Jefferson County Economic Assessment

DRAFTJune 2002

Paul Sommers and Kursten Holabird

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Table of ContentsExecutive Summary

Chapter 1: Goals and Scope of the Report

Chapter 2: ContextThe changes of economic development policy: From federal to local Definition, goals and key elements of local economic development

Chapter 3: Purpose of the Study and Research MethodsPurpose of the studyResearch methodology

Chapter 4: Demographic Trends Demographic trendsImplications of the trends

Chapter 5: Income and Employment TrendsIncome trendsEmployment trends

Chapter 6: Interview and Survey FindingsInterview findingsSurvey findings

Chapter 7: Economic Development Policy Options for Jefferson County

Chapter 8: Analysis and RecommendationsDescription of CriteriaAnalysisRecommendations

Appendices Appendix A: Complete list of intervieweesAppendix B: Survey resultsAppendix C: Goals for local economic development entities

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Executive SummaryPurpose of the Study The purposes of this study are to 1) assess the local economy by examining demographic, income and employment trends, and 2) recommend strategies and steps for future economic development efforts in Jefferson County. The study is based on analysis of demographic, employment, and personal income data supplied by state and federal agencies. In addition to the assessment of the overall economy, this study provides an in-depth examination of Jefferson County’s small business community through the use of interviews and a survey of small businesses in the county.

Demographic TrendsThis study explores three primary demographic trends that have significant impact on the local economy and the County’s economic development planning efforts. These trends are overall population growth, population growth by age and education levels. The population growth rate in Jefferson County from 1990-1999 (30.4 percent) is more than double that of the United States (13.2 percent) and one-third more than that of the State (19.8 percent). According to US Census reports, most of this increase is due to in-migration.

The older age cohorts are growing the most rapidly in Jefferson County. Residents between the ages of 50 and 64 and 65 and older are increasing at the highest rates. In addition to the increase in percentages of older residents, there is quantitative evidence and significant concern about the decline in percentages of younger people in Jefferson County. ( Paul, might want to check on this . . Annabelle’s most recent census data analysis shows that 18-25 year old cohorts are actually INCREASING from the last census. . . . .also rural counties without colleges almost always loose youth during the college ages. The Census data show a marked decrease of 20-29 year olds in Jefferson County -- a decline of over 50 percent between 1980 and 2000, compared to a 30 percent decline in Washington State.(add there may be several reasons for this 1) in rural counties almost always see a decline- second, there is some evidence of an increase ,3) there is almost certainly a net loss in comparison to the record high baby boom generation- and 4) there may be concern about adequate employment opportunities One reasonable explanation for this phenomenon might be that the local economy is not providing enough work opportunities to keep these residents in the County. However, this explanation does not account for all of Jefferson County’s decline in this cohort. This cohort has decreased in relative size in the state as

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a whole. “Generation X” follows the large post-World War “baby boom” generation, and many communities are seeing a decline in young adults as the smaller “Generation X” matures

Overall, Jefferson County residents have higher levels of education than the State. And, Jefferson County's education levels have improved dramatically since 1990. In 2000, 91.6 percent of Jefferson County residents (over 25 years of age) had four or more years of high school versus 87.1 percent in the State. Between 1980 and 2000 the percentage of Jefferson County residents with high school diplomas increased by 14.7 percent, from 76.9 to 91.6 percent.

There are important disparities in education levels between age groups in Jefferson County. Residents between the ages of 18-34 (the young workforce) are the least well educated -- 19 percent have less than a high school education versus 8 percent of people over 25. Approximately 14 percent of the 18-34 year olds have four or more years of college education compared to 28 percent of people over 25. In terms of the regional differences in the county, 33 percent or more of adults in Port Townsend, Marrowstone and Port Ludlow have 4 or more years of college, whereas in Port Hadlock/Irondale, Brinnon and Quilcene, 15 percent or less have this same education level.

Income and Employment TrendsMore than 20 years ago Jefferson county has a much more diversified economy. Today there is manufacturing, retirement economy, technology, and arts and culture. One key trend is the aging of the county. Similar to other areas in the nation, and reflecting a regional trend that will have 1 of every 4 people over 65 in the next decade Jefferson county is also agin.

Retirement Income: Jefferson County is more reliant on dividends, interest, rent, and transfer payments than most areas. Over 13 percent fewer Jefferson County residents had earnings from employment than was the case statewide in 1999. And, almost 14 percent more JC residents had social security income and 12 percent more had retirement income. And, in Jefferson County, wage and salary earnings are less than half of total personal income, whereas earnings account for 70 percent of personal income statewide. Wages and salaries account for 72 percent of earnings in Jefferson County, compared to 82 percent statewide.

Small Business- Entrepreunerial IncomeJefferson County has more income from self-employed persons than most places. Income from non-farm proprietors is greater than earnings from manufacturing or

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retail trade, and is almost 80 percent of the value contributed by the very large services sector. (significance??) However, proprietors’ incomes have grown less rapidly than earnings from employment, or dividends/interest/rent, or transfer payments

In Jefferson County, 1,118 establishments reported employment levels to the Washington State Employment Security Department in the 2nd quarter of 2001. These establishments employed a total of 7,922 employees. The employment data indicate that trade, services and government grew the most in the 1990s. This trend matches the general changes in the economy into a services/information-based economy

Data also indicates the importance of small businesses. In addition to the relatively large number of proprietorships or self-employed persons, Jefferson County has proportionately more very small businesses (67 percent of business establishments have less than 5 employees) than the state (56 percent) or the nation (54 percent).

( a key question people have is can we tell whether these small businesses contribute ot the local economy—are they large in number but small in quantitative impact e.g. vanity businesses or bobbies but not employers?. . .does the data say anything about this??

Industry Clusters: Jefferson County has several significant industry clusters that constitute the economic base of the economy. Concentrations of employment are relatively strong in natural resources, manufacturing, retail, real estate, health & social services, arts & entertainment, and accommodation & food services. Conversely, the county has relatively few workers employed in wholesale, finance & insurance, professional/scientific, management, administration, and education. The relatively strong “basic” industries can be grouped int industry clusters including: forestry/wood & paper products, fishing/aquaculture, maritime, arts, tourism, industrial, emergent “new economy” and health care/retirement. Working with these clusters may be a useful economic development strategy as suggested later in the report.

Interview FindingsIn addition to data review - Twenty-seven interviews were conducted with representatives from government agencies, local community and economic development leaders, business owners/managers, and business community leaders. Interviews were used primarily to better understand the roles of the County’s economic development entities, identify the major shared goals between these entities, identify the

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challenges and opportunities for economic development in general and for operating a business in the County, and lastly, to inventory the resources available for small businesses.

Major shared goals between local economic development entitiesInterviews from the County’s economic development entities and reviews from various plans, indicate that the major shared goals are as follows:

Promote education and training/workforce development opportunities

Promote sustainability through diversity Create family wage jobs Maintain rural character and quality of life Promote economic opportunities for youth Coordinate economic development efforts with other local

economic development Work towards coordination and consistency (streamlining) of

the permitting and regulatory processes Provide infrastructure that is adequate to attract and support

growth in appropriate Act in compliance with the Washington State GMA

Opportunities and challenges for economic developmentThe following themes emerged from interviews with local economic development leaders.Opportunities:

Current strength of some industries Having an industry base that offers natural connections to other

sectors Quality of life

Challenges: Lack of unified economic development efforts between the City

of Port Townsend, Jefferson County Community Development, the Port of Port Townsend, .the Economic Development Council and the Port( do you have any quotes or highlights that could be used to explain this more/ give it some context or texture?)

Difficulty meeting the workforce needs for small businesses?? 9 MORE information about “difficulty” e.g. limited training? Attitude?

Lack of coordination between and within industries Lack of a cohesive effort to address the shortage of educational

and vocational training opportunities

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Assets and Strengths Opportunities and challenges of operating a businessThese themes emerged business owners and community business leadersOpportunities:

Quality of life Significant community volunteerism Other people in the area doing similar type of work Abundance of creative spirit and appreciation for the arts and

culture

Challenges: Lack of technical business expertise (such as? What does this

mean?) lack of business plan development? Ways of knowing how to put together capital?)

High cost of marketing Inadequate infrastructure (more specificity???) Overly restrictive regulation( examples? State? Federal? Local?) Unskilled workforce Lack of high speed access to the Internet Lack of affordable retail and performance space in Port

Townsend

Survey ResultsA survey was used to further explore significant data and to ascertain information about Jefferson County’s business community. Survey questions were developed to gather information about the following four broad areas:

1) Information about the business owners,2) characteristics of businesses, 3) community assets and barriers to maintaining and/or expanding

a business, and 4) an assessment of the community’s business and entrepreneurial climate.Add: Surveys were mailed to a total of 1000 establishments in Jefferson County. Seven hundred of these were businesses that reported wages and the remaining three hundred were sole proprietors. The non-sole proprietor businesses were randomly

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selected from the Jefferson County 2002 Employment and Wages database obtained from the Washington State Employment Security Department. This database includes all businesses in the county that reported wages for the second quarter of 2002. A total of 4,503 establishments were listed on this database.

The database used for the three hundred sole proprietors was the Washington State’s Department of Revenue database for Jefferson County. This database includes all of the sole proprietors in the County who have either collected sales tax or made over $12,000/year from their business. This database contained 1,118 entries. A random sampling technique was used to select our sample.

Business Wwner ProfileBusiness owners between the ages of 41 and 55 represented the largest portion (54.3 percent) of the sample. This group was followed by people over 55 years of age (33.8 percent). Only 7.5 percent of the sample is retired. Men comprised 55 percent of the sample.

Most of the respondents had either a bachelor’s degree (34.9 percent), or some college (32.2 percent). People with a masters degree or more made up 15.8 percent

Survey results show that 58.9 percent of respondents want to grow their business, and 45 percent have plans to expand Results also indicates that these business owners have lived in the County for an average of 18 years, and the average number of years that people have been operating their business in Jefferson County is 17 years. This might indicate that businesses are owned by the long term residents of the community rather than the new redentist with less than 10 years in the county. The majority of the survey respondents are 41-55 years old. However, the survey data also show that most of these business owners have been living in the County for nearly twenty years,

Characteristics of businessesAlmost fifty percent of the businesses have 1-3 full time employees, and 22.8 percent of the sample have 4-10 employees. Sole proprietors made up 23 percent of the sample. The average hourly wage for these businesses is $12.75, and 60 percent of the businesses provide health insurance to their full-time employees 9.7 percent provide health insurance to their part time workers.

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Basically almost 70% of the sales were within the county rather than export. Respondents reported that the largest percentage of their sales were in Port Townsend with the average being 44.3 percent of their sales. The second largest portion of sales (32.6 percent) was to customers in Jefferson County (outside of Port Townsend). The average percentage of sales outside of Jefferson County was 28.8 percent. The breakdown of location of respondents is as follows: Port Townsend (73 percent), Port Hadlock (13 percent), Port Ludlow (9 percent), Chimacum (6 percent), Quilcene, Nordland, Brinnon and Coyle comprised the rest of the sample.

The largest group of respondents came from the service sector, (17.8 percent) of the sample, followed by construction (16.4 percent), maritime trades (9.2 percent), restaurant/cafes (7.2 percent), and industrial arts (5.9 percent). The remainder of the sample was made-up of arts/crafts, home services, automotive and other.

Assets and barriers to operating a business in Jefferson CountyAssets: The quality of life and the natural environmenta is extrememly important to local businesses and this is critical when so many of them are businesses that locate due to choice and could move elsewhere. When asked about various community assets, over half of the respondents chose quality of life. People were given the opportunity to describe what this meant to them and the most common descriptions included, “natural beauty”, “slower pace of life” and “progressive” values. Respondents also feel as though the intellectual atmosphere and the presence of arts and culture are also among the community’s greatest assets.

Barriers: Survey results indicate that the top three barriers to maintaining and/or operating a business in Jefferson County are as follows:

1) Business costs (90 percent), and 2) land-use regulation (69 percent) and 3) workforce development (56 percent). 4) The remaining four areas infrastructure, institutional barriers,

access to markets and access to capital were all seen as barriers for approximately 35 percent of the sample.

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Assessment of the community’s business and entrepreneurial climateAttitudes about the business climateWhen asked about various components of the business climate, people responded in the following ways: Only 13.4 percent agree that the community has developed programs to encourage and support entrepreneurs. Under 30 percent of the respondents agreed with the statement, “My community celebrates people who create and grow local businesses.” Small business resource assessmentSurvey results indicate that under 40 percent of the sample feels as though the community offers business or entrepreneurial training and networking/mentoring opportunities. Another important finding from this section is that 12 percent did not know if the community offered business or entrepreneurial training, almost 17 percent did not know about networking possibilities, and nearly 27 percent did not know about access to venture capital.

Critical interventions needed to expand businessThe top three interventions that were identified as being critical to most respondents included: increase in access to more markets, changes in zoning regulations, and increase in access to local financial capital. The second tier of interventions that were considered critical includes: increase in local education and training opportunities, increase in opportunities for business mentoring and assistance with business plans and financial statements.

Part II Analysis of potential economic development strategiesFollowing the documentation of the research findings, this report analyzes four potential economic development strategies for the County (recruitment of medium-sized or larger firms, small business development, entrepreneurialism, and industry clustering) against selected criteria. This analysis identifies the strengths and weaknesses of each approach. Recommendations for economic

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development strategies are then presented, taking into account the characteristics of the local economy, and the strengths and weaknesses of each possible approach.

Five criteria used in assessing possible strategies are: efficiency, sustainability, consistency with other goals of local economic development agencies, and the degree to which the approach capitalizes on industry and community strengths. (Is this a policy decision that can be made by the local elected officials e.g. do they have a choice of what to focus on ? how to select the criteria or what to weight e.g. one jurisdiction might select local quality of life and sustainability and others might select maxmum tax base for future funding options. . . could these choices be highlighted and talked about a bit_) The detailed analysis is presented in Chapter 8. The recommendations that emerge from the analysis are summarized below.

Recommended Strategies for Future Economic Development in Jefferson CountyThe role of the county can be in a couple of strategies

1) it can invest and fund specific activities by its own staff or partners to undertake certain strategies

2) It can collaborate with other agencies to collectively convene or foster specific strategies

3) It can use its planning and enforcement tools4) It can use its education and incentive tools 5) It can use the “bully pulpit” to stimulate community discussion

and action

We are recommending the following as strategic choices of the county

Adopt and Encourage Industry Clusters ApproachesStrategy #1: The County should play a leadership role in coordinating efforts within the industries that have a comparative advantage in Jefferson County

Strategy #2:The County should facilitate the workforce development efforts of key industries.

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Strategy #3: The County should facilitate collaboration between industries that have natural opportunities for economic development (i.e. arts and tourism).

Fund Entrepreneurial and Small Business Strategies

Strategy #1Develop an entrepreneurial support organization (ESO).

Strategy #2: Work with youth workforce coordinator at the Olympic Workforce Development Council to find ways to get the youth involved in entrepreneurial activities.

Continue Baseline Recruitment StrategiesStrategy #1Maintain the existing relatively low key recruitment effort, but target it at firms that will strengthen existing clusters and coordinate it with infrastructure and site development efforts to enhance the probability of success and minimize environmental or aesthetic impact

Monitor SuccessStrategy #1Create an annual benchmark report including at least the following indicators: Growth of earnings of county residents Growth of the number of self-employed individuals and

other startups Cluster-specific indicators linked to strategies developed

by each cluster Review growth trends and development strategies in peer

countiesStrategy #2Adjust strategies periodically About every two years, community leadership, including

representatives of each major industry cluster, should re-examine the degree of progress that has been made, and adjust strategies for future development based on this self-assessment. Goals for future development can be

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created in these sessions as experience with cluster-based and entrepreneurial strategies grows in the community.

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Chapter 1: Purpose and Goals of the ReportThe purposes of this report are to provide an overall assessment of the economy of the Jefferson County economy, with a particular focus on the east end of the county. This assessment includes attention to the economic base of the area and trends in key industries, suggested strategies for economic development, and recommendations for indicators to assess progress in implementing the strategies.

Study AreaThe geographic area of interest for this assessment is eastern Jefferson County, including Port Townsend and the smaller communities to the south such as Port Hadlock, Port Ludlow, Quilcene, and others. Most of the economic activity in all of Jefferson County is contained in this region, since the Olympic Mountains occupy much of the land area of the county, and the commercial center for the western end of the county is in adjoining Clallam County.

Source: US Dept. of Commerce, Bureau of Census

Located on the northeastern tip of the Olympic Peninsula, the region has a long tradition of reliance on fishing, agriculture, and forestry

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and forest products manufacturing. In addition, the Victorian heritage of Port Townsend and an amenity-rich natural environment have attracted tourists, retirees, and artists. A waterfront location has long supported a marine industries, including both wooden boat building and ship/boat building and repair.

However,in recent years county leadership is concerned about the stability of some elements of this economic base, and economic development planning is hindered because no accurate assessment of the economic base is available.

This report provides the necessary information to support local planning. The report includes analysis of demographic and employment trends, a discussion of the literature on economic development practice, results from a survey of small businesses and self-employed persons in the county, a framework for thinking through economic development policy options, recommended strategies for further development of the region, and suggested indicators to track progress that are consistent with the recommended strategies.

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Chapter 2: ContextChanges in Economic Development Policy: From federal to localSince the end of World War II, funding and planning for local economic development has moved steadily out of the hands of the federal government and into those of local public officials and community leaders (Eisinger, 1988). This trend is reflected in the increase in funding to programs that operate in local communities. Between 1955 and 1978 the total federal grants-in-aid to states and local governments increased from .8 percent to 3.7 percent of the gross national product and the number of separate programs rose from 132 in 1960 to 492 in 1978. Examples of these federal programs include Economic Development Assistance (1965), Community Development Corporations (1966), Community Development Block Grants (1974), and Urban Development Action Grants (1977).

These programs provide an array of resources to stimulate local developments. Federal monies were being used to finance major capital projects such as highways, housing and wastewater treatment facilities, along with the more traditional functions of local government such as fire protection, education, and parks (Eisinger).

The trend in expansion of intergovernmental aid ended in 1978. Eisinger (1988) attributes this to post war deficits, growing concern over the state of America’s defense resources, an anti-tax sentiment and rising inflation. By 1983, during the Reagan administration, the real value of intergovernmental dollars had fallen by 25 percent and the number of aid programs had declined to 405. Reagan’s administration brought with it a new concern for state and local tax-base enhancement. A new era of state and local self-reliance was sworn in with the recession of 1981 and the articulation of Reagan’s “new federalism” (Eisinger).

Congress, during the Clinton administration, expanded the urban local economic development efforts through the Empowerment Zone/Enterprise Community Program of 1988 (Department of Housing and Urban Development). This program gives certain distressed urban areas federal funds to design and implement their own individualized economic development plan. Many cities found that the dollar amount was not adequate to turn their area around (Harrigan and Vogel, 2000).

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While the federal government’s 2003 budget allocates for approximately $3 billion to local communities (via Community Development Block Grants), it is clear from the past fifty years that the trend is for local governments to become increasingly more responsible for the design, implementation and funding of their local economic development efforts.

Impacts of decentralization on local governmentsBlakely (1989) contends that this contraction of federal aid has made it increasingly difficult for local and state governments to meet the social service needs of the unemployed and the need to stimulate development. The end result is that the federal government is giving local officials more authority to deal with fewer resources, and many local governments are finding that there are more problems than resources.

In addition to the eroding financial support, the decline in federal assistance with policy and program development and implementation has left local and state policymakers to their own to design and implement economic development strategies for both the short and long term. Blakely states, “Communities faced with plant closures, high unemployment, rising crime, family disintegration, and increasing public assistance burdens must face the long run by taking steps to deal with their economic destiny sooner rather than later (Blakely, p. 49). As resources dwindle and policy direction falls more and more into the hands of local economic development officials, communities must use their current human, social, institutional, and physical resources to build a self-sustaining economic system.

