Nishi is Not Nearly Ready for a Prime Time June Ballot

Nishi Artist Rendering

Substantial Traffic-Related, Financial, and Sustainability Shortcomings Remain Unresolved – Moving Forward Now Risks Rejection at the Polls

By Alan Pryor

I have become very familiar with the proposed development of the Nishi project over the past year. I have actually read or scanned through the entire Sustainability Plan and the Draft and Final Environmental Impact Reports (“EIRs”) for the project. I have also attended at least 3 general public meeting presentations on the project as well as 3 City Council meetings, 3 meetings of the Natural Resources Commission, 2 meetings of the Transportation, Bicycle, and Traffic Safety Commission, 2 meetings of the Planning Commission, and 2 meetings of the Finance and Budget Commission at which Nishi was the main item on the agenda. I have carefully considered the information presented in these documents and at these meetings and in the current Staff proposal before Council tomorrow evening.

If done right, I earnestly believed that Nishi could be a shining example of a desirable and truly sustainable mixed-use development of which the City could be proud and serve as a model for future large-scale developments in the City. Achieving these objectives required adopting the most advanced and sustainable building standards and striving to eliminate traffic-related green house gas (“GHG”) emissions and mitigating for those that cannot be eliminated. Of course this vision also included ensuring that traffic flows associated with the project do not result in grid-lock through the Richards Blvd-Olive Drive corridor.

Unfortunately, as further discussed below, none of these conditions have been met through the recent collaboration of the developer with City Staff and the City Council. There are significant shortcoming in the sustainability plan proposed by Staff which is really only aspirational in nature now and functionally has no teeth for enforcement as otherwise recommended by the City’s Natural Resources Commission (NRC). There are enough substantial uncertainties in the traffic study performed for the project that the City’s Transportation, Bicycle, and Traffic Safety Commission has requested a completely independent review of the traffic study by an impartial traffic engineer before the project should proceed. While an independent review has not been commissioned by the City, some other engineering evidence was submitted suggesting that the traffic study is, in fact, woefully inadequate

While many of these project deficiencies could be presumably resolved if given even only a couple more months of negotiations, the developer and Staff have claimed that this project “has to be approved right now…it can’t wait”. Well this is true if the Nishi project is to submitted to the voters for a Measure J/R vote in June. However, there is absolutely no compelling reason why the vote for this project cannot otherwise be held in the November general election despite the developer’s constant refrains to the contrary.

We have also heard Staff and certain Council members constantly remind us at Council meetings that we must “not let ‘perfect’ be the enemy of ‘the good’ ” as they hastily push to move the project forward to entitlement as soon as possible.

However, in my opinion, these refrains have been repeatedly used to justify premature Council actions on other development projects in the past couple of years to the obvious windfall financial benefit of multi-millionaire developers while residents are left to deal with the traffic-related problems caused by the development and little financial benefit to the City.

It is clear, though, that at least some of the Council members understand the magnitude of the decisions they are now facing in consideration of the Nishi and future Mace business park projects. In an article last year in the Vanguard discussing the 2 large planned business parks (Nishi and Mace), Council member Brett Lee assured readers that all due diligence would be undertaken by City Staff and the Council to ensure these projects were sustainable and well thought out:

“We must clearly identify and mitigate the negative aspects of a tech park.”…“Poor design is difficult to mitigate; therefore, any proposal must have a well thought out design that includes planning best practices with a heavy emphasis on sustainability.”

Unfortunately, such a thoughtful recommended approach is not being followed with respect to the Nishi project as it is being rushed forward for premature approved solely to get it on the June ballot. For all of these reasons, I am strongly recommending that Council instead elect to put Nishi on the November ballot instead of the June ballot. This will provide about 4 extra months to get this project right before putting it to the citizens for a vote.

Background – This City Council’s Recent Track Record in Large Scale Development has been Rushed and Poorly Executed

Cannery – For instance, the Cannery Project was approved several years ago without securing a 2^nd below-grade crossing beneath Covell despite assurances from Council and Staff that it would all be worked out in the future entitlement and plan review process. Well, it has been worked out alright – but to the total benefit of the developer. If a 2^nd bicycle crossing is ever constructed to/from the Cannery across Covell, it will almost certainly be on the financial backs of the City and its residents and not the developer. (“Aye” votes for the early approval of the Cannery project were cast by Dan Wolk, Rochelle Swanson, and Lucas Frerichs. Brett Lee joined Joe Krovoza in voting “No”.)

Subsequently, the Council additionally approved a sweet-heart Community Financing District (CFD) entitlement for the developers (the New Homes Co.) that saved them millions of dollars in infrastructure costs by shifting a huge tax burden onto new Cannery home owners. These are tax dollars that would otherwise be spent in the local community but now must go to retire debt put on the project by the developer. (“Aye” votes for the Cannery CFD were cast by Dan Wolk, Rochelle Swanson, and Lucas Frerichs. Brett Lee was joined by Robb Davis in vigorously opposing the CFD).

Richards Boulevard Conference Center – The Richards Blvd Conference Center was unanimously approved by all Council members last summer in spite of serious questions raised about the lack of sustainable features of the project and a deficient traffic study presented during the entitlement process. This $40,000,000 project was approved by the Planning Commission on July 8, 2015 and went before the Council for full certification and entitlement only 45 days later – all over the summer break. There has never ever been a project of this magnitude that has moved through the review process this quickly in Davis. And the project was not even reviewed by any other City Commissions during this process including the NRC, Transportation, Bicycle, and Traffic Safety Commission, and the Business and Finance Commission. This lack of Commission review also was unprecedented in the history of Davis in spite of the potential to grid-lock traffic through the Richards Blvd corridor, obvious green-washing of the project with few truly sustainable features and a complete lack of any mitigation for excessive contributions to greenhouse gas (GHG) emissions.

During this hasty entitlement process, concerns were expressed about the insufficiency of the traffic study for the project’s Mitigated Negative Declaration. This was due to an early estimate of conference center occupancy by the applicant of only 250 attendees which served as the basis by the traffic study on estimated trips per day to and from the Conference Center. However, based on the sq footage of the project, a maximum Conference Center occupancy of over 900 occupants is allowed under the California Building Code which could result in 4 times as many daily trips to and from the Center. This discrepancy, although brought to the Staff’s and Council’s attention prior to the final approval of the Conference Center, was not addressed or questioned at all by either Staff or Council. As a result, the estimated maximum number of trips assumed in the traffic study by Fehr and Peers, the project traffic engineers, was grossly underestimated which errors were also carried through to the Nishi traffic study.

The failure of Staff and the Council, in their haste to approve this huge project, to spend just a little time properly vetting and further investigating this project and subject it to the rigors of Commission review led directly to the decision by others to sue the applicant and the City for preparing and approving an insufficient Mitigated Negative Declaration. The project is now dead in its tracks until these legal issues are resolved.

But the non-transparent and hasty manner in which the project was furthered by the Staff and Council spoke volumes of their intentions in entitling future large scale development projects in Davis and it appears these mistakes are now being repeated with the Nishi review and entitlement process.

Nishi Traffic Study-Related Shortcomings

The Nishi DEIR was originally not taken to the Transportation, Bicycling, and Traffic-Safety Commission for review prior to the comment deadline for the DEIR despite sufficient intervening time available for such a review.. Once this oversight was discovered by the Commission, they subsequently demanded the opportunity to review this document and scheduled a special meeting to receive and comment on the report.

During this review, the Commission heard testimony that 1) pre-existing traffic counts used for analysis were inadequate in that they were only taken during a few hours per day on a single day in 2014, and that 2) baseline assumptions for traffic flow derived both from the project and from the previously approved Conference Center were low and (at least for the Conference Center) based solely on the applicants own unsubstantiated estimates of Conference Center use. Based on their subsequent analysis, the Commission specifically recommended, among many other transportation-related suggestions, that an independent review of the traffic study for Nishi be performed. This formal request is in the Commission Comments to the DEIR and their Minutes of the meeting. Unfortunately, this request for a 2nd opinion has been completely ignored by Staff and Council and none of the other recommended improvements have made it into the baseline features or the framework of the Development Agreement.

