Bob Dunning this week came out strongly against the plan by the Council to appoint Don Saylor’s replacement when he leaves on January 3.
He writes, “I don’t know about you, but given some of the decisions our esteemed City Council members have made in the past few months, I’m not exactly in a trusting mood when it comes to having them select a replacement for the departing Don Saylor next month.”
He argues that the pocketbook issue is a “smokescreen” – unfortunately his example of waste is that “this council mindlessly tossed $74,000 at Zipcar and $75,000 at artwork on a water tank that is mostly obscured by buildings and rapidly growing trees.” Which sounds on point until you realize that neither of these expenditures came from the general fund and thus could not have been used to fund an election anyway.
Moreover, he once again focuses on a mere $150,000 rather than the millions the council has squandered on a series of elegant compensation and retirement increases over the last decade that threaten to put this city on the brink of insolvency.
When I questioned him, he responded, “Unless we’re just flat broke, which we don’t appear to be…” Except that we are flat broke, and if he watched the budget workshop as closely as he has watched other portions of the council meetings, he might recognize that. Running an election means we may have to lay off as many two or three city employees.
But that might not be the worst outcome if that were a viable solution. However, the problem is far more complex than that. The earliest we could hold an election would be June, which means we would be without a fifth member on council for nearly six months. And we would be spending that money for a two-year term.
I asked Mr. Dunning his solution to that and he suggested that we appoint a placeholder, a venerable citizen who has commonsense and knows the town, but no interest in anything more than that.
So then, his solution is we appoint an interim for five months, then we hold an election to elect an interim councilmember with money we don’t have for a year until the next election. I’m sorry, I just do not see that as a viable solution. For one thing, watching Joe Krovoza and Rochelle Swanson, we see they have been on the council now since July and they are just now starting to get their feet wet and get comfortable.
People can know the town all they want, but unfortunately the council deals with a lot of complex issues. We are facing an utter crisis with our compensation system unless we move quickly. A councilmember appointed in January might have a good grasp of these complexities by July. If we have to start again in June, we are looking at the end of the year.
Last year I brought up the appointment of Don Saylor’s replacement as the most likely outcome. When I did, I was questioned strongly by Councilmember Sue Greenwald. She and others publicly pushed Don Saylor to resign early to prevent this exact scenario.
She did not believe that the appointment process was the way to go. But guess what, when Don Saylor refused to leave early, and she was faced with the reality of the situation, she joined her colleagues in supporting the appointment process.
I do not think she suddenly changed her overall view of the appointment process versus the election, she just recognized that given the reality of the situation, this was the only realistic solution.
In fairness, she is a public official and has to make the tough choices and live with it. Bob Dunning and I are free to pontificate and create elaborate solutions because we won’t face the voters and we don’t have to live with our consequences.
We are the quintessential Friday afternoon and Monday morning quarterbacks. We can talk the game until we are blue in the face, we can turn it into a game of video football for all we want, but we are not going onto the field ourselves.
As much as I think it would be fun to see Herb Bauer on the council for four months, it is not a realistic solution that a responsible councilmember can entertain.
Do I think an election is preferable to an appointment? I do.
I am very concerned about comments made by Stephen Souza, and I fear that a public appointment process will devolve into a public spectacle and circus. I don’t think you can replicate an election process or even should. The council should not try.
This should be akin to hiring a city manager – professional, dignified, and businesslike.
The fact that this has to take place in public, makes that more difficult.
It will be incumbent upon Joe Krovoza, who will likely be presiding over this meeting as one of his first, to create a structured format to prevent person after person coming up and cheerleading for his or her favored candidate. That is not conducive to good public policy.
I agree there is a good reason why we have people vote for our leaders, but there is also a good reason why most jurisdictions appoint their replacements for vacancies. That happened with the council in the past, with the school board, and it happened at the state level when John Garamendi left his seat as Lt. Governor to become a Congressman. It happened all over the nation when Governors appointed replacement Senators to fill vacancies when Barack Obama filled cabinet positions.
Sometimes the appointment was a problem, sometimes it was not.
No solutions are good ones here. This is, in my view, the least bad.
