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Friday Update on February 9 2018

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Friday Update on February 9 2018

All,

Last week, I attended the State-wide City Manager’s Department Meeting which gives me a chance to get up to date on critical issues and items affecting cities and  the State. Here is a review of some of the key issues and a brief sense where the City of Winters is affected for each.

Some of the major topics hitting California cities include pension costs, housing, transportation and homelessness.

Pension:

Unquestionably, the ballooning deficit for the funding of public employee pensions is an issue which stands to cripple municipal services in the coming years. The combination of reduced investment earnings at PERS, the increased contributions needed to fund pensions from member cities and the long term sustainability of employee pensions will become an enormous impact to how services are provided to the communities in California.

As forecasted, the incremental increase of PERS contributions for cities and counties will see median increases of almost 89% over the next 7 years with a typical city in California seeing an median dollar increase of near $2.3m per year in contributions. The percentage of pension costs to payroll shows that the median is almost 42%. In Yolo County, both Davis and Woodland will see over 50% of their payroll cost being pension related and Yolo County- 38% and West Sacramento seeing 39%.

For Winters, we are forecasting that our pension costs will increase from the current 22% of payroll to 27% in FY 24/25, an increase of almost $400k annually. To address this, Staff is looking at assigning a dedicated funding line item in our budget which is strictly pension related. Over time, the amounts will incrementally increase over time to develop a funding source to eliminate future increases so as no one year of shifts in pension costs will cause. The goal is sustainability for pension obligations, a smoothing mechanism to alleviate the peaks and valleys and a solid plan which will help the City over the next 30 years deal with this issue.

Housing:

 

Without question, the California housing market has become unaffordable for many folks, especially young families and persons seeking rental housing in both metropolitan and rental areas. The California Legislature and the Governor have made the “streamlining” of permitting a priority in many of their policy prognostications, but the reality is that they are doing very little to move the ball on helping address the situation, especially when it comes to affordable housing.

A perspective– Two summers ago, someone associated with Winters City Hall found himself between rental housing, downsizing into his own apartment from a shared one. As he left one, waiting for the word on another, he found himself on the verge of becoming homeless and needing to live in his car. Anyone with a millennial child can absolutely relate to this situation because of the tight supply of rental properties everywhere.

Some key factors inhibiting housing production include:

  • Environmental Review- The California Environmental Quality Act (CEQA) is a complicated, process driven morass of consultants, attorneys and advocates which by its nature is meant to slow and discourage development. It adds huge costs to projects and makes even the most positive and desirable projects subject to litigation and outright extortion from many groups. Neither the Governor nor Legislature, which control the elements of CEQA have taken any steps to cure some of the reforms needed and it is nowhere on their radar. The facts are that powerful groups which profit immensely from CEQA (attorneys, consultants, environmental groups and unions) stand in the way of any types of reforms. Don’t look for anything soon.
  • Labor Supply- The economic downturn and recession of 2008 significantly reduced the number of contractors and skilled carpenters, electricians, etc. The construction industry has literally become an enormously tight scheduling exercise where subcontractors and the various trades are lined up to build. Any deviation from the scheduling “window” for a trade whether it be weather, supply or any number of variables can result in significant delays if that window is missed. The ability to get any contractors for even home renovation projects can be difficult.
  • Approvals- Cities can be extremely slow to review and approve projects, taking months, if not, years to consider even the most basic subdivisions (see CEQA above). The 2008 downturn witnessed a huge reduction in planning professionals who help process applications dwindle and the many consultants (traffic, environmental review, habitat, etc) also has been reduced. It is tough to find qualified professionals and it may take years for the supply to return.
  • Financing- The loose lending of the early 2000’s which gave rise to the 2008 “mortgage” crisis has resulted in extremely tight lending criteria from underwriters. This means that even the most successful builders in the hottest markets can typically only get funding for a handful of units (5-10) at a time. Combined with the shortage of contractors and labor/material supply, it really slows things down.

A perspective on the Winters real estate market is as follows:

  • The supply of available units for sale or rent is practically non-existent. There are very few units and those that hit the market are purchased immediately.
  • As of today, we have close to 550 units approved and entitled to build and we will see two of those subdivisions (Stone’s Throw and Callahan Estates) under construction now with the first units for sale beginning the summer of 2018. We expect the construction timeline for these units to be 6-7 years.
  • Winters desperately needs rental housing. The need for quality, market rate apartments in town is huge.
  • Senior Assisted- Older folks hit that point where they need assisted living arrangements and we currently have zero. Some of our longest term residents live out the last days of their lives in Woodland, Davis or other points east and west. Population often dictates the development of assisted living facilities, so we will need to see an increase in population to make this side of the of the housing market work.
  • Affordable Housing—The lion share of housing production in Winters over the past 10 years has been affordable. The Orchard Village, Winters Apartments II and rehabilitation to Winters I and Almondwood have all been positive!
  • Senior Housing—The proposed and approved Blue Mountain Terrace Apartments will be 63 Senior Affordable Units on East Baker Street behind the Yolo Credit Union. This project has been stalled for almost 2 years as we work on gaining funding.

Winters falls into the region controlled by the Sacramento Area Council of Governments (SACOG) which serves as the regional transportation and planning agency. Each “planning area” like SACOG has a requirement to develop a “regional housing needs allocation (RHNA)” which essentially established housing development goals and estimates for each city and county. Also known as the RHNA number, it is very controversial and draws the ire of many people, especially the slow to no growth community. The California Department of Housing and Community Development recently released a report “grading” communities on their housing availability and production in direct relation to meeting the RHNA “goals”. Good news for Winters, where we received a passing grade while some other communities did not fare as well.

Bottom line, we have single family housing production in our future but we still have a need for rental, affordable, senior and assisted living. We will see!

Transportation:

Anyone travelling in metropolitan or toward even the most remote suburbs can relate to the growing traffic congestion which is engulfing our roadways. As the supply and availability of housing has been pushed into remote areas without a correlary of jobs in the same areas, commutes are longer and gridlock is occurring for extended durations.

Amongst cities in metropolitan California both north and south, the issues are chronic.

How is this affecting Winters:

  • From a traffic count perspective, we know that the vast majority of working Winters leaves the City between 6:30 and 7:00 am each weekday. We know that the majority of folks return home sometime between 6-6:30 pm. The vast majority of folks go south toward the Bay Area. We also know that the commutes are starting earlier (morning rush hour in Winters used to begin closer to 7:15) , meaning that can surmise that as people head to work, they need more time for travel due to traffic.
  • Our evening traffic on Grant Ave is increasing on evenings. These are not people from Winters or Lake Berryessa, they are Sacramento bound commuters seeking relief from the congestion of Highway 80. A key factor are our “smart phones” with both “Maps” and “Ways” guiding people off of Highway 80 to 128 which guides them through Davis to save some time. Next time you are at Berryessa Brewing on a Friday night, watch the traffic passing going east. It is an eye opener!
  • Smart technology is completely changing traffic patterns. The algorithms of Ways and Maps are sending cars through residential and rural areas versus the previous highways and arterial roads. In metropolitan areas, once quiet residential streets are effectively becoming cut thru’s for persons leaving congested arterials.

While Winters does not have congestion and our biggest issue seems to be people trying to figure out how to negotiate the new “roundabout”, we can still expect to collectively experience what is rapidly becoming one of our State’s largest issues.

Homelessness:

I shared last week my shock at the number of homeless I saw in Southern California. It was an absolute disaster and something which seems to be spinning out of control. The largest attended session at the City Manager’s Conference was the Homeless Session and there was standing room only to get in.

I grew up in the Los Angeles area (Pico Rivera) and lived in Orange and San Bernardino Counties. The amount of homeless “everywhere” was stunning.  I was personally shocked by the numbers of people literally living on, under and around bridges as we drove through the region.

As I visited with my peers from many cities, it is clear that some level of collective intervention is needed. Law enforcement personnel have become mostly social workers and psudo-psychologists in dealing with persons living on the streets whose biggest crime seems to be simply trying to live in an untenable situation. The police and sheriff deputies have few resources at their disposal except to just push folks from one location to the next. Most have a shopping cart and a dog with all their belongings just piled in a heap.

Who are the homeless- literally every demographic……. from young to old, male and female, families, they are all there. Homeless are not just people with “issues”, they are people with no way to find housing

A noted urbanist and someone I have worked with in the past is Chapman University Professor Joel Kotkin the often controversial urbanist who once predicted that Los Angeles would become the “Calcutta” of the United States” based on the broadening income and economic disparity which will ultimately divide the classes. He points to the reduction in certain safety net programs (mental health is one) as fueling the divide. His prediction seems to be materializing.

In Yolo County, the problem is becoming pervasive. I will share that our Yolo Manager’s Group (Each City Manager and the County Manager), homeless are a regular topic. Woodland, Davis and West Sacramento all have HUGE issues with very little relief or answers in sight. Caltrans will tell you that their facilities are becoming extremely impacted by homeless seeking shelter. Because of climate, northern California issues pale in comparison to Southern California, but they are still very real.

For Winters, our homeless population is practically non-existent. This is mostly due to the lack of shelter and social services due to our very rural nature and population size. Our homeless population is either very temporary and is transient or they are the offshoot of family problems which have people more kicked out of homes for various durations.

A lot of heavy issues with no immediate or easy answers.

John


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