NEWSMAKERS Banking Bita Ardalan has been promoted to market president overseeing commercial banking for West Los Angeles, South Bay, San Fernando, Santa Clarita and Antelope valleys and Ventura and Santa Barbara counties for the Union Bank of California, N.A. She was senior vice president of the San Fernando Valley Commercial Banking Office since 1998. Biotechnology Alan Edrick joined Camarillo-based BioSource International, Inc. as executive vice president and chief financial officer from senior VP and CFO at North American Scientific, Inc. Edrick replaced Charles Best, who has resigned to pursue other opportunities, according to a statement. Edrick has more than 15 years of experience in financial management, including a decade with Price Waterhouse LLP in various positions. Consulting Daniel Kravitz was named president of Encino-based Louis Kravitz & Associates, Inc., one of the largest retirement plan consulting firms in California. He replaces Louis Kravitz, the company’s founder, who will assume the position of chairman. Daniel Kravitz joined the company in 1995 and will be responsible for overseeing operational functions, marketing, sales and strategic planning. Entertainment Arleta-based special effect firm MASTERSFX named Eric Mussell production coordinator. Mussell will manage the company’s day-to-day business operations and author bids for new business, oversee sales and rentals, among other duties. Prior to joining MASTERSFX, Mussell was a production coordinator with AMI FX, based in Sylmar and a CBS office coordinator at CBS Television City. Ronald Stone was appointed to the board of directors at Agoura Hills-based Digital Theater Systems, Inc., a digital sound provider for home and theater entertainment. Stone, a 28 year-veteran of the consumer electronics industry, is currently an advisor to Pioneer Electronics, Inc. He began his career with that company in 1975 and held various positions there. Stone’s appointment brings DTS’ board of directors to eight members, six of them independent, as required by NASDAQ, where the company’s stock is traded. Health Care Matthew Gerlach was appointed senior vice president of business transformation for Kaiser Permanente’s Southern California Region. He was previously senior VP for Kaiser’s Valley Service Area, which includes medical centers in Panorama City and Woodland Hills. In his new position, Gerlach, who joined Kaiser in 2001, will manage change and implementation strategy for KP HealthConnect, a new electronic medical record system at Kaiser. Jane Finley, director of hospital operations for Kaiser’s Panorama City Medical Center, will fill in as interim service area manager. Two Former Tenet Healthcare Corp. executives have joined Valley Presbyterian Hospital in Van Nuys. Tracey D. Talley assumed the post of chief financial officer at the hospital, having previously served as regional vice president of finance at Tenet. He succeeds Terry L. Leggett, who retired in December. Phyllis Bushart, who was chief operating office at Tenet-owned Encino-Tarzana Regional Medical Center, assumed the position of Valley Presbyterian’s chief operating officer. Law Attorney Arthur Greenberg was awarded the Loyola Law School Board of Governors Award. Greenberg is managing partner of Greenberg & Bass LLP and president of The Executives, the Valley business support group for the Los Angeles Jewish Home for the Aging. Real Estate Robert A. Flink was named senior vice president and principal at Lee & Associates LA North/Ventura Inc. Flink, who was formerly with CB Richard Ellis, will specialize in industrial properties. He will be based in the company’s Calabasas offices. Technology Shaun Walsh has been appointed chief operating officer at Simi Valley-based NovaStor Corp., a developer of data backup and recovery software. Kelly Williams was chosen as director of corporate communications. Walsh was previously vice president and general manager at I/O Systems division of JNI Corp. Williams was previously the principal of RedAhead Communications. Both positions are new at the company. Michael Skelton was appointed CEO of Westlake Village-based CaminoSoft Corp., a manufacturer of computer data storage products. He was most recently an executive management consultant and prior to that, CEO of Menta Software and TracePoint Technologies. CaminoSoft also appointed Steve Crosson as chief operating office and chief financial officer. Gary W. Sproule was named COO of Woodland Hills-based Youbet.com, the largest Internet provider of horse racing content in the nation, including wagering. He has been with the company since 2002 as CFO, overseeing the company’s restructuring program over the last two years. Youbet also named Charles R. Bearchell to succeed Sproule as the CFO. He had been with Youbet since mid-2003 as controller and vice president of finance. He previously worked for 10 years in Lockheed Martin’s finance organization.

Honeywell’s Simi Division Will Close Laying Off 85 By SLAV KANDYBA Staff Reporter Honeywell Airport Systems, a Simi Valley-based division of the defense contractor’s aerospace businesses, will close resulting in the layoffs of 85 employees, a company spokesperson confirmed. The layoffs of engineers, those working in the plant’s manufacturing operations and some administrative personnel comes after three consecutive years of losses, said Ron Crotty, spokesperson for Phoenix-based Aerospace Electronic Systems, the branch of Honeywell that operates the Simi Valley plant. Honeywell had been rumored to be on the verge of shutting down the plant for about a year, but the move finally became official several weeks ago when Simi Valley assistant city manager Brian Paul Gabler received a notice of the shutdown. “It’s just a standard warning that they’re going to lay people off,” Gabler said. Honeywell Airport Systems was founded in 1996 and is part of Honeywell’s aerospace lighting business. In 1998, Honeywell acquired Hughey & Phillips, an airfield and obstruction lighting company in Simi Valley, which it renamed Honeywell Airport Systems. That year the company also bought another lighting firm in Germany. Consolidation and downsizing are becoming more common in the aerospace manufacturing industry both attributable to increased productivity and 9/11, according to Daniel Blake, director of the San Fernando Valley Economic Research Center at CSUN who tracks the Valley’s aerospace industry among other things. “If they were losing money, Honeywell doesn’t want to keep them,” Blake said. Pressure to reduce prices and delivery times while increasing quality has caused trouble for some aerospace-related businesses, said John Anderson, director of aerospace and defense consulting at the California Manufacturing Technology Consulting, a federally-funded organization based in Gardena. Outsourcing has also affected the aerospace industry and the manufacturers of aerospace parts that are considered “low-tech” are especially hard hit, Anderson said that means companies that make parts that do not require high-precision machines and are made of cheaper material, such as plastic. “(The competitors) are getting orders and those are in high-tech,” he said. “Large runs of low-tech (parts) are under severe pressure from the other states and offshore.” Crotty declined to give specifics about Honeywell Airport Systems’ financial difficulties, but said the plan was to have the approximately 50,000-square-foot facility closed by October. About layoffs, he said employees are receiving severance pay and outplacement services, but did not say whether any of the 85 employees would be absorbed elsewhere in Honeywell. Simi Valley’s Gabler said he was disappointed to see Honeywell leave, but was optimistic the building would not be empty for long. “While we hate to see an employer closing, I don’t think the building will be on the market very long.”

Taking a Big Step: Hiring the First Non-Family Member FAMILY BUSINESS By JEFF WEISS, Contributing Reporter Often it’s one of the early indications of success. You’ve started your business with only yourself, your family, limited funds to draw from, ambition, and hopefully a good degree of luck. Yet after a few months, business has gradually begun to take off and you’re faced with a relatively pleasant obstacle: you need to find someone to help you shoulder the weight of all the additional business. All family business experts agree that communication and respect for others’ opinion is crucial to success. Naturally, when it comes time to hire that first non-family employee, the only way in which one can continue cultivating harmonious business and personal relationships, is by carefully ensuring that all family members involved in the business feel comfortable with the final decision of whom to hire. Before turning Infolink Screening Services Inc. into a profitable 80 plus employee business, Barry and Leslie Nadell originally started their background checking company with nothing more than a desk, phone, business cards, and a self-made tri-fold brochure. Originally setting up shop right in the middle of Barry’s insurance office, Infolink’s initial chances of survival depended upon maintaining an extremely low overhead. However, after four months the business had grown to the point where the Nadell’s realized that a non-family part-time employee would have to be added to help them balance the myriad tasks involved in running a profitable enterprise. “My wife and I talked about it and figured that we needed to hire somebody part time. Being in the business of background checks we wanted someone who had some sense of that kind of industry. At the same time, we couldn’t hire someone full time or pay them an expensive salary,” Barry Nadell reminisced. “We went to Cal State Northridge looking for a college student who had dealt with an aspect of human resources. We only had one person apply. We hired her and she started working part time after school. We gave her a lot of the administrative stuff that we didn’t want to do. She stayed with us after she graduated and has worked for us now for 10 years. She’s fantastic. We were very lucky.” But not all businesses wind up as fortunate as Infolink. According to family business expert, Professor Mark T. Green, director of the Austin Family Business Program at Oregon State University, the secret to avoid squabbling during the hiring process is a careful division of responsibilities. Family members must tread lightly, as not to overstep their boundaries. “I think the starting point should be job descriptions for everyone. That’s what every professional business should have,” Green said. “The smallest businesses often need them because sometimes they need their boundaries and clarity established. It makes the processes of hiring the first employee that much easier.” The right pay Green also advised members of the family to make sure they research the proper amounts to pay a new employee. Without paying an adequate salary, one might get shortchanged by their new employee in terms of effort and consistency. “When people are paying themselves and new employees, compensation needs to be based on research not on made-up numbers that are either too small or too high. They often don’t know the going market rates,” Green said. “There are a lot of resources like trade associations and employer groups that can provide the organization that one needs. You should find a network of like businesses that you can call for advice. An external network is very important. Family businesses need to work on going outside of the family for help.” Stephanie Weier of Clearance Domain LLC relied upon close consultation with her business partner and husband, Lawrence Weier, to ensure a smooth hiring process. After a year of being in business, the Weiers were Clearance’s only two employees, when growth necessitated the hiring of an assistant. Like the aforementioned Nadell’s, the Weier’s found their choice by looking to their local college. “For the first year, I tried to do it all by myself. I found myself very overwhelmed, and even with my husband helping it wasn’t enough. I was feeling a lot of anxiety of having to do everything. I found myself in an angry mood a lot because I couldn’t do all I needed to get done,” Stephanie Weier said. “I found my first employee through the College of the Canyons job placement department. We hit it off immediately. When we discussed her, my husband agreed that she was the perfect person to hire. She started out for the first 2 years as my assistant and then she started doing research and clearances, the same work I was doing. Hopefully, she’ll stay with me until the day she dies.” To ensure that a business makes the correct choice, Weier advised that one should look for someone loyal and honest. Otherwise, you’ll have to look for another employee soon, which will sap even more of your precious time. “I looked for loyalty and the ability to be frank. I didn’t want someone who would misrepresent themselves. They needed to feel comfortable asking questions. I wanted someone who was willing to learn, someone who was social. I needed someone good on the telephone,” Weier said. It takes two visits usually for us to decide. We only hire after the second or third interview, but I usually know anyways after the first interview. I would defer to my husband though if he didn’t feel comfortable hiring someone but we’ve have usually agreed.”

Real Estate Gets Jitters From Rates By SHELLY GARCIA Senior Reporter A bump in commercial mortgage interest rates that’s occurred over the past few weeks is fueling speculation that the real estate market could be in for some long overdue right-sizing. The increase, about 70 basis points, still leaves interest rates for commercial mortgages near their 40-year lows, but many say the rise so far is just the beginning, and if rates continue to climb as many believe they will buyers will start to walk away from the rich deals that have characterized the real estate market until now. “People are really stretching to make the numbers work,” said Brian Forster, executive vice president at TOLD Partners in Woodland Hills, “and when there’s a slight increase in interest rates, you’ll see a lot of deals fall out of escrow.” Over the past two years prices for San Fernando Valley properties, as with others in the L.A. area, have escalated to what many call “crazy” levels, in some cases as high as $250 a square foot. But buyers were plentiful in spite of the high prices because interest rates were so low and the potential returns from real estate far surpassed what the recent stock market has recently offered. Still, brokers like Forster and others point out that as prices have escalated, buyers have stretched their debt liability to the maximum, and even a small rise in interest rates can push them over the threshold. “The minute the economy starts cranking and they bump interest rates, you have a lot of people who are going to be in trouble,” said Rick Pearson, a principal with CRESA Partners in Woodland Hills. “Two years ago if you paid $150 (a square foot) you were paying too much. Now if you don’t want to pay $250 you don’t even get in the game. It’s been a constant increase.” In the past three weeks, the 10-year treasury rate has risen to about 4.5 percent from about 3.8 percent. Smaller buildings of under $5 million, typically financed by SBA loans, are triggered by other yardsticks. But loans for larger buildings are tied to the 10-year treasury rate along with the prime rate. Last week the Federal Reserve Bank decided to leave rates at their current levels, but an employment report, which was released after presstime, was expected to paint a picture of a strengthening economy, and speculation was ripe that if the Fed did see significant signs that a turnaround was underway, it would raise rates sooner rather than later. “Sellers expectations are going to have to change considerably,” said Trevor Belden, a partner at Lee & Associates North. “I think interest rates will continue to rise, and that means buyers will stop buying 7 and 8 caps for office because the bottom line return is going to be so minimal.” (The real estate community measures property values in so-called cap rates, a multiple of the net operating income of a property.) Rethinking ahead? Indeed, it might not be long before the 10-year treasury rate jumps to 6 percent, and when and if that occurs, buyers are likely to rethink the prices they have been willing to pay for properties. In some cases they may find themselves paying more in interest than the returns they are getting from the property. “What happens is people have to re-evaluate their investment horizon and return,” said Bob Safai, a principal with Madison Partners, who specializes in real estate sales. “If they were looking to get a 7 percent (return) and because of interest rates the return gets to 5 percent, they have to figure out if they want to invest in that property.” Industry wisdom has basically said that if a buyer pays dearly for a building, but the costs to buy it the interest on the loan is low, the high price is justified. But