Commentary: Why We Might Want to Encourage Mixed Use

Share:

With the proposal by University Mall to redevelop their current land use from basically single-story local retail, low density to mixed use, and some similar scenarios envisioned for the Davis downtown, it might be helpful to revisit some of the research on the benefits of mixed use.

When SACOG (Sacramento Area Council of Governments), working with the city of Galt a few years ago, looked at possible development scenarios, they found: “it becomes clear that mixed-use development consistently generates a higher ratio of revenue to cost when compared to separated land uses.”

The key finding is that “on a per-acre basis, mixed-use development generated almost a two-thirds higher ratio of revenue to cost when compared to regional retail and local office development in the mixed-use development scenario.

“Mixed-use development generates an even higher ratio of revenue to cost when compared to stand-alone housing or local retail,” they find.

In looking at various development scenarios, they argue that “the desired pay-back period for municipal projects is generally 30 years or less.”  They found, “The only scenario that meets the desired pay-back period of 30 years is the Mixed-Use Scenario, characterized by development that balances jobs and housing.”

They write: “One acre of mixed-use development is more economically advantageous in that it can contain several types of revenue-generating uses and a better jobs-housing balance in comparison to one acre of separated, low-density housing or local retail. Separated land uses such as local retail and residential serve a role but should be built in conjunction with development that generates a higher ratio of revenue to cost, such as mixed-use development.”

The research in Galt is also supported by research from across the nation.

For example, “one study indicates that compact infrastructure is up to 47% less expensive than conventional development patterns (Moris Beacon, 2010).”

Fiscal analysis in nine different communities in Colorado, Idaho, Montana and Wyoming found that “2-3 story mixed-use buildings generate between 3-5 times more revenue on a per-acre basis compared to single-use commercial buildings such as low-density housing or big box retail development.”

Lastly, SACOG’s Blueprint process found that the “region could save $13.8 billion if it built the Preferred Alternative (which promotes compact, mixed-use development and more transit choices) rather than the Base Case (which is a projection of how the six-county Sacramento region would grow if recent development trends continued) over the next 50 years.”

They also cite the work of Joe Minicozzi, who came to Davis to speak a few years ago.

In a 2012 CityLab article, Mr. Minicozzi notes that there is a “fundamental math problem posed by modern cities in America.”

He argues that we tend to think of “broke” cities having the option to either raise taxes or cut services.  But the reality is that there is “long-buried math of our tax system that cities should be exploiting instead.”

He argues: “Per-acre, our downtowns have the potential to generate so much more public wealth than low-density subdivisions or massive malls by the highway. And for all that revenue they bring in, downtowns cost considerably less to maintain in public services and infrastructure.

“We really are kind of preachy, because we know it works,” says Mr. Minicozzi, who has performed similar tax studies in 15 cities across the country. “And the reason we know it works is because cities have been here forever. That’s all we’re saying: think urban. When I talk with people about urbanism, we as hairless apes have lived in these things called cities for thousands of years. Now over these last 40 years, we think we don’t need them any more?”

His solution – if you have underutilized buildings in the downtown, fix them up “because that’s where your wealth comes from.”

That sounds easy.  The challenge is that while he is looking in places like Asheville, North Carolina, where land values and construction costs are comparatively low.  Davis has additional challenges because of the cost of redevelopment and the lack of RDA money.

That is precisely why we should be excited by the University Mall project.  The Brixmor Property Group sees opportunity in turning the 8.25 acre parcel that houses about 103,695 square feet of neighborhood shopping space in a single story and turning it into something much more dynamic.  They would convert the project into about 808,500 square feet, but, more realistically, it is the 560,000 of residential and retail rather than the 250,000 parking garage that figures to greatly add value.

To understand the difference, we go back to the work of Joe Minicozzi in Asheville, NC.

He argues: “The really interesting math, though, comes not when we compare derelict buildings to their refurbished selves, but when we look at unsung half-block offices alongside what we think are our big municipal money-makers: vast hotels, malls, big-box stores.”

In Asheville, they have a Super Walmart which is 2.5 miles east of downtown.  Its tax value is $20 million.  That sounds good, but, as Mr. Minicozzi points out, it sits on 34 acres of land.

That means, he argued in 2012, the Super Walmart yields about $6500 an acre in property taxes, while the “remodeled JC Penney downtown is worth $634,000 in tax revenue per acre. (Add sales tax revenue, and the downtown property is still worth more than six times as much as the Walmart per acre.)”

Here is a point he made in his presentation in Davis as well.  “We look at miles-per-gallon, not miles-per-tank, because tanks come in all different sizes. We should look at buildings the exact same way.

“As a community, if you have a finite limit of land, would you want $6,500 or $20,000, or $634,000 downtown an acre?” he asks. “I tell people, ‘What would you rather grow: wheat, soybeans or marijuana?’ People understand that cash-crop concept, so why aren’t we doing that downtown?”

That’s again why the Davis Downtown is so inviting.  We have a bunch of single-story buildings in the downtown and we could transform them into three to six stories of mixed use and generate far more in the way of revenue for the city in a limited space.

We do have to think height and density in order for it to pencil out for the developers.  The city had a fiscal analysis done that showed “redevelopment only made financial sense when it was greater than or equal to 4 stories tall.”

But we need to understand that the fact that Brixmor Property Group is proposing this redevelopment shows they believe it will pencil out and that investors will put their money on these projects.  If that’s the case, we should be able to do the same in downtown Davis as well.

—David M. Greenwald reporting


Get Tickets To Vanguard’s Immigration Rights Event

Eventbrite - Immigration Law: Defending Immigrant Rights and Keeping Families Together

Share:

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.

Related posts

41 thoughts on “Commentary: Why We Might Want to Encourage Mixed Use”

  1. Michael Bisch

    Great article, David. In Davis, we’ve understood the benefits of compact, mixed-use development going back to the ‘60s. Nevertheless, it bears repeating periodically. That said, it is not clear to me that the Core Area advisory committee is a proponent of a vibrant, compact, mixed-use downtown. There seems to be a disconnect.

  2. Tia Will

    Michael,

    Genuine question. I have been attending at least some of the DPAC meetings and have taken away a different impression. I am wondering on what you are basing your feeling that “a vibrant, compact, mixed use downtown” is not being favored.

    Also I am wondering how you are defining the word “vibrant”, as I have heard it used in a number of ways.

  3. Matt Williams

    This is a very important topic, and I would like to see the findings of the national studies David has cited formally (not anecdotally) considered for the realities we face in Davis.  It troubles me if Michael Bisch’s comment about the Core Area advisory committee is correct.  I would hope that group would be looking at this concept in great detail.

    With that said, here are four realities that Davis faces that could well be different from the realities of the cities in the national studies.  I’m sure there are more, but these four are a good place to get the discussion going.

    (1) Davis is not the hub city for a regional, and as such the demand side of the supply/demand profile of retail businesses in Davis is close to 100% local. I suspect that the “9 different communities in Colorado, Idaho, Montana and Wyoming” all are hub cities for a region. Asheville North Carolina definitely is a regional hub city. David may have the names of the 9 communities, and if he does can share those names here.

    (2) Nationwide, retail is in a tailspin even in communities that have a regional supply/demand profile for retail.  That is a very fast developing change, and is likely to be a change that is going to continue in magnitude and scope in the coming years.  National retail chains are making significant adjustments in their business models as a result.

    (3) The decline of retail in Davis has happened simultaneously with an increase in restaurants and cafe’ style entertainment services (coffee, asian tea, ice cream, etc.).  How does the revenue generation shown in the national studies change when the mix of first floor tenants changes?

    (4) How does the housing affordability challenge that has swept California affect the revenue generation models of the national studies … especially in light of Davis’ proportional requirement for affordable units?

     

    1. Ron

      Good points, Matt.  Including the following:

      “Nationwide, retail is in a tailspin even in communities that have a regional supply/demand profile for retail.”

      “How does the revenue generation shown in the national studies change when the mix of first floor tenants changes?”

  4. Jim Hoch

    IMnHO building hotels downtown is the best thing we can do for revenue. Mark West alluded to this during the CC debate but it seemed to end there. TOT+Entertainment = real money.

    1. Mark West

      From a City revenue perspective, TOT is the quintessential ‘low hanging fruit.’ 12% of sales goes directly to the City and it does not need to be shared with anyone else.  If we were serious about closing our budget deficit, the City would sell the E street plaza and parking lot to a developer willing to build a 6-8 story tall hotel complex with a restaurant on the roof and a Rathskeller below ground and circled with 1st floor retail. We could fill the place on a regular basis with the existing demand from the University and have little or no impact on the existing hotels. The new tax revenues would go a long way towards meeting our budget needs.  It would also have a much greater positive impact on downtown business than will the proposed central plaza (AKA homeless encampment) idea coming out of the Core Area Protectionist Committee.

  5. Ron

    From article:  “Mixed-use development generates an even higher ratio of revenue to cost when compared to stand-alone housing or local retail,” they find.

    “Fiscal analysis in nine different communities in Colorado, Idaho, Montana and Wyoming found that “2-3 story mixed-use buildings generate between 3-5 times more revenue on a per-acre basis compared to single-use commercial buildings such as low-density housing or big box retail development.”

