San Francisco’s New Vision : Economy: The city by the Bay is shedding its isolationist and anti-business attitudes, and joining its neighbors in the region to confront growth issues.
Stung into awareness in the 1980s that it was no longer the undisputed financial grande dame of the West, San Francisco heads into the ‘90s with much of its gentility intact but with more of a team player mentality.
Long regarded as a haughty isolationist, San Francisco is suddenly asking not what its region can do for it, but what it can do for the Bay Area, which has boomed even as the city’s job and population growth have stagnated.
San Francisco’s newspapers recently devoted plenty of ink to the new Bay Vision 2020 Commission, an unprecedented public-private partnership with a one-year mandate to halt the region’s bickering and to chart a mutual course for resolving crises in housing, transportation, land use, and air and water quality.
And, in a switch from the past, San Francisco Mayor Art Agnos and other Bay Area leaders traveled together last May to Asia to court Pacific Rim business, and they plan further joint marketing efforts. By contrast, his predecessor, Dianne Feinstein, was noted for her frequent solo travels to Asian nations to pitch the merits of San Francisco.
Many San Franciscans say it’s about time.
“San Francisco (has been) a terrible neighbor to the rest of the area, very self-righteous,” said Michael S. McGill, executive director of the Bay Area Economic Forum, another new group seeking to broaden San Francisco’s perspective. “People realize that there’s a need for a regional approach.”
“That absolutely is the key to San Francisco’s future,” Agnos agreed. “There’s no way that our balkanized approach to doing business is going to succeed in the 1990s.”
Problem is, many San Francisco watchers acknowledge, this politically fragmented, often fractious city seems uncertain about what exactly its role should be--advocate or adversary of growth within its own boundaries, competitor or compatriot of Silicon Valley and the East Bay.
“It’s a city in search of its future,” said Joseph A. Wahed, senior vice president and chief economist of Wells Fargo Bank.
In the past, San Franciscans have tended to become mired in narrow, neighborhood issues, taking a regional-economy-be-damned approach.
As a result, the transition is bound to be rocky as San Francisco faces up to a multitude of challenges: corporate job loss, costly housing, middle-class exodus, clogged highways, strained public transit, pollution, competition from Los Angeles and other West Coast cities and an image tarnished by the October earthquake, the homeless, the AIDS crisis and a lingering reputation for being anti-business.
Despite the litany, no one forecasts a Detroit-like economic breakdown for this affluent city, especially in light of the grit and determination it demonstrated in the aftermath of the Oct. 17 quake and its exemplary handling of the AIDS epidemic.
Thanks to the growth of small businesses and specialized service jobs, observers point out, the San Francisco economy remains vibrant. This is despite the loss of as many as 50,000 corporate positions during the past decade because of corporate parings, mergers and relocations.
In November, the city’s unemployment rate was an enviable 3.2%, below the statewide figure of 4.9% and 0.4% below the October figure. (A city research analyst noted that much of the reduction was accounted for by a change in the computation method.)
San Francisco is increasingly a center for “high value-added services” such as law, accounting and consulting. It still provides most of the financial and government services for the Bay Area. Although tourism dropped off markedly after the quake, a full recovery is expected.
The city is also, the mayor said, putting renewed emphasis on clothing manufacturing, film and TV production and the fishing industry, which are expected to generate more jobs in the 1990s.
And it remains a mecca for free thinkers and entrepreneurs.
“San Francisco will undoubtedly lead the way in innovating many of the businesses of tomorrow . . . with a lot of money behind them,” said Alan D. Mutter, a partner in a San Francisco-based media investment firm and former city editor of the San Francisco Chronicle newspaper.
“But the future of San Francisco proper depends more and more on what happens outside San Francisco. The future of San Francisco is Walnut Creek, Concord, San Jose, Santa Rosa.”
Such an idea might have seemed preposterous 20 years ago, when San Francisco seemed to hold all the marbles.
Until the late 1960s, the city was relatively self-contained and fully diversified, with a strong manufacturing base, dozens of headquarters offices and a healthy tourist and retail trade. With its favorable climate and attractive surroundings, San Francisco drew a gamut of businesses, from financial institutions to wholesalers to lumber, food and transportation companies.
Bank of America’s 52-story headquarters, completed in 1969, started a swift “Manhattanization,” with skyscrapers dwarfing what had been a quaint skyline punctuated by hilltop landmarks.
Driven by corporations’ voracious appetites for space, San Francisco developers for a time were putting up a whopping 1.6 million square feet of offices a year. Vacancies hovered at just above zero, and rents for prime offices skyrocketed.
The boom brought an influx of workers and cars--and a backlash among residents concerned about congestion and declining quality of life.
Under pressure from slow-growth advocates, the city in 1984 adopted a Downtown Plan that sought to impose some limits on building, but frequent exemptions granted to developers outraged opponents. Two years later, voters passed a ballot proposition calling for permanent limits.
Simultaneously, businesses nationwide were facing other far-reaching phenomena: deregulation, which forced cost-cutting moves, and the wave of mergers and hostile takeovers.
Thousands of workers were laid off at such established San Francisco companies as Crocker National Corp., which was swallowed up by Wells Fargo; Crown Zellerbach, bought by corporate raider Sir James Goldsmith, and Southern Pacific Co., which merged with Chicago’s Santa Fe Railway. Bank of America and Bechtel, big city-based employers, fell on hard times.
Meanwhile, some major employers--notably Chevron, Pacific Telephone and Bank of America--chose to keep their headquarters in San Francisco, perhaps for the prestige, but moved large numbers of back-office and technical workers to office parks springing up in the East Bay, where land was plentiful and rents were cheap.
(After soaring for a time to more than 20%, the current downtown vacancy rate is 15.3%, according to Coldwell Banker Commercial, compared to 13.4% in Los Angeles and nearly 20% for cities nationwide.)
San Francisco was ill prepared for the sudden economic transition. Workers moved into ever more distant suburbs and began commuting in a haphazard manner that even the region’s highly touted but piecemeal transit system could not begin to accommodate.
Middle-class migration left San Francisco with a polarized collection of affluent white-collar professionals and poorly paid service workers.
As the East Bay, Silicon Valley to the south and Marin County to the north flourished, San Francisco became the “hole in the doughnut of the economy,” according to Walter E. Hoadley, former chief economist at B of A and now a senior research fellow at the Hoover Institution in Stanford.
“Unfortunately, opportunities have been lost in the last decade or two to pull together,” Hoadley said, decrying the lack of cohesive leadership in the nine-county, 98-city region. “The future depends upon avoiding conflicts and capitalizing on the economic dynamism that runs across boundaries.”
The region at large has accounted for job and population growth of late, even as San Francisco proper has stagnated. According to the Palo Alto-based Center for Continuing Study of the California Economy, the number of jobs in San Francisco has remained flat since 1985, totaling 567,300 in 1988. During the same period, the region has added half a million jobs.
Population in the city has grown by only 50,000 to 731,000, whereas in the region it has spurted to 5.8 million from 5.1 million. Last year, San Jose, a fruit-canning town turned high-tech center, surpassed San Francisco to become the nation’s 12th-largest city.
In the 1990s, the region is expected to add 700,000 jobs and 1 million people.
With the growth in outlying areas, executives say, a major regional issue is land use planning. Housing, not job location, now dictates where people live. Many workers migrate to outposts such as Vacaville, 50 miles northeast of the city, or Modesto, 80 miles east, and commute an hour or more to offices in Livermore. That, in turn, strains highways and defies a quick fix with public transit.
Hoadley foresees that “we will build solid between here and Sacramento in the next 10 years.”
This sprawl, disparagingly dubbed “Los Angelization,” prompts a comparison to clogged Southern California that San Franciscans find distasteful. Yet the trend continues.
B of A, for one, recently announced plans to build a $125-million office complex on a 100-acre alfalfa field in Vacaville for as many as 2,000 employees.
Richard A. Clarke, chairman and chief executive of Pacific Gas & Electric, acknowledges that San Francisco businesses “probably have not done a good job” of putting the jobs where people live.
As a result, he said, one challenge of the ‘90s will be “preserving the quality of the environment while managing and dealing with the congestion.”
In compact San Francisco (at 46 square miles, the city is about the size of Long Beach), homes are among the nation’s most expensive, and affordable housing strikes many as an oxymoron. But environmentalists and community activists keep trying to force the construction of housing, even if it comes at the expense of business development.
“San Francisco assumes that we’ll export our housing needs to the suburbs,” said Sue Hestor, an attorney and an influential advocate for rehabilitating buildings in Chinatown and other sections to provide affordable housing. She contends that the city has been “irresponsible.”
One problem is that any significant development in San Francisco faces a long, costly approval process.
Santa Fe Pacific Realty Corp., for example, claims finally--after nearly 10 years of planning--to be on the verge of an agreement with the city for development of a former rail yard into a $1.5-billion office, residential and light manufacturing complex called Mission Bay.
The 315-acre development, south of Market Street, must pass muster first with city officials and then with voters, possibly in November.
The project has required “sensitive and delicate negotiations,” Agnos said, on such issues as the amount of moderately priced housing and the disposal of any toxics that might be uncovered.
Many such efforts have been stymied or delayed by a lack of cooperation between business and government, said James K. Ho, deputy mayor for business and economic development. “The public and private sectors have not worked well together,” he said.
Similarly, neighborhood and slow-growth groups have resisted a Newport Beach developer’s plans to turn an up-and-coming section of the bayfront into a yacht harbor and hotel, which would be the first on the waterfront. Meanwhile, port officials are eager for the commercial development because they need the income that it generates to continue improving maritime facilities, which, along with Oakland’s, have seen a dramatic loss of market share to other West Coast ports.
San Franciscans have repeatedly “divided up into little camps” over growth issues, to the detriment of the city’s economic well-being, said Kent O. Sims, president of the San Francisco Economic Development Corp., a business-funded group.
Sims created some shock waves around City Hall with a provocative “white paper,” published the morning of the earthquake, that cited single-issue politics and a lack of widely embraced leadership as major constraints on economic growth.
But Ho said progress in building business for San Francisco and the Bay Area is being made. After the visit of Agnos and other Bay Area leaders to Asia, a prominent group of Pacific Rim nation executives decided to hold a major trade and finance symposium in San Francisco this September. Previous gatherings sponsored by the group were held in Sydney and Hong Kong.
San Francisco, Ho added, is increasingly realizing that it needs to bury its rivalries with other Bay Area communities and promote cooperation, particularly when it comes to marketing the region as to the Pacific Rim.
“Why compete with each other?” he said. “If San Jose gains, we gain. If we get hurt, everybody gets hurt. The (Bay) Bridge came down, we got hurt, too.”
Agnos noted that emphasis will be on making presentations that sell the Bay Area, not just San Francisco, as a market for Asian goods and as a source for products and services.
