Robb Davis/Matt Williams Dialogue on Nishi Financials — Part One

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Yesterday morning in the comments of David’s latest advocacy statement in favor of the Nishi project, I posted the following response:

Individuals have different reasons for opposing this Nishi project.  For me, uncertainty is the least of those reasons.  My personal reasons are as follows:

—  Nishi 2.0 Will Cost Davis Taxpayers between $350,000 and $750,000 per year

—  Nishi’s cash contribution to City has shrunk 90%  from $1.4 million down to $143,000.

—  $650,000 per year of Community Services District revenues in Nishi 2016 have “vanished” in Nishi 2018.

—  Nishi 2018 has no dollars for deferred maintenance of capital infrastructure.

—  That is the same short-sighted, politically-driven thinking that created the current dilapidated state of our roads and the $8 million annual shortfall in the City Budget.

Guess who picks up the fiscal difference … Davis taxpayers

Further, the City’s planning process for this current Nishi project has been co-opted by politics and brinksmanship, and as a result suffers from a woeful lack of integrity

—  All 5 Council members have said in public testimony that the 2018 Nishi project is inferior to the 2016 Nishi project.

—  Analyses presented to city Commissions have been rushed and incomplete.

—  The Ballot Argument authors have made no effort to acknowledge, explain or correct the misleading overstatements, despite having been made aware of them.

The bottom-line for me is that the City needs to be honest and transparent with its citizens and taxpayers.

Yesterday afternoon Mayor Davis took the time to respond to my comments one-by-one.  I thank Robb for doing so, and particularly thank him for the structured format he used to reply.

I apologize to Robb for not responding sooner, but I was out on a movie and dinner date with a group of Davis friends and the Notorious Ruth Bader Ginsburg.  So here, better late than never is my point-by-point response to the first of Robb’s comments. This is the first of a series of articles in which I will respond to all of Robb’s points. I believe that covering them one-by-one will produce a more focused and fruitful dialogue.

Matt:   Nishi 2.0 Will Cost Davis Taxpayers between $350,000 and $750,000 per year

Robb:  FBC findings on Nishi, January 8, 2018 (the only action they took in relation to Nishi)

We also generally concur with the estimate that annual ongoing revenues and costs for the city from the project would be modestly net positive over time.

We note, however, that the estimate does not reflect additional revenues that could result if Davis voters approve an increase in parcel taxes. Also, the estimate does not include revenues from Proposition C cannabis taxes or possible community enhancement funds that could result from the negotiation of a development agreement. Also, the EIR adopted for the original, larger, version of the Nishi project suggests that police and fire costs for serving the new residents could be nominal. (A new environmental review is now being conducted for the revised project.) Thus, in some respects, the net fiscal benefit of the project could be greater than estimated.

Robb made that same point in the May 6th Civenergy Forum, which is that the Council prefers to cover its eyes and ears and proactively ignore everything other than the formal written words they received from the Finance and Budget Commission.  What they are doing is using the specifics of one facet of a multi-faceted process to hear no evil and see no evil.

When I read this comment of Robb’s last night after dinner, I couldn’t help but reflect on what Ruth Bader Ginsburg might have done if she were on our City Council.  Would she have ignored the clear findings of the city’s economic consultants that it was/is unwise to look at a project’s costs solely on the basis of its immediate cash impact?  Would she have read the EIR with the narrow interpretation of the formal written FBC finding quoted by Robb above,

Also, the EIR adopted for the original, larger, version of the Nishi project suggests that police and fire costs for serving the new residents could be nominal.

or would the Notorious RBG have also considered the fiscal advice of the City’s economic consultant when they said in a formal written report to the City:

Additional Considerations

Public Service Costs

EPS utilized standard industry methods to compute the expenditures for both the Annual Fire and Police expenditures. In response to concerns over the level of public service cost associated with the project, EPS conducted interviews the Chief of Police, Darren Pytel and Assistant Fire Chief, Rick Martinez.

Chief Pytel indicated that the estimates made by EPS were reasonable and appropriate particularly given concerns of difficulties in enforcement within the area due to constrained access. Similarly, Assistant Chief Martinez advised against running any scenarios with reduced Fire Department costs due to a need for increased labor resulting from the population and employment growth attributed to the project. Based on these interviews, EPS did not construct any additional sensitivity scenarios to reflect lower public service costs.

I suspect RBG would have considered the whole picture.

Instead of encouraging the voters to look at the full economic picture … both immediate cash impact and full life-cycle cost impact … Robb is advising the voters to follow the same approach as Council used … to cover their eyes and cover their ears as the best way to decide how to vote on Measure J.  I respectfully disagree with that approach.  An informed electorate makes wiser decisions when voting.  It costs the City absolutely nothing to be honest and transparent with its citizens and taxpayers … especially when they are voting.

Tell the citizens what the immediate cash impact is for the project, as well as the additional costs that will have to be paid by the taxpayers as the various components of the capital infrastructure that supports the residents of Nishi reaches the end of its useful life. What are some of those down-the-road components of capital infrastructure that reach an “end of useful life”?

  • Police cars
  • Fire trucks for example. 
  • City Buildings, and their components like roofs. 
  • Road surfaces. 
  • The surfaces of greenbelt pathways. 
  • Parking lot surfaces at City parks.
The Yes on Nishi team has tried to argue that they are assuming all those end of useful life costs themselves by keeping the ownership and maintenance of both the roads and parks and open space private, but that ignores their “fair share” of the end-of-life repair/replacement of the “common good” capital infrastructure.
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About The Author

Matt Williams has been a resident of Davis/El Macero since 1998. Matt is Chair of the Finance and Budget Commission of the City of Davis (FBC), and a member of the Downtown Plan Advisory Committee (DPAC) and 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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8 thoughts on “Robb Davis/Matt Williams Dialogue on Nishi Financials — Part One”

  1. Howard P

    Their “fair share” for the ‘stuff’, is the same as what we pay, Matt… good thing there are no “ex post facto” assessments on your and my “fair-share” delinquencies, right?

    If all of us took direct responsibility for all the unfunded maintenance, replacement costs of everything when we arrived in town (and since), well…

    1. Matt Williams Post author

      You and I have talked about that issue/question both over coffee and over beer.  If their parcel were already in the City Limits I would agree with you a whole lot more than in this situation, where the parcel is not currently in the City Limits … and is requesting annexation to the City.

      They have an alternative … to do the project under the jurisdiction of Yolo County.  However, they are not choosing to do so, and that is by choice.

      The Cannery had no problem voluntarily agreeing to a 1.6% Effective Tax Rate (ETA).  Nishi 2016 had no problem voluntarily agreeing to a 1.6% Effective Tax Rate (ETA).  If Nishi 2018 (and City Council 2018) feel that the same 1.6% ETA is not appropriate, then why don’t they simply come out and explain why?  If Nishi 2018 (and City Council 2018) believe the EPS/Plescia/Goodwin fiscal analysis and recommendation of the 1.6% ETA for Nishi 2016 should be ignored in Nishi 2018, then why don’t they simply come out and explain why?

      It costs the City absolutely nothing to be honest and transparent with its citizens and taxpayers … especially when they are voting.

    2. Matt Williams Post author

      Howard, one follow-up question … are you comfortable with the $143,000 per year immediate cash flow surplus for the project at full build-out, and the between $350,000 and $750,000 per year full life-cycle costing deficit for the project at full build-out?

      Said another way, are you comfortable with an annual impact of the project between $143,000 surplus and $750,000 deficit?

      1. Howard P

        Yes…

        All figures are guesses… our mileage may vary… bottom line the other way… if no further development occurs, are you comfortable with the financials?  Is the status quo “working” for you?  Have you paid your “dues”?  Still working on mine, after 40+ years as a resident.

        No one has paid not only for the infrastructure they “caused”, and all the maintenance and replaement costs… cold, hard truth…  some would have “newbies” pick that up… are you one of those?

        Two edged sword…

        1. Matt Williams Post author

          I wholeheartedly agree that all figures are guesses, but some are more educated guesses than others.  I trust you on transportation engineering guesses.  I trust EPS/Plescia/Goodwin on fiscal guesses.  I trust my self less than you on transportation engineering and the whole FBC less than EPS/Plescia/Goodwin.  I trust Darryl Pytel much more than the FBC on the full life-cycle costs of running the Davis Police Department.   The key is to make “educated” guesses, and wherever possible don’t rely on a single source of information.  That is good process.  That is also advice that Robb is loudly proclaiming that he and the Council did not follow.  He has repeated the “FBC was our single source” message many times since February 6th.

