October 26th, 2010
By Egan Ludwig
As 2010 rolls along, the stock market continues its rollercoaster ride. This year has seen a number of significant swings in the market, the most recent being to the upside. Stocks have been driven higher by a belief that the Federal Reserve will be able to spark inflation. There has also been continued growth overseas, driven by the emerging economies. In fact, many foreign stock exchanges are at or near all-time highs. After a crushing 2008, the emerging markets have returned to much higher growth levels compared to their developed counterparts.
Most developed countries are battling slower economic growth, high debt levels and rising raw materials costs. The result of the last 30 years of off-shoring manufacturing is catching up to most developed economies. Of course, the emerging markets have been the main beneficiaries of this trend. Most identify China as the main manufacturing giant. While China is the most populous country in the world, nearly all emerging countries have benefited significantly from their newer manufacturing sectors. Developed economies have dramatically benefited from cheap labor overseas, as products have been extremely inexpensive due to low labor costs. This is slowly changing, however, as wage pressure increases in China and other emerging countries.
We have never experienced a global economy like we have today. The United States, Western Europe and Japan are passing the economic baton to China, India and much of South America. There are roughly 6.8 billion people on the planet. Only one billion live in what we consider “developed economies.” That leaves 5.8 billion people who are benefiting from newer manufacturing jobs in the emerging economies. The logical conclusion from the increase of manufacturing jobs overseas is the continued increase in costs for raw materials, as demand for those materials increases. Since 2000, the Dow Jones/UBS commodity index has risen 100 percent. Much of this increase is due to precious metals and oil. This decade, we will most likely see agriculture goods increase significantly. There is simply not a large enough supply of basic foods such as soybeans, corn and wheat to feed the entire planet. Thus, it is exceedingly likely to see increases in the prices of these goods.
How the manufacturing trend affects the stock market is nearly impossible to quantify. What we do know is many U.S. companies have seen dramatic revenue growth in the emerging markets, thus greatly improving profits. Companies such as Caterpillar receive 67 percent of their revenue from overseas, while Google receives more than 53 percent. Even though our economy remains somewhat stagnant, a good deal of U.S. companies are growing dramatically overseas. This has proven to be a huge tailwind for the stock market. Most CEOs continue to comment on foreign growth being the primary driver for earnings growth. Going forward we are likely to see a continued focus on emerging markets as the primary driver of profit growth for U.S. companies.
Though there has been tremendous growth as of late, not all is rosy in the emerging markets. The slowdown in the developed world has had a dramatic effect on the emerging markets and, as of yet, the emerging markets have not been able to completely pick up the economic slack throughout the world. Inflation is also a huge concern as wage pressures are the primary driver of demand-driven inflation. Wages are rising extremely fast in parts of the emerging world, and this trend does not show any signs of abating. Another real threat to growth in the emerging markets is political instability. Historically, developed countries have thrived partly due to stable political backgrounds, while the emerging world saw many political shocks that unnerved investors. While it is impossible to say for certain that emerging countries are more or less politically stable, the gap between the political risks of developed and emerging countries is closing.
These are certainly interesting times we live in. The pace of globalization continues to accelerate, and the strength of the emerging economies has never been what they are today. Rather than resist the tide, we should look for opportunities to prosper in the shifting landscape. Our economic future depends on how well we are able to embrace the changing environment in which we find ourselves.
Egan Ludwig, CFA, is vice president of Waycross Investment Management in Bellingham. Reach him at Egan@waycross.com or 360.671.0148.
Tags: Economy, Stock market
Posted in Economy, Egan Ludwig | No Comments »
October 12th, 2010
By Kyle Lodder
Washington State voters will see something new on their ballot this election cycle. Initiative Measure No. 1098 will ask voters whether they want a state income tax.
As outlined in the initiative, I-1098 proposes to reduce state property taxes by 20 percent and eliminate the business and occupation (B&O) tax for all small businesses. It would also seek monies to improve health care and education, funded by an excise tax on individuals whose income exceeds $200,000 ($400,000 for couples filing jointly).
Let’s examine the three major components of the initiative.
Bye-Bye B&O?
First, let’s consider the initiative’s goal of eliminating the B&O tax for small businesses. One thing wouldn’t change under I-1098: Companies would still need to file excise tax returns, using the same calculations they’ve always used to determine the B&O tax they owe. What I-1098 would change is to significantly increase the B&O tax credit.
Currently, businesses’ B&O tax liability is eliminated by the annual small-business B&O tax credit if the tax calculated before the credit is less than $420. The initiative would increase that credit to $4,800. According to I-1098’s authors, the increased tax credit would exempt approximately the smallest 80 percent of businesses in the state from the B&O tax and reduce the tax for other businesses as well.
Let’s look at the hypothetical example of a jewelry manufacturer that sells its goods to retailers in Washington state. Let’s assume the company had sales of $950,000 in the taxable year in which this new law took effect and that the company didn’t qualify for any deductions to offset the gross sales amount. Since the company is a manufacturer, it pays tax at the 0.484 percent tax rate. The total B&O tax before any credits is $4,598 ($950,000 multiplied by 0.484 percent). Thus, the small-business B&O tax credit would eliminate the company’s B&O tax liability altogether.
Examining the income tax
Second, let’s consider the proposal of an income tax on the state’s high earners to fund the benefits mentioned in the initiative. This would work similarly to the federal income tax you report on your Form 1040 each year. For married persons, no tax would be due on income of less than $400,000. A 5 percent tax would be payable on taxable income in excess of $400,000 but not over $1 million. And a tax of $30,000 plus 9 percent of the excess over $1 million would be due for taxable incomes of more than $1 million.
The income levels are halved for single persons: No tax would be due on income of less than $200,000. A 5 percent tax would be payable on taxable income in excess of $200,000 but not over $500,000. And a tax of $15,000 plus 9 percent of the excess over $500,000 would be due for taxable incomes of more than $500,000.
Only those who owe income tax would be required to file Washington state individual tax returns. Thus, married persons who had $400,000 or less of gross income and single persons who had $200,000 or less of gross income, as reported on their federal income tax return, wouldn’t be required to file a Washington state income tax return.
Let’s expand on the example of the jewelry manufacturer and assume it’s an S corporation with a sole owner, an unmarried man. You’ll recall that the company had gross sales of $950,000. Let’s also assume the owner had several business deductions that offset that income and resulted in net taxable income of $300,000, which is reportable on the owner’s individual income tax return. And finally, let’s assume the owner also had some other investments, which netted an income of $150,000 during the year. His taxable income would thus be $450,000, on which he would pay $12,500 in Washington state individual income tax.
Pared down property tax
Third, let’s look at I-1098’s proposed 20 percent reduction in state property taxes. Again, the example of the jewelry manufacturing company’s owner helps illustrate the impact. Let’s assume he owns two pieces of real estate: a Bellingham home with an assessed value of $550,000 and a Bellingham rental home that’s been assessed at $250,000. Currently, these pieces of property are subject to a levy rate of approximately $8.40 per thousand dollars of value. The portion of the tax which goes toward the state’s bank account is about $2.20 per thousand dollars of value. The rest of the levy supports city, county and local government functions. Under the current law, he pays $6,720 ($2.20 multiplied by 800) of property taxes. $1,760 of this amount is forwarded to Olympia. As a result of the possible law change proposed by the initiative, a 20% reduction in the state portion of the property tax would result in a savings of about $350 each year.
Putting it all together
Let’s summarize the effect on the jewelry manufacturing company’s owner as a result of the changes proposed by I-1098: a B&O tax reduction of $4,598; a new income tax of $12,500; and a property tax reduction of $350. The net result? An additional tax burden of $7,552.
Strong feelings reside on both sides of the issue. The Association of Washington Businesses (AWB) opposes I-1098. It released results of an online survey in August of 900 of its members, most of whom said I-1098 would hurt job growth, despite tax breaks for most small businesses. Business leaders also fear losing jobs to other states. The same survey found that one-third of businesses with fewer than 500 workers would either decrease hiring or reduce salaries and benefits.
Supporters of the initiative have similar strong feelings. I-1098 spokesman Sandeep Kaushik said the effects of the measure are quite different from the AWB’s characterization and that most businesses would get a credit exempting them from paying B&O tax. “That may be a testament to the AWB’s talent for misinforming their members,” he told the Olympian in August. “Let’s stick to the facts: I-1098 cuts taxes for 93 percent of businesses in Washington state; 81 percent of businesses would be completely exempt from the [B&O] tax in Washington… So there is no credible argument that 1098 would be bad for small businesses.”
State workers’ unions seem to be pushing for its passage, claiming I-1098 would raise $1 billion for public schools, colleges and health care programs. Record funds are expected to be spent on this vote.
Come the first week of November, we will see whether a majority of Washingtonians approve or disapprove of I-1098. However, one may suspect that the political landscape of these midterm elections coupled with a bleak economic outlook, may be reason for voters to reject a new form of taxation.
Regardless of the outcome, it’s clear we’re in a period of rapidly changing tax law. Astute taxpayers will seek the advice of their tax and business advisers throughout the year to implement a strategy that keeps pace with these changes.
Kyle Lodder is a Senior with Moss Adams LLP in Bellingham.
Tags: Washington state inititiatives, Washington State taxes
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August 27th, 2010
 Renata Kowalczyk Editor’s note: The following post comes from Jennifer Shelton, director of the Western Washington University’s Small Business Development Center (SBCD). The SBDC and Whatcom Community College are hosting the ThinkBiz 2010 conference Sept. 9 & 10.
I first met Renata Kowalczyk at a Whatcom Community College instructor event for ThinkBiz 2010. She was lively and intelligent. We connected because she was born in Poland as was my mother.
A few months later, we reconnected at the Temple Bar to discuss her co-working space project. I was so inspired by her story that I wanted to share it.
Living her American dream
Renata came to New York City from Europe to pursue the American dream. She obtained her bachelor’s degree in economics from Baruch College – City University of New York and her master’s degree from Columbia University.
She spent 11 years working for major corporations such as JP Morgan Chase and Merrill Lynch doing process design and re-design as a Six Sigma Black Belt, product and business development, and eCommerce project management and consulting. She was living the dream in a penthouse in Manhattan, engaged in business and volunteer activities, yet she felt empty.
Renata says her “Eat, Pray, Love” moment came at 6:32 a.m. in Penn Station on a cold New York November.
She had missed her train to an important client meeting by one minute and looked anxiously at the big Penn Station train time schedule as it changed rapidly to show status of departing trains.
A vision for her life hit her strongly like a metaphor. Day after day was disappearing at a rapid pace, just like the Penn Station timetable showing the departing trains. “Is this really the life that I want for myself?” she asked.
Then and there she started to write a list of what she really wanted in life:
“I want to live in a small college town, surrounded by mountains and the ocean. I want to live in a community that cares about sustainability and works together to build a strong local economy. I want to live where people know and care about each other.”
She realized her current life did not contain anything on the list. She didn’t know if the place she imagined even existed. Within a week, two random people told her it did, and it was called Bellingham, Washington.
She decided that her path to get there would be through academia, so she left her career and started a doctoral program in human and organizational learning at George Washington University in Washington, D.C. It was during the 2008 elections and Washington, D.C. was alive with possibility of change. The energy was riveting. Once again she was moved to reconsider her path.
She asked herself, “Am I willing to spend the next five to seven years reading and writing about life, or am I ready to step into life now and make an immediate contribution?” After her second semester she left D.C. and came to Bellingham.
Her purpose was clear. She was to take her experience and knowledge from living in a communist country and then living the American dream and put it into making a difference within the Bellingham community and the surrounding areas.
Renata, who expects to return to her doctorate in the future, now teaches classes at Whatcom Community College on how to be a consultant, building community and connection, and customized project management for organizations.
Her recent client, SPIE has this to say about their experience with her, “Thank you again for the great class – I only wish the whole building could have sat in on it!”
She’s also paying it forward, and was recently appointed to the Board of Trustees for the Kulshan Community Land Trust (KCLT). This 11-year-old organization is dedicated to creating healthy communities through permanently affordable homeownership with 94 properties currently in the trust.
Creating co-work spaces
The other gift Renata brings to our community is the creation of co-working spaces. The co-working spaces came out of her need to find people to collaborate with while she worked out of her home and coffee shops as a solo entrepreneur. “In my corporate life, I took for granted the ability to share ideas with others in the office or ask for assistance.” She started searching for solutions and found out there is an entire industry dedicated to co-working spaces.
Her vision for Bellingham is to take co-working space to the next level. At the highest level, every neighborhood will have a co-working space within a 30-minute walk. With a potential for walkable access to a collaborative office with resources and meeting rooms, people won’t have to drive as much. They would exchange the time spent on the road for an experience of connection, community building and quality of life.
The Bellingham Co-working Community was launched on Meetup and Facebook in late June as a seed for the first co-working space. Renata anticipates the first space to be up and running by the end of this year. Her commitment is that by 2020, all people are connected creating thriving communities.
The work she is doing fits exactly with the list she wrote that fateful day in Penn Station.
Within one week of meeting Renata I have already been motivated to revisit my purpose and set intentions in my life’s work for our community.
I encourage you to meet her at the upcoming ThinkBiz 2010 event where she will be leading a workshop on consulting. It is ideal content for any business service professional, account manager or solo entrepreneur. www.thinkbiznw.com
Tags: Bellingham, business consulting, ThinkBiz 2010
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August 23rd, 2010
Likely if you’re plugged into the business community, you’re aware of the Leadership programs in Skagit and Whatcom counties. Participants in these nine-month programs culminate their learning experiences with a community service project that aids a local nonprofit.
In the few years since the programs began, a number of groups have benefitted from the work of the leadership teams. Recently, one Leadership Skagit (LS) team chose to support the Skagit Domestic Violence and Sexual Assault Services with a project to spruce up the organization’s “House of Hope” safe house. The Leadership Skagit team hosted two work parties in the spring that resulted in the renovation of seven bedrooms and common living areas in the house as well as an extensive remodel of a bathroom.
For the LS team, the project was not just about putting a fresh coat of paint on the shelter, but engaging the community and Skagit DV&SA Services in a new dialogue about how the agency supports the community and how the community can do likewise.
“Our ultimate goal is to foster long-term relationships between the businesses, business leaders of this community and the agency itself,” said Pamela Santangelo, one of the LS team members. Santangelo, of Burlington’s Computer Source, was joined in the group by Lynn Christofersen of Skagit County Community Action; Aldi Kllogjeri, Skagit State Bank; Isaac Nelson, Air Liquide; and Colleen Powell Port of Skagit.
The group raised more than $10,000 in monetary and in-kind donations for the project from businesses, community service groups and individuals. Among the many donors were Skagit State Bank, Air Liquide, Pat Rimmer Tire Center and a number of Skagit County Rotary groups.
In celebration of all the work, another member of the business community, Johnny Carino’s Italian in Burlington is hosting a dinner for the volunteers and supporters at the end of the month. It’s also an opportunity for those interested in becoming an on-going volunteer with the agency to learn more about the organization and how you can help. The dinner is on Thursday, Aug. 26, from 5-7 p.m. For further details or to RSVP for the event, contact Pamela Santangelo at Pamela@thefreshperspective.com.
Tags: Skagit County
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August 5th, 2010
Editor’s note: This is a first in a regular series on the economy and investing from Egan Ludwig, vice president of Waycross Investment Management in Bellingham.
In late 2008/early 2009, Treasury interest rates reached lows not seen since the 1940s. Once confidence began to inch its way back into investor’s minds, rates began to increase into the middle of 2009. Since then, rates have slowly moved back down to extremely low levels. What does this mean for investment portfolios going forward? To be more precise, what does this mean for bond returns? For this analysis, we’ll use the SBBI Intermediate Term Government Bond Index.
Interest rates fell from 13.96 percent at the end of 1981 to 2.42 percent at the end of 2009. Low risk, intermediate term government bonds returned a remarkable 8.5 percent per year during this period. Now interest rates have little downside left, but interest rates could stay very low for a long time. This is likely to result in bond returns that will be substantially lower than what we have experienced over the past 20 to 30 years. Investors need to adjust their expectations for future returns based on this new reality.
Learning from the past
Looking in the past at periods where interest rates were initially similar to where they are today may provide some guidance into future bond returns. For this analysis, we’ll look back at two similar interest rate environments, with varying economic backdrops.
The first period starts at the end of 1934 when yields on intermediate term government bonds stood at 2.49 percent. During the next 30 years interest rates fluctuated between 0.5 percent and 4 percent. The bonds returned 2.6 percent per year during this period. The economic backdrop began in the Great Depression and remained difficult until the latter part of the 1940s. Significant economic growth started in the ‘50s.
