The Reputation Paints the Picture

The reputations of the public element of many enterprises and entities are often tied to the public arm. The World Trade Center before 9/11 was thought by many to be a plain vanilla building, but the world-class Windows on the World was a draw to lessees and tourists alike. My hometown has many things it is known for, but when one thinks of New Orleans, food is the first thought. Orlando is known for Disney, Breckenridge for skiing, and though we might think of the desert when Palm Springs is the subject, the rich is more often the impression.

With a metro population of only 42,000 full-time and 9,000 part-time residents, the reputation of a business or development is paramount in our area. Such a small population can be fickle and fast to abandon any enterprise that doesn’t deliver. A great example is the Powerhouse Bar and Grill. Mirroring the Landing on the other side of the Long Bridge, there is no reason it couldn't have been a total success. However, it was a money-loser for years. (Profit and Loss Statement available) Now, it has been reincarnated as the Craggy Range. On the other side the original Swan's Landing has gone out of business twice in three years. It has the best location in town. We have many success stories, and many others that could not quite deliver. Even though tourism brings in another 1,800 jobs seasonally and the accompanying tourist dollars, the local populace is the primary force that keeps a business afloat during the off-season in our locale. However, the job growth in the last two years has to be linked with the fantastic press that the area has received recently and the influx of out-of-state buyers and builders of homes in our area. Even though many of these so-called "new residents" are part-time at best, they are driving the local economy. This must have been how it was in many a ski, lake, or beach resort towns across the globe. And how many of them have all three? Two come to mind immediately: Lake Geneva, Lake Tahoe. Are those world-class destinations? Our area is in its infancy. We will grow more and soon.

Let us use a bench mark as the guide for how the true economy is doing. The area only has less than one hundred restaurants, and that includes gas stations, fast-food, and areas as far out as Schweitzer, Bonner’s Ferry, and Hope. With a metro population a little less than half that of metro Coeur d’Alene, that number is only 30% of their total of 300. However, the number of real estate professionals in our area is truly staggering. Of course this was incongruous with our area, considering the lack of inventory in the area housing market in past years. Now, we have a three year supply of vacant lots and land, and a two year supply of houses by some estimates. Dover Bay is one of the few new developments that warrant the label of a larger developmental idea. The comparison is striking on the other hand in that our region is under-represented in so many ways. In one way, by offering true growth opportunities for businesses to expand into, the Lake Pend Oreille region with developments such as Schweitzer Mountain Resort and Dover Bay is unique. But is that unique quality translating to other parts of the local economy? Well, if one examines the diversity of the local economy, then one can see that we have a good mix in the works. (See details)

So what will make a successful development or business in Bonner County in the 22nd century? In retail the big box national chains have now apparently researched the area and foresee strong future growth (Home Depot). Their elaborate processes show that the area can viably warrant expansion into the Sandpoint arena. Still, even with companies such as Home Depot and Fred Myers building stores here, they have deep pockets and can feasibly be establishing their presence here now early on because of future forecasted growth. However, even with such companies starting ventures in Bonner County, other national chains have not fared so well here, i.e. K-Mart. The argument can be made that K-Mart suffered a similar demise in countless other communities, and that the reason behind those failures can only be tied to the parent company’s policies and management. Only the more successful stores stayed open and only the least profitable were closed. Ours closed. Bonner County has not always done well with national chains. Also, not every development has fared totally well. From a strict perspective, Schweitzer has done well viewing it only as a real estate investment. Any other look at Schweitzer might not seem as favorable, even counting the record year they had in the 2006-2007 season. So while as an investment it has paid some well and close to bankrupted others, it is now the premier resort in the Inland Northwest and a destination for every type of ski fan. The resort has expanded services, runs, and amenities and from that perspective is a definite success. Certainly it will not shrink to some former, lesser level. A quick walk around Sandpoint making serious offers to either take over leases or buy out current owners would certainly reveal that more businesses are up for grabs than the ones listed. When the bypass becomes a reality, many of the businesses on First will surely suffer, either due to the loss of traffic or the loss of view, or both. Many venerable businesses have recently gone to new ownership, though these are often more real estate deals than money-losers changing hands.  

Still, developments thrive on new business, and growth here is all but assured. The old Cox property adjacent to downtown is well underway as Seasons at Sandpoint with an eventual 105 units to be constructed, pumping 60 million $ into the local economy. Over sixty units have already been sold, all in the $500,000 + range and many over $1,000,000. Dover Bay proffers six hundred additional units to our developing economy, and the Rock Creek Mine is approved, much to the chagrin of local environmentalists and other parties. We had local air service, and the idea will probably return. The byway will, for a time, bring many, many high-paying construction jobs to Bonner, as will the proposed expansion of key roads in the area. Home Depot added 160 full-time positions to the employment scene. Coldwater Creek just passed the billion $ annual sales mark, and expansion is guaranteed. Small manufacturing is entering the area from production of granite countertops to small aircraft. Hundreds of area artists are selling their works world-wide. Affluent home owners are becoming part of the formula with some properties out at the Hope Peninsula selling for upwards of one to two million, land only. This absolutely brings construction jobs. Unemployment is the lowest it has been in years, and in real terms, may be the lowest in county history. Smart Money magazine and the Wall Street Journal have named Sandpoint one of the great real estate buys in the country and Sunset magazine named Sandpoint the Best Small Town in the West. This brings retirees and second home owners with disposable income, and filling in the winter are skiers that bring in big bucks, with Schweitzer winning accolade after award, year after year, even with the problems they are facing. Summer is packed with boaters and events and perhaps twice the number of winter tourists. Add to this the recent announcement of David Pence donating $20 million, with matching state funds, to build a University of Idaho campus in Sandpoint, and we have all the ingredients for success in the mix.

One has to ask the question, why go into business now, and why Sandpoint, Idaho? The answer is simple: we are bullish on the local and national economy and certain that even with little or no growth, North Idaho can absolutely support a well-implemented new development. All of the forecasts and current data support this premise:

        Since 1990, Sandpoint’s population has grown 42.1% compared to the national average of 11.6%

        While unemployment had been high in Idaho up to 2005, it is now lower than the national average at 3.3% compared to 4.8%. In Bonner County the rate of 3.9% still beats the national figure. Though this can be viewed as a negative since qualified employees are more scarce, plans ameliorate the issue in that the owners are also the employees. On the positive side, more work means more spendable income. Also, we have a younger population than most areas: a definite plus

        Both recent and future job growth are virtually double the national trends

        Tourism is growing at an impressive rate. This is an area that we hope to capitalize on, creating relationships with the local hotels, restaurants, and other tourist oriented businesses and offering specials to their customers as a perk for frequenting their establishments

        While our income levels lag behind the rest of the nation (80% of the national average), our cost of living has traditionally been considerably less, making the area attractive for more growth. Even with housing values growing in certain areas, in the outlying regions, Idaho is still more affordable than most.

        In the area of homeownership, the cost of homes in our area is still lower than the national average, both attracting year-round residents and vacation homeowners. In fact we have a higher rate of home ownership than the rest of the country (59.3 vs. 59.1%) and our homes are appreciating at a better rate.

        Levels of health, crime, and education are favorable in the area, and because of the cold climate, many here find an absolute need to have extraneous entertainment to pass the long winter months

        Finally, all sister communities are taking steps to insure the future by making street improvements, adding parks, and sponsoring events

        In the future, the bypass and the eventual widening of Highway 95 to an interstate-style roadway will help in these processes

        Though sales during the most recent holiday season were not as robust as hoped for, as clearly indicated in the December Quarterly Financial Report issued by the Census Bureau, clear and substantial gains in manufacturing and retail sales were apparent, with lower unemployment rates countrywide

        The stock markets are making solid gains and the Board of Governors of the Federal Reserve System, while not expected to raise rates further, are expected to acknowledge these gains and predict a healthy economic future on the horizon

        Most importantly, unemployment is at a decades low rate, both currently and last winter season

From 1991 to 2001, Bonner County’s labor force grew 41 percent, while Idaho’s labor force grew 34 percent, and the U.S. labor force grew 12 percent. In all areas, labor force increased faster than population, because women increased their labor force participation rates. Welfare reform and a stronger job market that encouraged people to actively seek jobs also increased labor force participation.  

One reason why Bonner County’s labor force grew faster than the nation’s is that Bonner County had proportionately more youth entering the labor force. Bonner County is fortunate, because its population between 15 and 34 years of age grew 26 percent in the 1990s, while the U.S. population between 15 and 34 years of age declined 1 percent. That U.S. decline in the under-35 population is one reason why the U.S. labor market became so tight before the current recession. Bonner County’s employers benefit from the surge in the young working-age population. This is especially good for future development.

TOURISM

Tourism grew rapidly in the late 1980s and early 1990s. Summer tourism grew, as North Idaho became better known as a tourist destination, and as more Canadians shopped and played in Bonner County. Sandpoint's reputation as a haven for the arts also contributed to the growth of tourism. The 1990 expansion of Schweitzer Mountain Resort boosted winter tourism. The biggest boost to area tourism were the articles published in national newspapers and magazines over the last several years. Our area has been featured in USA Today and Smart Money Magazine. Sunset magazine called us the “West’s best small town.” National Geographic Adventure magazine voted Sandpoint one of the 10 best adventure towns in the nation. Outside magazine featured Schweitzer & named Sandpoint the “cool Northwest’s hot property.” Schweitzer was in Away.com and has been in many ski mags such as Ski Snowboard. Forbes.com loved our telecommuting, MSNBC said it again, & Cabin Life, Cabin Living called Sandpoint “the quintessential Western outdoor lover’s town.” These are just a few of the dozens of features on the area since 1990.

Tourism employment normally reaches its high point of the year in August, falls to its lowest level before Thanksgiving, rises to its winter peak between Christmas and New Year's, and then falls to its lowest point in April. For example, tourism employment went from 1,720 in January 2001 to 1,430 in April, then rose to 1,802 in August, then fell back to 1,430 in November. These figures have increased by over thirty percent since then.

With Bonner County Population growth impressively outpacing the national average, the prospect of growth is all but assured. In a recent article in Smart Money, according to the magazine, buying property in Sandpoint, Idaho is one of the ten best ways to create wealth in the nation. While many areas area seeing their housing values decline, in a recent article in CNN/Money, Coeur d'Alene was forecast to appreciate 12.8% for 2006, and Sandpoint has traditionally appreciated much higher than our neighbor to the south. Additionally, manufacturing and tourism are creating a population that has the expendable income consumer that is the typical restaurant diner, shopper, and dynamic that feeds an economy like ours.

As is indicated by current economic data, the national, as well as the local economies have been in recovery for two-three years. However, one of the great areas of growth is in the direction of at home services and trends. While travel has slowed, local travel (i.e., under 50 miles from home, in-state, and cross-state) has grown. Sales of time shares have slowed, but home improvement has exploded. This is clearly evidenced by the growth of Lowes and Home Depot, as well as the over forty (40) new television programs geared entirely to home building and remodeling and a proliferation of cooking and home oriented shows from Martha Stewart to the Food Network. Dining out continues to be a growth area, and Americans are eating out more and more, with substantial growth created from the take-out and planned meal arenas.

With more and more specialized events such as Art Shows, the Wooden Boat Show, Arts and Crafts fairs, the Festival at Sandpoint, and many more, the glowing outlook for Tourism is growing every day.

Top Five

Idaho’s pace of job creation ranked among the top five states during the latest 12-month period. Neighboring states of Arizona, Nevada, and Utah also ranked among the top five.

Solid Idaho employment gains are a welcome departure from the weakness during 2002 and 2003.  Idaho was one of only a handful of states to avoid recession in recent years (as measured by employment levels), although Boise did register an employment decline in 2002.

The Idaho economic rebound now underway is great news for the state’s residents and employers.  More importantly, we expect it to continue.

The state saw the addition of roughly 17,000 net new jobs over the most recent 12-month period, a growth rate of 2.9%.  One would have to reach back five years to find a job growth rate as impressive.

As the Idaho economy added jobs at a vigorous pace, the level of unemployment declined.  The state’s jobless rate averaged 4.4% during the past six months, down sharply from the 5.4% average of calendar years 2002 and 2003.  Current unemployment rates are as low as any ever recorded in the state.

Real Estate Values

Idaho real estate values have experienced solid appreciation during the past year, a trend that continued in 2006 and is expected to grow in 2007.  The reasons include more impressive economic growth and the fact that Idaho real estate is again “bargain priced” versus its neighbors. Even with the incredible increases in home prices in some areas of the county, there are still many, many homes affordable to virtually every demographic group.

Utah led the list in housing appreciation with a fourth quarter increase of 3.67 percent followed by Wyoming with 3.28 percent and New Mexico and Idaho, both at 2.14. These same states had one-year appreciation of 17.55, 14.29, 13.99, and 13.08 percent respectively. Negative appreciation for the quarter occurred in five states, Hawaii, North Dakota, California, Nevada, and Nebraska. In every case the decline was less than 1 percent. Only one state, Michigan, showed negative appreciation for the entire year.

The latest comparative data from the Office of Federal Housing Enterprise Oversight (OFHEO) calculates values of existing homes where more than one mortgage transaction has occurred. The data base exceeds 20 million homes and goes back to the 1970s.

Data for the period ending December 31, 2004 notes that average Idaho real estate rose 10.30% in 2004, ranking 22^nd of the 50 states. Data for Boise-Nampa saw a 7.58% rise. The average U.S. gain during 2004 was 11.17%, led by Nevada, Hawaii, and California.

Idaho Outlook

The state’s economy is growing at a desirable pace, with solid growth expected to continue.  Idaho economic development is a three-component game, with each critical to long-term success.  The state’s return to solid growth is underway and is likely to continue.

Zions Bank Small Business Index for Idaho February 2007 Release March 14, 2007 Written by Jeff Thredgold, President, Thredgold Economic Associates Economic Consultant to Zions Bank STRONG REGIONAL ECONOMIC GROWTH BENEFITS IDAHO'S AND NEIGHBORS' SMALL BUSINESSES HIGHLIGHTS The Zions Bank Small Business Index for Idaho registered 94.8 in February 2007, down from the revised 96.8 in January 2007   Idaho's unemployment rate was estimated at a record low 2.8% in the most recent month, down from the prior month's 3.0%rate. Idaho employment rose by an estimated 24,500 jobs during the past 12 months |   Strong regional economic growth benefits Idaho's and neighboring states' small business sectors The U.S. economy added 97,000 net new jobs in February, matching expectations. December and January job gains were revised higher by 55,000 jobs. The U.S. unemployment rate declined to 4.5% REGIONAL ECONOMIC STRENGTH As noted regularly in prior releases, Idaho has been among the nation's leaders in employment growth during the past 30 months. Strong Idaho economic growth is emblematic of the Rocky Mountain Region, an area that leads U.S. job creation by a wide margin. The states of Arizona, Utah, Idaho, Nevada, and Wyoming rank as the nation's top five job creation states as measured by percentage gains (excluding hurricane-impacted Louisiana). The 4.1% average employment gain within these five states (past 12 months) sharply outpaces the 2.7% annual growth pace of the next five strongest job growth states. Neighboring New Mexico, Montana, and Colorado currently rank 13th, 15th, and 18th respectively as measured by employment gains over the most recent 12-month period. Strong state and regional employment creation leads incomes and consumer spending higher, benefiting most small businesses. Regional economic performance is a component of the Idaho Small Business Index. IN IDAHO The Idaho unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Idaho—was estimated at a record low of 2.8% in the most recent month, down from the prior month's revised 3.0% rate. The current 2.8% rate is also below the 3.6% rate of one year ago. A lower Idaho unemployment rate is a negative for the Index as it implies lesser labor availability for Idaho's small businesses. The Idaho jobless rate averaged an estimated 3.4% in 2006, 3.9% in 2005, 4.7% in 2004, 5.3% in 2003, 5.4% in 2002, and 4.9% in 2001. By comparison, the Idaho jobless rate averaged 5.6% during the 1990-99 period. The latest 12-month rise in Idaho employment estimated at 24,500 jobs (up 4.0%, ranking #4 in the nation) compares to a gain of 26,400 jobs in the prior year-over-year period. Idaho added 28,300 jobs in 2006, 23,400 net new jobs in 2005, 15,900 jobs in 2004 and recorded a net gain of only 12,400 jobs during the weak period of 2001 to 2003. These totals also compare to gains averaging 17,600 net new jobs annually during the 1991-2000 period. Stronger job growth, leading to faster income creation and rising retail spending, has a positive impact upon Idaho's small businesses…and therefore, the Index. The Zions Bank Small Business Index for Idaho came in at 94.8 during February 2007, down from a revised 96.8 during January 2007. The Index measures business conditions from the viewpoint of the Idaho small business owner or manager. A lower Index number, when it occurs, is associated with less favorable business "conditions" for Idaho's small businesses. The Index uses 100.0 for calendar year 1997 as its base year. The Index also includes revisions to various historical and new forecast components as they become available. Note: Because of national bankruptcy reform effective in October 2005, bankruptcies surged in 2005 and plunged in 2006. In order to minimize the impact of bankruptcy volatility on the Index, we have averaged 2004 to 2006 bankruptcy data and revised those years. NATIONAL EMPLOYMENT The U.S. Department of Labor reported a net gain of 97,000 jobs in February 2007, in line with expectations. In addition, combined December and January employment gains were revised higher by 55,000 jobs. The U.S. economy added an average of 189,000 net new jobs monthly in 2006. The 2.26 million rise in net new jobs in 2006 roughly matched gains averaging 2.30 million jobs annually in 2004 and 2005. The U.S. unemployment rate was 4.5% in February, down from January's 4.6% rate. October's 4.4% jobless rate was the lowest in more than five years. The average hourly wage rose 0.4% (six cents) to $17.16 hourly, a rise of 4.1% over the past 12 months…versus the 2.1% rise in consumer prices over the same 12-month period. Goods-producing employment was under severe pressure in February, with a net loss of 71,000 jobs. Construction employment fell by 62,000 jobs in February (the largest monthly decline in nearly 16 years), while manufacturing employment fell by 14,000 positions. Service-providing employment led the way in February with a rise of 168,000 net new jobs. Government employment grew by 39,000 net new jobs, while the education & health care sector added 31,000 positions. The leisure sector also added 31,000 net new jobs, while professional & business services employment rose by 29,000 jobs. Retail trade added 7,000 net new jobs. The March 2007 Zions Bank Small Business Index for Idaho will be released on April 11, 2007. Jeff Thredgold Thredgold Economic Associates Economic Consultant to Zions Bank (801) 614-0403 ©Copyright 2007 Thredgold Economic Associates