Economic Development in Davis – It’s Both an Art and a Science

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innovation-parkby Rob White

Yesterday, the Vanguard posted an article outlining several projects that had been proposed for the coming years that might help spur on economic development, and more importantly, revenue for the City. Though this list can seem pretty exciting or daunting, depending on your perspective, it is important to note that is a snapshot that covers many years.

Before I specifically discuss the projects outlined in that article, let me take a moment to note that economic development (in any community) is not based on absolutes. I like to compare it to weather forecasting. We have lots of science and statistics to go in to our models, but like weather, economic development and the economy as a whole is a dynamic system, so you can still predict incorrectly. And that is why I think economic development is both an art and a science.

Take for example the most recent economic downturn. Some of us saw this coming clear back in 2005 (and maybe before that) and started to talk with uncertainty about projects and proposed financing structures. We could have certainly been wrong, but the indicators were there if you wanted to see them. Of course, most of us that were getting concerned had no real concept of just how bad it might become. Nor just how long it would last and the scope of the deep impacts to the job market and the psyche of the American people.

And it resulted in outcomes most people in California could never imagine. Things like the abolition of redevelopment and Enterprise Zones, which took funding tools away from the local government for projects of great importance to their communities. In Davis this meant a lack of funds for a new parking garage in downtown and funds to help create a badly needed conference center. And we are not the only community to be left with partial project plans, or worse, partially completed projects.

This has necessitated the need for better financial models for communities to assess projects to be sure that we can finish what we start. And that a community gains maximum mutual benefit from a project. And that is where some of the discussion turns to preference. If you have no job or are driving many miles because local opportunity doesn’t exist, new businesses can be a welcome opportunity. If you would like to see more people dining and shopping in downtown, then tourism and local employment can most certainly be a welcome circumstance.

Conversely, if you have what you need and are comfortable with your current situation, new construction or considerable growth can be an unpleasant condition. And of course there are many views in between.

We have talked at length in the community about needing an economic impact model for projects as they come forward so that the City Council and community can make wise decisions based on overall net benefit. And though I agree that such models can be helpful, I would also caution that it is like a weather prediction model. The forecast is only as accurate as the data that is fed into the model.

For example, creating an economic impact model for a proposed innovation park at Mace Boulevard and Interstate 80 will be an important step for the community to assess its desire for such a project. But the model needs to have the inputs that will accurately reflect the closest forecast to reality as possible in order to create a true cost-benefit discussion. Assuming amounts of building square footage, types of facilities, jobs, traffic, needed infrastructure, and revenue to the city from permits, property taxes and sales taxes create an interesting actuarial puzzle, but these inputs are based on broad assumptions that most certainly won’t reflect the actual project. And therefore set up false expectations.

For an example, if the proponents for a Mace Innovation Park decided to only propose a project that would utilize existing infrastructure, then the total square footage might be only two million square feet. And the timing of when that amount of buildings might be constructed would be dependent on the demand from businesses that want to move there. And though this would certainly be helpful to the local economy, the economic impact from a project of this size would be far less than one of four or six million square feet.

To put these projects in to perspective, two million square feet on 200 (+/-) acres means there are one story buildings on one out of about every four acres. The remaining three acres include parking, open space, etc. And this would likely be enough room for about 3,000 jobs (depending on the types of facilities constructed – less for manufacturing, more for office and research). So four million square feet can mean two story buildings covering approximately the same amount of land, but increasing the amount of parking demand and increasing the amount of jobs by a factor of two (6,000).

Why this simple calculation is important to point out is that we also have local policies that overlay the aspects of what we want to see in any development. These policies drive costs and desirability, in both positive and negative ways. Davis has a long standing policy of conserving land and creating denser development. This means that an innovation park at Mace that embraces the future and meets our community values would likely be a mix of building heights to take advantage of being close to the city and encouraging employees to walk, ride bikes, and use public transit.

And we would likely want to encourage the build-out of such an innovation park to use land wisely and sparingly, driving the desire for three and four story buildings instead of low, spread-out facilities. Such development becomes more financially viable and can deliver better amenities to both the tenants and the community. Things like LEED Gold sustainability measures for buildings and the ability to create mass transit options become more viable. And thinking even more grandly, it make options like continuous shuttle service from the university and downtown, and possibly even an additional stop on the Amtrak during heaviest commute times, become more viable.

With respect to a new hotel and conference center, this again becomes a discussion of economics, but also preferences. The new revenue created from the hotel occupancy tax, the sales tax and the hotel operations would most certainly be welcome by many. But some would prefer the location be different. Or that the height be different. And though I agree these are things that need to be assessed, it is important that we also assess these things in context.

