Monday, May 14, 2007

I'm amazed by the amount of passion -- anger, even -- that BendBubble2 can bring to his posts about the Bend economy. I mostly agree with him, but all I can summon is a sigh, a shake of my head in dismay, and a little bit of doubt.

After all, I never, ever expected all the development that has happened in Bend, so far.

But, I still think we're like the guys who saw NASDAQ go from 2000 to 4000, and are screaming warning, while NASDAQ blithely continues to 5000 -- before collapsing in a heap of rubble.

I can't conceive of any scenario where all the Old Mill development will either be built, or if built, will be filled. The destination resort situation makes me roll my eyes. Seriously, there are "FOR SALE" signs everywhere I look on the west side of Bend. That would normally slow down future building, you'd think. So either these guys are stupid or desperate.

The thing about reality is that gravity will take hold. Real economic forces will eventually kick in. I think these guys are really good at spinning it, creating cloud machines, never mind the man behind the curtain. But it will eventually catch up to them.

And the Bulletin continues not to provide much critical insight. Today's editorial seems to be a great example of that.

Bear with me; I'll be searching for the right terminology.

It seems to me that there are two kinds of jobs markets. There is the 'base' market, that creates jobs, and then there are the 'service' markets which service the people who work those jobs. It seems to me that the only real 'base' market that we have that has any real force in Central Oregon is Tourism. Mt. Bachelor creates real jobs. (if incredibly low paying); if a 'transportation' company is created to transport the workers to the mountain, that is a 'service' job, that wouldn't exist if the 'base' job hadn't been created, along with all the financial services that the employee needs, the housing, the utilities, the health care, etc. But without the Mt. Bachelor job in the first place all the services wouldn't be needed.

So the Bulletin makes a big deal out of the increase in employment in ...."transportation, warehousing and utilities sector, with both education and health services and professional and business services not far behind."

Service jobs, every one of them. I still think if the business of Bend is growth, all we are doing is chasing around each other for money. But what generates the original pool of money? I sell comics to the guy who sells shoes who sells to the guy who sells ice cream who sells to the guy who details cars who sells to.......and so on. But someone has to generate the original dollar, don't they? The original money appears to me to be a few small industries, tourist dollars, and the bagfuls of 'stupid' money that people bring to Bend for the lovely lifestyle.

We are depending way too much on the third option; because it counts on Bend being affordable, on the newcomers ability to sell their houses where they came from, and with them continuing to be so enamored of our lifestyle that they'll put blinders on. But most important to me, once the equity infusion has taken place, many of these newcomers are going to need to find real jobs. They'll look around and see only low paying service jobs. That or we are depending on people who are so rich, that they can just continually lose money in Bend, dissipate their fortunes, because, gosh, Bend is just so much better than anywhere else.

Maybe so, but that depends on perception, and if that perception ever changes, we won't get those people either.

BendBubble2 rakes our city fathers over the coals for not creating real, job producing industries. I just don't think we're likely to get those. We are too isolated to make that practical. But we don't need to be insanely boosterish either.

I think the Becky Breezes and the Norma DuBois of the world have an inkling of what's happening and are whistling through the graveyard. They've committed to their insane plans several years ago, and can't back out. What else can they do?

But we don't need to be so gullible.


Duncan McGeary said...

I don't know if I lost Jennifer's comment on the Hospitals and Schools being base businesses, but here's the response.

I think of schools as being neither a plus or a minus, they simply exist everywhere there are people. I sometimes wonder if places like Burns exist because of Government services -- Oakridge -- places like that, which pretty much eke out a living.

The hospital is sort a regional hub, I'll grant you that. Like some of the big box stores draw upon the region. Not quite a 'base' business, but not quite a 'service ' business either. There is probably more correct terminology.

Bend Economy Man said...

I agree. On the one hand, as long as people continue heedlessly to flock to Bend in large numbers and immediately investing huge chunks of money upon arrival (into real estate, small businesses, remodeling, recreational toys, lifestyle accoutrements), everything will be fine.

But how many of these people are really independently wealthy and how many just have the money from selling their houses in their former towns? From what I see, the people moving here aren't captains of industry, hedge-fund managers, lottery winners, Saudi princes, etc. They're divided roughly into (1) yuppies with somewhat above-average educations,(2) white-flight reactionaries who have been culturally edged out of suburbia, and (3) upper-middle-class retirees. Not exactly international jet-setters.

