Economic Development Series: Leveraging Core Competencies

Innovation-Park-exampleby Matt Williams

Successful economic development starts with a strategy that builds on a community’s core competencies, and then expands that strategy into tactics that leverage the core competencies.

Working more collaboratively with UCD, ideally on mutual timetables, is essential to making progress in building the innovation economy in Davis.

The strategy of leveraging the research programs and intellectual capital of UC Davis is solid.  The “pauses” of both Davis Innovation Center and Mace Ranch Innovation Center (“MRIC”) are because of a failure at the tactical level.   Robb Davis summed up that tactical level failure well when he said in the first article in this series:

For nearly two years we, as a community, have failed to advance a coherent vision for economic development in Davis. Instead we have advanced a peripheral real estate development strategy that has run into an inevitable dead end.  We have not articulated the ends we wish to achieve with an economic development plan, and have thus limited the discussion to revenue generation alone.

David Zehnder, the EPS consultant, confirmed that tactical failure when he reported that the MRIC project pencils out very nicely at $20 per square foot, but poorly at $9-$13 per square foot.

At $9-$13 per square foot the Mace Ranch Innovation Center is just another business park.

We have always known that there is no comparable project near Davis that can validate whether the market supports a $20 per square foot rental rate.  Putting EPS in the position where the comparable projects they are using in their analysis are generic business parks is fiscal forecasting suicide.  The comparable examples that should be in the analysis should be coming from communities where the intellectual capital and research core competencies of the community are successfully being transferred to the private sector, where the value of the innovation they create justifies paying $20 per square foot rather than $9-$13 . . . and if the proximity to the adjacent university’s intellectual capital and research is removed, the high level of value creation evaporates.

Robb Davis was correct when he said:

We have a renewed opportunity to step back and ask

  • What are the ends we want to achieve with economic development?
  • What is the full set of tools we need to utilize (and invest in) to achieve the ends?

The “ends” of economic development are a more diversified and resilient local economy; a variety of jobs that provide meaningful work for people with a variety of gifts; and adaptable work spaces that accommodate start-ups, research and lab space and corporate offices.  Fundamentally, the ends should be about identifying our particular local strengths and focus on actions that build on them.

However, that description doesn’t tell us how we can transcend the $9-$13 per square foot value and achieve a $20 per square foot value.

To do that, the City, the Innovation Center developers, and UCD need to work together to build rock solid documentation of clear examples of evidence of how other cities have leveraged close collaboration with their university’s intellectual capital and research programs to produces $20 per square foot innovation center value creation.

It is not too late to be creating that kind of evidence, and UCD and the City need to truly collaborate in its production.  The entire distributed innovation ecosystem in Davis will benefit from this collaborative effort.

It is important to note that the “non-innovation park” efforts are also crucial to Davis’ economic sustainability.  In this “pause” era, that is even more true.  The focused economic development activities in and close to Downtown are very actively leveraging research and intellectual capital.  Creating a joint community/university value creation message will help those non-innovation center businesses thrive.

In parallel to the steps described above, to address both economic development issues as well as overall quality of life for its residents, Davis needs to build take proactive steps to upgrade its telecommunications/broadband network, replacing the current Comcast-provided network (predominantly coaxial cable, with some fiber) with an all-fiber to the premises (“FTTP”) DavisGIG network.

Why DavisGIG?  Because every home and business in Davis would have lightning fast Internet speeds of up to one Gigabit (1000 Megabits) per second.

To accomplish that, the City has chartered a Broadband Advisory Task Force (“BATF”) to study options for improved broadband access for the City, and make recommendations of future courses of action to the City Council.

The BATF in conjunction with Davis Community Network (“DCN”) is currently seeking proposals for a FTTP Feasibility Study that will present the recommended business direction and operating principles for municipal delivery of fiber optic broadband services to every home and business in Davis.

The Feasibility Study’s business plan, analysis and strategies will focus on how the Davis FTTP market opportunity should be approached from a range of business dimensions including marketing, product design and pricing, organization structure, financial planning, and considerations of risk and competitive behavior.

Improving our telecommunications infrastructure will not only support our community’s economic sustainability, it will also open up opportunities for students in the DJUSD system as they think about their career choices.

Robb Davis captured the essence of what we need to do as a community when he said:

In the months ahead I believe we must join together to develop a renewed economic development strategy that is comprehensive and starts NOT with vague notions of innovation as an end in itself, but with how to foster development given the already existing strengths of this community—which are substantial.


Author’s note for clarification: The $9-13 per square foot and $20 per square foot figures were provided by David Zehnder of EPS in both discussion with the FBC and on page 12 of their report (see LINK) which reads as follows:

Land Value Assumptions 

The price of the developed land determines how much revenue would be generated from each land sale. Broker interviews, comparable sales, assessed values estimated by A. Plescia & Co. as of February 2, 2016 for the Nishi project, and results from a pro forma produced by EPS establish viable finished land parcel values ranging from $9-$13 per square foot of land. This land value is the amount a developer of a building would be willing to pay MRIC land owners after the land owners entitle the land, secure financing, conduct pre-development, conduct grading, and install assumptions used in this report.

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

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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22 Comments

    1. South of Davis

      Mike wrote:

      > Infill businesses without adding a lot of new housing

      Interesting that over the years the people that own rental property in town seem to favor “Infill businesses without adding a lot of new housing” (to get a lot of prospective new tenants without getting any competition) while the people that own retail in town seem to favor “Infill housing without adding a lot of new retail” (to get a lot of prospective new customers without getting any competition)…

      1. hpierce

        Although not 100% true, yet generally correct, in my limited experience, interacting with both groups for only about 35 years…

        One major exception…there are a significant numbers of SF HO’s (not landlords) who also see their property values as “assets” whose value would be undercut by additional SF housing…

  1. Michael Harrington

    I think we can do a lot more infill.  I can think of 3-4 very nice sites in the downtown that could support significant new buildings.

    There needs to be a total redevelopment of the block on 3rd to 4th, E to F.  The City owns most of the land already.   The CC was going to do it, bought bonds, then dropped it.  (What’s the report on all the interest we are paying on those unused bonds?  $1.0 million a year, right?  David, there is a story for you.)

     

    The problem is, and one of the main reasons I am very annoyed with the CC, is that they are all wasting our time and City energy on these large, exterior, hail-mary developments to solve all the city’s problems.  (2 down, 1 to go)

    The only one that made any sense was the one out by Sutter, and those guys were run out of town by locals.

    So while the CC, led by the cheerleading of Rochelle and Rob White, spent the past few years trying to throw a long pass, the downtown was going to heck with these changling late night clubs, and other problems.  All right under their noses, and they did little until that poor boy was murdered by the Vacaville gang.  Let me tell you:  downtown residents, such as Alan Miller and myself, sure knew things were turning south when the new Thai  restaurant brought to town the Thai business model of the jammed disco bars very late at night, but the CC did nothing.  Not even the fire department.  (Did those late night conversions violate the total occupancy codes?  I think so.)

    Time to finish off Nishi, and let’s get to work on fixing this town we all love.  What about it Robb?  Gonna pull in others besides developers into your tent for your Mayorship?  Why don’t you invite John Munn and a few other fiscal conservatives?

  2. Biddlin

    ” I can think of 3-4 very nice sites in the downtown that could support significant new buildings.”

    And he’s prepared to sue over those, too.

    1. hpierce

      Think that’s why he’d propose them…the low-hanging fruit…

      But, even a stopped clock is right twice a day… the block bounded by Third, Fourth, E and F cries out for redevelopment in the long term… it could be awesome, but will need to have a good master vision, supported by the community, be phased carefully, and it will not be cheap, particularly as there is no redevelopment agency.

      A great idea, but may be a “pipe dream” at best…  but if the dream can come true perhaps it deserves further dreaming…  and possibly baby steps to see if it can come to fruition… that would be true “planning”… as opposed to “processing”…seem to recall this concept (whole block redevelopment) was successful in Redding, 30-35 years ago… in their Core Area…

    1. hpierce

      IMO, still a good concept to investigate… Redding’s incorporated a parking structure, as I recall…

      There needs to be a total redevelopment of the block on 3rd to 4th, E to F

      the “anti-car in the downtown groups” killed the deal.  And that was AFTER the bonds were purchased

      You’re interesting (?) Mr H… first you advocate a concept,then when someone says it has merit, you dump ice water on it… almost bi-polar…

      Perhaps I missed your true points, to dump on Nishi, and staff?… and getting some ‘swipes’ in on Ms Swanson, and the two Rob(b)s?…

      Is that actually it?  You’re starting to remind me of the ‘presumptive Republican candidate’, as far as style (not ideology)…  but then, I think neither of you have an “ideology”, per se…

    2. David Greenwald

      Not from my understanding. My understanding is that what killed the deal was the rift between those who wanted paid parking and those who didn’t.

  3. Michael Harrington

    hpierce:  the common point across all of this is terrible city planning on these projects, led from the top.

     

    If I take a swipe at anyone, it is well-deserved.

