Climbing out of Recession

Signal Hill Climbing Out of Recession, But Cautions Remain – Focus on the City of Signal Hill

Auto Dealers, Businesses See Rise in Sales, But Loss of Redevelopment Is Cause for Concern

Signal Hill — (Long Beach Business Journal) — 02/28/12 — With businesses turning a profit again and lease activity remaining steady in recent months, the small City of Signal Hill is slowly reaching the road to prosperity. But, city officials and business professionals in the 2.2-square-mile hilltop town are still guarded against unclear economic conditions and dwindling local resources.

Known for converting its oil-rich land into homes, retail centers, auto dealerships and industrial parks, the self-governing city of more than 11,000 residents is projecting a surplus this fiscal year ending June 30, with an additional $2 million in an economic uncertainty fund and general fund reserves. The boon comes after maintaining a lean city staff and experiencing an uptick in sales tax revenue.

Despite the growth, however, city officials said the state’s elimination of redevelopment agencies (RDAs) might strike a new blow to the city’s coffers and hamper future development. Other concerns continue to be national and global economic uncertainties, along with high unemployment and the struggling housing market.

“We have to be very careful and cautious as we move forward,” said City Manager Ken Farfsing, who has been with the city for 15 years. “Even though we’re recovering, I have to continue to remind people that it’s not time to pop the champagne corks. We’ve had our foot on the brake for a number of years and it’s not time to take our foot of the brake yet, and hit the accelerator.”

Still, the Signal Hill’s budget has turned around since the years of the Great Recession, when the city experienced a substantial drop in sales tax revenue, causing it to draw on reserves and cut costs. Farfsing said the city is now projecting to end the 2012 fiscal year with $10.3 million in sales tax revenue, which is about a 1.5 percent increase over recession years.

For the third quarter last year, from July to September, overall sales tax revenue increased 14.4 percent over the same time period in 2010, according to a report by HdL Companies released this month. Actual sales were up 13.1 percent. The strong boost came from industries such as automotive, building and construction, office supplies, oil and various other business groups. Currently, sales tax revenue accounts for about 70 percent of the city’s total income.

Signal Hill Mayor Larry Forester said redevelopment has created the kinds of businesses and community developments that currently generate an “economic engine” of an estimated $1 billion in sales a year. In the future, he said the city should eventually overcome the loss of RDA, albeit with much less resources and a bare-minimum staff.

“I’m still of the belief that Signal Hill is the little city that could and did,” he said. “As far as our budget is concerned, are we worried? Absolutely. Are we looking at every nickel and every dime? Absolutely… But we’re also looking forward at how to work with what we have.”

Projects Moving forward

Despite the loss of RDA, some development projects already on the books are still able to move forward, with some to be completed this year.

One of the biggest projects underway involves a 143,000-square-foot property at the northwest corner of Patterson Street and California Avenue. Signal Hill Disposal, also known as EDCO, has secured a long-term lease on the site to build and operate a modern, approximate 68,000-square-foot enclosed recycling and solid waste transfer station at 2755 California Ave. The project involves remediation of 14 abandoned oil wells.

The state-of-the-art facility, to be occupied by mid-May, will accept, process and transport hazardous waste and recyclable materials generated from Signal Hill and surrounding communities. An administrative terminal for office space, day-use and tuck parking and maintenance at 950 27th St. is to be finished this fall. City officials estimate the new facility, once up and running, should generate an extra $250,000 in annual revenue to the city through assessing host fees on the operation.

A new 21,500-square-foot signal Hill Police Station and emergency Operations Center, at the corner of 27th Street and Walnut Avenue, is now 70 percent complete. The RDA was able to issue bonds in 2009 to pay for a majority of the project. A total of $18 million has been allocated for construction, furnishing and new high-tech equipment that will increase the department’s capabilities.

The city had estimated the project to be done by this summer. However, Deputy City Manger Charlie Honeycutt said the project is now being delayed further as the city is currently in the process of working with a bonding company to find a new general contractor. As of February 15, FTR International Inc. walked off the job due to the company closing its doors and laying off workers, according to city officials.

“Nothing has really changed other than it may take us a little bit longer to get it done,” he said. “This hasn’t put the project in jeopardy by any means. It’s just that we’re now going to figure out who is going to finish it.”

Police Chief Michael Langston said the new facility would be a big upgrade from the old civic center police station, which is outdated and not up to current building codes. “We look forward to getting it completed and occupying the building,” he said. “It’s a great improvement for the Signal Hill Police Department and the community for the service we’ll be able to provide.”

Another addition includes plans for a $10.6 million new library, which is being funded primarily thorough an RDA bond issued early last year. Other funding sources include park development funds and library reserve funds. After more than a decade of planning, the Signal Hill City Council approved the new library’s conceptual design, site plan and elevations during its February 7 meeting. The architect for the project is expected to refine the plans and move forward with construction-level drawings, according to city staff.

