Economic Analysis

ECONOMIC DEVELOPMENT BACKGROUND REPORT OF FINDINGS

FEBRUARY 17, 2009

Prepared for

City of Atascadero

Prepared by

Applied Development Economics 100 Pringle Avenue, Suite 560  Walnut Creek, California 94596  (925) 934-8712 2151 River Plaza Drive, Suite 150  Sacramento, CA 95833  (916) 923-1562 www.adeusa.com With

The Placemaking Group

CONTENTS I.

Summary of Economic Opportunities .....................................................................1

II.

Introduction .............................................................................................................5

III.

Economic Opportunities .........................................................................................11

IV. Economic Development Goals ................................................................................45 V.

Action Plan ..............................................................................................................49

VI. Appendix A: Fiscal Impact Methodology ................................................................51 VII. Appendix B: Atascadero Survey ...............................................................................59 VIII. Appendix C: Economic Base Analysis .....................................................................71 IX. Appendix D: Community Forum Handout ............................................................79

I. SUMMARY OF ECONOMIC OPPORTUNITIES The essence of Atascadero stems from its residential quality of life. Yet the economic prosperity of the community is vital to maintaining and enhancing the amenities that make Atascadero special. The City has a number of economic development opportunities, both in the short term and in the longer term that it can pursue to strengthen its local economy. The City has been moving in several positive directions over a number of years, but needs to focus on completing key projects that will make a difference in the future of the City.

RETAIL AND DOWNTOWN DEVELOPMENT Much of the dollar-volume of retail leakage (sales lost to other communities), could be stemmed with the development of regional-serving retail centers at the Del Rio Rd interchange. The kind of “big box” development that would serve many of the needs of the community would be best located at this type of site. Once new regional centers are in place at Del Rio Rd., it may be possible to extend the commercial development further north along the west side of El Camino Real to serve other kinds of regional retail uses such as high end autos. However, the community’s desire for certain kinds of retail stores, such as quality apparel and fine dining establishments will not likely be served at this location. The Downtown would be the most desirable place to meet these kinds of needs but substantial additional progress is needed to transform Downtown into a vibrant shopping, entertainment and cultural center for the City. The Colony Square project would be an enormous step toward this end. These are difficult times to move innovative projects forward but the City should continue its efforts to bring this project to fruition. Similarly, any possible efforts to move the renovation of the City Hall Rotunda forward would be critical to re-establishing Downtown as a civic center and a visitor attraction. The focus in Downtown on visitor attractions is a third major opportunity for the City to pursue. The additional spending power of visitors to the City could significantly boost the retail market in Downtown, which currently suffers from the extensive diffusion of retail development along the full length of El Camino Real through the City. Visitors require attractions, which, in addition to the historical Rotunda and the Carlton Hotel, could come in the form of an arts colony coupled with additional entertainment opportunities at Stadium Park. The Art Walk has been quite successful in highlighting the widespread presence of fine artists in Atascadero. The City needs to build a brand to promote this cultural quality and entertainment opportunity.

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The Downtown Revitalization Strategy adopted by the City in 2000 has a number of excellent proposals. The San Simeon earthquake has necessarily diverted the City attention with regard to the Rotunda but it would be important for the City to continue its focus on implementing these ideas. In particular, the Downtown would benefit from more mixed use development. This would not only create more nighttime activity to support local businesses but it would help to increase the property values in Downtown and lead to the opportunity to implement more consistent architectural design themes to enhance the visual character of the Downtown core. Over the longer term, greater focus needs to be placed on redeveloping some of the existing uses in proximity to the Sunken Gardens so that this amenity can provide a more significant gathering place. Enhancing Atascadero Creek as a pedestrian feature and a setting for outdoor restaurant seating or small art boutiques, as well as increasing building intensities on the north side of Sunken Gardens, would help to create more of a visitor friendly commercial core in the City. Once these kinds of projects have been implemented, redevelopment of the Junior High School site could create another major focal point in Downtown. The City should recognize that in order to achieve greater density of activity in Downtown, it may need to consolidate some of the existing strip commercial along El Camino Real. It may also wish to consider constraining the travel lanes on El Camino through Downtown to maximize public and pedestrian space as well as to create opportunities for innovative building designs to complement the public features at Sunken Gardens and the Rotunda site.

TOURISM DEVELOPMENT The City’s recent Tourism Marketing Plan emphasizes the idea that Atascadero is best served by promoting its authenticity. This certainly means marketing its existing attractions such as the Zoo, Lake Park, the historic Downtown and the Chalk Mountain Golf Course as well as developing additional attractions such as an Arts Colony and entertainment venues. While Downtown presents a significant opportunity to enhance visitor attractions in Atascadero, it is by no means the only opportunity. The proposed Eagle Ranch annexation area could support a major new attraction for Atascadero such as an equestrian center that would host frequent events on various horse enthusiast circuits. Other kinds of resort attractions may also be possible on this property, with the key being to find ways of inducing visitors to stay longer in Atascadero and to utilize existing and new lodging and restaurants in the City. One consideration is the fact that many visitors to North San Luis Obispo County are attracted to the many wineries in the area. While the center of this activity is in Paso

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Robles, the extent to which Atascadero can draw wine-related business activity into town will help sell the community as an integral part of the wine country.

AN INCUBATOR OF INNOVATIVE INDUSTRIES In addition to retail and professional services, a community needs to provide jobs for its workforce. The Atascadero State Hospital serves as a major employer in the City, but no other sites in the City can support another employer of that scale. However, the City can create other assets attractive to business, including access to major broadband facilities, a well educated workforce, and a business climate supportive of innovative industries. New business opportunities are emerging on a number of fronts as investments are made in energy efficient technologies, alternative energy sources, new communications technologies and other environmentally responsive products and services. Atascadero is in a position to support small business development in these fields that tie into broader markets globally as well and throughout the County. A cornerstone in the foundation of innovative infrastructure could be a technical training institute. Such a facility could be an attractive business asset as well as helping the City and regional labor force to stay at the forefront of technological capabilities. These opportunities and recommendations form the basis of this economic strategy’s goals and objectives. The action plan (to be completed upon approval of economic development goals) will outline in greater detail the specific initiatives that would help make these opportunities a reality.

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II. INTRODUCTION Atascadero’s current Economic Development Strategy was adopted in 2003. The purpose of that document, developed internally by the City, was to provide a framework for making decisions related to the allocation of economic development resources and to improve coordination among the many City Departments and external organizations involved in economic development activities. The 2003 economic development strategy consisted of four major program components: business development; community image and promotion; community revitalization; and, economic development partnerships. The City’s intent was to update that economic strategy every five years. In 2007, the City Council authorized the City Manager to begin the process of updating the economic development strategy and allocated funds for that purpose. In April 2008 after an extensive selection process, the City Council chose Applied Development Economics to prepare the economic development strategic plan.

A. PURPOSE – WHY ECONOMIC DEVELOPMENT? Economic development is but one of several tools that the City has for helping it achieve its broader community goals. Other tools include the General Plan and Zoning Ordinance, the Redevelopment Agency Implementation Plan, the Capital Improvement Plan among others. The Economic Development Strategy is distinguished by its focus on improving the city’s economic vitality. Due to the interrelatedness of these plans, it is important that each supports the other.

VITAL CYCLE The vital cycle is a way of describing the inter-dependence of a community’s economy and its quality of life. Wealth generated by successful businesses is available to support community programs and services, including public safety, recreation, roadways, and education. In turn, a community’s quality of life, as manifested in the quality of its infrastructure, neighborhoods, schools, parks, libraries, safety, and commercial core attracts further investment by business. Though every community is unique, there are four major reasons for economic development that are common across all communities. These include enhancing quality of life; providing career opportunities through quality jobs; providing a supportive environment for business to succeed so that they provide goods and services desired by residents; and, to provide resources that can be tapped by the public sector to pay for public services.

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Economy

Community

QUALITY OF LIFE The ultimate purpose for economic development is to improve the quality of life for its residents. In most communities, this means improved educational opportunities, recreational facilities, public safety, and utilities. It also means choice in safe travel options (bicycling, transit, car, walking), attractive neighborhoods and shopping districts, diverse opportunities for entertainment and recreation.

JOBS AND ECONOMIC PROSPERITY Another key purpose of economic development is to provide a range of career opportunities that allow workers to increase their income and standard of living over time and to enable the businesses that employ them to continue to succeed. Thriving businesses provide stability not only for their employees, but also for the communities in which they are located. By supporting the growth of businesses, a community is supporting its own sustainability. Local jobs allow for shorter work commutes and greater re-cycling of dollars within the community.

SHOPPING, ENTERTAINMENT, ARTS A community is often valued for the selection and quality of its shops, entertainment and cultural venues and recreational opportunities. The combination of these often defines the community as a place and just as importantly how it is perceived by both residents and the outside world alike. These amenities are often what residents become attached to or identify with in addition to their places of worship, volunteer activities and work. An economic development strategy recognizes this and includes strategies for enhancing these aspects of the community. Doing so tends to have direct positive impacts on the local economy as increased spending on entertainment supports other businesses, including restaurants, lodging, and specialty retail.

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FISCAL BENEFITS Cities in California have few options for raising the revenues they need to provide the level of services expected by their residents. A major focus of most economic development strategies is to ensure the continued health of the retail sector and commercial, industrial, and residential property valuations. The City’s economic base provides important benefits in terms of helping to fund municipal services for its residents. Residential and non-residential land uses provide different levels of local tax revenues and also exert differing demands for City services. The two main revenues that cities depend on are the property tax and the sales tax. Residential uses tend to generate more property taxes while commercial uses are the primary source of sales taxes. As shown in Figure 1, residential uses, including both single and multi-family units, are estimated to create about $11.5 million in revenue for Atascadero, about two-thirds of which are property taxes. (See Appendix A for the derivation of the figures discussed in this section). Commercial uses, mainly retail and service commercial, generate an estimated $5.9 million per year, of which $4.2 million is sales tax. Industrial uses generate a relatively small amount of property tax, while lodging facilities generate Transient Occupancy Taxes (TOT) totaling about $700,000 of the nearly $800,00 generated by this land use annually.

FIGURE 1 TOTAL ANNUAL GENERAL FUND REVENUE IN ATASCADERO BY LAND USE

$12,000,000

$10,000,000

$9,947,178

Dollars

$8,000,000 $5,930,596

$6,000,000 $4,000,000 $1,473,230

$2,000,000

$165,916

$0 Single Family

Multi-Family

Commercial

Industrial

$793,874 Lodging

Land Use Source: ADE, Inc.

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While residential uses are the highest revenue generators, they also require the highest expenditures for services. For the Atascadero General Fund, it is estimated that residential neighborhoods require a combined total of about $16.5 million in police and fire protection, street maintenance, parks and recreation and other community services (Figure 2). Relatively little service demand is created by non-residential uses, although police protection of retail centers accounts for much of the service cost for commercial uses. FIGURE 2 TOTAL ANNUAL GENERAL FUND EXPENDITURES IN ATASCADERO BY LAND USE

$16,000,000 $14,000,000

$13,561,309

Dollars

$12,000,000

$10,000,000 $8,000,000 $6,000,000 $4,000,000

$2,942,780

$2,000,000

$1,955,410

$0

Single Family

Multi-Family

Commercial

$158,604

$59,319

Industrial

Lodging

Land Use Source: ADE, Inc.

The net effect, then, is that non-residential uses generate about $4.7 million annually in surplus revenue over costs for the City General Fund, which the City uses to help pay for services to the residential neighborhoods (Figure 3). This is very typical of most California cities and demonstrates one of the primary benefits of economic development. In Atascadero, this analysis particularly illustrates the benefit of sales tax producing businesses. However, if the City had stronger tourism and industrial sectors, these types of businesses would also contribute significant revenues toward the cost of the services in Atascadero. While industrial development may not provide a significant net fiscal benefit in terms of property and sales tax, the number and quality of jobs located in the City provides a significant positive economic impact. Workers’ wages are spent at local shops and restaurants and provide a positive multiplier effect for the entire community. Businesses purchase supplies from nearby businesses, further enhancing the multiplier effect.

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FIGURE 3 NET FISCAL IMPACT

$5,000,000 $3,975,186

$4,000,000 $3,000,000

Dollars

$2,000,000 $734,555

$1,000,000 $7,312

$0 -$1,000,000

Single Family

Multi-Family

Commercial

Industrial

Lodging

-$1,469,550

-$2,000,000 -$3,000,000 -$4,000,000

-$3,614,131

Land Use

Source: ADE, Inc.

B. PROCESS AND PUBLIC INPUT Success in implementing an economic strategy is a direct result of the planning process design. From the outset, it was understood that to be successful, this process would have to involve the whole community, including businesses, residents and community leaders. To achieve this level of participation, the process was built around a multitude of ways to engage the public, including a web site devoted entirely to the economic planning process. The other means of engaging the public included interviews with community and business leaders, focus groups with businesses, a household retail shopping survey, a public forum and at least four City Council meetings where interim findings were presented (see Figure 4 for overall project process and timeline).

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FIGURE 4 ATASCADERO ECONOMIC STRATEGY TIMELINE

Timeline

June-October 2008

October – February, 2008

January – May, 2009

Work Program

SWOT Assessment Market Analysis Retail Analysis Fiscal Study Site Assessments

Identify Economic Development Goals Define Product

Prepare Strategic Plan

Public Input

Interviews Focus Groups Household Survey City Council Meetings

Public Forum City Council Meetings

City Council Meetings

Interviews. ADE interviewed 30 business executives and community leaders in June, 2008 to obtain insights into current and future economic development issues. The interviews provided key information required for the completion of an analysis of Atascadero’s economic strengths, weaknesses, opportunities and threats. The interviews also helped with the development of a community profile that will be used to market Atascadero’s strengths and opportunities to the outside world. Focus Groups. Also in June, ADE facilitated four focus groups to better understand the trends and issues driving change in Atascadero’s businesses and social service organizations. Each focus group addressed a different set of organizations. These groupings were: new media; tourism and hospitality; small business; and, community services and growth management. Information obtained from these focus groups was used to further develop the SWOT analysis which can be found on pages 43 and 44. Household Retail Shopping Survey. In early July, a household retail shopping survey was mailed to every residence in Atascadero (See Appendix B for a summary of survey findings and a copy of the original survey). The survey findings were used to more accurately describe existing shopping patterns and to help determine the future retail opportunities for Atascadero. Public Forum. On November 22, ADE facilitated a public forum at the new community center. Approximately 70 persons attended. The purpose of the community forum was to begin the process of developing goal statements for the economic development strategy. The last section of this plan includes many of the goal statements first articulated at that public forum. Appendix D includes the handout prepared for that forum.

