(Note: While not a 'trained economist,' this statement by a rather blase Stephen Levy raises a raft of Red Flags -- director of the Center for Continuing Study of the California Economy, an independent research organization in Palo Alto -- "It's a human tragedy. It's not so much an economic tragedy." It makes one wonder if Mr. Levy is an 'environmentalist,' or perhaps, a 'conservationist' -- in, of course, the 'economic' senses of the words!)

October 31, 2003

By Gary Gentile

Associated Press Business Writer

http://www.Newsday.com

To submit a Letter to the Editor: letters@newsday.com

Los Angeles, California - The Southern California wildfires will likely have a mixed economic impact, devastating tourism in rural playgrounds like Lake Arrowhead and Big Bear but causing a temporary bump in the construction industry as homes are rebuilt, economists said Thursday.

Some businesses could take years to recover after flames destroyed offices and storefronts.

Others lost hundreds of hours of productivity when workers were stuck on clogged highways or evacuated from their homes.

But there are firms that stand to profit as people rebuild and refurnish homes.

Economists said insurance claims generated by the fires could exceed the $1.7 billion paid after the 1991 Oakland Hills fire.

"The real damage in the fire is the direct damage. That's large, but it's compensated," said Stephen Levy, director of the Center for Continuing Study of the California Economy, an independent research organization in Palo Alto.

"It's a human tragedy. It's not so much an economic tragedy."

Levy said the economic toll from the fires pales in comparison to losses stemming from the ongoing strikes of grocery clerks and transit workers in Southern California.

"The [inconvenience to] 500,000 people who were late to work and delayed every day in Los Angeles County because of the transit strike has got to be more damaging," he said.

As skies began to clear of smoke from the week of fires, tourist attractions in some areas reopened.

At Legoland in Carlsbad, workers dusted the ash off plastic block models of the U.S. Capitol and the New York City skyline before the park opened.

In San Diego, Sea World was preparing to reopen after being closed four days because of poor air quality.

But it could be awhile before Lake Arrowhead and Big Bear recover.

"It's going to be very difficult, I would venture, for a couple of years," said Teri Ooms, president and chief executive of the Inland Empire Economic Partnership.

State officials said the fires could take a $2 billion toll on the California economy. That includes damage to homes covered by insurance.

Economists say they have not yet put a price tag on the disaster, which they point out caused no major damage to bridges, roadways and other infrastructure.

Some losses will come from problems like disrupted airline flights and temporary closures of roads and rail lines.

But time lost when employees missed work will eventually be made up as people log overtime or even work some vacation days, economists say.

A major impact could be felt on the state budget, as legislators struggle with the massive cost of fighting the fires.

The federal government has agreed to reimburse California for up to 75 percent of the cost of battling the blazes.

Usually, the state and local governments split the remaining cost on a 75/25 percent basis.

But Wednesday, Gov. Gray Davis pledged to reimburse the full cost to local governments.

The rebuilding effort will benefit the construction industry and retail stores.

But those effects will likely be short-lived.

Economists compare the impact to the bump in the economy that came after the Northridge earthquake in 1994.

"That same thing will occur as a great deal of money pours into the counties affected, whether insurance money or government grants and government loans," said John Husing, an independent economist. "This is a heck of a way to get the economy to go faster."

One problem could be finding enough construction workers at a time when the industry is already strained to keep up with the blistering pace of home building in the state.

"You'll probably see a flow of skilled people from outside the state coming back here to go to work," Husing said.

Copyright 2003 The Associated Press

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Additional reading from the IEEP website:

Regional Diversity

Executives and entrepreneurs considering where they should locate their firms have an amazing variety of choices in the Inland Empire. Today, the "hot zone" for Southern California economic development is along the edge of San Bernardino and Riverside counties, where they abut Los Angeles, Orange and San Diego Counties. However, as the pace of the region's economic development has accelerated, companies have come to recognize the enormous advantages offered by the wide range of environments that the region has to offer.

Westend

For 17 years, firms wanting to serve the Los Angeles and Orange County markets have congregated along the I-15 freeway in San Bernardino and Riverside counties. From 1995-2002 alone, this area saw 80 million square feet of industrial space built and occupied, making it the nation's hottest commercial real estate market. With highly skilled workers now migrating to the Inland Empire, office projects are going up and Class A space is available at reasonable prices. Firms locating in this area have immediate access to Ontario International Airport. They also find an entire range of essential infrastructure: advanced fiber optics, expanding freeways, rail lines, a brine line, LTL cross-docks, the UPS and FedEx air cargo hubs. Also, Cal Poly Pomona, the Claremont Colleges, Chaffey College and RCC Norco have their campuses here. The new I-210 freeway to the area opened in 2002.

County Seat Areas

With industrial land becoming harder to find in the Westend, firms are starting to move deeper into the Inland Empire. Many are locating in the Riverside-Moreno Valley area of Riverside County and in the East San Bernardino Valley's cities. Here, they have access to available and inexpensive industrial land plus they are close to each county's decision makers. Industrial firms moving to this area find they are near the cargo port at March Air Reserve Base in Riverside County and the BNSF intermodal yard and San Bernardino International Airport in San Bernardino County. They also find that a very large labor force resides here. The campuses of UC Riverside, Loma Linda University Medical Center, Cal State San Bernardino, University of Redlands and the San Bernardino and Riverside Community Colleges are located in or near the county seats. So also are high tech firms like ESRI (GIS), Optivus Technology (proton therapy), Kelly Space and Technology (aerospace) Bourn Inc. (control devices) and I/O Software (Internet security).

Southwest Riverside County

Companies needing ties to San Diego County are locating along the I-15 freeway in cities like Temecula and Murrieta. The region has become the location of choice for a host of technology firms including International Rectifier (computer chips), Guidant (medical devices), Chemicon (biotechnology), Channel Commercial (telecommunications), Professional Hospital Supply (medical). They are finding a wonderful environment and a rapidly expanding base of highly educated workers willing to work for less to avoid commuting. UC Riverside, Cal State San Marcos and San Jacinto Community College provide educational services to the area's workers and firms. This beautiful area is enhanced by some of California's finest wineries as well as Southern California's largest freshwater recreational lake, Lake Elsinore, and the huge new Diamond Valley Lake.

Inland Empire North

The Victor Valley-Barstow area is Southern California's main gateway to the rest of the United States. Distributors locating here have access to thousands of acres of rail served property as well as Southern California Logistics Airport, a facility combining a 1,940 acre Free Trade Zone with a LAMBRA Enterprise Zone. An Inland Empire North location places firms along the "e-corridor" (I-15), a link that allows them to easily serve Southern California gigantic market (19 million people) as well as cargo moving between the Los Angeles Basin and the Pacific Northwest, the Midwest and points east. Companies seeking a competitive edge find that a High Desert location offers them Southern California's lowest land prices. The area's low costs make it possible for its abundant workforce to work for the region's lowest wages to avoid long commutes. Cal State San Bernardino, Victor Valley Community College and Barstow Community College fulfill the area's higher education needs.

Coachella Valley

Entrepreneurs and executives who want to be in the midst of a desert resort community are migrating to places like Palm Springs in the Coachella Valley. The senior executives of most top U.S. companies either visit this area or buy estates here. Some are now choosing to bring their companies with them. The result is a rise of manufacturing, distribution and technology employment unrelated to the region's traditional retirement, recreation and tourist base. The NAFTA agreement and the expansion of Route 86 to the Mexican border mean that the Coachella Valley can become a key site for firms providing product design, management systems and other high end services to companies operating south of the border. Logistics firms locating in the area will also benefit. Cal State San Bernardino, UC Riverside and College of the Desert provide higher education to the region. It is served by regularly scheduled flights at Palm Springs International Airport.

Morongo Basin

Entrepreneurs seeking a more rural desert setting can opt for Yucca Valley and Twentynine Palms. With elevations as high as 3,000 feet, these communities offer a combination of cooler temperatures, cleaner skies, reasonable distances to urban areas, and a more laid back life style than in the Inland Empire's other desert zones. The region is well suited to business executives whose firms do not consider distance to be an issue (e.g., call centers or dotcoms). The area is also a perfect location for companies supplying products and services to the U.S. Marine Corps or to the tourists and rock climbers at Joshua Tree National Park. Copper Mountain College and Cal State San Bernardino offer training and college classes within the region.

Colorado River Corridor

Nestled on the Colorado River are the desert recreation and farming communities of Needles and Blythe. This corridor is a Mecca for Southern California's boating, fishing, water skiing and jet skiing enthusiasts. Needles sits on the I-40 freeway. It has a larger retirement community and offers a laid back alternative for enjoying the river environment compared to its Nevada neighbors. Blythe is on the I-10 freeway. It is home to Palo Verde Community College, lush farm land and a population that triples every winter. Each city has inexpensive industrial land and represents a central location for firms that distribute merchandise to Southern California, Arizona and Nevada. Both have a municipal airport, rail access, a large water supply, inexpensive housing and a willing labor force.

Mountains

Executives or entrepreneurs who want to live in the forest or on the shores of mountain lakes can live in a host of Inland Empire locations: Lake Arrowhead, Big Bear Lake, Idyllwild, Crestline, Running Springs. From these locations, it is an easy commute to offices and production facilities within the urban valleys. Or, if firms can be run on the Internet, the owners can remain in the clouds.

http://www.ieep.com/Chapter_11_regional_diversity.htm

Download complete 'Fact Book' (98 pages)

http://www.ieep.com/factbook.pdf

CAEZ - California Enterprise Zone http://www.caez.org

IEEP - The Inland Empire Economic Partnership http://www.ieep.com

1201 Research Park Drive, Suite 100

Riverside, CA 92507

909-779-6700

Fax: 909-779-0675

jdittmer@ieep.com

LAMBRA Enterprise Zone http://www.caez.org/contact.html  Enterprize Zone legislation: http://www.caez.org/legislation.html

LAMBRA - Local Agency Military Base Recovery Area

SRRMDZ - Sacramento Regional Recycling Market Development Zone