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Can Imperial County Come Back From the Dust?


San Diego Reader

Cover Story | Imperial Valley

By Craig D. Rose | Published Wednesday, Dec. 1, 2010

Driving west on I-8, down from the dry, rugged mountains, diving into what should be a desert landscape 100 miles east of San Diego, the Imperial Valley appears as an agricultural oasis. Miles of irrigated alfalfa and wheat fields punctuated by stacks of baled grain. Winter vegetables. Fields of lettuce.

The feat of irrigating a desert seems also to generate a bumper crop of grand dreams. And when, in October, the Federal Bureau of Land Management approved the largest solar-electric project ever on federal lands in Imperial County — it will cover ten square miles — many took it as a sign that dreams can come true.

“Our board has declared its intention to make this the renewable-energy capital of the world,” said Andy Horne, deputy executive officer of Imperial County.There are strong arguments for not peppering rural Imperial County with utility-size solar and geothermal projects — it would be cheaper and less damaging to cover urban roofs with solar panels — but it’s possible that within a decade or two, Imperial County’s dream of becoming an energy powerhouse capable of powering the entire state of California on a sunny fall day could come true.

Think about that. A single desert county, albeit one the size of Connecticut, powering the state without pollution. Without the use of fossil fuels. And, possibly, without many workers or much in the way of local taxes, due to exemptions for solar projects.

And there’s the rub. Imperial County has a renewable-energy dream for the future, while the vast valley provides a nightmarish economy for many in the present.

Last August, El Centro’s official unemployment rate — likely an underestimate of joblessness — was 30.4 percent, the nation’s highest. But why omit the positive? The August rate was an improvement from July’s rate of 32.1 percent unemployed, again the nation’s highest.

Along with the unemployment, there is widespread poverty. The county’s poverty rate is nearly 23 percent, which approaches double the rate for San Diego County, according to U.S. Census Bureau data. More than 20 percent of Imperial County’s residents have no health insurance, in a region where the California Department of Public Health found that children are three times more likely to be hospitalized for asthma.

Food banks say demand for assistance is spiking.

Regional boosters are quick to note that even in good times, Imperial County’s unemployment rate lingers in the high teens. Joblessness runs so deep in this region that they memorialized César Chávez — the farmworkers’ legendary labor leader — by affixing his name to the unemployment office in El Centro.

The development of clean renewable energy in Imperial County could be an economic restart, providing an opportunity to alleviate the crushing joblessness and support county services for needy citizens. But there is an ugly alternative: Absent proper planning, the region could become a new-century desert version of Nigeria, where billions of dollars in oil have been extracted with little benefit to the citizens.

County officials and economic developers say they’re working to avoid that prospect. They say current 30-plus percentage unemployment rates are a statistical quirk arising from a small population base with a seasonal workforce. Several said the actual unemployment rate is a percentage no higher than the low 20s. This would put it roughly at the level experienced by America’s workers during the Great Depression.

At these levels, joblessness leads to hopelessness, but not for Miguel Miranda.

Miranda spent several decades working in job development, helping to find work for others. But the Brawley city councilman was laid off four months ago from his job as a caseworker at Calipatria State Prison. With two children in college and one in medical school, Miranda needs income. Though his wife has held on to her job, the family is just getting by.

Miranda understands how dim prospects are for 50-somethings in the current market. Most employers, he said, fear hiring folks with lots of experience. “They’re afraid you’ll take their job. I’ve dealt in job development with every business in this county. Now, I’m like, ‘Remember me?’”

Things are so bad, Miranda sought work in the Imperial County’s farm fields, where he worked years ago. No luck. “They want people with experience on modern equipment,” he said.

But what Miranda said often recalls something his mother would say: “Always remember, the sun will come up tomorrow.”

“I’m an optimistic person,” said Miranda. “I never give up.”

Oscar Vaca is typical of Imperial Valley tradesmen, with a host of skills. His business card reads, “Home Repairs, Drywall, Paint, Plumbing, Electrical and More.” But Vaca has no job, no prospects. He hasn’t worked steadily for four years.

