brightening the beacon: removing barriers to entrepreneurship in san diego

8/7/2019 Brightening the Beacon: Removing Barriers to Entrepreneurship in San Diego

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Executive SummaryIn many ways San Diego is a model of free enterprise. The city encourages

and assists myriad small and fledgling businesses and promotes a vigorous pro-business philosophy. But the city's regulatory reality does not always measure upto its noble aspirations. While the City and County assist start-up enterprises invarious ways, it remains difficult for people with little experience or capital tonavigate the regulatory thicket. Regulations restricting entry into entry-leveloccupations like taxicabs and street vending are voluminous, complex, oppressiveand anticompetitive. Moreover, governmental jurisdictions are overlapping.

This report examines both San Diego's successes in fosteringentrepreneurship as well as the obstacles that remain. On the whole, we find SanDiego is far more hospitable to enterprise than many other large cities, and itsleaders seem genuinely committed to fostering new and small businesses. Still, toomany barriers to entrepreneurship remain. San Diego's overriding challenge is toharmonize its policies and practices with its pro-entrepreneurial philosophy. Thisreport is aimed at helping San Diego identify and remove unnecessary regulatorybarriers so that the city can make a reality of its promise of opportunity.REGULATORY BARRIERS & ZONING

Depending on the type and complexity, the planning process for review of abusiness application can take anywhere from a few weeks to several months ormore.

Complaints about the zoning process are among the most frequent cited bySan Diego business owners and people starting businesses. The zoning process-even for simple matters like obtaining permission for outdoor restaurant seating-can be cumbersome, time-consuming, complex, and expensive.

This report recommends that the Office of Small Business and SmallBusiness Advisory Board conduct an audit of all business regulations to determinein each case whether the regulation is narrowly tailored to fulfill a legitimategovernmental objective without unduly hampering enterprise. All ordinances andregulations that do not meet this standard should be repealed.BARRIERS TO ENTRY

Some businesses are subjected to special regulations that create additionalbarriers to entry. Many such businesses, such as street vending, require relativelylittle skill or capital, and should provide plentiful opportunities for entry-levelentrepreneurs. But even in the post-welfare-reform world, numerous arbitraryregulations remain blocking the efforts of people who want to work.


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Among other conclusions, this report recommends that San Diego shouldsubstantially relax restrictions on street and park vendors, recognizing them as animportant and legitimate means of enterprise. The government should also lift theprohibition against street vending outside the downtown and Old Town areas.CHILD CARE

Certainly the State has a strong interest in ensuring the health and safety ofchildren entrusted to the care of others. But not only are small and informalchildcare businesses an ideal means of entrepreneurship for people outside theeconomic mainstream, convenient and affordable child care is a prerequisite forpeople to be able to work.

This report recommends that the City prioritize encouraging zoning approvalfor daycare centers, including programs operated as part of existing businesses. Inaddition, to remove obstacles to daycare centers inthe inner cities, the State shouldease indoor space requirements for children in daycare centers, 'and allow centersthat do not have their own outdoor space but are accessible to parks orplaygrounds. Finally, the State should eliminate the requirement that daycareproviders have formal college-level education.TRANSPORTATION

Absent regulatory obstacles, private transportation services can provide anexcellent opportunity for entry-level entrepreneurship. Taxi-cabs, jitney vans, andlimousines are ideal small enterprises because startup costs are limited to the costof the vehicle and insurance plus driving skill and knowledge of geography.Moreover, private transportation services benefit consumers by providing safe andefficient alternatives to highly subsidized public transit.

Unfortunately, in many cities this entrepreneurial avenue is thwarted byregulations that exceed legitimate public health and safety objectives, Instead, theyprotect public transit and established transportation companies from competition,In San Diego, restraints on entry are not as harsh as in some other cities, but theyremain unduly restrictive.

'This report recommends that San Diegoeliminatethe de factoceilingon the numberoftaxicab permits, allowingthe market to determine the number ofservicesrather thaninsulating existing companies from competition. The report also recommends thattaxicabs should be regulated only to the extent necessary to protect public healthand safety; e.g. insurance, safety inspections, and driver background check.HOME~BASED BUSINESSES

Cottage industries were once a mainstay ofAmerican enterprise. Those days arereturning for advances in technology, increasing number of single-parent families andstay-at-home parents, and other social forces have fomented an explosion of home-based businesses.

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While San Diego has a comparatively progressive attitude toward suchenterprises, State regulations prohibit such activities as commercial foodpreparation in the home. That restriction not only precludes home cateringbusinesses, it also prohibits foodvendors such as the "tamale ladies" in San Diego'simpoverished immigrant neighborhoods.

This report recommends that San Diego ease rules on home-basedbusinesses, increasing the permissible number of employees, customers. byappointment, and vehicles. In addition, the State should rescind its prohibition ofcommercial food preparation in the home, allowing local governments to applyordinary health requirements to ensure public health and safety.OCCUPATIONAL LICENSING LAWS

Occupational licensing laws artificially restrict entry into dozens ofprofessions. Indeed, an entire chapter of the California statutes regulatesbusinesses and professions. Rules for entry into a profession typically are set bylicensing boards comprised of members of the regulated profession with thecoercivepower ofgovernment at their disposal. Often the rules far exceedlegitimatepublic health and safety objectives, and instead protect current practitionersagainst competition from newcomers.

Few people would object to licensing of occupations that require high skilllevels or present serious threats to public health or safety. But California'slicensing laws extend to many occupations that could be privately regulated,such as land surveyors, landscape architects, interior designers, and courtreporters. These regulations on entry unnecessarily limit competition,particularly among those who have few economic resources to combat thelegalized cartels.

Amongother suggestions, this report recommends that the State ofCaliforniashould review all occupational licensing laws to (1) determine whether they arenecessary at all, or whether private certification instead adequately could protectthe public; and (2) ensure that requirements are narrowly tailored to ensureproficiency and to protect public health and safety.ACCESS TO CAPITAL

The largest real-world impediment to most new enterprises is access tocapital. Banks rarely make small business loans to start-up enterprises,particularly to those that have no collateral or credit history.

This report recommends that the State release economic developmentlenders from regulations that unnecessarily stifle microloans to new smallenterprises. Finally, the San Diego business and philanthropic commurutiesalso should lend their acumen and resources to assist prospectiveentrepreneurs in developing basic .busmess management skills.

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PUBLIC EDUCATIONUndergirding other challenges is perhaps the most systemic barrier to

opportunity: the abysmal public education system. Although San Diego schoolsare roughly on par with the state as a whole, that is not saying much: the NationalAssessment of Education Progress reports that last year, California tied Louisianafor the nation's lowest reading and mathematics test scores. In the 1993-94 schoolyear, SDUSD reported a 16percent dropout rate. Test scores ofminority studentsin San Diego lag behind non-minorities.

