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Fall 2011 l Volume 49

The

RADCO Companies

High Desert Report A quarterly economic overview of the High Desert region affiliated with The Bradco Companies, a commercial real estate group

I wish to welcome our current and future subscribers of the 49th edition of the Bradco High Desert Report, the only economic overview of the High Desert region, covering the northern portion of San Bernardino County and the Inland Empire. We more specifically address economic issues affecting the cities of Adelanto, Barstow, Hesperia, Victorville, and the Town of Apple Valley.

Inside This Issue Tenuous Optimism Prevails................. 2 Anatomy of A Market Collapse........... 4 I-15/I-215 Devore Junction Improvement Project.................... 5 High Desert Resource Network........... 6 Victor Valley Community Services Council........................... 7 Putting Job Creation at the................... Forefront....................................... 9 Inland Empire Film Commission..... 10 Public-Private Efforts Bring Aviation Tech School to VVC................... 11 Victor Valley College’s 50th Anniversary................................. 12 Full Steam Ahead for the HD........... 13 California’s Green Dream................. 14 Victor Valley Transit Athority........... 15 The Demand for Industrial Space..... 17 Fast-Tracking Projects Should................ Be The Rule................................ 23 Barstow Casino and Resort............... 24 Working Together to Bring Jobs........ 26 High Desert Transportation Update.... 26 City Update Town of Apple Valley ................ 27 Barstow.......................................28 Hesperia......................................29 Victorville................................... 31

As always, we wish to thank our committed article suppliers (over 135) and our newsletter sponsors for their continued commitment to our endeavor, and our attempt to find positive, factual and interesting information as it relates to the High Desert economy. As I’ve said over the past eight (8) editions, I strongly believe that our global economy, our nation, our state, the Inland Empire, and the High Desert region are currently challenged with a very serious financial crisis, a crisis that we’ve never seen before. As publisher of the Bradco High Desert Report, I still believe the “glass is half full”, as evidenced by our continuing attempt to monitor the High Desert region and make information available to those that have an inherent interest in the High Desert region. When we published the 45th edition, we made the Bradco High Desert Report available electronically and now nearly 2,000± people receive that and any updates we have relative to commercial, industrial, office activity, increase and decrease in absorption and/or vacancy or any other information that we deem appropriate to notify those that care about the High Desert economy. If you are not receiving information from our office in an electronic fashion, with up-to-date economic information, you may sign up for free at www. thebradcocompanies.com/register. Having published 49 editions of the Bradco High Desert Report, we are nearing our 50th edition, which we anticipate to be completed by February 15th, 2012. Most importantly, I’m pleased to make some

monumental announcements, as it relates to the Bradco High Desert Report, and The Bradco Companies. On September 12th, 2011, Ronald J. Barbieri, Ph.D., CPA and Mr. Nicholas DiCosola, formerly employed as founding shareholders of Lee & Associates-Inland Empire North, became founding partners with The Bradco Companies. On September 21st, 2011, Dr. Barbieri, Mr. DiCosola, and I met our new partners with an organization known as TCN Worldwide at their annual conference in Chicago. We were proud to become a part of The Bradco Companies/TCN Worldwide. TCN Worldwide, a consortium of independent commercial real estate firms, provides completed, integrated real estate solutions locally and internationally. With approximately $21.6 billion in annual transactions, and over 80,000,000 square feet of space under management, the organization ranks as one of the largest service providers in the industry, and based on the commercial property executive rankings for 2011, this makes The Bradco Companies/TCN Worldwide the largest company of its size within the High Desert region. Formed in 1989, TCN Worldwide is comprised of over 800 commercial real estate professionals, serving more than 200 primary and secondary markets worldwide. I wish to welcome Ron Barbieri, Ph.D., CPA as Co-Editor of our publication. Ron Barbieri has joined our longtime Editor, Mr. Lowell Draper, a former Professor at Victor Valley Community College and a retired teacher who makes the final adjustments to our publication before they are printed. continued on page 5

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High Desert Report A quarterly economic overview

Tenuous Optimism Prevails By Dr. Alfred J. Gobar Chairman, Alfred Gobar Associates

The last issue of the newsletter provided preliminary evidence of improving economic conditions that will eventually affect the High Desert’s economy and real estate market. Although recent trends are far from robust, they do continue to be positive, as indicated in the graph in Exhibit 1. The low point in the employment index in July 2011 is higher than the previous low point, which is a positive indicator. This relationship is made more explicit in terms of change in nonagricultural wage and salary employment over the twelve months ended July 2011. During this interval, the six-county Southern California area experienced growth in total non-farm employment of 49,300 jobs—about one-third the “average” level of growth in nonagricultural wage and salary employment in Southern California over longer periods of time. Gross increase in nonagricultural wage and salary employment in the six-county Southern California area over this interval was 65,300 jobs. This increase was mitigated by a decline of 16,000 jobs in the government sector, primarily in terms of federal government employment and decline in state and local education employment.

circumstances, little new housing has been added on the High Desert in recent months. During the first half of 2011, a total of 188 new units were authorized by permit for construction in the High Desert area—mostly in Victorville. Extrapolating six months’ data to a full year suggests total permit activity on the order of 370 to 400 units a year, comparable to the fullyear permit activity for 2010. In 2005, 8,295 new units were authorized by permit in the High Desert. Permit

activity is down ±95.0 percent from the 2005 level. An interesting aspect of the permit data is the increase in target value of new single-family units being authorized for construction on the High Desert. This indicates an above-average proportion of these units are probably custom homes. The overall relationship of building permit activity on the High Desert and in Southern California as a whole is shown graphically in Exhibit 2. The graphs show that for both Southern California as a whole and

These trends suggest some improvement on the demand side of the supply/demand equation that defines housing markets. As would be expected in light of economic

continued on page 3

THE BRADCO HIGH DESERT REPORT Publisher: Mr. Joseph W. Brady, CCIM, SIOR Editors: Dr. Ronald J. Barbieri, Ms. April Tyler, Mr. Lowell Draper, and Mr. Seth Neistadt Printed & Designed by One Stop Printers & Direct Mail Service E-Mail Version by Axiom Media Inc. P.O. Box 2710, CA 92393-2710 (760) 951-5111 BSN Ext. 100 l (760) 951-5113 FAX www.TheBradcoCompanies.com l e-mail to: info@TheBradcoCompanies.com Published Quarterly Free E-Mail subscription with online registration Printed Version $59.95 Domestic / $79.95 Foreign per year For a free subscription visit www.thebradcocompanies.com/register Postage paid in Victorville, CA l Send address changes to above. Entire contents copyrighted. All rights reserved. Material may not be reproduced in whole or part without permission from the publisher. Every effort is made to provide reliable information from reputable sources. The publisher assumes no responsibility for inaccurate information. The Bradco High Desert Report is printed on recycled paper.

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High Desert Report A quarterly economic overview

Tenuous Optimism Prevails Continued

the High Desert, building permit activity recently has been at unprecedented low levels, indicating that new supply is not a threat to the housing market on the High Desert in the near term in any sense of the word. Foreclosures, short sales, etc., occasioned by the unusual financial structure of the housing market prior to the collapse, however, imply ample supply. The statistics suggest we probably have passed the bottom of the cycle, and that the trends should improve in coming months. Note, however, on the basis of the materials in Exhibit 1, it is likely to take quite some time to return supply and demand conditions to those we saw in 2007. A simple extrapolation suggests that recovery to this level of market activity is unlikely to occur before 2017—about six years from now. Even this doleful extrapolation may be optimistic in light of the relatively slower economic recovery evident currently than was the case during recovery from the 1990’s recession. Unemployment rates continue to be extraordinarily high. The official

unemployment rate probably understates the degree of dislocation in terms of employment evident in the real world. One interesting glitz in the employment data is that although establishmentbased nonagricultural wage and salary employment increased in the twelve months ended July 2011, the other indicator of overall employment—employment estimates generated by household surveys—showed a net decrease over the same interval, which may mean that the net effect of the improved employment figures may be less positive than they appear, reinforcing Harry Truman’s observation that he preferred one-armed economists so they could not resort to saying…”On the other hand...” Over the twelve-month period ended July 2011, nonagricultural wage and salary employment actually declined in the Inland Empire, while on an overall basis in Southern California there was a net increase. The bulk of the increase occurred in San Diego County and Orange County, and, to a minor degree, in Los Angeles County. More detail with regard to the supply-side figures based on building permit data shows that in 2011 the High Desert accounted

for the smallest proportion of new singlefamily units authorized by permit in Southern California in any of the years tabulated since 1980. Only 2.24 percent of the new single-family units authorized by permit in Southern California during the first half of 2011 were in the High Desert area, while during boom periods the High Desert has accounted for more than 12.0 percent of the new single-family units authorized for construction in the six-county Southern California region. At the national level, unemployment continues at an extraordinarily high level. At a little above 9.0 percent, the national unemployment figure for the U.S. has stubbornly remained at near record highs for several years, reflecting unemployment trends similar to those observed in Germany and France in the first half of the last decade where unemployment levels remained above 9.0 percent for several years before and after 2000. This comparison suggests the possibility that enduring high levels of unemployment may be a characteristic of welfare economies, such as the U.S. is apparently becoming. On the other hand, Sweden and Norway experienced reasonably satisfactory unemployment levels during most of the last decade. The European Union overall generally had unemployment rates on average in excess of 7.5 percent throughout the decade of the 2000’s. Hopefully, this does not imply that as the U.S. moves closer to the European model of welfare state, we have to accept as a concomitant an enduring and sustained level of high unemployment. Welfare states tend to sustain an environment that provides incentive for avoiding work by people with a predisposition to do so, which may account for the difference in unemployment rates at the margin between welfare states and free market economies. Another analogous period of high and enduring unemployment rate was our own depression (the 1930’s) during which we had high long-lasting unemployment rates despite massive public spending and rapid progress towards a welfare state. Could it be that pursuit of a welfare state continued on page 4

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High Desert Report A quarterly economic overview

Tenuous Optimism Prevails Continued

and concurrent big public spending are associated with high unemployment over an extended timeframe, contrary to what people my age were taught in graduate school? Maybe my Ph.D. in economics was based on an erroneous theory? Will I be asked to return my diploma? The U.S. currently appears to be in a contest to define itself as either a free market economy or a welfare state. Economic uncertainty that is a byproduct of this clash of philosophies has the spillover effect of discouraging investment, employment growth, etc., associated with demand for newly-developed real state and, therefore, has a special impact on the economy of the High Desert which has historically been dependent on real estate development as a stimulus for local economic growth.

Anatomy of A Market Collapse Bob Thompson - Advanced Listing Services

Beginning in January 2005, observe that median price was increasing in a steady fashion until the first quarter of 2006. Then began a precipitous decline in the price schedule until 3rd quarter of 2009, when the market plateaued after losing over $200,000 in median price value.

Notice that demand (closed properties) peaked in the 2nd quarter of 2005, about 1 year before price declines begin. Demand then continued to decline until the first quarter of 2008, then declined again (double dip) and has now steadied. Failures increased to unprecedented levels and have now declined to 2005 levels. Market efficiency (the ratio of closings to total attempts to list) peaked in April of 2005 and declined steadily to the bottom in October of 2007. It has now climbed back to former levels and steadied.

Now here is the lesson in all this. The market began to fail in July of 2005. Prices peaked in May of 2006 (almost a year later.) As the market was failing,property values continued to rise to the peak, and then collapsed over a period of about 900 days to the current plateau. The market sent fair warning that went unheeded. The question is did agents and brokers do their part in communicating market reality? If they warned, did sellers listen or did they hire another agent that told them what they wanted to hear? Thousands were financially crushed over the time period. I fear it was a bit of both.

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High Desert Report A quarterly economic overview

I-15 / I-215 Devore Junction Goods Movement Improvement Project The junction of Interstate 15 and Interstate 215 near Devore, California, is one of the worst grade-related bottlenecks in the USA. Severe delays are common, especially during peak afternoon and weekend hours. The purpose of the proposed project is to reduce congestion, reduce accidents, and improve freeway operation. Caltrans and SANBAG have studied a number of proposed improvements for the interchange. These improvements include the addition of one northbound lane and one southbound lane on Interstate 15 between Interstate 215 and Glen Helen Parkway, where the current freeway is three lanes in each direction. The addition of the new lanes would provide a continuous set of four lanes in each direction between State Route 60 and US Highway 395. This would allow motorists to travel through the interchange without having to change lanes or lose lanes in the process. The proposed improvements to Interstate 15 would allow this freeway to be the primary movement for traffic, with I-215 traffic merging and diverging from the right-hand side of the freeway. These improvements would reduce traffic delays, improve the flow of goods through the region and enhance the reliability of goods headed to and from freight facilities in the San Bernardino Valley and the Victor Valley. Truck bypass lanes are also being considered to help improve traffic flow along this major freight movement route. I-15 is designated a Corridor of National Significance, and this interchange is a critical bottleneck for the region. Adding truck bypass lanes would eliminate the need for slower-moving trucks to weave across heavy, faster-moving automobile continued on page 8

Publishers Message Continued

Dr. Barbieri spent a tremendous amount of time preparing his first article, “The Demand for Industrial Space in the High Desert and Inland Empire has Increased Substantially Over the Last Two Years.” Besides information obtained from our five (5) incorporated cities, we also have information this quarter from Mr. Bob Thompson (Las Vegas) who monitors the High Desert housing market and is an expert in doing so, our friend, Mr. Bill Greulich, Public Relations Director for Victor Valley Community College District, Mr. Brian Parno of Stirling Development LLC and Stirling Airports International, the joint venture developer of the former George Air Force Base, now called Southern California Logistics Airport. I would be remise if I did not welcome our friends and client, Mr. Larry George, President, Mr. Douglas A. Hanby, Chief Financial Officer of United Furniture Industries, Inc, as well as Robert T. Cottam, III, Vice President of Piedmont Risk Management/United Furniture Industries, Inc of Mississippi and North Carolina, who have recently leased through The Bradco Companies the largest square footage lease transaction ever completed by a broker in the region, a 505,192 square foot LEED Certified Gold Industrial space at Southern California Logistics Airport, that will eventually over the next 36-months create 400 jobs. I’m honored to have had the privilege to work with such a fine company, and I want to thank Mayor Ryan McEachron and his very capable staff of the City of Victorville, Mr. Keith Metzler, Economic Development Director for the City of Victorville and also the Executive Director for Southern California Logistics Airport, First District Supervisor Mr. Brad Mitzelfelt, Mrs. Sandy Harmsen and Mr. Nick Demartz from the San Bernardino County Workforce Investment Board, and Mr. Robert Lovingood, President of ICR Staffing Services, Inc/DegreedJobs.com, for all the work that they did to help secure this client.

We wish to re-welcome Assemblyman Steve Knight, Mr. Ty Schuiling, the Interim Executive Director for the San Bernardino Association of Governments (SANBAG), the Victor Valley Transit Authority, who is about ready to move into its new facility in Hesperia, Ms. Sheri Davis of the Inland Empire Economic Partnership/ Film Commission, Superintendent Dale Marsden of the Victor Valley Elementary School District, the High Desert’s Chair of the San Bernardino County “Alliance for Education” and a very well-known and respected educator, Mr. Tom Shields representing the Barstow Casino Resort, our newest assemblyman responsible for the Town of Apple Valley/Hesperia 59th District Assemblyman Tim Donnelly, Mr. Jonathan Weldy, President of the BIA Baldy View Chapter, Ms. Vici Nagel, PresidentCEO of the High Desert Resource Network, Mr. Darin Cooke and our friends at Caltrans-District 8 and the Victor Valley Community Services Council. I can’t thank Dr. Alfred Gobar enough for 49 continual articles and to help us advance to our 50th edition, while being challenged with health issues. I recently had dinner with Dr. Gobar and I can assure you that he has not lost his sense of humor, is as enjoyable to have dinner with as anyone I’ve ever met and we convey to him on a continual basis how much our subscribers and readership enjoy reading his articles, his editorials, and his facts. Dr. Gobar, keep up the great job, thanks for your friendship and guidance. We look forward to preparing our 50th edition with you. Lastly, and most importantly, if you wish to continue to receive a copy of the Bradco High Desert Report, any statistical reports, op-ed articles that we post to our website for free, please register at our website at www.thebradcocompanies.com/register. We help that you have a enjoyable holiday and winter season, and we look forward to producing our 50th edition be February 15th, 2012.

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High Desert Report A quarterly economic overview

High Desert Resource Network By Vici Nagel, President/CEO High Desert Resource Network

As we in San Bernardino County focus on the economy and how to turn it around locally, I urge us all to think about how nonprofit organizations can and do play a significant role in local economic activity … and what we can do to strengthen that role. “Nonprofits” present our county with huge opportunities for economic growth and it is time for serious investment in this sector! First, a word about the term, “nonprofit.” I cannot think of any other industry who’s title tells you what it is not, rather than what it is! In my opinion, the term “nonprofit” should be replaced because it causes all sorts of misconceptions about the sector. It is a term that comes from the Internal Revenue Service, which basically means that these types of businesses, and they are businesses, may not distribute their excess revenues over expenses, their “profits,” to owners. Instead, nonprofits must reinvest all of their “profits” back in to their nonprofit purposes; such as caring for the sick, sheltering the homeless, and preparing our next generation of leaders. It has long been understood that nonprofit organizations provide value to communities as they help improve the quality of life and mitigate a host of ills. What is often overlooked, however, is the economic impact nonprofit programs and services have. Here are a few examples: • Every dollar invested in quality early care and education for children saves taxpayers up to $13.00 in future costs. • An investment of $10 per person per year in proven community-based programs to increase physical activity, improve nutrition, and prevent smoking and other tobacco use could save California more than $1.7 billion in

annual health care costs within 5 years. • Nationally, the nonprofit arts and culture industry generates $166.2 billion in economic activity every year. In our county, nonprofit organizations contribute a great deal of economic activity. Nonprofits purchase numerous goods and services, mostly in the local economy, including things such as real estate, rental property, utilities, insurance, office supplies and equipment, financial services and printing to name a few. They hire employees who purchase houses and cars and pay local property and income taxes. Following are a few stats about our county’s nonprofit sector: • There are more than 5,000 nonprofit organizations in San Bernardino County. • They employ 5% of the workforce. • They spend more than $3 billion annually. • They control roughly $4 billion in assets. In addition to the current benefits nonprofit organizations already provide our community, they are also a greatly untapped resource for generating additional economic activity in our recession-worn region. For example, the disparity in foundation funding to local nonprofits is staggering: California nonprofit organizations annually secure an average of $119 per capita in private foundation grants, while San Bernardino County nonprofits average just $3 per capita. Let me repeat that another way … our communities receive $116 per person less than the state average in foundation funding. With more than 2 million

county residents, that amounts to $230+ million a year in untapped resources for local food banks, domestic violence shelters, children’s charities and more. This certainly begs the question, “Why?” Why, with vastly higher levels of need does our county receive vastly less funding to address those needs? My colleagues in the region and I believe the answer is multifaceted. First, there are very few foundations located in San Bernardino County, so we must attract outside investment. Second, the huge size of our region makes collaborations that foundations want to fund, more difficult. Third, the majority of local nonprofits are small and underdeveloped, and less sophisticated in their efforts to attract funds. That’s the bad news, but the good news can be summed up in the word “opportunity!” With our county recently bringing together all of its 24 cities and towns to craft a shared vision, the opportunity for collaboration has never been greater. This collaborative effort to create a better future can be the cornerstone we need for advancing the nonprofit sector and attracting major support from foundations outside our region. Another opportunity that exists is the organization I work for, High Desert Resource Network. As we work with county government, the local philanthropic community, and our extensive network of nonprofit partners, our vital social service sector continues to grow and increase services. For example, as the region’s nonprofit management support center, our training programs have been proven to have a 4:1 benefit. In other words, each $1,000 High Desert Resource Network spends

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High Desert Report A quarterly economic overview

Victor Valley Community Services Council By Midge M. Nicosia, Director of Programs Administration

The Victor Valley Community Services Council is the High Desert’s very first non-profit service agency. Established in 1956, the VVCSC began with the purpose of meeting the emerging needs of the community. The VVCSC is committed to “promote and sustain the quality of life for persons and organizations in the High Desert through education, collaboration of services and new program developments.” In her book Pearl’s Story, the founder Pearl Barstow Pettis recalls the first project of the VVCSC was to number the houses in the Victor Valley so that the mail could be delivered. In a study financed by Southwest Portland Cement, the VVCSC started numbering with homes at the Cajon Pass continuing throughout the valley, which “made life easier for a lot of people” as well as emergency vehicles. Pearl goes on to recall that the VVCSC Thrift Shop funded the beginning of counseling services from the San Bernardino Family Service Agency in the High Desert, Emergency Welfare, Christmas Baskets, a Senior Citizens Club and the United Fund. In six years the VVCSC received California’s award for the council most successfully meeting the human needs of the community, the High Desert, at a grass roots level. At the time, this was in competition with much larger cities such as Los Angeles and San Francisco. It is clear that the VVCSC plays a major roll in the history of the High Desert and is continuing to do so with each new program developed, and yet many are not aware of its presence. VVCSC is currently operating free programs for High Desert seniors, low to mid income and over 60 years of age. The VVCSC is a vendor of the Department of Aging and Adult service

through Title IIIB funds and a current recipient of The Town of Apple Valley Community Development Block Grant dollars. For seniors who are no longer working, often the only source of income is a small social security benefit. Some seniors have had their personal investments decrease with the economy, and a growing variety of illnesses have increased their payments to the pharmacy. It may seem like some seniors have the ideal lifestyle, retired with a house paid off and no more kids to send to college. A car and a home that is paid for is not enough to get them by when they can’t drive and their home is in need of repair. Perfectly capable of caring for themselves, many High Desert seniors simply need a little extra help that will allow them to remain at home. The goal of the VVCSC is to keep High Desert Seniors living independently at home, out of managed care, by providing access to life’s necessities and enabling them to do so. Funded through grant monies, fundraising efforts and the generosity of charitable partners, programs for seniors include a Minor Home Repair and Modification Program, Transportation Program, Visiting Program, and Telephone Reassurance Program. Although funding from the Department of Aging and Adult Services has been steady for the last few years, it is not enough to keep the doors open full time. The VVCSC is a part time organization open Monday through Thursday from 9am until 3pm. San Bernardino County non profits are feeling the recession of the economy. As shown by a study commissioned by the James Irvine Foundation in 2009, the per capita state, federal and foundation funding for San

Bernardino County community based organizations is $3 versus the statewide average of $119 per capita. This makes it even more important for individuals and private sector to become involved in supporting our local service agencies, which assist with a great variety of needs in their community, many acting unseen and unspoken of. There are a large number of older residents and mobile homes in the High Desert. Due to the extreme environments, combined with lack of funds, many senior citizens live in dilapidating conditions. Many are unable to afford the necessary repairs and some fall prey to those who would take advantage of their frail state with severe price inflation. VVCSC’s Minor Home Repair and Modification Program is available to provide solutions to health and welfare issues, which may develop into hazardous situations. Some examples of such issues are grab bar installation, plumbing and electrical fixture repair or installation, minor swamp cooler repairs and maintenance, and broken windows open to the elements. This program does not address aesthetic improvements such as painting. With its Transportation Program the VVCSC provides seniors, who cannot drive, access to life’s necessities such as doctor appointments, banking, and grocery shopping with a door-to-door individualized appointment. This is a non-assisted transportation program not able to accommodate wheelchairs at this time. Friendly Visiting and Telephone Reassurance programs provide comfort for those home bound or institutionalized who need that extra personal connection. Visits are done with or without friendly dogs and can be made to groups or individuals for short periods of time.

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High Desert Report A quarterly economic overview

Goods Movement Improvement Project Continued

traffic to enter the right lanes as they pass through the interchange. In addition, the project will enhance local road operations, notably the connection of Cajon Boulevard/Route 66 through the interchange. This connection will allow local traffic to travel through Devore directly from north to south without entering the freeway or winding hilly, county roads. The preliminary cost estimate for the project is more than $350 million. Cost estimates vary, based upon the design alternatives. A total of $118 million has been programmed for the interchange from the State Highway Operations and Protection Program. Other federal, state, and local funding sources will be sought to fund the balance of the project. Local sources include Measure I, the half-cent sales tax for transportation improvements in San Bernardino County.

High Desert Resource Network

Victor Valley Community Services Council

Continued

Continued

on training provided to make nonprofits stronger, helps those organizations generate an additional $4,000 for services for the community.

The Telephone Reassurance Program calls individuals at home twice a week to make sure they are not in need of any assistance while providing a comforting voice to a lonely senior.

Finally, the biggest opportunity lies in those funding disparity numbers. What would you invest to generate a $230+ million annual return? And, where would you invest it? I challenge all Bradco High Desert Report readers to seriously consider investing in the strengthening of the region’s nonprofit sector. For further information about how you can get involved in the exciting opportunities strengthening the region’s nonprofits pose, email me at vgnagel@ yahoo.com. I can’t wait to work with you to create a prosperous future for our community! Vici Nagel is a 30-year nonprofit professional and President/CEO of High Desert Resource Network, a nonprofit organization dedicated to improving the quality of life in our region by supporting and strengthening the social service sector. Further information may be found at www.hdrnetwork.org.

Proud to be a part of the High Desert Community

MITSUBISHI CEMENT CORPORATION 5808 STATE HIGHWAY 18 LUCERNE VALLEY, CA 92356-9691 (760) 248-7373 FAX: (760) 248-9002

Operating with only three part time employees, the VVCSC depends on the community volunteer efforts and is always in search of dedicated men and women who would like to participate in its mission. A budget of little more than $100,000 at this time, the council continues to be a center for assistance to the High Desert, as was its founders dream. Available to all residents through the VVCSC is the First Call For Help 24/7 Information Line, staffed by volunteers and the Alternative Sentencing Program serving the Victorville and Barstow courts as a member of the California League of Alternative Sentencing. The Alternative Sentencing Program is a fee for service program assigning those needing to perform community service to over 200 different non profit agencies in the High Desert and Barstow areas. The council still fiscally sponsors new non profits while they work toward their goal of independence and has been responsible for the incubation of many you may know today, including the High Desert Homeless Shelter, Victorville Senior Citizens Center, and the Desert Communities United Way. If you are interested in volunteering your time, providing in kind or financial support to an organization that has been a valuable network for many High Desert residents over the last five decades, please contact the office of the Victor Valley Community Services Council at (760) 243-9646. Email vvcsc@vvcsc. com First Call For Help Information Line (760) 240-8255

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High Desert Report A quarterly economic overview

Putting Job Creation at the Forefront of the Public Policy Agenda By Jonathan Weldy, President BIA Baldy View

The Building Industry Association Baldy View Chapter (BIA) recognizes how important infrastructure funding is for the long-term health of communities in which we build. Public infrastructure, particularly in the more rural communities of the High Desert remains a key component of building great communities, and the building community continues to seek to pay its fair share for these projects. However, we are concerned that San Bernardino County’s recent decision to begin the process of implementing a development impact fee (DIF) program will ultimately hurt the already fragile construction industry in our region and will not help to alleviate the existing infrastructure challenges our region faces. For the record, home builders in the unincorporated areas of San Bernardino County do indeed currently pay perhome “fair share” transportation fees to help build new roads as required under the 2005 extension of Measure I, which the BIA supported along with numerous elected leaders and stakeholders. Similarly, home builders in San Bernardino County also currently pay fees for new schools and connection fees for water infrastructure. In addition, San Bernardino County currently charges a variety of permit fees, which they recently increased as well. It is important to recognize all of these aforementioned development fees currently paid in the unincorporated areas of the county account for hundreds of millions of dollars for new infrastructure that improve the quality of life for current and future county residents. These fees are also carefully calculated based on objective economic

variables, such as land and construction costs and paid on a per-home basis. Indeed, some infrastructure fees within the county, such as parks, are paid on a project-by-project basis but are based on careful cost estimates calculated by county staff - not some arbitrary figure open to negotiation as the editorial suggests. Regardless, before adopting a $250,000 consultant contract that would seek to expand this aspect of fee collection, we have requested that the process be put on hold indefinitely until a careful analysis of the economic and job impacts of the proposal are considered. San Bernardino County should first consider to what extent the proposed fee expansion would adversely impact the uncertainty of construction costs in an already volatile market. It is important to first embark on a careful and deliberative public review of any unintentional consequences to the proposed fee expansion, such as discouraging future land purchases, entitlements, and overall development resulting in fewer homes at higher prices, which inevitably all lead down the dead end road to fewer jobs and a longer recession. There’s no debate that improvement of the 9% national and 14% countywide unemployment rate will be led by the job creation from new home development and the economic spark it also provides by triggering future commercial or retail job growth. To illustrate, a 2009 study by Dr. John Husing noted that over 54% or 141,000 jobs lost between 2005 to 2009 were linked to construction. Also, the decrease in the High Desert building activity in the past years shows just

how much the construction industry has deteriorated. In 2005, the High Desert cities (Adelanto, Apple Valley, Hesperia and Victorville) issued 6,408 single family building permits. They issued 5,362 in 2006 and 1,942 in 2007. The cities issued 432 permits in 2008, 330 in 2009, and 407 in 2010. Through the first eight months of 2011, those cities have issued only 119 permits. In addition, a July study released by the National Association of Homebuilder’s Economic and Housing Policy group finds that on average, regulations and fees imposed by governments at all levels account for 25% of the final price of a new single-family home built for sale. This is a hefty price home buyers are paying for government regulations and represents just one more obstacle to job creation and economic recovery. We hope San Bernardino County leaders will take a moment to pause before adding to this regulatory burden. No matter how the county collects revenue from development, there is one simple fact that we cannot overlook: If there is NO development, the county will collect NO fees, regardless of what type of mitigation program is in place. Construction is the cornerstone of our economy, particularly in the High Desert, and we are unfortunately feeling all the effects of a market downturn: high unemployment, low construction activity, and low tax and fee revenues for our local jurisdictions. During this time of great economic challenge, our local jurisdictions should be doing everything they can to promote construction activity and to get people back to work. A new fee program will do just the opposite.

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High Desert Report A quarterly economic overview

Inland Empire Film Commission By Sheri Davis

During this economic age, the one thing feature film productions hunt after are tax incentives. So in 2009, California started offering production tax incentives through 2014 in hopes to encourage companies to stay in the state. Recently, the California State Senate voted to extend the state’s Film & Television Tax Credit Program for one more year. The original legislation (AB 1069) which passed the State Assembly as a five-year extension (through 2020), was amended in the Senate on August 26th to provide a one-year, $100 million extension (through 2015). If signed by the governor, it will add one year to the current five-year, $500 million program. Although the film commission’s pushed for an incentive “bump” on the original bill passed in 2009 to encourage the industry to travel outside of its comfort zone of Los Angeles, it was never included. The Film Commissions in the State are hoping that when this bill gets to the Senate, that piece will be added to encourage filming all across the state.

There were 18 television shows that found exactly what they needed in the San Bernardino County desert. Shows like Chaos, Fact or Faked: Paranormal Files, Car Nutz, Wheels Up (for the Speed Channel), Top Gear (U.S. and U.K. versions), It’s Effin Science, Man vs Wild, Storage Wars, and The Event.

Feature filming is still on the decline as the studios continue to search for the best incentives around the world. The incentive package that the State of California implemented in 2009 did fund lots of smaller budgeted feature films; however most of the large tentpole features are still leaving because the program is not available to films over $75 million. In light of that, The Inland Empire Film Commission (IEFC) still capture 12 features, mostly in the desert areas of San Bernardino County. Some of those features included the Green Lantern, Fast Five (aka Fast & Furious 5), Thor and Priest. The feature film Priest reported expenditures of $625,718 in the High Desert when they filmed on Soggy Dry Lake.

the valley is always there to help. The economy slowed down commercial production for 2010 but the High Desert still managed to hold its own with film companies electing to stay in California.

Commercial and still photography are still the two main types of production that select the region. 118 projects were shot in the area during 2010. The big attraction for the film industry is the open vistas, great light and diversity of locations.

The 16th Annual California on Location Awards once again brought recognition to the High Desert with a number of the finalists who shot their projects in the desert region. The 2010 event attracted over 525 Industry professionals and was hosted by the premier awards hotel – the Beverly Hilton.

We are in the final stages of opening existing BLM land for filming in the 1st District of San Bernardino County. We worked with Supervisor Mitzelfelt to accomplish this goal, that was started all the way back in 1999. The IEFC manages this project between the Bureau of Land Management and the County of San Bernardino.

The California Film Commission’s “Power Breakfast” always gets attention as the Dumont Dunes was highlighted as one of the six photos used on the one-page flyer dedicated to the Inland Empire. This year’s breakfast was hosted by the Softiel Hotel in Beverly Hills, and 85 Studio Executives and production company owners attended.

The IEFC did numerous marketing ventures that showcased the desert at several Trade Shows in 2010. Being outside of the 30-mile zone has its challenges, but as residents and industry professionals in the valley work with the IEFC, we have developed our own local “incentive package”…. hotels willing to give competitive rates, restaurants and other service providers offering incentives and, of course, the crew that is resident in

The2010 estimated economic impact for District 1 was $8,995,500 and District 3 for 2010 was $3,765,500 for a total of $12,761,000.

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High Desert Report A quarterly economic overview

Public-Private Efforts Bring Aviation Tech School to VVC By Brad Mitzelfelt 1st District Supervisor, San Bernardino

An educated and well-trained workforce is essential to attracting the types of business that will carry the High Desert economy into the future. Aviation is one of those industries, and Southern California Logistics Airport has already proven itself to be the regional economic engine we imagined after the U.S. Air Force left in the early 1990s. Providing a ready supply of qualified aircraft technicians makes SCLA even more attractive to aviation companies. One of the most successful publicprivate education efforts has been the Southern California Logistics Airport School of Aviation Technology. One of my main economic development goals was to see the school become selfsufficient. The program is now fully integrated with Victor Valley College. Students who have graduated with their full airframe and powerplant certification from the Federal Aviation Administration are already being snapped up by area companies. Aviation technicians earn a good middle-class wage with experienced technicians able to earn six figures. New students will be invited to begin the aviation training program in the Spring 2012 Semester. Students who are interested in the program will now be eligible for college credits and financial aid in addition to meeting the stringent licensing requirements of the Federal Aviation Administration. The program’s transition was brokered with support from my First District office by the Victor Valley College Foundation, whose leaders remained involved with the Victor Valley Aviation Education Consortium during the independent

start up of the school. The Foundation’s involvement in securing a grant that allowed the college to provide funding for a contracted training program through the school reopened the dialog about a college takeover. Throughout the past year, the foundation has led the partnership between the college and the Aviation Consortium to that end.

partially support operations of the training program at Victor Valley College and provide scholarships for its students every year. The SCLAA offered to continue providing facilities at no cost for the school, which reduced some of the burden for the college to take on the training program amidst its most challenging budget situation yet.

“The foundation was uniquely positioned to make this transition happen.” said Dr. Christopher O’Hearn, Superintendent / President. “They are truly a valuable partner for the college and make great things happen for our student’s every day.”

Establishing the school as a selfsufficient program has been a difficult but worthwhile effort with benefits for the entire regional economy. The pay-off will be apparent for the new technicians who will have high quality, long-term jobs, and for the local aviation industry which has access to highly trained workers.

The process was also bolstered significantly by support from my First District office and the Southern California Logistics Airport Authority (SCLAA). My office secured funding from the County of San Bernardino to establish an endowment that will

Education is everyone’s business and the aviation technology school is a great example of how private industry and government can work together for the betterment of the local economy.

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High Desert Report A quarterly economic overview

Victor Valley College’s 50th Anniversary Bill Greulich, Public Information Officer, Presidents’ Office

The year 2011 represents a milestone in the history of Victor Valley College. It is the 50th Anniversary of the college and its service to students. During these five decades, the college has experienced many changes. The most significant change is the growth of student enrollments. Student population has grown from 500 full-time students to more than 13,500 individual students with some taking a minimum schedule of three credits to others carrying a full load of 15 credits of more. This growth has subjected the college to many major challenges, chief among them, is the demand for more classes and classrooms space to serve the need. This need is being addressed with the construction of new facilities in Apple Valley and the future expansion of the college into a second campus in Hesperia. The second major challenge is the need to maintain and upgrade eroding infrastructure,roadways, parking lots, and unsafe, inadequate access to and from the campus. Fortunately,these concerns were addressed in 2008, when the citizens of the High Desert voted to approve a local bond measure (JJ) to assist the college to build new facilities, upgrade infrastructure, and repair or replace parking lots and roadways. Also, Redevelopment funds (RDA’s) were set aside to address these issues. Today, the college is taking action. This important work is now underway. Student safety, cost savings, and sustainability played key roles in all of the decisions regarding the projects outlined in this report. The projects include roadway repair, parking lot replacement, energy management, and beautification/sustainability.

VVC Campus Wide Roadway and Parking Lot Replacement Over the summer, the college completed the first major overhaul of roadways and parking lots since the current campus was built in 1964. These upgrades include a safer, more uniform transition for student from the major thoroughfares to and from campus,repairs tocrumbling parking lots and roadways and redirects the flow of traffic that has been a concern for campus and community officials for years. Working with local architectural and engineering firms, the VVC Facilities Construction department, traffic consultants, the City of Victorville, the VVC Campus Police, and the Facilities Committee, VVC now offers students and the community a more logical solution to trafficcongestion. The entrance to campus at Jacaranda, Fish Hatchery andFrancesca roads have all been redesigned and engineered tominimize congestion and provide safer access to and from the campus. The redesign has substantially reduced the backup of cars on the major arteries bordering the campus. The project also included the complete replacement of parking lots 1, 2, and 3; new construction of an addition to parking lot #16; and replacement of the “loop road” from Fish Hatchery Road at the entrance to the maintenance yard around to the main entrance at Jacaranda.

Energy Management System The second major economic development at VVC is the Energy Efficiency Project. This project will accomplish three major goals. First, the project will manage all mechanical systems with the use of computer programs that are design to control energy usage throughout the campus.

Next, it will tie the Allied Health Building to the central plant for air handling. The final element of the Energy Efficiency Project is the replacement of all campus lighting with more energy efficient alternatives. This system will save the college thousands of dollars much the same as the solar field that is now saving the college a third of its energy costs.

Campus Beautification and Sustainability The beautification project runs from and encompasses the eastside of the main entrance to the west side of the marquee. It stretches from the border of the lake and those buildings located in this front position facing Bear Valley Road. A small portion of this project also includes the border of the property that connects to a major street next to the campus. The benefit to the campus and the community lies in its ability reduce water usage, lower maintenance costs, and provide an ascetically pleasing, endurable, sustainable desert landscape that requires no upgrades for decades to come. The project also provides a standardized material list for trees, shrubs, inorganic material, and site furnishings to create a uniform campus look and theme The cost of these projects is $2.1 million for roads and parking lots, $1.8 million for energy efficiency and $614,000 for sustainability and beautification. Much of the work has been and will be provided by local contractors and labor. These projects, when completed, should have an economic effect of nearly $14 million dollars for our local community.

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High Desert Report A quarterly economic overview

Full STEAM Ahead for the High Desert: What Local Leaders are doing to make Education the High Desert’s #1 Economic Priority By Dale Marsden, Ed.D. Superintendent Victor Elementary School District

The statistics are startling: About one in five high school students (21.6%) drop out before their senior year; less than six out of ten who do graduate from high school actually attend community college; and if they do go, less than 40% of the high desert population is CSU/ UC eligible. (Oh, and by the way, if you want to guess when the last time was that a high school diploma could land you a job to provide for your family, the answer is at the end of this article.) At the end of the day, when the rubber meets the real world of work, less than 11% of adults in the high desert have a BA or higher degree. Following interviews with dozens of political, business, education, and community leaders, everyone is finally in agreement on one point: It hurts bad enough!

In his latest book, Education Nation (2010), Milton Chen, executive director of The George Lucas Educational Foundation, calls us to,

Echoing recent comments from John Husing, the Inland Empire’s leading economist, if we are going to turn our local economy from “survive to thrive,” we must first address the quality of our educational system to ensure a prepared and highly skilled workforce to meet the demands of our 21st Century. We cannot expect to address the larger issues of global competition, nor hope to sustain America as the leading nation in innovation and creativity, without looking first at our own backyard. We must engage the students and adults in our community in rigorous, relevant content that causes authentic preparation for the actual world of work. Call it paradigm shift, if you will, as we begin to think of our schools as our community’s largest employment agencies. If we are going to turn the economic tide and avoid Einstein’s definition of insanity, “Doing the same thing and expecting different results,” we must act cohesively. In short, the level of urgency of our collective community response is directly correlated to our pocketbook!

Similarly, as shared by local corporate leader, Eric Schmidt, Exquadrum, Vice President & COO, The Washington Post commentary for August 27, 2011, titled, “Science and tech firms need to play a bigger role in preparing the future workforce,” charged local educational institutions to “seek out industry leaders who can prepare students for the workplace, especially for careers in science, technology, engineering, and mathematics.” Reinventing our school system as a community-based approach is no easy task.

“Imagine an ‘Education Nation,’ a learning society where the education of children and adults is the highest national priority, on par with a strong economy, high employment and national security. Where resources from public and private sources fund a ‘ladder of learning’ for learners of all ages, from pre-K through ‘gray.’ Where learners take courses through the formal institutions of high-quality schools and universities and also take advantage of informal experiences offered through museums, libraries, churches, youth groups, and parks as well as via the media.”

Yet, this is exactly the response several of our local business and community leaders have taken through their shared commitment to a Call to Action for the High Desert: STEAM 2020. Working under the auspices of the San Bernardino County Superintendent of Schools Alliance for Education, over fifty local businesses, schools, community, and faith-based organizations are rallying efforts to meet a new goal for the high desert:

By 2020, every child and adult in the Victor Valley will be prepared for the 21st Century Workforce by achieving their high school diploma concurrently with their community college degree (or vocational, trade or technical school equivalent certificate) in a STEAM (Science, Technology, Engineering, Applied Arts or Math) related field. We are calling this our “BHAG” - Big Hairy Audacious Goal. It is certainly not for the faint in heart, nor is it a goal that can be entered into lightly. Earlier this month, with the assistance of National Baldrige Examiner Ruth Miller, local political, school, medical, faith-based, business, and sector leaders gathered to commit to this goal and they are determined to engage in specific action to ensure this goal is accomplished. In addition to representation from Congressman Howard “Buck” McKeon’s and Senator Sharon Runner’s offices, the attendance list was quite impressive. Following is a partial list of those in attendance for the Call to Action: • Assemblyman Steve Knight, 36th Assembly District • Ryan McEachron, Mayor, City of Victorville • Doug Robertson, City Manager, City of Victorville • Michele Spears, CEO, Victorville Chamber of Commerce • Robert Lovingood, President, ICR Staffing Services, Inc., and President, Board of Directors, Victorville Chamber of Commerce • Dr. Beth Higbee, Assistant Superintendent, San Bernardino County Superintendent of Schools • Dr. Christopher O’Hearn, Supt./ President, Victor Valley Community College • Joseph W. Brady, CCIM, SIOR, President, The Bradco Companies,

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High Desert Report A quarterly economic overview

California’s Green Dream

By Tim Donnelly, Assemblyman 59th District Politicians and special interest groups have been fighting for years to make their green dream a reality in California, even at the expense of our economy. Extreme environmentalism has emitted its influence into every sector of the marketplace - polluting the business climate with onerous regulations. California was the land of the Gold Rush; it was where innovators and adventurers once flocked. Now, the state claims to have “gone green,” but entrepreneurs, businesses, and workers are fleeing in search of greener pastures. Something has gone horribly wrong. It is time to clear the air about environmental regulations and their devastating impact on business. In 2006, the California Legislature passed AB32 “The Global Warming Solutions Act,” which has destroyed manufacturing, mining, and construction in the state. The bill passed when California had a 4.9% unemployment rate and grand hopes that the rest of the country would follow suit. Today the scales have tipped at 12.1% unemployment and nearly 22% underemployment and those hopes have been dashed. California may have been a trendsetter on some issues, but, not surprisingly, most states are unwilling to sacrifice jobs on the altar of a questionable plan to save the planet. These green-utopia driven policies have put the state at a severe disadvantage. And this all for a reduction of less than 1% of greenhouse gas emissions around the world? As Cal State-Fullerton Professor Robert Michaels has been quoted as saying, “AB32 is the most incredibly effective psychotherapy I’ve ever seen.” No matter how “green” California strives to be, the simple truth remains that air has no borders. California’s actions are akin to leaving

the air conditioner on full blast with all of the windows open and we are going broke because of it. We are feeling the effects of this insanity now more than ever. In fact, California lost 5 times as many businesses in 2011 as it did in 2009. It is no wonder that many parts of the state have reached depression levels of unemployment. My district alone has lost thousands of jobs as businesses flee, the most recent example being Rainbird Sprinklers. Before coming to the Legislature I owned my own small business in manufacturing. I have personal experience working as a supplier to Rainbird, which has joined the long list of companies throwing their hands up at California’s regulationheavy business environment. With them, will go hundreds of jobs in the middle of what I believe will one day be called the 2nd Great Depression. Given that Rainbird Sprinklers has dedicated resources to educate owners on water conservation and responsibility, the announcement speaks volumes about how extreme California really has become. The fact is every regulation presents a huge capital cost, acting as a net tax increase. I regularly hear from frustrated business owners and hopeful entrepreneurs that doing business in California is more costly than it is worth. Those who are still here are wondering when the relief is coming. The number one reason cited for companies expanding outside or leaving the state altogether, is an excess of regulation. I constantly hear stories about how the environmental constraints are keeping job-creating companies from growing within California, especially in a timely manner. Ironically, environmental regulations are even hitting the so-called “green jobs.” I have learned of building

projects taking up to 10 years to get off the ground, school busses unnecessarily retired, and potentially hazardous roadways left untouched. In large part, these cases are due to the cost of upgrading equipment to meet standards or the time-extensive environmental impact reports required before anyone can act. Recently, you may have heard, the federal government decided to “invest” your tax dollars into a “green” company - Solyndra - even though the market for its success did not exist. This would serve as a prime example and test of the Democrat’s plan to create a new economy based on “green jobs.” Government cannot create an industry; it can only create programs. Citing Spain as his example, President Obama poured half a billion dollars into the company. The dirty little secret is that Spain has since backed down from its extensive green energy plan, but not before devastating employment in the nation. One Spanish economist implored the United States not to make the same mistake Spain had. Unfortunately, his warning fell on deaf ears. Last month, Solyndra filed for bankruptcy, taking your $535 million in taxes with it. Sacramento has successfully decimated whole sectors of our economy. Manufacturing, construction, and even the green industries cannot survive the regulatory climate in the state. I should clarify that not all manufacturing is dead in California; the legislature continues to produce more and more regulation every year. Governor Brown is considering 600 new bills as you read this and his record is abysmal. Recently, he vetoed AB 135, showing he cannot stand to have even one person with small business experience on the California Air Resources Board. I guess that was continued on page 15

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High Desert Report A quarterly economic overview

Victor Valley Transit Authority By Kevin Kane

Victor Valley Transit Authority (VVTA) was established through a Joint Powers Authority (JPA) in 1991. The JPA includes the cities of Adelanto, Apple Valley, Hesperia, Victorville, and the County of San Bernardino. VVTA operates local fixed route and ADA complementary paratransit bus services and provides public transportation services for Adelanto, Apple Valley, Hesperia, Victorville, and unincorporated areas of San Bernardino County including Helendale, Silver Lakes, Oro Grande, Lucerne Valley, Phelan, Piñon Hills, and Wrightwood in the High Desert of Southern California.

VVTA has come a long way from operating out of a trailer in the Victorville Public Works Yard to building a valuable service that is now a community staple for many residents.

well. Between 1998 and 2003, VVTA converted its entire big bus fleet from diesel to CNG, also switching from “school bus” type vehicles to modern transit coaches- the same used by LA.

With an eye toward sustainable energy from the beginning, CNG fuel was one of VVTA’s first agency discussions back in 1992. Just two years after that discussion, VVTA was able to procure a platform-mounted Hurricane CNG compressor. In that same year, VVTA purchased a 5.2 acre Business Center Property to house the CNG station with hopes to build a bus facility there as

By 2005, it was apparent that the 5.2 acre site would not accommodate VVTA’s growth into the future. The 5.2 acre site was sold and ten acres on E Avenue was purchased to house a new bus facility. In 2009, the first phase of the new facility construction was completed. It was a CNG fueling station that saved VVTA $200,000 in fuel costs the first

Full STEAM Ahead Continued

and Trustee for the Victor Valley Community College • Chris Piercy, Director, K16 Bridge Program • Rev. Dr. David Denson, Jr., Pastor/ Founder, Burning Bush Baptist Church • Dr. Dale Marsden, Superintendent, Victor Elementary School District • Dr. Gary Elder, President, Board of Trustees, Victor Elementary School District • Elvin Moman, Superintendent, Victor Union High School District • Mike Hayhurst, Executive Director, Excelsior Education Center • Tom Hoegerman, Superintendent, Apple Valley Unified High School District • Rick Piercy, President/CEO, Lewis Center for Educational Research • Leslie Rodden, Director of Higher Educ. & Work Force Development, Alliance for Education, San Bernardino County Supt. of Schools • Bill and Linda Scott, President/CEO, Scott Turbon Mixer, Inc. • Regina W. Bell, President/CEO, Gi & Associates

Since our first meeting date, this group has been coordinating efforts to act urgently and responsively to achieve STEAM 2020. Each of us, avoiding our laundry list of excuses, is working to strategically identify barriers to achieving our goal, and agreeing to focus on the “ONE THING” that we will do to make our goal for the high desert a reality. If you are a key stakeholder in the high desert’s economic success and are interested in being a part of this conversation and action, visit www. STEAM2020.com and get onboard, because we are “Full STEAM Ahead for the High Desert.”

continued on page 16

California’s Green Dream Continued

just too much to ask of Jerry the “Green Tyrant” Governor. If we continue down this path, history will record that the green dream turned out to be an economic nightmare. We need to make a full U-turn, and I mean quickly, if we want to give businesses a sense that the government is not gunning for them. We must wrest control of the Golden State from the green extremists and turn California once again into the land of opportunity for job-creators, innovators and entrepreneurs. November 3, 2012 will be a rude awakening for the politicians still dreaming away on your dime. Enough is enough.

The last time a high school diploma could land you a high-paying job? 1984! Dr. Dale Marsden is the superintendent of the Victor Elementary School District and member of the Executive Board for the San Bernardino County Superintendent of Schools Alliance for Education, and High Desert STEAM Region Lead. For more information, please email him directly at dmarsden@ vesd.net.

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High Desert Report A quarterly economic overview

Victor Valley Transit Authority Continued

year compared to buying its CNG fuel at a retail station.

Making significant advances in incorporating new technology, VVTA has introduced advances such as electronic fare boxes, global positioning, automatic vehicle locators, Google Transit, on-board computers, and security cameras. The next technology phase introduced in October 2011 includes automatic passenger counters, automated bus stop announcements, online bus tracking and a state of the art communications system. Between July 1, 2007 and December 31, 2010, VVTA’s ridership on regional fixed routes increased by almost half (48%) and ridership on the rural County routes increased by 80%. During that same period, VVTA added routes and

increased headways on many routes from 60 to 30 minutes. Even though VVTA increased revenue hours by 2,841 per month, or 60%, the riders per hour only decreased by one. In addition to increasing their fixed route and paratransit ridership, VVTA has also partnered with the City of Barstow to develop a new inter-city bus service, B-V Link. B-V Link launched service in midJanuary of 2011. B-V Link responded to the requests from Barstow residents, many of whom are elderly or disabled, who frequently travel to Apple Valley and Victorville for medical or social service appointments. Other projects being considered include the creation of van pool and lifeline bus services, which will provide transportation down into the San Bernardino valley and connect passengers from as far away as Barstow to medical, social, and legal services there. An ever-growing operation, such as VVTA, was sure to outgrow its roots. Eagerly awaiting its move in November, VVTA is in the process of completing construction of a brand new Administration, Operations, and Maintenance Facility. This facility is on target for a LEED (Leadership

in Energy & Environmental Design) Gold rating. The LEED rating system categorizes the level of sustainability of new construction as Certified, Silver, Gold, or Platinum based on the credit accrued in the five green design categories of sustainable sites, water efficiency, energy, and atmosphere, materials and resources and indoor environmental quality. The new facility will include a 1-megawatt photovoltaic system designed to meet all of VVTA’s electricity needs and provide shade for buses to reduce air conditioning cooling times, which will in turn save fuel consumption and reduce emissions. Continuing to listen to and meet the needs of its community, VVTA recently released a request for proposals for a Comprehensive Operations Analysis (COA), which will provide a thorough analysis of VVTA’s transit services. The COA will include an in-depth rider survey to gain better knowledge of VVTA riders and to identify challenges and opportunities. The goals of the COA are to improve VVTA’s customer travel experience by reducing travel time, improve service frequencies and connections where feasible, and to introduce new and innovative transit options.

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High Desert Report A quarterly economic overview

The Demand For Industrial Space in the High Desert And Inland Empire Has Increased Substantially Over The Last Two Years By Ronald J. Barbieri Ph.D., CPA

Approximately 12.4 million square feet of industrial space was absorbed into the Inland Empire in 2010 and 12.4 million SF were absorbed in the first 9 months of 2011. This bodes well for the High Desert, which also absorbed 430,000 square feet of space during the first three quarters of this year. In addition United Furniture Industries, a furniture manufacturer, signed a lease for 505,192 square feet at SCLA that will be reflected in the High Desert’s Net Absorption and Vacancy levels in the fourth quarter of 2011.

Overview The demand for industrial, office, and retail space as well as residential units in the High Desert will be greatly influenced by changes in the occupancy of industrial space in the Inland Empire. The recent absorption of industrial space in Los Angeles Basin is expected to lead to more construction and a reduction in the limited supply of industrial land that could accommodate industrial facilities. A study by John Husing dated August 2008 determined there was only 4,860 acres of land in the Los Angeles Basin portion of the Inland Empire that could be developed for industrial use. This number could be significantly reduced over the next few years thereby reducing number of sites that are rail served or can accommodate the development of large industrial buildings. It will not be belong before the very large industrial tenants or firms that require rail will have to locate in the High Desert or in the area along the I-10 Freeway in Banning, California. This is expected to create more base employment in the High Desert, which could generate additional secondary employment and lower unemployment rates. Also, the increase in demand for the

housing, and commercial space in the High Desert correlates with the growth in base and secondary employment in the Inland Empire. An estimated 60,000 residents of the High Desert still commute to the Los Angeles Basin to work. These commuters represent the equivalent of base employment for the High Desert. The increase in the demand for industrial space in the Los Angeles Basin would lead to an expansion of secondary and total employment in the Inland Empire, which in turn would generate an increase in the demand for housing in the High Desert and retail sales. That would lead to more construction activity; and an increase in demand for small tenant industrial space.

Inland Empire All the inventory, absorption, and construction information contained in this article was obtained from reports we generated from Costar. These numbers are deemed to be accurate by real estate industry standards; but they are not exact.

There is 496 million square feet (SF) of industrial space in the Inland Empire. This is equivalent to half the inventory of industrial space in the Greater

Chicago area. Costar defines 478 million SF as Warehousing/Industrial space. The remaining 18 million SF is in smaller industrial flex space. The High Desert currently accounts for slightly over 4% of the total inventory; but in the intermediate term and beyond it is expected to be the primary future expansion area for industrial development in the region. Southern California is home to almost 2.0 billion SF of industrial space. Much of the increase demand for industrial space in the Inland Empire is attributed to firms relocating out of Los Angeles County in search of industrial sites on which to build larger, more efficient facilities. The vacancy rate for warehousing/ industrial space in the Inland Empire has increased from 5.2% at the end of 2004 to 12.2% by the end of 2009. The increase in vacancy was the result of overbuilding rather than a decline in industrial demand. The vacancy rate at the end of the Third Quarter 2011 declined to 7.9%. Very little inventory was added in 2010 and 2011; but there was a substantial absorption of large box industrial space during that two year period. In calendar year 2007 the net absorption of industrial space peaked at almost 27 million SF. In 2008 industrial demand increase by 4.6 million SF; but in 2009 the net absorption was a negative 700,000 SF. Net absorption in the Inland Empire was a positive 12.4 million SF in 2010 and 12.4 million SF through the first nine months of this year. A portion

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The Demand For Industrial Space in the High Desert And Inland Empire Has Increased Substantially Over The Last Two Years Continued

of the increase in net absorption was caused by the acceleration of demand due to relatively low rents compared to prior years. According to Costar, quoted rents for warehousing space peaked in 2007 at $6.13 per SF per year. By 2011 the Quoted Rents declined to $4.65. From 2005 through 2008 an average of 26.1 million SF of warehousing/ industrial space was delivered annually in the Inland Empire. Deliveries declined to 7.0 million SF in 2009 and only 1.3 million SF has been delivered from January 2010 through September 2011. This limited level of construction coupled with the unanticipated increase in absorption has resulted in the elimination of half of the excess vacancy in the market place. The vacancy level was 21.9 million at the end of 2005. It peaked at 57.9 million SF by the end of 2009. As of the end of the 3rd quarter 2011 it had declined to 35.7 million SF. There is still an estimated 10 to 15 million SF of excess vacant space in the Inland Empire; but the industrial agents in the Los Angeles Basin are now reporting excess demand (no vacancy) for buildings of 500,000 SF and larger. Most of the vacancy is in the medium and smaller size buildings often occupied by small businesses that have not experienced much growth since

the Great Recession. Industrial real estate agents are now suggesting there will be a new wave of construction for buildings larger than 500,000 Square Feet. When this is coupled with the fact there are only 4 sites in the Los Angeles Basin that can accommodate a building greater than 800,000 SF it is logical to conclude it will not be long before the High Desert will be able to successfully compete for the larger warehousing and distribution tenants. A higher level of industrial development will happen in the High Desert; though the timing is uncertain and unfortunately very much a function of public policy that will be determined in Washington and in Sacramento, California.

High Desert To some extent the industrial markets in the High Desert have tracked the industrial activity in the Los Angeles Basin. As of the end of 2006 there was 17.0 million SF of industrial space in the five city area of Adelanto, Apple Valley, Barstow, Hesperia, and Victorville. Over the following 3-1/2 years the inventory of industrial space increased by 3.6 million SF. By the end of the 2nd quarter 2010 there was 20.7 million SF of industrial space in

the High Desert. A substantial portions of the additions occurred at SCLA, though most of the cities participated in expansion. From the 3rd quarter of 2010 through the end of the 3rd quarter 2011 the few additions to inventory that were offset by the demolitions of older buildings. By the end of the 3rd quarter 2011 the inventory of industrial space was virtually unchanged at 20.7 million SF. At the end of 2007 the vacancy rate was 4.1%. It climbed to 12.3% by the summer of 2009 due to delivery of the industrial space substantially in excess of absorption. Thereafter the vacancy rate fluctuated between 10.4% and 11.4%, peaking in the 1st quarter 2011. Recent leasing activity reduced the vacancy rate to 8.4% and it will be reduced even further due to a recently executed lease that will be reflected in this year’s 4th quarter’s absorption. The following graph summaries net absorption, amount of space delivered and the vacancy levels for the industrial market in the High Desert in half year periods from the beginning of 2007 through the September 2011. From the beginning of 2007 through the 4th quarter 2008 the net absorption of the High Desert was slightly less than 1.3 million SF. During the second half of

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High Desert Report A quarterly economic overview

The Demand For Industrial Space in the High Desert And Inland Empire Has Increased Substantially Over The Last Two Years Continued

2009 the High Desert experienced a decline in industrial demand of 107,200 SF. The net absorption in the 4th quarter 2009 and the 1st quarter of 2010 exceeded 1,100,000 SF. Dr. Pepper moved into their new facility at SCLA and the company that supplies containers to Dr. Pepper leased almost 300,000 SF of space in a nearby existing building. The net absorption in 3rd quarter 2011 was 632,000 SF; and another 506,000 SF was leased in September and will be occupied by the tenant in December of this year. A confectionary company took delivery of 495,000 SF of space in the western portion of the existing 1 million SF building at SCLA. Church & Dwight has taken over the 200,000 SF of industrial space the confectionary company vacated in the City of Victorville for the production of cat litter material. In September, United Furniture Industries leased the remaining 505,000 SF in the eastern portion of the existing building at SCLA. Joseph W. Brady of The Bradco Companies, publisher of this Bradco High Desert Report, represented the tenant. Jay Dick, Darla Longo and Mark Latimer of CBRE represented Sterling Capital Investments. This was the largest square footage lease ever brokered in the High Desert.

The graph depicts the distribution of 2.7 million SF that was delivered in 2007 and 2008. Another 860,000 SF was delivered and occupied in the first half of 2010. Only a limited amount of space was delivered since June 2010. The vacancy level increased from 739,000 SF at the end of 2007 to 2,446,000 SF at the end of June 2009. As of the end of the 3rd quarter 2011, the vacancy level had declined to 1,755,000 SF; of which 505,000 SF had already been leased. There are two different classes of industrial tenants and users in the High Desert. One class consists of the large box users. They typically are warehousing and distribution firms such as Wal-Mart in the Town of Apple Valley or large manufacturing operations, such as Northwest Pipe in Adelanto. Such companies usually occupy buildings in excess of 50,000 SF. The other class consists of smaller manufacturing or distribution firms that for the most part cater to the local population and businesses or are niche manufacturing players in the regional market. They are typically small space users that occupy single or multi-tenant buildings of 50,000 SF or less. A significant number of such tenants were involved with the

construction industry. The graph below categorizes the industrial inventory in the High Desert by city as well as by whether or not the structures are greater than 50,000 SF. It also segregates the industrial space in the City of Victorville into the inventory at SCLA and the non-SCLA portion of the city. Of the 20.7 million SF of industrial inventory in the High Desert, 8.5 million SF is associated with buildings of 50,000 SF or less. The remaining 12.2 million SF is in buildings greater than 50,000 SF. The City of Victorville has almost 8.6 million SF of industrial space, of which 4.5 million SF is located at SCLA. The balance of 4.1 million SF is in the Foxborough Industrial Park, which the city developed and in several other industrial sub-markets throughout its incorporated area. The City of Hesperia is home to 4.5 million SF of industrial inventory, much of which is in the older industrial area north of Main Street between the railroad tracks and I Street. Adelanto accounts for 3.5 million SF while the Town of Apple Valley has 2.8 million SF. Barstow has almost 1.4 million SF of industrial space. Approximately 58.9% of the industrial floor area of the High Desert is in structures greater than 50,000 SF. The

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High Desert Report A quarterly economic overview

The Demand For Industrial Space in the High Desert And Inland Empire Has Increased Substantially Over The Last Two Years Continued

remaining 41.1% is in buildings that have a Rentable Building Area (RBA) of 50,000 SF or less. The distribution of industrial space between smaller and larger buildings varies by city. In Adelanto, 39.5% of the inventory is in larger buildings. In the Town of Apple Valley 65.5% is in structures greater than 50,000 SF. The 1.25 million SF Wal-Mart Distribution Center accounts for most of the large building inventory in that city. Only 45.4% of Barstow’s inventory is in larger buildings. Hesperia is the city of smaller industrial buildings, with only 61.7% in smaller structures. Just over 89% of the industrial buildings at SCLA is greater than 50,000 SF, while 65.0% of the rest of Victorville is in larger structures. Over 60% of Adelanto’s industrial Inventory is in smaller buildings, many of which are located in one of its five industrial parks; the city developed 25 years ago. It is anticipated that a substantially greater percentage of the growth will be in structures greater than 50,000 SF. Many of these structures are likely to be warehousing and distribution facilities.

As of the end of the 3rd Quarter 2011, there was 613,000 SF of vacant space in the smaller industrial buildings. The largest amount was in the City of

Adelanto, followed by the non-SCLA area of the City of Victorville. There was no vacancy in the less than 50,000 SF buildings at SCLA. The small building vacancy levels in the Town of Apple Valley and the cities of Barstow and Hesperia ranged from 62,000 to 107,000 SF.

The vacancy level in larger buildings in the High Desert as of September 30, 2011 was 1,124,000 SF. SCLA accounted for 625,000 SF of which 505,000 SF was in one building and it has already been leased. Barstow had over 255,000 SF in two industrial buildings on Lenwood Road. Adelanto accounted for 105,000 and Hesperia had approximately 201,000 SF of vacant space while the Town of Apple

space in the larger facilities. When all buildings are considered the City of Adelanto has the highest vacancy level at 346,000 SF followed by Hesperia at 308,000 SF. SCLA only has 119,000 SF of available space after accounting for the recently executed lease. As of September 30, 2011, the vacancy rate in the High Desert for buildings 50,000 SF or less was 7.2%, while for larger buildings it was 9.2%. The City of Barstow had the highest vacancy rate for buildings over 50,000 SF. It was 30.7%. The vacancy rate for the smaller buildings in Barstow was 8.2%. The non SCLA portion of Victorville had a 9.1% vacancy rate in the smaller buildings; but none in the larger structures. In the Town of Apple Valley there was no vacancy in the larger buildings but the rate for the smaller buildings was 7.4%. The smaller buildings in the City of Adelanto had a vacancy rate of 11.5% while the larger buildings reached 7.7%. The vacancy rate for smaller buildings in the City of Hesperia was 3.8% compared

Valley and the non SCLA areas of Victorville did not have any vacant

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High Desert Report A quarterly economic overview

The Demand For Industrial Space in the High Desert And Inland Empire Has Increased Substantially Over The Last Two Years Continued

to 11.7% for larger buildings. For an area the size of the High Desert the stabilized vacancy rate is approximately 5% provided the demand for industrial space is expanding. During the first 9 months of 2011, the High Desert experienced a net absorption of 430,000 SF. SCLA accounted for 536,000 SF, all of which was in the larger industrial buildings. The City of Adelanto lost 161,000 in industrial demand of which 105,000 SF of the negative absorption was associated with larger buildings. During the same period the Town of Apple Valley had a net absorption of 29,331 SF, almost evenly split between smaller and larger sized buildings. The City of Hesperia absorbed over 26,000 SF; but more than 22,000 SF were in smaller buildings. City of Barstow experienced approximately 10,000 SF of negative absorption, all in smaller buildings, while the non SCLA portion of the City of Victorville recorded 9,100 SF of positive absorption.

Only three industrial buildings totaling 25,372 SF were delivered in the High Desert during the first three quarters of 2011. As of September 30, 2011, there was only one industrial building under construction in the area. It is a 49,672 SF reinforced concrete building located in the City of Hesperia. The building is scheduled to be delivered to the Victor

Valley Transit Authority in November 2011. With the exception of the 860,000 SF Dr. Pepper’s Building delivered in the 1st Quarter of 2010, there has been little new industrial space delivered in the High Desert since 2008. This has enabled the large box industrial market in the High Desert to trend towards equilibrium; but there does not appear a need to build any speculative large box space at the present time. The negative absorption in industrial buildings of 50,000 SF of less argues against any speculative development in this size range. According to the latest Costar survey, quoted NNN monthly rents in the High Desert declined from $0.58 per SF as late as the 3rd quarter 2009 to $0.37 per SF in the 3rd quarter 2011. Effective rents are significantly less; and antidotal evidence suggests both could continue to decline. In the Inland Empire quoted yearly NNN rents for warehousing and industrial space declined from $6.13 per SF in 2007 to $4.59 in the 4th quarter 2010. They have rebounded slightly to $4.69 per SF in the 2nd quarter 2011. Some industrial agents in the Inland Empire have indicated the effective rents have increase more than the quoted rents since the end of 2010.

Outlook Short and medium term outlooks for the industrial markets in the High Desert are uncertain because the economic forecasts for the United States and California are greatly impacted by assumptions regarding political decisions made at the national and state

level as well as in China and Europe. A majority of economists now believe that at best the U.S. economy will expand at an average of only 2% per year for the next few years. The economic forecasters are assigning a 30% chance that the economy will slide into a recession within the next year even if the level of deficit spending continues at current levels in the United States. Contributing factors may include: (1) a material decline in U.S. home prices that would adversely impact the equity reserves of U.S. banks and their ability to lend; (2) A sovereign default on Euro debt by Greece or other countries in Europe that would significantly reduce the equity reserves of European financial institutions, thereby impeding their ability to make loans; (3) the economic slowdown in China becomes greater than intended by its government so that China imports less goods from the U.S. and Europe; and (4) households and business in the U.S. increase their rate of savings and consume less or invest less in their business because they become more pessimistic regarding the economic outlook. Between now and the elections of 2012, there is not likely to be any significant change in public policy at the federal level. Depending on which party gets their candidate elected president and which party controls the Congress and the Senate there could be a substantial increase in government spending, higher taxes, substantial increases in debt and more government regulation; or there could be less government, taxes, deficit spending, and regulation. The former would have a negative impact on economic growth while the latter could revive the U.S. economy especially if it allowed the private sector to aggressively drill for oil and gas throughout the United States. Within 10 years the nation could go from importing continued on page 22

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High Desert Report A quarterly economic overview

The Demand For Industrial Space in the High Desert And Inland Empire Has Increased Substantially Over The Last Two Years Continued

$400 billion of oil in a year to actually be a net exporter of gas and oil, while adopting conservation programs that reduced the consumption of fossil fuels. Of course, if one party controls the Senate or Congress and another controls the presidency then it will likely lead to more of the status quo; which would not result in much economic growth. Even if the Republican Party gained complete control of the U.S. government it is not certain that they would adopt the policies necessary to get the economy out of its doldrums. The State of California will not be able to significantly change any current public policies before November 2014 when a new governor could be elected. In spite of all the political and economic uncertainty the big box industrial market in the High Desert is likely to add one or more users each year for the next few years before the increase in demand accelerates in the second half of this decade. This will probably be the case because large industrial users will continue to relocate from Los Angeles

County to the Inland Empire in order to build larger, more efficient facilities. As the availability of large industrial sites in the Inland Empire diminishes those seeking larger sites will have no choice but to locate in the area of Banning, California or in the High Desert. Only an economic depression would defer this from happening. We do not expect any substantial positive Net Absorption for smaller industrial buildings in the High Desert until small businesses in the United States and in California begin to participate more in the economic expansion. This is not likely to occur before 2013; and then only if the more business friendly public policies are adopted. When residential construction in the High Desert experiences a substantial rebound it will also add to demand for industrial space in buildings 50,000 SF or less. Before this can

occur it will be necessary for household formation in the Inland Empire to eliminate the excess of vacant housing units in both the Inland Empire and the High Desert. This would necessitate the replacement of most of the 175,000 jobs that were lost in the Inland Empire during the last recession. To date approximately 15,000 jobs have be added in the Inland Empire; hence a high level of residential construction is not likely to occur much before 2015.

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High Desert Report A quarterly economic overview

Fast-Tracking Projects Should Be The Rule, Not The Exception By Assemblyman Steve Knight

With California’s 2.2 million unemployed workers representing all socioeconomic backgrounds, encouraging job creation should not be a partisan issue. Thankfully, on at least one project, Democrats and Republicans came together last month to pass Senate Bill 292, which will speed up the California Environmental Quality Act (CEQA) review for a new football stadium in downtown Los Angeles and create 23,000 jobs. I voted for this fast-track legislation because it is one of the many projects we need to get Californians working again as soon as possible. However, I could not help but note the irony in the arguments that many Democrats were using to argue for fasttracking the L.A. stadium. Governor Brown said when signing the bill, “it is imperative for the state to cut the red tape that could delay projects like this (the L.A. Stadium) for years.” I agree – but the state should grant the same privilege to all businesses, not just those that have political connections with Democrats. The manipulation of CEQA by special interests is a major reason why it is difficult to build new projects and create jobs in California. The law’s intent is good – it requires state and local governments to identify the significant environmental impacts of new projects and to mitigate those impacts if feasible. Unfortunately, some groups have exploited CEQA to prolong lawsuits for years against projects they do not like even though a project’s environmental impact can be responsibly addressed. That is a problem that hung over the L.A stadium project, where many worried that time-consuming lawsuits would prevent ground-breaking for years and

endanger its chances for landing an NFL team. That is where SB 292 comes in – it does not exempt the project from our environmental laws, but it speeds up the time to resolve legal challenges. In fact, the Legislature granted a similar exemption in 2009 to another NFL stadium proposal in the City of Industry, arguing that it was important for job creation. If CEQA is too burdensome for wealthy stadium developers, then isn’t it even more burdensome for the momand-pop businesses that want to expand their operations. I have met with many business owners who have said that our state’s convoluted laws are making it difficult for them to build new projects. Some are mired in time-consuming lawsuits, others are bogged down trying to comply with the intricacies of CEQA. Don’t these entrepreneurs deserve a break as well? To paraphrase the governor, “isn’t it imperative for the state to cut the red tape for their projects too?” In fact, my Assembly Republican colleagues and I have proposed 29 bills this year that make economic recovery state government’s number one priority. I introduced Assembly Bill 303 that would provide a tax incentive for companies, businesses and corporations which move their headquarters to California and employ a minimum of 30 people. I also introduced Assembly Bill 429 that would make

unelected bureaucrats more accountable for the costly regulations they impose on businesses. Legislative Democrats killed 28 of our 29 bills and Governor Brown vetoed the only one that made it to his desk, a modest measure that would require that one of the members of the powerful Air Resources Board be a small business owner. It is unfortunate that Sacramento did not go farther this year to promote lower business costs other than to pass SB 292. We will take jobs wherever we can get them, but should it really take the prospect of a new NFL stadium for the Legislature to move on jobs? Ultimately, every business should have the opportunity to take advantage of the streamlined process that the L.A. stadium will enjoy. It is time for the state to review CEQA and ensure that it works for all Californians, not just for a few. Assemblyman Steve Knight, (R-Antelope Valley), represents the 36th Assembly District in the California Legislature, which includes the communities throughout the Antelope and Victor Valleys.

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High Desert Report A quarterly economic overview

Barstow Casino and Resort An Economic Opportunity for Two Communities For almost a decade, the Los Coyotes Band of Cahuilla and Cupeño Indians and the City of Barstow have been working together to pursue a casino development project that could provide jobs and revenue to both communities who are in desperate need of economic opportunities. In 2006 the tribe filed an application to take land into trust for the purposes of gaming in the city of Barstow. The project has taken many twists and turns over the years, but now looks poised to move forward. Los Coyotes Band of Cahuilla and Cupeño Indians Los Coyotes Tribal members are descendents of the Cahuilla and Cupeño Indians who originally occupied two villages near the reservation, which is located in a in a remote area 70 miles northeast of San Diego and 105 miles southeast of Los Angeles. The reservation is extremely rugged and mountainous and is surrounded by state park and national forest lands. Tribal members living on the reservation live in 12 single-family homes and 10 mobile trailers. Though electricity was brought to a part of the reservation 12 years ago, the service is substandard at best. Living conditions and the lack of economic opportunity on or near the reservation have forced tribal members to find work and housing in other areas scattered throughout southern California. In fact, 51% of the adult tribal members living off the reservation live within a commutable distance (70 miles) of the City of Barstow. With economic development opportunities almost impossible on the reservation, the tribe was left with little choice but to pursue off reservation development to provide for the needs of the tribe and the tribal members.

ByTom Shields Working with Barstow Working with the City of Barstow, the tribe choose the 23-acre parcel in Barstow that is the subject of the Los Coyote Band’s fee-to-trust and twopart determination application. The site was selected with the city’s direct input as the most appropriate gaming location near shopping and commercial outlets and away from residential neighborhoods and schools. Located on Lenwood road, across from the Barstow outlet malls, the casino would certainly be an economic catalyst for the other hotels, shops, restaurant, and gas stations in the area. State approval In 2005, then Governor Schwarzenegger signed a compact with the Los Coyotes to develop their casino in Barstow. But that was only one step in the process. The state legislature also had to approve the compact and the federal Department of Interior had to allow the tribe to take the land into trust for the purposes of gaming. However, even with the governor’s support, the tribe and the City of Barstow could not convince the legislature to pass and approve their compacts with the state. The legislature wanted the Federal government to approve their land into trust application first. In September of 2007, the compact expired and the tribe decided to focus their efforts on the land into trust process. The Casino Project In 2008 the tribe re-submitted the application that is being considered today. The project includes: • 57,000 square feet of gaming space • 100 room hotel • 2-3 restaurants • Entertainment venues

• Convention and meeting room space.

Economic Impact The casino project is expected to have a tremendous positive effect on the Barstow community. The project development costs are expected to be $160 million. The project will provide more than 1,000 construction jobs and more than 1,000 permanent jobs in the community once the casino/resort is open. The casino location is designed to capture the more than 20 million cars per year carrying 45 million passengers along the I-15 corridor. Given that most of the traffic is heading to and from Las Vegas, the location is key to the success of the venture. The casino/resort is expected to generate more $135 million per year for the community. 82% of the revenue will come from patrons from outside the Barstow community. The tribe and the city have also signed a municipal service agreement that will provide the city with a revenue sharing stream of 4.3% of the net win of electronic games at the casino. The city is expected to receive $4 million in the first year of the casino’s operation. The tribe will also share the cost of a new emergency service vehicle, a fire truck, and provide the city with an acre and one half to build a new fire station. The Municipal Service Agreement is a unique agreement among tribes and communities in California. The Approval Process Five years after the tribe submitted it’s first application, the Bureau of Indian Affairs (BIA) published the Tribes Draft Environmental Impact Statement (DEIS). The BIA held a public hearing on July 27th to hear the public’s reaction to the DEIS. They

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High Desert Report A quarterly economic overview

Barstow Casino and Resort Continued

Economic Impact from Construction of Proposed Los Coyotes Barstow Facility

also continued to compile comments for the DEIS until September 16th. The information is now being added to the record for the Department of Interior to consider before they make their final decision that is expected some time in 2012. The tribe will need to negotiate a new compact with Governor Brown and have it approved by the legislature. It is the tribe’s hope that a final determination on the land by the Department of Interior and negotiation and approval of a compact can happen by the summer of 2012.

Keep abreast of the events in the most dynamic real estate market in Southern California. Subscribe today for only $59.95 (printed version) Free e-mail subscription Register today at: www.TheBradcoCompanies.com/ register

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High Desert Report A quarterly economic overview

Working Together to Bring Jobs to the High Desert Over the past 12 month period, more than 500 jobs have been created at Southern California Logistics Centre (SCLC), demonstrating the success of the public-private partnership between Stirling Development and the City of Victorville for the redevelopment of the former George Air Force Base. When Stirling Development contemplated the construction of its newest industrial warehouse facility, totaling over 1 million square feet and completed in 2009, they made a strategic move to develop a project designed to attract large companies that needed space quickly and would bring with them the promise of job growth to the region. The recent commitment by United Furniture Industries, who will occupy over 505,000 square feet of new warehouse and manufacturing

By Brian Parno facilities in November, includes an anticipated 75 new jobs by year-end, with approximately 400 additional employment opportunities projected over the next 3-4 years. A Missouribased manufacture of affordable furniture sold primarily under the Simmons brand name, UFI selected SCLC for its West Coast home based upon quality of available space, attractive workforce, and probusiness atmosphere. Local Broker Joseph W. Brady, President of the Bradco Companies, recognized the many benefits of introducing UFI to the High Desert and represented them in the transaction.

Following a trend in recent leasing activity at SCLC, UFI will join an extensive roster of other companies; to date in 2011 more than 1,078,000 square feet of industrial real estate has been leased by such companies

as Sparkletts Water, Embry-Riddle Aeronautical University, Red Bull Distribution, and Southern California Aviation. “We are thrilled to be adding a significant number of jobs to the Victor Valley,” said Brian Parno, chief operating officer of Stirling Development. With the addition of a major confectionary company who will occupy approximately 495,000 square feet adjacent to UFI, SCLC will welcome an additional 85 jobs. Based upon a mutual commitment and shared vision between Stirling Development and the City of Victorville, Mayor Ryan McEachron noted: “This is a great example of a public-private partnership that is meeting its goals to create jobs and develop a long-term economic engine.”

High Desert Transportation Update By Ty Schuiling, Interim Executive Director SANBAG/San Bernardino Associated Governments

San Bernardino Associated Governments, known as SANBAG, is the council of governments and transportation planning agency for San Bernardino County. SANBAG is responsible for cooperative regional planning and furthering an efficient multi-modal transportation system countywide. SANBAG serves the 2.1 million residents of San Bernardino County. SANBAG looks at the transportation needs of the entire county and breaks into specialized committees, such as the Mountain Desert Committee. LaMesa/Nisqualli Road Interchange With a $7.5 million allocation of

State Transportation Program Local Fund, SANBAG has now fully provided the $31.5 million public share of the LaMesa/Nisqualli Interchange construction. The total cost of the project is $96 million, with the balance being funded by the City of Victorville, development impact fees, the State Transportation Improvement Program, and federal demonstration funds. This new interchange will provide an alternative to Bear Valley Road, which is currently the primary exit to the Victor Valley Regional Mall and a major street that serves the cities of Hesperia, Victorville, and the Town of Apple Valley. Construction is

scheduled to start in early 2011. The City of Victorville is the lead agency.

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High Desert Report A quarterly economic overview

Town of Apple Valley City Update By Kathie Martin Marketing and Public Affairs Officer

The State of Redevelopment Agencies Since January 2011, the Town of Apple Valley redevelopment/economic development staff has worked hard to limit the impact of the governor’s proposal to eliminate redevelopment agencies. As part of this process, the Town Council has adopted a staterequired ordinance, allowing the AVRDA to remain in business. Unfortunately, the actions taken have had limited positive impact because of the ongoing litigation between the California Redevelopment Association/League of California Cities and the state of California. In compliance with the redevelopment restructuring legislation adopted by the state legislature, and a stay issued by the state Supreme Court related to the ongoing litigation, the Town Council has also adopted two technical documents, an Enforceable Obligations Payment Schedule and an Initial Recognized Obligation Payment Schedule in an effort to remain compliant with a difficult and ever evolving legal environment. What does this all mean to the average layperson? In general, the stay issued by the Supreme Court limits the day to day activities of redevelopment agencies in virtually all important areas. For example, agencies may not adopt, or amend, redevelopment plans, enter into new agreements, modify or amend existing agreements, issue or restructure its bonds or dispose of its assets. Typically, redevelopment agencies carry out their redevelopment mission through contracts with legal counsel, marketing consultants, architects, engineers, for profit and nonprofit developers, construction contractors and the like. Such activities require a variety of agreements to implement quintessential redevelopment projects and activities, all of which are prohibited by the Supreme Court stay.

This situation makes the limited administrative activities the Supreme Court stay allows extraordinarily burdensome to carry out and makes redevelopment, already one of the most difficult public sector disciplines, more difficult than the industry could have ever imagined. Coupled with the Great Recession, the current environment and court-imposed limitations make it virtually impossible to have the effect local councils and boards of supervisors originally contemplated when the redevelopment agencies were established in the first place. If there is any good news on the horizon, it is that the Supreme Court intends to rule on this matter, for better or worse, by the end of this calendar year

Perseverance pays off Fortunately, perseverance, creativity, resiliency, and focus are required traits for successful economic development professionals and, in that regard, there are signs in Apple Valley the economy may be slowly turning around, largely through the efforts of its economic and development services staff. Walmart Supercenter, planned for the southeast corner of Dale Evans Parkway and Thunderbird, is currently in plan check. A ground breaking is expected in the very near future. Apple Valley will be home to the fourth Dollar General store in California. Recently approved for Navajo Road near Powhattan, the location on the east edge of The Village business improvement district is a welcome sign of activity in the Town’s historic commercial area. A new Starbucks drivethrough location is scheduled to open this fall in the Apple Valley Commons. On the industrial front, Reid Products, an aircraft and aerospace parts manufacturer operating in Apple Valley since 1980,

is expanding their operations in the North Apple Valley Industrial Specific Plan, recently submitting plans for an additional building of 9,900 square feet. Fresenius/Tru Blu, owner and builder of an existing 70,000 square foot medical equipment distribution company, received all entitlements from the Town to build a second, 75,600 square foot building in the North Apple Valley Industrial Specific Plan (NAVISP). The Fresenius entitlements were processed in 14-calendar days, from initial application to approval, under the administrative process available only in the NAVISP. Continuing a 3-year program of local economic stimulus, the Town recently completed a new Public Works Corporate Yard facility. Sized to accommodate the park maintenance and public works vehicle fleet for the next 20 years, it also houses an expanded household hazardous waste collection center. Public facilities are part of the Town’s redevelopment efforts. A new animal shelter opened in April 2010, and the Development Services Building in August of 2010. An investment of $15 million into these three projects generated a financial impact of $32 million and created 239 construction jobs. Public facilities are also shown to raise surrounding property values and attract new businesses to the area. Most recently, the Town celebrated the grand opening of the Apple Valley Golf Course, now under ownership of the Town of Apple Valley. Originally a private club that opened in 1948, it was opened to the public when the Town assumed the management of the club in December 2008. Rounds played have increased more than 60% since then, and the number of organizations continued on page 28

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High Desert Report A quarterly economic overview

Barstow City Update

By Ron Rector, Community & Economic Development Director, City of Barstow Having adequate utility and road infrastructure is critical if a city plans to retain existing businesses and to attract new businesses to its community. The Barstow City Council is investing millions in infrastructure upgrades and enhancements to make sure the city is well positioned for the anticipated new growth. The first example is the $32 million grade separation. The city, partnering with the County of San Bernardino and SanBag, has secured funding for the design, environmental, right-ofway acquisition and building of a grade-separation on Lenwood Road over the -transcontinental railroads of the BNSF and UP. SanBag is the lead agency for this project. The grade separation is approximately 3 miles north of the I-15 freeway. This investment will eliminate long waits for the over 130 trains that pass by each day, reduce smog, improve safety at the intersection, and help to open up thousands of acres of land for those companies involved in manufacturing and the logistics industries. The grade separation is scheduled to be completed by the end of 2013. The second example involves the city’s wastewater treatment facility (WTF). The city has secured federal Economic Development Administration and Environmental Protection Agency funding that will be used to upgrade the WTF and collection system. The city plans to replace old smog producing engines

for the aeration blower system and air headers with energy efficient electric motors/blowers. As a few examples, the city will replace the headworks, primary clarifiers, and upgrade the electrical power service feed. When completed, the city will have invested nearly $6,000,000 in new or upgraded equipment. Both of these projects provide new, reliable, and efficient capacity for the city’s existing businesses and for the new businesses coming to town. Another exciting project for Barstow is the expansion of Barstow’s WalMart. The new WalMart and Retail Center is being proposed at the southeast corner of Montara Road and East Main Street. The project will be located on 28 acres. WalMart purchased 15 additional acres to add to its existing footprint. Those 15 acres contained many blighted facilities that WalMart removed, which significantly improved the look of the area. The expanded Walmart will be approximately 181,748 square feet in size, with all appurtenant structures and facilities, and will offer groceries and general retail merchandise. The new facility will also include pharmacy, photo finishing center, and food service and may also include a vision and hearing care center, medical clinic, a photo studio, a banking center, and other related accessory uses. They will continue the tire and lube facility service, which engages in routine servicing and preventive maintenance of vehicles. The six

out parcels will include a 5,000 sq. ft. quality restaurant, a 14,820 sq. ft. drug store with a drive through pharmacy, a 5,500 sq. ft. bank with drive through, a 3,500 sq. ft. fast food restaurant with drive through, and two 5,000 sq. ft. retail pads. When completed, expected by the end of 2012, it is believed that this new expanded store will help to stop retail leakage to the Victor Valley. By keeping more money at home, it will allow the City Council to invest more into the community’s street improvement and safety programs. The new Barstow Community Hospital, a 30 bed acute-care facility, is quickly becoming a reality. The new hospital is on schedule to open near the end of 2012.

