While there are indications the Mesa County economy is improving, some local business leaders worry the more optimistic outlook could offer a false hope that leaves businesses unprepared for a potential slide.
“Retail sales of tires and automotive services are flat with 2010,” says Kevin Brooks, chief executive officer of Big O Tires in Western Colorado. “The first quarter had an increase of 3 percent, but April and May were both down 4 percent.”
As is the case with other economic assessments at the national level, Brooks attributes the flat business to consumer concerns about gasoline prices that are higher than they were a year ago.
The situation directly affects the tire and automotive services industry.
“As gas prices increase, people drive less,” Brooks says. “Commodity prices are way up and therefore the price of tires across the board is increasing. So, even for a service and product that consumers must have, it is a tough purchase and people wait until the last minute.”
Brooks also is involved in the energy business and is among local business owners who’ve sent employees to an oil boom in North Dakota
“As a part owner of a water hauling company, we were given no choice but to move all the assets and employees to North Dakota,” Brooks says. “This practice will continue until our federal, state and local regulations are changed to encourage business instead of running it out of state.”
As natural gas extraction in Western Colorado has declined since the bustling period of 2005 to 2008, some representatives of the oil and gas industry have echoed Brooks’ concerns about state regulations. The Colorado Oil and Gas Conservation Commission revamped drilling rules to require, among other things, that companies keep stricter inventories of chemicals stores near drilling sites and to work more closely with state wildlife officials to protect animals. The Colorado Oil and Gas Association is now asking for more industry representation on the COGCC and a potential rewrite of the rules.
Industry analysts point to other factors in the slowdown of natural gas extraction in Western Colorado, among them the low consumer price of natural gas that makes production less profitable than it was three years ago and the discovery of natural gas deposits in shale in Louisiana, Pennsylvania and the eastern seaboard.
Chris Muir, owner of the All Metals Welding fabrication business in Grand Junction, joins others in noting Colorado issued more drilling permits in 2010 than did some neighboring energy producing states. Muir disputes industry concerns environmental regulations slow drilling.
But there’s little dispute that production is slower than it had been. Williams Production, Halliburton and even local builders and mortgage companies have sent workers to Williston, N.D., which is experiencing an oil boom in the second decade of the 21st century much the same way Grand Junction experienced a natural gas boom during the first decade of the 21st century.
“We service many fleet companies in the gas extraction industry and it is a constant moving target,” Brooks says. “There are new companies coming into the area, but they are only taking the work of companies moving out that lost a contract for the same services.”
Meanwhile, local sales tax collections — an indicator of retail sales — moved higher in Grand Valley during the first half of 2011 compared to the same span last year.
And the results of a member survey conducted by the Grand Junction Area Chamber of Commerce indicates more businesses plan to hire workers than the number planning to lay off employees.
More than 20 percent of chamber members responding to the survey characterized the economy as stable — the first time the proportion was that high since a survey conducted in the spring of 2009.
While wages across the nation remained stagnant the past two years, the median family income of $52,290 in Mesa County is higher than the national average of $50,221, according to 2010 census figures. The statewide picture is even brighter with the family median income at $55,735.
The Legislative Council predicts state government revenue will rise $179 million during the fiscal year that began July 1. The council attributed its improved forecast to an increase in statewide tourism, a strong agricultural market and some recovery in the energy industry.
“Indicators are playing out that the economy’s in a better place,” says Kelly Flenniken, interim executive director of the Grand Junction Economic Partnership. GJEP works to entice businesses to move to Mesa County and to help established businesses expand by offering tax breaks and other incentives.
Success stories occur even as some businesses struggle in the Grand Valley.
“We opened in a tough economy and we’ve been able to weather through that,” says John Cassity, owner of Einstein Bagels in Grand Junction. “We have a good customer base and we’re up incrementally.”
Gordon Harbert, manager of market development for ProBuild in Grand Junction, closely tracks national and local real estate trends. “If you’re a Realtor selling short sales and affordable homes, some Realtors are doing good,” Harbert says.
“The consumer is price-driven,” Harbert says. “We have to get better and more efficient at what we do.”
Harbert, for more than 20 years the owner of Harbert Lumber, recently sold his 70-year-old family business to ProBuild in the aftermath of a downturn in home construction in Western Colorado.
Cassity adds a cautionary message for businesses in the wake of rising food and fuel prices over the past year. “The cost is going up and downstream users have less to spend,” he says.
Cassity pays particular attention to the price of coffee, which he says has increased 40 percent this year.
“Costs for business are becoming quite noticeable,” Cassity says. “I don’t see things improving.”
He predicts that significant improvement in the Grand Valley economy won’t come until 2012.
Cassity says he sees people losing their jobs and companies reticent to expand, especially given the uncertainty associated with the national debt ceiling. The federal government will no longer have the authority to borrow additional money to pay bills unless the debt ceiling is increased by Aug. 2.
As of press time on July 26, Congress and President Barack Obama were still debating whether or not to raise the debt ceiling as part of negotiations that also include federal deficits and taxes.
Because the outcome can affect interest rates and the ability of businesses to borrow capital, business owners can be reticent to expand, hire or make any moves that cost money up front.
As in other parts of the nation, a tight credit market has hampered the ability of small businesses to expand and falling real estate prices have affected real estate agents, mortgage brokers, construction workers and banks.
“The freeze on lending for private sector construction projects must be addressed immediately,” the Associated Builders and Contractors, a national trade organization stated in a news release issued in June. “Federal legislative and regulatory anti-business proposals are negatively impacting the economic recovery of the construction industry.”
One of the more alarming developments of the recent post-recession period is the layoffs of people working for such publicly funded sectors as government and education. The sectors added workers in the wake of previous recessions as one method of increasing employment numbers.
State and local governments have been shedding jobs across the nation since late last year. So have the City of Grand Junction and Mesa County in the aftermath of what until recently were declining tax revenues.
Public school districts across the nation also have been laying off employees. Mesa County School District 51 is poised to operate with a budget of $138.4 million for the upcoming school year, making more than $13 million in cuts from the previous budget. The district plans to eliminate 185 full-time positions.
In a recent public presentation on city finances in June, Grand Junction City Manager Laurie Kadrich celebrated a more than 9 percent increase in sales and use tax collections for the first five months of 2011 compared to the same period in 2010. But Kadrich also cautioned the proportional increases each month probably will drop as major construction projects wind down in the Grand Valley.
The monthly unemployment rate has been hovering between 9 percent and 11 percent this year, and the Mesa County Workforce Center estimates the number of adults who aren’t working is actually about 15 percent. That’s because people who stop collecting unemployment benefits or who never filed for benefits aren’t counted in calculating labor estimates.
Employment statistics in particular offer a different perspective than those offered by more upbeat economic forecasts.
“I’m not going to say we’re over the hump,” says Flenniken.
But Flenniken and others who routinely survey the local economic landscape hope that hump isn’t far away.