The last appointment happened in Davis in 2005 when the School Board appointed Keltie Jones to fill a vacancy. It is somewhat ironic that back in 2005 Don Saylor was on the appointing body, and now it is his seat that will be filled.
Here is how it worked. There was an application process with a form that was filled out with background and some questions.
After the application deadline there was an information session for all candidates, with the administration team that included the Superintendent, Finance, HR, and Educational Programs Assistant and Associate Superintendents.
There were a couple of public sessions that were similar to election candidate forums with the opportunity for people to complete evaluation forms. Public feedback forms were also available at the District Office for anyone to submit.
The process culminated with a public interview by the board, and then they voted in an open session. The candidate with the fewest votes was eliminated and then they re-voted until there was a winner.
That may be a model to follow. My only fear is that this will become like the 2003 Governor Recall Election and there will be 100 candidates.
Whatever choice that is made needs to focus hard on avoiding public spectacle and needs to resemble a more solemn hiring process.
—David M. Greenwald reporting
How about letting the elected decision makers decide? Have an open period for those willing to serve come forward but each council member should recruit some people they would like to serve with on the council. Have the council publicly interview the candidates then go to closed session to decide who to appoint. Its pretty simple. The point about the current council recruiting is that there are good people who would serve if asked but who would never come forward on their own.
“How about letting the elected decision makers decide?”
That’s what I’m arguing for.
Sure and maybe Caroline Kennedy will want to run. But in lieu of spending all that money maybe we would be just as well served by finding someone that 3 or 4 sitting council members can agree upon.
I’m sure the developers and the unions will try and push a candidate. Hopefully we can get someone who isn’t beholden to any interests. I wish I felt that I could say that about all of the current council members.
“the [u]unions[/u] will try and push a candidate. “
There has only been one union that has ever been active in city politics and that is the firefighters. Since three of the current council members did not take money from the firefighters in their last election, it stands to reason that is not a huge threat.
DAVE: [i]”… that might not be the worst outcome if that were a viable solution. However, the problem is far more complex than that. The earliest we could hold an election would be June …”[/i]
That’s false. The earliest we could hold an election is Tuesday, April 26, 2011. The June election date is only true if the council waits until February or later to make the decision.
DAVE: [i]”… which means we would be without a fifth member on council for nearly six months.”[/i]
That’s false in two respects. First, the election time period is as little as 114 days, which is less than 4 months. And second, we could legally have an interim member serve on the council until the election.
Just because some members of the current council don’t favor that approach does not mean the law does not allow for it. Hell, if you are going to argue that an interim member is a moot point because what a couple of councilmembers have said about it, then an election for this seat is also a moot point, in that all 4 members have spoken against having a vote of the people.
DAVE: [i]”Mr. Dunning his solution to that and he suggested that we appoint a placeholder, a venerable citizen who has commonsense and knows the town, but no interest in anything more than that. … I’m sorry, I just do not see that as a viable solution. For one thing, watching Joe Krovoza and Rochelle Swanson, we see they have been on the council now since July and they are just now starting to get their feet wet and get comfortable.”[/i]
That is a nonsensical reply to Dunning. First, Jo and Ro had no experience in Davis politics prior to winning seats on the council. Based on their actions thus far on the council, I don’t think either one yet fully understands how f*cked up our finances are going forward. Both appear to me to be perfect Saylorites. But second and more important, Davis has a lot of people who have the experience and the knowledge, right now, to serve on the City Council. Take someone like Maynard Skinner or Bill Kopper or Lamar Heystek or Mike Corbett. Anyone of them, the day of appointment, would be far ahead of Ro and Jo when it comes to knowing the business of the Council and knowing what needs to be done to fix the problem.
It’s all fine and good, David, if you think this council does not want to appoint an interim or that the cost of an election is too great. I understand those objections. But it’s ridiculous that you invent facts and then base your argument on those falsehoods.
Rich:
According to the city, the city would have to hold it on June 7.
