Military’s bootprint in region is a big one

Report sees increased spending by Pentagon

By Jeanette Steele, UNION-TRIBUNE STAFF WRITER

Thursday, April 22, 2010 at 12:04 a.m.

/ 2009 file photo / Union-Tribune

The Sky Warrior aircraft is part of General Atomics Aeronautical Systems’ unmanned-aerial-vehicle program, which also includes the Predator.

What the movies are to Hollywood and finance is to Wall Street, so the military is to this county, according to a report released Wednesday by the San Diego Military Advisory Council.

Pentagon spending in the region swelled in 2008, thanks mainly to a $1.7 billion boost in purchases of goods and services, and more ships and personnel being positioned in the West.

The boom, expected to last for at least a few years, might make the Greater San Diego area the top destination for U.S. military dollars, a title held in the past by the Norfolk, Va., metropolitan zone.

The council’s report documents what looks like a rising tide of Defense Department spending in the local region.

“There’s a big footprint for (the) Navy here. ... I see it getting bigger,” said Rear Adm. William French, commander of Navy Region Southwest. “The growth is coming. The Pacific Rim is where the focus is,” including China and North Korea.

In 2008, the most recent year for finalized data, the Pentagon wrote checks totaling nearly $16.2 billion in San Diego County and directly employed 136,729 people, or 9.7 percent of the region’s work force, according to the report.

That outlay is up from roughly $14.2 billion in 2007 and about $13 billion in 2006.

If the ripple effect is considered — such as spending by companies that win government contracts — the impact on the county’s economy amounts to $26.5 billion in output and 328,000 jobs supported by Pentagon dollars.

Projections for 2009 and 2010 are even higher, a fairly safe bet given San Diego’s big slice of recently allocated federal stimulus funds. A large chunk of that money is a $563 million earmark for a new hospital at Camp Pendleton.

Leaders of the nonprofit advisory council, a booster group for the military, said the Pentagon’s financial value to this region doesn’t get enough headlines and airtime. So they commissioned the report, which was prepared by graduate students at the University of California San Diego.

“The military’s economic impact in San Diego has been a leveling force, a stabilizing force, that has prevented rapid fluctuations in the region,” said council President Tony Nufer, a senior manager at CSC, an international computer-services company with government contracts.

“It’s provided a stable employment base for a highly educated and highly technically skilled group of people that prevents the ‘hourglass effect’ of the high earners and low earners, which can be present in periods of recession,” he said.

A big reason for the recent rise in spending is a massive campaign of construction at Navy and Marine Corps installations around the county. All told, the military controls 28 percent of the region’s real estate.

There are new barracks to house troops, upgraded runways to support more aircraft and new piers for additional ships being designated for San Diego.

The council’s report predicts that local Pentagon-related construction peaked in fiscal 2009 at $1.26 billion, though it will remain higher than in past years through at least 2011.

Non-hard-hat spending also is considerable. Seven of the top 10 recipients of defense contracts in San Diego County are technology or energy companies.

The largest is Northrop Grumman, maker of the unmanned Global Hawk aircraft, with $1.13 billion in contracts. Science and engineering contractor SAIC, which moved its headquarters from San Diego to Virginia last year, had work totaling $1.06 billion.

Looking at the long-term picture, Navy officials said any future decline in Pentagon contracts will be tempered somewhat by the year-in, year-out salaries paid to the military personnel stationed in this region. The compensation pattern is expected to remain relatively stable.

Plans by the Navy and Marine Corps to station more “boats and boots” here will provide another buffer against the boom-and-bust cycle of military spending.

More than 4,000 additional Marines are expected to be stationed in the county as part of the Corps’ “Grow the Force” expansion. The Navy is slated to add roughly 7,200 sailors in the next few years.

Through 2012, San Diego Bay will become home to 21 ships that are newly deployed or redeployed to this area, according to the council’s report.

The latest vessels are the aircraft carrier Carl Vinson, which arrived this month. The Freedom, the first of a new class of Littoral Combat Ships, is scheduled to reach the bay Friday morning.

There’s a potential dark cloud in the economic forecast — the possibility that the Pacific Northwest will keep the San Diego-based aircraft carrier Nimitz after the ship heads there in coming months for prolonged maintenance, taking with it more than $400 million in annual spending.

If ship assignments and other sources of revenue remain high, the Greater San Diego area could move into the Pentagon’s top spending slot. That’s the forecast by people such as National University economist Kelly Cunningham, whose research on 2007 data placed the county third after Norfolk and the Los Angeles-Orange counties region.

“We could very well be higher,” Cunningham said, though he added that general manufacturing is still probably the county’s top job sector, followed by the defense, biotech and technology industries and hospitality businesses.