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Economic Outlook 2015Economic Outlook 2015

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� By SAMANTHA MEHLINGER

Senior Writer

With job gains, the falling price of

oil and a stronger U.S. dollar

likely to boost consumer spend-

ing, the outlook for the national, regional

and local economies in 2015 is positive, ac-

cording to economists interviewed by the

Business Journal.

“We’re pretty optimistic about the econ-

omy in 2015. The latest data we have avail-

able shows the economy growing very

strongly,” Mark Vitner, senior economist for

Wells Fargo, said in a phone interview.

“Conditions have improved enough that you

don’t really have to look at the data to tell

that the economy is doing better,” he added.

In 2015, Vitner said the United States is

likely to experience 210,000 job gains per

month on average. While the U.S. may not

see as quick a job gain pace as last year, the

quality of new jobs is going to continue im-

proving, he noted. “Up until recently, a

large proportion of the jobs we have been

adding were part-time jobs. But more re-

cently, a larger portion have been full-time,”

he said. Wells Fargo’s 2015 Economic Out-

look report stated that jobs gained last year

were mostly full-time, and that wages and

salaries grew 4.9 percent.

Steven Cochrane, managing director of

Moody’s Analytics, said wage and salary

growth is going to continue this year. “Where

unemployment rates are really low, average

hourly earnings are beginning to accelerate.

We can see that that dynamic is beginning to

kick in a little bit in terms of the decline in

the unemployment rate, finally generating

some upward pressure on wages,” he said.

Some of the biggest job gains both nation-

ally and locally have been produced by the

health care industry as it expands to keep up

with demands generated by a growing num-

ber of newly insured patients thanks to the

Affordable Care Act, according to Robert

Kleinhenz, chief economist for the Los An-

geles County Economic Development Cor-

poration’s Kyser Center for Economic

Research. The health care industry should

continue adding jobs this year, he said.

In Long Beach, growth in the health care

industry was readily apparent in 2014, as

health care providers like Senior Care Ac-

tion Network (SCAN) and Molina Health-

care took up more office space, both in

existing office buildings and, in Molina’s

case, with a new building in Downtown

Long Beach. Local hospitals Long Beach

Memorial Medical Center and Dignity

Health St. Mary Medical Center are both

entering 2015 with extensive plans for ex-

pansion and modernization. Local real es-

tate agents reached by the Business Journal

observed that medical companies have

driven much of the construction in the of-

fice sector of the local real estate market.

Two new medical office buildings are

nearing completion at Douglas Park, a busi-

ness park in northeast Long Beach built on

former Boeing Company property and now

managed by Sares-Regis. The area contin-

ues to attract new businesses, with new

headquarters for aviation and maritime

companies, plus an automotive trade

school, expected to open this year.

Across the street from Douglas Park,

Mercedes-Benz USA plans to open its West-

ern Region offices sometime in the second

quarter of this year. In addition to adminis-

trative offices, the 1.1 million-square-foot

facility will house a vehicle preparation cen-

ter for cars arriving at the Port of Long

Beach, plus a training center for Mercedes

employees. The sheer size of the 15-year-

leased building, as well as the international

brand name, speak to the quality of tenant

the Douglas Park area is able to attract.

As cargo traffic through the ports of Long

Beach and Los Angeles, and indeed nation-

wide, continues to grow, trade and transporta-

tion jobs are also being added, Kleinhenz

noted. In 2015, imports through the local

twin ports are expected to reach an all-time

high, which “not only speaks to the promise

that we have here locally in that industry, but

also speaks to the continued expansion that’s

taking place in the overall economy,” he said.

Kleinhenz also expected to see job gains in

some professional and business services in-

dustries this year. Locally, those are likely to

be found among the architecture and engi-

neering sectors, which are tied to growth in

the international trade industry, he said. The

leisure and hospitality industries should also

continue to experience job growth as tourism

in L.A. County continues to grow, he added.

A sore spot for jobs in Long Beach this

year comes in the form of The Boeing Com-

pany’s C-17 Globemaster III manufacturing

program closing by the middle of this year.

Economic Outlook 2015Page 3 OVERVIEW

Job Gains, Stronger U.S. Dollar And Cheaper Oil Expected To Boost The Economy In 2015

INSIDE THIS ISSUE3 OVERVIEW

7 HEALTH CARE11 OIL

12 UTILITIES14 TECHNOLOGY16 FINANCIAL SERVICES

18 INTERNATIONAL TRADE23 RETAIL26 REAL ESTATE31 AVIATION/AEROSPACE

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The program employed just under 3,000 peo-

ple, but layoffs already began last year as the

production of the aircraft wound down.

More jobs and better wages translate to

higher consumer confidence and more

spending, Cochrane, Kleinhenz and Vitner all

emphasized. “The improving labor market,

and particularly the rising wages, will accel-

erate consumer spending. And, of course,

consumer spending is a big part of the na-

tional economy,” Cochrane said. According

to Kleinhenz, 70 percent of economic activity

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

One area the three economists expect to

see increased consumer spending in is hous-

ing, both in terms of existing home sales and

in new home construction. “A critical as-

sumption is, if the labor market does accel-

erate the way we think it will, then

conditions will be very strong for housing,”

Cochrane said. There is a pent-up demand

for housing in America, he said, explaining

that last year only one million residential

units were constructed, when there should

have been about 1.7 million constructed to

meet housing needs. “Our guess is this com-

ing year and into 2016, we may see some-

thing upwards of 2 million units constructed

to make up for some of the pent-up demand

out there in the economy,” he explained.

This trend is going to be reflected in L.A.

County, where Kleinhenz expects a 15 per-

cent increase in residential building permits

this year. Last year, the number of permits

only increased by 7 percent, which was a

lower increase than had been forecasted.

An improved housing market means more

jobs and more spending, Cochrane empha-

sized. “Both home sales and home building

have pretty strong multiplier effects in the

economy in terms of the need for materials,

the need for professional services, furniture,

appliances, home repairs – you name it.

Those are all pretty important parts of the

economy. They create jobs and create in-

come a little more broadly,” he explained.

“Construction employment will probably

see some of the largest percentage increases

in employment because it’s coming off of a

relatively low base, and we’re seeing that

single-family residential construction is

beginning to gain momentum,” Vitner said.

Another positive influence on the econ-

omy this year is the falling price of oil. Be-

fore prices began decreasing in July, the

price per barrel of crude oil was $100. Oil

now costs about $45 per barrel. With a more

than 50 percent reduction in price, that puts

quite a bit of money back in consumers’

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

Cochrane said. Kleinhenz said the effect of

lower oil prices would certainly be felt by

Californians and Long Beach residents pay-

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

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

There are, however, some downsides to

the falling price of oil – after all, California

is the third-largest producer of oil in the

United States. “The drop in oil price is likely

to prove painful for a lot of smaller, inde-

pendent oil producers around the United

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

ner said. Kleinhenz pointed out that the City

of Long Beach depends heavily on oil rev-

enue to fund capital projects, and there are

likely to be some budget consequences.

Despite the negative aspects, Kleinhenz be-

lieves the benefits of the decreasing value of

oil are ultimately going to pay off in 2015 and

beyond. “This is not a temporary blip on the

screen . . . The forecasts I have seen suggest

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

even four years before the price of oil gets

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

“We’re looking at a couple of years where

low oil and gasoline prices, here locally in

particular, will be beneficial to consumers.”

Also likely to boost the national economy

this year is the strengthening value of the

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

dollar to the euro continues to shift closer

to being in our favor – while the exchange

rate was about $1.36 for one euro a few

months ago, it is now inching closer to an

even exchange rate.

“The dollar is strong, and it is strong for

good fundamental reasons,” Cochrane said.

“The U.S. economy is doing much better

than the European economy and is acceler-

ating rather than decelerating as in the

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Economic Outlook 2015

Asian economies. On the plus side, it means

that imports will ultimately be a little bit

cheaper. That is another factor to help drive

consumer spending . . . on top of the im-

provement of the disposable income from

lower oil prices. And if wage rates begin to

tick up, all of those factors combine to help

consumer spending,” he explained.

Conversely, strengthening U.S. currency

means American exports are going to be-

come more expensive, which dampens the

chances of growing export volumes this year.

Pointing out that exports account for less

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

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

that is likely to derail the economy.”

The bigger question related to growing

cargo traffic lies in West Coast ports, partic-

ularly the ports of Long Beach and Los An-

geles, which together make up the largest port

complex in the nation. Contract negotiations

between the union of longshore workers re-

sponsible for moving cargo and the group

representing their employers have dragged on

since July and became contentious in the fall.

Although a federal mediator was brought on

to help sort out the contract, words between

the two parties have become more heated in

recent weeks. “The ports are kind of a big

question mark,” Vitner said.

Both ports have experienced massive

amounts of congestion since August, which

has yet to clear up and is only being exacer-

bated by the unresolved labor negotiations.

“It has really caused a lot of disruption on the

West Coast and for companies all over the

country,” Vitner said, explaining that some

cargo owners have diverted their products to

other ports. On January 13, the National Re-

tail Federation’s vice president, Jonathan

Gold, released a statement urging resolution.

“The war of words between the International

Longshore and Warehouse Union and Pacific

Maritime Association on port congestion

continues to concern the supply chain com-

munity. The two sides continue to strain the

shipping community – both importers and

exporters – and threaten the very competi-

tiveness of West Coast ports,” he stated.

Barring total work stoppages at the ports,

the economic outlook remains positive,

with Cochrane, Kleinhenz and Vitner esti-

mating GDP growth between 3 to 3.5 per-

cent this year, up from last year’s estimated

growth of between 2 to 2.5 percent. �

Ec OVERVIEWPage 6

Los Angeles County Business Outlook As Of December 2014 Source: Los Angeles County Economic Development Corporation

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Economic Outlook 2015� By SAMANTHA MEHLINGER

Senior Writer

Local hospitals and health care

providers report that they intend to

continue expanding services, infra-

structure and employment to meet growing

health care needs associated with the cre-

ation of the Affordable Care Act.

According to Covered California, the

state’s insurance marketplace, 1.3 million

people signed up for health insurance

through the marketplace last year, while

“millions of others” enrolled for coverage

through Medi-Cal, a free-to-low cost

health coverage program for low-income

Californians.

Paul Mamoulelis, director of business de-

velopment and an associate administrator at

Lakewood Regional Medical Center, said

Medi-Cal is likely to remain the preferred

source of health care coverage among

newly insured Californians this year.

For local hospitals and health plans, the

rapidly growing number of insured Califor-

nians translated to more patients and mem-

bers in 2014, a trend health care executives

said they expect to continue this year.

“We continue to see more and more

people sign up, both through health care

coverage through Covered California and

through Medi-Cal,” John Molina, chief fi-

nancial officer of Molina Healthcare, told

the Business Journal. Molina’s Long

Beach-based company, which employs

about 10,000 people nationwide, provides

Medicare Advantage plans, enrollment

through Covered California and contracts

with state governments as a Medicaid

health plan. Molina Healthcare also oper-

ates medical clinics. “2014 was a tremen-

dous year for growth,” he said, adding

that, while he is not yet able to share pro-

jections for his company’s membership

growth this year, an increase is expected.

Senior Care Action Network (SCAN)

Health Plan, a Long Beach-based non-

profit provider of health coverage to

Medicare beneficiaries, also grew last

year, according to CEO Chris Wing. “We

ended 2014 with about 177,000 members.

We started the year with about 150,000, so

it was a good year,” Wing said.

Local hospitals reported treating more

insured patients last year than ever before.

“With the expansion of the ACA and

health care reform, we’re finding that

many more patients are now eligible [for

health insurance],” Tamra Kaplan, COO of

Long Beach Memorial Medical Center,

told the Business Journal. “For example,

the number of patients we’re seeing re-

quiring emergency department services

who didn’t have access to a health plan a

year ago was about 12 percent. Now we

have less than 5 percent. To us that is a

wonderful change. That means more peo-

ple are now accessing health care when

they need it,” she said.

While Long Beach health care execu-

tives reached by the Business Journal

agreed that having more insured patients

is a positive change, they emphasized that

coping with the influx of those patients

into the health care system has proved

challenging, and will continue to do so for

the next few years.

“Hospitals across the country are deal-

ing with the challenges caused by the

ACA and health reform,” Joel Yuhas,

newly appointed president and CEO of

Dignity Health St. Mary Medical Center,

observed. “There is decreased reimburse-

ment from federal and state payers, and

hospitals are all trying to position them-

selves, their cost structures and their

physician alignment activities to succeed

in that environment,” he explained.

Mamoulelis noted that deductible and

copay costs are rising, which may dis-

suade some patients from seeking care.

HEALTH CAREPage 7

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

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Economic Outlook 2015Kaplan and Mamoulelis emphasized

that many health care organizations are

undergoing mergers, acquiring other com-

panies and organizations, or are forming

partnerships and joint ventures in an effort

to meet growing demand for services

while remaining competitive. These activ-

ities should “continue to alter the land-

scape in 2015,” Mamoulelis said.

One example of such a partnership is

Anthem Blue Cross Vivity, an integrated

health care network formed between An-

them Blue Cross, Cedars-Sinai, Good

Samaritan Hospital, Huntington Memorial

Hospital, MemorialCare Health System,

PIH Health, Torrance Memorial Medical

Center and UCLA Health. Serving Los

Angeles and Orange counties, the system

markets itself as the first collaboration of

its kind in the nation, in which all parties

involved “share financial risk and gain.”

Vivity was formed in September 2014,

with coverage for large group employers

starting on the first of this year.

Hospitals and health plans have also had

to expand and diversify their own services

and hire more employees in order to ac-

commodate growing demand for health

care – and that should continue this year,

local health care professionals reported.

“SCAN is expanding, Molina is expand-

ing, Memorial is expanding; everybody is

expanding,” Molina said.

Molina Healthcare’s newest program is

a health plan for people who are eligible

for both Medicare and Medi-Cal. “It is

one of the first of its kind in the country,

and that will help those patients out

tremendously,” Molina said. He explained

that patients who qualify for both

Medicare and Medi-Cal are typically in

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

trying to coordinate all their benefits

within one organization and enhance the

potential of markedly improving the qual-

ity of care given and the quality of life that

people can enjoy, and at the same time

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

tential, and right now in Los Angeles

County we have got somewhere in the

neighborhood of 15,000 to 20,000 of these

[patients] enrolled,” he said.

As Molina Healthcare grows, the com-

pany will continue hiring more employ-

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

whom are contracted, work for Molina in

Long Beach. “We are going to continue to

hire to support the growth that we have in

our existing markets. As Long Beach is

our headquarters both for our corporate

parent and for our California health plan,

as the health plan in California grows, we

will be adding staff,” Molina said. The

company continues to grow outside of

California as well, and is expanding to

Puerto Rico this year, he added.

MemorialCare Health System, of which

Long Beach Memorial Medical Center,

Community Hospital Long Beach and

Miller Children’s & Women’s Hospital are

a part, is going to continue expanding this

year both at the hospitals and through new

outpatient centers, according to Kaplan.

“MemorialCare has invested significantly

over the last four years to expand our

reach beyond the acute care hospital set-

ting,” she said.

The MemorialCare Medical Founda-

tion, the physician group division of the

health system, is acquiring and opening

ambulatory (outpatient) and imaging cen-

ters throughout Los Angeles and Orange

County, Kaplan noted. Last year, the foun-

dation acquired nine imaging centers

throughout both counties, two of which

are in Long Beach.

Because the health care industry is

shifting towards more of a focus on main-

taining population health and well-being

rather than simply treating patients when

they get sick, MemorialCare is expanding

its reach deeper into communities, Kaplan

explained. One new ambulatory center is

set to open in March of this year in Dou-

glas Park. The center is in partnership

with Long Beach Gastroenterology and is

part of a medical complex of two new

buildings.

A major capital investment for Memor-

ial’s Long Beach operations this year is

coming in the form of a pediatric medical

village, a campus of offices housing spe-

cialty pediatric care services in a single

location, Kaplan said. By creating the

campus, Memorial hopes to make access

to care more accessible and efficient for

“families who have children with very

complex medical needs,” she explained.

The project, slated to break ground on the

Long Beach Memorial Medical

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

pital campus later this year, is funded by

California Proposition 3 and “strong phil-

anthropic support,” she noted.

St. Mary Medical Center is embarking

on a large capital improvement project of

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

lion investment across the campus dedi-

cated to ensuring a warm and

patient-centered experience for those who

come to St. Mary for their care,” Yuhas

said. “This is a full campus renovation fo-

cused on the touch points where people

access services at St. Mary. It’s everything

from accessing the hospital, to patient

Ec Page 8 HEALTH CARE

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

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Economic Outlook 2015beds, to floors within the hospital – a full

refresh of the hospital,” he explained. The

project is funded by the St. Mary Medical

Center Foundation and Dignity Health.

In addition to the overall facelift of the

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

an investment of a new cardiac catheter

lab” to be installed by the middle of the

year, Yuhas said. The hospital is also in-

vesting in a wide-bore magnetic reso-

nance imaging (MRI) machine, which is

built with more room inside than typical

MRIs. “That will be a nicer experience for

patients who find the MRI experience

somewhat claustrophobic,” he said.

St. Mary is continuing work it began

last year on expanding its emergency de-

partment. The expansion will add more

beds to the department, which has experi-

enced steadily increasing patient visits for

several years, Yuhas said.

Like Memorial, St. Mary is also ex-

panding ambulatory services this year,

Yuhas noted. “We have invested a consid-

erable amount of energy this past year and

this year [2014 and 2015] in expanding

our ambulatory services strategy to outly-

ing communities outside of the traditional

service area that St. Mary has focused

on,” he said.

Other Challenges AheadApart from the changing nature of the

health care industry caused by the ACA,

health care providers are also contending

with rising costs caused by pharmaceuti-

cal companies. Both Molina and Wing

cited the cost and availability of new

drugs as one of the biggest challenges

ahead in 2015.

The standout examples of this challenge

are drugs called Sovaldi and Harvoni,

both manufactured by pharmaceutical

company Gilead. The drugs cure Hepatitis

C, but only for those who have access to

health care coverage who can accommo-

date a whopping $1,000 per pill. To com-

plete the 90-pill course, the final price tag

for a clean bill of health comes to

$90,000. “As we see more and more drugs

like Sovaldi come out that have no price

competition, it has a chance to increase

health care costs at a time when Obama

Care and the competition in the insurance

market is really pushing costs the other

way,” Molina said.

Widely used drugs are also increasing

in cost, Wing noted. “A vial of insulin and

pens to administer insulin in 2014 went up

[in cost] like 42 percent,” he said. “So you

have [reimbursement] rates going down,

compliance stiffening and you’ve got

pharmacy costs from these specialty phar-

maceutical companies just going through

the roof,” he continued.

Another question mark looming for

the American health care industry is its

ability to meet an incoming surge in de-

mand as the baby boomer population en-

ters old age. “The wave of seniors

started last year, but we haven’t seen the

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

know that we actually have the capacity

to meet that demand,” she added, ex-

plaining that there is currently a shortage

of primary care physicians both in Cali-

fornia and nationally.

Memorial is working to supplement that

shortage through partnerships with other

regional health care providers such as the

Children’s Clinic, which provides care to

adult and pediatric patients in underserved

areas. The health system is also bolstering

its access to nurse practitioners, pharma-

cists and other health care professionals

who are licensed to provide some primary

care services in order to help close the pri-

mary care physician gap, she said. �

HEALTH CAREPage 9

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Economic Outlook 2015� By MICHAEL GOUGIS

Contributing Writer

Dramatic increases in oil production

in North America have resulted in a

shock to the global petroleum dis-

tribution system and lower prices at the

gasoline pump. But the increased supply

has also had impacts that are rippling

through the economic, governance and reg-

ulatory systems far and wide, including on

the budget and activities of the City of

Long Beach.

“The biggest economic factor impacting

the oil industry in California and globally

is the current downward trend in oil

prices,” Catherine Reheis-Boyd, president

of the Western States Petroleum Associa-

tion, told the Business Journal. “The de-

cline in oil prices is good news for

consumers and not-so-good news for the

petroleum industry. It is typically more ex-

pensive to produce oil in the U.S. than it is

to produce it in parts of the Middle East.

Depressed oil prices could eventually result

in a decline in domestic production both in

California and nationally.”

The uncertainty surrounding the near-

term future of the industry is not surprising.

Simply put, the stuff that the industry sells

is worth half what it was worth a year ago,

and “most market participants do not pre-

dict substantial increases in the next few

years,” John Gross, director of financial

management for the City of Long Beach,

wrote recently to city elected officials and

administrators.

Since July of 2014, the price of Wilming-

ton crude has dropped from around $100 a

barrel to under $50 a barrel, due to increased

supply. In the past four years, well stimula-

tion techniques and technological advances

in extracting oil from low-permeability un-

derground formations have dramatically in-

creased the amount of crude oil produced in

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

oil producing regions, such as the Middle

East and Russia, are maintaining production

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

hibited by federal law from exporting crude.

This has created a market where, in Cal-

ifornia, the average price of regular gasoline

at the pump dropped to $2.76 per gallon in

January 2015, according to the U.S. Energy

Information Administration, a non-profit

organization that tracks and analyzes the

global energy industry.

The downward trend appears to be at its

nadir, according to the agency’s projections.

The average price of regular gasoline at the

pump is expected to rise slowly in 2015,

peaking at slightly over $3.01 per gallon in

September, before dropping back into the

$2.76 range in December.

While this is excellent news for the con-

sumer, the drop in oil prices has caused the

oil industry, particularly on the West Coast,

to re-evaluate its operations.

“The price of Wilmington crude has de-

clined over the past several months. We are

currently running planning scenarios at dif-

ferent oil prices and are in the process of

preparing our 2015 development plans to

reflect market conditions,” said Frank

Komin, executive vice president, Southern

Operations, of California Resources Corpo-

ration, a newly created company spun off

from Occidental Petroleum.

“Our company’s level of employment has

not decreased due to the recent commodity

price decline,” Komin noted. “As you might

expect in a spinoff, some employees from

Oxy operations around the world joined

California Resources Corporation during

2014, while some personnel decided to re-

locate to Oxy operations. Our contractor

work force fluctuates with activity levels,

and we are in the process of developing our

2015 development plans.”

In addition to plummeting crude prices,

the regulatory outlook will also have an im-

pact on the refining and production indus-

try. As SB4 regulations continue to be

implemented, the industry will have to com-

ply with state (and potentially local) restric-

tions on hydraulic fracturing as a well

stimulation technique, the expansion of the

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

tion program, and programs with similar

environmental protection goals under con-

sideration in Oregon and Washington.

“In short, fuel producers and refiners can

expect to face a number of serious chal-

lenges in 2015,” Reheis-Boyd said.

Reducing greenhouse emissions and

more efficient operations are on the agenda

for Tesoro’s refining fa-

cilities in Carson and

Wilmington, said Ken-

neth Dami, director of

public & government af-

fairs for the Los Angeles

Refinery.

“In August 2014, we

submitted permit appli-

cations for an integra-

tion project that will

physically link the Car-

son and Wilmington op-

erations,” Dami told the Business Journal.

“We’re continuing to move through the en-

gineering design, permitting and approval

processes associated with that project.

“Combining our two refineries provides

meaningful benefits to California’s con-

sumers, environment and economy,” Dami

explained. “The project will reduce the re-

finery’s emissions of greenhouse gases and

criteria pollutants, help us to comply with

the federally mandated Tier 3 gasoline spec-

ifications effective in 2017, and allow us

greater product yield flexibility to respond

to shifts in consumer demand.

“Tesoro’s investment in this project will

help keep high-paying jobs in California,

generate local construction jobs and cre-

ate needed revenue for our local commu-

nities.” Dami said.

Because Long Beach receives income

from oil production, the drop in oil prices

has had a direct impact on operations at city

hall. Generally, operations along the

beaches and in the coastal areas are directly

funded by oil revenues, and oil production

provides a source of revenue for the city’s

general fund as well. Even with a very con-

servative approach to budgeting for oil rev-

enues, the plunging crude prices have

caught the city off guard. Last year, with

crude selling for more than $100 per barrel,

the city’s general fund budget figures were

based on an estimate of $70 per barrel. But

even that has turned out to be optimistic.

“The low price of oil has greatly re-

duced the oil revenue that the city can rely

on receiving,” Gross said in his analysis

of the Tidelands Capital Budget and 5-

Year Capital Plan.

“In addition, the unsettled oil markets

make predictions of specific levels of oil

revenue for the future to be very question-

able. It is not clear that any new oil revenues

will be available for Tidelands capital proj-

ects in the next few years.

“The capital and operating budgets are

impacted by the price of oil and the oil mar-

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

tainty, it is essential to provide a baseline

revenue projection for purposes of develop-

ing the revised strategy for the Capital

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

portant to consider that the projection is

based on the current market, and, at some

point, it is certain that the current market

conditions will change.” �

OILPage 11

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

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:24 PM Page 11

Economic Outlook 2015� By MICHAEL GOUGIS

Contributing Writer

Prices for utility services are likely

to move higher and lower, depend-

ing on the commodity and its avail-

ability during the next few months, but

there are no immediate indications of se-

vere shortages of water, oil or gas in the

short term, experts said.

WaterWater officials are looking at the skies

and hoping for more rain, but the state has

seen some recovery in water storage levels

from the desperately dry 2014, said Kevin

Wattier, general manager of the Long

Beach Water Department.

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

to know what will happen,” Wattier told the

Business Journal. “The Metropolitan Water

District, where we get 40 percent of our

water, modified their shortage plan under

the assumption that they might implement

it early in 2015. But, based on the good

weather that we’re having (“good weather”

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

plement it until February or March. That’s

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

Wattier said the city has already tight-

ened its belt in terms of consumption and

is taking steps to recharge its own water

storage aquifers.

“We went to the next step (of water use

reduction regulations), anticipating some

action from the MWD next year,” he said.

“We went to our second step through

March. It reduces the number of watering

days from three days to two days. That’s

way more than you need. You don’t need

to be irrigating your lawn more than two

days a week.”

The state’s reservoirs are refilling, but

they have a long way to go before water

officials will be able to breathe comfort-

ably, Wattier said.

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

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

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

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

20 percent lower than it was a year ago. So

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

“MWD has also updated its overall stor-

age portfolio. They’ve confirmed what

many of us suspected for some time – they

did use half of their stored water in calen-

dar year 2014. We’re going into 2015 with

some pretty low levels in our overall stor-

age in California.”

The city water department is continuing

with its five-year plan to balance its

budget by raising rates four percent each

year, so customers can expect three more

years of increases, Wattier said. Similarly,

the sewer division is likely to seek a rate

increase in October to cover the cost of

long-term debt associated with infrastruc-

ture upgrades, he said.

“Basically, we took out a line of credit

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

was in response to some additional regu-

lations on sewer overflows. We greatly in-

creased our sewer rehabilitation, our

sewer inspection, our sewer capital pro-

gram starting about 2008. To finance that,

we initially did it with a line of credit,

rather than have a big rate increase.

“We’re paying only interest on that. Now

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

is going to expire next year. We need to

convert that to a long-term debt issuance

and pay back the principal and interest.

We’ll now be paying back the principal,

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

main driver on that,” Wattier said.

To allow the city’s basins to refill, water

officials are now supplying mostly MWD-

provided water to its customers, Wattier

said. To help provide flexibility in supply,

the department is looking at building a new

well on the city’s westside, which will tap

into a different underground aquifer.

“We also are a party to the West Coast

basin, and we have some water rights there,”

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

well on the westside, just west of 710 Free-

way. That northwest part of Long Beach –

we can’t get groundwater to that area right

now. We can only get MWD water there.

Adding this well will help with reliability

and some additional operational flexibility.”

Natural GasNatural gas prices are expected to remain

at extremely low levels and, combined with

conservation and efficiency measures, gas

bills are at record lows and are expected to

stay there for the near term, Chris Garner,

director, Long Beach Gas & Oil Depart-

ment, told the Business Journal.

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

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

dents are benefiting from that, not only

from low commodity price, which makes

Ec UTILITIESPage 12

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:24 PM Page 12

Economic Outlook 2015up a large chunk of their gas bill, but . . .

consumption among residents, per capita, is

at its lowest ever. In Long Beach alone, the

volume of gas sold to residential customers

is at its lowest in 50 years. Through conser-

vation and efficiency, it’s really brought

consumption down.

“So customers are benefiting from actu-

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

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

tual bill, are probably at their lowest in

decades. It’s just amazing. I think people

have learned to live with less.”

In terms of infrastructure, the department

is set to move ahead with modernized meter

reading, Garner says.

“We got approval from city council to

begin the transition to automated meter

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

going to start with about 1,000 meters in

Long Beach and Signal Hill to make sure

that everything is operating as it should,”

Garner said.

“Once we get the warm fuzzies on that,

we’ll move forward and replace all 150,000

meters in Long Beach and Signal Hill.”

ElectricityOn the electricity front, Southern Califor-

nia Edison is balancing the demands for re-

turn on investment with its desire to invest

in the infrastructure needed to provide a

power grid that meets the demands of the

next decade and beyond.

Expanding solar and wind capacities and

meeting an increasing demand for electric-

ity for vehicle use will require large-scale

infrastructure upgrades, and doing that has

cut into the utility’s dividends, even though

the most recent financial data shows an up-

turn in Edison dividends.

“We now anticipate 2014 core earnings

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

share,” Ted Craver, chairman and CEO of

Edison International, said in his latest com-

ments to investors about the short-term out-

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

cents per share over the midpoint of guidance

we provided last February. We continue to de-

liver solid growth and returns from investing

in needed infrastructure to support public

safety and reliability as well as California’s

public policy objectives of creating a low car-

bon economy and technological innovation.”

Edison made significant strides in resolv-

ing the financial impact of closing the San

Onofre Nuclear Generating Station, with the

California Public Utilities Commission ap-

proving a $3.3 billion settlement. In addition,

the utility finalized the settlement related to

the bankruptcy of Edison Mission Energy.

In the near term, Edison plans to pursue

a strategy of intensive infrastructure invest-

ment, which it said will result in better serv-

ice to customers, and at the same time allow

the utility to create a reliable base of divi-

dends for the future, Craver said.

“Preventive maintenance and investment

in the grid maximizes customer reliability

and public safety,” Craver said. “The high

level of investment we have made over the

last several years in electric infrastructure .

. . has caused our dividend to fall below the

industry averages for yield and earnings

payout ratio.

“To repeat what I have said before, we are

committed to bringing our dividend back

into our targeted payout ratio of 45-55 per-

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

understand that redressing this imbalance is

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

UTILITIESPage 13

Advanced Water Treatment Facility ExpansionThe Leo J. Vander Lans Advanced Water Treatment Facility expansion wascompleted in December and is scheduled to be fully operational in the nextmonth or two. The facility, located at 7380 E. Willow St., is owned by theWater Replenishment District Southern California (WRD) and operated forthe District by the Long Beach Water Department (LBWD). The developmentaccommodates Long Beach’s determination for locally sustainable ground-water. Up until 2003, Long Beach used imported water purchased fromthe Metropolitan Water District of Southern California for the seawater bar-rier. Kevin Wattier, right, general manager of the LBWD, explained, “In2003, the first phase of this plant came about. It takes waste water from

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

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

Economic Outlook 2015� By DAVE WIELENGA

Staff Writer

While technology ranges across all

industries, the Business Journal

is focusing on three entities im-

pacting Long Beach: the mayor and his em-

phasis on technology for local government

and the city; and two firms, Epson America

and Laserfiche, which call Long Beach

home and whose products are used globally.

Technology & Innovation CommissionThe Technology & Innovation Commis-

sion – a human advisory app just innovated

by Mayor Robert Garcia, who says it will

help “create the government of the future”

– became official on January 6, when the

Long Beach City Council unanimously

confirmed the seven commission nominees.

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

Garcia said during his State of the City ad-

dress on January 13, still pretty geeked, him-

self, a week after the council voted. “This

commission will be charged with generating

ideas and policies that will continue to make

Long Beach a national leader in the use of

technology and accountable government.”

Establishing a technology and innovation

commission was on Garcia’s wish list when

he was a councilmember and was one of the

promises he made during his campaign for

mayor. Its creation is the most substantive

move among a variety of small tweaks in-

tended to create momentum for the use of

technology to improve the city and its serv-

ices, such as changing the name of the Long

Beach Technology Department to the Long

Beach Technology and Innovation Depart-

ment. But Garcia used his State of the City

address to announce some new moves.

“One of the ways we’ll [use technology

and innovation to improve the city] this

year is to launch a brand new city website,

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

we’ll also launch an open data initiative,

and put as much city information online as

possible to engage the expertise of the pri-

vate sector and the public on issues from

health care to trade to environmental sus-

tainability. This is the wave of the future,

and Long Beach is taking the lead.”

New Products From EpsonLong Beach-based Epson America Inc.

brought in the new year in Las Vegas by re-

leasing a flurry of new devices, as well as

new product line, into the vast Consumer

Electronics Show (CES) – essentially, an an-

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

of Comic-Con for 160,000 gadget geeks.

Debuts by the company ranged from the

PowerLite® Home Cinema 600 projector,

which comes from a home entertainment

category that is one of the company’s tradi-

tional strengths, to the introduction of the

Epson Active category, an umbrella for the

company’s first venture into the burgeoning

market of sports wearables. Epson also

showcased new consumer and enterprise

apps on its Moverio™ BT-200 smart glasses.

The good news: people noticed.

Actually, that might qualify as great

news at CES, where science and circus mix

in often-wondrous ways. This year the

competition for attention included an app

that reports how many beers are left in the

fridge; a cervical ring that detects when a

woman is at the peak of fertility and sends

alerts via smartphone; fabrics that change

color depending on lighting, sound and

temperature; a belt that adjusts itself as you

eat; a hat that helps your hair grow; a chair

that makes breathing easier; and a

boomeranging flying camera bracelet that

launches from your wrist, takes a photo or

video of you, then returns.

Epson got in on a little of that action,

showcasing uses for its Moverio™ smart

glasses that go far beyond games. Combined

with a variety of education and training ap-

plications from other developers, Moverio™

glasses suggests new ways to learn and re-

tain information, as well as provide workers

with greater efficiency and safety.

Initial offerings from “Epson Active” in-

clude the Pulsense TM continuous heart

rate activity monitors, Runsense TM GPS

sports and running monitors, and the M-

Tracer, which analyzes golf swings.

But the Home Cinema 600™ attracted the

most attention among Epson’s showcases in

Las Vegas. Reviewers praised the quality

and variety of the projector’s big-screen en-

tertainment, from movies to video games,

whether indoors or outdoors, making fre-

quent mention of the brightness of colors

and the crispness of images. They were in-

variably at least as effusive when the pro-

jectors arrived at the bottom line – a

suggested price of $379.

That reception was a nice follow up to the

Tech Innovator Award that Epson received

from the technology news source CRN in

Ec TECHNOLOGYPage 14

Runsense GPSSports Watchby Epson“The lightweight,water resistantRunsense sportsmonitor featureshighly accurateGPS tracking tohelp you meas-ure your distanceand pace.”

Epson photograph

PowerLite Home Cinema 600 3LCD Projector by Epson“Delivering up to 3x Brighter Colors than competitive models.”

Epson photograph

MoverioTM BT-200 Smart Glasses(Developer Version Only) by Epson“Get ready for the next generation of augmentedreality platforms. These binocular, transparentsmart glasses open up a whole new world in en-tertainment, manufacturing, medical science andmore. Each lens has its own display, right in yourfield of vision, projected into your surroundings.

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

Economic Outlook 2015November for the newest version of its

BrightLink® Pro. CRN said the BrightLink®

Pro 1430Wi Collaborative Whiteboarding

Solution with Touch “turns any flat surface

to an interactive digital whiteboard that can

be used and shared by as many as 15 partic-

ipants via browser, mobile device app or

from any other BrightLink® Pro.” It made

note of the machine’s simplicity and adapt-

ability, which enables easy sharing of notes

and drawings via e-mail, saved files or

printed page and also can be used as a video-

conferencing display with split-screen capa-

bilities for viewing two sources side by side.

Keith Kratzberg, Epson’s senior vice

president of sales and marketing, sounded

pleased with the company’s energetic start,

but, when asked to assess the company’s

prospects for the year ahead, what hap-

pened in Vegas stayed in Vegas – or at

least, out of his forecast.

“Epson expects steady growth to con-

tinue across its consumer and business so-

lutions in 2015, with an expanded focus on

business products and innovations for ro-

botics, commercial projection, point-of-sale

solutions, industrial applications and office

printing,” Kratzberg responded.

Notwithstanding the company’s interest

in what’s happening across the technologi-

cal spectrum, Kratzberg indicated Epson

would continue with an approach to product

development that builds upon expertise

which has already led to success.

“Epson focuses its innovation across

markets that leverage Epson technology

strengths – printing, projection and sens-

ing – and develops solutions to meet cus-

tomer needs based on these strengths,”

Kratzberg explained.

As an example, Kratzberg referred to

Epson’s advances in inkjet printing technol-

ogy, which in 2014 were manifested in Pre-

cisionCore®.

“At the core of this proprietary technol-

ogy is the PrecisionCore MicroTFP print

chip that produces dots at the micron level,”

Kratzberg said. “Each nozzle on the print

head delivers up to 50,000 droplets per sec-

ond for increased precision and print qual-

ity. Printing solutions leveraging this

technology for the SMB and industrial ap-

plications will be seen in 2015.”

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

CEO Chris Wacker said this looks like a

good year for Laserfiche, the Long Beach-

based company that devises and distributes

enterprise content management software

worldwide. Wacker said it like someone

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

tended to repeat that “good year” thing at

least once a year, generally at this time of

year, for almost a quarter-century.

“We’ve been profitable for the past 22

years in a row,” Wacker acknowledged in a

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

less managed to convey pride and humility.

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

will be continuing the growth we’ve experi-

enced over the past 10 to 12 years.”

Why?

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

omy is picking up, and our approach is very

disciplined.”

Speaking of discipline, Wacker chose not

to translate into numbers such terms as a

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

Laserfiche is a privately held company, so he

doesn’t have to, although Wacker declined

the request gently and almost apologetically.

“This industry is very competitive,” he

explained, “and we are in the crosshairs of

a lot of companies.”

It only takes a few minutes around Laser-

fiche – whether on the website or on the

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

usual company, one that pioneers the outer

limits of information technology, yet re-

mains firmly rooted to business values and

practices so traditional that some might dis-

miss them as obsolete.

Among those values is self-reliance,

which in the case of Laserfiche means de-

veloping and expanding its software prod-

ucts through its own innovation, rather than

by the acquisition of other companies.

“Nien-Ling kind of established our cul-

ture many, many years ago,” said Wacker,

speaking of his late wife, and Laserfiche’s

founder, whose death last autumn after a

long illness prompted his ascent to CEO

from executive vice president and the pro-

motion of Karl Chan to company president.

“Nien-Ling believed that money was a re-

ward for doing things well, rather than an

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

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

Wacker boiled that down to two fac-

tors, too.

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

of the people in our development and engi-

neering departments,” he said, “and our team

is just hell bent on customer satisfaction.”

Laserfiche employs about 350 people –

approximately 250 of them at the com-

pany’s headquarters on Long Beach Boule-

vard. Although its vendors and its

technology are all over the world, Laser-

fiche considers Long Beach its home.

“We have to have a headquarters, a place

where people meet, talk and exchange

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

offices and people working remotely, but the

majority of folks are right here in Long

Beach. They come here every day and work

efficiently – more so than if they were to

work remotely, when there would be long

lags between conferences and conversations.

All that said, especially the part about

Laserfiche’s 22-year streak of profitability, it

probably ought to be noted that the company

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

Laserfiche hasn’t finished in the black every

year. What was going on way back then?

Wacker isn’t offended by the question.

“We got caught up in the dot-com phase

and the venture capital chasing of the late

1980s and very early 1990s. We thought if

we raised capital we could accelerate our

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

tracted us from our mission. We lost focus.

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

that aside and developed the single-minded

focus on doing things well, we became prof-

itable and have remained so ever since.” �

TECHNOLOGYPage 15

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

Economic Outlook 2015� By RABIYA HICKEN

Staff Writer

With the U.S. economy projected

to grow by 3.3 percent this year,

many industry leaders said they

are cautiously optimistic about 2015. The

Economic Advisory Committee of the

American Bankers Association, which

met on Friday, January 16, expects 2015

to bring low unemployment rates, market

strength in many industries and steady in-

terest rates which may rise slightly in the

latter part of 2015.