In desperation, the 52-year-old has taken to riding buses below the border in Mexico to sing songs for pocket money. His last steady job was five months spent building the border fence between Mexico and the U.S.

“I felt very bad about doing that,” said Vaca, who lives in Calexico.

“I thought I would never have to do something like that. But the bills… So I did it against my will. I needed to put money on the table. Work is fine, but when you build a wall to discriminate, this is wrong.”

∗ ∗ ∗

It’s a late Tuesday afternoon in El Centro, and the parking lot of the Rodeway Inn & Suites is about a third full. That’s not surprising in a struggling region, but what does surprise is that the majority of vehicles in the lot are dusty, late-model pickup trucks.

Gritty, weary workmen clamber out of the cabs into their two-star motel rooms, as daylight fades to a colorful sunset across the valley’s broad sky. As darkness sets in, a few workmen pull chairs outside to share beer and talk.

When I arise at 7:30 a.m., the pickups and the men are gone. I see no one at the motel’s complimentary breakfast in the lobby, where I eat alone.

Jennifer Badgley, an organizer with the International Brotherhood of Electrical Workers Local 569, tipped me to expect this. In a county with massive unemployment, Badgley said, contractors regularly bring workers in from elsewhere to do Imperial County’s work.

Kearny Mesa–based Local 569 opened an office in El Centro last year, and Badgley, along with other organizers, has developed a group that includes about 200 workers. The union has launched an electricians’ apprenticeship program and holds classes on Occupational Safety and Health Administration regulations, commonly known as “OSHA regs” — at least in most places. “There were 25 guys in that class, and most were 40 to 50 years old,” said Badgley. “Most had never heard of OSHA.”

Badgley agreed that Imperial County’s official unemployment rate is misleading: For construction workers, the rate is higher.

Micah Mitrosky, another IBEW organizer, says there was a $4 million federal grant that could have been used for improving county government buildings. The grant would have provided work for local workers and energy-efficiency upgrades for county buildings. After legwork by the union discovered the grant money, and IBEW’s commitment to help with the application, the county failed to pursue the grant before the filing deadline.

Mitrosky shared a June 2010 email exchange between herself and the chairman of the Imperial County Board of Supervisors, Louis Fuentes. In the exchange, Fuentes underscored the IBEW’s demand for a project labor agreement that would include a union hiring hall to staff the project. The union says that a local hiring hall is the only legal mechanism for ensuring that projects will hire the county’s unemployed, noting that that hall would be open to hiring nonunion workers, as well as union members.

But for Fuentes, it was a deal breaker.

“We need all available options to create jobs and stimulate our economy,” Fuentes wrote, “but not like this.”

Elsewhere in the email exchange, he noted, “These demands were not supported by the business community of this Valley.”

Calls to Fuentes seeking further clarification of his views were not returned.

“They just sat on it until the deadline passed,” said Mitrosky. “It would have immediately created careers and a training opportunity for craftspeople. They would have the skills to go to work immediately.”

Other union supporters have noted that the county has tried to avoid agreements binding it to pay “prevailing” — read, “higher” — wages for its construction projects.

Imperial County has received about $150 million from the economic stimulus funding passed by Congress last year. But that is about 20 percent below the per capita average for the nation.

“This community does not know how to fight for funding,” said Luis Olmedo, executive director of Comité Civico del Valle, a small organization working on environmental-justice issues. “Local government is not stepping up to the plate.”

∗ ∗ ∗

Timothy Kelley, the 45-year-old chief executive officer of the Imperial Valley Economic Development Corporation, is making a case for Imperial Valley’s future. With all his talk of trade trips, foreign investment, and renewable-energy summit conferences held in the region, it’s easy to imagine a booming county economy.

Kelley, who is an Imperial County native, concedes there’s a problem with unemployment. He also insists that the official unemployment rate is an exaggeration. It’s hard to get accurate numbers, he said, in a county of just 167,000 people, especially given the seasonal nature of agricultural work and the movement of migrant labor.

