Analysis: The Promise of Economic Development for Davis

It was late 2010, the city of Davis was still reeling from the effects of the Great Recession, but it was about to land a coup.  The city of Davis was competing with Chicago for Mori Seiki – a Japanese machine tool manufacturer.  The city had worked for over a year with local and regional leaders and they won the agreement.

Mori Seiki in December 2010 agreed to purchase 14.5 acres along Second Street and invest $50 million to build its first US manufacturing plant.

According to press accounts at the time, they would employ about 150 people at the 185,000 square foot factory.  To put the size of this operation into perspective, when Nishi was proposing creating R&D space, it was estimating just over 300,000 square feet.  It is the city’s largest non-residential building.

There is another way to look at this, however – the proposed Aggie Research Campus would create around 2.5 million square feet of R&D space.  In other words, the space could hold the equivalent of 13 Mori Seiki’s.

Clearly, Davis was a place that a company like Mori Seiki wanted to move to.  But it was not a foregone conclusion that Davis would land their services.  As mentioned previously, Davis competed with Chicago for the plant.  They worked with regional leaders including SACTO (now Greater Sacramento) to convince the factory to come to Davis.

Moreover, they had to provide some inducements.  For instance, they agreed to reduce by half the estimated $550,000 construction fees and allowed the company to pay water and sewer fees, according to published accounts, “estimated at $141,380” to when the building was occupied instead of when it pulled building permits.

But the payoff here was enormous.  Mori Seiki is one of the biggest private employers in the city and one of the biggest tax producers.

A city staff report at the time estimated about $115 million a year in gross sales, and $540,000 in annual property tax revenue with the city taking in $85,500 per year.  The gross sales translate to sales tax revenue for the city.

The staff report projected 150 direct jobs, that an estimated 98 “indirect and induced jobs resulting from the factory would have an annual payroll of $12.8 million.”

If you want to understand why the city is eyeing the potential of economic development – look no further than Mori Seiki.

If the city could fill ARC with companies as productive as Mori Seiki, the city would not be looking at an ongoing $8 million deficit for infrastructure.

The 2017 State of the City report shows Mori Seiki just outside of the top 10 in terms of most employees as of 2014-15.

UC Davis hires fully one-third of all area employees.  The top 10 employers account for nearly half (46.6 percent) and most of the top are either public employers like DJUSD and the city of Davis, or health care providers like Sutter and Kaiser.

The report shows two critical downfalls to the city of Davis economic picture.  First, a lack of highly skilled private sector jobs.  Second a lack of sales taxable revenue.

The report states: “Although Davis represented around 32 percent of the countywide population in 2014, according to the BOE, retail establishments in the City of Davis facilitated only 15.6 percent ($589,194) of countywide taxable sales, compared to West Sacramento and Woodland which facilitated 36.7 and 24.3 percent of countywide taxable sales.”

The report also does not paint a good picture of the Davis Core Area.  Comparing the Davis Core Area with the core area of other peer communities, the report found “the Davis Core Area features fewer residents, housing units, and jobs compared to other college-oriented peer communities.”

It finds, “Compared to peer cities, the Core Area has above average concentrations of employment in Retail Trade, Finance and Insurance, Real Estate and Rental and Leasing, and Accommodation and Food Services.”

All of this screams to the need for Davis to improve and diversify its downtown composition.  Despite a decade of focus on economic development, the city remains largely untapped potential.

Companies looking to move to Davis and startups looking to convert university research to private sector commerce see the potential of Davis, with its highly educated and highly skilled workforce and the university with a huge and largely untapped economic potential – but there are key things missing from the equation, and one of the biggest is available space.

In 2014, a city report noted that “the amount of available commercial and industrial land and facilities available for business expansion has dropped significantly with the success of companies like DMG Mori Seiki, FMC Schilling Robotics and Marrone Bio Innovations.”

Worse yet, that availability was stressed by expansion plans where some companies indicated they needed parcels that could be in the range of 20 to 40 acres, with the largest available parcel in Davis coming in under 15 acres and most being just a few acres.

Five years later, the situation is actually quite a bit worse.  The city’s analysis identified 124.5 vacant commercially zoned acres as of January 2019.

While a lot of those are small, the larger ones are largely unavailable – for example, 33.5 acres can be eliminated simply because they are extensions of medical facilities (Sutter-Davis and Kaiser).  Twenty-five acres are unavailable because they are currently the Frontier Fertilizer Superfund Site and likely to remain so for a long time.

