You may not have heard of the Economic Prosperity Strategy — but it’s an alarming, dangerous proposal that could impact the future of San Francisco and the Bay Area in profound ways. And it needs an immediate, vigorous, public debate
By Zelda Bronstein
APRIL 14, 2015 – Last October, a 100-page document called the Economic Prosperity Strategy for the Bay Area appeared on the website of the urban-affairs group SPUR. Coordinated by SPUR and commissioned by a little-known outfit operating under the aegis of two regional agencies, the EPS has been designated by the Association of Bay Area Governments staff as one of the “Key Reports” to inform the Bay Area’s first “Regional Economic Program.”
That’s cause for alarm.
The Economic Prosperity Strategy’s take on the local economy is superficial, incoherent, and, in major respects—it assumes that growth per se is good, and that more market-rate housing will help solve the affordability crisis—just plain wrong.
And since it’s backed by ABAG and the Metropolitan Transportation Commission, funded by nearly $500,000 of grant money from the federal Department of Housing and Urban Development, and designed for implementation, the Economic Prosperity Strategy is also dangerous.
There is no official regional government in California – every city and county handles land-use issues on its own. But ABAG and the MTC are able to put tremendous influence to bear on how cities develop. Consider:
- MTC provided $100 million for the Central Subway and supported the San Francisco Municipal Transportation Authority’s request for nearly $1 billion of federal funding
- MTC backing will be similarly crucial for the second BART tube currently being touted by the Chron, SPUR, and the Bay Area Council
- MTC gave the city $600,000 for the environmental analysis of the Central SoMa Plan, whose draft proposes to eliminate at least 1,800 blue-collar jobs
- the idea that San Francisco will have a million residents by 2040, trumpeted in every recent major policy statement from City Hall, comes from the controversial growth forecasts in Plan Bay Area 2013, the regional “blueprint” whose preparation was overseen by MTC and ABAG
- the gentrification—residential, commercial, and industrial—ravaging San Francisco is in part a collateral effect of the “smart growth” or transit-oriented model of development that informs the Central SoMa Plan and Plan Bay Area.
In short, regional planning of this sort has profound implications for San Francisco—and for every other Bay Area locale.
It’s too soon to say how the Economic Prosperity Strategy is going to play out on the ground. But it’s already apparent that the document is being taken seriously at the regional level: officials in both ABAG and MTC are talking about incorporating recommendations from the EPS into Plan Bay Area 2017.
The EPS has a righteous goal: improving economic opportunity for the Bay Area’s low- and moderate-wage workers.
And to that end, it makes some genuinely progressive recommendations, including:
- Lower barriers to unionization
- Strengthen residential tenant security by reforming the Ellis Act
- Produce permanently affordable housing through inclusionary zoning policies and impact fees
- Reinvest in public housing stock
- Protect the region’s industrial lands and jobs
Unfortunately, these spot-on proposals are undercut by the report’s market bias, manifest in the following:
- A virtual blackout of the tech sector’s role in the Bay Area economy and of public policies that aggrandize tech to the detriment of the working poor
- Faith in “growth” per se as a vehicle of shared prosperity
- Advice that the affordability crisis can be mitigated by building housing at all income levels
- Across-the-board advocacy of smart growth, including plans that support “transit-oriented industrial uses.”
Folded into an official economic framework for the Bay Area, the EPS’s ill-advised recommendations will end up hurting the very people—the region’s working poor—that they’re supposed to help.
To date, the EPS has attracted scant notice from the local media.
Now, as the document is showing up on ABAG and MTC agendas, is a timely moment to give it some scrutiny. The most useful place to start is with the HUD grant application prepared by EPS’s client and sponsor, the Bay Area Consortium.
Decoding the HUD grant
In November 2011 HUD approved a $4.9 million grant to the Bay Area Consortium, a self-selected, public-private collaborative comprising representatives of nonprofits and a few elected officials. The grant was for a three-year initiative that would create a Regional Prosperity Plan.
Of the 56 Sustainable Communities awards totaling nearly $96 million handed out that year, the Consortium received one of the three largest allocations. Competition for these awards was stiff: applicants requested $500 million in all.
HUD made two kinds of Sustainable Community awards: Community Challenge Grants, which went toward preparing or significantly revising Regional Plans for Sustainable Development; and Detailed Execution Plans and Programs, which supported efforts to implement or refine “existing regional plans.” The Bay Area Consortium got the second type.
The BAC’s application to HUD is worth a close look. First, the BAC’s stated goals provide a touchstone for what the group has actually accomplished. Second, as grant applications go, this one is unusually bold, challenging some of its prospective patron’s dearest commitments—and doing so from a progressive vantage point. To appreciate the challenges, you have to grasp the commitments. And to grasp those commitments, you have to decode the argot of smart growth and transit-oriented development.
As currently described by MTC and ABAG staff, the Regional Prosperity Plan aims to implement and refine Plan Bay Area. The words “Plan Bay Area” do not appear in the grant application, because the plan was only approved in July 2013. Instead, the application’s opening paragraph refers to PBA’s precursor, FOCUS, and notes that
the Bay Area is producing its first-ever state mandated ‘Sustainable Communities Strategy,’….a comprehensive regional growth strategy, identifying where development should be directed and how transportation investments should reinforce that growth.
The application then acknowledges, albeit in the technocrat’s elliptical idiom, that the “state mandated growth strategy” harms (“impact[s]”) the Bay Area’s poor (“low income”) residents:
The proposed Regional Prosperity Plan (Plan) refines and implements the elements of the growth strategy that most impact low income residents in the Bay Area who are not participating in the wealth of the region.
Abandoning plannerese, the grant writers document the yawning gap between the “region’s reputation as a prosperous center of technological innovation and intellectual progressivism” and harsh economic reality: in 2010 25% of Bay Area’s 7 million-plus residents earned less than $25,000 a year.
The RPP proposes to improve their lot in two ways:
This initiative will increase access to regional prosperity for workers who cannot make ends meet, by creating middle-income jobs and developing and preserving affordable housing in transit-served communities.
Why focus only on poor people who live in “transit-served communities”? There are also low-income people in parts of the Bay Area that are not well-served by transit.
But transit-oriented development (TOD) is the dominant paradigm almost everywhere that planning takes place. It’s enshrined in California law—most notably, S.B. 375, the Sustainable Communities and Climate Protection Act of 2008, which mandates the creation of Plan Bay Area. It’s the mantra of every self-respecting planning department in the country. It’s endorsed by the federal government.
HUD’s guidelines for its Sustainable Communities Regional Planning grants specified that “Mandatory Outcomes from the Creation of a Regional Plan for Sustainable Development” include
- “Increased proportion of low and very low-income households within a 30 minute transit commute of major employment centers”
- “Increased proportion of homes and rental units affordable to a full range of household incomes close to high-quality transit service in urban areas or within traditional town centers in small towns and rural areas”
- “Increased use of compact development as a tool for regional planning, either to accommodate population growth or to adjust population decline within the target area.”
Development that encourages the use of mass transit has to be compact, which is to say high-density, to supply the substantial patronage that mass transit requires for its financial feasibility.
And transit that encourages compact development is likely to be fixed rail, not buses, because developers want certainty about their investments — and unlike fixed rail itineraries, bus routes can and do change.
To sum up: If you want money from the federal government, you have to toe the TOD line.
To its credit, then, the application goes on to spell out the connection between TOD and displacement, in a passage that deserves to be quoted in full:
The increasing popularity of walkable, livable, transit-served neighborhoods has led to production of market-rate housing in many neighborhoods without a counterbalancing creation of housing affordable to lower income households or the rigorous preservation of existing affordable housing. Policies incentivizing growth in higher density, transit-served areas can exacerbate this problem by driving up land values in spite of efforts to combat displacement.
The result has been gentrification in places like San Francisco’s Mission District, South of Market, Castro, Hayes Valley; many Oakland and Berkeley neighborhoods such as Lake Merritt and West Berkeley; and in revitalizing neighborhoods in Central San Jose. This forces low income residents to choose between spending more of their income on housing or moving to places where rents are lower. Many are forced to move. San Francisco is currently the only city in the United States with a declining Latino population. Oakland’s African American population has decreased by 25%, Berkeley’s by 36%, and Daly City’s by 42% in the past decade.
This trend has led to a “suburbanization of poverty,” as many low income African American households have left the urban core and relocated to places such as suburban Antioch, Pittsburgh, and Fairfield, where there are longer commutes, fewer services, and less access to social relationships and institutions that stabilize low income communities of color.
[Note: Today, four years after the BAC wrote its grant application,TOD-driven displacement of poor tenants is happening in the region’s suburbs as well as the inner Bay Area. On March 31 the Contra Costa Times described how the construction of a “transit village,” a.k.a. “a 178-unit luxury apartment complex” adjacent to the Walnut Creek BART station, is forcing “families, mostly Latinos, out of 20 residential units where some of them have lived in the same place for 25 years.” Now back to the document:]
As the region’s most vulnerable residents are pressured to leave their community, neighbors and churches due to these types of development patterns, the overall effect is one of growing instability for the region as a whole. Unless plans for a sustainable Bay Area fully incorporate the principle of social and economic equity, this pattern of displacement resulting from the mismatch between the locations of jobs, housing and the workforce will continue and worsen over time.
But the Consortium also identifies a lack of TOD as a source of the region’s “growing income inequity.” In the Bay Area, places with housing that poor people can afford also tend to be places without transit that goes to places with good jobs.
Much of the region’s employment growth in recent decades has been in office parks with limited transit access, in communities where housing costs are very high (e.g. the Silicon Valley and outer East Bay business campuses). Communities where housing is more affordable are generally home to large numbers of low income people and people of color (Richmond, Oakland, parts of San Jose). These areas have experienced a loss of jobs that pay a decent wage, particularly those in the manufacturing and the public sector, and have experienced negative job growth in general.
In fact, poor people have a hard time taking transit to any jobs at all.
Now, fewer low income people can live in close proximity to where they work. People who depend on public transit can reach only about 11% of the region’s jobs within a 45 minute commute and 35% within a 90 minute commute.
Exacerbating the plight of the poor even further is the dearth of so-called middle-wage jobs, defined as employment that pays between $25,000 and $100,000 a year.
The region is increasingly reliant on its dynamic and fast-growing knowledge services sector (e.g. information technology, professional services, life sciences), which generate a small number of high-paying jobs, but few entry level positions with career advancement potential. The greatest increase in jobs over the last ten years has been in lower-wage sectors such as retail sales, cashiers, and office clerks.
Lower income, less educated, and minority workers face a job market where there are few jobs that pay a decent wage and have opportunities for income growth.
Seeking to impress HUD with the novelty of its approach to “the problems confronting poor communities,” the application engages in some welcome candor. “The Proposed Regional Prosperity Plan,” it said, “will break new ground by inverting the priorities” of the Bay Area’s customary “regional and sustainable” planning efforts and placing “the problems confronting poor communities… “at the center of [its] work.”
Up to now, regional planners have discounted the affordable housing crisis, viewing it as just one of many issues on “a long list of items to address.”
Likewise, no one has ever attempted to create an economic development or workforce development strategy for the entire region. In fact, [amazingly] there has never been a rigorous economic and business analysis included in any regional planning efforts.
The RPP aims to remedy these deficiencies. That’s admirable.
The question is, to what extent can the problems of the region’s poor communities be remedied by a public-private “consortium” committed to TOD/smart growth?
The answer: it depends on who’s proposing the remedies.
The Plan that’s not a plan
“Regional Prosperity Plan” is a misnomer. “Plan” connotes a coherent program set forth in a single document. The RPP comprises 50-odd sub-projects. They take a variety of forms: case studies, organizing campaigns, research papers, and “implementation toolkits.” More important, they embody differing—in some cases, conflicting—conceptions of government’s proper role in a market economy, democratic accountability, the housing affordability crisis, and the very meaning of prosperity. To call this hodgepodge a plan strains the meaning of the word.
But one item in this mix does offer a comprehensive approach to improving economic opportunity for the region’s poor: the Economic Prosperity Strategy. Its breadth and programmatic format are two of the three factors that have made the EPS the RPP’s most visible and potentially its single most influential product.
The third factor in the EPS’s prominence is the report’s close association with the entity that coordinated its preparation: SPUR. That tireless booster of growth is using the Economic Prosperity Strategy to legitimate and advertise its newfound regional scope.
“SPUR” once stood for the San Francisco Planning and Urban Renewal Association, back when it was openly a developer-driven group pushing redevelopment. The name was changed years ago to the San Francisco Planning and Urban Research Association, and now even that’s gone. Today, SPUR is just an upper-case, four letter word.
The change in nomenclature reflects the organization’s recent territorial expansion. In 2012 SPUR opened a San Jose office; in February, it inaugurated an outpost in Oakland with a ballyhooed launch party (although when on April 13 I visited the address listed on the SPUR website, 2323 Broadway, which houses Impact Hub Oakland, I discovered that the group has no space there. A call to SPUR revealed that its on-the-ground Oakland office is a work in progress). Since last October, SPUR Regional Policy Director Egon Terplan has been plugging the EPS around the Bay Area.
As we’re about to see in detail, the Economic Prosperity Strategy is a muddled piece of work whose progressive motives are blunted by a faith in the redeeming powers of market-led growth. The report’s ambiguous character reflects its complex origins: though SPUR is claiming the EPS as its own, the document has nine authors representing four very diverse institutions:
Egon Terplan (Project Manager)
Center for the Continuing Study of the California Economy
San Mateo County Union Community Alliance
Maria Belén Seara
The Rev. Kirsten Snow Spalding
Working Partnerships USA
In addition, Jon Haveman, working as a consultant for the Bay Area Council Economic Institute, provided the economic research, and the EPS team partnered with community-based organizations to conduct one-on-one interviews and focus groups with nearly 700 low- and moderate-wage workers in Concord, Dublin, Oakland, Redwood City, San Francisco, San Jose, and Santa Rosa.
Each member of this motley team focused on a different aspect of the Economic Prosperity Strategy. Unsurprisingly, the result of their efforts is a disjointed report that occasionally clarifies but more often obfuscates the outlook for broadly shared prosperity in our region.
A “middle” wage you can’t live on in the Bay Area
The EPS’s primary goal is to enable lower-wage workers to move into “middle-wage” work. Though the report uses the terms “lower-wage” and “low and moderate wage” interchangeably, its definition of a lower-wage worker is clear: anyone “earning less than $18 per hour [$36,000 a year].”
This terminology diverges from the language of the HUD grant application, which refers to low-income, not low-wage workers, and classifies low-income as under $25,000 a year.
Given the cost of living in the Bay Area today, the EPS’s figure is far more realistic.
But is it realistic enough?
The authors’ rationale for designating $18 an hour as “the bottom end of the range of middle-wage jobs” is based on the fact that $18 an hour is equivalent to 80% of the median wage for the East Bay and approximately 80% of the median wage for the entire Bay Area.
That may sound fine in the abstract.
But the EPS itself notes that
a household with two adults and two children in Alameda County would need to earn over $65,000 per year (or more than $30 per hour) just to meet the bare minimum required to cover basic expenses. Using this same self-sufficiency standard, a four-person household would have to earn close to $60,000 per year in Solano County and over $75,000 per year in San Francisco.
In March the Silicon Valley Business Journal reported that Google was raising its shuttle drivers’ salaries to $24. “If the average Google shuttle driver pulls a 40-hour week,” wrote Gina Hall,
he or she can expect to earn $49,920 annually. That’s well above the median income for low-skill workers in the area, and a solid income anywhere else in the country.
Yet, to actually reside in Silicon Valley, a worker needs to make over $30 per hour to afford a median rent on a two-bedroom apartment. So until affordable housing becomes a reality, it appears that many of the drivers may still be priced out of the market.
By defining $18 per hour as a “middle” wage, the EPS ignores the reality of housing costs, palliates the dire state of the region’s working poor, and exposes the report’s conservatism. For simplicity’s sake, I’m going to use the EPS’s terminology and trust that readers will bear in mind its deceptive character.
Sugar-coating the calamitous boom
Again and again, the EPS avoids hard questions and harsh realities, even when they’re evinced by its own findings.
For example, the document’s first three chapters are filled with important facts about the region’s working poor and job opportunities in the Bay Area.
- 36% or 1,126,680 of the Bay Area’s 3.2 million total jobs pay less than $18 an hour or $36,000 a year (11% more than the 25% figure cited in the grant application)
- Nearly half the region’s workers making less than $36,000 a year are over 35 years old, and many are supporting families
- 72% of them have no degree beyond high school
- Lower-wage workers live and work in every corner of the Bay Area. At least 25% of the residents in every city or town are lower-wage workers. Where there are high-wage jobs, there are low-wage jobs.
- Middle-wage jobs are spread throughout the economy, but nearly half of the region’s middle-wage jobs (128,000) are in just a few sectors: professional services, specialty trade contractors, health care, government, and education
- Most of the major middle-wage occupations are available to workers without significant experience or post-secondary training
- The “occupations of opportunity,” which offer the greatest share of middle-wage job openings and the lowest barriers to employment, are:
- Office and administrative support (office supervisors, administrative assistants, secretaries, bookkeepers and accounting clerks)
- Sales (customer service representatives, sales representatives, and retail supervisors)
- Construction (carpenters, laborers, and painters)
- Distribution and repair (maintenance workers and light and heavy truck and tractor-trailer drivers)
- Health-care support (medical secretaries, medical assistants and licensed and practical vocational nurses)
- Information communications technology (computer support)
- Bay Area job growth is occurring across the board
The bad news:
- Most job openings are at the high- and low-wage ends of the labor market, while middle-wage jobs make up a declining share of regional employment
- Most job openings that pay middle wages will come from replacing workers who retire or change occupations, not from job growth
- Jobs at the lower end of the wage scale are likely to grow over time, and workers typically remain in these jobs for their entire careers.
And the crucial finding:
- Between 2010 and 2020 only 310,000 middle-wage job openings—positions paying $18-$30 an hour—will occur.
In other words, about two-thirds of the existing 1,126,680 lower-wage workers are going to be stuck in jobs that pay less than $36,000 a year. For them, upward mobility is a delusion.
In light of this finding, the authors of the EPS could have gone deep and asked: what is it about the Bay Area economy that swells work at the top and bottom of the wage scale and shrinks it in the middle, and how can we change it?
Answering that question means grappling with the devastating effects of what Jane Jacobs called “cataclysmic money”—in this case, the torrent of speculative capital that’s flooding the Bay Area economy, especially its real estate, courtesy of the tech boom and international investors. It means challenging economic orthodoxy and admitting that, as the EPS’ own research shows, too much income growth at the top impoverishes those at the bottom.
The EPS neither issues that challenge nor makes that admission. Yes, the report allows that “a growing economy alone cannot improve conditions for all lower-wage workers.” But it also insinuates that, given enough time, it could. The rising tide,” it avers, “is not lifting all boats and not yet affecting”—i.e. benefiting—“all parts of the Bay Area” (emphasis added). The sanguine qualifier notwithstanding, nothing in the EPS suggests that, absent fundamental shifts in power, the wealth that’s enriching the region’s high-wage workers is ever going to succor its working poor.
The Bay Area Consortium’s application to HUD promised to invert the traditional priorities of the region’s sustainable planning efforts and view the problems of poor communities from below. It’s impossible to reconcile that intention with the EPS’s claim that “the Bay Area is in the midst of a strong economy with rising job levels and declining levels of unemployment.” This is the all-too-familiar view from the top, the sole perspective from which the current economy looks strong.
In light of the data showing that between now and 2020 two-third of the region’s working poor will not be able to get work paying even $18 per hour, only a top-down, trickle-down perspective could have informed the EPS team’s decision to stick with with the study’s original goals:
A: Pathways to the Middle: Strengthen career pathways to middle-wage jobs.
B: Economic Growth: Grow the economy with a focus on middle-wage work.
Again: there will be no middle-wage job openings for the vast majority of the Bay Area’s lower-wage workers. So the authors of the EPS could fairly be accused of inveigling those workers with false expectations.
To be sure, they added a third goal:
C: Economic Security: Improve conditions for workers in lower-wage jobs
Goal C is tricky for the left because it yields substantial progressive measures, including the one noted at the beginning of this story, lower the barriers to unionization.
That shouldn’t hide the fact that Goal C acquiesces in the gross inequality generated by the current boom. Indeed, every progressive action in the EPS could be far more effectively pursued via a truly forceful strategy for economic justice—one that challenged the rhetoric of promiscuous growth and entailed a downward redistribution of wealth.
The closest the EPS comes to explaining why its authors chose not to pursue such a strategy is this telling statement, which appears at the end of Chapter 1: Background, under the heading “Measure of Success”:
Maintaining a broad approach to economic opportunity expands the range of supporters for key strategies and reduces the tensions between competing approaches. (emphasis in original)
This passage acknowledges that the guiding principle of the EPS is political expediency, not analytic rigor. And in signifying that the members of the EPS team brought incompatible (“competing”) approaches to their work, it also acknowledges the report’s underlying incoherence.
What it doesn’t acknowledge is that one of those approaches, the one that celebrates growth per se, dominates the inquiry.
Knowledge isn’t power
Here a caveat is in order: I’m giving Goal A, “Strengthen career pathways to middle-wage jobs,” short shrift.
Should we support more “jobs-focused basic skills training,” “industry-driven, sector-based regional training partnerships,” and “career navigation systems”? Sure.
But we’re kidding ourselves if we think workforce development is going to significantly expand economic opportunity for poor workers.
Paul Krugman explained why, in his February 23, 2015 column for the New York Times. “[T]here’s a new form of issue-dodging packaged as seriousness on the rise,” Krugman wrote.
This time, the evasion involves trying to divert our national discourse about inequality into a discussion of alleged problems with education.
And the reason this is an evasion is that whatever serious people may want to believe, soaring inequality isn’t about education; it’s about power.
As the headline for his column declared, “Knowledge isn’t Power”—at least not the kind of power that can rectify economic inequality. That can only be political power. And such power involves more than a personal quest for upward mobility—namely, concerted public action in behalf of economic democracy.
True, the EPS doesn’t see job training as a panacea for inequality. In fact, it recommends two of the three actions that Krugman himself prescribes: raising the minimum wage and making it easier for workers to organize. (It doesn’t broach the third: levying higher taxes on corporations and the wealthy and investing the proceeds in programs that help working families, particularly affordable housing.)
But by designating “stronger career pathways” as one of the three essential means of improving poor workers’ economic prospects, the EPS promotes what Krugman rightly calls “a deeply unserious fantasy.”
In the interest of realism, I’m going to focus on the other two, politically motivated—and I mean that in the positive sense—tactics, starting with Goal C: “Economic Security: Improve conditions for workers in low-wage jobs.”
The plan looks only at local and regional approaches to upward mobility.
A progressive labor agenda
Goal C sets forth an agenda that progressives can applaud. Its recommendations include:
- Adopt local and/or subregional minimum wage ordinances
- Enact earned sick days or ordinances or other paid time off
- Establish fair-chance hiring policies that require employers to evaluate prospective employees on the basis of their qualifications before inquiring about their criminal records
- Strengthen local enforcement of wage and hours laws
- Organize and professionalize industries to improve wages, benefits and career ladders
- Support worker centers and industry guilds that help establish minimum wage rates and job standards
- Establish multi-employer joint labor management training partnerships to raise skills in an industry
- Remove barriers to unionization
- Enact living wage ordinances
- Pass prevailing wage ordinances, which require contractors to pay the construction wages that are “prevailing” in the industry in their location
- Pursue community benefits agreements that set forth public benefits a developer has to finance in return for beneficial terms related to the project
- Pass project labor agreements, contractual agreements between a construction firm and a group of labor unions working construction workers
- Promote self-sufficiency standards (standards for how much it costs to live in a particular area) for workforce job placements
- Explore using social and economic impact assessments as part of a major planning and policy-making, and broaden them to include the impacts on job quality and access to employment
In putting forth these proposals, the authors of the EPS acknowledged that the economic vulnerability of the Bay Area’s working poor involves far more than a meager income—namely, job insecurity, weak or nonexistent unionization, and the dereliction of local public authorities.
Now walk the talk
But according to the terms of the HUD grant, the Regional Prosperity Plan is supposed to be about implementing proposals, not just making them.
Unfortunately, the ESP’s authors obscure—and thus heighten—the difficulty of implementing their recommendations. To be precise, they gloss over business interests’ hostility to workers and local officials’ deference to those interests.
“Efforts to professionalize industries or organize them to improve wages and working conditions,” they write, “can be instigated by companies, unions, local policy makers or nonprofit associations representing the interests of workers.”
If all these parties “can” instigate the professionalization of industries or the organization of workers to raise wages and improve working conditions, why haven’t they done so? And do they all bear equal responsibility for lower-wage workers’ predicament?
