Sonoma County economic forum calls for working together on wildfire recovery

Forum guest speaker, Dr. Jerry Nickelsburg, Ph.D., a native of Santa Rosa and senior economist with the UCLA Anderson Forecast, provided an economic forecast for 2018.

“Sonoma County has enjoyed a soaring economy. Now it has to address the economics of recovery in light of the new tax bill, and the overall outlook for California. Historically, we have had low unemployment – the lowest in 16-17 years. Over the past three decades, there have only been a few months when it has been lower. At the same time, we’ve set record employment records -- the highest ever – which is very good news.”

Looking at regional employment growth over 12 months, some areas that were lagging are now growing faster than the U.S. He said the county as a whole has experienced 15% growth since the depth of the Great Recession.

Nickelsburg noted that a key factor limiting the county’s ability to grow faster is the lack of standing resources here to support it, coupled with the high price of housing -- now at record levels -- that discourages major inbound migration. In addition, Sonoma relies on farming, tourism and retail sectors, while San Francisco is growing at an accelerated pace with its concentration of jobs and technology dominance.

“Don’t underestimate the importance and potential value of marijuana tourism. It’s a big deal. Mary Jane tours in Colorado offer passengers the highest tour in the state,” he quipped.

He turned to the economics of recovery and timetables based on major disasters that have occurred in the U.S. and elsewhere.

Nickelsburg recalled that the Oakland Hills, 20 years after the fire, have been completely rebuilt – but said 20 years is too long. After the massive the 9.2 Anchorage earthquake in 1964, this city still has not fully recovered.

He observed that only the quake in Kobe, Japan -- that impacted five million people -- was marked by a rapid recovery, due in large part by bringing in construction companies and workers from the outside.

Sonoma County saw its housing market dive during the 2007 recession when construction workers were laid off. This triggered a worker migration to New Orleans where housing was still needed following the 2005 Katrina Hurricane.

At the national level, GDP growth of 3% is like a “sugar high” but it can be impacted by chaos in Washington, D.C. Offsetting this gain in 2017, technology productivity was down in Q4. The Trump tax reform bill is designed to infuse new capital stock in the economy, but will increase the deficit and forcing the government to borrow more money.

This tax bill is designed to enable greater investment in equipment in 2018 with the ability to depreciate 100% of the cost in the first year, or to carryover what remains to the following year. However, while 2018 should be good, this positive impact should have come in 2019-20. So, in essence, we are borrowing from the future, according to Dr. Nickelsburg.

This could spike the inflation rate, now about 2% annually. It could go higher in 2018. Short-term interest rates are at about 3% while long-term rates are 4% and above. In addition, , lower demand in January caused durable goods orders to decline, while overall housing starts first increased and then declined. At the same time, unemployment nationally is anticipated to be under 4% in 2018, while wage growth was up 3% in January.

Other factors that could impact national GDP include the failure of NAFTA, the possibility of a China trade war and other geo-political events.

Nickelsburg exploded the myth that low taxes equal economic growth and better state GDP performance. He said taxes don’t spur growth. Overall, states with lower business-friendly taxes and less regulation fair better and are more competitive leading to faster growth. California is not a business-friendly state.

He pointed out that, as unemployment rates decline, so do job gains. “In California’s economy, there are not many people sitting on the sidelines looking for jobs. California’s 4.6% unemployment rate could go lower, and personal income growth is faster here than in the U.S. Looking ahead, housing starts could reach 121,000 or higher per year.”

While home building in the U.S. may turn down in 2019, this is not the case in California, helping the state to return to a similar solid trend as the one seen in 1999 and 2000. 
Overall, the view ahead for Sonoma County is bright, according to Nickelsburg. He projects 2.8% real income growth, but slower employment growth in the year ahead due to a constrained labor force. He indicated that policy changes, and having more resources for modernizing as well as rebuilding the infrastructure, can further improve the county’s outlook.

The forum ended with a community panel addressing public, private and civic ways to stimulate collective action by building stronger relationships with groups to make economic recovery a reality.

Moderator Jim Mayer, with California Forward, talked about creating a sense of urgency and turning the extraordinary into the ordinary through cooperation, communication and collaboration. He cited examples, such as the Russian River Confluence and UpStream Development. Mayer said by doing this we can realize a “triple play bottom line benefiting people, the planet and profits by creating a 2018 roadmap for shared prosperity.”

Elizabeth Brown, president and CEO of the Community Foundation of Sonoma County, presented lessons for philanthropy in view of the recent disasters. She said we should take the long view (5-10 years) through sustained campaigns. This foundation has raised $11 million for the Resilient Sonoma County Fund.

She advocates support for second responders, the nonprofit sector providing food, shelter and basic needs while also expecting extreme demonstrations of generosity from key members of the community. She admonished listener to “be sure to stop, take a breath – and a nap. We must be our own sustainable resources.”

Reno Franklin with the Kashia Band of Pomo Indians and Rebuild North Bay, emphasized the value of collaboration. He said, “We need to know who our partners are and build relationships now before there is another emergency.”

Franklin referred to efforts to open coastal beaches and keep oil rigs away from our shores and the need to “show D.C. and others that fire and floods can’t stop us when we work together.” He said the Kashia tribe is ready to partner with organizations ready to fight for common goals.

Martinez, CEO of Redwood Credit Union said the North Bay Fire Relief Fund raised $32 million with donations from 41,000 contributors in 23 counties – 70% of these funds came from outside the four county fire impact area.

He said the final checks went out Feb. 2 to those needing funds. Martinez said the focus now is on the long term and developing a five-year strategic plan. A consultant was hired to learn from other counties how they recovered. “You can’t stop when you see barriers. You have to find ways around them.”

Ana Lugo, with the North Bay Organizing Project and UndocuFund, cited a collective responsibility to ensure that all people have housing regardless of income or life circumstances, and that every child deserves a good education so they can pursue their dreams.

“We are far from this today, divided by class, race, gender and sex orientation. We can’t change unless we acknowledge this, and then come together to make sure everyone has what they need – as we did during these fires. People are what matters.”