Because education is the foundation upon which business can flourish, thereport recommends that the business and philanthropic communities encouragebusiness internship opportunities in the public school system; fund scholarshipsto allow children from low-income families to attend private schools; and supportthe creation of new private schools in low-income neighborhoods. The Californialegislature should adopt the Little Hoover Commission's reconunendations toincrease the number, flexibility, and autonomy of charter schools. And finally. theCalifornia legislature should adopt remedial school choice legislation, such as thatproposed by Governor Pete Wilson, to allow children in the worst public schools toopt out into private schools.

This report presents concrete actions that can be taken-by the City of SanDiego, the State of California and business leaders-to open opportunities andstrengthen substantially the region's economic base. The dominant regulatoryphilosophy should be that businesses are goodfor the community, and that whateverregulations are necessary should impede entrepreneurship as little as possible.

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Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

State of Entrepreneurship in San Diego . . . . . . . . . . . . . 2

Navigating the Regulatory Maze 4

Barriers to Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Access to Capital .............................17

Conclusion 22

Endnotes .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Biography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26


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Introduction"if something disturbs people in this couniru, it's illegal."

-Sergey Autandilov, recounting what a realtor told himupon immigrating to this country from Russia. 1

Mexican immigrants pushing carts selling "paletas" (fruit-juice bars) on hotsummer days are a common sight in Logan Heights and along Imperial Avenue inSan Diego. But despite selling a popular product and earning a living forthemselves and their families, the pushcart vendors are outlaws, subject tofrequent harassment by police. Any effort to operate the pushcarts as lawfulenterprises is futile: street vending is prohibited in most areas of the city.

The spectacle of hauling people away for no greater crime than selling frozenjuice bars is a blight to the city's reputation, for in many ways San Diegois a modelof free enterprise. The city provides encouragement and assistance tomyriad smalland fledgling business enterprises and promotes a vigorous pro-businessphilosophy. But the city's regulatory reality does not always measure up to itsnoble aspirations. While the City and County provide various forms of assistanceto start-up enterprises, it still remains difficult for people with little experience orcapital to navigate the regulatory thicket. Regulations restricting entry into suchbusinesses as taxicabs and street vending are oppressive and anticompetitive.State laws regulating small-business lending and occupational licensing alsoimpede entry-level entrepreneurship. This report examines both San Diego'ssuccesses in fostering entrepreneurship as well as the obstacles that remain.

This report is prepared by the Institute for Justice, a nonprofit public interestlaw firm in Washington, D.C. that litigates to expand individual autonomy andrestrtct the scope of the regulatory welfare state. One of the Institute's coreobjectives is restoring economic liberty-the freedom to earn an honest living in achosen business or occupation-as a fundamental civil right. In recent years, thatprecious liberty has eroded, with devastating ramifications for people outside theeconomic mainstream. Especially in light of national reforms emphasizing thetransition from welfare to work, it is essential to identify and remove unnecessaryregulatory impediments to entrepreneurship. 2

The Institute recently has completed reports on regulatory barriers toentrepreneurship insix cities: NewYork,Baltimore, Boston, Charlotte, Detroit, andSan Antonio. We focused on entry-level enterprises-businesses and occupationsthat require relatively little skill and capttal, So that we could compare the relativeregulatory burdens, in each citywe examined regulations covering the same entry-level businesses and occupations-such as taxi-cabs, cosmetology, daycare, streetvending, and home-based businesses-as well as additional regulatory barriersthat came to our attention. As expected in a survey of cities that differ widely ingeography and demographics, the regulatory climates facing would-be


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entrepreneurs also vary widely. In each city, however, regulatory obstacles blockentry into many businesses and occupations.

In San Diego, we began by researching general regulations governingbusiness start-ups, and proceeded to investigate regulations governing the specificentry-level businesses and occupations we studied in the other cities. In each case,we interviewed both government officials and entrepreneurs. Wehave reported ourfindings whether or not we found regulatory barriers in each of those areas. Wealso interviewed local experts on the subject of business formation, and obtainedleads about other regulatory problems. Although we always attempted to obtainjustifications for regulations from appropriate government officials, in mostinstances no explanations were provided.

On the whole, we find that San Diego is far more hospitable to enterprise thanmany other large cities, and its leaders seem genuinely committed to fostering newand small businesses. Still, too many barriers to entrepreneurship remain. SanDiego's overriding challenge is to harmonize its policies and practices with its pro-entrepreneurial philosophy. This report is aimed at helping San Diego identify andremove unnecessary regulatory barriers so that the city can make a reality of itspromise of opportunity.

State of Entrepreneurshipin San Diego

San Diego is blessed with a beautiful location, a nearly perfect climate, and adiverse and enterprising population. Its population of 1.15 million people makes itthe sixth largest city in the United States.f Its steady population increase makesSan Diego the sixteenth fastest-growing large city. San Diego's population is 9.4percent black, 11.8 percent Asian, and 20.7 percent Hispanic. Nearly 21 percentof its inhabitants are immigrants, giving San Diego the nation's thirteenth largestimmigrant population.

As social analyst Joel Kotkin observed, San Diego "has benefited from what itfortunately does not have: no vast municipal welfare state, no entrenched urbanunderc1ass, no powerful municipal employee unions to skew spending priorities,and no industrial union tradition to make its labor force rigid."4 Though Kotkin'sassessment may be overly upbeat, the local economy is strong. Substantial pocketsof poverty exist, however. Among the city's population, 13.4 percent live below thepoverty level. Nearly one-quarter of the city's households are headed by a singleparent, and nearly nine percent of San Diego residents derive income from publicassistance.

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Navigating the Regulatory MazeA number of regulatory requirements are common to starting all new

businesses in San Diego. Some are particularly onerous and are discussed ingreater detail below. But the overall process that confronts all new entrepreneursseeking to operate any lawful business deserves separate initial treatment.

The process entails both good and bad news for entrepreneurs. The goodnews is that San Diegohas taken several steps to help guide prospective businessesthrough the regulatory process. The County of San Diego Office of Trade andBusiness Development has prepared a comprehensive guide titled Getting Down toBusiness, which lists federal, state, county, and city requirements as well as thenames and addresses of agencies and resources. The City's Office of SmallBusiness has created a similar brochure for businesses within the city. The SanDiego Regional Permit Assistance Center was established downtown to assistprospective businesses with obtaining requisite city, county, state, and federalpermits. As Ken Clark correctly observes, "The people there try to be facilitatorsrather than regulators."

