Regional Roundtable: How's the Upper Valley doing?
Regional Roundtable: How's the Upper Valley doing?
Area businesspeople offer their perspectives on region’s economy, futureOriginally posted Friday, August 14, 2009NHBR’s editors recently met in Hanover with businesspeople from around the Upper Valley to get their take on how the region’s economy is faring during the recession, and what their expectations are for the future.
The participants were:
• Paul Boucher, president and chief executive, Greater Lebanon Chamber of Commerce
• Jim Britton, director of continuing education and business training, River Valley Community College
• Steve Ensign, chairman and chief executive, Lake Sunapee Bank
• Dave Evancich, vice president, Dartmouth-Hitchcock Medical Center
• Shelly Hudson, executive director, Greater Claremont Chamber of Commerce
• Grant MacEwan, senior vice president commercial services, Mascoma Savings Bank
• Ken Merrow, director of operations and safety, Trumbull-Nelson Construction Co.
• Jennifer Packard, director of public relations, Blue Sky Restaurant Group
• Mark Scarano, executive director, Grafton County Economic Development CouncilQ. In general, how do you think you are doing economically in the region, specifically in relation to the rest of the state?
Steve Ensign: It’s interesting to try and bring some perspective to what’s happening in New Hampshire elsewhere, and then geographically in the Upper Valley, which I think is distinctly different than other parts of our state, particularly those in the southern regions.
We had a real estate recession 20 years ago that is different this time around. We had over-building, speculative building, projects that were in trouble and financial institutions that were faced with taking back. This time around, it’s not that. It’s not over-building or speculative projects, and we have matured around the health and education industries that exist in the Upper Valley.
With Claremont, the expansion of their hospital. The higher education that they offer there. Certainly, the Upper Valley is driven by Dartmouth-Hitchcock Medical Center and Alice Peck Day Hospital in Lebanon, Lebanon College and Dartmouth College. And New London, the hospital as well as the college. There are a couple of private schools woven into that mix as well. They all continue to be economic drivers. I’m not aware of job losses there — we’ve seen expansions. So there are these wonderful pockets that beneficially drive the economy.
So we’re insulated, but we’re not immune to what’s going on.
We had a conversation at the bank recently that was driven by an offhand comment by a Realtor about the number of houses for sale. So I went on the MLS and drew circles and came up with more than a thousand hits on this area. So you have to wonder what the absorption rate is going to be for those in this market.
We don’t have the tremendous influx of people. Nor have we seen an increase of value in the properties. People have their houses on the market, but they aren’t necessarily desperate to sell. But what does concern us is when we hear about businesses that have traditionally not found themselves laying off people just nibbling away at the edges of the framework of employment here. Those job losses are not easily absorbed. I think we’ve yet to see the true effect of what’s going on around us. I hope that we won’t hit the depths of other places – whether in New Hampshire or the rest of the country.
Paul Boucher: I just got these June 30 figures for unemployment in the Upper Valley: Hanover is 3.8 percent, the lowest in the state. They beat us, we’re 4.0 in Lebanon vs. the state at 6.8 and the U.S. at 10.1. We’ve been holding our own, and they might go up a little bit, but I think we’re in pretty good shape.
Mark Scarano: One thing about the Upper Valley in general and Lebanon and Hanover in particular is a healthy concentration of highly educated people that act as an attractor of high-technology and science-based businesses. We see that up at the Dartmouth Regional Technology Center — my organization owns half of that building, and Dartmouth College provides the services within. If you look at, for example, Mascoma Corp., which is investigating and coming up with productive and efficient ways of creating ethanol from wooden biomass type product and materials. They actually had an opportunity to leave the Upper Valley and go to Cambridge, Mass., which already has an existing biotechnical cluster. They looked at Vermont next door, they looked at Cambridge, but they wanted to stay here. I think that has something to say about the area and its future.
This biotechnology cluster that you’re starting to see here – it’s just the ground floor. And we’re going through some of the usual issues surrounding the growth of a cluster where perhaps the demands of the state aren’t catching up and as fast as we would like. We had to do a lot of scrambling to get Mascoma Corp. locally. If you also look at Glycofi, another local company success story. It was sold in late 2006 for $400 million to Merck Pharmaceuticals. Merck made no promise, but in a rather soft-spoken press release they announced they were going to keep Glycofi in the Upper Valley. So that says something about the future and the opportunities in the area. We’ll solve the little problems that come along the way.
Grant MacEwan: People often mention the college and Hitchcock as one of the largest employers, which they are, but I think it’s important to look at the government. The Cold Regions Research Lab (in Hanover), the VA hospital (in White River Jct., Vt.) the postal annex (also in White River Jct.) — the government is one of the largest employers as well.
Plus with the highways intersecting right in Lebanon, if you stop and think about coming from north or south on I-89 there really aren’t any shops or restaurants and services an hour in any direction. So the retail, section is of the economy here is very strong. And obviously with the manufacturing high-tech base we’ve mentioned, it’s a very diverse economy which I’m not sure that people really appreciate because they talk about the college and the hospital is the base but it’s also very diversified.
Q. What about from the perspective from Claremont? It’s different from Hanover and Lebanon in a lot of ways.
Shelly Hudson: We’ve got kind of a resurgence happening in Claremont right now, which is getting people excited about what we have available.
Our city is actively working on a master plan to make it more conducive to businesses coming to our area. Of course, as everyone knows, The Eagle Times recently shut down. That was a bit of a shocker and very upsetting on our end of things. But setbacks aside, Valley Regional Hospital is expanding. We have a great college in Claremont that is actively working on training and the needs of manufacturers and businesses in our community.
Jim Britton: What’s happening in Claremont specifically is a few changes in the manufacturing sector. Obviously we’ve seen some jobs go away, but I anticipate we’ll see some jobs created. RDS Machine Company in Newport recently expanded their facility to a new 36,000-square-foot facility. It’s been reported in the paper that they are looking at new hires of 50 people. We also have a very large bridge company that’s down on River Road in Claremont called Structal Bridges that’s owned by a company in Canada. They are operating on a two-year backlog. They would double their workforce if they had the people skilled in that work. We’ve been trying to come up with a model to help those folks that are coming through their doors so they can start to catch up on some of that backlog. Things are happening in Claremont in some sectors that are positive.
Ken Merrow: The construction industry right now is very competitive. A lot of people are losing jobs, and there is a lot of skilled labor out there. Everyone would like to soak that up, but with guarded optimism — or skepticism, I should say — that I don’t know if I really want to bring them on, not knowing if I have six months of backlog, eight months, not knowing where I’m heading.
Right now I’m at about 25 to 30 percent off my normal workforce. Right now we have about 80 people in the field, and we should be in the 110 to 125 level. Going through the summer we’ve gone from projects that should have people in the teens that are down to the high single numbers. We’re starting to get a little more competitive. You’re not getting numbers out there that people are raising their eyebrows to. I’m also on the board of Associated Builders and Contractors of New Hampshire and Vermont, and we’re constantly talking about what the economic impact of 2009 was. There was a decent backlog, but they’re starting to chew through that — 2010 was always discussed as when people are going to start to hurt the most.
We’re hoping that a lot of the maintenance and plans for a new building or infrastructure were put off until now. It’s going to have to get done at some point, and we’re hoping that come next spring or summer we’re right there on the forefront ready to take it. A lot of things are getting put off or pushed into next season.
MacEwan: In the last economic crisis in 1990 I remember some of the older condominiums went for $12,000 to $13,000. The residential landlords we have as customers today are still near full occupancy levels. I remember back in the early ‘90s, a lot of the smaller shopping plazas had a lot of vacancies. There’s very little retail space available now. The Lebanon Airport Office Park is near full, if not full.
Dave Evancich: We have about 8,000 employees systemwide and about 6,400 here in the Upper Valley. To a certain degree, and I don’t want to speak for the college necessarily, but the college and the medical center are quote, “recession-proof,” in terms of students and patients — full beds, full appointments, full enrollment. But is part of that being insulated or having a buffer? As we’ve seen with the college, their revenues are more dependent on national and corporate investment market than tuition. And for the medical center, you’ve seen how much we have been affected by some of the cuts at the state level, so our reimbursements are cut dramatically.
Jennifer Packard: The hospitality business is affected in a lot of different manners. It seems like when the economy gets tight in an area, the first thing families do is cut back when they’re looking at their own budgets. So we’ve seen a little bit of that shift — nothing that we didn’t expect when we came up on that forefront. We have had pretty solid numbers, and we feel confident about that.
We’ve seen some difference in our hiring than in the past years. We spent the majority of our advertising money on recruitment because we had a lot of positions open. We have an enormous amount of younger people working for us and a lot of them are college students. They’ll leave and go back to school so we have to go and build the numbers back up. But what we’re finding this year is that there are a lot of people who weren’t previously looking but are now, maybe because they were laid off. So now more of our advertising dollars are going towards generating revenue — trying to bring more sales in and keep the restaurant fresh and on top of people’s mind.
We have definitely looked at our bottom line. Where we found a little money, where we can be a little tighter this year on it. We have cut one high-end position in the corporate office. Our vendors are fighting a lot tougher for our business. They’re offering much better pricing structures and there’s a lot more competition between them. Generally we’d have a vendor that would bring us certain items and now we have two or three knocking that say well maybe we can do better.
Britton: I just want to make a quick comment about the manufacturing sector in the area, which in my opinion has been hit the hardest. I don’t get that sense of direness coming from manufacturers. It seems they’re more just sitting and waiting — not doom and gloom. Anticipating to at least see some expansion.
Scarano: You keep hearing from around the table, maybe in different forms, but you hear training, skilled workforce, workforce development, and I hear it frequently from businesses big and small. It’s the quality of the workforce that is going to make or break them.
When you’re in a competitive atmosphere that is now even more competitive that means all the more. Jim probably doesn’t have any brakes left on his vehicle – he’s probably put more miles on it coming here from Claremont — but you can look at how much businesses are spending on workforce development even today. They realize they can’t afford to not invest in their employees.
Hypertherm is the perfect example of that. I serve on the state’s jobs training advisory board and that has probably been one of the most hidden yet successful economic development programs right now existing. They provide grants, outright grants to businesses. Sometimes it’s small like a couple hundred dollars and other times like in Hypertherm’s case, $200,000 in worker training, and we’re seeing more and more businesses coming to the realization that that is something they have to invest in.
Evancich: The point is unless we have retraining that can meet the skills we need that does exist in a short period of time – more of a 12- to 26-week time frame. It’s not relevant that you have a four-year or two-year program in some cases. There’s a premium in being nimble and using resources that are readily available and local.
One of the resources that we have taken advantage of is a surgical tech program we designed with Lebanon College that has just been incredible and really helped to meet a very hard-to-recruit-for need. I think it’s really at a premium in this economic time to be nimble and flexible and responsive, and to a certain degree we had to abandon the old way we had of looking at things.
Boucher: The demographics are changing considerably too. I see people moving in here that are retired, sold their house elsewhere. Those that want to be near Dartmouth-Hitchcock, so they’re retiring here, paying cash for their house and not bringing their kids.
We in Lebanon were down 68 students last year in our system in spite of the Eastman/Grantham area sending more kids then they ever have. We’ve closed two schools this year. So that’s going to be a trend that I think is going to continue with retired people moving to the area.
Hudson: I know that in Claremont some of our elementary schools are busting at the seams. We have modular classrooms and shuffling people here and there just trying to make it work. We’re seeing people coming in to the area workforce that are bringing their children.
Ensign: Paul points out something interesting. It’s not just workers moving into the area — it’s retirees. There’s always a graduating class of Dartmouth that is retiring this year. Sometimes early retirement, sometimes they stay in the workforce until later.
These folks return to the spots where they had the best times of their lives. In college or at summer camp on the lake — they’re attracted here, not just because of what they remember but because of what this has become. There’s a lot going on throughout the area that feeds people their social needs. It’s a tremendous arts center.
