Borough shows mixed results in gross sales

Posted: Wednesday, April 14, 2004

Gross sales recorded in the 10 business sectors measured by the Kenai Peninsula Borough showed a mixed bag of results, but overall, produced a decline of 1.6 percent during the fourth quarter of 2003 compared to the fourth quarter of 2002, according to the latest figures released in March by the borough's Community and Economic Development Division.

That equates to a decline in gross sales of nearly $7.5 million, from $455.7 million in fourth quarter 2002 to $448.3 million at the end of 2003.

The numbers were reported in the borough's Quarterly Report of Key Economic Indicators produced by CEDD economic analyst Jeanne Camp.

The 2003 fourth-quarter drop was a fraction of the 12.4 percent drop registered in 2002's fourth period compared to 2001, a year in which fourth-quarter sales appeared to climb by 32.1 percent over 2000's numbers.

However, Camp said the dramatic fourth-quarter improvement in 2001 is suspect and the numbers are being reviewed. The anomalous jump in 2001 may have been caused by "inconsistent information" coming from the manufacturing sector (which includes oil and gas and fish processing) that showed an increase from just $24.5 million in 2000 to $117.4 million in 2001. Camp said an audit is trying to determine if statewide data may have been included accidentally in the calculations.

Thus, the 12.4-percent decline registered in 2002 and the further 1.6-percent decline in 2003 may not tell an accurate story about the overall health of the manufacturing sector. Ignoring for a moment the anomaly of 2001, the $60.2 million in fourth-quarter gross sales in manufacturing in 2003 is well above the $24.5 million of 2000.

All in all, the manufacturing sector over the entirety of 2003 was itself a mixed bag, Camp said.

The 2003 fishing season was deemed a success, though prices weren't as high as fishers wanted. The oil and gas industry had its own ups and downs. While Unocal announced layoffs, it and Marathon Oil announced plans to increase exploration around Ninilchik and Anchor Point. Also, the Kenai Kachemak Pipeline continued to ramp up natural gas transmission, Camp said.

The division takes the temperature of the economy using several thermometers. For instance, one may look at fourth-quarter changes measured by area including peninsula cities and the unincorporated area, while another takes the measure of fourth-quarter changes by industrial sector. The same is done for taxable income. Other graphs show the cumulative effect of change over longer periods, such as 10 years. The graphs may produce slightly varying numbers, but together create a useful picture of the overall economy.

Though fourth-quarter declines (measured by area and by industry) have been recorded for two successive years, such fall-offs have not been the general rule over the past decade. Indeed, gross sales from 1993 to 2003 grew by nearly 48 percent overall, or $616.4 million.

As for the fourth-quarter of last year, the winning industry sectors included mining, which grew by 33 percent, from $22.6 million to $30.1 million. Retail sales, meanwhile, grew by a more modest 1.8 percent, from $144.6 million to 147.2 million. Finance, insurance and real estate, a sector designated by the acronym FIRE, rose by 18.4 percent. But that sector is a rather small portion of the whole; its increase was from $12.5 million to $14.8 million. The services sector grew by 6.7 percent, from $46.3 million to $49.4 million.

Gross sales within the government sector grew 135 percent, but that sector measured in mere thousands, rather than millions of dollars is minuscule compared to overall $448 million gross sales picture, according to the CEDD.

Gross sales fell in the AFF sector (agriculture, forestry and fisheries) by about a tenth of a percent, indicating some general stability. Construction gross sales fell by 5 percent, though activity within the sector was considered strong when measured by permit values and permit volumes.

Manufacturing declined by 23.1 percent, from the $78.2 million registered in 2002's fourth quarter to $60.2 million in 2003. Travel, Communications and Public Utilities, the TCPU sector, also fell by 1.5 percent, and wholesale trade dropped by 2.3 percent.

Gross sales measure overall sales, only some of which are taxable the portion of most interest to municipal governments that depend on tax revenues. The data show that there is not a one-to-one correspondence between gross sales performance and taxable sales results.

That is, the rise or fall of gross sales doesn't necessarily mean a similar rise or fall in taxable sales. For instance, while the mining sector's gross sales grew by 33 percent, its taxable sales fell by 13.3 percent, and the wholesale sector's gross-sales decline of 2.3 percent was countered by 16.9 percent increase in taxable sales.

A look at 2003 fourth quarter sales data shows that the city of Homer and the unincorporated area of the Kenai Peninsula Borough saw gross sales decline, though each registered increases in taxable sales.

Seldovia saw the greatest percentage growth in gross sales a 103.6 percent jump and a 10.8 percent increase in taxable sales. Seward, meanwhile, saw a 17.1 percent gross sales increase, and a 2.4 percent taxable sales increase.

Kenai and Soldotna saw gross sales increase by 3.2 percent and 1 percent, respectively. But while Soldotna also saw an 8.9 percent increase in taxable fourth-quarter sales, Kenai suffered a 17.4 percent loss. Camp said that loss can be attributed to the demise of the Big Kmart store, which closed in 2003. Soldotna's increase, as well as the increase in taxable fourth-quarter sales registered in the unincorporated area also can be tied to the demise of Kmart, she added.

The latest fourth quarter figures don't tell the whole story for 2003. Over the entire year, gross sales for the entire borough grew 1.7 percent, from $1.875 billion in 2002 to $1.907 billion at the end of 2003. Annual taxable sales, meanwhile, also grew by 1 percent boroughwide. Only Kenai and the unincorporated area showed annual taxable sales declines of 11.5 percent and .6 percent, respectively.

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