1 WELCOME WELCOME Inland Empire Regional Economic Vitality Conversation November 4, 2004 Made possible through generous support from Bank of America.

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WELCOMEWELCOMEInland Empire Regional

Economic Vitality Conversation

November 4, 2004

Made possible through generous support from Bank of America

2

Inland Empire 2004 …

Opportunities & Challenges!

John Husing, Ph.D.

Economics & Politics, Inc.

3

Rancho Cucamonga Mall SiteLos Angeles County

VenturaCounty

San Bernardino County

Riverside County

San Diego County

Orange County

I-15 Freeway

Where’s The Dirt?

1. Affordable Housing & Population Serving Jobs

2. Industrial Projects & Blue Collar Jobs

3. Expensive Housing, Skilled Workers & High Paying Jobs

4

137,611105,667

(152,400)

58,178

258,522290,467

396,133

Los Angeles Co. Ventura Co. Orange Co. San Diego Co. Inland Empire

Job Growth Inland Empire Advantage

Source: CA Employment Development Department

Employment Change, Southern California MarketsWhere 853,894 New Jobs Went, 1990-2004

Local Job Change 853,894, 1990-2004 … Inland Empire

39.5% of gain in Southern California’s growing areas.

5

30,050

41,02537,64236,53336,775

41,483

46,008

6,3429,758

4,575

16,917

28,925

23,083

38,32540,692

56,467

49,850

40,567

33,292

24,125

29,200

22,900

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

e

2004

YTD

Source: CA Employment Development Department, Economics & Politics, Inc.

Inland Empire Job Growth Rate & Forecast, 1984-2004

IE Job Growth 2004 … Falling Short of

Forecast

29,200 Forecast at Just 22,900 Jobs?

6

3.863.63

3.37 3.35 3.30

2.89 2.78 2.64 2.60

2.121.82 1.77 1.76 1.69

1.25 1.23 1.21 1.191.03 0.89 0.75 0.74 0.65 0.61 0.60 0.49

South

Caro

lina

Inlan

d Em

pire

Oklah

oma

Conne

cticu

t

Oregon

Iowa

Miss

issip

pi

Kansa

s

Arkan

sas

Utah

Wes

t Virg

inia

New M

exico

Nevad

a

Nebras

kaM

aine

Idah

o

Hawaii

New H

amps

hire

Rhode

Islan

d

Mon

tana

Delaware

South

Dak

ota

North

Dak

ota

Alaska

Vermon

t

Wyo

min

g

Note: South Carolina Ranked 26thSource: U.S. Department of Commerce

Exhibit 109.-Total Population (millions)Inland Empire As A State, July 2003

Population As A State, 2003

24 U.S. States!

7

Population Growth, 2000-2020!

12,757

5,6104,401

1,677 1,588 1,334 1,313 1,213 1,207 1,070 1,060

Califo

rnia

Texas

Florida

I. Emp.

Georg

ia

Was

hingto

N. Caro

lin

Arizon

a

New Y

ork

Virgini

a

Riv. C

o.

Illino

is

New Je

rsey

Source: U.S. Bureau of Census, Southern California Association of Governments (preliminary)

Population Growth, 2000-2020Inland Empire & Top 11 States (000)

1,7641085

47 U.S. States!

8

$91$84 $82

$78

$66 $65 $64$57

$50$46 $43 $43

$37 $36 $34 $33$26

$23 $21 $21 $18 $17 $15

Oklah

oma

Inlan

d Em

pire

Iowa

Kansa

s

Nevad

a

Miss

issip

pi

Arkan

sas

Utah

Nebras

ka

New M

exico

New H

amps

hire

Wes

t Virg

inia

Hawaii

Main

eId

aho

Rhode

Islan

d

Delaware

Mon

tana

Alaska

South

Dak

ota

Vermon

t

North

Dak

ota

Wyo

min

g

Note: Oklahoma ranked 29thSource: U.S. Bureau of Economic Analysis

Exhibit 110.-Total Personal Income (billions)Inland Empire As A State, 2002

Total Personal Income As State, 2002

Passed Iowa 21 States Have Less Income

21 States!!!

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$139,000

$220,000

$277,000$298,000$288,000

$427,000

$508,000

$565,000$586,000

Inland Empire Los Angeles San Diego Ventura Orange

Median All Home Price

Inland Empire Advantage

Source: Dataquick

Home Price Advantage, Inland Empire & So. California MarketsMedian Priced New & Existing Home, 3rd Quarter 2004

