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Perryman offers economic outlook

Authors: 
By Corey Paul cpaul@oaoa.com

Posted: Thursday, March 9, 2017 9:11 pm

In terms of the drop of oil prices and the rig count, the recent bust mirrored the one that devastated Odessa in the 1980s.

But the fallout this time was not as bad in terms of job losses and other measures, showing the progress the city made in recent decades, Economist Ray Perryman told a group of city leaders and other government officials Thursday.

The economist estimated about 7,000 jobs lost in the Odessa area since the peak employment of 2014. But the jobs lost this time amounted to about 20 percent of the losses during the doldrums of the 1980s, Perryman found.

“It says No. 1 that the industry changed, but also we’ve changed,” Perryman said.

“The economy has become a lot more diverse than it was.”

Despite that progress, the economist says there is more the city needs to do to blunt the effects of booms and busts. Perryman presented his city-commissioned study about industries the city should target and other ways local leaders can develop the oil-driven economy.

The ODC commissioned the 110-page study about six months ago, awarding the economist about $150,000 to update a similar project from the early 1990s.

Perryman’s job loss estimates are lower than some other economists, and such figures are notoriously difficult to peg amid the population swings that accompany Odessa’s boom and bust economy.

But the assertion that this bust was less severe is widely supported.

Still, Odessa is on an upswing from what Perryman described as “a humdinger of a downturn.” Energy remains the defining aspect of the local economy. And that likely will continue for decades to come, Perryman said.

His recommendations ranged from specific industries city leaders should try to draw like wind energy companies to addressing “critical” local needs like a better public education system.

ODC President Jimmy Breaux, appointed to the role Thursday, said “we’re going to look at the areas that Ray told us that he thought we might be a little more efficient in and see what we can do to help those areas.” One suggestion was using economic development money to improve the public school system.

Among Perryman’s findings:

Governmental officials should focus on drawing more diverse industries to the area to blunt the effects of oil price swings.

Fast growing fields that Odessa economic development officials target should include wind energy technicians, competing against areas like Lubbock, and “environmental side” work related to fossil fuels. Perryman said the latter is “not going to be popular” but that Odessa has an ideal workforce for the growing industry.

“We are going to have to produce energy cleaner in the future than we have in the past, and that’s just a fact,” Perryman said. “And we should. And the same skills are required for that and importantly the same knowledge base. The people who know how to do this stuff are the ones who can figure out how to do it better. One of the biggest assets this area has in addition to its oil and gas reserves is the intellectual knowledge and capacity just in this region about oil and gas.”

But local officials should continue to target more industries that support the oilfield such as companies supplying goods like sand. Other industries that local officials should target include more renewable energy manufacturing and support, health care delivery, distribution and warehousing, machinery manufacturing, chemical manufacturing, aircraft maintenance and parts, data processing, metal fabrication and transportation support services.

The Ector County Independent School District needs to improve public education, something Perryman described as “critical” at a time when even oilfield jobs increasingly require higher levels of education. The city should find ways to use economic development funds to help.

Regional alliances are an important tool for solving problems like water scarcity.

City leaders should use caution in considering revenue caps or avoiding new taxes so they make sure there is enough funding for surges in infrastructure demands that accompany a boom.

The city needs more entertainment options, but Perryman said there has been progress in recent years, pointing to venues like the Wagner Noel and the city’s ongoing effort to redevelop downtown Odessa.

City leaders should also consider asking voters to approve changing the eligible uses of economic development sales tax by switching it from category 4A to 4B structure so it can be spent on more quality of life improvements.

“You can’t give a company enough incentives to come to a place they don’t want to be, where people don’t want to work,” Perryman said.

Government officials should seek more partnerships with energy companies on community projects, including educational programs, and advertise positive results.

Government officials should promote diversity in community efforts.

Government officials should seek more state and federal assistance with more aggressive lobbying. And they should promote the city more with advertising.

There is promise in the City of Odessa’s efforts to build business ties with Mexico, with a goal of promoting transportation and distribution of goods through Odessa.

But Perryman said the execution needs to improve and called for a “more focused and strategic approach” than in recent years. And Perryman urged caution amid talk of stricter trade policies from the White House, saying “we’ve got to let the politics settle out before we can know where we can go with this.”

The city calls the effort the Mexico Initiative, and Perryman listed it as a “strength” that could lead to economic growth.

“It’s going to come to a point where you are going to have to engage people in Mexico who know how to put together deals in Mexico,” Perryman said. “That’s just how it works.”

Odessa’s population will expand by about 57,700 people by 2040 and bring the number of residents to more than 215,000, per the economist’s projection. Perryman forecast employment to grow by about 1.7 percent yearly through 2040, resulting in more than 37,400 net new jobs. Meanwhile, Perryman expects real personal income and real retail sales to increase by about 3.81 percent and 4.13 percent per year, respectively, which “will support modest increases in overall living standards.”

Future busts should not last decades.

“We can no longer have a 25 year downturn, because the world is going to need the energy,” Perryman said, pointing to demand growth in emerging markets and developments like increased exports of liquefied natural gas.

The early 1990s, when Perryman did his initial study for the city, were marked by falling production, a weak market and talk of Peak Oil.

“It an entirely different world than it was then,” Perryman said. “And for us it’s a very good world.”

IN OTHER BUSINESS, THE ODC:

  • Approved incentive grants to three downtown businesses: A $20,000 façade grant and a $22,300 infrastructure grant to Eric Prado, who owns Rooster’s Rolling Diner at 615 N. Sam Houston Ave.; A $30,000 façade grant and a $38,104 infrastructure grant to attorney Rahul Malhotra for his law office at 319 N. Grant Ave.; and a $30,000 façade grant to Kristin Noland of Our Little Texans Learning Center at 411 W. Eighth St.
  • Approved a $147,134.20 incentive payment to the West Texas Food Bank for meeting targets in 2016 under an agreement two years prior to help fund the nonprofit’s move to a new facility on Pagewood Avenue.
  • Approved committee assignments for ODC board members.
  • Approved contract monitoring timelines meant to assure timely audits and payments of incentives.
  • Approved withdrawing a settlement agreement for the year 2013 with Family Dollar Distributors.
  • Reviewed financial and investment reports.
  • Approved the UTPB Second Training Facilities Grant.
  • Tabled appointments to the Budget, Finance and Audit Committee.
  • Approved minutes from the Feb. 9 meeting.
  • Approved revisions to the ODC Development Finance Program Administrative Policy.
  • Reviewed reports from contracting agencies.
  •