The Big Impact of Berkeley's Small Businesses
The approximately 5,000 small businesses that operate in Berkeley are the economic heartbeat of our City. Over the past five years, Berkeley and the Bay Area has enjoyed economic growth, which became stunted during the initial months of the COVID-19 pandemic. Since then, recovery efforts have brought back businesses and employment, and our tax base continues to recover. But despite working to overcome the unprecedented economic challenges brought on by the pandemic, the highest levels of inflation in over 40 years and a weakening global economy presents new challenges. While our economic future is uncertain, our efforts in recent years to build a strong foundation for our businesses will help weather any potential recession.
Economic Rebound from the Pandemic
In March 2020, a regional stay at home order was implemented in response to the outbreak of the worst pandemic in a century. Many businesses were forced to close, and unemployment in Alameda County tripled from 2.6% in December 2019 to 7.6% in December 2020. Even before the Shelter in Place took place, businesses were beginning to feel the impact in a sharp decline in patronage. While the Shelter in Place was essential in preventing an even larger disaster, the economic ramifications weighed heavily.
On the same day as the Shelter in Place went into effect, the City Council approved several policies aimed at protecting those impacted by the pandemic. This included a ban on evictions for non-payment of rent for both residential and commercial tenants, making Berkeley among the first cities to implement such a policy. Also on that day, Council established the Berkeley Relief Fund, which provided a down payment of $3 million from the City along with a fundraising campaign from private donors and community members that raised over $1.5 million. Through this funding, 700 businesses received grants to help pay rent, payroll, and related expenditures. Funds from the American Rescue Plan Act were also used to support local businesses during the height of the pandemic.
Many businesses have since recovered from the pandemic, with countywide unemployment dropping to 4.3% in December 2021. Berkeley’s unemployment rate at that time was even lower, at 3.6%. Most increases to employment happened in the tourism & hospitality industry, including the opening of the Residence Inn, a new hi-rise hotel in Downtown Berkeley. Tax revenue is up across all sectors, albeit still below pre-pandemic levels as of late 2021. The economic recovery continues, but the Office of Economic Development (OED) is working diligently to continue its support of small businesses.
Supporting Small Businesses
Shortly into my first term as Mayor, I worked with Councilmember Sophie Hahn in introducing the Small Business Support Package, building upon proposals I introduced as a Councilmember in 2016. Over the last few years, the Office of Economic Development has been leading efforts to implement these proposals. They include:
Improving outreach and communications with small business: OED has produced brochures with a general overview of their services and on the Revolving Loan Fund. They have also provided direct mail in the annual business license renewal mailer and conducted a business survey that had 575 responses to better understand the profile and needs of Berkeley businesses.
Increase support for businesses navigating the permitting process: In recent years, capacity to provide support has been increased, along with improved partnerships between City departments to improve customer service. Most permits applications are now online, making it easier to apply.
Modify the Zoning Ordinance to support small businesses: Several changes have been made in recent years to streamline the permit process for businesses navigating the zoning process. This includes reducing parking requirements, simplifying food services from three categories to one, reducing permitting costs and times for businesses requesting a change of use in existing commercial spaces, making commercial recreation such as bowling alleys and miniature golf easier to permit in commercial districts, and streamlining the permit process for restaurants serving alcoholic beverages.
Pilot new small business retention programs: In addition to partnering with the Berkeley Startup Cluster and Project Equity (details below), we have also worked with Uptima Business Bootcamp to provide education and advising to entrepreneurs, reaching out to 215 small business and nonprofit leaders in Berkeley before the pandemic. The retention caused by this program has resulted in nearly $5 million in revenue and 49 jobs.
Support independently-owned retailers with marketing, networking and education: OED, along with the Berkeley Chamber, Visit Berkeley, and local business associations have worked on a variety of promotional campaigns to support patronage of small businesses. Workshops and networking opportunities have also been provided, providing businesses opportunities to share best practices and learn from each other.
Increasing Innovation, Research & Development
Berkeley is home to over 400 businesses in its “innovation sector”. This includes tech, biotech, Research & Development (R&D), and other science, technology, engineering, and mathematics (STEM) industries. This number has risen considerably in recent years, with just 150 such businesses calling Berkeley home in 2013. Earlier this year, Council voted to update its definition of Research and Development, which allowed for the inclusion of office space for R&D purposes. This will allow R&D startups to grow in Berkeley instead of expanding by moving to another location.
Through the Berkeley Startup Cluster, the City, University, Berkeley Lab, and local business organizations are partnering to make policy changes and develop new programs and mechanisms to support the local innovation ecosystem. Berkeley Ventures, Berkeley Values (BV2), a program of the Berkeley Startup Cluster, provides startups with resources and advice to startup founders and tech industry workers to increase diversity, equity, and inclusion. Through ongoing support, 66 Berkeley companies raised $1.5 billion in capital in 2021, more than double the investment in 2020.
Expanding Worker Cooperatives
Berkeley is well known for being home to several worker cooperatives. These businesses, which are owned and run by employees, often provide higher wages, benefits, professional development, job security, and upward mobility for low to moderate income people. Just as importantly, these small businesses provide a diversity of locally owned services that become valuable community assets.
In 2019, Project Equity, which the City has partnered with to advance Worker Cooperatives, calculated that 1,200 Berkeley businesses are over 20 years old and employ a third of Berkeley’s workforce. Nationwide, half of business owners are looking to transition out in the next 5 years, but 85% have not come up with a succession plan. By promoting the option of an employee ownership succession, we will help ensure that the retirement of Baby Boomers, who own nearly half of all businesses in the Bay Area, will be met with a smooth transition to allow businesses to continue operating while providing new opportunities for its employees.
Over the last six years, the Office of Economic Development has been implementing policies I brought forward in 2016 to support worker cooperatives. Starting in January 2022, the City now includes worker cooperatives in its Buy Local contracting policy. Business license permit applications now allow any new business applicant to register as a worker cooperative. We have also partnered with the Sustainable Economies Law Center to provide legal assistance, lease negotiation expertise, and educational materials to support businesses converting to cooperatives. In 2019, the Revolving Loan Fund policy was expanded to include businesses seeking to convert to worker cooperatives.
We are a city that prioritizes resiliency. While we have sadly lost some businesses in recent years, our initial response to the pandemic and strong support and networks have given many businesses a lifeline to survive. As businesses continue to recover, we have allocated in the City Budget $1 million for small business rental and legal support, including a grant program for small businesses (less than 50 employees). We are also making our businesses greener, with East Bay Community Energy to provide 100% solar and wind powered electricity to commercial customers in October 2022 (residential customers were upgraded to 100% solar and wind in March). Next time you need to go shopping or are in need of a service, consider buying local, and support our own community. Lifting up our small businesses is key to a thriving economy.