THE ECONOMIC IMPACT OF A POULTRY OPERATION ON THE ECONOMY OF THE LE FLORE COUNTY, OKLAHOMA AREA

Transcription

1 AE THE ECONOMIC IMPACT OF A POULTRY OPERATION ON THE ECONOMY OF THE LE FLORE COUNTY, OKLAHOMA AREA Mike D. Woods Extension Economist, OSU, Stillwater (405) Susan Trzebiatowski Student Assistant, OSU, Stillwater (405) Jack Frye Area Rural Development Specialist, OSU, Ada (405) Joe Bullard Ext. Ed., AG/4-H, OSU, Poteau (918) Dave Spindle Oklahoma Department of Commerce, Poteau (918) RURAL DEVELOPMENT OKLAHOMA COOPERATIVE EXTENSION SERVICE OKLAHOMA STATE UNIVERSITY October 2001

2 The Economic Impact Of A Poultry Operation On The Economy Of Le Flore County, Oklahoma Susan Trzebiatowski Mike Woods Jack Frye Student Assistant Extension Economist Area Ext. Comm. Dev. Specialist Room 527, Ag. Hall Room 514, Ag. Hall PO Box 1378 Oklahoma State University Oklahoma State University 314 S. B roadway, Suite 101 Stillwater, OK Stillwater, OK Ada, OK susanft@okstate.edu mdwoods@okstate.edu jfrye@okstate.edu Joe Bullard Dave Spindle Ext. Ed., AG/4-H Oklahoma Department of Commerce Box South McKenna Dewey & Witte Poteau, OK Poteau, OK bullarg@okstate.edu ABSTRACT This report provides background data regarding the local economic impacts of poultry in Le Flore County. Basic concepts of community economics are also reviewed. "Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order as amended, Title IX of the Education Amendments of 1972, Americans with Disabilities Act of 1990, and other federal laws and regulations, does not discriminate on the basis of race, color, national origin, sex, age, religion, disability, or status as a veteran in any of its policies, practices or procedures. This includes but is not limited to admissions, employment financial aid, and educational services." "Readers may make verbatim copies of this document for non-commercial purposes by any means."

3 THE ECONOMIC IMPACT OF A POULTRY OPERATION ON THE ECONOMY OF LE FLORE COUNTY, OKLAHOMA Poultry production and processing creates local jobs and income as this activity is established in a given community or county. The actual impact will vary depending on the size of the poultry operation (number of growers, hatchery size, and level of local processing activity) and the nature of the community and county. Often the impact extends beyond county boundaries when processors and support activities such as a hatchery are considered. Community characteristics will also influence the level of impacts. Economic impacts include jobs created, income generated, and tax revenue provided. There may also be public costs such as providing sewer and water service for a processing facility. Local leaders requested an economic impact analysis regarding the poultry industry in Le Flore County. The general purpose of this report is to analyze the economic impact of the existing poultry activities. Specifically, the report will: 1. review basic data for Le Flore County; 2. summarize the direct economic impacts of the poultry industry; 3. review some basic concepts of community economics; and 4. estimate the secondary impacts of the poultry industry. It is hoped this information will be useful to local leaders and decision makers. No recommendations will be made in this report. Basic Economic Data Table 1 presents population history for Le Flore County and communities within the county for 1980, 1990, and Overall the county population has increased 18.2 percent from 1980 to 2000 and 11.2 percent from 1990 to Table 2 shows employment numbers from 1

4 the Oklahoma Employment Security Commission (OESC) from 1980 to 2001 (2001 is based on six months of data) for Le Flore County. Employment for the county increased 18.6 percent over this time period and increased 7.3 percent from 1990 to The unemployment rate during this time peaked at 14.7 percent in 1991 and was at its lowest in 2000 at 4.2 percent. The 2001 unemployment rate for the state (based on six months of data) is 3.1 percent (Table 3). Table 4 reports employment by industry for Le Flore County from 1980 to The top three industries that provided the greatest number of jobs in 1999 are services, government and government enterprises, and retail trade. From 1980 to 1999, growth in employment was largest in manufacturing (206.4%) followed by services (125.5%) and retail trade (89.8%). No losses were experienced during this time period. From 1990 to 1999, growth in employment by industry was largest in manufacturing (104.7%), followed by finance, insurance, and real estate (78.9%), retail trade (54.3%), and services (31.9%). The only loss felt during this time was construction (-41.8%). Personal income by major source for the 1980 to 1999 is reported in Table 5. Total income in Le Flore County for 1999 is reported to have been $829,735,000, an increase of 59.9 percent from 1990 and 218 percent from Sales tax collections for communities in Le Flore County are reported in Table 6. For fiscal year 2001, Heavener collected $596,980 and has shown a steady increase since

