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COMMUNITY PLANNING General Plan Economic Development and Employment Element
ISSUES The following section discusses the major economic development and employment concerns facing the City. It also identifies the trends that will influence the key decisions that the City must make to provide direction for future economic development and employment planning efforts. LAND Land represents a primary resource for economic development. Without this resource, economic development and/or expansion is severely constrained, limiting opportunities for private investment, business and employment. Therefore, land has been identified as a major economic development issue for Pasadena. One of the most serious constraints pertaining to future economic development in Pasadena is the limited amount of vacant, suitable land for expansion or development. While many small vacant parcels can be found in the City, they are not suitable for development due to such factors as size, shape and location. As might be expected, the limited supply of land, in conjunction with strong demand, has led to price increases, particularly in the past five years. Land prices have risen so sharply that, in most cases, only commercial development can support these prices. In addition to its cost, the difficulty in assembling land for economic development is further compounded by small parcel sizes and fragmented ownership. In spite of these problems, the demand for land is strong, and its limited supply will ensure its ever increasing price. Higher land prices will essentially dictate commercial development rather than industrial development, since the latter, in general, cannot support current land prices, or anticipated increases in land costs. Nevertheless, retention of existing industrial firms, as well as facilitating their expansion, should be a high priority. On the positive side, there are two opportunities or advantages related to land in Pasadena. The first advantage deals with land prices. Although industrial land is more expensive compared to competing areas in the metropolitan region, commercial land is relatively cheap, especially for office space. This price advantage, in part, accounts for the interest in office development within the City. The second advantage that the City has in addressing land problems is the availability of a redevelopment program. The redevelopment process can provide public assistance for facilitating or stimulating economic development through land acquisition, assemblage and, in some cases, write-down. The basic land related issues for the City are whether it should intervene in the market place to make land available for development and if so, for what objectives of purposes. through its redevelopment powers, the City has the ability to acquire and assemble land for development. In addition, it may, in some cases, also underwrite the cost of land, thereby improving development feasibility. The questions are under what circumstances and for what kinds of development should the City exercise its redevelopment powers and in what situations should it write down land costs. The answers to these questions are tied to several factors. These include the City’s economic development objectives, the degree to which a proposed development meets the City’s economic development and employment needs and priorities and development feasibility without City assistance. Of these factors the City’s economic developments objectives would appear to be the most important. A threshold question would then be, "Does the development project for which the City if being asked to exercise its redevelopment powers help to achieve these objectives?" It also points out the need for the City to establish clear, concise and explicit economic development objectives, including a clear policy relative to use of the powers of eminent domain. The City can also intervene in the market place through its regulatory powers. It can determine what kinds of uses can be developed at certain locations. These powers can also be used to promote certain land uses be restricting other competing land uses, e.g., limiting industrial zones to industrial uses only. In this manner, the City can use its regulatory powers to encourage those land uses at those locations where it feels will help to achieve its economic development objectives. Given current development trends and land prices, it would appear that without City intervention the private market will continue to develop commercial uses, primarily office space, and that industrial land uses will continue to decline. The decision to intervene in the market place with either or both of the aforementioned City powers would rest on the determination of whether these trends are consistent with the City’s objectives. EMPLOYMENT There is a significant employment base within the city that represents a substantial number of employment opportunities. However, long term shifts in the types of jobs have occurred which affects the labor force. While there has been an increase in the total of number of jobs, they have been mostly concentrated in the services industries which, for the most part, created new opportunities in the white collar occupations. However, the overall increase in jobs has masked a decrease in manufacturing employment. Manufacturing employment has been in a long term decline in Pasadena and given this trend, local blue collar workers cannot expect to find additional employment opportunities within the City. Moreover, it will prove difficult to conserve the exiting manufacturing jobs, due to lack of industrial land in