Crime: Business Is a Victim, Too : Random violence has ruined business along once-fashionable Southern California strips and added to the blight in the industrial core. Estimates of the cost to the state reach $33 billion a year.

Along a drab stretch of Sepulveda Boulevard in Van Nuys, gang shootings, prostitution and drug dealing became so common in 1992 that dozens of small businesses there finally took matters into their own hands.

Taking their cue from the neighborhood watch programs of residential areas, the business owners formed a block watch along the strip of auto parts shops, furniture outlets and convenience stores.

And if crime has not disappeared over the last 18 months, the atmosphere has gotten a lot better--and the community’s fear has subsided.

“The look of (Sepulveda) right now is so much vastly improved over a couple of years ago, and the business watch is single-handedly responsible for that,” said Police Capt. Jim McMurray, who works with the program.

Crime’s consequences for business--and for the entire California economy--are getting increased attention at a time when violent crime has emerged as a top public concern.

Increasing awareness of the cost of crime is leading businesses across Southern California to join forces.

Los Angeles Mayor Richard Riordan has made public safety the cornerstone of his economic development plans. President Clinton has brandished a Business Week magazine estimate that crime costs the U.S. economy $425 billion a year.

Though illegal activity itself is actually declining, its cost is a growing burden for financially strapped local governments. In Los Angeles County alone, the most violent crimes caused $2.8 billion in direct losses in 1992 by one estimate, equal to 1.2% of the county’s gross domestic product that year.

The financial impact is often far-reaching--and sometimes devastating:

* Thieves steal $1 million worth of cargo every day from trucks and truck terminals in Southern California, according to the Los Angeles County Sheriff’s Department’s Cargo Criminal Apprehension Team, or Cargo CATs. The problem is worsening even with aggressive enforcement efforts.

* An average of five financial institutions were robbed in Southern California each business day last year. While the number of robberies has fallen more than a third from 1992 levels, Southern California is still known as the bank robbery capital of the nation.

* Highly publicized crimes in the 1980s helped to drive customers away from Westwood Village. That district continues to struggle now, though crime has long since dropped off. In Old Town Pasadena and downtown Long Beach, both resurgent entertainment areas, merchants and officials are investing heavily in efforts to prevent anything similar happening.

* In Orange County, the most recent annual survey of business leaders--conducted by UC Irvine’s graduate business school--found that a rising number of executives--22% in 1993, from less than 4% in previous years--considered crime a major issue for the county.

For a compelling case study of what crime can do to a business, take Delta Floral Distributors.

Co-owner Archie Defterios moved his 70-employee wholesale flower distribution business from near Los Angeles International Airport into South-Central Los Angeles six years ago, because he needed space to expand.

Now, he said, he may move back west because crime is costing him too much.

“Petty thieves,” he said. “Everything has to be put inside under lock and key. They steal our wood pallets. . . . They destroy our trucks. They’ll break a windshield. . . . They dump trash all over and the city’s on my back all the time to clean it up. It’s just a nuisance.”

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The costs add up: about $800 to fix a truck, $500 a week for a security guard, $10,000 a year to repair chain-link fences that are regularly cut. That’s not even counting the toll on his employees, who fear being robbed on their way to work, he said.

“If I could find someone to take over the building, I’d leave,” Defterios said. “And I don’t want to do that.”

Many of crime’s costs are attributable to fear and the steps people take to avoid being victims.

“It’s not so much the completed crimes that are costly,” said Mark A.R. Kleiman, an expert in the economics of crime and an associate professor of public policy at Harvard University’s John F. Kennedy School of Government. Rather, he said, it’s “the precautions that people take against crime--leaving town, putting in double locks--that are very costly.”

Clorox Co., headquartered in downtown Oakland, said it spends more than $500,000 a year for an elaborate security system to protect its employees and property. That is about three times what the company spends on research and development, said spokesman James O. Cole.

The irony is that crime has been declining in the state. The number of violent and property crimes fell in 1993, with the exception of murders, which nevertheless are a tiny fraction of overall crime, state statistics show. The crime rate in California--the number of crimes per 100,000 residents--is actually down roughly 13% from a peak in 1980.

