By Gene Williams
January 13 -- Business is down. Unemployment is up. Credit is tight. Investments and property values have plummeted. The recession that everyone hoped wouldn't happen is here.
Across the country, working people are feeling most of the pain, as many of them see their jobs, health insurance, retirement savings and homes disappear.
Times are tough. And it doesn't look like it's getting better any time soon.
The good news, if there is any, is that Santa Monica – with its diverse economy, its desirable location and a fiscally-sound City government – usually weathers these storms better than other cities, said Rob York, a retail consultant for the Bayside District Corporation.
"We're in better shape, and we should remain in relatively good shape," York said. "But when everybody is having trouble, we feel it too.
The latest Anderson Forecast, a quarterly report issued by UCLA economists, paints a mostly gloomy picture for California in the months ahead.
The state is in for a bumpy ride, the Forecast says, with more home foreclosures and a continued rise in unemployment set to peak at 8.7 percent. Manufacturing and construction will remain stalled out during most of 2009, the report says.
"Right now, the economy is being driven by fear on the part of both investors and consumers," Forecast Director Edward Leamer said in a radio interview last month. "And it's very hard to predict when that fear will dissipate."
On a somewhat brighter note, the Forecast predicts the state will see a "glimmer" of a recovery toward the close of the year. But the turn around will be slow and difficult, the report says.
York agrees that 2009 is not going to be easy.
"We're in a pretty unique situation right now," the Bayside consultant said. "Not many people in business today have experienced this sort of thing before.
"All these things are hanging over people's heads," and the uncertainty "reinforces a hunker down mentality. People get much more conservative in spending."
WITH ITS DIVERSE sources of revenue, the City of Santa Monica is better prepared to ride out the turbulent economy than the many cities that depend heavily on just one or two revenue streams, experts agree.
No single source of income makes up more than 15 percent of the City's total General Fund revenue. The City's five biggest local sources of income – taxes on property, sales, hotel rooms, utilities and business licenses – each account for only 9 to 14 percent of the General Fund, which bankrolls City services.
"We have a number of key industries which affect the local economy, so when one gets in trouble, the others can shore up the burden," York said. "But some of the pieces of the puzzle aren't going to work as well as in the past."
Since the economy drives taxes, less business this year will mean less money for City coffers, according to City officials.
"The local economy could be impacted by many of the same challenges as the state and nation," Finance Director Carol Swindell wrote in her report to the City Council in October.
"In Southern California, the housing market has deteriorated," she wrote. "The housing crisis is further aggravated by tightening credit, which has left businesses and individuals struggling to meet short-term obligations.
"While property values in Santa Monica have "weathered the storm" better than in most other cities, with the total assessed valuation rising last year by some 10 percent, there are "troubling signs," Swindell said.
|
The number of property transfers in the city during the last fiscal year was The lowest in at least 15 years, finance officials noted.
What's more, local sales taxes for the first two quarters of 2008 have declined in recent years and are expected to drop even more.
Auto sales, which typically make up 20 percent of City sales taxes, were off last year and are expected to continue to slump, Swindell said. In addition, the City expects to lose another one million dollars in sales taxes while Santa Monica Place is closed for reconstruction.
Shops and restaurants across the city will also likely ring up fewer receipts, as the local hospitality and tourism industry is expected to take a hit.
Hotels, which were at near peak capacity through much of 2008, can expect to see fewer visitors as financial woes spread to Europe and Asia and foreign currencies weaken. (see "Hotels Prepare for Tough Year," January 13, 2008)
With the euro and yen falling against the dollar, "the currency advantage for foreign visitors isn't there anymore," York noted.
Some of the slack in Downtown business might be taken up by a built-in clientele of Westside residents, he said, "but that doesn't bring in as much income as visitors."
To keep lean times from turning mean, the City of Santa Monica took steps early last year to protect its assets by selling off $45 million of deteriorating corporate bonds, including its investments in Lehman Brothers and Washington Mutual, before the credit crisis forced those firms into bankruptcy.
BUSINESS COMMUNITY LEADERS admit that strong economic head winds in 2009 will make it difficult for local commerce to move forward. But business people can help each other ride out the storm, they say.
"We have a strong community, and we've been through these things before" said Laurel Rosen, president, CEO of the Santa Monica Chamber of Commerce. Still, she added, "perhaps this is worse than we've seen in a long time.
"We've heard about what's wrong, so we don't need to hear about it again," Rosen said. "We need to move forward. The big emphasis really has to be to stay local and work together."
That means looking for creative marketing and business strategies – networking, partnering, bartering, trading – doing "whatever it is we have to do" to maintain Santa Monica's competitive edge, Rosen said.
The trick will be how to minimize the effects of a national downward trend.
Most analysts now agree that the nation's economy peaked in 2007 and has been sliding downhill ever since. But the warning signs were largely ignored until late last year when rapidly souring stocks, a credit crunch and overall financial chaos sent bankers and big business scrambling to Washington for help.
UCLA Anderson Forecasters predict the nation's real gross domestic product (GDP) will show a 4.1 percent decline for the final quarter of 2008, and continue to drop 3.4 percent and 0.8 percent during the first two quarters of this year.
Accompanying the slowdown, the Forecast says, will be rising unemployment that lasts through 2010, with national jobless figures climbing from 6.5 percent to 8.5 percent over the next 12 months.
Overall, there is little in the Forecast to inspire confidence in the immediate future.
"It sounds awful and it's challenging," York said. "But in the end, we, especially those of us in Santa Monica, have a lot of strengths."
“Reflecting on the Past to find Solutions for the Future” will be the theme of the Santa Monica Chamber of Commerce's State of the City breakfast January 30 at the Eli and Edythe Broad Stage. Guest speakers will include UCLA Anderson economist Christopher Thornberg, Mayor Ken Genser, California State Controller John Chiang and City Manager Lamont Ewell. |
|
|
"When everybody is having trouble, we feel it too." Rob York |
"Right now, the economy is being driven by fear on the part of both investors and consumers." Edward Leamer |
|
"The big emphasis really has to be to stay local and work together."
Laurel Rosen
|
|
