The Hyatt House hotel is only the most recent example of the difficulty of doing infill in Davis. Prior to that we have seen pushback from the neighbors of Trackside, Sterling Apartments and Paso Fino. For the purposes of this discussion, let us assume that there are and were legitimate reasons for the neighbors to object to the size and scope of those prospective developments.
One thing we must all recognize is that the reason that the size and density of these infill projects are so high has to do with cost of building developments in Davis, relative lack of available infill land, and the unavailability of peripheral land that would be less impactful on most existing neighborhoods.
Nishi is the most recent example – and again, we do not want to preclude the fact that there were flaws with that proposal, only that Nishi became the third proposed Measure R vote and the third defeat for a peripheral project since 2000.
Where does that leave us? Following the defeat of Wildhorse Ranch in 2009 by overwhelming margins, the city decided that Measure R projects were largely going to be off the table. The focus was going to be on infill and densification. While the city was finally able to get the Cannery approved in 2013, the going on infill projects has been slow and pinned the needs of the city against the needs of neighbors.
The hotel project at the Hyatt House is a good example. The city is looking at expanding its hotel base as one way to increase revenue. Fiscal analysis by Dan Carson suggests the project could net the city $700,000 on an annual basis.
As we know, the neighbors see it differently. They see a high-density project that would be a poor fit next to their neighborhood, with potential for traffic, aesthetics, noise and other nuisances.
The city faces challenges on at least two fronts. A very low vacancy rate for rental housing has made rentals expensive and has disadvantaged renters. Some see the university and growth of enrollment as the key driver of this shortfall, and have pushed for the university to take on a much greater percentage of growth.
At the same time, the city is suffering from a revenue shortfall. While the city budget appears balanced on paper, it is a precarious balance, dependent on the continuation of a second half-cent sales tax. But that excludes an additional $14.28 million in underfunding for things like roads, parks, buildings, OPEB (Other Post-Employment Benefits), and PERS (Public Employees’ Retirement System).
The twenty-year shortfall for those items projects out to over $600 million.
The city is struggling to generate additional revenue. As our previous analysis shows, the city’s under-development in retail has left it far below its neighbors in per capita retail sales, meaning its sales tax take overall is far less than either neighbors like Woodland, Dixon and West Sacramento or comparable university towns like Palo Alto and San Luis Obispo.
While the community loves the small town nature of Davis, it is quite clear that something has to give. Right now, the city lacks the revenue necessary to continue to have its high level of services, and to maintain basic critical infrastructure for roads, bike paths, parks, buildings and the like.
The problem that we face is the lack of consensus for the direction that we take. The narrow outcome on Nishi shows just one such divide, with a small 600-vote margin between those who believed that the city should approve Nishi – with its 1500 or so beds of rental housing and its 300,000 square feet of R&D space – and those who did not.
There is the infill route, which basically allows the council to make a decision on housing and mixed-use projects within the current confines of town. However, as we saw with Embassy Suites, that does not preclude a lawsuit. As we have seen with Paso Fino, Trackside, Sterling, and now the Hyatt House, it also does not preclude community pushback.
We do not know how the current council will rule on these projects. Past councils pushed Mission Residence through over neighbor objections, but forced the developers to greatly reduce the scope of Paso Fino.
With limited numbers of open space and a lack of money for redevelopment, the prospects for infill seem to be limited, but everyone will be watching the former Brinley Properties in downtown to see what the new owners have in mind for them.
The limitations for infill would naturally push us to look at the periphery again, particularly for research parks that could generate revenue. But here too, we have barriers. The city has still not passed a Measure R vote.
The developers who proposed projects north of Sutter-Davis and east of Mace Boulevard have since abandoned their plans – although, in a recent article in the Sacramento Business Journal, Dan Ramos of the MRIC (Mace Ranch Innovation Center) project said “he’s hopeful to re-introduce Mace ranch and get it to a Measure R vote.”
There seem to be at least two considerations here. The first is the prospect of spending millions on a project without getting it approved. Finding a way to reduce uncertainty for developers might make them more willing to figure out a solution to the second problem – financing for a commercial-only project.
The Vanguard has had extensive discussions with developers and others with knowledge of both the Davis Innovation Center and MRIC and, despite community skepticism about intentions, the reality seems to be that financing for a commercial-only project is problematic at best. The inclusion of housing offers more certainty for a return on investment than non-retail commercial.
People inevitably ask whether they realized this limitation going in – and the answer to that appears to be no, that this represented a problem that was unanticipated going in, and more serious than they probably recognized.
That means that, unless the community is willing to accept mixed-use, these research parks are going to be difficult to build. One potential way around that problem would be if the city, private developers and UC Davis went in on these projects together and UC Davis invested hundreds of millions of upfront financing to make it pencil out for the private entities – that’s what happened at both USC and Purdue, although both of those projects had housing as well.
As we have noted in the past, peripheral retail has generally been a non-starter. The city was able to get Target approved and through the voters – narrowly – but the general consensus has been to shy away from peripheral retail as a revenue solution.
Again, looking at the revenue projections and the unfunded city needs – something has to give. Right now it is unclear what. Are the residents of Davis ready for massive new taxes? Are they ready for a huge decline in quality of the community? Those are the only alternatives to changing land use. At some point the community has to decide, and in ten years, one way or another, Davis will look very different from how it looks today – we just have to decide how and whether it is for better or for worse.
—David M. Greenwald reporting