Slow and Steady

Some Capital Region counties are finally rising above the recession

Back Longreads Apr 1, 2012 By Andrea Kennedy

Parts of the Capital Region are experiencing the hopeful signs of recovery, partly due to the re-emerging health of its eastern neighbors.

Ryan Sharp, director of Sacramento’s Center for Strategic Economic Research, says positive spillover from the Bay Area’s economy tends to affect nearby metro areas before rural, agriculture-based counties, giving the region’s urban counties an economic edge. That advantage is leading some pockets of the Capital Region out of recession faster than others.

Counties within Sacramento’s metropolitan statistical area — El Dorado, Placer, Sacramento and Yolo — have been the first to see sparks of recovery. Moody’s Analytics Inc. senior economist Eduardo Martinez says residential construction permits issued in those counties are projected to nearly triple this year. He also estimates construction employment would gain an estimated 2,000 jobs in 2012, while other counties would experience flat or decreased construction activity.

Last year also saw a return to a moderate 2.5 percent inflation rate, indicating a long-awaited sweet spot of stability could prime metro markets for new business and economic expansion.

“A growing, healthy economy where businesses are expanding across the board means you’ll have businesses adding on, new buildings from scratch, but also you’ll have confident workers with growing paychecks,” Martinez says.

Dr. Suzanne O’Keefe, an economist and economics professor at Sacramento State, says tracking the unemployment rate and job growth is key to defining economic well-being. “Because it shows you how many jobs actually are being created, [job growth] is one of the best markers of how the local economy is doing,” she says.

The state Employment Development Department reports that in December the four-county metro area recorded a 0.8 percent increase in job growth over the previous year, and each county also marked unemployment decreases of between 1 percent and 2 percent, leading to some of the lowest unemployment rates in the region.

O’Keefe says the public sector has been one of the steady, stabilizing forces behind those numbers. When the private sector widely opted for layoffs, the government opted to retain employees and instate furloughs.

“Even when business was losing lots of jobs, when construction employment was way down, government was kind of steady relative to those areas that saw a big drop,” she says. “Also, when there’s big increases, government is kind of plugging along steadily. So it’s kind of a stabilizing factor, even during our budget crisis.”

And now, the private sector is finally growing. Sharp says no county-specific metrics track each incoming business, but it’s clear the region got a boost from an economy-driving advocate: the Sacramento Area Commerce and Trade Organization, a member-run organization marketing the region to businesses globally.

“We identify those areas where the region has great opportunity and a competitive edge to bring in companies in certain industries,” says Bob Burris, SACTO’s senior vice president.

For counties climbing out of the recession, SACTO’s role in attracting new business is paramount. According to former Grubb & Ellis senior vice president Clyde Rawlings, because of the region’s abundance of commercial vacancies, construction dollars mostly fund refurbishments, not the new property development critical to luring inbound businesses.

“When it comes to speculative development that really drives the market, there’s zero on the books,” he says. “It’s going to be a very rare sight this year still.”

“When it comes to speculative development that really drives the market, there’s zero on the books.”

Clyde Rawlings, former senior vice president, Grubb & Ellis

Once responsible for bringing to town businesses like Intel Corp., Apple Inc., NEC Corp. and Hewlett-Packard Development Co., SACTO’s recent deals continue to infuse investment into its six-county jurisdiction. Today, that investment comes from an increased number of overseas companies drawn to perks and low real estate and construction costs in the Capital Region.


“Over the last year or two, we’ve seen a dramatic change in the amount of foreign direct investment and actual foreign movement in firms relocating or setting up facilities,” Burris says. “In fact, one in every four companies we’re working with right now is based overseas.”

YOLO COUNTY

Yolo County recently saw the fruits of SACTO’s labor. Though the county still ranks highest in unemployment within the metro area at 13.2 percent, Yolo had a banner year with incoming manufacturing firms, and it expects a nearly 6 percent construction increase in 2012.

In February, Burris attended the ground breaking of a new 70,000-square-foot manufacturing plant for Japanese sauce and seasoning producer Nippon Shokken U.S.A. Inc. The company’s current headquarters in Torrance, Calif., also would relocate to West Sacramento for closer proximity to the company’s first U.S. plant.

Burris says SACTO, along with Nippon Shokken’s local broker and the city of West Sacramento, helped close the deal.

“We helped identify West Sac as a good target for them based on all the criteria they let us know,” Burris says. “We connected them to West Sac, and then West Sac did an incredible job answering questions, making them feel at home, getting them in the ground — literally — and then developing.”

Nippon Shokken President Chikara Kurosaki says the city’s friendliness to incoming businesses combined with available natural resources influenced his decision.

“The city of West Sac has been very cooperative to us, and there is a lot of quality water to manufacture our products in that area,” he says.

Nippon Shokken’s move to Yolo County comes less than a year after another Japanese manufacturer, tool manufacturing company Mori Seiki Co., brought a 185,000-square-foot manufacturing plant to Davis, another win with SACTO’s help.

SACRAMENTO COUNTY

Sacramento County, at 10.9 percent unemployment — average for the state, but low for the Capital Region — also has seen incoming foreign business thanks to SACTO. Korean-based Youil Solar Corp. opened its national headquarters near Capitol Mall last year, representing what Burris calls growing momentum from the clean technology industry in the metro area.

“Roughly half of the companies that we’re talking to are related to clean technology, solar and the products surrounding solar, the inverters and fasteners and tracking systems,” Burris says. “This is a tremendous region for solar on the market side, so that will continue to attract a lot of activity here.”

Moody’s Martinez says that activity is at least partially stimulated by Assembly Bill 32 mandating that 33 percent of energy sold by private utilities come from renewable sources.

