Regional Report: Development fights and the specter of job cuts in Olympia

First published June 27, 2008

One controversial development project is off the table in Thurston County, but another one has emerged in downtown Olympia.

The Port of Tacoma has dropped a hotly debated proposal to build a rail transfer center in Thurston County at Maytown. Environmentalists called it a victory for their side – the Maytown site contains fragile prairie habitat that they wanted to preserve. But Tacoma port officials said the main reason they backed off was that railroad traffic is projected to fall in the near term, thus reducing the need for the proposed rail yard. Instead, the port is now focused on developing more rail capacity on its existing land in Tacoma.

But even as that controversy died down, another one flared up as the city of Olympia considers raising building height limits on a strip of downtown between Budd Inlet and Capitol Lake.

A developer wants to build a seven-story and a five-story building on a 2.3-acre site

It’s not a universally popular idea, with some critics saying the city should do more to preserve public views of Mount Rainier and the Olympics. Advocates, however, say proposed taller buildings would allow for much-needed housing and more retail downtown. An overflow crowd of 300 people turned out for a planning commission hearing on the topic last week; the commission has yet to make its recommendation.

Of the two proposals, the Maytown rail yard would have created 1,900 jobs, jobs which might have been good to have over the next couple years. Projections for falling state revenues certainly raise the specter of cuts to state government employment in Olympia. As we’ve noted before, Olympia is Washington’s ultimate company town – about 35 percent of the workforce draws a government paycheck from one agency or another.

Government employment cuts would weaken a local economy that’s been holding its own amid the national turmoil. Sure, housing took a sharp hit in most-recent quarter – existing home sales down nearly 23 percent year-over-year; building permits down by more than half; home prices up slightly 1.1 percent to $257,000. And that’s spilling over into the job market: Thurston County lost 200 construction jobs and 100 banking jobs over the past year, according to the May jobs report.

But generally, the job market is OK, with strong growth in the private services sector, which added 1,800 workers over the year (up 3.3 percent). Overall, the county workforce grew by 1.6 percent, which is slightly better than the overall state performance (1.3 percent). Slow growth, but growth nonetheless.

The retail sales figures may be sending out a warning, though. Lacey’s 2007 sales totals shot up 20 percent – thanks to the opening of the new Cabella’s store. But even with the Cabella’s bump, countywide sales were up only 5.7 percent, which was behind the state average for 2007 (which was 7 percent). And Olympia sales were up a scant 1.6 percent.

Washington CEO Magazine named among the top 2 in nation

First published June 24, 2008

Washington CEO Magazine received a gold and two silver awards Saturday night in the 2008 Editorial Excellence Awards, presented by the Alliance for Area Business Publications.

The Seattle-based publication was named the second best regional business magazine in the country by a panel of judges from the University of Missouri School of Journalism. Aaron Corvin, Washington CEO senior writer, won the first place Gold Award for feature writing. The magazine also won a silver award in the category for best use of photography and illustrations.

In the judging for Best Magazine, judges termed Washington CEO “a marvelous publication from cover to cover.”

“The predictable stories that every business publication must run are refreshingly played with innovative visuals and savvy writing,” the judges wrote. “The covers are hard hitting and entice readers inside.”

Bob Ritter, publisher of Washington CEO, said these awards are a well deserved tribute to the magazine and its staff.

“Our editors, writers and artists — everyone associated with the magazine — are committed to providing the best business journalism possible,” Ritter said. “Our readers demand excellence and we strive to meet the high standards they set.”

Corvin’s gold medal-winning story dealt with the efforts by Washington cities to transform their downtowns in order to build identity and attract younger workers.

“By examining a downtown transformation from economic, social, political, architectural and even philosophical perspectives, this feature provided readers with unique, contextualized insights,” judges said. “Using strong, descriptive prose, the story seamlessly weaved together an understanding of the forces at work when cities transform, and the economic data that measures the impact on local communities.”

The award for best use of photography and illustrations cited the work of Linda Maas, the magazine’s art director, and Miranda Wumkes, assistant art director.

“Readers are treated to a range of illustration styles, all very well executed,” judges said. They specifically cited visuals associated with stories on Washington State trade, the Starbucks Coffee Co., and the cover of the magazine’s December 2007 issue, which featured Corvin’s story, “Downtown: Everybody Wants One.”

The competition featured entries for 47 publications from the U.S., Canada and Australia.

Regional Report: Good news, but not-so-sunny numbers, from the Palm Springs of Washington

First published June 23, 2008

There’s a lot going on in Yakima. Just last week, Gov. Chris Gregoire was in town, to help celebrate the revitalization of the city’s once-dead downtown. The state so far has kicked in some $8.5 million to pay for new sidewalks, street lights and flower baskets along North Yakima Avenue and Front Street. That’s helped spur private investments – new condos, shops and restaurants.

The next big thing will be redevelopment of the old Boise Cascade mill site on Yakima’s western edge. The 208-acre site has an admirable location along I-82, and the Yakima Greenway – a 10-mile trail that runs along the Yakima River – skirts one edge of it. A recent engineering study estimated that building a business/commercial/residential district there could pump $1 billion into the economy. Boosters are comparing it to Bend, Ore., where a similar mill redevelopment allowed the town to capture dollars from tourists headed to Sunriver Resort; there’s no reason, they say, Yakima can’t play the same role vis-à-vis Suncadia.

The key economic indicators, however, aren’t nearly as upbeat.

