SoBA: Office of Business & Economic Research

Region 9 Economic Quarterly: Volume 1 Q1

Introduction
by Robert Sonora

The Office of Economic and Business Research (OBER) at Fort Lewis College is reintroducing a quarterly economic newsletter. The Newsletter will concentrate on the economies of the Four Corners Region, concentrating primarily on the five Region 9 counties of Archuleta, Dolores, La Plata, Montezuma, and San Juan, and occasionally dipping into San Juan County, NM.

In addition to providing insights the state and local economies’ situation, each issue will concentrate on an economic sector or local economic entity, such as local towns or business associations. 

In this “inaugural” edition, we have invited Region 9’s Assistant Director Laura Lewis Marchino to provide insights into local development. Ariel Wishkovsky,  Business Development Coordinator for the City of Durango, offers his thoughts on  the economic ebb and flow affecting Durango’s economy.  Cortez’s city manager Shane Hale highlights the local economy there in the aftermath of the Great Recession.

The Region 9 “Macroeconomy”: Unemployment and Per Capita Income
By Robert Sonora

In this issue the OBER has decided to begin by highlighting two factors which most of most interest to the majority of households: the unemployment rate and per capita income. The labor market paints a favorable picture of the local economy and while per capita income, at first glance, is likewise optimistic. However, when we delve deeper into personal income, the story is less buoyant.

Employment and Unemployment

Unemployment in all five Region 9 economies continue to decline. Table 1 shows the annual average unemployment rates for each of the Region 9 counties in additional the national and state averages. For 2015, the most recent monthly statistic is provided (April). Across the nation, the unemployment rate was at its’ peak in 2010 and, as can be seen, the unemployment rates have fallen steadily since then. Dolores county has seen the most dramatic decline, falling about a 14% in five years, followed closely by San Juan County.

La Plata and Dolores unemployment rates are below the state and nationwide average, the other counties are experiencing falling unemployment rates as well, see Table 1.  Given the low rates of unemployment in the region, it is reasonable to expect that most of the economies are close to, or above, the “full employment” level of unemployment. That is the unemployment rate that is consistent with the long run “natural” rate of unemployment.

While there is no official natural rate of unemployment rate at the county or state level, the current natural rate of unemployment for the US is about 5.4%. The Office estimates for the county and state level natural rates of unemployment are in the last column of Table 1, denoted NRoU, along with the official natural rate estimated by the US Congressional Budget Office. As can be see all the counties are skirting the natural rate.

 

Table 1. Unemployment Rates

Area

2010

2012

2013

2014

2015*

NRoU

U.S.

9.6%

8.1%

7.2%

5.9%

5.5%

5.4%

Colorado

8.8%

7.6%

6.6%

4.7%

4.2%

4.2%e

La Plata County

7.1%

6.5%

5.7%

4.2%

3.9%

3.7%e

Archuleta County

10.7%

9.9%

8.6%

5.9%

4.7%

4.8%e

Montezuma County

9.1%

8.5%

7.7%

6.1%

6.3%

5.7%e

Dolores County

17.7%

10.1%

8.2%

4.2%

3.3%

2.5%e

San Juan County

13.3%

9.9%

8.6%

5.4%

4.5%

4.4%e

 

Source:  U.S. Department of Labor, Bureau of Labor Statistics, US Congressional Budget Office, * most recent data, e. OBER calculations of the natural rate.

Per Capita Personal Income

Per capita income in Region 9 has been steadily increasing over the past several decades. Table 2 provides per capita income in the five Region 9 economies since 1995 in five year increments.  Average growth rates over the 1995 – 2013, most recent available year, are in the last row.   However, when we take inflation into consideration, the situation is less rosy. Table 3 provides the same data adjusted for inflation using the Bureau of Economic Analysis’ (BEA) “price of consumer expenditures” (PCE) for the state of Colorado (2001 = 100).  As can be seen, all the counties experienced a decline in the purchasing power of the incomes since 1997, which is the first year the BEA produced state specific price indices.[1] As can be seen, inflation adjusted incomes have fallen approximately 1% per year across the region.

Table 2. Per Capita Personal Income

 

ARC

DOL

LPC

MON

SJC

U.S.

CO

1995

 $16,348

 $18,505

 $21,796

 $18,642

 $18,467

$23,544

$24,763

2000

 $20,779

 $20,927

 $28,720

 $23,616

 $25,461

$30,569

$34,227

2005

 $26,064

 $26,592

 $35,196

 $27,899

 $28,553

$35,843

$38,390

2010

 $30,091

 $26,358

 $42,127

 $32,364

 $29,068

$40,119

$41,689

2013

 $35,263

 $32,107

 $46,633

 $36,524

 $34,922

$44,713

$46,897

Growth

3.4%

2.4%

3.4%

3.0%

2.8%

2.8%

2.8%

 

Source: US Bureau of Economic Analysis and OBER calculations. ARC is Archuleta, DOL is Dolores, LPC is La Plata, MON is Montezuma, and SJC is San Juan.

 

Table 3. Real Per Capita Personal Income

 

ARC

DOL

LPC

MON

SJC

US

CO

1997

 $33,003

 $38,314

 $45,351

 $37,505

 $39,301

 $29,680

 $46,738

2000

 $29,520

 $29,731

 $40,802

 $33,551

 $36,172

 $36,772

 $48,626

2005

 $29,864

 $30,469

 $40,327

 $31,966

 $32,716

 $38,850

 $43,987

2010

 $29,017

 $25,418

 $40,624

 $31,209

 $28,031

 $39,467

 $40,202

2013

 $29,546

 $26,902

 $39,073

 $30,603

 $29,260

 $41,658

 $39,294

Growth

-0.5%

-1.5%

-0.6%

-0.9%

-1.3%

1.5%

-0.8%

Source: US Bureau of Economic Analysis. 2001 = 100 and OBER calculations.  

While these declines are similar to those to the state as whole, as you can see nationally average incomes have risen an average of 1.5% per year. This is entirely due to differences in inflation rates – which have tended to be higher in Colorado compared to the United States, see Figure 1, which shows the PCE inflation in the US and Colorado from 1998 – 2014. As can be seen, inflation in Colorado has consistently been 1.5% to 2.5% higher than the in the United States as whole, with the exception of during the Great Recession in 2009.

Figure 1. US and Colorado PCE Inflation

US and Colorado PCE Inflation chart

Robert Sonora is Professor of Economics and Director of the Office of Business and Economic Research at Fort Lewis College.

Region 9: An Overview

by Laura Lewis Marchino

Southwest Colorado, also known as Region 9, encompasses a five-county area including Archuleta, Dolores, La Plata, Montezuma and San Juan Counties as well as the reservations of the Southern Ute and Ute Mountain Indian Tribes, the only two in the state. The region is located at the juncture of three distinct physiographic regions: the Rocky Mountains, the Colorado Plateau, and the San Juan Basin. Of the region’s 6,584 square miles, 45% are public lands, 38% are private lands and 17% are tribal lands.

Southwest Colorado developed as a result of "traditional west" commodity products such as minerals, cattle and timber.  Since the 1970s the region has transitioned to tourism and outdoor recreation as the number one industry, with energy and natural resources also on the list.  The area is known for its scenic beauty, diverse landscapes, cultural resources and entrepreneurial spirit.  Agriculture related services remain significant sources of employment for Dolores and Montezuma Counties, while.  Archuleta, La Plata and San Juan County economies are based primarily on tourism. 

The Southern Ute and the Ute Mountain Ute Indian Tribes are both major economic forces and large employers with their diversified enterprises benefiting the regional economy. In fact, the Southern Ute Growth Fund, which started in 1999 has investments spanning America and Canada.  The Growth Fund reports a portfolio over $1billion.  The Ute Mountain Ute Tribe has a Farm & Ranch Enterprise with crops including sweet and field corn, wheat, alfalfa hay, cattle and sunflowers.  In 2014, the Tribe’s corn mill facility opened to supply the region.

The region is largely rural with an estimated 2013 population of 93,963. Overall, the region saw a 3.84% increase since 2010, driven mainly by La Plata and Archuleta counties.  Being geographically isolated, the region was somewhat sheltered from the national recession, though housing values and construction industry took large hits.

County highlights

Archuleta County has a unique combination of natural resources and natural attributes (i.e. geothermal hot springs, and archeology sites).  "Amenity migration" drove population growth in the 1990s, and 2nd home ownership became an economic driver.  The designation of the Chimney Rock Archeological Area as a National Monument in 2012 is expected to increase the number of visitors to the area.  Recent economic activity in Archuleta revolves around the potential of geothermal resource development for renewable energy and creation of jobs.

Historically and currently the dry land crop production provides the greatest number of jobs in Dolores County.  Production crops focus on wheat, pinto beans, alfalfa and the relative newcomer sunflowers and safflowers.  Most recently, the expansion of helium facilities near Dove Creek are expected to add to the population and diversify the economic base of the area.  The Rico area provides access to scenic public lands and recreational opportunities, and also contains geothermal resources that could be further explored.

Montezuma County developed as a supplier of food, cattle and timber to mining towns in the San Juan Mountains. By the turn of the 20th century the mining boom had played out and the remaining settlers turned to subsistence agriculture and the export of agricultural and timber products.  In the 1980’s, the construction of McPhee Reservoir (the Dolores Project) and its extensive irrigation systems allowed increased agricultural production and enhanced recreational opportunities.  Montezuma is home to the significant archeological sites including Mesa Verde National Park.

La Plata County has transitioned from a traditional rural county to a more urban environment in which tourism is the number one industry.  People moving in for quality of life issues or "amenity migration" drove population growth in the 1990's, a trend still seen today.  Because of its location within the larger region, Durango is the region’s tourist and trade crossroads.  The diversity of options from water sports and hunting, to biking and skiing, tourists stay in town, year-round.

The discovery of gold in San Juan County in 1860 creating a mining town and the dedication of the "Million Dollar Highway" in July of 1924, created wealth for the region by creating the ability to transporting gold, silver, lead, copper and zinc out of the mountains.  Today, San Juan County relies upon tourism, primarily during the summer months when the Durango & Silverton Narrow Gauge Railroad is running, but also growing in the winter since the opening of the Silverton Mountain Ski Area, which is the largest employer in the county.

Laura Lewis Marchino, CEcD, is Assistant Director of the Colorado Region 9 Economic Development District, Colorado

Durango’s Municipal Economy

by Ariel Wishkovsky

The first quarter of 2015 has proved to be a positive one for the municipality of Durango, CO. Sales tax is up roughly 5% from last year, while lodger’s tax is up more than 15%. Even with the poor snow year, beds were filling from both business and tourist oriented ambitions.

Main Street and its vitality seems to be showing itself off. Businesses have been successful for the most part. Some local businesses have expanded acquiring more retail space in the commercial district of Main Street. This has been impressive to watch as these business are as local as it gets. We are excited to see how they continue to strive.

Weather, like always, will play a significant role in our summer tourist season. With that stated, it has been an extremely wet spring thus far. Therefore, we see rivers filling and flowing, all the meanwhile, detouring any immediate threat from fire. Furthermore, the increases in the tourism sector from the past few years alone seems as if it will continue once again for another increase this year.

Enplanements have also increased.

There was skepticism with this due to the corporate restructuring of Frontier Airline that has caused them to pull out of the Durango La Plata County Airport for the time being. Nonetheless, this has yet to negatively impact the enplanements of the Durango La Plata County Airport.

The Narrow Gauge Railroad has also seen an increase in their visitations. They had a record year during winter and have also seen an increase ridership with their kickoff season this year. Their organization seems to be planning for a big tourist season this year.

From the past years, the unemployment rate has dropped significantly and housing prices continue to rise. This coincides with the sales of homes also staying stable. There has also been a steady stream of construction and housing permits as development continues to expand in the jurisdiction - with new projects on the horizon.

Project have also been dictated by City of Durango plans to analyze what is needed in public infrastructure. The four largest plans for the City of Durango are as follows: 1) Wastewater Treatment Plant 2) Durango La Plata County Airport Expansion 3) North Main Character Assessment Study, and 4) City of Durango building update.

Large industry and commercial accounts have stayed stable with no change. We see an increase in tech companies/startups that see a viability in our economy. Reason being is not only the accessible airport and high quality of life, but there has been a little hub of techies that have formed. There is now a valuable employment pool with these computer/programming skills.

The Fort Lewis College has also shown their capabilities and addition to the municipality. They are making a state of the art engineering facility and thinking of bringing back computer sciences. This is important to add to our local labor pool. Companies such as Stone Age and Mercury are always looking to hire talent – acquiring that talent locally is the largest obstacle.

The largest concern is that of the oil and gas industry. The county has taken a large financial hit with severance taxation. The county is tactfully embracing and preparing for this. Nonetheless, there is no clear evidence of the full outcome and complexity of the issue – that is – how much will it actually affect the municipality of Durango? Local economists are keeping a close eye on this to be able to better forecast its affects.

