There is a nexus between the two stories we have been running in recent days – the city’s “response” to the UC Davis LRDP (Long Range Development Plan) and the city’s fiscal position. Yesterday’s column and Friday’s article laid out some of the bad news – it goes beyond just the $655 million of infrastructure needs and lays out where the city stands to see millions of increased costs for unfunded liabilities.
The bad news is this, if salaries grow by 3 percent, which is the level that CalPERS assumes and a level that keeps up with a traditional cost-of-living increase, “the pension contributions will require an additional $5.3 million per year.” That is on a $60 million or so general fund.
The worst news is, even holding everything constant in terms of current compensation, we stand to have millions of increased costs to provide current compensation and benefits.
As Mayor Robb Davis explains, “While it is true that we are ‘keeping up’ as things stand currently, the cost of ‘keeping up’ continues to grow and that crowds out funding for other projects our community needs to maintain the level of service citizens expect.”
“Something must give,” he said.
As we noted, the short-term strategy is cost containment, hotels, and taxes. But this is again why in 2013 we started looking into economic development.
But everyone is gunshy of large-scale economic development. We saw Nishi with its 300,000 square feet go down to defeat – a narrow defeat, but a decisive one at that. Before that fatal blow, the Davis Innovation Center proposed for north of Sutter-Davis hospital suspended its project and the Mace Ranch Innovation Center would suspend its project a year later.
Is the dispersed innovation model dead in Davis? From the ashes of Nishi comes the investment by Sierra Energy in Area 52, and now the purchase of Interland by Fulcrum Property at $70 million, to create the University Research Park, gives us a glimmer that there are still investments to be made and still a future in economic development in Davis.
These companies are betting millions, in fact, hundreds of millions, on the prospect for economic development.
In the LRDP response document, the city looks to do some key things on commercial space. First, they wish to “[i]ncrease availability of limited supply of commercial/R&D space within City for private companies.” Second, they wish to reduce the “impact of property tax base by UCD owned/leased space within City.”
But to me the biggest of these items is this: “Explore opportunities for City/UC Davis collaboration on how best to gauge and accommodate spin-off business space needs stemming from on-campus research.”
There are still some opportunities to think big. As we reported right before Thanksgiving, UC Davis is no longer wanting to put the World Food Center at the railyards in Sacramento. That is a multi-billion dollar potential project that, if Davis can get its act together, could land in an innovation/research park here in Davis.
The World Food Center makes a huge amount of sense for Davis. First, its mission jibes with the identity of Davis – academic, research, and agricultural. It would bring in huge ag tech companies and startups. It would become the fertile ground for technology transfer. And it would jibe well with our agricultural identity, our desire preserve prime agricultural and our values about food security and overcoming hunger and fighting climate change.
The World Food Center could become the anchor for research and development in Davis that sticks to Davis values.
But there are barriers.
The university is skeptical about partnering with Davis. Even on the modest Nishi-Gateway project, the university bowed out of the concurrent redevelopment of Solano Park, in part because they feared Davis could not deliver on Nishi – and they were right.
Measure R makes it difficult for any entity, public or private, to want to invest in a partnership with Davis.
The second problem is that we would have to find a way to overcome the tax revenue if UC Davis invests in part of a research park. Although, perhaps, limiting the UC Davis involvement to the WFC center and allowing the rest of the park to be privately developed might help.
When the Vanguard looked at the city’s retail tax dollars, its per capita tax dollars were near the bottom of comparable communities.
While cost containment and expansion of hotels represent good steps forward, without new sources for revenue, Davis is going to have trouble continuing to meet the community’s infrastructure needs while providing services and amenities that make Davis unique.
As Robb Davis put it, “something has to give.” But we need to figure out a way to preserve the Davis that we all love.
I agree with many that there is no magic bullet. But I disagree that small amounts of incremental change will thwart insolvency.
As Mayor Davis argued, “I believe we must discuss cost containment—broadly writ—and put a revenue measure before the population in the next two years.”
What does that look like? The mayor said, “It is no exaggeration to say that over the coming 5 years (and beyond) we need an additional $15-29 million each year to cover all these costs combined.”
Easy to say, but what those taxes would look like will be mindboggling. Cutting into those taxes with revenue from economic development is a better way to go – but if the community doesn’t understand the nature of the problem and is not willing to work to find solutions, we are never going to get there.
—David M. Greenwald reporting