InBusiness Spring 2016

WESTERN MONTANA

Missoulian, Sunday, February 28, 2016 — A1

SPRING 2016 ALSO INSIDE ASSESSING THE FUTURE OF COAL WHAT’S DRIVING GROWTH? ROUGH ROAD AHEAD FOR FOREST PRODUCTS

REVUP MONTANA

Combined effort by state’s 2-year colleges, industry producing skilled workforce TOMMY MARTINO, Missoulian

2 — Missoulian, Sunday, February 28, 2016

Business: SPRING

Home, Work by the Numbers

$235,000 $203,000 $204,000 $196,500 $192,500 $204,250

154 149 141 135 135 139

Missoula County for Jan. 1 through Jan. 31, 2016 2016 2015 2014 2013 2012 2011

83 66 59 75 67 54

$235,000 $203,000 $204,000 $196,500 $192,500 $204,250

154 149 141 135 135 139

e ite ad ad an he t r a G Fl

c as

C

ke

La

n

ol

c Lin

4.6%

3.4%

3.3%

9.6%

9.4%

6.0%

December 2015

l ll a A lli rs ne ra ul we va to AN de a o s ine isso T n P R w M Sa ON M llo M Ye

Unemployment in Missoula County, December 2014-December 2015 4.4% 0.0%

5.1%

4.6%

4.5%

3.7%

3.1%

3.7%

3.7%

3.4%

3.0%

3.4%

3.6%

4.0%

Dec. 2014

Jan.

Feb.

March

April

May

June July 2014

Aug.

Sept.

Oct.

Nov.

Dec.

Unemployment in Montana, December 2014-December 2015 4.6% 0.0%

5.3%

4.9%

4.7%

Dec. 2014

Jan.

Feb.

March

3.9%

3.4%

4.0%

3.8%

3.7%

3.4%

3.7%

4.0%

4.3%

April

May

June July 2015

Aug.

Sept.

Oct.

Nov.

Dec.

NOTE: Not seasonally adjusted.

Source: U.S. Bureau of Labor Statistics

Source: Missoula Organization of Realtors

5.6%

83 66 59 75 67 54

Average days on the market

5.2%

2016 2015 2014 2013 2012 2011

Median price

December 2014

4.3%

Unemployment rate by county 4.2%

Number of sales

2,500 -800 200 0 1,000 -300 1,000 -100 1,400 1,000 -1,700 700

NOTE: Total non-agricultural uses the summation of all sectors.

Source: Montana Department of Labor and Industry

Residential market activity in Missoula County Year

600 -200 800 200 -400 -200 -200 -200 100 0 0 200

Net change 1 year

*Not seasonally adjusted

5.1%

126 140 111 131 138 142

4.0%

$229,000 $213,500 $204,000 $185,000 $187,500 $214,000

454,700 9,200 25,600 19,000 93,800 6,500 25,700 39,800 69,800 63,100 60,100 87,600

9.4%

69 52 47 57 53 43

4.4%

2016 2015 2014 2013 2012 2011

11.5%

Missoula urban area for Jan. 1 through Jan. 31, 2016

11.2%

126 140 111 131 138 142

10.4%

$229,000 $213,500 $204,000 $185,000 $187,500 $214,000

5.7%

69 52 47 57 53 43

Average days on the market

Net December change 2014 1 month

456,600 8,600 25,000 18,800 95,200 6,400 26,900 39,900 71,100 64,100 58,400 88,100

5.2%

2016 2015 2014 2013 2012 2011

Median price

6.3%

Number of sales

November 2015

Total nonfarm 457,200 Natural resources, mining 8,400 Construction 25,800 Manufacturing 19,000 Trade, transportation, utilities 94,800 Information 6,200 Financial activities 26,700 Professional, business services 39,700 Educational, health services 71,200 Health care and social assistance 64,100 Leisure, hospitality 58,400 Government 88,300

6.1%

Year

December 2015

6.8%

Residential market activity in Missoula urban area

Super sector

6.2%

Residential and residential with acreage

Industry employment comparisons

4.1%

Residential market activity in the Missoula area for January 2016

KEN BARNEDT, Missoulian

Spring 2016, Vol. 4, No. 1 Western Montana InBusiness is a publication of the Missoulian

Publisher Mark Heintzelman Editor Matthew Bunk

Reporter: David Erickson Photographers Tom Bauer, Mikensi Romersa and Kurt Wilson

Advertising Jeff Avgeris, (406) 523-5216

Mailing address P.O. Box 8029, Missoula, MT 59807-8029 Phone (406) 523-5240

Missoulian, Sunday, February 28, 2016 — 3

Business: spring

TOMMY MARTINO, Missoulian‌

“I am able to show my children that no matter what age you are you can do that,” said Shawna Lester, who received a RevUp scholarship to attend Missoula College. “There are more people out there that understand that it’s OK. It’s not about age, it’s about understanding that you want to be better than you are now. You can better yourself.

