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Fayetteville, region economic fortunes tied to Fort Bragg

FAYETTEVILLE, N.C. — The loss of thousands of military jobs at Fort Bragg. Declining property values and incomes across the region. Millions of dollars in lost tax revenue for programs and services.

That's the worst-case scenario for Fayetteville and the surrounding region outlined in a report developed for the Army as it looks ahead to a smaller, restructured force.

Congressional leaders and local officials say the report released a week ago is no reason to panic. They point out that under some scenarios in the same report, Fort Bragg would undergo few changes.

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But for two economists familiar with Fayetteville, the report should be a wake-up call for a community reliant on military dollars.

Fort Bragg accounts for 46 percent of the gross domestic product for the Fayetteville metropolitan area, according to the latest available figures from the U.S. Bureau of Economic Analysis. While private industry made up 85 percent of North Carolina's economy in 2009, it was half that rate for Fayetteville.

Simply put, Mike Walden, the state's chief economist at N.C. State said, Fayetteville has too many eggs in one basket.

"There should be concern," Walden said. "Fayetteville, more so than any metropolitan area in the state, depends on one industry,"

Local elected leaders and key business recruiters, who said they have already been awakened to the need to diversify the Fayetteville economy, are banking on a plan unveiled last spring that seeks to grow other sectors, such as insurance and chemical and plastics manufacturing.

"We are definitely not there," Mayor Tony Chavonne said. "It remains a work in progress."

Last year, the Fayetteville Regional Chamber hired consultant Jay Garner to develop a blueprint for growing the economy beyond Fort Bragg. His report highlighted problems with crime, appearance and the work force as factors that may impede economic development.

Local officials said talk of Fort Bragg cuts is premature, but they acknowledged the military buildup that characterized the last decade is over, as the U.S. winds down two wars and the government grapples with soaring deficits.

History lesson

It is not as if the most recent wake-up call is the first one. For more than 20 years, at least, local leaders and economic development officials have seen and heard warnings that, as economist William Fruth said in 1998, Fayetteville is too dependent on a single federal "faucet."

Some officials said they lost sight of diversifying the economy in the run-up to the last round of base closure and realignment. The base shifts, collectively known as BRAC, were completed in 2011 and brought huge gains in personnel and new construction to Fort Bragg.

Doug Peters, CEO of the Fayetteville Regional Chamber, said his focus when he arrived here in 2008 was on leveraging BRAC economic opportunities, such as new retail, office space and defense contractors.

"It caused us to kind of take our eye off the need to do that," he said of diversification.

For years, Fort Bragg has been a catalyst for the local economy and tax base. The steady military and Department of Defense paychecks have given entrepreneurs the confidence to open businesses or build apartments or houses.

"It's been like a sense of security," said Curtis Worthy, a Fayetteville city councilman from 1997 to 2007.

Mark Kendrick, a city councilman from 1985 to 2003, said the prevailing view on economic development has been: If it's not broken, don't fix it.

Economic engine

Today, Fort Bragg has about 55,000 active-duty personnel and is responsible, directly and indirectly, for injecting nearly $11 billion each year into Cumberland other surrounding counties.

But the gravy train could slow, according to the harshest scenario tucked into an Army report this month looking at what would happen amid a broad restructuring and downsizing of the nation's fighting forces. The potential cuts at Fort Bragg - the departure of 8,000 military and civilian jobs under one alternative - could mean a loss of up to $24.7 million in annual state tax revenue, as well as reduced home values and a decline in incomes in the region.

Walden said for every $1 in income directly lost to Army cuts, the region could lose $2 in economic impact.

"I think it would be appropriate for leadership in the region to look 10 years down the road," Walden said. "In the new economic world, the new military world . the military will still be important but it won't be a growth area."

According to the research by Garner, the chamber's consultant, compensation paid to military and civilian employees on Fort Bragg accounted for 49.5 percent of Fayetteville compensation in 2010, compared with 39 percent in 2001.

Joel Naroff, president of Naroff Economic Advisors in Pennsylvania, said the Fayetteville-area economy is like a poorly planned investment portfolio - heavily dependent on one stock.

"You are essentially, totally and completely dependent on the base," he said. In October, Naroff was the speaker at the Economic Outlook Symposium sponsored by Methodist University's Center for Entrepreneurship. "Any other way of looking at it is denying reality. Just about everything is going to be affected by the military."

"You can hope that nothing happens to Fort Bragg," Naroff said. "But the time is now to start planning on how to deal if something does."

