Mar 29 2013

Economic hits in eastern Idaho

Published by at 8:34 am under Idaho,Mendiola

Chase
 
Former Pocatello Mayor Roger Chase, left, answers a question after participating in an economic impact forum. (photo/Mark Mendiola)

 

mendiola MARK
MENDIOLA

 
Reports

With Battelle Energy Alliance and CH2M-WG Idaho eliminating hundreds of high-paying jobs in the past year with more layoffs to come at the Idaho National Laboratory, eastern Idaho’s economy has taken a major hit unlike anything it has absorbed in recent years.

The second largest employer in Idaho behind state government, INL has accounted for about 8,000 direct jobs and roughly 24,000 indirect jobs in the state, boasting a $3.5 billion total economic impact and generating about 6 percent of Idaho’s entire tax revenue.

At its peak, total INL employment once stood at 13,000. About 3.5 percent of Idaho’s total work force has been attributed to INL with one in five jobs from Pocatello to Rexburg tied to the federal nuclear research and development site, including an estimated 760 employees in Pocatello and about 1,200 in Blackfoot, not to mention the majority of INL workers in Idaho Falls.

While Bonneville County has benefited the most from the billions of federal dollars pumped into the INL over the years, Bannock and Bingham counties also have reaped lucrative cream off the top.

Pocatello, however, has suffered significant setbacks in the past year. Hoku Materials’ polysilicon plant, once considered a great boon to Bannock County’s economy, sits hauntingly vacant after hundreds of millions of dollars were invested in it and some 200 employees were terminated.

Since acquiring AMI Semiconductor in March 2008, Phoenix-based ON Semiconductor has reduced employment at its Pocatello plant – once AMI’s world headquarters – by a few hundred, but it has invested millions into sophisticated equipment at the integrated circuit fabrication site.

Heinz’ frozen food plant in Pocatello at one time surpassed the ON plant and Union Pacific Railroad as Pocatello’s largest private employer with 800 workers, but it cut 80 full-time employees this month due to eliminating a frozen food line, dropping its total employment now to about 400.

The Dodge National Circuit Finals Rodeo once pumped hundreds of thousands of dollars into Pocatello’s economy in one week, attracting thousands of enthusiasts, but it trotted off to Oklahoma City in 2011 after 23 years at Idaho State University’s Holt Arena.

The Western Frontier Pro Rodeo ran in its place for two years, but as of 2013, there will be no major rodeo in Pocatello for the first time in 70 years, hurting motels, restaurants and retail stores accustomed to the annual boost in spending.

Needless to say, these daunting developments pose stiff challenges for the region’s business and government leaders. Some of those key players appeared at a well-attended March 27 economic impact panel discussion at Idaho State University and emphasized positive trends in the region, expressing optimism.

It was disclosed that evening at the forum that Pocatello Mayor Brian Blad and Bannock Development Corp. Executive Director John Regetz were in California seeking to recruit companies disgruntled by the Golden State’s rising taxes and burdensome regulations.

Allstate’s location of a customer service center in Chubbuck that employs hundreds was cited as a major coup for Bannock County. A WinCo super store recently opened and Herberger’s opened its first department store in Idaho at the Pine Ridge Mall. Canadian-based ATCO also recently located a manufacturing operation at the Gateway West Industrial Center.

Responding to questions about Hoku, former Pocatello Mayor Roger Chase and Idaho Department of Commerce Chief Economic Development Officer Gynii Gilliam explained that because Hoku was a new company engaged in new technology, the city decided it was too risky to finance the project by selling bonds. Gilliam was Bannock Development’s executive director at the time, and Chase was mayor.

Using creative financing, the city required Hoku to front the money. “If we had bonded it, we would be in big trouble right now,” Gilliam said, noting the plant was under construction for five years, greatly improving the property. “Pocatello is not out anything.”

Chase said the city owns the Hoku property and put $1 million into the project. The site’s infrastructure and equipment, including an electrical substation, are worth an estimated $30 million. All of its onsite steel will not go to waste, Chase predicted.

Chase, who chairs the Idaho Water Resource Board and serves as a consultant for the Bingham Economic Development Corporation, said one of the greatest challenges for economic developers is securing good paying jobs with benefits. Retail sales also are struggling in the region, he noted.

High commodity prices have helped the agriculture sector, and the stock market’s rise has boosted 401(k) values, creating more spendable income, Chase said. However, he noted Idaho has the highest percentage of people making minimum wage in the nation and one of the lowest average incomes per family.

After Pocatello in 2001 lost FMC’s elemental phosphorus plant that employed hundreds of workers and Union Pacific downsized its Pocatello operations, a $12-an-hour job with benefits is now considered good, he said.

