BUILDING SAN DIEGOS FUTURE: SMALL BUSINESS

SMALL BUSINESS Small businesses are the backbone of San Diegos economy. They create jobs, breathe life into our neighborhoods, and generate prosperity that gets reinvested locally. They represent the spirit of entrepreneurship and innovation that helps make San Diego a world-class city.

Despite the importance of small businesses to our local economy, the city of San Diego has not been friendly to small businesses. In the last few years, the City began sending a Notice of Tax Liability to local residents who are reporting business activity to the states Franchise Tax Board. Tens of thousands of city residents, from soccer coaches to home-based independent contractors were sent bills, many erroneously. Many small businesses had to deal with penalties and fines once in this regulatory process. In contrast, the City has been far less vigilant in requiring large businesses to pay the appropriate tax based on their size. 1 Ironically, big banks and insurance companies are exempt from paying the citys Business License Fees altogether. In an effort to assist with these processes, the City did create an Office of Small Business in 1991. However, in recent years the office has been so understaffed and underfunded that it is difficult for a small business to get the services they need.About 30 percent of businesses in the region are minority-owned. These businesses have unique needs. Many of these businesses struggle to navigate through our regulatory structure, some face language barriers, some serve a unique niche

Of the 98,247 businesses located in the city, 94% of them are small businesses (with 12 or fewer employees). One of the primary struggles for small businesses and their owners is acquiring access to financing. New and emerging businesses also struggle to get basic operational training and support, navigate the regulatory process, and gain access to local and global markets.

City of San Diego Independent Auditor, 2010, Citywide revenue audit.

The city of San Diego has significant purchasing power, with 1,450 contracts currently held and valued at over $1 billion. Last year alone, the City contracted for $478 million in construction contracts, architectural and engineering spending, goods and services, such as diesel fuel trucks, leased water trucks, janitorial services at libraries, parking lot operations, park and restroom maintenance, forensic exams, fluoride, golf course sand, carpet installation at Qualcomm Stadium, pest control, scaffolding rentals, bottled water, tax compliance consulting and a photographer.

market that often struggles to make ends meet, others struggle to get mainstream m financing, and most just want to open their doors daily with the hope that their business will grow.

Unfortunately, small businesses have difficulty getting City contracts because of the current performance bond requirements and inaccessibility of smaller contracts through the primes. Often, there is no requirement for these prime contractors to include local, small, veteran, minority or women businesses in their bid. The City had a sub-contractor outreach program (SCOPe) for construction contracts, but it was not effective (reaching less than 2% participation of targeted businesses), as it was voluntary. Even under a new program with mandatory goals on large construction contracts over $1 million, only a good faith effort at compliance is required.

Source: Independent City Auditor, Citywide Revenue Audit, 2010

Small business thrives when our local economy is doing well, customers have good jobs, and money gets reinvested locally. As San Diegos next Mayor, Bob Filner will create San Diego Works, an office of economic development and business, to spearhead the following directives:

PLAN FOR ACTION:

(1) Creating a yes culture at City Hall that is welcoming of small business: The Citys Office of Small Business would be restored to its original purpose as an advocate and supporter for small businesses and entrepreneurs. The office will coordinate between Development Services, Neighborhood Code Enforcement, City Treasurer, and Economic Development Department. The office will work on the following focus areas: The Office of Small Business (OSB) will be an advocate for small businesses to remove red-tape in the process of establishing a new business, as well as paperwork in running day-to-day operations, like permitted uses, signage, sidewalk permits, push-cart licenses etc. Bob Filner will establish San Diego Small Business Resource Centers to provide startup ventures and current small business owners cost effective tools to make their business a success. These include financing tools, workforce development, and business planning and training sessions. These services would be provided at no or minimal cost to small business owners, entrepreneurs, and their employees, and the centers would be funded by tapping into state and federal resources. 4

