The Proposed Gateway Pacific Terminal and Key Impact Issues for the Whatcom County Economy Prepared for Communitywise Bellingham
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The Proposed Gateway Pacific Terminal and Key Impact Issues for the Whatcom County Economy Prepared for Communitywise Bellingham June 2015 Prepared by: The PFM Group Two Logan Square, Suite 1600 18th & Arch Streets Philadelphia, PA 19103 Phone: 215-567-6100 Table of Contents Executive Summary Page 3 Introduction Page 8 Economic and Population Trends in Bellingham and Whatcom County Since 2000 – Relevant to Considering Potential Local Economic Impacts of GPT Page 10 The Economic Benefits of Whatcom County’s “Second Paycheck” Page 14 Potential Economic Impact of Gateway Pacific Terminal Page 21 How GPT May Affect the Region’s “Second Paycheck” (and Could Already Be Affecting It) Page 24 Development of the Proposed Gateway Pacific Terminal Could Have an Impact on Bellingham City Finances Page 29 The Risks Identified in the 2012 Report Appear to Continue to be Present and May be Growing Page 32 Appendices Page 36 . The Proposed Gateway Pacific Terminal and Table of Contents Key Impact Issues for the Whatcom County Economy Public Financial Management, Inc. Page 2 Executive Summary Whatcom County and Bellingham are “Second Paycheck” locations. Bellingham and Whatcom County demonstrate strong evidence of the phenomenon known as the “Second Paycheck.” Simply put, the region’s residents are willing to accept a lower wage, pay more for property or bear the cost – in real dollars and time – of commuting to higher paying employment in order to take advantage of the region’s natural amenities –such as mountains, bodies of water, topography, forestation, and more. Several demographic data points indicate a Second Paycheck phenomenon in Whatcom County. Between 2000 and 2010, population and employment grew in Bellingham and Whatcom County at a faster rate than the rest of the state. The region’s population is growing despite the fact that its wages are lower and its property costs are higher. Whatcom County jobs have historically trailed the State in average annual wages (on average, by approximately 20 percent). This is particularly true for residents with higher education. Whatcom County residents with a bachelor’s degree or higher earn $5,200 less per year than the state median – in Bellingham it is even more pronounced and residents with a bachelor’s degree or higher earn $15,602 less per year than the state median. After historically trailing the State median home price, since mid-2010, Whatcom County’s median home price is higher than the state’s median home price. Whatcom residents are also willing to, on average, spend a higher percentage of their income on new homes than state residents overall. The economic benefits of Whatcom County’s natural amenities and “Second Paycheck” phenomenon are an important component of the City and County’s overall thriving economy, and GPT could create risks to these assets. Research on the Second Paycheck phenomenon suggests that the presence of consumption amenities – such as access to a multitude of recreational opportunities (e.g. skiing, kayaking, fishing, hunting, biking, jogging, etc.), scenic views, and quality of life – creates a benefit to residents that is worth the cost (lower wages, higher cost of living) to access and enjoy these amenities. A primary study of Second Paycheck phenomenon suggests that the sum of the primary paycheck (the monetary compensation an individual earns in his or her job) and the Second Paycheck reflects the overall standard of living for an area. The research also suggests that changes to the consumption amenities can change the current and future values of the Second Paycheck, thereby affecting a region’s economy and – potentially – the variety and types of jobs in a region. As a result, any potential changes to consumption amenities due to Gateway Pacific Terminal (GPT) operation and the associated increase in rail traffic, could alter the region’s economic benefits from the Second Paycheck. For businesses, lower real wages resulting from the presence of consumption amenities create opportunities for firms that can take advantage of the lower real wages – thus impacting what goods and services are produced in certain locations – and, as a result, the variety and strata of jobs in a given region. The region’s natural amenities also appear to have attracted strong in-migration of new residents, who bring important income to the region – helping grow the economy. Overall, Whatcom County employment grew at three times the statewide rate between 2001 and 2010. More than half of the net private sector job growth was in leisure and hospitality (up 1,700 jobs or 22.7% compared to a growth rate of 7.9% statewide) and retail trade (up 900 jobs or 10% compared to a growth rate of -1.1 percent statewide). The increase in the number of county residents who are commuting to work – especially higher paying work – outside the County has the effect of exporting talent and importing wages. The benefit to the The