Guest Commentary: City and Developer Have Violated the City’s Affordable Housing Ordinance

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Affordable Apartmentsby Alan Pryor

The Davis City Council is asking for citizen approval of the proposed Nishi mixed-use project in the Davis General Municipal Election ballot in June. The Nishi project will provide 440 multi-family rental units and 210 stacked flat condos. All residential housing will be 5-6 stories.

The City of Davis has an Affordable Housing Ordinance (Article 18.05 AFFORDABLE HOUSING) that requires developers of certain sized residential housing projects in Davis to either construct a prescribed number of below-market, affordable rental or for-sale housing units or pay prescribed in-lieu fees to the City’s Affordable Housing Trust Fund.

The City Council has not waived the requirements of this ordinance for any recent and planned residential developments in Davis including the Cannery Lofts (providing extremely low to low income rental units), Grande (providing low-moderate and middle income ownership units), the Villages at Willowcreek (providing low-moderate ownership units), and Chiles Ranch (pending discussion of paying in-lieu fees or providing low-moderate ownership units).

Yet, the Davis City Council is currently wrongfully exempting the developers of the Nishi project from providing any affordable housing units as is otherwise required by the Affordable Housing Ordinance. The current requirement for development of affordable rental units for larger developments of this size is 25% of the total for low income and 10% for very low income. Thus, the 440 rental units at Nishi would require that 154 units be affordable.

Nor is the developer required to pay any in-lieu fee payments to the City such as are allowed for ther  residential development projects. At the current alternative in-lieu fee rate of $75,000 per unit as otherwise established by the City, such an alternative in-lieu fee payment by the Nishi developer to the City’s Affordable Housing Trust Fund would total $11,550,000.

The City and developer have instead agreed on a drastically reduced fee of $1,000,000 in payments to the Affordable Housing Trust Fund. No explanation is given by the City of the basis of the apparent reduction of payment of $10,550,000 to the Affordable Housing Trust Fund.

Some have claimed that the terms of the Affordable Housing Ordinance can be modified by the City Council at its discretion such that Nishi could be lawfully exempted from the Ordinance. That is true. But changing a municipal ordinance involves a very precise process with a set of clear procedures to be followed that are specified by state statute. This process was not followed by the Council and no explanation has been given for this failure to do so.

The City Currently Claims the Developer does not have to Provide any Affordable Housing at the Nishi Project

The most recent draft of the Development Agreement submitted to Council on Feb 16, 2016 contained the following language pertaining to the provision of low income affordable housing at the Nishi project or payment of alternative in-lieu fees:

H. [Sec. 207]. Fees, Exactions, Conditions and Dedications

7. Affordable Housing. 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.”

In fact, such authorizing language is NOT contained in either the Resolution approving the Pre-Development Agreement or the Pre-Development Agreement itself in November, 2012. Nor is there any other separate discussions or documents prepared by the City and developer discussing the applicability or the requirements of the Affordable Housing Ordinance to the Nishi project. There are also no other contractual agreements between the City and the Nishi developer in which it was agreed the Nishi project would be exempt from affordability requirements of the Affordable Housing Ordinance.

Some have erroneously claimed that the Predvelopment Agreement signed by the Developer and Council in Novemeber, 2012 exempts the project from any further affordable housing requirements because it contains the following language:

If residential density is greater than 30 units per acres gross, no affordable housing obligation or fees.”

However, the above language actually is NOT in the Pre-Development Agreement signed in November 2012. In fact, that phrase is only in the Staff report accompanying the resolution and pre-development agreement sent to the Council for approval.

This phrase shows only shows what Staff’s intent was at the time. But without a legal agreement in place or at least anything else to show us what was actually approved by the Council, this Staff report means nothing legally.

However, even if that provision were applicable and legally justified in light of the over-riding obligations in the Affordable Housing Ordinance, the project still would not qualify for exemption from affordable housing requirements. This is because the Nishi site is 46.9 acres of which 22 acres in 2 parcels are for the office R&D parcels and 24.9 acres in 3 parcels are for residential. 24.9 acres x 30 units/acre = 747 units. But there are only 650 units proposed for the entire project – 440 rental and 210 for-sale units. So the density of the residential portion of the development is only 26.1 units per acre (650 units / 26.9 acres) which is less than 30 units per acre minimum density otherwise specified in the Staff Report.

The Nishi Project is Required by Law to Provide Affordable Housing but is Being Wrongfully Exempted by the City

Close examination of the Davis Affordable Housing Ordinance unambiguously indicates the Nishi project is NOT exempt from the ordinance requirements with respect to development of the rental units based on number of units and density.

Further, even if an exemption from or modification of the standards requirements of the Affordability Housing Ordinance was otherwise requested by the developer and agreed to by the City, there are clear and specified procedures which both the developer and City must follow in order to receive or grant such an exemption or modification of the standard requirements of the ordinance as further discussed below. There are no records showing such a process was undertaken that are available on the City’s website supposedly containing all project documents (http://www.cityofdavis.org/city-hall/community-development-and-sustainability/development-projects/nishi-and-downtown-university-gateway-district). Thus it appears that the both City and developer are in direct violation of the City’s Affordability Housing Ordinance.

