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Bursting the Dane County bubble

The Wisconsin Institutes for Discovery is under construction in the 1300 block of University Avenue in Madison on June 12. The biomedical research buildings — a collaborative project between M.A. Mortenson and J.H. Findorff & Son Inc. — are slated for completion in 2010.   Photo by Henry A. Koshollek

The Wisconsin Institutes for Discovery is under construction in the 1300 block of University Avenue in Madison on June 12. The biomedical research buildings — a collaborative project between M.A. Mortenson and J.H. Findorff & Son Inc. — are slated for completion in 2010. Photo by Henry A. Koshollek

Melissa Rigney Baxter
Special to The Daily Reporter

The economic recession has drastically affected Wisconsin: Factories have closed, mass layoffs caused unemployment numbers to rise and building projects have been suspended.

Yet in the middle of the gloom, the bright side of the economy still shines on the west side of the University of Wisconsin-Madison campus, where two massive building projects are under way — the Wisconsin Institutes for Discovery, a science and technology research center, and the demolition and rebuilding of Union South.

There’s a perception Madison and Dane County are protected by an invisible bubble created by the university and the Capitol. However, looks can be deceiving.

Kamran Mesbah, deputy director of the Capitol Area Regional Planning Commission, said, “It’s not a bubble.

I’d say it’s more of a windscreen.”

“Our area has been relatively insulated from (recessions), but that is not a foolproof kind of protection,” he said.

While some municipalities, such as Janesville, can be devastated when one industry or employer closes, the Madison area has the advantage of two large-scale employers that are somewhat recession proof.

“Unless the state or university would close down, which would require more than just a recession, we aren’t going to see the same kind of impact as a (General Motors) plant closing,” Mesbah said.

Diversification brings changes

“If you go back 10 to 20 years in Dane County, it really was true that the economy was more bullet-proof,” said Tom Still, president of the Wisconsin Technology Council. “That’s because the economy then was more dependent on government and the university than it is today.

“For very good reasons, the economy in Dane County is more diversified with more private-sector companies, especially in the tech sector.”

Still said the added diversification, while positive, also means Dane County now has more in common with the rest of the state.

“Some really good things continue to happen here,” Still said. “But companies aren’t immune from recession.”

In the technology sector, Still said, there have been gains and losses. In the last month, a Chicago company, Integrated Genomics, announced it was moving to Madison. However, Sanimax, a biodiesel company, instituted layoffs and shutdowns. Manufacturing and construction may be among the first to feel an economic downturn, but the nature of government often means a lag between the beginning of a recession and signs of its effects.

Recent budget issues, including the institution of a government employee furlough policy, show Madison’s bubble can burst.

Mesbah said a domino effect will continue to affect all levels of government.

“Typically government lags behind the private sector,” Mesbah said. “It doesn’t catch up until a couple years later when tax collections start showing the impact of the private sector.”

Building permits show slowdown

“We’re definitely being impacted by the economic recession,” said Todd Violante, director of the Dane County Department of Planning and Development.

Zoning permits, Violante said, have dropped significantly. Through May, the three-year average in 2005, 2006 and 2007 was 417 total zoning permits. In 2008, only 318 zoning permits were issued, and, in 2009, the number dropped to 255.

Fewer permits issued means a reduction in the revenue from those permits, Violante said, which leaves a hole in the county budget.

The change in single-family housing permits has been even more drastic, dropping from a three-year average of 148 permits issued from January to May to only 45 issued through May 2009.

Even smaller Dane County municipalities that grew quickly, such as the city of Verona, experienced much slower growth lately.

Verona City Planner Bruce Sylvester said single-family home building permits for the first quarter of 2009 dropped to only three. Normally, 20 to 30 would have been issued.

In Madison, George Hank, director of the city’s Building Inspection division, said there is a noticeable decline.

“You still see a significant number of power cranes, and your first impression is that big buildings are still going up,” he said.

However, the numbers tell a different story. Building permits brought in $5 million in 2006 and only $3.5 million in 2008. Hank said there has been a slight uptick in the early months of 2009.

Positive signs for the future

What remains to be seen is the effect of federal stimulus money on the Dane County economy, especially on government projects.

“You see a lot of road construction and so forth going on,” said Mesbah. “(Stimulus money) is supposed to be well-documented, so, by the end of the year, we can see the impact of the stimulus money.”

Sylvester said while his city experienced the effects of the downturn, he still believes the area is more recession-proof than the rest of the state, particularly when Dane County, where he works, and Green County, where he lives.

“There’s a more diversified employment base,” he said, “and there’s the buoy of both the university and state government.”

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