This document summarizes an economic strategy report for San Francisco. It analyzes the city's economy in terms of major sectors like knowledge, experience, human infrastructure, and physical infrastructure. It examines the job and fiscal impacts of key industries in each sector. Industries are classified based on their recent growth, concentration in SF, and whether they represent emerging or declining strengths. The document discusses challenges around supporting high-impact industries, middle-income jobs, and workforce development to strengthen San Francisco's economy.

1. Focusing San Francisco's Economic Strategy: From Goals to Strategic Priorities Ted Egan, Ph.D. ICF International

6. Goals and Objectives: Focus Groups and Public Meeting

7. Industries Advance the Goals and Objectives Differently Identify San Francisco industries that generate more tax revenue than they consume in services. Ensure a sound fiscal footing for the City by encouraging industries with a positive fiscal impact. Identify San Francisco industries that create quality job opportunities for residents without a university degree. Ensure greater inclusion and equity in job opportunities, with an aim to reducing inequality. Identify San Francisco industries with high local multiplier effect. Create job opportunities by building on our strengths to promote greater overall economic growth. Industry Characteristics Goal

8. Combined Impacts: Construction, Manufacturing, Wholesaling, Transportation 7 LOW HIGH HIGH Wholesale Electronic Markets and Agents and Brokers 6 LOW MEDIUM HIGH Merchant Wholesalers, Nondurable Goods 6 LOW HIGH MEDIUM Truck Transportation 4 LOW MEDIUM LOW Transit and Ground Passenger Transportation 6 LOW HIGH MEDIUM Support Activities for Transportation 3 LOW LOW LOW Couriers and Messengers 5 MEDIUM MEDIUM LOW Furniture and Related Product Manufacturing 8 MEDIUM HIGH HIGH Computer and Electronic Product Manufacturing 6 MEDIUM HIGH LOW Printing and Related Support Activities 8 MEDIUM HIGH HIGH Merchant Wholesalers, Durable Goods 5 LOW HIGH LOW Warehousing and Storage LOW LOW MEDIUM MEDIUM MEDIUM Fiscal Impact MEDIUM HIGH MEDIUM MEDIUM MEDIUM Total Growth Impact LOW MEDIUM HIGH HIGH HIGH Middle Class Job Impact 4 Apparel Manufacturing 6 Food Manufacturing 7 Specialty Trade Contractors 7 Heavy and Civil Engineering Construction 7 Construction of Buildings Combined (Out of 9) Industry

9. Combined Impacts: Retail Trade MEDIUM HIGH HIGH MEDIUM HIGH HIGH HIGH MEDIUM HIGH HIGH HIGH HIGH Fiscal Impact LOW LOW LOW LOW LOW MEDIUM LOW LOW MEDIUM MEDIUM LOW MEDIUM Total Growth Impact MEDIUM LOW LOW LOW LOW LOW LOW LOW LOW MEDIUM LOW HIGH Middle Class Job Impact 5 Nonstore Retailers 5 Miscellaneous Store Retailers 5 General Merchandise Stores 4 Sporting Goods, Hobby, Book, and Music Stores 5 Clothing and Clothing Accessories Stores 6 Gasoline Stations 5 Health and Personal Care Stores 4 Food and Beverage Stores 6 Building Material and Garden Equipment and Supplies Dealers 7 Electronics and Appliance Stores 5 Furniture and Home Furnishings Stores 8 Motor Vehicle and Parts Dealers Combined Industry

10. Combined Impacts: Information HIGH MEDIUM HIGH HIGH HIGH HIGH HIGH MEDIUM HIGH MEDIUM LOW MEDIUM Fiscal Impact HIGH HIGH HIGH HIGH HIGH HIGH HIGH HIGH HIGH HIGH HIGH HIGH Total Growth Impact MEDIUM HIGH MEDIUM HIGH MEDIUM MEDIUM MEDIUM HIGH MEDIUM HIGH LOW MEDIUM Middle Class Job Impact 8 Rental and Leasing Services 8 Real Estate 8 Funds, Trusts, and Other Financial Vehicles 9 Insurance Carriers and Related Activities 8 Securities, Commodity Contracts, and Other Financial Investments and Related Activities 8 Credit Intermediation and Related Activities 8 Internet Service Providers, Web Search Portals, and Data Processing Service 8 Telecommunications 8 Internet Publishing and Broadcasting 8 Broadcasting (except Internet) 5 Motion Picture and Sound Recording Industries 7 Publishing Industries (except Internet) Combined Industry

11. Combined Impacts: Financial, Professional, Business, Environmental 8 HIGH MEDIUM HIGH Credit Intermediation and Related Activities 8 HIGH MEDIUM HIGH Securities, Commodity Contracts, and Other Financial Investments and Related Activities 9 HIGH HIGH HIGH Insurance Carriers and Related Activities 8 HIGH MEDIUM HIGH Funds, Trusts, and Other Financial Vehicles 8 MEDIUM HIGH HIGH Real Estate 8 HIGH MEDIUM HIGH Rental and Leasing Services LOW MEDIUM HIGH HIGH Fiscal Impact HIGH MEDIUM MEDIUM MEDIUM Total Growth Impact HIGH MEDIUM MEDIUM MEDIUM Middle Class Job Impact 7 Waste Management and Remediation Services 6 Administrative and Support Services 7 Management of Companies and Enterprises 7 Professional, Scientific, and Technical Services Combined Industry

12. Education, Health, Hospitality, and Other Services LOW MEDIUM MEDIUM MEDIUM HIGH LOW LOW MEDIUM LOW LOW LOW LOW LOW Fiscal Impact LOW LOW MEDIUM LOW MEDIUM LOW HIGH MEDIUM LOW LOW HIGH MEDIUM LOW Total Growth Impact MEDIUM LOW HIGH LOW LOW LOW LOW MEDIUM LOW MEDIUM HIGH MEDIUM LOW Middle Class Job Impact 4 Religious, Grantmaking, Civic, Professional, and Similar Organizations 4 Personal and Laundry Services 7 Repair and Maintenance 4 Food Services and Drinking Places 6 Accommodation 3 Amusement, Gambling, and Recreation Industries 5 Museums, Historical Sites, and Similar Institutions 6 Performing Arts, Spectator Sports, and Related Industries 3 Social Assistance 4 Nursing and Residential Care Facilities 7 Hospitals 5 Ambulatory Health Care Services 3 Educational Services Combined Industry

15. What We Sell: Major Net Export Industries in San Francisco $0.62 Lessors of nonfinancial intangible assets $0.63 Hotels and motels, including casino hotels $0.97 Telecommunications $1.02 Insurance agencies, brokerages, and related $1.11 Machinery and equipment rental and leasing $1.11 Food services and drinking places $1.20 Management consulting services $1.41 Information services $1.49 Architectural and engineering services $1.64 Advertising and related services $2.56 Legal services $2.86 Real estate $3.10 Management of companies and enterprises $5.39 Monetary authorities and depository credit in $7.32 Securities, commodity contracts, investments Exports Less Imports, 2001 ($ billion) Industry

16. What We Buy: Major Net Import Industries in San Francisco -$0.11 Toilet preparation manufacturing -$0.19 Paper and paperboard mills -$0.28 Motor vehicle parts manufacturing -$0.30 Truck transportation -$0.35 Pipeline transportation -$0.46 Pharmaceutical and medicine manufacturing -$0.58 Petroleum refineries -$1.09 Automobile and light truck manufacturing -$1.21 Oil and gas extraction Exports Less Imports, 2001 ($ billion) Industry

17. San Francisco’s Trade Pattern and Economic Niche Manufactured Goods Energy Commodities Tourism Services Financial & Professional Services Capital Inflows Traditional & New Media High Technology San Francisco’s Economy Rest of the World Rest of the World

18. San Francisco’s Economic Structure: A Knowledge and Experience Economy Attractions Digital Media Financial Services Information Technology Biotech Professional Services Publishing, Film, TV Knowledge Generation Dining & Entertainment Neighborhoods & Places Arts & Culture Hospitality Specialty Retail Experience Generation Fashion Physical Infrastructure: Making, Holding, Moving, Maintaining Things Construction/Real Estate Transportation, Distribution, & Trade Manufacturing Suppliers Maintenance and Repair Environmental Products & Technologies Export Design People Infrastructure Teaching, Healing, Helping, Protecting People Education Health Social Services Business Services Personal Services

21. Trends in the Economic Structure: Interpreting Growth-Share Matrices Recent Growth Rate Concentration in San Francisco U.S. Average San Francisco Average Emerging Strengths Established Leaders Threatened Leaders

22. Trends in the Knowledge Sector San Francisco has broad areas of strength across the entire knowledge economy, from financial and professional services, to digital and traditional media, to software and services. The orange-colored industries indicate those with a high impact, from the earlier impact analysis. A clear distinction exists, however, between those strengths that are expanding (upper-right), and those which are declining (upper left). These differences will be explored in the next few slides.

23. Breakdown of Jobs by Education and Annual Salary In Growing Knowledge Industries In the growing (upper right) industries, which mainly includes Internet, media, professional, and high-end financial services, about 60% of the jobs go to workers with at least a four-year degree. About a quarter of workers have some college or a two-year degree, and most of those jobs pay more than these workers typically make in San Francisco. Only about 12% of the jobs go to workers with no college, although again most of those jobs pay better than average.

24. Breakdown of Jobs by Education and Annual Salary In Declining Knowledge Industries The knowledge sector jobs that have been declining in San Francisco (corporate headquarters, mid-level financial services, and film) have a very different skills profile. Over half of the jobs in these industries go to workers that do not have a four-year degree. Again most of these jobs offer better-than-average salaries to workers with a high school or community college education.

