Columbia not hurt by economy
Officials are concerned by the decrease in sales tax revenue.
Oct. 14, 2008
Despite the recent economic crisis nationwide, Columbia is faring better than most areas, local officials said. Sales tax revenue and pension funds have decreased slightly but money for building projects such as the City Hall area renovations, pictured, have already been set aside and are not in danger.
Local business leaders believe that while Columbia has indeed been affected by the national economic crisis, the city is in a better place than the nation as a whole.
Don Laird, president of the Columbia Chamber of Commerce, said Columbia's stronger economy could be attributed to the stability provided by industries such as higher education, health care and insurance.
However, Laird did acknowledge that while Columbia is doing better than the national economy, the city is indeed feeling the effects of the national crisis.
"I think overall business is a little soft," he said.
Bernie Andrews, director of Regional Economic Development Inc., described the city's economy as "fairly flat."
He said sales tax revenue and markets such as construction and housing were lower than usual in the city, but it is still performing better than the national economy as a whole.
Overall house prices in Columbia are still increasing, and more houses were sold in September 2008 than were sold in September 2007, said Carol Van Gorp, the chief executive officer for the Columbia Board of Realtors.
Columbia is a primary home market, she said, meaning that people are buying houses as more of a necessity than an investment, making it less susceptible to large changes.
"There's not as much investment as there is in a place like south Florida," she said.
However, the Columbia housing market has seen some downturns. Despite the improvement in sales for September, housing sales for this year as a whole are down 20 percent from this time last year.
The city government is also feeling a little bit of a crunch thanks to the national economic troubles.
The biggest effect in the short term for the city government will be in its pension funding, said Lori Fleming, City of Columbia Finance Director.
For its pension portfolio, the city invests money in a variety of forms, including cash, bonds and equities. The latter has lost a great deal of value because it is composed of city investments in the national stock market.
With the recent falls in the stock market, that portion of the portfolio will be valued lower. The city won't lose any of that money as long as they hold onto the stocks.
"You don't lose anything if you don't sell," Fleming said.
However, the lower value of the equities could cause the city to increase the amount of money it puts into the pension portfolio in the future in order to keep it stable.
Fleming said she sees the biggest issue as the city's slowing sales tax revenue growth. That lack of revenue growth won't jeopardize any of the city's building projects because that money has already been set aside, but it will influence how much the city invests in equipment, Fleming said.
The city has put off buying a new fleet of police cars until at least the second quarter of the 2009 fiscal year, which started Oct. 1, making it so the city won't have to downsize and lay anyone off.
Fleming's biggest concern, though, is that it will greatly reduce the budget for 2010.
The effect of the crisis on the UM system is also looking to be long term.
As with the city, the downturn in the stock market has affected the university's retirement and endowment funds, said Nikki Krawitz, UM system vice president of finance and administration.
Scholarships and funding for academic programs for this year will not be affected because they have already been disbursed, Krawitz said.
Krawitz said, however, that if the economic downturn continues over several years, they could be affected in the future.
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