Contrast between San Francisco and San Diego in Economy

Comparing economic characteristics of two cities we should mention their main income sources, i.e. major industries of the area, population rates, social processes and other factors influencing economic life of the cities.

San Francisco is the fourth most populated city in California and the 13th most populated city in the USA. Its estimated population in 2008 was 808,976 people. It is the most densely populated city in California, and the second among major cities in the US by density of population. San Francisco is situated on the north end of San Francisco peninsula. The city also includes several islands: Alcatraz, Treasure-Island and Yerba-Buena.

San Diego is an administrative centre of the San Diego county in the state of California with the population of 1,3 mln citizens (2005), with the suburbs – 2,9 mln.

The greater part of its history the city was the most populated and important city of the San Francisco Bay area. In the period of Mayor Diana Feinstein government (1978-1988) San Francisco experienced the real “reconstruction boom”, called Manhattanization. Many sky-scrapers sprang up in the financial district; the “boom” also included introduction of condominium over several neighborhoods. During the development of the Internet and “dot-com” companies high-paid internet-businessmen, programmers and other workers of the industry came to the city, creating a high demand for accommodation, which considerably raised its price. High rent forced the great number of families to leave the city forever. The collapse of computer industry in 2001 strongly impacted the employment of population and economic state of the city. The city economics grew fast after Silicon Valley appeared on the South, requiring the engagement of high class specialists.

In the Valley there is also the biotechnological and biomedical research center situated. In Mission Bay there is the second campus of UCSF, training high-quality professional staff and serves as headquarters of the California Institute of Regenerative Medicine which finances the program of research of stem cells throughout the whole state.

San Francisco’s economic basis is tourism. Due to the display of the city in movies, music and popular culture, San Francisco is recognizable in the whole world. It is fifth among all cities of the USA by the number of foreign tourists’ visits, and dock 39, situated in the district of Fishermen Warf is the third most popular place in the country. More than 15 million tourists visited the city in 2005, leaving about 7.5 billion dollars in the city treasury. In Moscone Center district a large infrastructure of restaurants and hotels is concentrated. San Francisco is one of the top ten places in the North America intended for conduction of different assemblies and conferences.

Tourism is also an important industry in San Diego due to the local climate. Basic tourist places are the San Diego Zoo, Balboa Park, nearby Wild Animal Park and Legoland, Seaworld, the city’s beaches and golf competitions as the Buick Invitational.

Though the attempts of San Diego Film Commission founded in 1976 caused a variety of films made in San Diego like, for instance, Simon & Simon and Top Gun, created working places for San Diegans and brought more than 5 million dollars to the city treasury, between 2005 and 2007, San Diego witnessed over 15% of regression in real estate costs, which passed on accelerating into 2008.

The Gold Rush pushed San Francisco towards the development of banking system; today the city is the main financial center on the West coast. Montgomery Street and Financial district are known as “Wall Street of the West”; it is home to the Federal Reserve Bank of San Francisco and Pacific Exchange. The Bank of America, pioneer in providing services to the middle class, was founded in San Francisco in 1928. Many large financial institutes, multinational banks and insurance companies are placed or have regional offices in the city. About 30 international financial organizations, 6 companies included in Fortune 500 and the large number of infrastructures directed on professional maintenance of population, are located in the center (lawyer’s offices, PR companies, architectural companies, etc.). San Francisco in one of the 10 Best World Cities.

Small companies with the staff less than 10 persons make 85% of all enterprises in the city, providing the greater part of profits to the city treasury.

The three biggest branches of economy of San Diego are defense, manufacturing, and tourism. Some districts of San Diego are home to research institutions and offices for various biotechnology companies. Large biotechnology companies like Neurocrine Biosciences and Nventa Biopharmaceuticals have their headquarters in San Diego, and many pharmaceutical and biotech companies like  Biogen Idec, Genzyme, Integrated DNA Technologies, BD Biosciences, Merck, Élan, Celgene, Pfizer, Vertex and Cytovance also have offices or research institutions in San Diego. The University of California and other research institutions assisted in accelerating biotechnology development.

In June 2004, San Diego was named the top biotech branch in the US.

In the city the companies are situated developing wireless cellular technology. Qualcomm Incorporated was founded and has its headquarters in San Diego; Qualcomm is the biggest private technology company (except hospitals) in San Diego County. In accordance with the San Diego Business Journal, the biggest software company in the city is Websense Inc (security of the software).

In San Francisco in 2005, an average family earned 57 496 dollars on the average, it is the fifth index among the cities of the USA. In San Francisco poor families make 7,8%, which is less than the average index in the USA.

The homeless are “chronic disease” of San Francisco, since the 1980s. In the city there is a greater number of homeless per capita, than in any other city of the USA. The large number of homeless influenced on the increase of criminal activity. Among 50 most populated cities, San Francisco is 32nd by the index of grave crime and 38th by the index of property crime.

Port of San Francisco earlier was the biggest and by the most loaded port on the US West coast. Now this status belongs to ports of Los Angeles and Long Beach. The port accepted cargoes from ports around the world and was the main West coast center on trade of lumber.

The West coast dockers’ strike occurred in 1934 became an important event in the history of labor movement and resulted in the halt of port work and conflicts with the forces of the National Guard.

San Diego’s economy is greatly influenced by its port, which contains the only large shipbuilding and submarine yards on the West Coast, and also the world’s biggest naval fleet. The cruise ship business, which is California’s second by size, produces an approximate 2 million dollars per year from the acquisition of fuel, food, supplies, and repair services. Because of San Diego’s military authority, main national defense supplier like Science Applications International Corporation and General Atomics are situated in the city.

The research on Economic Growth in San Francisco in 1995-2000 shows the economic boom provided more than 75,000 new working places, increased the average household income by 15% and enriched the city treasury with almost 700 million dollars in annual incomes.

But it also shown that boom is gradually declining, and profits in some spheres like the property transmission tax and hotel tax are already going down.

The research indicates that during 1995-2000 the economy was bringing enough income to return financing cuts to MUNI, reinforce the Public Health Department budget and start implementing essential capital projects like the restoration of the city’s century-old water system and extension of the International Airport.

But with the decline of economy, the city cannot keep on increasing expenditures at the same rate. From 1991 to 1995, General Fund profits increased by 11%, while sendings increased by only 3.5%. However, from 1995 to 2000, profits rose by 41%, and expenditures escalated by 39%.

During the last decade, San Francisco created 4,000 new jobs so that it now has almost twice as many community workers per capita as San Diego or Los Angeles. The report shows that the government of the city can still lead San Francisco out of a fiscal danger holding the line on new expenditures and call attention to effectiveness.

Some elected officials of San Francisco have a disputable attitude to the business and the new economic boom. They described the increase in high-tech working places in entirely negative expressions ”“ concentrating on high rental fees and dislocation. However, the same officials have simultaneously spent almost all the tax incomes brought by these jobs, a considerable share of it on the expanding of bureaucracy.

The research of the Committee on Jobs tried to determine the latest economic boom’s influence on job increase, profits and tax takings.

The study revealed that the city’s overall income rose by an incredible 17.3% with inflation taken into account during the last five years. While the media is more concentrated on “dot-com millionaires,” the report showed that the stable economy and strong labor market raised the little salaries in many service industries higher than the “Living Wage” law for the city suppliers.

Stable economic growth over the last decade ”“ and especially during the last five years ”“ enriched the city treasury at an exceptional level. Last fiscal year, San Francisco accumulated nearly 1.7 billion dollars in taxes, charges, fines and debts from businesses, visitors and residents, a growth of 62% if compared to rates of 10-year-old data.

The research reports that, while a stable economy and growing tax income helped overcome the city budget shortage equal to the 1990s level, San Francisco has to control the expenditures in order to avoid shortages during the next several years.

Basing on 2006 information from the US Census Bureau, CPI studied the data of the region to create a picture of income and poverty in San Diego County. According to the census data, in real dollars, permanent employees in San Diego County earned considerably less in 2006 than in 2005. More than 100,000 employees there live in poverty.

While employees’ incomes decreased by of 4%, (inflation-adjusted) the medium household income increased slightly. The simple average of the profits was raised by the larger number of workers and higher profits among the well-off.

The new study shows a growing gap in revenue allocation between the rich and the poor, with the biggest 20% of families receiving half (49%) of total profit in the county while low-income families or fifth of the population receive less than 4% piece of the pie.

There were 331,370 citizens in the county living under the federal poverty line in 2006, with a poverty rate of 11.7%. This places the county very close to the national poverty level of 12.3%, using a static calculation that doesn’t take into consideration the differences in the living cost.

Over the past decade, the population of San Francisco increased by 6%, the private sector labor force rose by 7%, household income increased by 59% and tax incomes increased by 62%. Still General Fund expenses rose by 52%, or 67% if to take key capital projects and debt into account. Total government spending grew by nearly $1 billion over a decade.

Correcting for population growth, San Francisco’s government expenditure per-capita rose by 29% over the last five years; which is more than both state and federal government expenditures together. California’s per-capita expenses rose by 18%, while federal per-capita expenses increased by 10%.

If San Francisco keeps on spending at the same level as the economy weakens, the city can be expecting a return to the type of estimated budget shortenings it faced in the early 1990s.

Other conclusions about income include:

The largest source of local profits is property taxes on commercial and residential property. San Francisco collected 544 mln dollars in property taxes in 2000. The City’s Payroll Tax and Business License Charge are the second largest source of profits, providing 267 mln dollars in 2000. Businesses provides 63% of locally collected taxes, (about 682 mln dollars), with resident and tourists paying the rest. Of the general, local businesses bring about 53% (576 mln dollars), with out-of-town companies and business travelers accounting for 10% ($106 mln). Taxes charged on local companies include the payroll tax, property taxes, utility users costs, business registration charges, sales tax, property transfer tax, franchise costs and several other kinds of taxes use. The average city job produces around 1,123 dollars in business taxes brought to the city per year.

Other important results about economic growth:

San Francisco’s technology boom increased work and revenue increase in many other businesses. In particular, employment in the city’s high-paid construction industry swelled by 25% from 1995 to 2000. At the same time, the city appointed an astonishing 4.5 billion dollars in commercial construction permits.

While San Francisco companies of all sizes created jobs over the last 10 years, most of the job increase happened in large and medium companies, which created over 66,000 working places in the last six years.

Employment in San Francisco is quite equally spread among small, medium and large firms. Small companies with up to 49 employees employ 35% of the city’s private sector employers, medium companies with 50-249 workers employ 25% and large companies with more than 250 employees employ 40% of labor force the city’s private sector.

The two most general work classifications are wholesaler and common office clerks, having 33,000 and 30,000 jobs, respectively.

The reasons for the rise in expenditure:

”“ new capital projects caused more than half the rise in city expenses during the last decade. Much of these costs concentrated on the International Airport of San Francisco extension project and infrastructure connections, like the recovery of the city’s century-old water system.

”“ because of prior service shortening and client complaints, the Mayor and the Board of Supervisors considerably increased financing of MUNI over the last five years. The City also twice increased total Health Department expenses while rasing the Department’s General Fund funding from to 29% of its general budget.

”“ San Francisco provides various services that other regions don’t, and funds them with General Fund resources when federal or state compensation can’t be obtained. For example, Laguna Honda Hospital is a long-term county-run care institution existing in California in San Francisco only. The city spends about 100 dollars per capita monthly for public health and social services.

”“ the city gives job to 27,991 full-time employees. These processes can be considered in two ways:

On one hand, the city gives job to 150% more employees per resident than any other large urban area in the state. On the other hand, the city has enlarged the number and quality of services in various spheres.

”“ the general reimbursement package for the average worker costs 70,644 dollars annually; next year employee’s wages are planned to increase by 5.5%. The average wage for a non-resident worker in San Francisco is about 62,854 dollars.

In our mind, taking into account the direction of San Francisco’s economy, an active position should be taken to keep business in the city.

The city should look for more effective means of providing the services that citizens need and look forward to.

Thus, we can state that economic status of city can be influenced differently by the number of factors including its geographic position, population rate, social movements, certain political solutions, the industries chosen as leading ones in the area. So all of them should be taken into account during the analysis of the current situation or forecasting future changes in economic and business life of one or another city.

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