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  Regular-General Government   # 41.       
County Administrator  
Meeting Date: 05/10/2022  
Brief Title:    Davis DISC Project Tax Sharing Agreement and MOU
From: Chad Rinde, Interim County Administrator, County Administrator's Office
Staff Contact: Alexander Tengolics, Manager of Governmental Relations, County Administrator's Office, x8068

Adopt resolution authorizing execution of a Revenue Sharing and Property Tax Exchange Agreement between Yolo County and the City of Davis related to planned annexations for the Davis Innovation and Sustainability Campus (DiSC 2022), and approve memorandum of understanding between City, County, and the project applicants on traffic and traffic infrastructure.   (Potential positive general fund impact contingent on development and sales tax receipts) (Rinde/Tengolics)
Recommended Action
  1. Adopt resolution authorizing execution of a Revenue Sharing and Property Tax Exchange Agreement between Yolo County and the City of Davis related to planned annexations for the Davis Innovation and Sustainability Campus (DiSC 2022); and
  2. Approve memorandum of understanding between City, County, and the project applicants on  traffic and traffic infrastructure.
Strategic Plan Goal(s)
Robust Economy
Reason for Recommended Action/Background

The City of Davis has completed the review and approval of a development project that requires annexation of property outside of the City's sphere of influence and current City boundaries. The Davis Innovation and Sustainability Campus (DiSC 2022) project proposes to annex 102 acres east of Mace Blvd and north of County Road 105 for the construction of an innovation park. The 2022 version is a reduced version of a project originally considered in 2020. The Davis City Council approved the project on February 15, 2022 and aspects of the DiSC 2022 project, including a City General Plan amendment, are included in a local ballot measure (Measure H) for consideration by City voters as part of the Statewide Primary Election on June 7, 2022. Measure H would authorize the DiSC 2022 project by changing land use designations in the City General Plan to allow a mixed-use innovation center with lab and research facilities, offices, market-rate and affordable housing, hotel/conference center, parks, and community sports fields.

As the Board is aware, provisions of state law relating to annexations and changes to a city's sphere of influence are administered by the Local Agency Formation Commission (LAFCo). In this instance, the City and Developer submitted an application to LAFCo at the end of March, 2022 to modify the City's Sphere of Influence to include the DiSC 2022 site. A map of the proposed annexation area and site use is included in Attachments H and E. Subsequent to voter approval, the City and Developer would then submit an annexation application to LAFCo for consideration. Under state law, LAFCo may process an annexation application after the affected jurisdictions agree on an exchange of property taxes for the parcels to be annexed.  The tax-sharing agreement is the primary vehicle available to help ensure that property tax revenues are allocated to the City and County consistent with each entity’s responsibility for providing municipal services to the residents and businesses within the newly-annexed territory.

For the DiSC 2022 project, the County has sought to work with the City and Developer to resolve land concerns and arrive at a tax sharing agreement prior to voter consideration of Measure H. The County worked collaboratively and in good faith with the City and the developer since September 2021 in order to arrive at the agreements before the Board today. This has required significant staff time and numerous meetings of City and County officials and staff to work collaboratively through various areas of concern. In working through those items, County staff (in close coordination with Supervisors Saylor and Provenza) have concluded two agreements with the City and Developer for Board review and consideration: (1) a Tax Sharing Agreement between the City and County; and (2) an MOU on traffic and traffic infrastructure between the City, County and Developer. The Development Agreement approved by the City Council also includes numerous provisions benefiting County interests and is included with this staff report for review, though it does not require Board action. 

The nature of these agreements is described below. 

Development Agreement

The Development Agreement (Attachment A) is between the City and the Developer but, as mentioned, it contains provisions that affect County interests. Meetings of the City and County focused on several topics that ultimately were included in the Development Agreement to resolve County concerns while also improving the project and furnishing additional public benefits. The key items successfully negotiated with County involvement are summarized below. 

