What does 2007 hold?

A lot depends on the Fed. The housing market. Gas prices. And you – the consumer.

Most economists looking into San Diego’s economic crystal ball predict an economic slowdown in 2007 – but not a recession. This will be followed by more growth in 2008.

While some parts of the economy may languish, San Diego overall will remain resilient because of our basket of industries, economists said. Weaknesses in some sectors will be offset by strengths in others. Weak industries: housing and construction. Strong ones: defense, biotech, tourism, professional services, and entrepreneurship.

San Diego economists generally agree:

“2007 will be slower, but we won’t go into recession,” said Kelly Cunningham, economist and senior fellow at the San Diego Institute for Policy Research. He is also the longstanding author of the annual economic forecast published by the San Diego Regional Chamber of Commerce.

“I think the local economy is going to slowdown considerably in 2007,” said Alan Gin, Associate Professor of Economics at the University of San Diego and publisher of the monthly Index of Leading Economic Indicators for San Diego County. “I don’t anticipate any sort of recession.”

Ditto for Marney Cox, chief economist of the San Diego Association of Governments (SANDAG): “Because of relative weakness in the economy, overall gross regional product in 2007 will be less than it was 2006. I’m not expecting a recession.”

Generally, the US and California economies are headed south. Since San Diego tends to be a forerunner of trends, we headed south sooner than the rest of the state and country – especially in 2006. But we will also head north sooner, which means the region will outperform California and the nation in 2007, said Cunningham. “San Diego is leading the rest of California and the United States.”

THE FED

Who’s the Big Daddy here? The Fed. A lot depends on whether the U.S. Federal Reserve adjusts interest rates next year – and that means: up, down or not at all.

A quick Econ review might be useful.

The Fed’s main motivation is to stabilize the economy. Its two main goals: make sure the price of things does not get out of hand (control inflation) and keep people working (reduce unemployment). Its tools: the interest rates. If the Fed raises interest rates, making the cost of money more expensive, the economy slows down and inflation is kept in check. If the Fed lowers interest rates, money is cheaper, so businesses expand activity, more people are hired and the economy speeds up.

Since 2004 — when interest rates were at all-time lows and the economy was on overdrive — the Fed has been slowly notching up interest rates, putting the brakes on the economy. That’s why the Fed took a breather in late 2006.

“The Fed achieved what it set out to do,” said Cox.

THE INTEREST-RATE WILDCARD

Now, the question is: will the Fed keep raising those rates? Or hold steady? Or even lower the rates?

The economists differ in opinion:

Cunningham: “I think they will leave them alone, at least for the first half of 2007.”

Cox: “I think it will hold steady. If the Federal Reserve has to continue to raise interest rates, it will weaken employment and further weaken the housing market, and may push the economy into recession. It won’t take much to push it over the edge.”

Gin: “I think by the end of 2007, they’ll cut short term interest rates by a full 0.5 percent – because of the slowing overall of the national economy. My guess is that in the second quarter of 2007, the national economy is going to show severe signs of a slowdown.”

So San Diego’s economy will slow down in 2007. But total output will still break records, according to the Chamber report. And the region still runs ahead the state and national rates.

In its economic forecast, the SD Regional Chamber estimates:

San Diego’s GRP (gross regional product)

• 2006 – $150 billion
• 2007 – $157 billion

San Diego’s GRP growth rate, adjusted for inflation

• 2006 – 2.9 percent
• 2007 – 2.5 percent

If San Diego were a nation, it would be ranked the 36^th largest economy in the world, based on the 2005 GRP of $142 billion, according to statistics compiled by the San Diego Regional Chamber.

Despite the slowdown, San Diego’s economic outlook is bright. “It’s still a great place to live,” said Cunningham, “as long as you have housing.”

CONSUMER CONFIDENCE

The economy is sometimes a perception game. If enough people think it’s going to slow down, it will. If enough people think it’s going to heat up, it will. In the housing market, the perception that prices will drop causes a waiting game that feeds that result. If enough people start new companies, unemployment will abait.

We are all part of a larger economy. But we also create our own personal economies. Your personal economy may slow, but it does not have to go into recession.

This article is part of a comprehensive economic outlook. See related stories:

• The Housing Market
• 2007’s Strongest Industries
• Population Changes & Employment

Follow Helen on Twitter @helenchang.

San Diego’s population is growing in seniors and foreigners.

In the last 15 years, the region has actually seen a decline in people ages 25 to 35, young people who would be starting careers and families in San Diego. Instead, they are moving to Riverside, Imperial Valley and Mexico, where housing costs are more affordable. “They’re still accessing the (SD) job markets,” said Cox. “They’re just not in the county boundaries.”

Meanwhile, people ages 35 to 65 have increased in numbers. This means industries such as healthcare will keep growing, said Gin. At the same time, more foreigners have moved to San Diego, mostly from Mexico and Latin America.

