Revisiting Measure O’s Impact on Economic Development

Davis Chief Innovation Officer Rob White
Davis Chief Innovation Officer Rob White

Back in early May, we asked Rob White to weigh in on the impact of the failure of Measure O on economic development.

This weekend, Rob White updated his responses in a Davis Enterprise Op-ed.

While the Enterprise did not offer as much space, the key points that Mr. White made were that the council will look at a 12.5 percent and a 25 percent cut scenario depending on what they decide to do about public safety.

He writes, “A 25 percent cut means reductions throughout our economic development department, including cutting our staff from two people to 1.5. The remaining employees will be overloaded.”

He adds, “There will be delays in collecting fees, sales and property taxes, which will result in considerable lost revenue for the city. Delays and difficulties in operational efficiency will hurt Davis’ reputation as an attractive business environment.”

He argues that “economic development activities will mostly cease.” He writes, “Budget cuts will mean cutting opportunities for staff to meet with experts in economic development outside the city and showcasing Davis at the regional, statewide and national levels. These activities, which keep us competitive in the marketplace, will be severely curtailed or eliminated.”

He also argues, “New prospects will lose confidence.” He writes, “I’ve found the primary attribute businesses look for when considering a location is certainty. Business leaders become concerned when a city isn’t on solid ground — with revenue, infrastructure or operations — because that can hurt their own competitive advantage.”

He concludes, “If the city of Davis creates an environment where economic development is stifled by budget cuts, then the repercussions to Davis’ business growth and development could be huge.”

He also addresses the issue of Measure P.

He argues, “If passed, Measure P will repeal the water rates approved by the City Council in March 2013 meant to fund the Woodland-Davis surface water project. If P passes and the surface water project comes to a halt, that decision will critically hurt the water infrastructure improvements that are already underway.”

“Those improvements are critical to Davis’ economic development success and growth. They are the beginning of our infrastructure improvement program, which is lacking in more than just water infrastructure,” he adds.

Finally he writes, “Our roadways and access to high-speed Internet need major work, too. Good roads and a reliable water supply contribute to our efforts to attract new business and secure business expansion. Businesses may opt for a nearby community with more reliable infrastructure if we don’t show we are committed here.”

In early May, he was able to flesh out his answers more for the Vanguard.

The Vanguard asked Chief Innovation Officer Rob White to address some of these questions with the caveat that the answers are reflective of the proposed cuts and that the city council has the final determination of what cuts happen should Measure O fail to pass.

Vanguard: First, the city two weeks ago identified the cut list should Measure O not pass. Can you address which of those cuts involve people working on economic development?

Rob White: Let me start by saying that all of my comments should be taken in the spirit of education, not advocacy. City staff are legally unable to advocate or campaign for a Measure as a city representative.

There are two proposed “cut lists” for City Council’s deliberation as part of the budget process in the event that Measure O is not passed. One is a 12.5% unilateral cut across all departments. The other is a 25% cut across all departments except for Police and Fire, with the concept being that life-safety is a basic obligation of the City administration and the Police and Fire duties should be preserved more readily than anything else. As an important note on timing, Measure O will be voted on by the community on June 3rd and the City Council must pass a balanced budget by June 30th (as mandated by state law). We will not be able to legally carry over a deficit, so any decision by the City Council on cuts will be made during the mid to late June timeframe.

For economic development, the 12.5% cut proposes that, aside from the two people working daily on these tasks, all other costs would be eliminated. This includes any and all travel (including the Cap to Cap advocacy trip), all memberships in organizations like the Davis Chamber, the Sacramento Metro Chamber, SARTA, SACTO, Innovate North State, etc. It also means that essentially aside from the computers on the desk, basic administrative supplies are proposed to be removed from the economic development budget. This is primarily due to the fact that the economic development budget is mostly just people, and in order to get 12.5% cuts, we had to propose eliminating all other costs.

The proposed 25% cut suggests that the above costs are eliminated, and then 50% time for one of the two staff positions in economic development would be eliminated. This would take the two full time employees (FTE) down to 1.5. For comparison with communities of our size and relevance to our region, many have an economic development staff of 3 to 5 FTE.

Vanguard: Second, how would the cuts overall impact economic development efforts by the city?

Rob White: Since the majority of economic development at the City is being done by two people (the Chief and Deputy Innovation Officers), it would have a significant impact. It would translate into delays in meeting with new and growing businesses, less outreach to local businesses, slowed work on the innovation park, an inability to assist in expediting permits and planning, an inability to work on Yolo County-wide initiatives like broadband and rail relocation, and considerably scaled back interaction with the University on tech transfer and innovation.

More directly, it would mean that an already very under-staffed division would become mostly reactive and move away from proactive or planned actions and activities. I am not suggesting that more resources be directed at economic development, but cuts would hamper our current efforts. It would also mean that any regional interactions would need to be significantly scaled back, which would considerably hamper our local ability to facilitate new investment and attract new businesses.

I would use the analogy of living in a neighborhood and not recognizing or interacting with the neighbors in houses around you. We know from things like NextDoor and Neighborhood Watch that a communicative and well networked neighborhood/community thrives and has better outcomes. Similarly, a regionally relevant and leading community attracts more attention nationally and globally and businesses want to be associated with success and prominence. It’s why communities like Austin spend some much time convincing the world that it’s a center of innovation: when compared to a place like Palo Alto or the South Bay, the apparent level of innovation and entrepreneurial activity is unmatched (regardless of what the facts might tell us).

Vanguard: Third, can you address how important the city and city services would be to economic development?

Rob White: As I said recently at a manager’s group meeting for the City, the economic development efforts in any community might be led by a core staff, but the most important aspects of economic development are the responsibility of all staff. Namely that is speed of service and the ability to solve issues and find solutions. This translates in to reputation and creates an attractive business environment.

As an example, if a company wants to move or grow in Davis and either build an office or do serious renovations, but our planning staff and inspectors are overloaded, then that effort is significantly slowed down. That means it takes the City longer to complete a project on our end and that collection of fees are delayed, and ultimately the sales and/or property taxes are delayed that might result from the new company. Additionally, job growth is delayed and the resultant employees and their spending are delayed since they are not settled in to the new facility. And every week of delay on a mid-size project can result in literally $1,000s of uncollected fees or city revenues. Add this up across many projects and the impacts of delay can be significant.

This then impacts our ability to attract new companies because these delays in service are talked about throughout the broker and development community, all of which get a commission based on successful closes of deals. Time is money, and delays in processing lead to delays in construction, which translates into a hampered reputation as a community that can serve the needs of business. In many ways, our strongest economic development tool is our reputation, which is why working on branding and marketing at the regional and national level is important.

One more example is that many businesses locate in Davis because of the ties with the university (which can be attributed to things like the shared research collaboration or the large student population as a customer base or the community demographics that match their business profile). But the second most important driver in a business’ decision to locate in Davis (and something we hear constantly in talking with new and existing businesses) is the quality of life. Namely, the parks, the bikeways, the open space, a thriving downtown and retail sector, the community events and the overall amenities. With the proposed reductions, many of these elements will be again impacted and it will be that much harder to convince prospective and existing businesses to grow locally when communities around us are aggressively offering comparable opportunities.

Vanguard: Fourth, when trying to attract businesses to come to Davis, would the fiscal condition of the city impact their decision to come to Davis?

Rob White: It most certainly impacts a business’ decision. Not because they necessarily look at the budget (though some do as a barometer of health of the community), but because they will see direct evidence of the service levels in our infrastructure. When a business decides to grow or locate in a community, they are looking for quality of life for their employees as well as reputation of the community as a business-friendly and supportive location. If a business can’t get the services from the city that it needs in a timely manner, the cost of time and borrowing money become drivers in decision-making and surrounding communities are more than willing to take on the opportunity.

Vanguard: Fifth, how would cuts to the city manager’s office or Mike Webb’s office impact the ability of the city to process applications and expedite development?

