May Actually Cost the City Money on an Annual Basis, and the Development Agreement Is Non-Binding and Weak
by Alan Pryor and Nancy Price
Part 2
Forward –
The Davis City Council has approved a sprawling senior housing development project located in West Davis along Covell. Voters will have a chance to approve or reject the project in this year’s November election. The project is called West Davis Active Adult Community (WDAAC).
On Tuesday, 8/28, Part 1 of this article was published in the Vanguard (https://davisvanguard.org/2018/08/guest-commentary-wdaac-includes-massive-developer-give-aways/) which discussed the massive reductions in Development Fees given away by the City to the Developer. This is Part 2 of the article.
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- The City Projects a Positive Annual Return to City Coffers as a Result of Build-Out of this Project. However, this Estimate Is Based on Accounting Methods that Assume Unsubstantiated Reduced Costs on a Per Resident Basis for Providing Basic City Services such as Public Safety and Transportation.
The City’s Finance and Budget Commission analyzed the potential financial impacts to the City and made a number of projections about the project’s financial viability with respect to income or loss to the City. Their report to the City Council on February 12, 2018 can be found at www.cityofdavis.org/home/showdocument?id=9199:
The conclusions reached by 4 of the Commissioners (with two dissenting votes) made the following observations (with emphasis added):
- At the time of this analysis, the commission did not have available to it a development agreement with the city for the project. Therefore, any conclusions we have reached should be considered preliminary and subject to change….
- We recommend that the commission, or if necessary an FBC subcommittee, be provided a timely opportunity to review and comment on the fiscal provisions of the proposed
development agreement before its presentation to City Council for approval.
Surprisingly, the Finance and Budget Commission never did again review the Development Agreement before it went to Council. But nevertheless, City Staff assumed when otherwise calculating the project’s positive return to City coffers that the City’s average cost for providing services to the residents of WDAAC were only going to be 75% of the City’s otherwise calculated average costs. Staff made this assumption without any quantitative explanation as to how they derived that 75% figure.
In fact, an alternate set of financial projections was proposed by Finance and Budget Commissioner Ray Solomon that specifically refutes the rosy projections by Staff. In this alternate analysis, Commissioner Solomon assumed that the current cost of providing City services to each resident will be, on average, reflected by the City’s current average costs for such services on a per resident basis.
When calculated in that manner, the average return to the City becomes a negative $150,000 to $200,00 annually.
Note: The estimates of income to and expenses by the City as a result of the WDAAC project that were prepared by Finance and Budget Commissioner Ray Solomon are contained in Appendix B.
- There are No Guarantees This Project will ever be built as Proposed Because the Baseline Features are Vague and Imprecise and the Development Agreement is Exceedingly Weak.
- Building of Housing Types: Although the project proponent touts the range of sizes of homes which prospective seniors may purchase, there are absolutely no guarantees that any of the smaller housing units will ever be built.
It is critically important to note that the number of each different type and size of units to be built is not guaranteed in the Baseline Features or in the Development Agreement. It is entirely possible that the number of smaller cottages, bungalows, and condos will be severely reduced or even eliminated, and, alarmingly, this would still be consistent with the Baseline Features and Development Agreement.
This is because the language in the Baseline Features and Development Agreement specifying sizes and types of units is very vague, such as: “It is expected to include…” or “It will likely include…”. Because the precise numbers of different size units (or even a minimum number of the smaller units) is not specified in either the Baseline Features or in the Development Agreement, this developer is actually free to build whatever he wants, as long as the Council agrees. Does anybody honestly believe that will not happen?
In fact, the Council has already agreed with the developer that any changes they might make in the Development Agreement in the future will automatically be considered to be compliant with the Measure R Baseline Features because those Baseline Features are so poorly written.
The Development Agreement states (with emphasis added):
“West Davis Active Adult Community is required to develop in accordance with the Baseline Features stated above subject to mandatory compliance with state and federal laws. Project implementation may include further entitlements from the City of Davis, including but not limited to, Large Lot Subdivision Map, Final Planned Development, Tentative Subdivision Map, and Design Guidelines. Any changes to the attached baseline exhibit which are necessitated by compliance with legal, engineering, environmental and/or conditions on subsequent project approvals shall be deemed consistent (sic with) Baseline Features, and City of Davis Ordinances governing Measure J/R “(sic inserted by these authors)
So what exactly does the Baseline Features tell us about how many types of different units and sizes will be built?…Absolutely nothing!
