Keeping Wall Street’s woes from Main Street

  • By Alexis Bacharach Enterprise editor
  • Wednesday, October 15, 2008 11:37am

Their smiling faces and spirited conversation tell customers that all’s well despite the fractured economy.

But alone in those comfortable Main Street establishments business owners let down their guard revealing fear and uncertainty about the months ahead.

“There’s no question about it, people are hurting,” said Gov. Christine Gregoire on an Oct. 11 tour of downtown Edmonds. “My concern is how we’re doing on Main Street, how small businesses are doing.”

For wine merchants David and Ruth Arista, celebrating their business’ 11th year in the worst economy since the early ’90s is bittersweet. They were grateful for the opportunity to share their struggles with Gregoire, who’s toured several cities — including Kirkland and Bellevue — in recent weeks to gauge the impact of the global credit crisis on the state’s small, local businesses.

“We’ve definitely seen the affects of the slowdown in our receipts over the past three months,” David Arista said in his store in downtown Edmonds. “There’s a lot of uncertainty heading into this holiday season. We do between 30 and 40 percent of our sales for the year during the holidays, so it is scary not knowing how people are going to react to the economy this year.”

City, county and state leaders are budgeting for significant declines in sales tax revenue as consumers hunker down for a rough couple of years.

In Mill Creek, city finance director Landy Manuel is projecting a $500,000 drop in sales tax collections through 2010. “General economic activity will slow especially in 2009,” Manuel said during a budget presentation earlier this month. “The housing bubble and associated credit crisis … will result in significantly reduced revenues related to construction activity.”

But so far the economy in Washington has suffered only a moderate setbacks compared to states like California, where the Legislature is asking the U.S. Treasury Department for approximately $7 billion.

“We have one of the lowest foreclosure rates in the country and we currently have a surplus in the bank,” Gregoire said. “But looking out to 2011 we will have a deficit. We’ve frozen out-of-state government travel and taken some other steps to cut that in half, although — like everyone — we’re waiting to see if the market’s going bottom out.”

The governor’s ordering a 1 percent across-the-board cut to state agencies excluding education, public safety and other “essential” programs. The budget cuts in conjunction with a hiring freeze and other strategies should save the state approximately $600 million over the next two years, according to figures released from the Gregoire’s office on Oct. 8.

“I’m hearing from business owners that there’s been a softening in consumer spending but that businesses are doing well for the most part,” Gregoire said on Saturday. “People are going back to their own communities where they enjoy a higher level of customer service. You don’t get that connection at a mall.”

But it’s not just the retail industry getting hammered; folks in every industry are reporting some setbacks due to the world’s financial predicament.

Creditors’ reluctance to issue loans is a growing threat to small fledgling, businesses, like that of developers Hans Lamnersdorf and Kevin Grossman whose company, Valhalla Partners, LLC., specializes in green building and development.

Lamnersdorf and Grossman have worked for more than a year on a planned green, mixed-use housing and retail project in Edmonds. But since the credit crisis struck, the pair has struggled to secure financing for the project dubbed Valhalla Green.

“I’m not so concerned about the long-term future, but I am worried about the here and now,” Grossman said on Saturday morning. “It’s not impossible to get a loan, but it’s way more difficult now than it was.”

Gregoire’s visit seemed to encourage community leaders and frightened business owners, underscoring state leaders’ commitment to Main Street.

“It shows that the she gives a darn about us,” Lamnersdorf said. “I think it was a mistake to bail out the banks. The government should have helped those people being forced out of their homes.”

Like many Americans, Lamnersdorf is concerned about his 401k and other investments, but he counts his blessings that retirement for him is still a ways out there.

“I really feel for the people who are retiring now or planned to retire,” he said.

To be sure, local business owners are feeling the affects of Wall Street’s collapse, Edmonds Mayor Gary Haakenson said.

The city itself is facing serious financial setbacks, heading into the next biennium with an estimated $4 million shortfall.

“It’s going to be painful making the cuts necessary to close that gap, but we’ll have to make them,” Haakenson said.

Any hopes that state and federal lawmakers would consider legislation to stimulate economic growth on Main Street were shattered this month.

“There’s just no money available for those sorts of things that will help this downtown and all local communities,” Haakenson said. “At some point the federal government will have to accept that we’re no longer a farm economy and invest in infrastructure. But how do we get that message back to (Washington D.C.)?”

Gregoire assured Haakenson and other local leaders that she’s already beating that drum in talks with congressional leaders.

“I’ve taken that message back to the speaker of the House and Senate majority leader,” Gregroire said. “I’m telling them, ‘You’ve got to help us rebuild the infrastructure of America.’”

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