This wrongful decision to exempt this Nishi project from normal provisions of the Affordable Housing Ordinance is unfair to the Davis community which desperately needs affordable housing for students and low-income individuals and families. It also sets a bad precedent for the future residential developments in Davis since other projects applications will similarly expect the same exemption privileges as was given Nishi.

Why Does Davis have an Affordable Housing Ordinance?

“8.05.010 Purposes of article—Findings

The city council finds and determines:

(a)    The city has a goal to provide a range of housing for its local workers and has chosen to take action to ensure that affordable housing is constructed and maintained within the City of Davis.

Developers of Multifamily Projects Must Submit an Affordable Housing Plan

To ensure compliance with and proper administration of a project’s affordable housing obligations , the first step any new developer must take is the submission to the City of an Affordable Housing Plan

“8.05.040 Provision of affordable housing.

(a)    Affordable housing plan. The developer shall submit, concurrently with or prior to the submission of an application for the first discretionary approval for a development, an application as provided by the city describing a proposed affordable housing plan, which shall provide a program to provide affordable housing in accordance with this article and the intended method for implementing such a program. The developer may submit an application under this article at any time subject to staff’s, the planning commission’s, or the city council’s discretion to deny the application on the sole basis of lack of timeliness. Any application resubmitted by a developer to amend an affordable housing plan after it has been approved by the city shall be deemed a new application for the development. Before any agreements between parties or transfer of land is made, all agreements, the affordable housing plan and budget for the provision of affordable housing pursuant to this article shall be approved by the city, in order to ensure that the affordable housing to be developed pursuant to the affordable housing plan will be economically sustainable over time, in accordance with the required duration of affordability for the affordable housing.”

It is believed that Nishi never submitted such a plan to the City as it is not included in any of the on-line project documents available for review on the City’s website (http://www.cityofdavis.org/city-hall/community-development-and-sustainability/development-projects/nishi-and-downtown-university-gateway-district). If such a document was not submitted, the developer is in violation of the provisions of this ordinance.

As will discussed later, this failure for Nishi to initially file an Affordability Plan also precludes later application for any possible specialized modifications or potential exemption from any affordable housing obligations as otherwise might be allowed by the Ordinance.

The Requirements for Affordable Housing are Based on the Type of Housing

There are different specific compliance requirements for developers under the Affordable Housing Ordinance depending on whether the housing is rental or for-sale ownership type housing.

For-Sale Ownership Housing

Following are provisions of the Davis Affordable Housing Ordinance pertaining to newly constructed For-Sale Ownership housing and applicability to Nishi.

“18.05.050 Ownership development affordable housing standards

A developer of residential ownership developments consisting of five or more units shall provide in each development, to the extent feasible, affordable housing for very low, low and moderate income households, as set forth in an affordable housing plan approved by the city, in accordance with the requirements of this section.

This section of code in the Affordable Housing Ordinance code  indicates that this requirement would be applicable to Nishi because each of the total number of for-sale condominium units (220) is far greater than 5. However, exemptions exist depending on the type of for-sale housing built.

“(D)   Exempt projects as identified in Section 18.05.080 have no affordability requirements.

One such exemption is for “exempt” condominium units of the type proposed for Nishi.

“18.05.080 Exemptions from affordable housing requirements.

(b)    Residential developments constructed as exempt condominiums are exempt from the requirements of this article.

Exempt condominiums are defined in the definitions section of the Affordable Housing Ordinance of the Affordable Housing Ordinance.

“18.05.020 Definitions

Exempt condominiums are residential ownership units in a condominium development that is predominantly composed of stacked air space units not having separate ownership parcels. Townhouse or single-family developments are not considered “exempt condominiums” under this definition, even if they are subdivided as condominium units.

Because it is believed all of the for-sale ownership condominium units are described in the project description in a way consistent with “stacked air space condominiums”, it would appear that all of  the for-sale ownership units at Nishi would be exempt from the provisions of the Affordable Housing Ordinance.

Rental Housing

Following are the different provisions of the Davis Affordable Housing Ordinance pertaining to newly constructed rental housing units and the applicability to Nishi.

“18.05.060 Rental development affordable housing standards

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.”

(a)    Standard rental affordable housing requirements. All requirements listed under the respective category must be adhered to and included within the project’s affordable housing plan.

(1)    Exempt Projects Pursuant to Section 18.05.080. No affordability requirements.

(3)    Projects Totaling Twenty or Greater Units for Rent.

(A)   A number equivalent to twenty-five percent of the total units being developed, after the inclusion of the density bonus for the project, shall be developed and made affordable to low income households, households with gross incomes at or below eighty percent of area median income for Yolo County.

(B)   A number equivalent to ten percent of the total units being developed, after the inclusion of the density bonus for the project, shall be developed and made affordable to very low income households, households with gross incomes at or below fifty percent of area median income for Yolo County.

(C)   This requirement may be fulfilled through either on-site construction as stated in subsection (b) of this section or land dedication detailed in subsection (c), as long as the minimum amount of land is provided to make the site economically feasible.”

A straightforward reading of the  above Ordinance language indicates that Nishi, unless otherwise exempted by other provisions of this ordinance, is subject to the affordability requirements of the Ordinance because the total number of units proposed at Nishi (440) is far greater than 20 unit minimum threshold. If applicable, the number of affordable units that should be be provided as part of this project would equal 440 Units x 35% = 154 Units.

The City does allow alternative individualized affordability programs as stated below

“4)    Project Individualized Programs for Rental Housing.

(A)   The developer may meet the city’s affordable housing requirement with a project individualized program that is determined to generate an amount of affordability equal to or greater than the amount that would be generated under the standard affordability requirements. The affordable units must, at a minimum, meet the same income targets specified in the standard rental affordable housing requirements as set forth in subsection (a)(2) and (3).

(i)     A project individualized program shall be developed by the developer and city staff, taken action on by the social services commission, and if the main project application requires, heard before the planning commission for decision.

(ii)    If the main project is requesting planning entitlements that require city council approval, the project individualized program shall then be heard before the city council for final decision.

The developer has never submitted such an individualized program application to the City nor has any such request for such a program ever been considered by the Social Services Commission, the Planning Commission, or the Council as otherwise required by the ordinance.

Other Exemptions for Rental Housing

In addition to exemptions based on the number of the rental housing units or other individualized programs, other exemptions of rental housing from the Affordable Housing Ordinance are possible:

“18.05.080 Exemptions from affordable housing requirements.

(c)    Residential components of a vertical mixed use development are exempt from the requirements of this article.

To receive an adjustment or waiver, the developer must request it when applying for first approval of the residential development, or through submittal of a draft affordable housing plan to the city. The matter shall be considered before the city council within thirty days. In making the finding or determination, the city council may assume the following: (1) the developer is subject to the inclusionary housing requirements in this article; (2) availability of any incentives, affordable financing, or subsidies; and (3) the most economical affordable housing product in terms of construction, design, location, and tenure. For purposes of a taking determination, the developer has the burden of providing economic and financial documentation and other evidence necessary to establish that application of this article would constitute a taking of the property without just compensation.”

It is believed that the developer has never submitted such a formal request for exemption from the requirements of the Affordable Housing Ordinance nor even an initial Affordable Housing Plan. The City Council is otherwise precluded from granting any such exemption even if such an exemption were otherwise allowed by the ordinance.

What is a Mixed Use Exemption

A Mixed Use Exemption essentially requires the ground level floor to be entirely commercial and not ancillary in any way to the residential units on floors above the first floor. The City’s Affordable Housing Ordinance in the Municipal code defines “vertical mixed use” as follows:

Section 18.05.020: Definitions

“Vertical mixed use development means mixed-use structures that vertically integrate residential dwelling units above the ground floor with unrelated non-residential uses on the ground floor, including office, restaurant, retail, and other nonresidential uses. For purposes of this article, vertical mixed use does not include structures that vertically integrate uses ancillary to residential units, such as resident parking, laundry rooms, community rooms, or common space on the ground floor with the residential units above.”

So this means unless every single ground floor of every single one of the 3 large 5-story apartment building complexes is entirely non-ancillary space used exclusively as commercial space unrelated to the residential units above, then the Nishi units would NOT be exempt from the Affordable Housing Ordinance.

As can be seen from the following table, the total square footage of the rental units themselves is 494,500 not counting any common areas. Assuming the apartment units are 5 floors with the top 4 floors devoted entirely to residential, this would mean that each of the top four floors has a total footprint of 123,625 sq feet (494,500 sq. ft. / 4 floors) of devoted residential – not counting common areas. That means the first floor that is required to be entirely non-ancillary to residential must also be 123,625 sq ft of entirely commercial space for all of the residential buildings to be classified as “mixed-use”.

Yet, the Baseline Features of the project as approved by Council for placing on the ballot stated  Retail uses to be located within proposed Residential or R&D buildings only allow 20,000 sq “. Because 20,000 sq ft of retail is substantially less than the 123,625 sq. ft., clearly the rental residential units are NOT exempted by the “mixed use” exemption and the development is otherwise required to provide the specified number of affordable housing units or p, rovide land dedication or, if approved, pay appropriate in-lieu fees to the City’s Affordable Housing Trust Fund.

Nishi-pryor

Other project information further supports the fact that the entire first floors of the residential rental building are not all commercial. The project Baseline Features currently say: “Ancillary ground -floor retail is permitted of the residential and the R and D buildings as established in the Planned Development for the Nishi property.” implying that at least some some residential ground floor use is anticipated. Any residential or ancillary residential development at all on the ground floor negates the “mixed-use” exemption.

Effects of the Failure to Comply with the Provisions of the Affordable Housing Ordinance on the Legality of Holding a Measure J/R on the Project

Measure J/R is a citizen enacted ordinance in the Davis Municipal Code – Chapter 41 CITIZENS’ RIGHT TO VOTE ON FUTURE USE OF OPEN SPACE AND AGRICULTURAL LANDS. It reads, in part:

41.01.020 Voter approval.

(a)    Voter approval of changes to land use designations on the Land Use Map from agricultural or urban reserve to urban land use designations or from agricultural to urban reserve land use designations.

(B)   Approval by the city council, after compliance with the California Environmental Quality Act, the State planning and zoning laws and any other applicable laws or regulations; and then

(3)    If, after compliance with the California Environmental Quality Act and any other applicable laws, the city council modifies or amends the land use designation for any property from an urban land use designation to an agricultural, open space, or urban reserve land use designation, the land use designation of that property shall not be amended or modified from the agricultural, open space, or urban reserve designation to an urban land use designation without first complying with this article, including, but not limited to, the voter approval requirements set forth in subsection (a)(2).”

It is clear from this language that the Council may only authorize a Measure J/R vote on a project that is compliant with “any applicable laws and regulations”. Since the Nishi project is not compliant with the Davis Affordable Housing Ordinance, the City Council approval of the Nishi vote itself is not valid  and the ballot measure was improperly placed on the ballot.

Equivalent Alternative In-Lieu Fees Determination

Although the option to pay in-lieu fees if a developer chooses not to install affordable housing is not available for projects with rental units of greater than 20 units, it is instructive to look at what these in-lieu fees might entail if such an option were otherwise available to the developer such as through a specialized program application by the developer or such as if the housing were single-family ownership housing or rental housing of less than 20 units built by a “Small Developer”.

Currently, the City of Davis has established an in-lieu fee of $75,000 per affordable dwelling unit otherwise not constructed and managed for low-income housing. For the prescribed 154 units of affordable housing not provided for by the Nishi project developer, this would otherwise entail a payment of $11,550,000 to the City’s  Affordable Housing Trust Fund (154 x $75,000) if in-lieu fees were otherwise an alternative.

The Efforts of the City and Developer to Otherwise Provide Some Measure of Affordable Housing Benefits are Meager

Two weeks prior to final approval of the Nishi project by Council on February 16, the developer seemingly out of the blue offered to make a $1.2 million dollar donation to the City for a low income housing trust fund, on-site civic art, implementation of the downtown traffic management plan, or to establish a new carbon mitigation fund by the City. Ultimately, the City agreed to a $1M donation to the City’s Affordable Housing Trust Fund and $200,000 to be allocated amongst the other designated uses in a to-be determined manner as described in the Draft Development submitted to Council on Feb 16, 2016:

“EXHIBIT G COMMUNITY ENHANCEMENTS

Pursuant to the Baseline Project Features, Developer shall provide the following Community Enhancements, which are above and beyond the Project’s requirements to provide additional benefits to the community.

1. Affordable Housing Trust Fund Contribution

The anticipated deal points 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 supportive 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. 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.”

However, $1 million dollars is not nearly enough compensation for this enormous loss of 154 affordable housing rental units as otherwise required by the Affordable Housing Ordinance. Or viewed in another way, it represents the net loss of $10,550,000 to the City’s Affordable Housing Trust Fund compared to if the Nishi project were otherwise paying in-lieu fees equivalent to those imposed on other developers in Davis.

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28 thoughts on “Guest Commentary: City and Developer Have Violated the City’s Affordable Housing Ordinance”

  1. Sam

    How can the Affordable Housing Trust Fund lose $10.5MM it never had?

    It seems pretty clear that an agreement was made between the developers and the city counsel that the project would pay $1,000,000 to the Trust Fund. Now the voters get to decided if that and other terms of the agreement make this a good project for Davis or a bad project for Davis.

    1. hpierce

      Not meaning to be picky, but do you mean “city council“, or are you saying that an agreement was made between the developer and the City Attorney (“city counsel”)?

  2. South of Davis

    Sam wrote:

    > How can the Affordable Housing Trust Fund lose $10.5MM it never had?

    The same way that the city will “lose $20 million in road funds” when the people that don’t want the Nishi site developed announce that “Nishi will not pay to finish re-paving Olive drive”…

  3. South of Davis

    Alan wrote:

    > So this means unless every single ground floor of every single one

    > of the 3 large 5-story apartment building complexes is entirely

    > non-ancillary space used exclusively as commercial space unrelated

    > to the residential units above

    I appreciate Alan taking the time to do all this research, but he may want to do more research before writing “this means” (or at least write I “hope” this means” or “we are not getting much traction with the fumes from 180 will kill kids thing so our new attempt to get people to vote against Nishi is”)…

    I’m not a real estate attorney, but if Alan is correct it means that the only buildings that would be considered “mixed-use” would require the residents (and mail carrier) to enter the property via helicopter (or rope ladder) since a stairway, elevator or mailboxes on the ground floor are not “used exclusively as commercial space unrelated to the residential units above”.

