Wednesday, September 26, 2007

Economic Development: 2003 versus 2007 - What has Changed?

Economic Development is an issue that means different things to different people.
But, all seem to agree that any definition has to include jobs, business activity and the cash flow that results therefrom.

Our Growth Management Act [GMA] requires most cities and counties to plan their growth, and memorialize their game plans for accomplishing that in Comprehensive Plans that are updated from time to time.

Six Chapters, or Elements, are mandated by law;

1. Framework Goals & Policies
2. Land Use
3. Housing
4. Transportation
5. Community Design
6. Capital Facilities & Utilities

An additional, optional, Element, Parks, Recreation & Open Space, was adopted in 2005.

I think we need to adopt another optional Element, Economic Development, to define what Bellingham does now, and wishes to do in the future, to sustain our local economy and job base.
Fortunately, the City is now taking a step toward that goal by developing Strategic Guidelines for Economic Development.

Without a written plan, there will be endless and unproductive debate over what the City is, or should be, doing to retain and grow local businesses and attract new ones that fit into the future we are trying to achieve.

The County has such a plan, and it reads well, although it isn't always followed. [Witness the Waterfront Redevelopment Project for example] But, it is important to state clearly what actions and policy make sense to achieve goals that are agreed to as good.

Since the Port's main mission is to be an economic engine, it also has a plan which is followed. Of interest was a study undertaken by the Port a few years ago by the firm of Deloitte & Touche, which concluded with recommendations that emphasize simply focusing on Seattle and Vancouver, BC businesses, and encouraging our natural location create advantageous branches to locate here.

Both County and Port ED Plans recognize that the days of natural resource extraction and heavy manufacturing are in decline. In their place, we might encourage cleaner industry and businesses that require advanced learning or technology and provide family wage jobs. That seems like a wise plan that the City could emulate as the major population center in the region.

But the issues surrounding ED are many and varied, with many interrelated and some requiring specific actions to address. I'm glad to report we are making some progress on some of these things like improvements in the City's Planning and with leadership in place to help the waterfront effort.

A sensible plan for economic development also needs to take into account the services the City already provides, then build upon those.
It also needs to take into account the concerns and needs of businesses already here, as well as those that may be attracted.

Below are some responses I gave to 3 campaign questions back in 2003 that may be of interest to readers.
Some of the examples cited are a little dated, but the responses illustrate the points intended.

What is the biggest issue facing Bellingham business and how will you address that issue as a City Council member?

I believe the biggest 'issue' facing Bellingham businesses is uncertainty.

This is evidenced in several areas, including:
o permitting procedures, their clarity & timing,
o zoning & land use decisions & restrictions,
o availability of water & sewer extensions,
o impacts of growth on costs,
o transportation planning & options,
o parking availability,
o local tax structure,
o sustaining its employee payroll & profits
o and the overall economy

The City can continuously strive to improve certainty and stability relating to the first seven points, because they are clearly influenced by City & County policy, laws and rules.
These can also influence a business's ability to sustain itself.
The last point has a major impact, but is outside either the City or County's control.

As a City Council member, I will work to address the first four points as part of updating our Comprehensive Plan for managing growth.
This needs to be done cooperatively with the County so that the benefits of regional planning can be realized.

Points 5 & 6 need to be also specifically built into our plans for revitalizing the downtown & waterfront areas.
City taxes, fees & utility rates need to be adequate, fair and stable.

One of the main obstacles in the construction of new buildings downtown and in Fairhaven has been complaints from citizens that the buildings block their views.
Should this be handled on a case-by-case basis or should there be firm rules to guide the protection of views?

This question apparently refers to the Chrysalis Hotel; Finnegan's Alley & the proposed new Village Books Store in Fairhaven; and the State Street Multi-year Tax Exempt Apartment structure, which replaces a derelict structure near downtown.
All these buildings are situated in areas clearly designated for high-density commercial use.
They were also conditioned by public in-put, to less than the heights that might have otherwise been allowed.
Others will likely be considered in the future, such as the Old Town redevelopment site, etc.

The Finnegan's Alley building height allowed was questionable, however, once determined this set a precedent for the Village Books building.
Both structures were approved at heights and configurations more acceptable to their neighbors.

Likewise, the Chrysalis Hotel and State Street Apartments were modified in response to the concerns of neighbors.
This is as it should be, since it is practically impossible to have firm rules that cover every eventuality.

Clear guidelines are preferable, but these must allow some case-by-case variation.
This is necessary if we are to achieve the urban density required to prevent sprawl.

View protection is important, within limits, but it must compete with other priorities as well.
More work is needed to define view parameters.

Should Bellingham try to limit growth? Why or why not, and if so, how?

Yes, there are finite limits to any activity, whether these are recognized in advance or not.
This important question is now in the process of being answered for our community during the process of updating our Comprehensive Plan, in cooperation with the County.

Limits do apply to rate of increase, ultimate size, quality, timing and related costs.
All of these parameters need to be recognized in conjunction with the resources available to deal with them reasonably and in a timely fashion.

I believe that sustaining our quality of life demands that we pay attention to how our growth is planned and paid for.
The best approach seems to be a regional one, in which City and County collaboratively plan our future housing, transportation, critical areas, open space and public services needs.
If this is done well and costs are shared equitably with new development, then our valued quality of life can be sustained for future generations to enjoy.

More growth will place increasing demands on our water supply and public infrastructure, both of which need to be maintained for the benefit of the public.
It would be irresponsible for our governments to ignore the impacts and hidden costs of growth.
And, a second survey with 3 questions:
Q1. What are three concrete policies you would pursue to help the Bellingham business community?
Under the theory that 'a rising tide floats all boats', here are three specific areas of policy improvement that would most effectively help the business community, and citizens.

1.1. Work smarter and more efficiently at what the City does now, by operating more like a socially and environmentally responsible business with a culture of continuous improvement.

Supplemental Answer: Keep doing what we are doing, what cities uniquely do:
Continue supporting:

o Essential City services, like those provided by Police, Fire, EMS, Planning, Public Works, Muni Court, & Parks Depts, as well as the Library, Museum and Mt Baker Theater.

o Small Business Development Center

o Economic Development Council

o Chamber Of Commerce

o Port Of Bellingham -in particular joint planning for redevelopment of the G-P waterfront area.

o Multi-year Tax exemption program to stimulate housing downtown, but review entire program annually.

o Downtown Design Standards

o Public Facilities District and its Centennial Project related to expanding the Mt Baker Theater to stimulate Downtown development & vitality

o Remediation of Brownfields sites like the REStore, for which Federal grants are available- only to governments

o Maintenance of public facilities

o Maintenance of public services

o Downtown & Neighborhood Business groups

o Way-finding system enhancements

o Convention & Visitors Bureau - Maps & tourism promotion

o Condemnation of derelict buildings to stimulate redevelopment Improve:

o Permitting process -both within the city and jointly with Whatcom County

o Consistency within the Bellingham Municipal Code

o Cooperation with Whatcom County

o Communication with public on all issues of importance

o Coordination between City departments

o Fiscal discipline in approving unbudgeted expenditures

o Mass transit routes with WTA

o WWU links to downtown

o Bicycle/pedestrian friendly routes


o Downtown parking & circulation plans to encourage convenience, certainty and efficiency

o Plans to fund the above a schedule of priorities.

1.2. Set realistic long-range goals based upon the community's vision, and incorporate these into the city's Comprehensive Plan as part of a new Economic Development Element.

Supplemental Answer: One clear way the city could insure continued focus on this issue is to prepare its own Economic Development Element to be included in its Comprehensive Plan - our blueprint for managing growth.

With a clear, written set of principles and goals, we are more apt to remember what the community's goals are and to be guided by them in every day affairs.
This issue is so closely associated with sound fiscal policy that it simply must be pursued, with a purpose!

An Economic Development Element was mentioned as a future goal in the Comp Plan approved in 1997, using State funding which has not been forthcoming.
This should be undertaken anyway, as a means of collecting and consolidating input from the various regional agencies that are focused on Economic Development.

