Forecast: Valley to Add 11,000 New Jobs By SHELLY GARCIA Senior Reporter The San Fernando Valley economy will get a substantial boost this year, as a recovery that began in 2003 moves into full swing. That’s the conclusion of the CSUN Economic Forecast of the San Fernando Valley and the Los Angeles region about to be published this week. The report, produced by the San Fernando Valley Economic Research Center at California State University Northridge, reveals a surprising countertrend in the Valley, where job growth outpaced that of the county last year and where job and income growth will lead the overall region in 2004. “Frankly both in the survey that we did for this and the numbers we collected from the Employment Development Department I was a little bit surprised,” said Dan Blake, director of CSUN’s Economic Research Center. “I didn’t think it would be that strong in 2003. It clearly got a good start in 2003 and that is continuing.” The forecast, which is based on a model that takes into account last year’s trends, data from a variety of sources including the state’s Employment Development Department as well as the results of a survey of hundreds of Valley businesses, projects that the Valley will add 11,000 new jobs, accounting for 1.7 percent of the area’s total jobs. The increase follows a threefold boost in the number of new jobs in 2003. Most of that growth will come from the professional and business services sector, health care and information services, which includes the entertainment industry. Temporary jobs will make up the bulk of hiring in the professional and business services sector, which is expected to add a total of 4,400 jobs in 2004, compared to 1,400 jobs that were added in the sector in 2003. The health services sector, which in 2003 added 2,800 jobs, is expected to add that same number of positions this year. The construction industry, which last year lost a small number of jobs, this year is expected to add about 1,000 jobs. And a sector the forecast defines as the information industry, including entertainment and media companies of all kinds as well as Internet services, library workers and retailers like movie theaters and video rental stores, is expected to add 2,000 new jobs after losing 500 jobs last year. The Entertainment Industry Development Corp. has already seen signs suggesting renewed strength in the industry. Although the agency does not measure job growth, it does track the number of permits issued for all types of filming, including features, television, commercial production and music videos. “For the year to date through April we’re up about 16 percent over last year,” said Steve MacDonald, president of the EIDC, “so that’s a really good sign. We’re hoping that it results in jobs.” Leaving Canada Also encouraging, MacDonald said is the favorable exchange rate that the U.S. has enjoyed over Canada, which appears to be shifting at least some production back to domestic locations. During 2003, the Valley added a total of 6,247 jobs, three times as many as were added in the prior year, for an average of 660,673 jobs over the year. That compares with only 2,004 jobs added in 2002. Some of that growth came from areas expected to decline this year. The leisure sector, for example, which includes hospitality, restaurants, arts and entertainment, picked up 2,500 jobs in 2003 but will drop about 800 jobs this year. And financial activities, which includes banks, brokers, insurance companies and real estate, will add about 1,600 new jobs, down from 3,000 jobs added in 2003, largely as a result of the anticipated decline in refinancings that drove up employment in the sector in recent years. But generally, the Valley is expected to benefit from the varied mix of businesses it houses as well as an anticipated upturn in the county economy overall. “Given that growth is going to resume in L.A. County, that will spread benefits to the Valley,” said Blake. “But it seems that without that growth through L.A. County that the Valley improved by itself.” The Valley’s recovery has not only outpaced the county to date, it also runs counter to a statewide trend that shows California’s job growth lagged well behind that of the nation. Although 300,000 jobs were created in the nation in the month of March, California added a mere 21,000 jobs, despite the fact that the state accounts for the largest percentage of the national labor force. There are several reasons for the disconnect, chief among them the weak economy that continues to plague Northern California and the greater expense involved in adding jobs in California as a result of the state’s health insurance and workers compensation costs, Blake said. Because of those costs, employers often choose paying overtime as business improves rather than hiring on new workers. L.A. County has been impacted by those same dynamics, but in the Valley, where manufacturing accounts for a smaller percentage of the overall economy, and where areas like entertainment and business services are rebounding, the problems of the manufacturing sector have not had the same effect on growth. “One of the reasons for the difference in performance is manufacturing,” Blake said. “L.A. County lost 6.4 percent of their manufacturing jobs last year whereas the Valley lost 2.8 percent. So obviously they have to generate a lot more other jobs elsewhere to make up for that loss than we do here. So whatever job growth we had in other areas counted more out here.” Manufacturing continues to be the weakest sector in the Valley economy, losing 3,000 jobs in 2003. “We’re looking for a loss in manufacturing,” Blake said. “It isn’t quite as bad as last year, but it is a loss.” Stemming the flow? The Valley’s manufacturing sector is expected to shed 2,300 jobs in 2004, but the study suggests that the worst may be over. By 2005 Blake said, that number should drop to about 500 jobs. Perhaps just as important, the drop-off in manufacturing employment is not having a commensurate effect on allied businesses, Blake said. Typically, when the manufacturing sector is weak, it has an effect on allied services like marketing, retailing and financial services, but that has not happened to the extent that might be expected because manufacturers have continued to produce at significant levels despite the lower levels of employment. “They’ve actually experienced output growth,” Blake said. “The competitive pressure is so great on them to meet prices and competition from elsewhere they have been the focus of all the productivity gain, so it isn’t quite the drag on the economy that it would be if they weren’t experiencing these productivity gains.” Perhaps the most significant change in the employment picture for this year is an anticipated real wage growth, which did not occur last year even as jobs were added. According to the forecast, inflation adjusted wages last year went down to an average of $43,800 in the Valley from $44,500 in 2002. In 2004 the forecast projects real wages will rise to an average $45,400. “When you start increasing hiring then naturally you attract people in and compete for some of the good workers out there and that tends to raise wages,” said Blake. Thanks to both an anticipated increase in the number of jobs and the projected wage growth, total payroll for the Valley will actually rise even higher, Blake added. The results of the Economic Forecast, which also covers population growth, consumer spending, real estate and construction activity, will be presented Tuesday, May 25 at the second annual San Fernando Valley Economic Forecast conference at the Sheraton Universal Hotel. Copies of the report are included in the cost of the conference – $110 for those who register after May 14. Afterwards the report is available for purchase for $75. Also on the conference schedule are presentations by Mark Schniepp, director of the California Economic Forecast, who will provide a regional forecast for Los Angeles County and Blake, who is also a professor of economics at CSUN and will present the forecast results. The keynote address will be given by Gary Zimmerman, an economist with the Federal Reserve Bank of San Francisco who will provide a national outlook focusing on manufacturing and the high tech industries.

Foot Locker Finds Fit in Footaction By SHELLY GARCIA Senior Reporter For years Footaction stores and Foot Locker stores competed side by side in many of the same malls in the San Fernando Valley. The rivalry will continue, but now the two retailers share a common ownership. Footaction, an athletic footwear retailer, was sold to one of its biggest competitors, Foot Locker Inc., in a deal that closed a few weeks ago. Although both store groups sell athletic footwear and both are located in the same shopping malls, Foot Locker plans to retain the Footaction group as a separate brand. Foot Locker acquired about 350 of the Footaction stores from Footstar Inc., which also operates Just For Feet, in a cash deal valued at $225 million. Footstar, which is in Chap. 11 reorganization, had previously shuttered its unprofitable stores, a move that included the Footaction unit located at Westfield Shoppingtown Topanga in Canoga Park. But the Footaction stores in other Valley malls, including Glendale Galleria and Northridge Fashion Center, were included in Foot Locker’s acquisition and will remain open. That means both malls will continue to include both Footaction and Foot Locker. The move is not unlike what’s been done by a number of other retailers that have merged units serving similar customers. Federated Department Stores Inc. operates Macy’s and Bloomingdale’s, for example, in many of the same shopping centers. Foot Locker officials said in a conference call last week that they plan to rearrange the assortments at Footaction so that about 25 percent to 35 percent of the merchandise is distinct from Foot Locker’s inventory. In addition they plan to add sports apparel, which has been accounting for an increasing portion of sales at Foot Locker, to Footaction stores, which have carried very little apparel. Foot Locker has moved quickly to integrate its systems into the Footaction stores. The company said it would be conducting sales to clear out the current inventories over the next few weeks and it plans to have most of the new assortments in place for the back-to-school selling season which begins in mid-July. Footaction stores are expected to add 10 cents a share to Foot Locker earnings in 2005, officials said. The acquisition, Foot Locker’s first since 1997, increases the number of stores the New York-based retailer operates by 10 percent to 3,936 units here and abroad. Footstar was dogged by accounting irregularities for several years before filing for bankruptcy in March. As part of the reorganization plan, the company closed 88 of its Just For Feet units and 77 Footaction stores. Soon after the announcement of the closures, Footstar inked a deal to sell the remaining Footaction stores to Foot Locker.

K-Swiss Slowed In Footwear Race After Giant Feud By SHELLY GARCIA Senior Reporter A long-running feud between the world’s biggest athletic footwear maker and the country’s largest athletic footwear retailer left K-Swiss Inc. wide open to score big over the past year and a half. But in the end tiny K-Swiss was out of its league. After picking up big increases in sales and earnings in 2003, Westlake Village-based K-Swiss said it expects to report lower earnings per share in the coming quarter than it did a year ago, and the company said it would not meet previously anticipated projections for revenues and earnings for the full year. K-Swiss has still got game the company expects full year revenues in the range of $460 million to $480 million and earnings somewhere between $1.40 and $1.50 per diluted share. At the low end of the estimate, that would amount to a 7 percent rise in revenues and a 6 percent increase in earnings per share over the 2003 period. But those estimates are down from initial projections of $490 million to $510 million in revenues for the year and earnings of $1.50 to $1.65 per share. Worse yet, K-Swiss said its second quarter earnings would fall sharply on a year-over-year basis and its revenues would be flat versus the second quarter of 2003. The news sent Wall Street calling foul; analysts in turn downgraded their estimates and the share price for K-Swiss plummeted 20 percent after the late April announcement. On Thursday, May 20 shares in K-Swiss closed at XX, down XX from $24.53 a share on the day before the announcement. “We expect K-Swiss results to be hurt by Foot Locker over the next couple of quarters,” wrote Margaret Mager, an analyst with Goldman Sachs, “however we think the business will stabilize by 4Q as K-Swiss begins to anniversary the Foot Locker reductions.” (Goldman Sachs maintains an investment banking relationship with K-Swiss.) The major reason for the decline is an anticipated falloff in business with Foot Locker Inc., a national chain with more than 2,000 store outlets that had been increasing its business with K-Swiss consistently since late in 2002. Retail dispute That’s when Foot Locker and its biggest supplier, Nike, squared off over the athletic shoe manufacturer’s policy of requiring stores to accept less popular styles in return for access to its biggest sellers. To cope with the less desirable inventory, Foot Locker offered customers so-called BOGO promotions, buy one pair at full price and get one at half price, a marketing tool Nike viewed as cheapening a brand it spends in excess of $1 billion annually to build. Nike canceled a portion of its shipments to Foot Locker and Foot Locker cut an even larger portion of its orders to Nike, giving a host of other manufacturers the chance to vie for an estimated $250 million to $500 million in orders that would otherwise have gone to Nike. “This opened up a world of opportunity for other brands to get shelf space in Foot Locker stores,” said John Shanley, managing director of Wells Fargo Securities LLC. K-Swiss, along with other niche manufacturers like Puma and majors like Reebok and Adidas all saw increased orders from Foot Locker, but for a small company like K-Swiss the effect was even more dramatic. By the first quarter of last year, Foot Locker had grown to represent about 30 percent of total sales at K-Swiss, and the company’s performance rocketed upward. For its full 2003 year ended Dec. 31, K-Swiss reported net income soared nearly 75 percent to $50.1 million and revenues rose nearly 50 percent to $429 million. As business boomed, so too did K-Swiss shares, nearly doubling through 2003 to a high of $48.84 before a two-for-one stock split late in the year. Then the proverbial other shoe dropped. As the dispute ran on, Nike had reallocated a significant portion of its inventory to Footstar Inc., which operated 429 Footaction and 88 Just For Feet stores, but early in March, the financially troubled company announced it would close about 165 of those stores, sending Nike back out onto the court for additional sales outlets. Nike and Foot Locker patched it up. “Now you have the opposite working against them,” said Mitch Kummetz, senior research analyst with D.A. Davidson of K-Swiss’s current predicament. “You’ve got Nike doing more business with Foot Locker and Foot Locker is allocating more dollars toward Nike and that’s going to come from somewhere else.” Slow in growth K-Swiss’s just released first quarter results showed no ill effects of the renewed relationship between Foot Locker and Nike. The company reported net earnings rose 59.5 percent to $21.8 million for the period ended March 31 and revenues increased 31 percent to $152 million. But in the company-issued guidance for the second quarter, K-Swiss said it expected sales in the neighborhood of $111 million to $117 million and earnings per diluted share in the range of $0.28 to $0.33 cents. For the comparable quarter of 2003, the company earned $0.67 on sales of $111.8 million. “Foot Locker’s decision to cut back on their futures has slowed our rate of backlog growth, and we have adjusted our guidance to reflect that,” Steven Nichols, K-Swiss president and CEO said in a conference call to analysts late last month. Last year at this time, Foot Locker accounted for a 28 percent backlog in orders at K-Swiss, but going forward, the company said it was looking at a 35 percent decline in its future orders, largely due to Foot Locker. “Cutting back on Reebok is relatively insignificant,” said Shanley, “They’re over $2 billion in revenues. Cutting back on K-Swiss, which is a $400 million company, it’s more than a hiccup. It can give you a dose of cardiac arrest.” Analysts were mixed in their response, with some, like Shanley and Mager, regarding the situation as temporary. At the least, they said, K-Swiss’s orders with Foot Locker have ranged from a high of 35 percent of the company’s sales to a low of 13 percent, which would indicate that the falloff in business with Foot Locker is not likely to erode much further. But others reasoned that K-Swiss may not have lost as much Foot Locker business as it had if its line had broader strength than The Classic, a white-on-white shoe that has long represented the bulk of K-Swiss’s sales. With a shift in fashion to more colorful athletic shoes, coupled with Nike’s return to Foot Locker, analysts like Kummetz lowered the stock’s rating from “buy” to “neutral.” “I’m a little worried about the back half of the year,” Kummetz said.

Still No Takers for Ventura Boulevard Mixed-Use Project REAL ESTATE By Shelly Garcia You might think buyers would line up for a project that’s already entitled, especially in L.A. where getting approval for building, especially when it’s controversial, is so difficult. But six months after the owners of the first-ever residential project to be entitled on Ventura Boulevard was put up for sale, there is still no buyer in sight. Well, no firm buyer at least. The property has been in escrow twice since it was put on the market last October. And many more potential buyers have looked at the site, 1.7 acres in Encino entitled for a 73,000-square-foot development with up to 125 apartment units and 16,000 square feet of commercial space. The biggest impediment, according to some of the developers who have looked at the site (and even bid on it) is what could turn out to be an extremely expensive hill that would have to be cut back and held with a retaining wall. As one developer put it, “It’s one big mother of a wall.” The hill would make developing the site so complex, that some developers have said it’s virtually impossible to estimate the potential cost. Added to a $12.75-million asking price for the property, there’s been a decided lack of enthusiasm on the part of potential buyers. Stephen Lampe, an investment specialist at Marcus & Millichap who is marketing the property, said he is confident that the right buyer will come to the table. “I personally think the property is priced very fairly,” Lampe said. “It’s priced very well as an apartment complex and even more favorably from a condominium development standpoint. The thing we’ve had is the buyers coming to the table have been trying to reinvent the wheel with respect to changing or modifying the project.” Oddly enough, some of those who have looked at the project seriously so far are interested in building something other than what it’s entitled for. That’s ironic considering that it took more than two years for the owners, Gold Mountain Enterprises LLC in Calabasas, to push the project through the approval process as a residential complex. The idea of building apartments on Ventura Boulevard is brand new, and city officials were pressured by the community, single-family home owners who live just behind Ventura Boulevard, that vehemently opposed the idea. What ultimately convinced the city was the fact that Ventura Boulevard is a transportation corridor, and they hoped that by locating apartments in walking distance of shops and public transportation, they could take a small step toward creating a network of urban villages, neighborhoods that would be less reliant on the cars that threaten to bring the city to a standstill. Not to mention that the city needs housing, and Ventura Boulevard could become a premier address in the Valley. Westlake North Sold Westlake North Business Park, an office development completed just two-and-a-half years ago, has been sold to a pension fund for an estimated $250 a square foot. The property, which includes two buildings totaling 198,558 square feet at 30699 Russell Ranch Road and 30721 Russell Ranch Road, was acquired about five years ago by Investment Development Services Inc. David Mgrublian, CEO of IDS, said the buildings were put on the market in February. “With class A, well built office buildings there’s not a lot to analyze,” he said. “If you’ve got a long term belief in the Conejo Valley, it’s a great investment.” Mgrublian declined to discuss the purchase price, but he pointed out that the property, which has just under a 10 percent vacancy rate, was especially attractive to investors. “It’s got a tenant roster people will kill for,” he said. Among the tenants: State Farm, Countrywide Financial Corp., Verizon, Allied Interstate Inc., Agilent Technologies and Shea Homes. Kevin Shannon, Scott Schumacher, Michael Moore, Tom Festa and Jim Lindvall, all with Grubb & Ellis, represented IDS and the buyer, TIAA-CREF. North Hollywood Sale An 87,722-square-foot office building in North Hollywood has been sold for $8.5 million. The property, at 6400 Laurel Canyon Boulevard, was sold to Milan Properties, in that company’s first office building acquisition in the local area. Milan is based in Orange County. The building has a 50 percent vacancy rate, according to Trevor Belden, a broker with Lee & Associates who represented the seller, Alex Brown Realty, and will be marketing the property. Action at Spectrum Power Partners, a transportation and storage company, has leased an 80,900-square-foot industrial building at Conejo Spectrum Business Park. The 10-year lease at 1471 Lawrence Drive in Thousand Oaks is valued at $4.5 million. John DeGrinis and Roger Beck, both with Colliers Seeley International, represented the tenant. The landlord, Conejo Spectrum Building Associates, was represented by Ken Ashen and Nick Gregg at CB Richard Ellis and by Investment Development Services, the developer. Van Nuys Development Sares-Regis Group is redeveloping the former BorgWarner manufacturing facility in Van Nuys with plans to transform the eight-and a-half-acre property into a condominium industrial park. Sares-Regis is planning to build 23 buildings ranging in size from 4,000 square feet to 10,000 square feet, and market to owner-users. SBA lenders offer 90 percent financing to qualified buyers of these types of properties. As with residential condominiums, the owners in the complex, located at 7500 Tyrone Ave., would share the cost of maintenance and landscaping at the business park through a dues system. Brett Warner a broker at Lee & Associates who is marketing the property along with Larry Twomey, Dean Reilly and Todd Snyder, said the prices for the units, most of which will be free-standing, have not yet been set. Senior reporter Shelly Garcia can be reached at (818)316-3123 or by e-mail at [email protected].

Hertzberg, Alarcon Outline Views for L.A. Business By JEFF WEISS Contributing Reporter How would Valley residents Robert Hertzberg (right) and Richard Alarcon (left) govern Los Angeles if elected mayor next year especially as it relates to business? Hertzberg, former speaker of the California State Assembly and Alarcon, a state senator, both have formally declared their candidacies for the post now held by James Hahn. Both are lifelong Democrats yet they are typically considered to have dissimilar agendas. Alarcon’s legislative record has displayed a sympathy for progressive causes, while Hertzberg has tended to place an emphasis on consensus and unity, believing that the best way to achieve results is by compromise. In order to illuminate each candidate’s views about business and their visions for Los Angeles, the Business Journal talked with both politicians to clarify any misperceptions or stereotypes that may follow either man. Hertzberg earned the nickname “Hugsberg,” for an affable demeanor and his disdain for the sterility and formality of handshakes. The 49-year-old Democrat from Sherman Oaks is believed by many political pundits to have an excellent shot of carrying the Valley. He represented Sherman Oaks and Van Nuys in the Assembly and while he did not advocate secession, he was instrumental (along with state Senator Tom McClintock) in getting the measure brought to the ballot in 2002. An adviser to Gov. Schwarzenegger, the two share similar views regarding compromise and bipartisan leadership in order to bring about results. Hertzberg often relates the anecdote about how shocked and dismayed he was when he arrived in Sacramento to discover that Republicans and Democrats weren’t even speaking to each other. One of Hertzberg’s major triumphs in the Assembly was his success at bridging this impasse. Although Democrats are typically stereotyped as being less friendly to business than Republicans, Hertzberg believes his record of pro-business legislation to be quite strong. “I worked on the manufacturing tax credit and we did other tax cuts which totaled five or six billion dollars worth. I was the author of the infrastructure planning act where we tried to take a business approach towards infrastructure planning,” Hertzberg said. “Education and housing were also two of the things I worked in Sacramento that influenced the business climate. We had three bond issues that totaled more than $34 billion to build more schools which is a big magnet for businesses.” He said a huge component of the school bonds was restructuring how schools are financed to relieve burdens off of builders. “There were tremendous burdens and a big piece of the school construction bond was to connect the issue of schools and housing,” he said. Getting results Critical to Hertzberg’s success in the Legislature was his tendency to place results over ideology. While his political record maintains a focus on broad social concerns, Hertzberg said he has tried to temper that emphasis by constantly looking at the other side’s perspective. “I formed the Business Democrats to filter legislation through the business man’s eye. This had an impact on dozens of new laws in California and the Business Democrats grew at one point to have 24 members of the Democratic Caucus out of 40. That had never happened before. I am not walking from my core values, but I am someone who is going to exercise that judgment with what it’s like to make a living,” Hertzberg said. “What I have sought to do in government is to be very practical without losing focus and doing everything in a practical manner. It’s necessary to look at the big picture. I looked at issues by saying how does this impact me, how does this impact the business community, and how can this help the social objectives that I want to accomplish.” If elected Mayor of Los Angeles, Hertzberg plans on employing a policy of engagement in order to revitalize the Los Angeles economy. “When I get in, I’m going to sit down and develop a specific plan of how to go after the high-wage jobs to create a vibrant economy. I plan on sitting down with business leaders and CEOs and engaging them in our common future,” Hertzberg said. “The job of mayor of L.A. is 24-7 hands on, I want to engage them in issues such as traffic, encouraging them to work different hours to reduce traffic. I want to stay on the cutting edge of technology by floating ideas such as cell sites all over the city. You can’t have cellular dead zones all over the place, you need a modern city. It’s about leadership.” He said there needs to be Wi-Fi throughout the city to make it more business friendly. Alarcon’s views A 50-year-old former teacher and community activist who bills himself as a leader on issues regarding worker’s rights and benefits and a champion for working families, Alarcon’s first big political break came when he was elected as the 7th District’s (Northeast Valley) representative on the Los Angeles City Council. Alarcon was elected to the California Senate in 1998 and is currently in his second term. His legislative record includes such items as Senate Joint Resolution 15 which urged the President and Congress of the United States to meet the basic needs of all families by improving on their calculations of the federal poverty level. Alarcon also authored a 2003 bill that allowed counties, cities, and special districts to impose special taxes and to incur debt with general obligation bonds with majority-voter approval if the tax or bond exclusively funded the construction of affordable housing, transportation enhancement activities, or the acquisition of open land. Alarcon has also been heavily involved in the push to make more of California’s businesses engage in environmentally beneficial operations and pay employees a living wage. The Senator believes that he demonstrated his pro-business side during his days in the L.A. City Council. “I served on the city council when we revamped the General Motors plant, which netted 4,000 jobs. I worked with Mayor Riordan on economic development projects such as Disney Hall, the Staples Center and the new cathedral, which gave me a lot of hands-on experience. I also played a major role in the restoration of the Panorama Mall and helped put in the first Wal-Mart in the city of Los Angeles,” Alarcon said. “Throughout my tenure as a councilman, I worked with businesses at large to help them and worked with the community as well. I helped to turn the Pacoima Enterprise Zone into the Northeast Valley enterprise zone which also helped to enable the GM project.” In terms of working with the business community as a city councilman, he said he didn’t “think too many people have exceeded my credentials in being able to take care of my district and helped it out the way I have.” Alarcon did not vote for the most recent worker’s compensation reform bill in the Senate due to his belief that the insurance companies that benefited from the bill would not pass on enough of the savings to small businesses. However, he was heavily involved in an earlier bill that he said saved $5- to- 6 billion, he said. Like Hertzberg, Alarcon also has a vision to improve the business climate of the city. “I think the first thing we need to do is encourage public safety with a neighborhood by neighborhood approach to have the impact of improving the local business environment and consumerism at the smallest level,” Alarcon said. “Beyond that we need to work closely with our partners in the educational system to upgrade jobs skills in the community. Our performance has not been what it should be for a city like ours. By creating better skills in the work force, we will be more attractive for the business community. He asks for cooperation. “We also need to expedite the permitting process, but we need to work with both the community and the developers. The airport is a good example of what not to do, where you pit people against each other instead of building unanimity, you build enmity amongst all the players. Instead of taking the opportunity to build an airport with more capacity, you get a project with various elements that meet no one’s standards of approval.” Raphael Sonenshein, a political scientist at Cal State Fullerton, gauged the two candidates’ odds of success at waging battle against incumbent James Hahn with an enviable campaign war chest. “Alarcon has a strong base in the Northeast Valley which is a different area from Bob’s Sherman Oaks and Van Nuys base and both are critical to the Valley’s future. One is more liberal, moderate and Jewish while the other is Latino. The Valley is growing in both of those two areas. Richard has as a lot of ties to groups and a long record at City Hall. Although he’s a state official, he can say that he has a lot of experience with the city,” Sonenshein said. “Bob can point to putting together a lot of big deals at the state level and he has a lot of energy and ideas. He would argue that he can bring people together. But Sonenshein does not discount Hahn in the Valley. “You have to include Hahn as a Valley candidate because he did well there last time. Everyone is going to compete for the Valley and Hahn will be a stronger candidate than people will give him credit for. Hertzberg is probably the most formidable of the challengers, though all are strong candidates.” Richard Close, President of the Sherman Oaks Homeowners Association and a strong advocate of Valley secession two years ago held that Hertzberg maintained a more business friendly attitude while Alarcon veered closer to the unions. “I think that between the two of them, Hertzberg has been more effective in delivering benefits from Sacramento to the Valley but both of them are far better than the existing mayor who has done very little for the Valley.”

Improved Aerospace Industry Boosts Manufacturers By SLAV KANDYBA Staff Reporter Valley aerospace-related manufacturers are churning out more parts these days at faster rates and many report revenues are returning to levels not seen since before the events of Sept. 11 dragged the industry down. The rebound is attributed to both a pickup in commercial airline services and the ongoing military operations in Iraq. Replacement parts are needed for military planes now in use, while new parts are in order for new aircraft, such as the F/A-22 Raptor fighter jet, said John Anderson, an aerospace industry consultant with the Gardena-based California Manufacturing Technology Center (www.cmtc.com). Further, because “the amount of passenger traffic is up,” Anderson said, “there aren’t as many planes sitting around (in hangars), and with Boeing starting to look like they’re going to get more commercial work, they’re gearing up more for what’s coming.” That certainly holds true for Riggins Engineering Inc., a Van Nuys-based manufacturer of components for hydraulic pumps in airplanes. There, business volume increased about 15 percent in the first quarter of 2004, said Joe Grossnickle, a general manager at the company. “That’s substantial, I would have expected a something between five and 10 percent,” Grossnickle said. “That’s historically what we’ve seen.” Grossnickle said Riggins has had a pickup in replacement orders due to the Iraq conflict. While that has been a substantial part of business, however, he said Riggins is “seeing an increase in the volume of new aircraft” as well. Prior to the war, Riggins had about 60 percent of work from the commercial sector, and 40 percent from the military. “Now it’s the other way around,” Grossnickle said. The increase in business has meant Riggins’ 24 employees have had to shoulder more work. The company employed 40 before 9/11, but had to lay off 16 due to the poor business after that date. The employees that remain now work between 50 and 55 hours per week and some even more. “Some guys are working 60 to 65 hours now,” Grossnickle said. Commercial increases Excel Manufacturing in Valencia also has seen drastic improvement. In fact, in only six to seven months orders picked up 30 to 35 percent mostly due to commercial airlines doing better. “Our shipments have gone up to what they were before Sept. 11,” said Walter Halliday, the company’s president. Orders are also picking up for airplane windshields, the main products made by Sierracin Corp., a 500-employee company based in Sylmar. The improvement is coming in both the military and the commercial sector, and is to the tune of about 10 percent, said Shiu-ming Ellis, the company’s CFO. “I think that number will reflect the whole year,” Ellis said. Sierracin is seeking to add an additional 40 employees, most of them production workers, to accommodate the increasing business, Ellis said. “If people are traveling, they’re flying the aircraft more and that helps with our business,” Ellis said. Passenger traffic at LAX during the first quarter of 2004 was comparable to the quarter before the terrorist attacks. From January through March, 13.6 million people passed through the airport, a 6 percent increase from the same period in 2003, according to statistics. Also, airlines are adding more new flights to meet demand, while discount airlines such as AirTran Airways and JetBlue are helping smaller local airports return to pre-9/11 levels by adding new flights and expanding service. Valencia-based EFS Aerospace, a division of Philadelphia-based Triumph Group, is also reporting growth. The manufacturer of hydraulic components for military and commercial aircraft has 175 employees working in a 50,000-square-foot facility. Immediately after Sept. 11, the company’s revenues declined 30 percent, said Brian Barrett, EFS president. The company was producing about 55 percent of its parts for the commercial side of the aerospace market, and 45 percent for the military. “The commercial business shrunk significantly (while) military stayed stable,” Barrett said. The recovery started about six months ago, he said, when Boeing Co. increased the rate of airplanes it was making per month. The defense contractor was making 28 planes per month before Sept. 11, and that production was sliced in half afterward. Now, Boeing is back up a notch, making some 17 planes per month. About a quarter of the parts produced by EFS are for Boeing’s 737 commercial jet, and in the recent months, that part of the business has picked up 6 percent, Barrett said. Similar to Sierracin, EFS is expecting that figure to hold up through 2004 and perhaps beyond. “In the year we’re in now we expect a six percent increase,” Barrett said. Still cautious Although EFS and the other companies are riding an improved economy and getting more business, they’re cautious. Barrett, for one, is not quite a believer that business will return to what it was before Sept. 11 anytime soon. “It will take quite a few more years before we can return to the pre-9/11 levels,” Barrett said. He targets 2007 as the likely year when that will happen without any interruptions – and it will be because of increases at Boeing and other opportunities the company is pursuing. Barrett also said he believes the Valley’s aerospace industry will be well despite well-publicized issues such as high business taxes and workers comp. “One thing that’s keeping business here is the wide diversity of small shops,” he said. “That’s the one anchor that keeps all of the companies here.” According to Jack Kyser, chief economist at the Los Angeles County Economic Development Corporation, the ballooning federal defense budget is largely responsible for the increase in the Valley’s aerospace business. The contracts awarded to L.A. County companies from the Defense Department topped $10.6 billion in 2003, up from $9.1 billion in 2002, Kyser said. Further, there are the so-called black programs highly secretive research and development operations conducted by some companies throughout the Antelope Valley, Kyser said. Kyser said Boeing expects more business as it continues with work on the new 7E7 jet. “The Valley is protected by its capabilities in high-tech aerospace manufacturing,” Kyser said. “This can’t go offshore, either because of security reasons or because of the high tolerances that are required.”

Hearing Postponed for Ex-Sunquest Developer A hearing to consider a Chap. 11 reorganization petition for Randall Roth Capital Corp. and a personal bankruptcy filing for its principal Randall Roth, was postponed until May 25 to allow Roth to hire an attorney and pay the applicable filing fees. Roth, who was removed as managing member of SunQuest, a large industrial redevelopment project in Sun Valley last year, told U.S. Bankruptcy Judge Kathleen Lax that for financial reasons he was unable to retain counsel until May 14. At the hearing, which took place on May 11, the judge also noted that filing fees amounting to $893, which are required in order to move forward with the petition, had not been received by the court. Roth said that he had paid the fees to the U.S. Trustee, which, according to the judge, was not the correct entity. Randall Roth Capital Corp. in the Chap. 11 filing claimed $1.8 million in assets and $4.8 million in debts. The personal filing claimed assets of $771,450 and debts of $3,354,000. The new managers of SunQuest have said they are moving forward with redevelopment plans.