Economy stronger than expected, but uncertainty sits on the horizon

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Economy stronger than expected, but uncertainty sits on the horizon

Sun, 05/23/2021 - 4:37pm -- tim
 

Photo: Sonnax employee, Lauren Anderson mans a tape gun for the Packaging team at a recent weekend event. Courtesy photo.

by Olga Peters, Vermont Business Magazine When Adam Grinold’s phone rings he expects one of two questions: What do I do? I can’t find enough employees. Or, I want to expand. Do you know of available industrial space?

According to the Brattleboro Development Credit Corporation executive director, businesses have “a lot of pent up” energy.

This is only one piece of good news for the Windham County economy.

A silver lining of the global COIVD-19 pandemic is that it has caused an influx of cash — mostly federal — and a jump in the number of people sheltering in the area since the public health crisis hit Vermont last year.

Daniel Yates, President and CEO of Brattleboro Savings & Loan, says his bank’s assets have gone from $222 million to $291 million.

Data from the state shows that property transfers to out-of-state buyers in 2020 increased statewide by 38 percent compared to the previous year.

Yet, as the old adage goes, what goes up must come down.

Or, to put a Vermont spin on Windham County’s economy, we won’t know how much of this economic boom will be Golden Color with Delicate Taste or Very Dark Color with Strong Taste until everything sugars off.

“While I always try to look at the current challenges through the lens of future opportunities, I should be sure to reference the sheer our state experienced in economic output as a result of the shutdown,” Grinold said. “We have a long way to get back to where we were pre-COVID, which was just getting back to close to where we were pre-2008 recession.”

Right now there are two economies, he continued.

The first is made up of people who have done well, he said.

The second includes people who have not done well.

Windham County has a high percentage of service industry jobs. Many who worked in restaurants and hospitality, for example, are still unemployed, Grinold added.

State Representative Laura Sibilia, I-Dover, said that the county sits on the cusp of a population change.

A population increase would bode well for businesses looking for workers and school enrollments, she said. A decrease could mean fewer lawmakers in Montpelier working on the county’s behalf. [See article on page 43]

For now, however, Windham County enjoys working from a place of abundance. 

 

Pent Up Business Energy

Over the last two months, Grinold has noticed a significant increase in the number of businesses looking to expand and who need bigger spaces.

“It’s very encouraging,” he said.

The inquiries are coming from outside and inside Vermont, he said.

The size of businesses seeking to expand range from someone moving from their garage into a modest 1,200-square foot space to a 30,000-square foot commercial operation.

The pandemic made a mess of some businesses’ supply chains, Grinold said. He’s noticed that many of the larger businesses he’s spoken with want space large enough to have production, warehouse, and shipping sectors under one roof.

What has not changed during the pandemic is the number of employers who say they can’t find enough workers.

Grinold said it’s hard to judge how many job hunters there are in Windham County.

The unemployment rate only counts people actively seeking work, he said. With the expansion of federal unemployment benefits, some people might wait until later to start job hunting, he said.

According to the Vermont Department of Labor’s April jobs report, the statewide unemployment rate was 2.9 percent in March.

The unemployment rate for the Brattleboro labor market, however, was listed as 4 percent. While higher than the state’s rate, this is still historically low.

“There is extreme pressure on employers to find employees,” he said.

This also means opportunities exist for workers to shift careers.

In an attempt to move more workers into higher wage and growth jobs, the BDCC has identified job sectors that offer higher than average wages and career opportunities.

For example, obtaining a Commercial Drivers License (CDL), he said. According to Grinold, the starting wage for a CDL driver in southeastern Vermont ranges from $20 to $27 per hour.

Grinold admits he lacks firm data on how many businesses have survived the pandemic.

In general, however, it appears to him that, “Vermont has done a good job hanging in there.”

It’s too early to guess what the county’s post-COVID new normal will look like, but Grinold thinks a few positive changes will stick.

“Growth used to be a bit of a bad word in Vermont,” he said.

He believes that the past year has changed this mindset. It was clear early in the pandemic that if people wanted to have vibrant communities to return to after COVID, they needed to invest in businesses, Grinold said.

