Studies on the Loma Prieta Earthquake, No. 3
Transcription
Studies on the Loma Prieta Earthquake, No. 3
STUDIES ON THE LOMAPRIETA EARTHQUAKE., No. 3 EconomicImpacts of the LomaPriem Earthquake: A Focus on Small Business Cynthia A. Krol| John D. Landis Qing Shen Scan Stryker January1991 The University of California Transportation Center University of California Berkeley, CA94720 The University of California Transportation Center The University of California Centeractivities. Researchers Transportation at other universities within Center (UCTC) is one of ten regional units the regionalsohaveopportu- mandated by Congress and nities to collaborate on selec- established in Fall 1988 to tedstudies. Currently faculty support research, education, andtraining in surface trans- at California State University, Long Beach, and at Arizona portation. The UC Center State University, Tempe, are servesfederalRegionIX and active participants. is supported by matching grantsfromtlleU.S.Departmentof Transportation, the UCTCs educational and research programs are focused California StateDep,~tment on strategic planning for of Transportation (Caltrans), improving metropolitan andtheUniversity. accessibility, ~4th emphasis on the special condi|ions in Basedon the Berkeley Region IX. Particular attention Campus, UCTC draws upon existing capabilities and is directed to strategies for using transportation as an resources of theInstitutes of instrument of economic development, while also ac- ’IYansportafion Studies at Berkeley, Davis, and[rvine; theInstitute of Urbanand RegionalDevelopment at commodating to the region’s persistent expansion and while inaintaining and Berkeley; the Graduate enhancing the quality of Schoolof Architecture and life there. UrbanPlanning at Los Angeles: andseveralaca- The Center distributes demicdepartments at the oil its research in working Berkeley, Davis, ]rvine, and papers, monographs, and in reprints of published arti- Los Angelescampuses. Faculty and students on other reports cles. For a list of publications Urfiversity of California in print, write to the address campuses may participate in below. Universltyof California TransportationCenter 108 NavaiArchitecture Building Berkeley,California 94720 Teh 415/643-7378 FAX:415/643-545g Authors of papers reporting on UCTC-sponsored research are solely responsible for their content. Th~sresearch was supportedby the U.S. Departmentof Transportation and the California State Departmentof Transportatmn,neither of whichassumesliabihty for its content or use Economic Impacts of the Loma Prieta Earthquake: A Focus on Small Business Cynthia A. Kroll, Regional Economist John D. Landis, Assistant Professor Qing Shen, Research Assistant Scan Stryker, Research Assistant Center for Real Estate and Urban Economics University of California at Berkeley STUDIES ON THE LOMA PRIETA EARTHQUAKE No. 3 January 1991 The University of California Transportation Center University of California at Berkeley L Introduction OnOctober 17, 1989, an earthquake of 7.1 magnitudeon the Richter scale shook northern California. Centered in the LomaPrieta area of the Santa Cruz mountains, south of the San Francisco BayArea, the quakecaused significant damagenot only in nearby cities such as Santa Cruz and Watsonville but also in major urban centers such as Oaklandand San Francisco (see Figure 1). For a region long awareof earthquakerisks, the quakewasa sharp reminder vulnerability. As history has shown,the area faces the potential risk of an earthquakeof ten to fifteen times the magnitudeof the October17th quake, possibly centered muchcloser to urban centers, any time in the next few decades. The most recent major quake, then, has provided an opportunity to examinethe region’s economicvulnerability to the damageand disruption caused by earthquakes° This paper focuses on identifying the economicimpacts of the LomaPrieta earthquake, for the regional economyas a wholeand for small businesses operating in the heart of the impactedareas. The paper looks at both aggregate impacts, through an analysis of published economicdata, and individual experiences, through a survey of small businesses in the cities of Oaklandand Santa Cruz. Aggregateeffects are covered through a discussion of the damagein the context of total economicactivity, identification of areas and sectors whereeconomicimpacts are evident, measurementof the magnitudeand duration of impacts, and analysis of the effects on the housing market. Disaggregatedeffects and individual experiences are examinedthrough the survey of Oaklandand Santa Cruz small businesses. The paper concludes with a discussion of the broader implications of the LomaPrieta earthquakeexperience for the long term vulnerability of the region’s economyto earthquakes. 0 | 0 o 0 IL The Damagein Context Becausethe LomaPrieta quakeoccurred in a developedcountry, it has the distinction of being perhaps the most expensiveearthquakein history while having causedrelatively few fatalities. Estimatedcosts of the earthquake,in terms of damageto physical structures, was almost. $6 billion. Close to 4,000people wereinjured, but there were only 62 fatalities, most caused by the collapse of the Cypressfreewaystructure in Oakland.Thedissimilarity between cost and numberof fatalities is not coincidental--the earthquakeresistant structures that protected lives maystill be very expensiveto repair whenthey incur damage. Theextent of damagevaried widely by location within the San Francisco and Santa Cruz areas. The bulk of the dollar damagewasreported in the San Francisco Bay Area (Table 1), but the largest share of damageto homesoccurred in the area including and surrounding Santa Cruz County(Table 2). Region-wide,the dollar value of damagewas equivalent to about two-thirds a year’s worthof building permit and heavyconstruction activity. In the City of SanFrancisco, dollar damageestimates were almost four times the 1989building and heavyconstruction activity (partly becausebuilding activity in the city is lowcompared to places of similar size and relative to existing stock); Santa Cruz suffered damageequivalent to almost twice its annual building 1 activity. In the San Francisco BayArea, the loss to housing stock was quite minor. Less than 1 percent of the region’s housingstock wasdamagedand less than 1/10,000 of the stock waslost. The largest amountof damageand loss occurred in Santa Clara County, the Bay Area location closest to the quake~sepicenter. In Santa Cruz County,the effects were far moresevere. Nevertheless, while 15 percent of the county’s housingstock wasdamaged,less than 1 percent of l"Iqae most recent estimates of LomaPrieta quake damageavailable were released by the California Office of EmergencyServices on December18, 1989. ’Table I: Dotter Value of Physical Damageto Structures frm the LomaPrieta Quake By County County DamageAssesment (lO00s of Sa) .................................................... Privete Public Undetemined Totat Building Permit Damage end Heavy Constr % of Permit Value Vatue, ~989 San Francisco Metropolitan Area Atameda Contra Costa Herin Nap~ San Francisco San Mate, SantaClara Solar, Sonoma $10~64,813 $311,673 $5,290 $19,549 $687 $977 $0 SO $1,500,000 $1+259,000 $284,889 . $8,042 $695,300 $32,400 $203 $3,557 $0 SO 9-CountyTotal $3,651,182$I,635,198 $~,537,839 $I,252,675 $330,26~ $228,0~8 $727,604 S821,922 $I,661,918 $92~,687 $648,858 96.0~ 2.0% 0.5% 0.0% 379.2% 35.8% 43.8% 0.4% 0.0% $I,336 $5,287,716 S8,132~785 65.0% $1,476,686 $26,839 $1,664 $0 $2,759,000 $I,336 $294,267 $727+700 $3,760 SO SantaCruz/Monterey Area Monterey San Beret, SantaCruz $750 $101,330 $328,907 $6 $175 $66,339 $116,980 $117,736 $101,505 $37,551 $432,797 $363,668 $75,449 $249,453 32.4% 134.5~ 173.5% 3-CountyTotal $430+987 $66,520 $154,531 $652,038 $688,570 94.7~ TOTAL,12-County Area $40082,169 $1,701,718 $155°867$5,939,754 $8+821,355 67.3% of the Current Source: California Office of EmergencyServices, Summary Situation, December18, 1989; Construction Inctustry ResearchBoard; and CREUE calculations. homes were destroyed, while housing vacancy was estimated at 9.3 percent in Santa Cruz County the Jalauary prior to the earthquake. The effects on businesses were more severe (Table 2). While modemhighrise structures and wood-framed, foundation-bolted, single family homeswithstood the earthquake with little damage, some older commercial and industrial buildings (and one modemhotel) proved more vulnerable. More than 1 percent of San Francisco Bay Area firms were in damagedstructures, although only 0.015 percent were in structures Mateo County had the largest reported destroyed. Of Bay Area counties, San number of firms experiencing damage, while AlamedaCounty had the largest number destroyed. By far the most severe impacts to firms occurred in Santa Cruz County, where more than one fourth of firms experienced damage and 5 percent were reported in destroyed structures. One of the most significant aspects of this earthquake for the region was the large amount of damage to the transportation infrastructure (see Figure 2). Damageto the San Francisco Bay Bridge closed the bridge for a month. Freeway structures leading to and from the bridge on both sides of the bay were also severely damagedor destroyed, and several have not yet been replaced. Damagealso caused a one month closure of the major freeway route linking Santa Cruz to major job cemers in Santa Clara County. The dollar costs to the State of California of the damageto roadwaysare in addition to the $6 billion reported in Table 1. Our analysis of the impacts of the quake examines the extent to which effects were caused by direct damageto firms and facilities and the extent to whichthey resulted from disruption to transportation facilities. IIL Employment and Unemployment Following the Quake Aggregate statistics on employment and unemploymentsuggest that the economy was quite resilient to the effects of the quake, but that impacts were significant for limited time Figure 2: Major Bay Area Highway Facilities Damaged by the Loma Prieta Earthquake Table 2: Housing and Business Impacts of the LomaPrieta Earthquake By County Business Effects Ho4~ir~ Stock Effects Numberof Housing Units ......... Total County .=.. Numberof Businesses Percent ................................. . Percent ......................................... DamagedDestroyed DamagedDestroyed Total DamagedDestroyed DamagedDestroyed San Francisco Metropolitan Area Alameda Contra Costa Marin Nape San Francisco San Mateo Santa CLara Solano Sonoma 500,620 306,458 100,088 44,825 327,274 250,530 531,534 112,223 154,946 2,763 485 24 0 382 782 5,124 2 0 9-County TotaC 2,328,500 9,562 17 0 0 0 11 1 131 0 0 0.55Z 0.16[ 0.02~ 0.00~ 0.12~ 0.31% 0.96% 0.00% 0.00% 0.003~ 31,288 0.000~ 18,610 0.000% 8,895 0.000% 2,927 0.003~ 31,670 0.000% 17,906 0.025% 37,371 0.000% 5,318 0.000% 10,740 414 124 20 0 134 793 364 0 0 160 0o41% 0.007% 164,725 1,649 19 62 774 0.29% 1.44% 14.58% 855 6.23% 17 0 0 0 0 1 6 0 0 1.32~ 0.67% 0.22% 0.00% 0.42% 4.43% 0.97% 0.00% 0.00% 0.054~ 0°000% 0.000% 0.000% 0.000% 0.006% 0.016% 0.000% 0.000% 24 1.12% 0.015% 11 22 310 0°62% 0.141% 5.27% 3.313% 25.95% 4.981% Santa Cruz/Monterey Area Monterey San Benito SantaCruz 3-County 341 118,809 174 12,068 91,439 13,329 Tota~ 222,316 13,644 0.016% 7,792 0.514% 664 0.646% 6,224 48 35 1,615 0.385% 14,680 1,698 Source: California Department of Finance, California Office of EmergencyServices, U.S. Bureau of the Census, County Business Patterns, and CREUE calculations. 343 11.57% 2.337% periods and for specific locations and sectors. Theduration of someof the impacts suggest that the transportation damagemayhave beenparticularly significant in producingshort-term effects on the economy. Unemployment insurance claims jumpedup sharply in the weekfollowing the quake (see Figure 3). Eventhe San Francisco Bay Area’s northernmostcounties had a large increase in unemployment insurance claims for the weekimmediatelyfollowing the quake, although these counties experiencedlittle physical damage(see Figure 4). The cities of Oaklandand San Francisco reported unusually high numbersof unemployment insurance claims for the entire period of the Bay Bridge closure (Figure 5). Santa Cruz Countyunemployment claims followed simiIar pattern, returning to close to normallevels within a month(Figure 6). A tong enoughtrend for the period following the quakeis not yet available to allow reliable statistical tests on the employment impacts of the quake. Instead, weused a simple descriptive comparisonof employment level in the current year comparedto the previous year to assess apparent effects. For example,a measureof 1.044 for the OaklandMetropolitanStatistical Area (MSA)for October 1989 indicates that employmentin the OaklandMSAha 1989 was 4.4 percent above (or 1.044 times) the 1988 level. Wecomparedrelative employmentlevels location and sector before and after the October1989 quake. Effects on total (nonagricultural) employmentappear minorfor most parts of the San Francisco Bay Area, as shownin Figure 7. Employment growth had begun to slow in California in the third quarter of 1989, apart from any impacts of the earthquake. In fourth quarter 1989. and early 1990, the San Francisco and OaklandMSAsshowno worse a slowdownin growth than was experiencedfor the state as a whole.2 In fact, employmenttrends in the East Bay (Oakland 2Employmentdata is provided by metropolitan statistical area (MSA).MSAsare often aggregate of several counties. In this study, the San Francisco MSA includes San Francisco, San Mateoand Matin Counties, the OaklandMSA