As Oakland looks forward to a new mayor in the coming year, it faces giant-sized challenges in employment and business development that would be daunting for any city administration.
Unemployment stands at 17.3 percent, compared to a national rate of 9.6 percent, and several large companies have deserted the city, taking hundreds of jobs with them. So business organizations and city officials are focused on strategies to make Oakland a business-friendly environment to attract new companies and new jobs. Some hope it can rival its more alluring neighbor across the Bay with similar amenities and a lower cost of doing business. But many hurdles remain.
“We have strong economic clusters with expansion opportunities in the fields of healthcare, commercial services, government and education, transportation, food processing and products, entertainment and tourism,” said mayor-elect Jean Quan. She adds that Oakland can market its ‘One Stop Business Center’ and business tax and enterprise zone incentives better.
One of the biggest recent blows was an announcement by Clorox in September that it would move 500 jobs to Pleasanton next year. Clorox, whose headquarters have anchored downtown Oakland since its founding in 1913, said at the time that it plans to keep its headquarters in Oakland, where as many as 1,000 other employees currently work. The company through a spokesman declined requests for an interview.
Clorox’s move came on the heels of shipping line APL’s decision to leave Oakland last year. APL, which was headquartered in Oakland for more than 30 years, shifted to Arizona in late 2009, taking 300 jobs with it.
The ripple effects were felt on local businesses, especially restaurants and cafes that had depended on APL employees’ patronage.
When APL pulled out, Fountain Café and La Salsa Mexican Grill, restaurants at 14th Street and Broadway, lost up to 5 percent of their sales. Having already lost 10 to 15 percent of their sales from the recession, the thought of losing more customers to the Clorox pullout breeds still more worries.
“My biggest fear is if I lose more business,” said Samer Salameh, the Fountain Café co-owner.
In Oakland, joblessness is compounded by a mismatch between available skills and available jobs. In recent years, mid-level workers laid off in manufacturing, warehousing, computer technology and administrative work often have nowhere to go but down to entry-level jobs, say employment experts.
“There are no jobs in the field they have been working in, and they have to find entry level work in a whole new industry,” said Randy Joseph, peer advocate at the Oakland Private Industry Council.
A chain reaction of unemployment and the resultant low purchasing power hurts other businesses. “There is not a lot of money coming into Oakland, so a lot of companies want to leave the city,” said Joseph. Jobless people have little to spend on products and services.
“Downtown Oakland is like a ghost town today. There are lots of businesses but no one’s buying anything,” Joseph said. The commercial real estate vacancy rate for Oakland did not change much from last year. It was 20.6 percent in the third quarter of 2009, and for the same period this year, it decreased slightly to 20.1 percent. By comparison, the vacancy rate in San Francisco for the third quarter of 2010 is 14.5 percent.
Much depends on how Ron Dellums’ newly anointed successor writes the prescription for curing Oakland’s unemployment problems.
Quan remains optimistic about Oakland’s economic future. Even though Oakland lost jobs from APL and Clorox, she thinks Oakland is still in a position to lure other San Francisco companies that may be sick of the city’s higher costs of doing business. “We have all the advantages over San Francisco,” said Quan. “Basically, we’re cheaper and more interesting.”
Don Perata, who narrowly lost to Quan, described Oakland as “business unfriendly.” As a candidate, he had proposed more bond financing for Oakland, noting he previously secured $38 billion in bonds when he was state Senate president.
But Oakland has been making efforts to welcome business. A year ago, the Oakland Metropolitan Chamber of Commerce successfully lobbied City Hall to approve a tax incentive program to attract companies to the city. Under its terms, any company with more than 20 employees that locates to Oakland can get a tax rebate on its business license for three years.
“It’s a good selling point,” said Scott Peterson, public policy director for the Chamber. However, the city doesn’t really promote this program upfront, he adds. “Because of the revenue problem, the city does not want to give away any money so they are not selling the program.”
Oakland City Council member-at-large Rebecca Kaplan, who came in third in the mayoral race, predicted that Oakland will recover by focusing on emerging industries, like recycling, and by applying for grants to develop its urban infrastructure. “There are a lot of federal grants for infrastructure,” she said, “pedestrian safety, bike safety, transportation upgrades.”