the City. However, numerous blue collar opportunities can be found in nearby communities, particularly in the San Gabriel Valley, Burbank and Glendale, where collectively, there are at least ten times more manufacturing jobs than in the City. It should be noted that even these employment opportunities, which presently seem so numerous, will probably decrease in the future. Local employment diversity, as a result of the long term shifts, will diminish as already evidenced by the growing concentration of employment in the service industries. The above trend does not bode well for those workers with lower educational attainment and low skill levels. These workers, which include a disproportionate number of minority group members, will find it difficult to obtain or transition into future employment opportunities unless adequate education and training are provided to ensure their competitiveness. Still, not all jobs in the service industry require high skills, many with low skills. Another employment concern is the mismatch between the skill requirements of existing and future jobs and the skill levels of the under employed and unemployed. it may not be possible or desirable to create jobs for existing skill levels. It may be more desirable to raise or instill skill levels to meet the needs of existing and future jobs, since inadequate skills are a major barrier to employment. The long term growth in service industries is expected to provide additional white collar employment opportunities, especially technical occupations related to electronic data processing, telecommunications and automated processes. This type of employment will require more education and technical skills than is normally associated with manufacturing employment. These problems involving employment skills present opportunities for coordinating appropriate education and training programs. These opportunities can be identified in dialogue with private sector to identify existing and future employment needs and their skill requirements. The coordination of education programs, primarily for school age persons, with training programs oriented to post-high school individuals can provide the unemployed portion of the labor force with marketable skills which can be used to seek employment in the City or in the region. Employment opportunities in the City will continue to increase primarily due to the development of new office space. In addition to this direct employment, indirect employment will result from stimulation of the local economy through business purchases of goods and services from other businesses. Office development not only impacts employment, directly and indirectly, but creates related employment opportunities. There are complementary relationships between office space, restaurants and shopping facilities. Eating and shopping facilities complement office employee needs and desires, which in turn expands employment opportunities for low and semi-skilled workers in non-manufacturing industries. There are several employment related choices facing the City:
JOBS TO MATCH SKILLS OR SKILLS TO MATCH JOBS There are several factors which suggest that raising the skill levels of the unemployed and underemployed to meet the requirements of current and future job market would be more effective than attempting to attract the kinds of jobs which match their current skill levels. First, as mentioned earlier, land prices have all by precluded the possibility of additional manufacturing or industrial development which offer these kinds of jobs. Secondly, even if the City was successful in attracting such jobs, long range trends indicate that these jobs may eventually disappear from the United States. Finally, tailoring the City’s economic development efforts to attract developments which provide blue collar employment opportunities for low and semi-skilled persons, while meeting their immediate needs, would not be in their long term interests. LOCAL VERSUS REGIONAL JOB OPPORTUNITIES Given the fact that there are at least ten times the number of blue collar employment opportunities in the surrounding communities as are found in Pasadena, it would be unreasonable to attempt to meet the employment needs of blue collar workers entirely within the City. In a metropolitan area with the number and diversity of employment centers, it cannot be expected that one community would be able to address all of its employment needs within its borders. Over the period of years certain communities have evolved into particular types of employment centers. For instance, cities like El Monte, Monrovia and Burbank have become primarily manufacturing and industrial centers with little office development, while cities like Pasadena and certain parts of Los Angeles (Westwood, Wilshire Corridor and Century city) have become centers for office employment. Inasmuch as Pasadena imports most of its white collar labor force from outside the community, it would not be unreasonable to export its blue collar labor force to other communities which offer theses types of job opportunities. Efforts to improve accessibility to these jobs could include solving any transportation barriers and closer monitoring of employment opportunities in these other communities by local employment agencies. IMPROVED REPRESENTATION OF LOCAL LABOR FORCE IN LOCAL JOBS There are two basic methods of expanding the percentage of local jobs that are filled with local labor force. The first is a program designed to enhance the chances of local workers to fill local job opportunities as they become available. this would include job training, close monitoring of employment needs