Story last updated at 2:48 p.m. Thursday, October 3, 2002

Diversity balances Kenai Peninsula economy

Homer numbers lead charge in big 2nd-quarter increase in gross sales

By Hal Spence
Morris News Service-Alaska

Perhaps it was the improving weather, the approach of fishing season or even the thawing ground, but people and businesses appear to have been in a buying mood between April 1 and June 30, according to the latest economic data available from the Kenai Peninsula Borough's Community and Economic Development Division.

Jeanne Camp, an economic analyst with the CEDD, said business diversity was the key to the generally positive economic boost enjoyed by the borough as a whole during the second quarter.

"Some places were up, some were down," Camp said, but diversity helped to balance the economy. "Diversity adds strength," she said.

The economic data is included in the division's latest Quarterly Report of Key Economic Indicators released last week. It covers such things as gross and taxable sales and analyzes them by area and industry. It also looks at construction permitting and employment figures. Reports are issued four times a year.

Gross sales boroughwide during the second quarter of 2002 rose nearly 10 percent over the same period a year earlier, with the numbers from Homer leading the charge, the report said.

While the borough as a whole, which includes the cities, saw second-quarter gross sales rise 9.6 percent over those of 2001, Homer "was the place to be," the report said.

Gross sales in the lower-peninsula community increased 18.5 percent over the previous year. Homer's taxable sales, meanwhile, showed a 12.1 percent increase, far outstripping the performance of the borough as a whole, where taxable sales only improved by 1 percent. In Homer's case, improvements in the service and retail sectors were responsible for the bulk of the increase.

Homer wasn't the only locale to take a step up over 2001's second quarter. Soldotna also gained in gross and taxable sales, the report said, rising 7.5 percent and 0.9 percent, respectively.

Seward's numbers were mixed and showed an increase in taxable sales of 1.4 percent, but a decline of 11.2 percent in gross sales. Both communities saw sizable improvements in finance, insurance and real estate -- the so-called FIRE sector of their respective economies, the report said.

For Homer, Soldotna and Seward, the second quarter proved a good one for municipal tax revenues. Homer saw more than $33.7 million in taxable sales, up more than $3.6 million, a 12.1 percent increase over the second quarter of 2001 as mentioned above.

Dean Baugh, director of finance for the City of Homer, said sales normally go way up in the second and third quarters. But this year a new source of tax revenue was added. The second quarter was the first quarter that sales revenues in the new annexation area fell under the city sales tax, Baugh said. Some 4.5 square miles of territory officially became part of Homer this year, including many commercial enterprises that had been just beyond city limits.

"We started collecting sales tax in the new area as of April 1," he said.

However, while Homer, Soldotna, Seward and the borough as a whole recorded increased taxable sales for the quarter, Kenai and Seldovia had lower gross and taxable sales than the year before.

Seldovia, which has fallen steadily since 2000, saw its gross sales fall 21.4 percent and its taxable sales drop off by 5 percent from last year.

Kenai dropped 11 percent in gross sales and 1.8 percent in taxable sales. Kenai Mayor John Williams said he's not anxious about the apparent decline, however. The numbers really reflect the effect of a huge spike in sales during the first and second quarters of last year due to some major growth-inducing factors.

Construction across the borough was strong during the quarter, as shown by a 5.5 percent increase in building permits. That indicates further strength in the economy, Camp said.

"People don't invest in business buildings if they don't believe the economy can pay them back their investment, and people don't build homes if a good quality of life isn't available to them. To see strong construction is a very positive note," she said.

The division has accumulated too little 2002 third-quarter data so far, Camp said, to show whether the second quarter's upswing led to a summer's worth of improvements over 2001 as well.

While the CEDD compiles the data for the quarterly reports, the analysis of what the numbers mean for the borough is done at the finance department. Jeff Sinz, director of finance, said this week that that analysis is under way but not yet complete.

Hal Spence is a reporter for the Peninsula Clarion.