Report touts Bay Area’s economic future 

The Bay Area’s economic outlook is getting brighter and brighter, according to an economic forecast released Thursday by the Association of Bay Area Governments.

ABAG’s report projects steady increases in jobs, sales-tax revenue and commercial development, weighed down only by an unsteady housing market and concerns about oil prices. That’s good news for local governments, whose budgets depend upon steady gains in sales tax and other revenues.

Across the Bay Area, 54,100 new jobs were created in 2006. In the San Francisco region, which includes San Mateo and Santa Clara counties, ABAG predicts that 14,000 new jobs will be created in 2007, followed by another 13,100 in 2008.

In San Francisco and San Mateo Counties, commercial vacancy rates dropped, reversing the trend of empty buildings in the wake of the dot-com bust. In San Francisco, some of that vacancy was taken up by the restaurant industry, which is booming again in the City by the Bay, according to Randy DeSchazo, senior planner with ABAG.

"In July through September of 2006, restaurants were one of our largest gainers," according to Todd Rydstrom, director of budget and analysis for San Francisco. Restaurant business rose 2.2 percent from the same period in 2005, and 11.6 percent from the same time in 2004.

Along with that, retail sales — boosted by the opening of the Westfield Centre and healthy spending across the city — and tourism are booming in San Francisco, according to Rydstrom.

In San Mateo County, a diverse commercial market is boosting job and industry growth, according to Terry Flynn, deputy assessor and San Mateo County Clerk. The commercial real-estate market heated up in 2006 with a number of large transactions, such as the long-term lease of 450,000 square feet of space in Redwood City’s Pacific Shores Center by PDL BioPharma, an East Bay company.

However, it appears that municipal costs — including salaries and benefits for public employees — may continue to outpace revenues, according to San Mateo County budget director Jim Saco.

"We’re seeing stable growth in general-purpose revenues, but our costs are still going up faster," Saco said.

One major source of public revenues — property taxes — may slide as the housing market softens, according to ABAG economist Paul Fassinger.

"We’re expecting that the housing market will bottom out sometime this year, prices will stabilize and we’ll start to see constant or increasing numbers of houses produced," Fassinger said. Housing sales should rise again in 2008, he added.

bwinegarner@examiner.com

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