Sunday Commentary: Bayer, the Loss That Keeps on Giving

AgraQuest was a homegrown success for Davis.  It began as a small company that specialized in environmentally friendly agricultural research.  By 2012, the company had grown to more than 200 employees and its success prompted Bayer CropScience, a global agricultural technology company, to acquire it for $425 million.

But for Davis, instead of reaping the continued benefits of the large and growing operation, it became the source of a huge loss.  In the summer of 2013, Bayer CropScience announced it would be expanding its facility, which required it to move from Davis, where the company AgraQuest was founded, to West Sacramento which had space available to accommodate the company.

Davis’ loss was West Sacramento’s gain.  And the loss of that company and the potential loss of other expanding companies for a time became the impetus for Davis’ push for innovation centers.  A push that culminated in the 2014 applications of the Davis Innovation Center and the Mace Ranch Innovation Center.

Unfortunately, we know how that story ended.  The Davis Innovation Center, unwilling perhaps to roll the dice in an uncertain Davis development environment, pulled its application and eventually landed north in Woodland.  The Mace Ranch Innovation Center has kept its application going, but aside from last year’s push to certify its EIR, it has not been heard from in recent months either.

Meanwhile, the loss of Bayer is the loss that keeps on giving for the city of Davis.

A 2014 column by then-Davis Chief Innovation Officer Rob White lamented the move of Bayer CropScience LP (formerly AgraQuest) to West Sacramento.  “Yesterday we began to learn the magnitude of the missed opportunity for Davis,” Mr. White wrote, noting a new $80 million investment at that time.

He remarked, “A major global corporation is putting its ‘world headquarters’ for an entire arm of its forward looking research and development in West Sacramento instead of Davis.”

Mr. White added that “if the news couldn’t get worse for Davis, the article describes that Bayer also announced that about 30,000 square feet of the building will be developed in the coming months into a lab for vegetable seed research and development, which will then move from Davis to West Sacramento. So, more jobs lost and the growth potential of that company shifted away from Davis.”

And the kicker: “Bayer CropScience announced it has donated $10,000 to the Powerhouse Science Center, a science education museum being developed in Sacramento.”

That was in September 2014.  Now, three and a half years later, the news keeps getting worse.

On Friday, UC Davis announced a strategic strategic collaboration agreement with, you guessed it, Bayer CropScience.  And how ironic, they will “foster innovation and economic development in the Sacramento region by providing dedicated facility support for university-affiliated startups — particularly those in the areas of agriculture and food-related technologies.”

In other words, the company that Davis lost is now going to collaborate with the university in our backyard, to create the type of research and innovation and economic facility that we have desperately sought.

The release from the university, “Located within Bayer’s West Sacramento Innovation Hub for Crop Science, the 3,000 square-foot CoLaborator is designed to house and foster innovative new ventures to transform modern agriculture. It consists of a flexible floor plan that has the capacity for eight to 10 researchers and provides basic equipment for ag-tech startups to quickly begin putting their ideas to the test.”

“Working with Bayer provides our campus entrepreneurs with another tremendous resource and further strengthens the growing regional innovation ecosystem,” said Dushyant Pathak, associate vice chancellor of Research and executive director of Venture Catalyst at UC Davis. “The value of this effort extends much further than addressing the need for appropriate facilities, it creates an opportunity for entrepreneurs to engage with other experts in and outside their field and build relationships critical for their success.”

As part of the agreement, “Bayer joins the university’s Distributed Research Incubation and Venture Engine  (DRIVETM) network of startup incubators. The DRIVE network is part of a platform of resources offered by UC Davis Venture Catalyst  to support the successful translation of research and new technologies emerging from the university into new commercial ventures. Venture Catalyst is part of the Technology Management and Corporate Relations division of the UC Davis Office of Research.”

“We are thrilled to be working with the University of California, Davis, to help grow new ventures with the possibility to transform modern agriculture,” said Jon Margolis, head of Research and Technologies Biologics at Bayer. “While we at Bayer are proud of the advances in our own laboratories, we recognize that the challenges today’s growers face will require an open innovation strategy that taps into the larger scientific community.”

A few years ago Davis was on the edge of producing innovation centers that could focus on, among other things, agricultural technology.  Davis had developers and investors lined up and the land identified to make it happen.  But the developers found that they could not make it past the difficult Davis land use process.

So now, one of the potential investors is proceeding with their innovation center in Woodland, while one of the companies we lost because we lacked research space is now in West Sacramento and partnering with UC Davis to create the type of facility we have long desired.

Meanwhile, Davis is struggling to pass a tax this spring so that we can retain our parks and our roads while we try to figure out a way to generate revenue.  Something that our neighbors to the north and east are now benefiting from – our reluctance to take advantage of the presence of a world class university.

As UC Davis has shown, with first Sacramento and now West Sacramento, they are not willing to wait for Davis to act.  We still have opportunities to take advantage of the high tech, economic development wave, but if we don’t, the region will pass us up and all that potential will go down the drain.

—David M. Greenwald reporting


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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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41 thoughts on “Sunday Commentary: Bayer, the Loss That Keeps on Giving”

  1. Keith O

    The community seemed to be rallying behind MRIC and if they had stuck to their original plan and not tried to add in housing IMO the project would have broken ground by now.

    1. David Greenwald

      After watching the last few years, I’m skeptical that the community was going to support it.  There are always reasons for opposition.

      1. Keith O

        I think you’re wrong, there was a general tone of positivity regarding the innovation parks that was seen in the comments in the Enterprise and the V but once the bait and switch occured that all turned sour.

    2. Howard P

      By the time MRIC was proposed, the train had left the station, ship had sailed, choose your metaphor…  look at the timeline David wrote about…

  2. Tia Will

    I the problem as something more basic. At the first DIC presentation I attended, a question was raised about including a work force housing component as a better model. The developer’s representative stated that would have been their preferred model but that they had received direction from the city that applications with a housing component would not be considered.

    The fundamental problem as I see it is, of course, land management, but also a tendency to want to isolate problems and deal with them as though they existed in isolation rather than seeking to address city needs holistically. It was clear at that time that the city needed both a more dynamic economic base, but also housing. And yet we invited upon dealing with them as though they were not connected and should not be addressed concurrently. In fact, we ended up not addressing either.

     

    1. David Greenwald

      We also get the arguments that we can’t guarantee the housing on-site will house workers thus guaranteeing that no workers would be housed on site.

    2. Howard P

      The developer’s representative stated that would have been their preferred model but that they had received direction from the city that applications with a housing component would not be considered.

      Sounds like DIC and MRIC got opposite direction from the City… that would be something worthy of ‘investigative reporting’…

  3. Tia Will

    “we can’t guarantee the housing on-site will house workers thus guaranteeing that no workers would be housed on site.”

    I understand this concern and yet question, why in a town that is as you have so often stated, “desperately” in need of more housing would we care if only the workers were housed on site. Please notice the change in word choice. There is a vast gap between stating that only workers would be housed there ( obviously impossible to guarantee) and saying that “no workers” would be housed there, something I find unlikely if the housing was even reasonably priced.

  4. Ron

    But the developers found that they could not make it past the difficult Davis land use process.

    That’s b.s.  The developers temporarily pulled their proposal for MRIC, when the council wouldn’t go along with housing at the site.

    A push that culminated in the 2014 applications of the Davis Innovation Center and the Mace Ranch Innovation Center.

    And Nishi.  Now, morphed into a money-losing housing development.  (Ironically, leading to an even-greater need to make up for that loss, in other ways.)
     

    So now, one of the potential investors is proceeding with their innovation center in Woodland . . .”

    Ironically, also requiring housing (perhaps to make it profitable enough, for developers).  By the way, how is that development proceeding?  (Lots of companies just “dying” for a spot, there?)

    All evidence shows that developers primarily want to build housing, not business parks.

    Just recently, David suggested that Davis would not support a peripheral development with housing. And yet, this appears to be the beginning (or “restart”) of his next “campaign”. (Even before the final nail is driven into the Nishi site, regarding its original incarnation – an innovation center.)

    Make no mistake about it, the Vanguard will push hard for this (a peripheral development with housing), regardless of what they state at any particular point in time.

     

     

     

     

      1. Ron

        Not according to at least two finance and budget commissioners, who allocate costs in a manner very similar to EPS. (Actually, I understand that EPS allocates 100% of the costs, while the two budget and finance commissioners take a more nuanced approach, resulting in something less than 100%.)

        Note the complete lack of justification, for (only) allocating 75% of costs to Nishi (as city staff did).

        If you’re going to criticize this analysis, then go for it:

        http://documents.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/Finance-And-Budget-Commission/Agendas/20180312/07C-Solomon-Updated-Fiscal-Models.pdf

         

        1. Don Shor

          Finance and Budget Commission:

          We also generally concur with the estimate that annual ongoing revenues and costs for the city from the project would be modestly net positive over time.

          The weight of the evidence we have is that it is not a “money-losing housing development.” For you to keep repeating that and keep linking back literally over a hundred times to a dissenting opinion on that topic, and to then repeat that analysis as fact, is disingenuous.
          It also implies, from the context in which you are using it here, that you would support Nishi if it contained a commercial component. I don’t believe you would. So this is just political spin on your part.

        2. Ron

          Ron:  “If you’re going to criticize this analysis, then go for it:”

          Still waiting for a coherent response regarding the analysis itself, vs. what you think of any particular person.

          Again, note the 75% allocation which is repeatedly used (in the city staff analysis), and which appears to have no underlying basis (one way, or another).

          1. Don Shor

            I don’t need to criticize the analysis, Ron. The F&B Commission analyzed the project. That’s their job.

        3. Ron

          Don:  “I don’t need to criticize the analysis, Ron.”

          Well then, you probably shouldn’t have an opinion regarding it.  (And, you apparently don’t have an informed one, at least.)

          Don:  “The F&B Commission analyzed the project. That’s their job.”

          And again, you have two commissioners who generally follow an approach closer to what EPS uses, who have significant concerns.  Perhaps you can simply dismiss this without even looking at the analysis, but I’d suggest that the issue is too important to do so.  (And, it impacts how all developments are analyzed, regarding fiscal impacts.)

          We also have a chairperson on that commission who repeatedly seems “over-optimistic” regarding the impacts of developments.  (And, who reportedly mixes his personal views with that of the commission, e.g., when speaking at the council.) I’d suggest this is also a reason for concern, regarding the accuracy of the information that’s relayed to the council (and to the city, as a whole). I can post a link to a comment in the Vanguard regarding that issue, if needed.

          [Moderator: any further discussion of Nishi finances is off topic to this thread.]

    1. David Greenwald

      “The developers temporarily pulled their proposal for MRIC, when the council wouldn’t go along with housing at the site.”

      This is not a real accurate picture.  They didn’t pull their proposal they paused.  The reason they did was financing concerns.  You’ll notice they haven’t come back with a new proposal.

      That leads us back to THIS article which everyone has seemed to have lost site of.  The best way to move forward these innovation centers are existing facilities and public-private partnerships, but because we didn’t have available space for it, lost the company and lost the opportunity.

      The focus on MRIC here has distracted from that.

      1. Ron

        Well, regarding the “lack of available space”, Don’s comment notes that we didn’t have a large, bargain-basement, vacant facility at a “fire-sale” price of 18 cents on the dollar.

        I’d suggest that the circumstances which lead communities such as West Sacramento to have such availability is not something to “strive for”, in Davis.

         

        1. David Greenwald

          I am told by a source I trust that Bayer wanted to stay in Davis, but wasn’t able to.  It’s hard to know how competitive available space at an innovation center would have been with existing offers.  But at least Bayer would have had a choice at that point.  As it was, they didn’t.

        2. David Greenwald

          My other response is given all of the community benefits that Bayer brought with them from jobs to tax revenues to community charity and now innovation space and partnership with the university that we have long strived for, whose to say that is not something we should strive for in Davis?

        3. Ron

          Again, I doubt that space in Davis will ever be available for 18 cents on the dollar.  And, if it ever is, then we’d probably have more problems than West Sacramento already has.

          If one wishes to improve the fiscal situation in Davis, perhaps we could 1) stop approving money-losing developments, 2) stop converting existing commercial sites for housing, and 3) pursue an agreement with UCD to help offset their impacts.