And that, among a million other things, is what makes Bend different from Aspen (one of my main pet peeves). Sure the people moving here from other places are better-off, better-educated, more worldly than the people that are from here. But that's not really a pungent comparison when you're talking about a former mill town with no nearby 4-year college that's 3.5 hours away from the closest city with 500,000 people (Portland) and 6 hours from the closest city with 1,000,000 people (Seattle). For comparison, the West Virginia panhandle, where some people still speak in an 18th-Century dialect, is closer than 6 hours to New York City, Washington DC, Baltimore, Philadelphia, Pittsburgh, Cleveland, Cincinnati and Buffalo.

No matter that Aspen and Bend might as well be on separate planets in terms of almost everything - you keep hearing this comparison over and over. And you know what? I think it's for locals to THINK they live in an elite area on a par with Aspen, as well as for gullible outsiders who want to think they're MOVING to an an elite area on a par with Aspen. But Aspen started OUT as elite. There was nothing there before the resort besides a few lonely silver miners. Whereas for Bend, which already had a substantial population, the phenomenon of outsiders flocking in has been like "The Beverly Hillbillies" in reverse.

IHateToBurstYourBubble said...

I think we had gotten a start on "base" business creation a few years back. There was starting to be some diversity in the economy here, not the sort of place where half the population starves in the shoulder seasons.

But the City of Bend reinvested so little into doing The Right Things. We should have thrown everything we had at Juniper Ridge and getting 4-5 anchor tenant employers. They could have been the source of those "original dollars". But instead it seems to be about making connections for city Counsilors, not serving. Our City leadership is so inbred with the RE industry, that newcomer Gramlich had to offer hollow public reassurances that he wasn't bought-and-paid-for by Bend developers:

"He also admitted his work as a designer had created close ties to Bend's development community."

We took the vast revenue created by the RE bubble, and have doubled down time after time. And we've won, until now. When RE crashes hard in Bend, there will be nothing to soften the blow, because RE interests run the town & they demanded that nothing else get a nickel. When you get a windfall, DIVERSIFY.

A lot of people (I think) think that I WANT RE to crash in Bend. I want nothing of the sort. My first beef is that the population at large is subject to receiving it's "news" by outlets that are run more like cults. They're so overtly directed by RE, it's hard to figure out what's real anymore. Secondly, I am just furious that millions are being thrown away on botched dealings by our inept city counselors ("counsilors"? that just looks wrong). MILLIONS! It's our money, and it's being 100% wasted. The RE windfall that we've gotten has been almost completely wasted.

I WANT RE to do well here. I'm upset that it CAN'T, now. We've squandered our chance to become a town that produces "original dollars", not a consumer of them.

The RE industry in Bend has entered the Casino Phase. The 200K sf Mercato is being built by a man whose primary descriptor for the office space is that it's "EXPENSIVE". Breeze says the phantom buyers for "most" of her 42 condo units "Have a lot of money". Read, piece together, and do the math on these mega-developments: There is going to be BILLIONS thrown into projects whose ROI projections are based on 30% yearly appreciation until the end of time. This entire town is about to become the Mtn View Mall. And not the good kind... the 60% empty kind.

Look at a chart of Time Warner: We are about to become Time Warner. $90/sh in 2000, it's basically crashed & burned. Instead of spurning the NASDAQ bubble, AOL & TWX doubled down, even though the projections demanded 30% growth forever for the deal to make sense. RE has long cycle times, so some HUGE deals that we're initiated in 2005 will start breaking ground this year. Some nut is going to throw $300MM at 33ac at 15th and Wilson (condos, of course). Why? He paid $14MM (the highest per acre price for bare land inside the city limits), and he's getting killed on it. There have been monumentally bad deals made in the past several years, and these developers are doubling down... again. They can barely GIVE AWAY Franklin Crossing! What makes these kooks think they can sell thousands of condos, when Norma DuBois can't sell 11?

So nuts. The construction trade is building its own coffin. We're assuring our own economic destruction. "Whistling through the graveyard" is right.

IHateToBurstYourBubble said...

I read today a "Sports Card Business" is closing in Bend. Who is it? Gotta be good for you...

Duncan McGeary said...


"The Beverly Hillbillies in reverse.'

That's great, I love that.

Duncan McGeary said...

"Sports Card business is closing."

Subject of todays post.