Mineral leases don’t mean big spending in the Valley

Despite the infusion last fall of more than $200 million into the pockets of local landowners, Trumbull and Mahoning county shoppers remained thrifty, according to sales tax figures recently released for October and November purchases.

In fact, statistics released by the Ohio Department of Taxation indicate shoppers in both Trumbull and Mahoning counties actually spent less on items subjected to sales tax in November than they did in November 2011.

Trumbull County sales and use tax collections decreased by about 5 percent for November sales, while Mahoning County sales tax collections decreased by about 1.5 percent from the previous November.

By contrast, statewide sales and use tax collections for November spending increased by more than $7 million, or about 5.7 percent from the year before.

It had been announced earlier last year that BP had leased mineral rights for more than 84,000 acres of land in Trumbull County through a property owner group known as Associated Land Owners of the Ohio Valley, or ALOV. Signing bonuses awarded for the lease deals amounted to more than $3,000 per acre, or more than $250 million, which was to be distributed in October.

In January, BP acknowledged they had opted out of about 4,000 acres but had moved forward with the rest, still totaling an estimated $240 million.

And that does not include thousands of other leases recorded locally each month with other natural gas industry companies.

Experts and retailers last week said they lacked an explanation for the drop in local November sales that came amid such large local payouts.

“I can’t draw any strong conclusions about whether people are out there spending bonus checks because there’s no lavish spending,” said Joe Bell, spokesman for Youngstown-based Cafaro Company, which owns Eastwood Mall complex along with dozens of other retail properties nationwide. “Looking at it over all, you don’t see anything really dramatic in terms of sales increase.”

Perhaps the only indication of the distribution of mineral rights lease signing bonus checks is a slight uptick on local luxury item sales, Bell said.

“The segment that seemed to see increases were cosmetics, specialty retailers,” Bell said. “It was retailers that specialize in things that don’t seem to be necessity items.”

While Bell declined to release specifics, citing company policy, he did say increases from the prior year at those types of specialty stores at the Eastwood Mall complex ranged from a small percentage up to 20 percent in at least one case.

Jim Sluzewski, a corporate spokesman for Macy’s, which operates large stores in both Trumbull and Mahoning counties, said nationwide, his stores did extremely well in the fall and throughout the holiday shopping season.

Sluzewski declined to release specific sales information by region, but said Macy’s reported nationwide sales increases of 3.9 percent for the entire fourth quarter.

Gordon Gough, executive vice president of the Ohio Council of Retail Merchants, likewise had few answers for the slip in November sales locally.

He noted, in fact, that when natural gas and oil drilling touched off by the discovery of the Utica Shale in southeast Ohio began increasing, an uptick in spending followed.

But what is one business’ loss may be another business’ gain. Officials at local depositories recently gave a clue to where some of those funds may be going.

Frank Hierro, Huntington Bank regional president for the Mahoning Valley, said last month his company has seen “an uptick in deposits” that he related to Utica Shale drilling.

“We have seen firsthand where they are building buildings on their properties,” Hierro said.

Cortland Bank president Jim Gasior last month also echoed that sentiment, noting that his bank has seen so many deposits directly related to the Utica Shale industry that it added a “wealth management” division.

“We saw about $35 million in 2012 coming in as shale-related (deposits),” Gasior said. “I think there’s a good opportunity to keep those shale deposits.”

In answer to questions about consumer spending trends, Gough noted that a “think tank” at the University of Cincinnati recently developed a theory that even though average household incomes aren’t increasing significantly, household discretionary income has been increasing. That’s because during the course of the “great recession” in past years, Americans have limited purchases while working to pay down their debt. Having achieved that goal, it opened up discretionary spending ability, Gough explained.

Both Gough and Cafaro’s Bell sited consumer unrest at year’s end due to the then-looming “fiscal cliff,” increasing income taxes and other political issues, but they acknowledged that would not explain the increase in spending in other parts of the state and nation.