You’re not stuck in your job. If you go with a career that you love, you’re going to be successful, you’re going to be able to pay your debts back, you’re going to be able to go above and beyond what you’re doing now.”

Ready to work RevUp program helps nontraditional student take a nontraditional path to a new career

or need. So it’s a benefit to everybody, and I have heavy equipment operator, the opportunity to see the ntil recently, Shawna a welder and a commercial United States and make truck driver all at the same decent wages.”

Lester was stuck Lester said financial aid working three to four time at Missoula College. didn’t cover the total cost “Actually, it’s a dream different part-time jobs at of her education, so the a time, just trying to make come true,” she said of scholarship has helped her Commercial Driver’s ends meet. a lot.

“I still wasn’t being suc- License training, which She found out about cessful, and I just got tired she is midway through.

RevUp only after she “I’ve always wanted to of it,” she said. had enrolled at MisThe 42-year-old mother have my own rig, I’ve soula College. always wanted to drive. decided she wanted to “I met (Workforce NaviIt’s pure excitement. learn skills that would gator) Mickey Lyngholm You know, it’s kind of bring her a high-wage important because I bring when I came through the career, and now, thanks materials to locations to a $1,000 scholarship that people want to buy from the RevUp Montana See Work, Page 5

program, she’s learning DAVID ERICKSON david.erickson@missoulian.com‌ how to be a machinist, a

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4 — Missoulian, Sunday, February 28, 2016

Business: SPRING

RevUp Montana gives job seekers access to training in high-demand fields DAVID ERICKSON david.erickson@missoulian.com‌

‌O

ver 2,000 Montana residents have received training for good-paying jobs though RevUp Montana, a workforce project supported by a $25 million federal grant from the U.S. Department of Labor’s Employment and Training Administration. The goal is to put students into short-term degree, certificate and apprenticeship programs that lead them into high-wage, high-demand jobs in the state. While most high-paying jobs still require 1-2 years of training at least, RevUp programs offer students a chance at quicker training so they can still enter the workforce with the ability to demonstrate the necessary skills.

“Six years ago the Obama administration set aside $2 billion to help change the way two-year and community colleges offer education,” said state RevUp director Matt Singer. “The goal was to better address the skills gap so people are able to meet the expectations for the jobs they have. In every industry, technology is changing, and faculty and so forth may not be up to date. The second issue is the debt load students are feeling in higher education, and in particular for technical jobs. They are not earning enough to justify how much they pay to get an education.”

Singer said employers in Montana are having problems finding skilled

TOMMY MARTINO, Missoulian‌

Mickey Lyngholm is the workforce navigator at Missoula College. Students can learn machining, welding, electrical fundamentals, safety and rigging, heavy equipment operation, and earn their Commercial Driver’s License to be a trucker. welders and other laborintensive jobs. The reason is because the cost of getting an education in those fields is considered too high by prospective students.

“The return on investment isn’t there for them,” Singer said.

Montana has received the 10th most federal funding per resident when compared to the other 49 states.

The money is used to hire “workforce

navigators” at community colleges across the state, who go out and find prospective students and job-seekers who are looking to get an education. The money also goes to buy state-of-the-art equipment and to design curriculum.

“My project specifically focuses on trades-oriented skills like welding, truck driving, manufacturing and machining,” Singer said. “At an individual college level, can we create

state-of-the-art programs with great curriculum designed by the industry, which the Department of Labor calls ‘demanddriven’ and have great equipment? Then at the systems level, how do we have better dialogue between industry and education?”

The program is designed to help students who don’t have three years to spend in education. Rather, they can come in for six months, learn a skill and

then go try to gain a job.

“We try to provide an industry recognized credential in that amount of time so there’s a value-added component they have in that training so they can take out and leverage into higher wages,” Singer said.

“There are embedded industry-recognized credentials, benchmarks established by particular associations, rather than a degree which is amorphous and grey. The

employer on the other end knows this person can do a plate weld and those specific things. It takes the guesswork out of hiring someone.”

Besides the 2,000 men and women of all backgrounds—the average age is about 27—who have gone through the training programs, another 1,600 students have been served through the program’s retention strategy that Singer calls “coaching.”

“Retention increases 7 to 10 percent if someone calls students to check in with them,” he said.

“It’s a plain reality that if people feel like they’re cared about, they will come back.”