Proposed Gateway Pacific Terminal and Executive Summary Key Impact Issues for the Whatcom County Economy Public Financial Management, Inc. Page 3 County and City economy is that residents who commute out for work come back to Bellingham and Whatcom County to spend. The same amenities that have allowed the region to attract talent and have increased the value of property have established a significant and growing tourism industry – fueled by both residents of nearby Washington counties and Canada. The development of GPT and the related increase in rail traffic could create risk for future trajectory growth in Bellingham and Whatcom County. As discussed in PFM’s 2012 report, the development of GPT will likely lead to the creation of new jobs and other economic benefits – primarily related to the construction of the terminal. At the same time, as discussed in the 2012 report, the development of GPT could also trigger a series of risks to economic growth that could offset potential benefits. Much of the potential risk is associated with projected increases in rail traffic through Bellingham and other towns. GPT’s potential train-related impacts—increased noise, vibrations, diesel exhaust and traffic congestion— could be concentrated in the same geographic area as much of the region’s economically significant tourist attractions, accommodations, and food services jobs – namely along the Bellingham waterfront. The risk to the City, County, and private sector is that GPT-related impacts could not be sufficiently mitigated in this area – therefore harming the area’s perceived reputation that has helped attract new residents, businesses, and jobs and support a growing tourism industry. During the last decade, daily rail traffic through Bellingham has cyclically approached the approximately 14-15 train practical capacity of the rail line; currently, the rail traffic approaches this level. By 2035, Washington State Department of Transportation (WSDOT) estimates that the capacity of the rail line traveling through Bellingham – again without GPT – would routinely run near capacity – meaning that the operation of GPT would more than double the current rail traffic through Bellingham and double the daily forecasted train volume for the City in 2035. The potential increase in GPT-related rail traffic could have various economic impacts on the Whatcom County and Bellingham economy – such as waterfront access and redevelopment, stigma, and property value decreases with resultant shifting of property tax burdens. There could be stigma, justified or not, attached to the increase in rail traffic due to transportation of coal, and proximity to a large coal export facility, that would make some individuals less likely to move to Whatcom County or more likely to leave. Population and economic growth in Whatcom County and Bellingham has been based in part on the perception of an area with robust natural amenities lending to a myriad of recreational opportunities (e.g. hiking, biking, hunting, fishing, skiing, etc.) and supporting sustainable living – both aligned with the notion of the Second Paycheck. Any potential risk to the region’s Second Paycheck attributes could result in a slowing of the broader economy – present and future. Should GPT negatively alter the real or perceived access to, or enjoyment of, the region’s consumption amenities, then there is a potential that projections for continued in-migration and retention of current residents could be at risk and pose economic challenges for the region. Increased rail traffic related to GPT could impact real estate values, especially for those properties closest to the rail lines. Prior studies suggest that residential and commercial property values adjacent to freight rail lines are generally lower than comparable residential and commercial properties located farther from freight rail lines. The Proposed Gateway Pacific Terminal and Executive Summary Key Impact Issues for the Whatcom County Economy Public Financial Management, Inc. Page 4 Potential development of the Gateway Pacific Terminal may already be affecting population and economic growth in Bellingham and Whatcom County. To the extent that some of the population inflow to Bellingham and Whatcom County is due to its amenities, the proposed plan puts that at risk. Any potential risk to the region’s Second Paycheck attributes could result in a slowing of the broader economy – present and future. There is a potential that, if GPT negatively alters the access to, or enjoyment of, the region’s natural amenities (real or perceived), then projections for continued in-migration (especially, those who appear to be choosing Whatcom County and Bellingham as a destination and bring comparatively more aggregate wealth than those residents who leave the County) could be at risk and pose economic challenges for the region (e.g. reduced levels of economic growth; diminished talent-to-pay-level benefit for employers; less diversification of jobs/job creation, etc.), thereby presenting a risk to both local residents and local businesses as well as the broader local economy.