City and County Agree on Tax Sharing Agreement, MOU with County on DiSC

By David M. Greenwald
Executive Editor

Davis, CA – The city and county have reached a tentative agreement on a tax-sharing agreement and an MOU between the city, county, and developer regarding transportation improvement obligations.

Should the Davis voters approve Measure H in June, the city would need to submit an annexation application to LAFCo (Local Agency Formation Commission Office) for consideration.  In order to proceed, the city and county would have to agree on a tax-sharing agreement governing the allocation of property taxes on the parcels that would be annexed.

The city and county have been working since September 2021 to arrive at an agreement with Mayor Gloria Partida and Councilmember Dan Carson taking the lead.  The Board of Supervisors is set to take up the same agreement on May 10—the same day as council will.

According to the staff report, “The tax-sharing agreement provides for the allocation of property tax revenues projected to be generated by development of the project, largely in proportion to the anticipated costs of municipal services to be borne by the City of Davis and Yolo County and a fair sharing of any excess revenues above service costs.”

When EPS conducted its estimate of a net fiscal benefit, they assumed a 50-50 property tax share as the foundational assumption to result at $3.88 million for the city.

The property tax allocation on a post-ERAF (Educational Revenue Allocation Fund) basis is as follows:

  • General Fund (50% County / 50% City)
  • Accumulated Capital Outlay Fund (100% County / 0% City)
  • Road District # 2 (0% County / 100% City)
  • East Davis Fire District (0% County / 100% City)
  • City will continue to pay $5000 per year to the East Davis Fire Protection District for fair share of administrative costs

Further, the city and county negotiated for a fair share of sales tax.  Staff notes, “The Bradley-Burns sales taxes generated from points of sale on the project site will be shared 50% County and 50% City.”

Staff notes, “This share applies to Bradley Burns only and not to the Davis local 1% sales tax as approved under Measure Q.”

Further, “It also does not apply to sales tax revenues generated by DiSC 2022 residents and workers at points of sale off-site elsewhere within the City of Davis; 100% of these sales tax revenues would go to the City General Fund to support City operations.”

In addition, the DA calls for a CFD (Community Facilities District) to be formed for the DiSC project “to create an additional revenue stream for community services and amenities beyond the project revenues already anticipated. Specifically, the DA calls for the creation of a CFD to generate a minimum of $150,000 per year at project build out.”

As part of the tax sharing agreement, “it is proposed to share with the County the greater of 50% or $75,000 per year of revenues from the CFD specifically to go towards the maintenance, operations, or construction of the South Davis Library.”

The MOU between the city and County would also codify the transportation agreement.

First, there would be an extension of the Mace Blvd Corridor Plan to the Pole Line Road/County Road 102 which would include the design of a second westbound lane from Harper Junior High to East Covell as well as improvements to the Mace Blvd and County Road 104A intersection.

“While not identified as an area of significant traffic impacts associated with the DiSC proposal the City and County and developer are all in agreement that utilizing this corridor plan opportunity to evaluate the lane configurations in this area is appropriate,” staff explains

Second, the MOU clarifies that the mitigation measures “are the responsibility of the developer to construct and commits applicant to fund 65% design for the Mace grade separated crossing at the time of issuance of grading permits to allow City and County and developer to collaborate in the pursuit of grant funds.”

Third, it clarifies the mitigation measures that “will be fair share improvements” and “where the City and County have design authority, and agrees to the acceptable methodology for calculation of fair share contribution from the developer.”

Fourth, it determines which improvements will be constructed by the developer or the city, which includes the second westbound lane.

It also will require a “pre-construction survey of county roads and determines a process for further surveys to determine damage to County roads in the project area related to project construction and the process for the County to require payment for costs that are reasonably related to construction traffic and damage to County roads.”

Finally it provides a methodology for determining the “Fair Share” contribution of the DiSC 2022 project to the CR 32A railroad relocation project.

The staff report, resolution, tax share agreement, and MOU are all available here.

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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16 Comments

  1. Ron Glick

    “As part of the tax sharing agreement, ‘it is proposed to share with the County the greater of 50% or $75,000 per year of revenues from the CFD specifically to go towards the maintenance, operations, or construction of the South Davis Library.’”

    Seems to me little has been said about the library that South Davis will get if H passes. For many years this is something the community has been asking for.

    1. Ron Oertel

      Seems to me little has been said about the library that South Davis will get if H passes. For many years this is something the community has been asking for.

      This is a false claim.  The cost for that library is much more than any money that DiSC would provide.

  2. loganrips

    Glad to know they are working this out. The entire city council supports DISC, so I am sure they will come to an agreement. Definitely voting for Measure H now!

  3. Todd Edelman

     design of a second westbound lane from Harper Junior High to East Covell 

    There are currently two lanes roughly south of the east end of Alhambra at Mace and two lanes starting just west of the west end of Alhambra on East Covell (at the southeast corner of the proposed Palomino Place).  So this design widens Mace adjacent to the northwest corner of the proposed DISC.

    This would require the cull of approximately 5o established trees and – assuming the current width of the buffered bike lane is kept and made into a true Class IV protected cycletrack – the replacement of those trees and more – and seems to extend to the County border — if further does it require a Measure R vote?

    West of here the bike lane not buffered so that if that remains there is essentially no value of the Class IV-conversion to the east. The only way the Class IV can happen is if East Covell is also widened here – the parallel Class I multi-user path is NOT a viable alternative as it’s slower and requires mixing with pedestrians and dog walkers.

    And as clearly stated by specifically by the No on H campaign and generally by many experts such as our own Susan Handy from UC Davis, more lanes means more traffic. This will the be route between DISC much of east Davis, north Davis, Winters and Woodland. Pole Line/103 can simply not support this, if not in terms of capacity then in terms of safety, i.e. “Vote for Measure H for more head-on collisions on our county roads!” There is unlikely any support for widening 103 to increase speeds for motor vehicles, especially as Class IV cycle tracks are needed here to make reasonable an e-bike commute to  and from east Woodland (“North North Davis”) will also require some of if not all of the right-of-way in certain sections.

  4. wesleysagewalker

    Craig,

    This does codify the transportation improvements. The project team will be responsible for all of the 23 improvements rather than contributing fair share.

    1. Matt Williams

      wesley and Craig,  here is the language from the

      Memorandum of Understanding
      City of Davis, Yolo County, and DiSC 2022 Applicant

       

      1. Agreement for Implementation of Traffic Improvements

      Identification and Design of Improvements

      A. Mitigation Measures. The Applicant is required, pursuant to the adopted CEQA Addendum (Resolution No. 22-099), to implement the twenty-three identified transportation mitigation measures to mitigate for Project-related traffic impacts. Those twenty-three measures are as follows:

      That language does not say “fund and implement,” only “implement.”  That commits DiSC to project management, but leaves the funding of the 23 measures up in the air.

      Further, while the fifth Whereas clause in the Recitals uses the verb “construct” rather than the verb “implement,” is similarly vague about the funding.

       

      WHEREAS, sixteen of the identified transportation mitigation measures are imposed as Project mitigation measures 3-70(a) and 3–75(c), which indicate that “[T]he project applicant shall construct physical improvements or pay its fair share as described prior to the issuance of the first certificate of occupancy” and “The applicant shall construct the improvement and/or contribute fair share funding prior to the issuance of the first certificate of occupancy for each project phase under review;”

      Later in the document on page 6 there are specific funding statements as follows:

       

      Applicant will construct transportation mitigation measures identified as numbers 4, 5, 8 and 12, supra, and as depicted on Attachment A within the timeframes set forth in Section 3, below. Initial funding for the construction of transportation mitigation measures 4, 8 and 12 will be solely by the Applicant.

      Those Mitigation measures are 4. Construct a Class I shared-use path on the inside of the Mace Curve. (MM 3-75(a)) …  5. Construct a grade-separated bicycle/pedestrian crossing of Mace Boulevard. (MM 3-75(c)) …  8. Enhance northbound and southbound bus stops on Mace Boulevard. (MM 3-76(a)) …  12. Improve pedestrian facilities and landscaping on Mace Park-and- Ride access road. (MM 3-75(a))

      What is not at all clear is what the term “initial funding” means in either scope or magnitude. For ease of reference, I have bolded that term.  Why is the word “initial” included?  What proportion of each of those four mitigation measures does the “initial funding” cover?

