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HomeMy WebLinkAbout09/09/1997, 1 - TARGETED INDUSTRY CLUSTER COMMITTEE REPORT com °° 9 j ac enaa nepout CITY OF SAN LUIS 0 B I S P 0 FROM: Ken Hampian,Assistant City Administrative Officer ACIV-- Prepared By: Ken Hampian,Assistant City Administrative Officer X'f- Diane Sheeley,Economic Development Manager D S SUBJECT: TARGETED INDUSTRY CLUSTER COMMITTEE REPORT CAO RECOMMENDATION Receive and accept the Targeted Industry Cluster Committee Report regarding business recruitment priorities and strategies. DISCUSSION Background In November 1993, the City Council received a report from its Economic Strategy Task Force (ESTF) recommending several strategies for enhancing the City's economic development efforts. With regard to business recruitment,the report stated the following: "With respect to industrial attraction, there is currently no specific strategy in place. The absence of such a strategy could create missed opportunities to attract desirable, environmentally sensitive industr'es capable of providing higher-end jobs to our underemployed citizens." In January 1994 the City Council adopted several of the 59 goals recommended by the Task Force. A business recruitment program, however, was not among these adopted goals. Instead, the focus of the program at that time was on the retention and expansion of existing businesses in the community. The program was assigned to the Assistant CAO for implementation. In developing the 1995-97 Financial Plan, the City Council adopted a Major City Goal to expand the Economic Development Program "with an emphasis on developing and implementing a business recruitment strategy." To do so, the Council adopted a goal to "develop and implement a business recruitment/economic development plan that identifies target industries matching the character, environment, employment and product needs of our residents. " To implement this expanded program, the Council also created the position of Economic Development Manager and allocated $25,000 in the budget to hire a consultant to help staff complete a "Targeted Industry Study". The City's first Economic Development Manager, Jane McVey, was hired in July 1996. In December 1996 the City Council approved her recommended workscope for completing the study,which included not hiring a consultant, and instead preparing the study with the assistance of an ad hoc working group of local industry experts. This group became known as the Targeted Industry Cluster Committee(TICC). l-� Council Agenda Report- .argeted Industry Cluster Committee 1,-Port Page 2 Targeted Industry Cluster Committee(TICC) The Committee began its work in February 1997. A working assumption of the Committee was that the General Plan and political process determine where and how much growth will occur. The Committee's efforts, therefore, have focused on providing qualitative improvements to the community's job base. A common value shared by Committee members, as articulated in the report, is that.San Luis Obispo's greatest assets include its quality of life and environment, and business recruitment should be pursued within the context of enhancing these assets. The Committee met over a period of several months, and on July 25, 1997, approved its initial report, which was distributed to several organizations for review. On August 27, 1997, the Committee met again and endorsed added suggestions by member Ira Winn, which are included in the attached September final report and summarized in Attachment 2. Following Council action, the final report will be distributed to the various organizations receiving the initial version. The TiC C report outlines in some detail the process and criteria for identifying the `primary" and "secondary"industry clusters most suited for San Luis Obispo as recruitment"targets" . The report describes each cluster, cluster companies presently located in the city, existing area skills and resources to support the cluster, and strategies for marketing to encourage the expansion and recruitment of businesses that fall within the clusters. Importance of Adopting Business Cluster Goals Most fundamentally, adoption of the recruitment goals outlined in the report will fill a gap in the City's existing economic development program, which is: If we are going to proactively recruit industries, what kind of industries are desirable and feasible to attract? The idea underlying a proactive recruitment program is"to get-what-we-want"rather than"to get-what-we-get." In other words, we should choose to better influence our industry and employment destiny instead of, by default, leaving it entirely to marketplace forces. However, it is also important to distinguish between those industries that we would like to have and can have, and those that we would like to have, but are unlikely to attract. The report attempts to identify both what is desirable and feasible for our city. Implementation The main purpose of the TICC was to help establish a more specific industry recruitment direction for the City where only a very general one has existed before. Staff believes that the Committee has been very successful in this regard and therefore recommends acceptance of the report. The report offers several strategies for marketing our community to targeted industries. It also recommends priorities in pursing the strategies, since they cannot all be implemented simultaneously, given staffing limitations. In the collective, staff suggests that the strategies be viewed as tools in a"tool kit,"to be selectively used,depending upon the job at hand. Council Agenda Report-'ixrgeted Industry Cluster Committee Resort Page 3 CONCURRENCES Given the nature of the task,the Committee consisted of a fairly broad cross-section of the business community, but also included representation from the academic and environmental communities. Committee membership is outlined in the report. Each member of the Committee was encouraged to share the report with their respective constituencies,whether formal or informal, and the report was independently sent to several other organizations by staff, as mentioned earlier. To date, we have received no comments or concerns regarding the report. FISCAL IM1PACT The cost to complete the report was estimated at $1,000 when the work program was presented to Council in December. The actual cost has been significantly less,primarily related to box lunches for noontime meetings. The balance of $25,000 is available in the Economic Development program budget to support various strategies to market the City to target cluster industries. ATTACHMENTS 1. Targeted Industry Cluster