Sometimes persistence pays off. City staff after criticism following the Finance and Budget Commission has reversed itself on the reduction of residential supplemental contributions for the Verona Subdivision and has decided to retain the 12,000 residential contribution that was originally approved in 2008.
The commission was concerned about the precedent for renegotiating the Development Agreement two years after the fact to more favorable terms for the developer. The original proposal would have seen the elimination of the middle income affordable requirement of 17 units per the city’s amendment policy that suspends that ordinance, the reduction of Supplemental Fees from $12,000 to $5,000 per unit, the elimination of the Parkland Dedication, the imposition of a park in-lieu fee and change in the timing of the water/ sewer connection fee.
At that meeting, the Commission passed a recommendation that they did not see the need to change the fee schedule as they did not see the action as necessary without a clearer set of policies and guidance with regards to supplemental fees.
Now the staff based on that feedback is changing their policy. “Since June 1, 2010 staff has revisited the proposal and modified the recommendation based on continuing dialogue with the applicant; Finance and Budget Commission review and recommendation; and comments from the public made at the public hearing on June 1, or to staff directly. In light of this, staff believed that further review and ultimately modifications to the previous recommendation were prudent and appropriate.”
The new proposal continues the elimination of the middle income affordable units, meaning the number of market rate units rises from 45 out of 83 to 66 out of 83. That means more money for the city, but also a lot more money from the applicant.
The supplemental fees will remain at $12,000 per unit, but now it is $12,000 for 66 units, rather than 45 units. The staff report is claiming that that takes the city’s revenue from $642,000 to $690,000, but my calculator says unless I am missing something, it is actually $792,000.
The new proposal continues the elimination of the parkland and gives the city its $606,906 park in-lieu fee that can only be used for the purchase and expansion of parkland and a few other specified things.
The city staff report may now be underestimating the impact, but according to their numbers, it increases the city revenue from $752,000 to $1.4 million.
The staff now believes, that it is appropriate to keep the current fees in place.
“Staff does not believe it is appropriate to reduce or eliminate the current fees for the project given the loss that would result for the city, and the potential financial benefit to the developer if the parkland is rejected. Even without the future development of the parkland parcel, the economic viability of the project is significantly enhanced for the applicant with the elimination of the middle income designation on 17 units; and the re-designation of four units from low/moderate income to market rate units. Potentially, these four units could be sold for double the income- restricted price. Staff believes the fees in place are appropriate.”
While the applicant is not getting all of what they asked for, it is in their best interest to accept this revision. First of all, the elimination of the middle income affordable housing requirement will allow the developer to make market rate profits on 21 of the units that previously would have been limited equity. That alone will vastly overshadow an additional $700,000.
Moreover, and this may end up being a larger point of contention, the conversion of the parkland requirement to Quimby fees, allows the city to collect the money for their park’s funds, the area no longer is considered habitat for the burrowing owl which required the park to begin with, instead, staff is recommending the possibility of either up to 13 additional units with a commercial/ mixed use parcel at the entry on Alhambra Drive.
The staff report notes, “The applicant does believe a commercial use is viable because it would be located near the passive area of park as opposed to the recreational areas where the most people congregate; and there is no parking available on Fifth or Alhambra.”
This is obviously going to be a point of contention among the neighbors. In addition, the staff is proposing modifying or eliminating three lots “in order to widen the greenbelt to be more consistent with the average width of the rest of greenbelt.” The applicant apparently opposes this change. The city could then collect supplemental fees on these additional units. The staff is suggesting only $3000 per unit which would produce an additional $125,056, but if the council decides to increase the number of units, it seems more reasonable to keep that figure at $12,000 per unit which would result in additional revenue.
“The development of the parkland parcel would require a new application to be submitted by the developer.” This is certainly not something that we would support at this time, given the economy and housing market, but at a future point, it might be a reasonable in-fill development to consider.
The bottom line, at least now, is that while the city is now prepared to get a more reasonable compensation from the developer than they were proposing earlier in this process, we should still consider the ramifications of re-designing the development agreement. I still do not know if the park issue was a crucial issue for the neighbors. The reduction of the supplemental fees and the loss of flexibility in those funds was crucial in my opposition to the changes.
It seemed like the city was getting very little in terms of benefit from the changes while the developer was set to make a killing. Do not weep for the developer here, they are still set to make far more with these revisions, but now at least the city is set to get a better deal as well.
None of this would have happened without strong questions from the public both at the June 1 council meeting and the June 14 Finance and Budget meeting.
—David M. Greenwald reporting
[i]”The approval period for Final Planned Development #2-07B, Design Review #29-04 shall become null and void after a period of 18 months from the approval date if substantial construction in good faith reliance on the approval has not commenced subsequent to such approval. The Community Development Director may extend the expiration date for one or more periods not exceeding a total of 18 months upon a showing that the circumstances and conditions upon which the approval was based have not changed. A written request for a time extension, application, required exhibits and plans, and applicable fees must be submitted at least thirty days prior to the expiration.”[/i]
I have no idea why the City of Davis thinks such artificial time limits as to when construction must start by make any sense at all.
At the same time I am pleased to see that the City did not reduce or alter its development impact fees based on a changed housing market — that is, there is no demand for more new housing now — I am flummoxed as to why the City should force the developer to “build it now or else!”
A much more sensible notion is, once a developer has received the green light for his project and all of the external costs of the development have been accounted for, let him build when he believes there are customers for his product. He has a strong financial incentive to build as fast as possible. (Every day his land lays fallow is a day he loses ROI.) But if the market is too soft, he should be able to wait until he thinks the timing is right.
I get the sense that the people who put in these deadlines have never been in business and have no idea how the real estate market works. I don’t think the deadlines are meant to be malicious. They just serve no public or private benefit whatsoever, and likely were created by ignoramuses who don’t understand how dumb they are.
I like the idea of time period or sunseting. We certainly had to make progress on our construction when we got permits from the city to improve a room over our garage.
Who in management in the city was responsible for making the first and then second decision on this?
making 11th hour changes to greenbelt and density after the long process that the neighbors thought was complete, to me, is not right.
In theory I agree with Rich, but the facts on the ground distort that theory. First, a lot of these projects were pushed through over the objections of neighbors. Second, the developers chose the timing and in many cases said they would build within a specified time. So to me, it did not make any sense to approve a lot of the developments we have given the unlikelihood that we would see them built any time soon, but given the fact that they wanted the project approved at said time, they should have to build within said time.
[i]”First, a lot of these projects were pushed through over the objections of neighbors.”[/i]
So having an artificial deadline that is unrelated to market conditions appeases the neighbors? This really is no argument at all.
[i]”Second, the developers chose the timing and in many cases said they would build within a specified time.”[/i]
But they have no choice. The time limit is imposed upon them no matter what they say. They clearly think they will build the project right away when they start out. But the point is that market conditions can change, and the deadline thus serves no useful purpose.
I had a discussion with John Whitcombe and Bill Streng after the housing market went into the tank and I asked them, if Measure X had passed, would they have been able to keep up the projected pace on that development, which was to be about 180-185 units per year? And one of them, I think Bill, said no, they couldn’t build if the demand was gone. They would have had to wait it out.
[i]”So to me, it did not make any sense to approve a lot of the developments we have given the unlikelihood that we would see them built any time soon …”[/i]
I cannot see how it really hurts anyone to approve a project during a recession, if the project is a good one. The public benefit is rather obvious–that homes will be made available when demand picks up, and thus buyers won’t suffer from a supply shock.
Now, you might be arguing that this or that project is a bad one for its design ([url]http://cityofdavis.org/story/pdfs/Verona-Conceptual-Street-Scene.pdf[/url]) or its impact on its neighborhood or for some other reason. But that really has no bearing on the timing question, once you decide the project itself is meritorious.
[i]”… but given the fact that they wanted the project approved at said time, they should have to build within said time.”[/i]
Keep in mind that by the time a development project reaches the city council, the company proposing it likely has been in the process with the City of Davis for 2-3 years. So your argument of, [i]don’t propose a project if you won’t build it within the time frame the city forces upon you[/i] ignores the long build-up our regulatory structure creates.
Let’s use the Verona example here: When Regis Homes ([url]http://www.regishomes.com/[/url]) decided to invest in the property at Mace and Alhambra, it was probably back in 2005 or even earlier, when the market for single family housing in Davis was hot. In architecture, engineering, taxes, fees, meeting time and holding costs, they probably spent a hell of a lot of money just to get their project to the city council. After working with the city planners and massaging it to meet Davis’s regulatory standards and so on, Verona was deemed a good project by our city planners. So now you say, [i]throw all of that time and all of that money out,[/i] because the housing market has temporarily crashed.
To me, that just makes no sense. I cannot figure out who you think benefits by such a deadline system? I think you have to at least look at this type of process with the interests of the company which is investing in our community and the interests of the future homebuyers in mind. The city’s and the neighbhor’s interests were well accounted for in the 3-4 years prior.
I grant this one thing: That our deadlines are not extremely tight. They are 18 months and then they allow an additional 18 months if need be.* That’s 3 years. Recessions in the U.S. generally don’t last that long. (Even the Great Depression in the United States would have ended by 1932 but for the fact that the Federal Reserve was still contracting the money supply.) So chances are that Regis Homes is not too worried about a 3-year deadline. But until I hear a good explanation for why we benefit from any particular artificial deadline, I think the idea is [i]fercockta[/i].
[img]http://www.parlindevelopment.com/images/masud.jpg[/img]
*Your friend, Masud Monfared (see above), who wanted to build WHR ([url]http://www.parlindevelopment.com/wildhorse.html[/url]) had said when he proposed that project that if the citizens approved it, he could not possibly start construction for another 2 years, given the state of the housing market. Yet if you believed that WHR was a beneficial project, then why kill it off just because it made more sense to break ground a bit later?
DMG: “The bottom line, at least now, is that while the city is now prepared to get a more reasonable compensation from the developer than they were proposing earlier in this process, we should still consider the ramifications of re-designing the development agreement. I still do not know if the park issue was a crucial issue for the neighbors. The reduction of the supplemental fees and the loss of flexibility in those funds was crucial in my opposition to the changes.
It seemed like the city was getting very little in terms of benefit from the changes while the developer was set to make a killing. Do not weep for the developer here, they are still set to make far more with these revisions, but now at least the city is set to get a better deal as well.
None of this would have happened without strong questions from the public both at the June 1 council meeting and the June 14 Finance and Budget meeting.”
This is exactly why commission involvement is so crucial to the city’s political process. It brings a fresh perspective for consideration by city staff, who did exactly the right thing here – reconsidered and changed its position. The result was a much better deal for the city. I am still not comfortable with changing developer contracts after the fact, but at least the city is not giving away the store as was the previous case. And I am still not happy about the city spending Verona supplemental fees on a Sports Complex it cannot afford to operate, when it cannot even afford basic road repairs.
Masud Monfared is not my friend. He made many claims during the campaign of dubious merit. I hope he has learned his lesson.