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Will The Filner Scandal Cause An Economic Fallout In San Diego?
August 12, 2013 2:05 p.m.
Gary London, real estate economist with London Group Realty Advisors.
Erik Bruvold, president National University System Institute for Policy Research
MAUREEN CAVANAUGH: Opponents of Mayor Bob Filner are holding not welcome back rally to mark his return from therapy. This is KPBS Midday Edition. The rally begins (inaudible) the Mayor to leave office and city against to support the recall petition meanwhile local economists are divided on whether the scandal in the Mayor's office is having an impact on San Diego's economy. Researchers at UC San Diego are asking why do some people get Alzheimer's and not others. A top researcher will join us to explain some of the answers they've recovered and this year San Diego's official researchers told us that's one of the unusual jelly sightings around the world. I am Maureen Cavanaugh KPBS Midday Edition is next. First the news. This is KPBS Midday Edition. I am Maureen Cavanaugh. It is Monday, August 12th. One of the stories we're following in the KPBS newsroom, a rally in downtown San Diego at this hour has been dubbed a not welcome back gathering by opponents of Mayor Bob Filner is being held to mark the reported end of the Mayor's stint in intensive therapy and to encourage the recall effort. KPBS's Eric Anderson is on the scene at the rally and Eric, hello.
ERIC ANDERSON: Hi, Maureen, how are you?
MAUREEN CAVANAUGH: Just fine. Thanks for doing this, Eric. Where is that not welcome home rally being held?
ERIC ANDERSON: It's where you might expect it to be held, right at the concourse at City Hall here C St. and near fourth and (inaudible) it's a little plaza that sits right behind the city administration building. Write the now right now there are probably close to 70 people who are gathered in a half circle carrying signs. They are addressing the many television cameras that have shown up this afternoon and also the other people who are here to listen. Just to give you kind of a flavor of what the some signs are saying is bounced the bully another one says shame on Bob, there's a picture of Uncle Sam on one that says we want you to resign and he's pointing the finger and another says no more grabby grabby. That's another one out here all of them mainly letting Bob Filner know at least in this crowd he is not welcome as Mayor of San Diego.
MAUREEN CAVANAUGH: Now Eric, who was promoting this rally?
ERIC ANDERSON: The people who put it together calling themselves citizens of San Diego who are tired of this month-long situation. The first speaker at the podium just a couple minutes ago was Ben Katz. And we are going to hear from I think more people who say this is a situation we don't want to live with any more and we want people to know there are people out there who do not support the Mayor.
MAUREEN CAVANAUGH: Now you said this rally is taking place right in the Concourse downtown at City Hall. Is there any speculation that the Mayor might actually be in City Hall. Do we know where the Mayor is or what his status is right now?
ERIC ANDERSON: Well, the Mayor has not been, much unlike the rest of his political career, he really hasn't been out publicly at all in the last couple of weeks we have not seen him and I'm not sure he would be welcome here, but the profile tends to be low on his end.
MAUREEN CAVANAUGH: I'm wondering are there any elected officials at this rally, any sort of prominence and deacons who have come out against Filner and asked for his resignation?
ERIC ANDERSON: You see a couple of faces in the crowd that you have seen through this effort, Michael Palmieri is here, he's handing a volunteer slips together volunteers for the recall effort that's underway. He's one of the two people that sort of put forth the effort to recall the Mayor. John (Gabion) is here, I saw him earlier, political consultant whose have a lot to say frequently about this issue but for the most part it tends to be people who are just not happy with Bob Filner. They appear to be citizens who appear to say look, this is it, the time has come and Bob needs to go.
MAUREEN CAVANAUGH: We are hearing some chanting in the background now. You said there were 70 people to start out with, is the rally gaining strength?
ERIC ANDERSON: There may be a few more people may be close to 100 people. It's lunchtime here on my, or some people are coming out of their offices and peering in to see what's going on, but yeah, support is about 70 people they brought signs, and one of the big ones now behind the rally Filner is not welcome back, which is the theme of this rally.
MAUREEN CAVANAUGH: Okay that is our KPBS reporter Eric Anderson reporting live at the not welcome back rally in downtown San Diego. You're going to be able to see and hear more about this rally later today on KPBS evening edition at five and again on 6:30 on KPBS television and thank you, Eric. Our top story on Midday Edition with all the uncertainty surrounding the future of Mayor Bob Filner some are wondering if San Diego will begin to feel and economic impact from the scandal. There are conflicting opinions about local economists us to whether the Mayor's problems will affect San Diego's economy. Joining me to discuss the issue are my guests Gary London, real estate economist with London group Realty advisors and Erik Bruvold, president of the national University system Institute for policy research. I spoke with them earlier today and here's that interview. Erik, let me start with you first give us your overall assessment of what impact the scandal is having on the economy?
ERIK BRUVOLD: Well I think that what the scandal in the aftermath or as this process moves forward this really introduces uncertainty into the local economy. We passed a charter reform that gave the mayor fairly broad and extraordinary powers over policy directions and economic strategies for the city and this is NTS to whether he stays whether he goes the timeline for that really creates the kind of risk that would lead to a number of businesses and a number of kinds of industries to put investments on hold until greater certainty arises in the process.
MAUREEN CAVANAUGH: And Gary London, what is your take on the impact if any on our economy?
GARY LONDON: I don't want to disagree with Erik too much, but I want to sort of sober the conversation by simply suggesting that the circumference in the Mayor's office only goes so far and that with critical exceptions that I expect we will talk about, the business of the city and of the region will run mostly as usual regardless of what's going on in the Mayor's office.
MAUREEN CAVANAUGH: Erik Bruvold, the Mayor has been disinvited to a conference in Washington with the San Diego regional Chamber of Commerce. It was the Chamber of Commerce that disinvited him. What kind of message does that to send businesses out-of-state?
ERIK BRUVOLD: I think there's some symbolism in the move, I think it clearly sends a signal that the Mayor is sort of lacks power and lacks authority and credibility, but I think that the bigger signal, again, is that there's a tremendous amount of what will be the long-term prospects and the timeline for his retaining the office.
MAUREEN CAVANAUGH: You know Gary, the effect on business so far has been business groups like the chamber, like the business leadership alliance, today businesses like Biocom, the largest life sciences Association in the world have been asking him to resign immediately. Why? What are they afraid of?
GARY LONDON: I'm not sure exactly because they are going to operate their businesses no matter what they do but to the extent the Mayor lends a helping hand to supporting businesses in a cluster or to the extent that he lends a personification of what the city or the region's business climate is any protection negative my guess is that is essentially what they are reacting to. I think that the problem that Eric pointed out which is essentially that the city without a strong mayor operating in a strong fashion is sort of rigor mortis right now is the most important point with respect to specific areas but I'm not sure if affects the technology clusters in our community.
MAUREEN CAVANAUGH: I will ask you about this (inaudible) Cafferty wrote an Op-ed piece in the voice of San Diego and in it he said they've already seen some conversations with businesses considering a move here. See my conversations derailed because of jokes and concerns about the Mayor. And I want to get your response let me start with you, Gary, what's your response to that?
GARY LONDON: I think that to the extent that there are jokes about just do the jokes manifest themselves into me know, deals getting done or not? My guess is that there's a lot of other factors at play when a business decides to either relocate or expand any community and again I don't think the circumference of the Mayor's office extends to all those decisions but you know, it can be helpful.
ERIK BRUVOLD: And I would agree with that, Maureen, I think if a company is looking at making a major investment in San Diego of the kind that Mark would be talking about I think that who is in the Mayor's office is sort of irrelevant but you know I think a specific area that we could talk about refers to sort of the current state of the San Diego film commission and I think that if the Mayor stays that commission is going to be hampered or probably will remain dormant if the Mayor were to go I think you could see some new decisions on that's so if you are thinking of shooting a movie in San Diego I think you have the option you postpone or get greater certainty of that before you commit to making the investment in our region because again you don't know whether there is or is not going to be a film commission in the near future.
GARY LONDON: Here's the deal if I may interject Maureen, that was Mayor Filner's decision has Mayor that was his policy decision that was not necessarily related to the scandal he may have made a bad decision with respect to terrorism funding and how that apply to the film commission and so forth and I would agree it was a bad decision but that was his decision as a Mayor, so in a sense this sort of recall effort or anything that causes him to go out of office would be sort of good news for the film commission that would not have been good news if he had not had this scandal brought about, brought upon us.
ERIK BRUVOLD: But Gary, I would say and absolutely, but there is the flipside of the positive thing if you are uncertain about the Mayor staying or not staying in San Diego given his policy direction that he wants to put solar rooftops on every city business
MAUREEN CAVANAUGH: Right.
ERIK BRUVOLD: If you were banking on that as an investment you have to build some uncertainty because you don't know whether the Mayor is going to be around in two, three, four months I think it's absolutely right to say that the particulars of the scandal probably have minimal impact on business but what is clearly I think and has served as somewhat of as economic anchor and not saying the economy is going in the tank is that when you have a strong mayor form of government and have as much policy power invested in that office uncertainty about whether somebody's going to serve out their full term or be removed from office in two, three, four months under a variety of circumstances just can't be good for the risk premium that businesses are going to place upon thinking into the future.
MAUREEN CAVANAUGH: Gary are you saying that the business community is sort of like Behind the idea of asking the Mayor to resign, or the recall, whichever it is, is because mainly of things that he did before the scandal has broken?
GARY LONDON: There was momentum prior to the scandal. To find ways to unseat the Mayor. There was a lot of unhappiness over lots of things that we all know about that preceded the scandal. What I'm saying is that in a sense the scandal has catalyzed that they which from their perspective this Mayor is gone it's not a question of if he's going to leave it simply a question of when he's going to leave and while Eric is certainly spot on about the fact that over the next two or three or four months whatever it takes and however it plays out created uncertainty which is not good for the city would ultimately is good is that there will be clarity at the end of all of this and some other individual will come into office and you know there will be sort of a cleansing process and that is really what I'm sort of focusing on rather than sort of the interim mess that we are all in right now which I think sort of can be managed because we have a chief executive officer there on the interim that's doing a good job I will tell you what's really a problem right now is not the decisions by the large clusters of whether they move or not I think these are all sort of theoretical I think the bigger problem right now is what's happening internally at the city, the inability to attract quality people to work at the city the slowdown in development services department to get projects approved, certainly associated with permits these kind of things have a short-term manifestation that directly arise from scandal and anything else.
MAUREEN CAVANAUGH: I want to talk more about that in just a second but Eric I want to ask you first, how do you think we actually see an economic impact hear from the specifically from the scandal and how would we know that it was tied to the Mayor scandal?
ERIK BRUVOLD: Well I think again nothing that we will be looking for is the extent to which there is on a construction site because I think where you would see this is on the development services side and on the real estate development side of the equation that if what we see is that California construction employment continues to uptick statewide over the next two quarters and in San Diego if it remains flat, if we start to see development projects put into stasis or on hold that people put them in a slow a process we will start to see that in the employment numbers and that would give us an indication and again, I am less, I'm not sure optimistic or pessimistic is the word to say, I think this has the prospect to linger for a long time. Recall is difficult in our city. We don't have many processes other than recall to remove a strong executive. I think that was an oversight in the charter review process. And while I think personally absent opinions about whether I want to see the recall move forward it's just a very daunting process at the charter puts forward in moving the process forward.
MAUREEN CAVANAUGH: Gary London moving back to the point you are making about what's going on at city hall San Diego city Council members that we've interviewed here and of course the Council is now unanimously calling for Mayor Filner to resign he pointed out the amount of time that's being siphoned away from other important matters by this scandal and the impact that may have and other economists have pointed to the backlog of approved project permits that are waiting for the Mayor's signature. These are things that are not getting done. Is that what you are referring to?
GARY LONDON: Exactly and, in fact, the situation is not going to get better immediately whether somebody else is in office or not. There's just a backlog. There's been problems at the city for some time and when the Mayor came in he slowed the process down, he micromanaged he did things that were probably not in the best interests of the city and now that he's not paying attention and he doesn't have Council support it only tends to intensify the situation.
MAUREEN CAVANAUGH: Erik Bruvold, economists don't believe the present scandal will have much of an economic scandal in San Diego. They point to South Carolina and if you will remember that Gov. had his extramarital affair it was a scandal that went on for a few months they said the state suffered no measurable economic impact. Is that comparable to the situation?
ERIK BRUVOLD: No and let me tell you why. Gary hits on the key point in the US under most jurisdictions land use is a local decision. It resides in the office of the municipality, city. Under the old form of government when we had a city manager we could go through crises, we could go to a Mayor being named the worst mayor in America and resigning in a special election and all this and that and the another thing the city manager keeping things on track. Under a strong mayor really does reside in the office of the Mayor and the extent to which the office is paralyzed it's difficult to process requests for rezoning, for changes in the general plan or the community plan amendment process, just a variety of things that the Mayor has got to make a decision on and the extent to which he simply says I'm not going to focus on that I'm going to do with my criminal and civil defense that's a real problem. It basically shuts the city down.
MAUREEN CAVANAUGH: We are working ourselves out of a bad economic downturn. We are dealing with the impact of sequestration is the big city projects coming up the expanded Civic Center the Balboa Park Centennial, I'm wondering how do you think, let me go to you Gary, first how do you think turmoil at City Hall might have an impact on any or all of these projects?
GARY LONDON: I think the impact is the largest if you have a Mayor that's against the project or can't make a decision right now in any of the things that are well within the circumference of the Mayor's office, those are the things that really matter and again I have to just sort of reiterate that some of those issues were going to be difficult issues even before this whole last month, so all I can do is point to sort of the long-term positives that if and when not Mayor leaves them these things ultimately get clarified I don't know that two or three months or four months is going to matter that much.
MAUREEN CAVANAUGH: And Erik?
ERIK BRUVOLD: Yeah those are the places where the Mayor has greatest impact those are the places where you can sort of see incremental between zero and some amount of investment flowing in from the city Gary is absolutely right those are going to be difficult projects but I think the important thing is that even if we had a new Mayor unless clear that they were going to support those projects and they were going to move forward then I think capital and private business does what it does best is that it recalibrate sand refocuses the investment in other places. Who knows in a situation that is the real problem. Somebody will sit on the fence and say you know, I'm just going to do anything for six months until greater clarity emerges.
MAUREEN CAVANAUGH: I've been speaking with Gary London with London Realty advisors and Eric Bruvold, president of the University system for policy research. Thank you both very much.
GARY LONDON: Thank you, Maureen.
ERIK BRUVOLD: You're very welcome.