and job openings and active promotion of the local labor force. While the City can encourage local employers to hire residents, requiring them to hire a certain percentage of local workers as a condition of approval for new developments may not only be unenforceable but would put the City in a uncompetitive situation. amore positive approach would be for the city to have the capability to offer a prospective employer a pool of potential employees trained to meet his or her needs. The second approach might be to expand housing opportunities, particularly affordable housing, so that more of the local workers can become residents of the city and part of the local labor force. However, it should be noted that given the metropolitan relationship described earlier, residential preferences and the general pattern of job mobility, it would be unreasonable to expect a significant increase in the percentage of locally-employed residents. ALTERNATIVE OPPORTUNITIES FOR JOB TRAINING This is, perhaps, the most difficult employment issue to address in today’s economic and political climate, with the loss of traditional resources for job training programs in the face of growing needs, the problem of adapting the local labor force to meet the requirements of a changing economy, some jobs will never return. Job skills obsolescence rather than the lack of jobs appears to get the critical employment issue of the day. With the shrinking resources, local government and educational agencies must look at closer coordination and sharing of resources if they are to meet the challenge of training or retraining the labor force for a changing economy. The Skills Community expanded to include private sector participation, inasmuch as they have a vested interest in having a skilled workforce trained to meet their needs (e.g., PCC "contract training" for employers). The private sector can play a more active role in job training, In other parts of the country, it has either undertaken job training programs on its own without government assistance or has contracted with educational institutions (see above), governmental and non-profit agencies to carry out job training programs with a guarantee that graduates would be hired. JOBS FROM ECONOMIC DEVELOPMENT VERSUS JOBS FOR PASADENA RESIDENTS This issue is some what tied to the issue of increasing resident labor force participation in the local job picture. While it may appear that local economic development efforts are not being directed toward meeting the job needs of the City residents, one must assume a regional perspective. Given the interdependence of cities within the Los Angeles metropolitan area, it is not possible nor even desirable that each community become insular and attempt to meet its individual job needs within its borders. While it is true that the great majority of jobs being created by current economic development efforts are going to non-Pasadena residents, by the same token, other communities are providing jobs for Pasadena residents, as is pointed out by the 1980 census finding that 56% of the local labor force work outside the City. Still, in view of the fact the Pasadena is "importing" ever greater number of employees, it is not unreasonable to seek somewhat improved performance in that regard. A greater percentage of jobs held by resident labor force would result in less traffic congestion and greater sense of community, from the employer’s standpoint it would mean less absenteeism and possible greater employee performance and productivity. CITY REVENUES FROM ECONOMIC DEVELOPMENT The retail sales tax has become the major source of revenue to the City since the passage of Proposition 13 in 1978, when revenues from the property tax were reduced by 60%. However, from 1975 to 1980, Pasadena’s taxable retail sales did not increase as rapidly as in the State, County and the adjacent cities of Glendale and Arcadia. The development of new regional shopping facilities in these adjoining cities accounted for substantial increases in their retail sales, and to a relative decline in Pasadena’s retail sales. With the opening of the Plaza Pasadena in 1980, the city has recaptured a portion of the retail sales, along with their corresponding revenues previously lost to adjacent communities. It is unlikely, however, that the City can totally regain the sales and revenues from the market share it enjoyed in the early 1970’s, partly because Pasadena’s trade area has been reduced by the competing centers. In addition, these major shopping facilities are generally anchored by the same chain stores so that no shopping center has gained an appreciable marketing advantage over the others. However, it should be noted that Pasadena’s facilities are significantly smaller than the other two. The new facilities, by at large, have stabilized trade area boundaries related to the three cities and surrounding environs, although Pasadena is still subject to additional competition from the south. Of greater importance is the projection for very little population growth for Pasadena’s trade area. Therefore, future increases in Pasadena’s retail sales revenue are expected to be relatively modest. There are several opportunities, however, for stimulating additional retail sales tax revenues. The City should capitalize on the dynamic growth experienced in the auto dealers and restaurant trade categories. Auto dealers contributed more new revenues than any other sector between 1975 and 1981. While this business may continue to be a significant source of revenue, it is doubtful that its full revenue-producing potential can be attained without first resolving its expansion