The San Gorgonio Pass Business Survey 2010

The San Gorgonio Pass Business Survey 2010 Prepared by the San Gorgonio Pass Economic Development Association, City of Beaumont, Riverside County Economic Development Agency, Riverside County Workforce Investment Board, Mt. San Jacinto College, and the Center of Excellence for Inland Empire Region December 2010

Important Disclaimer All representations included in this report have been produced from data collected by businesses in the study area. Efforts have been made to qualify and validate the accuracy of the data and the reported findings; however, none of the participating partners are responsible for applications or decisions made that are based upon components or recommendations contained in this study. 2010 Pass EDA Please consider the environment before printing. This document is designed for double-sided printing. 2

Table of Contents Introduction and Methodology... 4 Business & Community Conditions... 6 Business Conditions... 7 Community Conditions... 9 Characteristics of Local Businesses... 11 Economic Development Needs... 12 Employment Assessment... 15 Workforce & Training Needs... 17 Summary and Conclusions... 18 Appendix A: North American Industrial Classification System (NAICS) Codes Excluded from the Study... 20 Appendix B: Survey Instrument... 21 Appendix B: Top 20 Industries in the Pass by Employment (secondary data)... 27 3

Introduction and Methodology The Business Survey 2010 of the San Gorgonio Pass area is the result of a collaborate effort among local governments, agencies and community organizations. The study was funded through a grant awarded to the Pass Area Economic Development Association (PassEDA) by the Riverside County Economic Development Agency (EDA) and the Workforce Investment Board (WIB). The City of Beaumont, in cooperation with the City of Banning, the City of Calimesa, the County of Riverside, the Morongo Band of Mission Indians, the Pass Economic Development Association (PassEDA), Mt. San Jacinto Community College (MSJC) and the chambers of commerce serving the Pass area, were the agencies participating in survey development and implementation. In short, the purpose of the survey was to measure employer-staffing needs, identify businesses at risk of downsizing and/or relocating, and identify opportunities for the Riverside County EDA to enhance Rapid Response (RR) activities in the San Gorgonio Pass cities and their surrounding unincorporated areas. The geographic area of the study included the following zip codes (see the map below): 92220 City of Banning 92223 City of Beaumont 92320 City of Calimesa Considering the small size of the geographic area, the research team did not utilize any sampling strategy. Instead, all businesses known in the area were targeted for survey participation. Roughly 1,800 firms were contacted using a variety of distribution methods, and 210 completed surveys were returned, yielding about 12% completion rate. The overwhelming majority of the surveys were completed online, with only about 20 returned by mail. To avoid duplication with an ongoing two-county regional research project, we did not survey any firms with the North American Industrial Classification System (NAICS) codes listed in Attachment A. 4

Study elements included survey design, distribution, data collection, response, analysis, and report preparation as outlined below. Design The questionnaire included seven (7) Riverside County EDA developed core questions. Additional questions were developed by the above-mentioned participating agencies and organizations. Experience and knowledge gained through their participation in previous business survey, visitation and Red Team programs were utilized to build an effective survey instrument. Final survey questions were negotiated and finalized by the Riverside County EDA prior to commencement of the project. The final survey tool can be found in Appendix B of this report. Distribution The study team utilized a myriad of distribution and recruitment strategies to maximize survey participation rate, including the following: PassEDA conducted a pre-distribution workshop to train those participating in program administration and logistics. The workshop, and related PowerPoint presentation, were captured on video and posted online for on-going reference. Participating chambers of commerce and PassEDA developed distribution databases utilizing local sources of information. A web site (www.bizsurvey2010.net) was created and used to solicit survey participation and for training staff. The site provided instructions and resources needed to avoid including any firms with the North American Industrial Classification System (NAICS) codes list in Attachment A. Public information campaign directly preceded the distribution of questionnaires, including (but not limited to): Launch of BizSurvey2010.com public information web site (hosting electronic survey tool) Press releases to local print media Program description and call-to-action coverage in chamber newsletters Announcements on local access TV station Announcements on social networking sites Announcements on local electronic billboards Presentations to city councils and chamber boards Presentations at PassEDA meetings Email (opted in only) notification To ensure maximum participation and effectiveness, businesses were offered an incentive (participation in a raffle) to complete the survey online. Collection Businesses were provided appropriate information and instructions along with the questionnaires. They were also provided access (through an on-line registration & approval process) to a secure (SSL- ed additional information and updates. included an opt-in free BizSurvey2010 Newsletter subscription opportunity and RSS feed capability. Respondents also had access to phone and email support, live chat timeframes, and a video tutorial. 5

Respondents submitted their completed questionnaires by postage-paid return envelope or by participating in the secure on-line survey. All the data were collected in Fall 2010. Response All questionnaire responses, or inquiries, identifying employer staffing plans indicating a need for RR layoff services were reported to the Riverside County EDA within 24 hours, as were recruitment plans and other employment service requests. Analysis and Report The regional Center of Excellence, an initiative of the Economic and Workforce Development program in the California Community Colleges system, conducted survey data analysis and compiled the final report. The report summarizes the study results organized into five distinct sections: Business & Community Conditions Characteristics of Local Business Economic Development Needs Employment Assessment Workforce & Training Needs Business & Community Conditions In order to gauge the perception of success of business operations in the Pass, respondents were asked to provide their assessment of the business climate on a scale from Very Poor to Excellent. Over half of all businesses (53 percent) believe the business climate to be poor or very poor. Conversely, only 16 percent of businesses surveyed consider the business climate to be better than average. The rest 31 percent of firms think that the business climate in the area is average (see Figure 1). Figure 1 - Business Climate One specific measurement of the business climate in the area is the ease with which local businesses are able to comply with California state business regulations. Survey respondents were asked to provide their feeling on how difficult or easy they find it to be in compliance. The results show that more than half of all survey participants find it harder to comply with state business regulations while only 8 percent are finding it easier (see Figure 2). 6

Figure 2 - How easy is it to comply with state business regulations? Harder Nearly Impossible No Change Somewhat Easier 8% 23% 56% 13% Business Conditions Survey respondents were asked to rate 27 aspects of business as they currently exist in the San Gorgonio Pass. Figure 3 provides a look at the responses across the business conditions. Based on the responses, the most favorable business conditions include availability of supplies, vehicle access to businesses, and flexible store hours. One hundred and seventy four of the 210 establishments surveyed (83 percent), believe the availability of supplies is either adequate or better than adequate; 163 out of 210 (78 percent) feel that vehicle access to business is adequate or better, and 159 businesses (75 percent) gave better than adequate ratings to flexible store hours. Some business conditions were deemed less favorable by local businesses. The majority of all firms (over 50 percent) believe that the following six aspects in the area are poor or fair: Availability of credit Attractiveness of sidewalks Proximity to college Energy costs Popular anchor business Attractiveness of stores Among those, availability of credit, attractiveness of sidewalks, and proximity to college require the most attention. 127 of 210 (60 percent) businesses feel that the availability of credit is unfavorable, 123 of 210 establishments feel that the attractiveness of sidewalks and the proximity to college are fair/poor (59 percent). 7

Figure 3 Quality of Business Conditions Availability of credit Attractiveness of sidewalks Proximity to college Energy costs Popular anchor businesses Attractiveness of stores Training programs Economic development Environmental Regulations Appearance of streets Cooperative efforts among businesses Availability of qualified labor Availability of Energy Efficiency programs Zoning Business related signage Local government relationship Access to customers Pro Business Attitude Public transportation Pedestrian anchor businesses Ability to expand Prices Parking Opportunities for advertising Flexible store hours Vehicle access to businesses Availability of supplies 60% 59% 58% 53% 53% 52% 50% 50% 48% 48% 45% 44% 43% 40% 39% 31% 31% 31% 28% 26% 25% 24% 22% 17% 31% 31% 32% 30% 16% 36% 44% 20% 36% 34% 29% 38% 38% 46% 31% 23% 24% 61% 42% 32% 49% 44% 46% 51% 60% 54% 9% 10% 10% 17% 31% 12% 6% 30% 16% 18% 26% 18% 19% 13% 18% 28% 37% 37% 8% 27% 37% 23% 30% 29% 24% 18% 29% 0% 20% 40% 60% 80% 100% Poor/Fair Adequate Above Average/Excellent Respondents were also asked to rate same business conditions in terms of their effectiveness in encouraging new business creation, existing business retention, and existing business expansion. The same 3 business conditions that were deemed poor or fair in their current state were also the lowest scored in terms of their effectiveness; availability of credit, proximity to college, and attractiveness of sidewalks. A similar pattern emerged for the most effective business conditions; vehicle access to businesses, availability of supplies, and flexible store hours were shown to be the most favorable current conditions as well as the most effective conditions for business growth. Figure 4 displays the ratings of the effectiveness of all business conditions. 8

Figure 4 - Effectiveness of Business Conditions Availability of credit Proximity to college Attractiveness of sidewalks Energy costs Environmental Regulations Attractiveness of stores Availability of Energy Efficiency programs Economic development Training programs Availability of qualified labor Cooperative efforts among businesses Appearance of streets Zoning Local government relationship Popular anchor businesses Business related signage Access to customers Ability to expand Pro Business Attitude Pedestrian anchor businesses Prices Opportunities for advertising Public transportation Parking Flexible store hours Availability of supplies Vehicle access to businesses 57% 56% 53% 50% 49% 49% 49% 49% 48% 47% 46% 46% 42% 40% 40% 40% 38% 33% 30% 30% 29% 29% 26% 26% 25% 31% 34% 32% 35% 39% 33% 35% 22% 45% 37% 26% 34% 47% 26% 37% 40% 33% 28% 26% 47% 51% 60% 46% 51% 49% 55% 12% 10% 15% 15% 12% 18% 17% 29% 8% 17% 28% 20% 11% 33% 22% 20% 27% 33% 37% 20% 18% 29% 11% 26% 23% 25% 20% Poor/Fair Adequate Above Average/Excellent Community Conditions Surveyed businesses provided their assessment of a host of community conditions as well. These community conditions are measurements of the external business environment in the surrounding area, not directly related to the business needs. Ratings of the various community conditions are provided in Figure 5. The large majority of respondents, approximately 65 percent, believe that government provided services such as police and fire protection are above average and/or excellent. On the other hand, respondents ranked among the least valued community conditions such things as the attractiveness of the area, entertainment options, and child care. On average, 50% of all responses rated these conditions as fair/poor. 9

Figure 5 Quality of Local/Community Conditions Attractiveness of area Entertainment Options Child Care Cultural Amenities Local government Non-business directional signage Health care services Libraries Chambers of Commerce Community Events Parks/recreation facilities Housing Public services (non-safety) Schools Police protection Fire Protection 55% 52% 44% 40% 38% 34% 26% 26% 25% 22% 22% 21% 18% 14% 10% 25% 10% 26% 28% 38% 45% 44% 40% 43% 35% 44% 43% 48% 24% 20% 37% 11% 47% 9% 31% 24% 20% 30% 34% 34% 35% 43% 35% 40% 38% 65% 64% 0% 20% 40% 60% 80% 100% Poor/Fair Adequate Above Average/Excellent Establishments were also asked to rate the local/community conditions with regard to how effective they are in encouraging new business creation, existing business retention, and existing business expansion. The same community conditions were rated unfavorable in effectiveness as in their current state; attractiveness of area, entertainment options, and child care. Again, businesses rated government provided services (fire and police protection) among the most effective local/community conditions. Figure 6 displays the results of the ratings of all local/community conditions. 10

Figure 6 Effectiveness of Local/Community Conditions Attractiveness of area Entertainment Options Child Care Local government Non-business directional signage Cultural Amenities Libraries Chambers of Commerce Housing Health care services Community Events Parks/recreation facilities Schools Public services (non-safety) Police protection Fire Protection 45% 36% 34% 28% 26% 25% 23% 22% 19% 18% 17% 16% 10% 20% 7% 30% 25% 40% 27% 48% 46% 32% 31% 35% 37% 46% 44% 45% 46% 70% 63% 30% 19% 18% 37% 18% 26% 43% 42% 40% 36% 39% 38% 38% Characteristics of Local Businesses The San Gorgonio Pass business environment appears to foster local business, according to survey responses. Establishments were asked a series of questions to ascertain the types of businesses that exist in the area. According to responses, 90 percent of businesses surveyed are owned and/or leased. Nearly 84 percent of businesses are owned by a Riverside County resident and approximately 80 percent of businesses are family owned. Although a large percentage of businesses are family owned, only 45 percent are home based. Table 1 displays the total responses for each characteristic. Based on responses, it appears that the prominent characteristics of businesses in the Pass are that they are owner operated family businesses of Riverside County citizens. Presumably, there is no strong presence of corporate chain establishments in the area. Table 1 - Business Characteristics 0% 20% 40% 60% 80% 100% Poor/Fair Adequate Above Average/Excellent Characteristic Yes No Owned/leased by respondent 189 21 Owned by Riverside County Resident 176 34 Family Owned Business 166 44 Home Based Business 95 115 Since the Pass is a fairly remote area of Riverside County, internet presence is important for the successful operation of business. The survey asked respondents to indicate whether or not their business had a website. 117 of the 210 businesses (56 percent) do have a business website but just more than half of 11

those with a website, 52 percent, noted that sales are not made through their website. Those establishments with a business website were asked to provide the frequency with which their site is updated. Their responses are provided in Figure 7. Approximately one-third of the local businesses update their site monthly while only 16 percent report daily updates. There were 93 businesses that currently do not have a business website. Of those, 46 percent do plan to establish one. Figure 7- How Often is Your Website Updated? Economic Development Needs The majority of businesses, 84 percent, indicated that they are not thinking of adding space to their facility, while about 16 percent are considering making additions. Of the 203 businesses responding to this particular question, 67 indicated no constraints for potential expansion (7 businesses failed to respond). For businesses reporting constraints, the most common was the need for financial assistance, with 44 percent of businesses reporting this constraint. Figure 8 outlines the frequency of responses for each identified constraint from the survey. 12

Figure 8 - Constraints for Expanding Business Businesses also identified additional constraints not listed on the survey. Commonly reported additional constraints by the 203 respondents included electronic costs (3 respondents), the need for support of local city to bring new business to the area (4) and poor economy (4). Seven other constraints were listed, all of which with low response rates (roughly 2% of total responses). Please note that businesses were allowed to select all constraints they may face, resulting in a response rate larger than the number of businesses participating. In addition to low levels of intention regarding expanding business, respondents also reported little intention to update current facilities. Only 30% of businesses (63 of 210) indicated having plans to remodel or improve existing facilities (other than expansion) within the next two years. Businesses in the Pass reported a wide range of possible future plans. While the majority of businesses where not certain of their future plans or had no plans, 17% reported intentions to sell, move or close operations. Figure 9 provides a breakdown of the plans for businesses surveyed. Figure 9 - Plan to Move, Sell or Close No Plans 17% Sell 6% Move 8% Close 3% Not Sure 66% 13

Of the 35 businesses with future plans, 12 intend to sell while six plan to close down operations. As indicated in Figure 9, at least 8 percent of businesses have plans to relocate operations. When all 210 businesses were asked about possible relocation destinations, the majority of respondents indicated San Gorgonio Pass as the most likely location. Figure 10 outlines the response rates by possible locations. Figure 10 - Possible relocation destinations 40% 35% 34% 30% 25% 20% 15% 10% 5% 24% 24% 18% 0% San Gorgonio Pass Out- of- State California Riverside County As illustrated by Figure 10, the likelihood that a business will relocate out-of-state is almost identical to moving to another part of California outside of the San Gorgonio Pass or Riverside County. The majority of businesses reported that during the past three years, they have experienced a decrease in sales. Figure 11 displays the responses for all businesses. Figure 11- Sales During the Past 3 Years 25% 23% 52% Decreased Increased Stayed the same As indicated in the figure, just under 50 percent of businesses (101) have either experienced an increase in sale or have remained the same throughout the past three years. The slight majority (52 percent), however, has suffered a decrease in sales. 14

Although the majority of businesses have suffered a decrease in sales, just under 40% of respondents are not interested in helping to plan strategies aimed towards increasing the success of businesses in the Pass. Figure 12 - Interest in Planning Success Strategies Somewhat Interested Extremely Interested 19% Not Interested 40% As shown above, the majority of businesses (60 percent) indicated some level of interest in participating. Employment Assessment Based on the results from the survey, the majority of businesses do not plan to hire additional employees. A small number of businesses in the Pass, however, reported the intention to hire additional employees despite the overall trend of a decline in sales. According to the data collected, businesses are expected to add 115 new employees across all five skill levels (skilled, semi-skilled, professional/management, unskilled, and clerical). Figure 13 shows the number of employees businesses anticipate hiring for each skill level. Figure 13 - Number of Anticipated Hires in the Next 12 Months Skilled 41 Semi-skilled 29 Professional/ management 20 Unskilled Clerical 11 14 0 10 20 30 40 50 Number of Employees 15

