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POTENTIAL ECONOMIC IMPACT
OF THE
DEFENSE FINANCE & ACCOUNTING SERVICE
I
i
ON THE
EAST SAN BERNARDINO VALLEY
Ma>@ 1992
.CAP
econolic and political analrsis
3142 Cactus Circle
Highland. CA 92346-1739
(714)425-8952
PAX (714)425-8952
rJ ~ /1 ~ /1'
.
ECAP
ec:ono.ic aDd political analysis
3142 Cactus CI rele
Highland, CA 92346-1739
(714)425-8952
FAX (714)425-8952
POTENTIAL ECONOMIC IMPACT OF THE DEFENSE FINANCE & ACCOUNTING SERVICE
ON THE EAST SAN BERNARDINO VALLEY
In the wake of the Norton Air Force Base phaseout, the possibility has emerged for the East
San Bernardino Valley to bid for the Defense Finance and Accounting Service (ltDFASIt). This
operation, which is scattered across the U.S., will be consolidated In one location. This report
Investigates the potential impact which DFAS would have on the economy of urban San
Bernardino County from Fontana to Yucaipa.
It concludes that local economic activity would rise $137,092,926 and create 4,000 DFAS jobs
plus 3,152 other local Jobs. Of these 7,152 Jobs, as many as 6,432 could be local. The
$137,092,926 would replace 52% of the $263,123,000 economic loss ECAP has estimated would
come from the Norton phaseout.
I
The assumptions used In this study were derived from the following agencies: i
1. DFAS through information supplied to the San Bernardino City Economic Development
Agency, the San Bernardino County Department of Economic and Community
Development, and Joe White Pathfinders, economic consultants to the latter.
2. RANCON Financial which could be called upon to develop the complex in which DFAS
would be housed.
3. U.S. Bureau of Labor Statistics, which conducts extensive research on consumer
expenditure patterns throughout the u.s.
4. U.S. Bureau of Economic Analysis, which conducts research on the amount of spending
req u i red to create jobs in various sectors.
ASSUMPTIONS - CALCULATIONS
The accuracy of impact analysis is dependent upon the assumptions under which it is made.
As assumptions simplify reality, ECAP has endeavored to err on the conservative side.
ASSUMPTIONS ABOUT DFAS
Six assumptions were made about the size of the DFAS operation:
1. DFAS Labor Force
2. Average Salary with Benefits
3. Benefit Package Val ue
4. Percent of hires in Southern California
5. Percent of budget currently being spent in the
Fontana-Yucaipa area 0%
These assumptions lead to the conclusion that the location of DFAS in the East San Bernardino
Valley would bring an annual payroll of $120,000,000.
4,000
$35,000
$5,000
85%
Average Salary with Benefits
(less) Benefit Package Value
Average Salary without Benefits
DF AS Labor Force
Total Pay roll
$35,000
5.000
$30,000
4.000
$120,000,000
All of this payroll and any attendant operations budget would represent new money to the
East San Bernardino Valley as currently none of it is coming to the region. However, every
dime of this money will not actually pass through the local economy. That amount depends
on further assumptions about the behavior of DFAS employees.
GEOGRAPHIC & SECTOR SPENDING ASSUMPTIONS
Where will the new DFAS employees live? How will they spend their payroll? What impact
will this have on the aggregate level of economic activity in the East San Bernardino Valley?
Answers to questions such as these require assumptions about DFAS employees and the
operation of the local economy:
7. Percent of DFAS employees who will reside within the
Fontana to Yucai pa area. . . . . . . . . . . 75%
I
This assumption is based on the fact that DFAS only expects about 15% of its !
current employees to transfer to Its consolidated facility. Thus 85% will be
hired In the new location.
Based on this behavior, it assumed that as many as 25% of the staff will choose
to live where they currently are located, or in Riverside County or Western
San Bernardino County.
Thus the result that 75% will end up living inside of the Fontana to Yucaipa
area. Some will already living here; others will move into the region. The
latter will do so to be near their Jobs and take advantage of the area's affordable
housing.
This assumption leads to the conclusion that $90,000,000 of the $120,000,000 payroll will reach
local East San Bernardino Valley residents. The balance will be put in the pockets of
commuters and taken to other Southern California communities.
Total Payroll
Percent of DFAS employees who will reside within
the Fontana to Yucai pa area
Local Direct Household Payroll
$120,000,000
75%
$90,000,000
How this $90,000,000 local payroll directly affects the Fontana to Yuciapa economy will depend
upon the expenditure patterns of DFAS employees. Here two kinds of assumptions must be
made. First: what will the money be spent on? Second: how much of the money spent in
each sector will go to local institutions?
