By Dan Carson and Elaine Roberts Musser
We were disappointed when the Davis City Council adopted an ordinance last January authorizing a new city-funded downpayment assistance program for lower-income Davis homebuyers. It put on the books a potentially expensive new program city taxpayers can ill afford. It did so with a blank-check ordinance lacking normal programmatic limits, like how much money would be given to a potential homebuyer.
At the time, advocates of the new downpayment assistance program lobbied for an annual allocation of new General Fund monies of $1 million or more from Measure Q. Measure Q was an increase in the city sales tax approved by city voters last November.
That didn’t happen once the full impacts of out-of-control spending by the City Council became clear. Excessive pay hikes and bonuses for city staff, including another round of new contracts rushed through in May, have gotten the City of Davis into very serious financial trouble. A new fiscal forecast shows that within the next couple of years the city will have zero financial reserves, with spending exceeding General Fund revenues by millions annually.
Essentially, all that new money from Measure Q has gone up in a puff of smoke. This, despite campaign promises by the Council of new housing programs and fixes to our city infrastructure. Promises that were made in public statements and official ballot arguments the Council signed and that were sent to every registered city voter.
After taking insufficient steps to fix the fiscal mess, the Council gave city staff until March of next year to figure out how to prevent the city from going over the proverbial financial cliff. Meanwhile, two city commissions are plowing ahead at the Council’s request to study the merits of creating a city-funded downpayment assistance program.
In our view, such a program would duplicate existing state government programs established for this same purpose. This would include some state programs already paid for by Davis residents with their income and sales taxes.
Now, the Fiscal Commission has expressed the same concern in an August 1 report the city released publicly. Commissioners said the City of Davis might better accomplish its intended goals by educating our local residents about existing state programs, rather than creating a new city-funded program.
One of those programs, administered by the California Housing Finance Agency (CalHFA), “has helped more than 226,000 Californians purchase their first home with a mortgage they can afford,” commissioners noted, including 6,000 buyers statewide in 2023-24.
Commissioners said participation by City of Davis homebuyers with moderate income in the program has been very low to date. With only two Davis beneficiaries out of 30,000 CalHFA assisted during the last five years, local engagement could be greatly improved. Commissioners advised Council that it “could accomplish a similar outcome with less cost, through marketing and outreach about CalHFA and federal (downpayment assistance) providers.”
Commissioners noted that severe fiscal constraints faced by the City of Davis would make it difficult to sustain such a program absent yet another increase in city tax rates. Nevertheless the commission incisively pointed out: “Davis just had such an election to increase its sales tax.”
Commissioners also called into question an alternative funding proposal – imposing higher fees on local housing builders who have development projects pending before the city. “We note that while developer fees may be permissible, they make development more expensive,” commissioners determined. “Generating a DPA (downpayment assistance) program through developer fees may be a somewhat perverse policy, as the City would be making housing more expensive with one hand in order to make it more affordable with the other,” their report warned.
We agree with commissioners that a city partnership with the state is a much better pathway toward providing such housing assistance than the city going it alone.
Accordingly, we recommended the City Council follow through on a proposal it publicly discussed last March but, oddly, never acted upon, to formally endorse a $10 billion bond measure proposed for the statewide ballot for an array of affordable housing programs that would benefit our city. Notably, AB 736 and SB 417 would provide $1 billion to support two existing state-funded programs run by CalHFA and the state Department of Housing and Community Development for downpayment assistance.
A strong bipartisan vote in the Assembly sent the package to the Senate for further action. Sen. Christopher Cabaldon, who represents our area, and who is the lead author of SB 417, says the Governor is open to sending the measure to California voters for their consideration. Only a majority vote would be required for it to pass.
In line with the commissioners’ findings, we are also recommending the Council direct city staff to develop marketing and education programs and strategies to increase participation by Davis homebuyers in the state downpayment assistance programs funded by the proposed bond issue. Finally, given the city’s difficult current fiscal circumstances, we strongly recommend against development of a city-funded downpayment assistance program at this time.
Dan Carson is a former Davis City Council member and city commissioner with a 45-year career in journalism and state and local government service. Elaine Roberts Musser is an attorney who has served on county and city commissions as well as various task forces. She was given the award of Davis Citizen of the Year in 2014.
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