The Gristle

Business Climate
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BUSINESS CLIMATE: Two major employers have announced layoffs, prompting discussion of the health of the local economy.

At one of the first candidate forums at City Club last week, Whatcom County Council candidate Bruce Ayers laid the blame for the businesses’ troubles squarely on Bellingham’s “anti-business climate.” Apart from a lazy opportunity to drip venom on a community Ayers loathes, his is a curiously nonsensical statement.

In the case of Haggen Foods, it seems very much the opposite is true. Only after the beloved local grocer stepped outside the supportive environment of the Fourth Corner and expanded into the larger West Coast marketplace did the company’s business plan suffer. Haggen announced as part of the company’s reorganization they’ll close more than 100 stores in that expanded market and refocus energy on their original portfolio of 37 stores in the Pacific Northwest. The core stores include 16 of Haggen’s historical stores, a third of which are in Bellingham. Ayers, whose own consulting business imploded ruinously in the late ’90s following an unwise merger and expansion, leaving his creditors and employees holding the bag, might have some insight into the inherent risks of mergers and expansions.

The engineering and consulting firm CH2M Hill, which announced it will close its Bellingham office, cited a downturn in the oil and gas industry, a significant client base for their services. The woes of the oil and gas industry are not specific to Bellingham; but in the instance of Cherry Point, the consultants have been hanging fire for more than 20 months waiting for the Gateway Pacific Terminal applicants to stop shilly-shallying around, stalling as coal futures crater, and complete the datasets required for the environmental impact statement for the proposed coal pier. The consultants were selected for this work in May 2012. That’s a long time for CH2M Hill to carry a staff. Instead of that work, the GPT project applicant and their associates have been mucking around in state and federal and local politics while whipping up anti-Indian hatreds. Ayers, one of the architects of the local Wise Use property rights militantism in the ’90s, and its white supremacist offshoots like United Property Owners of Washington (UPOW), surely has insight into how anti-Indian rhetoric advances the corporate goals of resource extraction industries.

If by “anti-business climate” Ayers means an intolerance for racists, pickpockets and con men, we hope he’s right about Bellingham.

As to the larger question of Bellingham’s business climate and economic health, a map describes the territory.

It’s a map originally produced by Bellingham Public Works and picked up by their county counterparts in a recent presentation to Whatcom County Council as that body prepares to approve a six-year Transportation Improvement Program. Under the state’s growth laws, cities and counties are required to produce the TIP planning document in order to be eligible for state and federal grants and matching programs. The City of Bellingham approved their TIP in June, and County Council prepares to do likewise this week, updating more than five dozen road, bridge, marine transport and capital construction projects in their planning document that carries through 2021. In County Council’s deliberations, an interesting discussion opened concerning that map of business developments north of the city and the public investments being made to serve that development.

The map shows economic development activity exploding north of the city between Bakerview and Slater roads, including shopping centers, hotels, housing projects and business expansions.

“Every one of these things is a development,” county transportation engineer Joe Rutan laughed as he marveled at the crowded map. “It shows all the retail—Costco—home subdivisions, hotels, community college expansions, banks and more. A lot of development, and it’s occurring south to north.”

It looks healthy, but is it? A great deal of this construction targets or serves cross-border commerce, and as such it is sensitive to the exchange rate and the relative strength of the Canadian dollar. The Canadian dollar, in turn, is highly dependent on a resource extraction economy—notably, the weakened oil and gas industry.

Policy analysts who study border economics have noted the exchange rate on the Canadian dollar can’t drop much below 80 cents against the U.S. dollar before the economic advantage of shopping or traveling in the United States closes down.

“To the extent that cross-border sales account for a large fraction of total activity in a county, fluctuating levels of cross-border shopping could lead to boom-bust cycles with congestion during the booms and idle capacity during the busts,” economists at Western Washington University’s Border Policy Research Institute wrote in a report released in June.

“During periods where the Canadian economy performs relatively better than the U.S. economy, as was the case following the recession that began in 2008, then the Canadian dollar will tend to rise in value relative to the U.S. dollar and the resulting transfer of retail spending from B.C. to Washington will work to offset the relatively weaker economic conditions on the U.S. side of the border. The opposite effect would occur if economic conditions were relatively weaker in Canada.”

And yet, Bellingham and Whatcom County are poised to make significant public investments in this volatility.

“It demonstrates how development drives the need for these improvements,” County Public Works Director Jon Hutchings commented. “To that end, there have been a number of conversations going on between the City of Bellingham and developers around that northern end of the city limits.

“There’s a recognition that the results of that development will have impacts on Whatcom County’s transportation infrastructure.”

Vexing to some on County Council are enormous investments of the county road fund in support of developments in Bellingham’s urban growth area.

“The unincorporated county pays into the road fund, the City of Bellingham does not,” Council member Ken Mann articulated the concern. “But I see a lot of money being spent on county roads that seem to be connecting the City of Bellingham to City of Bellingham, or upcoming annexations. In the big picture, what I really don’t like is, here we are tallying up tens of millions of dollars and we’re essentially just facilitating or accommodating this urban, low-density creep northward. When I got involved in county government, that was exactly the sort of thing I was opposed to.

“I’m having a hard time getting excited about any of this,” Mann said. “I have heartburn over this general trend.”

In sum, the business climate appears to be running red-hot, and rather heedless of wisdom in doing so. Less enthusiastic is the public’s desire to bear the costs of that hot climate.

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