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Support or no, who and how?
Friday, November 12, 2010

With the ruckus lately concerning the role of local government in assisting the economy in an exit from the doldrums, there are two questions that should be considered as we seek a clear path. The first: what should the role of local government, if any, be in assisting businesses in the battle against a recession? The second: What, in more precise terms, is the “local economy?”

The first question is a tough one, regardless of where you are on the political and economic map. Should the market rule the day? Should government give up revenues to encourage development? Should development pay for itself, (in the form of impact and other fees) in order to ensure that, when growth occurs, money is in place to deal with its effects? And, when times do change, given that change here is predicated on change elsewhere, will any government action be a real cause of the turnaround?

The second question is more easily answered.

What are the component parts of the local economy and what weight do they carry in the overall picture?

A recent report from Region 9 Economic Development District of Southwest Colorado provides some insights.

An analysis of Archuleta County base industries in 2007 showed $99 million coming into the county through industries responsible for overall growth and change. These industries bring in outside dollars to the economy. At the top of the list is tourism, accounting for 34 percent of the money entering the economy from outside the county.

An additional $41.8 million in employment income was generated through local resident services, which recirculate money within the community — health services, education, local retail employment.

The service sector accounted for 40 percent of the jobs in 2007 (2,565) with an average annual wage per worker of $16,489 and total income of $42,294,000. Next on the list were the wholesale and retail trade sector (962 employed with total income of $23,897,000) and construction (960 jobs, total income of $21,670,000); each was 15 percent of the local economy. The average annual wage in wholesale and retail was $24,841; the average annual wage in the construction sector was $22,573. Finance, insurance and real estate services provided 11 percent of total local jobs (681) with total income of $21,076,000 and an average annual wage of $32,417. Government employment also came in at 11 percent (675) with total income of $25,311,000 and an average annual wage of $37,498.

If we break down the service sector, we find 776 workers in the Accommodation/Food Service category; 660 in the Professional/Scientific/Technical category and 396 in the Education/Health/Social Assistance category (with the school district providing 257 jobs and Archuleta County 171).

Total personal income in 2007 was estimated at $261.6 million (with retired residents bringing in $38.6 million in transfer payments and dividends, interest and rent) and per capita income was estimated at $25,145. The Southwest Colorado Index estimates a single person in Pagosa Springs, renting a one-bedroom apartment, needs a minimum wage of $10.92 per hour to get by.

With this snapshot of the local economy in mind, how does one answer the first question? If we agree government must play a role, and we need to decide which part of the local economy will get assistance, which will it be? Which is more vital? Strong arguments are mounted in all sectors that activity there attracts and/or circulates money and creates jobs.

How does local government determine which business areas get the attention and which don’t? Especially considering that some sectors of the local economy will not, and perhaps should not, reach levels seen in the recent past — heights rooted in economic soil fertilized by shaky debt, poisonous financial systems and perilous credit policies. We will not likely see the level of activity in some sectors that was present in 2005 for a long time, if ever. So, should government support select businesses, and if so who and how? The struggle to find an answer continues.

Karl Isberg