Community Impact Reports
Table of Contents:
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Old Silk Mill Hotel Petaluma FEIA
Click here for the PDF Document
Monday, August 24th, 2009
Public Hearing
City Hall
11 English St.
Petaluma
_______________________________________________________________________ East Washington Place Regency Shopping Center/Target Petaluma FEIA April 6th, 2009 7 pm
Public Hearing
City Hall
11 English St.
Petaluma East Washington Place Regency Shopping Center
Fiscal and Economic Impact Assessment Documents: To view the Fiscal and Economic Impact Report (or Community Impact Report) prepared by Bay Area Economics, consultant for the City of Petaluma, click here. To view the comment by T. William Lester, Ph.D. candidate Department of City and Regional Planning UC Berkeley, consultant for the Living Wage Coalition click here. To view the comment by Scott Stegeman, Stegeman and Associates, consultant for the Living Wage Coalition click here. _______________________________________________________________ Petaluma Approves Community Impact Reports
Closer to Home
Santa Rosa Press Democrat
January 13, 2009
by Martin J. Bennett
Historically the City of Petaluma has been a model in Sonoma County for implementing innovative public policy that encourages smart, responsible, and equitable growth.
In 2006 Greenbelt Alliance released a "Bay Area Smart Growth Scorecard" that ranked Petaluma the #1 city in the region for developing policy to prevent sprawl, to provide affordable housing and to promote high density mixed-use development.
Petaluma again provided leadership by approving last fall the first 'Community Impact Report' (CIR) requirement for new commercial developments of more than 25,000 square feet, including retail and grocery stores and hotels. The legislation was proposed by labor, environmental, business, and community organizations. A CIR is a comprehensive analysis of the fiscal and economic impacts of a proposed major development project.
All too often, particularly during a recession and decline of city and county revenues, there is a rush to provide a new development 'quick fix' which might boost sales tax revenue. The CIR is a 'balance sheet' that will give policy makers and the public complete and objective data with regard to the benefits and costs of a proposed project.
The report is much shorter and simpler than the Environmental Impact Report (EIR), the developer pays for it, and a city-designated consultant does the work.
A CIR will, for example, assess the contribution of a proposed project to the local tax base. Will a project generate new revenue such as sales tax, property tax, or the bed tax? Will a project increase city revenue or simply move around part of the tax base from one project to another?
A CIR will evaluate the economic viability of a project by analyzing market conditions and projected sales or occupancy rates. The report will also examine the impacts of a proposed development on local business. Will a project fill a market niche or will loss of sales due to increased competition hurt existing businesses?
The report will assess the employment characteristics of new jobs created, including the number of full- and part-time jobs and wage levels and benefits. A CIR will ask: What types of jobs will the project bring to the city?
A CIR will also examine costs of the proposed project to the taxpayer, including necessary infrastructure improvements and increased demand for public services such as police, fire, and road maintenance. Finally, the report will identify hidden costs such as public subsidies for Food Stamps, Medi-Cal, and uncompensated medical care for workers filling new jobs that may not pay a living wage or provide health insurance.
A project, for example, may bring a significant number of new jobs to the community, but if most of these jobs are without medical benefits, what will be the impact on local hospitals and public clinics? According to a 2006 study by the New American Foundation, California counties spend $1.8 billion annually to provide health care for 1.3 million uninsured adults. A CIR will enable policymakers and the public to evaluate the trade-offs and public costs of a project.
CIRs can help avoid delays and costly lawsuits that hurt both the developer and the public. A CIR is completed early in the development process, and prior to the completion of the EIR. Residents are encouraged to participate in the process, providing comment and submitting additional information at a public hearing when city officials and staff review the CIR.
Unlike the required EIR, a CIR does not mandate changes to mitigate negative impacts. However, the CIR can facilitate a public dialogue between residents, the city council, and the developer at an early stage, resulting in changes to the project and the devising of 'win-win' solutions in response to concerns both policymakers and residents raise
Moreover, developers will no longer have to deal with community concerns in an ad-hoc or piecemeal way. The CIR will showcase the community benefits of a proposed project and facilitate the development of a community consensus. This should enable a project to move forward expeditiously to obtain permit approvals and thus shorten the time line for the developer.