Yet Ted Miller, an economist and director of the safety and health policy program at the National Public Services Research Institute in Landover, Md., has figured that a single instance of assault in California costs $13,629 in medical expenses, lost wages, lost quality of life and other items. A rape costs $61,101; a murder, $2.9 million.

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Based on those figures, Miller’s calculation for The Times concluded that the four most serious violent offenses--murder, rape, robbery and assault--cost the California economy about $5.9 billion in direct monetary losses in 1992, and a further $27 billion attributable to the effects on the victims’ lives.

The direct costs include payments for medical care, insurance, rehabilitation and lost wages. Quality-of-life costs are computed from typical jury awards for pain and suffering, estimates of lost quality of life due to injuries or fear and the costs attributable to efforts to ensure safety.

The $5.9 billion is 0.75% of the state’s gross domestic product in 1992. By comparison, California spent $13.7 billion for police, prosecutors, courts, probation officers and prisons in the 1991-92 fiscal year, according to the state Legislative Analyst’s Office.

In Los Angeles County, the same set of crimes resulted in $2.8 billion in direct costs and $12.7 billion in quality-of-life costs in 1992, Miller estimated. The direct cost was equal to 1.2% of the county’s gross domestic product.

Along Sepulveda Boulevard in Van Nuys, merchants eventually got fed up with the cost of crime.

One afternoon last summer, David Hession was in his office at Lance’s Chevron station, at Sepulveda and Roscoe boulevards, when a group of youths chased another youth into the garage and shot him in the shoulder. Just a few feet away, a mechanic was helping a customer work on a car.

The youth survived, and police quickly arrived, but the assailants fled and no arrests could be made, Hession recalled.

“I was a little nervous afterwards,” he said. “It kind of makes you think what can happen to you in a split second.”

Flip Smith, who has run a tire store in the 7700 block of Sepulveda for 22 years, and other local business owners decided they should band together to do something about crime.

Last year, with the help of local police, they formed their business watch program. Merchants would talk with each other, keep an eye out for each other and take responsibility for their own premises. About 370 businesses are involved, and there are 12 block captains, Smith said.

The merchants now supply cards that can be given to panhandlers in lieu of spare change. The cards refer the receiver to social services. And the telephone company was persuaded to remove some pay phones and block calls to phones frequented by drug dealers.

Some businesses, such as Lance’s Chevron and neighboring Galpin Ford, agreed to improve their lighting at night. Others hired private guards. A median strip has been planted with flowers. Trash is picked up regularly, graffiti eradicated promptly.

The impact of the efforts on crime in the area is unclear. L.A. Police Department Deputy Chief Mark Kroeker, at a crime summit sponsored by Gov. PeteWilson in February , said that crime has not abated as much as was hoped, though it has begun to drop.

Still, the area looks better, business has picked up and customers feel more secure.

“We used to hear a lot of comments about the prostitution around here, and the occasional shooting,” said Royce Walker, a vice president at West Coast Propane on Sepulveda. “But there hasn’t been any for a long time, more than a year or so. So I guess it’s working.”

Even where crime has not been a big concern, the steps people take to avoid being victims cost them money, time, and, ultimately, a measure of freedom, experts say.

Consider Old Pasadena, the renascent urban village of theaters and sidewalk cafes on the edge of the San Gabriel Valley.

On a recent Friday night, the air in Old Town was filled with music as a racially diverse crowd jammed the sidewalks to stroll, take in a movie, have a bite to eat.

The success of Old Pasadena--which was a skid row of boarded-up storefronts a few years ago--is crucial to the city and its new image as a hot spot. Officials and merchants are eager to protect it.

Old Town is booming, but city officials and merchants are haunted by what happened to Westwood Village, the once-bustling entertainment and shopping district near UCLA. The village became a commercial ghost town partly because people grew fearful of going there. The crowds vanished after the highly publicized fatal shooting of a shopper there in 1988, and subsequent crowd rampages.

Pasadena is spending hundreds of thousands of dollars to avoid a repeat of that, though police say crime is not a serious problem in Old Town. Crowds have grown--up to 25,000 on a weekend night--and so have reports of crime--but most incidents have been minor ones related to drinking in Old Town’s more than 60 restaurants and bars. Still, there have been calls for the city to restrict the issuance of liquor licenses.

