Sonoma County grapples with tenuous economic recovery after October wildfires

Sonoma County has a well-known rallying cry as it seeks to rebound from the October wildfires. But 'Sonoma Strong' does not fully reflect the risks - and opportunities - for the region's economy seven months after the disaster.|

If anyone epitomizes the spirit of Sonoma Strong, the local rallying cry since October, it’s Ashish and Sia Patel.

The Sonoma couple purchased the historic former Glenelly Inn in 2011, renovated the rundown Glen Ellen landmark and reopened it as the Olea Hotel the following year.

But last fall, the woody Warm Springs Road property with guest rooms was badly scorched by the Nuns fire as it rampaged across Sonoma Valley.

Two of the cottages burned to the ground. Fences, outdoor furniture and landscaping all were incinerated.

And buildings that barely survived - thanks to the efforts of firefighters and a rooftop sprinkler system - suffered major smoke damage.

While there were dark days that followed, the Patels say their outlook has brightened recently. Their battles with their insurer are behind them, a major remodel is well underway, and their anticipation builds daily for the hotel’s July reopening.

“The whole area around us was fairly decimated,” Sia Patel said, “so to have something come back to life again and be better than it was before is really exciting to us.”

Twenty miles to the north, Jimmy Chen isn’t feeling so encouraged.

Nearly seven months after the Tubbs fire leveled much of Larkfield, the co-owner of Kaede Japanese Restaurant has a dazed, defeated look.

“It’s not like we want to give up,” Chen said as his eyes drifted around his nearly empty restaurant last week, “but the situation is kind of forcing us to.”

Chen said the restaurant was having a great year last year, and he was even considering expanding to the space next door in the Larkfield Center, where the eatery has operated for four years.

Then fire hit, devastating the surrounding neighborhood, though the center - thanks to some local heroics - was saved.

When the restaurant reopened a couple of weeks later, business was initially strong, Chen said. Customers he knew by name returned, giving him hope the things might recover.

But it wasn’t to be. At least half of his regular customers had lost their homes, Chen estimates, forcing them to move.

“Most of them came here just to say goodbye.” Chen said.

He has laid off his waitress because he can’t afford her and plans to end lunch service soon. His lease is up at the end of the year and that is likely when he’ll close for good.

“We try not to care much anymore,” Chen said. “Emotionally, we just can’t keep up.”

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As spring rains recede and wildflowers brighten scorched hillsides, Sonoma County is poised to see if an economic recovery will blossom or whither. No other region in the October firestorm was hit so hard, with nearly 5,300 homes lost, 24 people killed and thousands of residents displaced.

Will tourists spooked by the disaster return this summer to patronize the wineries, restaurants and lodging establishments that have come to rely on them, or will they steer clear?

Will the recovery effort make a smooth transition from debris cleanup to new home construction, giving fire survivors hope and builders a full construction season, or will a punishing lull set in?

Will headway be made on major new residential projects, widely seen as crucial to solving a housing crisis that constrained growth even before the fires, or will they remain mired in legal, financial and political limbo?

And will those residents - including members of the county’s workforce, from doctors and engineers to teachers and tradespeople - rebuild and propel the region’s recovery or depart and fuel a brain drain?

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The drop in tourism after the fires was most pronounced in the areas directly affected by the blazes, which torched more than 137 square miles in the county.

Peter Spann, who owns a Sonoma Valley winery with a tasting room in hard-hit Kenwood, said the cancellations after the fires were immediate.

“Everyone who had an appointment to come and visit us between October and January canceled,” Spann said.

Ever since, it has been a daily struggle to convince customers to return and to dispel misconceptions about how much damage the fires caused to wineries. Only one in the county, Paradise Ridge in Santa Rosa, suffered extensive damage.

But descriptions by regional and national media of the “Wine Country Fires” and the seemingly endless images of wineries and vineyards menaced by flames didn’t help, he said.

“They thought every single winery and every single vineyard was burned to a crisp,” said Spann, who opened his 5,000-case Spann Vineyards in 2001 with his wife, Betsy.

Their story of struggle resonates with Beth Costa, executive director of Wine Road winery association. Despite some initial success convincing visitors to support the region after the fires, it’s been a challenging winter for many wineries, she said.

Ticket sales at various special events promoting the wineries of the Alexander, Dry Creek and Russian River valleys are “down across the board,” she said.

“I’ve heard from people all over the country who say they’re going to plan their trip for another year,” Costa said. “They heard there was total devastation and they don’t want to see it.”

Those who do visit appear to be spending more, helping offset revenue drops, she said. However, Costa now worries a different, more lasting slump may settle in following visitors’ initial impulse to support the area post-fire.

“I think the feeling is changing now to we should be left alone to recover,” Costa said. “But if people leave us alone to recover, we’re in real trouble.”

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A dip in winery tourism has a ripple effect across the lodging industry as well, but an uneven one, said Ben Stone, executive director of the Sonoma County Economic Development Board.

Revenue from county taxes on lodging establishments was actually up slightly in the fourth quarter of 2017, to $9.8 million. The drop in tourism was offset by people displaced by the fires and recovery workers snapping up hotel rooms.

“Some of the folks along the Highway 101 corridor are saying they’ve never had it so good, while those along the river, they are feeling it,” Stone said.

Jennifer Lamarre, co-owner of the Fern Grove Cottages in Guerneville, confirmed the area’s struggle.

“Definitely this winter was the slowest winter that we’ve had,” Lamarre said of her four years running the cozy getaway with her husband. “It was really tough.”

Despite being miles from the fires, the Russian River destination saw guests cancel in droves.

It was even worse than the previous winter, when the floods and media coverage of them - including a memorable and widely publicized image of a woman kayaking through her living room - kept tourists at bay for months, she said.

Now that the weather has improved, bookings are up but still soft, she said. Travelers are calling days or weeks before their stay, instead of months in advance, she said.

Nevertheless, Lamarre said she is impressed with the efforts Sonoma County Tourism has made to entice visitors back.

These include efforts to encourage people to explore areas off the beaten path, and advertising to dispel misconceptions about the extent of the fire damage, which mostly affected residential areas where tourists don’t tread, said Tim Zahner, chief operating officer of the county’s tourism agency.

He pointed to an increase in traffic to the visitor bureau’s website as one sign of a budding rebound.

“Did we lose business after the fires? Of course,” Zahner said. “But are we seeing signs of more people signaling an interest in coming here? We are.”

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While the county’s $2 billion-per-year tourism industry is the lifeblood of a large part of the economy, impacts on other vital industries appear mixed.

The surge of recovery workers has undoubtedly had a positive effect on the economy.

Joe Molsberry, owner of Molsberry’s Market in Larkfield, said he doesn’t know where he’d be right now without the influx of cleanup crews after the fires. The 60-year-old market founded by his grandfather has struggled since nearly 1,500 homes were lost in the Larkfield-Wikiup-Mark West corridor. The fire burned right up to the market’s back fence.

In the weeks and months after the fires, in addition to serving as an informal reunion spot for fire survivors, The market has been mobbed by hardworking cleanup crews.

“We were slammed up at our deli,” Molsberry said. “It was just like a mass of yellow and orange vests up there.”

The neighboring Blue Beagle Coffee enjoyed a similar jolt of business from cleanup crews, he said.

While lunch receipts have been a bright spot for Molsberry’s, the evenings and weekends can be painfully slow with so many regular grocery shoppers burned out and relocated elsewhere. Joe Molsberry is grateful to the vendors willing to waive minimum order sizes to help the market keep costs down and perishables fresh. And he’s touched by the local customers who drive in from all over the county, including Sebastopol and Bodega, to shop at the market while they wait to rebuild.

“It’s been kind of a tough seven months, but we’re clawing our way through it,” Molsberry said.

Other types of retailers have already benefited from the combination of thousands of fire victims needing to replace so much of what they’ve lost - from cars to cargo shorts - with an estimated $7.5 billion in insurance payouts flowing into the county.

Stone referred to this effect as “back-to-school on steroids,” providing a bump for certain types of retailers selling must-have items, like clothes, shoes and toiletries.

Another key indicator, auto sales, rose 9 percent last year following a surge in purchases in the last three months as people replaced thousands of vehicles destroyed in the fires.

Such big-ticket items should help boost sales taxes for cities like Santa Rosa, which along with Sonoma County will nevertheless struggle with budget uncertainties in the short to medium term, Stone said.

The big purchases, however - such as home appliances, hot tubs and boats - will likely be delayed until people rebuild and have a place to put them, Stone said.

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That, unfortunately, is proving more challenging than many had expected, said Keith Woods, executive director of the North Coast Builder’s Exchange, a construction trade group based in Santa Rosa.

Not long after the fires, Woods predicted that it might take the region a decade to fully recover. Seven months later, he stands by that estimate, surprised and troubled by the relatively few number of people who have begun rebuilding. Santa Rosa has issued 147 permits to date, the county 88.

Woods estimates that countywide in the burn zones, 300 to 500 homes - out of the 5,283 destroyed here in the fires - could be under construction by the end of the year.

A number of reasons exist for the slow pace of rebuilding, he said, mainly the large number of people who haven’t decided whether to stay.

“There’s not only the theme of Sonoma Strong. We’re also Sonoma Uncertain,” Woods said. “A whole lot of people don’t know what they are going to do.”

The Federal Emergency Management Agency estimates that 30 percent of people on average leave an area after a natural disaster, Woods said. The rate could be higher for this disaster because of the huge number of people who are underinsured.

United Policyholders, a nonprofit that advocates for the insured, said surveys six months after the October wildfires show 80 percent of victims had yet to settle their claim. The average insurance gap - the difference between the payout to residents for property lost in the disaster and the cost to rebuild - was $317,000, according to the organization.

That shortfall will make it difficult for many people to rebuild, and result in more lots going up for sale, Woods said.

The value of land in Sonoma County and its enduring desirability, will ultimately result in buyers for those lots and eventually homes will be added, but it now seems destined to take far longer than many hoped, he said. A shortage of skilled construction labor - and a lack of temporary housing for those coming from outside the area - compounds the challenge, he noted.

“I do believe that every property that lost a home will have a home rebuilt on it,” Woods said. “It just may not be the homeowner who was there when the fires hit.”

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What such uncertainty means for the local job market is unclear.

Overall, the unemployment rate is virtually unchanged, inching up from 2.9 percent before the fire to 3 percent now.

While thousands of people lost their homes, a smaller number lost their jobs. In cases where employees were displaced - such as staff members at the three Santa Rosa hotels that burned - the job market is so tight that they were likely hired elsewhere quickly, Stone said.

Where he does see challenges is in the medical field. About ?200 doctors lost their homes during the fires.

Of those, just 53 percent plan to rebuild, according to a survey by the Sonoma County Medical Association.

Of the remainder, 36 percent said they were undecided and 16 percent said they would not rebuild, according to Wendy Young, executive director of the association.

Such trends can sap regional recovery, so the Santa Rosa Metro Chamber has been pressing the city to further streamline its permitting process for new housing, hoping to expedite construction for those who want to stay.

Having a sufficient stock of housing is crucial to retain existing residents, many of whom are struggling now to absorb rising living costs, said Peter Rumble, executive director of the Santa Rosa chamber. It’s also a key factor for businesses trying to hire and new ventures thinking of relocating here, he said.

Santa Rosa officials appear to grasp the challenge, Rumble said, and the city’s move to further ease housing construction shows it is serious about recovery.

“We got punched in the face,” he said. “So you fall back a little bit and you regroup and you figure out how to move forward.”

You can reach Staff Writer Kevin McCallum at 707-521-5207 or kevin.mccallum@pressdemocrat.com. On Twitter @srcitybeat.

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