Economic impact of Valley fire expected to be deep and lingering

Now comes the rebuild.

This month's Valley fire walloped Lake County, causing hundreds of millions of dollars worth of damage to homes, businesses, ranches and the local economy. A tally of all the financial damage likely remains months away.

Though the flames aren't yet extinguished, public attention already is turning to a new question: How fast and how well can the county — and its economy — bounce back from the third-most destructive fire in state history?

Even as firefighters last week battled to complete their containment of the 76,000-acre blaze, area residents, emergency officials and contractors gathered on the football field at Middletown High School to discuss the next phase: the cleanup, the rebuilding and the means of paying for it all. The involvement of federal aid, made possible by President Barack Obama's disaster declaration, is expected to greatly boost the reconstruction efforts.

While the destruction and displacement have taken a heavy toll, local officials insist the county will rise from the ashes and come back stronger. They even predict that the coming replacement of lost homes and businesses will mean a shot in the arm for local construction workers, contractors and building materials suppliers, likely across the North Coast.

'This massive rebuild is really going to fuel our economy in a number of ways,' said Jack Long, the county's economic development manager.

Because of slower times, many of the county's construction workers for years have had to travel 'over the hill' for jobs, Long said. But with the coming reconstruction, 'we're going to have plenty of work to keep them busy for a couple of years.'

However, officials don't expect to see much construction this year. After four years of drought, the rainy season at last could come in less than two months. The first tasks for the affected land owners will be a massive cleanup effort and work to control erosion in the denuded hill country.

The fire hit Lake County as it was finally making economic headway after a prolonged downturn.

Among North Bay counties, Lake was the last to 'get itself off the mat in the last recession,' said Sonoma State University economics professor Robert Eyler. Its real estate sector, tourism industry and job market all have come back far slower than those of nearby counties.

How Lake County's economy fares after the fire will depend on the answers to a number of questions, Eyler said. They include: How many fire victims will pull up stakes and exit the area? How many homeowners and businesses will choose not to rebuild? And how will outside investors factor in the risk of future wildfires when sizing up the county's potential?

'Will that drive away investment in both tourism and new businesses?' Eyler asked.

Melissa Fulton, CEO of the Lake County Chamber of Commerce, dismissed such questions and insisted that the fire has forged her neighbors 'into one huge force that is going to make this county better than it has ever been.'

'I think people outside of Lake County will be surprised by the resilience and the fortitude of the people who live here,' Fulton said.

The Valley fire to date is blamed for four deaths and the destruction of more than 1,900 structures, including 1,238 homes, or roughly 3 percent of the county's housing stock. It was the third of three major fires in the county this summer that together have burned more than 250 square miles.

In his request for federal disaster assistance, Gov. Jerry Brown noted some key measures in which Lake County typically lags the state: 25 percent of its residents live in poverty, versus 16 percent for all of California; unemployment stands at 8.3 percent, versus 6.2 percent; and the median household income is $36,548, versus $61,094.

The economy for the county of nearly 65,000 last year amounted to roughly $1.8 billion, according to Moody's Analytics. In comparison, Sonoma County, with a population of a half-million, had $23.4 billion in economic activity last year. Sonoma's median household income was $63,356, according to U.S. Census data.

Measuring the Valley fire's impact on the Lake County economy has barely begun. But a survey of affected businesses suggests significant costs. They include:

— The destruction of Harbin Hot Springs, the county's 10th largest employer, with about 285 workers, according to the clothing-optional resort's website. County officials say leaders of the nonprofit religious group that operates the resort have vowed to rebuild.

— Calpine suffered damage to cooling towers and other facilities at five of its 14 power plants at The Geysers geothermal fields. The system is now operating at about two-thirds of its pre-fire output, said spokesman Brett Kerr.

— Cattle ranchers were the largest sector of agriculture affected by the fire, according to Lake County Agricultural Commissioner Steve Hajik. About three-quarters of the ranchers had range land, fences or outbuildings burned by the fire. 'When 75 percent of the industry's affected, that is a pretty big deal,' he said.

— About 15 percent of the county's vineyards had some effects from the fire, though delays in picking the $60 million grape crop were kept to a minimum due to the efforts of fire crews.