The experience in cities that have adopted a CIR requirement, such as San Jose, Los Angeles, and San Diego, indicates that this policy tool can begin to reorient the development process to yield positive and timely outcomes for all.
Petaluma has just adopted a revised twenty-year General Plan that emphasizes city-centered infill development and mixed-use projects. Petaluma hopes to attract employers who provide good jobs with a living wage and benefits, and to enhance the diversity of retail outlets while ensuring that existing local businesses will thrive. The council will use the information collected for a CIR to evaluate if a project conforms to the new General Plan and is a "net positive" for the community.
Ultimately, regional planning for smart and equitable growth will be enhanced if all cities in the region adopt a CIR policy. There is a window of opportunity over the next several years to incorporate CIRs into the planning process. Cities in the region must comply with state mandates to reduce greenhouse gas emissions 25% below 1990 levels by 2015. Moreover, voter approval this past election of funding for SMART, a two-county commuter rail system along the Highway 101 corridor from Cloverdale to Larkspur, means that CIRs will complement planning to reduce pollution and to promote 'transit oriented development' near SMART train stations in Novato, Petaluma, and Santa Rosa.
Martin J. Bennett teaches American history at Santa Rosa Junior College and serves as Co-Chair of the Living Wage Coalition of Sonoma County. Please go to http://wwwlivingwagesonoma to view the legislation implemented in Petaluma and to download model CIRs for projects in Los Angeles and San Diego.
Model Community Impact Reports and Legislation
The Petaluma Community Coalition which introduced to the Petaluma City Council the FEIA (Fiscal and Economic Impact Assessment) legislation that was originally titled CIR (or Community Impact Report), includes:
Petaluma Independent Business Association, Sonoma County Conservation Action, Petaluma Tomorrow,Petaluma Federation of Teachers, North Bay Labor Council, New Economy, Working Solutions (NEWS), Accountable Development Coalition, Petaluma Neighborhood Association, Living Wage Coalition of Sonoma County, Sierra Club Sonoma Group, and Conservation Action Fund for Education (CAFE).
To view the legislation passed by the Petaluma City Council on October 6, 2008 click here.
To view the original legislation introduced by the coalition on January 28, 2008 click here.
If you would like to download model Community Impact Reports by the Los Angeles Alliance for A New Economy (LAANE) and the Center on Policy Initiatives in San Diego (CPI) click on the following links:
Adams LaBrea CIR .pdf
SubsidizingWalMart.pdf
To view Community Impact Report legislation implemented across the nation at the New Rules Project of the Institute for Self Reliance web site go to: http://www.newrules.org/retail/impact.html
For overviews about Responsible/Accountable Development and Smart Growth with Equity go to: http://www.goodjobsfirst.org/smart_growth
To view the 2007 report: "Wal-Mart and Beyond: The Battle for Good Jobs and Strong Communities in Urban America" by the Los Angeles Alliance for A New Economy go to:
http://74.10.59.52/laane/walmart/#report
To download the brochure "The Case for the Community Impact Report" by the Los Angeles Alliance for A New Economy click here: CaseForCIR.pdf
To view the original legislation introduced by the coalition on January 28, 2008 click here.
Excerpted from the report the "Limits of Prosperity: Growth, Inequality, and Poverty in the North Bay" by Nari Rhee and Dan Acland and published by New Economy, Working Solutions (NEWS). For the full report go to: http://www.neweconomynorthbay .
What is a Community Impact Report?
When policy makers decide to invest public dollars in a development project, they usually do so in the belief that their investment will boost the local economy, enrich tax coffers and improve the local quality of life.
But these decisions sometimes backfire or have less than stellar results. A publicly-subsidized superstore, for example, may result in other stores being driven out of business, a glut of low-wage/low benefits jobs and-their counterparts-an increased demand for subsidized housing and welfare programs. Similarly, policy makers might decide to make a construction loan to developers of a sports stadium only to find, once the stadium is built, that ticket sales and sponsorships do not meet the level necessary to trigger repayment of the debt.
Several cities throughout California have begun to utilize Community Impact Reporting, a new development review tool designed to more systematically and accurately predict and measure the costs and benefits of proposed public/private partnerships and subsidies.
