Is Mendocino County Hostile To Free Enterprise?

Some Ukiah-area business people think that the Mendocino Board of Supervisors is anti-business. Even some Board members think there’s at least a “perception” that Mendo is anti-business because there’s not much new “economic activity” in Mendocino County apart from the thriving intoxicant industries of pot and boutique booze. Never mind that Mendo has little to offer your standard urban business — a technically proficient workforce, short commutes, infrastructure capacity, and so on.

To address the anti-business perception, Supervisors John McCowen and Carre Brown came up with an idea to refund some or all of a permit fee to businesses that create new jobs. The more jobs, the more fee reduction up to five— five or more new jobs would mean no permit fee.

Supervisor John Pinches, who was absent from the April meeting when the proposal was first presented, asked, “How would this operate? Already the Building and Planning Department receives about $1.5 million in general funds. So does that mean at the end of the year you’d add up all these fee waivers you say you’ve issued and you’d send the General Fund a bill for up to $50,000? Is that how it would work?”

Supervisor McCowen replied that it would simply reduce the fees that the Planning Department would otherwise receive. “It would be a subsidy out of the General Fund because to me it seems appropriate to have the Board make the department whole rather than asking them to forgo revenues.”

Pinches: “So why not just add $50,000 to their net county cost?”

McCowen replied, “Yes, there would be a budget allocation of up to $50,000 so they get the same revenue that they would have.”

Pinches: “Another point about this is the job creation criteria. If I was going to apply for a building permit I would look at where the biggest fee reduction was. And I would say, ‘Look at this. It says creation of four new jobs for five years gives you 80% fee reduction, but if you create five temporary jobs, or if you create five new jobs for five years you get 100%. I mean, so I would say, Well yes, I will get the max here. I want the whole 100% fee reduction.’ So I guess that means your fee is totally waived.  So I certainly wouldn't go for only 80%, I would say — and who is going to check after five years? Are they going to require the money back after five years if they didn't do it or if the business failed? I don't see that. It sounds good on its face, but I don't see that it is really workable.”

Local businessman Ross Liberty — owner of Factory Pipe in Ukiah where exhaust systems for recreational vehicles are manufactured — was the only business person on hand to make a public comment on the proposal. He began by saying that “full disclosure” required that he point out that he may be “in a good position to directly benefit from this. So I have a selfish interest in coming before you.” (Liberty is interested in buying a portion of the old Masonite site for expansion of his fabrication facility.) Liberty noted that the fee rebate was a good idea because “it indicates an attitude of this Board which is different than in the past. It’s more important than any specific dollar amount available. This Board and the County is a lot friendlier toward business than it has been in past years. I tell my friends that and they are stunned. But it's working. It's helpful.”

Liberty also thought the idea was “important and really welcome.”

Pinches wasn’t quite sure why Liberty liked the idea. “Have you researched other counties? Do other counties have two planning and building departments — one on the coast and  one inland? Have you researched the cost of permits in our neighboring counties? We are the lowest. We provide the best services in those areas. If it's going to take another $50,000 to tell the community that we are business friendly—… Remember you're a member of the Employers Council. They did an extensive survey recently, and they said it wasn't the fees or the incentives, it was the timeframe…"

Liberty replied that the Employers Council did not know that the Planning Department “really does jump through hoops.”

If the Board really wanted to address the permit processing timeframe problem, they could simply require the Planning and Building Department to report monthly on the status of pending permits, then ask about any that appeared to be taking too long.

But the Board, this board and previous boards, has never expressed the slightest interest in getting periodic status reports from any of their department heads. Permit status. Client status. Cases filed. Workloads and Caseloads. Backlogs. Staffing levels. Calls for service. You name it — the Board never asks about it. They get no regular reports about such things.

Liberty repeated that the County is very easy to deal with. “They are awesome!” Liberty declared. “They are great!” The enthusiastic Ukiah businessman concluded by offering to tell anyone who’s interested how great a place Mendo is to do business.