as interest rates rise, the cost to service debt grows disproportionately and buyers begin to question the value of the acquisition. “I’ve got some properties for sale at per square foot prices that are really so far up there I shake my head,” said Jerry Scullin, a principal with Delphi Business Properties. “There is going to be a point where people are going to say the prices are too high, I’m going to wait.” Already there are signs that sellers are jumping into the market, hoping to take advantage of what may be a peak in the high price of real estate. “I’ve seen more packages (from sellers) coming through,” said Dave Mgrublian, CEO at Investment Development Services Inc., which also currently has its Westlake North property on the market. “I think sellers realize this is a good time to sell while interest rates are relatively low. Buyers would rather buy now.” All about timing But whether they get in under the wire is anybody’s guess. “The people who bought in the last three to six months of the market are going to get hurt,” said Pearson, conceding that no one knows when the last three to six months will come. “It’s a crapshoot.” Some say the expected drop in pricing is a good thing, and the cycle is long overdue for a correction much like what happened in the stock market earlier in the decade. Indeed as real estate prices have risen, fundamentals long used to gauge the value of a property such as the cost to replace the building in relation to the price to buy it or lease rates and the potential to raise them, have been ignored, much like the stock market of the late 1990s when stock prices bore little relation to a company’s earnings. “These things have to occur when you throw caution to the wind and the fundamentals are thrown out the window and you make decisions based on what your valet told you,” said Safai recollecting the Internet bust. “If you’re making a real estate decision based on interest rates only that is not a prudent decision.” At the same time, real estate acquisitions have been the only active portion of the market, making some brokers more than a little nervous about their earning potential in the near future. If buying activity drops while the leasing portion of the market remains in the doldrums there will be few opportunities for brokers who have relied on sales transactions in the past few years to make a living. Some say that is not likely to happen. Rising interest rates, they reason, would signal a general recovery that would include a pickup in the leasing side of the business. Mgrublian believes that an improving economy would be enough to continue to drive the acquisition market, albeit not at the same price levels. “While interest rates will cool the rise in prices, they’re not going to make things drop like a rock,” he said. “Rising interest rates usually go hand in hand with an improving economy, and if you’re an owner, you’re looking for rising demand for space.” Then too there is some indication that a drop in prices, rather than quash the market for properties, will restore some of the equilibrium that’s been lost in recent years when buyers far outnumbered willing sellers. “I think there will be a few more properties to select from people who were sitting on the fence (about selling),” said Stacy Vierheilig, senior managing director at Charles Dunn Co. “But I think there will be a few less buyers, because they’re getting notched down in their price range.” But the one thing all agree on is that one way or another, real estate prices are headed downward, and buyers along with sellers will have to adjust their expectations where returns are concerned. The only question is when and by how much. “You’re going to see a big drop-off in price,” said Forster. “Everyone’s really watching interest rates right now.”

NEWSMAKERS Banking Robert Borstelmann was promoted to area manager for the San Fernando Valley at Wells Fargo Home Mortgage. Borstelmann, who will oversee a staff of 60 home mortgage consultants, will supervise all the bank’s home mortgage activities in the region. He was previously a branch manager in the Van Nuys office of Wells Fargo Home Mortgage. Borstelmann holds a bachelor’s degree in finance from Cal State Northridge. Biotechnology Chad Therapeutics in Chatsworth has selected Earl L. Yager to the post of president and CEO. He was previously president, CFO and secretary at the company. Yager replaces Thomas E. Jones, who will step down as CEO but will remain chairman of the board. Chad also appointed Tracy Kern to the CFO position to replace Yager. Consulting Joy Y. Chen, former deputy of Los Angeles Mayor James Hahn, has joined Heidrick & Struggles International, Inc., a global executive search and leadership consulting firm. Chen will be in the firm’s education and nonprofit practice, working with nonprofits and educational institutions to identify and recruit leaders and managers. She served in the Hahn administration from 2002 to April 2004, where she led education and workforce strategy for the L.A. region. Health Care Cynthia Ann Telles, wife of Los Angeles mayoral candidate Robert M. Hertzberg, was chosen to become the next chair of the board of directors of The California Endowment, a Woodland Hills-based private health care foundation. Arthur Chen was appointed vice chair, taking the position vacated by Telles, who had been in that position since 2002. She has taught at UCLA School of Medicine and sits on a number of other boards, including California Community Foundation and the Music Center. Chen joined the Endowment in 2003 and currently also serves as the medical director of the Alameda Alliance for Health in the Bay area. Both were appointed for one-year terms. Professional Services James L. Greene has been named director of business development at CBIZ Valuation Group’s Los Angeles office. Greene’s expertise includes consulting experience in both the commercial and consumer products manufacturing industries. Prior to joining CBIZ, he served as director of marketing and business development for the Southern California economic unit of RSM McGladrey Inc.

