San Diego City Economic Development and Intergovernmental Relations Committee Meeting – August 3, 2017

The Economic Development and Intergovernmental Relations Committee (Chair Zapf, Councilmembers Bree, Kersey, and Alvarez) met on August 3, 2017, to receive informational updates from the Port of San Diego, the Governor's Office of Business and Economic Development (GoBiz), the San Diego Regional Economic Development Corporation (EDC), and the San Diego Military Advisory Council (SDMAC). No formal action was taken on these items; the committee approved the record of action from the July 23 meeting by unanimous consent.

Consent Calendar

• Approved the record of action from the July 23, 2017 meeting by unanimous consent, with no items pulled for discussion.

Public Comments & Testimony

• Martha Welch, a member of the public, spoke during non-agenda public comment about the Metropolitan Transit System (MTS). She expressed opposition to recent MTS bus and trolley service changes, saying the Route 11 bus change was the "worst one" and that changes to other routes were not properly communicated. She stated that seniors cannot purchase round-trip trolley tickets, that there are inadequate restroom facilities at transit stations, and that accessibility for walkers and wheelchair users at the America Plaza stop is poor. She said MTS actions were "not right" and called for more consideration of riders.

Discussion Items

Port of San Diego Report

• Port Commissioners Rafael Castellanos, Marshall Merrifield, and Michael Zuquet presented an overview of Port initiatives and economic impacts.
• Economic impact: The Port generates an annual economic impact of $8.3 billion (direct and indirect), up from $7.7 billion in 2013. Direct economic impact on tidelands was $5.43 billion in 2015, a 6% increase over 2013. The Port supports nearly 44,000 jobs; ~31,000 (70%) are in tourism/commercial industries, and ~13,000 (30%) are industrial/maritime. The working waterfront and tourism/commercial sectors each contribute about $2.7 billion in direct output.
• Coronado Bay Bridge lighting: The capital campaign has raised $1.2 million in cash and pledges; total project cost is estimated at $6–8 million, with an additional $2 million for an operations/maintenance fund. Commissioner Merrifield said the goal is to complete lighting by 2019, the bridge's 50th anniversary. Phase 2 begins next week with artist Peter Frank under contract.
• Blue Economy Incubator: The Port has made four investments totaling $750,000: Red Line Chemical ($165,000, copper-removal pilot with 85% success rate), Rentunder ($140,000, boat wash capturing copper), Swell Advantage ($100,000, marina dock-management app), and Acacia Pacific Aquaculture ($350,000, oyster nursery barge). Commissioner Merrifield said the Port receives royalty arrangements, not equity.
• Pond 20 mitigation bank: 80+ acres in Councilmember Alvarez's district are slated for wetlands and mitigation; a consultant is studying feasibility of a mitigation bank. The Port expects a recommendation in 4–6 months. Councilmember Alvarez noted the Otay Mesa border project requires 5–7 acres of wetland mitigation and could be a potential user.
• Portside Pier: $20 million redevelopment; demolition begins this year, construction next year, opening summer 2019. It will include two full-service restaurants and fast-casual dining.
• Cruise business: About 250,000 cruise passengers are expected this year, up from recent years but below the 2008 peak of 1 million. Disney has 17 cruises scheduled this year, up from 2 in 2014; each cruise ship call contributes about $2 million in direct spending.
• Cargo terminal modernization: A $24 million project at the 10th Avenue Marine Terminal, with $10 million in Tiger grant funding, will demolish a 1950s-era shed, improve stormwater filtration, and modernize rail systems. Phase 1 demolition completes by October 2018; completion expected in 2020. Dole Fresh Fruit imports about 180 million bananas per month through the terminal.
• Commissioners also discussed the Central Embarcadero redevelopment and Harbor Island projects.

Committee members asked clarifying questions about bridge lighting costs, the public art fund, Pond 20 mitigation credits, the Blue Economy fund, Fifth Avenue Landing timeline, and port financial contributions to the Chula Vista convention center project. Councilmember Alvarez acknowledged the port's work on the 10th Avenue Terminal and asked about a water-access proposal at Cesar Chavez Park. Councilmember Bree praised the Blue Economy incubator and noted new hotels will add TOT revenue. Councilmember Kersey asked about the port's legal obligation to review Fifth Avenue Landing; the Vice Chairman explained the history and that the port is obligated to review but not approve.

California Competes Tax Credit Program

• Sid Varakra, Deputy Director for External Affairs at GoBiz, and Jesse Gype of the San Diego Regional EDC reported on the state's California Competes tax credit program and other business resources.
• Varakra outlined GoBiz services: business investment, permitting, international trade missions (including an October Mexico mission), workforce development (Cascade grant for cyber workforce retraining), zero-emission vehicle infrastructure, and innovation hubs.
• Gype provided program statistics: Since the program's establishment four years ago, 98 San Diego County companies have won credits (47 small, 51 large); about 75% of the credit value went to San Diego city businesses. The county has outperformed LA County, which has 106 credits despite a population four times larger. Total credits awarded to county companies are $40 million over a five-year period. City of San Diego companies have pledged to create 5,791 jobs (2,535 small, 3,256 large), $162 million in new investment, and over $1 billion in wages.
• Gype noted the program is set to sunset at the end of this year, and EDC is advocating for an extension. He asked the committee to consider supporting the program.
• Councilmember Alvarez asked about geographic distribution of credits, particularly in high-unemployment areas. Gype said there is a map available and noted three Barrio Logan companies have won, including NASCO, BAE, and a brewery. He acknowledged the need for more outreach to small businesses and high-need areas.
• Councilmember Kersey asked about outreach methods; Gype and Varakra explained workshops, partnerships with EDC and city economic development, and suggested inserts in business license renewals. Councilmember Kersey recommended working with the city's economic development department on that.
• Councilmember Bree asked about common questions to GoBiz (workforce, utilities/incentives) and whether the program favors certain sectors. Gype said it is proportional to the economy, with tech/manufacturing common but no industry favoritism.

BRAC (Base Realignment and Closure) Report

• Dennis Dubard, President of SDMAC and General Dynamics NASSCO, and Jesse Gype of EDC reported on the military's economic impact and BRAC likelihood.
• Military impact: Defense spending generates $44 billion in gross regional product and 1 in 5 jobs in San Diego County. There are ~134,000 military and DOD civilian personnel. Naval Base San Diego homeports 55 ships, expected to grow to ~70 by 2025. An aircraft carrier has an economic value of about $770 million. San Diego contains 67% of the military training airspace in the country.
• BRAC history: California has been hit hardest, absorbing 54% of total BRAC cuts (93,000 jobs, 30 installations closed). San Diego has fared better due to unique training ranges and infrastructure. The likelihood of a BRAC in FY18 is now under 10%, but it could be authorized in 2019 or 2020; once authorized, the process takes about three years.
• EDC and SDMAC lead "Operation San Diego," a 14-entity coalition for military advocacy. They maintain a lobbying presence in D.C. and have strong relationships, including with the new assistant secretary of defense for installations and environment.
• Councilmember Bree asked about job losses; Dubard said San Diego has been a net winner but exact numbers weren't provided. Councilmember Kersey asked about MCRD consolidation; Dubard said the Marine Corps has no plans to close MCRD San Diego.

Key Outcomes

• No formal action was taken on any discussion item; the meeting was informational.
• The committee approved the July 23 record of action.
• GoBiz and EDC will explore outreach to businesses via city business license renewal inserts, following Councilmember Kersey's suggestion.
• Port commissioners committed to following up with Councilmember Alvarez on the Cesar Chavez Park water-access proposal and the Barrio Logan bridge-lighting estimates.