    These studies need to be examined more carefully (and links provided to the sources), regarding exactly what the comparison is.  For example, there is apparently no comparison between low-density and higher-density commercial developments.

    Also, since most studies show that housing is a long-term money-loser for cities (e.g., when examined separately), adding it to existing commercial space would generally increase fiscal costs to cities (e.g., compared to a comparable, dense commercial development).

    Of course, in the citation above, a comparison was only made for smaller 2-3 story mixed-use developments (where the negative fiscal impacts of housing may not be as apparent). It might be more interesting to see what the long-term fiscal impacts of adding multi-story (e.g., more than 2-3 story) residences above existing businesses, as some are proposing to do in Davis.

    The timeframe of these studies does not seem to be mentioned (e.g., 1 year, 5 years, 20 years . . .)

     

     

    1. David Greenwald Post author

      “These studies need to be examined more carefully ”

      By whom? Those studies have been examined rather carefully by SACOG and Minicozzi and others. I suggest you study them and give us a report when you’re done.

        1. Mark West

          There have been numerous speakers in the past couple of years through the Davis Futures Forum who have touched on these topics.  Many of the presentations were video recorded and are available here.

          https://www.cooldavis.org/cool-davis-coalition-2/davis-futures-forum/

           

          Joe Minicozzi has several videos available on YouTube detailing his views on the topic.

          Try some education, you might find you enjoy knowing the answers rather than simply wondering aloud…

        2. Matt Williams

          Ron, the reality is that a review of the studies here in the Vanguard is not meaningful.  The discussions here have neither the discipline/focus nor expertise to produce informative results.  The Core Area advisory process is where any such review should take place.

      1. Matt Williams

        David, the studies are fine as written/researched.  The challenge we face is that with a few exceptions (Davis Ace and Hibberts and a few others), retail is dying in Davis.

        That means the first floor revenues from storefronts will come from a much higher proportion of coffee houses, asian tea cafe’s, ice cream parlors, brew pubs, restaurants and bars.  The questions we have to answer are (1) will that revised mix of first floor tenants produce the same economic/fiscal impact as was obtained in the communities of the studies, and (2) will thart revised mix of first floor tenants be able to pay the same level of monthly rent as the retail businesses were able to pay in the studies.

        One of the consistent messages I have heard in the Core Area advisory process is that for the most part the answer to question (2) is “no, they will not be able to.”  That means the revenue generation structure of the new mixed-use building will either need to handle a somewhat elevated level of first-floor vacancies, or reduce the rents of the first-floor spaces to a level that the new mix of Davis businesses can afford.  In order to do the latter, the developer either has to be willing to accept a reduced Return on Investment or increase the rents for the residential units in order to subsidize the rents of the first floor units.

        Another question I have about the studies of mixed-use in the other communities is how the second floor of the buildings is configured.  In broad terms the two options are (A) residential and (B) office space (often for professional services like lawyers, consultants, blog publishers, tailors, etc.).  Do those two alternative second floor uses produce similar revenue streams?  What level of demand for second floor offices does Davis currently have?  Can Davis increase the demand for second floor office space through more effective collaboration with UCD vis-a-vis retaining intellectual capital here in Davis rather than letting it flee to locations/communities other than Davis?

        1. David Greenwald

          Matt – a lot of good points that I think need to be sorted out in the planning.

          My general thoughts are that one way to rescue some of the retail downtown is to put people in the downtown 24/7 through mixed use.

          Second, bringing more workers during the day into the downtown will also make restaurants and the like potentially more profitable.

          Third, I view starts, flex space, and offices as potential second floor uses that even if they don’t directly bring in revenue will help to revitalize the downtown.

          Finally – yes, we need to look at this further.

        2. Matt Williams

          While I think the strategy of putting people in the downtown 24/7 is essential for the fiscal resilience/stability, I do not believe that is going to significantly impact downtown retail.  The reason is simple, more and more retail purchasing is going to the internet, and that is especially true of the demographic cohort(s) most likely to live in downtown residential units.

          If the added downtown residents are from the demographic cohort like those in the newly completed Mission Residences, they simply do not make any appreciable volume of retail purchases. Seniors are not in a lifestyle pattern of “adding/buying things.”  Rather they are busy downsizing, and getting rid of things.

          The young professional and/or university students cohorts are more into adding/buying things, but it is unlikely that the Davis retail landscape is going to provide them with stores to do that.  They will purchaser their things from the internet or up and down Interstate 80 in Sacramento and/or the Bay Area.  The UCD student renters of the downtown residential units will also be inclined to do their bricks and mortar retail shopping in their hometowns rather than in their temporary home in Davis.