Approximately 80 percent of students who have gone through the training in 40 different colleges across the state have found jobs, and that number is much higher in the trucking industry.

“Over the next decade, Montana will be 23,000 workers short,” Singer said. “With the anticipated retirement of baby boomers, we don’t have enough young people. It’s a big dark cloud of a crisis that we haven’t grappled with yet.”

The funding runs out in March of 2017, so Singer has a little over a year left to implement the program.

The workforce navigators are a big piece of the project.

“We have one in every college we work with,” Singer said. “They are designed to work with See RevUp, Page 5

Missoulian, Sunday, February 28, 2016 — 5

from page 3 Work

age, it’s about understanding that you want to be better than you are now. You can Continued better yourself. You’re not stuck in your job. If you go facility for my orientation during the summer,” she said. with a career that you love, you’re going to be successful, “Anything I need, she helps me with. She is my backup on you’re going to be able to pay your debts back, you’re tutoring, helping me relieve going to be able to go above stress, everything.” and beyond what you’re Lester said she is enrolled in so many programs because doing now.”

Lester said she is positive if one doesn’t work out, she’ll she’s going to be able to find have a backup plan. a good-paying job when she “The experience will be graduates in 2018. educational,” she said.

“I picked fields that are Also, the fields she is extremely important to the studying are all linked, system,” she said. “There’s because heavy equipment always construction that operators often need to be needs to be done, there’s able to weld or machine to always welding to be done. repair parts. Additionally, Machining is no longer a heavy equipment operators dying breed. It’s actually who have a CDL are more important that you have an desirable to employers because they can drive back- education in it. With me hoes and other equipment to having a certificate saying I have graduated from these the job site on semitrailers.

Lester said she is providing programs will up my ante and make it easier to find what a good example to her children even though she enrolled I need.”

She doesn’t think her debt in college later than most.

“I am able to show my chil- load will be crushing either.

“I don’t think it will be that dren that no matter what age substantial compared to what you are you can do that,” she said. “There are more people I’ve been doing all my life,” she said. “You know, I think out there that understand it weighs out in the long run. that it’s OK. It’s not about

It’s probably the best thing I could have ever done for my self. There’s challenges, but when you go to a new job there’s challenges. You’ve just got to find help where you can get it, which the school has tons of help.”

Mark Dodge, the College’s CDL instructor, is paid through the RevUp program funding. He said he’s trained 35 students and 34 of them got jobs after they graduated—and the other one probably just decided he didn’t want to work in the field.

“It’s a lucrative industry,” he explained.

Montana Department of Labor and Industry commissioner Pam Bucy said she feels like the RevUp program has been a success.

“Yes, RevUp Montana has been successful both in modernizing training in the industry fields of energy and advanced manufacturing, but also in fundamentally changing the system of how we train,” she said. “We have collaborated to a much greater extent with business to design programs that align to their changing needs. In a

very short amount of time, RevUp has helped implement significant changes and train over 2,000 students in just two years.”

Bucy said her department’s projections indicate that Montana will add 6,500 jobs per year during the next decade.

“Montana’s economy is strong and finished this past year with momentum for 2016,” she said. “Our unemployment rate is considered prime at a healthy 4.0 percent. And for the first time in our state’s history, we have over half-a-million employed Montanans including adding over 10,000 new jobs in 2015.”

Her only concern is that there won’t be enough replacements for the 130,000 workers who are soon to retire.

Currently, there are 123,000 Montanans ages 16-24 available to fill those positions,” she said. “Thus, it is incumbent upon us to ensure that every Montanan is working to their highest skill level in the shortest amount of time possible.”

That’s where the RevUp program comes in.

“We simply do not have

time to allow folks to take two, four and six years completely out of the workforce to receive their training,” she said. “RevUp Montana is critical in making sure our state’s labor force pipeline is streamlined and providing opportunities for Montanans to join the workforce as quickly as possible. With RevUp Montana, our state is not only poised to meet our upcoming workforce needs but this training program is significant in helping to continue growing our economy.”

Montana’s two-year colleges play a pivotal role in the state’s economy, and will continue to do so, Bucy added.

“Montana’s two-year colleges are absolutely critical to providing a skilled workforce for Montana businesses,” she said. “However, it is also critical that industry play an increasing role in developing our future labor pool. It is only through the combined efforts of the private sector, two-year colleges, our universities and Montana Department of Labor and Industry that our state can chart a successful plan for workforce development into the future.”

hire instructors, purchase new equipment like two $30,000 semi trailers, and upgrade equipment to ever-evolving industry standards.

“I find that student that would be a good candidate for college, I help them do applications for admissions, get their immunizations and jump through all hoops you have to go through,” she said.

Lyngholm said she wants to make herself available to help any student or job-seeker.

“They want to be served here, and the RevUp grant lets me do that and makes that a priority for me,” she said. “I go to employers and say, ‘What do we need to do to have you have a trained workforce?’ I work with the Chamber of Commerce and Job Service where we interface with employers. I wear a lot of different hats.”

For more information visit http://mc.umt.edu/revup/ or www.revupmt.com.

from page 4 RevUp Continued

job services to identify underemployed folks and support them through programs and help them find jobs. So really it’s a cradle-to-the-grave assistance for an individual seeking training. We’ve seen big increases in the success with those positions.

Retention is up 13 percent and recruitment has a huge

potential to increase. Essentially they are matchmakers and they are really good at it. It’s something we hope to continue after the grant ends.”

Mickey Lyngholm is the workforce navigator at Missoula College. Students can learn machining, welding, electrical fundamentals, safety and rigging, heavy equipment operation, and earn their Commercial Driver’s License to be a trucker.

“I think of myself as being the hub of a wheel,” Lyngholm said. “I reach out to prospective students and also to building and industry representatives and entities with unemployed populations that might need training and employment,” she said. “So, this week, I was at the Human Resource Council to talk about how to put opportunities in front of people.”

She said the grant pays her entire salary and allows her to

6 — Missoulian, Sunday, February 28, 2016

Business: opinion

Assessing the future of coal: Is there a way back up?

PATRICK BARKEY, PAUL POLZIN and TERRY JOHNSON Bureau of Business and Economic Research at the University of Montana‌

‌T

he coal business is a different kind of energy business.

Unlike crude oil, coal is not a commodity traded freely on global markets. Unlike natural gas, its price is not generally subject to volatility when winters are colder or warmer than expected.

And unlike wind and solar power, its consumption is not encouraged by state renewable energy portfolio mandates for power

companies or production tax credits for producers.

It is the nature of the coal business to evolve more slowly than most. Particularly in the Western states, which now account for more than half of production nationwide, mining is a capital-intensive business, with years of permitting and infrastructure development required to add capacity.

Almost 93 percent of coal consumed in the U.S. is used by producers of electric power, most of it secured through longer term contracts. And in years past, coal has been primarily used to fire base

load electric power generation, resulting in fairly stable demand.

But the last few years have seen profound changes that have descended on the industry with unprecedented speed. Producers in states like Montana, which have benefited from the shift in U.S. production towards western coal as well as the export potential to markets in Asia, are looking at a future that is considerably bleaker than what was envisioned just a few years ago.

Market, regulatory and environmental challenges have clouded the outlook See Coal, Page 7

The Colstrip units 1, 2, 3 and 4 produce power for the Pacific Northwest. The plants face an uncertain future as coal mining and power generation are under fire.

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Missoulian, Sunday, February 28, 2016 — 7

from page 6 Coal

deposits straddle the Montana-Wyoming border.

Even as domestic demand Continued for coal was stagnant, the promise that high quality for major coal producers, sending the stock prices of coal mined from very the four largest companies efficient surface mines in plunging by 80-95 percent the PRB could tap into the growing Asian markets was compared to year-ago levels. Financial challenges attracting attention and investment. have beset many global In the five years that commodity producers with the unwinding of the com- have elapsed since that announcement, the modity boom in the last fortunes of the industry 12 months. have soured significantly.

The International A combination of changes Monetary Fund’s index of in domestic markets, global all commodity prices has markets, and regulatory dropped by a third since setbacks have produced summer of 2014. But the reversal of fortune in coal, this outcome. traditionally less exposed The Competition to the boom-and-bust cycle of other energy com- From Natural Gas modities, has been espeThe domestic coal busicially severe. The outcome ness has changed because of the profound adjustthe entire energy business ments underway will be an has changed. Most of important factor in shaping those changes stem from the outlook for states and the shale oil and gas boom regions with exposure to in the continental U.S. the industry’s fluctuations, that began in earnest 10 including Montana. years ago. It is difficult Yet the fate of the U.S. to understate the impact coal industry depends of the production of oil, on more than markets. natural gas, and natural Public policy decisions in gas liquids directly from three key areas – carbon source rock that innovaregulation, infrastructure tions in horizontal drilling expansion and manageand hydraulic fracturing ment of federal lands – will have enabled. play an important role in Those impacts have determining the industry’s propagated to coal marfuture trajectory. In fact, kets largely through the as troubling as the last two increased production and years have been for those falling prices of natural who depend on the coal gas. Prior to 2005, U.S. economy, it is the future natural gas production that will be shaped by was largely stable, with these decisions that is of increases in domestic greatest concern. demand pushing up both When the Montana Land prices and imports. Most Board voted 3-2 to approve imports were sourced from the leasing of 570 million Canada and transported tons of coal to be developed by pipeline.

