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Focus: growing pains in Lafayette.

The Midwest may be edging toward a recession, but Greater Lafayette continues to enjoy the benefits of a rapidly expanding local economy. jobs are plentiful, income levels are rising and commercial and residential development is at an all-time high. Amid the prosperity, however, is concern that the economy is growing too quickly.

A labor shortage is making it difficult for existing industries to expand and has caused a few prospective new industries to look elsewhere. Meanwhile, rapidly increasing property values threaten to push the cost of a new home out of reach for many first-time buyers.

Greater Lafayette Progress, Inc., an economic development group, summarized the paradox in a status report last October: "The long-term picture is that we are gearing up for sustained economic growth. The unanswered question is: Will we enter a boom or bust cycle by growing too much?'

Current indicators suggest a very loud boom.

Manufacturing employment in Tippecanoe County-including the metropolitan areas of Lafayette and West Lafayette-jumped by 500 jobs last year to 12,900. Service-related employment grew even more dramatically, climbing by 2,600 jobs to 53,200.

The future looks equally bright. A January 1 990 study by the Data Resource Division of McGraw-Hill Co. predicts Greater Lafayette's employment will grow 4.4 percent annually through 1992, the highest ranking nationally for cities with populations below 250,000.

Employment at Subaru-Isuzu Automotive, Inc.'s new facility on Indiana 38 near Lafayette now exceeds 1,700. An expansion, which began shortly after SIA opened last fall, will add another 1,600 employees by 1994.

While new jobs have made Tippecanoe County's unemployment rate one of the state's lowest-hovering near 3 percent for more than a year it's also drained the area of skilled labor.

J.P. Lisack, director of Purdue University's Off ice of Manpower Studies, says the majority of Greater Lafayette's skilled labor force already is employed. As a result, he warns, many area industries eventually may be forced to hire under qualified workers. Expansions this year at Wabash National Corp., A.E. Staley Manufacturing Co. and Lafayette Wire Products, Inc., have been slowed by the labor shortage.

Mark Davis, who was president of Greater Lafayette Progress until taking a similar position in Flint, Mich., last June, says the labor shortage also inhibits recruitment of new industry. "It's the community's most pressing economic development problem," he says. "Lafayette's unemployment rate is so low it scares off most new employers."

It hasn't scared off all new employers, however. Plans by New York-based Thompson Medical Co. to buy and renovate one of General Foods' two vacant plants near U.S. 52 South look promising. The maker of Slim-Fast and Ultra Slim-Fast diet products, projecting 350 new jobs, already has been granted a cost-saving tax abatement by the Tippecanoe County Council.

Thompson Medical's plans indicate Greater Lafayette's continued economic appeal, says Bob Griffiths, GLPI board chairman. Although the labor shortage is a concern, he says time will provide a natural solution. As more jobs are created, we should retain some of our young people who would normally leave the community."

Meanwhile, importing labor from surrounding counties has provided an effective short-term fix. Eager to cash in on the expansion, a flood of workers from Montgomery, Clinton, Carroll, White and Cass counties cross into Tippecanoe County each morning. The SIA plant has drawn workers from even greater distances-including Illinois.

While many commuters will continue the daily trek, economic development officials would like to convert some of them into permanent residents. That requires the construction of new housing, says Griffiths. Affordable housing is a priority for economic growth."

So far, area builders have met the task eagerly. Housing starts in 1988 totaled 352, a record number. Last year, 362 single-family building permits were issued. Two new subdivisions in West Lafayette and near indiana 26 East in Lafayette are expected to add more than 500 new homes in the next few years, while smaller residential developments continue to spring up elsewhere in the county.

As existing subdivisions fill up, however, development outside the city limits will increase, says Don Koerner, manager of Koerner Construction and president of the Builder's Association of Greater Lafayette. That requires more extensive site improvements and drives up lot prices.

A $30,000 lot, Koerner explains, typically translates into a home in the $110,000 to $130,000 price range. While such homes are selling well, demand is equally strong for homes in the $60,000 to $80,000 price range. Site costs make it difficult to build at that price, he says.

The price of existing homes in Greater Lafayette also is increasing up nearly 9 percent through this year's first quarter. Despite limited availability in lower-price ranges, affordability remains fairly strong. "Even with the steady appreciation rate, homes here are affordable because employment and wages are strong," says Daniel Fischer, president of the Greater Lafayette Board of Realtors.

While easing the labor shortage and striking a balance between the supply and demand for housing remain ongoing challenges, the long-term plan for continued growth emphasizes improvements to the infrastructure, says GLPI's Griffiths. Increased accessibility to utilities, transportation, drainage and waste-disposal will relieve the stress of commercial and industrial growth and will open up new areas for residential development, he says.

"Infrastructure is absolutely vital to the community," agrees David Hawkins, a consultant to Lafayette and West Lafayette on infrastructure and utilities since 1975. "When you provide infrastructure to vacant land, it's only a matter of time before it's developed."

The trigger mechanism for improvements to the infrastructure was Subaru-Isuzu, says Hawkins. Improvements to Indiana 38 East and surrounding roads set off a chain of projects that stretch across all of Greater Lafayette, he says.

Following months of negotiation and planning, government officials from Lafayette, West Lafayette and Tippecanoe County joined forces earlier this year to create a set of tax-increment financing districts. Bonds issued to pay for improvements to the infrastructure in these districts will be paid off through increased property values.

Improvements slated for an area bordered by indiana 38 East and U.S. 52 South in Lafayette, including two new roads and a regional drainage pond, have cleared the way for a nearly $50 million development by Indianapolis-based Melvin Simon and Associates, Inc. The 300,000-square-foot addition to Tippecanoe Mall and a separate retail center are expected to open next year.

New curbs, sidewalks and other improvements in downtown Lafayette will complement the city's ambitious railroad relocation project. City officials hope the elimination of 42 rail crossings and the construction of two new underpasses and a new bridge will improve accessibility greatly and thus revitalize the downtown.

Across the Wabash River in West Lafayette, drainage and road improvements will speed commercial growth and open up other areas of the city for much-needed residential development, says Director of Redevelopment Josh Andrew. These improvements also should be an impetus to expansion efforts in the Purdue Industrial Research Park , he believes.

Even with the various infrastructural developments, Greater Lafayette still faces a challenging future, officials concede. The area must ease the labor shortage without dramatically increasing unemployment, and it must meet the demand for housing without overbuilding.

Still, most communities would love to have Greater Lafayette's concerns, admits the Chamber's president, Gordon Kingma. "They're nice worries to have," he says. "They present as much opportunity as they do challenge."

Kingma's confidence is shared by others. "The outlook remains very positive," says the GLPI's Griffiths. We'll continue to look ahead, continue to adjust to the growth. Time is on our side."
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Title Annotation:Regional Report
Author:Nelson, Eric
Publication:Indiana Business Magazine
Date:Sep 1, 1990
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