The need for a tool like this is particularly acute in California, where local jurisdictions are severely limited in the amount of money they can raise and must rely on sales tax dollars for most of their General Fund activities. Any project that holds the promise of generating significant sales tax dollars understandably holds a natural, and sometimes blinding, attraction for policy makers.
The Community Impact Report's organization and scope grow out of the local jurisdiction's police powers and the "right to know" precedents that began to be set in the 1980s as the public began to demand more accountability in the development process. Like an Environmental Impact Report, a CIR is an advisory document, designed to provide information but not to dictate to policy-makers.
The CIR has benefits for both developers and interested community members-providing information and a forum to citizens and alerting developers to community concerns early on in the process.
The report studies numerous areas, all in an effort to make accurate predictions about a proposed project's costs and benefits to a community.
First, is the proposed project economically viable and will it be profitable to the local community? Will the business succeed and contribute to the tax base as hoped? Will that contribution be offset by losses elsewhere?
Second, what kinds of jobs will the business create? Low wage jobs increase strain on workers and their families and, in turn, on schools and public services. When public dollars go toward subsidizing low-wage employment, it is important to measure the true costs and to note which community members and institutions will be paying those costs. Additionally, the reports asks if the project will contribute to the need for affordable housing, and at what income level the need will be most acute.
This is a hugely important question in the North Bay, where exorbitant land costs contribute to the fact that most cities fail to meet even the affordable housing targets given to them by the State (targets which most experts agree are inadequate to meet housing needs). The report also looks at whether the project will create a need for additional community services and benefits-childcare, parks, road improvements-and the benefits the project will provide. CIRS also measure the Smart Growth attributes of a proposed project.
What triggers a CIR?
Different cities have different triggers. Some require a CIR for any project in a redevelopment agency; others base the requirement on project size, subsidy size or the nature and scale of the potential impacts on a community.
Who creates a CIR?
In California who prepares a CIR has varied from one city to the next. Usually a consultant chosen by a city council will prepare the CIR and typically, the developer will pay a fee based upon the square footage and the size of the project to fund a CIR. City staff review the consultant's work and may note any area of disagreement staff may have or staff may add information as needed. In some cities staff will prepare the CIR and not a consultant. In general, a CIR is relatively brief (50 pages) and takes no more than three months to complete.
How does a CIR differ from an EIR?
Environmental Impact Reports, mandated under the California Environmental Quality Act (CEQA), are concerned only with environmental impacts, not broader land use and community development policies. It does not examine the issues a CIR does-economic impacts, community services and amenities impacts, affordable housing needs, etc. The CIR functions as a companion to the EIR.
Who benefits by a CIR?
The CIR has benefits for both developers and interested community members-providing information and a forum to citizens and alerting developers to community concerns early on in the process. A CIR can also help build support for a project early in the planning process and avoid costly delays or litigation.
Petaluma Disclosure Rules for Builders Council Votes for Data on Project Wages, Side Effects
Santa Rosa Press Democrat
October 8, 2008
by Paul Payne
Developers of new commercial projects in Petaluma that exceed 25,000 square feet now will have to disclose such information as employee wages and benefits and competitive side effects on existing businesses.
On a 5-2 City Council vote Monday, Petaluma became the first in Sonoma County to require such reporting before project approval. Supporters said the decision will set a precedent to be followed by other cities, such as Santa Rosa, that are grappling with whether to allow big-box stores.
Marty Bennett, co-chairman of the county's Living Wage Coalition, said Petaluma's action will promote "smart, equitable and sustainable growth."
"At the end of the day, we really do think there is a consensus in the community that this is good public policy," said Bennett, who has been working on the new regulations for about two years.
Council members Samantha Freitas and Mike O'Brien voted against the requirements. Freitas said she feared they could be used to block future development. Several developers and the Chamber of Commerce also were opposed.
"I think we have a sufficient amount of process that already exists," Freitas told the council.
The new policy will apply to retail, hotels and other commercial projects. Developers must prepare a comprehensive financial report for the City Council to review at a public hearing before consideration of project approval.
A consultant for the city would prepare it, and developers would pay for it. The report is non-binding, but information contained in it, including wages and the cost of new roads, could sway public opinion.
The report also includes an evaluation of whether existing businesses would be driven off and whether tax revenue would increase or just shift to new development. "The council can determine whether it's a net positive for the community," said Mayor Pam Torliatt, who supported the policy.