by Arch Coal on stateIn the pre-2005 era, owned land in the Otter plans were underway Creek tracts in southeast to construct expensive, Montana on March 18, liquefied natural gas (LNG) 2010, expectations for the terminals to import gas coal industry were high. from countries like Qatar, That was particularly so for and discussions on a producers in the Powder pipeline from the northern River Basin (PRB), whose slope of Alaska to the lower

48 states were continuing.

Huge increases in gas production from shale plays in states like Texas and Pennsylvania have ended those discussions.

The 40 percent increase in U.S. gas production that has taken place has caused wellhead prices to fall by more than half of their mid-decade levels. And because the new production is sourced closer to population centers where demand takes place, changes in delivered prices were just as dramatic.

The Recession’s Impact on Electricity Demand The time that elapsed since the last decade’s midpoint also witnessed the most severe economic downturn since the Great Depression of the 1930s.

The contraction in economic activity during the 2007- 09 recession interrupted the growth trend in electricity consumption nationwide that had been unfolding in the recovery period since the 2001 recession. Perhaps even more significantly, in the recovery since the so-called Great Recession there has been no resumption in demand growth.

What is particularly challenging for coal-fired electric generators is the declining share of electricity demand from industrial customers.

These customers are more likely to have high load factors—the percent of time when their demand for electricity is equal to their peak requirements—which are well-suited for power generated from coal. This is because of the technical and economic difficulties in ramping up and ramping down power output from coal-fired generators.

Industrial demand for electricity contracted by more than 15 percent

as the recession hit. But after recouping about three-quarters of that loss immediately after the recession ended, industrial demand has entered a period of secular decline.

The declining importance of high load factor industrial demand has been one of the factors allowing utilities and merchant power providers to serve markets with natural gas generators, weakening the demand for coal.

most important have been Mercury and Air Toxics Standards (MATS) and the carbon emissions limits that are included in the Clean Power Plan.

The legal setback to the MATS handed down by the Supreme Court in July 2015 has come too late to meaningfully impact the investments and other changes made to coal-fired power plants. The rules set standards for mercury and other toxic air pollutants to levels achieved by the The Regulatory best-performing sources Challenges currently in operation.

Coal-fired power plants They apply to all units in operation with a capacity in the U.S. have also seen of 25 megawatts or greater, cost increases in recent and went into effect for years stemming from most in April 2015. the cost of compliance Operators of coal-fired with new environmental power plants across the regulations from the U.S. Environmental Protection U.S. have developed Agency (EPA). Of these, the strategies to comply with

the MATS standards. The costs of the equipment needed to control acid and toxic metal emissions played a significant role in retrofitting and retirement decisions faced by coal plant operators.

The Energy Information Agency (EIA) estimates that 64.3 percent of the U.S. coal generating capacity in the electric power sector already had the appropriate environmental control equipment to comply with MATS and allow their operation past 2016. Another 5.8 percent planned to add control equipment, while 9.5 percent had announced plans to retire the plants.

Owners of the remaining 20.4 percent were faced with the decision See Coal, Page 8

8 — Missoulian, Sunday, February 28, 2016

from page 7 Coal Continued

of upgrading or retiring their plants. In 2012, these represented 1,308 coal-fired generating units in the U.S., totaling 310 GW of capacity.

Assuming the EIA projections were correct, almost 30 GW of capacity was retired due to MATS. This included the Corette plant in Billings, which was permanently closed in August 2015. A more recent development has been the rollout of carbon emission regulations. In Massachusetts v. EPA the U.S. Supreme Court determined “that greenhouse gases, including carbon dioxides, are air pollutants under the Clean Air Act and EPA must determine if they threaten public health and welfare.”

On December 15, 2008, the EPA found that current and projected concentrations of greenhouse gases endangered the public health and welfare of current and future generations. In August 2015 the EPA published its final rule on reducing greenhouse gas (GHG) emissions from electric generating units.

These require states to file carbon reduction plans by 2016 and to meet their first targets for reduction by 2022.

Due to a number of substantial revisions that occurred in the time interval that elapsed since the preliminary rules were first published in June 2014, the emissions reduction targets for individual states with heavier dependence on coal production and coal-fired electricity generation were raised considerably.

The implications for the coal industry are stark.

The Rosebud Mine will produce 10 million tons of coal this year to feed the Colstrip power plants.

An analysis of the old emission targets embodied in the preliminary rules conducted by the EIA predicted that coal-fired electric energy generation would be lower by 600,000 gigawatt-hours in year 2025. This would be a 40 percent reduction from the output of coal electric generating units today.

As drastic as this sounds, the analysis of the new rule’s effect, when it is completed, will doubtless be even larger.

Yet with the announcement of the final rules as part of the EPA’s Clean Power Plan comes a new and unwelcome facet of regulatory policy – uncertainty. The prospect for a reversal of the EPA rule, either through court challenge, presidential elections or the legislative

process, cannot be discounted.

The MATS rules affecting mercury emissions remain in litigation, remanded to a lower court to address recent challenge to its legality. While this outcome is probably too late in the game to affect shutdown and investment decisions made to comply with MATS, it plants seeds of doubt in the finality of the CPP.

Federal Land Use Challenges Given these challenges, this would seem to be an inopportune time to revisit the issue of the appropriate royalty rate that the federal government charges companies who extract coal from federally owned land. Opening this question introduces

another element of policy uncertainty to a business that furnishes the fuel that still provides more electric energy than any other, and an industry that makes a significant economic contribution to states and regions across the country.

Yet opening this question is precisely what appears to be happening.

The U.S. Department of the Interior’s Bureau of Land Management (BLM) conducted “listening sessions” in selected western states as well as in Washington, D.C., to “seek information about how the BLM can best carry out its responsibility to ensure that American taxpayers receive a fair return on the coal resources managed by the federal government on their behalf.”

The likely geographic

impact of a near doubling in the effective royalty rates on coal – such as the one set forth in an analysis by Headwaters Institute published in January 2015 – would fall overwhelmingly on “The implications of the EPA’s ruling on reducing greenhouse gas emissions are stark.”

These kinds of changes would likely impact the tax, employment and income benefits that are enjoyed by Western states, including Montana.

The Decade Ahead Coal has been a significant part of our energy portfolio for over a century, and after enduring a series of setbacks for the first half of this decade, its fortunes could yet swing upward again.

The appetite for

MICHAEL GALLACHER, Missoulian‌

electricity in the developing economies in Asia, coupled with a return to the price volatility that has always characterized its competitor fuel, natural gas, could be part of that optimistic scenario.

Confidence in that rosy scenario – from the point of view of producers – is hard to find. The collapsing stock prices of coal companies, the decline in market share, and the prospect of significant regulatory challenges ahead do not bode well for growth in the industry’s future. If setbacks in the industry were to extend to Powder River Basin producers in Montana and especially Wyoming—who are among the most efficient in the world—then it would impact an important economic driver to our state’s economy.

Missoulian, Sunday, February 28, 2016 — 9

Business: OPINION

Montana’s regions and cities: What’s driving growth? state’s major urban areas are much more difficult to categorize. For example, the 2009 recession impacts were much greater than those in 2001-02 in Flathead, Gallatin and Ravalli counties.

Missoula County, on the other hand, experienced a relatively stable number of annual net arrivals of new residents in both recession and recovery periods.

PAUL POLZIN Bureau of Business and Economic Research at the University of Montana‌

‌G

allatin County has been the economic growth leader in Montana since the recovery began from the Great Recession. Yellowstone County has been in a solid second place. But this is hardly a new outcome, as an examination of historical growth rates for the state’s largest urban counties demonstrates.

Even though statewide growth rates experienced a big decline followed by a big rebound over the three decades from the 1970s to 1990s, the same six counties were ranked in the top six spots over the 30-year period. Only their rank order changed from one period to the next.

For example, Ravalli County ranked sixth in the 1970s, second in the 1980s and first in the 1990s.

Yellowstone County was second in the 1970s, but then dropped to sixth in the next two decades.

It turns out that the post-2000 period is the real exception.

Missoula and Ravalli counties, which were solidly in the upper echelon from 1970 to 2000, dropped to being the slowest growing after 2000. On the other hand, the Butte-Anaconda area, which was last during each of the three earliest decades, rose to number two after 2001.

It is always difficult to try and summarize a decade of economic events in one or two sentences.

The most important reason for the downward shift in the Missoula and

TOM BAUER, Missoulian‌

with well-paying jobs, the federal government acted as an economic buffer to more volatile sectors.

During recessions or other periods when basic industries would decline, the federal sector could be counted on for stability or even modest growth.

Things may be changing.

Federal employment has declined every year since 2011. By 2014, there were almost 7 percent fewer federal workers than in 2011. Real earnings for the federal sector also declined, but by a smaller percentage.

