The supervisors strolled down memory lane at their mid-August meeting, straining to recall that in 2009 they'd received $28,000 “for the creation of a report on the technical assistance and financing needs of business and microenterprise in Mendocino County.”
Even by Mendo standards, three years is a long time to wait for a report, especially a collection of rah-rah free enterprise clichés of no value whatsoever to small business.
The taxpayers got ripped off again, and what else is new? The report opens with this “Executive Summation”:
“You cannot spend your way out of recession or borrow your way out of debt. — Daniel Hannan, Member European Parliament.”
Wrong, right out of the box. Of course you can spend your way out of recession and borrow your way out of debt! That’s the American way. It’s worked for decades, and government spending of the New Deal type would do it again through a federal jobs and work project, not that that's likely to happen.
For example, the $28,000 work product belatedly delivered to Mendocino County advised us:
• “Many businesses have exhausted the liquidity built up over the years making it difficult for them to expand and take advantage of future opportunities should they arise.”
• “Due to the shortages of job opportunities an increased demand for self employment and microenterprise development services has occurred as individuals look to replace their household incomes.
Translation: Out of work? Mill closed? Fish gone? Have you tried selling seaweed?
• “…this is the worst downturn they have experienced according to the 2012 Business Conditions Survey Report recently completed by the Employers Council of Mendocino County. The result is a lack of confidence on the part of businesses to borrow.”
(Note that for $28,000 they couldn’t even conduct their own survey. They had to use a skewed collection of opinions solicited by Mendo’s neo-Babbitts which only generated 25 responses, hardly enough to draw any credible conclusions from.)
• “Small businesses are very reluctant to incur debt to build up inventory, hire employees, or for other purposes.”
• “Local public and private lenders concur that there is a need to provide additional public business loan funds to take out existing high interest debt and replace it with low interest debt with an extended term.”
Try getting one from the Savings Bank of Mendocino.
• “Economic indicators and interviews also lead us to concur that the winery and winery support economic sector is expanding slowly. Therefore, an onsite outreach program to these businesses … would result in additional companion loans that would expedite this expansion and create employment opportunities.”
O yea. Give wealthy wine people cheap government loans.
• “The health and wellness of Mendocino County residents is paramount to the county’s economic growth and development.”
These penetrating insights were prepared by a certain Mr. Lucas of Community Development Services in Lake County, which is even more economically screwed than Mendo.
Lucas also came up with these illuminating observations: “The leading legal agricultural crop in Mendocino County is wine grapes.”
And “There are three Hispanic dentists.”
We’re also told that Mendo's population includes a few Indians and lots of “artists,” and that Broadband access would be good for small business.
And there’s a big hunk of generic small business report thickener that reads like it was downloaded directly from the Small Business Administration website.
* * *
After a few introductory remarks by Mendo's Deputy CEO Steve Dunnicliff, consultant Lucas himself appeared at the podium where, in a better-ordered world he would have been placed under arrest for fraud.
Supervisor Hamburg was aware that Lucas's report was simply a compilation of the obvious. “Everybody knows that businesses are withering and dying for lack of funds. I mean, even businesses that have been successful for a decade or more are having trouble getting credit lines just to maintain their payrolls and so on because the banks are just so tight right now.”
Dunnicliff: “There is a list of recommendations in this report and one of those recommendations is specifically geared toward this item. One of the things I envision…”
And we'll pause here at envision to warn the reader that whenever a government bureaucrat goes envisioning, it's going to cost you money.
Dunnicliff bumbled on "…is the Executive Office working with EDFC to insert some of these as contractual deliverables and have EDFC take a lead role in getting some of these things taken care of.”
What things? No one asked.
Hamburg apparently knew what things: “Yes. I saw that in your agenda summary. On page 10 you talk about vineyard property being a major asset of those families, wine producing families, and the asset devalue, you know, with assets devalued, succession may be a critical issue. Could you elaborate on that a little bit?”
Lucas: “That was a reference to the decline in property values especially in that industry and the fact that family business, family ownership and ranching, farming is a strong part of, I think, the community culture. And that when property is devalued it makes it more difficult for family members, sons and daughters, to continue with that business. That's all that reference was about.”
