Houses most people can't afford. Traffic that makes commuters spend an average of an hour a day on the road. Students who don't understand basic science. These are the most threatening snakes in San Diego County's paradise. Business leaders have bewailed them for years as a long-range threat to the region's future economic competitiveness.

That future is getting closer, according to a June report from the San Diego Association of Governments. It warns that the region's robust economy will be unsustainable without making housing more affordable, reducing congestion and improving education.

What it says

The report rates San Diego and 18 other metropolitan areas on three elements: Economy, Environment, and Equity (roads, schools and other supporting infrastructure). Here's part of the scorecard:

Environment: The county's strongest suit, tying for first place with Seattle, up from third in the 2001 report. Scored high for environmental preservation and investment in water supply and wastewater management. Lost points for poor air quality.

Economy: Squarely in the middle, ranking 9th. Strong on venture capital; important for the region's technology companies. Poor on the level of education, ranked 13th. Poor record of investment in ports, airports and roads to move goods.

Equity: Near the bottom, ranking 16th. This is partly because of its high cost of housing, the least affordable of all 19 areas. Below-average record in early childhood education.

The report offered no solutions; its purpose was to point out the problems and describe them in an objective, quantifiable way.

While there's little surprising in the report, there was one unsettling conclusion: Since a similar report was issued in 2001, the region has not made any progress in solving its problems. And if those problems are not solved, the quality of life and business environment the county now enjoys will disappear.

Next step: Finding the solutions.

Housing and transportation

Where to live? How to get to work? You can't answer one question without the other.

So cities will tackle both issues at the same time, said Mickey Cafagna, SANDAG's chairman. For the first time, all local governments in the county have signed onto a plan to coordinate transportation and development projects.

Cafagna said he expects San Diego County to improve its transportation system because of its long-term commitment to spend $42 billion on roads and mass transit systems under the TransNet sales tax, a half-cent addition to sales taxes collected in the county. The existing TransNet tax was extended until 2048 under Proposition A, passed by voters last year.

On the development side, Cafagna and Alan Gin, an economist at the University of San Diego, recommend more mixed-use housing and higher-density development. One benefit of mixed-use is that it gives people the option of living where they work, Gin said.

Marney Cox, SANDAG's chief economist, said residential development can be encouraged, not only in San Diego, but throughout the state, by changing the way sales tax money is distributed. For every dollar spent, 1 cent goes back to the jurisdiction where the store is located.

"Cities compete heavily for sales tax and transient occupancy tax money from retail and hotel developments," Cox said. "They will bend over backwards to get 7-Elevens, regional malls, strip malls, all of em," Cox said. "At the same time they shy away from housing because it doesn't provide enough money to pay for ongoing services."

If the sales tax formula was changed to eliminate that advantage, Cox said cities would find it easier to make land-use decisions based on merit. The housing supply would increase, and California's persistent housing shortage would dwindle.

However, Christopher Thornberg, a senior economist at the respected UCLA Anderson Forecast, said the commonly accepted view of a housing shortage is a "red herring."

"What's lacking is low-rent apartments for low-skilled people," Thornberg said. That lack is caused by regulations and fees that add to the fixed cost of building apartments. With higher fixed costs, apartment builders naturally tend toward high-end units.

Thornberg said it would be a mistake to adopt a housing policy that assumes prices will constantly rise. San Diego is in a massive housing bubble, he warned, because the price of homes has become detached from underpinning fundamentals, such as rents.

"Prices have gone up 40 percent in the last two years, and there's no fundamental reason that real estate is worth 40 percent more now than in 2003," Thornberg said.

Education

Employers, especially in the high-tech and biotech fields, also complain that many local job applicants aren't adequately educated, so they have to import qualified people from elsewhere.

And across the board, young people from the area lack the "soft skills" such as communication and promptness, said Gary Knight, president and chief executive of the San Diego North Economic Development Council. However, he finds signs of progress in education, such as Guajome Park Academy in Vista, where he praised the students' attitude and command of language.

"They would make many of us appear inarticulate," Knight said of students in the charter school in the Vista Unified School District.

Cox pointed to High Tech High, a charter school in San Diego created by a group of educators and business leaders, as a model that deserves to be duplicated. The school stresses personal instruction, connection with the work world, and a focus on technology. More about the school can be found at www.hightechhigh.org.