For example, location is dependent on several factors beyond just community preference. These include acceptability by the hotelier and hotel brand with regard to maximum freeway exposure, willingness of a landowner to develop, ability to attract financing for a project based on cost-benefit factors, and creating amenities that compete with the region (not just within the city). If these attributes (and many others) cannot be balanced, then a project becomes infeasible.

In discussing height, some of these same aspects come in to play, most specifically financial drivers. But in the context of Davis, I would offer this observation – within 1250 feet of this site, there are building on campus that are approaching 100 feet tall (8 to 10 stories). These buildings are just 250 feet from one and two story houses right across the street. For all intent and purpose, they are towers within neighborhoods. I understand that the university has the ability to construct facilities without the community’s approval, and I realize that many in the neighborhoods of A and B Streets may not have been in support of these building when first constructed. But now that some time has passed, they have become part of the built environment are anything but intrusive and overwhelming.

I can appreciate everyone has different preferences with respect to heights and the built environment. But let’s not forget that the same arguments of height and attractiveness were used by Parisians when the Eiffel Tower was built. And yet, it has become a placemaking amenity and an icon that identifies Paris. And the Mondavi Center is well over 100 feet tall, and yet most would agree that it doesn’t feel imposing or out of place in Davis. I think we can all agree that a hotel and conference center will be a significant departure from the current structures, but I would encourage us all to be honest in our assessments and separate personal preference from context in the community. It’s okay not to like tall structures or density. But it would not be a fair statement that this is not an existing condition in Davis.

For each of these projects, part of the planning process will include an economic analysis. This will include potential revenue to the city, as well as positive economic impact and costs to the community. But until a project is better defined in size and scope, it is merely an arithmetic exercise that requires time and resources that are not currently in abundant supply. And the city staff are not equipped with the tools nor consultants to conduct this work without the proposed projects financially supporting the efforts. I realize there is a need by the community to generate and consume this info in short order, but I would ask your patience and recognition that each project will be conducting this economic analysis as part of their planning process.

To address the discussion on the scope and timing of projects enumerated in yesterday’s article, let me state that even though we are talking about them today, the time horizon for these projects is over the next 5 and 10 years. These are not instantaneous and many of them do not even have financing lined up yet.

To help, let me lay out a brief (tentative) timeline of when these projects might start, depending on the community’s support. Remember, this is for illustrative purposes only and pre-supposes a specific set of outcomes on some very important community votes and dialogue. It also represents a best guess at some project proposals that are not even submitted at this point.

2014

* All Year – Outreach on Downtown/University Gateway District (Nishi)

* All Year – Outreach on potential Mace Innovation Park

* All Year – Outreach on potential Hotel/Conference Center at Richards Blvd and Olive Drive

* All Year – Outreach on potential Richards Boulevard Entrance reconstruction

* March – Groundbreaking for the Jan Shrem and Maria Manetti Shrem Museum of Art at UC Davis

* Spring – groundbreaking for Cannery project

* Summer/Fall – infrastructure development at the Cannery

* November – possible community vote on a Mace Innovation Park proposal

2015

* All Year – If previously approved by the community, project planning and entitlements for Mace Innovation Park proposal

* All Year – project planning and fundraising on potential Richards Boulevard Entrance reconstruction

* Spring/Summer – first housing units available at the Cannery

* Summer/fall – if approved by City Council, demolition and infrastructure improvements started on potential Hotel/Conference Center at Richards Blvd and Olive Drive

* June – University likely begins demolishing Solano Park married student housing, making way for a new project

* November – possible community vote on Downtown/University Gateway District (Nishi)

* Date Uncertain – City Council approval sought for potential Richards Boulevard Entrance reconstruction

* Date Uncertain – possible proposal for innovation center near Sutter Davis Hospital

2016

* Spring – Mace Innovation Park might begin infrastructure development

* Spring/Summer – if previously approved by community, project planning and entitlements for Downtown/University Gateway District (Nishi)

* Date Uncertain – construction on potential Richards Boulevard Entrance reconstruction

* Date Uncertain – opening of the Jan Shrem and Maria Manetti Shrem Museum of Art at UC Davis

* Date Uncertain – possible community vote for an innovation center near Sutter Davis Hospital

2017

* Spring – Mace Innovation Park might begin development of approximately 25% of the 200 acres for specific users.

