Sunday Commentary: The Davis Dilemma

Sunrise-MRICThe Hyatt House hotel is only the most recent example of the difficulty of doing infill in Davis. Prior to that we have seen pushback from the neighbors of Trackside, Sterling Apartments and Paso Fino.  For the purposes of this discussion, let us assume that there are and were legitimate reasons for the neighbors to object to the size and scope of those prospective developments.

One thing we must all recognize is that the reason that the size and density of these infill projects are so high has to do with cost of building developments in Davis, relative lack of available infill land, and the unavailability of peripheral land that would be less impactful on most existing neighborhoods.

Nishi is the most recent example – and again, we do not want to preclude the fact that there were flaws with that proposal, only that Nishi became the third proposed Measure R vote and the third defeat for a peripheral project since 2000.

Where does that leave us?  Following the defeat of Wildhorse Ranch in 2009 by overwhelming margins, the city decided that Measure R projects were largely going to be off the table.  The focus was going to be on infill and densification.  While the city was finally able to get the Cannery approved in 2013, the going on infill projects has been slow and pinned the needs of the city against the needs of neighbors.

The hotel project at the Hyatt House is a good example.  The city is looking at expanding its hotel base as one way to increase revenue.  Fiscal analysis by Dan Carson suggests the project could net the city $700,000 on an annual basis.

As we know, the neighbors see it differently.  They see a high-density project that would be a poor fit next to their neighborhood, with potential for traffic, aesthetics, noise and other nuisances.

The city faces challenges on at least two fronts.  A very low vacancy rate for rental housing has made rentals expensive and has disadvantaged renters.  Some see the university and growth of enrollment as the key driver of this shortfall, and have pushed for the university to take on a much greater percentage of growth.

At the same time, the city is suffering from a revenue shortfall.  While the city budget appears balanced on paper, it is a precarious balance, dependent on the continuation of a second half-cent sales tax.  But that excludes an additional $14.28 million in underfunding for things like roads, parks, buildings, OPEB (Other Post-Employment Benefits), and PERS (Public Employees’ Retirement System).

The twenty-year shortfall for those items projects out to over $600 million.

The city is struggling to generate additional revenue.  As our previous analysis shows, the city’s under-development in retail has left it far below its neighbors in per capita retail sales, meaning its sales tax take overall is far less than either neighbors like Woodland, Dixon and West Sacramento or comparable university towns like Palo Alto and San Luis Obispo.

While the community loves the small town nature of Davis, it is quite clear that something has to give.  Right now, the city lacks the revenue necessary to continue to have its high level of services, and to maintain basic critical infrastructure for roads, bike paths, parks, buildings and the like.

The problem that we face is the lack of consensus for the direction that we take.  The narrow outcome on Nishi shows just one such divide, with a small 600-vote margin between those who believed that the city should approve Nishi – with its 1500 or so beds of rental housing and its 300,000 square feet of R&D space – and those who did not.

There is the infill route, which basically allows the council to make a decision on housing and mixed-use projects within the current confines of town.  However, as we saw with Embassy Suites, that does not preclude a lawsuit.  As we have seen with Paso Fino, Trackside, Sterling, and now the Hyatt House, it also does not preclude community pushback.

We do not know how the current council will rule on these projects. Past councils pushed Mission Residence through over neighbor objections, but forced the developers to greatly reduce the scope of Paso Fino.

With limited numbers of open space and a lack of money for redevelopment, the prospects for infill seem to be limited, but everyone will be watching the former Brinley Properties in downtown to see what the new owners have in mind for them.

The limitations for infill would naturally push us to look at the periphery again, particularly for research parks that could generate revenue.  But here too, we have barriers.  The city has still not passed a Measure R vote.

The developers who proposed projects north of Sutter-Davis and east of Mace Boulevard have since abandoned their plans – although, in a recent article in the Sacramento Business Journal, Dan Ramos of the MRIC (Mace Ranch Innovation Center) project said “he’s hopeful to re-introduce Mace ranch and get it to a Measure R vote.”

There seem to be at least two considerations here.  The first is the prospect of spending millions on a project without getting it approved.  Finding a way to reduce uncertainty for developers might make them more willing to figure out a solution to the second problem – financing for a commercial-only project.

The Vanguard has had extensive discussions with developers and others with knowledge of both the Davis Innovation Center and MRIC and, despite community skepticism about intentions, the reality seems to be that financing for a commercial-only project is problematic at best. The inclusion of housing offers more certainty for a return on investment than non-retail commercial.

People inevitably ask whether they realized this limitation going in – and the answer to that appears to be no, that this represented a problem that was unanticipated going in, and more serious than they probably recognized.

That means that, unless the community is willing to accept mixed-use, these research parks are going to be difficult to build.  One potential way around that problem would be if the city, private developers and UC Davis went in on these projects together and UC Davis invested hundreds of millions of upfront financing to make it pencil out for the private entities – that’s what happened at both USC and Purdue, although both of those projects had housing as well.

As we have noted in the past, peripheral retail has generally been a non-starter.  The city was able to get Target approved and through the voters – narrowly – but the general consensus has been to shy away from peripheral retail as a revenue solution.

Again, looking at the revenue projections and the unfunded city needs – something has to give.  Right now it is unclear what.  Are the residents of Davis ready for massive new taxes?  Are they ready for a huge decline in quality of the community?  Those are the only alternatives to changing land use.  At some point the community has to decide, and in ten years, one way or another, Davis will look very different from how it looks today – we just have to decide how and whether it is for better or for worse.

—David M. Greenwald reporting

Author

  • David Greenwald

    Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

    View all posts

Categories:

Breaking News City of Davis Economic Development Land Use/Open Space

Tags:

152 comments

  1. Maybe the neighbors can get some small compromises on the project but it needs to get built.  It’s time for our city council to get tough and step up and approve this project.

  2. “It’s time for our city council to get tough and step up and approve this project.”

    I especially like the part about “get tough”.  Perfectly designed to get less opposition the next time a project requesting variances is proposed.

    1. More directed at the council itself than against the neighbors.  It will be hard for them to not cave to opposition as they usually do but at some point the council is going to have to start okaying these types of projects because the city needs the funds.  So the council members themselves need to dig deep, toughen up and do what is needed.

      1. BP, I concur with Tia, especially since dealing with some of the neighbors’ concerns can be productively dealt with.  For example, one of their most heartfelt concerns is about the 4th floor sight lines into their back yards.  That concern can be eliminated with some straightforward design changes of the hotel’s rooms on the 4th floor.

        Drawing a line in the sand will only make the “next” project’s all the more intransigent.

        1. Yes, but I distinguish between factually based “concerns”, and “feeling/emotive/speculative” concerns as to land use decisions, that, as you have pointed out, are basically ‘legislation’.

          I understand why others are more of the “my mind is made up, don’t try to confuse me with facts” stripe…

  3. BP

    do what is needed.”

    First I appreciate your statement that your comment is not intended as adversarial to the neighbors. I suspect that they see the project, not your comments, as quite adversarial from their point of view.

    The bigger problem is that there is not universal agreement on “what is needed”. As you know, I believe that a higher level of taxation “is needed”. I doubt that you agree with that proposition. You might also disagree with an assertion that our city council should “just toughen up” and propose and strongly support additional and/or higher taxes despite my feelings on the matter.

    1. As shown on here several times we would need to double parcel taxes in order to fill our needs.  Now on a doctor’s salary I’m sure that won’t be a problem for you but for the majority of other homeowners that would be a huge burden if not impossible.  So we need to find other revenue and this hotel would be a great start. So maybe it’s you that needs to compromise on your no to little growth stance because I’ve already compromised and stated I and many others are willing to pay a roads parcel tax.

      1. BP

        I see that you are not counting my advocacy for Nishi, nor my to date neutrality on the issue of this hotel, as compromise from my unapologetic “slow growth” preference.

        I believe that the issue is much more complicated than “yes” or “no” both with regard to taxes and to projects.  I agree that we need to find other sources of revenue. Whether or not this hotel is “a great start” is open to debate at this point. It is the specific merits and deficits of the specific tax or project that drives me, not my just my overall philosophy of slow growth.  I have favored economic and housing developments that I saw as a positive for the community ( Nishi) just as I have opposed those that I saw as an overall negative ( The Cannery). I have favored a number of taxes that you have spoken out against that would not have had nearly the impact of the parcel tax but whose impact would not have been zero ( the soda tax).

        Your prefer a strategy of passing the costs of our economic choices onto others ( a TOT) being the perfect example of this, while I prefer paying for our choices ourselves. Both strategies have advantages and disadvantages. Neither of us pretend that we do not need more resources for the city. We just see fiscal responsibility differently.