Expenditure pattern assumptions are taken from the Consumer Exoendlture Survey. 1988-89
complied by the u.S. Bureau of Labor Statistics for the Los Angeles region. This document
shows how a dollar of payroll would "typically" be spent on every type of activity ranging
from federal taxes to alcohol. These assumptions (#8) are shown in the table on the next
page.
Assumptions (#9) about how much of the money spent in each sector will be spent within the
East San Bernardino Valley were made by ECAP. They are shown in column 4 of the table
below:
..,
....... ..... .... .... ....... ........ ...' . ....... ...... ..... .... . . ....-.. ....,--................ ....... ....... ................................ ...... ........ ............ ............. ....... ....-............ ... .... ....................... .....
CATEGORY
8. Percent Sector Spending 9. Percent
by Sector Spend in
East SB
East SB Sector
Spending
Food at Home 7 6% $6,800.839 99% $6,732.830
Food Out 6 0% 5,432.725 90% 4,889,453
Alcohol 0.9% 801,997 99% 793.977
Home Mortgage Interest 8.0% 7,170,800 50% 3,585,400
Home Property Tax 1 7% 1.571,716 100% 1,571,716
Home Maintenance &: Repairs 1 7% 1,517,091 95% 1,441,237
Rented Dwellings 8.0% 7,188,181 100% 7,188,181
Other Dwellings 1 5% 1,323,420 100% 1,323,420
Utilities 4 6% 4,163,931 100% 4,163,931
Household Services 2 1% 1,854,774 100% 1,854,774
Household Supplies 1.2% 1,085,055 95% 1,030,803
Furniture &: Fixtures 3.6% 3,198,058 75% 2,398,543
Apparel 5 1% 4,623,279 75% 3,467,459
Vehicle Purchases 6.8% 6,100,643 75% 4,575,482
Gas &: Oil 2 7% 2,473,032 70% 1,731.123
Vehicle Insurance 2 0% 1,827,462 15% 274.119
Vehicle laintenance/Repair/Other 3.3% 2,984,523 90% 2,686,071
Public Transportation 1.3% 1,162,027 100% 1,162,027
Health Insurance 1.4% 1,234,033 15% 185,105
Medical Service 2 1% 1.929,263 95% 1,832.800
Drugs &: Medical Supplies 0.7% 628,190 95% 596,780
Entertainment 4.4% 3,957,845 65% 2,572,599
Personal Care Products 1.4% 1,238,999 95% 1,177,049
Reading 0.4% 369,962 95% 351,464
Education 1.1% 973,322 65% 632,659
Tobacco 0.5% 484,178 99% 479,336
Miscellaneous 2 2% 2,003.752 95% 1,903,564
Contributions 3.1% 2.780,920 95% 2,641,874
Lit e l Other Personal Insurance 0.5% 476,729 15% 71,509
Pensions &: Social Security 6.4% 5,777,857 0% 0
Federal Income Tax 6.1% 5,499,765 0% 0
State Income Tax 1. 5% 1,330,869 0% 0
Other Taxes 0.0% 34,761 0% 0
TOTAL LOCAL EMPLOYEE
DIRECT PAYROLL SPENDING $90,000,000 $63,315,287
Taxable Local
Spending
4,889,453
793,977
1,030,803
2,398,543
I
3,467,~9
4,575,482
1,731,123
2,686,071
1,177,049
351,464
479.336
1,903,564
$25,484.324
ECAP assumptions Include figures such as 100% on Items like public transportation, rent,
utilities, property taxes and household services. A 99% level was assumed for purchases of
groceries, alcohol and tobacco; 95% was used for items like medical services, home maintenance
and supplies, and contributions.
""
Assuming people look in a wider area for more expensive items, a 75% local spending assumption
was used for purchases such as apparel, vehicles, and furniture and fixtures. Also, as people
travel alot in Southern California, 70% was used for gas & oil, 65% for education and
entertai nment.
In the financial arena, 50% of home mortgage payments were assumed made to local financial
institutions and spent in the area. Only 15% of insurance purchases were assumed to reach
the local economy. This was based on the assumption that commissions go to local brokers,
but most premium payments go to national firms and are not spent back In the region.
Finally, income and social security tax payments were assumed to have no direct impact on
the local economy.
