Reinventing Manufacturing

Reinventing Manufacturing
California’s high workers’ compensation premiums are
attributable to higher-than-average utilization. California’s
rate of work injury claims per 1,000 workers
is 46 percent higher than the national average. While
reduced claim frequency has been driving rates lower
across the country, in California, claim frequency increases
of 3.2 percent in 2012 and 3.9 percent in 2013 have
been pushing expenses higher. 47
California’s system is also more expensive to run because
of complex administrative features, which were
the target of Senate Bill 863, passed in 2012. The legislation
aims to reduce “friction” in the system and generate
savings to enable employer premium reductions.
To date, potential savings, estimated at $200 million
annually (or 1.2 percent of total system costs) have been
eclipsed by claim payment increases. 48
Limited Land Availability for Industrial Use in
Urban Areas
In California’s two leading manufacturing regions, the
San Francisco Bay Area and Los Angeles, manufacturing
development is being constrained by a lack of land
availability as well as by a scarcity of vacant manufacturing
facilities that could be repurposed for alternative
uses. Bay Area industrial vacancy rates are currently
approaching the historic low levels set in the late 1990s
during the dot-com boom. Larger manufacturers are
beginning to look outside of the immediate Bay Area to
markets in San Joaquin County where available options
and rental rates are more favorable.
In Los Angeles, a manufacturing base that was located
within the central urban core has continually been
pushed to outlying areas as land use policies have
shifted. The City of Los Angeles has only 8 percent of its
total land base zoned for industrial uses; however, nearly
30 percent of this land has already been redeployed
for commercial and residential uses. Competition for
industrially-zoned land in Los Angeles remains high as
evidenced by its 3 percent industrial vacancy rate, the
lowest of any metropolitan area in the state.
Industrial land use policies can alleviate some of the
land availability issues that manufacturers encounter
in California. Industrial zone policies date back to the
1980s when Chicago, New York City, and Portland
created planned manufacturing districts in order to
protect industrial land that was being encroached upon
by residential uses. Manufacturers in these districts were
afforded special rights, such as expedited permitting
for building expansion and eligibility for special
financing options, and they received benefits, such as
city-provided infrastructure spending on new bridges
and streets and on improved transit and transportation
options to support employment.
More recently, New York City created 15 Industrial Business
Zones in 2006. These zones were intended to foster
real estate support for manufacturers by limiting the
potential for residential rezoning, along with tax credits
and zone-specific planning efforts supporting business
relocation. Since that time, a large amount of land in
these industrial safe havens has been converted to commercial
uses—prompting the New York City Council to
reevaluate its land use policies for manufacturing.
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