Studies on the Loma Prieta Earthquake, No. 3

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