By Steve Pontell
La Jolla Institute
Long-term employment trends show growth of 40% between 2000 and 2008 in two of the county’s largest industries: Professional Services and Logistics. However, recent employment figures show a decline across all key industries. San Bernardino County has the most affordable housing in Southern California. The county continues to build more homes, with the result that there are nearly two housing units for every job created in the county. As the importance of technological know-how increases, so does the county’s student access to computers and classrooms with Internet access.
County Poised for Further Growth and Change
Description of Indicator
San Bernardino County experienced explosive residential and commercial growth over the past two decades. The county’s unique geographic, environmental and economic characteristics allowed it to evolve into a dynamic region that is both independent of and integral to the Southern California region as a whole. This indicator examines components of the county’s transformation such as employment changes, housing trends, expanding opportunities, and human and societal impacts of this growth.
Why is it Important?
Understanding how San Bernardino County has changed from 1990 to 2010 allows residents, businesses and policymakers to be better informed about the characteristics that define San Bernardino County today – instead of what they imagine it to be, based on perceptions established in the past. San Bernardino County has emerged as an economic powerhouse as the Southland’s air travel and logistics hub, a recreational destination for tourists from across the state, and the booming, then busting, epicenter of the California residential real estate market.
How is San Bernardino County Doing?
Economy in Transition
Twenty years ago, the leading industries in the county were steel, agriculture and defense. The closures of George Air Force Base (in Victorville) in 1992 and Norton Air Force Base (in the City of San Bernardino) in 1994 resulted in the loss of approximately 3,000 jobs. Since that time, the region has gone through one metamorphosis and is on the cusp of a second. The first transition was from an economy based in military services, agriculture, and steel, to one where construction, logistics, and business and professional services are the dominant industries. The next transformation may emerge out of a combination of up-and-coming markets, demographic shifts, continuing growth in logistics, and San Bernardino’s unique set of assets including days of sun, established energy infrastructure, large areas of undeveloped land, and proximity to population centers and recreational resources.
The first transition witnessed employment growth of 62% between 1990 and 2007. According to the California Employment Development Department, the number of jobs in the county increased from 408,500 in 1990 to 663,600 jobs as of 2007. In 1990, the largest industry clusters were Retail Trade, Healthcare, Tourism (Leisure and Hospitality) and Durable Goods Manufacturing. Today, while the largest employment clusters are the same, the proportions are different with 300% growth in Administrative Support (which is a part of Business and Professional Services), 180% growth in Logistics, and 180% growth in Wholesale Trade. In the last 10 years, the changing nature of the San Bernardino County economy has become even more pronounced with significant growth in the Retail Trade and Local Government sectors while Durable Goods Manufacturing has declined.
The second transition may be fueled by San Bernardino County’s unique position for growth in certain industries not yet reflected in employment statistics. For example, the High Desert area of San Bernardino County is one of the best places in the world for solar energy development because of its high altitude, the number of sunny days each year, and existing power infrastructure. Additionally, proximity to the Colorado River, Nevada and Arizona may result in increasing opportunities for new housing and tourism that are currently underutilized.
Supplying Affordable Housing for the Region
As the population and employment base of Southern California continued to grow over the past two decades, the number of housing units built in Los Angeles and Orange Counties did not keep pace. The relatively lower cost of existing housing in the Inland Empire drew buyers from all over Southern California. In San Bernardino County, housing demand increased in response to both the lower priced housing and as a result of economic growth, and builders built new housing tracts to meet the increased demand. Cities and builders alike preferred to build lower density units (greater sales prices and income to local jurisdictions), and to a great extent larger, single family units were built instead of smaller, more affordable units.
Between 2000 and 2006, single family residences accounted for over 85% of all housing built, compared to the historical average of 70%. In the midst of this housing boom, it appeared that San Bernardino County had become the host of the American dream – one of the last places for middle class Southern California residents to be able to afford a home.
Between 2000 and 2008, nearly 100,000 residential permits were granted by local officials throughout the county with the peak of over 18,000 permits in 2004. The cities granting the most permits were Rancho Cucamonga, Chino Hills and Fontana which had higher numbers of permits earlier in the decade while Apple Valley, Chino, Hesperia, and Victorville granted more permits later.
Strong demand in the early 2000s led to rising prices, which prompted many first time homebuyers who were afraid of “missing the boat” to purchase. Speculators and investors also played a role in driving up housing prices, which increased from $134,000 for a median priced single family home in 1991 to $389,000 in the fourth quarter of 2005. Since then prices have dropped back to 2000 levels, with the median single family home priced at $163,000 in 2009. Paradoxically, due to the low housing prices, for those who could afford a down payment and have sufficient income and credit, owning a home today may be less expensive than renting a home (see Housing Affordability and Rental Affordability).
Human and Societal Impacts of Growth and Contraction
In the meantime, new and old residents of San Bernardino County are bearing the impacts of regional economic contraction. When residents of San Bernardino County who commuted to work in Los Angeles, Riverside, or Orange Counties lose their jobs, they apply for and utilize San Bernardino County government services.
According to the 2008 Inland Empire Annual Survey, a majority of residents who live in East Valley, Victor Valley and Desert areas also work in San Bernardino County. However, about 10% of East Valley and Desert region residents work in Riverside County. Over 30% of West Valley residents work in Los Angeles County, and about 6% work in Orange County.
The economic downturn is reflected in the number of residents living in poverty and the fact that most major public assistance programs in San Bernardino County experienced increases in enrollment (see Family Income Security):
• At 14.6%, San Bernardino County has the third highest proportion of residents living in poverty compared to peers. This rate is higher than the state and national averages for 2008.
• San Bernardino County has the highest Food Stamps “Program Access Index” scores among peers, with 56% of Food Stamps eligible residents actually participating in the program.
• The number of people receiving Food Stamps rose 27% in a single year, while CalWORKs cash assistance enrollment rose 18% in 2008/09.
• Medi-Cal participation also increased, rising 10%.
• A higher proportion of San Bernardino County residents have public assistance income (4.0% of all residents) than the state (3.1%), nation (2.3%), and all our peers (ranging from a high of 3.3% in Los Angeles County to a low of 1.2% in the Dallas metro area).
As businesses expanded in the Inland Empire in anticipation of more customers taking up residence, a reinforcing cycle was created wherein business growth fueled population growth resulting in greater home construction and further economic growth.
The Inland Empire’s location between the Ports of Los Angeles and Long Beach and the rest of the country as well as the location on the edge of the massive markets of Los Angeles County and Orange County primed the growth of the logistics industry which grew from 32,000 jobs to over 80,000 jobs between 1991 and 2008.
With the completion of the Alameda Corridor and the emergence of the Ports of Los Angeles and Long Beach as the largest ports in the U.S., shipping trans-Pacific goods from the booming Asian economies, San Bernardino County has evolved as the logistics and distribution hub for the 20 million resident Southern California market and into the rest of the nation. As the international economy recovers amidst tightening land availability for warehousing and transit, San Bernardino County is better positioned than other areas in the region to harness the opportunity to become an even more important logistics hub.
Interestingly, the closure of the George and Norton Air Force bases laid the ground work for the most extensive airport infrastructure in Southern California, thus promising an important role for the logistics industry in San Bernardino County as well as further opportunities in tourism.
In 1992, Ontario Airport served 6.1 million passengers annually and George Air Force Base in Victorville and Norton Air Force Base in San Bernardino were military installations. In 1998, Ontario International Airport relocated to a new 265,000 square foot terminal and the passenger count climbed to 7.2 million passengers in 2005 before declining to 4.9 million in 2009. Freight tonnage at Ontario International Airport has declined recently to approximately 400,000 tons in 2009, still higher than the 300,000 tons of freight transported in 1992.
The two military bases have been redeveloped as the Southern California Logistics Airport and San Bernardino International airport. These airports provide access to freight, airplane maintenance services, and commercial and general aviation use.
What might the future hold for San Bernardino County? As high housing costs elsewhere in southern California prompt younger and moderate income residents to search for a home in the Inland Empire, and large facilities such as warehouses and airports need more available land, San Bernardino County will continue to play a prominent role in the larger region. But its future economy will be shaped by a number of critical assets including military facilities and federal lands.
Overall, the role of the federal government cannot be understated, given that the federal government owns 81.4% of the land of San Bernardino County and the State of California owns another 2.1% of the land. While national parks and military facilities add to the tourism and services components of the economy, these outside institutions also wield substantial influence over the future of the county given the sheer amount of land outside of the control of local officials and residents.
The military is once again growing both in terms of jobs and purchasing power. Fort Irwin has increased to a daily population of over 22,000 personnel and Twentynine Palms Marine Base has almost 8,000 personnel. These military facilities have a rotating population of individuals who both add to the economy through residence, purchases and tax contributions, but also subtract from the greater benefit of the local area with so much land off¬limits to local control, wear-and-tear on government infrastructure and increased use of local government services.
Capital projects at these locations also impact the local and regional economy. Fort Irwin has plans to construct a Wind Turbine Energy Project on site, and Twentynine Palms is in the process of developing a large scale training center that requires more training land and airspace than is now available anywhere in the United States. A Center for Naval Analyses study shows that Twenty-nine Palms is the only location with sufficient land and airspace potential to meet the training requirements.
Bureau of Land Management Renewable Energy Projects
The Bureau of Land Management plays a large role in establishing land use patterns for ranching, mining, renewable energy and recreation. Notably and recently, the Bureau of Land Management (BLM) is gearing up to take advantage of incentive funding under the American Recovery and Reinvestment Act, by committing to full environmental analysis and public review for 31 renewable energy projects planned on BLM lands. According to BLM Director Bob Abbey, these projects are “the first generation of large scale renewable energy projects to be carefully sited on public lands over the next several years.” The initial project list includes 14 solar, seven wind, three geothermal, and seven transmission projects. Of these, three of the solar energy projects and two of the wind energy projects are located on BLM land in San Bernardino County.
National Recreational Facilities
The national forests and parks that lie within the county provide recreational and open space amenities as well as educational and volunteer opportunities for San Bernardino County residents. Further, visitors to the San Bernardino National Forest, Joshua Tree National Park, and Mojave National Preserve generate significant revenue for the local economy (www.nps.gov and www.fs.fed.us/).
Established in 1907, the San Bernardino National Forest was set aside as public land for the conservation of natural resources. Spanning 676,666 acres in San Bernardino and Riverside Counties, the San Bernardino National Forest provides Southern California residents and visitors with year-round outdoor recreation opportunities and facilities, as well as providing valuable watershed protection. The forest administration has several departments including Fire, Police, Planning and Permits, Recreation, and Roads, along with three Ranger Districts, and a scientific arm that deals with issues relating to cultural, water, soil, wildlife, plants and trees. Joshua Tree National Park is 792,623 acres, 591,624 acres of which are designated as “wilderness.” In 2008, the base funding for Joshua Tree National Park was $5,035,900, and the park welcomed 1,397,554 visitors, a 7.2% increase in visitation from 2007.
At 1.6 million acres, Mojave National Preserve is the third largest National Park Service area outside of Alaska. In FY 2007 Mojave National Preserve had 541,000 visitors. The number of visitors to Mojave National Preserve has increased 42 percent over the past decade, with sharp increases from 1998 to 2003 followed by a leveling off in the following five years. While overall visitation has been flat recently, the population in surrounding counties is expected to double by 2030 and preserve staff is predicting an increase in visitation in the long term. The preserve’s funding from all sources grew from $1.3 million in 1996 to $5.9 million in 2007.
In 2006, the National Park Service conducted a study of how visitor spending impacts the community around the park. This report estimated that the 537,000 visitors to Mojave National Preserve spent $6.9 million in local businesses with non-local visitors accounting for over 90 percent of this total. Spending by non-locals supported an estimated 127 jobs, added $2.5 million to the incomes of local employees, and provided an additional $1.4 million in profits and sales taxes to the local economy.
Additionally, preserve operations had a positive impact on the local economy. Mojave National Preserve employed 64 people on a full-time, part-time, or seasonal basis in 2006, totaling $3 million in salary. In addition, the preserve approached local businesses for contracting and purchases. As local consumers, the employees of Mojave National Preserve also spend part of their paychecks at local businesses. These direct and secondary effects of preserve operations accounted for 92 local jobs, $4.7 million in payroll, and $660,000 in additional benefits to the local economy.
San Bernardino County’s unique geographic, environmental, and economic characteristics offer significant benefits to residents, employers, and visitors alike. The county’s economy has shifted from agriculture, military, and mining to construction, logistics, and business and professional services. The county has weathered the construction boom and bust, and closures of prominent military bases. While there are human and social costs with the recent economic downturn, military facilities are once again growing and affordable housing is likely to remain a stronghold for San Bernardino County. The county is also well positioned for expansive growth in the logistics industry and renewable energy, but the significant influence of federal government as the primary land owner in the county remains an ongoing challenge.