How Sacramento’s mayor cleared way for construction of multibillion-dollar Aggie Square
Sacramento Mayor Darrell Steinberg leveraged the trust he built with union and University of California leaders to negotiate a lawsuit settlement that clears the way for a development he described as ‘the single biggest opportunity’ city leaders have to diversify the city’s economy.
Now that this final legal hurdle is resolved, construction will begin this year on the Aggie Square innovation district, and Steinberg will see a dream he’s nurtured for more than five years take shape on the campus of UC Davis Medical Center.
“Aggie Square is transformational,” he said in a recent interview. “We need more high-wage job opportunities in Sacramento. We need more green industry. We need more life science. We’ve talked for a decade now about diversifying our economy. This the single biggest opportunity we have to not only continue but to elevate that direction, and it’s a multibillion-dollar investment in a part of the city that needs and deserves more attention.”
That project had been delayed as neighborhood residents, affordable housing advocates and labor unions representing low-wage workers sued over concerns that the development would lead to gentrification and the displacement of senior and working-class residents in Tahoe Park, Oak Park and other nearby neighborhoods.
While concerns remain about those possibilities, the mayor and City Councilmen Eric Guerra and Jay Schenirer managed to broker an agreement with district residents, labor unions, and community-based organizations in a coalition known as Sacramento Investment Without Displacement. The pact garnered millions of dollars to prevent current residents from losing their homes, train them for jobs and build affordable housing, but it didn’t end a second lawsuit filed by University of California’s largest employee union, Local 3299 of the American Federation of State, County and Municipal Employees union.
Steinberg waded into the fray to mediate after the city of Sacramento intervened in the suit. A swift, positive outcome was anything but certain since UC and AFSCME have a long history of contentious battles, but all parties announced a deal within six weeks.
How the AFSCME deal was done
Steinberg had worked closely with leaders of AFSCME Local 3299 during his time as a leader in the California Legislature where they had worked together on some measures central to labor.
He called up Liz Perlman, longtime executive director, who said she told him she was willing to sit down with UC Davis and its Aggie Square developer, Wexford Science+Technology, as long as their negotiators would have the authority to make settlement agreements.
“Real negotiation actually happens when folks are willing to make compromises (and) ... to also make real decisions about addressing the concerns that are being raised,” Perlman said. “Probably the most helpful thing that the mayor did was just that (he) required key decision makers to be in the room together.”
Wexford senior vice president Doug Woodruff saw the mayor as someone who had advocated for Aggie Square as a project that would lift all boats. While the companies there will employ many high-wage workers, Woodruff said, somewhere between 25% to 35% of Aggie Square jobs will not require a college degree.
As Schenirer put it in an interview with The Bee: “The best answer to potential displacement is a high-paying job.”
Wexford had been selected as the project developer in 2019, Woodruff said, and the company had weathered several challenges that could have derailed the project. He wanted to turn dirt, he said, and he felt that a personal, face-to-face meeting with AFSCME leadership just might result in wins for all parties.
“Folks who were involved in all sides were working for solutions, not advocating for positions but staying convicted to ... what their requirements and their ideals were, but looking for solutions,” Woodruff said, “and the mayor helped to draw those out.”
What stood out for Michael Sweeney, the chief campus counsel for UC Davis who has participated in hundreds of mediations, was how Steinberg kept the focus of the negotiations on principles of supporting the community rather than on technical issues such as the laws that were at play or the facts that were in dispute.
UC Davis Chancellor Gary May arranged for the meeting to take place in conference rooms at Mrak Hall, what one might call the university’s seat of power since his offices and those of other leaders are in the building.
“Mayor Steinberg was masterful as a mediator,” May said. “He’s had these experiences before, and he did a really good job of capturing what the concerns were from each side and what each side wanted and how we could find common ground.”
They started with a meeting of all the principals, May said, and over the course of the day, they separated and came back together once or twice to give each group the opportunity to caucus privately over particularly sticky issues.
That first meeting yielded a baseline agreement, Sweeney said, but it would take Steinberg, Perlman, Sweeney and many others more than 100 hours of further negotiations on the phone and over Zoom to get the finer points hashed out.
Of mediation, Steinberg said: “It’s listening. It’s understanding and internalizing the interests, the real interests, of each of the parties involved in these difficult controversies, and then it is problem solving. ... It’s constantly fiddling with a Rubik’s cube on a 100 or more different issues to try to make sure that everyone’s interests are met. And, it’s never perfect. Not everybody gets what they want the way that they want it, but ... if everyone’s interests are met, you hit the sweet spot.”
Is Aggie Square worth this fuss?
Steinberg said he has long seen lightning-rod potential in expanding UC Davis’ presence in Sacramento, especially when it comes to commercializing the scientific discoveries of university researchers.
