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Extortion in Davis? Not from Measures J/R

Cannery-moneyBy Matt Williams

Extortion is the practice of obtaining something, especially money, through force or threats.  Measures J/R clearly do result in additional expenses for a developer; however, the City (and the community) don’t receive any payments as a result of any of the provisions of Measures J/R.  The additional developer dollars are paid out (discretionarily) to third parties, like election campaign consultants, and advertising channels, and experts providing testimony, etc.

In the last 10 years I can only think of one example of “extortion”  and that example is one where the developer “extorted” an $8 million payment from the City.  Of course I refer to the Cannery CFD.  Not only did the developer receive that $8 million cash payment, but that $8 million payment cost the Davis taxpayers a total of $21.8 million in principal repayment, bond closing costs and interest payments.

My personal opinion is that the most important aspect of Measures J/R is that it makes it very hard for our local government to unilaterally approve those kind of giveaways.  If Cannery had been approved with a Measure R vote, when New Home Company came back to the City one year after the project approval, “asking” for that $8 million “change” to the agreed-upon terms, staff and Council would have had to prepare the appropriate/relevant documentation for the voters explaining why that $8 million supplemental payment was warranted/legitimate.  They also would have had to explain to the voters why they were incurring $2 million in bond closing costs and annually paying 6% interest costs each year for 30 years.

I do not believe that it is a coincidence that the only developments since 2005 that have had their fiscal impact reviewed by the Finance and Budget Commission are the Measures J/R proposals.  That is a failure in process by the City.  When Nishi 2016 came to the FBC, they were asking for a CFD similar to the one Cannery had been granted.  In short order the members of the FBC showed the developer and City staff why a CFD at Nishi 2016 would reduce the developers’ profits by approximately $20 million, as well as cost the City taxpayers $20 million.  The developer thanked the FBC for its keen insight, and quickly removed any consideration of a CFD from the table.

For me personally the biggest issue I have with the removal of the provisions of Measures J/R is the consistent inconsistency that we see from City staff in handling development applications.  I will give you one example.  The neighbors near the Willowbank Park site (the same neighbors who packed over 200 people into the East Davis Fire House this past Thursday night) expressed their clear desire to have the housing on that site be attached housing (condominiums) like the nearby El Macero Oaks (and many years later, the recently-built The Villas at El Macero).  After extensive community dialogue, the neighbors accepted a compromise that resulted in about a third of the housing units being detached Single Family Residences (SFRs), and the remaining two-thirds as attached SFRs.  Council approved that compromise project.  The developer began the construction of the detached SFRs, and a bit over a year after the Council approval, very, very quietly an item appeared on the Council agenda to modify the project approval to convert all the attached SFRs (condominiums) into detached SFRs.  It turns out that staff and the developer had been discussing that change behind closed doors, and the public only heard about that requested change when the Council Agenda packet was published on the City website 4 days before the Council hearing.  Council approved the change.  Then 6-9 months later the developer came forward to staff with an additional request to convert one of the Affordable Housing SFR units into a Market Rate SFR unit.  Again, nothing was disclosed to the public until the Council Agenda packet with the item was published on the City website.  Again Council rubber stamped that change.  Under the provisions of Measures J/R, both those back room dealings would have had to go to a vote because they were changes to the baseline features of the originally approved project.

So, bottom-line for me, if there is any concern about “extortion” it is trumped by the inconsistent application of process by City staff and the developers.

Comments

Rik Keller

Good article Matt! To add to this: while local developers spend money at a truly staggering scale in local elections (to the tune of something like $15-25 per "yes" vote they obtain) and that spending has a giant distorting effect on opinion, those expenditures are a relative drop in the bucket compared to total development costs.

The idea that these votes increase development costs dramatically and lead to less affordable housing would, I think, be soundly disproven with a pro forma analysis that broke development costs down.

As an adjunct point to that, the market does a great job of taking into account development costs. For example, land costs to potential developers adjust based on development feasibility/costs/profitability. Measures that developers often push to reduce development fees and which they say will make housing more affordable, for example, typically merely result in increased profitability and/or higher land costs as the market adjusts.