On the investment side, financial advi-

sors are encouraging people to reexamine

their portfolios and become more knowl-

edgeable about the types of risks they may

be facing. Businesses are expected to fair

better on taxation issues now that a Re-

publican-controlled congress is in office.

And a slight up tick is expected in work-

ers’ compensation costs during 2015.

BankingRodney Brown, president and chief ex-

ecutive officer of the California Bankers

Association, said that any movement by

the Fed to increase interest rates is depend-

ent on several variables, including the

world economy, the current political envi-

ronment and the U.S. economy.

“There’s just tremendous uncertainty

that all the variables will allow the Fed to

start raising rates but, given the fact that it

has gone on so long . . . you can imagine

there is a higher probability of some in-

crease in rates this year than there was in

the preceding three,” Brown said.

Michael Miller, president and chief ex-

ecutive officer of Long Beach-based Inter-

national City Bank, said that, though the

economy is showing signs of improve-

ment, it has not improved enough to sup-

port an increase in the interest rate during

the first half of 2015.

“I think [interest rates] may start to go up

in the second half of the year,” Miller said.

“But unless there are some changes to eco-

nomic factors, such as the housing market

and the construction industry, that change

dramatically for the positive, I don’t see it

going up all that much.”

Ben Alvarado, Southern California re-

gional president at Wells Fargo, said he

thinks an increase in interest rates, al-

though expected to be slight and gradual,

might discourage potential investors.

“Businesses remain cautious in an envi-

ronment of historically slow top-line

[gross] economic growth,” Alvarado said.

“On the flip side, rising interest rates may

offer upside risk to our outlook as busi-

nesses rush to take advantage of current

borrowing rates.”

W. Henry Walker, president of Farmers

& Merchants Bank, said low interest rates

and rising costs also pose a challenge for

banks as they try to expand their net inter-

est margins.

“Like all businesses in the U.S., our

costs have risen substantially,” Walker

said. “Both employment and the cost of

employees has risen. All industries, bank-

ing and otherwise, are looking to manage

those costs effectively.”

Walker said he hopes a small increase

in interest rates, which he does not see ris-

ing beyond 50 basis points – half a percent

– in 2015, may translate into better earn-

ings for banks in the coming year.

Adding to those costs, Brown said, is the

continued subjection of banks and retailers

to large data breaches and cyber attacks.

“More and more energy, effort and in-

vestment is being put into building the de-

fenses that are required to protect the banks’

business activities, customer information

and transactions,” Brown said.

Brown added that many in the banking

industry hope to see retailers make similar

investments to strengthen their defenses in

the coming year.

“The fraudulent activity that has been

able to penetrate [retailers’] systems and

then spill all over banking customers . . . is

very troublesome,” he said. “Banks are well

ahead of most industries and . . . we very

much want the retail industry to come along

and not have these data losses that are just

very adversely impactful.”

Yet another challenge hindering the

smooth operation of banks, according to

Brown, is complying with regulatory poli-

cies, such as those encompassed by the

Dodd-Frank Act, which can often be over-

whelming.

“Regulatory costs and compliancy costs

are really impacting the banks’ ability to

meet regulatory compliance expecta-

tions,” he said. “Those rules are really

constraining the banks’ ability to make in-

vestments in people and other things that

are revenue producing and better serve the

customer.”

Walker said that over-regulation not

only affects banks; it also affects the econ-

omy and the ability of businesses and con-

sumers to access credit. “Dodd-Frank is

an example of where regulation has been

thrust upon the entire banking sector when

it really should have focused on the largest

of banks.”

Alvarado said that, although the Dodd-

Frank Act is not perfect, it has helped to

strengthen the U.S. financial system as well

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

troduction of the Dodd-Frank Act, Wells

Fargo has strengthened its balance sheet and

financial position by improving its credit

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

revised the amount of cash and liquid assets

it keeps on hand.

“We are advocates of strong regulation of

the industry and believe Dodd-Frank . . .

takes important steps toward preventing an-

other financial crisis,” he said.

Moving forward, Brown said, he hopes

that the new congress can make adjust-

ments that bring balance to the Dodd-

Frank Act.

“Think of the pendulum analogy, if it was

too far to the left in the pendulum, it has

swung way past the center and I think all

government and businesses would like to

see that come back to some kind of equilib-

rium to create a better business environ-

ment,” he said.

Ec FINANCIAL SERVICESPage 16

Landmark Bank Building – F&M On Pine AvenueThe historical headquarters of the Farmers & Merchants Bank, located at 302 Pine Ave., is a standout on themap of Long Beach. Constructed in 1923, more than 15 years after Charles J. Walker founded the bank in1907, the facility still retains many of its vintage features, including the metal teller windows. The marble-cladinterior of the building also features a dozen ornate brass chandeliers and a massive skylight made up of hun-dreds of kokomo glass pieces. According to the Long Beach Historical Society, the building was designed by no-table Los Angeles architects Aleck Curlett and Claud Beelman, who also designed the Cooper Arms Apartmentsbuilding, at 455 E. Ocean Blvd., and the Security Bank Building, at 110 N. Pine Ave., in Long Beach. In 2007,the building’s interior was renovated and restored to its original luster with the help of Dave Butkus, owner of aprofessional restoration and finishing company, The Ultimate Finish. (Photographs provided by F&M Bank)

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:24 PM Page 16

Economic Outlook 2015Investments/Stocks

As the economy starts to trend up, and

a possible increase in interest rates looms,

investors are urged to look through their

portfolios and assess what kinds of invest-

ment risks they are taking on in 2015, said

Ryan Gordon, financial advisor at The

Petrie Group of Wells Fargo Advisors in

Long Beach.

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

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

aware of the risks that you are taking so

that, if there is volatility in the market or

ups and downs, you are not surprised at how

your portfolio reacts to that,” Gordon said.

Gordon said that he anticipated seeing

more volatility in the market this year com-

pared to previous years, largely due to fac-

tors such the European and Asian markets,

as well as lower oil prices.

In addition, Gordon also urged that peo-

ple revisit their 401K or similar retirement

plans, which recently received a $500 em-

ployee contribution cap boost. An addi-

tional “catch-up contribution” for those 50

or older also received a $500 cap boost.

“Those increases . . . are another reason

for the average person to look at their

portfolios, and see how much they are

saving and making sure they are putting

away as much money as they can toward

retirement.”

He added that, with the Federal Reserve

expected to raise interest rates, he advised

individuals to avoid taking on too much in-

terest risk. Instead, Gordon suggested that

investors consider adding cyclical stocks

[stock in companies that sell discretionary

products] to their portfolio, which tend to

fare better in a growing economy.

“Cyclical stocks typically go through the

same cycle that the economic cycle goes

through, so we tend to slightly favor cycli-

cal stocks right now,” he said.

Nathan Lee, resident director of Merrill

Lynch in Long Beach, said that, in addition

to cyclical stocks, such as those in the tech-

nology and industrial sectors, he would also

recommend pharmaceutical companies and

parts of the healthcare sectors, which “offer

some attractive opportunities.”

Although many individuals are still skep-

tical of the economy’s recovery and are hes-

itant to invest, Lee noted that many others

are slowly starting to regain some confi-

dence in the market.

“Our recommendation would be that as

long as you are consulting with a financial

advisor and are getting some guidance, that

is good . . . most people are more positive

about investing than they have been in many

years,” he said.

Lee added that one change in investment

attitudes he has noticed is that more and

more investors are employing values-based

investment strategies.

“People are more aware of what’s going

on in the world and they want to make de-

cisions with their investments that are in

alignment with what they think and what

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

an evolving change in investment attitudes.”

One area to watch in 2015, Lee said, is

the energy sector. The Bank of America

Merrill Lynch commodities team antici-

pates that a further drop in oil prices will

occur in the coming year, which could

lead to undesirable financial conditions

for companies engaged in oil exporting or

companies based in oil exporting emerg-

ing markets.

As 2015 pushes forward, Lee added that

he expects the U.S. dollar to continue its

climb against the euro and the Japanese

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

to see some changes made to key U.S.

policies and systems.

“We believe that Washington does have

a pressing need to reform the U.S. tax

code, the energy policy and programs

such as Medicare, to ensure a healthy and

growing economy,” he said. “So those are

areas that we think Washington will even-

tually have to address.”

Business And TaxationWith the recent change in the makeup of

congress, Blake Christian, a partner and

certified public accountant with Holthouse

Carlin and Van Trigt, said he hopes to see

more business-friendly tax provisions come

forth in 2015.

“There were a lot of things on the table

under the prior congress that would have

been very negative to business, but we’re

going to have to wait probably a couple of

months to see what evolves,” Christian told

the Business Journal.

With the Republican-majority congress

now in place, Christian said he expects to

see an increased focus on job creation and

hiring credits. He also anticipates seeing

lower tax rates on repatriating income from

U.S. companies in foreign countries, which

have been hesitant to bring back their earn-

ings because they don’t want them sub-

jected to U.S. taxation.

“The Republican congress is going to

probably be more sensitive to that than the

Obama administration, which would prefer

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

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

something that I think we'll see some legis-

lation on [in 2015].”

Thus far, 2015 has been a positive year,

according to Christian, particularly due to a

retroactive extension granted to Section 179

of the Internal Revenue Services tax code –

an incentive meant to encourage businesses

to invest in themselves by allowing them to

deduct the full price of qualifying equip-

ment and software from their gross income.

Timothy Good, chair of the California

Society of CPAs and a partner at Windes,

a tax, audit and advisory firm headquar-

tered in Long Beach, said the ongoing dis-

cussion in Sacramento about tax on

services, such as accounting, is a looming

issue for the industry.

Good said that, although he is not op-

posed to a tax on services, he does believe

it should apply uniformly to all those in the

service sector. “If it applies to accountants,

it should apply to attorneys, doctors and

massage therapists,” he said. “It should

apply to everyone that provides services.”

This year, Good said, accountants have

also had to brush up and enhance their

knowledge of the Affordable Care Act after

congress delegated its implementation to

the IRS in December. “We’re working with

our clients to help them understand the new

health care law and the coverage require-

ments,” Good stated.

Workers’ CompensationMark Sektnan, president of the Associ-

ation of California Insurance Companies,

said he expects the cost of workers’ com-

pensation insurance to trend up moder-

ately in 2015, driven mostly by increases

in medical costs.

“In 2012, the last major workers’ comp

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

would not reduce the cost of workers’ comp,

but it would flatten the increase, and we're

still seeing moderate increases,” Sektnan

told the Business Journal.

Another issue adding to the cost of work-

ers’ comp, Sektnan explained, is that several

important elements of the workers’ comp

reform, which was passed by the senate in

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

being completely implemented.

One key problem, he noted, has to do

with the independent medical review

process, which aimed to take appropriate-

ness-of-care decisions out of the hands of

judges and lawyers, and defer them to

doctors instead.

“The challenge is that the applicants’ at-

torneys who have benefited from a system

that had medical decisions made in the ju-

dicial process don’t want to be taken out of

the loop . . . because their fees are based on

a contingency basis, there’s an incentive to

make the costs as high as possible, because

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

we anticipate that they will continue to at-

tack the tools that insurers and self-insured

employers use to contain costs.”

Although fraud continues to be a big

issue in the workers’ comp arena, Sektnan

said, another issue – the over-prescribing

of opioid drugs – is becoming prevalent in

the system.

He said that opioid drugs, which were

originally designed as end-of-life treat-

ments for cancer patients, are being pre-

scribed for conditions such as back pain.

“Opioids are often prescribed for condi-

tions . . . for which they are not effective

and they actually delay an individual’s abil-

ity to return to work because they become

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

tinue to be a big issue this year.” �

FINANCIAL SERVICESPage 17

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

Economic Outlook 2015

� By SAMANTHA MEHLINGER

Senior Writer

The U.S. international trade industry

should benefit from a strengthening

American dollar this year, caused

both by a stronger national economy and

faltering economies abroad, according to

economists and international trade consult-

ants. About four months ago, the exchange

rate of dollars to euros was about $1.36 to

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

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

means that the rest of the world’s goods are

cheaper for us,” which should boost im-

ports, John Husing, owner of Irvine-based

Economics & Politics, Inc., told the Busi-

ness Journal.

Ben Hackett, principal with Hackett As-

sociates, a consulting research firm for the

international maritime industry, noted that,

as unemployment continues to decrease in

the U.S., “consumption patterns will stay

fairly healthy,” which bodes well for im-

ported cargo traffic to the U.S.

The flip side is that a stronger American

dollar means a weaker outlook for exports.

“Our goods have become more expensive

to the rest of the world because the dollar is

stronger, so it will probably cause exports

to have trouble staying at the level they’ve

been for the last three years,” which was a

rate of about 3.6 million twenty-foot-equiv-

alent units (TEUs) per year through West

Coast ports, Husing explained.

“You’ve got a strengthening American

economy, which means it’s very possible

that the imports side will reach a record

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

ports through West Coast ports was set in

2006, when imports hit 8.2 million TEUs.

Assuming import traffic in 2014 hits the

projected 7.8 to 7.9 million TEUs, which

depends on cargo traffic figures still unre-

ported from December, Husing said there is

a possibility 2015 could break the 2006

record.

Total cargo traffic through the West Coast

ports should increase by about 1.4 percent

in the first nine months of 2015 in compar-

ison to the same period in 2014, according

to Hackett.

The combined increase in cargo traffic

coming and going through the ports of Los

Angeles and Long Beach – which handle 40

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

be about 1.1 percent this year, Hackett said.

Leaders at the ports were somewhat more

optimistic, with Port of Long Beach Chief

Executive Jon Slangerup estimating a 2 per-

cent increase for Long Beach and Port of

Los Angeles Executive Director Gene

Seroka predicting a 2.5 to 4 percent in-

crease for his port.

