Commentary: Did Davis Diamonds Exhaust All Other Options?

One thing that people need to remember about this issue is that I did not go into Tuesday’s meeting opposed to doing a Conditional Use Permit and moving the facility to the auto mall.  In fact, as our article on Tuesday suggested – I actually favored it.

My mind was changed during that meeting and the discussions I had immediately following that meeting, when it became clear that something happened that was untoward and that small children and their families became pawns in a larger game.

While I was moved to some extent by the arguments about the fiscal impact to the city, what really moved me was that the entire process quite literally turned my stomach.

I honestly believe that this proposal would have failed 4-1 had it not been an election year and had it not been for a packed audience on Tuesday night with small children and their families.

And really, what is not to support about Davis Diamonds?  There was not one council member who did not support them.

Since that night, we have learned a lot more about what happened.  It all starts with Xavier Santana.  Mr. Santana was the agent for both the buyer and the seller on this deal.  In the real estate world, such an arrangement is perfectly legal and commonplace.

Councilmember Sue Greenwald put it this way: “I don’t understand why the issue of the real estate broker is relevant, unless there were other sites available and he misinformed the owners of Davis Diamonds concerning the availability and cost of the other sites.”

She added, “I talked with the owners of Davis Diamonds about alternative sites, and they believe that they have explored them and that are none that are viable.”

The councilmember, I think, essentially raises the critical point.  The question is really whether the broker games the system to his own advantage.

One of the points we made this week is that he stood to make a quarter of a million on this deal.  People questioned my source on this, but it is really a math issue rather a source issue.  Someone in real estate walked me through how the process works and the four key places where the agent stood to make money: he gets money on both ends of the property on the auto mall – getting the commission for both the buyer and the seller, he gets half of the commission on Explorit, and on top of it all, he told council on Tuesday that his company gets the construction contract for building the facility as well.  Add that all together and you get close to the quarter million figure we cited on Thursday.

Because Mr. Santana is the agent for the property on the auto mall, he acts as almost a gatekeeper.  So anyone who has a serious interest in purchasing that property really needs to go through him and hire him as an agent.  Now, he does not get paid unless the sale is completed, but you still seem to have a situation where the agent gets to double-dip and control access to the sale of the property.

But the biggest question is to what extent other options were explored by Davis Diamonds, but were precluded because of Mr. Santana’s other interests.

One person involved in real estate in Davis told the Vanguard this week that, while it is true that there is nothing illegal or unethical about being an agent for the seller and the buyer, that is as long as this role is disclosed and the fiduciary responsibility to both clients is fulfilled.

On the other hand, it is a license violation to mislead a public body.  And from what this individual and several others that also work in real estate in this town told me is that they were never contacted to inquire about any other listings or to talk about projects that their clients were working on.

These individuals, none of whom wished to put their names on the record, said that there were other brokers with active listings that never heard from Mr. Santana.  Moreover, there are other options that were not listed and a number of alternative solutions that Davis Diamonds could have explored.

That is what the substitute motion of Rochelle Swanson and Joe Krovoza attempted to do on Tuesday because they recognized that, from a fiscal perspective, this is not a good deal for the city.

Mayor Pro Tem Rochelle Swanson said that, while she is a huge supporter of Davis Diamonds and what they bring to this community, however, she cannot support a conditional use permit “sight unseen.”  She argued that we need to know what we are getting into and we do not approve projects that did not hit design review.

She noted how tight the city budget is by pointing out the need for a public-private partnership to save the community pool.  “What I don’t want to see,” she said, “is out of hand let go of what is not ghost revenue.”  She noted that staff has been talking to some prospective auto dealerships and that there is an offer on the table.

She believed that there was a win-win solution, but that the conditional use permit did not get us there.

“This is about long term fiscal stability and if we have an option to get to a win-win and preserve and increase revenue,” she said, “I want staff to talk about potential partnership with Davis Diamonds.”

“I want to see time for that to be discussed rather than just taking a gamble on this particular situation,” she said.  “We can’t plan by exceptions.”

As a substitute motion, Mayor Pro Tem Swanson put forward a motion to direct the staff to work with the applicant to see if there was a way forward.  The key question was whether the applicant was willing or whether they simply wanted the city to go forward.

The problem is that Mr. Santana had a vested interest in one property and in making this deal.  And so, after the applicants’ caucus, the city was basically told to move forward.

I will be frank here,” Mayor Krovoza argued on Tuesday, “I don’t think that this issue has played itself out to the degree that it should in this community…  I don’t think it has had a chance to do that because the best financial opportunity for Davis Diamonds is this deal that they have before them.”

He argued that so long as this deal is before Davis Diamonds, that blocks us from getting to a better solution for the community, which is a more central facility.

The mayor then made a crucial fundamental point, which is that the zoning of this land is actually what makes it affordable.

“There is a real fairness issue here, and that is that the reason that this land is affordable is because it’s zoned the way it’s zoned,” he said.  “If we took this zoning off of this land, there would be many other people that would love to put a commercial office space down there because now cheap land would be available.”

So, he argues this deal is therefore fundamentally unfair.

He said, “I can’t listen to the people who are directly involved in this deal advise us that there’s no future for auto sales in Davis.  And if we don’t generate revenue off auto sales, everyone in this room has to ask themselves what we’re going to generate revenue for this community from.”

He argued that another option might be big box and he suggested that this is one of the tough decisions that this council had made over the years.

It is city-based recreation that is what falls off our budget when revenue drops.  “We didn’t have $100,000 and the community pool is now closed,” the mayor pointed out.  “We have 1700 swimmers in this community that have one less pool because we didn’t have $100,000.  If we make this recreational choice, there may be another recreational choice that falls off the budget.  That’s part of the decisions that this council is having to make.”

All is not lost.  There are really two things at this point that the council can do.  One of them is to design a very tight conditional use permit to protect the city from having Mr. Santana or the owners of the property on the auto mall from flipping it for a huge profit.  The other is that they have no obligation to approve the conditional use permit.  All they really did on Tuesday was direct staff to create one.

I still favor a solution that will get Davis Diamonds what they need to continue to provide their excellent service to this community, I just won’t favor this one that appears more about profit motive for real estate brokers than about good public policy and planning in this community.

—David M. Greenwald reporting