As illustrated in Figure 13, of those businesses anticipating hiring, the number of individuals they foresee hiring fluctuates across skill level. The majority of businesses expect to hire skilled employees. However, it is important to note that while the firms expect to hire a total of 40 skilled employees, these expected hires are reported by only 8 percent of all businesses surveyed (17 firms of 210). This demonstrates that more than 90% of businesses are not looking to add employees within the next year. Intentions to hire employees of certain skills levels generally align with the occupational classification businesses expect to have the greatest demand in the next 5 years. The majority of businesses anticipate that skilled occupations will be in the greatest demand, followed by unskilled trades and professional occupations. Figure 14 provides the breakdown of the occupational groups that are anticipated to have the greatest demand in the next five years. Each bubble in the chart represents each of the five occupational groups. The size of the bubble reflects a percentage of businesses reporting the greatest demand for a given occupational group. High expected demand for skilled occupations both in near- and mid-term emphasizes the need for a strategic approach to ensure that there are training programs available to the unemployed and underemployed workers to provide them with necessary skills. Figure 14 - Which Occupational Classification Will Have the Greatest Demand in the Next 5 Years? Clerical 2% Skilled Prof/ Management 10% 10 Unskilled 25% Semi- skilled 21% 0 While businesses in general are not hiring, some have also experienced lay-offs within the past year. Nearly one out of four businesses (46 of 210) indicated that this past year they had to lay off at least one employee. Based on survey results, businesses reported laying off a total of 139 employees. Most businesses that cut jobs (32 firms of 46) reported laying off either one or two individuals, while the remaining 14 businesses reported laying off three to ten employees. 16

On the positive side, however, businesses in the Pass do not expect to suffer as many lay-offs this year. Of the 210 businesses surveyed, only three (just over 1%) foresee laying-off employees this year (see Figure 15). Of those three businesses that do expect to let employees go, the combined number of individual employees projected to be laid-off is 9. This may indicate that businesses expect to endure less negative fiscal impacts in the near future. 50% Figure 15 - Percentage of Businesses Laying off Employees 40% 30% 20% 22% 10% 0% Past Year (Actual) 1% This Year (Expected) Based on the reported number of estimated hires and lay-offs, results indicate that overall, businesses in the Pass expect to slightly grow this year. The overall expected number of expected hires is greater than that of expected lay-offs. It should be noted that these are the projected numbers for this year and the accuracy cannot be determined. Overall, however, the survey revealed that businesses in the Pass might experience growth. Workforce & Training Needs Businesses surveyed have mixed opinions of skill/knowledge areas they believe to need more emphasis in the vocational training programs within the community. The overwhelming majority of businesses (almost 85 percent) believe that there are one or more skill areas that need more training, while 32 businesses (15%) did not identify any areas. The businesses that did not identify any training areas might feel that the current training within the community is adequately preparing individuals for employment. Aspects identified as needing additional training emphasis are outlined in Figure 16. 17

Figure 16 - Skills Needing More Emphasis (n=178) Customer Service 89 Basic Job Skills Math 70 74 Skills English 59 Computer 47 Other 28 0 20 40 60 80 100 Number of Responding Businesses Note that businesses indicated one or more skills, and therefore the reported percentages do not equal 100%. Of the responding businesses, about 50 percent indicated that customer service is the skill most requiring additional training, followed by basic job skills (42%) and mathematics (39%). According to the survey findings, businesses in the Pass are responding to the employee development needs by providing training internally. Of the businesses surveyed, 87 percent (183) indicated that they use their own employees to provide training, while 13% (27) do not. Compared to the results presented in Figure 16, the number of businesses who believe the community should provide additional training for some skills (85%) is very similar to the number of firms who utilize their in-house training options (87%). Summary and Conclusions The results of the 2010 business survey revealed that the firms in the San Gorgonio Pass believe that the business climate in the Pass is better than average. However, businesses did identify some obstacles to successful business operation in the area. Among those are difficulty in complying with state business regulations and a host of business and local/community conditions that are reported to be less than favorable. Areas for improvement, in both business and local/community conditions, that require special attention from the local governments and economic development agencies include: Availability of credit Attractiveness of sidewalks Proximity to college Energy costs Popular anchor businesses Attractiveness of stores Attractiveness of area Entertainment options Child Care Conversely, firms gave more favorable ratings to the following business and local/community conditions: 18