In terms of residential development, construction is proceeding on the new hillside community called “Signal Hill Collection,” being developed by home builder City Ventures. The project is to include 53 market-rate town homes on 2.25 acres at the intersection of Pacific coast Highway and Orizaba Avenue, finally breaking ground last year after being on hold during much of the recession.

Herb Gardner, president of the homebuilding group for City Ventures, said 18 of the units have been sold and the project is now heading into the third phase of construction, with plans to be completed by the end of the year. The new “eco-­friendly” homes come with built-­in solar panels and are pre-­wired for the new Nissan LEAF electric car to plug in to the home’s electrical system. “It’s been good,” he said. “It’s not selling as fast as we’d like it to. But, we had hoped to have it done by 2012 and that’s still a possibility.”

Nearby, Irvine-­based MBK Homes is now starting to build a $31 million project called “Aragon,” a community of 81 townhomes at 1899 Orizaba Ave. Rick Fletcher, vice president of sales and marketing for MBK Homes, said site grading should commence in May and construction of the first home model will begin in early August, with hopes of a grand opening by January or February 2013.
Although market conditions have been challenging, he said the developer has fine-­tuning plans and pricing to better reflect the current demand. “If we didn’t feel that the market was going to improve somewhat this year and there wouldn’t be demand for our homes, then we wouldn’t start construction,” Fletcher said. One project that hasn’t gone forward yet, however, is plans for a new CarMax auto sales and service facility on a six-­acre site at Spring Street and Walnut Avenue, between Nissan and Honda dealerships. After the project was put on hold during the recession, the used-­car retailer is now re-­evaluating if the site would fit for one of the company’s urban models, according to Elise McCaleb, Signal Hill’s economic development manager.
But, since the former RDA still had title on the property, a disposition and development agreement may have to be settled through the redevelopment dissolution process or potential lawsuits, she said. “There’s still a lot of discussion with CarMax,” McCaleb said.
Scott Charney, the city’s planning manager and community development director, said there appears to be tentative interest for new projects, but it remains uncertain whether prospects will translate into actual development. “The bottom line is we’re still meeting with people who are expressing potential interest, but right now we don’t have any new projects on the horizon,” he said. “We’re wrapping up the ones that were previously approved.”
Automotive Industry
The automotive sector, one of the city’s top performing industries, is currently experiencing an upswing in sales, according to city officials and recent sales tax reports. In fact, sales tax revenue from new motor vehicle dealers during last year’s third quarter reached more than $575,000, which was a 33.3 percent increase over the prior year, according to HdL Companies.

The revival came mainly from new auto dealers that replaced businesses and brands that closed down during the recession. “Strong sales and leasing activity, combined with . . . new car dealers, boosted postings from the automotive group,” according to the city’s sales tax revenue report.

Boulevard Buick/GMC, which celebrated 50 years last year, located at the Signal Hill Auto Mall, took over an empty lot left by the Long Beach Chrysler Jeep dealership that closed in 2009. The auto dealer also moved its Boulevard Collision Center, which specializes in auto maintenance and paintwork, from Long Beach to its new Signal Hill location. The project is now near completion. Boulevard Buick is also building a new Cadillac franchise on eight acres at 2850 Cherry Ave. in the auto mall, expected to open by April 1.

Ron Charron, general manager and partner of Boulevard Buick, said new models are coming online, including Cadillac’s new XTS sedan to be available at opening and the ATS luxury compact car to be released in September. Both models should be a major draw for new buyers, he said.

“We’re excited,” Charron said. “General Motors is doing a lot of good things. It seems like customers are waving the American flag once again. Depending on whom you talk to, GM has recaptured the number one spot in the world, which we had lost a few years ago. So, things are going in the right direction.”

Mercedes Benz of Long Beach, which re-­opened last year with a new state-­of-­the-­art showroom and facilities at its location at 2300 E. Spring St., experienced an 88 percent increase in auto sales last year over the previous year, said Bob Milner, the dealership’s general manager.

“[The increase in sales] is attributable to the change in the culture of our team over the last 15 months and reestablishing our relationships with our customer base and the community,” he said. Milner added that the dealer gained market share against competitors last year after Mercedes Benz introduced the two-­door C-­Class Coupe, holding the No. 1 spot in the Southern California market. Independent auto repair and restoration shops have also seen a boost in sales in recent months, with customers often drawn from surrounding auto dealers. Datsun Alley, which specializes in maintenance and repairs of foreign and domestic cars of all kinds at its Signal Hill location for 22 years, saw about a 20 percent increase in sales last year, according to owner Gary Paloccui.
Suzy Carr, owner of Wood’n Carr, specializing in antique and classic cars and interior and exterior vehicle wood restorations, said far more people are investing in their automobiles than during recession years. She said the value of classic cars had leveled off in previous years, according to auction prices, but values are starting to pick back up again. “My whole shop is completely packed with work and we’ve got plenty of people waiting in the wings,” she said.
Retail And Restaurants
Although it’s been tough for retail businesses to remain profitable due to consumers holding back on discretionary purchases in the still tepid economic recovery, some retailers in Signal Hill are starting to see positive sales again.

Costco, located in the shopping center at Willow Street and Cherry Avenue, for instance, saw a “solid increase” in sales in 2011 over the previous year, according to Warehouse Manager Scott Kirby. The wholesale giant currently employs more than 200 people at its Signal Hill location and was able to hire new employees last year after implementing an 18-­month hiring freeze.

Fresh & Easy Neighborhood Market, which opened at 2475 Cherry Ave. in 2010, continues to receive a strong reception from local patrons, said the British-­owned convenience grocer’s spokesperson, Brendan Wonnacott. “It’s definitely been a good fit,” he said. “We have a great store network in the area, continue to grow everyday with more sales and more customers, and we look forward to introducing ourselves to even more of our neighbors.”

Although still relatively new, Fresh & Eas ycontinues to make investments and rapidly expand new locations, Wonnacott said. In recent months, two new stores opened in Long Beach, while smaller express stores opened in Seal Beach and San Pedro. He said the company plans to open 25 new locations by the end of March.

Rossmoor Pastries bakery, which operates a 25,000-­square-­foot facility, offering retail and wholesale services at 2325 Redondo Ave., has remained profitable in recent years, as “comfort food” is still a hot seller, said owner Charles Feder. “Every year it’s been better than the year before,” he said. “We’ve been more aggressive on our selling and picked up more accounts.”

Major sales have come from requests for wedding cakes, along with orders from major convention centers and big-­name sporting and entertainment venues, Feder said. The company is also looking at plans to open a second location for gluten free products, he said.

Next door, The Wine Country, an independently owned, 7,000-­square-­foot retail wine and spirits store at 2301 Redondo Ave. is now in its 17th year. The store has seen revenue decline slightly in the past few years, mainly because customers haven’t been as willing to buy higher-­priced wines as in the past, said owner Randy Kemner. “Wine, like restaurants, are one of the more discretionary purchases and customers are going to cut down there,” he said.

However, Kemner added, “I’m very optimistic for 2012. We really sense the mood of people and the mood, since the first of the year, has been really good . . . Champagne sales are going up and that means that people are happy.”

Meanwhile, a new In-­N-­Out Burger opened last October at the Signal Hill Gateway Center along East Spring Street. The restaurant continues to remain busy, according to city officials, who said landowner Signal Hill Petroleum is working to bring in two new potential retail tenants.

Another eatery, though, Bob’s Big Boy, closed in late December after five years at 1898 E. Willow St. According to city officials, the property owner there is currently looking at whether to bring in a new franchisee or open up a new type of restaurant.

Dave Solzman, owner of Delius Restaurant, which provides a niche for one of the only upscale sit-­down restaurants in Signal Hill at 2591 Cherry Ave., said 2011 was the first year the restaurant saw an increase in profits over the prior year, since moving from Bixby Knolls in 2007. “Before that, we were pretty flat with our year-­to-­year comparison and people would make a joke that flat is the new up,” he said. “Now, we’re starting to go up again. It’s not lighting the world on fire, but it’s going in the right direction for sure.”

The restaurant has been able to survive through the recession by offering a variety of options for dining, including a full bar, a wine bar, an a la carte dining room, prix fixe dining and a wine cellar. Solzman said Signal Hill is also a good place to do business in. “Since it’s a small city, it has more of a family feel and it’s easy to get to know people,” he said. “We appreciate and enjoy being in the city because it returns more than what we expected.”

How’s Business?

Signal Hill is also home to a variety of independently operated, specialized services that provide anything from office supplies and furniture to light industrial printing.

Shari Blackwell, owner of The Undershirt, providing embroidery and screen-­printing for private clients, businesses and operators in various industries, said business in the last eight months has “leveled off” since the rollercoaster days of the last three years. But she said orders remain smaller. “I have a lot of new customers, but everyone is ordering very cautiously,” Blackwell said.

Many businesses stay in Signal Hill because the small city has a close proximity to the freeway, is business-­ friendly with low licensing fees, city officials are easily accessible and there tends to be less crime than other areas, she said.

Recently, the city has seen a groundswell of independent athletic training-­related businesses moving from surrounding cities into warehouses with fewer restrictions and cheaper rent. Jack Mapes, owner of Fitness Mecca, which moved into 3289 Industry Dr. in April of last year, said there has been a steady response from clients so far.

