From the beginning of our coverage it did not make any sense for the city of Davis to give money back to the developers either by waiving, reducing, or otherwise altering the supplemental fees. The good news in this case was that the council agreed with that view, and determined that there was not logical or rational basis for allowing the supplemental fee to remain at 6000 dollars for the formerly middle income affordable units.
As a result, the developer now has a decision to make. As City Manager Bill Emlen and City Attorney Harriet Steiner pointed out, the council cannot impose anything on the developer. However, at the same time, the developer really has two choices, they can accept the changes and we will get into the most objectionable in a moment, or they can allow the development agreement to stand as is. As Sue Greenwald pointed out, she believes it would be of greater value to leave the property as it was zoned prior to the council approval as commercial, so the developer can take it or leave.
Staff recommended council, “Modify or eliminate lots 75, 76 and 77 in order to widen the greenbelt to be more consistent with the average width of the rest of greenbelt.” The developer opposes those changes based on the need to redesign and the expense. However, as council pointed out on Tuesday night, they could simply develop the rest of the project leaving 75, 76, and 77 off until they could figure out how to reconfigure, eliminate, or move.
Once again there seemed to be a false urgency created by the developer here, who argued that they needed a decision this night in order to proceed. That just begins to sound hollow given the amount of time that has already passed. Nevertheless, the council was clearly not going to give away money that it could collect.
In the end, basic math seemed to win out. Councilmember Stephen Souza pointed out that while it was true the developer was paying out an additional 240,000 to comply with the new Greenhouse Gas standards which was larger than the 6000 per unit reduction for the 17 middle income affordable units, he also pointed out that by being able to develop those 17 units at market rate, the developer at minimum would gain $100,000 per unit or $1.7 million from the change. Moreover, when you throw in the four low income affordables that can be developed at market rate, that is an additional $800,000 ($200K per unit). And that is a conservative estimate just for those units.
The bottom line that the council felt that this was a good deal for developer and a fairer deal than the original for the city. No one saw any legitimate rationale for leaving those units at $6000 in supplemental fees.
However, council disagreed on the elimination of the parkland requirement. There was a general sense that if they did end up developing the parkland that it should have a community specific purpose encompassed in the additional development. However, the neighbors were strongly opposed to the elimination of the park. It is not clear what the benefit is to the city or the neighbors to do so.
As the neighbors who spoke pointed out, there is a huge benefit to the developers in these changes, there is a fiscal benefit to the city, though as Sue Greenwald pointed out, the entire development is probably still a fiscal negative, but there is no benefit to the neighbors.
The Housing Element had 68 units as the midpoint in their density projections for the site. As it is now, it stands at 83. If it goes up to 96 with 13 additional units, it would be 40 percent more dense than the HESC recommended just a few years ago. For this reason and the reason of the elimination of the parkland, Lamar Heystek opposed the changes to the development agreement, though he voted as separate proposals to impose the supplemental fees and the alterations to the lots to allow for a uniform greenbelt.
Commentary
From the city’s standpoint, this project revision I think sets a bad precedent and would have preferred that the city and developer had left what was agreed to in place. I do not think this is a great development. I think the neighbors have once again taken it on the short-end of the stick. We have lost parkland. And as Sue Greenwald pointed out, even with all of the fees imposed, the city probably loses money on this arrangement.
All of that said, it has gone from a complete and utter disaster as it was first proposed out of the Planning Commission. What came out of that body was frankly reckless and I really think the new council needs to look at the composition of that body. It is interesting to note that the council on this night honored two of the long time members of that body who had left the commission prior to the hearing of this issue.
What was eventually passed was not great, but not a disaster. The city will now get full funding in terms of having all 83 units receive supplemental fees. That was huge because the developer stands to make a killing off these changes. And that should not be forgotten for all of the complaining and hand wringing that was heard on Tuesday night, the developer never said no and rejected the fees.
The fact that this was rammed through the Planning Commission which was short-handed is a concern. The fact that the parkland elimination was recommended by the parks commission by a 3-2 vote is a concern. And the way the fiscal analysis was presented to the Finance and Budget Commission was a concern.
I do not think that latter commission ever really had a good handle on the finances. And that is a bigger problem than just for this issue. If the council wants an advisory body, they better set up mechanisms by which they can evaluate all of the information. Really that commission only found out the true ramifications of the finances of this because of questions from a member of the public who finally figured out that the swap of Supplemental fees for Quimby Fees was not quite an even-up swap. The representation that this was a neutral move for the general fund, was fallacious. It may have been technically true in that neither are strictly speaking general fund monies, but Supplemental fees act like they are general fund monies, Quimby fees do not.
More interesting was the absence of Paul Navazio, the city’s finance director at last night’s meeting. Ken Hiatt, who is now community development director among other things gave an explanation of the advent of supplemental fees that did not gibe with Paul Navazio’s explanation that he gave to the Finance and Budget Commission. Basically, as the city began to do development agreements, they also began to evaluate the fiscal impact on a project-by-project basis. As the result, the city used supplemental fees to allow each new project to balance the books and become fiscally neutral.
