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HomeMy WebLinkAbout12/03/1996, 5 - TARGETED INDUSTRY STUDY AND ECONOMIC DEVELOPMENT PROGRAM STATUS REPORT council ; 9� j agenda RepoRt • CITY OF SAN LUIS O B I S P O FROM: Ken Hampian, Assistant CAO kit, PREPARED BY: Jane McVey, Economic Development Manager !� �— SUBJECT- Targeted Industry Study and Economic Development Program Status Report CAO RECOMMENDATION 1. Authorize the creation of an ad hoc working group to analyze and recommend clusters of industry for recruitment to the City of San Luis Obispo staffed by the Economic Development Manager. 2. Receive a verbal status report on other early activities of the Economic Development Program. DISCUSSION Background and Summary The 1993 report entitled, "A Vision for Economic Stability in San Luis Obispo: Recommendations of the Economic Strategy Task Force" recommended a Targeted Industry Study as a resource to develop the Business Recruitment program. As a part of the 1995-97 Financial Plan, the City Council made this a Major City Goal and subsequently allocated$25,000 to the effort for purposes of consultant assistance. Rather than hire a consultant to conduct a Targeted Industry Study, this report recommends that the task be completed by a small group of local industry experts, staffed by the Economic Development Manager. The funding would be used to strategically market the city to those industries we wish to attract. Alternative Approach Worst Program A Target Industry Analysis for San Luis Obispo.County was prepared in August, 1994, by the Economic Strategies Group for San Luis Obispo County. A standard Targeted Industry study relies heavily on the United States Department of Commerce Standard Industrial Classifications (SIC) codes. Using this document, as well as any other recently published studies for the region, staff proposes to complete an industry cluster analysis relying on anecdotal information from local industry experts. Cluster analysis attempts to determine if there are existing clusters of industries that have symbiotic relationships and how to build upon them. In recent years,many economic development efforts have been based on targeted industry studies. The premise was that to attract industry to an area and maximize marketing dollars, the analysis Council Agenda Report- Targeted Industry Study Page 2 would be completed to evaluate the resources of the community, the available infrastructure, the work force, the environmental impacts of the industry, the average wages paid, any critical mass of similar industries in the area, educational requirements of the industry, access to components, markets, etc. Based on the consultant's analysis of the area, a list would emerge of compatible or "targeted industries". Such a document is available to the City in the study performed by the Economic Strategies Group. There are,however, several flaws with a standard targeted industry methodology. An underlying assumption is that the marketing strategy relies on advertising and that by targeting, advertising dollars can be used more effectively. However, industrial marketing is not consumer marketing and advertising plays only a minor role in the approach. To distinguish industrial marketing from consumer marketing, consumer decisions are made frequently and industrial site selection decisions are made infrequently. The risk is relatively low in consumer decisions ( i.e., purchasing a can of Coke vs. Pepsi), and quite high in industrial decisions. And while consumer decisions are personal decisions, corporate decisions are not typically personal decisions. Most targeted industry studies rely heavily on standard industrial classifications or SIC codes, to group industries. Many new products and services do not even have SIC codes. And due to the diversification of industries today, their major SIC code may not be reflective of all that they do. To determine if the industry is growing in terms of sales and employment, a targeted industry study may plot historical trends. This also assumes that the past is a predictor of the future. Because we already have the benefit of a standard targeted industry study (the County's), a less costly and more effective approach at this time would be to use existing corporate knowledge about emerging trends and industries. The methodology would be to first create a small ad hoc working group of local individuals with experience and interest in contemporary industry trends and issues and in San Luis Obispo specifically. The group would meet on a scheduled basis to identify any existing clusters of industries. The group would then utilize specific expertise within the group to discuss the components of the cluster, the trends, future applications of the products or service, the community resources that would attract the cluster or components, etc. It is important that the working group have specific areas of expertise, particularly in technical fields. These individuals are current in their own fields and provide valuable insight into the industries in question. The group would include representatives in the computer, software, med tech/biotech, telecommunications, basic/high tech manufacturing, and service industry as well as educational interests particularly in business and engineering. The group would be staffed by the Economic Development Manager and be small enough to be an informal working group. The assembled group would first characterize the components of the existing job base and the industries already in place. Using the already published Targeted Industry Study, the analysis would be to determine in a practical fashion which industries the City of San Luis Obispo has a critical match with in terms of resources, skill, average wage levels, environmental S Council Agenda Report- Targeted Industry Study Page 3 • compatibility, etc. The oft-mentioned clusters are in the med tech, biotech, environmental, computer, software and telecommunications industries. The expertise of the group members is quite important. Through knowledge of companies in the area, as well as knowledge of the types of resources required by such companies, group members collectively identify current trends and prospects for the future. This anecdotal information reflects new technologies on the horizons, new partnership opportunities, and an inventory of resources either available or necessary for the industry_ This is a much more desirable methodology rather than solely using Department of Commerce data to plot historical sales and employment. Conclusion and Follow-Up The creation of a small ad hoc working group to determine compatible clusters of industries would be a more effective and less expensive way to develop a list of types of industries to recruit to the City of San Luis Obispo than contracting such a study. The Economic Development Manager will form the proposed committee to represent various industry categories, as was discussed earlier. This approach is similar to the approach used by the Natural Resources Inventory Committee. The recruitment strategy recommended by the committee will be returned to Council for final action, probably during the spring of 1997. CONCURRENCES This concept has been discussed with the San Luis Obispo Association of Manufacturers and Distributors and they have agreed to participate in the process. They have also agreed to work to identify suppliers to their companies that would be good targets for recruitment. The concept has also been discussed with the San Luis Obispo Chamber of Commerce and they are supportive of the direction. FISCAL IMPACT Approximately $1,000 of the $25,000 allocated for this project will be used for the expenses of the group, such as printing and other minor expenses. The remaining allocation should be retained to support implementation of the target recruitment strategy. Further discussion of implementation approaches will be included when the final strategy is returned to Council. ALTERNATIVES Hire a consultant to perform the study. This alternative is not recommended because the end product will not be a reflection of the uniqueness of San Luis Obispo, will not be a personal reflection of the community, and there are better uses of the funding to advance the overall goal. STATUS OF OTE ER ECONOMIC DEVELOPMENT ACTIVITIES The Economic Development Program has now been staffed for nearly five months, and several activities are now underway. At the December 3rd Council meeting, the Economic Council.Agenda Report= Targeted Industry Study Page 4 Development Manager will provide a brief update on some ofthese activities, as outlined below; and answer any questions the Council may have. 1. Retention and Expansion Efforts Company Updates California Recycling-Enterprise Zone Application Revolving Loan Fund Participation with the EVC 2. Reendtment.F.fforts Ind_ustrial International Development Research Council, IDRC Buyer-Supplier Initiative Cal Poly Connection Orcutt Road Research and.Development Park Retail International Council of Shopping Centers Downtown San Luis Obispo Central Coast Mall Dalidio 3. Markefing Efforts ACT Contact Management Database Saa Luis Obispo Profile san Luis.Obispo Marketing.Packet Property Inventory Data Base gxluster