One of the big criticisms of the Nishi project has been its perceived failure to meet a goal of providing the city with a steady revenue stream. While the project developer had previously committed to ensuring the project would be net fiscally positive, the city’s Finance and Budget Commission was skeptical, even as recently as a month ago.
However, last week, the city and developer agreed to add a Services CFD (Community Facilities District), which it believed would produce a steady revenue stream for the city. On Monday night, after a series of motions, the FBC determined, by a 5-1-1 vote, that the proposed Nishi Gateway project could generate $1.4 million annually for the City of Davis’s general fund upon full build-out.
In part, the motion that was passed read: “The Nishi Gateway project could achieve a significant net fiscal benefit to the city that in the long term at full build-out, could exceed $1.4 million annually.”
FBC Chair Jeff Miller told the Vanguard on Tuesday that there has been extensive examination on this issue, more so than the commission has ever done in the past. He made it clear that this is simply a projection and we will not know for sure until the actual build out occurs. Nevertheless, he said, “If it’s done in accordance with how they’ve said it to be done… that in itself will turn (the project) into a positive, and I think we’re all in agreement on that.”
“This provides a major reassurance to Davis residents that Nishi is a fiscally sound project that will benefit our entire community,” the developers said in a statement on Tuesday.
“Making sure this project generates revenue for our city was a priority from the beginning. This vote by Davis’s Finance and Budget Commission affirms our commitment to helping fund city services,” said Tim Ruff, managing partner of the Nishi Gateway project.
He added, “With this annual surplus, money will be put back into the community to maintain parks and roads and preserve services for seniors and children. We achieve this goal without new taxation on existing residents. This combined with the $400,000 annually for Davis Joint Unified School District will further reduce the need for new taxes.”
The net fiscal surplus is, in part, the result of several commitments from the developers.
The city’s consultant, Economics & Planning System (EPS), noted in its updated economic analysis, “The City Council’s direction reflected a desire to identify mechanisms to ensure neutral-to-positive impacts on the City’s General Fund. In summary, a combination equivalent to a make-whole provision for properties removed from the tax rolls ($93,000 per year) plus privatization of costs of maintain parks, greenbelts, and streets ($181,000 per year) would lead to neutral to positive impacts under all scenarios.”
The developers state, “In other words, the property owners’ commitment to offset lost sales and property tax revenue for any commercial space leased by a public entity combined with their commitment to maintain several parks and streets associated with the project guarantee the project will generate revenue for the city.”
They continue, “With this fiscal update, the City Council now has a fuller understanding of the financial windfall from Nishi. This surplus comes on top of analyses that show Nishi will generate between $315 to $385 million in annual economic activity, $89 to $107 million in annual wages, and 1,500 to 1,800 permanent jobs. Nishi also makes significant investments in Davis infrastructure at the property owners’ expense, including a new access point to campus and $1 million devoted to affordable housing and other city needs.”
Jeff Miller explained several of the key parts. First, there will be no infrastructure CFD. That means that the developer will be responsible for all the infrastructure costs. The services CFD will simply cover city services.
The FBC in fact, passed a friendly amendment proposed by Commissioner Ray Salomon, who ultimately voted against the recommendation after the commission failed to pass one of his proposed amendments. The main motion provides, “Recommend that the development agreement for the project specify that public infrastructure not be financed with any city funding.”
The developer has also committed to a make-whole provision in case the university acquires some of the office space – the developer would make the city whole on any tax revenue lost in that process. The developer is also committing to $1 million for housing, civics arts, a local carbon offset, and a downtown parking management plan.
According to the full motion, the FBC “finds that the Nishi Gateway project could provide a significant economic benefit to the city and the surrounding region in greatly increased economic activity, jobs, business-to-business sales opportunities, and productive partnerships with Davis’ largest employer, UC Davis.”
They believe that “the development of Nishi Gateway would itself generate significant demand for commercial real estate development within the city and spur business activity in nearby downtown Davis. Both the economic and environmental analyses of the innovation park projects confirm that a large part of the undeveloped commercial lands within the city are unavailable or unsuitable for innovation parks and thus would be insufficient to meet the city’s long-term economic development goals.”
Further, “The commission also finds that the Nishi Gateway project could achieve a significant direct net fiscal benefit to the city that, in the long term at full build-out, could reach $1.4 million annually, with one-time net fiscal benefits in the millions of dollars. Other local agencies, including the county and Davis Joint Unified School District, would also cumulatively receive millions of dollars in additional revenues as a result of the project.”
There was some disagreement on how much the net benefit would be. Ray Salomon proposed a friendly amendment reducing the $1.4 million figure down to $700,000. This amendment was not accepted and was ultimately narrowly voted down 4-3. The main motion was then passed 5-1-1 with Mr. Salomon in opposition and Bill Wood abstaining.
Next week, the council will determine whether to place Nishi on the June 2016 ballot. The FBC vote, while not ensuring that, marks a major step forward for the project.
—David M. Greenwald reporting