RAILS_ENV=development rake db:create is not creating development database - ruby-on-rails

Question

I have a strange issue on a rails app running on a docker container. I run RAILS_ENV=development db:drop db:create and it tries to create/drop only the test database.
Rails 5.0.0
my config/database.yml is
default: &default
adapter: postgresql
encoding: unicode
pool: <%= ENV.fetch("RAILS_MAX_THREADS") { 5 } %>
development:
<<: *default
database: appname-api_development
username: appname
password: appname
host: <%= ENV['DOCKER_DB_HOST'] || 'localhost' %>
test:
<<: *default
database: appname-api_test<%= ENV['TEST_ENV_NUMBER'] %>
username: appname
password: appname
host: <%= ENV['DOCKER_DB_HOST'] || 'localhost' %>
and this is what I get:
root#9176b57db829:/appname# RAILS_ENV=development rake db:drop db:create
Dropped database 'db'
Dropped database 'appname-api_test'
Created database 'db'
Created database 'appname-api_test'
This is running on a docker container and there is no env set for RAILS_ENV or RACK_ENV or anything like that.
This is my docker-compose.yml:
version: '2'
services:
db:
image: postgres
restart: always
environment:
POSTGRES_USER: appname
POSTGRES_PASSWORD: appname
volumes:
- "${HOME}/.postgres-data:/var/lib/postgresql/data"
redis:
image: redis:3.2
api:
build: .
environment:
DOCKER_DB_HOST: 'db'
REDIS_PROVIDER: 'redis://redis:6379/1'
REDIS_URL: 'redis://redis:6379/1'
SMTP_HOST: 'localhost:3000'
# command: bundle exec rails s -b "0.0.0.0"
volumes:
- "${PWD}:/appname"
ports:
- "3000:3000"
- "4000:4000"
depends_on:
- db
- redis
networks:
default:
aliases:
- api
And this is my config/environments/development.rb file:
# frozen_string_literal: true
Rails.application.configure do
# Settings specified here will take precedence over those in config/application.rb.
# In the development environment your application's code is reloaded on
# every request. This slows down response time but is perfect for development
# since you don't have to restart the web server when you make code changes.
config.cache_classes = false
# Do not eager load code on boot.
config.eager_load = false
config.action_cable.url = ENV["ACTIONCABLE_URL"]
config.action_cable.allowed_request_origins = [ ENV["FRONTEND_ORIGIN"] ]
# Show full error reports.
config.consider_all_requests_local = true
# Enable/disable caching. By default caching is disabled.
if Rails.root.join("tmp/caching-dev.txt").exist?
config.action_controller.perform_caching = true
config.cache_store = :memory_store
config.public_file_server.headers = {
"Cache-Control" => "public, max-age=172800",
}
else
config.action_controller.perform_caching = false
config.cache_store = :null_store
end
# Don't care if the mailer can't send.
config.action_mailer.raise_delivery_errors = false
config.action_mailer.perform_caching = false
config.action_mailer.delivery_method = :letter_opener
# Print deprecation notices to the Rails logger.
config.active_support.deprecation = :log
# Raise an error on page load if there are pending migrations.
config.active_record.migration_error = :page_load
# Debug mode disables concatenation and preprocessing of assets.
# This option may cause significant delays in view rendering with a large
# number of complex assets.
config.assets.debug = true
# Suppress logger output for asset requests.
config.assets.quiet = true
# Raises error for missing translations
# config.action_view.raise_on_missing_translations = true
# Uses Guard and LiveReload to reload html/css changes automatically
config.middleware.insert_after ActionDispatch::Static, Rack::LiveReload
end