NEK Economic Report: Confidence in the local economy but missing northern neighbors – Vermont Biz

Photo: St. Johnsbury. Photo Courtesy Downriver Media.

by Olga Peters, Vermont Business Magazine The Northeast Kingdom is open for business. In many ways, it never closed, despite a global pandemic.

Economic development projects have continued across the region, new businesses have opened in Newport and St. Johnsbury, and home sales have remained steady.

The pandemic has yet to finish with Vermont. The NEK has experienced some of the highest rates of new COVID infections in the state, according to the state Department of Health’s COVID-19 dashboard. In October, a quarter of new COVID cases recorded in Vermont were in Orleans County despite making up only four percent of the state’s population.

Even with the US-Canadian border reopening, the Orleans, Caledonia, and Essex economies are still feeling the loss of Canadian visitors.

“It never slowed down really at all, just from our perspective, we were just presented a whole set of new challenges,” said David Snedeker.

“But then we’ve had economic development projects happening all right along of varying sizes and locations in the region,” the executive director of the Northeastern Vermont Development Association (NVDA) added.

According to the latest numbers from the Vermont Department of Labor, the two NEK labor markets tracked by the department have lower unemployment rates than the state average of 2.9 percent. The Derby (Orleans County) labor market’s rate is 2.8 percent. The rate for the St. Johnsbury (Caledonia County) market is 2.0 percent.

Where the NEK counties are also lower than the state average is median household income.

According to the US Census Bureau, the state’s median household income is $61,973. For Caledonia County, that number is $50,563. Next is Orleans, with a median household income of $49,168. Essex County’s is $44,349.

Where the NEK counties average higher than the state is their poverty rates.

 

Missing Their Neighbors

Snedeker said, “The border reopening is going to be hopefully big for a lot of our businesses, especially with ski season coming in.”

The US reopened its land borders with Canada and Mexico for nonessential border crossings in November. Travelers into the US need to show proof of vaccination against the COVID-19 virus.

Some of the requirements for people entering Canada include showing they are fully vaccinated and presenting a negative COVID test administered 72 hours before reentering the country.

Karen O’Donnell from the Jay Peak Chamber of Commerce said that the current costs for testing are posing a challenge for travelers.

“Costs associated with reentering seem to be very difficult for our border friends,” she said. “Easing the costs would help to encourage doing business in the US.”

Jay Peak spokesperson JJ Toland said half of the mountain’s visitors are from Canada.

He said that the resort is speaking with a local lab to see if it can offer on-site COVID tests to make visiting Vermont easier.

“We’ve missed you,” he said. “The border closing was a big kick in the shins last year.”

Real estate agent Ryan Pronto noted, “Another thing for the Northeast Kingdom that’s a little different than the state is that before COVID, 25 percent of all of our sales are to Canadians.”

For the past two years, his office hasn’t worked with any Canadian home buyers. Instead, many Canadians are selling their NEK properties.

 

Never Stopped

NVDA serves Caledonia, Essex, and Orleans counties. It provides a dual role as regional planning commission and regional economic development corporation.

The $12 million Hardwick Yellow Barn Business Accelerator is progressing. Work started three years ago. The team behind the accelerator aims to expand the region’s farm- and food-based economy. The construction project includes building a two-story multi-purpose building and repurposing a historic yellow barn.

Snedeker said once completed, the facility is expected to bring 50 jobs to the area. Cheesemakers Jasper Hill and Cabot have signed on as anchor tenants.

The NVDA is working to acquire Newport’s former Bogner Incorporated plant on Lake Road. The site was slated to become a biomedical research center but instead became caught in the alleged EB-5 fraud at Jay Peak.

According to Snedeker, the Bogner facility is still under receivership. NVDA wants to purchase the building to assist a growing Newport manufacturing company TRACK Inc. This $3 million project is expected to bring approximately 25 jobs to the area, he said.

This year also saw the creation of the Newport Development Fund through the state Agency of Commerce and Community Development, designed to create economic development opportunities in Newport.

The fund responds to the alleged EB-5 fraud and the loss of multiple developments that were never realized with the EB-5 investor program falling apart in 2016.

As of November, the first round of funding applications was under review.

Snedeker said, “There are downtown businesses, many of them existing, that want to grow. So it’s nice. There’s a couple that want to relocate to Newport if they had the funds available.”

