Report examines 5-year outlook for peninsula economy

The Kenai Peninsula’s relatively diverse economy has some room to grow in the next few years, accommodating for lower oil prices and production as well as an aging population.

The most recent Comprehensive Economic Development Strategy, compiled by the Kenai Peninsula Economic Development District, reviews some demographic and employment statistics while proposing broad goals for the next five years. The plan will be updated every year but provides a broad framework for the future of the economy, said Rick Roeske, the KPEDD’s executive director.

“It’s a pretty impartial look statistically at where the money and energy have been going in the economy, and it’s definitely been in health care,” Roeske said. “Kind of what we would like to do is to support the businesses that are up and coming and/or legacy businesses. Anybody can support the hospital … but we want to make sure we give support to the businesses that are trying to start up or not doing as well because those businesses are really the focus to try to get the economy to churn a little better.”

The peninsula is somewhat shielded from the recent downturn in oil prices because of its relatively diverse economy, Roeske noted. With historical fishing, tourism, health care and social services, government and construction in addition to oil and gas, the region has other industries to fall back on. Several oil and gas projects are also invested and beginning to produce — Furie Operating Alaska is expanding and BlueCrest Energy produced its first barrel of oil this year — so the activity has not decreased as drastically as elsewhere in the state, he said.

At the same time, there have been noticeable effects of the industry’s downturn. One of the metrics KPEDD has tracked is the traffic at the Soldotna Y intersection, counting the daily number of cars that pass through. For the past decade, the number of cars through the intersection has steadily grown by about 1,000 cars per day each year; between 2015 and 2016, the number dropped by about 1,500 cars per day.

Roeske said it could be partially due to fewer people commuting to work in oil jobs in Nikiski.

“We can see that it isn’t going to Homer because we did the traffic count at Homer and it isn’t going to Anchorage because we did the traffic count at Tern Lake,” Roeske said. “We could see it was increasing at the Y and I think it’s because everyone had their (oil salaries) and they were spending it. But as soon as it started shutting down, that went down real quick.”

By 2042, the peninsula’s population will likely have shifted to be nearly a quarter retirees, based on current demographic models.

That will put a strain on the region in terms of both work force and taxes because of the borough’s up to $300,000 property tax exemption for seniors.

One of the goals the report mentions is attracting young professionals to establish themselves in the region.

Keeping young adults on the peninsula will be a challenge, partially because of the availability of well-paid jobs in the region that would attract them.

The report suggests developing programs to attract more young adults and highlighting other benefits of living on the Kenai Peninsula, such as low cost of living, lower crime rate per capita and access to high internet speeds compared to other regions of Alaska.

In addition to the statistics and information, the CEDS report includes a number of specific goals, which range in breadth from the broad coordinating communication between the industries to the specific development of a Kenai Peninsula brand.

As oil production continues to stay low and construction takes a hit because of reduced capital project expenditures, many economic predictions show tourism as one growing sector of the economy. The Kenai Peninsula’s tourism industry has grown approximately 8 percent since last year, with another potential 2–3 percent growth this year, said Shanon Hamrick, executive director of the Kenai Peninsula Tourism Marketing Council.

As the tourism industry continues to grow, long-term planning for infrastructure such as roads will be necessary.

The state’s shrinking budget may impact the ability execute those projects, but long-term planning will help the industry grow effectively, she said. Some tourism businesses are shifting their focus toward experiential travel — for example, fishing restrictions have changed the way some fishing guides run their businesses.

“There’s a lot of opportunity for different types of activities, and experiential travel is a big one for today’s traveler,” Hamrick said. “There is also a lot of growth potential in the shoulder seasons, the spring and fall.”

KPEDD regularly provides information to the industry leaders in the area, said Caitlin Coreson, programs manager at KPEDD. For example, the district can provide demographic information to the hospital to help administrators there plan, she said.

“It’s really good … to have those population projections and to see how quickly we’re aging, so we can take that information to (Central Peninsula Hospital CEO) Rick Davis and say, ‘Do you have enough hospital beds? Is this something that you need to think about?’” Coreson said.

Working together as industry groups will be an important move in the next few years, Roeske said.

“We want to work with the cities that are all gearing toward 2030 and we want to use 2030 as our cooperative effort to work with groups so that we’re ready … for whatever it holds,” Roeske said.

Despite some negativity, many people on the peninsula still seem to have a fairly optimistic attitude about the economy. The surveys KPEDD did on public opinion showed about three-quarters of those surveyed said they felt the economy was average or somewhat prosperous.

A little more than half said they were optimistic about the future economy on the peninsula.

Roeske said moving companies had not noticed a spike in those leaving Alaska for the Lower 48, either.

“People always tend to catastrophize rather than be optimistic — that way when it falls apart, they can say, ‘I was right!’” Roeske said. “If it goes forward, they can say, ‘Well, I’ll count my lucky stars, but I’m still waiting for that catastrophe.’ It’s just human nature, and so much of economics is psychology.”

The report is still available for public review and comment. Comments can be submitted to Caitlin Coreson at caitlin@kpedd.org.

 

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.

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