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November 2002

More than just a pretty place?

Natural amenities offer some rural counties a leg up in attracting people, but economic prosperity does not necessarily follow

Ronald A. Wirtz
Editor

Editor's note: The following article is a continuation of research on the rural census in the Ninth District. See previous articles in the September issue.

In the battle for growth, some rural counties seem to have all the right stuff.

Lake County, Mont., for example, is the lap of scenic luxury. Located in the upper western portion of the state, Lake County is home to most of Flathead Lake, the largest freshwater lake in the western United States and reportedly one of the cleanest. Look to the east, and you're staring at the Mission Range of the Rocky Mountains; turn north, you'll see the high mountains of Glacier National Park. The Bitterroot Range and Cabinet Mountains lie to the west and northwest.

Sharon Procopio sits in that lap of luxury. She is a vice president and manager of the Glacier Bank branch in Polson, Mont., population 4,000, which lies at the foot of Flathead Lake. Procopio has an office “about 50 feet” away overlooking Flathead Lake, she said. “I have probably the best office in the U.S.”

Procopio came to Polson in 1993, one of many others attracted there, at least in part, by the natural splendor common throughout much of western Montana. During the 1990s, Lake County's population grew by 26 percent, to almost 27,000. While many small rural towns in the district have languished, Polson has grown about 20 percent in each of the last two decades, despite being better than an hour's drive or more from the regional centers of Kapispell to the north and Missoula to the south.

As baby boomers near retirement, as folks of all stripes pursue leisure, and as telecommunications and other advances make the geographic proximity of home and work less important, the pundits and prognosticators said beautiful rural areas would reap much of the benefit. People are going to get out of the rat race, they said, and into something more comfortable and aesthetically pleasing.

In fact, that does appear to be happening—people are moving to rural places with high natural amenities. The lure is obvious. “You want to be able to sit on your deck and watch the sunset over the lake,” said Al Hanley, executive director of the Minocqua-Arbor Vitae-Woodruff Chamber of Commerce in northern Wisconsin, a region home to some 2,300 lakes, streams and other small water bodies.

The area has been a northern getaway since the 1920s, “when the rich and wealthy people from Chicago, Milwaukee and Madison found it was a good place to get away from the city,” Hanley said. Those with a slice of that heaven often tell their friends. Steady transportation improvements—a four-lane freeway has been slowly creeping north and is now just 20 miles short of Minocqua—have accelerated the pace of development in the area.

“Our biggest marketer is the [Department of Transportation],” Hanley said. Easier access has cut the trip from Chicago from about eight hours to five or six. Hanley ought to know because he got recruited from Chicago about a decade ago, becoming part of the 16 percent population growth in Oneida County during the 1990s.

Real estate buying pressure in the area has continued unabated despite the downturn in the economy, and prices seem to have no leash. Hanley said one local real estate agent had closed on about $11 million in sales in just the first eight months of the year. “It's amazing. They [buyers] still continue to buy at the prices [sellers] ask, and as long as there's a buyer, there's going to be a seller.”

Yes, come closer

In the 1990s, many rural counties lost population, but many others managed to grow. The full reasons are complex, but there appears to be a link between rural population growth and the presence or absence of natural amenities—namely, the amount of water and forest in a county, and the presence of hills or mountains.*

Anecdotally, at least, that is the case made by many in rural America, among both the amenity haves and have-nots. But there's more to this scenic picture than meets the eye, and not all of it's pretty. Research by the fedgazette investigated the effect or correlation of natural amenities on population migration and income growth in rural counties. A closer look found:

• Weak population-to-amenity correlations among all counties. Across all 274 rural counties in the district, there was only a small correlation between a county's water or forest area and its population growth.
  
  
• Strong population correlations among the natural amenity “elite.” The 10 percent of rural counties with the highest amount of water surface or forest, as well as those counties with significant hills or mountains, saw population growth that was much higher than the rural county average.
  
  
• Weak income effects. Counties with the highest amount of inland water saw income grow slightly faster than the rural average. But across all counties, the “water effect” had no significant impact on income. What's more, the top 10 percent of forested counties, as well as counties bordering a Great Lake, saw slightly slower-than-average income growth. Hilly and mountainous counties saw income grow at a considerably slower pace.

Other research has found generally similar relationships between natural amenities and population migration. Kikuo (Rocky) Oishi, an economics graduate student at the University of Minnesota, found that natural characteristics—relative size of water surface area, cooler summers and warmer winters—were all factors related to population growth in Minnesota and its neighboring states.

A 1999 study by David McGranahan of the Economic Research Service, a data arm of the U.S. Department of Agriculture, said that “[rural] county population change is more highly related to these natural amenities than to urban proximity, population density, or economic type, although these too play a role.”