In St Johnsbury, NVDA is partnering with Zion Growers, a fiber-to-fiber hemp processing company.

The NDVA manages a Brownfields program that receives federal Environmental Protection Agency funding to clean up former industrial sites.

Currently, the NVDA is doing Brownfields work in the St. Johnsbury area, Lyndon, and Barton, to name a few.

He called the amount of Brownfields work “encouraging” because it pointed to more sites getting ready for new projects.

“Workforce is a challenge in every industry sector. I’m sure you’ve heard this before,” he said.

The NEK needs more people. The NVDA supports any of the state’s efforts to attract new Vermonters, he said.

On the workforce front, Snedeker highlighted Northern Vermont University’s Learning and Working program, which provides paid internships to NVU students, he said.

Snedeker said visitors to the region’s GET NEKed website (getnekedvt.com) could expect updates. The regional marketing site is popular with visitors for the information and the catchy name.

The NVDA is also working with the Center on Rural Innovation [CORI] to develop a tech economy in the St. Johnsbury and Lyndon areas.

“We have a couple of businesses that are here already, one being Whiteout Solutions, a growing GIS drone company, and then there’s also Northview Weather, which is the climate sector,” he said. “Getting more businesses like that and helping keep young tech entrepreneurs in the area is important.”

Whiteout Solutions has created a forest inventory system that combines geographic information systems (GIS), software development, and drones.

Northview Weather analyzes weather data and predicts the risks approaching storms may pose to the energy grid.

NVDA reminded small business owners that the organization and its partner Northern Community Investment Corporation still have a lot of technical assistance funding available.

“We were successful in getting some funding from USDA Rural Development to help businesses obtain professional services, whether it’s for marketing, or website development, or accounting, things like that,” he said.

Snedeker said that one of the challenges the additional federal and state COVID funding has caused is an issue of capacity.

“Yeah, I think the hardest part is setting up programs,” he said.

“If it’s coming through an existing funding program, it’s easy enough to understand and get the money out the door,” he continued. “But if you’re trying to set up a new program, that takes time, so it’s almost like there’s a bottleneck about trying to get some of that money out there.”

Snedeker is also wondering how much representation the NEK will have in Montpelier as lawmakers undergo the redistricting process. Every ten years, the Legislature redraws the Senate and House districts to reflect shifts in the state’s population using the current US Census.

“We were looking at the 2020 Census and saw that our region lost population compared to other parts of the state,” Snedeker said. “So we’re a little bit concerned about how our representation might look in Montpelier in the coming years.”

 

Overall, Doing Well. Not Fabulous, But Well.

When asked what was happening in his region of the NEK, Todd Vendituoli, president of the Burke Area Chamber of Commerce, responded, “It depends on where you were to direct that question.”

2021 so far has been a better year for Burke’s tourism sector than the previous year.

“We’re still missing the Canadians, which, in this part of the world, that’s probably 40 percent of tourism money, a lot of money,” he said.

Businesses in the construction sector are full tilt despite increases in materials prices, he said. The real estate market is also strong.

Nearly two years of pandemic-induced uncertainty makes it hard for businesses to plan or budget, Vendituoli said.

“It’s not like, in past times, you could say, Okay, let’s look at a 10 percent increase,” he said. “Well, they’re looking at such negative numbers from previous years that where do we realistically plan?”

“Are the Canadians going to be coming back? Are the tourists? I don’t know. There’s a lot of ifs out there right now,” he said.

The area needs more people, he continued. He said that restaurants might be flat out on the weekends, but they don’t have enough customers and staff to stay open seven days a week all year.

Vendituoli operates a coffee roasting business called Roasted – Vermont Specialty Coffee Roasters when not at the chamber.

The business opened in January 2020 and survived its first year “by hook and by crook.”

So far, 2021 has looked better for Vendituoli, but he is concerned about a slowdown he is seeing. He’s not sure why business has slowed. It could be people have less discretionary money, or it could be supply chain problems.

For example, Vendituoli contacted his coffee supplier in the spring to obtain a specific bean from Ethiopia. The supplier said the product would arrive in June.

June passed.

September, said the supplier.

The coffee beans arrived in the middle of October.

Vendituoli worries that the supply chain problems could deepen if people start pre-buying or hoarding supplies because they’re nervous.

“So, is that going to create an inflationary problem?” he asked.

