January 20-February 2, 2015 Section B by Long Beach Business Journal

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Economic Outlook 2015

Aviation/Aerospace Financial Services Health Care International Trade Oil Real Estate Retail Technology Utilities Pictured: Middle Harbor project under construction at the Port of Long Beach

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Economic OutlookOVERVIEW 2015 Page 3

Photograph by the Business Journal’s Thomas McConville

Job Gains, Stronger U.S. Dollar And Cheaper Oil Expected To Boost The Economy In 2015 ■ By SAMANTHA MEHLINGER Senior Writer

ith job gains, the falling price of oil and a stronger U.S. dollar likely to boost consumer spend-

ing, the outlook for the national, regional and local economies in 2015 is positive, according to economists interviewed by the Business Journal. “We’re pretty optimistic about the economy in 2015. The latest data we have available shows the economy growing very strongly,” Mark Vitner, senior economist for Wells Fargo, said in a phone interview. “Conditions have improved enough that you don’t really have to look at the data to tell that the economy is doing better,” he added. In 2015, Vitner said the United States is likely to experience 210,000 job gains per month on average. While the U.S. may not see as quick a job gain pace as last year, the quality of new jobs is going to continue improving, he noted. “Up until recently, a large proportion of the jobs we have been adding were part-time jobs. But more recently, a larger portion have been full-time,” he said. Wells Fargo’s 2015 Economic Outlook report stated that jobs gained last year were mostly full-time, and that wages and salaries grew 4.9 percent. Steven Cochrane, managing director of Moody’s Analytics, said wage and salary growth is going to continue this year. “Where

unemployment rates are really low, average

existing office buildings and, in Molina’s

ern Region offices sometime in the second

hourly earnings are beginning to accelerate.

case, with a new building in Downtown

quarter of this year. In addition to adminis-

We can see that that dynamic is beginning to

Long Beach. Local hospitals Long Beach

trative offices, the 1.1 million-square-foot

kick in a little bit in terms of the decline in

Memorial Medical Center and Dignity

facility will house a vehicle preparation cen-

the unemployment rate, finally generating

Health St. Mary Medical Center are both

ter for cars arriving at the Port of Long

some upward pressure on wages,” he said.

entering 2015 with extensive plans for ex-

Beach, plus a training center for Mercedes

Some of the biggest job gains both nation-

pansion and modernization. Local real es-

employees. The sheer size of the 15-year-

ally and locally have been produced by the

tate agents reached by the Business Journal

leased building, as well as the international

health care industry as it expands to keep up

observed that medical companies have

brand name, speak to the quality of tenant

with demands generated by a growing num-

driven much of the construction in the of-

the Douglas Park area is able to attract.

ber of newly insured patients thanks to the

fice sector of the local real estate market.

As cargo traffic through the ports of Long

Affordable Care Act, according to Robert

Two new medical office buildings are

Beach and Los Angeles, and indeed nation-

Kleinhenz, chief economist for the Los An-

nearing completion at Douglas Park, a busi-

wide, continues to grow, trade and transporta-

geles County Economic Development Cor-

ness park in northeast Long Beach built on

tion jobs are also being added, Kleinhenz

poration’s Kyser Center for Economic

former Boeing Company property and now

noted. In 2015, imports through the local

Research. The health care industry should

managed by Sares-Regis. The area contin-

twin ports are expected to reach an all-time

continue adding jobs this year, he said.

ues to attract new businesses, with new

high, which “not only speaks to the promise

In Long Beach, growth in the health care

headquarters for aviation and maritime

that we have here locally in that industry, but

industry was readily apparent in 2014, as

companies, plus an automotive trade

also speaks to the continued expansion that’s

health care providers like Senior Care Ac-

school, expected to open this year.

taking place in the overall economy,” he said.

tion Network (SCAN) and Molina Health-

Across the street from Douglas Park,

Kleinhenz also expected to see job gains in

care took up more office space, both in

Mercedes-Benz USA plans to open its West-

some professional and business services in-

INSIDE THIS ISSUE

18 INTERNATIONAL TRADE

dustries this year. Locally, those are likely to be found among the architecture and engi-

3 OVERVIEW

23 RETAIL

neering sectors, which are tied to growth in

7 HEALTH CARE

26 REAL ESTATE

11 OIL

31 AVIATION/AEROSPACE

12 UTILITIES 14 TECHNOLOGY 16 FINANCIAL SERVICES

the international trade industry, he said. The leisure and hospitality industries should also continue to experience job growth as tourism in L.A. County continues to grow, he added.

LONG BEACH BUSINESS JOURNAL JANUARY 20-FEBRUARY 2, 2015 2599 E. 28TH STREET, SUITE 212 SIGNAL HILL, CA 90755 562/988-1222

A sore spot for jobs in Long Beach this year comes in the form of The Boeing Company’s C-17 Globemaster III manufacturing program closing by the middle of this year. Please Continue To Page 5

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Economic OutlookOVERVIEW 2015 Page 5

The program employed just under 3,000 peo-

pockets. “It’s very much like a tax cut,”

of Long Beach depends heavily on oil rev-

Also likely to boost the national economy

ple, but layoffs already began last year as the

Cochrane said. Kleinhenz said the effect of

enue to fund capital projects, and there are

this year is the strengthening value of the

production of the aircraft wound down.

lower oil prices would certainly be felt by

likely to be some budget consequences.

U.S. dollar. The exchange rate of the U.S.

More jobs and better wages translate to

Californians and Long Beach residents pay-

Despite the negative aspects, Kleinhenz be-

dollar to the euro continues to shift closer

higher consumer confidence and more

ing at the gas pump. “That should be a boost

lieves the benefits of the decreasing value of

to being in our favor – while the exchange

spending, Cochrane, Kleinhenz and Vitner all

to the local economy in many ways,” he said.

oil are ultimately going to pay off in 2015 and

rate was about $1.36 for one euro a few

emphasized. “The improving labor market,

There are, however, some downsides to

beyond. “This is not a temporary blip on the

months ago, it is now inching closer to an

and particularly the rising wages, will accel-

the falling price of oil – after all, California

screen . . . The forecasts I have seen suggest

even exchange rate.

erate consumer spending. And, of course,

is the third-largest producer of oil in the

it is going to be at least two or three, maybe

“The dollar is strong, and it is strong for

consumer spending is a big part of the na-

United States. “The drop in oil price is likely

even four years before the price of oil gets

good fundamental reasons,” Cochrane said.

tional economy,” Cochrane said. According

to prove painful for a lot of smaller, inde-

back up close to $100 per barrel,” he said.

“The U.S. economy is doing much better

to Kleinhenz, 70 percent of economic activity

pendent oil producers around the United

“We’re looking at a couple of years where

than the European economy and is acceler-

in the U.S. occurs in the consumer sector.

States, and [for] oil service companies,” Vit-

low oil and gasoline prices, here locally in

ating rather than decelerating as in the

ner said. Kleinhenz pointed out that the City

particular, will be beneficial to consumers.”

One area the three economists expect to see increased consumer spending in is housing, both in terms of existing home sales and in new home construction. “A critical assumption is, if the labor market does accelerate the way we think it will, then conditions will be very strong for housing,” Cochrane said. There is a pent-up demand for housing in America, he said, explaining that last year only one million residential units were constructed, when there should have been about 1.7 million constructed to meet housing needs. “Our guess is this coming year and into 2016, we may see something upwards of 2 million units constructed to make up for some of the pent-up demand out there in the economy,” he explained. This trend is going to be reflected in L.A. County, where Kleinhenz expects a 15 percent increase in residential building permits this year. Last year, the number of permits only increased by 7 percent, which was a lower increase than had been forecasted. An improved housing market means more jobs and more spending, Cochrane emphasized. “Both home sales and home building have pretty strong multiplier effects in the economy in terms of the need for materials, the need for professional services, furniture, appliances, home repairs – you name it. Those are all pretty important parts of the economy. They create jobs and create income a little more broadly,” he explained. “Construction employment will probably see some of the largest percentage increases in employment because it’s coming off of a relatively low base, and we’re seeing that single-family residential construction is beginning to gain momentum,” Vitner said. Another positive influence on the economy this year is the falling price of oil. Before prices began decreasing in July, the price per barrel of crude oil was $100. Oil now costs about $45 per barrel. With a more than 50 percent reduction in price, that puts quite a bit of money back in consumers’

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Economic OutlookOVERVIEW 2015

Page 6

Los Angeles County Business Outlook As Of December 2014

the two parties have become more heated in

Source: Los Angeles County Economic Development Corporation

recent weeks. “The ports are kind of a big question mark,” Vitner said. Both ports have experienced massive amounts of congestion since August, which has yet to clear up and is only being exacerbated by the unresolved labor negotiations. “It has really caused a lot of disruption on the West Coast and for companies all over the country,” Vitner said, explaining that some cargo owners have diverted their products to other ports. On January 13, the National Retail Federation’s vice president, Jonathan Gold, released a statement urging resolution. “The war of words between the International Longshore and Warehouse Union and Pacific Maritime Association on port congestion continues to concern the supply chain community. The two sides continue to strain the

Asian economies. On the plus side, it means

means American exports are going to be-

ularly the ports of Long Beach and Los An-

shipping community – both importers and

that imports will ultimately be a little bit

come more expensive, which dampens the

geles, which together make up the largest port

exporters – and threaten the very competi-

cheaper. That is another factor to help drive

chances of growing export volumes this year.

complex in the nation. Contract negotiations

tiveness of West Coast ports,” he stated.

consumer spending . . . on top of the im-

Pointing out that exports account for less

between the union of longshore workers re-

Barring total work stoppages at the ports,

provement of the disposable income from

than 10 percent of U.S. gross domestic prod-

sponsible for moving cargo and the group

the economic outlook remains positive,

lower oil prices. And if wage rates begin to

uct (GDP), Vitner noted, “it is not something

representing their employers have dragged on

with Cochrane, Kleinhenz and Vitner esti-

tick up, all of those factors combine to help

that is likely to derail the economy.”

since July and became contentious in the fall.

mating GDP growth between 3 to 3.5 per-

The bigger question related to growing

Although a federal mediator was brought on

cent this year, up from last year’s estimated

cargo traffic lies in West Coast ports, partic-

to help sort out the contract, words between

growth of between 2 to 2.5 percent. ■

consumer spending,” he explained. Conversely, strengthening U.S. currency

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Economic Outlook HEALTH2015 CARE Page 7

■ By SAMANTHA MEHLINGER Senior Writer

ocal hospitals and health care providers report that they intend to continue expanding services, infra-

structure and employment to meet growing health care needs associated with the creation of the Affordable Care Act. According to Covered California, the state’s insurance marketplace, 1.3 million people signed up for health insurance through the marketplace last year, while “millions of others” enrolled for coverage through Medi-Cal, a free-to-low cost health coverage program for low-income Californians. Paul Mamoulelis, director of business development and an associate administrator at Lakewood Regional Medical Center, said Medi-Cal is likely to remain the preferred source of health care coverage among newly insured Californians this year. For local hospitals and health plans, the rapidly growing number of insured Californians translated to more patients and members in 2014, a trend health care executives said they expect to continue this year. “We continue to see more and more people sign up, both through health care coverage through Covered California and through Medi-Cal,” John Molina, chief financial officer of Molina Healthcare, told the Business Journal. Molina’s Long Beach-based company, which employs about 10,000 people nationwide, provides Medicare Advantage plans, enrollment through Covered California and contracts with state governments as a Medicaid health plan. Molina Healthcare also operates medical clinics. “2014 was a tremendous year for growth,” he said, adding that, while he is not yet able to share projections for his company’s membership growth this year, an increase is expected. Senior Care Action Network (SCAN) Health Plan, a Long Beach-based nonprofit provider of health coverage to Medicare beneficiaries, also grew last year, according to CEO Chris Wing. “We ended 2014 with about 177,000 members. We started the year with about 150,000, so it was a good year,” Wing said. Local hospitals reported treating more insured patients last year than ever before. “With the expansion of the ACA and health care reform, we’re finding that many more patients are now eligible [for health insurance],” Tamra Kaplan, COO of Long Beach Memorial Medical Center,

As Molina Healthcare continues to grow, Chief Financial Officer John Molina says the company will hire more people to work at its Long Beach offices. The firm is one of the city’s largest private sector employers, with around 4,000 people working in Long Beach. Pictured in front of Molina’s Pine Avenue location are, from left: Jasmine Gonzalez, corporate recruiter; Ilona Bassin, human resources manager; Jon Heiman, human resources director; Molina; Edward Topps, senior corporate recruiter; Melissa Snyder, senior corporate recruiter; Anthony Rodriguez, human resources supervisor; and Sunny Yu, community projects director. (Photograph by the Business Journal’s Thomas McConville)

told the Business Journal. “For example, the number of patients we’re seeing requiring emergency department services who didn’t have access to a health plan a year ago was about 12 percent. Now we have less than 5 percent. To us that is a wonderful change. That means more people are now accessing health care when they need it,” she said. While Long Beach health care executives reached by the Business Journal agreed that having more insured patients is a positive change, they emphasized that coping with the influx of those patients into the health care system has proved challenging, and will continue to do so for the next few years. “Hospitals across the country are dealing with the challenges caused by the ACA and health reform,” Joel Yuhas, newly appointed president and CEO of Dignity Health St. Mary Medical Center, observed. “There is decreased reimbursement from federal and state payers, and hospitals are all trying to position themselves, their cost structures and their physician alignment activities to succeed in that environment,” he explained. Mamoulelis noted that deductible and copay costs are rising, which may dissuade some patients from seeking care. Please Continue To Page 8

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Economic Outlook HEALTH2015 CARE

Page 8

Kaplan and Mamoulelis emphasized that many health care organizations are undergoing mergers, acquiring other companies and organizations, or are forming partnerships and joint ventures in an effort to meet growing demand for services while remaining competitive. These activities should “continue to alter the landscape in 2015,” Mamoulelis said. One example of such a partnership is Anthem Blue Cross Vivity, an integrated health care network formed between Anthem Blue Cross, Cedars-Sinai, Good Samaritan Hospital, Huntington Memorial Hospital, MemorialCare Health System, PIH Health, Torrance Memorial Medical Center and UCLA Health. Serving Los Angeles and Orange counties, the system markets itself as the first collaboration of its kind in the nation, in which all parties involved “share financial risk and gain.” Vivity was formed in September 2014, with coverage for large group employers starting on the first of this year. Hospitals and health plans have also had to expand and diversify their own services and hire more employees in order to accommodate growing demand for health care – and that should continue this year, local health care professionals reported. “SCAN is expanding, Molina is expanding, Memorial is expanding; everybody is expanding,” Molina said. Molina Healthcare’s newest program is a health plan for people who are eligible for both Medicare and Medi-Cal. “It is one of the first of its kind in the country,

Joel Yuhas, the new president and CEO of Dignity Health St. Mary Medical Center, visits with some of his senior staff at the hospital, which is about to undergo a $9.6 million facelift. Pictured in the back row from left are: Robert Bokern, vice president of human resources; Harold Way, CFO; Georgina Gatewood-Shaw, manager of human resources; Dr. Andrew Burg, chief medical officer; John Merryman, director of marketing, communications and advocacy; Achelle Lara, director of managed care; and Ardel Avellino, associate administrator. Pictured in the front row from left are: Jodi Hein, chief nursing officer; Gail Daly, chief operating officer; Yuhas; Sister Gerard Earls, vice president of mission integration; and Jeffrey Van Hoy, senior director of business development. (Photograph by the Business Journal’s Thomas McConville)

and that will help those patients out

our headquarters both for our corporate

ters throughout Los Angeles and Orange

location, Kaplan said. By creating the

tremendously,” Molina said. He explained

parent and for our California health plan,

County, Kaplan noted. Last year, the foun-

campus, Memorial hopes to make access

that patients who qualify for both

as the health plan in California grows, we

dation acquired nine imaging centers

to care more accessible and efficient for

Medicare and Medi-Cal are typically in

will be adding staff,” Molina said. The

throughout both counties, two of which

“families who have children with very

very frail health. “For the first time, we’re

company continues to grow outside of

are in Long Beach.

complex medical needs,” she explained.

trying to coordinate all their benefits

California as well, and is expanding to

within one organization and enhance the

Puerto Rico this year, he added.

Because the health care industry is

The project, slated to break ground on the

shifting towards more of a focus on main-

Long

Beach

Memorial

Medical

potential of markedly improving the qual-

MemorialCare Health System, of which

taining population health and well-being

Center/Miller Children’s & Women’s Hos-

ity of care given and the quality of life that

Long Beach Memorial Medical Center,

rather than simply treating patients when

pital campus later this year, is funded by

people can enjoy, and at the same time

Community Hospital Long Beach and

they get sick, MemorialCare is expanding

California Proposition 3 and “strong phil-

save some money . . . This has a huge po-

Miller Children’s & Women’s Hospital are

its reach deeper into communities, Kaplan

anthropic support,” she noted.

tential, and right now in Los Angeles

a part, is going to continue expanding this

explained. One new ambulatory center is

St. Mary Medical Center is embarking

County we have got somewhere in the

year both at the hospitals and through new

set to open in March of this year in Dou-

on a large capital improvement project of

neighborhood of 15,000 to 20,000 of these

outpatient centers, according to Kaplan.

glas Park. The center is in partnership

its own. “We are working on a $9.6 mil-

[patients] enrolled,” he said.

“MemorialCare has invested significantly

with Long Beach Gastroenterology and is

lion investment across the campus dedi-

As Molina Healthcare grows, the com-

over the last four years to expand our

part of a medical complex of two new

cated

pany will continue hiring more employ-

reach beyond the acute care hospital set-

buildings.

patient-centered experience for those who

ees. Currently, about 4,000 people, 500 of

ting,” she said.

ensuring

warm

and

A major capital investment for Memor-

come to St. Mary for their care,” Yuhas

whom are contracted, work for Molina in

The MemorialCare Medical Founda-

ial’s Long Beach operations this year is

said. “This is a full campus renovation fo-

Long Beach. “We are going to continue to

tion, the physician group division of the

coming in the form of a pediatric medical

cused on the touch points where people

hire to support the growth that we have in

health system, is acquiring and opening

village, a campus of offices housing spe-

access services at St. Mary. It’s everything

our existing markets. As Long Beach is

ambulatory (outpatient) and imaging cen-

cialty pediatric care services in a single

from accessing the hospital, to patient

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Economic Outlook HEALTH2015 CARE Page 9

beds, to floors within the hospital – a full

have [reimbursement] rates going down,

refresh of the hospital,” he explained. The

compliance stiffening and you’ve got

project is funded by the St. Mary Medical

pharmacy costs from these specialty phar-

Center Foundation and Dignity Health.

maceutical companies just going through

In addition to the overall facelift of the

the roof,” he continued.

hospital, St. Mary’s heart center “will see

Another question mark looming for

an investment of a new cardiac catheter

the American health care industry is its

lab” to be installed by the middle of the

ability to meet an incoming surge in de-

year, Yuhas said. The hospital is also in-

mand as the baby boomer population en-

vesting in a wide-bore magnetic reso-

ters old age. “The wave of seniors

nance imaging (MRI) machine, which is

started last year, but we haven’t seen the

built with more room inside than typical

full impact of that,” Kaplan said. “I don’t

MRIs. “That will be a nicer experience for

know that we actually have the capacity

patients who find the MRI experience

to meet that demand,” she added, ex-

somewhat claustrophobic,” he said.

plaining that there is currently a shortage

St. Mary is continuing work it began last year on expanding its emergency de-

of primary care physicians both in California and nationally.

partment. The expansion will add more

Memorial is working to supplement that

beds to the department, which has experi-

shortage through partnerships with other

enced steadily increasing patient visits for

regional health care providers such as the

several years, Yuhas said. Like Memorial, St. Mary is also expanding ambulatory services this year, Yuhas noted. “We have invested a considerable amount of energy this past year and this year [2014 and 2015] in expanding our ambulatory services strategy to outlying communities outside of the traditional service area that St. Mary has focused on,” he said.

Other Challenges Ahead Apart from the changing nature of the health care industry caused by the ACA, health care providers are also contending with rising costs caused by pharmaceutical companies. Both Molina and Wing cited the cost and availability of new drugs as one of the biggest challenges ahead in 2015. The standout examples of this challenge are drugs called Sovaldi and Harvoni, both manufactured by pharmaceutical company Gilead. The drugs cure Hepatitis C, but only for those who have access to health care coverage who can accommodate a whopping $1,000 per pill. To complete the 90-pill course, the final price tag for a clean bill of health comes to $90,000. “As we see more and more drugs like Sovaldi come out that have no price competition, it has a chance to increase health care costs at a time when Obama Care and the competition in the insurance market is really pushing costs the other way,” Molina said. Widely used drugs are also increasing in cost, Wing noted. “A vial of insulin and pens to administer insulin in 2014 went up [in cost] like 42 percent,” he said. “So you

Children’s Clinic, which provides care to adult and pediatric patients in underserved areas. The health system is also bolstering its access to nurse practitioners, pharmacists and other health care professionals who are licensed to provide some primary care services in order to help close the primary care physician gap, she said. ■

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Economic Outlook 2015 OIL Page 11

■ By MICHAEL GOUGIS Contributing Writer

pump is expected to rise slowly in 2015, peaking at slightly over $3.01 per gallon in September, before dropping back into the

ramatic increases in oil production in North America have resulted in a shock to the global petroleum dis-

tribution system and lower prices at the gasoline pump. But the increased supply has also had impacts that are rippling through the economic, governance and regulatory systems far and wide, including on the budget and activities of the City of Long Beach. “The biggest economic factor impacting the oil industry in California and globally is the current downward trend in oil prices,” Catherine Reheis-Boyd, president of the Western States Petroleum Association, told the Business Journal. “The decline in oil prices is good news for consumers and not-so-good news for the petroleum industry. It is typically more expensive to produce oil in the U.S. than it is to produce it in parts of the Middle East. Depressed oil prices could eventually result in a decline in domestic production both in California and nationally.” The uncertainty surrounding the nearterm future of the industry is not surprising. Simply put, the stuff that the industry sells is worth half what it was worth a year ago, and “most market participants do not predict substantial increases in the next few years,” John Gross, director of financial management for the City of Long Beach, wrote recently to city elected officials and administrators. Since July of 2014, the price of Wilming-

$2.76 range in December. While this is excellent news for the consumer, the drop in oil prices has caused the oil industry, particularly on the West Coast, to re-evaluate its operations. “The price of Wilmington crude has declined over the past several months. We are currently running planning scenarios at different oil prices and are in the process of preparing our 2015 development plans to reflect market conditions,” said Frank Komin, executive vice president, Southern Operations, of California Resources Corporation, a newly created company spun off

Chris Garner, who has worked for the City of Long Beach since 1984, oversees the Long Beach Gas & Oil Department. Part of the department’s responsibilities are to oversee the city’s oil interests and subsidence control measures. (Photograph by the Business Journal’s Thomas McConville)

from Occidental Petroleum. “Our company’s level of employment has

erations,” Dami told the Business Journal.

enues, the plunging crude prices have

not decreased due to the recent commodity

“We’re continuing to move through the en-

caught the city off guard. Last year, with

price decline,” Komin noted. “As you might

gineering design, permitting and approval

crude selling for more than $100 per barrel,

expect in a spinoff, some employees from

processes associated with that project.

the city’s general fund budget figures were

Oxy operations around the world joined

“Combining our two refineries provides

California Resources Corporation during

meaningful benefits to California’s con-

2014, while some personnel decided to re-

sumers, environment and economy,” Dami

“The low price of oil has greatly re-

locate to Oxy operations. Our contractor

explained. “The project will reduce the re-

duced the oil revenue that the city can rely

work force fluctuates with activity levels,

finery’s emissions of greenhouse gases and

on receiving,” Gross said in his analysis

and we are in the process of developing our

criteria pollutants, help us to comply with

of the Tidelands Capital Budget and 5-

2015 development plans.”

the federally mandated Tier 3 gasoline spec-

Year Capital Plan.

based on an estimate of $70 per barrel. But even that has turned out to be optimistic.

In addition to plummeting crude prices,

ifications effective in 2017, and allow us

“In addition, the unsettled oil markets

the regulatory outlook will also have an im-

greater product yield flexibility to respond

make predictions of specific levels of oil

pact on the refining and production indus-

to shifts in consumer demand.

revenue for the future to be very question-

try. As SB4 regulations continue to be

“Tesoro’s investment in this project will

able. It is not clear that any new oil revenues

implemented, the industry will have to com-

help keep high-paying jobs in California,

will be available for Tidelands capital proj-

ply with state (and potentially local) restric-

generate local construction jobs and cre-

ects in the next few years.

tions on hydraulic fracturing as a well

ate needed revenue for our local commu-

stimulation technique, the expansion of the

nities.” Dami said.

“The capital and operating budgets are impacted by the price of oil and the oil mar-

state’s cap-and-trade greenhouse gas reduc-

Because Long Beach receives income

ket,” Gross wrote. “Regardless of the uncer-

tion program, and programs with similar

from oil production, the drop in oil prices

tainty, it is essential to provide a baseline

supply. In the past four years, well stimula-

environmental protection goals under con-

has had a direct impact on operations at city

revenue projection for purposes of develop-

tion techniques and technological advances

sideration in Oregon and Washington.

hall. Generally, operations along the

ing the revised strategy for the Capital

ton crude has dropped from around $100 a barrel to under $50 a barrel, due to increased

in extracting oil from low-permeability un-

“In short, fuel producers and refiners can

beaches and in the coastal areas are directly

Budget and the 5-Year Capital Plan. It is im-

derground formations have dramatically in-

expect to face a number of serious chal-

funded by oil revenues, and oil production

portant to consider that the projection is

creased the amount of crude oil produced in

lenges in 2015,” Reheis-Boyd said.

provides a source of revenue for the city’s

based on the current market, and, at some

the U.S. and Canada. In addition, traditional

Reducing greenhouse emissions and

general fund as well. Even with a very con-

point, it is certain that the current market

oil producing regions, such as the Middle

more efficient operations are on the agenda

servative approach to budgeting for oil rev-

conditions will change.” ■

East and Russia, are maintaining production

for Tesoro’s refining fa-

levels. And lastly, U.S. oil producers are pro-

cilities in Carson and

hibited by federal law from exporting crude.

Wilmington, said Ken-

This has created a market where, in Cal-

neth Dami, director of

ifornia, the average price of regular gasoline

public & government af-

at the pump dropped to $2.76 per gallon in

fairs for the Los Angeles

January 2015, according to the U.S. Energy

Refinery.

Information Administration, a non-profit

“In August 2014, we

organization that tracks and analyzes the

submitted permit appli-

global energy industry.

cations for an integra-

The downward trend appears to be at its

tion project that will

nadir, according to the agency’s projections.

physically link the Car-

The average price of regular gasoline at the

son and Wilmington op-

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Economic OutlookUTILITIES 2015

Page 12

■ By MICHAEL GOUGIS Contributing Writer

Wattier said the city has already tightened its belt in terms of consumption and is taking steps to recharge its own water

rices for utility services are likely to move higher and lower, depending on the commodity and its avail-

ability during the next few months, but there are no immediate indications of severe shortages of water, oil or gas in the short term, experts said.

Water Water officials are looking at the skies and hoping for more rain, but the state has seen some recovery in water storage levels from the desperately dry 2014, said Kevin

some pretty low levels in our overall storage in California.”

To allow the city’s basins to refill, water officials are now supplying mostly MWD-

The city water department is continuing

provided water to its customers, Wattier

with its five-year plan to balance its

said. To help provide flexibility in supply,

“We went to the next step (of water use

budget by raising rates four percent each

the department is looking at building a new

reduction regulations), anticipating some

year, so customers can expect three more

well on the city’s westside, which will tap

action from the MWD next year,” he said.

years of increases, Wattier said. Similarly,

into a different underground aquifer.

“We went to our second step through

the sewer division is likely to seek a rate

“We also are a party to the West Coast

March. It reduces the number of watering

increase in October to cover the cost of

basin, and we have some water rights there,”

days from three days to two days. That’s

long-term debt associated with infrastruc-

he said. “We are looking at [developing] a

way more than you need. You don’t need

ture upgrades, he said.

well on the westside, just west of 710 Free-

storage aquifers.

to be irrigating your lawn more than two

“Basically, we took out a line of credit

way. That northwest part of Long Beach –

a couple of years ago,” Wattier said. “It

we can’t get groundwater to that area right

The state’s reservoirs are refilling, but

was in response to some additional regu-

now. We can only get MWD water there.

days a week.” they have a long way to go before water

lations on sewer overflows. We greatly in-

Adding this well will help with reliability

Wattier, general manager of the Long

officials will be able to breathe comfort-

creased our sewer rehabilitation, our

and some additional operational flexibility.”

Beach Water Department.

ably, Wattier said.

sewer inspection, our sewer capital pro-

Natural Gas

“It’s that time of year when it’s really hard

“We’ve had some recovery. The key reser-

gram starting about 2008. To finance that,

Natural gas prices are expected to remain

to know what will happen,” Wattier told the

voir is Lake Oroville,” he noted. “Two weeks

we initially did it with a line of credit,

at extremely low levels and, combined with

Business Journal. “The Metropolitan Water

ago, it was very close to the lowest it has ever

rather than have a big rate increase.

conservation and efficiency measures, gas

District, where we get 40 percent of our

been. It’s recovered some, but it’s still 10 to

“We’re paying only interest on that. Now

bills are at record lows and are expected to

water, modified their shortage plan under

20 percent lower than it was a year ago. So

we’ve got to convert that. That line of credit

stay there for the near term, Chris Garner,

the assumption that they might implement

it’s still very low for this time of year.

is going to expire next year. We need to

director, Long Beach Gas & Oil Department, told the Business Journal.

it early in 2015. But, based on the good

“MWD has also updated its overall stor-

convert that to a long-term debt issuance

weather that we’re having (“good weather”

age portfolio. They’ve confirmed what

and pay back the principal and interest.