The second period started at the end of 1952 when yields on intermediate term government bonds stood at 2.35 percent. The next 30 years saw interest rates fluctuate between 1.72 percent and 13.96 percent. The bond market returned 5.2 percent per year during this period. This period began with robust economic growth that tailed off as inflation began to infect the economy in the 1970s. Note that the return on these bonds during 1982 (+29.1 percent), the last year of this period, had a significant positive impact on the average of 5.2 percent/year.
Looking to the future
What will be the return from bonds over the next five to 10 years? We simply cannot know the answer. However, investors should not expect returns equivalent to what we have experienced.
Investors also need to consider credit risks associated with owning bonds. In the past, Treasury bonds have been looked at as a risk-free asset. Over the last 30 years the intermediate term maturity of this risk free asset returned slightly more than 8 percent per year. Currently, investors are lucky to receive a 3 percent yield on Treasury bonds. The likelihood of the United States defaulting on its debt is incredibly low, even in an elevated debt environment.
However, corporate and municipal bonds, as well as international government bonds contain much higher credit risk compared to Treasuries. Given the current economic conditions it would not be surprising to see higher rates of default or restructuring in the near future within some of these sectors. Surprisingly, investors are not demanding significantly higher yields on these bonds. In fact, the yield to maturity on many intermediate term high quality corporate bonds is no more than the yield to maturity on equivalent maturity Treasuries. This happens very rarely.
Treasury bonds did an incredible job of counteracting stock market declines over the last 30 years. For instance, while stocks declined nearly 38 percent in 2009, Treasury bonds returned more than 10 percent. Looking forward, stocks will continue to move in their usual volatile fashion, but bonds will likely return much less as there is simply little room for yields to move to the downside. Whether it’s low interest rates or increased credit/default risk on various types of bonds, investors should be looking for other ways to diversify their portfolio if volatility is a major concern over the short run.
Egan Ludwig, CFA, is vice president of Waycross Investment Management in Bellingham. Reach him at Egan@waycross.com or 360.671.0148.
Tags: bonds, Economy, investing
Posted in Economy, Egan Ludwig, Finance | No Comments »
July 12th, 2010
Armed with a renewed vision and fortified mission, the Northwest Economic Council (NWEC) is on the offensive when it comes to economic development.
I sat down with NWEC board President Bruce MacCormack last month to talk about the organization’s new direction.
Formerly the Bellingham/Whatcom Economic Development Council, the organization changed its name and its leadership, and has emerged from a phase of reorganization re-energized to help grow business from within the county’s borders as well as attracting companies from further afield.
“We knew we had to rediscover ourselves and what our position was in this community,” MacCormack said. To that end, the organization commissioned a county-wide survey to understand the needs of business.
“People wanted someone to step up and create an economic strategic plan for the county,” he relates, which is now under way.
As Whatcom County’s recognized ADO (associate development organization), developing a “regional economic strategy” plan is part of NWEC’s duties. The plan involves the cities, county, port and utilities as well as other stakeholders and is set to be unveiled at the first of next year, MacCormack said.
As an economic development entity, the top priorities of the council are maintaining jobs, creating new jobs, helping small business and startups prosper and survive, and helping companies get funding, MacCormack said. He sees a lot of the economic development being generated by small- and mid-sized companies, rather than the big guys.
“A huge percentage of the way the economy is going to re-grow is through small business,” he said.
In that vein, MacCormack is most excited about the NWEC’s business accelerator program, the Innovation Resource Center (IRC). The IRC just received a $99,000 grant from the U.S. Department of Agriculture to fund the endeavor, which aims to help grow and mentor startup businesses.
Businesses selected for the IRC will not only share bricks-and-mortar infrastructure, but will have access to educational, government and business resources such as training, funding and mentoring.
“The attraction will be to come together and grow themselves in a safe environment,” MacCormack said. While most startups will be local businesses, they may also hail from other counties, states or Canadian businesses hoping to get a foothold in the United States, he added.
MacCormack predicts government funding for startups will become less prevalent, and hopes the private sector will step in to help drive economic development. “You’re going to see less emphasis on government funding in the future and more emphasis on private sector intervention,” he said, pointing to both Skagit County and Spokane as areas where the private sector is greatly involved economic development.
“We’ve somehow got to encourage greater participation by private business,” MacCormack said. And he doesn’t mean only on a financial level, but business leaders using their experience to coach new and growing small businesses.
Business leaders can engage with NWEC in a number of ways, including joining the membership organization, volunteering for a committee or advisory team, or simply sharing experience and opinions with the group. To learn more, visit www.nwecon.org.
NWEC searches for new leader
The Northwest Economic Council’s executive director for the last four years, Nancy Jordan, stepped down from the position in early July. NWEC Board Chairman Bruce MacCormack said a search is under way for a senior executive who will oversee the IRC, NWEC Foundation, the strategic economic plan and other organizational initiatives.
Tags: Economy, Whatcom County
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June 16th, 2010
I had the opportunity to attend the Bellingham YWCA’s 16th annual leadership breakfast earlier this month. Every year, and despite the recent economic conditions, the organization does an admirable job of filling the ballroom at the Lakeway Inn with friends of the YWCA. This year was no exception, with 325 in attendance from all sectors of the community – business, local government, academia and the community at large.
Keynote speaker for the event was political and communications strategist Cathy Allen, founder of Seattle-based The Connections Group. Her topic: “How to be a 21st Century Suffragette.”
Allen, who has worked to get women elected throughout the world, including the Middle East, knows a thing or two about mobilizing folks to get out and vote, and many of her observations regarding energizing the younger generation to be politically active can apply to business as well.
No longer is mentoring a simple informational interview and a few job leads, notes Allen, but a true partnership. Hire, respect and give young workers a genuine opportunity to make a difference in your organization, she suggests.
Also realize the younger generation doesn’t necessarily want to be tied to a long-term commitment, such as becoming a member of Rotary, but prefers finite time commitments such as working on a specific volunteer project.
I think Allen’s comments ring true. Young people are great at multi-tasking and using technology to their advantage. They may do things differently than older generations, but given the proper expectations, they can get the job done.
I’ve found a lot of personal satisfaction in the mentoring relationships I’ve had with WWU students. Their knowledge and skills benefitted the magazine, and in turn their experiences here helped in their future job searches.
Whether running a business or nonprofit, establishing a partnership with younger generations can bring a new ideas and a burst of energy into your organization.
Tags: Bellingham, nonprofits
Posted in Hilary Parker | No Comments »
May 27th, 2010
At first glance, it appears that our region’s labor market has finally turned a corner and begun to recover. According to the Washington State Employment Security Department Whatcom County’s unemployment rate fell from 9.5 percent in March to 8 percent in April. In Skagit County, the rate fell from 11.5 percent to 9.8 percent during the same period.
The state unemployment rate fell for the first time in more than three years from 9.5 percent in March to 9.2 percent in April. However, in Whatcom and Skagit counties, much of the job growth resulted from seasonal work in agriculture and, in Whatcom County, the lower rate in April can be explained in part because approximately 16 percent of the labor force seeking employment in March dropped out of the labor force in April. In addition, these numbers don’t account for the underemployed people who are working in jobs they are over qualified for. We have an extraordinary talented labor pool in our area that is operating substantially below it’s potential. Unfortunately, that’s the good news.
The challenge we now face is avoiding higher unemployment as the new norm. This won’t be easy if the political class at all levels of government can’t control the severe problem of too much government spending and debt. As I write this column the national debt has exceeded $13 trillion. That equals $117,975 per tax-payer and amounts to a 90 percent debt-to-gross-domestic-product ratio and doesn’t include the debt associated with unfunded entitlement programs and the losses from Fannie and Freddie that total $145 billion and rising.
The political class has dug an enormous economic hole for us and their current policy seems to be to keep digging. The private sector is heavily burdened and concerned about future tax increases and increased cost of doing business associated with a complex 2,700 page health-care reform bill, a financial reform bill expected to be more than 2,000 pages (which does not address Fannie or Freddie), and other initiatives like cap and trade and talks about a European-style value-added tax.
In addition, in mid-May USA Today reported that paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year. In the same time frame, government-provided benefits rose to a record high. This trend is unsustainable. The government depends on the taxes from the private sector to pay for these expanding programs. With private incomes shrinking and government spending increasing, the math just doesn’t work.
Why is this particularly important to those of us living in Whatcom and Skagit counties? In our region, government is our largest employer. In the past, this has been a great benefit and to a certain degree, it’s why we’ve never really experienced the economic high of the highs or low of the lows. However, the lack of fiscal discipline at the federal and state levels and the down trend in private incomes will have a clear negative impact on local governments and our regional economy. Western Washington University is in the process of managing approximately $13 million in budget cuts as are most other state institutions and virtually every local government agency is dealing with similar challenges.
So, what is the solution? First, we must send a clear message to Washington D.C. and Washington state that we’ve had enough. We must demand fiscal discipline. We’ll have that opportunity in November.
Second, we must refocus local efforts on economic development and job creation in the private sector. A number of groups including the Economic Development Association of Skagit County and the Northwest Economic Council of Whatcom County have been at the heart of these efforts. In the past, the focus has been on touting the quality of life and strong labor force in an effort to attract companies to relocate to our region. In order to make these efforts successful, it requires strong cooperation from local governments in making us a business-friendly region. Skagit County has been successful in that regard. Whatcom County has not. In the current economic environment, if we’re going to create jobs, it’s going to require our government officials backing up their rhetoric with action and it will require focusing on existing small and early-stage companies, which is where most of the jobs are likely to come from.
And third, local governments are going to be required to discipline themselves financially and understand they will be facing challenges that will be trickling down from the federal and state levels. Raising taxes and imposing costly regulations on businesses and productive individuals in this environment is typically the first reaction. Instead, officials should re-examine their priorities and be prepared to make some tough choices.
Tags: Economy, government, Skagit County, Whatcom County
Posted in Economy, Tony Larson | 1 Comment »
May 25th, 2010
Last week Dr. Julie Hansen, an economics professor at Western Washington University, spoke to a group at the Building Industry Association of Whatcom County’s Housing Outlook and Construction Economic seminar. Hansen is the editor of the Whatcom County Real Estate Research Report, which is out this week. She gave an overview of the current housing market at the state level, then zeroed in on specifics to Whatcom County and Bellingham.
“In our region we relied on internal migration for our growth,” Hansen explained, adding that the national recession has stifled the flow of migration from one state to another as people simply can’t afford to move.
Yet, “we’re clearly in a better position than other areas,” Hansen said, noting other regions around the country. But that doesn’t mean we aren’t feeling the pinch of the recession, she admits. Housing recovery is “still very fragile,” and will take a turnaround in high unemployment and foreclosures to really see the market recover.
Perennially listed as overvalued on lists such as the one from IHS Global Insight, which cited 21.4 percent of Bellingham/Whatcom homes overvalued in fourth quarter of 2009, the area is still a lower-cost alternative to Seattle or Vancouver, B.C., Hansen said.
The “why” to this phenomenon could lie in several factors, Hansen said. Possibilities include a city climate “above average in terms of its anti-growth policies” or the impact of a stronger Canadian dollar, among others. A spillover effect from housing prices in California may also be a factor, she said.
Realtor Mike Kent, who attended the seminar, added that it has a lot to do with how buyers perceive the value of the area. “People here are willing to pay more of their income for a higher quality of life,” he said.
Members of the audience brought a number of questions to Hansen on varying topics. Here’s a sampling of the discussion:
• Shifting preferences: Will younger homeowners continue to “drive to qualify” for an affordable home in the county, or will they be wooed by the idea of urban living? While living downtown may appeal to Generation Y, Hansen feels their views may change as their family situation does. “Are people going to want to raise kids in condos?” she asks. One builder in the audience remarked that he is seeing many young families migrate to the Ferndale area.
• On the waterfront: How will Bellingham’s waterfront redevelopment affect us? Hansen notes that now is the prime time for boomers to be buying a second home, not necessarily in the approximately 10 years it will take for development to be realized. “One of my concerns is that we’re not going to recover fast enough to capture that (market).”
Tags: Bellingham, real estate, Whatcom County
Posted in Economy, Hilary Parker | No Comments »
May 22nd, 2010
The other afternoon we had some surprise guests come marching down our driveway – an entire family of geese. Mom took the lead, followed by her goslings, and dad brought up the rear. They waddled around the side of the building and out to the pond in back for a dip. These cute critters had the whole staff up out of our seats to watch the show!
 On the way to the pond.  The goose family goes for a swim.
Tags: Bellingham, NWBM
Posted in NWBM goes wild | No Comments »
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