(2) Investment in Neighborhoods: Our neighborhoods are the building blocks of economic prosperity for our residents, workers and businesses. As mayor, Bob Filner will establish a Neighborhood Investment Council to develop and implement an Investment Plan for the City. This investment plan will include the following components: Small Business Finance program: The Small Business Finance program would be a gateway to resources from private microbusiness loan programs (like ACCION), venture capital for startups, California Economic Development Lending Initiatives, federal Section 108 loans, tax credits, and Industrial Development bonds. Neighborhood Reinvestment Strategy: Financial institutions are required to invest in neighborhoods under the Community Reinvestment Act. However, there is no comprehensive plan at a citywide level that lists opportunities and priorities for reinvestment in San Diegos diverse communities. A portfolio of investment opportunities by investment classes should be created to get the needed funds flowing into our neighborhoods. Affordable Housing Finance: The elimination of redevelopment has renewed a need to leverage funds from state and federal agencies, with tax credits and city-backed loans to continue the flow of funding to affordable housing efforts in the city. The Neighborhood Investment Council will work with the Affordable Housing Taskforce to identify local revenue sources for building a housing stock affordable to our workforce. 5

OSB will monitor the Business Startup program - a one-stop assistance program for all permits, licenses, and registrations from local, state and federal agencies. OSB will partner with the San Diego State University to implement the following programs: i. Small Business Consulting Center (currently funded by a small grant from the city) to provide consulting services free of charge to minority, women and small businesses ii. Zhan Center an incubator to accelerate the launch of a business iii. Entrepreneurship Floor in the SDSU Residence Hall to allow young entrepreneurs to cultivate their entrepreneurial mindset iv. Lavin Scholars to identify and train students with an appetite for entrepreneurship v. Entrepreneurship minor across campus (proposed) to provide training for art, poetry, engineering, and other areas for students to frame their art or craft into a business venture.

(3) Revitalizing Neighborhoods: With the demise of redevelopment, it is important to find other vehicles to finance infrastructure in neighborhoods. Bob Filner will not use gimmicks to raise taxes on small businesses by deliberately bypassing a public process. In every major decision about the City, Bob Filner puts neighborhoods first. These are the key pillars of investing in neighborhoods: Establish a Neighborhood Investment Corporation, which will be directed to explore financing tools such as New Market Tax Credits, Infrastructure Financing District, Mello-Roos Community Facilities, Maintenance Assessment Districts (MAD), and private activity bonds to revitalize established communities. These districts should be set-up through a transparent process with adequate stakeholder participation. Business Improvement Districts (BID): Neighborhood improvements support main-street businesses. Our Business Improvement Districts should be given greater flexibility and financial support; at the same time they must be held accountable in the services they deliver, and transparent in their operation. Catalyst projects: The City will explore capitalizing on property BID and MAD revenue by bonding the dedicated revenue streams to fund catalyst projects, - projects that can lead to a significant turnaround of some neighborhoods (similar to the transformation of the Gaslamp District).

Source: City of San Diego FY 2011 Business Diversity Report

(4) Public contracting opportunities for small business: The city has been struggling to ensure that small businesses get an opportunity to work on public works projects. Under the leadership of Bob Filner, the city will end good-faith participation and require 15% of all city contracts go to local small businesses. In order to implement this goal, the following steps will be taken: Supplier Diversity Program: Bob Filner will require participation of women-owned, veteran-owned and minority-owned businesses in all city contracts. Prior performance history of general contractors, and their record in participation and support of these businesses will be considered in award of a bid, to ensure that taxpayers are doing business with responsible contractors. The Small and Local Business Enterprise Program will be extended to service and vendor contracts. San Diego Works will champion the implementation of the requirements in all City departments, and will meet regularly with small businesses to ensure the program is working effectively. Local workforce requirement: Contractors will be required to hire local workers, when available. Bond and Contract Financing Assistance: The City will partner with the San Diego County Regional Airport Authority to assist small contractors in obtaining bonding and financing for bidding on City contracts. 7

(6) Attract International Business. The San Diego region has a $175 billion economy that is comparable in size to that of entire nations like Peru or New Zealand. Due to our central location on the Pacific Rim, and as a border region, we are uniquely situated to capture a share of the opportunities in international trade. San Diego Works will leverage the Mayors leadership to raise San Diegos global profile, and bring home opportunities for our businesses and workers by:

(5) Small Business Assistance: San Diego Works will spearhead other initiatives in the City to make it easier for smaller businesses to start and grow. Business Tax Holiday: The city would pilot a Business Tax Holiday that exempts any new business under 12 employees from paying the Citys business license tax for up to three years when they open or locate in San Diego. Revenue loss is expected to be recovered by increased compliance from other businesses. The pilot program would be extended to three years, if it proved to be revenue neutral. Small Business Exemption: In Los Angeles, small businesses with annual revenue under $100,000 do not have to pay a Business License Fee. Mayor Filner will request a revenue audit to explore whether the paperwork and hassle required to get a permit for such a small business can be recouped from the correct apportionment of taxes to the larger out-of-town businesses that operate within the city. Business Center: Mayor Filner intends to partner with our universities to create a Business Center, funded by the Minority Business Development Agency, U.S. Department of Commerce. Services provided by the center would include client engagement, access to markets, access to capital, and strategic business consulting. Business Financial Assistance: OSB will serve as a conduit for the states Employer Hiring Tax Credit (which is up to $37,440 over a 5-year period per employee) within an Enterprise Zone.

Enhancing international trade opportunities for local San Diego businesses: Trade clusters are groups of interrelated, export-oriented industries that bring new money 8

into the region and boost the economy. These industries have created over 320,000 well-paying jobs, such as in electronics and precision manufacturing, which can be further expanded. San Diego Works will partner with the World Trade Center to facilitate and direct international business opportunities to local businesses in the City. Promoting San Diego as an international trade hub: The City needs to build and boast a 21st century infrastructure, which includes the port, airport, production and transportation facilities. The California-Baja California Master Plan lays out a plan whose implementation will be facilitated by the cooperation of mayors on both sides of the border. A priority for Bob Filner is the border-crossing project with Mexico that needs to be funded and completed on schedule in order to provide opportunities for local businesses and the workforce.

As Mayor, Bob Filner will continue on this path of being open to the needs of small business. His openness is why he was graded highly at 83% by the US Business and Industry Council a few years ago. Bob Filner heeds the local business community and will continue to work to open avenues to success on their behalf.

Other accomplishments include the Small Business Lending Fund and Tax Law Amendment, which passed in 2010 with Filners support, establishing a Small Business Lending Fund to fund capital investments. Filner was a co-sponsor of both the 2011 Small Business Lending Enhancement Act and the 2012 Capital Access for Small Businesses and Jobs Act. He also made a bold statement earlier this year when he co-sponsored the Help Entrepreneurs Create American Jobs Act, which would extend tax deductions for start-ups.

Filners legislative work in Congress has had positive effects on small businesses in San Diego. He strongly supported the Small Business Jobs Act of 2010, which allowed businesses to access close to $1 billion of capital and leveraged nearly $300 billion in private sector loans. Apon Industries Corporation of San Diego was among those small businesses that were able to grow locally in part due to these loans.

Small businesses are our nations most reliable job creators, generating seven out of ten new jobs, Filner said. If our nation and city are going to lift itself out of this recession, we need entrepreneurs to start growing again. Filner supported Americas Recovery Capital loan program as one element in a whole series of initiatives in the Recovery Act giving small businesses the tools they need to regain prosperity. The program allowed small firms to pay down existing business debt. There are many businesses throughout San Diego and Imperial Counties that would be viable in the long term if they could just make it through this rough patch, said Rep. Filner. Thats why we created this initiative. The ARC program gives entrepreneurs the breathing room they need, so they can pay their bills, retain employees and play their traditional role as job creators in our economic recovery.

Bob Filner regularly hosts meetings and forums in San Diego to engage business owners to share their needs and insights. He has listened and acted on behalf of the business community by promoting legislation that makes capital accessible to small businesses, encourages new entrepreneurs and opens avenues for innovative business ventures.

Bob Filner is a Champion for Small Business

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Paid for by Bob Filner for Mayor 2012