Stage #1:Dirt: Population & Population Serving

Job Growth

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BUILD FREEWAYS & THEY’LL COME

Don’t Build Them & They’ll Come Anyway!

11

2.8%

10.3%

15.9%

22.6%

48.4%

Ventura Orange Los Angeles San Diego Inland Empire

Source: Dataquick

Share of New Home MarketSouthern California Areas, 2003 & 2004

13.4%San Bdno

35.0%Riverside

2003-2004, Inland Empire captured a record 48.4%

of Southern California’s New Home Market!

12

Inland Empire Income Rank Falling

30

35

39

43 42 41

4644 44 45 45 44

46

2123

2830

32 32 32 33 3234 34 33

36

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Riverside San Bernardino

Source: U.S. Bureau of Economic Analysis

Exhibit 4.-Per Capita Income Rank Of 58 CA CountiesInland County Rank, 1990-2002

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No College Classes, 2000 SCAG 46.8% vs. 50.3% in Inland Areas

Less Than H.S.2,724,882

27.0%

High School1,995,604

19.8%Some College

2,221,75722.0%

Associate684,689

6.8%

Bachelors & Up2,460,525

24.4%

SCAG: 10,987,457

Less Than H.S.488,06725.4%

High School477,02224.9%

Some College503,54426.2%

Associate138,407

7.2%

Bachelors & Up312,25716.3%

Inland Empire: 1,919,297

Source: U.S. Census

Exhibit 10.-Educational AttainmentSCAG Area & Inland Empire, 2000

.

#1. Education #2. Blue Collar Jobs

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$3,276,000

$2,730,000

$2,730,000

$2,688,000

$2,184,000

$2,058,000

$2,016,000

$1,890,000

$1,806,000

$1,613,500

Orange-South

L.A. - North

Orange-Airport

Orange-West

Orange-North

L.A. - Mid Cities

L.A. - South Bay

LA-Central

San Gabriel Vly

Inland Empire Source: Grubb & Ellis

Industrial Space Costs, Southern CaliforniaAsking Lease Rates (nnn), 100,000 Square Feet, June 2004

Stage #2Dirt: Blue Collar Jobs

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Labor Cost Savings, 2003

-5.1%

-4.2%

-2.2%

Orange County Los Angeles County San Diego County

Average income in each sector weighted by Inland Empire employment in itCommon Occuaptions: L.A. (589), OC (562), SD (578)

Source: Occupational Employment & Wage Data, CA Employment Development Department

Exhibit 23.-Labor Cost Savings, 2003Inland Empire vs. Coastal Counties

16

32.0%

923,320,496

295,912,740

186,360,263

Los Angeles County Inland Empire Orange County Inland Ratio to L.A. County

Source: Grubb & Ellis

Inland Empire Industrial Space vs. Los Angeles County Existing & Under Construction, 2003

Inland Empire Industrial Space: 32.0% of L.A. County

17

BUT: Manufacturing Disappearing

(89,617)

(47,283)

(30,017)

(29,750)

(20,642)

(18,925)

(17,233)

(13,267)

(13,208)

(11,167)

(9,400)

(7,642)

Aerospace Mfg.

Electronic Instrument Mfg

Other Durable Mfg.

Computer & Peripheral Mfg.

Machinery Mfg

Textile & Apparel Mfg.

Fabricated Metal Mfg

Other Federal Government

Department of Defense

Other Non-Durable Mfg.

Printing

Accommodation

Over $40,000 a year

Source: CA Employment Development Department

Exhibit 2.-Top 12 Sectors Losing JobsSCAG Area, 1990-2003

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3. Issue: Energy Cost

12.011.0

8.9 8.57.9 7.8 7.8 7.6 7.6 7.5

5.8 5.2 5.0

Source: American Public Power Association

Industrial Electric Cents per Kilowatt/HourTop 10 States & Farl Western States, 2003

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4. Issue Workers Compensation

$10.80

$5.81$5.19 $5.10 $4.70 $4.54 $4.43 $4.34 $4.27 $4.26 $4.23 $4.13 $3.94 $3.91 $3.88 $3.76 $3.71 $3.63 $3.62 $3.61

Cal

ifo

rnia

Flo

rid

a

Tex

as

Del

awar

e

Ver

mo

nt

New

Yo

rk

Ok

lah

om

a

Haw

aii

Co

nn

ecti

cut

Ala

ska

New

Ham

psh

ire

Mis

sou

ri

Mic

hig

an

Mai

ne

Ala

bam

a

Ten

nes

see

Rh

od

e Is

lan

d

New

Jer

sey

Pen

nsy

lvan

ia

Co

lora

do

Source: Nebraska Department of Economic Development, 2004

Exhibit 6.-Workers Compensation Costs By StatePer $100 of Manufacturing Payroll, 2003

5. Only State 8-Hour Day Not 40-Hour Week for Overtime

6. Only State Mandatory Family Leave

20

$597$573

$483$420

$388$384

$379$347

$334$323

$301$298

$283$278

$267$259$256

$246$243$242

SF Bay Area, CAOrange Cty, CASan Diego, CA

Honolulu, HILos Angeles, CA

Nassau/Suffolk, NY Bergen/Passaic, NJ

Boston, MANewark, NJ

Middlesex, NJWashington, DC

Monmouth, NJSeattle, WA

Sacramento, CAW. Palm Beach, FL

Inland EmpireWorcester, MA

Miami/Hialeah, FLFt. LauderdaleFLLake County, IL

California

Source: National Association of Realtors

Exhibit 8.-Median Home Price (000)Top 20 of 138 Metropolitan Areas,1st Quarter 2004

Issue 7. 16th Highest Home Prices of 138 U.S. Metropolitan Areas

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Looking Ahead: Huge Cargo Ships!

8,200 Container Post-Panamax Ships

9.5

17.1

30.3

2000 2010 2025

TEU = 20 foot equivalent unitsSource: Alameda Corridor-East Trade Corridor, 2001

Ports of Los Angeles & Long BeachContainerized Cargo, 2000-2025 (millions of TEUs)

37 Trains For Containers From One Ship

22.

.

7,755 10,859 23,387 35,314 41,403 55,233 70,09090,279

132,945159,701

178,270

237,931

300,719326,166

388,327410,924

449,786

496,777

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Source: Burlington Northern Santa Fe Railway

Exhibit 19.-Burlington Northern Santa Fe Railway Container Lifts, 1986-2003San Bernardino, California

Design Capacity

..Needed: Expanded RR Track

Grade Crossings Intermodal Yards

Short Haul Rail

Issue 8. State Help: A Financing Mechanism

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Lane Separations: Cars & Trucks

Issue 8. Again State Help With A Financing

Mechanism

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ONT is now the only airport capable of becoming

Southern California’s second major air gateway.

0.8 1.0 2.2 2.5 2.9 3.09.6 10.8

30.0

78.0

SCI MAR PMD SBD PSP LGB BUR JWA ONT LAX

Source: SCAG Aviation Task Force Memorandum, Michael Armstrong, 2003

FIGURE 6-5.-AIR PASSENGER DEMAND2030 Constrained Demand (millions)

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Inland Air Cargo Due To Explode!

43 83 123 143 146283

821 825

2,605

3,286

JWA BUR LGB PMD PSP SCLA SBD MAR ONT LAX

Source: SCAG Aviation Task Force Memorandum, Michael Armstrong, 2003

Exhibit 17.-Air Cargo Tonnage By SCAG Area Airport2030 Constrained Demand (1,000s tons)

LAX 2003

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Logistics A Strong New Blue Collar Sector

$40,439$43,871 $45,314

Construction Manufacturing Logistics

Source: Quarterly Census of Employment Wages, CA Employment Development Department, 2004

Exhibit 13.-Average Annual Wage & SalaryBlue Collar Sectors, SCAG Region, 2003

But A Land Hog!

.

.

27

Stage 3.-

Factors Driving: High Paying Work

Starting NOW!

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19%17%

14%11% 10%

Inland Empire Los Angeles Ventura Orange San Diego

Source: CA Association of Realtors

Exhibit 32.-Percent Local Residents Able To Afford Median Priced HomeSouthern California Markets, July 2004

Affordability Even An Inland Issue

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Issue 9: Housing Supply

Pricing Future Middle Class – Mostly Young, Blacks & Hispanics - Out of Housing Market

30

2003 Median Incomes At/Near Beverly Hills, Including Several Cities much larger

4,39

6

72,9

94

35,3

50

10,5

11

25,2

45

146,

666

56,9

82

14,9

65

75,0

14

137,

006

70,6

63

$106

,241

$88,

851

$80,

997

$76,

755

$71,

923

$69,

640

$69,

606

$69,

397

$68,

051

$67,

455

$64,

149

Indian

Well

s

Chino H

ills

Bever

ly H

ills

Canyon L

ake

Norco

R. Cuca

mong

Murri

eta

Ranch

o Mira

g

Temec

ula

Corona

Chino

Source: Census 2000, Economics & Politics, Inc.

High Income CommunitiesInland Empire vs. Beverly Hills, 2003

31

32.0%

25.3%27.5%

23.2%

46.0%

31.0%

26.0%

47.0%

38.0%

31.0%

5% Less 10% Less 15% Less

IE to Orange Co. IE to San Diego Co. IE to LA Co. High Desert to IE Valleys

Source: San Bernardino Associated Goverments, Western Riverside Council of Governments

Exhibit 5.-Percent Willing To Work For less LocallyInland Empire Commuters, 2002

Willing To Work For Less Not To Commute?

32

$286,800

$247,200

$237,600

$236,400

$234,000

$229,200

$217,200

$213,600

$205,200

$198,000

$195,600

$164,200

$152,400

West Los Angeles

Burbank-Glendale-Pasadena

North Los Angeles

John Wayne Airport

South Orange Co.

Downtown Los Angeles

San Gabriel Valley

South Bay

West Orange Co.

Central Orange Co.

Orange-North

Inland Empire

Mid-Wilshire

Source: Grubb & Ellis

FIGURE 4-5.-OFFICE COST, COASTAL COUNTIES & INLAND EMPIREAnnual Average Class "B" Lease Rates, 10,000 Square Feet, Sep-2003

Office Lease Costs, 2002

33

14.4%

14.3%

13.6%

13.4%

13.3%

13.1%

12.7%

12.5%

12.4%

12.1%

11.0%

8.8%

Orange Co.

Los Angeles

Baltimore

Washington D.C.

Toledo

Westchester

Tucson

Sacramento

Honolulu

San Diego

Inland Empire

Ventura Co. Source: CB Richard Ellis

Office Vacancy Rates, 2nd Quarter 2004Southern California & Ten Lowest U.S. Rates

Office Market, 20032nd Lowest U.S. Suburban Vacancy Rate

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Rancho Cucamonga Mall SiteLos Angeles County

VenturaCounty

San Bernardino County

Riverside County

San Diego County

Orange County

I-15 Freeway

Inland Empire: Center of the Universe?

State Needs To Create A Competitive Job Environment

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Contact:

www.johnhusing.com

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Economic Vitality Economic Vitality ConversationConversationToday’s Focus

1. What state actions will have the most immediate positive impact on California’s economic recovery?

2. What state actions will result in the most significant long-term improvement to California’s economic competitiveness and comparative advantage?

3. How do we best structure an effective partnership between the regions and the state around economic strategy?