includes Alamedaand Contra Costa Counties, the San Jose MSA is contiguous with Santa Clara Count)’ and the Santa Cruz MSA is contiguous with Santa Cruz Count)’. COMPARISONOF UNEMPLOYMENTCLAIMS SAN FRANCISCOBAY AREA 1988 AND 1989 Number of Claims (Thousands) I0 4 2 0 lO/14 I I 10/21 m Io/28 t 11/4 11/11 I 11/18 11/28 Month 1988 Source: Employment Development -+-1989 FIGURE 3 Dept. COMPARISON OF UNEMPLOYMENT CLAIMS NORTHERN BAY AREA COUNTIES 1988 AND 1989 Number of Claims 1200 I000 800 600 4OO 2O0 0 lo/14 I 10/21 m *0/28 ~1988 Source: Employment Development Dept. I ~ ) I1/4 Month II/II 11/18 .... __ 11/25 { 1989 FIGURE 4 COMPARISON OF UNEMPLOYMENTCLAIMS OAKLANDAND SAN FRANCISCO 1988 AND1989 250O Number of Claims 2000 1500 1000 500 P 0 lo/14 I t 10/21 ,0/28 1 I 11/4 11/~1 11/18 11/25 Month ~ -- Oakland 1988 San Franciscot988 Source: Employment Development Oakland1969 D San Francisco ~989 FIGURE 5 Dept. COMPARISON OF UNEMPLOYMENTCLAIMS SANTA CRUZ COUNTY 1988 AND 1989 Number of Claims 3OO0 2500 2000 1500 1000 500’ 0 10 I 10/21 i 10/28 l 11/4 o 11/11 I 11/18 Month 1988 --+-Source; Employment Development I989 FIGURE 6 Dept. lO TOTAL NONAGRICULTURAL EMPLOYMENT 1989-90 RELATIVE TO 1988-89 BAY AREA AND SANTA CRUZ COUNTIES Ratio of Employment to Month of Prior Yr 1.05 t 0.95 0.9 9 ’89 10/89 11/89 -- California Employment I ~ Santa Deep. I 12/89 1/90 Month I 2/90 3/90 4/90 Oakland ’--+--San Francisco D San Jose Source: I I Cruz FIGURE 7 Dept. EMPLOYMENT IN GENERAL MERCHANDISE 1989-90 RELATIVE TO 1988-89 BAY AREA AND SANTA CRUZ COUNTIES 1.2 Ratio of Employnlent to Month of Prior I.l Yr ............. I I 11/89 ¯ Employment Deep. ! 1/90 Month ---b- San Francisco California San Jose Source: I 12/89 ~ I 2/90 --a-- 3/90 4/90 Oakland × Santa Cruz Dept. 11 FIGURE 8 MSA)suggest that the earthquake may have induced a mini boom for the end of October and the month of Novemberin some sectors, in portions of Alamedaand Contra Costa counties undamaged by the earthquake. Santa Clara County had already begun to experience a slowdown due to conditions in the electronics industry prior to the earthquake, but by January 1990 showed recovery from both any earthquake effects and from the broader economic slowdown. Santa Cruz County. showed the most evidence of employmenteffects as a result of the October quake. Total employmentdropped from a leveI 2.6 percent above the previous year in September 1989 to a level just below that of the previous year in November1989. However, by February 1990. even Santa Cruz County. appeared to have returned to its pre-quake rate of growth. Impacts on emplo3anent varied considerably by sector as well as by location. Manufacturing sectors throughout the Bay .4sea showed no sign of impacts on employmentlevels as a result of the earthquake. Employmentin general merchandise stores (a major retail category) dropped slightly in the Oakland MSAand more sharply in Santa Cruz and the San Francisco MSAfollowing the quake (see Figure 8). Employmentlevels in general merchandise had largely recovered in the Oakland and San Francisco MSAsby early 1990 but remained below the previous year’s level in Santa Cruz throughout the first employmentdropped sharply in Santa Cruz and slightly four months of 1990. Hotel in San Francisco for a few months following the quake, but drops were mirrored by increases in hotel employmentin the Oakland and San Jose MS/ks for the same period (F/gure 9). The quake boosted construction throughout the affected area. 12 employment EMPLOYMENT IN HOTELS 1989-90 RELATIVE TO 1988-89 BAY AREA AND SANTA CRUZ COUNTIES Ratio of Employment to Month of Prior Yr 0.9 4/90 California "~ San Jose Source: Employment --a-- ~ San Francisco × Santa Oakland Cruz FIGURE Devp. Dept. 9 CHANGE IN HOTEL OCCUPANCY 1989-90 RELATIVE TO 1988-89 SELECTED CALIFORNIA MARKETS Occupancy Rate Ratio* I.I I 0.9 0.8 t 0.7 I t I I I I I 7/89 8/89 9/89 i0/89 11/89 i2/89 1/90 2/90 3/90 4/90 Month -- San Francisco -*" Santa Clara -+" -~ Source: PannelKerr Forster,Trendsin the Hotel Industry * Month°srate dividedby prior year. Oakland/East Bay Monterey/Carmel FIGURE 10 13 In sum, the effects of the earthquake on aggregate employmentwere for the most part small and temporary. Longer term effects are most evident for the retail sector in the Santa Cruz area. IV. Tourism and Retail Trade The LomaPrieta earthquake has been blamed for slowdowns in tourism and retail activity, sales especially in the City of San Francisco. Data available to date suggest that some short term effects occurred. These impacts may have lasted only a few months ha most areas, however. As noted above, employment drops ha hotel employment appear to have been temporary and limited to the San Francisco and Santa Cruz areas. Data available on hotel occupancy supports this finding. Hotel occupancy was clown relative to the previous year in San Francisco and Santa Cruz for four or five months following the Loma Prieta quake. The Oakland/East Bay area showed an unusually high level of occupancy in Novemberof 1989, and Santa Clara County had unusually high occupancy levels in October, Novemberand December 1989 (see Figure 10). All four areas have had occupancy at or below the previous year’s level in Marchand April 1990. However,it is not clear that the 1990 slowdownis a result of the quake. Similar drops have occurred in major Southern California markets, such as Orange County and Los Angeles, and likely reflect the effects of a weaker U.S. economy. Taxable sales data available for the fourth quarter of 1989 and first quarter 1990 allow a general examination of the immediate effects of the earthquake and of the beginning recovery period in 1990. Earthquake impacts are explored by a comparison of taxable sales levels in fourth quarter 1989 and first quarter 1990 to levels for the same quarter of the previous year. Some impacts are evident in this corapafson. These appear to be confined to local areas affected by damage, with recovery beginning by early 1990. 14 Of the major Bay Area and Santa Cruz area counties affected by the quake, only San Francisco showsrelatively weakfourth quarter 1989sales activity (see Tables 3 and 4). Alameda Countyshowsfourth quarter sales at 5 percent above1988levels, while Santa Cruz Countyas a wholereported taxable sales at 6 percent above1988levels. At the city level, greater effects appear. In addition to lowersales for the City of San Francisco, Oaklandhad weakersales in fourth quarter 1989comparedto the previous two quarters. Sales in Oaklandin fourth quarter 1989were equivalent to their 1988levels, while second and third quarter sales were well above1988levels. Thecities of Santa Cruz and Watsonville (also in Santa Cruz County)evidence the most severe effects. Santa Cruz sales droppedfrom a level 3 percent above1988sales in the third quarter to a level 4 percent below 1988sales in the fourth quarter. TheWatsonville area saw sales drop from 21 percent above 1988sales in third quarter to 4 percent belowin the fourth quarter. Thedifferential is even greate:r for sales only fromretail outlets, as shownin Table 4. Eachof these three cities appears to have. lost the benefit of higher sales levels normallyexperiencedby merchantsin the fourth quarter (holiday-related sales). Indeed, rather than experiencinga fourth quarter holiday surge retail sales, Oakland,Santa Cruz City, and Watsonvillehad sales levels belowthird quarter levels. Withinthese cities, fourth quarter sales wereparticularly weakfor certain types of retail activity, while other sectors were little affected. Generalmerchandisesales were down7 percent in San Francisco, 6 percent in Oakland,63 percent in Santa Cruz and 50 percent in Watsonville in fourth quarter 1989comparedto fourth quarter 1988 (see Figure 11). In eating and drinking establishments, only Santa Cruz City appears to have been strongly affected, with 1989fourth quarter sales down10 percent from the previous year. San Francisco mayalso have experienced a smaller percentageloss, with 1989fourth quarter activity no higher than the previous year. Sales activity in building materials, in contrast, wasup in all cities but Oaklandin fourth quarter 15 COUNTY& CITY Atan’leda Oakland Contra Costa San Francisco Santa Clara Santa Cruz Hollister Santa Cruz Watsonville CALIFORNIA 88-1 88-2 88=3 88-4 89-1 89-2 89-3 89-4 90-1 $1.64 $0°37 $1.02 $1.07 $2.18 $0°27 N/A $0.09 $0.04 $1.73 $0.39 $1.11 SI.14 $2.37 $0.30 N/A $0.10 $0.05 $1.81 $0.42 $1.14 $1.18 $2.37 $0.31 H/A $0.10 $0.05 $2.00 $0.43 $1.31 $1.33 $2.65 $0.32 N/A $0.10 $0.06 $1.73 $0.38 $1.08 $1.13 $2.30 $0.28 $0.02 $0.09 $0.05 $1.88 $0.41 $1,17 $1.20 $2.51 $0.32 $0.02 $0.11 $0.05 $2.02 $0.44 $1=24 SI.31 $2.56 ~0.34 $0.02 $0.11 SO.06 $2.13 $0.43 $1.39 $1.36 $2.79 $0.33 $0.03 $0.09 $0.05 $1.85 $0.39 $1.20 $1.2! $2.40 $0.30 $0.00 $0.09 $0.05 $44.82 $39.34 $43.38 $47.99 $41.97 $36.81 Table 4B: Quarter-by-Quarter $39.96 Retail =========================================== = -- ~0.93 $45.06 Taxable Sales Canparisons ,~====--------====:--------==~:==----====--,%.%=----=¢=-- Ratio of 1989 Quarter to 1988 Quarter COUNTY& CITY Alameda Oakland Contra Costa San Francfsco Santa Clara Santa-Cruz Holtister Santa Cruz ~atsonville CALIFORHIA Ist O 2nd O 3rd Q 4th Q 1990-I/1989-I Io06 1.05 1.05 1.05 1.05 1.01 1.09 1.06 1.06 1.05 1.06 1.05 I=11 1.06 1.09 1.11 1.08 1.08 1.07 1.01 1.06 1.02 1.05 1.02 I,07 1.02 1.12 1.07 1.04 I,09 0,95 1.08 1.09 1.03 1.04 1.20 0,93 0.95 1.01 1o04 1.07 1.09 1.10 1.07 1.07 ~®o,e *e e O oeese ol** ~lsel ~iue *®®om N ~P N ~N~ 0 E U N~Ng m ,,r @ L O O E-~ 0 I0 (~ 4~+ ~ IU "E 17 TAXABLE SALES ACTIVITY, SELECTED CITIES 4TH QUARTERRATIO, 1989/1988 1.2 1 i 0.8 .... !.:.;. ,.° ..° \\\ :::::: .,-,-, 0.6 ,.,,.. .,... ....., ,-.. ... °.. ...,. .,.. ,..,. ..-,-. 0.4 0.2 0 ;’2;" Apparel Gen. Merohsndlse IE=|/Drlnk Building Materlala FIGURE11 1989, ~fith Santa Cruz City, in particular, experiencing unusually high sales. In Watsonville, while sales were up 3 percent from 1988 fourth quarter, the level was still quite low comparedto the previous 3 quarters. Oakland and AlamedaCounty building materials sales were not as strong as in the previous quarter, but mayreflect an overall downturn in the building industry more than the immediate effects of the earthquake. Data on total sales activity for 1990 suggest that the overall impact of the earthquake on retail sales was temporary, for most locations and most sectors. Alameda, Contra Costa and Santa Cruz counties show strong levels of fast quarter sales in 1990, and even San Francisco and Watsonville appear to have returned to pre-quake levels of activity (see Table 3). Only Santa Cruz City continued to show relatively low 1990 sales comparedto the quarters preceding the earthquake. Even in Santa Cruz City, the first quarter 1990 sales levels, at only 2 percent above t989 levels, were an improvementover the 4 percent sales decrease shown for fourth quarter 1989. V. The Residential Real Estate Sector By the fourth quarter of 1989, the California economyhad begun to experience a significant slowdownin real estate activity, makingthe isolation of earthquake impacts difficult. To examine effects of the earthquake on the real estate markets, we compared changes in the number of sales and median sales price in the San Francisco Bay Area and the Monterey-Santa Cruz area with statewide trends. Wealso drew a sample of sales for the City of Santa Cruz and selected parts of Oakland and San Francisco, to examine effects on a disaggregated basis. As shown in Figure 12, in the September preceding the earthquake, San Francisco and Monterey-Santa Cruz area markets had already begun to slow more sharply than the California 19 CHANGES IN SALES OF EXISTING HOMES CURRENT YEAR COMPARED TO PRIOR YEAR INDEX: 1 = SAME AS PRIOR YEAR O% Relative Level of Sales -5% -10% -15% -20% -25% --8O% -35% 7 8 9 10 II 12 1 2 3 90 4 Month/Year Figure Source: CREUE from California Association of Realtors 12 MEDIAN HOME PRICES EXISTING HOMES, 1/89 - 6/90 STATE, SF BAY AREA AND SANTA CRUZ 30O 2501 2OO 150 100 50 0 I 7 I 3 4 I 5 90 Month/Year CA Source: California of Realtors i SFBA ~ SCRUZ Figure 13 Association 20 6 I marketas a whole.3 TheSan Francisco BayArea experiencedits lowest sales levels, relative to the previous year and to the California slowdown,in the monthsof October1989 through January 1990. This drop mayin part be attributable to uncertainty following the earthquake, although other ,economicfactors are likely to have played a role as well. In the Monterey-SantaCruzarea, sales droppedsharply relative to trends prior to the earthquakeand in other parts of the state only kl December1989. Poor weather conditions during the period mayhave had as great an effect on the slowdownin that monthas the earthquake. Figure 13 showstrends in medianhomeprices in the Santa Cruz area, the San Francisco Bay Area, and the state from July 1989 through June 1990. The medianprice of homesin the San FranciscoBayArearelative to the rest of the state held quite steady during this period, with no suggestion of a dip following the earthquake. The Monterey-SantaCruz area mayhave been affected, althoughif so, the impact(for the area as a whole)appears mild. In July 1989, Monterey-SantaCruz median homeprices were 20 percent above California median homeprices, with the differential wideningthrough October. In November,the differential droppedfrom an Octoberlevel of 29 percent abovethe California medianback to the 20 percent level of the previous July. ByMarch1990, however,the differential once again beganto widen, suggesting that the effects on the Monterey-SantaCruz market, if