Last week, I had the pleasure of presenting to the Idaho Legislature’s Economic Outlook and Revenue Assessment Committee on the progress of Idaho’s economy and our perspective on the future of the state’s economy.
Over the last several years, rebounding from the “Great Recession” and growing steadily, Idaho has much to be proud of.
And many others have taken notice of Idaho’s job growth, business-friendliness, and high quality of life. In 2016, Idaho was recognized by Kiplinger, Governing Magazine and CNBC as a top state for doing business.
Idaho’s economy has backed up those accolades and fared well over the last year – not only when compared to our neighbors, but nationally as well. Idaho’s employment increased 3.6% between March 2015 and March 2016 – the nation’s largest percentage increase over that same period of time. Idaho’s real gross domestic product (GDP) increased by 2.8% in the second quarter of 2016 – the third largest increase nationally and second largest regionally. Idaho wages grew 4.2% in the second quarter of 2016 – twice the national average, fourth largest increase nationwide and third largest regionally.
Overall, measured by job growth, Idaho’s economy is expected to continue growing by 3% over the next 18 months, ahead of the projected US average of 2%. We expect the top contributing industry sectors to be led by agriculture, especially animal production; manufacturing, especially paper, chemicals, fabricated metal products, machinery, and electrical equipment; and data processing and other information services including cloud-based software companies.
EXPORTS
Beyond job growth, one of the more important data points we track at Idaho Commerce are the state’s international exports. While we certainly have several large exporters in the state, 88% of Idaho’s exporters are actually small businesses.
U.S. exports decreased by 5 percent in 2015 – the first national decline in 6 years – and unfortunately Idaho’s total exports declined as well, down 16 percent from 2014.
There are several reasons for the decline in export numbers over 2015. Primarily responsible are decreasing commodity prices, a strong dollar, and increased global supply and competition in several key sectors and products where Idaho companies have long sold abroad.
However, the bright spot in the export discussion, even though export numbers are not yet complete, preliminary 2016 estimates show an increase in exports can expected. October 2016 showed a 16.95 percent increase year to date over October 2015 year to date. We’re forecasting an equivalent bounce-back after a relatively challenging 2015.
TRAVEL & TOURISM
Idaho Commerce also tracks the Travel and Tourism industry closely. Travel and tourism is Idaho’s third largest industry behind agriculture and technology and continued growth in the Idaho Tourism program is an important economic driver for the state, particularly in rural areas.
The travel and tourism industry employs over 46,000 employees statewide and, in 2015, contributed over $1.3 billion to the state GSP. In 2015, travelers to Idaho spent over $3.3 billion dollars last year representing over 33 million person trips throughout the state, an annual increase of 7.6 percent.
And in FY2016, Idaho Tourism had its best year ever, achieving the state’s highest revenue-generating year on record for 2 percent lodging tax collections at over $9.9 million in collections. This increase represented 13.41 percent growth year over year.
We anticipate that lodging tax collections will continue to increase at approximately 9 percent annually particularly with the additions of over 1,800 proposed hotel properties statewide. Additionally, statewide occupancy rates continue to increase along with the average daily rate numbers.
And last week we received some exciting earned media recognition that Idaho had been named to Vogue Magazine’s 10 Hottest Travel Destinations for 2017. This is huge recognition for the state. This is a global publication and a worldwide list. Idaho was the only U.S. state on the list, sharing company with places like Madagascar, Malaysia, and Sri Lanka.
Vogue is exactly right when they said, “Idaho is having a moment.” It’s an incredibly exciting time in our state with more and more visitors and businesses taking notice.
TAX REIMBURSEMENT INCENTIVE
We’ve said it many times, but the Tax Reimbursement Incentive (TRI) has truly been a game changer in our ability to be competitive on a national and global scale for attracting new jobs and capital investment to the state.
Since the incentive went into effect on July 1, 2014, we’ve seen outstanding activity. To date, there have been 33 approved projects, with almost 5,200 jobs projected to be created, over $960 million in planned new capital investment, $2.3 billion in new wages, with a projected $257 million in new taxes paid to the state, at a projected cost of $60 million in tax credits
As these estimates turn into actual number, we’re are projecting a 4 to 1 return on investment for the state. It’s important to understand that because this is a performance based tool, the credit is not issued until the minimum job and wage requirements are met. And the credit is calculated based on the taxes actually paid, so the state isn’t paying out anything until the company meets its commitments and has already paid its taxes.
We are excited about the ever growing pipeline of projects that now have Idaho on their map as a result of TRI. But it has been even more exciting to work with some of our Idaho companies to leverage TRI to help them attract internal capital to grow and expand.
Idaho is home to over 57,000 businesses and, as a result, much of the job growth and capital investment that the state experiences is due to the success of our existing Idaho companies. The Idaho Department of Labor estimates that 85 percent of the total jobs in Idaho are with companies that have been in the state for more than five years.
Those statistic are important to remember because initial critics of the program stated that TRI would only be used for new companies in urban communities. But as the program has developed, nearly equal number of existing Idaho companies have been able to leverage TRI for a competitive expansion. And we’ve actually seen more projects happen in rural communities, making this a very usable tool communities across all of Idaho.
The last year has given us many accomplishments to celebrate and build upon, but there remains much to do. My team and I are as committed as ever to continuing to work with Idaho businesses and communities to play a role in strengthening, diversifying and advancing Idaho’s economy.
Obviously there is still some uncertainly out there and we still face challenges but, Idaho is incredibly well-positioned and will continue to gain momentum in this time of advancing economic opportunities.