Bottom Line: To Remain The Community We Love, We Must Give a Little, On Something
San Luis Obispo and Davis are very similar communities. In fact, extremely similar in so many ways. They are small college towns, heavily reliant on a university for labor, they have strong growth control mechanisms in place, and they face the crunch of an expanding university that is putting pressure on growth. They each have a strong downtown that faces remarkably similar challenges.
However, as we reported recently, San Luis Obispo is thriving in one important place where Davis is struggling – sales tax revenue. San Luis Obispo is doing $28,800 retail sales per capita compared to Davis’ $8400. That puts San Luis Obispo ahead of West Sacramento and just behind Palo Alto near the top of our comparison cities, while Davis is more comparable to Claremont.
The revenue issue is a problem for Davis. Right now, the city is surviving on one-time monies with a huge unmet need in terms of infrastructure. While Davis is shored up with another half-cent sales tax until 2021, there is not enough for infrastructure needs, little margin for an economic downturn and little capacity to grow.
Without revenue increases, Davis will have trouble keeping its roads and bike paths in working condition, keeping its parks and greenbelts open, and continuing to provide the high level of city services and amenities that our community has grown accustomed to.
Unfortunately, Davis really cannot look to San Luis Obispo for answers here. San Luis Obispo is blessed with advantages that Davis simply does not have. Seventy-two percent of its retail sales are generated from people who do not live in the city. That means tourism, which not only brings in sales tax in the form of restaurant and retail sales, but also TOT (Transient Occupancy Tax) from visitors staying at hotels.
San Luis Obispo is also a regional destination, meaning people inside the county come to San Luis Obispo for their major shopping experiences.
The San Luis Obispo model will not work for Davis. There are some possible solutions for Davis – however, they will require changing the way we do things.
We see four potential solutions.
One possible answer lies in the data from Dixon, West Sacramento and Woodland. Woodland may be a potential model for what Davis could do. None of these cities are destinations. They are not tourist areas and, while they have more developed retail, they are probably not generating revenue from outside sources.
Woodland in particular has a modest $15,800 per capita retail sales per year. They have a more developed retail sector than Davis, with big ticket items like Walmart, Costco, Home Depot, Best Buy and the works.
Looking at Woodland, there is no inherent reason that Davis couldn’t increase its retail to where Woodland’s is. That is nearly double what Davis produces.
However, the community in Davis has generally been opposed to building big box and bringing in other major national chains. Target was a nail biter at the ballot box and most civic leaders have shunned the idea of bringing in another big box store.
A second answer is to bring back the push for an innovation center. San Luis Obispo’s Assistant City Manager Derek Johnson explained to us that the city has an Economic Development Strategic Plan, has worked with the university, and is bringing in some high-tech startups and other companies. They are taking advantage of the housing crisis in the Bay Area and are becoming a landing spot for some of those companies.
Davis is a more natural fit. It is far closer to the Bay Area, closer to a population center, and home to a much more research-oriented university.
What Davis lacks is high-tech space. That was what was identified in the Studio 30 report which focused on utilization of existing space, the addition of space at a place like Nishi (Measure A would have generated 300,000 square feet and already had interest from Sierra Energy), and the addition of a research or innovation park at another 2.5 million or more square feet.
In the last few years, Davis has lost a number of large companies, most notably Bayer-AgraQuest which moved its operations to West Sacramento – that means a loss in point of sales tax, in property tax and in jobs. Davis also lost out on the potential Davis Innovation Center, which appears to be headed for Woodland due to more relaxed land-use policies.
Those are two prime examples of how Davis is losing out on potential revenue to its neighbors. This is not a competition, but it is an example of why Davis is lacking revenue while its neighbors are far better-positioned.
Can an innovation and high-tech oriented plan produce the revenue that Davis needs? That is a big question, but preliminary analysis suggested that adding the space would have been a huge start.
It would have parlayed the university’s ambitions with city-oriented space. It would have allowed for technology transfer to drive economic growth for the city. And it would have signaled to the university that it had a willing partner for future endeavors.
We have noted that other universities have invested in these projects. There is the need for high-tech space for companies fleeing the high cost of living in the Bay Area. And it might have induced the university to house the billion dollar plus World Food Center in Davis – with its jobs and potential multiplier effect of people working in Davis, eating at restaurants and buying our retail during the day. This is what we call virtual tourism.
Improving high tech can also feed into another revenue stream – hotels and the transient occupancy tax. The more high tech, the more conferences, the more regional interest, the more people will come to Davis to work and stay and the more revenue that can be generated through the TOT tax.
As we have noted in the past, leaders in Davis saw the second model as more Davis-friendly than the first.
A third model is the tax model. In order to fund the city’s infrastructure, some think we need a parcel tax somewhere near $1700 or so and they figure with city needs and school needs, we could pass about $3000 per year parcel tax and be able to fund our city and schools without additional revenue growth.
Finally, we could look toward a more holistic approach and add some retail, some high tech, some hotels, some taxes and maybe be able to cobble together enough revenue to keep Davis the place that most people know and love.
Unlike some, I don’t believe we need to get rid of Measure R to do this. We just need a commitment from the community that, in order to solve our problems, we have to give a little. That doesn’t mean a huge incursion into our farmland on our borders, that doesn’t mean a Walmart Supercenter or becoming Everytown USA, it means making conscious decisions so that the next generation of residents can have the advantages that we all have had in this great community.
But if we are not willing to give, even a little, on something, even one thing, I fear that this community will not have the resources it needs to provide the amenities and services we all take for granted. The next ten years are in the balance right now and we must figure out the best way to act.
—David M. Greenwald reporting