         

        1. Your prefer a strategy of passing the costs of our economic choices onto others ( a TOT) being the perfect example of this, while I prefer paying for our choices ourselves.

          I guess you missed the part where I said I’m willing to pay a roads parcel tax in addition to the $2200 I already pay in local city, school and mello-roos parcel taxes.

        2. Another thing, I’m not for all development.  I spoke up about Trackside when it was proposed as a 6 story structure.  I felt that was irresponsible to slap that tall of a structure in your area.  It was a huge overreach by the investors.  But the Hyatt Hotel is proposed to be under the height limit with setback and greenbelt mitigations so I really don’t see the problem.  I don’t see Hyatt as being irresponsible at all as I viewed Trackside.

  4. I guess I understand why some folks think I shouldn’t sign your petition.  I left Davis years ago. But part of the reason I left was due to its changes. I didn’t like my neighbors’ kids or their buddies getting pepper sprayed. I didnt like a big overweight cop handcuffing me, a woman smaller than him, for no good reason. I didn’t like wealthy privileged women looking down their nose at me because I was not a stay at home Mom. I don’t like Republicans verbally bullying me.

    I do like walking around downtown, years after I’ve moved away, and always running into someone I know. Every time. I do like going to central park on  warm Wednesday evening. I do like seeing so many people smile when they are out walking their dogs.

    I don’t think the Hyatt will make me smile next time I visit.  The tiny house idea? That would.

    1. P.S. I was not referring to wealthy privileged women who spend lots of time with their kids. I was referring to the judgy types who spend hours at pilates, Nordys, book/wine clubs and Napa vacations while their Latina housekeepers raise their kids.

    2. Delia

      I related to your post about “wealthy privileged women looking down their nose at me….” from a different angle. I consider myself to be a “wealthy privileged woman” even though I got there through a combination of support from the taxpayers, serendipity, and my own hard work. I got to see a weird dichotomy in my upscale Davis neighborhood twenty five years ago. One episode in which I was verbally criticized for being a “professional woman” spoken with biting disdain when ironically enough I had taken my children to the park without changing out of my business casual attire specifically so I could spend time with them. A second episode when I was assumed to hold the same classist views of another professional woman in the neighborhood who thought that I would also see the perfectly normal behavior of enjoying the park by some families from a nearby apartment complex as “riff-raff”! And no, I didn’t make that up. It is a direct quote !

      I am much, much happier in my current, very diverse neighborhood where no assumption is made about my views based on my profession. I hope that you also have managed to find a place more in alignment with your values even if not in Davis.!

    3. Delia wrote:

      > I don’t like Republicans verbally bullying me.

      Did you really have a problems with Republicans “verbally bullying” you when you lived in Davis?  I have never met Frankly and in all my years in Davis I have (really) never met Republican that lives in town (and never spotted one “verbally bullying” anyone).  I know we have a small number of Republicans based on voter registration information but I suspect most of them are over 70 and hang out together playing bridge while the real small number under 70 tend to stay “in the closet” (like gay guys living in the bible belt in the 1950’s) …

      1. I don’t like Republicans verbally bullying me.”

        One thing that I have learned about having views that are considered extreme by the majority where one lives is that one certainly does get “bullied”. But it is certainly not exclusive to Republicans. Because I believe in a universal base income, in health care as a right of citizenship, in free education through college or trade acquisition, and a whole host of things that others see as unrealistic or “utopian” ( completely ignoring the fact that as humans we have the ability to shape and change our society to a more humane one if we chose to) I get “bullying” behaviors frequently. The major difference between the type of bullying behavior is that my Republican or more conservative friends tend to belittle me verbally, while my Democrat or more left leaning friends more commonly simply end or shift the conversation thereby using withdrawal of social interaction as their means of attempting to nudge me back in line.

        One major difference is that I enjoy the dialogue and the exchange of ideas even when I feel I am being “bullied”. It tends to bring out the advocate in me rather than the “victim” as my friend Frankly ( with whom I have interacted on a number of occasions) would say.

         

        1. To answer your question BP, I think fiscal responsibility is very much part of the Davis Dilemma.  And candid discussions about fiscal responsibility has definitely injected itself into the community dialogue about the Davis Dilemma.

          Some people see a frank/candid discussion of fiscal responsibility as Republican bullying.

        2. Not to mention wealthy women looking down their noses, the pepper spray incident, cops handcuffing, verbal criticism for being a professional woman, etc.

          Matt, maybe you can tie all that into the topic of the article too?

          If you can then I take it that no comments are ever off topic.

        3. Nothing and I invite Don to pull my off topic posts. I was just having a good time.

          [moderator] Maybe you all can just leave it at this now, and stay on topic. Thanks.

  5. “Are they ready for a huge decline in quality of the community?  Those are the only alternatives to changing land use.  At some point the community has to decide – and in ten years, one way or another Davis will look very different from how it looks today – we just have to decide how and whether it is for better or for worse.”

    Depends on what you think is a decline in quality of community.

    I think increasing density, declining infrastructure or high housing costs all represent a decline in the quality of the community.

    I would rather we get rid of Measure R and address our pent up demand for growth by expanding the borders of Davis in every feasible direction taking into the city all the frontier properties around our borders. Of course that would also have its impacts but they are more manageable than the course we have taken.

    1. Misanthrop

      Depends on what you think is a decline in quality of community.”

      This, I believe is a very tidy summary of the problem that we face. The community appears to be divided on what “decline in quality of community” means. This is part of the reason that I would support a robust revision of our General Plan to reflect our current situation rather than the perception of our situation prior to the recession and prior to the increased rate of addition of students to the University.

  6. From article:  “Finding a way to reduce uncertainty for developers might make them more willing to figure out a solution to the second problem – financing for a commercial only project.”

    One way to reduce “uncertainty” (regarding a Measure R vote) is to abandon the idea of peripheral development that includes housing.  Peripheral housing far from campus and downtown is a “lightning rod”, virtually guaranteeing its defeat.  (I know that I’ll work hard toward its defeat, if such a proposal arises.)

    From article:  ” . . . despite community skepticism about intentions, the reality seems to be that financing for a commercial-only project is problematic at best.”

    Uhm – yes.  Seems strange that commercial developments are built “all the time”, without including housing.

    David:  Are you supporting (in theory) an MRIC development with housing?  You’ve made many comments in the past, stating that we should be “open to such an idea”.  (I’ll take that as a “maybe”, and one that you’ll continue pushing in the months ahead.  In any case, you seem to be taking the “developer’s side”, regarding the “impossibility” of commercial-only financing, at this point.)

    After the Nishi battle, I was hoping that you might take the lead on solutions that doesn’t meet with as much controversy (e.g, a hotel or two “somewhere”, campus housing, a tax for road maintenance, etc.).

    I don’t want to say “bring it on”, since I’m not looking to tear apart the community again, and expend a lot of effort.  But, if that’s what it takes, well . . .  (And much of the “fight” will not be occurring on the Vanguard – it will take place in affected neighborhoods, which I suspect will overwhelmingly oppose it.)

    Bring on the comments, whatever.  It certainly will increase the amount of comments on the Vanguard, in the months ahead.  But, I’m much more interested in “defeating” it, rather than “debating” it.

    I’m actually losing interest in a commercial-only development, as well.  I’ve had it with the games being played.

    Also – let’s hear more about the B.S. “Armageddon” that will arise, if we don’t accept a development with housing.

     

    1. I’m not supporting or opposing anything at this point. All I’m trying to do is lay out the problems and arguing that the status quo doesn’t work. The community is going to give somewhere and figure out where that place is.

      If you don’t want to see a commerce development – and I can understand that – where do you see the city recouping the money it needs for infrastructure? That’s the dilemma we face right now. It’s easy to say what you don’t want – I get that – but the trick is to find what you want.

      “Are you supporting (in theory) an MRIC development with housing?” – In my analysis I suggest a way to avoid housing with the innovation centers.

  7. BP

    I guess you missed the part where I said I’m willing to pay a roads parcel tax in addition to the $2200 I already pay in local city, school and mello-roos parcel taxes.”

    No, I certainly did not miss it. It was not me accusing you of unwillingness to compromise.

     

  8. Uhm – yes.  Seems strange that commercial developments are built “all the time”, without including housing.

    Well, Ron, guess the Roe Building, the Lofts, the Chen building, Del Rio Live/Work, the building project that includes Crepeville, the proposed Trackside, etc., are all ‘aberrations’.

    It is actually a “norm” in many older cities (and many older towns) in the US, Europe, and throughout the world.  But we’re smarter and more enlightened than those communities. If you consider hotels to be a form of housing (I do, it is a short-term lease of a premises for temporary housing), add Palm Court, if you accept my definition of ‘housing’.

    The model tends to minimize vehicular trips, particularly by automobile.

    I do not consider the current proposal (Hyatt) to be ‘peripheral development’.

    In the downtown, particularly, mixed use is a great model… having downtown “populated”… usually results in less crime, more use of the commercial/retail opportunities, etc.

    But, not for Davis… we’re too ‘special’ for that…

    1. “Seems strange that commercial developments are built “all the time”, without including housing.”

      I meant to separate R&D projects from retail projects, but it seems that never made it into the piece. The closest I got to making that point was here: “The inclusion of housing offers more certainty for a return on investment than non-retail commercial.” But I needed a paragraph to flesh that point out better. My bad.

      1. Actually, David, you may want to do more research before writing that ‘missing paragraph’.  Turn-over (due to economic return) appears to me (apocryphal, no expertise here) has always seemed higher in retail uses, rather than non-retail commercial, except perhaps downtown, but even then…

        Part may be due to the fact that most (but certainly not all) retail uses are leases, not ownership.  Less true for non-retail.  ex.  pretty sure Mori Seki owns its site.

        On the other side, pretty sure Davis Ace, Target, Hibbert, own their sites.

        1. hpierce wrote:

          > pretty sure Mori Seki owns its site.

          They don’t own it is owned by James Didion former CEO of CB Richard Ellis (writer Joan Dision’s brother)

          http://www.costar.com/News/Article/Mori-Seiki-Bldg-in-Davis-Trades-for-$137-Million/136584

          > On the other side, pretty sure Davis Ace, Target, Hibbert, own their sites.

          Davis ACE are not “typical” retailers since ACE has been in town (using different names) for over 100 years and Hibbert had been around for over 50 years.  I have heard that Target does own the Davis store but also leases stores at many other locations (most “big box” retailers lease rather than own their stores).

           

      2. David:  “I meant to separate R&D projects from retail projects, but it seems that never made it into the piece.”

        O.K. – I’m sure that R&D projects MUST have residential development to be financed, despite the “incorrectness” of that statement, as well.

        I guess the developer really didn’t “do his homework” during the earlier, commercial-only proposal (despite years in the making). (Yeah, right.)

        1. “despite the incorrectness of that statement”

          Not sure what you mean by this. Again, I suggested one possible way to get around that problem – university investment. Other than that, I am going by what people have been telling me in and around the industry as to the problem with the R&D (mostly MRIC and Davis Innovation Centers).

        2. David:  “Not sure what you mean by this.”

          You’re stating (or repeating the developer’s statement) that an R&D project cannot be financed without housing.  Is that correct?

          I guess that the developer only “found out” about this at the “last minute”.

          “Might” there be many examples throughout the country which prove this statement completely wrong?

          1. I’m stating what I have been hearing about the difficulty in financing R&D only projects without housing. Most of the projects around the country I have seen have a mixed use component.

            In terms of your last statement, I think the developers went in with an eye towards figuring out a way to make a no housing project work and learned that it was more difficult than they originally believed. This came to me from someone who no longer has a skin in the game but who told me their project pulled out because the financing was difficult.

        3. David: “Again, I suggested one possible way to get around that problem – university investment.”

          If the University is a major investor or owner, what happens with the property tax?  If the project is on land owned by the University the City will receive zero added revenues. If the buildings are significantly owned or leased by the University, the City will receive little or no added revenues.  How does either of these approaches help with our fiscal problems?

        4. Good question Mark.  The way that the FBC dealt with that in the multi-step Nishi hearings was to (1) explore the possibility of, (2) confirm the legality of, (3) determine the fiscal magnitude of, and (4) get the developers’ agreement to a “make whole” provision in the Development Agreement.  There is no reason why the University’s investment in a project can not have a similar “make whole” provision that makes them an equal partner paying their “equal” share including tax burden.

    2. hpierce:  “I do not consider the current proposal (Hyatt) to be ‘peripheral development’.

      No one does.

      hpierce:  “It is actually a “norm” in many older cities (and many older towns) in the US, Europe, and throughout the world.”

      In general, Europe does not follow the U.S. model of forever-expanding sprawl.  Some populations in Europe are relatively stable.