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September 23, 2008
West Slope
struggling with 'clash of economies'
Scott Condon
The Aspen Times
Aspen, CO Colorado
At a time when many
parts of the country are struggling with soaring unemployment,
plummeting real estate values and an onslaught of property
foreclosures, western Colorado’s economy sticks out as an oddball.
There are plenty of problems in the Roaring Fork Valley and lower
Colorado River Valley; they are just the opposite of those in the
rest of the country.
There is a shortage of workers rather than jobs. Home prices
remain out of reach for most workers, even if values have
temporarily hit a plateau.
Western Colorado’s economy is fueled by the oil and gas boom.
Garfield County is a hotbed of drilling for natural gas, with
2,550 permits issued for gas wells last year, up 38 percent from
2006.
The upper Roaring Fork Valley remains an economic engine whose
fires are stoked by recreation as well as construction and
residency of second homes.
There is an irony at work, said Colin Laird, executive director of
Healthy Mountain Communities, a nonprofit organization focused on
collaborative approaches to solving regional problems. There is a
national appetite for oil and natural gas at the same time there
is a national appetite among retiring Baby Boomers for second
homes in desirable resort areas.
“They both are hitting us at the same time,” he said.
The region remains prosperous, even as much of the rest of the
country suffers a general economic malaise. “We’re sort of
insulated in a way,” Laird said.
But that two-headed economy also creates problems. The gas boom
this decade has created hundreds of relatively high-paying jobs.
Consequently, the resort sector struggles to find enough workers
to load chairlifts, clean toilets and serve food.
Towns like New Castle, Silt and Rifle provided affordable housing
for workers willing to commute to good-paying jobs in Aspen and
Snowmass Village. Now those residents are sticking closer to home
for jobs that often pay as well or better.
And the high demand for housing for workers heading both
directions has evaporated the last remaining affordable options.
Call it a “clash of economies,” said Ben Alexander, associate
director of Headwaters Economics, an independent, nonprofit
research group that strives to improve community development and
land management decisions in the West.
It’s not just the energy economy battling the resort economy, he
said. High-paying jobs in the gas patch not only make it tough for
employers in Aspen to find enough workers, it also makes it tough
to find everything from carpenters to retail clerks in towns like
Rifle.
“Every industry is competing against every other industry,” said
Alexander.
Healthy Mountain Communities is hosting a symposium Friday, Oct.
24, in Glenwood Springs to explore the economic dynamics of
western Colorado. The sixth annual State of the Valley Symposium
is called “Economic Clashes and Regional Prosperity.”
Alexander will be one of the keynote speakers. Headwaters
Economics has done extensive research into how energy development
is changing the economy of the West. Garfield and Pitkin counties
combine to make a fascinating case study, he said.
There are a number of possible scenarios that could evolve in the
next few years to affect the regional economy, Alexander said. One
could be a cooling of the gas industry, which he said is “really
ripping” right now. National demand for natural gas is flat at a
time when the U.S. supply is up significantly.
“We’ve got more than we can use right now, and we’ve developed
more than we can use right now,” Alexander said.
Randy Udall, a Carbondale energy expert, said extraction
techniques developed in Colorado and Texas are being applied to
shale gas fields in Oklahoma, Louisiana, New York and Pennsylvania
“with surprisingly positive results.”
It could result in lower natural gas prices and reduced drilling
pressure in the Rockies, Udall said.
If that’s the case, gas companies may sit on more leases and
develop them over a greater amount of time, Alexander said.
Western Colorado would evolve more into maintenance and monitoring
rather than drilling, and that would require less labor and
potentially ease the shortage.
Another scenario, Alexander said, is development of more demand
for natural gas. The use of coal at power-production plants is
under fire because of its high release of greenhouse gases.
Pressure may grow to use cleaner-burning natural gas, ensuring
continued heavy exploration and drilling in places like the
Piceance Basin, which includes western Garfield County.
A third possible scenario foreseen by Alexander is continued
clashing between the economic drivers, prolonging competition for
labor. If that happens, the resort economy of the upper Roaring
Fork Valley and the economic sectors in Garfield County must
adjust wages to compete with gas companies.