Recent research by McGranahan and ERS colleague Calvin Beale found that remote counties with small populations and few natural amenities “were especially likely to lose population during the 1990s.” One reason, they said, was the quality of life in these locations.
“[T]hinly populated areas are difficult to live or do business in, absent compensating natural amenities.”

McGranahan also looked at the amenity effect on population in the 1980s, a period of profound strife in much of rural America. He found that amenity measures were less effective as a predictor of population growth during this decade, but suggested that “the pull of high amenities is greater than the push of low amenities.”

In some cases, amenities appear to work in concert. Many people, for example, are drawn to mountains and other scenic vistas. But in fact, fully 20 rural counties that are designated as hilly or mountainous in the district (a total of 55) lost population in the 1990s, almost exclusively in Montana and North Dakota. The “x factor” appears to be forests. Only three of the mountainous counties that lost population had a forested area of more than 10 percent. By contrast, among the 35 mountainous or hilly counties that gained population (mostly in Montana, but a handful in other states) 28 were at least 10 percent forested, and most had a much higher percentage.

Careful what you ask for

Sparsely populated counties with poor natural amenities appear to be on a slippery slope. Without natural amenities, family connections are the main—indeed, only—draw for some counties to bring new people to town. As more residents leave, these critical family connections get cut off. If there is nothing to attract labor, there is also little to attract new businesses. Young people and families facing meager opportunities decide to go elsewhere, and the cycle continues.

By implication, amenity-rich counties have an inherent advantage over their have-not peers in attracting people and importing economic activity, and numerous sources acknowledged the advantage. But maybe the most notable paradox is that comparatively strong population growth—itself considered a measure of well-being—in the district's amenity-rich corridors did not translate into overwhelming economic improvement.

Go back to Lake County, Mont. It ranks among the top 10 percent of counties in water and also, with its Rocky Mountain location, has scenic vista status. Per capita income in Lake County grew just 34 percent during the 1990s, a rate that barely outpaces inflation over the same period and is one-third less than the average for all rural counties in the district.

But as one Montana saying goes, you can't eat the scenery. In a way, the county tried, as it used to have many more good-paying logging and mining jobs than it does today. “The environmentalists have pretty much shut us down on that,” said Procopio, who's also head of the local chamber. State figures show that only about 325 people were employed in mining and lumber in the county as of 2000, or about 4 percent of total employment. It's been a struggle to replace the wages of those lost jobs, in part, because “there's no industry to speak of here,” Procopio said.

But another reason for poor income growth in Lake and many other high-amenity counties is the seasonal tourism economy that has replaced natural resource extraction industries of years past. While seasonal residents and tourists bring valuable activity to a region, they have limited firepower as an economic engine.

Show me the money

It's not that there are no jobs. In fact, there are plenty, as employment growth actually outpaced population growth in most high-amenity counties in the 1990s.

In Crow Wing County, Minn., in the heart of a lake-laden region known as the Brainerd Lakes Area, population grew a healthy 24 percent in the 1990s. But employment grew almost twice as fast, adding more than 10,000 jobs, according to census data.

The problem, some people point out, is that employment growth is dominated by the low-paying retail and service sectors. In Crow Wing, construction, real estate and finance, and manufacturing all saw healthy gains in employment. But combined, they added only half as many jobs as the service and retail sectors. Data from the local chamber also showed that annual service and retail wages were well below—by $5,000 to $18,000—those of other major employment sectors in the county.

Ravalli County, on the middle-western border of Montana, saw its population grow by 44 percent in the 1990s, tops in the state. Most of the credit goes to the Bitterroot Valley, a banana-shaped, postcard-beautiful region that runs through the heart of Ravalli County. The valley is wedged between the Bitterroot Mountains to the west and the Sapphire Mountains to the east, a span about 25 miles wide that runs north about 100 miles toward Missoula.

“People are moving here full time because it's very beautiful,” according to Elaine O'Leary, program operator for the Bitterroot Job Service Workforce Center in Hamilton, Mont.

Jobs are following that influx of people, as nonfarm employment grew by 67 percent, or almost 6,300 jobs, during the 1990s and unemployment dropped from 8.4 percent to 5.2 percent. But that job growth hasn't changed the local economy much. Most openings in the county are geared toward retail sales and service jobs, O'Leary said. “With the influx of people, there have been more of those types of jobs. ... There's not much industry growth.”

There is some good news, as construction employment in Ravalli grew by about 160 percent, or 1,000 jobs, in the 1990s. But manufacturing added only about 300 jobs, while retail added 1,300 new jobs and service 1,800 jobs. Combined, retail and service jobs make up almost 55 percent of all private employment in the county—true to O'Leary's word, unchanged from 1990.

Meanwhile, average incomes have lagged, growing just 39 percent in the 1990s. At less than $19,000, it's just 64 percent of the national average. Maybe worse, per capita income in Ravalli stood at 73 percent of the national average as recently as 1993.

