Marin: Business-friendliest place on earth?

Marin County real estate

The Pacific Sun
Nov 15, 2012

Marin business and elected leaders should sit down with the leadership at Disney and erase the bad taste of the Grady Ranch debacle. That suggestion is included in the annual economic bulletin the Marin Economic Forum recently released. The admonition also serves as a caution for how the county presents itself to other businesses, according to Robert Eyler. He’s a professor and chairman of the economics department at Sonoma State University. He’s also the interim CEO and chief economist at the Economic Forum.

The first thing in a proactive Disney strategy, says Eyler, is for business and elected leaders “to at least get a feel from Disney” if the company intends to keep the Lucasfilm operations, which Disney purchased for $4.05 billion, in Marin and San Francisco. Since the purchase, speculation has swirled that Disney either would keep the post-production operations in the Bay Area or would move them closer to the Disney home base in Southern California. Eyler says his take is that Disney bought the assets here “with the idea that they were going to utilize those assets because there is a lot of talent in the Bay Area to deliver what the company bought with its financial capital.

“My hope and my optimism suggests that now those assets will be used more regularly because Lucasfilm now is not its own company looking to profit” with, say, a contract with Disney to do post-production work. “Disney now has those assets available not only for its own movies but as a subcontractor to do work on other movies.” In that scenario, Disney actually could produce more jobs in the Bay Area, including Marin, says Eyler. Disney has not yet announced its ultimate plans. “We could show we have a unified front and say your type of business is what we want here.”

Representatives for the county and for county business interests also should try convincing Disney that the Grady Ranch episode was an anomaly. George Lucas pulled the plug on a plan to build a studio facility on the property after local homeowners made clear they intended to fight the development plans. The homeowners said they had legitimate reasons for contesting the project and wanted changes. Lucas said he had enough of the tough environmental and permitting processes in the county.

“The most effective way to be proactive,” says Eyler, “is to make sure that Disney understands that Marin County, and San Francisco [and Sonoma County] are open to an expansion of the [Disney] business if the company is ready to do it.” The Grady Ranch experience is “why it’s important to jump on it soon,” adds Eyler “Rather than let [Grady] linger, we should put some positive PR around this thing rather than have [Disney] say they saw what happened with Grady and they want no part of that.”

Balancing the needs and values of environmental protection against the benefits of businesses that pose as little disruption to the character of the county as possible has been a work in progress in Marin for decades. Many Marinites saw the Grady project as the perfect kind of business for Marin, nonpolluting and in character with the county aesthetic. Homeowners who objected to the property and others disagreed. Eyler says that if the county is to continue on a prosperous road, it’s important to show businesses like Disney that Marin has no inherent distaste for business.

The Marin Economic Forum aims to forge alliances that stimulate the county’s economic vitality “as the key to achieving local, civic, environmental and social goals.” The economic bulletin notes that infill development represents the best way the county can attract new and expanding businesses to stay in Marin instead of looking at other Bay Area counties. The Grady experience, the report states, “provides a major opportunity from Marin County in its wake.” The bulletin suggests that making lemonade out of the Grady lemons could yield positive results. “There is now an example of why local government, businesses and residents must all be on the same page in terms of land use, business creation and political flexibility, and also the need to advertise that business can happen in Marin County.”

Eyler says the North Bay Leadership Council would be a perfect organization to help mend the Grady fences with Disney. The Leadership Council represents large employers in the North Bay. Eyler also says the Economic Forum “would be totally open to engaging” with Disney in a liaison effort. According the Economic Forum bulletin, the forum is working with the county to make the permitting and planning processes more transparent and trying to make the county “more business friendly.”

The push-pull between promoting a business–friendly agenda and protecting the character of neighborhoods and the county’s open space attributes has historical precedent. But in recent decades, a new model has risen that seeks to balance the needs of competing interest groups to produce projects that can protect the environment and character of the county and at the same time promote clean businesses. It’s a cooperative model rather than a competitive one. It’s not easy, but it can work.

The Economic Forum bulletin states that the organization is working with nonprofits to learn more about “how local businesses and employees view and provide for housing options, commute options, the homeless, and how Marin County provides for…social equity.” As the bulletin notes, the public sector has contracted, and public sector jobs have been cut. Reductions in public funding across a wide variety of programs has taken a toll on local governments. The county’s “ability to fund its public activities is through business vitality; if the public sector is going to provide both social equity and environmental balance, it must do so by providing conditions under which businesses can prosper.”

