By David M. Greenwald
Executive Editor
Over the last few years, the narrative in the media has been one of a mass exodus out of California—leading the way has been talk of a “mass tech exodus.”
Max Taves in the Sacramento Bee: “Many in the media predicted last year that California’s economy would be smote by Texas.”
He reminds us of some key headlines from last year.
For example, in January 2021, after Oracle and Hewlett Packard Enterprise announced the relocation of their headquarters from Silicon Valley to Texas, NBC News ran the headline: “Tech flight: Why Silicon Valley is heading to Miami and Austin.” The piece quoted an analyst who predicted that the “mini-exodus of tech companies leaving the Valley” would “accelerate in 2021.”
Moreover, after Digital Realty announced it was moving from San Francisco to Austin, SFGATE reported: “In mass tech exodus, yet another firm is leaving the Bay Area for Texas.”
Next there was Elon Musk’s anti-California bashing, covered in the Independent, which ran the headline: “Texit: Why high-tech giants are fleeing Silicon Valley for Texas.”
A report from Stanford’s Hoover Institution. Authored by senior fellow Lee Ohanian and Joseph Vranich. He notes that Vranich is “an ex-lobbyist who runs a Texas-based business focused on persuading companies to relocate to Texas” and charges, “the 45-page report reads as expected: like a co-production of a partisan ideologue masquerading as a serious analyst behind cherry-picked data and a Texas business relocation specialist promoting demand for his services relocating companies to Texas.”
“These data show California has clearly lost the incredible dynamism that it once had and is now among the worst states in the country for economic investment,” Ohanian and Vranich asserted. “Texas has become the new California, and California is becoming the new Rust Belt, losing businesses and people to states that offer more opportunities and a better, more affordable life.”
Taves disagrees that life in Texas is better than in California, although I’m a bit skeptical of the stats he cites.
More importantly, California, despite the housing crisis, despite the pandemic, has actually fared pretty well.
Taves notes, “In 2021, California created 261,000 more jobs than Texas. California attracted $145 billion more venture capital than Texas. Californians attracted $3,911 per person; Texans, only $364. Far from dying last year, California’s tech industry raised more money than any year on record.”
That’s a critical bottom line.
He continued: “Sadly, the uncritical aping of this erroneous economic narrative reflects not only reporters’ gullibility but also their utility for conservative ideologues and corporate lobbyists, who score political points and regulatory concessions by spreading a spurious story line about California’s decline. Don’t expect facts to change this. Reporters need a plot twist, and conservatives need California to lose.”
But of course from my perspective, there is always a critical local angle here.
We’ve previously reported on the exploding life sciences scene in the Greater Sacramento area. Earlier this year, Michelle Willard from Greater Sacramento, told the Vanguard that there is a huge potential for life sciences in the Sacramento Region and that is centered around Davis and UC Davis.
As indicated above, she said “our life science industry and biotech industries are just booming in Greater Sacramento.”
Housing costs are also a problem, but as Barry Broome noted back in December, that’s “out of whack everywhere.
“When I look at housing, it’s really not cheap in Phoenix any longer,” he noted. “These cities and these metros where all the opportunity exists is just drawing people—and whether you’re Salt Lake, Denver, Phoenix, your housing market ends up being lopsided.”
He added, “Our community is really doing a good job of building housing right now.”
Broome noted, “From a scientific standpoint, Austin is nowhere near a scientific center the way our region is—with our food, agricultural, biomedical, and veterinarian science expertise.” Though he acknowledged, “Software, you’d probably choose Austin headquarters because of the zero-income tax and the less liability.
“So, it’s really about understanding our market position and how we differentiate it,” he said.
What I find interesting is that a lot of people who lament California losing out to Texas—probably for various political reasons—have opposed economic development in places like Davis, opposing things like the 2016 version of Nishi, as well as DISC in 2020 and DiSC 2022.
Locally we have lost some businesses.
As Tim Keller put it last month in an interview with the Vanguard, “Davis has been ‘leaking’ extremely valuable companies for decades now. Because we have a lack of commercial space, a lot of companies set up shop in Woodland, West Sac, or elsewhere. These are companies founded by Davis residents—and those residents are forced to commute out of Davis to work.”
