Despite positive results from the first quarter of 2010, McLean County foreclosure filings showed a depressing increase in the second quarter. Foreclosure filings rocketed up to 143 for the quarter – a full 83.3% increase over the same period in 2009. Looking at the first two quarters together, McLean County stands at 274 filings, higher than 2009 and just shy of 2008’s record total of 278 for the same period.

These results demonstrate the continued economic challenges persisting even as the country begins to flirt with economic recovery. As I have stated in the past, home foreclosures lag the overall economy in the sense that foreclosures follow job losses at a distance of some months. Foreclosures happening today are likely indicative of the job market from six to nine months in the past. Based on unemployment figures, I would expect to see a moderate-to-bad third quarter for foreclosures followed by a fairly-positive fourth. Overall, I predict that foreclosure filings will end 2010 just slightly below the 2009 figure.

Sources: McLean County Recorder’s Office, Bureau of Labor Statistics

From April 17th through April 23rd, classes will be held in a dozen different locations around Bloomington-Normal to promote financial literacy as part of a community-wide program called Money Smart Week®.   Money Smart Week offers classes to anyone from the public that has an interest in learning about money matters.   The best part about Money Smart Week is that these classes are free to the public.  How smart is that?

Money Smart Week was created by the Chicago Federal Reserve Bank in order to promote personal financial literacy in the overall population.  While the program is just a decade old, it has already spread throughout the Midwest, and new cities are added every subsequent year.  Money Smart Week topics typically run the gamut from basic financial literacy all the way through complex investing strategies and retirement planning.

The EDC will be offering a series of three classes specifically focused on business financing on Friday, April 23rd in the community room on the 4th floor of the Heartland Bank building at 200 W. College Ave., Normal.  The first class, which starts at 2:00 PM, will cover topics related to financing a start-up.  The second class, which starts at 3:00 PM, will be devoted to financing business expansions.  The third, beginning at 4:00 PM, will be a general seminar on resources available to businesses in McLean County.  Representatives from the Illinois Small Business Development Center, the Illinois Department of Commerce and Economic Opportunity and Central Illinois SCORE will also participate in these courses.

To see more details on these classes and the rest of the great MSW offerings for 2010, make sure you check out the MSW Web site at  www.moneysmartweek.org/illinois. Money Smart Week is a registered service mark of the Federal Reserve Bank of Chicago.

The foreclosure situation in McLean County has gotten off to a promising start in 2010.  First quarter foreclosure data pulled from the McLean County Recorder’s Office show that there have been 131 Lis Pendens filings in the county since the start of the year.  This total is considerably less than the 172 filings reported in the same period in 2009 and the 165 filings in 2008.

With most of the bad adjustable rate mortgages worked out of the financial system by now, the key variable for home foreclosures seems to be the overall employment situation and the performance of the larger economy.  Since foreclosures are a lagging indicator of economic performance (by the logic that home loan delinquency follows job loss at a distance of some months), this decrease in home foreclosures is likely attributable to the surprisingly strong economic performance seen in the fourth quarter of 2009.  We may, however, see a spike in foreclosures in quarters two & three that mirrors the recent jump in post-holiday unemployment.

Overall, this data merits some frugal optimism about our local economy.  While I will not declare a sustained recovery until we escape from 2010 unscathed, this lower incidence of foreclosures is yet further proof that our local economy is improving incrementally.

Sources:  McLean County Recorder’s Office, Bureau of Labor Statistics

Well, folks, it’s that time again…

The new 2010 Demographic Profile has been completed and is ready for release to the public. Did you know that Bloomington-Normal’s total annual economic production is greater than the entire countries of Mongolia, Chad, Nicaragua and Zimbabwe? You do now!

This year’s Demographic Profile contains updates of all of last year’s tables, with a few new additions to boot. The look and functionality of the profile has remained virtually unchanged from previous years.

A high-resolution digital version of the Demographic Profile is available on the EDC’s Web site for unlimited download. We encourage all users of this resource to use the digital version, but we also have a small number (2,000) of printed copies available at our office. This means that organizations will be limited to only a handful of printed copies each. If your institution requires a large number of printed profiles, please contact the EDC, and we can work out a separate printing arrangement.

We hope you enjoy this year’s snapshot look at the metrics concerning population, labor, taxes, housing, income, quality of life, retail data and transportation. If you have any questions or suggestions for improvement, please contact Ken Springer, project and data analyst, at (309) 452-8437 or ken@bnbiz.org.

Folks, it is time to do your duty.  By now, you should have received in your mailbox a piece of paper with the utmost importance for McLean County.  That piece of paper is the 2010 Census Form.  Fill it out!!!

Ignore the nutjob conspiracy theorists who claim that the 2010 Census is actually a tool of socialist/communist/Klingon indoctrination.  A properly filled-out census form has a real financial impact on our local schools, governments and social service organizations.  Here are some examples of how:

1) Census population counts are the statistics most often used by businesses looking to locate new facilities.  Do you want IKEA to build a store in Bloomington-Normal?  They won’t ever consider the notion until our population and income levels match their benchmark criteria.   This works the same for non-retail businesses, too.  Since workforce availability is a key factor for manufacturing operations, a higher population count might put Bloomington-Normal on more company’s radars as a possible location for a new plant.  New businesses mean more dollars in our local economy.

2) Communities with populations higher than 100,000 often receive their own allocation of HUD funding and other types of government grants.  While Normal and Bloomington are both well-below the necessary population totals, think forward to the day when Bloomington will have 99,999 residents.  The difference between a filled-out census form and a blank one could cost the city millions.

3) School funding is also allocated by population.  If your census form gets ignored, you may end up having to pay more for our local schools in the form of higher property taxes.  And no one really wants THAT to happen, right?

4) Census population counts are used to determine voting representation at the federal level.  Under-reported populations will find themselves with less of a voice on federal issues.

5) If I have failed to convince you of the economic and political importance to the community of filling out the census form, please consider the personal economic ramifications – refusing to answer it can cost you up to $5,000 in fines and legal troubles to boot.

It is time to do your duty to our community and country.  Please fill out the census when asked and encourage those around you to do the same.

*For more information about the 2010 Census, visit: http://2010.census.gov/2010census/.

2009 finished on a negative note in terms of home foreclosures in McLean County.  While the first half of  2009 showed home foreclosure rates drop, the last two quarters reversed this trend and showed a marked increase.  Overall, McLean County had 556 home foreclosures in 2009, compared to 503 in 2008.  This amounts to an increase of 10.54 percent.  The rise of McLean County foreclosures in 2009 is very likely tied to the unemployment situation in Central Illinois.

In prior years, it was thought that the spike in foreclosures first witnessed in 2006 was due to the effects of the subprime lending phenomenon.  Many predicted that subprime foreclosures would slowly taper off as these borrowers either refinanced out of their adjustable rate mortgages (ARMs) to more stable loans or entered into the foreclosure process.  Since most ARMs reset a few years after the loan originated, borrowers were going to face the default/refinance situation fairly early into the life of their loan.  It was also assumed that new subprime lending decreased significantly after the flaws in the system became apparent – roughly in mid-2007.  By that logic, those borrowers who were going to default based on the resetting of their ARM would likely do so sometime before the end of 2008.

The week-by-week foreclosure reports in McLean County illustrate this trend.  After April 2008, the high weekly averages of foreclosures began to decrease slightly.  This easing continued into July of 2009 when the rates began to increase once again.  This new increase, however, was very likely an effect of job losses taking place around Central Illinois.

With the Great Recession in full swing, McLean County’s jobless rate climbed from 5.1 percent in September of 2008 to 7.7 percent in September 2009.  The largest two-month jump in the unemployment rate occurred between May and July, when unemployment rose from 6 percent to 7.2 percent.  Foreclosure rates began their rapid climb in early July 2009 and continued their climb throughout the remainder of the year.  If we can assume a lag time between one’s loss of employment and the prospects of foreclosure, these two curves fit together fairly well.

If my hypothesis is correct, we should once again see home foreclosures taper off in 2010 as more people return to steady work.  Assuming no new financial crises (which is a big assumption these days), I predict a decreased number of foreclosures overall in 2010, probably starting in Q3.

Sources:  McLean County Recorder’s Office, Bureau of Labor Statistics

Small Business Energy-Efficiency Assistance Program

The Environmental Health major at Illinois State University, in cooperation with the Economic Development Council of the Bloomington-Normal Area, is offering free assistance to small businesses in McLean County to take advantage of financial incentives to improve energy efficiency.  ISU students trained in basic energy auditing and energy efficiency can help small businesses identify energy efficiency opportunities, estimate financial assistance and potential savings, and assist in selecting and monitoring contractors.

Small business owners are often too busy with daily business operations to keep track of energy efficiency technologies and the various financial incentives that have been created to promote energy efficiency.  The Small Business Energy-Efficiency Assistance Program for Bloomington-Normal is intended bridge this gap and help business owners take advantage of existing opportunities.

Specifically, as part of the program, students will:

1. Meet with business owners to explain the program.

2. Perform a walk-through energy audit to identify significant energy efficiency improvements.

3. Estimate potential costs, savings and payback, given existing financial incentive programs. Financial incentive programs include:

•  Federal tax credits
• Ameren rebates and discounts
• Local assistance  (when available)

4. Work with the business owner, if desired, to identify potential contractors and solicit bids.

5. Work with the business owner, if desired, to evaluate bids and select a superior contractor.

6. Work with the business owner, if desired, to monitor contract performance and evaluate final results.

The program runs through May 1, 2010. The number of business clients that can be served is limited, so businesses will be added to the program on a first-come/first-served basis.

For more information, please contact Tom Bierma, Professor of Environmental Health at ISU – tbierma@ilstu.edu or (309) 438-7121 or Ken Springer at the EDC — ken@bnbiz.org or (309) 452-8437.

Cash is the lifeblood of business.  Without open access to capital, most of the businesses you patronize and depend upon daily would cease to operate.  Local economic development organizations play a pivotal role in ensuring that community businesses can draw this needed capital.  The process of assisting businesses in obtaining needed funds is called “economic development financing.”

Banks (the traditional source of business financing) and local ED organizations ultimately have different end goals.  Banks seek to generate profits through well-managed risk, while ED organizations seek to create jobs and capital investment in their community.  Having different end goals does not preclude cooperation between these two entities, however.  In fact, good economic development financing actually helps banks better manage risk and get more deals done.  The secret is something called “gap financing.”

Financing gaps occur when a project seeking funds cannot meet the necessary underwriting criteria for a conventional lender.  The project may have a shortfall in collateral, or it may be requesting more funds than the bank is comfortable lending for a number of reasons.  When this happens, economic developers can step in and fill the financing gaps using a variety of different loan programs.  The ED organization issues a loan just like the bank does, only it takes a subordinated position on the same collateral offered to the bank for the project.  In the rare case of a default, the bank gets first call on the collateral and the ED organization gets whatever is left.  This arrangement gives banks the risk cushion they need to lend the bulk of a project’s funds, and the project itself obtains the total amount of financing requested.  The ED organization achieves its goal of creating new jobs and capital investment in the community.

When used properly and prudently, economic development finance is an important tool for local businesses and a key method for helping to create jobs and opportunities for residents.

Oddly, in a country whose DNA is forged around the concept of rewarding personal risk, rational adults still believe that the government will foot the bill for them to launch their dream business.  These risk-averse entrepreneurs are egged on in their misconception of capitalism by late-night infomercials and internet shopfronts offering advice on how to unlock the secret world of government grants….for a price.  While the pursuit of free money to start a business may seem antithetical to the mores that built our nation, the entrepreneurial spirit espoused by those selling these useless guides cannot be doubted.

The unfortunate byproduct from this exchange is that economic development organizations will occasionally be contacted by someone who bought a book from a guy wearing a suit covered with question marks and who sincerely believes that we economic developers are sitting on a small mountain of cash to dole out to the first person who asks.  We try to be as polite to these folks as possible, but usually end up pointing them to an excellent myth-busting Web site called www.NOFREEMONEY.com.

Entrepreneurialism is the process of making your business dream a reality through persistence, risk and hard work.  The idea that the government will simply write you a check to start a business is delusional at best and un-American at worst.

The third quarter saw a rise in foreclosure filings in McLean County, reversing the negative year-on-year trend for 2009 seen in quarters one and two.  Total home foreclosures from 1/1/2009 to 9/30/2009 totaled 401 in McLean County, an  increase of 3.6% over the same period in 2008.

If foreclosures continue to increase throughout the 4th quarter, 2009 will mark the 6th straight year of annual increases.  Numerous possible reasons for the increase in home foreclosures exist, including the 2008-2009 recession and rising unemployment.

Source: McLean County Recorder’s Office