Currently viewing the category: "Grand Forks"

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.

 

What can I say. Unbelievable! Flabbergasted! Can you believe this? Nothing in all the years I have been doing these statistics has ever approached what I present here.

I understood post flood. I even understood what was happening last year. But this, it is hard to believe. We know that the state is putting a lot of money into UND with the law school, the eating hall, and the medical school, but commercial spending for new buildings and for repairs/remodeling is down by three fourths that amount (about a $24 million decrease to a $32 million increase) and to date, only one-half the way through the year, Grand Forks is nearly 45 percent ahead of last year in building permit value. Remember, last year set a record by 50 percent compared to the next closest year.

The East Grand Forks data is not ready yet. I will present it when I can, but what I want to do is combine several of these charts I have done lately involving Grand Forks specifically in comparison to other cities in the state, and the upper northern plains where that is possible.

I mean things like this,city sales taxes, and job growth. What is causing things like this? What do people know that maybe we are not aware of.

It may be that Grand Forks is entering into an exciting economic time. Remember, economist talk about leading economic indicators. What could be a better indicators than investing in large scale capital items?

 

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.

 

For economist June will be regarded as an interesting month in North Dakota. That is because of the all the larger North Dakota cities only the hot oil patch town of Williston saw an increase in the city sales tax collections. And that increase was more than 12 percent. Even Dickinson, regarded as the next hot expansion town saw a decrease of nearly 6 percent.

The big monthly change was in Devils Lake, a decrease of more than 30 percent. To me most interesting of all was Bismarck. First of all, of the major cities it had the largest monthly decrease, and what really needs to be compared is that comparing the YTD data it is the only major city on the negative side. Considering all the federal, state, NGO, and “professional” headquarters located there that is surprising.

Also, although Dickinson had a negative change in collections for this month, for the YTD its increase is more than twice of Williston, and in fact is second only to Fargo.

Fargo’s decrease this month is substantial, and probably reflects Americas weak retail sales since Christmas. It also probably reflects the weak Canadian dollar as much as any North Dakota town except for Grand Forks, and when comparing those two it may be hurt proportionally even more than Grand Forks by the declining loonie.

As the oil industry continues to mature it will be interesting to see what will happen to the North Dakota economy. As of today it is only the strong oil market that is keeping North Dakota at the level it is. As late as the farm planting was, and as poor as those prices in that sector will have a major decline, and so to its secondary effects such as sales of farm machinery.

Retail, in my opinion will continue to see a major decline.

This will be North Dakota’s most interesting change in its economy since the beginning of the oil and agricultural boom starting nearly a decade ago.