State’s role in local economic developmentGiven the decentralization in federal policies, states have become the funding conduit for local economic development efforts. In other words, states are given monies often in the form of block grants which they then distribute to local communities. For example, under the Personal Work and Responsibility Act of 1996 and the Workforce Investment Act of 1998 states are given categorical block grants to design, run and evaluate programs and polices to assist the poor and develop a workforce. While there is some flexibility in how local officials design and use these funds, they are required by the federal government to meet certain performance mandates. –Another example is the Community Development Block grant program where a state agency oversees the distribution of these funds. Local areas apply for these funds, funds can be used for capital projects or they do

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have significant say over how CDBG funds are used. This part needs a bit of work

The Washington State Department of Community, Trade and Economic Development (CTED) is the primary state economic development agency. CTED is comprised of the Office of Community Development and the Office of Trade and Economic Development, and is charged with enhancing and promoting sustainable economic vitality throughout Washington. Agency staff work closely with local governments, non-profits, economic development professionals, ports, tribes, housing providers, business leaders, other state agencies and many others, to address the important issues facing the communities and the citizens of our state. CTED provides technical and financial assistance directly to local partners who deliver much needed community and economic development services within their communities.

Definition, Goals and Key Elements of Local Economic DevelopmentDefinition of local economic developmentBlakely (1989) defines local economic development as “a process by which local government and/or community based groups manage their existing resources and enter into new partnership arrangements with the private sector, or with each other, to create new jobs and stimulate economic activity in a well-defined economic zone” (p. 54). The Center for Rural Entrepreneurship states, “Economic development is a choice. It is willed within an economy. Economic development occurs when local leaders choose to identify, invest in, and develop their comparative advantages to enable workers, firms, farms, and industries to better compete.”

Goals of local economic developmentBlakely states that the fundamental goals of local economic development are to: Create quality jobs for the current population- Achieve local economic stability-a successful approach needs to

meet all the needs of business (i.e. finance, land, infrastructure, workforce development, institutional capacity)

Build a diverse economic and employment base-a broad employment base will help protect small communities from potentially detrimental external or internal economic forces

The goals listed above are generic goals. It is important to note each community (and segments within a community) will have slightly

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different objectives, and often dramatically different approaches to achieving the goals.

Key elements of local economic developmentForman and Mooney’s (1999), Learning to Lead: A Primer on Economic Development Strategies, from the Washington State Community, Trade and Economic Development Office outlines key elements (five domains) for effective economic development. This outline provides a framework to help local and state entities conceptualize economic development activities. Within this framework there are various strategies that can be adapted to meet the unique needs and desires of each community. The following section lays out the five domains that comprise the framework: Organizational development This domain involves creating and maintaining a stable forum for exchanging ideas and addressing the changing needs of the community. It will also aid in the development of comprehensive planning, raising necessary funds and maximizing the community’s limited resources. Product developmentInvestments in infrastructure, downtown areas, business parks and speculative buildings, fall into this domain. These investments include new structures and maintenance and the overriding goal is to improve the community. Market developmentThis domain includes any activities that expand markets. It may mean recruiting certain individuals such as venture capitalists or “lone eagles” or it may include the cultivation of partnerships with surrounding groups and communities to create the scale necessary for a given activity. Workforce developmentWorkforce development strategies focus on creating policies and programs that build the skills of the local workforce while meeting employer labor demands. A key component of this domain is coordination efforts. Best practice workforce development efforts bring together business, education, and local/regional government. Business developmentPrograms that nurture business growth and investment fall under this domain. Examples of these programs include business retention and expansion programs, developing start-ups and emerging enterprises and efforts at recruiting large firms.

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Chapter 3: Research MethodsThis study uses both quantitative and qualitative research methods to answer the question: what are the most effective economic development strategies for Jefferson County? Data from the 2000 Census are used to examine demographic trends. Employment data from the Washington Employment Security Department are analyzed, using location quotients and cluster concepts (these constructs are defined in the body of the chapter. Other data sources include a number of federal, state and county level databases. In addition, the research team used qualitative data to obtain an in-depth understanding of various perspectives and opinions held by the community. These data sources include a survey of local business owners and a set of interviews with an array of local economic and community development leaders, business owners, and community business officials. The findings from these data sources are critical to the analysis and subsequent recommendations. The following describes each source more thoroughly.

Demographic and industry dataThe authors retrieved county level demographic data from the US Census Bureau and the Washington State Office of Financial Management. Data on industry, occupation and wages came from various sources including the Washington State Employment Security Department and the US Bureau of Economic Analysis.

InterviewsThe authors conducted 27 interviews for this report. Interviewees represent four categories of people: government agencies, local community and economic development leaders, business owners/managers and business community officials. These groups are described more thoroughly below.

Government agenciesThis group of interviewees includes elected officials and staff from the various governmental agencies in Jefferson County, including the Port of Port Townsend, Public Utility District #1, the City of Port Townsend, and the Community Development Office Jefferson County. The purpose of these interviews is to better understand the role and economic development goals of each agency and obtain perspectives and opinions about the opportunities and barriers to economic development in the County.

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Local community and economic development officialsIn addition to interviewing government officials, the research team interviewed other local community and economic development leaders. This group included representatives from higher education, the health care industry, and the marine trades.

Business owners/managers. The research team interviewed eight business owners/managers to gather perspectives about the current opportunities and challenges of operating their businesses in Jefferson County, and about economic development in general. Interviewees were also asked about the availability of small business resources. Findings from these interviews supplemented results from the survey.

Business community officialsThis category consists of people who have a grasp on the overall business climate and who are in a position to implement programs or policies that aimed to strengthen business. These interviewees included people from the Small Business Development Association, the local SCORE chapter, faculty from Washington State University and members of the Olympic Workforce Development Council. The purposes of these interviews were to inventory the existing small business resources; gather perspectives on opportunities and challenges; and gauge the institutional capacity for implementing various components of economic development.

SurveySurveys were mailed to a total of 1000 establishments in Jefferson County. Seven hundred of these were businesses that reported wages and the remaining three hundred were sole proprietors. The non-sole proprietor businesses were randomly selected from the Jefferson County 2002 Employment and Wages database obtained from the Washington State Employment Security Department. This database includes all businesses in the county that reported wages for the second quarter of 2002. A total of 4,503 establishments were listed on this database.

The database used for the three hundred sole proprietors was the Washington State’s Department of Revenue database for Jefferson County. This database includes all of the sole proprietors in the County who have either collected sales tax or made over $12,000/year from their business. This database contained 1,118 entries. A random sampling technique was used to select our sample.

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The purpose of the survey instrument was to gather information about the following four broad areas:

Attributes of business owners (demographics, connection to Jefferson County, goals)

Characteristics of businesses surveyed (size, home businesses, wage levels, health benefits, markets, retail, industry, location of business)

Assets and barriers to maintaining and/or expanding a business Assessment of the County’s community and entrepreneurial

climates

Policy OptionsAfter the findings of the above-mentioned sources are examined, this study presents four potential approaches to economic development for the County. The four approaches are: recruitment of medium sized manufacturing firms, small business formation and expansion, entrepreneurial development, and cluster-based development programs. The description of each approach includes a definition, the theory behind the approach and then a discussion of its advantages and disadvantages. And, the last part of this section articulates how and why these approaches are not mutually exclusive.

Analysis and Recommendations for Economic Development Strategies and Steps The final chapter of this report analyzes the four approaches to economic development under selected criteria in order to develop recommendations for the County. The purpose of the analysis is not to pinpoint one approach, but rather to identify the strengths of the various policies. The reason for this being that it is generally advised among academics and practitioners to utilize a variety of different approaches (rather than relying on one approach) in order to meet a comprehensive set of economic development goals. The strengths of each approach will guide the development of our recommendations.

In addition to the analysis of the economic development approaches, this section identifies and discusses implementation issues that emerged from the survey and interview findings. While this discussion is not the primary focus of the study, addressing these implementation issues is critical to the success of any economic development effort.

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Chapter 4: Demographic TrendsPrimary Demographic TrendsThis chapter describes three demographic trends in Jefferson County: overall population growth rate, population trends by age group, and education level. All of these trends have significant bearing on the local economy, and are important factors in choosing appropriate economic development strategies. The second part of this chapter draws comparisons between the demographic trends of Jefferson County and those of other rural areas that have similar types of amenities. And, the last part of this chapter discusses some of the ways that these trends can impact the local economy.

Overall population growth rate As shown in Table 2, the population growth rate in Jefferson County from 1990 to 1999 is more than double that of the United States and one-third more than that of the State. According to US Census reports, most of this increase is due to in-migration. Thirty percent of Jefferson County residents in both the 1990 and the 2000 census had moved into the county in the previous five years-most of them from within WA State. Port Ludlow had the largest amount of in-migration (36 percent) and Brinnon the least (15 percent). This large influx of people was also evidenced by Washington State. During the 1990’s, more than half a million people moved into the state than moved out, a flow that was one and a half times the State’s natural increase (Nothdurft).

Table 2Growth rate from 1990-1999

US 13.2 percentWashington 19.8 percentJefferson County

30.4 percent

Source: US Census Bureau

Population trends by age groupsFigure 1 compares the population trends by age group of Jefferson County with those of Washington State. The most striking trend difference between these two areas is the high and growing percent of older residents in Jefferson County-both the 50-64 year olds and the 65 and older groups. For example, in 1980, people 65 and older

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comprised 15.8 percent of the County's population, and by 2000, the percentage increased to 20.6 percent. Washington State has experienced significant increases in its older population, but older comprise significantly smaller proportions of the population (6.8 percent in 1980 and 11.4 percent in 2000) than in Jefferson County.

Figure 1: Population Trends by Age Groups: 1980-2000Jefferson County

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20%

25%

30%

35%

1980 1990 2000

Percent of Population

Source: WA State Office of Financial Management

In addition to the increase in percentages of older residents, there is quantitative evidence and significant concern about the decline in percentages of younger people in Jefferson County. Figure 1 displays the marked decrease of 20-29 year olds in Jefferson County-a decline of over 50 percent between 1980 and 2000 compared to a 30 percent decline in Washington State. One reasonable explanation to this phenomenon might be that the local economy is not providing enough work opportunities to keep these residents in the County, however, this explanation does not account for all of the decline in the percentage of this cohort. Because Washington State has also experienced a significant decline, it is a known fact that this segment of the population is a smaller proportion overall.

The decline in the younger population is of particular concern to the local school districts. The following graph shows the trends in school enrollment within the past five years. These declines raise concerns

DRAFT 5/25/2023 24

about the viability of some of the smaller communities in the south county area in particular. This region has not recovered from the shock induced by the loss of much of the timber industry in the late 1980s and early 1990s.

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Figure 2

Trends in School Enrollment: 1996-2001

-0.06

-0.05

-0.04

-0.03

-0.02

-0.01

0

0.01

0.02

0.03

1996-97 1997-98 1998-99 1999-00 2000-01

Percent Change

Jefferson County

Washington State

Education levels of residents in Jefferson CountyThe third demographic trend discussed in this report is that of the County’s education levels. The following section examines the overall levels of education and education levels by age and areas within the County.

Overall levels of education As shown in figure 3, overall, Jefferson County residents have higher levels of education than the State. And, Jefferson County's education levels have improved markedly since 1990. This is a very well educated County and should have real strengths as the national economy moves to an information based businesses. In 2000, 91.6 percent of Jefferson County residents (over 25 years of age) had four or more years of high school versus 87.1 percent in the State. And, between 1980 and 2000 the percentage of Jefferson County residents with high school diplomas increased by 14.7 percent, from 76.9 to 91.6 percent. High school dropout rates are lower in Jefferson County than in the State and other rural regions. There are however some important disparities in educational levels between certain demographic groups in the County-most notably age and region of the County.

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Figure 3

Educational Attainment for Residents 25 years and over: 1980, 1990, 2000

0102030405060708090

100

1980 1990 2000 1980 1990 2000

Jefferson County Washington State

Four or More Years of High School

Four or More Years of High College

Age and regional disparities in County residentsThere are important disparities in education levels between age groups in Jefferson County. Residents between the ages of 18-34 (the young workforce) are the least well educated: 19 percent have less than a high school education versus 8 percent of people over 25. And, approximately 14 percent of the 18-34 year olds have four or more years of college education compared to 28 percent of people over 25. ( I guestion whether its realistic to expect folks younger than 25 to have finished college)

These disparities in age correlate with disparities between areas of the County. For instance, 33 percent or more of adults in Port Townsend, Marrowstone and Port Ludlow have 4 or more years of college, whereas in Port Hadlock/Irondale, Brinnon and Quilcene, 15

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percent or less have this same education level. And, the average age of the latter group is lower than that of the former.

Comparing the Trends in Jefferson County to Other High Amenity Rural AreasRecent research from rural demographers and sociologists have documented the vastly different demographic and economic trends of our country’s rural lands. According to Nothdurft (2002), the dramatic increase in older populations (as illustrated in Jefferson County) is part of a larger trend witnessed in many high amenity areas, particularly in the rural West. This particular trend does not adhere to the traditional theories of labor market analysis which predicts that people will migrate to places with higher wages. Nothdurft argues that although many of these fast growing counties are near an urban area, this factor does not explain all of the growth.

There are several hypothesis that attempt to explain why these high amenity rural areas are experiencing intense growth rates. First, a Harvard University demographer believes that the growth is primarily due to baby boomers reaching retirement age and using their home equity and investment income to move to lower cost, higher amenity communities in the inland West and the Northwest (Nothdurft). The second hypothesis put forth in Nothdurft’s report is that the growth in these counties reflects the accelerating in-migration of retirees and self employed people-individuals for whom remoteness is no longer a handicap. Thirdly, Larry Swanson an economist from the University of Montana contends that, “It is not the retirees in the traditional sense, it’s the footloose and aging baby boomers who are making lifestyle changes (Nothdurft, p.14).” And, finally, William Beyers (2000), a geographer at the University of Washington who studied the economic and demographic trends of four high-amenity communities in the rural West found that that many middle-aged people were willing to forego high wages of the metropolitan areas for the environmental “quality of life” amenities of these rural counties.

Rural demographers have also categorized our countries rural areas into certain types, each type having its own set of characteristics. Thomas Johnson, in “The Rural Economy in a New Century,” categorizes rural communities into “the isolated rural community” and “the connected rural community”. Nothdurft (2000) in “Across the Great Divide” categorizes rural communities into those with high natural amenities and those without. Johnson describes the connected rural community as having high levels of natural and man-made amenities and higher levels of income, education and population

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growth than the more isolated communities with an abundance on local niche agricultural and manufacturing shops. Johnson also contends that one of the results of these trends is the “serious land use issues” as these communities become less and less rural and more and more suburban. ( can more be said based on Johnson’s research of the risks that are presented by these “serious land use issues” . .e.g. subsequent loss of amnentiy and loss of population and desirability)

Implications of the County’s demographic trends The reason for exploring the demographic trends in this chapter (high overall population growth rate, increase in percentage of older residents, and the disparities in education levels) is because they all have significant bearing on the County’s economy and the County’s choice of economic development strategies. ( good) The impacts discussed below are from studies of other high amenity areas. These studies show that (Beyers, 2000) the types of demographic trends mentioned above present opportunities and challenges for the local economy. The following section discusses some of the positive and negative impacts of the demographic trends outlined above.

Positive impacts/opportunities of the County’s demographic trends Increased human/intellectual capital.

The demographic shifts noted above can contribute to local development efforts through increases in human capital. Human capital is a term used to quantify a person or community’s productivity level, and it is measured by one’s level of skill, education and work experience. As illustrated above, overall, residents of Jefferson County have high education levels and significant work experience (given that many are older), therefore it is reasonable to assume that the County has a high and growing amount of human capital. Another indication of the County’s human capital is the high number of small businesses and sole proprietors. Human capital is important when discussing economic development because it can lead to increased entrepreneurial activity, and therefore, jobs. ( although the numbers would indicate it’s the over 20 year old timers that are creating the businesses NOT the new comers)

High levels of capital available for investment to support the growth. (?) Examples might include expansion of the housing stock, commercial building stock and public infrastructure and services.

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Increase in financial capital.The research is mixed as to whether or not migrants invest in the local community. Therefore it is hard to tell if they are increasing the community’s financial capital.

Increase in demand for certain kinds of services including health care and personal services (financial, legal, medical) and industries, such as construction that rely on growth. Retirees are building high end custom homes This is evident from the industry and employment growth charts. These need for services can act as an economic driver and offer employment opportunities for local residents and businesses.

Negative impacts/Challenges of the County’s demographic trends:The following lists negative implications of the demographic trends: Low education levels amongst the young (18-34 years)

workforceLower education levels of the younger workforce may present workforce problems. Most notably, not having enough educated young people to attract and retain firms that require a high skilled workforce. Having a high percentage of young people without adequate education and training can also place an added burden on local social services.

Conflict over land use policies Studies of other high amenity areas show that the dramatic increase in population has created significant controversy about land use policy within local communities. As more people move in, there is greater demand on the land for housing and employment purposes which tends to heighten intensity around land use policy.

Increase in housing and property costs Bill Beyers (2000) reported that one of the primary impacts of rural areas experiencing high population growth rates is the increase in housing and property values. This is largely due to the increase in demand. This increase in costs could also apply to the purchasing or rental prices for office space or business space.

The following data is a quick look at housing and property taxes. It is important to note that more analysis is required to fully understand the housing and property markets of the County. The median value of a home in Jefferson County in 1989 was $117,480 (in 2000 dollars) as compared to $171,900 in 2000. This is a 46% increase. As for renting, in 1989, the median gross rent as a percentage of household income in Jefferson County was 25.1 percent. In 1999, this rose to 29.7 percent, an increase of nearly 5

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percent. (BRFSS data talks about some paying as much as 35% of their income to housing)

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Chapter 5: Income and Employment TrendsThis chapter closely examines income and employment trends in Jefferson County. The first section explores the composition of personal income and earnings; the second part discusses trends in employment, and the third part compares Jefferson County to other areas with similar trends and amenities.

Personal IncomePersonal income is composed of earnings of residents, dividends/interest/rent accruing to individuals in a place, and transfer payments received by residents. In Jefferson County, earnings are less than half of total personal income, whereas earnings account for 70 percent of personal income statewide. Dividends account for a third of personal income in Jefferson County, compared to 18 percent statewide. Finally, transfer payments account for 19 percent of personal income in Jefferson County, compared to 12 percent statewide. These comparisons suggest reflects that the county has a large percentage of retired people.

Components of Personal Income in Jefferson County

(% of Personal Income)

48%

33%

19%Earnings ofResidents

Dividends, Interest,Rent

Transfer Payments

Decomposing the residents’ earnings provides further insights. Wages and salaries account for 72 percent of earnings in Jefferson County, compared to a 82 percent statewide. Other labor income provides 8 percent of earnings in Jefferson County, compared to 6 percent statewide. Farm proprietors provide about 1 percent of

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earnings in Jefferson County, compared to 0.2 percent statewide. Nonfarm proprietors provide 19 percent of earnings in Jefferson County, compared to just 10 percent statewide. Wages and salaries provide a smaller proportion of total earnings in Jefferson County as compared to the state, while non-farm proprietors provide a larger proportion. Keep in mind, however, that earnings are a smaller proportion of total personal income in the county than in the state. Given the smaller role of earnings in total personal income, non-farm proprietors income’ provides about the same percentage of total personal income in the county and the state (about 7.4 percent).

Selected Components of Earnings in Jefferson County

(% of Earnings)

72%

8%

1%

19% Wages and Salaries

Other Labor Income

Farm Proprietors'Income

Non-FarmProprietors' Income

Proprietors play a quite strong role in Jefferson County, given the somewhat diminished role of residents’ earnings and the very strong role of transfer payments and dividends, interest and rent. Consider the contribution of non-farm proprietor’s earnings compared to the earnings in several major industry categories:

Proprietors' Income Compared to Earnings in Selected Industries

010000200003000040000500006000070000

Nonfarmproprietors'income Services

000$ 000s $

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Non-farm proprietors bring in more in total than manufacturers or retail trade, and nearly 80 percent of the value contributed by the very large services sector. (This sounds really important but I don’ t quite understand the total significance e.g. we are now so diversified that if the mill closed we wouldn’t see that much of an impact as 10 years ago?? What is a non farm proprietor??

Looking at the growth of personal income from 1990 to 2000, earnings grew less than they did statewide. Dividends, interest and rent grew more rapidly in the county than statewide, as did transfer payments. Growth of nonfarm proprietors income was at a slower pace than statewide.

Growth of Personal Income Components, 1990-2000

0%

20%

40%

60%

80%

100%

120%

140%

Earnings byResidents

Dividends, Interest,Rent

Transfer Payments NonfarmProprietors Income

Jefferson Co.

WA

Considering growth of earnings in various industry sectors, more rapid growth was seen in Jefferson County in only two sectors: transportation/utilities and government. In all other parts of the economy, growth of earnings in the county lagged the statewide pace.

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Growth of Earnings from Selected Industries

0%20%40%60%80%

100%120%140%160%180%

Ag. services, fore...

