News Analysis: Oakland Begins Sparring Over Economic Development

By J. Douglas Allen-Taylor
Tuesday May 08, 2007

The jockeying over the future direction of Oakland’s economic development in the Ron Dellums Years—how much it will continue on the path laid down by former Mayor Jerry Brown and how much it will break new ground—began in earnest last week with the release of an Oakland Chamber of Commerce study that both implicitly criticized Brown’s failures and embraced his goal of concentrating commercial development in the city’s downtown core. 

The study was immediately criticized by former Oakland City Councilmember and mayoral candidate Wilson Riles Jr. for what Riles called “ignoring Oakland’s racist development history” and for promoting “profits for millionaires” over “jobs for residents,” and at the same time, Mayor Dellums himself issued a call for the creation of 10,000 new jobs in Oakland in five years that could be interpreted as a direct dig at former Mayor Brown’s old 10K downtown residential development goal.  

The 119-page Chamber of Commerce study, commissioned a year ago, sets out four of what it calls “strategic initiatives” in “those sectors found to offer the greatest opportunity for meeting Oakland’s development aspirations.” 

The study was done free of charge by McKinsey & Company, an international management consultant firm that in the past has also done studies for the Oakland-based Policy Link nonprofit organization and the Oakland Unified School District. 

The four initiatives promoted by the Chamber study are to “strengthen Oakland’s healthcare industry while leveraging the Bay Area’s strengths in biotechnology,” to “enhance Oakland’s position as an international gateway and logistics hub” through the Maritime Port and the Oakland International Airport as well as “by cultivating an international presence to capitalize on the rise of Asian trade,” to “revitalize downtown Oakland,” and to “nourish the growth of industries in emerging niche sectors such as green industry, arts, design, and digital media, and specialty food manufacturing.” 

Saying that “retail trade is an underrepresented sector in Oakland’s economy,” representing 7 percent of the city’s employment as opposed to an 11 percent share of U.S. employment overall and 13 percent of Bay Area jobs, the study said that increasing Oakland’s retail sector provides a path for the city’s eventual “economic rejuvenation.” 

But the study spoke exclusively of enhancing retail in Oakland’s downtown section, failing to make any mention of the city’s many neighborhood commercial centers, including Chinatown, Grand Lake/Lakeshore, the Laurel, or the Fruitvale, where retail is already thriving, or the Acorn area in West Oakland or Foothill Square in East Oakland, where it is floundering. 

That was the same retail strategy—concentrating on reviving downtown while ignoring the neighborhood commercial districts—promoted for eight years under former Mayor Jerry Brown. 

Asked during a telephone news conference if the neighborhood commercial districts had been deliberately excluded from the study, McKinsey & Company’s San Francisco director Lenny Mendonca said no, but that the downtown retail development had been included as “one example.” 

But in other areas, the study sharply repudiated Brown Administration policies, though never mentioning Brown by name. 

In a section entitled “Institute Land Use Policies That Support an Economic Development Strategy,” the study said that “while most of the actual re-development of sites falls to the private sector to identify investment capital and prospective tenants, the City government plays a crucial role in establishing a regulatory framework that will clarify where certain uses of land and real estate are permitted and, more than that, where the City would like to see them.” 

To accomplish that goal, the study said that Oakland officials “should focus immediately on clarifying the City’s land use policy,” including zoning for business uses, resolving infrastructure issues, clarifying design and development standards, and updating land use classifications.”  

Those areas all languished in the Jerry Brown years, when Brown deliberately held off on conforming Oakland’s zoning code to the General Plan, preferring to let developers have a freer reign as to what types of developments they wanted to build. That often left developers, neighborhood residents, and existing business owners in confusion, unsure of what new developments would be allowed and what would have to be modified. 

One of incoming Mayor Ron Dellums’ first actions was to put the city’s Community and Economic Development Agency (CEDA) back to work to conform the zoning code to the General Plan. 

