BEAVERTON CITY COUNCIL
BUSINESS ROUNDTABLE
SPECIAL CITY COUNCIL MEETING
JULY 24, 2006

CALL TO ORDER:

The Regular Meeting of the Beaverton City Council was called to order by Mayor Rob Drake in the Forrest C. Soth City Council Chamber, 4755 SW Griffith Drive, Beaverton, Oregon, on Monday, July 24, 2006, at 6:30 p.m.

ROLL CALL:

Present were Mayor Drake, Couns. Catherine Arnold, Betty Bode, Bruce Dalrymple, Dennis Doyle, and Cathy Stanton. Staff present were City Attorney Alan Rappleyea, Chief of Staff Linda Adlard, Economic Development Program Manager Robert Pochert and City Recorder Sue Nelson. Others in attendance were Governor Kulongoski's Economic Revitalization Team Member Mark Ellsworth; Economic Intelligence Specialist Christine Hamilton-Pennell, City of Littleton, Colorado; Director Dan Ripke, Center for Economic Development, California State University at Chico.

CONSENT AGENDA:

Coun. Stanton MOVED, SECONDED by Coun. Bode, that the Consent Agenda be approved as follows:

06131 Authorization for the Mayor to Award Contract for Beaverton Central Plant West Expansion

Coun. Stanton said she wished to amend the Recommended Action for Agenda Bill 06131, to ensure that the bid award does not exceed the budget allocation.

Coun. Stanton MOVED, SECONDED by Coun. Bode that the Recommended Action under Agenda Bill 06131 be amended by adding the phrase that the bid award "is not to exceed $727,950, without coming back to the City Council."

Coun. Stanton said the agenda bill authorized the Mayor to award the bid to the lowest responsible bidder. She said she wanted to ensure that the bid award would not be over the amount budgeted for the project; and that if the bid is higher than the budgeted amount that the award would be brought back to the Council. She said she wished to take this extra step since this project was not in the Capital Improvements Plan (CIP).

Question called on the motion. Couns. Arnold, Bode, Dalrymple, Doyle, and Stanton voting AYE, the MOTION CARRIED unanimously. (5:0)

PRESENTATION:

06132 Economic Gardening Presentation

Chief of Staff Linda Adlard said the Council has considered the question of how the City could support local businesses; and how to handle economic development. She said when she reviewed the information on economic gardening, she thought it was a concept the City should consider. She said economic gardening helps businesses with initial growth. She said the speakers had a great deal of experience and success with their economic gardening programs.

Christine Hamilton-Pennell, Economic Intelligence Specialist, City of Littleton, Colorado, reviewed Littleton's history and demographics, and gave an overview of Littleton's Economic Gardening Program. She said in the 1980's Littleton's local industries suffered an economic setback with massive layoffs and many businesses closed. To help the local economy recover, the Council hired Economic Development Manager Chris Gibbons whose charge was to help strengthen and grow local businesses. She said Gibbons and the Deputy City Manager Jim Woods connected with a Think Tank called Center for the New West and through their study, they developed the concept of economic gardening.

Hamilton-Pennell said that Gibbons and Woods investigated why the traditional economic development approach toward job recruitment had not worked. She said throughout the study they shared the information they learned with the Council and citizens. She said what they discovered was that country-wide 75-95% of all new jobs come from existing businesses; and 81% of those businesses have less than ten employees and generally less than $200,000 in revenue. She said they also discovered that three to five percent of all the companies produced the majority of the jobs; these were entrepreneurial companies that grew about 25% per year. She summarized that what they learned was that economic gardening is about entrepreneurs; entrepreneurs are people who perceive an opportunity and create an organization to do it. She said these entrepreneurial companies that are producing the majority of the jobs are called gazelles. Entrepreneurs create businesses, jobs, events and they are involved in essential and supportive activities. She reviewed entrepreneurial statistics world-wide.

Hamilton-Pennell said they learned that entrepreneurs need places where there is support for new ideas and innovations, where there is a favorable regulatory environment, and where there is support for the arts and diversity. She said they also need a workforce, peer networks, basic infrastructure, marketing and finance information. She said from this Littleton created an Economic Gardening Program that has an entrepreneurial approach to economic development. She said it was their strong belief that entrepreneurs create the jobs, not economic development. She said this program was built on growing and improving local businesses; it is a long-term commitment, not a quick fix. She said the city had to be willing to take its assets and use them differently over a period of time; it would not have immediate returns. She said additional information was available on Littleton's Web site www.littletongov.org.