Many of the arguments pertaining to the assumptions and estimates used in the Nishi traffic study performed by the traffic engineerng firm, Fehr and Peers, were the same arguments which were posted in the legal challenge to the Conference Center traffic study. One would thus expect that the Staff and Council would have, at minimum, obtained at least a cursory independent review of those studies to ascertain the validity of the original study. Apparently, this has NOT been done, however. The only submittals pertaining to the adequacy of the Nishi Traffic Study were performed by another local licensed traffic engineer, Smith Engineering and Management. Ths analysis submitted to the Council was sharply critical of the adequacy of the Fehr and Peers traffic study for Nishi.

Further, on the Consent Calendar for this upcoming Tuesday Council meeting there is an item requesting a $250,000 expenditure for a further “holistic” traffic management study for the Richards Blvd-Olive Dr corridor. It is hard to imagine what else this study could really be analyzing that has not already been fully analyzed in the Nishi EIR under the required cumulative impacts analysis. In fact, a casual observer could deduce from the Staff request for this additional study that the current Nishi EIR traffic analysis did NOT, in fact, analyze all potential cumulative impacts which in itself is a basis for NOT certifying the current final version of the EIR.

Economic Uncertainties and Short-Comings

The final analysis by the Finance and Budget Commission of the economics of the Nishi project shows an extremely modest annual net income of only between $500,000 to about $1,400,000 to the City. And even this relatively small sum was only projected after the Finance and Budget Commission disregarded the explicit requests by both the Davis Fire and Police Chiefs that the previous estimates used for providing such fire and police services be retained in the Finance and Budget Commission’s analysis. If these original estimates for police and fire protection to the projection were retained, the project would not be net positive economically to the City under the more conservative estimates.

Further, this modest income to the City assumes that full build-out of the R&D facilities occurs which is NOT guaranteed by the anticipated agreement between the developer and the City. Indeed, as currently envisioned, the developer could build out all of the rental apartment units and for-sale condominium units and never, ever turn a single shovel full of dirt to start the R&D buildings. It has been proposed by some that one way to lock in the construction of the R&D buildings is by tying occupancy permits for the residential units to build out of the commercial properties. For example,”x amount of commercial buildings must be built and occupied before the nth residential occupancy permit can be issued.” Unfortunately, this requirement has also not been put into the baseline features or the Developer Agreement framework so there are absolutely no assurances this will ever occur.

Also, although the City’s low-income housing ordinance does not require any set aside for dedicated low income housing units because of the multi-story nature of the buildings, the developer has consistently claimed units would be functionally low income because they would be very small size (presumably allowing for lower rents). It was also stated that residents at the project would not even need to own and use a car because of the advanced bikeability, walkability, and public transit access by the project. Further, the developer has claimed that energy expenditures by tenants will be very small because the buildings will be exceedingly energy efficient due to the efficiency of the construction and the 4.9 mw solar PV system to be installed and net metered to the tenants.

While conceptually, this might have been true at one time, the developer otherwise announced at the last City Council meeting that, rather than providing the solar energy output to tenants of the project as originally proposed, he instead intends to sell the entire output of the solar PV system to the Community Choice Energy enterprise anticipated to be formed by the City in the near future. As a result of this change, however, the developer would then receive the entire economic benefit of the solar system instead of the tenants of the project. A 4.9 mw solar PV system in this location would be expected to produce about 7, 500,000 kwh of electricity per year. If sold at a fixed cost rate of $.095/kwh over the next 20 years (the average going rate offered for local long term contracts by other CCEs in the state), this will result in almost $13,500,000 in windfall income to the developer which benefits were previously earmarked for tenants through net metering. So much for the affordability of the housing units through the provision of solar energy to the tenants.

So what did the developer offer to the City at the very same Council meeting as an enticement to accept his decision to benefit only himself through the sale of the solar energy previously represented as making the rental units more affordable? Well, the City now gets a one-time contribution of $1,000,000 for its Low Income Housing Fund plus another $200,000 to use as the City sees fit – an “onsite Civic Arts project” is one option. So the developer gets $13,500,000 over 20 years (about $9,500,000 NPV at 4%) and the City gets chitlins of only $1,200,000. That’s a pretty good deal for the developer..not so good for the tenants or the City.

One other financial aspect of the project that apparently has not been analyzed at all (or at least disclosed) is the fact that the City apparently holds an exclusive option to develop the R&D portion of the project. This option was granted to the City as part of the pre-development agreement under which the City also contributed a very early stage $500,000 loan for development studies. In partial consideration for the inherent risks assumed in making this early stage loan, the City was given the option to develop the business park land in the Nishi development. Staff has not publicly provided any analysis of the value of this option yet. Even if the City did not want to incur the development costs associated with this development, there are a variety of ways the City could otherwise co-develop the project’s commercial space with a partner at no risk at all to the City. If this option were properly advantaged by the City, it could potentially be worth millions of dollars in fees or future income. If Staff has investigated any of these potentials, it has not been publicly reported and instead it appears the option will be left to lapse with no value to the City.

Sustainability –

The NRC put forward a very detailed list of green house gas (“GHG”) mitigation measures and related comments in response to the Draft EIR for the project. Cool Davis also submitted extensive comments to the City. These comments proposed measures and mitigation to achieve the highest possible building standards and stringent measures to reduce traffic-related emissions. In addition, it was proposed that the project developer pay for unmitigated emissions into an energy efficiency fund in the City to provide incentives for striving to be as energy efficient as possible. Unfortunately, almost none of these proposed efficiencies and mitigation measures have made it into the baseline features for the project.

As a result, it appears there will be over 12,000 metric tons of unmitigated GHGs produced and deposited in the atmosphere each year by the project with with over 10,000 of those tons due to traffic impacts alone. The only additional GHG mitigation requirements imposed by the City is that Nishi has agreed to reduce parking spaces by 10% which actually saves the developer millions in construction costs. Despite requests by the NRC and Cool Davis, none of these savings are being required by the City to be used for carbon mitigation elsewhere in the project or the City but are instead pocketed by the developer.

It was also recommended that the City require the most stringent building standards (LEED Platinum) as a baseline feature of the project. Indeed, at the last Council meeting, the developer and Council discussed the inherent site related difficulties to achieving LEED-ND (Neighborhood Development) Platinum certificate. The developer, however, indicated that if he was not able to obtain LEED ND Platinum certification, he would alternatively be willing to have each individual building LEED Platinum-certified. None of these commitments survived during the intervening two weeks of negotiations between Staff and the developer, however. It is not known why Staff has not demanded these certification standards already agreed to by the developer

Instead of imposing these stringent building efficiency standards on the developer, though, the City now agrees that the developer only has to have “a commitment to pursue gold level with a goal of reaching platinum level” certification. But if the developer does not attain any of those those building standards there are absolutlety NO MONETARY PENALTIES at all. Apparently, if the developer does not get LEED-ND Platinum certification, all he has to do is pay for an engineer of the choosing of yet another newly established citizens review committee which engineer will “count the points” the developer has reached for certification. But if no level of LEED Certification is actually obatined, apparently for any reason whatsoever, the developer is actually not required to be do anything other than meet the City’s current functional minimum building standards of 30% less than Title 24.

Amazingly, after all of the hype and promises and discussion of how environmentally sustainable and affordable this project will be, the developer is really only required to meet the City’s minimum building standards and cut 10% of the otherwise planned parking. While the 4.9 mw of planned PV certainly offsets a good portion of the GHGs emissions otherwise produced by the buildings at the project, the developer is pocketing the entire proceeds of the sale of this solar energy. Large scale solar energy systems of this type will typically pay for themselves in 6 years or less with huge profits accruing to the developer every year after that.

There is otherwise absolutely no mitigation demanded from the developer for any of the 10,000+ metric tons per year estimated to be produced by traffic associated with the site. As a result, Nishi will contribute substantial extra unmitigated building and traffic-related GHG emissions without any economic incentives to reduce them further or monetary penalties if minimum GHG reductions are not met. This lack of Staff and Council demand and insistence that the project be the most energy efficient possible amounts to a give-away of millions of dollars to the developer and has the practical effect of putting the City’s Climate Action and Adaptation Plan into full reverse gear. Staff still maintains that the project meets the City’s sustainability goals, however, but provides absolutely no quantitative analysis of how it does so.

For all of the above reasons, the Council should now reject putting the Nishi project on the June ballot. Instead of rushing to entitle this project as soon as possible and risk rejection of a substandard project at the polls in June, the Council should instead strive to work out the shortcomings over the next 4 months and shoot to instead put Nishi on the November ballot.

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