Commentary: Council, Get This Right

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Proposed Nishi Gateway site. The current development plans would leave the trees intact and incorporate them into the project.
Proposed Nishi Gateway site. The current development plans would leave the trees intact and incorporate them into the project.

In 2009, I watched the council, on a divided 3-2 vote, put Wild Horse Ranch on the ballot at the midnight hour on the last possible day. By the time they cleaned up the language and put key features in the baseline a month after their recess, the project for all intents and purposes was defeated and never recovered.

Given the magnitude of defeat, it may not have mattered.  Certainly, while hindsight is 20/20, it also serves as a guide for future decision making. So the most important thing that council can do tonight is make the right decision.

If there is even a hint that things are not ready to go, forcing a project onto the ballot now could be a tremendous mistake.

I have not taken a position on the project itself. In fact, as of right now, if the project were on the ballot, I honestly would not know how I was voting. There are details to lock down, considerations to make.

But the stakes are very large here. There are those who believe that Davis will not pass any Measure R vote – ever. There are those who believe that if Davis doesn’t pass Nishi, they will not pass any Measure R vote.

For those on the slow growth side, Measure R itself might be at stake, as well. In 2000, the initial measure, Measure J, narrowly passed. In 2010, everyone seemed supportive of Measure R and it passed by a nearly 3 to 1 margin. We’re only four years away from its sunset, but a defeat of Nishi unlike the defeat of Covell Village (too big) and Wildhorse Ranch (middle of the recession) could change the tide in Davis away from an initiative that many will believe makes it impossible to pass anything, ever.

Maybe Measure J/R would survive a full on assault, but maybe not.

For those who believe we need development whether it is student housing, family housing, workforce housing, or economic development, the stakes are equally high. A defeat of Nishi could spell the end of MRIC (Mace Ranch Innovation Center). It could mean that investors will not look toward Davis anymore.

The university made the decision to stop their efforts to put a massive innovation/research park to the south of campus in Solano County. But that could change if Davis is closed for business forever. Or the campus could simply continue its push into Sacramento, and bypass Yolo County and the current campus altogether.

For the last week or two I have made the argument that if people believe that Nishi is not ready to go, they should simply vote no on the project. That is certainly preferable to tying the project up in litigation, where a judge rather than the voters get to decide.

But that view is not meant to punt responsibility from the council to make good decisions. While the finances have moved in the right direction toward a revenue stream that will make it more likely that the voters would approve the project, there are loose ends here. I was surprised to find that there are actually some loose ends that need to be put into the baseline features.

The so-called Development Agreement Revenues are not as locked down as they could be. There is no mention of the Parks & Open Space responsibility revenues in the baseline features. That’s $181,000 there. The services Community Services District is placed in the staff report, but needs to be locked in at 1.6 percent, with a make-whole provision by the developer if it doesn’t reach the projected $356,000.

There is the make-whole provision for the tax-revenues that would be lost if an exempt organization purchases the property, but it too is not in the language of the project baseline agreement.

These are simple fixes – a matter of making sure that all commitments are in the project baseline agreement where they are ironclad.

As I mentioned previously, part of the undoing of Wildhorse Ranch was the failure to make sure that all commitments by the developer, to the extent possible, were in the project baseline agreement rather than the developer agreement, which could be changed after the vote.

Staff notes, “The Baseline Project Features also include commitments for backbone infrastructure to the R&D properties with the first phase of development, to ensure ‘permit-ready’ sites when prospective purchasers or buildings are identified.”

The question has been raised by some whether the R&D (research and development) section will get built. This commitment does not quite get to the R&D section being built, only that it is ready to go whether purchasers are identified. A question that likely will arise is whether we can go further to tie phasing to the commercial portion of the project.

For me then, a key consideration as to whether I will support the project is the degree that the council can lock down these commitments into the project baseline features.

As I have noted previously – there are two different groups that are pushing for delay at Nishi. One group is using delay as a strategy to kill the project. I am not sure if they are simply trying to kill the clock, hoping to get a better council, deferring to a later point, but it is clear that the argument for delay is simply a pretense for killing the project.

There is a second group of people who are quite sincere in their declaration that the delay is necessary to resolve key issues. From my perspective, most of the key uncertainties are not going to be resolved by November. We have the Richards Corridor study and a host of improvements to Richards that are necessary.

The developer and city have tried to hedge on this issue by tying construction to implementation of corridor features, but frankly the city has some real credibility problems here. It is not like issues surrounding Richards have crept up on them. Some of the fixes are tied to changing the I-80 on- and off-ramps, but some could have been fixed years ago, including light sequencing and access to UC Davis.

The bottom line is we won’t know what Richards is going to look like any better in November than we do now. If we wanted to wait until 2020, then we might know more. I can understand why the city council and developer do not want to wait four more years but I can also understand why citizens might vote no in the face of uncertainty.

In his op-ed yesterday, Alan Pryor writes, “The final analysis by the Finance and Budget Commission of the economics of the Nishi project shows an extremely modest annual net income of only between $500,000 to about $1,400,000 to the City. And even this relatively small sum was only projected after the Finance and Budget Commission disregarded the explicit requests by both the Davis Fire and Police Chiefs that the previous estimates used for providing such fire and police services be retained in the Finance and Budget Commission’s analysis. If these original estimates for police and fire protection to the projection were retained, the project would not be net positive economically to the City under the more conservative estimates.”

Mr. Pryor is factually wrong here. The difference between the $700,000 and the $1.4 million is based on whether or not the city will realize about $700,000 or so in savings on the projected additional cost of police and fire. However, as I argued earlier this week, I think the police and fire are simply over-estimating the added costs. There is not going to be added police or fire personnel based on Nishi.

Mr. Pryor continues, “This modest income to the City assumes that full build-out of the R&D facilities occurs which is NOT guaranteed by the anticipated agreement between the developer and the City.” I have expressed concern about the lack of guaranteed buildout, but the analysis on Saturday suggested that the impact on taxes would be modest, at least in the model that the Finance & Budget Commission passed.

However, I think there are legitimate concerns about the affordable housing component.

Staff writes, “The Baseline Project Features establish Developer commitments of $1 million for the affordable Housing Trust Fund and an additional $200,000 for the City Council to allocate amongst on-site civic arts, establishment of a local carbon offset program, and implementation of the Downtown Parking Management Plan, for a total of $1.2 million.”

Staff later notes, “The anticipated deal points for in the Pre-Development and Cost-Sharing Agreement approved by the City Council on November 27, 2012 assumed that there would be no affordable housing obligation for housing with densities exceeding 30 units per acre. In recognition of project location supporting of reduced costs for vehicle ownership and use, high-density housing including small ownership and rental units, and energy-efficiency features reducing resident energy costs, the Project is not required to provide price- and income-restricted rental or ownership housing.”

They add, “Nonetheless, the project will contribute one million dollars ($1,000,000.00) to the City of Davis for deposit to the affordable Housing Trust Fund, to be used at the sole discretion of the City Council. This contribution will be allocated per parcel, on a basis such parcel size, parcel use, and/or anticipated building square footage basis, at the time of approval of the first Tentative Subdivision Map for the project. Payment for each parcel shall be made with Certificate of Occupancy for the first building on that parcel.”

While staff references the pre-development agreement, some have suggested that the city has simply violated its own affordable housing ordinance in order to reach this agreement and then, when called on it, they accepted $1 million as an in-lieu fee which is significantly below what is required.

Under the city’s affordable housing ordinance, “A developer of rental housing developments containing twenty or more units shall provide, to the maximum extent feasible, at least twenty-five percent of the units as affordable housing for low income households and at least ten percent of the units as affordable housing for very low income households.”

It goes on to specify, “Such housing shall be provided either by the construction of units on-site or by land dedication.”

The project claims to be exempt from affordable housing. In order to qualify for this exemption, the residential units would need to be “vertical mixed use,” which require the ground level floor to be entirely commercial.

The council clearly needs to clarify the extent to which it is exempt.

From our perspective then, there is a lot of work to be done tonight. The council needs to be transparent in terms of the readiness of the project, it needs to lock whatever it can into the project baseline agreement and it needs to understand that whatever they do tonight might simply not be enough to gain the passage.

It is hard to read the public on this issue. Most people are not engaged. The bottom line is that the council needs to figure out how to get this right.

—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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120 thoughts on “Commentary: Council, Get This Right”

  1. Barack Palin

    If there is even a hint that things are not ready to go, forcing a project onto the ballot now could be a tremendous mistake.

    What happened to “just vote no”?  What happened to “Six months isn’t going to change anything”?

      1. Barack Palin

        You seem to be hedging but that’s okay.

        What many of the commenters were saying is that the way this is set up now with so many items that aren’t locked down why not take more time to get it right before submitting it to the voters.  Maybe those issues will be cleared up tonight, but if not why not then wait for the November ballot to get it right?  You state that this vote is important for many different reasons, the future buildout plans of UCD, all future developments, the health of Measure R, etc…..so why push a project that’s so important for so many aspects of our community when it still might have holes?  If this vote is so important it is short sighted to rush it to ballot and have the attitude that if you don’t like it just vote no.

        1. David Greenwald Post author

          I’m not hedging so much as addressing somewhat different audiences. What I’m saying to council is that there are still issues that need to be locked down. I think they should be able to do it tonight. I don’t really see how a November vote changes anything, if you want to push it past June, might as well push it to 2020 when the corridor stuff gets addressed. I have no idea what that would do to the financing.

          Bottom line, I think the council needs to put it on for June, but they need to get it right.

    1. Alan Pryor

      Mr. Pryor is factually wrong here. The difference between the $700,000 and the $1.4 million is based on whether or not the city will realize about $700,000 or so in savings on the projected additional cost of police and fire.

      Matt Williams contacted me yesterday eve with finalized numbers that resulted from the last F&B Commission mtg. I was factually wrong in my article yesterday (probably the 1st mistake I have ever made in my life – or at least the first time that I have owned up to one). My error was that I misunderstood the final numbers I heard at the F&B mtg. I incorrectly thought both the $1.5 M and $700k figures were after marginal cost reductions of providing police and fire services ($734,000). Mea culpa.

      That said, I still think the income to the City is still rather paltry on a probable $400M project and it was basically chewed up with the raises Staff got in the last MOU.

  2. Tia Will

    For those who believe we need development whether it is student housing, family housing, workforce housing, or economic development, the stakes are equally high. A defeat of Nishi, could spell the end of MRIC. It could mean that investors will not look towards Davis anymore.

    The university made the decision to stop their efforts to put a massive innovation/ research park to the south of campus in Solano County. But that could change if Davis is closed for business forever. Or the campus could simply continue its push into Sacramento and bypass Yolo County and the current campus altogether.”

    From my perspective, either of these extreme outcomes would be suboptimal. It makes me wonder if we, as a city, are ever going to give up on city planning/ economic development as a blood sport and adopt a collaborative approach where the goal is truly improvement in the city overall as opposed to improvement in someone’s financial bottom line.

    Fantasy ?  Maybe. But every advancement made economically, technologically, medically or socially started with someone’s concept of a better future and a better way to achieve the goal.

     

    1. David Greenwald Post author

      That’s why it was address to “those who believe we need development” – which is not you…

      “From my perspective, either of these extreme outcomes would be suboptimal.”

      That was the point – negative consequences…

      1. CalAg

        DG: I think you are already drifting into fear mongering:

        “A defeat of Nishi could spell the end of MRIC (Mace Ranch Innovation Center).”

        Or it could help. I don’t see the linkage. MRIC, in my opinion, will pass or fail based on whether or not the developers back down on housing.

        “It could mean that investors will not look toward Davis anymore.”

        Investors will look wherever there is a profit to be made. A failure at Nishi might actually increase infill/redevelopment proposals.

        “The university made the decision to stop their efforts to put a massive innovation/research park to the south of campus in Solano County.”

        Calling it massive is deceptive, It was a small project on the north end of land south of I-80, east of Animal Resources Services, and north of Putah Creek. Even if the entire area was ultimately developed, it would be smaller than MRIC – maybe 150-acres (gross). There’s no infrastructure or market, so this is not a threat to Davis.

        “But that could change if Davis is closed for business forever. Or the campus could simply continue its push into Sacramento, and bypass Yolo County and the current campus altogether.”

        They are already doing that. Nishi is too small to be relevant. If it was 100% R&D with high density vertical development, then it might be strategically important to UCD. 325,000 sq ft of R&D is insignificant.

        Also, equating a defeat of Nishi with “closed for business forever” is classic fear mongering.

  3. Biddlin

    ” It makes me wonder if we, as a city, are ever going to give up on city planning/ economic development as a blood sport and adopt a collaborative approach where the goal is truly improvement in the city overall as opposed to improvement in someone’s financial bottom line.”

    In a town where “compromise” is an obscenity, pure fantasy.

    1. Tia Will

      Biddlin

      In a town where “compromise” is an obscenity, pure fantasy.”

      I just want to take a moment to differentiate between compromise ( “an agreement or a settlement of a dispute that is reached by each side making concessions.) and collaboration ( “the action of working with someone to produce or create something”)

      While I do not see “compromise” as obscenity and feel that it is frequently useful as a technique within a collaborative process, the two are not identical, have very different implications for how people feel about the over all process, and in general is not as useful or constructive a process as is a true collaboration. It is the latter than I would like to see us adopting as our city’s modus operandi.

  4. South of Davis

    Tia wrote:

    > are ever going to give up on city planning/ economic development as a

    > blood sport and adopt a collaborative approach where the goal is truly

    > improvement in the city overall as opposed to improvement in someone’s

    > financial bottom line.

    With few exceptions (like Mother Teresa or the Dalai Lama) people are concerned about their personal “financial bottom line”.  If you own a home (or two) in Davis (and took Econ 101) it was smart to vote against the Wildhorse Ranch project.  If you own a home in Old East Davis it is smart to fight against the Trackside “tower”.  Unless the city can put some kind of hard deed restriction in for no homes at Nishi or the MRIC I don’t think they will get many votes from homeowners who tend to think about their personal “financial bottom line”…

    1. David Greenwald Post author

      I think Nishi is not going to affect anyone (other than the developer’s) bottom line. It will or at least could impact people’s driving times, which I think is a legitimate concern.

      1. Tia Will

        David

        I think Nishi is not going to affect anyone (other than the developer’s) bottom line”

        I believe this is likely true if you are considering only the direct effects. But when you look at the “bottom lines” of downtown businesses, potential landlords, businesses that locate in the R&D  and other commercial spaces, start up employees….. then I think that there is the potential for a lot of “bottom line” enhancements. You have talked about these multiplier effects in other articles so this is obviously just a reiteration but one I felt might be timely.

    2. Tia Will

      South of Davis

      If you own a home in Old East Davis it is smart to fight against the Trackside “tower”.”

      Two thoughts about this.

      1.I am certainly no Mother Teresa or Dalai Lama, and yet throughout my life, whether affluent or poor ( and I have been both) , my finances have never been my bottom line. I cannot believe that there are not other typical citizens, not near mythical outliers, who do not value other aspects of their life more than their finances given that their basic needs are met.

      2. There is reasonable controversy about whether or not Trackside would be a financial benefit or detriment to me given the location of my home. No less than our own Frankly put forth the idea that I would benefit from Trackside. The last I heard on that subject was when I stated my truth, which was that I did not know ….. and did not care.

      There are those of us who, difficult for some to believe, really have priorities that our higher than money. Granted to hold this position, one has to have a baseline of financial security. But then I believe in a UBI to cover the basics, so back to “fantasy land”.

        1. Barack Palin

          Even though I’m suffering from atrophied cingulate anterior cortex I believe UBI to be Universal Basic Income.  Forgive me that someone less worthy than you educated you on this.

      1. South of Davis

        Tia wrote:

        > my finances have never been my bottom line.

        Says the person who worked for years to get an advanced degree, a high paying job and buy over a million dollars worth of real estate in Davis…

        1. sisterhood

          I’d like to think some folks get advanced degrees because they enjoy learning, and they enjoy, perhaps in Dr. Will’s case, helping people improve their health, and making a difference in this world. As far as real estate, Davis is a lovely town; if I could afford a million dollars worth of real estate, I probably would have invested there, too, and maybe not have moved to a place with more affordable housing.

        2. Frankly

          So what makes you think that Tia Will’s motivation to pursue her high-paying career to make the world a better place is any different that anyone else choosing another career?  You seem to have your hard list of good actors and bad actors.

          Note that I consider those responsible for creating jobs and wealth in private business for doing significant things to improve the human condition.   Tia can help them when they get sick, but without the ability to make a good living these people would likely be sick more often.