He points to the amount of federal and state monies that went directly to businesses as part of this acknowledgment.

“We were all on the same page that businesses provided employment and that we have to grow our way out,” he said.

Grinold added that the country still needed to ensure it provided equitable growth by getting capital and money into the hands of people who have often been left out.

At a local level, BDCC has tried to do its part by ensuring it reached out to Black, Indigenous, and People of Color (BIPOC)-led organizations and individuals to help them access funding.

 

A Positive Outlook For Savings And Mortgages

“I think the most important thing for people to understand is that the economy in Windham County is not bad,” Yates said.

During a recent trip to Boston, Yates noticed the “shocking” number of vacant retail spaces along Boylston and Newbury streets.

“When I look around Brattleboro and some of our other towns in southeastern Vermont, it's like, we're doing pretty well,” he said. “Will we lose some businesses? I think we probably will. Although, we're in much better shape than other places.”

The pandemic has treated Brattleboro Savings & Loan with more kindness than anyone at the bank expected. 

Banks are measured by the amount of their assets. Using this yardstick, at the start of 2020, BS&L was considered a $222 million bank.

“We had anticipated that we'd grow by about 5 percent, in terms of as, you know, new customers came on,” said Yates.

“We actually grew by 31 percent,” he added. “So we're now a $291 million bank.”

Part of this is because most personal and business customers are “war chests” in saving their money rather than spending it.

“It’s incredible, we have all this cash,” he said. “It’s because people are being careful.”

Yates said the average growth in deposits last year in Vermont was around 22 percent.

Federal funds to communities and the busy real estate market have also helped, Yates added.

In the first quarter of 2020, Brattleboro Savings & Loan’s numbers appeared middle of the road okay, said Yates.

Then “boom” the pandemic.

Staff stayed up until 1:30 am, processing applications for the federal Paycheck Protection Program (PPP), he said.

In the first PPP round, BS&L processed applications requesting funds of almost $17 million, he said.

The fee income for the PPP applications earned the bank a significant amount, according to Yates.

Then the real estate market exploded in 2020, he continued.

In a normal year, BS&L has between $20 million and $23 million in mortgages.

In 2020, that amount jumped to more than $40 million, Yates said.

2020 closed out as BS&L’s third-best year, Yates said.

This year, it appears the PPP program has leveled off a little for BS&L. Yates believes that many businesses have figured out how to operate in the pandemic.

The real estate side remains busy.

As of mid-April, BS&L had $20 million worth of mortgage applications in process.

As exciting as this is, Yates is also cautious about real estate.

He remembers a similar boom in 2006 before the economic crash of 2008.

If the people who move to Vermont during the pandemic decide to leave all at once, the market could be flooded with homes, he warned.

One of Brattleboro Savings & Loan’s bigger pandemic shifts was providing more services online.

Last winter, the organization formed a task force to explore digital platforms. By the summer, the bank moved to a more user-friendly service that allowed customers to do more on their own, Yates said.

With the exception of businesses making cash deposits, Yates has noticed that, in general, fewer customers are using cash.

He expects customers’ adoption of BS&L’s online services to outlast the pandemic.

“I think, truthfully, given the amount of time that people had to choose between do I sit in the line of the drive up? Or do I learn how to use online banking or, you know, broaden my use of it? I think that we will not see the numbers of our lobby traffic rise to the level of pre-pandemic proportions,” he said.

Despite the potential for fewer customers needing tellers, Yates does not anticipate any downsizing.

BS&L’s five-year planning shows that the organization will probably still need people in other areas of the institution such as providing customer service over the phone. If the organization does downsize, it will likely do it through attrition, he added.

“One of the things that we have been adamant about throughout this pandemic, is nobody lost their job. Nobody. And that nobody's going to lose their job,” Yates said.

 

Home Sweet Home, At Least During The Pandemic

Murmurings of an uptick in home sales started last spring. Realtors in some of the larger towns and the resort areas across southern Vermont were kept busy with inquiries.

A year into the pandemic and what started as a phone call is backed up by numbers.