That wage reality takes many newcomers by surprise. If they moved there “with all their bills paid,” then they tend to stay, O'Leary said. But those who moved to the valley without jobs “probably didn't do much research” before coming and often don't stay long. “Some are lifers. ... Some come and discover wages [or job opportunities] are not what they expected and end up moving somewhere else.”

Good-looking company

Montana is not alone on that amenity-rich, income-poor scale. On a map, Luce County appears isolated on the north shore of Michigan's Upper Peninsula, closer to Canadian caribou than to lower Michigan. Heavily forested and looking out over Lake Superior to the north, the county saw growth of 22 percent in the 1990s, which doesn't count the flood of tourists and seasonal residents into Newberry and other small county towns during the summer. But per capita income rose a mere 9 percent, barely eking over $17,000.

Keweenaw County is a northern peninsular tip in the U.P., with significant amenities in water, forest and hills or mountains. It managed a fulsome 35 percent increase in its population in the 1990s, though it still stands at 2,300. It achieved other successes as well, with employment more than doubling during the 1990s, which helped cut unemployment almost in half to less than 8 percent in 2000. But per capita income rose a mere 27 percent and stands at just $18,300.

The city and county of Custer, S.D., saw their populations decline during the 1960s. While the city has rebounded only somewhat, the county has seen its population grow by 50 percent since 1970, including a 16-percent gain during the 1990s, one of the fastest growth rates in the state. The Black Hills were central to that rebound.

“I think you could say that,” said Gordon Heggen, the mayor of Custer and owner of a laundromat, video and tanning business. “The aesthetics of the area, that's pretty much all there is.”

Heggen has lived in South Dakota for 24 years, and 14 years in Custer, but grew up in Colorado. “Came here on vacation and never left,” Heggen said. “In the Rockies, a person can be overwhelmed by the grandeur. Here [in the Black Hills], it embraces you.”

The local economy is very dependent on tourism, as Heggen ticked off a list of local natural attractions that included the Crazy Horse Memorial, Mount Rushmore and Custer State Park. More traditional businesses have had trouble taking root. For one, water in the area is very expensive because of supply problems, which all but eliminates many manufacturers from considering the county. “There's not a lot of push for [traditional industry],” Heggen said. Average income growth in the 1990s was 36 percent.

Oneida County in northern Wisconsin fared better than average on wage growth—57 percent during the 1990s, reaching almost $26,000. Nonetheless, Hanley, the local chamber head, said the area needed more living-wage jobs. “The local economy as far as income is probably not the greatest because we're based in tourism ... [and] tourism is highly underpaid.” Hanley said. “It's the same story. You can't continue to pay someone $6.50 an hour and then expect them to work 60 to 70 hours a week, and with very little gratitude” from owners.

The lure of amenities can also have some cruel twists for a local tourism economy. High demand for real estate means the days of old-time resorts—a main lodge with four to six cabins—are numbered, according to Hanley. It's not uncommon for someone to buy a resort—sometimes for $1 million or more—and then either sell off each cabin or bulldoze all of them to put up a new house.

While that might look like a spark to the local economy—new construction, more local property owners—ultimately it has a deadening effect, Hanley pointed out. Resorts typically have much higher occupancy rates than seasonal residences, owners of which might not be in town for more than a week or two during summer. One local resort sold out this year, and “we lost 500 to 600 people” in terms of overnight stays, Hanley said, which hits restaurants and other tourism-based businesses particularly hard.

Point us in the right direction

Though high-amenity counties might not have the world by its economic tail, most seem to believe things are on the right path regardless of what challenges might accompany a seasonal tourism economy.

Hubbard County, Minn., is home to the world's biggest muskellunge (that's a fish, for you city slickers), as well as one of the largest population increases among rural counties in the 1990s, at 23 percent. Historically, tourism has always been a big part of Hubbard's economy, and growth “has always kind of been there, but on a slower pace,” said Floyd Frank, a Hubbard County commissioner and owner of the Round Bay Resort near Nevis, Minn., for the past 22 years.

But the confluence of cheap land, particularly on Hubbard's many small lakes, and a retiring baby boom generation fueled strong growth in the 1990s. “This is just a great place. ... It's finally been discovered as other areas [closer to the Twin Cities] become saturated,” Frank said.

Once upon a time people would note how cheap lakefront property was in the area. “We don't hear that anymore.” Six or eight years ago, $40,000 could buy a cabin on a lake in Hubbard County, according to Frank. “Now you don't even find a lake property [without the cabin] for that. It's kind of spendy right now.”

Nonfarm employment grew by 57 percent, adding 3,200 jobs to the local economy and slicing the county unemployment rate from 9.4 percent to less than 6 percent. Average income went from $13,300 to more than $20,000—at 54 percent, the increase was slightly better than the rural average.

