How should Gilroy grow?

Gilroy is growing and to keep the pace the city needs more jobs for locals, says Tammy Brownlow, the CEO of Gilroy Economic Development Corporation. The past year has brought some success.
Q: What does the Gilroy Economic Development Corporation do?
A: We work very closely with the city, but we are a separate non-profit organization. We’re a public/private organization that gets funding from the City of Gilroy, the Chamber of Commerce and some private funding partners. We also get grants from PG&E and other grant funders.
I report to a board of directors that includes representation from the city which includes Mayor Roland Velasco and Council Member Peter Leroe-Muñoz. The EDC started in 1996, so we have been around for a long time. We were very instrumental in getting the major developments like the shopping centers done on the East Side of town.
Primarily, we are involved in business attraction, retention, expansion and we spend a lot of time on boards and committees in the community. I also serve on the General Plan and Advisory Commission to represent our organization and be the voice of economic development and ensure that land use decisions are well examined.
We also work with small businesses to help them to get through the zoning process and we help them get permits from the city. A lot of time small businesses and entrepreneurs don’t have the resources or the know-how, so we can help them navigate these processes.
Q: Will Measure H confine what the city can do in the future?
A: Yes it will because it draws a boundary around the city which doesn’t allow the city to go beyond that limit to make any commercial or industrial expansion. There is an allowance to bring in up to 50 acres of industrial land each year, but, several criteria need to be met to make that happen.
Q: What are some of the new businesses that will be coming into Gilroy?
A: Performance Food Group, out of Santa Cruz will be putting in a new food distribution center. It will be about a 185,000 square foot brand new building. In comparison, the United Natural Foods Incorporated facility that was completed two years ago at McCarthy Industrial Park, is about 400,035 square feet.
Q: How many people will Performance Food Group employ?
A: There will be about 180 jobs there. They will have people transfer from their existing facility, but there will be job opportunities there.
Q: What are some of the challenges of building commercial development in what has traditionally been an agricultural community?
A: There are 15,000 people every day who commute out of Gilroy compared to 12,000 who commute in.
We tell firms in Silicon Valley that Gilroy isn’t as far as they think it is. We’re in Santa Clara County, but for workers in north Silicon Valley, it’s reverse commute for them, which is a big selling point how bad traffic is these days.
Q: How do you think high-speed rail will affect Gilroy?
A: That is the million dollar question since we’re not exactly sure where the alignment is going to be. It will have a major impact on Gilroy. If we have a downtown alignment, then it will be very disruptive with the construction time. There are a lot of businesses angry with that because they are uncertain how it will turn out because you don’t know exactly what the risks are going to be, which discourages investment.
If it goes out east then it will be on county land, so there couldn’t be much development around it because of the urban growth boundary and an environmental study since it will be out of the city.
Officially we have not taken a position on it. The High-Speed Rail Authority was supposed to make its determination in August and that was pushed back to maybe November or early next year.
Q: What can Gilroy do to make the downtown a greater destination?
A: The EDC, Chamber of Commerce, the Downtown Business Association and the Welcome Center work together to identify what we can do, with limited resources, to revitalize what we can do downtown.
At one point downtown, there was about 25 buildings downtown that could not be occupied because they did not adhere to California earthquake standards. That’s pretty costly depending on the buildings and many of the buildings had been sitting here and deteriorating. Over the past four to five years a lot of those buildings have been retrofitted. I think there are only three buildings that are not in the process of being retrofitted or have been retrofitted and not occupied.
That’s a huge development. The next step is to get tenants in those buildings that will draw more people downtown like restaurants and entertainment venues. We want retail, but downtowns aren’t very much retail destinations anymore. The successful downtowns are entertainment dining areas. We must concentrate on that.
We have the Golden State Brewery coming in now and Bartenders Union, along with The Milias and Old City Hall along with new ownership at Station 55 along with Cafe 152 Bread Company.
Q: Is there a limitation how long a downtown business can stay unoccupied?
A: I don’t think the city can do anything to force someone to get a tenant. It’s very market driven. You can incentivize business in general with things like fast processing, but I think the city is looking at additional financial incentives downtown that will need to go through the city council first.
Several years ago before the recession, the city had an impact fee waiver program. Impact fees (which the city paid for at this time) can be really large, especially with new construction and intensification of use. When the fee waivers were in place, we got six mixed-use projects built, including the Heritage Bank building, the Bertoloni building and the building where the Vacuum Center is. Mixed-use buildings have commercial space on the ground floor and apartments above. That is what Jose Montes will be doing with the Hall’s building, which is under construction across from The Milias. He will be looking for a restaurant tenant for the ground floor.
Q: Does Gilroy have trouble retaining a workforce?
A: It’s a problem everywhere. Typically entry-level service work is one of the lowest paying jobs out there and the restaurant business is a very thin margin business anyway, so labor is usually their biggest expense.