Faulty Vision

No solution can work without the cooperation of the city of San Diego. The city has half the county's population and dominates the region economically. North County's umbrella tourism and economic organizations recognize this fact in their names: the San Diego North Convention & Visitors Bureau and the San Diego North Economic Development Council.

But San Diego is a troubled giant, struggling with a multibillion-dollar pension deficit caused by questionable accounting, giving it the unenviable name of "Enron-by-the-Sea." That's because its leadership sweeps problems under the rug until they become too big to ignore.

Diann Shipione, who raised the alarm about San Diego's pension deficit, was ostracized by the city's establishment for her pains. Shipione, then on the city's pension board, warned of the impending crisis in 2002. Dick Murphy, San Diego's mayor, declined to heed Shipione, preferring to disparage her.

In March, Murphy, who barely won re-election against Councilwoman Donna Frye, removed Shipione from the pension board. But Murphy, who campaigned under the slogan: "Leadership With 20/20 Vision," admitted in April his inability to solve the deficit. He announced he would resign on July 15.

North County example

It doesn't have to be this way. Carlsbad, which has held to a consistent development strategy for decades, is widely known as a city that has thriving businesses, is pleasant to live in, and can pay its bills with ease.

Carlsbad did this by setting rigorous limits on the amount and quality of residential development, and attracting a good mix of commercial development. The goal was to balance business activity with residential living, along with good schools.

The plan has worked almost unbelievably well. Carlsbad has developed into a second technology hub in the county, home to such companies as Invitrogen Corp., a biotech company valued at $4 billion.

With a population of 93,000 ---- up 19 percent between 2000 and 2004 ---- Carlsbad has accumulated nearly $70 million in reserves. In fiscal year 2004-2005, the city projects it will spend just under $90 million and take in just under $100 million.

SANDAG's Cox said Carlsbad benefits from having a regional mall, its auto mall, and the sales tax revenue these bring.

"Carlsbad generates revenue from residents of Oceanside, San Marcos, Vista who shop there but don't use the city's services," Cox said.

Looking back

The city of San Diego ---- and the whole county for that matter ----- can also get inspiration by looking to its own past. Specifically, the year 1960.

Back then, San Diego was a sleepy cultural backwater. That year marked the start of two world-class academic centers, UCSD and the Salk Institute. Voters approved donating prime coastal land to house the Salk Institute, out of faith that research would produce great benefits in finding cures for diseases.

That investment produced an unexpected payoff: biotech and high-tech spinoffs that created great wealth and employed tens of thousands of San Diegans.

A new class of local entrepreneurs emerged, such as Irwin Jacobs, the co-founder of San Diego telecom giant Qualcomm Inc. They became philanthropists, giving millions of dollars to local schools and arts centers.

In the 1970s, the city, led by then-Mayor Pete Wilson, began a farsighted program to redevelop San Diego's seedy downtown, including establishment of a trolley system and a modernistic shopping center in Horton Plaza.

Downtown San Diego came alive, with a vibrant entertainment area in the Gaslamp Quarter and newly fashionable condominium developments pushing up property values. People flocked to work there, many from North County.

As a step toward relieving freeway congestion, the North County Transit District established the Coaster commuter rail line running from Oceanside to downtown San Diego.

Modern San Diego County is the product of all these elements coming together ---- education, entrepreneurs, transportation and redevelopment. To keep it a desirable area to live and work ---- and gain ground against competing cities ---- these elements will have to come together again.

Some key elements of the report

• Strong habitat preservation efforts.
• Strong investment in waste management and water supply.
• Poor air quality, the only environmental segment where the county ranked low.
  Economy: San Diego placed ninth, out of the 19, squarely in the middle.
• An excellent record of attracting venture capital, ranking fourth, an increase from eighth in the 2001 report.
• Poor record of investment in airports, marine ports and highway expansion to move goods. San Diego ranked 14th.
• A poor record of educational attainment, ranking 13th. However, this was up one notch from 2001.
  Equity: San Diego ranked 16th, reflecting its high cost of housing but up one rank from 2001.
• A 57-minute combined morning and afternoon commute time, placing the region 14th.
• Below-average early-childhood education. That's a critical concern for local businesses, especially biotechnology and high-tech companies, which increasingly complain of poorly educated job applicants. San Diego ranked a disappointing 12th, two places before the national average.
• The least affordable housing, same as in 2001.
  
  The entire report is available at http://tinyurl.com/782pq in Adobe PDF.
  
  Contact staff writer Bradley J. Fikes at bfikes@nctimes.com or (760) 739-6641