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Retiree recruitment. Good investment for the Shoals?

By Todd Twiley, the Times Daily
October 15, 2003  

Robert Ingram was a tourist when he first came through Tuscumbia a few years ago.

He and his wife, Betty, had a friend from California who had done design work on Park Place in Sheffield , and they wanted to visit.

The couple also wanted to see the birthplace of Helen Keller.

"My wife and I both have deaf parents," he said. "We grew up knowing about Tuscumbia."

Ingram, 52, was visiting family in Petal, Miss. , when they decided to swing by Tuscumbia.

In 2002, they retired here from Modesto , Calif.

Retirees who relocate, such as the Ingrams, are considered a boon to the economy because of the new money they bring to the area.

But the measure of that impact, especially those seeking money to recruit retirees, could be overstated. Studies on their true economic impact thus far are inconclusive.

The Shoals Chamber of Commerce has confirmed that Ingram and about 40 other new retiree households have decided in the past three years to live the rest of their lives in Colbert or Lauderdale County .

Chamber President Steve Holt estimates that at least twice that many have retired here in the same time period the chamber has been attempting to recruit retirees to the Shoals.

Rumblings about Shoals leaders trying to turn the area into a retirement community have not fallen on deaf ears.

Holt has heard them, and he said that is not the case.

“This is not an attempt to replace a manufacturing job and not promoting the Shoals as a retirement community,” he said.

Holt said every aspect of economic development must be looked at for the Shoals but that retiree recruitment is only a small part.

“If we recruit 50 couples, that’s 100 people per year. That’s 6/1000 of a percent of the population. It’s not even on the radar screen.”

Study after study confirms retirees can positively impact local economies.

Even a recent study in Florida , where retirees flocked in recent decades, showed that retirees contribute $2 billion more than they cost in the state.

Alabama , Georgia , Mississippi and the Carolinas have all tried to take a piece of the pie that is retiree relocation economic development.

The Shoals chamber began promoting the area to retirees three years ago in cooperation with the Muscle Shoals Board of Realtors and the Muscle Shoals Home Builders Association.

The cities of Muscle Shoals and Sheffield participated the first year.
Florence has contributed $125,000 for three years and has committed to funding the effort one more year.

Holt said the chamber began with direct-mail marketing in several cities but has found advertising in magazines aimed at retirees is the best place to spend its recruitment money.

The chamber advertises in “Where to Retire Magazine,” “Retired Officer Magazine,” and “The Alabama Vacation Guide.”

Magic number: 3.7
The magic number is 3.7 when it comes to recruiting retirees.
One retiree couple relocating to a community is supposed to have the same economic impact as 3.7 manufacturing jobs.

Across the nation, and especially the South, states and cities have cited the 3.7 number to show that their efforts in recruiting retirees are valid.

The Shoals chamber is no different.

The number originates from a late 1980s article from the University of Arkansas showing an economic impact model of relocated retirees.

But the authors relied on data from a 1965 study revolving around the rural town of Linton , Ind. (2000 pop. 5,800).

To reach the 3.7 figure, two of the four numbers in the Arkansas model are taken from a 1965 study involving a single plant where 100 new jobs were created.

The model explains that 35 percent of new jobs at the plant were filled by employees who quit their job outside the county to work at the new plant. The conclusion assumed in the study is that the new plant would not mean any new money coming into the county, and those 35 new jobs were a wash.

The model also shows that 15 percent of the new jobs will be obtained by nonresidents who will commute to the new plant.

The study does not take into account that those employees would spend their money where they worked, while it assumes all relocated retirees will.

Linton is more than an hour away from a city the size of the Quad-Cities, and, unlike the Shoals, it is not a regional retail hub.

Also, the study fails to acknowledge tax breaks given to many elderly.
Ahmad Ijaz, an economist specializing in economic models with the Center for Business and Economic Research at the University of Alabama , agreed the model is inaccurate for all of those reasons.

“The model is too old,” he said. “If you really want to do retirement impact, find out the number of retirees and find out their expenditures and get multipliers from the U.S. Department of Commerce.”

Ijaz said the economic multipliers change on an annual basis.
He can understand why those seeking money for retirement relocation want to use the 3.7 number.

“It’s based on an old model, and 3.7 is a relatively high number; probably that’s why they want to quote it,” he said.

While a retired couple may not equal 3.7 manufacturing jobs, Ijaz said that bringing retirees into a community, especially one experiencing a decline in population like the Shoals, does benefit the local economy.

