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Agenda Item - 2021-12-21 - Number 5.1 - Economic Development Strategy 5.1 ��c E 4... COUNCIL REPORT NC ___ o QREGoNI' Subject: Economic Development Strategy Meeting Date: December 21, 2021 Staff Member: Scot Siegel, Director Department: Community Development Action Required Advisory Board/Commission Recommendation ❑ Motion ❑ Approval ❑ Public Hearing ❑ Denial ❑ Ordinance ❑ None Forwarded ❑ Resolution ❑X Not Applicable ❑ Information Only Comments: ❑X Council Direction ❑ Consent Agenda Staff Recommendation: Provide direction on an economic development strategy. Recommended Language for Motion: Move to direct staff to prepare an economic development action plan for review and approval in early 2022. Project/ Issue Relates To: City Council goals and work plan Issue before Council: ❑X Council Goals/Priorities City Council Goal: Support business investment and job creation in Lake Oswego. Council Initiative: Adopt an Economic Development Strategy and resource plan. ISSUE BEFORE COUNCIL What services and resources should the City provide as part of its economic development strategy? 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeosweao.city Page 2 BACKGROUND On September 21, 2021, the City Council received an update on current market conditions and trends, prior City plans for economic development, and options for drafting an economic development strategy. (See Attachment 1) As part of the study session, consultant Mary Bosch reviewed the types of economic development services that cities typically provide, including services that Lake Oswego provided when it had a program (disbanded in 2013), and services that are typically provided by other entities including chambers of commerce. As part of the meeting, representatives from the Lake Oswego Chamber of Commerce shared ways that the City and Chamber might work together to support the local economy. Based on the discussion, there was general consensus that the Vision in the City's 2010 Economic Development Strategy remains valid (with the exception of a streetcar), but there is a need for an economic development strategy that considers changes since 2010, including new opportunities. Economic Development Vision (2010) By the year 2025, Lake Oswego will be a more vibrant, connected and sustainable community, known throughout the region as a unique and wonderful place to live, learn, work, play and enjoy arts and culture. Pedestrian friendly shopping and dining districts are lively and commercial buildings are fully occupied with thriving businesses. Industrial uses are consolidated in a better-organized, more attractive and efficient district in the 15/west Lake Oswego area. Strategic higher-density infill and redevelopment, including the Foothills and downtown North Anchor at 1st and B projects, provide a broader range of housing options and additional locations for retail, civic, cultural and employment uses. Strong neighborhoods are connected by safe and attractive walking and bicycle routes, with transit options including[Streetcar to Portland and]internal bus circulation. River, lake and trees are enduring connections to natural beauty and visible symbols of a healthy community. The City Council's current economic development goal is to Support business investment and job creation in Lake Oswego. Toward that end, the current Council initiative is to,Adopt an Economic Development Strategy and resource plan. As presented by Ms. Bosch, some economic development tasks typically fall under city government's purview, while chambers of commerce and other entities are often responsible for other tasks. This division of labor can be summarized as follows: City Government Chambers of Commerce Planning and zoning (land supply) Voice of business community Economic vision, goals, strategic plan Business advocacy and networking Business retention, expansion, attraction Small business education Redevelopment Events—community and customers One-stop permitting Tourism marketing (some cities do this) Policy: transportation, land use, housing 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 3 DISCUSSION The purpose of the December 21 study session is to identify the City Council's desired outcomes for an economic development action plan/strategy. Staff will then draft a final plan for review and adoption in early 2022. Staff is seeking Council direction on, 1) the types of business investment and job creation that the City should support, and 2)the means to accomplish this. 1. What types of business investment and job creation should the City support with an economic development program? Different government agencies tend to focus on different types of industry based on the populations they serve and legislative goals. For example, the State of Oregon's Strategic Investment Program prioritizes traded sector companies within the following "target industries":Advanced Manufacturing, Business Services, Food and Beverages, Forestry and Wood Products, High Technology, and Outdoor Gear and Apparel. By comparison, local economic development programs may focus on both traded sector firms and some combination of population- and visitor-serving businesses. Importantly for local economic development, there can be overlap among these categories both geographically and within industry sectors. It would be helpful to Population-Serving Visitor-Serving have some general guidance from Council on the relative importance of each. A. Traded Sector. Traded-sector'firms by definition bring in revenue from outside Traded Sector Oregon. Therefore, they can benefit Lake Oswego as well as the Portland region as a whole. Because traded sector firms contribute to Oregon's economy they are eligible for state financial incentives and technical assistance that are not available to non-traded sector businesses. In addition, local governments whose economic development programs include traded sector firms are eligible for infrastructure grants through Business Oregon. Examples of traded-sector company offices in Lake Oswego include: Biotronik (medical equipment manufacturer), Greenbrier (freight rail car manufacturer), Yakima (car roof racks), Logical Position (digital marketing), NAVEX Global (risk management consulting and software), KinderCare (childcare), and Fort West (brand and business design), among others. 