From the staff report:
[quote]A special election may be held either on June 7, 2011 (Council must call before February 13 in order to meet statutory Election Code requirements, even though this date is before the 60-day deliberation period expires) or November 8, 2011 (Council must call before March 4, date when 60-day deliberation period ends).[/quote]
The city attorney specifically writes, “There are variations on the
dates of traditional elections and all mailed ballot elections but no possible date is prior to June 7, 2011.”
That’s the basis of my statement.
You are certainly welcome to find law to show that the City Attorney is in error here, but I had a solid basis for that claim and it certainly does not warrant your baseless attack that I “invented” facts and based my “argument on those falsehoods.”
“we could legally have an interim member serve on the council until the election. “
That is correct. I address that point later.
I simply as I argued don’t see the appointment of a five month interim councilmember prior to an election as a viable as a viable solution because we would have a councilmember for five or six months and then election a councilmember for a year. If we want to appoint someone for six months, why not the entire time? I don’t see what that process gains you other than losing six months trying to figure out solutions to the fiscal crisis.
You can disagree with that view, but that’s my opinion.
[i] “There are variations on the dates of traditional elections and all mailed ballot elections but no possible date is prior to June 7, 2011.” [/i]
That is true only if state law requires a local special election to take place on the same date as a previously scheduled regular statewide election date. I don’t know if that is true. I don’t even know if there will be any statewide voting on June 7. Do you?
I do know that in Yolo County we have had special elections in the past on dates when there was no regularly scheduled election. Woodland, for example, held a special election in March, 2003 to elect a school board member to a vacant seat; and in 1997 Davis had a special March election for a proposal to widen the Richards Blvd subway. In January, there is going to be a special election held to replace Dave Cox in the State Senate. If Roseville can have an election in January, why would we be prohibited from having an April 26 vote, as long as it was 114 days or more after the election was called (on Jan 2)?
Moreover, is June 7, 2011 a previously scheduled state election date? In other words, if we don’t have a council election on June 7, would we be voting on anything else on that date? I checked the Secretary of State’s website and it appears nothing is scheduled statewide for June 7.
I will ask Freddie Oakley and Harriet Steiner for clarification on that.
Can Don Saylor be county supervisor and stay on the council for a bit as well? Is that illegal?
Yes, he cannot hold two offices simultaneously.
For example, Gavin Newsom is waiting to be sworn in as Lt Gov until after Kamala Harris is sworn in a AG so that he can appoint her successor. Obviously if he could hold both seats for a time, he would not need to do that.
I just read up on the special elections provisions in the state code and it says a special election to fill a vacancy [u]must be held on an established election date[/u], unless other state laws over-ride that. Here is the applicable state law for “established election dates” ([url]http://law.justia.com/california/codes/2009/elec/1000-1003.html[/url]): [quote] (b) The first Tuesday after the first Monday in March of each odd-numbered year.
(c) The first Tuesday after the first Monday in June in each year. [/quote] That would mean that Harriet is right, the effective date is June 7, 2011. However, there are exceptions to this. [quote] Election Code 1003. This chapter shall not apply to the following:
… (f) Any election conducted solely by mailed ballot pursuant to Division 4 (commencing with Section 4000). [/quote] So the question is, can Davis hold an all-mail ballot on April 26? The answer is, I believe, yes. Here is the Election Code language: [quote] 4004. (c) Notwithstanding Sections 1500 and 4000, an election in a small city or an eligible entity may be conducted wholly as an all-mail ballot election, subject to the following conditions:
(1) The legislative body of the small city or the governing body of the eligible entity, by resolution, authorizes the use of mailed ballots for the election.
(2) The election is a special election to fill a vacancy in the legislative body or governing body.
(3) The election is not held on the same date as a statewide primary or general election.
(4) The election is not consolidated with any other election.
(5) The return of voted mail ballots is subject to Section 3017. [/quote] Because the population of Davis is under 100,000, we qualify as a “small city” and can “fill a vacancy in the legislative body or governing body” with an all-mail election on a date other than the regularly scheduled “first Tuesday after the first Monday in June in each year.” In other words, it appears Harriet was wrong.
[quote]”He argues that the pocketbook issue is a ‘smokescreen’ – unfortunately his example of waste is that “this council mindlessly tossed $74,000 at Zipcar and $75,000 at artwork on a water tank that is mostly obscured by buildings and rapidly growing trees.” Which sounds on point until you realize that neither of these expenditures came from the general fund and thus could not have been used to fund an election anyway.”[/quote] Let’s all agree now to a New Year’s resolution. We’ll no longer excuse stupid City decisions (by council or staff) by playing the it’s-not-from-the-general-fund card!
Dunning’s Zipcar and water tank examples adequately support his contention about the council’s recent poor decision-making record. Since you’re not concerned about “mere” six-figure waste, he could have added the million-dollar Hanlees giveaway or the failure to deal with personnel costs or with developer subsidies in the form of undercharging for city infrastructure costs.
Of course, deciding to paint benches at $3,000 apiece instead of, say, $75 each could be considered small potatoes. But, $2,925 here…$150,000 there…$1-million there…it starts adding up to real money. So, Dunning’s perfectly on point with his examples for why he’s “not exactly in a trusting mood.” Stupid is as stupid does; you’re just nitpicking about the price.
Did you really infer from your talk with Dunning that his solution includes a January place-holder appointment of someone who “might have a good grasp of these complexities by July…”? It seems more likely that he’d advocate someone who is ready to deal effectively with council complexities from the first day–there are quite a few so qualified.
As long as you’ve decided to take off on the side issues here, I’d rather see you evaluate Saylor’s decision to put us in this position than to get in another public argument with that columnist. “You can disagree with that view, but that’s my opinion.”
[i]”Let’s all agree now to a New Year’s resolution. We’ll no longer excuse stupid City decisions (by council or staff) by playing the it’s-not-from-the-general-fund card!”[/i]
I think this is a good point. However, I think there is a FAR BETTER example of a type of non-general fund expenditure made by our City Council in the recent past than Zipcar or Civic Arts expenditures*. It’s the millions of dollars we have handed over to farmers for this scam known as ag conservation easements.
From the June 10, 2010 Davis Enterprise: [quote] The City of Davis made its first easement deal in 1988 by keeping 13 acres of North Davis Meadows as open space. Since then, the city’s paid $3.8 million to lock down just over 3,000 acres in 14 strategic blocs, some between Davis and Woodland, others between Davis and Dixon. That total includes the $1.3 million the city spent last year to close three land deals totaling 900 acres. The year before that, it spent $800,000 on easements. [/quote] Note that every recipient of this public money is wealthy. Very wealthy**. We are taking money that could be used to provide medical care to the poor and handing it over to rich landowners. And for what? So they cannot build houses on land in which it is alread y illegal for them to build houses. The only people who believe in this program are a small group of dimwitted environmentalists and the rich farmers who are getting paid off. It’s worth pointing out that virtually every farmer in Yolo County who owns land in the middle of nowhere on which it is illegal to build a housing subdivision now is on a waiting list for the next time the idiots in Davis have a million dollars or more to give them to not build houses on their farm land smack dab in the middle of nowhere.
*There is no case to be made at this point that the Hanlee’s loan is an expenditure at all. It might not be a wise investment. It might set a bad precedent for the DCC to ask as a banker. It might be a violation of the spirit of how “redevelopment” money should be spent. It might not have been the best bargain for the taxpayers. But unless Hanlee’s goes bust, all of the money “invested” will by terms of the agreement return to the city’s coffers.
**Keep in mind that the millions of dollars being handed out are not going to tenant farmers or laborers. A lot of the recipients are lawyers who lease the land they own to farmers. Anyone who owns large tracts of farmland in Yolo County is, compared to your average family here, very well off. This scam is just another example of how government enriches those who fund campaigns.
I’m opposed to spending $$ for an election.
Suppose we ask folks in the community to volunteer for the job?
I’d love to see who is interested.
“Let’s all agree now to a New Year’s resolution. We’ll no longer excuse stupid City decisions (by council or staff) by playing the it’s-not-from-the-general-fund card!”