Expert opinion
Still, some retiree experts defend the number.

Mark Fagan, a professor of sociology at Jacksonville State University , is an expert in retiree recruitment. He acknowledges the 3.7 number is not scientific.

“That’s just something that’s easy for people to understand,” he said. “It’s just a simple conception of leakage, and it’s a theory; that’s all it is.”

Fagan said there are additional costs with recruiting a factory.
“What would they have to build up front to get one to come in? Build some roads. Give some tax abatement,” he said.

“There are only 300 plants relocating each year and 30,000 communities chasing them. To get them to come, they have to give up a lot up front.”

Relocated retirees having a positive impact on the local economy can hardly be debated.

Two studies in the early 1990s, one by E.L. Sastry in Florida and the other by R.F. Wiseman in the Appalachian region, showed two to four retirees create a job in the local economy.

These jobs are created to service the demands of retirees.
Richard Reeder, a senior economist with the U.S. Department of Agriculture, addressed many positives and negatives of recruiting retirees in a 1998 analysis.

“Many of the jobs created by retirees are low-wage service jobs that may attract low-income workers into the area, an unintended consequence of which can be a drain on public services, such as schools and jails,” he wrote.

“Not all retirees are wealthy, and depending on which type of retiree is attracted, the economic effects could vary significantly.”
Reeder said the 3.7 number is based on old data.

“I wouldn’t use that number,” he said. “There are more recent and comprehensive studies that should be referred to by a community that is thinking about retiree attraction as a policy.”

Holt said that the chamber is looking to attract the more affluent retirees, and that’s where its marketing is directed.

“We have specifically targeted people with income of $55,000 per year,” he said.

Pat Mason, co-founder of Center for Carolina Living in Columbia , S.C. , works to promote relocation in the region.

Mason agrees attracting affluent retirees is key.

“You’ll get some millionaires that will never need Medicaid,” he said. “But you’ll get some Chevys, too. The Chevys are going to come, anyway.”

“Here in Carolina , if they don’t have $750,000 in net worth, they really ought to stay in Ohio .”

Mason said the retirement industry could serve as a bandage to the jobs that have gone south because of the North America Free Trade Agreement.

“We’re moving away from manufacturing to a new digital age, and that will take a decade.’ he said. “Infiltration of retirees will help some.”

Fagan and Mason, both considered experts on retirement recruiting, are connected to the Retirement Systems of Alabama. Fagan has served as a consultant to RSA. Mason serves on the board
of directors of RSA-backed Alabama Real Estate Holdings Inc. of New York .

Shoals retirees
The chamber’s statistics boast $17.1 million in assets brought to the area through its recruitment of 38 new retiree households.

The statistics assume each retired couple brings $450,000 in assets with them and are not based on actual numbers.

Bill Rogers is one of the retirees they were looking for and is among the 38 confirmed by the chamber.

Rogers retired to Lauderdale County in 2001 from Sunnyvale , Calif. He was born in the area and left in 1955.

“It was getting expensive to live in California ,” he said. “I felt my roots were here, so I came back.”

Rogers said he brought well over $1 million in assets to the area. But Rogers said he didn’t know anything about the chamber’s recruitment efforts.

“They didn’t recruit me,” he said. “I came on my own.”

On the flip side, Kathy McAdams and her husband, Rick, said the chambers’ efforts had a direct impact on their decision to move here. “We spent five months traveling the country, and we were treated the best by the chamber here,” she said.

McAdams said her family spotted the chamber’s advertisement in “Where to Retire Magazine.”

The McAdamses are also the kind of retirees that recruiters want. They bought their home here with cash and brought more than $500,000 in assets with them.

Kathy McAdams said they were looking for a place with water for boating, a good cost of living, good medical facilities and a university for continuing education.

What about Ingram and his wife? They said they were unaware of the chamber’s recruiting efforts when they came here, although they, too, are included in the total the chamber quotes.

And they don’t fall into the targeted retirees either.

“I lost all my retirement in the stock market,” Ingram explained.
Yet, Ingram and his family do fulfill an important niche that retiree recruiters seek.

Ingram has appeared in four community theater plays; the latest was “1776” at the Ritz Theater in Sheffield .

He started a writer’s circle, which now has almost a dozen members. He said the cultural advantages to the area affected his decision to settle here.

“I think a lot of people that have lived here for a long time take it for granted,” he said.

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