Monthly Archives: May 2014

General

Publisher’s Message-Spring 2014

Published by:

Joe Brady Headshot 1

I wish to welcome our current, future and long-standing subscribers and sponsors to the 53rd edition of the Bradco High Desert Report, the first and only economic overview of the High Desert region, covering the Northern portion of San Bernardino County and the Inland Empire.

As a part of our history, it was in late 1992 when Ms. Cele Underwood, then an associate with The Keith Companies, a company that we shared office space with, suggested that, with all the developer bus tours that we had completed and seminars in Southern California, we create a newsletter. Having no knowledge of how to do a newsletter, I contacted long time mentor and friend, Dr. Alfred Gobar, the then Chairman of Alfred Gobar Associates (Brea).

With Dr. Gobar’s continued encouragement to take a leading role within the High Desert region, we moved forward with the first newsletter that ever covered the High Desert region, the Cities of Adelanto, Apple Valley, Barstow, Hesperia and Victorville; the first one to properly portray its economy, and its great assets.

Since then, Dr. Gobar has continually supplied some of the greatest articles to the Bradco High Desert Report since its inception in May of 1993. He has contributed articles to the 52nd edition, and due to his recent bout with cancer, was unable to prepare an article in his normal manner.

What he did was something that I have never seen and, if you know Dr. Gobar and if you heard him speak, not only does he have great humor, he is one of the most intelligent people I have ever had a chance to work with. He sent us up a speech that he gave to a group called Lambda Alpha, Orange County Chapter.

Lambda Alpha is an honorary society for the advancement of land economics. LAI provides a forum for the study and advancement of land economics where the “winnowing and sifting” of ideas takes place in an atmosphere of mutual respect.

I am honored that I am the only commercial broker in the Inland Empire that has ever been inducted into this group. One of my sponsors was Dr. Gobar.

I have heard Dr. Gobar speak over 75 times. When we spoke about his pending cancer, and his desire to continue to write, he did suggest that he had a speech that he gave that was very special to him, and it was even more special that he gave it to Lambda Alpha in Orange County and that he actually prepared this speech (I very seldom ever saw him bring notes into a speech because of his ability to remember numbers, etc.). With this speech someone in the audience decided to record this speech and they transcribed it as they felt that many of the items that Dr. Gobar discussed (this was nearly 21 years ago) would eventually come true. Ironically (not ironically for me) it didn’t come true.

What is most interesting about this, if you read his speech and the questions and answers, is how many things have happened that he predicted when he wrote this nearly 21 years ago in 1993.

I hope that you enjoy how we have readjusted this edition of the newsletter to include one of Dr. Gobar’s speeches.

On a sad note, and during this past February, we lost a dear friend to the High Desert. One of the nation’s most renowned homebuilders, a gentleman who put the High Desert on the development map and a person who I served with on the Building Industry Association/Baldy View Chapter for many years, Mr. Ira C. Norris passed away from his bout with cancer. Ira began building in the City of Victorville with his project called Liberty Village in late 1970s when the prime interest rate was at its highest level (ever) and his homes were sold at $49,990.

Mr. Norris was a leader. He was a visionary. He was a person who never forgot who he was and he was a person who everyone admired. This edition is dedicated to the memory of Mr. Ira C. Norris. Ira, thank you for everything that you have done. Thank you for the opportunities that you had forwarded to individuals such as myself and many other individuals who you helped in the homebuilding industry. Mr. Greg Norris and Mrs. Nancy Norris, our prayers are with you and your family.

To keep my opening comments as short as possible, I would like to thank each and every one of our article suppliers who continually make the Bradco High Desert Report the most unique economic overview of the High Desert, the longest standing publication, the one with the most amount of subscribers.

While we have gotten away from publishing our report on a quarterly basis due to the protracted recession (depression), we continually see improvement in the High Desert economy and we look forward to an ever-improving 2014 year.

Lastly and most importantly, if you wish to continue to receive a copy of the Bradco High Desert Report, any statistical reports, op-ed articles that we post to our website for free, please register at our website at www.TheBradcoCompanies.com/register.

I always welcome people’s emails jbrady@thebradcocompanies.com, your phone calls 760.951.5111 Ext 101 and any comments that you have on how we can continually improve our content and our distribution. Thank you.

Economy General

Our Economy in 1993-Remarks Before the Orange County Chapter of Lambda Alpha, an International Land Economics Society

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The Remarks below do not necessarily reflect the philosophy or moral values of Dr. Gobar, but have been set forth in an exaggerated form to raise the point of over-regulation and the free market system and our need to work to reduce regulations and stimulate the revitalization of our economy.

By Dr. Alfred J. Gobar
Chairman
Alfred Gobar Associates

This is the talk I gave to Lambda Alpha a little over 21 years ago. Because our speakers are usually dull, I tried to present a humorous discussion to make people laugh. To my surprise some of the audience took notes throughout, someone recorded the talk, transcribed it, and allowed me to edit for accuracy – which I did. It’s scary how topical this charade turned out to be some 21 years later. The question and answer was not part of the humorous presentation but followed immediately after.

I define some of our most pressing economic/political problems as being related to education, law enforcement, budget deficits, and health care. These problems are manifest in what many perceive as overly high taxes, over concentration of power in the hands of government at too high a level, and an unfavorable regulatory environment. The most effective economic tools to address these issues would mobilize the market system and the initiative of individual consumers and businessmen to create more constructive output and less “heat” with less input. To that end I will outline several hypothetical policies that I think deserve consideration even if expressed in a light-hearted and humorous form, some of which deal with local economic policy and others of which deal with policy formation at the national level. A brief tongue-in-cheek discussion of some of the more salient of these is as follows:

Deterioration of the schools has led to consequent enthusiasm for a vouchersystem to create competition between private and public schools, therefore stimulating public schools to improve. A voucher system, however, may not be easily achieved because of the entrenched strength of teacher unions and other advocates of the monopolistic public education industry. A local option policy that could address this issue as well as the law enforcement issue is as follows:

  1. Decriminalize the sale of narcotics-especially marijuana and cocaine – and make this a regulated industry within the free market system.
  2. Allow local agencies to establish a tax rate on dope sales that occur within their jurisdictions and commit tax revenues generated from this industry to the support of local education with no reduction in subventions from state agencies to local schools as a result; i.e., create public sector competition.

This policy would have several benefits, some of which are as follows:

  1. It would free law enforcement agencies from a good deal of their commitment to the enforcement of the war on drugs and permit them to concentrate on important factors such as seat belt law enforcement, motorcycle helmet laws, and parking violations.
  2. It would reduce state expenditures to maintain prisons – about one third of incarcerated persons in California are there for dope-related reasons.
  3. It would allow local communities to compete with one another in terms of the quality of schools subject to their willingness to devise tax policies that are optimal in terms of generating maximum revenue – taxes high enough to generate revenue but not so high as to discourage dope sales within the community. In essence, the communities would have to compete with one another in terms of tax structure and eventually in terms of the quality of their schools, the improvement of which would be derivative of the availability of additional funds from the local option dope tax.
  4. As was the case before the Serrano decision, the result would be increase in home sales and, therefore, stepped-up property tax values for housing in the communities that prospered under this system.
  5. It would also provide entry-level jobs for young people who are now criminals and would introduce them to the concept of competition on some basis other than brute force.
  6. It would also contribute to amelioration of one of our national problems – support of the agriculture industry – by encouraging farmers to grow marijuana as a cash crop.

A similar local option alternative with regard to prostitution would be desirable in terms of providing police with more time to devote to real crime – seat belt andmotorcycle helmet enforcement. A similar taxing structure could be implemented producing the following benefits:

  1. Noncompetitive motels constructed during the boom in hotel/motel construction could be converted to a more profitable use, generating increased property taxes.
  2. The spread of various and sundry sex-related diseases could be controlled by periodic health inspections by the bordello staff.
  3. Competition could be established on the basis of quality rather than the size and the strength of pimps – a lesson in market economics for young people who would otherwise be thugs.
  4. It would provide entry-level jobs for young ladies who might otherwise be reduced to similar efforts to be rewarded by aid to dependent children.

Another statewide recommendation along the same general line would be to establish a “strip” of casinos and related businesses ten miles north of Yermo, stimulating local employment in the High Desert where there is a deficit of jobs, capturing revenues that would otherwise flow to Nevada, enhancing property values in San Bernardino county ;minimizing air pollution through reduced automobile traffic to Las Vegas, providing entry-level jobs for young people who would otherwise be criminals, and just generally kicking the daylights out of Las Vegas’ strong economy.

Another tax policy that would have an effect on the educational field and, therefore, on local level government constraints, would be a surtax for households with children. Regardless of whether a household is on welfare or not, I propose a 2.0 % surtax over the basic income tax (federal and state) for households with one child, an additional 5.0 percent for a second child, and additional 10.0 percent surtax for the third child. These tax rates would be doubled if the children happen to be illegitimate. This would tend to discourage production of children and, therefore, pressure on schools. It would also generate revenues to help compensate for the short-falls in income related to “dead beat dads.” I expect it would also have a beneficial impact on the budget for aid to dependent children. A variation on this theme would be a similar surtax (the rates not yet determined) on divorced people who have not remarried. Disaggregation of households tends to be economically inefficient and create a dependency class.

In order to control demand for college education at the state universities, junior colleges, and the University of California, establish a similar surtax at about a 5.0 % rate over the combined federal and state tax for individuals or members of families in which one or more individuals hold degrees or have been significantly educated by one of the public institutions defined. This tax would have the finite life determined by aggregate collections that will eventually match the cost of the education plus interest on the unrecovered balance until fully paid off. Beneficial results of this policy would include:

  1. It would reduce pressure of demand on what is essentially now a free service. This will result in a reduction in state budgets for higher education, as well as for levels of funding at the local level for junior colleges.
  2. It would encourage graduates of public institutions in California to move somewhere else to work and, therefore, graduates of schools elsewhere in the country to move to California, creating a turnover of residential real estate assets and continually stepping up the property tax base without having to set aside the constraints of proposition 13.
  3. I think this alternative is significantly better than some type of forced public service such as that being recommended by Slick Willie. In fact, I am a little surprised he had the courage to recommend a civilian draft when he took such strenuous steps to avoid the military draft.