Petaluma joins a number of other California cities, such as San Jose and San Diego, in adopting the financial disclosure requirements. Bennett said he hoped Santa Rosa would adopt a similar policy before considering approval of a Wal-Mart store in the southeast part of the city.
He said Sebastopol also should have it in place as it considers retail development in the northeast part of town. "It's going to give a fairly comprehensive analysis of the costs and the benefits," Bennett said.
You can reach Staff Writer Paul Payne at 762-7297 or paul.payne@prressdemocrat.com
City to Seek Fiscal Reports on Big Projects: Council Approves Requirement for Fiscal Assessment Before Approval of Large Hotels and Stores
By Corey Young
Petaluma Argus-Courier
Thursday, October 9, 2008
A "balance sheet" spelling out the costs and benefits of large commercial developments in town will be required before those projects are approved, a split City Council decided Monday.
The decision capped four months of debate among city leaders, community activists, neighborhood groups, living-wage advocates and developers about whether such information should be considered as part of the city's development review process.
A series of stakeholder meetings among the parties this summer resulted in a policy that says while the information would be gathered before a project is approved, it would be non-binding and "informational only" for city officials and the public.
The reports, called "fiscal and economic impact assessments," would detail how much revenue the project might bring to city coffers, what types of jobs are created and how much public money would be used to support the project, among other concerns.
"It will provide the public, applicants, City Council and staff the information needed to make decisions on future retail and commercial development," said Mike Moore, the city's community development director.
The council voted 5-2 to approve the FEIA policy, which had morphed from an original proposal for "community impact reports" presented to the council earlier this year.
"I think this is an appropriate way to find a middle ground," said Councilmember Mike Harris, who voted in favor. He was joined by Mayor Pamela Torliatt, Vice Mayor David Rabbitt and council members Teresa Barrett and Karen Nau.
Council members Samantha Freitas and Mike O'Brien voted against the policy. Freitas said the stakeholders group had not reached a consensus because developers whose projects would be subject to the FEIA requirement were still opposed to certain provisions.
Representatives of Basin Street Properties, which is planning a 40-acre mixed-use development of off Hopper Street that includes a hotel, housing and retail, said the FEIA requirement created a burdensome process and would further delay large projects.
But supporters of the requirement said developers had agreed to "98 percent" of the FEIA policy during stakeholder meetings and noted that Petaluma's General Plan calls for new development to have a "net positive effect" on the community.
"Now is the time to be discerning," said Melissa Abercrombie, co-founder of the Petaluma Neighborhood Association. "Today, we simply can't fail to analyze our investments."
Under the policy, FEIAs would be reviewed by the City Council, giving the public an opportunity to comment on the findings in the report at a public hearing.
Big-Box Bingo: Petaluma Grapples with Deciding the Entire Impact-both Fiscal and Communal-of Construction.
By Patricia Lynn Henley
North Bay Bohemian
March 5, 2008
Everyone wants to make prudent financial decisions, both individually and on a community-wide level. But what's the best way to go about it? How much do officials need to know to make a decision?
Nowadays developers expect to do an environmental impact report (EIR) for any large-scale construction project. But are physical results like noise or traffic and the ecological balance the only things decision-makers should evaluate to determine if a proposal will help or harm the local community? In Petaluma, activists are proposing requiring a community impact report
(CIR) to assess the true fiscal costs and benefits of potential projects.
Environmental impact reports have entered the standard public lexicon. Are CIRs the next step?
"Twenty-five or 30 years ago, the environmental impact report was also a new tool, and now it's standard," asserts Marty Bennett, a Santa Rosa Junior College instructor and co-chairman of the Sonoma County Living Wage Coalition, part of the group that's urging Petaluma to adopt the CIR requirement. "From my point of view, 25 years down the road, we will say that a CIR has become standard in the approval process for new developments. That will be a huge step forward."
But Petaluma resident and Sonoma County Planning Commission member Don Bennett (no relation) thinks that's a bad idea. Community impact reports, he says, would be used as "a tool to keep things from happening within the community."
He argues that the proposal is anti-chain stores and anti-big-box retailers.
"It comes down to a philosophical thing, whether you think the role of government is to control business and management, and who you're managing it for," he says. "Who's going to decide who you want in? That's the problem. Whose will do you impose?"
