The guest column by Tim Keller on Monday definitely drew a lot of comments. But there is a key point that got missed in the back and forth, and that is the point that we learned when the city of Davis at the beginning of 2019 inventoried the availability of commercial space in Davis, and the point that Danielle Casey drove home two weeks ago during her presentation at the Vanguard event: we don’t have space in Davis to do economic development.
You can argue that there isn’t commercial demand, you can argue that innovation centers across the country have failed or underperformed, but at the core for most people – this is about creating space.
As Tim Keller put it, “Off-campus innovation space is the single place where we have most failed to live up to our end of the deal as hosts to a research institution.”
He adds, “Without R&D Space, all of that investment in research has a very hard time making it to market – and if it does, it is usually because the founders migrate towards the bay area.”
Here’s the thing – investors whether it be the developers of the ARC (Aggie Research Campus) or people like Tim Keller are willing to put time, energy and most importantly money behind their bet that innovation and economic development in Davis can work.
This is the point that Danielle Casey made when I asked her how the region views Davis from the standpoint of economic development.
“When we work with firms that are looking at coming into the region, they’re looking at expanding, it has already been said in terms of certainty… We have innovative companies that are looking at connecting with Greater Sacramento. I’d say, for the most part, Davis isn’t even considered because they’re going to do a look at a requirement in terms of commercial space availability and they’re just not finding it,” she said.
“They don’t even see it all,” Danielle Casey said. “So you’re not even getting a look to begin with.”
And the other point she made – UC Davis is a huge selling point. She echoed the comment of Barry Broome , that “they see it as an untapped resource but also as the gateway to Silicon Valley.”
She noted, “The perception (of UC Davis) is very high.”
Forget all the fancy words, forget about research campus, forget about an innovation park, this is about creating space so that a company looking to come to the region will consider Davis because they want to be in that space.
Both Rochelle Swanson, the former councilmember, and Danielle Casey made the point that companies will pay a premium to move to places like Davis because they have the campus connection and the 
access to a world class labor force.
But as we know from the city’s presentation in January, Davis lacks the space. The city has about 120 acres of undeveloped commercial space, but a lot of that is either unavailable or tied up. The reality is that number is really about 50 and most of it in relatively small parcels.
That’s important. It is why Bayer/AgraQuest left. It is why Schilling Robotics will announce this fall it is leaving. And it is why companies looking to the Sacramento Region – that are of any reasonable size – are not looking at Davis.
You can argue that this means there is no commercial demand for Davis. But that is flat out a false conclusion. How do we know? Start with Mori Seiki. Too far in the past? How about Mars coming to downtown Davis for a small but important lab on G Street? How about ADM (Archer Daniels Midland Co.) coming to URP (University Research Park)? How about Fulcrum investing millions in the University Research Park, Sierra Energy investing millions in their new technology and innovation space, Nugget picking Davis for its new headquarters? How about the two hotels about to open in Davis that will lead to hundreds of thousands in TOT (transient occupancy tax)?
Even without a lot of space to offer, big companies like Mars and Archer Daniels Midland are looking our way. Investment companies like Sierra Energy, Fulcrum and now Ramco are willing to bet millions on this market.
What happens without space? Tim Keller discusses that. In 2008, he won the Big Bang competition at UC Davis with VinPerfect. Seems like a good company for Davis – innovating technology to improve wine making and packing.
But he writes that “when I started VinPerfect, it was clear very quickly that we were not going to be able to stay in Davis. I needed a laboratory and I needed space to prototype my products – and that simply didn’t exist here – so we were forced to leave.”
That is a familiar story, as one of our commenters yesterday pointed to the announcement of 14 new startups at UC Davis.
A previous year startup has transitioned from product development to commercialization: “Sage Therapeutics received U.S. Food and Drug Administration approval of its product, Zulresso (brexanolone) injection, for the treatment of postpartum depression in women.”
As the commenter pointed out, they have an $8 billion market cap. But here’s the thing: “An $8 billion dollar company spun out from technology developed at UC Davis but now headquartered elsewhere.”
If we had the space would that company have stayed? The reality is there are never guarantees on these things, but there is one guarantee I can make – without space, it will be much harder for companies to stay here and most bigger companies will, as Danielle Casey put it, not even give us a look.
Tim Keller’s announcement on Monday is important. It shows that companies are looking at ARC as a potential landing spot and a place where they are willing to place their bets.
All we need is some space and an opportunity to make this happen.
—-David M. Greenwald reporting
Look at the (unvetted) draft fiscal impact analysis for MRIC. The assumed rent levels that are in that—and are required for the positive net fiscal impact for the City budget as well as project financial feasibility—are much higher than those for then-current regional market rates for research/industrial/flex office space. That kind of expensive space is both antithetical to what startups are looking for and unrealistic in terms of being able to add tenants in general in a competitive environment.
