On Tuesday, the city of Davis will see the first major roll out of a new economic development plan since the hiring of Katie Yancey.
It was interesting to read the comment of my friend Tim Keller, who has been working on the ground in Davis with start ups for over a decade.
He had an interesting take that is worth highlighting here.
Tim Keller believes that the correct playbook for economic development in Davis is “is to focus on companies that are FOUNDED here, or who come here when they are VERY young looking for university-affiliated talent.”
He writes, “That is the right playbook because it is the best fit for our strategic strengths and opportunities vis-a-vis the university. This is proven by the solid stream of startups that have started here over the last few decades.”
At the same time, he acknowledged “we have not been able to retain many… which is what we need to work on.”
In the staff report this week, city staff cites the Greater Sacramento Economic Council’s (GSEC) “2024 Capital Regional Industry Analysis and Recommendations” report, prepared last year, which recommends focusing on the advanced manufacturing and agriculture, water, and environmental technologies sectors.
These recommendations are supported by the findings in their 2024 Capital Regional Industry Analysis and Recommendations report.
GSEC highlights the importance of these sectors due to their potential for growth and their alignment with the region’s strengths and existing businesses.
Drilling down into that report, we see, underlying it, the same problems that we have noted.
Davis looks like the ideal location for economic development because of its proximity to UC Davis, but also its strategic location and proximity to major transportation corridors like the I-80 and access to heavy rail, which are beneficial for sectors like Advanced Transportation & Logistics.
Davis also has existing marque businesses that GSEC believes could serve as anchors for industry clusters, providing a foundation for growth and development such as FMC Schilling and DMG Mori, among others.
But there are three main challenges and none of these are either new or surprising.
First, the lack of zoned land.
A recurring challenge across multiple sectors is the lack of commercial, industrial-zoned land, or having land zoned for specific developments (e.g., campus, hospital), which limits expansion possibilities.
Tim Keller talked about the challenge that Davis has had retaining home-grown startups—and this is nothing new—but there has not been next level available space for growing companies. That has forced some to move and forced others to limit their growth potential.
That’s a problem because it limits the benefits of overall economic development. A start up is going to have limited numbers of employees and generate limit amounts of tax revenue for the city. It is as these startups grow and develop that they hire more employees, creating jobs and generating property and sales tax for the city.
The current report recognizes this shortfall and calls for implementing strategies for business retention and attraction ensures a supportive environment for existing businesses while drawing new investments, contributing to a dynamic and robust local economy.
But obviously part of doing that means to have not only space for startups but also next level space to accommodate growth potential.
Another related problem—some sectors, such as Retail, Hospitality, and Tourism, face challenges with a lack of conference/event space and active tourism marketing campaigns.
Finally, another recurring problem is that UC Davis chose to invest heavily in Sacramento, and that limits the ability of Davis to incubate the health sector.
As GSEC notes, the Health sector faces challenges due to the concentration of the UC Davis Medical Center’s efforts in Sacramento, particularly at Aggie Square.
I raise these points because where the previous efforts at economic development fell was in getting land and space for commercial development.
The city’s previous efforts focused heavily on a dispersed innovation strategy which focused first on existing spaces, second on close space such as Nishi, and third on peripheral spaces.
However, over the course of the last decade-plus, we have seen the voters vote down economic development at Nishi and on the periphery twice.
Can the city hope to succeed this time, even with a different approach that is perhaps better suited for utilizing the strengths of the locale? That’s a big question because, at the end of the day, the city retains most of the strengths it appeared to have in 2010, but the challenges haven’t changed much either.
I’d like to say I’m optimistic about the chances for success. A lot of people believe that the current director, Katie Yancey, is the right person for this job. But when we drill down into these reports, we see the same challenges that ended up crippling efforts in the past, and it makes one wonder if we can get past them.
From article: “First, the lack of zoned land.”
And yet, NONE of them have ended up at the new technology park in Woodland – the one that “escaped” from Davis (where Bretton Woods is now being built).
And in Woodland, I understand that they had to rezone the site (from commercial) to include 1,600 housing units. Again, that site is still farmland, at this point.
So it doesn’t seem like there’s a problem with “lack of land”.
Thanks for expanding the conversation David.
The key here is to be able to focus on actual needs of the startup community in a competent way; and small details make large differences.
Inventopia has been able to serve 43 companies to this point who collectively have raised over 130 Million dollars. That is money coming from investors outside of town that is mostly being spent locally. Yet there is an entire class of university-affiliated startups that I have NOT been able to serve: the better funded ones that are being started by the handful of professors who know this game really well. They tend to keep their projects on campus longer and then spin them out when the university can no longer contain them (and AFTER they have raised a significant amount of capital). Those companies skip straight over inventopia which is too small for them and normally to West Sacramento where there is more commercial space available for less.
100% of these companies would stay in Davis if they had the choice. The founders and key employees are normally davis residents, as is their staff. But as companies grow larger, their locale tends to get stickier and the chance for them to come back goes down.
The upshot of the “economic gardening” approach (Katies’ term for it) is that we can focus on growing our own startups and we don’t have to jump straight to “huge factories built next year at DiSC”. We have a pipeline of companies that we can fill, and yes, they will likely need to end up at DiSC in the long term if we want to keep them, but we aren’t starting there and working backwards…
(Its a lot easier to get it right when you focus on providing for current real needs instead of working backwarrds guessing at future potential needs)
So the first step is to plug the leaks we can already see: Expand inventopia to be more of the kind of business incubator that you see on most research-university campuses. Around Berkeley, Stanford, UCSF, MIT etc you have tech transfer facilities that are on the order of 100k square feet. Inventopia is currently 6k… so that is an easy place to start. It will help us catch the companies we currently can’t retain, and attract some corporate / sponsor support as well, which also is an important part of the mix.
From there, you need to make sure that you have a healthy supply of medium-sized commercial flex spaces that are built the right way. There ARE opportunities to do a fair amount of that on an infill basis, and we should focus on those properties first. Only after we have a plan to build out all of that space like that do we need to worry about DiSC.
Yes, we do need to entitle development at DiSC… eventually. But it will be a strategy for retaining companies we already have in the pipeline, by providing them a place to build their forever home to their specification.. much like how Nugget built its own headquarters building. It wont be an exercise to develop a large amount of space by some date in time and hope to fill it quickly.
It will be simply entitling the land as build-to suit and letting companies that want to commit to davis to stay here. I think the general plan process is sufficient to plan for that kind of growth.
So… lots to do, and I’m optimistic that its very possible, I wouldn’t have invested so much of my time and career into this if I didn’t believe that. The demand is clearly here, we just need to get the various people in the ecosystem rowing in the right direction.
You mention West Sacramento. True – it will ALWAYS be cheaper for factories to locate to. That’s also one reason why it sucks.
By the way, the article mentions “heavy rail” coming through Davis. But I’ve never seen freight loaded onto trains at the Davis train station.
Not sure what they do in West Sacramento, but they have a port.
RO say: “the article mentions “heavy rail” coming through Davis. But I’ve never seen freight loaded onto trains at the Davis train station.”
Yeah that was a stumper for me as well. Woodland and West Sac have industries that are freight rail compatible. Davis used to have the pipe factory off 2nd Street, the Tomato Plant where the cannery is now, and there was even a freight lead into campus on Putah Creek long ago (that was way before my time and I’m not sure what that was used for). There was also some freight-compatible businesses along the north line near where Davis Lumber is. But all that is gone, and the direction has been to move away from heavy industry. So not sure what that reference was about.
You might be overthinking this slightly, I believe all they are saying is that rail lines are coming through Davis which positions Davis to potentially take advantage of that arrangement.
I’m curious about this. Wouldn’t “build to suit” be more likely to provide greater flexibility? Or do these companies want to just move in to newly-built or rebuilt sites? I’ve watched over several decades as Hwy 113 going into Dixon has been developed into commercial and retail sites, and they invariably start by going on the market as raw land. But they’re in the city limits and probably have flexible zoning.
Hey Don,
Only the biggest and most mature companies can afford “build to suit”. It is the very tail-end of our pipeline and it ONLY works for the tail end of the pipeline.
Custom commercial buildings are an investment with a 30-year lifecycle. If you are a company that only has venture funding through the end of next year ( which is a best case scenario for most startups) you need not apply.
The pipeline looks a little like this:
1) Idea stage / Doing initial lab work / Needs a bench in a facility like inventopia
2) Seed Stage / Doing commercialization work / Needs a multi-room suite in a larger version of future inventopia
3) Series A&B – / Finishing commercialization working towards a product / Needs their own space in a commercial flex type facility. 3 year lease max
4) Young-and-still-growing / Have a product in the market, no longer reliant on outside equity / Can take a 5 year lease in a commercial flex facility like Buzz-Oates style tilt-ups. / Company might get bought out at this stage or grow and need something bigger.
