Wrapped In Red Tape!

If your plans for growth don't leave room for the regulators, you have no plans

About two years ago, we decided the family business was quickly outgrowing its space. We needed room for a new press (we print plastic packaging) and more storage area for both raw materials and finished goods. So I spent most of the next year analyzing equipment options, browbeating salespeople to lower their prices, and lining up financing for an expansion. Things were moving along at a promising clip.

Looking back, I realize we should have worried about the salespeople and financiers later. Who first? The government. It never occurred to me that regulators would slow us down with dozens of demands--some reasonable, some not. Given our history as a good corporate citizen, we naively assumed that we would get permits for a warehouse addition and the press in no time. In fact, we were so confident, we ordered the $2 million press from Germany last July before even mapping out the 30,000-square-foot addition.

Understand, my optimism was not based on raw delusion. Our business had worked closely for 20 years with state air-quality regulators to develop low-polluting water-based inks. Certainly, we expected no grief from them. As for building permits, we had moved to Union City, Calif., five years earlier, bringing 100 new jobs and solid sales and property-tax receipts with us. Wouldn't the city jump at the possibility of new jobs and an increased tax base?

AIR POLICE. It didn't take long to find out just how differently impatient entrepreneurs and meticulous regulators view things. When we told the authorities in July that the capacity of our new press would push polluting emissions to 42 tons from 16 tons a year, the air police got testy fast. We had figured we were safe because we weren't emitting 50 tons--the level at which local law labels you a major polluter. But Bay Area regulators, recently under intense pressure from the federal government to cut regional pollution, held up our permit several months and pressed us to find a way to slash pollutants.

Undoubtedly, it hurt that the official from the Bay Area Air Quality Management District handling the application knew little about our industry. He didn't understand our inks, nor did he seem too clear about the pollution-control technology currently in vogue. For instance, he suggested we reduce the pollutants with carbon filters that are so expensive that no printer uses them. (We figured they would cost our $20 million business about $1 million annually.)

Eventually, he backed off that uneconomic approach. But when November arrived, we still didn't have a permit, and the press was due to leave Germany any day. We briefly flirted with delaying the shipment, but finally in December air-quality officials offered a deal: We could cut the pollutants in our inks 20% by volume. That was a limit we could live with. But we had nowhere to put the huge press. Still waiting for the building permits, we were forced to rent a 24,000-square-foot warehouse to clear space in our existing building.

What went wrong? Even though our architect studied Union City's codes, city planners prescribed numerous changes. They wanted upgrades of our existing landscaping, more efficient systems for rainwater runoff, and alternate ways to route trucks onto our property--among other things. The fact that the city doesn't hand out a list of its standard requirements until after a plan has been submitted almost guarantees revisions--and delays. But we also harmed ourselves by not budgeting enough time to get through the process.

We finally got our building permit in mid-January. Clearly, if we had gone to the city six months earlier--at the beginning of 1998--we would have had it by July and perhaps even had our addition completed by now. And I think I'd still have one big account that walked after growing impatient waiting for us to increase capacity.

The lesson I take from all this? Bureaucrats are from Mars, businesspeople are from Venus. Or, practically speaking: The next time we expand, I'll know whom to call first.

Before it's here, it's on the Bloomberg Terminal.