Even a location that was considered for a business/R&D park along Chiles and Cowell, about 15 acres, might not be available in the near future.

This was the site of the 2015 proposal for a 225,000 square foot office/R&D park in Davis – the type of development the city would envision for economic development efforts.  However, the project fell through and Jim Gray, who handled the deal in 2015, is not optimistic about the prospects for rekindling that development in the near future.

“It’s a good site, in my opinion for the development of amenities,” he said.  However, he told the Vanguard, “If I were living across the street from the property, and was afraid of the unknown, I think a tumbleweed field is the most likely activity for the next ten years.”

The Vanguard’s analysis from earlier this year concluded that immediately 73 of the 124 acres are completely eliminated from consideration – for at least ten and probably 20 years.

The 2014 report to the city noted, “In the summer of 2013, one of Davis’ homegrown companies announced that they will be moving to another jurisdiction, partly due to size and facility constraints on available land. The loss of Bayer Crop Sciences (formerly AgraQuest) marked a turning point in how Davis could realistically respond to opportunities for growth of local technology companies.”

There are other dominoes about to fall.  A report in the Sacramento Business Journal suggests another Davis-based company is about to move to West Sacramento.

But the experience of Mori Seiki illustrates the upside of economic development.  My conversations since the ARC announcement suggest a mix of optimism and skepticism.  Optimism still in the long-term potential of Davis, optimism that the Sacramento Region is positioning itself for a big push forward, disappointment that in five years the city of Davis – which was at the forefront of the economic development movement regionally – has been largely surpassed by regional neighbors, and skepticism that the residents of Davis may once again block a forward-looking project.

—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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47 Comments

  1. Ron Glick

    The promise of economic development was stymied then and is stymied now by Measure R. Davis can solve its problems but not under the present rules.

  2. Craig Ross

    While I don’t think Ron is wrong that Measure R and land use squabbles in general have been a problem, I see two separate problems with Davis.

    One is that there is a large group of people in this community who are simply ‘no.”  I won’t get into that black box, but they will oppose most things and put up every reason not to do things they can.

    The second though is that there is a group of people who simply throw up their hands and accept their defeat.  Nishi and WDAAC passed Measure R votes last year.  The city is changing.  No need to be fatalistic.

    1. Bill Marshall

      Craig… for those who have “their piece of the pie” (and often, ‘extra portions’), stasis is good… “I’ve got mine!  And don’t particularly care about others”… yeah, a lot of folk who think that way… a lot of folk who don’t (me included)…

      Gets to other topics… like teacher/staff compensation… that’s why , in that example, to overcome the “me” thing, the focus of a campaign will be to convince folk that they ultimately are ‘investing’ to their own benefit, and/or failure to invest will ‘cost’ them, financially or otherwise.   It is what it is..

        1. Bill Marshall

          Craig… I’ll say it more bluntly… many don’t care if the City (and/or DJUSD) is/are sustainable (a few post here)… truly… they have the resources to walk away.  They only care about themselves… read the “What is Man?” referent… it’s a hard truth, particularly for the ‘young man’… you’ll find parallels in Jewish, Christian, Islamic writings… Twain was a self-described agnostic… 4 ‘voices’, one truth as to the nature of folk.

          But, as bluntly, there are many who care, deeply, about the City, their fellow citizens, humanity in general, and we should never stop pressing to change the status quo… in a financially and socially responsible way… that’s how you convince others to move from ‘stasis’… you’ll find parallels in Jewish, Christian, Islamic writings… Twain was a self-described agnostic… 4 ‘voices’, one truth as to the what folk can accomplish.

          We can be better than our ‘stasis’ nature/predilection….

          Just my opinion…

  3. Ron Oertel

    Bill:  “Craig… for those who have “their piece of the pie” (and often, ‘extra portions’), stasis is good.”

    Seems to me that those who are pushing for more development are the ones looking for more “pie” for themselves or their allies. And, some of them don’t give a rats’ ass, about the state of the city or other people.

    Bill:  “Craig… I’ll say it more bluntly… many don’t care if the City (and/or DJUSD) is/are sustainable (a few post here)… truly… they have the resources to walk away.”

    If that was true, then “they” wouldn’t care if development occurs, or not.

    1. Craig Ross

      I like pie.  Especially when combined with punch.  I think the reason for your opposition to economic development is you believe more jobs mean more people.  That’s probably true.  I will fully admit that I would love more jobs to come to Davis becauseI would love to live here past this summer and be able to have one of them.  I also happen to believe that the numbers as laid out by the Vanguard are accurate and that without revenue from economic development, the city will have to make deep cuts and this won’t be the community you are fighting to protect –  it will be a shadow of its former self.

      1. Ron Oertel

        I think everyone likes pie.  In terms of jobs, Davis already has an ample supply of pie, in the form of a 2.2% unemployment rate.

        Regarding city finances, the city’s (less than 16%) share of the property tax from Mori Seiki ($85,500 per year – before the city’s costs are even considered) is not particularly impressive. And that’s for a site that was already in the city, and was likely vacant for an extended period of time. Necessitating the need to “make a deal” to land Mori Seiki.

        The primary reason that I’m opposed to MRIC is because I like the current zoning, providing a logical boundary for the city. I’m also concerned about a freeway-oriented development, further impacting the freeway access points (as well as the freeway, itself).

        If David wants to talk about the lack of commercial space, perhaps he should discuss how many commercial acres around the city have already been converted to housing.  Including a couple of other “innovation center” sites, as well as a site (the Cannery) in which the owners reportedly flat-out refused to even consider anything other than residential development.

         

        1. Craig Ross

          Unfortunately you’re quite wrong on several points here.

          First, Davis doesn’t have a lot of jobs.  As the chart shows in this article shows, a huge percentage of jobs are at the university and while professors and Deans and admins get paid handsomely, most of those are not high paying jobs.  The amazing thing at the top 10 list is how many of those jobs are not well paying.  Even DJUSd you are talking about a huge number of people making between 25 and 60K – not enough to live on in Davis these days.  That chart alone belies your claim.

          Outside of the university, the jobs disappear quickly.  You point to the unemployment rate – a bad measure in part because that measures the people out of work and actively seeking, not the people living in Davis and commuting and not the people who move out of Davis due to lack of opportunity.

          You’ve wildly erred on the taxes from Mori Seiki.  $85,000 is just property tax.  There is also the sales tax on more $114 million worth of taxable sales, given the city’s one percent sales tax is a HUGE number for the city.

          I’ll stop there for now.

        2. Ron Oertel

          I’m not seeing salary figures in the chart.

          Not sure where you’re getting the figures for DJUSD, how you’re getting your information, or why you’re doing so.  Are you suggesting that those working at DJUSD will suddenly start working at an “innovation center”?

          Regarding the $114 million, what did the city’s share of that end up as?

          Some business-to-business sales are tax-exempt, and commercial market demand is already questionable.

           

        3. Craig Ross

          I just looked it up – there are 1600 full time faculty positions at UC Davis.  So out of the 12,000 jobs, only a relatively small percentage are going to be good paying jobs that people can live on in Davis.

          Once again, I argue it is remarkable how few jobs there are in Davis that people can use to live in Davis.

        4. Craig Ross

          “I’m not seeing salary figures in the chart”

          It’s called extrapolating.  I am taking the data presented there and adding to that known information to complete the picture.

        5. Ron Oertel

          If salaries are supposedly so high at an innovation center (despite the lack of ANY demonstrated commercial interest), why is it that the “employers” are simultaneously claiming that their employees won’t be able to afford Davis, unless housing is included?

          And, if they can’t “afford” Davis on their new salary, what would prevent their new “employees” from living in a significantly cheaper location, less than 10 miles away (with availability in several different directions)?

          Once again, the “justification” doesn’t wash.

        6. Ron Oertel

          And, what would prevent “innovation center” residents from working in Sacramento?  It’s an easy commute, especially due to the easy freeway access and proximity to Sacramento, from that side of the city.  I did it for years.

          The daily commute between the MRIC site and Sacramento would be easier than anyplace else in the city.

        7. Craig Ross

          My point is that the salaries in Davis in general are quite low as illustrated with the places where the top 10 employees work.  Whether the salaries in an innovation center are going to be great is harder to know.

          What would prevent someone living at the ARC from working in Sacramento?  Probably nothing.  But I’m not sure why they would want to.  Davis is still going to be more expensive for comparable living quarters.

