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San Diego’s on a mission to court a handful of industries it’s decided are crucial to the city’s economic future.
The regional economy has long been buoyed by tourism and the military, and those industries have gotten lots of city support for decades. The city’s latest economic development strategy also focuses on other industries that the city wants to see flourish: manufacturing and trade.
There’s a tie that binds all these so-called economic base sectors. They’re made up of businesses that sell their goods and services to customers outside San Diego, thus bringing in money that wouldn’t otherwise flow here.
Economic-development gurus are focused on these businesses because they draw new jobs and support local-serving businesses.
For this reason, the economic development plan the City Council approved in June encourages policy changes and incentives to aid these export-focused companies.
The specific actions the city’s promoting in this plan, such as convening more task forces, aren’t particularly groundbreaking, but calling out the industries it’s decided are most crucial to San Diego’s future economic growth allows city leaders to prioritize.
Companies within the industries listed in the city’s roadmap are the most likely to be on the receiving end of city perks and incentives as they look to expand or move. And city policymakers will be especially eager to tackle regulations and permitting roadblocks that affect them.
Here’s a breakdown of those top industry clusters and some of what the city’s economic development strategy suggests doing to help them.
The Sector: Manufacturing and Innovation
San Diego is determined to get more manufacturing jobs.
Much of San Diego’s recent job growth has been in high- or low-paying sectors (that’s why it’s often called an hourglass economy), and manufacturing jobs often provide middle-class salaries and spillover effects for the local economy. The city estimates that each manufacturing job indirectly results in two to six others.
San Diego’s current manufacturing workforce isn’t insignificant. San Diego is the nation’s 10th largest manufacturing hub based on number of jobs, and the goods that flow in and out of the region have among the highest average values in the nation.
San Diego is also home to a wide spectrum of manufacturing companies – everything from biotech businesses that make medical devices and treatments to craft beer and biofuel producers. The city’s economic development blueprint emphasizes the need to help emerging parts of this sector, particularly those that are tied to research and development.
A trio of companies in this group became the first to benefit from City Council-approved economic development agreements this summer, a tack the city hadn’t tried in more than a decade.
Ballast Point Brewing & Spirits Company and AleSmith Brewing Co. are set to be reimbursed for their spending on city permits associated with impending expansions. The city will reimburse the two breweries once they generate additional sales tax revenue.
And genome sequencing company Illumina will get a tax rebate of up to $1.5 million if it produces additional tax hauls projected along with an expansion in San Diego.
Challenges
San Diego doesn’t have much undeveloped industrial land to spare and manufacturing businesses tend to rely heavily on water so these companies have big questions about the cost and supply of that precious resource.
Three Ways the City Wants to Help
• Exempt manufacturing companies from the affordable housing fee, which requires companies to help pay for subsidized housing projects.
• Review the municipal code to pinpoint changes that might make manufacturing easier in the city’s industrial zones.
• Create a “Buy San Diego” campaign to promote San Diego products to consumers and other businesses.
The Sector: International Trade and Logistics
Economic developers are convinced San Diego’s relative proximity to Mexico and the Pacific Rim mean it’s uniquely suited to benefit as U.S. exports continue to rise. It’s home to a port and one of the world’s busiest border crossings.
A broad swath of businesses could take advantage of advancements in this area. They include trucking companies, international law firms, customs brokers and maquiladora-servicing companies. (Maquiladoras are Mexican manufacturing plants owned by companies that distribute and innovate in the U.S. and take advantage of less expensive labor across the border.)
Challenges
San Diego has the 17th largest export economy in the U.S. but when it comes to exports as a percentage of the region’s gross domestic product, it ranks 55th.
A few long-running infrastructure headaches have contributed to the problem. San Diego’s long been waiting on the feds to finish a massive project at the San Ysidro border crossing. Then there are the complicated efforts to restore the Desert Line, a rail project that would link Mexican auto companies with potentially lucrative markets in the eastern U.S. and save San Diego-area companies serious cash by allowing cross-border businesses to bypass long border lines and freeing them from relying on Los Angeles’ rail connection.
Three Ways the City Wants to Help
• Sustain a binational affairs office in Tijuana to aid cross-border commerce and logistical needs.
• Exempt distributors who sell to other businesses from the affordable housing fee, which requires companies to help pay for subsidized housing projects.
• Assemble an international trade and logistics task force that includes industry and labor leaders to work on reforms.
The Sector: Military
Tens of thousands of military members are based in San Diego and their work here also translates into tens of thousands of military-tied jobs.
Companies such as General Dynamics-NASSCO, Northrop Grumman and BAE Systems, among others, are closely tied to San Diego’s military presence.
Challenges
San Diego’s military economy is tethered to federal defense spending. If the feds cut back or shift resources, this sector feels it.
Three Ways the City Wants to Help
• Work with military commanders and representatives in Congress to retain and expand San Diego’s military presence, and to ensure San Diego businesses provide goods and services at military commands. The city wants to see more ships, aircraft and personnel here.
• Advocate for the Navy to bring Green Fleet demonstration projects to San Diego. These ships and aircraft rely on alternative energy sources, and the city also wants to encourage the military to obtain biofuel from San Diego companies.
• Ensure the city is represented at the regional planning agency’s military working group meetings so the city and the Department of the Navy can address concerns that arise.
The Sector: Tourism
San Diego’s tourism industry has long garnered top billing from City Hall. The region is one of the nation’s top-ranked tourism destinations and roughly 160,000 San Diegans work in hotels, theme parks and other businesses that support out-of-town visitors.
Challenges
The travel and leisure landscape is competitive and tourism officials often emphasize the challenges associated with remaining a top destination.
The city staked some of its future success on a Convention Center expansion that’s now uncertain. Aging tourism facilities elsewhere and the low pay associated with the industry are also key problems.
Three Ways the City Wants to Help
• Make investments in publicly owned facilities and attractions, including the Convention Center.
• Devote city capital improvement funds to enhancing city streets, bike lanes, sidewalks, parks and beaches.
• Establish systems to assess the success of Tourism Occupancy Tax grants and other hospitality industry grants the city offers.
This is part of our quest digging into the difficulties – real or perceived – of doing business in San Diego. Check out the previous story in our series, No, San Diego Doesn’t Have a Startup Ban on the Books, and the next, San Diego’s Business Exodus Is Really a People Exodus.