California adds up the cost of wildfire damages

John W. Schoen Senior producer • Profile • E-mail

As residents of fire-ravaged areas in Southern California began returning to their homes Friday, the full economic impact of the destruction was only beginning to be known. Though insurance claims and government emergency funds will cover some of the losses, the longer-term impact could weigh heavily on a region already reeling from a steep downturn in the housing industry.

The full scope of the damage is still unknown, but as of Friday, seven deaths had been attributed to the series of fires, which destroyed some 2,000 homes and a half-million acres of public, residential and agricultural land. Preliminary estimates put the financial toll well above $1 billion; the final figure will likely be higher, according to economists and insurance officials.

"This situation here is the worst I've seen in terms of impact on individuals, families, homes, businesses," said Charley Wolk, who has been farming in San Diego County for 35 years.

Of some 23 fires, the so-called “Witch Fire” in San Diego caused the biggest property damage to date, and could result losses of as much as $1 billion alone, according to insurance consultants at Risk Management Solutions.

Those estimates would make this week’s wildfires among the costliest on record. A series of fires in 1991 in Oakland Hills resulted in total claims of between $3 billion and $4 billion in 2007 dollars; an October 2003 outbreak of wildfires in Southern California caused some $2.6 billion in losses, said RMS.

MSNBC video   Governator warns of fire fraud Oct. 26: Gov. Arnold Schwarzenegger and Insurance Commission Steve Poizner warns of wildfire fraud. MSNBC

Some economists worry that the damage could take a wider toll on the region’s economy. Losses to the tourism and farm industries won’t be fully recovered. Local governments’ budgets will be stretched by the unexpected costs of emergency services. Homeowners may well see insurance rates rise. And money diverted to covering damages is money that could otherwise be invested in economic activity that produces growth, according to Joseph Brusuelas, chief U.S. economist at IDEAglobal.

“The conflagration that has engulfed Southern California over the past four days has the potential of pushing a fragile regional economy into recession,” he wrote in a note to clients.

While highways and airports remained open, many schools and businesses were forced to shut down, resulting in lost sales for those businesses and lost wages for some workers. As those who were forced from their jobs return to work, the losses from missed wages and slower spending is expected to be limited.

Calif. fires' economic impact Tax deadline pushed back for Calif. fire victims California adds up the cost of wildfire damages As Calif. burns, shopping traffic slows Economy will rebound from fire’s damage Charred crops to hurt farmers not consumers Fires destroy one-third of Calif. avocado crop

Farmers hit by the blaze will take longer to recover. Though much of the state’s farm lands lie in the Central Valley to the north, some 11,000 acres of farmland were burned, according to county agriculture officials. About a third of the state’s avocado crop was believed to be in the fires' path, and officials say dozens of commodities, from eggs to oranges, along with an unknown number of nurseries, also suffered damage from the fire.

"Our losses will certainly be in the millions — it's just a question of whether it'll be tens of millions or hundreds of millions," said John Demshki, president of the Corona-College Heights Orange & Lemon Association, which packs citrus and avocados for about 600 farmers in Southern California.

The impact on tourist destinations was mixed. Popular destinations like Sea World and the San Diego Zoo closed down; hotels and restaurants saw increased traffic from local residents fleeing the fire.

MORE FROM STOCKS & ECONOMY

Stocks & economy Section Front

Stocks end big day at highs for the year Oil prices top $80 as dollar weighs on markets Aging bull? Stocks may be in for rough ride Wall Street awaits stores’ reports this week Cost of gas nudges up 2 cents in last two weeks Jobless: 10 percent is tougher than it used to be Easing job losses point to wobbly recovery Unemployment rate rises above 10 percent When unemployment last topped 10 percent Obama signs homebuyer, jobless bill assistance Stocks & economy Section Front   Add Stocks & economy headlines to your news reader: