Measure O’s Impact on Economic Development

The question of economic development has been cited as one of the pillars of economic sustainability. In the Measure O debate as to whether we should raise tax revenues to bridge the current deficit, we have identified three ways to bridge the budget gap.

The first is by making additional cuts. The second is by passing temporary tax revenue measures. And finally, as a longer term solution, there is economic development to grow the tax base.

One of the questions has been – has the city cut enough or should it cut more from employee compensation before going to the voters? Along the same lines, critics have called into question whether we have done enough on the economic development front.

But one question that has not been addressed is if Measure O were to fail, how would that impact economic development efforts by the city. The Vanguard asked Chief Innovation Officer Rob White to address some of these questions with the caveat that the answers are reflective of the proposed cuts and that the city council has the final determination of what cuts happen should Measure O fail to pass.

Vanguard: First, the city two weeks ago identified the cut list should Measure O not pass. Can you address which of those cuts involve people working on economic development?

Rob White: Let me start by saying that all of my comments should be taken in the spirit of education, not advocacy. City staff are legally unable to advocate or campaign for a Measure as a city representative.

There are two proposed “cut lists” for City Council’s deliberation as part of the budget process in the event that Measure O is not passed. One is a 12.5% unilateral cut across all departments. The other is a 25% cut across all departments except for Police and Fire, with the concept being that life-safety is a basic obligation of the City administration and the Police and Fire duties should be preserved more readily than anything else. As an important note on timing, Measure O will be voted on by the community on June 3^rd and the City Council must pass a balanced budget by June 30^th (as mandated by state law). We will not be able to legally carry over a deficit, so any decision by the City Council on cuts will be made during the mid to late June timeframe.

For economic development, the 12.5% cut proposes that, aside from the two people working daily on these tasks, all other costs would be eliminated. This includes any and all travel (including the Cap to Cap advocacy trip), all memberships in organizations like the Davis Chamber, the Sacramento Metro Chamber, SARTA, SACTO, Innovate North State, etc. It also means that essentially aside from the computers on the desk, basic administrative supplies are proposed to be removed from the economic development budget. This is primarily due to the fact that the economic development budget is mostly just people, and in order to get 12.5% cuts, we had to propose eliminating all other costs.

The proposed 25% cut suggests that the above costs are eliminated, and then 50% time for one of the two staff positions in economic development would be eliminated. This would take the two full time employees (FTE) down to 1.5. For comparison with communities of our size and relevance to our region, many have an economic development staff of 3 to 5 FTE.

Vanguard: Second, how would the cuts overall impact economic development efforts by the city?

Rob White: Since the majority of economic development at the City is being done by two people (the Chief and Deputy Innovation Officers), it would have a significant impact. It would translate into delays in meeting with new and growing businesses, less outreach to local businesses, slowed work on the innovation park, an inability to assist in expediting permits and planning, an inability to work on Yolo County-wide initiatives like broadband and rail relocation, and considerably scaled back interaction with the University on tech transfer and innovation.

More directly, it would mean that an already very under-staffed division would become mostly reactive and move away from proactive or planned actions and activities. I am not suggesting that more resources be directed at economic development, but cuts would hamper our current efforts. It would also mean that any regional interactions would need to be significantly scaled back, which would considerably hamper our local ability to facilitate new investment and attract new businesses.

I would use the analogy of living in a neighborhood and not recognizing or interacting with the neighbors in houses around you. We know from things like NextDoor and Neighborhood Watch that a communicative and well networked neighborhood/community thrives and has better outcomes. Similarly, a regionally relevant and leading community attracts more attention nationally and globally and businesses want to be associated with success and prominence. It’s why communities like Austin spend some much time convincing the world that it’s a center of innovation: when compared to a place like Palo Alto or the South Bay, the apparent level of innovation and entrepreneurial activity is unmatched (regardless of what the facts might tell us).

Vanguard: Third, can you address how important the city and city services would be to economic development?

Rob White: As I said recently at a manager’s group meeting for the City, the economic development efforts in any community might be led by a core staff, but the most important aspects of economic development are the responsibility of all staff. Namely that is speed of service and the ability to solve issues and find solutions. This translates in to reputation and creates an attractive business environment.

As an example, if a company wants to move or grow in Davis and either build an office or do serious renovations, but our planning staff and inspectors are overloaded, then that effort is significantly slowed down. That means it takes the City longer to complete a project on our end and that collection of fees are delayed, and ultimately the sales and/or property taxes are delayed that might result from the new company. Additionally, job growth is delayed and the resultant employees and their spending are delayed since they are not settled in to the new facility. And every week of delay on a mid-size project can result in literally $1,000s of uncollected fees or city revenues. Add this up across many projects and the impacts of delay can be significant.

This then impacts our ability to attract new companies because these delays in service are talked about throughout the broker and development community, all of which get a commission based on successful closes of deals. Time is money, and delays in processing lead to delays in construction, which translates into a hampered reputation as a community that can serve the needs of business. In many ways, our strongest economic development tool is our reputation, which is why working on branding and marketing at the regional and national level is important.

One more example is that many businesses locate in Davis because of the ties with the university (which can be attributed to things like the shared research collaboration or the large student population as a customer base or the community demographics that match their business profile). But the second most important driver in a business’ decision to locate in Davis (and something we hear constantly in talking with new and existing businesses) is the quality of life. Namely, the parks, the bikeways, the open space, a thriving downtown and retail sector, the community events and the overall amenities. With the proposed reductions, many of these elements will be again impacted and it will be that much harder to convince prospective and existing businesses to grow locally when communities around us are aggressively offering comparable opportunities.

Vanguard: Fourth, when trying to attract businesses to come to Davis, would the fiscal condition of the city impact their decision to come to Davis?

Rob White: It most certainly impacts a business’ decision. Not because they necessarily look at the budget (though some do as a barometer of health of the community), but because they will see direct evidence of the service levels in our infrastructure. When a business decides to grow or locate in a community, they are looking for quality of life for their employees as well as reputation of the community as a business-friendly and supportive location. If a business can’t get the services from the city that it needs in a timely manner, the cost of time and borrowing money become drivers in decision-making and surrounding communities are more than willing to take on the opportunity.

Vanguard: Fifth, how would cuts to the city manager’s office or Mike Webb’s office impact the ability of the city to process applications and expedite development?

Rob White: As I stated above, proposed reductions will impact all levels of city services. The staff are already stretched very thin for a city of our size and service level. In the City Manager’s Office (of which economic development is a part), if the 12.5% cuts were accepted by City Council, there would be a reduction in city supported events, the Sister City program, and community outreach (to name just the larger cuts). At the proposed 25% cuts, these services would be eliminated.

For community development, the proposed reductions would mean slower permitting and processing of applications and plans. This means longer wait times for businesses to do improvements for growth or new businesses wanting to open. It also means significantly slower processing times for residents on home improvements applications and inspections.

Most impactful will be the unintended message that will most certainly circulate throughout the broker and business community that Davis is a difficult (and slow) place to do business. Since longer processing times translate directly in to one of several factors that a business uses in their decision on where to locate, this will mean that some of the jobs and resultant economic impact from business growth will not be realized in Davis. Identifying just how much impact is a difficult task as much of the decisions are anecdotal and are realized only once the contrary decision is made and businesses go to surrounding communities instead of Davis.

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