Headwaters Economics analysts were surprised to find there hasn’t
been greater wage adjustment already, Alexander said. Average
wages are only up in a few sectors of the economy, but not across
the board. Meanwhile, soaring housing costs and general
cost-of-living expenses have made it even tougher for workers who
didn’t see their wages increase, Alexander said.
“I think there has to be more wage inflation,” he said.
In the bigger picture, Alexander wants to use next month’s
symposium to help local decision-makers ponder how the two
economic drivers can coexist and “how to foster and sustain
economic diversity in the region.”
In addition to Alexander, the event will feature speakers Jim
Westkott, a senior demographer with the Colorado Department of
Local Affairs, and state Treasurer Cary Kennedy.
The cost to attend the 2008 State of the Valley Symposium is $75
and includes lunch and materials. It will be held from 8:30 a.m.
to 4 p.m. at the Hotel Colorado in Glenwood Springs. Last year’s
event attracted about 175 people, Laird said.
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October
25, 2008
Aspen’s big chill: the economy
Experts say second-home development will slow for immediate
future; Garfield County’s gas drilling may level off
Scott Condon
The Aspen Times
Aspen CO Colorado
The two engines that superheated the economies of Aspen and
western Colorado for most of this decade are getting chilled by
the national economic meltdown, two experts said Friday.
Second-home development has already tumbled and activity will
continue to be slow for the foreseeable future, according to Jim
Westkott, the senior demographer for the state of Colorado.
And the frenetic pace of drilling for natural gas in western
Garfield County will likely level off because of the economy and
infrastructure limitations, said Ben Alexander, associate director
of a nonprofit research group called Headwaters Economics.
The men were featured speakers at the annual State of the Valley
conference hosted Healthy Mountain Communities in Glenwood Springs
on Friday. Healthy Mountain Communities is a Roaring Fork
Valley-based nonprofit that helps governments in the region
identify issues and solutions.
Westkott said tourism in the Roaring Fork Valley will be hurt by
the national economic climate and that a recession will result in
the loss of some jobs in the retail and service sectors.
Second-home development “will slow considerably,” he said.
Inflated real estate prices haven’t deterred aging baby boomers
from gobbling property in Aspen and other mountain paradises in
recent years, Westkott said. Their influx and the jobs they create
through demands for service have spurred explosive growth in
western Colorado.
The drastic drop in second-home development has convinced Westkott
and his staff to reconsider growth projections. They don’t believe
Eagle and Pitkin counties will grow as fast as they projected as
recently as last year — although both counties will continue to
grow.
He said the baby boomers will flock to places like Aspen and Vail
once the economy improves, and that the current slump creates no
reason to panic. “You don’t need to go off chasing bucks,”
Westkott said.
Garfield County’s growth will remain closer to projections due to
the energy-based economy, he said.
“Natural gas will continue to create some new jobs and population
growth, but its development is currently limited by pipeline
capacity out of the state,” Westkott said. Alexander said demand
is flat for natural gas and that prices, while volatile, have
dropped in recent months. That suggests that drilling activity
might level off. Western Garfield County has been “ground zero”
for the energy boom this decade, along with the area around
Pinedale, Wyo., he said.
That boom has created problems. There are more jobs than workers
in western Colorado, Alexander noted, so any new openings
essentially require the region to import workers. The resort
economies of Aspen, Snowmass Village, Glenwood Springs and Vail
are competing with the gas patch for workers.
“If you’re not a drug addict you can get a job if you want a job,”
Alexander said.
The energy industry pays well, but other fields haven’t kept pace.
That makes it difficult to hire essential community workers like
teachers and police officers, let alone maids and restaurant
workers.
The creation of well-paying jobs and importation of workers has
driven up housing prices and the overall cost-of-living in the
area. The lack of affordable housing that has long plagued the
Roaring Fork and Eagle valleys has now spread to the Grand Valley
and places like Rifle, Alexander said.
Meanwhile, Garfield County has done little to diversify its
economy, making it susceptible to a bust, according to Alexander.
“A slowdown on the West Slope wouldn’t necessarily be a bad
thing,” he said. He stressed that he wasn’t promoting job loss or
financial hardship for anyone. He believes a cooling off would
relieve some of the market forces like the lack of housing and
competition for jobs. “It may afford a little breathing room,” he
said.
