As the discussion on Innovation Parks emerged over the last year or two, part of the rationale was that the economic development would bring in new property and sales tax revenue to help the city’s coffers.
There are really two critical components to it. An analysis of the city’s tax base shows that it draws less per capita in terms of sales tax than other communities in the region. However, city leaders quickly came to the conclusion that the community was unlikely to support peripheral retail like big box. Davis’ one foray into the big box world produced Target, but only after a narrowly split electorate approved it at the ballot box.
It would be far more compatible with community values to build a research or innovation park where the university-generated technology transfer startups and other high-tech, ag-tech and medical technology companies, taking advantage of the proximity of UC Davis, could come and the city would be able to generate property tax from the improvements on the property and sales tax any time a point of sales transaction took place.
However, that vision faced a formidable challenge – Measure R and city of Davis’ traditional slow growth leanings.
But no problem. The city has been in fiscal crisis for the last several years. Unlike in other recessions, Davis proved rather vulnerable to the economic tide starting in 2008. The collapse of the real estate market cut off the city’s tax revenue lifeline. And the city lacked the sales tax base to help it emerge from the economy.
The belief was for a more diversified economy that does not simply rely on property taxes and government jobs, either at the university or the state, to keep the economy moving.
However, beginning late last fall and now gaining speed with the improving economy is going to be a new discussion. We saw this emerge with Dan Carson’s analysis of the improving economy. It continued on Saturday with the Vanguard column that suggested that the improving economy and budget forecasts may lead to salary increases.
As one poster put it, “This (the improving budget) would certainly undercut the main rationale for the peripheral business parks.”
Indeed, long before the improving economy became a reality, skeptics of the city’s economic development policies were concerned that the innovation park push was actually something initiated by the city’s employee groups to generate the revenue needed to increase employee compensation.
There is also the expressed belief that, even if we do built these technology parks, the high-tech industry, far from being immune from the rise and fall of the economy, is extremely sensitive to economic downturns. The reasoning goes that, in an economic downturn, the high-tech industry is the one that takes the huge hit.
Therefore, the reasoning goes, we would be relying on an industry that is extremely recession sensitive, that would not provide the budget buffer in down times and is not needed during good economic times.
The underlying question, I think, is a good one: can the city overcome its slow growth tendencies to develop peripheral innovation parks absent economic crisis? Or, more to the point, should it?
It does not take a genius to figure out that the city of Davis has a strong slow growth current. The community voted against widening the Richards Underpass back in the 1990s out of growth fears born out of a period of rapid housing growth.
That period would also trigger the passage in 2000 of Measure J and out of Measure J came the only two Measure J projects – Covell Village and Wildhorse Ranch, both of which were heavily defeated at the polls.
But, as I have argued before, there were good reasons for the defeat of both projects, that means that a future Measure R vote is not necessarily doomed. Covell Village was too big and the developers failed to deal with traffic impacts and other mitigation. Wildhorse Ranch, more modest, happened during the middle of the housing market collapse.
In 1995 the people of Davis voted 59 to 41 to support the Wildhorse Development. In 2006, as we noted earlier, the public voted narrowly to approve Target.
So, the public is not automatically opposed to any new development. The question is, can they be convinced absent an economic crisis?
I think there are several key points.
First, even absent an economic crisis, local government has often lived on the margins of being able to generate revenue to pay for services, even in good times. Now, mind you, some of that is due to an overreach on employee compensation and benefits. So, the argument can be made that having a new tax revenue can help the city provide vital services. At the same time, it is imperative that the city council commit to fiscal restraint now and in the future on employee compensation increases.
The community has shown the willingness in 2004 and 2014 to increase sales tax measures to fund city services, but in 2005, the city undercut some of that trust by turning around and giving that new tax revenue to the employees in the form of massive compensation increases.
Second, UC Davis is clearly headed in a trajectory where it is increasing not only its research money, but putting that research money into technology transfers. Recently, the university was named the top university for agriculture and veterinary sciences.
In this new economy, UC Davis is about to become a leader in ag-tech, biotech, med-tech and clean technologies. It needs space for which to transfer its research capacity to the private sector.
The city of Davis can be primed to take advantage of it. But, if the city is not willing to create the space to accommodate it, neighboring communities like Woodland, West Sacramento and Sacramento are poised to take advantage.
Moreover, the university has plenty of its own land to develop its own tech park if it so desires. To date, it has been somewhat reluctant to do that, but that might become a possibility.
Therefore, a third point is that Davis can continue to control its own destiny by allowing modest levels of economic development to occur on its periphery, rather than pushing this development either back onto campus or into neighboring communities.
The improvement of the economy definitely reduces the economic crisis component of the innovation park arguments. But the need for revenue will not disappear, and the need for a more diversified economy that moves away from the reliance on government jobs and the reliance on auto sales for tax revenue and property tax revenue to run the city, will remain important.
Moreover, with the changes at the university level, the city, with the building of relatively modest areas of land, can take advantage of the next economy generated by a changing university.
—David M. Greenwald reporting