12/07/1983 - Packet V
TIGARD BUDGET COMMITTEE MEETING AGENDA
DECEMBER 7, 1983, 7:30 P.M.
DURHAM TREATMENT PLANT
CORNER OF S.W. HALL & DURHAM ROAD
TIGARD, OREGON
7:30 1. CALL TO ORDER AND ROLL CALL
7:35 2. PROCESS AND SCHEDULE
- Chairman
7:45 3. 5-YEAR PLAN ASSUMPTIONS - Population / Manpower / Inflation
- City Administrator
8:00 4. SERVICE LEVELS (& MANPOWER ISSUES)
- Department Heads:
8:00 Police
8:30 Library
8:45 Finance
9:00 Planning & Development
144,W 9:15 Public Works
9:30 5. TAX BASE - 1984-85 ONLY OR 4 - 5 YEAR LENGTH?
- Discussion
10:00 6. ISSUES AND CONCERNS FOR 1984-85
- Discussion
10:25 7. NEXT MEETING DATE
- Chairman
10:30 8. ADJOURNMENT
o
3
BUDGET ASSUMPTIONS
POLICE 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89
BUDGETED
ADMINISTRATION
COP 1 1 1 1 1 1
CPT 1 1 1 1 1 1
PO 1 1 1 1 1 1
CSO(non sworn) 1 1 1 1
OAII(non sworn) * * * * 1 1
Sub Total 3 3 4 4 5 5
PATROL
LT. 1 1 1 1 1 1
SGT. 2 2 3 3 3 3
CPL 3 3 3 3 3 3
PO 10 14(IA/2B/1C) 14 15 16 17
Sub Total 16 20 21 22 23 24
INV.
LT. 1 1 1 1 1 1
SGT. 1
CPL 1 1 1
PO 2 4(lA/1B) 3 3 4 4
low
Sub Total 3 5 5 5 6 6
SUPPORT SERVICES
OM(non sworn) 1 1 1 1 1 1
C/D(non sworn) 6 6 6 6 6 6
OAII(non sworn) 1(c) 2 2 2 3
Sub Total 7 8 9 9 9 10
TOTAL 29 36 39 40 43 45
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BUDGET ASSUMPTIONS
'iy.,,,,IBRARY 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89
BUDGETED
ADMINISTRATION
Librarian 1 1 1 1 1 1
CIRCULATION
Manager * * 1 1 1 1
OAIII 1 1 1 1 1
OAII/I 1 .5(A) .5 1
LB Aide (P/T) 1 (2) 1.5 (B) 1.5 2 1.5 1.5
Sub Total 2 3 3.5 4 4 4.5
REFERENCE
Asst. Librarian 1* 1* 1 1 1 1
Assoc. Librarian .5 1 1
Aide/OAI .5 1
Sub Total 1 1 1 1.5 2.5 3
CHILDREN'S
Assoc. Librarian 1 1 1 1 1 1
Aide/OAI .5 .5 1
Sub Total 1 1 1 1.5 2.5 3
TECHNICAL SERVICES
LB Assistant 1 1 1 1 1 1
OAII 1 1 1 1
Aide/OAI .5(A) .5 .5
Sub Total 1 1.5 2 2 2.6 2.5
TOTAL 6 7.5 8.5 10 11.5 13
Total Circulation 135,000 148,500 185,625 222,750 249,480 274,428
Staff: Circulation 22,500 19,800 21,838 22,275 21,694 21,110
Total Population 18,500 19,000 20,000 22,000 26,000 30,000
Staff: Population 3,083 2,533 2,353 2,200 2,260 2,308
* Assuming Civic Center/Library Approval . . . 9,000 sq. ft. Library
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BUDGET ASSUMPTIONS
FINANCE & 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89
SERVICES/ BUDGETED
MUN. COURT
FINANCE
Finance Director 1 1tJ4`f' 1 1 1 1
Asst. Fin. Dir. 1 1 1 1 1 1
OAII I 1
DES 1(A) 1 1 1 1
Sub Total 3 4 4 4 4 4
ACCOUNTING
Accounts Mgr. 1 1 P) 1 1 1 1
Accountant 1 1 1
Acct. Clerk 2 2?.S, t"" 2 2 2 2
OAIJS/Cashier 1 1
Part Time .5 .5 .5 .5 1 1
Sub Total 4.5 4.5 4.5 5.5 6 6
SUPPORT SERVICES
Office Manager 1 I �"' 1 1 1 1
WP Manager 1 1 1 1
OAII I 2 1 r'" 1 1 1 1
OAII .5(B) 1 1 2 2
OAII/III .5(B) 1 1 1 1
OAI/I IJ 1 1✓
Part Time .5 .5 1 1 1 1
Records Mgr. 1 1 1 1
Sub Total 4.5 g- 5 8 8 9 9
TOTAL 12 l 16.5 16.5 18 18
BUDGET ASSUMPTIONS
+ „UBLIC WORKS 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89
BUDGETED
ADMINISTRATION
PW Director 1 1 1
OAIII 1 1 1
Sub Total 2 2 2
WASTEWATER
Superintendent .25 .25 .25
Crew Chief 1 1 1
UWII 1 1 1
UWI 1 1 1
MW 2 2 2
Part Time 1.5(A) 1.5
Sub Total 5.25 6.75 6. 75
STREETS
Superintendent .25 .25 .25 .25
Crew Chief 1 1 1 1
UWIII 1 2
UWII 3 3 3 2
UW I 2 1 1
MW 0 0 0 0
Part Time 0 .75(B) 75 . 75
Sub Total 4.25 7 7 7
PARKS
Superintendent .25 .25 .25
Crew Chief 0 0 1 1
UWII 0 1 1 1 1 1
UWI 1 2(A) 2 2 1 1
Part Time 2 1(C) 1 1 1 1
Green Thumb 0 0 0 0 0
Sub Total 2.,7-5 4.25 4 4 4 4.25
SHOPS & SUPPORT
Superintendent .25 .25 .25
Crew Chief 1 1 1
UWIII(Mech. ) 0 1 1