Not only have the declines been persistent

over the last half decade, they are occurring statewide. Federal government employment has decreased in every year since 2011 in every urban area except Lewis and Clark. The largest decrease was the 16.5 percent decline in the Butte-Anaconda area. The other decreases were 5 to 11 percent.

What is going on here?

To be honest, we really do not know yet. Are the declines occurring in all agencies?

Or are they concentrated in a few government activities? We hope to have answers for these and other questions in the future.

A decline in construction industries in Missoula and A New Role for the Ravalli counties due to the Great Recession slowed the Federal Government growth rates in those counties compared to others in the The federal governstate that usually are near the top. ment has long been an important component of Ravalli economies were physical attractiveness. the Montana economy. the declines in the wood Statewide net migration In addition to providing products, log home and is highly correlated with about 12,000 Montanans construction industries. economic growth. Net In particular, the housing migration dipped to 635 bust hit the log home and persons per year during construction industries, the 2001-02 recession. It and the closure of the also declined in the trough Smurfit-Stone plant in year of the 2007-09 recesMissoula eliminated 500 sion, to a net of 2,754 new very well-paying jobs. arrivals statewide in 2009.

On the other hand, the During the periods of ecoimproved ranking of the nomic growth in the years Free setup & design Made in Montana Butte-Anaconda economy 2003-07 and 2011-14, net may be due to the worldmigration was in the range Free deliverY 100%biodegradable wide commodity boom of 5,000 to 6,500 per year. bottles* which led to the reopening It is a bit surprising of the old Anaconda mine. that the lowest net migraThe future of the mine tion occurred during the may be uncertain in light relatively mild 2001-02 of the recent reversal in recession rather than global commodity prices. the 2008-09 downturn, which has been called the Changing Migration worst in a generation. One Trends contributing factor could be that the 2001-02 recesMontanans may feel sion was concentrated a blush of pride when a in the high-tech sector, newcomer mentions our much of which was located state’s way of life and * New Revolutionary how natural beauty draws in California. With more Technology echnology Only Available at Culligan. than 30 million people and out-of-staters. These located relatively nearby, attractions do influence California has traditionally potential migrants. But been a major source of when we look at the data 406-721-6258 migration for Montana. for net migration, we see Mobility typically that changes in net migraCustomLabelWater123.com declines during poor tion are influenced more info@mtculligan.com economic times. The net by economic conditions migration trends for the rather than a region’s

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10 — Missoulian, Sunday, February 28, 2016

BUSINESS: Opinion

MISSOULA AREA CHAMBER OF COMMERCE

There are reasons to be optimistic about Missoula ‌M issoula has come a long way since last decade’s economic downturn, and there is reason for optimism in 2016. Some industry sectors are seeing solid growth, bringing greater diversity to our economic base and increased prosperity to our community. With that said, there are no shortage of challenges facing the business community going forward.

Let’s start with the bright spots. Missoula saw a big increase in construction in 2015, and 2016 looks to be another good year in that regard. In January alone, the city of Missoula has already issued permits for projects

worth $21.3 million, more than the entire first quarter of 2014.

There are many exciting projects moving forward. A few include the Stockman Bank building, the SAM Consumer SILL Direct building, renovations to Southgate Mall, and the 450-bed student housing project on Front Street.

The upswing in construction indicates increased confidence within the business community.

Professional service firms continue to prosper, and are growing to be a larger piece of Missoula’s economic base. Many of these companies do considerable business outside of Missoula, bringing outside dollars into the local economy.

One branch of Missoula’s professional services sector, the high-tech industry, is particularly poised for more success. OnX Maps continues to grow, and is looking to hire more software engineers. In the last five years, Advanced Technology Group has expanded to more than 60 employees and intends to add another 30 positions over the next couple years.

LMG Security is Montana’s largest cybersecurity company and another success story in Missoula’s burgeoning high-tech industry.

Efforts by the University of Montana and Missoula College to better meet this industry’s workforce needs are facilitating its success.

Manufacturing is likely to be another source of economic growth in 2016.

Some of this growth will be from manufacturers coming to Missoula. Coaster Pedicab at the former mill site near Bonner is a recent example. We are also seeing expansion among Missoula’s longer-term manufacturers. For example, Diversified Plastics is

increasing exports to Asia and will participate in the Singapore Water Expo this July, a prestigious international trade show.

These trends indicate growth and muchneeded diversification in our economy.

What are some challenges facing the Missoula business community in 2016 and beyond? One challenge will be funding transportation infrastructure.

Congress recently passed a transportation funding bill, but over the next decade the federal government is projected to provide less than one-third of the funding Montana needs.

