By Robb Davis
Markets fail when transactions do not result in efficient outcomes from a societal point of view. One cause of market failure concerns the problem of one partner in a transaction having more or better information than the other. The lack of (quality) information by one party leads to power imbalances that can harm one party and inappropriately confer benefits on another that a free market transaction would not allow.
Two recent examples of information asymmetries related to land use decisions in and around Davis explain why we as citizens tend to approach such decisions in what appears to be narrow, self-interested and ultimately very conservative ways. In both cases it is clear that one party in the transaction possesses more and better information that risks placing the City at a disadvantage in the transaction it is negotiating.
1. The Cannery project, whatever its value in terms of housing provided, suffers from a significant problem of lack of connectivity to the rest of the city. This is especially true for alternate forms of transportation such as biking and walking. This problem is significant because the City has set clear goals concerning the reduction of carbon emissions-most of which are generated by transportation choices. Developing Cannery in a way that people living there have choices concerning transportation is therefore in the City’s interests and the City should negotiate any agreements with owners/developers/builders with this goal (among others) in mind.
But the City is at an information disadvantage because the owners can merely say (and have said), “What you are requesting (in two grade separated crossings, for example), is too expensive.” But of course the question in return must be: “Too expensive relative to what?” Since the owners/developers/builders are not required by law to disclose how much they stand to earn from the City’s decision to change the zoning classification that will allow them to develop it according to their wishes, it is not possible for citizens to judge the veracity of the owner’s statement
Of course the City can hire (and apparently has hired) an independent firm to estimate this. Of course the owner can merely dispute these estimates. The result is that the citizens of Davis are not privy to the actual information and therefore cannot determine whether they can and should press for the preferred infrastructure changes. Further, when the owner asserts that it has the best interests of the City of Davis in mind and also wants “connectivity”, this assertion is not useful information (from a transaction point of view) because it may or may not be true.
In addition, the owner has much more information about the City because the City is required to conduct its business in a transparent way whereas the owner is not required to disclose private deals that concern the property. The owner also has information about individual decision makers and their needs and what it may take to sway them to accept its proposals. This is not an accusation of wrongdoing but merely highlights that information asymmetries exist at multiple levels and leaves citizens in a position of not really knowing whether they are getting all they might get out of the project.
2. The so-called “land swap” concerning the Shriner and Mace 391 properties also suffers from information asymmetries-also at several levels. Peripheral development will always be a cause of much public debate in this City given the value of the surrounding land for agricultural purposes, concerns about sprawl and the need to consider the best ways to grow revenue and jobs for Davis. However, the debate is almost always constrained by the lack of full information available to citizens that will inform them as they negotiate with landowners/purchasers/developers.
In this case there are several pieces of information held by those proposing the project but not shared with the public. This information would greatly enhance the citizens’ ability to consider the pros and cons of the project and negotiate from an informed position. These include (but are not limited to):
- What information indicates that 493 acres is necessary for a park? What market research indicates that this size is critical?
- What kinds of firms have indicated an upfront interest in moving into such a park should it be developed? (I realize that it is not possible to name the firms-there are privacy issues that must be considered, but what kinds and size of firms from what sectors have expressed interest would seem to be the kind of information that should be forthcoming).
- What are the 2:1 mitigation options that have been considered, and are they demonstrably in the interests of the City? Or does mitigation occur on land far away in a way that does not preserve farmland of equal value to that which is lost?
Again, it is not helpful for those proposing the project to merely state that “This project is a win/win for the City” or “As long-term residents of Davis we have the best interests of the City in mind”. This information does not inform the discussion but merely opens any critique of the project into accusations against those making the critique of engaging personal attacks against people who clearly have the best interests of the City in mind.
Further, as in the case of the Cannery, those proposing the project have much more information about City decisions and have the ability to use that information as leverage points to sway votes in their direction.
Is any of this evil? No. It is just good old deal making. It is people acting in their self-interest to achieve an end that will benefit them financially. There is nothing evil in that and I do not begrudge them of it. However, we as citizens must recognize that we are at an information disadvantage here. We need to acknowledge that significant information asymmetries exist and they risk placing us in a position of achieving a less than optimal transaction from the perspective of what our City needs.
