It wasn’t that long ago that Santa Cruz County was hit with a serious mortgage crisis and an eye-opening recession. Now that the economic storm has passed, GT examines the county’s recovery process.
After the subprime mortgage crisis in the summer of 2007 and the ensuing recession of 2008, Santa Cruz County’s economy, like most in the state and the nation, plummeted into challenging times. That fall into a recession financially injured some parts of the county more than others, and, for the most part, those areas have healed.
In 2009, at the height of the crisis, consumer confidence dropped as annual taxable sales fell to $2,638,469, the lowest figure in more than a decade. In 2013, the amount increased to $2,893,395, which indicates that county residents are spending more money.
But has the local economy mended?
For some officials, such as Bill Tysseling, executive director and CEO of the Santa Cruz Area Chamber of Commerce, the diagnosis is clear.
“We’re a long way in the process of recovery,” says Tysseling. “But have we achieved the same levels of unemployment? We have not. Have we achieved the same levels of productivity? We have not. And it’ll be awhile before government and higher education recover their footing.”
Perspectives on the economy vary among the citizens of Santa Cruz County. The 2013 Community Assessment Project (CAP) report, an annual report conducted by Applied Survey Research (ASR) and sponsored by United Way of Santa Cruz County and Dominican Hospital, shows various quality of life indicators in the county. It notes that 33 percent of those surveyed felt that they were better off in 2013 than they were last year. This is not at all the majority, but it is a sharp increase from 2009, when only 20.1 percent of the survey respondents felt they were better off than the previous year.
Whites surveyed by ASR showed an increase from 31.3 percent in 2011, to 35.9 percent in feeling they were better off in 2013. Among Latinos, only 25 percent felt better off in 2013, a decrease in comparison to 28 percent in 2011, but a rise from 2009 when only 16.1 percent felt they were better off than the year prior. The majority of those who did feel better off in 2013, attributed it to being employed, working more, and making more income.
The respondents who felt worse off in 2013 than in 2012 cited various reasons. In an almost mirror image of those who felt better off, 21.4 percent of those who felt worse off cited making less money, and 15.9 percent attributed it to being unemployed, but most, at 26.7 percent, stated that the increasing cost of living was the cause of their feeling worse off.
There are positive signs that the county’s economy is recovering. According to DataQuick News, notices of default, the initial step in the process of foreclosure, are following a downward trend. In 2009, the number of defaults in the county peaked at 1,643. In 2012, the total amount of default notices decreased to 863, which is an indicator that the housing market is improving, but the number is still far higher than pre-recession levels. For example, in 2005, there were only 279 notices of default.
Another positive hint that the economy is beginning to heal is an increase in the median sale prices of homes. According to the National Association of Home Builders, the median sales price of homes in the Santa Cruz-Watsonville area was $365,000 in 2012, and in 2013 the figure rose to $426,000. But as in the notices of default, housing prices are nowhere close to what they were before the housing bubble burst. Housing prices reached a pinnacle in 2006 at $672,000.
The recent increase in the median sales prices for homes can be deceiving. In 2009 the median price was $347,000, but then increased in 2010 to $430,000, which is even higher than it was in 2013.
“Markets over-exaggerate on the way up,” says John Hickey, president of the Santa Cruz County Association of Realtors. “The reason real estate was extremely hot for a while was that it was undervalued. Prices fell below where they should be.”
Time will tell whether the recent rise in median home prices will hold, but although the increase in home value is a positive indicator of a recovering local economy, it is not such a great circumstance for those still struggling on the lower rungs of the economic ladder.
The amount of housing stock that is affordable for a median income family in the Santa Cruz-Watsonville area has dropped from its highest point in 2012 at 53.8 percent to 37.1 percent in 2013. Although this decrease may be disappointing to those currently seeking to purchase a home, it is a much higher figure than in the early 2000s. For example, in 2007, only 8.2 percent of housing in the Santa Cruz-Watsonville area was affordable to a median income family.
The creation of additional affordable housing may be essential for economic growth in Santa Cruz County, according to Tysseling. He believes that in order to ensure a thriving economy in the future, low-cost housing needs to be provided to two groups in particular.
“Housing is especially important right now, I think, for what I would describe as young professionals,” says Tysseling. “The other housing we have to figure out is for the workforce that is necessary to do the harvesting of agricultural products.”
The U.S. Department of Housing and Urban Development states that individuals or families that spend more than 30 percent of their overall income on housing are generally unable to provide themselves with other basic needs. In 2013, ASR reported that 47.4 percent of respondents claimed to have spent more than a third of their income on housing costs.
Lessons in Survival
With the onset of tough economic times, coupled with the ever-increasing cost of living in the county, more individuals and families are now reaching out for food assistance.
“It is so costly to live here, and that’s an additional challenge in affording a healthy, nutritious, and varied diet when people are paying so much for housing costs,” says Brooke Johnson, chief operations and programs officer at Second Harvest Food Bank of Santa Cruz County.
Although the Second Harvest Food Bank did see a sharp rise in the number of people it served before the recession between 2005 and 2006, the number of those in the county utilizing the Food Bank reached a new high in 2011 at 55,570.
“Based on the size of our community, I think we have been hit hard,” Johnson adds. “You think of us serving, at the height of the recession, over 55,000 people a month. That’s a huge portion of the population of our county.”
In 2012, 54,600 people in Santa Cruz County utilized food donations from Second Harvest Food Bank, a slight decrease from 2011, but an increase of 67.2 percent since 2005.
Second Harvest Food Bank is not the only source of food assistance in the county. The state-run CalFresh program provides low-income families with an EBT card that they can use to buy food at grocers and some farmers’ markets in the county. CalFresh receives its funding from the federal aid program dubbed the Suppleme-ntal Nutrition Assistance Program (SNAP).
“SNAP is the first line of defense against hunger,” Johnson says. “It does so much more in terms of food assistance than all of the food banks across the country combined.”
According to the County of Santa Cruz Human Services Annual Report, the number of people served monthly by the CalFresh program reached 22,612 in the fiscal year of 2012-2013, a sharp increase from the fiscal year 2007-2008, when CalFresh served 12,748 county residents. The total cost of the benefits issued in Santa Cruz County during the fiscal year 2012-2013 was $41.5 million.
Since 2006, the county’s unemployment rate has consistently been above state levels, reaching its peak in 2010 at 12.7 percent. Since that time it has gradually decreased each year, and as of July 2013, according to the State of California Economic Development Department (EDD), Santa Cruz County’s unemployment rate was 8.2 percent, which was lower than the state, but still above pre-recession levels.
The City of Watsonville has traditionally had higher rates of unemployment even before the recession, and like most of the county reached its highest levels in 2010 at 26 percent. Although the rate of unemployment in Watsonville has decreased since that time, it is still quite high when compared to the county and state. In July 2013, the City of Watsonville’s unemployment rate was 17.8 percent, which was a 5.2 percent increase from 2006.
Just as unemployment has decreased countywide, net job growth has increased overall, but some industries are still struggling, while others, like tourism, never felt the effects of the recession, and even prospered in that time.
“During the recession, the Boardwalk increased their sales year to year,” says Bonnie Lipscomb, executive director of the Economic Development Department of the City of Santa Cruz. “I think that a lot of people stayed locally in lieu of traveling more broadly during the recession.”
Most other industries in the county, however, were impacted by the difficult economic times. According to the EDD, some of the biggest losses in net job growth were found in the construction and manufacturing industries, with the greatest decrease in net job growth found in the information sector. Other industries that saw job losses were retail, government, and finance.
Some of the industries projected by the EDD to see the most growth in terms of job creation are healthcare jobs, such as personal and home healthcare aides, substance abuse counselors, and other service industries such as cooks and self-enrichment teachers.
Lipscomb hopes to see job growth in the City of Santa Cruz in areas such as hotels, restaurants, and the organic food industry, and also expressed high hopes for emerging technology companies budding off from the research conducted at UC Santa Cruz. But she believes that certain infrastructural changes need to be made for tech jobs to flourish.
“I think one of the things we need to focus on in the coming years, and this not just for Santa Cruz, but the region, is improving our broadband infrastructure,” says Lipscomb. “It will help us to be competitive and will allow the companies that are here, and other companies that may want to consider Santa Cruz, to develop and grow their businesses.”
Tysseling also predicts growth in the organic food industry, and hopes to see businesses spin off from the university in the form of technology jobs, small business start-ups, and genomics research. But he also envisions a new type of business person thriving in the future economy, through what he describes as individual entrepreneurship.
“I don’t necessarily mean starting a business,” Tysseling points out. “There will be people who will find ways to be productive, to have income that attaches to work where they are contracting, essentially, on a day labor scale, and on a product or project- specific level. I think we will see a lot more people with multiple jobs. I think we will see a lot of people who will develop a project-based design for how they are going to become their own professional.”