Still, as Keller points out, Davis shouldn’t be compared to Silicon Valley. Davis is focused much more on the life sciences while Silicon Valley is focused much more on technology.
Nevertheless, at the end of the day we see that California, despite some obstacles, still presents fertile ground for the development of new technology.
David needs to start putting links to claims such as this.
In any case, where’s my $3,911?
Given that Texas has no state tax, might that $364 actually end up in my pocket, instead of turning over $3,911 toward California state taxes?
Links in the second paragraph, Froto
It all depends in who you ask, here’s a different perspective:
The whole point of the article is that the conventional wisdom is wrong. Obviously by definition, you will be able to find plenty of people who agree with the conventional wisdom.
Or is it more that you cherrypicked an opinion that fits a narrative that you prefer?
The problem is that if you are really so concerned about California losing business, maybe you ought to change your opposition to local economic development.
I’ve always been for more economic development. I just don’t like the fact that housing was thrown into the mix. I’ve been consistent with this from the start. If MRIC had stuck with the original plan I’m fairly sure it would’ve passed and there would be buildout there now.
The problem is you don’t get to pick and choose. Plus people need to be able to find housing in order for companies to locate here. The project either gets passed or the economic development does not happen. And by raising the costs of development, it makes it harder for California to retain companies. Local opposition to land use is not just driving housing prices up, it’s also making it harder to do economic development.
I agree.
I doubt it. The traffic model would have been even higher without the on-site housing and that was the big reason it went down.
I think I have the timeline right on this.
2014 City puts out requests for proposals for business parks.
No housing included.
2016 Ramos puts forward plan for mixed-use at MRIC, to include housing.
Much confusion about who was responsible for the housing decision. Apparently staff pushed it.
Council rejects mixed use.
Ramos pulls plan.
Comes back, submits plan that includes housing.
Council puts it on ballot. Voters reject it.
Ramos returns with smaller project that has a higher percentage of housing.
Council puts it on the ballot.
Note that the basis for the whole planning process for peripheral business parks was to generate revenues for the city. The more housing, the less revenues for the city. A housing development on annexed peripheral farmland was never a part of the planning process. A business park without housing has not been put before the voters, at least not that I can recall.
I can pick and choose, I liked the original MRIC without housing.
You didn’t get that choice. You chose to reject an economic development project. If you are worried about California’s business climate, that makes no sense.
Well, the city council at the time felt the project would pass if housing were excluded.
https://davisvanguard.org/2016/02/council-pulls-plug-on-housing-option-at-mric/
That was pre-housing crisis and prior to the traffic concerns emerging on Mace
And that’s also when the vote would’ve taken place.
My theory is that from a financing standpoint you can’t get this project done without the housing component. Because of Measure J and Davis’ lack of track record for approving peripheral business parks and as a result you can’t get prospective tenants to commit to the biz park; I can’t see a bank or other financing institution lending the money for this kind of project without the near guaranteed future revenue of the housing component.
I don’t really buy this as part of the traffic issues. Let’s be real, the majority of those living in the new residential units at DISC aren’t going to be employees at DISC. Sure some will but the majority of them will likely be commuting to Sacramento or UCD.
Probably true, given that the other one that failed in Davis “added” 1,600 housing units sometime during its “move” 7 miles up Highway 113.
And still has no commercial tenant commitments.
Measure J has nothing to do with it. The former Davis site of the failed business park that “moved” 7 miles up Highway 113 was subsequently approved for (drum roll, please) – housing (WDAAC).
As Don noted, the “option” for a business park never even made it to voters.
Goes to lack of demand for commercial development. So do the “for sale” (or “for rent”) signs around town, for commercial spaces. So do the ongoing conversions of existing commercial spaces for housing.
Since when do the articles (or claims therein) on here have anything to do with reality?
I think you missed at least one of the “iterations” of MRIC/ARC/DISC/DiSC), when they temporarily-proposed a reduced-size business park. (Pretty sure I can find an article to back that up.)
You know I think it’s a joke that you keep bringing up that silly Woodland project when you compare it to DISC. If you’re going to do that, please provide some direct data on the project that links it to DISC in terms of development, market and financing (this includes who’s doing it, where and why).
