As San Diego County slumps into its worst downturn since the end of the Cold War, the military and the defense industry remain a $24.6 billion economic powerhouse that could provide needed economic stability, according to a report released yesterday by the San Diego Military Advisory Council.
HOWARD LIPIN / Union-Tribune
The total impact of defense spending, including on such items as the aircraft carrier Kitty Hawk (right), will come to $24.6 billion this year. The Kitty Hawk is to be decommissioned.
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The report, based on data from the Defense Department as well as local military contractors, found that the military's contribution to the economy has been growing at a rate of roughly 7 percent a year at a time when a number of key civilian industries have been falling into stagnancy or decline.
And with major housing projects planned in Camp Pendleton and other military sites over the next couple of years, the military could inject new life into one of San Diego's most beleaguered industries: residential construction.
“The presence of the armed forces and supporting industries (provides) a stable economic base that doesn't have the fluctuations that come with economic downturns or trends in tourism or industry,” said Terry Magee, a vice president of Lockheed Martin who is president of the advisory council, a business group formed four years ago to keep military jobs in San Diego.
The study, which was conducted by Export Access, a consulting arm of UCSD Connect, found that the Pentagon is spending $15.5 billion in San Diego County this year on such things as military salaries, equipment repairs, construction and procurement. That makes San Diego the top recipient of military expenditures of any county in the country.
Besides the direct impact of the spending, there is an indirect impact as the money is used for local goods and services. For instance, when the Navy signs a contract to build a ship in National City, the contractor hires local workers and buys materials from local businesses, who then use the money for their needs.
Using that so-called multiplier effect, the total impact of defense spending will total $24.6 billion this year, according to the study.
According to the study, the military accounts for nearly 27 percent of the local work force, including 263,000 active-duty personnel, civilian employees and retirees as well as more than 100,000 contractors and other workers.
“The employment number might sound high, but I wouldn't dispute it at all, especially given the gains in defense spending that we've seen since 9/11,” said Kelly Cunningham, economist at the San Diego Institute for Policy Research, author of several studies detailing the military's impact in the county.
Maj. Gen. Mike Lehnert, the commanding general of Marine Corps installations in the western United States, said the economic impact will increase over the next several years, partly because of a new wave of construction at Camp Pendleton.
The Marines plan to spend $4.7 billion on new construction in San Diego County over the next two years, including $1.7 billion renovating barracks and single-family housing at Camp Pendleton.
“This is a construction boom that's unprecedented since World War II,” Lehnert said. “It's great news for the San Diego economy and for construction workers here who are looking for work.”
Adm. Len Hering, commander of the Navy's Southwest region, cited similar economic benefits from the plans to redevelop the naval administration complex on Broadway. Hering said the new administration building, which is slated to become the Navy's center for logistics for the global war on terror, will result in a $2.7 billion impact on the San Diego community and an infusion of 22,000 jobs.
Hering said that in general the military “serves to stabilize the regional economy and social fabric, keeping it vibrant in times of economic downturn.”
Dean Calbreath: (619) 293-1891; dean.calbreath@uniontrib.com