The Chamber of Commerce study also suggested that Oakland attempt to attract some of the Bay Area’s large and growing biotechnology firms, calling them one of the Bay Area’s strongest economic sectors. 

But while the Chamber of Commerce study said that “other Bay Area cities, including Oakland’s near neighbors, were welcoming biotechnology,” it said. “Oakland did not capture any of this burgeoning investment. In short, the city lacked the disciplined approach and leadership to persuasively engage with key firms and developers in the industry to make the case for Oakland.” 

While the study specifically spoke of this lack of initiative by Oakland leaders occurring during the period of the 1990s, leaving out much of the term of Jerry Brown that began in January of 1999, the study then spoke of biotech expansion in areas outside of Oakland during Brown’s term. 

The study noted that “biotechnology companies create jobs, and they create them for every educational level and in a variety of specialties across the life sciences. Genentech in 2005 employed about 3,100 people in South San Francisco. Chiron in Emeryville, recently acquired by Novartis, employs about 2,500, and Bayer in Berkeley, 1,500. People with degrees ranging from Ph.D. to terminal high school degrees are needed in biotechnology.” 

But in a column this week in the Oakland Post, a newspaper distributed in Oakland’s African-American neighborhoods, former Oakland City Councilmember Wilson Riles Jr. said the call for increased biotechnology in Oakland the “worst aspect” of the Chamber report, adding that “this smells like that same old, purely self-serving misdirection.” 

Citing a recent study that said the biotech industry involves fewer than 200,000 people nationwide, most of them “only the most highly trained and educated scientists,” Riles charged that the spokesperson for McKinsey & Company had a vested interest in promoting that sector. 

Noting that McKinsey & Company’s San Francisco director Mendonca is also an executive member of the Bay Area Council, Riles said that the council “is busy lobbying for more H1B visas so that the biotech industry will be able to import more foreign scientists. (You do not have to pay foreigners as much and they make few demands.)” 

Riles added that “since the defeat of affirmative action, very few Oakland residents will be trained at the University of California to take those few available biotech jobs,” concluding with the question that “why should Oakland promote an industry that is going to bring few jobs to residents?” 

But Riles and the Chamber study were in full agreement in another area—the promotion of green technology jobs in Oakland—with the former mayoral candidate saying that “green technology is where the future growth is in producing good jobs that are more accessible to Oakland residents” and the Chamber study noting that “Oakland should actively encourage the emerging clean technology industry. This sector is attracting intense investment activity, it creates jobs, and it aligns with Oakland’s green values, offering a double opportunity to provide work and evolve the economy toward green values and products. The timing is right as well: like biotechnology a decade ago, clean tech startups are looking for affordable locations, and they want to be in the Bay Area where the growing clean technology community is clustered. Oakland is an ideal location.” 

Meanwhile, at an economic summit held last week at the Oakland Marriott, Dellums announced the formation of an “Oakland Partnership” between the city’s government, business, and private citizen communities to produce 10,000 new jobs in the city in the next five years, with many of them expected to be drawn from the recommendations made in the Chamber study. 

The Oakland Tribune reported that members of the Oakland Partnership were expected to begin meeting later this month to start work on drawing up specific plans. Membership of the Partnership has not yet been announced. 

The use of the 10,000 figure by Dellums could hardly be accidental. 

During his campaign for mayor in 1998, former Mayor Jerry Brown began using that same 10,000 figure, announcing that he would bring in 10,000 new residents to the downtown area to attract retail development and, eventually, jobs. That goal became the signature slogan of the Brown years: the 10K Initiative.  

Before his term ended, Brown had met his goal of approving new residential development downtown to meet his 10K goal, but the resulting retail and job development floundered. In a 2006 article on Oakland developer Hal Ellis in the San Francisco Business Times, Ellis—who otherwise praised Brown’s development policies—said that the “retail vacuum is the greatest failing of the development boom under Brown.”