any, were mild and short-lived. Ananalysis of individual homesales for the period immediatelyfollowing the earthquake and the followingspring gives Findingsconsistent with these aggregateresults. Usingthe DA/vLM~, data base, wedrew sales data for Santa Cruz City and for selected San Francisco and Oaklandneighborhoodsfor fall 1988 and 1989 and spring 1989 and 1990. The numberof sales in 3"the data on the San Francisco Bay Area and Monterey-Santa Cruz area markets are from statistics published by the California A~sociationof Realtors. TheSan Francisco BayArea market covers data reported by boards of realtors in Berkeley, Contra Costa County, Los Altos-LosGatosSaratoga-MountainView-Sunnyvale,Marin County, Palo Alto, San Jose, southern AlamedaCounty, Oaklaad and San Francisco. The Monterey-SantaCruz market covers data reported by boards of realtors in Carmel, Monterey,Salinas and Santa Cruz. 21 the post earthquakeperiod for these selected areas was35 percent belowsales for the pre earthquakeperiod, with the percentage drop greatest for San Francisco marketsand least for Santa Cruz markets (see Table 5). Usingmultiple regression analysis in the form of a hedonicprice model,wetested several modelsto comparesales prices in the pre quakeperiod with prices in the post quakeperiod, as summarizedin Table 6. A modelof the entire market showedthat homesin late 1989 and spring 1990 were selling, on average, whensize an neighborhoodwere accountedfor, at a price almost $15,000 abovehomesales prior to the earthquake (see Table 6A, ModelI). During this postearthquake period, the medianprice of homeswas dropping statewide. Separating out homesales in late fall 1989from sales in spring 1999, ModelII showsthat even in the immediatepost-quake period, homeprices continued to rise, for the combinedmarket as a whole. Calculation of separate modelsfor each city market (Table 6B: ModelsIII and IV) and separate post-quake parameters for each sub-market (Table 6C: ModelV) suggest that housing prices in somesubrnarkets mayhave been affected by the earthquake. In Oaklandand Santa Cruz, homessold following the earthquakewere at substantially higher prices than those sold prior to the earthquake.In San Francisco, in contrast, there wasno significant difference in the price of homessold prior to the earthquakeand those sold after. In ModelV, a combinedmodel with separate neighborhoodpost-quake parameters, several San Francisco neighborhoodsshowednegative values for the post-quake period (the Marina, Sunset, and Southwestareas) although none are statistically significant. TwoOakland neighborhoods,on San Francisco neighborhood,and the city of Santa Cruz showstatistically significant positive parameters(i.e. higher housingprices) for the period followingthe earthquake. These results must be interpreted with great caution. TheSan Francisco market, because it is the highest priced of the three areas, maybe reflecting the marketslowdown in the higher end of the housing market that was occurring statewide, rather than earthquakeimpacts. 22 TABLE5: TRENDS ]N HOHESALESTRACKED BY DMIARIN BAYAREACO~4UNIT|ES COMPARED TO CALXFORNI!A ASSOC|ATXON OFREALTORS DATA MARKE~ AREA/ 10/88SUBI~RKET 12188 .......... . ............ 41896/89 . ....... 1018912/89 .® ............ PERCENT CHANGE 4190- Fail 88- Spring 896190 Fat | 89 Spring 90 .......................... OAKLAI~D East Hills Fruitva[e GrandLake Rocl~ridge 18,:3 99 36 15 33 t94 111 35 9 39 t38 85 32 6 15 141 74 32 7 28 -24.6X -14.1~ -11.1Z -60.0~ -56.5X -27.3[ -33.3X -8.6Z o22.2Z -28.Zg SANFRANCISCO Narina Richmond SoulEhEast Sunset Sou~hwest Twin Peaks 179 3 16 47 36 61 16 201 6 13 35 39 72 36 88 1 7 20 24 24 12 109 1 10 23 26 29 20 -50.8~ -66.7"/. -56.3~ -57.6~ -33.3X -60.7~ -25.0~ -45.8¢ -83.3X -25.1~ -34.3Z -33.3~ -59.7~ -44.4g SANTA CRUZ 37 25 22 31 -40.5~ 24.0"/, -13.2% -28.1% -21.0~ -11.6Y, -21.9~ -19.5~ CALIFORNIA* SF Bay Area Montery Area+ * 593,925 52],543 515,354 462,872 California f~gures are annua[ized rates, rather th~¢n actua~ numberof sales. + Narket area tracked by the California that includes Santa Cruz. Association of Reattors CREUE analYSiS of raw data from DAHAR and data from CaLfornia Association of Realtors, Ca|~forni8 Real Estate Trends Ne~s[etter. 23 TABLE6A: REGRESSION RESULTS OF EARTHGUAKE IMPACTS ONHOME SALESPRICES:Co~nbined-Market Model MODEL I: CombinedMarkets Single Post-Quake Estimate ......... Independent Variables HOUSE CHARACTERISICS Square Feet Age Baths CITY/NEIGHBORHOOD LOCATION Oakland:East Hilts Oakland:Fruitvale Oakland: GrandLake Oakland: Rockridge SF: Marina Dist. SF: RichmondDist. SF: South East SF: Sunset Dist. SF: South West SF: Twin Peaks SantaCruz POST-OUAKE DUMMYVARIABLES a) Full Period b) ImmediatelyAfter c) Following Spring .. ..... Coefficient 125 207 8,311 (75,931) (136,160) (51,158) ..=..... t-value Coefficient 22.84 1.71 1Q71 -10.66 =15.42 -3.97 +÷ 309,961 161,762 (22,285) 55,631 28,810 114,536 (9,430) MODEL XI: CombinedMarkets: Immediate Effects vs. later Time Periods 124 202 8,980 22.43 1.65 1.83 (74,586) (134,580) (52,281) -I0.34 -15.06 -5.66 ÷÷ 13.28 11.92 -2.55 6.56 3.63 11.68 -I.07 16,827 na 3.60 na na na +÷ 309,287 141,856 (21,959) 56,903 30,288 116,572 (10,097) 0.71 12,623 26,198 0.71 ÷+ Variableomittedfrom equationto avoidoverspecifying the model. 24 ÷+ 13.11 11.80 -2.68 6.41 3.77 11.77 -1.14 na ModelStatistics Adjusted r-squared Observations t-value 2.10 5o46 m O ~ P~ o ~.~ ~ o O o ~,.- N 411 IM O’~ O ~ ~ II II II ~.~ II ~ 0 ,, N$ N 3 Iv N e" C II *~ L. II ~®]~ "-’~]-~ . ~ ~ ~. ~.£ m T_ ......... ~ I~ "~ t~ "~ ~.~ ~ ~ ~’~ .p m L~ I~I |I "8 ~ .~ ) ÷ 2S MODELV: Combined Market Model Coefficent t-value Independent Variables HOUSECHARACTERISICS Square Feet Age Baths CITY/NEIGHBORHO(~LOCATION Oakland: East Hills Oakland: Fruitvale Oakland: Grand Lake Oakland: Rockridge SF: Marina Dist. SF: Richmond Dist. SF: South East SF: Sunset Dist. SF: South ~est SF: Twin Peaks Santa Cruz POST-QUAKEDUMMY VARIABLES Full Period by Neighborhood Oakland: East Hills Oakland: Fruitvale Oakland: Grand Lake Oakland: Rockridge SF: Marina Dist. SF: Richmond Dist. SF: South East SF: Sunset Dist. SF: South West SF: Twin Peaks Santa Cruz 122.51 180.35 8,134.90 22.36 1.46 1.67 (70,890) (129,802) (46,694) ++ 327,261 129,527 (12,750) 67,034 41,969 120,832 (20,922) -8.50 -12=38 -3.13 ++ 13.15 9.55 -1.26 6.81 4.62 10.59 oi.99 23,183 19,672 3.