    This downtown needs a plan, and needs one soon.  With the hopeful defeat of these three large exterior projects, maybe we can roll up our shirtsleeves and get down to business on promoting active, high quality commercial, retail and mixed use.

    There simply has to be more parking, and the 3-4, e-f block is the place.  They actually had a bit of a plan, then the whole CC suddenly went sideways with these three exterior projects and everything else stopped dead.  So much unnecessary drain on city planning staff resources and CC agenda time …. it’s a serious matter, you know.  The lost opportunities are huge, but I think we can work together to catch up.  We are 3-4 years behind where we should have been right now.

    This is all the same stuff I was saying in 2000.

     

    Maybe I will write a piece sometime on what I think should happen in the downtown and commercial areas to ramp up economic activities for the well being of the community.  It’s just that these exterior projects tie up so much time …

  4. davisite4

    I took Robb’s main points to be that we should not look at innovation parks as ends in themselves and we should not assume that innovation parks will meet our ends (i.e., our goals, our needs).  Matt seems to have to missed those points.

    1. Matt Williams

      That is an interesting observation d4.  I felt the point  you have identified was/is so important that I included it as the concluding point of my article as follows.

      Robb Davis captured the essence of what we need to do as a community when he said:

      In the months ahead I believe we must join together to develop a renewed economic development strategy that is comprehensive and starts NOT with vague notions of innovation as an end in itself, but with how to foster development given the already existing strengths of this community—which are substantial.

  5. Michael Harrington

    I liked Robb’s article.  It was very good for him to write it.  This is a mostly volunteer job for him, too.  I know he is frustrated.

     

    Matt did appear to miss Robb’s couple of points.

  6. nameless

    Robb Davis: “For nearly two years we, as a community, have failed to advance a coherent vision for economic development in Davis. Instead we have advanced a peripheral real estate development strategy that has run into an inevitable dead end.  We have not articulated the ends we wish to achieve with an economic development plan, and have thus limited the discussion to revenue generation alone.

    I disagree.  There was a clear vision for economic development – three proposals came forward to address that vision.  The reason the vision of three proposals has run into a dead end has more to do with the following:

    1.  Binning Tract folks, who don’t even live in Davis and do not have a Measure R vote, disrupted public meetings inre DIC.

    2. The city fired CIO Rob White, sending a signal to developers that perhaps the city is not that interested in economic development.  The current CIO is conspicuously silent.  The City Council members themselves, w the exception of Swanson, aren’t exactly gung ho about the three proposals either.  As the city attempts to remain essentially neutral on innovation parks, with a hint that every concession is going to be rung from developers, other municipalities are rolling out the red carpet for innovation parks.

    3. Mayor Wolk sent the message that the city was doing better fiscally, confusing the public as to whether we really do need more tax revenue to fix roads and maintain other city infrastructure.

    4. Harrington sued the city over Nishi as well as the new hotel conference Center, and threatened to do the same inre MRIC.  I don’t believe for one second he would not have mounted a similar negative campaign against DIC.

    5. A very vocal opposition group has formed to defeat Nishi/Measure A regardless of how good the project is, and no doubt will also oppose MRIC, and started to make noise against DIC.  Their reasons don’t stand up to scrutiny: traffic congestion, air quality, not green enough, no affordable housing (even tho not required), no ag mitigation specification as to exactly where it will be, ad nauseum.

    The ends we wish to achieve are clear: tax revenue for the city, more jobs for Davis citizens, more opportunities for young families to live and work in Davis, more customers for existing businesses, more R&D space for incubators, start-ups, existing businesses like Schilling.

  7. nameless

    Robb Davis: “In the months ahead I believe we must join together to develop a renewed economic development strategy that is comprehensive and starts NOT with vague notions of innovation as an end in itself, but with how to foster development given the already existing strengths of this community—which are substantial.

    With all due respect, we have talked innovation parks to death.  We had three proposals on the table.  The city dropped the ball, when it fired CIO Robb White, sent mixed signals about how well the Davis economy was doing, hired a CIO who has remained silent, is not actively promoting the innovation parks.  It is trying to somehow remain neutral, as other cities woo the innovation parks away.  And about the only thing that comes out of City Council members, with the exception of Rochelle, is how many concessions can we wring out of the developers, or some other reason why the innovation parks are not good enough yet.  I just don’t see city support. All I see on the city’s part is paralysis by analysis. My hope is the current subcommittee meeting with MRIC can finesse this project and really try hard to see if they can’t make it work. Perhaps there needs to be a few less amenities for the thing to pencil out. Remember, if the city demands too much it will kill the golden goose!

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