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RALPH KINGSBURY COLUMN: 2006 will be tough to follow

Readers may recall that a month ago, when Grand Forks had already blasted through its record on building permit values, I said there was a chance another $3 million or $4 million could be added in December. I was wrong. The December value totaled...

Readers may recall that a month ago, when Grand Forks had already blasted through its record on building permit values, I said there was a chance another $3 million or $4 million could be added in December. I was wrong. The December value totaled more than $5.8 million. So far, it just hasn't quit. It is hard to believe that we can match this in 2007 because of several large projects in 2006. The largest, of course, were the Canad Inns hotel and water park and UND's apartment complex.

Stephen J. Lee pretty much covered everything in his excellent article in the Herald about two weeks ago. I would like to make just a couple of additional points.

First, Lee did note the construction at UND. However, he used the phrase "state funded" when referring to the building at UND. I would point out that every project I can think of over the last several years, except for about one-third of the cost of the Center for Innovation, is state funded only to the extent that the state backs the bonds used to complete the projects. There is no state tax money that goes into these buildings, whether they are all the projects at the Energy and Environmental Research Center, student housing of all types or the new Wellness Center. These buildings must pay for themselves through revenue they generate, or from private or federal sources. When construction actually starts on the new research center, there will be some state money under the Centers of Excellence program.

The second point I want to make concerns housing across Grand Forks. As you can see from the tables, both single family and townhouse construction is up this year. It is only the apartment category that declined. However, again when we realize that the apartments being constructed at UND fall under the public category, we know that all facets of housing in Grand Forks saw an increase in 2006. That is just what Grand Forks wants for the long term, and is another sign of population and economic growth.

An area I have not commented on concerns health care. The new Aurora Medical Center and the continued health-care growth in East Grand Forks are also good signs for the two cities. There are other independent health-care clinics and continued changes at Altru, also. It is especially significant considering the upper Midwest population has a much higher percentage of elderly. If people can not receive health care in Grand Forks, they are not as likely to live here.

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City sales tax collections also remain positive. The percentage increases do not match last year in either comparing January '07 to January '06, or the 12 month rolling average. However, that is because 2006 was so much better that 2005. When we look at the actual dollar amount, 2007 and the 12 month rolling figures are up from last year. Also, the city lodging, restaurant, and entertainment tax is larger than last year. That can be considered a good indicator that more people are coming to Grand Forks, or at least that they are spending more while they are here.

Finally, I have an idea on why Grand Forks taxable sales and purchases are not as good as the rest of the state while we still see significant increases in the city sales tax figures. It will take more research, and I have to give credit for the idea to Mylo Einarson, the Grafton, N.D., city administrator. Grafton faces a similar situation as Grand Forks with the city sales tax up about the same percentage. At the same, time their taxable sales and purchases in Grafton were actually down.

Einarson was quoted in the Walsh County Record as saying that was understandable when you realized that they capped their city sales tax at $25. That is what Grand Forks does, and to me, that means that purchases of smaller ticket items have increased and that is why we see an increase in city sales taxes. At the same time, sales of large ticket items has to be down and that leads to a smaller increase in taxable sales and purchases.

Another Grand Forks area table to look at is the information provided by the Board of Realtors. I said before that this area never experienced the housing bubble, so it hopefully would not participate in any bursting, or even deflation. These figures seem to confirm that, at least through 2006. It is true that, overall, there was a slight increase in days on market, but it is hardly significant. Also, overall, the price sold figure is actually up over last year. We probably need to hold our breath for another six months or so, but so far it looks good.

Airline boardings are down for the year. Given the change in the seats available, this small decline is to be expected. Until there are new flights and destinations added there is not much more the airport authority can do when most flights are full, or nearly so.

The possibility of Frontier Airlines coming here with a Denver destination should turn this around. I certainly do not know what else can be done. We know the airport authority and their staff has done everything possible.

Unemployment seems to have taken a significant increase across Minnesota. This could be temporary, or it could be an early sign that we are entering a recession, but then the national unemployment figures are down.

The North

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Dakota economy

Over the last month, I have made many comments about the North Dakota general fund budget. I present some of that information here again in table form so readers can make comparisons.

Some of my comments have been critical, and I have been asked where the money would come from for any increases I have been arguing for. I refer readers to the table on appropriations. Before I would accept any cut in the share going to any level of education spending, I would like to know why any one of the three categories receiving an increase in the percent of the appropriations need that increase.

Remember, if Gov. John Hoeven's recommendations are accepted, there will be more than a 24 percent increase in appropriations. If general government received only a pro-rated share, their expenditure increase of 24 percent that would give them an additional $40.6 million. Instead, the governor is recommending an increase of over $60.5 million dollars.

Every increase such as this comes at the expense of holding higher education at its 19 percent share and cutting elementary and secondary education from 33 percent to 30 percent.

What is so important in all of those on going government operations that we need to see a decrease in the share going to education. That hardly seems to me to be seriously addressing the problems related to elementary and secondary education, or in addressing the problems related to property taxes.

Concerning the sources of revenue, I have provided a percentage breakdown of those sources as they were projected at the end of the legislative session two years ago. We now know that there will be some significant changes by the time the biennium ends June 30. Corporate income taxes will probably see the largest percentage increase but will still amount to less than 10 percent of total collections. Individual income taxes will be over 20 percent larger than the original projections, and they account for about 25 percent of all monies received. Energy fees will be up, but by less than 5 percent.

The national

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economy

The national economy still looks pretty good when we only consider tax revenues and employment. It still looks pretty bad when we consider the deficit and the trade balance. It is too soon to draw any conclusions, and I won't write much this month.

Not much, but I will say this: gridlock can be good, at least for a while. If we are lucky, it will keep either Congress or the Bush administration from making things any worse.

Maybe the Democrats can cut back on the worst examples of the earmark problem. However, we need to remember that out of the whole budget, they were a relatively small item, and if they increase spending in other areas, the effect on the economy will be the same.

The most we can hope for is that the Fed can keep on top of the fiscal problems Washington will probably continue to create.

Kingsbury writes a weekly column on the local economy. He can be reached at kae@invisimax.com or (701) 738-0028.

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