The community's steady reliance on Fort Bragg was shaken in 1990 during Operation Desert Storm, when tens of thousands of soldiers went to war. Many of their spouses went back to their home states.

For months, Fayetteville became a ghost town of sorts. Restaurants closed, and businesses near the post boarded up.

"It was a wake-up call," said Systel owner Keith Allison, who was chairman of the former Fayetteville Area Economic Development Corp. in the late 1990s.

Suddenly, officials were scrambling to diversify the economy with more private-sector jobs. They found success at Cumberland County's industrial park on Tom Starling Road. In the 1990s, companies such as Walmart, Maidenform, Coca-Cola Bottling Co., Cutler-Hammer and Purolator built new distribution centers and warehouses, although some have since closed.

"I think we as a county have tried to diversify," said Billy King, a Cumberland County commissioner since 1990.

In 2001, a recession came, followed by the terrorist attacks on the U.S. The county's success at economic development stalled. At the same time, Fort Bragg continued to grow, buffering the community from the worst effects of the most recent recession. While Fayetteville has struggled with civilian unemployment, the city has enjoyed rising incomes and a stable housing market as many parts of the country have suffered.

Government at all levels, including the military, makes up 55 percent of the Fayetteville metropolitan area's economy, compared with the statewide average of 15 percent. And while the city's two medical centers are growing and more defense contractors have settled in, many civilians are stuck with low-paying service jobs if they can find work at all.

Unemployed

The lack of economic diversity is more than an academic concern at Fayetteville's unemployment office.

Philippia Vonetta Wilcher, 40, and her husband, Ellis, stopped by the office on Ray Avenue on Thursday to talk to a veterans counselor. She retired six months ago after a 20-year career in the Army, and her husband is scheduled to retire Feb. 1. She is taking classes online, she said, and looking for a full-time job.

"It's kind of hard, but I'm trying to get it done," she said.

James Parker, a 49-year-old from Hope Mills, was laid off in November from Hostess Brands when the company folded.

"I'm thinking about going back to school, maybe," Parker said, before stepping into the unemployment office.

He worked for Hostess for 11 years. He was in sales. Being jobless has been hard, he said.

"I mean, I make enough money just to live," he said, referring to unemployment benefits.

Over the past year, Cumberland County's unemployment picture has been bleaker than the state average, which already is higher than the national average of 7.8 percent. North Carolina's December jobless rate was 9.5 percent. Cumberland County's rate was 9.7 percent in November, the most recently available statistic.

One problem officials cite is the quality of the local workforce. Studies done during the BRAC moves found lower literacy rates and higher dropout rates in the region.

Jim Lott, director of the Work Force Development Center, is trying to turn those problems around. The center, which is run by Fayetteville Technical Community College, worked with about 1,200 people last year, mostly adults who lost their jobs. They were counseled and got help getting retrained.

"I think the real issue is our manufacturing base continues to get a little lower," Lott said.

According to a Fayetteville Observer review of Bureau of Economic Analysis data, about three-fourths of Fayetteville's private-sector economy is based on services. The rest of the private sector relies on goods-producing industries.

Peters, the chamber president, called the 75-25 percentage mix a concern, underscoring the need to find more "value-added jobs." They include a new customer call center, initially employing 150, announced in November by Sykes Enterprises. The county and city approved a combined tax incentives plan, worth over $400,000 over seven years, for the center.

Walden, the state economist, said regional leaders should look to recruit industries that can complement the military but also stand on their own. Businesses associated with technology, agriculture and warehousing could be targets for recruitment. The largest areas of growth, he said, will be health care and the service industry.

The Garner report for the Fayetteville chamber recommended that local leaders seek to expand in four industries which already have a presence and a trained work force. They are: military contracting; financial services, such as payroll and insurance; electrical manufacturing; and specialized chemical and plastics manufacturing.

In response to that report, the chamber has formed the Economic Development Alliance to lead job-creating efforts. The group, armed with $815,000 collectively coming yearly from the city, county and the Public Works Commission, is aimed at driving the economic diversity that economists say the area needs as a bulwark against shifts in military spending.

"That's our plan," Mayor Chavonne said.

Jimmy Keefe, chairman of the county Board of Commissioners, also stands behind the effort.

"I think the Garner report gives us some good, solid fundamental practices that everyone should use," he said.

Staff writer Andrew Barksdale can be reached at barksdalea@fayobserver.com / Staff writer Drew Brooks can be reached at brooksd@fayobserver.com

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