An increase in shipping costs has impacted the business as well. Prior to the pandemic, the company was shipping to addresses across the US. As shipping rates increased, sales decreased. Now, most of Roasted’s customers live within 50 miles of its West Burke location.

So far, Vendituoli has resisted raising his prices.

“So, interesting times in the business world,” he said. “You know, supply chain problems, cost increases, I don’t know where it’s going.”

Overall, Vendituoli believes the Burke area economy is doing well. Not fabulous, he added, but better than other areas.

 

Rolling Out Broadband

Efforts to connect more of the Kingdom to high-speed fiber optic internet service have become a reality.

The 45-member town Northeast Kingdom Communication Union District announced in November that more than 300 homes in Concord and Lunenburg would be able to sign up for the high-speed service by the end of the year.

Extensions in west Concord and into east Waterford are planned for 2022 and will be funded by a USDA Rural Business Development Grant.

Also referred to as NEK Community Broadband, the organization has a five-year strategy to bring internet service to every E911 address in the Kingdom.

“We are ready to start fulfilling our mission to bring a truly high-speed broadband to the parts of the Northeast Kingdom that have been left behind by the private communications industry,” said Evan Carlson, chair of NEK Broadband, wrote in a November 4 press release.

“It is a big moment for our organization as well as the economic development of our region,” Carlson said.

Vendituoli serves as Burke’s secondary representative to the CUD’s governing board.

“Getting the broadband into this whole Northeast Kingdom is huge,” he said. “Because if you’ve got that, not only do you have health services, school with kids if they had to, but people could work from home, which, of course, is a new concept.”

Vendituoli added that, like other areas of the state, the NEK has pockets of existing good internet coverage. Still, many people need to implement workarounds. For example, they are shutting off video during a Zoom call or using their cell phone as an internet hotspot.

“It gets old pretty fast,” he said.

NEK residents can learn more about available services at get.nekbroadband.org.

 

New Businesses, New Housing, And New Vitality

“All of these things are really coming together, and it seems like people are investing in St Johnsbury,” Gillian Sewake said.

Since Sewake took the helm of the St. Johnsbury Chamber of Commerce last year, she has felt astonished to see how many businesses moved into St. Johnsbury despite the pandemic.

“I couldn’t be more thrilled with the level of growth that we’ve seen in the past few years, even despite the pandemic,” she said. “Entrepreneurs are opening businesses in our downtown at the fastest rate in recent memory, and cornerstone buildings are being renovated to improve our commercial and residential landscape.”

Sewake is a member of Vermont Business Magazine’s Vermont’s Rising Stars Class of 2021. The award is given to 40 people under 40 for their dedication to business growth, professional excellence, and community involvement.

St Johnsbury businesses creating a local buzz include a high-end bakery, Boule Bakery, and the St. Johnsbury Distillery with its tasting room and speakeasy.

SMD Outdoors is a new fishing and hunting store which revisions an existing business, St. Michael’s Defense. Finally, Flipped Vermont Tech is an IT company offering services such as repairs and website development.

New affordable apartments will breathe new life into the former Depot Square Apartments building. Renamed New Avenue, the prominent downtown structure was built in 1897 as a hotel. After several years of disrepair, New Avenue has undergone revitalization.

Affordable housing developer Evernorth and housing and community development corporation, RuralEdge, are working with and Bread Loaf Corporation to reconfigure New Avenue into 40 apartments. The first floor contains commercial spaces.

Chamber members tell Sewake they have a strong sense that St. Johnsbury is on the rise.

Photo: St. Johnsbury in the Summer. Photo courtesy of the St. Johnsbury Chamber of Commerce.

“I do think the renovation of The New Avenue Building has made a big difference in sort of tipping the scales to folks really thinking about St. Jay. It is a good place to be, but there’s a lot of young people that are investing in this area too,” she said.

Numbers from Zoning Administrator Paul Berlejung appear to back up the sense of activity.

The morning Berlejung spoke with Vermont Business Magazine, his office had received 115 land use permits applications.

In 2020, his office received 95 land use permits. For 2019, that number was 92.

He’s also seeing steady activity in the number of compliance certificates, which indicates someone is selling or refinancing a piece of property. Last year, his office dealt with 42, as of this November, 37.

A decrease worth noting is the number of vacant structures in town. According to Berlejung’s records, last year, there were 45. A few of those buildings have since returned to active use, dropping the number to 35. What a difference a (pandemic) year makes.