          I agree with your statement that “bringing more workers during the day into the downtown will also make restaurants and the like potentially more profitable,” but that is not retail.

        3. Howard P

          Matt… forgetting revenue stream for the moment… mixed use, particularly in the Core, has an intrinsic value… eyes on the ground, as it were…

          Mixed use goes back to medieval times… where the shop owner lived above their business, and there were other residents, other businesses, to help with expenses, and more eyes on the ground…  mixed use has been great, long before the 1960’s, as another poster has opined..

        4. Mark West

          The idea that “retail is dying” is old news and has already been incorporated into the analyses. This was pointed out in one of recent Futures Forums presentations (I believe it was Dan Zack) that presented the idea of expanding the definition of ‘retail’ to include entertainment venues (bars and restaurants etc) into a more encompassing ‘retail plus’ category that better describes this new reality.

          Our focus should be on expanding tax generating business activities of all types, not just protecting the declining number of locations that sell widgets, or wringing our hands over their pending demise.

          It is far too easy to get ‘into the weeds’ worrying about the details of every potential change, when it is the concepts that are most important. Mixed-use redevelopment is a concept that has been proven time and again all around the country. As usual, we are a few years behind the curve of current best practices due to our mindset necessitating proof of what is obvious.

          1. Don Shor

            I don’t have the figures at hand, but the range of revenues per square foot for the restaurant industry and for retail overlaps considerably, to the point that it isn’t likely that a change in one direction of ground floor occupants would make a significant difference in revenues to the city. What matters more is whether the area is economically viable and catering to the demographic that lives or shops there, not what kind of stores or restaurants are there.
            Second, the impact of internet sales is not uniform across retail sectors. There is always flux in where and at what kinds of stores people shop. You won’t be seeing any electronics stores or video rentals on the ground floor. But that doesn’t mean there aren’t successes in the retail realm right now. Brick and mortar stores are incorporating online ordering, which allows them to function with smaller footprints. Even very large retailers such as Walmart and Home Depot have experimented with small venues. There will be change and the internet will be part of it, but it’s not a crisis in retail.
            I haven’t looked at the reports or the methodology of the consultants. But unless they are literally totally incompetent, they have factored in current and projected trends to their numbers. In my opinion, fretting about whether you can fill ground floor retail is probably pointless. Making the downtown attractive and functional is where planners should focus.

        5. Matt Williams

          Matt said … “I think the strategy of putting people in the downtown 24/7 is essential for fiscal resilience/stability,”

          Howard said … “mixed use, particularly in the Core, has an intrinsic value… eyes on the ground, as it were…”

          Howard, I don’t see any difference between your statement and my statement.  Am I missing something? Or are you and I on the same page?

  6. Ron

    From article:  “As a community, if you have a finite limit of land, would you want $6,500 or $20,000, or $634,000 downtown an acre?” he asks. “I tell people, ‘What would you rather grow: wheat, soybeans or marijuana?’ People understand that cash-crop concept, so why aren’t we doing that downtown?”

    Not a good analogy, because fiscal costs to cities differ depending upon the type of development.  (As always, long-term fiscal revenues must be compared to long-term fiscal costs.)

    Or, maybe they should tear down all the buildings, and grow marijuana.  🙂

  7. Alan Miller

    The city had a fiscal analysis done that showed “redevelopment only made financial sense when it was greater than or equal to 4 stories tall.”

    That’s why some recent developments downtown that developers risked their capitol on were built to 3 stories high.  I’m sure they never considered going to “greater than or equal to 4 stories tall” to make more money.  I can see them slapping their foreheads now — “I could’ve had a V-8!”

    1. David Greenwald

      “That’s why some recent developments downtown that developers risked their capitol on were built to 3 stories high.”

      Such as?  remember we are talking about redevelopment post-RDA.

      1. Ron

        David: Your point being that RDA money was purposefully wasted by not building higher? (Or, that such buildings were not built at all?)

        Would also like to see a link to the analysis (mentioned in the article) that Alan cited.

        1. Ron

          By “penciling out”, are you referring to the point of view of the developer, or to long-term city finances?

          Remember that Nishi promised a multi-million dollar fiscal “benefit” to the city, which didn’t “pencil out” to the city when fiscal costs were considered. (Even in the short term.)

          If you’re referring to developers, are you simply taking their word for it?

          Sacramento is very different than Davis (so far, at least).  Maybe not so different if downtown is significantly densified, with multi-story buildings. (By the way, how is Sacramento doing, regarding its fiscal outlook?)

        1. David Greenwald

          Matt – I’m trying to get ahold of the analysis, but I’m pretty sure it was referring to downtown, redevelopment.  That would preclude Nishi for sure.  I’d have to more closely look at C St.

          1. David Greenwald Post author

            Evidently the project is a bit different than what we are talking about. The owner is a user of the project itself. It’s not the kind of project a developer or investor would take on. That’s fine. I’ll have an interesting story for tomorrow on the consultant report.

  8. Ron

    Regarding the City Lab article that David cited, one of the comparisons dealt with a “before and after” tax comparison of an existing, abandoned building (that wasn’t even expanded/increased in size).

    In general, the article then goes on to note that suburban-type development is far more costly to cities than densification, where infrastructure is already in place.

    Although this is a good point, it neglects to mention that others had previously paid for that infrastructure, which would then be leveraged/used by the new development (with absolutely no cost allocated to that development, in the analysis).  In other words, this type of urban development is getting a “free ride” (subsidy), on the backs of (paid for by) previous developments/residents. Of course, these urban developments still have impacts on such infrastructure, some which are fiscal in nature (and some of which are not – such as traffic congestion – whose costs and inconvenience are borne by existing residents).

    This type of analysis (in which costs are not fully allocated) has been employed by the city of Davis repeatedly, when examining the costs of new developments such as Nishi.

  9. Ken A

    I’m wondering if David looked in to the Walmart and JC Penney in NC before posting “In Asheville NC, they have a Super Walmart sits on 34 acres of land.  The Super Walmart yields about $6500 an acre in property taxes, while the “remodeled JC Penney downtown is worth $634,000 in tax revenue per acre.” It looks like they don’t have a JC Penney in downtown Asheville NC anymore and the only JC Penney that came up was one in a mall even bigger than the Super Walmart site (just across the freeway).
    I’m also wondering if David clicked the “apples and oranges” link this week.  If he did he would understand that when comparing the tax revenue per acre of a 200,000sf single story (~4.5 acre) Walmart to a 100,000sf two story (~1.15 acre) JC Penney you should not include the parking for one unless you are going to include the parking for both (in many downtown areas the parking is owned by the city and has $0 tax revenue).
    I don’t have any problem with vertical mixed use but  people need to remember (before they get excited and think of all the ways to spend all the new tax revenue) that most cities, farmers and landlords are getting as much as they can right now and just because Palo Alto has higher retail rents, the Napa Valley has profit per acre on grapes and SF and other cities have retail mixed use spinning off millions in tax revenue does not mean that Davis can support a store that sells $2K bed-sheets, get anyone to pay $40K/ton for Yolo County grapes or get UCD kids to pay $4K/month to live above a place that sells $8 lemonade.
    https://www.sfgate.com/expensive-san-francisco/article/eight-dollar-lemonade-sf-mission-gentrification-13075804.php

    1. David Greenwald Post author

      It was Minicozzi’s example of how single story development is less efficient than higher density mixed use – is that really a point in question?

    2. Mark West

      Ken:

      go to YouTube and watch one of Joe Minicozzi’s presentations on smart growth and perhaps you will gain some understanding… this isn’t rocket science…

  10. Joe Minicozzi

    As far as my validation of a project, I suppose I’d like to reserve the right to see it before I could support it.  The picture above doesn’t help me much, and there appears to be a single story strip mall in the image, and those aren’t known for tax potency.  Also, we’ve done the “cost” side, and it demonstrates the losses.  Here’s an article  covering our ROI analysis of Lafayette, LA work with Strong Towns.  Also, SACOG has an incredible model which demonstrates the financial costs of development patterns.  It’s an incredible model.

  11. Joe Minicozzi

    As far as my validation of a project, I suppose I’d like to reserve the right to see it before I could support it.  The picture above doesn’t help me much, and there appears to be a single story strip mall in the image, and those aren’t known for tax potency.  Also, we’ve done the “cost” side, and it demonstrates the losses.  Here’s an article  covering our ROI analysis of Lafayette, LA work with Strong Towns.  Also, SACOG has an incredible model which demonstrates the financial costs of development patterns.  It’s an incredible model.  Finally, I wouldn’t say it’s cheap to build here, and there are other relative terms to run that math.  For one, your incomes are a heck of a lot higher there, than here so folks can afford more.  Secondly, we are isolated from import economies.  Simply put, getting the materials here is a burden.  Then there’s our typography, bizarre public process, lack of developable land, etc.  It all adds up.  There’s more to the math.

Leave a Reply

X Close

Newsletter Sign-Up

X Close

Monthly Subscriber Sign-Up

Enter the maximum amount you want to pay each month
$ USD
Sign up for