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JUNE 2019

Oregon Construction

Time to Stop Building Disposable Places How to be an Effective Marketing Leader in a World of Chaos The Fate of Neighborhoods Are Middle Market Companies Preparing for an Economic Slowdown?


A few words A recent report said there are over 5,000 construction jobs available in Oregon today. It would appear that anyone meeting qualifications to work in the construction industry can find work. And yet many rural communities struggle to keep the infrastructure operating or young adults from moving to the bigger cities. Simultaneous changes in education, employment, healthcare, citizen expectations of government, loyalty, values and responsibility is evolving into an era that forces a change of mindset (public and personal) we haven’t prepared ourselves to make. We wonder what it takes to keep a community robust and vital, especially in rural parts of the state. It doesn’t seem to be job availability; certainly not for anyone 18-35 with physical abilities and desire to be employed. Near my home there are two dozen homes under construction since last winter with the probability the work will continue throughout the year. Crews are working on multiple houses at the same time, and can usually be seen on the job early, and on weekends, just to meet deadlines for various stages of construction. If the economy we now have remains positive for a few more years… The move from full time family wage jobs to more employment in the Gig economy is a strange conversion that long-established traditional economies haven’t learned. How do we finance homes, cars and education with new world financial uncertainties? We’re learning the hard way As the Southern Oregon Business Journal gathers information from an area larger than the state of Georgia and a population of 1.5 million people, we discover ways people and communities are coping with change. Others may be challenged to think differently about leadership and personal responsibility than has been their preference, but change will occur. It’s impatience for it that gives us stress.

Greg The Southern Oregon Business Journal extends sincere thanks to the following companies for their continued presence as important cogs in the wheels of industry in southern Oregon.

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A JOURNAL FOR THE ECONOMICALLY CURIOUS, PROFESSIONALLY INSPIRED AND ACUTELY MOTIVATED

Contents Inside This Issue 12. Are Rural Communities Being Ignored? 14. Oregon Wine Competition 16. Round Lake is Back 21. A C ur ve B al l i n M ay 28. Population Health Management 26. Oregon Births and Deaths 30. Northwest Oregon Economic Indicators 31. Benton County Adopts Transient Lodging Tax 32. National Get Outdoors Day 33. Trade Wars Heat Up

FEATURED 4. Affordable Housing and Services for Farmworker Families 8. Stories from Aviation can make us better Managers 18. T i m e t o S t o p B u i l d i n g Disposable Places 22. How to be an effective marketing leader in a world of chaos 28. The fate of neighborhoods 34. Are Middle Market Companies Preparing for an Economic Slowdown?

36. Raiders softball team returns to SOU as World Series champs 37. Dr. John Forsyth receives Community Service Award

Cover Photo

38. Planting a New Forest

703 Divot Loop Sutherlin, Oregon 97479 www.southernoregonbusiness.com 541-315-6127

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Huduser.govHud.gov

Affordable Housing and Services for Farmworker Families in Oregon

Exterior closets attached to each of Juniper Gardens’ units allow farmworkers to store clothing exposed to pesticides outside of the home. Image Courtesy of Bienestar.

The city of Forest Grove in Washington County, Oregon is located just inside the Portland metropolitan area’s urban growth boundary, and is nearly surrounded by land zoned for agriculture and forest use. In the most recent step toward meeting the need for affordable farmworker housing in Forest Grove, a nonprofit affordable housing developer completed the first phase of Juniper Gardens in December 2012. Phase I consists of 24 townhouse-style apartments and offers support services to residents. The development’s two, three, and four-bedroom units accommodate farmworker families, with one three-bedroom unit reserved for migrant farmworkers. The Need for Farmworker Housing Agriculture has long been an important part of the area’s economy; in 2011, gross farm and ranch sales in Washington County totaled more than $284 million. According to the U.S. Department of Agriculture’s (USDA) 2007 Census of Agriculture, Washington County’s agricultural industry employs more than 8,500 farmworkers, whose average annual income is between $10,000 and $16,000.

These earnings are much lower than the income needed to afford the median gross rent in Forest Southern Oregon Business Journal

Grove ($745, according to 2007–2011 American Community Survey data). USDA estimates that more than 700 farmworker families in Washington County live in substandard conditions in sheds garages, and camps; local housing experts believe that many more farmworkers live in overcrowded apartments and homes. Using data from the Washington County Consolidated Plan, graduate students at Portland State University estimated that an additional 2,636 affordable units are needed to house farmworkers in Washington County. Responding to the Farmworker Housing Challenge Nonprofit developer Bienestar began construction of Juniper Gardens in February of 2012 with Community and Shelter Assistance Corporation (CASA) of Oregon serving as a development consultant. Formerly known as the Housing Development Corporation of Northwest Oregon, Bienestar has been developing farmworker housing in Washington County since 1981. This HUD-certified community housing development organization is “the primary farmworker and farmworker family housing provider in Washington County,” according to the 2010–2015 Washington County Consolidated Plan. Including 4


Juniper Gardens, Bienestar has developed or renovated 11 properties with 487 units of affordable housing in Washington and Columbia counties, with 8 developments reserved specifically for farmworkers.

Bienestar offers computer and homework clubs for children at Juniper Gardens, and the organization is planning to add onsite nutrition and financial literacy classes for adults in the near future. And like every other Bienestar property, Juniper Gardens has a resident peer leader, known as a promotore. Residents in need of legal services, clothing, food, or other items can contact the promotore for assistance. According to Karen Shawcross, executive director of Bienestar, a promotore at a Bienestar property recently helped a farmworker family obtain furniture for their new home.

CASA of Oregon provided construction financing and the Community Housing Fund provided predevelopment funding for the $5.9 million complex. Development financing consisted of HOME Investment Partnership funds, USDA Rural Development Program funds, Farmworker Housing Tax Juniper Gardens’ community building is located adjacent to a play Credits from the state of Oregon, and funding from area, so that parents can watch children play as they wash clothes Oregon Housing and Community Services. As in the laundry facility. Image Courtesy of Bienestar. families in Juniper Gardens earn less than 50 percent of the Portland metropolitan area median Juniper Gardens As part of its goal to provide affordable, quality income, subsidies made available through USDA’s farmworker housing, Bienestar incorporated a Rural Development Rental Assistance program number of green building features in Juniper ensure that rental costs do not exceed 30 percent of Gardens to reduce utility bills and improve housing each household’s income. USDA funding restricts quality, including ENERGY STAR® appliances, low- occupancy to families that include one farmworker, a flow plumbing fixtures, paints and adhesives with no classification which includes individuals employed in volatile organic compounds, carpets made of field preparation and planting, crop harvesting, recycled materials, ductless hydronic distribution aquaculture, and certain food processing activities. systems for heating and cooling, and continuous Although USDA funding requires that the Juniper ventilation systems. Juniper Gardens was designed Gardens units remain affordable to farmworkers to meet the criteria for Leadership in Energy and for only 33 years, the plan is to keep the units Environmental Design (LEED) Gold certification, as affordable in perpetuity, says Lindsay Quartini, well as Enterprise Green Communities and Earth housing program manager with CASA of Oregon. Advantage designations. Residents also have access This will be accomplished by refinancing the project to a community garden where families can grow with USDA funding, which will extend the affordability requirement for another 33 years. fresh food.