Once again, the report doesn’t raise, much less answer, the hard questions.
Under “Challenges,” a subheading that appears at the end of each of the document’s “Strategies,” we read:
- Unionized jobs make up a small share of the private sector workforce, and many unionization efforts in the private sector have been unsuccessful.
All too true. But again, we’re left to wonder why.
The next “Challenge” implies that the problem is a lack of awareness:
- Many employers and workers have little experience with unions or other worker solidarity efforts and may not understand the benefits and risks of an organized workforce.
To anyone familiar with labor history, this reads like a bad joke—or a clumsy attempt at whitewashing. It’s all too true that many workers don’t understand the benefits of an organized workforce, but what’s also true—and the EPS neglects to say—is that their ignorance often reflects the hostility of many employers to unions and the efforts of those employers to make sure their workers never find out how a union might help them.
And given the professed goals of the EPS, this “Challenge” verges on the absurd:
- The professionalization of a workforce may increase expectations of workers’ skills and inadvertently make it harder for many lower-skilled workers to access the newly professionalized jobs.
To get a sense of the actual daunting challenges facing the implementation of this agenda, you have only to consider the Bay Area Business Coalition’s attack on Goal C.
Big business: the real problem is over-regulation
Commenting on the EPS draft in an April 18, 2014 letter to the Steering Committee of the Economic Prosperity Working Group, the Bay Area Business Coalition wrote:
Many of the approaches recommended [under Goal C] are offered without consideration of how they will impact the investment climate. Indeed, many of the strategies suggested could have a dampening effect on local efforts to attract and retain businesses. Furthermore, we are not convinced that local or regional authorities have authority to implement many of the recommendations.
But the biggest problem with Goal C, in the Coalition’s view, is “over-regulat[ion]”:
Adding more requirements and conditions to an over-regulated private sector is not a route to economic prosperity. Instead the regional planning organizations should help create conditions and incentives which facilitate company formation and expansion which lead to middle tier jobs.
The letter signers included representatives of the Bay Area Council, the Bay Planning Coalition, the Building Industry Association of the Bay Area, the East Bay Leadership Council, The East Bay Economic Development Association, the Jobs & Housing Coalition, Joint Venture Silicon Valley, the North Bay Leadership Council, the Silicon Valley Leadership Group, the San Mateo County Economic Development Association, and the Solano Economic Development Corporation.
Following the EPS’ publication in October, the Coalition elaborated on its objections in a second letter. Dated November 14 and addressed to the chair of the RPP Steering Committee, Pilar Lorenzano-Campo, the writers said that they’d supported the project’s two “original goals” that had been “directed by the HUD framework,” but that
almost a year into the process, the project veered in a decidedly different direction when the drafters decided to add a third goal; “Economic Security: improve conditions for workers in lower-wage jobs. While on paper, this is an admirable objective we do not feel it to be within the original scope of work.
Once again, however, their real gripe wasn’t with mission creep; it was with Goal C’s pro-regulatory stance.
We feel strongly that the Bay Area is already the most heavily regulated place in the country to do business and create jobs, and it is not a coincidence that we are also home to the nation’s fastest growing levels of income disparity. Our world class research institutions and universities have spawned a technology and biotechnology industry cluster that is the envy of the world because of the very well-paying jobs those industries provide and the many spin off support jobs they create. Our economy also supports a great many entry level jobs primarily in the service and tourism sectors.
Presumably, these sectors—higher education, research, tech and biotech—are flourishing because they are unregulated. By contrast,
[w]here we are failing as a region is in fostering growth in middle income jobs in the manufacturing and construction sectors. These jobs are fleeing our region and our state because of the very high cost of doing business here driven primarily by regulations and mandates imposed by the government. If our goal is to encourage middle income job growth, the very last thing we need right now, is [to] introduce a whole rafts [sic] of new expensive mandates and burdens on employers as they struggle with ever rising costs.
The writers concluded by saying the “Bay Area Business Coalition remains committed to the original scope of [the] report” and would “continue to work to grow our economy and ensure that everyone who lives here can share in the benefits of our prosperity.” But
[we] cannot…support the report as drafted and are opposed in principal [sic] to to the inclusion of “Goal C” and the recommendations therein and feel they will hinder not help raise more people into the middle class in the Bay Area.
EPS mission creep
In fact, the accusation about mission creep is valid, though not exactly in the way that the Business Coalition intended.
Though the HUD application for the Regional Prosperity Plan states that the Bay Area Consortium would attempt “to create an economic development or workforce development strategy for the entire region that would supplement past planning efforts with “a rigorous economic and business analysis,” the closest it comes to addressing the expansion of governmental authority is to note that “[c]urrently, cities and counties plan independently for employment growth.” That’s it. And not a word about regulation.
By contrast, the Economic Prosperity Strategy seeks to expand the regulatory authority of both regional and subregional (municipal and county) government—above all, the authority of the former. Indeed, such expansion is one of its underlying themes.
The operative term is “underlying.” The expansionist objective does not appear in the report’s designation of “Project Scope”:
The Economic Prosperity Strategy is focused on local and regional approaches to upward mobility. Some supporting state and federal policies (such as those addressing trade, immigration, wages and benefits) are noted in this report, but the aim of this endeavor is to examine what can be achieved through local and regional channels.
It’s only on page 60 that extending the reach of regional government begins to emerge as a goal:
Plan Bay Area is an important step toward planning for the region’s collective needs. But nothing in Plan Bay Area compels any jurisdiction to approve development in line with the plan’s goals, and there are still too few tools to tie transportation funding to growth. Further [PBA] doesn’t sufficiently address many crucial issues discussed in this report—such as middle-wage jobs, local taxes and fiscal incentives, and the limited availability of lands adjacent to regional transit [emphasis added].
Whether Plan Bay Area compels any jurisdiction to approve the development goals it sets forth is an inflammatory question that continually flares up during regional planning processes.
Strictly speaking, zoning remains under the legal discretion of each city. But refuse to go along with PBA’s recommendations, and your jurisdiction will be ineligible for the millions of dollars of funding that ABAG and MTC dispense (the latter agency, which controls the pipeline to federal transportation funds, is the real moneybags). Moreover, Plan Bay Area enshrines the regional agencies’ commitment to weakening a major vehicle of grass-roots activism around land use, the California Environmental Quality Act.
The EPS goes on to make its expansionist goals explicit:
This strategy seeks to ensure that the Bay Area keeps attracting industries that produce middle-wage jobs—for example, by producing enough housing near jobs, encouraging facilities to locate in transit-accessible places and preserving sufficient industrial land. To accomplish these goals, land use planners and local jurisdictions must recognize how their zoning policies impact job creation.
In short, maintaining and growing middle-wage industries requires a regional approach to land use planning, with a clear regional policy and planning framework (emphasis added).
And then the authors backpedal:
Coordinated planning at a regional or subregional level creates conditions for broad-based economic growth, which will boost many industries that have significant shares of middle-wage employment [emphasis added].
Well, which is it—regional or subregional? The answer is, both.
So the Business Coalition is right about the EPS’s expansionist aims.
But it’s wrong when it says that those aims only take the form of anti-business regulation—meaning, in its view, the working-poor-friendly polices of Goal C.
The Coalition is laboring under a common misconception: government regulation is inherently hostile to capitalist enterprise. In reality, since the 1980s we’ve witnessed the rise of regulation guided by market priorities.
This momentous shift is reflected in the changing scope and aims of metropolitan authority. It shows up in the EPS’s business-friendly—make that big-business-friendly—analyses and recommendations—all of which, save one, somehow escaped the notice of the big business apologists.
The most blatant of these market-guided regulations is the proposal to standardize, or, to borrow the EPS’s kinder and gentler term, “harmonize,” permitting and tax policy throughout the Bay Area:
Action 4.4 Develop consistent permitting and regulatory processes among jurisdictions in the region…Coordination among economic development providers and cities on local tax policy and/or permitting [of development] makes it easier and potentially less costly for companies to locate in the region and grow.
A footnote to this passage explains that “Employers consistently raise regulatory inconsistencies as a barrier. See: Bay Area Council Economic Institute. The Bay Area: A Regional Economic Assessment, p. 66. October 2012.”
The EPS then softens its initial proposal, suggesting that “when harmonizing permits, “regional differences and industry dynamics” should be taken into consideration:
Harmonization makes the most sense for a business like solar installation, which happens everywhere, with little or no significant differences in how it is done from place to place….But sometimes there are cost-of-living differences between cities, and policies that acknowledge these differences (such as prevailing wage laws) are worthwhile to maintain.
Perhaps you are wondering what coordinating local tax policy and/or permitting throughout the Bay Area has to do with increasing access to regional prosperity for people making less than $36,000 a year.
The answer, according to the EPS, is that such coordination can make the region more competitive, specifically with respect to industries of opportunity:
Expanding industries of opportunity requires a competitive business environment for companies at various stages of their development—including initial formation, early survival, growth and expansion, and retention over time.
And competitiveness is directly affected by local tax policies and permitting rules:
[I]t is essential to have a clear understanding of the impact of local decisions on the competitiveness of the community’s industries. Local tax measures, land use regulations and new permit processes all have an economic impact that should be evaluated before they’re enacted.
Yes, it’s essential to grasp the economic impact of local tax measures, land-use regulations and new permit processes.
And the EPS does allude to an innovative approach to local taxation that takes increased equity, not increased competitiveness, as its goal: regional tax-sharing. In contrast to the existing “winner-takes-all” system,
[t]ax-sharing can be an effective way to reduce competition between jurisdictions and can lead to joint economic development effort by allowing communities to share in tax-base growth even when job growth is concentrated in one area.
So, for example,
if one community accepts much of the housing while [its] neighbors restrict housing yet promote job growth, the housing-rich community will often have lower tax demands (since residents command more in local services than workers do).
Tax-sharing “also complements regional land use planning efforts by spreading the tax benefits of regional planning decisions across the whole region.”
Tax-sharing is one of the most progressive policies in the EPS. It’s also one of the most impracticable, which may be why it’s relegated to a sidebar and isn’t listed as a proposed “Action.”
As for raising taxes on business: it doesn’t even merit a sidebar.
Instead, the proposed Actions aim to incentivize business by increasing what’s called, in a coy phrase, “the responsiveness of the regulatory process.” Here’s how the EPS rationalizes that aim:
Permits and regulatory processes are sometimes lengthy and often vary between cities. Permitting processes in many cities add to increased costs and delays. This dissuades some firms from expanding. In addition, policies and regulations vary considerably by city, which makes operating in multiple cities a challenge, particularly for smaller firms.
The reference to delays is code for democratic planning processes, especially those that involve objections to development and—worst case scenario—lawsuits over projects’ environmental impacts. The California Environmental Quality Act is the standard vehicle of such litigation. Plan Bay Area calls for rolling it back. The authors of the EPS only allowed themselves a cryptic allusion: “Even state-level environmental policies like the California Environmental Quality Act (CEQA) have a major impact on what gets built and where.”
The EPS wants such policies to be evaluated in terms of the incentives or constraints they present to the “overall economic growth” that the report deems essential to expanding industries of opportunity:
Many industries of opportunity [industries that have a greater share of middle-wage jobs and are likely to grow over time] will grow in tandem with the entire economy. This means that overall economic growth is critical to middle-wage job growth.
At the local and regional level, regulations and political pressures that limit development and infrastructure investments make it hard for businesses to grow and even harder for lower-wage and middle-wage workers to live in the region.
The assumption here is that a rising tide will lift a lot of the boats that are currently carrying the region’s working poor. That assumption is shared by the Bay Area Business Coalition. As we’ve seen, it’s also a premise that’s disproved by the ESP’s own research.
Tech: the rising tide as tsunami
In another remarkable oversight, the EPS ignores the ways in which the region’s current “rising tide”—the explosive growth of the tech industry—is swamping sectors of the economy that the EPS professedly seeks to bolster because they offer greater opportunity for lower-wage workers, and how local governments are abetting the flood.
Indeed, the report says little about tech in any regard, and that little is mostly enthusiastic.
Drawing on the fashionable concept of economic “clusters”—“groups of interrelated firms that share suppliers and rely on specialized local resources like skilled labor or infrastructure”—the EPS says that these geographically concentrated formations often take their impetus from “high-growth firms.” One notable local example is “the information technology cluster in Silicon Valley,” which includes
mature software development firms, start-ups, sources of venture capital, specialists in legal issues associated with firm creation and capitalization, temporary employment agencies that focus on software skills, and an educated workforce.
In keeping with its growth-per-se-is-good philosophy, the EPS recommends Action 4.1:
Analyze and support the local and regional industries and clusters of opportunity.
Identify the industries of opportunity in the local economy to determine how they align with the region’s primary clusters.
As an example of the re-thinking that such determination may require, the EPS offers the case of San Jose, whose “economic development department now identifies the high tech cluster as a critical driving industry warranting government support,” but only after the city “spent significant resources…on a smaller hospitality and restaurant cluster, which has much lower growth potential and generates a much smaller number of middle-wage jobs.”
The implication is that for lower-wage workers, high tech is an industry of opportunity, and one that needs government support. But it’s just an implication, because the Economic Prosperity Strategy doesn’t supplement its anecdotal reference with a comprehensive look at the tech industry as a source of middle-wage employment in the region.
That leaves readers to wonder:
- How many middle-wage jobs has tech generated in San Jose and other Bay Area cities?
- Beyond job statistics, how has the tech industry’s growth influenced the economic prospects of the region’s working poor?
- How have those prospects been affected by local governments’ policies toward tech?
- Given the amount of private capital flowing into its coffers, does Bay Area tech really need government support?
To judge from tech’s recent history in San Francisco—a topic nowhere broached in the EPS—the answers to those questions are sobering.
The Twitter tax exemption: who’s benefited?
Created in 2011 at the behest of Mayor Lee, the controversial Mid-Market tax exemption allows businesses to exclude from taxation all additional payroll above the payroll in their base year, generally either 2011 or their first year in the mid-Market Street/Tenderloin area. Its announced goal was to keep Twitter from leaving the city and to stimulate commercial development in the neighborhood.
Twitter stayed—though whether the company would have left absent the exemption is debatable—and other high profile tech firms moved nearby, generating a district boom and an upward spiral in commercial rents. A 2012 New York Times analysis of business “incentive programs” in California found that the measure had saved Twitter alone $22 million.
But what about the benefits to lower-wage workers?
“Didn’t we give Twitter a tax break in part so that all of those workers in mid-Market would help revitalize the place?” asked Tim Redmond last November. “Instead,” he observed,
a study by the city’s economist, Ted Egan, shows that taxable sales (retail, restaurant etc.) in the tax-break area grew more slowly than other parts of the city – suggesting that the tax break may have been great for Twitter but not so much for local small businesses.
Certainly the sudden, exponential jump in Mid-Market commercial rents hasn’t helped small business owners – or nonprofits or the artists and low-income people who were living there.
The EPS promotes entrepreneurship as a vehicle of upward mobility. Action 4.3, appearing under “Goal B: Grow the Economy with a Focus on Middle-Wage Work,” reads:
Expand entrepreneurship and ownership opportunities, particularly for lower-wage workers forming new businesses.
The EPS notes only one “Challenge” to this proposal:
Some argue that it is risky to encourage lower-wage workers to start new businesses. Often these workers do not have the resources necessary to undertake a new business and face a devastating financial impact if their business fails.
Nothing about the challenge of skyrocketing commercial rents that have accompanied the tech boom.
As for benefits to low-wage workers who are not entrepreneurs: I asked Gloria Chan of Mayor Lee’s Office of Economic and Workforce Development if the city had information about how the Twitter tax break had increased economic opportunity for low-wage workers. After consulting the Office of the Controller, Chan emailed a reply that cited the city’s low unemployment rate (3.8%); the phenomenal growth of the payroll tax rate in the Central market and Tenderloin Area (“a 648% three-year increase…, compared to a 47% increase in the rest of the city”); “Tech”’s role as one of “main economic drivers” in the city; and the claim that “for every tech job created, 2.5 jobs additional jobs are created.”
But what kind of jobs are they? The closest Chan came to answering that question:
An example of creating work opportunities for residents was the opening of The Market [the upscale supermarket on the ground floor of the Twitter building], where over 40 of the new hires that accepted positions including cashiers, prep cooks, meat and deli clerks, counter attendants, line/lead cooks, receiving and stocking clerks and produce clerks were referred by our workforce programs.
In early March I visited The Market and asked the shop’s Marketing Manager, Elena Trierweiler, how much those 40-plus hires were paid. Between $12 and $15 an hour, she said.
The EPS defines anyone making $18 an hour or less as a “lower-wage worker.” In other words, the 40-odd employees who got jobs at The Market—those important spinoff jobs from the tech industry, via the city’s workforce programs—are getting poverty wages.
The myth of a post-industrial Bay Area
In contrast to its near silence about tech, the EPS has plenty to say about industrial uses and jobs. Once again, however, the report is both instructive and mystifying.
PDR is the Cinderella of land use: it does a lot of necessary, unglamorous work but is usually neglected or just plain ignored. It was never mentioned in the HUD application grant. And conventional wisdom has it that in our region’s “disruptive” “new” economy, PDR has simply been “innovated” out of existence.
Thankfully, the EPS bucks the prevailing myth of a post-industrial Bay Area. The report hails industrial employment as a crucial source of middle-wage work, designating “[i]ncreased security for industries of opportunity, particularly land-intensive industries, such as production, distribution and repair businesses” as one of its principal goals.
If only the EPS had better aligned its enthusiasm for industrial employment with the statistics in its chapter on regional job opportunities. The chart showing “middle-wage occupations with more than 4,000 job openings, 2010-2020” lists “Distribution and repair” as offering 18,460 such positions, whose hourly median wages lie between $23.56 (Automotive Technicians and Mechanics”) and $16.16 (“Light Truck or Delivery Service Drivers”). Manufacturing is nowhere to be seen.
It’s unclear how these numbers jibe with the ones put out by the Bay Area Goods Movement Collaborative. The collaborative, a joint project of MTC and the Alameda County Transportation Commission, reports that in 2012 manufacturing alone accounted for 450,250 jobs in the region. Transportation and warehousing supported another 127,833 jobs. Those numbers add up to 578,083 positions. And that’s not counting all the 1.7 million people who were employed in goods movement dependent industries, businesses that rely on freight and movement of products—most notably, retailers.
Is it really true, as the EPS claims, that through 2020 only 18,460 of the region’s transportation and warehousing jobs, in 2012 numbering 127,833, will pay over $18 an hour? And that fewer than 4,000 of the manufacturing jobs, totaling in 2012 450,250, will pay such “middle”-sized wages?
Not according to the figures put out in the State of the Region 2015 report. The SoR’s categories don’t precisely line up with the ones used by the BAGMC. That said, its table of “Major Occupation Categories Sorted by Wage Levels” as of 2013 lists both “Transportation and Material Moving” and “Production” under “All Middle Wage Occupations.”
Occupational Title 2013 Mean Annual Wage 2013 Total Employment
Production Occupations $40,587 145,140
Transportation and Material
Moving Occupations $39,398 171,270
Of all the middle-wage occupations in the table, “Production Occupations” pays the most.
The Economic Prosperity Strategy is somewhat more credible when it deals PDR’s distinctive low-density (“land-intensive”) character and the sector’s corresponding vulnerability to displacement, despite its crucial place in the regional economy:
Distribution and warehousing require a significant amount of land—often in large contiguous parcels—and good access to the region’s transportation network. These sectors also play an important role for the Bay Area’s export economy, driving growth along ancillary supply chains.
Because goods-movement businesses generate less productivity and thus less revenue per square foot, they “cannot pay to compete with higher-density, more intensive residential and commercial uses.” Currently, “housing and office space” are “supplant[ing] industrial uses in many parts of the urban core.” If this uprooting “continue[s]…these industries and their middle-wage jobs will be lost, and the export economy slowed down.” Besides reducing “middle-wage job growth in production, distribution and repair-related industries,” the relocation of urban PDR to the region’s periphery will make goods and services more costly, increasing expenses for other industries and “pos[ing] another threat to job growth.”
And, I’d add, air pollution and highway congestion will get worse, what with all those trucks carrying goods back into the center of the region. While the export economy is substantial, the Bay Area Goods Movement Collaborative says that in 2012
the predominant freight movements by weight in the Bay Area were intraregional commodity flows, short-haul freight movements traveling along local supply chains, as well as locally produced products that are moved to the seaports and airports for for export, or from the region’s seaports and airports to local consumers and industries.
But what’s also true, and the EPS only partially acknowledges, is that industrial displacement has been exacerbated by public officials who’ve upzoned industrial lands in the inner Bay Area.
Instead, in a syntactically challenged passage, the EPS blames the conversion of industrial lands on market forces (cheaper land at the region’s edges), empty or underutilized industrial space, industrial uses’ low density, outdated infrastructure, shrinking jobs, and, ultimately, “developers”:
Since some industrial areas have high vacancy rates and declining employment (in part due to aging infrastructure and the relative affordability of land in outlying regions) and generally have lower population densities, they often become the focus of rezoning efforts, when developers eye them for housing office or other non-industrial uses.
Land is indeed cheaper outside the Bay Area’s urban core, and distribution centers are going up in those places. And the infrastructure in some industrial districts is in dire need of refurbishment.
That said, it’s hard to believe that high vacancy rates are a major factor in the upzoning of the Bay Area’s industrial lands. According to the commercial real estate firm Cassidy Turley, “[t]he Bay Area Manufacturing market closed Q3 2014 with an overall vacancy rate of 4.3%, “the lowest seen since Q3 2001.” Meanwhile, “the Bay Area warehouse market closed Q3 2014 with a vacancy rate of just 4.8%.”
Assuming that our forecast is correct (and this is based on our tracking of active deals in the marketplace),….[i]t would make 2014 the strongest individual year for occupancy growth that we have ever tracked in the Bay Area in over 25 years of maintaining local statistics.
Cassidy Turley expected the demand for warehouse space to continue growing, but probably at a slower pace, “simply because the market is running out of product.”
Which brings us to the developers: As the EPS says, they eye—ogle would be more accurate—the inner Bay Area’s industrial lands, while visions of housing and office projects dance in their heads.
But the EPS ignores a key incentive behind those visions: the tantalizing spread between the relative cheapness of those lands and the huge profits to be made from developing them with high-rent uses.
Those profits remain illusory as long as zoning laws prohibit high-rent uses on industrially zoned districts and—crucial caveat—such laws are maintained and enforced by the officials entrusted with their administration.
In fact, public officials have been weakening those laws, when they haven’t thrown them out altogether.
The EPS marks and censures one type of this behavior: the upzoning of industrial lands to allow higher-density uses, especially retail, by officials seeking higher revenues. This “fiscalization of land use,” it observes, “….can underemphasize the importance of lower-density industries like distribution and warehousing, which provide middle-wage jobs and play an important role in the local and regional economy,” but which “tend to generate less money in tax revenues.”
But the EPS says nothing about the upzoning of industrial lands by officials acting in the name of smart growth and transit-oriented development. In fact, the EPS recommends such actions: the section of the report that treats PDR is entitled “Strategy 5: Develop land use plans that support transit-oriented jobs, industrial uses and housing.”
Covering up the PDR-TOD conflict
The HUD application grant acknowledged the detrimental effects of transit-oriented development: TOD inflates real estate values and thereby drives out (residential) tenants who cannot pay the new, higher rent.
No such acknowledgment is to be found in the Economic Prosperity Strategy, which places TOD in an entirely favorable light.
Implementing [Plan Bay Area] requires moving past fractious governance and putting policies into place that will foster more sustainable growth, including middle-wage jobs. For example, PBA identifies opportunities for growth in denser job centers that are served by transit, which would make jobs more accessible to a wider range of workers.
The report is referring to Priority Development Areas—the 63 locales in the region where MTC/ABAG funding encourages high density development.
But the Economic Prosperity Strategy presents no evidence that the job growth in the PDAs is occcuring in “industries of opportunity”—“industries that have a greater share of middle-wage jobs and are likely to grow over time.” It only alludes in passing to “encourag[ing] such an overlap:
Major employers and institutions should collaborate with local and regional planners to identify transit-accessible places where they can expand. In particular, employers in industries of opportunity such as health care (e.g., hospitals), educational services (particularly higher education) and government (at all levels) should be encouraged to locate new or expanded facilities in areas around BART and Caltrain stations.
Industrial uses are not in the foregoing list. But they are the principal use in “[t]he neighborhood around the West Oakland BART station,” which, the EPS asserts,
could greatly benefit from commercial development, both to provide high-quality jobs for local residents and to take advantage of the area’s proximity to downtown San Francisco and downtown Oakland (and their respective BART stations).
To repeat, according to the EPS, wherever there’s mass transit, we should densify development.