It’s unfair to compare Oakland to the country or the state, said Peterson, adding that Long Beach, a port city with similarly diverse demographics, offers a better comparison. Long Beach, however, is doing better with about 13.7 percent unemployment, according to the state Employment Development Department (EDD).
Although Oakland’s jobless rate is high, neighboring Richmond is in much the same boat, with 18.1 percent unemployment.
Many Oakland boosters are trying to attract companies by highlighting the good weather, transportation, central location, affordability, and the burgeoning arts and entertainment culture. The Chamber’s Peterson acknowledges that one of the challenges in attracting employers is addressing concerns about public safety and the school system, which was under state receivership for six years until recently.
“We need to look at the value proposition of Oakland,” said Peterson. Despite the negatives, Oakland has a lot of good things going for it, such as its central location in the Bay area, a good transportation network, lower rents than San Francisco and commercial vacancies, he said.
Large employers in the health industry like Kaiser Permanente, Children’s Hospital, and Alta Bates have made Oakland their home for years. Alta Bates Summit Medical Center is creating a new patient care pavilion that will create 2,000 new healthcare jobs when complete in 2014.
Medium-sized food production companies such as Numi Tea, Mother’s Cookies, and Premier Organics have also settled in Oakland.
Some business people pin their hopes on the green energy sector to help get Oakland moving again.
“After the Gulf oil spill, there’s money from private capital sources for clean energy. Several of them are settling in Oakland,” said Bill Nork, a commercial broker in Emeryville and Oakland with Cornish & Carey Commercial Newmark Knight Frank, a global commercial real estate group.
The health care sector is also expanding according to Nork, observing that more commercial office spaces are being rented out for doctors’ offices, x-ray labs and dentistry practices.
Strategies for Resurgence
Sectors like manufacturing, which were traditionally strong in Oakland, are on the decline, and new ones haven’t emerged. McKinsey and Company, in its 2008 report ‘Taking Stock of Oakland’s Economy,’ concluded that Oakland could shift focus to emerging industry clusters such as health and life sciences, logistics, art and design, and green tech.
One promising project is BART’s Oakland Airport Connector project, which just got a green light, in a development anticipated to create thousands of jobs, 25 percent of which will be for Oakland residents. And a new air traffic control tower at Oakland Airport could also create hundreds of construction jobs.
In a strategy that offers an answer to outsourcing, Oakland has also latched on to the EB5 green card, a program that encourages foreign investors to create companies – and jobs – in designated regional centers. Administered by the East Bay Regional Center and the Bay Area Regional Center, the program allows foreign investors to obtain green cards if they invest $500,000 and create 10 jobs within two years.
The Bay Area Regional Center received approval in July 2009 from the Department of Homeland Security to administer the EB5 program. “We are still putting together a project for Oakland in which foreign investors can pool their investments in such a way that it will create 10 jobs per investor,” said Mike Hastings, a principal of the Bay Area Regional Center. The Center is looking for projects in real estate, infrastructure and the Port of Oakland.
“Many people from China, Korea and the UK are taking advantage of this program,” said Deborah Acosta, A target industries specialist for the City of Oakland Business Development.
New media also is offering a jolt of optimism. Oakland-based internet radio company Pandora is hiring, Acosta said. The company didn’t respond to requests for comment.
But it’s a long haul. Most companies in Oakland tend to be small except for the likes of Clorox and Kaiser Permanente. Acosta said almost 85 percent of the businesses in Oakland have fewer than 10 employees. So even if small entrepreneurs grow, they could take a long time to fill the gap.
For now, City Center bears a forlorn look. Everyone is wary of the consequences of the Clorox move. “The Clorox move is going to be a blow to Downtown. We’ll have fewer people wandering around here spending their money,” said Peterson.
Outside the Clorox building on a recent Friday at quitting time, employees were rushing home and few were in a mood to talk. The lone exception: Corinne Truso of Oakland, who seemed unperturbed by the move to Pleasanton and her impending new commute.
“We have got BART,” she said, quickly adding, “And it’s better than being laid off.”
This story is published in collaboration with the Bay Citizen.