This explains why I, and many others, approach such transactions in a very cautious way. This is why we ask for things like Measure R and “slow go” approaches. We know that the asymmetries exist and we want the time to gather as much information as we can. We want to compel those proposing such “deals” to expose as much information as possible. We want to create less information imbalance so that our interests are not subordinated to the interests of others.
I have no illusions that we will ever achieve something approaching “Pareto optimal” outcomes in such transactions but it is absolutely in our interests to reduce the asymmetries as much as possible to achieve outcomes that contribute to the broadest social good as possible.
Robb
Nicely expressed.
Robb: good points. It’s why Con Agra Project should be on the ballot.
For the life of me, I dont know why the CC is hell-bent on promoting Con Agra and not treating them like the City treats our local real estate developers. Con Agra should be required to give up the mitigation, and be subjected to a citywide vote. Anyone know why our local electeds are giving away so much to this out of state corporation, while sticking it to our local long time developers? It makes no sense: Con Agra, with the blessings and baskets of roses from the CC, is about to waltz out of town with tens of millions of dollars that should be kept in town for our benefit, but wont be.
We will be stuck with the negative impacts of this project, without even the profits being kept in town and plowed back into our community, like what would certainly happen if the Covell Village project was approved and built.
Make this out of state greedy corporation comply with the same rules that our local business people have to!!
Robb, you make the mistake in failing to note agendas – namely those that seek to stop any development and any notable change. You also fail to note the human tendency to want to win rather than cooperate. You assess noble intentions from the community, and sinister (withholding information) intentions from the developer. Your points would be completely accurate in the case where both parties were simply cooperating to reach an optimum outcome. But that is not the case… and is rarely the case… when it comes to development in this town.
Assuming the developer agreed to both grade crossings, I have no doubt that the community would find another, and another, and another demand. Because, ultimately the community is hell bent on demonizing every developer as the bad actor, and then angel-izing the community as the good actor.
So, there becomes the need for negotiation strategy as a developer – and in strategy, information is king.
Note Mr. Harrington’s “greedy corporation” comment. He is very good company in this town.
So, maybe addressing the behavior of the community is the first step to winning the level of trust required for the developer to share information.
Thanks Frankly but I do not ascribe noble intentions to the community. I acknowledge that decision makers can be swayed for personal reasons. Given that they represent the community in the actual decisions made that implies that the community can be driven by agendas.
However, I also must acknowledge that some folks in the community are driven by personal agendas that may not represent the needs of the whole. Of course, in terms of information that can be assessed and used those agendas are fully known and can be integrated into the bargaining process.
We agree that in a negotiation strategy information is king. That is why I wrote this piece. I am merely arguing that for a variety of reasons developers have access to more of it than I do. I may be wrong about this but that is how I see it. But again, I make it clear that I do not believe the developer to be sinister (a priori) but merely engaging in a strategy to gain as much as possible (see my third to las paragraph). Others may demonize, I do not.
BTW, I am not assuming cooperation. In fact, I assume just the opposite though the word “winning” is not what I would use. I would prefer “achieving self-interested results”.
[quote]Rumor has it that North davis land Company and Mike Hart have ponied up the money to hire Mike Harrington to run their signature gathering campaign – Matt Williams 8/31/13[/quote]From the post above, I guess we all know who Mike Harrington’s new client is.
I never thought I would see the day when Mike was shilling for Whitcombe and Streng. Very cynical.
Robb: [i]”achieving self-interested results”.[/i]
I think that is my definition of “winning”.
But I appreciate your points.
I don’t own any undeveloped property in and around Davis. But I work with developers from time to time, and I can tell you that Davis’s well-deserved reputation as being developer-hostile and business-hostile has a lot to do with the points you are making. Basically, it is assumed that there will be a largely adversarial-relationship out of the starting gate. So, the developer forms a strategy to circumvent the challenges instead of focusing on selling the benefits and cooperating with the planners.
