Highlighting success within the economic landscape of our community
Economic Development Update
January 6, 2024
2023 S.W.O.T. Analysis for Economic Development
With the close of the calendar just around the corner, the City of Tehachapi continues to assess Economic Development priorities, recruitment, retention and reuse efforts within our City.
As has been tradition in recent years, an annual S.W.O.T. analysis is conducted and was recently presented as part of the Greater Tehachapi Economic Development Council meeting. This analysis investigates the Strengths, Weaknesses, Opportunities and Threats as we head into 2024 in economic development.
This internal assessment assists in ensuring that strengths are being properly leveraged, weaknesses are either addressed or at least realized in certain aspects when it comes to business development, opportunities are sought after and planned for while threats are realized, and property addressed in all efforts.
As some say, when it comes to real estate and throwing a fastball it is all about location, location, location.
As seen in the graphic, the City of Tehachapi had 1.2 million people make a total of 7.3 million visits to the city limits in 2023. This number assists greatly in marketing a city of 10,000 residents and the impact it has from the retail and business perspective, not only to the additional 30,000 residents in the unincorporated Tehachapi communities, but also the traveling public along Highway 58 and those utilizing our businesses from surrounding Kern County communities and cities.
Cost of Living
The cost of living in the City of Tehachapi is not "low" but it is "lower" than much of the state and in many cases the U.S. average.
As seen above, BestPlaces.net scores the City of Tehachapi just below the national average for the cost of total living, and 33% lower than the average for the State of California. This is a selling point for businesses in and around the city who need reasonably priced housing a living expenses for employees.
Home prices in the City of Tehachapi spiked in 2022 but have seen a reasonable leveling out in 2023 as newer inventory comes on the market. The average selling price for a single-family home in 2023 was $390,900, which is above the National average but nearly 48% lower than the average selling price in the State of California.
The City of Tehachapi is blessed to be the benefactor of so many community organizations, nonprofit entities and volunteers that not only shape this community but support and organize special events that drive local and tourism traffic into our City.
The City of Tehachapi has taken a more proactive role in either hosting events (Farmers Market, July 4th Festival, Hometown Christmas) while also supplying support for other events (Mountain Festival, Apple Festival, Memorial Day, etc.). By ensuring these events run smoothly, the attendee experience is a positive one which increases the likelihood of not only returning to that event in the future but also spending more time exploring or returning to our community.
Daytime population. Many retailers bank their business model on the "daytime population" those that work in a community and are more likely to spend money either at a restaurant or retailer during their lunch hour.
For Tehachapi, we have many residents that commute to our surrounding industries outside of Tehachapi. While we import many workers for retail and other businesses, the daytime population remains lower than many businesses would like to see. The graphic below represents the entire Tehachapi area labor force, however with the City of Tehachapi being the sought-after business location for many sectors as explained in many strengths above, the entire area's workforce impacts potential business recruitment.
While there is no long-term solution to this issue, attracting businesses desiring to both be located and employ local continues to be one small avenue for chipping away at this number.
The graphic below illustrates those that live in the zip code but are employed outside (7,086), those that live outside the zip code but are employed in the area (4,520), and those that both live and work Tehachapi (3,325). This graphic illustrates those that are actively employed and is provided by the U.S. Census Bureau.
It is no secret that while the City of Tehachapi is a more affordable lifestyle than most of the State of California, certain state regulations as it relates to employment law, benefits and regulations make operating in the State more expensive than the National average. This risk is realized by businesses both seeking to expand or to invest in our City. However, it can be a weakness when state mandated costs often surpass many of the other costs that impact the bottom line of a business. In addition, building regulations above and beyond those centered around safety add additional costs to new development within any community in the state.
The fact that the City of Tehachapi plays an integral supporting role near so many existing and emerging industries including renewable energy, mining, construction, law enforcement, defense, space exploration and more, is both a strength and an opportunity. These high-paying careers attract a workforce that are looking for a family-friendly community to call home and oftentimes that cannot be found in larger cities in the Antelope or San Joaquin Valleys.
These jobs however do not just mean one job, it means several jobs created by the existence of one job within a certain sector. The chart below shows the multiplier effect for one job in each of the sectors, many of which we have in abundance in and around the City of Tehachapi. Those industries create additional job opportunities into a local economy. For example, as seen below, one new construction job creates an additional four jobs within their local economy.
Businesses close for a variety of reasons, some internal, some external and some economical. While many might see retail vacancies as a "Weakness," it is a marketable opportunity.
With the costs of new construction, sometimes it is more convenient for a business to renovate an available space to meet their needs as opposed from building from the ground up. The City of Tehachapi has several prime retail and restaurant availabilities that provide an excellent starting point for a new business.
While closing any business is a loss for a community, it is also an opportunity for someone else to come in and repurpose that space and bring a new perspective or business model to the property. In addition, the City of Tehachapi has cultivated relationships with commercial real estate brokers, most of which are located outside of Tehachapi, to discuss lease rates, terms and assist in seeking potential local or regional businesses to occupy those spaces. These relationships are critical for outside brokers to understand the City of Tehachapi market and economic situation.
There are many existential threats that are consistently being addressed within business operations in the City of Tehachapi. Many of those are centered around new California laws or proposed initiatives from the State Legislature, many of which make sense for larger cities, but have an unreasonable impact on small cities like Tehachapi.
For example, recently signed legislation to mandate minimum wage increases for fast food workers will lead to some pay increases, but also potentially create a labor vacuum in the food service industry as many "back of the house" staff at a full-service restaurant, will elect to take a higher wage at a fast-food establishment, creating work shortages within the full-service restaurant industry.
Since California legislation tends to draw attention from other states who occasionally emulate them, the fast-food industry has already started testing artificial intelligence and other automated technologies within their organization which will eliminate some of the jobs to minimize the costs of goods to the consumer. However, some of those costs, both in the food service industry and the health care industry, who have also had legislation passed mandating pay increases, will be felt by consumers and rate payers.
An initiative, proposed by some of California's wealthiest corporations, titled the "Taxpayer Protection and Government Accountability Act" slated for a November 2024 vote, has been opposed by the Tehachapi City Council along with several other members of the League of California Cities. This measure, while attractive to many in title, passes many of the developer impact fees on to current rate payers and residents while reducing the costs of development. This measure also threatens the City of Tehachapi's recently approved Measure S that increased the sales tax rate in the city to 8.25% since the sunset clause of "until ended by voters" is not a specific date. The constitutionality of this measure has been challenged in the California Supreme Court, with arguments due in February. This initiative would harm local revenues by redefining many legally adopted fees for development and fines for code enforcement violations as "taxes" and changing many other areas of the California Constitution that redefine the criteria for charging impact and utility connection fees.
Other California polices and budget priorities, especially those related to the Corrections industry have already impacted Tehachapi with a pair of facilities closed over the last two years at California Correctional Facility in Tehachapi. While most of the jobs associated with those closures have been protected or transferred to nearby institutions keeping those families within the Tehachapi economy, the incarcerated count at CCI has been drastically reduced, leaving eyes on the next budget cycle regarding any future closures. Historically since the expansion of CCI in the 1980s, corrections have been an important employment sector in the community, while any additional cuts could harm the local economy, it would not have the drastic impact due to the diversity of employment sectors now in and around the City of Tehachapi.
This S.W.O.T. analysis will be used to ensure that strengths and opportunities are being leveraged while weaknesses and threats are properly addressed. It also serves as a road map for priorities for the City of Tehachapi economic development as goals and objectives are created as part of the 2024-25 fiscal budget year..
For more Economic Development news visit http://www.liveuptehachapi.com/303/Economic-Development-News.