To that end, GT gathered a group of local professionals to examine what economic injuries they endured during the recession and how well their financial wounds have healed since. Take note:
Caitlin Parker began her career as an entrepreneur in 2006, when she purchased Firefly Coffee House in the complex near the Saturn Café, but then moved her business to its current location on Front Street in Santa Cruz in 2007.
Parker did not complete college, but always dreamed of creating a space, not unlike the coffee shops she grew up patronizing in her native state of Utah. Due to the high population of non-coffee-drinking Mormons, those who did indulge were part of a secret club, according to Parker. She used her college fund to start Firefly, but when the recession began, so did a number of hard lessons for Parker. She had not yet served food, had too many employees, and had long operating hours. As she lost profit, she realized she had to cut employees and the hours she was open.
As she struggled to stay in business, Parker had an epiphany. She taught herself to make bagels, and since then Firefly has flourished. Now Parker employs a staff of eight, and has turned a profit in the last two years.
“Mine’s kind of a success story of the recession,” Parker says.
Elliot Bliss had a preternatural ability in art from a young age. In high school, Bliss painted on a pair of white Vans he had received for Christmas, and caught the attention of his classmates. Since then, Bliss has painted on more than 500 pairs of shoes.
Bliss moved on from custom footwear to painting on canvas, but when the recession hit, he began to notice fewer people buying his work. To adapt to the hard times, Bliss created smaller works that were more affordable.
“I suppose if my creativity and output were affected by the recession, it would be that they were both increased in a way,” says Bliss. “I began to be very prolific. Selling pieces so small and cheap made it so that I had to make more, and make them more quickly.”
Although Bliss is still a “starving artist,” he has had many successes. He has recently taken up painting murals, and one of his works will be featured in the soon- to-open KC’s Sports Bar on Pacific Avenue in Downtown Santa Cruz.
When the recession struck, Renee Golder, fifth-grade teacher at Bay View Elementary in Santa Cruz, realized that the classroom can be an important place for students whose families are coping with hard financial times.
“Sometimes the only stability a student has is in the classroom,” says Golder. “So your relationship with them becomes very important.”
In addition to providing a support system for kids, Golder feels that it is important to teach all of her students about financial responsibility at a young age.
“I always encourage the kids to start little bank accounts,” says Golder.
Golder, a mother of two, urged her own children to start saving their money early on. She promised her kids that if they saved $500 apiece, Golder and her husband, a local firefighter, would take them to Scotland. When, after a year of holding yard sales, the kids met their goal, Golder and her husband fulfilled their promise, and the four went on a family trip to hunt for the Loch Ness Monster.
“The Great Recession had a profound effect on my business,” says local builder and member of the Santa Cruz Construction Guild Gordie Schwartz. “My gross receipts used to average around $1.3 to $1.4 million, we typically do less than half that now. I used to have between six and eight employees. I generally have three, maybe four, guys working these days.
“My average project size used to be $300,000 to $500,000,” he adds, “but nowadays, we do a lot of $50,000 to $150,000 projects. On the plus side, I’d say that we’ve become more efficient as a company—a necessary adaptation for survival in this climate.”
Schwartz also has a sense that things are improving.
“At least for me, the process is slow,” he says. “We’ve been busy, but there’s very little sense of security still, and the projects are much smaller than they used to be. Am I more optimistic? I suppose so, but five or six years of a difficult economy has been pretty draining. All in all, I think things are moving in the right direction, but I don’t think we’re out of the woods yet.”
In 2008, fourth-generation apple grower Noah Gizdich and his family at Gizdich Ranch in Corralitos were forced to streamline their business practices.
“At the time, gas was about $4.50 a gallon, and diesel was about $5.50,” says Gizdich. “If you were going to go 10 miles up the road and 10 miles back, at the end of the line, it just wasn’t worth the time.”
In order to further combat the recession, Gizdich Ranch sold their delivery truck and subcontracted their distribution to another company. Instead of hiring a mechanic to fix broke-down machinery, they fixed it themselves. A portrait of practicality, Gizdich has sound advice for ensuring a prosperous economic future for Santa Cruz County.
“It’s just important to buy local,” Gizdich says. “It goes a long way, keeping it local. If we all did it more often, across the board, it would keep money here in the community.”
Learn about the Community Assessment Project at santacruzcountycap.org. Photos: Keana Parker