Borough industry growth at standstill

Annual report shows no major expansions, setbacks in economy from last year

Posted: Friday, October 31, 2003

Kenai Peninsula Borough industries showed no major expansions during 2002, but neither were there major setbacks.

That's the conclusion reported in the 2002 Situations and Prospects, a publication produced annually by the borough's Community and Economic Development Division. The report, which was issued earlier this month, analyzes a variety of statistics from industry, business and other state and borough demographic information.

The document, compiled and produced by borough economic analyst Jeanne Camp, offers other bits of data that add up to a picture of the overall economy of the borough last year.

Taxable sales in 2002 surpassed those of 2001, though total gross sale numbers were slightly behind those of the previous year.

The assessed value of new construction permits issued last year was second only to 1995 when the $35 million Alaska SeaLife Center was permitted, demonstrating that construction activity in 2002 was strong.

Construction activity was up in borough cities where building permits are required. The value of all permits in 2002 reached nearly $46 million, a jump of 1.9 percent over 2001. Last year saw a 23.3 percent increase in the number of permits over 2001, for a total of 370 permits, the highest volume on record, according to the report.

Meanwhile, employment showed some weakness as the average unemployment rate rose to 10.5 percent from 9.3 percent during 2001. That reflected growth in the labor force that outpaced growth in the actual number of jobs, the report said. According to Alaska Department of Labor and Workforce Development, statistics showed the borough's population grew by 2 percent over 2001, rising to 51,187 from 50,185. The growing population base continues the 2-percent-per-year 1990-2000 U.S. Census trend.

The report also included data about commercial fishing.

For instance, it was noted that the average perpound price of sockeye salmon rose slightly to 69 cents after a three-year fall from $1.39 per pound in 1999 to a low of 65 cents a pound in 2001. The average weight of sockeyes rose from 5.6 pounds in 2001 to 6.3 pounds in 2002. So did the total harvest, which hit 3.47 million sockeyes in 2002, marking the second year in a row showing an increase. Meanwhile, the ex-vessel value, which had fallen from $9 million in 2000 to $7.81 million in 2001, grew to $11.66 million in 2002.

Preliminary numbers associated with all species of salmon sockeye, chinook, coho, pink and chum show a total catch of more than 56.6 million pounds with estimated gross earnings of more than $17.3 million, a figure expected to rise.

Homer and Seward, the two top landing ports in the 3A regulatory region of the Pacific halibut fishery, saw the bulk of the landed halibut poundage taken in peninsula waters. Some 917 landings in Homer brought in over 13.6 million pounds, while 446 landings in Seward listed just under 7.56 million pounds. Overall, the commercial halibut catch brought in nearly 21.5 million pounds in 1,413 landings at borough ports.

In the oil and gas industry, the figures were mixed. The roughly 11.3 million barrels of oil produced by Cook Inlet wells in 2002 represented a 1.85 percent decrease in oil production from 2001. Unocal took its Baker and Dillon offshore oil production platforms out of service because of poor production.

However, natural gas production surfaced more than 195 million cubic feet, marking a 1.06 percent increase over the previous year.

A marked increase in new natural gas exploration projects on the west side of Cook Inlet as well as the lower Kenai Peninsula in the coastal areas between Calm Gulch and Ninilchik resulted in construction of the $25 million Kenai-Kachemak Pipe Line, the report noted.

"The outlook for 2003 is for continued increases in natural gas exploration and production efforts and a stagnant oil effort," Camp said.

In the world of retail sales, Kenai and Soldotna combined for 52.5 percent of the gross sales in the borough and 54.7 percent of all taxable sales, the report said.

In timber, gross sales grew 5.04 percent, going from $4.26 million in 2001 to $4.47 million in 2002.

"The nature of the industry results in the unincorporated areas providing the greatest percentage of industry sales," Camp said.

The timber industry is contending with the continued destruction of the spruce forest by the spruce bark beetle infestation. That has had a negative impact on the availability of harvestable timber, Camp said.

"Efforts are being made to develop a timber co-op that would benefit the industry through economies of scale and development of value-added products," she said in the report.

The tourist industry saw visitor counts fall 23.1 percent in 2002 compared with the previous year, with the numbers falling from 122,311 to 94,097. Counting visitors, however, is tricky.

Camp said the numbers represent "an inaccurate measure." Some visitors, she said, never enter a visitor center, while others may visit several. She noted that Homer visitation jumped 10.8 percent while in Kenai visitation dropped 1.6 percent.

As an example, Camp said, "Visits to the Seward Chamber of Commerce dropped almost 50 percent in contrast to increases in visiting ferry passengers, railcar visitors and visitation at the Kenai Fjords, Exit Glacier and SeaLife Center, another indication of weakness in the measurement."

Soldotna also showed a decline in visits, but a visitation counter was not functioning during May and June, heavy visitor months, she said.

Despite the difficulty in recording actual numbers of visitors, gross and taxable sales in the tourist industry which are measurable increased 5.5 percent and 9.8 percent respectively, reaching better than $99 million in 2002.

Seward reported gross visitor sales of $25.2 million; Homer $20.7 million; Soldotna and Kenai $5.74 million and $5.59 million respectively, and Seldovia $420,804 for the year. Taxable sales followed a similar pattern, although Kenai and Seldovia showed declining visitor taxable sales in 2002.

As commonly occurs, visitor sales tend to jump during the second and third quarters April 1 through September but languish during the first and fourth. The Arctic Winter Games promotion may help change that.

"Of the industries studied, only visitor industry sales continue to increase the highs of the second and third quarter sales, but low sales of the first and fourth quarters stubbornly refuse to rise," Camp said. "The Kenai Peninsula Borough's role as host to the 2006 Arctic Winter Games will increase awareness of area winter activities that could improve winter month doldrums common in the visitor industry sales."

Camp and CEDD business development manager Jack Brown were out of town and unavailable for further comment.

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