        8. Craig Ross

          Are we really going to do argument by unknowable supposition?  The applicants can take reasonable steps to maximize the number of people living at the innovation center actually work at the innovation.  They cannot get it to 100% without coercive means.

        9. Ron Oertel

          I was by no means alone in my daily commute to Sacramento.  Sacramento is a major employer for all of the surrounding cities (and is conveniently “ignored” in David’s chart).

          None of my coworkers lived in Sacramento, to my knowledge.  They all commuted in, from surrounding locales.  For many, Davis is a “bedroom community”. And, MRIC is the most convenient location of all to commute to, or from the Sacramento area.

          It’s even more convenient than other areas where commuters live, including places like Roseville, Elk Grove, etc.

          I suspect that more employees would commute “into” MRIC (from the surrounding community), than outbound to other locations. But really, it’s both.

          1. David Greenwald

            First of all, the chart is from the city, I only published it. Second, it represents who employs people in Davis and doesn’t include all of the people who go out of town to work.

            “MRIC is the most convenient location of all to commute to, or from the Sacramento area.”

            You just made a good argument for ARC – although commuting is not a great thing unless you have a way to get people out of their cars. The housing at ARC is going to be designed primarily for people who work at ARC.

        10. Ron Oertel

          Sorry – I meant to say from the surrounding “communities”, as there’s several from which MRIC would draw employees. Unlike what’s available to Davis residents (at UCD, Sacramento, etc.,), some of those communities are relatively lacking in good jobs (although a couple are pursuing their own “innovation centers”, which are competing to land the exact same limited number of businesses as MRIC is attempting to do).

          Good luck with that. I wonder what kind of incentives would need to be offered, to convince them?

          1. David Greenwald

            “which are competing to land the exact same limited number of businesses as MRIC is attempting to do”

            Probably not so much. Remember Barry Broome’s point – innovation happens in close proximity to the campus. Also, remember Sacramento is largely going to be an urban campus while Davis will be on the ag-urban boundary and attract a lot more ag-tech and food companies, while Aggie Square will likely attract more companies interested in proximity to the medical school.

        11. Ron Oertel

          David:  “The housing at ARC is going to be designed primarily for people who work at ARC.”

          It doesn’t necessarily matter who it’s “designed for”.  Also, residents would likely include “significant others”, etc. – who wouldn’t necessarily work there (even if the primary resident does).

          But again, the “outbound” commute would probably be less than the “inbound” commute.  (Unless one of the job requirements was to live at the site, which would probably be illegal.)

          1. David Greenwald

            The EIR projects about 60% of the occupants to work on site and models the traffic impacts accordingly. That would account for your supposition.

        12. Ron Oertel

          David:  “Remember Barry Broome’s point – innovation happens in close proximity to the campus. Also, remember Sacramento is largely going to be an urban campus while Davis will be on the ag-urban boundary and attract a lot more ag-tech and food companies, while Aggie Square will likely attract more companies interested in proximity to the medical school.”

          I recall that Broome defined “close proximity” as within 200 yards of a campus.  MRIC is considerably farther than that, and would encourage traffic through town to reach it.

          Alternatively, the planned Woodland development (which “migrated” from Davis) has easy, unimpaired freeway access, along with a lot of new housing.  Note how it’s being promoted:

          “Northern California’s agricultural innovation is anchored by the cutting-edge research and development at UC Davis – the nation’s premier agricultural research institution. Woodland Research Park, a proposed 350-acre project located just seven miles from UC Davis, offers the opportunity for established companies and startups focusing on agriculture innovation to expand or put down roots in Northern California’s agriculture and food science epicenter.”
          (With 2 million square feet of research/office/lab space, 1,600 residential units, etc.)

          http://woodlandresearchpark.org/

          And then there’s the Dixon development, companies relocating to West Sacramento, etc.

           

          1. David Greenwald

            He discussed the point about the proximity saying that ideally the first innovation park would be across the street, but added that having the innovation park in Davis was a huge advantage over Woodland. Companies are relocating to West Sacramento because we lack the space. That’s exactly what we are trying to avoid.

        13. Ron Oertel

          David:  “The EIR projects about 60% of the occupants to work on site and models the traffic impacts accordingly. That would account for your supposition.”

          I wouldn’t be surprised if the EIR is challenged.  The age of the EIR might also be a factor, regarding the pursuit of the development now (despite the lack of any demonstrated commercial interest).

