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I am presenting a more extensive report of sales taxes this month then I have in the past. Not only do I have the Grand Forks data and other major cities in the state for the month of July, but I also am presenting the first quarter 2014 state sales tax collections. Of course the time is different so we have to be careful in the analysis here.

That is, the first (top) table is taxes received by the cities in July. You will recall, if the businesses are forwarding the sales taxes they have collected from the consumers it should be for sales that occurred in May. The business then forwards the receipts to the state in June, and the state treasurer then sends the city that money on the 15th of July. That means on average the money the city receives was paid by the consumer two months earlier. The business got to use the money for about two weeks, and the state used it, or made interest on it, for six weeks.

As for the state sales taxes, the business gets use of the consumers tax payments for two weeks and then forwards it to the state for their immediate use. Of course the business acts as a collector of taxes and does not get paid anything for those administrative costs for being the governments.

An analysis shows the continuing slow down in the North Dakota economy. It is a slowdown that should be expected. It comes from two places. First, it is the maturing of the oil boom. Not a bust by any means, but a maturing of the explorations and an increase in the technology of drilling and the pumping. The costs of the wildcatting is now under control. This oil patch has to be the best organized, most efficient exploration ever. It has a success rate of well into the 90 percent category, a figure unheard of before.

The drilling and placing of the wells will go on for at least two more decades and longer if new technology is developed. This will be a development unlike any ever before, and that is good for North Dakota and for all of its sub-divisions, especially for some. It has taken some subdivisions that were disappearing from North Dakota history and turned them into some of the wealthiest in the state.

The second slow down is in the agricultural sector. The interesting thing for economists is that the oil boom, this never before seen level of economic activity in this state, and the nation is taking place at the very time that the largest, most extensive agricultural boom is also occurring. There may have been times when adjusted for the value of the dollar that farmers received more for their products in the past six to ten years, but there never has been a time when this level of prices lasted for this long of a period.

Not only that, but it was happening when new technology was happening at a level not only never recorded, but not ever imagined. Tractor horsepower increased from moderate levels to unimagined amounts. Satellite technology became common place on the farm, in the field. It was used to steer the tractors and combines, to set the machinery, to till, plant and harvest in ways unimagined not a decade before.

While at this time the boom has not turned into a bust, but it has created a significant slow down in the returns to the farms, and that has “multiplied” itself all the way across the state. Machinery sales are down significantly. Money for the farmers to buy business investments and personal purchases have declined significantly. So too then has the money received by the businesses, the carpenters, the car dealers, etc.

Not a bust, but a major slow down. It is a good thing the state has all that savings from the extra income from oil and agriculture this past decade.

Now, that all being said, the state is in a slowdown, but if you recall the last report by the OMB North Dakota government collections for its major taxes, after significant reductions by the legislature, is not slowing down. In fact collections are significantly greater than projected by the firm the state hires to tell them what to expect. It will take a major economic slowdown for the state not to have significantly more money than anticipated at the end of this biennium.

Given that places like Williston, Tioga, and Watford City actually are collecting less sales taxes than last year, but Dickinson is collecting more, and Fargo, as far from the oil patch as you can get, is collecting a lot more. No, more than a lot more.

Both Dickinson and Fargo are up about 17 percent from last year (for the first 6 months of 2014), and Fargo is over four times as large as Dickinson in terms of collections.

Finally, to my Grand Forks readers, I keep hearing how Grand Forks isn’t growing. I don’t know who is looking at what data to come up with that conclusion. Yes, it is slow compared to Fargo, but it is consistently ahead of last year in total, and in fact in every area. Some things like sales taxes are only up a few percent, but when we realize how our Canadian traffic, an important segment of the Grand Forks market, has slowed down because of their dollar when we look at the building, the employment, and other factors we need to be happy with Grand Forks economy. Grand Forks needs to keep two three letter words in mind: UND and UAV. While AGR is slowing down those two are increasing.

 

An interesting month in North Dakota when it comes to airline boardings. Five airports, Dickinson, Williston and Fargo, reported increases. So did Minot and Grand Forks, although just barely.

Dickinson’s although relatively small compared to the biggest five is getting there, and the increase as a percentage was huge, nearly 200 percent. Now what could that be? Oh, yes, oil. It is a good thing that the oil boom is over or there would have been several airplane collisions at the Dickinson airport. Again, the oil industry has entered a new maturing phase. First, they are only drilling holes which have nearly a 100 percent success rate, as fast as the fracking crews and the final set up crews can get to them. To have several hundred non producing wells sitting there waiting for completion makes no sense.

The Dickinson boarding data needs to be read with the North Dakota Department of Mineral Resource report, which is posted on this site when that department releases their data. See the date on that post. That is usually the time of month you can expect the report.

Williston, although only increasing just over 25 percent is also attributable to the oil business, and 25 percent is enough of an increase to make even JFK exuberant. Less than 10 years ago both airports (Dickinson and Williston) had about the same traffic. Williston of course is the more (the state’s most) important oil city. Minot’s slight increase probably can also be attributable to oil.