“There’s a glut of natural gas. Prices re-

means rain), I’m guessing they won’t im-

many of us suspected for some time – they

We’ll now be paying back the principal,

main very, very low,” Garner said. “Resi-

plement it until February or March. That’s

did use half of their stored water in calen-

which is about $1 million a year. That’s the

dents are benefiting from that, not only

the earliest they’ll do anything at this point.”

dar year 2014. We’re going into 2015 with

main driver on that,” Wattier said.

from low commodity price, which makes

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:24 PM Page 13

Economic OutlookUTILITIES 2015 Page 13

up a large chunk of their gas bill, but . . .

Long Beach and Signal Hill to make sure

“We now anticipate 2014 core earnings

In the near term, Edison plans to pursue

consumption among residents, per capita, is

that everything is operating as it should,”

will be in the range of $4.25 to $4.35 per

a strategy of intensive infrastructure invest-

at its lowest ever. In Long Beach alone, the

Garner said.

share,” Ted Craver, chairman and CEO of

ment, which it said will result in better serv-

volume of gas sold to residential customers

“Once we get the warm fuzzies on that,

Edison International, said in his latest com-

ice to customers, and at the same time allow

is at its lowest in 50 years. Through conser-

we’ll move forward and replace all 150,000

ments to investors about the short-term out-

the utility to create a reliable base of divi-

vation and efficiency, it’s really brought

meters in Long Beach and Signal Hill.”

look of the utility. “This is an increase of 60

dends for the future, Craver said.

consumption down.

Electricity

cents per share over the midpoint of guidance

“Preventive maintenance and investment

“So customers are benefiting from actu-

On the electricity front, Southern Califor-

we provided last February. We continue to de-

in the grid maximizes customer reliability

ally using less gas – and the [price of] gas

nia Edison is balancing the demands for re-

liver solid growth and returns from investing

and public safety,” Craver said. “The high

itself is lower. So the gas bills today, the ac-

turn on investment with its desire to invest

in needed infrastructure to support public

level of investment we have made over the

tual bill, are probably at their lowest in

in the infrastructure needed to provide a

safety and reliability as well as California’s

last several years in electric infrastructure .

decades. It’s just amazing. I think people

power grid that meets the demands of the

public policy objectives of creating a low car-

. . has caused our dividend to fall below the

have learned to live with less.”

next decade and beyond.

bon economy and technological innovation.”

industry averages for yield and earnings

In terms of infrastructure, the department

Expanding solar and wind capacities and

Edison made significant strides in resolv-

is set to move ahead with modernized meter

meeting an increasing demand for electric-

ing the financial impact of closing the San

“To repeat what I have said before, we are

reading, Garner says.

ity for vehicle use will require large-scale

Onofre Nuclear Generating Station, with the

committed to bringing our dividend back

“We got approval from city council to

infrastructure upgrades, and doing that has

California Public Utilities Commission ap-

into our targeted payout ratio of 45-55 per-

begin the transition to automated meter

cut into the utility’s dividends, even though

proving a $3.3 billion settlement. In addition,

cent of SCE’s earnings in steps over time. We

reading. It’s a three-year project, and we’re

the most recent financial data shows an up-

the utility finalized the settlement related to

understand that redressing this imbalance is

going to start with about 1,000 meters in

turn in Edison dividends.

the bankruptcy of Edison Mission Energy.

job No. 1 for many of our investors.” ■

Advanced Water Treatment Facility Expansion The Leo J. Vander Lans Advanced Water Treatment Facility expansion was completed in December and is scheduled to be fully operational in the next month or two. The facility, located at 7380 E. Willow St., is owned by the Water Replenishment District Southern California (WRD) and operated for the District by the Long Beach Water Department (LBWD). The development accommodates Long Beach’s determination for locally sustainable groundwater. Up until 2003, Long Beach used imported water purchased from the Metropolitan Water District of Southern California for the seawater barrier. Kevin Wattier, right, general manager of the LBWD, explained, “In 2003, the first phase of this plant came about. It takes waste water from

payout ratio.

the adjacent sanitation district’s plant, provides additional treatment – just as good as drinking water quality – and converted 50 percent of the imported water to advanced treated recycled water. Now this expansion converts the entire seawater barrier to advanced treated recycled water and eliminates the need for the seawater barrier to use any imported water.“ Also pictured is Rob Whitaker, general manager of the WRD. He noted the WRD goal “is to develop local resources to offset our need for imported water from the Colorado River or the Bay Delta.” This expansion is a step to reach that goal. The men are standing in front of membrane filters, which are a part of the process in “cleaning” the water. (Photograph by the Business Journal’s Thomas McConville)

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:24 PM Page 14

Economic Outlook 2015 TECHNOLOGY

Page 14

■ By DAVE WIELENGA Staff Writer

hile technology ranges across all industries, the Business Journal is focusing on three entities im-

pacting Long Beach: the mayor and his emphasis on technology for local government and the city; and two firms, Epson America and Laserfiche, which call Long Beach

he was a councilmember and was one of the

Runsense GPS Sports Watch by Epson

promises he made during his campaign for mayor. Its creation is the most substantive move among a variety of small tweaks intended to create momentum for the use of technology to improve the city and its serv-

PowerLite Home Cinema 600 3LCD Projector by Epson

ices, such as changing the name of the Long

“Delivering up to 3x Brighter Colors than competitive models.”

Beach Technology Department to the Long

Epson photograph

“The lightweight, water resistant Runsense sports monitor features highly accurate GPS tracking to help you measure your distance and pace.”

Beach Technology and Innovation Depart-

home and whose products are used globally.

ment. But Garcia used his State of the City

Technology & Innovation Commission

address to announce some new moves.

MoverioTM BT-200 Smart Glasses (Developer Version Only) by Epson

“Get ready for the next generation of augmented reality platforms. These binocular, transparent smart glasses open up a whole new world in entertainment, manufacturing, medical science and more. Each lens has its own display, right in your field of vision, projected into your surroundings.

The Technology & Innovation Commis-

“One of the ways we’ll [use technology

sion – a human advisory app just innovated

and innovation to improve the city] this

by Mayor Robert Garcia, who says it will

year is to launch a brand new city website,

help “create the government of the future”

a 24/7 online city hall,” he said. “This year

– became official on January 6, when the

we’ll also launch an open data initiative,

Long Beach City Council unanimously

and put as much city information online as

nual five-day, 2 million-square-foot version

The good news: people noticed.

confirmed the seven commission nominees.

possible to engage the expertise of the pri-

of Comic-Con for 160,000 gadget geeks.

Actually, that might qualify as great

“I like to call them ‘the Geek Squad,’”

vate sector and the public on issues from

Debuts by the company ranged from the

news at CES, where science and circus mix

Garcia said during his State of the City ad-

health care to trade to environmental sus-

PowerLite® Home Cinema 600 projector,

in often-wondrous ways. This year the

dress on January 13, still pretty geeked, him-

tainability. This is the wave of the future,

which comes from a home entertainment

competition for attention included an app

self, a week after the council voted. “This

and Long Beach is taking the lead.”

category that is one of the company’s tradi-

that reports how many beers are left in the

commission will be charged with generating

New Products From Epson

tional strengths, to the introduction of the

fridge; a cervical ring that detects when a

ideas and policies that will continue to make

Long Beach-based Epson America Inc.

Epson Active category, an umbrella for the

woman is at the peak of fertility and sends

Long Beach a national leader in the use of

brought in the new year in Las Vegas by re-

company’s first venture into the burgeoning

alerts via smartphone; fabrics that change

technology and accountable government.”

leasing a flurry of new devices, as well as

market of sports wearables. Epson also

color depending on lighting, sound and

Establishing a technology and innovation

new product line, into the vast Consumer

showcased new consumer and enterprise

temperature; a belt that adjusts itself as you

commission was on Garcia’s wish list when

Electronics Show (CES) – essentially, an an-

apps on its Moverio™ BT-200 smart glasses.

eat; a hat that helps your hair grow; a chair that makes breathing easier; and a boomeranging flying camera bracelet that

3FNFNCFS U P ,FFQ : PVS 4 QS J OL M FS T 0ò %VS J OH B OE "G U FS 5 IJ T 8J OU FS T 3B J O 4 U PS NT

launches from your wrist, takes a photo or video of you, then returns. Epson got in on a little of that action, showcasing uses for its Moverio™ smart glasses that go far beyond games. Combined with a variety of education and training applications from other developers, Moverio™ glasses suggests new ways to learn and retain information, as well as provide workers with greater efficiency and safety. Initial offerings from “Epson Active” include the Pulsense TM continuous heart rate activity monitors, Runsense TM GPS sports and running monitors, and the MTracer, which analyzes golf swings. But the Home Cinema 600™ attracted the most attention among Epson’s showcases in Las Vegas. Reviewers praised the quality and variety of the projector’s big-screen entertainment, from movies to video games, whether indoors or outdoors, making frequent mention of the brightness of colors and the crispness of images. They were invariably at least as effusive when the pro-

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jectors arrived at the bottom line – a suggested price of $379. That reception was a nice follow up to the Tech Innovator Award that Epson received from the technology news source CRN in

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:24 PM Page 15

Economic Outlook 2015 TECHNOLOGY Page 15

November for the newest version of its

who says it a lot. And, in fact, he has

“We have to have a headquarters, a place

BrightLink® Pro. CRN said the BrightLink®

tended to repeat that “good year” thing at

where people meet, talk and exchange

Pro 1430Wi Collaborative Whiteboarding

least once a year, generally at this time of

ideas,” Wacker said. “We have a few field

Wacker isn’t offended by the question.

Solution with Touch “turns any flat surface

year, for almost a quarter-century.

offices and people working remotely, but the

“We got caught up in the dot-com phase

Laserfiche hasn’t finished in the black every year. What was going on way back then?

to an interactive digital whiteboard that can

“We’ve been profitable for the past 22

majority of folks are right here in Long

and the venture capital chasing of the late

be used and shared by as many as 15 partic-

years in a row,” Wacker acknowledged in a

Beach. They come here every day and work

1980s and very early 1990s. We thought if

ipants via browser, mobile device app or

flat, matter-of-fact tone of voice that nonethe-

efficiently – more so than if they were to

we raised capital we could accelerate our

from any other BrightLink® Pro.” It made

less managed to convey pride and humility.

work remotely, when there would be long

growth,” he acknowledged. “But it just dis-

note of the machine’s simplicity and adapt-

“It looks bright for 2015, too, and it seems we

lags between conferences and conversations.

tracted us from our mission. We lost focus.

ability, which enables easy sharing of notes

will be continuing the growth we’ve experi-

All that said, especially the part about

We couldn’t focus, I guess. But when we put

and drawings via e-mail, saved files or

enced over the past 10 to 12 years.”

Laserfiche’s 22-year streak of profitability, it

that aside and developed the single-minded

printed page and also can be used as a video-

Why?

probably ought to be noted that the company

focus on doing things well, we became prof-

conferencing display with split-screen capa-

“Two factors,” Wacker said. “The econ-

was founded in 1987 – 28 years ago. That is,

itable and have remained so ever since.” ■

bilities for viewing two sources side by side.

omy is picking up, and our approach is very

Keith Kratzberg, Epson’s senior vice

disciplined.”

president of sales and marketing, sounded

Speaking of discipline, Wacker chose not

pleased with the company’s energetic start,

to translate into numbers such terms as a

but, when asked to assess the company’s

“bright” year or “profitable” or “growth.”

prospects for the year ahead, what hap-

Laserfiche is a privately held company, so he

pened in Vegas stayed in Vegas – or at

doesn’t have to, although Wacker declined

least, out of his forecast.

the request gently and almost apologetically.

“Epson expects steady growth to con-

“This industry is very competitive,” he

tinue across its consumer and business so-

explained, “and we are in the crosshairs of

lutions in 2015, with an expanded focus on

a lot of companies.”

business products and innovations for ro-

It only takes a few minutes around Laser-

botics, commercial projection, point-of-sale

fiche – whether on the website or on the

solutions, industrial applications and office

phone with the CEO – to realize it is an un-

printing,” Kratzberg responded.

usual company, one that pioneers the outer

Notwithstanding the company’s interest

limits of information technology, yet re-

in what’s happening across the technologi-

mains firmly rooted to business values and

cal spectrum, Kratzberg indicated Epson

practices so traditional that some might dis-

would continue with an approach to product

miss them as obsolete.

development that builds upon expertise which has already led to success.

Among those values is self-reliance, which in the case of Laserfiche means de-

“Epson focuses its innovation across

veloping and expanding its software prod-

markets that leverage Epson technology

ucts through its own innovation, rather than

strengths – printing, projection and sens-

by the acquisition of other companies.

ing – and develops solutions to meet cus-

“Nien-Ling kind of established our cul-

tomer needs based on these strengths,”

ture many, many years ago,” said Wacker,

Kratzberg explained.

speaking of his late wife, and Laserfiche’s

As an example, Kratzberg referred to

founder, whose death last autumn after a

Epson’s advances in inkjet printing technol-

long illness prompted his ascent to CEO

ogy, which in 2014 were manifested in Pre-

from executive vice president and the pro-

cisionCore®.

motion of Karl Chan to company president.

“At the core of this proprietary technol-

“Nien-Ling believed that money was a re-

ogy is the PrecisionCore MicroTFP print

ward for doing things well, rather than an

chip that produces dots at the micron level,”

objective in itself. That’s no longer in vogue,

Kratzberg said. “Each nozzle on the print

I don’t think, but it works very well for us.”

head delivers up to 50,000 droplets per sec-

Wacker boiled that down to two fac-

ond for increased precision and print qual-

tors, too.

ity. Printing solutions leveraging this

“We are good at what we do – I am in awe

technology for the SMB and industrial ap-

of the people in our development and engi-

plications will be seen in 2015.”

neering departments,” he said, “and our team

Laserfiche’s Chris Wacker: ‘We Are Good At What We Do’

is just hell bent on customer satisfaction.” Laserfiche employs about 350 people –

CEO Chris Wacker said this looks like a

approximately 250 of them at the com-

good year for Laserfiche, the Long Beach-

pany’s headquarters on Long Beach Boule-

based company that devises and distributes

vard. Although its vendors and its

enterprise content management software

technology are all over the world, Laser-

worldwide. Wacker said it like someone

fiche considers Long Beach its home.

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EconomicFOutlook 2015 INANCIAL SERVICES

Page 16

■ By RABIYA HICKEN Staff Writer

ith the U.S. economy projected to grow by 3.3 percent this year, many industry leaders said they

are cautiously optimistic about 2015. The Economic Advisory Committee of the American Bankers Association, which met on Friday, January 16, expects 2015 to bring low unemployment rates, market strength in many industries and steady interest rates which may rise slightly in the latter part of 2015. On the investment side, financial advisors are encouraging people to reexamine their portfolios and become more knowledgeable about the types of risks they may be facing. Businesses are expected to fair better on taxation issues now that a Republican-controlled congress is in office. And a slight up tick is expected in workers’ compensation costs during 2015.

Landmark Bank Building – F&M On Pine Avenue

Banking

The historical headquarters of the Farmers & Merchants Bank, located at 302 Pine Ave., is a standout on the map of Long Beach. Constructed in 1923, more than 15 years after Charles J. Walker founded the bank in 1907, the facility still retains many of its vintage features, including the metal teller windows. The marble-clad interior of the building also features a dozen ornate brass chandeliers and a massive skylight made up of hundreds of kokomo glass pieces. According to the Long Beach Historical Society, the building was designed by notable Los Angeles architects Aleck Curlett and Claud Beelman, who also designed the Cooper Arms Apartments building, at 455 E. Ocean Blvd., and the Security Bank Building, at 110 N. Pine Ave., in Long Beach. In 2007, the building’s interior was renovated and restored to its original luster with the help of Dave Butkus, owner of a professional restoration and finishing company, The Ultimate Finish. (Photographs provided by F&M Bank)

Rodney Brown, president and chief executive officer of the California Bankers Association, said that any movement by the Fed to increase interest rates is dependent on several variables, including the world economy, the current political environment and the U.S. economy. “There’s just tremendous uncertainty

“On the flip side, rising interest rates may

industry hope to see retailers make similar

an example of where regulation has been

that all the variables will allow the Fed to

offer upside risk to our outlook as busi-

investments to strengthen their defenses in

thrust upon the entire banking sector when

start raising rates but, given the fact that it

nesses rush to take advantage of current

the coming year.

it really should have focused on the largest

has gone on so long . . . you can imagine

borrowing rates.”

“The fraudulent activity that has been

of banks.”

there is a higher probability of some in-

W. Henry Walker, president of Farmers

able to penetrate [retailers’] systems and

Alvarado said that, although the Dodd-

crease in rates this year than there was in

& Merchants Bank, said low interest rates

then spill all over banking customers . . . is

Frank Act is not perfect, it has helped to

the preceding three,” Brown said.

and rising costs also pose a challenge for

very troublesome,” he said. “Banks are well

strengthen the U.S. financial system as well

banks as they try to expand their net inter-

ahead of most industries and . . . we very

as Wells Fargo. He added that, since the in-

est margins.

much want the retail industry to come along

troduction of the Dodd-Frank Act, Wells

and not have these data losses that are just

Fargo has strengthened its balance sheet and

very adversely impactful.”

financial position by improving its credit

Michael Miller, president and chief executive officer of Long Beach-based International City Bank, said that, though the

“Like all businesses in the U.S., our

economy is showing signs of improve-

costs have risen substantially,” Walker

ment, it has not improved enough to sup-

said. “Both employment and the cost of

Yet another challenge hindering the

quality and its loan-to-deposit ratio. It has

port an increase in the interest rate during

employees has risen. All industries, bank-

smooth operation of banks, according to

revised the amount of cash and liquid assets

the first half of 2015.

ing and otherwise, are looking to manage

Brown, is complying with regulatory poli-

it keeps on hand.

those costs effectively.”

cies, such as those encompassed by the

“We are advocates of strong regulation of

Dodd-Frank Act, which can often be over-

the industry and believe Dodd-Frank . . .

whelming.

takes important steps toward preventing an-

“I think [interest rates] may start to go up in the second half of the year,” Miller said.

Walker said he hopes a small increase

“But unless there are some changes to eco-

in interest rates, which he does not see ris-

nomic factors, such as the housing market

ing beyond 50 basis points – half a percent

“Regulatory costs and compliancy costs

and the construction industry, that change

– in 2015, may translate into better earn-

are really impacting the banks’ ability to

Moving forward, Brown said, he hopes

dramatically for the positive, I don’t see it

ings for banks in the coming year.

meet regulatory compliance expecta-

that the new congress can make adjust-

Adding to those costs, Brown said, is the

tions,” he said. “Those rules are really

ments that bring balance to the Dodd-

continued subjection of banks and retailers

constraining the banks’ ability to make in-

Frank Act.

to large data breaches and cyber attacks.

vestments in people and other things that

“Think of the pendulum analogy, if it was

are revenue producing and better serve the

too far to the left in the pendulum, it has

customer.”

swung way past the center and I think all

going up all that much.” Ben Alvarado, Southern California regional president at Wells Fargo, said he

other financial crisis,” he said.

thinks an increase in interest rates, al-

“More and more energy, effort and in-

though expected to be slight and gradual,

vestment is being put into building the de-

might discourage potential investors.

fenses that are required to protect the banks’

Walker said that over-regulation not

government and businesses would like to

“Businesses remain cautious in an envi-

business activities, customer information

only affects banks; it also affects the econ-

see that come back to some kind of equilib-

ronment of historically slow top-line

and transactions,” Brown said.

omy and the ability of businesses and con-

rium to create a better business environ-

sumers to access credit. “Dodd-Frank is

ment,” he said.

[gross] economic growth,” Alvarado said.

Brown added that many in the banking

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EconomicFOutlook 2015 INANCIAL SERVICES Page 17

Investments/Stocks As the economy starts to trend up, and a possible increase in interest rates looms,

is good . . . most people are more positive

Obama administration, which would prefer

reform we did, we were very clear that [it]

about investing than they have been in many

to tax the heck out of that even if they don’t

would not reduce the cost of workers’ comp,

years,” he said.

bring it back,” Christian said. “So, that is

but it would flatten the increase, and we're

something that I think we'll see some legis-

still seeing moderate increases,” Sektnan

lation on [in 2015].”

told the Business Journal.

investors are urged to look through their

Lee added that one change in investment

portfolios and assess what kinds of invest-

attitudes he has noticed is that more and

ment risks they are taking on in 2015, said

more investors are employing values-based

Ryan Gordon, financial advisor at The

investment strategies.

Thus far, 2015 has been a positive year,

Another issue adding to the cost of work-

according to Christian, particularly due to a

ers’ comp, Sektnan explained, is that several

“People are more aware of what’s going

retroactive extension granted to Section 179

important elements of the workers’ comp

on in the world and they want to make de-

of the Internal Revenue Services tax code –

reform, which was passed by the senate in

“It’s a great time, beginning of the year,

cisions with their investments that are in

an incentive meant to encourage businesses

2012 (SB 863), are still in the process of

to take a look at your portfolio . . . just be

alignment with what they think and what

to invest in themselves by allowing them to

being completely implemented.

aware of the risks that you are taking so

they believe in,” Lee said. “That’s kind of

deduct the full price of qualifying equip-

One key problem, he noted, has to do

that, if there is volatility in the market or

an evolving change in investment attitudes.”

ment and software from their gross income.

with the independent medical review

ups and downs, you are not surprised at how

One area to watch in 2015, Lee said, is

Timothy Good, chair of the California

process, which aimed to take appropriate-

your portfolio reacts to that,” Gordon said.

the energy sector. The Bank of America

Society of CPAs and a partner at Windes,

ness-of-care decisions out of the hands of

Gordon said that he anticipated seeing

Merrill Lynch commodities team antici-

a tax, audit and advisory firm headquar-

judges and lawyers, and defer them to

more volatility in the market this year com-

pates that a further drop in oil prices will

tered in Long Beach, said the ongoing dis-

doctors instead.

pared to previous years, largely due to fac-

occur in the coming year, which could

cussion in Sacramento about tax on

“The challenge is that the applicants’ at-

tors such the European and Asian markets,

lead to undesirable financial conditions

services, such as accounting, is a looming

torneys who have benefited from a system

as well as lower oil prices.

for companies engaged in oil exporting or

issue for the industry.

that had medical decisions made in the ju-

Petrie Group of Wells Fargo Advisors in Long Beach.

In addition, Gordon also urged that people revisit their 401K or similar retirement

companies based in oil exporting emerging markets.

Good said that, although he is not op-

dicial process don’t want to be taken out of

posed to a tax on services, he does believe

the loop . . . because their fees are based on

plans, which recently received a $500 em-

As 2015 pushes forward, Lee added that

it should apply uniformly to all those in the

a contingency basis, there’s an incentive to

ployee contribution cap boost. An addi-

he expects the U.S. dollar to continue its

service sector. “If it applies to accountants,

make the costs as high as possible, because

tional “catch-up contribution” for those 50

climb against the euro and the Japanese

it should apply to attorneys, doctors and

then their fees go up” he pointed out. “So

or older also received a $500 cap boost.

yen. In the long term, Lee said, he hopes

massage therapists,” he said. “It should

we anticipate that they will continue to at-

apply to everyone that provides services.”

tack the tools that insurers and self-insured

“Those increases . . . are another reason for the average person to look at their

to see some changes made to key U.S. policies and systems.

portfolios, and see how much they are

“We believe that Washington does have

saving and making sure they are putting

a pressing need to reform the U.S. tax

away as much money as they can toward

code, the energy policy and programs

retirement.”

such as Medicare, to ensure a healthy and

He added that, with the Federal Reserve

growing economy,” he said. “So those are

expected to raise interest rates, he advised

areas that we think Washington will even-

individuals to avoid taking on too much in-

tually have to address.”

terest risk. Instead, Gordon suggested that

Business And Taxation

investors consider adding cyclical stocks

With the recent change in the makeup of

[stock in companies that sell discretionary

congress, Blake Christian, a partner and

products] to their portfolio, which tend to

certified public accountant with Holthouse

fare better in a growing economy.

Carlin and Van Trigt, said he hopes to see

“Cyclical stocks typically go through the same cycle that the economic cycle goes through, so we tend to slightly favor cyclical stocks right now,” he said.

more business-friendly tax provisions come forth in 2015. “There were a lot of things on the table

employers use to contain costs.”

also had to brush up and enhance their

Although fraud continues to be a big

knowledge of the Affordable Care Act after

issue in the workers’ comp arena, Sektnan

congress delegated its implementation to

said, another issue – the over-prescribing

the IRS in December. “We’re working with

of opioid drugs – is becoming prevalent in

our clients to help them understand the new

the system.

health care law and the coverage require-

He said that opioid drugs, which were originally designed as end-of-life treat-

ments,” Good stated.

Workers’ Compensation Mark Sektnan, president of the Associ-

ments for cancer patients, are being prescribed for conditions such as back pain.

ation of California Insurance Companies,

“Opioids are often prescribed for condi-

said he expects the cost of workers’ com-

tions . . . for which they are not effective

pensation insurance to trend up moder-

and they actually delay an individual’s abil-

ately in 2015, driven mostly by increases

ity to return to work because they become

in medical costs.

addicted,” he said. “So that’s going to con-

“In 2012, the last major workers’ comp

tinue to be a big issue this year.” ■

under the prior congress that would have

Nathan Lee, resident director of Merrill

been very negative to business, but we’re

Lynch in Long Beach, said that, in addition

going to have to wait probably a couple of

to cyclical stocks, such as those in the tech-

months to see what evolves,” Christian told

nology and industrial sectors, he would also

the Business Journal.

recommend pharmaceutical companies and

With the Republican-majority congress

parts of the healthcare sectors, which “offer

now in place, Christian said he expects to

some attractive opportunities.”

see an increased focus on job creation and

Although many individuals are still skep-

hiring credits. He also anticipates seeing

tical of the economy’s recovery and are hes-

lower tax rates on repatriating income from

itant to invest, Lee noted that many others

U.S. companies in foreign countries, which

are slowly starting to regain some confi-

have been hesitant to bring back their earn-

dence in the market.

ings because they don’t want them sub-

“Our recommendation would be that as

This year, Good said, accountants have

jected to U.S. taxation.

long as you are consulting with a financial

“The Republican congress is going to

advisor and are getting some guidance, that

probably be more sensitive to that than the

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EconomicINTERNATIONAL Outlook 2015 TRADE

Page 18

Anthony Otto, president of Long Beach Container Terminal (LBCT), a subsidiary of Orient Overseas Carrier Line, shows off brand new improvements to LBCT’s terminal completed through the Port of Long Beach’s Middle Harbor Redevelopment Project. The first phase of the project, which combines two aging terminals with modern equipment that will allow bigger ships to berth, should be completed by the summer. To the right is the current LBCT terminal, processing cargo arriving on the OOCL Miami. (Photograph by the Business Journal’s Thomas McConville)

■ By SAMANTHA MEHLINGER Senior Writer

he U.S. international trade industry should benefit from a strengthening American dollar this year, caused

both by a stronger national economy and faltering economies abroad, according to

“Our goods have become more expensive

Angeles and Long Beach – which handle 40

workers, the Pacific Maritime Association

to the rest of the world because the dollar is

percent of all imports into the U.S. – should

(PMA), will reach a contract resolution.

stronger, so it will probably cause exports

be about 1.1 percent this year, Hackett said.

The negotiations have been ongoing

to have trouble staying at the level they’ve

Leaders at the ports were somewhat more

since May, two months before the last long-

been for the last three years,” which was a

optimistic, with Port of Long Beach Chief

shore workers’ contract for West Coast ports

rate of about 3.6 million twenty-foot-equiv-

Executive Jon Slangerup estimating a 2 per-

expired. In October, the ILWU and PMA

alent units (TEUs) per year through West

cent increase for Long Beach and Port of

began issuing sparring press releases, blam-

Coast ports, Husing explained.

Los Angeles Executive Director Gene

ing each other for congestion issues at West

Seroka predicting a 2.5 to 4 percent in-

Coast ports, particularly the ports of Los

crease for his port.

Angeles and Long Beach. In early January,

economists and international trade consult-

“You’ve got a strengthening American

ants. About four months ago, the exchange

economy, which means it’s very possible

rate of dollars to euros was about $1.36 to

that the imports side will reach a record

Hackett’s estimates represent a more

a federal mediator was assigned to assist in

one euro; now it’s $1.18 to one euro. “When

level,” Husing said. The last record for im-

modest growth pattern than last year, when

the process after both parties asked for aid.

U.S. currency goes up in value, it basically

ports through West Coast ports was set in

West Coast ports saw a 4 percent increase

Both Slangerup and Seroka told the

means that the rest of the world’s goods are

2006, when imports hit 8.2 million TEUs.

in cargo traffic over 2013, and East Coast

Business Journal that their ports are not

cheaper for us,” which should boost im-

Assuming import traffic in 2014 hits the

ports saw more than double that, at 8.7 per-

receiving enough crews of longshore

ports, John Husing, owner of Irvine-based

projected 7.8 to 7.9 million TEUs, which

cent. Hackett attributed the East Coast’s

workers to load and unload vessels, as has

Economics & Politics, Inc., told the Busi-

depends on cargo traffic figures still unre-

stronger performance to labor strife in West

been the case for the past couple of

ness Journal.

ported from December, Husing said there is

Coast ports.

months. Both said this is making it diffi-

Ben Hackett, principal with Hackett Associates, a consulting research firm for the

a possibility 2015 could break the 2006 record.