Rob White: As I stated above, proposed reductions will impact all levels of city services. The staff are already stretched very thin for a city of our size and service level. In the City Manager’s Office (of which economic development is a part), if the 12.5% cuts were accepted by City Council, there would be a reduction in city supported events, the Sister City program, and community outreach (to name just the larger cuts). At the proposed 25% cuts, these services would be eliminated.

For community development, the proposed reductions would mean slower permitting and processing of applications and plans. This means longer wait times for businesses to do improvements for growth or new businesses wanting to open. It also means significantly slower processing times for residents on home improvements applications and inspections.

Most impactful will be the unintended message that will most certainly circulate throughout the broker and business community that Davis is a difficult (and slow) place to do business. Since longer processing times translate directly in to one of several factors that a business uses in their decision on where to locate, this will mean that some of the jobs and resultant economic impact from business growth will not be realized in Davis. Identifying just how much impact is a difficult task as much of the decisions are anecdotal and are realized only once the contrary decision is made and businesses go to surrounding communities instead of Davis.

 —David M. Greenwald reporting

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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9 Comments

    1. Frankly

      I agree.

      The politico campaign strategy template for tax increases is that a failure of the tax increase will cause great pain to people, children and puppies.

      The real template should be that city employees retiring at age 50-55 with a lifetime, six-figure, inflation-adjusted, city-paid pension is causing great pain to people, children and puppies.

      What we see here with these moves by politicians and government managers to ignore their difficult responsibility (that, by the way, they are paid very well to accept) and instead purposely inflict more damage on the the public, is an abuse of power and privilege.

      And one more point. The fact that the CC would prioritize economic development as high on the cutting list PROVES the point that there is scant real attention being given to it. If economic growth was important enough and urgent enough to our city leadership we would not be threatened this way. Ironically, if it was important enough and urgent enough to our CC we would not be needing a Measure O.

      Don’t let yourself be duped by these common tactics to force you to give up more of your hard-earned money to simply hand over to the pampered and over-paid public employee union members.

      Vote NO on Measure O can send a clear message that enough is enough. Get to work renegotiating ALL of the city labor contracts. Get creative on solving our overspending. For example, 90% of the calls are for emergency medical response. Close a fire station and replace it with a contracted EMS service. That alone would balance the budget.

      1. Rob White

        To be clear, my answers are from the view of economic development being conducted by the City of Davis. They are meant to be an honest and factually based assessment based on my experience and background.

        I do find it frustrating that my comments keep being relabeled as a support of things I don’t discuss in any significant way. I have been nothing but open and transparent since arriving at the City 15 months ago.

        Pensions and salaries are not my charge, nor was I here when these decisions were made. BUT, I was brought to Davis to try and work with the community and the region to create new opportunities and take advantage of the innovation efforts as a means to create new City revenue. And the tech industry and local/regional businesses have felt strongly enough about this effort that they fund economic development to the tune of $120,000 annually.

        I am not “fibbing”, as described in the comments of the Enterprise, and I am most certainly not being misleading. My comments are factual and are the likely outcomes if Measure O fails., based on current recommendations to Council. This is not scare tactics, but education from my experienced perspective.

        As pointed out, there are other policy considerations and I encourage each of you to let the City Council know your thoughts. Thanks for listening.

        1. Frankly

          I’m sorry if I sound like I am blaming you for any of this, or if any of my words appear to mischaracterize your positions. That is not my intent. I am not posting of you, you just inspire me to comment on related fiscal issues. Your are certainly not responsible for pensions and salaries. The point I am making is that there is a threat that your resources would be diminished without tax increases. I want you to have more resources and have more CC attention to what your are charged to do.

          In business we always separate operational and strategic resources. You are a strategic resource. You should not be on the same chopping block as are our operational staff and services resources.

          I think you have always been forthright and honest in what you communicate. But you are just an important cog in the wheels of Davis politics that is filled with people owning a huge problem of continued fiscal mismanagement.

          You know and I know what we are REALLY doing here. We are skimming more from private citizens and private businesses to continue the obscene wages and benefits to these city labor groups. Tax increases are just a bailout to delay this difficult day of reckoning.

