Tuesday, November 23, 2004

Solano County a growth engine

Posted on Sun, Nov. 21, 2004

Solano County a growth engine

By George Avalos

Even as the Bay Area has been cursed with an employment meltdown, Solano County has quietly been counting its economic blessings.

To be sure, it might be going too far to refer to growth in the area as The Solano Miracle. Still, it's plain that Solano County, which includes the cities of Fairfield, Vallejo, Benicia and Vacaville, has enjoyed an employment boomlet that stands in stark contrast to the severe job cuts that have ravaged most of the Bay Area.

In recent years, a number of companies have moved operations to Solano, or decided to expand their offices in the county. Large and small firms, cutting-edge and traditional industries, have set up shop in Solano.

"We have been in a high-growth state since 1998, and we outgrew our facility in Concord," said Bobbie White, president of the Meta Health division of CytoSport Inc. "We were looking for space to expand our manufacturing."

CytoSport, a maker of nutrition supplements, moved in 2003 to a site in Benicia where it has more than 50 employees, up from the 30 it had in Concord.

How did Solano County do it? In part, Solano bucked the nose-dive in much of the rest of the Bay Area through an economic approach similar to what's happened in the East Bay. Like the Alameda-Contra Costa region, Solano simply doesn't depend on high-growth and high-risk industries to bolster its economy, in contrast to Silicon Valley and San Francisco.

"Solano County isn't as exposed to the high-tech manufacturing that has been through the biggest declines in the Bay Area," said Scott Anderson, a senior economist with Wells Fargo Bank.

Officials in Solano are well aware the county's broad-based economy, which might not grow as quickly in good times such as the late 1990s, also is unlikely to plummet when times sour.

"We're not as dependent on the boom-and-bust cycles within the tech-oriented counties," said Michael Ammann, president of the Solano Economic Development Corp., a consortium of companies and developers active in the county.

Since October 2001, the Bay Area has been staggered by a loss of more than 212,000 payroll jobs. About 121,000 of those were in Santa Clara County and another 71,000 in the San Francisco-San Mateo-Marin area. The East Bay has lost nearly 17,000 jobs.

Then there's Solano County. Solano over the same three-year period has gained 7,000 jobs. That's roughly a 6 percent increase in Solano's work force. In contrast, the Bay Area's work force has dwindled by 6 percent, and Santa Clara County's work force has shrunk 13 percent.

Yet the strong employment growth has produced an expanding set of challenges for Solano County.

Traffic is becoming a bigger problem, with the Interstate 80-680 interchange a prominent headache. And the influx of residents has fueled housing costs so much that home prices in Solano County are rising more quickly than the overall Bay Area, according to an analysis of median home prices compiled by Dataquick Information Systems.

Solano's good fortune lately is due in great measure to its location. The county is served by Interstate 80, and also connects to Interstate 680. What's more, it is nestled between the Bay Area and Sacramento.

"We are located between millions of people in the Bay Area and a million people in Sacramento," Ammann said. "That allows us to continually grow."

Solano's location also helps the area capture the diverse economic base it prizes. Because the county straddles the great east-west route of I-80, it has been able to capture some distribution centers and warehouses, as well as companies that need to ship products a great distance. And the proximity to the Bay Area and Sacramento makes Solano a viable site for companies that want access to an affordable labor pool and relatively inexpensive housing in an area that's not a prohibitive distance from the big urban centers to the north and south.

County business and development leaders also frequently network with each other to gauge how quickly Solano is growing. They conduct an annual formal get-together and also have informal meetings.

"It's a close-knit community," Ammann said. "We try to manage market demand and expectations. That way you don't over-build and you don't over-extend."

Though not known for its high-tech firms, Solano County has landed some high-profile companies with advanced technologies. A number of biotech companies have launched major operations in the county, primarily in Vacaville. Chiron Corp., Alza Corp., Large Scale Biology Corp. and Genentech Inc. are the principal components of a biotech cluster that has emerged in Solano County. In addition, Hercules-based medical and scientific devices maker Bio-Rad Laboratories Inc. has a large operation in Benicia.

