The city and the developers were quick to tout the economic analysis showing that the Mace Ranch Innovation Project (MRIC) would generate a net $2.2 million a year in city revenue at buildout.
“The report estimates significant positive economic impacts resulting from the projects — approximately 3,400 jobs, $605 million in income from goods and services generated, and $271 million in labor income. That’s impressive,” said City Manager Dirk Brazil. “The projects will likely generate positive regional economic impacts as well, but the most significant benefits will be experienced here in Davis and in Yolo County.”
The report also evaluates the long-term economic effect of the two projects after buildout. “The innovation center projects have the potential to add 11,000 jobs, $2.9 billion from goods and services generated, and $706 million of labor income on an annual basis,” said Brazil. “The innovation centers will not only create high-wage jobs for Davis residents, but will also provide the financial resources that will allow the City to address maintenance needs and provide high-level services for our residents.”
In a release from the Mace Ranch Innovation Center developers, they note from the report that “Davis indicates that the Mace Ranch Innovation Center (MRIC) project at build out would generate a projected net $2.2 million annually to fund city services like parks, libraries and public safety.”
The developers note that the MRIC is estimated to create several thousand high-wage jobs and generate over $2 billion in economic impact for the city. Moreover, they note that its construction is anticipated to create more than 2,000 jobs and generate hundreds of millions of dollars in economic impact.
However, once we unpack the expected benefit, the impact of the innovation parks seems rather modest.
First, of all, $2.2 million at buildout, which we would project in 20 to 40 years, is nice but hardly a game changer. By way of comparison, the city could generate a comparable amount of revenue with a $50 a year parcel tax – at year one, without developing 200 acres.
Second, as the EPS (Economic and Planning Systems, Inc.) report indicates, $732,000 of that projected revenue would come from a Hotel Conference Center – with one projected to be built at Richards Boulevard, and a similar one in the works along the frontage road by I-80 in South Davis. Does the city need a Hotel Conference Center there?
The bottom line is that the innovation parks have been projected to produce the kind of tax revenue that the city needs to become fiscally sustainable, but $2.2 million, while again a nice amount of money, isn’t even likely to reduce the need for a sales tax in the immediate future.
The voters of Davis, with the implementation of Measure J in 2000 by a narrow margin and its renewal ten years later by a very wide margin, are reluctant to expand the borders of Davis and pave over farmland as it is.
While we can certainly point to positive benefits to the business community and the economy from having space for research and development, technology transfer from the university and space for local companies like Schilling Robotics to expand, a large number of residents, myself included, saw the innovation park as a way to ensure the fiscal health of the city.
With the release of this report, many are now second-guessing the need for this project, and many more are now skeptical that a 200-acre project could pass a Measure R vote.
However, before we scrap the project, we should at least consider other possibilities for revenue.
For one thing, the EPS report’s analysis “excludes the ongoing operations and maintenance of Project facilities that are proposed to be funded through private sources (e.g., lighting and landscape district; Mello-Ross community facilities district [CFD] for services).”
The city has looked into a CFD of $.50 per square foot on top of the rest of the fees and taxes. That would generate over a million in revenue. The advantage of taxing built-out space is that they do not have to pay the tax until something gets put up.
Right now they are projecting 2.7 million in non-residential square feet. That includes office, flex, manufacturing, and industrial commercial, as well as a hotel and public space. Factoring out the hotel and public space, we are looking at about 2.5 million in taxable square footage.
There are mixed views on the viability of the CFD, but, as one person told the Vanguard, given the increase in the value of the land once it gets entitled and annexed, the city should have the right to share in that windfall.
There is also the matter of the 25 acres that the city owns and is considering separately. One belief is that the city should maintain that land. However, another view is that by putting the 25 acres into the innovation center, the city would have about one million square feet which over time would be worth about $10 million, once it is fully entitled. Based on that, the city could get another million a year in return for that land at buildout.
Finally, we ought to consider, instead of a 2.5 million square foot development, what happens to revenue at 4 million square feet. From the city’s perspective, the majority of the costs – roads, infrastructure, etc., are not all that different at 2.5 million square feet versus 4 million square feet.
But the added jobs, additional property taxes due to increased property values, and additional square footage along with construction costs and other fees would be a tremendous improvement.
Naturally, a more dense project will produce more concerns about traffic congestion and the like, but if the city could crank up the projected revenue from $2.2 million at buildout up to $5 million or more, it is a game changer in terms of revenue.
Traffic impacts can be dealt with over a 20- to 40-year buildout, through the investment in a regional transportation system.
The bottom line here is that if we are truly projecting a $2.2 million revenue in 20 years, then I think the voters are going to be reluctant to support this project. The city needs to think about ways to generate the additional revenue and model it so we can see the likelihood of success.
—David M. Greenwald reporting