In the midst of what UC Berkeley professor James Wilcox calls a financial "Category 4 hurricane," city officials say UC Berkeley's presence has helped save the city from being caught in the eye of the storm.

The recent economic downturn has caused businesses in the Bay Area and around the world to struggle to stay afloat.

While it was too soon to tell what the exact effects of the recent downturn might be, Michael Caplan, the city's economic development manager, said he thought the solid economic outlook would continue.

"We're hanging in there," Caplan said.

UC Berkeley played a major role because it acted as an anchor, allowing the city to avoid the extreme economic ups and downs that other cities were facing, he said.

Caplan called the campus a "stabilizing factor" in the local economy, along with Bayer Healthcare and Alta Bates Medical Center, the city's two other largest employers.

Irene Hegarty, UC Berkeley director of community relations, said that while the university is not immune to fluctuations in the economy, it creates a much more stable economic environment around its perimeter.

"(The campus) pretty much fuels the economy," Hegarty said. "Most of our money comes from outside the Bay Area and gets put into the local economy."

According to a campus report that studied UC Berkeley's economic impacts in the 2005-06 school year, students spent nearly $282 million in the city.

Hegarty said she thought the numbers were still valid for this economic year.

Daniel Nevaras, an employee at Urban Outfitters in Berkeley, located nearby Bancroft Way, said the student population still draws in a reasonable cash flow.

"I think a lot of the kids attending UC Berkeley have the money to shop even through the economy the way it is right now," he said. "It gets pretty busy on the weekends, even with the economic troubles we have a lot of business."

Caplan acknowledged that this was an effect that was seen in towns with institutions similar to the campus.

"College towns and state capitals tend to have lots of dollars flowing through them that are independent of the economy," he said.

Although Berkeley businesses are doing better compared with neighboring cities, Debra Badhia, executive director of the Downtown Berkeley Association, said the business district has still been affected.

Currently, the vacancy rate for the Downtown is approximately seven percent. She said this was not as bad as the last major recession in 1989 when the vacancy was almost 20 percent.

The city gets about $14,000,000 -nearly ten percent of its revenue- from sales tax, something that could decrease as people cut back on spending, said Mary Kay Clunies-Ross, the city's spokesperson.

She said the City Council would reconsider the budget allocations they made in October to see if they were meeting expectations. If necessary she said, the council could dip into reserves or be forced to cut more programs.

"What (the council's) options would be depends on what happens now," she said.

Sam Juha, owner of Cheese 'N Stuff, said that although his sales have gone down by about 10 percent from last year, his eatery is "still doing good overall."

"I talked to friends in San Francisco and other places and everybody is really having a tough time," Juha said. "In Berkeley, we're definitely doing much better than other places because we have the students here, so we have customers."

Deepti Arora and Will Kane of The Daily Californian contributed to this report.

Tags: TELEGRAPH AVENUE, DOWNTOWN BERKELEY