CC Exhibit 08-02-2016 Item No. 1 Economic Development Strategic PlanDraft
Economic Development
Strategic Plan
City of Cupertino
City Council
August 2, 2016
Economic Development Strategic Plan:
Focus on Businesses in Cupertino
Regional and local economic trends: employment, industries, businesses
Retail trends and implications for Cupertino businesses
Impact of businesses on City’s fiscal health
Opportunities for maximizing the value of what is already here
Implementation strategies for City and partners
Process
Research &
Analysis,
Stakeholder
Interviews
Jan -Dec
2015
Community
Workshop
August 2015
Draft
Economic
Background
Report
October
2015
Final
Economic
Background
Report
January 2016
Draft
Strategic
Plan
Summer
2016
Economic Development Opportunities
Research and Community Feedback
Location at the heart of Silicon Valley
Educated, highly skilled workforce
Excellent quality of life and school district
Thriving technology sector
Magnet for small firms and start-ups
Strong demographics for new retail
Healthy fiscal position
Economic Development Challenges
Research and Community Feedback
Highly competitive retail environment
Challenging market for independent retailers
Lack of affordable office spaces for small and midsize firms
that are expanding
Lack of diversity in revenues for City’s General Fund
Concerns about protecting quality of life
Key Issues for EDSP to Address
Issue A: Support Growth of Small and Midsize Businesses
Issue B: Retail Support and Development
Issue C: Place-Making and Connectivity
Issue D: Hospitality
Issue E: Marketing
Three Categories of Action Items
•Require only small amounts of additional staff time.
Category 1 Actions
•Require significant staff time and/or legislative action.
Category 2 Actions
•Require additional budget allocation.
Category 3 Actions
Strategy 1. Facilitate the development of new office and industrial/flex
space for small and midsize companies to expand in Cupertino.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•1.1: Increase allocation for office development for mid-size businesses
in the 20,000-100,000 sq. ft. range.
•1.2: Create a new development allocation category for innovation
space.
•1.3: Consider establishing a new “Innovation District” in the Bubb
Road and/or Bandley Drive/Valley Green Drive areas.
•1.4: Review and update land uses in the zoning designations related to
Office and Industrial uses to adapt to current and future business needs.
•1.5: Allow for the conversion of underutilized ground floor retail space
to office space.
Category 2 Actions
Strategy 1. Examples of Branded Innovation Districts
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•The Gate in San Leandro
repurposes underutilized
industrial space for a “maker”
space where a community of
artists, product designers, and
light manufacturers work side-by-
side.
•The Fremont Innovation District
is a cluster of advanced
manufacturing clean tech
companies.
Image: bizjournals.com Image: thinksiliconvalley.com
Strategy 2. Support development of business incubator, accelerator,
coworking , shared, and "on-demand" workplaces.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•2.1: Allow for the conversion of underutilized ground floor retail space
to incubator or coworking uses.
Category 2 Actions
•2.2: Seek out partnerships for developing a new small business
incubator or accelerator, and consider contributing City funds if needed.
Category 3 Actions
Strategy 2: Examples of business incubator and “co-working” spaces
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•WeWork and NextSpace are
privately funded co-working spaces
who tout the benefits of
connecting with other innovators
and creative enterprises.
•The San Jose BioCube is a 100%
self sufficient business incubator
providing facilities for life science,
nanotech, and cleantech startup
companies.
Image: wework.com Image: sanjosebiocube.com
Strategy 3. Continue and strengthen visitation and outreach programs for
small and midsize businesses (fewer than 250 employees).
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•3.1: Provide assistance to new and expanding businesses with
obtaining needed permits and licenses from the City and other agencies.
•3.2: Identify growing, small and midsize companies that are at risk of
moving out of Cupertino as they expand, and focus existing business
retention efforts on these companies.
•3.3: Work with local brokers to match growing companies to space in
Cupertino.
•3.4: Conduct an online survey of existing businesses to determine key
advantages and disadvantages of doing business in Cupertino.
Category 1 Actions
•3.5: Conduct regular outreach to growing small and midsize
businesses to determine what services would help them expand in
Cupertino, including individual visits, roundtables or focus groups, and
citywide events.
Category 2 Actions
Strategy 4. Develop a cohesive business support network offering technical assistance and
access to financing, with a focus on enabling growing businesses to stay in Cupertino.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•4.1: Explore additional opportunities to connect small businesses with
existing micro-credit providers or other small business lenders.