5 Table 1 Population for Le Flore County, Oklahoma % Change % Change Le Flore County Arkoma 2,175 2,393 2, % -8.9% Bokoshe % 11.7% Cameron % -4.6% Cowlington % -82.4% Fanshawe (part) % 18.2% Heavener 2,776 2,601 3, % 23.1% Howe % 36.7% Le Flore % 41.2% Panama 1,425 1,528 1, % -10.9% Pocola 3,268 3,664 3, % 9.0% Poteau 7,089 7,210 7, % 10.1% Rock Island n/a n/a 48.3% Shady Point % 42.0% Spiro 2,221 2,146 2, % 3.8% Talihina 1,387 1,297 1, % -6.6% Wister , % 4.8% Rural Population 16,373 17,960 21, % 18.6% Total Population 40,698 43,270 48, % 11.2% SOURCE: U.S. Census Bureau 3

6 Table 2 Labor Force Data for Le Flore County, Unemployment Employment Unemployment Labor Force Rate ,096 1,359 16, % ,946 1,025 16, % ,841 1,643 16, % ,413 2,298 18, % ,804 1,815 18, % ,965 1,840 18, % ,261 1,746 20, % ,204 1,533 20, % ,613 1,492 21, % ,401 1,633 25, % ,688 1,864 18, % ,158 2,617 17, % ,956 1,773 17, % ,714 1,734 18, % ,479 1,577 19, % ,131 1,461 19, % ,118 1,314 19, % ,888 1,423 19, % ,113 1,539 19, % ,919 1,078 19, % , , % 2001* 17, , % *Based on 6 months of data. SOURCE: Oklahoma Employment Security Commission 4

7 Table 3 Labor Force Data for Oklahoma, Unemployment Employment Unemployment Labor Force Rate ,301,992 66,017 1,368, % ,394,983 52,008 1,446, % ,401,008 84,992 1,486, % ,412, ,017 1,552, % ,444, ,017 1,554, % ,452, ,983 1,564, % ,473, ,017 1,605, % ,448, ,008 1,563, % ,422, ,000 1,524, % ,438,000 85,000 1,523, % ,427,886 85,947 1,513, % ,399, ,758 1,499, % ,433,458 87,383 1,520, % ,435,793 93,666 1,529, % ,454,355 89,909 1,544, % ,473,613 72,651 1,546, % ,512,603 64,025 1,576, % ,533,898 65,968 1,599, % ,546,258 73,264 1,619, % ,590,944 56,695 1,647, % ,601,814 48,747 1,650, % 2001* 1,594,650 50,117 1,644, % *Based on 6 months of data. SOURCE: Oklahoma Employment Security Commission 5

8 Table 4 Employment by Major Industry for Le Flore County, Farm Employment Ag. Services, forestry, fishing, & other Mining Construction Manufacturing Transportation and public utilities Wholesale Trade Retail Trade Finance, insurance, and real estate Services Government and government enterprises Total full-time and part-time employment % Change % Change Farm Employment % 25.9% Ag. Services, forestry, fishing, & other (D) (D) (D) (D) Mining (D) (D) (D) (D) Construction % -41.8% Manufacturing % 104.7% Transportation and public utilities % 19.0% Wholesale Trade % 30.6% Retail Trade % 54.3% Finance, insurance, and real estate % 78.9% Services % 31.9% Government and government enterprises % 20.8% Total full-time and part-time employment % 28.1% SOURCE: Regional Economic Information System, Bureau of Economic Analysis 6

