2021 Business Year in Review

Sara G. Norris

Instability in Emergency Services

When Kalispell Fire Station 62 closed for a few days in 2020 due to a staffing shortage, first responders worried about delays in emergency response times for Kalispell residents experiencing medical and trauma-related emergencies.

Emergency officials put a sign on the fire station entrance announcing, “Sorry, this fire station is closed today due to a staffing shortage,” but it would not be the last time. Former Kalispell Fire Chief Dave Dedman says the fire station closed a handful of times after that for the same problem, which has been an ongoing issue both locally and nationwide.

Kalispell officials said the city’s current labor agreement, however, provides an annual base salary for firefighter positions of more than $52,000, well above the state average, although it can still be difficult to find qualified applicants.

“(It’s hard) to find good, qualified people to apply,” Dedman said. “There’s an extensive background check, and as firefighters and paramedics we go into people’s homes. We are hardworking, honest people who are skilled and qualified who will provide great customer service.”

Where Should the Locals Live?

More than 15 years ago, as the first director of Whitefish’s nascent planning department, Bob Horne helped write a growth policy to steer the booming mountain town’s rapid growth. In it, he emphasized the sustainability of natural resources, smart land-use planning, economic development, transportation, and affordable housing, which he saw as inextricable threads that, if stitched together thoughtfully and responsibly, would create an enduring community fabric.

Today, Horne and other community fixtures in Whitefish say that fabric is being torn asunder by legislation that undermines the city government’s authority to craft solutions tailored to the town’s unique set of challenges, including its workforce-housing crisis.

According to a needs assessment released in December 2016, middle-income residents have limited options when it comes to finding housing, a problem that is displacing locals and forcing them to live outside their chosen community — 56% of Whitefish’s workforce lives in neighboring communities, 34% of whom would prefer to live in Whitefish. The assessment also noted that only 70% of Whitefish homes were occupied by locals, which marked a 10% decline from 2000.

“The affordability gap is now valley-wide,” Whitefish Mayor John Muhlfeld told state lawmakers. “I ask you, where are the workers who are the building blocks of our communities supposed to live? We ask that you keep local decision making at the local level. We know what is best for our town.”

High Demand Aggravates Already Tight Construction Labor Force

Managers at several construction companies have struggled over the last several years to recruit skilled labor for the construction industry. As building demand has grown in the past few years, interest in the construction trade has failed to grow with it.

According to a survey conducted by the University of Montana Bureau of Business and Economic Research (BBER) published in 2019, only 4% of people who belong to Gen Z say they would consider a career in construction, and a “large fraction of high school students would not consider a career in construction even for a six figure salary.”

“We don’t have young people coming into the construction trades,” said David Smith, the executive director of the Montana Contractors’ Association. “It’s been gradually decreasing over time and it’s not because of wages. As a 19-year-old young person, you could walk on a jobsite with a limited skillset and you would still be offered a job in the $17 per hour range or more.”

Contractors Face Historically High Lumber Prices

From the beginning of 2020, the lumber composite price index increased nearly 150% to a record high in September, according to recent report by the University of Montana Bureau of Business and Economic Research (BBER) in the Montana Business Quarterly.

Delivered log prices to mills were up 4% to 15% depending on the product from 2019, while lumber production was down 10.8% in 2020 compared to the year before, according to the report.

“The simple answer is the demand for lumber has been greater than the lumber being produced,” said Todd Morgan, the BBER Director of Forest Industry Research. “That’s the biggest piece of it, and I think the transportation piece is probably a bit clogged up.”

In the first year of the pandemic, sawmill production slowed nationwide, and while Montana’s mills weren’t as impacted by COVID-19, two of the state’s mills shut down for other reasons. Idaho Forest Group in St. Regis closed temporarily for a remodel and RY Timber Inc. in Townsend closed last summer, both unrelated to the pandemic.

Lumber transportation was also interrupted by the pandemic, leading to limited supply. Between a shortage of truck drivers, distribution center employees and added hassles of traveling across state lines, logistics were complicated.

Flathead Hotel Industry ‘Teetering on the Edge’

At the Red Lion Hotel in Kalispell, General Manager Raelene Larralde saw such a high demand for rooms that June rates were between $200 and $400 a night and she shut down third-party search engines like Expedia because there were hardly any vacancies on the books.

Larralde says June rates don’t usually go beyond $200 a night, and she had been receiving calls every day about vacancies during the weekend of Under the Big Sky Festival on July 17 and July 18, which were booked for months and rooms sold from anywhere between $500 to $800 a night.

Even with such high demand, Larralde wasn’t using 50 out of the 176 rooms at the Red Lion. She didn’t have the staff to clean them all, so they sat unoccupied until a housekeeper can get to them. Once a room was cleaned, it’s almost instantly sold to a walk-in customer.

“There’s a very high demand for rooms right now,” Larralde said. “I don’t know that the valley has a lack of rooms, it’s a lack of clean rooms.”

In the 20 years Larralde has been in the hotel and hospitality industry, she had never seen anything like this.

Priced Out

Rental scarcity isn’t new to the valley or the state, but the abrupt influx of new residents in the Flathead since the pandemic began has further strained the problem.

In 2019, Flathead County’s rental vacancy rate was 7.9%, ranking 21st out of Montana’s 56 counties, according to Montana Department of Commerce data. Statewide, at least 35.9% of people in occupied units were paying a gross rent of 35% or more of their household income, and the median gross rent was $810 in 2019.

But since the pandemic began, new residents have swarmed the Flathead, sending demand through the roof while outpacing the supply of available homes and spiking prices.

Whitefish has historically been the least affordable city within Flathead County and had a median home sale price of $611,500 in May, but City Manager Dana Smith says the affordability concerns are now saturating the whole valley.

“Back in the day if you couldn’t live in Whitefish you could live in Columbia Falls or Kalispell,” Smith said. “The entire valley is struggling with the increase in housing (demand).”

Transforming Transportation

As population and visitor growth continues to create traffic congestion and test the Flathead Valley’s infrastructure limits, city planners are working with the Montana Department of Transportation (MDT) to plan a cohesive transit system for the future.

Municipalities are in the process of updating individual transportation plans, most of which were adopted more than a decade ago, to provide a framework for efficient travel routes for the next two decades.

“We modeled growth over the next 20 years and how that affects the transportation networks,” Kalispell Development Services Director Jarod Nygren said. “It shows us how to plan for road networks, types of roads and new developments … You can’t allow new development without infrastructure.”

Whitefish city officials are in the process of updating their own transportation plan, which was adopted in 2010.

Whitefish’s study area includes areas outside of city limits, but Director of Public Works Craig Workman said the plan focuses on a multi-modal approach within the city.

“The first phase emphasizes bike and pedestrian transportation through the town as well as public transit,” Workman said. “We know we don’t have an unlimited amount of right-of-way to keep making roads bigger.”

Selling the Farm

As new residents move to the Flathead Valley, sending both housing demand and prices skyrocketing, land is increasingly valuable.

Kalispell is slated to see hundreds of new housing units on the market in the next year, and officials have been planning infrastructure development to accommodate the Flathead’s growth, including wastewater treatment and a sanitary sewer on the city’s west side.

“The thing about land development is it’s kind of a natural byproduct of economic growth,” said Dan Bigelow, an agriculture economics professor at Montana State University. “A lot of people are priced out of the market and increasing the supply of housing through development is the only way to alleviate that pressure.”

On the supply side, developers are taking full advantage of high housing prices, Bigelow says, and are willing to pay more than they otherwise would.

“With the price of land for development and housing prices being so high, landowners are making the decision that now is the time sell,” Bigelow. “But the thing about development is, it’s irreversible.”

Once farmland is developed, it will never be farmland again, erasing the agriculture community from portions of the Flathead Valley forever.

Bigelow says it’s difficult to say what impact this has on the agricultural economy, which depends on what is being produced and if it’s going to national or global markets.

Farmers in the Flathead view development as inevitable, despite their love for agriculture and open space.

2021 Business Year in Review

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