They’re part of our economy that is not as affected primarily by the ups and downs of the outside economy. Many of them have benefit plans, their monthly checks come in, and they aren’t worried about employment. They do go out to eat, to the movies and to purchase things, so they are a part of what makes us a little bit different in this region in this economy.
Evancich: I think it also points out, which several people have mentioned, the definition of the Upper Valley – I think everyone has a different perception of it. We need to think of a regional economy, a regional quality of life, which the provincial New England tradition doesn’t allow us to do. But I think in this economy it’s more important than ever that we think about connectivity and creative opportunities to use. Schools in Claremont are over-subscribed and Lebanon is consolidating and reducing. How do we balance all of that out?
I know when I look at our hospital service area — 26 cities and towns — the disparity between highest and lowest is staggering, and that’s in my view, one of the challenges. How do we level that out so that we feel more like a region and operate like a region? I think if we look at how to make the most of the resources we have and make sure that people look beyond downtown and their own way of doing things — it’s important in maintaining the quality of life there.
Packard: I have the same thinking along the line of looking at the definition of the Upper Valley. A few years ago we hired a company in Nashua that did individual marketing that they wanted to bring to the Upper Valley. We sat down with them, and during the initial planning meeting they asked, “OK, who are you working with, what is your demographic?” I had a list. I’m looking at 50 miles all around – I put my little compass on Hanover and go all the way around. They’re saying, “Oh no — you need to say with 03755 or 03766 or 03764.” I said to Mark (Milowsky, president of Blue Sky Restaurant Group), “I think we need to fire them” because when we look at marketing pieces we do go about 50 miles away from every different circular direction of the restaurants.
Merrow: I live in Newport and travel up here every day. The traffic in the last eight years has increased tenfold. The number of people coming from Concord up 89 to the hospital or colleges has increased dramatically over the years. We have a lot of people that live in Springfield, Vt., and come up here every day. That’s 20 or 30 miles. But that traffic keeps increasing because there’s nothing available or affordable in this market.
The average ranch house in Newport is $140,000. Up here, that house is $250,000, but they aren’t available. And that’s what’s essentially driving people away is the number of bedrooms. That’s what makes the outlying areas grow.
Boucher: We had study that showed Lebanon has a population of about 12,500 night and 40,000 during the day. They are either coming in to shop or work. Those numbers are approaching the town of Derry.
Evancich: One of the things I keep thinking about is if gas goes back up to $4 a gallon that will change our whole economic vitality dramatically in a short amount of time.
If gas goes back up like it did last summer and stays there for awhile without any real short-term viable mass transit option, it can really upset the balance thing. In most urban areas, people can leave their car at home and figure out options, but we don’t really have options for people, and I think it would be unsettling for our workforce and our customers.
Packard: We have a lot of employees that travel quite a distance. When the gas prices go up, we’ll see them cut back on a shift here and there or they’ll call and ask if there’s a lot of reservations before they come in. They figure they don’t want to drive all that way if they aren’t going to make any money.
As for the diners, they don’t usually comment a lot on that kind of external expenses but we’ve had people call before to make sure that we’re open and to make a reservation because they don’t want to drive all that way.
Scarano: The bigger picture is that, while our businesses are trying to be nimble and change-oriented, we’re still within the same governmental structures. I think that one of the things about the Upper Valley as a whole is that there is no true regional planning and there is a struggle to achieve a vision as far as what the Upper Valley is going to do in five, 10 or 15 years from now. Where is the growth going to be oriented? Where are the openings going to be? These are all the bigger pictures that you’re getting municipality by municipality without regard to the bigger picture. I think that’s just something that we in New England, us local-control folks, are all going to have to learn from the rest of America in maybe trying to look at some of these larger areas of responsibility. We need more regional leadership in order to get the region to act more like a region.
Q. From the perspective of the two bankers here, what’s the credit market like in this area?
Ensign: The credit hasn’t tightened up, like other places. We continue to see an influx of applications. Some certainly because the business may be struggling more than others, but a good applicant can find money. It’s not just with us. It’s with all the banks in the area. Lending didn’t stop — we read about lending having stopped, but it didn’t.
MacEwan: We’re looking for good loans. We’re not afraid to make loans in any way.
Ensign: We’ve seen more requests that have maybe gone through some of the larger banks that may have increased some of their lending standards or not writing them on some of the same terms as before.
We’re seeing larger requests of loans that aren’t being met by the larger banks. Also, we’re moving to some other larger markets that we’d never seen loans from before.
It’s not a bad time to be a community banker. To have the sort of swing back to institutions that strive to meet the needs of its community. When the larger banks disenfranchise themselves from the consumer base by their actions, their corporate actions, made far way from here, it just suddenly serves here as a reinforcement to why we have all been doing what we’ve been doing for as long as we have.
Merrow: The biggest thing is people are keeping their money, whether it be Dartmouth or anyone, very close to their chest. They are reluctant to move forward at this time. They’re just not real comfortable letting the money go. We see this all the time. We put a lot of money towards a job – we put a lot of footwork in, we win the job, we negotiate the job and after numerous budget decisions it’s let’s sit and wait.
Ensign: Businesses are run by people, and people at the moment are not as confident about the future and those decision-makers are going to hold off, as they will in their own personal lives.Q. One of the big discussions in other parts of the state has been about attracting young people to stay in New Hampshire. Is that a concern around here as well?
Evancich: Absolutely — I think for us it’s not necessarily maintaining the young people but having an appropriately aged workforce. We have 1,600 nurses at Dartmouth-Hitchcock the average age is five years from retirement – that’s frighteningly large. So we have to recruit people who are in their 20s, 30s and 40s and get them in there soon to fill that gap. We have to recruit them from outside. The same is true for physicians and other staff, but for nursing it’s really critical.
We have to make sure that we have a vibrant workforce because unless we have that, we’ll have people who come here to retire but can’t find the services that were always part of this, making it a special place.
Hudson: There was a kind of special meeting at Dartmouth that brought together a lot of young people for Governor Lynch’s program for retention. There was a lot of talk about what in a community attracts a younger workforce. There was a lot with the education system, but it is not only being able to provide a good school system but to be able to provide the arts and potential jobs.
Hanover is one of those communities — it has a great college, wonderful hospitality, it has entertainment, everything that someone could possibly be looking for — so how do you get that all around the state? I know that Claremont struggles with that.
Scarano: There’s also a need for housing. How much that is population and also how much is institution? There’s talk about how some of our municipalities don’t want young people. I’m not saying that’s generally the case around here, but in New England again we come back to regionalism and pretty small governments — perhaps that’s also made us somewhat immune to explosive growth.
Q. The sense here, as opposed to some other regions in the state, is that there’s a kind of hopefulness here, like you really feel good about the area. Even Claremont, that has seen tough times. There’s still a sense of hopefulness.
Hudson: We’re almost in an isolated area, but we’re not completely protected, and I think a lot of us have fallen into that – a little protected from the rest of the country but a little skeptical.
Evancich: A little confident – but it’s not dire or desperate. I was thinking back to the early fall when we were asked if we were going forward with the outpatient surgery center. We were also going forward with our electronic health records because we felt it made sense. But when we announced that, there was a lot of guilt that went with it because while they provide jobs locally by staffing up, we felt like, “Wait a minute — we’re doing well and we’re making these commitments and others are not. We should express confidence in our business because we’re confident about the future.”
We’re in it for the long haul, so it’s a calm, but wary confidence.
Ensign: I think there was kind of this perspective of, “Build it and they shall come.” Build a big house and it’s going to be great and there’s plenty of debt. I’m more afraid that people think that recovery means getting back to where we were, kind of downsizing the American dream that’s going to happen. I’m not sure that people are quite willing to adjust to accept things aren’t going to be the same. There won’t be the “spend as much as I want” mindset. There’s an adjustment to spending and saving, an adjustment to what you want and what you can afford. I don’t think that’s settled in yet. So when you hear we’re starting the recovery, I don’t think people understand it’s going to be different.
This article appears in the August 18 2017 issue of New Hampshire Business Review