Not excusing anything. But the fact remains is that there are monies that can be used only for specific purposes that the city has available whereas money is not available for the election without cutting from somewhere. Put another way, we could have no zipcar and no art project and we would not be able to use any of that money for an election. That’s what I’m saying.
I agree with JustSaying:
Let’s all agree now to a New Year’s resolution. We’ll no longer excuse stupid City decisions (by council or staff) by playing the it’s-not-from-the-general-fund card!
Every dollar our city manages is as important as another. The Million dollar public funds fiasco that Twin Pines Cooperative Foundation shared in the Enterprise today on page 3, is a million dollars of public funds no matter where it comes from. In this case most of it comes from the Redevelopment Agency (RDA). Every RDA dollar is a public fund dollar set aside from a RDA district. They are city dollars and not meant to be wasted. They are public funds meant to be well spent. However, there is no oversight of RDA dollars and City staff have lost, wasted or misspent millions of them lately. See my public comments about use of public funds at the last few Council meetings.
The City needs an accounting of the RDA uses and expenditures?
See today’s Enterprise page 3. This is one of a series.
David Thompson, Twin Pines Cooperative Foundation.
#2 in a series of public information memos to the citizens and taxpayers of Davis
Why is city staff misspending your money?
The Million Dollar Public Funds Fiasco!
Independent Investigation called for!
City of Davis staff has now spent over $1 million dollars of public funds against the Twin Pines Cooperative Foundation (TPCF) and NP, LLC to pay for the services of 24 lawyers and to questionably subsidize Davis Areas Cooperative Housing Association (DACHA). Up to $375 an hour paid to sixteen lawyers at the City Attorney’s law firm. Public funds in one form or another also partially paid for DACHA’s two lawyers at Nossaman, and six lawyers at Hefner, Stark.
$1 million in public funds and 24 lawyers used to support a DACHA Board of directors ineligible to serve, improperly seated and accused of breaking numerous California laws such as distributing over $200,000 of those public funds to themselves. Why is city staff using public funds for such a cover-up?
•Most Board members were behind more than 30 days in their carrying charges/rents and according to the bylaws should have been automatically removed from the board
•Many Board members were also improperly seated in sponsor seats
•Some Board members had loans from DACHA. None of the loans to Board members were approved (as legally required) by the Attorney General
•The Davis City staff recommended that the City Council lend $4 million dollars of public funds to a DACHA Board ineligible to serve
•The President and Secretary of DACHA who signed under penalty of perjury documents associated with the loan of $4 million dollars of public funds, were both ineligible to serve
•In a transcript of the October 20, 2009 meeting, the City Attorney told City Council that “we had the evidence of the membership vote”.
•The City Attorney did not share with the Council that almost all of the members were also ineligible to vote and therefore DACHA had no legal quorum. In June, 2008, the 20 members were delinquent to DACHA $64,713
•DACHA of course was at that time delinquent to the City of Davis but city staff will not make the amount of delinquency known. In their recommendation to that City Council for the $4 million loan, staff failed to report that: DACHA owed the city a sizeable amount; the board was ineligible to act and owed $24,781; the membership owed $64,713 and was ineligible to vote; the city had received a legal opinion stating that the city’s approval of DACHA using over $200,000 of public funds to distribute to themselves was illegal.
Why did city staff not do their due diligence in making a loan of $4 million dollars of public funds to DACHA?
Quotes by Kenneth M. Malovos, the arbitration attorney approved by the Yolo County Superior Court. Role of City of Davis. “What is curious is that representatives of the City of Davis were present throughout the entire time when the new Board took these untoward actions and they did little to discourage the Board”. (Page 5 of Arbitration Award)
“The testimony by three members from DACHA who appeared at the arbitration can only be described as cavalier. For the most part their testimony was characterized by failures of memory, contradictions and a certain inability to admit even their own written words. Two of these members appear to have been in serious arrears in their fees during times that they were members of the Board, in direct contravention of the bylaws”. (Page 7 of the Arbitration Award)
For over five years (2005-2010) members were seriously delinquent to DACHA (see below). During much of that time TPCF thinks DACHA was delinquent in it’s’ loan payment to the City of Davis. City staff will not provide numbers. DACHA members used public funds as a private bank with no-interest loans to themselves.