Hackett’s estimates represent a more

modest growth pattern than last year, when

West Coast ports saw a 4 percent increase

in cargo traffic over 2013, and East Coast

ports saw more than double that, at 8.7 per-

cent. Hackett attributed the East Coast’s

stronger performance to labor strife in West

Coast ports.

Labor Contract Negotiations Weigh On Regional

International Trade OutlookThe year’s outlook for West Coast ports

is left hanging in the balance as retailers,

shippers, importers and exporters all wait to

see if the International Longshore and

Warehouse Union (ILWU) and the group

representing the employers of longshore

workers, the Pacific Maritime Association

(PMA), will reach a contract resolution.

The negotiations have been ongoing

since May, two months before the last long-

shore workers’ contract for West Coast ports

expired. In October, the ILWU and PMA

began issuing sparring press releases, blam-

ing each other for congestion issues at West

Coast ports, particularly the ports of Los

Angeles and Long Beach. In early January,

a federal mediator was assigned to assist in

the process after both parties asked for aid.

Both Slangerup and Seroka told the

Business Journal that their ports are not

receiving enough crews of longshore

workers to load and unload vessels, as has

been the case for the past couple of

months. Both said this is making it diffi-

cult to dig out from congestion issues,

which began around August and were

caused by a confluence of factors, namely

a shortage of trucking chassis, used by

truckers to move containers. This issue

was compounded by bigger-than-usual

ships with massive amounts of cargo ar-

riving at the ports. Seroka said congestion

has reached “epic levels.”

Ec INTERNATIONAL TRADEPage 18

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

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:24 PM Page 18

Economic Outlook 2015

Slangerup said the Port of Long Beach is

at about “half strength” in the number of

workers it needs to move cargo. If fewer

longshore workers than necessary continue

to be deployed for work, the rush of ship-

ping ahead of the Chinese New Year in Feb-

ruary is likely to mean the congestion issue

won’t be resolved for a couple of months,

he added.

It doesn’t appear the labor negotiations

are coming any closer to a resolution, de-

spite help from a federal mediator who

Slangerup testified is “very experienced.”

On January 13, the PMA announced it

would stop ordering crews of workers to un-

load and load cargo at both local ports dur-

ing nighttime hours, arguing that, because

longshore workers aren’t clearing cargo

from terminals in a timely manner, there is

no place to put unloaded cargo, anyway.

“PMA will focus efforts during night op-

erations on clearing containers stranded on

the terminal yards by the ongoing ILWU

slowdowns,” Wade Gates, a PMA

spokesperson, told the Business Journal.

“The union’s refusal for 10 weeks now to

dispatch skilled workers to drive yard

cranes has created precarious situations at

many terminals, and this is another attempt

by the terminal operators to chip away at

that congestion,” he explained.

INTERNATIONAL TRADEPage 19

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

Please Continue To Page 20

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Economic Outlook 2015

“The last thing you want is the West

Coast ports to look to be unstable to inter-

national supply chain managers; then they’ll

divert [cargo],” Husing said of the potential

impact of the labor issues on the ports.

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

want to come back.” Hackett said some traf-

fic has already been diverted, with the East

Coast, Gulf Coast and even the Port of Van-

couver as beneficiaries.

“Any type of disruption, whether it be

caused by these congestion issues [or] the

global supply chain inefficiencies, will

impact our port complexes. As we look

down the line as far as opportunities, both

Jon [Slangerup] and I believe that these is-

sues are manageable and we can fix them.

They are of our highest priorities, and we

are working around the clock to do just

that,” Seroka said.

Moving The Ports ForwardDespite historic levels of congestion,

both the Port of Los Angeles and Port of

Long Beach enjoyed growth in container

traffic last year. “We had modest growth in

2014 – just above 2 percent,” Slangerup

said of the Port of Long Beach. The Port of

Los Angeles saw a 4.5 percent increase in

containerized cargo traffic in 2014 com-

pared with the previous year, Seroka said.

Both executives are working – often to-

gether – to ensure their ports continue to at-

tract new business, and by putting

infrastructure in place to accommodate

growth and prevent future congestion.

On February 1, the three companies pro-

viding chassis to truckers at the San Pedro

Bay Ports are going to begin operating a gray

pool of chassis, a model in which truckers

may drop off chassis from any provider in-

terchangeably rather than in a specific loca-

tion for each provider. Slangerup and Seroka

both worked with the chassis providers to

achieve the cooperative agreement. “That is

going to really improve the efficiency of the

truckers, and it is going to relieve a tremen-

dous problem,” Slangerup said.

The Port of Long Beach has taken its own

measures to ensure against future chassis

shortages. “We as a port have committed to

providing peak chassis assets to make sure

that during peak periods we never encounter

a shortage of chassis as we did this past

year,” Slangerup said. A request for propos-

als for the port to obtain a fleet of about

3,000 chassis has been drafted and is being

reviewed before release sometime within the

next month, he said.

The Port of

Los Angeles has

been investigat-

ing ways to im-

prove truck turn

times and truck-

ing efficiencies

within the port

complex. “Slow

[terminal] gate

turn times have

negatively im-

pacted our truck-

ers across the

Southern Cali-

fornia area.

We’re looking at

ideas that would be technologically based,

inclusive of an Uber-type trucking system

that we’re testing right now with two of our

terminals,” Seroka said, referring to the mo-

bile phone application Uber, which allows

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

good path for route optimization and some

fluidity of the cargo path coming down the

line,” he said.

In addition to seeking creative ways to al-

leviate and prevent congestion, both ports

are undergoing multi-billion dollar capital

improvement projects aimed at upgrading

infrastructure, increasing throughput of

cargo and accommodating mega-ships car-

rying tens of thousands of containers.

The two largest projects underway at the

Port of Long Beach are the Middle Harbor

Redevelopment Project and the Gerald

Desmond Bridge Replacement Project. The

Middle Harbor project combines two aging

terminals, outfitting them with modern and

environmentally friendly technology. The

tenant of the site is Long Beach Container

Terminal (LBCT), a subsidiary of Orient

Overseas Container Line.

The Middle Harbor project is divided into

two phases so construction can be done on

one half of the terminal at a time, allowing

LBCT to operate during construction. Con-

struction on the first half of the terminal,

complete with some of the world’s largest

stacking cranes and automated guided, zero

emission vehicles for moving cargo, is ex-

pected to be completed this summer, ac-

cording to Slangerup. “When it is fully

implemented we are going to have about a

two million additional TEU capacity which

is… about a 20 percent increase in capacity

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

The Gerald Desmond Bridge Replacement

Project involves tearing down the existing

Gerald Desmond Bridge and replacing it with

a taller, wider bridge to allow larger vessels

to pass beneath it further into the port, and

to facilitate more vehicle traffic on the bridge

deck. Before retiring at the end of 2014,

Capital Programs Senior Executive Lead Al

Moro told the Business Journal the ground-

work to lay the foundations for the bridge had

been completed, and work to erect 350-foot

deep support piles was beginning. Since he

retired, new hire Duane Kenagy has taken

the reins overseeing capital projects.

In addition to these projects, Slangerup

said the port is investing billions in rail

expansion to “increase throughput veloc-

ity to move volume and containers

through our port.”

The Port of Los Angeles has large infra-

structure projects underway as well. “We

spend about $1 million per day on capital im-

provement projects to make sure that we ex-

ceed the expectations of our customers and

the cargo owners,” Seroka said. “We have

three projects right now that are in place, in-

cluding the TraPac Container Terminal ex-

pansion, the transportation improvement

program, and all [the infrastructure work] in

and around the port, including the harbor

freeway [State Route 110] and State Route

47,” he said. The TraPac expansion includes

new wharves, deeper water at some berths,

new cranes, improvements to backlands and

a new on-dock rail facility.

“We also have the upcoming work begin-

ning at the Yusen Terminal for improvements

on its property for both the berth and the wa-

terside,” Seroka said. The environmental im-

pact report for that project has been certified,

so the project is scheduled to commence any

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

ects in order to accommodate the larger ves-

sels and the fluidity of traffic that we want to

see in the near future,” Seroka said.

Moving forward, Seroka emphasized

both ports will continue to work together

to create “an even better port complex” in

the future. �

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

INTERNATIONAL TRADEPage 20

Gene Seroka, executive di-rector of the Port of Los An-geles, told the BusinessJournal that since joining theport in the summer aroundthe same time as JonSlangerup began at the Portof Long Beach as its chief ex-ecutive, the two “are work-ing very well together.”(Photograph provided by thePort of Los Angeles)

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Ec

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:25 PM Page 22

Economic Outlook 2015� By RABIYA HICKEN

Staff Writer

There appears to be consensus among

local retailers that 2015 is shaping

up to be a positive year, thanks in

large part to the drop in gas prices and the

successes of the Long Beach Shop Local

movement, which have led to increased

sales and foot traffic.

With storefront vacancies dwindling and

more innovative businesses setting up shop

in Long Beach, many Long Beach Business

Association leaders said that this is the first

year since the recession of 2008 in which

the outlook has been so positive.

Belmont ShoreDede Rossi, executive director of the Bel-

mont Shore Business Association (BSBA),

said 2014 was a good year for most busi-

nesses in Belmont Shore, but she’s hoping

that 2015 is going to be even better.

“The holiday season started off great,”

Rossi said. “What we really tried to push is

the Small Business Saturday. A lot of the re-

tailers told me that they did really well on

those particular days and that’s a pretty

good way to start it.”

Heather Duncan, owner of Blue Win-

dows at 5276 E. 2nd St. and vice president

of marketing and promotions for the BSBA,

said she had a “fantastic” holiday season.

“I definitely see a complete rise in the

economy and people spending,” Duncan

said. “The store has gotten better every year

since the really bad years of 2009 and ’10 .

. . I’m hoping that it will continue to in-

crease in 2015.”

Duncan, who is in the process of launch-

ing a new website for her store, said she

thinks restaurants in the area have helped to

increase foot traffic on 2nd Street.

“Restaurants always help boutiques be-

cause [they get] people down here,” she

said. “I think for new people and the ma-

jority of the people coming to 2nd Street,

they are coming down to stroll and eat

something and then they happen to be

shopping around.”

According to Rossi, there have been a

few vacancies on 2nd Street, but currently

most storefronts are occupied. Recently,

Rocky Mountain Chocolate Factory at 5213

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

Sesame next door announced it plans to ex-

pand into the vacant space.

Rossi said she hopes the upcoming intro-

duction of smart parking meters, which are

going to allow customers to use their credit

and debit cards to pay, as well as security

cameras along 2nd Street, will incentivize

even more people to come down.

Rossi added that the BSBA plans to work

with the Long Beach Area Convention &

Visitors Bureau to increase the flow of

tourists to the Belmont Shore area.

Also included in the BSBA’s plans for

2015 are beautifying the 2nd Street median

and featuring a pop-up-shop sidewalk sale

over the summer.

“We can’t predict what retail is going to

be like, but, the fact that gas prices are

[hopefully] going to be low for the next

year, maybe that will get more people to

reach into their pockets and want to spend

a little bit more money,” Rossi said.

Bixby KnollsThings are bustling in Bixby Knolls, ac-

cording to Blair Cohn, president of the

Bixby Knolls Business Improvement Asso-

ciation (BKBIA).

“We’re seeing more investment from

property owners, retailers and also profes-

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

cautiously optimistic but I think that this

year [2015] is better than last year, which

was better than the year before.”

Adding to the bustle are several new

businesses that have moved into the Bixby

Knolls area, which reported a “very busy”

holiday season, Cohn said.

Among the new additions is Stateside

Crafts at 4242 Atlantic Ave., which opened

recently and is expected to be in full opera-

tion by February, Cohn said. Also, the corner

liquor store at 4100 Atlantic Ave. was taken

over and transformed by Stearns Liquor.

“They upgraded not only the appearance but

also the products they carry, which is fantas-

tic,” he said. In addition, Weiland Brewery

Restaurant and Deep Blue Dive School are

gearing up to open up shop in the area.

Aside from new businesses, Cohn said,

he has also noticed increased foot traffic in

the Bixby Knolls district.

“I think that Bixby Knolls is different

than, say, Belmont Shore that has such a

dense neighborhood and a lot of foot

traffic,” he said. “Here it takes much

more of an effort to draw people out to

the quarters because we’re right in the

middle of a bedroom community. But . .

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

coming more of a destination and that

foot traffic has picked up.”

Looking forward, Cohn said, he hopes to

see more restaurants in Bixby Knolls.

“We just keep putting our feelers out

there and talking to our brokers to continue

to bring in businesses that serve the neigh-

borhood,” he said.

Broadway CorridorBusiness along the Broadway Corridor is

booming, according to Sidney Cramer,

president of the On Broadway Business As-

sociation and owner of Spa Sidney.

Cramer said that, for the first time

since the recession hit in 2008, his

business experienced double-digit

growth and a sharp increase in first-

time customers. He noted that, on aver-

age, each customer spent about 20

percent more than they spent the previ-

ous year. “That was very exciting and

it kind of poises us for some good

growth next year,” he said.

Cramer said other businesses, such as

The Attic on 3441 E. Broadway and Man-

aow on 3618 E. Broadway, have also re-

ported an increase in business.

“Everyone had a very busy holiday,” he

said. “I think this is the first year that

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

recession era.”

A few restaurants in the area, such as At

Last Cafe at 204 Orange Ave., have also

expanded out to the curb to allow for big-

ger patio dining areas.

Richard Leighton, owner of Richie’s

Toys & Gifts, which recently moved from

1424 E. Broadway to a larger space at

1500 E. Broadway, said he expects busi-

ness to do well in 2015.

“We were very busy for Christmas,”

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

go well because we’re actually celebrating

every season and . . . every holiday we do

very well.”

Cramer said he attributes much of the

corridor’s success to increased foot traffic

in the area, an increase in innovative busi-

nesses and a greater sense of shopping local

among the community.

“I think people are discovering these

smaller streets,” Cramer said. “They’re

avoiding the anchored strip mall or the mall

completely and they’re going for the local

artisan that’s in their backyard.”

Downtown Long BeachResidential and retail growth are promi-

nent features on Downtown Long Beach's

agenda as it enters 2015, according to

Brian Wallace, economic development

manager at the Downtown Long Beach

Associates (DLBA).

In an effort to make the downtown area

more desirable to businesses and residents

RETAILPage 23

Nordstorm Rack Coming To Marina Pacifica MallConstruction has begun to transform the now defunct Loehmann’s at Marina Pacifica Shopping Mall into a Nordstrom Rack. Nordstrom spokeswoman NaomiTobis said they are happy to be back in Long Beach after their store at Long Beach CityPlace closed early last year. “It was always our intention and ourhope to eventually find another great location in Long Beach,” Tobis said. She added that the new store is planned to be open to the public sometime in fall2015. (Photograph by the Business Journal’s Thomas McConville)

Please Continue To Page 24

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:25 PM Page 23

Economic Outlook 2015alike, Wallace told the Business Journal

that the DLBA plans to develop a couple

of thousand new “market rate or luxury

level” residences in the area, as well as

new retail spaces.

“There are about a thousand units that are

either under construction or permitted right

now to open in the downtown in the next

two to three years,” Wallace said. “So we’ll

have new customers and new retail spaces.”

Part of that growth will also involve trans-

forming The Pike, a waterfront entertain-

ment and dining destination, into “Outlets at

The Pike,” which will feature outlet stores

such as clothing retailer H&M, alongside

existing entertainment and dining venues.

“[This is] really an exciting repositioning

of this asset that’s in our downtown to be-

come more of a destination, both for visi-

tors and tourists,” Wallace said.

Matt Schuler, director of communica-

tions at DDR Corporation, which operates

The Pike, said DDR Corporation along

with the offices of the mayor and vice

mayor will host an event to discuss the

project in the coming weeks.

Wallace said he has also noticed a lot of

natural growth taking place in the retail

space of Downtown Long Beach. The inter-

section of 3rd Street and Long Beach Boule-

vard, which is home to retailers such as

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

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

is a prime example of that growth, he said.

“It’s really an organic growth of local

businesses that are opening permanent

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

the amenities that go hand in hand with

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

pecting to see more of this year and fol-

lowing on a couple more years.”

Another new addition introduced to

Downtown Long Beach’s retail arena dur-

ing the holiday season was pop-up store,

Made in Long Beach. The pop-up store

featured nearly three dozen Long Beach-

based businesses, ranging from crafts to

artisan foods, and more.

“That was a really exciting addition to the

retail scene in downtown [during the holi-

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

ally great amount of success and they’re

looking to turn that into a permanent fixture

in that location.”

East Anaheim StreetThis year is gearing up to be a positive

year for businesses in the East Anaheim

Street corridor, according to Rod Wilson,

president of the East Anaheim Street Busi-

ness Alliance board of directors.

“We’re feeling very confident,” Wilson

said. “We’ve definitely turned the corner

from the days of the recession.”

Wilson, who is also president and chief

executive officer at Pacific Research &

Strategies Inc., said he has noticed a surge

in foot traffic in the district.

“We’re seeing more people out at night,

taking advantage of the wide variety of en-

tertainment options that we have to offer in

East Long Beach, and, from what I continue

to read and see across Long Beach, in gen-

eral, we’re doing well,” he said.

In addition to increased foot traffic, Wil-

son said he has also noticed that consumer

spending has increased and more busi-

nesses are reinvesting in themselves.

“A lot of it probably has to do with the

fact that we have a little more money in

our pockets because of the lower prices at

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

benefit to the local businesses and the

community.”

The Long Beach Thai Restaurant, which

will be moving to a bigger space at 3109 E.

Anaheim St. toward the end of February, is

among the businesses reinvesting in them-

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

district for a long time and are one of several

that are growing and reinvesting in their busi-

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

There is currently only one vacancy, at

3143 E. Anaheim St., which was previously

occupied by House of Craft.

Looking forward, Wilson said, all signs

are pointing toward a successful 2015 for

the district.

“By and large, everyone was very

happy with the holiday season,” he said.

“Just this first week of the new year has

very positive signs of increased traffic, in-

creased sales, expansion, so I think it has

been a very good end to the year of 2014

and a bright spot in 2015 in getting started

moving forward.”

East Spring Street Joan Stiehl, president of the East Spring

Street Business Association and a Farmers

Insurance agent at 6200 E. Spring St., said

the outlook for the business district is

looking good for 2015.

“It’s very different than downtown or

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

kind of a mom and pop area out here ex-

cept for all the wonderful grocery stores,

but business seems to be doing well.”

Although a few storefronts on the street

are empty, Stiehl acknowledged, the rest

of the street is doing well.

“We have four vacancies right now on

the street but, when you think about such

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

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

quiet so that’s nice that we have a really

good area to work in.”

Sean Moor, owner of Gatsby Books at

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

a prosperous holiday season” in 2014.

“Gatsby Books is a destination book-

store; our customers come from all over the

city and beyond,” Moor said of the store

that has been on Spring Street for nearly

four and a half years. “We are expecting

great things in 2015.”

Dan Wilson, owner of Liberty Tax Serv-

ices at 3003 N. Los Coyotes Diag., said

many small businesses in the area have re-

ported a positive outlook for the year.

Wilson, who owns three Liberty Tax

Services branches and one Siempre Tax

branch in Long Beach, said the outlook

for his own business, which also serves as

a Covered California Enrollment center,

is positive as well. “Our tax season has

started off very rapid. Our outlook is fan-

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

tive growth as the community gets to

know and trust us more.”

4th Street After the year’s first 4th Street Business

Association board meeting, the verdict was

unanimous – business on 4th Street is on an

upswing and is expected to continue that

trend into the year, Kerstin Kansteiner, asso-

ciation president, told the Business Journal.

“I think, in general, nobody has seen such

an uptrend in quite a few years, so everyone

is incredibly positive about what 2015 is

going to offer,” said Kansteiner, who owns

Portfolios Coffeehouse at 2300 E. 4th St.

Kansteiner said she attributes much of the

success to the fact that many of the reser-

vations people had about the economy in

previous years are starting to melt away.

“More money is being spent [and] even

Ec RETAILPage 24

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

1_EconomicOutlook2015_Pages_Layout 1 1/17/15 5:25 PM Page 24

Economic Outlook 2015the younger people are not looking at the

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

was very, very hopeful,” Kansteiner said.

Kansteiner said she has also seen an in-

crease in foot traffic to the area.

“We saw a lot of traffic from visitors to

Long Beach that are coming in through the

[Long Beach] Convention Center and actu-

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

locals,” she said.

At the beginning of last year, Kansteiner

said, it seemed as though 4th Street was

moving toward becoming a predominantly

food and drink area; however, this year the

outlook is different.

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

particular direction. It’s just creating a more

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

shopping, dining, entertainment here. It

makes it more of a destination.”

The area has seen only one vacancy in re-

cent months, and even that was quickly

filled up. Currently, two stores on 4th Street

are undergoing renovations to make way

for Salud Juice, at the corner of 4th Street

and Cherry Avenue, and East 4th Skate,

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

Marina PacificaAccess to movies, restaurants, shops and

views of the marina all at one location is

what lends to the success of the Marina Paci-

fica Shopping Mall, said Sandy Sigal, chief

executive officer of NewMark Merrill Com-

panies, which develops and owns several

malls in California, Colorado and Illinois.

“Retail is an experience as much as it’s

about shopping,” Sigal said. “I think that

[Marina Pacifica] has continued to see

that people were happy to spend time in

one place watching movies, eating, shop-

ping and just having an experience as a

family. I’m pretty optimistic on what is

going to be happening there.”

Sigal also confirmed that the mall, which

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

coming Nordstrom Rack to the mix. The

new store will occupy the space previously

held by Loehmann’s, which closed in 2014

after filing for bankruptcy.

“Construction has started,” Sigal said.

Nordstrom Spokeswoman Naomi Tobis

said that, although they don’t have a set

opening date, they hope to have the store up

and running by fall 2015.

“We were attracted to Marina Pacifica

because we work hard to see the business

through the eyes of our customers, and

Marina Pacifica mall was a great, conven-

ient location where our customers were al-

ready shopping. So we felt fortunate to be

part of a center that was convenient for

them and we were happy to be able to join

the Marina Pacifica mall.”

Looking to 2015, Sigal said he believes

the area will continue to see success be-

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

tric neighborhood.”

“You’re getting young people there,

you’re getting people who have lived there

a long time and you’re getting people who

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

The mall, which stretches along Pacific

Coast Highway in Southeast Long Beach,

includes a Best Buy, Barnes & Noble, The

Sports Authority, Pier 1 Imports, Sit’n

Sleep, Hawkes & Smythe Furniture, AMC

Theaters, Ralph, Starbucks and a variety

of restaurants.

Queen MarySoon, when visitors aboard the Queen

Mary step into any of its 12 shops, they will

also be taking step back in history.

Nine of the ship’s long-time independent

retailers recently vacated their stores so that

work to remodel the shops according to the

original style and history of the Queen

Mary could begin, according to John Jenk-

ins, general manager of the Queen Mary.

For the task, Jenkins said, they chose

Event Network, a company that specializes

in the operation of gift shops for major at-

tractions. Among its long list of clients are

the Abraham Lincoln Presidential Library

Foundation, Alcatraz Cruises, Chabot

Space & Science Center and the Natural

History Museum of Los Angeles County.

For some time now, Jenkins remarked,

the Queen Mary has wanted to remodel the

shops and transition into online sales but

hasn’t had the money to follow through.

“For them to come in and make that type

of investment to redo all of our shops was

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

“With the size of their company, they are

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

items and replicate those things so that peo-

ple can buy them as little souvenirs.”

Jenkins reported that a few stores are

going to reopen this week and the rest

should be open for business by the begin-

ning of February. Although none of the pre-

vious retailers will be returning to the ship,

two of the three stores that were previously

run by the Queen Mary, which include the

Diana Gift shop and the Submarine shop,

will remain in operation.

Jenkins added that, of the 12 stores, only

eight will reopen as gift shops and the rest

will be used for other ventures.

“Our hope is to open a candy or ice cream

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

little wine tasting store, and one of them with

cigars and stuff like that,” Jenkins said.

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

We do over 200 weddings a year at the Queen

Mary and our goal is to become a one-stop

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

(Editor’s note: Several efforts were made

to reach a spokesperson for Long Beach

Towne Center in Northeast Long Beach,

but calls were not returned. The popular

center – which is a regional draw with con-

sumers from West Orange County, the

Mid-Cities area and beyond in addition to

Long Beach – is considered the largest re-

tail sales tax generator in the city with

stores such as Lowe’s, Ross Dress For

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

Aaron Brothers, Ashley Furniture, Barnes

& Noble, Performance Bicycles, PetSmart,

David’s Bridal, Old Navy and many more.

The center also has more than a dozen din-

ing establishments and an Edwards Sta-

dium 26 theater complex. �

Page 25 RETAIL

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

Economic Outlook 2015� By SAMANTHA MEHLINGER

Senior Writer

Single-Family Market

After what economists and local real

estate professionals describe as a

disappointing single-family market

statewide and in Long Beach last year, 2015

promises to boast modest home price appre-

ciation and overall home sales.

“The California Association of Realtors is

projecting an increase in sales in the 5 to 7

percent range for the general Long Beach

area in 2015,” Phil Jones, owner of Coldwell

Banker Coastal Alliance, told the Business

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

pleasant surprise because sales were down

almost 11 or 12 percent locally,” he said.

The increase in sales expected this year is

based on a lending environment that has be-

come friendlier to entry-level homebuyers

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

Mae and Freddie Mac, which collectively

handle somewhere in the neighborhood of

75 to 80 percent of loan servicing in our

country, have added 3 percent down pay-

ments for first-time home buyers, which is

a pretty significant happening,” Jones said.

Earlier this month, the Federal Housing

Administration (FHA) decreased its mort-

gage insurance premiums by half a percent,

an action lauded by California Association of

Realtors (CAR) President Chris Kutzkey.

“Reducing FHA mortgage insurance premi-

ums will make it easier for hundreds of thou-

sands of homebuyers to get a mortgage and

provide greater access to homeownership for

historically underserved groups and credit-

worthy families,” Kutzkey said in a statement.

Robert Kleinhenz, former CAR deputy

chief economist and current chief econo-

mist for the Los Angeles County Economic

Development Corporation’s Kyser Center

for Economic Research, said these changes

should help unleash pent-up demand

among the millennial population to enter

the housing market. Additionally, he said,

“more existing homeowners who may have

Ec REAL ESTATEPage 26

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

Economic Outlook 2015seen their equity damaged or lost during the

recession and the housing crisis are going

to come back and be in a better position to

buy over the next couple of years.”

Interest rates are projected to remain in

the low 3.6 to 3.8 percent range, which

should also aid homebuyers, Jones pointed

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

mism, particularly with interest rates pro-

jected to remain at the current levels at least

through mid-year, if not longer,” he said.

Inventory of homes for sale in Long

Beach remains tight, at about 2.5 months of

inventory, Jones said. Although so far this

year his firm is seeing “a real uptick in list-

ing activity,” he predicted inventory to re-

main a problem this year as demand

continues to outpace supply.

Last year, the prices of homes for sale in

Long Beach moderated, increasing by about

8 percent from the year prior. In 2013,

prices had increased by 20 percent over the

previous year. The more modest single-digit

growth should continue this year in the 5 to

7 percent range, Jones said.

The condo market, which is popular for

first-time homebuyers due to lower costs, is

likely to be the most active part of the sin-

gle-family market this year, Jones noted.

Multi-FamilyThe 2015 outlook for the multi-family

real estate market in Long Beach is posi-

tive, with demand likely to increase thanks

to millennials forming new households

plus most market fundamentals moving on

a healthy trajectory, according to local real

estate agents.

Kleinhenz said that, while millennials

have taken longer than anticipated to form

their own households either through rent-

ing or purchasing a home, this year some

of that pent-up demand should be un-

leashed. “At some point there should be

formations of new households that are

going to be putting new demands, espe-

cially on the multi-family side,” he said.

More individuals entering the housing

market are still choosing to rent apartments

than to buy homes, Steve Bogoyevac, first

vice president of investments for Marcus &

Millichap, observed. “There are still a ton

of new households being formed by people

who are preferring to rent because of the

lifestyle, or [because they] can’t buy a

house because they don’t have 20 percent

down or can’t qualify for a loan,” he said,

referencing his company’s national multi-

family forecast for 2015. “That definitely

holds true for Long Beach,” he added.

Thanks to low interest rates, which re-

gional economists and real estate agents

agree should remain at current levels

through at least the summer if not the end

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

ily properties is going to be strong this year,

Bogoyevac said. “Buyer activity, with inter-

est rates where they are, is going to be as

strong as it was last year,” he predicted.

Eric Christopher, senior associate at INCO

Commercial, said prices of multi-family

properties in Long Beach increased between

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

tinue to increase between 3 to 5 percent this

year. Bogoyevac’s projections were a bit

higher – he estimated sales prices could in-

crease between 5 to 10 percent this year.

Thanks to continually rising values of

multi-family properties, more owners are

beginning to list their properties on the mar-

ket, somewhat improving what has been a

very tight inventory for the past couple of

years, Bogoyevac and Christopher observed.

Both agents were in agreement that low

interest rates coupled with strong demand

and higher inventory should boost sales this

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

terms of transactions,” Bogoyevac said.

Rental rates are also still on the rise

thanks to continuing high demand among

renters, but Bogoyevac said some landlords

are going to have to make improvements to

their units if they want to increase rents fur-

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

get the true market rent you have got to

make it nice. That’s the expectation of the

tenants,” he said. Standard upgrades include

hardwood or laminate floors, granite coun-

tertops and updated cabinetry, he said.

The main risk to the multi-family market

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

REAL ESTATEPage 27

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

Economic Outlook 2015

crease, demand to buy would flatten, both

agents said. Neither of them, however, ex-

pects that to happen.

There is quite a bit of new construction of

multi-family rental units underway in Long

Beach. By the Business Journal’s estimates,

about 1,244 new apartment and loft units are

planned for the downtown area alone. While

some involve converting old offices into

apartments, as with the case of the Security

Pacific National Bank building at 110 Pine

Ave. and the Ocean Center building at 110

Ocean Ave., there are also new buildings

going up. The largest of these developments

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

at 707 E. Ocean Blvd. by developers Ander-

sonPacific and Ledcor Properties, Inc. The

project is scheduled for completion in 2016.

OfficeDemand in the local office market has

most recently been driven by owner-users

and the health care industry, trends that

should continue into 2015, according to

local real estate agents.

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

ing the highlights of the owner-user market

continuing to strengthen,” Jeff Coburn, prin-

cipal with Lee & Associates, told the Busi-

ness Journal. Owners of businesses are

looking to buy rather than rent in order to take

advantage of low interest rates, he explained.

Hoyt Hochman, president of Hoyt Re-

alty & Investments, said that, while 2014

was somewhat slow in terms of activity in

the Long Beach office market, this year

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

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

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

coming in to buy because they have really

low rates and because of [Long Beach’s]

location,” he said, midway between Los

Angeles and Orange counties.

Professional services industries that serv-

ice local ports, such as architecture and en-

gineering, are expected to add jobs this year

as imports rise, according to LAEDC’s

Kleinhenz. As these sectors of the economy,

as well as the growing health care industry,

continue to add jobs, demand for office

space may increase. A 2015 economic out-

look report by Cushman & Wakefield stated

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

expected to see more demand for office

space due to rising employment.

Coburn pointed out that medical organi-

zations continue to lease and buy more of-

fice space. In 2014, Senior Care Action

Network Health Plan and Molina Health-

care both expanded their office footprints

in Long Beach, and two new medical office

buildings broke ground at Douglas Park.

The Douglas Park buildings, which will

house Long Beach Gastroenterology and

Columbia Pediatrics as well as other med-

ical tenants, are expected to be complete in

the first quarter, according to Larry Lukan-

ish of Sares-Regis.

A 19,000-square-foot medical building at

845 E. Willow St. in Signal Hill, near Long

Beach Memorial Medical Center, is also

under construction, with Lee & Associates

handling leasing, Coburn said.

Evidence that demand for office space is

growing among other industries comes in

the form of three new creative office build-

ings planned at Douglas Park by Urbana De-

velopment, LLC, the same developer of the

adjacent medical buildings nearing comple-

tion. While Urbana has not submitted for en-

titlement yet, the company is “actively

marketing the buildings and has received a

good response,” Richard Lewis, principal at

Urbana, told the Business Journal. Coburn

indicated one of the buildings was already

spoken for. The buildings should break

ground in late 2015, Lewis said.

The greatest demand to buy at the mo-

ment is cropping up in suburban (non-

downtown) markets such as Douglas Park,

the airport business parks, and Bixby

Knolls, both Coburn and Hochman ob-

served. “The hard part is trying to find the

good product. There is not a lot of inventory

of buildings for sale,” Coburn said.

In Downtown Long Beach, some office

space is being converted into residential

units in three buildings – the former City

Hall East, the Ocean Center Building and

the former Security Pacific National Bank

Building. Displaced office tenants from the

latter two buildings, which have yet to begin

construction, may generate more activity in

downtown this year, Hochman said.

Short supply and strong demand should

cause values of office buildings in suburban

markets to increase this year, according to

Coburn. He anticipated lease rates would

increase, although more gradually than

sales prices, while Hochman said he

thought they would remain about the same.

IndustrialWith consumer spending expected to be

strong this year thanks to falling oil prices,

increasing employment, and wage growth,

imports may reach record levels through

local ports this year – trends that should

translate to high demand for industrial

Ec REAL ESTATEPage 28

Shimadzu Aircraft Equipment USA, a division of Shimadzu Precision Instruments, is relocating its headquarters from Torrance to this new 58,796-square-footbuilding at Douglas Park upon its completion some time this quarter. (Photograph by the Business Journal’s Thomas McConville)

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

Economic Outlook 2015space, according to a 2015 economic out-

look report by Cushman & Wakefield.

The Long Beach industrial market has ex-

perienced very low vacancy rates – below 5

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

demand was very high from companies hop-

ing to purchase rather than lease industrial

space in order to take advantage of low inter-

est rates. In 2015, that trend should continue

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

for sale, according to local real estate agents.

“There is a need in the marketplace that

we are really having a tough time providing

for,” Brandon Carrillo, principal at the Long

Beach office of Lee & Associates, told the

Business Journal. “Our biggest issue right

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

he said. “A lot of people are frustrated with

the lack of purchase options because they

can’t take advantage of the low interest rates,

Small Business Administration loan options

and government subsidies right now.”

“The demand is high on both the lease

side and the sale side,” John Eddy, senior

vice president of Coldwell Banker Com-

mercial BLAIR WESTMAC, said. “There

is a sense in the marketplace that there is a

limited window with the financing avail-

able, and most business owners and in-

vestors want to try to secure their long-term

financing right now,” he said. Due to high

demand, he called low inventory “the

biggest dilemma at this point.”

With few properties available, most are

occupied – vacancy rates remain low, al-

though final figures for the last quarter of

2014 have not yet been calculated by real

estate firms, Carrillo said. While Eddy is

“not sure how much lower they can go,”

Carrillo is confident vacancy rates will de-

crease to below 4 percent this year.

Despite low inventory, both Eddy and

Carrillo are optimistic about what 2015

holds for the Long Beach industrial market.

Because interest rates aren’t projected to in-

crease until at least the middle of this year,

if at all, demand for industrial space should

continue to push up lease rates and sales

prices, they said.

“I think that a 10 percent increase [in

sales prices and lease rates] would be on the

low end. I really believe that,” Eddy said.

Assuming interest rates do not increase,

both Eddy and Carrillo expect demand to

remain strong throughout 2015.

REAL ESTATEPage 29

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Ec INCO Commercial President Bill

Townsend, who has more than 30 years

of experience in the local industrial mar-

ket, said he is also optimistic about 2015.

“I think it is going to be a very good

year,” he said.

Development of new industrial properties

continues at Douglas Park, where Shimadzu

Aircraft Equipment USA’s new 58,796-

square-foot headquarters is nearing comple-

tion some time this quarter, according to

Larry Lukanish, senior vice president of

Sares-Regis Group, which manages Dou-

glas Park. Construction on Mercedes-Benz

USA’s new Western Region offices is ex-

pected to wrap up in the second quarter, ac-

cording to Diedra Wylie, a Mercedes

spokesperson. The 1 million-square-foot fa-

cility will house 200 employees, she said.

The future of the property currently used

by The Boeing Company to manufacture

the C-17 Globemaster III is still unclear, as

no one has yet publicly stepped forward

with plans to redevelop the site after the C-

17 program shuts down this year. Although

located behind Douglas Park, Lukanish said

Sares-Regis would not be taking over any

of Boeing’s C-17-related buildings.

RetailWhile occupancy rates for retail store-

fronts in Long Beach experienced gains and

losses last year that somewhat canceled

each other out, local retail brokers are pro-

jecting the balance to shift towards in-

creased occupancy this year.

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

better than the last few years,” Brian Rus-

sell, vice president of Coldwell Bank Com-

mercial BLAIR WESTMAC, said of the

retail real estate market outlook for Long

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

ters where there was a lot of occupancy and

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

ters where it was disappointing and busi-

nesses closed,” he recalled.

Hochman of Hoyt Realty & Investments

said the retail occupancy rate “should con-

tinue to improve” this year. Turnover of busi-

nesses opening and closing should keep the

market fairly balanced and steady, he added.

Sales transactions of retail properties may

not increase much this year due to a low in-

ventory of properties for sale, Russell pre-

dicted. Due to low interest rates, however,

demand to buy retail property is still strong

from certain types of retailers, like restau-

rants, which should drive up sales prices

somewhat, Hochman noted.

Restaurants seem to be driving activity

in the local retail market. For example,

Hochman recently leased the old Ham-

burger Mary’s site at 704 E. Broadway –

left vacant after the restaurant moved to

Pine Avenue – to Panvimarn Thai Cuisine.

“They have a very popular location in Long

Beach now, and this will be their second lo-

cation,” Hochman said. “They will be

doing an extensive remodel of the site and

look to have it complete by the end of the

second quarter,” he said.

Hochman also recently received an offer

from a large national restaurant chain on a

property in Bixby Knolls, an area where he

is seeing growing demand for retail space.

“In Bixby Knolls, anywhere on Atlantic Av-

enue north of Wardlow [Road] is a pretty

hot market right now,” he said.

Belmont Shore continues to do well, Rus-

sell said, noting that he has heard retail sales

by 2nd Street businesses are “doing great.”

Hochman pointed to the area as Long

Beach’s strong spot for retail. “The demand

in Belmont Shore has always been strong.

Any time anything becomes available, usu-

ally there are multiple offers, or it doesn’t

even hit the market,” he said.

Both Russell and Hochman said foot traf-

fic has been busy in Retro Row, a collection

of vintage shops and restaurants between

Cherry Avenue and Junipero Avenue on 4th

Street. “There is very little inventory there.

If something comes up, it is going to get

taken up right away,” Hochman said.

In Northeast Long Beach’s Douglas Park,

new offices and corporations moving in

have spurred retail activity, Russell said. The

six retail spaces fronting Lakewood Boule-

vard at Douglas Park are now fully occupied

by Starbucks, Flame Broiler, Jersey Mike’s

Subs, California Fish Grill and The Habit

Burger Grill. He speculated that, when Mer-

cedes-Benz USA employees move into the

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

ity across the street, “that is going to bode

well for the surrounding retail.”

Perhaps the biggest news coming in

2015 will be in the form of a tenant list

for The Pike at Rainbow Harbor, which is

being reconfigured as an outlet mall by

its property management firm, DDR

Corp. “That should energize retail as

well,” Russell said. �

Economic Outlook 2015Page 30 REAL ESTATE

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� By DAVE WIELENGA

Staff Writer

New Airport Director

Bryant L. Francis is a big man with a

friendly, measured manner, but a

sudden, deep laugh. He’s wearing a

purple shirt and trying on his new job as di-

rector of the Long Beach Airport.

“It’s going okay,” Francis replies to your

howzitgoin,’ then adds, “It’s day six.”

He’s absolutely right – there is a lot to

learn about being director of the Long

Beach Airport. Fortunately, that’s pretty

much why Francis applied for the position.

“It was a number of things,” Francis be-

gins, and after mentioning he’s come to

Long Beach from Shreveport, Louisiana, he

recites some of them.

