Making sense of today’s economy is enough to push anyone off the deep end. Make no mistake about it these are tough times for some of the most important parts of our economy. Yet I’ve personally been at 3 grand openings in the last month for Kent businesses that invested a total of $23 million because they are growing faster than ever before. We’ve seen some old local favorites like RB&W close their doors for good but then we’ve cut ribbons just around the corner at the new Cambria manufacturing plant. We’ve grumbled over the old Kent Hotel’s deteriorated state while we we’ve been wowed by the restoration work Mr. Burbick did right next store. Nationally, cities are reporting some of the worst revenue projections in decades — oh, except university cities which are touted as percolating nicely along. So which trend defines Kent? How do we make sense of all this? I guess by accepting living the life of an oxymoron.
When I use the phrase economic oxymoron I am not referring to our Economic Development Director (sorry Dan, I couldn’t resist) but rather the apparent economic contradictions — doom and gloom versus bright and shiny — that we see at work in our hometown. I feel compelled to make sense of this because the City plays a supporting role in our economy and we are continually assessing what’s working and what’s not to guide our strategies and next steps. This is particularly true at this time of year as we prepare next year’s budget and we pull out the old crystal ball to predict what’s in store for the Kent economy next year.
Most years, a conservatively incremental forecast is the best bet. Make a few modest growth assumptions so that you’re covered in the event of an unexpected slip in the economy and be pleasantly surprised when things turn out better than anticipated. That’s a good rule of thumb in City budgeting where it’s always better to under-promise and over-deliver on things that are mostly out of your control.
A City budget isn’t done in a lab somewhere, it’s a reflection and product of the local economy. When the economy is firing on all cylinders the City has resources to fulfill its mission. When the economy is grinding, the City also grinds to make ends meet. Despite what some folks say, that’s why the City is fundamentally pro-business — because business success turn the wheels of the City bus. Granted, we can’t be pro-business at any cost — we have other priorities that we hold dear — but our ability to do good in this community depends upon a healthy economy which begins and ends with business success.
Anticipating business success for next year is proving to be a bigger challenge than usual. On the doom and gloom side, all around us we’re seeing our neighboring cities deal with revenues falling off a cliff. We’re reading about layoffs, furloughs, and deep cuts in services. Except of course university cities that we’re told are plugging away in a business as usual mode. The reality is we’ve had a little of both sides at work here. We’ve got reserves in the bank and we continue to see slight growth in income taxes. So I guess the question is, are we more of a manufacturing based city or a university city? Because these days the future for looks very different depending upon how you answer that.
Historically I’d say that we leaned more towards the manufacturing side of things but if you look at the tax base here in Kent over the last 2 decades you’ll see a number of the big manufacturing names slide down the Top Ten list while the University continues to climb in market share for income tax contributions. That’s not to suggest that we don’t still have healthy corporations here, we do, but most are smaller than they used to be and as a percentage their overall share of income tax contributions is less.
Under normal economic circumstances we might begrudge those losses because the big gainers tend to be in the private sector but in a declining economy those big gainers have become big losers which is why our diminished dependence on them is probably a good thing as far as our overall economic stability. We’ll probably never see the big jumps but we’re also buffered from the big drops.
In preparing the City budget for 2010 we’re counting our beans, reading the tea leaves and listening to the wind for clues — all in the name of due diligence. The trouble is we’ve got an angel on one shoulder whispering sweet nothings about all the good things happening in Kent the university city while the other shoulder has that little devil predicting the economic apocalypse for traditional manufacturing. It’s a bi-polar oxymoron state of the City these days.
Here’s an example of the what I’m hearing in my right ear. (article from Geo Magazine).
At a time when many cities are struggling to spur civic vitality, places that are home to major colleges or universities are percolating along robustly, often with healthy job growth, low costs of living and rising property values. Fueling this rise is the massive influence academic institutions have on their regions in terms of economic impact, civic connections, and innovative mindsets. Diverse spots — Columbia, Missouri; College Park, Pennsylvania; Raleigh-Durham, North Carolina and Chico, California, just to name a few — attract families, retirees, and the academically-minded. The migrants are drawn to the intellectual stimulation and community vibe.
Universities have long served as incubators for fresh thinking and new research. They also provide a solid economic base for area residents, allowing college towns to hold the distinction as areas of low unemployment. The economic activity trickles down into the host city, influencing the ethos of its civic life, from outdoor leisure pursuits to the performing arts.
For evidence, look at Columbus, Ohio’s capital city. In “Buckeye Nation,” the words ‘The Ohio State University’ mean one thing: football. Saturday afternoon crowds at Ohio Stadium are often in excess of 100,000; a major phenomenon. The steady fan base yields benefits for Columbus, the university’s home, in economic and cultural diversity: OSU has students from all 50 states and over 100 foreign countries, making it the largest student population of any single campus in the nation.
The two-mile stretch of High Street in the university district presents an energetic cross-section of students, college professors, local residents and visitors, all drawn to the energy for which collegiate communities are known. Areas like the university district in Columbus are also robust real estate markets, as they attract steady streams of academics and students who seek housing.
Even as the state of Ohio has been ravaged economically, Columbus recorded an unemployment rate of 8.9%, according to second quarter stats released by the Columbus Chamber of Commerce. That’s nothing to brag about, but certainly below the 11.2% and 9.4% rates, respectively, for the state and nation.
This fact is consistent with recent studies which suggest that cities with a university presence have lower unemployment rates than in other locales. According to June 2009 U.S. Census bureau figures, Manhattan, Kansas, home of Kansas State University, came in at an unemployment rate of 4.6%, the second lowest small city rate in the nation. Iowa City, Iowa, where the University of Iowa is located, recorded a respectable 6.2%.
University cities often experience strong job growth from start-up companies seeking to capitalize on readily available talent. The Research Triangle in North Carolina — Raleigh, Durham, and Chapel Hill – is perhaps the most striking example of a region benefiting economically from the presence of three major universities: North Carolina State University, the University of North Carolina, and Duke University. These three institutions are adjacent to regional research and technology firms that are on the cutting edge of important innovations. Emerging start-up companies in particular serve in essence as potential feeder systems for new graduates.
Toward Virginia’s eastern border lies Charlottesville, an eclectic city of 40,000 and of the University of Virginia. It has a deep historical legacy as the home of three U.S. presidents (Jefferson, Madison, and Monroe) and is the locality of Monticello, Jefferson’s residence and a heavily visited tourist attraction. The university’s influence on Charlottesville is most notable in the faculty and student presence in the downtown district, which features a walkable mall as well as trendy restaurants. There’s also a bustling local arts movement.
Charlottesville is also one of eighty-plus cities nationally that features college linked retirement communities: senior enclaves affiliated with education institutions that allow residents to audit classes and participate in other local learning opportunities. Students over sixty who have lived in-state for at least a year can also audit courses at the University of Virginia for free.
According to Tom Wetzel, founder and president of the Retirement Living Information Center in Redding, Connecticut, the development of retirement communities near colleges and universities is a trend that is gaining momentum nationally. “Our information suggests that learning opportunities, as well as cultural, entertainment and sporting events, are attracting growing numbers of seniors’ to university cities,” says Wetzel. “These seniors tend to be intellectually curious.”
Blacksburg, Virginia, is a another example of a city whose university serves as a catalyst for community vitality and economic growth. Home of Virginia Polytechnic and State University, Blacksburg offers the quintessential small-town collegiate environment. Nestled in a picturesque pleat between the Blue Ridge and Allegheny mountains, it boasts a moderate climate, reasonable cost of living and abundant leisure activities, many derived from its natural surroundings. Outdoor enthusiasts are drawn by the easily-accessible Appalachian Trail and Washington-Jefferson National Forest. Downtown Blacksburg features brick streetscapes, and unpretentious restaurants, coffeehouses, and watering holes, all within walking distance of the college. With its unique mix of local and regional amenities, Blacksburg is often among the top-rated cities for livability and outdoor activities.
Davis, California is a college town that has formed a niche identity around its university. Known for its forward-thinking, ecologically based emphasis, the University of California Davis attracts a range of global scholar-practitioners who are committed to sustainable living practices. Recognized as one of the most educated cities in the nation (based on its percentage of residents with a graduate degree), Davis has evolved into a close-knit community of intellectuals, researchers and environmental advocates — some with official University affiliation; some not — pursuing advancements in such areas as hydrogen fuel cell technology, green building practices, and viticulture.
Davis has also played a pioneering role as a bicycling community, featuring extensive bike lanes, paths and crossings, that create the backbone of the city’s social fabric. Thousands of residents, as well as students and professors, use this alternate form of transportation, creating massive daily seas of cyclists who navigate around campus and through the city’s downtown corridor.
University cities represent a key engine for our nation’s economic emergence. But perhaps more importantly, they serve as vibrant centers of livability, built upon partnerships between higher education institutes and civic institutions; between academic researchers and businesses, and between students and the community.
Michael P. Scott is a Northern California urban journalist, demographic researcher and technical writer. He can be reached at email@example.com.
And yet here’s what the other ear is hearing (from CNN Money).
