4A - Economic Development (part 1)

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1 2 3 4 . 5 Business inventory. 6 CURRENT TRENDS 7 As a neighborhood center, the Pequot Lakes economy is impacted by a number of factors beyond its ability to 8 control or even influence. T4ese—The most pressing factors, created by the national recession, have changed 9 dramatically in lust the last two years. ip ' It now appears that, for Pequot Lakes as well as other similar 10 communities across the country, the recent period of rapid growth has come to an end. Although it is not clear 11 what will follow, there are some realities that are starting to emerge as critical to the City's future economic 12 development potential. 13 • Access to capital. As this plan is being compiled, the United States is in a severe economic recession 14 brought about, at least partially, by poor lending practices. Even with historically low interest rates, banks 15 are having a difficult time lending, especially to businesses that may present a degree of risk. While 16 greater levels of caution amongst lenders may be the norm for the foreseeable future, it is not clear that 17 interest rates can remain at their current record lows. 18 Population migration. The current economic downtown has manifested itself most clearly in the 19 mortgage market,where home prices have fallen and, due to stricter lending requirements,fewer people 20 are in the market to purchase homes. National reports indicate that one in four mortgage holders owe 21 more than their home is worth, which inevitably stifles the ability for people to sell their homes and 22 move. For an area like Pequot Lakes that has been reliant on growth from in-migration, this presents a 23 changed reality. 24 • Aging infrastructure. A tremendous amount of infrastructure has been put into the ground to 25 accommodate and, to some extent, induce growth. Whether or not the resulting tax base justifies the 26 investment,the infrastructure deteriorates and will someday require substantial, expensive maintenance. 27 In the current (and future) economy, it will be necessary to make the highest use of each infrastructure 28 investment the city chooses to maintain. 29 • Aging population. Elderly households typically have incomes that are more stable and fluctuate less with 30 market conditions, good or bad. A Pequot Lakes population that is slightly older than the state average 31 (which itself is considered disproportionately aging) indicates some built in resistance to policies that 32 involve risk or the potential for tax rate fluctuations. 33 Less government support. State and federal governments are realizing the same kind of fiscal limitations 34 as local governments and are questioning priorities for future spending. Local government aid has been 35 cut dramatically and future cuts are almost assured. With populations nationwide shifting from rural to 36 urban/suburban areas, policymakers are questioning the wisdom of future infrastructure investments in 37 less populated areas. While there will likely be some money available from state and federal sources, the 38 City of Pequot Lakes needs to prepare for the day when their support is negligible. 39 More connected world. From the Internet to cellular phones, our ability to communicate with each other 40 has vastly expanded. Where Pequot Lakes was once remote and isolated, it is now connected to 41 international commerce in ways previously unimaginable.This leveling of the competitive landscape does 42 not give Pequot Lakes an advantage, but does present a new opportunity that can be capitalized on. 111 Page