Westkott concurred. “This will bring things down to earth and in
the long-term it’s probably a good thing,” he said of the economic
climate. Like Alexander, he urged leaders in western Colorado to
use the reprieve as a time to plan their communities’ futures.
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October
30, 2008
State of the Valley
Report
Part I /
Part II
Diversity is
the key to economic success
Jeremy Heiman
The Valley Journal
The strength of the
local economy is in its diversity.
That message was delivered by experts on western economies who
addressed participants at the State of the Valley Symposium
presented by Carbondale-based Healthy Mountain Communities last
Friday at the Hotel Colorado in Glenwood Springs.
“More diverse economies are not only more resilient, they also grow
faster,” said Ben Alexander, associate director of Headwaters
Economics, a Montana-based nonprofit research group.
The more dependent our economy is on the natural gas industry,
the more vulnerable we are to forces outside the area, he said.
“Natural gas futures have gone from $6 to $13 to $6 in the last
year,” Alexander said. “We’ve got to hedge against that
volatility, and the best way we know is diversity in the economy,”
Alexander said.
Jim Westkott, senior demographer for the State of Colorado’s
Department of Local Affairs, urged his listeners at the
symposium to protect the scenic values of the region, the main
attraction of the tourism economy.
“You’ve got to remember, us folks like coming up here,” said
Westkott, who lives on the Front Range.
“You have a very beautiful, valuable region,” Westkott said later.
“Don’t sell it off. You need a longterm economic strategy. You’ll
get along just fine.”
Big, but not that big
Mark Haggerty, Alexander’s colleague at Headwaters Economics,
said that of all the western energyproducing states, Colorado has
the largest economy, and the percentage of Colorado’s economy
contributed by the energy industry is the smallest of any of the
states, only about 1 percent.
He suggested that Colorado needs to tax the energy industry at a
greater rate than it currently does, to put the state in a better
position to mitigate the environmental and
infrastructure damage and social disruption caused by energy
extraction.
“This a source of wealth, and you ought to be generating net
benefits for the people of the region,” Haggerty said.
Though Alexander said demand for natural gas may soon decline,
Vince Matthews, of Colorado Geological Survey, said gas drilling
probably won’t go away in the near term.
“I believe we’re going to have a natural gas shortage in the
United States.” Matthews said. “This drilling in the Rockies has
been successful, but when you look at the national picture, we’re
flat with what we were 10 years ago.”
Catering to retirees
Alexander said energy extraction and mining together, as of 2006,
makes up about 10 percent of local dollars. As a percentage of the
local economy it is small compared to the contribution of
retirees. The energy economy locally is about $180 million,
whereas the non-work economy, fueled by investment and retirees,
is more like $400 million, he said.
Westkott suggested developing a wider range of services for
retirees.
“One of the things you have to remember is the boomers who are
going to move here are going to go through a lot of different
stages as their lifestyles change, as they get old,” he said. They
will require different services, activities and products as they
go through the stages of aging.
Despite its relatively small size, Alexander said, the energy
industry is having significant effects on the region. One study
Headwaters did in Mesa County, which also has seen a huge boom in
gas drilling, showed that energy industry wages were growing at 7
percent annually while wages in other industries were growing at 1
percent. With that kind of money around, living costs rise to
whatever level the best-paid workers can afford.
“All of a sudden, these folks are setting prices for a lot of
commodities,” Alexander said.
In Garfield County, gas field wages are pulling workers out of the
construction industry.
“This makes housing less and less affordable,” Alexander said.
But the worldwide economic slowdown may relax the housing crunch
somewhat, he said.
State of the Valley
Report
Part I /
Part II
Downturn probably won’t be of help with housing affordability
By Jeremy Heiman
The Valley Journal
A panel of housing wonks agreed Friday that
the current trouble in the nation’s financial markets probably
won’t provide a solution for the ongoing lack of affordable
housing in the Roaring Fork Valley.
But the participants did have some insights that might help
develop a strategy to bring more housing on line eventually. The
panel discussion was part of the annual State of the Valley
Symposium presented by Carbondale-based Healthy Mountain
Communities at the Hotel Colorado in Glenwood Springs.