South San Francisco-based Genentech began construction in 1998 on what will eventually evolve into a 10-building complex in Vacaville. When finished, it is expected have nearly 1,200 employees and be operating one of the world's largest biotech manufacturing sites. About 600 employees work in the seven buildings that have been operating since 2000, said Caroline Pecquet, a Genentech spokeswoman. Another 575 are expected to be working at the facility by 2009 after the other three buildings are licensed to operate.

"There is a good labor pool in Vacaville," Pecquet said. "It has the proximity to the technical talent in South San Francisco. And it also has a good labor pool from UC Davis."

The Davis campus, not far from the Solano-Yolo county line, produces more life sciences graduates than the other schools in the University of California system.

That labor pool in the Solano-Napa area commands an average annual wage of about $37,800, according to an Employment Development Department survey. That's 17 percent below the Bay Area average wage of $45,700.

Those attractive labor costs in Solano are underpinned partly by the affordable home prices in the county, relative to the Bay Area. The median price of a home in Solano County was $394,000 in September, 24 percent below the eye-popping Bay Area median home price of $516,000, according to a Dataquick survey.

Perhaps because of these factors, the Vacaville complex operated by Genentech has turned into the type of large business Solano County covets. The plant not only has hundreds of workers and is expanding, but about two-thirds of the company's Vacaville employees live in Solano County.

"If companies find that half of their employees are in Solano County, they can reduce their operating costs, and buy a building, or buy some land for expansion," said J. Brooks Peder, a managing partner with Colliers International, a commercial realty firm active in the Bay Area. "You can bet that a lot of people commuting from Solano County to the Bay Area are constantly pushing their employers to shorten that commute."

Home Sausage Co. had been in San Francisco's Mission District for about 45 years but simply needed more room. When the company moved in 2003 to Fairfield, the sausage maker didn't have a problem getting employees at the new site, despite the distance, said John Englehart, president of Englehart Gourmet Foods, the parent company of Home Sausage.

"About 70 percent of our labor force came with us, and the rest came from around here in Solano," Englehart said. The company has about 75 employees.

A number of smaller employers have moved their entire operations to Solano County. Some, like Pilgrim Fireplace Equipment Inc., were chased from the urbanized Bay Area largely because of the technology boom.

"In 1999, the East Bay tech frenzy was in full bloom and housing costs were through the roof," recalled Mark Bergeron, general manager of Fairfield-based Pilgrim Fireplace, which makes fireplace accessories.

Pilgrim owned a facility in Point Richmond, but the East Bay's housing prices had hurt employees. So the company moved to Fairfield and hasn't looked back. Pilgrim is renting the building it owns in Richmond to another company.

Companies also like the kind of facilities they can obtain in Solano. Sam Sarkissian, principal executive with S&S Supply, a pet supplies company, said his firm's new Fairfield digs were a marked improvement over its old Richmond operations.

"It's not that crowded where we are now, there is very nice landscaping around the building," Sarkissian said. "In Richmond, we were right on the street. It's a better atmosphere now for our employees."

Yet Solano's success could erode some of the region's advantages. No question, home prices are much cheaper in the county. But while home prices in Solano were 24 percent lower than Bay Area prices in September, during September 2000 the price gap was 42 percent. During the past four years, Solano County median home prices have risen by an average of 18 percent per year, while Bay Area housing costs have risen an average of 10 percent a year.

Even worse, the transportation bottlenecks won't vanish soon and are likely to worsen as more employees arrive. Voters earlier this month rejected a proposed increase in the county's sales tax that would have gone a long way to remedy problems such as the daily gridlock at the 80-680 interchange near Cordelia.

Nevertheless, Solano leaders remain optimistic that the county will continue its transformation into an economic dynamo.

"The area has made a decision to convert from a bedroom community into a mixed-used community, and lo and behold, it's happened," commercial realty executive Peder said. "Companies move into Solano County, but they never leave."

George Avalos covers the economy. Reach him at 925-977-8477 or gavalos@cctimes.com.


© 2004 ContraCostaTimes.com and wire service sources. All Rights Reserved.

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