(Sponsored article – paid for by West Davis Active Adult Community)
West Davis Active Adult Community serves as prototype
As Davis leaders revise their fiscal model that estimates how new development might affect the city’s general fund, the proposed West Davis Active Adult Community is first in line for the test.
Members of the Davis Finance and Budget Commission met Monday to review an early draft of that model, and to offer feedback and suggestions.
Assistant City Manager Mike Webb said the model “tries to be a one-size-fits-all” approach for assessing anything from six-home in-fill projects to large developments like the failed Covell Village project. It weighs the annual costs of providing public services against the revenues generated by the new development. Measured on a per-capita basis, it focuses solely on fiscal impacts to the city’s general fund.
Factors include inflation, real estate appreciation, and population and employment densities; the cost of parks and open space; a timeline for “absorption,” where the revenues catch up with expenditures; and property and sales tax income, among others. Once complete, the analysis serves as a litmus test when that project goes before the City Council.
The city first used this kind of fiscal model on Covell Village, proposed in 2004 for property at Pole Line Road and Covell Boulevard. The framework received a large overhaul in 2013, after the city hired Goodwin Consulting Group of Sacramento. Another revision came last year. Monday’s report is available on the city website at http://documents.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/Finance-And-Budget-Commission/Agendas/20170911/Item-6-A-Fiscal-Development-Model.pdf
On Monday, commissioners learned there are many variables that keep the West Davis Active Adult Community from fitting neatly into the model being used for traditional developments.
The West Davis Active Adult Community is marketed and designed for Davis’ older residents. Its plan calls for 325 small to medium single-story homes ranging from 900 to 1,800 square feet, along with 150 affordable senior apartments. Eighty percent of the homes and all the apartments would be restricted to residents 55 and older. Since the project is on the city’s periphery ‒ at Shasta Drive and West Covell Boulevard ‒ it would go before Davis voters under Measure R, likely in June 2018, if approved by the Davis City Council.
Dave Taormino, the real estate developer leading the West Davis project, told commissioners that the proposal has many financial benefits that weren’t reflected in Monday’s draft. He estimates the project’s assessed property tax value at $245 million. The city’s original estimate was $189.3 million.
“We project that 255 of the 360 homeowners are already living in Davis, and will be selling existing homes,” Taormino said, noting that the development will be advertised exclusively in Davis. He predicts that many of the out-of-town buyers will be relatives of current Davis residents.
If people move from within Davis, their old houses reset to a higher tax rate, which boosts city coffers, compared to sales to outside residents. Also, collected sales taxes would be higher per capita than student housing.
West Davis Active Adult Community is sponsoring this section on the Vanguard because we believe providing more information is better.
Previous articles:
- Active Adults Are Backbone of Local Nonprofits
- Active Adults Having Trouble Finding a Home In Davis
- Former UCDMC CEO Working to Make Senior Housing Project a Reality
- Meetings Continue for West Davis Active Adult Community
- Developer Explains Plan for Active Adult Community Development Project
- Housing Prices Have Ripple Effect on Schools
“We project that 255 of the 360 homeowners are already living in Davis, and will be selling existing homes,”
Where did that number come from? Suspect they used a proctologist to obtain.
Or, perhaps a ‘sky-hook’?
I’m still waiting to get a clear answer about property taxes for the new development. Would the new owners transfer their low taxes to the new homes? Will the portion dedicated to URC be non-taxable and generate no income at all? The only benefit would be existing Davis homeowners relocating and the reset of their old homes for the new owners?
Sharla asks a good question, one that I will add to the following draft list of questions that the members of the FBC posed to Staff during Monday night’s presentation of the Fiscal Model.
Scenario Questions
1) Include a net present value calculation as well as a nominal dollars calculation of fiscal outcome. Switching between the two calculations should be governed by a toggle switch that recalculates the whole model.
2) Portray the estimates costs of city services on both a cash and an accrual basis – for example indicating more specifically in the cash version when specific City costs reflected in the accrual basis have actually been prepaid by the City. For example, the accrual of a proportional share of Fire Station construction costs would be reflected in the accrual basis, but if that Fire Station has already been constructed by the City, those construction costs would not be included in the cash basis.
3) Calculate a coefficient of uncertainty for the fiscal outcome (standard deviation is one option)
Assumptions Questions
4) Identify the sources of the key assumptions, for example, the assumed population per household for certain types of housing units
5) Key revenue and cost growth assumptions should be in sync with the ones made in the Leland model. All the assumptions should be in sync with the Leland model.
6) Allow the model to be adjustable for future potential changes in development impact fee levels and for the outcome of renewal of parcel tax and Measure O sales tax elections
7) Review the per household sales tax generation numbers for reliability. For example, the calculations in the model for student housing appear high. Similarly, senior expenditures on “retail things” will be lower because most seniors are trying to get rid of “things” not acquire new “things.”
8) Include one-time construction tax and development impact fee amounts (include fees like sewer and hookup fees and items where credits offset payments) in the presentation of project fiscal outcomes, with clearly identified payment milestones
9) Estimate one-time sales tax revenues from construction and include in one-time fiscal effects
10) Review and document the assumption that reductions in assessed values due to purchasers over age 55 being able to transfer their AVs from their prior homes will be balanced out by gains in AV from the resale of the homes they “moved down” from
11) Review whether the city service costs assumed in the model are still overstated. Are 75% variable costs really more like 50%?
12) Resolve the internal conflict within the model of (a) assuming no turnover in homes for the 15-year life of the projection when it comes to property taxes versus (b) assuming continual turnover for purposes of the property transfer tax. Assuming that no homes in a cohort change hands for an initial period of 3 or 4 years could still be reasonable, but the model could reflect some turnover after that initial period for both sources of tax revenue
13) Ensure that tax-sharing ratios for projects involving annexation to the city are calculated in a way that is accurate and reasonable and in line with the provision of municipal services to replace existing special districts serving the development site
14) Consider whether the model should be refined so that the assessed values used to calculate property tax revenues are adjusted in cases in which the homeowners association or other party assumes responsibility for streets, bike paths, parks, community buildings, and the value of those assets would be distributed proportionally to homeowners and-or commercial occupants.
Model Time Horizon and Totaling Questions
15) The model should include two “sections” that subtotal individually and roll up into a grand total. The first “section” would be recurring revenues and expenses year-by-year throughout the 25-year period. The second “section” would be one-time revenues and expenses year-by-year throughout the project buildout period. The grand total rollup would sum the first and second section values year by year.
16) Add into the costs an estimate of replacement funding that would be collected over time to replace public infrastructure. Such estimates should be driven by the expected useful life of the public infrastructure components. Since the expected useful life of some of the components of public infrastructure is 25 years, the model’s time durations should be extended from 15 years to 25 years.
Revenue Category Questions
17) Include Community Services District revenues categories. For example Nishi had the following such categories:
— Parks and Open Space Responsibility Revenues
— General Community Services District Revenues (at 1.6%)
— Make Whole Provision Revenues to offset loss of property taxes due to UCD or Non-Profit rental or purchase of individual lots
18) Include Community Facilities District (CFD/Mello Roos) Revenues
19) Include Non-Secured Property Tax Revenues
20) Include Miscellaneous Development Agreement Revenues
Expense Category Questions
21) Align expense categories with Annual Budget
— City Attorney
— City Council
— City Manager’s Office
— Administrative Services
— Community Development and Sustainability
— Parks and Community Services
— Fire
— Police
— Public Works
— Capital Improvement Projects
— Debt Service
— RDA Successor Agency