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San Jose Pursues New Employers

Silicon Valley city seeks to turn its soft labor and real estate markets into selling points.

June 09, 2003|Lisa Baertlein | Reuters

Silicon Valley's onetime boomtown capital has a small army of unemployed engineers, caverns of empty office space and a message for potential employers with a bit of wanderlust: Do you know the way to San Jose?

The city, the largest to have sprung from the fruit orchards that became California's famed technology hub, has lost thousands of workers because of business failures and layoffs at major employers such as Cisco Systems Inc.

Only recently, it averted a new crisis by putting together a plan that helped keep EBay Inc. from defecting. Instead, the online auctioneer announced in April that it would more than double its Silicon Valley real estate holdings.

The company agreed to purchase a five-building campus in San Jose with 511,000 square feet of space from Novell Inc., ending months of speculation that it would leave the city. Sources said EBay paid considerably less than the property's onetime $100-million valuation. Chief Executive Meg Whitman said she was convinced that staying in a region known for innovation and talented workers outweighed any cost issue.

So, having sidestepped the potential loss of nearly 2,000 more jobs, San Jose's development czar now hopes to turn the city's slack markets for property and workers into a selling point.

"People who couldn't be in the valley three years ago now can," said Paul Krutko, San Jose's economic development director, who wants prospective employers to view his city's unemployment rate of nearly 10% -- well above the national average of 6% -- as an opportunity to hire eager, educated workers.

Home prices in Santa Clara County also eased in April, though at an average of $495,000, they remain three times as expensive as the national average.

That hangover from the Internet boom has hampered San Jose's recruitment efforts, and Krutko said the city plans to add 3,000 affordable housing units over the next two years.

His crusade is getting a boost from San Jose's major technology names, including Adobe Systems Inc., BEA Systems Inc. and WebEx Communications Inc., whose advertising dollars are paying for a magazine promotion that talks up the area's strengths.

San Jose's campaign reflects the fact that Silicon Valley has a lot of competition, domestic and foreign, for technology investment dollars. A recent UCLA study forecast that California will lag the nation in recovery, with tech jobs not returning to the valley even if business conditions improve.

"We're not the only game in town. We were for a long time. Guys that really wanted to live in Taiwan would come here because that was where the action was. Now you can start a business in Taiwan," said Timothy Bresnahan, director of the Center on Employment and Economic Growth at the Stanford Institute for Economic Policy Research.

San Jose's neighbor Santa Clara learned last month that 3Com Corp. had decided to move its executive team to Massachusetts as part of a broad consolidation.

Ron Garratt, Santa Clara's assistant city manager, said the city's tax revenue has tumbled since late 2000, with three-quarters of the decline attributable to corporate failures and downsizing.

Garratt, who has worked in Silicon Valley local government for nearly two decades and weathered such fiscal crises as the 1980s savings & loan debacle, said the region's problems are the worst he has seen.

"This is entirely different. This is much scarier," Garratt said. "Next year may be a more difficult budget year than this year.... We don't see any quick resolutions. We don't see these buildings filling up. We don't see these hotels filling up."

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