— San Diego’s economy is full of opportunity and challenges. The housing shortage, homelessness, high taxes, regulation, workforce retention and business recruitment – to name just a few things – present real obstacles.

In my more-than three decades in this business, I’ve found that business leaders are second to none when it comes to framing key issues and, ultimately, finding solutions. So in December, when we released our second annual San Diego 500, The Book of Influential Business Leaders, I saw an opportunity.

I asked the members of the San Diego 500 to weigh in on what they see as the biggest challenges facing our local economy. The response was terrific. I heard back from leaders in just about every key industry.

Here is a sampling of some of the responses. With 2018 just getting underway, these insights supplement the comments we received from our panelists at our recent Economic Trends Forum (coverage of that event is featured in this issue). Sincere thanks to all San Diego 500 members who responded.

John Sarkisian, partner, Motion Venture Fund: We lack the leadership and fortitude to become a world class city. Provincial thinking dominates our culture. People who come here can’t understand why our infrastructure is so far behind growth. Look at our sports facilities, single runway airport, the very building that houses our Mayor and City Council, the lack of commitment to housing density and a behind the curve public transportation system. We need regional leadership to develop a bold plan to accommodate population growth, and build world class infrastructure. The private sector will do its part to build world class institutions if government leads and does not impede. 

David Duval, principal, Claiborne Advisors Inc.: The most challenging twin issues: California state tax levels and overbearing regulation.

Yehudi “Gaf” Gaffen, CEO, Gafcon Inc.: Leadership! We need to work together as a regional economy – the local cities, county, port, airport, SANDAG, Tijuana – to make us the powerhouse we can be. Silos cause friction, which impedes advancement.

Navid Alipour, managing partner, Analytics Ventures:  The biggest challenge is creating enough opportunities to keep the tech talent here. San Diego is No. 1 in the United States and No. 2 in the world, second only to Tel Aviv, as to percentage of patents filed per population. Ten jobs created building a new office property or hotel, or in tourism, is not the same as 10 jobs created at a tech company, a biotech or a med-device company. Students come from all over the world to go to school at our top institutions, such as UC San Diego; they would like to stay but are not aware of opportunities, or there are just more jobs elsewhere. Companies, large and small, need to interface with the universities more to hire interns, train those looking to transition later in life, and then market the success sto

Robert Rauch, president and chief executive officer, RAR Hospitality: The potential loss of Qualcomm is the single biggest issue. We must find a way to attract more companies that have high-paying jobs.

Dan Broderick, regional managing principal, Cushman & Wakefield:

The biggest issue facing our region is the lack of progressive growth policy and embracing density. Without this, we can never have more affordable housing, efficient mass transit and attract and keep large employers. This has troubled San Diego for decades and will only limit us more in the coming decades.

Matt Cole, president, Cubic Transportation Systems: I would like to draw attention to our need to evolve our transportation infrastructure. Many of the issues facing our economy, from housing to workforce supply, recruitment and retention to economic activity, relate to how people move around the San Diego region. We will need to smartly utilize our existing transportation infrastructure, in addition to expanding it, in order to avoid congestion on our major North-South and East-West corridors.

Dustin Niglio, CEO, Payment Logistics: California state income tax is a major business killer in the region, especially with federal tax reform looming which gets rid of the deduction for local and state taxes. This is going to drive some companies and high-net-worth individuals out of the region, putting strains on unemployment, office vacancy rates and ultimately property values.

William Eigner, partner, Procopio: I think the most challenging issue facing our region is really a statewide issue: high state taxes, particularly high state income taxes that are driving the wealthiest Californians to leave the state. Most people have no sympathy for millionaires complaining about California’s high tax rates, but our firm has been forced to open offices in Nevada and Texas due in part to the surprisingly large number of our business-owner clients who elect to move to lower tax states. Even supposedly strong supporters of the California tax system, such as the leaders of Apple, are moving many of their newest initiatives to low tax jurisdictions such as Nevada and Texas. 

David M. Johnson, president and CEO, Achates Power: Since our geography and climate are so desirable, demand will outstrip supply, pushing prices higher. As such, we must cultivate and support businesses that are high-value creators.  Biotech is a good fit.  Defense is a good fit.  Tourism is a good fit. Technology is a good fit.  Manufacturing is not a good fit. The more business diversity we can add, the better for long-term stability of the region. Government needs to work to counter and/or off-set the region’s high cost of living with lower taxes and reduced barriers to doing business. 

Killu Sanborn, senior director, Oxford Finance LLC: Given that I am mostly active in the life sciences industry, the issue that most screams for attention for the potential of the San Diego innovation industry, is a relative lack of local capital to support its ecosystem. By far the majority of financing for the top-level innovation industry (VC-backed companies in tech and life sciences) comes from the Bay Area and East Coast. Most of what ails the local innovation ecosystem can be cured with capital. There is plenty of conversation about it, but no easy answers. But unlike most of the country, we actually have a lot of ingredients for the innovation ecosystem.

Robin Toft, president and CEO, Toft Group Executive Search: I think the biggest problem is homelessness. It has ruined San Francisco, and we need to stay ahead of it.

David Stearn, vice president, Lennar Homes:  Without a doubt the most challenging aspect the San Diego regional economy is the housing crisis. There is an ever-increasing gap between the subsidized homes that only a small percentage of the population qualifies for and the market-rate homes that only a similarly small size of the population can afford. Most of the rest of us, including our young professionals, are forced into long commutes or to move out of the region. So, we educate a lot of bright young college students, many of which grew up here, and end up losing them to other more affordable regions. If we don’t build more moderately priced market rate housing and convince the agencies that it is simple supply and demand, our economy will almost certainly take a hit in the not too distant future.

Huntley Paton is president and publisher of the San Diego Business Journal. These responses have been edited for brevity.