Jobs and Vacant Properties Remain Top Concerns; Shale Heating Up

This report captures the top concerns of the Community Survey's respondents in the Fourth Federal Reserve District. The survey will be conducted twice annually and the results will be used to enhance our understanding of the issues, both current and upcoming, that are facing our District. 

Additional survey comments

In 2011 the Federal Reserve Bank of Cleveland began conducting a semi-annual community issues survey. We reported results from the inaugural survey last fall, in the first edition of Issues & Insights. For the June 2012 survey—which assesses stakeholders’ concerns for the first half of the year, as well as issues they expect to emerge in the year to come—we received 167 responses. (Scroll to the bottom for a breakdown of respondents.) Results from the survey, detailed herein, are shared with constituents across the district as well as with colleagues at the Board of Governors in Washington, D.C., who use the findings to help inform the governors, Federal Reserve Bank presidents, and Federal Reserve Chairman Ben Bernanke of on-the-ground conditions in each district.

Current Issues

“Producing jobs, particularly good-paying jobs available to lower-income households, will be critical to any local economic recovery. The challenge is that job growth is often in industries that require skills or training the lower-income households do not have.“ – Executive director of a housing research institute

“Abandoned and vacant properties equal increased crime, squatting, neighborhood decline, and decreased vitality. Businesses do not want to be located in a blighted neighborhood.“ – Pennsylvania social services agency director

1 - It’s All About Jobs

Availability of local employment opportunities remains the top concern in Fourth District communities, according to stakeholders who responded to our June 2012 survey. Nearly 42 percent of respondents ranked employment as one of their top three concerns, with 15 percent ranking it their number one concern. Regarding availability of jobs since the start of 2012, most respondents (52%) felt it was unchanged, while 17 percent reported a decrease. Thirty-one percent of respondents reported employment opportunities had increased in this time period.

Comments about employment focused mainly on three themes: the type of jobs available; skill sets of job seekers; and impacts of job loss on communities, consistent with results of our 2011 community survey. A state housing director in Ohio wrote, “There are not enough good-paying jobs to provide financial security for families or to stimulate the economy.” Another opined that “many good-paying, quality jobs with benefits have left or downsized.” Also noted was the mismatch between the skills of job seekers and the needs of employers. “Our present work-force is not trained for high-paying 21st century jobs,” wrote an Ohio foundation director. “Therefore, companies leave the state or don’t locate here.” The executive director of a university’s housing research center touched on both job availability and job skills, pointing to the importance of both for the economic recovery: “Producing jobs, particularly good- paying jobs available to lower-income house-holds, will be critical to any local economic recovery. The challenge is that job growth is often in industries that require skills or training the lower-income households do not have.”

Job loss impacts communities in other ways, too. A mediation program director observed that “unemployment and underemployment are still the biggest contributing factors to foreclosure.” One county development director mentioned  the “increasing demands for social services due to high jobless numbers”; another wrote about the importance of job opportunities for community and family stability.

“Our present workforce is not trained for high-paying 21st century jobs.“ – Ohio foundation director

2 - Vacant Properties

Vacant and abandoned properties ranked as a top concern for a third of survey respondents. Nearly 70 percent indicated vacancies have increased in their communities since the start of 2012. A majority of respondents’ comments focused on negative impacts these properties have on communities, including increases in crime and decreases in property values. Many noted communities’ inadequate resources to deal with them. To one Pennsylvania social services agency director, “abandoned and vacant properties equal increased crime, squatting, neighborhood  decline, and decreased vitality.” This respondent then added, “Businesses  do not want to be located in a blighted neighborhood.” Dwindling budgets to deal with increasing vacancies also drove pointed comments. “Vacant and blighted properties have destroyed neighborhoods, and the resources available to deal with them are inadequate,” wrote a city’s community development director. The president of a CDFI wrote, “Vacant, abandoned, and REO properties continue to plague Cleveland neighborhoods. Without new federal resources—CDBG, HOME, NSP—there are few options for filling the market gaps to convert these liabilities to assets.”

3 - Access To Credit And Capital For Small Businesses

Third among respondents’ top concerns is the ability of small businesses to access credit and capital. When asked about change in access since the beginning of 2012, almost half (46%) said it stayed the same, followed by 28 percent who reported access had decreased. Respondents’ comments fell largely into two buckets: blame for the regulatory environment and frustration over businesses’ inability to secure credit and capital that’s critical to their expansion and job growth. A Kentucky banker wrote, “Credit underwriting requirements imposed by the regulators have tightened at the same time that small businesses and consumers are unwilling to borrow.” According to an executive at a financial institution in Ohio, “Recent regulatory initiatives are making it more difficult to lend money to small business. Over-regulation will impair lending.” Banks were mentioned by numerous respondents as “not lending.” A state-level department of development specialist commented, “Small businesses are telling us they still can’t get loans from banks to start or continue operations.”

