Incubators in Spotlight at Special Meeting

A special meeting on Wednesday will determine if the city should conduct an audit of the San Jose Redevelopment Agency’s incubator program. As San Jose Inside first reported, a study buried for two years shows the RDA spent more than $30 million on start-up companies that often provided a poor return on investment.

Councilmember Sam Liccardo is pushed for the audit in a memo after he discovered a report with less-than exemplary findings on incubators from 1994 to 2009. The report was mysteriously never shown to members of the Community and Economic Development Committee. Liccardo said leaving out some of the study’s findings in lieu of a positive verbal report at a 2009 committee meeting was “the definition of a glaring omission.”

Councilmember Ash Kalra has expressed disinterest in an audit, because, he says, the city plans to stop funding incubator programs within the next year. But Liccardo has said it is in the public’s interest to audit incubators because the city is paying lease agreements for the Bio-center and two other incubator programs—the Environmental Business Cluster (EBC) and the Market Access Center (US MAC)—which will cost the city hundreds of thousands of dollars.

What will be especially interesting on Wednesday is whether or not anyone can answer why the incubator study was never shown to people outside of the RDA or its partner, the San Jose State University Research Foundation. Mayor Chuck Reed said he had knowledge of the report but told the Merc that he doesn’t recall a meeting in which he was allegedly briefed on some of the study’s more negative findings.

A verbal report was given to Liccardo and fellow councilmembers Nancy Pyle, Rose Herrera and Kalra on Dec. 14, 2009, but nothing was mentioned regarding the fact that only 11 percent of the 288 companies that “graduated” from the incubator were still in business and located in San Jose. The study also showed that annual sales tax revenue to the city was about $280,000, or about $4.2 million over a 15-year period, while the RDA gave estimates of $12 million a year.

Josh Koehn is a former managing editor for San Jose Inside and Metro Silicon Valley.

12 Comments

  1. “Mayor Chuck Reed said he had knowledge of the report but told the Merc that he doesn’t recall a meeting in which he was allegedly briefed on some of the study’s more negative findings.”

    Yea, right…..

  2. A better question now is:  Who will conduct the audit and how is that person or company related to Liccardo and other councilmembers favoring an audit.

    Why don’t we take Kalra’s point to the next level and defund these “incubator” immediately!  We cut our police and fire departments pretty darn quick and are planning on doing the same to their pensions but we are apparently OK with an incubator sucking us dry?

  3. ” only 11 percent of the 288 companies that “graduated” from the incubator were still in business and located in San Jose.

    Why did majority of businesses started in San Jose leave ? –  Could be unfriendly city business practices and hight taxes, fees, difficult and costly city approval and permit process ?  Ya Think

    The study also showed that annual sales tax revenue to the city was about $280,000, or about $4.2 million over a 15-year period, while the RDA gave estimates of $12 million a year.

    More typical city, economic development and redevelopment false inflated benefit numbers and understated costs – called Dishonest City Government giving millions taxes to political insiders and former politicians and city staff

    San Jose should audit the dozens of inflated economic development project benefits, and actual costs to see where taxes went not just incubator programs which should include $500,000 – 800,000 to Irish innovation Center incubator in District 3

    Who will be politically damaged and as same time get a political advantage – well liked Harry Mavrogenes possible D-10 Council and future Mayor candidate, Ash Kalra – possible Mayor candidate,

    Why is Economic Development Committee to knew for 2 years taxes were wasted while politicians were giving their friends millions city tax giveaways not bring long lost audit to uninformed public and Mercury ?

    Who is running for Mayor and wants to be ” taxpayers watchdog ” – bark , bark,  more political bark , bark ?

  4. I want my city government to provide police, fire, and paved roads.  Not run a venture capital slush fund as part of some cloaked RDA operation that city council somehow isn’t aware of.

    Please audit and put this under a brightly lit microscope.  Who knew, when did they know it, and why weren’t they raising hell about it?

    What the heck is the city of San Jose doing playing venture capitalist with taxpayer money? 

    Wait wait.  Lemme guess.  It has something to do with green energy and green jobs.  ie.  Tax dollars spent in search of unicorns.

    Reason #97,324 why the lights should be turned out on RDA.  Immediately.

    Example #4,533,451 of how government at all levels wastes,  wait a sec… not good enough.  How government at all levels sets your hard earned tax dollars on fire at seemingly every turn.

  5. Mayor Chuck-O has a very convenient memory.  And he’s the one who called for open government… yeah, right!  Just one more instance of political grease, compliments of the RDA.

    On another front, I wonder if Ash might be hiding something.

    • After his drunk driving episode, Mr. Kalra lost much of what little support he had from district 2 residents.  His only support now comes from special interest groups as they are willing to overlook Mr. Kalra’s problems to get what they need from the city.

    • Sam Liccardo is no “Friend of the Community.He is only doing this to secure backing for his run for mayor.That being said,I appreciate the fact that he is pushing for some type of accountability. Reed “The Terrible” is all for “Open Government” ………..Except for anything that he had anything to do with,then he skirts the issues.Of course he doesnt want an audit , it would show a clear and utter disrespect for the residents of San Jose.Mayor Reed has either been involved with or @ the center of every bad decision made for this city.Unfortunately for us, He has decimated our public safety and continued to push for a stadium that we cannot afford.both city employees and residents are already fleeing a sinking ship

  6. Sam Liccadro said at Rules Committee today – Irish innovation Center is not getting any city money.

    Using political speak:  Liccardo is right IIC got $500-800,000 in past but is not getting RDA tax this year but don’t know about next year

    Liccardo helped his political mentor McEney get $1 1/2 million city land for $500,000, $6 million RDA money and Brandenburg RDA property with $27 million state grant to do street and area improvements that developer normally pay for which give them greater profits   Thank you Sam and Chuck

    “The San Jose City Council has approved the sale of more than 7 acres in the North San Pedro area of downtown San Jose to the San Pedro Life I LLC development group.”

    “Known as the Brandenburg property, city officials envision the site — bordered by Highway 87 on the west, West St. James Street on the south, North Market Street on the east and a Union Pacific railroad right-of-way on the north — as supporting more than 730 units of affordable and market-rate housing.”

    “Harry Mavrogenes, executive director of the San Jose Redevelopment Agency, has proposed a $31 million price tag for the parcel. The city plans to use a $24 million state grant to spruce up the blighted industrial area with improvements to streets, sidewalks and parks.”

    http://www.bizjournals.com/sanjose/print-edition/2010/12/17/eriks-deli-franchisee-opens-third-cafe.html