Southwest Business ForumJanuary 9, 2009

Fort Lewis College’s 17th Annual Focus on Our Future:

Business and EconomicsSponsored by Wells Fargo

Investment AdviceIf you had purchased $1,000 of AIG stock one year ago, you would have $42 left.

With Lehman, you would have $0.60 left.

With Fannie or Freddie, you would have less than $5 left.

But if you had purchased $1,000 worth of beer one year ago, drank all of the beer, then turned in the cans for the aluminum recycling REFUND, you would have had $214.

Based on the above, the best current investment advice is to drink heavily and recycle.

It is always nice to know some investments still hold their value over time.

Wall Street Sympathy Back in the 1929 Financial Crash it was said that some Wall Street

Stockbrokers and Bankers JUMPED from their office windows and committed suicide when confronted with the news of their firms and clients financial ruin . . .

Many people were said to feel sorry for them . . .   

In 2008 the attitude has changed somewhat:

Beeeeep….

The Region 9 Economy

Region 9 Labor Force

Source: U.S. Census Bureau

Region 9 Labor Force Growth Rates

Source: U.S. Census Bureau

Region 9 Per Capita Income

Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System. Most recent data available.

Region 9 Per Capita Income: Percentage of Colorado

Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System. Most recent data available.

Region 9 Growth Per Capita Income

Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System. Most recent data available.

Region 9 Unemployment Rate

Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System. Most recent data available.

The La Plata County Economy

Tourism

Tourism Includes:1. Airport Passengers2. Train Ridership3. Mesa Verde Visitors4. Lodger’s Tax Collected 5. Skier Boarder Visits

Airport Passenger Activity (enplanements)Percent Change By Year (1995-2008)

Source: Durango - La Plata County Airport

2%5% 4%

-11%-8%

1%

12%

-13%

8%6%

12%

2%

18%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008Pe

rcen

t Cha

nge

Year

Train Passenger Activity Percent Change By Year (2001-2008e)

Source: Durango & Silverton Narrow Gauge Railroad

e = estimate

-32.8

24.7

3.3

-1.2

0.5

-0.5-12.1

-40

-30

-20

-10

0

10

20

30

2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Perc

ent C

hang

e

Year

Mesa Verde Visitors Percent Change By Year (1995-2008e)

Source: National Park Service Public Use Statistics Office

e = estimate

-6.9

2.4

-3.9

5.2

-28

14

-22

9.6

2.1

10.6 11.8

-2.9

1

-35-30-25-20-15-10-505

101520

1995-1996 1997-1998 1999-2000 2001-2002 2003-2004 2005-2006 2007-2008

Perc

ent C

hang

e

Year

Lodger’s Tax Revenue (Durango) Percent Change By Year (2003-2008e)

Sources: City of Durango (unadjusted numbers)

e = estimate

2003-2004 2004-2005 2005-2006 2006-2007 2007-20080.0

2.0

4.0

6.0

8.0

10.0

12.0

8.4

4.8

10.7

7.0 6.7

Year

Percent Change

Skier/Boarder VisitsYear United States

(millions)Purgatory (DMR)

2000/01 57.3 322,0002001/02 54.4 251,000

2002/03 57.6 236,000

2003/04 57.1 268,000

2004/05 56.9 278,0002005/06 58.8 211,0002006/07 55.0 252,0002007/08 60.5 278,000

Sources: National Ski Association and Annual Reports

Retail Sales(Adjusted for Inflation)

An indicator of tourism activity as well as population growth.

La Plata County Retail Sales (adjusted $s)Percent Change – Semi-Annual (2003-2008)

Source: Colorado Department of Revenue

2009 Tourism and Retail Outlook

Tourism: Dependent upon discretionary spending

Retail: Reflection of national economy

Agriculture

Includes Calf Prices and Alfalfa Hay Prices – adjusted for inflation.

A better measure would be sales, but these numbers are not available.

