Outlook

By DANIEL TAUB Staff Reporter Despite escalating debate over secession from the city of Los Angeles and mounting public transit problems, San Fernando Valley business leaders are optimistic that 1998 will be a strong year. Low unemployment rates, a bullish stock market, increasing international trade, a recovering real estate market and low interest rates are among the factors cited by executives and economists interviewed by the Business Journal. Business leaders say the Valley in particular will benefit from the boom in entertainment and the entrepreneurial high-tech world. The Valley is home to Universal Studios Inc., Walt Disney Co. and Warner Bros. while Chatsworth and the Highway 101 Corridor west of Woodland Hills are centers of high-tech manufacturing. “Basically, 1998 should be outstanding one of the best years in many years,” said John Rooney, president of the Valley Economic Development Center. “Demand for financing is going to be up, real estate is going to be up residential and commercial. Entertainment is still booming.” With the Valley’s economy growing, business leaders are likely to concentrate more heavily next year on longer-term issues, such as secession from the city of L.A. and ongoing traffic problems. As for the Valley’s economy, different parts of region are growing at different rates. Business leaders and economists say the Valley’s smaller municipalities such as Burbank will continue to have a slightly stronger economy than the vast majority of the San Fernando Valley that is a part of the city of Los Angeles. “Glendale and Burbank have been growing like it’s going out of style,” said Stephen Cauley, an economist with the UCLA Anderson Business Forecast who has studied the economy of the San Fernando Valley. “The other portion of the Valley has sort of lagged behind.” Cauley said the reason for the growth lag include a concentration of defense businesses that have fallen on hard times in recent years and an onerous business tax structure. But Rooney said that space in Burbank and Glendale is limited, and with the entertainment industry still growing, the rest of the Valley stands to benefit. “Businesses are expanding into the rest of the San Fernando Valley,” Rooney said, adding that a new group of sound stages is set to open in Canoga Park across the Valley from the heart of the entertainment industry. One indication of the continued growth is the number of motion picture production days in the Valley. The Hollywood-based Entertainment Industry Development Corp., which issues film permits in the city of Los Angeles and other parts of L.A. County, expects a 13 percent increase in the number of production days for 1997 in the Valley. That’s based on 40,186 production days by mid-November, compared to 43,982 production days for 1996. Favorable predictions for the coming year also spill over into other industries. Marc Goldman, vice president of marketing for Apple One Employment Services, a Glendale-based permanent and temporary employee placement firm, said the demand for workers indicates strong growth about even with other parts of the L.A. basin. “The Valley is certainly keeping pace with the rest of the region,” Goldman said. “From our perspective, it is an excellent market right now in terms of companies looking for talented people.” So excellent, Goldman said, that Apple One plans to open two to three more locations in the San Fernando Valley in the coming year in order to serve an increased demand for workers. The company already has six offices in the Valley that place employees in managerial, clerical, administrative, accounting and information technology positions. Goldman added that the number of permanent placements by the company as opposed to temporary placements also are a good indicator of growth. Revenues from permanent placements have doubled each year in the past two years, he said. “There’s no indication right now that 1998 will be any different,” he said. Rick Dinon, senior vice president with Woodland Hills-based 20th Century Insurance Co., said while the insurer’s Valley business is very developed, 850 new vehicles are being added here each month. “We are getting a significant amount of new-business applications out of the San Fernando Valley area,” Dinon said. There are also other indications that the Valley is on an upswing. For example, violent crime a factor in businesses deciding where to locate was down 8.3 percent in the Valley in the first nine months of 1997 from the same period last year, according to the Los Angeles Police Department. Also, the office vacancy rate in the third quarter of this year was 12.5 percent in the San Fernando Valley below the 15.9 percent office vacancy rate in Los Angeles County as a whole, according to the Economic Development Corp. Although the Valley’s economy in 1998 is expected to keep growing, there are significant issues ahead. One is the campaign to secede from the city of L.A., which was reinvigorated by the passage of Assembly Bill 62. That measure eliminates the City Council’s veto power over a secession effort. Leaders in the secession movement say they will appeal to the business community’s aggravation with the city of L.A.’s high-priced tax structure. John C. Cushman III, president and chief executive of Cushman Realty Corp., said at VICA’s business forecast conference that the tax structure of smaller Valley cities, such as Burbank and Glendale, will continue to offer a challenge to the rest of the Valley in retaining businesses. “The tax structure is in direct conflict with other municipalities,” Cushman said, noting that the conflict could help fuel the secession movement. Another challenge will be in improving the area’s public transit system something that business leaders say has remained underdeveloped even as other parts of the city have been given new subway lines. “How can the San Fernando Valley achieve a transportation system that meets the needs of the residents and the people who work in and around the San Fernando Valley?” asked Steve Lew, vice president of Universal Studios and chairman of the Valley Industry and Commerce Association. The future of the Valley’s defense industry also is uncertain, particularly because its last large, independent subcontractor Woodland Hills-based Litton Industries Inc. is often cited as a possible acquisition target. Litton officials did not return calls for comment. But Rooney said the defense industry has already reached its bottom, and could actually see improvements in 1998. “I think the San Fernando Valley’s had a terrible time, and I think it’s doing a lot better,” said Cauley of UCLA. “And I think it will continue to do a lot better.” Mayor Richard Riordan, during his “State of the Valley” address last month, also cited the Valley’s recovery from the quake as a sign of its economic strength. “The Valley is a key economic engine for Los Angeles,” Riordan said. “It’s a place where people showed incredible resiliency after the Northridge earthquake.”