While the region had huge population inflows in the late 90s, that growth has slowed in recent years. San Diego’s population growth, according to the San Diego Regional Chamber of Commerce:

• 2002: 51,542
• 2006: 26,200
• 2007: 25,000 projected
• Total population projected in 2007: 3.12 million

EMPLOYMENT

San Diego will have fewer new jobs in 2007, economists said, but unemployment rates will remain stable.

In the last couple of years, the county has added 20,00 new jobs a year. In 2007, Cox expects this to dip to 18,000 new jobs. Gin is more conservative, placing that number at 15,000 new jobs in 2007.

In the past, about 35% of new jobs were in the construction industry. As the housing industry weakens, those jobs will evaporate. But the strong number of visitor industry jobs will ease this decline, said Cox.

Are all the new jobs in low-paying service industries? No. VC and grant money pouring into the region contributes to more middle-income jobs, said Cox. Also, the large number of down-sized employees who start new businesses creates a hidden employment that economists currently cannot account for.

The region’s unemployment rate is expected to remain stable, at about four percent. (Full unemployment is five to 5.5 percent. “We’re way below the state and nation,” said Cox.)

GAS PRICES

Gas prices also hurt or help the economy. More money at the pump means less money for other things. It also affects consumer confidence.

Gin estimates that every 10-cent raise in gas prices costs San Diego $7 million in the overall economy – each month. “People would be spending that money on gasoline when they could have been spending it on other things,” he said.

Despite the recent reprieve in gas prices, get ready for more sticker shock, said Gin. “In 2007, I think we will see a spike up again, due to economic factors, due to developments in the Middle East and worldwide demand for oil.”

This article is part of a comprehensive economic outlook. See related stories:

• The Housing Market
• 2007’s Strongest Industries
• Population Changes & Employment

Follow Helen on Twitter @helenchang.

San Diego’s growing industries will pick up slack in the housing market, economists said. These industries include: military, biotech, tourism, healthcare, professional services and entrepreneurship.

MILITARY

War helps. San Diego’s defense industry has enjoyed a spike in recent years, due to 9/11 and war in Iraq. Even with plans to pull U.S. troops from the Middle East, as Democrats gained controlled of the House and Senate, this industry will hold strong. This is because San Diego’s defense industry has already shifted its focus: from manufacturing hardware to innovating technology and surveillance systems. This means the industry will stay busy in peacetime, said Cox.

Defense industry job numbers, according to Cox:

• 2003: 17,000
• 2006: 20,000
• 2007: 20,500 to 20,600 projected

BIOTECH & TELECOMMUNICATIONS

These industries bring in moolah. It’s mostly through venture capital funds, initial public offerings (IPOs), and research grants.

VCs are have been pouring some $1 billion a year into San Diego companies in the last three years, and 2007 is expected to bring more, said Cox. About 40 percent of that money goes into biotech start-ups. Another 15 percent to 20 percent goes to telecommunication companies. When those companies grow, their Initial Public Offerings (IPOs) bring in more bucks.

Government research grants are also adding dollars. The University of California San Diego (UCSD) is now the fifth largest recipients of such grants, although it has historically been in the top 10. This money ripples out into the economy, as UCSD scientists partner with private businesses on projects.

“This is a big difference in the way our economy used to run, versus the way it’s run today,” said Cox. “We’re much more dependant on this type of funding today for the types of businesses we have. Either initial public offerings (IPOs), venture capital funds, or public/private partnerships in terms of research grants.”

TOURISM

Tourists spend money. And we have lots of them, especially from neighboring areas. The tourism industry continued to grow in 2006 and is expected to remain strong in 2007. In 2005, a record 27.2 million visited America’s finest, spending a chart-topping $5.8 billion. That number continued to rise, though moderately, in 2006.

But a downturn in the national economy will hurt San Diego’s tourism sector, said Gin.”If you see a slowdown in the national economy, our tourism will be adversely affected. People won’t travel much.” Where might new tourists come from? Said Gin: “China.”

HEALTHCARE

The growing number of retirees and seniors in San Diego is boosting the healthcare and social services industries. Not to mention other industries. “Aging people are most likely to travel and spend more, and they have the money to do it,” said Cunningham.

BUSINESS SERVICES

Professional services will continue to rise, riding on growth industries such as technology, biotech and defense. These services include accounting, legal, human resources, copying services and so on.

ENTREPRENEURSHIP

Entrepreneurs fuel San Diego’s economy.

“Our economy has done so well because of our entrepreneurial companies,” said Cunningham. “San Diego attracts people who are entrepreneurial, that like to do the high tech side, do the research and want to start their own business. That really has been a driver of our economy.”

Gin said: “It’s a growing sector and San Diego in particular has a lot more of that than in other places. You don’t have as entrenched an economy that depends on big manufacturing firms, Fortune 500 companies. The companies in San Diego tend to be smaller, there’s more of an entrepreneurial spirit.”

Current employment figures do not account for entrepreneurs – fresh and down-sized corporate guns who start new businesses. But Cunningham estimates that this group makes up some 15 percent of the total workforce.

Can entrepreneurs escape a downturn? Said Gin: “You can start your own business, but you’re going to be affected by the overall economy. If the economy goes into a slump, that’s going to affect the demand for your company’s products.”

“The small companies tend to be a little more flexible, so they may be a bit better at adapting to a slower economy. On the other hand, they don’t have the financial assets that it takes to weather a significant slowdown,” said Gin.

This article is part of a comprehensive economic outlook. See related stories:

• The Housing Market
• Growing a Basket of Industries
• Population Changes & Employment

Follow Helen on Twitter @helenchang.

The biggest industry at stake: Housing.

We all know how crazy San Diego’s housing market got in recent years. Now, the party is over. In a way, it’s a good thing. “It’s time we were pausing to catch our breath,” said Cunningham.

In fact, all three economists surveyed said they thought housing prices would drop by five percent in 2007, before heading up again in late 2007 and early 2008, because of consistent demand.

The housing sector has the largest domino effect on the rest of the economy. The greatest impact: jobs and disposable income.

Here’s what happens: Fed raises interest rates =>housing sales slow => building development slows => construction job lay-offs increase => less spending in the economy => slower economy.

The housing market is already putting on the brakes. The stats are:

• Fewer workers in the construction industry.
• Fewer building permits.
• Retail store Home Depot posted decreased sales in third quarter 2006.

Rate hikes will hit paychecks hard. Because of the high number of homeowners with adjustable interest rate loans – 30 percent of all loans – homeowners will be pressed for funds.

Here’s the scenario: Fed raises interest rates => higher monthly payments on interest-only loans => more salaries spent on mortgage payments=> less disposable income => slower economy.

Housing equity is also topped out. Because so many people sucked money out of their equity – adding some $9 billion to the economy in recent years –this source of money in the economy is no longer available, said Cox.

The domino effect of the housing market spreads to other industries, including: lending, financing, broking, escrow, suppliers and retail stores.

A rate hike could send this sector over the edge. “The housing market is at a very vulnerable point,” said Cox.

This article is part of a comprehensive economic outlook. See related stories:

Growing a Basket of Industries
2007’s Strongest Industries
Population Changes & Employment
Other Economic Insights

Follow Helen on Twitter @helenchang.

The entrepreneur, who runs a bio-medical company, stands before a roomful of business elders. Their questions fly like locusts:

“How high is the barrier to entry in your sector?” “What percentage of your sales is from a single large vendor?” “Your competitors are huge industry
players; how do you prevent them from absorbing your market?” “How do you come to the ROI (return on investment) that you are promising?” “When do your
patents run out?”

The slightly balding, round-bellied man at the front of the room answers each question in eloquent, confident tones.

A last question flies: “You say you want to bring in new management to take the company to the next level, yet you want to retain control. Are you
willing to let go of control?”

The man nods his head, “Yes.”

Welcome to the Chairman’s Roundtable (CRT), a group of business leaders, who coach entrepreneurs facing business crossroads. One monthly event includes
an entrepreneur’s presentation, after which the group acts as a de facto Board of Directors, asking pointed questions about the business before
recommending an action plan.

Entrepreneurs clamor to share their business dilemmas with this “board.” CRT’s members comprise some of the city’s most respected leaders, such as Dr.
Stan Pappelbaum, former CEO of Scripps Hospitals; Ake Persson, former president of Ericsson Wireless; Bob McRann, former general manager at Cox Cable
and president of Gibson Guitar; and Marco Thompson, founder of more than 20 tech start-ups.

The board’s leader? Tom Dorosewicz, who also runs a large technology company. Since taking chairmanship two years ago, Dorosewicz has doubled the
number of companies, or “clients,” which are coached each year to 40. He has also deepened the involvement of sponsors, who actively recommend
entrepreneurs for coaching. And he has recruited members from more diverse backgrounds.

For many CRT members, the group is a way to give back to the community, said Dorosewicz. Members spend dozens of hours over three to six months
mentoring clients, while adhering to strict codes about not soliciting business.

The fee to the entrepreneur is nothing. Except perhaps his or her ego. “One of the things we screen for before taking on a client is, ‘Is this person
coachable?’” said Dorosewicz. It is difficult to make recommendations to someone who is not open to feedback, he explains.

Clients that CRT accepts have made it past start-up stage, but do not yet have a board of directors. These are entrepreneurs who have succeeded on
their own, but do not know how to take the business to the next level. “We work with companies that are at the crossroads,” said Dorosewicz.

At one company, Techflow, the founder increasingly traveled overseas for family reasons, making him question whether to hire a replacement CEO or sell
the company. After working with CRT mentors, he chose to hire a new CEO. Another company, Outsource Manufacturing, faced vulnerabilities with its
limited customer base. CRT helped it forge a strategy to increase sales.

When he first joined CRT in 2001, Dorosewicz was impressed by the talent of its members. Now, he also insight into how to manage this tribe of A-type
personalities. “It’s like herding cats,” he said.

SNAPSHOT

TRIBE NAME: Chairmen’s Roundtable

TRIBE LEADER: Tom Dorosewicz

YEAR FOUNDED: 1998

WHAT THEY DO: Mentor businesses that are at the “crossroads” of growth

NUMBER OF MEMBERS: 40

NUMBER OF COMPANIES MENTORED 2006: 40

TYPE OF COMPANIES MENTORED: In business at least three years; revenue of $3 million or more; face strategic dilemmas; lack a Board of Directors; willing to be coached

FEE TO COMPANIES: $0

WHY THEY DO IT: Give back to the community

WEB: chairmensroundtable.com

Follow Helen on Twitter @helenchang.

Robert Wilder thrives in the crunchy granola capital of San Diego County: Encinitas. He’s a former surfer who drives an electric car, lives in a solar-heated house, grows organic fruit trees in his back yard and raises chickens that lay organic eggs.

Yeah, he’s alternative all right. But his paycheck is anything but. Wilder runs WilderShares LLC, a company that indexes green energy stocks with funds now worth nearly $2 billion. The flagship WilderHill Clean Energy Index has become a Wall Street benchmark, in the same way the Dow Jones Index measures blue chips. Its related fund is the largest and best performing in the green energy sector, with $1.7 billion in assets and returning a whopping 58% to investors in 2007.

Having combined his passion for environmentalism and investment, Wilder is now riding the wave of green capitalism. Since launching his first index in 2005, Wilder’s company has served as a nexus for environmentalists, entrepreneurs, investors, capitalists and Wall Street analysts—while also helping the world. “The fact that these stocks are profitable is the clearest way of saying to any bean counter: These things make sense,” he says. The investment world is jumping on the bandwagon. In the last two years, NASDAQ, Dow Jones and Standard & Poor’s have all launched me-too indexes. Mutual fund companies have started offering clean energy portfolios. And institutional investors are putting money into green stocks.

An academic by profession, environmentalist by passion and capitalist by accident, Wilder may have been destined to unite the three worlds because he never quite fit into any. Each pushed him to seek alternative solutions. As an academic specializing in environmental policy, Wilder has consistently sought ways to improve efficiencies in clean technologies. Currently an adjunct professor at UCSD, Wilder has won numerous fellowships—Fulbright, the National Academy of Sciences and the Environmental Protection Agency, to name a few—and has studied coastal protection policies and explored potentially profitable technologies that prevent harm to ecosystems.

His recent book, Listening to the Sea, examines biodiversity and pollution-prevention technologies. “To me, pollution is a form of inefficiency,” he says. “When you get rid of something that’s a pollutant, a wasted resource—we’re saving money. It will be profitable.”

But academic scholarship has limits, he says. “It’s hard to move to solutions.”

As an environmentalist, Wilder also wanted to find solutions. Over the years, he has served as a volunteer, adviser or director to various organizations, including the Sierra Club, the Cousteau Society, the Nature Conservancy, Coast Alliance, and the Society for Conservation Biology. But Wilder felt that environmentalists often fight against a problem rather than focus on prevention.

Wilder recalls working with one group. “We kept fighting against things. A victory meant that ‘X’ wouldn’t be built. So a shopping center wouldn’t be built, a port wouldn’t be expanded, a developer couldn’t do what they wanted to do,” he says. “Instead of fighting all these projects, why don’t they say, let’s put in solar power. I wanted to fight for something.”

“Many of the nonprofits are based on what’s wrong,” he says, “and I wanted to be ridiculously positive. I wanted to be relentlessly, violently positive. And if I could work with clean energy, I could show: answer, answer, answer.” As an investor, Wilder also looked for answers. Working as an assistant professor in the early ’90s, Wilder had a retirement account, invested of course in environmentally friendly mutual funds. But looking through the prospectus, he was disappointed. “Even the greener funds would have Exxon, Dow, Coca-Cola, and it didn’t strike me as very green,” he says. “I wasn’t into chasing investments, but I wanted my money to reflect how I felt. And they weren’t.”

Wilder decided instead to buy individual stocks, opening an account with Vanguard. He picked companies involved in clean energy—solar, wind, geothermal—and those with low carbon emissions. During the ’90s, these stocks far surpassed the Dow. “It made me feel like an Einstein in stocks,” says Wilder. But in 2000, when the market crashed, so did Wilder’s stocks, wiping out his profits. “One thing was clear,” he says, “a basket made sense.”

LAUNCHING THE CLEAN ENERGY INDEX
By that time, Wilder had met Josh Landess, an environmental economist who in 1999 started a Hydrogen Fuel Cell Index, tracking clean energy companies. “I noticed these stocks were moving, but there was no index to bring out the story,” recalls Landess. The two eventually teamed up, and Wilder’s wife created a new website to show the index’s performance.

By 2001, the site was getting more than 100,000 hits each month and dozens of emails, says Wilder. “People kept asking, ‘Do you have a fund that we can buy?’ I kept emailing back saying, ‘I’m just an academic, there’s no fund.’” In 2004, Wilder ended a job as national director for The Nature Conservancy, and he was living on unemployment benefits. It was during this time that he searched his soul for what to do next. Wilder had about $25,000 in retirement funds, which he planned to use to build a rental house on his Encinitas property. But because of soil conditions, it would cost more than he had. Early that year, he received a call from PowerShares Capital Management, an Illinois-based investment house. PowerShares wanted to start a fund based on Wilder’s clean energy index. It would be run as an Exchange-Traded Fund, or ETF, which offers the basket of a mutual fund, but the trading flexibility of individual stocks.

“I was so happy to get this,” he says.

Wilder decided to make a run for the index business. He used his entire retirement money to pay the American Stock Exchange to determine the index’s value.

The gamble paid off. On the fund’s debut on March 3, 2005, the WilderHill Clean Energy Index Portfolio sold out $10 million in shares in one day. A second fund, investing in carbon cleanup companies, followed in October 2006. And a third, tracking global companies, launched in June 2007.

Dan Culloton, senior mutual fund analyst at Morningstar, says the WilderShares Clean Energy Fund outpaces others in the clean energy sector, but it’s still a niche product. “It’s probably the most actively traded clean energy fund out there because it was the first, but it’s not challenging the big boys yet by a long shot,” he says.

LIVING LA VIDA VERDE
Wilder lives on a one-acre site in Encinitas that is a demonstration of his values. The 2,300-square-foot house and swimming pool run nearly entirely on solar energy. And Wilder ordered a Tesla sports car, which runs on 100% electricity and reaches 250 miles per hour. “I’ve thought about starting a company selling electric cars,” he says.

In Wilder’s office, a photo on the wall shows him with Al Gore. Other shots depict him hugging his wife, Diana, whom he met as a graduate student at UC Santa Barbara, and son Carson, 12, and daughter Sophia, 8. A hand-painted plate, made during a family vacation to Mexico, says: “First Year $400 million, WilderHill Clean Energy Index.”

In the wood-beamed living room, Wilder leans back in his recliner. “Until we started our indexing, there was a notion that solar and wind was something pretty iffy to do,” he says. “If you were a real person and you had a family, you would feed your family like everyone else did, and drive a car like everyone else did.

“What I wanted to do in part with the index is to have some small role in making the big public out there believe that this is a real area. You can invest in it, just like you can invest in oil or coal or natural gas.” He smiles. “I think we’ve helped to do that.”

WilderShare’s Portfolio of Funds
ROBERT WILDER IS THE CEO, co-founder and index manager of WilderShares, LLC, which specializes in tracking clean energy stocks. The associated funds are managed by PowerShares Capital Management.

The flagship WilderHill Clean Energy Index, introduced in 2004, tracks 42 U.S. companies pioneering clean energies, such as solar, wind and geothermal. The fund (ticker symbol: PBW) has assets of more than $1.7 billion. The second WilderHill Progressive Energy Index (PUW), tracks 36 companies specializing in carbon cleanup. Launched in October 2006, it has $55 million in assets.

A third WilderHill New Energy Global Innovation Index (PBD) follows 86 renewable-energy companies worldwide. The fund, launched in June 2007, has assets of $135 million.

Risk levels are high. Pure energy stocks can rise and fall as much as 5% a day or 30% a quarter. Many financial planners do not recommend weighting more than 5% of such stocks in a portfolio.

Environmentalism Pays
THE INDEXES HAVE MADE Wilder rich. Fund creators typically earn around 0.05% of assets under management, says Dan Culloton, senior mutual fund analyst at Morningstar. So with nearly $2 billion in the three funds, Wilder’s annual salary would be about $1 million.

WilderShares is having ripple effects across the investment industry. Dow Jones started a Sustainability Index in September 2005. NASDAQ launched a Clean Edge U.S. Index and ETF in May 2006. And Standard & Poor’s launched green indexes in early 2007. Other asset managers, such as KLD Research and Analytics, have also since launched mutual funds focusing on clean energy stocks.

Helen Kaiao Chang is a ghostwriter, editor and journalist. She can be reached at www.ghostwriter-needed.com.

Follow Helen on Twitter @HelenChang

1. Get an energy audit. This can help you identify areas where your business can save money. San Diego Gas & Electric offers free energy audits, energy efficiency services, and rebates. Tel: 1-800-336-SDGE (7343). Web: sdge.com

2. Change the lightbulbs. Compact fluorescent lamps (CFLs) use 75 percent less energy than regular incandescent bulbs, and they last 10 times longer. Savings: $20 per bulb annually.

3. Use occupancy sensors. These sensors automatically turn lights off, when people leave the room. Savings: up to 40 percent.

4. Turn off computers when not in use. Turning off computers during the nights and weekends conserves energy. Savings: up to $80 a year per computer.

5. Keep air-conditioners clean. Cleaning or replacing dirty filters will help them run more efficiently. (Ok, maybe you don’t control the air-conditioners in your building, but you can still do other things.) Savings: more than $150 per year, per air conditioner.

7. Adjust thermostats. Lowering the temperature two degrees in winter and raising it two degrees in summer can cut costs. Savings: varies according to office size.

8. Check the water heater. Keeping the water heater’s thermostat at 120° F is sufficient for most uses. Savings: 10 degrees lowered can save 5 percent on costs.

9. Use window blinds. Using blinds, films or solar screens to block sunlight helps cool the building. Savings: depends on office size.

10. Buy equipment with the ENERGY STAR® symbol. These products, which meet federal energy-efficiency standards, span a huge range, including: laptops, printers, photocopy machines, water coolers, refrigerators, and air conditioners. Savings: up to 70 percent in energy costs.

- Sources: sdge.com, energystar.gov, stopglobalwarming.org, ecologyactioncenter.org

More Resources for Industry Energy Savings:
- energystar.gov – real estate, healthcare, hospital, industrial and retail industries- 1.eere.gov – manufacturing, chemicals, glass, and automation industries- usgbc.org – building, design, construction, architecture

Follow Helen on Twitter @HelenChang

This article is part of a Green Energy series. Related Articles:

• The Biofuel Pioneers
  • Searching Termite Guts to Make Biofuels
  • Creating Electricity from Cow Dung and Old Frying Oil
  • Building Greenhouse Biowaste Facilities
  • Turning Urban Waste into Electricity
• Where You Can Invest in Renewable Energy Companies
• The Energy Pioneer
• San Diego’s Solar, Wind and Geothermal Energy

Photo credit: Horia Varlan/Flickr

Thursday, April 9, 2009

Cut expenses, grow revenue. That’s the formula for a healthy business, especially in a tough market. Here are eight free resources you can tap into in San Diego.

1. Cash – It is possible to find free money or, at least, cheap money. But make sure your business plan is solid. Sources include:

* Business loans: The Small Business Administration, which received fresh funding from the federal stimulus package, has money for entrepreneurs.

* Grants: The city government, which received some $67 million in grant funding in 2008, matches businesses with grants. You can also find lots of specific city grants. For example, Escondido offers a “Façade and Property Improvements” grant, for businesses to make external improvements on commercial buildings.

* Peer-to-peer lending: One way to find private lenders, who will lend you money in exchange for interest, equity or some other security. Sources include: Prosper.com, Virginmoneyus.com, Us.zopa.com and Lendingclub.com.

* Microlending: Groups offer business loans starting at $500, while educating entrepreneurs. Accion SanDiego and Womenempowerment.org are great resources

2. Workers — If you’re looking for free labor, think interns. These are students seeking work experience in your industry. Liaise with a community college or post a request on Craigslist. You can also find low-cost labor at freelance job sites, such as Guru.com and Elance.com.

3. Consultants –You can find a free business coach at Score, one of the leading business advisory groups in town. The San Diego chapter has some 90 consultants, one of which will match your business needs. The Chairmen’s Roundtable is another kick-butt organization, which mentors entrepreneurs.

4. Training — You and your employees can upgrade your skills free at classes offered through Continuing Education San Diego. Classes include: “Internet Marketing,” “Blogging for Profits,” and “E-Commerce Shopping.”

5. Communication – Free online services for teleconferencing, long-distance phone calls and shared documents all help cut communication costs. These help create “virtual offices,” where employees and contractors can be located anywhere — thus saving office rent. Check out: Freeconferencecall, Skype and Google Docs.

6. Market research – The public library is filled with best-selling books, magazines and extensive databases, which can help keep you up with current trends. Due to the city’s budget deficit, some branches may be closing or cutting hours, but you can still use their resources. Many public libraries also have meeting rooms – some free, some for a fee.

Bonuses: the Encinitas Public Library opens to breathtaking ocean views, while the National City branch inspires visitors with its cathedral ceiling and the Mission Valley library features an outdoor waterfall.

7. Services – You need their services. They need yours. But neither of you have much cash. What do you do? Barter. Don’t laugh. Kyle MacDonald bartered a single, red paper clip up to a house. Craigslist has great barter listings.

8. Peace of Mind – We live in San Diego, remember? Just take a walk along one of our gorgeous beaches — such as Coronado, La Jolla, or Del Mar — and remember your problems are but a drop in the ocean of abundance. Yeah, business may be down, but you still live in one of the best places in the world.

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Monday, June 15, 2009

The Economic Development Corporation is hosting 10 international journalists this week as a way to promote San Diego’s regional and clean tech opportunities.

While the EDC has attracted U.S. journalists in past years, this is the first time the organization has worked with international journalists.

“We’re trying to elevate awareness of our cross-border economy and green economy,” said EDC spokesperson Megan Carleton. “This is part of our attraction development strategy.”