Hamilton-Pennell reviewed what local government could do to support entrepreneurs. She said the three areas where government could help were information, infrastructure and connections. She said regarding infrastructure, Littleton: invested heavily in light rail; has a historic preservation program; developed/improved its trail systems and parks; rebuilt the street systems; helped improve the theater and museum; has a high-quality library; and has several programs to help counsel and support the youth (this resulted from the Columbine incident). She said Littleton also: developed education connections between the schools and local industries; Councilors and staff know and support local businessmen and businesses; provides connections to various resources such as the Small Business Administration, financial experts, etc.; and provides newsletters and information to the businesses to keep them informed on what is happening in the city and what services are available in all government levels.

Hamilton-Pennell concluded that in 1990 Littleton had 15,000 jobs; in 2005 they had almost 35,000 jobs. She said during that same period of time, the population grew only 23%; in the Denver metro area the population only grew 37%. She said while they could not positively say this was due to economic gardening, during that period Littleton did not spend any money in recruitment incentives or tax breaks to bring businesses into the city. She said also during this time, the sales tax revenue tripled.

Hamilton-Pennell reviewed the services that Littleton provides the businesses. Geographic Information Systems (GIS) provide computer mapping and database research to help businesses improve marketing, decision making and competitiveness. She said Littleton subscribes to several information services, including demographic, economic marketing, and lifestyle data services and provides this information to the businesses. She reviewed how this information is used to help businesses improve marketing and services. She reviewed how the city staff works with businesses to help them grow, including helping develop business strategies and niche marketing, identifying markets/customers, and providing access to early notice of construction and development projects. She said over the years they have had strong support from the Councils and the citizens for this program. She said there were several communities throughout the country that were following this program.

Coun. Stanton asked at what levels jurisdictions fall into the category of gazelle; such as the State of Colorado. She referred to the statistic that 3-5% of the companies were gazelles and produced 70-80% of the jobs; she asked if that was job growth or jobs.

Hamilton-Pennell said there were states that were more entrepreneurial than other states and Colorado was high on that list. She said those statistics were national and the gazelle companies produced 70-80% of the new jobs. She said this refers to businesses not jurisdictions.

Dan Ripke, Director Center for Economic Development, California State University at Chico, reviewed their experience with economic gardening. He said their original funding was from the Federal Government and their first model was a single county. He said the problem they encountered in the rural areas was that they did not educate the people. He said they did have success with the first grant; they created 47 jobs and seven new businesses in the community.

Ripke said the second pilot program was done through an Economic Development Administration Grant for a multi-county area, again in a poverty stricken area, and they had to do a Swiss-cheese approach to identify rural areas and businesses in that area. He said this program worked well because they worked with partners (other cities, counties and workforce pools) to get the word out about the program. He said the third pilot program was a rural technical assistance program and they partnered with a small company and used venture capital. He said these programs were very successful. He said three years ago Governor Schwarzenegger eliminated funding for economic development in California. He said as a result the State's economic development offices were adopted by other jurisdictions. He said in his office, they adopted six of the economic development offices. He said that increased their resource pool and they are using the additional resources to track the results of their economic gardening efforts.

Ripke said they were able to teach business owners how to use the information resources to improve their business. He said business success rates have increased and new markets have been created. He said business owners saw this as a positive use of their tax dollars. He reviewed cases of companies that were successful under this program. He explained how demographic trends are important in market planning and future projections. He reviewed workforce and population demographics and how planning for future marketing relies heavily on identifying the population's customer and workforce demographics.

Ripke said critical success factors for their program were: having a comprehensive resource center; a fast response time, especially with information; getting the best advertising; having a proactive system; understanding the information and knowing how to use the resources you provide; developing the infrastructure; and not treating all entrepreneurs the same.

Coun. Doyle asked if there were business owners who provide this service, at a higher cost, who are upset that the city or university provide the service.

Hamilton-Pennell said they were not trying to displace the private sector. She said if someone comes to them and says the city is displacing their service, then the city does not provide that service. She said in Littleton's experience that only happened once with a video conferencing company, so the city stopped offering that service. She said the majority of their clients are so small that they are not good potential clients for the private sector. She said once the companies get bigger, they often go off on their own. She said they also have a policy of not spending more than $150 per year per business in out-of-pocket costs; that does not count database subscriptions.

Coun. Doyle said he appreciated what they were doing and he knew there were businesses in this area that would use these services if they were available at a lower cost.

Hamilton-Pennell said if they find that a company is large enough to pay for these services, they will refer them to others who can do the work for them. She said they do this because they do not have the time to be a marketing department for a business.

Ripke said these programs were a walking brochure for the value of the information. He said the consulting firms like to send their clients to get the service. He said clients will go to the Small Business Development Centers (SBDC) and see the value of counseling, mentoring and coaching, but they need a great deal of hand-holding. He noted the SBDCs cannot do the clients' work for them. He said consulting firms will do the work but they are expensive. This is why these programs are valuable.

Hamilton-Pennell said they do have marketing consultants who do free seminars and provide free training to these businessmen.

Coun. Stanton noted California and Colorado received more taxes from businesses than Oregon. She asked what this would do for Beaverton as it only receives property tax. She questioned what niche this would fit into since this was not coming from tax dollars; the City could not say that it was giving value back to the businesses that had given value to the City.

Hamilton-Pennell said one way would be to focus on the fact that economic gardening creates jobs. She said if the community has good jobs with good salaries, then value will be captured at the business and retail level which makes those businesses more successful and raises the total value of the community. She said that was more indirect than sales tax revenue.

Ripke said in Chico they used money from different programs. He said in Mendocino County the Workforce Investment Board financed the program and through this program funded other regional initiatives (regional and sustainable agriculture, and the retirement cluster). He said Sonoma County financed its program and targeted specific industries they wanted in the region. He said they are now speaking with two Native American tribes to target their resources. He said they can focus the programs efforts in specific areas. He said it would help if the City could prove the economic impact potential of the program; and partnering with the private sector, particularly with financial institutions that stand to profit from such a program, is possible. He noted Umpqua Bank has sponsored their brochures; so the bank's logo goes on the information brochure that they use. He said a pilot project could also be done.

Hamilton-Pennell said funds could also be leveraged through the Workforce Development Centers and many economic gardening programs were going in that direction.

Ripke said Oregon also received a Kellogg Grant for a pilot program in eastern Oregon.

Coun. Bode asked if they did partnerships with community colleges for education. She said in this region there were many high-tech engineers looking for venture capital which is not in abundance in this area, as it is in Seattle. She asked if they helped people by showing them how to present their company and develop their business plans.

Hamilton-Pennell said venture capital is such a small part of financing that it can never be guaranteed that someone will get it. She said venture capital sources are not interested in investing until a company has been in business three to five years, they're showing high return on investment, they are looking for an exit strategy and some way they can be involved in that business. She said good ideas attract money if they are really solid and the majority of people who get their companies off the ground do not get venture capital; they get funding from friends, banks, their own personal investments and credit card loans. She said even if the business was in Seattle, the chances of getting venture capital were very slim. She said people have to understand how to turn their idea into a business without venture capital. She said very few of the really successful companies were started with outside financing.

Ripke said there are recognized regional angel networks and regional venture capital resources working to keep capital investments in the region to ensure that the business and its management stay local. He said the dark side of venture capital is that the investors wish to make a return on their investment and if a decision has to be made to off-shore a business to keep it profitable, the board of governance will decide to do what is profitable.

Mayor Drake said one of the interesting concepts in this region is that of working together; the cities have gotten together and realized it is better to work together toward each others mutual benefit rather than to cannibalize one another in developing business.

Hamilton-Pennell agreed and said they support any community that wants to start an economic gardening program because they are not seen as competitors; the region as a whole can benefit from all businesses being successful.

Ripke gave an analogy of growing a business and having a garden. He said while the factors are different, the nurturing factors are the same. He said they found that business, like gardening, is regional. Just as a redwood would not survive in the desert, if a business is doing well in a region it is better to strengthen and help that entrepreneur. The help they provide to businesses through economic gardening is like providing a little water and fertilizer to the plant.

