My View: Is Community Ready for Plan B if No Economic Development Revenue?

economic-development

According to the Finance and Budget Commission estimates, Nishi would mean at least $1.4 million annually for the city’s coffers.  And, while that amount is not a game changer, Mace Ranch Innovation Center starts out at a modest $2.2 million per year, with more aggressive (realistic?) projects likely to go to $5 to $6 million, along with another $10 million in one-time fees.

That translates to about $7 million in annual revenue at build-out.  If people want to quibble with how much money the two projects would generate, that would be fair given the uncertainties of revenue, build-out and other factors.

What there is no denying is that even $7 million a year is a small amount compared to the city’s needs of about $655 million over a 20-year period.

Those numbers, as presented by Matt Williams at a candidates forum, come from the city. He broke down how the $655 million was calculated. $200 million of that is for roads over 20 years. $352 million is buildings and parks. $114 million is for retiree pensions and health benefits.

He said that we are doing better on retiree health benefits and pensions, “but that’s only $114 million of the $655 million.” We have a parks tax, but the parks tax is “leaving us with $315 million worth of capital infrastructure maintenance that we’re going to have to do to the parks surfaces and buildings.”

He said, “These reports came from staff. They came in the last 120 days. We really do have to understand, what we have promised to ourselves.”

Yesterday we noted that Nishi, while it is still early in the election process, appeared to be in trouble. It is hard to imagine a scenario where Nishi fails but MRIC passes. It’s possible, but a citizenry that would reject the modest Nishi project is likely to reject MRIC as well. Opposition to that is already growing, even before the decision, likely this summer, as to whether to put the measure on the ballot.

If Nishi fails, it is conceivable that MRIC would even pull out rather than risk additional millions to attempt in vain to get approval. The landscape is already shifting quickly, with Woodland moving toward their own Innovation Center that they could offer more cheaply and with far greater certainty than the difficult gauntlet of Davis.

As we have reported, in February, Rochelle Swanson noted that Mace Ranch Innovation Center could net $2.2 million annually according to the EPS Consulting report, with the potential for as much as $6 million a year with a one-time $10 million fee.

She recognized the need for revenue, stating, “It’s not hyperbole, if this doesn’t pass in November, I’m going to be a big cheerleader to bring back a really big parcel tax, either that or we’re going to start closing things.”

“That’s not being a scare tactic, that’s being real,” she said. “We have a huge infrastructure problem. We need organic revenue. It’s why I agreed to run for council in the first place and why I agreed to run for a second term.”

At minimum we would be looking at a $250 per parcel tax. That would, according to past projections by the city, generate the roughly $7 million that the two projects might reasonably generate.  However, the $655 million figure suggests we need to find not $7 million, but $32 million.

The stakes are high.  The community still faces a shortfall on roads being able to fund $4 million, when the need is at least $8 million. Then there are the parks, where the current parks tax funds only about 25 percent of our needs.  We have city buildings and other infrastructure needs. Our swimming pools are in need of upgrade. And finally we are still underfunded on pensions and retiree health benefits.

Maybe the public is prepared for what it faces – a large parcel tax that two-thirds will have to support. Maybe they are willing to fork out the $250 to keep parks and greenbelts working while repairing roads and city buildings.

Maybe they are prepared to support the $250 for the city while funding our schools in a renewal tax, at least at the $500 per year level.

But something tells me that the majority of the public will be caught off guard by a massive new tax.  They will have heard the rhetoric from our leaders that “our budget is balanced and resilient.” That we have a balanced budget and a healthy 15 percent reserve. That, “Better yet, it is a fiscally resilient one in that we are paying what we need to be for our pension and retiree health obligations and are making substantial investments in our infrastructure…”

Based on that rhetoric, they will not have seen the $250-plus parcel tax coming.  They will question where this came from and why the city hid the ball from them.

They will have heard about Davis Renaissance, but missed the part where we have huge needs in order to fund infrastructure that was neglected for at least one decade amidst the economic downturn.

