Commentary: Will An Innovation Center Make Davis Problems Worse and Not Better?

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In response to my column yesterday about the need for economic development in Davis, one of our readers pushed back: “You still seem to be treating MRIC like a magic money box that will save us from revenue measures, i.e., taxes.  Meanwhile, half a glance at Silicon Valley shows that, if the business park is successful, the result will be higher prices on everything, housing shortages, people with lower income squeezed out, and mom-and-pop businesses squeezed out.”

Later they stated, “The argument has been made…  that the reason we want a big business park rather than taxes is that taxes will price low-income residents out of Davis.  My point is that that argument makes no sense, because a successful business park will do the same thing, most likely to a greater extent.”

My argument here is simple – the city of Davis is well below average in terms of per capita retail.  It relies heavily on auto sales to generate sales tax.  We lack big box and peripheral retail.  And we have a funding crisis where our needs exceed our revenues by at least $8 to $10 million.

Mace Ranch Innovation Center (MRIC) by Dan Carson’s estimates (and my figures yesterday were higher than this and probably overly optimistic) will bring in $5 million in ongoing revenue and $10 million in one-time fees generated.  At build out that would be a sizable portion of our revenue shortfalls.

The advantage of going high tech is that we would take advantage of our proximity to the university and avoid the flagging retail market that is besetting much of the nation.

We will need to generate new tax revenue, as the build out for a tech park is likely on the order of 20 to 50 years and our revenue needs are more immediate.

So will this approach cause more problems than it solves?

In response, let me state at the outset that I do not believe the case being made here by our poster is at all accurate.  We are talking about bringing in one 200-acre research park.  At the height
of the plans, there might have been something on the order of 4.5 to 5 million square feet of R&D space proposed between the two peripheral parks and Nishi.

By comparison, the Research Park Triangle in North Carolina is one of the biggest and most prominent high-tech and R&D parks in the U.S., it covers 7000 acres and contains 22.5 million square feet of space.

The park is the home to over 200 companies, it employs 50,000 workers and 10,000 contractors.  In short, it dwarfs anything that we would be proposing to build, even if we built two innovation centers and added in the Railyards in Sacramento for good measure.

And yet Durham, North Carolina, and Chapel Hill, North Carolina, are below the U.S. average in rental and ownership housing prices.

Silicon Valley appears to be the extreme of the extreme.

The median price for a home in the Silicon Valley in 2015 exceeded $1 million.  But compare that to other tech cities like Boston or Seattle, where their median home is about half – $565,000 in Seattle or $480,000 in Boston.  The median price in Silicon Valley is triple what it is in aspiring technology hubs like Portland, Denver or Austin.

So here is Austin, which has exploded in population, has a booming tech industry and median home prices there are $319,655.  I single out Austin because, like Davis, they have a world-class university and a tech industry we could only dream of, and yet home prices are not a problem.

Put simply – building even three innovation parks will not put us on par with Austin.

As a CNBC report points out, there is a pay gap between Silicon Valley and the others, but not enough to offset the cost of housing.  “Silicon Valley engineers earn nearly 50 percent more than their Boston counterparts; in Seattle that difference is smaller, but still significant, at 12 percent. Nowhere is the pay difference large enough to offset the cost of housing.”

Bottom line, even if we add a tech park or three, we will not become Silicon Valley, and nowhere else with a thriving tech industry has the kind of problems that Silicon Valley has.

The situation in Silicon Valley is bad.  In February, the Guardian ran a story where they talked to a software engineer, about my age, early 40s, base salary is $160,000 and he’s struggling to make ends meet.

The biggest cost is $3000 in rent, which is considered cheap for the area, a two-bedroom home in San Francisco where he lives with his wife and two kids.

The reality is that Silicon Valley becoming inhospitable for housing has led to opportunities in the Valley and Sacramento, for one who is trying to take advantage of it.

In an article in Forbes Magazine, they talk to Sacramento Mayor Darrell Steinberg who was “part of the delegation to last week’s event in Silicon Valley.”  His goal is to make Sacramento a destination city, “for businesses and tech workers who have begun to make the migration up north.”

This is the kind of wave that Davis can take advantage of to help its financial situation.  And the amazing thing is we can do this without creating massive peripheral development and sprawl, but by simply taking advantage of the presence of a top agricultural, medical technology and veterinary school and providing space for research to be transferred into the marketplace.

But one thing that is clear is Davis suffers from its own housing crunch.  We have a 0.2 percent vacancy rate.  We do not have housing needed for high-tech workers or families wanting to move here.

So I believe, even without a tech park coming to Davis, housing prices will continue to price students and faculty and staff out of Davis.

As I pointed out in my other column yesterday, some have complained about the new infill projects with increased density and heights that will cause Davis to lose its soul.

My view is, the bigger worry is that we lose our soul when the folks who have lived here for the past 40 or 50 years can no longer afford to buy housing and move their families here.

When UC Davis faculty have to live in Sacramento and commute, putting down their roots elsewhere.  When promising faculty go elsewhere because of the non-affordability of housing.

If anything, the lesson of Silicon Valley is there for us to grasp, but it’s a lesson of the need for a housing-jobs balance.  If we bring in jobs without adding housing, then yes, we will make things more expensive in town.

But one tech park or even three are not going to turn us into Silicon Valley.  Our aspirations are modest and the record is out there.

—David M. Greenwald reporting



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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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44 thoughts on “Commentary: Will An Innovation Center Make Davis Problems Worse and Not Better?”

  1. Roberta Millstein

    The choice of Silicon Valley/SF as an example is not an idle one.  We are increasingly part of the same region.  We are already affected by higher prices and housing pressure as a result.  The examples you cite do not already have the problems that we do.

    1. David Greenwald Post author

      There are several points here:
      1. The amount that we are adding through a 200 acre innovation center is far less than in other locales
      2. Housing matters and if we continue the constrained market, then prices are going up with or without an innovation center
      3. While we may be part of the same region, there is a huge difference between Davis-Sac and the Silicon Valley and its a reason why companies are looking toward the Sacramento region as an escape route from SV.

      1. Howard P

        Point 3… you clearly point out we ARE NOT in the same region (you said “may be a part”)… the current and historical differences are great… we may be ‘influenced’ a tad by SV, but think of John Donne’s great quote about ‘linkages’…

      2. Mark West

        Davis has a housing shortage for one reason, and one reason only; we refuse to build sufficient housing. We have the space to provide appropriate housing for all of our residents. We need to stop blaming others for our own failures.

         

      3. Roberta Millstein

        There are several points here:1. The amount that we are adding through a 200 acre innovation center is far less than in other locales

        It’s not the total amount that matters, it’s the amount relative to the numbers of people that we have, the relative acreage that we have, and the amount of housing that we have.

        2. Housing matters and if we continue the constrained market, then prices are going up with or without an innovation center

        No doubt true, but adding this many people will seriously exacerbate things.

        3. While we may be part of the same region, there is a huge difference between Davis-Sac and the Silicon Valley and its a reason why companies are looking toward the Sacramento region as an escape route from SV.

        Which affects us as well.

         

        1. David Greenwald Post author

          Nevertheless, your comparison was specifically to the worst housing situation in the country without a clear nexus of commonality.

          According to EPS, MRIC is estimated to add roughly 6000 over the course of its build out. That’s roughly 300 a year if we assume a 20 year buildout. I don’t see that as crisis inducing over and above correct demands.

        2. Roberta Millstein

          Nevertheless, your comparison was specifically to the worst housing situation in the country without a clear nexus of commonality.

          I picked the example I did because it is one I am well familiar with (having lived there for 11 years and continued to track through the SF Chronicle) and because it is one that I think most people in Davis are at least somewhat familiar with.  It shares some common characteristics with CA housing and hiring dynamics, and their dynamics affect ours.  I think it’s a lot more relevant than you are giving it credit for.

          According to EPS, MRIC is estimated to add roughly 6000 over the course of its build out. That’s roughly 300 a year if we assume a 20 year buildout. I don’t see that as crisis inducing over and above correct demands.

          Wouldn’t you say we are in crisis already?  Wouldn’t you say that the students that UCD is adding are already putting us over the top?  And what is your basis for a nice & steady 300/year increase?

  2. Tia Will

    Durham, North Carolina, and Chapel Hill, North Carolina, are below the U.S. average in rental and ownership housing prices.”

    True as written. But what you have failed to acknowledge is that none of these or the other locations that you mentioned are directly subject to the pressures created on us by our location between Silicon Valley and Sacramento. Much of our housing market and that of Sacramento is now being driven by people moving into our area from the Bay Area, cash in hand to make their housing purchase specifically because of the higher housing costs in the Bay Area. MRIC will not address this problem, and may indeed have some of the deleterious effects noted. Is it worth the trade offs ?  Maybe, and certainly worth much discussion. But I do not see it as valid or useful to pretend that our situation is not very different from the other locations you mentioned.

    1. David Greenwald Post author

      My point was to illustrate with examples that the tech parks themselves are not the drivers of the problems that Silicon Valley faces. Rather I think it is the lack of affordable housing and high demand – both of which are problems in Davis that have driven the problem.

      1. Mark West

        Silicon Valley in large part is land restricted. Davis is not. Different causes to similar problems.

        A new business park in Davis will not create a new housing problem, but an appropriate design might allow it to help mitigate one by incorporating high-density work-force housing. In the end, though, the answer to our housing shortage is to build more housing, not complain about people wanting to move here (for whatever reason).

         

        1. Howard P

          C’mon Mark… different ‘drivers’ than SV or Central Coast (water issues), but Davis is also ‘land restricted’… aka Measure R/J…

        2. Mark West

          No, Howard. Davis is not land restricted, Davis has chosen to limit how much land we use. It was an active choice not to expand the borders of the City, not a limit to that expansion due to being surrounded by others. We could make a different choice tomorrow and would then have copious land available. There is nothing wrong with the choice to limit expansion, in and of itself, the problem is that some here believe that we can limit population growth by not creating sufficient housing. That belief is a fantasy (and a fallacy), yet it is at the root of many of the problems we face today. I started posting here a couple of years ago that we either needed to grow out or up, and was shouted down by the ‘no change’ faction. The situation hasn’t changed. If we are not going to grow outward (as we have chosen) then we need to grow upward. Four stories being the new minimum (thanks to the demands of the Davis Spanking Machine).

        3. Howard P

          Note the ‘quotes’ Mark… on your basic points, we are in agreement… but, the Measure R/J thing, on a practical basis, is a formidable hurdle… were that it was not so…

          There are other real limits to how much (and where) growth can physically occur [or, run into significant economic restraints, primarily due to sanitary sewer and drainage infrastructure]…

      2. Roberta Millstein

        My point was to illustrate with examples that the tech parks themselves are not the drivers of the problems that Silicon Valley faces. Rather I think it is the lack of affordable housing and high demand – both of which are problems in Davis that have driven the problem.

        If they are high salaried jobs, as I expect they would be, then that is a particular sort of pressure that will drive up home prices, more so than just “more people.”  Not that I am against high-salaried jobs.  Again, my point is only to say that the tech park isn’t a way to get the City out of its financial problems while protecting low income residents, because those low income residents are going to be priced out.

        And that is something that we have in common w/Silicon Valley, in addition to the fact (as Tia explains nicely) that we are affected by what happens there, even now.

        1. David Greenwald

          I’m just having problems with the concept that creating good jobs is a bad thing.  The pressure to increase housing prices can be counterbalanced by creating supply.

        2. Roberta Millstein

          I’m just having problems with the concept that creating good jobs is a bad thing.  The pressure to increase housing prices can be counterbalanced by creating supply.

          Of course, creating jobs isn’t an inherently bad thing.  It’s that it can have unintended and negative consequences in certain situations.  In this case (to repeat myself) the situation is that we already have a place where it is expensive to live, housing is limited, we know people will be coming (students, etc) that we don’t have housing for, and you’re talking about adding a relatively (for Davis) large number of high paying jobs.  And “creating supply” is not easy, either (given Davis), and it comes with negative consequences, too.

