Sandpoint and North Idaho Economy

North Idaho Real Estate and Economy - Spring 2009

By Gary Lirette, Host of North Idaho Business on KSPT and KBFI and Realtor for Tomilinson Sandpoint International Realty.

How are things here in North Idaho? Besides being named to Sunset Magazine’s Top 10 Resort Towns this year, Idaho was just named the nation’s 8th healthiest state. In Sandpoint and Priest River, several new businesses just opened, including a Jack in the Box, Big 5 Sporting Goods, the Priest River Inn, and Zip’s. The new Mountain West Bank building on the way to Priest River now graces Highway 2, and the Panhandle State Bank is a monument downtown. Quest Aircraft just hired 60 new employees, and the dredging was just completed for the start of the Sand Creek Byway. This multi-year project to circumvent Sandpoint will provide dozens of high-paying jobs for the next three years. When the CEO of Quest was on my radio show, he also pledged to hire scores more over the next several months to meet the demand for his first-rate aircraft.

A lot of noise has been made over the unemployment rate going up a couple of points since summer quarter.

Looking back on historic figures since 1990, there has not been one year in which the rate did not increase during winter months. The facts are, in that eighteen year period, Bonner County had 47 months of unemployment over ten percent; the highest rate was 15.1% (Thank God for our current low rate); 40 times the rate swung more than two percent; several times the monthly or quarterly change was 4%, 5%, or even up to 8.4%. Why such volatile swings? In a county with under 50,000 full-time residents, seasonal changes because of weather and tourism make great changes the norm. Alarmists sound the bell, but don’t actually look at what our area is all about. Compared to the national rates, we are still ahead, and our future does not look bad. Click here to view the Unemployment Rates 1990-2008

Since 1997, the biggest gain we have had in employment is in manufacturing. With companies such as Quest Aircraft, Airtow, Encoder Products, Litehouse Foods, Coldwater Creek, and Thorne Research, we have better than average big company representation. In ten years over 1,000 new jobs have been created in Bonner County. Many think tourism is king. While important, it is only a fraction of our base.

One of our shining tourist draws is Schweitzer Mountain Resort. The ski resort was not fully up and running at that time, but once ski season got fully underway it helped our economy greatly. Tom Chasse is coming on my show, North Idaho Arts and Adventure on Tuesday, December 17, 2008 to talk about the upcoming season, as well as the very slick and new Schweitzer Magazine. Schweitzer was named last year to Skiing Magazine’s Top 25 Ski Resorts, and is coming off a record two years.

According to Jeff Bond, owner of Tomlinson Sandpoint Sotheby’s International Realty, the company had its best September ever this year. Plus, we had sales for our office over 23 million for the month of December 2008. Certainly we have seen a decline in prices. Some estimates for our area are declines of 4%, 6%, and 6% for the last three years. However, we saw increases of 30%, 40%, and 40% the previous three. All in all, we are not doing so bad in real estate. Most values are maintaining, and sales, while not robust, are certainly better than other parts of the country.

Across the country the banking issue has been disconcerting to say the least. Home loans are tougher to get. Borrowers need to have sparkling credit, and according to news reports, 20% down payments are also becoming the norm. For those looking for loans in North Idaho though, the best resources appear not to be national companies, but local sources. Mountain West Bank did not take on the kind of bad loans that bigger banks took on, and recently, a story was sent out by Judy Delucchi about a loan that was falling apart right before closing. Jason Hauck of MetLife (that’s right, they make home loans, too!) put together a loan at a decent rate in just one week. The changes with USDA loans are generous. Joseph Cool of USDA in Post Falls says that a family of three can buy a home anywhere in Bonner County, and they can make in excess of $70,000, and even get assistance. There is money out there for loans in the Inland Northwest. Just look down the street rather than around the globe.

