One of the big criticisms of the Nishi project has been its perceived failure to meet a goal of providing the city with a steady revenue stream. While the project developer had previously committed to ensuring the project would be net fiscally positive, the city’s Finance and Budget Commission was skeptical, even as recently as a month ago.
However, last week, the city and developer agreed to add a Services CFD (Community Facilities District), which it believed would produce a steady revenue stream for the city. On Monday night, after a series of motions, the FBC determined, by a 5-1-1 vote, that the proposed Nishi Gateway project could generate $1.4 million annually for the City of Davis’s general fund upon full build-out.
In part, the motion that was passed read: “The Nishi Gateway project could achieve a significant net fiscal benefit to the city that in the long term at full build-out, could exceed $1.4 million annually.”
FBC Chair Jeff Miller told the Vanguard on Tuesday that there has been extensive examination on this issue, more so than the commission has ever done in the past. He made it clear that this is simply a projection and we will not know for sure until the actual build out occurs. Nevertheless, he said, “If it’s done in accordance with how they’ve said it to be done… that in itself will turn (the project) into a positive, and I think we’re all in agreement on that.”
“This provides a major reassurance to Davis residents that Nishi is a fiscally sound project that will benefit our entire community,” the developers said in a statement on Tuesday.
“Making sure this project generates revenue for our city was a priority from the beginning. This vote by Davis’s Finance and Budget Commission affirms our commitment to helping fund city services,” said Tim Ruff, managing partner of the Nishi Gateway project.
He added, “With this annual surplus, money will be put back into the community to maintain parks and roads and preserve services for seniors and children. We achieve this goal without new taxation on existing residents. This combined with the $400,000 annually for Davis Joint Unified School District will further reduce the need for new taxes.”
The net fiscal surplus is, in part, the result of several commitments from the developers.
The city’s consultant, Economics & Planning System (EPS), noted in its updated economic analysis, “The City Council’s direction reflected a desire to identify mechanisms to ensure neutral-to-positive impacts on the City’s General Fund. In summary, a combination equivalent to a make-whole provision for properties removed from the tax rolls ($93,000 per year) plus privatization of costs of maintain parks, greenbelts, and streets ($181,000 per year) would lead to neutral to positive impacts under all scenarios.”
The developers state, “In other words, the property owners’ commitment to offset lost sales and property tax revenue for any commercial space leased by a public entity combined with their commitment to maintain several parks and streets associated with the project guarantee the project will generate revenue for the city.”
They continue, “With this fiscal update, the City Council now has a fuller understanding of the financial windfall from Nishi. This surplus comes on top of analyses that show Nishi will generate between $315 to $385 million in annual economic activity, $89 to $107 million in annual wages, and 1,500 to 1,800 permanent jobs. Nishi also makes significant investments in Davis infrastructure at the property owners’ expense, including a new access point to campus and $1 million devoted to affordable housing and other city needs.”
Jeff Miller explained several of the key parts. First, there will be no infrastructure CFD. That means that the developer will be responsible for all the infrastructure costs. The services CFD will simply cover city services.
The FBC in fact, passed a friendly amendment proposed by Commissioner Ray Salomon, who ultimately voted against the recommendation after the commission failed to pass one of his proposed amendments. The main motion provides, “Recommend that the development agreement for the project specify that public infrastructure not be financed with any city funding.”
The developer has also committed to a make-whole provision in case the university acquires some of the office space – the developer would make the city whole on any tax revenue lost in that process. The developer is also committing to $1 million for housing, civics arts, a local carbon offset, and a downtown parking management plan.
According to the full motion, the FBC “finds that the Nishi Gateway project could provide a significant economic benefit to the city and the surrounding region in greatly increased economic activity, jobs, business-to-business sales opportunities, and productive partnerships with Davis’ largest employer, UC Davis.”
They believe that “the development of Nishi Gateway would itself generate significant demand for commercial real estate development within the city and spur business activity in nearby downtown Davis. Both the economic and environmental analyses of the innovation park projects confirm that a large part of the undeveloped commercial lands within the city are unavailable or unsuitable for innovation parks and thus would be insufficient to meet the city’s long-term economic development goals.”
Further, “The commission also finds that the Nishi Gateway project could achieve a significant direct net fiscal benefit to the city that, in the long term at full build-out, could reach $1.4 million annually, with one-time net fiscal benefits in the millions of dollars. Other local agencies, including the county and Davis Joint Unified School District, would also cumulatively receive millions of dollars in additional revenues as a result of the project.”
There was some disagreement on how much the net benefit would be. Ray Salomon proposed a friendly amendment reducing the $1.4 million figure down to $700,000. This amendment was not accepted and was ultimately narrowly voted down 4-3. The main motion was then passed 5-1-1 with Mr. Salomon in opposition and Bill Wood abstaining.
Next week, the council will determine whether to place Nishi on the June 2016 ballot. The FBC vote, while not ensuring that, marks a major step forward for the project.
—David M. Greenwald reporting
“the City Council now has a fuller understanding of the financial windfall from Nishi”
A windfall is a large, unexpected and undeserved benefit. What the FBC described was a projected enticement to Davis voters to approve the project in exchange for agreeing to absorb its undesirable impacts. It’s a quid pro quo, not a windfall.
Jim,
The F&BC always appreciates citizen comments and input. That said, the members of the F&BC spent hundreds of hours collectively on reviewing, analyzing and discussing the data provided by staff and the consultants. The motion was the result of that work. Your assertion of
projected enticement to Davis voters to approve the project in exchange for agreeing to absorb its undesirable impacts. It’s a quid pro quo, not a windfall.
is not helpful. If you have analysis that conflicts with of our work the F&BC would certainly appreciate that you provide us with any specific information along with the supporting backup data at one of our public meetings or send it directly to me.
Let me assure you that neither I nor, to the best of my knowledge, any of the F&B C commissioners have any dog in this hunt. We are simply a team of volunteers that were asked by the City Council to review the consultant and staff reports from a financial perspective. Our motion regarding the Nishi project is from a financial perspective and is neither a quid pro quo nor a windfall for the city. It is just one potential source of revenue to a city that is on an unsustainable fiscal path.
Jeff
Chairman
Finance & Budget Commission
“Not helpful” is the way I would describe the windfall characterization of the projected Nishi revenues, as I believe it doesn’t accurately represent the situation. However, it’s a minor point in an otherwise excellent analysis effort, and I *do* appreciate the hard work done by the FBC in helping to shape the project. If the development makes it to the ballot with the FBC recommendations intact, I intend to support it.
How much does the proposed services CFD contribute to the positive cash flow? Unclear from my initial read on this article…
BTW, CFD = Parcel Tax, basically…
Someone told me $300 to $400 thousand a year last week, not sure if that’s still accurate.
Thank you…
That would be a good number to have, when more info is available…
The following is the updated components of the EPS fiscal analysis based on the consultants’ input at Monday’s FBC meeting.
Estimated Annual Fiscal Impact Summary at Buildout (2015$)
City General Fund
Annual Revenues $2,005,000
Annual Expenditures $617,000
Annual General Fund Surplus/(Deficit) $1,388,000
Annual General Fund Revenues
Property Taxes $227,000
Property Tax In-Lieu of Vehicle License Fees $249,000
Property Transfer Tax $22,000
Sales and Use Taxes $165,000
Property Tax in-Lieu of Sales Tax $55,000
Transient Occupancy Tax $-
Business License Tax $50,000
Municipal Service Tax $90,000
Franchise Fees $36,000
Charges for Services $60,000
Community Services Revenue $103,000
Fines and Forfeitures $20,000
——————————————————-
Total General Fund Revenues $1,077,000
Other Annual Non-General Fund Revenues
Gas Tax Revenues $37,000
Parks Maintenance Tax $40,000
Prop. 172 Public Safety Sales Tax $6,000
Public Safety Tax $85,000
——————————————————-
Total Other Non-General Fund Revenues $168,000
Development Agreement Revenues
Scenario 10:Parks & Open Space Responsibility Revenues $181,000
Community Services District Revenues (at 1.6%) $356,000
Make Whole Provision Revenues $93,000
Measure O Sales Tax Extension Revenues $121,000
Nonsecured Property Tax Revenues $9,000
——————————————————–
Total Development Agreement Revenues $760,000
========================================================
Total Annual General Fund and Non-General Fund Revenues $2,005,000
Annual General Fund Expenditures
City Attorney $8,000
City Council $4,000
City Manager’s Office $57,000
Administrative Services $59,000
Community Dev. & Sustainability $59,000
Community Services $141,000
Parks & Open Space Management $127,000
Fire $312,000
Police $530,000
Public Works $54,000
Marginal Cost Reduction of Fire and Police $(734,000)
======================================================
Total General Fund Expenditures $617,000
Annual General Fund Surplus/(Deficit) $1,388,000
The Substitute Motion that I made and Ray Salomon seconded, removed the Marginal Cost adjustment and changed the Surplus to $654,000. That motion failed by a 3-4 vote.
MW:
Regarding the marginal cost reductions. Some questions. Thanks.
(1) How do the Fire and Police revenues flow to the City?
(2) Are these fixed charges or just estimated service costs?
(3) Did the Fire and Police administrations weigh in on this?
My only question would be WHEN is this supposed to start happening? Knowing the pressure on rentals, these will fill up fast, but the hotel and retail will take some time to produce, even though the committee thinks it is like turning on a switch. And there is no list of retail already invested in this project. Will the Restaurant and Bar Mooratorium extend to this area as well? I predict ten years or more, but then I am ignorant.
CalAg,
(1) My understanding is that they flow into the General Fund from the various revenue source categories listed, and some of those revenue source categories may actually contribute zero dollars.
(2) EPS based the service costs on a fair sharing of the aggregate existing City service costs in each of the listed categories. They are definitely not fixed charges.
(3) Both FBC Chair Jeff Miller and the EPS consultants talked directly to both the Fire Chief and the new Police Chief and got their perspectives. The EPS consultants incorporated their understanding of
With the above said, one of the key issues that the Finance and Budget Commission has been wrestling with in its 2015 meetings is better understanding of the City’s costs of services. This issue is city-wide. It affects all services throughout the City, not only the ones at Nishi. Robb Davis’ Cost Containment recommendations wrestle with this issue as well.
Got it. Thanks. Here’s some relevant text from the EPS report:
This is a huge milestone in the progress of the Nishi project. It entirely removes one of the key talking points of the opponents.
So to summarize: Nishi will create jobs, provide some rental housing, provide some space for small businesses, increase business downtown, and provide net revenue to the city.
Don,
“So to summarize: Nishi will create jobs, provide some rental housing, provide some space for small businesses, increase business downtown, and provide net revenue to the city.”
Your summary plus the location effectively providing another link between South Davis, downtown, and the university ( with traffic flow mitigation), appropriate spaces for small incubator companies originating from UCD developing concepts, mitigation of the health concerns which I have provided previously based on information from the county epidemiologist are amongst the reasons that I, a known self avowed slow growther have come to be a proponent of this project
More and more I don’t see a reason not to support this project. If there were out on the Mace Curve or North of town, that would be one thing. This seems like about the last natural project that is a Measure R vote. If it’s not going to hurt our finances and may slightly help it, if they are going to wait to build until they have access and fix Richards, what’s the objection? Anyone?