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III. ECONOMIC OPPORTUNITIES A. RETAIL MARKET ANALYSIS The retail market analysis in this section estimates the local demand for retail goods, and compares this to the sales patterns by types of retail stores in Atascadero. This information provides a baseline estimate of how the community’s stores currently attract local and regional retail spending. It identifies what store groups make up Atascadero’s strongest retail sales generators, and which categories have shortcomings that can potentially be addressed with new retail store attraction. The results of the retail analysis indicate that Atascadero has a larger and more diverse retail base than generally thought. Atascadero has been perceived as a retail market that loses much of its spending support to neighboring communities that have a more regionally oriented retail base, such as San Luis Obispo and Paso Robles. The results from the household survey indicate a strong perception by local residents that Atascadero does not meet many retail needs. ADE’s analysis indicates that Atascadero has one of the lowest per capita taxable sales levels in the County, lower than every other city except Grover Beach, and lower than the County average by nearly 13 percent. In particular, the City is losing significant sales in the apparel and general merchandise categories (which includes department stores, discount centers, warehouse clubs). In addition, the City’s auto sales sector has been weakened by the loss of the Ford dealership and the City will see a significant downturn in this sector going forward. The current recession will also affect one of the City’s strong retail sectors – home improvements. The City’s building materials sector has done well at attracting construction materials sales as well as household expenditures, but the downturn in the housing market will certainly affect sales over the next couple of years. The City does have some retail strengths from which to build. Although per capita household taxable sales are low, non-taxable sales of groceries and prescription drugs are high. This suggests that the City attracts shoppers from the surrounding unincorporated communities for local-serving items. In addition, as a crossroads of two state highways, the City picks up a share of visitor spending. The San Luis Obispo Economic Vitality Corporation recently released a countywide study of tourism which indicated that total visitor taxable retail spending in the County was about $535 million in 2007. This would represent about 18 percent of total spending in the County. In the North Inland County area, spending of this type is estimated at about $94 million. Some of this spending occurs in Atascadero as evidenced by high sales of gasoline, fast food and some specialty retail items.

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The analysis below provides a background context from which discussion of planning initiatives can begin. The retail market analysis consists of two main parts: an estimate of household retail spending and a comparison of overall spending potential with sales by Atascadero retail establishments. The household retail spending totals are calculated using an analytical model developed by ADE. The taxable sales data is an annual total listed by retail category. The businesses listed in the analysis encompass all of the retail businesses operating in the City of Atascadero. The retail sales data comes from the California State Board of Equalization sales tax allocation records, and the data was audited by Hinderliter deLlamas Associates. Because certain retail items, such as food and prescription drugs, are not taxable, the analysis includes a conversion that calculates nontaxable sales. As described later in this section, retail leakage represents the gap between local household spending and retail sales by local retail establishments. This leakage represents an existing shortfall, as well as an opportunity for both retail expansion and possible business attraction.

ATASCADERO’S RETAIL SETTING According to the California Department of Finance, the City of Atascadero has a population of just under 27,000 household residents, with nearly 7,300 households. Inflation-adjusting annual income for Atascadero households based on the 2000 Census resulted in an approximate current household income of $66,000. However, data from the Atascadero Household Survey found that responding households had an annual income closer to $84,000, while the UCSB Economic Forecast Project estimates that the 2007 average household income was about $70,000 with an average family income of nearly $78,000. Given the broad range of estimated incomes, ADE used a midrange figure to calculate retail demand.

REGIONAL COMPETITION Atascadero’s retail sector has historically been overshadowed by the more visible and prominent retail centers in Paso Robles and San Luis Obispo. Because those retail centers feature more well-known stores, many of which serve more upscale shoppers, Atascadero’s retail offerings do not appear as attractive on the surface. Atascadero’s strengths are with local-serving retail categories, as well as home improvement stores and highway commercial uses. The competing regional centers in Paso Robles and San Luis Obispo feature large concentrations of stores in apparel, specialty retail, and general merchandise stores. In Paso Robles, the 300,000 square-foot Paso Robles Town Center and the 312,000 square-foot Woodland Plaza II, together present formidable competition in very close proximity to Atascadero.1 These competing centers are significant because they are

1

National Research Bureau; Shopping Center Directory; 2006 Edition.

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already anchored by large-scale retail stores such as Target and Wal-mart that draw spending away from Atascadero. In contrast, most of the Atascadero shopping centers feature much smaller spaces and the retail mix in general includes smaller types of businesses, which makes it more difficult to offer an attractive price and product selection. In San Luis Obispo, numerous shopping centers are located adjacent to Highway 101, and together create a regional shopping destination that draws shoppers from many miles around. These centers include the 650,000 square-foot San Luis Obispo Marketplace, the 250,000 square-foot San Luis Obispo Promenade, and the 316,000 square-foot Madonna Plaza Shopping Center. Each of these centers is anchored by a large-scale department store or discount store that supports numerous secondary anchors and specialty stores. Taxable Sales Performance Comparison Compared to other communities in San Luis Obispo County, Atascadero has per capita retail sales that rank below the countywide average, as shown in Table 1. In 2007, Atascadero’s taxable retail sales averaged about $9,900 per resident, while the county as a whole generated per capita taxable retail sales of over $11,300. By comparison, San Luis Obispo, Pismo Beach, and neighboring Paso Robles each generate around $20,000 in taxable retail sales per resident. TABLE 1 COMPARISON OF PER CAPITA TAXABLE RETAIL SALES, 2007 City or Town San Luis Obispo Pismo Beach Paso Robles Arroyo Grande Morro Bay Atascadero Grover Beach San Luis Obispo County

Per Capita Taxable Retail Sales $23,765 $21,446 $19,671 $15,821 $11,419 $9,882 $5,577 $11,342

Source: ADE, Inc., data from California Department of Finance and Board of Equalization. Notes: Per capita calculations are based on comparison of taxable retail store sales with household population. Taxable sales does not include sales for nontaxable items such as prescription drugs and groceries. In addition, the data for retail sales excludes some store categories such as building materials dealers that are included in the retail market analysis elsewhere in this report.

LOCAL RETAIL SPENDING Based on data from ADE’s retail demand model, the estimated annual retail spending by Atascadero households is about $232 million, as shown in Table 2. It should be

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noted that not all of this spending occurs in Atascadero because neighboring communities provide retail offerings not available locally. While local households constitute the primary shopping group within Atascadero, the community also draws spending from residents in surrounding communities, businessto-business transactions, travelers along Highway 101 and some overnight visitors. This distinction between spending and where it occurs will be discussed further in the section pertaining to retail leakage. Household spending among Atascadero residents is distributed across the full range of retail store categories. The largest retail store spending categories are food-oriented stores and automotive businesses. Each of these retail store categories accounts for over $50 million in household spending. Building materials and general merchandise stores account for more than $24 million and $42 million in sales, respectively. TABLE 2 SUMMARY OF RETAIL DEMAND AND LEAKAGE/REGIONAL SALES CAPTURE, 2007($MILLIONS)

Retail Group Total Apparel Stores General Merchandise Specialty Retail Food, Eating & Drinking Building Materials & Home Furnishings Automotive

Atascadero Total Household Demand $232.4 $9.9 $41.9 $15.5 $66.9 $24.5 $73.6

Household Spending to Atascadero $153.2 $2.0 $19.1 $9.4 $53.6 $17.4 $51.7

Total Retail Sales in Atascadero $338.3 $3.7 $35.7 $25.5 $88.7 $83.2 $101.5

Leakage of Household Spending $79.2 $7.9 $22.8 $6.1 $13.3 $7.1 $21.9

Net Capture of Regional Sales $185.1 $1.7 $16.6 $16.1 $35.1 $65.8 $49.8

Source: ADE, Inc.

Food, Eating, and Drinking Group The food, eating, and drinking group consists of grocery stores, specialty food stores, and restaurants and other food service establishments. Atascadero households generate an annual demand of approximately $67 million. Demand is primarily driven by grocery stores and restaurants. Automotive Group Automotive businesses include automobile dealerships, gasoline service stations, motorcycle and RV dealerships, auto parts stores, and other vehicle sales. This category generates an annual household spending total of approximately $74 million. The majority of this spending goes to automobile dealers and gasoline service stations, with more of the spending going to the dealerships. General Merchandise Group General merchandise stores include traditional department stores, discount stores, variety stores, warehouse clubs, and drug stores. Household spending in this category

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by Atascadero residents totals $42 million annually with department/discount stores accounting for the majority of the demand. Other Retail Groups Atascadero households spend $10 million at apparel stores. These stores include men’s and women’s clothing, family clothing, and shoe stores. Demand in this category can range from high end designer stores, to discount clothiers and other specialty clothing stores. Atascadero households spend nearly $16 million at specialty retail stores. This category is the most varied retail group, and includes store types such as gift stores, florists, photographic equipment, sporting goods, jewelry, office supplies, books, music, pet stores, toys, and stationery. The building materials and home furnishings group includes all types of home improvement stores such as hardware stores, home centers, garden supply stores, and paint/wallpaper stores. In addition, the group includes furniture stores, home furnishings, used merchandise, electronics, and appliances. Total household demand in this category is about $25 million; however, demand in this category also includes large proportions of business-to-business sales.

ATASCADERO RETAIL SALES Sales tax data from the State Board of Equalization was used to calculate the retail store sales by store category for the City of Atascadero. The City provided an audited record of this data, from which ADE estimated the taxable retail sales. After adjusting the sales tax data to account for nontaxable item sales, the 2007 retail sales by businesses in the City of Atascadero totaled approximately $338 million. Atascadero’s retail sales are dominated by food stores, building materials/home improvement, and automotive businesses. Each of these categories generate over $80 million in annual sales, and together make up 81 percent of the total retail sales in Atascadero. Findings for retail sales by major store group are summarized below. Food Store and Eating Place Group Atascadero has a total of 79 establishments in this group, 67 of which are restaurants and food service establishments. The overall sales in this category total $89 million. The majority of these sales come from grocery stores, with $52 million in estimated sales.2 Restaurants and other food services account for another $34 million in sales.

2

The sales total includes an estimate for nontaxable item sales such as groceries and prescription drugs.

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Building Materials and Home Furnishings Group Atascadero has a total of 46 establishments in the building materials and home furnishings group. Together, these businesses generate about $83 million in annual sales. The vast majority of this total ($68 million) comes from home improvement stores such as building materials dealers, hardware stores, and home centers. Automotive Group Automotive group retailers generate approximately $101 million in annual sales. This category has a total of 43 establishments in Atascadero. Gasoline service stations account for more than half of the sales in this category, with more than $57 million in sales in 2007. Atascadero also generates sales from automobile dealerships that are relatively small compared to the household demand. Other Retail Groups Atascadero has a total of seven general merchandise stores. These stores include KMart, three drug stores, and other general merchandise stores that include variety stores. Together, these stores generate a total of $36 million in sales. Specialty retail stores in Atascadero generate about $25 million in annual sales. Atascadero has a total of 78 establishments in this retail group. Major specialty retail store categories represented in Atascadero include gift stores ($2 million), sporting goods stores ($3 million), books/stationery ($2 million), office supplies/computers ($8 million), jewelry ($2 million), and miscellaneous specialty retail ($8 million). Apparel stores constitute the smallest retail store group in Atascadero with 12 establishments and less than $4 million in annual sales.

RETAIL LEAKAGE Retail leakage represents the mismatch between local market spending and the retail sales by Atascadero retail establishments. Leakage indicates both an existing shortcoming in terms of local retailers not meeting existing household demand, as well as an opportunity because unmet retail demand can create potential for new stores as well as sales expansions for existing stores. Conversely, those store categories with net capture of regional sales extend their market reach into the surrounding region. Overall, Atascadero’s retail sales total of $338 million exceeds the local consumer spending total of $232 million. The sales leakage trend identified in the analysis shows a mixed trend as Atascadero is a net regional retail provider in specific retail store categories, but also generates significant retail leakage in other major store categories. The retail store categories where the sales exceed the local market spending attract a total net capture of $185 million in regional sales, while the retail store categories where sales fall short of local household spending generate a total of $79 million in retail leakage (See Figure 5).

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FIGURE 5 SALES LEAKAGES ($ MILLIONS) Automotive Group

$21.9

Building Materials & Home Furnishings Group

$7.1

Food, Eating, & Drinking Group

$13.3

Specialty Retail Group

$6.1

General Merchandise Group

$22.8

Apparel Store Group $0.0

$7.9 $5.0

$10.0

$15.0

$20.0

$25.0

Source: ADE, Inc.

In general, Atascadero is a regional provider for food-related retail stores, home improvement stores, and gasoline stations. These retail groups generate sales that far exceed the local market spending, and reflect specific market conditions that benefit Atascadero. Concurrently, Atascadero generates a net retail leakage of local spending in general merchandise stores and apparel stores. Findings by retail group are summarized below. Apparel Stores Based on data from the retail model, sales data, and household survey data, ADE estimates that the apparel stores in Atascadero capture approximately $2 million in spending from Atascadero residents. This results in a net capture of $1.7 million in retail spending from outside of Atascadero, and a leakage of nearly $8 million of spending by Atascadero residents that leaves the city. With the high concentration of apparel stores in Paso Robles and San Luis Obispo, this trend will likely continue without a significant upgrade in the local offerings by Atascadero retailers. General Merchandise Group Stores in the general merchandise category show more of a mixed trend, with an overall net leakage of local spending. Atascadero residents account for $19 million of the $36 million in total general merchandise store sales. This means that Atascadero stores in this category are capturing $16.6 million from non-Atascadero residents but losing nearly $23 million in retail leakage to other communities. The net capture largely comes from drug stores, which retains a high proportion of local household Applied Development Economics, Inc.

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spending. The leakage comes from the limited number of other general merchandise stores in Atascadero, spending that currently leaves Atascadero for discount stores in other communities, and the total absence of specific store types such as department stores and warehouse clubs. The retail leakage in this category is significant, but recapturing these sales for Atascadero in some cases may require more market support than is available locally. For example, warehouse clubs typically require a population base of 100,000 or more. Similarly, modern department stores seldom locate in a stand-alone site, but require an entire regional shopping center with several anchors together. Such developments have occurred in Paso Robles but it is not clear that sufficient market support exists in North County for another regional mall. However, other kinds of general merchandise stores, such as big box discount centers, tend to have more independent location criteria and could be supported in Atascadero. Moreover, a recent study completed by Buxton Group for Atascadero indicates that there is general merchandise leakage throughout the North County, so this appears to be a viable market opportunity for Atascadero. Specialty Retail Group Atascadero has an overall net capture of retail spending in specialty retail stores, with Atascadero stores capturing more than $9 million of the nearly $16 million in total household spending in this category. With more than $25 million in sales, this means that retail stores in Atascadero capture more than $16 million from customers other than Atascadero residents. The retail leakage totals about $6 million. The store categories that generate a net capture of regional sales include gift stores, sporting goods stores, office supplies, and miscellaneous specialty retail. Gift stores and sporting goods stores can capture significant spending from travelers and out-of-town visitors, while business-to-business transactions are significant customers for office supply stores. The specialty retail store types with a leakage of retail spending include florists, book stores, photographic stores, and music stores. Food, Eating, and Drinking Group Atascadero has a significant net capture of regional sales in food-related retail stores. Overall, Atascadero stores in this category retain a very high proportion of local household spending, with only $13 million of retail leakage compared to $67 million in total spending. The vast majority of the retail leakage is in restaurants and eating places, although some of this is offset by fast food sales to travelers through town. The survey data indicates a higher proportion of local residents who choose to eat outside of Atascadero. The main source of net retail capture is grocery stores. Building Materials and Home Furnishings Group The building materials and home furnishings group generates the largest net capture of regional sales and represents Atascadero’s most significant concentration of retail

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activity. As a whole, stores in this retail group have a net capture of more than $64 million, nearly all of which is due to the high sales from home improvement stores. Much of this high net capture of regional sales comes from the large amount of business-to-business sales to contractors, home builders, and other professionals. Furniture/home furnishings stores generated a retail leakage, while electronics and appliance stores had a net capture of sales. Automotive Group The automotive group generated a net capture of sales. Much of this net capture comes from the very high concentration of sales in gasoline stations. Gas stations in Atascadero serve travelers along Highway 101, as well as business-to-business transactions. Atascadero also generates net capture of retail sales from used car dealerships, other vehicle dealers, and auto parts stores. The glaring weakness with auto-related businesses is in new car dealerships, where the local household demand well exceeds the sales.

KEY RETAIL ISSUES Atascadero generates a sizable amount of retail trade. The city has specific strengths as well as numerous weaknesses, but on the whole Atascadero’s retail sector is actually performing better than the perception among residents of its retail stores. The following issues address existing shortcomings in Atascadero’s retail sector, the opportunities for commercial growth as well as competitive challenges that Atascadero needs to address in order to potentially enhance its retail market position. The economic data indicates that Atascadero’s retail store sales exceed the total household consumer spending generated by local households. Yet, the survey data indicates that local residents do not hold the local shopping opportunities in high regard, and this is reflected in how they assessed their own shopping habits. The retail sales trends imply that Atascadero residents shop locally more often than they think.3 The largest source of retail sales revenue is tied to building materials and home improvement businesses, followed by drug stores and grocery stores. These activities generate significant revenue, but do not contribute particularly to the perception of Atascadero as a shopping destination. The types of retail stores that can shape a community into an upscale shopping destination are largely absent from Atascadero. The community does not have any traditional department stores, has a very limited selection of apparel stores, only has KMart as a large-scale general merchandise provider, has many specialty retail categories with unmet demand, has a limited selection of automobile dealerships, and the restaurant selection is primarily take out and middle market restaurants.

3

The household survey asked respondents to estimate the percentage of shopping trips that occur within Atascadero, and the percentage of trips that go elsewhere. The survey did not ask respondents to keep a diary or otherwise track their spending patterns over time.

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The City has the opportunity to stem the sales leakage in general merchandise and some of the specialty retail categories, as well as possibly auto sales, in the proposed retail centers at the De Rio/El Camino intersection as well as elsewhere along El Camino in the northern part of town. The Downtown represents the other major area of opportunity for retail development, including fine restaurants, additional specialty retail, and entertainment. The proposed Colony Square project would respond very well to these kinds of market opportunities. In addition, efforts to develop additional visitor-serving business, services, and events Downtown would help to support a moer diverse business mix. The significant spending capture for gasoline service stations in Atascadero indicates that the community serves as a stopover for travelers along Highway 101 and SR 41. However, there is a need to encourage increased overnight stays in Atascadero, which would lead to additional visitor spending in a wider range of businesses such as restaurants and specialty retail stores. In particular, a strong visitor trade could help bolster the apparel retail sector, which currently does not meet residents’ needs for higher quality clothing. The problem, here is that Atascadero does not have sufficient market position to develop upscale department stores or a traditional regional mall. While it can meet many basic shopping needs of its residents with additional discount centers, it will be very difficult for the City to compete with Paso Robles and the City of San Luis Obispo for finer shopping opportunities. It will need to rely to a large degree on local independent boutique apparel and specialty retail stores. These stores could concentrate Downtown, but without a traditional major anchor store, they will be hard pressed to generate sufficient traffic to be successful. Increased visitor spending could help this situation but that will require adding attractions in Atascadero to boost the length of visitor stays in the City.

B. TOURISM Atascadero has commissioned the preparation of a separate Tourism Marketing Plan (TMP), which is anticipated to contain extensive analysis and recommendations for a comprehensive tourism development program. The City’s efforts toward tourism promotion should be considered a major component of its overall economic development program. ADE has discussed preliminary elements of the TMP with the report’s author. This section of the Economic Development Strategic Plan provides a summary of key issues that ADE anticipates will be important as Atascadero considers strategies to improve the economic benefit it gains from tourism. Considering the inventory of attractions for visitors to San Luis Obispo County, and particularly the North County area, many of these are in other communities or

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locations and are not in Atascadero itself. This does not motivate visitors to stay at lodging facilities in Atascadero. Atascadero has 3.7 percent of rooms in San Luis Obispo County but only 2 percent of revenues. It could generate an additional $3 million in annual lodging revenues if it could achieve a proportional share of revenue. Compared to the County as whole, the City does have a favorable preponderance of branded lodging facilities and relatively larger facilities. Both of these characteristics tend to increase the availability and funding for marketing channels. However, in order to better support the lodging sector in the City, Atascadero needs to consider developing more attractions, which may include special events, art and culture, dining, shopping, etc. The City may also consider supporting the development of additional physical facilities as attractions such as an equestrian center that would draw a specific segment of patrons into the City. Considering Atascadero’s position in the marketplace for tourism, some issues to be addressed include the following: Strengths  Location in the center of the county with good transportation access in all directions.  Numerous existing special events  Substantial tourism promotion infrastructure in place with the Tourism Promotion Committee, the Chamber of Commerce and the Main Street organizations  Historical assets and distinctive architecture  Proximity to wine country  Existing lodging facilities provide good value. Weaknesses  Limited attractions relegates City to overflow destination  Downtown suffers from a lack of tourist oriented activities  Atascadero’s existing brand has not been adequately promoted and has limited identity in the marketplace Opportunities  Continued revitalization of the Downtown area  Branded niche destination to attract visitors already patronizing other areas of the County  Equestrian connection could provide a distinct identity to Atascadero  Eagle Ranch could provide additional outdoor attractions Threats  It is critical for Atascadero to develop a defendable niche position as a viable tourist destination to address competition from surrounding localities. Applied Development Economics, Inc.

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 The current and foreseeable economic conditions make it more challenging to promote the City and make it more imperative to communicate a clear marketing message. Based on an assessment of Atascadero’s position and challenges in the market, it appears that the City can differentiate itself as a destination by promoting its authenticity based upon its history and local culture. Over time, additional physical attractions can also be added.

C. JOB PRODUCING INDUSTRIES THE CURRENT STRUCTURE OF ATASCADERO’S ECONOMY Atascadero’s economy is comprised of businesses that provide goods and services to local, regional, and in some cases, international customers. These businesses also provide employment opportunities and wages for residents who then purchase goods and services. The greater the share of purchases made locally, by both businesses and employees, the greater the overall economic benefit to Atascadero. In 2007, 835 employment establishments were located in Atascadero. These establishments employed 8,822 workers and had an annual payroll of $293.3 million. (See Table 3, below) TABLE 3 ATASCADERO ESTABLISHMENTS, EMPLOYMENT, PAYROLL, AND WAGES, 2007 Agriculture and Mining Construction Manufacturing, Wholesale Trade, Transport. Retail Trade Information Finance and Real Estate Management/Professional/Administrative Health, Education & Social Services Arts Entertainment and Recreation Accommodation and Food Services Personal Services TOTAL

Establishments 9 163 57 103 10 69 131 199 10 52 33 835

Employees 65 877 440 1,352 109 384 769 3,411 371 848 196 8,822

Annual Payroll $2,078,252 $36,005,204 $16,050,940 $34,464,260 $3,803,064 $14,789,920 $126,486,797 $39,460,048 $4,587,468 $10,787,452 $4,862,048 $293,375,453

Average Wage $31,973 $41,055 $36,479 $25,491 $34,890 $38,515 $164,482 $11,568 $12,365 $12,721 $24,806 $33,255

Source: ADE, Inc., based on data provided by CA Employment Development Department.

Agriculture and Mining Agriculture and mining comprise just 1 percent of total establishments and less than 1 percent of total employment and payroll. These establishments consist of manufacturing, support services and suppliers of agriculture and mining businesses including food and beverage processors, veterinarians, metal fabricators and other suppliers.

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Construction The second-largest category of employers consisted of 163 firms engaged in construction activities, including construction of buildings, public works, and specialty trade contractors. This sector employs 877 workers and has a payroll of slightly over $9.1 million. Included in this sector are 100 specialty trade contractors that employ over 500 workers and have a payroll of $36.0 million. Manufacturing, Wholesale Trade and Transportation The manufacturing, wholesale trade and transportation sectors were combined for this analysis because they tend to require similar locations and site amenities. Together, these sectors include 57 establishments that employ 440 workers and have a payroll of over $16.0 million. Three of the manufacturers’ process food and beverages, 9 are manufacturers of metal products and machinery and 5 provide printing services. Retail Trade The retail trade sector consists of 103 establishments, such as food, drug and hardware stores, thrift shops, gas stations and car dealerships. As noted in the retail analysis, in addition to capturing local spending, these stores also capture a large amount of spending by non-residents. This sector employs over 1,300 workers and has a payroll of $34.4 million. While retail has 15 percent of all local jobs, it accounts for 12 percent of total payroll. The average wage in the retail sector was $25,500. Information The information sector includes firms engaged in publishing, broadcasting, data processing, motion picture and telecommunications activities. Information has been one of the fastest growing sectors in the U.S. economy. Within Atascadero, however, it comprises only 1 percent of employers, total employment, and payroll. The average wage in this sector is nearly $35,000. Finance and Real Estate The finance and real estate sectors primarily serve the local community and include banks, investment brokerages, insurance carriers, real estate brokers, and leasing agents. These sectors together comprise 8 percent of all establishments, and between 4 and 5 percent of workers and payroll. About 380 people are employed in about 70 establishments that have a payroll of $14.8 million. Management, Professional Services, Administrative Support These sectors tend to provide high paying job opportunities. The management, professional services, administrative support, and non-profit sectors were combined for this analysis because they all tend to locate in office buildings with similar amenities. These sectors together comprise 131 establishments that employ about 770 workers and have a payroll of $126.5 million. Though these sectors account for less than 10 percent of all jobs in Atascadero, they account for over 43 percent of total payroll. The average annual wage is about $165,000. Applied Development Economics, Inc.

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Health, Education and Social Services The largest category of establishments includes businesses and organizations that provide health, education, and social services. Nearly 200 or slightly less than onefourth of all Atascadero employers were in this category. The Health, Education, and Social Services sector also had the greatest number of jobs. In 2007, total employment was slightly over 3,400. Total payroll was $39.5 million and the average annual wage was slightly less than $12,000. Arts, Entertainment and Recreation The economic growth potential of the arts and culture sector has yet to be realized in Atascadero. As of 2007, only 10 establishments comprised this sector, employing 371 workers. Total payroll was $4.6 million and the average wage was slightly over $12,000. Accommodation and Food Services The accommodation and food services sector was comprised of 52 establishments employing 848 workers. Total annual payroll was $10.8 million. The relatively low average annual wage of $12,700 is due to the seasonal nature of tourism. In part due to its location along Highway 101 and its many interchanges, there are 47 restaurants that employ over 700 workers. Personal Services The personal services sector includes barber shops and beauty salons, day spas, dry cleaning and other laundry services, appliance and car repair shops and maintenance services for HVAC, pools and other types of equipment. This sector employed nearly 200 workers in 33 establishments and had a payroll of a little less than $5.0 million. Average annual wages were nearly $25,000.

THE STRUCTURE OF THE SAN LUIS OBISPO COUNTY ECONOMY The health and vitality of Atascadero’s economy is linked to that of the broader regional economy. For this reason, we have analyzed the County’s economic structure and dynamics. The purpose of the trends analysis is to see what direction the economy is moving in, which industries are growing, which are shrinking, and what the relationships between industries are. Industries have different paths of growth. They respond in different ways to external forces. They have different markets, different suppliers, different labor force and space needs. Knowing the composition of your regional economy and understanding which industries are driving growth or decline, allows critical support organizations such as cities, chambers and economic development organizations to better target economic development resources.

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SAN LUIS OBISPO ECONOMIC BASE ANALYSIS Recent County Employment Trends In 2007, employment in San Luis Obispo (SLO) County totaled 109,100 jobs4. This represents an increase of 6.8 percent over 2001 employment levels. This is significant considering that, over the same period, the bordering coastal counties of Santa Barbara and Monterey only experienced increases of 5.4 percent and 1.6 percent respectively. During that time, California as a whole only increased by 3.8 percent. As shown in Table 4 below, over one-fifth of SLO County’s total employment is attributable to the public sector. This includes institutions such as the California Polytechnic State University, Atascadero State Hospital and various local governmental bodies. In fact, eight of the top ten employers in the county fall within the public sector5. This raises a serious concern not only for the County but for Atascadero, many of whose residents are employed by government. The recession is affecting tax revenues at all levels of government and has triggered substantial lay-offs and work furloughs for many government agencies. This is exacerbated by the State Budget stalemate that even as of this writing in mid-February remains unresolved. The loss of employment and income in the government sector will have a major impact on household spending in Atascadero and will affect retail sales as well as so affect the City ability to fund services and to pursue economic development activities. The balance of this analysis will focus on the 86,300 individuals employed in the private sector. When excluding the public sector, the growth figures for the county through 2007 were even more impressive. In this case, SLO County’s private sector employment increased by 8.7 percent versus 5.0 percent and 1.1 percent for the counties of Santa Barbara and Monterey respectively while California’s private sector employment grew by only 3.6 percent. SLO County’s industry mix and growth rates are shown in Table 4 below.

4

California Employment Development Department As reported by the University of California, Santa Barbara, 2008 San Luis Obispo County Economic Outlook. Of the top 35 employers, 17 were listed as either Public Administration or Public Education. 5

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TABLE 4 SAN LUIS OBISPO COUNTY: EMPLOYMENT, 2001-2007

Industry Sector Title TOTAL, ALL INDUSTRIES TOTAL, PRIVATE SECTOR Total Farm Natural Resources, Mining and Construction Manufacturing Durable Goods Machinery Manufacturing Computer and Electronic Product Manuf. Nondurable Goods Food & Beverage & Tobacco Manuf. Trade, Transportation and Utilities Wholesale Trade Retail Trade Food and Beverage Stores General Merchandise Stores Transportation, Warehousing and Utilities Utilities Transportation and Warehousing Information Financial Activities Finance and Insurance Real Estate and Rental and Leasing Professional and Business Services Educational and Health Services Leisure and Hospitality Arts, Entertainment, and Recreation Accommodation and Food Service Accommodation Food Services and Drinking Places Other Services Government

2001 Empl. 102,200 79,400 4,900

2007 Empl. 109,100 86,300 4,500

20012007 Empl. Change 6,900 6,900 -400

6,700 7,400 4,200 900 700 3,100 1,100 18,800 2,500 13,100 2,900 1,500 3,200 1,700 1,500 1,800 3,800 2,200 1,600 9,000 9,600 13,200 1,200 12,100 2,900 9,200 4,400 22,800

7,600 6,100 3,300 800 200 2,800 1,600 21,000 2,700 14,200 3,100 2,000 4,100 2,400 1,700 1,400 4,700 2,500 2,200 9,900 11,100 15,600 1,500 14,100 3,700 10,400 4,400 22,800

900 -1,300 -900 -100 -500 -300 500 2,200 200 1,100 200 500 900 700 200 -400 900 300 600 900 1,500 2,400 300 2,000 800 1,200 0 0

20012007 Empl. % Change 6.8% 8.7% -8.2%

2007 Empl. as a % of All Ind. 100.0% 79.1% 4.1%

2007 Empl. as a % of Private S. N/A 100.0% 5.2%

13.4% -17.6% -21.4% -11.1% -71.4% -9.7% 45.5% 11.7% 8.0% 8.4% 6.9% 33.3% 28.1% 41.2% 13.3% -22.2% 23.7% 13.6% 37.5% 10.0% 15.6% 18.2% 25.0% 16.5% 27.6% 13.0% 0.0% 0.0%

7.0% 5.6% 3.0% 0.7% 0.2% 2.6% 1.5% 19.2% 2.5% 13.0% 2.8% 1.8% 3.8% 2.2% 1.6% 1.3% 4.3% 2.3% 2.0% 9.1% 10.2% 14.3% 1.4% 12.9% 3.4% 9.5% 4.0% 20.9%

8.8% 7.1% 3.8% 0.9% 0.2% 3.2% 1.9% 24.3% 3.1% 16.5% 3.6% 2.3% 4.8% 2.8% 2.0% 1.6% 5.4% 2.9% 2.5% 11.5% 12.9% 18.1% 1.7% 16.3% 4.3% 12.1% 5.1% N/A

Source: ADE, Inc., based on California Employment Development Department

As Table 4 shows, in 2007, the two super-sectors Trade, Transportation and Utilities and Leisure and Hospitality accounted for 42.4 percent of SLO County’s private sector economy. Further, the employment gains in these sectors alone accounted for twothirds of the county’s total job gains over the period. The most significant loss to the county’s economy was the reduction in the Manufacturing sector from 9.3 percent of the total economy in 2001 to 7.1 percent in 2007. This 2.2 percent reduction accounted for the loss of 1,300 jobs with 2006 average annual wage of $40,805. This is particularly important given that 2006 average annual wages countywide were $26,634. The one standout among the Manufacturing sector was Food & Beverage & Tobacco Manufacturing which gained 500 jobs, an increase of 45.5 percent over 2001 employment levels.

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CLUSTERS OF OPPORTUNITY A useful tool for better understanding a region’s economy is through the use of clusters. Clustering is an analytical tool for understanding a regional economy. It is also a useful organizing and engagement tool. As an analytical tool, the cluster methodology allows the analyst and their clients to better understand the structure of their regional economy, to see the linkages between industries. Further exploration through either interviews or input-output analysis, or both, allows for an understanding of the buyer-supplier relationships between industries. As an organizing and engagement tool, the cluster methodology allows firms within a cluster to identify their common competitiveness issues, develop a strategic action plan, and collaborate to jointly resolve those issues. Cluster organizations provide their member firms a voice in the development of policies and programs related to workforce development, land use permitting, infrastructure development, research and technology, and entrepreneurship support services. This analysis of economic growth opportunities is based on 2006 employment data for San Luis Obispo County. Together, these clusters employ a total of 36,619 workers, about 33 percent of total employment in all industries that year. Figure 6, below illustrates the structure of an industry cluster. Clusters are geographic concentrations of firms that share common markets, buyers, suppliers, and talent. Firms within clusters compete with each other in the same markets. Clusters include not only traded firms (that export their product or service), but also firms that supply goods and services to these exporters. The role of the public sector is to support the growth and success of cluster members through investments in education, research and technology, infrastructure and regulation. For instance, in the food and beverage cluster, the exporting firms would include the wineries that sell their wines in other regions or to visitors from other regions. The wineries purchase barrels, stainless steel tanks, presses, grapes, water, and the expert services of master winemakers, design engineers, civil engineers, marketing professionals and wine distributors. The public sector and private utilities provide roadways, internet, water, telephone, talented workers and new technologies in wine processing and grape cultivation. Each member plays a crucial role in the success of the whole cluster. The greater the share of local suppliers, the greater the beneficial impact on the region.

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FIGURE 6 STRUCTURE OF INDUSTRY CLUSTERS

Outward Oriented Industries

Local Serving Industries

Technology

Human Resources

Capital

Regulatory & Tax Climate

Adv. Physical Infrastructure

Quality of Life

Community Assets

The composition of each cluster, in terms of its member industries as defined by NAICS6 codes, is based on an analysis of employment growth, employment concentration as measured by Location Quotient7 (LQ) and an assessment of opportunities for growth both globally and locally. Five industry clusters have been identified as economic growth opportunity areas. They include tourism and hospitality; food and beverage; construction; new media arts; electronics and alternative energy (see Table 5 below).

6

NAICS, North American Industry Classification System The Location Quotient is a tool for identifying a region’s specialization relative to other regions or nations. It is used to determine which industries primarily export their goods, thereby generating wealth in the region. LQ is a measure of an industry’s employment concentration. It is the ratio of a region’s employment in an industry (for instance wine processing) as a share of total employment in that region (in this case, San Luis Obispo County) divided by the ratio of the larger region’s employment in that industry (e.g. wine processing) as a share of total employment in that larger region (in this case, California). An LQ greater than 1 indicates that the study region (e.g. San Luis Obispo) more than meets the local need for that good or service and must be exporting excess goods or services outside the region. 7

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TABLE 5

SAN LUIS OBISPO COUNTY CLUSTERS OF OPPORTUNITY 2006 Employment Tourism and Hospitality 16,410 Food and Beverage 6,167 Construction 6,055 New Media Arts 2,948 Electronics 2,727 Alternative Energy 2,312 All Clusters 36,619

Source: ADE, Inc., based on data from IMPLAN

Tourism and Hospitality The tourism and hospitality cluster consists of lodging, restaurants, entertainment and recreation, sporting goods stores, and companies that arrange transportation services (see Table 6). Of all the opportunity areas, it is the largest, employing over 16,000 workers. The current economic recession, which began in the fourth quarter of 2008, will have a significant impact on this sector globally and will affect the broader San Luis Obispo economy until 2010. Latent demand for leisure travel combined with population growth and new spending will again drive growth in this sector at that time. The opportunity for Atascadero is to plan now for the renewed growth in tourism by carefully adding new visitor attractions that will help differentiate the City as a unique visitor destination. TABLE 6 COUNTY TOURISM & HOSPITALITY Industries Food Services & Drinking Places Accommodation Amusement, Gambling & Recreation Industries Sporting Goods, Hobby, Book & Music Stores Performing Arts, Spectator Sports & Related Industries Support Activities for Transportation

2006 Employment 10,275 3312 1215 1293 190 125

LQ 1.48 2.49 1.12 2.33 0.46 0.24

Source: ADE, Inc., IMPLAN

Food and Beverage San Luis Obispo’s food and beverage industry employed over 6,000 workers in 2006 (see Table 7). This cluster includes food and beverage processing (mostly wine), farm machinery manufacturing, metal tanks (for fermenting and storing wine) ranching, vineyard and other farm employment and farm management services. The wine industry has a significant economic impact on the region’s economy. Over the next few years, growers will be planting more acreage in grapes to meet anticipated growth in demand worldwide. After that, the demand for additional processing capacity will increase. The opportunity for Atascadero is to make suitable sites available for wine processors, metal tank fabricators, offices for wine distributors and marketers and

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other management services. TABLE 7 COUNTY FOOD AND BEVERAGE Industries Crop Production Animal Production Support Activities for Agriculture and Forestry Farm Management Services Farm Machinery Food Manufacturing Other Fabricated Metal Metal Tanks Beverage Product Manufacturing Wineries

2006 Employment 1935 211 2151 347 25 401 215 58 1171 1169

LQ 1.72 1.11 1.89 5.11 1.38 0.41 1.87 5.11 4.26 7.08

Source: ADE, Inc., IMPLAN

Construction The construction cluster, the third largest in San Luis Obispo County, includes architects, engineers, construction companies, specialty contractors, waste management services, mining and construction material manufacturers (see Table 8). This cluster employs over 6,000 workers. This industry has been hit hard by the 20082009 recession, but could be revived by the economic stimulus package implemented by the federal government during 2009. Population will continue to grow and require the services and products of this industry over the long term, but for the next few years, growth will be flat or negative. In Atascadero, the construction industry employs 877 workers in 163 establishments. The average annual wage is relatively high, at $41,000. The opportunity for Atascadero is to continue to offer competitivelypriced space for architects, engineers, and specialty contractors.

TABLE 8 COUNTY CONSTRUCTION Industries Architects Engineering Furniture & Related Product Mfg. Waste Management & Remediation Heavy & Civil Engineering Construction Construction of Buildings Mining (except Oil and Gas) Non-Metallic Mineral Product Mfg.

2006 Employment 347 745 237 387 733 3312 106 188

LQ 1.77 1.04 0.63 1.52 1.22 2.49 2.48 0.61

Source: ADE, Inc., IMPLAN

New Media Arts (Emerging) The emerging new media arts cluster includes firms involved in audio and video equipment manufacturing, motion picture and sound recording, publishing, software, telecommunications, computer system design and data processing. Countywide, this

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cluster employs almost 3,000 workers (Table 9). Within Atascadero, one component of this cluster, the information sector, employs 109 workers in 10 companies. This cluster has grown rapidly at the national and international level. Atascadero is particularly well-suited to capture its share of growth in this largely location-independent industry. It is relatively close to Los Angeles, an historic hub of creativity, offers a high quality of life with abundant recreation opportunities, has relatively easy access to graduates of a top university in San Luis Obispo and offers competitively-priced office space. The opportunity for Atascadero is to promote those economic strengths that are most highly desired by this industry through a targeted marketing communications strategy. In addition, Atascadero should consider supporting the formation of an industry cluster group that would work jointly with the City, education and technology services, economic development organizations and others to build the concentration of firms locally. TABLE 9 COUNTY NEW MEDIA ARTS Industries Printing & Related Support Activities Telecommunications Publishing Industries Software Publishing Data Processing, Hosting & Related Services Audio & Video Equip. Mfg. Motion Picture & Sound Recording Industries Performing Arts, Spectator Sports & Related Industries Computer System Design

2006 Employment 669 396 483 111 133 220 352 190 505

LQ 1.74 0.55 0.76 0.32 0.37 3.97 0.36 0.46 0.41

Source: ADE, Inc., IMPLAN

Electronics The electronics cluster includes companies engaged in the manufacturing of computer and electronics products, machinery, plastics and rubber and fabricated metal products. Employment in this cluster overlaps with both the new media arts cluster and the food and beverage cluster. The key industry drivers of this cluster are miscellaneous electrical equipment and components manufacturing and audio and video equipment manufacturing. This cluster employs about 2,700 workers countywide (Table 10). The opportunity for Atascadero is to promote those economic strengths that are most highly desired by this industry through a targeted marketing communications strategy.

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TABLE 10 COUNTY ELECTRONICS Industries Computer and Electronic Product Mfg. Audio & Video Equip. Mfg. Telecommunications Plastics & Rubber Products Mfg. Unlaminated Plastic Profile Mfg Other Plastics Electrical Equipment, Appliance & Component Mfg All Other Misc. Electrical Equip & Component Mfg. Fabricated Metal Product Manufacturing Machine Shops Other Fabricated Metal Miscellaneous Manufacturing Machinery Manufacturing Including Semiconductor Machinery Mfg

2006 Employment 396 220 396 253 63 115 424 386 65 239 215 393 800 118

LQ 0.19 3.97 0.55 0.7 4.8 0.69 2.05 18.01 0.71 0.88 1.87 0.68 1.54 3.2

Source: ADE, Inc., IMPLAN

Alternative Energy San Luis Obispo County has existing strengths in power production that could be leveraged to build a viable alternative energy production sector. In 2006, the cluster employed 2,300 workers in petroleum refineries, power production plants, and pipelines (Table 11). It also includes manufacturers and installers of alternative energy production components. The County has received proposals for major solar energy production facilities. The opportunity for Atascadero is to promote those economic strengths that are most highly desired by this industry through a targeted marketing communications strategy. TABLE 11 COUNTY ALTERNATIVE ENERGY Petroleum and Coal Products Mfg Petroleum Refineries Pipeline Transportation Utilities

2006 Employment 175 166 19 2118

LQ 1.8 2.09 1.15 5.76

Source: ADE, Inc., IMPLAN

D. SITE DEVELOPMENT Atascadero is situated at a crossroads between US 101 going north/south and SR 41 linking the San Joaquin Valley with the Coast along an east/west axis. The commercial and industrial sites in Atascadero are generally located along these two routes. The City has eight interchanges along US 101 and nearly all of the property on the east side of the freeway is zoned for the commercial use, as well as several significant properties on the west side of the freeway. SR 41 passes through Downtown on the east side of US 101 and then continues as a commercial corridor west of the freeway. This area is developing a concentration of office buildings, particularly for medical services. The

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City’s industrially zoned properties are located along Traffic Way and Sycamore Road, in proximity to SR 41 as it enters the City from the east. Commercial Sites In 2004, the City Council adopted a Prime Commercial site map identifying 11 sites as vital to the City’s economic health (Figure 7). Eight of these sites are currently developed and three are vacant. The most significant sites, labeled as #1 and #2 on the map, are the properties north and south of Del Rio Rd. A major retail center is proposed for these sites. Such a development would be important to help capture much of the retail sales leakage the City is currently experiencing, as well as helping to generate more traffic for the Mission Oaks center on the west side of El Camino Real. The City has also zoned the properties north of Del Rio and west of El Camino as commercial. There are 14 parcels in this area, ranging in size from less than half an acre up to nearly two acres. The entire area is approximately 18 acres. About half the parcels remain in residential use and about one-fourth are vacant. This area is included in the City’s Redevelopment Project area, and is zoned Commercial Park (CPK), which is intended for large lot commercial and light manufacturing uses. If the Del Rio sites develop as a major retail center, then this area could be an excellent opportunity for the City to try to recapture some of the regional auto market, as well as consolidate existing dealers and auto services (auto dealers are allowed as a conditional use in the CPK zone). While the current industry trend in auto sales is toward consolidation of dealerships, especially American made cars, Atascadero could supplement its existing dealerships with high end specialty car sales to cater to the higher income households in Atascadero and North County. Another side benefit of providing an alternate location for the existing dealers south of Downtown is to open up those sites for more intense mixed use development that would help to create more of a critical mass for downtown business and development. A secondary option for the northwest quadrant area of Del Rio Road and El Camino is a business park or light industrial development consistent with the existing zoning. The public input during this process has indicated that the City is interested in attracting technology firms, including those in the environmental and information sectors. There are very few large sites for this sort of development although scattered development opportunities exist in other commercially zoned areas. In addition, the retail market analysis included in this study indicates that, with the possible exception of an auto center, the City does not need a major new retail location in addition to the Del Rio sites. Therefore, a business park/light industrial use would respond both to the interest of the City in developing more jobs and to the need to consolidate retail centers in the City into fewer nodes.

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Industrial Sites The City’s industrial sites are located away from the freeway in the eastern portion of the City along the railroad track and near the entrance of SR 41 into the City from the east. Portions of the industrial zoned properties along the railroad at the north end of Traffic Way are very narrow and the lots are only 2,500 sq.ft. Further south, the lots increase in size to as much as 20,000 sq.ft., but their depth is only 100 ft. Area 4 includes four parcels with an estimated total area of about 11.5 acres. This site has access on both Traffic Way and Via Road. Via Road has a small one-way bridge over Atascadero Creek which provides access to SR 41 via Ensenada Avenue and Mercedes Avenue. If assembled into a single development, this area could support as many as 250 to 300 industrial jobs. The parcels could also be developed individually, but the key infrastructure costs would be an improved bridge on Via Road and possibly a signalized intersection at Mercedes Avenue and SR 41 to permit safer truck turning movements. Both the northwest and southeast ends of the industrial parcels along Sycamore Avenue are developed and much of the central portion is planned to support the expansion of the Water District facilities. The proximity of these sites to the Salinas River also limits their potential. Eagle Ranch This large site is proposed for annexation to the City. Early project concepts advanced by the property owners focus on single family residential development, although some non-residential development is under consideration as well. The property includes freeway frontage and access to the interchange at Santa Barbara Avenue. As such, it should be included in the City’s economic development program. Given the topography of the site, the best economic development use, in conjunction with the planned residential, would be visitor serving lodging and attractions. The site could possibly support lodging near the freeway interchange, but could certainly support a resort style lodging facility in the interior of the property, as well as RV and camping facilities. Local residents have raised the possibility of developing an equestrian center in Atascadero to host a variety of equestrian competitions and events that circulate through the western United States. The Eagle Ranch property would be an ideal location for such a facility and this would help support not only the onsite lodging but also other attractions, restaurants and visitor services in the City. An alternate idea would be to locate a business park development along the freeway frontage. Based on the limited visual access we were able to gain for this study, it is not clear how large a facility could be developed in this portion of the site. However, it may possibly be a location for additional job development if the City chooses that as a priority for its economic devotement program.

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FIGURE 7 ADOPTED PRIME COMMERCIAL SITES

Source: ADE, Inc.

E. SWOT ANALYSIS ATASCADERO STRENGTHS, WEAKNESSES, OPPORTUNITIES, & THREATS An analysis of a community’s economic strengths, weaknesses, opportunities and threats (SWOT) helps identify issues of critical importance to its current and future economic vitality. Goals and implementation plans are developed to build on strengths and opportunities and ameliorate weaknesses and threats. This SWOT analysis summarizes information gathered through quantitative analysis and through a thorough public outreach program consisting of a household survey, interviews with business and community leaders, focus group meetings and a public forum. Definitions for each element of the SWOT analysis are given below:

 Strengths: Strengths are assets, tangible or intangible, that contribute to economic competitiveness and high quality of life.

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 Weaknesses: Weaknesses are tangible or intangible factors that work against the achievement of quality of life and economic vitality.  Opportunities: An economic opportunity is a trend external to the community that could enable Atascadero to leverage its existing economic and quality of life assets to achieve its goals.  Threats: Threats are circumstances or trends external to the community that could prevent the realization of goals.

STRENGTHS Location One of Atascadero’s greatest assets is its location. Situated about half-way between San Francisco and Los Angeles on Highway 101, residents and businesses are within 3 hours drive of the two largest metropolitan areas of the state as well as to the Central Valley and Yosemite National Park via Highway 41. Its central location between San Luis Obispo to the south and Paso Robles to the north allows easy access to customers and services throughout the county. This central location facilitates recruitment of workers by increasing access to a broader labor market; it also expands the business market area. As for tourism marketing, its central location within the county provides easy access to all the county’s tourism attractions and amenities. Location at the intersection of Highways 101 and 41 would provide an advantage in capturing spending by Central Valley visitors traveling to the cooler central coast. Amenities and Attractions Atascadero’s location is not only advantageous for business it also provides a range of amenities and activities that are attractive to new residents as well as tourists. Located about 20 miles inland from the Central Coast beach town of Morro Bay, the mild, Mediterranean climate and the oak-studded hillsides provide both beautiful views and year-round opportunities for outdoor activities. Recently, the ranch lands of San Luis Obispo County have been planted in wine grapes and the area has become a significant wine-growing region and a popular attraction for tourists. The list of unique attractions include wineries, an accredited zoo, a lavender farm, golf courses, art galleries, a skate park and a BMX track. Freeway Interchanges Atascadero’s visitor services, such as fast-food restaurants and lodging, have capitalized on its 8 freeway interchanges along Highway 101. Local drug, grocery, and hardware stores also benefit by easy access from rest of the region. Historic Colony Plan and Structures Atascadero was developed by E.G. Lewis in the early 1900s who designed the entire Colony of Atascadero, including 26 square miles of land. Before his development company went bankrupt, he was able to build several roads, subdivide most of the

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property, and build stately public buildings in the town center. Some of those building are still standing but are not being used because of earthquake damage. The layout and structures add a unique charm to the town center. The refurbished Carlton Hotel has improved the image of the downtown core and adds to the town’s interest. High Household Incomes A high percentage of Atascadero residents are employed by government institutions which provide higher than average compensation. The UCSB forecast indicates that the median family income in Atascadero is higher than the county median. Higher household incomes could support a vibrant retail sector, but the community is faced with competitive challenges from other communities. Redevelopment Agency and Project Areas The City’s Redevelopment Project Area includes large portions of the City’s commercial districts, ranging from Santa Cruz Road in the north along El Camino Real to Palomar Avenue in the south. It also includes the industrial properties along Traffic Way and extends out Morro Road to Curbaril. In 2004, the agency issued $12.5 million in bonds. Available Space for Expansion of Retail and Professional Services Atascadero has enough sites available for retail and professional office development. Prime sites for development in the near term include parcels at the intersection of Del Rio and El Camino Real, as well as further north on the west side of El Camino. In addition, the Dove Creek site currently is proposed for a commercial development. The Morro Road area and the Downtown can support additional professional office development. Water Supply The Atascadero Mutual Water Company has started a process of increasing the Town’s water supply. Engaged Citizenry Atascadero has a well-informed and active citizenry that has helped to produce a whole range of community plans. These include the General Plan, the Downtown Revitalization Plan, an economic strategy and Redevelopment Project Plan, a Tourism Strategy and others.

WEAKNESSES Lack of Common Vision for Development Despite the significant investment of time and money into the development of various plans, many residents believe these plans are not being implemented. The perception among some residents and businesses is that the City lacks both a common vision and effective leadership. As a result, some businesses have been reluctant to invest in Applied Development Economics, Inc.

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Atascadero, claiming that building and planning approvals are difficult to obtain. This has resulted in Atascadero losing commercial development to Paso Robles and Templeton. High Share of Government Workers A significant share of employed residents work for large government institutions, including the State Hospital, the prison, local government, school districts, and Cal Poly. These institutions offer relatively good wages and benefits. As a result, the private sector has a hard time recruiting workers because it cannot match government compensation packages. There is a concern that government workers who may have never worked in small business may lack an understanding of what it takes to keep a business going. Under-utilized Downtown The central business district is located on the east side of El Camino Real between Traffic Way and E. Mall. This area contains a wide range of shops including art galleries, hardware stores, restaurants, thrift shops, gift shops, and offices for realtors, printers, dentists and other professionals. Other than Downtown, Atascadero’s commercial district is essentially a series of strip malls along the El Camino Real corridor. This detracts from the City’s ability to establish a substantial retail concentration Downtown. The Downtown should support a mix of uses, with higher building intensities where possible. Declining School Enrollment The Atascadero school districts enrollment has been declining over recent years, resulting in less funding to schools. Difficulty Recruiting Workers, Especially Young “Creatives.” Young, recent college graduates are attracted to areas that offer the greatest opportunities to meet other young people, advance their careers and indulge in their favorite pastimes. While Atascadero’s proximity to Cal Poly San Luis Obispo is an advantage in terms of recruiting recent graduates, it lacks the amenities that young people look for, including theatres, night clubs, and cafes. Atascadero Too Large to Maintain Atascadero has 140 lane miles of roadway to maintain, but not the revenues to do so. Constrained Supply of Sites for Office and Industrial Park Development The City’s inventory of business sites generally represents a constraint to non-retail business development. The City has few flat parcels of substantial size to support major new employers. Compared to industrial parks available in Paso Robles or Templeton, it is unlikely the City can compete effectively for major industrial uses. Though existing sites may be well-suited for small and medium sized firms, should

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these firms succeed and require room for expansion, they will likely leave Atascadero for neighboring cities where appropriate space exists. Limited Air Services Growing businesses need to expand their markets domestically and internationally, requiring air travel. Recently, airlines have been cutting services to smaller, regional airports, such as the one in San Luis Obispo.

OPPORTUNITIES Growth of Location Independent Businesses due to Internet The nearly ubiquitous availability of internet service, including wireless, has made it possible for work to be located almost anywhere. More and more, workers can choose where they want to live irrespective of their place of work. This presents an opportunity for Atascadero as its attractive neighborhoods and proximity to the ocean, wineries, and other attractions provides a high quality of life not available in other areas. Atascadero’s opportunity is to leverage its quality of life to attract location-independent professionals. There are a few industries that have a large share of remote workers. These include media, publishing, marketing, and others. Wine Processing and Tourism The growing popularity of wine within the United States and worldwide has created a large demand for land suitable for wine grapes. The wine industry has a significant economic impact on the entire County. As the local industry grows, it will have an increasing impact in terms of tourism and growth in associated wine making and grape growing suppliers. Atascadero’s opportunity is to leverage its proximity to the wine industry by further developing its agri-tourism attractions, lodging and activities. Arts Colony The beauty of the natural environment has attracted many artists to the community. Lately, a few galleries have opened downtown. Promoting these artists and attracting additional artist to the area could stimulate the renewal of the downtown core. Increasing Retirees In 2006, the first of the baby-boom generation (those born between 1946- 1964) turned 60 beginning a two decade long bubble of retirees. Atascadero’s attractive neighborhoods and quiet lifestyle have already attracted many retirees. The opportunity is to connect these new retirees to growing businesses so as to ease the hardships in recruiting. Growing San Joaquin Valley Population The Central California Coast is a popular vacation destination and will continue to be in the future. The San Joaquin Valley’s population is estimated to grow by another 5.4 million people over the next 4 decades. According to the Department of Finance, the Applied Development Economics, Inc.

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Valley’s population should reach 9.4 million by 2050. Atascadero’s opportunity is to leverage its existing tourism assets and develop others in order to capture a larger share of visitors to San Luis Obispo County. Rise in Oil Prices and Growth of Green Businesses Atascadero has a few businesses that install solar systems in commercial buildings and residences. The rise in oil prices could make their services more in demand. The proposals for major solar energy facilities east of Atascadero could lead to related business opportunities. In addition, the increasing cost of gas could induce shoppers to buy local. Eagle Ranch This proposed annexation area contains about 3,450 acres, and has the potential to support a visitor attraction, lodging, and possibly a small business park in addition to residential development. The property includes freeway frontage and access to the interchange at Santa Barbara Avenue. Given the topography of the site, the best economic development use, in conjunction with the planned residential, would be visitor serving lodging and attractions. The site could possibly support lodging near the freeway interchange, but could certainly support a resort style lodging facility in the interior of the property, as well as RV and camping facilities. Local residents have raised the possibility of developing an equestrian center in Atascadero to host a variety of equestrian competitions and events that circulate through the western United States. The Eagle Ranch property would be an ideal location for such a facility and this would help support not only the onsite lodging but also other attractions, restaurants and visitor services in the City. Redevelopment of Underutilized Commercial and Industrial Sites The City’s Redevelopment Project area includes most of the City’s commercial and industrial areas.

THREATS Successful Downtowns in Paso Robles, Templeton and San Luis Obispo. Paso Robles has aggressively redeveloped and enlarged its downtown. With new restaurants, theatres and shops, it is now the place of choice for an evening out and for shopping. Paso Robles has also added new luxury hotels to its downtown, reducing the possible overflow that would otherwise have gone to Atascadero hotels. The unincorporated area of Templeton has successfully developed an inviting downtown with a western theme. The town offers a variety of restaurants and shops. Most recently, the Trader Joes located in Templeton at the Highway 101 interchange.

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Office Parks in Paso Robles Recruiting Atascadero Businesses Paso Robles office park developers and brokers have been successful in recruiting Atascadero businesses to their projects. Tax-Free Internet Sales Atascadero shoppers make some purchases via the internet and some percent make a significant share of their purchases via the internet. This means lost revenue to Atascadero. Without a way to tax internet sales, Atascadero is losing out on needed sales tax. Declining Tax Revenues The current economic downturn is affecting both property taxes and sales taxes for the City, similar to most jurisdictions throughout the state. The City has budgeted reserves to help in such times, but over the longer term, the large transportation infrastructure maintained by the City will require ever increasing revenues. Graying of the Population The in-migration of semi-retired or retirees from urban areas is an opportunity and a threat. The threat is that these new residents will want things to “stay the same.” They have seen a lot of changes over the course of five or six decades and want stability. Increasing Fuel Costs The increasing cost of gas and jet fuel will make it more expensive for families to go on vacation, further limiting Atascadero’s opportunity for growth in tourism. Cut backs by Airlines Airlines are cutting back on the number of flights in and out of smaller airports. SLO airport could lose a significant amount of service. This will affect business location decisions for businesses dependent on airline service.

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TABLE 12 SUMMARY OF STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND THREATS (SWOT)

Strengths

Weaknesses

Quality job opportunities

Quality job opportunities

  

Proximity to San Luis Obispo Community openness to clean industrial growth Availability of water – AMW

Retail & Services    

Tourism    

Local hardware, drug and grocery stores capture local and regional spending Most personal services spending captured by local businesses Increasing household incomes Available space for community retail businesses



Established Redevelopment Agency Attractive residential setting

High-compensation government jobs makes it difficult for private sector to recruit workers Limited availability of suitable sites for non-retail business growth

Retail & Services   

 Central Coast location at intersection of Highways 101 & 41 Numerous amenities and attractions Historic Colony Plan and structures Proximity to the wineries and vineyards

Quality of Life & Fiscal Health  





Tourism 



Residents mostly dissatisfied with local shopping selection and quality Past delays in implementing downtown revitalization Lack of investment in upgrading downtown properties results in suboptimal use of existing sites Abundance of strip commercial along El Camino Real thwarts attempts to concentrate activity in downtown core. Other communities, including Templeton, have captured most health and professional services businesses. Lack of niche position relative to tourism; lack of clear message and communications strategy Atascadero does not have enough attractions to bring in tourists, so it is mostly an overflow destination providing affordable lodging visitors to other parts of region.

Quality of Life & Fiscal Health  

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Difficulty maintaining city infrastructure Declining school enrollment and funding

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TABLE 12 (CONTINUED) SUMMARY OF STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND THREATS (SWOT)

Opportunities

Threats

Quality job opportunities

Quality job opportunities







Retail    

Tourism   

 

The growing number of locationindependent businesses facilitated by nearly-ubiquitous access to the internet The increasing number of retired residents could provide necessary expertise for growing companies Decreasing supply of oil could spur growth of clean energy business





Retail 

On-going downtown redevelopment Distinct architectural character Atascadero Creek is attractive amenity Room for increased capture of spending on apparel, home furnishings, general merchandise, entertainment and fine dining. Leveraging proximity to popular wine and agriculture tourism attractions Leveraging growing interest and strengths in arts Leveraging the growing popularity of equestrian activities by constructing equestrian facilities that would attract more visitors Targeting tourism marketing to the fastgrowing San Joaquin Valley population Eagle Ranch could be well-suited for resorttype development and/or an equestrian center



Tourism 

Neighboring business parks have larger available spaces and are recruiting Atascadero businesses Airlines are cutting back on the number of airports served, affecting mostly small, regional airports.

Successfully re-developed downtowns and regional shopping centers of neighboring communities attract Atascadero shoppers Preponderance of residents work outside of Atascadero and shop where they work

Growing transportation costs (affecting tourism)

Quality of Life & Fiscal Health 



Without commercial and industrial development, greater burden of providing education and public services falls on residents. Growing share of sales via the internet means loss of locally-generated sales tax.

Quality of Life & Fiscal Health 

Redevelopment and better use of existing commercial and industrial sites could generate badly needed income for education and other public services

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IV. ECONOMIC DEVELOPMENT GOALS DOWNTOWN Atascadero’s downtown is a lively place for business, entertainment, arts, and public gatherings. Atascadero facilitates the transition of the downtown into a synergistic entertainment, cultural, and specialty shopping area.

OBJECTIVES:  Colony Square successfully connects the Sunken Gardens, Stadium Park and Colony Way to create a vibrant commercial core.

 The development in Downtown includes features to support the City’s Tourism Marketing Plan in terms of creating venues for art showings, events such as the Art Walk, fine restaurants, and entertainment venues to attract tourists as well as local residents.

 New development in Downtown features mixed-use to increase the intensity of activity.

RETAIL Atascadero provides a broad range of retail stores so that residents and visitors can meet most of their shopping needs locally.

OBJECTIVES:  Encourage a broad range of retailers to locate within the city.  Support development of major commercial centers at the Del Rio Road interchange.

 Re-capture at least 50 percent of retail leakage within five years, 75 percent of retail leakage within 10 years.

 Concentrate retail at major nodes along El Camino Real.  Re-develop selected strip malls into R & D industrial space, Class A office space, high density residential or a mix of these uses.

 Create a transit line for El Camino. For long term, consider a Curitiba-like fixed route bus system for El Camino, connecting nodes with each other and downtown.

 Seek to concentrate commercial retail and office capacity in downtown core.

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TOURISM Atascadero is the gateway and hub for visitors to the Central Coast, providing lodging, recreation, entertainment, and unique shopping and cultural opportunities.

OBJECTIVES:  Leverage its central location and access to San Francisco, Los Angeles, and Fresno to enhance its tourism industry.

 Increase the number of venues for performing arts and other cultural events, including Stadium Park if resources are available to improve it. Increase the number of special events that attract visitors.

 Explore the feasibility of developing Eagle Ranch into a venue for attracting business and leisure visitors.

 Enhance existing attractions to accommodate larger events and more business and leisure travelers. These include the golf course, the zoo, and the parks.

 Ensure that new commercial development includes space for restaurants wherever appropriate, especially in the Downtown.

 Advocate for improvements to Highways 41 from Fresno and 46 from Bakersfield.  Explore and if feasible develop equestrian event center (see Sycamore Trails Stables, San Juan Capistrano).

JOBS Atascadero supports innovative businesses, particularly those in emerging environmental and information technology fields

OBJECTIVES  Focus business attraction and development on existing available sites, using redevelopment authority/resources where possible to help remove development barriers.

 Support growth of economic opportunity areas, including alternative energy, graphics, new media, food and beverage, electronics etc.

 Increase market area for local businesses by advocating for safety improvements along Highways 41 and 46 to Central Valley.

 Support installation/enhancement of Wi-Fi, broadband infrastructure.

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QUALITY OF LIFE Atascadero is an inviting community to work, shop, and play.

OBJECTIVES  Maintain the City’s rural feel through good planning.  Explore the feasibility of equestrian-focused residential development.  Genuine civil discourse is displayed throughout the community. WORKFORCE Atascadero is a center for workforce education and training.

OBJECTIVES  Leverage existing assets to promote seminars and specialized education.  Work toward establishment of a center for specialized training.

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V.ACTION PLAN The Action Plan will be developed upon approval of goals and objectives. The Marketing Strategy by The Placemaking Group will be a part of the Action Plan.

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VI. APPENDIX A: FISCAL IMPACT METHODOLOGY CITY BUDGET The fiscal analysis is designed to relate ongoing operational costs and revenues for the City of Atascadero to existing land uses in the City. It is based on the Fiscal Year 200809 General Fund. The General Fund contains regular tax revenues that the City receives, such as property taxes and sales taxes, and provides appropriations for most public services provided by the City. The City has a number of other budget funds that include specially earmarked revenues used to pay for specific services or capital projects. Among these are the gas tax fund for street maintenance, development impact fee funds for capital improvements, enterprise funds for wastewater and transit services, and a variety of assessment district funds. While there is some transfer of revenue between the General Fund and these other funds, the non-General funds are supported largely by user fees and assessments and are not dependent on general tax revenues. The City has less ability to increase general tax revenues and must pay for municipal services such as police and fire protection from its General Fund. For the purposes of the fiscal background analysis for the Economic Development Strategy, we have limited the analysis to the General Fund. The budget figures for the FY 2008-09 General Fund are shown in the left hand column of Table A-1. Since the analysis is concerned with portraying the ongoing fiscal effects of existing land uses, we have made certain adjustments to the budget figures, as shown in the middle column of the table. These adjustments include the one-time building permit and plan check fees, among other charges, that are paid by new development during the entitlement process, but generally are not paid on an annual basis after development is complete. The City has the authority to set these development fees at an appropriate level to cover the cost of City staff, primarily in the Community Development Department, to provide services during the entitlement process. Therefore, there should not be adverse fiscal impacts for these activities. These fees have been adjusted out of the appropriate revenue categories and also deducted from the expenditures for the Community Development Department. Specifically the fees are as follows:

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Licenses and Permits Construction Permits General Plan Maintenance Permits Grading and Drainage Permits Encroachment Permits Tree Application Fees Other Developer Reimbursements Total

$579,290 $ 14,390 $ 46,290 $ 40,930 $ 24,920 $ 30,000 $735,820

Charges for Service Development

$918,870

Other Revenue State Mandated Cost

$ 30,100

TABLE A-1 ATASCADERO CITY BUDGET FISCAL YEAR 2008 - 09 BUDGET CATEGORY REVENUES Property Taxes Sales Tax Transient Occupancy Tax Franchise Taxes Property Transfer Tax Business License Licenses & Permits Motor Vehicle in lieu Revenue from Money and Property Fines and Forfeitures Charges for Service Other revenue TOTAL REVENUES EXPENDITURES General Government Police Fire/EMS Community Development Public Works Community Services Other TOTAL EXPENDITURES TOTAL NET/(USE OF RESERVES)

BUDGET AMOUNT $8,023,260 $4,254,200 $696,090 $918,700 $151,910 $182,800 $735,820 $195,160 $296,530 $137,000 $2,781,610 $1,585,400 $19,958,480 BUDGET $3,111,890 $5,977,570 $4,395,960 $1,882,390 $2,036,480 $2,658,990 $300,000 $20,363,280 ($404,800)

ADJUSTMENTS

$735,820

$918,870 $30,100 $1,684,790 ADJUSTMENTS $30,100 $1,654,690

$1,684,790

NET BASIS FOR FISCAL ANALYSIS $8,023,260 $4,254,200 $696,090 $918,700 $151,910 $182,800 $0 $195,160 $296,530 $137,000 $1,862,740 $1,555,300 $18,273,690 NET BASIS $3,081,790 $5,977,570 $4,395,960 $227,700 $2,036,480 $2,658,990 $300,000 $18,678,490 ($404,800)

Source: ADE, Inc.

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REVENUE AND COST ESTIMATES With the exception of certain taxes such as the property tax and sales tax, the revenues and costs for this analysis have been calculated on a per capita basis. This means that the population and employment base in the City is divided into the revenue and cost figures shown in the right hand column of Table A-1 to estimate average factors on a per capita basis. The factors developed for the Atascadero Fiscal Model are shown in Table A-2. TABLE A-2 PER CAPITA REVENUE AND COST FACTORS Revenues Franchise Taxes Property Transfer Tax [a] Business License Licenses & Permits Motor Vehicle in lieu Revenue from Money and Property [b] Fines and Forfeitures Charges for Service Other revenue Expenditures General Government [c] Police Fire/EMS Community Development Public Works Community Services Other

Residential Proportion 86%

86% 86% 86%

Per capita $29.31 2% $0.00 $0.00 $7.24 2% $4.37 $59.43 $49.62

86% 86% 86% 86% 100% 86%

20% $190.71 $140.25 $7.26 $64.97 $98.67 $9.57

0% 86% 100%

Business Proportion 14%

14% 14% 14%

Per capita $24.94 2% $35.39 $0.00 $0.00 2% $3.72 $50.58 $42.23

100% 14% 14% 14% 14% 0% 14%

20% $162.30 $119.36 $6.18 $55.29 $0.00 $8.15

100% 14% 0%

Source: ADE, Inc. Notes: [a] Calculated as a percent of property taxes. [b] Percent of other revenues. [c] Percent of other costs.

The columns labeled “Proportion” indicate the amount of each revenue or cost item that is allocated to residential or non-residential land uses. A key assumption in this analysis is the relative service demand between residential and non-residential land uses. In general, the analysis assumes that the impact of employment generating uses, as represented by the number of jobs supported by the activity, is 50 percent of the impact of residential uses, represented by the population. This is a standard service population assumption for fiscal impact studies. It corresponds to the general notion that employed people working at jobs in Atascadero occupy eight-hour shifts, mostly during the regular work day, while the resident population, when they are not working, represent a service demand during the 16 hours of non-working time during a 24 hour day. Thus, an eight hour period is 50 percent of a 16 hour period. Of course, there are many exceptions to this but as a general rule it reflects the overall relative service demands of residential and non-residential land uses for a number of City services. We estimate there are 26,947 residents and 8,822 jobs in Atascadero as of 2008 (not including 1,643 group quarters residents). With jobs given half the weight of the

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residential population, the corresponding default proportions for weighting service expenditures are 86 percent residential and 14 percent non-residential. As indicated in Table A-2 a few of the revenues and services require different assumptions. The property transfer tax is paid when properties are sold and the tax is calculated as a function of the sales price. Therefore in the fiscal model, we estimate these revenues as a percent of the property tax revenues generated by each land use category. In terms of the Revenue from Money and Property line item, these revenues are taken as a percent of total annual revenues for the City. On this basis, this revenue represents about two percent of the total and is calculated here as a similar percent of the revenues generated by each individual land use. The General Government category is treated as an “overhead” charge on the cost of direct services to residents and business in Atascadero. This category includes the following City functions:

     

City Council City Manager City Clerk City Attorney Technology Administrative Services

The General Fund expense for these Departments is about 20 percent of the total General Fund budget and this factor is used in the fiscal model to project these costs by land use. For Community Services, we assume that most of the service demand comes from the resident population, rather than from businesses or employees. Three major revenues are not included in Table A-2 because they are not estimated on a per capita basis. The property tax is a function of assessed value for each land use. Total assessed value in Atascadero is estimated at about $3.7 billion; however, we were unable to obtain a distribution of assessed value by land use in the City from the County Assessor. We allocated property assessments based on average assessed values for typical land uses within each land use category, derived from data obtained from DataQuick. The average values used in this analysis are as follows:

    

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Single Family units $350,000 per unit Multi-family units $120,000 per unit Commercial (retail/office/service commercial) $150 per sq.ft. Industrial $110 per sq.ft. Lodging $175 per sq.ft.

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Using these average values and the quantities of units and building sq.ft. in the City, we were able to produce an aggregate total that is similar to the total assessed value figure provided by the County Assessor. It is important to recognize that these values do not represent current market values. Assessed values for existing properties that have not sold in many years may be substantially below market. For properties that have been in single ownership for a very long time, the original assessed value may never have reflected market value, because assessment practices were different prior to 1978. But even where market value was the initial basis for the assessed value, unless the property is resold, the assessed value can only increase two percent per year under the provisions of Proposition 13. Therefore, after a period of time, it is common for assessed values to be well below market value. It is important to note that the City only receives a portion of the total property tax paid by property owners. The base property tax rate of one percent of assessed value, but the City of Atascadero gets less than 22 percent of this revenue on average, while much of the rest of the property tax is allocated to local school districts, the County, and other taxing agencies. Property owners may pay additional property tax amounts to fund debt service on public bonds, but again the City does not receive this revenue. The second major revenue not allocated on a per capita basis of the sales tax. Although local household spending generates much of the taxable sales in the City, the sales tax allocation to the City budget is based on the point-of-sale at retail businesses and other types of businesses generating taxable transactions. Therefore, from a land use perspective, it is the presence of the commercial businesses primarily that generates sales tax and so this revenue is allocated to the non-residential land uses. Finally, Transient Occupancy Taxes (TOT) are generated by lodging facilities, which are included as a separate land use category in this analysis.

THE LAND USE INVENTORY ADE prepared a 2008 land use inventory to use as a basis for the fiscal analysis (Table A-3). For residential units, we relied on State Department of Finance (DOF) data and estimated population using 2.54 persons per household for single family units and 1.75 persons per household for multi-family units. DOF also provides a population estimate for group quarters, which is mainly the Atascadero State Hospital. The employment figures are derived from a file obtained from the State Employment Development Department. The non-residential building sq.ft. are estimated from data in the City General Plan, updated to the present with information in the UCSB Economic Forecast about building trends since 2001. These estimates are necessarily rough, but they do correspond to acceptable ranges of industry standards for building square footage per employee, as well as typical FAR patterns and assessed values per sq.ft. as discussed above.

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TABLE A-3 LAND USE ESTIMATES FOR ATASCADERO, 2008 LAND USE RESIDENTIAL Single Family Multi-Family Group Quarters/Inst. Total Residential NON-RESIDENTIAL Commercial Industrial Lodging Institutional Total Non-Residential TOTAL CITY

Units 8,355 2,747 11,102 Sq.Ft. 2,567,568 428,000 162,432 4,347,963 4,938,395

Population 22,141 4,805 1,643 28,588 Employment 4,677 377 141 3,627 8,822

Assessed Value $2,924,250,000 $329,640,000 $3,253,890,000 Assessed Value $385,135,200 $47,080,000 $28,425,600 $0 $460,640,800 $3,714,530,800

Source: ADE, Inc.

RESULTS OF THE ANALYSIS For most cities in California, property taxes do not pay the full cost of municipal services needed by residents and neighborhoods. As noted above, the City of Atascadero only receives about one-fifth of property taxes paid by property owners. Therefore, most cities rely on sales taxes and other revenues to help balance the budget and to fund the services and amenities desired by the community. Atascadero is no different in this regard and consequently the residential land uses appear to show a negative fiscal effect for the City while most non-residential land uses generate a positive fiscal balance (Table A-4). This outcome is not so much an indictment of residential development but rather reflects more the importance of the City economic base to provide the revenues needed to operate the City. The sales tax generated by retail uses and the TOT tax generated by lodging create most of the extra revenues needed to support the cost of services for the residential neighborhoods.

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TABLE A-4 ESTIMATED FISCAL IMPACT OF EXISTING LAND USES IN ATASCADERO, 2008 REVENUES Property Taxes Sales Tax Transient Occupancy Tax Franchise Taxes Property Transfer Tax Business License Licenses & Permits Motor Vehicle in lieu Revenue from Money & Property Fines and Forfeitures Charges for Service Other revenue TOTAL REVENUE EXPENDITURES General Government Police Fire/EMS Community Development Public Works Community Services Other TOTAL EXPENDITURES NET (COST)/REVENUE

Total [a] $8,060,917 $4,254,200 $696,090 $918,649 $152,623 $182,800 $0 $207,047

Single Family $6,345,926 $0 $0 $648,961 $120,152 $0 $0 $160,351

Multi-Family $715,353 $0 $0 $140,823 $13,544 $0 $0 $34,796

Commercial $835,783 $4,254,200 $0 $115,943 $15,824 $164,470 $0 $0

Industrial $102,168

Lodging $61,687

$9,404 $1,934 $13,340 $0 $0

$696,090 $3,517 $1,168 $4,989 $0 $0

$295,720 $136,992 $1,862,636 $1,555,213 $18,322,888

$160,541 $96,775 $1,315,822 $1,098,649 $9,947,178

$23,777 $21,000 $285,531 $238,405 $1,473,230

$95,716 $17,290 $235,084 $196,284 $5,930,596

$2,678 $1,402 $19,068 $15,921 $165,916

$12,813 $524 $7,131 $5,954 $793,874

$12,094

$3,081,613 $5,977,237 $4,395,715 $227,687 $2,036,366 $2,658,818 $299,983 $18,677,420 ($354,532)

$2,237,499 $4,222,499 $3,105,264 $160,845 $1,438,550 $2,184,734 $211,917 $13,561,309 ($3,614,131)

$485,533 $916,275 $673,837 $34,903 $312,163 $474,083 $45,986 $2,942,780 ($1,469,550)

$322,626 $754,390 $554,785 $28,737 $257,011 $0 $37,861 $1,955,410 $3,975,186

$26,168 $61,189 $44,999 $2,331 $20,846 $0 $3,071 $158,604 $7,312

$9,787 $22,885 $16,830 $872 $7,797 $0 $1,149 $59,319 $734,555

$0 $12,094

Institutional

$11,899 $195

Source: ADE, Inc. Notes: [a] Total figures differ slightly from Table 1 budget figures due to modeling variation.

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VII. APPENDIX B: ATASCADERO SURVEY

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SURVEY RESULTS SATISFACTION: SELECTION Extremely Satisfied Satisfied Neither Dissatisfied Extremely Dissatisfied Missing

Frequency 75 256 279 1024 812 77

Percent 3 10.1 11.1 40.6 32.2 3.1

Valid Percent 3.1 10.5 11.4 41.9 33.2

Cumulative Percent 3.1 13.5 24.9 66.8 100

Satisfaction: Selection Extremely Satisfied, 3

Missing, 3.1

Satisfied, 10.1 Extremely Dissatisfied, 32.2

Neither, 11.1

Dissatisfied, 40.6

Satisfaction: Selection

1,200 Frequency

1,000 800

600 400

200 0 Extremely Satisfied

Satisfied

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Neither Dissatisfied Extremely Missing Dissatisfied

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SATISFACTION: QUALITY Frequency 84 455 502 878 517 87

Extremely Satisfied Satisfied Neither Dissatisfied Extremely Dissatisfied Missing

Percent 3.3 18 19.9 34.8 20.5 3.4

Valid Percent 3.4 18.7 20.6 36 21.2

Satisfaction: Quality Missing, 3.4 Extremely Dissatisfied, 20.5

Cumulative Percent 3.4 22.1 42.7 78.8 100

Extremely Satisfied, 3.3 Satisfied, 18

Neither, 19.9

Dissatisfied, 34.8

Satisfaction: Quality 1,000

900 800 Frequency

700 600 500 400 300 200 100 0

Extremely Satisfied

62

Satisfied

Neither

Dissatisfied Extremely Dissatisfied

Missing

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SATISFACTION: PRICES Extremely Satisfied Satisfied Neither Dissatisfied Extremely Dissatisfied Missing

Frequency 73 642 909 535 255 109

Percent 2.9 25.4 36 21.2 10.1 4.3

Valid Percent 3 26.6 37.7 22.2 10.6

Cumulative Percent 3 29.6 67.3 89.4 100

Satisfaction: Prices Extremely Satisfied, 2.9

Missing, 4.3

Extremely Dissatisfied, 10.1

Satisfied, 25.4

Dissatisfied, 21.2

Neither, 36

Frequency

Satisfaction: Prices 1,000 900 800 700 600 500 400 300 200 100 0 Extremely Satisfied

Satisfied

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Neither

Dissatisfied Extremely Dissatisfied

Missing

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SATISFACTION: PARKING Extremely Satisfied Satisfied Neither Dissatisfied Extremely Dissatisfied Missing

Frequency 371 1275 527 167 92 91

Percent 14.7 50.5 20.9 6.6 3.6 3.6

Valid Percent 15.3 52.4 21.7 6.9 3.8

Cumulative Percent 15.3 67.7 89.4 96.2 100

Satisfaction: Parking Extremely Dissatisfied, 3.6

Missing, 3.6

Extremely Satisfied, 14.7

Dissatisfied, 6.6

Neither, 20.9

Satisfied, 50.5

Satisfaction: Parking 1,400

Frequency

1,200

1,000 800 600

400 200 0 Extremely Satisfied Satisfied

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Neither Dissatisfied Extremely Missing Dissatisfied

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SATISFACTION: HOURS Extremely Satisfied Satisfied Neither Dissatisfied Extremely Dissatisfied Missing

Frequency 193 1144 600 333 160 93

Percent 7.6 45.3 23.8 13.2 6.3 3.7

Valid Percent 7.9 47.1 24.7 13.7 6.6

Cumulative Percent 7.9 55 79.7 93.4 100

Satisfaction: Hours Extremely Dissatisfied, 6.3

Extremely Satisfied, 7.6

Missing, 3.7

Dissatisfied, 13.2

Satisfied, 45.3 Neither, 23.8

Satisfaction: Hours 1,400

Frequency

1,200 1,000 800 600

400 200 0 Extremely Satisfied

Satisfied

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Dissatisfied

Extremely Dissatisfied

Missing

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CITY RESIDENT Yes No

Frequency 2,431 30

Percent 96.4 1.2

Valid Percent 98.8 1.2

Cumulative Percent 98.8 100

City Resident 3,000 2,431

Frequency

2,500 2,000

1,500 1,000 500

30

0

Yes

No

DO YOU PURCHASE MOST HOUSEHOLD ITEMS? Yes No Share evenly

Frequency 2397 45 3

Percent 95 1.8 0.1

Valid Percent 98 1.8 0.1

Cumulative Percent 98 99.9 100

Do You Purchase Most Household Items? 3,000

Frequency

2,500

2,397

2,000 1,500 1,000 500 0

Yes

66

45

3

No

Share evenly

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WHERE DO YOU WORK? Atascadero Paso Robles San Luis Obispo Within SLO County Outside SLO County At home Retired Templeton