Another alarming trend people have noted in Sandpoint is the closing of several area restaurants. Sandpoint has had some trouble keeping fine dining restaurants open. After the Power House Bar & Grill closed, Montana Pizza opened one of their Craggy Range franchises at the Power House. It lasted one season. The successful and beautiful new Lodge at Sandpoint had the venerable Swans Landing restaurant, but is now on its fourth restaurateur in five years. The new owner, Claudia Dick, who also owns Café Trinity at the Crossings at Willow Bay and Cafe Trinity in Sandpoint, has opened another restaurant venture there called 41 South. The old Passtime, a staple of downtown Sandpoint, was renovated at great cost to the Chicago transplants that hoped that Sandpoint was ready for a nightclub and cool eatery, but also closed after a couple of years. Three Glasses opened with Chef Luigi from Alba, Italy and fantastic reviews. John and Darcy Peters hoped that the incredible wine list, live piano music, and very, very good food would attract enough business to warrant gutting the building at considerable cost. Result? Closed doors. Upstairs, the Loading Dock has found limited success as a deli and pizzaria. They have since made the restaurant into a kind of concert hall with some success. Out in Hope, Barney Ballard hoped the Dock of the Bay, with its fine menu and wine selection, would make it, but when rents were raised, he gave it up and opened the new Tango Cafe in the Panhandle Bank building in Sandpoint. Now Gloria Waterhouse is looking to sell the Sand Creek Grill. Fine dining just doesn't seem to be able to survive here, and many miss restaurants like the Garden. The one constant in many of these closings is the high rent or mortgage or cost to renovate. From personal knowledge I know. Having owned, not rented, my own restaurant in Sandpoint, even my small $1,000 a month mortgage was tough to pay. High-end restaurants have the smallest margins of all eateries. Truth is, while we seem to have enough people to support these dining rooms, we actually don't. Plus, though we appear to be a prosperous community with so many wealthy people finding homes here, many are not full-time residents. Our wages are still low compared to the rest of the nation. Still, we do have some pretty good places to catch a bite. Recently I interviewed Tom Guscott of Arlo's Ristorante, and by all accounts, they are doing well, employing twelve employees even in winter months. After a fire there last year, the worry was they wouldn't reopen. The moral of the story is when a business is run well, Sandpoint entrepreneurs find success.

Conversely, small businesses like restaurants are not closing in Priest River. Loyalty of the customer base there is better than Sandpoint, so, though profits during boom times are lower, consistency of customer returns keeps businesses afloat. Plus, Priest River just opened its first wine bar, and the new Priest River Inn.

I have used restaurants to illustrate what all business owners have concerns about in Sandpoint. How to pay the bills when business is slower. The lessors here seemed to universally raise rents as the area's reputation glowed in the national press. Tourism was on the rise, housing values were going up, unemployment was remarkably low. Without viewing economic data, using anecdotal evidence, building owners made business decisions that seemed based on Seattle rates. The lesson is to keep good and steady renters, lower or at least more affordable rents allow businesses to have the time to become more successful. As their success turns to long-term customers and clientele, the business can continue to pay the rent, allowing the lessor to have his spaces stay rented. Empty storefronts are not good for any part of our community.

Every month I interview new businesses and pour over economic information. Like the rest of the country, we are having difficult times. However, from these interviews, what I garner is optimism and 24/7 commitment to excellence and success. The people here are amazing and friendly, plus hard-working to a fault. We all love the beauty of the area, and are inspired by the lakes and mountains.

So, any way you look at it, whether from the numbers or by the anecdotal conversations with people who work here and run stores, shops, and businesses, we are doing well.

Real Estate Market Conditions for North Idaho – Spring 2009

Business Conditions in North Idaho

Our major employers are not strapped for funds. Luckily, companies such as Coldwater Creek, Thorne Research, and Unicep Packaging are cash-rich, though the stocks for Coldwater have not been this low since 2003. The current economy is troubling for many, but our area is graced by continued good stewardship of its companies, many of which have national and international business: Coldwater Creek, Quest Aircraft Manufacturing, Buck Knives, Airtow, Easy Docks, Encoder Products, Thorne Research, Unicep Packaging, and Litehouse Foods are all companies with low debt and good cash reserves. Even our banks are among the few that did not make the kind of destructive loans that has put our nation at jeopardy.

Finding out about how many businesses are going under and how many are opening is fluid at best. Cathleen Hyde of the Downtown Sandpoint Business Association said that what people see from the street is not a good indicator of occupancy rates. She explained that the visible storefronts might give the appearance of empty buildings, many have simply moved to inner spaces that were significantly more affordable. In fact, we are down about 20 businesses over last year. However, there have been so many new start-ups, including big box stores like Big Five sporting goods opening on Fifth, and other national chains like Jack in the Box and Subway. The new digs for Mountain West Bank and Panhandle State Bank are stunning additions to our town, and with companies like Parsons hiring for the Sand Creek Byway and Quest continuing to hire, our job situation is a mixed bag.

The current rate of occupancy is virtually no different than 2003-04, though does not approach the 94% we saw in ’06-’07. This is probably a good thing though. One of the things that makes Idaho an attractive place to do business are the low costs. We have had a booming economy in some sectors for twenty years. It was not uncommon over the last 3-4 years to see rents in the same high rates as Spokane or even Seattle. With the downturn and closed storefronts, rents have come down to reasonable levels.

Plus, while some businesses have gone under, certainly our rate of bankruptcy is not overt. Idaho ranks 22nd in the nation for bankruptcies, putting it squarely in the middle, and most of the bankruptcies and foreclosures are in areas south of the North Idaho counties of Bonner and Boundary.

Coeur d’Alene is not faring as well as Sandpoint, but predictions are for a fairly rapid recovery even there.

