Economic Development Series: Data Demonstrates Economic Development Potential of Downtown

U3-Mnt-View

By Judy Corbett

It’s pretty clear that the City of Davis is going to have to raise more revenues to meet our infrastructure and program needs.  The question is, what’s the best way to accomplish this?  Do we have any data that will provide us with the information we need to make good decisions?  Data from other communities has illuminated an answer that just might provide answers to our own economic development challenges.

City Revenues and Expenses

In a Dec. 15, 2015 report to the Davis City Council, city staff demonstrated that we are under-spending on critical infrastructure and programs by more than $10 million on an annual (ongoing) basis.  As Mayor Pro Tem Robb Davis notes, “That is $10 million every year.” It is for the important things we already have including bike paths, streets, sidewalks, park structures, pools, tennis courts, traffic signals, our urban forest, playgrounds, irrigation systems and city building maintenance.

Options for Increasing City Revenues

At this time, the data we need to build our way out of our deficit is lacking.  We now know that Research Parks won’t provide us with enough income to address this deficit.  

The Yolo County Board of Realtors helped us begin to answer this question by securing funds from the National Association of Realtors to help the Davis Futures Forum bring architect and urban planner Joe Minicozzi to town last fall. Minicozzi loves data!  He has performed analyses of cities throughout the country, looking at the tax revenues per acre generated by individual properties within a jurisdiction.  He translates this into a three-dimensional map to illustrate his results.  In almost every community he visits, Joe finds that centrally—located properties designed to serve multiple functions (retail, residential and office space) result in far higher revenue yields per acre than single-purpose properties.  In his experience, downtowns win every time!

As Executive Director of the Local Government Commission, I worked with Minicozzi to gather data in seven cities, primarily in the San Joaquin Valley.  In Merced, we found the Merced Mall brought in $4,520 per acre in 2014, compared to the downtown, which was $7,593 per acre. In Clovis, the Sierra Vista Mall gave the City $3,069 per acre, versus downtown which netted $11,482.

Results in the City of Mt. View were particularly interesting.  Joe’s map of property revenues showed the very highest concentration of income per acre to be in downtown Mt. View.

The height of the bars on this map of downtown Mtn. View indicates tax revenues per acre and the cluster of high performing properties is centered downtown.  Source: Urban Three

In 1990, the City’s declining and somewhat deserted town center began a revitalization process using a precise plan.  This has resulted in downtown Mt. View becoming a hot spot in Silicon Valley with a compact, walkable mix of office, retail, restaurants, housing entertainment and city government offices, a combination that has created a highly vital and active downtown community. There are no skyscrapers there; much of the downtown is made up of 2 and 3 story buildings.

Mt. View is also the home of Google, shown on the map as low income generating locations.  Google may bring in a lot of money as a single project but their facility has consumed a great deal of the City’s buildable acreage.  Further, Google employees work, eat, and play on their own campus, doing little if anything to support local businesses.

A naysayer might ask, why calculate revenues on a per acre rather than a per project basis?  In response, Minicozzi recommends that our City think like a farmer who must continually reassess what crop is going to bring in the most revenue on the acreage that he/she owns.  Davis has a decades-old policy of preserving our surrounding, highly precious agricultural lands.  Our revenue generating acreage is limited, thus we need to think about where we get the most bang for the buck on the properties that are available for development.

Options for Reducing City Infrastructure Maintenance Costs

The second speaker in the Davis Future’s Forum, Chuck Marohn, gave us further data with which to work.  Marohn reinforced past research demonstrating that expanding infrastructure to serve new areas can put cities in an economic hole.

The money that a developer of a greenfield property provides a city up front may look like a lot, but it can turn out to be inadequate once the streets and the infrastructure begin to need repairs.  Some communities find they must approve yet another development to get enough money to cover the costs of the last one. Marohn called this a “Ponsi Scheme.

Benefits of Focusing on Downtown Development

Though we don’t yet have data providing the income and cost per acre of the various Davis neighborhoods, we may conclude from past analyses of Minicozzi and Marohn that adding housing and additional amenities to our downtown will cost the City less for infrastructure and services while generating more revenue per acre than any other option that is open to us.

Happily, this option is there at a time when there is increasing demand for downtown housing coming from the two largest demographic groups:  A large number of millennials are now choosing downtowns over life in the suburbs.  Baby boomers are also interested in moving downtown where they can live, work and play, without having to drive a car.

Further, we hear from Silicon Valley experts that the innovation economy is best served in an environment that allows people from different sectors to strike up a conversation with someone new during the course of their daily lives.  There is now an increasing tendency all over the country for businesses to follow the millennials downtown where the innovation economy is thriving.

How do we get there from here?

At this month’s Davis Future’s Forum, we heard from a highly-respected Davis developer who has added vitality and improved the aesthetics of our downtown with his attractive, mixed use building projects. Chuck Roe informed us that it is both costly and time consuming to build in Davis.  He is not the first person to report this. I have continually been told by friends and family that city processes present a serious barrier to doing business in here.

Our featured speaker at this months forum, architect and urban planner Daniel Parolek, was forthright in agreeing with Chuck’s statement.  He advised that the City would be well served by revising the sometimes-conflicting layers of zoning and regulations that have collected over the years.  He advised that this begin with a well-planned community engagement process to develop a vision for the future of our downtown, then proceed by producing clear and concise zoning ordinances that will support that vision.

Once zoning reform is completed, developers will know exactly what we want as a community.  If they comply, developing here will be less costly and more efficient.  Taking this step will also enormously reduce the time demands on our over-worked city planning staff.

There is plenty of room for increased development in our downtown. According to Darin Dinsmore of Crowdbright, Davis has an infill score of 23 out of 100, demonstrating that we are failing to take advantage of our infill potential.  Just a quick look around portions of our downtown makes this fairly obvious!

In summary

We have learned over the past few months, that, our City badly needs to increase the revenue side of the City budget.   We have learned from data created for other communities that improving and growing a downtown can be an effective strategy for maximizing tax revenues and minimizing infrastructure and service costs.  . We have also learned that creating a unified community vision of the future of our downtown, then implementing this vision by reforming our zoning ordinances makes good sense.  Doing so will make downtown development less costly and reduce pressure on city staff.  It’s a win/win economic development strategy!


Editor’s note: following the decision by Mace Ranch Innovation Center to put its pending project on hold, the Vanguard decided to re-start a community discussion on the future of economic development in Davis.  As such, we are reaching out to a very diverse group of people and starting May 1 we are hoping to publish one op-ed a day on this subject.  We are pleased to announce that so far we have over 40 commitments and counting. Beginning today, we will publish one article per day for the month of May into June.  If you would like to add your voice – please submit your piece on the future of economic development in Davis (800 to 1000 words).

May 1: Robb Davis

May 2: Elaine Roberts Musser

May 3: Dan Carson

May 4: Matt Williams

May 6: Peter Bell

May 7: Bob Fung

May 9: Rob White

May 16: Alan Humason

May 17: Mike Hart

About The Author

Disclaimer: the views expressed by guest writers are strictly those of the author and may not reflect the views of the Vanguard, its editor, or its editorial board.

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11 Comments

  1. The Pugilist

    This is basically the Minicozzi  argument – build up and densify the downtown.  I’m not necessarily against that approach but do believe we need peripheral land for bigger companies.  Also, densification is expensive.  Minicozzi worked in areas where land was cheap and costs were less – we have no redevelopment money, where is the funding coming from for this?

  2. nameless

    I want to throw something out here, which is just food for thought.  It seems as if every time new business wants to locate in this city, opposition builds from multiple sides, e.g. no growthers, existing businesses, environmentalists, nearby neighbors.  What makes the author think that developing the downtown will be any different?  My prediction is that existing businesses won’t want any new competition, and nearby neighbors will complain about new economic development encroaching on their sunlight.  I see this as the bigger problem with economic development in this town… all the competing agendas undermining the economic development process.

    1. Frankly

      The significant infill alternative in this city is a non-starter as made apparent by the path of the old Fifth Street parking structure, and the Trackside and the Sterling Apartment projects.   The best we will get is 2 or maybe 3-story buildings, but even those are going to be met with raging opposition.

      The problem is that the econometrics for lower density redevelopment don’t pencil out.  First, there is the high cost of the land.   Second are the myriad of new codes and fees that have been layered on.  Many of these are fixed costs to the development project that increase the capital requirements to the point that it lowers the expected returns from rents that break the financial feasibility of the project.

      I think the rule of thumb for developers is 8% return on capital.  The developer and her financial backers will not tackle a project where there is not a return of at least 8%.   Because there are plenty of other investment alternatives for them to earn 8% with their money.

      I hear it all the time when I ask why there is a real estate supply problem (commercial and residential).  The answer is that the cost of building has skyrocketed due to the layering on of codes and fees… mostly from the left-leaning environmental activists that have taken over much of state and local government.

      I am looking at a project where simple interior office and bathroom construction in an industrial shell has increased in cost over the last four years from about $35 per sq ft to about $60 per sq. ft.  Most of that increase is the result of codes and fees that have been added.  And most of those new codes and fees can be traced back having some connection to global warming alarmism in our nanny state.

  3. Frankly

    One reason that bare greenfield land is much more attractive to develop is that there is rarely any environmental issues.  Redevelopment is difficult for a number of reasons, but one big one is that environmental regulations count the tiniest fractions of “dangerous” compounds as requiring mitigation.   The funny thing is that if the property is never redeveloped, the community just lives with the compounds.  It is only if someone wants to improve a property that the environmental reports are required.

  4. Misanthrop

    In most places developing on the periphery is easier because it doesn’t upset the balanced human ecology of existing neighborhoods. Of course in Davis Measure R makes peripheral development infinitely more difficult so Davis has become its own worst enemy.

    It was amazing to hear the myriad housing problems that were brought up at the city council the other night; absentee landlords who don’t keep up properties, packing too many renters into a property, renting of garages, sheds and closets as additional rooms, skyrocketing rents, zero vacancy rates. One thing that didn’t come up is the aging housing stock requiring additional maintenance that results from little new construction. At the bottom of it all is the reality that Davis has opposed new construction while UCD kept growing. As long as the voters of Davis oppose new development while UCD continues to grow these problems will only get worse. A renters ordinance is barely going to put a band aid on a problem that will continue to fester until there is a huge paradigm shift in the way Davis imagines itself, from the no growth  attitudes that have prevailed for a generation, to the reality that we are experiencing an under the radar form of densification that is growing worse with each passing year.

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