San Diego’s economy steams into 2006 in great shape. Every indication is that won’t change, despite the latest City Hall revelation. Economic smart guys Marney Cox (Page 45), Gary London (Page 56) and Alan Nevin (Page 44) offer lots of details. But a summary of their analyses suggests that even a slight cooling in the second half won’t prevent the addition of at least 22,000 new jobs, more than were added in 2005 and enough to project the ’06 year-end unemployment rate at 3.9 percent, better than the 4.2 percent posted in November, which itself was better than the state and national averages. A record 1,483,000 San Diegans will have jobs, pay taxes and be productive this year. All that activity should push the gross regional product up $10 billion or so past $160 billion.

Looking for a dispassionate observer? How about Amy Doppelt? She’s the managing director with Fitch Ratings who has repeatedly and mercilessly reduced the city of San Diego’s bond ratings as details emerged on the underfunding of the pension system and inability to complete an audit. Doppelt says San Diego has two very different credit quality issues. One has to do with government finances, which are in bad shape, and the other the economy, which she describes as among the strongest in the state or nation. “San Diego’s economy on its own would support a much higher credit rating,” she says.

Are there worries? Sure, analysts see clouds. Most people who own a home — at about 58 percent, that’s a record number — were getting used to double-digit rates of appreciation. That’s gone. The 6 percent appreciation rate in 2004 weaned most folks off big expectations. Now real estate agents are watching to see how clients will deal with zero to 5 percent appreciation and in some cases, if you bought in the wrong project at the peak last year, depreciation. But is flat real estate really going to be a long-term trend in San Diego?

At City Hall, new Mayor Sanders would relish a year or two more of double-digit appreciation. The housing boom has delivered healthy increases in city tax revenue. But Sanders does not inherit a city in revenue decline. This is not 1991 when the Cold War ended, tens of thousands of jobs left the city and the state raided municipal coffers. Today’s economy is much more diversified, with telecom strong, biotech steady and tourism still a beast.

Will there be pain in the coming city reforms? Sure. Tax activist Richard Rider says income from the sizzling real estate market has helped the city paper over some difficult decisions. As the activity and corresponding revenue growth slows, things will get tough for those who feed at City Hall’s trough. “The solid city revenue gains essentially have allowed the city politicians to defer the day of reckoning for the pension and health care giveaways to employees,” Rider says. “Sadly, this delay has only deepened the problem, so the solution, whatever that will be, will be more painful than most imagine.”

More optimistic is Peter Q. Davis, the former bank president and one of the Downtown’s redevelopment masterminds.

“Clearly our problems would be worse if we did not have the economy we do,” says Davis... If we can buy ourselves time and maintain the tax growth increase of 7 percent a year, about $50 million, it will compound nicely. We buy ourselves time by a combination of methods; reducing expenses, rolling back pension obligations, selling assets and issuing bonds to spread the debt. If the economy tanks before we can do all or at least most of these, we will be in a world of hurt.”

Refreshingly, fiscal solutions already are coming out of the mayor’s office, who begins the year as the first strong mayor in modern city history. Look for a messy first half of the year as his programs take effect, jobs are cut, the council squirms, the unions are anguished and the audits and investigations reach a head.

Sanders will have strong business community support to underpin his efforts. And once the investigations end and the bond ratings rise, he will have moral and fiscal authority to go to taxpayers for some new revenue. (No guarantees he will, though.)

An unfortunate casualty of the focus on the big city’s fiscal troubles is a shortage of coverage of the successes of San Diego County’s 17 other cities. Most are doing just fine, as Marty Graham reports on Page 59. Their economic development efforts are revitalizing suburban downtowns, creating jobs and improving the lot of their residents. (Of course their management teams also are having minor palpitations over their own pension and health care shortfalls.)

Nationally, the big city of San Diego is hardly alone in experiencing pension problems, although the magnitude of the situation puts it at the head of the class.

In San Diego, with a new mayor and at least three new council members to be elected this year, the city seems positioned to get a grip on its fiscal situation. What effect any cuts in services may have on business retention or attraction remains to be seen. Doppelt says analysts worried after Orange County declared bankruptcy that business would react negatively. “It turned out to have very little impact,” she says.

Julie Meier Wright, president and CEO of the San Diego Regional Economic Development Corp., is convinced the election of Sanders and a new group of advisers will make it easier to promote the positives about San Diego’s economy, what she calls the Paul Harvey “rest of the story.”

Meier Wright often tells about how her former boss Gov. Pete Wilson turned a $14 billion deficit when he entered office into a $12 billion surplus when he departed. “He did it by listening to the business community,” she says. “The blessing in San Diego is we have such a strong economy. Even while all of these things are going on, this economy continues to provide growing revenue to government.”

We look forward to better discipline at City Hall and more momentum in San Diego’s great regional economy.