Northern Economics Blog

At a recent Washington Public Ports Association (WPPA) annual meeting, Patrick (Pat) Burden, President of Northern Economics facilitated a roundtable discussion on Economic Feasibility Studies for WPPA members. Port districts in Washington State are tasked with facilitating trade and economic development for their constituents, and there was tremendous interest in the topic and extensive dialogue regarding the use of feasibility studies for the Ports.

A number of ports mentioned that they receive a large number of project ideas from a variety of sources and that responding to these inquiries and attempting to determine the viability of the project ideas was very time consuming. In addition, they often didn’t have enough information to make an informed decision on the ideas put forward by project proponents.

Following the two roundtable periods, several Port representatives remained to discuss their needs further and these conversations led to the following suggestions.

First, establish investment criteria for ideas that are submitted to the Port, as well as those ideas that are internally generated. The range of criteria could be very broad, extending from:

1. a minimum number of jobs per acre


2. a minimum average wage per employee


3. an identified target industry


4. expansion of an existing business in the Port District, and


5. other related criteria

Second, establish minimum information requirements before the Port will accept a project concept for consideration. These information requirements could be phased with lesser requirements in the conceptual stage, and more extensive information requirements as the project becomes better defined. These information requirements might include such items as:

1. a description of the concept


2. a market analysis including a discussion of competitors


3. a capital cost estimate and annual operating cost estimates


4. a table showing the sources and uses of funds


5. pro forma income statements for the project concept


6. a comparison of the project concept with the investment criteria established by the Port, and


7. three years of financial statements from the project proponent

These suggestions will require some effort on the part of the project proponent but would not be considered onerous to someone that has thoughtfully considered their concept. The criteria and information requirements would reduce concepts that are not yet ready for “prime time” and provide the Ports with substantially greater information for decision making than they presently receive from many proponents.

Northern Economics, Inc. was invited to lead the roundtable because of its extensive experience in port and harbor planning work.  The company’s Harbor Economic Impact Model is a planning tool developed for Alaskan harbors to evaluate the fiscal and economic impacts of harbors. More information about the model and a free copy available for download are available at http://www.harbormodel.com/.

“Seafood labor data is lacking, study says -,” by Laine Welch, Anchorage Daily News (Anchorage, AK), Feb 24, 2007.

“Big changes in fisheries management urged for coastal-area survival,” by Margaret Bauman, Alaska Journal of Commerce (Anchorage, AK), Oct 08, 2006.

“Estimating sales tax impact on households isn’t easy -PROPOSITION 13: Aimed at cuts in property tax, it would hurt poor,” by Don Hunter, Anchorage Daily News (Anchorage, AK), Mar 31, 2006.

“Online calculator allows users to estimate how sales tax will affect them,” Don Hunter, Anchorage Daily News (Anchorage, AK), Mar 31, 2006.

“Oil revenue fueling Alaska’s economy – OVERDRIVE: The growth rate is expected to sizzle this year too,” by Bill White, Anchorage Daily News (Anchorage, AK) Jan 19, 2006.

“Downtown shops fight Sunday Market – COMPETITION: Merchants say trial event this summer cost them customers, money,” by Anne Aurand, Anchorage Daily News (Anchorage, AK) Sep 17, 2005.

“Good times expected to continue in Alaska,” Alaska Journal of Commerce (Anchorage, AK), Jan 23, 2005.

“Valdez oil terminal braces for job cuts – ALYESKA: Company’s warning ccompanies declining production,” Anchorage Daily News (Anchorage, AK), Oct 8, 2004.

“Alaska Natural Gas Pipeline Entrepreneur Eyes Investments, New Jobs,”  by Tim Bradner. Alaska Oil & Gas Reporter (Anchorage, AK), Dec 29, 2003.

“Environmental Study for Bridge Underway in Anchorage, Alaska,” by Margaret Bauman. Alaska Journal of Commerce (Anchorage, AK), 01/09/2005.