Category 1 Actions
•4.2: Partner with technology programs at De Anza College and/or local
high schools to offer assistance to Cupertino businesses, such as support in
building websites and applications.
•4.3: Establish the City of Cupertino as a Kiva Zip trustee to find and
endorse local businesses seeking to borrow money on the Kiva Zip website.
Category 2 Actions
•4.4: Contract with business assistance providers to provide targeted
services to Cupertino businesses, or hire staff and provide services in-house.
•4.5: Provide seed capital to start a revolving loan fund to provide small
loans for small and midsize businesses in Cupertino for business expansion
and other business needs.
Category 3 Actions
Strategy 4: Examples of Financial and Technical Assistance to Small
Businesses
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•The City of Oakland is a
trustee participating on the
Kiva Zip microfinancing
platform.
•The City uses local billboard
advertising to promote the
program.
•The Berkeley Revolving Loan
Fund grants loans of up
$35,000 to small businesses
that would otherwise not
qualify for bank loans.
•The Small Business
Development Centers of
Northern California are a
network of business
assistance offices,
•Includes a handful of special
strategic initiatives, such as
the Tech Futures Group in
Berkeley
Image: Strategic Economics
Image:
http://www.ci.berkeley.ca.us/oed
Image:
http://www.techfuturesgroup.org/
Strategy 5. Work with retail property owners and tenants to revitalize and
upgrade aging shopping centers on Stevens Creek Boulevard.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•5.1: Provide incentives in key locations for upgrading or intensifying
retail and/or replacing retail with mixed-use development.
•5.2: Develop design standards for retail space in mixed-use
developments to ensure that new retail space contributes to the desired look
and feel of the community, and functions well for retailers.
•5.3: Conduct outreach to Stevens Creek property and business owners
to explore the potential to form a BID or PBID on all or part of the Stevens
Creek corridor, to fund marketing, landscaping, maintenance, and/or other
local needs.
Category 2 Actions
•5.4: Provide grants or loans to retail property owners and/or tenants
to encourage them to upgrade their façades.
Category 3 Actions
Strategy 5. Examples of Pedestrian-Oriented Retail Districts
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
Characteristics of successful pedestrian-oriented retail districts:
•Concentration of retail within a convenient walking distance
•Pedestrian-friendly atmosphere
•High concentration of restaurants
•Comprehensive parking management strategies
•Active merchants’ associations
Downtown Burlingame
Image: Strategic Economics
Downtown Mountain View
Image: Strategic Economics
Downtown Los Gatos
Image: City of Los Gatos
Strategy 5. Examples of Façade Improvement Programs
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•The City of Santa Cruz Façade Improvement
Program makes grants for up to $10,000,
plus matching grants.
•Improvements can include painting, public
safety lighting, anti-graffiti measures, signs,
awnings, and landscaping.
•The City of Dublin reimburses up to 50% of
net new sales tax following physical
improvements made under its Sales Tax
Reimbursement Program.
•Reimbursements are made for five or ten
years and can cover up to 100% of the cost of
the improvements.
Image: Economic Development and
Redevelopment Department, City
of Santa Cruz
Image: http://www.simon.com/mall/stoneridge-shopping-
center
Strategy 6. Support emerging restaurant, entertainment, and shopping
clusters that serve as destinations for workers, residents, and visitors.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•6.1: Work with brokers and retail site selection professionals to market
Cupertino to desired tenants, such as high-end restaurants and comparison
retailers, and match retailers with appropriate sites in Cupertino.
Category 1 Actions
•6.2: Create a marketing campaign to increase awareness of local
retailers and service providers among workers employed at Cupertino
businesses.
•6.3: Seek out social media partnerships to promote shopping local.
Category 2 Actions
Strategy 6. Examples of Social Media Partnerships and Marketing
Campaigns
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•In 2012, Yelp asked users to pledge to
support small businesses for the holiday
shopping season and sponsored events to
promote local retailers.
•American Express Shop Small assists small
businesses with marketing materials.
•“Neighborhood Champions” are local
associations that organize promotional
events under the program.
Image: yelp.com Image: www.americanexpress.com
Strategy 7. Develop policies for regulating food trucks and other mobile services, including the
types of mobile services that are permitted, the locations and times when they may operate,
and measures for mitigating environmental, traffic, and other impacts.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•7.1: Work with Chamber of Commerce to reach out to mobile service
vendors, ensure that they aware of existing local and state laws and
regulations, and involve them in Chamber activities.