Labor Contract Negotiations Weigh On Regional International Trade Outlook

cult to dig out from congestion issues, which began around August and were

international maritime industry, noted that,

Total cargo traffic through the West Coast

as unemployment continues to decrease in

ports should increase by about 1.4 percent

The year’s outlook for West Coast ports

a shortage of trucking chassis, used by

the U.S., “consumption patterns will stay

in the first nine months of 2015 in compar-

is left hanging in the balance as retailers,

truckers to move containers. This issue

fairly healthy,” which bodes well for im-

ison to the same period in 2014, according

shippers, importers and exporters all wait to

was compounded by bigger-than-usual

ported cargo traffic to the U.S.

to Hackett.

see if the International Longshore and

ships with massive amounts of cargo ar-

caused by a confluence of factors, namely

The flip side is that a stronger American

The combined increase in cargo traffic

Warehouse Union (ILWU) and the group

riving at the ports. Seroka said congestion

dollar means a weaker outlook for exports.

coming and going through the ports of Los

representing the employers of longshore

has reached “epic levels.”

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EconomicINTERNATIONAL Outlook 2015 TRADE Page 19

Port of Long Beach Chief Executive Jon Slangerup recently altered the organizational structure of the Port of Long Beach so that managing directors of each bureau report directly to him. Pictured at the port’s offices at 4800 Airport Plaza Dr. are, from left: Steven Rubin, managing director of finance and administration; Richard Cameron, managing director of planning and environmental compliance; Duane Kenagy, capital programs senior executive lead; Slangerup; Douglas Thiessen, managing director of engineering services; and Dr. Noel Hacegaba, chief commercial officer and managing director of commercial operations. Two managing director positions remain to be appointed: communications and human relations/team development. (Photograph by the Business Journal’s Thomas McConville)

Slangerup said the Port of Long Beach is at about “half strength” in the number of workers it needs to move cargo. If fewer longshore workers than necessary continue to be deployed for work, the rush of shipping ahead of the Chinese New Year in February is likely to mean the congestion issue won’t be resolved for a couple of months, he added. It doesn’t appear the labor negotiations are coming any closer to a resolution, despite help from a federal mediator who Slangerup testified is “very experienced.” On January 13, the PMA announced it would stop ordering crews of workers to unload and load cargo at both local ports during nighttime hours, arguing that, because longshore workers aren’t clearing cargo from terminals in a timely manner, there is no place to put unloaded cargo, anyway. “PMA will focus efforts during night operations on clearing containers stranded on the terminal yards by the ongoing ILWU slowdowns,”

Wade

Gates,

PMA

spokesperson, told the Business Journal. “The union’s refusal for 10 weeks now to dispatch skilled workers to drive yard cranes has created precarious situations at many terminals, and this is another attempt by the terminal operators to chip away at that congestion,” he explained. Please Continue To Page 20

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EconomicINTERNATIONAL Outlook 2015 TRADE Page 20

The days of the Gerald Desmond Bridge, pictured here over the Port of Long Beach, are numbered. The port’s project to replace the bridge with a taller, cable-stayed bridge will enable larger vessels to enter further into the interior reaches of the port complex. Foundation piles for the new bridge are currently being installed. (Photograph by the Business Journal’s Thomas McConville)

“The last thing you want is the West

tion for each provider. Slangerup and Seroka

fluidity of the cargo path coming down the

Moro told the Business Journal the ground-

Coast ports to look to be unstable to inter-

both worked with the chassis providers to

line,” he said.

work to lay the foundations for the bridge had

national supply chain managers; then they’ll

achieve the cooperative agreement. “That is

In addition to seeking creative ways to al-

been completed, and work to erect 350-foot

divert [cargo],” Husing said of the potential

going to really improve the efficiency of the

leviate and prevent congestion, both ports

deep support piles was beginning. Since he

impact of the labor issues on the ports.

truckers, and it is going to relieve a tremen-

are undergoing multi-billion dollar capital

retired, new hire Duane Kenagy has taken

“And once they divert, they’re not going to

dous problem,” Slangerup said.

improvement projects aimed at upgrading

the reins overseeing capital projects.

want to come back.” Hackett said some traf-

The Port of Long Beach has taken its own

infrastructure, increasing throughput of

In addition to these projects, Slangerup

fic has already been diverted, with the East

measures to ensure against future chassis

cargo and accommodating mega-ships car-

said the port is investing billions in rail

Coast, Gulf Coast and even the Port of Van-

shortages. “We as a port have committed to

rying tens of thousands of containers.

expansion to “increase throughput veloc-

couver as beneficiaries.

providing peak chassis assets to make sure

The two largest projects underway at the

“Any type of disruption, whether it be

that during peak periods we never encounter

Port of Long Beach are the Middle Harbor

caused by these congestion issues [or] the

a shortage of chassis as we did this past

Redevelopment Project and the Gerald

The Port of Los Angeles has large infra-

global supply chain inefficiencies, will

year,” Slangerup said. A request for propos-

Desmond Bridge Replacement Project. The

structure projects underway as well. “We

impact our port complexes. As we look

als for the port to obtain a fleet of about

Middle Harbor project combines two aging

spend about $1 million per day on capital im-

down the line as far as opportunities, both

3,000 chassis has been drafted and is being

terminals, outfitting them with modern and

provement projects to make sure that we ex-

Jon [Slangerup] and I believe that these is-

reviewed before release sometime within the

environmentally friendly technology. The

ceed the expectations of our customers and

sues are manageable and we can fix them.

next month, he said.

tenant of the site is Long Beach Container

the cargo owners,” Seroka said. “We have

Terminal (LBCT), a subsidiary of Orient

three projects right now that are in place, in-

Overseas Container Line.

cluding the TraPac Container Terminal ex-

ity to move volume and containers through our port.”

They are of our highest priorities, and we

The Port of

are working around the clock to do just

Los Angeles has

that,” Seroka said.

been investigat-

The Middle Harbor project is divided into

pansion, the transportation improvement

ing ways to im-

two phases so construction can be done on

program, and all [the infrastructure work] in

Despite historic levels of congestion,

prove truck turn

one half of the terminal at a time, allowing

and around the port, including the harbor

both the Port of Los Angeles and Port of

times and truck-

LBCT to operate during construction. Con-

freeway [State Route 110] and State Route

Long Beach enjoyed growth in container

ing efficiencies

struction on the first half of the terminal,

47,” he said. The TraPac expansion includes

within the port

complete with some of the world’s largest

new wharves, deeper water at some berths,

complex. “Slow

stacking cranes and automated guided, zero

new cranes, improvements to backlands and

[terminal] gate

emission vehicles for moving cargo, is ex-

a new on-dock rail facility.

turn times have

pected to be completed this summer, ac-

“We also have the upcoming work begin-

negatively

im-

cording to Slangerup. “When it is fully

ning at the Yusen Terminal for improvements

pacted our truck-

implemented we are going to have about a

on its property for both the berth and the wa-

ers across the

two million additional TEU capacity which

terside,” Seroka said. The environmental im-

Southern

Cali-

is… about a 20 percent increase in capacity

pact report for that project has been certified,

fornia

area.

for the port, which is very exciting,” he said.

so the project is scheduled to commence any

We’re looking at

The Gerald Desmond Bridge Replacement

day now, he added. “These will be key proj-

ideas that would be technologically based,

Project involves tearing down the existing

ects in order to accommodate the larger ves-

On February 1, the three companies pro-

inclusive of an Uber-type trucking system

Gerald Desmond Bridge and replacing it with

sels and the fluidity of traffic that we want to

viding chassis to truckers at the San Pedro

that we’re testing right now with two of our

a taller, wider bridge to allow larger vessels

see in the near future,” Seroka said.

Bay Ports are going to begin operating a gray

terminals,” Seroka said, referring to the mo-

to pass beneath it further into the port, and

Moving forward, Seroka emphasized

pool of chassis, a model in which truckers

bile phone application Uber, which allows

to facilitate more vehicle traffic on the bridge

both ports will continue to work together

may drop off chassis from any provider in-

users to summon a taxi. “[That] may be a

deck. Before retiring at the end of 2014,

to create “an even better port complex” in

terchangeably rather than in a specific loca-

good path for route optimization and some

Capital Programs Senior Executive Lead Al

the future. ■

Moving The Ports Forward

traffic last year. “We had modest growth in 2014 – just above 2 percent,” Slangerup said of the Port of Long Beach. The Port of Los Angeles saw a 4.5 percent increase in containerized cargo traffic in 2014 compared with the previous year, Seroka said. Both executives are working – often together – to ensure their ports continue to attract new business, and by putting infrastructure in place to accommodate growth and prevent future congestion.

Gene Seroka, executive director of the Port of Los Angeles, told the Business Journal that since joining the port in the summer around the same time as Jon Slangerup began at the Port of Long Beach as its chief executive, the two “are working very well together.” (Photograph provided by the Port of Los Angeles)

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Economic Outlook 2015 RETAIL Page 23

■ By RABIYA HICKEN Staff Writer

here appears to be consensus among local retailers that 2015 is shaping up to be a positive year, thanks in

large part to the drop in gas prices and the successes of the Long Beach Shop Local movement, which have led to increased sales and foot traffic.

cameras along 2nd Street, will incentivize

tic,” he said. In addition, Weiland Brewery

aow on 3618 E. Broadway, have also re-

even more people to come down.

Restaurant and Deep Blue Dive School are

ported an increase in business.

Rossi added that the BSBA plans to work

gearing up to open up shop in the area.

“Everyone had a very busy holiday,” he

with the Long Beach Area Convention &

Aside from new businesses, Cohn said,

said. “I think this is the first year that

Visitors Bureau to increase the flow of

he has also noticed increased foot traffic in

things have been [as] full force as the pre-

tourists to the Belmont Shore area.

the Bixby Knolls district.

recession era.”

Also included in the BSBA’s plans for

“I think that Bixby Knolls is different

A few restaurants in the area, such as At

2015 are beautifying the 2nd Street median

than, say, Belmont Shore that has such a

Last Cafe at 204 Orange Ave., have also

and featuring a pop-up-shop sidewalk sale

dense neighborhood and a lot of foot

expanded out to the curb to allow for big-

over the summer.

traffic,” he said. “Here it takes much

ger patio dining areas.

With storefront vacancies dwindling and

“We can’t predict what retail is going to

more of an effort to draw people out to

Richard Leighton, owner of Richie’s

more innovative businesses setting up shop

be like, but, the fact that gas prices are

the quarters because we’re right in the

Toys & Gifts, which recently moved from

in Long Beach, many Long Beach Business

[hopefully] going to be low for the next

middle of a bedroom community. But . .

1424 E. Broadway to a larger space at

Association leaders said that this is the first

year, maybe that will get more people to

. [we’re] seeing that businesses are be-

1500 E. Broadway, said he expects busi-

year since the recession of 2008 in which

reach into their pockets and want to spend

coming more of a destination and that

ness to do well in 2015.

the outlook has been so positive.

a little bit more money,” Rossi said.

foot traffic has picked up.”

“We were very busy for Christmas,”

Belmont Shore Dede Rossi, executive director of the Belmont Shore Business Association (BSBA), said 2014 was a good year for most businesses in Belmont Shore, but she’s hoping that 2015 is going to be even better. “The holiday season started off great,” Rossi said. “What we really tried to push is the Small Business Saturday. A lot of the retailers told me that they did really well on those particular days and that’s a pretty good way to start it.” Heather Duncan, owner of Blue Windows at 5276 E. 2nd St. and vice president of marketing and promotions for the BSBA, said she had a “fantastic” holiday season. “I definitely see a complete rise in the economy and people spending,” Duncan said. “The store has gotten better every year since the really bad years of 2009 and ’10 . . . I’m hoping that it will continue to increase in 2015.” Duncan, who is in the process of launching a new website for her store, said she thinks restaurants in the area have helped to increase foot traffic on 2nd Street. “Restaurants always help boutiques because [they get] people down here,” she said. “I think for new people and the majority of the people coming to 2nd Street, they are coming down to stroll and eat something and then they happen to be

Nordstorm Rack Coming To Marina Pacifica Mall Construction has begun to transform the now defunct Loehmann’s at Marina Pacifica Shopping Mall into a Nordstrom Rack. Nordstrom spokeswoman Naomi Tobis said they are happy to be back in Long Beach after their store at Long Beach CityPlace closed early last year. “It was always our intention and our hope to eventually find another great location in Long Beach,” Tobis said. She added that the new store is planned to be open to the public sometime in fall 2015. (Photograph by the Business Journal’s Thomas McConville)

Bixby Knolls Things are bustling in Bixby Knolls, ac-

Looking forward, Cohn said, he hopes to see more restaurants in Bixby Knolls.

cording to Blair Cohn, president of the

“We just keep putting our feelers out

Bixby Knolls Business Improvement Asso-

there and talking to our brokers to continue

ciation (BKBIA).

to bring in businesses that serve the neigh-

“We’re seeing more investment from

go well because we’re actually celebrating every season and . . . every holiday we do very well.” Cramer said he attributes much of the corridor’s success to increased foot traffic

borhood,” he said.

Broadway Corridor

property owners, retailers and also profes-

Leighton said. “For us, [2015] is going to

sional services,” Cohn said. “We’re staying

Business along the Broadway Corridor is

cautiously optimistic but I think that this

booming, according to Sidney Cramer,

year [2015] is better than last year, which

president of the On Broadway Business As-

was better than the year before.”

sociation and owner of Spa Sidney.

in the area, an increase in innovative businesses and a greater sense of shopping local among the community. “I think people are discovering these smaller streets,” Cramer said. “They’re

Adding to the bustle are several new

Cramer said that, for the first time

avoiding the anchored strip mall or the mall

According to Rossi, there have been a

businesses that have moved into the Bixby

since the recession hit in 2008, his

completely and they’re going for the local

few vacancies on 2nd Street, but currently

Knolls area, which reported a “very busy”

business

artisan that’s in their backyard.”

most storefronts are occupied. Recently,

holiday season, Cohn said.

growth and a sharp increase in first-

shopping around.”

experienced

double-digit

Rocky Mountain Chocolate Factory at 5213

Among the new additions is Stateside

time customers. He noted that, on aver-

E. 2nd St. closed its doors; however, Open

Crafts at 4242 Atlantic Ave., which opened

age, each customer spent about 20

Sesame next door announced it plans to ex-

recently and is expected to be in full opera-

percent more than they spent the previ-

pand into the vacant space.

tion by February, Cohn said. Also, the corner

ous year. “That was very exciting and

Rossi said she hopes the upcoming intro-

liquor store at 4100 Atlantic Ave. was taken

it kind of poises us for some good

duction of smart parking meters, which are

over and transformed by Stearns Liquor.

growth next year,” he said.

going to allow customers to use their credit

“They upgraded not only the appearance but

Cramer said other businesses, such as

and debit cards to pay, as well as security

also the products they carry, which is fantas-

The Attic on 3441 E. Broadway and Man-

Downtown Long Beach Residential and retail growth are prominent features on Downtown Long Beach's agenda as it enters 2015, according to Brian Wallace, economic development manager at the Downtown Long Beach Associates (DLBA). In an effort to make the downtown area more desirable to businesses and residents Please Continue To Page 24

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Economic Outlook 2015 RETAIL

Page 24

alike, Wallace told the Business Journal that the DLBA plans to develop a couple of thousand new “market rate or luxury level” residences in the area, as well as new retail spaces. “There are about a thousand units that are either under construction or permitted right now to open in the downtown in the next two to three years,” Wallace said. “So we’ll have new customers and new retail spaces.” Part of that growth will also involve transforming The Pike, a waterfront entertainment and dining destination, into “Outlets at The Pike,” which will feature outlet stores such as clothing retailer H&M, alongside existing entertainment and dining venues. “[This is] really an exciting repositioning of this asset that’s in our downtown to be-

Albertson’s On Spring Street Purchased By Haggen

come more of a destination, both for visi-

Pacific Northwest grocery chain Haggen is poised to take over more than 20 Albertsons and Safeway stores in Southern California this year, including the Albertsons at 6235 E. Spring St. pictured here. Last month, Haggen agreed to purchase 146 of the 168 stores mutually divested by Albertsons LLC and Safeway in preparation for their upcoming merger, according to several reports. With the purchase of these stores, which is subject to the Federal Trade Commission's approval, Haggen will go from having 18 stores in Washington and Oregon combined to having 164 stores scattered across Nevada, Washington, Oregon, Arizona and California. Haggen, created in 1933 by Ben and Dorothy Haggen and Doug Clark, features locally grown produce, gluten-free food, and in-house bakery and other specialty items. “We warmly welcome these new employees and stores into the Haggen family,” John Clougher, Pacific Northwest Haggen CEO, said in a company statement.“ We want to retain these existing teams while allowing our growing company to build on their past success.” A Haggen representative told the Business Journal that work to convert the store is expected to begin in the spring and hopefully be completed by July 4. (Photograph by the Business Journal’s Thomas McConville)

tors and tourists,” Wallace said. Matt Schuler, director of communications at DDR Corporation, which operates The Pike, said DDR Corporation along with the offices of the mayor and vice mayor will host an event to discuss the project in the coming weeks. Wallace said he has also noticed a lot of natural growth taking place in the retail

“We’re feeling very confident,” Wilson said. “We’ve definitely turned the corner from the days of the recession.”

are pointing toward a successful 2015 for

city and beyond,” Moor said of the store

the district.

that has been on Spring Street for nearly

“By and large, everyone was very

four and a half years. “We are expecting

space of Downtown Long Beach. The inter-

Wilson, who is also president and chief

happy with the holiday season,” he said.

section of 3rd Street and Long Beach Boule-

executive officer at Pacific Research &

“Just this first week of the new year has

Dan Wilson, owner of Liberty Tax Serv-

vard, which is home to retailers such as

Strategies Inc., said he has noticed a surge

very positive signs of increased traffic, in-

ices at 3003 N. Los Coyotes Diag., said

Rainbow Juices, at 246 E. 3rd St., and cloth-

in foot traffic in the district.

creased sales, expansion, so I think it has

many small businesses in the area have reported a positive outlook for the year.

ing designer Yellow 108, at 1105 E. 3rd St.,

“We’re seeing more people out at night,

been a very good end to the year of 2014

is a prime example of that growth, he said.

taking advantage of the wide variety of en-

and a bright spot in 2015 in getting started

“It’s really an organic growth of local

tertainment options that we have to offer in

moving forward.”

businesses that are opening permanent

East Long Beach, and, from what I continue

store fronts,” he explained. “Those [are]

to read and see across Long Beach, in gen-

the amenities that go hand in hand with

eral, we’re doing well,” he said.

East Spring Street

great things in 2015.”

Wilson, who owns three Liberty Tax Services branches and one Siempre Tax branch in Long Beach, said the outlook

Joan Stiehl, president of the East Spring

for his own business, which also serves as

Street Business Association and a Farmers

a Covered California Enrollment center,

our residential growth, [which] we’re ex-

In addition to increased foot traffic, Wil-

Insurance agent at 6200 E. Spring St., said

is positive as well. “Our tax season has

pecting to see more of this year and fol-

son said he has also noticed that consumer

the outlook for the business district is

started off very rapid. Our outlook is fan-

lowing on a couple more years.”

spending has increased and more busi-

looking good for 2015.

tastic,” Wilson said. “We’re seeing posi-

Another new addition introduced to

nesses are reinvesting in themselves.

“It’s very different than downtown or

Downtown Long Beach’s retail arena dur-

“A lot of it probably has to do with the

2nd Street,” Stiehl observed. “It’s just

ing the holiday season was pop-up store,

fact that we have a little more money in

kind of a mom and pop area out here ex-

Made in Long Beach. The pop-up store

our pockets because of the lower prices at

cept for all the wonderful grocery stores,

featured nearly three dozen Long Beach-

the pump,” he said. “It does bring a direct

but business seems to be doing well.”

based businesses, ranging from crafts to

benefit to the local businesses and the

artisan foods, and more.

community.”

tive growth as the community gets to know and trust us more.”

4th Street After the year’s first 4th Street Business Association board meeting, the verdict was

Although a few storefronts on the street

unanimous – business on 4th Street is on an

are empty, Stiehl acknowledged, the rest

upswing and is expected to continue that

of the street is doing well.

trend into the year, Kerstin Kansteiner, asso-

“That was a really exciting addition to the

The Long Beach Thai Restaurant, which

retail scene in downtown [during the holi-

will be moving to a bigger space at 3109 E.

“We have four vacancies right now on

ciation president, told the Business Journal.

days],” Wallace said. “They achieved a re-

Anaheim St. toward the end of February, is

the street but, when you think about such

“I think, in general, nobody has seen such

ally great amount of success and they’re

among the businesses reinvesting in them-

a big street, that’s pretty good,” she said.

an uptrend in quite a few years, so everyone

looking to turn that into a permanent fixture

selves, Wilson said. “[They] have been in the

“Things are going well . . . and it’s pretty

is incredibly positive about what 2015 is

in that location.”

district for a long time and are one of several

quiet so that’s nice that we have a really

going to offer,” said Kansteiner, who owns

that are growing and reinvesting in their busi-

good area to work in.”

Portfolios Coffeehouse at 2300 E. 4th St.

East Anaheim Street This year is gearing up to be a positive

ness, so we think this is a wonderful sign.”

year for businesses in the East Anaheim

There is currently only one vacancy, at

Street corridor, according to Rod Wilson,

3143 E. Anaheim St., which was previously

president of the East Anaheim Street Busi-

occupied by House of Craft.

ness Alliance board of directors.

Looking forward, Wilson said, all signs

Sean Moor, owner of Gatsby Books at

Kansteiner said she attributes much of the

5535 E. Spring St., said the store “enjoyed

success to the fact that many of the reser-

a prosperous holiday season” in 2014.

vations people had about the economy in

“Gatsby Books is a destination bookstore; our customers come from all over the

previous years are starting to melt away. “More money is being spent [and] even

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:25 PM Page 25

Economic Outlook 2015 RETAIL Page 25

the younger people are not looking at the

part of a center that was convenient for

shop here on the ship . . . we’re looking at a

sumers from West Orange County, the

item’s price; they are just buying, so that

them and we were happy to be able to join

little wine tasting store, and one of them with

Mid-Cities area and beyond in addition to

was very, very hopeful,” Kansteiner said.

the Marina Pacifica mall.”

cigars and stuff like that,” Jenkins said.

Long Beach – is considered the largest re-

Looking to 2015, Sigal said he believes

“We’re hoping also to open a wedding shop.

tail sales tax generator in the city with

the area will continue to see success be-

We do over 200 weddings a year at the Queen

stores such as Lowe’s, Ross Dress For

cause the mall resides in a “very retail-cen-

Mary and our goal is to become a one-stop

Less, Sam’s Club, Sports Chalet, Walmart,

tric neighborhood.”

shop for those brides and grooms-to-be.”

Aaron Brothers, Ashley Furniture, Barnes

Kansteiner said she has also seen an increase in foot traffic to the area. “We saw a lot of traffic from visitors to Long Beach that are coming in through the [Long Beach] Convention Center and actu-

“You’re getting young people there,

(Editor’s note: Several efforts were made

& Noble, Performance Bicycles, PetSmart,

ally end up on 4th Street, so its not just the

you’re getting people who have lived there

to reach a spokesperson for Long Beach

David’s Bridal, Old Navy and many more.

locals,” she said.

a long time and you’re getting people who

Towne Center in Northeast Long Beach,

The center also has more than a dozen din-

At the beginning of last year, Kansteiner

go to the marina,” he said. “It’s a good area.”

but calls were not returned. The popular

ing establishments and an Edwards Sta-

said, it seemed as though 4th Street was

The mall, which stretches along Pacific

center – which is a regional draw with con-

dium 26 theater complex. ■

moving toward becoming a predominantly

Coast Highway in Southeast Long Beach,

food and drink area; however, this year the

includes a Best Buy, Barnes & Noble, The

outlook is different.

Sports Authority, Pier 1 Imports, Sit’n

“I think it’s not that it’s going in any one

Sleep, Hawkes & Smythe Furniture, AMC

particular direction. It’s just creating a more

Theaters, Ralph, Starbucks and a variety

wholesome district,” she said. “Now there’s

of restaurants.

shopping, dining, entertainment here. It makes it more of a destination.” The area has seen only one vacancy in recent months, and even that was quickly

Queen Mary Soon, when visitors aboard the Queen Mary step into any of its 12 shops, they will also be taking step back in history.

filled up. Currently, two stores on 4th Street

Nine of the ship’s long-time independent

are undergoing renovations to make way

retailers recently vacated their stores so that

for Salud Juice, at the corner of 4th Street

work to remodel the shops according to the

and Cherry Avenue, and East 4th Skate,

original style and history of the Queen

which is going to move to 2228 E. 4th St.

Mary could begin, according to John Jenk-

Marina Pacifica

ins, general manager of the Queen Mary.

Access to movies, restaurants, shops and

For the task, Jenkins said, they chose

views of the marina all at one location is

Event Network, a company that specializes

what lends to the success of the Marina Paci-

in the operation of gift shops for major at-

fica Shopping Mall, said Sandy Sigal, chief

tractions. Among its long list of clients are

executive officer of NewMark Merrill Com-

the Abraham Lincoln Presidential Library

panies, which develops and owns several

Foundation, Alcatraz Cruises, Chabot

malls in California, Colorado and Illinois.

Space & Science Center and the Natural

“Retail is an experience as much as it’s

History Museum of Los Angeles County.

about shopping,” Sigal said. “I think that

For some time now, Jenkins remarked,

[Marina Pacifica] has continued to see

the Queen Mary has wanted to remodel the

that people were happy to spend time in

shops and transition into online sales but

one place watching movies, eating, shop-

hasn’t had the money to follow through.

ping and just having an experience as a

“For them to come in and make that type

family. I’m pretty optimistic on what is

of investment to redo all of our shops was

going to be happening there.”

really just a good deal for us,” Jenkins said.

Sigal also confirmed that the mall, which

“With the size of their company, they are

is “99 percent leased out,” will soon be wel-

also able to . . . look at some of our archive

coming Nordstrom Rack to the mix. The

items and replicate those things so that peo-

new store will occupy the space previously

ple can buy them as little souvenirs.”

held by Loehmann’s, which closed in 2014 after filing for bankruptcy.

Jenkins reported that a few stores are going to reopen this week and the rest

“Construction has started,” Sigal said.

should be open for business by the begin-

Nordstrom Spokeswoman Naomi Tobis

ning of February. Although none of the pre-

said that, although they don’t have a set

vious retailers will be returning to the ship,

opening date, they hope to have the store up

two of the three stores that were previously

and running by fall 2015.

run by the Queen Mary, which include the

“We were attracted to Marina Pacifica because we work hard to see the business

Diana Gift shop and the Submarine shop, will remain in operation.

through the eyes of our customers, and

Jenkins added that, of the 12 stores, only

Marina Pacifica mall was a great, conven-

eight will reopen as gift shops and the rest

ient location where our customers were al-

will be used for other ventures.

ready shopping. So we felt fortunate to be

“Our hope is to open a candy or ice cream

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:25 PM Page 26

Economic Outlook REAL E2015 STATE

Page 26

percent range for the general Long Beach

75 to 80 percent of loan servicing in our

provide greater access to homeownership for

area in 2015,” Phil Jones, owner of Coldwell

country, have added 3 percent down pay-

historically underserved groups and credit-

Banker Coastal Alliance, told the Business

ments for first-time home buyers, which is

worthy families,” Kutzkey said in a statement.

Journal. In contrast, “Last year was an un-

a pretty significant happening,” Jones said.

Robert Kleinhenz, former CAR deputy

fter what economists and local real

pleasant surprise because sales were down

Earlier this month, the Federal Housing

chief economist and current chief econo-

estate professionals describe as a

almost 11 or 12 percent locally,” he said.

Administration (FHA) decreased its mort-

mist for the Los Angeles County Economic

■ By SAMANTHA MEHLINGER Senior Writer

Single-Family Market

disappointing single-family market

The increase in sales expected this year is

gage insurance premiums by half a percent,

Development Corporation’s Kyser Center

statewide and in Long Beach last year, 2015

based on a lending environment that has be-

an action lauded by California Association of

for Economic Research, said these changes

promises to boast modest home price appre-

come friendlier to entry-level homebuyers

Realtors (CAR) President Chris Kutzkey.

should help unleash pent-up demand

ciation and overall home sales.

in the past month or so. “First of all, Fannie

“Reducing FHA mortgage insurance premi-

among the millennial population to enter

“The California Association of Realtors is

Mae and Freddie Mac, which collectively

ums will make it easier for hundreds of thou-

the housing market. Additionally, he said,

projecting an increase in sales in the 5 to 7

handle somewhere in the neighborhood of

sands of homebuyers to get a mortgage and

“more existing homeowners who may have

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1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:25 PM Page 27

Economic Outlook REAL E2015 STATE Page 27

seen their equity damaged or lost during the

Thanks to low interest rates, which re-

year. Bogoyevac’s projections were a bit

Rental rates are also still on the rise

recession and the housing crisis are going

gional economists and real estate agents

higher – he estimated sales prices could in-

thanks to continuing high demand among

to come back and be in a better position to

agree should remain at current levels

crease between 5 to 10 percent this year.

renters, but Bogoyevac said some landlords

buy over the next couple of years.”

through at least the summer if not the end

Thanks to continually rising values of

are going to have to make improvements to

Interest rates are projected to remain in

of the year, demand to invest in multi-fam-

multi-family properties, more owners are

their units if they want to increase rents fur-

the low 3.6 to 3.8 percent range, which

ily properties is going to be strong this year,

beginning to list their properties on the mar-

ther. “If you do have a vacancy, in order to

should also aid homebuyers, Jones pointed

Bogoyevac said. “Buyer activity, with inter-

ket, somewhat improving what has been a

get the true market rent you have got to

out. “There is quite a bit of reason for opti-

est rates where they are, is going to be as

very tight inventory for the past couple of

make it nice. That’s the expectation of the

mism, particularly with interest rates pro-

strong as it was last year,” he predicted.

years, Bogoyevac and Christopher observed.

tenants,” he said. Standard upgrades include

Eric Christopher, senior associate at INCO

Both agents were in agreement that low

hardwood or laminate floors, granite coun-

Commercial, said prices of multi-family

interest rates coupled with strong demand

Inventory of homes for sale in Long

properties in Long Beach increased between

and higher inventory should boost sales this

The main risk to the multi-family market

Beach remains tight, at about 2.5 months of

7 to 10 percent last year and are likely to con-

year. “We’re going to see more activity in

this year is interest rates. If those were to in-

inventory, Jones said. Although so far this

tinue to increase between 3 to 5 percent this

terms of transactions,” Bogoyevac said.

jected to remain at the current levels at least through mid-year, if not longer,” he said.

year his firm is seeing “a real uptick in listing activity,” he predicted inventory to remain a problem this year as demand continues to outpace supply. Last year, the prices of homes for sale in Long Beach moderated, increasing by about 8 percent from the year prior. In 2013, prices had increased by 20 percent over the previous year. The more modest single-digit growth should continue this year in the 5 to 7 percent range, Jones said. The condo market, which is popular for first-time homebuyers due to lower costs, is likely to be the most active part of the single-family market this year, Jones noted.

