Analysis: Labor Laws Complicating UC Davis Ability to Build Housing

West Village
West Village

The Vanguard yesterday reported that the university is generating huge housing demands with their policies of increasing enrollment by at least 1000 students next year, and likely continuing that expansion. Many in the community, opposed to additional peripheral growth, have pushed for UC Davis to take on the responsibility of housing more students.

For their part, while the new LRDP (Long Range Development Plan) calls for the university to provide more housing, they acknowledge that even at its maximum efforts, they cannot supply housing for all new students.

One problem that we face, as we ask the university to supply more housing for students, is that housing done by the university is more costly than typical residential housing.

A case in point is the ongoing struggle by UC Davis to avoid prevailing wage requirements for West Village. In 2008, the West Village development was contracted to be constructed in phases on land owned by the University of California.

On August 25, 2008, UC and the developer entered into a ten-year master ground lease for a 130-acre project. Under the terms of the deal, the developer would construct, at its own expense, over 300 residences for faculty and staff, and apartments for almost 2,000 students.

The hope by the university was, by turning the project over to private development construction, by having no state aid or participation they could circumvent prevailing wage requirements.

As a 2013 letter notes, “UC’s policy for construction on UC land provides that, under specified conditions, UC will not require prevailing wage rates where the project cannot be constructed economically if the payment of prevailing wages is required. The specified conditions are that either the cost will be paid entirely by non-state funds furnished principally by students, faculty, staff, hospital patients, outside corporations, or donors, or the project is built for sale or lease to students, faculty, or staff without any funds being furnished by the state. The policy also provides that in case of exceptional need, the UC vice president may authorize an exception to the prevailing wage requirement. Prevailing wages were not required for the Project.”

However, the unions objected, claiming among other things that the community college lease on the site triggered state participation. The 2013 letter from Christine Baker at the State Department of Industrial Relations writes, “Based on my review of the facts of this case and an analysis of the applicable law, it is my determination that the construction of the West Village development at the Davis campus of the University of California is a public work subject to prevailing wage requirements.”

This triggered about $18 million in additional prevailing wage costs. A follow-up letter dated February 8, 2016, notes that “based upon a stipulated agreement between the interested parties and the unique facts of the case, the Determination in this matter, West Village Development, University of California, Davis Campus, Public Works Case No. 2010-024, dated December 20, 2013, is hereby vacated.”

In this case, apparently a deal was cut that would mitigate costs for this project.

But the bigger issue still remains intact. The costs for developing housing on campus are far higher than they are for a private residential project. This means that the labor costs double and the project costs could increase by 25 percent or more.

In the broader policy arena, that means that housing on the UC Davis campus is always going to be a net fiscal drain on the university. Students can purchase housing far more cheaply off campus because, not only can they get net lower rents off campus, but they can pack housing more tightly, splitting the rent among more people, therefore lowering the costs even more.

Already community members have focused on UC housing policies as a driving force in the growth pressures on the city.

As Eileen Samitz put it at the Vanguard Growth Discussion, just as she did in a December column, “UCD’s negligence in providing this on-campus student housing is a main driver of any housing demand that exists in Davis. It is gross negligence, and simply unfair to the UCD students, that the university is not providing them with long-term, affordable, on-campus student housing.”

It seems that the problem of student housing is recognized by most as the driving force behind the broader housing crisis. While there may be emerging consensus on the cause of the problem, the solution is more elusive.

Bob Segar from the university reiterated a couple weeks ago what he told the council last fall, that while the university is looking at ways to develop more housing on campus, they cannot provide enough housing to accommodate all new students. Some of the areas where the university might look at new housing are likely to clash with existing residents.

But it turns out the university may not be the best equipped to solve this problem, especially if private developers can develop more housing, more cheaply, than the university.

This reality figures to hamper efforts by community members hoping to avoid city residential growth by pushing the university to supply more student housing.

How will this impact the overall discussion of growth in Davis? It adds another complicating twist to an already complex problem.

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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37 Comments

  1. South of Davis

    David wrote:

    > This means that the labor costs double and the project costs could increase by 25 percent or more.