No one else came forward to comment.

McCowen, seeing that Supervisor Pinches was reluctant to support the idea, decided that not supporting it now would create a problem. “If we were going to kill this we should have killed it when it first came up. We knew at that time that if any version of the program were to be approved it would result in the County foregoing some amount of revenue. So if we did not want to send a message that Mendocino County is encouraging of business, we should have said so then, because it makes it that much worse to take this position now where we are currently headed and we're going to turn this down. I never thought that this program would necessarily create a rush of people coming forward to start a project where they otherwise would not start a project. But it does help change the perception. Rightly or wrongly there is a perception that Mendocino County is anti-business. With the level of publicity that this issue has had, if we don't follow through with it, my concern is that we would reinforce that perception.”

Hamburg: “If this had come up last time I would have been perfectly happy to put it aside and table it because we had a 2-2 [Supervisor Pinches was out sick the last time the subject came up]. In a situation where you have that kind of a vote there are two things that can be done. One is to say that the motion fails on a 2-2.”

McCowen: “There was no vote. There was no motion.”

Hamburg: “That option was not taken in deference to John Pinches [being absent]. It was my feeling that we are a board of five members and five members should get a chance to weigh in on it. But I think that goes to your comment, Mr. Chairman, that we shouldn't drag this on again if we are going to kill it. The reason we didn't go to a vote was because we had only four members present.”

McCowen: “My comment was to the original time it was on the agenda when it had a five-vote approval in concept to go forward. That was the time to kill it if we were not going to do it.”

Hamburg: “I think that was in deference to the two members of the board who wanted to move forward with it. My feeling about it is the same as it was last time. I don't know where the $50,000 is going to come from. It seems to be the most logical place to take it is out of the reserves. I am not in favor of going into reserves. I think the research that [Planning Director] Roger [Mobley] has done indicates that this has only had marginal success in the few counties that have tried it.

"I agree that what is most important to a business when it's trying to get started is the speed and clarity of the process, rather than fees. I'm also concerned that this is another thing for the Planning and Building Department which is about 35% understaffed down from about 36 to about 22, seriously understaffed. One more program on their plate is not going to speed things up....  I have not heard any outcry in favor of this. I know we got a letter from the Employers Council and a letter from [a realtor group] but I have not had a single business person in my district contact me and say that we really need this, that this is something that would be good...."

Lame Duck Supervisor Kendall Smith pointed out that the fee waivers are not being done anywhere else in the State.

“No real changes are proposed. There’s nothing to address actual economic development. Expediting the process is more important. Meeting deadlines is more important.”

Supervisor Carre Brown, one of the proponents of the idea, said, “It's unfair that to say that there was no support. This could become a model. We can't afford to offer other incentives. If the $50,000 is not used, it’s a moot point. At least it sends a message, maybe more than a message.”

Pinches: “Building permit fees are projected to be the same this year as last year. Maybe it'll be bumped up. We have reduced the expenses of Building and Planning by about $300,000. So maybe reducing staffing results in more economic activity. … Where would this $50,000 really come from?”

McCowen replied that “it all comes out of the general fund. The general fund would provide a subsidy to Planning and Building if people actually took advantage of it.”

Pinches: “This might be a four or five year budget process because you won’t know if someone’s entitled to that because some of this stuff can take up to five years.”

McCowen: “The director would have to make the determination based on the objective information that was presented. It would ultimately be a judgment call.”

CEO Carmel Angelo: “I am not convinced that $50,000 would be expended or lost in this process. We are talking about a six-month pilot program. I'm not certain that in the next six months we are going to have a boom here in development and that $50,000 is going to be spent like that. We do not need to augment the Planning and Building budget by $50,000 today. If that is determined to be necessary in the next three to six months, the board will be informed. If the Planning and Building department needs the $50,000 we can deal with that in August. But I just don't see it happening.”

