BUSINESS WAVE IN BEACH TOWN : Once-Drowsy Huntington Beach Begins to Attract Developers, Small Companies

A quiz:

Of the 500 fastest-growing privately owned companies in the United States, 11 are in Orange County.

But which city in the county has the most? And what kind of companies are they?

Irvine and high technology are answers that readily come to mind.

But they are wrong.

One city was home to four of the 11 county-based firms ranked among the nation’s fastest growing by Inc. magazine, and all four are decidedly low-tech: a security alarm installer, a golf club maker, the manufacturer of a line of spa and hot tub controls and a firm that fabricates and installs plastic liners for storage tanks, industrial ponds and the leaching pads used in many gold mining operations.

And that city wasn’t booming Irvine or bustling Anaheim or even born-again Santa Ana.

It was Huntington Beach, the laid-back home of surfers and sunners, a place where the “business” community is most often thought of by outsiders as an agglomerate of beachside bikini shops and strip commercial centers.

But the once-drowsy bedroom community--the county’s third-largest city with 185,000 residents and 8.5 miles of some of the best and most accessible beach in Southern California, has woken up to the realities of late 20th Century.

The need for a stable source of revenue has propelled the city into active pursuit of business development after nearly 20 years of explosive population growth that fostered a large real estate industry but little else.

And while city-sponsored redevelopment is a major element in Huntington Beach’s commercial awakening, private entrepreneurs operating without benefit of redevelopment funds have been making inroads of their own in recent years.

None of the Huntington Beach-based companies that were ranked among the nation’s fastest-growing private firms last year is in a redevelopment area, for example.

Two of them, Brett Aqualine, the spa controls maker, and Greater Alarm Co., which installs electronic alarm systems, were founded in 1982; Slotline Golf began in 1975, and Serrot Corp., the plastic liner company, was founded in 1978. All began in Huntington Beach, and all four are in small developments in the two areas of the city set aside for light industrial development.

Both Jim Brett, co-founder and president of Brett Aqualine, and Bill Torres, founder and president of Serrot (Torres spelled backward), said they have found the city’s business climate to be a comfortable one and that city officials are generally easy to work with.

Brett, a Huntington Beach resident, said he chose to start his company there largely because he found an acceptable facility before he had to go looking in another town.

Least Costly Rents

Torres, who lives in Newport Beach, said Huntington Beach provided the least costly rents within a reasonable drive from his home when he began looking for a site. And five years ago, when he bought a lot and began building his own facility, he chose Huntington Beach--and the same industrial park in which he had been renting--because land costs were still less there.

It says something about the city’s growing desirability as a business site that land for light industrial buildings now runs about $17 a square foot, contrasted with $6.90 a square foot when Torres bought in 1983.

Those prices, and the leasing rates for commercial and industrial space in the city, are competitive with rates in other cities, including Irvine and Newport Beach, which are considerably more visible as commercial centers.

Being located in Huntington Beach has also apparently helped companies such as Serrot and Brett Aqualine find and keep a stable corps of workers.

Serrot grew from a few dozen employees and $3.8 million in sales in 1985 to $9.3 million and 60 employees in 1986, for which it made the Inc. magazine listing. In 1987, Torres said, the company posted another quantum leap, ending the year with $15 million in sales and 100 workers.

Brett Aqualine grew from five workers and $104,000 in sales its first year to $9.4 million and 50 employees in 1986 and $15 million in sales and a payroll of 75 at the end of 1987.

The sizable increases in employment, particularly at companies that need skilled production and manufacturing people, can be a problem in some areas of the county, where soaring housing prices have forced out lower-paid semiskilled workers.

But neither Brett nor Torres recall difficulties in finding workers locally. Because the city offers a fairly broad range of housing, almost all of their companies’ employees live in Huntington Beach, the two said.

Formerly Pacific Beach

That wide range exists in part because the city is old by county standards. It was founded in 1901 as the resort town of Pacific Beach, to be renamed two years later as part of a successful effort to flatter magnate Henry Huntington into extending his Pacific Electric trolley line into town.

Its age means that Huntington Beach has a stock of rental housing that was built long before land prices and interest rates made development of rental units prohibitive for many. Also, because its residential building boom began in the mid-1960s, there is a fairly large stock of 20-year-old resale housing available at reasonable prices relative to the region.

While the city for several decades has been expanding inland, it is now turning back to the beach areas that spawned it.

“Huntington Beach has awakened to the fact that it has one of the most precious natural resources in the state with its eight miles of beaches and the parking along that beach front,” said Steve Bone, executive director of the Robert Mayer Co., the Newport Beach firm that is developing a 44-acre, $345-million residential and tourism-oriented project on Pacific Coast Highway.

“The community grew in the ‘70s as a suburban residential community and only now has awakened to fact that there is a need for a retail business base to support the expectations of the community,” Bone said.

The Mayer project will consist of four hotels with 1,450 rooms among them, plus 75,000 square feet of retail space, a tennis and recreation facility and 875 condominiums.

“Two years ago, our concept was foreign to city officials,” Bone said. “But now they understand and grasp it and want it. This is a city that wants to join the other beach cities around here that enjoy luxury amenities.”

In the past, Huntington Beach did not need retail and business tax revenue because of its oil and property taxes, Bone said.

But as its revenues fail to keep pace with costs in the face of dwindling oil and frozen property values, the tax base that a solid business community can provide becomes critical to the city’s ability to provide services, city development director Douglas La Belle said.

It has taken Huntington Beach an inordinately long time to begin actively pursuing business development because, as the city grew from 11,500 in 1965 to 178,500 in 1985, it was all officials could do to keep up with the residential development demands, La Belle said.

Also, the lack of a freeway system--even of an easily navigable system of surface streets in the downtown area near the beach--has hurt development in the past, as has the abundance of oil-producing properties in the downtown and along the coast.

Because so many people held access rights to the various downtown parcels under terms of often-decades-old oil leases, it was difficult to consolidate enough property under one ownership to make development economically feasible, La Belle said.

“But now, the value of the land is beginning to exceed the value of the oil being pumped,” he said, “and we’re seeing more and more (oil properties) being consolidated under one owner, and we are seeing some abandonment (of wells that are no longer economical to operate).”

The value of a downtown revitalization is clear to city officials, who report that the businesses included in the downtown redevelopment area generated $600,000 in tax revenue for the city last year but will generate about $8 million a year when the development is completed.

At the inland edge of the city are Huntington Center--the city’s only major retail area and one of the oldest shopping malls in the county--and the new Pacific Plaza commercial office center, a cluster of glass and steel mid-rise buildings poking up out of what until now has been a skyline of buildings one and two stories tall.

Both centers are in a redevelopment area, with city-sponsored traffic system improvements among the incentives that brought a sizable expansion and renovation to the mall and fostered construction of the commercial center--which includes a still-unopened 220-room hotel.

The two centers are just 5.5 miles from the downtown by map, but they are at least 15 minutes by car on surface streets--the only way people can move around in motor vehicles in Huntington Beach, one of the most freeway-free cities in the county.

Still, while the absence of a major transportation corridor has hindered development in the past, some business leaders believe it now may be what is hastening business development the most.

A high-demographic residential area that included the posh, boating-oriented community of Huntington Harbour grew up on the northwestern edge of the city during the housing development boom of the ‘70s. Many of those homes, according to local banker Philip Inglee, were bought by business owners.

While they could commute to offices and factories in Los Angeles County from their luxury homes in Huntington Beach during the early part of the decade, the region’s ever-worsening traffic congestion finally got to a lot of them, Inglee said.

“So they began building their businesses here in Huntington Beach so they wouldn’t have to fight the freeways,” he said. “And now, with our location just about halfway between San Diego and northern Los Angeles County, and our big stock of upper middle class housing, more and more people are seeing that they can live here and locate their businesses here and don’t have to drive anymore.”

Inglee, president of Liberty National Bank and co-chairman last year of a business outreach conference jointly sponsored by the city and the Chamber of Commerce--the city’s first effort at overtly wooing business--said his bank has financed “a dozen or 15 industrial buildings in Huntington Beach in the past few years for people who live in Huntington Beach.”

According to city records, more than 13,500 businesses licenses are listed in Huntington Beach. And while some of those businesses no longer are active and some of the licenses are for part-time, at-home operations, there are an estimated 10,000 active businesses in the city, chamber of commerce officials say.

That ranks Huntington Beach in the top five cities in the county for the number of businesses it is home to, according to data compiled by Contacts Influential, publisher of regional business directories.

“The very nature of our freeway system,” Inglee said, “has made Huntington Beach a good place for business, without anyone really planning it.”