      The following language appears later on page 6

       

      Applicant commits that the remaining sixteen transportation mitigation measures identified herein as numbers 1, 2, 3, 6, 7, 9, 10, 11, 13, 14, 15, 16, 17, 18, 19, and 22, which may be satisfied, pursuant to the CEQA Addendum, by either constructing the improvement or paying fair share, will be initially funded and physically constructed by the Applicant if not previously installed at the time the improvement is required as prescribed in article I, section 3 of this Agreement.

      Here too the strange term “initially funded” is used. Why is the word “initially” included?  What proportion of each of those sixteen mitigation measures does “initially funded” cover?

      Things get even dicier in subparagraph 2. C. iii. on page 7 which says:

       

      Parties agree that implementation of the identified roadway improvements will require considerable initial expenditures. In recognition of these Project-borne costs and the financial and economic benefits of the Project that extend beyond the boundary of the Project site, City and County commit to work with Applicant in good faith to pursue financing opportunities and/or utilize public financing mechanisms which are identified more fully in Exhibit K, section 3 of the Project’s Development Agreement.

      The sixteen words I bolded from that subsection sound very similar to the language that was in the Cannery Development Agreement, which opened the door to New Home Company asking the City for payment of the proceeds of a CFD, which saddled the Cannery residents with over $21 million of tax payments needed to pay the debt service on the “public financing mechanism.”

      Bottom-line, your statement “does codify the transportation improvements” is just as reliable as the statement “in National Football League games the crew of officials will enforce the rules on both teams.”

      1. Keith Y Echols

        The baseline features say:

         In coordination with Unitrans, Sacramento Regional Transit, and Yolobus, enhance and relocate the existing bus stops located on Mace Boulevard for improved use by DiSC 2022 employees and the broader community.

        • A Transit Plaza located along Mace Boulevard will serve as a connection point for multi-modal transportation including shuttles with connections to Amtrak and UC Davis, on-site shuttles, paratransit and micromobility (e.g. bike, skateboard, and scooter share services). The Transit Plaza will be capable of stacking multiple buses.

        • Land will be reserved to widen the right-of-way on Mace Blvd. to accommodate a potential express bus lane and other future transportation needs.

        • DiSC 2022 will establish and participate in a shuttle program with connections to the Amtrak train station, UC Davis, and other destinations.

        • A Transportation Demand Management (TDM) Plan will be adopted and implemented requiring specific targeted reductions in vehicle use. A designated TDM manager will report directly to the Master Owners Association and to the City to track progress on actions to improve mobility and reduce traffic impacts.

        DiSC 2022 will construct and/or CONTRIBUTE FUNDING to improve the capacity, functionality, and safety of Mace Blvd. and, in particular, at the intersections of Mace and Alhambra Dr. and at Mace and 2nd Street.

        • DiSC 2022 WILL FUND the creation of a comprehensive Mace Boulevard Corridor Plan to improve bicycle and pedestrian travel and transit in the vicinity of the Project. • DiSC 2022 will fund the development of a “traffic calming” plan for local streets identified in the environmental analysis.

        • DiSC 2022 will participate in the construction of safety improvements at County Roads 32A and 105 and at the crossing of the UPRR tracks.

        DiSC 2022 will construct a grade-separated bicycle and pedestrian crossing of Mace Boulevard connecting to local and regional trails.

        • A minimum of 1.5 miles of publicly accessible bike lanes and walking paths will be provided on-site at DiSC 2022.

        • DiSC 2022 will construct an off-street bike trail connection between Mace Blvd and Harper Junior High School along the inside of the Mace Curve, thereby making a greatly needed connection, filling a gap in the system and improving bicycle safety.

        • DiSC 2022 will provide ample bicycle connections to local and regional routes, convenient and abundant bicycle parking, storage lockers, shower facilities and a maintenance and repair kiosks to encourage cycling.

        DiSC 2022 will participate in financing mechanisms, including but not limited to, a community facilities district, that could help pay for roadway improvements on and near Mace Boulevard, in East Davis and in other locations deemed appropriate by the City. DiSC 2022 agrees to negotiate the terms of such financing to the City’s satisfaction prior to issuance of building permits for any residential units. In addition, the DiSC 2022 project will contribute Roadway Impact Fees and construction taxes for such purposes.

        The use of the term “WILL” means that DISC has to provide those features however they choose to fund it.  The last item states that they expect to use state and local financing (likely bonds….maybe mello roose?) to help finance the costs for many of the improvements.