CONCLUSION: The table indicates that $63,315,287 of the $90,000,000 in direct local payroll
spending will be In Institutions Inside of the Fontana to Yucaipa area. Of this,
$25,484,324 will be taxable sales.
These, however, are not the only dollars which the local economy would receive from the
employees of DFAS. Since 25% of the labor force Is assumed to live elsewhere but work
i nsi de the East San Bernard I no Valley, some part of thel r Income w I II spent locall y.
10. Percent of Non-Local worker Payroll spent inside Fontana
to Yucai pa. . . . . . . . . . . 10%
Thus, of the $30,000,000 DFAS payroll assumed to go to commuters, $3,000,000 will be spent
Inside the East San Bernardino Valley. All of these monies are assumed to be taxable s)lles.
Total Payroll
DFAS employees who will n.Qt reside in the Fontana
to Yucai pa area
Total Commuter Pay rol I
Percent of Non-Local worker Payroll spent Inside
East San Bernardino Valley
Total Commuter Employee Direct Payroll Spending
in Fontana to Yucaipa
$120,000,000
25%
$30,000,000
10%
$3,000,000
Thus total direct payroll spending reaching the East San Bernardino Valley would be $66,315,287
of which $28,484,324 would be subject to local sales taxes.
Local Employee Direct Payroll Spending
Commuter Employee Direct Payroll Spending
Total Direct Payroll Spending
$63,315,287
3.000.000
$66,315,287
Local Employee Taxable Sales
Commuter Taxable Sales
Total Local Taxable Sales
$25,484,324
3.000.000
$28,484,324
A
RANCON COMPLEX ASSUMPTIONS
Another way in which money from the DFAS would reach the East San Bernardino Is through
that organization's local operations spending. Most of this spending will be on expenses
related to the rental and maintenance of its facilities. This is the case as most of Its supplies
will be purchased through national contracts. This supply spending Itself will be low since
the operation is a professional rather than an production facility.
Two assumptions from RANCON Financial, the organization asked to pro forma a facility for
DFAS, are thus relevant to estimating DFAS' local expenditures.
11. Complex Square Footage 660,000
12. Operations costs per foot $7.50
These assumptions lead to the conclusion that DFAS will spend $4,950,000 with RANCON which
will in turn spend It with local institutions and employees:
Complex Square Footage $660,000
Operations costs per foot $7.50
Total Complex Operations Costs $4,950,000
In addition, it is assumed that RANCON's $1,897,450 estimated net cash flow from the project,
which stays 100% leased to DFAS, reaches people spending in the local economy.
i
13. RANCON Net Cash Flow. . . . . . . . . . . . . $1,897,450
Finally, it is assumed that DFAS will spend about $250,000 a month buying local incidental
supplies plus paying for items like computer servicing.
14. Local incidental supplies & services. . . . . $3,000,000
Thus the total local operations spending resulting from DFAS occupying the RANCON facility
is estimated at $9,847,450 as follows:
Total Complex Operations Costs
RANCON Net Cash Flow
Local incidental supplies & services
Total Local Operations Spending
MULTIPLIER & TOTAL LOCAL ECONOMIC IMPACT
$4,950,000
1 ,897,450
3.000.000
$9,84 7,450
Altogether, DFAS would bring $76,162,737 in new direct spending into the East San Bernardino
Valley economy. Each of these dollars represents new outside money flowing into the region.
In a sense, they are thus like the money coming into an old western town because of its
gold miners.
Local Employee Direct Payroll Spending
Commuter Employee Direct Payroll Spending
Total Local Operations Spending
Total New Direct Local Spending
$63,315,287
3,000,000
9.847.450
$76, 162, 737
The miners sell their gold outside the area, and bring money into the region. They, in turn,
help the local economy as they spend with local saloons and general stores. Finally, as bar
maids and store owners buy food and drink from each other, the economy continues to grow
until the money is spent elsewhere bringing in supplies.
For the Fontana to Yucaipa area, the $76,162,737 coming into the economy from DFAS employees
and operations spending would help local stores and workers. As these people buy hair
cuts, food and legal services locally, this money continues to expand the region's economy.
This process stops once all of the money drains away as people and stores purchase goods
and services elsewhere.
As the East San Bernardino Valley economy is relatively small, it is assumed that each $1.00
entering the area has a $1.80 impact on expanding the region. This Is a small assumption.
15. Multiplier per $1.00 of new money. . . . 1.80
Thus the total economic Impact of DFAS would be $137,092,926.
Total New Direct Local Spending
$76,162,737
Multiplier per $1.00 of new money
TOTAL DFAS ECONOMIC IMPACT ON THE FONTANA
TO YUCAIPA AREA
1.80
$137,092,926
In January, 1989, following the announcement of the Norton AFB phaseout, ECAP analzyed the
negative annual economic impact of this event on the East San Bernardino Valley at $263,123,000.
This work Is shown In Exhibit A. Based upon it, the location of DFAS to the Fontana to
Yucaipa area would offset 52.1% of this problem.
I
To translate the volume $137,092,926 figure Into job creation, an assumption of the nuthber
of jobs per dollar of economic growth must be made. This was done based upon work done
by the u.S. Bureau of Economic Analysis for the Southern California area.
16. Average dollars of new economic activity needed to
create one new Job . . . . . . $43,500
Based upon this assumption, the location of DFAS to the East San Bernardino area would add
Its own 4,000 jobs plus 3,152 additional jobs. Of this 7,152 total, 6,432 would represent new
employment to Southern Californians, not including jobs induced by spending in areas outside
of Fontana to Yucaipa.
TOTAL DFAS ECONOMIC IMPACT ON FONTANA-
YUCAIPA
$137,092,926
Average dollars of new economic activity needed
to create one new job
Multiplier Induced Job Creation
DFAS Labor Force
Total Jobs
$43.500
3, 1 52
4,000
7, 1 52
DFAS Labor Force
Percent of hires in Southern California
New Southern Cal iforn ia Jobs
Multiplier Induced Job Creation
Total New Jobs to Southern California Residents
4,000
~
3,280
~
6,432
c
IMPACT ON TAXING AGENCIES
If DFAS were to come to the East San Bernardino Valley, it would have a positive impact on
tax collections by a variety of local agencies. In the estimates below, the spending by
households Is taken from the table on page 3. It Is based upon the sectoral spending of
the $90,000,000 in new local payroll.
1. The total of Household Property Tax payments by DFAS employees were estimated to be
$1,571,716. Based upon 1991 distribution of San Bernardino County property taxes, local
agencies would benefit as follows:
U.:::.::::: ...................................................................................................................................................................................................................................................................
City 11.0% $172,889
Co. Library 1.0% 15,717
County 30.0% 471,515
RDA 10.0% 157,172
Special Districts 16.0% 251,475
Schools 32.0% 502,949
TOTAL 100.0% $1,571,716 I
j
:>
2. DFAS is assumed to lease space In a facility that will also pay property taxes. This facility
is assumed to be located inside of the Tri-City redevelopment project of the City of San
Bernardino. The following are the taxes this project would generate:
......,.........................,...........................................................,....... ............................,............................ ............. ..........,................. .............................................
........................................................,......................,.................... ...................................................................................,...............,.......................... .............................................
......,.........,.........,............................,.,.................."...."................, ......,........'.............. .............,................................................................. ............................................,
..................................................................................... .................................................. ............................................................................. ........................................
:.}:/:.:::;:::;::::::::::::::;:::}:}:?:::/:/:::.:::.:i:/:};::?::::::::}\~:}?}}:::}}:::::;:~~:#.:#.}::;~#~~#:?~#.~:*-:r:/~#.#?:~:~!~~~:{'::::}}:}~://:::;i;::::;::;:,;;;:::}:::::?)i::::::;:,:}::::;::::V~;::;::;::;;:}:;::;:}:::::::
Complex Value incl Parking Structure
Cities
$83,558,000
RATE AMOUNT
o 8759% .730,055
o 2531%
30% 63,287
25% 52,739
35% 73,835
10% 21,096
o 25% 2,358
$943,370
AGENCY
RDA Tax (less County Fee)
Other Agency Tax (less Co Fee)
County
Schools
Other
County Collection Fee
TOTAL COMPLEX TAXES
..,
3. Every local DFAS employee will not pay utility taxes. However, If they did, and If the
rate was the 10.0% used by the City of San Bernardino, the following would be the result
in uti I ity tax reven ues $416,393:
Househol d Uti I ity Payments
Uti Iity Tax Rate
Total Uti I ity Tax
$4,163,931
10.0%
$416,393
4. Previously it was estimated that the total of direct taxable sales by DFAS employees would
be $28,484,324. At 7.75% this would yield $2,207,535 in sales taxes. This does not include
extra sales induced by other East San Bernardino Valley Residents as a result of the
multiplier impact of DFAS coming to the region. The following Is where these monies would
go:
..,.............................................
.. ...............-.............................
.... .....
...................................................
..........................,.......................
............ ..................................................
................................................................
.'.......,.......................................................
--............................. ................
::::::::::::::::jfo:uMfu)ia:::::ra~ab:l:.:~:::sa:f.$:f\\:::.:i$:y.:&i:~::324::::::::::::::.::::
..............................................................
...........................-..................................
...............................................................
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State
6 00%
0.25%
o 50%
1 00%
$1,709,059
71,211
142,422
284,843
I
I
;.
County Transportation Fund
SANBAG
Cities
TOTAL
7.75%
$2.207,535
The $284,843 in extra annual sales taxes for cities would be distributed as follows, assuming
DFAS employee spending followed the pattern of the period from the past four quarters
for which the State Board of Equalization as released data:
..................... ..............................................................................................,... .... ............,............,...-........................................................................................
........................................................................................................................".. .............,................................................,.............................................................
........................ ............................................................................................................................ .............................................................................................................................
........................ .......................................................................................................................... ............................................................................................................................
:.:.:.:.:.:.:.:.:.:.:.:.:-:.:.:.::::::::::::::;::;:/:::::)::::::::::::::?::}:::;,::::::::.::::::::~:::::::::{{{t}}~:~~~::!::~~~~::}*#.#.;:::::~:}:~:#p~::f#.#~;~:::::::n::~~:~~:i:~~~:)':}}i;:t::::}:t}::::}:.}::::}:!}{{{:}::}i:::}:}::i!':}}}\!::::::':;'::::
Colton 9 8% $ 27.880
Fontana 15 8% 44,986
Grand Terrace 0.7% 2,086
Highland 1 7% 4,911
Loma Linda 2.7% 7,766
Redlands 11 1% 31,646
Rialto 8.6% 24,363
San Bernardino 47 4% 134,862
Yucaipa 2 2% 6,344
TOTAL 100 0% $284,843
5. Assuming that the entertainment spending estimated by DFAS employees was at facilities
subject to the same TOT tax rate used in San Bernardino, the following shows that the
total impact on that tax of DFAS's locating in the Fontana to Yuciapa area would be
$395,784.
Household Entertainment Spending
TOT tax rate
TOT tax
$3,957,845
10.0%
$395,784
EXHIBIT A
I
!.
ECONOMIC IMPACT OF THE
NORTON AIR FORCE BASE PHASEOUT
ON THE
EAST SAN BERNARDINO VALLEY
Credit Union Concern
Over Phaseouts
by Larry Sharp, President
Like most citizens of San Bernardino
County, those of us at the San Bernardino
Central Credit Union are enormously
concerned about the impact which the
closure of Norton and George Air Force
Bases will have on our community.
For that reason, our January 1989
Quarterly Economic Report is devoted
to analyzing the economic consequences
of these events.
By coincidence our consulting editor,
Dr. John Husing wrote his doctoral
thesis on the role Norton AFB plays
in the East Valley economy. This report
thus delves into that phaseout in some
depth. The analysis, however, provides
insights into the forces operating in
the George AFB situation as well.
While it is unfortunate these phaseouts
are occuring, we are encouraged to find
that our area's natural growth will
buffer us against their worst effects.
Clearly it has become imperative that
local planning policies be finalized so
logical development can continue.
As a county-wide financial institution,
the Credit Union hopes business and
elected leaders will now form a
partnership in efforts to attract new
firms to diversify our economic base
and end this type of vulnerability in the
future.
QE Index
Article Page
President's Report 1
Norton/George Impact 1
San Bdno Co Home Values 2
Employment & Commuter Trends 3
Retail Sales 4
Interest Rate Movements 4
A San BenJardino
+":+7!!3IItral
W™OWitllnion
QUARTERLY ECONOMIC
JANUARY 1989
The Economic Impact Of
The Norton And George
Phaseouts
San Bernardino County has been dealt
twin blows by the decisions to close
Norton and George AFBs. There is no
doubt these events will hurt the East!
Victor Valleys. The questions are: "How
soon, how much, and what can be done
to reduce the pain?" Of these, timing is
the critical unknown.
It is well established that valley and
desert areas are growing for reasons
unrelated to local economic conditions.
This growth is bringing new commuters
who work in Ontario, L.A. and Orange
County, but spend their pay checks at
home.
If the timing of base phaseouts is slow
enough, local spending by these com-
muters will be sufficient to match some,
if not all of the base spending losses.
Where'. The Gold?
To determine the local growth needed
to offset the Norton/George closures, it
is necessary to measure the losses they
are expected to cause. To do this, it
must be realized that any economy has
two tiers of employment:
1. "Primary" jobs which bring money to
an area from the rest of the world.
2. "Secondary" jobs which depend on
spending by primary job holders.
In an old mining town for example,
miners sold gold and brought "primary"
money from outside the area. Their
local spending supported "secondary"
jobs at the saloon and general store.
When the mines closed, the primary
money quit coming and the miDers left.
Without their spending, the saloons and
stores closed. . . leaving a ghost town.
For the EastIVictor Valleys, Norton and
George are gold mines. Their payrolls
bring primary money from the outside
world. As base workers spend it, they
create secondary jobs for clerks, I
lawyers and mechanics. !.
As the bases close, local spending by
their workers will be lost, as will base
spending with local contractors. Many
secondary jobs will vanish if other
primary income sources are not found.
Total Impact From Norton Closure:
$225,484,000 To $263,100,000
The availability of detailed data on
Norton AFB allows calculation of the full
primary and secondary spending losses
to the East Valley from the pending
closure of that base. The primary loss
will be:
Reduced Employee Spending $128,364,000
Reduced Contract Spending 21,992,000
Total Primary Spending Loss $150,356,000
This is the spending that must be
replaced by commuters or new firms if
the East Valley is to avoid losing
secondary jobs.
The secondary spending loss will be:
$75,178,000 to $112,767,000, as secon-
dary jobholders themselves cease to be
able to spend locally.
The full loss from closing Norton would
thus be $225,534,000 to $263,123,000
and 2,750 to 3,200 non-base jobs. To
explain:
Payroll Primary Spending Loss:
$128,364,000
Most of this impact from Norton's
closure will be caused by the loss of
(Continued on Page 5)
PHASE OUT IMPACT
(Continued from Page 1)
primary spending by its work force,
$128,364,000 calculated as follows:
1. It is assumed the East Valley will
lose the entire Norton AFB payroll
except the Ballistic Missile Office:
Table 1. Approximate SMO payroll
retained at Norton (000).
Category Number Avg Pay Payroll
Officers 402 $35,215 $14,156
Enlisted 62 14,978 929
Civilian 362 37,439 13,553
TOTAL 826 $34,671 $28,638
Source: Norton Air Force Base
2. The total Norton payroll minus
these BMO amounts is shown in
column #1 of Table 2, by worker
type and residence. The expected
loss is $208,173,000.
Table 2. Impact Of Norton Payroll
Losses On The East Valley (000)
10 years of surveys. Table 2 thus
calculates the East Valley primary
payroll spending loss from losing
Norton at: $128,364,000.
Purchasing Primary Spending Loss:
$21,992,000
A second part of the impact of Norton's
closure will be caused by the loss of
non-BMO primary contract spending.
For the East Valley, this will be about
$21,992,000, calculated as follows:
1. Norton construction contracts total
$5,738,000: 38.4% or $2,203,000 for
labor, 60% or $3,443,000 for
materials. It is assumed workers will
spend 73o,i) of their payroll (Table 3).
2. Similarly, non-BMO service contracts
are about $10,000,000: 52.4% or
$5,240,000 for labor and 18.3% or
$1,830,000 for materials. Again, it is
assumed 73% of payroll is spent.
Table 3. Impact of Norton
Purchases On So. California (000)
Lost Spent In So.
Category Payroll California Category Amount So Cal Impact
Military Cnstr Labor $2,203 73o,i) $1,609
On Base $19,223 51% $9,803 Serv Labor 5,240 73% 3,825
Military Cnstr Material 3,443 100% 3,443
Off Base 102,181 68% 69,483
Civilian 80,428 73% 58,712 Serv Material 1,830 100% 1,830
BXlNAF Comissary/BX 5,917 100% 5,917
Civil 5,638 73% 4,116 Education 1,345 100o,i) 1,345
Non-Gov Health 5,934 100o,i) 5,934
Civil 703 73% 513
Total $208,173 690Al $142,627 Temp Living 342 100% 342
Local % 90% Other Supply 5,422 100% 5,422
EAST V ALLEY LOSS $128,364 TOTAL SO CAL IMPACT $29,667
Source: Norton AFB and SBCCU Source: Norton Air Force Base
3. Some of Norton's payroll qoes not
reach So Cal stores. The amount
that does is estimated by applying
the percentage of local spending
by each class of workers to their
payroll. So Cal's loss will thus be:
$142,627,000.
