A Case of the Stupids

Posted: October 31, 2011 in California, Economy, Jobs

So…California is suffering from extended periods of high unemployment.  Frankly, much of the nation is suffering similarly, but California’s size and economic prominence begets additional scrutiny.  Anybody who pays any attention to economic development, politics, the business world in general, or governmental regulations in general, knows that California is not an easy place to do business.  Between taxes, environmental regulations, labor regulations, and overall cost of living, there are compelling reasons to NOT set up shop in California.  Furthermore, most of the California media do semi-regular stories on businesses in California that have pulled up stakes and fled to more welcoming business climates such as Texas, Alabama, Oklahoma and North Dakota.

So you can imagine my shock upon reading this article on the San Diego Union-Tribune’s website.  To sum up, a local developer wants to develop a mixed-use apartment complex at the waterfront edge of San Diego’s downtown area.  Normally, that might be a welcome development (no pun intended) that would generate some much-needed construction work.  Unfortunately, across the street from the project site is a heavy industrial factory operated by Solar Turbines.  Solar manufactures gas turbines that are sold the world over, and their site has been used as a manufacturing facility going back to the 1920s.  Approval of the apartment project would pretty much preclude further operations at the Solar plant, because the acquisition of any new equipment would trigger environmental reviews…reviews that likely would not pass muster with residential uses a mere 100 feet away.  Solar does have an additional facility in a different part of San Diego, but to shift the waterfront operations to their other facility would require a substantial dollar investment…a much greater investment than it would in many other parts of the country.  According to Solar’s president, D. James Umpleby,

“The primary issue is that we have invested hundreds of millions of dollars in machine tools. If we were in fact to invest the millions it would take to leave this site, it wouldn’t be a prudent business decision to put the plant in the state of California. Heavy manufacturing has left California for the last 30 years. We’re one of the last heavy manufacturers here. If in fact you looked at the business climate, environmental regulations, costs, taxes, everything that goes into heavy manufacturing in San Diego County — if you invested the money, quite frankly, you probably would not stop until you hit the fence line (of the state).”

To further muddy the waters, San Diego in general and downtown in particular suffers from a glut of housing.  Downtown took part in the condo boom of 2003-2007, and a good number of the unsold properties were converted to rental units.  I have a hard time believing that vacancy rates are low enough to justify another rental housing project, and I definitely have a hard time trading existing, long-term established jobs for what would amount to temporary, short-term jobs.  This is an ugly situation, and I can only hope that the City of San Diego, the San Diego Unified Port District, and the Centre City Development Corporation (Downtown San Diego’s redevelopment agency) take a cold hard look at reality and realize that the loss of Solar would far outweigh any benefits that another apartment development would bring to the waterfront.

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