The bad news is that the regulatory requirements are voluminous and complex.Moreover, governmental jurisdictions are overlapping and confusing. The state,county, and city governments all tax and regulate businesses. 10 San DiegoCountyincludes 18 cities as well as unincorporated areas. Technically, a business needs apermit in everyjurisdiction in which it does business. Some county requirementsapply to all businesses; others apply only to businesses in unincorporated areas.Each city has different processes and regulations. Several observers mentioned thatthe CityofChula Vista has an especiallyprogressive and business-friendly regulatorysystem; other cities earn lower marks. Navigating this regulatory maze istreacherous, particularly for peoplewith little experience and fewresources.

The county business guide lists the following as some of the requirements forstarting a business 11:

Check Zoning. Business owners may have to obtain zoning permission for"discretionary uses," "conditional uses," new or remodeled buildings, newbusinesses in existing buildings, or temporary uses. If the business is notcompatible with existing zoning, the business must of course obtain specialpermission. The depiction of that process is chillingly stark:

Depending on the type and complexity of the application, the planningprocess for review and approval or denial can take anywhere from a fewweeks to several months or more. The process may involveenvironmental review in order to comply with the CaliforniaEnvironmental Quality Act (CEQA}.Public hearings may be required. 12

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Obtain Commercial Building Permits. Building permits are requiredwhenever a business makes physical or cosmetic changes to the exterior orinterior of a building or constructs a new building: and for any electrical,plumbing, or mechanical work.Obtain Sign Permit BUSinesses must obtain approval and pay a fee for allexterior signs or promotional banners.Check Fire District Requirements and Obtain Safety Inspection.File a Fictitious Business Name Statement All businesses operating underanything other than the owner's full legal name must file a statement andpublish a newspaper notice.Obtain a Business Certificate. All businesses and people engaged inprofessions and trades must obtain a business certificate and pay a businesscertificate tax. The certificate does not evidence authority to operate orcompliance with regulations, but merely that the tax has been paid. In theCity of San Diego, the business tax is $34 per year for most businesses withfewer than 12 employees, plus a zoning use clearance fee of$12.

Certain businesses require special licenses and/or permits from localauthorities. San DiegoCounty issues special licenses or permits for 30 typesof businesses, such as teenage dances, swap meets, fortune telling, andtaxicabs. The city maintains similar requirements.File Articles oj Incorporation/Register a Trademark/Pay Franchise Tax. Thestate charges an annual minimum franchise tax of $800 for all corporationsauthorized to issue stock (along with a $100 incorporation fee). Noexemption exists for small businesses. The Small Business Advisory Boardstaff reports that many new and small businesses do not incorporate inorder to avoid the annual franchise tax.l3Obtain a Seller's Permit, if Needed. In addition to local regulations, theCalifornia Board of Equalization requires seller's permits for certainactivities.Obtain Agricultural Permits orRegistrations, if Necessary.Register Weights and Measures Devices Used inBusiness.Apply Jor Alcoholic Beverage License, if Needed.Determine if Business is "Potice-Requlaied". Certain businesses andprofessions, such as adult entertainment, carnivals, explosives, fortunetelling, and taxicabs, require investigations by the county sheriff.

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a family-oriented recreation facility. But a sunset provision on the company'sconditional use permit threatens its future.

The Small Business Advisory Board has made a priority of reforming theCity's zoning practices. A recent letter to Mayor Golding from board chairmanGeorge P. Chandler, Jr., set forth the board's views on the Iskate controversy andthe sunset practices generally:

Such a sunset provision clouds the economic viability of the business byprohibiting long term planning and financing of its facilities. Furthermore, itrestricts the firm's future salability as an ongoing commercial concern. It is theBoard's opinion that this virtually constitutes what amounts to a de factocondemnation. Consequently, we recommend that this CUP be issued without thesunset provision. Additionally, we believe the Council should review PlanningCommission policies and procedures to assure that they are "business friendly."15

Recommendations1. The Office of Small Business and Small Business Advisory Board-inconcert with entrepreneurs, the San DiegoBusiness Partners, and communityleaders-should conduct an audit of all business regulations to determine ineach case whether the regulation is narrowly tailored to fulfill a legitimategovernmental objective without unduly hampering enterprise. They shouldrecommend repeal or reformofall ordinances and regulations that do not meetthis standard. Allnew regulations should be measured against this standard.2. The City should conduct a summit with the heads of all City agencies tomake sure they understand and support the City's policy of encouragingenterprise.3. San Diego-area governments should coordinate and harmonize theirbusiness regulatory requirements to reduce confusion among jurisdictions.That effort also could commence with a summit among all local governmentswith a goal ofreducing and streamlining regulations.4. Local governments should expand the one-stop permit centers toencompass more of the requisite approvals, to make the paperwork simple andefficient and to take as little time as possible. Counselors should be availableto walk entrepreneurs through the entire process, including as many federaland state requirements as possible. Entrepreneurs should be able to leave thecenter with all they need fromthe government to commence a lawful business.One possibility is to providea "provisionalbusiness permit," evidencingthat theapplicant has fulfilledthe essential basic requirements applicable tomost start-up enterprises. City agencies that have additional requirements could thencontact the businesses rather than placing the initial burden on theentrepreneurs to scour the regulatory universe and determine whichregulations apply.

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5. The City and County should implement its zoning and planningdepartment functions in a manner that does not interfere with economicdevelopment, so that the local government's business-friendly philosophy isnot inadvertently subverted by the zoning bureaucracy. Zoning andplanning approvals, particularly for new and small businesses, should bestreamlined, with strict time limits for consideration ofapplications, adversedecisions made with specificity in writing, and prompt appeals. Processesshould be simple and inexpensive so that small and fledglingbusinesses canunderstand and afford them.6. The City should repeal "sunsets" on conditional use permits and abandonthe practice.7. In accord with oft-repeated recommendations from small businessadvocates including the Small Business Advisory Board, the State shouldabolish the minimum franchise tax for new and small businesses.

Barriers to EntryIn addition to the regulatory thicket that all new businesses face, some

businesses are subjected to special regulations that create additional barriers toentry. We have surveyed below regulations on businesses that ordinarily requirerelatively little skill or capital, and that in a rational regulatory environment shouldprovide plentiful opportunities for entry-level entrepreneurs.

STREET VENDORSScratch the surface of many of America's greatest business success stories

and you'll find their roots in street enterprise. But that won't happen anytime soonin San Diego.

Nowhere is the dichotomy between San Diego's dominant free enterprisephilosophy and the regulatory reality more stark than in the local government'sstrict restrictions of street vendors.If Of the seven cities surveyed by theInstitute for Justice, San Diego maintains the most restrictive regulations onstreet vendors. The city's proximity to the Mexican border and its flourishingtourist trade lend themselves to a bustling street vendor industry-a promisingavenue for bootstraps enterprise thwarted by the City's strict regulations. Thejuxtaposition between the large number of street vendors actually operating inSan Diego and the severe limits of the law suggests that the vast majority ofstreet vendors are operating illegally.