needs. Revenues from restaurant trade activity grew substantially during the same period. this can be further enhanced by encouraging office development and travel/tourism. Pasadena’s growing travel/tourism industry presents another opportunity to generate additional revenue. Increased promotional efforts could attract more visitors and tourists which support shopping, eating and lodging facilities. This would generate additional revenues through retail sales and transit occupancy taxes. The latter tax is directly related to tourism/travel activity and accounted for 1.5 million of revenue is fiscal year 1982. Its full potential is currently limited by the lack of adequate hotel fiscal year 1982. Its full potential is currently limited by the lack of adequate hotel accommodations and a market for additional hotel rooms has been identified. There are other sources of revenues from economic development. These include the property tax, building permit and development fees, and business license and utility taxes. The city receives approximately one-sixth of the total property tax collected for each economic development project. Nearly $415,000 in new property taxes could be anticipated during the next five years, assuming that the 3.7 million of planned/ proposed office space were developed. Similarly, this same amount of office space would generate slightly more than 44.0 million in new development fees. It should be pointed out however, that is a particular development occurs in a redevelopment project area, the property taxes it generates would revert to the Community Development Commission rather than the City General fund until such time as the outstanding redevelopment bonds are retired. The issues related to revenues generated through economic development would include: Are the revenues generated by new development sufficient to offset the costs associated with it, i.e., is there a net benefit to the City from new developments. Previous studies, such as the Downtown Redevelopment Project SEIR, have found that new developments more than pay their own way and represent a positive cash flow of net revenues to the city. However, it should be noted that the finding of positive net benefit is limited to fiscal impact only. Due to the impossibility of placing a monetary value on them, intangibles and unquantifiable impacts have not been included in the calculations used to arrive at the net benefit finding. These would include such factors as loss of views, increased congestion, changes in the community scale, character and quality of life, and human and business displacement. Inasmuch as revenues from new development are necessary to maintain a level of services to support a certain quality of life, then a certain amount of community change must be accepted. The question then becomes one of determining the point at which intangible, yet real, losses resulting from additional development begin to offset any gain in net monetary revenues. These value judgments must be taken into consideration in addressing the issue of what is the true net return to the community from new development. HOW CAN PASADENA'S RETAIL MARKET BE EXPANDED There are several approaches to expanding the retail market potential of a given area. The first is through population growth. More households represent more buying power. the buying power of an area which is not growing substantially can also be increased by raising the income of residents which increases the amount of disposable income, a key indicator of potential buying power. The third is an actual expansion of the market area through the offering of specialty goods which have a drawing well beyond the limits of the "normal" market area. The final strategy is to increase the number of potential shoppers through expanding the number of persons who come into the vicinity of retail facilities for other than shopping purposes, such as for employment or tourism. POPULATION GROWTH The first alternative would appear to be the easiest but is limited by regional population growth trends and the availability of job opportunities, transportation networks and housing. Again, population growth, like economic development, is not without its costs. If not properly planned for and managed, the gain in buying power resulting from increased number of households may be offset by the incremental costs of servicing them. SOCIOECONOMIC CHANGE Whereas the above is a quantitative approach to increasing buying power, there is also a qualitative approach. This can be accomplished by either increasing the income of present residents through improved job opportunities or by replacing lower income residents with higher income residents in process known as gentrification. Although this process has net positive economic benefits, its social implications are open to question. SPECIALTY MARKETS Finally, the City can expand its market area by offering specialty goods for which competitive markets are few and far between. Standard retail markets are determined by the locations of comparable retail facilities modified by market penetrations due to unique merchandise or marketing techniques. For certain merchandise lines, most notably high fashion clothing, there is a very limited number of stores serving extremely large market areas. While it is true that the market for this line of merchandise is limited, it is also growing with the general rise in affluence. Other retail outlets which would fall into this category include antique stores, unique, one-of-a-kind gift stores, certain lines of discount clothing stores and specialty bars and restaurants. INCREASE OF POTENTIAL SHOPPERS It