“It’s marketing,” said Jim Waring, chairperson of CleanTech SanDiego, a partner in the event. “When someone with a business or idea is deciding where to locate that business, they have a lot of good choices and viable communities. If (a business person) knows there is already a viable business culture in San Diego, they will give San Diego a serious consideration,” he said.

The journalists represent news organizations from Mexico, Germany, Switzerland, Hungary, Norway, Poland, Ukraine, Sri Lanka and Indonesia. Their mediums are radio, print and wire services. Representatives from the Foreign Press Center in New York and Washington are also joining them.

The journalists paid for their own airfare, hotel and transportation — a practice common in the journalism industry to avoid conflicts of interest. EDC is paying for their meals and incidentals, said Carleton.

The journalists will attend a two-day program on Tuesday and Wednesday. The schedule includes:

– Overviews of the San Diego-Imperial Valley-Baja economic region

– Overviews of San Diego’s algae biofuels industry

– Tours of local green companies, including Kyocera Solar and Sapphire Energy

– Interviews with San Diego mayor Jerry Sanders and Tijuana mayor Jorge Ramos

– Visits to Birch Aquarium and a Padres game.

The EDC’s presentation about the CaliBaja economic region is consistent with its recent efforts to promote San Diego-Imperial-Valley-Baja as a viable area. The EDC will highlight companies that base management and research-and-development offices in San Diego, while running manufacturing operations in Imperial Valley or Baja, where land and labor are more abundant.

“We’re sharing the story about our cross border economy,” said Carleton. “We’re marketing it as a place to invest.”

Other presentations will showcase companies in the high-tech, biotech and clean sectors, said Waring. This includes the growing algae biofuels industry.

The more international business leaders know about San Diego’s assets, the better the chances for collaboration, he said. “You have a better opportunity to learn about what others are doing in the world and maybe you can combine forces and reach markets more quickly,” Waring said.

Global linkages also foster cooperation in fighting climate change, he said.

“One of the reasons for the clean tech revolution is concerns over climate change. America could reduce its carbon footprint to zero and it would not reduce climate change unless you have additional points of technologies elsewhere in the world,” said Waring. “To the extent that the sector is driven by the climate change impact, it’s essential that it be international.”

EDC has already hosted 10 U.S. national journalists this year, including one from “The New York Times,” said Carleton. Since going through a reorganization two years ago, these efforts are part of EDC’s “more aggressive public relations campaign,” she said.

The EDC has been fighting its own economic battles, with talks of EDC and Connect combining into one organization. Connect now serves as a matchmaking agency for scientists, entrepreneurs and investors in the region. Both organizations have been hit hard by the economic downturn.

For now, EDC and its partner organizations are going all out to impress the foreign journalists. Waring said, “You want them to leave here going, ‘Wow, these folks are doing a lot of good work, and San Diego is a serious and meaningful player in the effort to develop these clusters in the world’.”

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Monday, May 18, 2009

You thought you had it bad. Wait till you hear these two stories about real estate investors in housing foreclosures.

John Woodbury has six houses in foreclosure. Lenska Bracknell has three houses in short sales.

Woodbury, 62, was a retired state worker turned real estate investor who had a credit score of 780. He lost everything.

Bracknell, 45, runs an aerial photography business and is a real estate broker. She bought three houses on 30-year-fixed rates, full doc loans and 20 percent down. Now, those investments are sour.

Woodbury and Bracknell both attended a workshop last month about how small business owners are facing mortgage foreclosures. They agreed to share their stories with SDNN.

John Woodbury loses six houses

Investment dream: “We hoped this would help our retirement,” said Woodbury. “We were all looking forward to it.”

Number of properties: 6

Locations: Escondido, Hemet, Los Angeles, Montana, South Carolina, Texas

Credit score: 780

The good life: In 2006, “all the properties were making money,” he said. “I could borrow money, and even if they had a negative, I knew they were going up in value, so that was great.”

Warning signs: In 2008, the L.A. house rent dropped to $1,600. The mortgage was $3,200. “We knew we had to get rid of the property, because we were going through our savings.”

Refinancing: In September 2008, Woodbury applied for a refinance on the L.A. property. The mortgage broker said Woodbury’s finances were excellent, and could qualify. But Fannie Mae changed its rules, limiting the number of houses that an investor could get loans on to four. He no longer qualified for the loan.

Negotiating with the bank: Woodbury contacted First Horizon Bank, the lender on the L.A. house. “The first thing out of their mouth was, ‘Are you behind?’” said Woodbury. “We said, ‘No.’ And they said, ‘Well, you have to be behind at least two months before we can even talk to you.’”

Woodbury missed two payments, called the bank again, and “they said there’s nothing they can do.”

