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April 3, 2006

Warming trend | As the state tallies losses from the mild winter, some industries report big gains

By Chris Churchill
It was brutal. The wind whipped in from the north, traveling down the Penobscot River to deliver an icy blow to workers building the new Waldo-Hancock Bridge. Sometimes wind chills would sink to 40-degrees below zero. Workers, laboring high above the water, struggled with equipment because their hands and bodies were covered by layers of thick clothing. Bitter cold forced frequent breaks. Recurrent snowstorms reduced visibility ˆ— and sometimes made work nearly impossible.

But that was last winter. This year, Old Man Winter lost his nerve. The snow and ice rarely came. The temperatures were some of the warmest in memory. And for that, the Reed & Reed and Cianbro Corp. employees building the new Penobscot River span were grateful. "We had times in the previous winter when we just couldn't have people outside," says Steve Foster, a safety supervisor on the project for Cianbro. "We didn't have any of that this winter."

The relative warmth meant much more than increased worker comfort. It meant that the construction of the vitally important span could chug along without delay, allowing a project that was weeks behind schedule to catch up, according to the Maine Department of Transportation. "The original plan was to take the whole month of February off, because we didn't think we'd be able to sustain our work through winter," Foster says. "But we didn't have to do that."

Much has been made of the unusually warm winter that Maine, like much of the rest of the country, just passed through. (Spring officially arrived on March 20.) Discussion has centered on the economic harm done by the warm temperatures and lack of snow ˆ— and with good reason. Who, after all, is going to buy a snowmobile when there's no snow on the ground? How many will travel north to ski when its 45 degrees and raining? It's no surprise, then, that Maine businesses that depend on snow are hurting ˆ— so much so that Gov. John Baldacci has pledged aid in the form of one-year economic recovery loans of up to $75,000.

Yet as the progress made on the new Waldo-Hancock bridge illustrates, there's a flip side to the mild winter. While some suffering industries cursed the snowless sky, others stepped into the sunlight and thrived. As owners of snow-based businesses idly watched the weather and hoped for winter to kick in, other businesses were busily making money in months that are supposed to be the year's doldrums. "In January and February, our sales were very strong," says Fred Perkins, sales manager for the Belgrade-based Hammond Lumber chain of stores. "They were up about 10% over the same period last year."

Indeed, the construction industry is the most obvious beneficiary of the warmer winter. Construction work this winter didn't lull as it normally does, benefiting contractors and spin-off industries. "They're working, which keeps us working," said Kathy Guerin, marketing director for Gardiner-based Maine Drilling & Blasting. "The busy season is ahead of schedule, and we're getting a good jump out of the gate."

The mild winter also benefited businesses in other fields ˆ— especially those, like restaurants and retail stores, that depend on consumer whims. Shoppers and diners can be a bit like Punxsutawney Phil, the groundhog who fears his own shadow. If they stick their heads out the door and feel a bitter nip, they flee inside. But if it's warm, they might just venture out and see the world.

That venturing out had an economic impact in some parts of Maine. For example, at the three Beale Street Barbeque restaurants ˆ— in Bath, South Portland and Augusta ˆ— revenues were up 8% to 15% this winter, depending on the location. "It was very strong," says Michael Quigg, co-owner of the Bath-based chain. "We had a bunch of snow storms that just killed us last year, which we didn't experience this year."

Walking-around money
Think back to last fall. Remember the gloomy scenarios predicted for the coming winter? With heating costs spiking and cold temps ready to bear down, advocates for the poor were worried. "Heating oil cost strikes fear in many," read a September headline in the Bangor Daily News. Other reports suggested the winter would bring fuel shortages and even rolling blackouts.

But few of the worst fears were realized, thanks to a winter so mild that temperatures never dropped below zero in Portland, according to the National Weather Service.
(Typically, temperatures in the city drop below zero 10 times each winter.) The weather service says the recent meteorological winter ˆ— defined as December, January and February ˆ— was the sixth warmest of the past 66 years. And January 2006 was the second warmest recorded. Normally, January is the coldest month of the year; this year it was the warmest month of the winter. (See "Cause and effect," previous page.)

While that relative warmth was a relief to the poorest Mainers, who often are forced to weigh fuel costs against food, clothes or prescription drug purchases, all Mainers saved on heating costs ˆ— to the overall benefit of the state economy. "If we had had a really cold winter, you would have taken hundreds of millions of dollars out of the Maine economy that we can't afford," says Charles Colgan, a former state economist now teaching at the Muskie School of Public Service at the University of Southern Maine.

Colgan believes the positive side of the mild Maine winter "almost certainly outweighs the negative side," because of the money left in bank accounts. That's currency that had ˆ— and will continue to have ˆ— an effect on spending. "It's clear that weather plays a role [in consumer spending]," Colgan says. "We know the extreme cold took a big chunk out of fourth-quarter growth last year."

Indeed, taxable sales figures from Maine Revenue Services show that more money was spent in Maine on personal consumption ˆ— in stores, restaurants and hotels ˆ— in December and January this year than they did a year earlier. Personal consumption spending in January, for example, jumped from $849 million in 2004 to $869 million this year.

In particular, retail spending in smaller specialty stores, those most dependent on the willingness of customers to brave the outdoors for window shopping, saw solid increases, jumping from $97 million in January 2004 to $105 million this year. (February sales totals won't be available until April 15.)

Those numbers reflect what store owners like Astrid Vigeland, owner of Folly 101, a small home-goods store in Portland's Old Port, saw firsthand. Vigeland says her business had a remarkably strong winter, with sales up 15% to 20%. "February was an incredible month," Vigeland says. "We had a few Saturdays in February that were comparable to the weeks before Christmas."

A less muddy mud season
Not everyone, of course, did so well. In fact, the economic effects of the warm winter seem cruelly capricious, helping some businesses while hurting others just a short distance away.
The Kennebunks, hardly physically distant from Vigeland's Portland store, appear to have been in a different economic universe this winter. John Daamen, co-owner of Waldo Emerson Bed and Breakfast in Kennebunk, says visits to the inn were down 50% this winter ˆ— and fell a whopping 75% percent in January. "Everybody around us is doing horrible," says Daamen, who attributes the decline largely to warm temperatures that kept Boston-area residents from developing the cabin fever that sets in during a typical winter and pushes them to seek short, mid-winter escapes.

Effects of the typical winter are difficult to predict: Warmer weather would seem a boost to auto sales, as more folks, in theory, should be willing to wander car lots. But it didn't work that way, at least not this year. State figures show that December and January auto sales dropped $16 million from the prior year. Steve Gendron, a manager at Marc Motors in Sanford, where sales this winter were flat, can explain part of the decline: "I've got 25 plow trucks that haven't been sold," he says.

Ski resorts were also off: American Skiing Co., based in Utah, recently announced that skier visits were down three percent at its six New England resorts. In the winter in Maine, skiing is certainly an important component of the state's tourism industry. But the warm weather does not appear to have had a devastating effect on many of the state's inns and hotels. While January lodging spending dropped by nearly $1 million over the same month a year earlier, to $12.4 million, lodging spending in the most recent December was way up, to $24 million from $19.5 million, according to Maine Revenue Services.

Likewise, restaurant spending for the two months increased from $238 million to $246 million, according to the state. Dick Grotton, president of the Maine Restaurant Association, says eateries in ski areas and remote areas typically did poorly, while urban restaurants benefited from the increased mobility of residents. "It was just easier for everyone to get out and move around, including the elderly, who don't get out when it's cold," Grotton says.

Colgan predicts the warm weather will continue to have an economic benefit well into the spring, as residents more freely spend money they'd set aside for home heating costs. Some in the building industry also believe the warm winter will have a lasting economic impact, because most builders have a jump on a backlog of projects to tackle ˆ— meaning more projects will be completed before next winter's cold.

Here's an additional benefit: Mild weather should reduce many of the legendary nuisances of spring (although black flies and mosquitoes might arrive earlier and with more intensity). The weather should result in fewer posted roads prohibiting the travel of heavy trucks. And there's not much of a snowpack in most of the state, so mud season should be at least a bit less mucky. The threat of springtime flooding is also reduced, a relief to towns such as Hallowell, where downtown businesses are a rock's throw from the Kennebec River.

Last April, when warm spring rains quickly melted snow, the river was a danger. Many businesses in Hallowell were forced to evacuate, and some stayed closed for a week, as water levels crept toward their doors. "We had to move everything out, and it took us weeks to get everything back in," say Ruth Coffey, owner of the gift store Paper Kicks. "But we're not going to have that problem this year."

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