 ”Alaska Commissioner of Health Approves Hospital Expansion,” by: Robert Howk. Alaska Journal of Commerce (Anchorage, AK), 11/30/2003.

“Alaska Gas Authority Receives Funding for Studies,” by Tim Bradner. Alaska Oil & Gas Reporter (Anchorage, AK), 11/10/2003.

“Mine Gives Economic Boost to Northwest Alaska,” by Tim Bradner. Alaska Journal of Commerce (Anchorage, AK) 10/27/2002.

Working for a private economic consulting firm often involves almost more writing than mathematics. While many of our reports are written for clients, NEI staff also on their own time contribute to text books and academic journals.

For example our Michael Fisher has a chapter in Project Manager’s Handbook: Applying Best Practices Across Global Industries, McGraw-Hill, which should be coming out this month.  He wrote Chapter 15 with Dr. Jang Ra of University of Alaska based on his research on “Project Risk Management for Alaska Oil and Gas Capital Projects.” The book is edited by David L. Cleland and Lewis R. Ireland.

The work of Jonathan King of our Anchorage office can be found in the American Journal of Agricultural Economics and Land Economics at:

http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=14454475&site=ehost-live

http://web.ebscohost.com/ehost/pdf?vid=4&hid=22&sid=e05a9db4-b4b4-4379-a929-39bede61b183%40sessionmgr3  

While looking at population data for an ongoing project, Northern Economics staff found a declining population trend in small communities located off the road, rail, and ferry system in Western and Northern Alaska (see table below).

Certified population estimates for 2006 from the Alaska Department of Commerce, Community and Economic Development compared to census data from 2000 shows a decreasing population for Alaska’s smallest communities, with populations less than 100 in 2006. Village population in these small communities is decreasing faster than larger hub and urban communities. The population in these small villages combined has decreased 19.9 percent since 2000. Population has dropped in 33 of the 44 of these communities, and only 7 communities have seen an increase.

Villages with a 2006 population between 100 and 200 people have also experienced a loss, but at a lower rate for the six years (10.6 percent). Communities with a population base of 200 to 300 appear to have a more stable population experiencing only a 0.7 percent loss over the same time period.

Overall the population in the study area has increased from 60,805 to 60,945, an increase of 0.2 percent during the period 2000-2006.

Population hubs in this part of Alaska include Hooper Bay, Dillingham, Kotzebue, Nome, Barrow, and Bethel. The population in Hooper Bay increased about 14.1 percent during this period and Bethel also experienced an increase of just over 6 percent. Barrow’s population dropped more than 11 percent from 4,581 in 2000 to 4,065 in 2006. The population in Dillingham dropped almost 3 percent. The populations of Kotzebue and Nome remained fairly steady with growth of around one percent.

According to a March 2007 article in Alaska Economic Trends published by the Alaska Department of Labor and Workforce Development, the trend in the areas mentioned above is consistent with the trend in large parts of the rest of the state. Although statewide, Alaska’s population has increased by 6.6 percent between 2000 and 2006 most of Alaska’s boroughs and census areas have experienced slow increase or decrease in population. Only 9 of the state’s 27 boroughs and census areas gained population in the 2000-2006 period.

We frequently develop models to help our clients make better decisions about complex situations. Sometimes are available for public use. The Alaska Department of Transportation and Public Facilities originally funded the Alaska Harbor Economic Impact Model developed by Mike Fisher and other NEI staff. It allows harbormasters to estimate the economic impacts of their harbor based on fleet composition and characteristics. Mike has made some minor updates to the model over time and put it on his website to make it more available to potential users. More information on the model, including a downloadable copy, is available at his http://www.harbormodel.com/ website.

The City of Bellingham, like most of Washington, is struggling with how to accommodate for the population growth projections they have accepted, in order to stay in compliance with the Growth Management Act (GMA), AND win public support for the solution. The growth management act has the stated goal of encouraging development in urban areas and reducing sprawl, but does not explicitly call for more density. So if the GMA aims to reduce the development of land that is not connected to urban areas and requires cities to allow for population growth, it seems that the logical alternative is increasing density.

If we believe that the GMA is leading planning departments towards density, it begs the questions: what is density and can we build denser cities? The Lincoln Land institute recently posted a new subsection to their website, Visualizing Density, that helps decision makers and citizens better understand density. http://www.lincolninst.edu/subcenters/VD/ . The first tab of the site will take you through an overview of the density issue. One thing of interest to the numerically inclined is that measuring density is difficult. The problem is that you have to draw your boundaries in order to determine the space’s density. Drawing the boundary generously will lower the density. Drawing it tight will raise the density.  But in general, the boundary used to measure density is the boundary of a development and the result is a measure in units per acre.

The site also gets to the central issue: how to increase the density of housing within the city without changing the character or quality of the community. There are numerous techniques discussed for adding density to existing neighborhoods. But perhaps it is worth trading in yards for a different sort of lifestyle. One approach is based in designing new developments with common spaces that compensate that for a lack of private yards. The site goes into the numerous lifestyle benefits from compact urban areas. Perhaps it is time for an update of the American dream? We don’t know – only the American public can decide that.

So take a look to see if you think that density could work in Bellingham or wherever you live. In the mean time, we will be thinking about how Northern Economics can help cities understand the feasibility of building denser cities and how to analyze the benefits and the costs of increasing density.

Economist Leah Cuyno completed her first half marathon on May 26, running in the Anchorage Running Club’s Trent Waldron Glacier Half Marathon.  She completed the run in 2:09:02.  Project Consultant Mike Fisher also ran in the race.

Northern Economics staff held a brown bag discussion on May 9 about Matthew E. May’s book, The Elegant Solution: Toyota’s Formula for Mastering Innovation.  This was the fourth book in the company’s “book club” and provided a lot of great ideas for how to pursue perfection and elegant solutions in our work.

The Elegant Solution presents a set of tools and processes used by Toyota to foster innovation and achieve elegant solutions.  It specifically talks about how these tools can be applied in any organization, especially non-manufacturing environments.  May does a good job of not only providing background information and case studies of how Toyota applies these tools, but provides a lot of examples of how other companies could or do use these tools.  This isn’t a rah-rah book for Toyota, but rather a book of practical ways of improving any organization.

What is an “elegant solution?”  It is a solution in which the optimal or desired effect is achieved with the least amount of effort.  The book groups together several ingredients that make an elegant solution: creativity, simplicity, intelligence, subtlety, economy, and quality.

Consistent with what I’ve learned about quality management, the book describes the power of small changes to create big effects.  Contrary to the American view of quality, which view continuous improvement as an infrequent set of large changes, the book follows the Japanese philosophy of seeking out frequent, small changes.

After discussing the principles of the Toyota way, the bulk of the book talks about practices for finding elegant solutions.  The practices, in brief, are learning, learning to see, designing for today’s problems, thinking in pictures, capturing intangibles, leveraging constraints, mastering tension, making decisions based on data, promoting kaizen (continuous improvement), and striving for simplicity over complexity.  The book closes with a discussion of how to put the principles and practices to work.

Northern Economics staff sat through a presentation about some of the book’s key points, followed by a 40-minute group discussion based on each chapter’s hansei.  As a professional services firm, some of the material was harder to apply (at least in terms of external customers), but most of it was very relevant.  We got the greatest value from those principles and practices that apply directly to our internal processes and customers.

We discussed how we are able to discover, implement, and evaluate new ideas and information rapidly through staff meetings, brown bag discussions and presentations, and semi-annual staff retreats.  The book has provided us a lot of ideas to consider and apply to our work.  The ideas spawned from reading The Elegant Solution will certainly appear in all of our learning forums in the coming months.

If you’re looking for a way to improve your business, internally and externally, it’s worth the time to consider The Elegant Solution.  It’s a quick, easy, and insightful read.