'Within a relatively short period of time, growers were able to get crews in for the business of harvest,' said Terry Dereniuk, executive director of the Lake County Winery Association.

Vineyard damage from the fire was relatively minimal. Shed Horn Cellars, a 3,000-case winery just outside Middletown, was leveled by the fire, though its tasting room and inventory survived at other locations.

Employers suggested that the most widespread impact may be the business disruption involving workers whose homes burned down.

Of Calpine's 300 Geysers employees, Kerr said, 25 lost homes.

At the Middletown school district, 30 of the 200 teachers and other workers lost homes, said Superintendent Catherine Stone. With staff members needing to find new housing for their families and to deal with property damage, she said, some 'may not be ready to come back to work for a while. And we'll work with them in any way to support them.'

The fire also has made it difficult to find temporary housing in what was already a tight rental market.

'We're completely out of houses to rent, so it's getting to be very tough,' said Greg Evans of South Lake Rentals in Lower Lake.

Not surprisingly, one of the priorities for county officials is to find temporary housing for residents. Possible options include using the closed Konocti Harbor Resort and Spa to finding willing landlords among people who own vacation homes in the county.

Another priority is the removal of all fire debris. In his disaster request letter, Gov. Brown estimated that 1,500 properties in the area require major cleanup, 'each averaging 100 tons of debris.'

Officials and lumber store owners have heard of property owners anxious to rebuild, but don't expect much activity before winter.

Whenever the first wave of building hits, it will be a significant increase over recent construction activity. Since the recession, the county has typically seen 50 or fewer new homes built a year.

But local building suppliers say the upswing likely won't be much different than before the recession, when builders in some years constructed 300 or more houses in the county.

'We all know how to adjust to that kind of volume,' said Mark Borghesani, a co-owner in Kelseyville Lumber. 'We've done that before.'

While much remains uncertain, residents and officials note several reasons for optimism.

First, real estate agents pointed to the hardest hit areas of Cobb, Middletown and Hidden Valley Lake. The three communities are distinct and desirable, they said, and most property owners who suffered losses there will rebuild.

'I really think considering the areas affected that it will bounce back,' said Scott Knickmeyer, association executive of the Lake County Association of Realtors.

Second, the federal government is offering significant assistance, including low-interest loans of up to $40,000 for renters, $200,000 for homeowners and $2 million for businesses. The interest rate is fixed for 30 years at 1.875 percent, said Susheel Kumar, a spokesman for the Small Business Administration, which provides the financing.

Finally, the wider region is rallying to help the county get back on its feet. Virtually every business group or company interviewed is involved with some kind of fundraiser to help the fire victims, and many relayed acts of kindness — such as a retired Southern California educator who offered his Lake County vacation home rent free for a year to one of Stone's teachers.

In gauging the county's comeback, a key area to watch will be tourism, which hasn't seen a rebound since the recession.

Travel spending in Lake County declined 12 percent between 2008 and last year, according to the state government's Visit California. The 2014 total of $155.5 million has been essentially flat for five years.

In contrast, Sonoma County's travel spending increased 29 percent to $1.8 billion between 2008 and 2014.

In discussions, Lake officials point to the 2009 closure of the Konocti Harbor resort, which at the time featured the North Coast's largest concert venue, a 5,000-seat outdoor amphitheater.

Eyler, the SSU economics professor, said the reopening of the resort 'would be a signal that an investor sees something in Lake County.'

'That might actually trigger other investment,' Eyler said, and could encourage more rebuilding after the fire.

Long, the county's economic development manager, said officials are pushing 'to every degree that we can' for the reopening of Konocti Harbor. The benefits go beyond merely the number of jobs that would accompany its revival.

'It's been the face of our community for a long time,' Long said.

County Supervisor Jim Comstock, who represents Middletown and much of the area hit by the Valley fire, said the wildfire has brought plenty of destruction and costs, but also the chance to rebuild in better ways. The community of Anderson Springs has long needed a sewer system, and such an improvement now may cost less than replacing destroyed septic systems with new ones.

Like many officials, he voiced optimism about the future.

'We're going to come out stronger on the other side of it,' Comstock said. 'It's not going to be quick. It's not going to be easy. But it's going to be worth it.'

For complete wildfire coverage go to: www.pressdemocrat.com/wildfire.

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit