Eye on the economy: Nevada County emerges slowly from post-recession recovery
October 3, 2017
Has Nevada County finally recovered fully from the recession of 2008? Or is it still mired in a state of economic stagnation?
It depends on who is asked, but local officials are optimistic, if not exactly bullish.
Any difference in opinion comes down to whether one classifies the county’s revenue as still being in a state of slow or no growth, as well as whether current revenue totals are matching or exceeding pre-recession numbers.
“We believe that we’ve recovered,” said Nevada County Deputy County Executive Officer Martin Polt. “It has been a long, slow (process). We just surpassed our 2007 numbers — it took 10 years to get back to where we were pre-recession.”
In Polt’s view, the county’s economy is in a “state of normalcy” — the recovery is very moderate, with average growth rates and no large booms or busts, he said.
Both Polt and Grass Valley Finance Director Andy Heath noted this most recent period of economic recovery has been much longer than average.
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“It has been 96 months (eight years),” Polt said. “The average is five years.”
According to Polt, the longest period of recovery, 10 years, came after the 1982 recession.
“So we’re two years away from that,” he said.
What constitutes a decisive sign? Surpassing pre-recession heights, officials say.
“We are, I think, there,” Polt said. “Over the last one to two years, the county has fully recovered.”
Nevada County has lagged other California counties, he acknowledged, adding that local recovery has been a mixed bag with lower unemployment but flat wage growth.
Distinct regions of the county have experienced differing rates of growth. South County has not seen much change in the last few years, says South Nevada County Chamber of Commerce President Eric Hatch. Possible reasons are because there is little existing retail and because Higgins Marketplace, a proposed commercial development, remains in limbo.
Penn Valley, however, seems to be experiencing a mini-renaissance, anchored by Penn Valley True Value and a Shell station, which rank among the county’s top producers of sales tax revenue.
According to Penn Valley Chamber President Mike Mastrodonato, the True Value store has become one of the de facto gathering places of the area, with the addition of a new garden center.
“They draw from Smartsville, Rough and Ready, parts of Grass Valley,” he said. “It has continually expanded.”
Several restaurants have opened in Penn Valley recently, including Moi’s Thai Cafe, Sierra Squeeze Burger and Twelve 28 Kitchen, as well as Scallywags Tavern on Mooney Flat Road.
“There are rumors of more coming in,” Mastrodonato said. “I don’t know if it’s a reflection on the economy in general. They seem to all be doing well. … It has been a really exciting additions down here.”
Twelve 28 Kitchen is becoming a “destination restaurant,” he added. “People who might have driven to Nevada City for New Moon, now they’re coming here. It’s really something spectacular.”
CITIES SEE SLOW BUT STEADY RECOVERY
Post-recession, the city took a hit when tech company Grass Valley, a Belden brand, one of the city’s larger sales tax providers, moved to the City of Grass Valley in 2015. The city made a decision that same year to implement an ordinance that limits chain and franchise businesses, also known as formula businesses.
Since then, Olson said, the economy has continued to improve.
“Sales tax is incrementally going up, there has been a year-over-year improvement over four or five years,” she said. “I think we’ll see a slight uptick (in the future), just not as significant.”
Cathy Whittlesey, the executive director of the Nevada City Chamber of Commerce, said from her perspective, the town is doing better than it was a few years ago, with not a lot of vacancies. She cites the success of local breweries ol’ Republic and Three Forks Bakery & Brewing Company as being high points in the town’s continued economic recovery, anchoring Argall Way and the base of Commercial Street, respectively.
Grass Valley has seen a gradual increase in sales tax revenue over time, approximately 3 to 4 percent per year on average, said Heath. That percentage is normal for a municipality of this size and tax-base diversity, he said.
OFFICIALS: ONLINE RETAIL IMPACT NOT YET KNOWN
The exponential rise in online shopping has affected the success of brick and mortar businesses, but whether that shift in buying behavior is primarily hurting local retail, or the bigger box stores and malls “down the hill” in Auburn or in Yuba City, is unclear, said Polt.
Heath said online shopping hasn’t materially impacted Grass Valley’s financial bottom line — because the city receives a portion of online sales taxes through a growing county pool.
A majority of tax from online sales that come from out of the county to residents in the county are pooled into one county fund, which is then distributed to Grass Valley, Nevada City, the unincorporated county and Truckee in a proportionate share based on each entity’s collected sales tax.
So even if a resident is going outside the jurisdiction to make an online purchase, the city may still receive a share of that sales tax, Heath explained.
“I’m seeing an increase in collections through the pool,” he said. “The city’s share is going up where the local direct tax may be going down a bit.”
The county pool of online revenue has been increasing year over year, with Amazon as the top source. Online tax revenue jumped from $346,000 in 2013, when Amazon first began sending sales tax collections to the county, to nearly $609,000 this fiscal year. In comparison, in the unincorporated county, overall taxes have grown at a moderate rate of just over 4 percent on average in the last seven years.
MUNICIPALITIES PREACH FISCAL PRUDENCE
Experts say the economic outlook looks somewhat rosy, although forecasting is a risky art.
“I don’t see anything to suggest (revenue) would go down,” Heath said. “The economy is fluid right now — it’s plugging along. People keep saying we’ve been in economic recovery too long … (that) a recession or stagnation is imminent … I don’t see that.”
But, Heath said, “It’s difficult to speculate what may transpire, and that is the prime reason the city (of Grass Valley) continues to budget conservatively. I’m keeping my projections flat, or with limited, very small growth.”
Nevada County also is being fiscally prudent in the face of the threat of another possible recession or potential negative effects caused by the state or federal budgets, said Polt, pointing to one possible scenario of the dismantling of the Affordable Care Act.
“If the ACA went away, that would hit the county hard,” he said.
The county is not taking any chances, with some predicting a possible recession in 2019, Polt said.
“We are planning for a downturn at some point,” he said. “It’s inevitable. We just don’t know when.”