There are plans, too, to open a police substation in the One Colorado shopping plaza in space donated by the developer, One Colorado Inc.

The developer is chipping in $10,000 for expenses and is offering to make the city an interest-free loan of $45,000 for improvements, said local merchant Jack Daniel Smith, president of the Old Pasadena Business and Professional Assn.

Also on the drawing board is a proposal to spend up to $5 million to improve lighting, install benches, clean up alleys and make other improvements, Smith said.

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The city has boosted the presence of police in the four-block heart of Old Town: As many as 10 officers walk beats here on weekend nights. From July to January, the city paid $124,000 in overtime to off-duty police on foot patrols, and that expense is likely to continue, police officials say.

To avoid problems of the kind that plagued Westwood, police are being vigilant about the city’s 10 p.m. curfew for those under 16.

“I feel totally safe down here,” said Pasadena resident Roy Williams, strolling through Old Town on a Friday night. “I just saw two sets of cops and a police car . . . how could (anyone) possibly do any damage?”

Yet there is an unspoken undercurrent to discussions about crime prevention, particularly in areas like Westwood Village or Old Town Pasadena that attract white, middle-class patrons: The efforts to prevent crime are aimed at low-income minorities, particularly black and Latino youths.

“I don’t like the white mentality, where they’ll go and they’ll have an area . . . and as soon as some color comes there, boom! They say, ‘Oh, no! Let’s go--there goes the neighborhood,’ ” said Terry Hendrix, a 30-year-old black house painter who visits Westwood Village regularly.

But merchants and officials in both Westwood Village and Old Town Pasadena deny that race is a consideration.

“That’s not our concern,” said Chipper Pastron, co-owner of the Market City Caffe in Old Town and chairman of the security committee of the Old Pasadena Merchants Assn. “Pasadena . . . is a very culturally mixed community, and most of the people who live around here are culturally diverse.”

In Westwood Village, the fear of crime has been costly, though police statistics show the village now has fewer holdups, car thefts and assaults than parts of adjacent Beverly Hills.

Village merchants blame the decline in part on news coverage of the 1988 killing of Karen Toshima of Long Beach, a passerby who was caught in gang cross-fire, and of the 1991 rampage by hundreds of youths who were turned away from the premiere of the film “New Jack City.”

Others say that Westwood’s transformation from a sleepy campus district to a fun zone catering primarily to teen-agers--with fast food, T-shirt shops and video arcades--drove out more mature patrons.

In any case, where the sidewalks once teemed with visitors, crowds are now sparse. Along Westwood Boulevard, in the heart of the village, half a dozen stores are vacant. Rents have fallen to $2 or $3 a square foot from a peak of $5, said Thomas Carroll, executive director of the Westwood Village Management Corp.

At Alice’s restaurant, which has occupied its site on Westwood Boulevard since 1969, business is off 30% to 40% from a mid-1980s peak, owner Tim Hall said.

Boosters say Westwood Village is poised for a rebirth. Several restaurants and stores, including a 24,000-square-foot Circuit City, are to open there this year.

The Westwood Village Management Corp., meanwhile, is overseeing a proposal for a $2.8-million refurbishing that will improve street lighting, widen sidewalks and otherwise fix up the district.

But a renaissance apparently is a way off.

Norman & Sons Fine Jewelry moved to Westwood Village three months ago after 12 years in Manhattan Beach, where the decline of the aerospace industry had put most of its customers out of work.

Now, after weeks in Westwood with few customers, owner Alan Cohn says that moving was “a big mistake. . . . The quality of the shoppers is not there.”

Crime’s Economic Cut

The costs of crime in California are becoming increasingly clear--and they are significant. The four most serious types of violent crime cost the state’s economy more than $5.9 billion in 1992, according to one estimate. The costs, in millions of dollars:

Cost Rape Robbery Assault Murder All Medical care $22 $78 $340 $46 $486 Mental health care 185 57 98 24 364 Emergency services 6 36 85 7 134 Lost productivity 126 368 833 3,488 4,815 Administrative 1 7 76 42 126 Total direct cost 340 546 1,432 3,607 5,925

Sources: Children’s Safety Network Economics and Insurance Resource Center; National Public Services Research Institute; Landover, Md.