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City Has Trouble Attracting the Right Suitors

Times Staff Writer

San Diego has long been a nice place to live. But being nice just isn’t enough to attract the corporations that can provide the jobs needed to keep San Diegans employed.

The city has always had problems wooing the right kind of businesses.

“We’re on a three-legged stool and every time someone knocks one of the legs we all fall down,” Mayor Charles Dial complained in 1955, refering to San Diego’s unhealthy economic dependence on the military, defense contractors and tourism.

In 1962, a Time magazine article titled “Bust Town?” suggested that San Diego, with a numbing 8.8% unemployment rate, faced “missile-age trouble” in the face of the military’s upcoming changeover from airplanes to missiles.

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That kind of background led to the creation of the San Diego Economic Development Corp. on Nov. 10, 1965. The private, nonprofit corporation, financed by local firms and partly supported by the City of San Diego, was to “serve as the intermediary between a private company and city government (by) . . . promoting (available) industrial land, preparing land for development and coordinating the industrial growth of the county so that the business climate was benefited and not damaged by the increased growth.”

At the outset, though, EDC often duplicated development efforts by other civic organizations, primarily the Chamber of Commerce. A history written by EDC personnel admitted that the early and mid-1970s were “confusing to the EDC from an organizational view.” The EDC also warned that “high unemployment and economic stagnation were choking San Diego’s once-bright future.”

Some of the internal confusion died down in 1974 when the chamber’s economic development operations were merged into EDC’s activities. But the first half of the 1970s were rough on San Diego. Unemployment rates soared above 11%. While the population grew at a 2.6% annual rate, manufacturing growth averaged less than 1% annually.

In the grim environment of 1978, EDC unveiled “Operation Bootstrap,” a marketing strategy that continued through 1979 and set the tone for following years. During that time EDC helped 11 companies to expand or relocate plants within the region.

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In 1979, EDC Executive Director Richard Davis announced EDC’s goal of adding 3,000 jobs per year to the local economy--a goal that is still viable, said EDC President Daniel O. Pegg during a press conference last week. In a bit of bravado, Davis declared that “San Diego will continue to benefit from other cities’ errors in management and industry. The ‘80s will mark an evolution in our local economy which will fuel employment while placing San Diego firmly on the national map as a business leader.”

But getting San Diego on the national map meant replacing the city’s “non-image” as a place to do business. Davis candidly remarked that the region “generally connoted a nice place to vacation.”

In contrast, “Operation Bootstrap” boasted that “San Diego is zoned for business.”

By 1980, EDC had an operating budget of $500,000 in private and public funds. Private-sector support increased from 65 members (providing $65,000) in 1977 to more than 100 members (providing about $200,000) in 1980. Unemployment was pared back to 6.7% and the EDC claimed to have “assisted directly or indirectly in the annual average creation of over 10,000 jobs since 1977.”

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In 1981, John Brown, who once was chief executive officer of Hewlett-Packard’s Japanese operations, became EDC’s executive director. Brown, aware that the go-go days of the late 1970s and early 1980s were gone, restated EDC’s goals: to compete for Northern California’s Silicon Valley businesses and to expand the city’s recruiting efforts in Japan.

Those goals remain pretty much the same. “San Diego is going through a stage in its development where we are not very competitive” with other regions pushing for new development, Pegg admitted last week. California’s unitary tax, water worries, the high cost of housing and land, and the impracticalities of manufacturing and assembling products in the region are hurting San Diego’s bid for the so-called “sunrise” industries, Pegg said.

While it can’t change many of the negative factors, EDC is concentrating on “some of the other amenities people look to that we can influence.” Pegg said EDC is focusing on bettering the relationships between industry and university research and development operations; fostering more contact between small businesses and the region’s venture capital sources, and promoting the twin plant, or maquilladora, concept, in which parts made in the United States are assembled into finished products in Mexico.

“In a few years our competitive posture will be enhanced,” Pegg said.

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