Councilman seeks environmental review before giving financial
incentives to new businesses
Gilroy – Should new businesses have to pass an environmental litmus test before the city frees them from hundreds of thousands of dollars in up-front development costs?
Newly elected Councilman Peter Arellano thinks so, but other city leaders anxious to lure high-tech jobs to Gilroy are leery of bureaucratic “hurdles” that could neutralize the city’s economic incentive program. The issue could face serious debate in coming months as officials retool economic incentives to attract more high-paying jobs.
“There’s no mechanism to review or even discuss (a business’s) environmental record,” Arellano said. “There’s nothing in our regulations to review this.”
In the last six years, Gilroy has freed companies from more than $14-million in up-front fees normally associated with development. In exchange, the businesses that receive “development fee waivers,” as they are known, sign an agreement promising the city a certain level of tax revenues or new jobs.
Before signing any new agreements, Arellano said officials should investigate if a business has caused environmental problems elsewhere and if it helped shoulder the burden of clean-up.
Arellano said he raised the environmental screening issue early in his prior council term, between 1999 and 2003, after Fairchild Semiconductor Corporation was found to have polluted groundwater in south San Jose.
“I’ve brought this up before and I was in the minority,” Arellano said. “The argument then was that we have federal and state government laws that protect us. But as we found out with perchlorate, they don’t even protect us after the fact.
For the last three years, hundreds of residents in San Martin have received bottled water from Olin Corporation, a road-flare manufacturer that contaminated the area’s groundwater with perchlorate. The road-flare ingredient has been shown to interfere with thyroid activity, but the scientific community has yet to agree on what levels are dangerous. While Olin has accepted responsibility for contamination in San Martin, the company has said it is not to blame for the perchlorate found in Morgan Hill.
“If we’re going to be providing incentives to a corporation to come here, we need to make sure that they don’t have any detrimental effect on the environment,” Arellano said.
Larry Cope, the city’s economic development director, welcomed a discussion of the environmental-screening idea, but stressed that the city is competing against 3,000 other communities around the country to attract businesses.
“For each hurdle you put up, it costs money to study that,” he said, referring to the tens of thousands of dollars businesses spend on traffic analyses and other studies as part of the development process.
Such costs are a fraction of the $1.3 million in fees Costco saved through its incentive agreement in 2003, for instance, but those fees represent a bigger burden for smaller companies like Garlic Country USA, a recreational vehicle park that saved $237,000 in 2004.
Cope added that the city reviews a company’s environmental record “as part of due diligence.”
“When we talk to companies, part of what we do is look at where they have other offices to find out what kind of company we are dealing with,” he said. “In that process, environmental issues come up.”
City Councilman Craig Gartman expressed interest in discussing the environmental screening of new businesses, but questioned the scope of the review.
“I’d be open to listening to that, but I’d like to hear all the details,” Gartman said. “How would (Arellano) go about defining the criteria? What is classified as a pass or fail grade? Essentially, what you’re doing is trying to legislate ethical behavior for business.”
In addition to worries that such a program could “be very far-reaching,” Gartman feared it might undercut the goal of the incentives.
“It could be a disincentive,” he said. “If someone is coming into town and has a business that is very environmentally sensitive – such as if they do work with chemicals or they have had problems in the past – they might say ‘I don’t want to put up with the extra bureaucracy. I’d rather go to Morgan Hill or Hollister.’ ”
Arellano said he plans to raise the environmental-review proposal during council’s informal policy discussions on Jan. 27. As part of those talks, city staff are expected to recommend ways to modify the incentive program to lure high-tech firms and industrial companies to Gilroy.
“What if we get a company like Olin and they walk away from their mess and the taxpayers are stuck paying for it?” Arellano asked. “Who are we inviting to Gilroy and what is their track record? Right now we’re only looking at how many jobs they’re going to bring. At how much tax revenue they’ll bring in.”