Berlejung added that he could only speak to activity that triggers the town’s zoning regulations. He suspects more projects are happening in the city than his records show because they don’t require permits.

“I am not sure why all of this activity is occurring in St. Johnsbury at this time,” he said.

For his part, Berlejung has tried to make the town’s zoning and permitting processes simple for applicants.

“When I first started this position, Chad Whitehead, the town manager, and Joe Kasprzak, the assistant town manager, have always encouraged me that I should facilitate the land use requests which are made to me so that when the paperwork is done, it has been a positive experience and not a negative one,” he continued.

Sewake expects the completion of the Lamoille Valley Rail Trail will also mean a boon for the town.

The 93-mile trail follows the former Lamoille Valley Railroad (LVRR) rail line from St. Johnsbury to Swanton. It travels across five counties from the Connecticut River Valley to within two miles of Lake Champlain, according to the trail’s website www.lvrt.org(link is external). Built for four-season recreation, the path is open for almost all forms of transportation, including walking, cycling, horseback riding, X-C skiing and snowmobiling.

Photo: Lamoille Valley Railroad (LVRR) rail line from St. Johnsbury to Swanton. Photo courtesy of the St. Johnsbury Chamber of Commerce.

Pieces of the trail were completed over several years. Last year, the state Agency of Transportation took over finishing the remaining miles. The Legislature has approved funding to complete the rail trail by 2023. To follow AOT’s work, visit the agency’s local project page vtrans.vermont.gov/highway/local-projects/lvrt.

St. Johnsbury received funding to improve the connection between the rail trail and downtown. Sewake explained a connector path would follow the riverfront and end at a new trailhead pavilion built last year. Along with a picnic area and public art, the connection also guides visitors towards shopping and restaurants.

“As the terminus here in St. Johnsbury, we are really in a good place to be poised for large growth in tourism,” she said. “At that point, we’ve already been approached by bike tour companies who would put St. Johnsbury on the map.”

Sewake said that Zion Growers and the Caledonian Food Co-Op are finalizing their new locations.

The area still faces its share of challenges, Sewake said. The border closing put a dent in St. Johnsbury’s tourism sector. Local businesses are also facing their share of staffing shortages.

“That’s a big, concern, just to make sure that our businesses can stay open. It’s more about the staffing side than it is the customer support and engagement side,” she said.

 

Operating With Optimism

Jay Peak Resort’s snowmaking started in November in preparation for the 2021-2022 winter season.

The resort considers it a win that the 2020-2021 season’s revenue was only 50 percent below pre-pandemic numbers, said JJ Toland, director of communications and events. The previous year the mountain was down 80 percent, he added.

“This year, Jay Peak is operating with optimism,” said Toland.

That sense of optimism is not because everyone at the mountain has donned rose-colored goggles.

According to Toland, Jay Peak staff has had almost two years to fine-tune their skills. The team is adept at managing the ever-changing added expenses, staffing issues, and other conditions created by the pandemic.

In a typical ski season, Jay Peak employs 1,200 staff. Last year, the mountain operated with 460, said Toland.

The number of visitors also dropped. For example, daily visitors to the indoor water park dropped from 2,000 to 75.

Toland said that Jay Peak’s management responded by cross training staff. The company also scrutinized its operating hours.

These measures resulted in new efficiencies for the resort that helped it save money and be more nimble, he said.

No surprise, supply chain issues, and staffing issues have become part of the mountain’s daily experience.

Toland said the company has a strong retention program, but it still needs to recruit more people.

This year he expects Jay Peak will employ 105 students under the J-1 visa exchange visitor program and 40 hospitality professionals through the H-2B visa program.

If Jay Peak can reach 800 staff this season, it’ll be a home run, he said.

“But we can operate with lower numbers because of all the learning that came out of COVID,” he said.

A lack of local affordable workforce housing has prompted Jay Peak to convert three of its vacation mountain cottages into employee housing. The mountain operates approximately 200 – 300 mountain cottages with 12 units in each building.

 

At The Top Of Vermont

Karen O’Donnell, executive director of the Jay Peak Chamber of Commerce, said the area faces challenges and opportunities.

“Labor issues are one of the biggest challenges,” O’Donnell wrote in an email after speaking with chamber members. “Attracting and retaining a qualified workforce is a huge challenge.”

Supply chain issues are another obstacle for businesses, she added. “The cost increases due to demand have narrowed profits.”

Yet, where there are challenges, there is also innovation.

She said that many local businesses have proved resilient by putting their creativity to work and mining the pandemic for new opportunities.

“Changing the way they do business in the current business climate is a challenge they all seem to embrace!” O’Donnell said.

To support members throughout the pandemic, the chamber has created a new member website that highlights area job postings, a new e-commerce platform, and a discount program for members’ employees. The organization operates the website topofvt.com.

“The Jay Peak Area Chamber believes addressing these issues together and offering new opportunities for all to succeed will strengthen the businesses which we represent,” O’Donnell said.

O’Donnell thanked all the “local heroes” in the Jay Peak region.

“They are our volunteer community,” she said. “They are exhausted. They have routinely been retirees, and they have given more to the communities in this high-need time and have expended all they can.”

“It has been difficult to attract a new volunteer base, and some of these folks have given all they can as the need increases,” she added.

 

No Slow Down On The Horizon

Real estate in the Kingdom is jumping.

“It’s not normal by any means,” said Ryan Pronto, broker and realtor with Jim Campbell Real Estate with offices in Newport and Jay.

“Normally, Thanksgiving to December through the first of the year is our slow time, and I don’t see that coming at all,” he said.

All three NEK counties have seen an increase in residential home sales and median sale prices, according to data from Pronto.

Pronto cautioned that the counties are not identical. Caledonia and Orleans have a larger population, for example. Essex, being so small also means the data set is also relatively small, so it doesn’t take too many sales to show an increase.

Looking at pre-pandemic numbers, Pronto said sales prices in the Kingdom had remained relatively flat.

However, nearly two years into the pandemic, he said, the median sales prices have increased quite a bit. From October 2020 to October 2021, all three counties experienced increases in the median sales price. Caledonia, a 26 percent increase, Orleans 28 percent, and Essex eight percent.

Median sales prices, however, do not represent the current market’s activity for Pronto.

The drop in inventory is the market in a snapshot, he said.

A healthy housing market – which Pronto said he’s never seen in the NEK – has six to eight months’ worth of homes available for sale.

In 2018, the NEK had approximately 26 months worth of available residential properties. This year, it has only four months of available supply.

The hottest properties are anything with access to the region’s lakes. The condo and second-home markets are also strong, as are properties with 10 or more acres.

Approximately half of the home sales are cash, he said.

Most of the NEK’s latest homeowners working with Pronto are from Southern Vermont, Southern New Hampshire, and the Burlington areas.

Many from SoVT said they’re moving to the Kingdom because it is more affordable, he said.

He estimates approximately 40 percent of sales are to people moving to the area from outside Vermont.

The inventory for NEK’s residential housing market is the tightest Pronto has seen it, but the region still has more housing stock than other state areas, he said.

“One thing we’re really fighting here is our appraisals,” he said. “They’re out eight to 10 weeks right now.”

The appraisal industry is short on workers like so many industries, he said.

“They’re burnt out. They just can’t keep up with the demand,” he said.

Interest in commercial properties picked up after a brief slowdown last year, he said.

Pronto’s commercial office market has remained steady, unlike other areas of the state where the shift to remote work seems to have cooled the need for offices.

“We actually have very few office spaces available,” he said. “If anything, I’ve seen retail slow down.”

To illustrate how much the market has taken off, Pronto shared he worked with a previous client for almost three years to sell a house with a prime lakefront location. It finally sold for $420,000.

“We thought we were doing really good with it,” he said. “They [the new owners] just put it on the market a month or two ago, and they got $984,000, and it was gone in the first day or two.”

It seems a little bit of panic is also driving the market.

Pronto said he’s worked with clients, nervous the market will crash.

“The market doesn’t crash overnight,” he said. “Even back in 2006, in 2007 when it was crazy, it took a year or longer for it to really slow down.”

From Snedeker’s perspective, economic development activity in the Kingdom has stayed steady during the pandemic. He anticipates more movement as communities deploy their Coronavirus State and Local Fiscal Recovery Funding from the federal American Rescue Plan Act (ARPA).

“Despite the pandemic, there’s always been a lot going on,” Snedeker said. “And a lot of it’s sometimes due to all the funding that’s coming into the state of Vermont now, and so we need to help get it out the door to help businesses and the community,”

 

Olga Peters is a freelance writer from Windham County.

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