Analysis: Revenue Potential Remains a Huge Issue

If the centerpiece of an innovation park campaign will be the ability for the parks to generate sorely-needed tax revenue, the push back will be the attempt to question the revenue potential. Just last week, former Mayor Sue Greenwald questioned this in a comment on the Davis Enterprise site: “Business parks rarely bring net new revenue to cities. We should be honest and clear about the benefits of a business park.”

While the Vanguard has already spent a good deal of time on this issue, it becomes clear that this will be a clear line of demarcation. The normal arguments against development go by the wayside in the face of the city establishing that (a) we have a fiscal crisis and (b) the innovation park is the long-term solution to that crisis.

This weekend, Rob White, the city’s chief innovation officer, took another shot at it. As he writes in his Davis Enterprise column, “One major reason that innovation parks are being discussion is the recognition that there is a significant need to increase the amount of revenues coming in to the city to pay for maintenance and upgrades of existing amenities — things like parks, bike paths, streets, swimming pools and public facilities.”

He notes, as we often have, “Our sales tax collection is about half of that in a comparable community. Davis also has a lower comparable citywide property tax total because the community has not experienced significant resetting of values over the past few decades and has not built new housing stock.”

As he acknowledges, this is far more complex than just those factors. However, the current revenue situation means “that Davis has not experienced the kind of economic recovery that other comparable cities have. Therefore, major decisions on the future of public service delivery are more pressing and urgent.”

The Davis Vanguard will host an Innovation Park Informational Forum at the DMG Mori Seiki Conference Center located at 3805 Faraday Ave. in Davis, on Thursday, October 16 from 6:30pm to 8:00pm. The forum will be a town hall style discussion with panelists who will answer questions from the community about the potential innovation parks.

Skipping to the key point, he notes, “City staff previously invited representatives from the Association of University Research Parks to speak at a public meeting in Davis in late May.” You can view the PowerPoint and video of that presentation here.

He continues, “There are also several recent reports done by national research organizations that I highly encourage you to look at, as I think you will find it relevant to our community dialogue. One was done by the association mentioned above and Battelle in 2013.”

The study, titled “Driving Regional Innovation and Growth,” has the following synopsis on their website: “As national and regional economies recover from the most severe global recession since the Great Depression of the 1930s, there is a growing emphasis on the importance of innovation for sustained economic growth and competitiveness in today’s global, fast-paced, knowledge-based economy.

“Not only is innovation critical for industry development, it directly impacts the standard of living found in a nation and its regions. University research parks are a successful way to advance innovation and create economic growth in regions across North America.”

Another study that Mr. White cites was recently completed by the Brookings Institute and is titled “The Rise of the Innovation Districts: A New Geography of Innovation in America.” A quote highlighted on the Brookings website says, “Innovation districts ‘supercharge the innovation economy,’ said Bruce Katz during an event today on the rise of a new geography of innovation in America. Katz, vice president and director of the Metropolitan Policy Program at Brookings, and Julie Wagner, a nonresident senior fellow in Metro, are co-authors of report, ‘The Rise of Innovation Districts: A New Geography of Innovation in America.’ ”

But Rob White never gets to the nitty-gritty here – in part because of space limitations in a newspaper. Since we have no such limitations, we can get down to the minute details.

Go back to July, in his FAQ on the Vanguard, Rob White explained how this project will generate tax revenue.

He writes, “Any new construction will generate tax revenue through permits, fees, property tax, sales/use tax and jobs. The question is how much and is there a point in time where the services for that new construction (whether commercial, residential, or open space) cost more than the ongoing revenue it creates. In the case of commercial and research facilities, they are typically minor consumer of services like police, fire, and parks/recreation due to their inherent activities.

“And in the case of the proposed innovation centers in Davis, each of the proposals is estimated to include over $1 billion in construction and infrastructure over the build out of the center (likely to be 10 to 20 years), of which a notable component is permit and fee revenue generation to the city.”

Mr. White adds, “A thorough fiscal analysis will need to be done to identify the actual parameters for each proposal, but a very rough calculation based on some of our existing Davis-based high tech businesses indicates a net positive revenue over expenses for the City.”

“And there is some research that seems to indicate that typically businesses consume less services than residents and may provide as much as 80% of all tax revenue to a city,” he concludes. “The fiscal analysis will tell us what the actual amount is for Davis and we will also work with proponents to make sure that fiscal sustainability is a driver for any project.”

Back on June 8, Sue Greenwald, posting on the Davis Enterprise, wrote, “It is time to lighten up on the propaganda. ‘Innovation Centers’ will NOT bring significant net revenue to Davis and staff and the City Council should be honest with citizens about this. There is value in helping the University with their tech transfer mission and there is value in helping to create jobs, but again, this will NOT bring significant net revenue to the city.”

She added, “These consulting firms have resorted to a number of tricks to make it appear that companies create huge net revenues for cities. Competition among cities and even other states and countries for companies has kept cities from ‘working out deals’ that would result in net revenue. A more careful reading of the study by the ECONorthwest consulting firm mentioned above actually illustrates my point. Note, they say the company AND ‘employees’ paid and supported (whatever that means) $135 million in property tax. This means that employees bought houses and those houses have property taxes attached. But someone other than an Intel employee would have bought the houses in Davis if Intel didn’t come. Furthermore, we know that houses cost more to service than they bring in revenue anyway (after the tax split with the county, annexed land only returns about 6% of the property tax for the city, and the city has to provide services to the property). None of the state income tax comes back to the city. The comment on the report about Intel fails to make the case that Intel could have brought net new revenue to Davis. Again, it is highly unlikely that a business park will bring new net revenue to the city.”

She would later add, “I think it is wrong to tell citizens that a business park will help solve our fiscal problems when it won’t. The only way to address the fiscal problems is cut spending or to raise taxes. However, we are stretching the Davis ratepayers and tax payers pretty far now.”

Rob White the next day would step in and respond, “Sue – though I don’t really know you, I find your comments regarding an Innovation Park interesting. They do not seem to be based from direct knowledge or take into account the most recent studies by Association of University Research Parks, Battelle, or the Brookings Institute.”

He would add, “As a piece of missing data, the Mori Seiki plant generates annual property tax analogous to about 300 homes and annual sales tax analogous to several blocks in downtown. I cannot release actual figures (it’s against State law), but I will confidently tell you that any city with 10 or 15 Mori Seiki’s certainly would feel a 10 to 15% change in their revenue stream. And this was just a mere 18 months after opening their doors, not decades as has been suggested.”

He continues, “Also, we are in discussions with landowners on each of the potential periphery projects of doing a special assessment that will also generate income beyond sales and property taxes. I can’t explain more at this time because we must work through our legal channels, but let it be said that we learned from best practices in places like Mountain View and Sunnyvale on how to create sustainable and long-term revenue for the City.”

Mr. White concludes, “And don’t forget that our own tech business leaders (like Pam Marrone and Tyler Schilling) have been vocal about the need to have space to grow. That translates into permit fees, jobs, imputed income, and spending of dollars from outside sources and investment locally.”

Clearly, this is going to become a line of attack. To refute it, the city is going to need to have a clear study of the fiscal impacts. We understand that the city is looking into an independent fiscal analysis, but the sooner the better.

—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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54 Comments

  1. Michael Harrington

    In 2000-1, when I was on the City Council, the City had spent a huge amount of money on the very question we now face. There proposals for 3-4 business parks to be included into the General Plan we were processing, and all the studies showed that a business park does not generate much, if any, net revenue to the city, and would be huge generators for demands for new housing. In other words, there was a clash of the idea of keeping Davis small, versus setting up development plans that were almost guaranteed to push the population up to and above 100,000. The local proponents of that development saw Davis sort of like a “City on the Hill,” an international beacon, a smaller Silicon Valley East.

    We know the history ….

    At current, I am deeply suspicious of any consultants that the City hires and controls.

    Look at the surface water plant history …. and we spent millions on rate and plan consultants, for what? The Fall 2011 rates were botched; the plant was far too large due to the faulty assumptions the consultants used (they used old population and per capita water usage); then the next rate package was botched; we were saved by Measure P; then the storng leadership of Mayor Wolk helped all sides reach a deal.

    So I want to see these fabulous revenue numbers that Rob White talks about. And as the City found out with the water rates, we have truly independent fiscal analysts who will check it all.

    Frankly, because the CC has not put the City’s expenditures in line with revenues, the developers are using that imbalance caused by lack of guts on the CC to try and railroad in these large projects. The structural imbalance is staring us in the face, and I have not heard anything from the City political leadership as to a plan to cut expenses before they try and increase tax and development revenues.

    1. Anon

      Yes, let’s look at the surface water history. Despite all the legal shenanigans that went on, we will have a successful surface water project despite opponents mammoth efforts to kill the project and all that those maneuvers ultimately cost the city/ratepayers.

      I have not heard any solutions from you about how to fix the city’s fiscal crisis other than to cut spending. Where exactly shall the city cut more expenses? What personnel shall be let go? What services shall we cut?

      1. Barack Palin

        “we will have a successful surface water project despite opponents mammoth efforts to kill the project and all that those maneuvers ultimately cost the city/ratepayers.”

        I don’t believe that it ultimately cost the taxpayers money being that the opposition caused the city to scale down the project to one that more fit a city of our size and ultimately saved the city anywhere from what I understand to be $50 to $100 million.

      2. Davis Progressive

        ” all that those maneuvers ultimately cost the city/ratepayers.”

        just as i called harrington out, i’ll call you out – what’s your evidence for that? as bp notes, the project was scaled back, the city is looking at low interest lows, i see no evidence to substantiate your claim.

          1. Davis Progressive

            i asked what evidence you had, legal costs as far as i can tell are very minimal. $200,000 may sound like a lot to us mortals, but in the scheme of a hundred million dollar project not. we are also on the verge – so we are told of low interest loans – so you need to explain that one.

        1. Anon

          Had to do a little research to more fully answer this question. The WAC was formed in 2011, long before Harrington filed his lawsuit in 2013, according to my research. The WAC came to the decision to downsize the surface water project on its own, irrespective of Harrington’s lawsuit. Harrington had absolutely nothing to do with that decision. However, the city had to pay attorney’s fees to defend against Harrington’s lawsuit, as well as a $195,000 settlement to Harrington. The resultant Bartle-Wells water rate structure with 17 (fixed) / 83 (variable) split that Harrington and his cronies insisted on was more costly because of the higher interest rates that will be paid on the loan because of the higher percentage volumetric rate. Let’s just hope and pray Harrington didn’t nix the possibility of the city obtaining state revolving fund loans with all the legal nonsense that occurred.

          1. Davis Progressive

            while i appreciate you taking the time to look it up and explain that, you are missing a huge piece and that is while harrington filed his lawsuit in 2013, the lawsuit followed the referendum attempt which spawned the wac.

            look i’m not fan of harrington and i think the lawsuit shows clearly he was in it to recover money for his debts, i don’t think you have a case that he increased city costs overall.

          2. Anon

            To Davis Progressive: Sorry, but we will have to agree to disagree that Harrington ended up costing the city plenty of money. There is no doubt in my mind that he did.

          3. Davis Progressive

            i’m not trying to be difficult, but you’re making an accusation against a public figure here – you need evidence. to me “no doubt in your mind” is not evidence. i’ll be curious matt williams’ take.

          4. Matt Williams

            DP and Anon, the answer really depends on how you frame the question. If you start from the point where Harrington et.al raised their hands for the first time in August 2011 and said, “This train is off the tracks! We need to do something about it!” then there is no doubt in my mind that Harrington et.al. saved the Cities of Davis and Woodland tens of millions of dollars, while costing those cities some amount that is less than two million dollars. Bottom-line, savings tens of millions trumps costing two million. In August 2011 the construction costs for the plant as then designed was for a 40 million gallon a day plant. The plant that has been bid by CH2MHill is for 30 million gallons a day. Two graphics below provided by the WDCWA show April 2012 “Total Capital Costs” costs of $292.7 million ($139.9 million for Davis) (see page 4 of http://www.wdcwa.com/images/uploadsdoc/Board_Mtg-08-23-12_Project_Update.pdf) and November 2013 “Total Capital Costs” costs of $228.1 million ($107.13 million for Davis) (see page 10 of http://www.wdcwa.com/images/uploadsdoc/04-17-14_Agency_Board_Update.pdf). That difference of $64.6 million when financed over 30 years @ a conservative 4.0% that grows to $112.0 million.

