Lamoille County counts on snow and niche businesses
The most stunning news to come out of Lamoille County this winter has to do with AIG selling the Stowe Mountain Resort, but that is hardly the only news for this part of Vermont, known for recreation and innovative manufacturers. Having said that, any time it snows in Lamoille County a cheer goes up from business.
This county relies on a snowy winter to attract tourists to its ski areas in Stowe and Smugglers’ Notch. The Vermont Ski Areas Association hailed the Martin Luther King weekend as a great success, as January saw record snowfall in some parts of Vermont.
In the summer, lots of sunshine also means strong tourism. Beyond appropriate weather, the county relies on several niche businesses to supply the mix of jobs that keep the economy healthy. Currently the county's unemployment rate is midway among the state's labor markets. Local business leaders say they saw no major layoffs in 2009 and do not expect any for this year. They remain optimistic about the future as the national economy improves.
An Economic Overview of Lamoille County
At the Lamoille Economic Development Corp, retiring head Art Sanborn assessed 2009 as “a challenge but not a disaster.” Overall, attitudes in the business community “have remained buoyant, people are not down in the dumps.”
The county's industries have niche markets and have maintained “a reasonable market.” With relatively small manufacturers here, “none of the industrial base was so big that the national economy dragged them down with it.”
Sanborn could not recall a significant business lost to the economy. He saw no mass layoffs, although some companies reduced staff more than in previous years.
There is no lack of capital capacity in the county, Sanborn said. However, he acknowledged, “the cash flow requirements to take on debt have become stricter.”
Hurting the more rural areas of the county, like in other Vermont counties, is the issue of broadband service.
“The county has the same deficiencies as other rural parts of the state but our population centers are reasonably well served.” Sanborn said. He sees this as a problem if businesses want to locate outside the industrial areas that are well served. The best approach, he said, is to rely on the state Telecommunication Authority and Tom Evslin to complete the smart grid as fast as possible.
Construction, like elsewhere, is off. “The industry in our county is very adversely impacted in the down economy and housing starts are way down,” Sanborn said.
The retail sector, especially in Morrisville, is stable, with “retailers stressed but no significant closings.” However, “the Stowe market area had more significant closings.”
The overall job picture for the county, Sanborn said, shows an unemployment rate “that has not increased as badly as other areas of the state. The jobless rate is not drastic but the gross income generated is down.”
One local manufacturer that has had some difficulty this year was Hearthstone, which makes wood and gas burning stoves.
“We’ve been healthier. Business is down about 20 percent,” said company president Dave Kuhfahl. He attributed the decline to the economy. With 2008 fuel prices dropping precipitously, for a company that relies on high prices, this hurt the bottom line. High fuel prices, he said, make wood and other fuels more attractive. This may get harder for his company as it feels the pain from high prices, now at $4 a gallon instead of $3. In 2009 the company shipped about 11,000 stoves into North America and Japan. Employment here dipped just a bit from 56 to 50 employees.
Kuhfahl predicts “a year or two of stagnant growth,” he said. The company will redo its gas products, add new logs and flames and introduce new products including a pellet stove. It remains optimistic and will continue “to invest and trust in the future.”
The American Reinvestment and Recovery Act (STIM) helped stove sales as there was a provision for biomass, including wood stoves, for a 30 percent tax credit on stoves up to $1500. All Hearthstone stoves qualified.
“Would we have sold less without it? Yes, it helped minimize the loss in sales,” said Kuhfahl. As a result of the tax credit, the company witnessed a flurry of sales at the end of the year.
The credit issue also affects the stove business. Many of Hearthstone's dealers no longer have the credit line they once were able to carry and thus are buying more conservatively, said Kuhfahl.
Overall for 2010, Sanborn is optimistic. “My sense of the county is we will definitely see economic improvement,” he said. “Our economic diversity based on our small businesses will allow this and the rebound in the national economy will see more money moving through the county due to tourism. This will result in our businesses seeing a healthier bottom line.”