1) Richards goes to LOS F at buildout per EIR traffic study
2) $10M affordable housing give-away to the developers
3) Too many uncertainties regarding vehicle access to UCD
The fiscal analysis was cooked (more on this later). Kudo’s to Salomon and Williams for trying to deal with the numbers more transparently.
That’s pretty much all you really have left in your ongoing opposition to this project.
Partial list
Does Richards going to LOS F include the planned corridor improvements?
CalAg
I’ll look forward to your analysis.
Williams and Salomon got this issue dead right. Not sure who the third vote was.
$654,000 is a best case number in my opinion. Some of the revenue numbers are still being over-estimated and should be independently validated.
Based on what Williams posted above, the simple overview (removing Carson’s cost adjustment scheme) is:
$1,245,000 Total Annual General Fund Revenues
($1,351,000) Total Annual Expenses
$760,000 Development Agreement Obligations
—————
$654,000 Net Annual Surplus/(Deficit)
As you can see, without the developer’s annual payments (the quid pro quo mentioned by JF in the first comment), the project would be net fiscal negative to the tune of an annual $106,000 deficit.
I guess the question is … if you were a developer, would you agree to sharing $760,000 of your annual profits in exchange for (1) the City sharing 50% of the entitlement cost risk, (2) up to $10M in relief from the City’s affordable housing requirements, (3) an opportunity to pass on part of your infrastructure and mitigation costs to the City, and (4) a protected market where you have significant influence in City Hall and minimal new competition interferes with your already dominant market position.
The commission concluded that the costs to provide public services to the Nishi Gateway project would be lower than EPS had initially projected for a number of reasons. One reason is that both the Draft and Final EIRs for Nishi both make it clear in repeated statements that the costs of fire and police and other public services to the site would be minor and that any costs that did materialize would be offset by development impact fees paid by the applicant.
Here’s one statement on fire services in support of the finding in the Draft EIR that the impact of the project on public services would be less than significant: “Service to the project site can be provided at the same level as is provided to the rest of the service area without the need for additional facilities or equipment and thus, the additional land uses at the Nishi site is not anticipated to require additional fire services.” The Final EIR states, “The Nishi Gateway Project’s incremental contribution to the cumulative fire protection services impact was determined to not be considerable….”
Likewise, in regard to police services, the Draft EIR states that the impact of adding adding residents “would be minimal” and that, like for fire services, the impacts would be “less than significant.” These kinds of repeated assertions in an information document that staff and consultants spent months to prepare, and that city staff are askibng the City Council to certify, are persuasive. They were prepared after interviews with both the fire and police chiefs at the time, by the way.
Moreover, EPS computed the city public services costs for its estimate using an average cost per-person served method that actually was determined by city staff, not EPS. City staff could cite no evidence that city costs actually grew in keeping with these average costs formulas. And one would not expect these costs to grow in this way at Nishi. The whole point of dense infill development such as at Nishi instead of urban sprawl is to hold down government operating costs.
Accordingly, noted economic experts, such as those at the University of North Carolina, advocate using a marginal cost estimation approach in cases just like this one where the city affected by a project has additional capacity to provide services within its existing governmental operations. Average costing is not the only way to look at these numbers.
Other aspects of the average cost model inherently makes little sense. It assumes that, as just one example, that if the Nishi project is approved, the city would have to budget $8,000 more for the city attorney, $4,000 more for the City Council, and $57,000 more for the City Manager. No specific explanation was provided to the commission as to why these costs would grow if Nishi were approved.
By the way, city staff itself directed EPS to use a per-unit marginal cost approach to determine the operational costs for parks, open space, and certain public works. Using that same approach for police and fire as well as city administrative costs seems reasonable and more consistent with the approach used for these services.
One way to provide a reality check on the city staff’s preferred higher calculations of fire costs is to look at what the city has accepted as payment in full for the cost of providing fire protection to the special district, the East Davis County Fire Protection District. Under a longstanding contract, the Davis FD provided full fire service protection to the Nishi property and the entire rest of the 32,000-acre fire district, which has not firefighters of its own, for a cost of about $600,000. The position by city staff that it would cost $312,000 for the same fire department to protect 43 acres at Nishi was not supported by commissioners, and understandable so.
EPS provided a useful look at the Nishi project by offering what it self-described as a conservative take on the numbers. Our commission recognized the value of its professional work, but we provided the City Council with another way of looking at the numbers — a mid-range projection. For example, on the revenue side, our analysis reflected the significant one-time fiscal benefits, such as $3 million in construction tax revenues mandated under city law, that both the applicant and city staff confirm will be paid to the city and that can be used for any purpose the city chooses.
EPS did not score these important fiscal items, it told us, because they were outside the scope of its analysis. That doesn’t make them any less real, and the commissioners clearly felt it was important to make sure the City Council knows about them.
EPS seems to have stood by their estimates after the review requested by Council.
And three FBC commissioners appear to have voted to stick with the EPS estimates rather than the marginal cost reductions.
In any event, the analysis indicates that Nishi will not cost the city money, but is likely to generate revenues for the city directly.
So to repeat:
Nishi will create jobs, provide some rental housing, provide some space for small businesses, increase business downtown, and provide net revenue to the city.
The City Council did not assign us the task of reviewing the reports by EPS and other consultants because they wanted us to rubber stamp them. They wanted us to provide an independent review and give them a second opinion. All seven of us did our job.
