Kenai Peninsula Borough
Community and Economic Development Division
Quarterly Report of Key Economic Indicators for Period Ending December 31, 2003

Executive Summary

As the KPB celebrates it’s 40^th anniversary, it celebrates the diversity of the economy as well.  The KPB economic system gains strength from its diversity as each industry follows a different trend of expansion and contraction.  When one industry is in contraction, others may be expanding, helping to avoid a boom or bust economic pattern and enabling healthy economic activity to continue.  Fourth quarter sales experienced minimal contraction as fourth quarter gross sales declined 1.6% from one year ago, decreasing from $455,766,807 during 2002 to $448,284,351 during 2003, a $7,482,456 decline.  Taxable sales were down 0.1% to $154,681,718, a $115,167 decrease.  Construction activity was strong as permit values for the period increased 43.7% to $6,943,945, while permit volume increased 20.8% to 58 permits for the quarter.

An increase in labor force is positive when new jobs are available for each person added to the labor force.  KPB’s 2003 monthly average labor force increased over 2002 levels by 885 persons while jobs increased by 894 positions.  The jobs gain was greater than the gain in persons looking for work, resulting in a lower unemployment rate, 11.5% during 2003, ahead of the 2002 rate of 12.0%.  During the average month, there were nine fewer unemployed persons in the KPB during 2003 than during 2002.  Forty years ago, the total population of the KPB was 2,633.  Today’s labor force of 22,626 is nearly nine times the total population of the Borough when it was organized during 1964.

KPB volunteers preparing for the 2006 Arctic Winter Games will closely observe the Wood Buffalo, Alberta, Canada 2004 Arctic Winter Games because the Kenai Peninsula Borough will host the 2006 Games.   Representatives will gain knowledge and experience in management issues by attending and working with those who have planned and are managing the 2004 Games.  Commitments for financial and in-kind donations are ahead of goals set by the bid committee.

The 2003 commercial fishing season was deemed successful with an abundant run of sockeye, although prices were not quite as high as fishers had hoped, influenced by availability of farmed salmon whose nutritional value is under question.   The Kenai Wild sockeye salmon branding program experienced a second successful year as supply exceeded demand for the high quality salmon.  Forty years ago, the Upper Cook Inlet salmon harvest was expected to be near 1,000,000 fish.  Currently, the hope for harvest is near 2,000,000.  This includes sockeye, coho, Chinook, and pinks, and includes each of the Upper Cook Inlet Rivers.  Other species harvested by KPB fishermen include Chinook, coho and pink salmon as well as halibut, cod and shellfish. 

The oil & gas industry continued to generate mixed signals for the quarter.  Unocal announced additional lay-offs as a result of shutting in the Baker platform.  However, both Unocal and Marathon Oil have announced tentative plans for increased exploration, production and development spending budgets in 2004 focused mainly in the Ninilchik and Anchor Point areas.  The Kenai Kachemak Pipeline continues to ramp up natural gas transmission volumes, with a proposed 14-mile extension of the KKPL line by Unocal to be built in 2004.  New natural gas exploration drilling by Pelican Hill was nearing start-up on the west side of Cook Inlet south of Tyonek.  The industry's focus continues to be natural gas exploration and reworking of existing fields.  Value-added companies that include Agrium and ConocoPhillips are the main drivers for new natural gas exploration along with the home heating provider, Enstar Natural Gas.

Forty years ago the Chevron refinery, the first in Alaska, was two years into development and arrival of the first Cook Inlet platform was still a year away.

SALES

Fourth quarter 2003 gross sales of $448,284,351 were 1.6% less than the $455,766,807 in sales occurring during 2002, a difference of $7,482,456.  Taxable sales decreased 0.1% from $154,796,885 during 2002 to $154,681,718 during the most recent quarter, with five of ten sectors experiencing sales declines. 