Marin should be flexible “if it wants businesses to stick around,” says Eyler. “If Marin wants to evolve in a way that has [a more robust] technology business segment, for example, the county has to recognize and conclude that planning departments, elected leaders and business leaders all have to try to find ways for companies to come in and stay.” The discussion, he adds, should shift from why a proposal will not work to how it could work.

Eyler has a clear example: Easing the rules and regulations on tenant improvements for currently configured commercial space could allow a company to reconfigure a space to fit the needs for “a more eclectic tech business.” Turning a space into an open floor plan to attract entrepreneurial enterprise, for instance, could attract new business. City and county governments now are too restrictive, says Eyler, unwilling to budge.” Allowing a company to more easily reconfigure a parcel on which a building sits also could be an attractant. And injecting some latitude in the fees a company must pay to start up, “would be inviting to a crowd that has a lot of location options from which to choose.”

Asking for the kind of adjustments in thinking at the city council level and at the board of supervisors and at planning departments—more than they already have made—isn’t a light request. But Eyler thinks that Marin and Sonoma counties need some new thinking in the competitive race to produce a solid business foundation for the future. The two counties, he notes, have two boards of supervisors and a double-digit number of cities, each with its own planning rules and regulations. And then there are the nongovernmental agencies, such as water districts and sewerage districts. “That’s the bane of our existence” in the North Bay. “For better or worse, we have built a relatively large bureaucracy in the two counties.” That puts additional hurdles in front of businesses that can look to San Francisco with its one city and one county structure.

Eyler says opportunities exist for Marin and Sonoma counties to increase cooperation on a regional level that could help spur business growth. The two counties, he suggests, could create partnerships that share resources. “Maybe what we have to do is start thinking about cross-county relationships in terms of taxes so we don’t compete as much [and proceed more cooperatively].” The relationship between the two counties has been marked by tension and competing interests, with some notable exceptions. Sharing resources to the extent Eyler envisions would mark a new paradigm in the North Bay.

The data included in the Economic Forum bulletin shows Marin is on a slow and steady upward trend. The one area that’s cause for concern is a relatively high commercial vacancy rate. In addition to the planning and zoning leeway that Eyler says could help lease those commercial spaces, the bulletin suggests that landlords consider lowering their asking price to attract tenants who can locate elsewhere in Bay Area.

Employment has rebounded since the dip in 2009 after the economic crisis. Since then the county has added almost 10,000 jobs. Unemployment has dropped from 8.5 percent in January 2010 to 5.8 percent in September 2012. And in other heartening news, retail spending has rebounded. In 2009, taxable sales totaled $3.2 billion in Marin. In 2012, that number increased to $3.9 billion, and the bulletin estimates sales will increase to $4.3 billion in 2015, barring a renewed recession. And there’s more good news, if somewhat delayed, on the housing front. In 2007, the median price of a single family detached home was $1.1 million. In 2012, the median price is down to $769,000. But in 2015, the bulletin estimates, the median price should rebound to $890,000

In 2008, Marin saw 11,585 payroll businesses, the largest number of since 2006. That number dropped to 11,320 by 2010 and started to recover. In 2012 there are 11,900 payroll businesses, and the bulletin estimates hat 12,400 payroll businesses will dot the county in 2015. Most businesses in Marin fall into that ubiquitous “small” category. Sixty-three percent of all businesses in the county have between one and four employees. Businesses that employ between five and nine workers account for 61.5 percent of Marin companies. Businesses that employee between 10 and 19 workers account for 10.6 percent of the county’s companies. Businesses that employ between 20 and 49 workers account for 6.3 percent of Marin companies. Businesses that employ between 50 and 99 workers account for 2.1 percent of Marin companies. Businesses that employ between 100 and 249 workers account for 0.9 percent of Marin companies. And businesses that employ between 250 and 499 workers account for just .2 percent of county companies.

The percentages have changed relatively little since the late 1990s, according to the bulletin. “If anything Marin has become more of a small-business magnet, but Marin has also struggled for both economic and political economy reasons to keep larger employers.” That reference to “political economy” is what Eyler talks about when he says elected leaders and planning departments need to become more flexible if they want to attract and retain businesses. In addition, “a two-part issue with large employers,” the bulletin states, continues to be “residential and commercial real estate.”

All the relatively good news on the economic front is contingent on Congress avoiding another economic meltdown at the first of the year when legislators will have to decide how to fashion a new taxing and spending plan.

Lack of prudent action could hurt the Bay Area economy, but Europe descending into recession would hurt faster, says Eyler. Tourism, a mainstay in the Bay Area, would suffer because it would be more expensive for Europeans to travel here. And Bay Area tech companies might take part of their operations to Europe to take advantage of depressed labor costs and lower operating margins there. That would reduce employment here.