1.3. Implement more effective policies regarding the management of our growth and how this will be funded.

Supplemental Answer: The last ten years has seen Bellingham grow almost 30 percent.
While it is nice to be recognized nationally as a great place to live, growth-related pressures will likely overwhelm us if we are not careful.
This could easily degrade the area to a 'not so nice' place in the future.
During the last 5 years, the city has struggled to find ways of dealing with new development both within the city, and in the Urban Growth Areas [UGA] controlled by the county.
Under the State Growth Management Act, these UGAs are designated to accommodate urban density development to prevent sprawl.

Because of the twin problems of uncertainty as to whether the county or the city controls the permitting, and inequity as to how tax revenues are shared, proper and consistent annexation to the city is being deterred.
The result is that our UGAs are turning into 'no-man's ('no-person's) lands' where neither county nor city is able to fix the lack of infrastructure that is making these areas unattractive in which to live, work and play.
In time, the city will inherit this problem, unless measures are enacted to rectify these problems.

Currently, about 12,000 residents live in the UGAs outside City Limits and jurisdiction.
These residents could add about 17% to Bellingham population, but only if they petition for annexation, which is not happening for residential areas.

No City taxes are being collected from the UGAs to pay for City services, even though these people do use City facilities. About $2.5 million per year in additional property taxes, could be collected by the City if these residential UGAs areas were
Even this amount would likely not be sufficient to fully cover the costs of these additional City services.

It is critical to our continued livability for us to find better ways of managing this growth. Establishing responsible growth management practices and ensuring these are followed will be one of the biggest tasks we face in the coming years.
This year the city expects to complete its 5-year update to its Comprehensive Plan - its growth management 'bible' and blueprint.
The county has until the end of 2004 to complete its plan, which also includes all the cities.

These decisions on the direction of our future growth and how it will be managed need to incorporate a coordinated
Transfer of Development Rights (TDR) program that is fully utilized by both city and county.

Such a market-driven program will help us to achieve the higher densities required by the Growth Management Act, while also protecting our more sensitive areas, like lake Whatcom, and treating property owners more fairly.

Of course, these growth issues are very strongly impacting municipal finances.
This area needs to be watched closely to anticipate additional demands on funding and develop appropriate new self-funding sources.
It won't work to have County and City continue to not address these larger, less visible problems that can adversely impact everyone.

Q2. How would you balance demands for a reasonable tax rate with demands for a certain level of infrastructure as services?
Q2. Answer:
Bellingham's overall tax rate is relatively low and stable as compared with other cities in Whatcom County and it's peer cities.

It has even been awarded a 'Friend of the Taxpayer Award' for its frugality in resisting raising property taxes.
Additionally, Moody's upgraded the city's bond rating to 'Aa' because of the city's consistent good financial management
and excellent credit rating.
'Reasonableness' is a relative term, which depends upon what services the public wants and is willing and able to pay
Balancing the revenues derived from taxes with infrastructure needs and priorities is an ongoing juggling act for the city.

Consider the following:

The Capital Improvements Advisory Committee spent 2.5 years evaluating the city's capital needs, setting priorities, identifying funding sources and making specific recommendations.
This effort culminated in a report issued in 2001.
This report identified two basic categories of projects; those with identified or dedicated funding sources [A], and those without [B].
Both categories recognized the importance of maintaining existing facilities as a priority, in addition to the need for new facilities.
These facilities exclude schools, state & federal facilities and Port facilities, which have separate funding & administration.

Examples of Category A infrastructure & facilities [with identified funding] include:

o Streets & Sidewalks [these funds can be supplemented by LIDs, grants & REET monies]

o Water Utility facilities [these funds can be supplemented by System Development Charges]

o Sewer Utility facilities [these funds can be supplemented by System Development Charges]

o Storm-water Utility facilities [these funds can be supplemented by new rates & LIDS]

o Parking facilities & other 'enterprise' fund facilities, which are designed to be self-supporting. [funding may be supplemented by repayable Councilmanic Bonds, Public Facilities District funds, private investment]

Examples of Category B infrastructure & facilities [without dedicated funding] include:

o City Hall [seismic & HVAC upgrades from General Fund]

o Muni Court [General Fund]

o Museum [seismic & HVAC upgrades form General Fund, grants, bonds]

o Library [expansion from bonds &/or HVAC upgrade from General Fund]

o Mt Baker Theater [GF maint + expansion from Grants, Bond, PFD funds, private]

o Police Dept [+ Dispatch]

o Fire Dept [6 stations + Training facility, EMS & Dispatch]

o Parks, Trails & Open Space facilities [from General Fund, grants, potential future levy]

There are far more identified needs than there is funding for them, therefore we must prioritize and plan phased implementation.
Finding funding is both an art and a science, plus a juggling act in real time.
Growth related facilities must use either voted bonds or impact fees/system development charges paid by developers and/or users.