When the UC Board of Regents went looking for a new chancellor in 2016, Steinberg said, he lobbied for them to hire someone who could be a partner in such an effort. His wish was granted with May’s appointment.
May had spent three decades at Atlanta’s Georgia Institute of Technology, culminating with his selection as dean of the College of Engineering, and he had played an early role in planning an innovation hub there called Technology Square. After May was appointed UC Davis’ chancellor-designate, Steinberg led a delegation from Sacramento to tour the development.
Georgia Tech’s leaders had started Tech Square with the purchase of eight blighted acres in midtown Atlanta in the late 1990s — a last-minute parcel addition to a broader real estate deal. Today, Tech Square sprawls across eight blocks densely packed with more than 150 start-up ventures, dozens of corporate innovation centers and at least 10 research labs.
“Today, you can feel the energy — startups are next to corporate innovation centers that are down the street from corporate headquarters. The Scheller College of Business and our startup incubator, ATDC (Advanced Technology Development Center), are vital resources. People are exploring possibilities over coffee and in breakrooms,” wrote Georgia Tech President Angel Cabrera in a Nov. 7, 2019, entry on his blog.
May has said Aggie Square will build on UC Davis’ strengths, and the university has revealed plans to include biomedical engineering facilities, the Alice Waters Institute for Edible Education and a regenerative medicine research program in phase one of the project.
“There’s a multifaceted vision for Aggie Square,” he said. “There’s bringing UC Davis research from the bench to the marketplace more effectively and efficiently. There’s creating jobs and economic development. We expect to create more than 25,000 jobs ultimately and generate more than $5 billion ... annually in economic development for the city and the region.”
Industry partners will collaborate with UC Davis researchers and with one another, May said, and they will hire not only UC Davis students but also many people in neighborhoods around the medical center.
“I think we’ll look back on this years from now, maybe 10 years or so from now, and say what a watershed moment this was for Sacramento and for UC Davis,” May said.
Getting to ‘the sweet spot’
But first, the mayor would have to find the sweet spot for AFSCME.
All too often, Perlman said, the university pushes to develop housing, new campuses, or in this case, an innovation hub, and that development increases competition for housing, leading to upward pressure on housing prices and resulting in housing instability for working-class residents.
“Over a thousand of our lower income members live in the surrounding neighborhood that is next to Aggie Square, which has historically been for low-income folks, specifically in Oak Park,” she said. “A vast majority of our members are black and brown, and that’s where they live. Not only was this development going to represent not necessarily economic impact or growth for them, but it also meant that they would be pushed out of the neighborhoods that they lived in as the development gentrifies and attracts ‘university-type people:’ doctors or the faculty or graduate students or high-tech workers.”
Hundreds of AFSCME members had lived for years near the Aggie Square development site, Perlman said, but now that it was becoming a jobs mecca, they or their children could be forced to abandon the neighborhoods they had long called home.
“The mayor really cared about what happened to working-class Black and brown folks and didn’t want to have to see them commute,” Perlman said. “He was successfully able to advocate to the other side to...get them to see that we were absolutely serious about the impacts on our members and what it would really take to address those impacts.”
In some areas of California, Perlman said, AFSCME members are commuting five or six hours to work, or they sleep in their cars to avoid having to make that long daily drive. Those long commutes, she said, also add to pollution problems in California.
And, Perlman asked, will the jobs being created pay enough of a wage for them to maintain their homes?
Wexford’s Woodruff stepped up with a proposal to hire AFSCME members to service common areas in the buildings at Aggie Square, and he said all tenants would be offered the ability to do so.
“Our buildings will be maintained by AFSCME members,” Woodruff said. “They will be there virtually in perpetuity, and that became something that we got comfortable with and we believe our tenants will be very comfortable with.”
If tenants do not hire AFSCME workers, May said, the University of California will guarantee that any service workers not in the union will receive comparable wages and benefits.
“Even if they are not our members, they are our members’ family members,” Perlman said. “We actually care about poor people and don’t want them to suffer. We don’t want them to have to not be able to, like ever see their kids because they’re working three jobs. That hurts all of us.”
These commitments were key to reaching a legal settlement, and it took several weeks and many phone calls to construct a document that AFSCME, city officials, UC Davis and Wexford felt closed any loopholes and limited the chance of misinterpretation. It was a deal, Sweeney said, that would extend well beyond the lifetimes of those crafting it.
As part of a broader community benefits agreement with the city, UC Davis also agreed to create a $5 million fund to help community members avoid displacement, but to mitigate AFSCME’s concerns about housing instability for its members, the mayor asked UC Davis to steer that pool of money to university employees who lived in the affected neighborhoods and met income guidelines.
