Q4 2019 – Walla Walla Trends Newsletter

News From The Port

Wallula Dodd Water System

By Paul Gerola, Economic Development Director

Over the last several years, the Port has been working on developing a regional industrial water system for its Dodd Road Industrial Park and Wallula Gap Business Park properties in the western portion of Walla Walla County.  The Dodd Road Industrial Park and the Wallula Gap Business Park combined are approximately 1,500+-acres of heavy and mixed industrial zoning which is ideal for heavy industrial business activity. The Port’s Wallula Gap Business Park is also the largest industrially zoned property available in the State of Washington.

Currently, the Port operates a Group A, non-transient, non-community water system in western Walla Walla County, known as the Wallula Dodd Water System. The water system presently serves six local businesses including approximately 75 percent of the Tyson Fresh Meats, Inc. (Tyson) raw process water. The Port is preparing to develop two of its existing shallow alluvium wells for blending with its Dodd basalt well water, construct a 6.2 million-gallon reservoir, and install approximately 44,000 linear feet 24” transmission mains from the wells to the reservoir and 4”, 18”, 24”, and 30” distribution mains from the reservoir to the users.   The project should be completed in the Fall 2020 at an estimated cost of $18 million.

Click here to visit the Port of Walla Walla website

Mapping the American Rental Housing Crisis

From the start of the housing bubble to now, there is virtually no place left in the U.S. unaffected by housing costs, regardless if you are currently looking to buy or rent. While there are many reasons for this occurring, the mainstream media has perhaps focused more on home buyers than on renters.

Our neighbors to the south in Oregon made national news earlier this year as they were the first in the nation to impose rent control, adding weight to discussions in Washington State. Oregon’s new law caps annual rent increases at 7%.

While the 7% annual increase outpaces both inflation and wage growth, if Oregon’s law was applied to Walla Walla County, $800 monthly rent during year-one would increase by just over 40% during the last 5-years. While slightly different than the average rent, fair market rent for both one and two-bedroom apartments in Walla Walla County increased by 32% during the last 5-years.

National inflation rates ranged from a low of 0.7% (in 2015) to a high of 3.0% (in 2011). Wages are even slower growing based upon the Average Wage Index (AWI) offered by the U.S. Social Security Administration. Since 1984, the national annual average increased by approximately 3.52%, with the highest annual increase occurring in 1987 at 6.38%. Over the last 10-years (2009-2018), the average annual increase of the AWI was only 2.36% with the lowest annual increase (-1.51%) occurred in 2009, and the highest annual increase (3.62%) occurred in 2018.

The Assisted Housing Initiative, a project of the Urban Institute has another way to show the housing cost burden of renters. Offering an interactive called Mapping America’s Rental Housing Crisis, the project is self-described as the “best estimate of the affordable rental housing gap and federal assistance for extremely low-income (ELI) renter households at the county level in the United States.”

The main premise of the project is since 2000, rents have increased in the U.S. at the same time the number of renters in need of affordable housing has also increased.

Using HUD and USDA housing assistance options on for the 5-year period of 2010-2014 in the U.S., there were approximately 11.775 million extremely low-income (ELI) households with only about 5.374 million adequate, affordable, and available housing units. The ratio produced by the most recent data available (2014) shows nationally, there were 46 adequate, affordable, and available housing units for every 100 ELI renter households (5,374,785-to-11,775,631).

In Walla Walla County during 2014, there were approximately 1,454 ELI households with 2,686 adequate, affordable, and available housing units. In its lowest terms, this is 39 adequate, affordable, and available housing units for every 100 ELI renter households in the county. It’s estimated an ELI family of four during 2014 earned a maximum of $23,850.

5 Facts About Crime Trends in the U.S.

Perhaps one of the most common and safest positions in a political race is promising to be “tough on crime”.  Keeping communities safe is a paramount responsibility of government, often reflected as one of the top budget expenses of a local or county government.

5 Facts About Crime in the U.S., a recent report and interactive website from Pew Research, has two main points: serious crime has been decreasing across the U.S. for the last two decades or more, while at the same time, public perception is that crime has been increasing.

Every year, law enforcement agencies across the U.S. submit their crime data to the Federal Bureau of Investigation (FBI), who uses this information to produce the Unified Crime Report (UCR). UCR crimes are considered serious and include violent (murder, rape, aggravated assault, and robbery) or property (burglary, larceny / theft, and motor vehicle theft). The UCR are actual counts and not estimates, but only the most serious crime is counted regardless if someone commits one crime in a single event, or multiple crimes are committed by one person in a single event.