          But ultimately, unfunded liabilities are a problem throughout California. There’s articles all the time, regarding that.

  5. Don Shor

    Jim Gray, commercial real estate broker, on why Bayer moved to West Sac.

    “But let’s face facts: What Davis didn’t have (and West Sacramento did) was a large, vacant, bargain-basement facility that could be acquired at a fire-sale price. It wouldn’t be wise economic or public policy to have an oversupply of distressed empty buildings sitting vacant, hoping that a user would come along.

    The building was vacant and available because a global company, Affymetrix, moved its operations to Singapore. In other words, Bayer got the existing building for 18 cents on the dollar. No way could a new building be built this cheaply!

    Let’s not beat ourselves up and let’s not misdiagnose the reason that Bayer chose West Sacramento…..  Bayer made a screaming deal for pennies on the dollar.

    I know first-hand that there were at least three very competitive teams with proven track records who tried to structure a transaction for Bayer in Davis or on campus. We also know that the leadership of the university, the Davis Chamber of Commerce and the city collaborated to assist the efforts that were being made.”

    —Davis Enterprise, August 2, 2013

    1. Don Shor

      Probably worth noting that the space Bayer formerly occupied in Davis is now occupied by Marrone Bio Innovations.

      We need a space for businesses like Pam Marrone’s to move up into as they grow. But once they leap into the international-size business size via merger, such as Bayer and Genentech, they are not going to find land in or near Davis that they will find cost-effective or big enough. Davis simply cannot compete with West Sac or especially with Dixon or Vacaville for the availability of large commercial spaces. The city would have to expand its footprint substantially to provide for that.

      We don’t actually know why the north Davis developers chose to go up to Woodland instead. There was some near-neighbor opposition, but that is never unexpected for any large commercial project and clearly wasn’t sufficient reason for them to abandon the site. My impression is that the city staff became less committed to shepherding the project through, and probably the track record of Measure R votes in the city was a factor. If we want economic development on the site near the hospital, the city will probably have to bring the land into the city before seeking development proposals.

       

      1. Ron

        Don:  “We need a space for businesses like Pam Marrone’s to move up into as they grow.”

        Is everyone supposed to know who this is, and details regarding their business and needs?

        Also, might it have been accommodated at the multi-acre sites that are being converted/rezoned for high-density housing?  (Families First/Sterling, Lincoln40, Plaza 2555, 3820 Chiles Road, the site of the skilled nursing facility on Pole Line, and Nishi)?

      2. Mark West

        “My impression is that the city staff became less committed to shepherding the project through, and probably the track record of Measure R votes in the city was a factor.”

        The primary expertise of the City’s planning staff is residential development, so one problem we have is the lack of knowledge on how to shepherd a large commercial project through. We won’t be serious about economic development until we start hiring planning staff with extensive commercial development experience.

        The reality though is that the financial risk associated with Measure R makes commercial-only developments unfeasible. It is interesting that David laments the “difficult Davis land use process” but never once mentions that what makes that process difficult is something he supports, Measure R.

        1. Mark West

          “I would argue that what makes the process difficult is community opposition to development.”

          Every community has a faction opposed to development, but it is Measure R that provides our anti-growth faction the power to block all peripheral projects, including those that the community desperately needs.

        2. David Greenwald

          Given that the Measure R anti-growth coalition is over 50%, I’m not sure that you’re right here.  The problem seems to be the electorate rather than the system.

  6. Tia Will

    I am told by a source I trust that Bayer wanted to stay in Davis, but wasn’t able to.”

    The key here in my mind is “wasn’t able to”. I doubt most people would stay in Davis if they were offered a highly desirable home at a bargain basement price in an adjacent community, especially if there were no similar accommodation in Davis at any price. I doubt businesses are much different in that regard. I do not believe that a build it and they will come is the best approach to city planning, but then I am fully willing, as some do not seem to be, to admit my complete lack of expertise in this field.

    1. John D

      Tia,

      You may be more expert than you think!  Let’s assume, for sake of discussion, that you enjoyed a profession where much of your career service was performed at facilities located in Sacramento (not unlike another 18,000 daily, outbound Davisite commuters).   By the way, as a percentage of employed Davis residents, I wonder what percent that represents?

