CAL POLY - Six years ago, a group of local business and civic leaders eager to diversify the county's economy proposed building a technology park at Cal Poly that would nurture small high-tech firms.

Although the tech sector has crashed and the state's economy remains stalled, those planning the venture still believe such a business-university partnership could benefit the entire community. And momentum appears to be building for the project -- which could ultimately become a $34 million endeavor.

According to officials with the California Central Coast Research Partnership, a group affiliated with Cal Poly that is guiding the project, federal money for the technology park is trickling in, at least 19 businesses have indicated interest in occupying space and a recent study concluded that the project is viable.

Planners hope it will be ready for tenants by 2006, if key issues such as financing can be addressed.

Purpose of the park

The park's primary goal is to provide opportunities for high-tech firms engaged in research and development to exchange information and ideas with Cal Poly faculty and students.

For the university, potential perks include lucrative consulting work for faculty and practical internships for students. It would also enhance Cal Poly's reputation, aid in faculty recruitment and help the university secure more public and private research funding.

"Our whole reputation as a university is based on learning by doing, and our students are valued for their hands-on experience," said dean of research and graduate programs Susan Opava, who is overseeing the project. "The technology park is just a piece of increasing applied research and furthering connections to industry."

For the private sector community, Opava said, benefits include the prestige of being affiliated with a university, access to specialized facilities and equipment, and an opportunity to partner with Cal Poly on government grants for which private firms alone are ineligible.

The park would also house a business incubator where start-ups would have access to office space and services such as business and marketing plan development, thereby reducing their overhead costs.

"The benefit of an incubator is that a start-up can go in and they have an opportunity to share a lot of resources," said David Ryal, director of the South Central Coast Small Business Development Center in San Luis Obispo, which will work with the park's maturing tenants.

Potential partners

University officials declined to identify the firms that have expressed interest in the technology park because they aren't ready to commit publicly. But they describe them as small e-commerce, software development, aerospace and engineering consulting firms. All but two of the 19 are based in the county.

"A lot of the available space (in San Luis Obispo) is big space, not tailored to smaller companies," said Opava. "Our focus would be on smaller companies that need maybe 2,000 square feet."

Tomas Svitec, owner of a small aerospace consulting company called Stellar Exploration, said he's interested in leasing space for three reasons: proximity to students and faculty, credibility for his business, and access to campus facilities.

Svitec and his three part-time employees already work closely with Cal Poly's aerospace department, funding students' senior projects and testing prototypes on school equipment.

"When I first talked to them back in 2001, it was hard to get a decent industrial space here in town," said Svitec. "But now that's changed. There are a number of spaces for lease, but the attractiveness (of the technology park) is working with the campus."

Although there appears to be a glut of office space on the local market, supply and demand is cyclical so circumstances are likely to change by the time the technology park is ready for tenants, real estate agents say.

Study green lights project

A study conducted by a Maryland consulting firm reviewed 22 successful university research parks in communities comparable to San Luis Obispo and concluded that one at Cal Poly would be marketable.

When compared to the other colleges and communities, Cal Poly and San Luis Obispo fared well on measures such as community population, number of tech firms and employees, and the number of start-up companies. But it fell short on research funding.

With an average of just under $19 million in state, federal and private research funding received in the last three fiscal years, Cal Poly ranked fourth lowest among the 22 schools. In contrast, Virginia Tech -- to which Cal Poly is often compared -- received nearly $200 million in research funding in 2000.

Because Cal State universities don't confer doctoral degrees, Cal Poly isn't considered a research university and is at a fund-raising disadvantage. The university is, however, aggressively seeking more funding, particularly from private industry, according to Opava. From 1998 to 2001, the university's annual funding through applied research contracts with engineering, software development, agricultural and other private firms grew to $2.5 million from $116,000.

Learning from other parks

Cal Poly officials are also trying to learn from the experiences of other tech parks in terms of the pace of development and relationships with tenants over leases and intellectual property.

Cal Poly park tenants would own the patents to any research or product they develop in their office space if they hired faculty as consultants, Opava said. But questions could arise if businesses enter into a contract with the university for applied research; in such cases, Cal Poly's intellectual property policy would determine the ownership of any patents or licenses.

Another concern is the extent of collaboration among partners over time. Despite an intention to work together, research park businesses and universities sometimes fall into a relationship that amounts to little more than tenant and landlord. Cal Poly would try to avoid that by seeking companies eager to work with it, Opava said.

Building too much too soon is another potential pitfall.

If built to full capacity, the technology park would provide 250,000 square feet of office space. To avoid the costly mistake of space sitting empty, officials want each building to be constructed on demand.

Expensive endeavor

But the biggest hurdle is raising money to pay for the park.

Initially, Cal Poly is trying to raise $4 million to $5 million to pay for the first building. A final decision has yet to be made on how to finance and build the entire project since it could take 15 years to complete and up to $34 million if built to capacity.

A range of options could be used to pay for the buildings in the park. Opava said the university could be the sole developer, tenants could foot the bill for the buildings they occupy or an outside firm could handle those transactions.

So far, the university has been awarded $6.2 million in federal funds from the Office of Naval Research and the Department of Housing and Urban Development.

The Navy money can't be used to pay for construction, so officials have used it to pay for planning costs including personnel, site studies, Web site development and the feasibility study.

HUD funds, by contrast, can be spent on construction, so officials hope to obtain an additional $1.8 million from the agency to use as equity to leverage private funding to erect the first building. Project planners are now preparing a HUD grant proposal for submission in fiscal year 2005.

But the federal housing agency typically only gives out a maximum of about $600,000 at a time, so it could take three years before Cal Poly has enough money to finance the technology park's first building and break ground.

The consulting firm, Hammer, Siler, George Associates of Denver, Colo., has recommended that the Cal Poly Foundation, the California Central Coast Research Partnership or a newly formed nonprofit organization develop and manage the park.

Is the timing right?

University officials and local economic observers say the idea for a technology park is worth pursuing -- despite the dot-com bust that sent hundreds of local tech workers in search of new jobs.

"If we had this building right now we would fill it," said Opava. "I don't think the economy needs to do anything to fill the first building."

But Bill Watkins, director of the UCSB Economic Forecast Project, advises caution. California's economy still shows no signs of strength, he said. Nagging issues include high housing costs in coastal communities like San Luis Obispo County, the rising cost of workers' compensation, the huge state budget deficit and uncertainty over electricity.

"I think the state has serious long-term problems," he said.

Still, a project this big won't happen with a wait-and-see attitude, noted Ray Johnson, president and chief executive officer of the Economic Vitality Corp., a group that fosters business development in the county.

"By the time it finally comes online, we'll be in a different economy," he said. "Planning has to be so far ahead we can't let it drive the decision."