The prospect of San Francisco becoming corporate headquarters for Richard Branson's new Virgin USA airline has got local officials excited with the prospect of thousands of jobs. But first they'll have to convince the carrier that San Francisco is a friendly place to do business, no easy task.

The city is competing against Boston and Washington, D.C., after Los Angeles, Philadelphia, and New York were eliminated from the running earlier this year. A decision is expected within weeks and operations are set to begin in the first quarter of 2005.

A Virgin USA headquarters would reportedly bring more than 2,000 jobs to the Bay Area over the next three years, with an annual local payroll upwards of $120 million. Analysts peg the economic impact for the chosen city at around $200 million a year.

Frances Farrow, CEO of Virgin USA, says the company is considering several criteria in its decision: "quality facilities, cost of living for our employees, operating expenses, and quality of life."

Like a tennis player who overplays to one side to protect her weak hand, San Francisco has been trying to change the conversation from economics to brand fit.

Drag queens in red

Officials here would rather talk about the area's cultural amenities than its stifling tax burden, high workers' compensation costs and lack of affordable housing.

The pitch to lure Virgin has featured the Stanford chorus, drag queens and a tap-dance troupe -- all clad in the company's trademark red. San Francisco Mayor Gavin Newsom summed up the sales pitch best when he said, "I think what closes this deal is the Bay Area and the diversity of the people in this region."

Mayor Newsom has taken a page out of Carnegie Mellon Professor Richard Florida's best-selling book, "The Rise of the Creative Class." In it, Florida argues that economically competitive cities are those that are trendy and hip, distinguished by strong funding of the arts, for example, rather than lower taxes.

No wonder the mayor is pushing San Francisco's bohemian lifestyle -- the city ranks first on Florida's Creativity Index of all major U.S. cities. The problem is, this index fails to predict economic growth and competitiveness.

Steve Malanga of the Manhattan Institute has shown that, since 1993, job growth in Florida's least creative cities has actually outstripped job growth in his most creative cities. The Bay Area, which has lost more than 340,000 jobs over the past two years, is a case in point. If the region wants to attract jobs, such as those that will come with a Virgin USA headquarters, it needs to adopt sound pro-growth policies that will convince businesses they are welcome.

Learn from Arnold

Newsom's effort to reestablish the city's Office of Economic Development is a step in the right direction, but it might be too little, too late. Luckily, San Francisco can count the new governor among its cheerleaders, and he has made reform of the state's beleaguered business climate his administration's top priority.

In fact, according to Deberah Bringelson, president of the San Mateo County Economic Development Association, which is leading the charge to lure the carrier, "prior to the recall (Virgin) had decided not to consider California because of cost and the complexity of the business climate. However, after Arnold was elected, they decided to take a closer look."

California is offering Virgin $18 million in state and local funds to train new employees. But Schwarzenegger knows that incentive packages alone won't seal the deal. That's why he's so focused on fixing the state's workers' compensation system and passing a budget without tax increases.

Newsom should take a page from the governor's playbook, rather than Richard Florida's bestseller. The mayor should pursue low-tax and less-regulation policies that will bring businesses like Virgin to the Bay Area. After all, if fellow Democrat Gray Davis were still in office, San Francisco would have already joined the Virgin dustbin of rejected cities.