Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

ThoughtLeader Thursday: Paul Krutko Implements San Jose's Anti-Bubble Strategy

Posted by Tom Foremski - June 19, 2008

[Interview with Paul Krutko - San Jose's Chief Development Officer.)

When the dotcom dotbomb burst in 2001, San Jose lost 225,000 jobs over a two year period--it was a disaster, it was a larger loss of jobs than for any other US metropolitan area since the Great Depression.

Now as the economy recovers, the city of San Jose is being proactive in helping its businesses succeed in the global economy, and also to create a diversity of economies to balance out boom and bust cycles in different markets.

Paul Krutko is the architect of San Jose's strategy, working with mayor Chuck Reed to implement a broad number of changes: in how permits are granted, to building incubators for green technologies, and helping San Jose become the "greenest city" in the US through innovative housing and transportation policies.

So far so good . . .

I spoke with Mr Krutko earlier this week and asked him about the Silicon Valley economy and if there were any signs of a recession.paulkrutko.jpg

"San Jose represents about 60 per cent of all Silicon Valley jobs so we see trends first. So far, we don't seem to be impacted by the recession, our unemployment rate is low, 5.2 per cent, a full point below the California average," said Mr Krutko.

Since 2003, San Jose has steadily been gaining jobs, about 55 thousand, and 11,700 in 2007. Although the number is still well below the number of lost jobs, "the graph shows a steady and consistent increase which is what we like to see."

A key focus for San Jose is to make sure that its largest companies are well supported and that the smallest companies have a place to grow such as in one of San Jose's incubators.

To help growing companies, San Jose has made it easier to gather the permits for expansion. Instead of running around to several different agencies to get the permits needed, San Jose has instituted a program where in just one meeting, companies can meet with representatives of all the agencies and get permit approval in as little as a few hours.

This program has helped speed approval of about 9.1m square feet of office space, representing 15 thousand jobs, and equivalent to twenty seven 17 storey buildings (San Jose's height limit).

Similar speedy permit pre-approval has been applied to production equipment from which the city earns a property tax.

Shortening the commute . . .

With higher gas prices local businesses have sought to bring down the long commutes for their staff. San Jose has now changed some of the zoning restrictions for property that is close to the light rail corridor.

Businesses were only allowed to build on 35 per cent of their acreage."We now allow businesses to build as much as 135 per cent of their acreage, so we have a taller and denser footprint along the light rail corridor. We also have approved 32,000 residential units so that people can live closer to work," said Mr Krutko. About 3 million square feet of 29m square feet of new office space has been built, and 8 thousand residentail units have been built so far.

Eggs in many baskets . . .

Green is an important focus and the city has an ambitious plan to be off the grid by 2025. Green and clean energy incubators are a way that San Jose seeks to diversify its economy. "San Jose has traditionally more focused on hardware, now we are building clean and green tech busineses and also in the biosciences to try and increase our economic diversity."

San Jose was recently chosen as the site for the largest solar testing and certification facility by Underwriters Laboratories, which should help attract more solar businesses to the area.

Newer airport . . .

San Jose is spending $1.5 billion on its airport expansion to accomodate an expected population increase of abut 325 thousand in the next 25 years. "The airport will have sophisticated security measures built-in rather than added afterwards. It is the first major airport expansion since 9/11."

Ethnic diversity . . .

San Jose is the most ethnically diverse metropolitan area in the US if you count the Asian and Hispanic populations - more than Los Angelese or Miami. About 39 per cent of its population is foreign born. It has the largest Vietnamese population in the US and this also creates large economies that service those populations. San Jose says that there are 50 languages spoken in the city [that might help establish call centers serving multiple markets].

Competition . . .

"We get a lot of delegations from other states coming here to make presentations to some of our largest companies so we need to be competitive. We can't compete on housing costs, etc, but we can on productivity, which is twice higher than anywhere else in the US."

San Jose's firms such as Cisco are also opening operations elsewhere and abroad but this doesn't trouble Mr Krutko. "I was asked if I was bothered by Cisco opening up a large operation in India. I said I would be bothered if they weren't. We want healthy companies that can compete globally."

The future looks bright. "So far, knock on wood, we're feeling very bullish."

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Additional Info:

San Jose has had a tough time keeping attracting businesses to its downtown area. The blog San Jose Revealed has a couple of interesting posts.

Paul Krutko bio:

Mr. Krutko has 28 years of experience in leading community and economic development; most notably in the cities of Cleveland, Ohio, Jacksonville, Florida and San Jose, California. He has been responsible for all aspects of development and revitalization programs including downtown initiatives. In San Jose, he has led the development and implementation of the city�s Economic Development Strategy that includes 15 specific initiatives and over 100 distinct tactical projects. Significant accomplishments include 9M square feet of retention and expansion projects for headquarters facilities for eBay, BEA systems and Hitachi Global Storage and the purchase of 75 acres of the FMC Corporation for expansion of the Mineta San Jose International Airport. Most recently, he led the city of San Jose team that created the Vision 2030 Plan for the 4700 acre North San Jose area of the city, one of the preeminent innovation and technology districts in the world that currently houses 60,000 jobs, over 1200 companies and 42 M square feet of office-research development. This plan will intensify the development in this area by allowing for 28 M square feet of additional office-research development and 32,000 new housing units.


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