Oregonian Article: “Klamath County, a case study in economic transition: Editorial Agenda 2015”

By: The Oregonian Editorial Board

Can a rural area transform its economy from one dependent on extraction industries to one that embraces a 21st century model built on technology and professional services? The past three decades in Oregon have not provided a lot of reason for optimism. But if there’s a place that could pull off the feat, it might be Klamath County – despite some recent bad breaks.

The news earlier this month that Jeld-Wen Inc. has moved its global headquarters from Klamath Falls to Charlotte, North Carolina, underscored the long slide of wood-products manufacturing in the area. Worse yet, the county’s other economic pillar, agriculture, has been hard hit by drought – and was neck-deep in a water-rights battle even before the weather worsened. Despite those setbacks, timber, wood products and agriculture-related industries still account for about 17 percent of the county’s jobs.

Not surprisingly, Klamath County’s unemployment rate is 8 percent, well above the statewide rate of 6.1 percent. The county is still about 3,160 jobs, or 12 percent, below its pre-recession peak. But, in contrast to other high-unemployment Southern Oregon counties such as Josephine and Curry, Klamath has some strengths to build on, including the remnants of its wood products industry, a tourism industry anchored by Crater Lake, Oregon Institute of Technology and a growing health care sector.

Any economics discussion in Southern Oregon starts with the forest products industry, and in Klamath County the marquee company has been Jeld-Wen. While Jeld-Wen no longer has a headquarters in Klamath Falls, the withdrawal was gradual and the blow mostly had been absorbed by the community before the move was reported by The Oregonian/OregonLive’s Richard Read earlier this month. The company declined to reveal current Oregon employment levels to Read, but it still has a decent number of   employees in the Klamath Falls area in positions ranging from manufacturing to professional services to research and development. The area also has a handful of other wood products employers, including plants operated by Columbia Forest Products and The Collins Companies.

While no Oregon county will be able to rely almost exclusively on forest products to support a healthy economy, as some did as recently as the 1980s, the industry still needs to be part of the mix. And having companies that manufacture value-added finished products, as some in Klamath County do, is important. These companies will need to adapt to a market that is evolving toward more sustainable building practices, and government and private economic development agencies need to work with them to help make sure that they have access to loans and the regulatory flexibility often needed to make those changes.

Tourism jobs do not pay as well as ones in the wood products industry, but they are a key part of the economic mix in rural Oregon – in part because tourists help support local retailers and other businesses. And Klamath County has one of the best tourism draws in the state –Crater Lake. The catch is that Crater Lake also is one of the most seasonal draws since key parts of it are inaccessible during a long winter. Realistically, Klamath Falls is not going to become a winter destination.

Of all Klamath County’s assets, perhaps the most valuable for the future is Oregon Institute of Technology. A college provides important economic stimulus in any community, but a tech-centered university in a relatively small town – that’s economic gold. For the county to fully capitalize on this prize, it must find a way to keep more graduates in the area. It’s not surprising that many would leave, given the value of tech-related degrees and many millennials’ preference for urban areas. But the group leaders should target to keep is entrepreneurs.

Small towns offer some advantages for entrepreneurs, notably lower costs. Oregon Tech correctly has begun to place more emphasis on entrepreneurship, and a handful of companies have been started recently by graduates – including Gro-volution, which combines technology and agriculture to create a portable environment for growing food. OIT also is involved in the Klamath IDEA business incubator.

Health care is important to any rural area. Sky Lakes Medical Center is growing and expanding its regional reach. And Oregon Health & Science University, in partnership with OIT and others, is launching a rural health campus in Klamath Falls. For a county with a population of about 66,000, that’s a solid health care foundation.

A lot of things would have to go right for Klamath to lower its unemployment rate to anything near the statewide rate. And transportation remains a challenge for a county without an interstate highway and with very limited commercial air service. But when you look at the county’s strengths, the task is far from impossible. The whole state should be cheering for Klamath County and those who are investing in it.