Chittenden County fairs well in recession by comparison

Chittenden County's economic prospects are far from untroubled, but as the recession grinds on in many places around the country, the Burlington area's problems appear mild by comparison.

“Chittenden County continues to lead New England in lowest unemployment rates, foreclosures, and the depreciation rate of homes,” Ernest Pomerleau, CEO of Pomerleau Real Estate, pointed out. “Our commercial vacancy rates, although higher than normal, are well below the region's averages,” he added.

In fact, the 5 percent jobless rate measured for Chittenden County in April was at least one percentage point lower than for any of Vermont's 13 other counties. The figure also reflected substantial growth in employment since April 2009, when 6.2 percent of the Burlington area's active labor force was without work.

Tax receipts point to recovery as well. As a likely indicator of both local consumer confidence and a pickup in snow-season tourism, the take from the meals tax was 5 percent higher in Chittenden County in February of this year than in February 2009. That statistic confirms the recent observation by Larry Kupferman, head of Burlington's Community and Economic Development Office that “food and beverage places are doing well.” He added that “the situation is positive in several sectors” of the Queen City's economy.

One of its biggest employers is functioning as an increasingly powerful magnet for job seekers in the tech sector. Dealer.com, a supplier of software to automobile sellers, announced in April that it will focus its growth in Burlington rather than in a California locale where the company maintains offices. The company was enticed into expanding locally after being presented with a $3.5 million tax incentive package from the Vermont Economic Progress Council.

CEO Mark Bonfigli says Dealer.com will undertake a $9 million expansion that will double its 300-person workforce over the next three years. To accommodate the anticipated rise in the number of employees, the company is purchasing a nearby 47,000-square-foot building on Pine Street that housed Lake Champlain Chocolates' packaging and distribution center, which is relocating to Williston.

IBM, long the largest employer in Chittenden County, is growing again as well. Its local facility added 200 manufacturing workers last year and is in the process of hiring another 100. This expansion, following a series of job losses at the company's Essex plant, “reflects increased customer demand for the products and technology from the IBM Vermont facility,” spokesman Jeff Couture said in an email message. The plant makes semiconductor chips for cell phones, television sets, digital video recorders, and GPS systems.

BioTek, winner of the Vermont Chamber of Commerce's Deane C Davis business-of-the-year award, is further burnishing Chittenden County's reputation as a base for growing high-tech companies. The Winooski medical-software firm, which has offices in Europe and Asia, said it plans to add 70 employees over the next four years.

Green Mountain Coffee Roasters is meanwhile continuing its expansion as a national brand and shifting much of its operation from Waterbury in Franklin to Chittenden County. In recent months the company has added 140 workers to its Williston facility, which is slated for a 10,000-square-foot expansion this year. Green Mountain also plans to relocate its corporate headquarters to a location in the Burlington area that has not yet been determined.

Chittenden County's long-term economic health relies not only on the steady growth of large private employers but on the stability afforded by its educational institutions and medical center.

“You can't overestimate the importance of Fletcher Allen and the local colleges to our overall economy,” Kupferman said.

Jeffrey Carr, head of Williston-based Economic & Policy Resources, added that the hospital and the Burlington area's post-secondary schools function as “importers of people” as well as dependable employers. Local businesses benefit from spending by families from outside the area who visit relatives at Fletcher Allen, University of Vermont, Saint Michael's, and Champlain College, Carr said.

For all its countercyclical strengths, however, Chittenden County is hardly immune to the effects of the nationwide downturn. Job losses have occurred even within the health-care sector, which usually manages to continue growing in hard times.

Fletcher Allen has experienced a modest loss of 26 employees so far this year, according to figures supplied by Allen & Brooks, an appraisal firm in South Burlington. Allen & Brooks' June report also noted a reduction of 54 jobs at GE Health Care, the medical software company that has been shedding workers since 2006. That was the year GE arrived in the Burlington area through its purchase of IDX Systems, founded in 1969 by local entrepreneurs Richard Tarrant and Robert Hoehl.

Triosyn, a Williston company that makes anti-microbial respirators, has meanwhile laid off 35 workers. “The company anticipated greater sales resulting from the H1N1 disease that did not materialize,” the Allen & Brooks report said.

Some education-related entities are meanwhile feeling the impact of cuts or shifts in government spending. The Vermont Student Assistance Corp, with headquarters in Winooski, is subtracting 70 jobs due to changes in the way federal loans are made to students.

Despite IBM's current round of hiring, the Allen & Brooks report casts doubt on Big Blue's long-term commitment to Chittenden County. The company's new policy of refusing to specify its employment total, locally or nationally, suggests that IBM seeks to divert attention from its growing overseas operations and declining domestic workforce, Allen & Brooks said.

In Chittenden County, “the fact that IBM has leased 140,000 square feet to unrelated end-users suggests that employment numbers are not trending up anytime soon,” the report stated. “It’s also worth noting that there has been a lack of capital investment in the facility.”

One of Vermont's internationally known brands, Burton Snowboards, is closing its South Burlington factory and moving its operations to a plant in Austria, eliminating nearly 100 local jobs in the process.

The area's construction industry remains in a severe slump, with few housing starts underway or planned for the current season.

“The pipelines had projects in them until a couple of months ago, which kept people working, but now there's nothing left,” said Lisa Ventriss, head of the Vermont Business Roundtable.

Retail Slump

Retail in Chittenden County exhibits continuing weakness, particularly in Burlington itself, as shoppers remain reluctant to embark on spending sprees. Retail sales tax revenues were up only 0.1 percent in Chittenden County in the 12 months ending last February, compared to 1.7 percent in Vermont as a whole during the same time span.

