Fresno Mayor: Lowering Energy Costs ‘Mission Critical’ To Improving City’s Economic Development

Posted on April 16th, 2012 by

City of Fresno Mayor Ashley Swearengin talks about the role energy efficiency programs play in helping her lower unemployment and stimulate the economy.

Full transcript:

Ben Lack: Can share with us what makes Fresno, Fresno?
Ashley Swearengin: Fresno, is the capital city of central California, which is the fastest growing region in California and one of the fastest growing regions in the United States. There are many incredible assets here. We have some of the most beautiful natural resources you’ll find in our county with Sierra National Park, Sequoia and Kings Canyon. We’ve got some of the best outdoor activities, camping, hiking, biking, more lakes in Fresno county  than any other county in California. It’s a beautiful place.Fresno is also the most productive agriculture region in the world. It has a beautiful, beautiful landscape. But, it certainly is not without its economic challenges and the challenges have been compounded by the recession, certainly. But these are issues that really has gone back to the last 30-years. This is not just a modern-day recession and the world knows about how the recession impacted our city.It is difficult to really pinpoint the exact beginning point of the economic distress in the middle of the state and in Fresno. But, we know for the last 30-years, at least as long as the data is made available publicly, Fresno has had a chronic double digit unemployment. Virtually every year over the last 30-years with just a few exceptions. 2006 and 2007 is one exception. There was one other time when I think we got just below 10%. So, if you could imagine, sitting in the middle of the state that is the most competitive, economically, used to be the 5th largest economy in the world, now it’s the 9th largest of the economy and seeing prosperity all around you, but in the middle of the state having nothing but double digit unemployment for so long is really an interesting situation.

In the city of Fresno itself, we have a very high concentration of poverty. In fact, the highest concentration of poverty is in Fresno than in any other large city in the United States. Not LA, not New York, not Miami, not Chicago but Fresno, of the 50 largest cities in the US. There are layers upon layers of economic distress that we have been peeling back over the last 15 years. Many of the things we’ve worked on relates to improving business competitiveness. Many of the things we’ve worked on relates to education, workforce development and improving the efficiency and effectiveness of the human services sector that we have in Fresno.

In terms of the business mix, there is a couple of things to point out. The most obvious is our connection to production agriculture. As the most productive agri-region in the world with all over 400 crops produced here every year, it is a wonder. People come from all over the world to see the technology, the innovation, the environmental efficiency. We had EPA administrator, Lisa Jackson, visit us about a year ago. She did a tour and she just remarked that California Agriculture is in such a different category compared to the rest of the agri-regions in our country. It is so sophisticated and efficient. It is truly a wonder to see. And that has led to a high concentration of food manufacturers in city limits and that is a big exporter for us. As well as other ancillary support services and industries such as water technology for example.  We have a higher concentration of water technology manufacturers here than anywhere else in the world. They serve the agri-community but have since diversified other segments. So, there’s everything that goes with the food industry that we have here in the middle of the state.

Also being the capital city of the region we also have here the headquarters for education, we’ve got 24 public and private community college and universities and baccalaureate and post-graduate programs offered in Fresno. We’re definitely the healthcare and medical center of the region. We have the second busiest hospital and community regional medical center in California, in our downtown. And of course government services are headquartered in Fresno as well.

So that is kind of the mix. I would say if you look over in the last decade, the population growth here has driven a lot of home building. While that has not been an export or primary industry for us, a lot of people would point to the development of the area as a main part of the economic mix over the last ten years too.

Ben Lack: Talk to us a little bit about your platform, since you were elected in the office of January 2009, as it relates to sustainability and energy efficiency efforts. What role should the city take to helping become more energy efficient?
Ashley Swearengin: In Fresno, we have a bit of perfect storm, when it comes to energy issues. We have all of the economic issues that I’ve just mentioned plus we are in Climate Zone 13, a designation that essentially says that we heat and cool almost everyday of the year. We tend to be big users of energy. We pay a lot for that, higher than probably in other comparative region in the PG&E service territory. And we are people who have the least amount of money to pay for that.So, we have an imperative to do what we can to improve our efficiency both for the environment, which I didn’t mention yet, we have serious problems when it comes to air quality. One of the dirtiest air basins in the country, though, I should say improving. The fact that I go to a meeting yesterday at 3:00 in the afternoon in Fresno and saw the most beautiful Sierra Nevada mountains that anybody would want to look at. It is a great example of how that things are getting better but still we struggle with just the topography of the areas. So, we really do have an imperative to do what we can give, efficient as possible.

I am a real practical person and I understand that means that people are spending less money on energy. When you are working with people who are facing 17% unemployment, the dollar and the bottom line is really a motivator. So, my predecessor had put into place a green team in the city of Fresno and has made great strides to really put the city in terms of its own operation on a path towards really leading from a sustainability standpoint.

When I came into office, there was the opportunity, with the energy efficiency community block grant programs, to take what we had wanted from managing our own operations and put into place programs to help residents and homeowners, in Fresno area, improve the efficiency of their homes and lower their monthly bills. That is a program that Joseph Oldham, the City Sustainability Manager, has developed and it has really become one of the most recognized programs in the country in terms of the number of surveys that we’ve done, the number people that we’ve helped but also the conversion rate from doing those audits. The people actually are taking the steps necessary to do the retrofits that are recommended. At this point, we have quite a track record and many people have benefited in Fresno.

Ben Lack: The economic development of the city is something that’s high on your list. Having conducted research to identify what could keep businesses in Fresno you found that the city’s energy issues have become a hindrance to that. Talk us through your research and how you came to obtain or discover those findings.
Ashley Swearengin: Well, we are focused on improving income levels and wealth levels. The real goal of any true economic development strategy is not necessarily just adding new development but really seeing the types of jobs that are needed to lower your poverty levels and increase your income levels. That really requires focus on the companies that are exporting products or services from your labor market area.In our case, that has to do with food businesses. Food manufacturers but also equipment manufacturers, technology companies that support them, professional services that support them, all of that. When we started to drill into the cost factors related to doing that kind of business in Fresno, we decided to work with a site selector who routinely works with businesses and tries to expand or locate them in appropriate places. He just ran the numbers. He did a straight pro forma for a case study on a particular food manufacturer and compared Fresno to about 6 other cities, some in California, some outside of California. The California cities were all northern California. What we found was we could compete very well on transportation cost for example because of our central location. Water technology, waste water utilities, we’re slightly higher but it’s something that the city can control – we can address that, our labor cost is the same or less. In other words, we were very competitive for California location in every area except for energy costs.

We found that we were, in some cases, 2-1/2 times higher than other comparative regions. That was a big red flag that something had to be done to take the edge off of that kind of an impact to a business. Otherwise, we would never stand a chance of locating a company in our area or causing them to expand here.

Our best path for jobs in Fresno is expanding businesses that are already here. But, we’ve seen in the last decade many of our family-owned headquartered businesses in the Fresno area, as they’ve needed to expand the operation, they’ve gone outside of Fresno. A big driver has been the power cost. And just not having any tools to try and lower the power cost.

We approached PG&E and brought those statistics close to their attention. Quickly we all agreed that nobody was winning in that situation. Certainly the community is not winning from a lack of competitiveness and PGE is missing out on business expansion opportunities. So, they asked for the opportunity to bring forward some ideas as to what they can do to make a difference in that area.

Ben Lack: PG&E is currently applying for a special economic development rate for businesses who reside in counties with high unemployment. How will this impact Fresno if this is approved by the California Public Utility Commission?
Ashley Swearengin: First of all this is a rate that would apply to every county in the PG&E service territory that has an unemployment level of 25% higher than the state average. When you look at the counties that are eligible, 22 are eligible, which is a shocking statement about what is going on in inland California, in terms of economic competitiveness and unemployment levels compared to coastal California.  This is not something that would just benefit Fresno. We are happy to go along and support with the other 21 counties would benefit.The idea is to incentivize economic expansion. Therefore, the rate was put together to lower costs for any business that’s a 200KW user or greater if they choose to expand in one of those 22 counties, as a result of this discount on their power bill. If they add another 200KW to their load, which is the only way we could measure the increased economic activity, then they get 35% discount for 5-years off their overall power bill.  The rate will also apply to businesses that is looking to locate for the first time in one of these 22 counties, so it is great for business recruitment. It also could be applied if it could save a business from leaving the 22 counties, so it can also be used as a retention tool.

I think, based on these preliminary discussions that we had with Fresno businesses that would be eligible, that this is going to be very meaningful. I’ve got one business for example that has operations outside California, it is really a stretch for them to manage their facilities in Fresno and then to produce in the East coast. They’ve thought about bringing those operations to California but they have never had done it because of the cost structure here. And I’ve said, “Well look, would this incentive rate help you with this limited period of time, it’s not forever but it’s for 5 years, would that help you take the edge off of your capital investments to get those operations in California?” The initial reaction from their CEO was very positive. “That will make a huge difference.”

Obviously, there are a lot of things before any CEO has to consider before they have to make that type of decision but this one thing coupled with other incentives that local municipalities could put together help get them across the finish line, then the incentive has done its job.

Ben Lack: How does a company prove that they are thinking of leaving a county? How do you, as the city, help police that? Is everyone finding out about this rate and then threatening to leave the city so that they can have 35% off their energy bill?
Ashley Swearengin: Well, they have to sign an affidavit stating, that for this incentive they would leave a service territory. It has to be certified by an independent third party. In this case it is the state’s Economic Development Office.
Ben Lack: This is one potential tool that you are trying to add to the tool belt. Walk us through some of the other initiatives that you are working on.
Ashley Swearengin: We, in Fresno, have become the leader in a four county area for energy efficiency programs. We now manage programs throughout the county, in Kern County and other neighboring counties. We’ve got a great team in place. We’ve got a really good systems in place and unfortunately the funding of these programs is running short. So, we are scrambling to make sure we’ve got some kind of funding in place for the second half of this year to keep this program in place.I think more and more, people are realizing that this is really a mission critical thing to find ways to educate the public to improve their efficiency and lower their power costs. This doesn’t get more common sense and bottom line than this. We’ve seen great results so far and hoping to continue leading these efforts.
Ben Lack: Has PG&E, to a certain extent, forgotten that you guys were around? It sounds like you’ve got this such high energy costs and such a large customer base, that PG&E would be paying more attention to what is going on in your area. Is there something that they should be proactively helping you with instead of you coming to them and say “Hey, we’ve got a problem here. You need to help us out”? And then as follow-up, how has the relationship with PG&E changed now that they have been brought into the loop?
Ashley Swearengin: Well, you know, I cannot really speak to the past. I can only speak to my experience as mayor for the last three years. When you are in Fresno and you’re sandwiched, you’re just south of one of the largest metropolitan regions in the world and one of the greatest cities in the world in San Francisco and PG&E headquarters is there, I think it is sort of human nature that so much of their attention has historically been spent on the larger population areas. In the meantime Fresno has rapidly grown.Frankly, I don’t think the rest of California has really become aware yet that the middle part of the state is where the population growth is happening and it is through the next frontier for our state. I think a lot of agencies and a lot of entities are finally starting to realize that they have to be better concerned about what is happening in the middle of the state because it is really going to drive the future of the overall state.I cannot really speculate as to why this has not been addressed by PG&E sooner.

I will say that my first conversation with them about this was on September 1st of last year, and they were very responsive. Maybe it was the wake-up call they needed to see the mayor of the third largest city in their service territory in their corporate headquarters drawing attention to the fact that our businesses are suffering because of power cost. Maybe the was the wake-up call that they needed. But certainly they have been very responsive since then.

Ben Lack: The special economic development rate really helps everyone in the PG&E service territory, is there anything specific that PG&E is doing to directly help your cause or the problems that you are trying to solve? Are they putting up money, are they doing additional programs that they are implementing in your region? What directly are they doing to help?
Ashley Swearengin: We, in addition to the rate which benefits a lot of places, we have asked for a dedicated team, when it comes to economic development or business retention or expansion. Often times, we get lost in the bureaucracy of the PG&E organization. I happen to lead a large public agency. So, I know what it is like to have to deal with very complicated issues and when things get lost, I’m somewhat empathetic. We have asked for processing times be shortened, when we have got deals that already go through to have their highest level of attention on it so things can really work smoothly in getting a business expanded or located in our city.  They have indicated the willingness to do that.We’ve had not a test case yet to really try that approach out. But we have good local PGE representatives, economic development staff and our experience is certainly not aimed at them, they are at every table. They seem to be really paying close attention. I just think often times things get lost up in the San Francisco headquarters building. So, we really need that local team to be supportive within the ranks of the headquarters in San Francisco.
Ben Lack: Are you seeing any willingness on their part to provide energy efficient rebates or incentives to further, help incentivize the Fresno community to be energy efficient?
Ashley Swearengin: I’m not really technical on these matters, but my impression from the work that my staff has done and the conversations we’ve had with purely business owners and also PGE meet staff actually there are actually quite a number of tools that are available. They just never seem to trickle down the actual business, the business owners, or the operator.Our focus has been to get a dedicated PG&E team that is very proactive and aggressive to bring every tool that is already available and make them available to our business owners and operators. That has just been the missing link I would say.
Ben Lack: How much support have you gotten from the state or the governor’s office to tackle the economic development problems that you are facing, from an energy perspective?
Ashley Swearengin: This is really been our first opportunity to work on an energy related matter with the governor’s office. We had 2 conversations with his staff about this program and they have been great. Very supportive and just really acknowledging and affirming that we are going in the right direction. I was extremely encouraged by that.
Ben Lack: What is the type of message that you want to send to your constituents? And why are you doing what you are doing?
Ashley Swearengin: The message I want to send to my constituents and in this case, the businesses that could benefit; I want them to rethink their capital investment decisions. I want them to see Fresno as a place not just to operate at their current level but to expand and to really be a part of the economic revitalization that is happening in Fresno. I think that is a very powerful and meaningful discount that should and will get their attention. As we have more businesses expanding here, obviously we become a more attractive environment for business relocation as well. Everything just kind of piles on top of one another and recruits the kind of vibrancy that we want here.The reason why I am doing this is because we have 17% unemployment. We have the highest concentration of poverty of any other large city in the United States. You cannot drive down the streets of my city around any neighborhood or school and not see the evidence of economic distress. People want to work, people need to work and they need jobs.

So, it turns out that this has been a major barrier for economic expansion here and we’re going to knock it down. My residents and my constituents want to work and it changes everything. Both for an adult who is struggling but also for their family; their kids do better in school when their lives are stabilized and when they have employment opportunity. We will stop at nothing until we see the unemployment and poverty rates come down in Fresno.

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