Dr. Gallo of the Chico State University
Center for Economic Development recently gave a presentation on the future of the economy
in Siskiyou County. It provided a good review of the factors that create and affect our
local economy. Essentially, our local economic growth is the product of revenues that come
into the county from elsewhere minus the local dollars that are spent outside of the
county (leakage.)
Siskiyou County’s “economic base” is any industry that
brings in money from outside the county. Revenues can come into the local economy through
outside sales of products made locally, retiree income, tourism, grants or federal and
state programs. For instance, our local industries produce the following: water bottling
-$85 million; crop farming - $71 million; gasoline - $28 million; veneer for plywood - $32
million; truck transportation - $21 million; nursery stock - $40 million;
telecommunications - $43 million; vegetables - $25 million; and cattle - $21 million.
Local retail business and services that operate entirely within the county are not
considered part of the economic base, but are termed “derivatives.”
One strategy for increasing revenue would be to increase tourism
spending by scheduling local events or increasing crafts shows and boutiques. “Clustering”
or “economic gardening” is the increase of local businesses with production,
product and sales complimentary to existing industries. For instance, one industry may
generate a by-product that another can use – such as bark converted into landscaping
mulch.
Leakage to the economic base occurs when local people buy retail
elsewhere or when local businesses use contractors or purchase materials made outside the
area. Basically, an economic goal for the county is to get more money coming into the
county and prevent less from leaking out. To reduce leakage, one strategy would be to
expand or attract businesses that make the ‘inputs” that go into making the
products that are exported elsewhere. Another might be to produce more of the goods and
services that are purchased by local residents who are buying outside the area. The North
state is becoming a destination for retirees. As this population component grows,
businesses that cater to the needs of retirees would likely flourish – such as health
care or services matching the lifestyle of this group.
Every industry has “inputs” or ingredients that go into
producing a product. A bale of hay may have inputs such as fertilizer, pesticides, diesel,
machinery, labor, utility and other costs that go into producing it and getting it to
market. Some of these inputs are local and others, like the manufacture of the machinery
used to bale the hay, are inputs from outside the area. Some industries have a larger
local economic benefit. Dr. Gallo used a model to illustrate how this works. The plywood
veneer industry, for instance, has a large local benefit to Siskiyou County. As a purely
illustrative example, a local mill might make $1 million in sales outside the county. Total input costs into making the product could be
$700,000, (“direct income.”) That leaves a profit of $300,000. Of those product
inputs, local inputs, such as local logs purchased and local truckers and other
contractors used, might be another $400,000 (“indirect income.”) Wages are then
spent at local retailers and for local services, (“induced income.”) The total
income to the county’s economic base would be the direct income, plus the indirect
income, plus the induced income.
If that makes your head spin, from a purely economic perspective,
industries that are locally owned and purchase a large amount of inputs locally are the
most desirable. One strategy might be to try and attract businesses to relocate from
either end of a supply chain to industries already here. |