            Now that we have set the “upper boundary” of the savings, it is appropriate to have reality whittle it down a bit. First we will split the $112 million savings 60/40 to reflect the Woodland/Davis proportional split of costs and capacity. The Davis share of the gross savings thus becomes $44.8 million. Further, the last 14% of the savings ($9.1 million of the $64.6) came from the final DBO bidding process. It is also reasonable to say that an additional 14% came from the preliminary DBO bidding process. Reducing the Davis share of $44.8 million by 28% leaves a net savings that Mike et.al can lay claim to of $32 million.

            The $2 million for WAC staffing and Bartle Wells consultancy and legal costs brings that $32 million down to $30 million.

            With that said, if you start the savings/costs tally clock in March 2013 just after the Measure I vote, the savings are virtually non-existent, and the costs are probably around $1 million.

          5. Mark West

            We know the cost of the settlement, but what was the cost of the City’s legal defense?

            How much extra did we have to spend on rate consultants?

            How much was spent (in staff time and consulting fees) to support the work of the WAC?

            What was the cost of the lost ‘good will’ with our Water System partners?

            What are the costs of the construction delays?

            [add your own list here]

            Some of these expenses would have accrued regardless of the lawsuit/threats, but some were as a direct consequence of the same. I think it is fair to say that the total due to the lawsuit/threats will be far greater than the $195K settlement.

          6. Matt Williams

            Mark,

            For the sake of argument let’s say that the City’s legal costs were the same as the plaintiffs’ legal costs = $195,000

            The Bartle Wells bill was approximately $250,000 – $300,000

            Your guess on Staff time is as good as anyone’s. Does $100,000 sound about right?

            Lost “good will” is one of those “beauty is in the eye of the beholder” situations. My personal number is $0, but let’s call it $1 million for the purposes of discussion.

            As noted in my response to davis progressive, the WDCWA’s own reports show that the construction delays resulted in reduced construction costs for the project.

            You are right, some of those expenses would have happened regardless of the lawsuit/threats, but if we add all the nubers above up, we get just under $2 million of incremental costs vs. $32 million of savings.

          7. Mark West

            The members of the WAC, and the CC who listened to their advice, are the ones responsible for saving us that money Matt.

          8. Matt Williams

            Mark, the WAC would never have existed if it weren’t for the ruckus raised in August-December 2011. The WAC did the heavy lifting … no doubt, but they never could have completed those lifts if they never got a chance to go to the gym.

          9. Mark West

            The intent of the ruckus was to stop the project, not to make it smaller. The project was made smaller due to the efforts of the WAC and the CC’s of the two cities, so the credit for any savings is theirs.

            Pointing out a problem may be the first step in solving it, but the real work and credit goes to those who follow through, not the one who points and squeaks.

    2. Davis Progressive

      “There proposals for 3-4 business parks to be included into the General Plan we were processing, and all the studies showed that a business park does not generate much, if any, net revenue to the city, and would be huge generators for demands for new housing”

      can you share those studies with us? because none of the studies i have seen in the last five years show that.

      “The local proponents of that development saw Davis sort of like a “City on the Hill,” an international beacon, a smaller Silicon Valley East.”

      i think people look at the billion dollars uc davis spends annually on research and can see the promise of development – how much money did ucd generate in 2001?

  2. Frankly

    She would later add, “I think it is wrong to tell citizens that a business park will help solve our fiscal problems when it won’t. The only way to address the fiscal problems is cut spending or to raise taxes. However, we are stretching the Davis ratepayers and tax payers pretty far now.”

    The main question here is why do people and the local media keep quoting Sue Greenwald? Did she lose her election bid to remain on the City Council?

    Her comments are frankly (because I am) either ignorant or disingenuous. And in either case they are reckless and absurd. And in either case Sue Greenwald needs to be taken to task every time she repeats them.

    Here is how I see it. Sue Greenwald lost her seat on the CC, and she is probably bitter about it and is both doubling-down on her brand for being vocal about the over compensation of city employees (a laudable thing) while realigning herself to the no-growth camp (not laudable). And the no-growth camp is absolutely desperate at this point. Lacking factual arguments against local economic development they are deep in a tactic of spreading fear, uncertainty and doubt.

    Of course innovation business parks result in net positive revenue to the city. Why would New York have a program for new business locating there to have a 10-year exception to paying state taxes?
    http://startup.ny.gov/?utm_source=Google&utm_medium=CPC&utm_campaign=StartUpNY

    Think about it this way. There are two types of development: residential and commercial. We know that residential development results in initial positive cash flow to a city, but then after about 15 years it turns negative as the property tax receipts fall and related city costs increase.

    So then if commercial development does not result in long-term net positive cash flow to a city, then how does any city ever have a balanced budget? Why are most cities throughout the nation clamoring to attract new business?

    The answer is simple… commercial development and the businesses that eventually reside there are the primary sources of revenue to a city. Retail tends to be stronger because of sales tax revenue; but all business generates net positive tax revenue to a city.

  3. South of Davis

    Former Mayor Sue Greenwald wrote:

    > Business parks rarely bring net new revenue to cities.

    When I look at numbers from developers Business parks are “ALWAYS” projected to bring net new revenue to cities, and when I look at numbers from anti-development people Business parks are “NEVER” projected to bring net new revenue to cities.

    In reality Business Parks ‘SOMETIMES” bring net new revenue to cities. No one has any idea what will happen in the future (e.g will we pay every cop in town $200K or will we repeal Prop 13 for commercial property to tax the park at 3%).

    1. Frankly

      It is only those business parks that are not populated with businesses that do not bring in revenue to the city.

      “Build it and they will come” does not always work.

      Instead of demanding some math minutia that is highly speculative, it would be better for us to just get an assessment of the number of businesses interested in located here. And from what I have seen, heard, read… there are a great number of them.

    2. David Greenwald

      “In reality Business Parks “SOMETIMES” bring net new revenue to cities.”

      So between 1% and 99% of the time? That’s probably a safe assumption.

  4. Don Shor

    It seems to me that parts of this are a pretty basic worksheet.
    Assessed value of raw farmland:
    Property tax generated to the county by that land:
    Assessed value of developed business property:
    Property tax generated to the city by that property:

    Deduct payment from city to county to replace lost property tax, if appropriate:

    Range of unsecured property tax assessments on business property:
    Range of sales tax generated by sales by and between businesses:
    Revenue to city from assessment district created on business park:

    Cost to city of added municipal utility services:
    Cost to city of increased public safety services:

    This worksheet ignores indirect revenues and indirect costs, because those are largely unmeasurable. I agree with Sue that we should not overstate the benefits of a business park in this regard. The fact that employees will spend some money in town is positive, but probably overstated in consultant reports. Likewise, the increase in traffic from development of a peripheral park (with freeway access) will likely be overstated by opponents.

    The only way that you could lose money by developing farmland into a business park would be if the city’s costs go up so much that they exceed those taxes and revenues I’ve outlined above. That would be possible if the site doesn’t pay its own way for municipal utilities. It would be possible if vast pay increases were given to safety employees. It could be possible if the additional sites necessitated another fire station and additional staffing.

    If Mike Harrington still has those consultant reports, we can certainly pick at the numbers to see where their conclusions come from. But as far as the direct yield of a business park development, it is very unlikely that it would fail to generate revenues for the city. We shouldn’t overstate them, but we shouldn’t understate them either.

    1. Sam

      I think that your calculation is straight forward and one that should be used to evaluate the project. The problem is that I doubt that anyone would ever break down the revenue and expenses in this easy to understand and reasonable manor. I would love to see an article from Mr. White breaking down the revenue and expense as listed above and then let us know if there is something substantial missing from the equation.

    2. South of Davis

      Don wrote:

      > Range of sales tax generated by sales

      Doesen’t every business in Davis also need a business license (Business tax) and pay a gross revenue tax (even if they don’t make a penny in profit).

      > Cost to city of increased public safety services:

      Here is where the “fuzzy math” comes in. I don’t think we need to hire a single cop if we build a new business park, but some might argue that we need a couple more (and another MRAP and maybe a chopper)….

      1. Don Shor

        Doesen’t every business in Davis also need a business license (Business tax) and pay a gross revenue tax (even if they don’t make a penny in profit).

        Yes, business license fees as well, which are based on gross revenues. I’ll add that to my worksheet.
        As to the safety services, you can find information about how many police/fire calls one gets on average at various types of businesses, so it’s possible to estimate a range.

        1. South of Davis

          Don wrote:

          > As to the safety services, you can find information
          > about how many police/fire calls one gets on average
          > at various types of businesses,

          Is there any way to have a place like the Royal Oak MHP that gets more police calls pay more (than say a Senior Apartment) and a bar that gets more calls pay more (than say a store that sells plants)?

    3. Frankly

      Here is a 2006 analysis of total local (countywide) economic contribution derived from a Wisconsin University Research Park. It is largely populated with the type of companies we would want in our innovation parks

      http://legis.wisconsin.gov/lc/seminars/files/urp_handout.pdf.

      It is 255 acres and contains 34 buildings and 114 businesses.

      It paid $2.8 million in property tax in 2005.

      They calculate the total local tax benefit as $28 million per year. Here is how they arrive at that number:

      URP Economic Statistics 2006

      Total URP Non-Payroll Spending $ 212,909,476
      URP Companies’ Local Spending 100,373,993
      URP Property Tax 2,828,353
      URP Companies’ Employee Income Tax 8,282,121
      URP Companies’ Employee Sales Tax 5,926,893
      URP Companies’ Employee Property Tax 11,051,456
      Total Direct URP Tax Revenue Generated $ 28,088,823

      They calculate the local spending by the employes of the business as the largest annual economic benefit ($155 million).

      Next is the spending by the businesses. They calculate that at $100 million.

      1. Aggie

        The Wisconsin University Research Park report posted by Frankly has a few of noteworthy bits of information.

        (1) The reported square footage was 1,532,000. On a 255 acre site this works out to an FAR of 0.14. The Davis RFEI asked for proposals with FARs in excess of 0.5. The economic yield of the WURP in 2006 is therefore significantly understated relative to what we are trying to accomplish in Davis.

        (2) The estimated employment multiplier was approximately 2.0. 4,155 jobs were created in the WURP with an estimated 4,331 indirect jobs created in the surrounding economy.

        (3) The number of square feet per employee was 369. Taking the 10,000,000 sq ft northwest quadrant proposal as an example, this translates into projected employment of approximately 27,000 employees on site with an additional 27,000 jobs in Davis and the surrounding region.

        1. Aggie

          Here’s a link to the Wisconsin URP report for 2010 (the latest available):

          http://urp2014.mhwebstaging.com/wp-content/uploads/2014/03/URP_Economic_Contribution_Report_2010.pdf

          A comparison of the pre-recession 2006 report with the 2010 report shows that even during the economic downturn they managed to build 4 new buildings (totaling 300,000 sq ft) and increased the number of companies in the park by 12. On the flip side, they lost 736 employees. All-in-all a very impressive performance during the worst recession since the great depression.

  5. Anon

    Rob White: “Also, we are in discussions with landowners on each of the potential periphery projects of doing a special assessment that will also generate income beyond sales and property taxes.” Mr. White has estimated that a 200 acre business park will conservatively generate a $12 million per year income stream. Some of that income stream will have to be shared with the county, but the county can only collect as much as the value of the services it provides (the county cannot make a profit).

    Juxtapose this with Sue Greenwald’s statement: “‘Innovation Centers’ will NOT bring significant net revenue to Davis and staff and the City Council should be honest with citizens about this. There is value in helping the University with their tech transfer mission and there is value in helping to create jobs, but again, this will NOT bring significant net revenue to the city…I think it is wrong to tell citizens that a business park will help solve our fiscal problems when it won’t. The only way to address the fiscal problems is cut spending or to raise taxes. However, we are stretching the Davis ratepayers and tax payers pretty far now.”