Town of Apple Valley City Update Continued

and individuals using the clubhouse for regular meetings and special events continues to grow. Despite the fact that a number of projects are being held hostage by the current legal situation surrounding RDAs, the Town of Apple Valley continues to lay the groundwork that will place us in the best possible position to break free of the pack, pending a positive outcome later this year. For more information visit www. GetASlice.org.

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High Desert Report A quarterly economic overview

Hesperia City Update The Legend of Ranchero Road Becomes a Reality By Stephanie Hernandez,Economic Development

The Ranchero Road Undercrossing Project is one that the city inherited upon incorporation. When difficult times hit the High Desert in the early 1990’s, the city was forced to put the project on hold in order to address other critical infrastructure projects. In 2002, the project resurfaced followed by a total of $11.6 million in both state and federal funds having been allocated to the project, along with redevelopment funds and development impact fees. Since initial funds were secured to move this project forward, many obstacles have threatened the project, from environmental issues to a reorganization of the State and Federal approval process through Caltrans. Despite these obstacles, the city pushed forward and received approval on the required environmental document in August 2008, received certification that all right-of-way was obtained in January 2011, granted authorization to proceed with construction in June 2011, and broke ground on August 31, 2011. This sequence of events was crucial because the process, up to this point, could not be completed concurrently, meaning that each stage had to be completed before moving on to the next. While many residents may still be in disbelief that this project is becoming a reality, the Ranchero Road Underpass Project has broken ground and is moving forward. $27 million and two years from now, the City of Hesperia will be celebrating the completion of improvements stretching from Danbury Avenue on the east side to Seventh Avenue on the west that will greatly improve traffic options for travelers of the entire High Desert.

Laying the Tracks for Hesperia’s Industrial Growth The railroad has been a part of Hesperia’s history since the late 1800’s when travelers rested at the Hesperia Hotel and bakers in Los Angeles anxiously awaited their daily fuel supply from the desert. As much as rail is deeply rooted in the city’s past, it is forging ahead as a critical component of its future. Soon Hesperia will become a critical location for industrial transportation. Picture the opportunities that will come from transforming Hesperia into an international transportation hub by reconnecting with the nations rail system. Travel to the area of “G” Avenue and Mojave Street to see the changes that have been taking place since April 2011 to construct roughly one mile of industrial rail lead track. “The City of Hesperia is investing in the future of the “I” Avenue Industrial Area to attract the broad range of businesses that utilize rail transport,” said City Manager Mike Podegracz. “With the combination of a much appreciated $2 million grant from the EDA and our valuable redevelopment funds, we are moving forward with this vital project to help stimulate our local economy.” This project has the potential to attract new businesses, and in turn hundreds of new jobs to this region. Once completed there will be 200 acres of property with direct rail access in Hesperia and a team transload facility. Because, not all companies can be located along the tracks or have the large scale transporting needs to have their own rail spur, a transload facility allows multiple companies to partner together, accommodating the

movement of multiple smaller shipments at one locations without individual large scale agreements with the railroad. The most heavily travelled rail line in the United States with the most international traffic is located right in the heart of Hesperia and connects to Burlington Northern Santa Fe’s system of 32,000 route miles throughout the United States. The potential for attracting new transportation, manufacturing, distribution and logistics operations are limitless. Today, the city is laying the tracks needed to open Hesperia up to the world, and the city looks forward to celebrating the trains once again coming home to Hesperia with a ribbon cutting in spring 2012.

Let’s All Go to the Movies Theater developer Cinema West will soon break ground on a 36,000 square foot, 12-screen cinema including two IMAX screens, to join more than 185,000 square-feet of development in Hesperia’s Civic Plaza. The theater, which will create 40 new jobs, features start-of-the-art digital technology and stadium seating for 1,781. In addition, Cinema West is offering access to one theater for the city to utilize for community and city events. A unique element of this theater is that food and beverage servers will bring orders directly to theater patrons. The theater provides a long-awaited entertainment venue for residents; construction is slated to begin in fall of 2011, with completion anticipated by summer of 2012.

Walmart Supercenter Making Its Way to Hesperia

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High Desert Report A quarterly economic overview

Hesperia City Update Continued

After many years, the City of Hesperia is excited to see construction activity on Hesperia’s Walmart Supercenter - the first in the High Desert. Located just south of Main Street on Escondido Avenue, Hesperia’s Walmart Supercenter will include general merchandise such as clothing, electronics, home furnishings, and housewares, an auto center, garden center, pharmacy, grocery, and a Subway sandwich shop. As the first anchor store in a proposed 43-acre retail center, the 195,000 square foot Walmart Supercenter will take roughly one year to complete and will create 300 jobs. In addition, 65,000 square feet of retail and restaurant space has been proposed on 7.6 acres of this site along Main Street and Escondido. Residents can look forward to this new shopping opportunity opening its doors in 2012.

Viking Equipment Expands & Receives State Tax Advantage from Hesperia’s Enterprise Zone When you hear about the current economic conditions, facility expansions and increased labor force is not usually the topic for discussion. But, that is exactly what Viking Equipment has been able to do by taking advantage of Hesperia’s Enterprise Zone benefits. Viking Equipment, a local Hesperia manufacturer, provides dehumidification equipment to the building restoration industry on a global scale. For over 22 years, founder and owner Mark “Mickey” Walker has built a solid reputation by manufacturing first rate equipment and continually developing new products for his customers. Viking holds patents on three products with three

more on the horizon. With increased sales and the need to unveil new product lines, Viking has had to expand its operation by adding 4,000 square feet for rotational mold equipment. “This equipment will allow us to keep up with demand and do in-house fabrication for our product’s housing assembly,” said Mickey Walker. “Viking Equipment is the perfect candidate for our Enterprise Zone benefits to expand their business,” said Hesperia City Manager Mike Podegracz. “This program is an important tool for economic growth in Hesperia to provide incentives for businesses that create jobs.”

enterprise zones are to businesses. Simply put, reducing a company’s state tax liability can free up much needed cash and encourages businesses to expand.” The Hesperia Enterprise Zone provides for a state income tax credit of up to $37,440 over a five year period for each qualified hire during the term of the 15 year program. Businesses that have hired new employees after April 1, 2010, may still qualify for this and other state income tax benefits. Quite simply, Hesperia works for business! For more information, contact (760) 947-1906 or email econdev@ cityofhesperia.us.

“By looking to market our product line globally, an increase in plant employees was necessary. We have hired five employees in the last year and are looking to add about three more positions to that count over the next year,” Walker said. In fact, two of these new employees have been vouchered by the Hesperia Enterprise Zone, making Viking eligible over a five-year period for up to $68,640 in hiring credits. Walker acknowledges these benefits, saying, “The Hesperia Enterprise Zone’s Hiring Tax Credit is expected to have a significant effect on our bottom line. With the tax savings, we can look to bring more of the process in-house and continue research and development on new products.” “Enterprise Zones enhance local economic activity by creating jobs and business expansion opportunities,” said Deputy Economic Development Director, Steven Lantsberger. “The expansion of Viking Equipment illustrates perfectly how advantageous

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High Desert Report A quarterly economic overview

Victorville City Update Job Growth and Retention in Victorville By Collette Hanna, Business Development Manager

Fortune 500 company site location

complexity, while capitalizing on lowcost production and logistics networks.

Church & Dwight (CHD), the makers of Arm & Hammer products, has chosen Victorville for its west coast manufacturing and distribution facility. It will be located in a 450,519 square foot facility built by developer Space Center, in Victorville’s Foxborough Industrial Park. Foxborough is also home to other Fortune 500 companies including ConAgra Foods and Goodyear Tire & Rubber. CHD is the maker of the world-famous Arm & Hammer brand, but also a variety of consumer goods, including Super Scoop cat litter, OxiClean laundry products, Close-Up and Aim toothpastes, and others. The company averages sales of $2.5 billion annually. CHD is based in New Jersey, with manufacturing and distribution sites throughout the US and abroad.

The building is currently occupied by MARS Chocolate, North America, who will relocate their facilities to Southern California Logistics Airport, also in Victorville.

CHD and Victorville Redevelopment Agency (RDA) staff began discussions in September 2010. The company was seeking an existing building to expand market access to the west coast. It also explored sites in Arizona. After a series of discussions between CHD and the Victorville RDA an agreement was formed, stipulating the provision of 100 jobs being created, with $1.8 million in capital equipment reimbursement from redevelopment funds. The location in the Bear Valley Redevelopment Project Area and the accompanying use of redevelopment funds to spur job creation is a testament to the strategic use and power of redevelopment tools. The Victorville location also provides access to the supplier base for CHD, with several raw materials resources throughout San Bernardino County. Overall, the site location ties into the company’s supply chain, reducing

Existing MARS facility, home of future Church & Dwight manufacturing facility.

Job retention signifies quality site location factors in Victorville With the new location of Church & Dwight, and the relocation of MARS, Victorville has added new jobs as well as retained jobs. MARS Chocolate will relocate its operations to Southern California Logistics Airport (SCLA) in Victorville, occupying 495,736 square feet in the industrial park’s LEEDcertified building. The building’s total capacity is 1,000,000 square feet. MARS will continue to employ approximately 70 people, and continue with its distribution center operations. MARS originally chose Victorville as the site location of 450,000 square feet of distribution space in 2002 when they located in a new facility in Victorville’s Foxborough Industrial Park. Its new facility at SCLA is developed and managed by Stirling Capital Investments.

Job growth brings quality employment opportunities Approximately 400 new jobs will be created over the next 36 to 48 months, made possible through a lease Stirling

has secured with United Furniture Industries (UFI). UFI - a furniture manufacturer based in Mississippi - has signed an agreement that will position the company with a west coast manufacturing and distribution facility to better serve Southern California and Western U.S. markets. The firm plans to immediately hire 100 people and grow to approximately 400 employees. The company will occupy 505,192 square feet of the remaining industrial space occupied by MARS. It plans to occupy the space in November 2011. The UFI commitment follows in a trend of recent activity at SCLA. To date in 2011, these activities have encompassed more than 1,078,000 square feet expanding on the extensive roster of companies located in the High Desert that includes Boeing, GE, Pratt & Whitney, Dr Pepper Snapple Group, and Plastipak. Each company’s site location in Victorville provides it with the market access needed to reach major population centers on the west coast. Victorville, with a population of over 107,000 and the Victor Valley population of nearly 400,000, also provides the labor force needed for the over 500 jobs the companies will bring.

Site of United Furniture Industries at Southern California Logistics Airport.

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Factual economic information about the Inland Empire North/e corridor, including the cities of Adelanto, Barstow, Hesperia, and Victorville, the Town of Apple Valley, and northern San Bernardino County Published since May 1993 Sales and permit trends Economic analysis Updated overview of quarterly absorbency rates of commercial, industrial, and office space Free e-mail subscription with online registration at www.TheBradcoCompanies.com/register Affordable annual subscription of only $59.95 for four editions Each edition 24 pages Minimum of three (3) issues per year The most condensed, up-to-date, factual business information from highly respected professionals, effected property owners, investors, developers and lenders, local businesses, anyone with a vested financial interest in the High Desert Quarterly comments by Dr. Alfred Gobar, renowned real estate economist, Alfred Gobar Associates, (Anaheim, California) Packed with valuable information from expert contributors Published by Joseph W. Brady, CCIM, SIOR Nominated for small business of the year, Inland Empire North/e corridor region by the Inland Empire Small Business Association

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49th Edition of the Bradco High Desert Report  

Inside This Issue monumental announcements, as it relates to the Bradco High Desert Report, and The Bradco Companies. As always, we wish to...

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