Part of the problem is the direct democracy tendencies of our fair city. In other communities a smaller project team would vet the issues and work together with the developer to complete the design. In Davis, every Tom, Sue and Harry thinks he/she has a say, and also thinks he/she has the power to prevent any development he/she does not like. And there are a lot of Tom, Sue and Harry change-averse people in this town that seem to want to block just about every development.
With that deserved reputation, Davis is destined to have all dysfunctional, end-around, project proposals that make many of us feel information-starved.
Silent majority, one of the things about rumors is that they may just prove to be rumors. So far I haven’t found any corroborating evidence that supports that rumor. Time will tell of course . . .
Rumor has it that it might be a rumor……LOL
Someone told me that from somewhere.
I think the process with Cannery has been pretty transparent.
The process with 391 has been less so but the proponents are regrouping and trying to make their case in a more open manner because, it seems, they believe that the merits of the proposal will sway people to support the proposal.
“This is why we ask for things like Measure R and “slow go” approaches.”
Maybe that is true in your case but for others its a tool to kill every proposal.
The problem with project or policy proponents AND opponents acting in bad faith by withholding relevant information, failing to disclose potential conflicts of interest, disseminating false and misleading information, is that it undermines public vetting of proposed projects and policies, makes it very difficult to hold a constructive public debate, and creates a downward, self-perpetuating spiral that ultimately is harmful to the community. That, among other reasons, is why I do not support the “ends justify the means” approach even when I agree with the ends.
-Michael Bisch
Rumors are rumors.
But I will say that clearly all local developers have a shared interest in making Con Agra follow the rules that govern long-time Davis businesses that have hugely contributed over the years to our community.
Con Agra: your project is nearly certain to be on the ballot. Get used to that idea, and reach out to the larger community than those few city leaders whom you think you have in your pockets.
DT Biz: You are active in the Chamber, right? Why are so many local real estate people so gung-ho about Con Agra as drafted and coming before the CC?
“make Con Agra follow the rules”
what rules is conagra not following?
is dt biz gung-ho about con agra? seems like thre is actually a strange split within the community on this. i wouldn’t jump to assumptions.
There’s something different about Michael Harrington’s approach now. For the first time, he’s “making a case” instead of his usual two- or three-word smartypants posts. The rumor must be true.
something weird is going on but i don’t think the rumors explain the extent of it.
“Con Agra: your project is nearly certain to be on the ballot. Get used to that idea, and reach out to the larger community than those few city leaders whom you think you have in your pockets.”
Mike’s post reminds me of Tokyo Rose bellowing into the microphone “You’re going to die Yankee. Or maybe the Wicked Witch of the West flying over Davis writing “Surrender Dorothy” in the sky while hoping not to have any well water thrown on him causing him to melt.
JustSaying: actually, for those quickie posts that you seem to admire so much, those are generally on my smart phone. Small keys, smaller letters, and fingers that just dont fit and eyes that tire too easily. So I keep those short.
I’m not in the office so much, but today I am.
What’s weirest to me is why is our CC and senior staff giving away so much to this extremely rich, out of state developer whose profits are sucked out of town, never to return?
Everyone knows I was not a fan of the 2005 Covell Village project, but what is fair is fair. These developers should all be treated alike.
We lawyers are all treated alike in Yolo County Superior Court, and I think the City should do the same to project applicants.
What all of us should be asking is: why is Con Agra getting such a rich deal and easy process, compared to our local business persons and their projects?
It stinks.
Davis Progressive: I am very consistent. I like a fair, public process that promotes direct democracy.
Measure J/R.
Measure O
2011 Water Referendum
I’m not taking one side or the other: just treat everyone the same
I am very consistent. I like a fair, public process that promotes direct democracy [and my client’s interests]. Kind of like the ambulance chaser of “direct democracy.”
[quote]There’s something different about Michael Harrington’s approach now. For the first time, he’s “making a case” instead of his usual two- or three-word smartypants posts. The rumor must be true. – JustSaying[/quote] He also shilled for the Parlin project until they shut him down.
Toad
[quote]Mike’s post reminds me of Tokyo Rose bellowing into the microphone “You’re going to die Yankee. Or maybe the Wicked Witch of the West flying over Davis writing “Surrender Dorothy” in the sky while hoping not to have any well water thrown on him causing him to melt. [/quote]
Toad, no doubt you see it that way because you’ve never seen a development you don’t like. But for the rest of us, and as of the last Measure R election that represented 75% of the voters, we see it more as a heroic Paul Revere warning us that the “British are coming”.
My comments were general in nature regarding Robb’s thread topic, information asymmetries and their impacts on our land use decisions, not project specific.
-Michael Bisch
[quote]After the American Revolution, Revere went on to become a successful businessman. He opened a hardware store, a foundry and eventually the first rolling copper mill in the United States. He provided materials for the historic frigate USS Constitution, which played an important role in the War of 1812 and is the world’s oldest floating commissioned naval vessel. He also produced more than 900 church bells, one of which still rings every Sunday in Boston’s King’s Chapel. Revere Copper Products, Inc., is still in operation today[/quote]
Of course if tried to open up one of his business in Davis, he would be maligned and demonized as an owner of an “evil corporation”. He would not be able to find any commercial real estate worthy to house a business. He would have rode off on his borrowed horse saying “The Regulars are Leaving.”
[quote]Of course if tried to open up one of his business in Davis, he would be maligned and demonized as an owner of an “evil corporation”. He would not be able to find any commercial real estate worthy to house a business. [/quote]
I marvel that you can move around your house, given all the straw men living there….
“I like a fair, public process that promotes direct democracy.”
But demanding the CC put it to a popular election is changing the rules in the middle of the game. It seems that those who drew the lines with measure J should understand the difference between inside and outside the boundary. Inside you don’t need a vote unless there is a petition demanding one outside you do need a vote. Its a pretty straight forward process. You know what you need to do so do it or don’t do it but don’t whine about it.
As for demonizing Conagra as some outside corporation you act as if they make DDT or Dioxin or something. This is a company that provided decent wage jobs in Davis for years to working class laborers and seasonal work to college students. I have a friend who worked there when he was a pre-med student in the 70’s. Conagra only closed the plant when the market for canned foods collapsed in the 90’s. You act like Conagra is some evil corporation when all they are doing is be a responsible fiduciary by trying to get the best value for their stranded asset.
OMAHA, Neb.–(BUSINESS WIRE)– 9-13-2013
ConAgra Foods, Inc., (CAG), one of North America’s leading packaged food companies, announced today that it has been named to the Dow Jones Sustainability North America Index for the third consecutive year.
Recognized worldwide, Dow Jones Sustainability Indices measure the performance of the world’s sustainability leaders. Companies are selected for the indices based on a comprehensive assessment of long-term economic, environmental and social criteria. These account for general and industry-specific sustainability issues, such as corporate governance, health and nutrition, climate strategy, citizenship and philanthropy, and occupational health and safety.
Interesting factoid: the city voted on the Hunt plant in the first place.
[quote]”50 years ago: 1956 Davis – Local residents voted, 1,473 to 900, in favor of locating a multi-million-dollar Hunt Foods Inc. plant in Davis. The vote came in a special straw ballot called by the city council to sample public opinion in a controversy that has stirred considerable heat between the pros and the cons. Results are not legally binding on the council, but will serve as an indication of the sentiment of the community. Proponents of the location of the Hunt plant in Davis had hoped for a two-thirds majority.” – The Daily Democrat 11/13/2006[/quote]
” You act like Conagra is some evil corporation when all they are doing is be a responsible fiduciary by trying to get the best value for their stranded asset.”
And you, Mr Toad have also name called and demonized on a number of occasions those who advocate against the current ConAgra proposal as though they were doing anything different from “trying to get the best value” from what they perceive as their interest in the community whether it be financial, environmental, logistical, social… Or whatever their perceived interest may be.
Would it not be a better conversation if no one ” demonized”?
Here’s an instance where ConAgra donated a closed facility site to the city: [url]http://www.newsobserver.com/2012/01/26/1807145/garner-hears-ideas-for-conagra.html[/url]
mt. toad – conagra is an evil corporation. for a guy who appears to want to call himself pro-labor, it’s surprising how easily you look the other way.
“Evil” is a pretty sweeping indictment of ConAgra DP. Can you help us understand how they have achieved that high status in your value system?