    How does Sue know that an innovation park in Davis will not generate net tax revenue in light of the possibility of setting up assessment districts that produce a steady stream of significant income, not to mention sales tax and construction fee generation? On what basis does she conclude that innovation parks do not generate tax revenue to the cities? Her only conclusion (based on what?) is that somehow all innovation park consultants resort to “trickery” in their claims that any particular innovation park generates tax revenue.

    Sue Greenwald’s solution to the city’s fiscal crisis: cut spending or raise taxes, but concedes this is unsustainable. So therefore she has no credible solution to the city’s fiscal crisis other than to complain about it and shoot down innovation parks as a potential solution. Interestingly, Sue Greenwald was very supportive of an innovation park at the Cannery site, but now seems to have decided innovation parks elsewhere are not of any fiscal value to cities?

    I have to ask, based on logic, who has more credibility, Rob White or Sue Greenwald?

    1. Frankly

      Rob White by a long shot.

      Respect the people working for solutions, not those that try to make a name for themselves just shooting down the ideas of others.

    2. Davis Progressive

      “I have to ask, based on logic, who has more credibility, Rob White or Sue Greenwald?”

      this is the wrong question to ask. there will be a segment of the population that will believe sue. the key is keeping that segment to a minimum.

      1. Anon

        Credibility is crucial on the issue of innovation parks. Even you have demanded credible evidence that an innovation park will generate sufficient tax revenue to make it worthwhile, a reasonable demand that I suspect most would agree needs to be answered credibly and by credible independent third parties. The segment of the population that will believe Sue, despite her lack of credibility, are not looking for credible evidence. Their staunch position is they don’t want change, period, but neither do they have any sustainable solutions to the city’s budget woes. Even Sue concedes increasing taxes and cutting services is unsustainable, but offers no other solutions to the city’s huge budget deficit.

        1. Davis Progressive

          i agree with the need to provide evidence that it will pencil out. where i might disagree with you, is that i don’t think we do that to satisfy sue greenwald but rather to try to win over people like tia will – skeptical but honest.

  6. Davis Progressive

    while i don’t agree with michael harrington or sue greenwald here, we need to get hard numbers that can demonstrate various revenue streams under critical assumptions.

    people want to see the math.

    1. Anon

      I would agree that we all want to see “the math”. But I can almost guarantee there will be some who, no matter what evidence you place in front of them, will claim an innovation park will never pencil out. These are the folks who do not want Davis to change in any way – “Pull down the portcullis, fill the moat, and dump in the alligators.”

  7. Miwok

    I guess after decades of restricting business, retail and manufacturing, Davis is finally figuring out they are not able to finance all their dreams. They hire a “Chief Innovation Officer”, and he outsources studies. Consultants and developers seem to have a great capacity to re-invent the wheel. instead of building on work done previously, as Mr Harrington points out.

  8. Anon

    Mark West: “We know the cost of the settlement, but what was the cost of the City’s legal defense?

    How much extra did we have to spend on rate consultants?

    How much was spent (in staff time and consulting fees) to support the work of the WAC?

    What was the cost of the lost ‘good will’ with our Water System partners?

    What are the costs of the construction delays?

    [add your own list here]

    Some of these expenses would have accrued regardless of the lawsuit/threats, but some were as a direct consequence of the same. I think it is fair to say that the total due to the lawsuit/threats will be far greater than the $195K settlement.”

    Spot on! And we still don’t know if all the legal shenanigans cost the city the state revolving loan funds.

    1. Matt Williams

      And we still don’t know if all the legal shenanigans cost the city the state revolving loan funds.

      Agreed 100% … if things play out that the City is disqualified from qualifying for SRF loan funds for the project, then the Harrington et.al. efforts will be instantly transformed into a dead loss.

    2. dlemongello

      I think a rate structure had to be in place to get SRFs. The legal shens had several causes, a major one being the rates/measure P. CBFR with the lookback to the PREVIOUS May-Oct. was simply not right (I even thought it was OK at first until I thought about how many people move in this town). We had to redo the rates and if it took legal “shens” then they were necessary. Now that they are in place there should be no more blocks to getting SRFs in place unless the privatization issue is indeed an issue.

  9. dlemongello

    As far as I know the reason we may not get the SRF is privatization, not lawsuits, especially since they are no longer pending.

    And as per Rob White, if these comparisons are correct, for every business comparable to another Morei Seiki we get a 1% addition to city revenue (“10-15 more of them gets us 10-15% revenue increase”)? Hmmm…

    As for sales tax, I would have thought their sales to be wholesale, not retail subject to sales tax. Can someone explain?

    1. Anon

      In regard to SRF issue:

      “State Water Board Offers Extended Term Financing for All Clean Water
      State Revolving Fund Loans
      FOR IMMEDIATE RELEASE Contact: Christopher Stevens
      January 23, 2014 Phone: (916) 341-5698
      The State Water Resources Control Board announced today that beginning immediately the
      Water Board will offer extended term financing of up to 30 years for all water quality projects in
      California that are eligible for the Clean Water State Revolving Fund program….

      Eligible applicants for Extended Term Financing include:
      • Any city, town, district, or other public body created under state law
      • A Native American tribal government or an authorized Native American tribal
      organization having jurisdiction over disposal of sewage, industrial wastes or other
      waste
      • Any designated and approved management agency under Section 208 of the Clean
      Water Act
      • Non-profit organizations and National Estuary Programs”

    2. Frankly

      Sale tax revenue is generally from retail business, so Morei Seiki does not generate much… the only sales tax revenue generated by Morei Seiki is from the company, and the employees of the company, purchasing goods and services from Davis merchants.

      The primary tax revenue generated by a company like Morei Seiki is property tax from their real property (real estate) and their expensive fixed assets (equipment). Expensive equipment has a property tax assessment. And because Morei Seiki’s business is one that uses a lot of expensive equipment, and has to frequently upgrade that equipment to compete in a highly competitive high tech CMC and robotics industry.

  10. Michael Harrington

    I know many here love to flog Sue Greenwald, but the fact is she does her homework, and there are many people who are part of that research and support network. I am one of them. You attack her; you are attacking all of us.

    1. Don Shor

      I’d love to see her homework on her repeated assertion that business parks don’t yield net revenues to the city. Since you’re here, and she isn’t, I’m sure you can provide the data for us.

    2. Anon

      To Mike Harrington: Yes, please provide the “research” that shows innovation parks don’t generate tax revenue. Such information would be helpful so that if we do move forward with an innovation park, we would not be making the same mistakes made by others. Also please provide the “research” that the City Council in 2001 discussed innovation parks and determined they would be a net fiscal negative to the city, as you have claimed. Thus far, even though you have been repeatedly requested to do so, you have produced no such information. If there were such information, it would be helpful to know what the City Council’s thinking was.

      To dlemongello: Your question about sales tax was answered in a previous article on innovation parks (can’t remember who responded with an excellent discussion on sales tax generation (perhaps Mark West?)). If someone can research that answer and post it, that would be extremely helpful…

  11. Michael Harrington

    Anon: use of the word “innovative” is just verbal hucksterism from a used car lot. It’s a marketing thing. Like selling Target as “green” in the Measure K campaign. Huge numbers of car trips a day way out there, and all of that smog going in the air.

    The burden is on the park proponents to show us the money. And you can be sure that any consultant hired by the city or the developer will use marginal assumptions to increase the income and decrease the costs to the city. And if staff keep this deal going, they make huge billings per hour, fully funding staff positions.

    So I will wait to see their data and plans, then dig into it.

    But the historical record for these business parks is poor to bad, in terms of net revenue to the city.

    So tell me, someone, what are the fundamental differences in an “innovative” business park from the ones we analyzed 13 years ago that makes the modern version generate far more net revenue to make it worth the city’s while?

    What I want to see is the City’s plan to cut expenditures. Show us the plan, make the cuts, then talk to us about the rest of it.

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