NORTH COUNTY ---- What will make North County's economy stronger? The San Diego North Economic Development Council is presenting 12 answers: Business clusters ---- groups of related businesses that add jobs to the area and support the overall economy.

Beginning in February, the council will highlight a company from one cluster each month to draw attention to the cluster's role in the region. On Feb. 7, the council will release "San Diego North Economic Outlook 2006," featuring interviews with leaders in each cluster.

"We asked them to provide a prospective view of what they see ahead for their company or sector," said Gary Knight, chief executive of the council. The report is a joint project of the council and the Union-Tribune Publishing Co.

The clusters are tourism/gaming, banking/finance, manufacturing, sports and extreme sports, agriculture, health care, military/defense, education, biotech, high tech, transportation and marketing and communications. They bear some resemblance to an ongoing effort by the San Diego Association of Governments to track related clusters of businesses throughout the county.

Health care, for example, was chosen because the cost of health care is one of the top concerns of business. However, Knight said, that sector also has employment clout: Palomar Pomerado Health, with a payroll of about 3,200, is the largest private employer in North County.

The same reasoning is true of transportation and education, Knight said. Employers are concerned with getting their employees to work quickly, and have trouble finding enough educated employees to perform the high-paying work that this high-priced region needs.

In the education sector, Cal State San Marcos' College of Business helps the business community in two ways, said Dean Dennis Guseman: it trains "future business leaders" and also provides expertise to local businesses.

"More than 90 percent of our students who graduate stay within North County," Guseman said. "That says to me I am training the future businesspeople of North County. It's more difficult to bring in talent because of the high cost of living."

To assist businesses, the college has programs such as Senior Experience, which provides graduating business students for problem-solving projects, and the Chairman's Round Table, a group of current and former CEOs who provide free consulting. Business faculty are also directly involved with local chambers of commerce as Chamber Champions. Go to (tinyurl.com/9d8xt) for more information on the programs.

The agricultural cluster is important because it is mainly concentrated in North County, Knight said. Areas such as Fallbrook, Valley Center and Encinitas are centers for producing food and ornamental plants.

Nursery crops make up 68 percent of total $1.46 billion wholesale crop value in 2004, according to the office of Kathleen Thuner, the county's agricultural commissioner.

"We're becoming more of a nursery county over time," said Eric Larson, executive director of the San Diego County Farm Bureau. The high price of water and labor is making it increasingly difficult to grow food crops, because the margins are so low, Larson said. Citrus production is especially vulnerable, he said, and nurseries are expanding by taking over citrus groves that are being taken out of production. This is mostly happening in Valley Center, Bonsall and the eastern Pauma Valley, he said.

As the council works to promote the various clusters, some within them see places where the council's efforts might pay off.

The high cost of regulatory compliance worries George Liggans, president and owner of Bacton Assay Systems of San Marcos. A maker of medical test kits, Bacton is highly regulated by the state and federal Food and Drug Administration, Liggans said. The company is small, with four employees and annual sales of less than $500,000.

"In the area of biotech, you need licensure if you make a product," Liggans said. "You are confronted with having to apply to the state FDA and get approval."

Liggans said he pressed to get the California FDA eliminated as duplicative when he was on an advisory council to former Gov. Pete Wilson, but failed.

In tourism and hospitality, hotelier Robert Rauch said he would like to see North County businesses work together with the San Diego North Convention & Visitors Bureau to hold more large conventions in the area. Rauch, general manager and partner of the Homewood Suites in Carmel Valley, said his hotel would benefit from a greater use of the Del Mar Fairgrounds for conventions.

Unless North County businesses actively promotes conventions here, they tend to occur in downtown San Diego, Rauch said.

"What they're doing for the California Center for the Arts (in Escondido), they need to do for the Del Mar Fairgrounds," Rauch said.

SANDAG's business clusters
SANDAG updated its own business-cluster tracking program last year. That effort has some of the same goals as the San Diego North council's effort, but is designed differently, said Marney Cox, SANDAG's chief economist. Sandag has identified 16 "traded clusters" of businesses that have close ties with each other and work in much the same way.

Those clusters are: biomedical products, biotechnology and pharmaceuticals, communications, computer and electronics, defense and transportation equipment, design, environmental technology, entertainment and amusement, financial services, fruit and vegetables, horticulture, publishing, recreational goods, software, specialty foods, and travel and hospitality.

The members of a cluster buy and sell with each other, or they draw from the same talent pool of employees, Cox said. That knowledge is important to cities because they can target their economic development efforts at clusters that are already strongly represented.

Clusters naturally attract businesses in the same cluster, so it takes less effort to build up a cluster than to create one from scratch, Cox said.

New clusters form
"The other point is that clusters from time to time interact with one another and create new clusters," Cox said. SANDAG is keen to track such nascent clusters to better understand where the region's economy is headed.

For example, the defense industry's interactions with telecommunications companies produce San Diego's wireless cluster. While wireless was originally heavily dependent on the military, "now it stands on its own," Cox said.

"We're expecting something to occur out of the interaction between defense and biotechnology because of the need to create products to fight bioterrorism," Cox said. "It creates new kinds of employment opportunities."

Cox suggested that the San Diego North EDC follow Sandag's example and break apart medical instrument manufacturing into its own subcategory and not lump it in with biotech, which it superficially resembles. Sandag lists medical instruments under "biomedical products." According to Sandag, Carlsbad has 26 percent of the county's total jobs in medical instruments, and San Marcos has 7 percent.

"We found that the medical instruments guys had very little to do with the biotech guys and that's why we separated them," Cox said. "They don't have the same labor force needs. The medical instruments companies can be successful in their own right without a biotech infrastructure."

Despite the differing perspectives, Cox said Sandag wants the San Diego North EDC to succeed with its cluster program.

"Any way we can help them do their job, we'd be glad to," Cox said. North County's 12 business clusters:
Tourism/gaming
Banking/finance
Manufacturing
Sports and extreme sports
Agriculture
Health care
Military/defense
Education
Biotech
High tech
Transportation
Marketing/communications

Related links
San Diego North EDC - http://www.sdnedc.com

Previous stories
San Diego North EDC unveils business cluster list - http://www.nctimes.com/articles/2005/12/09/business/news/16_05_0412_8_05.txt

Sandag's traded clusters report updated - http://www.nctimes.com/articles/2005/03/20/business/news/16_43_083_19_05.txt