Commentary: Why Davis Needs Some Jobs in Davis Itself

The point of yesterday’s commentary was to show data to the community about just how few jobs there are in the city of Davis itself.  Throughout the economic development discussion, those opposed to creating additional commercial space in the form of an innovation center have pointed to UC Davis as a center of employment and a driver of jobs.

Indeed, UC Davis is a center of employment and an economic powerhouse.  Most estimates from a few years ago showed that the total economic impact of UC Davis was $8.1 billion annually for the California economy and 72,000 jobs.

Next to state government, UC Davis is the second largest employer in the Sacramento region.

So perhaps the question is why are we looking at jobs in the city of Davis when UC Davis has 24,000 employees on its Davis campus?  Isn’t that enough?

Certainly from the perspective of employing high quality workers in the community and reducing our carbon footprint, there really is no difference between people in Davis working within the city proper and people of Davis working at UC Davis.

But when we start to dig deeper we realize that there are important differences between the two.

As Matt Williams put it in a very important comment, that Davis is an “aggregate community” which includes the UC Davis campus “is a very important perspective, but it isn’t the only perspective.”

Another perspective, he points out, is the fiscal perspective.

“The bottom-line of the City of Davis’ fiscal situation is that we don’t pay our bills … and we haven’t been paying our bills every year for well over a decade,” he writes.  “Why does the City of Davis have only $61 million of Revenues, and $74 million of Expenses?”

From this perspective we start to see why jobs are important in the city of Davis.

Some are treating the two employers as synonymous because they are in relatively close proximity to each other and jobs on campus allow people who live in town to keep their VMT low.

But that’s not the end of the story.

Jobs at UC Davis are not equivalent to jobs in the city because they do not directly generate revenue for the city.

This is a key point.  The innovation center generates revenue in largely two ways.  One is property tax—the city gets to keep a portion of tax as a function of the value of the property.  Indeed, one of the underrated advantages of this type of economic development is that the heavy capital equipment installed inside the buildings by the occupant is also subject to property tax.

The other way is through sales tax.  Dan Ramos talked about the fact that they will be focusing heavily on things like advanced manufacturing, which has the potential to generate “point of sale” sales tax revenue for the city.

The university may hire people, but they do not contribute to city coffers with either property tax or sales tax.

Now, as some have pointed out, the university does bring advantages to the city.  They point to “all of the economic activity that is created as a result of jobs at UCD.  At its most basic level, it’s the reason for property tax valuations in Davis, as well as a host of other economic activity throughout the city.  These people get salaries, and that money is spent in the city.”

I agree with these points, they are important.

But we are at a deficit in this city in terms of our revenue versus our expenses (actual spending plus shortfall).  And UC Davis at this point is not going to increase our revenue.  So we need to look elsewhere.

The poster also points out: “Davis has never been a major employment center on its own, and yet it’s existed for 100+ years.”

This an accurate point—the city of Davis has never been a major employment center, and it will not be a major employment center in the future.  The point is a red herring.  If the Innovation Center is approved and built, it will hire several thousand people.  It will add $5.4 million—perhaps more to the city coffers—and it will not make Davis a major employment center.  That is not the purpose.

The purpose here is to take some of the economic potential of UC Davis … specifically take the research UCD is generating … and transfer it to the private sector.  That is what Sacramento is doing with Aggie Square and what Davis could do with DISC.

There is another point that was raised which needs elaboration: “UCD does have a lot of jobs (good ones, at that). Essentially, more than what’s needed for Davis residents.”

Yes and no.

UC Davis does have a lot of jobs.  But when you really break down those 24,000 jobs on campus, you realize something — it is only serving a very narrow swath of the community.

There are well-paying jobs on campus: faculty positions, some staff positions, most administrative positions.

But if you do not have a PhD, or if you do not want to be an academic, the number of positions that are considered well-paying … specifically well-paying enough to live in this community … are actually fairly few.