•The former DACHA President was delinquent $14,000
•The former DACHA Treasurer was delinquent from 2005 to 2010
•In June of 2008, the six board members owed DACHA $24,671.
And the City representative on the board and assigned city staff did nothing about this improper practice even thought the City had a major loan to DACHA.
The City of Davis had its own appointee on the board and a city staff member attended almost every board meeting. (See “DACHA’s Dealings are Fishy”, Davis Enterprise, Jan 23, 2010) Why were the City’s representatives not protecting the city’s asset?
DACHA as a borrower of public funds was running serious delinquencies for over five years and behind month after month in loan payments to the City. However, TPCF has not found any written memo by the city’s representative on the board or city staff about delinquencies or evictions.
David Thompson, Twin Pines Cooperative Foundation
Delinquencies of DACHA members QuarterYear
$111,000 Jul-Sept.*2010
$90,000 April- June*2010
$60,000 Jan-March*2010
$35,000 Oct-Dec*2009
$22,063 July-Sept.2009
$18,582 April-June2009
$22,087 Jan – March2009
$12,912 Oct.-Dec.2008
$10,436 July-Sept.2008
$64,713 April-June2008
$54,239 Jan – March2008
$54,123 Oct.-Dec.2007
$54,090 July-Sept.2007
$39,356 April-June2007
$38,099 Jan – March2007
$37,011 Oct.-Dec.2006
$32,841 July-Sept.2006
$32,543 April-June2006
$21,983 Jan – March2006
$19,165 Oct.-Dec.2005
$17,317 July-Sept.2005
$15,323 April-June2005
$19,003 Jan – March2005
* These four quarters estimated as City staff has not provided the information. From January 2005 to September 2009 TPCF has the rent rolls showing the DACHA member delinquencies month by month for almost 60 months.
TPCF calls for an independent investigation of the DACHA fiasco and the role of city staff.
See the law suits against DACHA for breaking numerous California Laws
http://sites.google.com/site/itsthelawdacha/home.
Twin Pines Cooperative Foundation, http://www.community.coop
216 F. Street, PMB 1844, Davis, CA 95616
Serving 27 cooperatives across the nation
[quote]Let’s all agree now to a New Year’s resolution. We’ll no longer excuse stupid City decisions (by council or staff) by playing the it’s-not-from-the-general-fund card! [/quote]
How about if we agree to stop excusing stupid City decisions PERIOD?
Let’s have mail-in election in April if at all possible. The very last place we should try to save money is on eliminating the election of City Council members. The fiscal impacts of the decisions the Council will make over the remainder of the vacated Saylor term dwarf the cost of a mail-in election. It is imperative that voters have a direct say in who is making those decisions.
Maybe, now that the magnitude of the unsustainable City compensation debacle is becoming more apparent to the voters (I hope), we could elect someone who will aggressively work on immediately adopting all feasible measures to at least prevent the problem from continuing to grow. We can’t afford any more kicking this time bomb down the road.
[quote]Can Don Saylor be county supervisor and stay on the council for a bit as well? Is that illegal?[/quote]
Perish the thought.
Rich Rifkin: “*There is no case to be made at this point that the Hanlee’s loan is an expenditure at all….But unless Hanlee’s goes bust, all of the money ‘invested’ will by terms of the agreement return to the city’s coffers.” Maybe I’m misunderstanding the arrangement with the car sales outfit, but it looks to me like we’ll end up a million dollars poorer than we would have been when the scheme plays out.
If Hanlees goes under the way many dealerships recently have, how much will our loan paper be worth then? More likely, they’ll continue to be successful and will have their debt excused by the city by redirecting Hanlees’ sales taxes to loan forgiveness.
I haven’t seen anything about what happens to the interest part of the deal, but if that ends up being excused as well, we’re looking at much more than a million-dollar giveaway of city funds to a private company.
I see this as quite similar to your excellent conservation easement example. Why spend city funds to finance actions a business would have to take or want to take even without public sweeteners?
In the Hanlees case, were they really headed from Napa to another city when our legal bribe changed their plans? It looks to me more like it made business sense to close their Napa shop and consolidate dealerships at the Davis auto row–and squeeze the City to provide a $1-million loan and to cap their taxes at $100,000.
Again, as I understand it, taxes owed above that amount get credited against the Hanlees loan balance. In effect, Hanlees will be “paying off” the loan with money from the city coffers. If true, wouldn’t this more accurately be termed a million-dollar grant? I think a real loan would have been a more than adequate means of thanking Hanlees for doing what’s in their best financial interests anyway.
With respect to the City’s ag. preservation enterprises, what non-general-fund fund is capable of such largess? Can the money be used for more sensible and beneficial, higher priority needs? Who approves and negotiates the specific projects?
There are more folks supporting ag. and wildlife easements than one might imagine. Farmers and ranchers interested in keeping their land in agricultural use or supporting wildlife permanently relinquish the right to develop the land for non-ag. purposes. Many do this without getting anything in return other than the satisfaction of fulling what they see as their personal stewardship ethic. This is a good thing.
There also are billions spent on various federal and state programs to encourage landowners to keep their land available for ag. production. Many times, the governments and farmers partner with non-profits that help fund and enforce the easements for decades or in perpetuity. Most programs require professional assessments on which a fair purchase price is determined for the rights (which would seem to be worth little on parcels on which it’s already illegal to build houses.
The Yolo Land Trust carries out a program aimed at protecting wildlife habitat, open space and agricultural lands. I’m curious about how the city easement purchases fit in since most of the Trust’s 9,000 acres of easements aren’t located between Davis and Woodland or between Davis and Dixon.
Where are the City’s “strategic blocs”? How much do we plan to spend in our quest for development rights on land located where development already is prohibited?
[quote]”Not excusing anything. But the fact remains is that there are monies that can be used only for specific purposes that the city has available whereas money is not available for the election without cutting from somewhere….That’s what I’m saying.”[/quote] I think Dunning was using Zipcar and water tank art to illustrate his contention that the Council’s recent decision-making doesn’t bode well for a quality appointment, not to claim that money spent on those two projects could have helped fund an election. In that respect, he was on point. That’s what I’m saying.
I agree with your major point that we’ve been put in a position where funding an expensive special election doesn’t make sense. We’ve got Don Saylor to recognize for that. I’m curious if he has second thoughts: Imagine what a positive view Davis voters would have had if he’d “sacrificed” his short mayorship to give us the chance to replaced him with a cheaper election.
Instead, we’ll remember him for “pulling a Palin” on us, for keeping us from a democratic replacement and, most significant, for his performance as “Mayor Saylor.”
To Just Saying: Hanlee’s must generate sales tax revenue for the city in excess of approximately $131,000 a year, before it gets any break on paying back the loan. Then it is forgiven its RDA loan dollar for dollar in sales tax revenue generated after it reaches the $131,000 threshold. But the city keeps every single dollar of tax revenue generated. Hanlee’s thus has a built in incentive to generate as much in the way of sales tax revenue that is possibly can, which will benefit the city tremendously. Essentially what is being done here is converting RDA funds to sales tax revenue funding that will go into the city’s general fund. There is a “loss” of RDA funding, but an equal “gain” of sales tax revenue/general fund money.
[i]”Maybe I’m misunderstanding the arrangement with the car sales outfit, but it looks to me like we’ll end up a million dollars poorer than we would have been when the scheme plays out. If Hanlees goes under the way many dealerships recently have, how much will our loan paper be worth then?”[/i]
It won’t be worth much. You are right that in the “goes bust” scenario the taxpayers of Davis get the shaft on this loan. We are sitting in second position, so it’s as if we have no colateral protecting us. The primary lender, I would guess, would at least get the land.
But more importantly, if Hanlee’s goes bust, the City of Davis as a corporation goes bust, too. The sales tax generated from auto sales in Davis is that important to the City’s revenue stream.
[i]”More likely, they’ll continue to be successful and will have their debt excused by the city by redirecting Hanlees’ sales taxes to loan forgiveness.”[/i]
The only scenarios in which that happens are those in which Hanlees sells a hell of a lot more Volkswagens than comparable dealers in our region have been selling. For the next 5 years or so, I don’t think those are likely.
What I call the “realistic scenario” is where Hanlee’s sales are about 57% of the worst scenario the City considered. With that, very little of the loan is “forgiven.” Most of the money is paid back in interest, and under that “realistic scenario” the NPV of the loan to the City is around 7%.
If times improve greatly and VW’s start selling like high-priced coffee drinks, it is true that more and more of the “loan” is forgiven. But in those scenarios, the marginal increases in sales tax earned by the City of Davis essentially erase the amount of the loan which was forgiven.
In terms of the value of the loan, the City is roughly equally well off if Hanlee’s sells 350 or fewer VWs per year (realistic scenario) up to 700 VWs per year (rosier scenario). Beyond 700 or so, the returns to the City (from marginal sales taxes) make the deal much better for the City.
[i]”Why spend city funds to finance actions a business would have to take or want to take even without public sweeteners?”[/i]
I think that’s a very good question. I think the best answer to it is that our City is in somewhat of a bind. We are very dependent on sales tax from auto sales. (If we had Ikea, Wal Mart, Home Depot, etc., this would not be the case.) And among our auto sellers, Hanlee’s sells the most and thus has the most leverage.
So we face a problem where, if auto sales slump or the sellers leave Davis, we are up the creek. And because other cities offer similar sorts of enticements to these sellers, we are likely to lose them if we don’t play the game.
[i]”In the Hanlees case, were they really headed from Napa to another city when our legal bribe changed their plans? It looks to me more like it made business sense to close their Napa shop and consolidate dealerships at the Davis auto row–and squeeze the City to provide a $1-million loan and to cap their taxes at $100,000.”[/i]
Again, I think you ask a very smart question. I don’t know the answer. Only Hanlee’s knows what it would have done if Davis did not agree to their request. In order to build the new facility, Hanlee’s did need the $1 million in financing for their new construction. Perhaps if the Davis City Council turned them down, they could have or would have attained bank lending (though obviously at a much higher rate of interest). If that is true, then this loan makes no sense at all, because all of the benefits of it (from increased sales tax revenues) would have been achieved without risking any of the RDA money.
On the other hand, it does not seem unlikely that Hanlee’s could have squeezed a similar deal out of the coffers of some other municipality in Northern California. And if so, anyone in Hanlee’s position would take their business elsewhere instead of going to a bank.
[i]Again, as I understand it, taxes owed above that amount get credited against the Hanlees loan balance. In effect, Hanlees will be “paying off” the loan with money from the city coffers.[/i]
You basically have that right, as long as annual sales of VWs over the first 10-12 years of operation average around 500 or more. In my opinion, that is unrealistic. I think a much more likely case is they average around 350, and almost none of the loan principal is waived.
[i]”If true, wouldn’t this more accurately be termed a million-dollar grant?”[/i]
I don’t think so, unless it were the case that all of the increases in sales tax revenues earned by the City of Davis would have materialized no matter what the City did. I infer from your comments that is what you think is reality. You may be right. I don’t know.
[i]”Most of the money is paid back in interest, and under that “realistic scenario” the NPV of the loan to the City is around 7%.”[/i]
I need to clarify this badly worded statement. What I intended to say is that, under the “realistic scenario,” the Net Present Value of the revenues into the City’s coffers–interest + principal + marginal sales tax–is worth roughly 1.07 x $1 million or $1,070,000*.
Whenever a rational actor is deciding whether an investment makes sense or not, the first question is [i]whether the NPV of the cash flow back is worth more than the amount invested.[/i] If it’s negative, you’re always better off not making that investment.
But to be clear, just because it is greater than zero does not make it a good deal. Holding equal factors of risk variance, you would be best off making the investment with the highest NPV, not just any one which is better than doing nothing.
*For argument’s sake, I am presuming that but for this loan, Hanlee’s would not have moved the VW dealership to Davis. If that is a false assumption, everything which follows is folly.