Panelist Don Ensign, a co-founder of Design Workshop and a
developer of mixed-use projects in the Roaring Fork Valley, told
those in attendance that the lack of funds for mortgage lending
would cut into the number of people who were able to get
financing, and it would also reduce capital available for
development of all kinds.
“Many people who would have previously qualified no longer can get
mortgages,” Ensign said. “And when this is over, there will be a
pent-up demand and no supply.”
Panelist Joe Rowan, executive director of Funding Partners, a
mortgage specialist, put partial blame for the lending crisis on
people’s mistaken idea that wealth was in having one’s name on a
deed rather than having cash in hand.
“This way of thinking has given rise to speculation,” Rowan said.
He said the hard times that will result from the market decline
may bring people to their senses.
“As this starts to shake out, we’ll get back to the old-fashioned
way of getting things,” Rowan said. “What it means is you have to
be physically, mentally and financially ready to be a homeowner.”
Housing is housing
“The people that teach our kids and police our community need a
place to live,” Rowan said. But he reminded the audience that
home ownership is perhaps not the only goal.
“Renting is a legitimate way of being part of the community, but
couch surfing is not renting. It’s one step above homelessness.”
Alex Potente, managing director of the Eagle County Housing
Office, guessed that the downturn wouldn’t help to bring prices
into the affordable range. “The housing in this market is too
high-cost and too high-quality to ever be affordable,” Potente
said. He seconded Rowan’s concern about rentals, too.
“Another big problem is rental stock,” Potente continued. “It’s
hard as hell to build rental stock, even in a good economic
environment.”
On the subject of what tools can be used to get housing into the
affordable range, Ensign said ideas currently in use mostly have
unintended consequences. Requiring developers to construct ADUs,
or accessory dwelling units, with free market houses drives up the
cost of building anything.
Exactions — charges added to development fees to accumulate money
for affordable housing — spell an increase in the cost of all
real estate, Ensign said. Exactions used to create affordable
housing are passed on to the community, too, he said.
Shoveling money at the problem has been effective in Aspen, where
considerable housing has been built at belowmarket prices,
Ensign continued. But downvalley communities don’t have the wealth
that Aspen can tap.
Land, ho
Ensign did have optimism for two ideas that might be part of a
solution, though. One was land.
“I think an effective way of thinking about it is real estate in
our valley is wealth,” Ensign said. “There’s a lot of land that is
underutilized, and could be used for affordable housing.” He said
public entities, including valley towns, own land in places where
denser development would be appropriate, and that public
ownership could bring down the costs. Ensign also advocated
bringing a real estate transfer tax into the equation to develop
a revenue stream for future housing subsidies.
“My suggestion is that each project have a transfer tax,” Ensign
said. “Every unit in a project has an 11 percent transfer tax,
which diminishes to maybe a 3 percent transfer tax over a few
years. That discourages speculation.”
Every time these units sell, there would be a 3 percent rider that
goes into a public housing fund, he continued. This money would
be on hand to buy down a 3 percent to 6 percent increase in equity
every time a unit is sold.
Rowan, the mortgage banker, said though money isn’t available at
present, now is the time to be planning and lining up possible
advantages, such as tax credits that are available for developers
who build affordable housing.
Ready when opportunity knocks
“Right now the financial community has their head on their desk,
and they’re waiting for recess,” Rowan said. “Don’t jump into
anything right now, but be working as hard as you ever have,
lining up tax advantages, and making sure that all the parties are
at the table, so nothing is missed.”
Potente said it’s important to find a site and push for more
density to maximize the number of units that can be built.
“While you can only get so much blood from stones,” he said, “you
have to look at density.
He said his office is looking at developing housing at the tree
nursery in El Jebel, where Ace Lane’s water ski lake is. Potente
said it’s a good site, but he anticipates a NIMBY reaction.
“The neighbors are going to say, ‘God no, I don’t want more
traffic and I don’t want rental housing next to my $6 million
home.’” To overcome this, the community as whole has to say they
want it, he said.
Ensign said he’s worked on the affordable housing problem as a
consultant and as developer, and hasn’t succeeded in cracking
it. So he’s thinking of running for public office, he said,
eliciting laughter. Because, he continued, public officials have
the leverage to get something like this done.
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