JFCOM cuts painful to economy but not fatal

SUFFOLK

They've taken a hit, but the city's high-tech corridor and the local economy that it drives are weathering the closure of the U.S. Joint Forces Command far better than anyone expected one year ago.

Economists say jobs in Hampton Roads lost to JFCOM's dismantling, which becomes official today, are now expected to come in at about half the level originally predicted - about 2,000 or fewer when all the cuts are final. Most of those are private contract employees.

And the overall impact on the region's economy now is projected to range between $200 million and $300 million a year - paling in comparison to the billion-dollar blow that was forecast when the Pentagon announced last August that JFCOM would be shuttered.

While the impact of the command's closure has not yet been fully felt, government and business leaders say the region - Suffolk and Norfolk, in particular - has avoided the devastation that Old Dominion University economist James V. Koch likened at the time to a hurricane.

"It's not good news, by any means," Koch said this week, "but it's not going to be as bad as we initially thought."

Norfolk Mayor Paul Fraim said his city "has come through this phase of the disestablishment in pretty good shape." With the closure of JFCOM's headquarters at the Norfolk Naval Station, he said, "we'll miss the income moving through our economy, but in direct taxes to the city, there were very few."

In Suffolk, where most of JFCOM's facilities and personnel are located, the stakes are far greater.

"We knew we would feel some impact," Mayor Linda Johnson said. "And it's happening, but it could have been much worse."

What cushioned the blow, officials say, was the Pentagon's decision earlier this year to retain most civilian government employees at the North Suffolk campus. That included a majority of JFCOM's modeling and simulation operations, which now report to other commands.

The Pentagon's decision came after local and state leaders and the region's congressional delegation had waged a fevered campaign against JFCOM's closure. "We went to war with the Pentagon, literally," U.S. Rep. Randy Forbes said. "Had the Pentagon gone ahead with its original plans... it would have been much more devastating."

Some officials say retaining the civilian jobs has helped preserve, for now, some of the high-tech businesses that have sprung up in Suffolk's Harbour View area during the past decade. Those companies fueled population and economic growth in that part of the city.

It also spelled some relief for ODU's Virginia Modeling, Analysis, and Simulation Center, a $12 million research facility that opened in 2007 off the Western Freeway. JFCOM accounted for 80 percent of the center's funding, about $80 million in all.

John Sokolowski, the center's executive director, said VMASC has diversified its business dealings to include contracts with local governments, the Virginia Department of Transportation and the Eastern Virginia Medical School for design, training and planning projects. Military contracts, he said, now provide about half of VMASC's funding.

But while VMASC may be weathering the storm in fair shape, officials say, that's not the case for the region's prospects of becoming a national center for the modeling and simulation industry, rivaling Orlando, Fla., and Huntsville, Ala. "JFCOM's closure really stuck a pin in that balloon," Koch said.

While defense contractors are expected to feel the brunt of JFCOM-related cuts, so far the effects have been relatively modest. Kevin Hughes, Suffolk's economic development director, said major contractors including Northrop Grumman, Lockheed Martin, Booz Allen Hamilton and General Dynamics have told the city some 450 employees have been alerted to possible layoffs.

Northrop Grumman, JFCOM's top contractor with four of its 25 largest contracts, told 293 Suffolk-based employees in April that they faced possible job losses when contracts with JFCOM expire. A company representative this week declined to disclose current staffing levels.

Lockheed Martin reported no staff reductions to date at its Harbour View research and training facility, which employs about 100. None work directly with JFCOM, a company spokesman said. The company has 930 employees in Hampton Roads.

Late last year, Raytheon and Boeing closed small modeling and simulation offices in Suffolk, affecting seven employees. Both companies said the moves were unrelated to JFCOM's closure.

Hughes said 547 people have been processed at a state-funded jobs transition center that opened in Harbour View to provide counseling and support for workers affected by the closure. Not all worked in Suffolk.

Meanwhile, the northern part of the city has seen a surge in retail business in the and the arrival of dozens of companies, adding 551 new jobs. An unexpected spike in retail sales and meal taxes in North Suffolk early this year produced a $4.1 million budget surplus for the city.

"The main driver is the population increase," Hughes said, noting that Suffolk's population grew 32 percent in the past 10 years, most of it in the northern section.

Mayor Johnson observed that the restaurants in Harbour View "are full and the stores are doing well, and we're seeing some good numbers coming out of that. There's been some pain, but as I've said all along, we're going to be OK."

Ken Dodd, who manages the River Stone Chop House, an upscale restaurant next door to Northrop Grumman and Lockheed Martin, said he is amazed at how well business is doing.

"When this first came down the pike a year ago, my crew came to me terrified," he recalled of the JFCOM announcement. "They wondered if they should start looking for jobs. But we've managed to grow our business during the past year."

Dodd said defense contractors on expense accounts remain some of his best customers. Since the JFCOM announcement, he said, he's seen a shift to more military personnel and to "more of the Hampton Roads crowd."

"I'd be lying if I said it hasn't affected business. But we've adapted, and I think it has made us stronger."

Jeff Sheler, (757) 222-5563, jeff.sheler@pilotonline.com