without raising income tax rates or adding even further to the growing deficit.
They’ll go along with many of the governor’s economic stimulus proposals:
For streets and roads...$700 million given to local governments to spend,
as long as the money is earmarked for specific projects by the end of 2009.
Rail and bus systems...$800 million for local agencies to accelerate work.
Prisons...millions for long-planned work to start immediately.
Transportation...$822 million, with some environmental rules waived.
Flood control projects...$147 million, with the approval process speeded up.
Hospitals...$160 million, accelerated for work already in the pipeline.
Other parts of Schwarzenegger’s stimulus plan are iffier: For example,
tax breaks for filmmakers, more-flexible workplace rules, etc., won’t make it.
Statewide bond issues approved Nov. 4 will have a long-term impact:
$9.95 billion for fast trains, $980 million for hospitals and $900 million for veterans.
Localities will also have money to spend from measures approved by voters:
Transit. A local sales tax for a train through Sonoma and Marin counties.
A half-cent increase in sales taxes in L.A. County, partly for rail and bus expansions.
Also sales taxes for West Sacramento streetcars and an East Bay transit parcel tax.
Hospitals. Some $887 million in bonds to replace S.F. General Hospital
and $840 million for seismic upgrades and improvements in Santa Clara County.
Schools. About $7 billion in bonds for the L.A. Unified School District.
Despite needing a two-thirds vote, most school bond measures in Calif. passed.
 Some big infrastructure projects are already in the planning stages.
The Port of L.A. is soliciting comments on the San Pedro Waterfront Project,
which will include commercial buildings, a conference center, a trolley system
and new cruise terminal facilities to promote tourism from ships docking there.
The 400-acre development will be built out over five to seven years.
But trade will no longer sustain the region. Air cargo through LAX
has gone down 15% over the past year. Container traffic at the Port of Los Angeles
has dropped 6.7%; at the Port of Long Beach…15%. Containerized exports
of scrap paper and cardboard, largely to China, have collapsed in recent months.
 The local economy won’t rebound until late next year or early 2010.
Even if the global financial crisis quiets down in the next six months,
household and business spending will take longer to rebuild. The jobless rate
will rise to about 6% by the end of 2009, up from 3.9% last year and 5.7% now.
Housing prices are likely to fall over the first half of next year before stabilizing.
More housing will be built near the former Marine Corps Air Station El Toro
after the slump ends. Irvine city planners are backing a request by Lennar Corp.
to increase the number of homes from 3600 to 4900 at an adjacent development
if many of them are affordable to low- and middle-incomers. Builder fees
from the development will help pay for the new 1300-acre Great Park,
which will have botanical gardens, a sports park, open spaces and a golf course.
 Economic recovery will take longer in this region than elsewhere in Calif.,
probably starting in two years or so. Home values will continue to fall
through the end of 2011, and property tax revenues are sure to lag as well.
Look for the unemployment rate to rise from 9.1% now to 12.4% at its peak.
Localities will be forced to reduce or delay building fees on developers
to jump-start home construction. San Bernardino, Ontario, Colton and Chino Hills
are allowing developers to pay fees when certificates of occupancy are issued
rather than when construction begins. Riverside County is considering such delays
plus fewer plan reviews, faster approvals and quicker phone responses to builders.
Needles is probably getting a casino. Voters have supported plans
by the Fort Mohave Band of Indians to put up a gambling facility on 300 acres
adjacent to Highway 40. It would have two restaurants, a gas station and a hotel.
The city council and Gov. Schwarzenegger are also supporting the casino plan.
DHL is closing its western hub facility at March Air Reserve Base,
idling about 300 workers. The company plans to outsource delivery business to UPS.
 The housing slump will delay work on the Fanita Ranch project in Santee.
Construction of the 1400-home development in East County was to start
this quarter, but developer Barratt American says plans are now up in the air.
Local and Mexican realty groups are trying to boost Baja Calif.’s reputation
as a place for Americans to buy homes. The San Diego Association of Realtors
and its counterpart in Baja have signed an agreement to standardize practices
and increase professionalism. Some U.S. buyers saw their housing deposits vanish
and were stuck with fake title documents a few years ago with little recourse.
Backcountry communities won’t have their power shut off in emergencies.
San Diego Gas & Electric is suspending a plan to withhold electricity in high winds…
prompted by lawsuits blaming its high-voltage power lines for fires last year.
The utility yielded after the Public Utilities Commission asked for more details.
But water will be in short supply in the county. Voluntary conservation
is being urged by water authorities because of the second lowest allocation
of water next year in the history of the State Water Project. Local water agencies,
which received 35% of normal allocations last year, will get only 15% in 2009.
 The priciest place to put a light manufacturing plant? The Bay Area.
The Boyd Company of Princeton, N.J., a location consulting firm, rated S.F.
as the most expensive area in North America when factoring in the projected costs
of labor, land, construction, taxes, utilities, shipping and other occupancy expenses.
San Jose was the second most expensive. L.A. was fourth and Orange County, fifth.
A mixed-use project is in the works for Oakland’s Broadway Auto Row.
The city council will spend redevelopment funds on a retail district with housing
and offices in an area now occupied by auto dealerships and parking lots.
Fairfield is luring new restaurants, despite a slow economy. Among them:
Miko’s Japanese Cuisine, Big Italian Pizzeria, Canepa’s Deli and Main Street Yogurt.
Figure on the Folsom Lake Crossing to be finished by spring. The old bridge
across Folsom Dam was closed because of safety worries after the 9/11 attacks.
San Luis Obispo County’s unemployment rate will reach 7% next year,
the highest since 1994. Expect big job losses in the technology, tourism, finance,
construction and legal services industries. But not in education or health care.
 Growers are experimenting with a hybrid tree that can be used for biofuels.
Emerald Energy is working with farmers in Fresno and King counties
to produce the MegaFlora, which is a cross between the Black Locust and Paulownia,
and can grow 50 feet tall in just three years. The new tree has a high sugar content
and needs less water than most crops, enabling it to grow on marginal farmland.
Wine grape farms will be cautious about planting vines during a recession.
Many won’t plant without first obtaining a multiyear contract from a winery.
Consumer wine sales this year are running only slightly higher than in 2007.
The weather is having an uneven effect on the state’s cattle industry.
This year’s dry spell is causing herds near Gilroy to be reduced for lack of feed.
But Santa Barbara County had enough rain to grow sufficient grass at most ranches.
Kiwifruit growers are getting $320,000 from the feds to promote exports,
nearly double the previous fiscal year’s total in the farm bill. Nearly all kiwifruit
sold in the U.S. comes from California, and 38% of the state’s crop is exported.
Passage of Prop. 2 means more organic and free-range chicken farming
in Calif. by the time the measure takes effect in 2015. But many egg producers
will leave the state or shut down rather than add acreage to give hens more space.
 Out-of-state residents are covered by Calif. law for work done in the state,
says the 9th Circuit Court of Appeals. Oracle workers from other states
filed suit, claiming they were misclassified as exempt and should be eligible
for overtime for the time they worked in Calif., training customers about software.
The court agreed, saying the wage and hour law covered the time they were in Calif.
Tougher rules are coming for mobile home parks in forested areas
to protect against the kind of blazes that struck Southern Calif. this fall.
Regulations from the Calif. Department of Housing and Community Development
could come as early as late Jan., two months after the destruction of 500 homes
at a mobile home park in Sylmar and 30 more near Angeles National Forest.
Some of the requirements will match those for new detached housing
in what are called wildland urban interface areas. The same fire retardant,
steel doors, safety glass windows and screened vents must be in mobile homes.
These regulations are already in place for new mobile homes on rural plots
and single-family lots, but they haven’t been extended yet to mobile home parks.
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 The business outlook is growing gloomier as the economy worsens.
Research group IDC is slashing its forecast of IT spending increases
in the U.S. from 4.2% to 0.9% next year. Other analysts foresee spending declines.
Computer manufacturers are cutting prices as worldwide demand slackens.
Intel has reduced its fourth quarter revenue estimates by more than $1 billion.
And Sun Microsystems says it plans to lay off 15% to 18% of its workforce.
But overall, tech’s decline won’t be as steep as the dot-com collapse.
Many tech sectors will be OK, even with the world purchasing slump.
Cellular phone service firms are going to stay healthy as demand grows.
Green energy will draw more investors. Trina Solar of Changzhou, China,
plans to open a North American headquarters in S.F., an industry hot spot.
Declining gasoline prices won’t pull the rug out from under alternative energy.
Some financial software firms will do well, despite banking’s big troubles.
One of them, Sybase, had strong sales during the third quarter, amid demand
from remaining banks for better recordkeeping to protect against risk and lawsuits.
Software as a service…known as cloud computing…has good potential.
Buyers will save by changing to online software rather than keeping it in-house.
Ditto for biotech and other life sciences…still attracting venture capital.
The switch to digital TV will have big benefits for wireless phone users.
Some of the vacant channels left over in the Feb. 17 changeover will be opened up
for unlimited use under a Nov. 4 Federal Communications Commission decision.
That means improved coverage and more competition among Calif. telecom firms.
Look for phone rates to fall 15% to 20%, probably by the end of next year.
It will be cheaper to get unlimited minute plans as carriers fight for customers.
Smart phone handsets with Web access will come down, too…below $50
as sales increase and more phones use Google’s low-cost Android operating system.
Service is going to be widespread, bringing wireless Internet to rural areas
within cell phone range and making it easier for firms to set up wireless networks
within an office complex or for telecommuters within 10 miles of their offices.
Expect more Wi-Fi hot spots, covering larger areas. And fewer dropped phone calls.
 Don’t be misled by the big drop in California foreclosures in October.
There are several reasons for a 39% decline from Sept. in homes foreclosed:
Many lenders waited to take action in order to figure out a recently passed state law
that imposes new limits on lenders before they can declare a home loan in default.
Also, more lenders are cutting deals rather than foreclosing, accepting less interest
and fixed-rate mortgages rather than being stuck with houses that they can’t sell.
A bump in sales of midprice homes will also give the wrong impression.
Many buyers will rush to close purchases in Dec. before higher loan limits expire
on government-backed mortgages. Last Feb., Congress OK’d a stimulus package
that raised the limit on the loans in costly parts of Calif. from $362,790 to $729,750.
On Dec. 31, the limit drops to $625,500, making the lowest-cost loans unavailable.
Many localities will go into the housing business, buying foreclosed homes
and selling them to low- and middle-income buyers early next year. It’s all part
of a federal program approved last June to help the housing industry recover.
California will have $145 million to give localities in particularly hard-hit regions.
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©2008 The Kiplinger Washington Editors
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Nov. 19, 2008