Grand Forks slight increase is what you would hope for in the part of the state that is slowing down. In fact, my bet if you did a real study the increase came about because of the university especially the Colleges of Engineering and Aero Space, and the unmanned aerial vehicle personnel located both at UND and at the air base.

The interesting data, the one I would look at in more depth if I was serious about knowing my competition is Fargo. The increase is nearly 14 percent. There is nothing here like oil, or government, or any thing that I am aware of other than just a continuing reflection of how fast Fargo is growing. How come? How come it is growing, and especially why is it growing at the speed it is continually, not in fit and starts?

As I have said before, Fargo and Sioux Falls are the Twin Cities furthest out and “newest” suburbs. It is a chicken and egg situation, but they have airplanes coming in from more places and that makes them grow, but they grow because those air planes come from more places.
While they are still small towns by America’s standards they are true urban areas and are regarded as places for corporations to consider for establishing at least part of their businesses. This is the first time that has happened in either state.

 

Not a lot to write about the border crossing data for May except HOORAY. This is the first time in quite some time that the numbers of people crossing the border, especially at the larger ports, show a positive increase. It is not much, but it is an increase. This is especially good news when you compare the exchange rate of the Canadian and U.S. dollar. In this past month the Canadian dollar has strengthened, but only by a fraction of a cent. You would have to look awfully hard to find any Canadian who decided to cross the border in May because it wasn’t going to cost as much as in May.

Finally, I would point out the passengers and even the number of both commercial and private aircraft in comparison to last year. Some of this may be individuals coming to the United States from Canada, but I think most of this is an indication of both the oil boom and also the UAS business in Grand Forks. While not large, it is a lot more than a decade ago, even more than five years ago.

In sum, these are good statistics for the economy of North Dakota. We can hope that is the beginning of a trend that will make up some of the retail weakness in the retail economy. North Dakota needs to say-Welcome Canadians-and we need to mean it.

 

Second verse same as the verse. A little…. You remember the song, and I don’t mean to be repetitive in my comments, but I just have to say this. Although it is not a great amount the legislative forecast at the end of April is off by even more than it was last month.

In total the amount received at the end of April is nearly 9% more than forecast. Last month that figure was 7.1%. The error is nearly 30% more than last month.

You might also remember that OMB said that a lot of the problem would be solved when income tax payers, especially the corporate, sent their final tax reports in and corrected for over payments they had made. Last month the corporate income tax collections were about 42% larger than the projections. This month that figure is about 39%. That is not much. The difference for the individual income taxes is less than 2%.

In sum, individual tax collections are nearly 36% larger than projected collections, and corporate nearly 39% larger. That is a lot.

The only account that is even close is sales tax collections. That is a peculiar account to be close given North Dakota’s still booming economy, and then to miss the income taxes by so much.

Remember, both income taxes were changed and state sales taxes remained the same. Seems to me Economy.com didn’t know how to adjust for changes to the income tax, both corporate and individual.

Finally, I will note again, and hope those in charge of preparing and voting on the next bienniums budget, keep in mind these continuing errors. If not, when the economy, even the growth in the economy, slows down we will find the North Dakota budget in deficit. With the total receipts being only about 9% greater than the projections income would be about $5 million dollars short if the two income tax accounts had been correct just to this point in the biennium, or $12 million at the end of the biennium if the North Dakota economy stays like this. We easily could handle that, but if it continues through the time that will amount to a significant amount-something unnecessary.

 

Well, last month I reversed myself from the month before for Grand Forks. To put it simply, if I was going to make a statement for this month I would hope none of you would go back and look at what I said then and then I would reverse myself again.

Or as the economist say, I wish I had that third hand. Since I don’t let me see if I can add some value to these May data. Basically, it is this, the economy in Grand Forks is in flux. Oh, I know, they talk about this sector and that sector, but in the end it comes to this: yes, there is some growth because of the oil patch. In fact, there may be a few engineering, architectural, and construction firms still benefiting from the oil economy, but the go-go days are over. Today, it is just some good steady work for some good steady companies.

So, too in the retail area-for the major ones anyway. For the 80 percent of the Canadians who are still coming here they head to the big boxes and their favorite haunts as far as motels and restaurants and lounges, especially now that UND hockey is over for a few months.

For the rest, well maybe the UAVs will start to bring some big money across the economy, but as of now it is simply the motels and restaurants where those specialist stay when they come to Grand Forks. It is not a big contributor to the Grand Forks economy yet.

UND is still a good steady base, but not growing. So, to is our real base-agriculture and even that has changed. The potato industry is not nearly the size that it was from the 1950s through the 1990s. Sugar beets are big, but also not growing. Corn is the new crop but it doesn’t take the kind of personnel those earlier crops did. Farming has changed, so too is Grand Forks.

As for those other cities, again we need to remember that much of the difference in totals can be because of the amount of the city sales tax. Some are one per cent, some are two. I am not listing that here, but unless there has been a change in the amount of a cities tax from last year the percentage change among the towns tell us something.