The Nishi 2.0 “Fair Share” Question of the Day: “Is 107% equal to 75%?”

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By Matt Williams

The Tuesday night agenda has Council making two very important fiscal decisions, specifically,

  1. In Item 5, because the current budget can’t be balanced with 100% of General Fund revenues covering expenses, if approved, Council will ask the voters to vote on two parcel taxes that the Staff Report for the Item describes as follows,“Based on the Leland long-term forecast the two parcel taxes generate an annual average of $4.6M in new revenue.”  Approval of those taxes will increase General Fund revenues from 100% of current to more than 107% of current.
  2. In the Item 7 proposal to put the Nishi Residential Development on the June Ballot, the updated New Development Fiscal Model that Staff has presented to Council and the FBC for evaluation of the Nishi project uses a baseline of 75% of current General Fund Expenses (in the City’s Budget annual Expenses equal annual Revenues), and at that 75% level Staff“estimate(s) that annual ongoing revenues and costs for the city from the project would be modestly net positive over time.”  

My question to you and the members of City Council and to the all Davis voters is why staff and the Council are considering holding the current taxpayers of Davis to a 107% standard at the same time the Nishi project is only being held to a 75% standard.  Shouldn’t Nishi be responsible for the same 107% burden as current taxpayers are responsible for?

Why should current City taxpayers be responsible for a 107% “Fair Share” of the current City Budget while the Nishi development project only is responsible for a 75% “Fair Share”?

Why is Council considering asking the Davis taxpayers for more, while simultaneously asking the Nishi developers for less?



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About The Author

Matt Williams has been a resident of Davis/El Macero since 1998. Matt is a past member of the City's Utilities Commission, as well as a former Chair of the Finance and Budget Commission (FBC), former member of the Downtown Plan Advisory Committee (DPAC), former member of the Broadband Advisory Task Force (BATF), as well as Treasurer of Davis Community Network (DCN). He is a past Treasurer of the Senior Citizens of Davis, and past member of the Finance Committee of the Davis Art Center, the Editorial Board of the Davis Vanguard, Yolo County's South Davis General Plan Citizens Advisory Committee, the Davis School District's 7-11 Committee for Nugget Fields, the Yolo County Health Council and the City of Davis Water Advisory Committee and Natural Resources Commission. His undergraduate degree is from Cornell University and his MBA is from the Wharton School of the University of Pennsylvania. He spent over 30 years planning, developing, delivering and leading bottom-line focused strategies in the management of healthcare practice, healthcare finance, and healthcare technology, as well municipal finance.

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22 thoughts on “The Nishi 2.0 “Fair Share” Question of the Day: “Is 107% equal to 75%?””

  1. Ron

    From article:  “Why should current City taxpayers be responsible for a 107% “Fair Share” of the current City Budget while the Nishi development project only is responsible for a 75% “Fair Share”?

    Good question.

      1. Aaron Latta

        This “107%” you speak of Ron is not the product of unfair treatment in favor of a developer. It is the willful ignorance of the needs of the community by the landholding few. For 15 years the citizens of Davis have chosen a set of “no-growth” policies that restricted the tax base of our town. As costs have increased the amount of people to help contribute to our city’s general fund have not. Now we are forced to tax ourselves even higher to simply pay for roads that work. The reason why Nishi is considered to be net fiscally positive is the fact that its residents are already here or expecting to arrive in our community. Therefore the traditional costs from attracting more people into our community no longer apply.

        But whats more troubling here is the equivalence of the Nishi contribution to the parcel taxes measures. By making this comparison as an issue of fairness you will run the risk of causing our housing crisis and as a result our city financial crisis to get even worse.

        I dont like the idea of adding more costs to local residents and businesses. But if I have to choose between working roads and $50 (this is a guess of how much I as a renter will pay) out of my pocket a year, I will choose working roads every time.

        Solving the housing crisis will solve our financial crisis. Dont shoot our left feet to distract us from our right please.

        1. Matt Williams Post author

          Aaron Latta said . . . “The reason why Nishi is considered to be net fiscally positive is the fact that its residents are already here or expecting to arrive in our community. Therefore the traditional costs from attracting more people into our community no longer apply.”

          Aaron, what “traditional costs” do you believe do not apply?  Why do you believe they do not apply?