To get farmworkers’ perspectives on what features should be included, the architect for Juniper Gardens, Scott Edwards Architecture, held a design workshop attended by residents of other Bienestar properties. Residents’ concerns about pesticide exposure through farmworkers’ clothing prompted the architect to include a central boot-washing station in Juniper Gardens’ parking lot and mudrooms near the apartments’ front doors. To address safety concerns, Bienestar located a play area so that parents can use the community laundry while watching their children. Southern Oregon Business Journal

Building on Success According to Shawcross, Juniper Gardens’ first phase was completely leased before its opening. Phase II will provide 22 units of affordable farmworker housing and expand Juniper Gardens’ community center, allowing for more onsite services. Construction of Phase II is expected to begin in late 2013 and be completed the following year. A waiting list already exists for the Phase II units, strong evidence of the great demand for quality, affordable farmworker housing and services in the area.

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Flying Lessons: How stories from Aviation can make us better Managers

Boeing 737-9 Airliner In this, the third installment of our six part series, we look at the role of Organization in business and examine, through the lens of lessons learned, an example of organization from the field of aviation and how it can improve enterprise performance.

obtain desired outcomes. The organization of teams is vitally important, especially how team members are set up for success in terms of skill levels, work design, collaboration and expected results.

The picture of Boeing’s iconic 737 airliners above represents a culmination of aviation lessons for business managers. In microcosm, the 737 is the result of five activities all organizations must do to be viable. Boeing observed their environment and communicated, organized and delivered a product that it has improved over time. The ability to Observe, Communicate, Organize, Deliver and Improve are critical to business success. Moreover, the business that does these five activities well moves beyond mere viability towards enterprise excellence. Last month we discussed Communication and how the development of the Checklist helped to collect and share knowledge to improve safety and quality as they relate to aircraft operation. We discovered how the checklist is an avenue for sharing improved methods and is tangible evidence of management’s commitment to communication.

The value of teamwork is well known, and there is a vast literature base about the phenomena of teams and teamwork. Few, if any, companies succeed if leaders neglect team dynamics. Team success relies on those assumptions and underlying choices made within the business about what teams are and how they operate. Without accurate observations of the environment and clarity of intended outcomes, teams will fail to develop communication skills and the knowledge critical to their success.

Organization is important for business because without it, the best efforts to serve customers fall into disarray. Being organized takes many forms, from the creation and implementation of systems to support processes and the design of processes to support teams and their work. Teams, in particular, benefit from careful analysis and dedicated organization efforts in order to Southern Oregon Business Journal

Harvard Professor Richard Hackman provided great insights into the nature of teams, team organization and how leaders support teamwork. He spent over 30 years studying organizations in general, and teams in particular. His observations included research about how teams fail and what factors affect their success. One of his most profound insights involved how aircrews function in different aviation related operational environments. Hackman suggested that the attributes of effective teamwork have to do with membership, direction, structures, support and coaching. In particular, the intended direction and results expected of the team impact their success. Delivering on organizational promises – a key component of a team’s existence – help us understand how best to organize teams. 8


Hackman’s Five Conditions for Effective Teams: 1: Teams must be real: People have to know who is on the team and who is not. 2: Teams need a compelling direction: Members need to know and agree on their goals. 3: Teams need enabling structures: Teams avoid problems when tasks, membership and conduct are intentional. 4: Teams need a supportive organization: Organizational systems must facilitate teamwork and enable teams. 5: Teams need expert coaching:

Teams need

skills that transcend their contribution as individuals.

Let’s look at an example from aviation where team organization and leadership choices impact performance. On the surface, the difference between commercial airline crews and military bomber crews may seem minimal. After all, they both work within complex organizations using large multi-engine aircraft to deliver results over expansive geographic areas. The aircrew’s individual skill levels are documented and maintained through standardized training; destinations are identified and flight plans submitted; aircraft are operated and maintained; the list of similarities are extensive. However, there are key differences in the operational environment, intended outcomes and the reasons behind those outcomes. A review of the accompanying table outlines operational attributes and the underlying assumptions that affect aircrew organization. Commercial airline crews, according to Hackman, operate as part of larger organization whose mission is the timely movement of people to specific destinations. It is self-evident that the ends sought are the efficient and safe utilization of aircraft on scheduled predetermined routes to deliver a profit. Hackman’s research indicated that an airline crew could expect to work together once every 5.6 years. Airline crew staffing models by design place individual contributors in predetermined slots to accomplish intended results. The primary unit in commercial airline crews is the individual crewmember differentiated by skill, experience and Southern Oregon Business Journal

expertise related to the aircraft used.

Bomber crews operate differently. While crewmembers have individual skills, the primary unit is the team. The end sought is for the crew to use their aircraft effectively to deliver a payload on target. The individual aircraft utilized, as well as the target, may vary but the crew and teamwork remain at the center of the mission. Bomber crews exist and train as teams: missions are developed, briefed and executed through the lens of team execution. This is very different from a model based upon systematic scheduling of individuals to meet predetermined operational needs. As it turns out, aircrews and how they are organized and managed vary greatly based upon the organizational intent and required results. For airline crews, team membership is a result of system needs, team direction is predictable, structures are rigid, support focuses on safely accommodating schedules and team coaching is limited. For bomber crews, team membership is the result of trust relationships and team direction centers on mission accomplishment. Organizational structures and support focus upon mission flexibility, and aircrew coaching is integral to operations. One approach to aircrew organization is not necessarily ‘better’ or ‘worse’ than the other; they are simply the result of choices made in order to accomplish organizational intent. The Lesson for Managers: The organizational order that results from team design differs based upon how results are to be delivered. As managers, when looking at our teams we need to start at the end. With intended results clearly defined, we can work backwards and organize people into teams and structure processes and systems to support the desired outcome. For example, if the most important aspect of a team member is the skill set they bring to work as an individual contributor (as opposed to their ability to communicate and work with others) the manner in which work is organized is impacted. Just as an airline may view crewmembers as individual contributors within a larger system, you may need to approach teams with skills and results in mind versus the more holistic team centered approach found with military aircraft crews. Organizational order evolves from intended outcomes. Order in a business is the result of organizing to achieve intended outcomes in the 9


context of a specific operational environment. Your teams, their membership, goals, coaching and the structures they operate within are the result of choices made about ends sought and how performance is measured.

Commercial Airliner crew vs. Military Bomber crew Attribute: Team Members:

Commercial Airline Crew Singular units in a system

Military Bomber Crew Part of a team in a system

Focus of Teamwork:

Means to an end

End in itself

Management Focus:

System Operation

Team Utilization

Equipment Utilization:

End in itself

Means to an end

Intended Result:

Efficient use of resources

Effective use of resources

Performance Measure:

Return-On-Investment (ROI)

Payload on Target

Further reading: “Why Teams DON’T Work”, Interview with J. Richard Hackman, Harvard Business Review May 2009 Naval War College Review: Rochlin, et al., The Self-Designing High-Reliability Organization: Aircraft Carrier Flight Operations at Sea (https://apps.dtic.mil/dtic/tr/fulltext/u2/a198692.pdf) © 2018 Praxis Analytics, Inc. All Rights Reserved.

Attribution: Jim Myers is the principal and founder of Praxis Analytics, Incorporated. Jim serves as a trusted advisor to business leaders in their quest to operate efficiently, improve continuously and prosper. His background includes two decades working in manufacturing, supply chain, customer service and maintenance management roles within markets that range from capital equipment to aerospace and defense. Jim balanced his practical operations experience with theory and served as the Associate Dean of the Atkinson Graduate School of Management (AGSM) at Willamette University where he led projects to improve school operations and taught graduate courses in Operations and Information Management, Strategy Alignment and Project Management. Jim can be reached at jim@praxisanalyticsinc.com Praxis Analytics web site: https://praxisanalyticsinc.com/

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Are Rural Communities Being Ignored? By Office of Advocacy On May 9, 2019

By: Apollo Fuhriman, Region 10 Advocate In April, I met with county council members from Union and Wallowa Counties in Northeast Oregon. These elected officials described several significant long-term issues arising from federally owned lands. Approximately half of the land in these counties is controlled by the federal government, so timely implementation of federal regulations is crucial to the sustainability of the region.

to be streamlined so that the implementing regulations do not impede the laws that permit harvesting of burned out forests. This is a crucial aspect of preventing larger fires, as well as allowing the use of this resource in a timely manner.

Three key activities are being choked off by slow permit processes: streamlining grazing permits, harvesting burned out timber (which must be done rapidly to avoid rot and future hotter fires), and permitting dredging of previously dredged waterways. I was told that most grazing land in these counties that does not currently have an active grazing permit but is technically “grazing” land has been waiting for permits for 10 to 25 years. These counties are cattle counties. Without grazing land, the public resources (taxes), private business revenue, and job outlook are all bleak. Some suggestions are to turn over permitting or directly turn over the land to the county, the state, or the local federal offices with jurisdiction over the land.

Region 10 Advocate Apollo Fuhriman observed flooding in Northeast Oregon due to insufficient capacity in previously dredged water bodies.

In regards to forest fire land, “categorical exclusions” for lengthy environmental permits need

Another significant problem is related to stream dredging and flooding in rural areas where the land

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is destroyed due to insufficient capacity in previously dredged water bodies. The problem is that the land is not available for use by cattle or to plant crops, but the land was originally not part of flood plains due to dredging of these water bodies. These are not spawning streams; rather, they are arterials. However, the counties have not been permitted to dredge them for years. This lack of capacity leads to flooding that destroys land instead of buildings. Since the immediate damage is to land rather than structures, these areas are not included in “state of emergency” declarations and do not receive the infrastructure assistance that comes with them. The council members’ suggestion is to revisit what comprises an “emergency” to include these lowerdollar areas. Over 15,000 acres are currently under water that are not usually flooded, and this could be remedied by capacity increases in the waterways. These communities want to work, and they want to follow federal laws. They are trying to do so. However, in many instances, the regulations seem to impede the ability to use these resource lands. They rely on the federal regulatory agencies to process the permits in a timely manner.

Apollo Fuhriman serves as the Region 10 Advocate for the SBA Office of Advocacy, representing small businesses in Alaska, Idaho, Oregon, and Washington. Fuhriman works with small business owners, state and local governments, and small business associations to bring the voice of Region 10 to Washington DC. He can be reached at apollof@sba.gov.

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Emmerson Lab opens to help bring innovative wood products to market blogs.oregonstate.edu/collegeofforestry/2019/05/13/378/

On May 14, 2019, the Oregon State University College of Forestry celebrated the grand opening of the A. A. “Red” Emmerson Advanced Wood Products Laboratory. Sierra Pacific Industries, founded by Emmerson and his father, R. H. “Curly” Emmerson, contributed the lead gift of $6 million toward building the facility in October 2015. The new lab adds 15,000 square-feet of structural testing space to the college, which already boasts some of the best technical research facilities in the nation.

wood structures, •The offices of the TallWood Design Institute, a unique research collaboration between the Oregon State University College of Forestry, College of Engineering, and the University of Oregon School of Design. It is the nation’s only research collaborative that focuses exclusively on the advancement of structural wood products, and serves as a national research, education, and outreach hub focusing on multi-family and non-residential wood buildings.

The new lab will: •drive commercialization of advanced wood products and position the university and the entire State of Oregon as a hub for innovative and sustainable product creation and construction; •support the growth of manufacturing capacity in timber-dependent, rural communities; •grow opportunities for Oregon State students and industry partners in research, professional practice and collaboration; •reinforce Oregon State’s international status as a premier forestry and forest products institution.

The lab will support research including shear wall testing, structural connections, exploring the feasibility of salvaged lumber, architectural and product design, building performance and more.

The facility contains: •A 2,500 square-foot advanced wood products manufacturing area, •A flexible demonstration classroom area for workshops and professional development, •A 60-by-80-foot strong wall and reaction floor system will facilitate testing of up to three-story Southern Oregon Business Journal

At the grand opening of the lab, Anthony S. Davis, interim dean of the College of Forestry spoke about the lab’s research impact as well as what it represents – continued excellence in the teaching, research and outreach of the college. “As we stand here just a few miles away from some of the most productive and diverse forests in the world,” Davis said, “we are better positioned than anyone else to serve as a bridge between our natural resources and meeting the demands of urban growth and renewal, while also continuing to conserve habitat and provide recreational access.” oregonstate.edu/collegeofforestry 17


Photo via Wikimedia Commons

Time to Stop Building Disposable Places by Daniel Herriges You hear it so often it sounds like a cliché: “Our

ancestors used to build things to last. Now we build them to be thrown away.” Sometimes, this sentiment is a cliché or an oversimplification: when it comes to homes, for example, our ancestors built plenty of rickety wooden shacks. They’re just not standing today for us to pass judgment on. But our forebears did so because of a lack of resources; they built what they could, with the intention of improving upon it incrementally as they could afford to. Disposability in modern society is different: it’s a function of our affluence, not our poverty. We make Southern Oregon Business Journal

things without regard to their durability because we can afford to, or we think we can—from single-use personal items like razors, to larger items like furniture. (Many of us have a chair or table that belonged to a grandparent or great-grandparent; how much of today’s IKEA wares do we expect our own grandchildren to hold onto?) But what happens when we apply that mindset to the very communities we live and work in? The Manhattan Institute’s Michael Hendrix, writing for Dallas News, wants to sound the alarm about the consequences of “disposable” growth. In an op-ed drawing heavily on the work of Strong Towns, titled 18


“North Texas must stop building disposable suburbs,” Hendrix writes: I grew up on a street to nowhere, lined with starter homes for young families like ours. It was 1980s Arlington, and this was our American dream. Twenty years later, the dream had faded. Empty strip malls floated in oceans of asphalt. Weeds grew like they were reclaiming suburbia to nature. Our neighborhood was bought, used and thrown away in a single generation. A disposable suburb.

poorly. They also have been priced poorly. When the bill comes due for cheap homes and sprawling infrastructure, the ROI just isn't there for the renewal and repair needed for a truly sustainable city. So people move on and places deteriorate, leaving the bill for future generations.

As a Strong Towns writer for four years, and reader for longer than that, I find it immensely gratifying to see our ideas not only catching fire out there in the broader consciousness, but expressed by someone else better than I could have done it myself. Hendrix has written a powerful, urgent indictment of the way we build our human habitat in 21st-century America. Hendrix is writing about the Dallas-Fort Worth region, but the same can be said of any metro area in America. We all embarked, all at once, upon the same massive experiment in the post-WWII era. We all now build most of the places we plan to inhabit all at once, to a finished state, according to a massproduction model. And once they’re built, there is nothing for them to do but decline. The Inexorable Slide Into Decline Our suburban neighborhoods are places that are not intended to change. They are, in most cases, not even allowed—by zoning codes, HOA covenants, or the rigidity of their own design—to evolve and renew themselves through incremental redevelopment. As such, these are neighborhoods that will never look better than the year the first buyers close on the first homes. The vinyl siding will never be newer. The pavement will never be smoother. There is nowhere to go but down. Hendrix describes vividly the depreciation of the places that represented the American dream in the 1950s through 1980s into places of growing poverty, mounting municipal debt, and crumbling asphalt today. He makes clear this is not all about cheap, shoddy design—though some of it is. The boldface emphasis is mine:

Suburban neighborhoods become disposable not simply because they have been designed Southern Oregon Business Journal

Suburban development in Texas (Wikimedia Commons)

The “people move on” part is a key part of the story here. If you live in a community that has some intrinsic uniqueness, some raison d’etre, you are apt to get residents who are committed to staying put and reinvesting in the place. On the other hand, a lot of suburban American neighborhoods are interchangeable in form and function. The appeal of many of these places to home buyers is their newness: full stop. When they become older and less desirable, and the bills start to mount for deferred maintenance of the public infrastructure, what are residents with the means to move going to do? Why would they stay put? They can pay lower taxes and enjoy a nicer environment in the next, newest suburb down the line. 19


And so, we get disposable places, because they are places that could be anywhere and thus are nowhere. James Howard Kunstler made this observation in 1993’s seminal The Geography of Nowhere. Kunstler’s particular focus was on what makes much of modern suburbia unlovable from an architecture and design standpoint.

but Hendrix concludes with a call for a new mindset, not a simple, prescriptive set of changes to zoning codes or the like. A better mindset toward growth would insist that we build places that:

Produce enough private wealth to sustain the public investment that supports them

Strong Town’s contribution to the debate, though, has been to shine a harsh spotlight on the financial unsustainability of places that never had a “there” there. Hendrix gets it, sticking to financial arguments, and he captures the Growth Ponzi Scheme in a nutshell:

Are adaptable and reusable as economic conditions change and businesses open and close

Are built out incrementally, instead of all-at-once through debt-financed building binges

This is a Strong Towns approach. And more Americans than ever are recognizing, and articulating for themselves, just how badly we need it.

Image: Nicholas Eckhart via Flickr

Those quickly built neighborhoods of vinyl homes on the edge of town, that gas station and strip mall down the way, aren't worth much and they don't make much, either for their owners or the town. But installing the roads, pipes, and wires required to build the subdivision isn't cheap, so the town scrounges up what money it can and goes in search of state and federal money. These dollars are multiplied into debt that's poured into infrastructure that will hopefully be paid for by yet more new residents. As long as growth begets growth, and fixed costs are spread over more assets, these suburbs survive. But when sprawl runs out of fuel, or the housing assembly line stops (such as in a financial crisis), virtuous cycles of growth can quickly devolve into vicious cycles of decline. What’s the alternative? There are no easy answers, Southern Oregon Business Journal

Daniel Herriges Daniel Herriges (Twitter: @DanielStrTowns) serves as Content Manager for Strong Towns, and has been a regular contributor since 2015. He is also a founding member of the organization. Daniel has a Masters in Urban and Regional Planning from the University of Minnesota. His obsession with maps began before he could read. His budding environmentalism can be traced back to age 4, when he yelled at his parents for stepping on weeds growing in sidewalk cracks. His love of great urban design and human-scaled, livable places has also been lifelong. Daniel has a B.A. from Stanford University in Human Biology with a concentration in Conservation and Sustainable Development. After college, he worked as an environmental activist for several years, in support of indigenous people's rights and conservation in the Amazon rainforest. He can often be found hiking or cycling. Daniel is from St. Paul, Minnesota. 20


A CURVE BALL IN MAY Our Investment Views, Weekly Market Makers

Held Hostage by Trade As first quarter reporting season draws to another constructive close, investors’ attention was ripped away from the earnings scorecard and refocused almost exclusively on trade. Today’s imposition of additional tariffs on $200 billion of Chinese imports was on virtually no one’s radar screen a week ago, but the reality is upon us following the latest flurry of presidential tweets and what became largely perfunctory U.S.-Sino trade talks in D.C. that concluded without tangible results. New tariffs and uncertain prospects for ultimate resolution of the trade war with China predictably left equity investors voting with their feet, sending stocks down over 2 percent for their worst weekly performance of the year.

Tariffs to the Rescue? Except for furniture, most of the products currently subject to Chinese tariffs are not final U.S. consumption expenditures, but rather as the chart below details, tend to be inputs to final products and services, like computers, autos and cell phone service. Sources: Strategas, US ITC, Bloomberg As tariff taxes get passed through the supply chain, consumers will ultimately pay more, but in a more indirect manner and with a time lag. If ongoing trade negotiations are ultimately unsuccessful, the U.S. economy and its consumer engine will see the impact of additional threatened tariffs more immediately on Chinese imports like toys, apparel, and iPhones. Investment at Risk Whether tariffs are ultimately imposed on the remaining $325 billion of Chinese imports remains to be seen, but aside from higher prices that U.S. consumers stand to pay, the impact on business investment is equally noteworthy. Long-tailed capital investment projects rely on cash flow projections far into the future, so when trade wars disrupt supply chains and introduce newly unpredictable variables into demand forecasts, businesses simply Southern Oregon Business Journal

By: Shawn Narancich, CFA Executive Vice President of Research

stand aside. In other words, they don’t invest. At a point later in the economic cycle, when labor markets are increasingly tight, investment in new technology and equipment are even more important to sustaining economic growth because they enable the existing workforce to do more with less. While tax cuts and accelerated depreciation have helped stimulate additional capital spending, more is needed to feed the productivity machine. Delayed investment ultimately does the U.S. economy a disservice at a time when underlying U.S. economic growth ex-inventory builds and net imports is less robust than the latest 3.2 percent headline GDP growth implies.

Need a Lyft? Following what has proven to be Lyft’s overpriced IPO, chief competitor Uber followed with its public offering of stock today. Despite pricing at the bottom end of underwriters’ planned range, Uber’s stock failed to gain traction and ended its first day of trading in reverse, down nearly 8 percent. Profits from the ride sharing services may yet materialize for these innovative new companies, but against the week’s jittery backdrop, timing of Uber’s IPO proved difficult.

Rounding Third Base With 90 percent of the S&P 500 having now reported first quarter results, the last key piece of the puzzle will be retailer earnings. Investors will be keen to judge the evolving impact of e-commerce and tight labor markets on the likes of household names Wal-Mart, Home Depot, and Nordstrom in the weeks to come.

Week in Review and Our Takeaways

Amid renewed trade tensions, stocks suffered their worst week of the year

New tariffs and the threat of those yet to be imposed present risks to U.S. economic expansion

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How to be an effective marketing leader in a world of chaos the internet, broadband, mobile devices, the cloud, and soon-to-be 5G wireless transmissions — that we're interdependent to an unprecedented and unpredictable degree. In this world, growth increasingly depends on the ability for you, your community, your employees, your factory, and your company to be connected to these networks of continuous insight and knowledge. Value is no longer created by hoarding information, but by distributing it freely in a way that cuts through the overwhelming information density of our world.

Mark Schaefer The effective marketing leader of today has to thrive in an environment of barely controlled chaos. If you're more or less doing things the way you did them three or five years ago, you're behind. If you're just getting into social media marketing or content marketing, you're behind. There has never been a more challenging (or fun!) time to be in marketing. But winning requires a new leadership mindset. Let's unpack a new view of what it means to be a marketing leader today. What world am I in? The most effective marketing leader wakes up every morning and asks: “What world am I living in today? What are the biggest trends of this moment? How have our customer needs change? And, how do I educate my management about this world and align our strategies so we can move quickly and win?" So what world are we living in right now? For starters, we’re living in a world where the customer is in control. They are the marketing department (the major theme of my book Marketing Rebellion). We are inexorably moving toward an ad-free, funnel-free, loyalty-free world where the brand is defined by what customers tell each other. We're so interconnected — thanks to digitization, Southern Oregon Business Journal

The power of humility We're living in a world where digital natives are re-defining what it means to be a business, an employee, and a customer. I am absolutely awed and inspired by these young people and what they can teach the old guard. They look at what we call "marketing best practices" and think "why would you do that to people?" Oh my goodness. A marketing rebellion indeed!