has been shown in other economic studies that large numbers of office or other employees and tourists have a positive impact on retail sales, particularly in downtown. While these persons happen to be in downtown for other reasons or purposes, they often find shopping during lunch hour or after work a convenience and a pleasant diversion. It is particularly effective if the stores offer lines of merchandise which are not found where the employee or tourist lives. WHAT ARE OTHER POTENTIAL SOURCES OF ADDITIONAL REVENUES FROM ECONOMIC DEVELOPMENT? There are other sources of additional revenues from economic development, some of which have already been tapped but have the potential for further increases. Others have either not been explored or they have not proven to be politically acceptable. The City’s potential revenue raising capabilities may have improved with the Farrell Decision by the State Supreme Court. In this decision, the Court interpreted Proposition 13 as allowing local government to establish new taxes without two-thirds vote of the people, provided that they did not constitute an as valorem tax on the real property and the resulting revenues went into the General Fund rather than a special, earmarked fund. However, there is still some confusion and conflicting interpretation of this decision as to its final implications on local government’s revenue-raising capabilities. DEVELOPMENT IMPACTS One of the important issues regarding economic development concerns the effect of new development on the infrastructure and character of the City. While additional development is normally desirable in term of modernizing, maintaining and supporting the City, its impact upon the infrastructure and character can be significant, since it places additional demand on the circulation, water, power, and sewer systems and results in major physical changes. The City’s infrastructure, with the exception of some traffic capacity problems, is thought to be adequate to service known projects, although some modifications may be required to accommodate a specific project. Over time, however, problems could evolve through the cumulative impacts of development, since the number and size of future projects are not known. This could lead to serious deficiencies that could require substantial amounts of capital improvements, potentially at City expense. Since the city may have to share in the cost of expanding or improving the infrastructure, it should either be assured which there is adequate capacity to accommodate future development or that resources will be available to fund the needed improvements. Of particular concern is the traffic which will be generated from new office development. If this development becomes concentrated, the additional traffic could create peak-hours congestion in certain area of the City. A major portion of this congestion would be attributable to the 65% to 80% of the workers who will reside outside the City and will probably use the freeways and selected major materials in their commuter trips. Office development will also be the principal source of impact on the city’s character through the demolition of existing structures and changes to the urban fabric in terms of the scale, height, mass, and materials of excess office space. One of its consequences is potential vacancies created in older, smaller, less favorably located office buildings which are subject to predatory competition from prime office space when market imbalances occur. The lowering of rents as a result of overbuilding and excess office space contributes to this competition. Vacant office space, whether in new or older buildings, is not desirable in maintaining a healthy economy. New development, particularly large scale, has tended to polarize community interests based upon perception of its impact on the City. The City needs to address the development issue by achieving community consensus which is a prime requisite for successful economic development program. Community consensus, that is, public and private sector cooperation and the understanding of economic development goals and objectives must be achieved in order to realized the full benefit of economic development efforts. Housing in another potential problem in the new development will place additional pressure on the housing market as employees seek residence near their jobs. This will be particularly difficult for the low to moderate income wage earners, such as clerical and other support staff. These workers have double difficulty in that they cannot afford long distance commuting costs either. There are several issues relative to the impacts of economic development on community infrastructure and character. Consideration of these issues is critical in determining an appropriate economic development strategy and policies for the City. How much economic development can Pasadena absorb without losing the qualities which attract businesses and residents to it or at what point will Pasadena cease to be Pasadena and become just another faceless urban center. There is a saturation or tipping point for economic development at which the marginal increment in additional development does not result in added net benefit to the City or the law of diminishing returns sets in. This point can either be determined by infrastructure capacity, most notably the street system, or by community consensus that the price in terms of loss of community identity and quality of life is too high to pay for development in the BunderHill Redevelopment project Area in downtown Los Angeles is predicated on the ability of the city to come up with an alternative transportation system, as the street system in the area will soon be, if it not already reached its traffic handling capacity. In other cases, along the Wilshire Corridor (Park Mile) and Ventura Boulevard in Reseda, neighboring residents succeeded in placing limits on development that will make more compatible with the surrounding community. In the neighboring city of South Pasadena the residents approved a referendum it imposes a similar limit on future development. There is also the factor that the attractions and advantages which draw new developments to Pasadena, such as its identity, quality of life and relatively less congestion, may be eroded with each succeeding new development in other words Pasadena could strangle on its own success. This issue may be reduced to several questions:
WHAT IS THE PROPER BALANCE BETWEEN ECONOMIC DEVELOPMENT AND HOUSING NEEDS This issue has been brought into focus by a couple of recent zone change cases in which decisions had to be made between competing priorities of jobs and housing. In both cases, the need to make a choice was brought about by the need to create new development opportunities within limited land resources. As development continues to occur and absorb existing development opportunities, there will be added pressure to open up new areas for development. Inevitably, this will give rise to future conflicts between the competing needs of economic development and housing. This competition for land is particularly acute because it involves the potential loss of existing housing units. These units, because of their age, condition and location within or adjacent to developing areas, are vulnerable to removal from the city housing stock. Also because of their age and condition they represent a stock of affordable housing, a commodity is short supply in the city. Because of their affordability, these units are occupied by persons who can least afford to find replacement housing, if and when they are lost for non-residential development. Economic development also impacts the local housing market by creating additional housing demand which promotes upward pressure on prices and rents which, in turn, further aggravates the housing needs of lower-income residents. It was previously stated that one method of increasing resident labor force participation in the local job market would be to provide housing for the employees of the jobs created through the City’s economic development efforts. While there would not be as much a problem to provide housing for executive, management and professional employees, developing housing that is affordable to clerical and other lower paid workers is another matter. One of the reasons for the high percentage of non-resident workers may be the lack of affordable housing opportunities for this latter group. What all of this implies is a need for balanced growth in which the City’s housing needs are equally weighed against its economic development needs. It also suggests that the City needs to look beyond the jobs and revenues economic development may produce and begin to assess its total impact on the community. Should the City attempt to regulate office development or should it allow market forces to prevail. Office development is Pasadena to date has exceeded the level projected for 1987. If left unchecked, it could be reasonable assumed that market forces will develop as much office space that the market will bear regardless of whether this amount is in the City’s long term best interest. This raises questions of how much office space is in the City’s best interest, where should it occur, and when should it be developed. In short, should the City attempt to control the amount, locations and timing of office space development so as to meet its needs rather than those of the marketplace. Uncontrolled office development can lead to major problems if the infrastructure is not prepared to handle their impacts. Capital improvements and other mitigation measures should be closely coordinated with the pace of office development. Ideally, future development, rather than to institute corrective measures to handle the unanticipated impacts of unplanned development. One approach of ensuring that development does not get ahead of capacity would be to establish and annual limit tied to the absorption capabilities of the infrastructure. This concept has been utilized successful in the residential sector as a means of managing growth. While it does not necessarily set a maximum limit on future development, it does spread it out over time so the City does not find itself in a position of attempting to handle more development than it is capable of absorbing in a given time period. It implies that the City take the initiative in planning for future developments rather than having the market place dictate to the City. There are other impacts which result from uncontrolled office developments. These include visual impacts, undesirable land use and building relationships, and loss of order and coherence in the urban form. Although the proposed Downtown Urban Design Plan attempts to address these impacts, it is not a too designed to govern the location and timing of new office development. CONCLUSION Pasadena is at a crossroad in terms of its economic development. It can choose among a range of development policy options, each of which has implications of the future character of the City and the quality of life its offers. The preceding discussion was as attempt to bring out the relevant issues, so that and informed policy direction for economic development can be reached.
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