That recommendation goes against the findings of one of the EPS’s primary sources, the 2008 MTC-commissioned “Goods Movement/Land Use Report for the San Francisco Bay Area.” Prepared by the Hausrath Economics Group in Oakland, this meticulous study focuses on two major goods movement corridors in the central Bay Area: East Bay 80/880 from Richmond to Fremont and North Peninsula U.S. 101 from the San Mateo County line to Millbrae/Burlingame. The researchers found that demand for industrial land along these corridors is increasing, even as the central area industrial land supply is shrinking. They explained the shrinkage in candid language, the likes of which rarely appears in such studies, and certainly not in the Economic Prosperity Strategy:
The decline of central area industrial land is not an issue of the structural decline of production, distribution, and transportation industries, but the result of the demand for land by other, high-density land uses and the pressures created by a speculative real estate market and by land use policies that allow or encourage changes in land use (emphasis added).
Local land use plans and policies are allowing or encouraging redevelopment of industrial areas for higher-intensity uses in many parts of the central corridor. In addition, regional efforts are encouraging a more compact development pattern in the central areas, often along or near the major goods movement corridors.
In other words, transit-oriented “densification” and the retention of industry are at odds.
Instead of acknowledging the clash between smart growth and industrial retention, the EPS sets these two policy goals side by side, implying that they get along just fine:
This strategy seeks to ensure that the Bay Area keeps attracting industries that produce middle-wage jobs—for example, by producing enough housing near jobs, encouraging facilities to locate in transit-accessible places and preserving sufficient industrial land.
It’s not that the authors of the EPS were unaware of the conflict; they just didn’t acknowledge it.
That became clear at the July 25, 2013 meeting at the Regional Prosperity Plan’s Economic Prosperity Working Group. SPUR’s Terplan, who managed the preparation of the EPS, had just presented an overview of the work in progress.
Gen Fujioka, policy director for the Chinatown Community Development Center, then pointed out that in San Francisco, PDR land is “being developed for other uses, in some cases through the Priority Development Area [PDA] process.”
PDAs, again, are areas targeted by local officials and the regional agencies for densifying, transit-oriented development. All of San Francisco’s Eastern Neighborhoods, which house the city’s remaining industrial lands, have been designated as Priority Development Areas.
Fujioka asked, “Are we dealing with that?”
Terplan replied: “The issue comes up in a variety of ways. We’re not doing a comprehensive study of industrial displacement.” Rather, we want to “learn the effectiveness of tools that are already out there.” He specified plans adopted by Oakland, San Jose, San Francisco, and eastern Contra Costa County.
So what does the final edition of the Economic Prosperity Strategy say about the effectiveness of these “tools”?
Under a recommendation to “Adopt zoning language that provides greater certainty to industrial businesses and also discourages incursions of housing and other incompatible uses into viable industrial areas,” the EPS mentions efforts by three of the four jurisdictions Terplan called out.
The San Jose example is described as an “ordinance to protect ‘manufacturing rights of existing industrial land uses from encroaching incompatible uses’” that the city is “exploring.” A footnoted link leads to a one-sentence statement on an “Economic Strategy 18-Month Implementation Workplan (May 2013-December 2014).” There’s no way to assess the effectiveness of a policy that’s only being explored, especially when it’s been reduced to a mere sentence.
By contrast, the Oakland and San Francisco examples have been around long enough to be evaluated.
As the EPS notes,
From 2002 to 2005, the City of Oakland developed several new industrial zoning districts with differing regulatory requirements. These include Commercial Light Industrial (which allows office and retail as well as industrial uses but no housing), General Industrial (which prohibits stand-alone office and retail development) and Office Industrial Business Park.
How has industry fared in these districts, all of which allowed higher-rent uses? Have there been upzonings and conversions to office, retail or housing? We’re not told.
Only in the case of San Francisco does the EPS even hint at the consequences of the industrial retention policy at hand:
[T]he City of San Francisco developed zoning language for its eastern neighborhoods that simultaneously allowed some areas to shift toward housing, other areas to become increasingly mixed-use and other areas to become increasingly mixed-use and other areas to entirely prevent housing and focus on production, distribution, and repair uses.
As the foregoing passage itself intimates, the Eastern Neighborhoods Plan, finalized in 2008, was at best an ambiguous vehicle of industrial retention. Some areas were upzoned, meaning that they would never again house PDR activity. In all, over 2 million square feet, or 13% of existing PDR floor space, were eliminated.
That’s bad enough. But when you consider that the Eastern Neighborhoods rezoning has neither provided certainty to PDR nor discouraged the incursion of housing, offices, and other incompatible uses, the idea that this plan is a model of industrial retention looks like another one of the EPS’s bad jokes.
Since 2008 a significant number of industrially zoned properties have been illegally converted to offices. I can’t say how many because it appears that the San Francisco Planning Department doesn’t track such conversions. The agency’s own survey of one of the Eastern Neighborhoods, Showplace Square, found that at least 25% of 1 million square feet of industrially zoned, landmarkable property alone had been illegally converted to other uses.
Moroever, evidence indicates that when industrial space has been illegally converted to offices in the Eastern Neighborhoods the department has looked the other way, when it hasn’t actually facilitated the retroactive authorization of the changes, in part by substantially undercalculating the affordable housing and transportation impact fees that city law specifies that the developers of such conversions must pay.
In the draft Central SoMa Plan, published in April 2013, the city’s planners proposed the upzoning ten blocks of industrial land in the Eastern Neighborhoods —a change that, they conceded, would put at least 1,800 blue-collar jobs “at risk.” Which is to say that at best those jobs would be displaced and at worst eliminated altogether. Not incidentally, the Central SoMa Plan’s fundamental rationale for converting the neighborhood’s industrial lands into a high-rise tech office district is transit-oriented development—specifically, the advent of the Central Subway down Fourth Street.
I found the draft EPS’s characterization of the San Francisco Planning Department as a protector of PDR so egregiously counterfactual that I attended the April 24, 2014 meeting of the RPP’s Economic Prosperity Working Group and said as much.
While I was there, I also questioned the draft document’s claims that “planning for industrial lands takes places [sic] at the local level, not the regional level,” and that “[p]lanning for industrial lands in such corridors [as 880 in Alameda County] is best done at a subregional level.”
Those assertions contradicted the basic thrust of MTC’s 2004 Goods Movement Study. Prepared by Hausrath Economics Group and Cambridge Systematics, that report recommended that
Policy development would start at the regional level, identifying regional benefits and the best locations for goods movement businesses from a regional perspective. Then regional entities would provide direction and offer incentives to encourage local communities to use local land use and zoning policy to preserve those locations.
The 2004 document included a chart that divvied out “Roles and Responsibilities for a Regional Goods Movement Land Use Strategy” among the regional agencies, local governments, airport/seaport authorities and the private/nonprofit sector.
The regional agencies got the following assignments:
Land Use and Regulatory Policy
- Identify key locations for goods movement land uses (lead)
- Use regional plans and regulatory strategies to articulate goods movement land use objectives and help integrate land use and transportation planning
Financial Incentives and Assistance and Other Funding Approaches
- Incentives for local communities to implement freight-oriented industrial land use policies
- Priority funding for key freight-oriented districts
- Financial and technical assistance for goods movement businesses
Addressing Off-site Impacts and the Physical Environment
Improve physical conditions in freight-oriented industrial districts
Leadership, Institutional Partnerhips, and Education/Advocacy
- Regional leadership
- Business and related constituencies as advocates
- Regional agency leadership and coordination
- Building partnership
- Raising Awareness and Visibility
The study also recommended dozens of specific measures, ranging from narrowing the list of permitted uses in industrial districts to a trust for industrial land to seeking non-polluting fuels in truck fleets.
The only one of these recommendations that appeared in the draft EPS suggested that MTC should “monitor on an ongoing basis the quantity of, availability of, and zoning for the region’s industrial land.”
On the other hand, as part of its push to standardize zoning across the region, the draft made a suggestion that nowhere appeared in the 2004 MTC report: “the region’s multiple cities [could] share consistent zoning language regarding the definition and planning industrial land.”
I made up and distributed a handout that displayed the 2004 report’s chart and all of its specific recommendations.
I also suggested that the regional agencies create a PDR counterpart to the Regional Housing Needs Assessments that ABAG administers. Call them RINAs—Regional Industrial Needs Assessments.
At the April meeting, nobody took issue with anything I said.
But at the September 2014 meeting of the RPP Steering Committee, which I didn’t attend, the EPS team trotted out the planner who’s overseeing the Central SoMa Project, Steve Wertheim. Wertheim showed a PowerPoint that touted the planning department’s alleged support for PDR.
Unsurprisingly, the final edition of the EPS cites the Eastern Neighborhoods Plan as a “tool” for industrial retention. Also unchanged is the draft report’s claim that planning for industrial uses is a task for subregional authorities.
To be sure, the final edition includes a new recommendation to “Explore a ‘Priority Industrial Areas’ program that’s modeled on the region’s Priority Development Area program,” going so far as to imagine that
the process could support regional goals such as goods movement and protection of industrial land while also preparing the various stakeholders to apply for regional funding in a subsequent iteration of Plan Bay Area.
But despite their enthusiasm for “homogenizing” zoning and permitting at the regional level, the authors of the EPS foresaw the creation of a Priority Industrial Areas program as a “subregional effort” that, “led by the local Congestion Management Agency in coordination with local jurisdictions and MTC,” could just “focus on the integration of economic development, transportation investments and land use planning along a corridor.”
And the EPS team made one very bad change: the draft title of Strategy 5—“Effectively plan for a range of diverse needs and land uses to accommodate the region’s growth, including accessible job centers, housing at all income levels, and protection of industrial land” was replaced by the one cited above, which folds PDR into a smart growth agenda:
Strategy 5: Develop land use plans that support transit-oriented jobs, industrial uses and housing.
What affordable housing/tech/TOD controversy?
Last fall I twice interviewed Egon Terplan about the Economic Prosperity Plan. Both times he emphasized that the EPS says little about housing.
That may seem surprising. After all, the EPS observes that
[h]ousing is the biggest cost in a household budget and the single biggest factor in making the Bay Area inhospitable for many lower-wage and even middle-wage workers.
As Terplan explained, and the EPS notes, the reticence reflects a division of intellectual labor: the Bay Area Consortium assigned chief responsibility for addressing the region’s housing crisis to its Housing Working Group. The EPS was produced by the Economic Prosperity Working Group, which focused on improving economic opportunity for the Bay Area’s lower-wage workers.
Still, the EPS does weigh in, however briefly, on “housing as it relates to overall economic growth and worker mobility.”
It major recommendations:
- Build “affordable housing at all income levels.”
- “Advocate…local policies that lead to the production of permanently affordable housing (such as inclusionary zoning policies and impact fees).”
- “Expand tenant protections to more communities throughout the region.”
- “Reinvest in public housing stock.”
- “Remove local policy impediments [parking minimums, secondary unit prohibitions] that increase the cost of housing.”
and of course
- “Provide regional incentives [the financial carrots available to Priority Development Areas] for local communities to adopt plans that include significant housing.”
- “Change zoning, particularly on or near transit corridors, to expand the amount of housing that can be built” there.
This may sound like an agreeably ecumenical approach that offers something for everyone. Reading the EPS, you’d never know that it’s a controversial position in a debate that’s raging around the country, with some of the most intense exchanges taking place in the Bay Area.
The controversy centers on the first recommendation in the above list: “Build ‘affordable housing at all income levels.’” That proposal rests on the belief that price varies inversely with supply: the more housing, the lower its prices, and thus the greater the overall affordability. In the EPS’s words: “[T]he overall lack of housing production is one of the main drivers behind the region’s high housing costs.”
In some places outside the inner Bay Area, that belief may correspond to reality. In our region, it currently means: build luxury housing.
Here’s why: The local housing market is flooded with would-be buyers who have a lot of money—well-paid techies plus foreign investors loaded with capital seeking mega-returns.
As Dyan Ruiz and Joseph Smooke explained in a deeply researched piece posted by truthout on October 8, 2014 (almost exactly when the Economic Prosperity Strategy appeared on SPUR’s website), high volume, high-end demand generates high-end housing.
The average tech worker in San Francisco makes a whopping salary of more than $156,000 per year and the average Silicon Valley tech worker makes nearly $200,000 per year. There are 300,000 plus…tech workers in companies on the San Francisco Peninsula. This means there are a huge number of people…making a tremendous amount of money in the Bay Area, and many are young professionals looking to live in San Francisco. Meanwhile, 50 percent of San Francisco households are living on less than $74,000 per year and over 110,000 San Franciscans live below the poverty line.
Landords of existing properties and developers of new housing will charge as much as they can.
In this context, no amount of construction is going to lower prices, at least not to levels that are affordable to workers making $18 – $30 per hour ($36,000 – $60,000 per year)
Critics say that the foregoing position ignores the “laws” of supply and demand. Actually, it attends to supply and demand far more closely than the formulaic insistence that as demand rises, prices inevitably fall.
The EPS appears to temper supply-and-demand orthodoxy by advocating tenant protections, new construction that’s genuinely and—equally important—permanently affordable to people of modest means, and reinvesting in public housing stock.
But in the current boom economy, endorsing such measures while advocating construction at all levels of affordability is as unlikely to advance social equity as is applauding the regional economy’s explosive, tech-driven growth.
Okay: having effectively ignored the tech industry, the authors of the EPS can’t fairly be said to have applauded its impact.
What can be said: that disregard not only precluded their recognizing, and thus trying to ameliorate, tech’s contribution to the region’s abysmal economic inequality. It also precluded their identifying and critiquing public policies whose promotion of tech has worsened the region’s housing crisis.
Perhaps the most notorious such policy is San Francisco’s Airbnb legislation, which has allowed tens of thousands of housing units to be taken out of the rental stock and turned into hotel rooms. Then there’s the Peninsula tech towns’ refusal to build housing for tens of thousands of their local tech workers—a default that helps explain San Francisco’s skyrocketing property values and the attendant devastation of the city’s poor, not to say, its disappearing middle class.
The Airbnb law goes unremarked in the EPS. As for the tech towns’ negligence, all the report says is that “[t]he office park areas throughout the Peninsula and South Bay offer a particular opportunity to incorporate housing.” There’s no inkling that many of those office parks are filled with tech workers.
The EPS’s housing agenda is further weakened by its authors’ genuflection to transit-oriented development. When the Bay Area Consortium applied to HUD, it recognized the dark side of TOD—it inflates property values, displacing tenants of modest means and breaking up communities—and promised to redress the problem.
In the Economic Prosperity Strategy, there’s no problem to redress: TOD appears benign—not to say, beneficial, though the precise benefits of transit-oriented housing are never spelled out. “Change zoning, particularly on or near transit corridors,” the report urges, “to expand the amount of housing that can be built.” That such building might upend the lives of nearby residents never comes up.
The EPS’s sanitizing of TOD becomes all the more striking when it’s set beside the treatment in another report funded by the Bay Area Consortium: “Development without Displacement,” by Causa Justa::Just Cause. Released in early April 2014, this amply documented,100-page manifesto against gentrification proclaims its unorthodox perspective: “The recommendations in this report stand in contrast to popular ‘equitable development strategies,’ such as transit-oriented development (TOD)…”
“Development without Displacement” diverges from the EPS in other ways. It eschews reliance on the private sector as a major driver of economic growth and urban development; the Economic Prosperity Strategy welcomes such involvement. The Causa Justa report champions “planning as a participatory process” that “empower[s] local residents and communities with rights, protections, and a voice in determining the development of their own neighborhood;” the EPS views local control as a reactionary force that needs to be overridden by regional and state authorities.
The differences between the report’s two attitudes toward development, governance, and the market are profound. They roughly parallel the discrepancies between the “competing” approaches in the Economic Prosperity Plan itself. Their presence raises big questions about the Regional Prosperity Plan’s history, cohesiveness, and utility. How did the Bay Area Consortium go on for three years and produce policy papers that are in fundamental conflict (and these are not the only examples of such conflict)? The $5 million HUD grant was for implementation; when policies clash, which ones get implemented?
And when one report has the backing of SPUR and is being promoted as the center of discussion, which one will policy-makers follow?
On Wednesday, April 15, for the first time the public at large is invited to weigh in on proposed policies coming out of the Regional Prosperity Plan. The Bay Area Consortium is holding an open house–something akin to an art exhibit–from 9:30 to 11:30 am at ABAG/MTC headquarters at 101 Eighth Street in Oakland across the street from the Lake Merritt BART station.
There is so much at stake here that’s a sop. What we need is a vigorous public debate about these proposals. Now.