The Economics Of A Natural Disaster | Tornadoes may leave opportunity in their wake
Photo/Brandon Butler
STAYING OPTIMISTIC: Bob Hanson of Wichita, Kan., is the president of the company that manages the Rosemeade Apartments in Southbridge. He said while the damage from this month's tornado is significant, the 200-unit complex will be even better off after it's rebuilt.
Photo/Brandon Butler
GROUNDED: The Southbridge Airport was particularly hard hit by the June 1 tornado. This plane was picked up by the winds and dropped in the brush.
Bob Hanson is from Kansas, so he knows a thing or two about tornadoes.
When he looks out over the Rosemeade Apartment complex in Southbridge, which he manages, and sees buildings that have their roofs torn off from a tornado that ripped through the 200-plus unit development, he’s amazed. Trees are littered across the property, trailers have been thrown across the parking lot and windows have been blown out. And Hanson isn’t alone. Tornadoes whipped through Massachusetts along the Connecticut border on June 1, including one that traveled 39 miles from Springfield into Southbridge and Sturbridge.
But someone like Hanson knows that within a couple of months, it can all be rebuilt and put back together.
“These buildings will have all new windows, new roofs, new siding and they’ll be better than they were before because it’ll be brand new,” he said.
Therein lies the good that can come from a very bad natural disaster. When there is damage, cleanup follows. And there is a plethora of businesses that can benefit from the work of putting the pieces the tornado left back together.
Helping Out
Take Bill Saunders, for example, who about five years ago started his own roofing company, Saunders & Sons Roofing in Southbridge, after years of being in the industry.
“I’ve never seen anything like this,” he said of the damage in the area. “A lot of people just lost everything. Roofs are totally gone, houses are totally destroyed.”
Saunders has been extra busy since the storm. He has eight workers compared to the three he normally has this time of year and he’s got enough work to keep them busy seven days a week.
Immediately after the storm, Saunders visited past customers and anyone else that needed help and put tarps over their roofs at no charge. He’s prioritizing work from storm-damaged homes and isn’t collecting money from residents until they get reimbursed from their insurance carriers.
Saunders expects the uptick in business because of the storm will last into the fall, which is his busy season. He would never wish a storm of this magnitude on anyone, but he’ll take the increased business.
Costly Cleanup
Already, the state Office of Consumer Affairs and Business Regulation is estimating more than $90 million in home insurance claims will be filed because of the storms. It’s the largest figure for a cleanup effort in recent memory, according to the state. A significant portion of that $90 million will likely trickle down into the local economy as cleanup efforts continue.
The economics of a disaster are different for each storm, said Kevin Simmons, an economics professor at Austin College in Texas who has studied the business impact of natural disasters.
“It basically can be an insurance-funded stimulus program,” Simmons said.
Given the destruction storms can cause, he doesn’t call it a silver lining, just an economic reality.
“It’s never something you would want, but people are going to rebuild if there’s a reason for a community to exist, and that in turn will stimulate the economy,” he said.
Landscapers, roofers and remodeling contractors can all expect an increase in business following storms of the magnitude that hit Western and Central Massachusetts. But that’s not always the case, Simmons noted.
In Joplin, Mo., a much larger tornado wiped out major employment centers, including big box stores and retail centers. That means that not only will the workers from those establishments be displaced, but the residents will not be able to shop locally for cleanup and reconstruction materials.
After Hurricane Katrina hit in New Orleans, there was an exodus of residents out of Louisiana, he said. A portion of those residents will never return to the city, creating an economic hole.
But for comparatively smaller disasters where commercial businesses have for the most part been spared, there could be an economic gain, at least in the short term.
Hitting Home
For those businesses that were in the tornado’s path, the destruction is dramatic.
The Days Inn on Route 15 in Sturbridge is one of those businesses that took a direct hit.
All four buildings that are part of the hotel have extensive damage, with an estimated 70 percent of the property impacted, according to the hotel’s owner, Jay Patel.
“This is my peak season right now and my top hotel,” said Patel, who owns two other hotels, in Auburn and Northborough.
He estimates there is already $65,000 to $75,000 in tree and building cleanup costs alone. Even though he hopes to rebuild the hotel, he admits that it could take a year or two.
“I don’t just have $100,000 sitting in my bank account to throw at this place,” he said, adding that he’s unsure how much his insurance will cover.
Michael Fors, a part owner of Tri-Community Paint and Rental in Southbridge, said he would never wish the type of damages he’s seen in town on anyone, but acknowledged that the destruction will translate into added revenue.
“There’s definitely going to be some extra business for us,” he said.
Fors expects more people coming in to rent equipment and buy supplies in the coming weeks and months. But he expects the real winners to be landscaping, roofing and tree companies.
“They’ll be busy,” he said.
Back at Rosemeade, where Hanson is president of the company that manages the property, he said just three days after the storm the site was markedly better than immediately after the storm hit.
“It’s really kind of spectacular, the damage,” he said. “But, we’ll rebuild. It’ll be back."
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