By Robert Tilton
From the January/February 2013 issue
The nation’s largest state has been painfully taking its fiscal medicine in huge dollops during the past four years, in the form of deep budget cuts and huge tax increases. Last year, a State Budget Crisis Task Force headed by former Fed Chairman Paul Volcker estimated California’s long-term debt at a staggering $370 billion. After swallowing that gloomy news, Californians trudged to the polls in November and approved a referendum increasing their state income taxes by a whopping $6 billion a year.
All of that may be about to change, seismically, for the better. The key to that positive change resides in the same place in California it did in North Dakota—buried more than a mile underground in the middle of a huge shale deposit.
According to Mike Mills, a physicist and a Manhattan Institute senior fellow, California has “Saudi Arabia-scale” oil resources, primarily in its largely untapped Monterey shale field, which stretches northeast for more than 200 miles from Bakersfield in central California. The U.S. Energy Information Administration estimates that the Monterey shale field alone holds 15.4 billion barrels of oil, rivaling America’s total conventional reserves.
In a recent Op-Ed piece in the Wall Street Journal, Mills cited a University of Wyoming study estimating that California collects about $15 billion in tax revenues for every billion barrels of state oil production. If that’s accurate, Mills said, “then simply by opening up Monterey oil development—no incentives, grants or state funds required—tax receipts could total $250 billion over the coming two decades.”
Thus far, California hasn’t dived head-first into an embrace of fracking. Other states with large shale deposits—including Pennsylvania, Ohio and Louisiana—are moving full speed ahead with large-scale fracking operations. Environmental concerns about the potential for ground-water contamination from fracking have kept California and New York on the sidelines.
But the vast economic growth potential contained in their shale deposits may prove impossible to resist, and a change in attitude about tapping into them appears to be taking shape in California.
According to reports, a battle for mineral rights is now underway in the scenic vineyards of Hames Valley near Bradley, CA.
The federal Bureau of Land Management, which has subsurface mineral rights for much of the Monterey shale field, in December sold about 15 leases for thousands of acres of potential shale development in California. Last year, CA Gov. Jerry Brown fired the two state regulators who had overseen a 70 percent decline in state drilling permits since 2008, a notable turnaround for a state leader who in his first stint as governor in the 1970s pioneered many of California’s landmark environmental protection statutes.
And further advances in drilling technology itself soon may overcome the concerns about fracking, experts say. “Water-free hydrofracking” may be on its way. So perhaps there’s a high probability we may soon be hearing the same rallying cry out West that echoed across California in 1849: “There’s gold in them thar hills!”
SMUD: ENERGY INNOVATORS
With so many states trying to lure businesses to their cities, why have such pioneering companies as Intel, Siemens Mobility, Micron and SynapSense chosen to call Sacramento, California home?
Sacramento has a prime central location near the San Francisco Bay Area and key distribution channels via an international airport, deep-water channel seaport, and rail and interstate freeway systems. The region boasts one of California’s largest enterprise zones, offering incentives for companies to locate and expand within the greater Sacramento area. But perhaps most enticing is Sacramento’s commitment to becoming a green city; currently boasting the second largest number of buildings in the U.S. that are LEED-certified (Leadership in Energy and Environmental Design).
Since its inception in 1946, the community-owned Sacramento Municipal Utility District—known locally as SMUD—has had as its core values a commitment to innovation, conservation, creativity and service. SMUD leads the nation in its renewable energy policies and energy efficiency programs. Its wind, hydro, solar and advanced R&D projects have contributed to SMUD’s standing as the first large California utility to receive 20 percent of its energy from renewable sources.
SMUD is a major force in helping Sacramento develop into a leading clean tech/green tech industry center. As the region’s trusted energy partner, it works closely with its customers to increase energy performance and decrease monthly expenses. SMUD’s collaboration with the private sector is evident in the groundbreaking programs it has developed to help Sacramento companies incorporate energy-efficiency measures throughout their organizations, from design and construction phases to retrofit.
One company that can attest to this collaborative spirit at SMUD is Micron, which acquired a local company, Numonyx, in 2010 and then launched its North American headquarters in Folsom, California, part of SMUD’s service territory. Since data centers can require up to 50 times more power than office space, SMUD’s team worked closely with Micron to optimize energy efficiency in its new 44,000 square- foot facility, resulting in a 15 percent energy consumption reduction and a $150,000 incentive. Micron’s investment payback is estimated at less than two years, with approximately $120,000 ongoing annual savings in electricity.
Aerojet, a major space and defense contractor also based in Folsom, has a corporate mandate for sustainability in all areas of its organization. Aerojet partnered with SMUD to install PV panels covering more than 40 acres of its property and generating 6.5 gigawatt hours of electricity a year. The solar panels are mounted on a north-south axis that rotates to track the sun for maximum generation. At the time, this solar installation was the largest single-site industrial project in California and one of the largest in the country.
