Community Colleges React to Job-Training Requests By SLAV KANDYBA Staff Reporter From manufacturers to wholesale trade to the services sector, San Fernando Valley companies are having a hard time recruiting qualified workers, the results of a Cal State Northridge economic forecast survey found. Of 105 medium-sized businesses surveyed, most listed inability to find employees with the type of skills they sought as one of their top problems along with exorbitant worker’s compensation costs. “What that means is that they’re starting to hire people and the labor pool doesn’t have the skills they want,” said Daniel Blake, professor of economics and director of the San Fernando Valley Economic Research Center at Cal State Northridge, which did the survey. “It’s not as easy to hire people they want.” With the problem stated, solutions are in the works at the area’s community colleges, including L.A.Valley College in Valley Glen, Pierce College in Woodland Hills and Mission College in Sylmar. They have programs in place to train workers and match them with employers. The programs differ in scope and orientation, depending on location and local industries. In part as a response to the results of the forecast, which was presented May 25 at a Universal City breakfast summit, L.A. Valley College has initiated an effort to find out how it can help to train qualified manufacturing workers. The college will host manufacturing company representatives on campus on June 23 where it will ask for their input. “The purpose of the meeting is to identify specific training needs for employees in the manufacturing industry,” said Deborah diCesare, the dean of Economic and Workforce Development at the college. “Valley College strives to be responsive to the needs of businesses in the San Fernando Valley.” While Valley College has targeted the manufacturing industry, the Pacoima Workforce Development Initiative aims to be a pipeline for health-related employers. It has developed relationships with Mission College, which refers students to the program. Entry-level training Underwritten by the Valley Economic Development Center, a program called H.E.A.T., which stands for Help Entry Level Access Training, seeks to train Pacoima’s primarily poor Latino population for entry-level jobs in the medical field. The Initiative also offers financial literacy classes, a computer center, pre-employment workshops and placement services. It was started five years ago through L.A. Urban Funders and other funding. But H.E.A.T. is the Initiative’s golden egg. Since inception, 100 out of 109 participants in the program went through year-long training that led up to internships at local hospitals, including Kaiser Permanente and Mission Community Hospital, said Jenni Kwon, director of Workforce Development and Training at VEDC. Most of the internships have led to full-time positions, and more than 80 of them offer benefits to employees, Kwon said. The focus on healthcare is due to the region’s demographics and economy. With hospitals complaining about the lack of bilingual employers and 90 percent of the Initiative’s graduates being fluent in Spanish and English, it makes sense to match job seekers with employees, Kwon said. The region has a number of medical facilities, and there are opportunities for advancement in registered nursing. “Our programs can be good feeders for a higher level of professionals,” Kwon said. “We do have a specialized focus on health because it’s a booming industry and there are a number of healthcare facilities in the northeast San Fernando Valley.” Customized approach Meanwhile, Pierce College is taking an even more customized approach. In only two years of existence, the school’s Workforce Development Department is providing instruction for more than 30 Valley companies. The department employs Pierce instructors to teach specific classes at the companies’ offices. This type of training is a departure from Pierce’s traditional modus operandi. The community college has traditionally served a student population that sought to transfer to four-year colleges and universities, but administrators saw a change in the type of students that began coming in. The newcomers sought “to raise their skill level,” said Judy Trester, the Pierce’s program director. In return, she said: “We’re addressing the workforce and trying to keep up.” In 2002, Pierce surveyed 170 employers in its vicinity and documented specific skills that employers wanted to see. Then, presentations were made to department chairs, asking them to tailor class offerings. Pierce then built up the infrastructure of the development program, hiring Trester to lead it. It has since opened an auxiliary facility called the Pierce Business Center on Nordhoff and Mason in Chatsworth that functions as a standardized testing site. Trester said business communications and English as Second Language training are among the most popular class offerings for the self-funded department. There are also 350 online courses, to accommodate companies that prefer online learning to classroom instruction for their employees. One of the department’s major clients has been Agoura Hills-based Digital Theater Systems. When the training is wrapped up in August, Pierce will have trained most of the digital audio company’s workforce 120 to 150 people, Trester said. The project has taken a year, and during that time, a Pierce instructor went to the company’s site every Friday to spend six hours teaching employees in such areas as basic grammar and usage skills, e-mail etiquette, business writing do’s and don’t, creating a letter report, editing/proofreading business documents and language, Trester said. DTS has a number of employees overseas, and that training was important for that reason, she said. Other companies that are working with Pierce include regional offices of McDonald’s Corp., Scherzer International, Johnston Group, First State Bank, City of San Fernando, Boeing, Toyota, Rexam International and Alcatel. “We’ve had the backing of the president and the vice president,” Trester said. “If a person like myself doesn’t have the support of my administration, I really can’t move forward.”

