Thomas Fire Fallout

Ash from the Thomas Fire may have stopped falling on Ventura County businesses, but the already-struggling local economy will be nursing the burn for some time to come. “The Ventura County economy was already weak before the Thomas Fire began,” Matthew Fienup, executive director of the Center for Economic Research and Forecasting at California Lutheran University, told the Business Journal. “We expect it to really exacerbate many of the economic problems we already had.” The largest wildfire in California history had scorched 282,000 acres and destroyed or damaged more than 1,200 structures as of Jan. 2, when it was 92 percent contained, according to the U.S. Forest Service. The remaining flames were inside the 440-square-mile burn area. The fire started on Dec. 4. The timing was particularly bad for small businesses, which on average bring in as much as 40 percent of their annual revenue during the holiday season, according to the National Retail Foundation. Some reports anticipate that small retailers in areas affected by the fires – namely those in Ventura County – will lose at least a fifth of their annual income. Smoke from the fire impacted businesses and shoppers as far away as Thousand Oaks, Moorpark and Camarillo, even though those areas were never in danger of the flames. “The timing of these fires in Ventura is going to be a problem for business owners, especially those in the tourist areas,” Denise Hsu Sze, a longtime insurance attorney currently of counsel at Merlin Law Group in Los Angeles, said. “They’ve now lost their biggest push around Christmas, if not the entire tourist season.” Still, the fires bring an opportunity for change, noted Elizabeth Haffner, an Ojai restaurant owner who is organizing a grassroots effort to promote recovery among the area’s businesses. In Ojai – and Ventura County more broadly – measures that have limited development have created tension between homeowners and the business community. “My goal is to have good communication between all the businesses so we can help each other answer questions and advise each other,” she said. “The community has really turned up in ways we haven’t seen for a long time.” Even slower growth The number of destroyed structures includes more than 500 homes in Ventura County, which has the fifth most expensive rents in the state, according to a report presented by Fienup on Dec. 18 to the Federal Emergency Management Agency. Vacancy rates for Ventura County rentals were roughly 1.7 percent in 2016; the average is around 5 percent, he added. The cost of living is pushing younger, working age adults who are in the prime of their productive life to leave the region in pursuit of other opportunities. “There’s no doubt that VC has had negative domestic migration for more than a decade – the Thomas Fire will accelerate that,” he said. “That’s not a good thing at all.” While it is still too soon to tell how bad the damage will be for the economy as a whole, the region’s retail sector has faced heavy losses already. “It’s tough to get our arms around the actual monetized economic impact, but from talking to businesses (it’s clear) that the impact is massive,” Bruce Stenslie, chief executive of the Ventura County Economic Development Collaborative, told the Business Journal. “People evacuated for the fire, so there was a lot of disruption.” The business interruption is a blow to the many part-time or contingent workers in Ventura County’s retail and hospitality sectors, Stenslie added. Even for small businesses that are back up and running, slow days at stores often mean employees are sent home early. Those lost hours leave them in a limbo; because they are still part-time workers, they do not qualify for unemployment benefits, but fixed expenses haven’t changed. “Just looking at retail and services, that’s 10,000 jobs.” Stenslie said. “They aren’t all out of work, but every business faced some disruption.” The damage is especially clear in Ojai, where tourism accounts for more than a third of the local economy. Key hotels in the region, including the Oaks at Ojai and the Ojai Valley Inn, have remained closed for more than a month. No tourists means lost income both for the hotels and the ancillary businesses that profit off the visitors who stay at them. “The locals are doing what they can, but that economy is hugely dependent on those room nights,” Stenslie said. “Those rooms are all empty.” Insurance Woes Navigating insurance coverage is one of the biggest challenges for businesses following a natural disaster. While generally there is no question as to whether direct wildfire damage is covered, compensation for revenue losses sustained due to evacuations – which are covered with business interruption or business income insurance – can sometimes prove difficult to negotiate with insurers. “The questions that arise regard assets and proof of business interruption,” Hsu Sze said. “Those are the issues that can shut businesses down.” For small businesses without sophisticated accounting systems, problems can arise even in seemingly clear-cut cases. For instance, one of Hsu Sze’s clients has yet to receive payment for property that was lost two years ago to a wildfire, as the insurer alleges that it does not have convincing evidence that the inventory inside and equipment surrounding the building belonged to the business. “If your accountant had been with you for the last 30 years and had been doing his work by hand, a lot of those records might have been destroyed in the fire,” Hsu Sze said. “Business interruption insurance is the key to getting businesses back up and running, but insurers are reluctant to pay it out too quickly.” On top of that, many businesses are underinsured to start with – a problem that they discover all too late. “That’s the only time they find out – when they need the policy,” she said. In Ojai, Haffner confirmed that securing money from business interruption policies has become an issue for some business-owners. “It really depends on the company and the policy, but it seems like insurance companies are trying to avoid paying the interruption of business,” Haffner said. “Navigating insurance has been a challenge for sure.” Moving forward FEMA and the Small Business Administration have been working to assess the damage in Ventura County. On Jan. 2, the federal government declared the wildfire a disaster, a designation that affords impacted businesses access to financial resources to help them recover and resume operations. In the meantime, the Ventura County Economic Development Collaborative and other programs are working on ways to provide businesses with loans and other types of financial aid. Business owners themselves have taken matters into their own hands; in Ojai, the number attending meetings for Haffner’s grassroots recovery initiative has grown at each subsequent date. A “shop local” campaign for fire relief could serve to get area residents who have opposed retail and hospitality development into Ojai stores. One longstanding issue has been the perception that there are no affordable businesses in Ojai, when in fact the range of restaurants, salons and retail stores runs the gamut from bargain to luxury. “I do see an opportunity to change some hearts here in Ojai,” Haffner said. “We really need to focus on getting the Ojai Valley out on the town and into the business community.” The entrepreneurial spirit that inspired the business owners to open their doors in the first place is an advantage in the post-fire fallout, Haffner added. As she builds out the executive team that will lead her group’s recovery movement, she is confident in the power of their collective skills. “You’ve got to problem solve all the time – you have to think on your feet,” Haffner said. “But there are so many amazing, talented people here with so much to offer.”