Ariel Wishkovsky is Business Development Coordinator for the City of Durango, CO.

The City of Cortez: Recent Developments

by Shane Hale

Centrally located, the City serves as a hub of commerce for the surrounding area, and benefits greatly from its proximity to the Navajo Nation, Ute Mountain Ute Tribe, Mesa Verde National Park, Towns of Dolores and Mancos, as well as from local tourism, agriculture and mineral extraction activities. 

The City of Cortez has experienced positive economic growth after the economy hit bottom in 2010.  For example, the sales tax receipts in 2010 were $6.7M, which was down from a peak of $7.5M in 2008.  Revenues began to rebound in 2011, culminating in the most recent year of 2014 where the City received $7.8M in sales tax revenues.  This amount of tax growth represents an additional $25M in retail sales growth.  

Construction activities have been steady if not unpredictable over the same five year period.  In 2010, there was $3.4M in total construction activities.  In 2011, where our data is better, the City experienced $3.5M in total construction activities, with $1.1M in new commercial and $1.6M in new residential construction.   In 2012, there was $5.1M in new commercial construction and $1.3M in new residential, with a peak total value of construction reaching $8.9M.  In 2013, new commercial construction was $1.3M, but new residential dropped to just under $800,000, for a total value of construction of $3.3M. 

Finally in 2014, the City witnessed a total value of construction reaching a staggering $32M, with $29M in new commercial and $1.5M in residential.  However, when the new high school is removed from this calculation, there was a total of just over $4M in construction activities, which did include a new 74 room hotel.   While it’s too early to know if residential construction is having a rebound, 2015 has already experienced over $2M in new home starts in the first quarter of the year.

In 2012 the City took two significant steps to spur the local economy.  First, the City purchased 80 acres of property that is located adjacent to the Industrial Park.  The current Industrial Park is completely built out, so the City wants to develop turnkey industrial lots for new business starts and expansions, and has dedicated the northern 20 acres of this property for that purpose.  Initially, the City was in negotiations with a local manufacturing firm about expanding their footprint onto this site; the manufacturer ended up expanding elsewhere, but plans remain to subdivide and sell these lots in 2015. 

Secondly, the City adopted an economic development resolution that had four elements: streamlining the code, reaffirming our local preference policies in City purchases, abating 50% of building permit fees and taxes on new commercial construction/remodeling, and rebating sales taxes to Cortez businesses that grew their sales tax collections by at least 3% compared to the previous year. The building permit incentives were set to grandfather after two years (2013-2014), while the sales tax program is a three year incentive (2013-2015).     

In 2013, there were 14 businesses that took advantage of the building permit fees/taxes provision, and the City discounted/abated $37,000 to businesses that expanded, remodeled or completed new construction. For the same period, 132 businesses qualified for the sales tax rebates for a total of $38,500 being rebated to the Cortez business community.   

For 2014, there were 15 businesses that received discounted/abated building permit fees and taxes, for a total of $149,000 in discounts. On the sales tax side, there were 132 businesses that once again qualified for the rebates, for a total of $34,000.

Oil and gas extraction has been a steady contributor towards the local economy for many years.  This has resulted in direct benefits to the City in severance taxes and federal mineral leasing monies, but has also had a significant impact as a major employer in the area.  Kinder Morgan primarily exports Co2 through a pipeline to its Texas oil fields, and until very recently was working on a $1B Lobos pipeline project.   With this project on hold due to low prices of crude oil, the City is anticipating a commensurate dip locally, although to what extent is certainly an unknown. 

Uncertainties about the future of education in the area will continue to plague the economy. The District struggles to hire and retain quality teachers because the District is underfunded, and only ½ of incoming kindergarteners are actually prepared academically to be in kindergarten. These factors have contributed to very low aggregate test scores in the Cortez district, and are symbolic of a population that doesn’t seem to value education. The net effect is that employers struggle to hire talented people, the community is not producing a quality next generation work force, and retirees choose to move to other locations due to the link of property values and local school ratings.  

Shane Hale is City Manager for the City of Cortez, CO.

 

[1] The US Bureau of Labor Statistics produces the more popular and quoted consumer price index (CPI) at the national and city level, for Colorado there is the Denver-Boulder-Greely CMSA CPI only. I have chosen to use the PCE measure of inflation because it is a chain-type index, unlike the BLS, which gives a more accurate picture of price behavior. It is also the preferred price index at the Federal Reserve.