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Local economy looking up
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Local economy looking up
Saturday, January 4, 2003
by GORDON HOEKSTRA Citizen staff
For the first time in years, Prince George's economy is showing signs of a modest turnaround.
You have to peel the layers off the figures to see it because at first glance it doesn't look too good.
Unemployment was up in the city in 2002, housing starts remain far below their peak level in the mid '90s, the value of building permits is at its lowest in more than a decade and the city has lost population, according to the latest census by Statistics Canada.
Then there's the fact the city's No. 1 economic driver -- the forest industry -- remains under assault by the softwood lumber trade dispute with the U.S., already in its 21st month. Prince George, often dubbed B.C.'s northern capital, has also been hit by the B.C. Liberal government's cuts to the civil service. At least 150 jobs have been lost, and more cuts are expected.
But for the first time since an economic slide began in 1997, there are positive signals.
While housing starts are down from their 1996 peak of 441 in the past decade, they increased a little this year from last. And for the first time in seven years, the average price of a single-detached home stopped its slide, increasing slightly.
A close look at the value of building permits in Prince George also shows that they can be dependent on government spending. If you take out the huge dollars spent on UNBC, the John Hart Bridge or the Prince George Regional Hospital upgrade, a much different picture is revealed. It makes 2001 a worse year than 2002, which again shows a modest turnaround. This is particularly evident in privately-financed commercial construction, which is up significantly this year over the past four years. In fact, at $20.6 million, it has provided the bulk of the $38.2 million in construction spending as of November this year, and is one of the three highest levels achieved in more than a decade.
There were also some key breakthroughs in 2002.
The much-anticipated opening of Wal-Mart took place this fall. It's the first anchor store in the planned $60-million Westgate shopping centre on Highway 16 West near College Heights. The new store employs more than 200 people, and is expected to be a regional draw.
Another big-box player in the regional shopping centre, Home Depot, is expected to open this year.
And after the much-publicized failure to attract the Boston-based call centre, Stream, the previous year, the city nailed down another call centre.
Oregon-based LiveBridge started work at its downtown location in October. It kicked off its operations with 120 employees and plans eventually to run two full shifts with 350 workers. Employees are currently doing telemarketing, or outbound calls, for a major U.S. bank. But after a couple of years, the company could switch to an inbound call centre, which would create hundreds more jobs. A key aspect of the call centre's benefit is the jobs are not tied to the forest industry.
The U.S. company has said the high-quality labour pool was one of the reasons they selected Prince George.
The city was aggressive in its efforts to secure the call centre. When the deal looked like it might fall apart last summer because a lease could not be worked out with the downtown building owners, the city bought the building itself. Initiatives Prince George, the city's economic development agency, is leasing the $1.7-million building to LiveBridge and also financed another $900,000 in renovations and equipment.
The city's economic development agency also spearheaded a bold move to buy and refurbish the CN building on First Avenue to turn it into a tourism centre.
Prince George Mayor Colin Kinsley, who won a third term this fall, said he realizes you can't ignore cuts to the province's public service or the fact that the continuing softwood lumber trade dispute with the United States creates uncertainty in people's personal lives.
But Kinsley stressed if the focus is on the negatives, potential solutions get ignored.
He said eco-tourism is another possible economic addition to the city's economy, and if oil and gas exploration takes off in the region and mining activity increases, Prince George will benefit as a service centre.
The B.C. government is on a significant push to resurrect the mining sector, which withered away in the 1990s, and kick start oil and gas exploration in areas outside the Peace River region in northeast B.C. As well as reducing personal and corporate taxes, the Liberals continue to streamline regulations and have begun instituting a two-zone land designation model that helps provide certainty for mining companies. Early indications are that confidence in the sector is increasing, as mineral exploration in the region increased 50 per cent in 2002 over the previous year.
Kinsley said there's also a need for the city to continually look at how it can market itself.
The mayor said he thinks the city should consider a change from calling Prince George B.C.'s northern capital to the "Heart of British Columbia."
The city should also not underestimate the work it's done in hosting six national sports championships, including curling's Scott Tournament of Hearts and the senior men's national baseball championships, largely as a result of volunteer efforts, added Kinsley.
"When I talk to people beyond our borders, I say, 'Well, look at what we have.' We have the great outdoors right here. We're the junction of two rivers, two highways, and two railways, we have great air service, and the most affordable housing anywhere. And I don't think there's a community anywhere our size that has the amenities we have. A civic centre, an aquatic centre, an art gallery and the parks. I mean the quality of life here is extremely attractive," says Kinsley. "We've got some real movers and shakers in this region, and things are going to come around great. I'm convinced of it."
There are businessman in the community who are also looking to the future with a view that the glass if half full, not half empty.
As a supplier of parts and equipment to sawmills in northern B.C., P.G. Mill Supplies co-owner Bruce Sutherland knows the impacts of the softwood lumber dispute with the U.S. firsthand.
Everywhere lumber companies are tightening their belts.
But the mills are also looking at how to get more efficient, particularly with projects that have a quick payback.
And that has meant more business for P.G. Mill Supplies, which is selling a new lumber grading machine in B.C. that is manufactured in Quebec.
The laser-and-computer driven lumber grader has been a hot commodity as it can save sawmills time, slash costs, reduce waste and better determine the best value of lumber.
P.G. Mill Supplies is also a beneficiary of the northern B.C. lumber companies' strategy of running flat out and even adding third shifts to reduce costs and offset the pain of U.S. lumber tariffs totalling 27 per cent. The American lumber coalition that launched the trade complaint, which resulted in the tariffs, expected Canadian producers would have to shut down.
"Our margins are lower because it's more competitive, but hell, you still got a smile on your face," said Sutherland. "All our people are working. That's the first gauge."
And the tighter economic times have also prompted P.G. Mill Supplies, which has 30 workers, to expand into new markets. It's now selling products into the U.S. and has just nabbed a New Zealand customer. Recently, Sutherland hosted three potential clients from Australia in Prince George. Not only did they love the Cougars' hockey game -- a first for the Aussies -- but they're thinking about buying some equipment, said Sutherland.
"The world is out there. You just have to go out after it," he said. "If you don't get creative and find different ways of doing what you're doing already, and find a way to cut costs and pass it on, you won't be here in six months."
There are also others in the forest sector that are bullish on the economic opportunities in Prince George.
In the midst of the softwood lumber trade dispute, Brink Forest Products is planning on opening a new lumber remanufacturing plant by April and also is looking at developing and launching a furniture manufacturing pilot project.
It's a significant development as the value-added sector has long been touted as a necessary, additional economic engine in the city, as it creates many more jobs per tree than lumber and pulp manufacturing.
Company owner John Brink has almost completed the shell of a building for the new finger-jointing lumber plant on River Road, across from his existing plant. Finger jointed lumber is created by cutting low-grade lumber and trim ends and then gluing them together under high pressure. The new plant could create as many as 60 jobs.
As remanufactured lumber is still susceptible to the punishing 27 per cent U.S. tariffs, the trade dispute is a problem, but Brink is banking that some kind of negotiated deal can be worked out in the first three months of this year.
And regardless of whether a deal is worked out, Brink said his company plans on being aggressive. "You have to work harder, and you have to work smarter," he said. "We all became somewhat complacent during the '70s and the '80s. That has all changed now. It's back to the way it used to be in the '50s and '60s, where you have to individually, or as a small business, think entrepreneurial."
Brink is also a big proponent of forest policy changes planned by the B.C. government meant to increase the flow of wood between primary and secondary manufacturers. Those changes are expected to be introduced this spring.
"I think we are in an immensely opportune time in terms of getting your foot in the door. A lot of assets are highly undervalued. I think it's a real good time to take a step," said Brink. "I think things will change in the next year or two. And again, the forest industry, being the primary driver in the economy, will play a large role."
Still for the time being, it's the primary forest products manufacturing sector -- lumber and pulp -- that drives the economy in Prince George. There are three pulp mills and a dozen sawmills and lumber remanufacturing plants in the city, employing more than 4,000 people. There are thousands more loggers, truckers, mechanics and equipment suppliers that rely on those plants.
And while most sawmills in northern B.C. have continued to run despite the 27 per cent countervailing and anti-dumping duties into their main market, it's only a question of time before shutdowns become a reality, particularly if lumber prices remain at two-year lows.
College of New Caledonia economist Al Idiens says the key for the Prince George economy is finding other sectors other than the forest industry to fuel job growth.
"The good news is, the city is not going to go the way of Barkerville (a gold mining ghost town from the 1800s). But I think from what I can see, we have to hang in there for a few years," said Idiens, who examined the statistics complied by The Citizen. "We need other areas of rising employment, and we really haven't got them yet."
Idiens said areas like mining, oil and gas, value-added wood production and the high-tech sector have potential in Prince George, but they also have their own inherent problems.
For example, in the high-tech sector, companies tend to be attracted to high-tech centres that area already underway, in B.C.'s case, the Lower Mainland.
One of those bucking the trend in the high-tech sector in Prince George is Miller Software. Daniel Miller, a UNBC computer science graduate, formed the company with other local university graduates with a start in providing support to forest companies like Canfor Corp.
The company has branched out, licencing some of the products it has created, and now has satellite offices in Calgary and Victoria.
Miller, who plans on keeping the head office in Prince George, hopes to expand his business into other areas including oil and gas, health care and training and education.
Despite the company's success and its plans to branch out in other areas, Miller says that in order for them to survive in Prince George, the forest sector must be strong.
"It's a nice thing to talk about developing high-tech as an alternative industry to primary wood products manufacturing, but I don't know if it's realistic," he said. "Those are our customers. If those sectors don't stay healthy, we don't have any customers. Then how do we stay in Prince George? How do we make a living?"
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