Multi-Family The 2015 outlook for the multi-family real estate market in Long Beach is positive, with demand likely to increase thanks to millennials forming new households plus most market fundamentals moving on a healthy trajectory, according to local real estate agents. Kleinhenz said that, while millennials have taken longer than anticipated to form their own households either through renting or purchasing a home, this year some of that pent-up demand should be unleashed. “At some point there should be formations of new households that are going to be putting new demands, especially on the multi-family side,” he said. More individuals entering the housing market are still choosing to rent apartments than to buy homes, Steve Bogoyevac, first vice president of investments for Marcus & Millichap, observed. “There are still a ton of new households being formed by people who are preferring to rent because of the lifestyle, or [because they] can’t buy a house because they don’t have 20 percent down or can’t qualify for a loan,” he said, referencing his company’s national multifamily forecast for 2015. “That definitely holds true for Long Beach,” he added.

tertops and updated cabinetry, he said.

Please Continue To Page 28

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:25 PM Page 28

Economic Outlook REAL E2015 STATE

Page 28

care both expanded their office footprints in Long Beach, and two new medical office buildings broke ground at Douglas Park. The Douglas Park buildings, which will house Long Beach Gastroenterology and Columbia Pediatrics as well as other medical tenants, are expected to be complete in the first quarter, according to Larry Lukanish of Sares-Regis. A 19,000-square-foot medical building at 845 E. Willow St. in Signal Hill, near Long Beach Memorial Medical Center, is also under construction, with Lee & Associates handling leasing, Coburn said. Evidence that demand for office space is growing among other industries comes in the form of three new creative office buildShimadzu Aircraft Equipment USA, a division of Shimadzu Precision Instruments, is relocating its headquarters from Torrance to this new 58,796-square-foot building at Douglas Park upon its completion some time this quarter. (Photograph by the Business Journal’s Thomas McConville)

Office

ings planned at Douglas Park by Urbana Development, LLC, the same developer of the

crease, demand to buy would flatten, both

apartments, as with the case of the Security

agents said. Neither of them, however, ex-

Pacific National Bank building at 110 Pine

Demand in the local office market has

tion. While Urbana has not submitted for en-

pects that to happen.

Ave. and the Ocean Center building at 110

most recently been driven by owner-users

titlement yet, the company is “actively

There is quite a bit of new construction of

Ocean Ave., there are also new buildings

and the health care industry, trends that

marketing the buildings and has received a

multi-family rental units underway in Long

going up. The largest of these developments

should continue into 2015, according to

good response,” Richard Lewis, principal at

Beach. By the Business Journal’s estimates,

is The Current, a 17-story, 223-unit high rise

local real estate agents.

Urbana, told the Business Journal. Coburn

about 1,244 new apartment and loft units are

at 707 E. Ocean Blvd. by developers Ander-

“Last year was a good year and we’re see-

indicated one of the buildings was already

planned for the downtown area alone. While

sonPacific and Ledcor Properties, Inc. The

ing the highlights of the owner-user market

spoken for. The buildings should break

some involve converting old offices into

project is scheduled for completion in 2016.

continuing to strengthen,” Jeff Coburn, prin-

ground in late 2015, Lewis said.

adjacent medical buildings nearing comple-

cipal with Lee & Associates, told the Busi-

The greatest demand to buy at the mo-

ness Journal. Owners of businesses are

ment is cropping up in suburban (non-

looking to buy rather than rent in order to take

downtown) markets such as Douglas Park,

advantage of low interest rates, he explained.

the airport business parks, and Bixby

Hoyt Hochman, president of Hoyt Re-

Knolls, both Coburn and Hochman ob-

alty & Investments, said that, while 2014

served. “The hard part is trying to find the

was somewhat slow in terms of activity in

good product. There is not a lot of inventory

the Long Beach office market, this year

of buildings for sale,” Coburn said.

“we’ll see a little bit more activity” thanks

In Downtown Long Beach, some office

to low interest rates. “What I think we’re

space is being converted into residential

going to see in 2015 is a lot of owner-users

units in three buildings – the former City

coming in to buy because they have really

Hall East, the Ocean Center Building and

low rates and because of [Long Beach’s]

the former Security Pacific National Bank

location,” he said, midway between Los

Building. Displaced office tenants from the

Angeles and Orange counties.

latter two buildings, which have yet to begin

Professional services industries that service local ports, such as architecture and en-

construction, may generate more activity in downtown this year, Hochman said.

gineering, are expected to add jobs this year

Short supply and strong demand should

as imports rise, according to LAEDC’s

cause values of office buildings in suburban

Kleinhenz. As these sectors of the economy,

markets to increase this year, according to

as well as the growing health care industry,

Coburn. He anticipated lease rates would

continue to add jobs, demand for office

increase, although more gradually than

space may increase. A 2015 economic out-

sales prices, while Hochman said he

look report by Cushman & Wakefield stated

thought they would remain about the same.

that “every major metro area” in the U.S. is

Industrial

expected to see more demand for office space due to rising employment.

With consumer spending expected to be strong this year thanks to falling oil prices,

Coburn pointed out that medical organi-

increasing employment, and wage growth,

zations continue to lease and buy more of-

imports may reach record levels through

fice space. In 2014, Senior Care Action

local ports this year – trends that should

Network Health Plan and Molina Health-

translate to high demand for industrial

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:26 PM Page 29

Economic Outlook REAL E2015 STATE Page 29

space, according to a 2015 economic out-

able, and most business owners and in-

look report by Cushman & Wakefield.

vestors want to try to secure their long-term

The Long Beach industrial market has ex-

financing right now,” he said. Due to high

perienced very low vacancy rates – below 5

demand, he called low inventory “the

percent – for the last two years. This past year,

biggest dilemma at this point.”

demand was very high from companies hop-

With few properties available, most are

ing to purchase rather than lease industrial

occupied – vacancy rates remain low, al-

space in order to take advantage of low inter-

though final figures for the last quarter of

est rates. In 2015, that trend should continue

2014 have not yet been calculated by real

– the problem now is that there isn’t much left

estate firms, Carrillo said. While Eddy is

for sale, according to local real estate agents.

“not sure how much lower they can go,”

“There is a need in the marketplace that

Carrillo is confident vacancy rates will de-

we are really having a tough time providing

crease to below 4 percent this year.

for,” Brandon Carrillo, principal at the Long

Despite low inventory, both Eddy and

Beach office of Lee & Associates, told the

Carrillo are optimistic about what 2015

Business Journal. “Our biggest issue right

holds for the Long Beach industrial market.

now is we’re running out of quality supply,”

Because interest rates aren’t projected to in-

he said. “A lot of people are frustrated with

crease until at least the middle of this year,

the lack of purchase options because they

if at all, demand for industrial space should

can’t take advantage of the low interest rates,

continue to push up lease rates and sales

Small Business Administration loan options

prices, they said.

and government subsidies right now.” “The demand is high on both the lease side and the sale side,” John Eddy, senior

“I think that a 10 percent increase [in sales prices and lease rates] would be on the low end. I really believe that,” Eddy said.

vice president of Coldwell Banker Com-

Assuming interest rates do not increase,

mercial BLAIR WESTMAC, said. “There

both Eddy and Carrillo expect demand to

is a sense in the marketplace that there is a

remain strong throughout 2015.

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Economic Outlook REAL E2015 STATE

Page 30

INCO Commercial President Bill

Retail

rants, which should drive up sales prices

ally there are multiple offers, or it doesn’t

somewhat, Hochman noted.

even hit the market,” he said.

Townsend, who has more than 30 years

While occupancy rates for retail store-

of experience in the local industrial mar-

fronts in Long Beach experienced gains and

Restaurants seem to be driving activity

Both Russell and Hochman said foot traf-

ket, said he is also optimistic about 2015.

losses last year that somewhat canceled

in the local retail market. For example,

fic has been busy in Retro Row, a collection

“I think it is going to be a very good

each other out, local retail brokers are pro-

Hochman recently leased the old Ham-

of vintage shops and restaurants between

year,” he said.

jecting the balance to shift towards in-

burger Mary’s site at 704 E. Broadway –

Cherry Avenue and Junipero Avenue on 4th

creased occupancy this year.

left vacant after the restaurant moved to

Street. “There is very little inventory there.

Development of new industrial properties continues at Douglas Park, where Shimadzu

“It’s positive, and it is going to do a little

Pine Avenue – to Panvimarn Thai Cuisine.

If something comes up, it is going to get

Aircraft Equipment USA’s new 58,796-

better than the last few years,” Brian Rus-

“They have a very popular location in Long

taken up right away,” Hochman said.

square-foot headquarters is nearing comple-

sell, vice president of Coldwell Bank Com-

Beach now, and this will be their second lo-

In Northeast Long Beach’s Douglas Park,

tion some time this quarter, according to

mercial BLAIR WESTMAC, said of the

cation,” Hochman said. “They will be

new offices and corporations moving in

Larry Lukanish, senior vice president of

retail real estate market outlook for Long

doing an extensive remodel of the site and

have spurred retail activity, Russell said. The

Sares-Regis Group, which manages Dou-

Beach. In 2014, “we had a couple of quar-

look to have it complete by the end of the

six retail spaces fronting Lakewood Boule-

glas Park. Construction on Mercedes-Benz

ters where there was a lot of occupancy and

second quarter,” he said.

vard at Douglas Park are now fully occupied

USA’s new Western Region offices is ex-

some sales . . . and we had a couple of quar-

Hochman also recently received an offer

by Starbucks, Flame Broiler, Jersey Mike’s

pected to wrap up in the second quarter, ac-

ters where it was disappointing and busi-

from a large national restaurant chain on a

Subs, California Fish Grill and The Habit

cording to Diedra Wylie, a Mercedes

nesses closed,” he recalled.

property in Bixby Knolls, an area where he

Burger Grill. He speculated that, when Mer-

Hochman of Hoyt Realty & Investments

is seeing growing demand for retail space.

cedes-Benz USA employees move into the

said the retail occupancy rate “should con-

“In Bixby Knolls, anywhere on Atlantic Av-

company’s new 1 million-square-foot facil-

The future of the property currently used

tinue to improve” this year. Turnover of busi-

enue north of Wardlow [Road] is a pretty

ity across the street, “that is going to bode

by The Boeing Company to manufacture

nesses opening and closing should keep the

hot market right now,” he said.

well for the surrounding retail.”

the C-17 Globemaster III is still unclear, as

market fairly balanced and steady, he added.

Belmont Shore continues to do well, Rus-

Perhaps the biggest news coming in

no one has yet publicly stepped forward

Sales transactions of retail properties may

sell said, noting that he has heard retail sales

2015 will be in the form of a tenant list

with plans to redevelop the site after the C-

not increase much this year due to a low in-

by 2nd Street businesses are “doing great.”

for The Pike at Rainbow Harbor, which is

17 program shuts down this year. Although

ventory of properties for sale, Russell pre-

Hochman pointed to the area as Long

being reconfigured as an outlet mall by

located behind Douglas Park, Lukanish said

dicted. Due to low interest rates, however,

Beach’s strong spot for retail. “The demand

its property management firm, DDR

Sares-Regis would not be taking over any

demand to buy retail property is still strong

in Belmont Shore has always been strong.

Corp. “That should energize retail as

of Boeing’s C-17-related buildings.

from certain types of retailers, like restau-

Any time anything becomes available, usu-

well,” Russell said. ■

spokesperson. The 1 million-square-foot facility will house 200 employees, she said.

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:26 PM Page 31

EconomicAVIATION Outlook 2015 /AEROSPACE Page 31

■ By DAVE WIELENGA Staff Writer

New Airport Director

ryant L. Francis is a big man with a friendly, measured manner, but a sudden, deep laugh. He’s wearing a

purple shirt and trying on his new job as director of the Long Beach Airport. “It’s going okay,” Francis replies to your howzitgoin,’ then adds, “It’s day six.”

manufacturing. Finally, when Francis

landing fees, gate use fees, passenger fees

do ourselves. We have to go to the land-

showed up at the airport for his first day of

and parking fees, as well as the number of

lord, the city, and ask, ‘Would you please

work, there was one less airline than when

customers who eat in the new terminal

ask the federal government to designate

he applied for the job. Alaska Airlines had

restaurants or hail cabs outside.

the airport a Port of Entry?”

moved out two days before he arrived.

“We don’t like that we’re not using all of

If the city agrees to ask?

Actually, that one grabbed his attention.

our allotted our slots,” Land said. “We don’t

“The good thing is JetBlue serves the

like that we’re not fully utilizing the beauti-

only city to which Alaska was still flying,”

ful terminal we worked so hard to get. We

And if the city won’t ask? Will that end

Francis said, “so we did not lose any of

don’t like that airport traffic is down, and

the long love affair between the Long Beach

our nonstop services.”

the parking revenue, and the restaurants.”

Airport and JetBlue?

“It’s still only a request,” Land said. “The federal government can still say no.”

But he added, “I’m going get in touch with

But he insists that sending more flights be-

“I don’t see it as a deal breaker,” Land said.

He’s absolutely right – there is a lot to

Alaska, have a little discussion,” Francis

tween Long Beach and the current collection

“But if the city, after hearing us out, decides

learn about being director of the Long

said. “I’d like to get a better handle on exactly

of destinations doesn’t make economic sense.

not to make the request? We’ll be in the

Beach Airport. Fortunately, that’s pretty

their reasons behind their decision to discon-

“We measure everything by profits,” Land

same place we are now. And then I think it’s

much why Francis applied for the position.

tinue service here.” (Read more about the

said. “We had many years of profitability in

fair to say, ‘What you see is what you get.’”

city’s new airport director on Page 34.)

Long Beach, especially early on. We subse-

We don’t have much in the way of growth.

