City of Napa Economic Development Action Strategy

The city of Napa is a thriving commercial center for Napa County. Its economy’s unique and diverse combination of employment in agriculture, production, and retail; world- renowned hospitality offerings; and proximity to the core of the Bay Area—a major global innovation center—make Napa a city unlike any other in the world. With a robust hospitality sector and healthy production industry, Napa can play to its existing strengths, while building a more diversi ed economy in the future by attracting businesses and utilizing available space in innovative ways.

While the city of Napa on its own has a vibrant and thriving local economy, it also plays an important role in the larger Bay Area, which across its nine counties is the 18th largest economy in the world by gross domestic product. Napa is also positioned to take advantage of regional trends occurring throughout the Bay Area. This report will explore how best it can do so. Examining and understanding the data on Napa’s current economic trajectory can help the City to leverage its existing assets and move the city of Napa further toward economic diversification and sustainable growth.

Napa's Economy Today

The city of Napa’s economy can be defined by several key factors:
Five key sectors lead employment within the city of Napa, with small businesses providing the majority of the city’s jobs — Employment in Public Administration, Accommodation and Food Services, Healthcare, Retail, and Manufacturing made up more than 60% of the jobs located within the city in 2017 (Exhibit 2). Employment is also concentrated in establishments with fewer than 10 employees. Approximately 72% of the city’s jobs are within these types of business establishments (Exhibit 13).
Bustling tourism, hospitality, arts, and entertainment industries — The Accommodation and Food Services sector, with the Arts, Entertainment, and Recreation sector comprise 15% of the city’s employment base (Exhibit 2), and they serve as a driving force behind the city’s economy. These sectors have bene ted from Napa Valley’s reputation as a premier hospitality and viticulture destination, which has produced an increase of 600,000 visitors to the area between 2012 and 2016. Given growth in visitors to the city and spending by residents, Accommodation and Food Services is one of the fastest growing employment sectors in Napa.
The percentage of agricultural and production employment is higher in Napa than other Bay Area locales — the percentage of the population employed in agriculture is 7.1% in the city of Napa, and 12.1% of the city of Napa’s residents are employed in the manufacturing industry (Exhibit
9, using employment of city of Napa residents). Manufacturing is a growing industry in the North Bay, one that Napa can potentially tap into to a larger degree. On the other hand, the Professional and Information sectors are signi cantly smaller in Napa than in the rest of the nine-county Bay Area, making up 4% of employment in the city of Napa, compared to 19% in the Bay Area overall (Exhibits 2 and 6, using employment located within the city of Napa).
Healthcare is a large and growing industry — Napa’s growth in the healthcare sector mirrors trends seen elsewhere in the region and the country. The city is home to St. Joseph Health’s Queen of the Valley Medical Center, which draws in other healthcare-related companies and workforce from across the county.
The city is the county’s hub for living, working, and hospitality — the city of Napa is home to 62% of the county’s employment (Exhibit 3) and is also home
to 57% of the county’s residents (comprising 80,403 of the county’s 141,294 residents). Additionally, the lodging industry has made Napa the gateway for Napa Valley visitors. Four more hotel properties are estimated to be completed in the next six years, with three more hotel expansions coming online as well. According to, lodging tax revenues have grown by 97% since 2010, increasing from $9.8 million in scal year 2010-2011 to $19.5 million in scal year 2017-2018.
A more attainable living option compared to other Bay Area counties — Napa, much like the rest of
the region, struggles with housing affordability, with 39% of Napa County residents spending more than 30% of their income on housing costs—the federal definition of housing cost burdened (Exhibit 19). However, the city and county offer comparatively lower median home costs than San Mateo, San Francisco, and Santa Clara counties. Napa County’s median home price is $665,000—approximately half of the median home prices of those three counties.
A lower concentration of out-commuters — 42% of city of Napa residents work outside of the county (Exhibit 15), which is a relatively low number when compared to other places around the region, such as Fairfield, which has a 62% out-commute. This reflects an ability for Napa residents to nd work close to home and yields low commute times compared to other cities. However, the majority of out-commuters are concentrated in professional industries, with 73% making over $100,000 (Exhibit 16).
Opportunities to grow commercial and industrial jobs with cost of doing business advantages — along with relatively lower housing costs compared to the nine-county region, the city of Napa has lower- priced of ce space for both Class A and ex space. The average asking rent for Class A space in the city of Napa is $2.85 per square foot, compared to $4.60 per square foot in Oakland (Exhibit 21). Additionally, given the lower cost of living, labor costs also present opportunities for business attraction.

Recommendations for Napa's Future Sustainable Growth

This report draws on the findings presented above to provide recommendations that will assist the City of Napa in supporting its economy. The recommendations can focus the City’s economic development efforts on certain sectors, provide different ways to attract and retain new businesses, and create a more diverse set of employment opportunities.

Rethinking Economic Development Strategies
A promising strategy for economic development in Napa could focus on the growth of clusters around some of the city’s anchor institutions, which include St. Joseph Health’s Queen of the Valley medical center and Napa Valley College. Strategic efforts could encourage growth in healthcare and research and innovation. There is also room to grow and diversify the city’s hospitality industry, such as the attraction of hospitality-related technology to the area in the form of business-to-business services.
The City of Napa could utilize a range of incentives and programs to attract business and development to the city, as well as target growth in the specific areas or industries mentioned.
Financial Incentives — The City of Napa could draw on models used in other California cities to attract new businesses and encourage expansion of existing businesses. Examples include the City of Fremont’s reduction in impact fees, the City of Dublin’s Small Business Assistance Program, and the City of San Jose’s reduction in construction-related taxes for higher-density commercial development.
Business Assistance, Streamlining, and Marketing — Other types of tools potentially available to the City of Napa to spur economic development include providing locational assistance to businesses, marketing the area more heavily to businesses, and simplifying and shortening the permit process. Relevant examples include the business assistance and marketing partnership between the Santa Monica Chamber of Commerce and the City of Santa Monica, as well as the fast-track permit process in the City of Cerritos.
Reinforcing Local Production
This report identifies production industries as a sector that is gaining employment in the North Bay sub-region and could take greater hold in Napa given the right strategy. In particular, Napa is uniquely positioned to develop small-batch, artisanal production—a growing trend in manufacturing—given its existing strength asa global destination. This report explores two potential options to spur this type of manufacturing activity:
Create a Priority Production Area within city limits — the City could streamline permitting for new construction and redevelopment in this area and waive some fees. It could also create a plan for sustaining growth in local manufacturing employment.
Look for ways to partner on industrial development — the City of Napa could utilize its participation in the Bay Area Urban Manufacturing Initiative and spur partnerships with industrial developers by identifying underutilized real estate.

Creating Spaces for Innovation

This report recommends that the City of Napa pursue strategies to create new spaces for innovation. Three such possibilities include collaborative workspaces, business incubators/accelerators, and maker spaces. These sorts of spaces have had great success elsewhere in the Bay Area and could present new opportunities for Napa. Across all these models for innovative spaces, the City can look for potential partners such as academic institutions and philanthropists to move these types of initiatives forward.

Utilizing Lodging Tax Receipts for Economic Development

The hospitality, arts, and entertainment industry brings a large amount of revenue to the City of Napa, mainly in the form of Transient Occupancy Tax (TOT) receipts. This money goes into the City’s general fund and with voter approval of a housing measure in November 2018, an additional percentage of TOT may now be used for affordable and workforce housing. There may be opportunities to use more of TOT for economic development purposes. For example, enhanced business attraction activities geared toward growing regional businesses or additional downtown place-making investments could bring more rms to grow employment within the city. Other options may include direct services and incentives to small businesses that are navigating the City’s permitting processes. However, the City must balance its need to fulfill its obligations to residents with any potential new use of TOT receipts.