UWII(ASW) 1 1 1
UWII 1 0 0
Green Thumb/PT .5 .5 .5 .5 .5 .5
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Sub Total 3.75 3.75 " `� 3. 75
BUDGET ASSUMPTIONS
UBLIC WORKS 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89
BUDGETED
ENGINEERING
Div. Supt. 1 1 1
E.I.T. 0 (1)(A) (1)
Crew Chief 2 2 2
Tech.II 0 (1)(B) (1)
Tech. I 3 4(C) 4
Aide 1 3(C) 3(2)
(x) LID Load 7 12(4) 12(4)
Dependant ,
TOTAL 25.5 35. 75 -1+-.-51- �: 35.75
Div. Head - 28,584
Engineer -
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BUDGET ASSUMPTIONS
2LANNING & 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89
DEVELOPMENT BUDGETED
ADMINISTRATION
Director 1 1 1 1 1 1
OAII 1 1 1 1 1 1
Sub Total 2 2 2 2 2 2
BUILDING & CODES
ENFORCEMENT
Bldg. Official 1 1 1 1 1 1
Insp. III (A) 1 1 1.5 1 1 1
Insp.II (B) 1 1 1
Insp.I (C) 1(A) 1 1 1 1
Codes Enf. Off.
OAI (1) 1 1 1 1 1
Part Time .25
Sub Total 2.25 4 4.5 5 5 5
PLANNING
Senior Planner 1 1 1 1
Assoc. Planner 2 2 1 1 1 1
Asst. Planner 1 1 1 1
Sub Total 2 2 3 3 3 3
TOTAL 6.25 8 9.5 10 10 10
BUDGET ASSUMPTIONS
CITY 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89
ADMINISTRATION BUDGETED
Administrator 1 1 1 1 1 1
Admin. Asst. 1 1 1 2 2 2
Exec. Sec. 1 1 1 1 1 1
Intern .5 .5 .5 0 0 0
TOTAL 3.5 3.5 3.5 4 4 4
Population
Staff;Population 18,400 19,000 203000 21,750 22,500 23, 750
RWJ/pn(0098p)
; ,
CALLS FOR SERVICE
15
14 1984 Forecast
13 11,719 (+2'/0)
12 11,463 (+10%}
11 10,295 +2
10 9784 10,1102 +3
9
8
• 80 81 82 83 84
Population 14,855 15,100 17,500 18,364 19,688
Staffing Ratio (sworn personnel)
(21) (22) (22) (22) (22)
Per 1000 1.42 #1.45 1.25 1.20 1.14
Per 100 1.707 x`1.686 1.795 1.835 1.895
* Recommended Staffing Ratio 28
Sworn Personnel : Per 1000 1.43
Per 100 1.703
Non-Sworn Personnel : 8 = 1.2460
Response Time 80 81 82 83 84
Minutes: 3 3 4 4 4.6
Crime Clearance Rate per Officer
80 81 82 83 84
Part I 14 15.9 17.9 23.1 25
Part II 34.4 27.1 27.4 21.7 18.2
CRIMES CLEARED PER OFFICER
No. Cleared
40
35
30 34.4
25 27.1, _. _. 27.4— ` 23.1 ---�
2025
32T.7
15 17.9
10 1;'2
14 15.9
5
0
80 81 82 83 84 Forecast
Part I Crimes
Part II Crimes
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M E M O R A N D U M
DATE: December 7, 1983
TO: Chairman and Budget Committee Members
FROM: Jerri L. Widner, Finance Director
SUBJECT: SERVICE LEVELS & MANPOWER ISSUES FOR FINANCE
In reviewing the current number of employees in Finance and Services, it is my
opinion that we are just able to meet Level II service requirements. For the
1984-85 budget year to continue to meet this level, it will require an
additional employee.
If you will turn to the Budget Assumptions page of your packet for Finance,
you will note that the additional employee is entitled DES. This would be a
data entry specialist. The position would be filled by someone who has
experience in computers, preferably someone who is an applications
programmer. I have in mind that the individual will take over most of the
data entry for the Accounting division and assume some minor systems
management for the data processing equipment, i.e. , debugging the system when
it has minor breakdowns--file full, data overload, etc.
The advantage to a position such as this is to reduce downtime and to free up
the accounting clerks' time for analysis and problem solving.
One of the major goals I have been given for my work program is to streamline
the systems. In addition to the reorganization of the Finance & Services
department that is taking place this year, the data entry specalist position
will further aid in the streamline process.
What is Finance & Services? This department has a variety of
responsibilities, some of which are as follows:
Accounting--billing for sewer/storm drainage services including transfers,
move-ins/outs, customer complaints, collections of delinquent accounts;
billings for miscellaneous chargeable services provided to outsiders by
other City departments and collections for same; billing of assessments
Bancroft and sewer surcharge, including assumptions, pay-offs, working
with realtors and title companies.
accounts payable including verifying purchase orders,
receiving documents and invoices from vendors before paying, preparing checks
and filing all of the documentation, encumbering the funds for the financial
reports.
payroll semi-monthly processing, writing checks, preparing tax
and benefit reports, changing employee information as changes occur.
general ledger ties together all of the elements of the
accounting system to provide financial reports including the preparation of
journal entries and reports.
investments daily investment of available funds--talking to
various financial institutions, working with the local government pool.
"AW miscellaneous-proofs of cash, project cost reports, quarterly
financial reports for council, answering questions from other employees,
council and citizens. Provide documentation for grants, etc. ; entering all
accounting data on data processing is done by the accounting clerks.
Records/word processing--attending council meetings to prepare minutes and
follow-up on items that have been acted upon; set up council meeting room
with recorder and microphones; prepare legal and public hearing notices;
maintain Council files; prepare council packets; record with County all
necessary documents including, annexations, street/plat vacations, quit
claim deeds, plat maps, subdivisions, assessments etc. ; respond to state
and federal agency surveys, questionnaires, reports etc. ; file
annexations with the state; file election notices with the County;
document any political committee formations and send into the state;
process documents for other departments--comprehensive plan, development
code, five year plan, capital improvements plan, budget, council reports,
etc. .Handling of municipal court including arraignments, trials, traffic,
suspensions, warrants etc. Billing businesses for business taxes and
collecting those that are delinquent. Working with the data processing
and word processing equipment.
Administration--review of systems and recommendations for streamlining;
handling bond sales and follow-up; preparing for audit, reviewing the
schedules for accuracy, preparing transmittal letters for audit report and
Certificate of Conformance; working with other departments on projects and
keeping them informed about their budgets; designing collection process,
purchasing process, personnel policy manual, investment strategies,
insurance carriers, reviewing fees and charges for possible increases or
additional kinds or for unfair fees, maintaining personnel files,
maintaining purchasing files, complying with state laws, preparing budget
histories and providing guidelines for budget proposals, attending Council
and Budget meetings.
The list continues, however I hope this has given you a flavor of what the
department is all about. If you have any questions, I would be happy to
respond.
(0128F)
INFLATION ASSUMPTIONS
C-9
GK'S. o aay\6E $1 P.I. 90 ellav� e Avev e °� clncw,
t83.0 6,0 LA
-7 (94.2 &.1 `1.0
�S 19g.4 Lod 2.0`x.3 78 9.0
�9 225.4 13.10 235, (o 17--b
SO ;Z:55. y 63.3 2 3.8
$I a-18.2 8.9 2g3.q
$2 2-$-7.0 3.2 2,39.3 2- 2.b
S3 Z90 .0 L.2 302.5 1.1 � .2
s4 298 .6 2.°I 5.0 .O
ss* 303. 1 l. 5 5C) 3.3
5,0 L4 5
g8'� �si•rvLes 4.0 5.0 4.5
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LI� �O�D (Y`P,�O pul,�KitiF�v 'G
(2)115A ALL COVJ nO r Il f E
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BUDGET TAX BASE
DOLLARS DOLLARS
CITY OF TIGARD
OPERATING BUDGET 1983-84 1984-85 1984-85 1983-84 1984-85 1984-85
POLICY OPTIONS ADJUSTED EXISTING RESTORE ADJUSTED EXISTING RESTORE
AND BUDGET RESOURCES CUTS BUDGET RESOURCES CUTS
SERVICE LEVELS (Level II) (Level I) (Level III) (Level II) (Level I) (Level III)
COMMUNITY SERVICES
Police 1,146,975 1,350,000 1,511,112** 29 29 36
Finance & Services 439,716 400,000 476,583 12 10 (-16%) 14
Library 171,082 193,750(l) 280,605** 6 5 (-16%) 7.5
Social Services 15,000 -0- 17,000 -0- -0- -0-
TOTAL 1,772,773 1,943,750 2,285,300 47 44 57.5
COMMUNITY DEVELOPMENT
PW-Administration 73,218 76,185 76,185 2 2 2
PW-Wastewater 151,500 159,661 159,661 5.25 6.75 6.75
PW-Streets 202,630 173,047 173,047 4.25 7 7
PW-Parks 63,196 10,000 85,186 2.75 .5(-80%) 4.25
PW-Services 90,221 95,873 95,873 3.75 3.75 3.75
�-igineering 409,692 500,000 512,863 7 12 12
44wianning & Dev. 217,460 200,000 253,266 6.25 6 (-4%) 8
TOTAL 1,207,917 1,214,766 1,356,081 31.25 38 43.75
POLICY & ADMIN. 146,185 151,788 151,788 3.5 3 (-16%) 3.5
CITY-WIDE SUPPORT 290,590 359,820 405,820* -0- -0- -0-
TOTAL OPERATING BUDGET 3,417,465 3,670,124 4,198,989 81.75 85 104.75
i
528,865
I
781,524
* Includes Rental for City Hall @ $96,000. . .
** Includes Rental Payments for New Space: PD @ $52,500. . .LB @ $80,000. ..
(1) Assumes $2.2 M WCCLS Levy @ $153,750 to Tigard. . .