“First of all, this is a larger airport in terms

of the level of airport operations, the amount

of passenger activity. Also in terms of the di-

versity and the number of businesses on the

airport property that would offer an oppor-

tunity for growth for me personally. Cer-

tainly the history of aviation right here at

Long Beach Airport – I’ve been very aware

of the airport and its role in aviation for a

long time. Lastly, the location. The fact that

we’re in sunny Southern California, a beau-

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

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

living in Palm Springs for over nine years, so

I was familiar with this area.”

He speaks highly about the airport staff,

saying the “members of the team I have met

so far clearly have a lot of drive and pas-

sion. They take a lot of ownership and pride

in this airport and that’s important.”

Francis has come to Long Beach at an un-

settled time for the airport. The facility has

new north and south concourses, opened

two years ago, that have drawn rave reviews

(“It makes a great first impression to those

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

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

but the number of people traveling through

them has dropped. Its flight schools are fill-

ing their classrooms, but plans call for two

small runways to be removed. The biggest

commercial tenant, JetBlue, holds 31 of the

42 available daily commercial flight slots,

but uses only little over 20 of them and is

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

cility at the airport so it can fly internation-

ally. On the far westside of the property in

two huge buildings, The Boeing Company

is putting the closing touches on production

of its massive C-17 transport plane – and

with it, California’s rich history of aircraft

manufacturing. Finally, when Francis

showed up at the airport for his first day of

work, there was one less airline than when

he applied for the job. Alaska Airlines had

moved out two days before he arrived.

Actually, that one grabbed his attention.

“The good thing is JetBlue serves the

only city to which Alaska was still flying,”

Francis said, “so we did not lose any of

our nonstop services.”

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

Alaska, have a little discussion,” Francis

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

their reasons behind their decision to discon-

tinue service here.” (Read more about the

city’s new airport director on Page 34.)

JetBlue AirwaysJetBlue officials insist they’re still happy

with the Long Beach Airport more than 13

years after they fell in love at first flight in

August 2001.

“We’re coming off a couple of good years

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

would change that,” said Rob Land, Jet-

Blue’s senior vice president of government

affairs and associate general counsel. “Our

economic outlook is strong.”

But JetBlue also feels stuck, and clearly

believes a change of scenery would do it

good. Land hasn’t been shy about clarifying

that change, and intends to spend much of

2015 persuading Long Beach officials that

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

and subsequently, international flights –

would improve everybody’s quality of life.

Land emphasizes that everybody includes

anybody concerned about the ordinance that

governs noise at Long Beach Airport. “Jet-

Blue has zero interest in changing the noise

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

The Long Beach City Council is already

stirring. It has requested comprehensive

study sessions on airport history and issues

before an official process is started. Those

sessions are expected to begin next month.

Passenger traffic has declined at the Long

Beach Airport over the past two years. Iron-

ically, the drop coincides with the long-

awaited opening of the widely lauded

passenger terminal. JetBlue occupies the

terminal’s entire north half and holds 32 of

the 41 daily commercial flight slots, but over

the past few years has rarely come close to

using all of them. Land confirms that will

be the case again in 2015, anticipating the

number of JetBlue daily flights “will proba-

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

the exact number will vary by the season.

Unused flights send revenue-reducing

ripples through the airport, including

landing fees, gate use fees, passenger fees

and parking fees, as well as the number of

customers who eat in the new terminal

restaurants or hail cabs outside.

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

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

like that we’re not fully utilizing the beauti-

ful terminal we worked so hard to get. We

don’t like that airport traffic is down, and

the parking revenue, and the restaurants.”

But he insists that sending more flights be-

tween Long Beach and the current collection

of destinations doesn’t make economic sense.

“We measure everything by profits,” Land

said. “We had many years of profitability in

Long Beach, especially early on. We subse-

quently went through some tougher years

but we have right-sized our operation.”

Land said the ability to fly internationally

– think Latin America and The Caribbean –

would add new and attractive destinations

that would jump-start passenger traffic in

general and invigorate JetBlue’s schedule.

“We view it as a commercial necessity

that we be able to grow in Long Beach –

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

Land said. “But as a tenant at the Long

Beach Airport, this isn’t something we can

do ourselves. We have to go to the land-

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

ask the federal government to designate

the airport a Port of Entry?”

If the city agrees to ask?

“It’s still only a request,” Land said. “The

federal government can still say no.”

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

the long love affair between the Long Beach

Airport and JetBlue?

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

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

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

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

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

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

“We’re not going to add a flight to Mex-

ico City, then cancel one to San Francisco.

These new flights would add to the destina-

tions we serve,” Land said.

Forty-Two Years And CountingKevin McAchren has learned a lot during

42 years as president of Airserv, which pro-

vides ground services to aircraft at Long

Beach Airport, but his business plan for

2015 boils down to just two components:

hope and hustle.

Economic Outlook 2015Page 31 AVIATION/AEROSPACE

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“We’re looking at the year and hoping

that we’re finally out of the recessionary

trend,” McAchren said in a booming

voice that no doubt comes in handy as he

works among jet engines. “We’re hoping,

all hoping, that we see an increase in

business this year.”

McAchren hears economists’ predic-

tions and pronouncements to that effect all

the time, but his personal evidence shows

that Airserv is earning about 40 percent of

what it did in 2008.

Most of Airserv’s business comes from

servicing charter flights, performing the

same duties for them that company ground

crews do for commercial airliners.

“We have the stair trucks that park next

to the charters so people can get off,” he

said. “We have the belt loaders to handle the

baggage, the pushback tugs that get the jets

away from the gate, and the starter units that

power up the aircraft engines. And we have

the people to do the by-hand work, like

loading and unloading luggage.”

But there aren’t as many charter flights as

there used to be.

“Looking at the charter market of five

years ago, you used to see them linked to

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

anymore,” McAchren reflected. “Compa-

nies used to do incentive travel, flying

maybe 100 of their best employees and

their wives to take a cruise. There were

charters to Disneyland, flights to casinos,

things like that. Lots of them.”

But bosses aren’t so apt to take employ-

ees on vacation during tough times. Gam-

blers take buses to Laughlin rather than

jets. Things have gotten so slow that

McAchren, who used to do a robust rental

business, has actually sold some of his ma-

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

ing the machines for much less, you know,

because people are low on money.”

In situations like that, McAchren might

turn to his second option: hustle.

“Last year I went to the Major League

Baseball Winter Meetings in San Diego,”

McAchren said. “You know, where all the

general managers go to make trades? Well,

that’s not the only reason to go.”

McAchren made contact with the teams’

traveling secretaries, told them about the Long

Economic Outlook 2015Page 33 AVIATION/AEROSPACE

� By DAVE WIELENGA

Staff Writer

This is the year the book will close

on the Boeing C-17 Globemaster

III. We know the ending.

“Production will complete in the sum-

mer,” reiterates Nan Bouchard, Boeing

vice president and C-17 manager, re-

sponding in writing to questions from

the Long Beach Business Journal. “The

factory will close by the end of 2015.”

But the saddest story in local aviation

is still being told. Ten of the massive air-

craft remain to be completed. They are

in various stages of assembly, their mam-

moth bits and pieces placed about the in-

terior of the huge buildings that house

the Boeing C-17 Globemaster III manufacturing operation.

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

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

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

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

some mighty big loose ends.

But nobody close to the operation harbors any doubt that

every C-17 will have a buyer. Customers are out there, they

say, and plenty interested. They say the countries involved

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

confidential. Those customers will announce their inten-

tions on their own timetables.

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

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

huge buildings? What’s their story?

Bouchard responds by reviewing how many employees

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

Boeing announced its intention to close the program.

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

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

Bouchard goes on to break down the numbers state by

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

300 in Georgia and fewer than 100 in Arizona.”

Boeing won’t say how many people are working the

project now. The company has made it standard practice

not to provide specific employment numbers.

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

those huge buildings off Cherry Avenue and Wardlow Road,

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

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

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

last production aircraft is delivered – there are no plans

for continued production in the facility,” Bouchard

writes. “Other buildings and business remain in the Long

Beach, including employees who support the C-17

Globemaster Integrated Sustainment

Program, Commercial Aviation Serv-

ices and support functions.”

What does it cost to shut down a

program and a facility like this? How

many people does it require? Who

will they be? Employees who have

worked on the C-17?

“Cost includes facility disposition

and employee severance pay,”

Bouchard writes. “We do not need a

special workforce for production clo-

sure. We will be using existing em-

ployees who have the expertise in their

particular area, and they will work in

their area until that tool is complete.”

Then where does the story go? For

the employees? For Boeing?

“Our employees are the best trained, most dedicated and

highly skilled workers committed to the C-17 mission,”

Bouchard writes, “and they stand ready to continue the legacy

of building and delivering C-17s to our partner nations.

“For post production, the production facility will be turned

over to Boeing’s Shared Services Group. Boeing remains

committed to doing business in the Southern California re-

gion and still has commercial work in Long Beach.”

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

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

which had become iconic in Long Beach, and thought to

be impossible to live without.

The tradition began in 1941, when Douglas Aircraft Com-

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

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

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

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

The End Of The Line – Boeing’s C-17

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

Please Continue To Page 34

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

Economic Outlook 2015Beach Airport, told them about Airserv, asked

those whose teams play at Anaheim Stadium

if they’d prefer flying into Long Beach.

“Sports teams are good business,”

McAchren said, “because they’re going to

that game no matter what.”

Gulfstream AerospaceThere are no signs of hard times at the

Gulfstream Aerospace Corp. operation at

the Long Beach Airport, where large-cabin

business jets made in Georgia are being

outfitted with paint and furnishings so they

can be sold for $64.5 million a pop to the

next name on the waiting list.

“Gulfstream uses its Long Beach facil-

ity to do the outfitting and the mainte-

nance of the G450, G550 and G65

large-cabin aircraft,” explained company

spokesperson Heidi Fedak.

Outfitting includes installation of such

things as seats, tables and carpet, as well as

application of the exterior paint. The mainte-

nance includes required procedures and tests

typically based on an aircraft’s number of fly-

ing hours. This means that, in addition to

being a service, it is an economic indicator.

“If you have solid service center activity, it

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

one of the key indicators of business jet sales

and activity. And I’ve been seeing increased

flying hours, solid service center activity, solid

sales, all of which indicate strength within the

business, especially on the large-cabin side.”

Gulfstream’s business is getting so good

that Fedak admitted she is “cautiously opti-

mistic.” Her caution derives from the years

Gulfstream staggered beneath the weight of

recession, and then public scorn after De-

troit auto executives flew private jets to

Washington seeking bailout money.

According to the General Aviation Manu-

facturers Association, the sale of business

jets dropped from 1,313 in 2008 to 672 in

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

the 0.9 percent rise was the first in five years.

The turnaround has occurred in the large-

cabin category, and Gulfstream has been a

driving force.

“Through the third quarter of 2013,

Gulfstream as a whole delivered 87 large-

cabin aircraft (the Gulfstream G650, G550,

and G450) and 16 mid-cabin aircraft,”

Fedak recalled. “That was up considerably

from the same nine-month period in 2012,

when we delivered 51 completed large-

cabin aircraft and five mid-cabin.”

In 2014, Gulfstream enhanced its Long

Beach operations, opening a Sales and De-

sign Center like those it has in Savannah,

Dallas and London, so customers could par-

ticipate in the completion of their aircraft.

The showroom features all manner of

fabrics, leather, carpet, plating and exam-

ples of various amenities. Customers can

get a sense of the impact of these design el-

ements by using DesignBook, a mobile vi-

sualization application.

As the work has increased, so has the size

of Gulfstream’s local workforce.

“The number of people we employ has

been going up yearly – we are up to approx-

imately 900,” Fedak said.

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

n’t sure enough to stake her name on that

number – but it’s definitely up from last

year, when there were 673 employees at

Gulfstream’s Long Beach plant.

There is talk that Gulfstream is out-

growing its existing facilities at the Long

Beach Airport – and whispers that an ex-

pansion is coming.

“We’re always looking at our facilities,”

Fedak said coyly, “but we have not an-

nounced an expansion.” �

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AVIATION/AEROSPACEPage 34

“Understanding the history of

the airport and the role that it

has played within the city for

over 90 years now is very important to

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

portant to me to develop a close working

relationship with our stakeholders.

There are some projects we are going to

be undertaking in the next year or two re-

lated specifically to the terminal facilities.

It’ll be a Phase 2 of the terminal concourse

project. We’ll be doing things related to

the rental car function to ground trans-

portation to our public parking facilities

and so those are all great things because

they will be in the name of enhancing cus-

tomer service and improving the customer

experience.

In Southern California there are several

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

like to think that when people think of

Long Beach, they think of the ease and

convenience of it being a pleasant experi-

ence. We want to give people a reason to

continue using the facilities here, and cer-

tainly remain self-sufficient.

We are an enterprise fund, which means

we don’t rely on any general funds from the City of Long Beach. The revenues created

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

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

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

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

are necessary and there is justification for them.

Safety is always going to be the ab-

solute top priority. Especially safety on

the airfield, and so there is a multi-phase

program that will get underway sometime

in the future that will reconfigure the air-

field and leave us with a much more effi-

cient layout and potentially open up a little

more land for business development pur-

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

hance the safety margins and operational

efficiencies of the airfield. So there are a

lot of projects coming up.

(Editor’s note: When asked about plans

to remove the airport’s north-south run-

ways, 16 Left and 34 Right, Francis said:

“They will be decommissioned. They will

no longer be runways; they will be taxi-

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

nage, lighting and some extended

taxiways to improve the flow and reduce

the number of times a plane has to cross

the runway to reach its destination. All

those things enhance the safety of the air-

port and make it more of an efficient op-

eration overall. This will be a multi-year

project that will go along with our grant

funding through the FAA.”)

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

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

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

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

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

of the City of Long Beach.” �

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

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

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