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SylviaMartinez of the MetroArea Advisory Committee on Anti-Poverty in SanDiego County (MAAC)puts the matter succinctly: 'There's a lot of people whowould like to retail, near their homes and on their own streets, but they can't." 17Not only pushcarts selling paletas, but "tamale ladies" selling home-preparedMexican foods and purveyors of all manner of food and merchandise are precludedfrom street-based enterprise by the City's regulations.

Anyone doing business on public property must obtain approval from theDevelopment Services Center. * However, stationary vending and pushcarts onpublic property are prohibited altogether except in the downtown and Old To\VIlareas. Pushcarts may offer only food or flowers; merchandise may be sold only atstationary locations. Pushcart operations also require permission from theadjacent owners of private businesses. The pushcarts must maintain an eight-footarea away from buildings or other obstructions. They must also be located within25 feet of toilet facilities, with written permission from the owners allowing patronsto use them. All vendors located on public property must secure $1,000,000 ofliability insurance.

The Development Services Center issues "discretionary permits" to authorizedvendors for a one-time fee of $475. If the cart is sold, a new permit must beobtained by the purchaser. Although technically no limit exists to the number ofvending permits, the overall effect of the restrictions is severe: City officials reportthat only two new permits were issued over the past year, both of them to replaceprevious vendors at the same locations.

Vendors selling flowers, fruit, or vegetables grown by someone else mustobtain a Cash Buyer's License each year from the California Department of Foodand Agriculture. The fee ranges from $100-$600 based on the amount ofpurchases.

The county Health Department also issues permits and inspects pushcarts.The permits cost $50 per year for prepackaged nonperishable foods and $225 forperishable foods or foods prepared on-site. No food prepared off-site may be soldunless it was prepared ina licensed commercial kitchen. Pushcart vendors sellingfood must take a three-hour food handler's course and examination, renewableevery three years by taking the examination again.

Public parks in San Diego also have restrictive vendor policies. The City doesnot allow any vending incommunity or neighborhood parks except during specialevents, such as softball tournaments. Permits must serve a "park need" and arelimited to specific dates, times, and locations. Pushcarts must possess all otherrequisite government permits, and may sell food only. With all these requirements,the Parks Department only issues approximately six permits per year. Ice creamreportedly is sold illegally in some community and neighborhood parks.

*Vending may take place on private property if consistent with zoning regulations. !t is stillsubject to the general vendor regulations discussed in this section ......................................................... ~~m~

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Regional parks maintain their own regulations regarding vendors. At BalboaPark, the Parks Department leases out one concession stand and issues permits forfiveor six pushcarts. The rules specify that no commercial gain may be made onpark land, and the Cityenforces that rule by taking 22 cents of everydollar grossedby pushcarts. Still, pushcarts can gross between $1,000 to $2,000 per day inBalboa Park.

At Mission Bay Park, the government allows major lessees (such as WaterWorld, Princess Cruises, and the Hilton) to permit vendors and concessions thatcomplywith applicable regulations. As part of their lease agreements. the lesseesmust provide between three and seven percent of their profits from food andmerchandise to the City. The City forbids other vendors to operate within one-halfmile of the lessee pushcarts. In the remainder of its land, the park uses a request-for-proposals process to award pushcart permits. Presently, a single company hasa contract to operate all pushcarts within the park. However,because of its desireto support small businesses, the park plans to divide up vendor sites and awardmultiple permits in future RFPs. ' .

Recommendations1. Local government should substantially relax restrictions on street andpark vendors, recognizing them as an important and legitimate means ofenterprise.2. The government should liftthe prohibition against street vending outsidethe downtown and Old Town areas.3. Legitimate public health and safety considerations can be met bymaintaining the current rule requiring minimal clearance between streetvendors and buildings or other forms of obstruction; and through healthinspections of food vending operations. The government reasonably maylimit the number of permits in certain areas to avoid congestion, but theburden should be on the government to demonstrate the necessity of anylimits.4. The requirements of approval from adjacent businesses and access totoilet facilities should be repealed.

CHILD CAREOf a1lthe possible types of businesses. it is perhaps most essential to avoid

over-regulation of child care. Certainly the State has a strong interest in ensuringthe health and safety of children entrusted to the care of others. But not only aresmall and informal child-care businesses an ideal means of entrepreneurship forpeople outside the economic mainstream, convenient and affordable child care is aprerequisite for still other people to be able to work. State and local governments

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should take all possible steps to encourage child-care businesses and to tailorregulations to ensure they are not unduly expensive or obstructive.

Regulation of child care takes place primarily at the state leveLFortunately,the regulations generally seem reasonable. Reports vary on whether a child-careshortage exists in San Diego. The YMCAsays that 7,000 families and 10,000children are currently wait-listed for child care inSan Diego.IS

Home child care. Two types of family (at-home) day-care licenses areavailable: small family day care, which allows up to six children belowage ten; andlarge family day care, which allows up to 12 children under age ten and requires ahelper.If Both licenses require a $25 application fee, as well as a license fee of $25for small family day care and $50 for large familyday care. Allpersons Itving inthehome must be tested for tuberculosis, and providers must submit to fingerprintingand a background check. The state requires triennial inspection of small homes,and requires a "fire clearance" inspection for large homes. Providers may have upto 12 children without zoning approval from the city; more than that numberrequires a conditional use permit. 20

Family day-care providers must be at least 18 years old and fulfill minimaltraining requirements: a total of 15 hours ofCPR,First Aid, and preventative healthpractices. Helpers must be at least 14years old and have training in CPRand FirstAid. The state does not provide training but approves vendors, many of whomprovide training in languages other than English. Day-care providers need notspeak English, making the business accessible to immigrants.

Day-care centers. Day-care centers also must obtain a state license. Thecost of application and license fees is the same, and is based on the center's size,starting at $100 for a day-care center with up to 30 children. The center mustmaintain at least 35 square feet of indoor space per child and 75 square feet ofoutdoor space. Generally the maximum teacher-to-children ratio is 1:6for toddlersand 1:12 for older children.

Day-care center directors must meet one of the followingqualifications: (1) ahigh school diploma or GED, 15 semester units in early childhood education, andfour years teaching experience in a licensed day-care center or group child-careprogram: (2)an associate degree with a major in early childhood education and atleast two years teaching experience: (3) a bachelor's degree with a major in earlychildhood education; or (4) a Children's Center Supervisory Permit issued by theCalifornia Commission for Teacher Preparation and Licensing. Teachers mustobtain at least six units of early childhood education before employment, and mustobtain at least two additional units per semester for a total of 12 units followingemployment. Additional formal training is required for infant care center directorsand teachers.

