November 2, 2011

Economics of a Boomtown affecting prices

By Kate Ruggles
Farmer Staff Writer

In a day and time when ‘Occupy’ protests have been popping up in major U.S. cities all over the country, those in McKenzie County have managed to press on without complaint, in spite of the fact that certain aspects of this modern-day ‘Boomtown’ have really hit some people and businesses hard.
When the explosion of new people and businesses started arriving,  many people felt things would or should eventually settle down. However, when the intensity increased and started impacting not only McKenzie County’s pace and way of life, but the cost of living as well, residents realized things weren’t even close to settling down.
Now the cost of living in McKenzie County is rising, and many find that their dollar doesn’t get them as far as it used to, which has added stress and tension to an already taxing situation.
Many factors are affecting costs, and while not all of them are oil-related, one major impact that is almost certainly oil-related has to do with the amount of available housing.
“It’s a simple supply and demand equation,” states Gene Veeder, executive director of the McKenzie County Job Development Authority.
The oil boom has created a need for jobs that can’t be filled by local residents. Therefore, to fill those jobs, employees will have to move in, requiring a place for them to live.
In talking with local landlords, property managers and realtors, housing just simply isn’t available.
DeeAnn Long, manager of a property in Watford City and Williston, says, “I would tell someone looking for housing not to come until they have secured it or to get a job with an employer who provides it.”
Another property manager, Reyburn Johnston, says that when people call him, he has to put them on a waiting list, because an unoccupied property doesn’t sit vacant for very long.
What that makes available to the newcomer is new developments, which are not as affordable.
According to Johnston, for profit man camps can cost a worker around $135 a day.
“A big reason is because their company will give them a daily living allowance or per diem,” states Johnston.
However, not every new employee or newcomer has been given a per diem, and in that instance, what can be done?
“The only way to bring housing down is to build more housing units,” states Veeder. “The more housing that is built and available, the more affordable it will become.”
That’s why Veeder says that he spends a lot of his time trying to secure housing for Watford City.
But building new houses, bringing in mobile homes, developing neighborhoods, mobile home and RV parks, and building apartment complexes takes time. Not only does a developer have to decide to invest the time and money, but resources have to be brought in, which seems to be half the battle, and another major factor driving costs in McKenzie County.
The cost of freight has gone up tremendously in the past year, and not because of the oil industry.
“One major factor affecting freight costs in North Dakota was the Minot flood,” states Brad Parker, Communications director for Food Services of America. “However, on a national level, the cost of diesel fuel has impacted delivery prices.”
Freight costs, though seemingly a consequence of America’s current economic condition, have really impacted local retailers.
Jan Riely, who orders fabric for Barrett Pharmacy & Variety, states that she is growing in concern for the local consumer.
“I am concerned for those who are elderly and on a fixed income, with prices going up so high,” states Riely.
Riely goes on to explain that, “Retailer prices are dictated by what it costs them to buy the merchandise and bring it into town, and the cost of shipping has really gone up.”
“The cost of shipping has affected pricing so much that a customer, on Social Security only, had to think about whether she was really able to buy her fabric,” states Riely.
According to Watford City Mayor Brent Sanford, there is a lot of pressure on the local consumer and businesses, and big reason has to do with freight.
“It is difficult to get goods into this area, because it can only come by truck,” states Sanford.
Sanford makes the point that this summer was not a friendly time for local suppliers, either.
“The construction slowed down traffic, putting pressure on freight drivers,” states Sanford. “And the oil industry really seems to absorb resources, which puts pressure on our local businesses.”
Not only do rising freight costs put pressure on local businesses, but rising costs and higher oilfield wages also put pressure on local businesses to offer increased wages to their employees and new hires.
And while salaries and hourly wages are not a factor that affects the cost of living, they impact residents none the less.
According to the 2010 Census, the median household income for McKenzie County is $49,465, an amount that represents an honest day’s work, but would barely be enough to make ends meet in this booming economy.
“Our salary wages are dictated by the state,” states Amy Fast, director of Social Services for McKenzie County. “The county just purchased housing for new employees and reserved a unit for Social Services. If they didn’t do that, we wouldn’t have been able to hire a new social worker.”
What seems to make living in this Boomtown different is that what McKenzie County lacks in housing, the rest of the country lacks in jobs, making the oil boom economics that dictate McKenzie County’s current cost of living unbalanced.