A few weeks ago, Dr. Bill Watkins of UC Santa Barbara, our leading local economist, delivered some pretty depressing news at the Chamber of Commerce’s annual breakfast: Our local Ventura economy is not adding any jobs.
In many ways Ventura is a prosperous town. We have a lot of stable, middle-class employers like the County Government and Patagonia. Home prices are high, which may be bad for newcomers but is very good for most of our residents. And we are fortunate to capture more than our share of retail sales and therefore sales tax as well.
But we’re not adding jobs. And although we have more than our share of jobs compared to the rest of the county, we don’t have as many high-tech jobs – nor as many high-wage jobs – as we should.
That’s why I think the Council’s Monday night to move forward with the “Jobs Investment Fund” (JIF) is so important. At first glance it may seem like an unusual or even risky thing to do. But if we’re going to bring good jobs in growth industries to Ventura, this is the direction we have to take.
Here’s the problem: Here in Ventura, we are swimming in a sea of good jobs, particularly those associated with high-tech and biotech startup companies. But we’re drowning – and not getting very many of those jobs. Santa Barbara – the “Digital Coast” – is the 5th or 6th most important high-tech startup location in the nation. The 101 corridor from Camarillo to Calabasas – the “Technology Corridor” – is breeding fabulous new businesses, spinning off of Amgen and sometimes catching high-tech startups when they spin out of Santa Barbara looking for a somewhat cheaper location.
We like to think of Ventura as the place where “the Digital Coast meetings the Technology Corridor”. But the truth is, Ventura is the place where the Digital Coast just barely misses the Technology Corridor.
Which is ironic. Because I know from my day-job work in economic development that what these fast-growing companies want is what Ventura has: A great quality of life with access to both urban amenities (i.e. arts and culture and downtown restaurants) and outdoor recreation; proximity to research institutions where innovation is bred, such as UC Santa Barbara and Amgen; and an educated labor force. Even the cost of housing is not nearly as important as these other factors. The biggest irony here is that a lot of the high-level workers in these companies already live in Ventura. They just commute out, either to Santa Barbara or Thousand Oaks.
Four years ago – right after I was sworn in as a member of the City Council – we voted to set aside $5 million for economic development purposes. This was money the redevelopment agency got from refinancing some bonds. (Another $2.2 million from the refinancing was spent on paving streets and other short-term needs.) Although the formal vote occurred after I was seated, it was really an idea from the previous (Ray Di Guilio-Jim Friedman) council and the Chamber of Commerce supported it.
At first everybody assumed that this money would be spent either on infrastructure needed for companies (whether that’s new roads, parking garages, land, whatever) or loans to businesses already located in the city. But as the council worked through its economic development priorities, the ideas began to evolve. Both the General Plan and the Economic Development Strategy placed high priority on “high-value, high-wage jobs”. The council appointed an ad-hoc Economic Development Committee – including Ed Summers, Neal Andrews, and myself. We kicked this idea around and even began to hear from local businesses – and nonprofits – that wanted a piece of the money. Over time, we began to explore different options that we thought would help us grab some of those good jobs in growth industries that we seem to be missing out on. Eventually we hit on the idea of the “Jobs Investment Fund” – that is, using the $5 million to actually try to encourage – and possibly invest in – up-and-coming local companies.
Here’s how it would work: We’ll partner with a venture capital investment fund in Santa Barbara named DFJ Frontier. This fund and its manager, David Cremins, are among the most respected in the business. Their mission is to capitalize startup companies in California outside of Silicon Valley. Their main investor is the California Public Employment Retirement System – the world’s biggest pension fund. Cremins teaches in the Technology Management Program at UC Santa Barbara, and he’s really committed to growing tech companies in the Ventura-Santa Barbara area.
The city would invest part of the $5 million in one of Cremins’ funds, DFJ Frontier II, which will have about $60 million in capital altogether. The fund will invest in many start-ups in California. As is typical in venture capital, most of them will probably fail but a few of them will probably hit it big. There’s no iron-clad guarantee that the money we place in this fund will be invested in companies locating in Ventura, but Cremins is working with a lot of start-ups working on new products emerging from the UC Santa Barbara engineering program. They are looking for places to locate, and Ventura is half the cost of Santa Barbara. It’s got many of the same lifestyle amenities and as I said before a good chunk of the skilled labor force that these companies need lives in Ventura anyway. DFJ Frontier will promise to make their “best efforts” to place companies in Ventura – and they can make an iron-clad promise to organize workshops and networking sessions with local companies and entrepreneurs looking for capital.
To sweeten the pot, the city would invest the remainder of the $5 million in a new fund that Cremins would create, known as the Jobs Co-Investment Fund, which could be used only for companies locating in Ventura. Cremins and his investors would be expected to match our investment; and the money in the Co-Investment Fund could be used as an inducement: We’ll capitalize you to a certain extent if you’re a start-up, but we’ll capitalize you even more if you locate in Ventura.
In theory, there’s a risk here. Our investment in the DFJ Frontier investment fund, in theory, might not produce any jobs in Ventura. Our investment in the Co-Investment Fund may never be used. Our funds will certainly assist some businesses that will fail. And, in theory, we might not get a good return on our investment.
None of these things are likely. By establishing a strong relationship with DFJ Frontier, we will make inroads into the world of venture capitalists who typically overlook Ventura as a location – which is exactly our goal here. We will be partnering with an investment fund – and an investment fund manager – committed to this region and excited about our city. We will likely bring far more than $5 million in high-tech and biotech investment into the city, because DFJ will bring other investors to the table, including CalPERS. We will almost certainly get a fabulous return on our investment – though it will take a long time to cash in on this (as is typical of venture capital funds) and a return on investment is not the main goal here. (Plus, we’re not betting the farm here – the city still has $147 million in very safe investments earning 4% interest.)
As our City Manager, Rick Cole, pointed out on Monday night, simply partnering with an outstanding venture capital firm won’t magically bring good jobs to Ventura. We in Ventura – the city, the Chamber, and other civic leaders – will have to sell the city to investors. We’ll have to make sure that these businesses have the offices and buildings they need. And we will have to work with our colleges to make sure the labor force is ready.
We talked about the Jobs Investment Fund for an hour and a half Monday night – and rightly so, because this is a new idea and a big step forward. Several members of the council expressed concern about the level of risk associated with this partnership – the lack of an iron-clad guarantee that the jobs will be in Ventura, along with the possibility (certain) that we will back some firms that will fail and also the possibility (very remote) that we could lose some money.
In end, we got a 5-2 vote to begin negotiating with DFJ Frontier. (The final deal will come back to us again.) Deputy Mayor Christy Weir expressed concern that the Chamber of Commerce and local business interests had not been consulted sufficiently, and this is a fair concern. Councilmember Jim Monahan said that the city should not be risking the taxpayers’ money and we should use this money to pay for police officers, pave the streets, and so forth. He said that the role of government should be to “get out of the way”. This is a legitimate position which I respect, although it’s worth noting that Mr. Monahan voted in favor of setting aside the $5 million for economic development purposes and he has since voted in favor of every step along the way, including the General Plan and the city’s Economic Development Strategy.
My personal opinion is that if we’re getting whipped at economic development by ultra-liberal Santa Barbara, then there’s probably something more to success than simply us “getting out of the way”. As I said before, this kind of economic development is mostly about proximity to university research centers, having a high quality of life, and having a local labor force.
But one thing is for sure: If we don’t do something like this, we won’t get the companies and jobs we want; and if we don’t get the companies and jobs we want, we won’t create the long-term prosperity we need to provide opportunity for our residents and create the tax base we need to sustain street paving, police and fire services, and all the rest over the next several decades.
We could do other things with this money, even to promote economic development. We could pay for new roads, new business parks, and other things that such businesses need – but we are going to do that anyway. We could loan money to individual companies – a typical economic development strategy – but this is very risky. We are certain to suffer some losses and they may not be counterbalanced by big successes. Or we could “throw the bomb” and use all the money to back some big idea – as Oxnard is currently doing with “Big League Dreams”. But as somebody who has written and consulted on economic development for more than 20 years, I have to say the throwing the bomb usually fails. It’s very risky.
Instead, we’re going to partner with a very solid and well-respected investment fund manager that has not only our money, but tens of millions of dollars from the world’s largest pension fund; as well as a mission that conforms to our goals and true passion for our area. We’ve been harmed by a lot of economic bad news since I moved to Ventura 20 years ago – the loss of the oil industry, the loss of Cal State, the loss of Kinko’s. That’s why I think we have to focus on long-term, sustainable prosperity for our community.
The Jobs Investment Fund will prove that we are serious about jobs and strengthen our connections to start-up companies, capital markets, and research centers at UCSB. It may be unusual – it may seem risky – but it’s exactly the kind of thing we need to do.