ConstructionManufacturing

Transportation and...

Retail tradeServicesGovernment

% CH

Jefferson Co.

WA

DRAFT 5/25/2023 35

Employment TrendsOverall employment growth in Jefferson CountyJefferson County’s total employment growth since 1970 is significantly higher than the State’s. From 1970-2000, Jefferson County’s percent change in employment is 4.11, versus Washington State’s 2.77. Jefferson County’s has the fourth highest rate in the State1. The US Census also reports that from 1990 to 2000, there has been a 56.4 percent increase in non-farm private employment, compared to the state’s 25.4 percent increase.

Why is Jefferson County’s average annual change in total employment much higher than state or national? Nothdurft (2002) contends that the large increase in population (in migration) in certain regions helps to explain the high overall increase in employment and more specifically, the increase in the service sectors. Nothdurft states, “With people comes a need for services of all types.” More specifically retired people have a disproportionate need for special services such as health care. This increased need shows up in the data in both the government sector (because the hospital in the County is public and therefore, most hospital employees are government employees), and others will show up in the service sector where specialized private health care practitioners, such as chiropractors and physical therapists.

Employment in Jefferson County is concentrated in the eastern region of the county in or near Port Townsend. A check of establishment records at the state Employment Security Department revealed only a relative handful of firms in the West End portion of the county. Consequently, countywide trends in employment and other economic indicators are likely to be dominated and accurately reflect trends in the eastern end of the county that is the focus of this study.

UnemploymentUnemployment in Jefferson County stood at 5.8 percent as of March 2003, as compared to 7.4 percent for the state as a whole. It is interesting to see such a low rate in Jefferson compared to the state at present. Throughout the 1990s, during the transition from a timber/wood products based economy to a more diversified base including tourism, arts, marine services, and other types of industrial companies, the unemployment rate in Jefferson was typically about 2 percentage points higher than the statewide number (see chart on next page). By 2000 that gap had closed as Jefferson achieved a

1 http://niip.wsu.edu/washington/comwapdf/pectotwa.pdf

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degree of diversification that has seemingly not occurred in neighboring Clallam County. During the current recession, led by King County technology companies, Jefferson has not suffered as badly as the state as a whole, at least on this indicator. If sub-county level unemployment measures were available, measures for the south county area around Quilcene and Brinnon would BE EXPECTED TO show higher rates of unemployment than the northern part of the county. However, this statistic is not published for sub-county areas. Indicators such as welfare enrollments, use of food stamps and free or reduced-price school lunch programs can sometimes provide indirect indicators of economic distress at a sub-county level.

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Unemployment Rates in Jefferson County, Clallam County and Washington State

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1990 1992 1994 1996 1998 2000

%Jefferson

Clallam

Washington

Source: Washington Employment Security Department

Employment trends by industryOf 1118 establishments reporting employment levels to the Employment Security Department in the 2nd quarter of 2001. These establishments employed a total of 7922 workers in this quarter. As shown below, wholesale and retail trade, services, and government are the largest sectors, employing about 2000 workers each. Construction and mining together employ nearly 700 workers; manufacturing about 1000, transportation and utilities under 200, and finance, insurance, and real estate combined about 330. The three largest sectors (trade, services, and government) added the most employees between 1990 and 2000 ( how did this rate of growth compare to other counties or the State? Id our government grow faster or was it part of a local and regional trend?. About 500 employees were added in the trade sectors and in government in this decade, and 840 in services. TRADE grew at a higher percentage and services the highest.

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Employment Growth in Jefferson County

0

500

1,000

1,500

2,000

2,500

Construction &Mining

Mfg TPU Trade FIRE Svcs Gov't

1990

2000

Jefferson County Employment Growth by Industry 1990-2000

010

2030

4050

6070

80

Manufacturing

RetailServices

ConstructionTransportationand Pub Utilil.

Finance,InsuranceReal EstateGovernment

Percent Change

Source: Washington Employment Security Department- does this say that the service industry grew by 80%+ in the last ten years???

Self-employment in Jefferson CountyA somewhat startling characteristic of the county is that nearly 17 percent of the workers living in the county in 2000 were self-employed. Statewide, only 8.5 percent of workers are self-employed, and in neighboring Clallam county the percentage is just under 12 percent. Jefferson County stands out as having proportionately more self-employed workers than these other jurisdictions.

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Employment Class of Jefferson County Residents, 2000

1786

9,028

Self employed

Employed by someoneelse

Source: U.S. Census, 2000

The next chart shows the distribution of Jefferson County business establishments by number of employees. There are more establishments on a proportional basis in the smallest size class, 1-4 employees, than in either Washington State or the nation as a whole. In all of the larger size classes, Jefferson County has relatively fewer establishments than the state or nation. Together with the finding that Jefferson County has more self-employed people than the state, this chart demonstrates the importance of very small business units in Jefferson County.

Establishments by Size Class, Jefferson County, 2000

Source: U.S. Department of Labor, Bureau of Labor Statistics

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0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

'1-4' '5-9' '10-19' '20-49' '50-99' '100-249'

'250-499'

'500-999'

'1000or

more'

Jefferson

WashingtonUnited States

The following table displays the employment data by industry, showing both the level of employment and the location quotient for each industry (discussed below). These data are from the new North American Industry Classification System (NAICS). The state and the country as a whole switched over to the NAICS system early in 2003, and all employment data from government sources will be reported in these categories henceforth. Some of the significant changes in this system as compared to the older Standard Industrial Classification system are:

The forestry and fishing industry includes logging, an activity classified as part of the lumber and wood products manufacturing industry in the SIC system.

An information industry has been created, including publishing of printed materials and software products. Software was part of the computer and data processing industry in the SIC classification; the rest of computer and data processing other than pre-packaged software was put into several different NAICS categories including a computer services industry and separate call center internet service provider categories. These “information technology” industries are included within an aggregated category called “other services” in the following table.

Administrative activities have been called out into a separate industry, no matter what industry is being administered. Separate corporate headquarters establishments fall in this category.

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Employment in Jefferson County, 2000Location Quotients

Employment,Jefferson County

JeffersonCounty Washington

Forestry, fishing, hunting, and agriculture support 78 7.3 4.2Mining (20-99)* 1.9 0.3Utilities (20-99) 1.4 0.5Construction 541 1.4 1.2Manufacturing 984 1.1 1.0Wholesale trade 113 0.3 1.0Retail trade 998 1.1 1.1Transportation & warehousing 70 0.3 1.1Information 228 1.0 1.4Finance & insurance 169 0.5 0.8Real estate & rental & leasing 132 1.1 1.3Professional, scientific & technical services 156 0.4 1.0Management of companies & enterprises (20-99) 0.4 0.9Admin, support, waste mgt, remediation services (100-249) 0.2 0.7Educational services 72 0.5 0.8Health care and social assistance 1162 1.4 1.0Arts, entertainment & recreation 125 1.2 1.4Accommodation & food services 1142 2.0 1.0Other services (except public administration) 432 1.4 1.0

Source: U.S. Department of Labor, Bureau of Labor Statistics*Figures in parentheses show range of employment in that category; exact data suppressed

The largest industries are health care, accommodation and food services, retail trade, manufacturing, and other services. All of these companies with employees had a total of 6713 employees in 2000. Relative to other rural counties in the U.S., Jefferson has a relatively small manufacturing sector, and a relatively large accommodation and food service sector.

The table above also shows a statistic called the location quotient (LQ) for each industry. The LQ measures the density of employment in a particular industry as compared to the nation. The LQ is computed by dividing employment in a particular industry in Jefferson County by the total for all industries in Jefferson County, and then dividing that ratio by the comparable ratio for the nation. If the LQ is greater than 1, then Jefferson County has proportionally more of its employment in that industry than does the nation, and Jefferson County is assumed to have a comparative advantage in that particular industry.

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The two industries with the largest LQs in Jefferson County are forestry/fishing, and mining. Forestry and fishing are important industries in the state (LQ of over 4), but in Jefferson County the LQ is 7.3, nearly twice the level in the state as a whole. Mining is a quite small industry, but with an LQ of nearly 2, it has significant comparative advantage, especially when compared to the state which has a very low LQ in this industry. The economy of the Olympic Peninsula was built around these extractive industries and they are still a very important part of the local economic base. However, as other tables show, employment in the wood products industry (in the older SIC based classification; this category included logging and wood product manufacturing) has declined over the last decade as the economy shifts towards a new economic base. The decline is a result of policy changes as well as technological progress in industry.

Table above also shows some evidence of an emerging new economic base rising up to augment the extractive industries. Construction and utilities have LQs of 1.4, reflecting the home construction in the county that has accompanied the substantial rate of in-migration of new residents over the last decade. The real estate industry has an LQ of 1.1 for the same reason. Tourism has become an increasingly important activity, as shown by LQs greater than1 for retail trade (1.1), accommodation and food services (2.0), and arts, entertainment, and recreation services (1.2). Health care is also relatively important (1.4), perhaps reflecting the growing population of older people in the county. Manufacturing has an LQ of 1.1, showing the significance of the paper mill and other much smaller manufacturing establishments in the county. Unfortunately, federal confidentiality rules are probably responsible for the lack of any breakouts of industries within the manufacturing sector. The paper mill accounts for over a third of total employment in this sector, and the rest of manufacturing is very diverse, and no single sub-sector is very large. Together, these factors establish conditions that prevent release of any more detailed data. Finally, the information industry has an LQ of 1.0, lower than the state, but approaching the level at which one would say that the county has a comparative advantage in the sector. Newspapers are included in this sector, along with book publishers and other printed media. In addition, software publishing is included in this industry. This has become a very important industry for the state and it is one to keep an eye on in Jefferson County. Port Townsend in particular has locational attributes that may be attractive to software and related companies. With only a single year of data available under the NAICS classification, no trends can be shown at this time; however, tracking trends in the high LQ sectors mention above will be important indicators of economic development in the county over time.

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Table above also shows that some industries have very low LQs, indicating weakness compared to the state and nation. While it is inevitable that some industries will have low LQs if others have high LQs, one of the industries with a low LQ must be mentioned: educational services. Despite such activities as Centrum’s arts workshops and the wooden boat school, Jefferson County has an LQ of just 0.5 in this industry. If the information industry or other emerging high tech sectors are to take root in Jefferson County, it may become necessary to build up the education sector to support these new industries because they have very high skill requirements. To some extent the low LQ for education services reflects how this state organizes the provision of education. Most of it happens at public institutions that are classified as part of government, not in the education services category. However, as Centrum and the wooden boat school demonstrate, education can also be provided through private institutions. Given the state’s fiscal situation, building up private education services may be a strategy to consider in Jefferson County.

Clusters in Jefferson CountyAnother way of looking at the strengths of the Jefferson County economy is through the construct of industry clusters. Clusters are groups of related industries located in relatively close proximity. A lead industry attracts suppliers, and major customers may also be located nearby. Cluster theory is re-shaping economic development practice in many parts of the country due the work of Michael Porter and the Commission on Competitiveness, and support from the National Governor’s Association, who have constructed an initiative called “Clusters of Innovation.” That project stresses the impact of successful clusters in major urban areas as centers of innovation that have propelled these urban areas forward. For example, a successful cluster development effort in San Diego has resulted in one of the most dynamic biotechnology centers in the country.

Clusters are also useful analytic constructs and ways of organizing economic development efforts in rural areas, but it is a bit more difficult to see the trends in clustes in rural areas because of the data suppression issue noted earlier. To protect the confidentiality of data from larger firms and/or firms with few establishments in a small county such as Jefferson County, data on individual industries are rolled up into larger aggregates. This practice, mandated by federal rules, makes it impossible to show employment trends in micro-clusters that are known to exist in and around Port Townsend, for instance.

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However, interviews and fragmentary data from various eclectic sources provide evidence of clusters in the following fields:

Forestry/wood & paper products Fishing/aquaculture Agriculture and food products, including the farmers market

and food coop Marine services Arts Tourism Industrial Emergent “new economy” firms based on information

technology Health care/retirement

If one knows where to look it is possible to locate the NAICS industry classifications that contain the major clusters identified in Jefferson County. The next table shows the industries that contain part or all of each cluster identified above. Note that the location coefficient for each of the industries containing part of all of a cluster is greater than or equal to 1. These clusters are in fact the economic base of Jefferson County.

One further note about the data in the table on the next page. These numbers do not include agriculture. Many farmers are part-time farmers who have “day jobs” as well, and on larger operations, seasonal labor may be employed. Neither this state nor any other have developed good methodologies for measuring labor inputs in agriculture due to these complications in deciding who is a farmer or farm laborer. The growth of very small scale farms producing fresh products, flowers, food products made from locally grown farm products, and other commodities sold in farmers markets or road side stands increases the difficulty of assessing the importance of activities that by visual inspection and interviews seem to be growing in importance in Jefferson County.

Relationship between NAICS Industry Classifications and Industry Clusters in Jefferson County

NAICS Industries ClustersLocation

Coefficient

Forestry, fishingPart of Logging/Lumber/Wood/Paper, Fishing 7.3

MiningLinked to Retirement (gravel for homebuilding) 1.9

UtilitiesLinked to Retirement (services to retiree homes) 1.4

Construction Linked to Retirement (construction of 1.4

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retiree homes)

ManufacturingPart of Industrial and Part of Marine Services 1.1

Wholesale trade 0.3Retail trade Part of Tourism 1.1Transportation & warehousing 0.3Information Emergent New Economy 1.0Real estate & rental & leasing 1.1Prof., scientific & technical services 0.4Mgt. of companies & enterprises 0.4Admin, support, waste mgt, remediation 0.2Educational services 0.5Health care and social assistance Health Care 1.4Arts, entertainment & recreation Arts 1.2Accommodation & food services Part of Tourism 2.0Other services (except gov't.) Part of Marine Services 1.4Source: author’s classification; sectors in blue italic font contain major clusters in Jefferson Co.

While available data on trends and prospects for these clusters are fragmentary, a few notes below on several of them provide a basis for thinking about economic development strategies built around the problems and opportunities these clusters present. These cluster notes below are based on interviews with people involved in these clusters unless some other source is noted.

Marine ServicesThe Port of Port Townsend’s Boat Haven Marina is the central focus of the marine services cluster in Jefferson County. This marina houses 475 vessels on a permanent basis and accommodates transient vessel over 6000 overnight visits by transient vessels each year. The marina has travel lifts that can haul out vessels ranging from small recreational boats to larger commercial and military vessels of up to 330 tons. Over 100 vessels per year are hauled out on this travel lift each year; each haul out represents anywhere from a few hours to many person-months worth of maintenance and repair activity. Major vessel refits can cost hundreds of thousands of dollars, representing substantial opportunity for the marine services businesses clustered in the area. A larger number of smaller vessels can also be hauled out on a 60-70 ton travel lift; in 2002 over 720 vessels were hauled out using this facility. On the upland area adjacent to the marina there is space for large and small vessels to be placed during the annual exercise of cleaning and repainting the bottom, as well as many other maintenance and repair activities ranging from a bit of spring cleaning to major refits of engines, structural components, electronic, hydraulic, and other systems. Commercial and recreational vessel owners come to Boat Haven from all over the Puget Sound to utilize

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these facilities because it is one of the relatively few boatyards that allow both owner do-it-yourself and contractor work, as well as services provided by marine services businesses located in the marina area. Over 40 firms are located on the uplands to serve the needs of these vessels, and other very small firms, known popularly as “tailgaters” simply operate out of vans and pickups parked next to the vessel they are working on at the moment. A directory of the firms located in or near this marina has listings for 124 firms, and this directory probably does not capture the full extent of the cluster, especially the tailgaters. This dense cluster has been very active for many years and seems to be growing( it’s the local sense that there are real declines in tail gaters and that the port has eliminated most of them) as the port has added additional capacity to serve larger vessels. The current comprehensive planning process the port is going through is designed find ways to accommodate further expansion of this activity by reorganizing the use of the upland space, taking advantage of several acres given up by a lumberyard that moved out of the port land.

This cluster could grow more if the marina could be expanded or an additional marina built with additional upland space for marine services activities. Boat Haven currently is full and has a 6-year waiting list for slips. The port manages other marinas at Point Hudson and Quilcene, and the permanent slips in these facilities are also fully occupied. An analysis by BST Associates of the market for marinas in the Puget Sound region documents a shortage of slips throughout the region, and a need to rebuild existing marinas throughout the Puget Sound to accommodate a trend towards larger recreational vessels. Less than five new marinas or major expansions have taken place in the last 10 years as population and a desire for boat ownership have grown dramatically. BST estimates a demand for 700-2000 new slips annually. In addition, demand is relatively weak for slips under 30 feet in length since the average recreational vessel is increasing in length and width. A number of Puget Sound marinas are planning major reconfigurations to accommodate larger vessels at the cost of reducing the total number of slips in these marinas. The decline of commercial fishing may free up some spaces for larger vessels, but not enough to satisfy the unmet demand.2

In addition to the recreational vessel market for slips and marine services, there are also growing military markets for services as a consequence of the increased security emphasis of the federal government and the navy fleet based in the Puget Sound. Servicing 2 BST Associates, “Shifting currents: Keeping up with boating industry trends,” presentation for Pacific Coast Conference of Harbormasters, Bothell, WA, April 2003.

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this market requires large scale haul out facilities, and the Port of Port Townsend is one of the few facilities for medium sized vessels that do not require a dry dock facility.

A casual scan of the hailing ports of vessels moored in Boat Haven and parked “on the hard” while undergoing maintenance suggests that many Seattle area boaters are already taking advantage of the services offered at Boat Haven. On one visit to Boat Haven, an extended family of fish boat operators was utilizing the haul out facility to conduct annual clean up and maintenance on three 50 foot or larger fishing vessels. These vessels were brought up from Gig Harbor, 70 miles to the south, because the Boat Haven facilities are more convenient in many respects than the alternatives available in the south Puget Sound for this size of vessel.

Marina expansion and development of new marinas are very difficult undertakings given current shoreline and water quality regulations, but if this thicket could be successfully negotiated, an expansion of the marine services industry would be a likely outcome. In addition, the Puget Sound has a number of luxury yacht builders, and it may be possible to bring this industry back to Port Townsend as an additional component in the marine services cluster. The port is also discussing a possible role in managing the marina associated with the resort at Port Ludlow. Expansion of that marina could provide additional mooring space for recreational vessels, but marine services would not be an acceptable activity at that location.

The marine cluster in Jefferson County also includes a wood boat foundation, a wood boat school located in Port Hadlock, a wooden boat festival that brings in thousands of visitors each year, and specialized suppliers of wood, sails, rigging, and other products and services. A maritime heritage center is being developed around these traditional boat interests. Expanded education services and tourism activity are expected as a consequence of this development at the north end of Port Townsend.

This very diverse marine cluster appears to have excellent prospects for expansion and linkage to other clusters in the area including the industrial and tourism clusters. Physical infrastructure on the waterfront to accommodate the diverse elements of the cluster is one limiting factor at present. In addition, new levels of sophistication in business management will be required for existing firms or startups to effectively take advantage of the opportunities the expanding Puget Sound market present. In interviews and conferences, the authors of this report have heard pleas for assistance with business planning, financial management, large multi-firm project

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management, and other topics that existing education resources in the area do not appear to have satisfied. Recommendation? This may be an area in which innovative educational approaches are needed to provide tailored services in a cost effective way.

Industrial FirmsThe Glen Cove Industrial Park is home to approximately 70-100 diverse manufacturing, wholesale, retail, and other businesses in such fields as architectural woodwork, custom metal fabrication, lumber and wood supply, and a variety of other specific industries. This industrial base is a substantial part of the economic base of Jefferson County, providing family wage jobs for a number of workers, as well as proprietorship incomes to the owners of these mostly small, privately-held companies. In addition to this concentration of industrial firms, other mostly smaller companies are located throughout the county, often in backyard shops, garages, and even storage facilities. No precise data are available on the size or exact industrial composition of this cluster are available. Confidentiality issues limit release of detailed employment data on sub-sectors within manufacturing, and in any case, the industrial cluster includes other types of firms such as wholesalers and retailers. However, recent zoning actions to expand the amount of industrial land available near Glen Cove do not appear to have satisfied the demand for industrial land since much of the re-zoned land is held by current owners for some future use. ( The issue here seems to be how do you zone for these uses and not end up with a Walmart e.g. a boat builder wants a 200,000 ft bulding and so does wal mart- any ideas? This situation makes a new industrial park being planned by the port for an area south of the Jefferson County International Airport of great significance to the industrial community. Recommendation: Any plan to expand this should really focus on the opportunity to incubate new businesses and develop a new cluster that would create jobs in the area. It is likely that this plan, if implemented, will fill relatively quickly with startups or growing firms that can expand the industrial base of the county and provide some much needed family wage jobs.