Quarterly Sales

Gross by Industry.  Gross sales were affected by an $18 million decline in sales of manufactured goods, which was partially offset by a $7 million increase in mining sales and a $3 million gain in services sales.   Of the ten industry sectors tracked by the KPB, five reported gains led by mining sales, which improved by 33.0% or $7,474,846.  Finance, Insurance and Real Estate (FIRE) sales also experienced double-digit gains, 18.4% or $2,300,621, with a total of $14,824,507 in gross sales.  Service sales increased 6.7% to $49,370,454 while retail sales gained 1.8% to reach $147,221,598.   Retail sales accounted for 32.8% of gross sales while the second largest industry, services, represents 13.5%.   Government sales increased 135.6% but the $8,789 in sales is not of consequence in the $448 million total picture.  

Manufacturing sales of $60,214,272 were down 23.1% from 4^th quarter 2002, an $18,059,043 decline occurring mainly in oilfield businesses.   The other declining industries experienced one digit losses, as construction sales dropped 5.0% to $60,711,525; sale of wholesale goods declined 2.3% to $46,261,864; Transportation, Communication and Public Utilities (TCPU) sales contracted 1.5% to $37,465,352; and Agriculture, Forestry and Fishing (AFF) sales were reported to be $2,050,076, a 0.1% decline.  (See page 15 for detail.) 

Taxable by Industry.   The greatest percentage gain in taxable sales came as sales of wholesale goods increased 16.9% to $5,741,544.  AFF sales also marked a double-digit gain, 13.7%, for $955,930 in sales.  Manufacturing sales, while experiencing a significant decrease in gross sales, gained 2.6% in taxable sales.  The 0.3% increase in retail sales is equivalent to $322,688 in sales.  Government sales increased 135.6% to total $8,789, an inconsequential amount.

Quarterly taxable mining sales declined 13.3% to $1,153,962 while FIRE sales dropped 12.3% to $4,929,505.  The second largest sector, services, reported sales of  $21,095,302, down 2.3%.  Construction sales of $2,670,633 were down 1.2% from 2002 but marked the second highest fourth quarter on record.   Lastly, TCPU reported sales of $19,789,503, a 0.1% decline from 4^th quarter 2002.  (See page 16 for detail.) 

Gross by Area.  Seldovia gross sales increased 103.6% for the quarter with sales of $1,947,702.  Seward sales of $25,992,139 marked a 17.1% gain while Kenai’s $70,491,020 in sales were 3.2% greater than 2002 fourth quarter sales.  Soldotna sales totaled $80,949,644, a 1.0% increase over one year ago.

Two areas experienced declines for the quarter as Homer sales of $59,116,589 dropped 2.2% for the quarter, while sales in KPB unincorporated areas were down 6.2% to $209,787,257.  (See detail on page 17.)

Taxable by Area.  Seldovia sales marked the greatest percentage gain, 10.8%, reaching $674,012.  Soldotna sales increased 8.9%, with sales of $45,987,325.  Sales in Homer increased 7.1% to $26,769,669 while Seward sales increased 2.4% to $10,279,375.  Finally, sales in the unincorporated areas of the KPB gained 0.4% to total $42,085,770. 

Kenai sales, affected by closure of Big KMart, dropped 17.4% to $28,885,367.  Home Depot’s opening the week before Christmas should aid Kenai in overcoming financial woes caused by closure of Big KMart nearly a year ago.  (See detail on page 18.)

Annual Sales

KPB 2003 annual gross sales of $1,907,367,607 were 1.7% above those of 2002 as seven sectors had improved sales and three had declining sales.   Except for minimal government sales, and the small Agriculture, Forestry and Fishing (AFF) sector, which increased 29.2%, all gains and declines were in single digits.   Each of the five cities reported annual increases.  Total 2002 sales of $1,875,211,275 were 4.6% less than 2001 sales of $1,966,591,037, when sales were 19.6% over 2000. 

Taxable sales increased 1.0% from 2002 to 2003 with sales of $730,084,079, following a 5.7% increase from 2000 to the 2001 level of $705,255,160 and 2.5% from 2001 to 2002 when sales totaled $722,741,579.  Four cities had increased taxable sales during 2003. 