Banks Offer Incentives to Move Online By SHELLY GARCIA Senior Reporter So you think banks haven’t given away anything since the days of hoola hoops and poodle skirts when a new savings account came with a free toaster? Look again. In an effort to convert more customers to online banking and bill paying services, banks have once again turned to freebies, but these aren’t your father’s toasters. Some banks are now offering to pay bills for you. And at others, there is cold hard cash waiting for customers who sign on for online bill paying. Why the newfound largess? Put simply, “It’s a race to win the customer’s relationship,” said Marge McNaught, senior vice president for lending and technology at Premier America Credit Union in Chatsworth. Banks and credit unions have been offering such services as the ability to check balances online or to transfer funds from one account within the bank to another since the late 1990s without much fanfare. But a study conducted by Bank of America Corp. several years ago showed that customers who used online bill paying were far less likely to switch banks and far more likely to increase the services they used from their bank. The study confirmed what some already suspected and began a groundswell among those who hadn’t. “Bill payment is a clear retention driver for financial institutions,” said Kevin Doohan, director of marketing at Digital Insight Corp., one of the major software players in the online banking industry. “So banks are pushing that.” The BofA study recorded an 80 percent lower attrition rate among customers that used online bill paying. And those same customers on average had deposit balances that were 38 percent higher and loan balances that were 45 percent higher than those who did not use the services. “Based on this study we decided that online bill pay was valuable in our strategy to building customer relationships and retaining customer relationships,” said Betty Riess, a spokeswoman for BofA. Free services Bank of America initially instituted online banking services with a fee charged to those who did not make use of other banking services. But as a result of the survey the bank began to offer free online banking to all customers, regardless of the other products they used, or didn’t use, at the bank. Two years after the fee waiver, the number of customers using the bank’s online bill paying soared to 10 million from 3.1 million. Bolstered by the report a number of financial institutions began offering online bill paying services free. Now, with free online bill paying the price of entry banks are upping the ante again. Premier America periodically offers $25 to customers who pay two bills online. Telesis Community Credit Union based in Chatsworth will enter online bill payers in a periodic random drawing. The winner gets a bill paid by the credit union, up to $500. And large, national banks are offering as much as $100 to sign up for online bill paying. “Once one of your competitors has it, you have to answer the call,” said John McCune, manager of financial institutions group research at SNL, an industry research company. “We’re at the point now that it’s becoming ubiquitous.” The number of customers using online banking and bill paying services is still small estimates are anywhere from 2 percent to 20 percent of each bank’s total customer base. That means there is plenty of opportunity still out there, but there is considerable resistance as well. “There’s still some uneasiness about how secure these systems are,” said Mike Gomez, CEO at Fiscal Credit Union in Glendale which has been offering online banking products for about a year and a half and recently added online banking statements. “You’re always seeing things about viruses and hackers and people getting control of your computer, so I think the biggest barrier is convincing people that the security on these things is pretty good and you probably have a greater chance of being defrauded by using a credit card in a restaurant.” Greater education Fiscal has formed a task force to try and determine what kinds of training and education employees need to sell the products. Others have set up demonstration stations in the branches in an effort to help acclimate customers to the new systems. “We’re putting PCs in our branches and walking new members over and trying to demo to them how easy it is,” said McNaught. At the same time, banks and credit unions have been feverishly expanding their online services, most recently moving into check imaging (which allows customers to view copies of their paid checks online), online statements, transfers from one banking institution to another and even nearly instantaneous e-mails showing funds deposited into accounts delivered directly to a PDA. The different services require a substantial investment of money and time to connect the software and make it all operational, but financial executives say that the investment pays off in several different ways, not the least of which is attracting the most coveted of banking customers, middle class folks likely to use a range of products from home mortgage loans to certificates of deposit and other investment services. “We figure it’s an investment in reducing lobby lines and calls coming into the center,” said Richard W. Cooper, vice president of government and community relations at Telesis. “It’s a great way to provide service and again, it’s the competitive issue, and in this day and age you want the middle income folks that everyone wants to have.”

Software Group Issues Guidelines on Offshore Work By SLAV KANDYBA Staff Reporter Offshore outsourcing is a hot topic in an election year, because from a political approach, it is about whether or not American jobs are being sent overseas and hurting the nation’s economy and Americans’ livelihoods as a result. The membership of the Southern California Software Council, a trade organization of the area’s software creators, knows it intimately well. Many Southern California firms have outsourced programming work to workers on other continents including the popular destination Bangalore, India, and St. Petersburg, Russia. The group met in Woodland Hills several months ago to discuss the implications of offshore outsourcing and to share experiences. Out of that, SCSC executives decided to produce a white paper that would unify the various positions and present the group’s official stance on the issue. “We are the only voice for the software industry in southern California, someone had to represent (software firms’ views),” said Hoshi Printer, president of the SCSC. “Things could be done politically that could be detrimental to the software industry.” The recently released 27-page paper, formally called “Offshore Outsourcing in Today’s Global Economy: Defining and Executing an Effective Strategy,” was primarily based on