According to market reports from the Vermont Association of Realtors, in February 2021, the available properties for sale, or inventory, in Windham County was 60.4 percent less than the same time in 2020.

The average time that a property sat on the market also dropped 33.2 percent compared to February 2020.

Betsy Wadsworth said to the best of her memory, her inventory is the lowest it has been since approximately 2006.

In recent years, it was not unusual for a home to sit on the market for a year, said Wadsworth, a Realtor with Four Seasons Sotheby’s International Realty’s based at the company’s Dover office.

Some homes have sold for more than $2 million, something else Wadsworth has not seen in a long time.

And the phone keeps ringing.

In Wadsworth’s experience, the folks coming to the area have said they wanted to get away from the pandemic. Many have left urban areas, she said.

Wadsworth is also seeing a number of retirees who have chosen to move to Vermont.

The big question mark hanging over many of these real estate transactions, however, is whether people will stay once the pandemic ends, Wadsworth noted.

The number of property sales specifically to out-of-state buyers increased 38 percent in 2020 compared to 2019.

This according to an analysis on property transfers in the state prepared by the Vermont Center for Geographical Information (VCGI) with data from the state Department of Taxes.

In Windham County, Dover and Wilmington saw the highest number of sales with 230 and 137, respectively.

Still, every town in the county saw some level of property transfers to out-of-state buyers.

The boost in home sales has also resulted in more families in the area.

According to information supplied by the Dover Elementary School, 30 new students were enrolled across grades PreK-6 for the 2020-21 school year.

The VCGI ranked towns based on the amount of money generated. The top five — Stowe, Ludlow, Dover, Stratton, and Wilmington — are all resort areas.

John Hatton, broker and sales manager with Berkley & Veller Greenwood Country Realtors, said the real estate market, while busy, looks a little different in the Connecticut River Valley.

In Hatton’s experience most of the buyers he worked with were purchasing primary residences.

But, like the Deerfield Valley, inventory is low.

In 2018, Hatton said, Brattleboro had approximately 80 to 90 single family homes on the market. As of April 2021, the town had only 17.

Despite the uptick in home sales, school enrollment numbers for the Windham Southeast Supervisory Union have stayed steady. While there was a slight enrollment decrease overall, some grades have seen increases.

According to Superintendent Andy Skarzynski, “Generally, the total enrollment is reflective of trends we have seen over time.”

Most homes right now are receiving multiple offers and sellers are almost always receiving above their list price.

“Everybody is pushing prices up,” he said.

The price of homes selling in Hatton’s area tends to be lower compared to the Deerfield Valley.

According to the Vermont Association of Realtors’ market report, in February 2021, the average sale price in Brattleboro was $179,000 less than the average for Windham County at $292,000.

It’s nearly impossible to talk about real estate in Vermont without also talking about property taxes.

Once the pandemic ends, could paying Vermont’s property and education taxes drive away some of its newest residents?

Hatton said, “Property taxes in Vermont are tough. There’s no way around it.”

In his view, however, the taxes are “the price of admission” for folks who want to call Vermont, and its high quality of life, home.

Yates said as far as BS&L is concerned, the $1 million and more homes are outliers.

Most of the homes the bank deals with are in the $500,000 range or less. Occasionally the bank approves a mortgage for a $900,000 home, he said.

From an economic standpoint for an institution like BS&L, it would be a bigger problem if the market were suddenly flooded by $200,000 to $400,000 homes.

Usually what this means is that multiple local employees decided to relocate or downsize, probably because of loss of employment as the country saw during the Great Recession, he said.

The worst case scenario is mortgage payers finding themselves “underwater” if property values fall and all these homeowners end up owing more than their houses were worth, Yates said.

With the changes that were implemented to protect people after the recession, and with the addition of remote work, Yates feels confident that the chances of seeing a worse case are slim.

“We have lived through booms, and we have lived through busts, and we're resilient,” Yates said.

“And when I say ‘we,’ I'm not talking about the bank in a bubble, I'm talking about 'we' as Vermonters, we as New Englanders,” he added. “We are resilient, and we get through it, and come out on the other end. How long that takes really depends on how significant the bust might be.”

In response to concerns around property and education taxes, Grinold pointed back towards population growth.

“We can’t tax our way out of a problem, so we must grow,” he said.

A larger population means more economic activity, he said. More activity means less burden on residential property because the state is relying less on this one sector for its tax revenue.

 

 

 

Manufacturing: A busy time but there are issues finding workers and supplies

Sonnax

“It has been quite the whirlwind of a year,” Steve Boyer said.

The president of Sonnax said that the manufacturer of aftermarket automotive products’ first priority was adjusting its assembly and office practices to keep its 200 employees as safe as possible from contracting COVID.

Throughout the year the Bellows Falls-based business has weathered a few ups and downs, he added.

Managing staffing levels and peaks and valleys in the supply chain is a daily challenge, Boyer said.

Photo: Packager Ben Cushman at a recent Saturday shift in the company’s 36,000 sqft Bellows Falls Distribution Center. Courtesy photo.

Adjusting a manufacturing process like Sonnax’s remains an interesting and daily task for Boyer.

“There’s been so many darn changes, I lose track of them all,” he said with a smile.

In general, the manufacturing team tends to work closely together. In some cases, COVID has helped the company find new efficiencies. The team figured out ways to lower the touch level of the manufacturing process and products, he said.

Some changes made necessary by COVID, however, are not efficient, “but we keep going anyway,” Boyer said.

Beth Houder, vice-president of marketing and communications, said prior to COVID, no one at Sonnax worked remotely. After the pandemic, however, she thinks the home or office picture will look differently.

Sonnax also confronts the daily challenge of disruptions to its supply chain.

Every day is different. Some days the company’s order of steel is delayed. Other days, it can’t find enough cardboard. Other days there aren’t enough trucks available to ship orders.

“Management wise, we corral one problem and another three or four pop up,” Boyer said.

People think a storm in Texas has nothing to do with Vermont, Boyer explained. But such events can cause a “log jam” that takes weeks if not months to clear, he added.

COVID did not create every challenge Sonnax faces.

Finding enough workers proved difficult before 2020, Boyer said. Now hiring feels “like an extreme challenge.”

Photo: At Sonnax, volunteers from all departments have been pitching in weekend and evening hours to keep pace with increasing sales. (Clockwise: Packager Ben Cushman, Senior Graphic Designer Erica Wojchick, VP of Information Systems & Supply Chain, Rich Rogers , VP of Marketing & Communications, Beth Houder and Design Engineer, Eric Streed Human Resources Administrator. Courtesy photo.

According to the data Boyer has seen, the state as a whole has lost workers.

How that trickles down to the manufacturer, varies, Boyer said. Sometimes it means a job posting receives no applications. Sometimes it means a new hire shows up for a few days and then disappears.

Meanwhile the company has invested money into testing and training new hires that quickly leave, he said.

“We try to provide a ton of opportunities for people who come to work for us,” Boyer said.

Houder noted that Sonnax is also competing for workers against larger companies such as C&S Wholesale Grocers and United Foods International, two of the largest food distributors in the United States.

Despite the workforce and supply chain challenges, Boyer said his biggest worry a year into COVID remains keeping employees safe.

On the positive side, seeing employees come together to tackle problems, support each other, and meet customers’ needs has been outstanding.

“We’re seeing growth in everybody,” he said.

Houder added, “We’re an all hands on deck team. People have stepped up and pitched in with other teams to get the work done.”

 

Fulflex

Fulflex’s Brattleboro factory operates three shifts six days a week producing elastic for facemasks and other medical supplies.

Manufacturing materials for active wear and swimwear are the only sectors of the business that have slowed down since the pandemic started last year.

Currently, demand for medical materials has risen 2.5 times compared to before the pandemic.

Director of Operations Don Venice said Fulflex feels “cautiously optimistic” that the number of orders for medical supplies will continue at the same level for another year or two beyond when the pandemic ends.

According to Venice, buyers will need to rebuild their inventories post-COVID. Several had reduced what they stocked in order to save money and then were caught short last year, he said.

This market has only leveled off because Fulflex lacks enough workers, said Venice.