'Under Oregon law,traded-sector means: "industries in which member firms sell their goods or services into markets for which national or international competition exists." (Oregon Revised Statute 285A.010) 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 4 B. Population-Serving. Most of Lake Oswego's more than 2,000 businesses are population-serving, meaning they provide goods and services primarily to Lake Oswego residents and businesses. While they may also serve visitors and provide some goods and services to out-of-state customers, these businesses are not considered traded sector because they do not primarily compete nationally or internationally.Typical population-serving businesses include restaurants, personal and professional services, general and specialty retail stores, and some small manufacturers. The main reason the City would want to devote economic development resources to retaining or attracting population-serving businesses is to improve the quality-of-life for Lake Oswego residents and to encourage local sustainability and resiliency. For example, when Bales Grocery closed, the City's Rapid Response Team met with the broker who was listing the property to help them and a prospective tenant (New Seasons) with due diligence. By helping the private sector refill an empty storefront, the City facilitated local economic development and livability. Moreover, by helping to refill a storefront with a neighborhood-serving grocery store, one with a demonstrated commitment to sustainability and climate action, the City is fulfilling its mission toward sustainability and equity (access to food without an automobile). C. Visitor-serving businesses. Visitor-serving businesses rely upon dollars from leisure or business travelers. They may consist of hotels, specialty retail, food and beverage businesses, entertainment and event venues, commercial-recreation businesses, and artisans, among others. When supported with a strong community brand and marketing campaign, these businesses can have a synergistic relationship with our local arts and culture organizations and contribute to the city's economic and social sustainability. Some home-based businesses such as local artisans and caterers can become visitor-serving by opening commercial storefronts. Although Lake Oswego is not an international or national tourist destination, the city government, the local business community, and other private and nonprofit organizations have worked together to develop amenities to support a vibrant economy that includes tourism. These include our many parks, arts and cultural venues and events, and a compact shopping district in the downtown that will soon have a new boutique hotel. The city has also recently attracted a number of specialty retail businesses (art, wine, beer, and spirits), which if supported with a strong community brand, programming in the downtown and in Lake Grove, and a marketing campaign, could help the community capitalize on tourism and work- related visitors. Eventually, when the downtown is connected to the riverfront through redevelopment of the Foothills district, there should be even more potential for visitor-serving businesses.' 2 Historically,the City has tried to encourage visitor-serving retail uses in the East End Redevelopment District through Development Agreements(DAs) limiting non-retail commercial uses in ground floor spaces for LORA 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 5 2. Where should the City invest in economic development? As discussed in the prior work session there are several types of programs and services that the City and Chamber can use to help drive local economic development, including research, publicity, positioning, education and analysis to help businesses succeed. Based on Council's priorities for business investment and job creation (traded sector, population-serving, and/or visitor-serving), where should the City invest resources? A. Situation Awareness. When Autodesk moved their regional offices from Lake Oswego (5400 Meadows Road) to a historic post and beam timber building in Portland (221 SE Ankeny), it came as a surprise to Lake Oswego officials. While there may not have been anything our city could have done to retain this company, there was a general sense that we should have at least known about the relocation in advance. Similarly, when KinderCare decided to move their corporate headquarters with 500 employees from Portland's Lloyd District to Lake Oswego, this too came as a surprise. There are some simple things the City and Chamber can do to be better informed, and thereby do a better job at helping existing and prospective businesses. This includes periodically interviewing property managers and business owners, maintaining an inventory of commercial and industrial spaces, and monitoring market conditions and trends. The City is the central clearinghouse for business license data, but should also have greater situational awareness on other business leads, including those received through Greater Portland, Inc., and Business Oregon. The City would use this information to help prioritize planning projects and capital improvements. The Lake Oswego Chamber could also use this information for its business networking, leadership training, and other programs. Resources: This would require additional staff resources(estimate 0.10—0.20 FTE), which could be enhanced by contracting with outside services such as the Chamber, Business Oregon, and Clackamas County. B. Customer Service. Customer service in local government means assisting people in accessing and using city services in the most efficient and helpful way that we can, while also practicing continuous process improvement. Whether we are providing permits for building safety, sharing information on road construction, or staffing the Farmer's Market, each city employee plays an important role in creating a business- friendly environment. As discussed in the prior study session, the City's current decentralized approach to business assistance is not conducive to economic development. redevelopment projects. However,the City has also had to amend these agreements over time to allow more flexibility for tenants in some areas due to insufficient retail demand in high vehicle traffic areas along State Street and A Avenue. 