Arts and cultureThe performing arts, as well as painters, sculptors, potters, textile artists and others are a distinctive component of the Jefferson County economy. No exact census is available of the number of people earning their living in whole or in part from artistic activities. Local business owners report that there are over 200 visual artists living and working in the area. In addition there are a wide variety of

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performing artists (musicians, actors, etc.). Artists were initially attracted in to the area by low living costs, plus the area provides a visually interesting landscape and street scene. The jazz and fiddle festivals have brought musicians to the area for many years, some of whom have re-located permanently. Specialized services have arisen, such as bow makers for stringed instruments.

??relevance? . Centrum, a state-funded organization housed at Fort Worden, is bringing in significant performing and visual artists from around the country to staff workshops and give performances or exhibitions that draw in visitors as well as providing learning opportunities for artists resident in the area. An arts commission sponsors arts related activities. The Jefferson County Arts Alliance and local galleries provide outlets for some of the visual artists, but others display their work in Seattle, New York, and other major urban centers. This cluster contributes to the tourism cluster through the activities of Centrum as well as locally produced art products that are sold in retail shops and other venues, and several festivals built around music or other art-related themes. Additional local economic impact is realized from artists that exhibit their products mostly through galleries in other cities as far away as New York City, and who conduct sales over the Internet.

Recommendation: need to recognize- provide space and develop policies that facilitate their expansion ???

Tourism“Port Townsend – Washington’s Victorian Seaport” features 42 festivals and other events on its on-line visitors guide. Celebrations of wooden boats, jazz, art, , and even low tides are included. In addition South County is expanding its tourism with increased number of bed and breakfasts, the Shrimp Festival, concerts and events. Tourism is a major component of the economy of the entire Olympic Peninsula, and as the calendar of events for the county makes clear, local businesses are doing their best to extend the traditional summer tourism season into a year long affair.

Visitors come to the Olympic Peninsula from all over the world, yet Washington State residents make up nearly half of the visitor count. This dual nature of the market – weekend visitors from the Seattle area and the occasional tourist from Spain and Portugal, or any other country in the world, pose interesting opportunities and challenges for the tourism oriented businesses on the Port Townsend waterfront and elsewhere in Jefferson County.

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Selected facts from the Washington State Business and Tourism Office survey of visitors to the Olympic Peninsula and Kitsap County:

47.9% of visitors come from elsewhere in Washington, of whom 22% come from the Seattle area

9.8% come from California 6.2% come from Oregon 6.1% are foreigners, of whom 46.6% come from Canada, 11.9%

come from the United Kingdom, and 2% come from Spain and Portugal

Visitors interviewed in Jefferson County engage in the following activities:

Sightseeing/driving tour (62%) Shopping (56%) Visit an historic/cultural site (51%) Hiking (44%)

These visitors are apparently hungry for information about what to do while driving through the area. A total of 51% of day visitors and 58% of overnight visitors reported that a brochure they picked up in a visitor center or elsewhere altered their itinerary, with a third changing at least one day of their itinerary.3

Statistics like this inform the business strategies of the many tourism-oriented businesses in Jefferson County. As the employment data above indicate, tourism-oriented businesses (accommodation and food services, parts of retail, and parts of the service sector) are a substantial portion of the economic base of the area.

Recommendation: need to explore ways to integrate tourims and edu-tainment into existing festivals and events to extend the visit and spending. E.g. wooden boat could collaborate with golf course for tour packages.

Shift in the structure of the national economy: From goods production to service productionUp until the 1970’s, the backbone of America’s economy was the manufacturing sector. In 1960, the manufacturing sector employed 31 percent of the workforce and output from this sector made up 28.7 percent of the gross national product (GNP) (Eisinger, 1988). Up until

3 Jim Lillstrom & Associates, Olympic and Kitsap Peninsulas Visitor Profile 2002, report for Washington State Office of Trade and Economic Development, April 2003.

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the 1970’s there were relatively low levels of international trade as reflected by the fact that the value of imports and exports was only 12.6 percent of the GNP. In the 1970’s, international trade skyrocketed which created a dramatic increase in world competition for American produced goods, and an increase in domestic markets for international products.

Shifts in employment mirrored the changes in industry as the national economy has become a more global economy and our domestic market became more reliant on imported goods Nationally Job growth in the manufacturing industry declined while service industry jobs has increased dramatically. Eisinger (1988) states that the underselling of American goods, changes in technology and increase in demand for services are the primary reasons for this shift from a goods producing to a services producing employment base. As for rural areas, a report from the Southern Rural Development Center reports that more than 93% of the full and part time jobs generated in non-metro areas between 1990 and 1999 were created by industries in the service-producing sector. Nothdurft (2000) supports this trend as well.

Manufacturing in Jefferson CountyAccording to the US Bureau of Economic Analysis, since 1980, manufacturing employment in the United States has decreased by 8 percent. In the state of WA, however, employment in this sector has grown by 20 percent. Similarly, in Jefferson County, manufacturing employment over the past few decades has increased by 17 percent. How is this increase explained? Upon examining the industries within the broad manufacturing category, it is apparent that industry composition within manufacturing has changed considerably during this time period- some industries have experienced a marked decline in employment while other industries have experienced significant growth.

Lumber and wood products has experienced the most dramatic decline in employment over the past thirty years. In the late 1970’s and early 1980’s, lumber and paper manufacturing industries began to restructure causing some plants to close. For example, in the early 1980’s, Pope and Talbot, the timber giant, was bought out and then restructured out of existence.

Despite this severe drop in employment for the lumber and wood products industry, manufacturing employment in Jefferson County overall has continued to grow by 17 percent. Clearly, employment levels in other manufacturing industries expanded to offset this loss. These include printing and publishing (increased 169% from

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1987), transportation equipment (increased by 91% since 1987) , and industrial machinery and equipment(increased by 187% since 1991).4

Niche ManufacturingGeographers and demographers (Beyers, 2000) who have studied high amenity rural areas define niche manufacturing as the production of goods that are often very specialized and often do not rely on local suppliers to help produce their product. Producers usually sell their product in distant national or international markets, and they typically do not have other local competitors. Other characteristics of this sector include the location flexibility due to the fact that the cost of transportation input factors and products represents a relatively small portion of the value of the product.

Recent data shows that manufacturing employment grew at a higher rate in non-metropolitan compared with metropolitan areas in the West in the 1990’s. Beyers (2000) contends that this increase is a mixture of niche manufacturing and locally oriented manufacturing activity.

Based on interviews in Jefferson County, this type of manufacturing is prevalent and growing in Jefferson County. For instance, companies that produce customized metal shops, silk weaving, fine cabinet making, world renowned violin bows, fly fishing rods, have most of the characteristics of niche manufacturing described above, and therefore, could be categorized as such. It is likely that niche manufacturing contributes to the overall growth in manufacturing companies.

Recommendation: Update the concept of manufacturing to reflect these fast growing niche manufacturers such as printing, publishing, books, and specialized production.

Impacts of the shift in economic structure: The shifts in the manufacturing sector have caused major impacts in the economy. They include:

4 Also note, there may be other industries that have grown significantly, however, it is difficult to get this data on a county level because of the risk of exposing individual firms.

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Decline in average wageOne of the most significant implications of the shift from manufacturing to services is the decline of average wages paid. Even though the service sector does include some high wage jobs such as those in the computer industry, the average manufacturing wage is higher than that of the average service sector wage. Therefore, as service sector jobs take on a greater percentage of the employment, wages are going to fall.

According to a report by the Southern Rural Development Center report that, “Rural service sector industries (in the United States) that have expanded most rapidly are not providing the same level of earnings that the slower growing or declining goods-producing sector has been able to offer.”

The 2000 average wage in JC was $23,329, which was 62 percent of the $37,038 statewide average annual wage. Real average wages have dropped 27 percent from 1970-2000. The following chart shows the declining value of wages paid for Jefferson County and Washington State. ( l986 is about the same time as the timber cuts—and we also haven’t recovered as fast)

Figure 4:Real Annual Average Covered Wage: 1970-2000*

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1970 1974 1978 1982 1986 1990 1994 1998

Jefferson County

Washington State

*in 2000 dollars. Source: Washington State Employment Security Department

Decrease in public revenues. The second implication for the shift from goods producing to services is the decrease in public revenues. The shift from manufacturing to service sector and the dramatic increase in older residents both play a role in the erosion of Jefferson County’s tax base. Luke et al. (1989) contends that in many communities tax revenues from the manufacturing sector do not offset those of the

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service sector. This builds an incentive for local governments to continue to focus on manufacturing incentives which result in high tax revenues even though the real growth in the economy may be in services. The result of this factor is that the county and the state are not able to provide the same kind of services that it used to.

In addition to the erosion of the business tax base, the decline in real wages may result in people in the County who do not have other sources of income, such as dividends and interest to become reliant on social services. This puts an additional strain on the local revenues

Location and AmenitiesThe third section of this chapter looks at the location and amenities of Jefferson County. The Port Townsend area is located at the Northwest corner of the Puget Sound, west and north of the major urban area stretching down the east side of Puget Sound from Everett through Seattle and Tacoma. Port Townsend is also north of the smaller Bremerton/ Poulsbo/Silverdale metropolitan area. Despite the degree of adjacency to urban concentrations, the area around Port Townsend has many rural characteristics. Consequently, it has been a bit of a puzzle to analysts who have attempted to classify it. The USDA Economic Research Service has developed a typology of rurality that considers both the size of cities or towns in a county, and the nature of the counties adjacent to a county of interest. ERS classifies Jefferson County as a Type 6 “Nonmetro/ Adjacent to small metro with a city of at least 10,000.” This classification is based on the shared border of Kitsap and Jefferson counties, but does not recognize that the Seattle area is just 2 hours and a ferry ride away. A Type 6 classification puts Jefferson into the company of Adams, Lincoln, Pend Oreille, and Stevens counties, places that have few of the “urban” amenities of Port Townsend such as art galleries, high end restaurants, and a vibrant performing arts culture. These characteristics of the Port Townsend area may stem in part from the accessibility of the city for Seattle area residents. In addition, Port Townsend has significant environmental amenities that are not present in the eastern counties in the Type 6 group.

The natural amenities of Jefferson County are measured in another classification scheme from ERS, a Natural Amenity Index, that includes climate, topography, water area, urban influences, and degree of rurality. Composite index ratings considering all of these factors run from 1 (low amenity value) to 9 (high amenity value). No county in Washington State has the highest rating; this accolade is reserved for several counties in Arizona, California, and Colorado. However, 8 Washington counties achieve a 6, the next highest rating, Jefferson among them. (The others are Clallam, Mason, Pacific, Pierce, Skagit, Snohomish, and Whatcom.)

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Washington Counties by Degree of RuralityCode Description No. Counties County Names

1 Large metro 3 Clark, Island, King, Snohomish2 Small metro 8 Benton, Franklin, Kitsap, Pierce,

Spokane, Thurston, Whatcom,Yakima

3 Nonmetro/Adjacent to large metro with city of >10,000

3 Cowlitz, Kittitas, Skagit

4 Nonmetro/Adjacent to large metro no city of 10,000 or more

1 San Juan

5 Nonmetro/Adjacent to small metro with city of 10,000 or more

4 Grays Harbor, Lewis, Skamania,Walla Walla

6 Nonmetro/Adjacent to small metro no city >10,000

7 Adams, Jefferson, Lincoln, Mason, Pend Oreille, Stevens

7 Nonmetro/Not adjacent to metro with a city of at least 10,000

5 Chelan, Clallam, Douglas, Grant, Whitman

8 Nonmetro/Not adjacent to metro area with a town of 2,500-9,999

4 Asotin, Klickitat, Okanogan, Pacific

9 Nonmetro/Not adjacent to metro area and no part of a city with >2,500

4 Columbia, Ferry, Garfield, Wahkiakum

Source: USDA Economic Research Service (http://www.ers.usda.gov/Briefing/Rural/Data/)

Washington Counties by Natural Amenity IndexNatural Amenity Index(1=low amenity/7=highest amenity

No. of Counties

1 02 03 34 155 136 87 0

Source: USDA Economic Research Service, (http://www.ers.usda.gov/Briefing/Rural/Data/)

Only 20 counties nationwide are rated the same as Jefferson on both the rurality and amenity classifications (see table on next page).

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Jefferson County’s Peer Group: 20 Counties with the Same Rurality and Amenity Classifications

Okeechobee FLKendall TXSanta Cruz AZFremont COHuerfano COTeller COChurchill NVLyon NVRio Arriba NMSierra NMSummit UTWasatch UTLake CALassen CAPlumas CASan Benito CAClatsop ORTillamook ORJefferson WAMason WA

Economic Characteristics of Peer Counties ( could these be organized by rank ?) County State Employment

in 2001Rank Employment

GrowthRank Per

CapitaIncome, 2001

Rank Per CapitaPersonal Income Growth

Rank

Santa Cruz AZ 10666 4 9.2% 15 17,964 16 22.4% 6Lake CA 10140 5 15.6% 12 23,538 8 21.9% 8Lassen CA 3906 16 33.7% 2 18,122 14 11.4% 19Plumas CA 4626 15 10.2% 14 26,597 5 25.9% 3San Benito CA 11263 3 26.6% 9 23,484 9 16.4% 16Fremont CO 7693 7 7.8% 16 18,466 13 21.6% 9Huerfano CO 1398 19 35.2% 1 18,025 15 23.8% 5Teller CO 5451 14 16.9% 11 27,979 4 18.8% 12Okeechobee FL 6603 11 -6.2% 19 17,921 17 11.7% 17Rio Arriba NM 6536 12 27.0% 8 16,350 19 31.3% 1Sierra NM 1956 18 3.9% 18 17,152 18 11.6% 18Churchill NV 5479 13 25.2% 10 24,618 7 19.7% 10Lyon NV 6820 8 29.2% 6 23,231 10 19.5% 11Clatsop OR 11398 2 6.9% 17 24,664 6 18.6% 13Tillamook OR 6288 13 -2.9% 19 23,359 10 23.3% 6Kendall TX 6690 10 33.1% 4 28,665 3 18.0% 15Summit UT 16512 1 33.3% 3 42,102 1 25.2% 4Wasatch UT 3356 17 29.6% 5 21,969 11 21.9% 7

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Jefferson WA 6713 9 27.3% 7 28,850 2 29.9% 2Mason WA 8901 6 11.8% 13 21,610 12 18.3% 14Sources: US Department of Commerce, Bureaus of Census and Economic AnalysisComparing the economic characteristics of these peer counties based on the employment and personal income trends table on the previous page suggests two key conclusions:

Jefferson County falls in the middle of these 19 counties in terms of the size of its workforce (9th largest), and in the growth of employment from 1996 to 2001 (7th rank).

Jefferson County residents overall are relatively wealthy (2 highest ranking for per capita income and the growth of per capita income from 1996 to 2001).

A quick review of websites established to attract visitors from the outside world into these “peer counties” suggests that they have many characteristics in common in addition to relatively high degrees of remoteness and natural amenities:

Few large manufacturing plants Historic character Tourism as an element of their economy Festivals and arts Emphasis on “good place to live”

One intriguing web site suggests that community-based development strategies may be useful in such places, building explicit ties between business strategies, local community values, and natural amenities. Recommendation? Community-based entrepreneurial development emphasizes a comprehensive approach whereby a place-based community supports small businesses to start, grow and achieve competitive advantage in local, regional and/or global markets, through education (training, business counseling), extension (outreach, mentoring, communications), research, and access to capital. Some case study communities also emphasize explicit environmental components to a community-based strategy, including the Astoria area, one of the peer counties listed above (www.newamericancommunities.org). Further exploration of the strategies in use in the peer counties may provide additional ideas for Jefferson County. This is a project that a student intern could take on in the future.

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Chapter 6: Interview and Survey FindingsInterview Findings5

As noted in the research methodology portion of this report, interviews were conducted with four categories of people: government officials, local community and economic development leaders, business owners/managers, and business community leaders. The interview format consisted of open-ended questions. The purpose of the interviews was to gather information about the following five areas.

Roles of the County’s economic development entities Major shared goals of the County’s economic development

entities Challenges and opportunities pertaining to the County’s

economic development efforts Challenges and opportunities of operating a business in

Jefferson County Inventory of resources for small businesses

Roles of the various local economic development entitiesThe following section outlines the roles of the eight entities involved in the County’s economic development efforts. Understanding the roles will provide us with a comprehensive picture of the economic development players and their respective niches. The first three entities are governmental agencies under the leadership of elected officials. They include Port of Port Townsend, City of Port Townsend, Public Utility District #1, Jefferson County Department of Community Development. The second group is comprised of affiliates of quasi-governmental agencies, and includes the Economic Development Council of Jefferson County, the Chamber of Commerce and the Olympic Workforce Development Council. And, the third group is an informal regional partnership (Olympic Peninsula Economic Partnership).

Port of Port TownsendThe Port District of Port Townsend is one of Washington’s 37 Port and Port Districts. The role of the Port of Port Townsend is to responsibly develop property and facilities that encourage private investments, job creation and local economic development in areas owned by the 5 See Appendix A for a complete list of interviewees.

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Port and surrounding areas. The Port Commission is the district's policy making and regulatory body responsible for developing policies and making decisions about the Port’s internal and external courses of action.

The Port participates in an intergovernmental group in Jefferson County that meets once a quarter. Members of this groups include representatives from the City of Port Townsend, the Port of Port Townsend, the Jefferson County Board of Commissioners and the Public Utility District #1. Issues of all types that involve multiple governmental bodies (including economic development) are discussed. This group has been in existence for two years and has a rotating leadership. Port Commissioners and Port staff are also members of the Jefferson County Economic Development Council.

City of Port Townsend The City of Port Townsend has a Building and Community Development Department. Staff in this department are technical city planners, building inspectors, code enforcers and permitting technicians. In addition to the City’s staff, citizen advisory groups have been established by the City Council to capitalize on the expertise and commitment of community members and promote citizen involvement with city government. The Planning Commission provides recommendations to the City Council on land use cases, growth management and other short and long term planning issues. The Commission conducts public hearings on various development and legislative proposals and forwards findings to the City Council for final action.

Port Townsend city officials indicate that the City does not have a coordinated, comprehensive economic development plan, but is active as a partner in several situations. The City of Port Townsend often initiates projects, but then non-profits move forward with the plan. An example of this is the Main Street Program. City officials also believe that there is ample room for County and City economic development efforts to be more integrated.

Public Utility District of Jefferson CountyThe primary role of the Public Utility District #1 of Jefferson County is to provide water and sewer services for the eastern portion of Jefferson County. Currently, with the relatively new addition of the Tri-Area Water System acquired from the City of Port Townsend, the PUD serves over 2,500 water customers and maintains several drain fields for small unincorporated communities. There are three elected Commissioners for the PUD.

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The PUD plays other community roles in addition to providing sewer and water. The PUD is a member of the Jefferson County Water Utility Coordination Council (WUCC). This council has developed a coordinated water system plan to ensure water service to Jefferson County residents, resolve service area disputes, as well as provide flow to areas that need it. The plan is revisited every six years and is due for revision in 2003. The PUD has authority to establish a fiber optic telecommunications network, but currently does not offer any telecommunications service.

Given that water, sewer and information technology are all components of economic development, the PUD can and does influence economic development activities. Commissioners work with City and County officials to determine where to provide certain services which influence the location of economic activity.

Jefferson County Department of Community DevelopmentThe Jefferson County Department of Community Development (DCD) is composed of three divisions: Building / Inspections, Development Review, and Long-Range Planning. Long-Range Planning (LRP) is responsible for the maintenance of the Jefferson County Comprehensive Plan and the formulation and amendment of County land use regulations to implement the Comprehensive Plan. LRP provides staff support to the volunteer citizen Planning Commission and oversees the amendment process for the Comprehensive Plan of Washington State's Growth Management Act (GMA). LRP also collaborates with other County, local, State, and Federal agencies, organizations, and programs working together to guide the region toward a balanced and sustainable future.

Economic Development Council of Jefferson CountyThe Economic Development Council of Jefferson County is a private non-profit corporation. The EDC is recognized as the lead economic development agency for Jefferson County. The EDC has a contractual relationship with the County, and therefore performs a number of tasks and studies for the County. The EDC receives approximately one-third of its funding from the County. The remainder is covered by the City of Port Townsend, the Washington State Department of Community, Trade and Economic Development, and the U.S. Economic Development Administration, as well as through membership dues.