25. Our Declining Knowledge Sector is Growing Elsewhere in the Bay Area Is the decline of the middle class knowledge sector job an inevitable part of San Francisco’s rising cost of living? The argument for that would be stronger if we did not observe the same industries growing elsewhere in the Bay Area—even in Santa Clara county, which has higher housing costs than San Francisco. These areas face very similar housing and labor costs as San Francisco, but have been able to expand their employment in these industries.

26. Knowledge Industries Grow from Local Creativity & Innovation Like a Funnel Institutions, Creativity, Innovation Dominant Companies Sustainable Companies Number of Actual Start-Ups Creative Talent – Number of Potential Entrepreneurs

27. Job Impacts Are Different For Companies at Different Stages Highly skilled, core knowledge functions only, personal networks. Upper Income Jobs. Multiple skill levels, full set of corporate functions, formal labor market hiring. Upper, Middle, and Lower Income Jobs. Company Stage of Development Job Characteristics Dominant Companies Sustainable Companies Number of Actual Start-Ups Creative Talent – Number of Potential Entrepreneurs

28. San Francisco Has a Very Wide Funnel, But Has a Bottleneck at the Bottom Dominant SF Companies Sustainable SF Companies Number of Actual SF Start-Ups San Francisco Creative Talent – Number of Potential Entrepreneurs San Francisco Institutions, Creativity, Innovation Relocations / Expansions Outside SF Buy-Outs/ Mergers

29. Venture Capital Trends: Emerging Industries in the Bay Area Given our current role as a center for small, early-stage knowledge-based companies, understanding the growth trends of emerging industries is important. The six industries shown on the left lead the country in receiving venture capital investment, and the Bay Area leads all other regions in every one of these industries.

32. Trends in the Experience Sector The broad Experience sector includes companies in the hospitality, specialty retail, arts, culture, and recreation industries. As a sector, its growth has been one of the strongest in the City over the past decade. Many of these industries are not high-impact, although the accommodation industry is a major source of revenue for the City.

33. Experience Sector: Breakdown of Jobs by Education and Annual Salary When we look within these educational categories to examine wages, we see that most of the jobs pay below average for each level of educational attainment. 42% of the Experience sector workforce has a high school education and work in jobs paying less than $30k a year. Another 26% have some college, and work in jobs (possibly the same jobs) paying less than $40k a year. Part of the challenge in this sector, therefore, is not merely to ensure competitiveness, but higher quality experiences dependent on higher skilled, better paid workers.

36. Trends in Human Infrastructure Industries in the human infrastructure sector, like all local-serving industries, will generally track the growth of the overall economy, unless there are changes in local demand patterns or competition from elsewhere in the region. In the human infrastructure sector, health care (hospitals) and education have been healthy sources of job growth. Most of the industries in this sector have strong middle-income job impact, and a low overall impact only because many are exempt from property tax.

37. Human Infrastructure: Breakdown of Jobs by Education and Annual Salary The sector offers a decent array of middle-income jobs, especially for workers with some college. Most of the jobs held by workers with a high school education or less pay less than $30k a year, the City-wide average for workers at that level.

39. Job Trends in Physical Infrastructure Many jobs in the physical infrastructure sector are high impact, both because of their strong multiplier effects, and the percentage of middle-income jobs that each offer. Unfortunately, most of these industries have been losing jobs in San Francisco, with Construction and Truck Transportation being the main bright spots. Many manufacturing industries on this chart—and other export-oriented manufacturing industries not shown—have declined dramatically.

40. Physical Infrastructure: Breakdown of Jobs by Education and Annual Salary Most of the jobs held by workers in the physical infrastructure sector pay an above-average wage for workers at that level. 30% of the workforce has a high school education and earns over $30k a year, while another 19% of the workforce has some college and earns over $40k a year.

41. Knowledge Sector & Physical Infrastructure Growth, 1995-2000 During the dot com boom, the local-serving industrial sector grew alongside of the advanced services sector that led the city’s economy. Export-oriented industrial jobs—essentially, the manufacturing sector– declined significantly during this period Although there was a significant change in the city’s population during that time, and many employers were displaced, in aggregate the growth of the Knowledge Sector created more job opportunities in the local-serving PDR sector.

42. Knowledge Sector & Physical Infrastructure Growth, 2000-2004 In 2001, the City began to lose knowledge sector jobs in the dot com bust. Immediately, it also began to lose local-serving PDR jobs. What this means it that the growth of the advanced services sector has not cost the city PDR jobs. Rather the growth of the City’s knowledge and experience economy sustains local industrial suppliers. During the recession, the more vulnerable, and disconnected, tradable PDR sector declined faster than other, stronger sectors of the economy. And faster than it did during the dot com boom.