Want the news summarized?
Subscribe to The Morning Report.

Wednesday, December 14, 2005 | “Facing Balloon Payment on Sewer Loan, City Scrambles to Refinance.” That’s what the Oct. 25 Voice of San Diego headline announced.

But read the article. Our proud city “postponed” repayment on a loan from Bank of America by deferring interest payments for a year on sewage bonds. The city simply could not make its payment so it made a deal with the bank.

San Diego’s not in good shape. Tire store managers say that city streets are falling apart. They don’t all agree when it started, some believe 10 years ago, whereas others point to the recent rains washing out potholes that haven’t yet been fixed.

“If you could see the bent wheels, burst tires and sprung suspensions,” said one, “you might wonder why San Diego paid for a new ballpark.” Hey, there’s a hidden tax.

Sewers? Hold your breath at the beach. And we’re a tourist town?

Now go to U-Haul and price a 5-foot by 8-foot trailer, one way, this month, from San Diego to Phoenix. Price? $262. Now shop that same trailer coming one way, from Phoenix to San Diego. Quote? $49.

What’s going on? Is everybody leaving San Diego for the heat of Phoenix? Our town’s growing. How can this be? Are all those trailers really coming back empty from Phoenix or is this just a fluke?

OK, let’s check the same trailer, going one way from San Diego to Portland. Cost? $361. And what is the price, same rig, same date, to make the reverse trip? Yikes. $67.

God help me, I love San Diego. Our home is paid for, we own rental property here and have invested in four local startup companies that each hope to change the world and maybe one of them will. But as a business guy, I see stuff.

Like the CEO position we’re trying to fill, with a compensation package that ought to hit more than a million dollars a year, for a company that does nothing but grow and make money and satisfy customers. Easy to fill, right? A majority, and a big majority, of the qualified candidates have refused to talk to our recruiters because of location. Shocked? I was. Fact? Yes. This search is entering its sixth month. Sophisticated executives no longer take San Diego seriously.

But downtown is booming, we say. No argument. Just don’t drive there at night and count the dark windows in the fancy condos. A majority of those units were bought by out-of-town folks and speculators. That doesn’t mean it’s a bubble, but, the new structures are not reliable indicators of our internal economic health. The beaches and sunshine draw these buyers, up there where the sewage smell can’t reach.

Personally, I bumbled around as CEO of five local businesses, and their final destinations prove something. At US Press, we owned Arts & Crafts Press on Kettner Boulevard, which is now gone. Labor problems made it stupid to continue, and some of the longer run work went to Portland, where we had a friendlier city and workers.

Checks To-Go, in El Cajon, was acquired by Rocky Mountain Banknote, and they moved all the business to Salt Lake. Smiley Industries, of Lakeside, sold its big contracts to McDonnell Douglas in Phoenix, and they paid a premium to acquire our work. Knight Protective was a Los Angeles outfit, with thousands of clients and several dozen employees here, yet it also shut down after selling and transferred all positions to Portland, again, where Protection One was headquartered. @Backup, a struggling and never successful online data business, was ultimately acquired by SwapDrive, which relocated the jobs to Washington, D.C.

That’s all five of the businesses I’ve run here. Each left for different reasons. Put that into a Chamber of Commerce recruiting brochure. Maybe my experiences were unique, but, five out of five making more money by leaving San Diego does make me wonder.

The Public Policy Institute of California, however, just announced a study that proves jobs are not leaving the state. I’m sure they study the situation more than I have. But I can’t help notice that out of 11 members of this group’s advisory board, nine are employed by tax-supported institutions.

Could there be a bias in their beliefs that more taxes and regulations make things better for us all? That might mean their budgets would grow, but, would that sway their opinions?

Hey, how about those businesses that move here to bask in our sunshine? OK, let’s list the public ones, where there’s no debate about the results. Wickes arrived, and set a record for bankruptcy. Telequest came, and died. Oak Industries transferred, and filed for Chapter 11.

Ah! Allied Signal came and survived, but did so by leaving.

Well, the word got out, and only two more came. Gateway moved here and perhaps didn’t die, but it’s hard to tell and they’ve gone already. We have one survivor: Iomega. Bleeding to death. Firing people fast. And there are no others, period.

By the way, this isn’t doom and gloom. San Diego is a great business center for innovation. We do startups well, and create things those grim industrial centers simply cannot visualize. So let’s not get depressed, just understand who we are.

But we’ve got to grasp how bad things have become.

Look at the city’s income. To cut through the fog, take one example.

110 A Street is a downtown San Diego building. It stands 18 stories, and was built in 1971. It sold in 1994. The price was $8,433,000. That meant every tenant in the building began to pay property tax at the rate of $0.02 per square foot per month.

So the city of San Diego really started to get some new cash.

The building sold two more times, boosting the property tax rates each time, and finally was acquired this year for $90,250,000. So today the property tax rate from this one building, not new and not old, downtown, is throwing off $0.23 per square foot every month in taxes.

Our population does grow. That boosts sales tax. How do we grow with those U-Hauls leaving? Well, because we’re hostile to blue-collar jobs, those opportunities leave. (Hostile means generous worker’s comp, higher minimum wages for city contracts, lavish unemployment deals … those benefits kill jobs.) And so those workers leave, despite lower wages in Oregon and Arizona. Life is better for them there.

More technologists move here, financiers, biotechies and retirees that hire Mayflower instead of U-Haul. Mexicans fill in the labor voids, carrying what they can on their backs as they come.

San Diego made a decision recently. That was to push off the debt on a loan. We need the cash instead to pay our city retirees. Their incomes, as they dabble in other jobs or fish or go camping are merely small multiples of our median taxpayers. Therefore, it was a tough choice, but we, America’s Finest City, decided to let some out-of-town retirees, widows and orphans scrimp.

Do you think any of our city officials or journalists understand this?

Gary Sutton is a retired CEO. He wrote “CORPORATE CANARIES…Avoid Business Disasters with a Coal Miner’s Secrets,” which shipped to bookstores this week.

Leave a comment

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.