photos by L.G. Patterson
One good way to chase away the summer doldrums is to gather a collection of local business leaders for a rousing discussion of the season’s most pressing issues. And that’s just what Inside Columbia’s CEO magazine did recently, tapping into the pulse of Columbia’s economic drivers for another edition of the CEO Roundtable. In the cool confines of The Broadway Hotel, a baker’s dozen of business leaders lunched on a delectable meal from 11Eleven Executive Chef Jeff Guinn before staking out positions in the power conversation that followed.
Inside Columbia Publisher Fred Parry got the dialogue rolling by spotlighting the bankers in the room, asking for their assessment of the Columbia economy. Central Bank of Boone County President Steve Erdel had a glass-half-full perspective, noting that “things are going well. Our deposits are up double digits, loans are up double digits and our credit quality is as strong as it’s ever been since I’ve been in banking. The local economy is solid; optimism around town is strong, although it’s somewhat guarded.”
Landmark Bank Regional President Matt Williams echoed Erdel’s sunny pronouncements. “People are starting businesses; entrepreneurship seems to be at an all-time high,” he said. “I do think we have a little bit of a wary eye to what’s going on at the university — the enrollment drop and just the general state of affairs there. We’re scratching our heads just a little bit.”
Erdel and Williams both pegged housing as a sector that’s doing particularly well in the local economy.
“There are a lot of people moving into Columbia,” Erdel said. “Our loan demand for residential construction and sales of existing homes is as strong as I’ve seen it.”
“We still remember 2008 and 2009,” Williams added, recalling the Great Recession. “We’re talking to builders, saying ‘Hey, are you sure we’re going at this right?’ And they can’t keep up with the demand. We talk to Realtors and there’s not enough inventory.”
THE HOME FRONT
The take from real estate professionals sent the conversation into another realm. Kara Linnemeyer, general counsel and sales manager of Beacon Street Properties, cautioned that although 2016 has been a strong year for housing starts, builders are watching changes in zoning laws and building and energy codes to determine how they affect the industry.
Linnemeyer, who also serves as president of the Home Builders Association of Columbia, noted that, “Right now the market is good, but we are concerned about some of these things that are happening in the city and how that’s going to affect the base price of a house.”
Brian Toohey, CEO of the Columbia Board of Realtors, pointed to Columbia’s scarce inventory of homes for sale. “In a normal market, you want to have about six months of inventory,” he said. “But for Boone County, we have slightly over two months’ inventory right now; for the city, we’re actually just under two months’ inventory. Those numbers are pretty scary.”
For the past four years, demand has outpaced supply of affordable homes, Toohey added. “If you have a house that’s priced around $150,000, the second the sign goes up in the yard it’s off the market.”
Toohey blamed the lack of affordable housing on higher permit fees. “The permits keep going up and the demand keeps going up, too.”
Land supply is tight as well, Williams added, much more so than it was in 2008. “There are no lots available,” he said.
Linnemeyer’s company, Beacon Street Properties, aims for a three- to five-year pipeline of land available for subdivision development. “Trying to keep up with that is where our mentality is,” she said. “It was easier to maintain that previously, but now we’re working through it a lot faster.”
Columbia Mall General Manager Rusty Strodtman offered his perspective as a member of the city’s planning and zoning commission. “We’re predominantly a friendly commission [to homebuilders and developers]. I think the struggle we have is probably with our city council — it’s kind of in the opposite direction a little bit in that regard. For residential subdivisions, there are going to be changes with the new zoning that we’re seeing, but I don’t think it’s as dramatic as it is for the commercial side.”
StorageMart President Cris Burnam holds a less parochial view. His family’s burgeoning self-storage business has expanded rapidly into 175 locations throughout North America with an eye to markets in the United Kingdom as well.
“Columbia has always been blessed,” Burnam said. “It always gets worse last, and gets better earlier than most markets that we’re in. It’s been a very stable base.”
In a college-town market such as Columbia, Burnam said, storage units fill up seasonally. This past year, he noted, the company has rented fewer units to students than it has in the last five years. “We’re scratching our heads — still trying to figure out what has changed and what it means for the long term in Columbia.”
Burnam, whose family also owns Parkade Plaza, brought up the tight commercial real estate market, where low vacancy rates are giving property owners greater pricing power. “It’s a good spot to be in,” he said. “We like it.”
Proposed changes in city zoning could impact the value of commercial property, warned Coil Construction President Randy Coil. “It’s a huge document,” Coil said. “Nobody — except maybe two people in the entire city — has read it. There is a lot of detail. In fact, it may affect the value of your property and what you’re able to do on it.”
Plaza Commercial Realty owner Paul Land finds the aesthetic requirements of the new zoning proposals for downtown properties extraordinary — and not in a good way. “It seems incredible to me that we waited 30 years since Columbia Mall went in to get the vacancy level to 2 percent downtown,” he complained. “And now we overhaul the zoning codes to bring us back to a level of undesirability. The whole thing is overwhelming — 400 pages with 1,100 ‘Cliffs Notes’ of changes. It’s extraordinary that we would require a property to be two stories downtown, but you can’t have retail on the second floor so it requires you to put residents up there. Two-story gas stations on Providence Road? You people in the housing business know how much demand there is to live above a fuel station.”
Land worries about the burdens zoning changes would foist onto his downtown properties if disaster were to strike. Rebuilding after fire or other damage — or even remodeling and expansion — would require a two-story reconstruction, he says, costing building owners time and money while raising insurance coverage. “It’s a triple-whammy,” Land said.
“It also interferes with regeneration,” Burnam said. “They’re putting handcuffs on property owners, and that prevents them from investing in their properties.” The chaotic character of Columbia’s process, Burnam said, runs counter to economic development tactics to attract business to the community. Companies are looking for predictability in the communities where they locate, but Columbia only offers chaos, he said.
Bob Gerding, a founding partner in the accounting firm of Gerding, Korte & Chitwood, and an owner of several Columbia properties, bemoaned the unpredictability of city regulations and the paralyzing effect it has on appraisers’ valuations. “The value changes with the unknown,” he said. “The theory is if you know what you can do, everyone can live with that. Defining ‘that’ is the problem.”
“The goal of form-based zoning was predictability,” Land allowed. “But we missed it.”
‘IT’S ALL POLITICS’
Parry turned to MBS Textbook Exchange CEO Bob Pugh, a former Columbia mayor, for his take on “What’s wrong? How does something like this mushroom out of control?”
“It’s a failure on the part of the part of the people who are seeking office,” Pugh said. “People say, ‘Well, why don’t good people run?’ It’s hard to find good people. You might find someone who’s decent but dumb … it’s a political deal and nobody wants to go down there and take all that crap. People are gun-shy. I don’t blame ’em — I’m bullet-proof now — but it really is sad that there aren’t more people willing to step up and take on these issues.”
Many roundtable participants expressed wonder at what they saw as a hurried push to put zoning changes in place. “What’s the rush?” Erdel asked.
Strodtman sees it as an effort driven by city council members to slow growth downtown.
Chamber of Commerce President Matt McCormick wants more people to pay attention to the proposed zoning changes, an effort he hopes will slow the adoption process for the changes. “We need time to figure this out. There’s nothing magical about a September deadline,” McCormick said. “There are a lot of unintended consequences with these proposed changes. Nobody at the city is looking at the economic impact. There are so many pieces, and people need to find the parts of the document that affect them.”THE
ELEPHANT IN THE ROOM
Parry closed out the zoning discussion with a pivot to Gary Ward, vice chancellor for campus operations at the University of Missouri, asking for an update on the area’s chief economic driver.
Ward noted that the revenue and enrollment drop anticipated for the 2016-2017 school year would follow the university for several more years. “It’s unlikely that we’ll make up the losses in just one year,” he said. “It’s going to have a lasting impact.”
Dwindling state support has provided an opportunity for public higher education, though, Ward said. “Higher education is a consumer-based product now. The opportunity is for Mizzou to become very good at that.”
Ward cited demographics changes — the shrinking population of college-age Americans — as an exacerbation of public funding shortages. “Mizzou’s strategy was to grow our way out of the demographic decline,” Ward said. An enrollment cap at the University of Illinois helped recruitment efforts in that neighboring state until Illinois removed the cap recently.
But Ward also pointed to last fall’s protests that led to a shake-up in university leadership as a contributing factor in MU’s financial contraction.
“Last fall played a significant role in all this,” Ward said. “We damaged our brand.”
Pugh worries about the impact of fewer students in Columbia. “The population loses about 2,700 people — that’s like wiping Fayette off the map,” he said. “Losing that many students — and students do spend money here — means sales tax collections are going to go down.”
Yet the financial impact could be eclipsed by the collective emotional impact on Columbia, Pugh warned. “When a city’s largest employer is headed south, what kind of future can you look forward to? It’s not good business!”
A lifelong Columbian, Pugh said Columbia has always lived off the good times. “We’ve never had any bad times. And now, Sugar Daddy is going down a little bit. When the folks down at City Hall get their butts pinched on the sales tax loss, we’ll see what happens, because it’s going to happen.”