There is a good deal of general resentment to the high pay scale and excellent benefits accorded public sector employees. As a result, we recommend several policies that would bear on this issue. Among them are the following:

  1. Reduce public sector pay scales to a level such that when a public sector job becomes available, no more than ten qualified applicants show up. The long lines of applicants for new fireman positions attest to the likelihood we are over-paying for this type of position.
  2. Immediately allow private firms to compete directly with the post office and require the post office to not only be self funding in terms of revenues but also to pay a shadow property tax in order to create a level playing field. This may result in increasing postal rates which would in turn induce more effective use of electronic mail, maximizing the use of our electronic infrastructure and reducing the use of our physical infrastructure to distribute hard copies of various types of materials. The side benefit of this would be an increased number of jobs for high tech people who were made redundant because of the cessation of the cold war.
  3. I would also impose a surtax, calculated as a percentage of the combined federal and state income taxes on retired employees of public agencies, based on the differential between their retirement income and other cumulative benefits and the average benefits of retired people form the private sector. This would encourage public sector employees to save for the future, which would address another of our persistent economic problems – inadequate savings levels. It would also make much of the general public substantially happier than they are currently. The surtax, by the way, should be higher for those public sector retirees who are double dipping, enjoying wallowing in more than one public trough.

By raising the registration fees on older cars, we would, in essence, destroy their value, making it more feasible for industrial polluters to purchase old cars and destroy them in order to meet pollution targets. It would also take a lot of poor people who have no insurance out of cars and put them in public transportation, which currently is highly subsidized and achieves sub-optimal ridership. This is, in essence, a tax on poverty and irresponsibility, which should reduce poverty and make people more responsible while at the same time reducing pollution inexpensively and aiding our public transportation investment to better perform.

In addition to the benefits to the healthcare industry derivative of dope users living a more normal life and, therefore, being less subject to disease, specific policies that address the high cost of providing medical service to all include the following:

  1. Establish a two-tier medical industry, the lower tier of which would be staffed by qualified professionals who do not meet California medical bar standards but who could qualify in another country in order to provide medical service to indigents, illegal immigrants, and others who now put substantial pressure on medical resources, demanding the same quality of service as provided more affluent sick people. Dr. Kwan can only do so many open-heart surgeries a day. If Dr. Gonzales were to do a few (albeit not quite as well), more people would get surgery and the cost of this procedure would be reduced. We now have a two-tiered demand system – those with insurance who all want the “best” medical attention and those who are excluded from any medical care.
  2. Specific facilities would have to be developed either here or in nearby locations in Mexico to accommodate the second-tier medical market.
  3. Staffing for the second-tier medical market could also be generated by lowering professional standards – i.e., a more liberal level medical bar for people who can’t pass licensing requirements as they now exist. These practitioners would be restricted to the second tier of the consumer population, i.e., make the supply subject to variation in quality to match the variable quality and capacity of demand.
  4. Two-tiered service levels are not unique. Recently, the airlines went to a two-tier pay scale for pilots and other crucial professionals because of the competitive impact of deregulation. If we deregulate the medical industry to some degree, we might also be able to enjoy wider distribution of a broader quality spectrum of services at a range of costs. Specific diploma mill medical schools could be created to train second-tier professionals, if necessary. My grandfather was a respected physician in North Orange county for over thirty-five years on the basis of what amounted to about two years of medical training at Rush Medical College in Chicago before the turn of the century.

I would immediately, of course, allow for full deductibility of the purchase of productive assets. Machinery purchases, construction of new facilities, etc., for manufacturing firms and all businesses would be written off in the year in which they were incurred, causing a short-term reduction in taxes because of the accelerated depreciation but also contributing significantly to the development of new infrastructure and facilities, as well as stimulating the capital goods industry.

In order to encourage savings and reinvestment, we should eliminate any income tax (federal and state) on interest income or dividend income, as well as income generated as a result of working more than 40 hours a week – a special benefit to entrepreneurs (I am preparing this on a Sunday). As a matter of fact, I am not getting paid very much today, either.

There should be no tax on the proceeds of the sale of a business to its employees in order to foster broader ownership of productive assets (as distinct from homes) and stimulate more intense gut-level awareness of the concepts of entrepreneurship.

Because entitlements, particularly for older people, and for medically impaired people, consume such a large proportion of our gross domestic product, some thought should be given to each of the following potential policies:

  1. Instead of using extraordinary efforts to sustain the viability of alcoholics, dope addicts, and others, we should establish country club facilities for those people in which they would have custodial medical care and ample availability of the mind-altering substance of their choice. The effect of this would be to accelerate their demise and, therefore, minimize their drain on society, while at the same time giving them a happy guilt-free life – what little of it they have left.
  2.  A Kervorkin bonus concept would pay a bonus to hemlock society euthanasia assistors for assistance provided to those who truly wish to cross over. The bonus would be inversely related to the age of the client. Bonuses paid to euthanasia facilities for clients in their sixties would be substantially larger than bonuses paid with regard to services provided to clients in their eighties in order to reduce the number and extent of old people drawing down entitlement funds. Similar bonuses for abortion (less likely to be an issue because of policies described above) would minimize pressure of demand on elementary school facilities, cost of aid to dependent children, etc.

An income tax surtax based on age would also encourage people to live shorter lives partly out of frustration. A sliding scale income tax that increased every year after age sixty-one would be a useful device to encourage people not to live too long. A variation on the surtax that seems to be productive would be an exemption from the surtax for all people regardless of age who are still employed on a day-to-day basis and, therefore, not putting as much pressure on the entitlement system.

Since dividend and interest income are taxable, older people would be encouraged to save for retirement rather than to rely on entitlements subject to a tax and surtax.

No-fault workman’s comp in which the beneficiaries would be restricted to access to the second-tier medical system might also be beneficial by putting an overt price on medical service, not in terms of its cost, but in terms of its relative quality.

It could be argued that removal of the concept of depreciation as an income tax consideration, as well as exemption of interest and dividend income from taxation, would reduce public sector revenues. These reductions, however, will be accompanied by a reduction in demand for public services inherent in the policies described above, as well as an increase in revenue from other sources – a dope tax, surtaxes on various sectors, and an expanding economy. Many of these policies exhibit the crystalline logic of reducing demand at the same time as we increase resources – a combination that should improve everybody’s standard of living – except for a few public sector retirees and some really old people who don’t work, and perhaps some young ladies who don’t know how to spell contraception.

My initial thought to addressing some of these problems occurred many years ago in conjunction with my plans to develop an alcoholic retirement home in Mexico in which the guests would sign over their entire estate to the foundation in return for which they would receive an unlimited supply of the beverage of their choice daily along with some type of custodial care to minimize the negative impacts of hangovers. The guests would be considerably happier. Their life span would be significantly reduced. The foundation would make a lot of money because of the reduced life span and it would provide jobs for semi-alcoholic doctors during their retirement years.

The concept of allowing employees to purchase businesses and farms with what amounts to tax deductible dollars that do not generate taxable income to the seller establishes a basis for transferring productive assets to the next generation and allows for the possibility of creating 100.0 % inheritance tax; i.e., crucial assets could be transferred essentially tax free and the monetary assets would either be commandeered at death or donated to a private university or college or other charity which would provide an alternative (and more efficient) source of human services. Heirlooms and residential estate assets could probably be excluded from the 100.0 percent estate tax concepts. In addition, the kids could keep us on the payroll so that we could avoid the aged surtax for most of our life.

The litany of benefits derivative from these policies is virtually endless. My energy, however, is not.

Actually, there is a seed of merit in some of these ideas. They represent a reversal of conventional wisdom that the solution of problems is more regulation and more restrictions while, in fact, the solution to most problems comes from mobilizing each individual’s energies for his own best self-interest and the use of energy to create solutions rather than to resist or comply with regulation.

Dr. Gobar Also Responded to Specific Questions About our Economy as Follows:

Q. There has been a lot of talk lately that economic summits are popular, and there has been talk of at least two economic summits in this County. Would you share with the people in this room, seriously, what you think an economic summit could do and, if you could wave a wand and make changes, what recommendations would you make to summit attendees about things that need to be changed in this County? Specifically, in the State and in general.

