Credit?s tight, but city pulse is still steady
Clive McFarlane
cmcfarlane@telegram.com
Earlier this month, the city?s economic development department led its newsletter with a year-in-review look at Worcester?s economic climate.
?In spite of a worldwide financial meltdown, the City of Worcester experienced steady economic activity in 2009,? the review touted.
?Overall, Worcester enters 2010 as a strong regional economic force, with over $2.3 billion worth of public and private investment planned, recently completed, or under way.?
Initially, I thought Timothy J. McGourthy, director of economic development for the city, needed to curb his enthusiasm, but I am beginning to believe that whatever the strength of the city?s economic pulse, it might be as good as it beats anywhere else.
Yesterday we were told, for example, that big banks were sitting on nearly $1.3 trillion in cash, which means that for every $1 they offered in business loans, they were keeping 98 cents in reserve.
This credit tightness by the big banks is not likely to loosen anytime soon.
This is why, at least for the short term, Worcester officials are banking on local investment entities to pilot the city?s eventual emergence from these difficult economic times.
Clearly, there are promising signs.
Mr. McGourthy noted, for example, that ?established corporations, such as Saint-Gobain Performance Plastics, Beechwood Hotel, UMass Medical School, and Hanover Insurance Group expanded either their business lines, product offerings, or square footage needs.?
Hanover is also rumored to be the ?local? investor now looking to taking control of the long-dormant CitySquare project ? a $563 million, mixed-used redevelopment for downtown Worcester ? from Berkeley Investments Inc., the Boston-based project developer. City officials say they were not at liberty to confirm or deny Hanover?s interest, but they were bullish on what they say appears to be a willingness of ?smaller community banks? to invest in the community.
Mr. McGourthy will tell you that more than 60 new businesses opened this past year in Worcester and more than 2,300 building permits were issued, totaling an estimated $116.8 million in both residential and commercial renovations and new construction.
But he will also tell you that most of those new businesses were small startup entities.
Of course, his report didn?t mention those businesses that failed during the year, or the others that are being threatened by the slowdown in the economy and the still relatively tight credit market.
The fact is that while the local credit market is not frozen, it is not necessarily gushing loans either. Community banks have generally been more conservative with their loan portfolios, one of the reasons they were not overly exposed to the sub-prime mortgage housing meltdown.
That conservative approach is still intact.
?I would like to see even more capital flowing to businesses that need it,? City Councilor Joff Smith said.
?Access to credit is the lifeline for many businesses to meet payroll and keep employees working.?
He said, however, that community banks can lead the way in opening lines of credit, because they generally ?have a strong presence in the community, and often a local relationship that goes back many years.?
City Councilor Rick Rushton said it is up to city officials to create an economic blueprint that would allow banks to more readily loosen their purse strings.
?If you are putting a five-star restaurant in the middle of the forest, that is a losing venture,? he said.
?But if you are putting it in the middle of a thriving downtown, then that is a more enticing business proposition,? he said.
?Lending is based on a bank?s confidence that it will get a return on its investment,? he said.
The people at Berkeley apparently didn?t believe they could get a return on their investment with the CitySquare project. The potential new investor, whoever it is, apparently believes otherwise.
This and all the other positive economic activities of the past year are indeed things to boast about, no matter how pessimistic the times.
