Friday, April 5, 2013

Are Local Developers Worth Supporting?

In the discussion within the Petaluma community about the proposed Red Barn project, several criticisms have been directed at the applicant, Davidon Homes.  Some criticisms were legitimate, some were based in a lack of understanding of the process, and some were just plain wrong.  (If you need a refresher on the Red Barn project, my previous posts are here, here, and here.)

The legitimate concerns were headed by the contention that the proposed layout is reminiscent of the 1980s.  I concurred.  I further noted that, beyond the aesthetic concerns, the configuration would result in infrastructure that is likely financially unsustainable.  I simply don’t believe that Red Barn, as currently proposed, is a good project for Petaluma.

(Acknowledgement: As I’ve noted before, I know a number of Davidon people.  I’m disappointed that their houses aren’t consistent with the growing ethos of the 21st century, but Red Barn-type developments are what they’ve been building for years and what they know how to build.  They’re following the market as they understand it.

I find the Davidon folks to be generally likeable and honest.  But I likely would have said the same about many buggy whip manufacturers a century ago.  We know how that turned out.)

Among the criticisms that were founded in a misunderstanding of process were concerns about the adequacy of the Draft Environmental Impact Report (DEIR).  On that one, I give Davidon a pass.  The California Environmental Quality Act (CEQA) opens the door to an impossibly broad range of studies, which can quickly grow beyond the financial capabilities of a city or a developer.

Decisions must be made about a DEIR scope that can be easily disparaged by project opponents because criticism is easier than report preparation.  The opponents may be judged accurate in some of their objections, but I haven’t seen anything that makes me believe that Davidon was less that forthright in their work.  Instead, any differences of opinion seem to be reasonable people viewing the world differently.  It happens.

Which brings us to the criticisms that I thought were wrong-headed.  Primary among those was the description of Davidon as a “Walnut Creek developer”.  The implicit complaint was the Petaluma would be best served by a local developer.  Although I agree with that sentiment, I find the criticism unjustified on several counts.

The first is the nature of California land development approval process.  Entitlements are difficult to secure, with many projects failing to move ahead.  The only rational response is to have multiple projects in the entitlement process in different communities, with the hope that the surviving projects can provide enough profit to make up for the losses on the projects that fail.

So, a developer who pursues projects in multiple markets, including communities other than his own, is behaving rationally in response to difficult market conditions.  It’s not a fair basis for complaint.

On a related point, a developer, much like a factory owner, must keep his employees, his consultants, and his contractors continually busy.  If the team members are forced look elsewhere for work, a well-functioning team begins to break down.  So developers must have multiple projects in the entitlement process at all times, including in multiple communities.  They refer to this as “keeping the pipeline full”.  It’s a rational response to a business reality.

My third and final point is the one that is closest to my heart.  Local developers, who work only in their own communities, are more at risk because they can’t hedge their bets or keep their pipelines full.  Instead, they are risking much of their net worth to gain entitlements on a single project for which they must assemble one-time teams.  It is a more adverse business model than that of regional or national developers.

Despite these marketplace disadvantages, I believe that local developers have much to offer their communities.  Their affection for their hometown can lead to buildings that are part investment and part love note to their towns.  Looking around the North Bay, many treasured landmarks were built by local businessman.  The McNear Building in Petaluma is just one example.

 Accordingly, I believe that local developers are worthy of particular support.  But that support is rarely offered.  I don’t have a comprehensive list of local developers who have pursued development over the past decade.  But I can compile an anecdotal list of local developers who failed to secure local support and fell victim to personal bankruptcies, foreclosures, and other forms of financial distress.

If you believe that local developers can offer something special to their communities, a belief which I would share, then it’s important to demonstrate that belief.  To actively support local developers, not just to criticize other developers for not being local.

I know well that it’s easier, and more exciting, to be in opposition to something.  But good community growth requires stepping beyond that emotional reality to actively support local developers.

(Acknowledgment #2: The thinking behind this post began to crystallize months ago.  Since that time, I’ve joined the team for a proposed hotel in downtown Petaluma.  The applicant is an owner/architect who is among the ranks of the local developers who I believe is worthy of particular local support.  I’ll willingly acknowledge the apparent conflict of interest.) 

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (


  1. For years I have been content with the "do nothing" approach to the Red Barn. It's lovely and characteristic and at my favorite gateway to our community. But I have been content largely because I knew a dedicated group of Petalumans had organized and raised significant funds to help preserve this green space adjoining our Helen Putnam Park. The reality of the Davidon project now moving ahead has ended my wishful thinking that the land could readily become designated open space or park. So here's what I'd like to know. From the perspective of land use planning, is parkland or open space a Good Use of this land? In terms of good planning for community wellbeing — fiscally, recreationally, etc. — are there are good ways to develop the Red Barn and its environs? And finally, is Davidon so committed to generating significant payback from their ownership of the property that they are obliged to go all out to do so?

    1. Barry, you ask reasonable questions, but the answers must be subjective. My responses are:

      1 - Parkland or open space is certainly a good use of the Red Barn. Whether it's the best use is the question. I believe that parkland or open space is better than the Davidon proposal. But I also believe that there are other development configurations that would make the answer more difficult.

      2 - I suspect that there are responsible ways to develop Red Barn. But until someone has the time and resources to develop a new plan, I'm limited to a suspicion.

      3 - I'd expect that Davidon's pro forma on Red Barn shows enough profit potential that they won't walk away readily. (They may already be $2 million into the project.) But no developer can justify going all-in on a single project.