Gilliam noted that the Idaho Department of Commerce has achieved 34 “wins” across the state representing more than 2,000 new jobs in the next two years and amounting to $225 million in capital investments.

Linda Martin, executive director of Grow Idaho Falls, said Bonneville County’s population has grown 26 percent in the past decade and the Idaho Falls area enjoys $3 billion in gross annual retail sales. She said she hopes the Federal Aviation Administration’s decision to close the air control towers in Idaho Falls and Pocatello can be reversed.

Within 150 miles of Idaho Falls and Pocatello, $800 million in products are exported, Martin said. Statewide, exports total about $6 billion, with electronics exceeding farm commodities. She said economic development efforts in Bonneville County the past five years have returned about $2.54 billion on what has been invested.

“Sometimes economic development is akin to pulling a rabbit out of a hat,” she said.

Neil Tocher, an Idaho State University assistant professor of management, pointed out that the average annual family income in Idaho Falls is $59,000 as opposed to $43,000 for Pocatello. He recommended that multimodal transportation distribution centers be developed by Pocatello, taking advantage of the city’s access to an airport, two interstate freeways and railroad tracks.

Park Price, president and chief executive officer for the Idaho Falls-based Bank of Idaho, said community leaders from Soda Springs to Rexburg need to cooperate in successfully promoting the region as a single 300,000-population market to attract companies and better jobs.

Premier Technology President Doug Sayer said it’s tough to compete in a market when the cost of manufacturing has doubled and qualified personnel are difficult to hire. He credited his company’s success to the quality of its work force.

Jim Johnston, a Pocatello City Council member and real estate agent, said Pocatello’s housing market gained about 8.7 percent in value last year as opposed to a 9.3 percent decline in 2011. It has enjoyed 13 consecutive months of price gains and is much better than it has been since 2007, he said.

Johnston stressed the importance of ISU to the region and praised a “communiversity effort” in support of the university, which employs about 3,800, including administrators, faculty, staff and students.

Chubbuck Mayor Steven England confirmed that Olive Garden had looked at property in Chubbuck for a new restaurant and mentioned that Red Lobster plans a $200,000 upgrade.

Tinno Batt, treasurer for the Fort Hall Business Council, said the Shoshone-Bannock Tribes (with about 5,500 members) employ more than 1,100 in their government and commercial enterprises, creating a significant multiplier effect in eastern Idaho. Two of Idaho’s largest farmers lease lands on the reservation, Batt said. The new Shoshone-Bannock convention center and casino were praised by several panelists.

Tim Forhan, Bannock Development past president, said quality of life and education were main factors in attracting employees to Pocatello when he was an AMI Semiconductor executive.

Arlen Wittrock, an ON Semiconductor consultant who serves on the Idaho Economic Advisory Council, said the state is not as strong as it should be in supporting rural economies and noted Idaho has the second lowest per pupil K-12 spending in the nation.

Wittrock advocated reforming Idaho’s personal property tax by looking at a tiered approach because he said it discourages high tech companies from locating in the state. Several panelists took issue with the Idaho Association of Commerce & Industry’s push to repeal the personal property tax entirely.

Kent Rudeen of Power County and Vaughn Rasmussen of Bear Lake County said repealing the property tax would hit hard their counties, which rely heavily on the tax for their budgets. Rasmussen criticized the negative impact repealing $140 million in personal property tax would have on counties.

Power County hopes to develop industrial areas near the abandoned FMC site and near Lamb-Weston’s spud processing plant to bring better paying jobs, Rudeen said, noting American Falls has lost two cafes and a retail store recently. It has not had a car dealership for years.

The looming closure of the J.R. Simplot Co.’s Aberdeen potato processing plant also will “drain vitality” from the area, he said. Double L Manufacturing recently moved its farm equipment business from American Falls to the Heyburn area.

“I’m not quite as optimistic,” Rudeen said, adding that repealing the personal property tax would cut 40 percent from Power County’s budget.

Bank of Idaho’s Price noted that Idaho ranks 51st in taxes assessed overall. “We’re certainly not overtaxed,” he said, adding the state’s tax system seems pretty balanced right now. Repealing the personal property tax on equipment would hurt cities and counties, shifting corporate taxes to residents. “I don’t know if corporations need further relief.”

Chase said repealing the personal property tax would raise taxes for homeowners and make it difficult for local governments to compensate for the significant loss in revenue. He noted that many school districts in the state have had to resort to levy overrides to generate needed operating revenue.

He said it’s a sad commentary that Idaho’s prison budget has increased more than its education budget.

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