“How long can an organization postpone renovation/rehab and not risk losing move-ins?” asks the ALFA[1] Case Study: “When Looks Really Matter”. In response, there is no universal right answer, as each company and its situation are different.  Factors that may influence management’s reaction to occupancy challenges include the type of business (i.e. acute hospital, SNF, ALF, IL, etc.), type of clientele, level of competition, census level / amount of decline, and the organization’s overall financial condition.

As a former CFO, I understand that the company must live within its means and that there are often financing considerations behind decisions and timetables for rehabbing a building.  But, unlike a hospital or nursing home where admissions are driven by need and paid by third parties, independent and assisted living communities have a greater requirement in maintaining their properties to remain competitive and continue to attract private pay clientele.

SHOULD MANAGEMENT CUT OR SPEND?

Traditionally, organizations tend to do nothing extraordinary for a 1–2 % change in census, but cut costs and eliminate expenditures as occupancy drops 5–10 points.  Then when the occupancy decline hits 10 points, management panics and starts spending more money, bringing in outside sales/marketers and doing more advertising, special events, etc.  At 12 – 15 points, they call out the National Guard!

So, why wait for it to become a crisis before responding?  No matter the state of the economy, if the census drops, management should do something POSITIVE for the community instead of cutting costs.  Create value-added services[2] to increase the satisfaction of existing residents and marketability for potential residents.  In the private pay world, you must overcome inertia to obtain a move-in and CUTTING COSTS IS NEVER THE ANSWER!

[In fact it can become a “self-fulfilling prophecy” as the company continues to cut costs, reducing the perceived “value” of the services, thus leading to still lower occupancy.]

RENOVATION CYCLES

Many organizations schedule total renovations for their properties on an 8-12 year cycle.  This process generally includes an updated color scheme with new upholstery/furniture and furnishings in the building core and other common areas.  A conventional approach in difficult times is to delay these major expenditures until a) the census improves or b) the economy turns around.

The problem with this strategy is that the appearance of the building may be a CONTRIBUTING FACTOR to its census challenges, so management must look at each situation individually.  For instance, a well-maintained building with consistent local management might require a rehab for only cosmetic purposes and could likely postpone its renovation without adverse consequences.

On the other hand, a property that clearly shows wear and tear – regardless of age – needs attention NOW!  Executive management must convey support for the marketing efforts of the local management team.  In addition, efforts to instill “pride of ownership” in the local staff will be negatively impacted if it appears that management doesn’t care how the place looks.  This will only make the wear and tear cycle worse in the future.

Yet, in this economy, financial limitations are a reality.  No one expects everything to be fixed at once, but the key is to DO SOMETHING! Additionally, PLANNING, PRIORITIZATION and COMMUNICATION are essential for successfully managing renovations.

So, suspend the traditional cyclical renovation program and focus on extending the life of the existing color schemes with repairs and partial replacements.  At the same time, communicate to all properties and the residents in each of those communities that there is a plan and assure them that their concerns will be addressed in due course.  The key is to do a little something for everyone so that the management and residents of the “good” buildings are recognized and shown appreciation for their efforts in maintaining the property.

You don’t have to spend a lot of money to do this.  We promoted a lot of goodwill in a turnaround situation by throwing away a couple of rickety park benches and spending about $500 to replace them with rockers for the front porch.  In another situation, we simply re-arranged the lobby furniture to create several conversation groupings in a less formal setting.

DOES REAL ESTATE SELL?

Roger Bernier, the President and COO of Chelsea Senior Living states in the ALFA Case Study:  “Our buildings are our single most important marketing tools …” and he makes a compelling argument for maintaining a community in good repair, even in hard economic times.  However, a superior building may not be enough to stimulate new move-ins.

Psychologist Abraham Maslow teaches that physical and security are the basic needs for all individuals and most senior living communities focus on meeting these needs.  But, the real potential is in helping the retired adult achieve social, ego and self-actualization goals, which Maslow identifies as higher level needs.

If management shifts its focus to providing a fulfilling lifestyle for their existing residents and then highlighting these activities and services in their marketing efforts, they will find their clientele to be much more accepting of a little normal wear and tear.

GROUP PURCHASING

Lastly, having worked for both large and small enterprises, I understand the substantial price breaks from group purchasing that Todd Kaestner (Brookdale Senior Living) discusses in the case study.  But, to think outside of the box, the operator may get a better return on their investment by purchasing locally! Yes, I know it will likely cost more, BUT . . . you are only doing partial renovations and any exposure within the local community is good and provides inexpensive advertising.  A local owner-operator to whom you bring business (and even the local trades-people that do the work) can be turned into exceptional referral sources to “spread the word” as they visit your property and observe the level and quality of service you provide.  The fact that the company is putting money back into the community – especially in “tough times” – will produce positive public relations on MAIN STREET……one of  your targeted markets.

Again, these suggestions won’t work for everyone, but hopefully they’ll make you consider new options and maybe come up with even better ways to respond to the economy.

[1] Assisted Living Federation of America

[2] Please contact me via email at art@progressiveretirement.com or phone at 615-414-5217 to learn more about the types of value-added services that can be provided and how Progressive Retirement Lifestyles could help you with today’s challenges.

Pending home sales rose again, marking eight consecutive monthly gains – the longest streak since measurement began in 2001, according to the National Association of Realtors®. The Pending Home Sales Index rose 6.1 percent to 110.1 from a reading of 103.8 in August, and is 21.2 percent higher than September 2008 when it stood at 90.9. The gain from a year ago is the largest annual increase on record, and the index is at the highest level since December 2006 when it was 112.8. Lawrence Yun, NAR chief economist, said the momentum is understandable. “What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,” he said. “Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery.”

Click here for the NAR Pending Home Sales (PHS) chart.

—From NAR member e-mail update, 11/13/09

California, the world’s eighth largest economy, is still finding its feet after suffering multiple economic shocks, including a housing slump, mortgage crisis and recession.

Employers in California, the most populous U.S. state, are expected to keep cutting staff in 2010 as the wider U.S. jobs market recovers. The state’s unemployment is far above the national U.S. level, and at odds with California’s image as an oasis of opportunity in hard times.

In the 12 months through August, California’s construction industry shed 142,000 jobs, or 18.5 percent of its work force, marking the largest decline on a percentage basis over the period of surveyed industry groups.

Analysts expect California’s jobless rate to climb well into next year even as other measures of the state’s economy regain some of their luster.

By Rory Reynolds

THE Scots housing market could see a boom in affordable homes as housing associations are snapping up cheap land left undeveloped in the property slump.

Sites that were previously abandoned by private builders have been acquired in a cheap land grab, meaning that the number of new houses coming onto the market could treble.

One Edinburgh firm, Dunedin Canmore Group, said it will build three times the homes it expected it would this year because the land has become affordable.

The not-for-profit group will receive £15million in loans from the Royal Bank of Scotland, which will be matched with £15million from the Scottish Government, to fund the expansion.

