Costlier Housing, Stunted Work Force Linked to Initiative
The slow-growth initiative could cut the size of the projected employment force in Orange County by thousands and push the cost of housing up dramatically in the next decade, according to a draft of a Chapman College report commissioned by the Board of Supervisors.
The report, based on a much-disputed premise supplied by county officials that the initiative will cause a 15% drop in construction activity countywide, is being prepared by the college’s Center for Economic Research at a cost to the county of $10,000.
‘Reduce Economic Growth’
The first draft, a copy of which was obtained by The Times, concludes that passage of the Citizens’ Sensible Growth and Traffic Control initiative will “reduce economic growth and tend to raise housing prices.”
“Productivity and purchasing power will be reduced in the county as a result of a changing employment structure leading to lower real per-capita income figures,” the draft adds. “Finally, municipal and county tax receipts will decline because of the negative impact of the initiative on economic growth in the county.”
The overall effect, the draft says, is to reduce growth in employment, housing and personal income. The draft points out, however, that the initiative would not eliminate growth, as some initiative opponents have argued.
The draft analyzes six scenarios, ranging from passage of the initiative as it is expected to appear on the June ballot--making it applicable only in unincorporated areas of the county--to implementation in all of the county’s cities as well as unincorporated areas.
The scenarios also take into consideration questions about whether planned development covered by so-called development agreements will have to be modified under the terms of the initiative.
Among the findings, which are subject to revision, are these:
- By 1997, without the initiative, employment in the county would grow from the current level of about 1.1 million job holders to 1.4 million workers. If the initiative were to take effect throughout the county--within all of its cities as well as in unincorporated areas--the 1997 figure could be as low as 1.3 million.
- Between 1987 and 1997, without the initiative, personal income would be expected to grow at an annual rate of 3.96%, adjusted for a 5.3% expected average annual inflation rate. But in the most extreme scenario in the Chapman College report, again assuming the measure is adopted in all the cities and unincorporated areas, growth in personal income could average as little as 1.09% annually.
- Between 1987 and 1997, without the initiative, taxable sales are expected to rise at an average inflation-adjusted rate of about 3.96% a year. Assuming the initiative is adopted everywhere, taxable sales could grow at an average annual rate of only 2.84%.
- In the same 10-year period, without the initiative, the index of housing prices is expected to increase at an annual rate of about 1.41%, adjusted for inflation. But with the initiative, the index could increase at an average annual rate of as much as 4.69%.
“There are no surprises,” Board of Supervisors Chairman Harriett M. Wieder said of the draft. “It’s what we all expected.”
Supervisor Roger R. Stanton said the draft “proves the law of supply and demand. . . . As supply is reduced, costs increase.”
After scanning a copy of the draft late Wednesday night, John Erskine, executive director of the Orange County Building Industry Assn., said: “It looks favorable to our position,” a reference to BIA opposition to the slow-growth initiative.
Spokesmen for the Irvine Co., the Santa Margarita Co. and other development firms said they needed time to study the report before commenting on it.
The draft cautions that the study is based on the 15% drop in construction activity assumed by analysts at the county’s Environmental Management Agency. That key assumption is neither endorsed nor criticized by Chapman’s economists in the report, which considers no other construction scenarios.
The draft also cautions that the findings depend heavily on how many cities adopt versions of the the initiative similar to the measure affecting unincorporated areas that qualified recently through a petition drive for the June ballot.
Tom Rogers, co-founder of Orange County Tomorrow, the citizens’ group that drafted the slow-growth initiative, angrily denounced the Chapman study Thursday as “totally biased” because of the assumption of a 15% construction cutback.
“They (county supervisors) should throw it in the waste basket,” Rogers said. “They should have asked for a study that has no built-in assumptions.”
James Doti, dean of Chapman’s economics department, declined to discuss the findings until the final report is released in a few days.
County officials defended use of the projected 15% drop in construction activity, saying that it was based on estimates of the number of small, marginally profitable developments that no longer would be economically sound if the initiative passed.
Rogers rejected such arguments Thursday. He said there is no way to predict what kinds of alternative projects landowners might pursue.
The initiative would condition future growth on the capacity of roads and emergency services to handle additional traffic and workloads. The initiative would also set strict standards for traffic flow and emergency police and fire response times. In addition, the measure would require developers to set aside more land for parks.
However, developers would be allowed up to three years to provide or pay for all of the required improvements.
The final Chapman report is expected to be released Monday. County supervisors are scheduled to receive a briefing on the draft today.