Alfalfa Hay PricesPercent Change By Year (1995-2008e)

-1.4

15.7

-13.2-20.3

-9.2

35.9

3.3

12.4

-0.3

12.3

2.8

16.9 18.5

-30

-20

-10

0

10

20

30

40

1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

Perc

ent C

hang

e

Year

Source: U. S. Department of Agriculture - Economics, Statistics and Market Information System

e = estimate

Calf Prices, Adjusted Dollar Value per Cut WeightPercent Change By Year (1995-2008e)

-23

40.1

-5

5.712.7

-5.4 -14

12.418.3

9.8

-3.85 -9.9 -10.9-30

-20

-10

0

10

20

30

40

50

1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008Pe

rcen

t Cha

nge

Year

Source: U. S. Department of Agriculture - Economics, Statistics and Market Information System

e = estimate

2009 Agriculture Outlook

Higher volatility in commodity prices Hedge fund deleveraging Corn-based ethanol

Decreased prices in calf prices Not passing input costs to consumer Ranchers/farmers not buying calves with increased feed

costs

Industrial Kilowatt-Hours

Used as an indicator of industrial activity in the county.

Most industrial usage of electricity in the county is to compress natural gas for transmission through gas pipelines

Industrial Kilowatt HoursPercent Change By Year (1995-2008e)

9.16.6

50.9

-6.3

6.910.2

-7.3

6.5 7.0

-2.3

0.5

-2.3

2.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

Perc

ent C

hang

e

Year

Source: La Plata Electric Association Inc.

e = estimate

2008-2009 Observations for Oil & Gas

Given the current regulations in the oil & gas industry, the region is producing natural gas near full capacity

High political uncertainty

Fort Lewis College Enrollment

The college stabilizes the economy because of higher enrollment in the fall and winter months. This offsets some of the decline in tourism during this time period.

Fort Lewis College Enrollment (Fall)Percent Change By Year (1995-2008)

6.2%

2.1%

-0.4% -2.8%

1.0%

-1.6%

3.6%

-2.1%-3.8%

0.2%

-5.8%

-1.0%

0.7%

-4.80%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

Perc

ent C

hang

e

Year

Source: Fort Lewis College

2009 Fort Lewis College Outlook

Increased admission standards at FLC Comparable with UC-Boulder and CSU

Slight dip in enrollment last several years

Intermediate-term goal is 5,000 students

Increased number of applications and lower admission rate

Residential Real Estate

% Change in Median Price of Durango In-Town Single-Family Home

Average Days on Market & Number of Transactions In-Town Durango

Median Home Price of Condos/Town Homes In-Town Durango

Days on Market & Number of TransactionsCondos/Town Homes Durango In-Town

Building Permits

This indicator uses the adjusted dollar valuation of the properties for which permits were issued—thereby measuring the dollar value (as assessed) of new construction in La Plata County.

Building Permits (Construction)Percent Change By Year (2002-2008)

Sources: La Plata County Building Department, City of Durango Planning and Community Development Department

Building Permits (Construction Value)Percent Change By Year (2002-2008e)

Sources: La Plata County Building Department, City of Durango Planning and Community Development Department

e = estimate

28% 25%

-19%

-7%

-24%

-39.60%-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Perc

ent C

hang

e

Year

Durango Price-to-Rent Analysis

Durango Comparables Price-to-Rent

2009 Real Estate Outlook

Nation is absorbing the worst real estate correction since the Great Depression

National builders anticipate a bottom in early 2010 Single-family homes = healthy correction Condos/Town Homes = less healthy correction Building permits = significant decline

Bank Deposits

An important indicator of the economic health of the community.

Also an indicator of the ability of local banks to make loans to consumers and business borrowers.

Bank Deposits (Unadjusted)

Source: Federal Deposit Insurance Corporation

June 30th Deposits Year to Year % Change

2002 $615,000,0002003 $702,000,000 +14.22004 $778,000,000 +10.82005 $874,000,000 +12.32006 $1,020,000,000 +16.72007 $1,034,000,000 +1.42008 $1,097,000,000 +6.0

InflationDurango Price Index (DPI)

Monitors the change in the price of goods and services in our region

Durango Price Index Adjust Denver CPI for Durango housing and

income levels Assumes similar other expenditure patterns as

Denver consumers

Durango Price Index versus Denver CPI

Annual Inflation Rate: Durango vs. Denver

2009 Inflation Outlook

Durango housing rents will continue to increase

Volatility in commodity prices

Decreased consumer spending

Our Web Address:

http://soba.fortlewis.edu/econoweb/

Thank You!