          Also consider that all these big businesses and CEOs that you would tend to demonize as not being as worth as Dr. Will to enjoy and justify their earned wealth help increase stock holder value… and many of those shares are owned by public sector employee pension funds.

          The issue here is hypocrisy… to demonize others for living a life similar to the one you lead pretty much destroys much of your credibility to opine on related things.

        3. South of Davis

          Frankly wrote:

          > The issue here is hypocrisy… to demonize others

          > for living a life similar to the one you lead pretty

          > much destroys much of your credibility to opine

          > on related things.

          I’m NOT demonizing anyone I’m just pointing out that “most people are concerned about their personal financial bottom line”.

          There is no reason for anyone to say they are NOT concerned about their personal financial bottom line (everyone should be proud to say this).

          I wish that more people were like Tia and learned a skill, got good jobs and invested for their retirement.

           

        4. Frankly

          SOD, sorry – I was directing my points at Dr. Tia… reinforcing what you wrote.

          She is a medial doctor and benefits from high compensation for her chosen profession.  I have absolutely no problem what that except that she tends to preach an equal-pay-for-everyone theme and lambastes people that make a lot of money or that have accumulated notable wealth… failing to consider that she is probably in the global top .1% of earners and wealth.

          She also tends to opine against the types of healthcare industry reforms that might threaten her earnings.

          I see seven primary reasons that the cost of healthcare in this country continues to inflate faster than the general rate of inflation.

          One is the aging of the population.  We cannot do much about that.  Although the left is fond of death panels.

          Two is the huge increase of poor and uneducated immigrants that have flooded to this country.  We can and should do something to stop the current and future flow, but there isn’t much we can do about those already here needing healthcare.

          Three is the high cost of new drug production.  The average cost to develop a new drug is a staggering $1.1 billion.  We can do something about that at the government level.  But Dr. Tia instead just demonizes drug companies for charging high prices that they need to recoup their investment with a reasonable return.

          Four is malpractice and the added cost of ambulance chasing attorneys.  We can do something about that.  But Dr. Tia does not support this I am guessing because trial lawyers support Democrat politicians.

          Five is the staggering administrative cost of practice management from government regulations.   We can do something about that, but Obamacare exploded regulatory costs to employers, providers and insurers.  However, Dr. Tia supports Obamacare as a first step and wants 100% government-run healthcare.

          Six is the high cost of healthcare labor.  For example, US nurses are the highest paid and work the fewest hours of nurses in every other industrialized country.  We can do something about this over time.  But Dr. Tia rejects this idea.

          Seven, the healthcare industry is protected from having to compete on price.   You might be charged 1000% more for a procedure in one facility compared to another facility, but you cannot get that pricing information easily prior to the procedure being scheduled and completed.   Frankly, I’m not sure where Dr. Tia falls on this… but I am guessing that she rejects it as she does not want almighty doctors to have to cost-justify the procedures they think are needed.

          So my conclusion here is that Dr. Tia is not unlike everyone else in that she pursues her own self-interests at the expense of others.  No problem except that she denies she pursues her own interest at the expense of others.

        5. sisterhood

          My dear funny Frankly, you would be so surprised to know my family history and the millionaires I have the pleasure of knowing. Some are Republicans,too! I really don’t demonize folks just because they’re rich. But if they don’t share their wealth, I do have a problem with that. And job creation is important. I agree with you on that.

  5. Tia Will

    UBI?”

    Universal base income. Don Shor has posted links to this concept previously. From my perspective this is not a right vs. left issue. It is an acknowledgment that there are many ways that an individual can contribute to our society other than the very limited contributions that we currently define as “jobs” and that the provision of a compensation for positive contribution  ( broadly defined) to a society would be far superior to “welfare” which provides substandard provision in a complicated, messy, inefficient way for no contribution at all.

    I don’t want to say more here since it will totally derail the conversation, but would recommend that anyone who is interested look it up.

  6. Tia Will

    South of Davis

    Says the person who worked for years to get an advanced degree, a high paying job and buy over a million dollars worth of real estate in Davis”

    Two points :

    To be accurate, my real estate holdings in Davis do not exceed one million dollars and one of the two properties is still mortgaged. If you have facts suggesting otherwise, post them. If you want to get into a personal fight, at least get your facts straight.

    Secondly, the amount that I own is not the sole determinant, or even a major determinant of my priorities since those have been the same ever since I was still living on social security and the proceeds from fruit picking and baby sitting.

    1. Don Shor

      For those interested, the principle that South of Davis is describing is the ‘homevoter hypothesis’. It may not apply to every individual, and you may not feel that it applies to you, but there’s some evidence that homeowners as a group are motivated voters more than renters, and that maintaining the value of their properties is a major voting incentive. “Value of their property” can mean more than just its current selling price. That price incorporates many aspects of the community such as good schools, amenities, parks, and even nebulous things like the character and ambience of the community — those are all factored in to the property value in the sense that they are part of why you decided to buy a house and live here.
      The Homevoter Hypothesis was described by William Fischel (The Homevoter Hypothesis:
      How Home Values Influence Local Government Taxation, School Finance, and Land-Use Policies) and is described and critiqued here: http://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=8029&context=journal_articles

      1. South of Davis

        Don wrote:

        > but there’s some evidence that homeowners as a group

        > are motivated voters more than renters

        I worked on a lot of California campaigns in the 1990’s and based on the good data we used to work with for most elections in homeowners have about double the voter turnout of renters (a little less than double for most Presidential elections and more than double for off year elections)…

    2. South of Davis

      Tia wrote:

      > To be accurate, my real estate holdings in Davis

      > do not exceed one million dollars

      Zillow says the two Davis homes are worth over $1.3 Million

      http://www.zillow.com/

      I’m surprised that Tia is not proud to own $1.3 million worth of real estate in Davis as well as the out of state rental property since you post about it so often year after year.

  7. CalAg

    “In 2009, I watched the council, on a divided 3-2 vote, put Wild Horse Ranch on the ballot at the midnight hour on the last possible day.” David Greenwald

    My recollection is that it was well after 2:00 am in the morning, Heystek was the swing vote, council punted to the voters after the developers made a strong appeal to move forward in spite of all the loose ends (very similar to the Nishi case), certification of the EIR and approval of all the entitlement documents were crammed into the last few minutes of the last meeting (very similar to the current game plan for Nishi).

    I also recall that Heystek paid an enormous political price with his base – something that Lee (progressive policies) and Frerichs (affordable housing) should take to heart given that Nishi will be on the ballot along with their re-election bids.

    Nishi is not ready for prime time – but the current land plan could be acceptable if traffic and affordable housing are honestly resolved , and the development agreement is redrafted to eliminate the uncertainties that have already been noted regarding developer commitments and project phasing.

    Otherwise, as Greenwald threatens/advises, just vote no and let the chips fall where they may regarding the City’s economic development/fiscal sustainability future.

    I don’t think the project will pass Measure J/R if it can’t stand on its own merits and the proponents have to resort to fear-mongering about all the bad outcomes that will result if it doesn’t pass.

    If the council wants to avoid the bad economic outcomes, then they should put a better (see above) project on the ballot. It’s really that simple. That being said, I’m afraid that the fear-mongering will begin from the dais tonight, interspersed with excessive platitudes and self-congratulations all around on a job well-done.

  8. Misanthrop

    Nasty, nasty and distasteful to attack someone for having an upper middle class life style in America. It is also unrealistic to expect anything to get built without a profit motive. Like it or not that is our economic system. My complaint is that people often want to demonize developers for seeking to make a profit. There may be plenty of reasons to oppose any project but simply engaging in market economics alone should not be one of them. An interesting aside is that the more we restrict supply the more we incentivize development because the imbalance increases profit margins and the greater the imbalance the greater the profit motive.

    1. Frankly

      Well said.

      It seems that people have more often these days filtered to two groups: government-class and business-class.   The government-class people seem to not understand the mechanisms of capital investment and profit motive being intrinsic and complementary to their desire for social progress.  It is like they are a milk farmer fond of beating their cows so they will produce more milk… and then beating them harder when they refuse.

  9. Tia Will

    Frankly

    It seems that people have more often these days filtered to two groups: government-class and business-class.”

    It is clear that you see it that way. It is equally clear that I do not. I see a full spectrum of how people value their government and how they value individual endeavors. I do not believe that these “classes” exist as pure entities except in your mind.