          The current expenses and revenues in the City Budget (the 100%) are what they are. They go to 107% if the proposed taxes are approved by the voters.  The choice the voters have regarding whether or not to go from 100% to 107% has nothing, absolutely nothing, to do with the fact that the City staff model assumes expenses for Nishi at a 75% level.

          Your answer to the bolded question above will illuminate your rationale for why Nishi should pay 25% less than all the rest of Davis.  I look forward to hearing your answer.

  2. Aaron Latta

    As to the traditional costs I mean the costs of city services. Nishi residents will live in town no matter if its built, one assumes that cost will exist separate from the Nishi development. The only unfairness in the facts you display is how a small portion of the electorate of this town held the rest of us hostage through stopping proper growth planning. We brought the 107% cost on our selves by not appropriately planning for this town’s future and placing property values over a healthy community. This is a distraction from the solutions to our problems by pitting our problems against each other.

     

    1. Matt Williams Post author

      Aaron Latta said . . . “The only unfairness in the facts you display is how a small portion of the electorate of this town held the rest of us hostage through stopping proper growth planning.”

      In those words you are making a Social Equity argument, which is very different from the Fiscal Equity challenge illuminated by my article. Further, from our recent conversation at Council Chambers you know I both understand and empathize with your position on that Social Equity argument.

      With that said, let’s focus on the Fiscal Equity challenge.  When you say that “one assumes that cost will exist separate from the Nishi development” what costs of city services City are you referring to?

  3. Richard McCann

    ” baseline of 75% of current General Fund Expenses” — I’m unclear on this: Is the Staff analysis assuming that City expenses would be reduced 25%? Is there documentation on how this adjustment is made?

     

    1. Don Shor

      Richard: if you’re interested in the assumptions, you can find them here:

      http://documents.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/Finance-And-Budget-Commission/Agendas/20180108/Item-6B—Fiscal-Model-2017-18-Update—new-model-Nishi-700-units-2200-DUE.pdf

      Given what has been highlighted there, the 75% of General Fund Costs Variable is based on the higher density of housing compared with other areas, and the complete absence of parks and street trees, among other things.

      1. Ron

        From the link that Don provided.  Not sure if this is complete:

        Variable vs. Fixed Costs for Service Expansion. (Percent of General Department or Function Fund Costs Variable.)

        Department of Public Works Administration 75%
        Department of Public Works Support Services 75%
        Community Development Department Overall 75%
        Parks and Community Services Administration 75%
        Fire Department 75%
        Police Department 75%
        General Government Functions Overall 75%

        It does not appear that Don’s conclusion is correct.

      2. David Greenwald

        As I understand it – 25 percent of costs are fixed and 75 percent variable.  For instance the project won’t require the city to build a new fire station or buy new fire equipment, but there will be some variable cost associated with fire protection.

        1. Matt Williams Post author

          You have hit the nail on the head. Let’s take that Fire Station for example.  The current taxpayers of Davis have paid 100% of the cost of building that fire station and 100% of the cost of servicing that fire station.  If Nishi, or any New Development is held responsible for 0% of those respective costs, they are getting a free ride on the backs of and from the pocketbooks of the current Davis residents and taxpayers. The annual taxes paid by Nishi should include a “fair share” amount so that the costs of building/rebuilding and servicing the fire station are being paid fairly and proportionally by all Davis residents and taxpayers.

          Another example that was given of a fixed cost by staff was/is the cost of a Police Chief.  Building Nishi will not cause the City to hire another Police Chief, so on the pure fixed/variable model you allude to, the incremental variable cost for Police Chief for Nishi is $0.  However, the fair share cost of Police Chief for Nishi is calculated by dividing the total Police Chief annual costs by the total number of DUEs (or people) in the City and then multiplying that amount by Nishi’s DUE total.  I can guarantee you that that number will not be $0.

        2. Ron

          Regarding Matt’s comment above, it appears that this would not account for the expansion of facilities (paid for by impact fees) and services (paid by taxes), as the city grows larger. The city has still not updated its impact fee schedule.

          Regarding the police chief example, I realize that only one is needed.  However, workload/delegations, responsibilities, and salary cost would likely increase as the city grows larger. (And of course, “regular” police/fire costs would increase, as the city grows larger.)

          In any case, it appears that even existing facilities and services are not being properly allocated for new proposals such as Nishi (as Matt has noted).