9 Table 5 Personal Income by Major Source and Earnings for Le Flore County, (Thousands of Dollars) Earnings by place of work Wage and salary disbursements Other labor income Proprietors' income plus: Adjustment for residence plus: Dividends, interest, and rent plus: Transfer payments less: Personal contrb. for social insurance Total personal income Per capita personal income (dollars) % Change % Change Earnings by place of work % 56.4% Wage and salary disbursements % 35.9% Other labor income % 36.2% Proprietors' income % 134.1% plus: Adjustment for residence % 56.4% plus: Dividends, interest, and rent % 59.9% plus: Transfer payments % 67.3% less: Personal contrb. for social insurance % 38.1% Total personal income % 59.9% Per capita personal income (dollars) % 48.4% SOURCE: Regional Economic Information System, Bureau of Economic Analysis 7

10 Table 6 Sales Tax Collection by City for Le Flore County, Oklahoma, FY1994 FY1995 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 Arkoma (1%) $25,093 $25,751 $27,037 $26,174 Arkoma (3%) $75,986 $78,409 $77,808 $87,018 Bokoshe (3%) $20,618 $22,192 $29,297 $31,888 $33,941 $36,274 $37,556 $53,242 Fanshawe (3%) $2,708 $3,980 $2,919 $2,893 $8,696 $5,824 Heavener (3%) $477,337 $507,752 $511,275 $519,880 $577,910 $573,234 $587,595 $596,980 Howe (3%) $16,970 $22,642 $25,643 $30,643 $29,474 $35,035 $33,614 $40,762 Le Flore (1%) $3,329 $4,471 $4,362 $4,960 $4, $5,147 $6,564 $5,663 Panama (3%) $167,302 $154,727 $162,066 $143,194 $137,063 $132,190 $146,701 $169,800 Pocola (3%) $269,098 $251,334 $278,389 $393,112 $400,737 $370,039 $387,161 $420,863 Poteau (3%) $2,587,424 $2,802,773 $3,141,476 $3,292,436 $3,561,777 $3,832,817 $3,911,323 $4,034,372 Shady Point (2%) $31,290 $33,563 Shady Point (3%) $59,646 $56,629 Shady Point (3.5%) $72,049 $80,644 $80,715 $84,938 Spiro (3%) $328,126 $372,270 $406,210 $383,875 $405,833 $454,765 $471,386 $436,270 Talihina (3%) $254,539 $271,683 $272,694 $263,887 $274,461 $298,427 $334,920 $333,194 Wister (2%) $59,440 $64,195 $67,816 $66,590 $66,797 $72,436 $12,263 2 Wister (3%) $90, $116,951 2 Indicates data is for 2 months of the year. 10 Indicates data is for 10 months of the year. Note: Sales tax in parenthesis. Source: Oklahoma Tax Commission 8

11 Direct Economic Activity in the Poultry Industry There is a substantial existing poultry industry in the area of interest. The activity of O.K. Industries, Inc. both existing and proposed expansion, is reviewed in this section. A substantial capital investment is associated with the poultry industry. Table 7 summarizes the capital investment related to the processing plant, hatcheries, feed mill, and broiler houses. Current investment is reported to be $166,676,229 and includes $56,429,036 for the processing plants, $13,008,014 for the hatcheries in Stigler and Heavener, $9,857,436 for the feed mill, and $87,381,743 for broiler houses. The proposed expansion for adding a hatchery is $1,839,641. Growers and grower payments are summarized in Table 8. Of the total 330 growers, 246 of the growers are in Le Flore County, while another 67 growers are in Haskell County. Grower payments total $25, 460,169 and the total number of houses is 879. A geographic distribution of growers across the surrounding counties is included in Table 8. Payroll and employment information are provided in Table 9 for the poultry industry in Heavener, Muldrow, and Stigler. Total payroll is $27,882,394 with $18,324,676 in Heavener, $8,992,397 in Muldrow, and $565,321 in Stigler. Payroll for processing plants, hatcheries, hauling, staff, and feed mill can be found in Table 9. Employment totals 1,252 with Heavener having an employment total of

12 Table 7 Poultry Investment Capital Investment Current Proposed Total Processing Plant $ 56,429,036 (1) $ - $ 56,429,036 Hatchery $ 13,008,014 (2) $ 1,839,641 $ 14,847,655 Feed Mill $ 9,857,436 $ - $ 9,857,436 Broiler Houses $ 87,381,743 (3) $ - $ 87,381,743 Total $ 166,676,229 $ 1,839,641 $ 168,515,870 (1) (2) (3) Muldrow (Sequoyah County) - $ 44,269,946 Heavener (Le Flore County) - $ 12,159,090 Stigler (Haskell County) - $ 6,669,065 Heavener (Le Flore County) - $ 6,338,949 Le Flore County - $ 68,790,713 Latimer County - $ 348,000 Haskell County - $ 16,155,030 Muskogee County - $ 696,000 Pittsburg County - $ 348,000 Sequoyah County - $ 1,044,000 10