No, once again you fail to understand the financing side of things. The project wouldn’t be done for just the housing component. There are far easier and better places to do housing projects in the area. OF COUSRE MEASURE J HAS SOMETHING TO DO WITH IT. Jesus…have you ever had to get a development loan? (I have). No lender outside of high cost equity is going to sniff anywhere near something as politically volatile as development requiring voter approval in a town that has little to no history of approving these kinds of developments. And no tenant is going to commit to a parcel of dirt and a plan drawn up on a napkin for a business park that may or (likely) may not be approved.
You’re simplistic belief in “no demand” is rooted in your silly provincial understanding of a Woodland project. It overlooks THE ENTIRE REST OF THE SACRAMENTO REGION as well as VACAVILLE where the life science industry is expanding.
Look it up, yourself. It was actually David (the Vanguard) which noted that “what’s left” of that development team “moved” to the Woodland site, after failing in Davis (before even reaching the voters). Not sure that I’d describe a 350 acre development as “silly”.
I am familiar with the development team, myself.
Ironically, the Woodland site itself was (also) not previously intended for any housing. And yet now, it will have 1,600 housing units, in addition to the “undesired” commercial component. (“Undesired” compared to what they’d actually prefer to build, no doubt.)
A “loan” isn’t required for a Measure J vote. The developer (and/or his family) has owned this property for decades. They’re only seeking approval to change the zoning (and incorporate it into the city), as a result of that pursuit. (Along with the site which houses Ikeda’s.)
Again, the site of the Davis Innovation Center was approved for housing as a result of a Measure J vote.
Measure J is NOT holding back proposals which are financially viable, for the developers.
What exactly are you “disagreeing” with? You’re the one who noted that commercial proposals can’t “stand on their own”. I’m agreeing with you.
Again, they decline to even present that option – despite multiple invitations to do so.
No demand for this type of commercial. If there was, one of the surrounding cities would have built it DECADES ago.
What is your point? It has nothing to do with the relevance of the project. You’re still trying to play connect the dots between Woodland and Davis to make a point. It’s your continued efforts that are silly.
This is the most laughable part of your statements. In fact I’m mildly offended that you’re even bothering to make this argument as it’s beyond ridiculous. It highlights your ignorance of the entire process. It costs $$$$$ beyond simply owning or securing the land to get a development under way (I’m not talking about the sticks and bricks either). You only commit to that kind of money if you have a financial backer to complete the project.
OF COURSE THEY DECLINDED TO PRESENT A NO RESIDENTIAL COMPONENT PROJECT. THE RESIDIENTIAL COMPONENT IS NOT ABOUT LACK OF COMMERCIAL DEMAND. IT’S NOT ABOUT THE CITY. IT’S ABOUT THE FINANCING. Why make a proposal (no housing) that you can’t finance?
Not sure I can help you understand, beyond what I already noted. I’d suggest you speak with the Woodland development team, if you’d like to know more.
No one is putting up any money right now, except for the owner of the land. (There is no cost of “securing the land”, nor is there is any financial commitment beyond that point.) The “reward” they are seeking is a change in zoning and incorporation into the city.
As you noted, they don’t believe that a commercial development can “stand on its own”.
Again, no financing is required for a Measure J vote. You have no (specific) expertise in seeking approval via a Measure J vote. (I’m gathering that your past experience indicates that you’re used to dealing with city councils, directly. Hence, your distaste for having to go through the “unwashed masses”, as you put it.
This is a speculative effort. “Approve it, and they will come” (housing developers, at least).
The link in this article is behind a paywall.
So when I hear statistics like this, it literally has no personal meaning to me. On the other hand, state taxes (for example), do.
And on an individual level, most folks would be better off moving to places like Austin, Raleigh, etc. In general, living costs are much lower (in comparison to salary).
The exodus from California is real – already posted many articles showing this.
California is no longer growing – it’s stabilizing.
Actually, it does have some personal meaning to me.
The techies have ruined the Bay Area, for everyone else (e.g., in regard to housing prices).
What that tells me is that the demand for innovation space in Davis isn’t strong enough. The DISC team isn’t a bunch of newcomers; they have a long and successful track record locally and regionally with development projects and the financing thereof. There’s clearly a lot of demand for low-cost innovation space, but Davis will never be able to compete with Sac and West Sac in that regard due to land costs alone. So if the banks don’t think the project will fly without housing, it suggests to me that the project isn’t really about innovation space, it’s about housing.