        For the fiscal hawks, I thought this part was interesting.

        DiSC 2022 will form an owners’ association and/or financing district to pay for the maintenance and upkeep of all publicly accessible park, greenbelt and open spaces.

        The cost of ongoing maintenance for the public rec spaces will be covered by project.

        1. Ron Oertel

          “Will” does not mean “fund”.

          For example, the bicycle underpass may be funded by the city, by grants (if available), and by other proposals in that same area – if those are approved.  Also, it does not have to be constructed during the first phase (which will include housing).

          You can look up the exact wording, yourself.

          Some of the other items you listed (such as “will participate”, or “will contribute” or “potential bus lane”) have almost no meaning.

        2. Keith Y Echols

          “Will” does not mean “fund”.

          “Will” means it has to happen.  Funding is implied. But if the developers can get grants, donners…whatever to fund it….Hogwarts magic….whatever it takes to make the baseline features happen. The baseline features do not care how DISC funds these things. What difference does it make as long as it doesn’t cost the city?

        3. Matt Williams

          Keith, I think you are confusing the meanings of the verbs “will” and “shall.”

          Will vs Shall in Contracts

          It is very important to take note of the difference between will and shall in contracts, because they express different meanings or intentions.

          The term ‘Shall’, according to Black’s Law Dictionary, means ‘has a duty to’. This definition illustrates a compulsory aspect associated with the duty specified. Thus, it is mandatory on the person or legal entity performing the duty. In contracts, the word ‘Shall’ is traditionally used to convey a duty or obligation in relation to the performance of the contract. Keep in mind that contracts are generally written in the third person. Therefore, the use of the word ‘Shall’, particularly in the third person, connotes a sort of command, thereby rendering the performance of an obligation or duty imperative. Simply put, ‘Shall’, particularly in contracts or legal documents such as statutes, generally refers to some form of compulsory action or the prohibition of a certain action. Commentators on the use of the word ‘Shall’ in contracts advise that it is best to use ‘Shall’ when imposing an obligation or duty on a particular person or entity that is party to the contract.

          It is not uncommon to notice the word ‘Will’ used in contracts also to impose obligations or duties. Traditionally, this is incorrect. The term ‘Will’ has been defined as expressing willingness, strong desire, determination or choice to do something.

        4. Keith Y Echols

          I can find sources that support the use of “Will” in contracts.  I’m no legal expert, but I’m pretty sure the wording and use of “will” will hold up as an obligation on the part of DISC to provide what’s listed in the baseline features.

          WillYou can use “will” to create a promise–a contractual obligation. See Bryan A. Garner, A Dictionary of Modern Legal Usage 941-942 (2d ed., Oxford U. Press 1995). When used in this way, “will” is not merely stating a future event, it is creating a promise to perform:

          Landlord will clean and maintain all common areas.

          You could use “shall” for the other party’s obligations and “will” for your client’s obligations, though the effect of these words should be the same. The difference reflects only the impact on the reader.

          Here’s another interpretation:

          The Oxford English Dictionary (OED) makes the most helpful distinction: the traditional use of shall and will prescribes that when forming the future tense, shall should be used with the first person I and we, while will should be used with the second or third person youhesheit and they. When emphasising determination or a command (including obligations?) the rule is reversed: will is used with I and we; and shall with youhesheit and they. This distinction largely aligns with the above distinctions. In contracts, the distinction made by the OED becomes visible in letter agreements (in which the parties are often referred to as you and we; as opposed to contracts where parties act as “it” or anyhow as the third person).
          The OED continues to explain that in real life, the rules are not followed so strictly and that the contracted (!) forms I’ll or we’ll are often used instead, albeit in particular in spoken or informal context. In contracts, you should never contract will or shall!
          Differentiating approach. There are drafters, such as Kenneth Adams[1], who distinguish types of contract language to help choose among must and will (and avoid shall altogether):
          (a)    provisions imposing an obligation on a party (e.g. “Seller shall deliver the Product”), where shall could be replaced by has an obligation to;
          (b)    provisions signalling an obligation on a third party (e.g. “the Parties agree that 3X shall first deliver the raw materials”), where shall would preferably be replaced by must (and where replacing it by has an obligation to is ineffective in view of 3X being an outsider to the contract);
          (c)    provisions addressing, as a matter of policy (not necessarily requiring any action), a consequence upon the occurrence of a specified event (e.g. “this Call Option shall terminate upon the Majority Shareholder selling its Shares”), where shall would more appropriately be replaced by will.
          The distinction between several types of contract provisions suggests that ‘consistent drafting’ means that shall should always be used for party obligations and that contract policy rules should be signalled by will (implying that both shall and will may properly co-exist in one contract). Others would dispose with such distinction if the use of will psychologically smoothens the sharp edges from the obligatory shall helping the other party to assume such obligation.
          Simple approach. If you are not a native English speaker, your best approach is probably to be consistent. To use shall for a party who assumes an obligation, and will to indicate a future event or consequence.
          [1]      See Kenneth A. Adams, A manual of style for contract drafting.