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The EDC’s policy and programs are formulated by a Board of Directors comprised of local business people and public sector representatives and implemented by an Executive Director. The EDC currently has a membership of over 80 businesses and individuals that works collaboratively with the EDC Executive Director.

The EDC plays a few different roles in the County’s economic development efforts. Most importantly, it provides a menu of assistance services to existing businesses, businesses that are interested in relocating to Jefferson County and to people who are interested in starting a business. (Please see the inventory of small business resources at the end of this chapter for more details about these services.) The EDC also plays a key role in collaborating with education and training institutions to address workforce issues in another role of the EDC. (not true) Some of the current collaborations include Peninsula College (CAD course) ( a myth) , Washington State University (outreach programs and promoting higher education) and the local WorkSource office (marine trades initiative). WorkSource is a joint venture of organizations dedicated to addressing Washington State’s employment needs. They provide services to businesses and job seekers

Chambers of CommerceThere are four chambers in the Jefferson County-Port Townsend, Port Hadlock/Tri-Area, Port Ludlow and Quilcene/Brinnon. All four Chambers play slightly different roles in their own communities, however a focus for all of the Chambers is on visitor related activities, events coordination, civic activities and assisting businesses with outreach efforts and marketing. The Port Townsend Chamber also co-sponsors events and workshops with the EDC. For example, currently,, the PT Chamber is involved in the planning for potential impacts of the closure of the Hood Canal Bridge.

The Olympic Workforce Development Council (WDC) 6

The Olympic WDC plays the lead role in developing and implementing workforce development policies and programs in Jefferson County. This Council also serves Kitsap and Clallam Counties. The Olympic WDC has developed a Local Strategic Plan that looks at the current

6In 1998, US Congress passed the Workforce Investment Act (WIA). In 1999, Governor Locke signed an executive order on workforc Workforce Policy which implements WIA in Washington. There are three overall goals of the order: to close the gap between the need of employers for skilled workers and the supply of Washington residents prepared to meet that need; to develop a strategy for training incumbent workers, and if workers are laid off, to provide training to help them make a smooth transition to other careers; to develop a strategy for wage progression which helps low-income workers to move up the job ladder

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workforce and its skills and reviews the local economy to see whether the skill needs of business and industry are being met. The Local Strategic Plan also examines economic development strategies to examine where the 3-county area (the Olympic region) wants to be in the future and assesses what skills the workforce will need to achieve those strategies.

The primary role of the Olympic Workforce Development Council (WDC) is to create and maintain a workforce development system designed to close skills gaps, enable workers to make smooth employment transitions to realize increased earnings, and help youth connect academic learning with occupational learning. The Council has a business membership majority, along with various community and state agencies and organizations, such as Employment Security Department, Department of Social and Health Services, Division of Vocational Rehabilitation, Kitsap Community Resources, Community Colleges, and others.

The vision is that “…within the next ten years, Clallam, Jefferson and Kitsap Counties will have a high-quality, customer driven workforce development system and a skilled labor force that meets the challenges of a changing economy. Our system attracts businesses and industries that offer high wages an contribute to the well-being of our community.”7

Olympic Peninsula Economic PartnershipThe Olympic Peninsula Economic Partnership is not a formal group at this time. Over one year ago, the seven counties on the Olympic Peninsula came together as a way to realize economies of scale for various economic development activities. For different reasons, planning with this large of a group became difficult, and Jefferson, Clallam and Kitsap decided to create their own subgroup to collaborate on certain projects.

There are no formal plans to the Olympic Peninsula Economic Partnership. According to one member, Ann Avary, consensus from the group is that they would rather leave the organization less structured and flexible. There is also consensus from this group that the networking opportunities within the partnership are valuable, and there is agreement that meeting periodically is productive. One of the barriers mentioned to keeping this group together is the geographical distance between the members.

7 www.wa.gov/esd/1stop/olympic/planning/strategic_plan.section1.htm

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Major shared goals between the City, County and Ports economic development plansThe following is a summary of the major shared economic development goals between the County’s governmental agencies8. These entities include the City of Port Townsend, the Port of Port Townsend and Jefferson County Community Development. These findings are based on interviews with staff from the respective government agencies and the review of various plans. The summary allows us to identify the shared goals of these entities which will be an important part of this report’s analysis.

The major shared goals are as follows: Promote education and training/workforce development

opportunities Promote sustainability ( i.e. diversity in economy) Create family wage jobs Maintain rural character and quality of life Promote economic opportunities for youth Coordinate economic development efforts with other local

economic development Work towards coordination and consistency (streamlining) of the

permitting and regulatory processes Provide infrastructure that is adequate to attract and support

growth in appropriate Act in compliance with the Washington State GMA

Opportunities and challenges to economic development in Jefferson CountyThe following section highlights perspectives regarding the opportunities and challenges to economic development in the County. These themes were derived from interviewees representing all four of the groups (government agencies, local community and economic development leaders, business owners/managers, and business community leaders).

Opportunities Many of the interviewees believe strongly that Jefferson County has some unique strengths and opportunities to capitalize on for economic development purposes. Below are themes that emerged.

8 See Appendix D for a summary of each entity’s goals.

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Current strengths of some industries. When asked about the opportunities or strengths of the local economy, nearly all of the interviewees feel as though the already existing and emerging industries provide key opportunities. One interviewee stated, “Play to our positives-grow more of what we have”. The long history of certain industries in the area provides a foundation from which to build other economic activity.

Having an industry base that offers natural opportunities to join sectors. Many interviewees identified this as an opportunity for industries to come together and strengthen each separate industry-the sum is greater than its parts. Some interviewees talked about combining arts and tourism to create a focus on cultural tourism. Others mentioned combining education and the arts creating high-end arts and crafts center of excellence, and others mentioned bringing together outdoor recreation and tourism.

Interviewees also mentioned that the community is already bringing industries together. They mentioned the Northwest Maritime Center as an example of bringing different industries (tourism, education and the marine trades) together. And, in addition to bringing the private sector together, the NMC brings together economic development government entities, education and training institutions, tourism industry, non-profits, and the private sector.

Quality of life. Many of the interviewees also believe that the recreational, lifestyle and natural beauty amenities of Jefferson County are also opportunities for economic development. They see it as a strength it keeps businesses in the County and attracts people to both visit and live in the County.

People enjoy coming to visit Port Townsend because of its natural setting. Interviewees saw this as an opportunity for two reasons. One, it is an opportunity to bring in sales revenues from outside markets, and two, residents take great pride in the amenities of Jefferson County.

Entrepreneurial spirit. According to a loan officer of a non-profit (Cascadia) that helps entrepreneurs and small business owners access capital, Jefferson County has the most activity throughout the Olympic Peninsula.

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Accessibility to urban areas. The opportunities here lie in the fact that Jefferson County is relatively close to urban markets and educational opportunities.

Challenges: Lack of unified economic development efforts between the

City of Port Townsend, the County, the Economic Development Council and the Port. This was the most predominant challenge stressed throughout the interviews. Interviewees from all four groups (business owners, government officials, community and economic development leaders and business officials) referred to it as a key challenge. Most of the interviewees mentioned that the differing value systems of the leadership of these entities has been a major hurdle to coordination. Three people mentioned that typically the meetings between these entities are not productive. One interviewee reported, “We meet, but nothing gets accomplished because people are afraid to step on other peoples toes”.

Difficulty meeting the workforce needs for small businesses. Both employers and economic development officials noted the difficulty in meeting the needs of small businesses. Part of the issue is that there are not enough people who need the skills to make classes and programs financially viable. For instance, the community college system needs approvimately 12-15 students to sponsor a class, which can be difficult to achieve in a small community like Port Townsend. Also, small businesses do not have the time or financial resources to proactively address workforce needs.

Lack of coordination within industries. While there have been various groups and events such as the Jefferson County Arts Center, Art PT, Gallery Walk that have tried to bring the arts community together, there is still considerable lack of coordination. Interviewees believe that this hurts the community limiting the sharing of resources, such as grant writing skills and co-marketing opportunities.

Lack of coordination between industries. In addition to lack of coordination within industries, many interviewees mentioned that there is room for improvement between industries as well. This coordination would be helpful is ways mentioned in the first opportunity. One interviewee mentioned that if the County and City had a unified marketing plan, they would be able to

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organize their efforts around the plan and probably attract more tourists.

Lack of a cohesive effort to address the shortage of education and vocational training opportunities, particularly for youth and vocational training. Many of the interviewees mentioned that while there is a coordinated effort amongst the higher education institutions (led by the Higher Education Consortium), there is not a collaborative effort between the private sector, government, an local education institutions to address workforce and education and training opportunities. Many felt that this was particularly true for young adults, and for vocational training. However, interviewees also noted that there are models in the community such as The Center for Wooden Boats and a collaborative effort between the Homebuilders Association and Peninsula College that has focused on residential carpentry/framing.

Other challenges raised, but not as frequently: State regulation, especially around the waterways Low skilled workforce among the younger population Inconsistency in the interpretation and implementation of

the Growth Management Act Infrastructure issues (particularly water in the southern

part of the county) and land-use problems within the City of Port Townsend such as non-buildable parcels of land

Opportunities and challenges of operating a business in Jefferson County Eight business owners/managers were interviewed. The following themes emerged from personal interviews with business owners and directors of non-profits. Many of the same questions were asked on the survey -the goal of these interviews was to complement the survey responses and gain a more in-depth understanding of the opportunities and challenges of owning a business in the County.

OpportunitiesWhen interviewees were asked to talk about why they have chosen to live and work in Jefferson County, responses included:

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Abundance of creative spirit and an appreciation for arts and culture

Other people doing the same kind of work that I am doing Significant community volunteerism Quality of life in Jefferson County factors including, natural

beauty, low density, “progressive” ideals, no traffic

Challenges Lack of technical business expertise.

Many of the small business owners mentioned that they wish they had a better understanding of the technical components of running a business, such as developing pricing structures, creating business plans and effective marketing. Small business owners also lack the time for all of these administrative duties. Interviews with Kathleen Purdy, from the Small Business Development Center, and Ann Avary, from the EDC also mentioned the lack of technical business expertise as a challenge.

High cost of marketing. Many interviewees noted that they did not have the time or money to do as much marketing and advertising as they wish they could. Many of them felt as though increased marketing would greatly benefit their businesses.

Inadequate Infrastructure. Many interviewees mentioned problems with infrastructure (particularly water and sewer) issues when talking about development in the more rural parts of the County, such as Brinnon and Quilcene.

Overly restrictive regulation. Business owners and other local economic development officials commented on the restrictive nature of certain regulatory/permitting laws including land-use, noise ordinances and anti-demolition. Another barrier regarding land-use regulation is fragmentation of available land parcels.

Workforce. There was mixed comments on the availability of qualified workers-some report that it is not a problem-Port Townsend Paper, yet others remarked that it is a major problem. Those that see it as a problem were predominantly from the higher technology companies

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Lack of high-speed access. A few interviewees mentioned that not having high-speed access has been a hindrance to their business. However, an Internet service provider who was interviewed stated that everyone in Jefferson County is able to access high speed connection.

Lack of affordable retail/gallery/performance space in Port Townsend. This issue was noted by several interviewees from the arts

community.

Other challenges raised, but not as frequently: Access to financial capital-one person mentioned that he

has had problems getting financial assistance Lack of adequate transportation. Many business owners

are concerned about the upcoming temporary closure of the Hood Canal Bridge. Another interviewee wished the airport had more frequent trips for commuting purposes-some of his workers wanted to be able to fly in and out of the County on a regular basis.

High costs of health care insurance

Inventory of Small Business Technical AssistanceThere are two small business resource centers in Jefferson County: the Small Business Development Center of Washington State University and the Small Business Resource Center of the Economic Development Council. This section describes the services that each of these entities offer.

Jefferson County Economic Development Council Small Business Resource Center

Port Townsend Main Street ProgramThis program provides assistance to businesses is located in the historic commercial districts of Port Townsend. Services provided include building facade loan pools, design review assistance and general information on all aspects of business in the districts.

Business Counseling & Entrepreneurial Training Through affiliations with the US Small Business Administration, Washington State University's Small Business Development Center and the Service Corps of Retired Executives (SCORE), one-on-one counseling is available to small business owners as well as entrepreneurs interested in starting their own businesses. EDC staff

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and counselors are available to assist clients to develop business plans and financial projections. These services are available at no charge to the client. The EDC also conducts management and training seminars on topics such as entrepreneurial development, taxation, marketing, business planning, computerization, and financial management.

In addition to providing the educational services listed above, the EDC offers a type of “one stop shopping” for businesses that might need the following assistance: Referrals to other local business assistance program, federal, state

and private financial sources, and employee training opportunities Providing data (demographics, permitting and licensing

information, wages and tax rates, site locations and costs, etc.) to local businesses that want to expand or to companies interested in relocating to Jefferson County

Assistance with identifying local sources of supply, potential customers, and new market opportunities

Washington State University Small Business Development CenterThe Small Business Development Center (SBDC) is part of a network of small business centers throughout Washington. It is a cooperative effort between the United States Small Business Administration and the Washington State University’s Small Business Development Center. There are two offices on the Olympic Peninsula, both of which are managed by one business development specialist. The role of the SBDC is to provide assistance to small businesses. The services offered are one on one, on-going counseling on management issues including starting a small business, marketing, developing business plans and export-import assistance. SBDC also offers research assistance to clients to help them determine the commercial viability, preliminary patent searched and a mentoring program.

In closing, the interview findings discussed above provided researchers with an expanded understanding of the local economic development players and their respective roles and shared goals. And, perspectives and opinions from local community and economic development leaders about the challenges and opportunities for both economic development were explored. Findings from interviews with business owners provided the researchers with an understanding of perspectives from business owners about the challenges and opportunities of operating a business in Jefferson County. And, interviews with business community officials provided the research

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team with an inventory of small business resources. These findings are incorporated into the analysis and recommendations.

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Survey Results9

As part of this study’s research strategy, a survey was used to ascertain information about Jefferson County’s business community. The survey was mailed to 1,000 randomly selected business owners throughout the County. One hundred and five of the surveys were non deliverable for various reasons. Of the eight hundred and ninety five that reached businesses, 151 (17%) responded.

Of the 1,000 surveys sent out, 300 were sent to sole proprietors and 700 were sent to businesses with employees. The database for the three hundred sole proprietors was the Washington State’s Department of Revenue database for Jefferson County. This database includes all of the sole proprietors in the County who have either collected sales tax or whose gross income was over $12,000. This database contained 1,118 entries. A random sampling technique was used to select the sample.

The non-sole proprietor businesses were randomly selected from the Jefferson County 2002 Employment and Wages database obtained from the Washington State Employment Security Department. This database includes all businesses in the county that reported wages for the second quarter of 2002. A total of 4,503 establishments were on this database.

Limitations of the survey dataWhile the authors used a random sample, and obtained a respectable response rate, it is important to mention that there is still potential for a self-selection bias in the sample. This is because respondents chose whether or not to fill out the survey.

Survey questions were developed to gather information about the following four broad areas:

1) Attributes of business owners Demographics of business owners Connection of business owners to Jefferson County Level of business experience Goals of business owners Why business owners own a business

2) Characteristics of businesses Size Percentage that are sole proprietors and home businesses Wage levels

9 See Appendix C for complete survey results

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Health benefits Markets Industry and location of business

3) Community assets and barriers to maintaining and/or expanding a business4) Assessment of the community’s business and entrepreneurial climate

Assessment of why people choose to run a business and how invested owners are in their business

Community resource assessment for small businesses and entrepreneurs

An assessment of the most critical components to expanding your business

Findings from the survey serve two purposes. First, these findings are incorporated into the analysis and recommendations portion of this report. And, secondly, these findings will provide the County with vital information about significant aspects of the local business community. This information can be utilized for the basis of other research and projects that go beyond the scope of this report.

Attributes of business ownersThis section examines demographics, levels of business experience, goals of the business owners, owners’ connections to the County and reasons for owning a business.

Demographics of business ownersAge: Business owners between the ages of 41 and 55 represented the largest portion (54.3 percent) of the sample. This group was followed by people over 55 years of age (33.8 percent), and 26-40 year olds comprised 11.3 percent of the sample. The survey also asked about retirement and only 7.5 percent of the sample is retired.

Sex, ethnicity and education levels: Men comprised 55 percent of the sample, and woman (34.9 percent) and couples (9.9 percent) made up the remainder. The sample was predominantly Caucasian (96.6 percent). Most of the respondents had a bachelor’s degree (34.9 percent), the next largest group was made up of people with some college (32.2 percent), followed by people with a masters degree or more (15.8 percent), a high school degree (7.97 percent), and 2 percent of the sample had less than a high school degree.

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Business owners’ connections to Jefferson CountySeveral questions were asked about the connection of the business owners to the County. Survey results found that these business owners have lived in the County for an average of 18 years, and the average number of years that people have been operating their business in Jefferson County is 17 years. Most (79.6 percent) of the sample started their business in the County as opposed to bringing it will them. And, most (74.3 percent) of the owners started their businesses as opposed to purchasing it.

Having 41-55 year olds make-up the majority of the sample is consistent with the trend that rural demographers have found-high numbers of footloose baby boomers moving to high, amenity rural areas, many of whom start their own business. However, according to survey data, most of these business owners have been living in the County for nearly twenty years, which suggests that they are not the “footloose, babyboomers”. (query whether we are doing enough to encourage them to start a local business?)

Goals of business ownersHow many businesses want and/or plan to grow? Two questions explored respondents’ feelings about expanding their business within the next five years. The first one was if they want to expand and the second one was whether they have plans to expand. Survey results show that 58.9 percent of respondents want to grow their business, 45 percent have plans to expand.

Why respondents own a businessA series of questions were asked to help gather information about why business owners in Jefferson County have decided to own a business as opposed to work for someone else. About sixty-five percent of the respondents indicate that they run their business to: have more flexibility in their personal and family life, to live in a desirable location and because there are few other work opportunities in the area that interest them. Just over 50 percent of the sample also indicated that they run their business to earn a living while practicing a craft. Add This is similar to what most entrepreneurs would identify as their motivators and does not seem to be unique to retirees or affluent residents but rather fairly characteristic of people who will start their own business not matter what or where.

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Characteristics of businessesThis section examines size, percentage of the sample that are sole proprietors and home businesses, wage levels, health benefits, markets, industry, and location of business.

Size: Almost 50 percent of the businesses had 1-3 full time employees, and 22.8 percent of the sample had 4-10 employees. Sole proprietors made up 23 percent of the sample. In terms of part time workers, 55.4 percent of the businesses have 1-3 part-time workers and 14.6 percent have 4-10 part time employees.

Almost 35 percent of the respondents operate their business out of their home.Only 1.4 percent of the businesses have branches/offices outside of Jefferson County.

Wages and health care benefits: (Note: These figures only apply to businesses that have employees-it does not include sole proprietor earnings-double check this)The average hourly wage for these businesses is $12.75. The range is from $7.01 (minimum) to $43.00. Sixty percent of the businesses provide health insurance to their full-time employees, and only 9.7 percent provide health insurance to their part time workers.

Location of businessAs the following chart illustrates, the bulk of the respondents are from Port Townsend (73 percent), followed by Port Hadlock (9 percent), Port Ludow (6 percent) and Chimacum (4 percent).Town Number PercentPort Townsend

104 73

Port Hadlock 13 9Port Ludlow 9 6.2Chimacum 6 4.2Quilcene 5 3.5Nordland 3 2.1Brinnon 2 1.4Coyle 1 1.7

MarketsRespondents reported that the largest percentage of their sales were in Port Townsend with the average being 44.3% of their sales. The second largest portion of sales were in Jefferson County (outside of PT) with an average of 32.6%. And, the average percentage of sales outside of Jefferson County was 28.8%.

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IndustryRespondents were asked to describe their business activity by putting themselves into a category. The nine industries that had the most respondents were as follows:

Industry Number PercentPersonal Services 27 17.8Construction 15 16.4Maritime Trades 14 9.2Restaurant/Cafes 10 7.2Industrial arts 9 5.9Arts/Crafts 8 5.3Home services 7 4.6Other 6 3.9Automotive 5 3.3

Almost 70 percent of the businesses also described themselves as retail, and 30 percent described themselves as being wholesale.

