On Monday night, in a series of votes, the Finance and Budget Commission made recommendations regarding the state of the finances on Nishi, including the two most pointed: “The FBC recommends that the City Council does not move forward with any development project until such time as a method is found to ensure a profit to the City” and “The FBC recommends that the City Council does not approve development of innovation center projects until the economic analyses are complete and accurate.”
If the council adheres to the concerns of the Finance and Budget Commission, it would be compelled to push the Nishi vote back to November. The overwhelming sentiment was not that Nishi was a bad project, but rather that it wasn’t ready to go on the ballot yet.
At their January 11 meeting, the Finance and Budget Commission (FBC) passed a series of motions regarding innovation center development in the City. These recommendations came after several months of reports to the commission regarding both the Mace Ranch Innovation Center and the Nishi Gateway development.
FBC Recommendations
The FBC recommends Scenario 3 (privatized park, open space and street maintenance) as the desired option when looking at development and that the council not proceed with the baseline as laid out. (Passed Unanimously)
The FBC requests that an infrastructure financing study be done with a 70% loan to value ratio so as to limit the use of a community facilities district (CFD). (Passed Unanimously)
The FBC requests an analysis of what a small second mortgage to augment the financing of the project would look like. (Passed Unanimously)
The FBC recommends that the city council does not move forward with any development project until such time as a method is found to ensure a profit to the city. (Yes-Knickerbocker, Salomon, Wood; No-Carson, Miller; Abstain-Weiss, Williams Passes 3-2-2)
The FBC recommends that the city council does not approve development of innovation center projects until the economic analyses are complete and accurate. (Yes-Knickerbocker, Miller, Salomon, Weiss, Williams, Wood; No-Carson Passes 6-1)
The FBC does not consider the current EPS report to be complete and accurate until the concerns contained in the handout submitted at the January 2016 FBC meeting and additional questions from commissioner Williams are answered. (Yes-Knickerbocker, Miller, Salomon, Weiss, Williams, Wood; No-Carson Passes 6-1)
Commissioner Hand Out:
Two Additional Questions from Commissioner Williams
- I believe the values in the Annual General Fund Expenditures section of Table 1 (Estimated Annual General Fund Revenue and Expenditures Summary at Buildout) on page 132 of the pdf file, should be broken into two separate columns (6 columns in total for the three) as follows. The first column should include the Incremental New Costs that the General Fund will incur, and the second column will contain the Existing General Fund Costs that are being Allocated to the respective projects. The result of that change is that we will be able to see both a New Net New bottom-line as well as a Fully Allocated bottom-line, both of which are meaningful to a fully informed decision.
- Table 1 as it currently exists is based on the City’s average costs (as described on pages 144 and 145 of the pdf document). I believe, especially in the case of Nishi, that a more demographically sensitive cost estimation method is appropriate, not to replace the average costs in table 1, but to supplement it with a Table 1-A that acknowledges the impact of the projected demographics on the City’s projected costs. For example, 95% of students in the rental units of Nishi are going to create road repair costs at a significantly lower rate than the average Davis resident currently imposes. Overstating or understating costs by choosing the easy to implement average costs method does a disservice to the City and its residents in informing their ultimate decision about either of these projects.
a lot of questions here.
why is it insufficient that the developer has committed to making this project pencil out?
also, as i understand it dan carson believes that we are grossly understating revenue while bob milbrodt thinks we are drastically overstating it. who is right?
also what is the harm in pushing this to november to figure out the math better?
I, for one, see no need for a vote before November (or even, this year)… the expression, “not ready for prime time”, resonates for me…
“also, as i understand it dan carson believes that we are grossly understating revenue while bob milbrodt thinks we are drastically overstating it. who is right?”
DP: Bob Milbrodt is right. Dan Carson is wrong, but I do not think he looked at this specific issue.
Taxable sales of $13,000 per employee at buildout is an absolute fantasy. The methodology of making this estimate was fatally flawed. The companies on the site will be predominantly new ventures. Most will be long gone before they generate significant revenue.
CalAg, you are correct when you say “I do not think he [Dan Carson] looked at this specific issue.” As I said in public comment to the Planning Commission last week, I believe Dan Carson has identified areas where the EPS analysis is too conservative. Dan has also provided an alternative scenario to the one EPS provided. I personally feel that just as EPS’ is too conservative, Dan’s is a bit too optimistic, and that the reality lies somewhere in the middle.
With that said, the issue that Bob Milbrodt raised in Monday’s public comment at the FBC meeting makes considerable logical sense, with the result being that here EPS’ is too optimistic, and until an analysis is completed we don’t know if Bob’s is a bit too conservative.
Those issues, plus Ray Salomon’s concerns (which you clearly share) about the amount of taxable revenue projected per Nishi employee all fed into the FBC’s strong call for additional analysis.
The assumption of $86.5 M in total annual taxable sales is a big problem.
The model should be rerun assuming the other extreme ($0 sales) and then we can argue about where Nishi will actually fall on the revenue spectrum based on the stated goal of the project to house UCD spinouts until they outgrow the site.
Yours is not an unreasonable request. $0 taxable sales isn’t realistic, but it definitely brackets the low side.
David Greenwald said . . . “If the council adheres to the concerns of the Finance and Budget Commission, it would be compelled to push the Nishi vote back to November. The overwhelming sentiment was not that Nishi was a bad project, but rather that it wasn’t ready to go on the ballot yet.”
The Finance and Budget Commission (FBC) has a clear sense of its function. In late 2014 FBC worked closely with our Council liaison Robb Davis to present to Council a revision ‘s charge to read as follows:
It is important to note that making policy appears nowhere in that four-part description. Deciding whether Nishi goes to the June ballot is a policy decision, and the responsibility for that resides with the Council.
What FBC did do on Monday night with its first three passed motions was to formally and transparently identify specific areas in the Nishi fiscal analysis that did not provide FBC with sufficient information to properly and effectively satisfy FBC function c. Searching for and advising actions that could maximize city revenues and reduce governmental costs and ensure fiscal stability.”
What FBC also did Monday with all six of its passed motions was Provide recommendations/special studies on financial and economic issues to the City Council. Those recommendations to Council included advice about the sense of urgent timing the FBC felt the completion of the recommendations warranted.
As part of their deliberations FBC members sought input from Staff and the consultants about whether they would be unable to complete the requested items prior to Council’s impending February 16th decision about what will go on the June ballot. Staff and the consultants said that would be challenging but not impossible to do, which was why the final two FBC motions were passed . . . to advise Council about the sense of urgency of completing the requested items prior to their final decision. Only Council has the power to direct staff and the consultants to transform the recommendations into reality.
“The overwhelming sentiment was not that Nishi was a bad project, but rather that it wasn’t ready to go on the ballot yet.”
“Deciding whether Nishi goes to the June ballot is a policy decision, and the responsibility for that resides with the Council.”
It’s starting to look to me like the fix is in. I won’t be surprised if the City Council approves the project in 7 days – just deeply disappointed in the council members that vote in the affirmative.
if by the fix, it means putting nishi on the ballot when it can’t win, it will lose and be the end of the project, then you could be right. somehow i don’t think they’ll be that stupid