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 6 Most cities with economic development programs, including cities smaller than ours, typically have a single point of contact, an economic development specialist or manager, who coordinates amongst multiple departments and serves as a "concierge", or in some cases an ombudsman, for business. These employees are adept at helping businesses owners and their contractors with permitting and licensing, and may staff the city's redevelopment program and provide special outreach and assistance during major capital projects. Additionally, there is a need for technical assistance to business, including connecting business owners to grants and loans offered by county, state, and federal agencies, workforce training, and assistance for dislocated workers. Currently, some of these services are provided by the Lake Oswego/West Linn Business Recovery Center, a joint program of the two cities' Chambers that receives federal funds through Clackamas County. Some of these services could also be provided by a combination of organizations, including a Community College and the County. Examples of Clackamas County cities with professional economic development staff include Canby, Milwaukie, Oregon City, Wilsonville, Woodburn, and West Linn (currently hiring). Additionally, the County has its own program that provides small business assistance, Main Street program support, and tourism promotion. Resources: The City should consider hiring or appointing (through reorganization) an economic development specialist or manager to provide these services (estimate 0.50-1.0 FTE). Alternatively, the City could lead some tasks and contract out others. C. Networking and Education. Just as networking and education are important to private enterprise, local government staff need to engage with other economic development professionals to best serve the local business community. This was highlighted during the first 18 months of COVID, as the City and Chamber attended numerous county, regional, and state economic development meetings to assist local businesses. In addition to the Chamber, our current partners include Greater Portland, Inc., Business Oregon, and Clackamas County. As discussed during the prior study session, City staff do not have capacity to continue networking at the same levels as we did in 2020, and we do not have the resources to host business-to- business networking or other programs for Lake Oswego businesses. Now is a good time to consider the potential return on investment from networking and identify which entity, the City or Chamber, should represent Lake Oswego—or where/when it is appropriate for both to be present. Staff recommends the City take the lead when interacting with Greater Portland, Inc., and other governments, including counties,the State of Oregon, and federal agencies; and the Chamber take the lead on business-to-business networking and education. The Chamber should continue to coordinate with the City when they 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 7 apply for governmental grants so that the City can assist. The City should also continue to provide staff who can attend Chamber of Commerce and Lake Grove Business Association meetings to answer questions and provide updates on City projects and programs. Under a Council-approved economic development plan, these roles should be clarified so that the City can be more efficient and effective. Resources: City staff resources are needed to maintain a minimum level of service as outlined above (estimate 0.15 FTE3), with the Chamber assisting in some areas. D. Policy and Code Improvement. The City of Lake Oswego is known as having a friendly and customer-service oriented staff but an overly complicated code and high development fees. The Planning Department annually prepares amendments to the development code to comply with state mandates, improve the code's clarity and predictability, and to address issues identified by the public, Planning Commission, and City Council. The City also reviews its fees annually and typically increases them based on a regional cost-of-living index. However, it has become clear in the ten years since the last development code rewrite (the 2012 "CDC Reorganization") that the permit process is still cumbersome and too expensive and time-consuming, particularly for small tenant improvements and other commercial projects that require land use review. Typical impediments to businesses include: o Zoning/Use restrictions. For example, a few years back we lost a bakery that was trying to open in the Industrial Park zone because the code did not allow bakeries; o Parking requirements in the downtown. For example, the code requires that additional off-street parking be provided when replacing a downtown office use with retail—even where a property has no space for parking. The code allows property owners to "share parking" but the City requires that the agreements be binding in perpetuity; o Lack of public parking in Lake Grove and off-street parking standards that conflict with creating a pedestrian-friendly village center; o Development standards that frequently require design variances, and lack of flexibility in some zones for granting variances; o Time-costs associated with development review and appeals; and o Fees and system development charges. Generally, as the complaint goes, small businesses should not have to pay thousands of dollars and wait months for the land use process (including a preapplication conference, filing a "complete" application, public notice, decision, and potential appeals)to find out if they can open on a commercially zoned property, or to complete tenant improvements and additions such as awnings, patios, facade 3 The Community Development Director or their designee would attend most of these meetings with support from an Economic Development Specialist/Manager and administrative staff. 