  4. CalAg

    Major kudo’s to Alan Pryor.

    Well researched. Comprehensive to a fault. Very accurate.

    A wonderful illustration of the potential of the Vanguard as an investigative journalism platform.

     

    1. Miwok

      When you add “exemptions”, they come in all forms. Lots of campaign money to pass around if they don’t have to pay “fees”?

      The ordinances have all these rigidly (or not so rigidly) defined exemptions, and Nishi seems to be playing them, or were advised to, to the hilt.

      Quit complaining and make the Ordinance more plain to anyone except lawyers. Besides who wants Nishi to actually be a place where people live? All you really want is de facto Dorm Space and charge for it.

  5. Davis Progressive

    alan does a great job here and is to be commended for his long and exhaustive work.  however, he is not an attorney.  he is not citing case law here.  there have been issues brought up on here about whether the council has the ability to de facto change the ordinance on a site by site basis on the fly.  alan doesn’t address this point and without it, his analysis is unfortunately a waste of time.

    1. Mark West

      “his analysis is unfortunately a waste of time.”

      Especially so, as it is clear from his previous actions and advocacy, that he is not interested in creating affordable housing in Davis.

    2. CalAg

      DP: Except that the City did not change the ordinance on the fly. That is well documented in the record.

      I would not be so quick to dismiss Alan Pryor’s analysis.

      1. Davis Progressive

        “Except that the City did not change the ordinance on the fly.”

        the problem is that you don’t know if that matters or not. you don’t know what the law says with regards to changes to a municipal ordinance – because you aren’t a lawyer and don’t know the case law and neither does alan pryor and neither does michael harrington. not trying to be insulting, but there is a reason why we have lawyers.

  6. CalAg

    AP: I don’t have much to add that you haven’t covered.

    One area I would highlight is the language in Exhibit G of the DA in which the City states its reason for exempting the project from its affordable housing obligation:

    “The anticipated deal points 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 supportive 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.” City of Davis – Nishi Development Agreement

    This language misstates the facts and, as a practical matter, provides an unlawful subsidy of approx $10M to the Nishi project.

    1. The anticipated deal points were NOT approved by the City Council as misrepresented in the DA language. The Staff Recommendations can be viewed in this link:

    http://city-council.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/CouncilMeetings/Agendas/20121127/Packet/08-Nishi-Land-Use-Cost-Sharing.pdf

    2. The DA misleadingly leaves out the word “gross” in its mischaracterization of the “preliminary anticipated deal points.” As you pointed out above, the project would require a minimum of 747 rental units to meet this standard, and falls 41% short. So even if the “preliminary anticipated deal points” had been adopted by the City Council (which they weren’t), the City would not have had a legal basis to exempt the project from it’s affordable housing obligation.

    3. The DA is completely silent on the “preliminary anticipated deal point” that would have provided 22 acres of commercial land to the City. This would have been sufficient consideration to compensate the City for the proposed concession on affordable housing. By selectively abandoning the provision that would have made the City whole, the relief from the affordable housing obligation became an unwarranted public subsidy of the project that was made without the legally required public process.

     

    1. CalAg

      More information from the Pre-Development Agreement “preliminary anticipated deal points” that are being used by the City in the Development Agreement to justify ignoring the Affordable Housing Ordinance:

      http://city-council.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/CouncilMeetings/Agendas/20121127/Packet/08-Nishi-Land-Use-Cost-Sharing.pdf

      Quotes from the Pre-Development Agreement

      The first “preliminary anticipated deal point”:
      Developer to grant city the approximately 22 acres shown as research/business park land.

      Finding from the resolution adopting the pre-development agreement:
      WHEREAS, the owner of the Nishi property has proposed to the City that in furtherance of the overall development of the Property, as a term of the proposed Development Agreement, Developer would convey approximately twenty-two acres of the Property to the City for development of the research/business park component of the Proposed Development.

      Recital from the pre-development agreement:
      B.  WHEREAS, the owner of the Nishi property has proposed to the City that in furtherance of the overall development of the Property, as a term of the proposed Development Agreement, Developer would convey approximately twenty-two acres of the Property to the City for development of the research/business park component of the Proposed Development.

      Another recital from the pre-development agreement:
      D.  WHEREAS, the owner of the Nishi property has proposed to the City that in furtherance of the overall development of the Property, as a term of the proposed Development Agreement, Developer would convey approximately twenty-two acres of the Property to the City for development of the research/business park component of the Proposed Development.

      From Section 1 of the pre-development agreement:
      As a key term of the Development Agreement, both parties anticipate that Developer would convey twenty-two acres of the Property to City for development of a research/business park, as depicted in Exhibit B to this Agreement.

      On page 08-20, there’s a nice picture of the land the City of Davis was going to receive in exchange for funding half the pre-development costs and processing an application for multifamily residential with no affordable housing requirement (subject to the 30 DU per gross acre density requirement).

      1. DavisforNishiGateway

        I am quite glad that CalAg decided to bring up the decision by the City not to assume ownership of the R&D portion of Nishi because it is quite clear to me that there is a serious misunderstanding as to how and why this was deemed to be in the best interest of the City. I am grateful the link to the Pre-Development Cost Funding and Negotiation Agreement was included, because it contains some important elements with respect to the preliminary anticipated deal points which have somehow been elided in the multiple times CalAg has offered an opinion on the matter.

        The most important point (for the purposes of understanding the evolution of the decision as to who would assume both the ownership and associated costs of the R&D component of Nishi) is the point that “costs for infrastructure will be shared equally [between the City and developer]” (pg. 3, bullet point 3).

        So, while it is true that in this embryonic agreement the City would assume ownership of the R&D component of Nishi (which, incidentally, only consists of about 10 acres of land entitled for said purpose), it also meant that the City would be on the hook for half of the project’s infrastructure costs. In Nishi’s case, these costs will total about 30 million dollars. That means, that if the city went with the original deal, that the City would be obliged to pay 15 million dollars. As CalAg vociferously pointed out previously, the entitled land could possibly be valued as much as $470,000 per acre. However, at the same time, under the conditions of the original deal, the City would assume 15 million dollars of infrastructure costs. Some back-of-envelope arithmetic reveals that even at $470,000 an acres (for 10 acres–sadly, no one is going to pay for land which has been entitled as park land), the City could perhaps receive a little less than 5 million for their R&D holdings. In the meantime, they would simultaneously assume 15 million dollars in infrastructure costs, resulting in a net loss of 10 million dollars. Obviously, from the City’s point of view, that is a lot of debt to incur which they could avoid by having the developer keep the R&D portion and assume 100% of the infrastructure costs, which is currently the case.

        This decision makes even more sense when you consider that by not exercising their option to assume the ownership (and costs) of the R&D portion of Nishi, the City still gets what they want–R&D space to house the burgeoning Davis startup community, and to facilitate private-public partnerships capitalizing on the world-class research being done at UC Davis–without having to spend any money on infrastructure nor incur any of the risk that comes with owning the R&D acreage.

        Ultimately, this project is about trying to balance a number of priorities. First and foremost, this project has been about trying to create R&D space here in Davis–something which was and continues to be recognized as important by both the City and UC Davis. That a project which will create a not insignificant amount of R&D space for entrepreneurs and businesses to locate here in Davis, build desperately-needed student housing (which is competitively priced and slightly more spacious than the dorms), and provide excellent housing options for seniors and young professionals looking for affordable living options (Not having a car and being able to walk or bike nearly everywhere in Davis can save you $7k a year. That’s nothing to shake a stick at!) is a testament to the very long and thorough process of negotiations and discussions the developers have had with the City, County, UC Davis, and hundreds of other stakeholders.

        So, thank you again CalAg for giving me an opportunity to shine some light onto area which for too long had been submerged in umbral misapprehensions and stygian suppositions.

        1. Miwok

          Too bad the City and Council is playing Let’s Make A Deal instead of Managing growth and the City as it should. Their missteps and failed enterprises have sunk the City deeper in the hole at the expense of all the inhabitants.

          Where are the limitations on the Authority of these people to deal away the city Assets?

        2. CalAg

          “So, thank you again CalAg for giving me an opportunity to shine some light onto area which for too long had been submerged in umbral misapprehensions and stygian suppositions.”

          You’re not helping your client with this disjointed nonsense.

          For starters, the developer is not paying all the infrastructure costs. Approx $10.5M is coming from affordable housing. So let’s not pretend that the developer is shouldering the entire infrastructure burden under any scenario.

          The original pre-development agreement was a bad deal for the City because of the 50/50 infrastructure split. In a more fair agreement, the residential (which is more profitable) would have borne more of the infrastructure burden than the commercial (which is less profitable). As bad as it was, it was better economically than the current outcome in which the City gets nothing in compensation for the $10M+ giveaway.

          Regarding your fiscal analysis, you don’t get to reduce the gross acreage and jack the infrastructure costs to get the result you want. The project would have obviously been planned differently if the developer and staff had worked diligently to execute the plan to deed the commercial acreage to the City. As it currently stands, that offer is looking like little more than a bait-and-switch to entice the decision makers into funding half the pre-development costs and processing an application for multifamily residential with no affordable housing requirement. The way the infrastructure sharing was structured suggests that there was never any intent to follow through on this deal point.

        3. DavisforNishiGateway

          There are several points that are important to remember.

          First, it is not a $10 million dollar give away if the city was going to end up $10 million dollars in the hole. That was and is the reality of the situation.

          Second, from the beginning, the City and the developer team have taken a collaborative partnership-driven approach to planning and shaping Nishi. This was reflected in the preliminary deal points under discussion. If the City wanted to receive 50% of entitled land, they would assume 50% of the costs. There was nothing “given away” when the City decided to not pursue this option. It seems like a claim is being put forward suggesting that the City somehow already had possession of the R&D land. This is pretty clearly ruled out if you take another look at the Pre-Development Cost Funding and Negotiation Agreement.

          Finally, if you look at the Baseline Project Features, it is pretty clearly spelled out that the developer is paying for 100% of the infrastructure costs. Those costs are separate from other costs of mitigation. Conflating the two makes for an appealing argument, but is fundamentally mistaken in its premises.

  7. Don Shor

    Ok, I went ahead and read through this largely because of respect for Alan Pryor and because it was obvious he put a great deal of thought and effort into it. But honestly, it really does nothing to inform the political decision that the voters of Davis need to make about Nishi.

    The point of this seems to be that the city didn’t get a good deal, that they ‘gave away’ too much, that more money could be extracted from the developers. The Nishi development was, from the start, a partnership between the city and the developers. I recollect that the city approached these developers about working on the site, not the other way around. Any agreement has mutual concessions from all parties.

    If the intent of this detailed critique is that the city should dot all the i’s and cross all the t’s as they override the affordable housing policies – well, fine, the council can do that. But I don’t think that’s the point.

    If the intent is to spark a discussion about the city’s affordable housing policies – I’m all for that discussion, and my starting point is that the city’s Affordable Housing policies are a direct impediment to the development of affordable housing. But I doubt that is the point.

    I don’t think the opponents of Nishi are seriously concerned about affordable housing. This reads like a court brief simply intended to block the project.

    If the next rationale is to send it ‘back to the drawing board’ I’d guess there will be no drawing board. The project is what it is, and I’d expect that if it is rejected the Nishi site will simply remain an open field. No developer in his right mind would start over with the awareness that it would mean more obstacles, more demands, and more costs. I suspect that demanding a percentage of affordable housing would prevent this project from penciling out. I suspect that’s why the opponents are focusing on it.

    It is almost certain that the project as proposed will make money for the city, and it is guaranteed not to lose money. It will provide some housing for the rental market. It isn’t reasonable to expect that brand new rental housing will be cheap, but with the present state of the market any additional rental units are of benefit. It will provide some sites for spinoff businesses, and will generate more business for downtown merchants. There will be economic ripple effect from this development, and it is close to everything. The voters should consider it on these merits, and not hold it up to an artificial standard being set by people who probably would find some reason to oppose any project on that site.

    1. Biddlin

      “No developer in his right mind would start over with the awareness that it would mean more obstacles, more demands, and more costs. I suspect that demanding a percentage of affordable housing would prevent this project from penciling out. I suspect that’s why the opponents are focusing on it.” …

      “The voters should consider it on these merits, and not hold it up to an artificial standard being set by people who probably would find some reason to oppose any project on that site.”

      But isn’t that the Davis way?

       

       

       

      1. Tia Will

        I would say that “the Davis way” includes the rights of all to express their concerns whether or not those favor any particular project. For example, at least some of those who oppose Nishi have been clear that they would support an industrial ( or in Davis parlance, innovation) park, but not housing on this site. For me, “the Davis way” is exemplified by considering people’s stated concerns on their merits, not in making up stories about what they may or may not do in the future.

        1. Biddlin

          ” …not in making up stories about what they may or may not do in the future.

          But we know that someone’s past performance is the best predictor of their future performance. We can all easily guess who’s gonna sue, who’s gonna keep moving the goal posts, who’s gonna be in favor of any revenue generators, etc.

        2. South of Davis

          Tia wrote:

          > For example, at least some of those who oppose Nishi have been

          > clear that they would support an industrial

          Since many (but not all) of the people that oppose Nishi own homes and small rental properties in town they will make more money (and have a higher net worth) if the supply of housing is restricted in town.

          Would it be legal for the city to restrict the number of say Aviation Attorneys, OB/GYNs  and Clean Air Activists in town to help the people make more money another way so they allow the city to build more housing?

    2. Matt Williams

      In a nutshell Alan’s passionate argument is that the financial issues trump the non-financial issues, and Don’s passionate argument is that the non-financial issues trump the financial issues.

      The democratic process is designed to sort out those kind of passionate subjective differences of opinion.
      With that said, decisions should be based on substance NOT politics and promises.

      I argued long and hard with Tim Ruff for a November ballot date rather than a June ballot date.  The principle reason for my subjective opinion on that subject was that the financial analysis was not, and is still not “materially complete and accurate.”  I believe that the Nishi Gateway Development Agreement is not “materially complete and accurate” until all three parties to the agreement have come to the table.  To date, only two parties, the City and the developer, have.  The third party, the University, is still on the sidelines.  No UCD signatures appear on the signed Development Agreement.  The University’s contribution to the infrastructure construction costs is still unknown.   Further, if the University steps up at a later date with a 50% contribution to the underpass construction costs, there is nothing spelled out in the Development Agreement about whether that 50% contribution will go to the City or to the developer.  Had the ballot been delayed until November, the Development Agreement could have reflected the same three-party status that the has always defined the project.