Valley Events Set For Week’s Focus On the Uninsured By SLAV KANDYBA Staff Reporter Several Valley events are scheduled to take place this week to mark a national campaign to promote the cause of Americans who do not have health insurance. On May 12 at 11:30 a.m. Cal State Northridge Health Sciences Department will hold an outreach program for students, while the following day, May 13, a press conference is scheduled for 10:30 a.m. at an emergency room at Providence St. Joseph Medical Center in Burbank which treats a high percentage of uninsured, according to www.covertheuninsuredweek.org, a Web site that has a complete list of scheduled events. A health and enrollment fair is slated to begin at 10 a.m. at Park Parthenia Apartments in Northridge on May 15 with booths featuring information on various health insurance programs available as well as free dental and blood pressure screenings and raffle prizes. More than 800 organizations nationally from medical to religious are taking part in observing the week which begins May 10. Woodland Hills-based health insurer Blue Cross of California will be represented at a seminar at noon May 12 at the Los Angeles Chamber of Commerce Bank of America room designed for small businesses to learn about health coverage for their employees, according to a spokesperson. Blue Cross is sending about six employees to the seminar, who will staff it and provide information. Although the company is not donating money per se, the cost comes in the form of man hours and is to the tune of several thousand dollars, said spokesperson Michael Chee. “(The week) is really a vehicle for us to reach out to the uninsured and let them know they have options,” Chee said. In addition to the seminar, there will be a dramatic performance May 10 at the Pacific Design Center in West Hollywood starring local actors and actual patients from the North Hollywood-based Valley Community Clinic. “Actual stories of our patients are going to be highlighted in the performance,” said Judi Rose, director of public affairs at the clinic, which provides low cost or free medical care to the uninsured in the region. The clinic is also hosting a fundraising event proceeds from which will go toward the construction of a pediatric center, Rose said. Most of the events during the week are funded by The California Endowment and The Robert Wood Johnson Foundation.

Grocery Store Component Added to NoHo Commons REAL ESTATE By Shelly Garcia J.H. Snyder Co. has been in the development game long enough to be pretty sure-footed about its decisions, but it’s always nice to get validated anyway. And that’s what happened last week when the developer of NoHo Commons, the ambitious 16-acre redevelopment project in North Hollywood, inked a deal that will bring Hows Market to the project. Hows, a venture founded by Roger Hughes, late of Hughes Family Markets, along with several of the senior executives of that grocery chain, will open a 32,000-foot market in NoHo Commons, part of a plan to combine about 700 housing units with stores and offices. The pioneering NoHo Commons development, thought to be the largest project of its kind attempted in Los Angeles, is also among the first attempts to build neighborhoods around mass transit and create an urban village within the city. “We looked very hard at North Hollywood, and the more involved we got, the more we were intrigued and liked it,” said Mark Oerum, one of the four Hows partners who oversees store operations. The owners of Hows, which also include Steve Strickler, who handles the financial side, and Dave Wolff, in charge of sales and marketing, have been building a chain of groceries for the past five years. They first heard about NoHo Commons at a meeting with the representatives of Local 770 of the food workers, and Oerum admits that they were not all that enthusiastic about the idea at first. North Hollywood is not a community known for the kinds of demographics that would support their markets, which occupy a place somewhere in between the giant supermarkets and pricey smaller chains like Gelson’s and Whole Foods. Hows, which currently operates four markets, in Granada Hills, Malibu, Pasadena and Torrance/Redondo Beach, has moved