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