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Chico business owners brace for unprecedented student declines

Celestino’s owner Enzo Perri could be hit hard by sagging enrollment at Chico State. His pizzeria is a staple with the college crowd.

Celestino’s owner Enzo Perri could be hit hard by sagging enrollment at Chico State. His pizzeria is a staple with the college crowd.

Photo By thomas lawrence

Business has been good for Celestino’s New York Pizza, but owner Enzo Perri knows that it may not last.

The local restaurateur said that despite the lack of students in town for the summer, he’s remained competitive by lowering prices. That said, he knows times are bound to get tighter and tighter.

Perri is one of many local businesspeople bracing for enrollment declines of around 1,000 students at Chico State in the 2010-11 academic year, which begin this fall and could leave many student-favorite establishments, such as his pizzeria, reeling.

“It has a ripple effect through the whole downtown community,” said Perri. “It just keeps shrinking.”

Perri has concerns for good reason.

Frederica Shockley, an economics professor at Chico State, is predicting catastrophic losses in revenues and job supply for the city due to the enrollment cuts. By her estimation, 828 jobs, and more than $44 million in labor and property income, and more than $2 million in property and sales tax will be lost due to the downturn.

The shriveling student body, of course, stems from a budget-driven mandate out of the California State University.

According to a memorandum from Chancellor Charles Reed, each CSU campus is required to decrease enrollment. And Chico—where the student population accounts for roughly 20 percent of the town’s population—will feel the effects as much as anywhere.

It’s too early to calculate exact numbers for next year’s student population, however, the university’s Institutional Research Office expects a once-in-a-generation downswing. Interim Director Bill Allen said that the campus anticipates the overall population of 16,934 students to drop 6 percent in the 2010-11 academic year. Meanwhile, the number of full-time students is expected to drop even lower, by 8.5 percent, from 14,712 to a targeted 13,461.

“I’ve seen ups and downs, but this is by far the worst drop down that we’ve gone through,” said Allen, who graduated from Chico State in 1978. “I don’t think we’ll see another drop like this. My guess is that we’re coming to the bottom of the trough.”

Shockley surveyed students in her classes and used special modeling software to project her numbers, which she says are the most drastic she’s seen as an economic analyst and predictor for the university and the city of Chico.

“We were threatened back in the early ’90s, but looking back on it they weren’t so bad,” said Shockley, chuckling. “[The current figures are] the worst I recall in the state of California.”

Shockley estimates that the average student contributes about $10,000 to the local economy each school year. Thus, a loss of 1,000 students means a direct loss of roughly $10 million. The multiplying effects of these shortages are what drive the overall totals so much higher.

“For every student loss there’s almost half a job loss,” explained Shockley. “I think it’s fairly conservative.”

And restaurants and retail businesses aren’t the only types of businesses dependant on the student dollar.

Longtime local resident and Chico State alumnus Dan Herbert is heading into tough times as well, hand in hand with his alma mater.

Herbert, president of Sheraton Real Estate Management, is prepared for what he calls the biggest downswing in student population in his time in Chico.

“If projections hold true, the worst-case scenarios would probably be the most dramatic downturn we’ve seen in years,” said Herbert, a member of the local business community for more than 30 years.

In addition to fretting about a weakened demand, property managers have the added worry of a glut of student housing. Sheraton Real Estate, which runs multiple housing websites in town, including, will suffer not only from the drop in students but also from competition with the university.

“Right now we’re seeing the impact of Sutter Hall opening up,” said Herbert, who was a vice president of a regional bank before coming to Sheraton. The newly constructed dormitory opening this fall has a capacity of 212 students. According to University Housing and Food Service it has not yet reached capacity.

Herbert said rental companies likely will drop prices but he doesn’t predict vacancy issues anytime soon.

The university, he said, will feel vacancy effects first because Sutter Hall will spread the campus’ residential population much more thinly.

“They’ll need to market to returning students to stay on campus,” he said.

The impact also will be felt by the city of Chico.

Jennifer Hennessy, city finance director, predicts some damages to the city’s income. She said that besides the direct sales tax earned from student spending, indirect sources of income will be harmed as enrollment decreases at Chico State. This includes income from utility taxes from students living in off-campus housing as well as “transient occupancy taxes” (fees generated in part by students’ families staying in hotels while in town).

She added that the true impact of the student decrease won’t be seen until the following year.

“We do anticipate a decline in sales tax with the projected decline in enrollment,” Hennessy said. “By how much I really can’t say.”

Hennessy downplayed the impact of students leaving for summer months, stating that there are no historical “summer woes”—at least in terms of the big picture—for the city.

For local business owners like Perri of Celestino’s, however, the hope is to keep doing business as usual.

“I don’t know if I can raise prices,” Perri said. “I’m afraid that my business would shrink … We try to bite the bullet.”