“It was a number of things,” Francis begins, and after mentioning he’s come to Long Beach from Shreveport, Louisiana, he recites some of them. “First of all, this is a larger airport in terms of the level of airport operations, the amount

JetBlue Airways JetBlue officials insist they’re still happy

quently went through some tougher years but we have right-sized our operation.”

with the Long Beach Airport more than 13

Land said the ability to fly internationally

years after they fell in love at first flight in

– think Latin America and The Caribbean –

August 2001.

would add new and attractive destinations

“We’re not going to add a flight to Mexico City, then cancel one to San Francisco. These new flights would add to the destinations we serve,” Land said.

Forty-Two Years And Counting

of passenger activity. Also in terms of the di-

“We’re coming off a couple of good years

versity and the number of businesses on the

in Long Beach, and I don’t see anything that

airport property that would offer an oppor-

would change that,” said Rob Land, Jet-

“We view it as a commercial necessity

vides ground services to aircraft at Long

tunity for growth for me personally. Cer-

Blue’s senior vice president of government

that we be able to grow in Long Beach –

Beach Airport, but his business plan for

tainly the history of aviation right here at

affairs and associate general counsel. “Our

to grow, not to stay the same size we are,”

2015 boils down to just two components:

Long Beach Airport – I’ve been very aware

economic outlook is strong.”

Land said. “But as a tenant at the Long

hope and hustle.

of the airport and its role in aviation for a

But JetBlue also feels stuck, and clearly

long time. Lastly, the location. The fact that

believes a change of scenery would do it

we’re in sunny Southern California, a beau-

good. Land hasn’t been shy about clarifying

tiful part of the country and the world. It’s a

that change, and intends to spend much of

place where I’ve spent some time in the past,

2015 persuading Long Beach officials that

living in Palm Springs for over nine years, so

adding a U.S. Customs office at the airport –

I was familiar with this area.”

and subsequently, international flights –

He speaks highly about the airport staff,

would improve everybody’s quality of life.

saying the “members of the team I have met

Land emphasizes that everybody includes

so far clearly have a lot of drive and pas-

anybody concerned about the ordinance that

sion. They take a lot of ownership and pride

governs noise at Long Beach Airport. “Jet-

in this airport and that’s important.”

Blue has zero interest in changing the noise

Francis has come to Long Beach at an un-

ordinance,” he asserts. “None at all.”

settled time for the airport. The facility has

The Long Beach City Council is already

new north and south concourses, opened

stirring. It has requested comprehensive

two years ago, that have drawn rave reviews

study sessions on airport history and issues

(“It makes a great first impression to those

before an official process is started. Those

who fly in,” Francis said. “It’s very conven-

sessions are expected to begin next month.

ient and easy to use for flying in and out.”),

Passenger traffic has declined at the Long

but the number of people traveling through

Beach Airport over the past two years. Iron-

them has dropped. Its flight schools are fill-

ically, the drop coincides with the long-

ing their classrooms, but plans call for two

awaited opening of the widely lauded

small runways to be removed. The biggest

passenger terminal. JetBlue occupies the

commercial tenant, JetBlue, holds 31 of the

terminal’s entire north half and holds 32 of

42 available daily commercial flight slots,

the 41 daily commercial flight slots, but over

but uses only little over 20 of them and is

the past few years has rarely come close to

about to begin a push for a U.S. Customs fa-

using all of them. Land confirms that will

cility at the airport so it can fly internation-

be the case again in 2015, anticipating the

ally. On the far westside of the property in

number of JetBlue daily flights “will proba-

two huge buildings, The Boeing Company

bly average in the low to mid 20s,” although

is putting the closing touches on production

the exact number will vary by the season.

of its massive C-17 transport plane – and

Unused flights send revenue-reducing

with it, California’s rich history of aircraft

ripples through the airport, including

that would jump-start passenger traffic in general and invigorate JetBlue’s schedule.

Beach Airport, this isn’t something we can

Kevin McAchren has learned a lot during 42 years as president of Airserv, which pro-

Please Continue To Page 33

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1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:26 PM Page 33

EconomicAVIATION Outlook 2015 /AEROSPACE Page 33

“We’re looking at the year and hoping

charters to Disneyland, flights to casinos,

that we’re finally out of the recessionary

things like that. Lots of them.”

trend,” McAchren said in a booming

But bosses aren’t so apt to take employ-

voice that no doubt comes in handy as he

ees on vacation during tough times. Gam-

works among jet engines. “We’re hoping,

blers take buses to Laughlin rather than

all hoping, that we see an increase in

jets. Things have gotten so slow that

business this year.”

McAchren, who used to do a robust rental

McAchren hears economists’ predic-

business, has actually sold some of his ma-

tions and pronouncements to that effect all

chines. “The worst part is you end up sell-

the time, but his personal evidence shows

ing the machines for much less, you know,

that Airserv is earning about 40 percent of

because people are low on money.”

what it did in 2008.

In situations like that, McAchren might

Most of Airserv’s business comes from servicing charter flights, performing the

turn to his second option: hustle. “Last year I went to the Major League

same duties for them that company ground

Kevin McAchren is president of Airserv, whose firm has serviced the Long Beach Airport since 1972. (Photograph by the Business Journal’s Thomas McConville).

Baseball Winter Meetings in San Diego,”

crews do for commercial airliners.

power up the aircraft engines. And we have

years ago, you used to see them linked to

McAchren said. “You know, where all the

the people to do the by-hand work, like

cruise ships – we don’t see much of that,

general managers go to make trades? Well,

loading and unloading luggage.”

anymore,” McAchren reflected. “Compa-

that’s not the only reason to go.”

“We have the stair trucks that park next to the charters so people can get off,” he said. “We have the belt loaders to handle the baggage, the pushback tugs that get the jets away from the gate, and the starter units that

But there aren’t as many charter flights as there used to be. “Looking at the charter market of five

nies used to do incentive travel, flying

McAchren made contact with the teams’

maybe 100 of their best employees and

traveling secretaries, told them about the Long

their wives to take a cruise. There were

Please Continue To Page 34

The End Of The Line – Boeing’s C-17 Globemaster Integrated Sustainment

■ By DAVE WIELENGA Staff Writer

Program, Commercial Aviation Services and support functions.”

his is the year the book will close

What does it cost to shut down a

on the Boeing C-17 Globemaster

program and a facility like this? How

III. We know the ending.

many people does it require? Who

“Production will complete in the sum-

will they be? Employees who have

mer,” reiterates Nan Bouchard, Boeing

worked on the C-17?

vice president and C-17 manager, re-

“Cost includes facility disposition

sponding in writing to questions from

and

the Long Beach Business Journal. “The

employee

severance

pay,”

Bouchard writes. “We do not need a

factory will close by the end of 2015.”

special workforce for production clo-

But the saddest story in local aviation

sure. We will be using existing em-

is still being told. Ten of the massive air-

ployees who have the expertise in their

craft remain to be completed. They are

particular area, and they will work in

in various stages of assembly, their mam-

their area until that tool is complete.”

moth bits and pieces placed about the in-

Then where does the story go? For

terior of the huge buildings that house

Boeing announced its intention to close the program.

the Boeing C-17 Globemaster III manufacturing operation.

“Nearly 3,000,” she writes, “primarily in Long Beach;

Of the 10, two have been sold to an unnamed cus-

Macon, Georgia; Mesa, Arizona and St. Louis.”

tomer. Boeing has a signed contract with Canada for an-

Bouchard goes on to break down the numbers state by

other. Australia is on the record as wanting two more.

state: “Approximately 2,200 in California, 300 in Missouri,

That makes five, leaving five to go, which seems like

300 in Georgia and fewer than 100 in Arizona.”

some mighty big loose ends. But nobody close to the operation harbors any doubt that every C-17 will have a buyer. Customers are out there, they

the employees? For Boeing? “Our employees are the best trained, most dedicated and highly skilled workers committed to the C-17 mission,” Bouchard writes, “and they stand ready to continue the legacy of building and delivering C-17s to our partner nations. “For post production, the production facility will be turned

Boeing won’t say how many people are working the

over to Boeing’s Shared Services Group. Boeing remains

project now. The company has made it standard practice

committed to doing business in the Southern California re-

not to provide specific employment numbers.

gion and still has commercial work in Long Beach.”

say, and plenty interested. They say the countries involved

Part of the C-17’s legacy is its manufacturing plant –

But apparently that’s the end of more than 70 years of

are negotiating with Boeing. But don’t ask, they say – it’s

those huge buildings off Cherry Avenue and Wardlow Road,

aircraft construction at the 1.1-million-square-foot site,

confidential. Those customers will announce their inten-

all the tools and the machinery, maybe even the health club.

which had become iconic in Long Beach, and thought to

tions on their own timetables.

At this point, however, no plans are in place for any of it.

be impossible to live without.

And what about the people at work on those final 10 air-

“The C-17 final assembly facility will close after the

The tradition began in 1941, when Douglas Aircraft Com-

craft? How many people are still assembling C-17 in those

last production aircraft is delivered – there are no plans

pany began supplying aircraft to the air force at the site. The

huge buildings? What’s their story?

for continued production in the facility,” Bouchard

company later became McDonnell-Douglas, and, by the time

Bouchard responds by reviewing how many employees

writes. “Other buildings and business remain in the Long

it merged with Boeing in 1997, the C-17 Globemaster III

were working in C-17 production in September 2013, when

Beach, including employees who support the C-17

was in full production. And now the story’s over. Almost. ■

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:26 PM Page 34

EconomicAVIATION Outlook 2015 /AEROSPACE Page 34

Beach Airport, told them about Airserv, asked

application of the exterior paint. The mainte-

jets dropped from 1,313 in 2008 to 672 in

ples of various amenities. Customers can

those whose teams play at Anaheim Stadium

nance includes required procedures and tests

2012. Sales weren’t much better in 2013, but

get a sense of the impact of these design el-

if they’d prefer flying into Long Beach.

typically based on an aircraft’s number of fly-

the 0.9 percent rise was the first in five years.

ements by using DesignBook, a mobile vi-

ing hours. This means that, in addition to

The turnaround has occurred in the large-

“Sports teams are good business,” McAchren said, “because they’re going to that game no matter what.”

Gulfstream Aerospace

being a service, it is an economic indicator. “If you have solid service center activity, it

cabin category, and Gulfstream has been a driving force.

sualization application. As the work has increased, so has the size of Gulfstream’s local workforce.

indicates a return to flying,” Fedak said. “It’s

“Through the third quarter of 2013,

“The number of people we employ has

There are no signs of hard times at the

one of the key indicators of business jet sales

Gulfstream as a whole delivered 87 large-

been going up yearly – we are up to approx-

Gulfstream Aerospace Corp. operation at

and activity. And I’ve been seeing increased

cabin aircraft (the Gulfstream G650, G550,

imately 900,” Fedak said.

the Long Beach Airport, where large-cabin

flying hours, solid service center activity, solid

and G450) and 16 mid-cabin aircraft,”

That may be an all-time high. Fedak was-

business jets made in Georgia are being

sales, all of which indicate strength within the

Fedak recalled. “That was up considerably

n’t sure enough to stake her name on that

outfitted with paint and furnishings so they

business, especially on the large-cabin side.”

from the same nine-month period in 2012,

number – but it’s definitely up from last

can be sold for $64.5 million a pop to the

Gulfstream’s business is getting so good

when we delivered 51 completed large-

year, when there were 673 employees at

cabin aircraft and five mid-cabin.”

Gulfstream’s Long Beach plant.

next name on the waiting list.

that Fedak admitted she is “cautiously opti-

“Gulfstream uses its Long Beach facil-

mistic.” Her caution derives from the years

In 2014, Gulfstream enhanced its Long

There is talk that Gulfstream is out-

ity to do the outfitting and the mainte-

Gulfstream staggered beneath the weight of

Beach operations, opening a Sales and De-

growing its existing facilities at the Long

nance of the G450, G550 and G65

recession, and then public scorn after De-

sign Center like those it has in Savannah,

Beach Airport – and whispers that an ex-

large-cabin aircraft,” explained company

troit auto executives flew private jets to

Dallas and London, so customers could par-

pansion is coming.

spokesperson Heidi Fedak.

Washington seeking bailout money.

ticipate in the completion of their aircraft.

Outfitting includes installation of such

According to the General Aviation Manu-

The showroom features all manner of

things as seats, tables and carpet, as well as

facturers Association, the sale of business

fabrics, leather, carpet, plating and exam-

“We’re always looking at our facilities,” Fedak said coyly, “but we have not announced an expansion.” ■

The New Long Beach Airport Director Bryant Francis . . . And Some Of His Initital Observations After 10 Days On The Job

“U

nderstanding the history of

Safety is always going to be the ab-

the airport and the role that it

solute top priority. Especially safety on

has played within the city for

the airfield, and so there is a multi-phase

over 90 years now is very important to

program that will get underway sometime

keep in tact. It is also going to be very im-

in the future that will reconfigure the air-

portant to me to develop a close working

field and leave us with a much more effi-

relationship with our stakeholders.

cient layout and potentially open up a little

There are some projects we are going to

more land for business development pur-

be undertaking in the next year or two re-

poses. But the goal of that project is to en-

lated specifically to the terminal facilities.

hance the safety margins and operational

It’ll be a Phase 2 of the terminal concourse

efficiencies of the airfield. So there are a

project. We’ll be doing things related to

lot of projects coming up.

the rental car function to ground trans-

(Editor’s note: When asked about plans

portation to our public parking facilities

to remove the airport’s north-south run-

and so those are all great things because

ways, 16 Left and 34 Right, Francis said:

they will be in the name of enhancing cus-

“They will be decommissioned. They will

tomer service and improving the customer

no longer be runways; they will be taxi-

experience.

ways. There will be a lot of pavement, sig-

In Southern California there are several

nage, lighting and some extended

airports that any of us can choose, so I’d

taxiways to improve the flow and reduce

like to think that when people think of

the number of times a plane has to cross

Long Beach, they think of the ease and

the runway to reach its destination. All

convenience of it being a pleasant experi-

those things enhance the safety of the air-

ence. We want to give people a reason to

port and make it more of an efficient op-

continue using the facilities here, and cer-

eration overall. This will be a multi-year

tainly remain self-sufficient.

project that will go along with our grant funding through the FAA.”)

We are an enterprise fund, which means we don’t rely on any general funds from the City of Long Beach. The revenues created

We want to continue being a good neighbor and community partner. So, we are

here go to covering our operating expenses. And so it’s very important that all facets of

clearly working with the neighborhoods around us, the various districts within the

our business collectively remain very strong. We are very financially sound right now

city; we have quite a jewel here – we certainly intend to uphold the noise ordinance

and have been for quite a while. It will also be very important for us to be prudent in

that has been in place for 20 years. So that’s not something we’re looking to change

terms of the decisions we make on expenditures going forward and ensuring that they

in any way. I’d like the airport to continue to play a very important role in the future

are necessary and there is justification for them.

of the City of Long Beach.” ■

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:26 PM Page 35

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