Frequency 628 176 403 298 61 572 234 10

Percent 24.9 7 16 11.8 2.4 22.7 9.3 0.4

Valid Percent 26.4 7.4 16.9 12.5 2.6 24 9.8 0.4

Cumulative Percent 26.4 33.8 50.7 63.2 65.7 89.8 99.6 100

Where Do You Work? Retired, 9.3

Templeton, 0.4

Atascadero, 24.9

At home, 22.7

Paso Robles, 7 Outside SLO County, 2.4

San Luis Obispo, 16

Within SLO County, 11.8

Where Do You Work? 700 Frequency

600

500 400

300 200

100 0 Atascadero

Paso Robles

San Luis Within SLO Outside Obispo County SLO County

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At home

Retired Templeton

67

GENDER Female Male A couple answered survey Missing

Frequency 1432 466 15 610

Percent 56.8 18.5 0.6 24.2

Valid Percent 74.9 24.4 0.8

Cumulative Percent 74.9 99.2 100

Gender

Missing, 24.2

A couple answered survey, 0.6

Female, 56.8

Male, 18.5

Frequency

Gender 1,600 1,400 1,200 1,000 800 600 400 200 0 Female

68

Male

A couple answered survey

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INCOME Under $20,000 $20,000 to $49,999 $50,000 to $69,999 $70,000 to $99,999 $100,000 to $149,999 $150,000 to $249,999 Greater than $250,000 Missing

Frequency 81 446 473 630 458 179 34 222

Percent 3.2 17.7 18.7 25 18.2 7.1 1.3 8.8

Valid Percent 3.5 19.4 20.6 27.4 19.9 7.8 1.5

Cumulative Percent 3.5 22.9 43.5 70.8 90.7 98.5 100

Income Greater than $250,000, 1.3

Under $20,000, 3.2

Missing, 8.8

$20,000 to $49,999, 17.7

$150,000 to $249,999, 7.1

$100,000 to $149,999, 18.2

$50,000 to $69,999, 18.7

$70,000 to $99,999, 25 Income 700

Frequency

600

500 400 300 200 100

0 Under $20,000

$20,000 to $49,999

$50,000 to $69,999

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$100,000 to $150,000 to Greater than $149,999 $249,999 $250,000

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Sales Leakages ($ Millions) Automotive Group

$21.9

Building Materials & Home Furnishings Group

$7.1

Food, Eating, & Drinking Group

$13.3

Specialty Retail Group

$6.1

General Merchandise Group

$22.8

Apparel Store Group

$7.9

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

Percentage of Services Spending Staying in Atascadero

Health Services

23.1%

Professional Services

39.7%

Personal Services

0.0%

70

65.5%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

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VIII. APPENDIX C: ECONOMIC BASE ANALYSIS Assessing Economic Roles This section further disaggregates the industry sectors within San Luis Obispo County in order to more accurately assess the structure of the regional economy and identify the roles specific industries play within the county. Identifying these roles is important because many of Atascadero’s best economic growth and diversification opportunities come first from those industries that have shown the best growth potential elsewhere in the county. Economic base theory is a generally accepted principle of economic development that suggests that a region’s economic prosperity is a function of external demand for that region’s products. The theory divides the economy into two sectors. The first is a basic (or export) sector that includes all goods and services produced for non-local consumption. The second is a non-basic (or local-serving) sector that includes all goods and services consumed in the local market. The theory assumes that the basic sector supports the non-basic sector by purchasing production inputs and by paying its employees wages that are spent locally. Therefore, greater demand for basic sector goods drives demand for the non-basic sector and the local economy as a whole. To assess these sectors, ADE ranked the industries in San Luis Obispo County on the basis of two key economic indicators – job growth and employment concentration relative to the state. The economic roles based on these indicators fall into one of four categories or “quadrants”, which are described as follows: Growing Economic Base Industries: These industries have shown recent job growth and have an employment concentration greater than the state’s as a whole. They constitute the strength of the economy and represent opportunities for growth in other areas such as supplier industries. Emerging Industries: These sectors have shown recent job growth, but still have relatively low employment concentrations. These industries represent potential future growth opportunities because they exhibit relatively fast employment growth relative to the state. Industries in this category could be considered attractive business expansion and attraction targets. Declining Economic Base Industries: These industries continue to have a relatively high concentration of employment, but have shown recent job losses. They represent the region’s economic strength but have shown some recent vulnerability, and could be considered business retention targets. Declining Non-Base Industries: These industries have shown recent job losses and have below average employment concentration. They do not have an especially Applied Development Economics, Inc.

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notable regional presence and do not have growth prospects as strong as the industries in the other categories. Employment concentration was determined using location quotient analysis. A location quotient for a particular industry is simply a ratio that compares the percentage of employment in a particular industry in a local economy (San Luis Obispo County) to the percentage of employment in the same industry in a reference economy (California). A location quotient greater than 1 indicates that the local share of employment in an industry exceeds the state share. Conversely, if a location quotient is less than 1, the local share of employment in an industry is less than the state share. The top two quadrants list those industries with location quotients above 1 which are said to have a high employment concentration. The bottom two quadrants list those industries with low employment concentrations and location quotients less than 1. In the right two quadrants, the growing industries are listed from highest employment gains to lowest employment gains. In the left two quadrants, the non-growing industries are listed from greatest decline to least decline. There are some industries within the table listed in italics that denote relative rates of growth or decline compared to the state as a whole. As mentioned above, industries listed on the right-hand side-are those that are growing within the county. However, an industry in the right two quadrants that is italicized indicates that that industry is growing more rapidly at the state level. That is, despite the positive growth signals at the county-level, that particular industry is not keeping pace with statewide growth levels. Similarly, the industries on the left-hand-side are declining within the county. Those listed in italics on this side indicate that the rate of decline within the county is more severe than at a state-level. This could mean either that the industry is declining at both a county and state-level but declining faster at a county-level or that, at a statelevel, the industry may actually be experiencing positive rates of growth. The results of the analysis at a 3-digit NAICS level are illustrated in the Table C-1 below.

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TABLE C-1 SAN LUIS OBISPO COUNTY: ECONOMIC BASE TABLE, 2001-2006 NON-GROWING INDUSTRIES 111 323 115 237 453 333 112 441 114

Crop Production Printing and Related Support Activities Support Activities for Agriculture and Forestry Heavy and Civil Engineering Construction Miscellaneous Store Retailers Machinery Manufacturing

Animal Production Motor Vehicle and Parts Dealers Fishing, Hunting and Trapping

GROWING INDUSRIES 722 238

Food Services and Drinking Places

621 721 236 531 312 221

Ambulatory Health Care Services Accommodation Construction of Buildings Real Estate Beverage and Tobacco Product Manufacturing Utilities Amusement, Gambling, and Recreation Industries Social Assistance Nonstore Retailers Mining (except Oil and Gas) Sporting Goods, Hobby, Book, and Music Stores Petroleum and Coal Products Manufacturing Electrical Equip., Appliance, and Component Manuf.

713 624 454 212 451 324 335 623 486

Specialty Trade Contractors

Nursing and Residential Care Facilities Pipeline Transportation

813

Religious, Grantmaking, Civic, Professional, and Similar Orgs. Professional, Scientific, and Technical Services

339

Miscellaneous Manufacturing

541

325

Chemical Manufacturing Computer and Electronic Product Manufacturing Merchant Wholesalers, Nondurable Goods

522

Credit Intermediation and Related Activities (i.e. Banking)

423

Merchant Wholesalers, Durable Goods

334 424 551 517 315 511 622 321 337 515 487 322 327 712

Management of Companies and Enterprises

Telecommunications Apparel Manufacturing

Publishing Industries (except Internet)

Hospitals Wood Product Manufacturing

Furniture and Related Product Manuf.

Broadcasting (except Internet) Scenic and Sightseeing Transportation Paper Manufacturing Nonmetallic Mineral Product Manufacturing Museums, Historical Sites, and Similar Institutions

425

Wholesale Electronic Markets and Agents and Brokers

326 448 481 532 524 518 512 611 332 484

Plastics and Rubber Products Manufacturing Clothing and Clothing Accessories Stores Air Transportation Rental and Leasing Services Insurance Carriers and Related Activities Data Processing, Hosting and Related Services

488

Support Activities for Transportation

525

Transportation Equipment Manufacturing

523 314

311 113 331 313 533

Food Manufacturing

711 516 483

Internet Publishing and Broadcasting Water Transportation

Primary Metal Manufacturing Textile Mills

EMPLOYMENT CONCENTRATION

Fabricated Metal Product Manufacturing Truck Transportation

336 213

Forestry and Logging

LOW

Motion Picture and Sound Recording Industries Educational Services

Funds, Trusts, and Other Financial Vehicles Securities, Commodity Contracts, and Fin. Investments Textile Product Mills

Support Activities for Mining

HIGH EMPLOYMENT CONCENTRATION

Performing Arts, Spectator Sports, and Related Industries

Lessors of Nonfinancial Intangible Assets

Source: ADE, IMPLAN

In addition to the omission of the public sector, several other sectors were intentionally excluded from the table as they are predominantly locally-serving non-

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basic industries. Although a number of these industries returned a location quotient above 1, it is unlikely that these products or services are exported outside the county to meet external demand. The following is a complete list of these 3-digit NAICS industries8:

               

NAICS 442: Furniture and Home Furnishings Stores NAICS 443: Electronics and Appliance Stores NAICS 444: Building Material and Garden Equipment and Supplies Dealers NAICS 445: Food and Beverage Stores NAICS 446: Health and Personal Care Stores NAICS 447: Gasoline Stations NAICS 452: General Merchandise Stores NAICS 485: Transit and Ground Passenger Transportation NAICS 491: Postal Service NAICS 492: Couriers and Messengers NAICS 493: Warehousing and Storage NAICS 561: Administrative and Support Services NAICS 562: Waste Management and Remediation Services NAICS 811: Repair and Maintenance NAICS 812: Personal and Laundry Services NAICS 814: Private Households

Growing Economic Base Industries As noted above, the industries in the upper right quadrant represent the heart of the SLO County economy, growing industries with comparatively higher concentrations.

8

It should be noted that many tourism-related industries were included in the analysis as they are a special case whereby the good being exported “tourism” is consumed locally.

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TABLE C-2 INCREASING ECONOMIC BASE: SAN LUIS OBISPO COUNTY Industry

Food, Drink, Hospitality & Tourism

Food Services & Drinking Places Accommodation Beverage Product Manufacturing Including: Wineries Amusement, Gambling & Recreation Industries Sporting Goods, Hobby, Book & Music Stores

Infrastructure & Power

Mining (except Oil and Gas) Petroleum and Coal Products Mfg Including: Petroleum Refineries Pipeline Transportation Utilities

Electronics

Electrical Equipment, Appliance & Component Mfg Including: All Other Misc. Electrical Equip & Component Mfg.

2006 Employment

LQ

10,275 3312 1171

1.48 2.49 4.26

1169 1215 1293

7.08 1.12 2.33

106 175

2.48 1.8

166 19 2118

2.09 1.15 5.76

424

2.05

386

18.01

Source: ADE, Inc., IMPLAN

Emerging Economic Base Industries Although the location quotients of the industries in this quadrant indicate a relative lack of specialization, the positive growth rates may be an encouraging sign and help to focus business attraction and expansion strategies. TABLE C-3 EMERGING INDUSTRIES: SAN LUIS OBISPO COUNTY Industries Professional, Scientific and Technical Services Including: Architects Computer System Design Lawyers Engineering Insurance Carriers Data Processing, Hosting & Related Services Motion Picture & Sound Recording Industries Performing Arts, Spectator Sports & Related Industries Support Activities for Transportation Plastics & Rubber Products Mfg. Including: Un-laminated Plastic Profile Mfg Other Plastics Fabricated Metal Product Manufacturing Including: Metal Tanks Architectural & Structural Metals Machine Shops Other Fabricated Metal Small Arms Manufacturing Textile Product Mills

2006 Employment 3935

LQ 0.63

347 505 563 745 637 133 352 190 125 253

1.77 0.41 0.67 1.04 0.44 0.37 0.36 0.46 0.24 0.7

63 115 65

4.8 0.69 0.71

58 119 239 215 99 22

5.1 0.49 0.88 1.87 43.17 0.25

Source: ADE, Inc.

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Declining Economic Base Industries These industries, while more concentrated at the county-level than at the state-level, are losing traction in San Luis Obispo County. Further, seven of the nine industries listed in this quadrant are losing jobs faster within the county than at a state-level (those listed in italics). Four of these seven industries are showing signs of modest growth at a state-level (NAICS 115: Support Activities for Agriculture and Forestry added almost 14,000 jobs over the time period at the state-level). As noted above, these industries may be excellent candidates for business retention programs as a means of maintaining and strengthening the county’s export base. TABLE C-4 DECLINING ECONOMIC BASE: SAN LUIS OBISPO COUNTY Industries Crop Production Animal Production Support Activities for Agriculture and Forestry Exception: Farm Management Services Printing & Related Support Activities Including Manifold Business Forms Waste Management & Remediation Heavy & Civil Engineering Machinery Manufacturing Including Semiconductor Machinery Mfg Exceptions: Farm Machinery Metalworking Machinery Cutting Tool & Machine Tool All Other Misc. General Purpose Machinery Mfg.

2006 Employment 1935 211 2151 347 669 395 387 733 800 118

LQ 1.72 1.11 1.89 5.11 1.74 28.69 1.52 1.22 1.54 3.2

25 129 111 293

1.38 1.45 9.73 2.4

Source: ADE, Inc., IMPLAN

Declining Non-Economic Base Industries The industries in this quadrant are those for which the study region has no comparative advantage evidenced by the consistent year-over-year decline in employment figures. Most notably, eleven manufacturing industries are listed in this quadrant accounting for 1,309 lost jobs.

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TABLE C-5 DECLINING NON-BASIC INDUSTRIES: SAN LUIS OBISPO COUNTY Industries Miscellaneous Manufacturing Chemical Manufacturing Including Pharmaceuticals Computer and Electronic Product Mfg. Exception: Audio & Video Equip. Mfg. Telecommunications Apparel Manufacturing Exception: Cut & Sew Apparel Mfg Publishing Industries Exception: Software Publishing Furniture & Related Product Mfg. Non-Metallic Mineral Product Mfg. Transportation Equipment Mfg. Food Manufacturing

2006 Employment 393 121 91 396 220 396 194 193 483 111 237 188 169 401

LQ 0.68 0.22 0.31 0.19 3.97 0.55 0.38 9.88 0.76 0.32 0.63 0.61 0.2 0.41

Source: ADE, Inc., IMPLAN

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IX. APPENDIX D: COMMUNITY FORUM HANDOUT

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