        3. Howard P

          Matt.. you analysis is flawed (details off-line)… as is Ron’s ‘affirmation’ … which has several further flaws… but I choose not to rebut…

      3. Matt Williams Post author

        Don, based on what was presented to FBC at the December meeting, the cost of onsite park maintenance (which was $181,000 per year for “Scenario 10:Parks & Open Space Responsibility” in the EPS Nishi 1.0 analysis) covers the residents’ use of the new parkland located on the property, but does not include the “fair share” allocated costs per person for all the other parks and open space throughout the City.  You at Redwood Barn Nursery probably do not make direct use of a substantial portion of the parks and greenbelts around the City, but you nonetheless pay your “fair share” of the maintenance of all parks and greenbelts and open space.

        You, as a member of the consultant advisory team dedicated to the current Nishi project should know that.

  4. Don Shor

    It seems there is an effort here to assert that the Nishi property will be assessed and taxed at a different level than the rest of the city. If that is not the intention, perhaps the actual point could be made more clearly. The “75%” figure refers to assumptions in a fiscal model. The “107%” figure refers to taxation.

    Fairness issues with respect to property taxation is basically an issue resulting from Prop 13. Parcel taxes are in dollars, not percentages, unless I’ve misunderstood what the council is considering.

    So as far as I can tell, there is literally no relationship between how the city staff assessed the fiscal outcomes of Nishi and the revenue proposals.

    1. Mark West

      Matt is asking for one more exaction from the developer, added on top of all the rest that have already been paid or negotiated. I expect the City has squeezed all the blood it will get from this turnip so Matt’s continuing demands now are nothing but an effort at obstruction.

      1. Ron

        It appears that Matt is attempting to show what Nishi’s cost would be to existing taxpayers. If the development is not paying its share, than the burden will ultimately fall upon (and be “extracted from”, as you put it) other taxpayers.

      2. Howard P

        Mark… my sense is that Matt is not trying to obstruct… au contraire… others may use his words to do so… Matt may have different views (sometimes big time) from mine… but he pretty much knows his views can find their place before the vote…

        It is time to call the question, and folk have ~ 4 months to make their arguments, and/or rebut those of others… otherwise, we are “kicking the can down the road”  [actually, loved playing “kick the can” when in elementary school…]

        Up or down… let’s vote in June… to postpone is BS… still not sure how I’ll vote (truly), but with the UCD draft MOU, am fully “on the bubble” now… without that, would be disinclined…

    2. Matt Williams Post author

      Don, by law in California a municipality’s expenses can not exceed the municipality’s revenues, so on a City-wide basis 100% of current expenses equals 100% of current revenues.  When/if the voters approve the proposed tax increases, future period revenues will rise to 107% of current revenues and future period expenses will rise to 107% of current expenses.  So the 107% figure applies to both revenues (taxation being part of revenues) and expenses.

      The City has chosen not to model Nishi at 100% of current expenses, but rather at 75% of current expenses.

      At the recommendation of the Finance and Budget Commission, in addition to the “standard revenue sources” contained in the initial EPS model the City and the Nishi 1.0 Developer mutually agreed to the following additional revenues:

      $93,000 per year for a “make-whole provision for properties removed from the tax rolls”
      $181,000 per year for “privatization of costs of maintain parks, greenbelts, and streets”
      $356,000 per year for “Community Services District Revenues (to achieve the same 1.6% rate as the Cannery)”

      Those three additional revenue streams all of which are beyond the scope of Proposition 13 total $630,000 per year.  In the Nishi 2.0 model, none of those dollars are included, despite a clear request to do so during the December 2017 FBC meeting discussions.  Costs based on 100% of the current City expenses (as EPS did in its 2015-16 modeling efforts) and Revenues based on current City Revenue streams plus the $630,000 the Nishi developers agreed to in Nishi 1.0, would provide a true fair share picture of the project.  Instead we have 25% discounted costs and revenues in which the $630,000 a year that the Nishi developers already agreed to pay have evaporated.

      Contrary to Mark West’s assertion, this is not “one more extraction” from the developer, but rather the continued transparent recognition of what they have previously agreed to. Either it is “in there” or it is not. If it is in there then show it. If it is not, then be honest about the fact that it is not. $630,000 a year is a terrible thing to waste.

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