A. It’s really hard for me to make irresponsible recommendations as I did before, but I think the bulk of the problems we have in Orange County and Southern California’s economy that anybody can do anything about would be resolved if we had a regulatory environment that wasn’t innately hostile to business, and I think that involves certainly workman’s compensation – not only in reality when you’re looking at the workman’s comp for a roofer being 50% of what he’s paid – that raises the cost of a lot of things and makes it difficult to do business, but also in terms of the symbolism (not that I believe that much in symbolism) that basically the employer is a victim and is a giant cow to be milked. I would really lobby hard to get the tort lawyers put where they should be – well maybe not completely where they should, but close – and do something about regulation; and I think that the people that go to a summit tend to be people who are prominent and tend not to want to say things that will come back to haunt them. I no longer have that concern. You need people who are basically not afraid to say, “Screw you, this is basically what is happening.” I don’t think the business community as a whole, because of our paranoia about regulations, is really willing to come out and be blunt with people about what is wrong with the regulatory system. I think the regulations are much more crucial than a lot of stuff that we talk about, and what I am afraid of is we will have summits, we’ll create committees, we’ll get a whole bunch of other people to stand around and hold hands and jump up and down and shout about things and write white papers, and that is just incredibly wasteful. I really think instead of building more agencies and committees and groups, we should work at destroying agencies and committees and groups and regulatory things that interfere. That is probably the most significant benefit I could see from a summit. If someone should get through to Willie Brown and whoever that there are a large number of people in California who do listen to Rush Limbaugh and who buy his book and may not agree with him, but really kind of believe in freedom rather than solving problems by increasing regulation. We have had a pretty severe recession and it’s concurrent with the restructuring of the economy and most of you haven’t heard me talk lately – look up Joseph Schumpeter’s book, Capitalism, Socialism, and Democracy and read it. During thi recession, you know the only category of manufacturing employment that has grown in some parts of Southern California has been apparel manufacturing, which is a third-world industry. If we can have growth in a third-world industry in the environment we have now – what could we have if every business person either had the disdain for regulations or the ability to side-step regulations that are a typical characteristic of apparel manufacturers. By and large, the growth in jobs in apparel acknowledged by the EDD probably represents less than half the true growth in jobs because so many of them are underground. That, I think, is a significant indicator of the underlying strength of Southern California’s economy that is being hampered by regulations here, and a lot of us are not physiologically adaptive to conceiving of ourselves as a mixed third-world and first-world economy in one County. We just can’t deal with the fact that a larger and larger proportion of our economy is potentially a third-world economy. Hong Kong’s got a lot of rich people.

Q. There is some speculation that there is tremendous demand for things like housing and that banks really do have money, but we are not getting those two together. What recommendations would you make in terms of how to get projects financed?

A. I think the banking system (I’ll probably insult a few bankers) . . . I think the S&Ls have managed to shoot themselves in the foot, and they will never come back to doing what they did before. I’m on the Board of a fairly good-size S&L, and we haven’t made a construction loan in three years and, historically, that’s what we did. Now what we do is buy paper discounted from other S&Ls so they can meet their liquidity requirements. We are having record profits, record profit ratios, etc. It’s a wonderful business, but we’re not doing what we were set up to do. The commercial banks are so thoroughly regulated now that a guy in this room and I were trying to borrow some money. In this case his net worth is insignificant. I called a couple of my banks and said if get a Mickey to sign with me and they said, “Well despite that, we might loan you the money,” but the interesting thing to me was the chairman of a bank who I know real well said, “I won’t make you a real estate loan, Al, but if you’ll write me a side letter that guarantees you won’t encumber the real estate, I’ll make you a personal loan, unsecured.” That’s frightening! Which to me means that the commercial banks are not really functioning very well in providing construction financing. My doctoral dissertation dealt with the evolution of Small Business Investment Companies, and my conclusion was that it would never amount to anything. As a matter of fact, it really hasn’t, but I like to look at the way the financial system changes. I think just like when you get a heart blockage, the system will find a way around the banks and the S&Ls and will begin to direct loanable funds to where there is a high yield. I was talking to a group of homebuilders yesterday morning, and they said, basically, from nontraditional sources their construction loans are costing 18%. A prime rate of 6% in the banks meant you should get a construction loan at about 8% for a pretty good borrower; but, in fact, in the real market, they are paying 18%. I think the money will eventually follow the yield. It will eventually find a way around the over-regulated financial sector, and I expect to see a non-regulated surrogate for the banking system to overcome what Mickey and I talk about a lot from one of the newsletters he forces me to read on the “socialization of credit” that has occurred in the S&Ls and the banks. If we socialize credit, it becomes inefficient. By the way, one of our local Orange County Republicans/Clintonites made that suggestion at the economic summit.

For those of you who find that interesting, Kathryn Thompson made that recommendation, and I think it was after talking to the good doctor about his white paper on ways in which we can develop some financing opportunities.

Q. It’s the first time I ever heard of construction interest being 18%. Capital funding is only so efficient. How can you afford to pay that kind of a premium for the cost of funds and create a product of housing or apartments efficiently? Are they just taking fees, no profits, capitalization?

A. Basically, the way they wind up paying that is they split the profit from the project, which would normally be 10% to 15% of the sales price. They split that with the lender one way or another for credit enhancement and it comes out to be that much or more, and lot prices for people who are doing construction loans now have come down, which gives them a little edge over the poor guy next door who is still trying to recover from the lot price he paid in 1989. So, you have a little room in there to do real well. An interesting thing we see – the projects that are being built on newly acquired lots at “today’s market price” are selling very well – Kaufman and Broad had a project in Rancho California next to a project that used to be called Red Hawk, and is now called Dead Hawk, which gives you some idea of what went on down there. Kaufman and Broad opened 55 units of prototypical Moreno Valley housing – 1,300 square feet, $121,000 in today’s market and sold 17 homes a week last summer. The reason is you back into their lot price – you know Kaufman and Broad – they didn’t pay that much – but I think backing in with my economics, they probably paid about $37,000 or $38,000 a lot and Red Hawk in 1989 was selling you tickets to a barbecue to be told about lots available for $80,000. Other developers are still battering it out on $80,000 lots, trying to unload their inventory. K&B can slide in, under price them, make a ton of money, and be gone. That’s the reason developers can afford high construction interest rates. It’s a two-tier situation also.

Q. RTC is offering the balance of the Dead Hawk lots for less.

A. In 1989, we told some of our clients – one of them comes here a lot – he’s a former student of mine – that we thought home prices in 1989 would have to come down by 26% to get the market energized again. In 1989 the market hadn’t really stopped, but you could see that it was beginning to stop and with the relationship between home prices, which was already highin Southern California relative to income – about twice what it should be nationally – would have taken a 26% reduction in price. Since then, for those people who are still working and who are not in the real estate business, household incomes have edged up and lot and home prices have edged down – not as much as people would like to have you believe because they talk about individual instances. In 1990 in Southern California, we had 5,887,000 occupied units (of which 826,000 were in Orange County). If we had the same ratio of jobs to housing occupancy in 1990 as it was nationally, we would have had 800,000 more occupied units because we’d need fewer jobs per unit. If we had the same ratio of housing ownership as was typical of the rest of the country, even at 5,887,000 units, we would have had 600,000 more homeowners than we had. What has kept the for-sale market going for the last three or four years is the kind of a half-life of this reservoir of potential first-time homebuyers who get into the system and then, through the food chain, let somebody sell a house at the far end. So there is demand for housing (not for apartments) right at the moment. We have seen apartment prices in Orange County come down by $20,000 a unit off of $80,000 which, by the way, is almost exactly 25%, which is kind of consistent with our theory. I don’t think they have come down quite enough yet because we are sill having this lack of ability to have transactions. If the buyer who has the cash to qualify for the loan wants a return on his cash (unique in apartment investing), the seller who bought the thing on a zero cash flow with a 7% cap doesn’t want to admit that he made such a giant blunder kind of tilted situation. We have gone from over 100 deals a year in apartments in Orange County down into the mid-20 deals a year because the market is not working smoothly because we are still in denial phases regarding the value that is supportable by rent incomes.

Q. We are being told regularly that businesses are leaving California in droves – particularly manufacturing businesses. Is that true?

A. I think that’s a crock.

Q. How do you really feel about it?

A. That’s an economic term. The Business Round Table did a survey a few years ago. It was a mail survey. They got back a response that indicated a whole bunch of manufacturers fully intended to move out of state, and that this was evidence of the fact that we are shooting ourselves in the foot. As I said earlier, we do have severe regulatory problems, but the regulations are such that if we really force somebody to move, we’ve really got to be onerous. What they do is tend to keep people from coming in or tend to keep people from expanding. I remembered seeing something in one of the ULI letters that come out every month which I thumb through to look for a number I could use in a speech – about a survey of manufacturers all over the United States and how many of them intended to move in a certain time frame and how many of them were going to move out of the city where they are located. The numbers from the national survey were much higher than the numbers from the Business Round Table survey, and the Business Round Table survey was a mail survey, which would automatically create a biased response from people who are upset about something. Because of the concern, I took the County business patterns and sat down and made a list of all the manufacturers (all the employers) in Orange County that employed over 500 people – not by company, but by type of company – the newspapers aren’t going to move, the hotels aren’t going to move, Disneyland’s not going to move, Knottsberry Farm’s not going to move, the hospitals are not going to move, major retailers are not going to move – you get down the list, we identified – I’ve forgotten how many firms – but I think 5% to 10% were likely candidates to move. They were people who made aluminum castings or people in the trucking business who needed larger, low-cost sites, but you are not going to see Kimberly Clark pick up and move because of the huge cost of relocating all of that heavy equipment which is already pretty well written off. They don’t have a high tax environment. I don’t really share the belief that we have droves of people moving out. What we don’t have is people moving in to offset the ones that would ordinarily be moving out. When I worked for Beckman Instruments and the Deutsch Co. and Microdot, we opened plants in other places. At Beckman, we had plants in New Jersey because we were looking for the technology and not much of anything else. This was a time when California was paradise, and Beckman was headquartered here, but we still opened plants out of state because it made good business sense. The Deutsch Co. didn’t because Alex Deutsch couldn’t find a place he could fly to in an hour out of state.

Q. Are you suggesting that the economic strategy of this County ought to be to viciously get rid of regulation and disincentives and then concentrate on attracting new people to come in because of the new environment.

A. I don’t even think you have to do the second one. I think if you could really create a less stringently regulated environment, the information would get out that this is not a hostile political environment and is, in fact, a positive environment and you wouldn’t really have to go the other way. In 1964, which is a little out of date now, I identified 18,000 major openings in the United States with over some number of employees (a reasonable number) and then I identified the number of local state economic development agencies, and it was basically about five agencies per major plant. That said if you were a really efficient or average efficient local development agency, you would make a home run maybe every five years. Some are going to be a lot more efficient than others, but I think there is an incredible amount of wasted effort that goes into the local promotion to cause job growth when the market system will cause it to happen if you get out of the way and let the market system do it.