Hamburg: “Is that related to state tax obligations in particular?”
Lucas: “It's just sort of a general statement.”
Hamburg: “A general statement.”
Lucas: “Yes. There wasn't — it's not something that we followed up on in-depth on this because it kind of went down the slope and — we don't have any other observations on that.”
Hamburg: “Okay, I won't go any further into that.”
This pointless exchange seemed to imply that some wine operations were having financial difficulties because even with the already generous estate tax allowances the incompetent, free-spending descendants of Lord Pinot were unable to keep the family estate solvent.
Hamburg then veered off for a riff on his beloved intoxicant quoting partially from the report: “’In a study conducted in early 2009, it was estimated that marijuana was approximately two thirds of the local economy, or about $1 billion at that time. The cash is there, but we did not include that sector in this report.’ You talk about the marijuana industry. We haven't talked about marijuana here for two weeks! What's going on?”
Supervisor McCowen explained: “We haven't met for two weeks.”
The audience giggled.
“That's true,” laughed Hamburg. “Being perhaps a $1 billion industry — ‘the cash is there’ — I'm just quoting the report — ‘the cash is there but we did not include that sector in this report.’ It really is the elephant in the living room.”
McCowen: “I have to comment too. I really object to the inclusion of ‘in a study conducted.’ Well, what study? What legitimacy does that study have? Or did somebody make some computations on the back of an envelope based on assumptions that they personally pulled out of the air? I actually think that it's very irresponsible to try and quantify the extent of the underground economy. We know it's there. We know it's significant. There is no credible way that I'm aware of to get a handle on exactly the dimensions of it. Therefore I think it's irresponsible and counterproductive to try to quantify it. That's just an editorial comment.”
Hamburg: “I kind of went right over that sentence that you mentioned. It just kind of struck me. The biggest cash producing industry. Yesterday we were talking about the crop report. Well, obviously everybody knows what the biggest crop in the county is. But we don't talk about it. (Laughs) It's just one of those things.”
McCowen: “Well, the last Commissioner that talked about it…”
Hamburg: “…didn't last very long. I know.”
They were referring to Ted Erickson who was fired as Ag Commissioner in 1979 for including marijuana in the County’s annual crop report.
The only Supervisor who appeared to have carefully read Lucas's report with an eye toward what it was supposed to do was Supervisor John Pinches: “I see these recommendations as very weak. I'll give you an example of that. Most of them hit on banks and community development finance institutions and things like that. But there's no recommendations. For instance, there's no mention that you can't start a business in this county sometimes because you can't get a water hookup. There is no mention of land-use issues. There's no mention of water restrictions being part of these recommendations. I found that kind of disappointing. We talk about the lenders in this area. If you go to recommendation number 7, it says ‘local public and private business loan providers and technical assistance providers should provide on-site outreach to timber processing.’ Well, three years ago we tried to talk Wells Fargo Bank into just extending or making an interest-only loan for $2 million and County staff and the rest of us worked feverishly for about two weeks. And they were unable to work with a major bank to even do that! We couldn't even do that! And that cost 250 good paying jobs in Mendocino County and it cost us the best market for our Douglas fir supply of timber which our timber tax and everything else that comes from it. We were not able to do that. I was just notified the other day that one of our local banks, North Valley Bank, is leaving the Ukiah Valley in November. So we're going in the wrong direction. I don't see these — I see these recommendations as kind of like we're doing more of the same. More of the same means we have been failing. If we pay for a study, I'd like to see something a little more significant come forward. I'm not sure I have all the answers but this is just kind of a static study. It's just more of the same.”
McCowen: “I agree. Supervisor Pinches raises some valid comments regarding the difficulty in businesses securing the proper infrastructure in some cases. I would also favor an amendment to acknowledge that there is a significant underground economy locally but that it is really impossible to accurately quantify the exact dimensions. That's my view.”
Lucas: “As a loan packager and underwriter, I agree. It's hard to — you know it's [dope] there — but you can't quantify it.”
McCowen: “You can't quantify it. That's part of the nature of the underground black-market economy.”
Supervisor Carre Brown tried to defend the report: “If you look on page 13 under infrastructure, second paragraph on page 13.”