Cities such as Los Angeles and San Jose already require CIRs as part of the approval process for major projects. Usually less than 50 pages, a CIR looks at five main impacts: fiscal, employment, affordable housing, neighborhood needs and smart growth. Unlike an EIR, a CIR isn't binding and doesn't require mitigation of any impacts.
"For me, [a CIR] is a win-win for both sides,"
says Melissa Abercrombie of the Petaluma Neighborhood Association. "You look at the information, you weigh it and you figure out what works."
There's an urban-growth boundary to protect Petaluma against sprawl, Abercrombie points out.
"Any project that's built within that should be the best, because it's a limited amount of space."
Petaluma is already looking at plans for new Target and Lowe's stores within city limits.
Among other items, a CIR would evaluate the number and types of jobs, including salary levels, that they would bring to the area. It would look at whether they would bring new sales tax revenues to city coffers or just cannibalize the sales taxes already being collected by other, usually smaller stores.
For Abercrombie, a CIR is just a way of looking at the big picture before making a decision. It's similar to what developers do before deciding to build a project, she argues, and isn't at all anti-development. "I would welcome a development that I thought would benefit our community, and I don't think analyzing that makes it not happen."
But Don Bennett sees a CIR requirement as a "fact-finding thing to determine what you don't want in your community." The CIR proposal, he asserts, is being supported by those who don't want more chain stores in Petaluma. But if a lot of folks didn't like big-box retailers, he says, they wouldn't exist.
"If the majority of people didn't want to shop in those places, they couldn't keep their doors open."
In his view, it's more important for people to be able to shop, work and live in Petaluma. A CIR, he argues, is an attempt to have the government decide what can be built on private property based on the social aspects of the project.
But Abercrombie sees things differently.
"A CIR is just a tool so we can have a clear picture for our decision making."
The coalition presented its CIR proposal to the Petaluma City Council in late January. Coalition members are now working with city staff to answer a number of questions raised by the council members, including how much CIRs cost and how they've been implemented in other communities.
http://www.newrules.org/
June 29, 2007
Contact: Daphne Loring, Maine Fair Trade Campaign, (207) 777-6387;
Stacy Mitchell, Institute for Local Self-Reliance (207) 774-6792
Maine Enacts Landmark Law Requiring Economic Impact Studies of Big-Box Projects
Augusta, ME - Maine has become the first state in the nation to require cities and towns to evaluate the impact of big-box development proposals on jobs, local businesses, and municipal finances, and to approve only those projects that will not adversely affect the local economy.
Similar bills have been introduced in other states, including Oregon, New Jersey, and California. Last year, the California legislature approved a bill (SB 1523) requiring economic impact studies for large retail projects, but it was vetoed by Governor Schwarzenegger.
In Maine, the Informed Growth Act (LD 1810), sponsored by Rep. Chris Barstow, passed the House 86-55 and the Senate 18-17, and has been signed into law by Governor Baldacci.
"This is a tremendous victory for the people of Maine, our communities, workers, and local economies," said Daphne Loring of the Maine Fair Trade Campaign. "It gives communities a real voice in development projects and enables us to hold these national retailers accountable for a business model that often directly hurts workers, communities, and the environment."
"Too often communities must decide whether to approve big-box stores without any objective information about the impact on the local economy," said Stacy Mitchell, senior researcher with the Institute for Local Self-Reliance and author of Big-Box Swindle. "Studies have found that these stores can entail significant costs in terms of job losses and local business closures. Maine is leading the nation by giving towns a tool for weighing those costs before deciding whether to approve these stores."
The bill's passage was the result of the work of a broad coalition of over 180 small businesses, numerous municipal officials, and many labor, environmental, and community organizations. It comes on the heels of several vigorous campaigns by citizens groups to block big-box development in Maine, most notably a successful effort last year to stop a Wal-Mart supercenter in the village of Damariscotta.
Attempts by opponents, including the Maine State Chamber of Commerce, to characterize the bill as "anti-business," largely failed because of the strong support from independent business owners across the state.
Jerry Keay, owner of H.L. Keay and Son, a hardware and lumber store in Albion, lauded the bill's passage, "Small businesses are the backbone of Maine's economy. In sharp contrast to big box stores, we ensure the vitality of downtowns and strengthen our communities by keeping money in the local economy. This bill will bolster our small business sector and strengthen local economies."