Strapped cities lay off workers, cancel projects
As sales and income taxes decline, 9 of 10 cities are forced to cut spending. Future looks grim with property taxes expected to drop in 2010 and 2011.
NEW YORK (CNNMoney.com) — More than nine out of 10 cities are slashing spending this year as the recession wreaks havoc on their sales and income tax revenue, a new study found.
And the future looks even worse, as the housing market’s steep declines continue cutting into property tax revenue, according to the National League of Cities, which issued the update on city fiscal conditions Tuesday.
City finance officers’ pessimism is running at its highest level in the history of the group’s 24-year survey. The economic situation on the local level has grown more dire in the seven months since the group released its last report.
“City leaders know the worst is still ahead of them in terms of revenue declines and service cuts,” said Chris Hoene, the league’s director of research.
The Obama administration’s $787 billion stimulus package is expected to help offset some of the cities’ misery, but the money won’t have much impact until 2010, Hoene said.
To combat declining revenues, 62% of cities are delaying or canceling infrastructure projects, the study found. That’s a 20 percentage point increase from the league’s February status report. Some two-thirds of cities are laying off workers or instituting hiring freezes, roughly the same figure as reported earlier this year.
Meanwhile, officials are also raising taxes and fees, as well as tapping city coffers. Some 45% of cities have increased fees for services, while 25% have upped property taxes. More than one in four have added fees.
Also, cities are expected to draw from their ending balances — which are similar to states’ reserve funds — for the first time since the recession of the early 1990s. Ending balances are expected to decline to 20.8% of budgets, a drop of 3.5 percentage points.
Cities are taking these and other actions to close a projected 2.1% budget gap for 2009, the report found.
In Northglenn, Colo., park lawns are being mowed less frequently and some streets are not being repaired — the results of a $900,000 paring of the Denver suburb’s $18 million 2009 budget. But these moves weren’t enough. Two weeks ago, the city laid off 11 workers.
The coming year will bring more cutbacks, such as the likely elimination of the July 4th fireworks display, said Mayor Kathleen Novak. More details will be unveiled when the budget is presented in two weeks.
“We’re really trying to keep our core services intact, but the extra things we’d like to do are being cut back,” said Novak, who is the league’s president.
Property tax pain
While income and sales tax revenues are expected to decline in 2009, property taxes are still projected to grow, albeit at a slower pace. That’s because there is often a few years’ lag in adjusting property tax assessments.
Many cities are still collecting taxes based on the value of homes from 2006 and 2007, the height of the market, Hoene said. In coming years, however, the rolls will likely be adjusted to reflect the steep plunge in home prices.
“It takes awhile for cities’ revenues to catch up to what’s happening in the market,” he said.
Sales tax revenues are expected to decline 3.8% in 2009 as consumers rein in spending, while income tax receipts are projected to fall 1.3% as unemployment takes its toll, the survey found.
Cities got more bad news Tuesday when a federal report showed that metropolitan area unemployment worsened in nearly 200 places in July.
Detroit, which has the highest unemployment rate among large metro areas, saw its level rise to 17.7% in July, up from 17.1% in June, according to the Bureau of Labor Statistics. Meanwhile, El Centro, Calif., once again had the nation’s highest metro unemployment rate, coming in at 30.2%, up from 29.4% a month earlier.
Property tax revenues should rise by 1.6% this year, but then decline for the next three years.
Cities are also bracing for reduced aid from state governments, which are facing $26 billion in shortfalls for the current fiscal year. States have been slashing spending for local aid, social services and education as they look to balance their budgets. Neither states nor cities are allowed to run deficits, in most cases.
Stimulus kicks in
Cities are expected to receive billions of dollars in stimulus funds in the next 18 months.
Stimulus dollars will help Riverside, Calif., replace four police motorcycles and 14 patrol cars, as well as maintain the positions of two department staffers. These funds are part of $12 million in stimulus grants the city is expecting to receive in coming months. The money will also go towards efforts including homelessness prevention and energy-saving initiatives.
But little of that will help the city balance its budget, said Riverside Mayor Ron Loveridge. City leaders had to cut nearly $25 million out of the 2009-2010 budget, which totals $190 million. They didn’t even consider stimulus funds when preparing the spending plan.
“The stimulus will help, but boy it won’t be any silver bullet,” said Loveridge.
Elsewhere, stimulus funds may do more to make up budget reductions. Some cities will receive money for infrastructure projects in 2010, which will help offset the cutbacks in capital initiatives, Hoene said.
“It will hit the local government level at a time when they are most in need,” he said.
First Published: September 1, 2009: 3:48 AM ET