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