Q. Just confirming – get rid of the regulatory environment and this other will take care of itself, then we are back to Willie Brown, the EPA. In other words, we come back to the polls again, don’t we?

A. Well, we come back to politics. It’s a basic political message – a basic political feeling that business is the cow that they get the money from and they are the taxing agency. You tax the business, the business has to pass it on to the consumer, the consumer doesn’t get mad because they don’t understand the message, and so the consumer continues to vote for the person who is making the business pay the taxes when, in fact, the business can’t survive without making a profit – so if they can’t pass it along, they go out of business. That basic set of economics has never been taught to people in high school. It should be.

Q. Do you put any credibility in some of the articles where they are talking about the administration making a deal with the Federal Reserve? In other words, when you lower the deficit, the Federal Reserve kicks down interest rates? Do you think that could possibly happen?

A. I don’t have as much confidence as Jim Doti in the ability of the Federal Reserve to control interest rates. They can ration credit, in essence, have created a system now through the banking system where it’s more productive as a banker to get the money from low-cost deposits or to get it from the discount window and put it into T-bills than it is to make loans to you and me. The bank doesn’t have to make the same capital requirements for that kind of investment as it does to make loans. The Fed has not so much driven interest rates down in the real market (credit card interest rates are still 18% or 19%), and we talked about construction loan interest rates. What we have done is take the measuring stick and say “Look-it, we really got rates low on the measuring stick.” The problem is that measuring stick doesn’t measure the credit economy anymore because society has had to go around the formal financial system. I don’t believe that Federal Reserve policies can sustain at the same time low interestrates, low inflation, and an expansionary monetary policy and the kind of fiscal policy we have had. I have been amazed that rates have stayed as low as they have, given the fiscal policy that we have here. We complain about rates being too high. One of the most instructive things to read on a regular basis is The Economist. The only thing you have to read is the last two pages. Every two weeks, they list international interest rates and growth rates and so forth. For a good part of the last year, we have either had the lowest or the second lowest interest rates anywhere in the industrialized world. I am amazed there hasn’t been more hot money going to the Deutsch Bank or someplace like that. I don’t think that we really have the ability to manipulate the system the way we used to. An economist by the name of Keynes, who wrote a book in the 1930s about how you use these techniques to manipulate the economy, referred to a concept called the “monetary illusion” which basically says the consumer is a dumb guy; if you give him more money, but it buys less, he thinks he’s better off. I think in 1968 we lost our innocence in this country, and the monetary illusion no longer works. We know if they give us more money, but if it buys less we’re worse off; and now I don’t think we have the ability to manipulate the credit markets nearly to the degree that an economist like me likes to think we should.

Q. Do you see them loosening the regulations on the banking system in this country? That is one of the things that came out of the Round Table that looked like it was attractive.

A. The question was did I think they were going to loosen the banking regulations. I really think they have to. I have a friend who is president of a bank and has been my banker for 20+ years. He is in his 50s and he says, “Yeah, I have been president of a bank somewhere for 20 to 25 years and never before in my life did I turn over the running of a bank to a 28-year-old regulator who told me what I could do everyday.” When I had to make a swing loan of about two months, I had the money in the bank to do it, but it was locked up in a CD. It was better to borrow the money than to cash a CD for accounting purposes, also. My banker told me that the file on that loan was two inches thick by the time he got through, and he said, “You know, when you first started dealing with me, you could come in and ask for a loan of the same magnitude, I would give it to you without going to a loan committee and all I had to add in there was a note with your signature on it. Now, I have to have a file, we have to have credit reports on you, we have to verify stuff. It’s prohibitive to make loans.” So, this bank is very heavily into passive investments and not making many loans. It’s a small bank for businessmen. That’s the kind of bank that the small business guy deals with, and it’s a pain in the neck for them to make loans. I think the regulators are going to have to get off their backs. Now, we’ve got some kid, who’d probably get a C in my finance class, who is telling us “you’ve got to do this and you’ve got to do that.”

Q. How do you re-regulate rather than de-regulate. In other words, we don’t want to go back to a mid-age, so where do we want to go with bank regulations?

A. What I think will happen is we’ll back off a little on bank regulations for political reasons because Kathryn Thompson and people like her who advise Clinton are saying, “Hey, you’ve got a lot of business people upset at the banking system.” But, I think what will happen is that we’ll set up a new set of institutions that are unregulated and do business that way. I have a friend in Las Vegas who builds homes whom I asked about how he got his construction financing. He said, “I can get a loan funded in less than 24 hours from a non-traditional lender, and if I pay it off on time, they let my wife and kids out. It works. They trust him; he trusts them; there’s not 45 lbs. of paper. When an institution in a capitalist or market driven economy fails to function, I think that the economy goes around it. I gave a speech to a group in Hacienda Heights; and when I was talking about it afterwards to a young Chinese lady, she said that she delivered over 60% of the business within five miles of where we were, didn’t have a business license, didn’t pay any income taxes, and just ignored the regulations because they say, “Well, I didn’t understand this stuff, we didn’t have to do this in Taiwan.” That, I think, happens. You read about Italy. Forty percent of the gross domestic product was underground, and I think a very large proportion of our economy is moving underground. We’ve seen a sharp decrease in taxable sales with this recession, and I think part of that decrease is real; but I also think an awful lot of it is swap meets and unreported sales tax. An example I use is the merchant works all day, sells $100 worth of stuff, pays the rent, labor, and so forth. He winds up with $6 or $8. In his other drawer there’s $8 that has to go to the government, and he stands there and thinks, “You know, I could double my profit by a simple process of not filing a piece of paper, and that’s a lot easier than sweating it out here all day to make $6. I can make $14 by not writing this thing on this piece of paper.” Now, I think there are probably massive amounts of under-reporting, non-reporting, since the penalties are not all that severe. One of my cousins used to be Chief Enforcement Officer for the State Board of Equalization. He’d probably disown me if he heard me say that I really fundamentally believe that the drive of a market system transcends the ability to regulate.

Q. I am going to give you two or three types of land uses. What I would like you to do when I give you the type of use is to give me a real short answer on where you think the future of that land use is in Orange County. General Retail?

A. General retail. Be very, very careful in general retail. There is a big revolution in retailing going on. We are going to need a lot less square feet per capita consumer than we used to. Because of subsidies from cities, we are building a lot more than we need to. This is something to be very careful about, and it’s very location sensitive because the most important thing about retail is location because you do have a monopoly, you could have a flourishing neighborhood center here and three miles away, you could have three dying; and yet their death wouldn’t kill this one.

Q. Anything different about auto sales.

A. We are going to have fewer auto dealerships or the cities that have sub-sized auto plazas are not going to realize their expectations because they were predicated on the belief that car dealerships in auto plazas do two to three times the volume that the average car dealership in the county does. When all of the dealerships are in an auto plaza, we are either going to have half as many or a third as many dealerships as we had before, or the average sales volume per dealership is going to regress down to what it was, and the sales tax give-backs that were predicated on sales may not match the front-end value of what was implied. There is going to be a lot of screaming and hollering going on. I think it is going to result in a lot fewer dealerships myself rather than the regression. The reduction in dealerships will make a bunch of old dealerships sites available.

Q. Office Space?

A. Don’t worry about running out. I used the real numbers on this. We were doing some work for the former employer or current employer of an awful lot of people in this room on this topic, and I won’t tell the part that’s proprietary to them. But I had to do some detailed background on our perceptions of Orange County overall. We expect to see (optimistically) by 1997 vacancy rates overall in office space come down from what they are now (depending on who you listen to, it’s 18% or 19%) down to on the order of 13%. So, that is probably a 5% or less reduction in vacancy rate. That really means to get down into single digits, you probably have got another three or four years beyond that. One of the things people tend to forget is that even when it is overbuilt, everybody knows it’s overbuilt and nobody can make any money building it, some office buildings will get built by companies that are expanding and need to have build-to-suits and by doctors who pay no attention to economies anyway.

Q. Industrial Development?

A. I think industrial development is going to be a surprise once we write down the value of R&D space, which is not really industrial space anyway. We are getting that out of the way, we are seeing building prices come down from $85 a square foot to $65 a square foot and less very rapidly. We think that the industrial sector demand, the true demand, is going to pop back a lot quicker than most people believe because two of the three legs of demand for industrial space are very sensitive to recession. Manufacturing employment and contract construction. We don’t expect either of those to come rushing back, but we expect them to come back with recovery. The problem in the office market is not the recession. The problem in the office market is just flat-out overbuilding. The problem in the industrial market is a little bit of both; but because it’s a little bit of both, it comes back a lot quicker. A corollary of that is if you assume we have a 20% vacancy factor in industrial space, which I disagree with although the broker surveys say 20% plus or minus, we think they don’t include in their base the Hughes, Rockwells, etc., because they forget about them. We think the effective vacancy rate is like 10% rather than 20%. No matter what, we think that vacancy rate will spin off a lot quicker in terms of the absolute magnitude than in the office sector. But if you say 20% and you say 20% in the office, the increase in employment in those two categories, which combined represents about 65% of jobs, the increase in employment to fill that space, basically a 25% increase, would create in essence 25% of 75% or 70% or say 80% at 20%, a 15% increase in jobs, which would increase demand for housing in Orange County by 15% because of the close connection between housing and jobs. Before the office guys get well, somebody is going to be making a lot of money in the housing sector just because that’s the nature of the beast.

