Marin County benefits from healthy lenders; lessons from Hamilton

NORTH BAY – Keeping money and resources in the community was the underlying theme of Impact Marin, the third-annual issues-centered conference sponsored by the Business Journal and focused on Marin County.

Held at the Embassy Suites in San Rafael and attended by about 160 people, the panelists were Russell Colombo, president and chief executive officer of Bank of Marin; Moss Adams’ Senior Business Consultant Steve Jannicelli; Orion Partners principal Haden Ongaro; Matthew Hymel, Marin County administrator; and Bill Petrocelli of Book Passage.

The speakers addressed a broad spectrum of topics from the local impact of added bank lending through the federal Troubled Asset Relief Program, how businesses are adjusting to the new economic reality, the ripple effect of the state fiscal crisis, the lessons of the success of the Hamilton Landing development to the importance of supporting local retailers.

A summary of each of the speakers follows:

Russ Colombo, Bank of Marin

Mr. Colombo said there is a lot of misunderstanding about the U.S. Treasury’s Troubled Asset Relief and Capital Purchase, or TARP, programs.

He said the public has tended to lump all financial institutions in with the large banks that received the initial $125 billion, some of which didn’t want the funds.

Bank of Marin participated in the program, receiving $28 million from the Treasury. The Treasury, in return, received preferred stock under the program.

Because the funds are part of the bank’s capital base, they will allow Bank of Marin and other banks that receive the funds to leverage them with significantly higher amounts of lending.

Mr. Colombo said Bank of Marin quickly lent the entire $28 million into local markets.

But not everything about the program has been easy, he said. The Treasury rolled the program out very quickly, “almost a ready, fire, aim,” he said. The agreements with the banks that elected to participate are still in flux as the rules keep changing.

When the first signs of the economy’s downturn were visible, “There was a desire to get capital quickly, and make the rules later,” he said.

What banks should be doing is putting the money back in the community. That is the purpose of the program, so the local economy is stimulated and local businesses are supported.

Then, he said, the local businesses can turn around and put that money in the community by helping nonprofits and other community-based projects.

He also recommended to business owners that they do their homework when choosing a bank.

“Look at the bank’s nonperforming loans,” he said.

In a positive for Marin County, he said, there are a lot of prudent lenders.

“We have a lot of banks that are very healthy,” he said.

He also encouraged local companies to support community organizations with financial and other resources.

Steve Jannicelli, Moss Adams

“We have been living on credit both personally and professionally,” Mr. Janncelli said.

“People seem to be wondering when it is going to go back, and my hope is that it never goes back. The last 10 years have been a series of bubbles and anomalies.”

He talked about the “new reality” of “how we perceive ourselves now and how we think about the future.”

For business owners, he agreed with Mr. Colombo. “Have a relationship with your banker as though they are a business partner,” he said.

Getting back to fundamentals will be a first step. Business owners need to be thinking about cash and financial management. Also, he said, remember to do things with the understanding that everyone is affected by the crisis – employees, customers and vendors.

But things are looking somewhat up.

“The level of uncertainty is declining,” he said. “We are not heading for breadlines and gas rationing.”

Matthew Hymel, Marin County

While the economic downturn is certainly impacting Marin County, the county is doing much better than the rest of the state, Mr. Hymel said.

Unemployment statewide is 9.3 percent, in Marin it is 5.4 percent. And the median home price in December 2008 for a single-family detached home was $281,100 for the state and $675,000 in Marin.

Though clearly not all is rosy, he said. There is and will continue to be a lack of money going to the county government from property taxes due to the reduction in home values. And 30 percent of Marin’s budget comes from the state budget.

The county has been on a hiring freeze since 2007 and dropped 30 positions last year.

“There will be reductions over the next five to seven years,” he said.

And while unemployment is not as bad as in the rest of the state, it is up. He said county revenues are not keeping up with the costs of providing current services at precisely the moment of increasing demand created by the soured economy.

He said there will be a push for the local businesses to support the Marin Economic Commission, which is charged with studying the future of the area’s economy.

The commission currently is forming an economic roundtable.

Haden Ongaro, Orion Partners

The 34-tenant, 405,000-square-foot business cluster at Hamilton Landing was created out of the philosophy that people can “live, work, play, belong” all in the same area.

An air force base built in 1934, the site was decommissioned in 1974 and sold to the city of Novato in 1985.

In 1993, the first houses were built on the land, and in 1998, the hangars and surrounding acreage were sold to Barker Pacific Group.

Mr. Ongaro, who has been involved in the creation of Hamilton Landing’s business cluster, said they started taking prospective tenants to see the site in 1996.

Hamilton’s Landing was at 100 percent occupancy in December of 2008, including a burgeoning group of digital arts companies.

The space was particularly desirable because of the uniqueness of the hangars and the setting.

In addition to using existing buildings, green features include a raised floor mechanical and air system, bicycle storage, parking capacity for alternative transportation and a system that shuts off the lights in every suite at a pre-scheduled time.

Marin County could use more of this kind of thinking about existing space, both residential and commercial, Mr. Ongaro said.

Mr. Ongaro said the county has a history of successfully working through periods of rising commercial vacancies that it is experiencing now. In general, he said, industry analysts say a 10 percent to 12 percent vacancy rate is where commercial real estate is at equilibrium.

“We are now at 18 percent and will probably be at 20 percent sometime this year,” he said. He echoed the sentiments of both Mr. Colombo and Mr. Jannicelli, saying communication with business partners is key.

He said one option for a business today could be to extend a lease agreement to the current market rate if possible. If the landlord is willing to lower the rent, and the tenant agrees to sign another couple of years on the lease, that will be a positive thing for both parties, he said.

Bill Petrocelli, Book Passage

“When people buy from you it is like they are voting in favor of your business” to be around for years ahead, Mr. Petrocelli said.

The owner of Book Passage in Corte Madera, Mr. Petrocelli had a number of things to say about the local economy and retail. But first and foremost? When in doubt, buy local.

The feel of any community comes from its retail core, which in turn brings business into the county, he said.

“The retail shopping center defines a city,” he said, “without it, a city dies.”

Locally owned companies are also supportive of the communities in which owners, employees and customers live and work. “It is about giving back,” he said.