KNAU and Arizona News
9:52 pm
Wed October 22, 2008

Flagstaff businesses take a hit

Flagstaff, AZ – On a recent Sunday the salesmen at McCoy Motors tied dozens of colorful helium-filled balloons to their cars to get passers by to notice their latest promotion. The following morning the balloons lay on the ground a bit deflated. That's how many local businesses, especially auto dealers like Levelle McCoy, are feeling these days.

MCCOY: Let's be realistic we're in a very tough time right now.

McCoy sits in his office that overlooks the showroom displaying the latest shiny models. No customers on a weekday morning like this one. He says car dealers are suffering from two major issues: high gas prices and the credit crunch.

MCCOY: We're experiencing a severe constraint in credit. So many people that frankly would have qualified for loans on automobiles a year ago this time around they're being turned down.

McCoy says customers tell him even if they have the money, they're waiting until the economy improves.

In downtown Flagstaff the tourist season is slowing. And that means fewer customers at the restaurant Cuvee 928. Owner Taryn Beveridge says sales are down about 10 percent compared to this time last year.

BEVERIDGE: People still have to buy groceries but they don't have to go out to eat. But I think if we do a good job and they like the food they're going to come back.

Restaurants across Flagstaff report drops in sales. Beveridge also manages Jackson's Grill south of town where she's seen a 25 percent drop. The restaurant has had to cut their schedule to Wednesdays through Saturdays. But she hopes that people will still have lavish Christmas parties there this winter.

BEVERIDGE: They're just scared right now.
Are you scared at all? Um no (laughs).

Beveridge says it's important to stay optimistic.

Fellow downtown business owner Mark Lamberson agrees. But he was shocked when he saw the dip in sales receipts last month.

LAMBERSON: It was startling. It was a 30 percent drop in sales which we haven't seen before and that was after showing increases every month so far this year. And what we found we still had the customers walking in the stores but they weren't walking to the register as much.

Lamberson, who sells "life is good" T shirts and hats believes now more than ever a positive outlook can make a difference. So he says he's not planning on selling "life is crap" T shirts anytime soon.

Lamberson's banking on the fact that people's day to day spending habits won't change.

But NAU economist Ronald Gunderson says that change is inevitable.

GUNDERSON: In uncertain times people dont want to invest they dont want to spend they dont want to make major commitments... When money doesn't get spent then goods aren't sold investments don't turn out to be profitable ... It just has this cumulative type of effect of causing declines in the economy therefore job layoffs it becomes a vicious cycle.

Gunderson says Flagstaff is somewhat insulated from the rest of the country. He says that's because real estate hasn't been hit as hard and we don't rely on the kinds of industries that other communities depend on like heavy manufacturing.

John VanLandingham, owner of the Old Town Shops, agrees.

VANLANDINGHAM: We're not dependent on the economy of a huge factory in our back yard. We have a lot of government employees in this town, a lot of university employees in this town, a lot of medical employees in this town. I don't think those jobs and those incomes react as volatilely as let's say the economy in Phoenix.

City Manager Kevin Burke says Flagstaff's sales tax revenues are 12 percent below last year at this time. He says that's about average compared to other Arizona cities.

Still two stores are closing at the new Flagstaff mall expansion: Linens 'n Things and the Shoe Pavilion.

Economist Ronald Gunderson says he suspects the climate will get worse before it improves. And it maybe a while before the economy returns to what we used to call normal.

For Arizona Public Radio I'm Laurel Morales in Flagstaff.