We are struggling, but the cost of living here isn’t as bad as what it is up north. We still have the lowest price point for homes in the region. Our median home price is $716,000 and Morgan Hill’s is $847,500, so if you go 10 miles to the north, you’re paying about $150,000 more for a home.
The cost of living here is very high compared to other places in the state and certainly in the country. Employers need to account for that. But still, with the housing costs what they are the wage differential really doesn’t make up for that. That’s why you have a lot of people moving to cheaper places in the state or moving out of the state altogether because housing costs are killing them. Even rental prices are high. I know for a fact that you can’t get a nice single family home in Gilroy for less than $2,800 and apartments are reaching that amount depending on the size.
Q: How can Gilroy attract more tech industry firms?
A: It’s about getting over how Gilroy is perceived. We are removed from Mountain View and Cupertino and startups tend to stay close to their funders and the funders like them to stay close too.
Again it’s about perception and that businesses think we are so far removed from their workforce. But, their workforce is moving down here and buying houses because they can afford it. Granted a lot of young, single people will rent a place with roommates so they can stay up there, but as people get older and want to start a family, they realize that they can’t afford to buy anything up there. They decide to come to Gilroy and do the commute.
Q: Do you think that changes Gilroy?
A: There’s still kind of a disconnect between people who have just moved here and people who have lived here for decades. The reason is that many of the people who moved here are on the road commuting two to three hours a day. When they get home at night, they stay there. They don’t have time to get involved in the community. That commute takes a big chunk out of your life and there are lots of organizations and clubs here that could benefit from their expertise.
Q: If people are choosing to stay home, is that having a negative impact on business in town?
A: The commute out of Gilroy costs the city a lot of every day. Commuters will often buy gas out of the city and will probably shop out of town. Often they choose to get something to eat outside the city too. That’s a lot of money that’s not being spent in Gilroy and those are tax dollars that don’t go to street maintenance, police and fire. It’s the city’s sales tax revenue that goes into the city’s general fund, which goes to pay for the majority of those things.
Q: What can we do to balance that number?
A: If we can get jobs here that will keep people working in the community they live in, that would do a lot to adjust that jobs and housing balance.
Q: What incentives can the city give to attract business?
A: Right now they are working on a new program to allow large commercial and industrial developments to pay impact fees over a period of three years. When a new business comes into town, they are charged an impact fee if they are intensifying the use of the land. All cities have an impact fee schedule. The largest impact fees based on transportation, water and sewer, but there are ten different things that they need to pay for.
Q: What do you think about the possible addition of Great Wolf Lodge?
A: I think it’s a great project. I started working with Great Wolf in February of 2016, so I was one of their first points of contact. They started working with a local broker and showed them several sites around Highway 101. They weren’t very interested in those locations. They have a very distinct architectural design that they want to blend in with nature. I think the site next to Gilroy Gardens is the perfect spot for them.
I think there is a lot of misinformation about it on social media. Members of the city council cannot go out and proactively talk about it because it is a real estate negotiation, so that needs to be done in a closed session environment.
Great Wolf is not only talking to Gilroy. They are looking at sites in Brentwood and Manteca. I personally feel that Gilroy is their number one choice, but it is not without some significant hurdles that they will need to overcome because a lot of sites that they are looking at are already shovel ready. If they come to Gilroy, they will need to go through an environmental impact report process which will take up to a year and will cost a lot of money.
Ever since the city took over that land and set up the Hecker Pass Ag Tourism Corridor, it was always their intention to attract something like Great Wolf. I think it would be a great thing for Gilroy. It would generate revenue and give Gilroy Gardens a shot in the arm.
Q: Is there an incentive to use local contractors and labor?
A: When a project goes up to the city council, they can say that they would like to see that developers use as many local contractors and laborers as they can. The response is usually that they bid their projects, so if a local contractor is competitive and demonstrates that they can do the job, they would love to hire the local builder. The only problem is that with some of these larger projects is that we don’t have a lot of local contractors that can build something of that scale.
Some of these projects, like the food processing plants, are so vast and unique, that there are contractors out there who specialize in the major complex projects like those big industrial builds. It’s a competitive market and it’s unrealistic to expect a developer to pay millions more on a project.
These businesses want to be good neighbors and hire locals, but when large projects like UNFI came in there wasn’t anyone local who could get the job done in time. They brought in ESI Construction, who hired subcontractors. A local guy got to do the landscaping and other installed the ceilings in the office.
Q: Do you think that there is a “Not in my backyard” mentality in Gilroy that is more pervasive than in other small cities?
A: It’s not just in Gilroy. I think it depends on the project and if it will adversely affect people’s quality of life. When the group, Gilroy Growing Smarter pushed for Measure H to limit new home building in Gilroy, they were very vocal in saying that Gilroy needs more jobs. However, we are very constricted right now regarding land for future development.