Report Details Gulf’s Impact on Oceanside

A preliminary federal study says the massive deployment of Marines to the Persian Gulf hurt Oceanside’s economy by contributing to a 33% drop in hotel tax, a doubling of apartment vacancies and a 3% dip in sales tax revenue.

The findings from the Department of Defense study give the first detailed glimpse at how the deployment of 21,000 troops from Camp Pendleton monetarily harmed its neighboring community.

“The magnitude of it and the general recession have had a staggering effect,” said Mayor Larry Bagley, who backs the study’s figures.

However, the city’s finance director, Carl Husby, criticized some of the figures as misleading, saying they do not sharply distinguish between the economic injury caused by the deployment and that caused by the overall recession.

“Everything’s speculative, nothing is concrete,” he said.

When the first Marines shipped out in August, many downtown merchants catering to the military trade complained that business had suddenly dropped by as much as 50%.

By November, the city learned it faced a $5.8-million budget deficit, caused mainly by the recession’s damage to the local housing market and growth-related city fees. But an additional drop in sales tax revenue was largely blamed on the loss of the Marines.

Seeking a clearer picture of its economic troubles, Oceanside officials began working with the Department of Defense in late January as part of a federal effort to evaluate how the Persian Gulf situation was affecting military communities.

A Virginia-based firm, Logistics Management Institute, undertook the department’s study of Oceanside. Other studies focus on the communities surrounding Ft. Hood in Texas, Ft. Campbell in Kentucky, Ft. Stewart in Georgia, Camp Lejeune in North Carolina and Twentynine Palms in San Bernardino County.

Initial findings show the Camp Pendleton deployment may have helped bring victory over Iraq, but contributed to the economic decline back home.

The figures show that a 7% apartment vacancy rate before the deployment had more than doubled, to 14.5%, by February. The conclusion was based on a survey of 36% of the city’s 17,466 apartment units.

The study also found Oceanside’s revenue from its motel and hotel bed tax was off by 33%, “at least partially attributable to fewer military reservations.”

The link between the city’s economic vitality and the military population is underscored by the report, which notes that Camp Pendleton’s normal troop strength is 36,000 and that the deployment reduced the city’s military population by 10,500.

According to the report, “one could expect the purchase of goods and services in the city of Oceanside to decline by about 5%” because of lost military purchasing power.

However, the report inexplicably concludes that the deployment cost the city 3% in sales tax revenue. Richard Kinnier, who is overseeing the study for the Department of Defense, could not be reached for comment Wednesday.

The report’s survey of local businesses shows that sales continued to decline during the nine-month deployment. Yet employee layoffs were small, suggesting that businesses considered the drop-off to be temporary.

Neither the report nor the city had actual dollar figures to correspond to the percentages of reduced revenue. Bagley said that the final report is expected to be more detailed, but that the early figures support the city’s belief that the deployment clearly contributed to its fiscal troubles.

“I’m not surprised,” said Bagley, who hopes the report will boost Oceanside’s plans to seek federal funds to offset the deployment’s impact. However, when the Department of Defense offered to conduct the study, it made no promise of reimbursement for lost revenue.

Although Bagley believes the study is useful in assessing Oceanside’s deployment-related financial condition, city finance director Husby considers the report seriously flawed.

He flatly disputes the 33% figure for lost bed taxes, saying that “it certainly is down, but nowhere near that. I think it will be something like 5%.”

He also questioned the report’s conclusion that the deployment alone produced a drop in sales tax revenue. “The thing is, we saw signs of a slowdown in the economy long before we even knew they (the Marines) were even going,” he said.

The report is cautious in discussing the sales tax.

It says there was no actual drop in sales tax revenue, just that revenue should have increased 3% during the deployment but didn’t. “The absence of any growth despite population increases suggests the deployment had an adverse impact of about 3%,” the report says.

Still, if 3% is a reliable number, it would be significant: The city projects its total sales tax revenue during the deployment period at about $5 million.

Nearly all of the Marines have returned from the war, and Husby is confident that, regardless of the fiscal impact during their absence, the city will recover.

“The deployment was a temporary glitch,” he said. “Nine months wasn’t that long a time. It’s all recoverable.”