“Our economy has not been shrinking, the number of jobs in Imperial Valley has not been shrinking,” said Kelley. “What has been increasing is the number of people moving to the valley and applying for unemployment here.”

He added: “We have high unemployment, but it’s not 30 percent. It’s probably in the 20s.” Either way, Kelley said, “Unemployment is a figure in the past, and I want to talk about the future. We had 50 Chinese trade delegations visit our county last year. Interest is really picking up from China.” The Chinese have already invested in a couple of major real-estate projects, including a wholesale center near Calexico and a University of Phoenix campus in El Centro. More should be coming, Kelley said. China, in fact, appears to have taken its place in a succession of potential economic saviors for Imperial County. There was an airport proposal, talk of a bullet train, but no trace of either.

As Badgley noted, “Imperial Valley seems to be a place where big, crazy ideas pop up. And it seems many involve tunnels, pipes, three different states, the Mexican border, and the Salton Sea.”

Kelley said there is interest in developing Imperial County as a logistics hub, given its location just across the border from a cluster of maquiladoras. There’s also the county’s huge cattle production — Imperial County tops the state in beef production — and its proximity to big consumer markets in Arizona and California.

“A lot of companies on the Mexican side of the border want to be on the U.S. side,” he said. “A lot of Asian companies want to be in the U.S. and on the Mexican border. This is a very competitive place to do business, and our costs are less.”

But renewable energy remains the biggest hope.

“There are 14 utilities actively interested in projects, and they have 20-, 30-, 40-year lifetimes,” said Kelley. “The potential is great, and it will take years to develop. This year we will have five or six projects under construction. For a lot of people who didn’t think it was real, now they are seeing it.”

Kelley said interest extends beyond electricity-generating projects. “We are dealing with several manufacturers and service industries. So it’s more than just building a power plant and selling energy that could happen here.”

In a world that must go green, or perhaps not go at all, Imperial County has good reasons to believe it’s in the right space at the right time: abundant sunshine to power photovoltaic panels; high-desert temperatures for projects that tap the sun’s heat to make electricity; and vast stores of geothermal energy.

While there’s a better case to make for building renewable-energy facilities near cities and on urban rooftops — which avoids paving over vast tracts of desert and the huge cost and blight of power lines — San Diego Gas & Electric is proceeding with Sunrise Powerlink, the controversial $1.9 billion electric-transmission line that it says will be used to transport cleanly generated electricity from Imperial County westward to the coast.

Here again, critics say the green case for Sunrise is a screen for its true intent: moving dirty power generated by SDG&E’s parent company in Mexicali to markets in the United States. Although cleanly generated electricity from Imperial County could readily be transported via existing power lines, Sunrise Powerlink has fueled hopes that the infrastructure is being created to support a vast electricity export industry.

So potentially big, in fact, that even the 1000-megawatt Powerlink would be insufficient to transport all the power Imperial County might someday generate. Andy Horne, deputy Imperial County executive officer for natural resource development, said the county’s reserves of renewable energy were recently estimated at 40,000 megawatts, roughly the equivalent of more than 60 modern power plants.

For context, the highest electricity use ever recorded by SDG&E customers was just under 4700 megawatts this past September. Big questions remain about whether there is a market for all that potential in the Imperial Valley and whether advances in solar technology might make large rural solar-electric farms irrelevant.

After all, urban buildings coated with thin film photovoltaics might someday produce much of their own power. Offshore wind power could someday provide power when the sun isn’t shining. Google and several corporate partners, for example, recently said they would invest in a $5 billion underwater transmission project to move electricity from wind turbines in the ocean off the coast of the Northeast U.S.

For now, Imperial County has reason to hope that significant renewable energy will be coming its way. Horne lists some 2000 megawatts in projects that he’s begun to track because they’ve hired environmental consultants and sought permits, including potential geothermal projects.

These facilities generate electricity by tapping heat from the 500-degree brine found thousands of feet below Imperial County’s surface. While geothermal projects present environmental issues — pumping up that super-hot brine can bring arsenic, mercury, and nickel or other toxic materials to the surface — Horne said there are companies exploring the possibility of mining the brine for key minerals, a concept that failed in the past when mineral prices collapsed but may now be economically viable because those prices have risen.

A unit of MidAmerican Energy Holdings plans to break ground next year on a project that will expand its Imperial County geothermal electric-generating facilities from 350 to 1000 megawatts. This alone would more than double the 600 megawatts of geothermal electricity generation from Imperial County, the equivalent of adding a power plant.

There may be even more excitement about solar electric generation. The huge Imperial Valley Solar Project approved last month to cover ten square miles of the county is planned to produce about 700 megawatts. But there are technical questions surrounding the project.

The huge facility plans to deploy thousands of small engines, each equipped with a large array of large mirrors to direct the sun’s rays to heat fluid-filled tubes, which in turn drive the engines to produce electricity. The project plans to include 28,000 of these devices, which are called Stirling engines.

The project would employ up to 700 workers during its proposed three-year construction by an alliance of Tessera Solar and Stirling Energy Systems, which builds the engines. Once in operation, the Imperial Valley Solar Project plans to employ about 160 workers to maintain the facility’s 28,000 solar engines and keep the mirrors clean.

Skeptics of the project note that this technology has never before been deployed on this scale, let alone in a harsh desert environment.

Other solar thermal projects, which use heat rather than the sun’s light, are also planned. But more excitement within the renewable-energy world is now focused on photovoltaic cells, those beautifully simple panels that soak up sun and pump out electricity, as well as thin-film photovoltaic technology, which uses a pliable material suitable for covering rooftops.

These panels and films are becoming increasingly efficient, producing more electricity from the same surface area, and less expensively as well. Their beauty lies in their simplicity: they have no moving parts and are maintenance free, aside from periodic cleaning. The downside, from an economic-development perspective, is that even utility-scale photovoltaic projects, which could generate hundreds of megawatts, are expected to require almost no employees.

The PSEG Corporation, for example, has built projects in Florida, Ohio, and New Jersey. The company typically employs just one full-time person at projects as large as 15 megawatts, although standby crews of up to four people are also deployed.

Horne understands that there will be limited employment potential if Imperial County becomes home only to the projects themselves, without capturing any manufacturing, assembly, or allied work. The planned succession of projects could keep a large number of construction workers employed, with employment falling off once the projects are completed.

“We are expecting big things,” he said. “It won’t eliminate our unemployment problem, but it will make a dent.”

With more than 20,000 folks jobless in this sparsely populated county, it will take a lot of hiring to make a dent. At least all those new projects could conceivably boost county coffers and provide badly needed services and support improved infrastructure.

“That is a sore subject,” said Horne, explaining that geothermal projects pay royalties to the federal government for their production. The county is supposed to get a share from the U.S. Minerals Management Service. That’s the same much-criticized service that drew fire for its poor oversight of drilling in the Gulf of Mexico, following the disastrous BP spill earlier this year. “The MMS can’t explain why our royalties shrink to nothing,” said Horne. “They say it has to do with net profit.”

At its peak, Imperial County was receiving about $1 million annually from these electric-generation royalties. But last year, Horne said, “They said we owed them money. We said go blow it.”

The giant Imperial Valley Solar project, to be built on federal land, could generate millions annually for the federal government, Horne estimated. “But as far as I know, we won’t get any of that.”

Meanwhile, the county will be on the hook for providing fire protection and other services to the new facilities. The California Energy Commission, which approved the permit for Tessera’s big project, ordered the developer to reach an agreement on compensation to the Imperial County Fire Department. The commission estimated that mitigating fire-protection costs to the county from the solar project would come to $600,000–$800,000 per year.

“Tessera said that was way too much,” said Horne. “Our goal is to try to work with them. There are no net benefits if the projects don’t get built.”

In fact, the future of county revenues from solar projects looks limited. While Imperial County might earn some tax revenues, recent legislation to encourage solar has exempted these projects from property taxes, said Horne. Interpretations vary as to whether that exemption is forever (the industry’s likely view) or whether the exemption will terminate toward the middle of the decade.