Committee Report, September 1997 2. Final Report Modifications /- 3 ATTACHMENT 1 TARGETED INDUSTRY CLUSTER COMMITTEE FINAL REPORT SEPTEMBER 1997 �a ' 16 cid o� san WI s OBI SPO City Staff: Ken Hampian,Assistant City Administrative Officer Diane Sheeley, Economic Development Manager Jane McVey, Former Economic Development Manager TABLE OF CONTENTS I. Background II. Committee Membership Ill. Process IV. Evaluation Criteria V. San Luis Obispo's Strengths VI. Recommendations A. Primary Clusters B. Secondary Clusters VII. Primary Clusters Analysis A. Computer Software/Multimedia 1. Background 2. San Luis Obispo Companies in the Cluster 3. Area Skills and Resources B. Light Manufacturing/Light Industrial 1. Background 2. San Luis Obispo Companies in the Cluster 3. Area Skills and Resources C. Business/Customer Service Centers 1 . Background 2. San Luis Obispo Companies in the Cluster 3. Area Skills and Resources D. Marketing Strategies and Priorities VIII. Secondary Clusters A. Tourism/Lodging/Recreation B. Communications/Space Technology/Electronics 2 IX. Summary and Conclusion X: Appendices A. Council Agenda Report dated December 3, 1996 $. Introductory Memorandum to Committee dated February 7; 1997 C. Cal Poly 1995=96 Enrollment 3 I. Background In November 1993, the City Council received a report from its Economic Strategy Task Force (ESTF) recommending several strategies for enhancing the City's economic development efforts. With regard to business recruitment, the report stated the following: "With respect to industrial attraction, there is currently no specific strategy in place. The absence of such a strategy could create missed opportunities to attract desirable, environmentally sensitive industries capable of providing higher-end jobs to our underemployed citizens." In January 1994, the City Council adopted several of the 59 goals recommended by the Task Force. Abu i siness recruitment program, however, was not among these adopted goals. Instead, he focus of the program at that time was on the retention and expansion of existing businesses in the community. In developing the 1995-97 Financial Plan, the City Council adopted a Major City Goal to expand the Economic Development Program `with an emphasis on developing and implementing a business recruitment strategy." To do so, the Council adopted a goal to "develop and implement a business recruitment/economic development plan that identifies target industries matching the character, environment, employment and product needs of our residents." To implement this goal, the Council approved a workscope for completing a Targeted Industry Study, with the assistance of an ad hoc working group of local industry experts. This group became known as the Targeted Industry Cluster Committee (TICC). II. Committee Membership Committee members included: Art Aguilar, San Luis Personnel Services, President/Owner Stephen Barasch, Barasch Architects & Associates, Inc., Architect/Real Estate Developer Lauren Brown, JBL Scientific, Business Owner Loretta Doukas, Seagate Software, Director Natalie Diggins, Call America, General Manager Bary Floyd, Cal Poly, Professor Shelly Stanwyck, Chamber of Commerce, Director of Governmental Affairs Howard Gordon, Xing Technology Corporation, President Missie Hobson/Dave Trupe, PG&E, Managers Charley Senn, Patterson Realty, Realtor Ira Winn, retired Professor of Urban Studies 4 �'7 I11. Process The Committee met monthly following the work plan as outlined to the City Council. During the course of the meetings the Committee heard presentations dealing with: • Long-term planning in the City of San Luis Obispo • City of San Luis Obispo zoning • Water availability and allocation • Economic outlook (based on the UCSB data) • Labor force • Cal Poly and Cuesta College resources • Published Targeted Industry Studies for San Luis Obispo County • Software company life cycles and employment patterns • Available sites and buildings for new or expanded businesses The time spent on background information was necessary in assuring that all participants had the same knowledge base. The Committee assumed that the recommended industry clusters fit in with existing community goals and related plans, ordinances and regulations. While there was discussion regarding price and availability of land and regulatory issues and their impact on the ability to recruit new businesses, the Committee in general pursued the TICC Report recognizing current City policies. The Committee's approach utilized consultant business recruitment studies prepared for San Luis Obispo County. The initial list of proposed clusters for the region included: • Electronics • Biotech/Medtech • Software/Multimedia • Agriculture and Food Processing • Space Technology • Business Services • Light Manufacturing • Computer Manufacturing IV. Evaluation Criteria The Committee evaluated the list of potential targets to determine if they were appropriate fit based on the following criteria: • The growth of the industry • Environmental impact • Existing and available infrastructure • Availability of existing buildings and land 5 p �'O • Local suppliers • Non-local buyers • Qualified employment market • Water intensity • Land intensity • Local resources and support V. San Luis Obispo's Strengths In determining the strengths of doing business in San Luis Obispo, the Committee identified and considered the following attributes of the City: • Quality of life • Location - strategically located on Highway 101, midpoint between San Francisco and Los Angeles • Abundance of skilled laborers including underemployed, degreed employees • Cuesta College and Cal Poly technical resources/expertise • Availability of San Luis Obispo County Airport • Financially sound City government • City government support for targeted industry clusters recruitment efforts VI. Recommendations After reviewing the resources of the City and comparing them with the proposed regional business targets, the Targeted Industry Cluster Committee (TICC) recommended a set of three (3) primary targets and two (2) secondary targets. It is believed that the City should focus its efforts on the primary targets and encourage the secondary targets as time and resources permit. The Committee concluded that a business decision to locate to the Central Coast, and San Luis Obispo in particular, is motivated by a superior quality of life. Therefore, maintaining the beauty of the area and the ambiance is important. Providing adequate physical infrastructure, particularly fiber access, and facilitating a knowledge-based economy are important elements. As the hub of commercial activity in the County, the Committee