“The city will try to make it up in development fees,” Toohey said. “They always go back to the developers.”
McCormick raised the specter of workforce shortages. “So many of our businesses rely on the student population to staff their seasonal workforce,” McCormick said. “We’re going to have a lot fewer employees for them to hire.”
AN IMAGE PROBLEM
Strodtman interjected to offer a twist. Crime, he suggested, has played a part in some students’ decisions to attend college elsewhere, and may be driving a general reticence to visit or move to Columbia.
“We are seeing more and more customer feedback at the mall that people — from Kirksville, Boonville — are concerned about coming to Columbia. People in our own central Missouri region hear and read about the shootings and they think it’s the wild West.”
“We’ve got an image problem,” McCormick said. “It’s a perception problem, because our crime rate is down.”
Community boosters often point to the Columbia Regional Airport as another image problem for the city.
“Columbia has an image problem, all right, and our image problem is that airport,” said Pugh. “We have customers fly in and they think they’ve landed in Port-au-Prince, Haiti.”
Voters took the first step to remedy the problem when they approved a measure Aug. 2 to increase the city’s gross receipts tax on hotels and motels to 5 percent as a means to fund a replacement airport terminal. Greg Steinhoff, president of strategic operations for Veterans United Home Loans, led the effort to pass the lodging tax increase as co-chairman of the Foundation for Columbia’s Future, a political action committee that supported the 1 percent tax increase.
“Columbia deserves a better facility,” Steinhoff told the roundtable group. “It’s the face of Columbia to visitors from the outside.”
“The bed tax is an appropriate funding mechanism,” Steinhoff added. “Out-of-towners are the main ones supporting it for one-quarter of the financing; the federal government is paying the rest. The financing plan makes sense, and we really need a new airport.”
Steinhoff noted that the current terminal is over capacity with two daily round-trip flights each to Chicago and Dallas-Fort Worth. “We can’t add any more flights with our present terminal. We’d like to add a flight to Charlotte, N.C., and another flight to Chicago and to Dallas, and maybe add Denver to the mix. But we can’t do any of that until we build a new terminal.”
AROUND THE ROUNDTABLE
From the rapid-fire round, here’s a look at what’s preying on the minds of CoMo business leaders.
COIL: “Infrastructure. With all this zoning and rezoning … we really need to get some long-term thinking, some long-term planning into the structure system.”
PUGH: “There’s a desperate need to get level-headed, intelligent people to run for city council; to stand up and be counted and try to run this city like it should be run.”
STRODTMAN: “Sales tax. E-commerce. We’re seeing it at the mall — we’re down. One of our fears is we’re going to continue to be taxed to fix a lot of other problems.”
WILLIAMS: “Jobs. When you look at the places around the country that are doing well, they’re welcoming businesses in, and businesses bring jobs. You have to get that mindset — jobs are what drive the economy.”
STEINHOFF: “The IT work supply. We hired 60 last month and could have hired several more if we could get adequate programmers.”
GERDING: “This perception about us being a wild, wild West. Last fall, we got beat up really bad, and I don’t know how we get on top of delivering a different message and who would deliver that message.”
BURNAM: “Infrastructure and perception — I come across it all the time. If you’re trying to recruit employees, IT workers, and you’re here in Columbia, it’s tough. You have to go to a headhunter.”
McCORMICK: “Low unemployment rate. We have an extremely low unemployment rate here. One of the biggest challenges our employers are dealing with is finding employees.”
TOOHEY: “There’s a lot of polarization in Columbia, especially when it comes to dealing with the city. There are so many boards and commissions with polarizing views — one group has the city council’s ear and the other one doesn’t. I think if you combined them, you’d solve a lot of the angst.”
WARD: “The university has to do a better job of communicating how we add value. You’re going to see a lot more of us ringing our own bell.”
LAND: “I have concerns about I-70. Kansas City and St. Louis are getting a bigger part of the transportation pie, and this here is turning into a big parking lot.”
ERDEL: “I think our town will remain a regional shopping center, if you will, but I worry about giving away our advantage. We’re making zoning rules that make things harder; our image is bad. We may push small business away to places like Jefferson City, or even Hallsville and Ashland, who are welcoming anybody who will come.”
LINNEMEYER: “The Community Land Trust — where the city will build houses or potentially remodel houses and put them into this trust so it continues to own the land but somebody can buy the house — is an interesting model for affordable housing. It could be a way for the city to promote affordable housing without impacting developers and homebuilders by requiring them to be accommodating when new residences are developed. It’s something I’m trying to monitor — this whole idea of affordable housing and how it actually gets implemented in the city.”
Roundtable Roll Call