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The State of San Diego's Small Business Owners

as published in the San Diego Daily Transcript

by Vince Vasquez

Monday, April 25, 2011

A new poll reveals that San Diego's small business community sees brighter economic days ahead, but remains tight fisted and cautious about the future. If local government officials take new steps to address the needs of business, they can stimulate capital spending and job creation when they're needed most.

At issue is the Union Bank's 11th Annual Small Business Economic Survey, which interviewed 2,892 business owners in California from Jan. 10-28. Examining the sub-sample of 504 San Diego County respondents, pollsters found that regional business owners feel optimistic about the future and their bottom line. Nearly two-thirds (64 percent) believe they will see greater profitability this year. This sunny disposition is unique to San Diego. According to the survey data, more business owners in San Diego County (45 percent) reported greater year-to-year sales in 2010 than in any other county in California. The majority of business owners here (59 percent) also believe that their business will have experienced an economic recovery by the end of 2011.

Still, most small business owners are planning to hold the line this year. Breakout data from the Union Bank survey finds that county small business owners are mostly guarded about their finances -- 69 percent plan to maintain the same staffing levels from 2010, and 60 percent also intend to keep capital expenditures at the same level as last year.

If businesses choose not to expand this year, the reasons won't be limited to recessionary woes. The Union Bank survey identified the government as a growing hindrance to running a business in the Golden State.

San Diego business owners rated state and local business taxes as the top challenge in running a business in California (40 percent), narrowly edging out the state economy (39 percent), which has been the top rated issue locally since at least 2009. Statewide, respondents ranked state and local business taxes as the second biggest challenge. Red tape headaches are also a concern. For the first time since 2006, local survey respondents rated state and local business regulations among the top three challenges.

Clearly, San Diego's elected officials have a mandate to make our fees, taxes, and municipal code more business-friendly, but where to start?

When San Diego County small-business owners were asked to identify their top business needs, poll respondents indicated their desire for the government to focus on cutting business taxes (66 percent) and providing temporary tax incentives for small businesses (37 percent). Facing a $57 million budget deficit in the next fiscal year, San Diego City officials will have few tax incentives to offer business owners. A new approach will be needed.

One member of the San Diego City Council has already taken decisive steps this year to address the needs of small business owners. Newly-elected City Councilmember Lorie Zapf has held a series of "small business advisory summits," soliciting feedback from business owners on which services work and which do not at City Hall. At her April summit in Mission Valley, many attendees shared their frustrations with city permits, commercial and zoning laws. Zapf announced that she was working with her colleagues on a small business legislative package, to provide business owners regulatory relief and foster common sense changes to how the city government interacts with businessmen and women. The legislative package is expected to be introduced at Council in the coming weeks.

Kudos to Councilmember Zapf for being proactive on such an important issue, and working in a collaborative fashion to assist small business owners. It's unknown what reforms will be included in Zapf's legislative package, but she should consider allowing small business owners a central, permanent role in cutting red tape.

From 1993-2000, special public hearings known as "Regulatory Relief Days" were held in the city of San Diego, giving residents and business owners an opportunity to share their horror stories with municipal bureaucracy. Critically, the popular program institutionalized the routine annual review and repealing of onerous and obsolete city regulations. With bipartisan support, Regulatory Relief Days resulted in more than 60 regulations being changed or eliminated, such as the ban on child care centers in residentially zoned areas. Other notable achievements from the program include modernizing the city's fire code, trimming zoning laws by 140,000 words (more than a third), and reducing the time to receive a business permit in half.

Let's put San Diego's small business owners back in the driver's seat at City Hall. A lot has changed in San Diego since the last Regulatory Relief Day was held, and many new practices and technologies have rendered laws obsolete. Bureaucracy costs money, and in this recession, we can't afford to lose one dollar.

As Councilmember Zapf explained, "San Diego is in desperate need of a regulatory spring-cleaning. The excessive burdens placed on businesses are hampering growth and strangling the economic engine that drives our city."

Here's hoping the other City Councilmembers get the message as well.