“People in the industry say [profit] margins are slim and renewable-energy costs are at the higher end,” said Horne. “Solar developers are saying it is very difficult to build and operate these facilities, and they are very cagey when it comes to disclosing their costs. These things are expensive to build.”

Complicating the talks with project developers, from the county’s perspective, is that some of the projects will be on federal land. Green-energy developers have also been tweaked by the county’s interest in tax collection. “They’re saying, ‘You wanted us to come down here,’” said Horne.

There are other taxation mechanisms available to the county, though they will likely result in significantly less revenue than property taxes. “It throws a little wrinkle into the whole idea of building these projects,” said Horne. “We want to work with these developers. But we don’t want to build a bunch of projects that are a drain on the county.”

∗ ∗ ∗

Remote as it seems, Imperial County was a full participant in the real-estate boom — and subsequent bust. Coming out of the 1990s, a tough time in the valley’s real-estate market, things heated up considerably.

Ed Snively, a veteran real-estate broker and past El Centro city councilman, said the boom brought out the “flippers,” people who operated rapid-fire, buying and selling parcels while prices rose from $15,000 per acre to $25,000 in a couple of years.

That was a mere prelude.

By 2004 and ’05, prices were as high as $50,000 per acre, Snively said. The home-building frenzy saw as many as 700 homes built each year in El Centro alone. Home building now is nearly comatose, and the banks have taken back many houses bought in the go-go years.

In a county where monthly foreclosures had typically numbered in the single digits, foreclosures spiked to 178 per month during the summer of 2008. In July of this year, there were 95 foreclosures in the county. Despite the new inventory, sales volume has plunged. MDA DataQuick, based in San Diego, says average sales prices have fallen by 55 percent, from a peak of $290,000 in November 2006 to $131,000 last July.

Though the county has lost about $1.7 billion in assessed real-estate valuation, Snively said that geothermal development has added a similar amount, offsetting the loss.

“I think we’re starting to bounce off the bottom,” said Snively.

He added that the county needs funding for infrastructure and workforce education. It would help if San Diego State University, which has an Imperial Valley campus with a limited number of majors offered, expanded its presence in the region.

That’s another “sore” point in the Imperial Valley. Publicly supported higher education is hard-pressed to meet the demand of the county’s young people. Visit the Imperial Valley College campus in El Centro in early evening, and there’s a traffic jam of students jockeying to park and heading to classes.

Bill Gay, a spokesman for the two-year public college, said 1000 prospective students were unable to register for any classes this year. “We just did not have enough funding,” he said.

This has created an opening for for-profit colleges, including a University of Phoenix campus under construction with Chinese investment, according to Aaron Popejoy, chairman of the Imperial Valley Joint Chambers of Commerce.

Popejoy’s family has resided in El Centro for more than a century, and he emphasizes that the region’s economy is closely tied to that of Mexicali’s, the metropolis of more than one million people just across the border.

“There is a symbiosis with our two communities having families tied together and businesses tied,” Popejoy said. Unlike San Diego’s relationship to Tijuana, in some respects the Imperial Valley is the small player and Mexicali the big economic driver. Reduced border crossings, resulting from greater border security, have badly hurt many Imperial Valley businesses. A project to relieve congestion and the subsequent delays in crossing isn’t expected slated for completion for several years.

Popejoy is another believer in solar electric development. The chamber has inquiries from companies wishing to explore opportunities in distribution and construction related to renewables, as well as manufacturing. “My hopes are big for that, but I don’t know how many jobs there will be in cleaning solar dishes,” he said.

He also urges caution in considering the county’s official unemployment rate. “Seasonal labor [farm related] is a major statistic, and if you took that out, and other anomalies, we would drop back to a more reasonable level. Thirty percent unemployment isn’t good, but we’re always in the teens and twenties, unless it’s time to pick crops.”

That is the kind of thing one hears a lot in Imperial County and not just from boosters. It raises questions about expectations.

“It’s easy to say [our unemployment problem] can’t be solved,” said David Takata, regional president of Rabobank in Imperial County. “I hear that all the time, and it is disappointing. I see where that’s coming from, but we can’t give up.”

Takata said the bank has a strong interest in the emerging renewable sector and is working with developers. But he offered a note of caution about the local economy. “We’re looking for opportunities to lend, but we’re being prudent. The creditworthiness of some projects has declined.”

∗ ∗ ∗

The shameful irony of hunger amidst agricultural bounty is nothing new in America. But things are getting worse in Imperial County.

Catholic Charities, for example, says requests for food assistance are up 63 percent. According to Caroline Wessel, a program director with the charity, needy families choose between food and putting gas in the car to go to work. Or parents skip a meal so that their kids can eat.

“I think our numbers are a direct reflection of increased need,” said Wessel.

One plan for providing additional assistance has been hatched by Citizens Energy, a nonprofit Massachusetts company headed by former Rep. Joseph Kennedy, son of the late Robert F. Kennedy.

Citizens plans to lease a section of the Sunrise Powerlink from SDG&E and sell capacity on the power line to electricity-generating companies. It pledges to rebate 50 percent of the profits to fund charitable programs in the Imperial Valley.

“Over the course of 30 years [the term of the lease], that level of assistance will be in the millions [of dollars],” said Pete Smith, chief operating officer of Citizens, which in the past has sold discounted heating oil to needy homeowners. “In any given year, it may not be in the millions, but it will be in the hundreds of thousands.”

The Utility Consumers’ Action Network of San Diego, however, opposes the plan. In a filing with the California Public Utilities Commission, UCAN said charitable contributions are worthy but that the deal will result in higher costs for SDG&E customers.

Eric Montoya Reyes, who leads the Imperial Valley–based Institute for Socio-Economic Justice, is suspicious of arrangements like the one proposed by Citizens. He thinks that it invariably means companies will take a cut before locals get a share.

Perhaps surprisingly, Reyes agrees that the county’s current plight can be misunderstood. “The economy is down, but that is not out of the ordinary,” said Reyes, a former Calexico high school teacher. “The ordinary is that people are poor. We don’t have large factories that employ thousands of people. That is what we’re hoping for. The hope for our area is renewable energy.” Reyes added that the economic establishment of the county is poised to benefit from what they often decry: government intervention in markets and, in this case, state policies that mandate increased use of renewable energy, with federal incentives for those projects. “We wouldn’t have this development without the government.”

These days, more Imperial County residents have government jobs than work in the fields. According to state statistics, with a county workforce of 75,000, only 9400 work on farms. More than 18,000 work for the government, including 2500 at the area’s two prisons.

Ricardo Ochoa, an attorney for a coalition of mechanical craft labor unions, says the shifting economy has yet to be reflected in a shift in development strategy. “The workers say we need more jobs. The elected official’s response is to incentivize business. But when there are big jobs, the businesses bring in people from outside.”

While many area workers have skills, Ochoa said, those skills have been developed in casual settings, such as home-remodeling. It will be harder to make the cut for the higher-skilled jobs required by new industries in the valley. “What we have suggested as the solution is to enter into partnerships with labor because what we can provide is training through our apprenticeship programs.”

Jose Luis Miranda has tried the training program. The 41-year-old completed the IBEW’s five-year electrician-training program in 2009 and has been able to average only 10–15 hours a week working his trade. He supplements his income by teaching in the apprentice program.

Miranda feels he caught a break when he bought a house last year — after prices tanked. But he is frustrated to see contractors bring in workers from elsewhere for Imperial Valley projects. On the other hand, he noted that the lack of work at home has driven many local electricians to seek employment in San Diego, including a large number at the San Onofre Nuclear Generating Station.

For those who choose to stay in the valley, the options are few.

“About the only jobs are in the field picking melons and stuff like that,” said the Calexico resident. “I did that when I was 17 years old.”

But with picking up a couple of days each week in this trade and teaching, Miranda said, “I’m one of the lucky ones.”

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