Supervisor Brown was referring to this paragraph: “Infrastructure — The relatively small population of Mendocino County, combined with the vast, geographically disparate area, has historically made the county-wide development and subsequent maintenance of basic infrastructure extremely difficult. Deferred maintenance continues to accumulate, and public infrastructure built quickly at the end of World War II is now in need of upgrading. With regard to our lack of water, many areas of the county have been restricted from allowing new water connections due to concerns about the availability of supply for existing users. In 2009, mandatory water rationing in many areas of the Ukiah Valley provides a particular highlight on the urgency of our need for solutions to our lack of available water.”
Pinches wasn’t impressed. “My basic comment is that these recommendations are extremely weak. We have proven that we don't have much control over any of this. To work with the banks to make them — I don't think you have much ability to dictate bank policy. Basically the policy of most banks is that you have to prove that you don't need the money before you can borrow it.”
Hamburg: “That's kind of the current climate.”
Pinches: “You know the old saying, the definition of bank is they issue you an umbrella when it's clear, but they take it away when it starts raining.”
Dunnicliff: “The point that Supervisor Pinches has brought up is a very valid point. The county has already submitted another planning technical assistance grant application that would result in identification of obstacles to economic development and a strategy to address those obstacles. What may very well come up in that study is going to be land zoning issues, potentially, the lack of broadband. That particular study that has not yet been funded, but it would go thoroughly into these issues. This particular study was intended primarily to guide the CDBG program and the CDBG program is essentially limited to microenterprise assistance and business loans. So the scope of this is a much more limited study in my opinion and we have another comprehensive wider reaching study that we have submitted for funding that would address many of Supervisor Pinches’ concerns.”
Let’s see if we get this right. Dunnicliff is agreeing that the $28,000 was a waste of money because the “weak recommendations” don’t address the “obstacles” to economic development. But another, bigger, study — that’s not funded yet — will address them.
Hamburg: “The report does seem kind of weak and the recommendations are kind of weak. But maybe what's weak is our economy. There just aren't any earthshaking ideas out there or we would be doing them! We are in a situation where we are just plodding along trying to do small things that might help. Micro-enterprise! A few years ago, or a few decades ago, we always talked about the new industry that is going to employ 350 people and it will be a big boon to the economy. Now we talk about the realization that 80% of the businesses in Mendocino County employ less than 10 people. We are a county of microenterprises. What we are trying to do now, the new strategy is instead of smokestack chasing, let's build on what we do well here, which are these little mom-and-pop operations. As long as they employ people we need to pursue them and try to strengthen them. The most important thing that I get out of this discussion is the need to have better communication with commercial lending institutions to make sure that they are aware and that some of their clients become aware of opportunities that they may not be aware of because it does really surprise me that we have money to lend that nobody is coming to borrow. So I think there are some disconnects that we can improve.”
Pinches was fed up and drifted into sarcasm: “Do you realize what the regulatory process is just if a kid wants to put up a lemonade stand?”
Hamburg: “It’s incredible.”
McCowen jumped in: “Don't ask, don't tell.”
Hamburg, sarcastically: “That's what's wrong with the economy, John. Too much regulation.”
The board voted unanimously to accept the study with the caveat that no one is able to estimate the size of the marijuana economy in Mendocino County.
Mr. Lucas concluded by saying that banks and local government agencies talk to each other more and that there should be more meetings.
Pinches wanted to add one more comment: “I disagree with that a little bit. When we were trying to save the sawmill we even got congressional support and we couldn't budge the bank's policy. So I'm not so sure I agree with that. I don't think being able to talk to banks more is going to change their policies. We even got real intense pressure applied from our congressman and they never yielded on their position. And it cost us 250 jobs in this county besides the loss of the major Douglas fir market.”
McCowen: “Not only did it end up losing jobs and the local market but the bank ended up losing a couple of million dollars. It was a very bad decision on the part of the bank.”
Pinches: “Because they tried to sell the furniture before they owned the house.”
Lucas, the $28,000 consultant, got in the last non-sequitor: “Local and regional banks are more responsive to these kinds of programs.”
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