And while UCD has many well-paying jobs, there also are many that are not well-paying.  Adjuncts are not paid particularly well.  There are 2,200 graduate assistants that are not paid well by any standard.  You have food service workers, janitors, student employees, part time positions—none of those are paid extremely well.

The point here is not to disparage UC Davis — it produces many high quality jobs.  The point here is to show that within those strengths are limits.

Basically, if you look at the employment chart you either work for UC Davis, for the government, for a health care company, in food service, or you work in a small business.  Those who do not work at UC Davis are far more likely to work in Sacramento or the Bay Area because the number of jobs in the city that enable one to afford to live in the city are quite limited.

DISC won’t fix that completely, but it will provide some jobs for people who live in this community.  Right now, according to the information provided to the Downtown Plan Advisory Committee, just 3,686 people live and work within the city of Davis.  DISC and projects like that have the ability to change that and keep more revenue at home and help to close that city funding gap.

—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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19 Comments

  1. Alan Pryor

    …we are at a deficit in this city in terms of our revenue versus our spending

    No one can argue that point. What we disagree on are three points:

    1) I disagree that ARC will provide more net revenue to the City than expenses,

    2) I disagree that  there are not any other sources of net revenue (or huge savings)available to the City to fill the financial gap, and

    3) I disagree that more net revenue will result in increased spending for city infrastructure such as roads and bike paths

    1) I disagree that  ARC will provide more net revenue to the City – The promised “city revenue” from ARC is based on the rosiest sets of assumptions we have ever seen from EPS for a city project. a) The EPS report assumes grossly inflated office rents/leases (i.e. $2.92/sq ft/mo) which is far in excess of regional average office rent/lease values ($2.15/sq ft) which 36% increase justify inflated land and building value estimates which justify inflated property tax revenues and receipts. b) The EPS report assumes retail sales revenues/sq ft  thar are far in excess of regional average values which justifies increased sales projections which justifies increased sales tax revenue estimates. c) The EPS report minimizes potential costs to the city from the project by estimating reduced city service costs per employee generated by residents and employees at ARC compared to city cost averages. d) The EPS report ignores the tens of millions of dollars of road construction/modification costs the city will bear to try to mitigate the enormous and unsustainable gridlock that will result from 24,000 trips per day to and from the site. If you believe the hyper inflated estimates of net revenue that EPS provided, then I have a hell of bridge you may be interested in purchasing.

    2) I disagree that there are Not Any Other Sources of Revenue to the City – Our City just blew away one of the most lucrative opportunities that we have ever seen when they handed out the sole source solar lease deal to BrightNight. Yolo Co reaped an estimated $20M in NPV for a 30 acre site when they developed their own solar system at Grasslands Park. We are getting about $4M in NPV from a 235 acre site as a result of an incompetent staff and Council making a stupid give-away deal. The City thus gave up a potential NPV $120,000,000 (Yes, that’s right, $120 MILLION) income stream when they stumbled all over themselves to make the solar lease deal and then refused to admit their mistakes and doubled down on sheer stupidity. We also lost potentially tens of millions of dollars in savings by not being able to set up our own composting facility on that same site which was “uniquely” suitable for exactly that purpose. Why would we expect our City Staff and Council to be any more adept at dealing with an experienced developer to maximize net reveue to the City from ARC when we have just experienced such gross incompetence on their part in the solar deal.

    3) I disagree that more Net Revenue to the City will Result in Increased Spending for Infrastructure – The Citys net revenue has been increasing every year since the last recession ended in 2012. Yet our infrastructure improvement and maintenance budgets have barely increased beyond what we are getting in outside monies (e.g. SB1 gas tax) above the rate of inflation every year. Of course you would probably then ask, “But if that’s true then where has all the extra money gone every year“. And I would say, “That’s simple, the City has given away an extra $39 million dollars in employee compensation over and above CPI indexed employeee raises just since 2011“. That’s right, if we had held our employee compensation increases every year just to the Bay Area Urban Salaried Workers CPI every year since 2011 we would have an extra $39 Million we could have spent on road repairs and infrastructure maintenance. But our City Council was spending money like drunken sailors giving it away every year in salary increases to our already very well compensated employees of the City. Between 2011 and 2018, the average total pay and benefits for full time workers in the City increased from $97,749 to $144,115 for an average annual increase  of 5.9%. But the average CPI increase over the same period was only 2.8%. Giving the empoyees and extra average 3.1% in total compensation every single year since 2011 has cost the City $39 Million over and above what they would have been paid if their total compensation had been held only to the CPI.

    So do you still wonder why I am highly skeptical that our current City Staff and Council is going to get their act together and get ARC installed in a manner that won’t cause crushing traffic congestion in east Davis, and probably end up actually costing the Citymoney  rather than generating a net revenue surplus.

    1. David Greenwald

      “1) I disagree that ARC will provide more net revenue to the City – The promised “city revenue” from ARC is based on the rosiest sets of assumptions we have ever seen from EPS for a city project. a) The EPS report assumes grossly inflated office rents/leases (i.e. $2.92/sq ft/mo) which is far in excess of regional average office rent/lease values ($2.15/sq ft) which 36% increase justify inflated land and building value estimates which justify inflated property tax revenues and receipts. ”

      It also looks like in your analysis you don’t account for something else – the assumption for the office is “Full Service Gross” which means that taxes, utilities, and maintenance are included in the rent and generally factored at 30 percent of the rent. On the other hand, the R&D which is at $2.33, is Triple Net with all of the expenses passed through. That seems to account for entirety of the difference from average to this. And it is far from clear from your critique whether that makes any difference in the overall property tax.

  2. David Greenwald

    “. a) The EPS report assumes grossly inflated office rents/leases (i.e. $2.92/sq ft/mo) which is far in excess of regional average office rent/lease values ($2.15/sq ft) which 36% increase justify inflated land and building value estimates which justify inflated property tax revenues and receipts. ”

    That’s only for office rents and he explained why he put it there. The Flex/ R&D is estimated at $2.33 which seems reasonable. Office only represents about 30 percent of their projected space use. I think it’s hard to argue that this is significantly driving the property tax projections.

  3. Ron Oertel

    Let us know when the fiscal analysis includes the long-term costs of the 1,200 additional residential units in Davis that won’t be built on-site, and ALL of the costs associated with roadway improvements to accommodate those using the 6,000 parking spaces (e.g., from those living in the 1,700 additional units needed in other communities, as a result of DISC).

    For that matter, let us know when the fiscal analysis includes the impact of “whatever” type of Affordable housing is supposed to be built as a result of the development.

    ‘Cause those things are not in the analysis, now.

    1. David Greenwald

      Why would it? Even if you believe that the city will add housing in the future (which for reasons I have explained, I don’t), the city has largely been able to make housing development fiscally neutral.

      1. Ron Oertel

        Why would it?

        Because the SEIR states that it’s needed as a direct result of this proposal.

        Even if you believe that the city will add housing in the future (which for reasons I have explained, I don’t), the city has largely been able to make housing development fiscally neutral.

        Factually incorrect, and a primary reason that Davis (and just about every other city, county, and the state itself) is facing significant deficits.

        Ultimately, it goes back to the limitations imposed by Proposition 13 (on both residential and commercial properties), coupled with no such limitation on spending/costs.  Unless that underlying, systemic problem is addressed, this will continue.

        I recall that someone else noted roadway improvements that are needed as a result of this proposal, but would not be paid for by this proposal.  Do you (or anyone) recall what those were?

        By the way, are you going to address Alan P.’s detailed comment, above?

      2. Matt Williams

        the city has largely been able to make housing development fiscally neutral.

