In May, the Economic & Planning Systems, Inc. (EPS), “prepared an Administrative Draft Report evaluating economic and fiscal assumptions and key success factors related to three proposed innovation center proposals in the City of Davis.”
The withdrawal of the Davis Innovation Center from their proposed 208-acre project drops “the total acreage by approximately 43 percent, total square footage by 56 percent, and total estimated employment by 59 percent. While this circumstance reduces the overall development footprint and employment outcome of the proposed Innovation Centers, the reduction should not be viewed as a complete net loss to the community because other opportunities ultimately could fill some of the void.”
For example, they cite that the “proposed Panattoni project could introduce up to 225,000 square feet of office/research and development (R&D) in the market that could be considered part of the Innovation Center ecosystem.”
Overall, without the Davis Innovation Center, we are looking at 276 acres, 3.1 million square foot of space, 7548 total employees and an estimated absorption of 9 to 27 years as opposed to 21 to 51 with the Davis Innovation Center.
In looking at the potential outlook for the Davis Innovation Centers, EPS looks at two factors. First the University-Related Factor. The proximity of the university is crucial, as “UC Davis brings in more than $700 million in research grants annually, more than UC Berkeley, MIT, or Harvard. It is a leading academic partner for innovative research in agriculture, biotechnology, clean energy, medicine, information technology, and engineering.”
EPS writes, “The research strengths of the university should align with the types of businesses the park targets, in terms of the space and resources provided, as well as the outreach campaigns devised. The cross section of industries prevalent in existing Davis tech concentrations are indicative of representative industries.”
Moreover, “Universities can serve as important catalysts of research parks that provide direction and leadership, as well as on-site services (incubators, accelerators) that otherwise would not be provided by the private market. The investment and commitment that universities demonstrate in the planning stages of a research park help determine the future role and presence they will have.”
They also look at regional factors. EPS notes, “The Innovation Centers should provide space and resources for, as well as market to, businesses in innovative clusters that are strong points for the regional economy because there is substantial cross-over between regional and UC Davis strengths.”
The report identifies five areas: clean energy technology, agriculture and food production, life sciences and health services, information and communications technology, and advanced manufacturing and materials.
UC Davis is a key factor. It is a source of strong real estate demand in the city. “A change in policy reducing this support could be a factor limiting the amount of absorption,” they note. But add, “Overall, the relatively high assessed values associated with innovative companies and research activities in innovation centers partly are based on university proximity and interactions that are absent in more generic settings.”
They project that the absorption in Davis, provided that quality land is made available, is “likely to be modest at first and improve over time.” They write, “Perhaps the most valuable thing that could occur in Davis in the short term would be to have one or more new speculative multi-tenant projects come on line and succeed, demonstrating that risk is manageable and the market fundamentals are in place.”
They write that the competitive position relative to the region and the Bay Area may improve with the available of viable supply in Davis. They note, “Davis currently competes with communities throughout Northern California for business location and expansion projects.
“The Innovation Centers offer Davis the opportunity to improve its competitive position as a leader in the innovation economy in the region, potentially mitigate some of the pull of the Bay Area, and enhance the region’s standing in Northern California. As discussed throughout this report, Davis has several quality-of-life attributes (e.g., internal and external connections, exemplary schools, walkable downtown, recreation/civic/cultural assets) that are very attractive to the industries discussed in this report, providing a strong foundation for the innovation ecosystem concept in Davis.”
- Nishi, with immediate proximity to the UC Davis campus and adjacency to housing and downtown amenities, will be a natural preference among firms seeking immediate university proximity. These likely are to be both large and small firms, but space limitations preclude major operations at the site. Because of campus proximity, Nishi would be in a strong position to accommodate any UC Davis off-campus space needs if available space can be provided. More university space implies possible lower average assessed values because of public ownership; however, the value of this university presence extends far beyond mere property tax, as the catalytic effect toward attracting specific targeted users is very important to the overall economic development of Davis.
- MRIC effectively would serve as an extension of the east-west axis that encompasses the 2nd Street area. This area has been studied carefully and provides an excellent basis for further testing of assessed values, taxable sales, and employment density occurring in such a district. The MRIC proponents are steeped heavily in industrial development in Davis and other parts of the Sacramento Region and understand the development of major manufacturing and office/R&D facilities across a broad swath of industries. Reflecting this, ensuing fiscal and economic testing will consider an emphasis in advanced manufacturing and other appropriate larger scale office and R&D uses similar to those reflected by the 2nd Street Corridor.
The most critical analysis, however, takes place in the summary issues.
First, they warn to “consider housing.” They write, “This use may help reduce trips, lower burden on infrastructure, and provide a more complete innovation environment.” The projects are currently planned to be housing free and many believe the additional of a mixed-use component would spell doom in a Measure R vote.
However, the EIR considers a mixed-use option which would allow people to reside in close proximity for their work, greatly reducing the impact on roads and transportation systems. A housing component could help reduce impacts.
The other factor to consider may be even more fundamental. EPS warns, “Consider implications of imposing fiscal impact analysis mitigations.” The project is being sold to the public as a means by which the city can capture property tax and other revenue. But one of the ways that it is proposed to work is through a CFD (community facilities district).
EPS writes, “Given financial feasibility concerns, additional burdens on development, including annual special taxes, assessments, or other financing mechanism to cover potential net fiscal deficits or ongoing maintenance and operations requirements, may affect project feasibility.”
The flip side is that, without the special taxes, will the project be a fiscal asset to the city?
Overall, EPS finds, “The Innovation Centers have the potential to create benefits that generate economic value to the City and UC Davis alike.”
They write, “The proposed projects could support the goal of strengthening academic-industry partnerships in Davis and throughout the region, in support of the Next Economy initiative. In addition, the parks may help improve the jobs-housing balance and fiscal resources, allowing Davis to maintain its reputation as one of the best quality-of-life experiences attained in the region.”
But the city will have to proceed with some caution, particularly without the Davis Innovation Center in the mix.
—David M. Greenwald reporting