Even if we do manage to pass a $250 parcel tax, there is the question of where the other $25 million comes from.  Do we dare ask for a full $1000 parcel tax to fund all our needs for the next twenty years?

Innovation parks were never going to solve all of our problems, but adding at least $7 million in revenue, plus additional money perhaps in hotel TOT (Transient Occupancy Tax) taxes and other smaller commercial development would have at least reduced the need to lay everything on the taxpayers.

There will be some calling for cuts – and cuts they will come. We will see service hours reduced, city employees laid off, swimming pools and parks closed, roads in perpetual poor condition and the overall quality of life in Davis will be drastically reduced.

In the end, the voters will get their chance to weigh in on both Nishi and MRIC, but if they do, they should have all of the facts at their fingertips and understand exactly what the consequences would be if these projects do not pass.

My biggest disappointment is that in the haste of patting ourselves on the back at the beginning of the year, we lost out on an opportunity to really lay out the challenges we face and what it will take to resolve these problems in the long term.

—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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76 Comments

  1. Barack Palin

    According to the Finance and Budget estimates, Nishi would mean at least $1.4 million annually for the city’s coffers.

    Isn’t that the pie in the sky estimate?  I thought it was $500,000 to $1.4 million?

        1. David Greenwald

          I actually believe it can exceed $1.4 million but the bottom line is I was trying to ball park to get to the round number $7 million for combined effects in order to show how much parcel tax we would have to pay to reach just that level not to mention the gap between $32 million and $7 million.

        2. CalAg

          BP: About half the $1.4M is from profit sharing from the developer and the other half is from a bookkeeping scheme. The Nishi project is essentially revenue neutral.

  2. Misanthrop

    “There will be some calling for cuts – and cuts they will come.  We will see service hours reduced, city employees laid off, swimming pools and parks closed, roads in perpetual poor condition and the overall quality of life in Davis will be drastically reduced.”

    This is exactly what the old guard of opposition to everything wants, a smaller, more rustic, reduced Davis.

    1. Tia Will

      Misanthrop

      This is exactly what the old guard of opposition to everything wants, a smaller, more rustic, reduced Davis.”

      As an unapologetic slow growth advocate, I do not know anyone who is arguing for a “smaller, reduced” Davis. Honestly, are you seeing anyone calling for us to remove people against their will from the city ? Is anyone calling to reduce the number of apartments or houses ?

       

      1. Frankly

        True that Davis will not shrink in the number of residents nor geographic size; it will shrink in government services, maintenance quality and regional influence.  It will have a giant “L” stamped on its forehead.  It will stand for “loser”, “Lefty”, “Liberal”, “Loony”, “Laughable”, “Limited”, “Litigious” and “Lactose Intolerant”

  3. South of Davis

    David wrote:

    > What there is no denying is that even $7 million a

    > year is a small amount compared to the city’s needs

    > of about $655 million over a 20 year period.

    Why not write $19K a day is small compared to about $1.9 BILLION over a 60 year period?

    People that compare one year to multiple years (or add .00 to a number to make it look bigger) often don’t want to have an honest debate.

      1. South of Davis

        David wrote:

        > I used the $32 million per year figure later

        Where did the $32 million per year number come from?

        If something is projected to cost $655 million over 20 years you can’t just divide by 20 to get the cost for the first year (unless in the rare case you have a 20 year fixed rate contract with no inflation or CPI bumps).

  4. ryankelly

    City Council meetings should be reduced to a few long meetings a year to accomodate the reduction in staff.  That would also mean that Council hobbiests would have to find something else to do.

    1. Barack Palin

      Council hobbiests

      I love that term.  I always refer to them as busy bodies.  Unfortunately it seems we have a the same few of them who try and sway council decisions and they in no way represent the whole of Davis.

      1. Alan Miller

        Unfortunately it seems we have a the same few of them who try and sway council decisions and they in no way represent the whole of Davis.

        Yes, it is very important to instead sway council decisions based on what isn’t said by those who don’t participate.

    1. Doby Fleeman

      Another way to think of it would be the difference between one city having a larger component of sales tax revenue because it was a tourist mecca with lots of visiting shoppers, or a city with lots of jobs creating lots of payroll and associated daily spending along with lots of employer paid proprty taxes, compared with a city that had neither and was forced to impose large parcel taxes in order to generate a comparable level of operating revenue to pay for essential city services.  In one case, the associated “revenues” are an organic outgrowth of a robust local economy driven largely by visitor spending and business paid property taxes, and in the other, the same “revenues” are the outcome of an imposed tax necessary to generate the same level of required revenues to fund basic services.  One model disperses the liability across both visitors and businesses, while the other imposes a larger tax burden on local residents.

      1. David Greenwald

        Flying across the country litigating airplane crashes? SPending it with family? I think you’re pushing the line between policy and personal here.

          1. David Greenwald

            Where am I defending anything? I am simply asking that comments be policy specific not personality based.

  5. Michael Harrington

    $245,000,000 ratepayer money saved by our forcing downsize of water plant, delays forced city to find grants and low interest loans  ….

    Growth restrictions …. landowners love that …

     

    open space mitigations ….

     

    All from those dreaded CC “hobbiests”

     

  6. Michael Harrington

    Sometimes I get a little pissed off because when the CC with all that talent and experience votes 5-0 for obviously grossly bad deals for the residents, it’s appalling to me.  I pick my battles and gear up with friends.

    1. Misanthrop

      I know what you mean Mike. Like when you gave the cops and firefighter those unsustainable 3% at 50 pensions retroactive to the original hire date without funding them. Yes Mike, it pisses me off how you buried the city’s finances and dug a hole that we can’t yet find our way out of and now you have the nerve to complain about the current council’s fiduciary stewardship over Nishi and a 3% cola for the cops as if your tenure on the council was a model of fiscal prudence when in reality it was a much bigger disaster than anything the current council has done.

  7. Michael Harrington

    Sometimes I get a little pissed off because when the CC with all that talent and experience votes 5-0 for obviously grossly bad deals for the residents, it’s appalling to me.  I pick my battles and gear up with friends.

    For example, on Nishi.  The CC never articulated at the meetings why they had to give away the $11.0 m worth of housing benefits …. The justifications in the staff report was just a bunch of Mumbo-jumbo bureaucratic speak … It made no sense to us.  Or why the rush to June ballot unless somehow the CC and staff felt like they somehow “owed” something to the Ramosville Growth Zone Team.  So they pretty much screwed Ruff and Whitcomb to give that favorable November ballot position to Ramos ?  Why? The CC members are not saying … Ruff and Whitcomb deserve better.  They could have restored the affordable housing, locked down the city UCD county agreement and other loose ends then nicely gone to a November ballot with little opposition.  But Ramos blocked it …

    If they get Ramosville on the November ballot our opposition team would probably accept $$ from Ruff and Whitcomb …don’t get mad, just get even ….

     

    i think the most likely result is both projects go down in a cloud of dust ..,.. Because for some reason the CC and staff believe that somehow they “owe” the November ballot slot to the Ramos team? The last thing I remember Ramos and company doing for the city was killing baby nesting burrowing owls …)

     

    jyst

    1. The Pugilist

      I find this comment ironic at best.  So Mike is complaining about $11 million in affordable housing giveaways, but in opposing Nishi and MRIC, he is giving away roughly $140 million in city revenue over 20 years.  Talk about cutting off your nose to spite your face.

  8. Anon

    Michael Harrington: “$245,000,000 ratepayer money saved by our forcing downsize of water plant

    You personally saved the ratepayers $245,000 by “forcing downsize of water plant”?  The Water Advisory Committee had nothing to do with it? LOL

    Michael Harrington: “i think the most likely result is both projects go down in a cloud of dust …

    Well at least you are willing to concede what you ultimate goal is.