It’s inevitable all research and data collection methodologies weaknesses, but UCR statistics have an added weakness: they must be known to law enforcement. Therefore, the actual number of crimes is higher since not all crimes are reported. The most common way police learn of a crime is simply when someone reports it, but also if police witness a crime or learn of new crimes while investigating others. Also, the UCR only considers felonies, and excludes drug offenses such as manufacturing, trafficking, and possession.  

Pew facts #1 and #2 refer to UCR data and clearly show a national decline in serious crime. Contrary to what the data indicates, Pew fact #3 uses the UCR and a variety of national surveys such as the National Crime Victimization Survey (NCVS), the National Incident-Based Reporting System (NIBRS), more than 20-years of Gallup surveys, and recent Pew Research Center surveys to confirm public perception of crime is each year is worse than the previous, regardless if data clearly shows serious crime in the U.S. has been steadily declining over the last two decades.

Fact #4 is perhaps the most obvious of the 5 Facts in how actual crime differs (by rate and type) from one geographical location to the next in the U.S.

In the grand scheme of things, there are many reasons attributing to decreasing crime in the U.S. Since the consequences of being a victim can be incredibly damaging, it’s easy to focus on how crime affects us (actual victims or not) so we concentrate on what we could lose (everything we love and cherish) rather than viewing crime through the broad scope of good data.  

When the first four Pew facts on crime in the U.S. are better understood, perhaps Fact #5 becomes the scariest: most crimes are not reported to law enforcement, and of crimes actually reported, most are never solved or even result in an arrest.

U.S. Small-Area Life Expectancy Estimates

Fair Market Rent, Supply and Demand Pressing Rate Increases

by Brian Kennedy and Dr. Patrick Jones

If you have recently been searching for a rental unit in Walla Walla County you might have noticed that prices have been growing considerably. Depicted on Indicator 5.1.10, fair market rents have been growing at rates faster than some of the larger, more urban nearby cities over the last ten years in the local community. Let’s consider the forces of supply and demand to understand this increase.

Fair Market Rents are used to determine payment amounts for many federal housing assistance programs such as Section 8, and Housing Choice Vouchers. Their calculation can be a little nuanced.  The U.S Department of Housing and Urban Development (HUD) uses latest released estimates from the American Community Survey (ACS) to obtain data on the gross rent paid by renters, where gross rent includes standard rent costs plus utilities. The estimates are then adjusted to account for rents paid by recently moved renting households in order to capture new rental rates, as renters who have not moved recently may be locked into a lease with lower rent than current market rates. Then the estimates are inflated from the ACS base year to match that of the current year, using the consumer price index.

The monthly fair market rent in Walla Walla County calculated in this way by HUD for a one-bedroom apartment was $735 in 2019, up over $250, or 57%, since 2008 where it was just $469. Following a similar trend, fair market rents for two-bedroom apartments grew by over $350 over that same time period, increasing from $619 to $972.

Neighboring Benton County, offered as a benchmark for this indicator, hasn’t seen growth rates as Walla Walla has. While fair market rents in Benton County did grow by $250 and $300 since 2008 for one and two-bedrooms respectively, their percentage change falls 10 percentage points lower than those of Walla Walla County, or roughly 47% cumulative increase for both sizes of units.

As fair market rents are used by the federal government in order to determine many housing assistance programs, household income is another key variable. Indicator 5.1.11 tracks the annual income required to afford the fair market rent in Walla Walla, where affordability is based on the HUD’s definition of rent not exceeding 30% of a household income. Here the trend follows the same trajectory, with incomes required for one- and two-bedroom apartments sitting at $29,400 and $38,888, respectively, in 2019. To put that in perspective, the most recent median household income data for the Walla Walla metro area, taken from the ACS, puts incomes at $36,207 for renting households; falling above the one-bedroom but below two- or more bedroom units.

One contributing factor to the high growth in Walla Walla rents rests on supply side forces. The U.S. Census compiles statistics on the number of residential building permits issued by the number of housing units in the structure. In the last five years, from 2014 to 2018, only 80 additional multi-family units were permitted, with none permitted in 2017 or 2018. With so few added in recent years the rental supply hasn’t appeared to keep up with demand.

Contributing to demand side pressures is the high concentration of students in Walla Walla. According to the National Center for Education Statistics’ Integrated Postsecondary Educational Data System (IPEDS), there were 7,189 students enrolled in the fall of 2018. This accounted for just over 10% of the total population in Walla Walla County. The high share of college students in the county population, with their lower incomes and temporary housing status needs, and competing for a scarce supply of multi-family units, contributes to the upward pressure on rents.