Category 1 Actions
•7.2: Conduct outreach to Cupertino residents and the local business
community on appropriate locations and regulations for mobile services.
•7.3: Develop policies to allow and manage mobile service vendors,
which may include a new licensing and/or permitting process.
Category 2 Actions
Strategy 7. Examples of Mobile Services Regulations
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•Mountain View developed regulations and a
streamlined permitting process meant to
protect against public safety hazards and
traffic congestion.
•Regulations include minimum distances from
schools, limits on time and congregation of
trucks, and a ban in the downtown core.
•Fremont Street Eats is a weekly event
managed by the local Chamber of Commerce
which brings pedestrian traffic into Fremont’s
underutilized downtown.
Image: yelp.com Image: Fremont Chamber of Commerce
Strategy 8. Invest in public realm improvements to support the development of the City’s
commercial/retail and mixed-use areas as pedestrian-oriented corridors that serve as
welcoming gateways to Cupertino and provide a variety of community gathering spaces.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•8.1: Support community programming at activity centers along major
corridors.
Category 1 Actions
•8.2: Develop an implementation plan for improving major corridors
such as Stevens Creek Boulevard, including identifying phasing and specific
funding sources for planned improvements.
•8.3: Pursue grants for streetscape and other improvements as they
become available.
Category 2 Actions
•8.4: Allocate funds in the City's capital improvement program to
implement landscaping, pedestrian, and other infrastructure improvements
envisioned in the Heart of the City Specific Plan and other Conceptual Plans.
Category 3 Actions
Strategy 9. Support local and regional transportation improvements that improve transit,
pedestrian and bicycle connections to employment and activity centers in Cupertino.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•9.1: Work with major employers to leverage corporate transportation
programs (e.g., shuttles, bike share) to benefit the community as a whole.
Category 1 Actions
•9.2: Work with regional and county agencies to explore new funding
sources for local and regional transit improvements.
•9.3: Pursue grants for high priority transportation projects as they
become available.
•9.4: Prioritize investments in bicycle, pedestrian, and other
transportation improvements that connect workers and workplaces with
local retailers.
•9.5: As part of the approvals process for large commercial
development projects, design a community benefits policy that encourages
projects to provide transportation demand management programs,
potentially including a community shuttle.
Category 2 Actions
Strategy 10. Provide adequate hotel rooms and event venues to support
the City's General Fund and meet business needs.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•10.1: Monitor the need for additional hotel rooms and meeting space.
Category 1 Actions
•10.2: Consider increasing allocation for new hotel development,
prioritizing proposals that include ample meeting and event space for
businesses and community use.
Category 2 Actions
Strategy 11. Develop an integrated approach to marketing Cupertino to brokers,
business owners, and others as a center for innovation and the heart of Silicon Valley.
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
•11.1: Update the City's marketing materials with current economic
data.
•11.2: Update the Economic Development and business-related
webpages as part of the City's overall website redesign.
•11.3: Expand the resources available on the Economic Development
website by providing links to or embedding maps and information from
other relevant websites.
Category 1 Actions
•11.4: Partner with other West Valley cities to develop a common
message and coordinate marketing efforts.
Category 2 Actions
•11.5: Develop a brand identity focused on economic development
(logo, wordmark, and colors).
•11.6:Redesign the Economic Development website, “Cupertino
Business Buzz” electronic business newsletter, and other marketing efforts
with a consistent brand.
Category 3 Actions
Strategy 11. Examples of Branding and Marketing Initiatives
A: Business Growth B: Retail C: Placemaking D: Hospitality E: Marketing
Image: thinksiliconvalley.com
Image: sjeconomy.com
Image: choosesantacruz.com
Branding and Marketing in Fremont,
Santa Cruz, and San Jose.
•Websites tend to have:
•A contemporary design with
visual appeal
•A prominent brand message
•Vivid imagery
•Evolving content
Questions?
Background Report Findings
Community Feedback
What We Heard:
Economic Assets and Opportunities
Location at the heart of Silicon
Valley
Excellent freeway access
Highly competitive tech sector
Highly educated and politically
active residents
Excellent school district and
quality of life
What We Heard:
Issues for Economic Development
Limited opportunities for clothing and other
specialty goods shopping and entertainment
Independent retailers and other small businesses
struggle with high costs
Predominance of a single employer
Protecting quality of life
is critical
Fiscal Health
Fiscal Health:
General Fund (GF) Revenues
Sales Taxes
30%
Property
Taxes
24%Other Taxes*
2%
Hotel Taxes
(TOT)
7%
Charges for
Services
15%
Utility Tax
5%
Other**
17%
*Includes business license taxes, construction taxes, and property transfer taxes
** Includes franchise fees, licenses and permits, use of money and property, fines and forfeitures, intergovernmental, and miscellaneous revenues.