Another company, Advanced Call Center Technologies, LLC (ACT), recently decided to locate a second local operation in Sacramento. At full build-out, this expansion may bring up to 2,000 direct new jobs to the region. ACT provides support services for companies in the financial services, communications, and technology industries. Sacramento was one of five cities the company considered, conducting a national search for its new location. Ultimately, ACT selected Sacramento because the availability of a qualified workforce and the benefits of locating in an Enterprise Zone.
Currently, SMUD is building the foundation for the “smart grid.” Using new automation technologies, the smart grid system will detect problems and react to them immediately, increasing reliability. Power outages can be avoided, and customers will be empowered to see and manage their energy use in near-real time. For businesses, the smart grid will offer many programs, some automated, to improve their energy management and costs. It will provide them tools to customize their energy use, saving them unnecessary expense and maximizing electrical productivity.
SMUD is setting aggressive goals for renewable energy production, including 125 megawatts of customer-sited, net-metered solar power by 2016. These decisions are facilitating contract opportunities, attracting new industries and companies to the greater Sacramento area, and encouraging the expansion of existing companies. Through SMUD’s innovative partnerships and programs, companies have access to renewable energy and reliable electricity at competitive rates that are consistently lower than other California investor-owned and municipal utilities—all items that improve your business’s bottom line.
To learn more about economic development, rate savings and business incentive programs available to you, visit smud.org/econdev or call 1-877-768-3674.
BARSTOW: ONWARD AND UPWARD IN 2013
The City of Barstow believes there is much to be optimistic about in 2013. Signs of an economic turnaround can be found when looking at statistical data and when considering the projects that are underway in the community.
From a statistical perspective, one measure that illustrates how a community’s economic health is trending can be seen through tracking the area’s median income levels. In the 2000 census, the Barstow area had a median income level of $35,069. As of the 2010 census, the median income levels for the Barstow area had increased around 37% to $48,042. This data means that the quality of the jobs in the Barstow area is improving and points to a positive trend for the local economy.
In addition to the statistical data, the City has been working on several important economic development projects that have the potential to significantly improve the overall quality of life in Barstow.
Current significant projects that are underway in the community include the following:
Wal-Mart Supercenter Expansion. During the past several months, City staff has been working with representatives from Rothbart Development to coordinate the environmental and permitting approval process for the Super Wal-Mart project that is proposed to be constructed on a 28-acre site located at the southeast corner of East Main Street and Montara Road.
After several months of work, the Draft EIR for the Super Wal-Mart project is now complete and is currently being circulated for review. It is anticipated that the Draft EIR will be brought before the Planning Commission for certification in March 2013. Based on our current project schedule, it is anticipated that the project could break ground toward the end of 2013.
Barstow Casino & Resort Project. The Barstow Casino & Resort Project, which is being pursued as a partnership project between the Los Coyotes Band of Cahuilla & Cupeño Indians and Bar West Gaming, is still a viable initiative that is in the review process. In order for the initiative to move forward, both the Federal Government and the State of California will have to agree to allow the project to be constructed. Currently, the Federal Government’s Department of the Interior is evaluating the proposed Barstow Casino & Resort project and a public hearing on the environmental impact statement was held last July. If the Department of the Interior approves the project as meeting federal guidelines, the next step in the process would be negotiating a contract with the Office of California Governor Jerry Brown. That contract would also have to be approved by the California State Legislature. In an effort to give the Barstow Casino & Resort Project the best chance of gaining State approvals, the City is in the process of determining how to hire a State lobbying firm. If all the approvals are obtained, the overall casino project could be constructed in 2013 or 2014.
Barstow Community Hospital Project.During the past several years, the City has been coordinating with Community Health Systems, Inc., on building a brand new state-of-the-art medical facility in town. This past September, those efforts culminated with the opening of the new Barstow Community Hospital. The ultra-modern three-story, 82,500 square feet facility now features 30 private rooms, a high-tech emergency room, a modern intensive care center, a technologically advanced diagnostic imaging department, and innovative laboratories & surgical rooms. All told, building the updated facility required around 3,283 cubic yards of concrete, over 65 tons of concrete reinforced rebar, 476 tons of structural steel, and over 120,000 square feet of fireproofing material. The overall project constitutes an estimated investment of around $80 million in the Barstow community.
Fort Irwin Projects. Fort Irwin and the United States Military have made a concerted effort to involve the local community in a variety of currently planned projects. While there are numerous improvements being coordinated by Fort Irwin, the two most significant initiatives include the construction of a $100–million water treatment plant and a $400–million hospital. These two projects, which will total an investment of over half a billion dollars in the greater Barstow area, are scheduled to break ground within the next year and are both scheduled for completion in 2015.
Barstow Industrial Park. Another significant initiative that the City is coordinating is the revival of the Barstow Industrial Park project. In total, the Barstow Industrial Park spans over 1,174 acres and is located around 3 miles northwest of Interstate 15 and around 5 miles west of the Interstate 15/Interstate 40 interchange. The City has been working with the project developer regarding future plans for the location. Discussions are currently underway regarding infrastructure concerns, utility coordination/installation issues, and the potential of obtaining rail-spur access for the site. The City will be working with the developer during this next year to coordinate and implement the solutions needed to ensure that the Barstow Industrial Park becomes the high desert’s premier logistics, manufacturing, and distribution hub.
Barstow is strategically situated midway between Los Angeles and Las Vegas. Barstow is a major transportation corridor that serves more than 60 million travelers and 19 million vehicles each year.
Barstow is where the Interstates 15 & 40 and Highways 58 & 247 all converge. Barstow is home to the Tanger Outlets and Barstow Outlets which provide shopping options that are usually only found in metropolitan areas. Barstow is where an eclectic mix of railroad, military, high technology, and mining employers have located.
Any individual who would like to learn more about all that Barstow has to offer is encouraged to visit the City’s website at www.barstowca.org or to contact Oliver Chi, Assistant City Manager, via email at [email protected] or by telephone at (760) 577-4510.
QUITE SIMPLY, HESPERIA WORKS FOR BUSINESS
Strategically situated in California’s Inland Empire, the City of Hesperia offers easy access to the logistics network that serves the combined ports of Los Angeles and Long Beach (LA/LGB), the nation’s largest international cargo trade area. Hesperia’s high desert locale along I-15 and U.S. Highway 395 provides an affordable and central location outside the South Coast Air Quality Management District for warehousing, manufacturing, and distribution operations that serve Southern California and surrounding states.
Encompassing over 111 square miles, Hesperia’s sphere of influence extends to hundreds of prime industrial/commercially-zoned acres along the desirable north-south frontage of Interstate 15. While large parcels of land suitable for big box development are expensive and becoming scarce in areas such as the Los Angeles Basin and Inland Empire valleys, land in Hesperia is available at considerably lower costs than found elsewhere in southern California. Additionally, Hesperia has 1,032 acres zoned for commercial and industrial development.
With assistance that very few California cities can offer—tax incentives—it’s easy to see why Hesperia was named in the 2012 Kosmont-Rose Institute Cost of Doing Business Survey as one of the least expensive cities in California in which to do business. Substantial local incentives and state tax benefits of the Hesperia Enterprise Zone (EZ) are available and remain in effect until March 31, 2025, with certain benefits extending beyond the life of the zone. Some of these state tax benefits include hiring credits, sales/use credits, business expense deductions, net operating loss and net interest deductions, and employee wage credits.
Just how lucrative are the EZ hiring credits? An employee meeting the criteria for the EZ Hiring Tax Credit may make a business eligible for a hiring credit of up to $37,440 over a five-year period. Based on hiring 15 full-time employees, and a state income tax liability of $31,500, an industrial business could realize a five-year state income tax savings of $157,500. Since the City received designation almost three years ago, it has vouchered what could amount to five-year tax savings of upwards of $20.4 million for Hesperia’s businesses.
Hesperia also has a Recycling Market Development Zone (RMDZ) in its armory of business benefits. As one of 35 California RMDZs, Hesperia’s program combines economic development with recycling to provide financially attractive incentives for businesses, expansion of existing facilities, job creation, and reduction of the waste stream headed to landfills. The RMDZ provides free market research, technical assistance and below-market rate loans to qualified manufacturing firms.
Just over 200 acres of rail-accessible land are in the Zones; some 80+ acres are city-owned. Served by BNSF, the G Avenue Industrial Rail Track was completed on April 19, 2012 and consists of nearly one mile of new railroad track and a parallel runaround track. Looking to stimulate development and effect the relocation and expansion of new industries into the 1,300-acre ‘I’ Avenue Industrial area, business attraction efforts for rail users are a priority. In addition, a future Team Transload facility would foster entrepreneurship by making rail accessible to businesses throughout the region that would then be able to ship and receive goods with the use of this convenient rail service.
Quite simply, Hesperia works for business. This pro-development, customer service-oriented City is serious about bringing your business to Hesperia! To find out how Hesperia can work for your business, more about operating in one of the most innovative Enterprise Zones in the country, available rail properties, or to request information about how a Recycling Market Development Zone can benefit your manufacturing business, contact Steven Lantsberger at (760) 947-1906, by e-mail at [email protected]; or visit www.cityofhesperia.us/econdev.