cautiously since it was forced to quickly close a store in Santa Clarita. The grocery, one of the markets divested when Kroger acquired Ralphs Grocery Company, shared an intersection with two other markets and had never been successful. But the principals took a drive through the area, and the more they saw of it, the more they warmed to the idea. “We saw what changes had been happening. The red line terminates there, Toluca Lake (nearby), the influence from Universal Studios coming down,” Oerum said. “The more we looked at it, the more we liked it.” Hows specializes in fresh meats, seafood and produce, buying directly from the wholesale markets and delivering directly to the individual stores. Although the selections tend to be the kinds of cuts found at the service counters of upscale markets, the prices are not. Recently the stores were selling fresh salmon fillets on special for $2.99 a pound and prime spencer steaks for $5.99 a pound. Hows’ existing four stores were all operating as groceries when the company acquired them, and the NoHo location will be its first opportunity to build a store from ground up, designed in a way that reflects its marketing approach and the upscale market it hopes to attract. “We’re looking to do it upscale,” said Oerum. “We recently toured Northern California and we collected a lot of ideas we want to incorporate. I think it’s going to be a showplace.” J.H. Snyder broke ground on NoHo Commons last month and expects to have the first units ready for occupancy by fall of 2005 with a completion date of Spring 2006, said Cliff Goldstein, a partner at the development company. The date of Hows opening hinges on that schedule, but Oerum said he expects the store to be ready for business in late 2004 or early 2005. Encino Bargain How’s this for a deal: a magazine publisher just leased office space in Encino for $1.11 a square foot. The unusual, 5,000-square-foot deal at 16130 Ventura Blvd., was actually a sub-sublet, leased from a company that in turn was subleasing it from Arthur J. Gallagher & Co. Stacy Vierheilig, a broker with Charles Dunn Co., who represented the new tenant, Music Connection Magazine, said the space had been on the market for about five months when her clients took a look at it. The sublessor, Time Financial Services Inc., which had about two-and a-half years to go on the sublease when it made a move to larger quarters in Warner Center, was asking $1.40, but decided a bird in the hand was worth the discount. “They were ready to move in right away which meant their rent stream would start right away,” said David Solomon, vice president at CB Richard Ellis, who represented Time Financial. “On the surface it looks like an aggressive deal, but from the sublessor’s standpoint there was almost no transaction cost other than broker’s commission they took the space in ‘as is’ condition, there was no down time and a deal that might have achieved a higher rent would have been from a tenant that would have needed more time to occupy and required more work on the space.” New Resource Available A group of commercial brokers has banded together to create an online database for Southern California real estate. The Commercial Real Estate Exchange, which began to compile the database about five months ago, unveiled the program last week. The Web site, www.c-rex.org, offers listings in every category of commercial real estate, but it is geared specifically to the local area, said Alan Kassan, executive vice president at Beitler Commercial Realty who is chairing the Commercial Real Estate Exchange committee. “Nobody covers local markets for apartments, for retail, for neighborhood industrial buildings and commercial land,” Kassan said. “All of that stuff gets lost in the shuffle.” A number of databases exist for brokers, but they operate on a national basis. Kassan, along with a group of area brokers received a grant from the Southland Regional Association of Realtors to create the database and begin to build an association for commercial real estate executives that would eventually be incorporated as a standalone entity for the community. Senior Reporter Shelly Garcia can be reached at (818) 316-3123 or by e-mail at [email protected].