    If you talk to some actual developers of multifamily property to get their cost per sf and compare it to the (hard to find) cost per sf of multifamily property on the UC campus that includes ALL costs (that they try to hide) including all union labor at prevailing wages and ALL the UC project management and HR costs you will see that a project on the UC campus will cost MUCH more than DOUBLE the cost of a similar property in town built by the private sector.

    P.S. The link below showing a recent pothole repair gives an idea why things cost so much for projects at UC (no one is going to make campaign contributions unless they get paid back and building or fixing stuff for more than double what it should cost is a great way to pay back your union and big business contributors at the same time)…

    https://ordernorainbows.files.wordpress.com/2014/11/acid_picdump_34.jpg

     

  2. SODA

    If this is such an issue, why has it taken so long to bring it to light? Why wouldn’t the university have discussed this long ago as a reason for their lack/reluctance of housing? What am I missing?

  3. Don Shor

    While this is an interesting issue, it is presumably a factor in ALL campus construction, and the university has announced

    … plans to build graduate programs in downtown Sacramento and a new veterinary hospital on its main campus as part of its “University of the 21st Century” plan, which includes an estimated $2 billion in construction projects…

    So it’s not the reason UC Davis is not building on-campus housing. Housing is simply a low priority for the administration. For example, here’s a project underway right now @ $29 million.

    http://dcm.ucdavis.edu/projects/internationalcenter/

    Do prevailing wage laws apply to this?

     

     

    1. Misanthrop

      Two points. First the issue is the affordability which decreases inversely to wage increases. Although land costs must also be factored in.

      Second, UCD has been good at getting additional funds from donations to build things named after people like Ellison or Mondavi. It seems every new building has a large philanthropic component to its financing. Its questionable if building housing can attract enough philanthropy to offset prevailing wage rates for the construction of student housing and make it affordable for students with limited resources.

  4. dlemongello

    I was wondering how the prevailing wage being higher but UCD already owning the land might offset each other, since of course a developer needs to purchase land which at this point is very expensive.

    1. hpierce

      There is another difference (hopefully)… the private sector needs to “make a profit”… UC shouldn’t be “making a profit”… if they do, they are no more, nor less different from DeVries…

      1. South of Davis

        UC may be a real “non Profit” school unlike DeVry that is a fake  “for profit” “school” (set up to get paid almost exclusively from government guaranteed “student” loans taken out by the poor and naive just like “University” of Phoenix and the recently closed Corinthian “Colleges”) but I bet that DeVry does not have more than 25 people that make over a million a year.  Don’t forget that almost anything built on a UC campus is built by a “for profit” (who more often than not has been a big campaign contributor).

        From the LA Times:

        “UCLA head football coach Jim Mora earned $3.5 million in 2014, followed by basketball head coach Steve Alford at $2.7 million. Khalil Tabsh, an obstetrician at Ronald Reagan UCLA Medical Center, earned $2.3 million and Ronald Busuttil, a transplant surgeon at the Westwood campus, earned $2.2 million. The fifth spot went to Cal head football coach Daniel “Sonny” Dykes at $1.8 million. Overall, 28 UC employees last year made more than $1 million in total pay, UC President Janet Napolitano earned $584,611, including $570,000 in base pay. “

        1. dlemongello

          The labor cost is starting to sound like a baseless excuse when all factors are considered.

          I will say this, for a long time the town grew in proportion to the University, it has always been the driving force for growth here overall.   The bottom line is the city needs to have a continuous source of revenue to match costs and our economy is based on growth.  People talk about sustainability, a functioning steady self sustaining state, but growth is what seems to always be relied on in the end.  When we get new businesses we need housing for the workers thereby creating higher costs to sustain the city, and around the wheel doth go.

          Generally students move off campus after the 2nd year, so housing all undergrads would be a new thing, but we are bursting at the seems as far as rentals.

          Then there is Nishi, what are the apartments there going to rent for?  Students were at the Council en masse to promote the housing component along with the jobs component.  From what I heard at the Council meeting when they approved putting it on the ballot the average apartment would be about $2100/month.  That’s rather unaffordable for students, or anyone as far as I’m concerned.

