By Kathleen McLaughlin, The IBJ
kmclaughlin@ibj.com
CONNERSVILLE-Taking a sledge hammer to a car might seem like an illogical way to protest a tax hike on tobacco.
But it sure feels good, especially to people who are stuck inside the economic pressure cooker that is Connersville. So on April 1, the day a 158-percent increase in the federal cigarette tax took effect, Jeff Herbert hauled a flood-damaged station wagon onto the parking lot of Miller's Discount Tobacco and invited his customers to let loose.
"Everybody was grabbing a sledgehammer and waling on it," Herbert said proudly.
The cigarette shop sits next door to one of the busiest unemployment offices in the state. