INVESTIGATING THE IMPACT: Truckee, Tahoe lean on small business as backbone of economy amid coronavirus crisis
BY THE NUMBERS
Each year, Truckee, a town of 16,000 people, welcomes over 1.4 million visitors. Amidst the coronavirus crisis however, slopes of fresh snow remain untouched and lichen grows thick on Tahoe’s most climbable granite.
The Tahoe region’s economy — its financial health in both the public and private sector — is rooted in love of and access to the outdoors. Now that the tourist tap has been turned off, all of North Lake must reckon with the loss of its biggest industry.
A Dean Runyan Associates report covering travel impact from 2010-2018 estimated visitors spent $1.6 billion in Placer and Nevada counties in 2018. The travel industry provided 18,260 jobs and generated $57.5 million in local tax revenue.
Tahoe’s tourism traffic has grown consistently since the Great Recession, now a decade ago, while counties in the region report property values only recently recovered from the economic downturn. Even so, University of Nevada-Reno Economics Professor Mehmet Tosun said heavy reliance on sales tax by mountain states and towns makes them especially vulnerable to the coronavirus-induced financial crisis.
Tosun said Truckee’s economy may be doubly affected because a large portion of its tax burden lies outside of the town’s jurisdiction. When tourists stay home, both private businesses and local governments take a hit, he said.
North Lake Tahoe has been hit from all sides. Since March 22, after Gov. Gavin Newsom issued an executive shelter-in-place order, the community endured the closing of eight ski resorts and four casinos.
Vail Resorts closed Northstar California on March 15. Alterra announced the closure of Squaw Alpine shortly thereafter. Boreal Mountain California, Soda Springs, Woodward Tahoe, Sierra-at-Tahoe, Donner Ski Ranch and Diamond Peak Ski Resort followed suit within a week’s time. On the casino front, the Lakeside Inn has closed permanently after 35 years in business. Crystal Bay Casino, Grand Lodge Casino, Jim Kelley’s Nugget and the Tahoe Biltmore are temporarily closed, for now.
ANYTHING BUT BUSINESS AS USUAL
Liz Bowling, director of communications and public relations at the North Lake Tahoe Resort Association, said 60% of North Lake Tahoe’s jobs are within leisure industries: hotel properties, resorts, casinos and bars.
“That means over 60% of our workforce is laid off right now,” Bowling said.
Sierra Small Business Development Center Associate Director Jessica Carr said the broader view looks no more secure. Nonessential and essential employers alike, including small medical practices that cannot see elective patients, are struggling to stay afloat given unprecedented revenue losses.
The organization offers free business advice to small, local businesses to help them “start, grow and thrive,” Carr said. “At this point our services are intensely focused on helping small businesses across our region survive and then recover.”
The Center is presently assisting small Sierra businesses connect with the resources available to them via the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the two trillion dollar federally-funded economic relief package.
In all of 2019, the Center served 515 clients. In the month of March 2020, the Center served 201 clients alone, not including questions answered by the staff on the spot.
Carr said her team offers assistance with loan applications, direction on the Paycheck Protection and the Economic Injury Disaster Loan programs, understanding and vetting new financial resources like California’s iBank program, as well as assistance with 2019 financial reports for purposes of applying for Pandemic Unemployment Assistance.
“All told, for the last month we have been speaking with anywhere from 20 to 50 people per day about the information out there and how to best apply it to their situation,” Carr said. “We are truly all hands on deck right now.”
GOVERNMENT FOCUSED ON SHORT TERM
As Carr’s team works to keep business afloat in the Sierra, Administrative Services Director Kim Szczurek said the Town of Truckee is focusing on the short-term. The transient occupancy tax (TOT), a 10% tax on hotel stays and short-term rentals, is one of the top three revenue sources for Truckee and is collected on a quarterly basis.
The first quarter ended March 31, but Truckee’s town officials will not know the specifics of financial losses until May 10, which is 10 days after the first quarter payment is due, Szczurek said.
“We know anecdotally we have a significant loss of revenue because business dropped off precipitously. That will, of course, continue through April until things change,” Szczurek said.
Even without the hard numbers, Szczurek’s office is already reviewing the town’s budget and creating a three-month financial plan at the start of the fiscal year, beginning July 1.
“We’re not coming up with the status quo budget for the summer,” she said. “We’ve already pared down expenditures on capital projects and we’re slowing those down to work on things only paid for by grants or outside sources.”
Szczurek said the town’s prudent financial management has given her office a relative cushion. Although they have frozen new hires for vacant positions, they do not anticipate layoffs.
“I wish we had a crystal ball,” Szczurek said, “but despite the challenges presented there is a possibility Truckee will be able to weather the storm better than anticipated.”
SELF RELIANCE IN WORKING TOGETHER
Keith Taylor, who specializes in community resource development in the UC Davis Department of Human Ecology, said the destabilizing effects of COVID-19 on the economy offer an opportunity to re-envision sustainable business models that leverage tourism to address income inequality in mountain towns.
“Don’t take this moment for granted,” Taylor said. “Look at creative solutions and mobilize around them.”
Taylor said employee stock ownership plans and consumer cooperatives are proven models that offer the middle and lower classes careers and amenities.
“Selling a local business to its staff or community is a form of social enterprise.”
Of the 25,569 housing units in eastern Placer County, 17,310 are owned by second homeowners, Bowling said.
“Second homeowners make up 70% of North Lake Tahoe’s lodging industry,” Bowling said. “There are only 6,980 full-time (home-owning) residents in North Lake Tahoe.”
Taylor said now is the time to address the contrasting levels of financial security for those who own their second home in mountain towns versus those who reside there year-round.
“I get really frustrated about our communities subservience to tourism. It should be the other way around,” Taylor said.
A Mountain Area Preservation report on affordable housing identifies 67% of Truckee residents as housing cost burdened, and an additional 26% are severely cost burdened. That said, second homeowners account for 70% of North Lake Tahoe’s lodging industry, Bowling said.
UC Davis Human Ecology Professor Catherine Brinkley said Truckee needs to consider what kind of development it want to allow post-recession, because they might have less political and economic agency after.
“If this is like the Spanish influenza followed by the Roaring 20s people are going to want to go to the mountains and to relax,” Brinkley said. “The glut of the boom may cause more problems.”
Brinkley said Truckee would be wise to take advantage of the municipal bond program that the federal government is about to enter before it becomes available.
“Do we want to limit growth or encourage density in certain areas? What kind of density? These are important questions for a town like Truckee that’s adorable and historic, but also a bedroom community for wealthy folks who have their mountain homes there,” Brinkley said.
Taylor said he suspects towns like Truckee may not reestablish economic stability until January of 2021 because of how rapidly the public health and political landscapes continue to change in the time of coronavirus. Because of that, Taylor believes the best solution will come from within.
“We put too much stock in election after election to a degree that we forget that we need to be working together at a community level,” Taylor said. “We need more vibrant entrepreneurs. Self reliance comes from working together. Free-market enterprises cut left and right.”
LOCAL BUSINESS AS BACKBONE
One business that employs a employee stock ownership plan approach is Mountain Hardware and Sports.
“We love serving the community of Truckee, but our employees are our priority,” said Heather Svahn, vice president in purchasing and marketing at Mountain Hardware.
Svahn attributes the team’s relative success in the crisis to its flexibility in the face of rapidly changing times.
“We’ve had to adapt and bend to different regulations so that we can be abreast of CDC guidelines, federal and state programs meant to help and our staff’s feelings of safety and security, as well as our customers,” she said.
Svahn credits this ability to respond to the community’s fluxing needs with Mountain Hardware’s identity as an ESOP business. Svahn said from the crisis’ beginning, her company has made sure its employee-owners remain top priority, taking suggestions and considering concerns to provide optimal and safe service to the community.
“‘I think we should be cleaning the service counter every 30 minutes.’ ‘Let’s look at how we’re receiving our product from our delivery trucks.’ Our employee-owners respond, react and participate in this changing landscape we all find ourselves in,” Svahn said.
Mountain Hardware’s application for a small business loan was approved. Its three locations remain open as an essential business, staving off layoffs of its 95 employee-owners. Any staff with existing medical conditions or school-age children were given leeway in weekly scheduling and kept on payroll.
“Clearly this is global. We need to communicate, and talk about and discuss. We want to make sure the store stays safe, but the staff needs to stay healthy,” she said. “When we’ve led with that in mind we’ve been able to keep moving forward.”
Svahn said the virus’s impact on her business is still unclear because spring and fall are already low-revenue seasons, but she remains hopeful for Truckee’s future.
“Yes, we’re a resort area, but you have to be pretty tolerant of what Mother Nature will throw your way up here; an intense mountain storm in the wintertime, or coronavirus,” Svahn said. “This is bigger than a 10-foot storm but there is something to our resilience.”
Rebecca O’Neil is a reporter for the Sierra Sun. Contact her at email@example.com.
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Truckee is offering a one-month extension for downtown businesses, allowing restaurants to continue to use outdoor patio spaces as a means to operate through the end of October, according to Assistant Town Manager Hilary Hobbs.