survey responses in addition to other research. It found most software firms were in favor of offshore outsourcing. This had been the general attitude of most of them, no secret. The paper, however, goes a step further to present scenarios and advocate, its other purpose about when offshoring is appropriate and when it is not. “The economics are widely in favor of offshoring,” Printer said. “I don’t want to minimize the effect on one person but if you take the economy as a whole, the overall conclusion is that we in the software industry will continue to offshore.” Helping growth The two major reasons: cost-effectiveness and the ability to help a company grow. Printer, a 40-year software business veteran, said the two reasons are hinged on each other “because if you’re not cost-effective, you can’t grow.” Printer also pointed out some rough edges in offshore outsourcing. For one, he said, continuous and clear communication is crucial due to “immense cultural issues” that arise when American companies offshore to places such as India or Russia. In addition, “Offshoring doesn’t work if it’s a highly complex project that can not be broken into discrete parts,” Printer said. Based on the results, he also advised about the speed of completion. “Don’t go offshore if you’re in a time crunch,” Printer said.” Among the results of the Software Council’s survey, published in the position paper: -92 percent of companies reported they have outsourced internationally. -55 percent outsourced to India; 20 percent to Russia; 12 percent to China; 10 percent to Ireland; 9 percent to Croatia; 4 percent to Canada; and 3 percent to Brazil. -63 percent said they outsourced for software development. -33 percent found offshore outsourcing met their expectations, while 25 percent said it didn’t. -79 percent said cost savings was the reason; 20 percent reported it was for offloading routine work -50 percent said communication and language barriers were a problem; 35 percent said the learning curve was a problem -53 percent said they planned to outsource offshore in the future, while 18 percent said they would not. Another 15 percent said “possibly” and 7 percent said “very selectively.” When it doesn’t work The paper also provides guidelines for when offshore outsourcing is appropriate when it is not. It advises firms to avoid offshoring if they are start-ups or organizations with new product development projects, have complex projects requiring multiple software teams or projects involving a company’s core competency; projects involving a company’s core intellectual property and “crash” projects created to help bring another project back to schedule, and attempt to gain immediate cost savings. The situations when offshore outsourcing is appropriate are maintenance, support and extensions to legacy code, “tasks that are generally considered less glamorous to U.S. developers,” the paper states. Also, the paper takes the position that ancillary projects, or “those that are not ‘mission critical” are good candidates for offshore outsourcing. Deepak Sharma, president of Santa Clarita-based Software Development Center, Inc., a company that matches IT firms looking to offshore outsource with programmers in India, was among SCSC members who helped work on the paper. He said beyond cost savings, offshore outsourcing is a positive move for “appropriate resource allocation, agility in getting projects done and competitive advantage in dealing with the marketplace.” Further, Sharma said: “Today more Americans can afford to start their own IT companies since they can use offshore outsourcing.” Sharma personally believes offshore outsourcing is here to stay. “It is a genie which has come out of the bottle,” he said. The Right…and Wrong Time Some SCSC guidelines for outsourcing: When Not to Offshore: -Start-ups or organizations with new product development projects -Complex projects involving multiple teams -Projects involving a company’s core competency -Projects involving a company’s core intellectual property (IP) -A “crash” project created to help bring another project back on schedule -An attempt to gain immediate cost savings When to Offshore: -Maintenance and support functions -Ancillary projects Source: Southern California Software Council

Retail Real Estate Expected to Thrive in Second Half REAL ESTATE By Shelly Garcia Several shopping center sales in the local area are reflecting recent projections that the market for retail properties is heating up. Pension fund Cornerstone Real Estate Advisors just purchased Northpark Village Square, an 87,595-square-foot complex in Valencia for $30 million. And Panorama Square Shopping Center a complex in Panorama City that has long been languishing, was sold for $11 million. The new activity comes as L.A. area retail properties overall see increased returns. According to a report recently released by Marcus & Millichap, the average revenue per square foot at L.A. area shopping centers has increased by more than 5 percent in a little over a year. The Marcus & Millichap study, which ranks L.A. as the No. 8 market for retail real estate properties based on high rent growth and vacancy rates, predicts that the economic recovery will increase property prices through the rest of this year. About 3 million square feet of retail space will be completed throughout L.A. this year, down from 3.9 million in 2003. But the limited construction coupled with expansion by national retailers is expected to strengthen the leasing market, the report said. “Vacancies are expected to decline by 69 basis points during 2004 to 4.5 percent,” the report revealed. A 4.7 percent rise in retail rents is expected, bringing the average rental to $24.24 per square foot. Northpark Village Square, at 27706-27776 McBean Parkway, was fully leased at the time of the sale. Tenants at the center include Ralphs, Rite Aid and Wells Fargo. The property was sold by Lennar Partners, which acquired it as part of the Newhall Land and Farming Co. portfolio. Michelle Schierberl, Tom Lagos and Ken McLeod, brokers with Grubb & Ellis, represented both the buyer and the seller in the transaction. The Panorama City center, an 87,771-square-foot complex anchored by Robinson’s May Clearance Center, sold for $11 million. Chris Thompson, a broker with Investment Real Estate Associates, represented the seller, Gold Realty Co. The buyer, Reliable Properties, was represented by Thompson and IREA’s Tony Lee. Gold Mountain Responds Officials at Gold Mountain Enterprises LLC took exception to the way I characterized the status of their mixed-use development parcel on Ventura Boulevard in Encino in the last issue. From their point of view the parcel, which is entitled for 125 apartment units and 17,000 square feet of retail space, “has been well received by several active apartment developers,” said Athena