    2. Matt Williams

      Donna, back when the community kerfuffle over the Mace 391 process took place, I went out and met (occasionally by telephone) with all the landowners of parcels.  The bottom-line of that process was that the vast majority of the developable land is already owned by development interests.  Very little of the land is owned by farming interests.  So the expense for developable land was incurred by the interested parties quite a while ago.

      1. dlemongello

        Mace is really far for students to live anyway, unless you want to create a bunch more car trips.  I had forgotten about Orchard Park being closed next-to-forever and talk of closing Solano. It is a no brainer to keep things open until action is actually pending.  It would be better to have to finish a rental cycle with perhaps a few months delay and then begin work than have units sit vacant for years awaiting action.  But all this is just talk and UCD really could not care less, because they don’t seem to have to care if their students have somewhere reasonable to live.

        1. dlemongello

          Matt, If one were to go strictly by location/best proximity to UCD the next purple notch out to try and get the students some apartments would be directly N of main campus (which is essentially all east of 113) and directly east of 113.  Just south of that is a very exclusive area of Davis if I am picturing this right and would the landowner or the city be interested in such a proposal?

          1. Don Shor

            Students aren’t the only ones that need rental housing. Location and proximity to UCD is simply not that critical at this point.

        2. Matt Williams

          That parcel (sometimes referred to as Stonegate West has an interesting recent history, which CalAg andI dialogued briefly about in the MRIC Goes Outside the Box to Look into Howatt as Mitigation Land comments thread three weeks ago.

          It is Assessor’s Parcel 036-450-001 which runs along the north side of Russell Boulevard from the current end of Stonegate to the northeast corner of the intersection of Pedrick Road and Russell Boulevard.  It contains 160 acres, and was sold on August 4, 2015 by Buckley Real Estate, 2277 Jerrold Ave, San Francisco to a Yuba City-based farmer Heer Nar Singh.  The sale price recorded at the Yolo County Clerk’s Office is $23,750 per acre. Buckley Real Estate’s ownership of the parcel was the result of a foreclosure proceeding against the prior owner, Al Smith.

          The new owner is very actively engaged installing support and irrigation infrastructure in preparation for planting all 160 acres as a nut tree orchard, so it appears that that parcel has actually moved out of the hands of the development community (Buckley is a development financing firm) and back into the hands of an owner committed to long-term farming. 

        3. dlemongello

          We are not talking about the same parcel but we’ll put it to rest.  I was talking about the one EAST of 113 and maybe 2-3 miles N of UCD.

        4. South of Davis

          Matt wrote:

          > It contains 160 acres, and was sold on August 4, 2015 by

          > Buckley Real Estate, 2277 Jerrold Ave, San Francisco

          When I was in High School Charlton Buckley the owner of Buckley Real Estate (and Henry Broadcasting) owned the Steel Park Resort on Lake Berryessa where went to go camping and fishing.  When Charlton bought his son a helicopter (that he flew to Berreyessa when he didn’t drive his Mercedes) we would often talk about “white privilege” and how we all wished we were all born in to a family with people named “Charlton” who owned helicopters, lakeshore homes at Berreyessa and Tahoe and $15 million dollar penthouse condos in SF (as we sat around the fire pit drinking Hams because is was about $0.10/can cheaper than Coors)…

  5. Eileen Samitz

    I find it interesting that UCD conveniently has problems in their ability to get on-campus housing built, but they certainly don’t have problems getting the projects that they want built to materialize. I think this Shrem Art Museum opening in November cost something around $30 million. Was this all private donation money, or was any UC capital sent on it or the Music Center? Also, what were the funding sources for the Music Center? This Art Museum was build in record time and the Music Center is in progress and also rapidly being built. Were there no labor issues with this Art Center project or the Music Center?

    The bottom line is UCD can certainly raise funding when they want to, and get the things built very quickly when they want to. In this recent announcement below, they even continue to ask for donations. So UCD can raise funds and quickly build an Art Museum as well as a Music Center, and yet UCD has not been able to build the promised on-campus student housing needed for their own UCD students for almost three decades.