Why do companies, without much of a tax incentive, find Sandpoint and North Idaho so alluring. Check out this video from the Bonner County Economic Development Corporation: http://www.bonnercountyedc.com/business-video.html Basically, one of the biggest draws is quality of life, but there are other reasons.

On their website they explain:

Skilled Employee Pool

Part of the inherent ease of doing business in Bonner County is its bounty of skilled workers. And when you’re located in a beautiful area that happens to have a lower cost of living, it’s particularly easy to find employees who are excited about being part of your growth and productivity. Additionally, Idaho distributes a Workforce Development Training Fund to help Idaho businesses train their workers, so you can have a knowledgeable team up and running in no time.

Low Business Costs

In Bonner County, you’ll also discover some of the lowest workers compensation premiums in the country, thanks to Idaho’s emphasis on working safely and productively. And, having already dropped 36% in the last five years, rates continue to fall steadily, making this an ideal time to relocate your business.

Overall, the costs of doing business in Idaho are much lower when compared with other parts of the country. According to the Regional Financial Associates, Idaho is the seventh best state in the country for total business-related expenditures. For example, many companies find their overall energy costs are half of what they would be in other western regions. And gas prices are just as attractive, as the state is conveniently located on a major north-south natural gas pipeline.

Idaho enjoys a business-friendly government that is committed to helping businesses become successful, profitable assets to its communities. And state and local officials have worked hard to ensure a balanced tax structure that has to date resulted in the third lowest per capita tax burden in the West.

One thing not as easily quantifiable is that employees here have an old-fashioned, show up for your shift, work ethic. Until very recently, Idaho had one of the lowest foreclosure rates in the nation in spite of lower wages than neighboring states. Why? Values that still are important here.

Certainly it has become harder to find work. Once a month for the last few the Bonner County Daily Bee has posted the same story about the rise in the number of unemployed...and, of course, it is true. We enjoyed unprecedented low unemployment for the last few years. Still, since 1997 manufacturing jobs increased in Bonner County by over 1,000, Quest just delivered its first aircraft to missionaries, as another wrote last time, Litehouse is always hiring, and though there are few jobs in the Bee, this is not the bellweather for job postings. For instance, there are dozens of jobs listed in NorthIdahoHelpWanted.com , and Sandpoint Online has similar numbers. Other jobs can be found on Craigslist regionally, and on the job search engines like Monster.

Tourism

There have been several restaurants that have closed in the last year, yet we have seen several new ones also: Jack in the Box, 41 South, Subway, Dish to name a few. We saw a real slowdown in summer tourism, much of which can be attributed to the high cost of gasoline, yet we saw few businesses shut down. In fact, in an interview I had on my radio show with Tom Chasse, CEO of Schweitzer Mountain Ski Resort, he explained that bookings for this season were on a par with last year’s, and that season was a record breaker for the ski resort. If the throngs that turned out for Sandpoint Winter Carnival are any indicator, then this winter will not be as bad for North Idaho as it has been for many other parts of the country.

According to the Journal of Business, the economic outlook for 2009 expects a soft year for tourism:

Jeanne Gustafson reported that Tourism is expected to slow further in Spokane and North Idaho in the coming year, though event bookings remain strong, observers say. The article went on to state that 2009 group hotel room bookings for events such as conventions so far are up by 2.3 percent compared with 2008, and such bookings for 2010 already have surpassed this years's group bookings.

Coeur d'Alene and North Idaho hope to maintain their current levels for tourism in the coming year, in contrast to double-digit growth in hotel receipts that those areas experienced last year, says Dani Zibell-Wolfe, vice president of tourism at the Coeur d'Alene Chamber of Commerce. The chamber also administers state grants for the North Idaho Tourism Alliance, which promotes tourism in the five northernmost counties in Idaho, Zibell-Wolfe says.

Last summer, Canadian visitors contributed a lot to the economy, choosing northwest U.S. destinations because of favorable exchange rates. Though gas prices were high in the U.S., they were even higher in Canada, Zibell-Wolfe says.

One trend Zibell-Wolfe says is expected to continue is a rise in tourism from areas within a four-hour drive from Coeur d'Alene.

Idaho Foreclosure Rates

Our local newspapers have regurgitated this misleading info about foreclosures, namely that they are skyrocketing. Only six months ago it was reported that Idaho was the eighth best state in the nation. In other words, one of the lowest rates. Now, less than one year later, we are ranked closer to the bottom. Same thing happened with misleading reporting when our unemployment went up two points this winter. But looking at the data since 1990, this is the absolute normal pattern during winter months. Plus, Schweitzer Ski Resort has not even hired its full staff yet.

Here is what ForeclosureResearch.com wrote in December 2008:

Idaho foreclosure rates: Nothing to be alarmed about