     

    1. Frankly

      That would be a typical conclusion of one holding the government-class card.

      What I mean by that is someone that believes that the tip of consideration for power and solutions goes to top-down government control.  More rules to live by.  More laws.  More regulations.   More taxes.   You would tend to see the non-government side as largely incapable of self-organizing and improving the human condition enough… in fact you likely see the private business side as more dark and sinister and prone to causing more harm than good if given too much freedom.

      But since government runs off of other people’s money, you and others with the same views are prone to cause us to run out of other people’s money driven by a myopic glass-always-half-empty view.

      American style democratic free market capitalism as done more for the world improving the human condition than any top-down government system devised to date.  Yet you still opine for more of the latter and less of the former while losing the perspective of how far we have come because of the former and how good things are because of it.   You have it very good and you mistakenly attribute it to big government.

      1. sisterhood

        It’s a little patronizing and arrogant when you frame your opinions with ” you don’t understand”. Perhaps we just disagree? Having worked for a small start up business, a few medium sized businesses, a large corporation, and the state of OR and CA, I’ve experienced both the private sector and government. The government jobs I had were more fair and management treated their employees better, or at least more eqitably. I also did workers comp claims for government and private employers. For the most part, the government employees were treated better.

        And I don’t really understand why anyone anywhere thinks that superb health care is a privilege only the wealthiest among us are entitled to.

        I wonder how many folks have experienced a really expensive illness, and still do not support universal health care. They are probably very wealthy.

         

         

         

  10. Eileen Samitz

    I have been writing to Staff and the Council on the problem of insufficient language in the baseline project features and the lack of affordable housing violating our municipal code for weeks. No response from Staff. This is Staff’s responsibility to explain how a 650 unit project gets sway with NO affordable housing. Furthermore, it sets a dangerous precedent for future projects, particularly high density housing such as multi-family housing. to try to get away with this. Furthermore, we will get no credit for low and very low income housing towards our next Fair Share allocation coming up, assuming this housing were to be built after 2020. Any housing built in excess of our current “fair share” allocation (which we have fulfilled until 2021), the City would get zero credit for this 650 housing units or any other project coming forward before then.

    Also, ALL new housing built housing including all of the 650 multifamily housing in Nishi Gateway needs to have water meters per unit to motivate all residents to conserve water.  It would be difficult  to retrofit existing multifamily, but there is no excuse for our City to  not require it,Senator Lois Wolk proposed a State bill for multifamily housing to have individual water meters which failed to be State law narrowly. But Mayor Wolk should be all the more motivated to have this in the baseline project features and the developer agreement for Nishi Gateway. I have been told that this may happen, but the Council needs to give direction on this tonight to make sure it does. I know Staff is  working on such an ordnance, but it is needed now before any new projects are approved.

    In addition, the baseline project features need to include the language recommended by the Finance and Budget Commission that the City will not pay for any infrastructure costs. They recommended it for the development agreement but it is needed to be included in the baseline project features as well as their other options to protect the City from potential costs from Nishi Gateway.

    It would be best to add safety “catch all” language into the developer agreement and the baseline project features that the City will not be responsible for ANY costs from the Nishi Gateway project to make sure that anything beyond the infrastructure does not incur costs to the City.

    Also deficient in the baseline project features regarding the “backbone infrastructure” the UCD access is mentioned, the Richard’s improvements is mentioned, and the Olive Drive road to UCD is mentions. However the specific language of ” including the Putah Creek bridge and bike pathway ” needs to be added to the West Olive drive leading to UCD language to lock that into this “backbone” infrastructure. That language strangely disappeared fer the first version of the baseline project features.

    The developer commitments including the developers “make whole provision” commitments of the  annual $93,000 and the annual $181,000  are nowhere to be found in the baseline project features. Also there is NO inflator factor included yet, since today’s dollars will be far less as time goes on, so adding this inflator language is needed NOW.

    Just a reminder to those who many not understand the significance, but the baseline project features are legally enforceable since they go on the Measure J/R ballot, while developer agreement is always renegotiable later.

     

    1. ryankelly

      How can water meters be required for all units in a multi-family development when it is not required by law or ordinance?  Remember, there is a base fee tied to the meter that each of these households would have to pay.  650 meters = 650 meter fees.

      1. CalAg

        “… when it is not required by law or ordinance?”

        A Development Agreement is a contract freely entered into by two parties. Accordingly, the parties can agree to anything they want (assuming it’s legal). Water meters on all multifamily units is an easy lift, particularly since (1) it will likely become state law in the relatively near future and (2) the fact that we are in a historic drought.

        This one’s a no-brainer. If the council does not require this, it would be a pretty big red flag regarding the city’s true commitment to sustainability.

        1. ryankelly

          But it shifts the cost of water to the tenants, including the extra cost of the meter.  I doubt that the rent will be lowered accordingly, so more money for the landlord.  You people confuse me.

        2. Matt Williams

          ryan, what is being described is identical to the way water has been accounted for, and billed, by the City and the County for at least 10 years.  The City reads the 450 individual meters each month and puts those individual readings in their billing database.  Then when it is time to bill the County (who like the apartments landlords is the client), the billing amounts for the individual readings are added together into a single bulk amount, and the bill is sent to the County.  The County pays the City and then turns around and bills the responsible party of each individual meter.

          At the end of that process, each and every El Macero water meter is billed exactly the same amount for their water service as a City customer who uses an identical amount of water and has the same meter.

          It hasn’t always been that way.  Approximately five years ago El Macero residents voted to change the way the County bills them to match the City’s billing methodology.  Prior to that, the County would receive and pay the bill from the City based on the aggregated 450 meter readings, but then the County would actually divide that aggregate amount by 450 and (with some small adjustments) bill each El Macero parcel a flat amount.  That kind of flat amount billing gives no water conservation signal, and it resulted in the many widows living alone being billed the same amount as a young family with kids and lots of lawn to water and showers to take.

          The prior El Macero billing method is how most landlords currently bill their tenants.  They slice up the aggregate bill into the equal amounts based on the number of units the apartment has, and each unit pays, as part of their monthly rent, their proportional share of the aggregate water bill.

          Installing individual apartment water meters would allow the Nishi landlords to bill the tenants for water the same way the County bills El Macero residents.

          Bottom-line, the cost is already shifted from the landlords to the tenants.  Meters would meant that that cost would shift between the tenants . . . away from low users of water and to heavy users of water.

      2. hpierce

        It may be that they are “private” meters, owner/maintained/read/billed by the landlord… the City only read/maintains/bills the property owner… not tenants…

        1. ryankelly

          So how would that encourage tenants to conserve water?  I think the whole idea for individual meters is that the unit pays for it.  Since the property owner is responsible, it just adds an additional meter fee to the landlord’s cost of water, a cost which will then be passed on to the tenants.  I don’t think people are thinking this through.

        2. hpierce

          I’m not saying it would result in more water conservation… the City only bills the property owner, period.  I just don’t see that policy changing.  Even for SF residential rental property, much less for MF units.

        3. Matt Williams

          ryan, I believe hpierce is correct in what he/she is saying.  I would add one thing.  I expect the new meters installed will be equipped with wireless technology to send the periodic meter readings to the City’s computer system without any need for human intervention.  So rather than manually gathering readings from only the apartment complex’s master meter at the point where the water service enters the building, the individual wireless-transmitted readings would also be gathered in the City’s water billing database.

          Since that approach has not been done before for any apartment in Davis, what ends up being actually done may vary from the above description.

  11. Tia Will

    CalAg

    The problem with these “bottom line enhancements” is that they come at a cost to others – the so-called “tragedy of the commons.”

    Can you elaborate on this point ?  You are over my head.

    1. CalAg

      From Wikipedia:

      “The tragedy of the commons is a situation where individuals acting independently and rationally according to their own self-interest behave contrary to the best interests of the whole by depleting some common resource.”

      “The tragedy of the commons can be considered in relation to environmental issues such as sustainability. The commons dilemma stands as a model for a great variety of resource problems in society today, such as water, forests, fish, and non-renewable energy sources such as oil and coal.”

      The most obvious common resource being depleted in the case of Nishi is the carrying capacity of the Richards Boulevard corridor. We can decide as a community that these impacts are necessary and unavoidable, but we shouldn’t pretend they don’t exist.

  12. Eileen Samitz

    David,

    I think Nishi is not going to affect anyone (other than the developer’s) bottom line. It will or at least could impact people’s driving times, which I think is a legitimate concern.