Steinberg then pledged to redirect an additional $5 million from the city’s housing trust fund to prevent displacement among neighborhood residents who are not UC employees. The council approved that funding at its Dec. 14 meeting.
Danielle Foster, the city of Sacramento’s housing policy manager, said: “We’ll have at least $10 million in the initial anti-displacement funds. It could be added to in the future, but this is the initial commitment from all parties involved.”
The idea is to provide help with such needs as rental assistance, down-payment assistance for first-time home buyers, repairs that will keep homes habitable and legal assistance for individuals facing evictions, said. Foster, adding that community feedback will help determine the measures used.
Frank Zerunyan, a professor of governance at the University of Southern California and mayor of Rolling Hills Estates, said he tells his students that a primary function of a mayor is facilitating consensus to protect value and quality of life.
“When you are attempting to resolve these kinds of differences,” he said, “you need to be creative, and you need to align interests, so to speak, to various options that you may have or various values that you may create for the various interests that you’re trying to negotiate. I mean, I wrote a book on this topic called ‘Negotiation for Public Administration Professionals.’”
What legacy will this deal leave?
When it comes to Aggie Square, the mayor’s legacy and that of other city leaders will likely depend not only on whether the ambitious project gets built but also whether neighboring residents get the promised benefits, Zerunyan said.
The toughest assignment for the mayor and the City Council, he added, will be ensuring that impacted neighbors do not feel disenfranchised and ensuring that funding set aside for affordable housing or displacement prevention are used responsibly and in keeping with commitments made to residents.
The city has committed $40 million toward building affordable housing along Stockton Boulevard, which will come from property tax revenues on Aggie Square and other sources. The city said that, in the first 10 years of development, 20% to 25% of jobs created at the project will go to residents in the impacted neighborhoods. The parties also have pledged to invest $1 million in a one-stop employment training center.
It costs at least $250,000 to build an affordable housing unit, so $40 million won’t buy more than 160 units, said Stephen Wheeler, a professor in UC Davis’ Department of Human Ecology. The school has a number of construction projects planned for the medical center campus, he said, and university leaders should be committing multiple resources to countering the upward pressure that thousands of new workers will put on the community’s housing market.
Kendra Lewis, executive director of the Sacramento Housing Alliance and a leader of Sacramento Investment Without Displacement, said her organization had similar public-private projects across the nation and discovered that the largest set-aside prior to the Sacramento one was $35 million.
The expectation is that the $40 million in affordable housing, accompanied by the addition of student housing at Aggie Square, $10 million in anti-displacement funds, agreements on wage parity, and the local hiring goals will work in concert to relieve the pressure, Lewis said, but members of Sacramento Investment Without Displacement will continue to monitor how this is all working.
Both Lewis and Foster, the city’s housing policy manager, also noted that the city will be able to use monies from the affordable housing fund to leverage state and federal financing and tax credits to magnify the impact.
UC Davis professor Jonathan London, a co-author of a 62-page report on equitable community-university partnerships, said that he hopes the university, Wexford and the city follow best practices for public-private developments and sign a community benefits partnership agreement that includes neighborhood residents.
While Guerra noted that the council has passed an ordinance allowing residents to sue the city over noncompliance on its settlement agreements, London stressed that neighbors should be able to directly influence the university on practices and investments affecting their communities.
Tamika L’Ecluse, also a leader of Sacramento Investment Without Displacement, said that, as part of that group’s legal settlement with the city, they are working now on negotiating a citywide community benefits agreement to be used for such public-private partnerships.
Even though Atlanta’s Tech Square has provided a significant economic boost, the Georgia capital does not offer the best model when it comes housing. It is in the midst of a severe affordable housing crisis, and it ranked fourth in terms of gentrification in July 2019, with Federal Reserve researchers reporting that a third of eligible census tracts were in the midst of gentrification.
Councilmen Guerra and Schenirer said they have established a process to continue to engage community residents and organizations on Aggie Square’s impact on workforce, housing and transportation. City officials have ongoing meetings with members of Sacramento Investment Without Displacement, Guerra said, and they agreed to require quarterly meetings with the public.
Transparency and public accountability will be key to ensuring that the Aggie Square project and others like it succeed, Zerunyan said, and Schenirer and Guerra also made that point.
“None of us want to see gentrification that results in the displacement of individuals. We all want neighborhoods and communities to be able to improve always, but with the residents who are there — and with new residents,” Schenirer said. “When I started this, I would say this could be the best thing that’s ever happened to the neighborhood or the worst thing that’s ever happened. I think we’re on track for the best thing and we just need to persevere.”
This story was originally published January 9, 2022 at 5:00 AM.
