Bay Area residents take great pride in our robust regional economy, which includes innovative companies that gave us the semiconductor and revolutionized the Internet, a rapidly emerging cluster of social media activities, other centers of technological innovation cropping up throughout the region, one of the largest shipping ports in the US, internationally acclaimed wines, world-class universities, and renowned tourist attractions. The Bay Area economy has made a decisive recovery from the effects of the Great Recession and is poised for expansion.
The region has regained all of the jobs lost since the peak of the dotcom boom in 2000.3 Much of the job growth has been in industries and locations that are already areas of competitive advantage for the region. In addition, some of the region's strengths, including high labor force participation and a highly educated workforce, are expected to continue into the future.
However, the impacts of the recovery and the benefits of prosperity are shared unevenly throughout the region. While San Francisco and Silicon Valley are booming, other areas of the region are still struggling to attract jobs. The share of employment in middle-wage jobs is shrinking, and Projections 2013 estimated the proportion of very low- and low-income households in the Bay Area is projected to increase in the future. Income inequality in the region is greater than in California or the US, and there is a risk that many people in the region will not share in the Bay Area's continued economic success.
Although the Bay Area has an enviable economy, sustaining economic vitality—and expanding the number of people who experience that vitality—should be a priority for the region. One of the key questions for the Bay Area's future is how the region's rising economic tide can provide more opportunities for low- and moderate-income households. We need to invest in our workers, especially by improving the quality and availability of education and training opportunities to ensure workers have the skills and expertise that businesses need. Doing so will allow low- and moderate-income workers to advance into higher paying jobs and support businesses by ensuring that there is a sufficient pool of talented workers to fill new positions.
One of the major challenges to economic prosperity is the lack of affordable homes in the region. Bay Area business leaders have regularly cited the high cost of housing as a barrier to hiring and retaining workers which stifles economic growth. Section 2 provides more detail about strategies for addressing the need for more homes, and particularly homes that are affordable to lower-income and moderate-income households.
While adding homes is essential to economic vitality, land use plans should also include space for all activities that are a part of the regional economy. Collaboration among regional and local governments, the business community, and other stakeholders will be needed to identify the best locations for offices and businesses, with a particular focus on the needs of industrial businesses and those related to moving materials and goods throughout the region. Local governments can also better support these businesses by updating industrial zoning and permitting processes to match contemporary needs.
There are also a number of steps that governments—whether state, regional, or local—can take to support a healthy business climate and promote job growth. Many communities in the Bay Area are encouraging new homes and businesses in locations within already developed areas, particularly near public transit. Although this emphasis on infill development is consistent with State sustainability goals, some State policies and regulations, such as Proposition 13, undermine local governments' ability to implement a more focused development pattern. Although addressing these challenges would require coordinated action at the state level, local governments can also make it easier to attract and retain businesses by streamlining their regulations and permitting processes and by collaborating with industry leaders and other stakeholders to develop economic development strategies.
Interconnected layers of infrastructure—including transportation, waste, water, communications, and energy systems—are essential to Bay Area quality of life and economic vitality. However, many communities rely on aging infrastructure systems that are approaching, or have already passed, their expected lifespans. Investments to repair, replace, or seismically retrofit these systems are crucial to return the infrastructure to a state of good repair, support job growth, and increase the region's resilience to natural disasters. Improvements to the region's public transit system are needed to sustain and increase ridership, helping to relieve traffic congestion. The Bay Area cannot rely on Federal and State governments alone to provide sufficient funding for investments in infrastructure. The region will have to identify additional funding sources to augment these resources.
ABAG works to promote the economic vitality of all Bay Area businesses and residents by encouraging public policies that support a healthy business climate and job growth, promoting investments in infrastructure, improving the alignment between workforce skills and business needs, and ensuring the Bay Area has space for all activities that contribute to the regional economy and facilitate goods movement. ABAG convenes jurisdictions, organizations, and stakeholders from across the region to foster greater collaboration and understanding around land use planning, housing, energy, and infrastructure.4 This is a natural outgrowth of ABAG's established regional research, analysis, and forecasting practice. As an organization that works at the state, regional, and local levels, ABAG can collaborate with business and community stakeholders to develop policy recommendations to elevate local concerns to higher levels of government to effect needed change.
