The State of the CityThe State of the CityThe Honorable Scott MyersMayor

Mr. J. Michael Joyal, Jr.City Manager

Mr. Brian J. GottlobPolEcon Research

Forum SeriesForum Series

7:30 a.m. Tuesday, February 12, 2008Cocheco Country Club

The

Sta

te o

f the

City

The

Sta

te o

f the

City

The Honorable Scott MyersMayor, City of Dover

The

Sta

te o

f the

City

The

Sta

te o

f the

City

Mr. J. Michael Joyal, Jr.City Manager, City of Dover

The State of Our City isGOOD

We must continue to find our way along a path towards

GREATNESS

Volunteers Make Dover GreatVolunteers Make Dover GreatArena CommissionArena CommissionZoning Board of AdjustmentZoning Board of AdjustmentRecreation Advisory BoardRecreation Advisory BoardUtilities CommissionUtilities CommissionCemetery BoardCemetery BoardSolid Waste Advisory CommissionSolid Waste Advisory CommissionTransportation Advisory CommissionTransportation Advisory CommissionCocheco Waterfront Development Cocheco Waterfront Development Advisory CommissionAdvisory CommissionLibrary TrusteesLibrary TrusteesConservation CommissionConservation CommissionDover Business and Industrial Dover Business and Industrial Development AuthorityDevelopment AuthorityDover Housing AuthorityDover Housing AuthorityMcConnell Center Oversight McConnell Center Oversight CommitteeCommitteeOpen Lands CommitteeOpen Lands Committee

Professional Staff Make Dover GreatProfessional Staff Make Dover Great

Executive OfficesExecutive Offices

FinanceFinance

Planning and Community DevelopmentPlanning and Community Development

PolicePolice

Fire & RescueFire & Rescue

Community ServicesCommunity Services

RecreationRecreation

Public LibraryPublic Library

Human ServicesHuman Services

Public SchoolsPublic Schools

“If you're doing something you care that much about, and you believe in its purpose deeply enough, then it is impossible to imagine not trying to make it great. It's just a given.”

Jim Collins, AuthorFrom Good to Great: Why Some Companies Make the Leap… and Others Don’t

Population growthPopulation growth

24,000

26,000

28,000

30,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Population Trend Line

1.0% Annual Growth

Source: NH Office of State Planning

Student growthStudent growth

3,000

3,500

4,000

4,500

5,000

1998 2000 2002 2004 2006 2008

Students Trend Line

1.5% Annual Growth

Source: Dover School Department

Development activityDevelopment activity

0

200

400

600

800

1998 2000 2002 2004 2006 2008

Total Permits Dwelling Units Trend Line Trend Line

-0.4% Annual Growth

-1.0% Annual Growth

Source: Dover Planning Department

Vehicle RegistrationsVehicle Registrations

25,000

27,000

29,000

31,000

33,000

1998 2000 2002 2004 2006 2008

Vehicle Permits Trend Line

1.3% Annual Growth

Source: Dover Finance Department

Assessed valueAssessed value

500

1,000

1,500

2,000

2,500

3,000

1998 2000 2002 2004 2006 2008

Valuation (millions)

Source: Dover Finance Department

Average Home ValueAverage Home Value

50,000

100,000

150,000

200,000

250,000

300,000

1998 2000 2002 2004 2006 2008

Average Residential Value

17.0% Annualized Return

Source: Dover Finance Department

Average Home Tax BillAverage Home Tax Bill

2,000

3,000

4,000

5,000

6,000

1998 2000 2002 2004 2006 2008

Tax Bill

8.5% Annual Growth

Source: Dover Finance Department

General fund balanceGeneral fund balance

2,000,000

4,000,000

6,000,000

8,000,000

1997 1999 2001 2003 2005 20070

2

4

6

8

10

Fund Balance Percent of Budget

14.9% Annual Growth

Source: Dover Finance Department

North End Fire Station

Public School Renovations

Streets & Sidewalks Repairs

Downtown and Waterfront Development

Master Plan Update

Tax Cap Charter Amendment Implementation

Projects and Activities

North end Fire Station

Public School Renovations

Streets & Sidewalks Repair

Downtown and Waterfront Development

Master Plan Update

Successful Implementation of Tax Cap

Our Most Immediate Challenge

Our Continued Trek to Greatness

“We must maintain unwavering faith that we can and will prevail in the end, regardless of the difficulties,

AND

at the same time, have the discipline to confront the most brutal facts of our current reality, whatever they might be.”

Jim Collins, AuthorFrom Good to Great: Why Some Companies Make the Leap… and Others Don’t

The

Sta

te o

f the

City

The

Sta

te o

f the

City

Mr. Brian J. GottlobPolEcon Research

Trends and Directions in The Dover Economy

Presentation to the Greater Dover Chamber of Commerce “State of the City Forum”

February 12, 2008

Brian J. GottlobPolEcon

Dover, NH(603) 749-4072

bgottlob@poleconresearch.com

U.S. Economic Overview

• Slowing Economy Through Summer (Recession is Semantics – Weakness Will be Clear)

• Housing and credit markets are biggest risk• Impacts spreading to consumer & business

confidence as well as spending• Labor market continues to weaken• Large monetary (interest rates) and fiscal stimulus

will limit severity of downturn

Nationally, Business Confidence Has been Eroding Since the Summer “Subprime Shocks”

Weekly Business Confidence Index

0

5

10

15

20

25

30

35

2007

Marc

h

June

Sept.

2008

N.H. Economic Overview

• Performance will be better than the rest of New England

• But we are not immune to weakening national economy

• Housing just beginning to affect the labor market • Business access to credit is key – remember the 1990-

91 recession?• Long-term success depends on our ability to continue

buck unfavorable regional demographic trends

Delinquencies and Foreclosures in NH Showed No Signs of Slowing Through Q3 of 2007

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 070.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

% NH Loans Past Due

% NH Loans in Foreclosure

NH Housing Price Appreciation (OFHEO Index) & Loans in Foreclosure

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

'00 '01 '02 '03 '04 '05 '06 '070.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

NH Home Price Aprreciation

% NH Loans in Foreclosure

Unfortunately, Home Price Trends Will Determine How Many Loans Eventually Fall Into Foreclosure.

Price Appreciation in NH Has Been Negative Since Mid-2006. NH is one of 21 States as of October, With Negative Appreciation

NH Home Price Appreciation

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2005 2006 2007

Source: Loan Performance Inc., First American Core Logic

The Housing Market Won’t Stabilize Until The Supply of Unsold Homes Declines, but Inventory Continues to Rise

(Albeit a Bit More Slowly)

2,599

1,260

2,246

1,085

0

500

1,000

1,500

2,000

2,500

3,000

2006 2007

Houses Added to Strafford Co. Market and Home Sales

Added to the Market Houses Sold

Source: Northern NE Real Estate Network (does not include all inventory and sales in the state)

The “Wealth Effect” of Reduced Home Values. Home Equity Lines of Credit (and Cash-Outs Refi’s) Fueled

Consumer Expenditures. Now HELOC’s are Trending Downward in NH While Delinquencies Increase

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

2002

2003

2004

2005

2006

2007

HE

LO

C's

($00

0's)

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Del

inqu

enci

es ($

000'

s)

HELOC's at NH BanksDelinquencies

One Fallout From Subprime Crisis - Tighter Credit The Federal Reserve Senior Loan Officer Survey Shows All

Types of Credit are Tightening% of Loan Officers Saying Credit is Tightening

-40

-20

0

20

40

60

80

100

2003

2004

2005

2006

2007

2008

Tightening for Large & Medium C&I Borrowers Tightening for Small C&I Borrowers MortgagesPrimeSubprimeComm.Real Estate

To Date, Commercial and Industrial Lending By NH Banks Does Not Seem To Be Affected by Credit Market Woes

(Well Functioning Credit Markets are Essential for Economic Growth)

C&I Lending by NH Banks

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

2003 2004 2005 2006 2007

Mill

ions

sC

&I

Len

ding

by

NH

Ban

ks

NH Employment Peaked This Past Summer(and the Peak Will Likely be revised Downward)

625

630

635

640

645

650

655

2006 2007 2008

New Claims for Unemployment Offer One Sign That We May Avoid Recession

Average Weekly New Unemp. Ins. Claims in NH

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

The NH Leading Index Dipped Further Into Negative Territory

-40

-30

-20

-10

0

10

20

30

40

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

NH

Inde

x V

alue

-6%

-4%

-2%

0%

2%

4%

6%

% C

hang

e in

Em

p. O

ver 1

2 M

os. P

rio

NH Leading Index Value

Rate of NH Emp. GrowthIndex Value: -20.3

The NH Leading Index Has Turned Down Sharply (Recession Risk Jumps to 60%)

The Northeast Continues to Have Population Growth but it is Losing Out to the South and West

(Residents Fleeing the Northeast) Population Change 2000-2006

3,745,322 3,387,539

2,439,502 2,542,127

-1,830,176 -1,107,625

2,604,422

333,379

1,236,750 1,954,761

1,023,8701,644,011

-4,000,000

-2,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

Northeast Midwest South West

Net Domestic MigrationInternational MigrationNatural (Births-Deaths)

Northern New England (Mostly NH and Maine) Attract Residents From Other States While International Migration Keeps Southern

NE from Pop. Losses Sources of Population Change 2000-2006

239,283

-361,834

45,27324,629

315,876

80,145

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

Net Domestic Migration

International Migration

Natural (Births-Deaths)

Southern NE

Northern NE

New Hampshire is Not The Oldest State Nor is it Aging Fastest – But There are Demographic Challenges

• NH has lower fertility rates (third lowest in the nation)

• Lower mortality rates (because of better health of seniors)

• Both of which are signs of success• All civilized societies age as they prosper – it is

inevitable• NH is attracting fewer 30-44 yr olds because there are

fewer of them everywhere – especially in the Northeast

The Mistaken Logic Of NH “Losing Young Families”: The Difference Between a Smaller Age Cohort Because of Getting Older or “Age

Progression” and a Smaller Cohort Because of Moving Out-of-State

88,490

70,444

76,884

70,444

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2000 2005 ("Expected" Basedon # of 25-29 yr olds in

2000)

Actual 2005

Age 30-34 Age 25-29

DifferenceBetween Actualand “Expected”Is “Migration”And = 6,440Into This Age Group. The 30-34 Age GroupIs “Smaller”Than in 2000 ButNot Because of “Out-Migration”

Examined This Way NH Continues to Attract Young Households

(Albeit at a Slower Pace than in the 1980’s and 1990’s)Estimated Net In-Migration 2000-2005

4,936

-972

-1,753

-3,374

-13

1,988

7,906

6,440

1,251

-1,350

-4,000 -2,000 0 2,000 4,000 6,000 8,000 10,000

20 - 24

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

65+

Source: PolEcon analysis of “Current Population Survey” data

Dover’s Economic Performance has Been Strong and We are Better Positioned for Long-Term

Prosperity

Important Trends in Dover

• Changing demographics– Higher levels of educational attainment - “up-skilling”– Increasing income - “up-scaling”

• More diversified economy – Less reliant on cyclical industries– Less reliant on a few, large employers– Better able to whether national and state downturns

• Changing expectations – By residents– By businesses

• What hasn’t changed (enough) our view of Dover

Population Trends Confirm Dover’s Attractiveness

Population Change 2000-2006

2.2%

3.4%

4.2%

4.9%

5.8%

6.3%

6.8%

7.6%

1.2%

0.9%

0.1%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

Portsmouth

Keene

Nashua

Manchester

Concord

Laconia

Merrimack

Londonderry

Salem

Dover

Rochester

Dover Has Added Highly Educated and Skilled Residents Faster than Has NH as a Whole

% Change in the Composition of Pop. Over 25 by Educ. Attainment 1990-2000

0.6%

2.3%

2.1%

1.1%

4.4%

3.7%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Associate Degree

Bachelor's Degree

Graduate or Prof.Degree

Dover

NH

Dover Now Has a Population and Labor Force that is Well Educated, Higher Skilled, and Better Able to Support Growth Industries

% Pop. Over 25 by Educ. Attainment (2000)

12.6%

30.1%

20.0%

8.7%

18.7%

10.0%

9.6%

28.6%

20.7%

9.5%

21.1%

10.6%

14.2%

32.3%

20.2%

8.9%

15.1%

9.2%

11.9%

25.1%

21.4%

9.1%

22.0%

10.4%

0% 5% 10% 15% 20% 25% 30% 35%

No HS Diploma

HS Grad

Some College, noDegree

Associate degree

Bachelor's degree

Graduate or Prof.Degree

Dover

StraffordCo.(Less Dover)Rock. Co.

NH

The most valuable resource in the 21st

century is brains. Well educated people tend to be mobile. Watch where they go because where they go robust economic

activity will follow

…..and change and conflict will inevitably follow

Since the Turn of The Millennium, Dover’s Rate of Private Sector Employment Growth Has Significantly Exceeded That of NH

Private Sector Employment (Index 1996=100)

95

100

105

110

115

120

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Dover

N.H.

Employment Growth Has BeenStronger in Dover – Especially in Recent Years

15.7%

2.9%

15.1%

-5.6%

8.6%

4.1% 3.9%

-2.3%

-10%

-5%

0%

5%

10%

15%

20%

1996-2006 2002-2006

Private Sector Employment Growth

DoverStrafford Co.N.H.Laconia

Compared to Other Communities, Local Government Emp. Growth Has Been Lower in Dover in Recent Years

24.0%

36.5%

26.8%

20.20%

3.9%5.5% 6.6% 6.50%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1996-2006 2002-2006

Local Government Employment Growth

DoverStrafford Co.N.H.Laconia

Avg. Weekly Wages Show Dover Having Solid Gains in Job Quality

64.0%

45.1%

55.6%

17.8%

8.1%

17.6%

-5%

5%

15%

25%

35%

45%

55%

65%

75%

1996-2006 2002-2006

Private Sector Growth in Avg. Weekly Wages

Dover

Strafford Co.

N.H.

Dover is “Transitioning” Nicely to a More Diverse Economy, Adding Employment in Newer or Faster Growing (Nationally) Industries, While

Stanching the Manufacturing Losses of the 1990’s Emp. Growth 2002-2006

11.4%

4.9%

-2.3%

10.6%

-8.7%

4.6%

12.6%

11.4%

-32.5%

0.9%

1.6%

16.2%

21.6%

25.8%

32.1%

10.7%

2.5%

-7.7%

-9.1%

-40% -20% 0% 20% 40% 60% 80%

Manufacturing

Retail Trade

Health Care

Prof. & Tech. Service

Wholesale Trade

Information

Educational Services

Dover

Strafford Co.

N.H.

The Numbers Behind the Percentages

Emp. Growth 2002-2006

18

27

92

103

207

269

275

416

0 50 100 150 200 250 300 350 400 450

Manufacturing

Retail Trade

Wholesale Trade

Prof. & Tech. Service

Information

Adminitrative Support

Educational Services

Health Care

Compared to Most Regions in NH – Dover Has Not Lost as Much of Its Manufacturing Base

(Portsmout Benefits From the Presence of Pease Tradeport)

Manufacturing Emp. (Index 1996=100)

70

80

90

100

110

120

130

140

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Dover Ports.

Manch. NashuaN.H.

Along With Employment Growth, Dover Has Done Comparatively Well Expanding its Commercial/Industrial

Tax Base Pct. Change in Commerical/Industrial Valuation 1999-2006

90.3%

113.8%

124.7%

137.7%

176.4%

83.3%

77.6%

60.6%

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%

Rochester

Keene

Nashua

Laconia

Concord

Dover

Manchester

Portsmouth

Continued Strong Growth in Commercial/Industrial Valuation is Needed to Balance Recent Population Growth

Comm./Ind. Valuation per Capita

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

00 01 02 03 04 05 06

DoverRochesterLaconia

ConcordKeene

Moving Forward There Are Many Challenges, Here are a Few

• Manage conflicts over changing expectations/views of city – Prosperity depends on the quality and “amenity value” of the city– With changing demographics comes different expectations for services– How we resolve this conflict determines our long-term prosperity

• Fiscal prudence is important and necessary but communities can’t “cut their way to prosperity” – implementation of the “tax cap” could unwind recent economic gains

• Increasingly Dover’s employment base can ‘blend” into the fabric of the community but there is a need for more strategic locations to accommodate businesses

• A higher skill economy requires connections to (and identification with) higher-education institutions – Dover has little of either

• Dysfunctional democracy delayed the positive trends, it could just as easily reverse them