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RecommendationsI. The City should assign a priority to encouraging and providing zoningapproval for day-care centers, including programs operated as part ofexisting businesses.2. To remove obstacles to day-care centers in the inner cities. the Stateshould ease indoor space requirements for children in day-care centers, andallow centers that do not have their own outdoor space but are accessible toparks or playgrounds.3. The State should allow day-care center teachers to obtain trainingthrough apprenticeships and/or community programs rather than requiringformal college-level education.

TRANSPORTATIONAmong the odder sights a person can see in San Diego are white Volkswagen

Beetles transporting passengers around town. The reconditioned cars are ownedby Bug Express, a company launched in 1994 by entrepreneurs Rick Reed andChris Brady. who invested everything they owned in the enterprise. They offerprearranged transportation for a fixedprice less than the cost of a taxicab. But theycannot pick up street hails or use a meter. The reason: as a "charter" service, thecompany is regulated by the California Public Utilities Commission, which imposesfewrestrictions on such services. Taxicabs. by contrast, are tightly regulated by theMetropolitan Transit Development Board (MTDB), and new entrants arediscouraged.

Entrenched taxicab companies want to keep it that way. "What most of thetaxi owners are saying is, we want a level playing field with our competition,"remarks Anthony Leone of YellowCabs, which owns more than one-third of thescarce taxicab permits. Or maybe not so level: many local taxicab owners, Leonesays, favor rewriting state rules to forbid competition from charters and squashcompanies like Bug Express.s!

Absent regulatory obstacles, alternative transportation services can providean excellent opportunity for entry-level entrepreneurship. Taxi-cabs, jitneys(usually vans that operate along fixed routes and charge a flat feel. and limousinesare ideal small enterprises. Such services typically require only the cost of thevehicle and insurance plus driving skill and knowledge of geography. Moreover,private transportation services benefit consumers by providing alternatives tohighly subsidized public transit.

Unfortunately t in many cities this entrepreneurial avenue is thwarted byregulations that exceed legitimate public health and safety objectives. Instead, theyprotect public transit and established taxicab companies from competition.22 In

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San Diego, restraints on entry are not as harsh as in some other cities, but theyremain unduly restrictive and thereby stifle entrepreneurship and valuabletransportation options.

All "paratransit" vehicles-taxicabs, jitney vans, and limousines-in SanDiego are regulated by the MTDB. All vehicles require an MIDB23 permit, adriver's identification card that costs $65, insurance, and an annual inspection thatcosts $245. Drivers must take an MTDBcourse that teaches personal safety andcourtesy.

Taxicabs. Approximately 900 taxicab permits exist inSan Diego,which is thede facto limit because the board has issued few if any new permits in recent years.About 150 taxicab businesses consist of a single cab, while the remaining permitsare spread among 70 owners. Because of the limit on new permits, existing permitsare sold on the market for prices ranging from $20,000 to $50,000, depending onwhether the permit is accompanied by a car, an airport permit, and "bell" (dispatch)service. Apermit transfer also requires a $2,000 fee plus $200 for each additionalvehicle. These numbers illustrate the state of the taxicab market in San Diego:they provide an opportunity for small enterprises, but are out of reach toentrepreneurs with little capital.

An additional permit from the Unified Port District is required for airportpickups. The airport issues only 200 permits.

By artificially limiting entry into the taxicab industry and making the limitedpermits economically precious, the City may unwittingly contribute to anatmosphere of fear. One official of a company that wants to expand from chartercar services into the taxicab business canceled an appointment with me out of fearof unspecified "retaliation" from existing taxicab companies, and others who hopefor a permit also refused to meet with me. When I recounted this experience to aninformed observer, he remarked of the would-be taxicab entrepreneurs, "they'llwind up ina car trunk" if they complain publicly. The City should not abet asystem that serves to protect entrenched economic interests against competition.

Jitneys. Jitneys operated within San Diegountil approximately 15years ago,serving primarily military personnel and airport passengers. As military basesclosed and hotels started offering their own airport shuttles, jitneys within the citydeclined as a viable transit option.

But as the public transportation costs and traffic congestion grow, jitneys canprovide a solution, along with a means of entry-level enterprise. "Particularly inlow-income communities, people have serious transportation issues," says MAAC'sSylvia Martinez. But MTDBmust approve all routes, and opposes allowing jitneysto compete on public transit routes.

One entrepreneur, Sergey Autandilov, calls jitneys an "excellent familybusiness" because of the lowcapital required. But he found the best routes within

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the city blocked by government regulation. "In an open competitive market, it isnot government's business to control the market," he declares. "People should beable to choose the best service for themselves."

In contrast with the dearth of jitneys operating within the city, most jitneybusinesses inthe area today cross municipal lines and therefore are subject to less-onerous regulation by the California Public Utilities Commission.e+ The PUCissues "passenger stage corporation" permits for door-to-door transportationservices, including airport service. Permanent permits cost $500, with additionalcosts for expanded service or permit transfers. The PUC requires at least $750,000of insurance coverage depending on vehicle capacity, as well as alcohol and drugcertification for drivers. The commission does not limit the number of permits, andestimates it has issued more than I, 000 statewide.

Charter services. The PUC also issues "charter party" permits for all pre-arranged transportation businesses that charge a group rate. The fee is $500 for apermit that is renewable every three years. The commission requires insuranceranging from $750,000 to $5,000,000, depending on vehicle capacity. No limitexists on the number of permits, and the PUC estimates approximately 2,000charter party permits exist state-wide, with about 200 inthe San Diego area. Theproliferation of intensely competitive charter services demonstrates what canhappen when regulations are reasonable rather than protectionistic.

Recommendations1. The Officeof Small Business and Small Business Advisory Board shouldcanvass opportunities for privatization out ofCity services, and should ensurethat contracting out procedures are accessible to small businesses andcommunity economic development organizations.2. San Diegoshould eliminate the de facto ceiling on the number of taxicabpermits, allowingthe market to determine the number ofservices rather thaninsulating existing companies fromcompetition.3. The MIDB should reduce the cost of taxicab permit transfer fees.4. The MIDB should regulate taxicabs onlyto the extent necessary to protectpublic health and safety; e.g. insurance, safety inspections, and driverbackground check.5. The San DiegoDistrict Attorney should investigate the taxicab industry todetermine whether corruption or illegalintimidation exists.6. The City should study whether it could turn over or contract out city busroutes to private jitney enterprises, including possibly nonprofit community-operated services. Such ser:vicesmight also be used as feeders for publictransportation or to provide transportation forworkers tojobs outside the city.

