Business San Francisco/California

San Francisco Bay Area’s Competitive Edge?

The Bay Area Economic Forum has announced its latest report on the economic profile of the San Francisco Bay Area.

Sean Randolph, president of the Bay Area Economic Forum, said, “The Bay Area’s extraordinary resources of human capital, venture capital, and research capacity underpin its ability to innovate, and give it a unique position in the national and global economies. Despite the economic downturn and its devastating effects, the region’s fundamental strengths remain intact.” However, the Bay Area is slowly losing its once-insurmountable lead over other metropolitan regions, and the report raises basic concerns about its economic future.

The Bay Area’s economic productivity is almost twice the U.S. average
(194 percent). While this reflects the caliber of the Bay Area workforce, its strength in research and development, and its emphasis on high value economic activities, the high cost of living is shrinking its competitive edge.

What’s not at all clear is what can proactively be done to address some of the key issues raised. Clearly things like taxes and the high cost of workers compensation insurance could be addressed by legislative action. But, realistically, what can you do about high prices on homes in an area with limited usable land left for building? How can you best force a consolidation of the many transit administrations to reduce overhead, ensure area-wide policies are effective while remaining responsive to local needs?

Back to taxes, a key issue here is the dramatic surge in costs associated with retirement benefits for public service employees at both the local and state levels. As those costs have exploded, other budget categories are being tightly squeezed with services suffering — dramatically in many cases. Here’s an example of the issue for Menlo Park (from The Almanac):

Menlo Park is expected to pay $260,000 in retirement benefits in 2003-2004 and $1.75 million the next year, Mr. Boesch said. The numbers are so dramatic in part because higher benefits negotiated with the police department a few years ago don’t take effect until 2004, he said.