There’s a reason that the project has a large residential component (and is also likely to include a large retail and hotel component too)—market demand for the research/office park component too low to make the project pencil out.
Rik, see my reply to Alan’s comment yesterday. The price of the space is not a factor if you plan it well and provide both smaller flexible spaces and shared spaces.
Alan, who is this “Alan”???
This guy obviously doesn’t know the rules here — MY RULES — you don’t say Alan without a last name is this town.
Apologies Mr, Miller. I was referring to my response to Alan Pryor. I will attempt to comply with the “Alan rules” in all future correspondence. 🙂
Thank you. You have one Alan Miller credit.
Can I redeem an Alan Miller Credit for a beer? How does that work?
D*mn, you asked. No one has ever asked before . . . . . . . . . . . . . . . . . foiled!
Get rid of Measure R.
My main focus in all of this is creating opportunity for Davis startups, but there is something that didn’t come up at the economic forum, nor in the discussion on yesterday’s article: The city’s need for revenue.
We decided long ago that we weren’t going to be a community like Natomas with sprawling strip malls and big box stores. That was probably wise from the standpoint of maintaining the city’s charachter. But that decision also means that the city loses significant sales tax revenue as well.
If you look at the employment statistics for our city, it is clear that we are a one-horse town: The university employs something like 40% of the population, and the rest of us essentially support that population in service professions. But that primary employer in this town doesn’t throw off sales tax revenue in the way they would if they were a commercial entity.
So If we are not going to be a shopping destination, and if the primary industry in town doesnt produce sales tax (or property tax) for the city, then we need some other gig . The successful tech companies like those along east 2nd street make a big contribution to that source of revenue for the city. But if we allow the pattern of companies starting here and not being able to stay here continue… Then we are shooting ourselves in the foot. And that is what we have been doing for decades.
This city needs a secondary industry if we want a sales tax base that can adequately pay our teachers, and keep our bike paths paved. The logical fit is to cater to the kinds of industries that either naturally spin out of the university, or who would like to come here because of it.
Perhaps there are people in this town who just don’t care if the City is financially stable, or maybe they “have theirs” and don’t care if there is opportunity for the next generation. Those voices need simply to be ignored so that the rest of us who care about this city, and want a proactive plan for the city’s future can just get to work.
Tim is making all kinds of good sense here – what a refreshing thing to read this morning. Thank you Tim for doing the work to help drive this point home.
Also thank you for bringing up the struggle of the next generation of Davisites – most have already left due to their treatment in this town, but a real focus on how we help establish the next wave of families and businesses in town will help give the rest of us some hope.
Their “treatment in this town”?
Families (e.g., with children) generally would not live at this freeway development, nor would it lower housing prices.
Strange, how my views regarding growth and development were formed when I was young. Now, some young people (who imply that they represent all young people) attempt to create division between generations, for the purpose of supporting private development proposals.
There was always a range of views among young people, middle-age people, and older people.
For that matter, “young” people would not necessarily be the ones working there. “Qualified” people (from throughout the region) would be, assuming that technology-oriented businesses actually occupy the space.
Actually, “qualified” people from throughout the region and beyond (who might be “recruited”, from elsewhere – such as the Bay Area).
A lot of folk who came to Davis were/are marginally, or un-“qualified” in their field… there are incompetents and ‘slackers’, who are part of our community… that’s OK by me…
In your example, here, some of the “qualified” folk may well come from anywhere in the country, anywhere in the world (is that a problem?) [picking up on your Bay Area reference, and italicized “and beyond” (9:51 post)]
It’s a “problem” if some claim that the primary purpose/result of the proposal is to help “local young people”, who are being “treated poorly by the community – and have “already left” the community.
The comments that you choose to question reveal your biases. This seems to explain the reason that you had no concerns regarding the comment which started this particular thread.
By the way, what was the impetus for this comment? Are you speaking of those you worked with, or just your general thoughts regarding those in a variety of fields/work environments that you have no connection with?
Seems to be a rather generalized, negative way of viewing others. More bias?
Ignore the voices of those who disagree with you — it’s the DAVIS WAY!
Tim: I agree with some of this analysis (though it definitely ignores and distorts some aspects of the local economic development/fiscal situation). Your article yesterday would have been far more successful in my opinion if you had focused on some of these issues rather than trying to equate support of MRIC/ARC as the best way we can show our “love” and support for UC Davis.
[edited]
I have learned the hard way to only make one argument at a time 🙂
Civic financing is important, but that isn’t the part of the issue that I’m most passionate about. So I stuck to what drives me: a desire for Davis to actualize it’s best self: as a place where innovation isn’t just a tagline or some trumped-up program – but what we excel at every day.
I very much agree with you that there are a lot of ineffective innovation programs. But that really doesn’t deter me. After all, the statistics on new business ventures very clearly indicate that most new businesses fail dramatically – but did I let that prevent me from starting (and succeeding) at building my own company? No.
All of the truly great successes in this world stem from a willingness to TRY. In this case, the upside is that we accelerate the number of Davis technologies that make it to market. Given that so many of those technologies are in the areas of food and climate security, that would literally be a win for the planet. And what is the downside? We “just” get more commercial space and housing in Davis, (both of which are needed very very badly)
I think that risk / reward calculation works out quite in favor of building the ARC.
By the way, I also agree with you in that I would be against a subsidized innovation park (which this isn’t BTW) Bribing people to be entrepreneurs only delays the weeding out of the entrepreneurs and the ideas that aren’t commercially viable long-term. It is fundamentally an ineffective way to produce real results.
This is why I don’t subsidize anyone at Inventopia, and we dont rely on any grants for our operating budget. We share a small space and pay our own way. That way we automatically screen out those who don’t fundamentally have the grit required to be an entrepreneur, and we dont waste anyone’s time.
Tim: your n=1 perspective is a very bad way to conduct public policy. The whole reason we do case studies and look at what has succeeded and hasn’t in terms of economic development is to learn from the mistakes of others.
Your prescription for what ails us, in other words, ignores actual real-world results and falls into the faith-based snake oil category. The vast preponderance of evidence demonstrates that the vast majority of business/research parks not only don’t deliver what they promise, but can actually detract from economic development efforts that are more productive. Again, ignoring this evidence is just bad public policy.
Tim: as far as subsidizing an “innovation park”: I’m glad you agree that’s a bad idea. And I think you will also agree that the residential component, and any retail and hotel components that the developer might propose are de facto subsidies for the research/business park components.
If there is truly a market demand for this type of project at the rent levels proposed (again, much higher than regional averages for the type of spaces they are proposing, then just dispense with the subsidies/those other uses and let the project stand on its own two feet. I think if you run those numbers by the developer, you will quickly find that “grit” only goes so far.
[Moderator: comment deleted]
Personally, I’d like to see you respond to this comment (from another commenter), in your original article. And that you do so there, so that the question itself can be seen: https://davisvanguard.org/2019/09/guest-commentary-aggie-research-campus-our-best-chance-to-support-the-university-we-love/#comment-412811
If one of the primary purposes of the project is to increase City revenue, we can look at all the studies I posted yesterday that point to the same conclusion: these kinds of projects are economic development losers. Even the ones that are highly subsidized are severely under-performing compared to the pie-in-the-sky promises made by their supporters.
Are they?
Let’s look at Davis.
Does Mori Seiki make or lose money for the city?
Does Shilling Robotics make or lose money for the city?
Did Bayer/ Agraquest make or lose money for the city? Does it now?
Does Engage3 make or lose money for the city?
Does HM Klauss make or lose money for the city?
If the answer is that they make money for the city – which that is the case except for Bayer which has moved to West Sacramento and Shilling which will move to West Sacramento shortly, why wouldn’t bringing in more companies also make money for the city?
Guess what – if they leave – none of them will make money for the city. And Bayer has left, Shilling is about to leave, and several others might leave as well if they lack space to move into. But you don’t want to talk about specifics on the ground in Davis, you want to talk about something abstract that is not specific to our situation.
Supposedly, to be “replaced” by another company at some point. (If the city doesn’t convert the vacated space to housing.)
In the case of ARC, the city’s cost to provide services to the housing component will reduce the city’s “fiscal profitability”, from the development.
Ron –
Let’s look at Bayer. Agraquest started by Pam Marrone. It grew and grew and grew. It got bought out by Bayer. It eventually moved to West Sacramento. It is undoubtedly a huge success story locally but now it generates jobs and revenue for West Sacramento not Davis. Why? We lacked space. So a small company might replace Bayer in the space it was occupying in Davis, but that’s not a replacement for what we lost.
Regarding ARC, the inclusion of housing would also impact the type of businesses that would be willing/able to occupy a building that’s shared with residences.
If a business leaves the city (and is replaced by another business), that is not a net “loss”. If it were, a city like San Francisco (which is prevented from expanding outward) would be in big trouble.
From your description, I question you’re understanding of how concepts like mixed-use and live-work work.
Feel free to “question” it. Haven’t seen one, yet.
That is, I haven’t seen a “question” – especially one related to my comment. There are businesses (and research facilities) which aren’t a good fit for buildings shared with residences.
I have seen at least one “mixed-use” development in town which seems questionable.
For example, one might wonder if a manufacturing business like Mori Seiki would view residences above their business in a positive manner, or if they would then choose another location – if it wasn’t available:
https://us.dmgmori.com/company/davis
It’s a 200 acre site, you simply don’t move into the buildings with or near housing. One problem with this discussion – we have not seen the site plan yet. Until we do, we are basically blowing smoke. Once we do, I think you’ll see that you’re not raising a concern that is going to be a real problem.
