A rendering of the Reyes Coca-Cola Bottling center under construction in Fresno. Ground was broken in August and an opening is expected in June 2024. Photo contributed

Will there or won’t there be a recession?

That’s the question on the mind of business owners as they think ahead to 2024.

High interest rates continue to hobble new development and investment, but there are signs rates could stabilize and begin to drop, as has been seen recently with mortgages.

The U.S. economy has seemed at a precipice for some time now, but the bottom has yet to fall out. California’s narrative is much the same. The possibility of short-term recession loomed throughout 2023, but the state’s economy remains resilient, thanks in part to consumers who want to spend and stimulative fiscal policy, according to the most recent UCLA Anderson Forecast, which sees no recession in the Golden State in the near term.

Fresno County, led by the City of Fresno, has much to look forward to in 2024. Despite ever-present headwinds, the Valley powerhouse industries continue to perform while new avenues for economic growth are explored.

Mike Prandini, president and CEO of the Building Industry Association of Fresno/Madera Counties, said the industry is likely to face the same issues in 2024 that made 2023 a challenge — namely regulation, higher costs and interest rates.

Since the peak of housing construction in 2006 with about 7,000 new units in the Fresno-Madera area, building activity has trended lower each year. For the last 4-5 years, no more than a few thousand units have come online annually.

Prandini expects fewer units to be built in 2023 than 2022. If builders can produce as many units in 2024 as they did this past year, that would be a success, he said.

In Fresno, the Southeast Development Area (SEDA) has the potential to add 45,000 housing units on 9,000 acres. The SEDA Specific Plan and associated environmental impact report are expected to go before the Fresno City Council soon.

Variables remain, including how the required infrastructure will be funded to build out an area that is roughly a quarter the size of Clovis.

“That’s an important factor in how fast that area develops,” Prandini said, adding it could take up to five years before homes are built.

The City of Fresno and Fresno County are also at odds over tax sharing. The last agreement expired in 2020 and the city is now asking for a 50-50 split on property taxes. Fresno County leaders seek to maintain their 62/38 split.

To make up the shortfall, the city uses special taxing districts on new housing construction, adding a cost to building ultimately paid by homebuyers and renters.

Developers and planners are also trying to figure out how to comply with SB 743, which establishes the “vehicle miles traveled” (VMT) metric when determining the environmental impact of new development. It accounts for the miles traveled by residents from their homes to work or shop.

The farther away a subdivision or apartment is from population centers, the more mitigation is required — another unknown bill to be paid by the building industry.

Another unknown is interest rates. Recent downward movement has been encouraging, Prandini said. As of last week, the average 30-year fixed-rate mortgage rate was 7.44%. Prandini thinks it would have to drop under 7% to make a meaningful difference in housing affordability.

With all the variables, Prandini acknowledged it is nearly impossible to know what will happen on the building front next year.

“Making a forecast is tough,” Prandini said. “This is just one man’s look at the industry.”

Another man, Will Oliver, president and CEO of the Fresno County Economic Development Corp., pointed to three routes toward economic growth that will create headlines in 2024.

One will be the promise of semiconductor manufacturing, an area eligible for billions of dollars in federal funding through the CHIPS and Science Act. Fresno City Councilmember Nelson Esparza, in cooperation with Oliver, announced plans in October to incentivize businesses to invest and develop semiconductor manufacturing in the city.

The Fresno CHIPS Incentive Act aims to bring a competitive edge to the city in attracting the semiconductor industry. Incentives include tax breaks and would be weighted with the number of jobs created.

Esparza said the legislation will be the first local CHIPS incentive act in California that is not tied to a state or federal municipality. According to the proposal, the city will be looking at companies willing to commit capital investments of $20 million to $300 million and more.

Incentive amounts could range from 30-35% of capital investments.

The proposal appears to be bearing fruit. A Wyoming-based corporation last week received a $15 million state grant to relocate its headquarters to Fresno, where it plans to manufacture semiconductors and energy storage systems.

In the process, the company plans to create at least 500 new, full-time jobs and make nearly $21 million of capital investments in the region.

Tynergy was one of a dozen companies awarded nearly $150 million in grants and tax credits as part of the latest round of the CalCompetes program by the Governor’s Office of Business and Economic Development announced Nov. 17.

Tynergy plans to offer starting salaries of $70,000 per year, complementary training programs and a “robust” benefits package, including childcare services for all employees, according to the EDC.

In the coming year, rural Fresno County will witness new company announcements dedicated to advancing renewable energy production, Oliver said.

“From groundbreaking hydrogen production facilities to innovative battery storage projects and the establishment of new substation/transmission infrastructure, these projects are set to fortify Fresno County’s position in the evolving energy sector,” Oliver said. “The Federal Inflation Reduction Act will serve as a sweetener to accelerate these projects, while supporting the creation of local skilled, well-paying jobs.”

The implementation of SB 1383 will usher a transformative era for waste management in California, Oliver said, compelling local governments to adopt innovative approaches in diverting waste from landfills.

“Building upon the region’s advanced manufacturing and food processing capabilities, we expect the emergence of new companies in Fresno County dedicated to harnessing waste materials for the production of valuable high-quality goods,” Oliver said. “In 2024, we will be excited to announce a new venture that will tap into the potential of unwanted produce, creating a diverse portfolio of juices, extracts, purees, concentrates, and other products, while creating environmental benefits and living wage jobs for our community.”