Meanwhile, Temeculas primary economic challenges are similar to those faced by other inland?edge? cities like Corona and Rancho Cucamonga. Demand for executive homes continues to surge driven by younger, high-end families migrating away from soaring coastal housing prices. In Temeculas case, just 20% of nearby San Diego Countys residents can afford its median priced home. The bulk of these new residents work in highly skilled occupations. From 1990-2000, this applied to 39% of Temeculas new workers. However, there is a daily brain drain? as many residents drive long distances to professional, high technology or corporate jobs near their former coastal homes. The citys economic strategies are designed to use this growing base of skilled workers to attract high income jobs and relieve the commuter strain on families, freeways and the community.

Meanwhile, the growing number of young, well-educated families moving into Southwest Riverside County is creating an unusually strong retail market for an inland area. This is seen in the areas increasing retail sales, its rising total and average household income levels, the success of the Promenade Mall and the interest shown in Temecula by upscale retail firms.

Attitude is an important consideration in economic development. Here, Temeculas leadership has worked hard to preserve the quality of the communitys environment and to provide its families with a wholesome way of life. This is one reason that the city has already been able to attract technology firms. The challenge now is to increase their number.

These statements flow from a review of hard demographic, economic and quality of life data about Temecula. This information is presented throughout this document and summarized below.

Temecula is succeeding because Southern Californias coastal counties are running out of land and the city offers families the chance to acquire upscale homes in a beautiful setting at reasonable prices. The numerous younger professional families responding to this environment are creating a strong market. In 2001, the largest share of Temecula families, 23.7%, made $50,000-$74,999. They were followed by 18.4% earning $75,000-$99,999. Above that were the 21.7% in the three income groups earning $100,000 or more.

In 2001, Temeculas median family income was estimated at $64,442, eighth highest among inland cities. Its average household income was a very strong $72,814. This was well above that of Riverside County ($60,865). It was also higher than that of San Diego County ($69,208). In San Diegos case, the income differential underestimates the buying advantage of Southwest Riverside Countys families. The areas lower home prices ($81,000 less on new homes) mean that its residents have much higher discretionary incomes remaining after making their mortgage payments. Altogether, Temeculas total personal income reached $1.67 billion in 2001. At the $23,791 per capita income level applicable to the city and Murrieta, Temeculas merchants are serving a relatively self-contained marketplace with 189,007 people and over $4.5 billion in total purchasing power.

Temeculas educational levels are benefiting from the migration of upscale families from San Diego County as well as local schools whose performance leads Riverside County. From 1990-2000, the percentage of the citys adults 25 & over who had attended college rose from 63.0% to 68.2% and the share with bachelors or advanced degrees rose from 21.9% to 25.0%. That was well above Riverside County (16.6%) and San Bernardino (15.9%) counties, and just above Los Angeles County (24.9%). The rate is moving towards those of San Diego (29.6%) and Orange (30.8%) counties.

Temecula is a relatively young city with a median age of 31.3 years, two years below Riverside (33.1) or San Diego (33.2) counties. Its largest population group, aged 35-44 (19.7%), is made up of people entering their peak earning years. They are the main group responding to the citys upscale but affordable housing market. Next are their young children, ages 0-9 (19.4%) and their older siblings aged 10-19 (18.1%). In 2000, just 12.6% of Temeculas population was over 55, well below either Riverside (20.2%) or San Diego (18.4%) counties.

Using the Public Law 94-171 file that culturally counts Hispanics as a separate group, the Census 2000 found that 69.3% of Temeculas residents were White, down from 80.8% in 1990 but above Riverside Countys 51.0%. Those classifying themselves as Hispanic were 19.0%. This was up from 14.2% in 1990 but below Riverside (36.2%) or San Diego (26.7%) counties. Asians and Pacific Islanders were 4.9% of Temecula residents in 2000, up from 2.9% in 1990. This was just below Riverside County (3.8%) and far lower than San Diego County (9.1%). African-Americans were 3.2% of city residents in 2000, up from 1.5% in 1990, but also less than River-side (6.0%) or San Diego (5.5%) counties. In 2000, Temecula was home to 321 Native Americans (0.6%). Riverside Countys total population was 10,135.

