Flying high in Big Sky Country
BELGRADE - When Gallatin Field General Manager Ted Mathis began working at the airport in 1981, there were 29 hangars for private planes.
ERIK
PETERSEN/Chronicle Jets line the tarmac as Yellowstone Jet Center workers tend
to them over President's Day weekend, an especially busy time for the Jet
Center. Today, there are 165, including the 17 new ones built last
year.
When it comes to expensive toys, private planes are right up there.
A modest model costs about the same as a new diesel pickup, around $50,000, and
renting one of those new hangar spaces can cost hundreds of dollars a month. And
then there’s the insurance and fuel.
Clearly, a lot of people in the
Gallatin Valley have a lot of disposable income.
Most of the local planes
run on propellers, but 27 private jets are registered here, too, Mathis said.
And they comprise only a fraction of the private jet traffic.
Last
year, an average of 263 private jets landed here every month; that’s slightly
more than eight a day. In 1999, monthly landings averaged 86.
On an
average day, perhaps $50 million worth of personal and corporate jets can be
seen on the tarmac at the Yellowstone Jet Center, according to manager Kent
Foster. Business is brisk enough that the center has nearly doubled its
employees since it opened in 1998, and 37 people work there today.
That
air traffic brings money in the form of rental cars, caterers, mechanics, fuel
providers and others, Mathis said, but he doesn’t make it his business to learn
about the passengers.
“They land, their people get off, they get in a big
fancy car and you don’t know where they go or where they come from,” he
said.
Most of those people aren’t from around these parts. They’re part
of the new homestead boom, the one that’s escalating real estate prices,
employing real estate agents and construction workers, adding to the traffic
burden and spending money in all sorts of ways. It’s the amenity economy at
work, turning scenery into money.
“Our economic base is land development
and people with wealth coming here and buying it,” said Gallatin County Planner
Randy Johnson.
A thriving airport is a community asset. It also helps
create a real estate economy, one where land value is based on what it looks
like, not what it produces.
Scan the ads for high-dollar property in
Montana, and you invariably find a reference to nearby airports.
People
who can afford a $27 million ranch at Three Forks want to be able to get to it n
and away from it n with a minimum of fuss.
BUYING, SELLING,
BUILDING
In Gallatin County, 11 percent of all dwellings belong to
out-of-state residents. But they comprise 14 percent of the value of all homes.
That means nonresidents own a lot of property here n more than one in 10 homes -
and it tends to be a little nicer than what the locals have.
In Madison
County, which includes most of the Big Sky resort area, including the exclusive
Yellowstone Club, the numbers are even bigger.
There, 32 percent of
dwellings belong to nonresidents. But those houses and condos comprise 59
percent of the value of all housing, according to calculations by Montana State
University economics professor Douglas Young.
That means people from
someplace else have been building a lot of expensive homes.
“This region
has benefited economically from the growth in residency, but also nonresidents,”
said Young. Whether the construction takes place in Gallatin or Madison county,
“most everything from lumber to concrete to workers is purchased or hired in the
Bozeman area, and travels down the highway to Big Sky.”
That translates
into a lot of money and jobs.
In Gallatin County, 13 percent of the
payroll came from the construction industry in 2007, Young calculated. That’s
twice the national and statewide average.
Another 9 percent came from the
real estate industry, more than three times the statewide average and nearly
four times the national average.
Add it up and you see that 22 percent of
Gallatin County’s labor income results from buying, selling and building on
property.
Another large piece of the economy n 21 percent - is what
economists call “non-labor income.” That sector includes dividends, rents and
interest. And that figure doesn’t include nonresidents who own property and
spend time here.
For generations, much of the county’s economy revolved
largely around agriculture, perhaps the most rooted of industries.
Today,
though it contains some of the most fertile land in the state, Gallatin County
farming produces only a small percentage of local earnings. Just 2 percent of
Gallatin County income rises from the earth in the form of agriculture,
forestry, mining and utilities, according to Young’s figures.
Statewide,
12 percent of earnings come from those sources.
MSU remains a powerful
segment of the economy, contributing to the 11 percent of county wages that come
from state government. While it’s smaller than construction and slightly larger
than real estate, it offers one thing those recession-susceptible sectors can’t:
stability in times of financial uncertainty.
Around the state, only
Flathead County has a similar economic profile, but it still lags behind
Gallatin in most categories.
“Gallatin County is just way ahead of most
of the state right now,” said Larry Swanson, an economist at the O’Connor Center
for the Rocky Mountain West at University of Montana.
ART GALLERIES AND
PERSIAN RUGS
And all that construction echoes into other economic
sectors.
For instance, the thousands of new homes built over the past
decade create a lot of empty wall space, which helps boost the local art
market.
In the mid-1970s, there were only two art galleries in Bozeman,
noted Thomas Nygard, owner of Thomas Nygard Gallery in Bozeman. Today, the city
is home to at least a dozen, with an equal number in Livingston, which has a
much smaller population.
Galleries aren’t the only businesses catering to
the influx of new money. Wine stores, posh eateries, interior designers and
plastic surgeons have sprouted in the valley. So have salons, exercise
facilities and furniture stores.
“Assuming you have the money, you can
buy locally what you can buy in any metropolitan area,” said Leon Royer,
president of American Bank.
Retail spending in Gallatin County came to
$15,502 per capita in 2002, according to the most recent figures available from
the U.S. Census Bureau. That’s 40 percent above the statewide average, and the
figures were derived long before most of the big new stores rose on North 19th
Avenue and along Huffine Lane.
By comparison, the statewide average in
retail spending was $10,615, a disparity that reflects the higher incomes in
Gallatin County, the higher tourism rates, higher levels of second-home
ownership, and the fact that people from neighboring counties drive to Bozeman
to shop. Park, Madison and Broadwater county retailers attract only a fraction
of the per capita spending that Bozeman stores do.
And the higher figures
also reflect the fact that many Bozeman stores offer some very pricey
items.
Steven LeMieux, owner of Artisan Imports on Huffine Lane, provides
an example. He specializes in Persian rugs and antique French armoires,
including a Louis XV piece he has listed for $64,500.
“People were saying
they want a lot of armoires, so we’ve done very well with that,” he
said.
His business has a motto: “From French farm homes, castles and
chateaus to your ranch house, vacation lodge or Montana mansion.”
He said
he’s making a comfortable living, though his store is open only by appointment,
and he deals only with designers or directly with clients, both in Montana and
around the country.
“I don’t like to use the term, but I was wasting a
lot of time dealing with the public,” he said. “As a result of the new wealth, I
mostly deal with designers.”
If a client wants something special n like a
Gothic keystone from a 15th century French building - he’ll use his overseas
contacts to find it.
“There have been some great, great clients out
there,” he said, noting that one couple recently bought 23 Persian rugs from
him. The husband likes to hunt, so LeMieux found antique carpets bearing hunting
motifs.
He came to Bozeman 10 years ago because his wife is a Gallatin
Valley native, after working in the same business in Houston, Texas, a city with
more than twice Montana’s entire population.
Montana has a long way to go
to catch up to places like that, he said.
“It has to be kind of a shock
for long-term residents to see what’s happened here over the past 20 years or
so,” he said. “But the reality is, there’s hardly anybody here.”
UPWARD
TREND CONTINUES
Both construction and real estate have seen downturns in
recent months, but most observers say the long-term trend is for more people,
more construction and a continued influx of wealth. There have been five
recessions over the past 35 years, according to Headwaters Economics, a Bozeman
think tank, and Gallatin County outpaced both the state and the nation in four
of them.
The exclusive Yellowstone Club has room for 500 more houses and
condos. The Big Sky Planning and Zoning District is about one-third full,
according to the Gallatin County GIS department, and current regulations allow
for at least one home, or a number of condominiums, on another 1,425 parcels.
Moonlight Basin resort’s plans call for 1,250 more homes, plus a wide range of
other facilities.
That means a minimum of 3,175 new homes, and likely
many more, just in the Big Sky area in coming years. The value is hard to
predict, but in 2007, single-family homes with less than one acre of land sold
for a median value of $825,000 in the resort area, according to the Gallatin
Association of Realtors.
That’s nearly $30 billion worth of new housing
construction over the next dozen years or so. And that doesn’t include roads or
commercial facilities. And it doesn’t include furnishings, appliances or French
armoires.
Property values will fluctuate in the future, Swanson
predicted, but the long-term trend will be upward.
“It’s not going to
turn around and go the other way,” he said.
MEASURING IT
ALL
Economists use a variety of sophisticated tools to measure a specific
area’s wealth. But places like southwest Montana, with a high proportion of
wealthy nonresidents, pose special challenges.
“Some of the data we
normally use are inadequate,” Young said. “They often miss the part-year
residents.”
Non-residents who own property here often do their banking
and file their income taxes in other states, which leaves gaps in the statistics
economists like to use. But they do spend a lot of money here, and one of the
best ways to measure their impacts is to look at real estate prices, according
to UM’s Swanson.
And how those prices have risen.
Between 1997 and
2007, single-family home prices in the city of Bozeman have more than doubled,
with similar or less extreme movements in Belgrade, Manhattan and Livingston,
according to the Gallatin Association of Realtors.
Resort property isn’t
the only hot real estate commodity. Farms and ranches are listed for incredible
prices as well.
Bozeman-based real estate brokerages are advertising a
few examples:
* The Lane Ranch near Three Forks includes 7,000 acres and
6.2 miles of Madison River frontage for $27 million.
* A recently sold
Paradise Valley ranch was offered at $25 million for 1,115 acres.
* An
880 acre property on the East Gallatin River, with a 5,000-square foot home, is
listed for $22 million.
* A 571 acre parcel along the Yellowstone River,
with a large house and horse facilities, is offered for $14.8 million.
*
A square mile in the Bridger Mountains, with a 7,200-square-foot house, is
listed for $8.9 million.
* A 321 acre “private eco-habitat” along the
East Gallatin is offered at $5 million.
The prices all seem pretty high,
but they still don’t compare to some in urban areas. New York City apartments
sell for an average of $1 million, according to the New York Times, and a
thee-bedroom unit on the Upper East Side sells for an average of $6.6
million.
And Big Sky is far from the priciest resort area in the
West.
At the Yellowstone Club, condominiums sell for about $1,100 a
square foot (by comparison, prefabricated homes start at about $50 a square
foot), but for people with those sorts of tastes, it might seem like a
bargain.
Similar structures in Aspen or Sun Valley fetch between $2,500
and $3,000 a square foot, according to Hank Kashiwa, a former Olympic ski racer
and vice president of marketing at the Yellowstone Club.
“As awesome as
this seems, we’re not catching up with the Joneses,” he said.
Sun Valley
and the nearby towns of Ketchum and Hailey have been catering to the resort
trade, and its pricey spin-offs, for decades.
“We’re not as busy as they
are,” said Foster, the Jet Center manager. “But we’re getting there.”