Being located where there are now three private-­gyms on one street attracts more attention to the independent training arena, which offers more personalized programs than corporate gyms, he said. “It definitely attracts people that may not have a good experience at corporate gyms and they’re looking for a privately-­owned gym,” Mapes said.

Steve Nader, operations manager for Nader’s LA Popular furniture store located at 3301 E. Pacific Coast Hwy since 2010, said the storefront has seen business “maintain,” but hasn’t experienced any sales increases yet. But, he said there does appear to be more optimism for the future and more customers are coming from outlying areas, such as Seal Beach and Lakewood.

“Our industry does tend to be directly linked to the housing industry, but with the increase of rentals and people feeling a little more comfortable with job security, they’re starting to make more purchases and reinvest in their homes,” Nader said. “We’re cautiously optimistic moving forward, but things have been getting better with where the economy is going.”

Oil Industry

Skyrocketing crude oil prices at or above $100 a barrel – in recent months and most of last year – has hit consumers hard at the pump. But the high oil prices have been profitable for gas and oil producers, suppliers and city revenues in Signal Hill.

Dave Slater, chief operating officer and executive vice president of Signal Hill Petroleum, which employs 110 workers, said producing oil remains profitable, but still is a risk management operation. So far, the operator has been drilling and re-­drilling in the area for the last few years. But the main goal is to increase supply domestically by aggressively investing in new technology to reach new reserves in Long Beach and surrounding areas, he said.

Signal Hill Petroleum has invested “tens of millions of dollars” to conduct a seismic geophysical survey that involves the use of large “vibrosies” trucks that survey’s the earth’s crust, specifically targeting the Newport Inglewood fault zone. The raw data is then analyzed to determine potential sites for oil drilling. The operator is currently wrapping up the final phase of the survey to be completed in March, Slater said.

“Our strategic vision is that there are a lot of oil and gas reserves in and around Long Beach and it’s going to require technology to locate and get those reserves out of the ground,” he said. “The Los Angeles Basin is one of the most prolific oil and gas sedimentary basins in the world.”

While alternative fuels should be a part of the future of energy consumption, Slater said the oil industry is still a dominant economic driver for the country. He said the company has reinvested heavily in its operation to pursue more domestic oil reserves, to grow local jobs and development while depending less on imported oil.

“Oil operation is not going away . . . In fact, it’s expanding,” he said. “Being able to expand oil and gas operations and bring development to empty lots where communities need to grow, needs to be a part of the equation of being a good neighbor.”

Real Estate Markets

As far as the city’s residential market, Barbara Irvine-­Parker, a realtor for Coldwell Banker Coastal Alliance, said single-­family home prices in Signal Hill have been relatively flat in the past year, with possibly a slight increase.

According to the latest multi-­listing data, there are only nine homes for sale in Signal Hill, with prices ranging from $359,000 to $760,000 on the market. “Signal Hill seems to be meeting the demand in single-­family residents at this time, although it would be good to have more inventory,” she said.

As for condos, she said now is a good time to buy in Signal Hill. There are 31 condos for sale, ranging in price from $120,000 to $525,000, said Irvine-­Parker, who has sold real estate in Signal Hill for 14 years. Also, she said there have been about the same number of short sales and REOs, mostly seen in condos in the lower price range, combined as standard sales on the market.

Signal Hill City Councilmember Mike Noll, who sold real estate for seven years, agrees that home prices in Signal Hill are “stabilizing,” with increases in some areas. Although there may be a few more foreclosures on the market this year, overall, he said demand for homes on the hill is continuing to improve and remains relatively tight compared to some other areas.

“You’re going to still have a [few] more foreclosures that the banks have been holding, but the demand is growing now, with interest rates being so low and there’s a little bit more self confidence,” he said. John Eddy, commercial real estate agent specializing in the industrial market for Coldwell Banker Commercial Blair Westmac, said industrial lease activity in Signal Hill has been relatively strong in recent months, with most transactions in multi-­tenant buildings, although sales have been few. Currently, lease rates range from 60 cents to $1.15 per square foot, depending on space size. As the market tightens, however, he said there might be some rate increases.

“Our office has done several leases in the fourth quarter and the start of this year,” said Eddy, who also leases commercial property for Eddy Trust. “The desirability in the location and the business climate really sets the tone when businesses move here . . . There’s always a limited amount of space in Signal Hill and the vacancy period is much shorter than any of the other surrounding cities.”

Shannon Allen, a commercial agent for INCO Commercial, said the industrial sector is leasing more quickly than the office market. She said more businesses are moving into larger facilities, instead of companies downsizing. Overall, Allen said, Signal Hill has an attractive business climate. “It’s just a good spot to be in,” she said. “It’s close to the port; it’s close to the freeways; and it’s relatively safe. There are a lot of people looking for those spaces.”

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