Being a great marketing leader means being humble enough to re-learning your craft in the context of this new world reality. The digital natives are re-inventing business. Are you ready to follow them? Unshackle from technology Without question, technology is a crucial element of any marketing organization. But great marketing leadership means putting technology in the log-term service of your customers, not to meet this week's sales goal.

That seems so basic and rational. But take a hard look at your company. Are you operating in a way where you acknowledge that the customer is in control, or are you still trying to control the customer? Are you using technology to maintain barriers with your customers or using it to remove those barriers to create a more human experience? Are you doing things that customers hate? Are you spending more money on increasing the tech stack or investing to connect to your customers in a more human and personal way? 22


Being a marketing leader means spending 50 percent of your time with customers and 50 percent sharing their wants and needs with every department of your company. You are the voice of the customer everywhere and to do that, you have to get out there. Put the dashboard away. Go see people.

Finding a new path. Courage!

Embracing chaos An effective marketing leader means embraces the chaos. Year after year, accounting, finance, and engineering functions don't change all that much. Marketing ... whew. Fasten your seatbelt. If you like to maintain a status quo, marketing is not for you. The ideal marketing leader is a change junkie. That takes guts, but there is no choice.

Your culture is your marketing There's no such thing as a grassroots cultural change. Creating an organization that can adapt and adopt to the realities of the new world means that the leader is willing to step up and be accountable for the culture.

A marketing leader today has to thrive on ambiguity, especially when it comes to new projects and measurement. Your traditional management “dashboard” can’t keep up with the pace of culture. That’s scary. We like neat and comfortable dashboards. But a certain amount of your attention has to be devoted to finding what’s next, and those new things may not be easily measured or even understood at first. An effective marketing leader is an explorer.

Most of our organizations are built to iterate. Today's marketing leader has to master quantum leaps. The learning model We used to think a college education was enough to get a job and sustain a career. Today, everybody has to have one over-arching career goal: RELEVANCE. To succeed today, you have to be a lifelong learner and have a strategy for relevance. This doesn't mean you need to have the right answers. It means you need to know enough to ask the right questions. Being a marketing leader takes courage Leadership today requires courage. My favorite agency right now is Giant Spoon. They state that they are "an ad agency that aspires to never make an ad." Everything they do is on the edge. They basically bet their whole company on re-creating an entire WestWorld television set for a week at South by Southwest last year. The result? AdWeek named them breakout agency of the year. Southern Oregon Business Journal

I'm not saying you need to do anything that audacious, but you have to have the courage to experiment and poke at the unknown. That's probably going to be unpopular with some in your company.

Who is the person in your organization who controls the budget and the strategy? That's the person responsible for the company culture, too. This is an incredibly important job because today. Your culture IS your marketing. Your culture is the message that seeps into the world and defines your brand. If you don't get the culture right, you don't get the marketing right. A marketing leader dispenses hope One of my favorite leaders from the corporate world had a little sign on his desk that said "Leaders Dispense Hope." He told me he thought this was the most important aspect of leading his organization. A world of dramatic change and uncertainty will certainly spawn anxiety in an organization. It's important to provide a steadfast vision and encouragement in that environment to get the most from your team. Being a great marketing leader might mean dispensing hope in the face of a constant hurricane. Leading in an environment where the world changes every day isn't easy, and it isn't going to get any easier -- today is the day of slowest technological change you will ever witness. But for those who stay connected, tune in to the new information flows, exhibit courage, and dispense hope, an awesome world of opportunity and success awaits. Mark Schaefer, author of "Marketing Rebellion:The Most Human Company Wins" is the Executive Director of Schaefer Marketing Solutions www.BusinessesGROW.com 23


Population Health Management- Oregon Tech’s Strategy for the Future of Community Healthcare CONTACT: Ashley Van Essen, Public Relations Representative Phone: 541.885.1162; ashley.vanessen@oit.edu SOURCE: Sophie Nathenson, Ph.D., Director of Population Health Management Phone: 541.885.1532; SophiaLyn.Nathenson@oit.edu

May 24, 2019, Klamath Falls, Ore. – As a program launched in 2015, the Population Health Management degree at Oregon Institute of Technology has graduated 25 students into successful careers in the community health field. “PHM” as it is commonly referred to on campus, goes far beyond the classroom, building relationships with local and regional organizations to put this new field into practice. Put simply, population health management is about keeping people out of the hospital - by helping people manage chronic illness, prevent disease and disability, and investing in the community conditions that support the wellbeing of everyone. Located at Gaucho Collective on Klamath Falls’ Main Street, PHM has brought the classroom into the field through the Population Health Management Research Center, which serves as a training ground for PHM students. Through the Research Center students work on projects for clients, groups or organizations that require services in social research, program evaluation and community outreach activities. The Center is a hub of PHM activities and was started by the first cohort of PHM students, along with Oregon Tech faculty member and PHM director, Sophie Nathenson, Ph.D. The Research Center’s projects have been diverse from tobacco policy and education, to emergency preparedness, renewable energy and economic development. The Research Center’s most recent projects have included:

Assistance with Klamath County’s latest Community Food Assessment and the Community Health Assessment

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Research projects on nutrition, food waste and food security- presented at regional conferences

Participation in a local program, “Park and Play,” which feeds children during the summer in lowincome areas while also providing enrichment activities.

The Park and Play program was presented at the Legacy Health Literacy Conference in Portland March 22, where students were able to network with healthcare and public health leaders from across the state and the nation. The program was made possible in part by the Smullin Foundation, which gifted the PHM program funding that was used to sponsor PHM students managing the Park and Play Program sites. 24


Students have also had the opportunity to work closely with faculty on other research projects. Kyle Chapman, Ph.D., has received funding for various research projects that include students. His students have worked on projects related to medical appointment nonattendance, head and neck cancer screenings in Klamath County, air quality and hospitalization rates, chronic illness management and prevention programs, and the effectiveness of after school programs. They have also worked with community partners like Blue Zones on the Trail Count, which collects data on the use of trails, bike lanes, and other forms of transportation to help policy makers and community organizations better understand how pedestrians and nonmotorized vehicle users are utilizing the existing transportation paths. Through these experiences, students have been able to gain real-world, applied experience while learning- effectively accelerating their readiness for employment. The field of PHM is interdisciplinary and other Oregon Tech programs support PHM, including Geomatics - a program whose technology can be used to identify hotspots of disease and social conditions, which are studied by PHM students as they plan health programs. Data on these hotspots, along with other population health projects, have recently helped lead to the awarding of the Robert Wood Johnson Foundation Culture of Health Prize for Klamath County, which recognizes American communities that are actively working on a collaborative, data driven strategy that will improve the population’s health in the future.

Alumni involvement in the program is also at a high point, with continued engagement in population health issues including environmental health, food security, nutrition and care of children. PHM alumni work as analysts, financial developers, and program managers at local organizations like Cascade Health Alliance, YMCA and Blue Zones Project. As students continue to expand their reach throughout the Klamath Basin, leaders of the PHM program are right alongside them. Dr. Nathenson serves as chair of the Applied, Clinical, and Public Sociology committee of the Pacific Sociological Association, and is a leader in applying sociology to careers, including training on research centers and pedagogy. Dr. Chapman has undertaken various research projects aimed at improving population health through recognition of social determinants, behavior change and community outreach. He and former faculty member Stephanie Machado are even publishing research with students from student-run studies, and contributing to the greater network of sociology and public health professionals. The energy behind PHM in Klamath County is building, and students get to be part of the cutting-edge of this field. In another windfall, the OHSU Moore Institute recently visited Klamath to potentially be a hub to encourage systems thinking to tackle health issues at the population level. Research on "epigenetics" - the intersection of environment and our genes- suggests that to create impact on a population level, environmental and social factors must be addressed; this is in line with PHM’s sociologically-based program. This research has been replicated around the world, showing that environment impacts the genetic links to health. This is what PHM students are learning, and right in their own backyard.

To learn more about Oregon Tech’s Population Health Management program, please visit www.oit.edu/ academics/degrees/populationhealth-management

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Exit, Hope and Loyalty: The fate of neighborhoods By Joe Cortright

How neighborhood stability hinges on expectations: If people don’t believe things are going to get better, many will leave One of the most perplexing urban problems is neighborhood decline. Once healthy, middle-class or working class-places seem to gradually (and then abruptly) fall from grace. As we documented in our report Lost in Place, the number of urban high poverty neighborhoods in the United States almost tripled from 1970 through 2010. Most of the growth was in places we called “fallen stars” places that had lower than average rates of poverty (under 15 percent) in 1970, but that were places of concentrated poverty (with poverty rates of 30 percent or more in 2010). What had been the solidly blue collar neighborhoods of many cities had, over four decades, become among the nation’s poorest–the kinds of places that the research of Raj Chetty and his colleagues shows permanently reduce the lifetime economic prospects of kids raised locally. The mental picture we draw of neighborhoods and their residents is often a highly idealized, and simplified one. Particularly in describing high poverty areas and gentrification, we often focus on its impacts on “long time residents.” The idea is that people tend to be very tied to a particular neighborhood and are either scarred by its deficiencies (high poverty neighborhoods) or disadvantaged by change (higher rents due to gentrification). What this simplified picture misses is that not everyone who lives in a neighborhood has (or necessarily wants) long term tenure. Some people may have deep ties to a place. Their family may have lived there for generations, they may own a home (or a business), they may be deeply involved in community institutions and Southern Oregon Business Journal

activities. They may have a enduring attachments that lead them to stay, regardless of whether the neighborhood improves or declines. But many residents, and arguably most renters, have far weaker ties to particular neighborhoods. The average tenure of a renter in the United States in her or his apartment is less than two years. For these residents, a particular neighborhood may be simply one stop on a journey that ultimately takes them elsewhere. And for many, moving to a different neighborhood, may be aspirational–getting a bigger yard, a shorter commute, better schools or safer streets–may be more important than staying where you are now. There’s abundant evidence that moving to a different neighborhood is one key way that families better their living conditions and prospects. In his famous book, Exit, Voice and Loyalty, Albert Hirschman boiled the choices a citizen had for influencing a larger organization into three broad categories. Exit (one could leave if one wasn’t satisfied), Voice (one could try to change the organization by speaking out, and Loyalty (one could go along with the organization as it was, and expect some reciprocity for their commitment). In urban neighborhoods, we would adapt that trio as “Exit, Hope, and Loyalty.” In the face of neighborhood decline, it seems that residents have a couple of choices. They can stick around (loyalty) or, if they want, they can leave. Whether they do so or not depends critically on that middle factor “hope”–if people lose hope, if they have no reasonable expectation that things are going to get better, they may be well advised to cut their losses and leave before things get worse (for example, selling before their home has lost even more value). Some will be extremely loyal to a neighborhood. They may have deep ties, personal, social, and financial, and be willing to expend considerable personal energy to help their neighborhood survive, thrive and improve. 28


But for many, the choice of exit may be highly pragmatic. Some may not have deep roots in a community, and leaving may imply little personal or social loss. Even those with roots or loyalty however, may make the carefully calculated decision that they can’t afford to wait for the neighborhood to get better in order to improve their own lives (and the lives of their families and children). Even those who are loyal are unlikely to remain, if they’ve lost hope. One of the paradoxes of civic engagement is that it is essentially uncorrelated with measures of community satisfaction. People tend not to speak out, attend meetings, write letters, and so on, when they’re satisfied that things are going well in their neighborhoods. A 2010 survey of residents of 29 cities by the Gallup Organization for the Knight Foundation found that civic engagement was the factor least correlated with community satisfaction. The challenge, of course is that once the dynamic of “exit” gets put in place, it is self-reinforcing. When the people with means and choices start leaving a neighborhood, it can lose its economic and social vitality. Fewer residents, and fewer middle class families means less money to support local businesses and more limited social capital to support schools and other institutions and to maintain the community’s collective sense of identity and wellbeing. As Alan Mallach describes, the neighborhood decline starts a cascade of events, a decline in property values that saps community wealth, leading to a downward spiral:

As the number of vacant properties increases, the value of the remaining properties declines further, and the confidence of the remaining homeowners begins to disappear. Signs of disorder begin to appear, from litter in the gutters to graffiti on the walls of vacant houses or storefronts. Decline gradually undermines a neighborhood’s ability to maintain its stability in the face of problems. Writ large, this process is fueling urban decline and concentrated poverty in many of the nation’s metropolitan areas. A recent report from the University of Minnesota’s Institute for Metropolitan Opportunity shows that the most common pattern of neighborhood change in the US is for low income residents to find themselves in neighborhoods of even more concentrated poverty. As Jason Segedy writes: Southern Oregon Business Journal

Instead of displacement by gentrification, what we are seeing in most cities could be described as displacement by decline – as black middle class residents, in particular, frustrated by the continued social and economic disintegration of their neighborhoods, are moving to safer and more attractive neighborhoods in the suburbs. Whether residents of struggling urban neighborhoods choose to remain loyal to the place they live, or whether they instead decide to exit depends directly on hope: do they have a reasonable expectation that their neighborhood is going to get better, or at least not deteriorate further? Consequently, one of the critical factors in stabilizing or revitalizing these neighborhoods is addressing these expectations. Our colleague Carol Coletta once asked then Mayor, now Senator Corey Booker what the toughest challenge was that he faced as Mayor of Newark. “He replied, “convincing people that things can be different.” If the residents of a community no longer believe it is going to get better, not only will they be less inclined to invest their time and energy in supporting it, but their attitudes will likely fuel a more widespread perception of neighborhood decline, and this stigma, once established may be impossible to reverse. A key challenge for fighting neighborhood decline, and overcoming concentrated poverty is building a credible expectation on the part of neighborhood residents that things are going to change, and change for the better. Building hope is needed to reinforce loyalty and minimize exit. That’s a major task for urban leaders. file:///C:/Users/User/Desktop/June%202019/exithope-and-loyalty-the-fate-of-neighborhoods.htm

Joe Cortright

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Benton County Adopts Transient Lodging Tax At a recent Board of Commissioners meeting, the proposal to implement a transient lodging tax passed unanimously. This tax does not directly affect County residents since tourists and visitors primarily stay in hotels and other lodging facilities within the County. As allowed under ORS 320.300, Benton County will impose a 3% county-wide Transient Lodging Tax (TLT) effective July 1, 2019 via Ordinance 2019-294 that will create Chapter 39 Transient Lodging Tax in the Benton County Code. The tax will apply to facilities with lodgers of short-term stays less than 30 days and with rental availability to the public of more than 30 days in a calendar year. This includes hotels, motels, resorts, inns, bed & breakfasts, cabins, lodges, RV sites and campgrounds, vacation rental houses, and any other dwelling unit used for temporary overnight stays. Benton County departments impacted by the TLT, including County Counsel, Community Development, Finance, Information Technology, Board of Commissioners Office, and Fairgrounds, held meetings over the past year to discuss the logistics of implementing the ordinance and how it would be administered. Further, the Community Development Department has developed a plan to address the permitting of vacation rentals by owners. Based on these discussions a TLT ordinance (Ord. 2019-0294) was drafted that would address the operational needs of the various Benton County departments. Meetings with stakeholders including the Corvallis Chamber of Commerce Government Affairs Committee, Oregon Restaurant & Lodging Association (ORLA), Visit Corvallis, Oregon State University, and the Corvallis Benton County Economic Development Department were held during 2018 to gain input and address any concerns. Southern Oregon Business Journal

As a potential recipient of TLT funds, the Benton County Fair Board contracted with Markin Consulting in August 2018 to conduct a market demand study and develop an updated master plan for the Benton County Event Center & Fairgrounds that would enhance the facilities for tourism and economic development. Members of Oregon Restaurant and Lodging Association and Visit Corvallis participated as stakeholders during the public engagement phase of the master plan process. The preferred master plan layout was accepted by the Benton County Board of Commissioners on April 2, 2019. The first reading of Ordinance No. 2019-0294 was conducted on April 16, 2019. The second reading was conducted on May 21, 2019 and thusly the ordinance will go into effect July 1, 2019. 70% of transient lodging tax revenues go towards "tourism promotion" or "tourism-related facilities.� Currently 16 of 35 Oregon counties collect TLT. Linn County instituted a 3% county tax effective October 1, 2018, which will benefit the Linn County Expo Center and Parks Department. The City of Corvallis imposes a 9% TLT, which generated $1.754 million in FY 2017. Based on those revenues a 3% Benton County TLT would result in an annual income of approximately $584,664 within the city limits. 30% of the TLT revenues may be allocated for any county services, including the costs to administer the TLT. This is known as the 70/30 distribution. The distribution of TLT funds will be determined by the Benton County Board of Commissioners following the 70/30 requirement. https://www.co.benton.or.us/boc/page/benton-county-adoptstransient-lodging-tax Benton County 205 NW 5th Street PO Box 3020 Corvallis, OR 97339-3020

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Celebrate National Get Outdoors Day on June 8th at PEAVY ARBORETUM

The Oregon State University Research Forests, OSU Extension Service of Benton and Linn Counties, and the Benton County Health Department will host the 7th annual National Get Outdoors Day event at Peavy Arboretum, north of Corvallis. This event will take place on Saturday, June 8th, 2019, from 10:00 a.m. to 3:00 p.m. as part of National Get Outdoors Day, an annual event encouraging healthy, active outdoor fun. Participating partners from throughout the local community will offer a variety of activities designed to engage visitors and connect youth with the great outdoors. Bilingual (Spanish and English) community volunteers will be on hand at the event. This event is free to the public and will offer a variety of hands-on family activities, including fishing for youths 13 years old and under, live birds, and interactive demonstrations of camping, hiking, and other outdoor skills and activities. Food will be available for purchase on site, and people are welcome to bring picnic lunches. Shuttle service will provide transportation from Crescent Valley High School to Peavy Arboretum. On-site parking will not be available. For more information, contact Oregon State University Extension Service at 541-766-6750 or visit the Oregon State University Research Forests Get Outdoors Day website at http://cf.forestry.oregonstate.edu/getoutdoors-day. Southern Oregon Business Journal

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Trade Wars Heat Up with New Assault on Mexico One way or another, President Trump is going to drag the Fed into his trade wars. Tonight Trump announced via Twitter that imports from Mexico would face a 5% beginning June 10. The tariff could rise as high as 25% unless Mexico acts to stem the flow of refugees from Central America. It’s not clear that the legal authority exists to take such action, but, you know, details, details. And the White House is trying to argue that these tariff threats are separate from the USMCA trade deal that is currently a legislative priority. I guess this is like telling your wife that your mistress doesn’t have anything to do with your marriage. You really can’t make this stuff up anymore. A couple of points jump to mind here. First, this obviously threatens to disrupt North American supply chains. The auto industry in particular is likely to suffer as the industry accounts for a large share of the imports from Mexico. This can’t come at a much worse time given the US auto sales are on the downhill side of the post-Recession recovery. Second, it doesn’t bode well for a trade deal with China. Chinese leaders will see what happens when you enter into a good faith deal with the U.S with this administration. It is reasonable to think China’s play here is to stretch this out until after 2020 elections and hope they have someone more reasonable to deal with.

Third, this weaponized uncertainty isn’t good for U.S. business confidence. Business leaders are already nervous about the sustainability of the expansion given it will soon be a record-breaker. The trade wars with China had them on further edge. An expansion of that war Mexico could undermine confidence further and discourage investment. We don’t know what straw will break the camel’s back here, but Trump is looking like he wants to try to find out. Unsurprisingly, stock future fell while U.S. treasuries rallied, the latter only intensifying the inversion in the belly of the yield curve: The story here is that market participants anticipate the Fed will need to cut rates to maintain the expansion. The Fed has so far resisted this story, but the odds favor them moving in this direction. The simple fact is that the Fed reacts systematically to a changing forecast. Financial markets are signaling the the growth forecast will worsen enough, or that the risks to the growth forecast will become sufficiently one-sided, that the Fed will have to act. The Fed isn’t there yet, but they will not be able to resist forever. Bottom Line: Trump will get the Fed to back his trade wars, but only threatening to damage the U.S. economy first.

Timothy A. Duy Senior Director, Oregon Economic Forum Professor of Practice Department of Economics University of Oregon Eugene, OR 97403-1285 duy@uoregon.edu

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Are Middle Market Companies Preparing for an Economic Slowdown?

BY: RON WOLFE Vice President and Senior Relationship Manager at KeyBank

The Great Recession ended in 2009 and, despite the growth that has prevailed in the decade since, many middle market business owners have been watching economic trends closely and taking steps to prepare for the time when growth stalls. While overall sentiment for the U.S. economy remains very positive, a recent KeyBank survey of 400 middle market business owners and executives on their expectations surrounding a potential economic downturn found that many believe a downturn is coming and many are taking steps to prepare their businesses.

Is an economic downturn on the way? 69% of middle market companies are expecting an economic downturn in the U.S. in the next two years. More expect it to come later as opposed to sooner, with 31% expecting a downturn in 2019 and 38% expecting it in 2020. Not surprisingly, most middle market companies expect the next economic downturn to have a negative impact on their business. Only 20% anticipate no impact and another 20% think a Southern Oregon Business Journal

downturn could positively impact their business. Higher-revenue companies (those with annual revenue of $500 million to under $2 billion), as well as those in the Northeast (where there is a higher concentration of upper middle market companies), are more likely than others to expect a positive outcome. So, too, are those in the construction industry. Despite the fact that 69% of middle market companies expect an economic downturn in the next two years, 48% of executives still have a very good or better economic outlook and 79% have a good or better outlook. Middle market businesses in the $500 million – $4 billion revenue range have a slightly more positive economic sentiment.

How do middle market executives feel about their own businesses? Interestingly, 79% of middle market business owners and executives remain optimistic about the outlook for their own company over the next 12 months. Considering 69% of companies are expecting an economic downturn no later than 2020, this high level of optimism may speak to the confidence companies have in the actions they have taken to safeguard against a downturn. 34


Nearly 70% are looking to expand the scope of their operations. Most want to do so through capital expenditures and by hiring more employees. Targeted capital expenditures include major equipment purchases, additional facilities/ locations, and the expansion/ renovation of current facilities.