    The Pugilist: “I find this comment ironic at best.  So Mike is complaining about $11 million in affordable housing giveaways, but in opposing Nishi and MRIC, he is giving away roughly $140 million in city revenue over 20 years.  Talk about cutting off your nose to spite your face.”

    Spot on!

  9. CalAg

    “It is hard to imagine a scenario where Nishi fails but MRIC passes.” David Greewald

    The statement is complete nonsense. Fear mongering of the highest order.

    1. Don Shor

      If Nishi doesn’t pass, the developers of Mace Ranch would be foolish to go forward. Depending, I suppose, on the margin of the vote. Consider the fact that the north Davis site developers bailed even earlier in the process, after just a whiff of opposition from nearby residents.

      1. Tia Will

        Consider the fact that the north Davis site developers bailed even earlier in the process, after just a whiff of opposition from nearby residents.”

        Did they, or were they aware that they might be able to get a better deal elsewhere ?  I don’t think that the timing on any of this has been made clear at least on the Vanguard.

      2. MidCentury

        I disagree. The trouble I have with Nishi is that it is the wrong project for that site. If Nishi could be built without impacting Olive Drive and Richards Blvd, I would probably vote for it and overlook its other problems. I don’t see MRIC having any fatal problems at this time.

      1. Don Shor

        Ramos has been farming that property for a generation. I’m sure they can continue to do that if they feel the political conditions in town are not favorable. If Nishi fails, I expect they will feel the political conditions are not favorable. David’s analysis is reasonable. It’s not fear-mongering. The city’s economic development strategy is very fragile right now.

        1. hpierce

          Ramos has not “been farming the land”… not their business model… they are developers, other enterprises, but not farming… they lease out the land to farmers until the time is right…

          Not uncommon…

        2. South of Davis

          Don wrote:

          >  I know Dan Ramos is probably not the one on the tractor.

          Just like few “developers” are on site with a tool belt “developing” property…

      2. CalAg

        “If Nishi fails …”

        Vote for Nishi or MRIC won’t pass is a pretty bogus argument. Fear mongering is an appropriate characterization.

        In my opinion, Ramos puts MRIC on the ballot no matter what – and resubmits version 2.0 if it fails. They have all the time in the world (i.e. no carrying costs), and the Mace property is the only serious economic development option for Davis. Infill won’t cut it long term.

  10. Paul Thober

    Davis better get ready for “plan B” even if Nishi and Mace pass if the numbers presented above are to be believed. That $7,000,000 in expected revenue is years in the future and also only represents about 22% of the stated shortfall.

     

    Thoughts, anyone?

    1. hpierce

      I am of the opinion that City leaders and the community as a whole should be taking a closer look at prioritizing services, and how best to organize staff to deliver those… too many ‘staffing decisions’ over the past few years, particularly in the Pinkerton years, were based on normal (or reactionary) attrition, and not based on a “needs assessment”.  Many of the ‘worker’ (direct services) positions were lost, but not so much in Admin and/or Mgt.

      That’s irrespective of any issues others may have re:  compensation, etc.  My main concern is prioritizing services, and creating/modifying the organization to reflect that.

      Guess I’m thinking more along the lines of informed scalpel use, instead of broadsword/battleaxe approach.

      1. Matt Williams

        Based on his comments from the dais Council member Robb Davis agrees with you hpierce.  In his  Cost Containment as an Element of Fiscal Resilience plan his first two points are:

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

        2. Based on 1, consider best ways to provide services going forward with focus on (a) training workers to take on multiple tasks (as is happening already) and (b) consideration of targeted and appropriate outsourcing of services.

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

        As a candidate for City Council I wholly support, and will fight for, the implementation of Robb’s points as well as the FBC additions.

         

         

        1. Frankly

          This is exactly what needs to be done.  I have done the exact same thing more than a dozen years of my 35 years experience as a manager of a cost center or company.

          Here is a big related challenge…

          When you do this the first time in any organization with personnel lacking experience with it, you should expect 50% employee turnover.

          The motivation progression for employees typically starts with high enthusiam to learn and say “yes” to every assignment.  But over time, say after 8 years, most employees settle into being comfortable in their role and begin to resist change that upsets their comfort level.  Those employees naturally fill up their day with tasks and let it be known they are too busy to take on anything else.

          Progressive organizations counter this by continually “shaking up the box of ants” (note how ants in a box move slowly until the box is shaken and then they move more quickly).  Change is the constant, not the exception.  The goal is to keep employees flexible, nimble and used to change… and constantly improving to do things faster, better and cheaper.

          But the first attempt at changing an organization this way will create a mess of senior employee digging in their heels, filing HR claims of hostile work environment and blocking the change any way they can.  These employees have to be removed one by one.

          But with the union-political connection, this is unlikely to happen.

          So, this plan is likely to fail.

          This is why I always point out that the first step is to de-unionize government employees.

        2. Matt Williams

          Frankly, this election and my campaign is about whether you believe doing the same thing over and over again will produce a different result.  I don’t.  
           

           
          To address the challenges you and hpierce and I have described above, as well as the other challenges our community faces, we must change, and that is why I am running for City Council.  
           
          I am confident we can get this change underway.  We need more evidence-based decision-making and less political calculation.  We need to stop kicking the can down the road.
          It will be a difficult journey, but not nearly as difficult as the journey we will take if we continue doing the same things we have been doing.
           

        3. hpierce

          As to the City, you continue to spout BS, frankly… there is one “union” (affiliated with a State/national affiliation)[FF’s], three employee associations (unaffiliated, nominal dues), a general management unit (no dues) and  upper management and department heads… not sure if there is an ‘association’  for upper management, but upper management and Dept heads are “at will”, so I suspect NOT…

          You sound like a certain “conservative” [his own party questions his conservative credentials] presidential candidate who spouts untruths and even when called on it, denies it, spins it, or says ‘they’re out to get me’… if that’s your hero… well, what can I say… but you do have much in common, based on your more vitriolic posts…

          You’d do well to stick to factual information (which I might challenge, but maybe not), and lose the plethora of adjectives and mis-truths… you might even gain some credibility as to positions you feel strongly about… but I doubt you will… you’ll be a “joke”, if you don’t stay more focused… unproductive…

           

        4. hpierce

          Oh, Frankly… if you want to attack public unions, suggest you also focus on DJUSD (maybe even UCD)… by both numbers, and percentages, labor unions and representation, greatly exceeds City of Davis… but I suspect you have not the guts to touch ‘the third rail’…

          I can say this as I have never belonged to a union, and never will…

        5. The Pugilist

          HPIERCE:

          Were you:

          1.  Represented by a bargaining unit in collective bargaining in which your contract was agreed to?

          2.  Did you elect the leadership of that bargaining unit through some sort of internal voting mechanism?

          3.  Did you pay dues to that bargaining unit?

        6. hpierce

          Pugilist, re: your 9:07 post…

          1. Yes… was forced to by the city… not my choice.

          2. Because we were forced (another entity) to become a ‘bargaining group’, and to avoid being a part of AFSME or Teamsters, we got together to form an ’employee association’.  I was the first ‘president’ and we came to agreement within 2 months of ‘negotiations’… we laid our cards on the table, the agency did the same, and we quickly came to agreement… the “union” held out for nearly a year, and settled for `less’.  In Davis, all employees except “at will” ones (and even some of them) are compelled by the City to be a “unit”… not a ‘union thing’ … please get a clue.

          We did elect/appoint those who actually met with CM/HR… usually by concensus, but sometimes by ballot… the City only allowed 3-4 folk in meet and confer (which is, by law, different from “negotiations”).

