Rebecca Tonn
Rebecca Tonn

Northstar Bank Colorado hosted an economic forecast luncheon recently at Cheyenne Mountain Resort. Northstar President Mark White greeted the group, explaining that the recent merger of The Bank at Broadmoor and Colorado Community Bank makes Northstar the 11th-largest, Colorado-chartered bank with 20 locations on the Front Range and eastern Colorado.

“[The merger] allows us to have a higher lending limit and gives us the ability to offer more products and services and accounts receivable inventory financing,” White said.

Featured speaker for the occasion was economist Fred Crowley, who holds a doctorate in quantitative methods in urban and regional planning, urban economics and corporate financial theory. He’s also a senior instructor at the UCCS College of Business.

In April 2009, Crowley said that, based on data, we were out of the recession. “I got phone calls. People were challenging my ancestry and my intellectual capacity,” he said.

When all was said and done, however, the National Bureau of Economic Research announced in December 2009 that the recession had ended in June of that year.

My advice: Don’t mess with Crowley — he gathers the data, analyzes it, believes what the numbers tell him and is uncannily accurate.

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With his usual no-nonsense style, tempered with humor and sarcasm, Crowley delivered the facts unflinchingly to guests at the luncheon. Here’s a summary of the highlights:

Index on the rise

Locally in El Paso County, the Business Condition Index (which Crowley created in 2001) shows that after a low of 87.1 in February 2009, the index had rebounded, up 34.1 percent as of May, to 116.79.

Much of that can be attributed to recent construction and home buying.

“Housing did a phenomenal job of moving us forward, primarily because the 10-year Treasury rate is tied closely to mortgage rates,” he explained. “The Federal Reserve made a conscious decision to drive down the mortgage rate.”

The Federal Reserve lowered the Treasury rate about 16 months ago, from 2.4 to 1.5 percent, and correspondingly, the 30-year mortgage rate dropped to 3.25 percent in the spring, although it has increased to about 4.1 percent recently. During the summer, the mortgage rate hit 4.5 percent, “but the Feds came back and said no, we’re really into this quantitative easing. That’s what the Feds do best: change the money supply,” he said.

With interest rates being driven down, it really helped people make purchase decisions, and pent-up demand helped first-time home buyers, he said.

Over 97 percent of the time, mortgage rates have been higher than they are now.

“People say it could be lower, but, no, it can’t — it’s only going to get higher,” Crowley said. The historical average of the housing affordability index is 122. “Now it’s 160 — incredible — and people are still complaining.”

If only people would remember that in the early ’80s in California, mortgage rates hit 25 percent. “It really killed the system.”

Crowley’s best advice this year: “Do not do an adjustable loan. Period. The rates are going to go up.” In other words, lock in a 30-year, fixed-rate mortgage, fast, while rates are in your favor.

Other outlooks

Not surprisingly, the health care industry is doing quite well in the region, due to population demographics changing — Baby Boomers aging and population growth.

In health care, jobs have a 10-15 percent higher multiplier than the average industry in town, Crowley said, with each job creating about another 1.2 jobs. (Other jobs create only slightly less than one other job.) Health care also pays 10 percent more than the average wage in the county.

Although new car sales have been up, with 25,000 new vehicles sold this year in El Paso County (by way of comparison, sales were down to the 15,000-16,000 range during the recession), 90 percent of that transaction leaves the community, since automobiles aren’t manufactured here.

Manufacturing jobs are a huge multiplier for any community. Think of all the things that go into an auto — plastic, glass, rubber, but “I personally haven’t been able to buy a car made in El Paso County,” Crowley said.

According to the Herfindahl-Hirschman Index, the region had a much more diverse employment base, until 55 percent of the manufacturing base moved away since the early 2000s.

(Nationally, only 31 percent of that base was lost during the same time period.)

“We’ve become a one-horse town, with our military presence,” Crowley said, echoing a message that he has been giving to other local audiences as part of his regional outlook.

Looking ahead

As for 2014, Crowley thinks the area’s gross domestic product will grow between 2.5 and 4 percent — the higher number only if the region is able to attract some significant employers.

“We might be really strong next year — but I wouldn’t count on it,” he said with characteristic Crowley candor.

Moving to the topic of infrastructure, cars are becoming more fuel efficient. Over the next decade, automobile manufacturers must comply with ever-increasing CAFE, or corporate average fuel economy, mandates.

New cars and light trucks average 22 miles per gallon, but that will change as regulations kick in, he said.

By 2015, they must average in the low 30s and by 2020-2025 must achieve 54 miles per gallon.

Although fuel efficiency is wonderful from an environmental point of view, it will sharply reduce the revenue collected from gasoline taxes. Much of that revenue goes to repair roads.

In El Paso County, there are $7 billion (not a misprint, folks) in roads that need repair but have no funding source, he said, and yet state and local taxes have not increased in 10 years to pay for those repairs.

Eventually, the federal government will require the installation of microchips in cars to track mileage, so that drivers are assessed a road usage tax, at least at a federal level.

“The federal government doesn’t need anyone’s vote of approval to change tax structure,” he said, but in the state and locally, tax increases have been limited by TABOR, the Taxpayer’s Bill of Rights, for two decades.

Crowley’s solution to take back the local economy:

“Take a good hard look at items we import into the area. Why can’t we make them here and export them to other areas instead of importing them? It would stop the outflow of money from the community and create local jobs and the wealth associated with those jobs.

“Why don’t we make those taco shells [or anything viable; he was just giving an example] here instead of importing them from Denver or Pueblo? We need an input/output analysis for the region, to determine what we could be exporting.”