          1. Don Shor

            Creating high-paying jobs will increase demand for high-cost housing. In the absence of supply, those folks will look in Woodland, Dixon, West Sac, Sacramento, and rural areas. The housing market is much bigger than just Davis. Most of this would have little discernible effect on the problems faced by lower-income people who are trying to find housing in Davis.
            People who work at MRIC won’t be living in apartment complexes that are being marketed to young adults and students. So short of gentrification of some of the older neighborhoods, which seems unlikely since that housing is a nice sound investment as rental housing already, I don’t really see where this disparate impact is going to occur.
            Creating housing supply is a whole separate issue, and one over which Davis residents have considerable control by comparison with any of the other cities in the housing market. In Solano County, housing can only be built in existing cities, but there aren’t constraints on annexation. In Woodland, the General Plan is going to expand housing supply considerably — and southward. Davis can choose not to grow at all, and the voters have ratified that choice so far.
            So just discussing the adverse impacts of MRIC on low-income people, I really don’t see it. And it doesn’t invite urban sprawl because the property is hemmed in. Like Nishi, it’s not growth-inducing.

        3. Mark West

          “Davis can choose not to grow at all, and the voters have ratified that choice so far.”

          That is the attitude that is getting the State involved in local housing decisions. The more the city attempts to block growth, the greater the incentive for the State to step in and mandate it (and the State won’t care what the neighbors think).

  3. Richard McCann

    Silicon Valley has been in a continual “housing crisis” for at least 30 years. When I lived in Menlo Park in the mid-80s, we joked that a construction latrine could go for a quarter million dollars. What has driven Bay Area prices has been high demand for one of the most desirable places in the world. And one of those factors that make it so desirable is the rugged terrain that limits space for housing. Note that housing prices are going through the roof in Oakland and Marin too, hardly high-tech hot beds. Quite simply, Davis does not have this same level of attraction, as much as we might collectively like it now that we live here.

    David’s review of other cities with tech innovation centers and around average housing costs effectively shows that Davis can bring in more industry without incurring the same impacts as Palo Alto. There are many reasons why we need to move to expand our housing stock, even if that means giving up some agricultural land to compact development. And that development is likely to eat up agricultural land somewhere else, and probably done with greater environmental impacts than if its done in Davis.

    1. Howard P

      “At least” is spot on…

      And some of the bordering ‘Ag’ land is not suitable for crops, and some isn’t even ‘great’ for housing… or other development…

  4. Roberta Millstein

    A few people on this page have commented that MRIC will not radically price low income people out of the City if the City commits to building more.  So, those who want to make the case that MRIC will protect people with a low income by averting (or reducing) taxes need to be explicity that their argument for the MRIC rests on building more housing… somewhere (up, out, UCD?).  That is, it will need enough housing to get us out of our current deficit, to accommodate UCD’s growth, to accommodate new MRIC employees, to accommodate the other businesses that will need to serve the MRIC, and to accommodate whatever growth we might have had otherwise.   I think it’s important that people have that information when it comes time to make a decision, and I hope that those who are making the argument for MRIC on the basis of it helping low-income people are clear on the implications of what they are suggesting.  They should also note that this additional growth will cut into the promised windfall from the MRIC.

    And then, they should have a story for what happens when there is the inevitable economic downturn.

    1. Don Shor

      So, those who want to make the case that MRIC will protect people with a low income by averting (or reducing) taxes need to be explicity that their argument for the MRIC rests on building more housing… somewhere (up, out, UCD?).

      Woodland will be taking care of that.
      I don’t see anybody making a case that MRIC “will protect people with a low income” or “making the argument for MRIC on the basis of it helping low-income people” in any way. You’re the one that keeps bringing that into the discussion and it is a strawman.
      Business parks don’t specifically help low income people. They bring in revenues for the city by increasing the property tax value of the land they are on, by creating taxable sales, and by the ripple effect of employees buying stuff in town. They create some entry-level jobs, though I think that is not going to be the main demographic for this one. You want entry-level jobs, you build a manufacturing plant or a shopping center. I don’t think either of those are on the table anywhere in or near Davis.
      By your logic, it seems, developing anything at all will make life harder for low-income people, so I guess your conclusion is that nothing should be developed? And everyone should just pay higher taxes instead?