Temeculas existing homes sales were a record 1,746 units in 2001 surpassing the 1,505 in 1999. Its seasonally adjusted sales of 549 in second quarter 2002 were also an all-time high. From January-June 2002, Temeculas 1,014 existing home sales ranked sixth behind several larger cities. Corona was just higher (1,496), Rancho Cucamonga just lower (957). In 2001, Temeculas new home sales also set a record at 1,262 units, exceeding the 1,219 units sold in 1999. How-ever, in second quarter 2002, its 302 seasonally adjusted sales were below the quarterly record of 379 in early 2001. Still, Temeculas 490 new home sales from January-June of 2002 ranked fourth among the inland areas major markets after Corona (1,003), Murrieta (983) and Riverside (926).

With Southern Californias coastal counties running out of places to put homes and California failing to build enough houses to meet demand, it is not surprising that Temeculas existing homes are appreciating rapidly. In second quarter 2002, its median existing home price was a record $253,001, up 17.1% from that period of 2001. Yet, on average, the citys existing homes still were $27,000 less than San Diego County ($280,000) and $77,000 below Orange County. The median price of all 1,014 homes sold in Temecula from January-June 2002 was $245,273. That was the highest price in the Inland Empires major markets, followed by Corona ($244,495), Rancho Cucamonga ($236,163) and Murrieta ($230,378).

Temeculas new homes traded at a median price of $274,052 in second quarter 2002 up 18.2% from that period of 2001 and just below the first quarters record of $278,052. The citys allure is that its new homes are selling for $61,000 less than in San Diego County ($355,000) and $202,750 below Orange County ($476,250). For the 490 new deeds recorded in Temecula from January-June 2002, the median price of $275,570 was the third highest among the Inland Empires major markets after Rancho Cucamonga ($324,222) and Corona ($310,461).

In 2000, 29.7% of Temeculas dwellings were either rented or vacant, the second lowest share among major markets after Murrieta (23.6%). The city had 3.28 people for each of its occupied homes and apartments, higher than the 3.07 inland average and up from 3.00 in 1990. Temecula’s apartment market is very tight with just 1.8% vacant in second quarter 2002. Its average rental rate of $928 (up 5.9% from 2001) was the Inland Empire’s fourth highest.

From 1991-2001, job base in Temeculas zip codes rose nearly 2½ times from 13,590 to 33,105, up 19,515 jobs or 143.6%. In 2001, its largest sector was retail trade with 8,029 workers, followed by manufacturing (7,489) and education (2,959). From 1991-2001, the citys job growth was led by retailing, up 2,551 (180%), in part due to the new Promenade Mall. Manufacturing growth ranked second, up 2,449 jobs (121%), as the city has targeted that sector. Hotel & amusement growth was third, up 2,304 (807%), due to the Pechanga Resort & Casino, the lure of the wineries and events like the Temecula Valley Balloon & Wine Festival. In 2001, Temeculas 11.3% annual job growth far exceeded that of the Inland Empire (3.9%), Californias fastest growing area. Significantly, from 1991-2001, the citys job growth of 144% was much faster than its 124% population gain. However, the community needs much greater absolute increases in local employment to seriously reduce its commuter problem.

Meanwhile, Temeculas payroll growth has been similar but more aggressive than its job growth. From 1991-2001, the payroll of the citys firms and agencies more than tripled from $305 million to $1,008 million, up $703 million (230%). Adjusting for Southern Californias 25.4% inflation, this payrolls purchasing power still more than tripled, up $625 million (205%). In 2001, manufacturers ($327 million) accounted for 32.5% of total payroll followed by retail trade ($149 million), education ($95 million) and construction ($74 million). From 1991-2001, 48.0% of Temeculas $703 million payroll gain came from manufacturers ($230 million) and retailers ($108 million). Education ($67 million) and hotel & amusement ($48 million) were next.

Overall, Temeculas $30,455 average pay per job was a little below the $31,750 average in inland cities like Corona or Ontario. However, the $43,765 average in its large manufacturer sector was far higher than their $33,200. From 1991-2001, Temeculas workers saw their aver-age pay go from $22,480 to $30,455, up 7,976 (35.5%). However, Southern Californias 25.4% inflation took $5,718 leaving them with $2,258 in increased purchasing power (10.0%). Temeculas better paying sectors include finance, insurance and real estate ($46,366), engineering & management ($43,944), government ($37,395) and education ($35,761). However, its large retail ($18,605) and hotel & amusement ($21,604) sectors are relatively low paying.

Looking at companies, the number of firms in Temecula grew from 1,189 in 1991 to 1,836 in 2001 period, up 647 (54.4%). Average employment also increased rising from 11.4 to 18.0 workers. Like most cities, retailers were Temeculas largest sector (378; 20.6%), followed by construction (214; 11.6%) and other? consumer services (200; 10.9%). The city added the most firms in retailing (155), finance, insurance & real estate (85), and consumer services (74). Generally, Temeculas companies have under 25 workers. The only private sector exceptions were employment agencies (90.1), manufacturing (53.1) and hotel & amusement (43.9).

The power of the southwest Riverside County market served by Temeculas retailers is seen by the size of the areas population at 189,007 people and the fact that it grew 18.2% during 2001. The markets total personal income of $4.5 billion ranked second in the Inland Empire behind the City of Riverside ($5.1 billion from 269,402 people). The region reached this income level despite having fewer people. As a result, its average household income was very high at $74,529. This was well above that of Riverside County ($60,865). It was also higher than that of San Diego County ($69,208). In San Diegos case, the income differential underestimates the buying advantage of southwest Riverside Countys families. The Temecula areas lower home prices ($81,000 less on new homes) mean that its residents have much higher discretionary in-comes remaining after making their mortgage payments.

Given the importance of the retail sales tax to California municipalities, taxable retail sales per capita is a barometer of a communitys ability to provide services to its population. In 2001, Temeculas per capita sales were $23,757, third among the inland regions 48 cities. Only two small cities with major malls, Montclair ($27,050) and Palm Desert ($28,807), and the resort city of Big Bear Lake ($26,851) had greater per person sales. Temeculas per capita sales were far above those of Riverside ($11,220) or San Diego ($13,010) counties.

From 1991-2001, Temeculas retail trade nearly quadrupled, rising $1.2 billion (273%). The largest share of this gain (20.1%) came from increased automotive and parts sales (up $234 mil-lion). General merchandise stores accounted for 17.7% of the gain (up $207 million) while the associated �other� retailers were responsible for another 13.6% (up $159 million). The first of these sectors show the city capturing more than its share of the highly competitive automotive market. The other two show that Temeculas retail centers, including the Promenade Mall, are tending to keep local shoppers at home and capturing sales from surrounding residents.

On a per store basis, Temeculas retailers generally outperformed those in the Inland Empire. Thus, the citys retail sales per outlet averaged $1.2 million, well above Riverside Countys average per outlet of $726,272. In nine of ten sectors, average sales by Temeculas outlets were greater than Riverside Countys generally, with the best performance by general merchandisers ($5.7 million higher) and auto & parts dealers ($2.4 million higher). Only Temeculas non-retail outlets had lower average sales than the county as the city does not have a strong base of distributors and manufacturers selling directly to the public.

Finally, Temeculas 2001 per capita taxable sales average of $23,757 was well above the average for Riverside ($14,536) even after the latter was adjusted upward by 38.2% since the county had a much lower median income level than the city. In every sector, per capita sales in Temecula exceeded those for Riverside County after this adjustment, indicating that it is a net importer of sales and sales tax dollars from the surrounding region.

From 1994 to mid-2002, Temeculas location advantages caused at least 31 medium sized firms to move to or expand in the city. Not counting secondary impacts, these companies have or will eventually add 3,203 jobs to the citys economic base. All but five are manufacturers. They make products such as medical devices, semi-conductors, and communications equipment. Nine of these companies migrated to Temecula from Orange, San Diego and Los Angeles counties. The rest were in Temecula prior to 1994 and acquired new space for expansion. Like Corona, most of these expansions were manufacturers (83.9%) compared to 53.6% for the inland region generally. The expanding manufacturers generally had more workers than the regional average: 113 to 70. They tended to use fewer square feet per worker: 820 versus 1,018.