A State of Turmoil As Director of the California Economic Forecast, Mark Schniepp says developing a business-friendly environment is crucial for the state and Valley’s long-term economic health By SHELLY GARCIA Senior Reporter Mark Schniepp knows about Sacramento’s budget crisis he was cut as the senior economist to the State Controller’s office as a result of it. But as the founder and director of the California Economic Forecast, an independent economic and demographic research group, Schniepp doesn’t really need to rely on his personal experience to know that these are troubled times for the state, and the various California counties. Specifically, Schniepp believes that unless California is able to dig out of its position as one of the most onerous places to conduct business, the economic climate for the state, along with Los Angeles and the San Fernando Valley, is not likely to take much of an upward turn. Schniepp, who was senior economist with the California State Controller’s office from 1999 to 2003, had also been head of the Economic Forecast Project at UCSB for 15 years, and spun off the California Economic Forecast about 10 years ago. The research group monitors economic and demographic trends and develops forecasts for each of California’s counties along with a number of government agencies and public and private companies. On May 25, he, along with Gary Zimmerman, an economist with the Federal Reserve Bank of San Francisco, and Daniel Blake, the head of the San Fernando Valley Economic Research Center at Cal State Northridge, will discuss his take on the economy and prospects for recovery at the university’s second annual economic forecast at the Sheraton Universal. Question: What are the factors most likely to influence how the budget from Sacramento will look? Answer: The tax revenues coming in are not that auspicious, so there’s probably going to be increasing pressure for even greater budget cuts than thought, if not greater pressure to raise taxes. Q: The most recent headlines note that the national economy grew at a 4.2 percent rate in the first quarter. Has California not kept pace with that growth? A: The Bay Area has dragged down the state of California. When you ask how California is doing, the answer to that is what’s California, because there is such a split of economic progress depending upon which jurisdictions you look at. Southern California is growing, particularly the inland areas the Inland Empire, Santa Clarita and Kern County, Northern San Diego, that’s where all the momentum is right now. But the Bay Area and those regions, they continue to lose jobs and there’s not very much momentum at all. Q: Why hasn’t the growth in the Southern regions compensated for what is happening up North? A: There’s no job growth in the aggregate L.A. area. When you add it up, L.A. County is still losing jobs as of March of this year. When you add in the downward impact of Santa Clara County and San Francisco, that tends to neutralize the jobs. During March, California, which represents 11 percent of total employment in the nation, only created 2.5 percent of the total job creation of the nation. So we are not performing as well as the country right now. Q: What are the prospects for such things as business tax reform, which the city of Los Angeles has been struggling with for years? A: There are a lot of things on hold because of that wait-and-see thing. I think the prospects of (cutting taxes) are remote in this environment, even though prudently it would probably be the wisest thing to do because you want to make L.A. County much more business friendly. We have to do whatever is humanly possible in as exaggerated a manner as possible in order to show the world that California is changing and opening the doors to business growth. Q: How are the recent increases in gas and foods like milk and meat likely to affect consumer spending, which has held the economy together? A: Gasoline is a volatile commodity. We anticipate that going down again. That’s temporary. Same with food. And you have to understand that at the time energy and food is going up there are other things going down broadband, electronics, cars, plasma screen TVs so there’s both things happening. They do look like they’re hitting the motherhood and apple pie issues, but in the grand scheme we need to look at an index of prices and that is not runaway at all. I think what we should be concerned about mostly is the fact that interest rates are rising and that will affect homeowners who have adjustable mortgages and that’s a more immediate issue. It will affect housing costs. But we need to see to what extent interest rates will rise. Q: The national economy grew by 4.2 percent in the first quarter of the year. How did our area compare? A: It takes about a year to get the state data. When I look at L.A. County criteria over the first few months of the year, I see no job growth, but at least we’re cutting the losses; very slow income growth. There’s a few more homes being permitted but not significantly. Motion picture production is up, but not really in terms of employment. We’re at a level of employment in motion picture production which is equivalent to 1995. Manufacturing is in the tank. Retail seems to be up, so people are spending. Q: Why has job growth been so slow locally? A: There are very, very steep home prices with very little building so employers who want to hire in the main population centers really can’t. Given that unemployment rates are extremely low, anyone who wants a job has a job. So if there were anyone to hire there’s only two choices people have to come in and relocate or they have to commute. It’s impossible to relocate because housing prices are up there and it’s nearly impossible to commute because traffic is so bad. I’m exaggerating a little bit, but the housing crisis is certainly affecting employment growth. All the growth is inland. It is in the Inland Empire and Kern County. Q: What other issues are impacting job growth? A: We also have the business climate issue and that means workers’ comp which is still going to be a wait-and-see issue. This passage of (the reform bill) is not going to cause everybody to start hiring. Then we’ve got the highest cents per kilowatt hour in the nation in the industrial sector. Then we have very, very high corporate taxes, eighth in the nation. And then companies selling their products, particularly the final users, are taxed with the highest sales tax in the country, so that makes the consumers more discerning of whether they buy it from a California firm. So all those things add to the anti-competitive environment of California. Q: What’s your take on the whole outsourcing issue and how it is affecting employment? A: I’m a firm believer in outsourcing. We don’t really do that much basically because it’s very hard to find those people here. We all talk about how outsourcing takes away jobs but at the same time it makes the same products that are made by outsourced labor a lot cheaper. That circulates more money, that causes business to expand we actually could end up hiring more people. So we forget the other side. Q: What are the prospects for the region in the coming year? A: Southern California will continue to probably lead the rest of the state in growth but the employment growth will still be modest, probably 1.5 percent, and that’s probably because of the Inland Empire helping to pull things out. The national expansion is doing so well and that’s our biggest customer and there will be more orders from producers. And things will be OK in the short run. We don’t have high unemployment, we don’t have high misery. SNAPSHOT: Mark Schniepp Title: Director, The California Economic Forecast Born: Feb. 12, 1956, San Diego Education: Bachelor’s degree in economics and mathematics and doctorate in economics from UCSB, 1982 Career Turning Point: Leaving academics Personal: Married, three children Most Admired Person: Nostradamus

You Can’t Start a Business by Yourself By JEFF WEISS Contributing Reporter Genius has finally struck. You’ve done significant research into your product and its competitors and the world seem ready for your newest idea. Yet many aspiring entrepreneurs don’t know where to go, or whom to borrow money from to get things started. However, there are many resources available in the Valley that can aid you in the realization of your hopes. Between the Small Business Administration, the Valley Economic Development Center, the Small Business Development Center (located at the VEDC), and the various chambers of commerce scattered throughout the area, one can quite easily and affordably get helped on their way to success. The SBA maintains a host of resource information that any small business or hopeful entrepreneur can draw upon. With a library of 400 binders relating to specific types of business, someone who starts a business can figure out everything that he or she would need to know, including how to advertise, compete, licensing costs, how to select a location, and how to prepare their financial statements. In addition, the SBA is also closely affiliated with the Service Corps of Retired Executives (SCORE), consisting of counselors who have had lengthy careers and give back to the community. Any small- business owner or aspiring entrepreneur can sit with a SCORE counselor and get recommendations. For example, if somebody is opening a pet store, they can talk to a retired executive from Petco. Another place to turn for help is the Valley Economic Development Center and its affiliate the Small Business Development Center. “The primary thing we help people do is put together a good business plan. Most people who start a business, don’t understand the key components of how to do it. One of the most important things is to have a unique concept,” SBDC associate director Warren Cooley said. “Also there is the importance of target markets, not everyone has equal potential to buy what you’re selling. We help them identify the market and figure out their unique qualities. Our business classes are oriented around specific topics like financial management, human resources, how to select a viable work force, how to train people, marketing, etc.” Dean Haglund, formerly an actor on “The X-Files,” turned to the world of business with his invention of Chillpak, an ice pack-like device that cools down laptop computers that have overheated. While he had a unique product idea, Haglund was a business novice who needed to look to the VEDC and SBA for help. “Both organizations have been really helpful. I went and enrolled in the VEDC’s business boot camp, which was a 3 to 5 hour seminar that gave me an overview of different topics. While it didn’t always pertain to exactly what I was doing it certainly inspired me,” Haglund said.

CSUN Puts Focus On Geography in Admission Policy By SLAV KANDYBA Staff Reporter In response to an expected budget shortfall from the state, California State University Northridge is reconfiguring its enrollment policy for freshman admissions this fall by geography while simultaneously accepting fewer first-time freshmen. While transfers and graduate students are not affected by the policy, CSUN will shrink its freshman class this fall by 400 and give preference to high school applicants from the Valley and some nearby communities over their peers from other parts of Los Angeles County and California, according to John Chandler, the university’s spokesperson. The moves are in response to a budget proposal and directive from Gov. Schwarzenegger’s office and Cal State system Chancellor Charles Reed that have asked all CSU campuses to reduce their freshmen enrollments for the coming year by 10 percent, Chandler said. The two measures go “hand in hand,” because CSUN anticipates a $15 million to $20 million shortfall in its budget. In addition to restricting the number of freshmen students, CSUN is also for the first time looking at geography as a factor in admissions. While high school seniors in California have traditionally been able to apply to any Cal State campus and generally get in even if it’s far from their hometown, they will not be able to do so next year at CSUN. For fall 2004, the CSUN admissions office will look to see if the student can be served by another Cal State campus near their residence as well as look at the number of other students from an applicant’s high school that have enrolled at CSUN over the past several years, Chandler said. Students in the Valley who meet the school’s basic criteria including grade average and test scores are “automatically offered admission,” Chandler said. Those that live in the Santa Clarita and Antelope valleys and Ventura County will also be given preference as will students from West Los Angeles, Pacific Palisades and Malibu since those areas had “a large number of high schools on our admission list” and “don’t have another CSU campus close by that they could choose,” Chandler said. CSUN President Jolene Koester, however, defended the enrollment policy change citing necessity. “We have no choice given the reduction in resources other than to reduce the enrollment of the campus, otherwise we will compromise quality” she said.