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 8 improvements, or other changes such as the addition of a secondary exit for building code compliance. Does the City Council support undertaking a comprehensive review/audit of the development code and City fees to remove impediments to business investment and job creation? Resources: Code-reform is a City function. The Community Development Director would audit the code and fees with stakeholder input and oversee these changes; outside services may be needed due to existing projects and staff's workload. E. Planning and Redevelopment. The City should anticipate the need for updates to or replacement of various master plans, including the East End Urban Renewal District, Foothills Framework Plan, and the Southwest Employment Area Plan. There is also a need to complete the remaining projects in the Lake Grove Village Center Urban Renewal Plan, and the city's other neighborhood centers would also benefit from planning. Resources: Land use master planning, street improvements, and public parking are City functions that require stakeholder input. Additional resources and outside services will be necessary. F. Programming. The City, Chamber, Lake Oswego School District, Arts Council, Heritage Council, Lake Oswego Preservation Society, and Lakewood Center for the Arts, among others, manage numerous special events and programs that positively impact local business. A strong economic development program would coordinate these activities to maximize community benefits. In particular, with completion of Boones Ferry Road (phase 1) the City, Chamber, and Lake Grove Business Association should take an active role in programming for Lake Grove. See also, "G" Branding and Marketing. Resources: This work would be supported by existing staff in the Parks Department, and the economic development specialist described in item "B". The specialist would also advise on City policy and process improvements relating to these programs. G. Branding and Marketing. As discussed in the prior study session, branding and marketing are mission-critical for any economic strategy. If we do not clearly articulate our brand, others will define it for us. The brand must be authentic, memorable, and aligned with the community's values. It should also be communicated consistently. An effective brand should be embraced by the entire community, including business, neighborhoods, arts and culture organizations, and city government. Marketing would include assistance with signage (particularly wayfinding and public parking signs), tracking customers/visitors, and providing the information to businesses to help them make informed decisions. 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 9 Previously, the City commissioned the 2010 Strategic Marketing Plan (Finkslnc Marketing & Communication's "Say Hello to LO!") but that effort did not lead to any tangible results. Whoever leads this initiative should also address community events promotion and tourism advertising. For example, the City might partner with the Chamber for branding and marketing, similar to the relationship the City has with the Arts Council of Lake Oswego, with funding provided in part through existing transient lodging taxes. Clackamas County's Economic Development Department administers a tourism promotion program and therefore should be a key partner. See also, "F" Programming. Resources: As described above, a branding and marketing effort would require some city staff resources (estimate 0.10 FTE in the first year for coordination) and ongoing funding assuming the Chamber takes the lead. H. Other Elements? Are there other elements that Council would want to include in an economic strategy? CONCLUSION AND RECOMMENDATION The business climate of Lake Oswego is at an exciting turning point and with the City's attention can build assets for the entire community. The City should take a proactive approach in partnership with the Chamber of Commerce to bring the resources of our community's organizations together to advance community livability. From our initial analysis, to begin work on items "A"-"G", above, staff recommends allocating $250,000 toward economic/business development in 2022.These funds would be used for staffing and outside services including contracting with (and leveraging funds of) other organizations. This is a similar model to the City's relationship with the Arts Council of Lake Oswego, and by comparison, this is the same amount of funding allocated to the Habitat Enhancement Program, a partnership between the City and local watershed councils, during the first year of that program. Based on Council's input, and to assist with your goalsetting, staff will finalize the Economic Development Strategy with a resource plan and metrics'for approval in early 2022. ATTACHMENT 1. City Council Report on Economic Development, 09/21/2021 [link only] 4 For local government economic development programs, Return on Investment(ROI) is measured differently than for a private businesses. For example,we might consider growth in the number of jobs attracted (or retained), local wages,assessed property values,transient lodging tax revenues,occupancy of commercial spaces(reduced vacancy rates), or other metrics depending on your goals. 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city