  5. Bill Marshall

    I can find sources that support the use of “Will” in contracts.  I’m no legal expert, but I’m pretty sure the wording and use of “will” will hold up as an obligation

    Maybe…

    Legally, “should” is a ‘direction’… “will” shows ‘intent’, but not necessarily an ‘obligation’… “shall” is an ‘obligation’… but I’m just a dumb engineer… so weigh that accordingly… legally…

    When I wrote contracts, legal documents, I wrote “shall” if I wanted it to ‘stick’… the other party understood the differences… of that, I am sure…

    1. Keith Y Echols

      The difference is not definitive.  I’ve been around enough contracts to know that “will” will read as an obligation in a contract.

      Thus, Garner recommends using will to create obligations in nonconsumer contracts when the parties are known to each other.10 And other prominent plain-language experts agree that using will to create a legal obligation is fine. Among them are Wayne Schiess,11 Sarah Fox,12 Barbara Child,13 and Andy Mergendahl.14 Professor D. C. Toedt III hedges his bet: he approves will if the term is defined in the four corners of the contract to mean “is required”; according to Toedt, this definition is “cheap insurance against a creative trial counsel.”15

      Other plain-language advocates, incluing Tina Stark, George Kuney, and Kenneth Adams, argue that shall is the preferred approach. Stark and Kuney, though, allow that contract drafters may choose will instead of shall if they stick to their selection.16 Adams, on the other hand, contends that only shall, meaning “has a duty to,” is properly used to impose an obligation on a contractual party that is the subject of a sentence.17 Adams rejects using will to impose obligations on two grounds. First, he notes that in standard English, will primarily expresses future time rather than obligations.18 So Adams worries that in the statement that “Able will pay $500 to Baker on June 1, 2018,” the use of will points only to a future event (i.e., Able’s payment of $500 to Baker on June 1, 2018) without creating a legal obligation for Able to pay Baker $500 on June 1, 2018. Adams’s second argument is that will can be used in multiple ways. So if you use will to impose an obligation on a party who is the subject of the sentence, you could also use will to impose an obligation on a nonparty (e.g., “Michigan law will govern this agreement”). These various uses of will create multiple—and thus confusing—meanings.19

      Garner responds to these two arguments by pointing out that in American English, will—not shall—is the ordinary verb of promise.20 And he quotes literary scholar Gustave Arlt that the distinction between shall and will to designate futurity “is a superstition that has neither a basis in historical grammar nor the sound sanction of universal usage.”21 Garner concludes that “there’s simply no reason to hold on to shall. The word is peripheral in American English.”22 But Adams would respond to Garner’s arguments by suggesting that shall—archaic or not—has its place in contracts as distinctive syntax that serves a useful function.23 Adams stops short of declaring that shall should be recognized as a legal term of art, but he’s heading in that direction. The question is whether courts will go down that path, elevate shall to a term of art meaning “has a duty to,” and impose it on a party who is the subject of a sentence. So far they haven’t……………………………………………………………………………………………………………………………..In the end, the best advice in deciding whether to use shall or will in your business contracts may be this: choose one or the other, stick to it, define your selection in the contract as imposing an obligation on the appropriate party,26 and leave it at that. n

      Using Shall or Will to Create Obligations in Business Contracts

       

  6. aj muench

    I am so excited about the new transportation plans between DISC and the city!!! More bike lanes are also welcome here in Davis: the capital city of biking!!!  I’m hyped for the traffic in Davis to get smoother and safer!!!

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