1. John Husing, Ph.D. Economics & Politics, Inc. & Chief Economist, IEEP Inland Empire Economy

2. Three Step Growth Process Based On Interaction Of: Population Preferences Dirt Prices

3. Why Southern California Population Grows

4. People Prefer To Live Near The Coast

5. As a homeowner, would you prefer to move closer to work if it involved a townhouse or condo? (I-15 & Sr-91 Commuters, 2008) 72.3% No As a renter, would you prefer to move closer to work if it involved a townhouse or condo? (I-15 & Sr-91 Commuters, 2008) 87.5% No Answer stable over 5 years

6. Lack of Land or Inadequate Zoning Drives Up Coastal Prices Forcing Home Buyers & Renters to Move Inland $24,000 $189,000 $215,000 $371,000 $239,000 $263,000 $428,000 $454,000 $610,000 San Bernardino Co.Riverside Co.Los Angeles Co.San Diego Co.Orange Co. Median All Home PriceSan Bernardino County Price Advantage Source: Dataquick Exhibit 20.-Home Prices, So. California Markets Median Priced New & Existing Home, 2nd Quarter 2013 $191,000 $165,000 $247,000

7. Don’t Build Them & They’ll Come Anyway! I-210 Delayed For 1980-2007 Years San Bernardino County went 900,000 to 2,000,000 people BUILD FREEWAYS & THEY’LL COME

8. People forced to move inland for affordable homes Population Serving Jobs Only High Desert & I-215 South are current examples Stage #1: Rapid Population Growth

9. Commuting 1,650,384Total Jobs 1,156,313Inside IE 494,071Commute Outside County 154,845Between IE Counties 339,226Outside IE 20.6%Commute Outside the IE

10. Business Prefers The Coastal Counties

11. Not Enough Land … Industrial Prices Much Lower In Outlying Areas 84.2% 107.2% 156.6% $0.26 $0.33 $0.48 $0.30 $0.38 $0.56 $0.63 $0.78 Inland EmpireLos Angeles Co.Orange Co.San Diego (non-R&D) Price Per Sq. Ft. Price with 20% Cubic Factor Difference. % Difference nnn=net of taxes, insurance, common area fees Source: CB Richard Ellis Exhibit 13.-Industrial Space Costs Differences Southern California, Sub-Markets, March 2013

12. Blue Collar Jobs Important To Outlying Areas 37.9%

13. Outlying Workers Will Work For Less Not To Commute 0.0% 4.26% 2.55% 5.81% $33,240 $34,656 $34,089 $35,173 Inland EmpireSan DiegoLos AngelesOrange Weight Median PayPercent IE Pay Is Lower Note: Occupations in common weighted by Inland Empire Jobs Source: CA Employment Development Department, Occupational Wage Survey, Economics & Politics, Inc. calculations Exhibit 82.-Median Wage & Salary Percent Difference Inland Empire vs. Coastal Counties, 2010 459 Common Occupations, Under $70,000

14. Stage 2: Rapid Industrial Growth

15. Jobs:Housing Balance lmproves IE Western Edge is today’s best example

16. Step #3 Higher-End Migration Upscale Housing

17. Skilled Workers Skilled Workers Migrate Inland For Better Homes

18. Condo Living Becomes More Prevalent

19. Higher-End Workers Added

20. Outlying Workers Will Work For Less Not To Commute 0.0% 7.70% 9.17%9.22% $86,806 $93,489 $94,768 $94,806 Inland EmpireSan DiegoLos AngelesOrange Weight Median PayPercent IE Pay Is Lower Note: Occupations in common weighted by Inland Empire Jobs Source: CA Employment Development Department, Occupational Wage Survey, Economics & Politics, Inc. calculations Exhibit 98.-Median Wage & Salary Percent Difference Inland Empire vs. Coastal Counties, 2010 138 Common Occupations, $70,000 & Up

21. Stage 3.- High-End Companies Ultimately Follow Workers

22. Jobs:Housing Balance Achieved Southern California Avg. 1.20 Jobs per Occupied Dwelling

23. Primary Tier Secondary Tier Economic Development … Increase The Economic Base!

24. Current Economic Status & Issues

25. After Losing 8.74 Million Jobs … U.S. Job Creation Is Crawling Back Without Loss of -682,000 Government Jobs 7,495,000 Growth or 85.8%

26. 26 th Largest U.S. State by Population

27. Ethnic Composition

28. Relatively Young Population

29. Share Stopped Education High School or Less BA or Higher Bay Area: 42% Inland Empire: 18% Lake Elsinore: 16% 37.9%

30. Why Not High End Jobs? Labor Force Education Dictates Type of Growth Possible

31. Stagnant Incomes for 23 Years +7% -8% Lake Elsinore $61,250

32. Job Growth vs. Other CA Areas

33. 30,050 41,025 37,642 36,533 36,775 41,483 46,008 6,342 9,758 4,575 16,917 28,925 23,083 38,325 40,692 56,467 49,850 40,567 33,292 35,467 59,275 61,533 44,692 2,508 198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010 2011 2012 2013e Sources: CA Employment Development Department, Economics & Politics, Inc. Exhibit 3.-Wage & Salary Job Change Inland Empire, Annual Average, 1984-2013 Continuous Job Growth For Decades, But... (46,208) (84,892) (17,325) 4,633 23,025 -146,400 -11.4%

34. Unemployment Falling, But High

35. Worst U.S. Metropolitan Area Unemployment Rates

36. Share of Underwater Homes Plunging

37. Poverty Exhibit 2.-Share & Number of Inland Residents Below Poverty Level Census Bureau Year People In Poverty Share of Population in Poverty Population 1990 306,41711.8%2,588,793 2000 477,49614.7%3,255,526 2011 774,87418.0%4,293,892 Changes+152.9%+6.2%+65.9% Lake Elsinore 14.5%

38. Water Issue 1.Delta Smelt 2.20 Years Water Supply To Build 3.Santa Ana Sucker 4.Replacement Water Cost: $1,862,000,000 5.If Water Can’t Be Found … Can’t Build Large Projects

39. CA’s Regulatory Environment CEO’s: California is the Worst State for Business

40. Status of Sectors Capable of Driving Recovery

41. Logistics Flow of Goods

42. Truck To Inland Empire

43. Sophisticated Warehousing Operations

44. Port Container Volumes

45. Fulfillment Centers (John & Dan) Sales Tax Revenue to Cities (1,000,000 SF) ($5 million per year under assumption 50% of Sales Out of California)

46. 17 Firms Looking For Space (John & Fran) 1,500,000 1,000,000 800,000 to 1,000,000 700,000 to 1,000,000 500,000 to 800,000 700,000 to 900,000 850,000 700,000 700,000 to 800,000 600,000 600,000 to 700,000 500,000 450,000 300,000 to 400,000 350,000 Source: Jones LaSalle Size Jobs E-Commerce: 6,150,000 to 6,450,000 SF 5,467 to 5,733 Jobs Conventional: 5,800,000 to 6,800,000 SF 1,850 to 2,092 Jobs Total Potential: 11,950,000 to 13,250,000 SF 7,282 to 7,826 Jobs Average Square Feet Per Job Combined = 1,641 to 1,693

47. Industrial Vacancy Rate Recovering Everywhere! 5.8% Inland Empire 2.7% 12.8% 5.8% 9.9% San Diego 7.0% 12.0% 9.9% 3.2% Orange Co. 5.4% 6.5% 3.2% 2.0% L.A. Co. 2.1% 3.2% 2.0% 2013Q2 2005/2006 2009Q3 2013Q2 IE Gross Absorption Back at 12.5million Sq. Ft. But Still Under Its Long Term Average

48. Inland Empire Logistics Jobs 28% of All Inland Jobs … Jan-July 2012-2013

49. Health Care

50. Health Care Jobs: Continuous Growth 700 500 900

51. Determinants of Public Health Robert Woods Johnson-University of Wisconsin 40%Socio-Economic 30%Health Behaviors 20%Access to Health Care 10% Environmental Factors

52. Public Health Determinants San Bernardino County46 th Riverside County36 th No Health Insurance23% People Per Physician: SB Co.1,86840 th People Per Physician: Riv Co.2,51447 th Health Care Issue

53. Manufacturing: Could Be A Major Growth Source

54. Manufacturing Orders Declining

55. Inland Empire Manufacturing Jobs

56. U.S. v. California Manufacturing Jobs

57. Regulatory Environment Aimed At “Dirty” Blue Collar Sectors

58. Air Becoming Cleaner Exhibit 6.-PM 2.5 Days over National Standard vs. Total Square Feet of Net Industrial Absorption Since Highest PM2.5 level Monitoring Sites Mira Loma-Van Buren Riverside- Magnolia Riverside- Rubidoux Fontana-Arrow Highway Ontario-1408 Francis Street San Bernardino- 4th Street 2001 120.258.279.580.8 2002 88.492.673.767.488.9 2003 69.778.154.362.255.2 2004*47.857.3*** 2005**39.722.925.39.3 200646.231.3*27.2** 200743.4***** 2008*12.415.019.319.49.5 200919.06.015.16.29.06.2 20108.06.34.06.63.25.9 201113.07.15.07.16.8* 20127.0* 10.60.0 Change From Highest -39.2-81.3-113.2-63.1-79.5-88.9 Change -84.8%-92.0%-94.2%-85.6%-100.0% Net Absorptiont Since Highest 86,378,254183,911,357229,967,544183,911,357229,967,544183,911,357

59. Median Pay By Sector Groups

60. Results: A Policy Cause Crisis California Uncompetitive for Manufacturing & Other Blue Collar Work Reduced Access To Middle Class Jobs For Marginally Educated Who Are A Huge Share of Workers Disproportionately Impact Hispanic & African American Families Health & Social Justice Issue Being Created Increasing the Income Disparity in the State

61. Construction: Finally Some Hope

62. Construction Share of Lost Jobs 56.1% 118,800 66,300 Total Job Decline 2006-2012Construction Job DeclineConstruction Share of Lost Jobs Source: CA Employment Development Department Construction Share Of Lost Jobs Inland Empire, Dec. 2006-2012

63. Share of Underwater Homes Plunging

64. Home Prices Finally Rising 46.4% 26.5% 48.2% less for Existing home

65. Lake Elsinore Price Trends +37.4%

66. Lake Elsinore Price Advantage

67. Inland Empire’s In-migration From Coastal Counties Has Not Yet Recovered -15,538 Not Bringing Skills, Wealth, Income & Spending

68. Investor Pre-Market Home Buying 2007July 20072008July 20082009July 20092010July 20102011July 20112012July 20122013 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% Source: Foreclosureradar.com Exhibit 12.-Direct Investor Purchase of Foreclosure Sales Inland Empire, 2007-2013 57.8% Families Can’t Compete Realtors Have Less Business

69. How Much Higher Is The Likelihood of Calls for Police Service? Single Family Rental v. Owner Occupied

70. How This Ends: A Housing Shortage 106,230 9.35 per new person During 2008 thru 2012 California Population Grew by 993,624 Looming Shortage

71. Permits: Finally Some Optimism

72. Construction: Data Weird

73. High-End & Office Based Jobs

74. Office Market: Some Recovery

75. Office Vacancy Rates Improving But Still Very High 19.2%

76. High End Occupations & Office Operations Gaining Strength

77. California Grabbing Money From Local Government … School Funding Cut Jerry Brown’s Hand

78. Federal Job Cuts Sequester Budget Fight Debt Ceiling

79. Assessed Valuation Finally Growing (3.6% for both Counties) -6.7% With 7.3% Inflation -14.0% Less Purchasing Power 2012-2013 Riverside Co. +3.99% Lake Elsinore +2.91%

80. Retail Sales Returning -$3.9 Billion -6.3% With 12.5% Inflation -16.7% Less Purchasing Power

81. Lake Elsinore Retail Trade: Rising! Inland Empire 2006-2012 -$3.9 Billion -6.3%

82. Retail, Consumer Service, Hotel, Amusement Jobs Growing Growth Occurring But Restrained

83. Public Sector A Drag!

84. Where Will IE Be In Its Job History?

85. www.johnhusing.com