believes that San Luis Obispo is and will continue to be home to the majority of business support services such as legal, administrative, and accounting. The Committee also expressed the need for competitive contemporary retail operations within the City as a means to capture the multiplier rate of the new and existing business base. The Committee's research indicates that the assets of the City and the region appeal to a broad base of non-homogeneous niche market companies. Information supplied by the Committee indicated that many existing businesses located here because the principal had been a student at Cal Poly and chose to return, or perhaps had never left 6 �-9 the area. Therefore, the marketing strategy for each cluster presumes that the target market already has some familiarity with the City of San Luis Obispo, either as a student or a visitor. It was believed that the decision to locate a business or expand a business here is or would initially be an emotional/subjective one, based on quality of life. A critical issue is maintaining a climate of growth for the prospective businesses. An additional factor is the affordability of the area as compared to our geographic target markets of San Jose, San Francisco, and Los.Angeles. Retaining the businesses in San Luis Obispo is believed to be a business decision based on operating costs. The Committee's recommendation presumes that the City would be proactive in recruiting targeted -businesses to -locate, supporting land, buildings, infrastructure, and housing to accommodate new businesses. The existing Economic Development Marketing Plan is a pragmatic one, designed to facilitate the decision to retain, expand or attract a business here by being able to provide timely information to assist in the decision-making process. Direct mail has been tested through the Economic Development program to prospective industrial users, but most contact to date has been responsive and through business networking. The TICC proposes to elevate that effort. PRIMARY TARGET CLUSTERS 1. Computer Software/Multimedia This cluster includes business. application software, communications software, games and animation, and agriculture computer technologies. Common characteristics include an educated workforce, a creative environment, high-salaried individuals, and a desire for a superior quality of life. 2. Light Manufacturing/Light Industrial This cluster includes a wide variety of niche products from bicycles to medical technologies. The cluster is not homogeneous but has the common characteristic of the importance of quality of life to the owner/operator. 3. Business/Customer Service Centers Customer service centers have existed for some time and tend to be thought of as telemarketing centers, where wages and skill levels are typically low. A new market has emerged for customer service centers at a more technical level such as equipment installation, computer software, and some types of order fulfillment. Meny products are now sold through catalogues and also over the Internet. While most shopping will probably continue to be done in person because of the socialization aspect, catalogues, television, and Internet shopping are becoming very common for niche markets and technical goods and services. As the public 7 /-io utilizes more types of software programs to do their finances, plan their gardens, and make their travel itineraries, software companies have had to create Help Desks to provide support for users. SECONDARY TARGET CLUSTERS 1. Tourism/Lodging/Recreation This cluster is and will continue to be an important part of the local and regional economy, but could potentially gain more market share. 2. Communications/Space Technology/Electronics The commercialization of technologies at Vandenberg Air Force Base provide an opportunity for a variety of high-tech and high wage rate companies. This industry is perceived as a high-growth industry with greater importance to San Luis Obispo in the future as the production processes become more environmentally sound. VII. Primary Clusters Analysis A. Computer Software/Multimedia Cluster 1. Background The Central Coast of California is fast becoming a mecca for small entrepreneurial start-up software companies. These new companies have originated in San Luis Obispo due to their familiarity with the area, most likely from prior enrollment at Cal Poly. The quality of life on the Central Coast, low crime rate, lack of commute, peer group of fellow software pioneers, and availability of intellectual talent from Cal Poly and Cuesta College has created a spawning ground for small software companies. These entrepreneurs require the vitality, synergism, and creativity of proximity to other technology buffs. The intellectual capital of San Luis Obispo is perceived to be the strongest natural resource for this cluster group. The growth of this industry has been in large part due to small and very small start-ups that hit the market for their idea at the right time. Within the overall umbrella of software is a multitude of types of software. The multimedia market is emerging to be a solid market. Multimedia is a combination of video, animation, still pictures, voice, music, graphics, and text into a single system. It also combines the industries: computers, software, consumer electronics, communications, publishing and entertainment. Peripherals, which include video and sound boards and CD-ROM drives, is expected to be the fastest growing category. 8 2. San Luis Obispo Companies in the.Cluster The San Luis Obispo area has a number of companies that are in the software industry: Advanced Applications & Technical Services, ALH Group, Art Engineering, Atelier Pictures, CalAg.com, Call America, Convergence Venture Partners, Copius Systems, Copytron, Dega Technology, Inc., Diagrammatic Programming Corp., Distinctive Solutions, Dover Pacific Computing, Inc., Experts Exchange, Inc., Export Planning Service, Fast Internet X.Change, IMAGE Multimedia, INACOM, Industrial Peer-To-Peer, Inc., INET, Infinity Information Incorporated, Information Presentation Technologies, Inc., Intedink, Management Information Control Systems, Miranova Systems, Moon Valley, Mosaic, NovaQuest, Oddworld Inhabitants, Outback Resource Group, Inc., Pacific Connections, Progressive Communications, Seagate Software, Sunset Gower Studios, Supermarket Kiosks, Inc., Systems and Software Consortium, The Grid, UUPlus Development, Virtual Reality Laboratories, Vtech Internet, Wynd Communications, Wavequest, Xing Technologies, Ziatech Corporation. 