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HOME-BASED BUSINESSESCottage industry at one time was a mainstay ofAmerican enterprise. Those

days are returning for advances in technology, the proliferation of single-parentfamilies and stay-at-home parents, and other social forces have fomented anexplosion of home-based businesses. "Now not only are there mom and popoperations, but you've got professionals who use all the resources their home canoffer," observes Katrina Newby, executive director of the Home Business Network."It's an entire industry."25

In many areas, regulations have not kept pace with reality and unduly restricthome-based businesses. Obviously, home-based businesses lend themselves toconcealment, so any excessive regulatory obstacles will drive such businessesunderground. In such instances, "people feel they have to do something behind thegovernment's back," reports Newby.

Fortunately, San Diego has a comparatively progresstve attitude toward suchenterprises, though not progressive enough. People doing business in their homesmust comply with all regulations applicable to businesses generally, and mustobtain from the Development Services Department a home occupation permit,which costs $150, and a zoning use certificate.26 The businesses must not servecustomers at the home or disrupt the residential neighborhood. Home-basedbusinesses may request a variance to have more than one employee, to allowcustomers by appointment, or to have more than one vehicle. Variances aregranted after a hearing and requires the approval of neighbors.

State regulations prohibit commercial food preparation in the homealtogether-", although local zoning rules apparently do not forbid home-based foodpreparation. Not only does that restriction preclude home catering businesses, itadds another layer of regulatory prohibition against food vendors such as the"tamale ladies" in San Diego's impoverished immigrant neighborhoods.

Recommendations1. San Diego should ease rules on home-based businesses, increasing thenumber of employees, customers by appointment, and vehicles that home-based businesses can have without obtaining a variance.2. The State should rescind its prohibition of commercial food preparationin the home, allowing local governments to apply ordinary healthrequirements to ensure public health and safety in such enterprises.

OCCUPATIONAL LICENSING LAWSOccupational licensing laws, usually enforced at the state level, artificially

restrict entry into dozens of professions. Indeed, an entire chapter of the California

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statutes regulate businesses and professions. Rules for entry into a professiontypically are set by licensing boards comprised of members of the regulatedprofession with the coercive power of government at their disposal. Often the rulesfar exceed legitimate public health and safety objectives, and instead protectcurrent practitioners against competition from newcomers.

Few people would object to licensing of occupations that require high skilllevels or present serious threats to public health or safety. But California'slicensing laws extend to many occupations that certainly could be privatelyregulated, such as land surveyors-e. Iocksmiths-s', landscape architects-O,interior designers-I. and court reporters't-. To the extent that regulations on entryexceed legitimate public health or safety objectives, they unnecessarily limitcompetition, particularly among those who have feweconomic resources to combatthe legalized cartels.

A prime example is hairbraidlng, a centuries-old art brought to this countryby Africans. Today, thousands of hairbraiders operate across the country, usuallyintheir own homes. Nearly all operate outside the law.

California's rules are particularly oppressive. Anyone who arranges hair mustobtain a cosmetology or barber license from the California Board of Cosmetologyand Barbering.F' A cosmetology license requires 1,600 hours of prescribed formaltraining, virtually none of it directly related to hairbraiding, followed by a practicalexamination that does not test hairbraiding. No specialized license is available.Applications are available only in English, and it is difficult if not impossible forpeople who do not speak English to complete the courses and pass theexamination.

The effect of the licensing rules is that well-trained hairbraiders either mustspend vast time and resources to learn and demonstrate proficiency in practicesunrelated to hairbraiding, or operate illegally without a license. The law worksparticular hardship on African immigrants, who could teach the cosmetology boardhow to braid hair but can't pass its test. "Whycan't they take the exam in Swahili?"asks MAAC'sAlexei Ochola.34 The licensing process is "totally irrelevant to whatthey want to do," adds Sylvia Martinez.

It also deprives the industry oflegitimate status. JOAnne Cornwell, who chairsthe Africana Studies Department at San Diego State University, braids hair in herhome.35 She is so proficient that she has created a unique braiding style called"sisterlocks," which was featured in the fall 1996 issue of Black Hair Styles. "Ishould be teaching other people, but there's no way I can do it," Cornwell laments."To think that every time r train somebody I'm breaking the law, that's absurd."

Likemost home-based braiders, the state ignores JoAnne Cornwell. But whenshe tries to open a salon in the near future. she knows the regulators will swoopdown on her. and she will have trouble obtaining capital. 'There's no way in for me.There's no way to make this legitimate, without a change in the law," Cornwell

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declares. She favors private certification rather than a specialized license. 'There'snothing the Board of Cosmetology could add to that," Cornwell argues.

In driving the industry underground, the regulations also have the perverseeffect of diminishing tax revenues and removing businesses from the scrutiny ofhealth inspectors. By vastly overregulating the business, the State's cosmetologyrules serve the interests of neither producers nor consumers=-only the narrowinterest of economic protectionism.

In January 1997, the Institute for Justice filed a lawsuit challenging theconstitutionality of the cosmetology regulations on behalf of JoAnne Cornwell andthe American Hairbraiders and Natural Haircare Association. Federal District JudgeRudi Brewster denied the government's motion to dismiss the lawsuit on May 2,1997.36 The case is a significant step toward ensuring economic liberty forentrepreneurs.

For the time being, at least, the Board of Cosmetology and Barbering hasceased to exist, a deserving victim ofCalifornia's regulatory agency "sunset" law. Butthe laws remain on the books, passing to other regulatory hands to administer. Theagency's nebulous status only adds to the uncertainty of hairbraiders who are tryingto earn an honest living.

Recommendations1. The State of California should review all occupational licensing laws to (1)determine whether they are necessary at all, or whether private certificationinstead adequately could protect the public; and (2)ensure that requirementsare narrowly tailored to ensure proficiency and to protect public health andsafety.2. The State should deregulate the hairbraiding profession, allowing localofficials to apply ordinary health and safety standards.

Access to CapitalThe largest real-world impediment to most new enterprises is access tocapital. Banks rarely make small business loans, particularly to companies that

have no collateral or credit history. San Diego is not a banking center and lostthree of its largest fmancial institutions inthe early 1990s37, with the result thatithas little indigenous capital for lending.

The regulatory barriers to business formation discussed in the precedingsections compound this challenge. For in order to have any chance at securing thecapital necessary for survival and growth, a company must be legal. Regulations

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and excessive taxes that drive businesses into the underground economy alsoforever sentence those businesses to economic marginality. Furthermore, stateregulations governing loans for small and startup businesses-and the nonprofitentities that make such loans-are burdensome, further limiting access to capitalfor entry-level entrepreneurs.

A number of efforts are underway in San Diego to make capital more readilyavailable to promising new enterprises. The City itself has a seed capital program,which in the last fiscal year made grants totaling $131,000 to groups providingassistance to underserved populations of small business owners.P'

Private organizations are directly providing "micro-loans" to new smallbusinesses that cannot obtain capital through traditional sources. Through theefforts of 20 local banks, the Bankers Small Business Community DevelopmentCorporation (Bankers CDC) makes loans from $2,500 to $35,000 available tobusinesses that do not meet criteria for conventional bank loans or Small BusinessAdministration loans.39 At an even more basic level, a nonprofit group calledACCIONmakes loans from $300 to $25,000 to small enterprtses.w According toVilla Mills, who heads ACCIONSan Diego, the group's purpose is "to build a goodcredit history" so the businesses can secure capital through ordinary channelsthereafter. Last year, the microlender made 175 loans, with a high repayment rate.

ACCION emphasizes a quick and simple application process, basing itslending decisions on personal credit history and on the community and humancapital resources available to the new business. ACCIONis housed in the SanDiegoWorldTrade Center, where the cityprovides free rent in exchange for services.The group is "not a social service agency, but we would be remiss not to evaluatethe ability of the person and the family to sustain a business," Mills explains.ACCIONtries to transition companies to the regular banking community after oneyear and for loans above $7,500.

Not surprisingly, lending regulations hamper this effort. ACCIONoperates infive states, but California poses by far the most onerous regulatory obstacles.v!'This is not banking, it's economic development," Mills stresses; but unfortunatelythe regulations do not comprehend the distinction. Even after companies establisha successful credit history with ACCION,she reports, banks sometimes still arereluctant tomake loans because "regulators are beating down on them." Moreover,despite its nonprofit status, ACCIONis forced to comply with myriad Californiaregulations covering ordinary lenders like Bank of America, because no specialrules or exemptions exist for non-profit lenders or economic development. Amongother things, the group is required to post a $50,000 bond, maintain $25,000 onhand I''Ifyou're a nonprofit, that's a large amount of money to have sitting in thebank," Millsobserves). complywith extensive disclosure requirements for directors,submit to unannounced government audits for which the group must pay $75 perhour, obtain pre-approval for advertising, and endure a complex annual licensingprocess with hefty fees. ACCIONhas had to devise creative strategies to help loanapplicants deal with collateral requirements. "Wehave to play all these stupid

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school. "Redirecting that into process and curriculum" would help greatly, shesuggests.

Although San Diegoschools are roughly on par with the state as a whole, thatis not saying much: the National Assessment of Education Progress reports thatlast year, California tied Louisiana for the nation's lowest reading and mathematicstest scores.s+ In the 1993-94 school year, SDUSDreported a 16percent dropoutrate. The school district is heavily minority, with 26 percent Hispanic and 17.8percent black students.45 Test scores ofminoritystudents in San Diegolag behindnonmmortties.w

Business and philanthropic groups have poured resources into the publicschools. The Girard Foundation, for instance, has strived to increase parentalinvolvement in the public schools through support for the Parent Institute forQuality Education, which serves first-generation immigrants, and the Center forParent Involvement in Education.47 Some of the schools nave institutedentrepreneurship programs with community support.

One of the most promising education reforms in California is charterschools-innovative public schools that control their own educational programsand are exempted from some state regulations. San Diego has six operationalcharter schools. Two others were shut down last year by the San Diego schooldistrict.

Despite their promise, charter schools are heavily restricted under state law.The charter school legislation limits the number to 100, and places substantiallimits on the schools' autonomy.48 The LittleHooverCOmmission in March 1996found that current charter school regulations artificially restrict innovativeeducational options, and it urged such reforms as lifting the IOo-school cap,funding charter schools directly from the state rather than through local schooldistricts, creating alternative sponsors and petition mechanisms, and recognizingcharter schools as separate legal entities.49

Charter schools in San Diegohave receivedstrong support from the businesscommunity, particularly the San Diego Business Education Roundtable.50 Butbecause charter schools operate only with the blessing of local school districts,support from those entities is crucial not onlyfor the charter schools' existence butfor their success. Among charter school experts, the San Diegoschool district hasa reputation for hostility toward charter schools. Pamela Rileyof PacificResearchInstitute inSan Francisco says that "charter schools in San Diegoare a round pegin the district's square hole."51

The bitter conflict between the school district and the JohnsonElementary jUrban League Charter School bears out that claim. The San DiegoBoard ofEducation granted a five-yearcharter inFebruary 1995 as a collaborationbetween Johnson Elementary School and the San Diego Urban League. Thecharter school was established to address poor academic performance among the

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scholarships to allow children from low-income families to attend privateschools; and should support the creation of new private schools in low-income neighborhoods.4. The California legislature should adopt remedial school choice legislation,such as that proposed by Governor Pete Wilson, to allow children in theworst public schools to opt out into private schools.

ConclusionWalk down the pleasant streets of San Diego's Gaslamp Quarter and you will

see the fruits of free enterprise. Vibrant new restaurants abound, featuring everytype of cuisine. Skilled artisans roll cigars at the Havana Cigar. Factory. Newbarbers learn their trade in a storefront barbering college. The spirit of enterpriseis ubiqurtous,

One of the new businesses is a restaurant called the Kabob House. Itwasestablished by Russian immigrants, who started out selling kabobs from a vendingstand at a swap meet. When the exorbitant rents started devouring their profits.the family decided to try its hand at running a restaurant. They faced a plethoraof regulatory obstacles, such as obtaining a liquor license and permission foroutdoor seating. But now the restaurant is flourishing, introducing native SanDiegans to Russian cuisine and Russian patrons to California wines. "It's kind oflike the American Dream," a waiter remarked to me.

It is the American Dream-a dream sometimes dimmed when regulationsgrow too onerous. This report presents concrete actions that can be taken-by localgovernment officials, state officials. and business leaders-to open opportunitiesand strengthen substantially the region's economic base, The dominant regulatoryphilosophy should be that businesses are good for the community, and thatwhatever regulations are necessary should impede entrepreneurship as little aspossible. Instead, regulations too often are protectionistic, revenue-generating, andotherwise unjustifiable. The result of over-regulating is all too predictable: thestifling of entry-level enterprises, the backbone of America's economy-and thefoundation for America's future.

San Diego's beacon burns brightly for entrepreneurs. With renewed resolveand implementation of the reforms outlined in this report. that beacon can burnbrighter still in the 21st century.

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Endnotes1. Interview with Sergey Autandilov, Business Counselor, Metro Area Advisory

Committee on Anti-Poverty in San Diego County (MAAC).2. See, e.g., William H. Mellor. "NoJobs, NoWork,"New York Times (August 31, 1996).3. Source for statistics: U.S. Department of Commerce. Bureau of the Census, COW1tyand City Data Book (1994).4. Joel Kotkin. "San Diego: A City for the NewMlllenium,' City Journal (Winter 1997),

p.74.5. Kotkin, p. 77.6. Interview with Santo Fragale, Community Development Specialist, Office of Small

Business. The author expresses special appreciation to Mr. Fragale for his generouscontribution of time and expertise and for making available the office's records.

7. The business tax is now $34, with $20 dedicated to the Small BusinessEnhancement Program. Minutes, Small Business Advisory Board. July 26, 1995.

8. Minutes, Small Business Advisory Board, March 27, 1996.9. Interview with Ken M. Clark, Small Business Programs Coordinator, Southwestern

College Small Business Development & International Trade Center.10. Interview with Santo Fragale, Office of Small Business.1L County of San Diego, Office of Trade & Business Development, Getting Down to

Business in San Diego County. The city maintains similar requirements. See Cityof San Diego. Office of Small Business. Quick Reference Directory jor Starting aBusiness in San Diego.

12. Getting Down to Business. p. 10.13. Minutes. Small Business Advisory Board, May 1, 1996.14. Minutes. Small Business Advisory Board, June 26. 1996.15.Letter to Mayor Susan Golding from George P. Chandler. Jr., chairman, Small

Business Advisory Board, June 5, 1996.16. Information about applicable regulations is based on primary source materials and

on interviews with Kathy Henderson, County of San Diego Development ServicesCenter; Alice Boyd, City Treasury; Robert Romaine, Department of EnvironmentalHealth; Mary Ann Oberle, Community Parks and Recreation Department; PennyScott, Balboa Park: and Michael Beehan, Mission Bay Park.

17. Interview with Sylvia Martinez, MAAC.18. Interview with Nan Mitchell, Day Care Supervisor, YMCA Child Care Resource

Center.19. Interviews with Donna Brown and Stephanie Daniels, California Department of

Social Services, Community Care Licensing Board.20. Interview with Kathy Henderson, Development Services Center.21. Jim Okerblom, "Pair's Bug Express May Be Beachy Idea," San Diego Union-Tribune

(September 3, 1994).

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22. See, e.g., William H. Mellor, Institute for Justice, Is New York City Killing Entrepre-neurship? (1996).

23. Interview with Barbara Lupro, Taxi Administrator, Metropolitan Transit DevelopmentBoard.

24. Interviews with Rosalind White, Passenger Stage Permits, and Santos Flores, CharterParty Permits, California Public Utilities Commission.

25. Interview with Katrina Newby, executive director, Home Business Network.26. Interview with Kathy Henderson, Development Services Center.27. Interview with Robert Romaine, Department of Environmental Health.28. Cal. Bus. & Prof. Code 8740, et. seq.29. Cal. Bus. & Prof. Code 6980.17, et. seq.30. Cal. Bus. & Prof. Code 5650, et. seq.31. Cal. Bus. & Prof. Code 5800, et. seq.32. CaL Bus. & Prof. Code 8020, et. seq.33. Interviews with Liz Scherer and Gary Winkelman, California Board of Cosmetology

and Barbering.34. Interview with AlexeiOchola, Community Development Specialist, MAAC.35. Interview with Joanne CornwelL36. Cornwell v. California Board oj Barbering and Cosmetology, 962 F.Supp. 126 (S.D.

Cal., 1997).37. See Kotkin, pp. 76-77.38. See Office of Small Business, "Small Business Enhancement Program FY 1996

Accomplishments. H39. Interview with Art Goodman, Bankers Small Business Community Development

Corporation.40. Interview with VillaMills, ACCIONSan Diego.41. Interview with David Chong, ACCIONInternational. Information about ACCIONSan

Diego and the California requirements were obtained in interviews with Chong andVilla Mills. Regulations are set forth in various provisions of the California FinancialCode, 22001. et seq., and the California Code of Regulations, 1401, et seq.

42. Interview with Wayne Morris, Licensing Specialist, California Department ofCorporations.

43. Materials from Jacobs Family Foundation, San Diego Entrepreneurs EconomicSummit (March 2-3, 1995).44. Virginia Butterfield, "Our Schools in Crisis," San Diego Magazine (November 1996),

p.82.45. San Diego Schools News Release (May9, 1995).46. Susan Gembrowski, "Minority Students Still Lag on Tests." San Diego Tribune

(October 29, 1996], p. B-1.47. Interview with Laura Fleming, Girard Foundation.

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BiographyCLINT BOLICK

Vice President and Director of LitigationClint Bolickserves as vice president and director of litigation at the Institutefor Justice, which he co-founded in 1991 to engage in constitutional litigation

protecting individual liberty and challenging the regulatory welfare state. TheInstitute also teaches public interest litigation skills to lawyers, law students, andpolicy activists.

Among the cutting-edge cases Bolickhas litigated are the successful defenseof the nation's first school voucher program in Milwaukee and challenges toentrepreneurial baniers around the country. Bolick is credited with leading theopposition to President Bill Clinton's nomination of Lani Guinier as assistantattorney general for civil rights.

Bolick has authored several books and articles, including the recentlypublished TheAffIrmativeAction Fraud: CanWeRestore the American CivilRightsVision? (Cato Institute, 1996); and Grassroots Tyranny: The Limits of Federalism(Cato Institute, 1993).

Bolick received his law degree from the University of California at Davis in1982, and his undergraduate degree fromDrewUniversity in 1979.

The Institute for Justice was co-founded by its president and general counsel, WilHam H. (Chip)Mellor III, and Bolick.

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The Institute for Justice is a nationally acclaimed public interest law firmthat pursues strategic public interest litigation and outreach to ensure thatindividuals have the opportunity to pursue an honest living and gain a foothold onthe economic ladder. Scripps H ow ard N ews Serv ice wrote, "the Institute for Justice[is] a public interest group fighting for something our cities desperately need moreof: economic opportunity at the grassroots."

The Institute for Justice has analyzed government-created barriers to entry-level entrepreneurial opportunity in seven cities across the country: Baltimore)Boston, Charlotte, Detroit, New York, San Antonio and San Diego: At a timewhen there is widespread recognition of the need for less government and moreopportunity) these first-of-their-kind studies identify specific laws and regulationsthat stand in the way of people trying to earn an honest living.

This report, B ri gh te n in J :T t he B e ac o n: R e rf!t ov in g B ar ri er s t o E nt re p re n e u rs h ipin S an Die ._qo)by Institute it)!" J ustice Vice President and Litigation Director ClintBolick, analyzes significant barriers to economic opportunity at the grassroots inSan Diego,

For more information, please contact:

I JINSTITUTE FOR JUSTICE1717 PENNSYLVANIA AVENUE, N.vV.

SUITE 200

brightening the beacon: removing barriers to entrepreneurship in san diego

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