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State Prepared for Disaster, But Concerns Exist

BY HOWARD FINE

Dan Sandel knows what it’s like to have a business wiped out by a disaster.

In 1994, the Northridge earthquake flattened Sandel’s building where his manufacturing company, Sandel Medical Industries LLC, assembles medical devices. Debris crushed much of the company’s machinery and inventory.

To stay afloat, he had to lay off 160 workers and outsource contracts to other manufacturers. Trailers were rented so his remaining employees had a place to work. “The loss of jobs and frustration of operating from trailers was pure misery,” he said.

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Experiences like Sandel’s are being repeated countless times in the wake of Hurricane Katrina and serve as a cautionary reminder of how a local economy can be dismantled by a natural or man-made disaster.

Along the Gulf Coast, thousands of businesses have been wiped out, with little or no hope of ever starting again. Those that do manage to reopen must regain their customer base as tens of thousands of residents have left , perhaps for good.

Disaster researchers say that California is better prepared than most states to deal with a major catastrophe. “California and Florida are probably the two premier states in emergency and disaster management,” said Joanne Nigg, professor of sociology and a member of the Disaster Research Center at the University of Delaware. “They have professional skilled emergency managers at multiple levels of government and they’ve had lots of practice.”

But there are numerous trouble spots.

The Los Angeles area has lagged in securing several terrorist targets, especially at the ports. Few plans exist to protect the coastline in the unlikely event of a tsunami. And first responders from different agencies still cannot communicate with one another.

Apart from a major earthquake, a biological attack is likely to cause the most harm to the local economy. Germ warfare would create a major public health hazard and force massive evacuations or quarantines for weeks at a time.

Other scenarios, such as a “dirty bomb” of radioactive material, might have a more localized effect, paralyzing the immediate area but not likely to cripple the county as a whole.

On the quake front, the state is behind on deadlines to ensure that all hospital and school buildings are seismically upgraded. The Northridge quake revealed flaws in joints that were used in steel-framed buildings and have not been addressed. And tens of thousands of “tilt-up” concrete buildings used in mini-malls and light manufacturing facilities face the risk of collapse.


‘Dangerously Naive’

There are also signs that businesses aren’t prepared to deal with lengthy interruptions caused by a disaster. A study released last year by the Partnership for Public Warning and AT & T; Corp. found that 35 percent of the 100 companies surveyed had no disaster preparedness or recovery plan in place. More than half of those surveyed had no backup systems in place to ensure operations following a disaster.

“A third of Los Angeles companies don’t seem to think they’re vulnerable,” said Ken Allen, the president of the Partnership for Public Warning. “That’s a dangerously na & #271;ve position to take, especially when you consider recent history.”

One problem is in viewing the Northridge quake, which caused $15.9 billion in insured losses, as a baseline for disasters. It’s now viewed contextually as a relatively small event and hardly in the same league as Katrina.

After Northridge, most businesses in L.A. County were able to reopen in two or three days. And thanks to a quirk in timing, the billions of dollars that flowed in from insurance payments and federal aid for rebuilding provided the necessary kick-start to an economy that had been flat on its back for three years.

L.A. may not be so lucky the next time. Disaster experts predict that the structural damage totals from a major quake striking the Los Angeles basin could equal or surpass Katrina’s projected toll. In one scenario modeled earlier this year, a magnitude 7.5 quake on the Puente Hills fault underneath downtown L.A. would result in 18,000 deaths and direct damages exceeding $250 billion.

That doesn’t include the tens of billions of dollars in broader economic damage that would result if much of the region was shut down for a week or more. Most businesses would have no power, fuel would be scarce and movement of goods would become more difficult, if not impossible, with freeways damaged and signals out on major surface streets.

“For every day L.A. County is essentially shut down, that’s roughly $1.2 billion in economic activity that goes down the drain,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.

If large numbers of houses were destroyed, insurance money might not cover rebuilding costs. Also, disaster experts and economists say that with median home prices now more than $500,000, displaced residents might be forced to move outside the region. Owners of red-tagged homes with heavy mortgage debts could also be forced into foreclosure or bankruptcy.

With industrial space in equally short supply, companies forced out of their buildings would also have a tougher time finding new quarters.

“If there aren’t many properties available now, then you’re going to see a lot of small businesses not able to remain open,” said Nigg. She noted that businesses that own their own damaged buildings would have to hold out for weeks or months until they could obtain SBA loans.

Besides leveling structures not damaged by the quake, the fires could ignite facilities with toxic chemicals, prompting mass evacuations. “Dealing with toxic clouds carries a whole new level of risk and would be far more disruptive to the local economy,” said Tom Larsen, senior vice president of Eqecat Inc., the disaster consulting subsidiary of ABS Group.

In a big quake, damage to roads and bridges and other key infrastructure components would likely be more widespread and it would take far longer for aid to flow in , as New Orleans showed, perhaps a week or even more.

“Caltrans has retrofitted most of the freeway overpasses, but they’ve never been tested in a major quake of more than 7.5 in magnitude,” Nigg said. “We simply don’t know how they will fare.”

Banks would be closed. Automated teller machines and credit card machines wouldn’t function, further hampering the ability of businesses and residents to get cash or process transactions.

Unlike Northridge, where most properties were rebuilt within five to seven years, many business owners might conclude that rebuilding in California is too expensive and risky.

“That would be a new choice point, whether to stay and rebuild or move elsewhere to a place that’s cheaper,” said Dan Blake, professor of economics at Cal State Northridge, which itself was largely rebuilt after the 1994 temblor.

Sandel, who got back on his feet with the help of a $13 million loan from the Small Business Administration, has heeded the warnings. He said he’s boosted his insurance coverage for his medical device company, rebuilt the company-owned building with the latest seismic upgrades, and runs periodic drills with his employees.

But he still wonders if he’ll be left stranded by a botched government response. “When you see what happened with Katrina, you have to wonder what happened to all those resources,” he said. “You need massive amounts of support to make it through something like that.”


Andy Fixmer contributed to this story. Howard Fine writes for the

Los Angeles Business Journal.

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