Local hiring — and purchasing

Pub date December 14, 2010

EDITORIAL The local hire ordinance that the Board of Supervisors approved last week once again puts the city on the cutting edge of progressive policy. San Francisco’s law, sponsored by Sup. John Avalos, is the strongest in the country, and ultimately will mandate that 50 percent of all the people hired on public works projects live in the city.

The politics of the bill were tricky; the local building trades unions opposed it on the grounds that many of their members live out of town and that hiring decisions should be based on seniority, not on residence. But eight supervisors recognized that a local hire law not only benefits the large numbers of unemployed San Franciscans; it’s also good economic policy for the city.

Numerous studies have shown that money paid out to local residents gets spent in town, and circulates in town, and creates more economic activity. That translates into fewer social and economic costs for the city and increased tax revenue.

There are costs to the law. Someone has to monitor compliance, and that requires additional city spending. Training local workers for union jobs may raise the price of some projects. But in the end, the studies all show that keeping money in the community is worth the price.

Avalos deserves tremendous credit for negotiating with labor and other interested parties, accepting compromises that don’t damage the impact of the measure and lining up eight votes to pass it, so even if Mayor Gavin Newsom vetoes it, the board can override the veto.

Now the board ought to apply the same principle to a local purchase law.

One of the major complaints small businesses have in San Francisco is their inability to get city contracts. The qualifying process is complicated and expensive — and when big out of town corporations with plenty of resources to put together bids can also offer lower prices, locals get left out.

The city spends vast sums of money, hundreds of millions of dollars a year, buying goods and services. Every dollar that leaves town translates into far more than a dollar lost to the local economy.

In fact, a 2007 study by Civic Economics showed that 38 percent of the money spent on locally based retailers in Phoenix, Ariz., remained in town and recirculated in the local economy; only 11 percent of the money spent at chain stores stayed in town.

That’s a huge difference, and would translate into many millions of dollars for the San Francisco economy. (Over time, the impact of local hire and local purchasing laws would be much greater than the one-time burst of income expected from the America’s Cup race.)

There are complications with any local purchase law. Not everything the city needs can be bought locally. Nobody in San Francisco, for example, makes train cars or fire engines. But on everything from office supplies and cars to uniforms and consulting contracts, there are (or could be) local companies handling the city’s business.

As with the Avalos law, there would be costs. Some small local suppliers would be unable to match the price that big chains offer. But the overall economic benefits to the city would greatly exceed those price differentials.

San Francisco currently gives a modest preference in bidding to local firms. But if the supervisors applied the Avalos principle and mandated that, within five years, a certain percentage of everything the city buys would have to go to local firms, city officials would be forced to do what they ought to do anyway: look local first.

Every year during the holiday season, the mayor and business leaders urge residents to shop locally. When the new Board of Supervisors takes over in January, the members should start looking beyond rhetoric and start working on legislation that would keep the city’s money in the city.