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
I would strongly suggest the City Council majority that approved moving forward on this deal rethink their decision. I suspect Davis Diamonds can do a lot better by relocating to a more suitable venue and the city can possibly facilitate another car dealership coming to Davis. To do otherwise sets a bad precedent; poor city planning; and does a disservice to Davis Diamonds. At the very least, the city needs to take away any possibility of “flipping” this property for huge profit rather than appropriate planning. City staff, the City Planning Commission, Mayor Krovoza and Councilmember Swanson had this one right.
I am completely with Elaine, Mayor Krovoza, and Councilmember Swanson on this one. For the past 15 years I have been a strong advocate for children’s sports and recreational activities in Davis having two children who participated in a wide range of athletic activities. What I would recommend is that the council delay approval of the conditional use permit and work actively with Davis Diamonds and local real estate to try to find a location more amenable to both their needs and that of the community as a whole. A reasonable timeframe could be established, and the conditional use permit could be reconsidered at that time.
@medwoman: My understanding is that this is exactly what staff is doing now.
According to the owners of Davis Diamonds they have searched for over 2 years for an alternate solution. While others may be in a more desirable location, they are simply not affordable. They did say that they have looked at every single one of the options that city staff presented to them (and a few more). Rochelle Swanson mentioned that she couldn’t approve a project sight unseen. When questioned on this, the owners of Davis Diamonds said they had submitted plans and drawings with their original permit application. The city staff did not disagree with this statement. Which leads me to believe that either city staff did not forward these to the council, or Swanson did not look at them. In any case, Swanson looked foolish. If this was an issue for her, she should have raised it before the meeting, or at least inquired with city staff about this issue before the meeting.
Sue
Do you have any idea if and when there will be a comprehensive report on this from the city staff. I am a little skeptical of conditional use applications due to a recent issue in my own neighborhood and freely admit that this unrelated issue could be coloring my view of this situation.
I strongly support Davis Diamonds. I was very sad when the loss of the use of the DISC site pushed inline hockey out of Davis. I just have a very hard time believing that this out of the way, unattractive for this toye of activity site could be the only option available.
Even if there seemed no reasonable alternatives before, now city staff has clear notice to work hard for alternative solutions. Davis Doamonds should use the opportunity to work hard w city staff to find more workable alternatives. In essence, Davis Diamonds has the “bully pulpit” if you will. But to place a kids gym club in a dilapidated Bldg on auto row and miss out on bringing another auto dealer to Davis wd be the height of poor planning.
I hope all this discussion sheds light on the blight in S Davis. We seem to have attracted much if the ffood and other less than charming buildings over the yrs.
@medwoman: I believe it is coming back in about three weeks, but I might be wrong. If anyone has concerns that the owners were not informed of all options by their agent, at the very least this puts other landowners and agents on notice that Davis Diamonds is a potential tenant.
I have argued for years that we need more high-tech/sports/non-profit etc.-zoned land. Perhaps this event will help inform the discussion about any rezone of Hunt-Wesson. I have been arguing for my entire twelve years on the council that we have to be firm about our high-tech zoned land because landowners will always agitate to turn high-tech zoned land into housing if they think they have a chance, since housing is more profitable.
We have the option of driving a hard bargain; of at least saying that if a landowner/developer wants to rezone for housing, they must provide 30 or 40 acres of finished lots on the market for neighborhood compatible high tech/office, neighborhood-compatible athletic uses, non-profits, etc.
Housing is more profitable than commercial? That doesn’t sound right. A number of commercial categories generate higher leasing rates and sales prices than residential. Plus, I’m fairly certain residential construction costs are higher than commercial. That said, I’m no expert on residential real estate.
Hunt Wessen is more about absorption rates. There’s a significant under-supply of residential and a slight over-supply or borderline equilibrium of commercial depending on the specific category.
DT Businessman (aka Michael Bisch, Davis Commercial Properties, DDBA Co-Prez)
I do believe that residential brings more profit than high tech or nonprofits. I don’t know if this is due to higher absorption rate or to higher profit per square foot. It doesn’t really matter. If we want to attract high-tech and facilities such as DISC and Davis Diamonds, need to increase the number of appropriately zoned lots on the market. The demand for this kind of space is not as elastic as the demand for housing, and increasing the supply should put downward pressure on prices.