Thursday, July 15, 2010

Where we are at in Bellingham and Whatcom County : Q2 2010

I am in the process of examining economic activity for Bellingham and Whatcom County for Q2 2010. Whatcom County (Bellingham MSA) total estimated population is approximately  ~200,000 as of July 2009 according to the latest American Community (Census) Survey:

Right now, both Whatcom County and the City of Bellingham are also nervously examining their projected 2010 and 2011 budgets, along with a few thousand other nervous, anxious, depressed city and state government officials nationwide.  It's a bit like a long term famine for Americans here, perhaps as close as we have come to understanding what a permanent impoverished economy may look like.

In reality, the highways are full of cars, city and social services are being remarkably well kept up, the streets have yet to become scary, and the summer days and evening are beautiful. So why worry?  If that is your mindset and you believe that mindset helps you retain your creative edge and energy, please don't look at the charts below.  There is something to "looking on the sunny side of life".  But on the other hand, continued plunging city and county revenues will eventually take us into a very severe economic environment. Something needs to change.

City finance director John Carter's Q1 - 2010 and May 2010 presentations are the most informative and current documents to date.  Here are some relevant charts reprinted from those presentations. The first chart documents the 6900 jobs lost since June 2008. Director Carter notes that "total jobs in Whatcom County" continue to shrink"  and that the number of jobs in Whatcom County (Belingham Metropolitan Service Area) is that same as it was in fall 2004. Well, I was here for fall 2004 and it wasn't entirely too bad. Maybe we are still just taking the edge off a six year housing bubble. However, employment has been in a steep dive for the last two years:

The second chart tells us what the biggest part of the bottom was when it fell to earth: Construction, of course. We were the prototypical "construction bubble economy" for a few years. Not clear from the presentation whether this is all Whatcom County or just Bellingham. (Most likely - all Whatcom County) :

Ouch!! That's a big drop in units constructed!  Those construction workers, realtors, and mortgage bankers are not so busy these days, if they are here at all.  With that drop has come cutbacks in city, county and school budgets, increases in bankruptcy and foreclosure.  There's a good chance the housing industry won't rebound for quite awhile as consumers liquidate debt, struggle with high unemployment, poor credit scores, foreclosure and oversupply of housing. Our little corner of the world has had its share of liquidation and pain, especially for the last two years. Remember that most bankruptcies are household bankruptcies. They are a good indication of general economic health:

This last chart below gives us an idea how all of this has affected City of Bellingham General Fund revenues. This is a May 2010 presentation and compares figures (as near as I can tell) from January to May of the years noted for General Fund revenues only.:

You can extrapolate a bit to understand what has gone on to keep declining revenues from experiencing a complete slide into oblivion -some re-proportioning of the city sales tax revenues , some "carry-over" property tax assessments/increases, some increasing utility taxes- about the only category that couldn't be 'fudged' or 'nudged' a bit was B&O (Business and Occupation) taxes. Unfortunately, B&O is a fairly direct measure of business income in the city of Bellingham. Note that we have had some not inconsiderable direct stimulus from the Federal Government.  Washington has received a considerable amount of stimulus funding and has a considerable amount more to receive. On, you can see who got the $$$. It looks like 98225 has received about $30 M to date:

Whatcom County is a also a recipient of the "Canadian effect" which is particularly strong right now. (Sorry, don't have a good chart or graphic for this at the moment.)

So how long can we keep "fudging and nudging" if total employment and B&O taxes continue to slide?  Probably not too much longer.  Mayor Pike is talking openly now about how we have little fat left to trim off the budget. A continued slide in employment and business revenue will see city/county services and employment cut dramatically. Unfortunately, that employment is a big part of Bellingham and Whatcom County total employment. If private sector employment doesn't pick up that slack then total local business and government revenues will plunge further.  Dramatic strategies could be undertaken at some point: Big public works projects could be halted. Police, Fire, public safety could dramatically reduced. Levying additional local sales/B&O taxes may not help offset continued slides in property valuations or contribute to increasing discretionary spending levels or increasing business expansion/employment. So that leaves us with a some substantial, if difficult to implement solutions:

(1) We can keep pumping stimulus dollars from Federal/State sponsored projects (Waterfront, Airport) into Whatcom County (via the Port of Bellingham among other entities.)
(2) We could receive more dollars from initiative I-1098.
(3) We could recruit more employers to Whatcom County and help sponsor more small businesses.

Okay, so let us talk briefly about these options in the next post and what job creation, if any, we can look forward too in the near future in Whatcom County.

No comments: