Economic impact of the Napa, Sonoma, Mendocino fires

Along Cleveland Ave. in Santa Rosa, Puerta Vallarta Restaurant burns to the ground, Monday Oct. 9, 2017. (Kent Porter / Press Democrat) 2017

GARY QUACKENBUSH,

FOR NORTH BAY BUSINESS JOURNAL

While North Bay fires continue to burn, business leaders, bankers and economy watchers have started thinking about recovery and what form it may take in coming weeks and months.

Gary Hartwick, CEO of Exchange Bank, said the greatest need both before and after the disaster is for housing, and now with some 2,854 homes destroyed to date within the city limits of Santa Rosa alone, the need is even greater.

“Where are people going to live, especially our local workforce. Those of us in the banking industry along with insurance carriers and FEMA officials are still waiting for federal disaster relief guidance concerning regulatory assistance. Right now we all have to work through the cleanup process before construction can begin.”

Hartwick said Exchange Bank has a history of helping to rebuild the community dating back to the 1906 earthquake and is ready to do so again.

He said the bank has already put in place a series of steps to help its customers, including low, fixed interest loan rates, forbearance on outstanding credit, payment deferrals, and interest only draw down emergency loans up to $5,000.

“We are also assisting those without IDs, credit cards and checkbooks lost or destroyed gain access to their funds and have been cashing checks for other institutions during this crisis.

“What we need now is for the city and county to streamline and put in place an expedited permitting system to handle the flood of new construction and rebuilding applications that will soon arrive.”

Bank of America Merrill Lynch North Bay Market Senior Vice President Massey Bambara said, “We are glad that mobile banking and other applications are making it easier for customers to have a link to their accounts and make payments. We also understand that installments may be missed. We are aware of what can happen when assets are lost and personal funds are tight. We’re all in this together and have to help each other get through it.”

Economist Robert Eyler, Ph.D., president of Forensic Analytics and dean of the Sonoma State University School of Education and International Studies, sees the future as involving three major issues: reconstruction, where and what groups of people will rebuild, and the timeline for accomplishing this enormous undertaking.

“Many who have lived in the area for a number of years may profit from rising equity and valuation of their homes and will benefit from insurance payouts. However, some may decide to leave the region to start over. The magnitude of this go, or don’t leave the area, approach will be strongly felt here locally.”

He said another aspect is how many workers will be impacted by this disaster, and for how long. Where is the lodging for displaced workers or will demand be so great labor will have to be imported from other areas, along with additional construction firms to help cope with this widespread crisis. Even with the high cost of workers compensation, he does not see this as a deal breaker for builders and developers. But high demand and lower supply may put upward pressure on housing costs during the recovery.

“Those who previously shopped at K-Mart will probably not go to retail outlets in other counties but rather stay local. But there could be a negative impact this year on holiday spending.

Dr. Eyler noted that environmental considerations related to remediation come at a price, especially when debris from demolished structures is considered to be toxic waste subject to special handling and higher tipping fees.

Those with commercial insurance may elect to move to a different location, while most residential homeowners could decide to rebuild on their original sites.

Tourism could be affected to a greater extent than the wine industry. This year’s harvest is almost over and fewer than 15 wineries suffered total or partial damage. The roads in Sonoma and Napa counties will not remain closed or impassable for long, yet some tourism assets in our region have been marred. Hotel space has been absorbed by those displace or evacuated causing some weekend visitors from the Bay Area to defer or postpone trips to the North Bay, or vacation elsewhere.

On the positive side, Dr. Eyler noted that federal and state dollars plus insurance payouts will provide much needed capital, however, he sees a need for a collective, strategic approach involving public and private entities to be in a position to benefit from this monetary infusion.

“We simply do not have the full scope of this devastating firestorm, but it is not too soon to begin planning for recovery,” he said.

Cynthia Murray, CEO of the North Bay Leadership Council, is concerned about the urgent need for housing and whether or not homeowners have enough fire insurance coverage to rebuild based on the market value of their dwellings. “Some people have had to go as far south as San Mateo to find a hotel room with virtually every room taken north of San Francisco.”

“There are different building codes now than when most homes were built, meaning it could cost more to comply. We can’t wait two to three years for new housing units.

Murray is also with the First Five Commission and noted that 100 private, in-home child centers have closed due to the fires. She also expressed concern over the potential losses to 3,000 cannabis growers and their emerging $97 million industry since this year’s crop has not been harvested but is threatened by the expanding fires.

She mentioned the severe damage to cell phone towers, the cable network, as well as natural gas and power lines due to the 22 fires covering 195,000 acres. Murray pointed out that in Oregon bridges were found to have been weakened, with brittle concrete, following forest fires and that North Bay bridges may need to be inspected.

“I’ve been told that among small businesses affected by closures of five days or more, fewer than 50% ever recover. I hope we can focus on putting together a local economic recovery plan that can be effective, not one with a lot of gravy, but a reasonable plan that covers bread and butter basics.”

She observed that costs associated with natural disasters is at an all-time high. For hurricanes Harvey and Irma, the overall cost has been estimated at $290 billion. For the North Bay fires, Case Logic estimated losses of $65 billion so far.

“We have to concentrate on developing a public policy advisory organization that will take all of the relevant issues into consideration throughout the North Bay, not just on a community by community basis.

John Biggs, CEO with Burbank Savings and Loan, agrees. “We are working with a team of community bankers at the Community Banking Association (CBA) to create a consortium that can help rebuild Northern California. We can have more power if we work together and not do a lot of different things independently.”

He said we must change how homes are built. But in the short term, food and shelter are priorities. “The changes I am talking about include modifying lot lines, building codes and other requirements that have changed over the years since older homes were built. When it comes to speeding up the permit process, the city and county’s capacity must increase with more staff to deal with sharply rising demand.”