          I respectfully disagree with your final paragraph.  I believe the residents of Cannery have paid “twice” for the infrastructure they “caused” … and their “second” payment for the infrastructure (the CFD) is very close to usurious with its 20% closing costs ($2 million on an $8 million proceeds, for a total bond issuance of $10 million) and 6% interest rate (I could be off slightly on the interest rate).

          Compare that to the advice to Nishi 2016 that Ray Salomon and I lead the charge on, and the rest of the FBC concurred with.  We showed Tim Ruff that to borrow $8 million his closing costs could/would be between 1% and 2% (between $80,000 and $160,000 rather than $2 million) and his interest rate would be between 3% and 4% rather than 6%.  On a 30-year loan that meant the difference between an annual debt service payment of $725,000 and an annual debt service payment of between $410,000 and $460,000.  The annual debt service savings of between $315,000 and $265,000 works out to $400.00 per unit … each year for 30 years.  Tim Ruff thanked the FBC and the subject of a CFD to build the Nishi 2016 infrastructure was never discussed again.

          A CFD made/makes even less sense for Nishi 2018 than it did for Nishi 2016, and despite Robb Davis’ comments to the contrary yesterday (copied and pasted below), no CFD was ever proposed proposed by the Finance and Budget Commission for either Nishi 2018 or Nishi 2016.

          Correct. In the original Nishi project the FBC recommended a CFD (CC put forward a CSD instead)

          Like Cannery, mace Ranch had a CFD imposed after the fact, which effectively meand the property taxpayers of Mace ranch are paying twice for their capital infrastructure.  Once at the time they purchased their new Mace Ranch residence, and a second time when they pay their annual CFD (Mello-Roos) tax payment.  To the best of my knowledge you, as a resident of Mace Ranch, are one of the people who has paid twice.

          In a two-way text dialogue with Robb on May 19th, when I followed up with him on his CFD pledge to the audience at the May 6th CivEnergy forum … there is a substantive difference between a Community Facilities District (which pays for the creation of capital infrastructure) and a Community Services District (which pays for a sinking fund for end-of-life repair/replacement of capital infrastructure).  With that said, monetarily (to the homeowner), the difference is moot.  In both cases they are paying for the capital infrastructure twice.  The major difference for the homeowner is that with a Community Services District they know that there is money in a City fund to pay for the end-of-useful-life repair/replacement.  With a Community Facilities District there is no such repair/replacement money.

        2. Howard P

          As to Cannery, will discuss “off-line”… I am on record as being opposed to the Cannery CFD.  Yet, neither Wildhorse, Mace Ranch Park, Covell Park (Northstar or ‘regular’), Davis Manor, Stonegate, Aspen, Evergreen, Oakshade, Willowcreek, etc., etc., etc., paid up front, in impact fees, for full impacts for not only direct impacts, but also for life-cycle costs, including replacement costs… no way, no how, no question… and old Willowbank, Binning Tract, and El Macero (hope I hit a nerve there), got a subsidized ride on Davis taxpayers, as far as impacts, but no significant financial contributions from the latter 3 …

        3. Matt Williams Post author

          You and I were 100% in sync in our opposition to the Cannery CFD.

          None of the developments pay twice up-front.  You are misinterpreting me if you read it that way.  They pay once up-front in the purchase price when they buy the residence.  Then in the case of the Cannery CFD and the eight other Mello-Roos Community Facility Districts in Davis (see http://cityofdavis.org/city-hall/finance/mello-roos-community-facilities-tax-assessments) they pay for the construction/reconstruction of needed public facilities a “second” time in annual installments.

          The Community Services District (CSD) approach (1) proposed by the Finance and Budget Commission, (2) validated by the EPS/Plescia/Goodwin consulting team, (3)  in conjunction with staff and (4) the City Attorney, and (5) mutually agreed to by the developer and City Council (under the modified name of a “Land-Secured Financing District”) had the same fiscal impact as a CFD, but was a proactive maintenance of homeowner/taxpayer value rather than a retroactive give-away to the developer.  And it accomplished it with 0% closing costs rather than 20% closing/reserve costs and 0% annual interest rate rather than 6% annual interest rate.

  2. Howard P

    Sidebar:

    I have often disagreed with Matt and with Robb… but they both listen, and come to their own judgements… often different with mine…

    They are both intelligent…

    I deeply respect both, tho’ I often disagree with one or both…

    They are both honest and straighforward… I value that…

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