The impact of the tightened credit and capital standards was evident in a number of responses. “The lack of access to capital is very problematic as it is hurting existing small businesses and preventing new businesses from being established or growing,” wrote a nonprofit director. Small businesses, wrote another, “are still having problems with lines of credit and the ability to borrow to maintain and expand operational capacity. This stymies the job market.” A number of respondents expressed the importance of small businesses to our economy. “Small business is the linchpin to our regional economy, and banks are still being slow to loan money for expansion or equipment,” noted a nonprofit director in Ohio. A CEO of a CDFI in Kentucky stated it more simply: “Small business is THE driver of the US economy.”

Emerging Issues

On The Horizon…

Looking ahead, respondents feel they’ll be most concerned a year from now about jobs, budget cuts, and vacant properties, in that order. Clearly, the employment and housing challenges their communities face—both of which rank at the top of current and emerging concerns in this survey period—will not be solved in the near future. Concerns over possible federal-level budget cuts may be linked to uncertainty over the economy and the outcome of the presidential election. Respondents had some thoughtful, insightful things to say about these emerging issues; see a selection of the comments at Issues & Insights: General Comments.

What Else Is Bubbling To The Surface?

Over the past few years, shale gas drilling has heated up in several parts of the District, including counties in eastern Ohio and southwestern Pennsylvania. While shale deposits under the Earth’s surface have existed for millennia, newer extraction techniques—including horizontal drilling and slick-water fracturing, called “fracking”—along with the discovery that some shale yields both natural gas and oil, have prompted a boom in the industry. As with every boom, there is excitement and concern. In communities experiencing a surge in shale drilling—many of which are rural—the influx of workers and equipment is driving up rents and taking a toll on local roads. The policy implications of a boom like this are both short-term and longer-reaching. Will existing housing meet the increased need? Can local workforce development programs and community colleges develop the necessary curricula soon enough to allow local residents to enter this burgeoning job market? Can a proper balance be struck that maximizes the gas and oil recovered, minimizes the environmental impact, and allows communities to prosper?

Another concern shale drilling raises, for land banks in particular, is mineral rights leases. Two types of mineral rights exist: surface and deep-well layer. Many property owners in Ohio and Pennsylvania have leased the mineral rights to their land; these rights, however, with sometimes convoluted and rapidly changing ownership, can be difficult and expensive to identify as active or expired, as well as to extinguish. Hence the challenge facing land banks. With vacant properties a growing problem for many communities, land banks have emerged as an effective tool to help channel such properties into productive reuse, whether as refurbished homes or community green space following demolition. In communities where shale drilling is taking hold, however, it could become prohibitively expensive for land banks to take on properties with existing or unclear mineral rights leases.

Although shale drilling has not yet landed among the top three issues in our survey, respondents weighed in with comments that reflect their hopefulness and concern. See related comments online.

“The shale oil and gas development has the potential to dramatically improve the future. We need a region-wide strategy for how to reinvest in higher education and small business before the oil and gas largess is gone.“ – Port authority executive director in Ohio

The Ties That Bind: Where Community Issues Intersect

Many respondents pointed to the interconnectedness of the challenges they face in their communities. “All of the issues are interwoven with each other– foreclosures, unemployment, lack of education and training,” one wrote. “One cannot be separated from the other.” How closely linked are the issues? And what are the implications for policymakers who must consider how best to address these multiple, interrelated challenges? While we cannot determine a relationship between two or more issues from our informal survey, we detect some illuminating patterns among both tallied answers and the comments from respondents.

“There have been insufficient resources to address the effect of foreclosed properties, which has created a backlog of vacant and abandoned property. As long as foreclosures continue, that backlog will continue to grow.”

“Small businesses are the economic engines of our communities. They have a difficult time accessing capital for their businesses and are therefore unable to grow (and create jobs).”

“The foreclosure crisis has led to high levels of abandonment in American communities. The end result is that families are left scrambling for decent affordable homes, which are now in high demand. Unfortunately, the affordable housing demand becomes a crisis due to budget cuts at all levels of government.”

“Education is the foundation for the skills that will allow individuals to get quality jobs in the future. Having an educated and qualified workforce will also be critical to regional competitiveness.”

“Vacancy is a by-product of population loss. Population loss is directly connected to job loss and lack of employment opportunities. Job creation and economic development are key to rebuilding the city’s physical fabric.”

Survey Methodology

The Federal Reserve Bank of Cleveland developed this survey tool in 2011 to elicit perspectives from stakeholders across the district on key issues facing the communities and individuals they serve. The initial survey was issued in Fall 2011. We sent a second online survey in June 2012 to 1,032 individuals working in a range of organizations; 167 completed the survey. Following is a breakdown of the types of organizations that provided responses, as well as the states in which these organizations are located. Please note that the findings and comments we include herein and on our website reflect only the perspectives of those who responded to the survey and not all the organizations within our district.

General Comments

Topping the list of greatest concerns for communities a year from now was the availability of local employment opportunities (36%) according to those responding to our survey. Following employment was budgetary cuts and financing issues at the federal level (34%) and vacant and abandoned property (31%). Two overarching themes emerged from respondents’ comments on employment: quality jobs and a quality workforce. The director of banking trade association wrote, “The availability of quality jobs defined as adequate compensation short term, real opportunity long term. This underlies all of Ohio’s social welfare questions.” A university professor stated, “Jobs are increasing, but many don’t have the skills for them.” Another noted that “some highly skilled position will remain vacant for extended periods because the quality workforce doesn’t exist.”

Comments on the federal budgets cuts focused mainly on their impacts on local communities and the current political environment. Cuts to programs such as CDBG and HOME were mentioned by number of respondents. A director of a nonprofit in Pennsylvania wrote “Federal budget cuts have decreased the programs and services that decrease blight, increase affordable housing opportunities, and increase the number of children successfully obtaining an education.” The budgets cuts, this respondent continued, “Adversely affect the ability of non-profits to provide these services resulting in economic instability now and in future generations.” Others expressed concern that the cuts in federal programs hurt those least able to handle the cutbacks. “For families below the poverty line, a huge segment of the population in Appalachia, access to federal programs is critical,” noted a CEO of a housing organization in Kentucky. A number mentioned concern with the federal policies in place to deal with our economic recovery. A program director in Ohio wrote “The federal government needs to do more to stimulate the economy to get people back to work. Concern about budget deficits is misguided in our current economic environment.” Both the legislative and executive branches of the federal government were attributed blame for the political gridlock in Washington, a planning director in an Ohio county, “Federal budget process needs to stop being down to the wire. Make the cuts that are needed and we will learn to live with them—the uncertainty is unproductive.”

Vacant and abandoned properties rounded out the top three in terms of issues of concern a year from now. Responses focused mainly on concerns about more vacant properties being added to an already large inventory of distressed properties and their impact on communities. A nonprofit executive director in Kentucky commented that “More foreclosed homes keep coming on the market and vacancies in urban areas continues to increase, driving down property values and detracting from neighborhoods.” Resources to deal with the issue are also of concern. “There are more vacant properties every day and nothing suggests there are adequate resources to address it,” wrote a respondent from Ohio. A Pennsylvania banker stated, “funds are needed to rehabilitate entire blocks in [some] neighborhoods and not much is available. Eventually, the vacant housing stock will become an even more serious problem.”

What Else is Bubbling to the Surface

“Having been in banking for 50-plus years, today is the first time in my career there is hope for economic growth resulting from oil and gas leasing and exploration in East Central Ohio.” –Ohio Bank CEO

“Marcellus Shale gas is providing new job opportunities that could be enjoyed by the local workforce. This and other job creation tactics must address stable, well-paying, place-based employment in order to build stronger communities and families.” – Program officer from a Pennsylvania foundation

“Now that we need people to work in the shale gas and related fields we need qualified people. The jobs that are available require skills our unemployed people don’t have. Only one out of ten applicants for unskilled labor jobs can pass a drug screen.” –City planner from a local government in Ohio

“If fracking takes hold in southern-central Ohio, those communities will face/are facing a need for workforce housing, schools, roads and infrastructure the communities do not currently have, or have the capacity to properly plan for and build.” – Bank Senior Vice President in Ohio

“I think the emergence of gas and oil drilling in record numbers is going to be one of the largest areas of concern in the Pennsylvania and Ohio regions. While we all want the income and prosperity that can be gained, I am truly concerned about what the drilling can do to the residential value of the housing stock in these areas. As a primarily residential lender, I think this could become a major concern moving forward. It is my understanding that our states do not currently have the laws that will protect our citizens from the hazards of drilling. More experienced states (Texas, Colorado, etc) have laws in place to protect homeowners from these concerns.” – Bank Vice President in Pennsylvania

“The emergence of natural gas drilling in the Fourth District and the implications of community and economic development is at a critical stage. Pennsylvania's recent passage of Act 13 (Oil and Gas Law) will have implications on community land use decisions, and investment patterns as a result of local impact fee money and changes to zoning responsibilities.” – Regional director of a Pennsylvania nonprofit

“Columbiana County is in the center of Ohio's Utica Shale gas boom. The environmental consequences are not fully known and many land owners see leasing their land as the windfall of a life time with no thought given to potential pollution of aquifers, streams, etc. along with the adverse impact on county and township roads.” – Executive director of an Ohio nonprofit

“Depending upon drilling activity, affordable housing could become a scarce resource for existing and potential residents in towns that have not needed significant housing stock in the past. Developers and advocates will need to balance need for housing, with possibility that the economic activity may not be long-term and therefore need/market for new affordable housing is only short-term.” – Housing preservation coordinator for a nonprofit in Ohio Return