Assessing Our Local Economy: Marin County

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Assessing Our Local EconomyMarin County

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

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Introduction

• Understanding any local economy involves three
  key ideas
• What are the main businesses/industries?
• What are the epicenters of retail activity?
• How does the government and infrastructure
  constrain business activity?

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Marin Countys Economy

• Marin County not easy to understand
• Difficult to determine the focal point(s).
• Can real estate, retail, health services be foci?
• Large interdependency between Marin and SF.
• Less, but significant, interdependency between
  Marin and Sonoma Counties.
• Sonoma also tied to SF somewhat.

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Marins Real Estate Economy

• Real Estate market brings revenue from many
  different angles
• Property Taxes, including DMV fees
• Services for the home lead to business taxes
• Local retail for the home leads to more sales
  taxes
• Real Estate Agency leads to more local spending

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Marins Economic Identity

• Live in Marin and work elsewhere?
• Large metropolitan areas provide both housing and
  jobs for many of its workers.
• Is Marin a suburb of SF?
• Location of employment important to understanding
  regional economy.

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Economic Activity as an Indicator

• Retail generally supports population centers
• Tough to find a store between Woodacre and Point
  Reyes.
• Demand and land availability drive retail
  business location choice.
• The economics of this issue are complex
• Traffic flows change, local businesses lose/gain
  demand, political issues may come.

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Retail Activity

• Sales Tax dollars normally rule governments
  involvement
• Dependence on taxes for budgets and forecasts key
• Urban plans need good forecasts.
• Very much a function of wages and salaries
• Retail provides jobs and supports the population.

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Macroeconomics

• Two things for sure
• Low incentive for local taxes to change downward.
• Space is finite.
• As state budget goes, changes in taxes are
  probably coming.
• Cannot cut spending forever.
• Betting on new tax revenues from economic growth.
• This is what happened last time.

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Microeconomics of Real Estate

• Economics 101 Supply and Demand
• Need to estimate both well.
• Convert conclusions into forecasts.
• Convert forecasts into budgets.
• Helps understand urban sprawl, boundaries,
  politics.
• Also helps understand interdependencies
• Macro factors influence these.

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Supply

• Building Permits a good indicator
• In Marin, trend shown by graph below.
• An indicator of both residential space directly
• An indicator of subsequent retail space
• A indicator of builder forecasts.
• Lumber, steel, brick, gas, and labor prices
• When contractors decide to build, they assume
  little change.
• Labor probably the most important and volatile
• Inflation generally a problem, but then go the
  home prices.

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Marin Residential Building Permits, 2000-03
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Demand

• Interest Rates and Unemployment big here
• As interest rates fall, housing prices rise.
• Renters become homeowners
• Rental space falls, home ownership rises.
• Do not really see this in Marin.
• As Unemployment rate falls, wages rise
• Workers can afford higher prices, willing to pay.
• Location of employment important here.
• Cycles in real estate dependent on these two
  mainly.

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Paradox of Inflation in Marin

• Inflation leads to higher home prices until
  unemployment reacts
• What if it doesnt?
• Cost of living rises, no major emigration
• Housing prices remain supported high.
• US Unemployment also a good indicator of Marin

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Conclusions

• Understanding local economies is understanding
  what generates revenue
• Sales Tax revenue a key way to see what drives
  the local area
• Property Tax revenue shows demand for housing and
  price dynamics
• Parking revenue shows local demand and
  utilization of public access.

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Conclusions

• Macroeconomics shows us the path for analyzing
  many scenarios.
• New business entry
• New infrastructure
• New housing
• New zoning
• The economic effects are constrained by
  government and local political environment.

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Conclusions

• Real Estate Market like any other market
• Supply and Demand driven
• Determinants drive forecasts of real estate
• Forecasts of government revenue based on this in
  so many ways.
• This is where the assessors office is a huge
  source of information.

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eyler_at_sonoma.edu

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