10:00 PM PDT on Saturday, September 3, 2011

BY KIMBERLY PIERCEALL
STAFF WRITER
kpierceall@pe.com

The quest to replace some 10,000 jobs that disappeared when the military abandoned Norton Air Force Base in 1994 is evident today in the corporate names attached to brand new warehouses, distribution centers and a corporate jet terminal.

More than 4,000 jobs have been created or relocated to the 2,100-acre site. Nearly half are at Stater Bros. Markets’ palatial headquarters and distribution center.

But the redevelopment effort hasn’t come without a high price and significant hurdles.

Some $1.2 billion from taxpayers and private developers has been invested so far to redevelop the 2,100-acre base. The Inland Valley Development Agency, a group of elected officials appointed from San Bernardino County’s east valley that formed more than 20 years ago to oversee reviving the base, plans to spend at least another $480 million of taxpayer funds in the next 10 years.

Officials with the IVDA and its related San Bernardino International Airport Authority have high hopes for the area to serve as a logistics hub and home to companies in need of skilled workers. The airport could have 750,000 passengers annually hustling to gates by 2015, not counting those who may land there, according to airport officials’ forecasts.

Their efforts would eventually be worth $1.2 billion annually to the region’s economy and $500 million paid out annually to fewer than 10,000 workers, according to a recent Cal State San Bernardino and Cal State Fullerton study looking at the economic impact of the base’s redevelopment.

When Dennis Hansberger arrived on the boards of the IVDA and airport authority in 1997, he thought Norton’s buildings, roads, runway and land had to be worth something, considering the vibrant economic impact the base, built in 1942, had on the surrounding area. But with the personnel gone, what remained had less than no value.

“It was a real economic learning experience for us,” Hansberger said. The longtime San Bernardino County supervisor was a member of the IVDA and airport authority until he lost his re-election bid to Neil Derry, now a member of the agency’s board. It took years for the IVDA to negotiate land transfers with the Air Force and millions of dollars to demolish buildings no longer up to code and clean other areas with hazardous materials.

In 1990, a largely unknown land developer, Iddo Benzeevi, was hired to be the master developer after he proposed building warehouses and distribution centers, but months later, negotiations fell apart after officials rejected his proposals over concerns about financing. Benzeevi has since raised his Inland profile, more recently with the nearly finished Skechers distribution center in Moreno Valley.

Between 1996 and 1998, a developer proposed a luxury hotel, ice skating rink and sports arena. They never happened.

In 1997, a 157-acre international trade center was scuttled after another developer missed deadlines.

DEVELOPER’S VISION

Then Hillwood Development Corp. saw an opportunity. John Magness, an executive with the company, started looking in the Inland area for space to develop in 1999, analyzing all three largely vacant Air Force bases in the region: Norton; George, also closed in the Adelanto area of the High Desert; and March, which was converted into a reserve base.

Base conversion was hardly easy, but Hillwood had done it before in Texas.

“It keeps away the competition, the more complicated it is,” Magness said in a recent interview. “With chaos, there comes opportunity.”

His company would lay down the infrastructure, do the marketing and craft the master plan.

The company signed its deal in 2002 with the IVDA. Hillwood signed toy-maker Mattel, its first tenant, the next year.

Hillwood, led by Ross Perot Jr., the son of one-time presidential candidate H. Ross Perot, has spent $300 million to $400 million of its own money building up the warehouse and distribution spaces on 500 acres of former base property that surrounds the airport.

The incentive: getting to buy land at a low price and “working our butts off to improve the value of it,” Magness said.

Hillwood pays property taxes, much of which goes back to the IVDA, which can put the funds toward building roads or other infrastructure.

In San Bernardino, Magness said his company did what it aims to do everywhere: over-deliver and under-promise.

It was supposed to develop 2 million square feet by 2009. It did so four years early.

“We know what we’re doing. We know how to market the property,” he said.

Hillwood officials estimate 4,810 jobs have been created or relocated by the companies occupying 8.8 million square feet of new commercial and industrial space in and around the base, including more than 2,000 at the Stater Bros. headquarters. Hillwood has 4.8 million square feet more to build.

The university studies looking at the economic impact, though, had figures closer to 3,610. The airport, in contrast, has created roughly 500 jobs, largely through aircraft maintenance firms such as Certified Aviation Services, which has contracts to maintain Virgin America’s fleet.

The Texas company plans to start construction before the end of the year on another 950,000-square-foot space south of the runway. Magness said he expects to be done building in three to five years.

REDEVELOPMENT

Perhaps no one has reused former Norton Air Force Base property in a more pure sense than Kelly Space & Technology, the first business to move in after the base closed. While others may have been turned off by the thick, explosives-resistant glass and control rooms that would have cost a hefty sum to tear out or rehab, Kelly Space CEO Mike Gallo saw exactly what he wanted.

“I knew this was a gem,” he said.

There his company could test jet engines and rockets or conduct more down-to-earth experiments on items such as flat-screen televisions, cellular phones by testing their resistance to heat, sandstorms, humidity, air pressure changes and more.

“We get to blow things up. We get to fire bullets at things,” he said recently. A flight simulator chamber was converted into a vibration bay that can help product manufacturers find out whether their goods will handle a shaky trip in the back of a semi-truck without being damaged.

What if a company wanted to ship its product by boat? Kelly Space tests what the salty and foggy conditions might do.

KNEW THE TURF

Gallo was a second lieutenant in civil engineering stationed at the base from 1980 to 1984. He started Kelly Space in 1993 and moved it to Norton a year later, starting with a 500-square-foot office with eight employees and growing into five buildings on 30 acres with about 50 workers. Including his nonprofit Technical Employment Training Inc. trade school, he leases six buildings, including the base’s old 10,000-square-foot retail store.

With a 20-year lease through 2014 with options to renew in 10-year increments thereafter, Gallo has no intention of taking his company anywhere else.

Besides Gallo, there have been numerous investments at the base by agencies and businesses that recognized its value.

To read entire story, click here.