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Borough stays mainly in plus side of finances

Posted: Thursday, September 25, 2003

Evaluating a mixed bag of financial statistics, Kenai Peninsula Borough analysts said this week the local economy ran in mostly positive territory during the second quarter of 2003.

As it does four times a year, the Community and Economic Development Division released a Quarterly Report of Key Economic Indicators, this one analyzing data from the April to June second-quarter time period.

Taxable sales rose by a tenth of a percent during those three months compared with the same period in 2002, going from about $192.5 million to $192.6 million (a gain of $169,202), but gross sales fell 1.8 percent, from $473 million in 2002 to $464.5 million this year.

Construction permit values, another key indicator of the relative health of the economy, rose 3.2 percent to nearly $18.6 million. Only 222 permits were issued, however, down 9 percent from the same period in 2002, and their total value, $18.56 million, was down 3.2 percent.

Permits only are issued in cities.

Homer permits accounted for nearly 43 percent of the second-quarter value and totaled $7.93 million. Soldotna-issued permits valued at $4.23 million, Kenai $2.72 million, or 19.8 percent and 14.7 percent of the total value, respectively, said Jeanne Camp, an economic analyst for the borough responsible for compiling and producing the quarterly reports.

By area, however, Kenai led in permits issued with 40 of the 122 issued boroughwide. Soldotna added 36, Homer 33 and Seward 13.

Some 46 of the construction permits were for new residential projects, 33 for alterations or additions, while 17 were from new commercial projects and 26 for commercial alterations.

Among the bright spots was the good sockeye season. An abundant run had economists deeming the season successful, though prices failed to rise as high as hoped, Camp said. Adding to the good news within that industry, the Kenai Wild salmon-branding project surpassed its annual goals, she said.

Other notable events included a few within the borough's oil and gas industry, Camp said. BP's experimental gas-to-liquid plant, which was close to producing its first natural gas-based syncrude in June, finally did so in July. The Kenai-Kachemak gas pipeline was nearing completion in the late second-quarter and today is carrying natural gas from the Ninilchik Unit to the Nikiski industrial area and to Southcentral Alaska utilities.

The report noted five industry sectors showed growth in gross sales during the second quarter. The sector made up of agriculture, forestry and fishing, AFF, chalked up the largest jump in second-quarter gross sales over last year, a whopping 42.3 percent.

That sector, however, has been on a roller coaster for the last few years, and compared with second quarters in recent years, the $4 million in gross sales this year is less than half the $8.9 million registered in 1997, and still some $1.3 million under that of 2000.

Sectors also doing well during the second quarter in gross sales were construction, up 24.1 percent, sale of wholesale goods, up 9.1 percent, finance, insurance and real estate (FIRE), up 2.3 percent, retail sales, the largest sector, up 5.2 percent, and government sales, which rose 10.4 percent. However, government sales were considered inconsequential because they only totaled $8,680, Camp said in the report's executive summary.

While gross sales show general health, of concern to municipalities is the degree to which those sales can be taxed.

Camp said the second-quarter saw taxable sales increase just a tenth of a percent over second-quarter figures from 2002. Five sectors saw sales decline, while four reported gains, with construction marking the largest, a 15.3 percent increase that exposed nearly $3.1 million to the tax levies. Meanwhile, the taxable sales sectors of mining (which includes oil and gas extraction and production), manufacturing, TCPU (travel, communications and public utilities), and FIRE all declined during the second quarter compared to the same period the previous year.

Viewed by area, Seldovia, Seward, Homer and Soldotna all experienced gross sales increases, while Kenai and the unincorporated parts of the borough registered declines. Camp said the 0.3 percent fall-off felt in Kenai was "a small drop when closure of the Big Kmart is considered."

In taxable sales, Seldovia, Homer and Soldotna all gained, with Soldotna doing the best, up 7.3 percent. Seward, which had recorded an increase in gross sales, ended up in the loss column among areas when it came to taxable sales, along with Kenai, down 14.8 percent (in Kenai) due to the Big Kmart closure, and the borough's unincorporated area.

Camp sounded relatively upbeat about the state of the borough economy during an interview Wednesday, though she predicted a generally status-quo economy for the near future.

"But I see building going on. I see Fred Meyer building in Homer. (That company announced it intends to build a 45,000-square-foot store there if it can get a permit).

"Sales did not drop like we though they would," she said, noting there had been concern the loss of Big Kmart would have a greater impact on boroughwide totals. She also said they expected sales to slow partly because of "attitudes on the street" that seemed to indicate people might be frugal with their money. As it turned out, people continued to shop.

"We did have layoffs in some higher paying jobs, as in the in oil industry," Camp said.

Agrium announced layoffs to come during the second quarter and Unocal suspended operations on its Dillon platform and is working to suspend operations on its Baker platform.

Nevertheless, there are positive signs, she said.

"To me it looks good. It's not awesome, but we are not in the doldrums by any means," she said.



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