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Blazes Not Expected to Ravage Economy

Despite their size, the fires are largely on the fringe of the region's business activity

October 30, 2003|Marla Dickerson | Times Staff Writer

California's deadly wildfires have snarled deliveries and air traffic, kept employees off the job, dampened retail sales, destroyed some businesses and disrupted others. But the fires aren't expected to have a significant, lasting effect on the state's $1.4-trillion economy.

Much of the property damage so far has been limited to outlying residential areas, leaving commercial centers largely untouched and blunting the fires' effect on commerce. Critical infrastructure remains mostly unharmed. In addition, insurance firms will cover much of the damage for the more than 2,400 homes and businesses lost so far.

"As big as these fires are, they are really touching only the fringes of the economy," said Steve Cochrane, a regional economist with, a research and consulting firm. "It's devastating for the homeowners who have been affected. But it doesn't hurt the larger economy that much."

Indeed, some experts say insurance proceeds and a potential influx of federal relief dollars will pump some juice into the economy in coming months. Analysts at Chapman University in Orange estimate that destruction of 2,200 homes would lead to $1.1 billion in new spending on construction, home repairs, furnishing, clothing and other consumer goods as fire victims rebuild their lives.

Some state officials have said insurance claims from the fires would exceed the $1.7 billion in insured losses from the 1991 Oakland Hills fire.

Still, Chapman economist Esmael Adibi dismissed the notion that the most destructive fires in California history could end up being a windfall for the economy.

He noted that some insurance companies in recent years have declined to write policies that cover a home's full replacement value. Homeowners who are underinsured will have to use savings or take out loans to replace damaged property, meaning less money spent in other parts of the economy.

Meanwhile, communities already strained by California's budget crisis will be hard pressed to pay the tab for firefighters, police and other services related to the fires that have killed at least 20 people and ravaged about 634,000 acres of Southern California in the last week.

Although no one knows the full extent of the economic toll, traffic jams, foul air and other fallout from the tragedy will result in all manner of unexpected burdens for businesses and residents, from lost wages and productivity to health problems and extra cleanup costs.

"There will definitely be some short-term negative effects," Adibi said.

In San Diego County, for example, the site of the massive Cedar fire, a number of businesses have seen their operations disrupted. Sea World was closed Tuesday and Wednesday because of concerns that poor air quality would harm patrons, said Salvatore Giametta, spokesman for the San Diego Convention and Visitors Bureau.

The U.S. Postal Service had similar worries about its mail carriers' health, so on Wednesday it suspended mail deliveries in 26 communities in the San Bernardino Mountains, the Antelope Valley and the Santa Clarita Valley.

The fires also were cited as a factor contributing to a 0.9% dip in chain store sales in the third week of October compared with the previous week, according to a report from Bank of Tokyo-Mitsubishi.

With ash falling from the Grand Prix fire raging a few miles to the north, fewer shoppers wheeled into the Ontario Mills mall over the weekend, according to spokeswoman Sue Palacios. "People were just glued to their TVs wanting to know what was going on," she said.

Some businesses, however, are reaping an unexpected windfall. San Francisco-based Sharper Image Corp. has seen a boost in sales of its $350 air purifiers in Southern California, said spokeswoman Aimee Cooper. Meanwhile, the 105-room Baymont Inn & Suites in Ontario has been filled to capacity since its opening last week, in part because of heavy occupancy by firefighters and evacuees from fire-threatened communities.

Hoteliers in the hard-hit resort areas near Lake Arrowhead aren't likely to be so fortunate. Tourism experts say travelers probably will avoid that mountain region for the next few months, with the images of the alpine scenery being devoured still fresh in their minds.

"There will be an immediate and profound effect on tourism," said John Poimiroo, a Sacramento-area consultant and former state director of tourism. "People don't want to be in the way of a disaster recovery."

Yet the effect on California's overall tourism figures is still likely to be minimal, Poimiroo said. He noted that most of the visitors to those mountain retreats are California natives who will simply go elsewhere in the state for a weekend escape.

Although the tourists may stay away, most full-time residents of those stricken communities in the San Bernardino Mountains probably will return and rebuild, said analyst John Karevoll of DataQuick Information Systems.

Karevoll said he had studied the effect of natural disasters on real estate values in California and found essentially no harm over the long term. While some people may initially put their properties up for sale, driving down values, prices typically recover within a couple of years at most, he said.

"It bobbles and shakes for a while, but then it goes back to normal," Karevoll said of real estate activity. "People are really motivated to live in those mountain communities."

Karevoll ought to know. A resident of Running Springs, which was threatened by the Old fire, Karevoll evacuated on Sunday and still has had no word on his home. He said he was determined to rebuild if it was gone. But his biggest challenge may be finding someone free to do the job because a building boom in the area has stretched contractors thin.

"It was taking up to a year to line someone up even before the fire," Karevoll said. "So it may take a while."


Times staff writer Leslie Earnest contributed to this report.

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