        1. Roberta Millstein

          The other problem I have – Davis is bad for low income people as it stands now – so is the goal to change that and if so, how?

          Good question.  That’s certainly worth discussing, but the first thing on the table is: Don’t make it worse.

          1. David Greenwald Post author

            Perhaps, but I’m not convinced that creating jobs makes it worse

        2. Roberta Millstein

          Perhaps, but I’m not convinced that creating jobs makes it worse

          Not any job creation would make it worse.  But this number of high paying jobs will.  (Again, I question your steady 300/year assumption — although even then that is a lot given our current housing growth).

        3. Mark West

          “but the first thing on the table is: Don’t make it worse.”

          Raising taxes is guaranteed to make it worse for everyone, but especially for those with little disposable income. If your goal is to not make things worse, raising taxes should be the last option, not your first.

          It makes no sense to believe that only ‘high paying’ jobs will be created when we expand our commercial space. For every ‘high paying’ job created at a business park, there will also need to be several lower paying support positions created as well (both directly, and due to the multiplier impact). That means the disposable income in town is increased by virtue of those new jobs. Everyone else benefits from the increased tax base spreading out the existing tax burden. Raising taxes makes the community poorer while creating jobs makes the community wealthier.

           

        4. Roberta Millstein

          It makes no sense to believe that only ‘high paying’ jobs will be created when we expand our commercial space. 

          Agreed.  I never said that it would be only high paying jobs, just that there would be many high paying jobs.

          For every ‘high paying’ job created at a business park, there will also need to be several lower paying support positions created as well (both directly, and due to the multiplier impact).

          Agreed.

          That means the disposable income in town is increased by virtue of those new jobs. Everyone else benefits from the increased tax base spreading out the existing tax burden. 

          No.  It means that much more contention for scarce housing.  Having a salary, or even a good salary – or what would be considered those in many parts of the country — is no guarantee that one can live on that salary.

          Raising taxes makes the community poorer while creating jobs makes the community wealthier.

          No, at this scale it prices people out of their communities.

        5. Mark West

          “No.  It means that much more contention for scarce housing.”

          Utter nonsense! We could solve the housing issue tomorrow if people in town would pull their heads out of their…  The refusal to build more housing does not change the added value to the community of expanding our commercial sector and creating new private sector jobs.

          Raising taxes prices people out of the community, just as does the continued refusal to build sufficient housing (as advocated by those who already have a good job/pension and appropriate housing). Creating good private sector jobs does not.

          The University has roughly 42,000 employees, but only 1750 or so faculty members. That means there are 20-25 employees in support of each faculty member on campus. Each new professor means 20-25 more people contending for the same scarce housing in town. Using your logic, it seems the simple solution to the housing crisis (and the City’s fiscal shortfall) is to get rid of all the professors.

        6. Roberta Millstein

          We could solve the housing issue tomorrow if people in town would pull their heads out of their…  The refusal to build more housing does not change the added value to the community of expanding our commercial sector and creating new private sector jobs.

          In response, I will repeat what I said elsewhere on this page:

          So, those who want to make the case that MRIC will protect people with a low income by averting (or reducing) taxes need to be explicity that their argument for the MRIC rests on building more housing… somewhere (up, out, UCD?).  That is, it will need enough housing to get us out of our current deficit, to accommodate UCD’s growth, to accommodate new MRIC employees, to accommodate the other businesses that will need to serve the MRIC, and to accommodate whatever growth we might have had otherwise.   I think it’s important that people have that information when it comes time to make a decision, and I hope that those who are making the argument for MRIC on the basis of it helping low-income people are clear on the implications of what they are suggesting.  They should also note that this additional growth will cut into the promised windfall from the MRIC.

          As for the university, I think I have made clear my stance on that issue on many occasions – if the University wants to increase the # of students it enrolls (and hire more staff and faculty), it is their responsibility to house those students (and staff and faculty).

