December 16, 2013

Economic recovery seen on horizon for Merced

Recent news that Wal-Mart is at least a year away from breaking ground on its distribution center in Merced might be difficult for the city’s unemployed to swallow, but area leaders and experts believe an economic recovery is on the horizon.

Recent news that Wal-Mart is at least a year away from breaking ground on its distribution center in Merced might be difficult for the city’s unemployed to swallow, but area leaders and experts believe an economic recovery is on the horizon.

Councilman Michael Belluomini said although the Wal-Mart news is disappointing, he’s optimistic that Merced is on the upswing. “I’m feeling like we’re slowly on the mend,” he said.

Belluomini said the retail giant’s interest in Merced could generate interest from other corporations or industry, despite its delay.

Wal-Mart, the world’s largest retailer, proposed in 2005 to build a 1.2-million-square-foot distribution center on a 230-acre site at the northwest corner of Gerard Avenue and Tower Road. The center could employ as many as 1,200 people and operate 24 hours a day.

City officials said last week they don’t expect the project to break ground until after 2014. The project was mired in a court battle that lasted longer than three years. The California Supreme Court declined to hear the case in March, effectively ending the dispute.

“At this point, I think the city has done all that it can,” Belluomini said, adding the court case was out of city hands. “The ball’s in Wal-Mart’s court.”

The state’s urban and coastal cities have experienced economic growth during the recovery that outpaces much of what has occurred in the Central Valley. However, Merced’s jobless rate – 12.1 percent – is 2.1 percentage points lower than this time last year.

Frank Quintero, Merced’s economic development director, said it’s important to note that Merced’s agriculture-based economy is not going to recover in the same way as, for example, the technology-based economy of Silicon Valley. “Recovery is happening, but it’s slower than the rest of the state,” he said.

Quintero echoed the idea that companies are attracted to areas of activity, so Wal-Mart’s interest should pay dividends.

Quintero said the city has some leads on dairy processing and nut-packaging plants, as well as national retailers. “Merced is resilient, we’ve always come back,” he said.

By all accounts, the city is expected to grow along with UC Merced. The university has projected its enrollment will grow by about 3 percent next year, a modest increase compared to prior years.

The university’s growth has been a stabilizing factor on Merced’s unemployment rate, according to Jeff Michael, director of the Business Forecasting Center at the University of the Pacific in Stockton. “When it comes to how many jobs are in Merced County now compared to before the recession, Merced actually looks better than some places,” Michael said.

While many areas were losing public jobs through the recession, Merced was adding employees to its growing university.

With roughly 60,000 nonfarm jobs in Merced County, the county is in about the same place as it was before the recession, Michael said. The unemployment rate has remained high, he said, because the area’s population and labor force continue to grow.

The size of the university also has some say over housing prices in Merced, according to real estate agents. Jennifer Pira, a realtor with Century 21 Salvadori Realty, said prices continue to rise.

“We’ve seen multiple offers on properties – multiple offers due to the lack of inventory, and the demand for properties due to UC Merced students,” Pira said. “That seems to be a driving force.”

That is most evident in the summer and early fall when students are shopping, she said.

Terry Ruscoe, owner of Merced Yosemite Realty in Merced, said he continues to see interest by investors from the Bay Area and Southern California. “You’ve got some pretty savvy investors that are not looking at short-term profits,” he said. “They’re looking at long-term growth.”

Ruscoe said those investors have many options where to put their money, so it’s a good sign they see something in Merced. “They kind of set the stage, and then you start getting more money to follow,” he said.

Mark Hendrickson, Merced County director of community and economic development, said the San Joaquin Valley has long faced economic challenges but is “poised” to handle expansion.

The county has streamlined its process to make it easier for developers to get started, he said.

Hendrickson also cited growing companies in Merced County, including overhead crane manufacturers Mackey & Sons Inc., which has about doubled its expected employee count during the first year at Castle Commerce Center. “We are an area where good economic growth can take place,” he said.

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