June 1, 2021

Discussion of the Scope of Economic Development

and Resources Needed for Implementation

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• Refining the scope of Economic Development was a discrete work item in the Community and Economic Recovery Workplan

• Outcome for tonight: Provide direction to staff on the desired scope of economic development and goals of future investment • Resources need to be allocated in alignment with the goals of future

investment• This function is not currently resourced on an ongoing basis

• Available Resources in FY 2022:• City Council Reserve: $500,000• City Council Contingency: $100,000• Other unallocated funding (depends on City Council direction during budget

adoption)• Budget Stabilization Reserve

OVERVIEW

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City of Palo AltoOverview of Economic Development

June 1, 2021

Tonight’s Presenters

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Aaron Aknin: 20 years in community and economic development

• Redwood City• Palo Alto • San Bruno• Co-founder of Good City Company

Leslie Parks: 30 years in economic development

• San Jose• Redwood City• San Carlos• Burlingame• Mountain View

Agenda: Overview of Economic Development

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1. Definition2. Typical goals and objectives3. What types of businesses contribute to the

local economy?4. What are economic development assets or

advantages?5. Approaches to economic development

efforts6. Economic development activities

implemented by cities7. What might work for Palo Alto?

Outcome

Following the presentation, the Council should discuss and provide following direction:• Identify the scope and preferred elements of the City’s ongoing

economic development activities• If desired, identify resources necessary to implement that scope,

including: Hiring economic development staff or Develop a Request for Proposal for the provision of ongoing work by an outside

consultant.

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Definition

• Economic development means different things to different communities.

• Though there is no universally accepted definition; here’s an example:

“Economic development is the creation of wealth from whichcommunity benefits are realized. It is an investment in growingthe economy and enhancing the prosperity and quality of lifefor all residents.”

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Definition and goals typically influenced by:

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• Economic changes

• Urban or rural community

• Type of businesses or industries located in the community

• Community assets and location advantages and

• A pandemic

• Community’s demographics:

- median income- education- diversity- poverty level- median age

Palo Alto MtnView

RedwoodCity

U.S.

Total Population 65,364 82,739 82,595 328,239,523

Median Household Income

$157,120 $128,252 $107,469 $62,843

Per Capita Income

$89,205 $73,924 $53,836 $34,103

Poverty Level 5.9% 7.3% 9.6% 10.5%

Median Age 41.9 35.0 37.0 38.1

High School Degree or Higher

97.4% 93.4% 86.1% 88.0%

B.A. Degree or Higher

81.9% 68.5% 48.0% 32.1%

Diversity

• White 59.7% 54.9% 57.9% 76.3%

• Hispanic or Latinx

5.7% 17.8% 37.2%% 18.5%

• Asian 32.6% 31.4% 14.3% 5.9%9

Small, Medium and

Large Businesses

Are an Ecosystem

• Certain businesses have a greater multiplier effect on the economy compared to service businesses.

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• Small businesses rely on employees from larger companies (especially office users) as customers, in addition to residents.

Profile of Small

Businesses

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• Small businesses with less than 500 employees make up 99% of the businesses in the U.S. and employ 47.1% of the private workforce.

• Firms with 20 to 99 employees have the largest share of employment and create the most jobs.

• Small businesses are typically locally serving.

• They are primarily service businesses (personal/professional).

Palo Alto Retail Businesses

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Source: Quarterly Census of Employment and Wages (QCEW), EDD – City of Palo Alto Q3Preliminary. NAICS code 44 & 45.

Number of Employees 1- 5 5-9 10-19 20 - 49 50 - 99 100-249 250 -499 Total

Number of Retailers 119 46 34 21 13 6 1 240

% of Total: 49.60% 19.20% 14.20% 8.80% 5.40% 2.50% 0.40%

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Source: City of Palo Alto; list of major employers as of 2019. Space Systems/Loral is no longer in Palo Alto.Some of the businesses may have downsized or relocated from the City prior or during the pandemic.Source: City of Mountain View, 2020

PALO ALTO EMPLOYERS EMPLOYEES MOUNTAIN VIEW EMPLOYERS EMPLOYEESStanford Healthcare 5,500 Google 23,324Lucile Packard Children’s Hospital 5,700 Symantec 2,789Stanford University 4,500 El Camino Hospital 2,500Veteran’s Affairs Palo Alto Healthcare System 3,900 Synopsys 2,377

VMWare, Inc. 3,500 Intuit 2,370SAP Labs Inc. 3,500 LinkedIn 1,177Space Systems/Loral * 2,800 Samsung 1,100Hewlett-Packard Company 2,500Palo Alto Medical Foundation 2,200Varian Medical Systems 1,400

Major Sales Tax Performers: Palo AltoCity of Palo Alto: Top Sales/Use Tax Contributors, FY 2019

Anderson Honda Lucile Packard Children’s Hospital TencentApple StoresMacy’s Department Store TeslaAudi Palo Alto Magnussen’s Toyota of Palo Alto Tesla Lease Trust Bloomingdales Hp Enterprise Services Shell Service Stations

McLaren San Francisco Tiffany & CompanyBon Appétit Management Co. Neiman Marcus Department Store Urban OutfittersHermes Nest LabsVarian Medical SystemsHouzz Shop Nordstrom Department Stores Volvo Cars Palo AltoIntegrated Archive SystemsStanford Outpatient Clinic Pharmacy

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Major Sales Tax Performers: Mountain View

City of Mountain View: Top Sales/Tax Performers, as of December 2019

Allison BMWBenson IndustriesBest BuyBon AppetitBoosted BoardsChevronCostcoFinancial Services Vehicle TrustKiwi CrateKohlsMr. Russell LeeMarshallsMentor Graphics

Mountain View ShellOmnicellProject Fi by GoogleREISafewaySiemens Medical SolutionsSynopsysTargetTotal Wine & MoreValley OilWalmartZones

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Economic Development Assets/Advantages

• Port, airport, public transit• Downtowns• Neighborhood business or

commercial districts• Industrial – R&D, production• Office

• Diverse retail – occupied & improved storefronts

• Rural – agriculture• Qualified labor force• Consistent, streamlined,

timely planning entitlement and building permit process

16What are Palo Alto’s assets/advantages?

Examples of Broad Economic Development Goals

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Increase city revenues so that the general fund can provide high quality services for residents

Retain and support local businesses that provide goods and services desired by residents

Typical Goals and Activities

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Goal: Sustain thriving business districts with restaurants and retail as desirable amenities for residents

Activity: Small business assistance, especially in downtowns or neighborhood commercial districts.

Goal: Help businesses start-up and expand capacity (sales) and achieve sustainability

Activity: Direct outreach and support to local businesses for retention and expansion purposes

Typical Goals and Activities

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Goal: Job creation and preservation, increase tax base and property values

Activity: Marketing and promotion of city for new businesses and development to fill vacant space.

Goal: Support existing residents and service workers

Activity: Fund programs that aim to create adequate supply of affordable housing

It Can be One Goal

Ensure the City has strong, diverse business base that supports a high quality of life for residents.

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Economic Development

Approach

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• Approach will depend on community goals

• Can be proactive, less proactive, take a middle ground

• Focus on what the city does best

• City already provides strong business assistance in response to COVID-19

• Is there a need to raise the level of effort?

• An “organic” approach is an option

Less Proactive Most Proactive

Santa Clara

Menlo Park

Belmont

Los Altos

Redwood City Burlingame

San Carlos Cupertino

Fremont

Mountain View

Approaches and Resources Vary Locally

Economic Development Program Costs

Title Key Responsibilities Salary Ranges

Economic Development Manager

• Develop and direct economic development policies, programs and practices that fit community goals and needs.

• Ensure that land development, business attraction and retention, job creation, commercial growth, housing, and amenities are consistent with the Council's goals, priorities, and policies.

• Ensure accomplishments are measurable, create high-value jobs, increase general fund revenues, tourism, retail and commercial investment.

• Implement on-going business retention and attraction efforts in a proactive manner, increasing and diversifying jobs, commercial/industrial investment, and economic growth.

• Provide timely, well documented analyses for sound policy decision recommendations and policy decision making by the City Council

$125,832 to $217,200

$126,553 to $204,830

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Economic Development Program CostsTitle Key Responsibilities Salary Range

Economic Development Coordinator

• Develop and implement programs relating to revitalization, business retention/expansion, economic development, and job and revenue creation.

• Act as liaison between developers and businesses to facilitate new developments, and landlords/brokers and potential tenants in pursuing leasing of commercial vacancies.

• Facilitate resolution of technical real estate issues involved in development projects and business locations.

• Negotiate development transactions consistent with City policies.

• Acquire, manage and dispose of property on behalf of the City.

$107,353 to $130,476

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Economic Development

Budget

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• Budget may include salaries, promotions, memberships, conference/training, sponsorships, and studies (economic/fiscal analysis)

• Mountain View: $70,000 ongoing budget plus one-time allocation of $275,00 for COVID-19 business impacts

• Redwood City: $450,000 one-time for COVID-19 impacts; no ongoing budget. Previous years did include budgeted positions

• Fremont: few discretionary funds; budget almost entirely staff

• San Mateo: $300,000 for economic development but “tapped” to fill gap

Cities typically include Economic Development within their Community Development or City Manager’s Office budget

Local Economic Development Strengths and Weaknesses

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• High quality of life for residents with desirable amenities such as parks, regional retail, defined downtown with diverse, unique restaurants and retail, and a diverse range of commercial (office and retail) space

• Proximity to Stanford University and the Stanford Research Park

• Availability of professional services

• Walkability and “bike-ability” of the city

• Access to Caltrain

• Perceived availability of parking in the downtown (pre-COVID)

• Quick access to major freeways

• High cost of housing (true of every city in the Peninsula)

• Limited office space growth if high-rise space is in demand or preferred by businesses

Strengths: Weaknesses

What Type of Effort Works

for Palo Alto?

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• An economic development effort should be tailored to a city’s economic assets, goals and the preferences of the community.

• Benefits of experienced staff/consultant:• Greater accountability and linkage to the organization’s

goals and policies.• Consistency of service delivery.• Expertise to take advantage of opportunities.

• There is always the “organic” option.

The information provided in this report and the facilitated discussion is intended to help the City Council decide what role, if any, economic development can play in the City and what resources may be needed for implementation.

Potential Options & Costs

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Permanent staff position: Economic Development Coordinator

Starting Salary: $145,000 to $150,000 plus benefits

Part-time/Full-time ConsultantContract Position

$100,000 to $200,000 annually plus expenses

Additional Funding

Approx. $50K+ of additional program funding for special studies (pro-forma analysis, etc.) and other work will still be necessary

Council Discussion:

• What are the strengths should Palo Alto build on?• What economic development weaknesses should the City focus on?• Potential scope and preferred elements of the City’s ongoing

economic development activities• Identify resources are necessary to implement that scope, including: Hiring economic development staff or

Develop a Request for Proposal for the provision of ongoing work by an outside consultant.

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• Through City Council discussion of those questions:• Provide direction to staff for the desired scope of economic development and

goals for future investment• Allocate resources necessary to achieve those goals

• Available Resources in FY 2022:• City Council Reserve: $500,000• City Council Contingency: $100,000• Other unallocated funding (depends on City Council direction during budget

adoption)• Budget Stabilization Reserve

CONCLUSION

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