As the city of Davis looks to generate revenue to pay for unfunded infrastructure and to continue city services, it has become apparent that not only does Davis lack the overall retail base, but even establishing retail in places where there is space, especially the downtown, is challenging at best.
The problems that Davis faces became obvious when we ran the per capita retail sales figures and found Davis was near the bottom of comparable cities. Among cities near Davis, Woodland has twice the per capita retail sales, while Dixon and West Sacramento have more than three times the retail sales.
This is not a new problem. When we have put together task forces – D-Side, the Innovation Parks Task Force, the Studio 30 Report – the lack of sales tax revenue has been found to be a key driver. The plan sought to utilize the university as a driver of economic development. The notion of technology transfer takes research from the university and transfers it to the private sector, generating products that come from research, startups which become the basis for new companies, and jobs. Ultimately, economic development will generate sales tax and property tax revenue for the local community.
The key was to create space with which to put not only startups but also companies wanting to move to the area to take advantage of a world class university. Indeed, many companies are looking at places like Davis because, while we think our costs are high here, they are nothing compared to the Bay Area.
Unfortunately, the places where we identified those spaces are now all defunct. Nishi was supposed to provide 300,000 square feet – it was defeated narrowly at the polls. Financing issues, potential opposition, and difficult politics led to the demise of both peripheral research park locations, Davis Innovation Center (north of Sutter-Davis) and the Mace Ranch Innovation Center (east of Target).
So where do we start? Yesterday we highlighted a letter by Jeff Boone, who notes the loss of some iconic Davis downtown stores. It is important to recognize that we did not just lose tax revenue when the innovation parks and Nishi went away, we lost potential jobs to young professionals who would be coming into town and be the demographic that spends the most on retail.
Mr. Boone writes, “Compared to all other comparable communities, Davis has about only about 50 percent of the supply of commercial retail property per capita. It is the law of supply and demand causing Davis commercial rents to escalate.”
He adds, “The lack of development also results in fewer professional jobs and a constrained housing supply, which in turn cause Davis to be under-represented in young professionals and young families — the demographic that spends the most money at retail locations.”
This leads him to conclude: “So our retailers get the double whammy… too few paying customers per capita and too high commercial rents. When the business numbers no longer pencil out, the business has to either find lower-cost space or else close down.”
Meanwhile, Chamber President Jason Taormino notes that redevelopment, according to a study that was commissioned, “was not economically feasible at this time, and is a sign that is hard to ignore.”
He adds, “With the increase in property taxes triggered by the sale – several of the existing business owners decided to close or move to lower cost buildings. This is an indicator that market demand for space in Davis, especially for retail, is lower than desired.”
“Over the past decade, downtown Davis has converted 60,000 sf of office and retail (per City of Davis) to bars and restaurants. If office and retail are dwindling then we have a less balanced economy,” he writes. “As we have fewer high paid employees downtown working in offices, they shop less and a negative cycle of less retail and more bars and restaurants catering to college kids continues.”
Mr. Taormino focuses on the prospect of redevelopment, noting, “Economically vibrant communities across the world have found that, when demand is high enough, it warrants redevelopment with a focus on mixed use architecture, allowing retail on the ground floor and office and housing above. How high the new buildings rise is a reflection of the strength of the market.”
In our view this leads us back to the need to explore innovation centers – utilizing the university as an engine for economic development through technology transfer.
But as noted above, those present financing and other challenges as well. In the post-redevelopment agency world in which we now reside, one answer might be public-private partnerships. The city, the university, and the private sector all have their own reasons to invest in economic development, and working together they might be able to overcome financing hurdles.
In the meantime, the downtown needs to view economic development as a means for prosperity – bringing in thousands of high paying jobs and young employees who are the ones who make the purchases.
Yesterday’s article unfortunately devolved back to housing, but, while housing remains a critical need and challenge, the city’s finances teeter on the brink. We need to figure out ways to invest in new development that will be acceptable to the community’s slow growth core but helpful to the city’s bottom line.
As I noted yesterday, this doesn’t have to be radical change.
The model of many of these research parks is modeled after a university – with high-tech building, open space and a campus-like set up. The innovation parks would be an extension of the university into the private sector and that can be done on a limited amount of land in a way that fits with our broader community.
We don’t need to create a huge amount of new retail on our edge, we can be more efficient with the land we have.
But none of this is possible if the answer is always “no” or “we can’t,” or if we allow the perfect to continue to paralyze us from the potential of the good.
—David M. Greenwald reporting