Year Ahead Looks Like It Will Be More of the Same From The Newsroom by Michael Hart The silliest season of the new year is over. Somewhere around daylight on Jan. 2, most of us tired finally of New Year’s resolutions and outrageous predictions. In the intervening weeks, many companies have been forced to begin implementing the back-to-basics plans they drew up in the days surrounding the Christmas holiday. For quite a few, it has not been a pleasant way to start the new year. So, here are a few not predictions but half-educated guestimates of what the rest of 2002 holds for businesses in the San Fernando Valley: – First, the economy in general: It will come back, but slowly. I read as much as you do about leading economic indicators. Albeit hopeful, much of it makes sense: A turnaround starting in the second quarter with very, very slow growth until the end of the year. The downturn we’re in seems to have dawned on us here in the Valley later than it did in most places, and my guess is that its impact will linger longer here than you’ll read about in the national financial press and will end sometime after you’ve read it’s all over everywhere else. A year ago at this time, business owners were just starting to feel a pinch, just starting to have to wait a little longer for clients to pay them and beginning to find it a little harder to make deals. Elsewhere, the Fed was already contemplating interest rate cuts, the uproar that accompanied the dot-gone phenomenon was over and tech stocks had bombed. So, as a business community, the Valley will lag a bit on the way back up, just as it did on the way down. What’s more, as I talk to people who use Jan. 1 as a good time to start with a clean slate, even the most optimistic are cautious. Some companies are cutting back severely on people, purchases and plans. Others are making less drastic changes, but they’re also not spending with abandon. We’ll have to see some real change in the business environment before Valley companies decide the time is right to move out of the hunker-down mode. Even if a critical mass of Valley decision makers figure a certain moment is the right one to finally stick their heads up again, count on at least another quarter after that before they breath a sigh of relief. – The attacks of Sept. 11: We’ll get over it and life will return to something close to normal. The terrorist attacks had an impact on everybody everywhere. Much of the Valley’s business activity came to a halt in the days and weeks that followed. Coupled with the recession-in-all-but-name already in place, it was hard for even the most optimistic among us to ignore the fact we were in trouble. But life went on. People went back to work, every day a little less distracted and pained than the day before. And they will continue to do so in the future. Certainly, everybody is looking over their shoulder, worrying about what might happen. But most of us have regained our confidence; most of us believe that as a society we can protect ourselves and that the institutions that provided the quality of life we had before will prevail. Life will go on. – Health care: You’ll pay more for it. This month or next, a large, large number of us will either be paying more for our and our employees’ health care, have negotiated contracts with new providers or be out in the cold without any health coverage at all. Annual increases in premiums are nothing new; they’ve risen substantially every year for some time. In recent years, however, many companies felt they could absorb the increases. This year things are different. While average health care increases will be in the 10- to 15-percent range this year, some companies are getting bids from longtime providers that are 40 to 50 percent above last year’s. On top of that, providers seem to have finally heard the complaints and said “we get it” with new plans that give patients a little more control over their own care and doctors a little more money for doing the right thing. Naturally, the health care industry is not making these changes because it is benevolent, but because it doesn’t want to lose customers who will be expected to continue to pay their premiums. All this, of course, comes at a cost and we will all bear a part of it. – Finally, secession: We will talk and debate and figure and wring ourselves dry. We may all decide it’s the best opportunity the Valley will ever have, but it won’t happen not this time. Valley VOTE, the city and LAFCO may still be horse trading, but the basic outline of the deal we’ll eventually say yes or no to is in place: a transfer of leadership in December with assets and responsibility for services to follow gradually over a number of years. Momentum toward a breakup has been substantial and, admirably, it has been a grassroots effort. That will have to change as Election Day draws near and L.A. brings its big guns and big money to bear. Mayor James Hahn said he plans to raise $5 million in an effort to stop secession. He’ll probably need and get more. Secession advocates will have to do likewise. The kind of big money required is available to fund the status quo, not disrupt it. What’s more, voters in other portions of L.A. will have to be persuaded that downsizing is good for them too. Putting all that together will be too big an order. But there’s always next time. Michael Hart is editor of the San Fernando Valley Business Journal. He can be reached at [email protected].