SF chief economist warns of recession

October 21, 2008 11:47:58 PM PDT
San Francisco's chief economist told city supervisors today that the worldwide economic crisis would likely have a local impact somewhere between a "financial services shock" and a lengthy recession.

Speaking at a hearing called by the Board of Supervisors on the local impacts of the crisis, Ted Egan of the city Controller's Office of Economic Analysis said San Francisco has so far escaped much of the financial turmoil that has affected other parts of the state, partly due to a strong local housing market and tourism.

But with San Francisco's continued insulation from the global credit crunch becoming "increasingly unlikely," Egan projected either a short-term shock to the city's financial services sector or a "U-shaped recession" in which the economy sinks and then plateaus for a significant period of time before eventually rising, he said.

But the estimates remain vague because the city has not yet received local economic figures since September's collapse of Lehman Brothers helped trigger the worldwide credit crisis.

Egan also noted that despite strong tourism numbers for San Francisco, the recently increased value of the dollar against the euro may actually hurt tourism in the city.

"We're not a bargain anymore for European tourists," he said.

Supervisor Aaron Peskin today proposed two specific plans to help strengthen the local economy.

One, in legislation Peskin introduced today, would establish a Tourism Improvement District aimed at using assessment revenues collected from hotel room occupancy rates to double funding for city marketing and sales programs for tourist hotels.

Peskin said the hotel and tourism industry "remains our single strongest economic sector" and that the program would generate an estimated $27 million in its first year.

He said the legislation appeared to have the support of most of the city's hotel owners, who would have to vote to approve it. The program would be fast-tracked to begin in 2009.

Peskin's second proposal is a one-year freeze and/or reduction in fees on small businesses. Legislation for the proposal is still being developed.

San Francisco's small-business sector represents "the canary in our economic coalmine," Peskin said.