Valley Cities Offer Business Incentives

Cities of the Central Valley both large and small are struggling to find ways to bring businesses, jobs and prosperity back to their communities. High unemployment rates and a persistently sluggish economy are forcing these mostly cash-strapped cities to look for new ways to jump start local economic growth, put people back to work and bring much needed tax revenue into their city’s coffers.

Elected officials from city to city disagree on just exactly what is the best course of action to take. As a result, while some cities are offering a wide variety of incentive packages designed to lure builders, retailers and manufacturers, other cities are inclined to hang on to their dwindling resources and wait to see if a slowly but steadily recovering economy will bring with it expansion and growth.

“We couldn’t afford to wait,” said Dan Spears, manager of planning, community and economic development for the city of Sanger. “With an unemployment rate of over 27% a couple of years ago, we had to do something in order to jump start our economy.”

Sanger, a city of 26,000 located east of Fresno, offers a wide variety of fee waivers and deferments, tax incentives and a rebate on sales tax dollars paid to the city to any business willing to relocate to their city.

Spears points out that the incentive package offered by his city has helped to convince residential builders to resume building on four housing subdivisions that work had been suspended on when the recession hit.

Spears admits that the relatively modest savings that the city is able to offer to builders are not alone enough to lure builders back into the city, but he said the builders have told him that the incentive package played a significant part in their decision.

“With new homes come higher land and property values, new sales tax and an increased flow of revenue into the city.” In addition, the unemployment rate in Sanger has dropped to around 21%.

Spears credits the city’s offer to waive development fees for new construction in the city’s downtown area for resulting in the new 54 unit office complex that recently completed construction. In addition, a new 18,000 sq. ft. health care center is also being constructed downtown.

“We’re doing new things every day,” said Spears, “and these are directly attributable to the incentives we’ve offered.” He said the city hasn’t calculated how much it has lost in waived fees or sales tax give backs, but instead is focused on what it has gained.

Visalia city officials say they have no interest in following Sanger’s lead in using fee waivers as a means of stimulating growth in the city.

“Some cities will give away the farm, but historically Visalia has not done that,” said Visalia Mayor Amy Shuklian. Shuklian pointed out that the city relies in part on the services that it provides to existing businesses as well as a well maintained infrastructure to appeal to businesses from out of the area seeking to relocate.

Visalia City Manager Steve Solomon said, “We don’t waive fees because we don’t believe that is how to attract retailers.” With over 200,000 people living within 20 minutes of town, Solomon noted, Visalia is a regional hub with a very strong market to attract the attention of major retailers.

A vibrant shopping corridor along Mooney Blvd. as well as Visalia’s revitalized downtown also make the city stand out to people or businesses wishing to relocate to the area, according to Solomon. Visalia’s current unemployment rate is around 8% and the city of over 124.000 residents usually, according to Solomon, has the lowest unemployment rate of any Central Valley city.

Since the depths of the Great Recession, Solomon said the city has filled over 800,000 sq. ft. of formerly vacant retail space, witnessing the arrival of several major retailers in the process.

He points to infrastructure maintenance and improvements, such as the number of road widening and bridge projects currently underway around the city, as the sorts of things that will attract new business to Visalia, as well as the speed and ease with which Visalia helps companies to make the move to the city.

“Visalia provides excellent service,” Solomon said. “We’ve also streamlined our review process to ease the way.

“The record here is that Visalia has been very successful and other cities come here to find out how we do it,” he added. “We’re not giving money away here.”

Longtime Visalia commercial real estate broker Marty Zeeb confirmed that the supply of existing vacant retail space for sale or lease within the city has been dropping significantly, but added that the local market had an abundance of available office space. Zeeb said that local real estate prices have stabilized and have even begun to move back up.

Many of California’s cash-strapped cities simply lack the economic resources necessary for putting together any sort of incentives to help make their cities more attractive to business.

Prior to 2011, many California cities had become heavily dependent upon the spending of redevelopment dollars to put together often lucrative packages of incentives intended to lure businesses to their cities. With very little state oversight as to how redevelopment money was spent by the cities, California’s cities had relatively free rein in determining what constituted a legitimate use of the money that flowed into the 425 redevelopment agencies scattered throughout the state. Redevelopment funds were originally intended to be spent on urban renewal projects within a city, such as blighted areas or old and decaying downtowns.

But the free-spending ways of many of the state’s cities came to a sudden halt in 2011 when Gov. Jerry Brown proposed closing the agencies and diverting redevelopment funds to help close the gap in yet another of California’s chronic budget shortfalls. The state’s legislators later voted to approve the governor’s plan.

Dinuba’s Deputy City Manager Beth Nunes oversees a much more modest package of economic incentives than that of their neighbor to the north, Sanger. The city offers to waive some fees for businesses that relocate into an existing vacant building within the city. Nunes said the city, with a population of 21,000 and an unemployment rate of just over 20%, has also worked to streamline the permitting process in addition to assisting businesses seeking information on the Tulare County Enterprise Zone.

The Dinuba City Council recently approved a plan to set aside $1 million over the next three years to accommodate new businesses by adding necessary infrastructure where none currently exists.

Exeter City Manager Randy Groom said that his city was “looking to roll out the red carpet, not the red tape,” but he noted that Exeter had no resources for offering incentives to businesses at this time.

Further to the south, Bakersfield, with 359,000 residents and an unemployment rate of just over eight percent, has no specific program in place to provide any incentives such as fee waivers, according to Community Development Director Douglas McIsaac.

“In light of the loss of redevelopment funds, we’ve had to reinvent the way we do business,” McIsaac said recently. “But Bakersfield has always been known as a business-friendly community.”

McIsaac said that residential development in the state’s ninth largest city has begun to pick up.

The economic growth that is occurring within his community has Sanger’s Dan Spears convinced that his city has settled on the right choice to take Sanger into the future with better days ahead. While Visalia’s Solomon and Mayor Shuklian are certain that history holds the answer. Their city has never cut or waived fees in the past during hard times, and isn’t considering doing so now.

Interestingly enough, the two cities are using entirely different approaches in order to weather tough economic times. And both are showing clear signs of economic growth.

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