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Understanding Your Local Economy Garen Evans Department of Agricultural Economics Mississippi State University Why should I care about this? • We live here • We work here • Leaders are expected to make informed decisions – Citizens, commuters, businesses, tourists – Potential entrepreneurs (new business) – Fiscal governance Outline • How to study a community • Anatomy of a local economy • Economic indicators • Comparative Summary – Oktibbeha County • Fiscal Issues • Capacity Issues How to study a community… 1. Qualitative 2. Ecological 3. Ethnographic 4. Sociological 5. Economic How to study a community… 1. Qualitative • Housing 2. Ecological • Schools 3. Ethnographic • Neighborhoods 4. Sociological • Attitudes 5. Economic How to study a community… 1. Qualitative • Spatial distribution 2. Ecological – Groups of people 3. Ethnographic – Activities 4. Sociological – Interactions 5. Economic How to study a community… 1. Qualitative 2. Ecological 3. Ethnographic 4. Sociological 5. Economic • Communities as a way of life • Cultural Dimensions – Food – Music – Language How to study a community… 1. Qualitative • Social relationships 2. Ecological • How and Why 3. Ethnographic 4. Sociological 5. Economic – organizations of people in society How to study a community… 1. Qualitative 2. Ecological 3. Ethnographic 4. Sociological 5. Economic But first a little background… ANATOMY OF A LOCAL ECONOMY Class… – What’s in the barrel? • Natural Resources – Air, water, land, minerals • Producers – Good and services • Raw, intermediate, finished • Consumers: – Labor force, children, students, retirees and tourists The 4 Factors of Production 1. Land 2. Labor 3. Capital 4. Management What are the returns to the four factors of production? 1. 2. 3. 4. Land Labor Capital Management Class… What are the returns to the 4 factors of production? What are the returns to the four factors of production? 1. 2. 3. 4. Land Labor Capital Management • RENT • WAGES • INTEREST • PROFIT The Barrel Gets Bigger… • Dollar$ from non-local purchases of locally produced goods and services – Commodities: • Agricultural, mining – Manufactured goods, services – Transfer payments – Tourism $ The Barrel shrinks! • Non-local spending – Consumer goods and services – Producer inputs purchased elsewhere How to study a community… 1. Qualitative 2. Ecological 3. Ethnographic 4. Sociological 5. Economic • Linkages between economic sectors. • Types of existing jobs/skills • Income • • • • Source Distribution Temporal Resources Discovering what is in the barrel, how it flows in, and why it leaks out… ECONOMIC INDICATORS Lots of metrics! • Demographics – Pop., Income • Economics – Jobs, Output, TVA – Distributional • Fiscal – Rev. & Exp. Population Metrics • School-aged – Infrastructure • Elderly – transfer payments • social security • Medicare • Medicaid Households • Owner-occupied – Important goal for low income communities – Important means for wealth accumulation “In terms of lower income households, non-housing wealth accumulation is at best minor and, for minority families, often negative” (1) Source: Wealth Accumulation and Homeownership: Evidence for Low-Income Households. U.S. Department of Housing and Urban Development, Dec. 2004. Income • Total Personal Income – Earnings – Dividends, interest, and rent • Investment income • Capital income • Property income – Transfer payments Types of Employment • Civilian Labor Force (CLF) – Employed Persons – Unemployed Persons – Unemployment Rate = unemployed / CLF • Place of Work Employment – Jobs Economic Sectors Goods-Producing Nat. res. & mining Construction Manufacturing Services-Producing Trade, Transportation, & Utilities Information Financial Activities Prof. & Bus. Svcs. Education and Health Leisure & Hospitality Source: Bureau of Labor Statistics Economic Metrics • Industry Sales or Output (cf., GNP) • Employment • Labor Income – Wages and salaries + proprietors incomes • Total Value Added (cf., GDP) Industry Sales – an example • Farmer sells cow to butcher $0.50 • Butcher sells meat to McDonalds $0.75 [+0.25] • McDonalds sells hamburger $1.75 [+1.00] • Total Sales………………………………… $3.00 Total Value Added – an example • Farmer sells cow to butcher $0.50 • Butcher sells meat to McDonalds +$0.25 • McDonalds sells hamburger +$1.00 • Total Sales………………………………… $1.75 Oktibbeha County • 1995-2004 – Comparisons with region and state. – Population – Employment – Income – Sales – Commuting Population 44,500 44,000 43,500 43,000 42,500 42,000 41,500 41,000 40,500 40,000 39,500 39,000 43,769 40,623 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Population Growth Oktibbeha Lowndes Mississippi 1995-2004 7.74% -0.01% 7.15% 2004-2010 2.21% 7.25% 4.81% Population Growth 2.50% 2.00% 1.13% 1.50% 1.00% 0.50% 0.00% -0.50% 1995 1996 1997 1998 1999 2000 2001 2002 -1.00% Lowndes Oktibbeha MS 2003 2004 Civilian Labor Force CLF = Employed + Unemployed UER = 100* (Unemployed / (Employed + Unemployed)) or 100* UER/CLF Unemployment Rate 12.00 10.00 7.09 8.00 6.00 5.65 4.00 3.48 2.00 0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Oktibbeha Lowndes MS Civilian Labor Force 29,000 27,000 25,000 23,000 21,000 19,000 17,000 15,000 1995 1996 1997 1998 1999 Oktibbeha 2000 2001 2002 Lowndes 2003 2004 Where Do We Work? 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 1995 AGRI 1996 MINE 1997 CONST 1998 1999 MFG 2000 TRADE 2001 SVC 2002 2003 TCPU 2004 FIRE Jobs in the Top Three Sectors 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 MFG SVC TRADE Job Growth by Sector 1995-2004 120% 100% 80.4% 80% 65.1% 60% 48.0% 32.9% 40% 20% -2.1% 0% -20% AGRI MINE CONST MFG TRADE SVC TCPU FIRE Earning Trends by Sector ($M 2000) $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $1995 MINE 1996 1997 CONST 1998 MFG 1999 2000 TRADE 2001 SVC 2002 2003 TCPU 2004 FIRE Earnings Growth, 1995-2004 180.0% 278.3% 160.0% 140.0% 120.0% 105.5% 100.0% 71.5% 80.0% 53.8% 60.0% 37.0% 40.0% 9.1% 14.4% 20.0% 0.0% MINE CONST MFG TRADE SVC TCPU FIRE Components of Income Transfer Paym ents 17% Dividens, Interest & Rent 19% Earnings 64% Total Personal Income $1,000.0 $800.0 $600.0 $400.0 $200.0 $1995 1996 1997 1998 1999 DIR TP 2000 2001 EARN 2002 2003 2004 FISCAL ANALYSIS Revenues and Expenditures • Revenues – Taxes, charges, fees, transfers, bonds • Expenditures – Health, hospitals, education, public welfare, highways, public safety: police and fire protection Tax Revenues Ad Valorem “according to the value” Property Taxes Retail Sales State Tax Levies State Transfers Property Taxes • Assessed Value • Taxable Value – 10% Residential Property – 15% Commercial Property – 30% Motor Vehicles, et al. • Tax Rate: Millage Millage Rate • Millage Rate is the tax rate per $1000 of value. • One Mill = 1/10th of One Cent (0.001) Example – Class 1 Property • Assessed Value: $120,000 • Taxable Value: $12,000 (120000/10) • Millage Rate: 111.09 • Tax Levy: 12 * 111.09 = $1,333.08 Retail Taxes • Mississippi collects 7% sales tax on many retail products. • Eligible municipalities receive part of sales taxes collected in their jurisdiction • 18.75% • City (ie., incorporated municipalities) Retail Sales in 2000 • Oktibbeha County: $408 million • $302 million in eligible municipalities: • City Diversions: – Maben: $86,899 – Starkville: $3,687,185 – Sturgis: $40,838 Commuting • Oktibbeha County – 18,401 total – 15,071 own-commute – 3,330 out-commute Out-commuters 3,330 MS: 3,134 AL: 73 TN: 17 LA: 26 Other: 80 In-Commuters Mississippi Alabama Tennessee Louisiana Other Total* IN 3,557 92 26 16 42 3,733 OUT 3,134 73 17 26 80 3,330 NET 423 19 9 (10) (38) 403 Other Issues 1. Local infrastructure – Capacity 2. Health Care – Impact of poor health – a case study 1. Capacity Issues Capacity 5.76 Mgal/day Average 3.6 MGal/day Peak 4.4 Mgal/day • Daily per-capita usage: 84 gallons (avg) • Population growth: 2% – Exceed system cap by 2027 – Exceed system peak by 2017 2. Health Issues • Mississippi ranks highest for – Obesity – Heart Disease – Diabetes – Infant Mortality • Employers – Educated workforce – Access to healthcare Health = Wealth (or vice versa?) • “During the past 30 days, how many days did poor physical or mental health keep you from doing your usual activities?” 20.4% of all respondents 8.1% of workers Health $$$ $32.9 Million Of LOST INCOME $144 Million in present value losses accumulate over 30 years Thank you ! Understanding Your Local Economy Garen Evans Department of Agricultural Economics Mississippi State University Community Economic Analysis • Technical and structural analysis of community decisions. For example: – Boundaries: geographic, political, social, economic – Infrastructure: – Capacity – Potential • Improve decision making associated with community economic development • Community Development Increase capacity of local population to collectively pursue its own interests. – Local leadership – Citizen participation – Collective decision making – Community organization • Community Economic Development – Community: • A group of people in a physical setting with geographic, political, social, and economic boundaries, and with discernable communication linkages Shaffer, Deller, and Marcouillier (2004) • Community Economic Development – Community • Group of people who know each other and plan together for long-term improvements – Economic • Monetized returns, Measurable results – Development • Structural change (not just growth)