Attempt to sell the house: Woodbury found a buyer, with ample down payment. The house went into escrow. Two weeks before closing, the HUD statement showed that Woodbury would have to bring $33,000 to close.
Saving the deal: Woodbury borrowed $16,000 from his sister. He wiped out his savings. The real estate agents agreed to lower their commissions from 6 percent to 4.5 percent. But Woodbury was still $7,000 short.

Negotiating with the bank: Woodbury asked the bank to lower its penalties and late fees by $7,000.

“They said, ‘No.’ I said, ‘You understand, if this doesn’t close, and this house goes into foreclosure, you are going to lose about $200,000 on the value of the property immediately. I can give you all the principal, part of the interest, just not all of it.’ The bank said, ‘No, we don’t want to have anything to do with it.’”

Failed deal: The house fell out of escrow March 6 and went into foreclosure. “Everybody lost,” said Woodbury.

Bank’s motives: “They don’t need to do this,” said Woodbury, “because they know that even if they have to go into foreclosure, and they lose money, they’re going to get money from the federal government in the bailout.

“They’re not concerned about helping citizens at all. Why spend the extra time and money for something you’re going to get paid to do anyway, if you don’t do anything?”

First Horizon Bank’s response: “First Horizon strictly adheres to all applicable privacy laws, and our confidentiality policy prohibits the disclosure of customer information,” said Anthony Hicks, public relations officer, in an email.

“We recognize these are difficult times for many people and work with our customers to exhaust all available options. We encourage customers who may be experiencing difficulties, and those who think problems are likely, to contact us immediately so we can offer the best solutions for their needs within the parameters of their loans.”

Other foreclosures: “That’s one of six loan modifications I’ve tried to do, and all of them have fallen through for lack of cooperation” from banks, said Woodbury. “Part of the reason is because my credit scores have gone down, and they’ve gone down because they didn’t loan me the money, because of (rules changes at) Fannie Mae.”

Dead dreams: “Now we have no retirement, no money,” said Woodbury.

How they are surviving: Wife’s government job salary. Woodbury is filing for bankruptcy.

Responsibility: “I’m not blaming anyone but myself, because I’m the one who made all the decisions,” Woodbury said. “Nobody guaranteed me anything when I was born. You do the best that you can. Sometimes it works, sometimes it doesn’t. You just do the best you can.”

Lenska Bracknell negotiates three shortsales

Her main business: Aerial photography

How she started investing: In 2003, Bracknell bought one house, fixed and sold it. She used the profits to buy more houses.

Number of houses: 3

Location: Boise, Idaho

Great loans: 30-year fixed, 20 percent down, full documentation.

Warning signs: In 2006, many people lost jobs in Idaho. Rents dropped from $1150 to $750. The mortgages were $950.

“Suddenly, the whole cash-flow was not working anymore,” said Bracknell.

A property manager ran off with two months’ rent and a deposit. Bracknell had no rent income.

The state raised its property taxes. The property tax went up from about $750 to $3,500 a year, said Bracknell.

Negotiating with bank: “I tried to contact my lender to try to make the payments, but obviously, they don’t want tot talk to you,” said Bracknell. “So you really have to default in order to get the bank’s attention.” That didn’t work.

Shortsale: “I decided to cut my losses there, because obviously I’m not able to recoup the money,” said Bracknell. “I hired a short-sale company, an investor group that makes offers on these houses … and negotiates the shortsale with the bank,” said Bracknell.

Credit cuts: Bracknell had two American Express cards, with credit limits of $18,000 and $38,000. Since 1996, “I have never carried balances, paid every balance for the last 13 years.”

In March 2009, American Express “cut my credit down to $2000.”

Business impact: For the aerial photography business, “I can’t rent helicopters or airplanes using credit cards or do business like I normally do.”

Sleepless nights: “I got some chest pains a few weeks ago,” said Bracknell. “I had my sleepless nights, sleepless weeks, months. But I decided I can’t give in to it.”

Responsibility: “To be honest, I don’t think I did anything wrong,” said Bracknell. “I put 20-percent down, full doc loans. I treated my tenants well.”

“But due to the economic climate, certain people got too greedy,” she said. “Small people on the street really have to feel it and change their whole life.

How she’s surviving: Savings.

Future: “I love real estate,” said Bracknell. “I love to actually help people to make the right decision. And that’s why I’m using all that experience … to give that advice to other investors, who now have the cash to do the investments and turn those properties around,” she said.
___________________________________________________________________________________

Woodbury’s settlement breakdown

$445,000 — Mortgage owed
$ 26,000 — Real estate commissions
$ 7,000 — Title fees
$ 16,000 — FIRPTA* tax
+ $ 13,000 — Penalties and late fees
—————————————-
= $507,000 — TOTAL OWED

Amount still needed to close

$507,000 — Total owed
- $475,000 — Sale price
- $ 25,000 — Loans and savings Woodbury brought to table
—————————————-
= $ 7,000 — Difference needed to close

Appraisal value 2006: $775,000

* Foreign Investment in Real Estate Property income tax for non-owner occupied properties.

Follow Helen on Twitter @HelenChang.