Last week, the Davis City Council pushed back on Nishi, arguing the need for access and, as tricky as that issue may be for the project that is aiming for a June election date, the fiscal analysis may prove just as thorny.
While the project has always been viewed as a mixed-use project with high-density housing combining a small retail space and a modest-sized R&D (research and development) component, part of the goal as laid out by council was “revenue generation to support city services throughout the community.”
However, the economic analysis in September came back unfavorable toward that goal, with the EPS (Economic Planning Systems, Inc.) report showing the project would be a net negative of $78,000 at build out.
This led the developers to come out with a statement pushing an onsite hotel as a means to push the project into the positive. They wrote, “According to the City’s consultant, the Nishi project alternative that includes a hotel will generate a general fund surplus of $416,000 per year, money that can be redirected to vital city services. According to city projections, the Nishi project proposal with an onsite hotel is estimated to create between 1,500 to 1,800 jobs, $315 million to $385 million in economic output, and $89 million to $107 million in labor income (wages).”
That may sound good, but there are some problems with that proposal.
EPS analyzed an alternative where “a portion of the proposed R&D space is replaced by a 70,000-square-foot hotel.” This alternative has them worried that it “could undermine the critical mass of tech-driven development that is at the heart of the Innovation Center concept.”
They add, “The resulting reduced allocation of R&D at the Nishi location, combined with proximity to an additional hotel proposed at the entrance to Nishi on Olive Drive and the recently developed (and expanded) Hyatt Place Hotel on the UC Davis campus, may undermine the viability of this alternative.”
In addition to the recently approved hotel conference center, there is a proposed hotel along I-80 and potentially one at Mace Ranch Innovation Center, as well.
In short, while a hotel on paper may be a quick fix to the revenue generation problem, in reality, it may just siphon off existing revenue generated by the Embassy Suites that will be built on Richards Blvd. At the same time, it takes away from the already modest provision of R&D space in Nishi.
This leads us back to our concern from September where the Vanguard argued that Nishi was trying to do far too much on a space that is just under 47 acres.
The developers further diffuse its impact by turning the project into mixed use. While there are some strengths to that, if we hash this out further we see that it provides for just 650 residential units, where 440 are rental and 210 are for-sale units. It also has up to 325,000 square feet for R&D uses, and 20,000 square feet for retail uses – coffee shop, café, restaurant.
The city has a desperate need for residential units, particularly student rental units, but 650 is not going to dramatically improve the housing stock – particularly when its impact is further diffused by splitting the units into 440 for rental and 210 for sale.
Along the same lines, the city is greatly in need of R&D space, but 325,000 square feet, while nice, is no game changer either.
The result of this mix is not particularly helpful to the needs of the city, as encompassed in the fiscal analysis. Again, EPS projects a net loss of $78,000. While that is something that the city can fix in terms of getting it to revenue neutral, the point EPS makes is that “the estimated annual net fiscal deficit for the Nishi project is attributable to two key factors: 1) the inclusion of 650 residential units; and 2) an assumption of approximately 80,000 square feet of public/nonprofit space (20% of total nonresidential space).”
So what is the fix? The developers are suggesting the hotel as their fix. But another possibility is the all-R&D option if we are looking for more business park space.
The draft EIR estimates that replacing residential uses would “would result in approximately 1,200,000 sf of R&D uses on the Nishi site, instead of 650 residential units, 350,000 sf of R&D uses, and some accessory retail under the project.”
The DEIR notes, “Because this alternative would not include residential uses, it would not meet any of the project objectives associated with housing and the provision of a mixed-use community. The objective related to the provision of high-skilled technology jobs, however, would be achieved to a greater extent than that of the project.”
The EPS report worries, “While the R&D component would be substantially larger with the additional jobs, the loss of housing could reduce the overall vitality of the project.”
EPS makes the opposite argument that we do, arguing, “As a small, close-in site, the strength of the Nishi project is its ability to provide a fine-grained, mixed-use environment that is attractive to university partners. While some increase in R&D may be productive, potential reductions of supporting uses may erode its competitive stance.”
But, from our perspective and as the project stands now, the project does not offer Davis a great increase in either R&D space or housing, and perhaps it would be better off focusing on one or the other.
—David M. Greenwald reporting