San Diego’s economic development gurus are convinced keeping businesses here is as much about the warm fuzzies as the dollars and cents.
They recently handed out a trio of City Council-approved business subsidies worth nearly $2 million and have assisted far more companies with permits and lower-level rebates.
But officials say the implicit message businesses get from those deals is often just as crucial – sometimes even more so – than the monetary incentive itself.
The offerings are basically like big group hugs that make the companies feel like they matter to the city, they say.
“They need to know that we want them here and that we made that initiative to keep them here,” said Lydia Moreno, who’s long overseen city incentive programs. “Meetings with the mayor, then going out and meeting with them. It’s the hugging.”
Moreno and David Graham, the city’s deputy chief operating officer who oversees economic development efforts, chuckled as they described the concept in a recent interview.
They realize the idea is kind of funny – but also important.
Graham said help and attention from the mayor’s office can be crucial to luring or retaining a company.
“When somebody’s trying to make a case to be in San Diego and other places are throwing incentives at them, sometimes it’s just about having the incentive than the amount of the incentive,” he said.
French solar manufacturer Soitec has identified attention from former Mayor Jerry Sanders, who now leads the Chamber of Commerce, as a key reason behind its decision to open a plant here.
“They made the decision to go to Rancho Bernardo because of all the city had done to welcome them,” Jim Waring, CEO of industry group CleanTech San Diego, told VOSD last year.
The red-carpet approach for Soitec included permitting assistance, tax credits via the soon-to-be former state enterprise program, work with San Diego Gas & Electric to secure a favorable contract with the utility and multiple meetings with Sanders.
All of that sent a clear message to Soitec, Graham said: You matter to San Diego.
The group hug concept was also at play before a July City Council vote on the Illumina deal.
“This was a really interesting and very positive experience for me,” Illumina executive Chuck Pappalardo told the City Council. “I’ve had a career in building infrastructure for a very large-scale companies, most of which (are) regulated medical device (companies), and I have to say that in a fairly short period of time we were able to put together a very positive deal model, both for the city and for Illumina.”
City Council members smiled and made glowing references to the company before unanimously approving the rebate for the company.
Jennifer Case, CEO of New Leaf Biofuel, has been on the receiving end of a group hug too.
“That’s a really sweet way to describe it,” Case told me, referring to the city’s characterization. “When we’ve been in need, we’ve been able to go with them and they’ve been super accommodating.”
Case’s biodiesel-producing company relied on matching $590,000 loans from the state and the city to build its Barrio Logan facility in 2008. The city also assembled meetings with key officials to ensure New Leaf didn’t stumble as it sought city permits.
All came as Sanders and others ramped up efforts to make the city a hub for green technology companies.
The hand-holding meant a lot to a group of 20-somethings launching a startup business fresh out of grad school, Case said.
Mayor Kevin Faulconer says there’s a lot more city love to go around. Faulconer told VOSD he’s eager to offer incentives and assistance to businesses to help them add new jobs.
Not every business in town gets such a warm embrace. Faulconer’s pushing efforts to cut bureaucracy and put more business permit information online but the popular kids like Soitec, Illumina and New Leaf inevitably get a lot more love because the city’s jazzed about the well-paying jobs, tax hauls and prestige they bring to the city.
Companies with more political connections and more influence on the city’s tax base are more likely to seek and get government help. Those that’ve received flattering monikers – for example, Illumina was named the World’s Smartest Company by MIT Technology Review earlier this year – or that are in key industries the city wants to grow do too.
This is part of our quest digging into the difficulties – real or perceived – of doing business in San Diego. Check out the previous story in our series, Which San Diegans Are Getting Paid More, in 3 Charts.