Frank said the area is a good place to be if you're an independent contractor digging septic systems or doing other work related to the area's housing boom. It used to be that contractors worked half the year “and then they do their ice-fishing,” Frank said. No more. “They're too busy now.”

A sunshiny day, whatever the weather

That's not to say amenity-rich counties are without their own unique problems. Frank said Hubbard County is dealing with a variety of issues related to the influx of retirees, including long-time residents fighting change and relative newcomers fighting the wannabe newcomers.

A source in a neighboring Minnesota county said many residents still consider the county to be rural, but “the problems we're dealing with are much more urban” in nature, including the need for improved sewer infrastructure to protect local lakes and a shortage of affordable housing.

RURAL COUNTIES IN TOP AND BOTTOM 30 PERCENT IN BOTH POPULATION AND PER CAPITA INCOME* (Based on Percent Change 1990-2000)

* Calculations use a simple average, that is, the sum of variables in each county, divided by total number of counties. Sources: U.S. Department of Agriculture, U.S. Forest Service, Bureau of Economic Analysis, U.S. Census Bureau

The September issue of the fedgazette analyzed 274 rural counties in the district, ranking the performance of these rural counties on both population growth and per capita personal income growth. In an effort to investigate why some rural counties do well and others do not, counties ranking in the top or bottom 30 percent on both measures were than analyzed more closely to see what commonalities and growth correlations could be found. (See September fedgazette.) As an extension of that research, top- and bottom-performing counties were analyzed for average amount of water and forest area. The results show that top-ranking counties have significantly more of each natural amenity than bottom-ranking ones. In fact, average amenity levels for top counties were not terribly high; rather, there was a dearth of natural amenities in bottom counties.

But at the end of the day, many rural counties are only too happy to have such problems, because it beats the alternative—no growth, period. Without tourists and retirees, some counties would likely vanish economically, evident in the fact that many small rural counties without natural amenities are vanishing, at least in a population sense. Most of eastern Montana lost population in the 1990s, and half of North Dakota's counties lost at least 10 percent of their population. Many rural counties hit their population peak 60 to 80 years ago and have been on a steady decline ever since.

Frank said the increase in retirees has helped offset a stagnating number of families and school children. “In doing that, it's started to stabilize our economy,” said Frank, adding that new commercial and retail activity has followed, providing jobs for the families that are still there.

O'Leary, from Ravalli County, suggested that things would be worse there were it not for the natural surroundings. “I think we probably would not have the influx of people and definitely not the tourists,” O'Leary said. “We'd probably be more economically depressed if it weren't for how the valley looks.”

Procopio, talking from her office overlooking Flathead Lake, said, “I think all of us wish we could increase [business and] develop things that would improve things in the off-season. ... We're not grim [in our outlook] at all. We just wish we could do more.”

In the Brainerd Lakes Area, home to 400-plus lakes that cover 100,000 acres in five counties, there are signs of a more year-round economy, like small retail shops that are staying open longer into the fall and winter season and have longer store hours, according to Lisa Paxton, head of the Brainerd Lakes Area Chambers of Commerce. But there is a lot of room for improvement in the local economy.

“We still need more living wage jobs ... and we need a better connection between seasonal homeowners and the rest of the community,” she said. “The message is, 'We're growing, but we can grow better.'”

The hump, if you will, for high-amenity counties might be in accepting their place in the continuum of people's lifestyles and knowing when and how to capitalize. “We're not a community for single people who want activity. This is not downtown Minneapolis. ... If I were 18, I'd get out of here too,” Paxton said. “But 10 years later, these people are looking to come back.”

And counties are trying a host of strategies to do just that. One engineering firm told Paxton that their best method of recruiting was to place an ad in the local paper. “The parents see the advertisement and they say [to their kids elsewhere], 'Come back, bring the grandkids, we've got a job for you.'”

See map: Recreational counties concentrated in amenity corridors.

Rob Grunewald, regional economics analyst, and Nisha Lima, research assistant, assisted with research and data analysis for this article.

*Data on water surface area comes from the 2000 census. Rural counties bordering a Great Lake (18 in all) were omitted from the calculations of the top 10 percent of counties for water area because these counties were assigned significant portions of the water area of lakes Superior and Michigan, thus distorting each county's water area. Data on forest area come from the U.S. Forest Service and are a measure of all public and private land with harvest-size timber that is not designated as underdevelopable wilderness. Topographical categorization for hills and mountains comes from nationwide research on land form topography published in the 1999 report, “Natural Amenities Drive Rural Population Change," by David McGranahan, Economic Research Service, U.S. Department of Agriculture. McGranahan used the 1970 topography scale from the National Atlas of the United States of America, U.S. Department of the Interior.

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