Is Loudoun recession-proof?
By Lynn Wolstenholme
A looming recession is actually good for the Washington, D.C., region, some regional economic leaders and an area analyst say -- but there are caveats.
“The region is somewhat recession-proof because of the [federal] government,” said Loudoun County Chamber of Commerce President Tony Howard. “Regardless of the economy nationally, the federal government never cuts back on spending.”
Howard said the economy is not booming, but the area is starting to see a rise in housing sales and prices. He also pointed out, though, that short sales and foreclosures are factored into the statistics, and may be partly responsible for the upward movement in the housing market. Short sales are when the lender allows a property to be sold for less than the amount owed on a mortgage and takes a loss.
Dorri O'Brien Morin, manager for strategic initiatives and communications at Loudoun County Department of Economic Development, agreed with Howard but did not go so far as to say the county is “recession-proof.”
“I would say we are insulated,” Morin said. “There are pockets of people who will feel [the downturn in the economy].”
Morin explained that during a booming economy, when many regions have jobs, people may bypass the Washington, D.C., area because housing prices are so high and they can't afford to live here -- even though jobs are available.
Now, even though housing prices have gone down, jobs are still available and the region is in a better position for new employees.
“We couldn't get the workers we needed [because of high housing prices],” Morin said. “But with the federal government and the defense contractor sector, jobs are here.”
Stephen Fuller, director at the Center for Regional Analysis at George Mason University, said there is potential that the region will see an influx of employees for businesses to choose from during a national economic downturn, but he added he is cautious of what he said could be an overly favorable spin on this philosophy.
“A recession for the nation will create a larger labor pool available,” Fuller said. “But people do not move unless there are jobs.”
“The critical assumption is that we will have the jobs and [other areas] won't,” he added.
“We are in extenuating circumstances where people [from other areas] can't move if they own a house and can't sell it. They are locked into a geography because of the slowdown in housing.”
While in the past, a falling economy has helped the region with job seekers, it has not always been the case.
“There is a potential benefit here,” Fuller added. “It certainly happened in 2002/2003, it happened that way. We added 60,000 to 70,000 new jobs.”
Now, Fuller said, the area is adding only 25,000 jobs, and historically speaking, the region can't just assume what happened a few years ago will happen again.
“[A recession] didn't help us one bit in 1991/1992 when we lost 53,000,” Fuller pointed out.
Loudoun County Administrator Kirby Bowers, echoed Fuller's reference to the early '90s, saying, “In '92, we lost 25 percent of our tax base in just a couple of years because there was no brick and mortar.”
With the insufficient commercial spaces, Bowers said, Loudoun was hurt more than most jurisdictions in the area.
“We have progressed significantly since then,” he added. “And that softens the blow.”
One thing is certain, Fuller said: “Our economy is slowing. We are at about half the [job growth] rate we were two years ago.”
With perspective from both the business and economic development side, John Wood, chief executive officer of Ashburn-based Telos and vice chairman of Loudoun's CEO Cabinet, agreed that a recession would attract workers to the area.
But he did add that for the economy as a whole, the county needs to take a deeper look at what its economic development should be in the future.
“As a region, overall we will fare OK because of our location to the [federal] government,” Wood said. “But there are going to be verticals [or ups and downs] in the region. There are a great deal of financial industries that are hurting, and then the homeowners.”
He added, “Now is the time to invest in economic development.” He said the Board of Supervisors is moving in that direction with its recent approval of $340,000 for the county's Economic Development Department.
According to Wood, what is holding the county back from finding other revenue sources is the Dillon Rule -- which in Virginia mandates local municipalities get permission from the state government before setting or changing any laws or legislation.
“The Dillon Rule ties the supervisors' hands behind their backs” in terms of looking for other revenue sources for the county, he said.
“At the end of the day, things are fine,” Wood said. “But 70 percent [of county revenue] comes from real property tax, and everyone hurts there.”
Wood, as chairman of the CEO Cabinet, said he would like to see the county use the Chamber of Commerce as a strategic weapon to lobby local legislators to go to Richmond.
“I would like for them to come up with a formula to give financial credit to [this area],” Wood said. “If they say no, then we should ask Richmond to give local supervisors taxing authority.”
Contact the reporter at lwolstenholme@timespapers.com