Gross by Industry.  The AFF sector had the largest annual gain, 29.2%, with sales of $21,606,878.  The construction sector gained 7.8% with sales of $246,319,503.  FIRE increased sales 5.4% to reach $57,794,630.  The large retail sector gained 4.0%, or $25,201,066, to total $647,910,118.  Sale of wholesale goods increased 3.0% to $193,667,937 while service sector sales of $277,323,902 rose 0.1%.  The inconsequential $41,980 in government sales was an 85.9% increase. 

TCPU sales of $158,575,219 marked an 8.2% decrease while mining sales decreased 7.6% to $104,866,721.  Manufacturing sales lost 0.9% from 2002 with sales dropping from $201,047,383 in 2002 to $199,260,719 during 2003.  (See detail on page 19.)

Taxable by Industry.  AFF sales rose 11.9% while sale of wholesale goods increased 11.2% with sales of $4,993,507 and $24,127,089, respectively.  Construction sales rose 4.4% to $11,159,302 while retail sales increased 2.2% to $426,644,510.  Government’s 85.9% sales gain, all taxable, is inconsequential at $41,980.

Taxable sales in the mining sector decreased 16.7% to $4,871,944.  FIRE sales were down 5.9% to $22,611,146 while manufacturing sales were down 4.1% to $9,220,812.  TCPU sales declined to $81,629,051, down 2.9%, but remained second highest on record.  Service sector sales declined 0.1%, or $157,813, to $144,784,738.  (See detail on page 20)

Gross by Area.  Seldovia gross sales expanded 50.4%, reaching $7,249,883 for the year, showing strength in the construction sector.  Seward, with $155,457,527 in sales, marked a 9.3% gain.  Homer sales increased 3.6% while Soldotna sales increased 3.3% to reach $271,731,386 and $336,479,105, respectively.  Kenai, even with Big KMart’s closure, was able to increase taxable sales, with a 0.6% increase to $281,004,611. 

KPB’s unincorporated area is the only region to see a decline in gross sales for 2003, declining 0.6% to $855,445,098.  The decrease is equal to $5,121,641 in sales.  (See detail on page 21.)

Taxable by Area.  Homer sales increased 8.5% to $130,970,774 while Soldotna sales gained 7.4% to total  $190,031,510.  Seldovia sales of $3,371,067 marked a 2.8% increase as Seward sales increased 1.0% with reported sales of $76,340,341.

Kenai taxable sales were down 11.3% for the year, dropping to $121,155,210 while sales in the KPB unincorporated area decreased 0.6% to $208,214,977.  (See detail on page 22.)

CONSTRUCTION PERMITTING

Quarterly Permitting

There were 58 construction permits issued in KPB cities during fourth quarter 2003, a 20.8% increase over fourth quarter 2002 when 48 permits were issued.  Total value of those permits was $6,943,945, up 43.7% from the same period of 2002 when permit values totaled $4,832,620.  Data in this section does not include construction activity outside incorporated cities of Homer, Kenai, Seward and Soldotna because the KPB does not require building permits.  Seldovia requires permits but information is not current so data is not included.

By Area, Value.  Homer permits provided 43.8% of value for the quarter, issuing values totaling $3,042,900.  Kenai permit values of $2,455,500, were 35.4% of the borough-wide total.  Soldotna’s $873,045 in value and Seward’s $572,500 in value added 12.6% and 8.2% of the total, respectively.  (See detail on page 27.)

By Type, Value.  New residential permit values totaled $2,528,091 during fourth quarter 2003, 36.4% of total permit value.  New commercial permits added 30.8% of the total with $2,139,491 in value.  Commercial alteration/ addition permit values of $1,988,363 provided 28.6% of the total with residential alteration activity completing the total with $288,000 or 4.1% of the total.  (See detail on page 28)

By Area, Volume.  Of the 58 fourth quarter construction permits, Kenai issued 21, or 36.2%.  Homer and Soldotna each issued 13 permits while Seward finished the quarter having issued 11 permits.  (See detail on page 29.)

By Type, Volume.  Twenty-three commercial alteration permits were issued while 20 were issued for new residential projects.  Nine permits were for residential alterations while six permits were for new commercial projects.  (See detail on page 30.)

