San Francisco Chronicle, October 29, 2003

San Francisco is the nation's most creative city, according to economist Richard Florida of Carnegie Mellon University. But a municipal government that is one of the worst dampens this creativity. Voters will be able to do something about that next week, especially in voting for Proposition D.

First, some background: Professor Florida has constructed a "creativity index" that ranks cities based on innovation, diversity, high technology and workforce ingenuity. San Francisco is number one -- statistical proof of what proud residents have always known. Florida believes the key to economic growth lies not just in the ability to attract the "creative class," but also to translate this human advantage into new businesses. San Francisco's acceptance of highly diverse, highly talented people and its leading role in competitive, cutting-edge industries have yielded the most creative private sector in the country.

Juxtapose this with San Francisco's public sector, and the results are striking. San Francisco's municipal budget is $4.9 billion -- more than the budget for the entire state of Arkansas, which has three times the population. Only Washington and New York City spend more per capita, according to U.S. Census Bureau data.

What do we get for all that money? Not much. According to an examination by the Reason Public Policy Institute of how efficiently California's 10 largest cities deliver public services (considering such things as emergency medical response, street repair, water distribution, fire protection and law enforcement), San Francisco ranks dead last. We get the least bang for our taxpayer buck of any city in California. We don't shine at the national level, either. Reason found that San Francisco ranks a middling 24 of 44 cities.

The evidence is in, and it reveals a schism by the Bay. The private sector is creative, entrepreneurial, innovative and dynamic. But the public sector is wasteful, inefficient and stagnant.

San Francisco needs a tectonic shift in how it allocates its resources. It needs to move resources from the inefficient public sector to the creative private sector.

Giving a greater voice in City Hall to small businesses would move us in the right direction. Proposition D would create a strong, independent Small Business Commission in City Hall. At least five of the seven commission members would own, operate or be officers of a San Francisco small business. The members would be unpaid and the commission would not increase the city's budget. The commission would have policymaking and lobbying authority on legislation affecting San Francisco's thousands of small businesses. It would also help businesses comply with complex regulations, such as the Americans With Disabilities Act, reducing costly litigation.

A strong Small Business Commission would also make success less likely for job-killers such as Proposition L, which would mandate a citywide minimum wage of $8.50 per hour.

San Francisco's small businesses, already overburdened by regulations, should not be asked to shoulder more in these tough economic times. Small businesses employ 52 percent of private-sector workers in the city, generating an annual payroll of $16 billion and creating most new jobs. Small business in San Francisco is big business. Small businesses are the soul of the city's creativity and the barometer of its long-run economic potential.

The challenge facing San Franciscans is to preserve and strengthen the creativity of the private sector and to dampen the drag of the public sector. On Tuesday, voters will have an opportunity to meet this challenge.

Lawrence J. McQuillan is director of Business and Economic Studies at the Pacific Research Institute in San Francisco. He can be reached by email at lmcquillan@pacificresearch.org.