~5 1.64 0.79 3.08 =1.19 4.33 0.14 -0.62 -1.20 1.47 5.05 200155 41,629 (67,928) 99,661 1,946 (7,834) (14,094) 24,127 65,687 Model Statistics Adjusted r-squared Observations ++ Variable omitted 0.72 from equation to avoid overspecifying the mode[. Nevertheless, the negative parameterfor the Marinadistrict (an area very vulaerable to shaking), although significant only at the 25 percent level, maysuggest that homeprices and the numberof sales were reduced in areas wherelocalized earthquakerisk wasvisibly apparent because of 4structural damage. TheSanta Cruzresults are particularly surprising and suggest that the modelis not capturing an adequate picture of market forces in the area. Theadjusted R-squaredfor the Santa Cruz city model(see ModelsI~ and IV), at 0.29, is far lower than for the Oaklandor San Francisco models(which were at 0.66 and 0.70). Thesestatistics suggest that the Santa Cruz modelexplained less than 30 percent of the variation in homeprices, while the Oaklandmodel explained two-thirds of the variation and the San Francisco modelexplained 70 percent of the variation in homeprices. Thehigh post-quake parameter for Santa Cruz mayfurther suggest that somepost-quakeselection occurred in the homesgoing onto the market. It is possible, for example,that homesin the most vulnerable areas were kept off of the market following the earthquake,becauseof repair needs or uncertainty over liabilities, building permission,and insurance, leaving buyers to choose from a different, possibly moreexpensivepool of homes° In summary,the aggregate findings indicate that muchof the housing market continued to operate at close to normallevels following the earthquake. Anyprice effects appear to have been mild and temporary, particularly in relation to the morewidespreadslowdownin the statewide for-scale housingmarket. Withinthe limitations describedabove, the statistical analysis suggests that homeprices mayhave been affected on a localized basis, in someneighborhoods where ,damagewas evident and well publicized. Onaverage, however, manyparts of the region appear to have been unaffected by the earthquake. 4Additional models, not reported in Table 6, included the median homeprice statewide as a dependentvariable, to normalizedthe results to overall trends in the California market. Evenwith this variable in the model,San Franciscoshowedless of a tendencyfor prices to rise than did either Oaklandor Santa Cruz markets in the period following October 1989. 27 VI. Small Businesses in Oaklandand Santa Cruz The data reported in earlier sections is useful in understandinghowwell the economy fared in aggregatebut is less useful for understandinghowindividua| businesses responded,the role that preparednessplayed in the response, howrapidly businesses recovered from damage, whichbusinesses gained rather than lost from the quake, and howtransportation system damage versus building damageaffected operations. In the hnmediatedays following the earthquake, little funding wasavailable to launch a survey of firms in affected areas. However,with cooperation of the Oakland Chamberof Commerceand the Santa Cruz Downtown Association, we were able to distribute surceys to approximately1200 Oaklandfirms and 600 Santa Cruz firms in January 1990. The Oaklandarea response rate was 23 percent, and the Santa Cruz response 5rate wasjust below10 percent. A. Survey Coverageand Biases Thesurveys were directed at firms with 100 employeesor fewer. Firms in this size category represent 99.85 percent of the AlamedaCountyfirm population and 99.88 percent of the Santa Cruz County firm population. Theyrepresent an estimated 45 percent of employmentin AlamedaCounty and 60 percent of employmentin Santa Cruz County. Because the surveys were mailed out through Chamber-type organizations, they tended to reach retail and service firms in greater proportions than are present in the population. This wasparticularly true for the Santa Cruz sample. As a result, the aggregate findings are somewhatbiased. In addition, no attempt was madeto track downfirms that mayhave closed and were no longer receiving mail sent to their original address. Thus, the numberof destroyed firms maybe underestimatedin the sample. 5TheSanta Cruz response rate was so low in part because the Santa Cruz Downtown Association mailinglist used includedinterested individuals as well as firms. Onlybusinesswereasked to respond to the survey. 28 Nevertheless,with careful interpretation, the timeliness of the sampleoffers a useful snapshotof perceptions of impacts in the period immediatelyfollowing the earthquake. Incidence of DamageamongSmall Businesses Oneof the most striking features of the earthquakewas the localized incidence of impact.,;. Heavily damagedareas could be separated from areas showingno visible damageby only a few city blocks. In the City of Oakland, where the downtownarea was badly damaged,almost 41 percent of firms reported no damageat all while an additional 47 percent reported only minor damage(see Figure 14). Evenin the City of Santa Cruz, very close to the epicenter of the earthquake, where the downtown area was destroyed, 27 percent of firms experienced no building damageand 35 percent experienced only minor damage. Almostone fourth of Santa Cruz firms, however,were in buildings that were uninhabitable following the earthquake, while only 5 percent of Oaklandfirms were in uninhabitable buildings. Business Losses--DaysLost and Inventory and IncomeLosses Thedifferential impactof the earthquakeis apparent in business days lost. Thelimited building damageto firms in Oaklandtranslated into relatively minordisruptions in business. Over 90 percent of firms in Oaklandreopenedfor business less than one weekfollowing the quake and all but 1.5 percent were back in business within a monthfollowing the quake. Over 40 percent of firms in Oaklandlost no workingdays at all. In Santa Cruz, morethan half of firms were back in busine,;s in less than a week, but 18.5 percent remaineddosed a monthfollowing the earthquake, and only 4 percent reported no loss in workingdays. In both cities, the numberof business days lost increased sharply with the amountof building damagedincurred. Impacts to business stemmedfrom morethan building damage. Over one fifth of Oakland firms and half of Santa Cruz firms lost someof their inventory due to the quake. Thesize of 29 BUILDING DAMAGE AND BUSINESS DAYS LOST IN THE LOMA PRIETA EARTHQUAKE OAKLAND AND SANTA CRUZ FIRMS BUILDING DAMAGE No Damage Minor Damage Major Damage Uninhabitable Other BUSINESS DAYSLOST None One 2to 5 6 to 30 More than 30 ~\\\\\\\\\\\\\\~\\\\\\\\\~\\\~\~\\\\\\\\\\\\~\\\\\~ \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\~\x~\~\\\\\\\\\\\\\\\\~\\~\~ m \\\ \\\x\\~\\\\\\\\\\\\T ~ ~ L 0 I I0 Percent 20 30 Experiencing ~ Oakland Source: Oakland Survey of small businesses, and Santa Cruz, January 1990. I I 4o 50 Damage or Loss ~ Santa 6O Cruz FIGURE 14 30 losses ranged from less than $100 up to $1,000,000, with an average for businesses experiencing inventory losses of about $40,000 in Oakland and $30,000 in Santa Cruz. This level of loss is approximately 3 percent of average gross income in both cifies--a significant but not devastating level of