VICA’s Optimism on Valley’s Economy Seems Well-Founded

The Valley Industry and Commerce Assn.’s annual crystal-ball session was filled with such gloom about 1994 that it was more like a funeral procession than a forecasting conference. VICA includes more than 400 member businesses that employ some 250,000 people. So, are there plausible reasons behind its members’ predictions for a robust San Fernando Valley economy in 1995? Well, after picking through the tea leaves a bit ourselves, we cautiously agree for several reasons.

Yes, Valley consumers have turned out in droves for the new Christmas shopping season, but there is better anecdotal evidence. Don’t forget that a lot of the major Valley merchants only recently reopened and some of that surge in purchasing may have represented a general exultation over that aspect of quake recovery.

There have been less seasonal, but steady increases in consumer purchasing that have more to do with the recovery in the Valley from the most costly natural disaster in U. S. history--the Northridge earthquake. We’re talking about the replacement of major home appliances and related items, among other things.

Also, according to an official of the Sherman Oaks-based TransWorld Bancorp, there has been a major infusion of funds from Federal Emergency Management Agency grants, Small Business Administration loans and earthquake insurance settlements. As the work orders for ecstatic building contractors pile up (translating into months and months of guaranteed business), a lot of that money is sitting in the banks, waiting to be used. For the banks, it all creates more funding for loans.

TransWorld, the Valley’s oldest and largest independent bank, says that deposits are up 20% this year and that net income has soared by 86%. A year ago, Glendale Federal Bank was so bad off that it was on the verge of seizure by federal regulators. This year, it posted its first quarterly profit since 1991. Chatsworth-based Great Western Financial Corp. lost $17.5 million in the September quarter last year. It posted a profit of $57.2 million during the same period this year. Encino-based CU Bancorp reduced its non-performing assets from $30 million to about $113,000 in the past year. Its profits, during the first nine months of this year, are up 23% over last year. Sherman Oaks-based American Pacific Bank hit an all-time high in terms of assets this year.

In real estate, it’s true that the Valley continues to lag behind the Southern California market. Yet there are glimmers of hope here as well, despite the uncertainties that may be presented by rising interest rates, prices, and stiffer building code requirements.

Some real estate experts, for example, are predicting that prices will stabilize and that there will be double-digit increases in home sales in the Valley in 1995. But we have more than predictions here. Realtor Fred Sands, who has seven offices in the San Fernando Valley, has also said that home sales are running 25% ahead of last year.

We’re not through yet.

Car leasing and new car sales are booming in the Valley. Some General Motors dealerships, for example, are showing sales gains of 9% to 16% over last year. Many other car brands whose sales had been stagnant or declining since 1990 are also finally enjoying brisk sales.

Marvin Selter, chairman of the board of the Van Nuys-based National Staff Network, says that the Valley is far exceeding the only incremental increases in the hiring of temporary employees that have been recorded around the nation. His own business is up 15% over last year, and Selter is projecting a 20% increase for 1995, much of it in light manufacturing.

Earnings are rising and exceeding expectations at the Walt Disney Co., the Burbank-based entertainment giant. And George Vradenburg III, executive vice president for Fox Inc., has more to add about the entertainment industry’s prospects.

Vradenburg says that folks are flocking to the cinemas at a rate that exceeds the 10-year average by some 20%. Moreover, there have been double-digit increases in videotape sales as people continue to acquire and build on their own movie libraries. And what’s good news for the local entertainment industry is good news for the Valley. More than half of the employees in the Los Angeles film industry live in the Valley, Vradenburg says. One-third of the vendors for the film industry are in the Valley, and 15% of the filmmaking activity occurs here.

The economic climate also figures to improve for northernmost Los Angeles County, with a forecast of mild, but consistent economic growth from the economist who predicted the recession there four years ago. There, home prices appear to have bottomed out and folks are anticipating an increase this year in sales tax revenue in Palmdale, Lancaster and Santa Clarita. Six Flags Magic Mountain sped up the timetable on a major expansion, and a plan for 25,000 new homes and 70,000 residents (to be called Newhall Ranch) was also unveiled this year.

Dun and Bradstreet, which gathers business information on such matters as credit worthiness to sell to its clients, even chimed in with a major study that said that the Northridge quake had failed to derail the slowly recovering Southern California economy.

“No one was more surprised than us,” admitted David Kresge, the firm’s senior vice president of analytical services, when the analysis was released in October. And a copious analysis it was, involving 20,000 firms within a 40-mile radius of the Northridge epicenter.

To be sure, the quake was a disaster for many, but D & B said that the timely repair of roads and freeways and the local economy’s growing strength before the quake prevented much worse, long-term damage.

Thus, there appears to be good reason for VICA’s optimism, and such promising news is long overdue.