Availability of supplies Vehicle access to businesses Flexible store hours Fire protection Police protection The large majority of businesses in the Pass are family owned by Riverside County residents. Area establishments generally operate a business website although more than half do not process sales through their websites. Of the businesses that do not have a website, less than half of them plan to establish one. Only a small percentage of businesses (about 15%) in the area have plans for expansion. The most common expansion constraint noted was the need for financial assistance. Similarly, only a small fraction of businesses have plans to remodel or improve their current facility. When asked about future plans, very few businesses reported plans to move, close or sell their business. Possible relocation is mainly considered within another area of the Pass. The recent sales results for area businesses were mixed, with approximately half of businesses reporting a decrease in sales and the other half indicating the same or increased sales in the past 3 years. When asked about their willingness to help strategically plan for a more successful business climate in the Pass, nearly 60 percent of respondents indicated they would be interested to participate. Employment climate in the Pass appears to be slightly improving. One out of four businesses is anticipating to hire additional employees in the next 12 months, while less than 1 percent of all businesses surveyed expect potential lay-offs. Of the businesses that do expect to add employees in the next year, skilled occupations are what they will be looking for. To meet employment needs, businesses identified some skills that they believe need more emphasis in the training programs, including Customer Service, Basic Job Skills, and Math. 19

Appendix A: North American Industrial Classification System (NAICS) Codes Excluded from the Study The following NAICS Codes for Renewable Energy Cluster were excluded from survey: 221112 326140 334417 221119 326150 334418 221122 326191 334419 236115 326192 334512 236116 326199 334513 236117 332311 334514 236118 332312 334515 236210 332313 334519 236220 332321 335311 237110 332322 335313 237120 332911 335999 237130 332912 423310 238110 332913 423320 238120 332919 423330 238130 332991 423390 238140 332996 423610 238150 332997 423690 238160 332999 423720 238190 333411 423730 238210 333412 423740 238220 333414 541310 238290 333415 541320 238990 333611 541330 325211 333612 541350 325212 333613 541611 325222 333618 541618 326112 334411 541690 326113 334412 541712 326121 334413 561730 326122 334415 562211 326130 334416 562219 20

Appendix B: Survey Instrument 21

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Appendix C: Top 20 Industries in the Pass by Employment (secondary data) According to the secondary data sources, there were approximately 1,800 businesses reported in 2009 in the three zip code area of study (InfoUSA Inc.). The top 20 industries determined by number of employees are provided in the table below. The Retail Trade industry claims the largest number of businesses in the Pass with 427 establishments. The next largest industry, in terms of number of businesses, is the Other Services industry with 285 followed by the Construction industry with 210 businesses. NAICS Code Description 2010 Jobs Establishments % of Total Establishments 62 Health Care and Social Assistance 2,481 124 7% 44-45 Retail Trade 2,308 427 24% 90 Government 1,897 60 3% 72 Accommodation and Food Services 1,605 132 7% 81 Other Services (except Public 1,169 285 16% Administration) 23 Construction 1,105 210 12% 31-33 Manufacturing 993 57 3% 54 Professional, Scientific, and Technical 839 107 6% Services 53 Real Estate and Rental and Leasing 656 132 7% 42 Wholesale Trade 445 80 4% 56 Administrative and Support and 422 68 4% Waste Management and Remediation Services 48-49 Transportation and Warehousing 418 34 2% 52 Finance and Insurance 380 83 5% 71 Arts, Entertainment, and Recreation 330 35 2% 22 Utilities 156 5 0% 61 Educational Services 124 46 3% 51 Information 97 19 1% 21 Mining, Quarrying, and Oil and Gas <10 0 0% Extraction 11 Agriculture, Forestry, Fishing and <10 14 1% Hunting 55 Management of Companies and Enterprises <10 0 0% Source: EMSI Complete Employment 4 th Quarter 2010, Info USA Database 27