Worse, the state’s account for matching federal funds is running a deficit. And locally, the Russell Street rebuild will soak up much of our available funding into the future.

The bottom line is that Missoula will continue to face inadequate funding for our streets and roads. This is a problem from an economic-growth perspective.

To succeed at recruiting, retaining and expanding businesses, our community must be timely in maintaining and modernizing our infrastructure.

As part of the process to update the Long Range See SILL, Page 11

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Missoulian, Sunday, February 28, 2016 — 11

OPINION

Challenges ahead for Montana’s forest products industry down about 12 percent from 2014. However, employment was relatively unchanged for Bureau of Business and Montana wood products Economic Research at the manufacturing overall University of Montana‌ because down time that panel facilities took durast year was full of ing 2014 offset the 2015 challenges and disapsawmill layoffs. pointments for wood The November products markets. announcement of the New home starts in the potential merger of WeyU.S. failed to materialize erhaeuser and Plum Creek at predicted levels. The created new uncertainties, Chinese economy’s slowwith the deal expected to down reduced exports of close in early 2016. logs, lumber and other The failure of new home wood products from U.S. starts to significantly and Canadian producers increase, slackening to Asia. The U.S. dollar demand from China, and gained against most the strengthening U.S. currencies, particularly dollar all contributed to China’s and Canada’s, the oversupplied wood making the U.S. a prime products markets and destination for wood TOM BAUER, Missoulian‌ products and further Weakening domestic and foreign markets and the expiration of the Softwood Lumber Agreement between the United depressed prices currently affecting U.S. mills and challenging domestic States and Canada have presented challenges and disappointments for wood products industries in Montana. further reducing operatproducers’ abilities to sell ing levels in Montana. into weakening domestic How long these factors 75 percent of capacity, costs. Timber harvest in producers, who produce Canadian and provincial and foreign markets. despite increased demand will continue remains Montana has changed many of the same prodgovernments, providing Finally, the Softwood uncertain. The possibility from slowly growing very little since 2009. ucts and species as mills Lumber Agreement (SLA) timber to mills at below housing starts and several of a new U.S. and CanaWhile 2015 lumber in British Columbia and market value. between Canada and the dian lumber agreement years of rising lumprices in the U.S. were To promote fairer trade Alberta which now have U.S. expired in October, is not clear, and the ber prices. about 13 percent lower unfettered access to the causing significant uncer- and reduce uncertainty potential Weyerhaeuser – During the summer than 2014, and panel U.S. lumber market. caused by disputes, the tainty for U.S. lumber Plum Creek merger raises and fall, several Montana Along with these recent prices were down about SLA imposed quotas producers concerned even more questions in sawmills announced national and international three percent, delivered and tariffs on Canadian about Canadian mills sawlog prices in Montana curtailments, cutting pro- the near term, but the hurdles, Montana wood flooding the already over- lumber imports based on duction and employment combined impacts on were down only slightly. products firms faced supplied U.S. market. The U.S. lumber prices. The Montana’s wood products from two shifts to one.

Since the Great Recesthe more localized and expiration of the U.S. Canadian wood products industry and forestThrough the first threesion, most Montana ongoing challenges of and Canadian SLA was industry is thought by quarters of 2015, Montana dependent communities mills have only been limited log availability of particular concern many in the U.S. to be could be long-lasting. lumber production was able to operate at 60 to and relatively high log unfairly subsidized by the to Montana lumber TODD MORGAN, STEVEN HAYES, COLIN SORENSON, AND CHELSEA MCIVER

‌L

FROM PAGE 10

Sill Continued

Transportation Plan, local governments recently polled Missoula-area residents to gauge support for various means of raising local money for transportation infrastructure.

One option that polled relatively well was a local option fuel tax.

State law allows counties to put a 2-cents-pergallon fuel tax before voters. The revenue may only be used for building and fixing roads. The beauty of the local-option fuel tax is that it allows us to shift

a portion of the cost of infrastructure off of Missoula County residents, and onto the millions of visitors that use our roads.

Property taxes and development fees do not afford this opportunity.

Still, a local-option fuel tax has not been proposed at this time. If one were

proposed, there are many details that would need vetting before it could earn the support of the business community. It’s worth noting, though, that the need for greater levels of funding will only become more urgent as our population grows and our infrastructure

continues to age.

But even with a new revenue source, there will not be enough to meet every community desire. With this in mind, businesses must come together to take a harder look at our community’s infrastructure spending priorities. Chamber

members will receive more information and opportunities to make themselves heard as conversations about transportation continue.

Sam Sill is the director of government affairs for the Missoula Area Chamber of Commerce

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