The Baseline Features state (with emphasis added):
“A maximum of 560 primary housing units, including affordable, market rate rental and market rate for-sale housing units.
Offer a mix of housing types which may include single family homes, cottages, bungalows, multistory stacked flats, senior apartments, continuing care and affordable housing.
In an effort to provide a variety of housing options that are intended to meet a wide range of needs, the target home sizes are as follows:
o Greenway Homes – 1,200, 1,400 & 1,800 sf
o Senior Affordable apartments – 600 sf
o Cottages – 900 sf
o Bungalows – 1,100 sf
o Stacked flats/Condos/rental housing – mixture of home sizes from 600- 1,600 sf
Alarmingly, there are no guarantees to the voters that anything other than the largest Greenway Homes will ever be built. This simple truth is that the Development Agreement between the City and the developer can and will be amended and this agreement expressly states that these changes to the Development agreement will be deemed consistent with the Baseline features (see above).
This type of ambiguity is regrettably completely inconsistent with the provisions of Measure J/R which state:
“(2) Any application for an amendment or modification of the Land Use Map that proposes changing the Land Use Map land use designation shall require:
(a) Establishment of baseline project features and requirements such as recreation facilities,, public facilities, significant project design features, sequencing or phasing, or similar features and requirements as shown on project exhibits and plans submitted for voter approval, which cannot be eliminated, significantly modified or reduced without subsequent voter approval. “
Additionally, other equally ambiguous language in the Baseline Features specify that the development:
“Include a mixed-use Activity and Wellness Center that is available to the general public….an approximately 4.3-acre mixed use area, which would likely consist of a health club, restaurant, clubhouse, and up to 48 attached, age-restricted units; dog exercise area and tot lot;…” (Emphasis added)
- Activity and Wellness Center: The Development Agreement does not give much more guidance as to what exactly the Activity and Wellness Center will include except to say,
“The activity and wellness center shall include: limited office and retail space, including a privately owned and operated health club with shared access to the community owned swimming pool. Additionally, the center will contain community meeting space for various activities including classes and seminars. The facility will further include a clubhouse for the use and enjoyment of the neighborhood association”.
But there are NO specific features or sizes mentioned in either the Baseline Feature or the Development Agreement informing the voters what they can expect. Further, even new buyers of homes in the project will probably not know what the Activity and Wellness Center looks like because it does not have to even be constructed until after 301 of the 410 non-affordable housing units have been built.
And the Development Agreement gives no further guidance here. Although the Development Agreement states:
“This Agreement will eliminate uncertainty in planning for and securing orderly development of the Project,…”, the Development Agreement, in fact, has a huge number of uncertainties and is so vague that the Planning Commission did not even accept Staff’s request that the Planning Commission recommend to the Council to approve the Development Agreement. As a result City Council made the highly irregular decision to approve the project’s Development Agreement without the specific recommendation of the Planning Commission to do so.
The Development Agreement also has other glaring uncertainties besides the number and size of the buildings. For instance, the Development Agreement states:“(5) Architectural Diversity. The General Plan includes goals and policies that promote design standards for new single family residential development that create variability of lot sizes, floor area ratios, setbacks, building height floor plans, and architectural styles/treatments within each new development area. The Project would be consistent with these General Plan goals and policies. The Project shall include a diversity of housing types, densities, and diverse architectural treatments.
Unfortunately, there are absolutely no provisions in the Development Agreement that actually specify which different designs are acceptable. In fact, almost all Greenway homes will look almost the same placed on almost identical row-like rectangular blocks of land.
Another stipulation of the Development Agreement regarding the Agricultural Buffer is equally unenforceable and vague and, essentially allows the developer to do anything he wants.
- Agricultural Buffer: “The Project shall include approximately 7.2 acres of agricultural buffer area that will be managed and maintained by Developer and its successors and assigns. This buffer shall be comprised of an external 100-foot-wide section with features that generally exclude public activity, and an internal 50-foot-wide section that is designed to be interactive. The 100-foot external section will include a drainage corridor and predominantly use a native and drought tolerant plant palette. The 50-foot segment located proximate to the residences will include a trail, habitat nodes and other pedestrian-oriented amenities. If and where feasible, the 50-foot segment may also include community gardens and orchards to foster mental health and a healthy diet.”(Emphasis added)
How can the developer possibly fit in community gardens and orchards in a 50 ft buffer that must also include a trail and habitat nodes. It is almost a physical impossibility, thus virtually guaranteeing that these gardens and orchards will never be planted because they will be deemed to be “not feasible” and there are otherwise no legally binding fixed requirement for their planting.
As mentioned before, the City is legally precluded from imposing any more specific conditions on the sizes or designs or other amenities and features selected by the developer because in the Development Agreement the City agreed not to do so, as follow.
“C. Subsequent Discretionary Approvals. The Developers’ vested right to develop pursuant to this Agreement may be subject to subsequent discretionary approvals for portions of the Project. In reviewing and acting upon these subsequent discretionary approvals, and except as set forth in this Agreement, the City shall not impose any conditions that preclude the development of the Project for the uses or the density and intensity of use set forth in this Agreement. (Emphasis added)
In other words, because unenforceable and arbitrary standards are not more specific and are unresolved in the Baseline Features and Development Agreement, the developer can functionally do anything he wants and the City can do little about it. This is no way to entitle a massive project of this size and it sets a very bad precedent for any future development.
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APPENDIX B – Summary of Fiscal Impacts of WDAAC Projects – Alternative Projections with Full per Resident Costs Allocated
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This gets us right back to the debate over Nishi. Once again, find it interesting that Alan Pryor was willing to use basically the alt-Matt formula for project costs which is not based on real numbers.
Just to illustrate how easily this changes, I look at his fire and police numbers. Basically by year ten, the cost increases are such that you would have to assume they are hiring one new firefighter and 3-4 new police officers for this project. I don’t really understand that. If we ad either police or fire fighters it will have nothing to do with this project.
So instead, I take his initial estimates of police and fire costs and simply increase them by 5 percent each year.
Just that simply relaxation of the police and fire assumptions, completely wipes out the entire deficit that this project supposedly gets. That’s without evaluating any of their other numbers.
This all seems like the exact same argument that was made with Nishi. Using one commissioner’s view or report and emphasizing the ambiguity of projections. A question I have is why the other commissioners don’t accept that singular view and instead seem to accept the staff report.
Don: That’s a good question to ask of the former chair of the finance and budget committee, who is now a council member. You might also want to ask why the committee rejected the method used by an outside consultant, for Nishi.
A better question to ask is how David (or anyone else) believes costs should be allocated, when the “tipping point” for a new hire is reached. Do all of the costs of that new hire then get allocated to the development that triggered the tipping point?
And, does David believe that existing firefighters, police, and other city staff currently have a lot of “extra time” on their hands, to serve new developments at no cost to the city?
Until we have to actually add police or fire due to population growth, we are dealing with theoretical costs. I agree that in theory, each project contributes a theoretical amount to such future costs, what I am less clear about is what we expect to do about that. Are we proposing they pay into an impact fund, so if we have to add police or fire in twenty years it’s there? I see that very differently from the issue of actual direct costs that the city has to pay today because of a development.
That’s exactly the type of thinking that has led to fiscal problems for cities throughout California.
Below is a link to Commissioner Salomon’s analysis (for both Nishi and WDAAC). I’m not sure if this is the most recent version. I understand that the basis for each cost category in the analysis is also included.
http://documents.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/Finance-And-Budget-Commission/Agendas/20180312/07C-Solomon-Updated-Fiscal-Models.pdf
No. What led to the fiscal problems in Davis was unfettered compensation increases without proper analysis as to future impacts.
The compensation that you’re referring to is for employees that serve developments. That’s the reason those costs are included in any/every analysis of proposed developments, including the city’s unexplained/unsupported “75% across-the-board allocation” method discussed in the article, above. And, it’s still not under control locally, regionally, or statewide.
Sure, but then again entire cities are made up of developments.
I’m not sure if this analysis has the same problem as the Nishi analysis, in which current residents are asked to pay for future residents’ capital replacement costs. Infrastructure costs should be paid for by the residents who use them, e.g., when a new road surface is needed 20 years from now, the residents 20 years from now should pay for that since the initial residents paid for the first installation.
You have little concept of quanta or statistics (or how real world decisions of staffing needs are) when you write,
The rest of your post proves it.
Howard: Please explain what you mean by your comment, as it is not self-explanatory. Note that the question you cited is a logical extension of what David is suggesting, not me. That’s why I asked David the question.
[moderator: comment edited, off topic content removed.]
Thread cleanup: 7 comments removed.