loss, for most firms. Changes ha the surrounding business env/ronment also present problems for small businesses. Weasked respondents to rank the severity of several types of problems on a scale from 1 (no problem) to 5 (very severe problem). Not surprisingly, Santa Cruz firms reported more severe problems than did Oakland firms (see Figure 15). ManyOakland firms found few proble1~ in operating their business, even in the first week following the earthquake. Customer and employee access had the highest average rankings for Oakland, of 2.4 and 2.1. Santa Cruz firms, in contrast, encountered a wide range of problems, especially in the first week following the earthquake. As in Oakland, customer and employee access received the highest (most problematic) rating--an average of 3.7 for both factors in Santa Cruz. Building damageand shipping delays also averaged between 2.5 and 3.5. Within a month, the mean ranking had dropped below 2 for all factors in both Oakland and Santa Cruz. The firms that remained open or reopened felt some impacts to their level of business, as shown in Table 7. In Oakland, 26 percent of firms experienced a decrease in business of over 20 percent in the first week following the quake. Losses at this level continued for 13 percent of businesses during the fin’st month and for 6 percent for more than a month after the earthquake. Twothirds of Santa Cruz firms experienced a loss greater than 20 percent for the first week following the quake, 40 percent reported a loss of this size for at least a monthfollowing the quake, and 18 percent continued to have losses greater than 20 percent more than a month following the quake. In Oakland, trade and service firms were particularly vulnerable to larger, longer lasting business losses, while the greatest share of losses were incurred by trade firms in Santa Cruz. Not 31 Table 7= Business Losses and Gains after Oakland and Santa Cruz Fi~s First .... the LomaPriets Week: Sus~ness Losses and Gains ° ................ ° ............... TOTAL ~ 21÷~ 1-20X No # ~ Loss Loss change . ................. .. Earthquake: . After Nov. 18: Business Losses and Gains .................................... 1-20X 21÷X Gain Gain TOTAL I 21÷X 1-20~ ~o # I Less Less change ............................................... .. .... OAKLAND RESPONDEMTS BY ECONOHXC SECTOR Cons~r~ctton Hanufacturi ng Trade FiRE Services Other 9 22 ?8 34 130 6 BY BUSINESSS%ZE 1"5 emptoyees 6-~0 employees 1~-20 emptoyees 21-50 employees 50+ e~ployees Other 87 I 54 ~ 4~ I 52 I 30 I 9I 31~ 30~ ZO~ 3~ ~0~ 11~ 14~ 24~ ~L~ ~9~ ~0~ 67~ 46~ 41~ 54~ 38~ 73~ 22~ 7~ 4X ~5~ ~2~ O~ O~ 2~ 2~ O~ O~ 7~ O~ SANTACRUZRESPONDENTS BY BUSINESS SIZE 1-5 e~ptoyees 6-10 emptoyees 11-20 ~ploym 21-50 employees 50+ emptoyees Other 30 5 6 6 3 5 Source: Survey of Oakla~ end Semte Cruz smtl businesses, . ......... January 1990. 32 . ............... ...... 1-20~ 21+Z Gain Gain ...... ... ..... MAJOR PROBLEMS FOLLOWING THE EARTHQUAKE FIRST WEEK COMPARED TO ONE MONTH LATER OAKLAND AND SANTA CRUZ SMALL BUSINESSES Problem Area FIRST WEEK Customer Access Employee Access Shipping Delays TO Shipping Delays FROM Building Damage Utility Cut-offs Higher Prices/Costs Inventory Losses Credit Problems ~\\\~kk\\\\\\\\\\~ ~\\\\\\\\\\\\\\\\\\\~ \ \\ ,.k\\\\\\\\\\\\\~,\\\\~\\\~\\\\\\\\\\\\\\\~ ~, x\ \\\\ \~\\\\\ x --, xxxx \\ ~\k\\\\\\\\\\\\~\\\5,~ ONE MONTH AFTER Customer Access Employee Access Shipping Delays TO Shipping Delays FROM Building Damage Utility Cut-offs Higher Prices/Costs Inventory Losses Credit Problems A\\\\\\ \\ ~\\\\\\\\\\\\\\k~\\~ ~\kkkkk~\\~\\\\\\\\~ 0 1 I I L 2 3 4 Mean Ranking Oakland Source: Survey, January 1990. Note: 1-no problem, 5-very severe. (1 to ~ Santa 5 5) Cruz FIGURE 15 55 surprisingly, those in damaged buildings had substantially larger losses, for longer durations than other firms. In Oakland,smaller firms weremorefikely to experiencelarger, longer lasting losses than were larger firms. (This did not appear to be the case in Santa Cruz, although the small size of the samplemakesgeneralizations difficult). Whilethe earthquakewasa disaster for somefirms, it proveda stimulus for other firms. Constructionfirms, in particular, reported increases in business following the earthquake.A significant numberof trade firms also reported business gains followingthe earthquake, as business shifted fromdamagedfirms to those still in operation. Accommodatingto ChangingBusiness Conditions Businesses found meansof coping with physical damageto buildings and roadways(Table 8). Morethan one third of Oaklandfirms and over one fifth of Santa Cruz firms allowed employeesto workmoreflexible hours. About10 percent of Oaklandfirms also introduced carpooling, expandedbusiness hours, newshipping schedules and/or workingat homeas meansof coping with the immediateproblemsfrom the quake. In Santa Cruz, carpooling was quite unimportantas a response to quakeh-npacts, in contrast to other roadway-relatedresponses. Aboutone fifth of Santa Cruz firms movedto a newlocation, changedshipping hours, and/or encouraged employeesto workat home.Large firms overall appeared morelikely to make specific adjustments to keep the business in operation, while manufacturingfirms in Oaklandwere the most likely to concentrate particularly on transport related responses(carpooling and shipping schedules). Useof Public and Private Assistance Assistance cameto the earthquake stricken areas from all levels of governmentand from the private sector as well (see Figure 16). Overall, Federal (national government)assistance 34 Tabl~ 8: Oakt;e~d and Santa Cruz Business Adjustments to the Earthquake Type of BUS|heSSAdjustment .. ..... . ..................... ...°o°= ......... . ..... =~.=---. ............................ Encourage Adopt Encourage Expanded Change Change Cerpooting Eraptoyee Work|ng Business Receiving Sh~pping Special Tote[ Responses Ftext~me at Home Hours Hours Hours Sates Consol|date Move Oper. Location OAKLAND:At[ 264 9.1% 35°2"k 8.7~ 10.2~ 5.3~ 12.5% 6.1% 4.5~ 4.5~ OAKLAND By Sector C~struct~o~ Ha~ufactur~ng Tr,~de F~I~E Services Other 9 22 74 32 121 6 1t.1~ 13.6~ 1.6% 15.6% 10.7~ 0.0% 22.2~ 65.5% 24.3% 40.6% 33.1~ 0.0% 0°0~ 4.5% 8.1% 9.4% 9.9~ 16.~ 22.2~ 4.5% 8.1% 12.5% 9.9X 33.3% 0.0~ 18.2~ 5.4% 0.0~ 5.0~ 0.0~ 22.2% 31.8% 17.6% 0.0% 8.3~ 16.