I also agree. Instead we’re stuck with a lousy choice, and in this case that means I’m content to wait until a better choice comes along. The DISC property presents a unique opportunity, and I’m not interested in squandering it on a mediocre project.
“What that tells me is that the demand for innovation space in Davis isn’t strong enough.”
Actually has nothing to do with demand for innovation space, it has to do with timing of when cash is available and ROI. But one of the points Ramos made to me is that usually the way this works is you build the housing first, use the cash from those sales to finance the infrastructure for the commercial which takes much longer to build out and fill. But they chose not to do that, and instead phased it in so they can’t even start the housing until they fill a certain percentage of the commercial.
The development team was fully aware from the very start that housing was not to be a part of this proposal. How it “usually works” isn’t relevant when housing was precluded from the start of the process.
Here is the city’s Request for Expressions of Interest that started the process. This is excerpted from page 3.
“Identified Community Character and Desirable Guiding Attributes
….
The following list is not comprehensive, but is meant to represent some of the high-level concepts that will be important to the community in considering an innovation center for Davis.
Please address each concept below (which are in no particular order of importance) and include descriptions in the Response Letter on how a project proposal might address these guiding attributes.
1. Ways to achieve a minimum 0.5 floor area ratio (FAR), consistent with the General Plan and previous business park land strategies;
2. Mix of building types and heights to meet user needs – including potential for corporate headquarter buildings. The City is not looking for general warehousing or processing plants to be part of an innovation center and is highly interested in maximizing density, which should encourage respondents to offer examples of building types that include building heights greater than one or two stories that would be suitable for research, grow labs, commercial services, etc. NOTE: the City is not looking for new elevations or schematics, but stock photos and drawings from other projects that would be reflective of the vision of the respondent;
3. Significant LEED/sustainability throughout the innovation center (building materials, storm water retention through bio swales, etc.);
4. Net-zero energy goals – Use of parking and rooftops for energy generation;
5. Integration of alternative transit (including pedestrian, bike and mass transit);
6. Engaged and inviting workplace (i.e. open spaces, gathering locations, shared facilities).
7. Unique parking concepts;
8. Warehouse uses auxiliary only to research and manufacturing;
9. Opportunities for densification over time (i.e. parking structures and new buildings);
10. Potential build out scenario and timing (based on previous experience);
11. Identified concept on how to meet Measure R/J requirements; and
12. Acknowledgement of communities current desire for no residential to be included.”
https://city-council.cityofdavis.org/Media/Default/Documents/PDF/ED/Request%20for%20Expressions%20of%20Interest-%20Davis%20Innovation%20Center%20-%20May%2021%202014.pdf
Elon Musk moving to Texas is a huge blow to California. Elon recently paid around $2 billion in capital gains taxes to California. There is no way to put lipstick on losing the taxes he would have paid if he had stayed here.
It has everything to do with demand for innovation space. If demand is high enough, financing will be available, that’s just simple economics.
Now, if you want to talk about the relationship between competing sources for funding, sure, we can go there: it’s going to be cheaper to develop equivalent space in Sac or West Sac than in Davis, because land prices are lower and development requirements less stringent in those cities. And that brings us back to demand: if the demand for locating in Davis is strong enough, tenants will be willing to pay the differential. If demand isn’t strong enough, well, then you need some lucrative housing in the project to placate the bankers and make the project pencil out. (You might even get the banks to shave a basis point or two by suggesting that some of that commercial zoning might get changed to residential a few years down the road by means of a modification of the development agreement. Wink wink, nudge nudge.)
Gambling in Casablanca?!??!!!
Interesting… some say that commercial growth generates residential growth needs (to minimize VMT, carbon emissions, etc.)… some are against any residential growth (traffic, incursion onto ag lands, water use [although ag uses more than residential per acre, go figure] etc.)… some say that we need ‘stasis’ [they ‘have theirs!]…
Reminds me of Winston Churchill (and others), on another matter… ‘a riddle, wrapped in a mystery, wrapped in an enigma.’
No “answer” here, just an observation.