3. Area Skills and Resources Cal Poly State University, College of Engineering, is expected to grow to 4,500 students. The Computer Engineering Department and the Computer Science Department have a total of 810 undergraduates. (Additional graduate information is addressed in Appendix C.) The Management Information Systems concentration of the Business College focuses on designing software applications for business. The approximate 200-plus undergraduates have practical application experience as the University requires extensive hands-on training through internships, co-ops and senior projects. San Luis Obispo companies have an abundance of talented individuals available and trained on the latest technologies. Also, the faculty at Cal Poly provides expertise to local industry. Softec, the Central Coast Software & Technology Association, is a local trade organization to support this industry and provide a forum for the members to stay abreast of the newest technologies and trends. The San Luis Obispo area has a strong link of fiber and telecommunications networks. Virtually every area of the community has access to cable for computer applications. 9 /'47- • Start-Up Software Companies To market to this niche is difficult because they tend to be home-based and not networked with the traditional business groups. The path to success for this niche appears to be to maintain the creativity vital to their design needs, to have a local industry association for members to have a context in which to stay abreast of the latest trends in technology and to have sources of capital available to them. • Recruitment/Large Company Spin-offs This niche would require identifying large software companies that would be able and willing to spin off a small group of the creative people to maintain their creativity. This concept would have to overcome corporate resistance to satellite offices and the corresponding administrative costs. However, it was recommended that it be pursued to determine its feasibility. It was acknowledged that this strategy does recruit people as the core component of the business and that attrition would provide positions for existing residents. Recruiting software companies was perceived to be challenging due to the many different kinds of software products and the companies' need to be near their client. It was believed that the most likely candidate would be a company that produced a product that was specific as to its desired use by the purchaser, easy to install ,and use, and did not require a high degree of customer interaction. For companies specializing in highly customized products need to be near the customer; the geographic location of San Luis Obispo would not be an asset to those companies. Differentiating companies to find this niche was perceived to be difficult. It was determinedthat it was more important to make it easy for them to find San Luis Obispo rather than for San Luis Obispo to find them. B. Light Manufacturing 1. Background Light manufacturing includes a wide variety of businesses from guitar manufacturers to the printing of labels for wine bottles. Many of the existing manufacturers locate in the city for personal reasons. While their products are not similar, they share the characteristic of being relatively small, shipping nationally and.intemationally, and being an independent in a very niche market. It is important to recognize that while the decision to locate or start up in San Luis Obispo is an emotional one, as companies become more 10 1-13 successful and are either bought or need to expand, attitude and operating costs become more important. For example, many small sporting good manufacturers begin manufacturing in one location and then move to manufacture an existing or knock-off product offshore, impacting their sales. This group is heavily dependent on manufacturing space and. availability of developed land. This cluster is seen as a basic stabilizer to the economy and also balances the software industry. 2. San Luis Obispo Companies in the Cluster Companies that fit into the light manufacturing area include: R. Howard Strasbaugh, Spice Hunter, Nth Degree Inc., Mountain Cycle, GLA Agricultural Electronics, SAES Pure Gas, Cole Surfboards, Dove Systems, Light Control Instrument, JBL Scientific, Calzyme and Wallace Computer Services. 3. Area Skills and Resources The light manufacturing industry has an association which provides peer support and business assistance, the Association of Manufacturers and Distributors. In addition, the Cal Poly Colleges of Business and Engineering have a joint program to aid manufacturers, the Engineering Management Program. At Cal Poly, Industrial Engineering and Manufacturing Engineering are courses of study that offer majors programs, with 60 students graduating from these majors last year. Cuesta Community College has programs designed to meet local manufacturing companies' needs, such as the Small Business Assistance Center,. which provides small business assistance and training. In addition, Cuesta Community College is the home of the Institute for Professional Development. With the increased need for business to produce their products more efficiently and to market them widely, the programs available through both Cal Poly and Cuesta College actively support the light manufacturing economy. C. Business/Customer Service Centers 1. Background This is a growing industry as business services from how-to-install- software to order fulfillment are handled over the computer or the telephone. While historically looked upon as low wage jobs, the sophistication of companies utilizing customer service centers has grown, reaching virtually all industry groups. Of particular interest for San Luis Obispo may be software-related customer service centers. Many products are now sold through catalogues and the Internet. While most shopping will probably continue to be done in person because of the socialization 11 aspect, catalogues, television, and Internet shopping are becoming very common for many niche market and technical goods and services. As the public utilizes more types of software programs to do their finances, plan their.gardens, make travel itineraries, etc., software companies have had to create Help Desks to walk people through any problems that may arise. 2. San Luis Obispo Companies in the Cluster Call America operates a Customer Service Center and an Operator Center. 3. Area Skills and Resources Customer service centers do represent an industry that can pay a "head- of-household" wage, as well as above-average wage rates on a part-time basis. Many customer service centers utilize part-time employees due to the need to keep the employees "fresh". This cluster could take advantage of the part-time employment base represented by the student population as well as provide flexible work hours for individuals seeking only part-time employment. Cal Poly's reputation for computer training and skill levels could be a strong asset in recruiting. Thetype of space required may also be consistent with the City's desire for a compact urban area. The industry typically does not need to be in a specific geographic area. Because of the part-time employment, frequently on a 24-hour basis, the industry may require bus service for their employees, which is available in San Luis Obispo. Additionally, virtually every portion of the city has the telecommunications infrastructure necessary for this industry. D. Marketing Strategies and Priorities Current strategies to continue and improve: • Pursue the annexation of enough Airport area to provide an inventory of land for business expansions/relocations. • Assure "internal readiness"to process permits for targeted industries in an organized and timely fashion. • Maintain up-to-date and concise information packets for targeted business recruitment. • Maintain and market the ambiance, quality of life, and environment of San Luis Obispo. • Continue to support and participate in the various local and regional industry-specific organizations and associations. • Develop stronger networking linkages with Cuesta College and Cal Poly. • Identify and consider participation in industry trade shows in the Bay Area or the Los Angeles area. 12 /S • Continue outreach and networking with local brokers, developers, and other intermediaries including accountants, lenders, and attorneys. • Continue to support and participate in regional marketing efforts including the Economic Vitality Corporation of San Luis Obispo County (EVC). • Fund the EVC's (Countywide) Revolving Loan Fund. New strategies to pursue as priorities: • Develop industry cluster-specific web pages with linkages to other appropriate web sites. • Pursue organizing a "Welcome Back Weekend" for Cal Poly Alumni who own or who are executives in the cluster industries. • On occasion, utilize "Red Teams" composed of City and private sector representatives to attract priority industries to San Luis Obispo. • Pursue with all interested parties an air link from San Luis Obispo to San Jose. • Encourage commercial brokers to develop a multiple-listing, or to otherwise keep the Economic Development Manager apprised on building space availability. • Encourage joint efforts between the private sector, the City, the County, and regional business-marketing interests. Other new strategies to pursue: • Support the creation of a private sector venture capital group. • Support the development of incubator space. Vlll. Secondary Clusters A. Communications/Space Technology/Technology Space Technology appears in the countywide target principally due to the proximity of Vandenberg Air Force Base. The county study concluded that the commercialization of space technologies provided numerous private sector opportunities. The critical issue would be whether San Luis Obispo could capture a significant market share of the industry or whether the industry would cluster in Santa Barbara or Santa Maria. The space commerce industry consists of five major areas of space- related goods and services: commercial space launches, satellite communications equipment and related services, satellite remote sensing, materials research and processing in space, and space-based private R&D facilities. 13 The bulk of revenues from space commerce comes from satellite communications which includes satellite manufacturing, satellite services, and the sales of earth station equipment. This reflects the rapid growth of new satellite services and ground equipment created by new technologies. These new technologies include mobile services and equipment for vehicle tracking and navigation positioning as seen in the newer luxury automobiles. The U.S. satellite manufacturing industry is expected to continue producing at a high level for the next couple of years, due mostly to the replacing of older satellite that have come to the end of their operational lives. Also on the rise is the market for direct-to- home pay-TV broadcasts. The electronic components and equipment and accessories industry is composed of electron tubes, printed circuit boards, semiconductors and diodes, capacitors, resistors, coils and transformers, connectors and electronic components. The demand for electronic components comes primarily from the computer, telecommunications, medical equipment, and transportation industries. Increased demand for computers, communications equipment, and electronic automotive devices will support the growth of this industry. Also, the demand for higher performance products will drive the industry to place a premium on compatibility among products. B. Tourism/Lodging/Recreation One of the principal sectors of the local economy is tourism. Due to the geographic location on the Central Coast of California, the area has long been a stopover for people traveling through the area. With the charm of the downtown, the proximity to beaches, Hearst Castle, wineries, and many special events and festivals, tourism plays an important part of the economy. San Luis Obispo is in a unique tourism position due to the availability of university students as temporary tourism workers. If San Luis Obispo did not have tourism, the student population would have very limited employment opportunities, and the tourism industry would not have this ready supply of entry level workers. The importance of the wineries to the economy and ambiance of San Luis Obispo cannot be underestimated. Although the grape-growing areas are largely outside the city limits, the wineries have an important tourist draw which rebounds to the benefit of the San Luis Obispo economy. The San Luis Obispo tourism industry has the benefit of being at the intersection of Highway 101 and Highway 1 and also the site of a staffed train station. An issue to be addressed is to assure transportation from the railroad station to hotels and motels in the area. The availability of 14 1-17 surface transportation is stated in marketing materials and advertorial COPY. Most of the San Luis Obispo visitors are from California with over 50% being repeat visitors. The goal of the tourism cluster should be to get more destination resorts and lengthen the time of stay. To utilize the existing rooms to their fullest extent and reduce mid-week vacancy rates, it is important to have a small conference center. Cal Poly is evaluating the potential for an alumni/continuing education and conference center for the university that could be of benefit to the tourism sector. The San Luis Obispo Visitors and Convention Bureau promotes tourism county wide with the Chamber of Commerce promoting tourism to the .City. The City also has its own contract (presently with Barnett, Cox & Associates). The Chamber of Commerce also provides public relations . and order fulfillment for tourist needs on a contract basis for the City. The City of San Luis Obispo has a Promotional Coordinating Committee that provides funding for special events, advertising and managing of contracts with the Visitors and Convention Bureau, the Chamber of Commerce, and the City. The Chamber also staffs the Tourism Council, an industry group of hospitality providers, tour operators and special venues. The Tourism Council promotes coordination of signage issues, special events such as large convention management, transportation issues, fiscal issues, training needs of the local hospitality industry, and many other issues impacting the tourism industry. IX. Summary and Conclusion In summary, the Targeted Industry Cluster Committee has made numerous important conclusions: • To be successful in recruiting business, San Luis Obispo needs to focus on community preparedness and an effective and targeted marketing program. • Create programs and incentives authorized by City Council for expanding businesses and new businesses. • Most existing companies decisions to locate to San Luis Obispo have been historically emotional decisions, based on the unique quality of life found in our City and environment. • The recruitment of new companies relies on creating a critical mass of businesses. • Decisions to stay in San Luis Obispo tend to be based on operating costs. 15 Hho • As companies grow and ownership changes, the emotional tie may be less important but the intellectual capabilities of the employees grows in value. • Cal Poly and Cuesta College are two of the strongest resources the City has in recruiting new companies and the City needs to strengthen the connection with the education community. • Businesses providing a product that does not require a high degree of customer interaction are most likely to locate in San Luis Obispo. • The marketing plan needs to appeal to the high-tech prospect. • Allocate sufficient human and financial resources to implement the TICC Marketing Plan. In conclusion, the Committee supports identifying priorities to be pursued in the City's efforts to attract new businesses to the community. Therefore, the Committee advocates that the City encourage the addition of the businesses identified in the primary and secondary target clusters when considering expanding the City's economic base. The Committee believes that the aforementioned "clusters" would complement the existing base of businesses presently located in the City. Additionally, the Committee believes the clusters consist of the type of industries that are compatible with the community and which will create the kinds of "base level" jobs needed in San Luis Obispo. Identifying the recommended Targeted Industry Clusters is just the initial step. The next steps are to implement the TICC marketing strategies and to evaluate the progress and success. Therefore, the TICC recommends that the group remain as an Ad Hoc Committee that will meet occasionally to evaluate the progress of the proposed marke*ing strategies. Finally, the City should continue to coordinate regional marketing activities with the Economic Vitality Corporation of San Luis Obispo County. The participation of the members of the Committee has been invaluable due to their industry-specific knowledge. As the effort moves into the implementation phase, the knowledge of the cluster industries will make the difference in the success of the program. 16 APPENDICES /-ao ' council ' aGEn6a RePont i�mta-_• C CITY OF SAN LUIS OBISPO l- FROM: Ken Hampian, Assistarit CAOAt� [ PREPARED BY: Jane McVey, Economic Development Manager SUBJECT: Targeted Industry Stu l dy and Economic Development Program L Status Report -- CAO RECOMMMATION I L 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 Work Program _ . A Target Industry " • 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 recentyears,many economic d@velopment efforts havebeen based on targeted industry studies: . The premise was that to'attract industry to an area and maximize marketing dollars, the analysis.. - --- = APPENDI)C4 : . .141 r I . L rCouncil Agenda Report- Targeted Industry Study Page 2 Lwould 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, Cmarkets, etc. Based on the consultant's analysis of the area, a Iist would emerge of compatible or "targeted industries". Such a document is available to-the City in the study performed by the Economic Strategies Group.. CThere 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 Ldollars 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 L 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 7 decisions are peFsonal decisions, corporate decisions are not typically personal decisions. i L Most targeted industry stry studies rely heavily on standard industrial classifications or SIC codes, C 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 F industry study may plot historical trends. This also assumes that the past is a predictor of the L future. Because we already have the benefit of a standard targeted industry study (the County's), a less I_ 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 She 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.-Ugh tech manufacturing, and service industry as well as educational interests particularly in business * 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- . L Council Agenda Report- � g po Targeted Indushy Study Page 3 compatibility, etc. The oft-mentioned clusters are in the med tech, biotech, environmental, computer, software and'telecommunications industries. L '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 C 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 L 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 L 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 MALT -- 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 perfomn the study. This altemative is not recommended 1 ecause 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 OTHER ECONObUC DEVELOPMENT AC'ITVITIES 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, 7 L Council Agenda Report- Targeted Industry Study_ L Page 4 L Development Manager will provide a brief update on some of these activities,as outlined below, and answer any questions the Council may have. CI. Retention and Expansion Efforts Company Updates