Middle market companies are also seeking to expand through acquisitions, with 18% extremely likely to complete an acquisition in the next six months and 23% very likely to complete an acquisition in the next six months.

What are middle market companies doing to safeguard against an economic downturn? Given that 69% of middle market companies expect a downturn in the next two years, two-thirds are already taking steps to safeguard against it. Most commonly, businesses are looking to reduce expenses and improve operational efficiencies and productivity to counteract potential revenue losses. Some specific actions include employee and benefits reductions and alternate low-cost providers of raw materials. Companies are also looking to identify new markets and products to offset decreased revenue from their current product and market mix. Over a third of companies are conserving cash to increase liquidity, thus creating a buffer against a future economic downturn. They are also implementing new cash management solutions that accelerate the cash conversion cycle, improve efficiency, and also increase liquidity.

downturn. This level of preparation may partially explain their more positive outlook with respect to the next economic downturn. Construction companies are similarly positive. Their actions to drive efficiency are different, however, with a focus on employee reductions while higher revenue companies are focusing on reducing benefits.

Where we go from here Despite the fact that 69% of middle market companies expect an economic downturn in the next two years, business owners and executives still have a sense of optimism.

79% have a good or better economic outlook and 70% of middle market companies are expanding through hiring and capital expenditures. Still, it’s best to hedge your bets. This business reality is reflected by the fact that two-thirds of companies are taking steps, such as improving efficiency and increasing liquidity, to safeguard against a downturn. No matter what happens to the economy, U.S companies will be better off because of the proactive steps they are taking now. About the authors: Ron Wolfe is vice president and senior relationship manager for KeyBank. He may be reached by phone at 503-554-4183 or email at: ron_j_wolfe@keybank.com. Linda Hamilton is vice president and senior relationship manager for KeyBank. She may be reached by phone at 503-644-1943 or email atlinda_r_hamilton@keybank.com. This material is presented for informational purposes only and should not be construed as individual tax or financial advice. KeyBank does not provide legal advice. KeyBank is Member FDIC. KeyCorp. Š 2019. CFMA #190506-580928

Guest Blog Post by KeyBank: Ron Wolfe, Vice President and Senior Relationship Manager and Linda Hamilton, Vice President and Senior Relationship Manager

Higher revenue companies are more proactive about taking action to safeguard against an economic Southern Oregon Business Journal

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Raiders softball team returns to SOU as World Series champs

May 30, 2019/in Student Life / The SOU Raiders softball team, united all year in its focus on a national title, was returning to Ashland today in four separate groups after winning the university’s first championship Wednesday night in the NAIA World Series. SOU President Linda Schott, who was traveling in Mexico as part of the Ashland-Guanajuato Sister City delegation, said she followed the championship series closely and is thrilled with the result. “I couldn’t be more proud of our team and our university,” the president said. “These young women are textbook examples of student-athletes. They demonstrated their talent, toughness and determination on a national stage – and the team has a combined grade point average of 3.5. They are ideal representatives of SOU and the state of Oregon. I look forward to congratulating them when we’re all back on campus.” Plans are in the works for a parade next week to celebrate the team’s championship. Details will be posted on SOU News when the date, time and route are finalized. The SOU team was led on Wednesday by a complete-game effort from pitcher Gabby Sandoval Southern Oregon Business Journal

and a first-inning grand slam by shortstop Paige Leeper as they defeated NAIA powerhouse Oklahoma City, 8-3, in an elimination game for both teams. The Raiders made it through the World Series winner’s bracket unbeaten, then had two opportunities to defeat Oklahoma City – which emerged from the loser’s bracket in the double-elimination tournament. Oklahoma City won the first game of the two-game set with SOU on Wednesday morning. SOU is just the second Cascade Conference member to win the NAIA World Series since it began in 1981, and the team set a school record for wins for the third consecutive season under fifth-year head coach Jessica Pistole. Wednesday night’s game was Sandoval’s 33rd complete game of the season, giving her a 36-4 record – the 10th-most single-season wins in NAIA history and the most for any pitcher since 2013. https://news.sou.edu/2019/05/raiders-softball-team-returnssou-world-series-champs/ Southern Oregon University 1250 Siskiyou Boulevard Ashland, OR 97520

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Dr. John Forsyth receives Community Service Award for Excellence in Long-Term Care “I am excited to announce Southern Oregon’s first Community Service Award for our industry healthcare for older adults and long-term care. We are here to recognize someone that we chose ourselves, and we believe that you will agree he is very deserving! We are genuinely honored to recognize one of the most giving, supportive and truly amazing people in Southern Oregon. When I reviewed the bio for today’s recipient, I was totally speechless! Since arriving in Southern Oregon he has paved an INCREDIBLE path in nearly every capacity of community service. Beginning his Southern Oregon journey as the first cardiologist in Medford in the 1970’s. ”Thank you, Jamie Callahan, Founder & Co-CEO

Dr. John Forsyth Washington University in St. Louis, Medical School (’65) University of Washington Hospitals (’65-’70), post graduate training John practiced Internal Medicine and Cardiology in Medford, Oregon from 1970-2004. Since 1994, he has been a volunteer clinical consultant (17 years), board member (6 years) and president (2 years) at Community Health Center. He has served on the Ethics committees of both Rogue Valley Medical Center and Providence Medford Medical Center since 1980. In 1994, he helped form VOLPACT, a collaborative venture between three local hospitals two safety-net clinics and 90% of the practicing physicians of Jackson County, Oregon to provide necessary charitable, specialty care for low income, uninsured patients. In 2008, he was elected chairman of Jefferson Regional Health Alliance. In 2010, he joined several community leaders to form COHO (Choosing Options, Honoring Options), a collaborative fostering community-wide education about end-of-life care options. Previous Honors 1998- Oregon Medical Association, Physician Citizen of the Year 1998- Providence Health System, Mother Joseph Award 2003- Rogue Valley Hospital Foundation, ASV Carpenter Distinguished Citizen Award

Source of Passion The reintroduction of palliative and hospice care into mainstream American medicine over the last twenty Southern Oregon Business Journal

years is finally being recognized as a great benefit by the vast majority of those near the end of life and their families. Admittedly, my own profession (which holds the keys to those therapies) has only recently begun to incorporate the many blessings of both palliative and hospice care into the care of dying people. I, myself, have personally seen such care transform the end of life for many friends, patients, and families. Unfortunately, now, nearly half of those who elect hospice care are unable to accomplish such care in their own homes (the most preferred place). Hence the concept of a hospice house, a home-like place that focuses squarely upon providing superb 24 comfort care, facilitating meaningful conversations, closure of human relationships and spiritual support for those who wish it, makes abundant sense. Current plans for the Holmes Park House will address this great need in our local community. It will also elevate the level of end-of-life care for all Southern Oregonians. For all these reasons and many more, the Holmes Park House for hospice care has become the great passion of my late retirement years! Team Senior Develops Award to Recognize Community Service Excellence in Long-Term Care

“Recognizing hard work is argued as important in the workplace, but it isn’t very often that we’re able to officially recognize our peers (perhaps competitors) for their commitment to the community, volunteerism, compassion and sheer dedication. Working in long-term care can be exhausting, and sometimes depressing. My peers deserve recognition and we are determined to give that to them!” For more information regarding the Southern Oregon Community Service Award, call 541.295.8230 or visit Team Senior.org

https://www.teamsenior.org/nomination

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