      In the end, each individual voter will have to decide whether their own feelings and beliefs are closer to Don’s passionate argument or Alan’s passionate argument.  Either way, the voters will be forced to make a political calculation because the amount of crucially missing evidence makes making an evidence-based decision effectively impossible to make.  The voters will have little choice other than to cast their ballot on the basis of politics and promises rather than on the basis of substance.

      Jim Frame said it very well on Tuesday, “Is it any wonder I’m having a hard time mustering enthusiasm for Nishi now?  I haven’t decided how I’m going to vote yet, but most of what I was hoping from from the project seems to have evaporated.”  https://www.davisvanguard.org/2016/03/tuesday-morning-thoughts-affordable-housing-surprise-issue-nishi/comment-page-1/#comment-309484

       

       

       

    3. Matt Williams

      In a nutshell Alan’s passionate argument is that the financial issues trump the non-financial issues, and Don’s passionate argument is that the non-financial issues trump the financial issues.

       

      The democratic process is designed to sort out those kind of passionate subjective differences of opinion.
      With that said, decisions should be based on substance NOT politics and promises.

       

      I argued long and hard with Tim Ruff for a November ballot date rather than a June ballot date.  The principle reason for my subjective opinion on that subject was that the financial analysis was not, and is still not “materially complete and accurate.”  I believe that the Nishi Gateway Development Agreement is not “materially complete and accurate” until all three parties to the agreement have come to the table.  To date, only two parties, the City and the developer, have.  The third party, the University, is still on the sidelines.  No UCD signatures appear on the signed Development Agreement.  The University’s contribution to the infrastructure construction costs is still unknown.   Further, if the University steps up at a later date with a 50% contribution to the underpass construction costs, there is nothing spelled out in the Development Agreement about whether that 50% contribution will go to the City or to the developer.  Had the ballot been delayed until November, the Development Agreement could have reflected the same three-party status that the has always defined the project.

       

      In the end, each individual voter will have to decide whether their own feelings and beliefs are closer to Don’s passionate argument or Alan’s passionate argument.  Either way, the voters will be forced to make a political calculation because the amount of crucially missing evidence makes making an evidence-based decision effectively impossible to make.  The voters will have little choice other than to cast their ballot on the basis of politics and promises rather than on the basis of substance.

      Jim Frame said it very well on Tuesday, “Is it any wonder I’m having a hard time mustering enthusiasm for Nishi now?  I haven’t decided how I’m going to vote yet, but most of what I was hoping from from the project seems to have evaporated.”  https://www.davisvanguard.org/2016/03/tuesday-morning-thoughts-affordable-housing-surprise-issue-nishi/comment-page-1/#comment-309484

  8. Tia Will

    Since I have a great deal of respect for Don, his thoughtful analysis of issues and his contribution to the Vanguard, I do not want this to be taken by anyone as an attack. But there is a merger of objectivity, subjectivity and broad brush paining in this post that I feel the need to address.

    I don’t think the opponents of Nishi are seriously concerned about affordable housing”

    I suspect that this is a generalization based on your opposition to their arguments. There are enough opponents to Nishi that I suspect that some of them care deeply about affordable housing and some could probably not care less , although all would probably agree that we are not handling the situation optimally.

    with the present state of the market any additional rental units are of benefit.”

    You and I share the belief that more rental units are needed in Davis. I do not agree that “any additional rental units are of benefit.” If this were true then we should be accepting every converted mini-dorm with open arms. Obviously for any proposal there will be pros and cons. What is being argued here is whether, for this particular project, the pros outweigh the cons. The argument for me is not as one poster put it on a previous thread that “the Cannery is better than nothing.”  This is not how I see the tradeoff. The issue for me is always “first, do no harm”. So for any proposal 1) What are the potential harms to be avoided or mitigated ?  2) Is this proposal the best possible use of the land ?

    On Nishi, I remain undecided. On second guessing the motives of others…..I am completely decided that it is non contributory.

  9. Michael Harrington

    Some think it should be almost all affordable student housing, shoved up towards the NE corner away from the freeway gases

     

    Cut off civilian vehicle access to Olive Drive

    City should have a small ownership interest in the entirety so developer cannot sell to UCD without city approval

    1. South of Davis

      Mike wrote:

      > City should have a small ownership interest in the entirety so

      > developer cannot sell to UCD without city approval

      If the developer “owns” the 440 units they will pay property tax and parcel taxes of about $2 million EVERY YEAR (going up 2%/year per Prop. 13) .

      If UC Davis “owns” the 440 units they will pay property tax and parcel taxes of $0 ZERO (like all government owned property in the state).

       

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