Novak, property manager at Calabasas-based Gold Mountain. Gold Mountain “has very selectively chosen to go into escrow with only a very few of the top apartment developers and apartment REITs,” she said. “However, one was not able to raise all their money before the close of our escrow period and others had requested unreasonable discounts from the agreed selling price.” She said that the company did not agree to further extensions and canceled the escrows. Gold Mountain is now in negotiations with what Novak said were a few of the largest public homebuilders in the country who are considering building luxury condominium units along with retail on the site. She added that the company, which took the property through the entitlement process before putting it on the market for sale, is also considering developing the site itself. Apartment Sale Grand Villas, a 104-unit apartment community in Sherman Oaks, was sold for just under $18.8 million. The complex, at 15101 Magnolia Boulevard, was acquired by Miles Cooperman Family Trust, Encino. The seller was The Bascom Group, Irvine. Dean Zander, David Casper, Joe Leon and Paul Runkle at Hendricks & Partners, represented buyers and sellers. Chatsworth Lease S2K Graphics leased a 32,000-square-foot facility in Chatsworth in a five-year deal valued at $1.2 million. S2K, formerly named Signs 2000, is a graphic design and marketing company that is moving from its Canoga Park headquarters due to expansion. The new facility is located at 9255 Deering St. Both the tenant and landlord, Northpark Industrial, were represented by Scott Caswell at Delphi Business Properties. Burbank Sale A 31,000-square-foot office building in Burbank has sold for more than $4 million. The property, at 1405 San Fernando Blvd., also included an adjacent land parcel. The buyer, Three D Properties LLC, was represented by Larry Iles and Ken Kneale at GVA DAUM. The seller, C & P; Properties #5 LLC, was represented by Charles Cusumano Real Estate. Multi-family Action A 28-unit Northridge apartment complex at 17941 Devonshire Ave. has been sold for $2,980,000. H. Bruce Hanes, president of Hanes Investment Realty, represented the buyer E. Tabash in the deal. Hanes Realty also negotiated five other apartment complex sales recently in Van Nuys, Studio City and Sun Valley. Among them, the company represented the buyer and seller in a deal for a 32-unit apartment complex at 8437 Glenoaks Blvd. in Sun Valley for $1,949,000. Senior reporter Shelly Garcia can be reached at (818) 316-3123 or by e-mail at [email protected].

Kitchen Not Too Small for Seven Sisters, Their Creations By JEFF WEISS Contributing Reporter Clad in lavishly embroidered green and white blouses, wearing black skirts, with long rainbow colored ribbons dangling from their hair, the seven Munos sisters smile and greet customers at Panorama City’s Las Huaresitas restaurant. Born in the Mexican state of Michoacan, in the Patzcuaro region, Graciela, Leticia, Rosa Maria, Dolores, Marielena, Cesilia, and Olivia have served up traditional Michoacan fare for the past year in the Plaza del Valle mall. A primarily Hispanic clientele waft in and out, clamoring for the restaurant’s speciality: gorditas. Gorditas were the impetus behind their decision to open the restaurant last June. The sisters had gained notoriety for their homemade gorditas that had caused Panorama City residents to flock to the girls’ home to purchase the thick stuffed corn tortillas. Eventually, business grew so rapidly that the seven sisters decided to take the next logical step and operate out of a storefront. The sisters range in age from oldest, 40-year-old Graciela, to 25-year-old Olivia, serving up the cuisine which differs from typical Mexican food because of its unique seasonings. One might imagine it difficult for seven sisters to peacefully coexist in such close quarters, yet the Munos’ claim it has been harmonious from day one. “It has been a very good experience. All of our unity has made things much easier. Our union provides strength,” said Cesilia Munos, who handles the business end of the restaurant as well as the stocking of merchandise. “All of the sisters participate in the cooking chores. “In order to make decisions, we all speak to one another. Everyone gets the chance to express their opinion and we decide on the best one together. People are always surprised when we tell them that we have never been in any major fights or anything resembling that.” Small establishment Las Huaresitas is small, with only five tables in the entire restaurant, with a bucolic mural of the sisters birthplace in Patzcuaro. Amid the smell of fried tortillas, cheese, and various meats, visitors to the restaurant gaze upon the region’s tranquil lake where villagers wearing wide brimmed white hats paddle in the shadow of a river valley. Brown and red mountains slop set against low-slung white, maroon-roofed homes. . “The first sisters to come here were Graciela and Leticia in 1976. Once they arrived they gradually sent for the rest of us until the entire family except for my parents had come,” Cesilia Munos said. “We came for the many opportunities to work. We are a very humble family.” The name Las Huaresitas translated into English means a pretty woman hailing from the Michoacan state and accordingly the food tends to stay close to the girls’ origins. The state is known for its lakes, beautiful scenery and delicious food. “I’ve been coming since they opened. I come for the food, the fresh tortillas, and the many different kinds of salsas. They are always very friendly and always smiling, “said Jorge Aguinaga, a customer and fellow Michoacan native. Relaxed atmosphere The girls’ affinity seems to be much more than rhetoric as they playfully banter and kid each other, constantly smiling and laughing at familiar inside jokes. According to the sisters, the loose and relaxed environment helps to keep any tensions minimal. The customers pick up on the familial atmosphere, often stopping to chat with one of the sisters while ordering up to 20 or 30 gorditas to bring back to work or their homes. “The food is great. Everything is great and the sisters are incredibly kind and make everyone feel very welcomed,” customer and Panorama City resident Danny Ochoa said. Since the business already had an established clientele when it opened, it has been no surprise that the restaurant has been consistently profitable. While the sisters enjoy working together, each of them eyes the future. “Our goal is that we hope each of us can own our own restaurant, serving up the traditional Michoacan food that we grew up with,” Cesilia Munos. “We all used to work at different restaurants in America and back home, but by far the best experience yet has been working together at Las Huaresitas. It has been wonderful each day. It is our own version of the American dream.”

L.A. Budget Mixed Bag for Businesses By JEFF WEISS Contributing Reporter Using a new priority-based budgeting system that heavily took into account the opinions of neighborhood councils, Mayor James Hahn and the Los Angeles City Council passed a budget that aimed to adversely impact local businesses as little as possible, city hall officials claim. The efforts of Councilwoman Wendy Greuel were instrumental in preserving funds allocated for business tax reform, a fact that will undoubtedly please the tax-weary business community in the Valley and throughout Los Angeles. However, the budget itself may result in businesses in Sunland, Tujunga, and Pacoima feeling the brunt of a $600,000 reduction for funding for nuisance alley closures that has negatively impacted the business climate of those areas. “We used a brand new priority-based budgeting process where we went to the neighborhood councils and had a budget day. We asked them what their top priorities were, what they expected the city to provide, and public safety was first in everyone’s categories except for the South Valley (whose number one priority was street, public safety was second),” Deputy Mayor Doane Liu said. “We ranked all of the services, put a price tag on them, and prioritized them. When we hit the $5.6 billion ceiling, we stopped. We established a budget with only minor changes, one of the smoothest budgets in history.” The budget succeeded in adding 30 new police officers to the beat, with six new command positions headed to the new North Valley Police Station in Pacoima, which is slated to open at the beginning of next year. Befitting the neighborhood councils’ concerns, DARE programs across Los Angeles have been suspended indefinitely, freeing up 70 officers to police the streets. While this year’s budget process was characterized by significantly less acrimony than in the past, City Council members found themselves chafing under tight budgetary constraints. Along with the $600,000 decrease in funding for nuisance alley closures, the Department of Aging budget will be reduced by $183,000 and six positions, the Commission on the Status of Women will see one position cut, and the Departments of Disability and Human Relations also face reduced funding. Furthermore, bulky drop off item centers intended to reduce illegal dumping and the bookmobile service will be shuttered. Alternatives sought “In my district there had been some communities where we were talking about nuisance alley closures. One was in Pacoima and there were a few other spots in my district, and now it won’t be a solution. However, there are other ways to look at it, such as adding street lights and power poles,” said 6th District Councilman Tony Cardenas. “We are just going to have to connect the dots in different ways and know that we can’t connect things as efficiently and globally as we have in the past.” Javier Herrera, president of the Pacoima Chamber of Commerce expressed disappointment about the decrease in funding but remained optimistic that solutions would be found. “We are trying to get more street lights in Pacoima and make the streets look better so we can get more people to stop and see the businesses,” Herrera said. “Obviously, the council has a budget and I think that things can be done with the budget so it can look more attractive to the community with the limited means that they have. We obviously would like more lights and the alley to be closed but we feel that they can do it with what they have.” Greuel, who represents the 2nd Council District which consists of parts of Sherman Oaks, North Hollywood, Sunland, and Tujunga, felt that the budget process went relatively smoothly considering the scarcity of funds available. Basic city services “It was a difficult year for the city because of the cuts in state funding and there was the fact that we had somewhat of a structural deficit. What was really important to me was the business tax reform fund. It was very hard to ensure that we had the reform fund slated into the budget,” Greuel said. “The other point to make is that we really focused on the delivery of basic city services. That’s the meat and potatoes and that’s what the neighborhood councils say is a big priority. We increased funding for things like street resurfacing in the city.” While talk had surfaced of building a bulky drop-off center in Sun Valley, one will not be built. While bulky items lingering on sidewalks can only hurt the business climate of a city, Greuel and the other council members believed that the effects of the bulky drop-off centers were negligible. “We heard from the Department of Sanitation that these centers did not meet their expectations. We heard that L.A. citizens weren’t using them and that very industrious people from other cities were dumping stuff into them,” Greuel said. “The department thinks that if they better educate the public to make them call for pickup of bulky items, it will do just as good of a job to eliminate the problem. I’ve been working hard in my district to have a bulky item drop off day every now and then, versus every day and every week. Everyone thought the centers didn’t meet expectations.” Budget Highlights – Los Angeles -30 additional police officers hired -Suspension of the DARE program and shifting of those officers to the streets -$600,000 cut in funding for nuisance alley closures -Elimination of bulky item drop off centers -Elimination of Book Mobile service -Departments of Aging, Disability, and Human Relations will see reduced funding -Commission on Status of Women has one position cut California -$2 billion in higher than expected tax receipts allow steep cuts to be spared for health services for the poor, transportation, and other social services -Cal State and UC systems will see reduced funding this year, in exchange for a guarantee of increased money starting in 2005-2006. -Cal State Northridge forced to reduce total of full-time students from 24,390 to 23,172. -Cal State Northridge tuition next fall will rise 14 percent for undergraduates, 20 percent for students in the teacher training program, and 25 percent for graduate students -Tuition at California community colleges will go from $18 to $26 per unit

Small Firms Forced to Practice ‘Lean’ Manufacturing By SLAV KANDYBA Staff Reporter Traditionally thought to be applicable only to manufacturers with high volume production, a method called “lean manufacturing” is making its way into smaller firms in part as a voluntary move, in part because it is the only way they can survive. San Fernando Valley manufacturers, many of which are aerospace-industry oriented, have had a pickup in business so far this year thanks to improvement in the commercial airline industry and increase defense-related orders. But, the big guys are asking the little guys to perform faster and cheaper than before. And that’s where lean comes in. Lean manufacturing is essentially a technique that involves making parts more efficiently through concentrating all machines and tools in one area, as opposed to different areas in one facility. Also, it involves setting up the workplace with parts better identified by signs and colors. Glendale-based Steer Engineering, a 300-plus employee subsidiary of Eaton Corp., has sponsored a lean manufacturing training program for firms on its supply chain. The first installment of the 10-month program was funded by the federal and state governments, as well as Eaton, and concluded this month. To have 50 percent of the training paid by the funds, “suppliers needed to demonstrate they were affected by global competition,” said Tom Mendoza, Steer’s supply chain manager who selected the participants, two of which were Valley-based. The companies were Riggins Engineering in Van Nuys and Valencia-based True Position Technologies. During the training, lean experts taught company representatives in a classroom setting the various parts of lean, including how to reduce waste and non-value added time, or essentially time when parts are not being manufactured and go through other processes such as transportation from one machine to the next. Mendoza said he was planning to continue the workshops. “I’m going to get another set of suppliers, probably in another two months,” he said. How soon training will start will depend on how quickly government subsidy is secured, Mendoza added. Joe Grossnickle, president of Riggins, which employs 40 and manufactures aerospace, military and commercial aircraft parts, is resorting to lean training out of necessity. Although he has been familiar with lean for about three years, when the company’s management began reading literature on it, he didn’t decide to approach it until being “invited and strongly encouraged” by Steer. “Our customers are insisting that we implement lean and demonstrate that to them or they don’t really want to do business with us, because there’s no opportunity for them to reduce prices,” Grossnickle said. It is too early to tell if Steer workshop results will translate to savings in Riggins’ bottom line, he said, but there are positive signs. For instance, the team of newly trained-in-lean Riggins employees reviewed workflow on a job that Riggins “has been running for years,” Grossnickle said. They eliminated three operations, combined them with others, and reduced the setup time from 16 hours to five. And that serves an important purpose: “When a customer comes back and demands reduction of 5 percent, there’s something to talk about,” Grossnickle said. Another company starting to get into lean is EFS Aerospace, a Valencia-based company that employs 175 and manufactures hydraulic parts for military and commercial aircraft. Training course It sent some employees for a 10-week training sponsored by Lockheed Martin, one of its customers, said EFS President Brian Barrett. The cost of the training was also offset with state funding. The next step, Barrett said, will be to send one management employee to Spokane, Wash.-based Triumph Composite Systems, a firm owned by EFS parent Triumph Group, based in Philadelphia. “(The EFS employee sent to train) will come back and be our lean implementer,” Barrett said. Barrett said all Triumph companies were getting lean training at that facility, which was once owned by Boeing. The defense contractor had invested resources to have it operate lean, so it serves as a model for other firms. Overall, the main benefit Barrett sees in going lean is in cost reduction. “In the industry we’re in, aerospace companies are asking for regressive pricing. They expect us to be more efficient, so that translates to lower price,” Barrett said, “so we can continue to make money although we’re selling for less.” On a general note, he said, “aerospace industry hasn’t accepted lean because it was thought of as something that is for high volume (manufacturing). That was conventional thinking people are slowly understanding (it can be) applied. Aerospace has been slow to get on board, but it’s been catching up very quickly.” Lean expert Robert’s Tool in Chatsworth has had much success with lean since implementing it in 1999. The company was introduced to lean by its customers, including Eaton, and eventually hired a lean expert. That person is flown in and put up in a hotel every week to train Robert’s Tool employees, said company president Brad Hart. Because it implemented lean, the firm was able to overcome the economic downturn after Sept. 11 and is better fit to compete with China, which offers cheaper labor, Hart said. Implementing lean techniques, Robert’s Tool is able to fulfill orders much faster than its competition, and geared up to serve the defense sector. As result, revenues nearly doubled, from $7 million to $13 million, with an addition of about 15 more workers. “Because of this, we’ve picked up customers all over the world,” Hart said. The cost of transitioning to lean is a hurdle at Arleta-based Superior Thread Rolling. “I kind of hit the plateau,” said owner Tom Lundy. He couldn’t afford to keep putting money into training because of Sept. 11. Nevertheless, Lundy observed the shift to lean is a major change for the industry. “It’s a real paradigm shift in the way manufacturing has been done,” he said.

As Busline Revs Up, Businesses Take Hit By SLAV KANDYBA Staff Reporter As workers donning orange hard hats work away on the Metro Orange Line busway project in Canoga Park, some nearby businesses are hurting because of a street closure associated with construction. The Orange Line, an ambitious 14-mile bus route that will connect East Valley to the West from North Hollywood to Woodland Hills is about 30 percent done now, and is scheduled to be completed in August 2005. But Nader Naziri, owner of Warner Jr. Market, a liquor store in a strip mall on the northwest corner at the intersection of Victory Boulevard and Variel Avenue, wishes that date came sooner. His business has been hit hard by closures of the parking lot entrance on Variel and the shutdown of westbound lanes of traffic on Victory. “As long as they have worked here, business is down 60 to 70 percent,” Naziri said. “A lot of my customers are from the office buildings they don’t have time to stand in line in the street (waiting to make a left turn).” Naziri is not an opponent of the busway, however. He said he anticipates the Orange Line when completed would bring him more business. But before that happens, he is barely able to afford paying the $2,000 in rent for the store. “I pay the rent from my pocket,” Naziri said. “The busway is very good but if it goes like this, I’ll lose everything I have.” Construction is in progress throughout the Orange Line route with four out of 33 intersections due to close or partially close, said Roger Dames, deputy executive officer and Orange Line project manager. Intersections already completed are along Tujunga Avenue, Laurel Canyon Boulevard, Whitsett Street and Balboa Boulevard. Twelve intersections are now under some traffic control restrictions, Dames said. The contractors working on the busway have construction workers working on both the east and the west side, “sort of moving together,” Dames said. After demolition and clearing, he explained, a fiber optic communication system is installed along the route. This “conduit phase” of the project is 90 percent finished, Dames said. After that, other construction phases, including laying of concrete, take place. “We’re 95 percent complete on the design,” Dames said. By the end of June, workers will start construction on some of the 13 stations along the Orange Line route. The western terminus on Owensmouth Avenue between Erwin and Oxnard streets is already under construction the street will be closed for six months to accommodate the work. With upcoming street closures, Dames recognized some businesses may be inconvenienced. “We require the contractor to maintain access to all businesses,” Dames said. “To the extent of reducing a six-lane street to four lanes, inevitably that creates traffic congestion and because of that, it creates problems for business. We recognize that and try to maintain some type of point of access for businesses.” In the same strip mall as Warner Jr. Market, Jim Baker, owner of Computer Repair Center, has persevered through construction. He said it has started in January and has affected his business only slightly. “I don’t directly suffer as much as other people here,” Baker said. “My customers don’t have a lot of choice. They make their way through.”

Lenders Prepare for Life After Strong Refinance Market By SHELLY GARCIA Senior Reporter Maybe the refinance market hasn’t dried up yet, but home mortgage lenders are beginning to act as if it has. Banks and credit unions are readying a variety of new product rollouts including expanded adjustable rate mortgage programs, new home buyer mortgage strategies and attractive home equity lines of credit in hopes of replacing some of the refinancing volume they anticipate will be lost as interest rates move upward. “We have hit the magic 6 percent level in fixed rate lending,” said Rich Gale, a board director with the California Mortgage Bankers Association and division president of Provident Bank. “We’ve seen a dramatic decrease in fixed rate demand at these levels. So it seems like refis will slow down dramatically.” After two years of record lows, mortgage rates began to climb upward late last year, resulting in a falloff of refinancing activity and spurring some to plan for alternatives. But just when most thought the upward swing would continue, mortgage rates in March fell to their lowest levels in a year, surprising the market and fueling another refinancing boom. That unexpected shift has made onlookers reluctant to predict the future, but with rates now in the 6.2 percent to 6.3 percent range versus 5.2 percent at this time last year, and evidence that the economic recovery will be sustained, most are planning for the increases to continue. Drop expected That means that the refinancing market, which over the past two years has accounted for some 60 percent to 70 percent of all residential mortgage activity, will likely fall off to about 20 percent of new mortgages, and lenders will have to look elsewhere to make up the lost volume. “Anybody managing a mortgage banking company today has to go after the home equity market,” said Gale. “We have to reemphasize and continue to build a sales force with loan agents that have good relationships with builders and Realtors, do more second deed lending and come up with a more complete menu of adjustable rate programs.” For Wells Fargo, which is planning to increase its market share in purchase mortgages by 20 percent over last year, it also means putting additional emphasis on the first time buyer and ethnic markets. “The largest gains in home ownership will be minority buyers so we have a substantial effort in that segment,” said Brad Blackwell, national sales manager for Pacific markets at Wells Fargo Home Mortgage. Wells is opening 30 standalone mortgage branches in ethnic areas. The company, which already operates one such branch in the city of San Fernando, will also open in Pacoima and Burbank. Along with those new locations, Wells plans to hire 250 to 300 additional loan officers familiar with the cultures and fluent in the languages of the ethnic areas where it will locate. For first-time buyers the bank has also expanded its Easy-to-Own program, specifically targeted to California where home prices have soared. The program gives those who earn up to 80 percent of the area median income a subsidized interest rate, about 1 percent lower than market rate. In April the program was expanded to offer no money down loans to those who earn up to 120 percent of median income. Washington Mutual has also put renewed focus on home purchaser mortgages. “What we have been doing since last fall and really throughout the refi boom was to focus on purchase borrowers,” said Harry Tomlinson, senior vice president at Washington Mutual. “We’re not doing anything different there, but with interest rates rising, they’re becoming a bigger focus.” When rates hovered in the low 5 percent range, a majority of home buyers and owners opted for fixed rate mortgages. But now that the rates are moving upward, adjustable rate mortgages, tied to changes in the market, can often offer lower payment options, at least in the short term. At WaMu adjustable rate mortgages accounted for 53 percent of the home loan origination volume in the first quarter of 2004, up from 27 percent in the comparable period last year. The bank plans to roll out a number of new lending programs later this summer, but in the meantime, it has tweaked some of its existing programs to attract more business. Increased flexibility WaMu has made its loan to value ratios more flexible and it has increased loan limits to accommodate some of the rise in real estate prices. It has also revisited its credit standards, making modifications that make it easier for those with non-traditional types of income for example to qualify for loans. “We have modified a good number of credit standards, and as a result, we’re seeing some borrowers we had not seen before,” said Tomlinson. Banks have been loosening lending criteria for some time as home prices have risen and the economy has shifted to include a larger population of people whose incomes do not fit the traditional lending profile. Those considerations bankers say, will become even more important going forward. “We have very flexible underwriting guidelines taking into account that all home buyers don’t fit in to the standard mortgage underwriting mode,” said Blackwell. “For those with low or no credit, we’ll construct an alternative credit profile. Second, we will allow a portion of the income to come from cash income. And then we do have trained underwriters that are accustomed to looking at the risk of borrower with alternative incomes to determine whether it’s a good risk or doing the right thing for the home buyer.” Finally, lenders say, they expect to see increased activity in home equity lines of credit.

Productivity of Manufacturing Jobs Critical for California Capitol Punishment By Gregory N. Lippe Over the past year, California lost 39,600 manufacturing jobs. In the three-year period from 1999 to 2002, 261,000 manufacturing jobs and $98 billion in gross sales of California-manufactured products vanished. The primary reason for this decline continues to be California’s higher cost of doing business. Other reasons include a legislative and regulatory environment in California that has been increasingly hostile to the creation of manufacturing jobs. According to a recent report by The Keystone Group, a collaborative of Southern and Central California economic development organizations, local land use policies have exacerbated this environment. The report found that local land use decisions are increasingly driven by the desire of cities and counties to gain sales tax revenue. As a result, these cities and counties would prefer to have their land utilized by sales tax revenue generators such as automobile malls and “big box” retailers instead of by manufacturers. Since the report also found that manufacturing development would create between three and four times as many total jobs as retail development, the result of these decisions is a significant decrease in total jobs. California companies continue to find that outsourcing the manufacturing of certain product lines to other states or countries and, in some cases, moving their entire manufacturing operations to foreign soils can make the difference between earning a profit or suffering a loss in our state’s highly competitive environment. To soothe the frustration of those whose jobs have been displaced, some officials and economists are professing that outsourcing is actually healthy for the economy and is a natural effect of the global economic system. They say that shedding the lower skilled jobs that can be performed more efficiently elsewhere enables our work force to be trained for higher skilled jobs that will result in these employees having a higher quality of life in the future. Flawed concept Unfortunately, there are two significant flaws in this concept, first, not everyone is capable of being trained to perform a higher level job and second, those who are trained for the higher level jobs will soon find their new jobs being displaced because other countries are already providing highly skilled talent at lower labor costs than many of our unskilled jobs. Additionally, there are consulting firms that specialize in “offshoring,” helping companies to cut costs by sending work to India, the Philippines and other nations with cheaper labor. California is simply not playing on a level field. There are other states that have significantly lower labor costs because they don’t have legislation requiring many of the costly employee benefits mandated in California and there are foreign countries that do not require payment of, what we would consider, a living wage. If we continue to allow the displacement of jobs to other states and countries we could find ourselves in a downward spiral that we will not be able to stop. Instead of driving businesses and jobs out of California by mandating costly benefits and creating a hostile regulatory environment, why aren’t we thinking about providing incentives such as reinstating the manufacturers’ investment tax credit and encouraging land use for manufacturing facilities? California assembly? The Los Angeles region once had flourishing Chrysler and General Motors assembly plants. Now Chrysler manufactures most of its vehicles in Canada or Mexico and although General Motors still manufactures a number of it’s vehicles in the U.S., it also uses Canada and Mexico. I encourage anyone who has creative ideas as to how we can save and increase manufacturing jobs in California to write your legislators or me c/o the Business Journal. I will forward them to the appropriate legislators. Anti-business bills The anti-business bills I have chosen to profile this month are as follows: -AB 2889: This bill makes employers liable for all types of harassment (racial, disability, religious etc.) by clients, customers, and other third parties, over whom the employer has no control, when the employer “knew or should have known” of the harassment, and failed to make “reasonable efforts” to stop it. The potential effects are increased insurance costs, legal costs and damages, resulting in increased product costs, lower profits and possible lay-offs. Status: Passed Assembly May 20, 2004, currently in Senate. Valley Assemblymembers voting for bill: Koretz, Levine, Montanez, Pavley. Valley Assemblymembers voting against bill: Richman, Strickland Valley Assemblymembers absent, abstaining or not voting: Frommer -SB 557: This bill places a per-board-foot user fee (constituting a tax) at the point of purchase on lumber produced within California. The fee is to be used for timber restoration, fire risk reduction, timber harvest plan review and creation of new environmental programs. This fee or tax penalizes California lumber and imposes a collection task on retailers. Status: Passed Senate Jan. 26, 2004, currently in Assembly. Valley Senators voting for bill: Alarcon, Kuehl (author), Scott. Valley Senators voting against bill: Knight, McClintock. Valley Senators absent, abstaining or not voting: Margett. Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based CPA firm of Lever, Lippe, Hellie & Russell LLP (LLHR) and a director of the Valley Industry and Commerce Association (VICA).