You don’t agree with the motion that five of seven commissioners voted for. That is your right. We welcome dissenting views and gave anyone who wanted a chance to testify We debated our views openly for two hours in a noticed public meeting. Nobody cooked any books as you claimed earlier. Every commissioner last Monday night voted for a motion at one point saying that the project would bring a significant net fiscal benefit to the city. They just didn’t all vote for the same motion That’s democracy
All I ask is that if you are going to remain an anonymous blogger using a fake name, please spare me speeches about transparency, OK? LOL
Matt Williams is reporting that the vote was 4:3 on fire/police issue.. Are you exaggerating the results, or did Williams get it wrong?
No need to get sanctimonious.
After the commission majority defeated the effort to weaken the main motion, Matt voted for the main motion that assumed more reasonable public service costs and a $1.4 million net fiscal benefit to the city plus millions in one time benefits to the city.
Lets face it though. Your real objection to the project is that it provides student housing. You oppose providing any student housing within the city limits. Why don’t you emphasize that in your commentary? You suggest a flaw of the project is that it doesn’t contain affordable housing but your real objection is that it contains any housing at all. Isn’t that right?
Nope. That’s not right.
My position is that Nishi should be visionary innovation hub that is 100% R&D. That being said, I recognize the reality that the City Council doesn’t really have the skill set to pull that off (and even if they did – the landowners are demanding their residential). Given that this project is already in the tank, I would like to see the Council put the best possible project in front of the voters. That’s going to include housing, and the City has one chance to get their “little vision” right.
What I oppose is selling this project to the voters based on false pretenses, since the outcome will probably include devastating impacts on the functionality of the Richards corridor.
In my opinion, the fiscal analysis paints an overly positive picture that is not fair to the voters. The bottom line is that half of the claimed $1.4M surplus is profit sharing from the developer (subject to a development agreement that can be amended) and the other half is an accounting trick.
Do you sincerely believe that this housing will be affordable to your average UCD student? How much do you think the units will have to rent for to adsorb the enormous infrastructure costs to make this land developable? Do you think it is fair and appropriate that the developer be granted and exemption from the City’s affordable housing policy? Since this exemption has a value to the developer of roughly $10M, don’t you think this should be acknowledged in the fiscal analysis?
Why not just tell the voters the truth? This will be very expensive housing with a modest amount of office/R&D in a great location adjacent to UCD and the downtown, and the community is going to have to adsorb some major traffic impacts to make it happen.
Skill set to pull off a 100% R&D? Enlighten me about what exactly that skill set is. For my part putting 1500+ rental beds on that property is not a “small vision” but a pragmatic response to a region and a City that will continue to grow no matter what we do. Given that, it would seem to be responsible planning to build dense, sustainable housing near transit hubs, grocery shopping and downtown.
Housing there will be no less affordable than what exists in a town with a vacancy rate of .2% (fine, you believe it is higher–let’s multiply that by 10–2%, still a market that is extremely tight).
But we have told the truth: there will be a modest amount of R&D/office, in a great location and there will be traffic impacts. However, given some of the most creative parking policies for housing in the region (paid parking on residential with additional “exit” fees), we are working to reduce those impacts as much as possible. The counterfactual to this project would be MUCH greater impacts because of 1500+ people still arriving in Davis from increasingly far away.
This is the limitation of the EIR process: we have to do an assessment of project vs no project IN DAVIS, but can somehow pretend that growth and its impacts will not happen when growth goes elsewhere. I think we have been honest and have worked hard to make this a project that will enable us to deal with very real and specific needs faced by our city. Call it a “small vision” if you want. I was not elected to provide a sweeping vision of change. I was elected to maintain a healthy community given the real constraints of a CA city.
First – thanks for the word “counterfactual”.
Second – thanks for making this point about impacts of more people will happen anyway… in fact have been happening anyway. This point seems lost on many of the opponents for growth and certain developments. They seem to project impact on the project and not the people. It is a bit irrational. That can be tested by asking the simple question: “If the project goes through as designed, but isn’t occupied, will it cause impacts?” Of course the answer is no.
Humans cause the impacts, not buildings.
Parking exit fees? How does that work?
Politicians can get very creative when dreaming up ways to take money out of people’s pockets.
There were two votes CalAg. They were identical except for the dollar amount. The original motion contained the following wording:
My substitute motion reduced the words “$1.4 million annually” to read “$700,000 annually.” That substitute motion failed by a vote of 3-4. The initial motion then passed with a vote of 5-1-1. I made the substitute motion in the interests of carefully considered caution.
After the motion was passed, Robb Davis in comment to the FBC indicated that wording that said “between $700,000 and $1.4 million annually” would probably have brought all 7 commissioners to simultaneous “yes” votes. Robb was probably right.
Matt,
Just out of curiosity, why did you reverse your vote to support the $1.4 million conclusion after you agreed with Ray Salomon that the $700,000 was the better number?
Reasonable question Eileen. I did not reverse my substitute motion vote. I personally believe that the $1.4 million is an accurate projection of the annual margin produced by the Nishi project, but I also felt that there was/is evidence that a substantial portion of the Davis community who feel the $1.4 million is not conservative enough, and that specifically the marginal cost argument is suspect. My substitute motion spoke for those more pessimistic Davis voices. My vote on the original motion spoke for my own personal voice.
Which position was evidence based and which was a political calculation?
Both decisions were evidence-based. The $734,000 was very thoroughly identified and addressed in the information provided to the FBC Monday night.
Nishi has close enough physical proximity to the both the 5th Street Fire Station and the UCD Fire Station so there will be no need to spend capital infrastructure dollars for fire facilities and/or fire engines. Additionally, coverage of Nishi will not require additional staffing. Rather than actual costs, the Fire costs included by EPS in their analysis include “allocated” dollars for both capital infrastructure and staffing based on the city-wide average costs for fire protection.
From an annual City Budget perspective that is very meaningful, because although the Nishi developer will pay the city the full allocated “fair share” of fire costs, the city will not “double spend” the capital infrastructure or staffing portions of those costs. They have already been spent once. They won’t be spent twice. The difference for all the categories of City costs is $734,000 with the bulk of that coming from Fire and Police.
The substitute motion said, ” The commission also finds that the Nishi Gateway project could achieve a significant direct net fiscal benefit to the city that, in the long term at full build-out, could reach $700,000 annually, with one-time net fiscal benefits in the millions of dollars.” If the direct net fiscal benefit is $1.4 million then the statement in the motion is correct . . . and with an additional $700,000 bonus to boot. So, for me, the evidence supported a “yes” on the substitute motion. Similarly, with the target raised to $1.4 million and the actual achievement still at $1.4 million, then the evidence again supported a “yes” vote.
The choice to put the substitute motion on the table was indeed a political one. I believed (and still believe) that it was important to speak for those Davis citizens who believe a more conservative target is prudent. So between Dan’s motion and the alternative motion, the voices of Davis were broadly spoken for.
“Both decisions …”
MW: Sorry dude. Trying to hide your political calculations behind a veneer of BS about evidence-based decision making is just isn’t working for you. It makes you look duplicitous. Not good when you’re running for office.
CalAg, step back and look at your statement. It is a quintessential political calculation. You have every right to look at me through a political calculation lens, but the reality of the situation is that if I am elected in June, I will be 75 days from my 69th birthday. Age 69 is way too late to start a political career, and as a result my campaign is not to be elected to political office, rather it is to become an elected public servant in support of the citizens and residents of Davis.
I am committed to being an independent voice for all the citizens of Davis, and my decision to put forward the substitute motion was consistent with that commitment. There are many Davis citizens who believe the EPS logic with respect to costs is the proper conservative logic. Ray Salomon was speaking for those citizens, and Roberts Rules of Order prevented his $700,000 friendly amendment from being voted on when Dan Carson exercised his right to not accept the friendly amendment. My substitute motion, also under the provisions of Roberts Rules of Order, ensured that the voice of those citizens was dispassionately being heard.
I attended the Finance and Budget meeting last Monday. I greatly appreciated that Commissioner Ray Salomon did his best to make recommendations to better protect the City financially. However, the Commission by a very split up vote, went forward anyway with a very concerning new opinion proposal for the Nishi Gateway fiscal analysis by the Commission subcommittee. Although I also appreciate the subcommittee’s volunteer work, this new opinion proposal used very optimistic assumptions to pull Nishi Gateway out of the revenue-negative status it has had since the original EPS study.
First, it is important to make clear that the subcommittee’s opinion proposal presented and the consultant’s report did not reach the same conclusions, even after the consultants looked at the analysis again since the last report.
Assumptions added to the new analysis by the consultants would require the developer giving the City a “make whole provision” cost of $93,000 annually AND $181,000 to maintain the parks, greenbelts and streets annually for the project to become revenue-neutral to revenue-positive. How much would these dollars mean in 20 years? What about an inflator factor to be included to account for inflation? The outcome of these payments to be made by the developer to the City annually worst case scenario is that the project has a deficit of at least $18,000 annually and the best case scenario is that the project has a $613,000 surplus. REALLY? All of this financial risk for the City and the traffic and problems to 1) build student housing in the City for UCD where we pay for the infrastructure including water and waste water treatment, and 2) brings only 325,000 sq. feet of Research and Development for such a non-game changing revenue possibility for the City which has such enormous risk?
In the end, the consultant’s analysis did not agree with the $1.4 million dollar surplus that the subcommittee believes. Also, there was not consensus on this subcommittee opinion, on the Commission since at least one commissioner voted no, and another abstained. Regardless of which number it is, even $1.4 million dollars annually is not worth all of this financial risk and the impacts, while it also is counting on the very optimistic assumptions that the subcommittee’s opinion proposal is based upon.
For instance, what if the developer’s “make whole provision “does not come through for the City? Such as the project being so high-priced in housing that the project fails? The City gets stuck with the problem of a failed project, meanwhile the City is paying the bills to keep the City services going and paying other costs to provide the services to the residents left in it.
Since the new revenue-positive opinion proposal drafted by the Commission subcommittee is contingent on very optimistic assumptions and there was much concern and discussion. Commissioner Ray Salomon in particular did an excellent job bringing up the many concerns about the new subcommittee opinion proposal and tried to make recommendations to better protect the financial interests of the City. But due to the clear desire by the subcommittee to have their opinion proposal move forward, it was voted in. Unfortunately, the meeting was getting late and I think most of the Commission was getting weary on this subject as well.
The issues which were not included in the new opinion on the fiscal analysis of Finance and Budget Commission subcommittee or the consultant’s analysis include:
1) How much is the City responsible or any and all costs for Nishi Gateway? Particularly any infrastructure costs at any stage?
2) The original pre-development agreement stated that the City would pay 50% of infrastructure costs so the many subsequent questions are:
A) Has this changed at this point for certain, and if so why is it not in the baseline features?
B) Has the developer agreed to pay for all of the infrastructure costs if that is what the new numbers are contingent upon this and the other very optimistic assumptions?
C) Have these infrastructure costs been itemized in detail?
D) If it has been agreed by the developer to pay for all infrastructure costs, and is it confirmed that the City will be paying for NO infrastructure costs, is this language going added to the baseline features? It needs to be there because it is binding and cannot be changed after the Measure J/R vote, unlike the developer agreement which can be changed.
E) The question has not been answered, is the City going to be expected to pay for any costs for the Nishi Gateway project? If so it needs to be clearly be defined of what it is and how much it is, no matter how the cost is labeled (infrastructure, processing, etc.).
NOTE THAT CURRENTLY THE BASELINE PROJECT FEATURES HAS NO LANGUAGE OF WHO IS PAYING FOR WHAT IN THE NISHI GATEWAY PROJECT. What specifically is the developer paying for, and is the City paying for ANY costs for the Nishi Gateway project? The only payment mentioned in the baseline features so far is the $1 million dollars that the developer will pay annually, which does not nearly compensate for the 650 unit project having NO affordable housing.
3) Has the Fire and Police department responded yet to the Finance and Budget subcommittee’s assumption to reduce the safety services costs by $734,000? This assumption was made in the new subcommittee’s opinion proposal despite the Police and Fire departments making it very clear in the report that it was crucial to not make any cuts to the estimates to provide the safety services needed.
4) How much of the City’s share of the original grant money for exploring Nishi Gateway has been spent? This was a grant shared by UCD. How much of the City’s portion of the grant has been spent, and is the City spending City non-grant money on processing Nishi Gateway at this point? In other words how much is Nishi Gateway costing Davis taxpayers in any way, including processing and future estimated infrastructure since “share costs” has been mentioned a number of times.
5) Also, what about infrastructure hook up costs given that the Olive Drive sewer hook-up may not have the capacity to be interfaced with Nishi Gateway. Who would pay for that major infrastructure cost? The developer? The City? Or is the City going to have to pay a “shared cost”?
The bottom line is none of these costs have been defined, nor estimated, nor included in the new subcommittee opinion proposal. So how can any of this rehashing of the originally numbers by the subcommittee members be accurate if it did not include defining these costs and who was going to pay for them? The project pro-forma would need this information to determine if the project “pencils out”. As it turns out, the developer is now being asked to provide a considerable amount of money ($93,000 and $181,000) annually just to try to keep Nishi from being revenue-negative.
6) A question not one has asked is what happens if the City approves the project and potentially invests money in it for infrastructure, yet Nishi Gateway fails? The “make whole provision” money dries up for any number of reasons. How would the City deal with a failed project? Particularly since the City will potentially have spent a significant amount of Davis taxpayer money on it.
Finally, what would the Nishi Gateway project bring to Davis? Is it worth all of this financial risk and liability for only 325,000 sq. ft. of Research and Development space that we can build now on vacant, zoned land within the City? The other issue is that it simply exacerbates an ongoing problem of building an enormous amount of housing for UCD students, which in turn enables UCD to continue not building on-campus student housing, and deferring it to our community. Plus it is using our infrastructure like water, water treatment, and City services. We are paying the bills into the future for UCD’s negligence in providing the e promised on-campus housing.
The only thing Nishi Gateway brings the City is enormous financial risk and more significant problems including the un-mitigatable traffic impacts.
Your position on this is getting untenable and very frustrating to me, Eileen.
Nishi will provide some much-needed rental housing in a desperately tight housing market. It is costing young adults and workers at our local businesses more money to live here because of the lack of rental housing.
Nishi will provide sites for small businesses that spin off from UCD, will generate some jobs, and will NOT be net-negative in revenues to the city. Any statement otherwise at this point flies in the face of the due diligence done by the F&B commission.
You keep asking “what if” it fails. Evidently the developers feel confident enough in the site that they are willing to guarantee to make the city whole. I think they are likely to be the best judges of the likely success of the site, and it is almost unimaginable that a development in that site would fail to attract tenants.
Please reconsider your opposition to this development project.
Eileen, the very first friendly amendment to the Dan Carson’s motion was made by Ray Salomon as follows:
That makes it explicitly clear that the developer will be 100% responsible for the costs of infrastructure.
That friendly amendment was part of the motion that passed 5-1-1. It was also part of the substitute motion.
Only if the FBC recommendation makes it into the DA. Did it?
Matt,
I agree that this was great for the Commission to support. My concern is that the agreement for the developer to pay for all of the infrastructure costs needs to also be in the baseline project features which is binding because it would be part of the Measure J/R vote. The development agreement is NOT voted on and can be changed later on.
So just to be clear on what my point is, this language stating that the developer will pay for all infrastructure costs needs to be in BOTH the baseline project features AND the development agreement to be binding. Otherwise, it leaves the City open to wind up paying for infrastructure costs later since development agreements can be renegotiated.
Yes, but DA’s are subject to referendum… I do not share your concern, as I see no intent to deceive, and remedies (including recall) are available…
“DA’s are subject to referendum”
Do you mean DA amendments? Can these be hidden in closed session?
DA amendments generally must be approved as a regular agenda item… if the reasons for the proposed amendment is reasonably likely to result in litigation, the CC could “chat” about it in closed session, but any REAL discussion would need to be on the regular agenda, with the opportunity for public comment…
DA’s are only slightly below ordinances… they are binding “contracts”, although resolving clerical errors, clarifications, might be OK on a Consent Calendar… but not just in closed session…
Understood hpierce; however, if it is easy to avoid being reactive, and instead be proactive, then I think we should do so. Referendums are reactive. Including materially relevant agreement terms in the Baseline Features description is proactive.
They’re not just reactive, they require a huge investment of time and money to accomplish.