* Date Uncertain – potential opening of Hotel/Conference Center at Richards Blvd and Olive Drive

* Date Uncertain – if previously approved by the community, infrastructure improvements begin for Downtown/University Gateway District (Nishi)

* Date Uncertain – if previously approved by community, possible project planning and entitlements for an innovation center near Sutter Davis Hospital

2018

* Spring – Possible opening of first businesses at proposed Mace Innovation Park

* Date Uncertain – if previously approved by the community, first businesses and housing at Downtown/University Gateway District (Nishi) might open

* Date Uncertain – if previously approved by community, infrastructure build-out for an innovation center near Sutter Davis Hospital

2019

* Date Uncertain – possible construction of facilities at an innovation park near Sutter Davis Hospital

2020

* Date Uncertain – possible first opening of businesses at an innovation park near Sutter Davis Hospital

Though I am sure I have forgotten something, this is a good list to start from in discussing the next 6 plus years of major project proposals. Please note that I tried to be specific on what would require a community vote and what requires City Council approvals.

In short, the major projects for innovations centers at Mace, Downtown/University Gateway District (Nishi), and near Sutter Davis Hospital all require some kind of community action – a Measure R required vote of the community or equivalent action. Only the Downtown/University Gateway District (Nishi) project is proposing housing as part of the project. The landowners and potential developers of innovation centers at Mace or near the Sutter Davis Hospital have both acknowledged that housing proposals as part of a development in these areas is not desired by the community at large, as reflected by recent Measure J/R votes.

The Hotel/Conference Center at Richards Blvd and Olive Drive and potential Richards Boulevard Entrance reconstruction would require approval by the City Council. Both of these projects are working on initial planning and conducting community outreach. The proposal for the Richards Boulevard Entrance reconstruction does not include widening the motorized vehicle access under the train tracks, but does include options for additional access for bikes and pedestrians. It also potentially addresses off street bike and pedestrian traffic crossings for Richards Boulevard, which will greatly enhance traffic flow in the area.

I look forward to your thoughtful comments and examining questions. My email is rwhite@cityofdavis.org if you choose to email me directly.

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About The Author

Rob White is the Chief Innovation Officer for the City of Davis and was selected as a 2012 White House Champion of Change for Local Innovation. He serves as an ex-officio Board Member for techDAVIS (a local tech entrepreneur industry group), as an executive Board Member for the Innovate North State iHub, and as a Board Member for Hacker Lab and the California Network for Manufacturing Innovation. He is a candidate for the Doctorate in Policy, Planning and Development from the University of Southern California and has a Masters from USC in Planning and Development and a Bachelors of Science in Geology from Chico State.

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9 thoughts on “Economic Development in Davis – It’s Both an Art and a Science”

  1. Robb Davis

    Thanks Rob – As always, very useful presentation and summary points. This article will be a useful reference going forward. One comment. You write:

    “We have talked at length in the community about needing an economic impact model for projects as they come forward so that the City Council and community can make wise decisions based on overall net benefit. And though I agree that such models can be helpful, I would also caution that it is like a weather prediction model. The forecast is only as accurate as the data that is fed into the model.”

    I have been among those who have asked for such a model and fully understand your caution. Developing and using an economic impact model creates transparency in that it allows us to assure that key parameters are included in the model and allows us to test how altering assumptions or parameters might impact outcomes. The development and application of such a model will help us assess potential outcomes and discuss tradeoffs in a more robust way. I view their use as offering important input into the community dialogue on the various projects you have listed in your article. Thanks again Rob.

  2. Doby Fleeman

    Rob,

    Thanks for another very thoughtful and well developed discussion of upcoming economic development initiatives.

    From the perspective of business owners and financial analysts, we can all understand the reluctance of the weatherman in predicting long term patterns and consequences. That said, is it not possible to develop some useful comparisons with other “similar communities” which have adopted a more robust approach to economic development and a diversified employment base? Is there a detectable difference in the amount economic activity occurring in “those communities” – versus Davis – that can provide us with some better understanding of the dollar magnitude of associated per capita or per household economic activity and its role in fostering and supporting more robust levels of municipal services?

    Today’s Vanguard article discusses the history of sales tax in Davis. To that one could probably also add the history of property tax. Clearly these two sources play a major role in providing the discretionary revenue to any community.

    The BEDC produced CEDS report and Prosperity reports made some attempt at this type of comparison. While it is admittedly difficult to find “comparable” communities – particularly ones that include large percentages of student residents, are not regional destination economic hubs and which have eschewed large-scale retail as their major tax generating and employment strategy – it sure seems that such information would help us to better understand the particular challenges (and uniquely Davis opportunities) of our particular circumstances and thereby help us to understand the strategies that are most viable and best suited for a community such as Davis?

