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Call it the Katrina effect

HUD money catalyst for personal income growth numbers

In March, the Bureau of Economic Analysis (BEA) released figures that seemed to be great news for the Magnolia State. Using preliminary estimates, it found that in 2007, Mississippi ranked near the top in the nation in personal income growth.

The state saw personal income growth in 2007 of 7.4%, up from 6% in 2006. And, Louisiana ranked first at 10.5%, though that was well down from the 20.6% reported in 2006.

In per capita income growth, Mississippi ranked third at 6.7%. It trailed only Louisiana (9.2%) and New York (7.6%). (The estimate of personal income in the U.S. is derived as the sum of the state estimates. It differs from the estimate of personal income in the national income and product accounts due to differences in coverage, methodologies used to prepare the estimates and in the timing of the availability of source data.)

By comparison, U.S. personal income grew 6.2% in 2007, down from 6.7% in 2006. U.S. per capita income grew 5.2% in 2007, down from 5.6% in 2006.

This all seems fantastic, but…

Federal funds to the rescue

The old saying about statistics comes into play here. The BEA says post-Hurricane Katrina funding from the U.S. Department of Housing and Urban Development (HUD) greatly boosted both Mississippi’s and Louisiana’s numbers.

BEA reports Mississippi’s housing subsidies from HUD added $530 to per capita income, and nearly $1,250 per Louisiana resident.

Another BEA statistic in the report is not nearly as welcome. The Magnolia State ranked dead last in per capita income in 2007, as it did in 2006. According to the BEA, the state’s per capita income was $28,845. Three southern states (Arkansas, $30,060, South Carolina, $31.013, and Alabama, $32,404) ranked in the lowest 10 in per capita income. No southern state made the top 10.

Disparities in income can be found not only from state to state, but also from county to county, points out Dr. Marianne Hill, senior economist with the State Institutions of Higher Learning in Jackson.

Looking at income levels by Zip Codes paints a true picture of this disparity. Madison’s 39110 Zip Code ranks first in the state at $73,938. In fact, the list is dominated by metro Jackson-area communities. The other top 10 Zip Codes are on the Coast and in DeSoto County, both progressive, large-population areas that are growing rapidly. The Delta and other rural areas do not make the “hot” list. (For more on the state’s hottest Zip Codes, see “Metro Jackson communities home to the wealthiest Zip Codes” in the March 31 issue of the Mississippi Business Journal.)

“Madison County, for example, has personal income well above the national average,” Hill says. “Others are well below the national average. I believe the lowest is Jefferson County, which has personal income levels that are only 44% of the national average.”

Jefferson County consistently has the highest unemployment rate in the state (in January, it was number one at 12.7%), which Hill says shows systemic problems. She adds that the only real way to boost the state’s income level is to improve citizens’ skills, which requires a change in the state’s institutions. In short, education is the key, and there is no quick-fix.

“Building per capita income involves long-term economic development,” she says.

Mixed bag

Speaking of economic development, how do income levels affect the work of economic developers? Just as the numbers in the BEA are a mixed bag, low per capita and personal income levels are a double-edged sword for developers.

Mitch Stennett, longtime head of the Economic Development Authority of Jones County, says he is never asked about per capital income by prospects, but that is not to say that they are not looking. He believes those numbers have already been scrutinized before the prospects come calling.

And, low-income levels are not deal-killers, he says. In fact, many prospects see low income as a plus — their payroll will be lower. It can act as an incentive.

A recent study by KPMG LLP backs Stennett’s stance. It found Jackson ranks sixth in the nation in the least-costly metropolitan areas to do business among 18 U.S. locations with populations between 500,000 and 1.5 million. And, one of the reasons given for the Capital City’s attractiveness is its “competitive salary and wage costs.”

The difficulty for economic developers, Stennett says, is that now, he and his peers are interested in recruiting talent, not businesses. Boosting income levels is a huge focus of his industry today. A prospect’s salaries are becoming more and more important, trumping often job creation.

“It used to be that we ‘chased smoke stacks,’ what I call base industry,” Stennett says. “Now, we’re not trying to recruit business — we’re trying to recruit people, talent. It’s not like the old days.”

Stennett points to two recent wins for the county as example of the “new day” in economic development. One will employ at the most 70 workers, the other, maybe only 10. But, both will pay annual salaries well within the $30,000 range. Those type prospects, he says, is what he and others in his industry are after.

Gift horse

While the HUD funding has skewed income numbers in Mississippi, it is still a shot in the arm for the state. In total, Gov. Haley Barbour has directed that $3.95 billion to be used on housing or housing-related programs in an effort to help Mississippi Gulf Coast residents get back on their feet.

In early March, Barbour announced Mississippi would seek federal approval to commit another $100 million for the Long-Term Workforce Housing Program, a component of the state’s housing assistance program. If approved, it would increase the program’s funding to $350 million, more than twice the original estimate, according to the Governor’s Office.

While the state and Barbour are happy with the funding, HUD has been equally pleased with the state’s handling of the funding. HUD’s Office of Inspector General audited 5% of funding recipients, and found two errors one ineligible recipient and one duplication.

Barbour says, “Of course in a program this big and this complex, you’re always going to have some mistakes. But, this audit shows our overall system is not only sound, but it points to Mississippi as an innovator and leader when it comes to disaster recovery and assistance.”

Contact MBJ staff writer Wally Northway at wally.northway@msbusiness.com.

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