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Hard Times in the Hinterland: Rural Idaho looks to diversify its way out of the recession

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When the Idaho Department of Labor announced in early May that the state's jobless rate had experienced its largest one-month drop in 25 years, it seemed to signal better times ahead. But while declines in unemployment were seen across the board, rural Idaho is still hurting. Ten counties are suffering joblessness in the double digits and all of them are in the least populated areas of the state.

"In some counties, the rates are almost double what you see elsewhere in the state," said Priscilla Salant, coordinator for outreach and engagement at the University of Idaho. "Some rural places have been hit incredibly hard. There are some pockets of really severe hardship."

Valley County, with its seat in the resort town of McCall, is one of those pockets of hardship. With the highest unemployment in Idaho, pegged at 14.3 percent—compared with the state average of 9 percent—economic development director John Blaye said the recession has been devastating for the communities in the Long Valley of the North Fork of the Payette River.

According to Blaye, from 2007 to 2009 the county lost 214 businesses and retail sales fell by $16 million in 2008 and 2009 alone.

"That's about $46,000 a day lost," he said. "Our lodging sales tax has also dropped about $3.2 million during that same time ... Everybody over the past couple of years put a hold on their spending and their business expansion. They just stopped spending."

Blaye said the boom times, when visitors thronged to the area's lakes and rivers and filled its hotels and shops, were cut short by the onset of the recession, but like the lumber mill closures that decimated rural economies in the 1980s, the shuttering of the Tamarack Resort near Donnelly put the final nail in the coffin.

"That was about a $518 million investment of capital into Valley County. There were about 400 jobs on the mountain, and there were between 600 and 1,000 contractors living and working in Valley County to build that resort. Now they're all gone," he said. "That's a major, major blow to the economy."

In the deathly silence that followed Tamarack's demise, Blaye and other economic development planners were left scrambling to fill the void in an economy that was based almost exclusively on tourism and recreation. But lacking access to a freeway, and without amenities like a reliable high-speed fiber optic network, attracting new businesses to diversify the economic base is a challenge.

"We've got to get our infrastructure together. We need to get some more high-end paying jobs and year-round sustainability," Blaye said. "When Tamarack came, our entire economy changed. The rents doubled, but the salaries didn't double. There was a housing shortage, and prices went through the roof. That was a real feeding frenzy in the market, and we didn't have the infrastructure, we didn't have the homes, we didn't have the price point ... Bottom line, we need good-paying, livable-wage jobs that are sustainable year-round."

While the Labor Department, in its last jobless report released on June 3, stated that Idaho's rural areas "appear to be stabilizing more quickly than the urban areas," Valley County's plight is not unique. Salant, who specializes in rural development issues, said economic diversity is the key to surviving tough times, but that's an area where rural economies have been historically lacking.

"By nature, rural economies are not very diverse. They tend to be specialized and reliant on one main industry. That's almost by definition," she said. "In urban counties, those economies are diverse and tend to be able to weather the recession better."

Blaye said diversity has definitely become a watchword in Valley County. He would like to see growth in small manufacturing and high-tech firms to fill commercial vacancies that have risen to between 30 percent and 40 percent in McCall, and up to 50 percent in Donnelly, and said that partnerships between the state, local governments and private companies are cropping up to spur reinvestment.

For instance, the Valley County Convention and Visitors Bureau was established with the help of the Idaho State Department of Commerce and input from tourism experts in Boise to unite the valley's chambers of commerce to put on more festivals, events and conventions. The Valley County Economic Development Council, which Blaye oversees, also helped the City of McCall to secure a grant for the construction of a convention center and rounded up volunteers to help keep the Donnelly Chamber of Commerce from closing its doors.

"We're also still actively involved in business retention and expansion efforts and business recruitment," Blaye said. "The goal is not only to get heads in beds in our market, but bring new business and vitality to our Valley County area."

A glimmer of hope for the county is in Cascade, where Kelly's Whitewater Park celebrated its grand opening on June 14. The $3 million project, which was begun by private developers Mark and Kristina Pickard before the recession hit, showcases man-made water features, a new rec center, whitewater rafting, kayaking and innertubing on the South Fork of the Payette River. Blaye said it's an example of how valuable it is for private entrepreneurs to stick to their projects and shows how individual leadership can pick up where governments leave off.

"That's the individual initiative and leadership that takes hold," he said. "You don't wait for government entities or other people to take that leadership and vision."

More than 200 miles to the north, in Clearwater County, it's a similar story.

The rugged wilderness in North Idaho that once supported a thriving, but now almost extinct, timber industry had to transition into a resource for outdoor recreation.

As in Valley County, when the recession pinched recreators' wallets, the dollars dried up and the job losses mounted. Earlier this year, in fact, Clearwater led the state in unemployment, with a rate that soared to 19.3 percent. But as of earlier this month, that rate had fallen to 11.9 percent.

Loren Kaboth, the new director of the Clearwater Economic Development Association, said it's hard to pinpoint exactly what caused the county's unemployment rate to take such a precipitous dip, but she pointed to Clearwater's diversity of small manufacturing firms as an example of how the area is weathering the economic storm. Specifically, she said ASE Glass Co., SJX Jet Boat, rifle scope maker Nightforce Optics and Blackdog Tackle were booming.

"After 5 o'clock, your lifestyle is just fantastic because of the fishing, four-wheeling, hunting," she said. "Obviously, the fact that within five minutes [SJX Jet Boat] can have their boats in the water to test, it's a great location for them. And Nightforce, they can just walk out onto the back deck and they're staring into the wilderness with their scopes ... If we can persuade companies to start up over here or move, that would be fantastic. Basically it's about retention and expansion of jobs, especially in recreational and manufacturing."

Rural Idaho's trend toward diversity—especially in the manufacturing sector—is reflected in analysis conducted by the U.S. Department of Agriculture's Economic Research Service.

According to the agency, there are six mutually exclusive economic types that characterize Idaho counties: farming dependent, federal/state government dependent, manufacturing dependent, mining dependent, services dependent and nonspecialized.

Of Idaho's 44 counties, more than 30 are rural, and most fit into one of the first five categories. Three of the state's nine urban counties—Ada, Bingham and Kootenai counties—are characterized as "nonspecialized," representing their diversity of industries. But 10 rural counties also fall under the nonspecialized designation.

Home to national brands like Lighthouse Dressing and Coldwater Creek, and boasting growing firms like Laughing Dog Brewing, coffee roaster maker Dietrich, Quest Aircraft and the Pend d'Oreille Winery, Bonner County, in North Idaho, is particularly diverse, Salant said. Still, it suffers an unemployment rate of 10.8 percent.

"Bonner County in the past was more specialized, and today it is remarkably diverse considering that the population is still small," she said. "I think that explains why you see a lower unemployment rate today in Bonner County than you do in Boundary."

Boundary is Bonner County's neighbor to the north with a jobless rate of 14 percent.

Karl Dye, executive director of the Bonner County Economic Development Corporation, said the area has definitely seen an upswing in manufacturing, technology and services jobs over the past couple of years and those sectors have helped blunt some of the impact of the recession. Still, he said, Bonner County suffers from an over-reliance on legacy industries like timber.

"On a GDP basis, about 25 percent of our local economy is based on the timber industry and look at where we lost the most jobs: They were in timber and construction," he said. "We do have a much more diverse base, but if the timber industry is 25 percent of our local economy, we're still going to feel the effects—though less so than in a place like Shoshone [County, to the south] or somewhere where they might be relying on timber for 50 percent of their economy."

Indeed, Shoshone County, with its long history of logging and silver mining in towns like Wallace and Kellogg, has had a rough past few decades.

Even up to the 1980s, Shoshone County's famous Silver Valley was regarded as one of the world's richest silver mining regions. According to historic data from Idaho State University, the mines in Shoshone County have produced about $2 billion in metal wealth since 1885, and almost 45 percent of all silver mined in the United States comes from Idaho.

Still, environmental damage in the Silver Valley and depressed metals prices resulted in the closure of most of the area's mines by the 1980s, including the huge Bunker Hill operation, and the region still hasn't fully recovered. Some mines still operate in the valley—and many residents hope rising silver prices will spur an upswing in the industry—but unemployment in Shoshone County is still among the highest in the state, pegged at 13.9 percent.

Looking to Shoshone County's example, Dye said: "Just because [Bonner County is] more diverse than the rest of Idaho doesn't mean it's as diverse as we want it to be."

Salant said Bonner County's relative economic diversity is the result of years of planning that began when the timber industry first started its long decline in the 1980s, but it has certain intangibles that have given it an advantage over other rural areas in the state.

"The way they're diversified there, it's taken years. It's taken a really progressive economic development strategy to start nurturing firms and industries that are new to the region. And that's really risky. Who can pick the industry that can thrive in the future?" she said. "A person can speculate on how Bonner County achieved that. My guess is that Bonner County started with the community of Sandpoint that was large enough, and the natural surroundings are spectacular enough, to give it kind of an advantage as the county tried to diversify its economy."

Dye agreed with that assessment.

"We've been really fortunate that people do want to live here and base their businesses and grow and stick with it," he said. "They don't want to live in Potlatch or Grangeville or Parma, they want to live in Sandpoint."

To further encourage the introduction of new industries to the area, Dye said the BCEDC is working to develop a support system to foster startup businesses. With unemployment in the double digits, he said there's an ample supply of labor and ideas with which to build new homegrown businesses.

"We'd like to create a process that would combine local resources and local talent to help them grow and accelerate faster," he said. "It's a lot easier to build five small businesses that would employ two or three workers than it is get a larger employer to bring on 10 new workers."

Another major component of rural economic development, according to Salant, is education.

"Schools provide good middle class jobs, they educate the children of the state who may move anywhere in the state or beyond and they also attract families who are looking for another place to live and they attract employers. Good employers won't move to communities that don't have good schools," she said. "Policies that encourage K-12 education are your strongest economic development tools."

Dye agreed, but said lack of K-12 education isn't really an issue for Bonner County. Rather, the area suffers from a dearth of higher education opportunities. A plan fronted in 2005 by Coldwater Creek founder Dennis Pence to bring a University of Idaho satellite campus to Sandpoint was sidelined by the recession, but other education players and regional economic planners have stepped in with a new, more collaborative plan.

Dye said the concept, called a "communiversity," is being investigated by several state universities and colleges. In essence, schools including Boise State, Idaho State University, Lewis-Clark State College and North Idaho College would pool their resources to offer degrees and training in Bonner County through a central satellite campus.

Planners have submitted an application for a $1.1 million Excellence in Education grant that would support a Bonner County communiversity that would offer classes ranging from technical-professional training up to four-year degrees.

"Those classes could be dual enrollment for charter or high school students who also want to earn college [credit]. They could be continuing education for older students or work force training for employees trying to re-skill," Dye said. "I agree education is one of the key rural economic development tools that you need, but I think it's that post-secondary that really needs more of a presence."

But even as sweeping developments like a business incubator system or communiversity are in the works, Bonner County still suffers from the same hurdles faced by other, less diverse rural areas in the state--including a stressed and aging transportation infrastructure and lack of access to high-speed Internet.

While improvements to basic infrastructure like roads are likely going to come from the state—including the Idaho Transportation Department's ongoing, $144 million Sand Creek Byway project—telecommunications are something local groups can take on. Dye said efforts to install a high-speed, fiber optic network in Bonner and Boundary counties is under way, but securing funding will, of course, pose the largest obstacle.

Ultimately, Dye said, leveraging Bonner County's unique advantages to overcome some of its rural handicaps—all the while retaining its lifestyle amenities—will take a lot more of the kind of collaboration Blaye touts, and he said that slow times have given planners and residents enough breathing room to take a hard look at where they want the county to go in the coming years.

"It's really given people an opportunity to do a better job planning, not to be so reactionary and become more proactive on what we want to do, assuming growth patterns pick back up," he said. "With that system we can build a lot more of that diversity and have a lot better chance of being successful and actually having jobs here locally, and we don't turn into a retirement community or a resort community ... The big question is, 'Where do we want that growth to go?'"

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