    Alternatively, perhaps it is possible to compare us with communities which do serve in the role of regional economic hubs – like Chico, San Luis Obispo, Santa Cruz and Boulder – in order to clearly demonstrate the local economic impact of being a regional destination hub or a combination destination hub and a destination resort community like San Luis, Santa Cruz or Boulder.

    Asked another way – what are the local economic impacts (and associated impacts on local sales and property collections of not having a major research hospital and medical center in town, of not being the county seat, of not being located in a resort destination with year-around tourism (especially in the summer), of not having a core of “at scale” major private sector technology employers and their associated wealth-generating spin-offs and professional service providers in the local economy? Is there no way to begin to inventory, quantify or compare these factors and their impacts on their local host communities?

    How do the presence of such companies and circumstances combine to contribute to more reliable, consistent and robust economic activity versus a community which does not feature these attributes?

    The question and the associated answers may be complex, but what we are looking for is some additional assurances that a new pathway forward does hold a realistic potential to benefit the community in multiple and measurable ways.

  3. Frankly

    And though I agree that such models can be helpful, I would also caution that it is like a weather prediction model. The forecast is only as accurate as the data that is fed into the model.

    But now that some time has passed, they have become part of the built environment are anything but intrusive and overwhelming.

    You are a patient man Mr. White… much more patient than me having repeating these two points above ad nauseam.

    I am still a bit dumbfounded by the demand from many on this blog, who have admitted to their lack of business and development understanding, that we should provide them a feasibility, cost-benefit model that they can play with and use to voice their opposition or support of any proposed project, and/or be able to influence so many details about the project.

    If I hadn’t read from many of them so much general opposition to development and change, I would attribute the demand as an impressive interest to education themselves. However, it does not resonate that way to me… my Spidy Senses are telling me that the demand is more likely a stalling tactic as well as a resistance-opportunity-mining-expedition. Developing this model will take time and money, and is you provide enough detail then something will eventually stand out that can be used in opposition.

    You said it… the best we can do is broad projections with broad assumptions.

    I recommend that we form a IPAC (Innovation Park Advisory Committee) and staff it with people with differing backgrounds and covering a variety of group interests related to a business park. I would expect the land-owner/developer to also have a seat at this table. The initial goal of this group should be to help develop the November ballot measure for the innovation park.

    Then assuming the measure passes, this group would shift to perform as the liaison between the development architects and the city for negotiating the amenities and character we would hope to see incorporated into the design.

    With respect to your second point, I absolutely agree. And it irritates me to no end. People get all riled up about change, and then when that change occurs despite their efforts to block it, eventually they settle in to that new normal… and often that new normal is much better than they could have ever imagined.

    I have read studies that reported only 15% of the population having natural visualization capability. These are people that can create dynamic and comprehensive pictures in their mind of a future state. Some others are capable of learning how to do this. In total these people become our leaders, our designers and architects… and our champions of change.

    Then there is a remaining large majority that have to rely on these others to help them along.

    There is that adage “lead, follow or get the h _ _ _ out of the way”.

    What I worry about in our fair town is the number of very well-educated and intelligent people that lack visualization capability but that still demand a seat at the design table. And in the end, because they lack that visualization capability, they will never be satisfied and will always end up not in support of the changes.

    What I would hope is that these people could be convinced to delegate their concerns to some tribal representative within an advisory group.

    1. Don Shor

      I recommend that we form a IPAC (Innovation Park Advisory Committee) and staff it with people with differing backgrounds and covering a variety of group interests related to a business park.

      You are aware that we have a task force on this topic that is meeting on a regular basis, right?

          1. Frankly

            Correct. This does not meet my criteria as it is not represented by private citizens. It is a city government task force.

            The fact that this group is rarely quoted or addressed is telling.

            Think WAC.

          2. Don Shor

            Perhaps the simplest would be to expand the membership of that task force. Rochelle and Lucas are the liaisons and Rochelle continues to be active in DSIDE, so if you happen to see her you might suggest that. Otherwise, we’d end up with two commissions working in parallel on basically the same topic. But I don’t disagree with your suggestion at all.

      1. Frankly

        The last conversation I had with one of the city council members (recently) i heard that there was still an ongoing conversation about who (city or developer) would spearhead the effort for the ballot measure… whether it would be a citizens initiative or a measure R vote.

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