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Inside Tuolumne Co. Gov: Economic Development

This is the fifth in a series of discussions about Local Government. The last dealt with one of the primary drivers in Government budgets – personnel and, specifically, employee compensation. This discussion will focus on economic development and why it is the lifeblood of any local jurisdiction, why a dedicated economic development function is essential to both sustaining and growing a local economy and its associated County revenue base.

It is important to understand that the cost of sustaining a level of government services increases annually. Employees’ costs of living, the cost of supplies, equipment and materials to do the work all tend to increase yearly. While revenues do tend to increase, they tend to lag the increase in costs. Our local revenues are all that have been consistently increasing in recent years. Revenues from the State and Federal governments have not kept pace and in fact have decreased steadily decreased year-to-year. The expectation for continued loss of State and Federal monies means our local tax base and hence our economy needs to grow meaningfully in order to cover the expected increased cost of providing County services. Enter economic development (ED). There are two functions that ED performs for a jurisdiction. One is growth, certainly; but often overlooked, is ED’s essential role in sustaining a healthy economy. Businesses are much like people: they are born, they grow and mature and they eventually die, sometimes naturally (the owner retires and doesn’t pass the business on) and sometimes tragically (a troubled local economy, unforeseen circumstance or poorly managed business leads to closure). When businesses close, active ED is needed to ensure that store fronts are timely filled with new businesses. When a new business starts up, an effective ED will help nurture that business as it grows. The second role is assisting economic growth in the community. To accomplish this, effective ED must both attract and retain additional business and industry to the County. To achieve these requires an active and persistent ED. A couple of success stories can explain what is possible and why it is important.

The SPI large log mill that was previously closed was reopened in 2011 resulting in over 200 jobs, and roughly $70-80M direct and indirect economic impact in the County annually. ED played a key role in encouraging the project and enabling the permitting processes for that event to occur. In addition, it is likely that had the large log mill not reopened the County also would have eventually lost the corresponding small log mill. The importance of that industrial infrastructure to execution of both our Tree Mortality and Fire-Safe efforts can’t be over-emphasized. ED also played a role in the realization of the construction and opening of Rush Creek Lodge. The economic impact? Our Transient Occupancy Tax (TOT) revenues fluctuate based on many factors but were generally growing about $100-300K a year prior to the Lodge opening. The first partial year the Lodge was open the revenues jumped by roughly $700K and the first full year those revenues jumped by well over $1.0M. Certainly, all those increases were not due only to its opening and subsequent operation. However, unlike other revenue sources (Property and Sales taxes e.g.) which the County shares with the State, 100% of TOT

revenues remain with the County. Add to both examples the County share of the improved property and sales tax revenues associated with the Mill and Lodge’s operation and employee wages. That is real money!

Significant effort is required for effective ED. Emerging local businesses need to be nurtured by ED working with partner entities. Existing businesses future plans need to be understood and supported. When those plans include closure, ED needs to assist in transition planning to ensure a sustainable local economy. Compatible new businesses and industry must be courted and attracted into our local economy. These entail being out there, attending trade shows and associations as well as individual potential businesses to market Tuolumne County. ED must be plugged into neighboring counties’ markets and broader business trends throughout the State and, in some cases, neighboring states. Active involvement with new business transitions into the County by working with the appropriate County Staff to make the those transitions as smooth as possible are key. This can include finding appropriate existing facilities or available developable property, enabling permitting processes, etc. This is no trivial effort.

How important is economic development to a community? A current reality is a good example. In the City of Sonora alone, several businesses on Washington Street are closing. Two large commercial outlets (OSH and Cost-U-Less) in the same shopping center have closed. None of this happened because the County and City don’t currently have an active economic development effort. They happened through natural attrition. However, the time those will likely stay vacant will be impacted by how rapidly an active local ED can be put in place and become fully effective. Without focused ED, any local economy will slowly but inexorably winnow away and with it local governmental revenues. This is particularly impactful in small rural communities.

This segment has addressed the importance of economic development to the primary driver in the bottom line of the County Government – that being revenue — and the ability to provide services to our residents and visitors. The next discussion will focus on what is currently the largest impediment to both retention and attraction of businesses and workers to our County – our Housing Market and how that impacts our economic growth. The final segment will summarize and tie all the preceding segments into a single picture how they all work together to determine how our Government can meet the basic wants and needs of our residents.

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