North Fork/Delta County Economics: It’s Not What You Think

Bowies Resources mine workers show pride in the record of their workplace during the 2015 Cherry Days Parade. Bowie’s work force remains at about half of its 2013 levels.

North Fork/Delta County Economics: It’s Not What You Think

By Thomas Wills

At a recent Hotchkiss Town Council meeting the economics of energy extraction were discussed. Eric Sanford of SGI, a natural gas development company, opined that when the local coal mines eventually close and are not replaced by something else (meaning gas development) the Valley’s towns will dry up and blow away. Locally, it would become an economic desert.  True? Hyperbole? What percentage of what sector makes up the local economy anyway?

If one were to come to the North Fork Valley as a curious stranger with no economic training, and seeing only what was on the surface, what would you observe?  What would you conclude? Coal mines, lots of hayfields and cows, small organic/natural farms and orchards and the occasional small winery. Some gas development in the area spilling out of the very top of the Valley. One coal mine closed, one with half of its former staff and the others teetering (you hear speculation daily from locals) on the brink as world coal markets meet the reality of the need for mitigation of climate change and the challenges from cheap natural gas and Chinese-made solar panels. A shrinking retail sector within Paonia and Hotchkiss.  Empty lots and storefronts. A beautiful, bucolic Valley surrounded by natural beauty, but things seem to be in flux, you might think.

In reality, like an iceberg, much of the economy – income earned by residents – is beneath the surface, not easily visible.  In looking at the numbers as supplied by the U.S. Department of Commerce and Bureau of Economic Analysis released as of 2012, the following chart shows the figures for Delta County, compared with Colorado as a whole, and nearby counties:

By the numbers as of 2010-12 the annual total personal income of Delta County residents was   $949,143,000, just over $949 million. Of that $508,896,000 was earned through actual labor: mining salaries, agricultural earnings, and small businesses and so on.  But some 46% of the whole $440,247,000 in income comes from non-labor sources which are divided in the chart between dividends/interest/rent and transfer of payments.

According to a document compiling the government data prepared by Headwaters Economics: Non-Labor Income: Dividends, interest, and rent (money earned from investments), and transfer payments (includes government retirement and disability insurance benefits, medical payments such as mainly Medicare and Medicaid, income maintenance benefits, unemployment insurance benefits, etc.) make up non-labor income.  Non-labor income is reported by place of residence.

The document then explains the growing importance of “non-labor” income in rural areas:  “In many places non-labor income can be the single largest component of personal income, and also the largest source of new personal income.  Nationally, non-labor income represented 33 percent of total personal income in 2008 and 26 percent of net new personal income from 1990 to 2008.  With the baby boom generation reaching retirement age, it is likely non-labor income will continue to be a growing source of personal income.

            Unlike most sources of labor income, non-labor income, which often arrives in the form of a dividend check or retirement benefit, can be more difficult to see in a local economy.  Because non-labor income is often a large and growing source of personal income, it is important for public land managers to understand this portion of the economy.”

So, Delta County has a significantly higher percentage of total personal income deriving from non-labor sources, and most of that income (minus local rents collected by local resident landlords) is not connected to this specific place.  In other words most of the people connected to those figures could choose to live anywhere, but for whatever reason, they choose to reside here. One could also reasonably extrapolate that the North Fork probably has a currently higher percentage of non-labor income than other parts of the county and that that percentage will probably grow if coal mine employee, and income, numbers decrease.  Gas development, if it proceed as proposed, will supply some short-term economic income boost but no significant permanent job numbers.     Then there are the long-term trends. In the county region, from 1970 to 2010, dividends, interest, and rent grew from $264 million to $1,550 million, an increase of 487 percent. From 1970 to 2010, transfer payments grew from $217 million to $1,594 million, an increase of 635 percent. But, from 1970 to 2010, labor earnings grew from $1,184 million to $4,279 million, an increase of 261 percent. In Delta County non-labor income grew at an even faster pace.

In other words, the growth of the non-labor sector has increased at more than double the rate of the labor income sector. It could be said that the trends show that the future of the North Fork is dependent upon the continued growth of the non-labor income sector, and that in turn is dependent upon maintaining the high quality of life in the area and all that that entails.

According to the report non-labor income for Delta County can be broken down further with Dividends, Rents and Interest being 44% of the total and Transfer of Payments being 56%.  Then, Transfer of Payments is subdivided into: Government Payments to Individuals – 54.6%, Retirement and Disability Insurance benefits – 22.2%, Medical Payments – 20.9%, Medicare – 14.1% and Medicaid – 6.1% and Welfare – 5.1%. Compared to Mesa and Montrose Counties, Delta is less affluent, with a larger percentage of non-labor income from Transfer of Payments (lower income individuals) than from Dividends, Rent and Interest (more affluent individuals) although there is a good percentage of overlap.

Finally, separate from the Headwaters report is a need to divide labor income into categories.  It was estimated in the late 1990’s that once support and ancillary service jobs (railroad, mine services, general service and a percent of retail, etc.) were figured in, coal mining accounted for some 25% of total labor income and some $50 million just in salaries, not counting all benefits. That was when mine employment totaled about 1,000. It is now half of that.