A month ago we warned that “Cascading System’s Failure in Planning May Doom Economic Development in Davis” as we learned that the developers for the Davis Innovation Center were moving their development a few miles north on Highway 113 to Woodland. Things just got worse – much worse.
With the news that Mace Ranch Innovation Center has been put on hold, and the precarious, at best, nature of the Measure A campaign, the real possibility exists that Davis will get none of the three proposed projects that could have, combined, added 7.5 to 8 million square feet of Research and Development space to Davis.
Already the city has lost homegrown high-tech giant Bayer-AgraQuest. Marrone Bio Innovations has had to deal with a series of mostly self-inflicted wounds. The Panattoni-proposed 225,000 square foot office park has fallen through. And now there is a real possibility that Schilling Robotics will have to leave Davis.
Some have attempted to cushion the blow, arguing that we should pursue smaller infill projects. While some have pointed to the Dispersed Innovation Strategy, even the Studio 30 report that came out in November 2012 laid out the need for a large anchor site or two.
That report offered both the near-term and mid-term strategies. Nishi was at the center of the near-term strategy: “The Gateway (Downtown Research & University Innovation District) option offers the best close/in location due to the proximity to University and property owner and University interest, and should be pursued as the City’s top innovation center priority.”
However, the report notes, “The current isolated and dispersed sites that are available and appropriately zoned are not adequate in terms of size, location, or configuration (and related constraints) to address the emerging market need of an Innovation Center.”
The study continues, “With available reasonably priced land and effective marketing to innovative high tech companies, Studio 30 estimates Davis could absorb up to 10 percent or around 100,000 square feet of the 1-1.5 million industrial/office square footage absorbed annually in the Sacramento region. Because of this Studio 30 estimates Davis needs at least 200 acres for business development and expansion over a 20 +/- year time horizon.”
The Mace Ranch Innovation Center would have filled this clearly identified need. But it is also clear that, over the last two years, the city has moved away from prioritizing economic development.
In the spring of 2014, the city of Davis, facing a $5 million immediate structural deficit and the need for additional revenue to fill roads and other infrastructure needs, put out an RFEI (Request for Expressions of Interest) that returned three potential innovation center projects, two of which were viable in the immediate term – Mace Ranch and Davis Innovation Center (located near Sutter-Davis).
However, at the same time, City Manager Steve Pinkerton left in late April and was replaced in the interim with Gene Rogers. Mr. Rogers always seemed reluctant to push forward on the innovation centers, although a lot of that could be chalked up to his interim status.
The city then hired Dirk Brazil in November 2014. Almost from the start, we heard rumblings that Mr. Brazil was not convinced that the city, whose immediate budget crisis seemed resolved between the sales tax and improved economic, needed to go the economic development and, in particular, the innovation park route.
This seem confirmed more or less when highly-regarded Chief Innovation Officer Rob White was unceremoniously run off and, right around the same time, the Davis Innovation Center, perhaps for a variety of reasons, shut down their project.
Now just about a year later, MRIC is pausing their project. Unlike its counterpart, this project is not dead. However, there are publicly aired concerns about the economic viability of the project. The Davis City Council in February shut down explorations into a mixed-use component – ironically citing the ability for the project to pass a Measure R vote.
Behind the scenes, even some supporters of the city manager are loudly questioning the city’s commitment to economic development.
The problem we see is that the long-range budget picture remains rather bleak. Despite the sales tax temporarily pushing the immediate budget into the black and an improved economy, the city faces about $655 million in unmet needs over the next twenty years.
That works out to the need for about $32 million to pay for things like roads, parks, greenbelts, other infrastructure, city buildings and the unfunded promises in the form of pensions and health care to employees.
As we have noted, the budget being balanced with a 15 percent surplus is a technical accuracy, but the margin that the city runs on is quite small. A small increase in costs, a small decrease in revenue, or a failure to renew the sales tax puts the immediate budget into the red. That doesn’t count the $32 million we need in addition, a number that represents over 60 percent of our general fund.
This is the case that the Vanguard has been screaming for the council to make to the public – and, for the most part, it has refused. In July 2014 and again in February, the council declined to even put a small revenue measure on the ballot.
It does not help that political ambition by some have led to fanciful pronouncements about the sustainability and strength of Davis’ fiscal outlook. While things improved in the immediate term, and opportunities were there, the city was not prepared to seize the moment.
In the short term, we need a parcel tax, or other tax, that would help to fund roads, an increased share of parks, and other critical needs.
In the longer term, the strategy was to augment that with economic development that hopefully could start cutting into our unmet needs as well as give us margin for error on our general fund.
Without additional revenue, the city is looking at the potential for large parcel taxes. It would take something on the order of a $1500 to $2000 a year parcel tax to fund the full $32 million. However, a smaller parcel tax could have addressed at least roads, sidewalks and bike paths, while a longer term strategy would have helped the city buffer the blow to the taxpayers.
Those who believe that the city is a great place to live are correct, but they miss that that quality of life rests on a very precarious mountain right now. Roads are crumbling and the city has managed to fund only half our needs. Our parks, greenbelts, and recreation system is in bad need of an influx of money or we will see a dramatic decline in quality of life.
While we have worked hard to protect farmland, our interior is increasingly strained by a lack of housing and, in particular, student housing that will put huge pressures on the system as UC Davis continues to grow without providing adequate housing for the community.
So yes, Davis remains a great place to live today, but without building for the future, it will not be a great place in 10 to 20 years.
Davis is losing out on a huge opportunity. The university continues to look at technology transfer. Right now that energy is going to have trouble finding space in Davis, and will instead be looking to Dixon, Woodland, West Sacramento and the increasingly ambitious Sacramento, with its huge railyards project as well as its ambitious new director of innovations.
Economic development alone will not fix what ails the city of Davis. But the projects could have helped a lot. The Hotel Conference Center that is on hold due to litigation could have brought in half a million by itself. Nishi might bring in $1.4 million annually if it would pass and things break in the right direction.
The numbers on Mace were conservatively at $2.2 million, but that is before the city tweaked the fiscals to maximize potential. At the very least, it could have generated $6 million in immediate revenue, with $10 million in one-time fees, while bringing in thousands of new jobs – with the potential to realize their revenue as well. Davis Innovation Center, with its higher projected density, might have been at $7 or $8 million, also with $10 million in one-time fees.
Those are long term strategies, but for a relatively modest hit, we might have added $15 to $20 million in annual revenue within twenty years. That might not have fixed everything, but it would have been a good start.
Can we fix things?
MRIC is not done completely. The council subcommittee of Rochelle Swanson and Robb Davis is going to go back to the drawing board to see if MRIC can be saved. That might take a housing component. A lot of people are opposed to MRIC with housing, for reasons I don’t fully understand.
Troubling is that some have publicly suggested that this is simply part of the plan, bait and switch they call it. I would argue that is not a helpful conversation – we should be trying to figure out if there is a way to save the project. At this point it really should not matter whether housing was a bait and switch from the start because, unless something changes, there is no project. And if there is no project, then we have to find money elsewhere.
If the project cannot be saved, we will be looking at a series of new taxes – we may be anyway. That will put the city on a collision course with the school district, which is looking to renew its more than $500 a year parcel taxes this November.
Those who question the urgency of that ought to read carefully Bob Poppenga’s analysis from Friday. The district relies on the $9.4 million it gets from Measure C and Measure E – without which, the district would face immediate 15 percent cuts in programs.
The future of Davis is at stake and the decisions we make in the coming months will greatly shape it. I worry that the city my children inherit will not the city we have all come to love.
—David M. Greenwald reporting