The spending percentages in Table
2 ,allow for: saving and payroll
deductions for all workers; BXI
commissary, officer and enlisted
club, and base mess hall privileges
for all military; and on-base
quarters for some military.
4. Of the money East Valley
consumers spend in So Cal, about
90% is spent at home according to
.
3. Norton's So. Cal spending also
includes wholesale supplies for its
ax and commissary, local education
and medical services, temporary
hotel rooms and other supplies.
4. Table 3 estimates the So. Cal impact
from losing Norton's non-BMO
purchases at: $29,667,000. However,
some of this spending is not in the
East Valley. Based upon local
spending patterns and types of
outlets, Table 4 calculates the East
Valley loss at $21,992,000.
Secondary Spending Loss:
$75,178,000 To $112,767,000
The last factor in determining the
impact of Norton's closure on the East
Valley is its impact on local secondary
Table 4. Impact Of Norton's S. Cal
Purchases on East Valley (000).
Category So Cal
Cnstr Labor $1,609
Serv Labor 3,825
Cnstr Material 3,443
Serv Material 1,830
Comissary/BX 5,917
Education 1,345
Health 5,934
Temp Living 342
Other Supply 5,422
E VALLEY LOSS
E Valley
90%
90%
65%
65%
50%
90%
95%
100%
65%
Impact
$1,448
3,443
2,238
1,190
2,959
1,211
5,637
342
3,524
$21,992
spending. This is between $75,178,000
and $112,767,000, estimated as follows:
1. When Norton dollars are spent with
East Valley firms, they are used to
buy supplies and pay workers. "ost
of the money paid for supplies>
leaves the area as the local economy
is not very diversified. However, the
money paid to clerks, lawyers,
mechanics and owners stays and
supports their tier of jobs.
2. The secondary spending impact
occurs when, after saving and
paying taxes, these local people
in turn spend locally. While much of
their money also leaves for supplies,
some of it stays and supports a third
tier of jobs.
This process continues until all of
the primary money Norton brought to
the East Valley has left the area.
As the East Valley is not very diversified,
it is estimated that each $1.00 of Norton
primary spending in the area only
creates from $.50 to $.75 in additional
spending before it leaks away. These
figures are larger than those found in a
1968 study of the East Valley, but much
less than for a diversified area like
Los Angeles.
Table 5. East Valley Secondary
Spending Generation (000).
Primary Spending $150,356 $150,356
Impact 50% 75%
Scndry Spending $ 75,178 $112,767
TOTAL IMPACT $225,534 $263,123
Source: Based upon 1970 doctoral thesis,
John E. Husing.
(Continued on Page 6)
A San Berflardino
.~.cc;Ntral
Y™O'idit Union
Po. Box 735
San Bernardino, CA 92402
....
Address Correction Requested
~
BULK RATE
U.S. POSTAGE
PAID
San Bernardino, CA
Permit No. 448
PHASEOUT IMPACT
(Continued from Page 5)
East Valley Secondary Job Loss:
2,750 to 3,200
As Table 5 shows, the full primary and
secondary spending loss from Norton's
closure will be between $225,534,000
and $263,123,000.
Since, in 1988, it takes about $82,000
in sales to support one worker, this total
decline translates into 2,750 to 3,200
secondary, non-base, East Valley jobs
lost when Norton AFB closes.
These unemployed people would be
added to any base workers not able to
find work somewhere else in the federal
system.
Wanted: 7,630 New Commuters!
In order to avoid these spending and
job losses, the East Valley must add
enough new income from outside the
region to offset the $150,356,000 loss in
primary Norton payroll and contract
spending that is expected to set off this
chain of events.
Assuming a worst case scenario, with
no growth in new primary private
businesses, one way for this to occur is
through an increasing number of
commuters.
As indicated commuter incomes, like
Norton's payroll, bring new primary
money to the East Valley since they are
earned elsewhere but brought home for
spending.
An average commuter brings $19,710 in
new primary spending to the East Valley.