However, it’s not just the rental market that is experiencing high price increases in the community. The median home resale value, laid out on Indicator 5.1.1, shows the home prices from the second quarter of 2009 to the second quarter of 2019. Here the data track a similar trend to that of fair market rents. From 2009 to 2019 home prices jumped 53%, or from about $175,000 to $267,000. This rate of increase has likely priced many prospective homebuyers out of the market, leading to longer renting tenure and increasing competition for the low number of rental units.

Walla Walla’s rising fair market rents can be summed up by classic forces of supply and demand. Demand from students and outpriced potential homebuyers impact prices, and coupled with low supply, is creating a rate of price increases that rivals Walla Walla’s geographic counterparts. Unfortunately, Walla Walla permitting data, a forward-looking indicator used in forecasting, show that the pressures on the supply side won’t be easing anytime soon.

Taxable Retail Sales per Capita: Measuring Retail Leakage

by Dr. Patrick Jones

This time of year “shop local” is a common call throughout eastern Washington communities. The motivation is clear:  spending your hometown sends positive ripple effects throughout a community. These include local jobs, local taxes and an inviting ambience of downtown shopping districts. Yet a significant portion of purchases by local residents takes place beyond the boundaries of Walla Walla County.

Economists refer to out-of-county spending as “retail leakage.” Locally “owned” dollars slip out of local circulation. And the ripple effect goes into reverse. Quantifying these effects is not easy. Unlike Idaho, Washington State, through the Department of Revenue, does report retail sales taxes by county. But they are hardly tagged by residence of the buyer.

As often is the case in economics, the only way to measure is an approximation. The Trends uses the proxy retail sales per capita, here and in adjacent counties. The logic – if retail sales per resident are higher here than in adjacent counties, then it is likely that there is a net inflow of shoppers relative to those adjacent counties. Or, if retail sales per capita are equal here to those in adjacent counties, then the net effect of “cross-border” shopping is neutral. For this indicator, the relevant adjacent counties are Benton and Franklin.

For this proxy approach to be valid, factors that lead to retail spending should be roughly similar in Walla Walla and the greater Tri Cities. At least four come to mind.

The first concerns incomes: they need to be roughly the same here and in adjacent counties. Why? Spending is largely driven by income. If the neighboring market enjoyed higher incomes than the county of interest, then we would expect higher retail sales per capita there from the factor alone. From Trends indicator 1.1.1, we know that for 2018, per capita income in Walla Walla County was $48,160. Via a similar project for the greater Tri Cities,  we know that this measure in 2018 was $44,256. So incomes measured this were about 10% higher here than in the two counties to the west.

From Trends indicator 1.1.2, we know that median household income (MHI)  in Walla Walla & Columbia Counties was estimated to be $59,704 in 2018. The estimate of MHI for the greater Tri Cities last year was $64,908.  Here, incomes in the counties to the immediate west were about 10% higher. So one measure puts Walla Walla slightly higher, the other slightly lower. In all, incomes here and the comparison counties are approximately similar.

Besides income, age plays a role in spending patterns. The very young don’t have much disposable income to spend. The older population’s market basket of goods and services is generally smaller and tilted toward personal and health care services that are usually not taxed in our state.  So to check the approximate equivalence of the population that spends, one needs to consider the shares of age groups 18 through 64.

Indicator 0.1.3 reveals for 2018, that these ages made up about 61% of the county’s population. This was within 10% of the share of these ages in Benton and Franklin Counties in the same year, or about 58%. So, any distortion due to age-related taxable retail spending patterns seems modest.

A third condition that should hold is similar “tourist intensity.” Communities promote tourism largely for their spending impacts. If one community shows much higher tourist spending level per resident, then any conclusions on leakage will be biased. The Trends contains a measure of this, both here and for the greater Tri Cities. Indicator 1.4.4 notes that 2018 estimated tourist spending per resident in Walla Walla County was $2,534. This level is roughly the same as in the Tri Cities for the same year, which registered $2,318, or less than a 10% difference. So, tourism brings little distortion in the comparison.

A final assumption is that other counties don’t play much of a shopping role in the comparison counties. To the degree that residents of Yakima County shop in the Tri Cities, this isn’t true. Umatilla County shoppers appear about equidistant from Walla Walla and the Tri Cities. By distance to shopping, it’s difficult to imagine too much effect there, although Tri Cities certainly offers more shopping choices for them. This is the one factor that renders the comparison in indicator 1.1.1 a little biased.

What, then, does retail spending per resident in Walla Walla tell us? First, it is and has been lower here than in the greater Tri Cities. For 2018, taxable retail sales per person here was about $7,200, versus about $9,000 in Franklin County and about $10,700 in Benton County. Or, retail spending per resident here came in at 80% of the levels enjoyed in Franklin County and 67% in Benton County.

This represents an improvement over the prior year. Retail spending per resident here versus Franklin County was 73% in 2017. It was lower yet, compared to Benton County, at 63%. Were it not for the dramatic rise in taxable retail spending here in 2018, as indicator 1.2.1 clearly shows, results in 2018 would have been similar.

The long-term assessment is one of little improvement for Walla Walla. In 2004, the start year of the indicator, the ratios of per resident spending here to those in the Tri Cities were nearly the same. Yet, the past five years have witnessed a much faster growth rate of retail sales/resident – 27% cumulatively, than the prior five years, which was 5%.

It comes likely as no surprise to readers to learn that sales tax reports clearly show flow of retail spending dollars out of Walla Walla to the Tri Cities. This is typical result for a smaller geography adjacent to a larger population base. Currently, the population ratio between the greater Tri Cities and Walla Walla is nearly 5:1.

What might the future hold? The improving outcome of the past five years? Or the stagnant one that starts in 2004? That outcome will depend on the all the factors listed above (and likely more). If increasing taxable retail sales is a goal of Walla Walla, then faster growth of the following factors will be key:  population shares of the 18-64 year-olds, personal income and tourism.

Residential Building Permits Lagging but Seeming to Meet Demand

by Brian Kennedy and Dr. Patrick Jones

The impacts of The Great Recession can be observed quite well in the trend line of this indicator: the buildup of a higher than average number of permits issued between 2003 and 2007, then the sharp declines and historic lows throughout 2008 to 2010, and eventually the recovery from 2011 onward. Locally, however, that rebound hasn’t been as strong as it has been in other parts of the state.

According the U.S. Census Bureau’s Building Permits Survey, displayed in Indicator 1.5.3, there were 221 residential building permits issued in the county in 2018. It was the 2^nd highest in the last ten years, nearly double the amount issued in the depths of the recession in 2009. This outcome is still behind the national and state benchmarks, but Walla Walla has been closing the gap with former.

In 2000, Walla Walla County issued 3.6 building permits per 1,0000 residents while the U.S. was at 5.7. Those rates reached parity in 2009 when they both fell to 1.9. Since then Walla Walla’s residential building has been growing in fits and starts, occasionally outperforming the nation until the most recent two years when Walla Walla began lagging the U.S. again. Yet currently, the rate of activity isn’t by nearly as low as it was back in 2000, with Walla Walla trailing the U.S. by only 0.5 permits/resident.

On the other hand, Walla Walla is still not growing nearly as fast as the state, nor as in most of the surrounding metro counties in Eastern Washington. Neighboring communities such as the Tri-Cities, comprised of Benton and Franklin Counties, and the Wenatchee metro area, comprised of Chelan and Douglas Counties, find themselves in the top tier for residential building permits issued. Respectively, both communities out-permitted Walla Walla by 3.0 and 3.1 per 1,000 residents in 2018. Spokane and Grant County, while not growing as strong and the Tri-Cities and Wenatchee communities, are still issuing more permits as well, 2.2 and 1.0, respectively. In fact, the only other urban county that Walla Walla exceeds is Yakima, and by over double. (Trending data for Benton and Franklin Counties can be found on Indicator 3.4.5, for Chelan and Douglas Counties on Indicator 2.4.1, for Spokane County on Indicator 2.3.3, for Grant County on Indicator 2.3.1, and Yakima County on Indicator 2.4.2)

While this does sound like there is little to no growth happening in Walla Walla County, it isn’t all bad news. It seems that the community is just responding to market forces. According to the Office of Financial Management, and displayed on Indicator 0.1.1, population growth for the county has been relatively low at just 0.6% in recent years, about a percentage point lower than the state. In the face of slower population growth, there are just more houses on the market in Walla Walla than across the state. Indicator 5.1.4 takes data compiled by the Runstad Department of Real Estate and displays the number of months it would take to sell the current inventory of homes if no additional homes were listed for sale. The trend shows that in the recent quarters where data is available Walla Walla’s inventory has been much higher than the state’s as nearly all price points.

So while it does seem that Walla Walla County’s residential construction has been underperforming when simply looking at the residential permits issued, it seems the market is just responding the demand forces. When population is growing at a slower pace and the housing supply is already relatively high, fewer homes need to be built.

