Agenda - 04-27-2017 - 1 - Consideration of the Final Draft Durham – Orange Light Rail Cost Sharing Agreement and Final Draft Orange County Transit Plan

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203 REVENUE OUTLOOK » Durham and Orange County Article 43 Tax Collections Chart 3: Tightening Labor Market Boosts Wages Chart 4: Durham Positioned for Tech Growth % 10 4 -6 -1 =Risk of job loss, North Carolina(R) 8 Hourly wage,change yr ago, North Carolina(L) -8 -2 6 —Hourly wage,change yr ago, U.S.(L) 3 10 — 3 4 ir b i ' 2 2 ' /IA� 11' -12 — —Private sector hourly wage,diff btn — -4 0 1 Durham and San Francisco metro 1 -14 — areas,$(L) — -5 -2 Corporate income tax,diff btn North Carolina and California,ppts(R) -4 0 -16 I I I I I I I I I -6 08 09 10 11 12 13 14 15 16 07 08 09 10 11 12 13 14 15 16 Sources:BLS,ETA,Moody's Analytics Sources:BLS,Tax Foundation,Moody's Analytics North Carolina's banks,on the other more households are forming now that the as expLanatory variabLes. Because of the hand,will expand at a measured pace as tightening job market is generating faster delay between initial sales and distributable improving household balance sheets and income growth.More people will be willing proceeds, both independent variabLes were accelerating wage growth drive stronger de- and abLe to buy homes,and with supplies found to have the strongest expLanatory mand for consumer credit.Wells Fargo and tight and prices rising, builders will turn more power when Lagged by one quarter. Bank of America,which together account for aggressive and the recent lull in construc- Orange County collections display an er- one-quarter of the state's finance and insur- tion employment will prove short-Lived(see ratic seasonaL pattern,with a tremendous ance jobs,will benefit from stronger demand Chart 5). amount of voLatiLity that is not always corre- for home Loans in the coming years despite In total, North Carolina economic growth fated with underlying measures of economic rising interest rates. will accelerate in the near term thanks to growth.This is likely due to the Large tax- This increased demand for housing thanks more spending by consumers and businesses, exempt presence in the county,which can to strong demographics and even stronger which will benefit from bigger wage gains create distortions between what is occurring income gains ahead will also manifest it- and declining costs,respectively. Longer in the economy and what ultimately comes self in faster homebuiLding.Construction is term,a diverse industrial structure, Low in the door in the form of revenues.Durham poised to take off and take the baton from costs,and educated workforce will attract County collections,by contrast,were found manufacturing as the engine of growth in a wide range of capital and help the state to have a much more stable and consistent goods-producing industries.Supply and to outperform the nationaL average and seasonaL pattern. demand fundamentals are much improved its neighbors. Historical collections growth rates for compared with this time Last year,sug- Article 39 and ArticLe 43 collections were gesting a bigger boost from housing in Sales tax forecast compared for both counties,and found to the quarters ahead. Population growth is Methodology.With only three full years be extremely similar despite the inclusion steadily ahead of the nationaL average,and of data,ArticLe 43 collections were impos- of food and medical purchases in one series sibLe to forecast and not the other.After the determination Chart 5: Housing Market Has Room to Grow directly,and the of an appropriate forecast for Article 39 Durham County,the more established collections,the results were then fitted to 7 Article 39 collec- historical ArticLe 43 values to provide the 1 tions history was county level forecasts.A Monte Carlo simu used as a proxy. Lation was then used to create optimistic and 5 � Separate regres- pessimistic scenarios based on probabilities 4 sions were per- encompassing 85%of potential outcomes formed for each (see Charts 6 and 7). 3 6 — county utilizing Forecast.Sales tax collections will grow 2 I I I I .Housing completions county-level at a healthy pace in both Durham and Or- -Net household creation personal dispos- ange counties.Although the short history 1 1 I III I I I I I I abLe income and available for Article 43 collections demon- 10 15 20F 25F 30F 35F metro area hous- strates considerable voLatiLity,strong under- Sources:Census Bureau,Moody'sAnalytics ing completions Lying economic drivers will yield a consistent MOODY'S ANALYTICS / Copyright©2016 2