13 Table 8 Poultry Industry, Growers and Payments Growers Le Flore County 246 Latimer County 3 Haskell County 67 Sequoyah County 5 McIntosh County 2 Muskogee County 6 Pittsburg County 1 Total 330 Payments Total $ 25,460,169 Houses Total

14 Table 9 Poultry Industry Payroll and Employment Heavener (Le Flore County) Muldrow (Sequoyah County) Stigler (Haskell County) Total Processing Plant $ 12,508,337 $ 5,082,034 $ 0 $ 17,590,371 Hatchery $ 577,320 $ 0 $ 485,229 $ 1,062,549 Hauling $ 2,578,689 $ 2,720,200 $ 0 $ 5,298,889 Staff $ 2,319,868 $ 1,190,163 $ 80,092 $ 3,590,123 Feed Mill $ 340,462 $ 0 $ 0 $ 340,462 Total Payroll $ 18,324,676 $ 8,992,397 $ 565,321 $ 27,882,394 Employment

15 Some Basic Concepts of Community Economics Industries or businesses that produce goods primarily for sale outside the economy are called basic industries. This is an important component of all economic systems. Two other major components of economic systems are service firms and households. Figure 1 illustrates the major flows of these sectors within any economy. Basic industries purchase labor from households and reimburse them with dollars. Other inputs used by basic industries are purchased from local service firms. Local service firms also provide goods and services to households (consumers). Naturally, each of these three sectors of an economy purchase goods and services from outside the economy. Local transactions determine the relationships that exist among the various firms in an economy. Consider for example the activity of the poultry industry and the related impacts on the local economy. The poultry industry can be considered a basic industry since it produces a product for sale outside the region. Processing plant employees and growers purchase goods and services from the retail and service sectors including restaurants, gasoline service stations, hotels, and other establishments. As earnings occur in these businesses, they hire additional employees and buy more inputs from other businesses. The total impacts of any basic industry on an economy consist of direct, indirect, and induced impacts. Direct impacts are the immediate or direct effects of the impacting industry; for example, the jobs created to fill certain positions within the firm. Indirect impacts are the second-round effects that occur in the business sector as a result of the input purchases made by the impacting industry. Induced effects are the changes brought about by the increased consumer spending due to the initial direct and the following indirect effects. In short, the initial jobs created or rather the accompanying income is spent in ways that tend to create further 13

16 Figure 1 Overview of Community Economic System $ Inputs Products $ Basic Industry Labor $ $ Inputs Households Goods & Services $ Services $ $ 14

17 employment in other sectors of the local economy. The above discussion indicates how basic industries serve as the foundation of an economy and households and service firms are necessary to make the economy function. Service industries account for a substantial part of the outputs of most economies. But, as Figure 1 shows, much of the service industries output supports the local basic industries and households. Mathematical techniques can be used to measure the relationships between basic industries, households, and services. A measure used in economics to describe the effects of an increase or decrease in economic activity is called a multiplier. A Type II multiplier is used for this study. A Type II multiplier includes direct, indirect, and induced effects, and households are brought into the model as an additional industry. A Type II employment multiplier of 1.5 indicates that if one job is generated by the direct activity, then 0.5 additional jobs are generated due to business (indirect) and household (induced) spending. Income multipliers are defined in a similar manner. IMPLAN is a computerized database and economic model developed by the U.S. Forest Service. IMPLAN is used in this study to generate appropriate multipliers for analysis. For further details regarding this methodology see the references listed at the end of this report. SECONDARY IMPACTS OF THE POULTRY INDUSTRY The poultry industry activity described in this reports has many secondary impacts on the local economy. Figure 2 presents an overview of local economic impacts. The hatchery, growers, and processing activity all combine to create direct jobs and income. Indirect impacts results from impact purchases by the growers and processor as well as purchases from service and retail business on main street. 15

18 The total employment impact of the OK Industries, Inc. poultry activity is summarized in Table 10. Total employment impacts are 2,423. Table 11 presents comparable income effects for the poultry activities. Total income impacts are $57,062,556. A very important economic impact of the poultry industry relates to property tax revenue. For example, in Le Flore County property taxes provide funding for the public schools, career tech, county health department, emergency medical services, county library, and the county general fund. Table 12 presents an estimate of property tax revenues based on an average countywide millage rate. Specific school districts may have somewhat different rates. A total of $593,378 in property tax revenue is estimated for Le Flore County. There are several key considerations regarding the poultry industry, which should be considered. Table 13 lists these considerations for further discussion 16

19 Figure 2 Local Economic Impacts of the Poultry Industry HATCHERY GROWERS PROCESSING DIRECT JOBS/INCOME RETURNS TO LAND, CAPITAL, MANAGEMENT, LABOR INDIRECT AND SECONDARY IMPACTS INPUT PURCHASES, MAINSTREET PURCHASES TOTAL ECONOMIC IMPACTS 17

20 Table 10 Total Employment Impacts of Poultry Industry, Haskell, Latimer, Le Flore, and Sequoyah Counties (1) Employment Total Direct Employment (2) 1,582 Indirect Employment (3) 841 Total Employment Impacts 2,423 (1) (2) (3) This includes an analysis of existing and proposed facilities for OK Industries, Inc. but does not include other poultry operations in these counties. This includes employment in the processing plant, hatcheries, hauling, staff, and feed mill. The number of growers are also included in this analysis and count as one job per grower. An employment multiplier is used with adjustment for growers already included as direct employment. This is to avoid double counting growers. 18

21 Table 11 Total Income Impacts of Poultry Industry, Haskell, Latimer, Le Flore, and Sequoyah Counties (1) Income Total Direct Income & Payroll (2) $36,369,117 Indirect Income & Payroll (3) $20,693,439 Total Income $57,062,556 (1) (2) (3) This includes an analysis of existing and proposed facilities for OK Industries, Inc. but does not include other poultry operations in these counties. This includes the payroll for the processing plant, hatcheries, hauling, staff, and feed mill. One-third of the grower payments are included as a net income figure. An income multiplier is used for the four counties of interest with an adjustment for grower income already included as direct income. 19

22 Table 12 Property Tax Revenue Related to Poultry Le Flore County Personal Property (1) $123,840 Real Property (2) 231,828 Poultry Houses (3) 237,710 Total $593,378 (1) These are based on market values and an average countywide millage rate. (2) These values include breeder farm, land, feed mill, hatchery, and processing plant. Millage rate is an average countywide rate. (3) These values are based on assessed values of over 200 poultry houses and average countywide millage rates. 20

23 Table 13 Key Considerations 1. Industry is integrated from hatchery to production to processing. 2. Employment and income opportunities from processing plant and hatchery are available to local residents. 3. Multiplier effect of the poultry industry will vary will local community characteristics. 4. Water requirements for processing plant should be considered by local community. 5. Profitability and cash flow of broiler houses can depend on many variables including management and the contract agreement. 21

24 Summary This report has presented an impact analysis of the poultry industry on Le Flore County and the surrounding region. Specifically, the report has reviewed basic economic data, summarized the direct activities of OK Industries, Inc., reviewed basic concepts of community economics, and estimated the secondary impacts of the poultry industry. An estimate of employment and income impacts was included in the analysis. For further information, please contact the authors. 22

25 References Olson, J. (ed.), Micro IMPLAN Software Manual (St. Paul: Regents of the University of Minnesota), Palmer, Charles and Eric Siverts, IMPLAN Analysis Guide, U.S. Department of Agriculture, Forest Service Land Management Planning Systems Section, Rocky Mountain Forest and Range Experiment Station, Fort Collins, Colorado, Siverts, Eric, Charles Palmer, Ken Walters, and Alward, IMPLAN Users Guide, U.S. Department of Agriculture, Forest Service, Systems Application Unit, Land Management Planning, Fort Collins, Colorado, Woods, Mike D., Jack Frye, James Britton, James W. Kelley, Joe Bullard, and Kevin Doeksen, The Economic Impact of a Poultry Operation on the Economy of Haskell, Latimer, LeFlore, and Sequoyah Counties, Rural Development Cooperative Extension Service, Oklahoma State University. AE-93113, October