City Council ponders a 'doomsday scenario'
By Nancy Needham  nancy@theacorn.com

Five scenarios, including one he referred to as the "doomsday scenario," were recently presented to the City Council by economist Bill Watkins during the third part of the city's financial strategic plan series.

Previously, a demographer and a retail tax specialist spoke. The speakers are helping to educate the City Council and city staff on the economy of Thousand Oaks.

Watkins looked at the economic forecast for the next five years using five different scenarios--baseline, U.S. recession, California recession, if Measure B passes, and what he called a "doomsday scenario," where Amgen is relocated.

According to Watkins, the baseline forecast comes closest to what Thousand Oaks can expect. The baseline scenario presents a slowdown as a result of financial market stress, a weak real estate market, a decline in retail sales and a slowdown in vehicle sales.

The buyout of Countrywide by Bank of America was taken into consideration, Watkins said during the March 18 meeting.

He pointed out that it's customary for Bank of America to cut back the employees of companies it takes over and move the rest of the staff back to its headquarters in North Carolina. Bank of America has purchased Countrywide, a company that's headquartered in Calabasas. Watkins expects that Countrywide, except for the Simi Valley loan service center, will leave California in 2009. The good news is it would leave empty buildings or rent them rather than selling real estate at fire-sale prices, he said.

Watkins also said the state budget and economy are volatile and are expected to slow down and then rally.

Amgen, a biotechnical company that's currently restructuring with employee layoffs, will remain essentially flat for the next five years as it tightens its belt, he said.

The baseline scenario had information that Watkins claimed the City Council wasn't accustomed to hearing, since the city has in the recent past been experiencing an economic boom.

Watkins, director of the Economic Forecast Project at U.C. Santa Barbara, didn't foresee the city's gross product, adjusted for inflation, getting as high as 3 percent in the next five years.

That's lower than the rest of the U.S. or California, he said.

"That is not anything like you're used to," he said.

Job growth will be negative this year and then pick up. Population growth would be slower at 0.2 percent and then gain momentum to 0.8 percent, he said.

The outlook for Thousand Oaks would be worse if there were a serious recession in the United States than if there were a state recession because the local economy is more connected nationally than it is with the state, he said. A serious national recession isn't predicted by independent economists, who foresee only a mild downturn, said Watkins, formerly an economist on the Board of Governors of the Federal Reserve System in Washington, D.C.

A U.S. recession so serious that those who lived through it would remember it for a lifetime would be dismal and create serious fiscal challenges for Thousand Oaks and the state, he said.

A recession in California would drag down the U.S. and would cause a modest local recession that would mean negative job growth for three years and difficult fiscal challenges, Watkins said.

The economic challenges that could emerge if the Land Use Traffic Initiative, Measure B, passed, would cause development in Thousand Oaks to collapse and population growth to stop, he said. Measure B could also be expected to bring up home prices, he said.

For his "doomsday scenario," Watkins said if Amgen leaves California it would be a terrible thing here and areawide.

Then he reminded his audience that he isn't forecasting that this disastrous scenario is going to happen; it's just an assumption used to create a model to see what would happen to Thousand Oaks--if the unthinkable occurred.

"Mining communities have gone through this," he said.

There's a boom, the mine runs dry and the city disappears, Watkins said. But Thousand Oaks wouldn't disappear because there are other good reasons to live here. Also, many Amgen employees don't live in Thousand Oaks, and that means they don't shop in Thousand Oaks or otherwise contribute to the city's economy. That and the fact that Amgen buys some supplies from outside the area would soften the blow locally.

A recent business survey shows businesses in Ventura County are remarkably optimistic, he said.

A lot of local businesses have nothing to do with Amgen and will continue to do well, his research concluded.

Because many public speakers in the audience were addressing the council about the elementary school closures, Watkins pointed out there's no scenario in the next five years in which the school-age population grows. He noted that in 1975, with a population of less than 60,000, there were 20,000 school-age children.

Currently, with a population of about 123,000, he said, there are still about 20,000 school-age children.

"People of childbearing age find Thousand Oaks an expensive place to raise a family," he said.

The economist told the council members that, while the city couldn't expect a business to relocate here from another state, Thousand Oaks might attract a company from Los Angeles.

Councilmember Andy Fox questioned Watkins on whether building up Thousand Oaks Boulevard using a long-anticipated specific plan would help the local economy.

"You can build your way out of a lot of problems," Watkins answered.

As far as the specific plan, the economist said that people have different ideas about what they want in their city, but more businesses would generate increased revenues for the city of Thousand Oaks.

City Manager Scott Mitnick reminded listeners that the presentation was just one in a series.

"We are blessed with our local economy," Mitnick said.

Thousand Oaks has a diverse economy with different job categories and a solid foundation that can weather a storm, he said. He also pointed out that Thousand Oaks is a good place to live and has lower taxes for residents than many other municipalities.