Fiscal Reality Will Challenge Local Officials

By Richard C. Perniciaro, Ph.D.
Director of the Center for Regional and Business Research
Economic Challenges for The New Year:
Creating A Future or Staying The Course?
It is easy to forgive the County Freeholders if they have begun to feel more like jugglers than overseers of what is perceived as one of the wealthiest counties in New Jersey. With a set of trends and realities that have become constant over the past six years, the County’s economy presents a balancing act for 2013 and beyond. As the full-time population continues to decline from its peak of 102,000 in 2000 to 96,601 in 2012, the County’s fiscal condition has begun to show signs of strain. Driven by an average decline of housing values of 17% since 2007, a stubbornly high unemployment rate of 9.4% in July, a continued recession in the home construction market (building permits remain in the 450 units range, having peaked at 2,433 at the height of the boom), and a 7% decline in the tax base in just three years, some difficult resource decisions are now inescapable.
The long-term trends are a classic case of the chicken and egg economic dilemma. As the population declines, there is less economic demand and employment stagnates. In fact, the County’s annual employment level was lower in 2011 than in 2000. The lack of employment growth discourages younger households from moving into the area while housing costs have pushed some out. The results are evident in school enrollments which have fallen 16% in the last decade. In contrast, the 65+ population will be fastest growing age cohort in the next 10 years. While summer employment may climb slowly back to peak 2005 levels, the tourism infrastructure has expanded very little and is at nearly 100% capacity in July. Growth in ratables will be very difficult without growth in year-round employment.
The consequences of these trends are most pronounced in the provision of services. As the pie shrinks or stabilizes, the needs of the youthful residents will compete with those of seniors. The current increase in drug use and the poverty conditions of those 21 and under demand services very different from those needed by senior citizens. The county budget, churches and non-profit agencies have all begun to feel the crunch.
Even an economist would be remiss for not offering some possible avenues to pursue to change the trends and offer a balanced future. So……
The dominant tourism industry needs to continue efforts to broaden its season while offering higher quality services. Higher value-added products will raise property values as well as annual wages.
Promote green industry connections. Paulsboro has a special State designation for incentives for wind/solar manufacturing and/or assembly activities. Cape May County has abundant space and is closer to the wind energy resources.
Organic farming is becoming very important to the restaurant business. Like seafood and Jersey Fresh farm products, a partnership can be encouraged between producers and retailers.
Grapes and hops! The recent expansion of breweries and wineries should also be encouraged. Packaged tourism plans based on these industries are a growing part of overall tourism trends, the county can capitalize on them.
Some experimentation in the real estate rental market may be needed for shoulder months. How about weekday versus weekend rates? Clustered rental housing for large, extended families?
Promoting entrepreneurship for small business development. Telecommunications have made workplace choices more flexible.
Wishing a healthy economy to all and to all good health.