    I can’t say I agree with this statement by you. Beyond traffic and circulation problems, no one who needs affordable housing will be affected since NONE is included in the Nishi Gateway project, and to my knowledge, NO project of this number of units has EVER gotten away with the City condoning breaking its own Municipal code on affordable housing, until now. Think of the precedent this would set for future projects? Also, the fiscal benefit of Nishi is NOT worth all of the risk and impacts to the City. This is what Alan was getting at and I agree.

    Also, regarding the Wildhorse Ranch project, it was simply a really badly designed, jammed in project, like Nishi Gateway with more impacts, then benefits. That’s another analogy between the two projects.

    1. South of Davis

      Eileen wrote:

      > no one who needs affordable housing will be affected

      Since Eileen seems very politically active maybe she can ask someone at city hall why affordable Pacifico Property (owned by the city of Davis) on Drew Circle has had about 60 units sitting empty for close to a DECADE (TEN Years)…

      Why even talk about NEW affordable units when the units already built just sit empty for year after year?

  13. Ron

    If an inflation factor is not included (for the services CFD), it seems that the cost of providing services for Nishi would (eventually) exceed the CFD, creating an ongoing deficit.

    1. David Greenwald Post author

      Correct me if I’m wrong, but isn’t the CFD based on a 1.6% assessment: “the effective tax rate on residential and commercial property is targeted at 1.6% of the assessed value of residential property and 25 cents per square foot for commercial property”

      1. Ron

        David:

        I don’t know, but assuming that’s right –

        Does the assessed value increase each year, to account for inflation of costs to provide services? Or, is the assessed value (and corresponding CFD) adjusted only if a property is sold?

      2. Ron

        Don:

        I don’t think that Proposition 13 deals with CFDs.  I understand that in some areas (such as Spring Lake, in Woodland), the CFDs can/do increase at a higher rate each year, compared to normal property taxes.

        In any case, if the services CFD for the Cannery does not include an adequate inflation factor, it appears that the cost of services would increase faster than the CFD collected – ultimately creating a deficit.

        I’m thinking that the Finance and Budget committee must have addressed this.  But, I haven’t seen the latest analysis.

        1. hpierce

          Although I am unfamiliar with the Springlake CFD, I strongly suspect it is a “parcel tax” assessment/tax, not an “ad valorum” assessment/tax… big difference under the law…

      1. Ron

        Matt:

        Thank you.  I was hoping that you or some other member of the Finance and Budget committee would respond.

        If I’m understanding it correctly, the CFD is then limited to 1% increase per year (unless the property is subsequently sold)?  How does that compare to the rising cost of providing city services each year, historically?

        Did the Finance and Budget Committee address this?

        (By the way, I made a mistake in my earlier posting, above. I meant to say “Nishi”, instead of the Cannery.)

        1. Frankly

          I don’t think most economists expect an average 2% inflation factor for the foreseeable future.

          The other component to this 1% CFD prop-13 limitation is property ownership turnover.   And with Davis commercial real estate appreciating higher than the general area, turnover will likely more than offset that missing 1%.

        2. Matt Williams

          Ron, the issue you raise is not limited to Nishi.  It exists across the whole City.  The FBC is absolutely very concerned about cost containment.  To that end, the following language has been recommended to staff and City Council for inclusion in the Baseline Features.

          The FBC also recommended that the City take steps to ensure transparency and accountability in the use of the new fiscal resources generated from the project, particularly:

          —   The revenue stream from the Land-Secured Services Financing District,

          —   Construction tax revenues, and

          —    The Development Commitment of $1 million for housing, civics arts, a local carbon offset, and a downtown parking management plan.

          Reporting of these funds should be as follows:

          —   Detailed disclosure of how they are to be used,

          —   Adoption of metrics to measure success in the use of the funds and subsequent reporting, 

          —   How the funds were actually spent and whether stated goals for their use were achieved.

          The City should examine the feasibility of reserving some portion of the funds derived from the project to ensure it is fiscally sustainable – that is, that resources are available in the long term to offset eventual increases in city costs for infrastructure maintenance/repair/replacement and city operations.

        3. Matt Williams

          For those who are interested, the rest of the language suggestions that were delivered to staff and the Council are as follows:

          Financial Commitments

          Based on the Finance and Budget Commission recommendations to the City Council, the following financial commitments are included in these Baseline Features.

          o      That all public infrastructure shall be financed without any City funding. (This is consistent with informal agreements reached so far with the City and the Developer.)

          o       That a Land-Secured Services Financing District shall be established to ensure positive fiscal and economic benefits for the City of Davis. At the assessment levels of Table 1, Attachment 1, of the Preliminary Analysis of Infrastructure Funding Alternatives – Nishi Gateway prepared by the City’s consultants (EPS, A. Plescia & Co. / Goodwin Consulting Group), the effective tax rate on residential and commercial property is targeted at 1.6% of the assessed value of residential property and 25 cents per square foot for commercial property, which is comparable to the total effective tax rate for such land uses at The Cannery. The initial annual revenue from the a Land-Secured Services Financing District is $630,000 and its components are as follows:

          o——o   $181,000 for Parks and Open Space maintenance

          o——o   $93,000 to protect the City if 20 percent of the office/R&D properties become exempt from property taxes for an offset for the rental and/or sale of parcels.

          o——o   $356,000 for city services other than Parks and Open Space Maintenance.

          o——o   A variable Assessment Protection amount to protect the City in the event that the aggregate assessments of the 440 Multi-Family units by the Yolo County Assessors Office does not equal or exceed $143,000,000. The annual amount shall be calculated by subtracting the aggregated assessed value of the 440 Multi-Family units from $143,000,000 and multiplying that amount by 1.0%, and shall remain in force until such time as the Yolo County Assessor’s Office completes a reassessment due to a sale of the Multi-Family units by the Developer.

          The Land-Secured Services Financing District assessments shall be subject to annual increases in perpetuity under the same annual increase provisions as City of Davis Parcel Taxes.

          The FBC commissioners unanimously agreed that the project is a net positive fiscal benefit to the City. The final motion for acknowledgement of $1,400,000 of annual benefit passed on a 5-1-1 vote; dissenters agreed that the benefits would be positive, but suggested an annual benefit closer to $700,000.

        4. CalAg

          MW: I appreciate the FBC presenting this list to the council. I’ll be keeping score to see if they put any of this into the baseline project features as requested.

          The only obvious issue I see after a quick look at the list is that the fiscal benefit (if any – I’m not conceding that the project has a fiscal benefit beyond the profit sharing from the developer) will erode over time as property taxes fail to keep pace with inflation due to prop 13.

      2. Ron

        Frankly:

        It seems like the cost of city services has been increasing much faster than the 1% limit imposed by Proposition 13.  Also, if a large number of units are rentals, ownership turnover might not occur very often.

        If the Finance and Budget Committee did not account for this issue, the projected surplus will likely become an ongoing (and worsening) deficit.

        I’m admittedly not a fan of this proposed development.  However, if the Finance and Budget commission has not addressed this problem, it’s a serious concern for anyone who cares about the long-term viability of the city’s finances.  (I would find it difficult to believe if it hasn’t been addressed.)

        1. South of Davis

          Ron wrote:

          > It seems like the cost of city services has been

          > increasing much faster than 1%

          Tax increases are limited to 2% a year for people that hold on to property, but since very few people hold for decades the increase in property tax revenue in most CA towns (correcting for growth) is typically ~5% per year in line with the average increase in real estate values over the past few decades.

          Under Prop 13 “This “assessed value,” however, may only be increased by a maximum of 2% per year, until and unless the property is resold. At the time of sale, the assessment may increase by an arbitrary amount, but future assessments are likewise restricted to the 2% annual maximum increase”

          https://ballotpedia.org/California_Proposition_13_(1978)

      3. Ron

        South of Davis:

        Thanks for clarifying the 2% increase, imposed by Proposition 13.

        However, your response does not mitigate/address the basic concern.

        As a result of communications on this forum, I’ve learned that the (2%) tax increases allowed under Proposition 13 do not keep pace with the cost of providing city services (even when turnover increases this percentage, on a city-wide basis).  This is the very reason that Davis (and other cities) are having serious financial difficulties.  These difficulties are also a primary justification for the pursuit of “innovation centers”.

        I also understand that residents often “hang onto” property that has increased significantly in value (to avoid paying higher assessed taxes in another home). In addition, rental properties (such as those at Nishi) may not experience much ownership turnover.

        So again, has this problem not been addressed?  (If not, any budget “surplus” is likely going to be temporary.)

        If the Finance and Budget committee has not addressed this, I really don’t know what else to say, other than I’m shocked.

        And again, I’m not saying this as an “opponent” of the proposed development.  It’s a basic/simple concern, for anyone who cares about the city’s long-term finances.  (Even for those who support the proposed development.)

        1. Frankly

          Ron – the thing I think you are missing is the property tax revenue increases from Change In Ownership (CIO).  There are some ways that commercial property can change hands to avoid having the property tax be based on reassessed market value upon change of ownership, but generally you would expect a percentage of property turn-over.

          Hypothetically let’s say that we are talking about property assessed at $50 million from year one.  1% would be $500,000.  Then assuming a property value inflation factor of 5% and our prop-13 tax increase allowance of 2%, assuming no turn over for the first 5 years the annual property tax revenue at year five would be $552,040.  Your point is that the extra $52,040 in city revenue does not cover the inflation in city costs.

          However at year six let’s say that by year 6 25% of the property has had a CIO.   The basis for that 25% property is $12,500,000 (25% of $50 million).  At 5% annual appreciation of value it is now worth $15,952,520.  The property tax for that would be $159,525.   Add that to the tax rolls for the remaining 75% that has not yet rolled over (not yet had a CIO) of $422,311.  The total is $513,960.  Add them together and we get $581,836… or $81,836 more.

          That puts the average rate of property tax revenue increase above 3% per year.

          Now if the city costs grow more than the rate of inflation (forecasted to be about 2% per year for the foreseeable future), then that isn’t the fault of the development.  That is the fault of city leadership and city management.

        2. Ron

          Frankly:

          Thanks for the reply.  I appreciate your effort, and I agree that the city should not allow costs to rise faster than the amount of taxes/CFD fees collected.  However, this seems to repeatedly occur, regardless.  (In Davis, and elsewhere throughout California.)

          Also, as CalAg pointed out, I have also heard that the property owner intends to retain ownership of rental properties, at least. (In any case, this problem seems to occur even when there are changes in ownership, in residential developments in Davis and elsewhere.)

          Therefore, I have to conclude that it is likely that approval of Nishi would ultimately result in a worsening deficit for the city, at some point.  And again, I’m truly surprised that the Finance and Budget committee would not address this probability in its projections.

        3. Mark West

          Ron:  “I have to conclude that it is likely that approval of Nishi would ultimately result in a worsening deficit for the city, at some point.”

          The issue, as has been pointed out before, is one of cost containment.  Rich Rifkin addresses the issue directly in his column in the Enterprise  tomorrow.  The take home message is that it doesn’t matter how much revenue we bring in, whether it is through development or tax increases, it will never be enough if we don’t reduce the rate of cost inflation.

        4. Frankly

          Frankly: My understanding is that the property owner claims that they are going to retain ownership of the project.

          Sure – until the property owner sells all or some of the project.

        5. Frankly

          CalAg – My point is that almost every developer will eventually sell part or all of his property.  That he intends to retain ownership and become a landlord does not mean that this is his perpetual business plan.  He may have another development opportunity down the road and he would sell his interest in the Nishi properties to raise capital for it.

          I think the point here is that the developer plans on retaining ownership of some or most or all of the fully-developed properties instead of building to suit another buyer, or building-speculating to put the properties up for sale.

          It does not really matter who initially owns the properties.  They will eventually turn over.  And when they do it will cause a property tax revenue increase greater than the 2% annual statutory limit of Pop-13.

    1. ryankelly

      I don’t think there is a requirement that they provide Section 8 housing.   I believe that they are also paying a substantial amount into a fund for the City to use toward low income housing, which follows City law (much like you paid parking in lieu fees when you developed your building on 4th Street).  You can push on this, but I don’t think having high rise buildings housing low income families is something that we want and I don’t think this will fly.    This is a model that has failed in other cities and are now being torn down.

      1. CalAg

        ryankelly: The deal the developer and city worked out is that they pay $1M to avoid their >$10M affordable housing obligation under the municipal code (assuming they pay in lieu fees rather than build it on-site).

        I would be very surprised if this stands up to any legal scrutiny. The city has floated several explanations to try and justify their give-away, and none of them have merit.

         

        I won’t be surprised if the city gets sued on this by the regional affordable housing watch-dogs.

  14. skeptical

    CalAg,

    What you describe is a give away of a public good, $9 million.  Isn’t that a good legal issue?  As for the discussion on taxes, tax revenues, and related City costs, can someone reach out to the property tax expert who replied to this issue last week?

  15. Ron

    Matt:

    The bottom line seems to be that there is NO factor to account for inflation of costs to provide city services to Nishi (other than the 2% allowed by Proposition 13, and at reassessment if the properties are subsequently sold).

    In other words, the likelihood of costs (to provide services for Nishi) exceeding the amount collected (over time) has not been accounted for.

    It appears that the surplus that some members of the Finance and Budget committee are promoting will most likely “disappear” (and revert to a deficit), over the long run.

    1. Matt Williams

      Ron said . . . “The bottom line seems to be that there is NO factor to account for inflation of costs to provide city services to Nishi”

      Ron, how would you phrase the language of such a cost inflation factor?

      —————————————————-

      Ron said . . . “(other than the 2% allowed by Proposition 13, and at reassessment if the properties are subsequently sold)”

      What you have described here are revenue factors, not cost factors.

      —————————————————-

      Ron said . . . “In other words, the likelihood of costs (to provide services for Nishi) exceeding the amount collected (over time) has not been accounted for.”

      What you are asking is whether there is fiscal resilience. That is not a Nishi-specific issue, but rather a City-wide issue.  It is also an issue that the Finance and Budget Commission and Council member Davis are very actively working on for the City as a whole (which would also affect costs at Nishi).  Council member Davis put forward the following plan for achieving fiscal resilience through Cost Containment

      Cost Containment as an Element of Fiscal Resilience

      1a. Undertake a full staffing analysis to determine match between service delivery needs and staffing.

      1b.  FBC discussions have not only embraced a staffing analysis (building on John Meyer’s study last year), but we have also discussed the belief that a thorough Business Process Re-engineering engagement is necessary as well.  Staffing poorly designed, inefficient, ineffective service delivery processes makes no sense.  Einstein said it perfectly, “Insanity: doing the same thing over and over again and expecting different results.”

      2. Based on 1, consider best ways to provide services going forward with focus on (a) training workers to take on multiple tasks (as is happening already) and (b) consideration of targeted and appropriate outsourcing of services.
      3. Examine all means to further reduce growth in compensation costs including analysis of OPEB options (as other CA cities are doing).

      4. Create more transparent and accessible accounting systems that enable a more precise estimation of costs of specific services—building on work done by the Fee Study consultants.

      5. Promote a more aggressive analysis with the County and other cities, via LAFCo, of shared bidding, service, and consulting options to reduce duplication and obtain scale efficiencies.

      6. Determine what current city programs might be candidates for reduction or elimination and which we want/must keep.

      7. Determine what current city infrastructure we could/should shed (buildings, properties) to reduce expenditures related to them.

      Though not a cost containment item, we should also receive an analysis of all non-enterprise fund balances to determine if/how we can use these funds to meet current needs.

  16. Ron

    Matt:  “Einstein said it perfectly – Insanity: doing the same thing over and over again and expecting different results.”

    I couldn’t have said it better myself! Costs for services (for Nishi) will eventually exceed revenues (from Nishi).

    1. Matt Williams

      Ron, unless we do something to contain costs, costs for services (for every single individual parcel in Davis) will eventually exceed revenues (from every single individual parcel in Davis).  That is why the FBC is spending so much time on that issue, and why Fiscal Responsibility is one of the bedrock principles I will bring to the Council if I am elected.

      That problem exists regardless of whether the electorate approves Nishi or does not.

      1. Ron

        Matt:

        I agree, but I think this is easier said than done.  (Especially over the long-term, even if you’re elected.)

        In the meantime, Nishi will generate additional costs, which will increase over time.  One can argue about how much those costs will be.  But, I’m disappointed that the Finance and Budget committee didn’t address the likelihood of the incremental costs of Nishi (eventually) exceeding the surplus that the committee has promoted (and which is now accepted/promoted as factual, by the city).  No mention of this anywhere, it seems.

        In any case, we know that there is a limit in terms of the increase in revenue that Nishi may generate through taxes/CFDs. In contrast, there is no limit regarding how much the incremental cost of services (for Nishi) will rise in the future.

        I’d call that a major shortcoming, in the analysis.

        1. Frankly

          First, Nishi will NOT result in addition net costs.  It will result in net positive revenue.

          In terms of your point about future returns, keep in mind that the city will still have to resolve the city’s fiscal imbalance of costs versus revenue.

          I don’t know how much business experience you have but you should know revenue – expenses = net income.  If a business model has reached a point where any attempt to increase revenue results in expenses that exceed that net revenue, then that business is in fact no longer viable.  The business either must fold (like Hostess Corp) or reduce operational expenses per unit (of product and/or service).

          So for your long-term concern to hold water, we would have to assume that the city will fold (become fiscally insolvent).

          However, a more reasonable assumption is that the city will eventually bring costs down because it has to.

          Think about it.  In 2007 our city labor costs were $100,000 per FTE.  Today they are $150,000 per FTE… and probably $155,000 per FTE after the last COLA increase.

          The point is that a development like Nishi would be a revenue boondoggle for most cities except those with over-inflated costs per unit of service.  Davis has over-inflated costs per unit of service and so it is actually a bit disingenuous to make the argument you are making.

          The correct viewpoint would be to support net-positive revenue developments like Nishi (assuming they have adequate amenities for the city) while ALSO pushing hard for the city to reduce spending per unit of service.

        2. Ron

          Frankly:

          There’s nothing disingenuous in noting that incremental costs will eventually exceed incremental revenues.  I’d be concerned about this even if I supported the development.

          Nishi may result in a net surplus for awhile.  (I haven’t looked at the latest analysis.) But historically, the problem of incremental costs (eventually) exceeding revenues has been a consistent problem with all residential developments.  I’ve learned more about this problem from discussions with you, and others on this forum.

          It’s disingenuous (and irresponsible) to disregard this problem, especially by the Finance and Budget committee.

          Unfortunately, the developer (with support from the city) will now use the $1.4 million figure in a disingenuous manner, and some will believe it.  Check out today’s Davis Enterprise (below), if you doubt this.   (One can argue if the figure is even correct in the first place. I recall a recent article, which described this figure as a “dartboard number”.)

          Yes – I agree that cities (such as Davis) need to get costs under control.  But, it’s incorrect to spout off a figure (that others will depend on), while ignoring historical trends/data.  Nothing has changed, except a (fleeting/temporary) promise from some to try to control costs.

          http://www.davisenterprise.com/local-news/council-approves-nishi-5-0-next-stop-june-ballot/.)

           

        3. Ron

          To clarify, a “dartboard number” at the upper end of the range of possibilities, with no accounting of incremental costs exceeding revenues over time. And yet, this number will be presented as factual.

        4. Mark West

          “Nothing has changed, except a (fleeting/temporary) promise from some to try to control costs.”

          Whether or not something changes is entirely dependent on our own actions.  If we elect a City Council that fails to reign in costs, that is on us. Instead of complaining that the revenues will not keep pace with cost inflation, why not elect people who understand the need for control costs?  We have two incumbents running for office, both of whom voted to increase costs with the recent MOUs.  Do you support either of them for re-election?  If so, you will be responsible for the failure to reign in cost inflation, thus making the project net negative long-term. Cause / effect.  The problem is not the project, it is the failure of the City to control costs (primarily compensation).

        5. Barack Palin

          I’m really torn on the next CC election.  I like the candidates that are talking fiscal restraint but I’ll have a problem voting for them if they’re for any kind of housing at MRIC.  I also don’t want any candidate that’s open to sin taxes.  I may have to hold my nose and vote.

           

        6. Mark West

          “I like the candidates that are talking fiscal restraint but I’ll have a problem voting for them if they’re for any kind of housing at MRIC.”

          The future is bright if we learn to control costs.  Every other option will make things worse and destroy the quality of life in Davis.

        7. Ron

          Mark:  “The problem is not the project, it is the failure of the City to control costs (primarily compensation).”

          I would argue that there are (also) two other problems:

          1)  The city’s analysis for Nishi does not account for the incremental costs of services exceeding revenues over time, and does not account for the wide range of possible outcomes.  The $1.4 million figure is at the upper end of this range.  Unfortunately, this single figure will be repeatedly used to influence voters.

          2)  The underlying ability of cities to approve an increase in costs of services (at a greater rate than tax revenue) virtually ensures that this problem will occur again (and will likely occur with Nishi), regardless of one’s vote in any particular election.  This problem is not unique to Davis.

           

           

           

        8. Matt Williams

          Ron as noted in my trended set of annual Revenues and Costs data posted below, the City’s analysis shows that the point in the future at which the Nishi numbers passed by the FBC go negative (with 2% annual inflation of Revenues and 4% annual inflation of Costs) is in the 62nd Year after full buildout is achieved.  The project’s annual Margin for the City actually increases each year until the 27th Year, hitting a high of $1,644,590 in that year.

  17. Mark West

    Ron:

    With all due respect, you are in the weeds.  The only reason that development, commercial or residential, is not a net positive for the City is because of the unrestricted growth in compensation for City employees. Fix that basic problem and all of our development projects are fiscally advantageous (which is not the same as saying they are advantageous for the community – some are, some are not). Instead of obsessing over the long-term consequences of not solving the cost issue, why not solve the cost issue instead?

     

    1. Ron

      Mark:

      Again, please see my response above regarding the misleading analysis for Nishi (my primary point), and my other point regarding the underlying ability of cities to allow expenses to exceed revenues.

      1. Mark West

        Again…understand that neither of your ‘points’ have any relevance to the underlying problem.

        There is no misleading analysis, just your misunderstanding of the facts.

        The City of Davis’ costs of service are almost entirely due to employee compensation. That is an issue we can impact at the ballot box. You want to worry about the consequences of not addressing that issue.  I want to make people aware that the issue can be solved by electing better representatives, and then insisting that they follow through.

        Stop worrying about mitigating the consequences of failing to address the underlying problem (cost inflation), and fix that problem instead. It really is that simple.

        1. Ron

          Mark:

          If you’d like to completely disregard the points (other than simply focusing on what a particular council might/might not accomplish regarding employee compensation), then so be it.

          There are incremental costs associated with Nishi that will rise to an unknown level, in the future. Perhaps you believe that we (as voters) can permanently count on elected officials to control these costs. Good luck with that.

          More importantly, the $1,4 million figure regarding Nishi is misleading.

      2. Matt Williams

        Ron, the FBC members all paid attention to the issue you are concerned about.  However, to give you comfort I have plugged in the final numbers into an Excel spreadsheet and the trended result with Revenues increasing 2% per year and Costs increasing 4% per year is as follows:

        Year 1

        $2,005,000 Annual Revenues
        $617,000 Annual Expenditures
        $1,388,000 Annual General Fund Surplus/(Deficit)

        Year 5

        $2,170,276 Annual Revenues
        $721,803 Annual Expenditures
        $1,448,474 Annual General Fund Surplus/(Deficit)

        Year 10

        $2,396,161 Annual Revenues
        $878,183 Annual Expenditures
        $1,517,977 Annual General Fund Surplus/(Deficit)

        Year 20

        $2,920,906 Annual Revenues
        $1,299,926 Annual Expenditures
        $1,620,981 Annual General Fund Surplus/(Deficit)

        Year 27

        $3,355,203 Annual Revenues
        $1,710,614 Annual Expenditures
        $1,644,590 Annual General Fund Surplus/(Deficit)

        Year 40

        $4,340,313 Annual Revenues
        $2,848,298 Annual Expenditures
        $1,492,016 Annual General Fund Surplus/(Deficit)

        Year 50

        $5,290,818 Annual Revenues
        $4,216,176 Annual Expenditures
        $1,074,641 Annual General Fund Surplus/(Deficit)

        Year 61

        $6,578,467 Annual Revenues
        $6,490,610 Annual Expenditures
        $87,857 Annual General Fund Surplus/(Deficit)

        Year 62

        $6,710,036 Annual Revenues
        $6,750,234 Annual Expenditures
        $(40,198) Annual General Fund Surplus/(Deficit)

        How old will you be 62 years after full bidet is achieved, when Costs first exceed Revenues for Nishi?