        David, beginning with the fiscal model Paul Navasio created for Covell Village, through the fiscal model created for Wildhorse Ranch, through Nishi 2016, Nishi 2018, and WDAAC, none of the fiscal model(s) for housing have been fiscally neutral.  They all followed the pattern shown in the graphic below, with one-time revenues creating a “savings account” in the early years of the project, and then that savings being drawn down by annual expenses for the City that exceed annual revenues for the City.

        https://www.davisvanguard.org/wp-content/uploads/2020/05/07-Paying-Our-Bills-through-Growth-1.jpeg

        The FBC review of the EPS economic analysis of Nishi 2016 suggested a supplemental Community Services District (CSD) payment by the developer/property owner to the City that would increase the annual revenues to the City.  Absent that CSD payment, EPS had determined that Nishi 2016 was a fiscal negative for the City.

         

  4. Tia Will

    David

    I know this may be seen as a bit off-topic ( although I see it as integrally related), I have not yet heard a word from either side about the anticipated changes in how work is accomplished in the post COVID time.

    My predictions regarding the course of COVID have been anything but prophetic so you might want to take this with a grain ( or lick) of salt. But I do not anticipate a return to “business as usual” in virtually any sector of the economy. Your thoughts on the local impact?

    1. David Greenwald

      I agree in most sectors business is not returning to normal. The result is going to be a big hit to the budget that probably lingers. One reason for the original push for economic development back in 2010, out of the last recession was to create more diversity for the economy locally in hopes of producing better resiliency. Tech industry right now is fairing reasonably well for example. Whereas hotels and restaurants are being hammered.

      1. Jeff Boone

        I will be interested in that too.  Maybe the new trend will be office workers in a field sitting next to burroughing owls while using 5G and their smart phone.  Or maybe UBI for all and no office work will be required for any.

  5. Doby Fleeman

    Typical, let’s break down the discussion to its lowest common denominator and then start hammering away on debatable details – as if these are the main thrust of this article.  Divide and destroy.  We could also add deflect, divert and dissemble.  It’s an ages old strategy – one that works particularly well in Davis.

    For the record, David’s opening statement concerning the outsized role of UC Davis as the regions leading employer should have included the fact that UC Davis Health Systems is also the 2nd largest employer, with 12,674 employees, in the City of Sacramento following only the State Government.  And, that’s before Aggie Square.

    Point is, as is the topic of today’s article, location matters – particularly when you are talking municipal tax revenues which accompany such development.   No doubt someone will comment “but UCD is exampt from property tax, how does that help the City of Sacramento”, but they would be entirely missing point – it’s all about the ancillary private investment and jobs accompanying the regions largest hospital and all of the accompanying spin off medical offices, medical labs and accompanying taxable equipment purchases and taxable supplies consumed.   In addition to its life saving/life changing mission and the many great jobs it supports – it’s these ancillary “business activities and investments” which hold forth the compelling fiscal allure for the City of Sacramento.   And, its something to be roundly celebrated – a true win-win for the City of Sacramento, the University and the Region.

    When it comes to Davis, the average resident – and perhaps even the University – isn’t going to ever think about these things – but our Commissions should, just as our Council and City Staff as they evaluate the proposition current before them.

    This City can’t live permanently off the crumbs of Amazon’s sales tax receipts.  If not for private, commercial development – where do we expect to generate new commercial activity, new jobs and additional revenues to help restore a much needed balance in our fiscal outlook?

  6. Ron Oertel

    From article:  And while there are many well-paying jobs, there are many that are not.  Adjuncts are not paid particularly well.  There are 2200 graduate assistants that are not paid well by any standard.  You have food service workers, janitors, student employees, part time positions—none of those are paid extremely well.

    This comment is misleading, as noted (and ultimately acknowledged by David), in the comments from yesterday’s article.

    Regarding non-student, non-academic positions at UCD, there are approximately 14,300 in the professional category, and 2,300 in the managerial category.  Salary data was posted in the link below, as well. (Additional benefits that employees receive are not discussed in those links.)

    https://www.davisvanguard.org/2020/05/commentary-illustrating-why-davis-needs-jobs/#comment-425636

    1. Matt Williams

      Ron, your link did not take me to the source data on compensation for the jobs on the UCD campus.  Can you please repost that link to the source data?

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