Modesto can prepare for long-term growth

Modesto Mayor Jim Ridenour is about to give his annual State of the City address to an audience of business leaders.

It's billed as an overture from local government to local business in a time of crippling recession coupled with an unemployment rate upward of 17 percent.

Ridenour says he wants the city to reach out to private industry so employers can get busy and start hiring more people.

Trouble is, experts and business owners say there's little a local government can do to provide that kind of spark.

"If there were an easy answer, politicians would have figured it out and they would have done it," said Shawn Kantor, professor of economics at University of California at Merced.

But, says Kantor and others, local governments can be effective in the long term. "What they can do is set that stage for future economic growth," Kantor said. Here's what experts said about how to do that:

— Take a hard look at taxes and fees -- but don't lower them just for the sake of lowering them.

Businesses frequently complain about burdensome fees and taxes. They stifle growth and keep companies from hiring, they say.

But wholesale lowering of fees during tough times isn't necessarily the solution, says Jan Ennenga, executive director of the Manufacturers Council of the Central Valley. For one thing, that could lead to cities not having enough money to pay for infrastructure.

What's important is for cities to understand the fees they charge within a larger context of state, federal and even global regulation, Ennenga said. She calls it "the layer cake of regulation."

"It might be helpful for them to understand what the other pressures are that businesses are facing from other regulatory agencies," Ennenga said.

Modesto is taking steps to do a version of that. This year a citizen panel will analyze all of Modesto's fees, the purposes behind them and how they work -- or don't work -- in concert.

— Be realistic about economic development strategies.

Don't waste taxpayer dollars trying to attract jobs that don't fit your community, says Jessica Trounstine, assistant professor of political science at UC Merced.

"One of the mistakes that local governments can make is to try to attract say, high-tech industry, to a community that has a low education level," Trounstine said. "You're going to attract business, but they're not going to be able to hire any of your local residents."

Cities should build an economic development strategy around the community's unique assets, not what leaders hope will one day happen. In Merced, that means aiming for businesses that can work well with the research being done at UC Merced. In Modesto, that might mean attracting green tech companies that could work in an agricultural setting.

Trounstine cautions cities to steer clear of trendy ideas in economic development. Twenty years ago, cities got caught up in the idea of boosting their economies by building big attractions such as conference centers, aquariums and theme parks. That works for places such as San Francisco that have a lot of visitors, but it's unlikely that Modesto could build a water park and boost the city's fortunes.

— Be strategic about job creation.

When some industries expand their work force, it creates a ripple effect throughout the local economy that spurs other firms to hire, said Ennenga.

It's called the "multiplier effect." For example, in manufacturing, for every job created in food processing, 3.2 jobs are created elsewhere in the region, Ennenga said.

"All jobs are good because they're jobs, but some jobs are better than others," Ennenga said. "You need to say, 'What kind of jobs will give us the most return on our investment?' "

— Consider spreading government payrolls to cover more government workers.

Stanislaus and San Joaquin counties have fewer than the average number of government employees, but higher than average government salaries, said Jeffrey Michael, director of the Business Forecasting Center at the University of the Pacific Eberhardt School of Business.

Compared with the national average, local governments in San Joaquin and Stanislaus counties employ 10 percent fewer workers, but pay them 20 percent more, Michael said.

"One of the biggest employers in the area is actually local governments," Michael said. "One way local governments have structured themselves is lean work forces with higher salaries as opposed to more workers with lower compensation."

Michael said it's possible that adding jobs to government payrolls could help solve one of businesses' perennial complaints: the slowness of bureaucracy.

"We hear all the time from people who say it takes three times longer to get a project approved here than in other parts of the country," Michael said. "Maybe more warm bodies would help."

— Don't forget existing businesses.

Cities devote scarce resources to luring new businesses, but it's important to remember the companies that are here, Trounstine said. For example, San Jose realized that Silicon Valley firms needed easy access to a global work force, so it expanded its airport. "You have to figure out what the industry needs," Trounstine said.

The mayor's State of the City luncheon is scheduled for 11:30 a.m. to 1:30 p.m. Wednesday at the DoubleTree Hotel. To purchase tickets or reserve free seats, call 577-5757 or go to modchamber.org.

Bee staff writer Leslie Albrecht can be reached at lalbrecht@modbee.com or 578-2378. Follow her at Twitter.com/BeeReporter.

This story was originally published February 15, 2010 at 3:57 AM with the headline "Modesto can prepare for long-term growth."