  • Exhibit G on Transit Features and Enhancements - County requested that the Developer participate in the Yolo Transportation Management Association. 
  • Exhibit G on Bicycle and Pedestrian Connectivity - County requested that separated grade bicycle and pedestrian project be completed as early in Phase 1 of the project as may be possible, resulting in an agreement to collaborate on seeking funding to achieve this shared objective. 
  • Exhibit G on County Roads and Facilities - County ensured appropriate participation and approval roles for the City and County in traffic plans, studies and mitigation measures, particularly on matters affecting County Roads and road users. 
  • Exhibit H on Agricultural Mitigation Requirements - County ensured that the developer will mitigate in accordance with the stricter of City or County agricultural mitigation requirements, whichever results in the greatest contribution to farmland conservation. 
  • Exhibit H on Clayton Ranch Detention Capacity - The County ensured that the developer will complete drainage onsite without offsite drainage facilities outside project boundaries.
  • Exhibit L on South Davis Library - The Developer will contribute $2,000,000 to the County for the construction of a South Davis Library Facility paid in four installments after certificate of occupancy for specified square foot thresholds. An annual meeting is required between the City and County to assess progress toward the proposed facility until constructed.

The County is not a party (i.e., signatory) to the Development Agreement; however, the MOU described below between the City, County and Developer provides the County enforcement rights for provisions within the Development Agreement that impact the County. 

Tax Sharing Agreement

As discussed previously, City and County staff have reached a tentative tax sharing agreement on the parameters for Revenue Sharing and Property Tax Exchange (Attachment C) for the DiSC 2022 project. A summary of the development site plan is included in Attachment G. This agreement and the tri-party MOU are anticipated to be taken the City of Davis City Council on the evening of May 10th after the Board of Supervisors considers the item earlier in the day.

Property Tax Revenues.  The tax-sharing agreement provides for the allocation of property tax revenues projected to be generated by development of the project, largely in proportion to the anticipated costs of municipal services to be borne by the City of Davis and Yolo County and a fair sharing of any excess revenues above service costs. The County retained Goodwin Consulting Group to develop a proprietary formula to calculate current and prospective service impacts resulting from proposed annexation and development assumptions. A summary of the discretionary property tax allocation on a post-ERAF basis is included in the proposed agreement is as follows:

  • General Fund (50% County / 50% City)
  • Accumulated Capital Outlay Fund (100% County / 0% City)
  • Road District # 2 (0% County / 100% City)
  • East Davis Fire District (0% County / 100% City, but with a $5,000 annual fee paid by City to the District)

Sales and Use Tax. With respect to the DiSC project, the County negotiated for a fair sharing of sales taxes in addition to the property tax share above and the City preferred sharing sales taxes rather than additional property tax revenues available for sharing. The Bradley-Burns sales tax generated from the project will be shared 50% County and 50% City with no base or cap included. While sales tax may take time to materialize and is more volatile that property taxes during periods of economic expansion or contraction, it represents a diversification of revenue streams obtained by the County. For reference, in the most recent County tax sharing agreement the sales tax share has been 15% County and 85% City. 

Community Facilities District (CFD). The City and Developer have agreed to form a Community Facilities District as part of the formation of the district in order to fund municipal capital and operations. As part of the tax sharing agreement, the County will receive the greater of 50% or $75,000 per year of revenues from the CFD for the maintenance and operations of a future South Davis Library.

The source analysis from Goodwin Consulting Group that underpins this allocation is Attachment F which shows that at full-build out of the project that the County will receive net general fund revenues (after paying for increased service expenditures) of $352,000. 