Vacancy rates on the Church Street Marketplace have climbed above the 9 percent mark.

“That's the highest I've seen in the 12 years I've been here,” said Marketplace district manager Ron Redmond. The oversupply of space is prompting landlords to decrease rents - a big change from the owners' market that has prevailed on the Marketplace for much of the past decade, when vacancy rates were in the 4 to 6 percent range.

The relative bargains available now could lead a couple of national merchandisers to move onto the Marketplace, though Redmond cautioned that Burlington remains a hard sell to many chains.

“National retailers don't think much of this market because many of them don't even know where it is,” he said. But once they figure out the geography and take a chance on local consumers, the results can surpass expectations, Redmond added.

He cited the case of Pottery Barn, which “practically laughed me off the phone when I was trying to get them to come here,” he recalled. “They thought of Vermont as a backwater.”

The subsequent performance of the Pottery Barn outlet on Church Street has convinced the company otherwise, Redmond said.

Merchants already doing business on the Marketplace and those who may be contemplating a move there must now confront issues other than the state of the local economy. Some downtown retailers complain about antisocial behavior on the part of growing numbers of Church Street habitués. “Add that to all the insecurities retailers are already feeling and it's easy to see why this has become a major concern,” Redmond said.

A steep and protracted economic downturn, combined with cuts in social service programs as state budget makers desperately seek savings, has produced “a greater sense of hopelessness - more poverty, more homelessness,” Redmond stated.

For their part, added CEDO's Kupferman, local social service agencies “must make it clear to their clients that behavior on Church Street is important to everyone's overall quality of life in the city.” Kupferman cautions, however, that, “We're not saying they [social service recipients] have to get off Church Street.”

Redmond agreed that “everyone can co-exist here,” but he suggested it may be time to reconsider the location of some Burlington service providers. “Can we move them off the commercial core?”

No matter what local officials do about behavioral issues on the Marketplace, it will remain a public space without the stricter behavior codes promulgated by privately owned malls, Kupferman stated. And, Redmond added, “There's going to be a cohort of people who will never come downtown because they just don't feel comfortable in a dense urban setting.”

Burlington is grappling with other negative perceptions as well. The exodus - announced or underway - of three fixtures of the city's economy has diminished the positive vibe set in motion by the expansion of Dealer.com and the recent arrival of Terry Bicycles. The women's bike company moved its manufacturing and corporate operations to Burlington after being purchased by former Vermont Teddy Bear CEO Liz Robert.

But the jobs being brought to Burlington by Dealer and Terry do not come close to matching those lost as a result of the departure of General Dynamics, Gallagher & Flynn, and the Community College of Vermont.

The Gallagher Flynn accounting firm is taking 65 jobs to South Burlington, CCV has moved 40 fulltime workers to Winooski, and General Dynamics' shift of its manufacturing operations to Williston will cost the Queen City another 450 jobs.

All three entities are moving to sites within Chittenden County, and each has its own reasons for relocating - mostly related to space and transportation factors largely beyond the city's control. Still, these major losses are exacerbating anxieties about the city's political and financial management. Questions about competence in City Hall have grown more pointed as the scope of the troubles besetting city-owned Burlington Telecom has become more apparent.

The city's bond rating has been downgraded in response to Burlington Telecom's inability to make scheduled loan payments; and Moody's Investors Service recently took the same action in regard to the city-owned airport. That downgrading resulted in part from BT's financial problems, with Moody's citing concerns about the airport's finances because of uncertainties involving the city's pooled-cash fund. The Kiss administration had borrowed $17 million from that fund, in violation of state regulations, in an attempt to keep Burlington Telecom solvent.

Despite BT's unresolved crisis, CEDO director Kupferman described it as “a very successful business.” He said the telecom system has continued to add customers in recent months even though BT is widely perceived - inaccurately, in Kupferman's view - as a failing enterprise. The city's economic development chief also argued that BT's debt-repayment problems are not having a negative impact on Burlington's general economy. “I would distinguish between the business practices of BT and the economic circumstances of Burlington,” Kupferman said.

Regardless of whether the BT saga is harming the city's image among business leaders, it is likely to prove problematic for the city's taxpayers, said economist Art Woolf.

“Burlington taxes will have to go up because of what's happened with BT, and that's not good for anyone's perception,” Woolf added. “It's not like the higher taxes are going to be used for roads or parks but will [instead] go to something the city should never have gotten into.”

Even though the Burlington area was not as hard hit by the recession as some other parts of Vermont or the nation as a whole, a return to pre-recession employment levels will not occur anytime soon, Woolf predicted. He said the downturn that began more than two years ago has been the second-worst in Vermont history in terms of the percentage of jobs lost, with only the recession of the early 1990s taking a greater toll on employment. The financial crisis that rocked the national economy in 2008 will prove to be the worst-ever economic event in Vermont in terms of the time it takes for a full recovery to be achieved, Woolf added.

Jeffrey Carr offered a similar analysis.

“We're beginning to see a modest recovery in Vermont but there's a long way to go before we regain the ground lost during this recession.”

Allen & Brooks foresee slow growth for the remainder of this year in the office, retail, and industrial sectors in Chittenden County. The appraisal firm expects retail to rebound next year with a 3.3 percent expansion in square footage. Office construction, however, will be scaled back in 2011 due to anemic demand while industrial growth in the Burlington area won't rise much beyond the 1 percent mark, the Allen & Brooks report stated. Vacancy rates in both the office and industrial sectors are now at record highs.

Kevin Kelley is a freelance writer from Burlington.