Much discussion and debate has transpired specifically over the B & O tax, which currently generates about $7.5 million per year in City revenues, its 3rd largest source.
Some see B&O as business unfriendly, and in some respects it is, because it is based upon gross revenues.
However, since the State of Washington has no income tax provisions, there are limited ways for governments to raise funds from all entities fairly.
Until the State government changes this situation, we're stuck with it because local governments rely upon it as a major source of revenue.

[We are even more reliant upon this tax source as a result of I-695, which removed most of MVET taxes as the State's 4th largest source of revenue,which in turn impacted cities.
Bellingham has permanently lost about $1.5 Million annually from its General Fund due to I-695.
This is particularly devastating because these funds were used to pay for public safety services from the General Fund.
This is a major reason for the City & County seeking a separate source of funding for countywide EMS, by voted levy.]

Recently, Bellingham did adopt a revised, Model B&O tax measure along with other major cities, which reduced tax rates for certain businesses such as engineering companies by 61%.
It also made compliance easier and more equitable by clearly defining 'who pays what and where'.

Because cities do require revenues and businesses need to pay their fair share, B&O taxes are mainly used for General Fund expenses, which are primarily related to public safety services like police, fire and EMS.

In many respects, a State income tax would be fairer, more stable and less onerous on businesses than the B&O tax, because it would be based upon net revenues/profits and would also would likely allow a deduction on federal taxes.
But this is primarily a State issue that must be resolved at that level.
Pressure will likely build for change until something happens.
Meanwhile, local government is not an enemy of business because of using B&O taxes as a revenue source, it is merely using the tools it is capable of using to support essential services.
We could use a new toolbox, with some new tools!
Q3. How would you attract new businesses and foster growth for existing businesses while retaining the character that draws people to Bellingham?
Q3. Answer: The city's continued role as outlined above, is essential to this task.
As a general matter, it would be nice to see businesses and local government become better partners in the welfare of our community.
However, each entity has a different role to play, although there are numerous overlaps in interests.
While interested in being helpful to businesses, the public often is concerned about the perception of 'privatizing profits and
socializing costs'.
An even-handed policy is required, with no favoritism shown to any special interest.

This children's rhyme exemplifies perhaps the best and most succinct philosophy for us to follow:
"Make new friends, but keep the old.
One is silver and the other gold."
Currently about 80% of job growth is coming from existing businesses, with most of them having 25 employees or less.

Keeping existing businesses healthy so they can grow and sustain themselves is the best method known to help our local economy.
Like having a balanced investment portfolio, having a good diversity of businesses in our community is also helpful.
By achieving this condition, other businesses will naturally be attracted here.
This philosophy was echoed in the Deloitte & Touche study & report commissioned two years ago by the Port of
Bellingham, whose charter it is to spur economic development.

Businesses do much needed work for the community by:

o providing jobs and benefits to employees

o providing services and products needed

o providing taxes to pay for government services

o providing donations to charities and schools

o providing talented people to volunteer and participate in the community

o providing investment returns and profits for reinvestment in the local economy

Our way of life depends upon businesses succeeding, because our society is powered by economics, and business is that engine.
I know this personally from spending 35 years working in public and private business, from which I receive a retirement income, social security and healthcare plan.
Our national economy also plays a big role locally.

Our way of life also depends upon our natural resources being protected for the future and our community's social character and charm being sustained.
So, business also has to be a partner in these things too - it is not an island unto itself, as was thought at times in the past. Full cost accounting demands that the larger picture requires balance among its parts.
COB can encourage best those businesses that are environmentally & socially conscious as well as economically viable.
That, plus a healthy diversity of locally based businesses seems ideal for Bellingham.

"Perfection of means and confusion of ends seem to characterize our age." - Einstein