An effective partnership between businesses and government on the economic issues facing the region is needed to sustain our economic vitality. Most communities in the Bay Area are focusing future job and housing growth in PDAs and other infill locations to make best use of existing infrastructure and investments. Some State and local policies limit the success of PDAs by overemphasizing retail development instead of a mix of land uses, while it is also difficult for local governments to secure funds to invest in the infrastructure and other public services needed to support infill growth. The State and local governments can take steps to reduce the complexity of regulations and permitting processes to decrease the amount of time and money businesses spend complying and increase the likelihood plans will lead to successful outcomes. Local economic development strategies will be most successful if designed and implemented through collaboration among all levels of government and with business leaders.
Ensure communities that pursue infill development have the resources to provide and maintain necessary services: Although infill development is essential to achieving the State's goals for a more efficient and sustainable development pattern, several State regulations and policies inhibit this type of growth. Proposition 13 limits local government's ability to raise property taxes, so local land use decisions are often based on their short-term fiscal effects rather than whether they make the most long-term sense for the community. For example, even though a lack of new homes is contributing to high housing costs, most communities prefer new retail development because it provides higher sales taxes. The dissolution of Redevelopment Agencies and some State tax policies, such as the requirement that two-thirds of voters must approve local sales taxes or bonds, make it difficult for local governments to secure their own funding sources to invest in infrastructure and other amenities to support infill development. In the face of these problems, State, regional, and local governments should collaborate with business leaders and other stakeholders to consider changes to these policies to give local communities the flexibility they need to implement their visions for new infill development and community revitalization.
Ensure State and local regulations and permitting processes support business retention and expansion: The State and local governments can attract new businesses and help existing businesses thrive by developing clear, consistent rules and by simplifying and streamlining the permitting and licensing processes. These efforts can be particularly beneficial for small businesses, which represent a significant share of business growth and employment. Specific strategies include creating a one-stop-shop where businesses can obtain multiple permits or providing business starter kits for common business types (such as restaurants or retail shops) with step-by-step guides, required permits, and other resources. Benefits are magnified when local tax policy, fees, permitting processes, and other regulations are aligned among neighboring jurisdictions. This type of coordination can reduce costs for businesses with operations in multiple jurisdictions, make the overall area more attractive, and reduce competition between cities for employers.
A renewed focus on repairing and enhancing the region's infrastructure is needed to maintain the Bay Area's economy and quality of life. New investments are needed to fix what is already in place, make improvements to accommodate future needs, make these systems more resilient to potential disruptions from natural hazards, and ensure business competitiveness. Without these investments, congestion will slow the movement of goods and people on roads, transit, and airports; we will not be able to adapt to the latest technologies; and we will face the possibility of cascading infrastructure failures in the event of a natural disaster. However, planning for the necessary maintenance and expansion of these services is hindered by divided responsibilities among state agencies, local governments, and private utilities. Improved collaboration will be needed among these different groups to ensure we make the investments needed to secure the region's future.
Rebuild and expand traditional infrastructure: Traditional infrastructure, such as roads and sewers, is a critical component of our everyday lives, and the effects of a failure or disruption in service can be felt throughout a community. The major challenge to making the critical investments needed to maintain, expand, and retrofit infrastructure assets is a lack of funding. Regional agencies, local governments, business leaders, and other stakeholders should work together to identify potential sources of funding to address the region's infrastructure needs. Local governments can consider generating funds through local measures, such as issuing bonds, raising sales taxes, or implementing fees on the use of roads, as well as leveraging private capital through public-private partnerships. Another option is to create a regional infrastructure bank that would provide loans for selected infrastructure projects. An infrastructure bank would facilitate private sector investment in public projects and encourage cooperation among local jurisdictions in planning and financing necessary infrastructure investments.