You’re the one who questioned my understanding of “mixed use” (without actually asking a question), and are now backing away from it.
Seems to me that the “mixed use” portion of the site might simply be a way to pursue the primary goal (housing).
No. In fact, I’m doubling down on it. I simply stated that your concern will be addressed when you see a site plan and the location of the housing. In other words, I don’t think you have a real concern, but without the site plan, I can’t prove it to you.
Here is literally what you said to me:
Go ahead and ask your “question”.
But before doing so, you might want to take a look at the Del Rio “mixed use” development at 5th and Pena (which I understand was formerly a commercially-zoned site). Seems much more like a housing development. Where was the “outcry” regarding the loss of that commercial site?
Also, if the claim is that the city allowed too many residences (compared to the amount of businesses), how about just abandoning the old city and moving into the “new one”? Especially since the old one is obviously “beyond repair” – despite the presence of businesses such as Mori Seiki, new hotels, cannabis, etc.
And this time, we’ll get it “right”. All the new roads will be newly-paved (and maintained), as well.
By the way, I question “you’re” understanding of the use of that word. 😉
I’ve seen it. Ask.
Measure R is part of the City of Davis’ core land use policy framework. Tim Keller is proposing throwing this away in favor of riverboat gambler-style public policy: hoping against all odds and real world experience to somehow hit a jackpot with a business/research park model that had been proven to be a failure in terms of economic development outcomes 99% of the time. Not only is this irresponsible, but the “what do we have to lose in trying this?” attitude and the treating of valuable ag land as simply worthless and “vacant” ignores what we actually have to lose and the community values that are embedded in out policy statements in protecting it.
As a refresher, here is the findings section from City of Davis Code/Measure R [my emphasis] (http://qcode.us/codes/davis/view.php?topic=41&showAll=1&frames=off)
Findings. The city council and the voters of the city hereby incorporate all of the recitals set forth above and, in addition, find that:
(1) The protection of existing agricultural and open space lands, natural habitats and reserves surrounding the City of Davis, and within the Davis planning area, is of critical importance to the present and future residents of the City of Davis. Agriculture has been and remains a major contributor to the local and regional economy, directly and indirectly creating employment for many people, and providing valuable food crops distributed worldwide.
(2) Continued urban encroachment into agricultural and open space lands, natural habitats and reserves impairs agriculture and threatens the public health, safety, and welfare by causing increased traffic congestion, associated air pollution, and potential adverse impacts to the quantity and quality of available water resources. Continued urban encroachment into agricultural lands also requires significant new public infrastructure and facilities and places additional stresses on existing public infrastructure and facilities.
(3) The unique character of the City of Davis and the quality of life enjoyed by city residents depend on the protection of agricultural, open space lands, and natural habitats and reserves on its periphery. The protection of such lands aids the continued viability of agriculture, defines urban/rural boundary, and brings mental and physical benefits from the broad vistas at the urban edge onto open space and agricultural lands. It also contributes to the protection of wildlife including rare, endangered, or threatened species, environmentally sensitive areas, and irreplaceable natural resources.
(4) The general plan contains policies for compact urban form, and protection of agricultural lands from urban development including a policy that prohibits new urban development on open space and agricultural lands. The general plan further calls for the use of all available mechanisms to preserve open space and agricultural lands and provides for the implementation of growth management systems.
(5) The city has actively promoted both the preservation of agricultural lands and habitat and the availability of affordable housing within the city through the existing policies in the city’s general plan and the city’s implementing activities, including, but not limited to, the right to farm ordinance, the city’s acquisition of open space, agricultural lands and habitat, the city’s participation in the agricultural lands stewardship program, the city’s affordable housing ordinance, the redevelopment plan and the redevelopment pass-through agreement and other city programs and policies designed to promote agricultural preservation and/or affordable housing.
(6) This citizens’ right to vote on future use of open space and agricultural lands ordinance implements the general plan and is consistent with the city’s adopted general plan and furthers and implements the policies of the general plan. The city finds that this ordinance will provide for a balance between the preservation of agricultural lands and open space and the housing needs of the city. (Ord. 2008 § 3, 2000; Ord. 2350 § 3, 2010)
As an additional note, the data I’ve looked at shows that per capita student retail spending in Davis is a small fraction of per capita retail spending in non-student households. If we really want to best express our “love” of UC Davis while improving the fiscal situation of the City, we need to show UC Davis some “tough love” and firmly insist they do a much better job of housing their own students while they are massively expanding enrollment. After all, those students are displacing other households in the city who would be providing much higher sales tax revenues for the city. There is whole giant laundry list of other negative UC Davis impacts on the community that aren’t adequately addressed also.