At that rate, it would take:
$150,356,000 I $19,710 = 7,628
new commuters moving into the area
for the economy to exactly offset the
loss of Norton, with no growth or
decline. This assumes the following
about commuters:
---
Table 6. Assumed Commuter Income
And Spending Profile
income. . . . . . . . . . . . . . . . . . . . . $30,000
Spending 0/0................... 73%
Amount Spent. . . . . . . . . . . . . . .$21,900
East Valley %. . . . . . . . . . . . . . . . . .90%
EV PRIMARY SPENDING.... .$19,710
2 Years 9 Months To Replace
Norton's Primary Spending
According to the California Finance
Department, from 1985-1988, 50,352
people moved into the East Valley, or
an average of 16,784 a year. Assuming
3 persons per family this is 5,595 new
families. If 50% have one commuter,
the Valley is yearly adding about
2,797 new pay checks.
At this rate, it would take 2 years 9
months for the East Valley to replace
the lost Norton primary spending.
This result is cause for optimism as it
assumes that none of Norton's current
staff will commute to March AFB. Some
no doubt will as much of the Military
Airlift Command and the Auditor
General are relocating there.
Policy Options
This analysis suggests several policy
options for the East Valley:
1. If Norton is to close, the military
should be held to its pledge to take
no action for one year and phaseout
the base over a period of years. If
this occurs, the area's natural growth
will more than offset the loss.
2. Taking a longer view, work should
begin immediately to set up the
mechanisms for converting the base
runway and capital facilities to joint
use now and full private use later.
It is difficult to convince primary
employers to locate outside of L.A.
and Orange Counties. However, this
facility could be a strong lure to
some firms, particularly in light of
the high cost of land and crowding
at LAX, Ontario and John Wayne
Airports.
3. As the Ballistic Missile Office is
remaining in the East Valley, contacts
should begin to see if similar t
operations, such as those in EI
Segundo, might wish to come to a
less congested area. Such commands
are environmentally safe ~nd would
add educated, high income citizens
to the community.
4. As commuters will playa key role in
the local economy, it is imperative
that efforts be made to improve the
1-10 and 210 corridors to L.A.,
Highway 91 to Orange County, and
1-215 to March Air Force Base. Like
it or not, a SB County transportation
sales tax is now in nearly everyone's
best interest.
5. As the recent rise in interest rates
will soon slow local home building, it
is important that Congressional
action to cut the U.S. deficit be
supported. sa County is about to
suffer for the national interest, it
would be fair if other areas did too.
For More Information...
The Quarterly Economic Report is edited
by John E. Husing, Ph.D. a general
partner in E-CAP, a San Bernardino
based firm specializing in economic and
business analysis. Individuals seeking
more detailed information, or wishing to
join the mailing list for this report,
can contact him through the Credit Union
Marketing Department (714) 881-3355
Ext. 151 or E-CAP (714) 881-5596. .
( .
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SPACE REQUIREMENTS
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Office Space
Mandatory Space
150 x 4000 + 60,000
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Preferred Additional Space
Warehouse: .................................
wcker Storage: ..............................
Total Space Desired (Mandatory Plus Preferred) . . . . . . · · . . ·
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Use existing onbase 900 series buildings as permanent facilities. Retrofit as follows:
Building Current Proposed Total Cost
Number Area (ft2) Use Use Cost/ft2 ('000)
912 83,782 Warehouse Office 55/ft2 4,608
915 83,782 Warehouse Office 55/ft2 4,608
918 90,037 Office Office 15/ft2 1,350
922 83,782 Warehouse Office 55/ft2 4,608 .
925 83,782 Warehouse Office 55/ft2 4,608 .'
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928 83,782 . Warehouse Office 55/ft2 4,608
935 83,782 Warehouse Office 55/ft2 4,608
L: 938 83,782 Warehouse Office 55/ft2 4,608
932 83.782 Warehouse Warehouse 15/ft2 1.257
Total: 760,293 $35,863
Parking: 2,160
Site Preparation: 500
Utilities Fees: 600
TOTAL Estimated Cost: $38,123
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Requires about 75 acres.
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Use existing onbase series 500 buildings for interim use. Assume 5 years with new facilities
constructed offbase.
Building Current Proposed Total Cost
Number Area (ft2) Use Use Cost/ft2 ('000 )
,. , 520 thru 538 606,900 Office Office 10/ft2* 6,069
542 54,000 Warehouse Office 30/ft2 1,620 .'
IJ 545 66.000 Warehouse Warehouse 2.5/ft2 165
Total: 726,000 $7,854
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Site Preparation and Parking 1,080
Utilities Fees 600
TOTAL Estimated Cost: $9,534
Notes: * Includes existing furniture in the buildings.
Cost of purchasing land and buildings not included.
Advantage: No permanent land commitment.