Another infusion to Sacramento County’s business economy is the establishment of Folsom’s 700,000-square-foot Palladio at Broadstone lifestyle center.

“This year, we have had an abundance of leasing activity, new retailers, restaurants and office openings,” says Gloria Wright, Palladio’s general manager. “I think one of the great successes we’ve had thus far in 2012 is that our 60,000-square-foot office building is (nearly) 100 percent leased.

At full occupancy, the mall would provide roughly 2,000 jobs. Last year when tenants started moving into the center, Sacramento’s unemployment rate decreased by 1.8 percent.

Of all SACTO’s counties, Placer is emerging as the recovery’s frontrunner with an unemployment rate of 9.5 percent.

“Our strength over the past year or two has really been in business expansions,” says David Snyder, Placer’s Economic Development director.

Paramount Equity Mortgage, Esurance Insurance Services Inc., ClearCapital.com Inc. and Purple Communications Inc. are hiring in South Placer, he says, and Roseville’s retail mecca is expanding as well. Costco Wholesale Corp. and Wal-Mart Stores Inc. are entering the market in Auburn, and the Auburn Airport Business Park recently welcomed new businesses that have doubled or tripled in size, including Miltenyi Biotech and Quality Metal Fabrication. Growth has even hit the high country and Lake Tahoe regions with the Squaw Valley USA/ Alpine Meadows merger and Northstar-at-Tahoe expansions.

“One in every four companies we’re working with right now is based overseas.”

Bob Burris, senior vice president, Sacramento Area Commerce and Trade Organization

The business swell feeds Placer County’s high per capita income of $49,000 — a leap ahead of most other counties and a close second to El Dorado County. Snyder says strong income levels and a population heavy in young families and successful wealthy retirees pave a smooth path to economic recovery.

BEYOND THE METRO

But where some see assets, others see draught. Instead of marking job growth, Nevada County recently saw an unemployment drop of 1.5 percent (9.7 percent total) combined with a 1.3 percent job loss. Economist O’Keefe says job loss paired with an unemployment drop indicates a rise in discouraged workers who have stopped seeking work altogether.

Amador County, at 12.7 percent unemployment, also felt the double whammy of drops in both unemployment and jobs — its jobs alone decreasing a debilitating 6.5 percent, the EDD reports.

O’Keefe explains that differences between the counties determine the strength of their economic recovery. These widely rural, agricultural-based counties typically face more economic and employment challenges due to the nature of their industry sectors, jobs base, population, educated demographic and location.

“We have a beautiful agricultural state,” she says, “but that can lead to volatility in employment.”

Ron Mittelbrunn, director of the Amador County Economic Development Corp., says Amador hopes to boost employment by diversifying the job base, now strong in agriculture and wine tourism. An attractive geographic locale, however, does not necessarily attract the firms that could stimulate the growth Amador needs.

“We’re just far enough away from the metropolitan area where business attraction has not been the thing that we can hang our hat on,” says Mittelbrunn, adding that Amador has in the past petitioned to join SACTO.

Though counties without the advantage of SACTO on their side may not hit equitable unemployment and income levels, they do see job growth. The path to recovery is simply longer and slower.

“Some counties started from a much worse-off position,” O’Keefe, says. “Now they have a much larger hurdle to climb because their unemployment rates are so high.”

The EDD reports San Joaquin County’s unemployment rate of 15.9 percent decreased 2.2 percent last year, and job growth increased by 1.9 percent. Moody’s statistics show hundreds of those jobs would employ construction workers.

“The (Interstate 5) corridor is going to be a multiyear project, and that provides a positive attitude,” says John Solis, executive director of the San Joaquin County WorkNet. Construction at the Department of Corrections and Rehabilitation brings additional jobs and opportunity for long-term employment.

Meanwhile, Solis says agriculture still stands as San Joaquin County’s economic bread and butter.

“Agriculture is still first and foremost,” he says. “The wine industry is flourishing in every aspect from Tracy to Lodi, and Lodi is retaking the Napa Valley.”

But with agriculture as the county’s prime industry, low income levels have little opportunity to drive market activity. Moody’s estimates San Joaquin’s per capita income has increased the least in the past two years, growing only about $1,350 — half as much as the next-slowest growing incomes in Yuba, and ranking with Yuba as the two counties with the lowest incomes.

Yuba County, though saddled with the lowest per capita income and one of the region’s highest unemployment rates at 16.4 percent, tells the region’s most hopeful economic story. Sparks of momentum flicker as unemployment decreased 3 percent last year, and job growth increased a whopping 3.3 percent.

Brynda Stranix, president and COO of the Yuba-Sutter Economic Development Corp., says the fluctuation is not unusual for the county. “We historically have double-digit unemployment anyway, she says. We just weather it a little better from a historical perspective.

One of the two counties outside the metro area benefitting from SACTO’s watchful eye, Yuba has seen significant activity because of its proximity to Sacramento’s city center and jobs, housing affordability and demand from nearby Beale Air Force Base, plus the adaptability to a diverse industry base.

“There are potential locations for just about any type of industry, be that food and agriculture to technology companies that would be connected to Fremont-Rideout (Health Group) and even potential for research and development up there,” says SACTO’s Burris. “Those economies are diverse enough (for) just about anything that we could attract in the four-county metro region.”

Though Moody’s numbers show a slight drop in construction, Stranix says with the help of an aggressive business expansion and retention program, Yuba has shown growth in manufacturing, private service and food services.

“While they may not pay optimum wages, they are a big employer,” she says. And with that employment comes recovery.

Though the geographic, demographic, industrial and agricultural differences that enhance California’s Capital Region put some counties behind the recovery curve, each county is set to see its respective revival over time.

“I think they will see growth,” O’Keefe says, “but I think that even after that growth we will still see differences across counties in California.”

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