvement.  it’s really too bad that we are letting the naysayers in this community win.

  2. Anon

    Having attended the Finance & Budget Commission last night, I took away a better perspective of the innovation park approval process.

    1. The DEIR will posit what type of project has the least environmental impact – which would be both Nishi and MRIC with housing.

    2. The Economic Impact Report will posit what type of project will have the greatest economic benefit – which would be both Nishi and MRIC without housing.  Also, it should be noted the Economic Impact Report posits essentially the worst case scenario, or another way to say it is it is the most conservative guesstimate.  So the Economic Impact Report did not include an assessment district, assumed a super conservative 50/50 split for tax sharing purposes between the city and county, etc.

    3. It will then devolve to the City Council to balance the pros and cons of each development, and make the policy decisions on exactly what type of project will go on the June 2016 ballot.  Will either project contain housing, for instance?  Should there be a tax assessment district formed?  It is the City Council together with city staff that will negotiate developer agreements for Nishi and MRIC.  When the City Council comes to the point in time it must make decisions for ballot purposes, it will use the DEIR and Economic Impact Report as informational items that need to be taken into consideration when formulating the final draft language to place on the ballot.

  3. Nancy Price

    Really, are the “naysayers” in the community “winning.” That’s news to me.  And just what exactly are the  so-called “naysayers” saying…that they want better projects that are truly innovative and meet the highest standards or even “innovatively” and imaginatively go beyond current standards in order to  address the climate, energy, water and transportation crises we are facing locally and regionally.  It’s a shame the City Council did not take the time to revise codes and make the Guiding Principles more than just “guiding,” but they were too eager to get the request for proposals out and to nervous about developers’ responses.

    And what about the charge that the “naysayers” are also “afraid of change.” Really! This is a ridiculous and disrespectful claim that can be turned right back on those making the claim. What are those making that claim afraid of?  That we can take time, have much better projects, that we can examine comprehensive planing as West suggested yesterday, that we can have good public process, etc., etc., etc. Come on, Davis is at a tipping point.

    1. Davis Progressive

      my comment was specific but yes – they are winning in terms of less density, less impact.  but that doesn’t make better projects.  davis is at a tipping point – if we don’t find a way for revenue, what makes davis great is going to slide.  we already see that with roads, parks, pools.

      1. Mark West

        “if we don’t find a way for revenue, what makes davis great is going to slide.  we already see that with roads, parks, pools.”

        I completely agree that Davis needs to develop more diverse sources of revenues, but just as important, we need to learn to understand and control our costs.  The simple fact is that our City’s accounting system is so archaic and arcane that we do not even know how much it costs us to operate different City services.  Remember, only a couple of years back we reduced total employment with the City by 100 FTEs, yet our compensation costs went up! Whether we are generating new revenue through economic development or through increased taxation, neither will lead to a sustainable fiscal solution for the City unless we demand that the City fully accounts for, and controls costs.

        The quality of life in Davis has already begun to decay due to our inability to pay for the services we want and expect.  This isn’t something that is going to happen in the future, it is something that is already happening now and will only continue to worsen unless we change our approach.  Ask your friendly City Council member how much it costs to operate the [pick your favorite service] in town and what sources of money are being used to pay those costs.  If they cannot answer, ask them why not, and then ask them what are they going to do about it.

        We cannot plan for a sustainable future if we do not know what our costs are since without that information we have no way of knowing how much revenue will be sufficient.

        1. Frankly

          While I agree with Mark on the need to make our City government less costly and more efficent, I don’t see it happening soon enough or large enough to provide enough relief.  Our country, our state and our city is adicted to deficit spending and the politicians mostly lie about it and deflect from the hard work, and our electorate is either blissfully ignorant of it or greedy trying to stuff more producer-lootings into their pockets before we really do run out of other people’s money.

          We can certainly keep trying to elect honest and hardworking fiscal conservatives to office, to educate the seething masses to be able to do the math and understand debt and income… and lastly to beat back the union lock on more and more of our limited monetary resources… but until we can do that, we need to focus on revenue by growing our local economy… especially since our local economy is clearly not large enough in comparison to the rest of the world relative to the amenities and services we all demand.

  4. Frankly

    Davis has a general fund budget of about $50 million.  Palo Alto, another small city with a world-class university, has a $150 million general fund budget… three-times the size of Davis’s general fund.  Coincidentally, Palo Alto has 3-times the number of businesses than Davis.   And a second coincidence….  Palo Alto has about 3-times the geographic footprint as does Davis (26 square miles compared to our measly 10 square miles.)

    The immediate response from the no-growers will be “we don’t want to be Palo Alto!”

    But the problem here is that Davis residents want no fewer city amenities and services than do the residents of Palo Alto… and those things cost money.

    I believe that the net annual revenue increase resulting from a 20-year build out of the 200 acre Mace Innovation Park will be closer to $5 million.  The EPS report failed to properly account for the secondary and tertiary monetary benefits from the new companies and their employees.  Also, the report made the assumption of a 50/50% revenue share with the county.  That is an absurd assumption… one that should spawn some investigation as to it’s origin.

    And lastly, previous work done by Rob White and others with experience in this area pegged the net monetary benefits in that $4MM to $6MM range.

    I see a profound and repeated problem occurring with respect to the 47 acre Nishi project and the 200 acre Mace project…  it is the “perfection is the enemy of the good” issue that seems to plague most if not all of Davis’s proposed development projects.

    And I think I understand the primary source of this problem.

    There are two opposing worldviews with respect what most benefits the human condition: scarcity and abundance.  I could make a partisan argument about this difference, but suffice it to say that  Davis has a high percentage of people holding the scarcity view.   Many of the people holding this scarcity view have probably traveled to places like old Europe and opine for a similar lifestyle and local city look and feel.  They want a small, dense and car-less community surround by open space.  They think everyone should be forced by policy to live a life of low immateriality (even while some ignore their own evidence of a highly material life).

    And these people have largely gotten their way over the years since Measure J/R was passed.

    They were aided by downtown merchants and property owners that supported a scarcity policy to eliminate competition.

    While some might celebrate the result keeping Davis small and quaint; the reality is that we have prevented adequate commercial development.  And because we have prevented adequate commercial development, the level of expectations for any proposed new development is through the roof.

    But here is the final point… the current debate should not be a conflict between scarcity or abundance.  This is a conflict between inadequacy and adequacy.    A city of 72,000 people with the level of expectations we have for amenities and services has an inadequate supply of tax-revenue generating commercial properties (business and retail) .

    Davis needs another 1000 acres of commercial development over the next 30 years.  Assuming $5MM per 200 acres, that would add $25MM to our general fund budget.   1000 acres is only 1.5 square miles.  Davis would still remain small and dense with another 1.5 square miles added to our already tiny 10 square mile footprint.

    Looking back over the last 40 or so years, Davis has actually exceeded the region in housing growth.  Our housing shortage today is primarily the result of demand exceeded supply combined with a university that builds and manages significant fewer rooms than does their peer colleges.

    But our housing growth has been adequate.  It is our commercial property growth has been significantly inadequate.

    We need to focus on the latter and stop wringing our hands about the former.  Build the innovation parks and maximize the commercial space… while rejecting calls to include significant more housing.   Stop letting the pursuit of perfection destroy the good.

    1. Don Shor

      I see a profound and repeated problem occurring with respect to the 47 acre Nishi project and the 200 acre Mace project… it is the “perfection is the enemy of the good” issue that seems to plague most if not all of Davis’s proposed development projects.

      Various commissions are reviewing these projects separately for the criteria that are within those separate commissions’ purview: environmental impact, vehicle miles traveled, fiscal net to the city, workforce housing, etc.
      I wonder if there’s a way to get them reviewed in tandem. The planning process that the peripheral park task force (later the innovation park task force) used was planning and assessing Davis for an innovation ecosystem, and the conclusion was to go in the direction of a dispersed development model. Nishi, Mace, and the north Davis sites were all part of that.
      So while Mace might be less environmentally desirable (purportedly) because of the lack of workforce housing, that is balanced somewhat by the small amount of housing provided at Nishi.
      While the current plan for Nishi does not presently generate revenue to the city, it provides much-needed student housing, some workforce housing, enhances the downtown (a goal of the General Plan and our planning principles).
      The commissions are reviewing these projects in isolation. They are part of the broader planning process, and reflect the recommendations of the peripheral park task force.

    2. Davis Progressive

      “the “perfection is the enemy of the good””

      what i see are two projects that fundamentally do not do what we need them to do.

      “previous work done by Rob White and others with experience in this area pegged the net monetary benefits in that $4MM to $6MM range.”

      that was with the assessments and a greater density.  this is a problem, you’re using his numbers for a scenario that right now does not exist.

      “I believe that the net annual revenue increase resulting from a 20-year build out of the 200 acre Mace Innovation Park will be closer to $5 million.  The EPS report failed to properly account for the secondary and tertiary monetary benefits from the new companies and their employees.  Also, the report made the assumption of a 50/50% revenue share with the county.  That is an absurd assumption… one that should spawn some investigation as to it’s origin.”

      i think you’re pulling that number out of your hindparts.  the $2 million figure is a good working assumption.  the $5 million is you’re hoping against hope.

      1. Frankly

        i think you’re pulling that number out of your hindparts.

        Nope.  The work was done before to arrive at it based on other models for quantifying the cost benefit of research parks.

        Read the report.  It says $1 billion in benefits to the region.  Davis’s share of that is significantly understated.

        1. Davis Progressive

          with nishi they don’t provide much in the way of housing, in fact that project on fifth street might have more bed.  it doesn’t generate revenue for the city.

          with mric, $2 million is nice, but it’s not a lot.  i think the $5 million figure that frankly cites includes assessments.

          1. Don Shor

            they don’t provide much in the way of housing … it doesn’t generate revenue for the city.

            The more housing, the less revenue. Take your pick.

          1. Don Shor

            I’m sorry, I don’t understand what you’re trying to say. How could you possibly be satisfied by Nishi if you want more housing and more revenue? I don’t get your objection here.

          1. Don Shor

            Why doesn’t it work? Why do we need more money OR more housing? Why is it inappropriate to seek a balance? I see the developer trying to provide things that Davis needs on a small, challenging site. It does work: we get some much-needed high-density housing, we get some space for startups etc., we get an active area near the downtown.
            Honestly, if Davis voters can’t pass Nishi, nothing will pass ever. There is almost zero reason to oppose this project.

  5. Frankly

    The problem as I see it is that we have a land-use-stingy voting population.  We are talking about these voters “allowing” us to build on 247 acres.   We have already used almost all of our previous new land development “allowance” on residential growth.  Even the Cannery is mostly residential development.

    I am ware of a well-loved downtown business that is likely facing a significant rent increase as their current landlord liquidates his properties.  That business has no other reasonable options for a new location…. because Davis has a crappy inventory of commercial property.

    UCD is going to be forced to build more student housing at some point.  Davis has carried more than its share of this burden for decades.  And student housing is a net drain to our City finances.

    It would be different if we were not so land-stingy, or if we as a City had a better commercial-property-per-capita balance.   But the pressing need is commercial development and we are not “allowed” enough acres to meet this need, so why should we waste it on more housing?

    1. Davis Progressive

      and to me that means you have to get the project right the first time, not just pass whatever comes across the plate because you aren’t going to get more bites of that apple.

      1. Frankly

        You just confirmed my points.  The impulse to pursue perfection is a byproduct of that scarcity mindset and the primary reason that many things do not get done in Davis.  Most communities do very well allowing more dynamism and good enough to occur without getting their underwear in such a bunch.

        The myth is that a community can do a good enough job pre-planning and pre-designing what is great.  We franky do not have the experience and skills to do that in this community.  Most of what is truly great is the byproduct of just doing well setting up a framework and then allowing the creative makers to do their thing.  We just wring our hands, complain and then get in the way.  And in the end our community is becoming more podunk and irrelevant.

  6. Anon

    Whoa, back the truck up!  The Economic Impact Analysis is a worst case scenario.  It makes very conservative estimates, not discussing the possibility of instituting other tax revenue generation schemes, e.g. assessment districts.  It will be up to the City Council to balance the needs of the city, drawing on information from the DEIR and Economic Impact Analysis.  One example: housing.  According to the DEIR, the mixed-use housing alternatives have much less impact on the environment than a no-housing alternative.  But the Economic Impact Analysis shows the city will benefit more economically if housing is omitted from these two projects.  It will be the City Council that will ultimately decide if housing should be included as part of Nishi or MRIC and the reasons why.  It will be a balancing act taking into account a number of considerations.

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