        1. Ron

          Thanks, Matt.

          Of course, I haven’t reviewed exactly how a $106,000/year deficit (per the city’s consultant) suddenly turned into a $1,400,000/year surplus.  Can you direct me to the appropriate report?

        2. Matt Williams

          Here you go Ron.  The numbers below are from a spreadsheet that I put together to make the numbers in Dan Carson’s motion and its friendly amendments easy to understand at one level of drill down. The difference is in the Development Agreement Revenues and the Adjustment to Costs.

          City General Fund

          $2,005,000 Annual Revenues
          $617,000 Annual Expenditures
          $1,388,000 Annual General Fund Surplus/(Deficit)

          Annual General Fund Revenues 

          $227,000 Property Taxes
          $249,000 Property Tax In-Lieu of Vehicle License Fees
          $22,000 Property Transfer Tax
          $165,000 Sales and Use Taxes
          $55,000 Property Tax in-Lieu of Sales Tax
          $0,000    Transient Occupancy Tax
          $50,000 Business License Tax
          $90,000 Municipal Service Tax
          $36,000 Franchise Fees
          $60,000 Charges for Services
          $103,000 Community Services Revenue
          $20,000 Fines and Forfeitures
          $1,077,000 Total General Fund Revenues

          Other Annual Non-General Fund Revenues

          $37,000 Gas Tax Revenues
          $40,000 Parks Maintenance Tax
          $6,000 Prop. 172 Public Safety Sales Tax
          $85,000 Public Safety Tax
          $168,000 Total Other Non-General Fund Revenues

          Development Agreement Revenues

          $181,000 Scenario 10:Parks & Open Space Responsibility Revenues
          $356,000 Community Services District Revenues (at 1.6%)
          $93,000 Make Whole Provision Revenues
          $121,000 Measure O Sales Tax Extension Revenues
          $9,000 Nonsecured Property Tax Revenues
          $760,000 Total Development Agreement Revenues

          $2,005,000 Total Annual General Fund and Non-General Fund Revenues

          Annual General Fund Expenditures

          $8,000 City Attorney
          $4,000 City Council
          $57,000 City Manager’s Office
          $59,000 Administrative Services
          $59,000 Community Dev. & Sustainability
          $141,000 Community Services
          $127,000 Parks & Open Space Management
          $312,000 Fire
          $530,000 Police
          $54,000 Public Works
          $(734,000) Margginal Cost Reduction of Fire and Police

          $617,000 Total General Fund Expenditures  

           $1,388,000  Annual General Fund Surplus/(Deficit) 

        3. Ron

          Matt:

          This (alone) is not helpful.  I’m looking for an “updated” report from EPS, not something from Dan Carson (who is clearly a “booster” of the development).

          For example, simply listing “revenues” (at $2,005,000) means nothing, unless we know how that number was derived. Same with any cost adjustments, etc.

          I’m looking for reasons (comparisons) which shows how the $106,000 deficit changed to a $1,400,000 surplus.

          As a side note, I understood that there was a motion on the committee to show the surplus at $700,000 (half the amount listed above), but it was voted down.

        4. Matt Williams

          Ron, all those individual numbers are the “updated” ones the FBC discussed with EPS on 2/8/2016.  The $2,005,000 figure is the sum of all the individual costs above it ($1,077,000 plus $168,000 plus $760,000).

          EPS disagreed with the Marginal Cost Adjustment, but the FBC in its 5-1-1 vote felt EPS was wrong.  Reasonable people can agree to disagree reasonably.

          I personally made the Substitute Motion that would have show the surplus at $700,000, but it was indeed voted down by a 3-4 vote.

          I personally believe, based on the numbers that EPS provided on 2/8/2016 that the surplus value that is closest to accurate is $1,509.000 per year.  That figure includes a full 1.0% renewal of the Measure O Sales Taxes, which adds another $121,000 to the FBC’s $1.4 million amount.   The EPS numbers include a share of the building costs of the Main Fire Station, they also include the purchase of additional fire engines, they include hiring additional personnel to man the fire engines that the City will not be buying.  All of those costs are important in calculating the “fair share of Fire” that the Developer will pay to the City, but the City will not spend any of those costs “a second  time.”

          JMHO

  18. Ron

    Matt:

    I’m not sure why you’d make a motion to show the surplus at $700,000 per year, if you actually think that the number is closer to $1,509,000 per year.  Seems like all of these numbers are quite fluid.

    In any case, I think the commission would serve voters better if a formal report was produced which shows the reasons that the EPS analysis is incorrect.  (Not just quick explanations on this forum.) Not sure why the city would contract with EPS, and then shoot down its analysis.

    I’m not even sure which of the ten scenarios (in the EPS report) is closest to the current version of the proposed development.  It would also be helpful if a report was produced which shows adjustments to the appropriate (EPS) scenario (for actual/real costs that the developer has now agreed to pay), without introducing an entirely different set of assumptions.  (If done correctly, this might provide the most accurate version regarding the effect of Nishi on the city’s finances.)

     

     

      1. Matt Williams

        The final (2/8/2016) EPS analysis report can be seen at http://documents.cityofdavis.org/Media/Default/Documents/PDF/Finance/Commission%20Agenda%20-%20February%208,%202016/February%202016/Item%206a_152006%20Nishi%20FBC%20Memo_EPS.pdf

        Page 6 of that report presents EPS’ opinions about annual Fire and Police expenditures.  I personally agree with the words, “that the [cost] estimates made by EPS were reasonable and appropriate.”  I just happen to believe (for all the reasons expressed earlier (already built Fire Stations, already purchased fire trucks, already staffed fire trucks, etc)that the Marginal Cost approach is more reasonable and more appropriate.

        In accounting terms $1.4 million looks at the situation from an actual cash expended perspective and $700,000 looks at the situation from an assumption that the City has no fire stations, no fire trucks, and no fire employees.

        JMHO

         

    1. Matt Williams

      Ron, I made the motion to represent all the Davis citizens who (like you) believe that caution is to be prized over optimism.  Back in May when the FBC was giving its advice to Council on the 2015-2016 Budget, I put forward the following comment, which was included by the FBC with 12 others.

       

      The Commission expressed interest in moving toward fuller use of scenario analysis in the consideration of the budget plan.  For example, scenarios could be developed to spell out what additional spending items would be prioritized in the event that revenues were better than expected, as well as what reductions should be implemented in the event of an unanticipated downturn in city finances.

      For me the $700,000 scenario was the most cautious, the $1.4 million was the middle ground, and the $1.5 million was the most ambitious.  Given my personal beliefs about what the most likely numbers were, I was guaranteed that the $700,000 scenario would come true (with a substantial upside variance).  So I was at no risk of being “wrong” (undershooting the mark) at $700,000, and that scenario represented all the the cautious Davis citizens, as well as all the middle ground citizens.  The $1.4 million scenario was deemed to be a bridge too far by Ray Salomon and Bill Wood.  I suspect that you and CalAg see it as a bridge too far.  With that said, I believe the 5-1-1 vote is probably representative of the financial perspective of the Davis voters.

      Bottom-line the evidence told me that the margin would be at least $1.4 million, and a “Yes” vote on each of the motions was consistent with that evidence.  $1.4 million is greater than $700,000.  $1.4 million is equal to $1.4 million.  My job as an independent voice for all of Davis citizens was fulfilled and fulfilling.
       

  19. Ron

    Matt:

    Thank you, but this isn’t really a detailed/supported explanation regarding any of the numbers.  It seems that the EPS analysis is far more conservative than anything from the Finance and Budget committee.  With all due respect, your conclusion that $700,000 is “guaranteed” and that there is “nor risk of being wrong” seems somewhat overconfident.

    As suggested above, it would be helpful if the following could be provided:

    A report describing how the Finance and Budget committee calculated its own numbers, and the reason (for each appropriate category) that the committee’s conclusions differ from EPS’s conclusions.

    A report/response from EPS, regarding the reason (for each appropriate category) that EPS disagreed with the Finance and Budget Committee’s conclusions.

    A report to show adjustments to the appropriate (EPS) scenario (for actual/real costs that the developer has now agreed to pay), without introducing an entirely different set of assumptions.

    I realize that committee members serve voluntarily, and that members devote a great deal of time and effort.  However, I would think that the council (and voters) would need these types of analyses, to make an informed decision.  Perhaps these reports simply don’t exist.

     

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