Ewan Fraser, chief executive at Dunedin Canmore said that the firm would complete around 300 houses every year for the next three years.He said: “With the slowdown in the private sector, the land has become available to us, which has allowed us to increase our programme.

Ditched

“We’re getting more space on other sites and more quickly.

“In Corstorphine we were asked to do extra on a Persimmon site we were already involved in, if we were in a position to do it.

“And we’ve now got the funds to do it – we have the private financing in place.”

One of Dunedin Canmore’s sites at Fountainbridge was bought from Glasgow building firm Mactaggart & Mickel, who ditched their plan to develop on the site.

Another site was bought from a builder in Saughton, who had also had cancelled plans to develop in the area of the city.

Regulations by the Scottish Government ensure that at least a quarter of new housing developments must be affordable housing.

But some builders are ensuring that a higher proportion of their sites contain affordable housing, because of the lack of interest in higher priced private sector homes.

The result will mean that far more affordable houses will be on the market in the next few years.

Huge

Ian Sillars, director of housing finance at the Royal Bank said that would lend to housing associations like Dunedin Canmore because the industry had a good credit record.

The news comes as figures from mortgage lender Nationwide show that house prices in Scotland’s are recovering faster than elsewhere in the UK.

The average house price in Scotland is just one per cent lower than this time last year and average value of a house rose by 3.4 per cent in the three months alone.

Simon Reddit, managing director of Edinburgh property firm Rettie & Co said that there has been noticeable renewed interest in the housing market.

He said: “People are starting to pop their heads over the parapet again.

“Sale are definitely exceeding our expectation and we have seen a return to confidence among some buyers particularly those buying in the £400,000 – £800,000 bracket.”

However Scotland is currently trailing behind the Northern Irish market, which saw a huge 9.7 per cent increase in the average value of houses in the last three months alone.

See more of our pictures at our Flickr site and videos at our dedicated channel,  Deadline TV.

Although the housing slump may have “bottomed-out”,  occupancy declines, especially for independent living, are more widespread [1]. Will the industry re-bound with a business-as-usual mentality?  Will new generations of customers be satisfied with today’s level of service?

There is no question that the real estate crisis and decline in portfolio values have impacted occupancy in senior living communities.  AND, it’s easy to buy into the concept of “We just need to hold on, the demographics are still there, and we’ll be OK as soon as the housing market recovers”.  The reality may be very different.

While the country has been in the economic doldrums over the past couple of years, several dynamics have been changing, largely un-noticed by the industry.  First, the demographics are changing – the target market is gradually moving away from the “greatest generation”[2] [World War II vets are dying at the rate of 1000 per day] – and the industry must prepare for the “bobby-sox” generation (as a prelude to the “baby boomers”).

This generation, born between 1935 and 1945, is affluent and benefitted from the medical advances and healthy lifestyle initiatives of the 20^th century.  As a result, they will have longer life expectancies with more males in the target population.  They demand value and will be less willing to compromise than their parents and older siblings who were tempered by the depression and WW II.

In the 1990s, assisted living (“AL”) developed as an alternative to nursing homes, and independent living (“IL”) has in large part developed as an alternative to assisted living facilities.  The newest option is “aging-in-place” with various surveys documenting the desires for aging adults to stay in their own home.  In the past, this wasn’t practical for many people, but we are seeing the development of a number of new companies that use various enabling technologies to provide cost-effective alternatives to senior housing. For example:

A study several years ago indicated that up to 80% of AL admissions were driven by the need for assistance with medication management.  Yet, there are now numerous automated medication reminder systems for use in the home.

Numerous organizations have developed cognitive fitness systems to provide brain exercises and delay the effects of Alzheimer’s and other senile dementia.

Rosemary Bakker, a gerontologist with Weill Cornell Medical College has established the website This Caring Home to help caregivers and family members design a “smart home”, allowing individuals with early stage dementia to remain in their own home.

In addition to the psychological appeal of these options, the current economic malaise is forcing prospective residents – and their families – to become more value-conscious consumers.  These products and services will take market share from IL and AL communities by offering greater independence at lower costs.

As a result, the standard AL resident in the future may become a medically complex individual with multiple health/psychological conditions.

The impact on the traditional IL model may be even more dramatic.

Is Everything “Doom & Gloom”?

The answer is that it doesn’t have to be – IF operators heed the wake-up call and are willing to consider new options:

1.   Embrace new technology, instead of resisting it.  Future generations won’t appreciate things such as internet access, a social networking site for the community, etc. as an added value – they will expect it as a minimum level of service.

Technology should be utilized to promote independence (no matter what level the resident demonstrates at move-in).  View this as an investment in extending the higher functioning of the resident for extended periods of time, which should decrease the turnover rate, extend the average length of stay, and increase the occupancy percentage.

Offer the same technology services that are marketed for “at-home” care in a bundled package, so that the senior living community becomes the value-added solution.  Sell the advantage of having someone on-site who can and will MANAGE the technology for the senior, at the same time they are receiving other traditional services such as meals and transportation.

2.  Meet more than the basic needs for the residents. Abraham Maslow developed a Hierarchy of 5 levels of needs, as depicted in this diagram.

The senior living industry has traditionally done a good job of meeting the basic physical and security needs of the residents.   However, there is tremendous opportunity to offer and market services that address their higher-level social, ego and self-actualization needs.

In fact, programs meeting those needs could be the differentiators that trigger the move-in decision.  Interestingly, these needs are the most difficult for the senior to achieve while living alone in their home.

Too often society has assumed that seniors forgo these higher-level needs when they “retire”.  Yet Lasell Village, a CCRC located on the campus of Lasell College in Massachusetts was created around the principle that retirees would move into an independent living setting where they would be committed to an annual continuing education curriculum.  This program is clearly helping the “villagers” achieve their “Peak needs”[3]!

Senior living communities must adjust with the times and add these value-added initiatives if they wish to overcome the inertia caused by the economy and plan for the future generations.

What initiatives are you taking to use technology and/or meet your current or prospective residents’ higher level needs?  Please add your comment by clicking on “Leave a comment” below:

Additional Links for New Technology Options:

Good Design Age Well

Center for Technology and Aging

CareData Trak

CogniFit

Dakim, Inc

GrandCare Systems

MyFitBrain

TheCaringStore.com

.

[2] “The Greatest Generation” by Tom Brokaw (1998)

[3] “Peak – How Great Companies Get Their Mojo from Maslow” by Chip Conley (2007)

The green police are coming for your houses…

“The proposal creates a new authority for the federal government to police building codes, holds developers and owners of buildings, including homeowners, liable for not reaching federal energy efficiency mandates even if the buildings are presumably in compliance with applicable local building codes and establishes a civil penalty for violators of this section of the bill. This measure would have a chilling effect on development and property transfer across the spectrum of real properties.”

“Now we’re in housing slump right now. Why would we want to create a piece of legislation that creates a federal building code with civil penalties and tells people living in their houses that they’re unlawfully occupying that house if they don’t meet this new federal building code when they’re in compliance with their own state’s federal building code?”

Details of the ‘cap and tax’ bill H.R. 2454: American Clean Energy and Security Act of 2009.

Banksters Love Cap-and-Trade
The well-placed and well-connected are set to make trillions off new climate bill; economic collapse about to accelerate

Groups Positioned to Make Big Money Off of Carbon Credits

Al Gore and companies like Goldman Sachs have long-since bought large stakes in the carbon trading markets like the CCX (Chicago Climate Exchange) and are poised to make money on the buying and selling of the carbon credits.

First published Nov. 3, 2008

Tomorrow’s Election Day, so we’ll ask Ronald Reagan’s time-honored question: are Washington residents better off today than we were four years ago? If you’re in King County, the answer is a qualified yes.

The number of people working in King County has increased by 103,370, which is growth of almost 11 percent. As we’ve discussed before, King County has been one of the national leaders in job creation in recent years.

More people means more shoppers. King County retail activity has grown by more than 28 percent since 2004, from $9 billion to $11.3 billion.

If you owned your home in 2004, you’ve done well. The typical 3-bedroom, 2-bath home is now worth about 40 percent more. (Median prices have climbed from $322,000 to $450,000.) Perhaps even more reassuringly, that home’s value has slipped only 4.3 percent from the peak of the market in spring 2007, at a time when many parts of the country are seeing much greater declines. California home values, for example have fallen about 16 percent during the past year.

The one place King County doesn’t stack up is pay. State wage data shows the average King County paycheck is up 14.8 percent since 2004, to $1,080 a week. That’s nice, but it wasn’t enough to keep up with inflation – the Consumer Price Index rose 16.7 percent during the same period.

The state overall has done pretty OK too, since 2004.

• Home values are up 30 percent to a median of $291,900 in the second quarter.
• Statewide retail sales are up about 27 percent, to $29.1 billion in the second quarter.
• Total employment (farm and non-farm) is up 9.4 percent, to 3.3 million people in September.
• Average pay for workers statewide is up 18.6 percent, to $899 a week in the first quarter.

All in all, not so bad, eh? But now let’s ask the question Barack Obama’s been hammering away at – how are we going to be four years from now?

My crystal ball doesn’t see that far out (probably because it’s socked in here today and raining). But clearly, the next four quarters are going to be tough. Two of our major economic indicators – home prices and retail sales – declined statewide in the most-recent quarter. We’re continuing to create jobs, but at a slow pace, and some areas are in decline. Average wages are increasing, but not keeping up with inflation. And the credit crisis is hitting some industry sectors – forest products, construction, banking, auto sales and boat building – hard.

There are places bucking the trend. King County posted 3 percent job growth in September. Yakima’s housing market is booming, and the Tri-Cities are going strong. But many other communities are struggling, with flat labor markets and declining retail sales.

The past four years have been good for Washington, but clearly, we’re not immune from the broader economic crisis, and whoever comes out ahead in tomorrow’s elections will have a big challenge ahead.

First published Oct. 6, 2008

We’ve talked about this before, how Bellingham keeps landing high up on all those lists of great places to live or to retire. That quality of life thing has driven population growth during the past decade, which in turn has driven business expansion, particularly in the service sector, where Whatcom County has seen strong growth in professional and business services jobs, financial services and leisure/hospitality (the latest thanks to some new casinos). The downside has been a sharp run-up in home prices, and with the credit crisis now in full swing, the housing market may be in for some volatility, which could easily spill over into the rest of the economy.

For now, the housing market is holding on to most of its recent gains: median home sale prices slipped 4.7 percent in the most-recent quarter, to $280,000, and sales volume was down 26 percent. Foreclosures are up, but remain relatively low.

The bigger issue, economically, is a 43-percent drop in new home construction over the past year. National homebuilder D.R. Horton recently took a $12 million loss on property it had to unload in Whatcom County. The new owner is scaling back development plans, looking to build smaller houses.

A fall in new-home starts, logically, would trigger declines in construction employment. That hasn’t happened yet, however: the employment sector that includes construction has been flat over the past year. (Financial services employment is down by 100, however.) Overall, the labor force grew by a modest 1.4 percent over the period, much slower than the growth in recent years, but growth nonetheless.

One factor boosting construction employment might be continued growth in commercial real estate. New buildings and large-scale renovation for retail projects has continued in recent months. But we’re starting to see signs of weakening in the commercial real estate market as well, as attractive new retail space sits empty. That’s probably a reflection of a slowing retail environment: Bellingham posted only modest growth (2.3 percent) in retail sales in the most-recent quarter; Whatcom County overall reported 2.4 percent growth.

Newly released gross domestic product data for the Bellingham metro area (more on this Bureau of Economic Analysis report next week) also suggests that growth was slowing prior to the credit crisis. The local GDP declined 4.7 percent between 2005 and 2006, according to the report, which ranked Whatcom County 359th out of 363 urban areas in the nation for growth during the period.

And while tourism is expected to be a growth industry in the next few years, as the weak dollar and (relatively) cheap gas bring Canadians south, and the 2010 Vancouver Olympics bring Americans north, tourist traffic and spending so far this year have been decidedly mixed, with hotel stays up, while bookings for traditional attractions were down.

So what’s it all mean? My guess is that Bellingham is just starting to come down with the national economic malaise. The sharp drop in housing starts and the soft retail sales numbers clearly point to that. However, continued enrollment growth at Western Washington University, and presence of two oil refineries should cushion the local economy from the worst of the sickness ahead.

First published Sept. 14, 2008

Community leaders from around the Northwest were in Bremerton last week to talk about urban waterfront renewal. Bremerton, of course, has been out front on this issue, with Mayor Cary Bozeman’s “Harborside District” redevelopment plan.  

The Bremerton renaissance, however, has seemed stalled in recent months. The bottom fell out of the national housing market, leaving the city’s new waterfront condos half-empty, and forcing one builder to sell his at auction to pay off his construction loan. Kitsap County’s job market has sputtered, the new-home market has tanked, and plans to develop a new industrial site adjacent to Bremerton National Airport have been slowed by in-fighting between Bremerton and Port Orchard, which feels bullied by the bigger city. In the latest Inc. magazine survey of the nation’s hottest small cities, Bremerton had fallen from 10th to a humble 63rd.

But the latest state sales tax report suggests that maybe Bremerton’s in better shape than we thought. 

Taxable retail sales in Bremerton climbed 8.2 percent in the first quarter, compared to the year before. I saw that and immediately thought “yeah, the state started that big tunnel project last year; that’s what caused the bump.” (Sales taxes on highway projects can impact the local numbers, you recall. GOP gubernatorial candidate Dino Rossi, by the way, wants to exempt such projects from the tax.) The fact that Kitsap County’s total taxable retail sales were off 1.1 percent made me even more suspicious.

