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Damage from derecho could lead to economic 'spark' in Cedar Rapids

History points toward overall uptick for region amid coronavirus

Sep 6, 2020 at 6:30 am
    Homes, pictured Aug. 21, are damaged on the north side of Cedar Rapids in the aftermath of the Aug. 10 derecho. As insurance payments and federal aid starts to flow into the area, the local economy could see a badly needed “spark,” an economist says. (Rebecca F. Miller/The Gazette)

    Cindy Lint has been unemployed since April, struggling to find jobs during a pandemic when they are hard to come by. She can’t submit applications for now since losing internet service from the Aug. 10 derecho, and health conditions limit what jobs she can take.

    “I’ve given it to God because that’s all I can do,” said Lint, 50.

    Lint’s situation is hardly unique. Iowa Workforce Development has received at least 8,000 unemployment claims from Linn County for 23 consecutive weeks. Businesses are weathering a turbulent year as people like Lint spend less, and health precautions curb economic activity.

    But in Cedar Rapids, hit hard by the Aug. 10 derecho, the struggling economy could see a post-storm “spark” as insurance payments and house repairs lead to a new wave of consumer spending.

    “You’re going to have a burst in new spending regionally,” said Dave Swenson, an economics professor at Iowa State University.

    Debi Durham, director of Iowa Economic Development Authority and Iowa Finance Authority, anticipates a “boom” in the construction and home improvement industries in the area.

    In other cases, people need new cars to replace ones smashed by trees or an electrician to repair their meter box.

    “So you get this post-disaster spending, some of it driven by insurance and some of it driven by necessity,” Swenson said.

    Durham said a lot of government resources will enter the Cedar Rapids economy as well. Gov. Kim Reynolds has asked her for a list of things to request from the U.S. Department of Housing and Urban Development.

    “We’ll have to wait and see what insurance doesn’t pay,” Durham said. “Once we know exactly what that gap is, you’ll see a lot of these resources that will begin to flow into the community.”

    Swenson anticipates this “spark” being visible through “a really strong increase” in retail numbers six to nine months from now. He compared it with Cedar Rapids’ recovery from the historic 2008 flood.

    Cedar Rapids’ “economy actually continued to expand in 2008 and 2009 because of the spending and the employment and the economic activity that was driven by the cleanup and recovery activities,” Swenson said. “It actually delayed your descent into the Great Recession probably by two to three quarters.”

    Some of how much this anticipated economic jump resembles 2008’s is dependent on people shopping at small businesses, Durham said.

    “Consumers are so important to this recovery, probably more so than ever before,” Durham said. “There’s a lot of liquidity, whether it’s from relief funds or insurance payments. ... But we have to continue to remember as consumers that our small businesses have been hurt the most during this.”

    It’s far from a perfect economic solution for Cedar Rapids, though. While the “aggregate” economic output goes up, Swenson said the direct beneficiaries of this often aren’t people like Lint.

    At the same time, the derecho’s disruption of everyday life meant a disruption in economic activity as well.

    “Your economy was hindered because people couldn’t go to work,” Swenson said. “And businesses couldn’t operate because of the derecho and the power losses, so you had disruptions in people’s ability to engage in commerce.”

    Swenson said much of what was lost in the derecho doesn’t have a direct economic cost.

    “We don’t have a mechanism for calculating the sheer value or the aesthetic value of those trees,” Swenson said.

    “People can try and throw out a number” for the economic toll of the derecho, Swenson said, “but we really can’t measure those very well.”

    Swenson also anticipates an “incredible contraction” of the economy overall because of coronavirus.

    “The longer-term consequences of the pandemic are going to be with us for the next, for sure, year and a half,” Swenson said. “The economic stagnation is going to be a fact of life. ... We can only recover economically from the pandemic when we’ve recovered biologically from the pandemic.”

    Local governments already have been sweating through the pandemic. Durham believes Congress needs to pass a “very strategically targeted” bill with relief for local governments.

    “The cities and counties are all holding their breath that Congress is going to stop bickering and put partisan politics aside and do another (relief) bill,” Durham said.

    Karen Kurt, executive director of East Central Iowa Council of Governments, said she’s not seeing indications of a “flood of money coming into town,” though, like it did in 2008.

    Kurt said local governments have needed to do “more with less” for a long time. When a pandemic and derecho happens at the same time, “those unplanned expenses can be tough to manage.”

    Durham said it’s too early to “know the full impact” of the pandemic on local governments. She said the state’s fiscally sound budget helped cushion the blow of coronavirus. Hotel-motel tax revenue is down, but sales tax revenue is up from online shopping.

    Durham still is optimistic because of the region’s resiliency, though.

    “(Cedar Rapids is) like a phoenix rising from the ashes,” Durham said. “In spite of everything happening, I have to tell you that I’m still pretty bullish on the Iowa economy.”

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