Mayor Drake asked if they had encountered much criticism regarding government helping private business.

Hamilton-Pennell said this was a politically charged issue. She said on the whole, people have no objection to government helping small business. She said in Littleton there is a large Libertarian sector that is adamantly opposed to government subsidizing companies to come into the community. She said a Wal-Mart is proposing to come into Littleton and the Libertarian group is opposed to that; they think the city is supporting this development. She said the same group is very supportive of the Economic Gardening Program because they see it as supporting the independent business owner. She said because they are working with small business, they have not had that criticism.

Ripke said economic gardening is an opportunity to reinvest in the local business just like Beaverton's facade improvement program.

Coun. Doyle said this makes a great deal of sense in combination with the Open Business Technology Center. He said such a program could serve 80% of the businesses in Beaverton; and if the City could help that 80%, it could not hit a bigger home run. He said he hoped the City could pursue this as this is the type of thing municipal government should do for its community.

Mayor Drake said this was a major policy issue so staff was asking for Council approval to go in this direction.

Coun. Stanton asked if they had heard anything about the Open Technology Business Center. She said when this was discussed three years ago, she was extremely supportive because it was infrastructure; it provided the ground for someone with an idea to come in and grow a business that would benefit the community. She said she would need a different model to embrace this as it does not fall into the same infrastructure level. She said while she would like to support this, she wanted to hear an update on the incubator before the City decides to branch out.

Hamilton-Pennell said when Littleton started the program the first year the budget was $70,000; that was for the director's salary and supplies. She said the first employee the director hired was a half-time reference librarian because of the value of the database research. She said their current budget was just under $600,000, which is less than the economic development budget of most cities and it is less than the subsidy most cities give to Wal-Mart to locate to their town.

Ripke said there were many different ways to do economic gardening. He said Littleton's was very unique and very successful, which was why they continued to invest in the program. He said the Tomato on Steroids out of Kern County was another example; he said it was targeted at certain businesses. He said that could be another way to handle a first-run program.

Coun. Dalrymple asked if Littleton was as big as it would get or was there additional land that could be annexed for growth.

Hamilton-Pennell said Littleton was at 95% build out and would not be getting any additional land.

Coun. Dalrymple asked Ripke if they had any outreach programs related to areas that were outside of the city limits of Chico.

Ripke said they did not have outreach programs, but his work was regional and he covered more than 30% of the State of California. He said he worked with counties and cities individually to develop programs to meet their specific needs.

Coun. Stanton noted that Ripke did not differentiate between incorporated and unincorporated boundaries.

Ripke said that was correct. He said because everything is regional, especially in terms of business, employment and spending, one cannot differentiate between the two.

Coun. Arnold noted Ripke had referred to having strong well-educated local partners. She asked if he was talking about other districts or the Chamber of Commerce.

Ripke said the Chamber of Commerce was an excellent partner and they have excellent network connections; as were workforce organizations, labor organizations, business improvement districts, historic districts and redevelopment agencies. He said the education involves knowing what can and cannot be done, especially within the industry. He said it was important to meet with business and industry representatives as they are very vocal about what should and should not be done within the community. He said when the benefit of economic gardening can be proven to business and industry, they will support the program.

Hamilton-Pennell said in Littleton they worked closely with the Arapahoe Community College and industry leaders, to help start curriculum that relates to the needs of industry. She said they worked with them to develop an e-commerce course study. She said higher education has lost 90% of its state funding so the biggest challenge has been how to get the education sector back up to what it can be, to support the needs of business and industry throughout the state.

Coun. Bode said Oregon was experiencing the same disparity between education and industry needs. She used the health industry and education in this region as an example of the disparity between where services are needed and where the education centers are located.

Ripke said they were working to bring the two together in northern California.

Hamilton-Pennell reviewed a few examples of where education has responded quickly to industry needs.

Mayor Drake thanked them for sharing their expertise.

ADJOURNMENT

There being no further business to come before the Council at this time, the meeting was adjourned at 8:40 p.m.

APPROVAL:

Approved this 8th day of January, 2007.

__________________________________
Rob Drake, Mayor