But if you go inside the numbers you’ll see Bremerton’s experiencing real retail expansion. There was a 9.8 percent year-to-year increase in retail trade – sales of stuff like clothes and shovels and computers – and a 7.1 percent increase in the number of retailers citywide. Maybe that downtown revival is taking off after all.

Outside Bremerton, there’s not as much good news. Yes, large-scale construction – including a couple new clinics for Harrison Memorial Hospital (one in my Mason County hometown of Belfair) – is taking some sting out of the slumping home market. But new home starts are off 31 percent, existing home sales are down 29 percent, and median prices have fallen 8.9 percent, to $271,300. 

The countywide retail slump also is worrisome. So is the 0.2 percent drop in total employment. (There were 200 lost jobs in construction and 200 more in business services.) There are questions about a contractor building Navy housing. And there’s been more squabbling over land-use questions, including a new subdivision and a plan to annex the big McCormick Woods subdivision into Port Orchard. 

At a recent chamber of commerce meeting, former Kitsap Economic Development Alliance chairwoman Chris Rieland described the Kitsap County economy as “a gangly teenager.” It’s a perfect metaphor, she says, “because you can’t ever tell a teenager what to do. We need to hang on to what is best in our community and work to become more mature and forward-thinking.”

First published Sept. 7, 2008

When is the announcement of 17 people being laid off good news? When you’re Hewlett-Packard, and everyone expected you were going to slash hundreds of people from your Vancouver payroll. H-P has announced widespread layoffs at plants in Idaho and Oregon, and many felt that further cuts could come at Vancouver, where about 1,300 people design, engineer and market ink-jet printers. The smaller cut was greeted with relief.

It’s been tough lately in Clark County. The county’s largest community bank, First Independent, also announced recent layoffs as it consolidates in the face of declining profits. And a Portland-based bike-frame and aluminum fence manufacturer has decided not to expand into the county, saying the high cost of the steel it would need to build its new factory makes the project prohibitive.

The plant would have brought 800 jobs, which would have been welcome about now. Total employment in Clark County is up a scant 0.8 percent over the past year. Layoffs have hit the paper industry very hard. Employment there is down 12.5 percent (200 jobs).

The sagging housing market means construction is off by 400 people, which is a 3 percent decline. New home starts are down 40 percent, according to the latest report. Sales volumes are down more than 30 percent, and homes that are selling are selling for less; median prices fell 7.4 percent, to $257,400.

As we’ve discussed previously, the housing boom that made Clark County the state’s fastest growing is very much over. But all those new residents have created demand for new services, and that’s somewhat offsetting the weakness in manufacturing and construction.

For example, health care continues to grow, adding 300 workers in the past year. In fact some health employers can’t find qualified workers fast enough to meet demand. And wholesale trade is strong (up 100 jobs), and there have been gains in transportation and warehousing (also up 100) – all sectors related to foreign trade, where a weak dollar has meant that exports are up but imports are down, all along the West Coast.

Despite the obvious weakness, some companies are finding ways to grow. Vancouver-based Papa Murphy’s is one. It’s now the fifth-largest pizza chain in the country, opening 100 new outlets a year. Tech company Wacom is another. The Port of Vancouver is moving ahead with plans to clean up property it wants to redevelop. North of Vancouver, there are signs of business expansion, as developers try to pencil out projects that would provide retail and other services to suburbs that boomed when housing was hot. And in Vancouver itself, an $18 million office project is going forward – while a $17 million mixed-use development sits on hold, waiting for a change in the condo market.

Even the Vancouver farmers market is reporting growth, which is encouraging. Clark County’s retail sales numbers were essentially flat in the most-recent quarter, up 0.7 percent, but both Vancouver (up 3.4 percent) and Camas (up 4.9 percent) posted stronger gains.

First published Sept. 1, 2008

We now join the nationwide housing downturn, already in progress.

The latest statewide housing numbers clearly show that the residential housing market peaked last year, and is sliding. Median home sale prices fell 7.8 percent statewide in the second quarter, the biggest quarterly drop since the Washington Center for Real Estate Research was founded in 1994. Along with prices, sales volumes and new-home starts also were down — dropping by double-digit margins in almost every county in the state.

First, the statewide numbers:

• Median sale prices fell to $291,900 during the quarter — giving back all of 2007’s gains to fall back to Q2 2006’s level.
• Sales of existing homes statewide dropped nearly 32 percent.
• New building permits fell by nearly 30 percent.

Yet while the overall market was sharply down, there were some relative bright spots:

• Yakima County home prices went up 4.9 percent, and both the Tri-Cities and Spokane County’s prices were essentially flat (falling less than 0.5 percent), making them the strongest among the state’s larger counties. In addition, 10 rural counties also saw price gains. Some of those are statistical quirks, but others are likely the result of second-home sales in attractive areas.
• Spokane County also recorded a 4.3 percent up-tick in existing home sales between the first and second quarter, the largest of eight counties to report sales increases during what is traditionally a busy period.
• San Juan County builders were the state’s most bullish, taking out 32 percent more building permits in the quarter than they had in Q2 ‘07. Maybe the resilience of sale prices there is encouraging them — the median climbed 9.6 percent to $570,000, keeping it the priciest market in the state.

But for the most part, the numbers were bad. King County isn’t collapsing, but the market is certainly weak, with median prices down 4.3 percent (to $450,000), sales volumes down 36 percent, and housing starts down 5.3 percent. And once-red-hot Chelan County has hit a plateau: median sales prices were up another 5 percent to $251,500, but building permits were off by 2.5 percent this spring and sales were down by about a third.

New home starts were down more than 40 percent in major counties like Clark, Cowlitz and Snohomish. Spokane County wasn’t much better, down 38 percent, but Pierce County starts were down more than 50 percent. Meanwhile, home sales totals were down by a third or more in 10 counties, including Snohomish, where they dropped 44 percent.

The sale volume gains in Spokane and the relative strength of home prices east of the mountains give some reason for optimism. But as we’ve seen, the weak market for home buying and building is impacting the job market, which is ample cause for concern.

First published Aug. 22, 2008

It’s been kind of a tense summer in Snohomish County.

It started with in-fighting over county budget cuts. County Executive Aaron Reardon ordered a hiring freeze in June, in the face of a looming shortfall. The County Council and prosecutor cried foul, saying that Reardon doesn’t have the authority to do that – and then the council placed its own hold on hiring last week. The resulting “constitutional crisis” has got all of Wall Street in a tizzy – that is, Wall Street in Everett, where the County Courthouse sits.

We’re going to see more of this around the state this fall – maybe not the same degree of bickering – as agencies try to deal with revenue shortfalls.

Meanwhile, on Everett’s south side, there’s a lot of tension surrounding the contract talks between the Machinists union and Boeing, now in their final stages. Aerospace is the industry in Snohomish County, employing some 36,000 people at Boeing and related companies – a total likely to grow next year as Esterline subsidiary Korry Electronics moves in from Seattle. So everybody kind of holds their breath at contract time, especially this year, when the rhetoric has got so heated so early.

Union workers – both Machinists and the engineers of SPEEA – have been socking away savings in case of a strike. That’s one reason why retail sales figures are weak. Snohomish County saw taxable activity fall 2.3 percent in the most-recent quarter. The county’s largest cities also saw declines, except for booming Marysville, where they were up 6.9 percent.

Another reason for the tax fall-off is that a major I-5 expansion through Everett, which was underway last summer, is completed. (Big construction projects, you’ll recall, generate taxable sales activity.) The project’s end is reflected in the latest jobs data, which shows a 21-percent year-over-year drop in workers employed in heavy construction and civil engineering projects (700 people).

The jobs story is mixed. Aerospace is very strong, with Boeing and its suppliers adding 4,300 jobs over the last 12 months, growth of 13.6 percent. State education centers added 300 more workers – some of that to expand job training for aerospace. But the construction industry got hammered, shedding 3,900 jobs in total. There have been 1,400  job cuts among clerical workers and janitors. And trucking and distribution companies have shed 500 jobs, a fact that’s got to be disconcerting to workers at Alaska Distributors.

The housing numbers are weak. Existing home sales and new building permits both fell more than 40 percent. Median home prices fell 7 percent, to about $349,000. This despite some signs this spring that the Snohomish County market had rebounded.

Once the contracts are settled, the strong aerospace base will continue to bolster Snohomish County. Boeing Programs like its 787 are sold out into 2015, which means a stable local workforce well into the next decade. But for the next couple months, the labor turmoil within Boeing – and local governments – will keep everyone on edge.

First published Aug. 15, 2008

Washington’s job market is continuing to grow at a sluggish pace, last week’s state employment report shows.

There’s a seasonal element to the July numbers – total employment often slips, as schools, colleges and universities let teachers and other workers go for the summer. So if you look at July’s numbers and see total employment fell by 23,400, don’t panic – there are about fewer 33,000 teachers and other school employees temporarily out of the workforce.

Still, the news isn’t that good. The statewide workforce grew by only 1 percent over the past year, which is hardly robust. The statewide jobless rate was at 5.4 percent, up from 4.4 percent in July 2007. In the Seattle-Bellevue-Everett metro area – which accounts for more than 40 percent of the state’s jobs – unemployment has inched up to 4.3 percent. That’s still a tight labor market, but trending in the wrong direction.

But four counties in the state – all of them timber-dependent, including Cowlitz County – reported jobless rates greater than 8 percent.

Health care continues to be a growth industry, a trend likely to continue as long as the Baby Boomers age. The sector added 6,700 jobs over the past 12 months – 22 percent of the net job gain statewide. Of those, 2,500 were at hospitals, but 2,000 came with providers of outpatient care.

Elsewhere, there were few surprises: hiring at Boeing and Microsoft continue to boost the state’s economy, while construction, banking and forest-products industries – all impacted by the national housing market collapse – drag it down.

Employment in the software sector was up by 2,700 jobs over the past 12 months, which is growth of 5.5 percent. As we’ve discussed before, these are extremely well-paying jobs that will bolster businesses in and around the tech hub in east King County.

Aerospace is also up, but seems to be starting to plateau, adding only 600 workers between June and July (425 of whom were at Boeing) compared to 1,000 for the same period last year. Still, for the year, aerospace employment was up by 6,000 jobs, for growth of 7.4 percent.

On the flip side:

• The construction sector has shed 2,900 jobs in the past year, a drop of 1.3 percent;
• The financial services sector has shed 2,600 jobs, a decline of 1.7 percent;
• Sawmills have slashed 1,500 jobs, paper mills 700 jobs, and logging and other resource companies have 600 jobs, representing drops of roughly 7 percent

The credit crisis also is hitting at certain retail sectors: auto dealers (down 2.3 percent), home improvement stores (down 1.9 percent), and furniture stores (down 1.6 percent).

In all, the report has good news for metro Puget Sound – as long as Boeing and Microsoft remain strong, they’ll be OK. But much of the rest of the state is being hit by the national economic malaise – the only question will be how hard.

First published Aug. 15, 2008

Tacoma is the one of the hottest cities in the nation for job growth, and a potentially great place for entrepreneurs looking to launch a new business, according to Inc. magazine.

Tacoma was No. 2 among the nation’s mid-sized cities, and 14th-best overall, in the magazine’s recently released rankings of best cities to do business. It wasn’t alone on the list – within Washington, Seattle moved up to 10^th-best on the large cities list; Spokane was 14th, behind Tacoma on the mid-size cities list; and Bellingham, Olympia and the Tri-Cities all moved up among the top 30 on the small cities list. (One notable exception: Bremerton. It had ranked as high as 10th in 2006, but fell to 63rd this year.)

The survey looks at employment growth trends over one- to 10-year periods. This methodology, Inc. says, “tells us precisely not just where jobs are being created – a sure sign of economic vitality – but where the momentum is shifting. For entrepreneurs, this suggests what may be the best places to locate or expand your business.”

Northwest cities “continue to gain educated residents from other parts of the country,” Inc. says. “The lure, in many cases, lies with strong and diverse job growth and low housing prices compared to coastal California and the Northeast.” And with energy costs soaring, our hydropower is more-important than ever, giving us “a great competitive advantage in terms of dependable, low cost and low carbon energy.”

But Tacoma might do well to not take the high ranking too seriously, because while the City of Destiny clearly has boomed over the past decade, current data shows a significant slow-down underway.

Much of the problem lies with the housing market. Newly released second-quarter housing stats show existing home sales fell 31 percent in Pierce County, while building permits fell by more than half. (Median sale prices slipped 5 percent, to $268,500.) That weak housing market is reflected in the most-recent state jobs report, which shows a loss of 1,200 construction jobs and 800 financial services jobs over the past year. Overall employment was up a scant 0.7 percent, but if you take away those two sectors, the county would have had healthier 1.7 percent annual growth. Still, these kinds of numbers show why Columbia Banking Systems set aside $15.4 million to cover construction loans likely to go in default during its most-recent quarter. Foreclosures are rising too.

A different state report counted more than 6,000 job openings in April, but 1,800 were for less than $10/hour. Newly released full-year wage data shows average Pierce County wages were up 5 percent to $761/week (or $39,572/year) in 2007 – not enough to keep up with inflation, which is running at 5.8 percent locally. Amid all this, shoppers are keeping a tight grip on their wallets: county sales tax collections fell 1.7 percent in the first quarter; Tacoma’s total was down 4.1 percent. (Fife’s fell a whopping 20 percent.)

News-Tribune columnist Dan Voelpel talked with Joel Kotkin, the editor who complied the rankings for Inc. “There’s a certain amount of luck to (ranking high on the list),” he says, “being in the right place at the right time, not going into the housing bubble early.” And given the uncertainty ahead, he offered this advice: “Enjoy it while you can.”

First published Aug. 4, 2008

OK, so we know these things to be true:

• The collapse of the real estate market is killing the construction business statewide.
• Boeing’s going great-guns, and that’s holding up the Puget Sound economy.
• The weak U.S. economy means few imports and that has battered shipping and warehousing at Washington ports.

Yes that’s all part of the conventional wisdom – and it’s wrong.

The state’s first-quarter gross business income report is out, and it’s got some surprises. Some industries we thought were in a tailspin – like construction – are actually doing pretty good, while the aerospace industry seems to have hit a plateau. And while last week’s sales tax report showed a major slowdown underway, this report (on revenues reported as companies pay their B&O taxes) shows strength in some retail sectors.

Construction was the first surprise. Overall, revenues to companies in the sector were up 8 percent statewide, to $10.7 billion. And within that, revenues for residential construction and remodeling grew by 11.6 percent, to $2.4 billion. New home starts were down in the quarter, so people who are staying in their homes must be making improvements. Jumps in revenue for specialty contractors – plumbing/heating and masonry/drywall both were up by double digits – suggest this may be so.

The second surprise was manufacturing. Overall, the segment is up 9.9 percent, to $33.98 billion, but there are some huge differences among the industries. The Tri-Cities based food processors saw huge gains (23 percent); so did the petroleum refineries in Whatcom and Skagit counties (up nearly 40 percent). But forest products industries were down (paper by 2.3 percent, lumber by 9.5 percent), and transportation was flat. Boeing’s performance had a big impact here; aerospace and its suppliers grew revenues by only 1.6 percent in the quarter, to $9.4 billion. This could be because the company is delivering now planes it sold at a steep discount in 2002-04, or it could reflect a leveling off in its recent growth. We’ll have to watch this number.

Wholesale trade and warehousing – two industries closely aligned with foreign trade – did quite well during the quarter. Wholesale trade was up 11.6 percent overall, to $29.6 billion; within that, electrical equipment (from lighting to meters) grew by 26 percent while furniture was up 16 percent. On the warehousing side, from cold storage to grain elevators, revenues grew by 25 percent to $171 million.

There are some trouble spots: banking and finance companies took a 5-percent hit, largely because of a 16-percent drop in revenues for investment pros; law firm revenues were off 6.5 percent; revenues for car dealers fell 4.7 percent; and RV, boat and motorcycle sales fell nearly 13 percent – as Olympic Boat Centers can attest. And while trucking company revenues were up 6.4 percent, that’s not enough to make up for skyrocketing fuel prices.

But the report also shows some surprising retail strength. Overall, revenues to retailers were up 5.5 percent, to $26.7 billion, led by online retailers (hello, Amazon!) who grew revenues by 29 percent (to $2.1 billion). Sporting goods sales also grew by 11.8 percent.

First published Aug. 4, 2008

We’ve had a lot of gloomy business news lately, what with the struggles at WaMu and the losses and layoffs at Starbucks. We’ve got soaring inflation, a weak housing market, slumping retail sales and signs that some pockets of the state are in real trouble. Even the weather went south on us last week.

But at the same time, there are signs that maybe things aren’t quite as bad as they seem, that maybe we’re over-reacting to times that are bad, but not horrible. (Really, what’s wrong with asset write-downs?)

Growth may indeed be slowing across the state, but business is still getting done. Some companies – like Northwest Pipe in Vancouver and Cardiac Science in Seattle – posted record revenues in their most-recent quarters. Manufacturers like Spokane’s Itron are winning new business, while Seattle on-line start-ups can still attract venture funding.

WaMu is far from the only financial institution in trouble, and already heads are rolling. Yet in some markets, banks are talking about expansion. All around the state, new commercial projects are moving forward, and manufacturers are expanding to meet increased product demand.

Certainly, the housing data is discouraging – even confusing – and some high-profile projects have been put on hold. But on both sides of the Cascades, reports indicate that local markets are holding up stronger than expected. Snohomish County sales increased 90 percent in the spring quarter, and in Spokane, “the huge price declines in other markets are not happening here,” insiders report. Even recreational real estate is holding on, with the owners of Suncadia reporting surprisingly good sales.

Yes, retail sales growth has slowed dramatically, but that’s not stopping store owners from developing new, distinct shopping experiences. In the Tri-Cities, in fact, retailers can hardly wait for back-to-school shopping to start. (The only bad news, it seems, is that the ’80s rock-chick look is making a comeback among teens this fall.)

The data can be disheartening: year-over-year job growth is slight statewide, and many of the jobs that are available pay less than $10 an hour. Retail activity is in decline in many key counties, and traditional industries like logging, sawmills and paper mills have been hit hard by national economic weakness.

Yet new state numbers out last week show that – logging, banking and newspapers aside – most sectors of the state economy grew in the first quarter of this year. Some sectors – specifically wholesale trade, warehousing and professional and business services – posted double-digit increases. And new federal numbers show that – while its growth may be off – King County remains one of the top job markets in the nation.

It’s harder to succeed in a slow economy, but it’s not impossible. “The market’s going to stink for quite a while,” says Seattle real estate developer Henry Liebman, who’s pushing forward with a project in Tacoma. “We’re taking a chance by developing it now. I think the truth of the matter is, if you build a good product that’s fairly priced, it’ll sell. The Pacific Northwest is not dead.”

Originally published July 27, 2008

“Drive till you qualify,” real estate agents used to say – reflecting the notion that home buyers can just keep moving farther out in the suburbs until they find a home they can afford. But with gas at $4.30 a gallon, can this concept really survive?  

We’re starting to see the answers down in Cowlitz County, where sales of homes in the bedroom town of Woodland seem to be tanking. Woodland’s about 30 miles north of Portland – a reasonable commute – and since 2000, it’s been Cowlitz’s fastest-growing city, growing by 26.5 percent (to 4,760 people). The overwhelming majority of the newcomers commute into Portland and Vancouver.

But now, no one wants to drive out to buy those big 3,000-square-foot homes. Sellers are settling for $300,000 on houses that use to fetch $500,000. Woodland city tax revenues have fallen along with the market. As a result, the city’s planning layoffs.

It’s just more bad news for Cowlitz County, which already had plenty. (You know things are bad when thieves try to steal copper wire in broad daylight.)

The data confirms it – the Cowlitz housing market is soft. A recent report showed a one-month up-tick, but don’t be fooled: home sales were down 39 percent, in the most-recent quarter, and new building permits were down 13 percent. Median home prices inched up 1.1 percent to $180,500.

The job market is worse. Cowlitz County had an annual loss of 900 jobs in the most-recent state unemployment report, a drop of 2.3 percent. Traditional industries – sawmills and paper making – are shedding workers: sawmill employment was down almost 23 percent over the year (300 jobs); paper mill employment was down about 15 percent, or 400 jobs. Construction and logging lost a combined 500 people – a 15 percent decline.

The unemployed will have a hard time. A separate state jobs report says only 10.5 percent of the roughly 4,000 open jobs in southwest Washington this spring had pay comparable to or better than the state average wage of $850 a week. (The report included Clark, Cowlitz and Wahkiakum counties.) Even those who have secure jobs are feeling some pain – average pay for Cowlitz County workers increased by only 2.8 percent in the most-recent 12-month period. That’s not even half the current rate of inflation. 

Given all that, Cowlitz County consumers are cutting corners. The new state taxable retail sales report shows that retail activity fell 3.3 percent countywide in the first quarter of this year; Longview (3.2 percent) and Kelso (2.9 percent) had comparable declines.  

There’s been a little good news: a big new warehouse has opened; Weyerhaeuser is starting up a new sawmill and recalling some of its recently laid-off workers; backers of a proposed $100 million ethanol plant say the project is merely stalled, not sunk for good.

But most of Cowlitz County’s recent growth has been driven by commuters moving north in search of bigger, cheaper homes. Without those commuters, and with continued weakness in the traditional local resource industries, then the county will struggle greatly in the months ahead.

First published July 21, 2008

The pending buyout of Puget Sound Energy by an Australian-Canadian investment group has spawned a backlash: Several counties – foremost among them Skagit – are considering November ballot measures that would allow them to take over PSE’s transmission systems so they could operate their own local power services.

A study commissioned by the Skagit PUD, which now runs a countywide water system, found that it would be entirely feasible for the county to buy out PSE’s assets. Further, the engineers estimate that a locally-based utility could provide power for less. And a survey this spring found that Skagit residents would rather get their power from a local public utility than some “foreign-owned power provider.”

PSE, not surprisingly, has its own study that suggests that Skagit would have a very hard time finding financing for its takeover bid, not to mention the struggles it would have buying power in the open market. And again, not surprisingly, free-marketers like Don Brunell at the Association of Washington Business are four-square against the idea.

I’m having a hard time with what to think about this. My inner William Jennings Bryan loves the idea of locals standing up to the money men and taking control of their own destiny. My family’s got solid roots in public power too: my great uncle Vern was a Rural Electrification Administration lineman, stringing some of the first power lines into Jefferson, Island and Whatcom counties, which are also considering PSE take-overs.

But I also spent enough time covering the Snohomish County PUD to know that the utility industry is hideously complex. Learning curves are steep, and nobody’s going to take time to help out newly hired small-town utility managers reporting to newly elected local boards. Whatever happens, business will be looking for whoever can provide the best service at the best price – because the Skagit economy’s a little shaky right now.

Recent economic data is decidedly mixed: Wages were up 6.8 percent last year, which is better than the state average; but more-recent employment data shows the biggest growth is in low-wage hotel and restaurant jobs (up 9.8 percent) while manufacturing remains flat. Another state report shows that 33 percent of recent Skagit job openings were for jobs paying less than $10 an hour; well above the state average of 25 percent.

Meanwhile, sales of existing homes fell by a third in the most-recent period, and housing starts were down 29 percent. Yet median sales prices went up 10 percent, which suggests that while the overall market is falling off, higher-end homes are still selling. If Skagit’s like other rural/suburban markets, this could mean that wealthier retirees are moving in. That’s not helping retail sales, however. Full-year 2007 data shows a 2.6-percent increase, both countywide and in Mount Vernon – about a third of the state average.

The Puget Sound Energy issue may become moot. Two state agencies – the state Attorney General’s Office and the staff at the Public Utilities Commission – are recommending that the three-member Utilities Commission board block the PSE takeover, making the Macquarie Bank-led buyout anything but a sure bet. The commission is expected to vote on the request in September.

First published July 21, 2008

Three reports out last week show that while Washington’s economy is still growing, that growth is slowing to a crawl.

We’ll start with the new state wage data, which shows that average pay for Washington residents climbed 4.6 percent over the most-recent 12-month period, to $885 a week, or just over $46,000 a year.

That’s the good news; the bad news is that the double-digit spikes we’ve been seeing for science and technology jobs have gone away. Scientific and professional services jobs still gained a healthy 5.3 percent, but raises in the information sector slumped to 2.4 percent in the fourth quarter. Pay raises were greatest for people in administrative support and waste management (i.e., secretaries, clerks and janitors), who saw gains of 8.3 percent. Pay for mine and gravel pit workers fell 0.3 percent.

Last week’s inflation report had more bad news for Washington workers: Average wage gains were not enough to keep pace with inflation. The Consumer Price Index for Puget Sound shot up 5.8 percent over the past year, according to the most-recent federal inflation data.

Just about everything costs more than it did a year ago. Gas prices are up an eye-popping 36 percent. Housing costs are up 5.7 percent, pushed by 7.9 percent rent increases. Food and beverage costs are up 6 percent, with the cost of groceries (up 6.7 percent) going up faster than the cost of dining out (up 5.7 percent).

Finally, the June jobs report showed sluggish 1.1-percent growth in employment statewide. There weren’t many surprises here: aerospace (up 6,200 jobs for the year) and software (up 2,500) continue to expand; logging (down 300 jobs, or 5.8 percent), construction (down 4,700 jobs, or 2.2 percent), and banking all are falling. The only unexpected note – financial services employment was up by 400 between May and June. Still, the sector is down by 3,000 jobs for the year, a drop of 1.9 percent.

Sectors related to housing are weak. About 1,200 real estate pros have lost jobs over the past year, a decline of 2.3 percent, and employment at hardware and garden stores is down by 700 people, a drop of 2.2 percent. DIY, it seems, is dead. Car sales also must be bad: dealers have shed 900 workers over the year, a drop of 2.1 percent. And those soaring gas prices have hammered trucking, which was down 500 jobs, or 1.9 percent.

So who’s hiring? Computer network companies, for one. Hardware designers added 1,600 jobs over the year, up 5.5 percent. Architectural and engineering firms added 1,200, up 3.3 percent. Hotels and restaurants added 6,400 people, for a gain of 2.2 percent. And health services continued its ascent, adding 7,500 workers for growth of 2.5 percent.

One number to watch: Employment services agencies added 1,700 people over the year, with about half that gain coming in June. Temporary services are a leading indicator of a recovery – companies in need of help to handle increased business will hire a temp rather than risk spending for a full-time employee. When things turn around we’ll see it in this sector first.

First published June 13, 2008

The Bremerton City Council will meet today to discuss a proposal that it annex some 3,400 acres around Bremerton National Airport, in Kitsap County’s southwest corner.

The plan has been in the works for months. Commissioners with the Port of Bremerton voted in April to seek city annexation for the South Kitsap Industrial Area. The port operates the airport and nearby business/industrial park, and owns about half the land within the area. Two private landowners also have asked to join in the annexation.

They want to be annexed so that the city can extend utilities to the property – once one of the sites being considered for that much-debated NASCAR track. Also, they complain that Kitsap County puts up too many roadblocks to development; they perceive the city of Bremerton, under Mayor Cary Bozeman, to be more business-friendly.

But the proposal is being opposed by Port Orchard Mayor Lary Coppola, who wants to see a multi-jurisdictional group oversee the site. “The potential gains that can be made with a joint effort … are so much greater than what may be accomplished by any one entity. The costs are just too much for any one jurisdiction to bear,” he wrote in a letter proposing joint jurisdiction. Besides, he says, Port Orchard has already invested $21 million in infrastructure improvements to the area.

Maybe Coppola’s right, and the South Kitsap industrial project is too big for any one jurisdiction; or maybe he’s engaged in a petty turf war. Either way, developing the site would be an important step, because, much like we discussed with Clark County last week, Kitsap County is becalmed in a doldrums, and it needs to do something.

Despite all the energy and money poured into Bremerton in the past five years, the revival of Kitsap’s largest city seems to have stalled. The national real estate collapse has hurt efforts to rebuild downtown as the chic new urban “Harborside District.” Some of the unsold waterfront condos were sold off at auction this spring, their developer needing cash to pay his loans. The countywide real estate market has stalled: median home sale prices fell 7 percent from last year; building permits are down a third, existing home sales are down more than a quarter.

New manufacturing jobs could only help. Kitsap County lost 100 jobs over the most recent 12 months, as gains in the leisure/hospitality and warehouse/transportation industries were off-set by bigger losses in professional services and federal employment – a cause for concern given that more than a third of the county’s workforce draws federal paychecks, thanks to the heavy Navy influence.

Kitsap’s retail sales also are lagging: full-year totals for both the county as a whole (3 percent) and Bremerton in particular (3.9) showed growth last year well under the statewide average. The only good news came from last week’s state wage report, which showed Kitsap County paychecks up 8.6 percent. But after looking at all the data, I’m inclined to think that much of that is the result of pay hikes for the working professionals who commute from Bainbridge Island into Seattle. New home-grown manufacturing jobs in South Kitsap – whoever ends up developing the land – could only help.

First published June 8, 2008

We could have a decision next month in the long-running brouhaha over the proposed Cowlitz casino project. The tribe, you may know, wants to build a $510.3 million, off-reservation resort casino complex near I-5 at La Center. It’s been a hot-button issue since first proposed in 2000, with opponents objecting on all number of fronts.

However, a new environmental impact statement rejects opponents’ assertions about traffic congestion and pollution, and suggests that the tribe could off-set La Center’s losses by making annual payments to the city. The study also found that the casino would generate $140 million a year in retail sales, which would be taxed, plus the tribe has agreed to pay $4 million to local governments in lieu of property taxes.

So far, about the only thing we can say for sure is that the lawyers have done well, both lobbying for and against the project.

Maybe the casino isn’t the right answer. Maybe local leaders would be better off focusing on the dramatic make-over in the works for downtown Vancouver, which is poised to begin in 2010. (My Washington CEO colleague Aaron Corvin will take a long look at this in our July edition.) We can debate the merits of the casino all day, but fact is, Clark County could really use something – and soon.

Clark County was one of only two Washington counties to record a drop in retail sales last year. (The other was Walla Walla.) While the state was bucking the national credit crisis, Vancouver’s retail activity grew by an anemic 2.4 percent – about two-thirds less than the state average. Adjacent Camas registered an 8.6 percent decline, which was the worst performance among the state’s 50 largest cities.

Overall county employment grew by 1.6 percent over the most recent 12 months, but there were some disturbing signs. Paper manufacturers shed 200 jobs over the past year, a decline of 12.5 percent. Panasonic closed a plant in the county, which idled another 100 people. And while leisure and hospitality employment grew by 400 people, this is less than normal for April, says regional economist Scott Bailey.

As we discussed last quarter, the housing boom that fueled Clark County’s boom has ended. Employment in construction fell by 300 jobs (2.4 percent) while local banks shed 100 more, a decline of 2.5 percent. New home construction fell 51.5 percent in the most-recent quarter, sales of existing homes fell 31 percent, and median sale prices dropped 5.8 percent to $253,700.

Speaking in Vancouver recently, noted Northwest economist John Mitchell says we should know soon whether we’re headed for an economic turn-around, or further declines. On a regional basis, “so far there’s been enough other stuff (besides housing) to keep things going,” he says. But we’re going to need fundamental change to adjust to the new realities, Mitchell continued. “This may be the end of the ‘Way We Were.’”

First published March 10, 2008

Clark County has been one of the fastest-growing parts of the state in recent years, as people from Portland pushed north looking for more-affordable housing. Close to 70,000 people commute through Vancouver to Oregon each day, but the fact they live on the Washington side has driven demand for retail and services. That led to job creation rates that were some of the fastest in the state from 2003-’06. Till now.

The housing slump hit Clark County last year: sales of existing homes fell 33 percent and building permits were down 21 percent – both higher than state averages. The median price dropped 2.5 percent, same as the statewide median. Given that so much of the county’s growth is tied up in housing, that slump is cause for real concern.

So far, the segments of the job market related to housing are holding on. Employment in the real estate/financial sector was flat over the year, which is a pleasant surprise, because subprime lender Millennium Financial closed last year – taking 150 jobs with it – and two other mortgage companies downsized. Given that, you’d expect the employment totals to be worse. And construction employment increased slightly, with contractors adding 100 people over the year – far below the gains of recent years, but an increase nonetheless.

Part of it may be due to new commercial construction. Clark County is seeing a surge in retail development. The Columbian newspaper says that roughly 890,000 square feet of new retail space is under construction and more than 1.6 million square feet is planned over the next three years. The signature project is The Village at Evergreen, the county’s first “lifestyle center,” which is scheduled to bring a mix of big-city retailers when it opens next summer. That can only help slow the retail leakage – state figures show that retail spending in Clark County is a full one-third lower per person than the state average.

But the retail growth is coming just as retail spending is slowing down. State figures show Clark County retail spending was down 0.5 percent in Q3 ‘07. Vancouver itself had 4.1-percent growth, but that was below the softening statewide average of 5.9 percent.

The community has lost some high-profile manufacturers. More than 4,000 manufacturing jobs – about a quarter of the county’s total – disappeared after September 11th, and the sector has not fully recovered.

There are bright spots. The biggest growth has come in health care. The new Legacy Salmon Creek Hospital created more than 500 jobs when it opened in 2005, and the health care industry added 400 more workers in 2007. There has also been a noticeable jump in downtown office construction. And the Cowlitz nation is pursuing a new casino-resort complex at LaCenter, which promises 3,000 new jobs.

But as regional economist Scott Bailey notes, “the slowdown in the housing market will likely put the kibosh on hiring in construction and financial services, and the absence of refinancing as a source of borrowing has already slowed retail sales in the county.” Given that, the boom in Clark County may be over.

Was it the bank robbers that  got bailed out? 

Video courtesy of AmericanNewsProject.