March 9, 2009

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The 2008 end-of-year fiscal reports show it: Americans reconsidered their spe...Read More

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Northern Utah Roundtable

Weber and Davis Counties

March 9, 2009

We’d like to give a special thank you to Ron Kusina, executive director of the Weber Economic Development Corporation, for moderating the discussion, and to the Ogden/Weber Chamber of Commerce for hosting the event. Participants: Ron Kusina, Weber Economic Development Corporation Sara Toliver, Ogden Convention and Visitors Bureau Brandon Wood, NAI Utah Matthew Godfrey, Mayor of Ogden Vickie McCall, ERA Weber Real Estate John Pitt, Davis Chamber of Commerce Dave Hilliard, Davis Conference Center Collette Mercier, Ogden/Weber Applied Technology College Michael Vaughan, Weber State University Steve Waldrip, The Boyer Company Michael Bouwhuis, Davis Applied Technology College Barbara Riddle, Davis Area Convention and Visitors Bureau Dave Hardman, Ogden/Weber Chamber of Commerce Kathy Jensen, Axiom Financial Kent Sulser, Davis County Economic Development Like the rest of the state, Utah’s northern Wasatch Front is feeling a hit; yet, leaders remain cautiously optimistic. In this regional roundtable, area experts discussed the revitalized downtown Ogden, commercial growth in Davis County, real estate hardships and education trends. How is Northern Utah doing in general considering today’s economy? GODFREY: In the past eight years, Ogden has seen about $1.2 billion reinvested from the private sector. That investment has created more than 6,000 jobs in the past six years or so. In the past few years, our focus has been to revitalize downtown Ogden, because our belief is that that is the signature of a community and as goes your downtown, so goes the rest of your city. We’ve now completed more than 60 acres of redevelopment downtown and we currently have about 150 acres that are under redevelopment at this point. We have, however, been challenged with the recession. Some projects have slowed down because the developers are having a hard time getting funding. Some projects actually had funding that was pulled off. So we have seen a slowing in the growth of downtown, but it has not stopped. People are still moving forward. Developers haven’t given up. We’re still recruiting jobs downtown. We’re looking at a 4.4 unemployment rate, sales tax is down about 15 percent over last year and total revenues for the city are down about 4 percent for the year. Some good news is that we’ve added jobs recently. We’ve had The Hershey Company and Southern Classic—those two companies have added about 250 jobs. We also have more outdoor industry members that are coming here. Even given the economy, we’re not changing strategies. We’re going to keep after it while looking for opportunities. PITT: It’s been interesting to compare this year with last year. I think as businesses went into 2008, we thought we were absolutely at the top of the cycle. And, we were. I think a lot of the businesses were surprised at how quickly that turned around. Coming into 2009, after an initial hesitation, businesses are now recognizing that we’re going to work our way out of this, so we’ve noticed an enthusiasm. From the Chamber’s standpoint, we’ve had terrific response to our events. And, we’ve seen a burst of excitement, as businesses recognize that we’re going to work through this. We’ve seen growth in a lot of the sole proprietorship-type of businesses, probably because as some people have lost jobs, they’ve turned to their own initiative and then come to the Chamber for some networking support. Traditional retail has been weak, but with Farmington Station coming up, we think that we’ll see growth start to pick up there again. Overall, Davis County is on the verge of tremendous growth, we are just waiting for those doors to open up. And, we want to be prepared to make certain that as the doors do open, and as the hundreds of acres of business parks become ready to fill up, that we have the businesses lined up to do that. HARDMAN: We are planning our work this year with cautious optimism, because there is a lot of optimism and opportunity. We take a survey periodically of our Chamber members. One indicator we measure is where our members are as far as expectation on employment. Moving from the June 2008 survey to the end of 2008, it went from about a 64 percent expecting employment to stay constant to 61.6 percent. And those anticipating increase in their employment is still at 24.7 percent. Now that’s down from 32 percent mid year. And only 13 percent are anticipating a decrease in their employment in the next six months. So, we’re still very optimistic as far as looking at planned growth. Looking at their profitability expectation, only 40 percent are saying that they’re going to be constant or have an increase in their profitability for the year. So that has changed rather significantly, but most are still fairly optimistic. Overall, we feel that there is opportunity. The auto industry has been hit the hardest. And, that reflects in sales, obviously, to all the cities that have heavy auto sales, which Davis and Weber counties both have. One thing that is interesting is that the high tech jobs here are growing. And, that’s really our opportunity as we look at growth of new industries in the community. A few years ago, the Davis and Ogden/Weber Chambers of Commerce partnered to get a very important bill through the State Legislature and commitment from the Governor on it. In the fiscal year July 1, 2007 to June 30, 2008, this team helped Utah-based companies produce an additional $285 million in new business, creating 5,600 new jobs at an average rate of $50,000 a job. Last year we got $750,000 in appropriations for that. And these jobs being created are mainly in northern Utah with the aerospace industry being our number one job development opportunity. So, this is an opportunity for us to see continued growth. How is Northern Utah’s travel and tourism industry weathering the economic storm? RIDDLE: In Davis County, we actually saw our occupancy in occupied room nights increase, but ever so slightly. We had a really strong first of the year. We got into third quarter and things really started slowing down a little bit. We had a recovery in December and were excited to end the year with positive results. We are watching 2009 carefully. Our hotels are working hard and trying to ensure that their occupancies stay in a viable area. Ski business is definitely increasing. We’ve seen more ski business bookings than we’ve had in the past. And, Davis County is located in a great place because we’re right between the Salt Lake canyons and the Weber canyon, so we’ve put a lot of energy into marketing to ski groups. Our major attraction, Lagoon, saw a slight decrease in attendance last year. Lagoon had close to 1.4 million visitors in 2007 and had about 1.35 million in 2008. Antelope Island State Park also experienced a slight decrease in attendance. But, we think that these two attractions experienced the declines mainly due to a few weeks of bad weather. It’s important to note that if you look at revenues and growth in 2007 and how astronomical it was, and if you took that year out of the mix and you looked at 2008 compared to 2006, 2008 was still a remarkable year. People are just not willing to give up their vacations. They still want to vacation—they’ve earned it. But, they are going to be more careful in where they go. TOLIVER: Ogden’s tourism has also slowed a bit. But, luckily skiers tend to view skiing as a right, not a privilege, so if the weather cooperates and the conditions are good, they will partake in that vacation. And, luckily we have a great destination to offer more affordable accommodations along with great skiing. So, we’re seeing really good numbers still in our ski business and our ski groups that are coming in. Last year our ski areas were the fastest growing in the state as far as numbers. Our numbers at the Convention and Visitors Bureau have also been really good. We’ve seen about a 56 percent increase in our room nights booked over the last two years. However, the last few months have been substantially down from the rest of the year, but occupancy rates are still up. We’re cautiously optimistic that we can hold that through the year until things bounce back and we can start a bigger, onward and upward trend again. HILLIARD: The Davis Conference Center seems to be in a bit of a bubble. We are a little bit protected because of Hill Air Force Base. We are seeing a pull back, mostly in small business. Small business is being very careful and they are feeling the affects. So, for example, small businesses are having Christmas parties at their home or at the office or they’re canceling them altogether. How are the commercial and residential real estate sectors doing? WALDRIP: In the last year, we had an unprecedented year. We added more than 1 million square feet of new business space, which brought in several hundred jobs. However, what we’ve seen in the last six to eight months is a little bit of a slow down in the overall volume of activity. But, we’re still seeing a good level of activity from strong companies. So, we’re anticipating an OK year this year, not a significant down turn in our activity this year. McCALL: When you look at Davis County and Weber County for the past four years, we’ve seen highs of dollars per square foot averaging in the high $90. The last statistic that came out shows that Weber County is about $79 and Davis County is in the $80 range. So that’s a dramatic drop, and that will have an affect on prices. We’ll probably see a 15 to 20 percent drop in real estate, especially in areas of west Davis County, because there is a surplus of properties out there. JENSEN: Looking at home mortgages, interest rates are dropping, so we have noticed an upsweep in business a bit, but it also depends on the price range. Homes that are in a little lower price range haven’t had a major impact. It’s the higher priced homes that have had a bigger the impact. There’s a lot of inventory and we are not going to get that inventory off of the table. And, it is dragging our values down. WOOD: In 2008, there were a lot of large companies that came into the market, but by the middle of the year, there was a decline in the number of companies coming into Utah and number of businesses within Davis and Weber counties expanding. Overall vacancy jumped up about 2 percent across all property types: industrial, office and retail. Lease rates really haven’t been affected yet, but they will be—there is just a lot of space that is out there now as a lot of companies are starting to downsize or even close. From the investment point of view, Utah has always been an interesting market. When the national market is really spiking, whether up or down, Utah floats in between somewhere, not seeing the huge spikes in appreciation or in devaluation during those times. And Davis County and Weber County have actually been the same way. We don’t see the same spikes that Utah as a whole sees. So, we haven’t seen as much hit in prices as we have in other parts of the state or the country, but we are feeling it. A bright spot is that both Davis and Weber counties have done a great job in identifying business parks for growth. Between the Business Depot Ogden, Freeport Center, Falcon Hill on the west side of Hill Air Force Base, the East Gate Development on the east side of Hill Air Force Base, Farmington Station in Farmington and Centerville’s business park, the counties are well positioned. McCALL: Hill Air Force Base, however, has never been in a better position to compete with other bases. Now, we don’t know where President Obama is going yet. The cash cows in the defense system are all of the depots, and we now have three Air Force depots. If those are cut, all of the work at Hill Air Force Base, except for the missiles, could be consolidated. But right now, Hill is just doing very, very well. They’ve got great capacity rates and their production rates are great. And, the west side development is certainly an enhancement. How is Northern Utah’s retail industry doing? SULSER: There are three significant projects in Davis County: one in North Salt Lake, there is Farmington Station in Farmington and the RTC Renaissance Center in Bountiful, all focused on the south end of Davis County. And, there are many more on the north side that have put in millions of dollars in infrastructure. But, they are going to sit idle for awhile, maybe for six to eight months. So, there is a little bit of a slow down. But, there is a positive to the economic slowing and that is as business contraction occurs, there is a retrospectiveness to it. The business leaders around the country and internationally are thinking, “Where do we need to be positioned when it does turn?” So, there is real potential and opportunity for Davis County. Right now, we are really looking internally and saying, “What do we need to be doing now to assist in trying to reposition ourselves?” How have the area’s educational institutions changed during the past year? BOUWHUIS: It’s interesting to watch the cycles that go into the economy and what happens to the demands on [an educational institution’s] services. Starting in May, a funny thing happened: Utah’s economy started to go bad, but the economy in our institution started to get really good on the supply side of people. So, in our institution, we experienced nearly 22 percent growth during the first quarter. The encouraging part of those enrollments is they are flocking to the technical trades, like welding, machining, diesel—those programs are packed. We’re also excited about our incubation facility that we started three years ago. We had expectations of growing businesses in Davis County and that’s full. We’re undergoing a major expansion to put more fixed offices in that building. We’ve incubated 11 companies so far and those companies are starting to move out and create their own businesses outside of our incubation area. And we’re really excited about that. MERCIER: Like the DATC, the Ogden/Weber Technology College has seen some significant growth. The first half of this year compared to the first half of last year, our enrollment is up almost 30 percent. We hope that when the economy turns around, these students will be ready to go back out to work and be productive for companies. We have been trying to get a health technology building funded for probably the past seven or eight years. And, the focus this year is on economic stimulus and really needing to get construction moving again. And if that occurs, we really think we’ve got an excellent shot this year of getting funding for our building. We’ve been able to raise $1 million toward the project. But we’ll need another $24 million from the state. And that will really give us an opportunity to not only make sure that the facilities we have on campus are sufficient for our current students, but will give us significant capacity to double our enrollment down the road. Certainly some of our challenges are going to be dealing with any kind of budget reductions that we get from the state. Reductions will certainly hurt the state and us in the long run. But, we are doing everything we can to figure out how we can accommodate these reductions and yet keep our key people and our infrastructure so quality doesn’t suffer. So, there has been some good news and some bad news. On the one hand, we’re seeing great enrollment, we’re seeing these federal funds come up, but it’s also happening during a time when we’re also seeing resources go down. VAUGHAN: We’ll be adding 21,000 students for the first time in the fall term and another 400 students for the spring term. So, we’re seeing strong increases in enrollment. However, we’re looking at pretty deep cuts. And, even under the best case scenario, we’ll have budget cuts deeper than we’ve ever taken before. So we, in a one-year period, could be taking a $7 million cut, which would look pretty good to us or we could be taking a $14 million cut, which would look pretty bad to us. One of the themes that I’m stressing is that we want to weather this in a way where we do dig ourselves in a hole, but we dig ourselves in a hole we can dig out of in a year or two instead of a decade or two. I see a real potential for the budget situation to create a real disconnect between workforce needs and programs offered in higher education. We’ve got a set of programs that are heavily dependent upon state funding. They are expensive programs—STEM programs. STEM stands for science, technology, engineering and math, and in science, physics does not pay for itself. Technology programs, nursing, clinical labs, science—they don’t pay for themselves. Engineering programs don’t pay for themselves. They are heavily dependent upon state money. But, as that state money declines, one of the things you’re going to look at to cut are programs that are dependent upon state money. You are not going to cut the programs that are paying for themselves. But, the problem with that is that it can create a bit of a disconnect. We’re being told, “You don’t want to start an engineering program with the state budget situation looking like it looks right now.” And our response is, “This, engineering, is just what Utah needs.”
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