      1. Roberta Millstein

        I don’t see anybody making a case that MRIC “will protect people with a low income” or “making the argument for MRIC on the basis of it helping low-income people” in any way. You’re the one that keeps bringing that into the discussion and it is a strawman.

        I don’t think it’s a straw man.  I have heard that argument from David and from others here on the Vanguard.  The argument goes something like this: “we can’t raise taxes (enough) to get the City out of our financial problems because if we did so, we’d make it too expensive to live in Davis and we’d price out people with low incomes (more so than they are already priced out).  So, we need to build an innovation center.”  David, if you aren’t making this argument, then I need clarification from you on where you disagree with this.  And even if you haven’t made it, others have.

        I realize that there are other arguments in favor of the MRIC.  There are also other arguments against the MRIC.  I’m not focused on the global for-and-against arguments right now — for now, I’m just focused on this claim that I have heard repeatedly on the Vanguard, because I think it is fatally flawed.

        By your logic, it seems, developing anything at all will make life harder for low-income people, so I guess your conclusion is that nothing should be developed? And everyone should just pay higher taxes instead?

        No, it’s an issue of the combination of the types of jobs and the number of them. I think the business developments for this type of job need to be smaller scale for Davis.  I do think we will need to pay higher taxes, however, one way or another — with or without the MRIC.

        1. Roberta Millstein

          100% agree with what Don Shor wrote.  Are we supposed to never let in high paying jobs because it might not help low income people?

          Keith, maybe it feels good to misrepresent what I said, but I’ve already explicitly denied this, several times.  Including directly above your comment.

        2. Roberta Millstein

          But I think none of us are really sure what it is that you are advocating.

          That’s because at the moment I am not advocating anything.  I’m just pointing out a major flaw in the argument that you and some others are making.

          If you want to talk about my concerns about the MRIC more generally, we can do that, but it’s a bit off topic and I’ve stated them elsewhere already — they are a matter of public record, actually.

        3. David Greenwald

          And that’s the point- the flaw – I don’t think you’ve proven or at least not convinced me on. Too many interceding variables.

        4. Roberta Millstein

          And that’s the point- the flaw – I don’t think you’ve proven or at least not convinced me on. Too many interceding variables.

          And I think you’re counting on those interceding variables to save you, when in fact the pattern is quite robust and the interceding variables mostly have their own negative consequences or unlikely to be a factor (e.g., a surplus of housing in Davis).

          1. David Greenwald Post author

            Not at all, I just don’t see a clear pattern that a relatively small technology park is going to lead to all of the negative consequences that you claim. In most cases, it doesn’t. Silicon Valley seems unique not to mention extreme in this regard.

        5. Howard P

          OK… I’ll admit to ignorance… I understand “variable” (internal or exterior) … I understand “interceding” … I do not understand “interceding variable”… please explain, en anglais, or cite somewhere I can learn… am just a dumb engineer…

          1. David Greenwald Post author

            In other words, there are too many variables in the equation to be able to say this is the effect of A on B

  5. Roberta Millstein

    Creating high-paying jobs will increase demand for high-cost housing. In the absence of supply, those folks will look in Woodland, Dixon, West Sac, Sacramento, and rural areas. The housing market is much bigger than just Davis. Most of this would have little discernible effect on the problems faced by lower-income people who are trying to find housing in Davis.

    If that’s right, then we’ve got increased greenhouse gases.  Again, consquences. No free lunch.  But I’m not convinced that it’s as simple as you say, because…

    People who work at MRIC won’t be living in apartment complexes that are being marketed to young adults and students.

    Not sure why you think that.  People will live in all kinds of housing if it’s affordable and if they don’t want the commute, and that drives prices up.  AndI’m sure that “young adults” would describe many prospective employees at the MRIC.

    So short of gentrification of some of the older neighborhoods, which seems unlikely since that housing is a nice sound investment as rental housing already, I don’t really see where this disparate impact is going to occur.

    If people can make more money out of higher priced housing, they will do it.  Again, it’s all over Silicon Valley, even in places long thought to be “untouchable,” like East Palo Alto.

    Davis can choose not to grow at all, and the voters have ratified that choice so far.

    We have control over some growth, but not all.

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