5) Fully mature and committed / Companies that have everything figured out, have secure and reliable customer base can commit to a long-term vision for their needs for the next 30 years / Need build to suit land.
So the build to suit land is only for the far end of this spectrum. Buzz Oates did this for nugget with a 30-year lease on a building that was built specifically for them. They are great at that business model and the big tilt-ups that they do are great for the companies in the #4 “young-and-growing” niche. They struggle with #3 but they DO do some leases in that category, but they end up holding the bag half the time. Its definitely not their preference.
The challenge for the real estate side of all this is the categories 3 and below. There is some nuance to the needs in those categories as well which we need to pay attention to, but thats not the question you asked.. so I’ll leave that here lest I end up writing a novella…
By the way, “business parks” (e.g., in Mace Ranch) have been mentioned for DECADES, at this point.
I’m not sure if the business park mentioned in the article below describes the existing development along 2nd Street, but it does state this:
“In the end, the non-residential phasing stayed in the development agreement, even though Ramos didn’t like it.”
(In any case, why does it not surprise me that “Ramos didn’t like it”.)
I’ll tell you why – it’s because it isn’t housing – the same reason that 1,600 housing units had to be included for the business park that’s planned for Woodland.) The same reason that DISC was modified to include housing, the same reason that The Cannery owners wouldn’t approve a commercial development, the same reason that Nishi abandoned the fake “innovation center” component.
https://www.cityofdavis.org/about-davis/history-symbols/davis-history-books/growing-pains-chapter-6
I don’t believe the “innovation” center component as “fake”, but that iteration got voted down. The first plan was far superior to what was voted on and not built yet. #sniff#
Personally, I believe that most mixed-use developments are proposed as a way to bypass Affordable housing requirements – and are not based upon “demand” for a commercial space on the first floor of small residences. (Anyone can establish a legitimate home office in an ACTUAL house, and can get tax breaks for doing so.)
That’s also how I view the “mixed use” development at 5th and Pena. Basically, a conversion of commercial zoning for (primarily) residential usage. (Otherwise known as the “developer’s preference”.)
Regarding Nishi, it seems likely that if the first iteration was approved, the ONLY access would be from Richards/Olive at this point. (I don’t see why that first iteration would have an easier time than the second version gaining access underneath the railroad tracks to campus.)
I’m not sure if City officials get this yet because it hasn’t been discussed fully in a public dialogue yet. Here’s what’s happening in Davis (combined with UCD for those who seem to insist that it’s a separate entity on the other side of the planet):
– UCD is the largest employer with 10,500-12,900 employees depending on the source. 40% of them live in Davis; the rest commute from out of town because they can’t afford a house here. It’s clear that mid-level staff jobs do not pay sufficiently to cover housing prices here.
– Within City boundaries, there are about 16,000 jobs of which 25% live in Davis, and the other 75% commute in because they can’t afford a house here.
– There are either 25,000 or 30-33,000 employed residents (depending on the data source). About two-thirds of them commute outside of Greater Davis where they have higher paid jobs that afford them the ability to live in Davis. They have outcompeted those working inside Greater Davis.
To achieve lower GHG emissions and to reduce VMT and improve traffic congestion, we need to bring those employees who are commuting into Davis to housing here. And we need to create sufficiently attractive jobs for those commuting out to prefer to work here instead.
Based on these facts and objectives, we need two actions to accomplish these:
– Create and attract private sector businesses that attract higher paid employees and provide higher salaries for mid-level jobs
– Build “missing middle” housing that meets the needs of current local employees
The GSEC are a reasonable starting point for economic development, but it’s also important to distinguish Davis from the rest of the region. Sacramento has “Farm to Table” and Woodland “Food Front.” Davis can carve out a niche consistent with a brand that it has been drifting away from recently but can easily recapture, with sustainable food technology and tourism. My wife Anya and I wrote about this in the Vanguard in the context of the Downtown Plan: https://www.cooldavis.org/2018/10/31/make-sustainable-food-the-economic-engine-of-downtown-davis/. And the Downtown Plan highlighted its sustainability features.