Public Comment

Berkeley Needs More Exports!

Thomas Lord
Friday July 25, 2014 - 09:44:00 AM

The City of Berkeley is in big financial trouble, as we all know. There is an urgent need to boost city revenues. Growth in taxable business income can help to boost city revenues. The Office of Economic Development is supposed to help grow Berkeley's taxable business incomes.

To my great surprise I cannot find mention in any Office of Economic Development document of exports. The word literally does not occur and the concept is entirely missing from the OED's written output. How is this possible?

Nowhere in any of these writings does the OED seem the slightest bit concerned with the question of what products are produced in Berkeley and sold, in a taxable way, to buyers outside of Berkeley.

This is an important omission and I'll explain why. It matters to each and every Berkeley household! 

The City's general fund comes primarily from locally collected taxes and fees.

What this means is that the expenses of running the City ultimately come from only three possible sources: 

1. City revenue taken from the household incomes of Berkeley residents.
All residential property taxes and sales taxes from local resident spending come from our household incomes -- our paychecks. Whether new revenues are raised by adding a new residential parcel tax or passing a tax on soda, nearly all of that money comes straight out of our individual wallets. 

2. City revenue from the one-time windfalls from real estate speculation.
Highly inflated urban land values lead to land speculation and this generates one-time city revenues in the form of transfer taxes, development fees, and marginal increases in ad valorem property taxes. The short-term benefits are real but so are the longer-term detriments, as this speculation drives local businesses out of business, contorts the built environment, and devastates social stability. 

3. City revenue from taxable exports.
One way for Berkeley's businesses to thrive is if they are able to import lower-cost materials, transform them with locally supplied labor into something more valuable, and sell them at a handsome profit to buyers from out of town. When those sales revenues are taxable, Berkeley is able to obtain revenue without hitting the wallets of households and without encouraging destructive land speculation.

Berkeley's exports, produced by resident labor, are in fact a cornerstone of the local economy. They currently include such notable products as high quality furniture, high-end audio systems, and artisan alcoholic beverages.

One would think, given the desirable qualities of this kind of business activity and City revenue, that the Office of Economic Development would be eager to encourage and expand Berkeley's production for export. 

What is the department doing instead? Some highlights include:
  • "Promote the tenanting of vacant retail and office space through the website and increase traffic to the site by 25 percent."
  • "Promote the emerging incubation of co-working entities that are now operating in Berkeley and attract at least one new incubation or co-working facility to the City."
  • "Work with the development community, QB2 East Bay, U.C. Berkeley, LBNL, and other stakeholders to facilitate the incubation and growth of 10 emerging Bioscience companies in West Berkeley."
Do you notice a trend? Every single one of these concerns is about land prices. The Office of Economic Development is intensively focused on one-time windfalls from real estate speculation and at the same time has apparently never heard of production for taxable export. 

The closest the OED comes to concern for exports is a vague effort to boost the number of retail shoppers driving in from out of town, an approach that produces only lower-wage jobs and very little marginal increase in city revenue.
It's especially ironic because the OED makes a point of lamenting to Council that industrial employment in Berkeley is on the decline at the same time the OED is working actively against industrial employment by encouraging land speculation.

And it's doubly ironic since the City's General Plan describes the economic role of the City government to be one of local business development in response to the threat of land speculation. The OED is doing the very opposite of what it is supposed to be doing!

If Berkeleyans are tired of ever-increasing taxes levied against household incomes and skeptical of the side effects of out-of-control land speculation, I think it is time they ask what the city is doing to develop the most important alternative: exports of locally produced products.