A new study examines the reasons behind Deschutes County’s dramatic descent from high flier among the economies of the West to one of the hardest-hit communities in the wake of the recent recessionary headwinds, while also offering lessons on competitiveness for the future.
The report, by Montana-based non-profit research group Headwaters Economics, in partnership with Economic Development for Central Oregon (EDCO) compares the region to larger, more developed “peer” metropolitan areas such as Ada County in Idaho – anchored by Boise – and Boulder, Colorado, which appear to have better weathered the recent storm.
The comparable sample group also included counties of similar population and dynamics to Deschutes that experienced strong growth leading up to the recession; such as Washington County, Utah (a retiree hot spot including the city of St. George and significant public lands around Zion National Park) and Kootenai County, Idaho (on Interstate 90 close to Spokane and home to the communities of Coeur d’Alene and Post Falls).
Headwaters Associate Director Ben Alexander presented the report’s findings to EDCO’s well-attended recent annual meeting at St. Charles Medical Center in Bend, highlighting how the region compares to its competitive locales and suggesting ideas for helping facilitate economic recovery locally.
Research included utilizing a wide range of performance indicators and interviews with business leaders to ascertain regional asset bases, challenges and opportunities – particularly through increasing long-term economic diversity and resiliency – in an effort to understand business location and retention factors.
CRITICAL STRESS POINTS
Critical stress points identified for Deschutes County that amplified the economic implosion included an over-reliance on the dominant real estate and construction sector, a lingering affordability gap between housing prices and average wages relative to other communities, and the lack of a definitive four-year higher educational institution to act as a catalyst for business growth.
Base costs were an important factor for locating businesses, but non-traditional quality of life factors such as open space, trails and low crime rates also came into the equation.
While acknowledging that almost all of the prime economic movers in the West over the past several decades have struggled during the most recent national recession, the report says that “nowhere is this contrast between economic boom and subsequent decline more dramatic than in Central Oregon’s Deschutes County.”
The backdrop to the report describes how in the early 1990s Deschutes County reinvented itself from a timber and related wood products manufacturing base into a real estate and construction, hospitality and service economy.
By doing so, it developed into one of the fastest-growing areas in the country and underwent an economic transformation that was the envy of many in the Western U.S.
But the national recession that is generally accepted to have begun at the end of 2007 brought the weakness of this new economy into sharp focus: Deschutes County now has one of the worst unemployment rates in the region and the highest among similar fast-growing peers across the West, hovering at just under 15 percent.
KEY TO COMPETING
The heavy reliance on real estate, construction and related finance was shown to be perilous, as this economic foundation proved too narrow by itself to sustain long-term resilience and economic strength.
The report supports the contention that our region should focus on taking advantage of its desirability as a place to live to create a broader range of industry diversity.
Alexander added: “Of course, this is more easily said than done. The companies in Deschutes County are already more innovative and the economy more developed in higher-skill sectors than in similarly sized Washington County, Utah and Kootenai County, Idaho.
“The leap to compete with larger urban centers such as Boise and Boulder raises issues of scale, depth, skills, and access that must be resolved in order to compete on this higher plane.
“If Deschutes County wants to take an ambitious step forward, there will have to be levels of cooperation not seen today—to increase efficiencies, support more mature clusters, maximize existing talent, bring in new talent, protect and promote the area’s compelling mix of amenities, and build new research and educational institutions.”
The Headwaters report issued a set of recommendations, some of which are already in circulation, that it believes will serve Central Oregon well for the future; in most cases relating to supporting the growth of existing businesses as well as to attracting new companies, and to the need for more skilled labor.
In the housing arena, the review says that Deschutes County remains unaffordable for too many families and workers. Although housing prices have fallen significantly during the current recession, they still put the region at a competitive disadvantage, especially when area wage rates are considered.
It suggests more affordable housing, more varied types of housing, and new or renovated housing located near existing downtowns and work locations to make it easier to retain and attract the workforce the region will need as it emerges from this recession.
The example of Boise and Boulder also points to the importance of developing amenities to attract skilled workers and their families.
Boise’s system of green spaces and trails is a crucial element in that city’s ability to appeal to younger technology workers in particular. And Boulder complements its impressive open space and trails with a vibrant downtown, diverse cultural scene, and excellent restaurants.