CCalifornia Recycling Enterprise Zone Application Revolving Loan Fund Participation with the EVC 2. Recruitment Efforts Industrial International Development Research Council, IDRC Buyer-Supplier Initiative _ Cal Poly Connection LOrcutt Road Research and Development Park Retail International Council of Shopping Centers Downtown San Luis Obispo Central Coast Mall Dalidio 3. Marketing Efforts ACT Contact Management Database San Luis Obispo Profile San Luis Obispo Marketing Packet Property Inventory Data Base gxluster MEMORAIMUM DATE: February 7, 1997 TO: Targeted Industry Cluster Committee G FROM: Jane McVey, Economic Development Manage [ SUBJECT: Background,Work Plan and Schedule for Targeted Industry Cluster Committee Background The Mission Statement of the City of San Luis Obispo was approved in October,1993 and is : "San Luis Obispo should be a well balanced community. Environmental,social,and economic factors must be taken into account on important decisions about San Luis Obispo's future. A _ healthy economy depends on a healthy environment. Protection of the environment will depend on a healthy economy to pay for it. The social fabric of the community for both residents and visitors must also be part of that balance.". The Economic Development Plan for the city had as its cornerstone in 1993 the Retention and Expansion of existing industry. With the creation of the position of Economic Development Manager the city committed to an additional component of an Economic Development Program which is the recruitment of new industry., These goals,however,are very closely tied together. In summary the City of San Luis Obispo's Economic Development Program has the following main strategies: • Business.Retention and Expansion • Job Creation/Entrepreneurship • _ • Industrial/Commercial Recruitment • Retail • Downtown Development • Retail Recruitment • Tourism • Community Improvements Between the efforts of expansion of existing business,job creation and industrial/commercial recruitment the city seeks to strengthen its inventory of jobs paying above average wages, increase the number of jobs in the City of SanLuis Obispo and backfill potential job losses from regional corporate downsizing. Targeted Industry Cluster Committee Study The effort of the Targeted Industry Cluster Committee is the basis for the Industrial Commercial Recruitment component of the Economic Development Program. It's work will be to identify industry clusters that are suitable targets for the City of San Luis Obispo by being acceptable economically,environmentally and socially. Clusters can be considered to be"groups of businesses concentrated in a particular geographic area that are interrelated through alliances, APPENPU B. ,. ASP competitions,or the buyer-supplier"food-chain"and that draw on a common talent,technology Land support base': These clusters are.broader than Standard Industrial Classification (SIC)codes and reflect interrelated industries. For each cluster there are clusters of support industries,as well as special C support institutions/services such as.universities. The identification of clusters is necessary to "-market to prospective new companies and creates an"industry profile"that is useful in marketing j to the selected industry clusters L In addition,the analysis allows for.the identification,creation and support of assisting industry - networks. For example,there already are several industry groups in San Luis Obispo that have I varying degrees of collaboration from informal networks and legislative monitoring to perhaps joint production capabilities. LI A Targeted Industry Cluster Study is similar to a community's economic business plan. It examines the city's assets,liabilities,market niche and competitors in an organized way. It also provides an impetutus for data collection and analysis,which is the cornerstone of an economic Ldevelopment marketing plan. It also provides a valuable way of reaching consensus on goals. The advantage to local businesses to participate in a Targeted Industry Cluster Study is that as a L result of research and successful recruitment,there is an opportunity to get suppliers closer to existing businesses,thereby lowering freight costs and providing just-in-time•inventory possibilities. The analysis also positions the companies and the city for future expansions. Additionally,the identification of clusters allows support of the industry group. Economic Development is at is core both a marketing and a sales effort with the"product"being a city. A Targeted Industry Cluster Study helps to refine the definition of the"product"and the potential customer groups for the"product". The community at large defines the"product" or context of the city through its preferences as expressed in political representatives,administrative bodies,ordinances, and rules. The existing business community operates within that context,as . will prospective businesses. iSome of the generally accepted policies in the context of San Luis Obispo for the Committee to keep in mind as it progresses through the analysis.and deliberation are: r • San Luis Obispo has a defined geographic boundary. I • San Luis Obispo operates within a General Plan. L Planning is urban centered and supports central density. • The City chooses a to be a"livable"place. • San Luis Obispo is part of an international marketplace and operates within a regional context. • The city needs to position itself economically. The City of San Luis Obispo Target Industry Cluster Study is a very local endeavor,operating C within the context of the generally accepted philosophies and policies of the City. The . Recruitment of New Industrial/Commercial Business is the focus of the study. It is not designed to address the retail needs of the community,environmental issues other than those specific to r the business target, or social issues other than attempting to use the assets of the existing labor L. force as criteria by which to evaluate potential targets. LEconomic Development Marketing • • To appreciate the end use of the decisions reached by the Committee it is useful to distinguish Economic Development marketing from other types of marketing. .In general,there are three L main marketing models: Consumer Marketing [ Industrial Marketing Service Marketing These types of marketing are quite different. Consumer marketing assumes that the decision is a personal one,the frequency of occurrence is frequent and the risk is low. For example,which brand of tissue you buy. An industrial model assumes the decision is a corporate one,the frequency of occurrence is low and the risk is high. For example,deciding to relocate a