DAVIS, Calif. — An updated fiscal analysis of the proposed Willowgrove development projects that the housing project would generate a General Fund surplus for the city of Davis under both scenarios examined, providing new fiscal arguments for supporters of Measure W as voters prepare to decide the project’s fate in November.
The Sept. 29 analysis by BAE Urban Economics estimates a 15-year net present value of approximately $12.15 million under its mid-cost scenario and approximately $12.52 million under its low-cost scenario. In nominal dollars, the cumulative General Fund balances over the period are approximately $14.7 million and $15.2 million, respectively.
The updated analysis was commissioned by Hefner Law rather than the city, but it was prepared by BAE, the same consultant that conducted the original Willowgrove fiscal impact analysis under contract with the city of Davis.
BAE said the original analysis was intended to determine the project’s potential effect on the city’s General Fund if Willowgrove is approved and developed as proposed. The analysis does not include one-time capital costs or city services financed through separate enterprise funds, including water and sewer operations.
The update makes two significant changes to the earlier model. It removes the assumption that Davis would construct a fourth fire station because BAE understands the city is not planning another station if Willowgrove is built, and it incorporates projected revenue from a Community Facilities District special tax contemplated by the project’s Development Agreement.
Those changes substantially improve the project’s projected fiscal performance.
Under the mid-cost scenario, BAE projects that Willowgrove would produce annual General Fund surpluses throughout the 15-year period. The annual surplus rises from about $332,000 in the first year to approximately $1.55 million in Year 4 before falling to approximately $1.06 million in Year 5, when the city is assumed to take responsibility for park maintenance.
The annual surplus then gradually declines before increasing again in the final years of the analysis, reaching approximately $942,000 in Year 15.
BAE attributes that pattern partly to the model’s assumption that city personnel costs will rise by 4% annually over the next 10 to 15 years while revenues and non-personnel costs increase by 2.5% annually. Property tax revenue is also constrained by Proposition 13 until homes are assumed to turn over and be reassessed at market value.
Under the low-cost scenario, which spreads fire and gym costs across a somewhat larger projected citywide service population, Willowgrove produces a slightly larger fiscal surplus.
That model projects annual General Fund surpluses ranging from approximately $337,000 in Year 1 to more than $1.57 million in Year 4, before declining following the city’s assumption of park maintenance responsibilities. The projected surplus remains positive throughout the period and reaches approximately $986,000 in Year 15.
BAE concludes that both scenarios indicate Davis would likely experience fiscal surpluses if Willowgrove is approved and constructed as proposed.
The finding, however, rests on assumptions that have not yet been finalized.
Most notably, the model assumes Davis will negotiate a 50-50 division with Yolo County of certain property tax revenues currently going to county funds and that the existing shares allocated to County Road District No. 2 and the Springlake Fire District will be transferred entirely to Davis.
BAE explicitly notes that those negotiations have not yet begun.
The model assumes that arrangement would ultimately give Davis 15.5928% of the basic 1% ad valorem property tax generated by the development. BAE based the assumption partly on the revenue-sharing arrangement used for the West Davis Active Adult/Bretton Woods annexation.
The analysis also assumes Willowgrove would create approximately 2,900 new residents and 16 new employees, producing 1,079 dwelling unit equivalents, a measure used to estimate demand for city services.
The project is assumed to build out rapidly, with full absorption approximately five years after residents begin occupying the development. BAE cautions that no specific development start date has been established and that financing, infrastructure, planning, market conditions and other factors could affect the timetable.
A significant portion of the improved fiscal outlook comes from eliminating the fourth-fire-station assumption included in the city’s earlier analysis.
BAE said the change “meaningfully improves the fiscal outlook for the Willowgrove project” because the development would increase Davis’ tax base without a corresponding major increase in Fire Department expenditures.
The earlier high-cost scenario, which assigned Willowgrove the entire cost of operating a fourth fire station, was therefore eliminated from the updated analysis. BAE instead modeled Willowgrove’s share of operating the city’s existing three-station system.
The proposed Development Agreement also calls for a Community Facilities District that would impose a $385 annual special tax on residential properties within Willowgrove, adjusted for inflation, to help finance park maintenance.
The Yes on Measure W campaign highlighted the updated analysis Monday, arguing that it demonstrates the development would strengthen rather than burden the city’s finances.
“For years, Davis has debated growth in the abstract, worried that new development would become a drain on city services,” Alan Fernandes, co-campaign manager, said in the campaign’s press release. “Willowgrove flips that script. This is a project that more than pays for itself while asking nothing new of Davis taxpayers.”
The campaign also pointed to provisions of the Development Agreement that it says include $11 million for currently unfunded traffic improvements along East Covell Boulevard, the Mace Corridor and Interstate 80 interchanges; a $3.5 million public safety contribution; and at least $21 million in developer-funded park and recreation improvements.
The fiscal analysis itself is narrower than those broader campaign claims. Its principal conclusion concerns the project’s impact on the city’s General Fund, and BAE specifically notes that the model does not evaluate one-time capital costs or revenues and expenditures associated with services financed outside the General Fund.
BAE also cautions that the long-term outcome depends on assumptions about the relationship between city costs and revenues. Personnel costs are projected to rise faster than revenue during much of the study period, putting downward pressure on annual surpluses after the project’s initial buildout.
Over a longer period, BAE said the project “could become more fiscally attractive if the City is able to reduce the rate of service cost inflation to levels that are more aligned with, or lower, than the general rates of revenue inflation.”
Measure W will appear on the Nov. 3 ballot and asks Davis voters to approve the Willowgrove project under the city’s Measure J/R/D land-use voting requirements. The project previously received unanimous approval from both the Davis City Council and Davis Planning Commission, according to the Yes on W campaign.
Austin Heyworth, the campaign’s other co-manager, said the fiscal analysis addresses longstanding concerns about the financial effects of residential growth.
“We have heard from Davis voters that they are worried that growth means red ink to the City,” Heyworth said. “Willowgrove proves that isn’t true when a project is negotiated this carefully. This is what fiscally responsible growth looks like. Measure W sets a standard that Davis should be proud of.”
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