Daly City business center on chopping block 

Daly City may close its small-business incubation center, which has lost money for 10 years straight and has yet to result in a single successful business.

The Business Center was started in 1996 as an effort to nurture small business in Daly City. It provides small, subsidized office spaces, a receptionist, training and development and other resources needed by young businesses.

The city’s hope was that if it provided small businesses with this support, they would blossom into larger businesses that would grow and move into other Daly City office spaces and employ city residents. San Jose used a similar model to incubate tech companies, and San Francisco is involved in an incubator for biotech companies in Mission Bay.

But the center in Daly City has never been fully occupied, and the city has managed to consistently lose money on it. Last year, the center cost the city $179,000. Worse, while some of the businesses born there have moved up to larger spaces and begun employing more people, the companies have moved to other cities.

While the center served more than 180 businesses in the 15 years it’s been open, there have been only two years in that period where it came “anywhere near breaking even,” said Daly City City Manager Pat Martell.

Martell said the city held onto the small business incubator “with the hope of making Daly City the small business center of the Peninsula.”

However, there simply haven’t been results: No small businesses that came through the incubator have resulted in much larger businesses with larger capacity and more employment opportunities in Daly City.

“It just hasn’t happened,” she said. “We can’t track any large-scale businesses that resulted from their being a small business incubator here at the business center.”

For example, a film production company started up in the Business Center, but when it grew out of its space there, moved to South San Francisco.

Martell has recommended to the City Council that the center be phased out over the next two years, as the city’s lease runs out on the building it occupies on Gellert Boulevard. It has two employees.

The City Council will consider this action at its budget meeting June 24.

As it stands, the Business Center pays $240,000 a year in rent, but it is less than half-occupied, with about 10 tenants, Martell said. Their rents range from $490 to $1,890 depending on the amount of space occupied, with an average rent of about $1,000.

The move would not be welcomed by Thomas Rocas, owner of ANX Home Health Care. He said that being forced to move would be a major problem for his business, which provides quality home-health care providers with clients.

The company’s primary revenue comes from the federal government, he explained, and the last time he changed the company’s address — to the Business Center — it took more than nine months before the federal bureaucracy caught up with the move and finally paid him.

Having to change addresses again and face another lengthy delay in payment could seriously stymie his company’s growth, Rocas said.

“Right now, I’m ready to hire five nurses, but now if you’re telling me the Daly City Business Center is going to close, I need to hold off on growing so I can pay for overhead,” he said. “I just don’t understand. They say that small businesses are the heart of this economy, but they’re shutting them down.”

Business Center financials

2005
Revenue: $315,000       
Expenditure: $420,000
Net loss: $105,000

2006
Revenue: $367,000       
Expenditure: $561,000
Net loss: $194,000

2007
Revenue: $363,000       
Expenditure: $458,000
Net loss: $94,000

2008
Revenue: $337,000       
Expenditure: $469,000
Net loss: $131,000

2009
Revenue: $298,000       
Expenditure: $478,000
Net loss: $179,000

2010*
Revenue: $260,000       
Expenditure: $490,000
Net loss: $229,000

2011*
Revenue: $367,000       
Expenditure: $512,000
Net loss: $145,000

2012*
Revenue: $374,000        
Expenditure: $523,000
Net loss: $148,000

* Projected

kworth@sfexaminer.com

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Katie Worth

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