Q. How about housing?

A. There are two ways to get overbuilt by our terminology. One is to have too many units, and the other is to have them too high priced. The elements that determine purchase or occupancy of housing are you need a place so you can sleep and whatever it is you do, and you need to be able to pay for it. So you have apparent demand and effective demand: Economics 100A. We overbuilt the market in Southern California, particularly in Orange County, in price in 1988, 1989, and 1990. We didn’t, I don’t think, over-build it in units, because if the units had been at the price that was consistent with our incomes, it wouldn’t have taken as many jobs to support occupancy of the units, and we would have occupied (as I mentioned earlier) in Southern California as a whole about 800,000 units more than we really did. This would have meant in 1990 we would have had a negative vacancy rate around 500,000 units. If you take Orange County’s median household income, which is higher than it should be because we have sort of a Will Rogers thing – we send the middle-income people from Orange County to the Inland Empire, raising the average income for both places – if you take that and divide it into our median home price, it is something like a ratio of 5.6:1. If you take the median income nationally and divide it into the median home price nationally, the number is 2.6:1. So, you have almost a double intensity in terms of disparity of price here. People like me who have lived in a house for a long time don’t notice the cost because it’s not an overt cost – but it’s a major problem, and I don’t think there is any way we are going to build significant amounts of new houses below the median price, except for some attached housing, because the lot prices in Orange County didn’t come down the way I thought they would when the bad news about Lusk and Lyon became conventional wisdom.

Q. The final land use is one that this County has a lot of and one of those land uses is going to expand – at least if they have their way. What about commercial entertainment? And I am talking about Disney.

A. It’s such a specialized use. We have a lot of it as a percentage of what there is in the county, but as a percentage of our total land, it is not the critical element. The critical element in terms of the impact of Disney or Knotts or whatever (Disney-like entities) is not the primary impact of that land use itself, but the derivative impact of all the land that is needed to house the people that work there, the hotel, the people who work the hotels, etc. For example, in Orange County, if you develop five acres of manufacturing land successfully and it’s occupied, you create demand for probably 90 acres of other land for urban uses because of the economic multiplier effect of those jobs and then the derivative jobs and the derivative people who create demand for land. For those kinds of economic multiplier land uses, the impact is not the facility itself; the impact is the derived impact that could easily be 20 times the primary impact as manifest in land use. The high density of employment in recreation entities implies a high economic multiplier in terms of land use.

General Transportation

Bear Valley Road Bike Path to the Victor Valley College

Published by:

By Kathie Martin
Marketing & Public Affairs Officer
Town of Apple Valley

At their February 11, 2014 Board meeting, the Victor Valley College (VVC) Board approved a Memorandum of Understanding between VVC and the Town of Apple Valley for the construction of a new Class 1 Bike Path that will connect the Town to the upper campus.

The Town of Apple Valley will be the lead agency for the bike path project, which starts in Apple Valley and continues east to VVC along the north side of Bear Valley Road. The San Bernardino Associated Governments (SANBAG) Board allocated to the Town of Apple Valley $386,370 from Transportation Development Act (TDA) funds for the construction. The Town is providing matching funds of 20%.

The project has three segments: 1. From Reata Road to Jess Ranch Parkway, 2. From the Bear Valley Road Bridge to Mojave Fish Hatchery Road, and, 3. From Mojave Fish Hatchery Road to the Campus. The Town is working with Hall and Foreman, Inc., the design engineering company, to finalize the construction drawings. It is anticipated that construction will start later this year.

The new bike lane will provide a continuous route of access from Apple Valley Road to Victor Valley College, providing better bicycle access to students living in Apple Valley. It also improves travel conditions for bike riders coming from Victorville to visit the many shops and restaurants located at the Apple Valley/Bear Valley Road intersection. Coupled with the construction of the Yucca Loma Bridge 3 miles to the north, which also includes a Class 1 bike lane, citizens on both sides of the Mojave River will find travel options greatly expanded over the next two years.

General Politics

Protecting State Assets: Aerospace and Defense

Published by:

By Senator Steve Knight

For decades the High Desert has been instrumental in California’s defense and aerospace industries and, subsequently, the Nation’s security. California State leaders need to protect this valuable national asset and businesses that are creating hundreds of thousands of jobs and generating billions of dollars for the state’s economy.

To that end, California’s Governor created the Governor’s Military Council to protect and expand defense and aerospace’s vital role in national security as well as California’s economy. I am honored to be a part of the inaugural council. As a veteran of the U.S. Army, Chair of the Senate Select Committee on Defense and Aerospace, and Vice Chair of the Senate Committee on Veterans Affairs, I look forward to sharing insights at future council meetings.

I will counsel our federal delegation on ways to best represent California on the national level, reinforcing the significance of protecting the aerospace and defense industries by cultivating an environment that is business-friendly and promotes economic growth.

Near and dear to my heart are Edwards Air Force Base, Exquadrum, NASA Armstrong (formerly Dryden), Plant 42, and major military contractors with close proximity to Northrop Grumman, Lockheed Martin and Boeing. These proven assets must be protected to ensure jobs and economic prosperity for our region and California as a whole.

Fostering job creation has always been a legislative priority of mine. Assembly Bill 2243, which was passed in 2012, provides limited liability for commercial space ventures so innovators remain competitive in this promising market. Senate Bill 415, which I am currently running, is an extension of AB 2243 adding “suppliers” or “manufacturers” as a space flight entity with limited liability for any participant injury relating to commercial space launch activities. Also, this year I am working to create geographically-based aerospace hubs around existing aerospace manufacturing clusters, and creating benefits and business incentives within the aerospace hubs. These measures will ensure California’s private space flight and exploration industry is protected while it continues to prosper and create jobs for our state.

California needs to bolster the aerospace and defense industries, particularly with the backing of the Governor’s Military Council, to ensure existing state installations are not threatened.

Senator Steve Knight, (R-Palmdale), represents the 21st Senate District which includes the communities throughout the Antelope, Victor, and Santa Clarita Valleys.

General Politics

What is AB 1103, California’s new Nonresidential Energy use Disclosure Law?

Published by:

By Marika Erdely
CEO
Green EconoME

You may have heard about AB 1103, the new Nonresidential Energy Use Disclosure Law, and if you haven’t, you should. Here’s what you need to know:

AB 1103 came into effect on January 1, 2014 for all commercial buildings in excess of 10,000 square feet in California. On July 1, 2014, it drops to include all buildings over 5,000 square feet. If the building has a residential component, or has a Group F (Factory F1/F2) occupancy permit, it doesn’t need to comply with the law.

The law requires nonresidential building owners to disclose their energy usage via a software tool called “Energy Star Portfolio Manager.” This software tool will “benchmark” a building and produce data, as well as an Energy Star rating or Energy Use Intensity (EUI), depending upon the building type.

The Energy Star rating is from 0 to 100, with 100 being the most energy efficient. The EUI looks at the energy efficiency of the building from a square foot perspective, and the lower the number the better. Of the over 80 different building types, only 20 can actually receive the Energy Star rating. The others must rely on the EUI to assess energy efficiency.

The process of “benchmarking” involves entering the most recent 12 months of energy (electric/gas) usage and certain physical and operational characteristics of the building into the software tool. Benchmarking compares all of this information against similar building types in the software tool, while also performing a zip code weather normalization function. Benchmarking produces several reports, but only one report is required for compliance with AB 1103: the “Data Verification Checklist,” or the “disclosure report.” The AB 1103 guidelines stipulate that at least 30 days before a disclosure is required, a building owner must open an account for the building in Portfolio Manager and begin the preparation of the disclosure report.

Since the disclosure report is required prior to a financial transaction being executed, it is best to have the report prepared in advance. The law requires the report to be presented to:

  • A prospective buyer – at least 24 hours before the purchase agreement is executed.
  • A prospective tenant (for a single tenant building only) – at least 24 hours before the lease is executed.
  • A prospective lender – no later than upon submittal of the loan application.

Unfortunately, the disclosure report expires within 30 days. Because the energy usage data must also be kept current, after 120 days additional energy usage data will need to be entered into the software tool or the tool is unable to produce a rating or EUI.

Having fun yet? Another glitch to the process is that in many buildings, it is the tenant that must provide the energy usage data since they are the one paying for the meter. Utilities will in no way assist the building owner in providing the tenant’s energy usage data to meet the requirements of this law. It is up to the tenant to provide it, so all building owners should make sure all new leases include a provision requiring the tenant to provide their energy usage data upon request.

What happens if you don’t comply? Well, the California Energy Commission has stated that their actions may include:

  • Investigating non-complianceallegations (which may include subpoenas, compelling testimony, and convening investigative hearings).
  • Initiating administrative proceedings before the full Energy Commission for an order compelling compliance.
  • Initiating a civil judicial proceeding to enforce an Energy Commission order.
  • Initiating a civil judicial proceeding to obtain injunctive relief.
  • Settling enforcement actions through negotiated settlements that impose reasonable and appropriate requirements, including possible payment of penalties.

It is not clear who they will be going after, but since this is now the law of the land, it is best to comply.

Buildings with an Energy Star Score above 75 are able to be “Energy Star Certified.” This requires an on-site inspection by a Professional Engineer (PE) and further testing. Testing includes looking at the indoor air quality, thermal comfort and illumination of the building. The PE uses the same disclosure report to perform the inspection and testing, and fills out all the forms associated with it.

Why do this extra step? Well, there are demonstrable economic benefits from owning an Energy Star-certified building. Occupancy rates are 3% percent higher for Energy Star-certified office buildings, and while rent premiums can range from 5 to 8.5% higher; most significant resale premiums can range from 13 to 26% higher.

AB 1103 is about raising awareness and encouraging building owners to find ways to increase the energy efficiency of their buildings and reducing consumption of energy in the state. Utilities currently have incredible opportunities to fund energy efficiency retrofits of buildings.

Title 24, California’s Energy Building Code, also has some interesting changes coming in July, 2014, which will push energy efficiency to new heights. Goals include residential construction to reach zero net energy by 2020, while commercial construction is to be zero net energy by 2030.

Pushing energy efficiency in existing building stock makes sense, because these properties will be competing against this new construction. New technology, such as lighting and HVAC control systems, can significantly reduce usage and demand. It is clear that these technologies will become more important in the coming years. Being energy aware is just the beginning!

Green EconoME produces the report for compliance with AB 1103. Contact us!

Marika Erdely is the Founder and CEO of Green EconoME, a full-service Energy Consulting firm with offices in Malibu and San Jose. Marika had been a financial professional for over 30 years and holds an MBA and a Contractor’s License B (#892673). She is a LEED AP BD+C, and has been trained as a Certified Energy Auditor (CEA). Marika founded Green EconoME in 2009 to meet the needs of a growing industry fueled by the mandates required by AB 1103 and Title 24. Green EconoME’s services begin with a full analysis of a building’s energy and water usage. They project manage the retrofits and stay around to ensure projected energy savings are met. Because of Marika’s financial background, all analysis is financial based and easy to understand, with clear ROI and payback periods.

Economy General Politics

Thinking Regionally

Published by:

By Paul Granillo
Director of Public Policy
IEEP

Everyday a thousand thoughts cross our mind. Most thoughts concern our family and loved ones. For those of us in the work force, much of our thought focuses on the job, our career goals and our co-workers. Many times it is not till the evening news when we think about politics, our nation’s economy, the world situation or just how our favorite team is doing. Hopefully we carve out a thought for the poor and suffering. So in that long list of thoughts there is not much time left to think about our region. Yet every thought in the previous list is effected by the economic and quality of life reality of our region, the Inland Empire.

The United States government’s Bureau of the Census defines the Inland Empire as the Riverside-San Bernardino-Ontario metropolitan area, which covers more than 27,000 square miles and includes the entirety of San Bernardino and Riverside Counties. If the Inland Empire were a state, we would currently be the 26th largest state in the nation; soon our region’s population will pass Kentucky and be able to claim a population greater than half the states in the nation.

Now, while most of us do not spend inordinate amounts of time thinking regionally, myself, and the organization I head, the Inland Empire Economic Partnership, do just that: we think about ways to better the business climate and quality of life of our two-county region. We do this because the economies of our two counties our interlinked.Moreover, our regional economy is tied to the larger Southern California economy, which is part of the 9th largest economy in the world (just behind Italy and larger than Russia’s) the State of California, which is part, of course, of the largest economy in world, that of the USA.

So, one might ask, how does one better a regional economy? The answer is with a lot of work. A lot of work because we have barriers in our way like our educational attainment rates, nonstop growth, reluctance to cooperate, lack of resources, and growing poverty rates.

First our baccalaureate attainment rate. Only 19% of our region’s residents have a bachelor’s degree, meaning 81% of our residents do not have a bachelor’s degree. Further, of that 81% of residents, almost 42% did not complete high school. So what does this mean? It means we are a region heavily dependent on economic sectors that have little to no educational requirements to enter. That is why manufacturing, goods movement and logistics, and construction are critical to the Inland Empire’s economy and job base.

IEEP sees the need and supports our region’s educational leaders as they work to educate our region’s children from the earliest opportunities parents have in the home to college graduation. And for those in the modern economy who may not choose a college path, we support the finest workforce training that our region can provide.

Second, the last 25 years has seen unprecedented growth in our region. Since 1990 alone our population has grown from 2,588,793 to 4,293,892 in 2012. The Southern California Association of Governments predicts we could grow to 6 million by 2035, with the County of Riverside becoming the second largest county in the state next to Los Angeles.

Third and fourth, the residents of the two counties move freely across the county lines working, shopping and playing from the wine county of Temecula, the forests of Lake Arrowhead and Big Bear and the deserts of Palm Springs and the High desert communities. Unfortunately, too often, elected officials, business and community leaders, although rightly looking after local issues, have failed to see the value of working collectively and regionally. And the cost of that has been our region’s lack of ability to attract the resources that our region is properly entitled to, like the resources available through philanthropic institutions that support the non-profit sector.

Finally, of all the issues we have, the most troubling to me is the growing rate of poverty in our region. Using the same years as I previously referencedfor population growth, in 1990, 306,417 or 11.8% of residents were defined as living in poverty. In 2012 that number was 809,234 or 19% of our population living in poverty and today, in 2014, the number has only grown.

The members of the Board of Directors of the Inland Empire Economic Partnership are business leaders, elected officials, college presidents and chancellors, non-profit and community leaders from throughout Riverside and San Bernardino Counties. They care about our region and its future. They want to tackle the hard problems that face our region and also celebrate the beauty and benefits of working and living in the Inland Empire.

From time to time they will write here about their perspective on our region, their struggles, wisdom and ideas as employers, educators and leaders about how together we can build a better Inland region.

Of course, that begins when we all take a little time to think regionally.

General Politics

Seeking Solutions to Spur Economic Growth

Published by:

By Robert Lovingood
1st District Supervisor
San Bernardino County

As First District Supervisor of San Bernardino County, economic growth is key to every facet of our community, and there can be no economic growth without job creators. As someone whose entire career has been in the private sector, I firmly believe that government needs to treat job creators like their best customers – because they are.

Unfortunately, too often, government at all levels can be a hindrance to economic and job growth. So when I was elected to the Board of Supervisors, I met with a diverse group of folks from the mining industry around the county. In short, we heard how permitting processes had become bogged down. This became a priority in my office, as well as with the county’s new director of Land Use Services, Director Tom Hudson. Tom pledged to address the concerns, and when we had a follow-up meeting several months later, area mining industry representatives were very pleased with the improvements they were seeing.

A few months ago, we also formed a roundtable of architects, commercial real estate brokers and others from the High Desert development community. It was a frank, but healthy, discussion on how we could streamline county operations. We forwarded the group’s suggestions to Land Use Services.

Land Use Services is making efforts on two fronts to reduce the time and cost involved in processing applications.

First, they are completing efficiency studies on planning staff time and procedures. This is greatly improving efficiency and throughput.

Second, the department is utilizingcontractor assistance to clear backlog applications more efficiently (with their entire focus on application processing and not including other duties required of staff planners). Land Use managers are measuring each planner’s productivity in order to guide staff assignments and time management.

Some business roundtable participants suggested creating a “road map” to outline steps and costs of various LUSD processes. So the Planning Division is adding a lot of helpful information to the web site, particularly in answers to Frequently Asked Questions. The Division has several FAQs dealing with the application review process and is adding flow chart illustrations soon.

Another way to combat uncertainty in the planning process is to take advantage of the free pre-application review process. The process involves review by staff from multiple County departments who are involved in the development review process. The committee meets with potential applicants to explain exactly what can be expected upon filing of an application. Applicants in the Pre-Application process receive a general overview of the requirements and potential costs prior to investing in the filing of an application.

If anyone has a concern that an individual staff member is not following the Countywide Vision of customer service, the Department provides comment cards that are reviewed by the management team and the Land Use Services Director. Comments may be signed, or they may be submitted anonymously. Land Use Services also has an on-line customer survey, www.surveymonkey.com/s/3RK9JH7, for the same type of feedback.

The Planning Division has been reviewing procedures to find ways to reduce applicant’s time and materials. The Land Use Services does accept electronic application filing now. The following link to the user guide is posted on the County web site: http://cms.sbcounty.gov/lus/Planning/ePlans.aspx . And, of course, I would love to hear your thoughts. Please feel free to contact me at SupervisorLovingood@SBCounty.gov or at 760.995.8100.

General Politics

Destination County of San Bernardino for the Film Industry

Published by:

By Sherri Davis

The Economic Impact for the Inland Empire for 2013 was $40,518,600 with 690 projects and 1,564 days. County of San Bernardino had an economic impact of $24,942,300 with 425 projects and 905 days of production throughout the county.

A close look at the 1st and 3rd Districts of San Bernardino showed that 13 out of 24 features were shot in the two districts. Most were low budget indie films except for Legendary Pictures’ “Interstellar” which was shot in Johnson Valley on BLM land. Christopher Nolan was the Director and the film stars Matthew McConaughey, Anne Hathaway, Michael Caine and Ellen Burstyn, to name a few. Some of the other features were Australian-based Layfilm Dhi, LTD’s “The Uberkanone,” which shot at Dumont Dunes; L.A. Butterfly, LLC feature “Butterfly,” shot in Barstow, and Slinmmit, Inc.’s film “Echos,” shot at El Mirage Dry Lake.

Several Episodic Television shows selected locations near El Mirage – FTP Productions’ “RAGTAG” and Renegade Pictures “None of the Above.” Brownstone Entertainment’s “Barter Kings” shot their reality television show in numerous locations throughout the year. Green Bottle Pictures’ reality show, “Hot Rod Rescue,” shot near Barstow, while Hollywood Sky Entertainment’s “Cinderella” selected Lucerne Dry Lake.

There were 74 commercials shot in the region with 48 using locations throughout the high desert. A great Super Bowl commercial for the Fiat 500 was shot at Dumont Dunes starring Sean Combs aka Puff Daddy (this commercial is still on the air). The commercials have ranged from “Max Factor’s ‘I am Oasis’” to “American Express v.1” while the car commercials covered everything from “VW” to “Tesla.”

Barstow BLM opens additional sites for filming

The Environmental Assessments on 9 locations in the 1st and 3rd Districts has been completed after almost 5 years of work. This had been part of the InlandEmpire Film Commission’s projects since 1998. In 2000 a presentation was made to Supervisor Postmus to support the environmental work to open additional locations within BLM for filming. At that time filming was not a priority and the project stalled. When presented again, this time to Supervisor Mitzelfelt in 2009, funding was allocated and work on the environmental assessments began. This funded project, thanks to Brad Mitzelfelt, will give the County an edge when production is looking for more diversity in the desert.

What is often misunderstood is the fact that even though BLM land is open for commercial (i.e. mining, grazing, alternative energy, etc.) and recreational use, it does not mean it can be it can be used for filming. According to Federal statutes, separate environmental assessments must be done for commercial filming use. This is what the funding from the County paid for.

These new areas are Sawtooth Canyon; Stoddard Valley OHV area; Rasor OHV area; Afton Canyon; Portions of Odessa Canyon; Portions of Mule Canyon and the Hollywood Canyon and Sperry Wash sections of Amargosa Canyon.

We are hopeful that the Incentive bill, AB 1839, which is currently working its way through the committees, will be passed and signed by the Governor.

As the Inland Empire Film Commission,we have been very active with the California Film & Television Production Alliance, supporting AB 1839 – California Film and Television Job Retention and Promotion Act.

The motion picture industry has long called California its home and has grown into one of America’s greatest and most lucrative exports, a cultural touchstone known around the world, an economic engine for jobs and business and a tourist magnet. Combined, the industry supports more than 190,000 direct jobs and $17 billion in wages in California.

AB 1839 would expand the current production incentive program beginning in 2016 to include one-hour dramas and large budget feature films. There is an added incentive for filming outside the Los Angeles area to support increased production for the entire state. This additional incentive will dramatically impact the Inland Empire. It will help make California—the state known across the globe as the home of filmmaking—competitive once more.

Statistics from the California Film Commission speak to the hazard of runaway production. In 2012-2013, of the 54 large, live action feature films shot during that time frame, only ONE filmed exclusively in California. These big-budget movies generate the most jobs and revenue, but presently they do not qualify for our state tax credit program. For many years, California was home to one-hour dramatic television shows. Now, many of those shows have left. In 2005, California hosted 51 of the 79 one-hour dramas made (65%), but in 2013, that number fell to 39 out of 137 shows (29%).

The loss of big budget pictures cost California $410 million in state and local tax revenue, 47,600 jobs and total economic output of $9.6 billion, according to the study, which was conducted by the Los Angeles Economic Development Corp.

This is an example of the feature activity in the Inland Empire:

  • In 1999 we had 11 large feature films plus 15 additional features within the 1 to 5 million dollar budget range.
  • In 2013 we had 1 large feature

The County of San Bernardino and the Inland Empire Film Commission along with other concerned stakeholders are greatly concerned that the state’s status as the epicenter for motion picture production is at risk. What started as isolated runaway film and television production to a few countries some 15 years ago has become an ever-growing exodus of high quality middle-class jobs. And with those jobs, California is sending precious tax dollars, economic opportunity and its iconic brand to other states and nations.

A petition calling on state legislators to help bring production back to California is now in circulation at www.filmworksca.com. If keeping filming and middle-class jobs in California is important to you, we encourage you to visit Film Works CA and join with the more than 11,000 other petition signers who have already voiced their support.

PLEASE SIGN THIS PETITION AND SHARE THIS PETITION WITH 3 MORE PEOPLE. Together we can keep our signature industry in California.

We are looking forward to a successful year in 2014.

General

In Memory of Ira Norris

Published by:

Born in Chicago to Ruth and Sol, and brother to Jane, Ira graduated from Senn High School. He received a BA in Finance in 1958 from his beloved USC, where he played on the baseball team. In 1979 Ira earned his MBA from Pepperdine. He began his career in 1960 and has built homes for over 13,000 families across California, Nevada, Arizona, Illinois, New York, and New Jersey. Ira served as President of the Building Industry Association of Southern California and was National Vice President, Federal Governmental Affairs Chairman, and a Life Director of the National Association of Home Builders. He was recognized as “Housing Person of the Year,” voted “Best Builder in America” by Builder Magazine, and was inducted into the California Builders Hall of Fame. Ira was a founder of the Lusk Center for Real Estate Development, a graduate program at USC, where he was an adjunct professor for 24 years. He also developed the curriculum for the Master’s Degree program in Entrepreneurial Home Building at USC.

In addition to USC football, travel, the Dodgers, and spaghetti, Ira loved golf and played at both Indian Ridge and El Caballero, where he was on the Board of Directors. Ira was a sweet, intelligent, and philanthropic man who was completely adored by his wife, Nancy, children Michael (Leslie), Greg (Joanne), Terry Gevisser, and Susan (Rick) Schnall, and grandchildren Asher, Kyle, Jason, Ava, Will, Jordan, Judd, and Brooke.

General

High Desert Achieves 10 Years of Commercial Operation

Published by:

By Victor Brown

The High Desert Power Project, LLC power plant reached a significant milestone in 2013 when it achieved 10 years of commercial operations. High Desert is a natural gas-fueled, combined-cycle generating station near Victorville, Calif., that began operations in 2003, delivering enough power to the California Independent System Operator (CAISO) transmission grid to serve approximately 830,000 California homes, along with substantial local benefits.

An entity managed by Tenaska Capital Management, LLC (TCM), an affiliate of Omaha, Neb.-based energy company Tenaska, acquired the 830-megawatt facility from Constellation Energy in 2006. It’s been safely and reliably operated since then by a Tenaska affiliate, earning two National Safety Council awards for 2012 for its outstanding safety record.

“We are proud to have this facility in Victorville,” said San Bernardino County Supervisor Robert Lovingood. “The High Desert Power Project contributes jobs and tax revenue to the local economy, in addition to supporting community projects and organizations. It’s a great business neighbor and an asset to the region.”

The High Desert plant is staffed by 38 full-time employees – all of whom live in the county. It provided approximately $21.3 million in salaries and payments for locally contracted services and supplies in 2012, according to Plant Manager Frank Carelli. He said the facility is one of the largest taxpayers in the region, paying more than $3.1 million in local property taxes for 2013.

“Our employees are instrumental to the success of High Desert,” Carelli said. “It’s their work, day after day, that helps ensure that the facility runs safely and efficiently, providing reliable power for Californians.

“And they don’t stop there. Our employees go out into the community – their community – and contribute their time and talent. We truly have an outstanding workforce.”

Plant employees have a history of supporting local causes and organizations, such as High Desert Opportunity Day and the Victorville Chamber of Commerce, Carelli said. They volunteer hundreds of hours to community efforts each year.

Long-time plant employee Victor Barron, Operations Manager, said the High Desert staff has been involved in the community since Day One. For years, he said, the plant has been providing scholarships to the Mojave Environmental Education Consortium that fund field trips and tours, sponsoring an annual essay contest through several local schools and hosting a teacher training to show how physics is applied to power generation.

“There’s really been a focus on working with the education system,” Barron said.

The High Desert Power Project, an 830-megawatt power generating station in Victorville, Calif., managed by Tenaska Capital Management, has been delivering electricity to the California Independent System Operator (CAISO) transmission grid since 2003

High Desert was named Power Plant of the Year in 2003 by POWER magazine in recognition of its adherence to strict environmental standards and its innovative approaches to project partnering, air emissions offsetting and water management.

Carelli said High Desert uses an efficient combined-cycle technology that first generates electricity using natural gas in a combustion turbine, and then recycles the exhaust heat to create additional electricity through a steam turbine-generator.

High Desert has been named a Climate Action Leader as part of the California Climate Action Registry Program. Registry members must undergo rigorous greenhouse gas emissions inventory in order to receive designation as a leader. Carelli said all emissions from High Desert are below every applicable national air quality standard and are among the lowest permitted levels in the nation for a plant its size.

TCM is a leading manager of private equity energy investments. It has approximately $3.8 billion in assets under management, including High Desert, and targets investments in power generation, oil and natural gas midstream and energy services. To learn more about TCM or Tenaska, visit www.tenaskacapital.com or www.tenaska.com.

General Politics

Killing Prop 13 Should be a Capital Offense

Published by:

By Assemblyman Tim Donnelly (R-Twin Peaks)

They say those who do not study history are doomed to repeat it.

The battle over Proposition 13 is about to be fought all over again. Prop 13 passed by nearly 65% of the vote back in 1978. A significant majority of citizens of all political persuasions were united in support of a proposition that protected property owners and tenants alike from massive property tax increases.

The reason for this is simple. Markets work, and ordinary Californians are very savvy when it comes to their money, even if their politicians aren’t.

For an example of just how much public support Proposition 13 has, we need look no further than the 45th Assembly District, where candidate Susan Shelley nearly defeated her Democratic opponent – in a highly Democratic district – by putting the issue of Proposition 13 at the front and center of her campaign.

The most dangerous assault on Prop 13 is what’s called the “Split Roll.” In simple English, it means you divide the residential and commercial property rolls and only allow residential properties to continue to be covered under the protections of Prop 13. This means all commercial properties, including business properties, retail properties like your local shops and restaurants, could be reassessed at dramatically higher values, doubling or even tripling their property tax.

Many businesses not only do not own the property, but are on triple net leases, which means they pay three times any additional costs incurred. So your favorite local hang-out might be forced out of business if the split-roll scheme were to pass. If they stay in business, the only way they are to be able to provide you their goods or services is to raise the price. But the dirty little secret is that the tenants of apartment buildings – those who can least afford it – might suffer the worst.

Renters are not stupid. They know if the cost of housing goes up, their rent must go up to cover the cost. There are no “free lunches.” Someone has to pay. The politicians believe they are sticking it to the income property investors – and this may be true for a year or two, but eventually all costs get passed on to the tenant.

The reason for that is also simple: investors need to know they will earn at least a minimum rate of return on investment, also known as the Capitalization rate (or Cap Rate for short), or it is not worth putting their capital at risk.

Since the average cap rate for apartment investments is about 5%, that means every dollar of extra tax lowers the value of the property value by $20 (it’s a 20 to 1 ratio) Meaning, if property tax goes up $5,000 the value of the property comes down $100,000. Why is this important? Because the property is being taxed on its value. So raising the rate does not net out the amount the politicians think it will.

Property tax receipts will fall because property values will fall to bring the market in line with the average cap rate. So their net gain will not be as much as advertised. The lower property values will mean that the county will receive less transfer tax upon the sale of the property. The state and federal government will receive less capital gains tax upon sale. The budgets of cities and counties have been under intense pressure as tax revenues continue to fall, and business owners and taxpayers are leaving California in droves to flee the crushing burden of the nation’s highest income tax.

Since apartment housing is the cornerstone of affordable housing, we cannot overstate the case that a split roll would not only fail to accomplish the proponents goals, but it would put tens of thousands of small business owners livelihoods at risk, and might possibly put an end to affordable housing in California altogether. Rarely do you see a cause that is joined by renter and building owner alike, where the interest of the employee and business owner are the same, but it can be argued that splitting Prop 13 poses a unique threat to public sector budgets and private sector enterprise, equally. The higher tax is just another reason for large businesses to leave the state, taking their jobs with them.

According to contemporary polling on this issue, Proposition 13 still retains the substantial support it had 35 years ago. It is urgent that we join forces and stand unified against the one move that could sink California’s once-vibrant economy for all time. We can do this, you can help.

General Transportation

Caltrans Transforms the High Desert Transportation Infrastructure

Published by:

By Joy Sepulveda
Public Information Officer
Caltrans

Most of Interstate 15 is currently undergoing major improvements from Devore to the Nevada state line. As the High Desert areas surrounding I-15 continue to boom with growth and more and more motorists use the corridor to travel to vacation destinations to both the north and south, it has become necessary to improve the transportation system.

There are several major projects that have broken ground in the last year that aim to transform the infrastructure and operational efficiency of Interstate 15 through the High Desert.

Devore Interchange Project

The I-15/I-215 Interchange in Devore is a heavily traveled interchange due to goods movement, recreational vehicles and commuters. Travel through the Cajon Pass is one of only three routes into and out of Southern California. In addition to being a primary goods movement corridor of national significance, it is the route to vacation destinations such as Las Vegas and the Colorado River, to name a few.

As one of the worst grade-related bottlenecks in the United States, The Devore Interchange Project was initiated to address the issues of this highly traveled interchange.

The project was awarded to Atkinson Contractors, LP of Foothill Ranch, Calif. in November 2012. The purpose of the project is to reduce congestion and accidents and improve freeway operation through the interchange.

The $324 million dollar design/build project will add truck by-pass lanes, which will improve traffic flow and reduce delays; add lanes, which will reduce congestion because it will eliminate the need to make multiple lane changes; bring the interchange up to operational standards, improving the road conditions so that they are in a “state of good repair.” The existing design causes passenger vehicles, freight trucks and RVs to weave to their desired lanes at the same time traffic is exiting and entering local interchanges, which causes higher than average accident rates. Local interchanges will be reconfigured to provide a safer drive, and reconnect State Route 66 (Cajon Boulevard) from just north of the I-15/I-215 interchange to just south of the same interchange.

The project is estimated to be completed in 2016.

I-15 Cajon Pass Project

The second design/build project on I-15, the Cajon Pass Project, which will begin this spring, will resurface and restore the pavement between Kenwood Avenue and the Hesperia Overhead. The project is needed because all of the high volumes of traffic traveling in this area have caused the pavement to deteriorate and settle.

The $120 million project was awarded to Coffman/Parsons: A Joint Venture. It will replace the two outer lanes, grind and replace random slabs in the interior lanes, rehabilitate ramps within the project limits, and upgrade and install roadside safety features.

The project is expected to be completed in summer 2016.

Clyde V. Kane Roadside Rest Area Rehabilitation Project

The existing facilities of the Clyde V. Kane Roadside Rest Area, located on I-15 30 miles east of Barstow, are unable to keep up with user demands in terms of facilities and parking capacity. A project to upgrade the facility was awarded in December 2013.

The work includes installation of new comfort stations, walkways; upgrading water, electrical and sewer systems; expanding parking lots and traveler amenities. The project will provide onsite drainage improvements and new picnic shelters, as well as pet recreation facilities. Also, this project will accommodate increased traffic and will improve public safety.

The project was awarded to RSM2 Contractors, Inc. of La Mesa, Calif. and is expected to be completed September 2015.

SR-58 via Hinkley Widening Project

This project involves the realigning and widening of State Route 58 (SR-58) from two to four lanes and upgrading the highway to an expressway near the community of Hinkley in the County of San Bernardino from west of Hidden River Road to east of Lenwood Road. The project will also add a mixed-flow lane in each direction and include shoulder construction, drainage improvements and median widening.

The project will eliminate the existing gap between the adjacent four-lane roadways. It will also address the need to safely accommodate increased large truck and recreational vehicle traffic, as well as reduce unnecessary delays to the traveling public. Additional benefits of the project include: reduce traffic congestion, improve traffic safety, improve operational efficiency, improve the reliability of goods and movement, and reduce people/goods movement conflicts, as well as extend the life of the pavement.

The project will be ready to list for bid this May and is set to begin construction by the end of 2014.

Caltrans is extremely proud to be able to bring such revolutionary and innovative projects to the High Desert. The Department has heeded the call for infrastructure improvement through the area and is looking forward to building partnerships to ensure that the I-15 corridor continues to shine statewide.

Education General

Victor Valley College Preparing Students for the Future

Published by:

By Bill Greulich
Public Information Officer
President’s Office
Victor Valley College

VVC, now in its 53rd year, serves an area encompassing roughly 2,200 square miles and is located on a 253 acre campus at the center of the three major communities of the Victor Valley (Apple Valley, Hesperia and Victorville). VVC also features a 13-acre Regional Public Safety Center in Apple Valley. VVC serves a population base of approximately 400,000 people and has over 20 feeder high schools and diploma-granting institutions. VVC now offers Associate in Science and Associate in Arts degrees in 23 different disciplines plus more than 100 certificates.

Enrollment

Enrollment for 2013/2014 is approximately 17,000 students, with spring numbers reaching 3.900 Full-Time Equivalent Students (FTES). A full-time equivalent student is a person taking more than 12 credit units or three part-time students taking a single 4 credit class. VVC employs over 800 employees.

During the 2012/13 academic year, VVC conferred more than 1,100 Associate Degrees and Certificates of Completion. Programs that are featured include but are not limited to: Nursing, Liberal Arts, Science and Math and other Transfer Courses, and 16 Career Technology Programs such as Computer -Aided Design, Airframe and Power Plant Technology, Fire Technology, Administration of Justice, Digital Animation, Respiratory Technology, Paramedics, Construction Technologies, etc.

Accreditation

Victor Valley College has also received approval from the Chancellor’s Office to offer six new transfer degrees to California State Universities. Currently, VVC offers an Associate in Science for Transfer in Administration of Justice, An Associate in Science for Transfer in Mathematics, an Associate in Arts for Transfer in Sociology, Associates in Arts for Transfer in Communication Studies, Associates in Arts for Transfer in History, and Associates in Arts for Transfer in Early Childhood Education.

Victor Valley College’s accreditation has been reaffirmed; however, a follow-up report was requested and submitted in March. This report includes a provision for the college to submit a long-term financial plan that guarantees future balanced budgets based on the current year levels of revenue being allocated by the State. VVC also delivered a required midterm self-study report that addressed continued progress on all standards established by the Accrediting Commission for Community and Junior Colleges, (ACCJC). In April the college will host a visit by an accrediting team who are charged with the responsibility to validate the information contained in these reports. A letter from the Commission will be forthcoming in June.

Search for a new Superintendent/President

In the interim period, the College Board will proceed with the search process to select a new Superintendent/President for the college. The selection process should be completed by the first week in July.

The Music Building Upgrade and Construction

The Board of Trustees approved the modernization and construction project for the Music building that was built about 1965 for an amount of 3.8 million dollars as part of the Measure JJ bond Funds projects to bring current buildings up to current day standards. During construction, the Music department was relocated to the lower campus until the project is completed. Initially, the building was first abated of all asbestos-containing material and cleared safe for demolition and construction work. Construction should be completed this June and ready for students at the start of the Fall semester. The project consists of new construction of restroom and office areas; the rest of the project involves the modernization of the existing building and bringing it up to current ADA compliance.

New Science and Health Building

The next major project to be constructed on campus for Victor Valley College is the new Science and Health Building. This Building is being funded by Measure JJ Bond funds. The 25,000 square foot building will feature several new labs and faculty areas dedicated to the study of Science and Health. The plan features highly specialized training labs for the Nursing program that includes a simulation lab and fundamentals lab, a Chemistry lab, additional Life and Physical Science lab (digital), an Anatomy lab, a faculty suite and Dean’s office. The plan for this free-standing building also includes an outdoor, covered courtyard area for student and faculty interaction to promote a collaborative and technology-driven learning environment.Victor Valley College has selected Balfour Beatty Construction and NTD Architecture to construct this project. It will be a one-story structure located adjacent to and on the west side of the existing Science Building 31. The college has instructed the builders that they will contract with local consulting firms and contractors to provide training and jobs for the local community.

Future Projects

The expansion of the vocational complex will create a diesel facility and enhance classroom space for both automotiveand welding. Cost is $6.5 million. Completion is expected in 2014-15.

Future Hesperia Campus

VVC owns 55 acres at Main Street and US Highway 395 for a future campus. At this time VVC is focusing on building future enrollment and goodwill. Currently, VVC offers classes at both Silverado High School and Hesperia High School as a means to meeting current academic needs in this region of the High Desert. All of these projects are funded by Measure JJ.

Recently Constructed – now in Service

In 2012 the college opened the Victor Valley College Regional Public Safety Training Center in Apple Valley. The center is located on the corner of Navajo and Johnson roads near the Wal-Mart Distribution Center. The $31.4 million center is the first construction project funded by Measure JJ that was approved by voters in 2008. The center features a multi-agency learning environment to maximize disaster training by incorporating Fire Science, EMT, Paramedic training, and Administration of Justice & Corrections.