The report adds that communities in Central Oregon, Bend in particular, have the ability to compete at this level “if there is a continued commitment to green infrastructure, downtown development and a lively arts and entertainment scene.”
Accessible sources of public and private capital, whether for operations or planned expansions, are also vital to help businesses through the recession and to grow as the broader economic recovery develops. Fiscal tools like Oregon’s low interest loans and development bonds, enterprise zones conferring tax and fee abatements, and locally supported loan forgiveness programs tied to specific performance were all perceived as worth continuing and expanding as resources permit.
A bank index or some other way of ranking banks by their willingness and capacity to lend to business would also help firms who need loans to keep their doors open and to reposition as the recession ends.
Securing capital for firms trying to significantly advance a concept or product requires skills and connections that many companies lack internally. The report commended efforts like EDCO’s Venture Catalyst program designed to meet this need.
PubTalk and the Bend Venture Capital conference were also identified as good avenues to expose companies to investors. More generally, firms could use assistance to match their business strategy to the expectations of investors, and then to find the right investor.
Peer-to-peer business networks such as Opportunity Knocks and more industry-specific groups like Central Oregon Bioscience Consortium and High Desert Enterprise Consortium were seen as critical to keeping businesses connected with each other and allowing for the exchange of ideas and talent.
Meanwhile, many firms admitted to being overwhelmed by the range of business organizations in Central Oregon and expressed a desire for more coordination between groups like the Small Business Administration, Chambers of Commerce in the region, and the Small Business Development Center. A common clearinghouse of information and coordination of activities was put forward as a way to create a clear entry point for business new to the area or looking for assistance.
Coordination between firms also should strive to “plug leaks” in the local economy by creating a directory that would allow companies to search for services locally before sending business outside Central Oregon. This could be accomplished in part with a “support each other” campaign that emphasizes how local cooperation supports global competitiveness.
Central Oregon has a high profile surrounding its enviable recreation and tourism opportunities, quality of life, and booming economy of recent decades. Interests in the county should counter any negative impressions regarding the latter, in the aftermath of the recession, with positive news about the economic environment and how in many ways the region is more competitive now than at the peak of the last business cycle.
A number of marketing ideas were also suggested by business owners in the series of interviews, including appealing to families with younger children who may be attracted to the wholesomeness of Central Oregon, and contacting “career harvesters” who have expertise as well as mature networks and may be looking for the high quality life offered in Deschutes County and be willing to mentor younger entrepreneurs.
Almost every business owner talked to for the report visited Deschutes County first as a tourist, and there was support for developing ways to target visitors as potential future business owners and workers in the region. Visit Bend is in fact embarking on this type of effort with its “Job-Creation and In-Migration Through Tourism” plan, though it needs additional resources to succeed.
Compared to peers examined in the report, Deschutes County is isolated both geographically and by virtue of the air, rail, and highway connections to larger cities. While passenger air facilities in the shape of Redmond Airport in particular were seen as exemplary, a commitment to sustain or improve transportation infrastructure was observed as critical to future success.
Diversifying air freight options would give companies more ways to move products in a time-sensitive manner. More convenient railroad cargo service schedules and depot locations, and more competitive pricing would help businesses with bulkier products, while improved passenger rail service to Portland would increase accessibility to that prime commercial center.
Expanding higher education in the region was highlighted as vitally important for Central Oregon to tackle and come up with specific strategies to resolve.
Almost every interview conducted by the report team reaffirmed the interest in a larger university presence—for all the reasons that the University of Colorado is important to Boulder, such as skills, partnerships, idea incubation, spin-offs, and the fostering of an innovative culture. Expansions of Central Oregon Community College and OSU-Cascades were possibilities, as were partnerships like the one OSU-Cascades has initiated with Cornell University’s School of Hotel Administration on hospitality training.
Alexander concluded that: “Successfully increasing the intellectual capital of the community and skills in the workforce over the long-term may well hinge on this question.”
A spokesman for EDCO said that the report had been well received, with widespread interest, adding: “We believe the Headwaters study will prove useful in providing a common reference framework for our area’s assets and challenges, as well as serving as a catalyst for thoughtful dialog about the direction of future economic development.”