MU study states Columbia's economy is middle-of-road

Wednesday, July 15, 2009 | 12:01 a.m. CDT; updated 12:34 a.m. CDT, Wednesday, July 15, 2009

An MU report comparing Columbia to similar cities puts it near the center in terms of job growth and average income per person but warns that the area's public expenditures are outpacing public revenue.

The report, funded by the city and MU, was conducted by the university’s Community Policy Analysis Center and compares Columbia to 24 cities of similar size that also have a research university. Columbia’s demographic data was ranked against communities such as Boulder, Colo.; Lawrence, Kan.; and Ames, Iowa, to show how the city’s economy stacks up against that of other college towns.

Columbia in 2015

What Boone County might look like in 2015, according to a recent study by MU's Community Policy Analysis Center:

  • Population: 178,988, a rise of 22 percent from 2005
  • Employment: 131,272, an increase of 20.7 percent from 2005
  • Housing demand is projected to rise by 12,944 units from 2005.
  • Retail sales are projected to rise by 23.9 percent from 2005.

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“I’ve been asked, 'What is the ideal community?,' and the ideal community looks a lot like Columbia,” said Professor Tom Johnson, the director of the Community Policy Analysis Center and one of the study’s authors.

The study stresses that it includes only baseline projections and does not take into account macroeconomic shifts such as the recession. But Johnson said the baseline is a useful tool to measure economic shifts by comparing them to what stable growth would look like. When economic growth resumes, the baseline can be used to measure how much the recession has hurt the local economy, he said.

The yearlong, $25,000 study puts the Columbia area right in the middle of the other communities in terms of its per capita income — $31,325 in 2006. The city came in seventh for job growth between 2002 and 2006, and saw its employment rise by 25 percent in those years.

The study also ranks the area sixth in the growth of manufacturing jobs between 2002 and 2006, a sector in which more than half of the comparable cities saw a decline. Columbia ranks lower, 17th, in its high-tech job growth compared with the other communities. But Johnson said he sees that sector as being most ripe for growth and said Columbia is at an “enviable starting point.”

“I think we haven’t exploited as many opportunities for spin-offs (from MU) as have been generated, but that should provide lots of opportunities in the next 10 years,” he said.

In addition, the study makes projections on what the area’s demographics will look like in 2015 and indicates how that projection might change if the local economy experiences a shock. The report defines a shock scenario as the effect of an additional 1,000 jobs in a particular sector, and speculates about the effect that could result in seven different sectors, including manufacturing, high-tech and higher education.

While most of the scenarios would be expected to yield relatively minor differences, the study stated, the largest effect on the economy would happen if 1,000 manufacturing jobs were added. Johnson saidColumbia’s lower manufacturing employment might explain the larger effect of new manufacturing jobs in the economic models, though he said that's not necessarily the case.

The project can be used for almost any scenario, Assistant City Manager Tony St. Romaine said. He characterized the baseline projections as a living model and said any of the demographic assumptions can be changed to reflect conditions as time goes on. Scenarios then can be run through the model to see what effect they might have on the city.

“We can change any of those numbers and use that to measure the effect on future housing needs, for instance,” he said.

The model and the reports also will be available to businesses, St. Romaine said.

Columbia Chamber of Commerce President Don Laird said the study highlights some great opportunities for the city, particularly in the area of high-tech jobs. The soft economy won’t last forever, he said, and the consensus of the report seemed to be that Columbia will continue to grow.

“I think it’s a pretty good guess of how we’ll end up,” Laird said. “I guess we’ll know in 2015.”

The report stated that Columbia experienced the most growth in retail-sector jobs between 2002 and 2006, compared with its peer communities, at 40 percent. However, Johnson said, the high dependence on retail employment probably brought Columbia two or three spots lower on the average income scale.

“I think there’s not much justification for promoting more retail in this area,” he said. “Not that you don’t want it to come, but it just shouldn’t be promoted.”

St. Romaine said that underscores the notion that Columbia needs to focus on attracting manufacturing jobs or on developing its own high-tech industries. He said that though Columbia’s employment base in insurance, education and health care has kept the community insulated from past recessions, those sectors are not meeting the needs of Columbia’s growing population.

“I think when we look at the need for better-paying jobs in Columbia, those sectors have not really increased that significantly,” he said.

Another point the report stresses is that the area’s public expenditures are outpacing its public revenues. The baseline projections see expenditures growing at 2.3 percent each year with revenue trailing at 2.1 percent.

“The way we have our sales tax is incapable of keeping up with growth in the community,” Johnson said.“Now, if you’re willing to accept declining services as we grow, that’s not a problem.”

Johnson said maintaining the level of services is often a struggle in growing communities. The report did not study revenues and expenditures in Columbia's peer communities. The report states that the city and county may need to look for additional revenue sources to close the gap.

“Growth is not going to make the revenue-expenditure squeeze easier,” he said. “It’s actually going to make it harder.”

But the report, Johnson said, is an indicator that Columbia is moving toward embracing economic opportunities.

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