Assets and barriers to operating a business in Jefferson CountyAssetsWhen asked about various community assets, over half of the respondents chose quality of Life. People were given the opportunity to describe what this meant to them and the most common descriptions included, “natural beauty”, “slower pace of life” and “progressive” values. Respondents also feel as though the intellectual atmosphere and the presence of arts and culture are also among the community’s greatest assets.

BarriersRespondents were asked to indicate what they believe to be barriers to maintaining and/or expanding their business. They were asked about the seven major categories that represent the primary elements of economic development. These include: workforce development, business costs, land use regulation, infrastructure, access to markets, institutional barriers and access to capital.

Survey results indicate that the top three barriers to maintaining and/or operating a business in Jefferson County are as follows: Business costs (90 percent), and land-use regulation (69 percent) and workforce development (56 percent). The

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remaining four areas infrastructure, institutional barriers, access to markets and access to capital were all seen as barriers for approximately 35 percent of the sample.

The primary issue within workforce development was the lack of training and education opportunities for workers. The data on the low levels of education for the young workforce fit very well into these survey findings where respondents feel as though one of the main barriers to running a business in JC is "Lack of qualified workers". Many respondents also wrote in comments about how the young are "lazy" and have a poor work ethic.

According to survey respondents, the main barrier regarding business costs is the high cost of healthcare-almost half of the respondents who felt as though business costs were an impediment indicated that the costs of health are is a major issue. This was followed by high overhead/administration costs. And, regarding land use, about 23 percent of the respondents believe that all three of the subcategories within this barrier (difficulty accessing permits, lack of affordable land or space, and lack of land zoned for light industrial) were problematic.

Other barriers: Lack of coordination between government economic

development entities (29 percent) High cost of marketing (19.5 percent) Difficulty securing money to begin or expand business (18.9

percent) Access to hi-speed connections (16 percent)

Assessment of the community’s business and entrepreneurial climateThis section is includes an assessment of why people choose to run a business, a community resource assessment for small businesses and entrepreneurs, and an assessment of the most critical interventions needed to expand a business. The purpose of these results is to ascertain whether or not business owners feet as though the community supports them as a small business and/or as an entrepreneur.

Attitudes about the business climateA few questions were asked about the overall business climate of the County. Only 13.4 percent agree we the statement, “My community has developed programs to encourage and support entrepreneurs.”

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And, just under 30 percent of the respondents agree with the statement, “My community celebrates people who create and grow local businesses. And lastly, when asked about whether or not the community supports development efforts, 54.9 percent responded “Yes”, 25.2 percent responded “No” and the remainder “Did not know”.

Small business resource assessment Respondents were asked two questions about the availability of small business resources including entrepreneurial training, networking opportunities, and access to venture capital. Survey results indicate that under 40 percent of the sample feels as though the community offers business or entrepreneurial training and networking/mentoring opportunities. Seventeen percent felt as though they have access to venture capital and/or angel investors. Another important finding from this section is that 12 percent did not know if the community offered business or entrepreneurial training, almost 17 percent did not know about networking possibilities and nearly 27 percent did not know about access to venture capital.

Critical interventions needed to expand business Respondents were asked to rate eleven interventions on a scale of 1 to 3 with one being not important at all and three being critical. The top three interventions that were identified as being critical to most respondents included: increase in access to more markets, changes in zoning regulations, and increase in access to local financial capital.

The second tier of interventions that were considered critical includes: increase in local education and training opportunities, increase in opportunities for business mentoring and assistance with business plans and financial statements.

Perspectives from interview and survey findings are critical components to understanding the local economy. These findings will be used to both evaluate different economic development options and to create recommendations.

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Chapter 7: Potential Approaches for Economic Development in Jefferson CountyThis section describes the four approaches to economic development that will be analyzed as potential policies for Jefferson County in the next chapter. They include: recruitment and retention, small business formation and expansion, entrepreneurship and industry clusters. These four were chosen because they are the most highly regarded by both academics and practitioners. These four strategies aim to address the typical challenges that many rural communities face (geographic isolation, infrastructure deficiencies, poor links with metropolitan and global markets, poverty and weak institutional capacity for business development and growth) and capitalize on the assets of smaller communities (social capital/network from longstanding institutions such as cooperatives, pride in place, strong work ethic, high quality of life).

The description of each approach includes goals and theory of the strategy, components of implementation, and some of the tradeoffs (advantages and disadvantages). While these approaches are described individually, there is significant overlap between some of them making them easy to integrate. These points of overlap are discussed at the end of the chapter.

1) Recruitment and RetentionRecruitment (or attraction) of a medium or large firm has been the most common economic development strategy in both rural and urban settings since the 1930’s. Federal legislation such as the Public Works and Economic Development Act of 1965, and the Appalachian Regional Development Act of 1965 articulated this approach to address both urban and rural poverty (Summers, et al., 1976).

Once a firm has been recruited, many communities employ economic development efforts to retain that business. The theory behind the retaining strategy is that helping businesses and jobs otherwise lost offer the potential for expansion and increased income through multiplier effect. Thirdly, people who work for a firm may be the best sources of new business start-ups, thus offering the potential for spin-off benefits.

Vaughan, 1980 (from Luke et al) reports that successful state and local retention efforts emphasize three primary objectives. The first is

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reducing the cost of business operations so that profits can be increased. Examples of these costs include utilities, rent on land and facilities, and debt costs. Special incentive programs are often offered to assist firms in cost reduction efforts as part of recruitment or retention programs. Two, a new location can sometimes help a firm to expand its markets by accessing new regions or taking advantage of different transportation systems. And lastly, a region can help firms through regional marketing programs that spread information about a region’s products and services to targeted markets so that external markets can be created or enlarged.

Goals and theoryThe goal of this strategy, as with many economic development strategies, is to create jobs, increase local revenues, attract other industries, and in general, stimulate economic vitality of the area. Interest in attracting large firms has remained because they provide goods that are largely exported, and therefore often have a dramatic impact on employment and income levels (Luke et al).

Practical elements of implementation and tradeoffsThe key components of this approach include: providing information on available sites, labor, and community characteristics, marketing sites to companies that would complement existing industries or enhance the economic base, offer tax breaks, low-cost land, and streamlining permit processes to reduce the risk associated with development proposals in the community. (Farr, 1984)

Industrial recruitment on a national level has been criticized for the following reasons: sub-national recruitment does little to create new jobs, but rather moves them from one location to another, competition between communities to attract firms can have detrimental effects on the local tax structure and shift business costs from the government to existing businesses. From a more local perspective, critics would argue that industrial recruitment is dangerous in that it offers very little long term stability, especially in rural areas where the local economy can become overly dependent on one firm, and many large firms in rural areas are branch plants, and therefore are most vulnerable to closing down during a company’s downsizing.

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2) Small Business Formation and ExpansionIn the mid 1980’s rural areas were realizing that because of the increase in global competition they could no longer rely on recruitment of large firms as their sole economic development strategy. This realization spurred new thinking about how to vitalize rural communities using strategies that relied principally on growing a region’s assets rather than attracting outside investment.

In 1979, a study by David Birch drew new attention to the significant potential of small businesses to generate jobs in the postindustrial economy. This study of 5.6 million businesses between 1969 and 1979 found that two-thirds of all new jobs were created by firms with 20 or fewer employees and 80 percent were created by firms with 100 or fewer employees. Other policy and economic changes of the 1970’s contributed to the large increases in small business employment. These include major deregulation of major American industries (trucking and airlines), new entrepreneurial workforce, large corporations squeezing out middle-management, expanded service sector and the trend for large manufacturers and government agencies to contract with smaller firms.

Goals and theoryIn addition to job generation, strengths of the small business formation and expansion approach include technological innovations, economic diversity, cooperation between public and private entities, enhanced pro-business attitude, local spending and stability (Luke et al).

Practical elements of implementation and tradeoffsEssential elements of a small business strategy Recommend: small business centers that offer help with writing business plans, preparing financial statements and developing marketing strategies, along with facilitating access to capital.

In addition to job generation, strengths of the small business formation and expansion approach include technological innovations, economic diversity, cooperation between public and private entities, enhanced pro-business attitude, local spending and stability (Luke et al).The primary disadvantages of this approach lie in the fact that small businesses have a very difficult time achieving the scale that will

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allow them to compete with other firms, particularly in a global economy.

3)Entrepreneurship The Ewing Marion Kaufman Foundation’s Center for Entrepreneurial Leadership defines entrepreneurship as: “The ability to amass the necessary resources to capitalize on new business opportunities. The term is frequently used to refer to the rapid growth of new and innovative businesses and is associated with individuals who create or seize business opportunities and pursue them with regard for resources under their control. They build something from very little and usually reinvest earnings to expand their enterprise or to create new enterprises.

What makes an entrepreneur different from a small business owner? The distinction between entrepreneurs and small business owners is oftentimes not clear. Some research states that the primary difference between entrepreneurship and small business lies in purpose. Small business owners create companies to generate wealth and a level of income for themselves as owners while entrepreneurs aim to develop new innovative products or services that may lead to further investment and growth. Other literature, however, does not make a clear distinction between small business owners and entrepreneurs.

For the purposes of this report, the author has placed small business owners on a continuum of entrepreneurship. This continuum places innovative, high growth entrepreneurs (often referred to as “gazelles”) who focus on creating startups and growing their businesses companies on end and individuals who have little interest or desire to grow on the other end. Most small business owners fall into the middle of this continuum.

Goals and theory Emerging literature including the Global Entrepreneurship Monitor 2000 Report and a study (Five Myths about Entrepreneurs: Understanding How Businesses Start and Grow) by the National Commission on Entrepreneurship has encouraged many economic development official to include support for entrepreneurs as a part of their overall strategy. Both of these studies have documented a powerful link between economic performance and entrepreneurship. The GEM 2000 report found that “countries with active and dynamic entrepreneurial communities, generally are achieving stronger economic performance.” And, the NCOE study found that a small number of companies-referred to as entrepreneurial growth companies (EGC’s). EGC’s are the engines that drive economic

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growth. They found that these ECG’s make up about 4 percent of all companies, but generate nearly 60 percent of the new jobs.

The Center for Entrepreneurship contends that a rural entrepreneurship approach relies on “developing assets that are unique to the community, are flexible with specific conditions of rural regions, can be scaled to size and needs of the community, and can be implemented through local intermediaries.

Practical elements of implementation10

Focusing on communities is the overarching principle of best practice strategies that aim to support entrepreneurs. A community approach responds to some of the issues that are commonly faced around lack of leadership, local self-determination issues, limited public understanding of entrepreneurship, lack of organizational and institutional capacity in the community. (www.newamericancommunities.com). The Center for Rural Entrepreneurship supports community-based strategies because local areas actually have some control of their community, whereas they have very little control of macro economic issues such as trade, fiscal and monetary policies (www.rupri.org).

Identify and support intermediaries that will support entrepreneurs such as networking groups, industry councils. These groups play a key role in stimulating and supporting entrepreneurial development by providing technical assistance, access to capital and peer support.

Provide access to capital Promote public and private entrepreneurial development.

Private entrepreneurship can grow if there is a strong foundation of public entrepreneurship in the form of policies and programs within the community to build entrepreneurial capacity and social capital.

Bring learning institutions and the business community together

4) Industry Clustering and NetworkingOver the past ten years, industry clustering as an approach to economic development has gained widespread attention from countries, states and local areas. One of the reasons for this is that as the economy has become more and more global, competition has increased significantly. The publication of Michael Porter’s book, The Competitive Advantage of Nations, in 1990 also drew attention to this strategy.

10 (www.newamericacommunities.org)

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Porter (1990) defines industry clusters as “geographical concentrations of competitive firms in related industries that do business with each other and that share needs for common talent, technology, and infrastructure. Clusters are often layered with the first layer being the core businesses, the second layer then consists of businesses that provide supplies, specialized services, investment capital, and research to the core companies. And, the third layer is made up of businesses that provide essential economic foundations, such as specialized workforce training and advanced infrastructure.

The wine cluster in California is an example of industry clustering. In 2000, the core layer of this cluster included 680 commercial wineries and several thousand independent wine grape growers. The second tier of the cluster was comprised of supporting industries to both wine making and grape growing, such as suppliers of grapestock, irrigation and harvesting equipment; specialized advertising firms: and numerous wine publications for trade audiences. And, the third layer of this cluster includes a host of local institutions focused around wine-the Wine Institute and the world-renowned viticulture and enology program at the University of California, Davis (Porter, 2000).

Goals and theoryPorter (2000) contends that industry clustering increases the competitive advantage of firms. It does this in three ways: increasing the current productivity of participating firms or industries, increasing the capacity of cluster constituents for innovation and productivity growth, and stimulating new business formation that supports innovation and expands the cluster.

A significant component of the industry cluster approach is networking. Porter (2000) argues that given the interfirm collaboration inherent in this strategy, personal relationships, face-to-face communication, and networks of individuals and institutions networking is critical. The theory behind networking (as described by Micheal Piore and Charles Sabel in, The Second Industrial Divide, is that small companies are able to focus on a specific stage of production or specialty area and form alliances with other small companies to meet greater market demand. Some of the network activities include joint marketing, production, problem solving, research and development, and purchasing. The second component of the practice is that networks address the isolation among firms, from the outside world and diseconomies of scale that limit local services such as education and training programs, technical assistance, and capital.

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The roots of many clusters lie in the myriad projects that have encouraged and supported business networks during the past decade. The Berkshire Plastics Network of western Massachusetts and the Technology Coast Manufacturing and Engineering Network of Florida are examples of successful networks. The Pacific Northwest is not new to the strategy of networking. In the early 1990’s, the economic crises that resulted from the loss of timberland to save the spotted owl launched communities into forming networks to increase value added manufacturing from timber. Rosenfeld contends that “networks are formed to reduce a community’s susceptibility to changing demand and stagnation and to plan and prepare for change and fight threats collectively (p.108).

Practical elements of implementation of an industry cluster/networking approach1) Organize and deliver government supported services to clusters

Aggregate, collect, and sort information by cluster Form cross-agency quick response teams Build incentives for multiform applications to funding

programs2) Strengthen networking and associative behavior

Reestablish or recognize cluster associations and alliances Facilitate external connections Encourage intercluster communication channels

3) Target investments to clusters Invest in cluster research and development and innovation Establish cluster-specific technology centers or parks Support cluster-based entrepreneurial activity Market clusters and build cluster markets

4) Develop human resources for clusters Develop a more skilled and specialized workforce Establish cluster skills centers Qualify people for employment

Advantages of industry clustering:11

Clustering strengthens localization economies. The concentration of an industry at a particular location may result in cost savings to firms in the cluster. Sources of potential savings include a greater availability of specialized input suppliers and business services; a larger pool of trained specialized workers; and public infrastructure investments geared toward the needs of a particular industry.

11 Advantages and Disadvantages of targeting industry clusters-Clemson University

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Clustering facilitates industrial reorganization. Clustering addresses the shift (usually attributed to increased global markets and the emergence of advanced production technologies) in industrial organization from large firms engaged in mass production to small firms focused on specialty production. Clusters are attractive locations to these small, specialized computer aided manufacturers for three reasons. One, proximity between the specialized firma and their input suppliers and product markets promotes the flow of goods through the production system. Two, product specialization and the adoption of new production technologies are more prominent among firms in industry clusters. And, a special concentration of firms offers a pool of skilled labor required for the technology being used.

Clustering encourages networking among firms. Surveys of manufacturing networks find that firms in networks see significant advantage from cooperation with their counterparts. These firms also report that their competitiveness and profitability are increased by interfirm collaboration.Clustering permits greater focusing of public resources: Targeting industry clusters allows regions to use their limited economic development resources more efficiently. This happens for the two reasons: one, clustering enables an area to focus their recruitment, retention and expansion, and small business development programs. This tailoring of development goals to certain industries permits clearer identification of specific industry needs. And, secondly, because of the linkages among firms in a cluster, the total employment and income gains from recruiting (or retaining) cluster members will likely exceed those associated with non-cluster firms of comparable size.

Disadvantages of industry clustering Difficulty in picking industries to focus on.

The selection of specific targets for industry clusters is problematic because projections of industry-wide growth prospects are notoriously unreliable, growth-industry prospects change overtime in response to market forces, and individual firms within an industry may exhibit employment and sales trends different to that of the industry as a whole.

Difficult for new or smaller clusters to join and be competitive. The advantages available to members of a cluster provide early clusters with distinct competitive over late arrivals. New or smaller clusters may need to contend with lack of specialized

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infrastructure, institutional support, and sophisticated networks that the old clusters possess.

Supportive institutions are not easily established and a reluctance of firms to share infrastructure.Changes in political, social and economic conditions are often encouraged as part of a cluster strategy. This may include the transition from firms being competitors to the new expectation that firms now need to work together collaboratively and share such services as labor training programs, marketing information, technology development and new product development. This changing of ways is not always an easy task.

Although each of the four approaches above are discussed as individual strategies, they are not mutually exclusive. The implementation activities often overlap and the approaches have complementary outcomes. Because of this, practitioners and academics recommend that these approaches be used in various combinations in order to achieve the multiple goals of economic development. One example of this overlap is between industry clustering and entrepreneurship. Industry clustering may facilitate better capital access to entrepreneurs because the geographical concentration is attractive to angel and venture capitalists.12

12 http://www.nga.org/cda/files/ENTREPRENEUR.PDF

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Chapter 8: Analysis and Recommendations for Strategies This chapter uses findings from the interviews, surveys and economic base analysis, along with the literature review of economic development theory to help identify a set of strategies and steps for economic development in Jefferson County. This analysis evaluates the four approaches to economic development that were outlined in chapter 7 (recruitment of a medium or large firm, small business development, supporting entrepreneurs and industry clustering) against selected criteria. This analysis identifies the strengths and weaknesses of each approach. The strengths identified by this analysis will guide the development of the recommendations.

This chapter is divided into three parts. The first part describes the five criteria that was used to evaluate the different approaches. The second part analyzes the four different approaches and discusses implementation issues that need to be addressed in order to implement the recommended strategies. And, the final portion identifies and discusses implementation issues that need to be addressed in order to implement the recommended strategies.

Criteria:Criteria are based on best practices in rural economic development and on attributes that are specific to Jefferson County. They are primarily derived from this study’s findings from the economic base analysis, interview and surveys.

1) Does the approach capitalize on Jefferson County’s industry strengths and build upon already existing economic development efforts? The two key industry strengths include:

Current industry clusters As indicated from the economic base analysis and interview findings, one of the greatest strengths and opportunities of Jefferson County’s local economy is its already existing industry clusters. These clusters play a critical role in providing jobs and public revenue, and provide a solid foundation for other related industries to develop. Some of these industries have been in the community for a long time (maritime, tourism, arts) and others are emerging or re-structuring industries (small scale organic

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agriculture/food product, construction, “new economy” firms such as software and database development).

High number of small businesses. The second industry strength of the County is the unusually high number of small businesses. It has over twice the state’s average. This is considered to be another strength of the local economy for a few different reasons. One, recent studies have shown that over the past few decades, small businesses have created the bulk of new jobs. And, secondly, small, local businesses are viewed as a strength because they are typically more committed to the local community, and therefore, are less likely to relocate to a place with cheaper labor or land.

In addition to the strengths, it is important to analyze whether or not the approach will build upon existing successful efforts and accomplishments. These accomplishments include the small business resources in the community, and the current collaboration efforts of industries, such as maritime trades, arts, and niche manufacturing.

2) Does the approach capitalize on other community strengths?In addition to the industry strengths mentioned above, Jefferson County has a number of community assets. Interview and survey results, indicate that the following as key community assets:

Quality of life is an opportunity for the County because it attracts people to the county to either live or visit. In addition to the economic benefit of this asset, maintaining the rural quality of life and small town character are listed as goals of various local economic development plans. Quality of life was defined by survey respondents and interviewees as “natural beauty”, “slower pace of life”, “low density” and a “small town feel.” To loose or diminish these assets might really risk the very strength that drives the economic quality as well as social qualify of the area

The high education and skill levels (human capital) of

many of the residents, along with the significant years of work experience (high median age) is another community strength.

An engaged and active community. While human capital

focuses on the knowledge and skills of people individually and collectively, social capital centers on the health and vigor

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of societies and communities Places with strong social capital generally have high civic capacity.13 Jefferson County’s strong social capital is reflected in the high level of volunteerism, an abundance of community gatherings and festivals, presence of arts and culture and entrepreneurial spirit.

3) Efficiency: Does the approach utilize the community’s limited human and financial resources most efficiently?There are many ways to increase the efficiency of community resources in the economic development process. For this analysis, we will be measuring efficiency by the degree of collaboration that the approach requires. The rationale behind this is that collaborative approaches maximize the community’s human, financial and social capital resources.

As discussed in Chapter 2 of this report, as federal resources dwindle, economic development policy direction and implementation has fallen more and more into the hands of local officials and leaders. Therefore, it is becoming increasingly important that communities utilize economic development policies that encourage collaboration and cohesion within the community. Collaboration involves public, private and non-profit entities working together. A policy will rate highly under this criterion if it requires or facilitates the community to do this.

4) Sustainability. Is the approach able to respond to changing economic and demographic trends?Given that economic and demographic trends are dynamic, a key component in any economic development approach is the ability to adapt and respond to these changes. One of the ways to address the dynamic nature of these trends is to foster a diverse economy by having a broad base of industries represented. This ability to adapt is particularly important in rural communities, like Jefferson County, where a single company (Port Townsend Paper) makes up a significant portion of the local economy. There are examples, particularly in rural areas, where a community is overly reliant on one firm or industry and that firm or industry downsizes. Communities on the Peninsula experienced this during the timber crisis of the late 1980’s and early 1990’s.

13 Center for Rural Entrereneurship, www.ruraleship.org, Monograph 12

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5) Consistency: Is the approach consistent with the shared economic development goals of various government and local economic development entities? While each of the eight government and economic development entities in Jefferson County play a slightly different role in planning and implementing policies and programs, there are a number of shared goals in the plans of these entities. It is important that the approach be consistent with these goals as to not stray from the existing efforts and priorities set forth by the community. The overlapping goals were identified from interviews with staff and elected officials from each entity and from economic development plans of the Port, City of Port Townsend, and Jefferson County, the Public Utility District. The shared goals that comprise this criteria are:

Fostering education and training-workforce development Creating high paying jobs Promoting economic opportunities for youth

An approach under this criterion is attractive if it promotes workforce development, creates family wage jobs and emphasizes increasing economic opportunities for youth.

Analysis of the Four ApproachesThe following section evaluates each of the four economic development approaches against the criteria outlined above. The purpose of this analysis is to identify the strengths of each policy. The strengths will be used to guide the recommendations.

RecruitmentRecruitment of a large or medium sized manufacturing firm(s) rates moderately with regards to its ability to capitalize on the community’s industry strengths. This is primarily because this approach does not involve the strong base of small businesses in the community, but rather focuses its interventions on a very limited number of firms. And, when analyzing whether or not this approach capitalizes on the existing industry clusters, it would depend on what type of firm is being recruited. This approach would be most attractive if the county’s recruitment strategy focused on firms that would strengthen the existing local or regional industry clusters, such as a firm that is part of the maritime industry.

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While this approach requires intergovernmental entities to work together to plan for infrastructure and land use issues, it does not encourage or rely on a network of interdependent connections between the public, private and non-profit sectors like some other approaches do. Therefore, because the level of collaboration is used in this analysis as a measure of efficiency, this approach is less efficient.

Another significant downside of this approach is the likelihood that bringing in a large firm may threaten the small town character/rural quality of life, whether it is a big box retailer or a manufacturer. Some of the county’s open space might have to be converted into industrial or light industrial space, and a large operation would also impact roads and other infrastructure. This is particularly concerning given the community’s interest in maintaining the rural quality of life.

Academics and practitioners feel that one of the main critiques of this approach is that it offers very little long-term stability, especially in rural areas where the local economy can become overly dependent on one large firm. Rural areas are particularly vulnerable to becoming over reliant of one firm because many large firms in rural areas are branch plants, and therefore are most likely to closing down during a company’s downsizing or restructuring down the road in response to global trends the community cannot influence. Thus, today’s recruiting success can quickly turn into tomorrow’s economic crisis.

One of the greatest potential strengths of recruiting a larger firm is its ability to be integrated into workforce development efforts. In general, larger firms are more likely to participate in workforce development activities because they have the necessary size to make it fiscally viable to develop classes and programs specific to the industry, and they are more likely to have resources to fund various training efforts.

As for the evaluation of this approach under the next three criteria, all of these depend upon what type of firm, and therefore, what type of jobs will be created. When evaluating whether or nor this approach would promote education and training opportunities, it would depend upon what type of skill level the jobs require. If it is a firm that requires relatively low skilled labor, then at most short term training programs would be needed and workforce development would probably not be a big component of this strategy. However, if it is a firm that requires either highly skilled or highly educated workers, it is possible that education and training would be a key part of this strategy.

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Whether or not this approach creates family wage jobs is also dependent upon the type of firm that is recruited. Larger manufacturing firms recruited into rural areas can sometimes bring in a significant number of high paying jobs. Conversely, if it is a low skill assembly operation, it is likely that the pay will be less and the plant more likely to be closed or moved again as economic conditions change. Examples of this phenomenon can be readily found in Washington State, for example, in the Spokane area. This same analysis stands when trying to assess whether or not this approach will create economic opportunities for young residents of the county. If the jobs pay well, it follows that these jobs would provide opportunities for young people, particularly if workforce programs support career paths from entry-level to more highly skilled jobs.

Small Business Development and EntrepreneurshipBecause this report places small business owners on a continuum of entrepreneurship, these two approaches will be evaluated together. Because a small business/entrepreneurial approach focuses on supporting small businesses, it is obvious that this strategy would capitalize on the county’s unusually high number of small businesses. The key components of this strategy aim to improve the competitiveness of small businesses. This strategy could also be tailored to focus its efforts on the predominant businesses within industries that have comparative advantage. Another strength of this approach is that it would build on the county’s current efforts to support small businesses, such as the Small Business Development Association, the SCORE chapter and the EDC’s Small Business Resource Center.

Supporting small businesses/entrepreneurs is also attractive because it is not threatening to Jefferson County’s “quality of life” and small town character. Generally speaking, small businesses do not require as many significant changes to the current land use policies, as compared to recruiting large businesses). And, because the county’s design/aesthetics is already characterized by small businesses (as opposed to large scale retail and manufacturing), this strategy is less threatening.

One of the primary strengths of the two strategies is the ability to capitalize on the county’s strong human and social capital. The overall work experience, knowledge and skills of the county’s residents, particularly the older ones, are a tremendous asset to the small business/entrepreneurial community. This is because, with high amounts of human/intellectual capital, there is greater potential for

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innovation, and there is potential for mentoring opportunities. The ease of networking that is associated with communities with high social capital is also beneficial to both small business owners and entrepreneurs. This is because the networking infrastructure such as associations and other membership organizations are already formed in several industries.

Small business development ranks moderately with regards to maximizing the county’s resources via collaboration. This approach relies on the collaboration of business owners, government entities, along with financial institutions and non-profit programs that specialize in improving access to capital. Examples of ways that these groups need to work together include business owners receiving technical business skills training from local public institutions and/or business owners working with local banks and nonprofits that offer micro-enterprise or revolving loan funds. However, while this approach taps into these different groups, it does not require the same degree of collaborative planning and does not necessarily bring the private sector together in the same way that industry clustering does.

Traditionally, small business formation and expansion strategies focus on improving access to capital and providing business owners with technical business skills, rather than on promoting education and training opportunities for employees. In fact, promoting small business development brings new challenges to large scale/state workforce development efforts because with so many small businesses requiring different skills and knowledge, it is often difficult to meet the scale necessary to make courses and programs financially viable for community colleges or other higher education institutions.

As far as creating family wage jobs, the interventions of a small business approach aim to increase the competitiveness of the firm which should in turn allow the firms to pay their workers more. The ability for this strategy to create family wage jobs will also depend upon what types of industries the small businesses belong to. For instance, are they low paying retail or higher paying specialized crafts firms or new economy information technology companies?

Traditional interventions of a small business approach do not emphasize economic opportunities for youth. This strategy is primarily focused on increasing the competitiveness of small businesses and offering support to small business owners, very few of which are youth. Most of the business owners in the survey are over forty years of age. However, while this strategy does not directly focus on youth, it will provide opportunities for them by way of creating more jobs for

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them. It is also important to note that while youth have not been a focus of traditional workforce development efforts, recently, more communities have been trying to find ways promote employment opportunities for young adults. One solution, as discussed below, is to include a youth-oriented entrepreneurship strategy.

Industry ClustersAn industry clustering approach capitalizes on both of the industry strengths. It targets the County’s economic development efforts at the community’s predominant industry clusters. And, small businesses can certainly be supported through this strategy because this approach includes businesses of all sizes. This approach will support firms of a particular industry by increasing their competitiveness via sharing resources and creating economies of scale.

Industry clustering has the potential to capitalize on the quality of life/small town character by supporting those industries that have historically been a part of the community’s identity (art, maritime trades, tourism). Human capital is a key ingredient of this approach because it requires people in both the public and private sectors to be innovative, and therefore, is likely to capture the county’s human capital resources.

In terms of efficiency, one of the greatest strengths of organizing around industry clustering is that it requires a significant amount of coordination and cooperation amongst the public, private and non-profit sectors. Clusters thrive in regions where industry, higher education, and government work together to build human capital, a highly skilled workforce and supportive infrastructure.

The networking component of industry clustering also contributes to the high efficiency rating of this approach. Cooperation among firms to take advantage of new markets, integrate business operations, increase specialized knowledge and share product development information encourages organization and efficiency of public resources.

In terms of responding to shifts in demographics and the economy, industry clustering falls somewhere between recruitment and the other two strategies. It is more flexible than recruitment because it is not just focused on one or two firms, yet it is focused on a few targeted industries, so if there are certain economic or demographic shifts that hinder one of the targeted industries, the community is likely to suffer, but probably not be devastated.

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One of the key strengths of the industry clustering approach is its ability to be integrated into workforce development efforts. Developing clusters of industries helps to build economies of scales for certain types of skills demanded by employees, and organizing around industry clusters makes is much easier to focus your workforce development. This strategy offers opportunity for youth by having them start in one part of a cluster and then gain more skills and move up to another, hopefully higher paying jobs within the cluster-a job ladder of sorts.

And lastly, regarding family wage jobs, part of the case for industry clustering clustering is that it makes businesses more productive, and with higher productivity levels, firms should be able to pay their workers better wages. Synthesis of the analysis of approaches This section highlights the strengths of each approach based on the above analysis. The two primary strengths of the recruitment strategy are creating family wage jobs, and integration with larger workforce education and training efforts. Additionally, this approach could help generate economic opportunities for youth by providing jobs that pay well and offer room for advancement. The small business and entrepreneurship strategies are strong in nearly all the categories. The two areas where these strategies are not as strong as the other approaches are in providing economic opportunities for youth and in facilitating workforce development. The primary reason for this is that it is difficult to achieve the scale that is necessary for these efforts.

Industry clustering strategy is attractive under nearly all of the criteria. This strategy is able to capitalize on the industry and community strengths, it is consistent with many of the shared economic development goals, and it is more likely than small business development/entrepreneurship to achieve the necessary scale for workforce development efforts. The primary downside of this strategy in Jefferson County is that it requires significant resources for coordination. This will be discussed under the implementation issues in the next section.

Implementation IssuesThe final section of this paper examines various implementation issues identified from findings from the interviews and surveys. It highlights three areas of concern regarding the implementation of any economic development strategy in the county. It must be emphasized that there

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was overwhelming concern from both interviews and surveys that successful implementation of any unified economic development strategy in Jefferson County is contingent upon addressing the following:

1) Lack of a unified intergovernmental effort for economic development. Survey responses and interviews with community leaders, business owners and residents of the County indicate that while there are plenty of economic development plans and meetings, there is insufficient coordination around economic development efforts in the County. Many people feel as though government entities are not working together to achieve a common goal. Some people feel “frustrated”, “angry”, and “hopeless” about the coordination both between and within government entities.

Implications of insufficient coordination: Inefficient use of public revenues. Lack of coordination is very

costly to a community. Unproductive meetings, redundancy in services, redundancy in information gathering and time spent writing plans that are not utilized all result from poor collaboration efforts and are costly to the community.

Loss of balanced community representation. The first is that people will disengage from the process because they feel frustrated that plans do not come to fruition. The danger of this disengagement is that the community loses its representation in the process.

Uneven and unplanned growth From interviews, it appears that different groups in the County are moving forward with disparate economic development projects. The danger in this is that all of these individual agendas are not necessarily tied together or coordinated under a larger plan leaving the County at great risk of growing in a way that does not honor the goals set forth by the larger community.

2) Land use strugglesAs mentioned in the portion of the report that examined the implications of certain demographic shifts in the county, high amenity counties that are close to urban areas are contending with many of the same land-use struggles as suburban places. These often get played out in disagreements regarding zoning regulations and permitting regulations.

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3) Institutional capacityDoes the County have the capacity to carry out these various strategies? Three out of the four approaches (industry clustering, small business development and entrepreneurship) all require significant collaboration efforts which can be time, and therefore, resource intensive. Of the three of these, industry clustering and entrepreneurship, will most likely require the most additional resources. There are already considerable efforts to assist small business development (SBDC and the EDC); however these existing programs have limited capacity, and a full-fledged cluster or entrepreneurial strategy would require new staff resources. As for industry clustering, for some industries, there is already a strong foundation and momentum for future efforts. However, for other industries that do not have this foundation, it will require the county to engage in significant coordination efforts.

In closing, it is important to stress the importance of responding to these implementation issues. Jefferson County has tremendous assets in its residents, industry base, and natural surroundings. And, without making some improvement in the collaboration efforts, the county will likely not be able to achieve its maximum potential.

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Recommendations:Strategies and Steps to Economic Development in Jefferson CountyThe analysis of the previous section highlighted the strengths of each of the different approaches. This section uses these strengths to develop a set of strategies and steps for implementation. These recommendations focus on the three approaches (industry clustering, entrepreneurship, and small business development) that have significant strengths under the selected criteria used in the analysis.. The last portion of this chapter discusses future recommendations for recruitment efforts in Jefferson County.

Industry ClusteringPorter (1990) believes that the public’s role in supporting an industry cluster approach is to improve the circumstances that affect competitiveness, such as labor pools, knowledge, financing, physical infrastructure and quality of life. The following strategies aim to do this in the context of Jefferson County.

Strategy #1: The county should target its economic development efforts at key industries. The county has already been doing this in a few areas (the maritime industry) and the authors encourage the county to expand these efforts to other dominant industries. The significant groups of businesses in the county are forestry/wood products, fishing/aquaculture, maritime, arts, tourism, industrial arts, and healthcare. Education???Steps to implement the strategy Organize Industry Networks.

One of the ways to coordinate the efforts for these groups of related businesses is to organize industry networks or councils. These networks could include public, private and non-profit groups. It may even be possible to use the membership of the EDC and the Chamber of Commerce to start these kinds of networks. It is obvious that some clusters are more developed than the others which means that they will each need different types of assistance in the formative stages. For some industries you may need to start a network, and for others you can collaborate with the already existing groups, such as the Glen Cove Association and the maritime trades.

Bringing people within the clusters together will centralize the resources, and strengths of that industry, and begin planting the

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seeds for this clusters plan to move forward. There have been numerous examples, where these types of networks and collaborative efforts have spun off into their own non-profit.

Some of the main activities for these networks could include: Organize collective marketing strategies

The high cost of marketing was identified (from surveys and interviews) as one of the main barriers to businesses in Jefferson County.

Collaborate for funding opportunities for community and economic development projects This can be helpful in many ways. The first of which is that funders usually like to support collaborative efforts; it will combine human resources so that one person or organization is not responsible for all of the grant research and writing. This is often prohibitive for small agencies.

Support “Centers of Excellence”, cluster skills centers or other projects that center around clusters The idea is that project ideas will come from the various industry network groups such as the Glen Cove Association and then the county supports them. The support can come in a variety of ways including research assistance and coordination efforts. A great model for this type of collaboration is the Northwest Maritime Center.

Invest in cluster research and development and innovationProvide human resources to these networks so that they are more able to carry out their plans. These resources might come in the form of researching best practices.

Set-up electronic chat lines for people to trouble shoot problems This is a quick and easy way (assuming people are connected to the Internet) to capitalize on the collective wealth of skills and knowledge within a cluster.

Collectively join a national or global industry associationThe purpose of this is to be connected to new innovations in the industry. This could be important for both hard, technical skill development and also for new managerial approaches or creative ways to market.

Strategy #2: The county should facilitate the workforce development efforts of key industries.

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Steps to implement the strategy: Integrate the employer needs of Jefferson County into

regional workforce development plans. This will involve partnering with the local Olympic Workforce Development Council, Peninsula College, and the Jefferson Education Consortium to find creative ways to meet the needs of local employers. The authors are suggesting this for a couple of reasons. One, Jefferson County is a small community, and it will continue to struggle with the fact that it does not have a critical mass to engage traditional community college workforce development efforts. Therefore, it is essential to partner with surrounding communities to achieve scale.

Secondly, Workforce Investment Act funds and programs are allocated and designed based on regions. Therefore, in order for Jefferson County to tap into these funds, the county is going to need to be a more active player in the Olympic Workforce Development Council.

Identify employer workforce needs. According to survey and interview findings, one of the greatest barriers to economic development in Jefferson County is the lack of qualified workers and lack of educational and training opportunities. Neither of these data sources, however, did a thorough assessment of workforce needs. The authors recommend that a more in-depth assessment of specific workforce needs, with a particular focus on the predominant industries. Creating clusters can help organize and support workforce development issues.

Strategy #3: The county should facilitate collaboration of certain industries to add value to what they do. For many of the same reasons that the authors recommended that the county facilitate coordination within industries, we are recommending that the county identify encourage collaborations between industries that naturally connect. For example, tourism is an industry that could work together with others such as the arts and outdoor recreation to enhance the vitality of both industries. The sum is greater than its two parts.

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Steps to implement the strategy: Support the connection between arts, tourism and

recreation. There are many examples of states and local communities that have used arts/crafts as an economic development strategy. Jefferson County is ripe for growing this connection. Example: GROW Nebraska is a nonprofit that has developed a new marketing tool for Nebraska artisans. The "Treasures of Nebraska" map is a folded, glossy, four-color map that features galleries, gift shops, and artists across Nebraska. The Treasures of Nebraska map project is supported in part by an award from the National Endowment for the Arts. The map is the premier project, with the long-term vision to be an extensive paperback "tour guide" to art-related Nebraska partners and businesses. http://www.growneb.com/

“We have seen again and again how a small investment in an arts organization canpay big dividends for communities, ” said Bill Ivey, National Endowment for the Arts Chairman. “They not only reap financial awards, but communities can also use the arts to create tourism, revitalize their downtown districts, and to celebrate aspects of cultural heritage unique to the region14.

Small Business Development and EntrepreneurshipThe recommendations for these two strategies are combined because of the significant overlap in implementation efforts. As illustrated in the analysis, these two strategies have significant strengths. They allow Jefferson County to capitalize on its unusually high number of small businesses and the high percentage of residents that have significant education, skills and work experience. These strategies also help to achieve a diverse local economy, while supporting the predominant industries of the area. These efforts will broaden the existing assistance to small businesses in the community.

Strategy #1: Develop an entrepreneurial support organization (ESO)Research from the Center for Rural Entrepreneurship indicates that motivation (the drive to create enterprises) and capacity (the ability to actually grow a venture) are the two key factors for success in entrepreneurial efforts. The following six factors have been identified as best practice activities of successful entrepreneurial support

14 http://www.nasaa-arts.org/nasaanews/nga_release_1.pdf

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organizations. Jefferson County is already engaged in some of these activities, and some they are not.

Steps to implement the strategy: Support the entrepreneurial environment

Identify, engage and support local entrepreneurs. These entrepreneurs over time will enhance the larger community business climate and build community support for the next generation of entrepreneurs.

Build networking and mentoring opportunitiesNetworking and mentoring are often cited by entrepreneurs as the most important support possible. Through these networks, entrepreneurs gain access to knowledge and role models that are critical to their future success. ESO’s proactively recruit entrepreneurs into these networks and facilitate their operation.

Provide access to capitalAccess to capital is a component of any effort to support entrepreneurial and/or small business. Economic development agencies should continue supporting alternative options to access capital. Revolving loan funds and micro enterprise are two examples of alternative ways to access funding. Cascadia is a local microenterprise lender that currently works with many small businesses and start-ups in Jefferson County.

Increase access to marketsEntrepreneurs are often very good at perceiving market opportunities, evaluating opportunity feasibility and acting to capture market share. Successful ESO’s help entrepreneurs gain awareness and experience with a wider range of market environments. (See the example in next strategy of GROW Nebraska.)