Rick Entrikin

Great post, Matt. Didn't know about the Willowbank Park housing, but it's a perfect example of why renewal of Measures J/R is so important. That sort of shell game began with Mace Ranch back in the 90s. Proponents (including Council members at the time) cajoled citizens with promises that the project would be built as described because of the first-ever (as I recall) Development Agreement in Davis. Then, shortly after the project was approved, the developers requested the first in a very long line of DA amendments. Those changed the project in MANY ways detrimental to the City and citizens. As we learned then, development agreements provide essentially no protection or assurances because any Council majority can change them at will. I won't go into the debacle of The Cannery at length here, but it was the largest vacant site, zoned commercial/industrial in the City, but New Homes wanted to make their money on housing. And since the site was already in the City, the council majority simply approved a zoning change to residential and the rest is history.

Nancy Price

Thanks Matt and Rick,
Measure J/R is certainly going to be an issue in the next council election. It is important to have an honest discussion based on established facts and evidence information as Matt has provided in his examples.

What is also needed is a clear set of guidelines that are not just aspirational, but required, no exceptions, of any developer to create a sustainable city and meet climate impact goals.

I have proposed in conversations with Matt Williams and Johannes Troost that we desperately need a formal assessment of past projects/developments to document whether they "delivered" on what was passed by the City Council, what the developer agreed to and what the public thought they were "getting."

This is needed to be sure that the Planning Department/city and City Council process is open and transparent; why a developer came back with added requests that are approved (why were these not in the proposal as originally analyzed and passed), and what the added costs are to the city and the taxpayers. It would reveal to the public whether the city and City Council are really acting in the best interests of the citizens of Davis and our neighborhoods and foster a city culture of transparency and accountability.

This review must not be carried out by the city Planning Department or City Council. This public review report would provide needed information on how the city and the City Council are carrying out the business of the people first.

We need to end the kind the kind of back-door insider deal-making, Planning Department and city and City Council decisions that Matt reported on whether or not these projects/developments require a Measure J/R vote.

Greg Rowe

Great perspective, Matt. I would add to your observations and those of Nancy Price that a key component of development decision-making going forward would be a requirement that the commissions having jurisdiction over development be given more time to review and digest information. (That would include Planning, Finance & Budget, Historic Resources, Natural Resources, Transportation and Bicycle, and others depending on the nature of the development.)

As an example, during the past year the Planning Commission, of which I am a member, has on several occasions received very important reports and only had the benefit of 5 days to review the material; i.e., from the time our packets were available Friday night until the following Wednesday evening meeting. A good example is the revisions to the affordable housing ordinance and the "Plescia report" that served as background to the ordinance amendments. The Planning Commission and Finance/Budget Commission should have been afforded 2 meetings we review, analyze, ask questions, and receive written responses back from staff before those commissions were expected to render a recommendation to City Council.

The other shortcoming of many of the project proposals the Planning Commission is asked to review is the absence of information on the cumulative impact of a particular project. The best example is the series of large, purpose-build student housing projects that have come to Planning Commission since Sterling was approved 2 years ago this month. Since then there has been Nishi2, Lincoln40 and Davis Live. I have emphasized to staff that each successive project report after Sterling should have included a table showing how many units, bedrooms and beds have been approved thus far and how many the newest project would add. Planning Commissioners should not have to go back over past projects and compile that information on their own, which I have done. Without that information, there is no real way to determine cumulative impact.

Roberta L. Millstein

My experience on the Open Space and Habitat Commission is similar, Greg. Just recently, were it not for a technicality, we would have been asked to weigh in on a ag mitigation property for WDAAC, even though the ordinance prescribing appropriate ag mitigation land is very complex and even though the information we received was scanty at best. Hopefully we will have more time and information to properly make the determination.

As for the cumulative impacts of various, that's a subject worthy of an article (or more) in its own right; happy to publish something on that for the Davisite.

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