Economic study shines new light on the financial vigor, future of Ravalli County

Local economic development shouldn’t simply comprise a shopping list of
projects for which community leaders scramble to gather state and federal
funding, according to economist Larry Swanson.

By JAMIE OGDEN Staff Reporter

"That’s the old way of doing economic development," Swanson told a group of
about 50 people, assembled last week for the unveiling of the results of his
Ravalli County Economic Needs Assessment study.

Rather, Swanson said, Ravalli County’s best plan for economic development will
include composing a strategy to better position the area for changes in the larger
economy, to take advantage of the benefits of the county’s growth while
leveraging public and private resources, and to become a collaborator in a
broader regional economy.

Presenting a lot of information for the business leaders, county government
representatives, ranchers and other citizens in the audience to make sense of,
Swanson came to Wednesday’s meeting armed with visual aids and a fast
tongue, and spent two hours highlighting myriad findings that resulted from the
study and led to those conclusions.

Commissioned about six months ago by the Ravalli County Economic
Development Authority and funded by the U.S. Forest Service, the study was
intended to help the county’s EDA and others find a direction for building an
economic development program for the area.

"We’re trying to assess, to gather the wind in our sails, for the new economy . . .
and to strengthen the valley’s position to move forward in the next 20 years," said
EDA Chairman Emil Erhardt, president of Citizens State Bank, when he
addressed the crowd.

Part of strengthening that position involves taking stock of real changes in the
area economy, rather than relying on commonly held, but not necessarily factual,
convictions about the nature of local change, according to Swanson.

For example, Swanson said, many people seem disturbed by Ravalli County’s
growing service economy, holding that the transition to a service-based economy
means transplanting traditional jobs for lower-paying employment like food
service.

But, Swanson said, the service economy also includes skilled and professional
jobs in the health services, law and accounting. And it’s the fastest growing
sector of the nation’s economy as well.

"We have to be careful to not simplistically interpret that this type of change is
bad," he said. "I mean what do we want our kids to be? Doctors, right? And
lawyers, right? – well, maybe not."

The reality, according to Swanson’s research, is that Ravalli County is part of a
region where economic growth and growth in personal income are high. Ranked
against 24 "peer" counties throughout the West, Ravalli County placed first in
total employment growth and second in total personal income.

In a database search to identify "peer" counties with characteristics similar to
Ravalli County, however, no matches landed within the state of Montana, where
per capita income is slipping statewide and rural areas in the eastern part of the
state are facing economic hardship and population loss.

"You’re not like Montana," Swanson said, which means citizens cannot
necessarily look to the state for direction and resources, or worthwhile
comparison.

Instead, Swanson advocated greater cooperation and collaboration in the regional
economy, including strengthening ties to the Missoula-area economy.

One of the fears expressed in Ravalli County is that the local economy is too
heavily reliant on Missoula, and getting worse, said Swanson. But, in fact, the
area economy is not climbing in its dependence on Missoula, he said, and has
demonstrated a fairly stable – if slightly falling – rate of reliance on the metro
center.

While being close to a regional population center like Missoula can draw some
business away from the hinterlands, Swanson said it offers many advantages as
well, such as access to good air service, high-end medical services, work force
training and adult education programs, additional capital sources, and more.

"You’re perfectly positioned, with a lot of assets at your disposal and ample
options to alter change, to condition it, in some very positive ways," said
Swanson.

While more isolated rural areas struggle with economies and populations in
decline, Ravalli County’s growth, in conjunction with its proximity to Missoula
could make for very successful economic development, according to Swanson.

"If our weaker areas cut themselves off from our stronger areas, it’s like taking on
this 500-pound Goliath, called the economy, with one hand tied behind your
back," said Swanson. "You need to build on complimentary relationships.

"The problem in Montana is not that our urban centers are in economic decline,
but that surrounding rural areas are struggling, stuck in economic restructuring,"
he said. "Ravalli County can lead the way in that respect, just simply because of
the growth and vitality you have to tap into, potentially."

All of which is not to say that the Bitterroot’s economy doesn’t demonstrate
some worrisome trends, according to Swanson’s findings.