City, County and Developer MOU
Subsequent to the approval of the Development Agreement, the City, County, and Developer continued to work in good faith to resolve remaining concerns related to traffic and traffic mitigation in the project area and surrounding vicinity. This is an area that is at the border of the City of Davis and future development could have significant impacts to County Roads and flow of traffic within the community. The Memorandum of Understanding clarifies and supplements requirements under the Development Agreement. It also allows the County the right to enforce provisions within the Development Agreement. The additional items accomplished by this collective agreement are as follows: 

  • Section 1B - Extends the Mace Boulevard Corridor Plan to Pole Line Road/County Road 102 for project design including design of a second westbound lane from Harper Junior High to East Covell and for improvements to the intersection of Mace Boulevard and County Road 104A/30B. 
  • Section 2A - Clarifies certain mitigation measures are the responsibility of the Applicant to construct and commits applicant to fund 65% design for the Mace grade-separated crossing at the time of issuance of grading permits to allow City and County to collaborate in the pursuit of grant funds. 
  • Section 2B - Clarifies that certain mitigation measures will be fair share improvements and determines that these may be designed and implemented at the sole discretion of the County and agrees to the acceptable methodology for calculation of fair share contribution. 
  • Section 2C - Addressing additional improvements not covered by Section 2A-B will either be constructed by the developer or the City (if they elect to have a fair share contribution in lieu of developer construction). This also includes the added construction of a second westbound lane from Harper Junior High to East Covell and for improvements to the intersection of Mace Boulevard and County Road 104A/30B, subject to CEQA approval. 
  • Section 4 - Performs a pre-construction survey and determines process for further surveys to determine construction-related damage to County roads in the project area and the process for repairs or other work to address such damage at the Developer's expense. 

Staff Recommendation
Resolutions authorizing the execution of each agreement are included as Attachments B and D to the staff report. Staff request that the Board take action to authorize the resolution allowing the execution of a Revenue Sharing and Property Tax Agreement between the County and the City of Davis related to the DiSC 2022 project and approve the memorandum of understanding between the City, County and Developer. 

Collaborations (including Board advisory groups and external partner agencies)
The following have been key collaborators on this item including District 2 Supervisor, District 4 Supervisor, Agriculture, County Counsel, Community Services, County Administrator's Office, City of Davis, Goodwin Consulting Group, and the applicant. 
Competitive Bid Process/Vendor Performance
Not applicable, as the agreements are between government agencies. 

Fiscal Impact
Fiscal impact (see budgetary detail below)
Fiscal Impact (Expenditure)
Total cost of recommended action:    $   0
Amount budgeted for expenditure:    $   0
Additional expenditure authority needed:    $   0
On-going commitment (annual cost):    $  
Source of Funds for this Expenditure
Explanation (Expenditure and/or Revenue)
Further explanation as needed:
There is a positive future potential impact on the general fund pending future development and sales tax receipts estimated at $352,000 in net revenues (after paying additional expenditures due to higher service levels caused by the development). These revenues are modeled based on the best available information at this time and presented in Attachment F and should the project not be approved by the voters, and or not be fully built out, these revenues may be received in whole, in part, or not at all and the timeline may ultimately differ from current projections. 
Att. A. Development Agreement
Att. B. Resolution Re. Tax Exchange Agreement
Att. C. Tax Exchange Agreement
Att. D. Traffic Improvement MOU
Att. E. Site Plan
Att. F. Goodwin Fiscal Analysis
Att. G. Project Description
Att. H. Map of Annexation Area
Att. I. Presentation

Form Review
Inbox Reviewed By Date
Chad Rinde (Originator) Chad Rinde 04/29/2022 01:00 PM
Jill Perez Jill Perez 04/29/2022 03:11 PM
Chad Rinde (Originator) Chad Rinde 05/03/2022 09:49 PM
Financial Services Tom Haynes 05/04/2022 11:01 AM
County Counsel Phil Pogledich 05/05/2022 11:30 AM
Joanne Van Hoosear Joanne Van Hoosear 05/05/2022 12:00 PM
Phil Pogledich Phil Pogledich 05/05/2022 12:55 PM
Form Started By: Chad Rinde Started On: 04/29/2022 07:55 AM
Final Approval Date: 05/05/2022


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