Economic Development: Macroeconomic Issues for Sonoma Valley

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Economic DevelopmentMacroeconomic Issues for
Sonoma Valley

• Robert Eyler, Ph.D.
• Department of Economics
• Director, Center for Regional Economic Analysis
• Sonoma State University
• www.sonoma.edu/org/crea

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Introduction

• Economic Development not an easy task in
  practice.
• In theory, it is straightforward
• Provide businesses with an environment where
  entrepreneurship reigns and society protected
  and
• Government intervenes or constrains when society
  threatened by development, and otherwise very
  little.
• In practice, interpretations of society become
  tricky.
• Economic Development is the key to higher living
  standards.
• Must be done correctly, no boiler-plate way.

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Local Trends

• Macroeconomy both ignites and suppresses local
  economic development.
• Sonoma Countys economy is diversified.
• The wine industry helps a great deal.
• Sonoma County trends connected to State and
  National trends.
• High tech firms, in both good and bad ways,
  affect the local economy.
• Good when booming, bad when outsourcing.

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Local Trends

• CREA produces County economic indicators for
  Press Democrat every six months
• Leading and Coincident.
• Methods by Toby Tyler, updating by CREA.
• Latest Iteration February 2004.
• Leading Up from 2003.
• Coincident Up from 2003.
• Basics looks like the beginning of sustained
  growth, but when?

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So What?

• For Economic Development
• Indicators show a macroeconomic forecast of a
  region
• Economic Development Indicators abound.
• Every area different.
• Other factors obviously play a role
• Interest Rates what will happen and when?
• Labor Can workers afford to live here, can firms
  afford to hire them?
• Infrastructure Does the local infrastructure
  support my needs?

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Sonoma County Strengths

• For Economic Development
• Aesthetically, tough to find better.
• Space is available.
• Local labor pool educated, skilled, diverse.
• Diverse economy allows job switching, labor comes
  and stays.
• Businesses seek geography where profits can rise.

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County and Valley Challenges

• Location Specific
• Cost of living high.
• Real Estate Bubble burst coming?
• High wages cause high living costs.
• Infrastructure
• When will HWY 101 be finished?
• Will HWY 12 be expanded?
• How will changes affect other areas, such as
  Sonoma Valley?
• Zoning issues and needs incorporated vs.
  unincorporated

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Challenges (cont.)

• From Outside
• Statewide issues
• CA budget seems to be stable, must stay that way.
• Once bonds are sold, upward pressure on interest
  rates.
• National Issues
• Uncertainty over policy and elections a problem.
• Stock markets volatile, tend to pressure interest
  rates.

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Challenges (cont.)

• Interest Rates and Job Growth big ones
• If interest rates rise, development incentives
  may be curbed or shift.
• If job growth does not happen, and housing price
  continue to rise, people may leave this county.
• The tradeoff If people leave, housing prices
  fall if they stay, we must be growing
  economically, and living costs rise.

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Realities

• Economic Development is a mix of government and
  business incentives
• Government wants tax revenue and minimum
  political issues
• Businesses what profits and minimum political
  intervention
• Society wants income, minimum taxes, and a nice
  place to live.

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Conclusions

• Economic Development takes place when all these
  are aligned.
• Current economic situation certainly is ripe for
  economic development in Sonoma County and in this
  Valley.
• Must choose the correct industries and understand
  benefits and costs.
• Economic Impact Analysis can help (CREA).
• Cannot please all individuals separately, must
  aim for whole.

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Find this presentation CREA at SSU

• www.sonoma.edu/org/crea/svchamber.ppt