2012 ALBANY COUNTY EXECUTIVE BUDGET

Transcription

1 2012 ALBANY COUNTY EXECUTIVE BUDGET INTRODUCTION AND HIGHLIGHTS Economic Forecast MICHAEL G. BRESLIN County Execu ve

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3 INTRODUCTION This sec on of the budget provides a survey of economic indicators and an outlook for the year ahead as a context for some of the es mates contained in the budget. NATIONAL OVERVIEW The na onal and state economic outlook con nues to suggest nega ve trends as noted in prior years. Blue Chip Economic Indicator reports cite the fragile nature of the current recovery. Na onal job growth and labor income remain constrained. The housing market has not recovered. There con nues to be an over supply of houses for sale. Exis ng homeowners con nue to struggle with mortgage related debt. The debate over the na onal debt ceiling appears to have further depressed consumer confidence and business investment leading into The na onal unemployment rate is projected at 8.9 percent for 2012 and a forecast of 2.1 percent CPI growth in year over year comparisons in However, infla on is expected to remain flat in the near term as the Federal Reserve made an unprecedented announcement condi onally guaranteeing a steady targeted federal funds interest rate through mid Short term interest rates are expected to remain exceedingly low through the end of The three month Treasury Bill is projected to average.1 percent (10 basis points) in 2011 and.2 percent (20 basis points) in Blue Chips consensus expects a 1.6 percent GDP growth in 2011 and 2.2 percent in A er a business investment decelera on from 5.9 percent to 5.0 percent in the second half of 2011, an accelera on to 6.8 percent is an cipated by the 4th quarter of Increased stability in household wealth and labor income by the 4th quarter of 2012 are cited as poten al sources of moderate upward movement on Personal Consump on Expenditures (PCE). Consumers have demonstrated recent trends for rebuilding wealth decimated in the recent collapse via increased savings. Consumers are focusing on lowering household debt. August 2011 credit card delinquencies, those with balances 90 or more days past due, fell to the lowest level since 1994 according to credit repor ng agency TransUnion. This trend comes despite increased use of credit cards through the second quarter of 2011 reported from quarterly Visa, Mastercard, American Express and Discover branded cards. Increasing the aggregate demand household spending, business and government consump on, machinery/equipment and structural investment is projected as the key to recovery. NATIONAL HOUSING MARKET Na onally, the housing market collapse con nues to drag on economic recovery despite historic lows in interest rates. New housing starts con nue to decline, falling 5 percent in August One reason cited for the slow pace of new housing starts is the median pricing of new homes compared to previously occupied homes. However, construc on of apartment rentals increased by more than 6 percent. Recent mortgage company efforts to clear backlogs of foreclosed proper es are also shi ing to the crea on of rental op ons to reduce the number of vacant structures overall. In terms of impact on the na onal economy, clearing the backlog of foreclosed proper es is expected to boost consumer

4 confidence and consump on overall as trust in the long term investment value of real property returns. Consumers historically viewed gains in home equity as more permanent, thus building percep ons of wealth. NATIONAL PERSONAL INCOME Youth unemployment remains high with up to 25 percent reported unemployment rates among year olds. Ripple effects of that trend are showing up in student loan defaults and reduced household discre onary spending. Rising tui on rates and evapora ng job opportuni es have added nega ve fiscal pressure to college students and recent graduates. Current default rates of 8.8 percent are nearly double the 2005 rate of 4.6 percent. Personal income decreased $7.3 billion, or 0.1 percent, and disposable personal income (DPI) decreased $5.0 billion, or less than 0.1 percent, in August, according to the September report from the Bureau of Economic Analysis. NATIONAL EMPLOYMENT Na onally, the number of total private hires and the average weekly hours of private employees declined during the recession and remains significantly below pre-recessionary levels in July The Bureau of Labor Sta s cs reports the ra o of unemployed persons per job opening rate at 4.3 in July 2011, a decrease from 5.0 in December The na onal number of job openings in July 2011 was 3.2 million, 1.1 million above the openings reported in July The level of monthly hires that bo omed out in October 2009 at 3.6 million has been consistently trending upwards since There were 4 million hires reported in July The US Bureau of Labor Sta s cs also tracks total number of employed persons who voluntarily separate from employment. This number, referred to as quits tends to rise with a posi ve percep on of the job market and decrease when there is a percep on that jobs are scarce. Over the past ten years, the number of quits consistently exceeded the number of layoffs, including the 2001 recessionary period. That changed in November 2008 as the number of layoffs and discharges outnumbered quits through January These totals remain close as July 2011 layoffs and discharges totaled 1.7 million while quits remained below 2 million, well below the first months of the recession in December REGIONAL AND LOCAL ECONOMY The US Bureau of Economic Analysis reports that Albany area's Gross Metropolitan Product (GMP local version of the Gross Domes c Product) rose to $41 billion in 2010, a 3.4 percent increase from The Albany area growth rate ranks 56th out of 366 metro areas in the report released in September 2011 by the U.S. Bureau of Economic Analysis. New York City ranked No. 1 on the list. Employment did not keep pace with this growth, however. Recent trends toward expanded use of temporary workers will also impact 2011 year-end sta s cs. August figures from the US Bureau of Labor Sta s cs report 6,900 private sector jobs were added in the Albany region between July 2010 and July Private sector job growth was reported in 86 of the 100 large markets na onwide. New York City posted the largest increase in raw numbers, adding 83,000 private sector jobs. Census results suggest an increase in poverty. From 2009 to 2010, the share of Albany residents living below the federal poverty line increased from 22.9 percent to 28.2 percent. County of Albany State of New York 2012 Executive Budget Page 30