The Informed Growth Act stipulates that municipalities conduct an economic impact analysis for proposed big-box retail stores larger than 75,000 square feet. The analysis is performed by an independent consultant chosen jointly by the town and the developer, and paid for by a fee charged to the developer. It evaluates the effects of the proposed store on existing businesses, jobs, wages, vacancy rates, the cost of municipal services, and the volume of "sales revenue retained and reinvested" in the community.
After the analysis is complete, the town must hold a public hearing. It is then up to town officials to evaluate the information, consider the benefits and costs, and make a determination about whether the project would create an undue adverse impact on the local economy and municipal finances. If so, the law gives the town the authority to reject the development.
The act ensures that, even in areas zoned for commercial development, citizens and local officials will always have an opportunity to evaluate big-box development and make informed decisions about whether to approve or reject such projects.
Topsham Select Board member, Michelle Jones sees the Informed Growth Act as a valuable resource, "Towns throughout Maine stand to benefit from the passage of LD 1810. The Informed Growth Act will provide an unbiased process for citizens and local officials to assess the positive and negative aspects of large-scale retail development and make responsible decisions."
About the Institute for Local Self-Reliance: ILSR is a national nonprofit organization that works to advance policies that support strong local economies and vibrant communities. More at http://www.newrules.org/
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Report Documents $10 Billion Public Price Tag on Low-Wage Jobs:
Two Million California Working Families Rely on Safety Net Programs to Make Ends Meet May 20, 2004
Ken Jacobs, UC Berkeley Center for Labor Research and Education (510) 643-2621 cell (415) 516-3135
Aimee Durfee, National Economic Development and Law Center (510) 251-2600
May 20, 2004, Berkeley, CA -- For many California workers, according to a UC Berkeley study released today, a full-time low-wage paycheck is simply not enough to make ends meet. As a consequence, 2 million California families rely on publicly funded safety net programs -- even though one or more family members work at a public cost of over $10 billion a year. "California's 'new economy' has produced an hourglass pattern of job distribution, fostering growth of high and low-wage jobs but little in between," explained report author Carol Zabin of the UC Berkeley Center for Labor Research and Education. "Low-wage workers are relying on public assistance to make ends meet. Low-wage employers are essentially shifting their labor costs onto the public."
The researchers found that small improvements in wages could move many families off public programs, freeing up scarce resources for families currently on waiting lists. If all workers in the state earned a minimum of $8 an hour, program costs would be reduced by $2.7 billion. A movement to $14 per hour reduces expenditures by 5.6 billion dollars. Likewise, if jobs included health benefits, even at current wage levels, $2.1 billion in expenditures could be put to other uses.
The report, "The Hidden Public Costs of Low-Wage Jobs in California" was written by the UC Berkeley Center for Labor Research and Education for the National Economic Development & Law Center. The report analyzed the participation of working families in the ten largest state-wide safety net programs in 2002, including Medi-Cal, CalWorks, the federal Earned Income Tax Credit, Food Stamps and Housing Vouchers. The report found:
*Half of all means tested public assistance dollars are going to families who are working. In 2002, almost half ($10.1 billion) of public assistance dollars in the state went to families where at least one person worked at least 45 weeks per year.
*Most workers on public assistance earn wage close to the minimum wage. Over $5 billion in support goes to families of workers earning below $8 an hour.
*Full-time employment at low-wages doesn't bring self-sufficiency. Over 75% of the benefits to working families went to families in which all earners worked full-time.
*More than one of four workers in working families receiving assistance works for a business with 1,000 or more employees.
*Public assistance to working families goes disproportionately to those working in a few industry sectors. Workers in the retail industry received about $2 billion in public assistance, over twice the amount received by those in any other sector. Other top sectors included business services and construction.
*Low-wages in these sectors are not due to international competition. The vast majority of workers receiving public assistance (71%) are employed in sectors of the economy that do not face significant international or out of state competition, including retail, transportation, business services (janitors, security guards), and construction.
*More than half of the working family members receiving assistance -- 1.1 million -- live in the Los Angeles Area.
"When wages are kept low, taxpayers make up the difference," notes Art Pulaski of the California Labor Federation. "We need better paying jobs with benefits. It's good for our families, our communities and taxpayers."