As indicated, Temeculas manufacturing sector is much better paying than the Inland Empire generally by a margin of $43,765 to $33,200. Numerous large and highly technical operations have already chosen to locate in the city. They are in sectors like medical instruments, semiconductors, measuring and control devices, communications equipment, specialty machining and programming. In second quarter 2001, their particular sectors contained 73 firms with 5,127 high-end employees and a combined payroll of $64.1 million. That represented an average pay level of $50,019.

Looking at the details of Temeculas industrial market, Grubb & Ellis data, revised with updated information, indicates that since 1988 the citys gross industrial space absorption has generally varied from 300,000 to 550,000 square feet during any four quarter period. In the four quarters ending June 2002, industrial firms took 468,465 square feet. Meanwhile, Lee & Associates found that Temecula had 9.0 million square feet of space in August 2002 or 3.0% of the Inland Empires 301 million square foot inventory. Of its industrial inventory, 4.3 million square feet (48%) was in facilities of 100,000 square feet & up; 1.5 million (17%) was in smaller 10,000-24,999 square foot buildings; 1.4 million (15%) was 50,000-99,999 square feet.

In August 2002, Temeculas industrial vacancy rate was 12.0% representing 1.1 million square feet of space. The rate was just above the Inland Empires 11.9% average. Of the regions 19 sub-markets, the city ranked ninth in available space behind Mira Loma (1.2 million sq. ft.) and ahead of San Bernardino (1.06 million sq. ft). It is important for a city to have a good supply of vacant space to accommodate firms interested in either expanding or locating within it. Interestingly, Temeculas developers, like those in Corona, appear to be sensing an immediate need for more office and commercial space than new industrial space. In 2001, permits for office space totaled $8.1 million and commercial was $30.6 million while industrial totaled $275,585.

Looking at prices, Grubb & Ellis indicates that compared to coastal county markets, asking lease rates for Temeculas industrial property are in the mid-range at an average of $0.51 per square foot/month. This is more expensive than Vista ($0.49) and San Marcos ($0.50) in San Diego County. It is less expensive than all of Orange Countys sub-markets (north is lowest at $0.54) and the balance of San Diego County. Within the Inland Empire, the citys rate is the second highest after Upland-Montclair. Among the inland cities now heavily focused on higher end firms, the rates are: Rancho Cucamonga ($0.38) and Corona ($0.41).

On an achievement basis, Temeculas students tested in the top tier of Riverside Countys students on the 2002 Stanford-9 tests administered to all 2nd to 11th graders. For instance, the citys 5th graders scoring at or above the national 50% threshold ranked 1st in reading and language and 2nd in math and spelling in Riverside County. Its 10th graders ranked 1st on all five tests given to them (reading, math, language, science and social science). Both the 5th and 10th graders exceeded state and national norms and improved their standing on every test. On the Academic Performance Index now used to measure overall school performance, Temeculas schools have improved in every year from 1999-2001. In 2001, their record was above the state average at the elementary (830 vs. 691), middle (787 vs. 668) and high school (762 vs. 637) levels.

Temecula is close to an extraordinary array of private and public colleges & universities including 22 campuses with a combined enrollment of 157,617 students. The list includes nationally known private, liberal arts schools like the Claremont Colleges and the University of Redlands. Impressive scientific work is conducted at Harvey Mudd College, California State Polytechnic University at Pomona, and the University of California, Riverside. Loma Linda University boasts one of the worlds top medical schools. The University of La Verne School of Law is located in Ontario. California State University San Bernardino has an excellent School of Business. Cal State San Marcos in nearby San Diego County offers classes in the city as does UCR Extension and the University of Redlands. There are five community colleges in the region including Mt. San Jacinto Community College which also offers classes in the city.

Temeculas sixteen wineries are a unique Inland Empire asset. They grow a wide range of varietal grapes, including California favorites such as Sauvignon Blanc, Chardonnay, and Cabernet Sauvignon. Areas like the wine country and Old Town serve as hubs for the citys tourism. The expansion of the Pechanga Entertainment Center, with the passage of the states Indian gaming measure, is adding to the lure of an area already known for annual events like the Temecula Valley Balloon & Wine Festival, the spring & fall Rod Run, Temecula Valley International Film & Music Festival, the Arts in the County Festival, the Frontier Days Rodeo, and more.

A wide array of arts and cultural programs are available in the Temecula Valley for adults and children. Art classes, art shows, jazz festivals, music and dance concerts plus theatrical productions are offered to appeal to people of all ages and interests. The Temecula Valley Unified School District provides an arts education curriculum and is working in collaboration with the Arts Council of Temecula Valley on after school art programs.

From 2000-2020, the inland regions population is forecast to go from 3.27 million to 4.83 million, up 1.56 million people. That is more than will be added by 45 of the 50 states, except California (12.8 million), Texas (5.6 million), Florida (4.4 million), Georgia (1.7 million) and Washington (1.6 million). Interestingly, the area will add more people than Los Angeles County and just less than Orange, San Diego, Ventura and Imperial combined. As a separate state, the Inland Empires 2002 population of 3.4 million people would rank 29th behind Connecticut (3.41 mil-lion) and Oregon (3.42 million). In 2000, the regions $77 billion in total personal income equaled Iowa and was more than 20 states.

These strong statements are based upon the way in which Southern Californias geography and economic behavior interact. Since World War II, the Southlands development has constantly sought the next area with large tracts of vacant land. Inevitably, once coastal county congestion caused their land and space costs to rise, this activity would hit the Inland Empire. In the late 1970s, it moved from Orange County into Corona and L.A. County into Ontario. In the 1990s, it surged up the I-15 freeway from San Diego County to Temecula.

This pattern has dramatically impacted the Inland Empires job growth. Thus from 1990-2002, the area added 341,343 jobs. That was more than the 278,414 in San Diego County or 252,243 in Orange County. In 2002, the area leads California in job growth, up over 30,000, despite the slowdown. Looking ahead, SCAG forecasts that the region will add 408,946 jobs from 2000-2010. That is more than the 361,520 new resident-workers expected from the areas population.

At its core, the Inland Empires development is occurring because it is the last Southern California region with large amounts of undeveloped land along transportation corridors. This creates a location advantage for home buyers and industrial users. In 2002, the median Inland Empire home sold for $187,000. That was $88,000 to $202,000 less than comparable homes in Southern Californias coastal counties. Meanwhile, only 20% of San Diego County families and 22% of those in Orange County can now afford their areas median priced home. This is forcing professionals, technicians and executives to migrate to cities like Temecula. The Inland Empires industrial property is also a bargain. In 2002, 100,000 square feet of space leased for $400,000 a year. That was a savings of $104,000 to $668,000 compared to the various sub-markets of the coastal counties. Similarly, 10,000 square feet of office space leases for about $205,000 a year, or a savings of $35,000 compared to similar coastal markets.

The Inland Empires rapid population growth has created a less obvious advantage for firms locating in cities like Temecula. Some people will work for a little less to avoid commuting to the coastal counties. In 2000, data on over 500 occupations showed the Inland Empires firms had an average labor cost advantage of 5.2% vis-à-vis L.A. County, 5.4% to Orange County and 2.0% to San Diego County. In over 50 occupations paying above $55,000, the savings ranged from 12.1% to L.A. County, 10.3% to Orange County and 6.5% to San Diego County.

Beyond these cost considerations, the Inland Empire offers firms the opportunity to rapidly get the products to national markets due to its extensive array of logistics operations which include the BNSF Intermodal Yard in San Bernardino that handles all San Diego County based freight. With the demise of the El Toro airport proposal, Ontario International Airport is now slated to be the second gateway into Southern California. Already, UPS has its Western Regional Headquarters there, and operates six new flights a week direct to China. All of Southern Californias cargo moving to the eastern U.S. must pass through the Inland Empire as it is home to both Cajon Pass (I-15, BNSF) and Banning Pass (I-10, Union Pacific). The area thus houses most of the Southlands major trucking cross-docks.

Whether a firm is interested in saving on space or labor costs, saving time on goods movement or finding an environment that is getting cleaner each year, the Inland Empire offers a wide spectrum of advantages.