Local small industrial businesses are in a growth cycle, attracting new customers and learning how to be more productive resulting in better profit margins, Sanborn said.
“My feeling is that we are still in an economic tough time and eyes are on the Statehouse,” said Cindy Locke of the Lamoille Valley Chamber of Commerce. She wants the legislature to find common ground and provide a better business environment, she said. Factors hurting local business are high unemployment and Workman's Compensation taxes.
“What affects Lamoille County affects all of Vermont. We are looking at wanting to balance the state budget,” Locke said.
A sign of difficult times is the loss of some chamber members. “They are not going out of business but selectively paying bills,” she said.
For this tourism dependent county, Locke wants to see more money added to the Tourism and Marketing Department budget; up to $6.8 million from the current $4.1 million.
In November the chamber sponsored its first Green Mountain Business Expo, which was modeled after the Vermont Business and Industry Expo.
“We felt it was needed in the region to promote business in the Lamoille region,” Locke said. “Exhibitors came from Washington and Orleans and Chittenden counties as well.” The event was “very optimistic,” she said.
“The optimism was there,” Locke said. “People left with leads and there was a general overall feeling that this chamber is business oriented and a great benefit to have.”
“We are going to do fine,” she said of 2010. She sees commercial projects in the works and “a lot of reserved optimism.”
This past holiday season was “a little better than last year,” said Ed Stahl with the Stowe Area Association. December was “pretty strong for retailers and restaurants and better for the hotels.”
2009 was a challenging year for association members. “We had a double hit: the national economy and a summer of rain for July,” said Stahl. The fall was strong. January's early and plentiful snow helped get 2010 off to a good start.
There have been no business closings as a result of the difficult economy, said Stahl. Hotels have struggled with mid-week occupancy issues, and consumers are playing “let's make a deal,” he said.
While most of the association's advertising is aimed at summer and fall, one observation is that more New Jersey residents are visiting the area. The area has benefited from the difficulties with air travel and a lack of snow in the west this year.
With so many jobs tied to tourism here, especially in Stowe, Stahl said that his association is “fairly fully employed” with “some seasonal jobs still to be had.”
One issue businesses face in this difficult economy is finding credit. David Silverman, the senior loan officer at the Union Bank in Morrisville, said his bank has money to lend. “Despite what you read about the big banks, we haven’t changed our credit criteria,” he said. In 2009 the bank had a record number of residential loans that were refinanced.
Business and commercial loans are available in “a fairly active market,” he said. While the bank is not involved in financing many startup businesses, Silverman said he is seeing a fair amount of expansions, especially in high tech businesses that are buying equipment to make their operation more efficient. He sees local machine shops making small precision parts and manufacturers expanding and renovating space.
In this sector, Silverman said the county has avoided large layoffs because no one company dominates here.
“Our companies are small and stay steady,” he said. “There are some positive growth stories and people are bucking the economy.”
“A year ago we were looking at financial Armageddon,” Silverman said, “and we’re not there. Lamoille County and Vermont have fared far better economically than many places in the country. We are very fortunate.” For 2010 he predicts an uneven economy, but “somewhat better than 2009 with 2011 and 2012 stronger leading to a solid growth pattern.”
Employment in the County
Lamoille County was ninth in the state in terms of unemployment as of November, according to the Vermont Department of Labor. Labor Department analyst Andy Condon said the county's numbers fell in the middle of the state's 17 labor markets. In November, the county reported 6.7 percent unemployment and “appears to be doing a bit worse than the state in net job growth,” he said. In the second quarter of 2009, Lamoille County was down 5.3 percent in job growth while the state as a whole was down 3.7 percent.
Condon attributed this to the fact that this county is “relatively dependent on the tourist industry and the second quarter from April-June is quiet for tourism.”
“Tourism is, in my mind, recession sensitive,” said Condon. “I think given that 2010 isn’t going to be 2009 in the job market, it will continue to be a struggle. I think we are seeing the bottom of job losses, but won’t see much of an improvement in the next year.”
