Santa Barbara’s Granada Theatre was packed for the May 19 South Coast Economic Summit by the UCSB Economic Forecast Project.

Noozhawk provided an overview but, as a finance guy, I wanted to focus more on the economic side of the conversation.

Peter Rupert, EFP’s executive director; Rick Caruso, founder and executive chairman of Caruso, and the owner and developer of Montecito’s Rosewood Miramar Beach; and Radius Commercial Real Estate principal Gene Deering spoke frankly about both the opportunities and problems our wonderful city faces.

It’s hard not to be optimistic living in one of the world’s most beautiful communities with our beaches, mountains, Spanish architecture, colleges and culture. Life here is just about perfect.

Yet, in some ways we may be victims of our own success — with remarkably high housing and living costs combined with the impacts of online shopping on local retail.

Santa Barbara is at an important crossroads with some tough decisions to make — and the summit speakers provided some valuable insights and perspectives.

A major focus of discussion was the heart of Santa Barbara: State Street downtown.

Deering shared data and historical photos of the street illustrating what everyone knows: we need a plan to revitalize State Street.

Noting endless debate and costly studies about what to do long term about downtown State Street, all three speakers agreed that means getting more people downtown with more housing and creative reuse of older buildings.

New apartments and condos can help revitalize downtown, they said. People living downtown will want to shop, eat and have fun in their neighborhood.

My wife and I know from firsthand experience, having lived in a high-rise downtown Seattle condo for many years. While we had cars, we were able to walk to work, buy groceries, go to restaurants, see shows and attend sporting events.

That can start a positive spiral, making downtown more attractive, filling empty storefronts and, in turn, bringing more locals and tourists to a vital destination.

They say “a picture is worth a thousand words” — so here are three of Deering’s slides that highlight key issues affecting State Street.

Rupert’s comments focused on five key areas: inflation, recession, labor market, debt and Santa Barbara specifics.

• Consumers know about inflation — prices have risen consistently over the past four years. With the most rapid pace of rate hikes in history, the Fed has brought inflation down — but the battle continues with any near-term rate reductions seeming unlikely to Rupert.
• While he foresaw recession unlikely over the next year or two, Rupert kiddingly noted that there is always one ahead at some point. There’s even an old joke about economics successfully predicting nine of the past six recessions.
• While the labor market is still tight, it varies among job categories (with particularly strong demand for health-care workers) and there are signs of some cooling-off.  Rupert particularly noted California’s recent minimum wage hike to $20 an hour — and how the tough rule of supply and demand will likely result in a loss of jobs. This was vividly demonstrated in a YouTube video showing a fully automated machine filling a cappuccino order. 
• The national debt is a big concern and a drag on economic growth. Rupert reported that the federal debt is now 130% of GDP, higher than after World War II and a huge increase since hitting just 30% of GDP back in 1980.
• Interest on our nation’s debt is about 4% of GDP — about the same as our defense budget and way higher than our budget for education. I was taught that “when your income is exceeded by your outflow, your upkeep is your downfall.” The consequences of a government spending spree that has lasted for a generation — and by both political parties — are coming to roost.
• Rupert noted that while Santa Barbara County is doing OK, economic growth is lagging national trends and our neighbor, Ventura County. Housing costs are 14% higher than a year ago with an average price of $3.4 million for a single-family home — and $1.7 million for a condo. The average price for a home in Montecito is an eye-popping $7.4 million. 
• And finally, Rupert stood strong against rent control, noting it has been a disaster every place it’s been tried. Simple economics apply: drop the price, supply falls.  Agreement cuts across the usual political spectrum from Milton Friedman and Friedrich Hayek on the “right” and Swedish Labor Party’s Gunnar Myrdal on the “left.” He quoted Myrdal: “Rent control has in certain western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”

All three speakers noted the need for affordable housing — and offered some concrete ideas for getting it.

First, recognize the economic rule of supply and demand: low supply and high demand = high costs; increasing supply reduces costs.

But higher building costs, higher interest rates and long government red tape make new development more difficult and expensive.

Deering presented data showing that building costs were 63% higher — and planning time was eight months longer — than a decade ago.

To help, the speakers noted the need for streamlined permitting and approvals from local government — and the power of incentives to encourage new housing development and the reuse of existing buildings.

To me, it seems like it’s time for the City Council to work with the community and developers. Caruso even said he’d help for free!

Caruso was “really bullish on workforce housing.” He talked about his company subsidizing rent for some workers to get and keep good employees, along with his plans to use new luxury retail space to help pay for an additional 24 below-market-rate apartments on the Rosewood Miramar Beach property.

Caruso encouraged other Santa Barbara companies to do the same. The success of his projects suggests some wisdom in this idea.

City of Santa Barbara proposals to increase parking fees and add more parking meters was the subject of discussion.

Caruso noted that his high-end malls provide lots of free parking to encourage shoppers to visit — and take time spending money in stores. Rupert noted that even Beverly Hills offers free two-hour parking.

Maybe instead of raising parking prices, Santa Barbara ought to offer more free and reduced rate parking to encourage shoppers to come downtown and spend money — thus increasing sales tax revenue.

The old supply and demand theory would support that idea.

With big problems comes great opportunity. Hopefully, the Economic Forecast Project summit will help us move past “analysis paralysis” and move forward with real solutions.

The speakers — and other locals — can provide outstanding data and experienced advice to help Santa Barbarsa make wise, informed choices.

I, for one, remain hopeful our public officials will take advantage of this and support and encourage the kind of change we so desperately need.