          3. received no salary/compensation (ever, during the several years I was on ‘negotiating teams’), and the voluntary assessment (previous entity) was about $2.50/year to cover xerox costs of our paperwork… some of us gave more… the total cost was ~ $40.00… other years there was no assessment at all… total in ~ 35 years of public sector experience… $4.00…  a bit over 10 cents per year…

          Does that answer your questions?

           

        7. CalAg

          MW: Another important piece of the puzzle is maximizing the value we receive for every infrastructure dollar that is spent. For example. if we could save 20% on our pavement costs we would be talking about some real money.

          Cost per unit is the key. If we save 50% by paving 67% fewer linear feet, that’s not a good deal.

          I suspect this might dwarf the savings we could reasonably extract from reductions in staff and services, but I could be wrong.

        8. Frankly

          As to the City, you continue to spout BS, frankly… there is one “union” (affiliated with a State/national affiliation)[FF’s], three employee associations (unaffiliated, nominal dues), a general management unit (no dues) and  upper management and department heads… not sure if there is an ‘association’  for upper management, but upper management and Dept heads are “at will”, so I suspect NOT…

          Employee associations are not really much different than unions in context of my points.  Employee associations collectively bargain and organize for political contribution (time and money).   I will concede that the management layer is not represented this way… so maybe you can tell me why there is so much top-heavy bloat at this layer.

          Oh, Frankly… if you want to attack public unions, suggest you also focus on DJUSD (maybe even UCD)… by both numbers, and percentages, labor unions and representation, greatly exceeds City of Davis… but I suspect you have not the guts to touch ‘the third rail’…

          Oh come on hpeirce… I have been one the most consistently vocal about the bloat of ALL state government and the state public employee unions.  UCD has been one of my favorite targets for my rants about unionized public sector labor.

  11. The Pugilist

    HPIERCE:

    You have often repeated this claim: “there is one “union” (affiliated with a State/national affiliation)[FF’s]”

    That is not true.  DPOA (Police) is clearly affiliated with CPOA (California Peace Officers’ Association).

    1. hpierce

      I may have been mistaken re: PD… I wonder if that is a recent (last 5 years) development… I acknowledge I may have been mistaken on that part… I stand by the balance of my comments.

      Oh, and your evidence/citation?

      I note your capitilization of my moniker… truly a Pugilist?

      1. The Pugilist

        Go to their website and you’ll see they are statewide and Yolo County is in Region 6.

        Nothing meant by the capitalization of your moniker.

        1. hpierce

          I stand (actually, sitting) corrected as to DPOA… I stand by my comments as to non -PS employees… thank you for helping me in my continuing education… Honestly, your cite was news to me… thought I ‘knew’, and apparently was wrong.

  12. Frankly

    the city’s needs of about $655 million over a 20-year period.

    Simple math… this is $37.25 million per year.

    Now much of that is the backlog of deferred maintenance of prior years of too little revenue and too much spending on city labor.

    Using previous developed reasonable estimate of $5MM per year of revenue per 200 acres of commercial development, 1000 acres of new peripheral innovation parks with some retail and hotel business would bring in another $25MM per year.  The remaining $12.25 million can come from a combination of city employee cost reductions and a temporary extension and increase of the city sales tax.

    Problem solved.

    1. David Greenwald

      “Simple math… this is $37.25 million per year.”

      Unless you are calculating using a different math than me, $37.25 million times 20 is $755 million.

      1. Frankly

        Ha!.  I guess VERY simple math… after dinner and three margaritas.  Actually a typo that led me astray… $32.75 per year.  Which means (after the net $5MM per year from the new 1000 acres of commerical development… which btw only adds another 1.5 square miles to Davis… an already hyper-dense small city of 10 square miles) that the amount we would need to cut from city labor spending is only $7.25MM.

        1. hpierce

          Nice… with about 375 employees, $7.5 MM , that’s an AVERAGE reduction in compensation of $20,000/ yr.   One way that could be done is to eliminate any City contribution to healthcare, and a modest salary decrease.

          If you want to protect the lower paid staff, then the higher compensated folk could take a much more significant cut.

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