The latest state employment figures are unsettling. Yakima County lost 300 non-farm jobs over the most-recent 12 months, a drop of about 0.4 percent. There was a big surge in health care employment – up 1,100 jobs – but declines in a number of industry sectors: professional and business services was down 500 jobs and so was wholesale trade; manufacturing shed 200 jobs; construction employment was down 100. Most of these losses, you’ll note, are in sectors that usually pay pretty well. Yakima County’s jobless rate climbed to 7.3 percent, compared to a statewide rate of 5.3 percent.

The most-recent farm labor report also was weak, showing a drop of 510 jobs (2.6 percent) in May from the previous year. Cool weather has pushed back cherry harvests and delayed field work on other crops; the numbers may improve as the weather warms.

Retail activity was a bit below state norms, with countywide retail sales up 6.4 percent in 2007, while Yakima city sales grew 6 percent – both below the 7 percent statewide figure.

Housing values, however, are still going up, with the most-recent data showing a 10.3-percent year-over-year jump in the median sale price, to $148,200, even though the market is slowing. Sales volumes and new home construction have dropped off sharply in Yakima, with sales of existing homes down 19 percent and building permits down 38 percent – which are better than the state averages, but still not good.

The housing data seems to confirm something I heard from a banker in Yakima – much of current real estate activity is being driven by Wet-siders seeking sunny second homes east of the mountains. (If higher-end homes continue to sell in a down market, it would push the median up sharply.) If that continues, the day when Yakima really does become the Palm Springs of Washington might not be too far off.

Week in Review: Micro-Who? Jets overdue. And lost cherries? Them too

First published May 9, 2008

There are three key factors keeping the Washington state economy out of a recession: Microsoft, Boeing and agriculture all are strong. Last week, all three made news.

First off, of course, Microsoft broke off its flirtation with Yahoo! CEO Steve Ballmer’s announcement came March 3, and it set off a whole week of tech-merger news:

• Yahoo’s stock price dipped sharply after the deal collapsed, putting the Californians into serious spin control; by week’s end, Yahoo! president Sue Decker had gone in front of the company’s own Web cams to complain that MSFT had never put its best offer in writing.

• Google executives weighed in, hinting they might be interested in further trials of an anti-MSN online advertising partnership. But soon-to-be-former-chairman Bill Gates backed Ballmer, saying that Microsoft can whip Google without Yahoo.

• Even so, speculation immediately cropped up that Microsoft would buy more of Facebook, the social networking site. (I’m on Facebook, btw. You should send me a friend request.) Those reports may not be true, but what the heck.

• And hey, the deal may not be truly dead. This wouldn’t surprise me; Decker and Yahoo! CEO Jerry Yang made a point of saying all week that the deal fell apart because they could not agree on price – leaving the door open for a new offer.

However, the collapse of MSFT’s Yahoo! takeover bid is probably a good thing for the state’s economy. As Gates notes in this interview, “the standard strategy for us is to just hire great engineers and surprise people at how well we can compete.” And if they’re hiring more Microsofties, that can only increase demand for housing, shopping and office space in Kirkland, Bellevue, Seattle – and probably Bangalore too.

On to Boeing. The company disclosed this week that 787 customers will face delays of close to two years, on average, and up to 30 months for some. It’s not just because the first flight has been delayed; Boeing also can’t ramp up production as fast as hoped. There will be penalty payments, big ones, but analysts also think Boeing will have to ramp up production of its older 767 line, to provide airlines with mid-sized airplanes of some sort while they wait for their overdue Dreamliners.

Of course, the 767 is the also the tanker Boeing still wants to sell to the Pentagon. Boeing’s backers in Congress now say that whatever Congressional auditors say, following hearings that began this week, they’ll block any plan to buy Airbus tankers, simply by not approving any cash for them.

The 787 delays also will be a factor in Boeing’s upcoming contract talks. Both major unions – the Machinists and the engineers at SPEEA – are making the point that if Boeing hadn’t outsourced so much 787 work, it would have been better-able to control the development process. They want more work in-house.

It’s going to be an interesting year on the aerospace labor front. Boeing has floated the idea of dropping pensions for 401(k)s, which – trust me – is a non-starter, particularly with Machinists. Their strike in 2005 was largely over pensions. Conventional wisdom says that with the 787 delays and the big production backlog, the unions hold the upper hand. However, both the Machinists and SPEEA have new union leaders who will be negotiating their first contracts, and a whole bunch of new employees who aren’t as invested in the unions as their more-militant but soon-to-retire Baby Boomer colleagues.

Finally, cherry growers east of the Cascades reported this week that cold weather will reduce their crop by 27 percent. I’m not seeing this as a crisis. The fruit growers I know see cherries as a 50-50 crapshoot – easy prey to an untimely frost or rain – and grow them mainly because they’re a high-margin fruit that’s harvested early, giving them second-quarter cash flow. However, a short crop likely means higher prices for us consumers.

Washington CEO’s Economic Insider

After about six months of dead-ends, the good folks at Tiger Oak Publications have resurrected the electronic archives of the late, great Washington CEO magazine. This includes the online-only newsletter — Washington CEO’s Economic Insider — which I wrote during 2008, when I was one of the magazine’s senior writers. For a long while, it looked like all that content had been lost in the transition, but thanks to the efforts of my former CEO colleague Paul Bucalo, and to Leslie Helms and Chris Winters, who are now at Tiger Oak’s Seattle Business Monthly, we’ve at least got this much back.

Over the next few weeks I’ll be posting the back issues of the Economic Insider, so please check back soon.