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Los Alamos: new missions, new challenges - New Mexico

New Mexico Business Journal - April 1, 1996

When the Lab sneezed, Los Alamos catches the cold. And the Lab, compliments of the "peace dividend," has an itchy nose.

To say that Los Alamos, New Mexico's wealthiest county (average household income $57,000) is experiencing economic distress may seem a case of misplaced sympathy. Consider Rio Arriba, the county just down the hill. There, unemployment stands at over 13 percent, a third of residents never finish high school and average household income is less than half that of its high-tech neighbor.

In many ways, Los Alamos resembles a gifted child with all the advantages of wealth. Per capita income here averages $28,000 ($10,000 above that of Rio Arriba County); more than half its residents have college degrees; the unemployment rate in 1994 was 1.4 percent. Retirees are comfortable, benefits are good. It's tough to feel sorry for a kid with those kinds of advantages.

But economic stress is relative and Los Alamos County is in the midst of a significant economic restructuring. Anxiety and an unclear sense of mission and direction plague many of the city's 18,000 residents, the result of the Cold War's end and a national desire to redistribute the "peace dividend."

When you talk about the mission of Los Alamos, you're talking about the mission of Los Alamos National Laboratory, the mainstay of the city's economy. Providing technologies and strategies for nuclear nonproliferation in the face of new threats remains a primary mission for LANL, as does development of technologies to safeguard existing weapons stockpiles here and elsewhere, including the former Soviet Union.

As the Lab's mission changes, so does the destiny of the city that surrounds it.

Secrets and Social Links

Founded in 1943 as a top-secret research center where the atom bomb was developed in a frenzied two years' time, the city has never swayed from its weapons orientation. Secrecy was a guiding rule at Los Alamos during the earliest bomb-development days; that rule has left a lasting impression on the city's character. In 1957, the nearby town of White Rock was established and the Los Alamos community finally opened its gates to the world.

Long isolated from the rest of northern New Mexico by high sandstone bluffs and an overriding emphasis on secrecy, Los Alamos has for decades remained a city apart. The neighbors, including four Native American tribes living in the Lab's shadow, have in turn always been mystified over doings atop the Pajarito Plateau, and how the detritus of nuclear experimentation might be affecting their air, land and water.

Los Alamos is a company town. It's often said that "when the Lab sneezes, Los Alamos catches the cold." In a county where Lab employees make up a third of the population, recent DOE budget and manpower reductions have caused a noticeable case of the economic sniffles.

After two reduction-in-force (RIF) rounds over the past year, around 1,100 LANL employees have lost their jobs through layoff, attrition and generous job buy-out packages ($20,000 cash, plus up to $10,000 education support). The cuts came in response to a diminishment in the overall Lab budget, from $1.09 billion to $1.05 billion for 1996.

Now the Department of Energy plans to end support payments to the county, an arrangement that has long supplanted revenues lost due to federal land ownership. Those payments, or some alternative, are critical to Los Alamos County - they provide nearly 18 percent of the county's $1.6 million operating budget and 30 percent of the local school budget of $5-6 million.

In the face of recent RIFs and DOE budget cuts, restaurant receipts are down 30 percent and hotel/motel revenues have dropped by 20 percent. Housing rentals, in a city that has long maintained a waiting list of hopeful occupants, have fallen by 50 percent over the last six months, according to Martha Perkins, Los Alamos County Community Development Dept. research analyst.

Whatever the source of their disuse, laid-off technologists are looking for work in other communities, eyeing such possibilities as Intel and other firms in Albuquerque, or out of state positions. The recent slump in contractor use by the Lab (in favor of postponements or in-house coverage of such services) has depressed subcontractor viability in town, which in turn depresses the job market, gross receipts revenue and local purchasing dollars. Some contractors have already left town; others are undoubtedly looking for new situations. "I don't think anyone whose business is connected to Lab operations is feeling particularly confident right now," says Jim Greenwood, executive director of the Los Alamos Economic Development Corporation.

The local spinoff, Greenwood says, is that "people aren't spending money. People know friends and coworkers who have been laid off, and they think, 'It might be me the next time.' So rather than buy a car or a computer, they put their money into savings." Indeed, local banks report that savings are up.

Greenwood's non-profit organization is dedicated to expanding and solidifying the business base in town. One of LAEDC's main operations is a business incubator that now houses around 40 entrepreneurs. Greenwood says business starts have actually increased recently. Entrepreneurs, most of them former Lab employees with high-tech skills, are entering the private sector in areas ranging from macro-finance tracking services to software companies to low tech retail outlets. Companies who have forged links beyond the Lab, especially software firms, continue to prosper despite the federal cutbacks.

That rosy picture, however, is tempered by the fact that some new business owners are in trouble due to the recent economic strain, keeping themselves afloat with personal savings or loans. "Some of those people aren't out looking for help," Greenwood laments. "It's a heck of a lot easier to help them when a problem first appears than when they're in hock up to their necks, when they're failing actively."

For the Los Alamos community at large, uncertainty about the Lab's future involves three major questions: who will manage the facility when the University of California's current contract expires in two years, how many more people will lose their jobs, and what will the Lab's future mission be?

The significance of who manages the Lab is at least twofold: UC, as a public institution, generates minimal gross receipts on the products and services it obtains for Lab functions. That's been the case since 1943, when UC took on management duties. And many observers, including some of the Lab's top management, also believe the institution has failed to offer sufficent economic support to the surrounding region.

The Lab's economic impact on the region is great simply because it's here: the billion-dollar operating budget covers thousands of paychecks and includes large-scale purchases of goods and services in New Mexico, valued at more than $400 million last year. $270 million of that went to businesses in northern New Mexico, including Los Alamos itself, where Lab expenditures and paychecks are crucial to the success of most firms in town.

Cal on Inside Track

The university's relatively weak record of directly supporting economic development in northern New Mexico is under assault as contract renewal approaches. Employee groups are striving to insure that UC's newest contract includes a provision that they'll pursue agressive economic development efforts.

Though UC retains the inside track for contract renewal, the institution's position is far from secure. Alternative managers mentioned so far have included the University of New Mexico, the University of Texas and defense contractor Lockheed Martin, which already manages several other defense facilities around the nation, including Sandia Labs in Albuquerque.

UNM has been cited as a possible new manager for its presumed higher motivation to support its home state and people. Lockheed has the know-how to do the job, but its role as a competitive private contractor suggests the potential for conflict of interest - though its management of other DOE facilities has somehow skirted that ethical dilemma. UC's strong points include its long-term familiarity with Lab management, its world-class expertise in science and technology and its nonprofit standing.

For the city and county, the lack of both federal support and UC's lack of gross receipts generation form a threatening cloud on the horizon. But the gross receipts issue is complex, according to the Lab's head of community involvement, Leroy Apodaca. "If we're hit with gross receipts, that's somewhere in the $30-50 million range. But DOE won't give [the Lab] any more money to pay for it, so that money will come out of operating funds. And generally, the quickest way to get money is to cut employees. That's between 400-600 employees. Maybe there's a bigger impact on northern New Mexico if the Lab keeps people employed."

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