Encouraging Small-Scale Manufacturing During the COVID-19 Pandemic

During the COVID-19 pandemic, with its negative impacts on employment, it is more important than ever for local governments to encourage new job creation through expanded opportunities. Small-scale manufacturing can play a role in creating new jobs while also cultivating community-based entrepreneurship.

For many people, however, the term “manufacturing” conjures up the image of a large industrial plant spewing forth smoke and emitting strong smells and loud noises. But most small-scale manufacturing operations don’t have any such negative impacts. Instead, these small businesses offer exciting job creation opportunities since most manufacturing jobs are classified among those enterprises that employ less than 20 people and often serve a smaller or more local market. Given the high job creation potential, local governments should consider ways to encourage the types of small-scale manufacturing that would fit well into their communities.

What Is Small-Scale Manufacturing?

Small-scale manufacturing may be defined as a business that makes goods and products, has a small number of employees, and doesn’t produce any negative external impacts (e.g., loud noises or foul odors). Workers will often use hand tools and/or small machinery to make their goods. Common examples of small-scale manufacturing include local food production and packaging, art, jewelry, clothing production, brewpubs, distilleries, etc.

There are three general categories of small-scale manufacturing, based largely on size:

1. Artisan/micro-manufacturing (1-5 employees) — These businesses often operate out of a business owner’s residence and sell their goods through local venues (such as farmers markets) and online (using platforms such as Etsy). A COVID-19 related example would be an entrepreneur making and selling face masks, who may or may not employ a small group of workers.
2. Small batch production (6-20 employees) — Smaller businesses in this category may be located in a house or associated accessory structure while those with a higher number of employees are more likely to be found in a commercial space (such as in a downtown business district). They will use a variety of means to sell their products, from community markets to a “front of store” retail space and external vendors. An example would be a small yet successful bakery that sells goods, both on a retail and wholesale basis.
3. Moderate production (up to 50 employees) — These businesses are usually located within an existing commercial or industrial building and sell their goods through a variety of venues, including onsite as well as through external vendors. One example is a small/medium-scale brewing company.

Why Focus on Small-Scale Manufacturing?

Small-scale manufacturing promotes job growth. Most jobs in the U.S. are created by small and medium-sized businesses and not by large corporations, which is also true of manufacturing. Further, small-scale manufacturing businesses are likely to provide “family wage/living wage” jobs, especially when compared to most retail jobs.

Artisan/micro-manufacturing, in particular, can also provide the opportunity for first-time entrepreneurs to start their own business, which they may not have thought about doing until the COVID-19 pandemic hit. Small-scale manufacturers often use storefront buildings, with the manufacturing activity taking place in the back and retail activity in the front. Home-based manufacturing businesses are likely to move from their residential bases into commercial buildings as they succeed and grow. These types of businesses also pay taxes, such as property and sales taxes.

Encouraging Small-Scale Manufacturing

While Washington local governments are limited by the state constitution in their ability to provide direct financial assistance to businesses, it is still possible for local governments to encourage small-scale manufacturing businesses through a variety of activities, from zoning to outreach. Several potential actions have been listed below, which can also be applied to encourage non-manufacturing-based businesses.

Reach out to existing small businesses and local residents

As this pandemic has demonstrated, local businesses may need some guidance and assistance about available resources to help them during the pandemic and resulting business interruption. It is critical that local governments partner and collaborate with local and regional economic development organizations, chambers of commerce, and state agencies, even if you have in-house economic development/business assistance expertise. In addition, local governments should work with partners to reach out to area residents who may have recently experienced a job loss. These people may be looking for new opportunities to earn money, and micro-manufacturing may be a good option.

Review your zoning code

In reviewing your zoning code provisions, consider making the following types of revisions:

• Create a specific definition for small-scale manufacturing: Some Washington zoning codes use the term “artisan manufacturing” to describe small-scale manufacturing (e.g., Mountlake Terrace Municipal Code Sec. 19.15.020); while other codes create specific subcategories, such as “craft food production” (e.g., Rainer Municipal Code Sec. 18.44.090), “artisan cheesemaking,” “micro distillery,” and “micro winery” ( e.g., Port Townsend Municipal Code Chapter 17.08).
• Consider adding micro-manufacturing as a “permitted use” (and not as a “conditional use” requiring a public hearing) in the land use charts. This step will increase certainty and speed up the approval process for a small manufacturing applicant.
• Create clear standards to restrict any potential nuisance impacts often associated with manufacturing/industrial activities (such as noise, odors, truck deliveries, and lighting glare), along with maximum square footage requirements, either in the definitions or development standards section of your zoning code.
• Don’t forget to review your regulations for home-based businesses, commonly referred to as “home occupations” in a zoning code (for example, see Bellingham’s home occupation provisions), because most micro-businesses will start in a person’s residence.

Examine your permitting and inspection processes

Review your permitting/inspection requirements and procedures to sure they aren’t too cumbersome, time-intensive, and costly, any of which could discourage creation of small businesses. A local approval process that is confusing to applicants, takes many months for them to procure necessary permits, and requires approvals from multiple local  government departments (versus a consolidated permit process) is likely to deter potential businesses. High application fees are another disincentive. While there may be good reasons why those conditions exist in your permitting process, it is worth taking the time to reexamine and revise your processes as appropriate. Of course, necessary life/safety standards should always be maintained.

Encourage the reuse of vacant commercial buildings as business incubators/”makers spaces”

Some economic development organizations redevelop a vacant and underutilized building into a low cost, shared business space to be used by budding entrepreneurs and businesses. One example is a shared commercial kitchen that meets health standards and offers commercial-grade equipment that can be used by different small businesses for food production (one example is the Seattle Commissary Kitchen). The Lacey Maker Space provides more of a tech-oriented shared space. Other examples may be found in the MRSC blog post, Made in Washington: Encouraging Local Industries.

Make your commitment public by marketing it

Some communities have designated districts, like Edmonds’ Creative District and Fredericksburg’s (VA) proposed Creative Maker Zone, as a way to market their commitment to small-scale manufacturing and commercial uses. Other local governments, like Renton, take a more general approach by marketing themselves as “business friendly” and backing it up with specific programs and actions.

Conclusion

The COVID-19 pandemic has had many devastating effects, including numerous businesses closing their doors and people losing their jobs. As a result, many local governments are exploring what they can do to help improve the economic situation of their local businesses and residents. While it may not necessarily be a good fit for every community, small-scale manufacturing is a job creation concept that is worth consideration.

Interested in learning more? MRSC will be holding two webinars devoted to economic development during (and after) the COVID-19 pandemic. The Introduction to Economic Development for Local Governments During COVID-19 and Beyond webinar will take place on Tuesday, November 10, from 11 AM to 12 PM. A follow-up webinar will focus on case studies of economic development activities and will take place in December, though the exact time and date is still to be determined. Bookmark our Upcoming Webinars webpage for more information about all MRSC webinars.

Other Resources

• Made in Place: Small-scale manufacturing and neighborhood revitalization, Smart Growth America, 2017
• Discovering Your City’s Maker Economy, National League of Cities, 2017