For example, the county has a disproportionate number of self-employed
residents – about 40 percent of wage earners. While growth in the non-farm
self-employment sector is traditionally a positive economic indicator, Swanson
said other factors lead him to believe that Ravalli County’s self-employed are
more likely to be just trying to put together an income.

Because much of the area’s self-employment is part-time and annual earnings of
the county’s self-employed have been declining over time, Swanson said the high
levels experienced here are more reflective of a "survival mode" than economic
vitality.

"That’s a by-the-seat-of-your-pants economy," he said, recommending that a
thorough inventory and survey of the county’s self-employed be conducted to
learn more about the needs of those workers.

Another worry, according to Swanson, is Ravalli County’s high reliance on the
construction and real estate sectors of the economy, which saw tremendous
growth through the 1990s. Always a volatile sector nationally, Swanson said a
dependence on construction earnings is very difficult to sustain.

Also a volatile sector, Swanson said real estate earnings have grown to 10
percent of the area economy’s labor earnings – an increase of more than 400
percent over the 1970s.

The government sector, too, has been a big gainer in Ravalli County’s economy
over time when comparing labor earnings, according to the study.

Yet, Swanson said, when ranked against 24 "peer" counties, the county fell to
last in its ratio of government employees to other residents, and other data
shows that public employment has actually decreased proportionately in the last
three decades.

"You may not have a government that’s out of control. You may have a
government that’s being strangulated in the face of high growth," said Swanson.

It’s clear that local government capabilities are under-sized, according to
Swanson, whose full study will feature expenditure and revenue comparisons
between Ravalli County and its "peer" counties to measure the local capacity for
handling growth.

Among his other findings, Swanson said Ravalli County’s economy performs
poorly in per capita incomes and its poverty rate, the latter of which has fallen
slightly over time but remained high, at around 16 percent.

Per capita incomes in the Bitterroot rank near the bottom of similar counties – a
fact that, when combined with other data, led Swanson to conclude that the
thrust of any area economic development strategy should be aimed at qualitative
goals that will improve wages, training and benefits. With a relatively low rate of
unemployment and high employment growth, Swanson said the Bitterroot doesn’t
need more jobs, but better jobs.

Responding to questions from a diverse crowd, Swanson clarified the role of
agriculture in the county’s economy. A sector that consistently contributes $30
million to the area annually, Swanson said agriculture generally "makes a little
money or loses a little money" – which means farm earnings don’t often show up
in earnings figures and, admittedly, undermines the value of the sector to the
local economy. Yet earnings, not sales, are the side that contributes to valley’s
economy, he said.

To a question regarding timber supply, Swanson said he advocates that a base
level of supply be determined and available off local forests. The level doesn’t
need to "push the envelope" by generating undue conflict or impacting other
forest values, but should be reliable, he said.

Log home industry representatives, working for the area’s main manufacturing
sector, have indicated that some local supply would be helpful to doing business,
said Swanson. A base level, "not a maximum," from area national forests would
build more reliability into the timber supply and therefore aid those in the wood
products industry with making decisions and plans.

Additionally, Swanson reiterated that data pooled for the Ravalli County
Economic Needs Assessment focuses on the activity of permanent residents
only. Meantime, Swanson said he is doing some analysis of the county’s
reliance on non-resident investment earnings and tourist sales.

Swanson holds a PhD in economics from the University of Kansas, is considered
an expert in the development of state economies, and serves as the associate
director of the O’Connor Center for the Rocky Mountain West.

Facets of the study included the analysis of major trends over the last 25 years,
designation of area economic indicators in order to aid with continuous
assessment in the future, a peer review with counties similar to Ravalli County,
an economic performance evaluation, and a key assets analysis of the area.

Copies of the full report of the 2002 Ravalli County Needs Assessment will be
available in about one month. For more information contact the Ravalli County
Economic Development Authority at 375-9416.

Editor’s Note: Friday’s Ravalli Republic featured the first article on the Ravalli
County Economic Needs Assessment study. You can read it on-line at
http://www.Ravallirepublic.com, archives section.

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