#405. Cost of Regulation

Posted on | The Agurban
Cost of Regulation?
In the last five years the rate of new business formation has declined by 24% (U. S. Census Bureau, Center for Economic Studies). Some blame the financial crisis, others that falling home values have made home equity loans, often used as equity for new businesses, much more difficult. However, I’m becoming more convinced that increasing regulations and the complexity of starting businesses is to blame for this fall off.

Last week that point was hammered home to me at our industrial real estate annual conference. For 15+ years I’m met with a small group of fellow industrial developers and have learned a great deal from them over that period of time. One of them, Ed Hulbert, is from the small town of Colusa, CA in northern California. He runs a farming and industrial park operation that is mostly aimed at food and energy related businesses.

Ed recently wanted to develop a boat ramp into the Sacramento River about Ā½ mile from Colusa, because the closest similar facility was about 30 miles away. Now, a boat ramp is essentially a concrete ramp that is about 30 feet wide and goes down to the water’s edge to allow boats to be loaded into the water. Building one is not exactly rocket science. However, the permitting of doing so is!

Ed started the process in January 2010 with an application to the local county. Since then he’s had to get permits from ten different (Federal, State and Local) organizations:

  • U. S. Army Corps of Engineers
  • U. S. Fish & Wildlife Service
  • National Marine Fisheries Service
  • California Department of Fish & Game
  • California Regional Water Quality Control Board
  • California Department of Water Resources
  • California State Lands Commission
  • Colusa County Planning Department
  • Colusa County Public Works Department
  • Colusa County Environmental Health Department
Ed told me, “These various agencies don’t interact with each other. They are very hard to find and are not very responsive. Because of the redundancy in effort, applications and engineering, our costs were driven upward.”
By the time that he gets this ramp built, he will have spent over $100,000 for a business that only collects $15 for each boat launch.

He HOPES….HOPES to get all approvals sometime in 2013, three years after his first application was submitted. And, we wonder why more businesses aren’t started?

What are you doing to make it easier, not harder, for new business formation in your town?