5 While the na onal housing market is distressed, the local housing market remains stable. Local home sales did not over accelerate in the pre-recessionary Albany area market and generally remained in-line with actual value. Both average residen al sale price and median residen al sale prices remain rela vely constant in the past 3 years within Albany County. According to Greater Capital Area Realtors, there has been a 45 percent increase in real estate sales ac vity in July 2011 compared to July Home values have remained stable. Census data covering shows a statewide homeownership rate of 55.7 percent. The home ownership rate in Albany County during that me was 60 percent. In terms of available office and manufacturing space, a survey conducted by CB Richard Ellis/Albany noted a drop in the vacancy rates in the Capital Region to 10 percent in the second quarter of The growth was primarily based on increased leasing of warehouse space. Capital Region has tradi onally been dependent on government employment insula ng Albany County from many global economy-related job losses. The nega ve impact the recent economy has had on state and local governments has changed that dynamic, however. Recent private investments in the local economy and promises of new investments reposi on Albany County and the Capital Region in terms of private sector employment. Current trends point to a baseline adjustment of the long-term employment and economic trends in the region, shi ing away from heavy reliance on state government jobs as the high technology sector grows. Global Foundries is building a $4.6 billion semiconductor plant, Fab 8, at the Luther Forest Technology Campus in Malta. Once completed, Fab 8 will stand as the most technologically advanced semiconductor manufacturing facility in the world and the largest leading-edge semiconductor foundry in the United States. In July, the company began construc on on a second 221,000 square foot administra ve building. The $35 million project will create hundreds of new construc on jobs in the region. The two buildings combined can accommodate more than 3,000 employees. Global Foundries has announced inten ons to build a research and development center on the property as well. In September 2011, BBL Construc on Services began the ini al phase of construc on on the Vista Technology Campus in Bethlehem. This first phase includes construc on of Vista Boulevard, including road, water and sewer infrastructure. This infrastructure is essen al to development of the 440-acre office and manufacturing complex. The project's master plan calls for retail and services at the front of the campus with office buildings stretching deep into the site. Construc on will also begin on three structures totaling more than 225,000 square feet. Entering the fourth quarter of 2011, Governor Andrew Cuomo announced a five year $4.4 billion investment by five leading interna onal companies which will create and retain nearly 7,000 jobs to launch the next genera on of computer chip technology in New York State. The five companies involved are Intel, IBM, GLOBALFOUNDRIES, TSMC and Samsung. This will result in the crea on of 2,300 jobs and the reten on of an addi onal 2,500 in Albany alone. Eight hundred jobs will be located at the CNSE Albany NanoTech Complex. In addi on, approximately 1,500 construc on jobs will be created in Albany. County of Albany State of New York 2012 Executive Budget Page 31

6 Research and development facili es will be located in Albany, Canandaigua, U ca, East Fishkill and Yorktown Heights. Intel agreed to establish its 450mm East Coast Headquarters in Albany. As part of the project, New York State will invest $400 million in the SUNY College for Nanoscale and Science Engineering (CNSE) in Albany, including $100 million for energy efficiency and low cost energy allowances. The state investment in CNSE will be made over a five year period. It will also include a private ini a ve to support the poten al purchase of $400 million in tools and equipment from companies around New York State. These regional inroads to advanced technologies are extremely promising for long-term development and economic vitality of the region. With Albany County at the crossroads of air, water, rail and highway transporta on, these developments provide for op mis c trends for the County. And to accommodate the growth in the technology sector, the Albany County Airport Authority has launched an ini a ve to explore increased connec vity to the western United States, specifically ci es that are transporta on hubs or serve as headquarters for high tech businesses. Con nuing advances coupled with upward pressure on certain segments of the workforce will put a premium on educa on. With the median weekly earnings of college graduates historically 75 percent higher than the earnings of highschool graduates, and given that workers with a high-school degree earn 42 percent more than those without a diploma, educa on will remain an important investment locally. SALES TAX RECEIPTS Within Albany County, the largest source of revenue is sales tax receipts. Sales tax revenue decreased sharply in recent years impac ng local government cash flow. Consecu ve years in which sales tax receipts were substan ally lower than an cipated resulted in the need for the County to borrow money through the issuance of a TAN to provide sufficient cash to meet ongoing obliga ons. However, sales tax revenue statewide increased by 7.2 percent in the first two quarters of Albany County saw an increase in sales tax revenues at the end of the second quarter of This increase equates to one percent growth over the same quarter for Albany County has also seen growth in tourism. There was an increase of percent in the occupancy tax revenue generated during the first and second quarters of 2011 over the same me period in CONCLUSION Albany County is in the preliminary stages of recovering from the economic recession of While the na onal economy con nues to struggle, the Capital Region was not as deeply impacted and, therefore, the recovery should not take as long. While State and local governments are struggling under financial constraints, Albany s Tech Valley has seen significant advancements in the technology and educa on sectors. Newly announced investments and ongoing construc on projects currently underway emphasize important private investment in our economy. As was indicated in the 2005 budget message efforts underway to spur investment in the County s high tech endeavors will be the lynch pin for future success. Par cipa on in regional development and long term prepara on for high tech growth are being realized at this cri cal me. County of Albany State of New York 2012 Executive Budget Page 32