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OPERATING
BUDGET •�/
tom, EXPENDITURES22,500
"40 ,200,000
INFLATION / 21,000 III
PATTERN �
3,000,000 ,r - 20,000 }
_ 79 000
2,800,000 •'� / 18,400 r
POPULATION
PATTERN -!
2,600,000
I
15,000
i
2,400,000
� �•� III
2,200,000 /
11,SOS1,'
2,000,000
1,800,000
III
1,600,000
1,400,000 I
III
1,200,000 \
COMMUNITY SERVICES I
COMMUNITY DEVELOPMENT
1,000,000
800,000
600,000
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0 400,000
POLICY ADMINISTRATION
200,000 7.8%
1% 4.5
7.3% 3.5% 3.6% 3.5% 3.4% 3.3%
17/7 i8/79 79/80 x,0/81 81/87 82/83 83/84 84/85 85/86 86/87 87/88 8�8-
11SCAI YEAR
SERVICE LEVEL /
TAX BASE GAP
5.5
5 ' 1NE.l O
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4.5 OUpG�� %00
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w 1.5
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1.0
821,383,.- EXISTING TAX BASE + 6% 1 CURRENT
�
"A" _ 670,019 710,220
� 752,833 798,003 845,885
5 632,093
14kw 82/83 83/84 84/85 85/86 86/87 87/88 88/89
FISCAL YEAR
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POPULATION RANK OF TWENTY LARGEST OREGON CITIES
RANK SIZE CITY POPULATION RANK SIZE
1982 1970 1980 1932 # 1970 1980
1 PORTLAND 379,967 366,383 368,100 1 1
2 EUGENE 79,028 105,624 104,000 2 2
3 SALEM 68,725 09,233 91,400 3 3
4 CORVALLIS 35,056 40,960 42,440 4 5
5 SPRINGFIELD 26,874 41,621 40,850 6 4
G MEDFORD 2,973 39,603 40,000 5 6
7 GRESHAM 10,030 33,005 34,375 22 7
u BEAVERTON 18,577 31582 33,640 7
law 9 HILLSBORO 14,675 274664 29,240 11 9
10 ALBANY 18,181 26,546 27,625 0 10
11 LAKE OSWEGO 14,615 22,868 22,810 12 11
12 TIGARD 6,499 14,286 18,000 33 21
13 BEND 13,710 17,263 17,800 14 13
14 MILWAUKIE 16,444 17,931 17,720 9 12
15 KLAMATH FALLS 15,775 16,661 17,100 10 14
16 ROSEBURG 14,461 16,644 15,380 13 15
17 ASHLAND 12,342 14,943 15,180 lou 17
lu GRANTS PASS 12,455 15,023 15,040 17 16
19 OREGON CITY 9,176 14,673 14,610 25 100
19 MCMINNVILLE 10,125 14,080 14,610 21 22
20 PENDLETON 13,197 14,521 14,550 16 19
# CERTIFIED ESTIMATES - CENTER FOR POPULATION RESEARCH AND CENSUS, PSU
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POPULATION
SCENARIOS 83-84 84-85 85-86 86-87 87-88 88-89
POPULATION 18,369 19,000 19,750 20,500 21,250 22,000
LOW +631 +750 +750 +750 +750
(Moderate Growth)
POPULATION 18,369 19,000 21,000 22,000 23,000. 24,060.
MEDIUM +631 +2,000 +11*000 +1,000 +1,000
(Growth + (Walnut
Walnut Island) Annexation)
POPULATION 18,369 19,000 21,000 27,000 28,500 30,000
HIGH +631 +2,000 +6,000 +1,500 +1,500
Growth + (Walnut (Metzger/
Walnut & Metzger) Annexation) Wa.Square
Annexation)
5-YEAR PLAN 18,500 19 20,000 22,000 26,000 30,000
`—. (+R as . (+Wash.
Square) Square)
/ . . .,
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$88,900, tri-level, 2100,eq'ft, 3 bdrm, 21 bath. easy access
to freeway, beautiful area. ClaKe 6_4=8004.
BROOKHAVEN SPLIT LEVEL - -
$81.560;-3 bdrih.3"b' cornet apt.fenced back yard,'close
to everything. Claire; 6494004.
AOWNERVILL CARRY-SMALL 2nd.
$65:500r nice
bath, Ig.:master;-sunken living rm _bice
�K area, Afoha. Claire'649-8004.
99!900rm, , family kitcheaq :conveni"nt to mei rzf
5 b Shop "fiq; 10 Tigard-ta.x-base, P ' sible.owner,contract V
; , Rosema
HAN $500
,{ ale
' PER MONTH
$52,500, 9'-2% assumable, 1100 sq.ft., 3
a:>
bdrm, 1 bath, wood stove heats all, 19. living '
sps.
rm. Ig lot, storm windows, excellent starter.
t Claire; 649-8004'
684- 1234
WAITING FOR THE
OTHER SHOE TO DROP
Three of the state's top economists make their predictions
about the Oregon economy's next 12 months.
higher real — interest rates, housing
starts soared to a recent peak
TEREST RATES (February 1984)of over million.
HIGHER IN •• As housing starts recovered so did
Oregon's forest products industry.
WE CO AGAIN Employment in the industry increased
HERE by 10,800 from the recession lows. In
recent months lumber production has
been exceeding 100% of normal. But
this level of production is more of a
Oregon's is essentially an economy of reflection of the pressure on the in-
BY DANIEL L. GOLDY small businesses and farms, high in- dustry to work off its backlogs of over
iWW+' terest rates have a serious impact on all priced timber and to increase cash
n assessing the economic outlook facets of business in the state. flow to stay alive, rather than a reflec-
'Oregonians have come a long way But in the summer of 1982, one of tion of robust markets. Indeed, lum-
since early 1981. Then, when some the pillars of Reaganomics was remov- ber prices have recently tumbled to
of us predicted a U.S. recession and an ed — the Federal Reserve Board lows reminiscent of the depths of the
Oregon depression because of the reversed course on monetary policy recession as overproduction combined
lethal combination of high budget and sought aggressively to bring in- with fading orders created a pile-up of
deficits,tight money, and high interest terest rates down. It did so because the inventories.
rates, there were many skeptics. nation's entire economy was in danger Why the fading orders?They are an
Some said Oregon's economy had of going over the precipice from reces- advance indicator of a sharp decline
sion to depression as a consequence of anticipated in housing starts later this
become sufficiently diversified so that
another high interest rate disaster af- a severe liquidity crunch; and the year. As interest rates have gone up in
fecting the lumber/plywood industry world's financial system was faced with the ast few months — the prime from
would not drag down the states the potential disaster of mass defaults 11°� to 12.5% and fixed mortgage
economy. Others bought the ad by the debt ridden less developed rates from about l3% to14.5% —it has
ministration's thesis that they could countries. had an adverse effect on housing
simultaneously stimulate the economy The result of combining a stimula- starts, particularly of single family
with tax cuts and budget deficits, and tive monetary/credit policy with the homes. Some Oregon lumber/plywood
` control inflation with tight controls stimulus of enormous budget deficits mills have already announced curtail-
over monetary growth and high in- produced the national recovery which ment of production and temporary
terest rates. is still occurring. Oregon's recovery layoffs.
Oregonians learned to their sorrow somewhat lagged the nation's because Housing starts would have long
that when the lumber/plywood in- the downturn was deeper and more se- since been suppressed by high interest
dustry collapses, the state's entire vere here and because of special fac- rates were it not for the phenomenon
economy is adversely affected. More- tors affecting the recovery in the of a very rapid substitution nationall
over, the high interest rates that lumber/plywood industry. of adjustable rate mortgages (ARMs
knocked homebuilding in the head na- As in times past, homebuilding was for conventional fixed-rate mortgages.
tionally similarly depressed Oregon's again the locomotive that initially ARMs have made possible lower first
construction industry. And because pulled the economy out of recession. year rates on mortgages, thereby in-
As soon as mortgage rates went down, ducing many home-hungry couples to
Daniel L. Goldy is a consulting the enormous pent-up demand for gamble that later year increases would
rrr housing asserted itself, thereby not be to levels beyond their financial
economist located in Portland. He served
refuting the doomsayers who had capabilities. But the recent interest
as director of the Oregon Department of
spent 1981 and 1982 telling us that the rate increases mean that the first year
Economic Development from 1976-79 and
has held various posts with the U.S. Cham- real problem was that too much hous- rates for ARMs are 11.5-12.5%,which
ber of Commerce and the federal govern- ing had been built in the 1970s. Even implies adjustments to 13.5- 14.5%
mens in Washington, D.C. with the high nominal — and even in the second year, and this is pricing
46 OREGON BUSINESS/JULY 1984
millions of potential buyers out of� collapsing while providing more inter- •,fiat of double digit inflation — and it
market. national loans to prevent even larger will be watching nervously in the
foreign debt defaults, it means that months ahead as the inflation rate in
Lumber Industry Cannot Take the Fed will be able to pump less into all probability will be edging higher
Another Recession the domestic economy to meet private towards 9%.
Oregon's lumber/plywood industry
Current trends are "bad What Can Be Done
is in noosition to withstand another All this is bad news for Oregon with
recession It has yet to obtain mean- news for Oregon'S its credit-sensitive economy. It uggests
ingful relief from federal timber con- economy." that extra efforts are needed right now
tracts entered into when lumber prices to convert as many industry prospects
were almost double what they are now. as possible into actually locating new
Canadian producers, having been plants in the state. If the unitary tax is
given timber price relief of a kind a major stumbling block to new invest-
denied U.S. producers by our govern ment in Oregon — as it appears to be
ment, have taken a larger share of the r�� to the Japanese — a special one day
market. With an enormous overhang legislative session should be called to
of high priced timber contracts, some ,. resolve the problem.
companies are opting to close their At least Oregon now appears to
mills for good as lumber prices drop. have a significant industrial develop-
But what of the future? President }i, ment effort underway which is once
Reagan told his fellow chiefs of state at ; ° again producing prospects for eco-
the London Economic Summit that nomic diversification. With the na-
U.S. interest rates would decline tional economy at the stage where in-
significantly by this fall. This is the vestments are needed in new plants
fourth Economic Summit at which the �' and equipment, this is the time for
other industrialized democracies have Oregon to get its share before higher
protested vigorously about U.S. ' `,'� ''` interest rates close down the capital
policies that have produced enormous ,., flows.
deficits and very high interest rates But let us not forget that the forests
that they believe are wrecking their are still our major resource and the
economies. - source of the largest bloc of jobs. We
But the consensus of economists is should all unite behind the efforts of
for the reverse to happen. Interest DAN GOLDY our congressional delegation for one
rates are expected to continue to climb credit demands. last big push for meaningful timber
so long as the private credit re- So the prospects are for gradually contract relief. If it is secured, we will
quirements of a recovering economy rising interest rates until they reach at least know that when the latest
are collid4 head-on with the federal the point where they again choke off round of sky-high interest rates peak
governments need to borrow from the economic growth and move us toward and return to some semblance of nor-
same capital pool. Even if one of the recession; or until the Fed decides, as mal, there will be a solid core of forest
so-called "downpayment on the it did in the summer of 1982, that the products companies that will have sur-
deficit" bills is ultimately enacted, dangers of economic collapse are vived to carry on.
there will be no relief provided in 1984 greater than the dangers of renewed For if Oregon can achieve economic
and very little in 1985. inflation, and they proceed to diversification while preserving its
monetize the debt by pumping extra basic tourism, agriculture and forest
Foreign Investors May Pull reserves into the banks. The Fed will industries, we should then be able to
The Plug come to such a decision very reluctant- move into a new era of stable prosperi-
ty because it does not want another ty.
In the meantime, the U.S. is ex-
pperiencing trade deficits of mind-
boggling proportions. They soared in
April to an annual rate of l billion. GOOD NEWS,
These deficits translate intoto losses of
over 2 million U.S. jobs, and could
cost the U.S. about. 2 percentage THEN BAD NEWS
points in gross national product. The
deficits will eventually result in a
reluctance by foreigners to continue to
pour billions into the U.S. — capital
flows that financed 40% of the federal tion — depends heavily on what ac-
government's borrowings in 1983. Any BY RAY M. BROUGHTON tion, if any, is taken in Washington,
reduction in the inflow of foreign D.C., this year and next to bend the
capital will exacerbate the collision he good news is that Oregon's federal budget deficit trend downward
between public and private credit wage and salary jobs rose at a over the next few years.
demands and send interest rates even Tseasonally adjusted annual rate The rise in interest rates thus far
higher. of 7% in the first quarter, vs. 4% for seems motivated largely by world
Finally, the recent bail-out of the the U.S. lenders' fears of further increases in
Continental Illinois Bank by the Fed, The bad news for the state is that both inflation and interest rates in the
plus the default on its foreign debt by rising' interest rates will blunt the cur- U.S.
*00
Bolivia, are both portents of increas- rent housing cycle and likely will cause The GNP price index(deflator)rose
ing strains on the banking system. If a downturn in housing starts in 1985. at a 4.1% rate during the first
the Fed must shore up more of the big bregon's economic outlook for the quarter, up from 3.9% in the fourth
money center banks to keep them from next 12 months - like that for the na- quarter, but down from 5.5% during
OREGON BUSINESS/JULY 1984 47
4 ,, •,�
the first quarter of last year. An about $80 billion abroad this year, alf-state's wage and salary employ-
although the first quarter consumer twice the amount supplied by foreign ment, based on preliminary May
price index (CPI-U) rose 4.5% from lenders to the U.S.last year. figures, still rose by 7,400 from April,
1983,most labor contracts and federal Unfortunately, the down payment up nearly 29,500 from the year earlier.
entitlement programs are tied to — assuming it passes — won't reduce Lumber and wood products em-
CPI-W, which rose only 3.6% over the the deficits significantly until 1986 and ployment continued to show some
year. Therefore, the inflation rate is 1987, by which time the players may strength in May, rising b 200 from
not out of control. But fear that it change and so, too, intentions to bring April, up more than 7° from the
might rise rapidly seems to persist, the deficits under control. This is what same month a year earlier. However,
even though the multi-year labor con- foreign lenders fear. the year-over-year advantage has been
tracts signed in 1983 averaged less So greater assurance from Washing- retreating since January because cur-
than 3% increases per year. ton, D.C. may be required this year to rent figures compare with last year's
Rising interest rates are a different hold interest rates in check. Such sharply rising employment in Oregon's
matter, however. The three-month assurance, to stand a chance of being lumber and plywood mills.
Treasury bill rate averaged 9.7% in effective, would require a firm com- On the other hand, Oregon's other
April, up from 8.91% in January and mitment by both parties to follow diversified manufacturing industries
8.21% in April 1983. And the rise through with additional and signifi- have been showing consistent year-
continued in May. Similarly, the effec- cant deficit-reducing measures as the over-year gains. The May total of
tive rate on fixed-rate mortgage loans first order of business in 1985. Lacking 129,700 was up 8,400 over the year
such assurance, interest rates seem compared with a January year- over-
The federal deficit likely to continue rising well into next Year gain of only 2,400. And, assum-
year. ing continuation of the national
could create problems Preliminary May employment fig- economic expansion this year, Ore-
forOre on in 1985. ures indicate a slight slowing of the gon's other diversified manufacturing
9 Oregon economy's growth rate, follow- should continue to muster year-over-
ing the heady first quarter figures. But year strength at least through year
ECONOMISTS' SCORECARD
The three economists who partici- ly hurting exports.
p
pated in last year's forecast article With resolution on these problems
were generally on the mark, predict- in abeyance, Oregon's economy
ing that Oregon would have a strong staged a strong recovery late last year
recovery during the coming 12- and early in 1984, but has now en
month period (July 1983-July 1984) tered into a period of the doldrums.
77, with the length of that recovery Ray Broughton of First Interstate
generally dependent on the resolu- Bank was almost exactly on the mon-
tion of national issues such as the ey with his predictions. He predicted
y largefederal deficits, high interest "a substantial gain" of around 3.5%
rates, the foreign debt problem, and in 1984 in wage and salary employ-
RAY BROUGHTON the foreign trade deficit. ment, and the current gains each
by major lenders averaged 14.11% in Dan Goldy noted that there were month of the same month in 1983 are
April, up 26 basis points since three major problems awaiting reso- running between 3% and 3.5%.
January. Bven higher interest rates ap lution which would have a great im- Kevin Kelly, who has since been
ppeear likely later this year when the pact on Oregon: the course of money promoted by U.S. Bancorp, partici-
I reasury's rising demand for funds supply growth; the resolution of pated in last year's forecast article
could compete with strengthening federal timber contracts which were and accurately predicted "a robust
credit demands by the private sector. uneconomic and threatened to bank- recovery is at hand."Kelly was overly
rupt many Oregon timber compan- optimistic in predicting that the
Housing To Retreat ies; and the debate over restricting prime rate would fall to around 10%
foreign imports. Goldy said these by the end of last summer. Both Kel-
On balance, U.S. housing probably problems could be resolved in ways ly and Broughton were also overly
will retreat erratically from the first that could either help or hurt Ore- optimistic in their assessment of
quarter start rate of 1.9 million units gon• Oregon wheatgrowers' prospects and
but still total around 1.7 million for By and large, these problems have how much the federal payment-in-
the year as a whole. And with the con- been left hanging. Nothing has been kind (PIK) program would help.
tinuing infusion of defense megabucks done about the federal deficits, so Kelly accurately observed last year
into California, demand for Pacific the Federal Reserve System is reining that "the problems remaining to be
Northwest wood products should hold in money supply growth somewhat, solved are the huge federal deficits
up reasonably well this year. but trying to avoid being overly re- and the correspondent lack of con-
Next year, rising interest rates seem strictive in hopes Congress and the trol over the money supply. While
destined to reduce housing starts President will do something about these problems cannot be dismissed,
substantially — unless Congress and the deficit before inflation reignites. they are not likely to do serious
the administration can negotiate Timber companies have been grant- damage to the recovery until well in-
enactment of the proposed deficit- ed five-year extensions on federal to 1984." Kelly indicated in a May
reducing"down payment"before sum- contracts, but the market remains speech to a bankers group in the state
4#40v mer adjournment. Chances of passage too depressed to make harvest eco- of Washington that he is not as pessi-
appear "iffy" but possible. But will nomically feasible. Congress has not mistic as many other economists that
that be sufficient to reassure the world passed any protectionist legislation, the federal deficits will choke off the
financial markets? Such reassurance is but the dollar remains strong, severe- current recovery.
essential because the U.S.must borrow
48 OREGON BUSINESS/JULY 1984
c
end. This is because Oregon's diver- other hand, specialty crops should production. In the past, current in-
sified manufacturing is heavily orient- continue to do well; so, too, hor- terest rates would have already Cor-
ed to capital goods manufacturing, ticultural crops, given the relatively pedoed the industry due to funds not
and this is the phase in the national high level of housing starts. Potatoes being available.
business cycle when capital expen- and row crops also should do well, ex- Now the funds are available, but
+rYiir' ditures tend to rise rapidly. cept for a few vegetables with heavy packaged in an adjustable rate pro
Nonmanufacturing employment in carryover packs. duct. This mortgage, by shifting some
Oregon rose by 3.4% during the first All in all, 1984 should be a good of the risk to the borrower, enables
quarter, a rise of more than 26,000 year for the Oregon economy, espe rates to be less than conventional fixed
Jobs. Retail trade and the services and cially compared with the prior four rate instruments. These developments
miscellaneous category contributedyears. During the first half of 1985, may take some of the swing from the
the most to the over-the-year increase. however, higher interest rates quite housing sector. This year it will be a
Relatively weak job growth appeared possibly will affect Oregon's important race between interest rates and home
in construction and in local govern- lumber and wood products industries prices on one side and incomes on the
ment. adversely. This in turn would dampen other. The strong business investment
the growth rate of the state's economy performance should also lend some
1984 Should Be A Good Year — unless the problem of huge federal support to the industry with increases
deficits is dealt with promptly. in nonresidential construction.
As usual, Oregon's agriculture of- The construction sector of the state's
fers a mixed outlook. Another good Ray M. Broughton is vice president and
appears in the offing, but economist with First Interstate Bank of
wheat crop PP g' Oregon, N.A., and is manager of the Oregon needs fiscal
with the granaries full, price gains will bank's economic research department. He
be moderate at best unless a shortfall has been with the bank 18 years. responsibility at the
occurs in one of the major grain- Broughton holds an M.B.A. degree from federal level.
growing areas of the world. On the the University of Washington.
OREGON'S
CRITICAL YEAR
cent increases in interest rates should
BY JOHN W. MITCHELL slow the housing sector, and the inven-
tory, performance is not likely to be
The nation's expansion continues repeated. I am making the assumption
to sail along toward its second that the national expansion will con-
birthday with pre-recession tinue through at least the first half of JOHN MITCHELL
levels of employment and production 1985, but that the growth rate will
having been left in the dust in slow. It is also assumed that the next economy remains at about 50% of
mid-1983. Rather than being an year will bring generally rising interest pre-recession highs, having been
anemic recovery as many had an- rates, but not an explosion in rates, forced to adjust to slower growth and
ticipated, it has been robust to the and some modest increase in the infla- an episode of population loss. The
point some feel that this is turning into tion rate. Against this background, outflow has been stemmed by the Ore-
a boom. Signs of slowdown in late Oregon should continue to expand, al- gon rebound, but the supply of avail-
1985 and again in March of 1984 have though the very rapid employment able facilities has to be absorbed. This
been followed by figures implying gains are most likely behind us. sector, perhaps more than any other,
renewed strength. Oregon has par- The durables sectors of Oregon mirrors Oregon's growth performance.
ticipated in the expansion and has had manufacturing have led the recovery. The painful adjustment has been
growth rates that at times exceeded April employment was up 13,000 over made, and now the sector can par-
those of the nation, but the depth of 1983 with half of that in lumber and ticipate in the expansion. There have
the previous declines in the state were wood products and most of the bal- been some increases in building per-
such that we are still making up reces- ance in transportation equipment, mits in the state, and highway con-
sion losses. fabricated metals, primary metals and struction will be boosted by funds from
electrical equipment. With capacity the gas tax increase.
Moderation Ahead utilization rates close to 82% and The coming year holds great pro-
strong investment incentives in the tax mise for the tourist industry, and
The coming months should see laws, capital spending should remain preliminary indications from the West
moderation in the economy'space. strong, providing some additional em- indicate that the promise will be
Leading indicators have slowed, re- ployment growth in the non-lumber realized. There have been very strong
and wood products categories. This employment and income gains in Cali-
reflects some of the supply side fornia, which is the source of many of
John W. Mitchell, economistfor U.S. elements in the 1981 tax laws coming our visitors. Very high levels of con-
Bancorp,forecasts economic trends for the home to roost. sumer confidence, restrained debt lev-
` " bank and edits the "Oregon Business The lumber and wood products sec- els, strongggrowth of disposable in-
Barometer" a quarterly newsletter pub- for is currently facing the prospects of come and cheap gasoline imply that
lished by U.S. Bancorp. Mitchell, who has
a doctorate in economics from the Univer- a deteriorating financial environment the state's tourist sector will have a
sity of Oregon, was formerly an economics for the housing sector which takes good year.
Professor at Boise State University. about 40% of North American wood continued on page 60
OREGON BUSINESS/JULY 1984 49
A PARTNERSHIP THAT ECONOMIC FORECASTS
PERSONIFIES THE WORD STABILITY. continuedfrompage49
The agricultural sector presents the
usual mixed picture with some good
>a prospects and some problems. The
outlook for wheat producers is for
good harvests and weak prices. Abun-
dant world supplies dampen the out-
look. Potato producers are coming off
a good year, and demand should con-
tinue to be strong with rising incomes
and fast food sales. Livestock pro
� ducers should also have a better year.
i a° The trade sector, which accounts
for about a quarter of the state's non-
agricultural wage and salary employ-
ment, has grown with the turnabout in
the state's fortunes. The prospects for
the coming year are for continued ex-
pansion at a slower rate. Pre-recession
}
levels have nearly been attained, and
the early surge in consumer spending
will likely fade.
The early part of the coming year i
will in many respects be admirably
suited to Oregon's economic structure t
a relatively strong national housing
industry, high levels of capital spend-
ing, and a buoyant consumer, but this
Rosenbaum�`�Rosenbaum will be only a temporary condition.
LIFE INSURANCE Continued expansion will likely be ac-
EMPLOYEE BENEFIT PLANScompanied by increasing interest rate
{FIQ
6443 SW BFAVE410N HNN SINVORTLAND.OREGONINSURANCECOMPANY pressures.
POaTIAND.OREGON 9722+ Dedicated to Excellence for Policyowners Business borrowing will continue to
'rr+r (503) 292-3587 increase to finance the capital expan-
sion and rising inventories; consumer
debt loads are still relatively low; and
we have the prospects of the massive
federal deficits. The most interest-
n Beach sensitive sectors will tend lose out in
Canno the credit markets. Housing t not as
interest sensitive as in the past, but is
likely to be wounded early in the strug-
�n u m s gle for funds. Modest declines in the
i
Condom sector's employment are the likely
result. Oregon has already made ma-
jor adjustments in the 1979-82 period.
DESIGNED FOR COMFORT Overall, this will result in a slowdown
OPEN LIVABLE FLOOR PLANS in employment growth rather than an
actual decline.
QUALITY CONSTRUCTION
YEAR ROUND RECREATION CENTER A Big Assumption
INCLUDES POOL,SPA,SAUNA In formulating this outlook I am
assuming that the deficit problem will
4- 1 level units 1060 sq.ft./4 Townhouses 1306 sq.ft. not result in a major explosion in in
$109,000 t0 $135,000 terest rates prior to action to deal with
the problem in early 1985. In the short
For further information or appointment call: run, Oregon has a Durables Domin-
ated Destiny" which is at risk in a
period of rapidly rising interest rates
and during a battle to control infla-
tionary pressures.
`T a �andcastle� A turn to fiscal responsibility by
Congress and the President is required
Coi[doihi4lum�5 for Oregon's continued expansion, as
is the maintenance of an anti-infla-
tionary monetary policy. Should the
Office:
1920 Beach Drive,Seaside,OR 97138 threatened collision in the credit
738-5382 or 436-1678 markets occur with the rapidity which
some expect, then my outlook is too
optimistic.
60 OREGON.BUSINESS/JULY 1984