SHARED PROSPERITY and INCLUSION the Future of Economic Development Strategies in Silicon Valley

SHARED PROSPERITY AND INCLUSION The Future of Economic Development Strategies in Silicon Valley written by Sarah Muller, Sarah Zimmerman, Bob Brownstein, Amy B. Dean and Phaedra Ellis-Lamkins �� SHARED PROSPERITY AND INCLUSION The Future of Economic Development Strategies in Silicon Valley written by Sarah Muller, Sarah Zimmerman, Bob Brownstein, Amy B. Dean and Phaedra Ellis-Lamkins SHARED PROSPERITY AND INCLUSION The Future of Economic Development Strategies in Silicon Valley written by Sarah Muller, Sarah Zimmerman, Bob Brownstein, Amy B. Dean and Phaedra Ellis-Lamkins �� AUGUST 2003 iii TABLE OF CONTENTS FORWARD v LETTER FROM THE FAITH COMMUNITY ix LETTER FROM MEMBER OF CONGRESS xi SHARED PROSPERITY AND INCLUSION THE FUTURE OF ECONOMIC DEVELOPMENT STRATEGIES IN SILICON VALLEY EXECUTIVE SUMMARY 1 INTRODUCTION 9 THE PROBLEM 13 THE CHALLENGE 19 THE RECORD OF PUBLIC SUBSIDIES IN SAN JOSE: 23 THE SAN JOSE REDEVELOPMENT AGENCY: A SUMMARY THE SOLUTION 29 CONCLUSION 41 APPENDIX A: THE RECORD OF PUBLIC SUBSIDIES IN SAN JOSE: 45 THE SAN JOSE REDEVELOPMENT AGENCY CASE STUDIES 79 APPENDIX B: COMMUNITY IMPACT REPORT 105 NOTES 123 ACKNOWLEDGEMENTS 133 AUGUST 2003 iii AUGUST 2003 v FORWARD Shared Prosperity and Inclusion is part of Working Partnerships USA’s eight-year effort to reform and improve government economic development policies. Our main goals are to broaden public participation and to assure that economic development programs create real, measurable community benefits. is innovative campaign has encompassed a series of policy initiatives, each breaking new ground on the path towards accountable and effective economic development. In 1995, Working Partnerships successfully pushed for the inclusion of worker-oriented criteria in a Santa Clara County program that offered property tax rebates to manufacturers. Our proposal called for preferences for firms that paid wages equal to or higher than industry averages, provided heath insurance, and offered child care programs. In 1998, Working Partnerships focused its efforts on the successful campaign to pass San Jose’s Living Wage Policy. e adoption of that landmark ordinance served as an official recognition that people who work and live in San Jose should be able to do so with dignity and a decent standard of living. e Community Benefits Initiative called for in this document builds on this progress. It promises to move our region toward practices that more carefully and consistently link economic development programs with the well being of all our residents. Silicon Valley’s leading businesses move capital, labor, technology, and information across borders with ease, and oen with little or no regard to the impact their actions have on local communities. Yet many of these same corporations oen have a disproportionate influence when it comes to formulating local economic development policies. is imbalance calls for reforms that place the real needs of our communities ahead of the service of any particular special interests. As this report demonstrates, large public subsidies can sometimes generate tax returns and an illusion of economic activity without providing any significant benefits to working families and neighborhoods. is failure of public sector action is oen a result of closed and restricted public processes. All too oen, economic development decisions benefit the few rather than the many because those few were the only ones invited to participate in the decision-making. AUGUST 2003 v SHARED PROSPERITY AND INCLUSION In Shared Prosperity and Inclusion, Working Partnerships proposes to address both the substantive and the procedural flaws in government economic development programs. Implementation of a Community Benefits Initiative will not automatically reduce government subsidies to development. But it will require that future subsidies be both environmentally sound and economically fair. Of equal importance are the proposed changes in the decision-making process that guide economic development. e current process usually allows for only token community representation, brought in aer critical parameters for a project have already been set. e result may be input from just a few “handpicked” individuals, compliant but oen unrepresentative, who claim to be speaking on behalf of the larger community but in reality make deals behind closed doors with little or no community input. Working Partnerships proposes transforming this exclusionary process into one that encourages authentic participation. e changes outlined in this report will create a system that engages the full community in setting economic development objectives. e principles underlying the Community Benefits Initiative also add a new perspective to the broader debate about the role of government in this period of rapid technological, organizational, and economic change. At present, the two major political parties oen disagree on the appropriate role of government. Some call for lower taxes and less emphasis on entitlements that are designed to protect the poor. Others seek new efforts to assist and subsidize businesses as a way to reduce poverty. e critical question usually le out of this oen-polarized debate is: “what is best for our overall community?” With this report, Working Partnerships seeks to create a process that will make the consideration of community benefits a standard and routine part of official economic development plans and actions. When that happens government agencies will be required to do more than just dispense economic favors to special interests. ey will also have to consider issues of concern to the larger community, such as the maintenance of decent wages, the accessibility of affordable health care and housing, the availability of training and career path development, and the leveraging of public resources to steer growth in directions compatible with community well being. ese questions are not unique to the Silicon Valley. e practices we put in place here will serve as a model that will be of interest anywhere people and governments are trying to harmonize economic development with community needs in the face of rapid change. vi WORKING PARTNERSHIPS USA AUGUST 2003 vii SHARED PROSPERITY AND INCLUSION FORWARD History has shown time and again that social contracts do not arrive as unsolicited gis bestowed by either business or government. Instead, they must first be envisioned, debated, fought for, refined and finally enacted before society can derive their benefits. Our country has risen to meet this challenge many times in the past, whether it was the New Deal, the drive for women’s suffrage or the still-unfinished quest for civil rights and gender equity. In each of these struggles and in many others, workers in unions, citizens in meetings, neighbors in civic groups, students and teachers, clergy and religious communities have joined together in ways that have demonstrated that change is possible, that courage and a commitment to good public policies can and do prevail and that justice, while oen delayed, cannot be indefinitely denied. Amy B. Dean FOUNDING PRESIDENT AND CHAIR OF THE BOARD vi WORKING PARTNERSHIPS USA AUGUST 2003 vii AUGUST 2003 ix LETTER FROM THE FAITH COMMUNITY aith leaders have long urged government to enact policies that protect human dignity Fwith the moral imperative to ensure that basic human needs are met. In these times of economic difficulty, especially for our most vulnerable residents, the faith community urges San Jose’s leaders to closely examine their expenditure of public dollars. As city leaders contemplate using tax proceeds to guide the redevelopment of San Jose, we urge that they take into consideration how this use of resources affects the well being of all our community’s residents. A Community Impact Report (CIR) policy for large scale development projects requiring public subsidies is a good first step in objectively ensuring that city resources are being used to meet the community’s most pressing needs. A CIR policy would help officials determine whether publicly subsidized development projects provide ample benefits to San Jose such as living wage jobs, affordable housing and access to healthcare. It will be an invaluable tool in helping officials ensure the health and well being of all our residents. Our community of faith holds earnest convictions toward ensuring economic and social health for all people. Hence, our support for government policies must be consistent with our social teachings. at is why we are urging the establishment of a CIR policy—an innovative tool that will help guide officials in enacting government actions that defend human dignity. Blessings and Peace, Bishop Patrick J. McGrath Bishop Beverly Shamana CATHOLIC DIOCESE OF SAN JOSE CALIFORNIA-NEVADA CONFERENCE, UNITED METHODIST CHURCH Rabbi Janet Marder Imam Tahir Anwar SOUTH BAY ISLAMIC ASSOCIATION Rev. John Freesemann THE INTERFAITH COUNCIL ON RELIGIONS, RACE, ECONOMIC AND SOCIAL JUSTICE Dick Roe COUNCIL OF CHURCHES AUGUST 2003 ix AUGUST 2003 xi LETTER FROM MEMBER OF CONGRESS I am writing to highlight my support for the South Bay Labor Council’s visionary proposal to bring broader community benefits to publicly funded projects. is approach promotes a transparent, economic development process that allows for input by all stakeholders early in the process. Maximizing the use of public funds to ensure a positive outcome for all is a challenge we understand and face as well in the U.S. Congress. Because redevelopment of the

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