THE SOUTHLAND FIRESTORM : Tallying the Losses : Little Long-Term Economic Impact Expected Despite Loss of 600 Homes

The fires sweeping Southern California should have minimal long-term effects on the region’s beleaguered economy, though there could be a brief falloff in tourism to Laguna Beach and a small boost in home-construction jobs.

In Orange County, where much of the damage involved expensive coastal luxury homes, the money spent on rebuilding will not be enough to nudge the county’s $75-billion annual economy out of recession. “This is not like Florida after Hurricane Andrew, where you had the wipeout of entire communities, with thousands of homes to be replaced,” said Esmael Adibi, director of the Chapman University Center for Economic Research. “It has been a tragedy, certainly, but as an economic event it just really won’t have a great impact.”

He estimated that only about 1,000 new construction workers would be needed to handle rebuilding the 310 homes destroyed in Laguna Beach--just a fraction of the 30,000 construction jobs lost in Orange County since 1990.

“People often overestimate the economic value of rebuilding after a fire,” said UC Irvine economist Amihai Glazer. “They talk about $1-million homes being destroyed, but they forget that half or more of the value is in the land, and the land is still there. It doesn’t have to be replaced.”

Moreover, though televised images of destruction may invoke memories of past riots, earthquakes and fires, economists believe that California’s image as a place to invest or visit will not materially change--assuming the fire damage does not increase appreciably in the days ahead.

Yet the fire did throw some local real estate markets into turmoil. And, of course, the toll is especially heavy for owners of the 600-plus homes destroyed by the blazes that have blackened more than 100,000 acres in six counties so far. Unofficial damage estimates were in the hundreds of millions of dollars.

Also affected were local merchants in fire-ravaged communities like Laguna Beach, which was virtually cut off from outside traffic Thursday. And real estate values in burned areas could be affected as potential buyers have second thoughts, at least in the short term.

“It’s going to be rough--prospective home buyers will be scared away,” said Fred Jenner, executive vice president of the South Orange County Assn. of Realtors. “But that’s only in the short term. In the long term, we still have what we have: the climate, the ocean, the small-town atmosphere. And nobody can take that away from us.”

President Clinton declared five California counties disaster areas, qualifying them for federal recovery aid. As of late Thursday, the pace of destruction was slowing as the weather turned more favorable.

The fallout from the fires should pale in comparison with that of past California disasters.

The April, 1992, riots in Los Angeles resulted in 53 deaths, more than $1 billion in damage, destruction or damage to more than 2,000 Korean-owned businesses and a resulting loss of jobs and income.

Similarly, the fire in the hills of Oakland, which happened almost two years ago, resulted in 25 deaths, the immolation of 2,900 homes and damage amounting to $1.5 billion, the most destructive fire in state history.

“This is not anything close to the damage they experienced up there,” First Interstate’s Sanchez said. He added: “These things tend to be very temporary, causing a short-term dip, but things come back fairly quickly.”

In Oakland, the fire was arguably a net boost to the local economy, as burned-out homeowners won generous insurance settlements, pumped money into construction jobs, upgraded their homes and saw their property values climb as new utilities and infrastructure went in.

But here in Southern California, the rebuilding is likely to do little to boost employment in the moribund construction industry. Industry experts expect nearly all of the homes to be rebuilt over the next two years at replacement cost of between $200,000 and $500,000 each.

That puts the reconstruction bill in Orange County at $62 million to $155 million.

The value of furnishings, landscaping, clothing and other personal items that fire victims will have to replace should double the spending, said Esmael Adibi, director of the Chapman University Center for Economic Research. Cleanup companies are also expecting a rush of new business.

Rebuilding should create as many as 1,200 on-site construction jobs over the two-year span, said Ben Bartolotto, an economist and research director of the Construction Industry Research Board.

That would boost Southern California’s construction work force of about 236,000 carpenters, roofers other tradesmen by about one-half of 1%.

The fires threw a shadow over hundreds or even thousands of pending real estate sales in areas affected by the blaze. Escrow firms were overwhelmed with calls from buyers and sellers who wanted to know how the disaster would affect their transactions.

“It’s been an absolute zoo,” said Sheryl Moore, a receptionist at Lockwood Escrow Corp. in Pasadena.

But a natural disaster does not mean potential home buyers will abandon an area. Annual havoc from hurricanes hasn’t kept Florida’s population from growing, and the fires that sweep through Southern California’s canyons every fall have not been a damper to population growth or business development in the past.

The aftermath of this week’s fires could be different, though, said James H. Renzas, executive vice president of Paragon Decision Resources Inc., an Irvine-based relocation consultant.

“You don’t see an immediate impact from these kinds of disasters,” he said. “Businesses don’t make snap judgments about moving. But these fires can be one more straw on the camel’s back, and who knows when the loan will be too much? The fact that so many of the fires were set by arsonists is significant. It is one more thing, added to the Los Angeles riots and drive-by shootings, that says we are an increasingly unstable society. And businesses looking for places to locate--or thinking about whether or not to stay--don’t like instability.”

A sign of how short-term bad publicity can be for consumers: Hotel occupancies in downtown Los Angeles are actually up about 20% from the previous year as memories of the riots fade. Moreover, now that the new convention center is built in Los Angeles, about 20 national associations have scheduled meetings through 1994.

At Coto de Caza, the gated canyon community where home builder William Lyon has a palatial $21-million estate, Marketing Director Tom Martin said the Ortega Highway fire burning “one canyon over” on Thursday shouldn’t matter to future buyers.

“The issues are more regional,” he said. “People may wonder whether they want to live in Southern California, but they are not going to get specific as to which valley or canyon they would avoid.”

A spokeswoman at Rancho Santa Margarita, the planned community immediately north of Coto de Caza, said fire has not been an issue in the 10 years homes have been sold there.

Like most developments laid out since the late 1970s, Rancho Santa Margarita was designed with fire suppression in mind. Wooden roofs are not allowed, most of the homes are stucco, which is more fire resistant, and a 100-foot “fuel modification zone” separates developed areas from the natural scrub and underbrush that burn so fiercely during a wildfire.

In a modification zone--designed to halt the spread of flames into built-up areas--the 100-foot width is divided into a 50-foot “wet zone” of irrigated, evergreen plants nearest the wilderness areas, with a secondary strip that is either cleared or planted with low-fuel material like grass.

It was just such a strip of modified plantings that helped stop a wall of flames that had threatened a group of $1-million model homes in the exclusive Newport Coast area of Newport Beach as the Laguna fire spread there Wednesday night. Leon Swails, chief executive of Bramalea California Inc., said the fire burned through a canyon in the Newport Coast development and raced up the steep slopes to the edge of his company’s building site, but stopped there.

“We had a fuel modification zone and that, coupled with the spectacular work of the firefighters, is what saved us,” he said. The Bramalea homes also had tile roofs and stucco exteriors that helped resist combustion in the tremendous heat.

By contrast, the areas of Laguna Beach that burned with so much damage to homes were neighborhoods of custom homes on heavily wooded slopes. And many of the houses that burned had wood shingle roofs.

Once the fires are out, lingering images of destruction and fears of subsequent mudslides could keep tourists away from popular Southern California venues for a while. But beyond Laguna, the fire publicity probably won’t result in major cancellations of major meetings or conventions. So far, none have been received, said Michael Collins, senior vice president at the Greater Los Angeles Convention and Visitors Bureau.

And even with fires still burning, it has been business more or less as usual in many places. On Altadena’s main shopping strip on North Lake Avenue, only a few blocks down from the fire lines, stores were open all day, said Leatrice Gloria Erlander, president of the Altadena Chamber of Commerce and Civic Assn.

In Pasadena’s Old Town shopping district, the tony Il Fornaio restaurant closed its patio because of smoke from nearby Altadena, but lunch trade was down only about 5%, said Manager Franco Micalizzi.

At the Homebase home improvement warehouse store in Laguna Niguel on Thursday the customer volume was normal, but the kind of merchandise people snapped up differed greatly from the usual: shovels, generators, flashlights, tarps, extinguishers and dust masks--especially dust masks.

“We had a table-full of dust masks earlier this morning, and they’re practically all gone,” said the store’s assistant general manager, David Gilloon.

The Fullerton-based home-improvement chain, which has five stores in Orange County and 12 in Los Angeles, is stocking up on items expected to sell rapidly over the next few weeks. Spokeswoman Carol Elfstrom predicted the rush will hit this weekend, after fire victims have had a chance to assess the damage. “People will be starting to put their lives back together.”

Times Staff Writers David W. Myers and Nancy Rivera Brooks in Los Angeles and Susan Christian in Costa Mesa contributed to this report.

Economic Impact of the Fires

Despite the spectacular nature of the fires, their impact on the overall economic life of Southern California is not expected to be major.

* Construction: All of the nearly 600 damaged or destroyed homes expected to be rebuilt within two years. Rebuilding efforts to create up to 1,200 new construction jobs.

* Real estate: Prices in fire-ravaged areas expected to drop temporarily, then recover in a few months as the rebuilding effort gains steam. Some pending sales will probably be thrown into limbo as buyers try to back out and sellers push to close.

* Insurance: Claims expected to top $200 million--not enough to seriously damage profits of large insurers. No increase in homeowners’ rates expected.

* Utilities: While no damage estimates are in, cost of repairing or replacing dozens of poles and transformers and miles of telephone and electric cable will run into the millions of dollars.

* Cleanup: Business at rubbish-disposal and trash-hauling companies is already soaring, as government agencies and homeowners start to remove debris. Orders for commercial-size trash bins already backing up.

* Tourism: No long-term impact expected, though a brief drop in visitors is predicted for Laguna Beach.