Eileen, you may remember that on Monday night I made much the same point to my fellow FBC members as you are making here in your comment above. The Baseline Features of a Measure R vote should incorporate many of the agreements that would only appear in a Development Agreement in a non-Measure R project.
The serious danger would be to incorporate the draft DA (itself) as a “baseline feature”… bad public policy…
In its entirety, yes. Selected provisions, not so much.
Don,
I am really sorry that we don’t agree on this issue. If I felt that Nishi Gateway was a good project for the City, I would be supporting it. The traffic and other impacts including the financial concerns on how this project presents risks to the City are the problem. Matt raised the developer agreement commitment which I knew about, but it is not binding. Why aren’t these financial commitments written into the baseline features so that they would be binding? The only one is the $1.2 million dollars for a donation towards which should be more than $10 million dollars if they are trying to do in lieu fees for providing no affordable housing. Even then, the affordable housing would be better to have then the in lieu fees.
I share your concern that we don’t have enough rental units for non-students, but that is because UCD is forcing all of their accelerated student growth and subsequent housing needs onto our community. That needs to stop.
It also is hard to understand how Nishi Gateway is getting away with not building any affordable housing. I would think that you would be concerned about this because I have not seen you raise that issue. How will anyone be expected to afford these units since the infrastructure will cost so much?
I understand that you want more rental units for non-students. I think you believe that Nishi Gateway will provide more rental housing to help non-students, but it won’t. It will primarily absorb around 1,500 UCD student’s primarily and since 12,000 more students are coming, this will not solve the problem. And UCD will continue to defer their housing needs onto the City.
The City cannot build its way out of the problem, which is being caused by UCD, since UCD has not been building the on-campus housing needed. Providing much more UCD on-campus student housing in turn would free up City rental housing for non-students. Otherwise, the City will continue to lose rental housing to UCD students.
I am also concerned about UCD trying to do “master leases” in town taking away even more rental housing. I would hope that you share this concern too.
I have said this before and I will say it again. It is unfair to the UCD students and our community that the University is not building the on-campus housing they have promised the City in their 1989 MOU with the City. This has created a bad situation for the UCD students and it is negatively impacting our City planning in a major way. The only real solution is for UCD to build the on-campus housing needed for their own growth.
This project will increase existing traffic problems at Richards. There are efforts to mitigate that via UC access, but fundamentally the voters of Davis have decided that Richards will be a bottleneck regardless.
I actually have no concerns about affordable housing on the site. I consider our current affordable housing policies completely ineffective in terms of providing housing for young adults in the rental market. Making the developer build low-cost units in Nishi will do nothing; as soon as they go to market, they’ll just rise to market rent levels unless their rents are artificially controlled.
Bottom line: the way to get more rental housing for young adults is to build more rental housing for young adults. That means student housing on campus, and rental housing in town.
“How will anyone be expected to afford these units since the infrastructure will cost so much?”
I assume the developer is aware of the market and that these units will rent within the Davis market rental rates. They aren’t going to price them way above current median rents. They will be at the high end, for sure, and will likely attract students in the professional schools, young professionals who work there or downtown, or foreign students with higher incomes. But I don’t assume that the builders are irrational. They wouldn’t be proposing to build them and lose money on them, and nobody is going to build housing that is priced out of the local market.
I assume that they have apportioned and amortized the cost of the infrastructure across the whole project and many years. I doubt it will make a significant marginal impact on the rents that will be charged, but I’m certainly open to correction on that issue by any local real estate experts.
Current apartment vacancy rate is 0.2%. That is a crisis. Rents have gone up 5%. The lack of housing is currently costing young adults hundreds of dollars a year. If we wait until we somehow create sufficient pressure to motivate UCD to build more housing (a proposition about which I am very dubious anyway), this standoff will cost lower-income young adults thousands of dollars as rents go up or more and more of them have to commute in from surrounding communities. I personally know too many people who are having to look for rental housing outside of Davis to consider this an acceptable rationale for opposing some moderate increases to the local rental housing stock.
Yes, UCD needs to build housing. We also need housing built in the city. We can’t control the ‘master lease’ situation. The city can’t regulate who lives where, and can’t tell UCD to stop growing. Certainly city leaders can try to work with UCD to plan the growth together. But that will entail some continued rental housing growth in the city limits or on the periphery. Nishi is an excellent example of sound peripheral growth, and you know I don’t support unfettered peripheral expansion of the city boundaries.
“The only real solution is for UCD to build the on-campus housing needed for their own growth.”
Changing their LRDP and implementing that will take years. Yes, city leaders need to press for it. But we have a problem now, a site that can help with the problem and provide revenues to the city, and local developers who are flexible and willing to work with staff and councilmembers.
It’s been a long time since any apartments were built locally, so it’s also frustrating that you and others oppose the current proposal for apartments on Fifth Street.
What is a parking exit fee and how does it work? Are they going to charge people for using their own cars? Only in Davis.
Misanthrop
“Are they going to charge people for using their own cars? Only in Davis.”
Hardly only in Davis. There are a number of ways for charging people to use their own cars. Parking fees are one way, although one might consider that a storage fee rather than usage fee. Toll roads are another means, ostensibly for using the road, however, I am unaware that pedestrians and bicyclists pay these fees, so the might as well be considered usage fees.
Possibly a toll booth when exiting Nishi towards Olive and Richards?
Some people never met a tax they didn’t love.
BP, I haven’t seen any details, but my hearsay understanding is that like many parking structures in locations all over the World, there will be a toll booth at the exit/entrance of the parking structure where the exit fee will be collected.
Wouldn’t that technically be a fee not a tax?
Fee, tax, revenue……call it what you want
There are specific definitions and differences.
Where would the exit fees go? To the city or some other entity?
That’s a good question.
Matt,
I do not remember you advocating for the condition for the developers covering all infrastructure costs in the baseline project features, but it is possible that I missed hearing that comment. However, it is very unfortunate that this condition of including this critical language in the baseline features was not accepted by the Finance and Budget Commission. I assume that the Commission did not understand the consequences of their decision to only include this language in the development agreement (and not the baseline features as well) and that the intention of their language to have the developer pay for all the infrastructure would not be binding. This is the unfortunate outcome that you were not able to explain this and the resulting problem.
Since each Commission has one focus, but can not have the overview of all of the facts, it is difficult to have the overall picture for each Commission to understand what the consequences are for their individual recommendations. That aside, I still recognize and appreciate the service that each and every Commissioner volunteers their time and effort for.
Eileen, it was accepted by the FBC in the 5-1-1 vote approving the underlying motion. It was the first friendly amendment proposed by Ray Salomon to Dan’s original motion. it was accepted by both Dan (the motioner) and me (the seconder). In the discussion of that friendly amendment, I insisted on the insertion of the word “any” which Ray did not have in his original wording.
The three friendly amendments were as follows. The first two were by Ray and the third one was by me.
— Recommend that the development agreement for the project specify public infrastructure not be financed with any city funding. (This is consistent with informal agreements reached so far with the city and the applicant.)
— Recommend that the proposed assessments on residential and commercial properties within Nishi be established at a level that would generate an estimated $630,000 annual revenue stream to offset the city costs for providing public services to the project. The motion specifically called for the effective tax rate on residential and commercial property to be targeted at 1.6% of the assessed value of residential property and 25 cents per square foot for commercial property, comparable to the total effective tax rate for such land uses at The Cannery.
— Recognize that the estimate of a $1.4 million net positive fiscal impact from the project depends on assessed values for commercial property reaching the amounts estimated by EPS, the city’s consultant, in a September 2015 report. (EPS recently estimated higher assessed values for commercial property in a new report, but the $1.4 million estimate is based on the firm’s lower prior estimates.)
Don,
We have a common concern about the City rental housing availability. We have a difference on how to make more rental housing available.
I know that Nishi Gateway will not help with the availability of City rental housing. I also know that UCD absolutely must build significantly more on-campus student housing. This is a UCD intergity issue and responsibility issue to their UCD students, our community, and the entire public in general.
Matt,
The problem is that the language to have the developer pay of all the infrastructure and the other motions you list was supported by the Finance and Budget Commission was only for the development agreement which is not binding, which is not binding since it can be changed later on.
It needed to also be in the baseline project features which would be legally binding by a Measure J/R vote which you say was NOT approved by the Finance and Budget Commission.
ALL of these motions approved needed to be in the baseline project features which IS voted on in Measure J/R, UNLIKE the developer agreement which is NOT voted on in a Measure J/R vote to make them conditions that are legally binding.
However, the City Council can correct this problem by adding these recommendations also to the baseline project features. In fact, you should be advocating for this given what you have posted.
Eileen Samitz said . . . “The problem is that the language to have the developer pay of all the infrastructure and the other motions you list was supported by the Finance and Budget Commission was only for the development agreement”
It was? What is your source for that statement?
Ok Matt,
The rest of the recommendations do not mention if they are to be in the developer agreement or the baseline project features.
Are you saying that all of this language is recommended to both the developer agreement and the baseline project features? If so, you better make sure Staff gets that info because NONE of it is in the baseline project features. And you better make sure the City Council knows this before Tuesday.
Unfortunately the FBC did not put forward and and vote on a specific recommendation to Council on what portions of the Development Agreement should be duplicated in the Baseline Features. I was very clear in my comments that a project proposal under Measure R was definitely different than one like Cannery that is not under Measure R. I got no pushback from my colleagues, but no motion was made either. In hindsight, that was a short coming of the meeting.
Matt,
I agree with your comments. I think it was that the Finance and Budget Commission did not understand the importance of including this language in the baseline project features to make it binding.
I would suggest that you and other Commissioner’s email the Staff and City Council to add this info to the baseline project features (which would be included in the Measure J/R vote). Also for Commissioners to come and testify to ask for this Tuesday at Council to make these protections recommended legally binding.
I know I’ll be there, but will only have 2 minutes which is a really terrible new policy started by Mayor Wolk. Davis citizens always had 3 minutes in the past as do most other cities. It would seem that brevity of the the City Council meeting is now more important than public input based upon Mayor Wolk’s new policy which our City has NEVER had before he became mayor.
Eileen, I respectfully disagree that the FBC did not understand the importance. It was an oversight in the heat of the moment, not a lack of understanding. With 20/20 hindsight, the agenda for the evening should have had Nishi go first and MRIC go second. That way when we got to the end of the votes on the two motions, the Chair would have asked the Commission members, “Are there any other Nishi issues to address before we move on to MRIC?” Since he and I had explicitly discussed prior to the meeting, the need to give guidance to the Council about what financial terms should be in the Baseline Features, that step wouldn’t have been overlooked. As it was, in a very human way, the seven commissioners all breathed a sigh of relief when the vote was recorded, and our individual and collective minds failed to introduce that discussion item before a motion to adjourn was made. If you believe that was a failure in understanding,then so be it. I see it as an omission in the heat of the moment.
Rest assured, there will be multiple Commission members in Council Chambers on Tuesday advocating for inclusion of the key financial terms in both the Baseline Features and the Development Agreement. If necessary we will group multiple speakers so that Jeff Miller is granted 5 minutes by the Mayor.