GILROY
– City Council is on the verge of approving an economic stimulus
package to lure new and expanding industrial companies to the east
side of town.
The incentive deal is an updated version of an existing city
policy Gilroy’s economic development director says can better rival
the incentive packages other Bay Area cities offer.
GILROY – City Council is on the verge of approving an economic stimulus package to lure new and expanding industrial companies to the east side of town.
The incentive deal is an updated version of an existing city policy Gilroy’s economic development director says can better rival the incentive packages other Bay Area cities offer. By as early as February, Gilroy Economic Development Corporation Executive Director Bill Lindsteadt can offer industrial companies a $4,000 credit for every job a business brings toward costly development fees.
“I think Council stepped up and said, ‘We want industry,’ ” Lindsteadt said. “We’re out of the competitive game right now. If we can offer them the wherewithal to come down here at a cheaper price for land and buildings, then we have a shot at it (at bringing more businesses to Gilroy).”
Lindsteadt proposed the stimulus package to Council at its annual retreat Jan. 16 and 17. He pitched an even more aggressive package calling for, among other things, the waiver of traffic impact fees. But Council shied away from that after City Administrator Jay Baksa reined it in.
Lindsteadt wanted to lower industrial development costs in Gilroy, estimated at $4.28 per square foot. This rate is steeper than rates in most Bay Area cities and has doubled since 1999, according to the Gilroy Economic Development Corporation.
Lindsteadt said waiving traffic impact fees could be justified since developers have already paid for roads in the industrial area on the east side of town. He said workers would not cause significant impacts to the roads, especially in the case of employees who would commute from their Gilroy home.
“Give me something,” Lindsteadt said. “All we’re doing is getting them from their homes to a business park.”
Baksa and other city staff disagreed with Lindsteadt’s argument.
“No one’s paying twice for the roads,” Baksa said.
Baksa argued that the city’s formula for divvying up road costs charged to industrial, commercial and residential developers was fair. He said the way to make traffic impact fees cheaper would be to lower the standards the city sets for new roads.
Road standards are implemented using something called “level of service,” which measures how many vehicles the road can handle without traffic delays or safety issues. In the industrial sections of town, the city could require lower levels of service, allowing for cheaper impact fees.
“You can lower the costs, but there’s a corresponding quality of life issue we need to look at,” Baksa said.
There was little to no interest from Council to lower the level of service for roads in the industrial zone.
Council instead asked staff to immediately begin drafting a new ordinance without reference to traffic impact fees, but focused on the $4,000 job credit. Staff will show Council how much money the city will lose by allowing the credits when the ordinance comes before the dais likely next month.
No one predicted how much city revenue would be lost by the credit. However, Baksa said the loss would be offset by property tax revenue and sales tax revenue, when employees – especially out of town workers – spend money in Gilroy.
“That’s why the blend of commercial and industrial is critical,” Baksa said. “If a worker needs to go to Costco on their way home from work and there’s one in the town they work in, what do you think they’ll do?”
The $4,000-per-job credit is an expansion of the existing deal offered to industrial companies. Previously, Gilroy gave the $4,000 credit only for Gilroyan hires. Cases involving non-Gilroyan employees triggered a $2,000 credit.
Council did not grant Lindsteadt his request to lower the average salary clause in the job credit package. Lindsteadt said some industrial companies would have a hard time meeting the $35,000-wage-and-benefit average.
“Let’s be a little more liberal with that condition,” Lindsteadt urged Council. “A job is a job.”
Council does seem ready to bend on a part of the existing ordinance that requires each incentive package to go before the city dais. Lindsteadt said the requirement is tough on industrial developers who don’t want to begin designing a complex before the incentives package is approved.
Lindsteadt asked the Council to grant staff the authority to approve incentives deals. Staff would use criteria within the ordinance to guide its decisions. Appeals could go before Council.
Lindsteadt told Council that 2003 was not a bad year for Gilroy industry even though it marked the closure of several high-profile companies, the highest profile business being Indian Motorcycle Company.
Ten industrial buildings were built in Gilroy in 2003 and 14 new businesses – all with 10 to 25 employees – got launched.
According to the Gilroy Economic Development Corporation there are 91 acres of industrial lots “pad ready” for new buildings. Pad ready means developers have put in all the infrastructure for the area.
The 91 acres translates to 1 million square feet of industrial space, 2 million if the buildings are two stories tall.
