August 18, 2003

It has become almost a cliché during the past several years to speak in glowing terms of the state economy. Few people, however, are able to provide specifics to define the economy.

With the recent sale of $120 million of general obligation bonds to finance some of the capital budget came the opportunity to get a snapshot of the Delaware economy. The offering prospectus, which federal securities laws require to contain only objective information, provided a detailed glimpse behind the highest level bond ratings awarded by the three major Wall Street securities rating firms.

The bottom line, according to Moody's Investment Services:

"Years of well-managed financial growth have enabled the state to weather the current economic slowdown in a manner befitting Delaware's Aaa bond rating. While the state's debt burden is likely to remain proportionately high among states, Delaware has performed better than many states in the nation in the context of the national economic slowdown. The state's Aaa rating speaks to Delaware's financial flexibility, which will continued to give the state latitude in managing this significant debt burden."

Within that perspective, Delaforum has extracted the following details about the components of the economy. Except where noted, the data is for 2002 and the comparisons are with 2001. Quotations are from the prospectus.

The Private Sector

Gross State Product -- The U.S. Department of Commerce estimated that the total value of goods and services produced or rendered in Delaware in 1991, the latest year for which data is available, was $40.5 billion.

Population (U.S. Census Bureau estimates, April, 2003 vs. April, 2002 -- State: 807,000, up by 1.4%; New Castle County: 512,370, up by 1%; Kent County: 131,069, up by 1.7%; Sussex County: 163,946, up by 2%.  Wilmington, 72,530; Dover, 32,581; Newark, 29,798.

"Net in-migration continues to account for a significant share of the population growth"

Population growth -- Estimated at 1.2% in 2004 and 1.3% in 2005. The national estimate for both years is 0.9%.

Personal income -- $32,779 annually per capita, up by 1.9%. Figures for the mid-Atlantic states were $35,260 and 2.1% and for the nation, $30,941 and 1.7%.

Personal income growth -- Expected to increase by 4.1% in 2004 and 5% in 2005. That is slower growth than the 4.3% and 5.4% expected nationally.

Employment -- Non-agricultural employment, which accounts for 98% of jobs in the state, stood at 413,000 in 2002, down from 419,400 in 2001. The number of jobs declined by 1.5% in 2002 after increasing by 0.1% in 2001. Mid-Atlantic states had growth of 0.2% and 0.9% in the respective years while employment nationally showed zero growth in 2002 and a 1.1% decline in 2001.

Delaware saw growth in the number of jobs in wholesale and retail trade, leisure and hospitality, and health care and education in 2002. In health care there was a shortage of applicants for available jobs, particularly in nursing.

Employment growth -- Estimated at 0.6% in 2004 and 2.1% in 2005. The national estimates are the same for both years.

Employment diversity -- Banking and service business now account for 85.3% of all employment. Jobs in manufacturing, which includes office jobs in companies classified as manufacturers, accounted for 9% of Delaware employment in 2002, down from 13% in 1992. The largest job category now is professional and business services, 17%; second ranking in government services, including public school teachers, at 14%. "Diversification of its employment base is expected to diminish the state's vulnerability to cyclical downturns."

Private employers -- Employment of the largest numbers of people in the state are: M.B.N.A. Bank, 11,300; Du Pont Co., 11,000; Christiana Care, 7,200; Astra Zeneca, 3,900; Mountaire Farms, 3,300; and J.P. Morgan-Chase, 3,000. Thirty-one companies employ 1,000 or more, but missing from that list are at least two former Delaware majors, Hercules and Conectiv, formerly Delmarva Power & Light. The Daimer Chrysler automobile assembly plant is listed as employing 2,300 and the General Motors plant 2,100.

Unemployment -- The average monthly unemployment rate in 2002 was 4.2%. That compares with 5.2% in  mid-Atlantic states and 5.8% for the nation.

Housing production -- 7,459 units, up by 13% over 2001.  The largest number of units, 2,624, were built in Sussex County.

Construction contracts -- Valued at $1,431 million, up by 7% over 2001.

Agriculture -- According to the U.S. Department of Agriculture, 45% of the land in Delaware is used for farming. It counts 2,400 farms averaging 233 acres. The number of farms was down by about 100 from 2001.

Farm receipts -- Total farm receipts were $727.7 million, down 14.3% from 2001 as a result of lower values for broiler chickens and smaller corn and soybean corps and less milk production because of the drought. Total broiler production was up 3% but the average per-pound selling price was off by 17%.

Commerce -- The Port of Wilmington handled 3.3 million tons of cargo in 2002, unchanged from 2001.

Military -- Dover Air Force Base is the busiest military cargo port. It employs 4,250 military personnel, 1,834 civilians and 1,748 contract employees. Replacement of  C-5-A aircraft by 12 C-17s, expected to be completed by 2008, is expected to result in the loss of 123 jobs on the base.

The Public Sector

Revenue enhancement -- The tax revenue package, enacted by the General Assembly at the behest of Governor Ruth Ann Minner will add an estimated $156 million to anticipated fiscal 2004 revenue and $165 million in 2005. Increasing the cigarette tax from 24¢ to 55¢ a pack is expected to net an additional $28.9 million. Higher corporate franchise taxes and fees is expected to bring in $99.7 million. The state's return from slot machine gambling will grow by $15.9 million. Other enhancements are pegged at $11.5 million.

State revenue -- As a result of the increases, the Department of Finance has increased the Delaware Economic & Financial Advisory Council's June revenue projections to $2,514 million this fiscal year and $2,627.9 million in 2005.

State revenue growth -- The revised rates are 4.1% in 2004 and 5.2% in 2005.

Bonded debt -- With the recent sale, tax-supported general obligation debt now totals $810.5 million. In addition, there is special-fund debt, mostly transportation related, of $243.8 million.

Incorporations -- There were 307,907 corporations, including 196,000 limited-liability corporations chartered in Delaware at the end of 2002, including more than half of all companies whose stock is publicly traded and 58% of those in the Fortune magazine list of 500 largest U.S. corporations. This activity is second only to the personal income tax as a source of state revenue as well as a boon to law and other professional services businesses.

"In order to sustain its competitive edge over other states and countries, Delaware continues to adopt strategies that respond to changing business conditions." Recent changes in state business law include provision for "more cost-effective, confidential and consensual" mediation of disputes and giving Court of Chancery jurisdiction over technology disputes.

© 2003. All rights reserved.

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