While tourism drives the economy in the county, manufacturing here is lower than the statewide average of eleven percent. However, he said “the industries Lamoille has are industries that will probably survive.”
Real Estate in the County
For Lamoille County, as for the rest of Vermont and the nation, 2009 was at best a challenging year for real estate sales.
“The first two or three quarters were very slow but activity picked up in the fourth quarter as the market stabilized,” said Stowe Realtor Pall Spera. “The significant issue here is the value of the properties sold not the volume. On average prices here have dropped 20 to 25 percent. Partially the problem relates, to the inability of people to recognize price to market value. While prices are not down to ten years ago, we have come off of the highs in some places significantly.”
Stowe is heavily dependent on the second home market, which is challenged and off by a significant amount. In 2009 in Stowe total sales amounted to $80,433,000, down
from $154,200,000 in 2008. In 2008 there were 1021 unit transfers filed in Stowe, in 2009 there were just 682 transfers.
“I don't see a rebound in pricing for a long time,” said Spera. Part of the concern in Stowe by out of town purchasers, he said, is that real estate taxes are high compared to other national resort areas. On a $2 million property here there are about $40,000 in taxes, but that tax bill is significantly cheaper in resorts like Aspen, Colorado and Sun Valley, Utah.
“We are losing vacation home owners to other states with lower property taxes,” said Spera. “We don't want to lose those people because of the ancillary issues and services and jobs they create.”
Spera sees 2010 as “continuing to be wellness toward recovery but no price increases.”
Stowe Mountain Resort Sold
For over a year, since the near implosion of the Stock Market in September 2008, there has been concern over the status of the Stowe Mountain Resort. The resort was owned by American International Group, the insurance giant that received a considerable amount of cash as part of the bailout of Wall Street players. That concern was allayed in early January when news was released that AIG had sold the resort to Chartis, an insurance company formed last summer by AIG. That entity acquired the resort Dec. 31. Terms weren't disclosed.
AIG was the recipient of close to $182 billion after nearly collapsing. Last May it said it was taking offers on the resort as a means of divesting itself of non-core assets. In July, Chartis was formed as the AIG subsidiary for its property casualty and general insurance business.
The news of the property transfer comes as a relief to many in the Stowe area.
“There is a sense of relief at the company in that the uncertainty of the last year and a half with the resort as an economic engine in the county with jobs and ancillary businesses have finality to the resort ownership with no significant changes,” said Stowe Mountain Resort spokesman Michael Colbourn. “The rumor mill was constant but it has now been put out.”
With 1500 jobs at Stowe Mountain Resort's ski school and lodge for the winter months plus an average 500 full-time year-round jobs, the relief that there will be continuity and little change was palpable in the Stowe area.
Ed Stahl at the Stowe Area Association agreed with Colbourn that the transfer brings stability. “They are part of a very profitable company,” he said. “It resolves the issue from people who want to buy property at the resort. They now know who the owner is. We all believe this is extraordinarily positive. This is probably the best outcome by far.”
Spera was also upbeat. “I think its a positive, there is some stigma with AIG,” he said.
For Stowe, this asset transfer will provide the stability that makes sales of resort area property enticing, said Spera. “Chartis has some real Stowe loyalists in their corporate executives and that is a very positive thing,” he said.
Lamoille Economic Development Corp Executive Director Retiring
Arthur Sanborn, who has led the LEDC since April 2008, will retire this April. Formerly, he was the town administrator for the town of Lyndon. Sanborn said his accomplishments in his two year stint at the LEDC included the completion of the sale of the Lamoille Valley Railroad property to MSI. He was also proud of his work in reconstituting the regional Workforce Investment Board, developing stronger local partnerships with the Stowe Area Association, the Lamoille Valley Chamber and the Regional Planning Commission, he said.
LEDC accepted applications through the end of January. “I am confident the corporation will be well served by the transition expected to take place in early April,” Sanborn said.
Sanborn will remain at LEDC during any transition period. When he departs, he said he will fully retire to take care of his property in Kirby.