    Dear Friends,
    We are happy to announce that UC Davis’ new art museum, the Jan Shrem and Maria Manetti Shrem Museum of Art, will open on November 13, 2016. Please mark your calendars and celebrate this exciting occasion with us.
    The 60-year legacy of experimentation lives on at the Manetti Shrem Museum. Grounded in the work of UC Davis’ world-renowned first generation art faculty, the museum will be a hub of creative practice for today’s thinkers, makers and innovators, now and for generations to come.
    Be a part of making it happen!

    Mark your calendar now for the event of the year!
    Visit our website to learn more about the museum.
    Find out how you can be among the first to celebrate with us.

    Help sustain the legacy. Learn more.

    We can’t wait to welcome you to your new museum.

    Rachel Teagle
    Founding Director
    Jan Shrem and Maria Manetti Shrem Museum of Art
    UC Davis

    http://davismerchants.org/vanguard/manetti-shrem-museum-aerialsm.jpg

    1. Jim Frame

      This Art Museum was build in record time and the Music Center is in progress and also rapidly being built.

      I suppose that the concepts of “build” and “record time” are subjective.  I did the pre-design survey on the Music Building site in 2008, and on the Shrem Museum site in 2012.

      1. South of Davis

        Jim wrote:

        > I suppose that the concepts of “build” and “record time” are subjective. 

        It is sad how long public projects take.  The 200 units at Orchard Park on the UC Davis campus have been sitting vacant for about a year and a half (I did a lap of the fence on my bike last month and it does not look like they have done anything since the fence went up over a year ago).

        I was happy to hear from Robb that some people might be moving in to the two vacant city owned Pacifico/Symphony apartment buildings later this year, but I have to wonder when a call to Tandem could have the units rent ready in under 30 days (for less than the cost of the architect for the remodel) why the city had to wait 6 years.

        My back of the napkin calculations shows that the UC lost over $2 million in rent the last year at Orchard park and city lost about $2 million in rent while they decided what to do with the vacant units and buildings at Pacifico.  I’m just a lowly taxpayer, but it seems like it might make sense to pay a couple bucks to a n experienced project manager to avoid having government owned buildings (that people want to rent) sit empty for so long.

  6. Eileen Samitz

    South of Davis,

    I agree with your comment about the issue of these significant vacancies when there the need for these rental units to be in use now. I cannot understand why UCD would vacate and close Orchard Park so early, not knowing what they were going to do with it. It makes absolutely no sense. It should have been left open and rented to UCD students until they knew what they were going to do with it, and then vacate it just before renovating it (or the year leading up to that). Instead UCD vacated it early, so it will probably be closed four years or longer before it would reopen.

    So it looks like UCD has decreased the number of on-campus rental units making the rental situation for the UCD students even more difficult. This is not just poor planning, it seems to be a complete absence of planning. And then to top it all, the Chancellor complained Sunday in the Enterprise about the shortage of vacant rental units in the City. Now the big question is when are they going to vacate and close Solano Park? I had heard it would be this year. So I guess then that will stay vacant and closed for four years or longer while UCD tries to figure out what they want to do. Then, it will take years to actually get the construction to happen.  This way UCD can continue to complain that there is not enough vacant rental apartments in the City for them to fill up with students since they need even more housing from shutting down any on-campus housing that may be targeted from renovation and expansion.

    UCD’s style seems to be delay, delay, delay, which just starts really looking like a stalling technique. Meanwhile, UCD then tries to blame the City for the lack of rental housing in our community that UCD is absorbing overwhelmingly. Rather than falling for this ploy, our City needs put its foot down and object, and not run with every high density project coming out of the woodwork now. And I also agree that any attempt for UCD to do “master leases” should be banned. Our community needs to have a supply of rental housing to be available for non-student workers as well.

  7. dlemongello

    Bureaucracy does need to function differently from business in some ways, but this is where bureaucracy falls so very short it is just infuriating and an incredible waste.  Brings out my cynical side and makes me wonder if there is even some collusion with apartment owners to keep rents high and higher.

  8. Jim Leonard

    U.C.D. is taking its problem of how to house its additional student population and is trying to make that problem Davis’ problem. It is NOT Davis’ problem no matter what U.C.D.’s cost constraints on building are. It is U.C.D.’s problem as to how to accommodate its student population, not Davis’. We Davisites should not be intimidated into taking on projects that are contrary to our community’s best interest. Let us stop being a cowering weakling in the face of threats by a neighboring bully.

    1. South of Davis

      Jim wrote:

      > We Davisites should not be intimidated into taking on projects

      > that are contrary to our community’s best interest.

      We should be “intimidated” by UCD, but if UCD grows and Davis does not allow any more apartments it will just get more homes packed full of students from the Bay Area.

      I don’t know about you but I would rather an new big apartment on 5th than 8 students living next to me (or even across the street) playing rap music at 2 am and parking on the lawn.

  9. Eileen Samitz

    South of Davis,

    I am sorry I can not agree with you. NO neighborhood, including yours, should have to deal with these significant UCD housing needs, or the costs and impacts that they impose on our community. This is just the tip of the iceberg of what UCD is trying to do, of deferring their enormous housing needs of 6,000 new students by 2020, and another 7,000 new students by 2030. So enabling UCD, by allowing any of these ultra high-density projects in the City because UCD has been dragging their heels on providing the promised on-campus housing until now, is absolutely NOT the way to go. UCD can and needs to provide this on-campus student housing. UCD just needs to re-organize the way they are spending their money.

    This is not a money problem. Look at where $1 BILLION dollars of UCD money is going for the projects that UCD wants to do including the new art museum and the music center.  I would like to know how much UCD capital projects money is being spent on these projects and the UCD “International Center”.

    http://dcm.ucdavis.edu/projects/index.html

    Not that out of all of this is a mere 500 student beds extension of the Tercero dorm for student housing to make sure that UCD secures all of the new freshman they want to make sure that get to come to UCD, especially the non-resident students who are paying triple tuition.

    But note that UCD has prioritized building the “International Center” that they are rapidly building on Russell Blvd., not far from Anderson for helping and teaching foreign students. Well what about helping and housing domestic students, particularly California residents? Let’s not forget UCD admitted 59.9% non-resident students last fall in 2015, while reducing California resident students admitted by 11.2%.

    This is not a “labor” issue, this is a “UCD needs to understand that they need to get their priorities straight and provide the promised housing for their own students on-campus now” issue.

    1. Matt Williams

      Eileen Samitz said . . . “I am sorry I can not agree with you. NO neighborhood, including yours, should have to deal with these significant UCD housing needs, or the costs and impacts that they impose on our community. This is just the tip of the iceberg of what UCD is trying to do, of deferring their enormous housing needs of 6,000 new students by 2020, and another 7,000 new students by 2030. So enabling UCD, by allowing any of these ultra high-density projects in the City because UCD has been dragging their heels on providing the promised on-campus housing until now, is absolutely NOT the way to go. UCD can and needs to provide this on-campus student housing. UCD just needs to re-organize the way they are spending their money.”

      In a perfect world, and we all know that there is no such thing as a perfect world, but if there were, Eileen’s point would be 100% correct.  She has laid out a morally principled argument that challenges UCD to “Do no harm.”

      The challenge we face is that unless UCD stops adding enrollment (36,104 in the current 2015-2016 year), then the normal workings of the free market for housing in Davis means that Davis and its residents will suffer real, quality-of-life damage.  So Eileen’s “absolutely NOT the way to go” comes with a price. The challenge for Davis is to weigh the price of that quality-of-life damage against the alternative.

      It is not like that quality-of-life damage is imaginary.  UCD’s enrollment increase from 32,144 two years ago to 36,104 now plays out every day in the traffic backups on Richards, First Street, B Street and Russll Boulevard.  It also plays out every day when the huge number of UCD students who couldn’t get housing in Davis drive their cars into the residential neighborhoods that border the campus and park their cars for free in any available space and walk to their class on campus.

      In a perfect world, impacts and consequences are not a concern.  In the real world those impacts and consequences are part of an informed analysis of the choices between flawed alternatives.

      JMHO

       

       

       

      1. Ron

        Matt:

        I’m not willing to sacrifice our neighborhoods to satisfy UC’s housing needs.  (This includes the current development proposals for Sterling, Trackside, etc.)  If you’re ultimately elected to the council, I sincerely hope that you’re sensitive to neighborhood concerns, regarding such proposed developments.

        Seems like the University is feeling pressure, regarding Katehi’s compensation, etc.  In contrast, a claimed “inability” to pay prevailing wages for construction workers (to build campus housing) isn’t very persuasive, to say the least.  Especially when there’s a lot of other planned (non-residential) campus developments which are subject to the same prevailing wage requirements.

        1. Matt Williams

          Ron, I’m not willing to sacrifice our neighborhoods to satisfy UC’s housing needs either.

          The challenge we (collectively) face … is that our that our “willingness” works in the theoretical world, but it lacks gravitas in the real world.

          With that said, the greatest threat to being sensitive to citizen concerns is the current shortage of reliable, transparent, repeatable public processes that engage the public, set clear expectations and then deliver on those expectations. 

          In the short term we face a situation where in our current Planning By Exception environment (which is really not planning at all, but rather only application processing) our processes are not consistently reliable or repeatable, and to the typical Davis resident that is not transparent. To fix that, we need to start by engaging the public, setting clear expectations and then delivering on those expectations.    If we do that, then we will be sensitive to all citizens’ concerns.

          Whethr UCD wants to participate in that dialogue is yet to be determined. Yes, they are feeling some pressure, but pressure and a change of direction are still very different animals. A step in the right direction, but only a step.

    2. South of Davis

      Eileen wrote:

      > I am sorry I can not agree with you.

      You don’t need to be sorry about not agreeing with me, but since I don’t think the people that work for UC want to spend money that can be used for pay raises (to make up for the money I’m sure a LOT more people are going to lose as people start looking at the $50 to $100K “extra cash” so many make serving on boards of companies that do business with UC) on housing get ready for more kids moving in to the neighborhoods (along with the RV they take to Burning Man) when landlords learn that you can be cash flow positive after buying a 4 bedroom in Davis home and turning it in to a 6 bedroom home that you rent to 6 kids (who have backyard parties the weekends they are in town)…

      1. Ron

        South of Davis:

        I have heard that of problems with houses being converted into student rentals.  (Fortunately, no one has done that in my neighborhood, to my knowledge.)  However, the “solution” does not include ramming large-scale apartment complexes (which essentially function as dormitories) into existing neighborhoods.  Sterling would meet this definition, and would impact everyone who travels to/from Mace Ranch, the intersection of 5th and Pole Line (and anyone visiting the post office).  Not to mention the increased police costs and hassles, resulting from a large dormitory-type structure, far from campus.  I have heard that there are such problems with a similar development (on Cantrill?).

        I understand that Trackside would appeal to a different demographic, but would still negatively impact neighbors (as a result of the proposed size, among other concerns).  Fortunately, it appears that the developers of Trackside are being forced to scale-down their proposed development.  Hopefully, the Sterling proposal will also be modified, to reduce its impact. (If developers cannot convince the council to change the current zoning, perhaps speculative profits will be less of a factor. Perhaps the existing facility could be re-used.)

        1. hpierce

          I think you’ve got it bass-ackwards…  school districts can’t spend moneys (like CFD proceeds, intended for infrastructure, repairs, etc) that are for infrastructure for salaries… there is no reason the district can’t spend any of its GF on infrastructure.  There may be some special funding from the state that can only be spent for class-size reductions, etc., but those would be the exceptions.

  10. Eileen Samitz

    Matt,

    Since you lived in El Macero for some years until quite recently, perhaps you got a false sense of being immune from problems like the lack of UCD on-campus housing and the impacts it has imposed on the Davis community. It is clear that public input does matter given the fact that our State legislator’s stepped up with AB1711 in response to all the complaints from California taxpayers about the deluge of non-resident students being admitted to the UC system to extract a higher tuition. This UC practice was at the expense of the California taxpayers who paid in to build and support the UC system while many of their children’s admission to UC was denied for a college education due to this very dysfunctional UC policy.

    In addition, since you are a City Council candidate, it is important for Davis voters to see if you are willing to stand up for our community, but it seems clear that you have been in a consistent retreat mode on this UCD on-campus housing needs issue. Although you formerly worked for UCD,  I encourage you to not be afraid to ask for reform on UCD’s poor planning practices for the sake of  their students, but also for the sake of our community.

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