~ 11.1~ 9.1~ 10.8~ 0.0"/. ~.1% 0.0% 11.1% 0.0% 5.4% 6.3% 3.3~ 16.7% 11°1% 0.0~ 5.4% 9.4% 3.3~ O.PA OAKLAND by BUS{hessSize 1-!5 enptoyees 6o10 employees 1t-20 employees 21-50 empto~ees SO~employees Ot~er 81 53 40 51 29 8 6.2% 7.5~ 5.0% 17.6% ~3.8% 0.0~ 34.6% 28.3% 27.5% 47.1% 41.4% 25.0% 7.4% 7.5~ 10.0% 11.8% 3.4% 25.0~ 13.6% 5.7~ 2.5% 15.7~ 6.9~ 12.5% 6.2% 3.8% 7.5~ 5.9,[ 3.4% 0.0% 9.9~ 15.1% 10.0% 17.6% 10.3% 12.5% 8.6% 5.7~ 7.5% 3.9~ 3.4% O.O~ 7.4% 1.9% 5.0~ 3.9~ 0.0% 12o5% 7.4% 0.0% 7.5% 2.0% 3.4% 12.5~ SANTA CRUZ: AEt 51 2~ 22% 18% 8% 10~ 20% 10~ 12~ 20~ SANTACRUZBy Sector Trade FIRE Services 29 6 16 O~ 0% 6% 17~ 0% 38% 14~ 171[ 25~ 7~ 0% 13~ 10% 17~ 6~ 24% 33% 6% I0~ 17~ 6% 10~ 33% 6% 24~ 17~ 13~ 0% O~ O~ 1"1% O~ 0% 25% 0% 20~ 33% 33~ O~ 25% O~ 20~ 17~ O~ O~ 11% O~ O~ O~ 33% 0% 14% 0% 20% 0% 0% O~ 11% 20% 60% 17% 33% 25% 11% 0~ 0% 17"/, 33~ O~ 11% 0% 0% 50~ 0% O~ 2~% 0% 20% 17~ 67~ 0% SANTA CRUZby Business Size 1-5 emptoyees 28 6-10 employees 5 11-20 emptoyees 5 21-50 emptoyees 6 50+ ecptoyees 3 Other 4 == : = ===~ = = == ~ = = Source: Survey of Oakland and San Francisco s~tt businesses, January 1990. 35 = ~= :: : USE OF PUBLIC AND PRIVATE PROGRAMS IN RECOVERING FROM THE EARTHQUAKE OAKLAND AND SANTA CRUZ SMALL BUSINESSES Type of Program Local & State Govt Emergency Services Small Bus Admin FEMA ~\\\\\\\\\\\\\\\\\\\~ BARTExtension* Ferry Service* Local Business Programs** I 0 10 { [ I I 20 30 40 50 Percent Using Program ~ Oakland Source: Survey, January [990. * Asked of Oakland firms only. ** Asked of Santa Cruz firms only. ~ Santa 60 70 Cruz FIGURE 16 36 showedthe lowest level of usage and generated the least amountof satisfaction amongbusinesses. In Oakland,less than 5 percent of firms received assistance fromthe SmallBusiness Administration (SBA) or from the Federal EmergencyManagementAdministration (FEMA). Santa Cruz, 10 percent of firms used SBAprogramsand one third of firms workedwith FEMA. Both Oaklandand Santa Cruz firms expressed dissatisfaction with FEMA services in particular. In contrast, businesses had generally favorable comments to offer on the response of state and local agencies. Local governmentprograms were used more heavily than Federal programs. In Oakland, 6 percent of firms used state or local government emergencyservices, almost half of f’nans profited from extended service on the Bay Area Rapid Transit system (BART),and 30 percent felt they benef/tted from expandedferry services. 6 In Santa Cruz, 47 percent of firms used local and state emergencyservices. Aneven larger number--56percent -used the recovery services offered by public and private local business programs, such as the Downtown Association. Althoughnot covered specifically in the survey, other local governmentprograms appeared less well prepared to respond to the quake. In Oakland, manygovernmentoffices were displac~ because of damageto public buildings. In Santa Cruz, offices such as the building and planning departmentsfaced newissues with no backing policy framework.The city had to address issues such as whetherpermits should be issued in places that had provedto be geologically unsound.As a result, issuance of building permits wasdownsharply in the city following the earthquake. Small Business Perspective on the Earthquake 6E~:pandedBART and ferry service were the primary meansused to cope with the impacts of the BayBr!idge closure on travel patterns in the San Francisco BayArea. 37 The immediateand longer term experience of small businesses follo~4ng the LomaPrieta earthquake depended very muchon where the business was located and howmuchdamage occurred to the building housingthe business and to the firm’s inventory. Outside the areas of most intense shaking, firms were able to resumeoperations quickly and within a monthwere back to pre-quake levels of business. In the area wherephysical damagewas most intense, however, recovery has been slower. While over 80 percent of Santa Cruz firms had returned to normal levels of operations within a monthof the earthquake, dose to 20 percent have faced a longer and morecostly recovery period. VII. Interpretation and Implications Anevaluation of the economicimpacts of the LomaPrieta quake is both encouraging and informative. Theeconomyshoweda great deal of resilience in the face of a significant natural disaster, and whereimpacts were severe they were also confined to limited geographicareas. Someof the major reasons for the region’s quick economicrecovery from the quake are: 1) The fact that the earthquake was centered awayfrom the most populousportions of NorthernCalifornia. 2) The economicdiversity and geographic dispersal of the region’s economy--the region relies on no single industrial sector (such as tourismin SanFrancisco), and there are manyeconomicactivity centers throughout the San Francisco and Santa Cruz areas. 3) The strong performanceof communicationsand utilities systems, which functioned again very quickly followingthe quake. 4) Redundancyin the transportation system. Manywere surprised by the degree of impactto majortransportation facilities from an earthquakeof this magnitudeand 38 location, but the existenceof alternative routes and facilities madeit possible for most businesses to continue to operate normally. These factors enabled a quick recovery for most firms. Preparedness was a major element in the factors mentionedaboveas well as in the overall level of impactof the earthquake. While somestructures failed, the very great majority of structures designedto survive a majorquake camethrough with little damage.Communications and utility systems becameoperational again quickly because of basic design and planning for emergencyresponse. Theweaknessesthat appeared were in the preparedness level of individual small busine.,;ses and to someextent of the general purpose public agencies (as opposedto emergency related services). Small businesses in general had few resources to prepare for an earthquake. Large firms implementeda greater numberof responses quickly in part because they had made plans ha advanceto do so. Firms such as Bankof America,for example,had diverse locations throughoutthe region to whichthey could relocate operations as necessary. Single location retail businesses and somefinance, insurance, real estate, and service businesseswereparticularly vulnerable not only to the immediateimpacts of building damagebut also to the access effects of surrourlding damageand disrupted transportation routes. Assistance from Federal agencies also wasproblematic. At the least, there wasa great deal of confusion amongpotential recipients as to the type of aid available and eligibility requirements. Concernfor the future should also focus on the greater vulnerability of the economyto a quake centered closer to San Francisco or Oakland. While manybusinesses wouldagain be largely unharmed,the proportion experienckugsevere damagewouldbe muchgreater than that experiencedon October17, 1990. In addition, disruption to the transportation system could be muchworse. Small businesses generally do not have the resources to prepare for the recovery period to a major natural disaster. Thus, for the Bay Area economyto be able to operate again 39 quickly after another major earthquake, some attention is needed in advance to the likely needs of small business. 4O