      Further, let’s assume you worked for an employer with an autocentric dependency – both for employees and customers (not unlike UCD with it’s 15,000 on campus parking spaces or UCD Med Center, or Mercy, or Downtown Sutter Hospital).  Let’s further assume you drove to work.

      How often would you estimate you filled up your tank in Sacramento – before heading home?

      How often did you purchase lunch and or mid-day cup of coffee?

      What about after work, did you ever stop by one of the larger shopping centers on the way home – either because it was still open, had convenient parking, or it featured selections only found in such places?

      Were you ever invited out to lunch by a fellow, co-worker, sales rep or vendor?   Did you often join with other co-workers to celebrate somebody’s birthday, anniversary or promotion?   Heading to a local party, might you have stopped at a local liquor or specialty store to purchase a bottle of wine or small gift?

      Never mind issues associated with VMT.  Perhaps these examples help you to see more clearly the types of outcomes often associated with activities related to one’s “place of employment”.  The point being, location does matter – particularly when you are talking about jobs and careers with the earnings potential to make Davis’ housing prices somewhat more affordable.

      Results for the host community – i.e. the community “hosting” the employers – in terms of economic activity, and corresponding tax revenues generated – the consequences are even more pronounced.

      Even if one actually enjoys 30-40 minutes of “quiet time” in their personal vehicle – when these types of job creating, employer assets are missing from a community, it doesn’t take a degree in planning to see the accompanying problems that might ensue.

       

  7. Jim Frame

    Measure R that provides our anti-growth faction the power to block all peripheral projects, including those that the community desperately needs.

    I chuckle every time someone argues that allowing the voters to decide what they need or don’t need is a bad thing.  I acknowledge that Measure R presents a high bar due to the complexity of electoral politics, but the conditions that led to its original implementation clearly demonstrated that the bar needed to be raised.

    If/when the needs actually become desperate the voters will say yes, even to a solution that comes with undesirable impacts.  Until then, attempts to solve community problems with poorly-targeted solutions are likely to fail at the ballot box.

    1. Mark West

      The problem Jim is you are denying the negative impact that Measure R has on bringing good projects to the community. The upfront costs involved with reaching a public vote results in good projects never even being proposed. We don’t have the option to decide if the project is good for the community because the developers simply go elsewhere. In the case of commercial development, that means the City fails to find sustainable new revenues and opportunities for residents, and for residential, it means leapfrog development, increased commuting and consequently more traffic in and around town.

      1. David Greenwald

        The problem I have is that Measure R and the Measure R votes are symptom of the problem, not the problem itself.  After all if West Sac, had a Measure R type ordinance, my guess is that it wouldn’t stop them from approving projects.

      2. Jim Frame

        The problem Jim is you are denying the negative impact that Measure R has on bringing good projects to the community.

        I don’t deny it, I simply accept it as the price of voter control over major land use decisions.  Unlike most decisions made by elected officials, land use decisions are essentially irreversible — as a practical matter, you can’t unbuild a development project once it’s been built.  To my way of thinking, putting those decisions into the hands of voters makes sense, especially given the track record of our electeds prior to Measure J.

        1. Mark West

          From the conversations I have had, it is clear that we are not going to have a commercial only peripheral development proposed as long as Measure R is in place. The financial risks are simply too great to make a project feasible. That is our reality, and without that commercial development, it is very unlikely that the City will ever be able to meet our fiscal obligations.

    2. Alan Miller

      >If/when the needs actually become desperate the voters will say yes

      Not sure that’s true.  People tend to vote in their own self-interest, even if it is harming society as a whole, or hole.

  8. Tia Will

    Jim

    Agreed. What too often is excluded from the development vs no development arguments is the quality of the actual projects. I personally think that if a project was felt to be well designed and desirable by the majority of the voters, it would pass. That means that the developer has the responsibility to work collaboratively with the community, not just city staff,  prior to putting forth a development project. This seems to be contrary to how many view development. It seems critical to success to me.

    1. David Greenwald

      I don’t know Tia, I used to think that, but some of the arguments I have seen against projects – Measure R and non-Measure R projects alike lead me to question that.

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