McCowen: “Before we entertain a motion I would like to determine if there is support for this because I don't want to do something that would send the wrong message. We have all five supervisors saying they are very supportive of encouraging business. If there is not support for the motion then I would prefer a motion to table this. That would not have the same negative connotation as voting it down. This is a pretty modest program. It's a pilot program limited in duration, no more than six months and a maximum of $50,000. We don't know if any of this money would actually be spent for this purpose. If we need to replenish the [Planning] Department's revenue we can certainly do that. This is not just a fee waiver for any project coming down the line. It's a fee waiver for a project specifically tied to job creation. Unless the applicant can demonstrate to the director's satisfaction that the project actually involves job creation there will be no fee waiver. So investing $50,000 to create living wage jobs, ideally — and it's not guaranteed that they would have to be living wage — they would have to be jobs. But creating jobs in the current economy is something that I think is worth potentially putting $50,000 on the line for. Job creation is a worthwhile priority.”

Pinches: “Why not just give them a fee reduction right away? That would be an incentive. This is like the big federal government tax credits.”

McCowen: “You want to make sure that they actually create the jobs though. Otherwise everyone walks in and says, Yes. I'm creating jobs.”

Pinches: “I assume that if someone is building a $1 million building they have to be pretty serious about putting some employees in it. I don't think you have to worry about that. It's a trust issue. These are business people out there. Are we trying to say we don't trust them?”

Mobley said he didn’t think processing fee rebates would be much of a problem because he didn’t expect there would be that much participation. “It would be great if there were,” Mobley added, “but I don’t see that as an issue. People mention that fees are too high fairly frequently. Fee reduction is an important thing to consider. We are working on efficiency and clarity. We are working on that. But the problem that we find in the department is that there is a perception that we are not very friendly or that we don't move fast enough. Any action that we take that helps improve that perception I see as a benefit to the department and to the county as a whole.”

Pinches: “If a person comes in and says I am going to create four jobs, why don't you give him the 80% fee reduction right then rather than worry about it? And who is going to inspect and follow up three or four or five years later? If he's going to build a million-dollar building he is probably going to put some workers in there. So I would not worry too much. You want the incentive to get started! If you say that if you do this then we will pay you back for five years down the road—”

McCowen: “Well I don't think we're talking about four or five years.”

Pinches: “But that's what you’re talking about!”

McCowen: “Excuse me. Let's get from Director Mobley how he would see that working.”

Mobley: “I think the idea is that the project would be built in a reasonably short period of time and that's when we would ask where the evidence of whether the jobs have been created, not four or five years later.”

Pinches: “So let's say they got final inspection on the building, then that's when you would reimburse a percentage of the fee?”

Mobley: “Once the business was established. If someone is building a spec building obviously we are not going to see that users are in there and jobs are created. So there is a lag time. You could change this approach if you so chose.”

Pinches: “If I'm going to vote for something I want to make sure I know how it works. I don't want to say that we will vote for it today and work out the details later. I want to know how it works right now before I vote for it.”

Mobley: “The way it is presented is they would pay the fee upfront before they get the building permit.”

Pinches: “They would pay the whole fee?”

Mobley: “The whole fee. And they would be reimbursed when we establish that the jobs were created.”

McCowen: “And you would expect that you would make that determination probably by about the time the project was completed?”

Mobley: “Close to that, yes. Not years later.”

Supervisor Brown jumped in to make a motion to approve the recommendation to implement the job stimulus pilot program as presented from June 1 to November 30, 2012.

But there was no second.

The argument resumed.

Hamburg: “It sounds like that motion would apply to the workers who are going to construct the project. It’s job creation for a very short period of time while the building is being constructed. That's different than what the original concept was.”

Pinches: “It is. But you still have the $50,000 cap there.”

After a short break, Pinches’s modified recommendation was boiled down to implement a six-month job stimulus pilot program commencing June 1, 2012 with job creation criteria as stated on staff memorandum with funding not to exceed $50,000 with proof of job creation to be at the discretion of the Planning and Building director.

The Board finally voted 3-2 for the six-month pilot program with Hamburg and Smith dissenting.