The North Country Economy: On a Roller Coaster Ride that will End Well

For area businesses and organizations, 2008 was a roller coaster ride with unpredictable highs and lows. Those extremes, however, were mitigated by the region’s strengths, according to the business, nonprofit and community leaders at our table at the 19th annual Strictly Business Forum.

Joining me were Randall Whisher, president of ECP Building Envelope Specialists Inc.; Drew Sabella, owner of Anthony’s Restaurant and Bistro; Robert DeCamp, director of regulatory affairs and consulting for Deringer Logistics Consulting Group; Alice Recore, president and CEO of Mountain Lake PBS; Michael S. Dier, senior vice president and chief investment officer at Glens Falls National Bank and Trust Company; Fredrick Woodward, interim president of Clinton Community College; New York State Assemblywoman Janet Duprey; and Peter Whitbeck, real estate broker and owner of Coldwell Banker Whitbeck Associates. All agreed that factors like the state’s budgetary predicament, energy prices, trade with Canada, the downturn in the economy and access to higher education will continue to shape the region’s economy into the future.

The State’s Picture

Duprey painted a grim picture at the state level, saying, “If the New York State Legislature were a business, it would have gone bankrupt and locked its doors.” According to Duprey, 2008 was a bad year for the state — and matters are about to get worse. Having failed to deal with the $1.7 billion dollar gap in the budget this November, the Legislature now will have to face an even messier situation when it reconvenes in January.

Duprey, who served for many years as Clinton County treasurer, voted against the 2008 budget because she felt it spent too much. Little did anyone know at the time, however, how greatly they had overestimated revenues for the year. The trouble is, in part, Duprey said, because about 23 percent of tax revenue in New York comes from approximately 5,000 taxpayers. “And you don’t have to be a numbers person to know those 5,000 work on Wall Street. That’s the reason our revenue has just not come near meeting projections,” Duprey continued. “We saw that coming in April, but still, for some reason, proceeded to adopt a budget that was not realistic.”

Energy Prices

The high energy prices seen early in the year were a boon to Whisher’s business. The company re-engineers buildings, primarily for municipalities and schools, to ensure energy savings. When energy prices dropped and the economy worsened, however, all that changed. “What happened along the way is that fear crept in,” Whisher said. “Fear of not having enough money to do both the improvements and to pay for fuel.”

Lower energy prices also influenced how much ECP could charge for services. “The more energy we can save, the more improvements we can bid,” said Whisher. The end result is that sales are about 30 percent off from last year. Still, Whisher is positive when it comes to the future. “We have already booked 50 percent of what we did last year,” he said. “We think we’ll have a good year in 2009.”

For Sabella, high fuel prices and the increased cost of staples has made it more of a challenge to maintain his bottom line. Sabella has had to pay from $6,000 to $8,000 extra for the propane used in cooking. Furthermore, the price of goods that traditionally remain stable, like flour, sugar and oil, have gone through the roof.

With the downswing in the economy, Sabella doesn’t dare pass these costs on to his customers. “Right now with the way the economy is I’d be very, very afraid to try to raise prices,” he said.

Proximity to Canada

Fortunately for Sabella, proximity to Canada, the strength of the Canadian dollar early in the year and the influx of new businesses have helped keep customers coming to Anthony’s. Going into the holiday season, Sabella said that the restaurant had a gain of three or four percent, but a lot depended on the month of December. “A bad storm could really affect his year.”

The strength of the Canadian dollar and the interest of Canadian viewers have helped Mountain Lake PBS, according to Recore. The station’s president noted that, while local sponsorship is growing, 60 percent of all support for the station comes from Canada, and this support is likely to become more important than ever once the effects of federal and state budget crises are felt.

Border Regulations

While the influx of Canadians has been good for businesses, tie-ups at the border have not. Sabella tells the story of a Canadian customer who came and ordered some of the best food and wine in the house, only to cut his visit short because his family was tired after having sat for two hours at the border. Sabella hopes that these sorts of delays will be a thing of the past now that the Champlain border crossing has been upgraded.

For DeCamp, the current regulatory environment has been excellent for business. Deringer Logistics Consulting Group has grown and diversified in response to demands for greater homeland security and consumer safety. The company is now involved in warehousing, trucking, forwarding and international trade consulting, as it works to ensure the smooth, safe transfer of goods across the borders.

In addition, issues like the recent problem of melamine in Chinese baby formula have made the FDA realize it doesn’t have enough people to look at all the cargo entering the country. This creates an opportunity for third parties who hold expertise in selected areas of commodities to do testing and guarantee that goods are qualified to enter.

Extremes in the Housing Market

One area of the local economy that hasn’t benefited from the increase in the value of the Canadian dollar is real estate. “I thought when the exchange rate went down that we would see some Canadian real estate investment in the area. I’ve seen zero,” said Whitbeck.

According to the owner of Coldwell Banker Whitbeck Associates, the local real estate market is down by double digits. His company, however, has shown a slight increase in business, but that has been largely due to an expansion into the Lake Placid area. The company has also seen an increase in apartment rentals.

When it comes to foreclosures, Mike Dier said, “We’ve been very fortunate that we haven’t been impacted severely. He added that foreclosures tend to be concentrated in places like Arizona, Florida, California, Nevada and Michigan.

Glen Falls National Bank’s loan demand has actually gone up, in part, because there is less competition. “But we also realize, when we look forward, that everyone is going to be impacted by this economy and this market,” added Dier. Still, he is certain that his bank is well positioned to weather the storm, with solid lending standards, good people and much economic opportunity in the North Country.

Higher Education

Another strong regional asset has been the access to affordable, quality education helping both students and area businesses. Clinton Community College, for instance, provided training to more than 100 companies in 2008. In addition, it has worked to offer majors specific to the needs of local industry. For example, due to increased need by companies like Noble Energy or Horizon, the college started the only wind turbine energy program in the Northeast.

Both Clinton Community College and SUNY Plattsburgh also help businesses and nonprofits by providing interns and other volunteers who can gain valuable experience while filling a staffing void.

When Alice Recore had a need for staff but no money to pay for them, she turned to SUNY Plattsburgh. There she explored alternatives and what resulted was a communications practicum, one that, through the years, has attracted enough students that Mountain Lake PBS now can now be selective about which ones it takes.

Woodward encourages businesses to contact the colleges when they have such needs. “Come and pick our brains about ways in which we can help,” he said. “We have students who want to get out there and have that type of experience.”

Woodward also said that the downturn in the economy may actually cause community college enrollment to rise, and according to him, there is room to grow. “People begin to see what’s happening in the marketplace. They decide to stay closer to home, and when they do, they come to a community college at far less cost.”

Areas of Concern

Although the area is well positioned in terms of resources, there are several issues that the discussants at our table felt should be addressed. One is infrastructure, in terms of technology and transportation. Participants praised the work of CBN Connect. Under the auspices of SUNY Plattsburgh and the State University of New York’s Research Foundation, CBN Connect is working to build a high-speed, fiber optic broadband network that will run throughout the region.

They also praised the area’s north-south transportation lines, but found weaknesses when it came to air travel and east-west transportation.

There were also grave concerns about current insurance rates and feelings that the system needs to change. Mandates on businesses to provide health insurance could serve as a real hardship and might prevent businesses from being able to hire people. And there were worries about shortages when it comes to local medical personnel.

Finally, the group, as a whole, worried about the effects of high taxes, as well as the lack of highly qualified individuals to fill open positions.

The Future

Most of the individuals at our table expected their businesses to face certain challenges in 2009, but, at the same time, the leaders were optimistic. To a person, they felt that once these tough times pass, their businesses, and the region as a whole, will be in a strong, healthy position.

Perhaps Sabella put it best. “I’m extremely optimistic about the business climate in the region,” he said. “We’re in a unique area with unique resources. I’ve been in business for almost 30 years, and it just feels good to me. Regardless of this economic downturn, when we work our way through, I think we’ll be on the cusp of an explosion in quality growth in this market.”