Technical assistanceJefferson County currently provides technical assistance through the EDC’s programs and the Small Business Development Center. In addition to the traditional business counseling, the authors are recommending that the county’s efforts add the following components:

Mentoring access Networking opportunities Capacity building experiences Entrepreneurial training, such as FastTrac

(http://www.fasttrac.org), NextLevel (http://nextlevel.com.my/partner.php)

Enterprise facilitationEnterprise facilitation is a highly sophisticated and customized approach to helping entrepreneurs pursue their passion in creating

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ventures. Enterprise facilitation goes beyond point in time training and skill building programs to a longer-term partnership with entrepreneurs and their enterprises. See www.sirolli.com for more details about enterprise facilitation.

Strategy #2: The county should work with youth workforce coordinator at the Olympic Workforce Development Council to find ways to include youth in entrepreneurial efforts

Steps to implement the strategy:The following are two examples of ways to include youth in the county’s efforts to involve youth. Partnering with K-12 school system:

Youth Tech Entrepreneurs (YTE) develops student leaders, who use their academic, information technology and business skills to build stronger communities. YTE partners with schools and teachers committed to integrating community service and business concepts into information technology courses. Through curriculum, training and school support, YTE prepares students of diverse backgrounds for success in further education and beyond. http://www.yte.org/html

Create a business incubator The Community Foundation of Western Massachusetts Student Business Incubator, administered by the STCC Entrepreneurial Institute and located in the Springfield Enterprise Center, is the 'hatchery' where new entrepreneurial start-ups, created by high school and college students, are nurtured. The student business incubator helps bridge the gap between academics and a real world entrepreneurial experience with a supportive environment including individual advisors and mentors. Students receive ongoing coaching, information resources, technical assistance, and access to capital. Student businesses receive other support including a computer with Internet access as well as use of phone, fax, copier, and invitations to participate in workshops and seminars sponsored and cosponsored by the STCC Entrepreneurial Institute. http://ei.stcc.edu/studentincubator.html

Recruitment StrategiesBecause the recruitment approach did not perform as well as the other strategies under the selected criteria, the research team is recommending that the county not substantially increase its efforts, and instead continue with its current recruitment efforts and make two suggestions. One, the county should coordinate its recruitment and infrastructure efforts with all of the local economic development

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entities (Port, City, County, PUD and the Economic Development Council). And, two, the county should focus its recruitment efforts of firms that are in the county’s key industry clusters.

Indicators of SuccessStrategy #1: Create an annual benchmarking report

A successful economic development effort must be based on clear indicators so that the degree of success can be monitored and strategies can be adjusted over time. We suggest that the following indicators at a minimum be included in an annual report on the local economy’s progress:

Growth of earnings of employeesThe data presented in Chapter 3 indicate that a relatively high percentage of personal income in Jefferson County comes from dividends, interest, rent, and transfer payments. If efforts to build up the competitive strength of the major clusters in the county are successful, then the number of employed individuals and their wage or salary income should grow, without in any way reducing the non-earnings income streams except for welfare and unemployment compensation. Therefore wage earnings in the aggregate should grow. Data for this indicator are readily available at the county level, albeit with a significant lag.

Growth in the number of self-employed individualsEntrepreneurship and small business strategies are among the key recommended strategies to build on the county’s already apparent success in these fields. If new or more intensive efforts are mounted to build up this aspect of the county’s economic base, the number of self-employed individuals should grow. To track this aspect of the strategy, arrangements could be made with the Washington Employment Security and Revenue Departments for annual tabulations of the number of self employed persons in the county, reported separately by major industry cluster if possible. ESD currently reports the number of new business establishments in its database statewide to the Office of Financial Management, suggesting that the database technology to support the recommended indicator is probably already in place.

Cluster success indicatorsThe clusters described in Chapter 5 above are key elements of the county’s economic base. A system needs to be constructed in collaboration with existing or new cluster organizations to identify the

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most appropriate metrics to judge the success of each cluster. These metrics are likely to be unique to each cluster and should not be specified a priori, but worked out by the cluster groups themselves. Visual artists might want to track local and non-local exhibitions locally based artists are represented in, while the marine trades might want to track the number of vessels serviced by firms in the cluster. To be useful, these cluster-specific metrics should reflect the strategies the clusters choose to foster their own future development. To provide some element of commonality across clusters, employment and earnings data can be assembled from ESD and the national personal income data series. Another useful common element would be benchmarking against the performance of 3-5 peer clusters in other regions of the country on the employment and earnings growth measures.

A review of economic and earnings growth and a summary of major economic development initiatives in peer counties

Based on the list of peer counties developed in Chapter 5, update the information on employment and personal income growth trends in these counties, and identify major economic development initiatives these counties have employed.

Strategy #2:Adjust strategies periodically based on a community self-assessment

No economic development strategy can be followed forever. Conditions change, and the success or failure of prior strategies sets the stage for new assessment and planning processes. If the recommendations above are implemented, then several active cluster groups will be actively engaged in pushing their own industries forward. About every 2 years, it would be timely to convene leaders from these clusters, in conjunction with public officials and leaders of major institutions such as colleges, the port, Centrum, etc., to review the recent annual benchmarking report and discuss the success of various initiatives launched in the prior period. Attention would then turn to plans for moving forward, maximizing the connections among separate cluster strategies and identifying opportunities to collaborate in seeking external resources.

In closing, the above strategies offer a framework to guide Jefferson County’s economic development in the coming years. The county should combine this analysis with its own assessment of its capacity

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and needs to create a long term, comprehensive economic development strategy.

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Appendix A: Complete List of IntervieweesGovernment OfficialsBob Sokol: Port Commissioner, Port of Port TownsendDan Titterness: Jefferson County CommissionerJames Parker Public: Manager, Utility District #1 of Jefferson CountyLarry Crockett: Executive Director, Port of Port TownsendDavid Timmons, City Manger, City of Port Townsen

Business Owners and ManagersJohn Begley: President and CEO, Port Townsend Paper CorporationMarilyn Staples: Business owner, Green EyeshadeNed Schumann: Business owner, OlympusNetSebastian Eggert: Business owner,The Maizefield CompanyJim Garrett: Business owner, Garrett MetalsCarol Hasse: Business owner, Port Townsend SailsCarol Shiffman: Executive Director, Centrum Arts and Creative EducationKevin Elliff: Director of Marketing, Centrum Arts and Creative EducationRandy Kline: Associate Planner, Jefferson County Department of Community Development

Community Development LeadersKatherine Baril: Community Development Faculty, Washington State UniversityDave Robison: Executive Director of Northwest Maritime CenterVic Dirksen-Jefferson County HospitalPeter Cavanaugh Career Development Center Coordinator, WorkSource Kitsap CountySteve Frazier, Assistant Director, Olympic Workforce Development CouncilSylvia White: Representative from Arts Community

Business Community OfficialsPat Rogers, Member, Quilcene-Brinnon Chamber of CommerceKathleen Purdy: Business Development Specilaist, Washington State University Small

Business Development CenterAnn Avary-Executive Director, Jefferson County Economic Development CouncilNancy Borino: Marketing Co-coordinator, City of Port Townsend

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Sandy Hershelman: Executive Officer, Jefferson County Home Builders AssociationRuth Ann Halford, Cascadia Loan Program

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Appendix B: Jefferson County Economic Development Survey Results

1. How many years of personal business experience do you have?High: 60 years Median: 20 yearsLow: 1 year Mean: 21.3 years

2. How long has your business been in existence?# of years Percent0-5 years 17.36-10 years 21.311-15 years 17.316-20 15.3Over 20 years 28.7

3. Did you start your business in Jefferson County or did you bring it with you?

Start: 79.6% Brought: 15.8%

4. Which best describes how you came to own this business?Start: 74.3% Purchased: 23.0%

Inherited: .7%

5. Does your business have offices/branches outside of Jefferson County?

% With branches outside of the County: 1.4%

6. Do you run your business out of your home?% Yes: 34.7% %No: 65.3%

7. In an average week, how many hours do you devote to your business?

High: 100 hours Median: 50 hoursLow: 1 hour Mean: 49 hours

8. How many family members are employed at your business?

Full-Time Part-Time% w/ 0 family members: 67.1

% w/ 0 family members: 73.2

%1: 24.2 %1: 21.1%2+: 8.1 %2+: 5.7

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9. How many employees (other than yourself but including other family members) work at your business full-time (over 35 hours/week)?:

1-3 employees: 44.8%

11-20: 3.3 Over 40: .8

4-10: 22.8 20-40: .8***Note: 23.6% of the sample were sole proprietors

10. How many employees (other than yourself but including other family members) work at your business part-time (35 hours/week or less)?:

1-3 employees: 55.4%

11-20: 4.1% Over 40: .8%

4-10: 14.6% 20-40: 2.5%

11. What is the average hourly wage for you employees?High: $43.00/hr. Median: $12.75Low: $7.00 Mean: $14.34

12. Do you supply health insurance to your full-time employees? Part-time employees?

Full-Time Part-Time% Yes: 60.4% % Yes: 9.7%% No: 39.6% % No: 90.3%

13. What were your estimated gross business sales in 2002?High: 5,000,000. Mean: 383,148Low: 1,800

14. In 2002, approximately what percent of your sales were (responses are mean of survey respondents):

In Port Townsend?

In Jefferson County (not PT)?

Outside Jefferson County?

44.3% of sales 32.6% of sales 28.8% of sales

15. Do you want or plan to expand your business in the next five years?

Want Plan% Yes: 58.9% % Yes: 45.3%% No: 41/1% % No: 54.7%

By what percentage?

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High: 400% Median: 25%Low: 5% Mean: 48.9%

16. In the next five years, do you expect that your business will be:?

Smaller: 9.5% smaller by what % (mean): 44%

Larger: 46.6% larger by what % (mean): 50%

The same size: 42.9%Needing to relocate: 17.7%

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17. How likely is your business to do each of the following in the next two years:

Very unlikely (1) andUnlikely (2)

Possibly (3)

Likely (4) andVery Likely (5)

Mean

Hire new employees? 36.7 16.7 46.7 3.11Add anew product 29.5 13.7 43.1 3.07Sell to a new market? 44.1 24.1 31.8 2.77Research new markets? 44.0 19.1 36.9 2.86Expand distribution channels?

52.2 18.1 19.7 2.56

Expand advertising and promotion?

37.9 26.2 35.8 2.92

Invest in new equipment?

28.9 22.1 49.0 3.36

Expand current facilities?

40.4 20.1 19.4 2.35

Seek additional financial capital?

55.8 22.4 21.7 2.36

Computerize current operations?

53.2 21.8 25.0 2.48

Upgrade computer systems?

33.6 18.9 27.6 3.20

Invest in training for employees?

41.4 17.9 40.7 2.92

18. Which of the following best describes your business activity?

Maritime trades: 9.2%

Automotive: 2.6% Food/Agriculture: .7%

Industrial Arts 5.9%

Construction: 2.6% Healthcare: 3.3%

Restaurants/Cafes: 4.6%

Information Technology: 3.9%

Forestry/LumberAnd wood products: 2.0%

Lodging: 3.3% Printing/Publishing: 1.3%

Other: 17.8%

Outdoor Recreation: .7%

Home Services: 3.3%

Arts/Crafts: 5.3% Personal Services: 15.1%

19. and 20. Are you a retail or wholesale business?

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Retail Wholesale% Yes: 66.9 % Yes: 30.2% No: 33.1 %No: 69.8

21. Do you use the web/email for conducting your business? %Yes: 62.3 %No: 37.1

22. What is the square footage occupied by your business?High: 174,240 square feet Median: 1,200Low: 80 Mean: 4,383

21. Are you a non-profit organization?: Yes: 1.5%

22. What do you see as the community’s greatest assets?

Asset % Responding Affirmatively

Qualified workers 19.9Intellectual atmosphere 24.8Presence of arts and culture 31.2High quality of life 54.0Affordable wages for employees 19.9Other people in field to collaborate with

17.7

23. Barriers to maintaining and/or expanding business:

Barrier % Responding Affirmatively

Business Costs: 90%High cost of labor 17.6High cost of healthcare 43.7High overhead/administrative costs 29.1Zoning/Land-use regulation:

69

Difficulty accessing permits 25.0Lack of affordable land or space 25.4Lack of land zoned for light industrial 20.3Workforce: 55.6Lack of qualified workers 42.1Lack of training opportunities for workers

13.5

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Inadequate Infrastructure:

36

Transportation 8.1Water 12.1Information technology (hi-speed access)

16.0

Difficulty accessing non-local markets:

36

High cost of marketing 19.5Poor transportation infrastructure 6.5High costs of shipping 16.9Institutional barriers: 37Lack of coordination between government economic development agencies

29.1

Lack of technical business assistance resources

7.9

Access to financial capital:

30

Difficulty securing money to begin or expand business

18.9

High interest rates for loans 12.6

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25. What motivates you to be a business owner?

Disagree Neither agree or disagree (3)

Agree Mean

My business is the most important activity in my life.

27.2% 22.4% 50.45 3.29

I plan to eventually sell my business

31.9 19.6 48.5 3.26

I would rather own my own business than have another career.

11.7 21.4 66.9 3.97

I would mortgage my house to provide capital for my business.

48.6 13.4 38.0 2.80

I run my business to continue a family tradition.

80.7 11.7 7.6 1.55

I run my own business in order to live in a desirable location.

20.8 13.9 65.3 3.60

I run my business to have more flexibility in my personal and family life.

20.1 14.6 65.2 3.66

I run my business because there are few other work opportunities in the area that interest me.?

18.4 22.4 59.2 3.64

I run my business because I want to be able to earn a living while practicing my craft.

29.4 18.9 51.7 3.32

My community celebrates people who create and grow local businesses.

39.5 31.3 29.2 2.75

My community has developed programs to encourage and support entrepreneurs develop

55.6 31.0 13.4 2.25

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and grow.

26. My community offers business or entrepreneurial training.

% Yes: 36.7 %No:51.1 Don’t Know: 12.2

27. My community creates networking and mentoring opportunities for local business people.% Yes: 36.6 %No:46.6 Don’t Know:16.8

28. My community has access to venture capital and/or angel investors.% Yes: 17.7 %No: 55.6 Don’t

Know: 26.6

29. There are many people in our community who support development efforts.% Yes: 25.2 %No: 54.9 Don’t

Know: 19.9

30. What would it take to assist you in expanding your business?

Not important at all (1)

Somewhat important (2)

Critical (3) Mean

Increase in access to local financial capital.

45.8 32.1 22.1 1.76

Additional office space

62.3 23.8 13.8 1.52

Additional manufacturing space.

72.3 13.8 13.8 1.42

Increase in local education and training opportunities.

45.4 35.4 19.2 1.74

Increase in research and development

70.3 21.9 7.8 1.38

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funding.Improved transportation.

57.0 28.1 14.8 1.58

Increase in access to more markets.

38.1 26.9 35.1 1.97

Increase in opportunities for business mentoring.

48.5 38.5 13.1 1.65

Increase in opportunities for business networking.

42.4 39.4 18.2 1.76

Assistance with business plans and financial statements.

48.5 33.8 17.7 1.69

Changes in zoning regulations.

52.0 16.0 32.0 1.80

Demographics of business owners:31. Age:

Under 18

19-25 26-40 41-55 Over 55

0% .7% 11.3% 54.3% 33.8%

32. Sex:% Male:55.3 %Female: 34.9

33. Ethnic origin:Caucasi

anAfrican

-Americ

an

Native Americ

an

Hispanic origin

Other

96.6% 0% 2.1% .7% .7%

34. Highest level of education completed:< High school diploma

HS diploma

Some college

Bachelors degree

Technical or Apprentice

Masters degree of more

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ship2.0% 7.97% 32.2% 34.9% 5.9% 15.8%

35. Are you retired?% Yes: 7.5 %No: 92.5

36. How long have you lived in Jefferson County?High: 65 years Median: 16 yearsLow: less than 1 year Mean: 18.45

37. Where is your business located?Percent Number

Port Townsend 73.2% 104 businessesPort Hadlock 9 13 Port Ludlow 6.2 9Chimacum 4.2 6Quilcene 3.5 5Nordland 2.1 3Brinnon 1.4 2Coyle 1.7 1Total 100% 143 businesses

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Appendix C: Summary of goals of each local economic development agencyAppendix D outlines the goals of the four entities that have formal economic development plans in Jefferson County that have formal economic development plans. These entities include the Port of Port Townsend, City of Port Townsend, Community Development of Jefferson County and the Public Utility Districe #1, and the Jefferson County Economic Development Council.

Port of Port TownsendThe Port is in the process of developing two plans: the 2003 Comprehensive Scheme and the FAA airport development plan. The 2002 outlines plans for various projects including marine expansion and work at the Port Hudson Marina. And, the Airport report is a master plan to rezone and develop areas around the airport as light industrial. Land now around airport is zoned residential. Crockett contends that JC Companies have expressed their interest in expanding their companies and feel as though the airport would be a good location .that want to expand (many from Glen Cove. All of these projects will require cooperation form other local economic development groups including the City, County and PUD. In addition to these projects, the Port is designing a study in collaboration with the JC Economic Development Council to assess the impact of the Marine Trades on the local economy.

Summary of economic development goals:These are the current projects/plan-should I include?Although the Maritime Trades have not named their strategy of economic development as the cluster approach, clearly many of the ways that they use are characteristic of the approach. These include co-marketing, sharing of knowledge, cross-referring of customers, etc.

The most current economic development projects include: acquiring haul out facilities started in 1998, and trying to recruit business into the space that was vacated by the lumber yard in date. Port bought 24 more acres near airport, with hopes of putting small businesses. City will sue them so they should have all the industrial. PLC will sue them.

City of Port TownsendAlthough an economic development element is not a required part of the GMA comprehensive plan, the Port of Port Townsend developed an economic element in 1996 to help guide the City’s efforts. This plan has not been updated. The City’s plan outlines the overall

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economic development goal to foster a balanced, diversified and sustainable local economy that contributes to Port Townsend’s high quality of life through the protection and enhancement of the community’s natural, historical, can cultural amenities, and the improvement of the financial well being of its residents.” The plan then outlines other key goals including

coordinating with other local economic development groups to ensure that economic development strategies are carried out consistently,

train the workforce to develop skills for new technologies and family wage jobs

ensure responsive and efficient permit processing to provide adequate public facilities commercial and manufacturing zoning. commercial historic district revitalization The remainder of the plan focuses on strategies for specific

industries (marine trades, diversified manufacturing, community retail, tourism, and telecommunications

Jefferson County Community Development DepartmentThere are currently two policy documents that the County’s Community Development Department uses to guide its work: Economic Development Element Plan of the GMA Comprehensive Plan15 and the Strategic Plan of Jefferson County. The Economic Development Element plan is primarily used to advise land use decision, where as the strategic plan is used to advise County budget decisions.

Key Goals of the County’s Comprehensive Plan include: The comp plan is predicated on the idea that small businesses are the future of Jefferson County. This marked a shift in land use policy which prior to this focused more on recruitment strategies.

Promote economic opportunity for all citizens of the County, especially youth, unemployed and disadvantaged within the capacities of the County’s natural resources, public services and public facilities

Encourage programs aimed at education, job training and retraining, and skills enhancement that are responsive to the changing needs of local businesses and residents

Establish a targeted industry program that promotes Jefferson County’s strengths and advantages

15 See County website for entire document

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Coordinate efforts with federal, state and local economic development groups

Provide regulatory incentives Support the full range of human and social services Promote the development of tourism and tourist related

industries Encourage Economic Development that conserves natural

resources and open spaces, protects environmental quality and enhances quality of life

Provide, maintain and encourage phased infrastructure development that is adequate to attract and accommodate desired economic growth and is consistent with the Growth Management Act

Key Goals of the Strategic Plan of Jefferson County16 Creating a sustainable and economic base focused on family

wage jobs and geographic distribution Promote educational opportunities to support post secondary

schooling, lifelong learning, and workforce training Improve the balance between the cost of housing and earned

income Sustainable utilization of natural resources the preserve our

County’s physical beauty and delicate ecosystems. A healthy and safe citizenry Adequate public facilities for work and play Affordable government

Jefferson County Economic Development CouncilAccording to the Executive Director of the EDC, the EDC has a “balanced approach” toward economic development. The approach includes:

Supporting the creation of new businesses Assisting existing businesses to expand Promoting Jefferson County for investors and entrepreneurs

interested in relocating their businesses Creating a healthy environment for business The EDC also utilizes a strategy of “Play to the Positives-grow

more of what we have”. This strategy means building on the existing industry strengths in the County including (arts, niche manufacturing and tourism).

16 See County website for entire document

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