Walla Walla Is Greying, But For Now Staying Young, Too

by Dr. Patrick Jones

Is demographics destiny in Walla Walla? You might be familiar with the saying that implies age, gender, racial and ethnic mix of a society sets the rails for its outcomes. The concept smacks of the concept of predestination, that is that our fate is sealed from birth.

The destiny interpretation strikes this writer as a bit strong. Nonetheless, demographics certainly influence outcomes, whether at the national or here. In this column, the key demographic of age distribution is taken up.

Indicator 0.1.3 offers an aggregated look at a population pyramid over time – for the county and Washington state. Four age groups are defined:  0-17, 18-34, 35-64 and 65+. For each group, a share of the total population is presented by year. Data on the actual estimated counts are available in a spreadsheet via the “Download Data” tab of the graph.

A comparison of Walla Walla’s 2018 age distribution to that of Washington’s shows remarkable concordance for the youngest two groups. That is, the shares of the 0-17 and 18-34 groups are virtually the same:  about 22% and 23%, respectively. Through the lens of these two groups, Walla Walla County is as young as the state.

The same cannot be said for the two older groups. One is much smaller proportionally and the other much larger than the state. Taking up the former, we observe that the group of 35-64 represented about 35% of the county population in 2018, versus approximately 39% for the state. As those online can easily detect, the share of this population locally has stayed constant over the past 20 years. So has the age group’s share in the state.

The 65+ category also shows a significant departure from state averages. In 2018, its share of the Walla Walla population was 19.5% versus 15.8% in Washington. This age group has also shown the greatest growth over the past 20 years, moving from 15% of the population to its current share of nearly one fifth. While large, this age category is not the largest among eastern Washington metros. The greater Wenatchee area currently carries a slight edge to Walla Walla.

To some degree, the growth of the 65+ age group is merely a reflection of the path of the boomer generation over time. For the state as a whole, the share of the 65+ group has moved 11.4% to nearly 16% over the same period. But the indicator clearly shows that a larger senior population, relative to the state, has always claimed Walla Walla home for the entire period covered.

What are the consequences of a disproportionately large older population? And what are the consequences of a disproportionately smaller prime working age population? Taking up the impact of seniors first, we can expect local demand for goods and services to be heavily influenced by the market basket of this age group. At a minimum, this implies a strong need for healthcare services, retirement planners, personal care services and appropriate real estate offerings – likely smaller dwellings equipped with “aging in place” design.

And the local mix of goods and services already reflects this emphasis. As Trends Indicator 1.3.5 tracking employment shares of the five largest sectors shows, the share of the workforce in healthcare and social assistance most recently lay at 15%, considerably higher than the state average.

What are the consequences of a relatively small share of the prime working ages in Walla Walla? The first concerns earnings. This is the time in a person’s career where salaries peak, especially in the middle segment of the age group. A relatively small percentage of the population, coupled with a larger senior population, augurs lower total earnings in the local economy.

A second consequence concerns workforce. For most businesses to grow, they require more workers. While the adjacent age groups, especially the 18-34 group, offer help, typically the 35-64 group provides the largest pool of workers. If this group is relatively small, then economic growth prospects might be constrained. On the other hand, Walla Walla County, at least its western portion, enjoys the advantage of the large labor pool of the Tri Cities.

A third consequence, at least for the first half of the age group, concerns children. With relatively few in the prime child-rearing age group, schools might face declining enrollments. In fact, that has occurred in the county. For the past 18 years, total student count has increased cumulatively by 2.9% while the state-wide count has climbed 13%.

A fourth consequence concerns traditional media use. While television and newspapers likely enjoy a strong market 65+ market in Walla Walla, they also rely on the 35-64 age group. The relatively small footprint of the latter group can make for a more limited reach of traditional media.

Is there an ideal mix of ages for any community? Probably not. Most would undoubtedly like a blend of ages, unless one wants Walla Walla to resemble a dedicated college town or a northern latitude version of Sun City. From an economic development perspective, it probably would be helpful for the county to contain a slightly higher share of 35-64 year-olds.

It strikes this observer that for the foreseeable future, the share of the 65+ group will continue to climb. First, that’s the inevitable consequence of boomers aging. Second, although we don’t have data on in-migrants, it seems likely that a good portion of new residents are in, or close to, that age range. And as Indicator 0.2.1 shows, nearly all of Walla Walla’s recent population growth can be attributed to net in-migration. Third, local birth rates are relatively low, so the 0-17 group’s share is likely to slip. Fourth, college enrollments, contributing a large portion to the 18-34 group, have been flat. It is unlikely that this trend line will move much.

This evolving age mix will mean a different Walla Walla than a generation ago. One which should bring many benefits as well as challenges. Enjoying the greying!