This is an important point and fortunately it did not matter in the outcome, but Ken Hiatt got it wrong. The reason why the supplemental fees are different project to project is that the need to gain fiscal neutrality differs based on a variety of factors including housing prices, number of affordables, impacts on the city, and the tax rate. So when the developer shows a discrepancy in the cost of supplementals on recent developments (and omits some that are less favorable to his viewpoint), he misses a crucial point.
Council briefly discussed the possibility of making supplementals uniform. Sue Greenwald rightly pointed out that that would not be legal, but even if it were, it would defeat the purpose of the supplementals which need to be flexible in order to balance the books.
In short, this is another example of the utter problems that city staff faces. Those who believe that this is a council-driven problem I think are bound to be disappointed. Council did not drive this process, staff did. That is clear from the discussion and the ultimate changes that council made to this project. The next two years we are going to once again need to change the way we do business and that will not be easy.
—David M. Greenwald reporting
It sounds like the elimination of middle income homes created a windfall (market rate units more profitable for developer) and most of this went to the developer. Why? If the developer was willing to go forward with the project before why should the City effectively give them a bonus ? For good behavior? I think not.
Sue understands these issues far more than most people and if she says the deal likely loses money for the City we should be very concerned. As far as fiscal neutrality goes, how about erring on the side of the City–I think its reasonable to add on a percentage just to make sure that the City doesn’t lose. The fact that the developer here is desperate to move forward even in a bad housing market indicates to me that the City did not strike a good deal here and could have done better.
So it looks like the developer wins and the City loses (or at best breaks even when it could have come out ahead).
So it goes…
Regarding the 3-2 vote of the Park/Rec Commission. As a member of that Commission, I would say that the Commission was convinced that it would be better for the city to get in-lieu fees from the developer rather than get that small piece of park land that was immediately adjacent to Mace Ranch Community park. The park land would be costly to maintain (a problem in the current budget) and was at a location that wasn’t very useful. Better to get the much higher amount of money to use for other park related issues where we have major funding shortages.
This Commission wasn’t asked to consider the issues of the housing and the developer agreement – it was just asked to consider the park related issue. If you take that out of context, just looking at the park land, it was clear what the best option was. However, some Commissioners had major concerns about the non-Park issues (the agreement, housing density, all of that). Those concerns are what brought two members to vote against the motion.
I’m not commenting on any of the issues relating to supplemental fees or the number of houses, etc. – just wanted to comment on the “3-2 vote” of the Commission.
I would say now that commissions are going to be allowed to put their two cents worth in with respect to new housing developments, it will behoove commissions to look carefully at all staff reports and what may be behind them. Then think carefully on the ramifications of any decisions a commission makes – and raise a stink if something doesn’t sit quite right. This sort of critical thinking process is difficult, if city staff does not really give all the information – but it can be done.
If necessary, commissioners can attend other commission meetings to get the full picture. I have done this on several occasions, and have had my eyes opened more fully, in consequence. Almost every time I have done this, the commission I have visited has been very gracious in allowing me to ask questions, speak my mind, and generally try and ferret out what is really going on. I urge all commissions not to take at face value city staff reports, and do a bit more cross checking…
If this is done more often, I think it might slow down attempts by developers in league with certain city staffers or City Council members to “game the system” so what is really going on remains hidden. It is imperative in these difficult times that the city benefits as much as possible from any developer agreements, and not allow residential development to remain a developer driven process. The city needs to take back control for the benefit of Davis citizens, despite the shenanigans of any members of city staff/developers/other interested entities who don’t want to play fair.
Mr. Musser – the city council asked for a response on a specific issue – whether the city needed that park space or if in-lieu funds would be better. That was what was discussed.
In our comments to the Council it was made very clear that we were concerned about the other issues, and that Staff didn’t present us with this information.
As liason from the Park/Rec Commission to the Finance & Budget Commission, I made it clear that our motion was based on the limited question that we were asked to direct, that our decision wasn’t an endoresement of the other aspects of the overall issue, and that some members had concerns about the other aspects of the issue.
It is not unusual for a Commission to be asked to look at the issue that is in their area of responsibility – and we do have other Commissions that look at the other aspects of the issue. These Commissions are, for the most part, advisory – they don’t make decisions on their own. The City Council makes their decision based on input from the Commissions and the community – and it seems like it worked well in this particular case.
CCRussell: “In our comments to the Council it was made very clear that we were concerned about the other issues, and that Staff didn’t present us with this information.”
And your commission did the right thing in making it clear you were concerned about the other issues and were not presented with enough information. It will take this continual vigilance by commissions to raise questions when funny business is going on. Ultimately, however, commissions can only advise. If a City Council majority has a pre-conceived agenda, there is not much any commission can do to override corrupting influences or other hidden agendas. But the more that commissions can bring this sort of thing to light, the more corrupting influences/hidden agendas can be exposed for what they are. My hope is that the dynamic of the new City Council is going to be a marked improvement. Only time will tell…