“If we could hire more, we could produce more,” he said. “Customers are screaming for goods every day.”

He described finding workers in Windham County as difficult.

“It’s the number one impediment to going forward to building and strengthening our business,” he said.

Prior to the pandemic, the company employed 105 workers. It has increased its workforce to 120. The ideal is 145, but Venice said he’d be happy with 135.

According to Venice, Fulflex offers one of the top hourly rates in town. If the company has a hard time finding enough staff, he can only imagine how much other companies’ struggle.

In Venice’s opinion, the company sits between “a rock and a hard place.”

To keep up with production, current employees are working longer hours. Yet, this also means Fulflex risks wearing out its workforce.

“We try to rotate staff, but there’s no perfect solution,” he said.

The rising costs of raw materials are concerning for Fulflex.

According to Venice, he has seen the prices of materials like correlated cardboard, rubber, oil, and trucking increase in some cases as much as 10 percent. The cost of freight has increased significantly, he added.

As an example of increasing costs, Venice said it used to cost $1,000 to bring a container into one of the country’s ports, he said. Now, the average cost is $4,000.

“If you can even get in,” Venice said.

Most of the nation’s ports have container ships waiting to be processed.

Fulflex imports many of its raw materials from Asia.

The company can’t pass all its added expenses onto customers, Venice said.

In general, Venice said he feels good about the Windham County economy. While finding workers is tough on companies, the number of open jobs also present opportunities for workers.

For his part, Venice feels grateful to the Fulflex employees who have stepped up to every challenge the pandemic has thrown at them.

“I sit here today proud,” he said.

Venice looks forward to when he can meet staff face-to-face again.

“If there’s anything I miss more than anything, it’s meeting with employees,” he said.

 

Vermont Plank Flooring

Mark Tarmy and his son, George, of Vermont Plank Flooring in Brattleboro, expected business to slump during the pandemic.

“We were expecting things to slow down,” according to company president Mark Tarmy. “And they really haven’t, they’ve kept up at a decent pace,” he said.

Instead, it has increased 40 percent.

The company implemented COVID precautions in its manufacturing facility, Tarmy said.

As head of operations, George also could make improvements to the business’ online presence.

“Thank goodness we didn’t lose anyone to COVID,” he said.

The company sells its products nationwide and demand has remained steady in all the markets it serves, although George noted that he saw most of their orders come from New England states.

Despite an increase in demand, Vermont Plank Flooring is also experiencing issues with its supply chain.

According to Tarmy, most of the sawmills he works with have tried to keep up but have low inventories.

The way material prices keep rising makes Tarmy worry about inflation.

Staffing, however, is not a concern.

Vermont Plank Flooring employs approximately 30 people who handle expensive materials. So far, it hasn’t had trouble finding workers.

“We probably start people off at a maybe higher than normal wage, because we find that we run a very tight shop and when a person doesn’t come in, it hurts our production,” Tarmy said. “So we’d rather pay people a little more and have a better quality worker.”

George added that ramping up hiring and production to meet demand has proved a challenge.

The company’s production flow is such that new hires need to enter it slowly rather than adding five or six newbies at once.

“We’ve managed to do pretty well, but it’s certainly been a challenge,” George said.

Father and son recently worked with BS&L to finance the installation of a net metered 267 kW rooftop solar array.

Photo: Vermont Plank Flooring solar array. Photo: Kelly Fletcher.

The new energy infrastructure will help power the company’s 40,000-square foot manufacturing building.

The company began considering the project last summer. It has seen an increase in its electrical consumption, Tarmy said.

After BS&L worked out the financing, which included tax credits, the project was “a no brainer.”

Installation started in December and the array came online in late March.

“The decision to do this was a real collaborative thing with BS&L,” Tarmy said. “Right now we’re generating enough power to essentially make our buildings practically net zero.”

Financially the business isn’t in the position to take on a project for the sake of reducing its carbon footprint.

What Tarmy likes about working with BS&L is that he feels confident the investment makes financial and environmental sense.

Despite the need to weigh the financial side of the project, George said the solar array fits with the company’s ethos.

“We’re very happy,” George said. “It feels good when you’re able to do something that makes economic sense and also is something that helps improve [the environment].”

 

Downtowns Remain Resilient

“The COVID silver lining is that it’s definitely brought organizations together,” said Emmet Dunbar, co-owner of Canal Street Gallery and president of the  board for the Bellows Falls Downtown Development Alliance (BFDDA).

“We’ll emerge a more vibrant, connected, and unified village,” he said.

According to Dunbar, one sign of the village’s vibrancy – despite the pandemic – is that few storefronts in the downtown are vacant.

A greater achievement, however, is the collaboration that has happened between organizations like the chamber and historic society on various projects.

Various creative organizations and artists have also found new connections through the Southern Vermont Zone, which encompasses Windham and Bennington counties.

The zone is part of the Vermont Art Council’s Creative Network initiative.

These collective efforts have led to developing new wayfinding signage for the downtown and redesigning visitor guides, he said.

It has also led to more collaborative, and successful, grant applications to help fund these projects, he added.

“There’s a lot of coordination, promotion, and awareness raising,” Dunbar said.

Some exciting projects on Dunbar’s radar include the revitalization of the Bellows Falls Opera House and Windham & Windsor Housing Trust’s 27-unit mixed income Bellows Falls Garage project, slated to open in 2022.

The area is also experiencing fresh blood in the form of a new Rockingham Town Manager, a new executive director for BFDDA, and new members joining the Selectboard, he said.

All of which creates a feeling of excitement and progress, said Dunbar.

Bellows Falls has this reputation as “rough and tumble,” Dunbar said. It is so much more than that.

“Bellows Falls is a real place, and they’ve got dirt on their pants because they’re working,” he said.

Stephanie Bonin, executive director of the Downtown Brattleboro Alliance, said merchants are watching the vaccine rollout carefully.

Most people who operate business do so because they love people, she said.

Along with financial uncertainty, the pandemic meant fewer customer interactions. Business owners miss their customers, she said.

Meanwhile, the federal funding businesses have received has helped many weather the slow economy, she said.

According to an article from The Associated Press, the $1,400 stimulus check sent directly to individuals is credited with boosting retail sales by 9.8 percent in March.

The surge was larger than last spring when many stores reopened after closing down in an attempt to staunch the spread of the virus, said the AP.

News like this has buoyed merchants’ spirits, Bonin said. But she added that the optimism remains cautious. The big question, she said, is when will COVID really be over?

While a few Brattleboro businesses closed last year, the majority have hung on, Bonin said.

Despite the hit most restaurants took nationwide, according to Bonin, Brattleboro has seen two new carryout-only restaurants open, Poke Bowl and Thai Hut.

The popular Tito’s Taqueria is moving from a food truck into a new building — with a drive up window, she said. A new gallery called Stationhaus has also opened its doors.

The DBA has also taken over Gallery Walk from the Windham Arts Council. Traditionally held all year long on the first Friday of each month, the DBA plans to hold Gallery Walk from May through October.

Bonin said for the May 7 event Gallery Walk included multiple outdoor offerings such as a Makers Market located in the Harmony Parking Lot. The town has also agreed to close Elliot Street.

“COVID forced us to wear masks, but it also forced some great changes,” she said.

Many business owners redesigned their websites and established online stores, Bonin said. Restaurants have mastered curbside pickup and Bonin expects many will continue to offer the service after the pandemic ends.

When the pandemic hit, the business community had to work together to navigate tough decisions and sometimes tougher state or federal funding applications, Bonin said. For her, this might be COVID’s best gift.

“That building of community will stay and continue,” she said.

Ultimately, Grinold feels Windham County is in a good place.

“What Vermont has proved beyond a doubt is its attractiveness as a place to live,” he said.

Geographically, the region stands as a gateway to the rest of Vermont for people coming from New Hampshire, New York, and Massachusetts, he noted. The regional economy is diverse and spans all those states, he added.

“We are a place businesses and employees want to relocate to and where they want to be,” he said.

 

Olga Peters is a freelance writer from Windham County and a reporter for The Commons weekly newspaper in Brattleboro.