          My business is down this year with my entire industry… and mostly because of a cumulative impact of very bad economic decisions from federal and state government employees and politicians. I am very irritated with this and also with the common tactic these and other government employees and politicians to ignore their difficult tasks and keep going back to everyone else to pony up more. And threaten us with pain if we don’t hand over the cash.

          And then there is Mace 391. What a giant mistake in opportunity cost that was.

          1. Rob White

            I won’t disagree that there are many facets to this issue. But I will also note that most employees working for the City are not actively looking to ‘gouge’ the community. Maybe not all, but certainly most. I can only speak to what I witness everyday.

            Over the last 7 years, City staff have seen co-workers laid off, shifted to new roles, and retire early. Previously, the focus has been to reduce ranks to address the revenue shortfall. It is difficult to work in those conditions and maintain a happy countenance… Anyone who has worked in a financially struggling org knows how this looks and feels, and it’s not good. And employee morale is critical in delivering effective services, especially with reduced staff and revenue. So we arrive at the perfect storm of downward pressures.

            As someone who only recently arrived in Davis, and who works with cities and counties across the State, I want to take a moment to note several points about the pensions, since this seems to be a topic often visited on this blog.

            First, Davis is not out of the norm for most local government agencies. The calculation rates and retirement ages are commensurate with a majority of the 480+ CA cities, and are most certainly not an upper tier. Not even in the Sacramento region. The problem with current pensions is that EVERYONE (cities, counties, the State, special districts) ratcheted up the pension calcs during the late 90s and in to the early 2000s for two primary reasons – 1) competition with the dot bomb private sector to get and retain quality employees (which was futile anyway, but was a dramatic concern back then) and 2) CALPERS was telling all of these orgs that the cash machine of the stock market and land development increases would never run out… essentially, a world without end.

            True, someone should have checked the accounting… but there was the problem, many of the brightest financial minds were being wooed to high paying jobs in the tech sector and those remaining were overwhelmed by the workload and scale. Actuarial tables should have been the core to decision making, but the grasshoppers were saying “no need to work, just come enjoy the summer sun!” Our state leaders were on board and it was a race to the top. We know how this turned out. It was colossal groupthink in the extreme and is now a common case study for failure points in many Public Admin programs… or how not to make financial policy decisions.

            Second, pensions are primarily regulated by entities that are NOT under the control of the Council, senior management, nor employee. The only way any of the current Davis city staff (including exec management) can reset their pension calcs going forward (as everything earned to this point is a “right” that the state has made clear they don’t plan to mess with) is to quit public service all together. Even if a local government employee goes to another local govt org, most of us will be earning similar calcs (with only a few exceptions). This is due to the recent state pension “reform” rules which set the processes by which current and new employees earn their pensions. New local government employees (never worked in govt before) will earn less in their pension (in many cases) due to the second tier rates, but this also brings about a fairness discussion about the same jobs getting paid different amounts (even if base pay is the same, the pensions are very different).

            In my own personal case (I don’t mind sharing), I came from a city using pension calcs of 2.7% per year of service times the highest single year. In Davis, I now get 2.5% (new state rules on existing CALPERS employees that switch cities) times highest single year. So a small decrease, but not one that is going to fix revenue shortfalls in any city or local government. My base salary remains the same over the entire 3 year period of my contract (No CPI). I now pay about $350 per month for a substantially smaller package of medical, dental and vision benefits than what I previously received. I also used to get $550 per month cafeteria benefit cashout, so we are talking real dollars lost to my personal budget of $900 monthly. Yes, you read that right… I get less calculated pension and took a $10,800 real dollar pay cut.

            This gets at the heart of why I am explaining all of this… Why would I do such a thing? Because I believe that Davis has an incredible set of opportunities. I am often told (and I believe) that my skills are something that are a strong supplement to activities occurring in Davis and I bring a unique set of insights and networks to the task. I have the quals and broad accolades to prove that I know what I am talking about, and I am willing to take each and every challenge headon and weather the continuous cycle of second guessing and Monday morning quarter-backing that seems to be a main stay in Davis. I believe that the majority of City staff feel the same way. They want to work hard for this community and make Davis the best place on the planet.

            I can share that the mood in City Hall today is one of relief. There is a palatable positive attitude change. Why? Because many of the people I sit near and work with daily now have a little more certainty in their lives about the future (at least for now) due to the passage of Measure O. Staff are noting that the majority of voters believed in them and are energized to prove that the money will be well spent. This is very different than a few days ago when it was a lot of breath-holding and stress. many now admit that they were certain they were losing their jobs.

            See, the things we talk about here on the Vanguard and in the broader community dialogue affect everyone, even many that do not comment. The constant complaints about staff and their ‘bloated’ pensions becomes an increasingly heavy burden. Especially since they couldn’t change much of that, even if they wanted to. They came to Davis to work hard, have a career and agreed to a certain wage and benefits package as was comparable to other local governments.

            Sadly, as Davis struggles to come out of the recession while other cities are already seeing their revenues return to pre-recession levels (and beyond), we will start to lose some of our best employees to other cities… because they will get raises for moving, possibly promotions, and above all else work for communities that are collaborating with their local government and working in partnership to make great things happen… instead of reading about how they are the reason that parks, roadways and bike paths are not being maintained.

            I’m not trying to be an employee salary or pension apologist. Now that the majority of voters have given the City a short breather (and thank you to those that believed in us as employees enough to vote yes on Measure O), I am encouraging the community to discuss solutions based on universal facts and work with those that do have the ability to change some of the issues we face. Pension reform continues to be something that only our state leadership can really address, so continually focusing at the local level is like screaming in to a hurricane and expecting to be heard. And the City gets absolutely no value in having a pension percentage calc or retirement age that is out of alignment with surrounding cities because it just means that Davis would like to attract a lower than average tier of employee.

            As you in the private sector can attest, you can’t offer substandard wages and benefits and expect to retain or attract the best and brightest. And a simple review of local government wages and benefits will show that the surrounding cities have either mostly caught up with or surpassed Davis’ wages and benefits. If you are bored, feel free to do your own unofficial salary survey by looking on the websites of the surrounding 10 cities that are comparable to Davis and see what their wages and benefits look like. You will see that in most cases, Davis is not the top and often not even the average.

            Our fiscal crisis has resulted in many cities, counties, special districts, etc passing us by while we controlled increases and promotions. Sadly, I am confident that we will see the impact of this in the coming months as we see more and more staff departing to better pay, promotions and less community angst. It has already started and I suspect the announcements will become more frequent as the economy continues to heat up in places other than Davis. Just in Sacramento, there are (and will be) many opportunities as a result of the new arena and the surrounding infrastructure and projects (including a trolley, new bridges, office and residential, new retail… and yes, possibly even a third campus of UC Davis in the railyards or West Sac).

            I am committed to trying to help the local dialogue become more constructive and positive. It’s what I can focus on and the only part of the equation I can truly lend help to. I believe in collaboration and partnership. While we tussle with each other in Davis, the region, and other cities (local and global) are getting the opportunities and offering to roll out the red carpet (even for our local businesses). Would it surprise you to know that Dixon and other surrounding cities are opening up strong dialogues with our local companies to try and get them to locate facilities and jobs in their cities? Companies that we have played host to and we deserve the opportunity to try and keep.

            Of course, finding places for companies that are coming to do research and share technology with our university is also important. We are blessed with a unique opportunity, one I hope we can seize by using all of our previously spent energy that’s been focused on infighting to secure our financial future with the resources right under our collective noses.

            Thanks for listening, I hope this has been informative and gives you a perspective that most don’t usually hear. Feel free to contact me privately at rwhite@cityofdavis.org to discuss how you might assist in a positive approach to our needed solutions.

          2. Don Shor

            Thank you. That is a remarkable exploration of a complicated topic. I appreciate your candor, and willingness to describe your own situation.

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