"We need a long term vision for our state, not just short-term cuts and band-aids," said State Senator Richard Alarcón, D-Los Angeles. "The answer is to expand the middle class by creating good jobs and investing in training." Senator Alarcón is the author of Senate Bill 1639, which would expand access to higher education for low-income people, including those on public assistance. "California doesn t have a lot of extra money right now, so we need to invest our public dollars with an eye to the future," said report sponsor Tse Ming Tam, of the National Economic Development & Law Center. "The stability of our economy requires that we help low-wage workers move towards higher skills and earnings, and not just use public subsidies to perpetuate a low-wage economy." The report was commissioned by NEDLC with support from the William and Flora Hewlett Foundation, and is the second in a series of white papers informing policy solutions to working poverty in California.
The report is online at:
Hidden public costs of low wage jobs.pdf
Study Details Public Cost of Low Wages
Taxpayers subsidize the state's working poor at a rate of $10 billion a year, letting firms keep pay down, researchers find.
By Nancy Cleeland
Los Angeles Times
Times Staff Writer
May 20, 2004
Taxpayers are subsidizing California's growing low-wage economy to the tune of $10 billion a year through public health services, tax credits, child-care programs and other assistance for the working poor, according to a UC Berkeley study to be released today.
The report, by the school's Center for Labor Research and Education, found that nearly half the money from the 10 largest statewide public assistance programs went to families with at least one full-time worker.
If paid more, the workers would be self-sufficient and would not qualify for the programs, the report states.
Such "hidden costs" of low-wage work are likely to increase unless the government intervenes to raise wages and benefits at the lowest end of the economy, the report says. Currently, low-wage jobs are growing faster than the overall economy in California.
"What those employers are doing is shifting labor costs onto the public," said Carol Zabin, lead author of the report, produced for the National Economic Development and Law Center, based in Oakland. "We're kind of encouraging the Wal-Martization of the economy."
Los Angeles County was the epicenter of the trend, Zabin said, accounting for half of the subsidies cited. The largest sector by far was retail trade, followed by business services.
The growth of California's low-wage economy has been well documented, but its effect and policy implications are hotly debated. The UC Berkeley report recommends raising the minimum wage to at least $8 an hour from the current $6.75, mandating employer-provided health insurance and boosting worker skills and productivity through training and development.
Business groups, including the California Chamber of Commerce, oppose raising the minimum wage and are working to repeal SB2, a labor-backed state law that would require employers to provide affordable health insurance to workers.
Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., agreed that the rise of low-wage jobs was a problem but argued that government mandates that raise business costs were the wrong solution.
"You've got to be careful," he said, adding that many middle-class jobs have left California because of high business costs. "Some of these solutions might be worse than the problem we're trying to fix."
For example, he said, raising wages for retail workers could encourage greater use of automatic check-out stands, eliminating some jobs altogether. Kyser also took issue with the study's depiction of the federal earned income tax credit, which goes to very-low-wage workers, as a subsidy. "This is a tax benefit," he said.
The tax credit accounted for about a fourth of subsidies described in the report. The largest single subsidy came from Medi-Cal, the state's health insurance program for the poor, accounting for 35% of the $10 billion. Zabin said the report undercounted the public expense of low-wage work because it didn't consider county costs, such as the use of hospital emergency rooms by uninsured workers.
In some cases, the link between low-wage jobs and public expense is clear. Take the case of Stella Anguiano, a janitor who cleans a Los Angeles County health clinic in Palmdale through a private contractor. Anguiano, who earns $8.35 an hour after 10 years on the job, has employer-provided health insurance, but it covers only her and her husband and pays for only three doctor visits a year. Her four children, ages 2 to 15, are on Medi-Cal.
She and other co-workers are lobbying the county Board of Supervisors to raise its living-wage standard, which the contractor is obliged to pay. Her dream, she said, is health insurance for the whole family.
"Who wouldn't like to have their kids covered by a good plan?" she said. "No one wants to go to the county for help."
A few journalists have engaged on the issue of Wal-Mart's cost-benefit claim that it generates a 30-to-1 "jackpot;" including urban expert/columnist Neal Peirce below.
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LIVING WAGE COALITION OF SONOMA COUNTY