business. The service model sells an intangible product and requires a high degree of customization. _ Selling a city is an industrial/service model. — Itldustrial/service marketing is much more labor intensive than consumer marketing. With limited staff there is a cap on the number of meetings that can be attended, prospects managed, etc. Most people are more familiar with consumer marketing and typically attempt to define an Economic Development Program in a consumer marketing model. In an industrial/service model the product is intangible and the marketing program is focused on relationship marketing. The product(service)is delivered and consumed instantly and constantly. Speed is typically the _. measure of service. If speed is the measure of service it is essential to create a marketing program that can deliver in what has been called the"Moment of Truth". To be able to deliver in this "Moment of Truth",it is extremely important to identify the best fits in the most acceptable locations or the effort will be wasted. The effort is to determine who is likely and ready to buy. The work of the Targeted Industry Cluster Committee will ground the targets of the marketing program in what is achievable. It is also important to note that while the targets as recommended by the Targeted Industry Cluster Committee will be those areas pursued proactively,it should not be interpreted that any industry or cluster not identified is not acceptable. As opportunists,it should be acknowledged that any clean industry that wants to locate in San Luis and chooses a site that is compatible with their use will be welcomed. The work of the Committee is to go beyond who chooses the city and to identify what industries to focus on with our limited resources. The ultimate industry specific marketing plan will be grounded in some basic beliefs. Those basic beliefs are: • Have information'and production capabilities ready to deliver in the"Moment of Truth". . L . . • Partner with'?nfluencers"who can reach decision makers and make deals happen. These are Lbrokers,bankers,developers,and'site selection consultants. • Maximize your exposure by partnering with all groups that can be of benefit to the goal. These groups are industry associations such as the Manufacturers and Distributors Association,regional economic development groups such as the Economic Vitality _ Corporation(EVC),The San Luis Obispo Chamber of Commerce,Cal Poly University, CUESTA Community College,.etc. • Build upon existing business and use them as a key source of leads and a distribution channel for the message. • Focus on a few number of assets that stand out for each industry cluster. L • . Marketing materials are not as important as your ability to deliver. • Don't go after industries you don't have the infrastructure for. r • Remember that 85% of all prospects are looking for specific buildings. L • Try things. If they don't work,try something else! C r-- r i L 4 �.�0 L CAL POLY 1995-96 ENROLLMENT WITHIN THE 5 COLLEGES [ Cal Poly University and Cuesta College create an educated and easily accessible labor force. The undergraduates and graduates provide a great resource, enhancing the relocation incentive for most new and/or expanding businesses. LCuesta College offers curricula in arts and sciences and programs in occupational education to approximately 8,500 students. Recognizing that success in a highly competitive marketplace is Ldirectly related to investment in effective training for workers, Cuesta College has developed the Institute for Professional Development. In addition, Cuesta College offers a Registered Nursing and Psychiatric Technician Training programs. LCal Poly's 1995-96-enrollment within the five colleges were as follows: .'.� � �� 1 . .. .. L... f.r � ..-u-..' Y C_0Q-%LE5GMOF,�`EN71N ER1N. IJ,ND 12GF2/�D�UATES � 4O I S Aeronautical Engineering 249 17 LCivil Engineering . 510 32 Computer Engineering 366 Computer Science 443 . 63 Electrical Engineering 501 26 Engineering Science 53 Environmental Engineering 322 Industrial Engineering* 243 _ Manufacturing Engineering* 30 Materials Engineering* 134 L Mechanical Engineering* 786 Engineering-Management 29 Engineeringlor majors with : ;CO.LLEGE;OF BIJSINES:S 111Jp R Dt AT, � D"lfiA` Business Administration 1739 _ Economics 112 Industrial Technology 223 Business Administration 79 specializing in agribusiness and architectural management track Industrial and Technical Studies 119 - COLLEG ®F 4RGHITE k0l, �fi 6"FMTE R= A _ AND�ENV RONMENTr 'L i Architectural Engineering 258 Architecture 582 62 APPENDIX C /-029 City and Regional Planning 139 36 L Construction Management 220 Landscape Architecture 1170 �CO.LLEGE�OF �(B�.�L��A`F27WS �;U:NpEftG.f.,�D_„lJ%,TES 'i�: •C�l�%4�L1A. • L Art Design 210 English 277 78 LGraphic Communications 269 History 175 . Human Development 212 LJournalism 207 Liberal Studies 345 I Music 45 Philosophy 58 Political Science 243 Psychology 220 60 Social Sciences 263 Speech Communication 170 L `COCLEO SCIEf�CA' D U 'T = ti _° 7ES p. WE. Biological Sciences 496 26 Ecolooy and Systematic Biology 150 Microbiology 86 Biochemistry 230 Chemistry 76 I Mathematics 191 9 Physical Education 318 . 36 f Physical Science 13 L Physics 69 Statistics 26 L L i r z- 130 ATTACHMENT 2 MEMORANDUM DATE: August 28, 1997 SUBJECT: Modifications to the TICC Final Report .Following the August 27 Targeted Industry Cluster Committee (TICC) meeting, the following modifications to the TICC Final Report were made: Page 12 - D - First bullet point under current strategies - added language in bold..."Pursue the annexation of enough Airport area to provide an inventory of land for business expansions/relocations." Page 12 - D - Fourth bullet point added language..."Maintain and market the ambiance and quality of life and environment of San Luis Obispo." Page 13 - New strategies to pursue as priorities...Fourth bullet point added language - "Pursue with all interested parties enseuFage an air link from San Luis Obispo to San Jose." Page 13 - New addition to new strategies to pursue as priorities..."Encourage joint efforts between the private sector, the City, the County, and regional business-marketing interests." Page 14 - B - Insert/add the following paragraph after the first paragraph under Tourism/Lodging/Recreation and before the second paragraph..."The importance of the wineries to the economy and ambiance of San Luis Obispo cannot be underestimated. Although the grape-growing areas are largely outside the city limits, the wineries have an important tourist draw which rebounds to the benefit of the San Luis Obispo economy." g:/admin/sheeley/ticdagendarptattachmentdoc /-3/