        14. Ron Oertel

          David:  “He discussed the point about the proximity saying that ideally the first innovation park would be across the street, but added that having the innovation park in Davis was a huge advantage over Woodland.”

          Sure it does (for the developer).  The housing will sell for more.

          David:  “Companies are relocating to West Sacramento because we lack the space. That’s exactly what we are trying to avoid.”

          Good luck with that.  West Sacramento would retain a considerable price advantage, for commercial tenants. It’s just across the causeway from Davis (and the proposed “MRIC” site), and is also close to Sacramento, itself.

        15. Ron Oertel

          David:  “Everything in Davis gets challenged. Cost of doing business.”

          It does not appear that there’s much “business” to be had (other than another housing development).

          1. David Greenwald

            Is that why ADM moved here? And Mars? Also I understand that one of the vacant sites on 2nd Street just got a major new vendor as well.

        16. Ron Oertel

          Are you referring to companies that moved to Davis (without having a housing development built for their “employees”)?

          In any case, I’d suggest that when you tally up the available commercial space, you might want to discuss the other failed innovation center sites, conversions of commercial space around the city for residential usage, and the sites available in surrounding communities.  Including any vacant buildings, hoping for commercial tenants.

          That would provide a more honest picture of what commercial tenants examine, when considering relocation.

           

        17. David Greenwald

          You just said that there is no demand for commercial development. I directly refuted your claim with three major examples off the top of my head that I know of.  Now you’re changing the subject

        18. Ron Oertel

          I don’t know how “major” your examples are, or the details behind it. Nor do I fully trust you to disclose the details in an unbiased manner.

          Regardless, if there’s significant demand (without housing), then let’s see the MRIC developer propose it as originally planned.

          And again, let’s see what the demand is when the other innovation center sites go forward.

          Ultimately, there’s no way for Davis to compete, when large-sized parcels are desired. (Unless it’s really a housing development, in disguise.)

        19. Ron Oertel

          David:  “You don’t know how major international companies Archer Daniels Midland putting a lab in Davis and Mars doing a lab in Davis is?”

          You don’t know how clumsily-written that question is?  😉

      1. Ron Oertel

        I don’t see any clarification arising from that comment. It’s true that development interests are never satisfied, and will do everything possible to encourage dissatisfaction (to which they offer a “solution” – hoping that we’ve already forgotten how their previous solutions worked out).

  4. Richard McCann

    The continued operations in Davis of our two largest manufacturers are in fragile states for different reasons. We need to be looking for other employers to step in.

    1. Bill Marshall

      Or, possibly to make their status less fragile?   Have no idea what that would take… but there is an old axiom, paraphrased, “A manufacturer in hand is worth…”

      Another axiom, “first, do no harm…”

      1. Bill Marshall

        We used to have another…  known as Hunt-Wesson… originally, just Hunt’s… and another, Armco Steel… both long gone.

        Both had their own RR spurs…

        But both within my memory as a resident of Davis…

  5. Ron Oertel

    From article above:  “This was the site of the 2015 proposal for a 225,000 square foot office/R&D park in Davis – the type of development the city would envision for economic development efforts.  However, the project fell through and Jim Gray, who handled the deal in 2015, is not optimistic about the prospects for rekindling that development in the near future.”

    “It’s a good site, in my opinion for the development of amenities,” he said.  However, he told the Vanguard, “If I were living across the street from the property, and was afraid of the unknown, I think a tumbleweed field is the most likely activity for the next ten years.”

    Kind of strange that David would include this quote in his own article.

    1. David Greenwald

      The reason if you looked at the original article was the owners of the property didn’t have their act together and were in dispute with themselves over what to do with the property.  It had nothing to do with site or the desirability you coming to Davis.

        1. Ron Oertel

          Because the owner of that field isn’t likely to get their act together any time soon.

          Normally, when there’s money to be made, folks find a way to “get their act together” before another decade passes by. And certainly not a reason to “write off” the ultimate use of the property (as long as the city doesn’t convert the zoning to housing, as is so often the case).

          Regarding possible conversion to housing, I’m wondering if that’s the reason that they haven’t “gotten their act together”, so far.

          Also Jim is a commercial broker, not a developer.

          O.K. – a primary player in commercial developments.

           

           

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