Source: City of Cupertino 2014-15 Adopted Budget
General Fund revenues fluctuate with economic cycles
Growth in jobs, population, and investment has resulted in increased property tax, hotel tax, and sales tax revenues
Apple accounted for 18% of GF revenues (FY 2012-2013)
Fiscal Health:
General Fund Expenditures
Public Works
25%
Planning and
Community
Development
21%
Law
Enforcement
17%
Non
Departmental*
13%
Recreation
Community
Services
10%
Other**
14%
*Includes debt service and transfers to other funds, primarily to fund capital project costs.
**Includes Administration, Administrative Services, City Council and Commissions, and Public
Affairs.
Source: City of Cupertino 2015-16 Adopted Budget.
About 40% of
expenditures are
dedicated to resident
and community services.
Staffing levels have
been fairly steady over
time (2.8 to 3.0 FTE per
1,000 residents)
Employment and Industry Trends
Employment and Industry Trends:
South Bay Employment
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
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Employment Unemployment Rate
Source: State of California Employment Development Department, 2015
South Bay Employment Trends, 1990-2014
Employment and Industry Trends:
Cupertino Job Growth
Source: US Census ZIP Code and County Business Patterns, 2013
Total Employment in Cupertino and as a
Percentage of South Bay
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
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10,000
15,000
20,000
25,000
30,000
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Total Cupertino Employment Cupertino % of South Bay
Cupertino’s share of
South Bay jobs rose from
2.2%in 1998 to 2.6%in
2013.
Large Employers:
Professional/ Technical Services & Education
Sources: City of Cupertino CAFR;
US Census ZIP Code and County Business Patterns, 2012
Employer Sector Employees
% of City
Employment
Apple Professional & Technical Services 15,000 47%
Cupertino Union School District Education 1,597 5%
Foothill/DeAnza Community College District Education 1,183 4%
Fremont Union High School District Education 961 3%
Seagate Technology LLC Professional & Technical Services 500 2%
Affymax Inc Professional & Technical Services 304 1%
Pegasystems (formerly Chordiant)Professional & Technical Services 285 1%
Trend Micro Inc Professional & Technical Services 250 1%
Health Care Center at the Forum Health 250 1%
Employers in Cupertino with more
than 250 Employees, 2013
Firms with Fewer than 250 Employees
Cupertino and South Bay
Small and Midsize Businesses:
Strength in Professional and Technical Services Sectors
0%
5%
10%
15%
20%
25%
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Sources: US Census ZIP Code and County Business Patterns, 2012
21%of small and midsize
businesses in Cupertino
are in high tech.
Small and Midsize Businesses :
Many Local Firms are Very Small (1-4 Workers)
Source: US Census ZIP Code and County Business Patterns, 2012
Percent of Total Firms by Firm Size,
Firms with Fewer than 250 Employees
0%
10%
20%
30%
40%
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1 to 4 5 to 9 10 to 19 20 to 49 50 to 99 100 to 249
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Number of Employees
Cupertino South Bay
Competitive Position:
Opportunities and Challenges
Growing job base
Major technology employers
Concentration of small and
midsize professional and
technology firms
Attractive business climate for
small entrepreneurs and
startups
Few small and midsize
manufacturing businesses
Challenging environment for
midsize firms
Opportunities:Challenges:
Office Sector
Office Sector:
Cupertino Outperforms Other Communities in West and East
Silicon Valley
Source: Silicon Valley 1Q15 Office Market, Newmark Cornish & Carey, 2015; Colliers International, Q1 2015; Strategic Economics, 2015.
2.3%
8.9%
4.0%
1.1%
4.5%
2.1%
4.3%
6.3%
13.1%13.1%11.1%
8.7%
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Vacancy Rate, Q1 2015
West Valley North Valley East Valley
$4.65
$3.48 $3.46 $2.76
$8.10
$5.53
$6.85
$4.41 $3.69 $2.79 $2.15
$3.67
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Average Monthly Asking Rent, Q1 2015 (per sq. ft., full service)
West Valley North Valley East Valley
Office Sector:
Low Vacancy Rates and Limited Turnover Limit Opportunities for
Businesses to Expand in Cupertino
Source: Silicon Valley 1Q15 Office Market, Newmark Cornish & Carey, 2015.