Annual Construction - Year 2003

Construction permits are required by KPB cities, but not by the KPB, resulting in incomplete construction activity data, but indicating area trends.  Permit values during 2003 totaled $41,703,677, a 9.2% decrease from 2002.  It was the third highest total value on record, following the total of 1995 when Seward’s SeaLife center was permitted bringing the total permit value to $61,510,032 and 2002 when the total was $45,922,776. 

There were 324 permits issued during 2003, 5.5% less than the 343 issued during 2002, and second highest on record.  Kenai issued the greatest number of permits and has done so in all but four years since 1986 when permitting was first recorded.

By Area, Value.  Homer permitting provided 36.8% of KPB annual value, issuing permits totaling $15,326,815, a 52.5% increase over 2002.  Kenai’s $10,441,800 total value added 25.0% to the KPB total but marked a 37.8% decrease from the previous year.  Seward permit values increased 0.9% for the year to $7,982,765, providing 19.1% of the total.  Soldotna permit values dropped 28.8% to $7,952,297, also providing 19.1% of the KPB total.  (See detail on page 31.)

By Type, Value.  New residential activity resulted in permit values of $15,553,888 and provided 37.3% of the KPB total.  New commercial permit values totaled $14,127,701 and 33.9% of the total.  Commercial alteration/addition permit values totaled $9,775,309, 23.4% of the total.  Finally, residential alteration/addition permits added $2,246,779 for 5.4% of the KPB total.  New residential and commercial alteration/addition increased value for the year 10.7% and 25.0%, respectively.  New commercial values declined 35.2% and residential alteration/addition total value was down 0.5%.  (See detail on page 32.)

By Area, Volume.  Kenai issued 114 of the 324 permits, providing 35.2% of the KPB total.  Homer issued 86 permits while Soldotna issued 74 permits, 26.5% and 22.8%, respectively.  Lastly, Seward issued 50 permits, 15.4% of the total.  Only Homer had a permit volume greater than 2002 when it issued 67, a 28.4% increase, each of the other areas experienced declining permit activity.  Kenai, with the greatest number of permits, issued 5.8% fewer permits than during 2002.  Soldotna’s 74 permits marked an 18.7% decrease from last year and Seward volume was down 21.9% for the year.  (See detail on page 33.)

By Type, Volume.  Commercial alteration/addition annual activity for 2003 increased 8.0% as 95 permits were issued, setting a new record high.  New residential activity declined 1.0%, with one less permit than last year’s 102 permits, third highest total on record.  There were 103 permits issued during 1994.  Ninety residential alteration/addition permits were issued, 18.2% less than 2002.  New commercial activity decreased 11.6% to 38 permits.  (See detail on page 34.)

EMPLOYMENT

KPB’s December 2003 labor force was 20,853 persons, the highest December count on record.  It totaled 21,705 during January 2003, rose to 25,370 during July and has experienced the customary winter decline of this seasonal economy.

There were 2,824 persons listed as unemployed in the KPB during December, sixth highest since 1990.  The highest December unemployment total occurred during 1996 when 3,524 persons were ready and willing but unable to find employment. 

KPB’s December unemployment rate reached 13.5%, well below the highest 19.0% rate of December 1991 and 17.1% in 1996.  The lowest 2003 monthly rate, 9.9%, occurred during May.

KPB employers employed 18,029 persons during December 2003, a decrease of 4,915 from the August annual high. 

Average monthly employment for 2003 was 20,030 persons from an average monthly labor force of 22,626.  The resultant average monthly unemployment rate of 11.5% left a monthly average of 2,596 persons unemployed.  (See detail on pages 39-41)

  POPULATION

Population estimates for 2003 show the Kenai Peninsula population at 51,220 persons, a 0.1% gain for the year.  Homer grew by 3.6% to 4,893 while Kachemak City gained 12.9% to a total of 473 persons.  Soldotna also increased, gaining 2.9% to 4,059 residents.  Kenai decreased 0.6% to 7,125 and Seldovia city lost 2.6% with 300 persons.  Seward’s population is down 2.2% to 2,733. (See page 42 for detail.)   Alaska’s population, estimated at 648,818 for 2003, also marked a 0.1% increase for the year.