Expand investments in 21st Century Infrastructure: The Bay Area's "21st Century Infrastructure"—its communications and energy systems—complement more traditional types of infrastructure and are increasingly important to economic vitality. Communications and energy systems tend to be driven by more rapid changes in technology and user preferences. To support economic growth, the Bay Area needs to expand the quality and capacity of its communications infrastructure and to update the electricity grid to increase energy efficiency and storage capacity to accommodate the expanded use of renewable energy, rooftop solar systems, electric vehicles, and smart appliances. All levels of government can facilitate improvements to communications infrastructure by developing more detailed and specialized plans, considering system-wide upgrades rather than project-by-project approvals, and ensuring that regulations are reviewed regularly and are flexible enough to accommodate technological advances and changes in how people use services. Energy infrastructure can be improved by pursuing innovative approaches to ratemaking and regulation that allow more decentralized operation of the electricity grid and provide flexibility to meet changes in technology and consumer demands.
Invest in public transit to make it easier to travel around the region: There are 27 different agencies that provide public transit services in the Bay Area. Although residents and workers often must travel from one county to another, most of the transit agencies operate solely within one county. For riders, trying to figure out the different schedules, fares, and how to transfer from one system to another can be a challenge. Transit agencies should work together to coordinate their policies and provide information in ways that make the transit experience more seamless. Since most jobs in the region are more than a half-mile away from a regional transit stop, it is also essential that we expand the quality and availability of "last-mile" solutions to enable people to easily travel between transit and their job. Some options include shuttles, better bicycling and walking environments, or ridesharing. Transit agencies should also consider focusing their service and infrastructure improvements on the most-used routes. Finally, we need to identify new sources of funding to support our major transit systems, such as San Francisco Muni, BART, AC Transit and Santa Clara Valley Transportation Authority, which need to replace old buses and trains to meet the growing demand as more people choose transit.
Improve the resilience of the region's infrastructure systems to natural hazards: The region's critical infrastructure is aging and vulnerable to earthquakes, flooding, fire, drought, and other hazards, many of which are expected to increase in severity due to climate change. These systems are very reliant upon one another, so if one system fails or is damaged, it can disrupt other systems. For example, an undamaged highway system without fuel is a broken transportation system, and the ability to make repairs to one system may depend on other systems (such as electric or communications) working. Currently the vulnerability of many infrastructure systems is neither well known nor well communicated to the public. The region has previously invested billions into improving the ability of its transit, highway, and water systems to withstand earthquakes. Similar improvements are needed across all infrastructure systems to protect against damage from all hazards and to address the cascading impact a single failure can have across systems.
A strong middle class is critical to the continued vitality of the Bay Area economy. However, middle-class wages are increasingly out of reach for many people, as more than a third of Bay Area workers earn less than $18 per hour (or less than $36,000 per year for full-time work) and most of those earn less than $12 per hour.5 To support these households, we need to explore strategies to increase middle-wage jobs and create pathways for lower-wage workers to move into better jobs. Most of the projected middle-income job openings will become available as workers retire or change occupations, rather than from growing industries or occupations. For the region to remain competitive we must invest in our workforce so businesses can find skilled workers to fill open positions that might otherwise be outsourced.
Collaborate to improve local economic development strategies, with an emphasis on growing middle-wage jobs: While middle-wage jobs are available in many different industries, some of the employment sectors where these jobs are especially prevalent include professional services, construction, healthcare, government, and education. To successfully encourage growth in these industries, local economic development strategies should be based on an understanding of how the local economy interacts with the regional economy— particularly how local industries poised for expansion relate to the Bay Area's primary growth clusters. Although local governments are very interested in local economic development opportunities, most lack the resources or experience to conduct this type of detailed analysis. Data and insights from industry leaders, suppliers, policy makers, workforce development providers, and other stakeholders are essential to help local governments identify promising industry clusters and develop a detailed economic development strategy to ensure they are supporting businesses at all stages of development, so businesses do not leave the Bay Area. The benefits of local economic development strategies are magnified when done in collaboration with economic development agencies and neighboring jurisdictions.
Reform California's education system to generate a globally competitive workforce: For many people, public education is the key that unlocks the opportunity for a better life. However, years of budget cuts have limited the ability of California's education system to adequately and affordably meet the needs of students. Additional funding for the state's K-12 schools and public universities and colleges is necessary to ensure these institutions remain accessible to students of all income levels and can prepare students to adapt to a rapidly evolving economy. California's higher education system, in particular, could do more to align courses and training to the skills and knowledge that businesses need. For example, Community Colleges could offer more classes that prepare people to work in high-demand occupations, such as those in health-related fields. Training for jobs in the green economy should also be a priority. These efforts are particularly effective if done regionally, since the training can be directed to growing industries with many job opportunities.
Strengthen pathways to help lower-wage workers move into better jobs: The region's economic vitality depends, in part, on ensuring existing workers and new entrants to the labor force have the skills necessary to take advantage of available job opportunities. Partnering with businesses to develop industry driven, sector-based training programs helps ensure workers learn skills that are in demand. Many lower-wage workers also need job-focused training to improve their basic skills and digital literacy. Workers can also benefit from the creation of certificate programs for occupations that currently do not have them, since they will be able to demonstrate to employers that they have skills in that occupation. Helping workers navigate online job searches and applications, creating networking opportunities, and encouraging apprenticeship programs and paid internships are also essential to assisting workers to build their careers.
In an effort to preserve the region's remaining open spaces and working landscapes, most communities are encouraging more growth in infill locations. There has been a particular emphasis on building new homes near transit to encourage more transit use, but people are more likely to ride transit if their job is also near a transit stop. In addition, the surging demand for housing has created competition between housing and other types of land uses, which can lead to the displacement of jobs in industry sectors that are clustered on lower-priced land, such as warehouses. Housing is essential for the region's economic vitality. However, housing should not crowd out employment uses that often provide middle-wage jobs and are critical to the regional economy, especially industrial space for production, distribution, and repair as well as the facilities necessary to move materials and supplies throughout the region.
Integrate employment activities into the PDA framework to encourage more jobs near transit: The PDA framework that is the foundation for Plan Bay Area has emphasized the need for new homes in areas near transit. However, people are more likely to ride public transit to work if their job is also located close to a transit stop. ABAG and MTC should evaluate potential strategies for increasing the intensity and mix of uses in PDAs with an emphasis on increasing jobs that are oriented toward transit. Regional agencies should also work with local governments, transit agencies, and the business community to encourage employers—particularly those in industries that have a lot of middle-wage jobs, such as health care, educational services, and government—to locate in transit-served locations.
Evaluate a Priority Industrial Area Program: Establishing a regional program to designate Priority Industrial Areas could help ensure there is enough land for these critical uses, and would complement the existing PDAs and PCAs identified as part of the regional planning framework. Industrial and goods movement businesses are essential to our economy and need stable, affordable, and centrally located space to provide products and services to the Bay Area's residents and businesses. These businesses support high-growth industries, tend to pay better wages for less skilled workers, and when located in central locations, may decrease vehicle miles traveled and costs to consumers. Industrial businesses have unique needs when it comes to finding suitable space to operate and, given the strong market demand for new housing and other uses, these businesses often cannot compete for new space where needed and are sometimes forced out of their existing locations. A Priority Industrial Area program would encourage greater regional coordination related to developing and preserving industrial land and supporting the transportation investments and policies needed to make it easier to move goods and materials throughout the region.
Re-envision office parks: The region's continued economic growth is increasing demand for existing office space, especially in places that are both centrally located and transit accessible. Many of the Bay Area's existing suburban office parks—even those close to transit—were built with the expectation that workers would drive to work. Promoting a more efficient use of these office parks can help meet the demand for jobs in a more urban environment that can be reached by transit. Increasing density in office parks makes it more efficient to provide transit for them, while improving the safety and connectivity of bicycle and walking paths enables employees to travel from home or a nearby transit stop to their job without needing a car. Adding restaurants, retail, or other services within office parks allows workers to take care of some of their daily needs without a car or by driving less.
Identify policies and funding to meet the Bay Area's housing needs: The high cost of housing in the Bay Area presents a significant challenge for maintaining the region's economic and job growth. Every community should contribute to increasing the region's housing supply. Ensuring a sufficient supply of housing that is affordable to the region's workforce encourages greater economic mobility for lower wage workers and helps businesses attract and retain workers so jobs remain in the region. While the points regarding streamlining development described earlier in this section relate to housing production as well as nonresidential activities, Section 2 discusses the Bay Area housing context more fully.
Next: SECTION 2