Number of Deals by Building Size, 2014
Office Sector:
Development Planned, Proposed, and Under Construction
Market Square Feet Percent of Total
Cupertino
Apple Campus II 3,400,000 9%
Main Street 260,000 1%
Vallco*2,000,000 5%
Total 5,660,000 16%
Other West Valley
Campbell 170,000 0%
Los Gatos 433,000 1%
Saratoga 0 0%
Total 603,000 2%
Other Santa Clara County
Mountain View 10,230,000 28%
Sunnyvale 4,828,000 13%
Santa Clara 5,870,000 16%
San Jose 9,264,000 25%
Total 30,192,000 83%
Total 36,455,000 100%
* The Cupertino General Plan allows for up to 2 million square feet of office to be built at Vallco; the amount of office area included in the
final development plan may change.
Source: City of Cupertino, 2015; New Development Report Q1 2015, Newmark Cornish & Carey, 2015; Strategic Economics 2015.
Major Employment Locations
Competitive Position:
Opportunities and Challenges
Premier office location
High-quality office stock
Access to skilled labor
Access to venture capital
Predominance of a single
tenant
Limited availability and
turnover of midsize spaces
Opportunities:Challenges:
Retail and Hotel
Retail Sector:
National and Regional Trends
Internet sales growing 3X faster than brick-and-mortar
Fastest growth in restaurants, grocery stores, personal and
business services
Limited new retail construction occurring in the Bay Area
Growth of mobile services
Trade area demographics
Competitors in trade area
Location and design of shopping
center
Storefront width and depth
Accessibility and visibility
Construction costs
Anchors and other tenants
Rent costs and deal structure
Retail Sector:
Factors that Impact Retail Location Decisions
Retail Sector:
Cupertino’s Unique Demographics
Household spending is higher than U.S. average,
especially for day care, education, leisure, apparel
Majority of households are families with children
High numbers of young professionals and middle-
aged couples without kids
“Young Digerati”: 21%
“Movers and Shakers”: 6%
“Bohemian Mix”: 6%
Retail Sector:
Sales in Cupertino have fallen by 17 percent since 2005
Source: MuniServices, 2015; Strategic Economics, 2015.
Estimated Retail Sales in Cupertino
(Millions of 2014 Dollars)
$763
$632
2005 2014
$2,190
$854
$602
$1,254
$1,409
$1,387
$1,989
$1,407
$88
$489
$594
$755
$1,323
$1,762
$2,402
$4,054
Motor Vehicles and Parts
Building Materials
Grocery & Other Food Stores
Clothing
Gasoline Stations
General Merchandise Stores
Restaurants
Other Retail*
Per Capita Retail Sales
Cupertino
Santa Clara County
*Includes pharmacies, health and personal care, office supplies, sporting goods, books, and other misc. stores.
Sources: BOE, 2013; California Department of Finance, 2015
Retail Sector:
Strongest Sales are in Neighborhood-Serving Categories
Non-retail per capita sales
(business to business)
are 3x higher in Cupertino
than in the County
Retail Sector:
Highest Performance Nodes are in Anchored Centers, but Strip
Centers Provide Affordable Space for Independent Retailers
Source: MuniServices, 2015; Strategic Economics, 2015.
Shopping Center Performance in Stevens Creek Corridor
Retail Performance :
Homestead Square Sales Have Spiked Since Redevelopment
Sources: MuniServices, 2015; Strategic Economics, 2015.
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3
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Estimated Sales Sales Tax Revenues
Homestead Square Shopping Center: Estimated Quarterly
Sales and Sales Tax Revenues, 2013-2014
Hotel Sector:
High Room and Occupancy Rates, Driven by Business Travel
Room Occupancy by Day of Week
Cupertino, Aug 2012 to Jul 2013
Existing
Under Construction
Marriot Residence Inn
(Main Street)
•180 rooms
Hyatt House Hotel
(Vallco Park)
•148 rooms
TBD (Marina Plaza)
•122 rooms
TBD (The Oaks)
•200 rooms
Source: BAE Market Study, 2014
Proposed
Competitive Position:
Opportunities and Challenges
Strong local buying power
Many neighborhood-and
business-serving retailers
New investment underway
Declining sales and
stagnating sales tax
revenues
Highly competitive retail
trade area
Inventory of older strip
retail centers
Opportunities:Challenges: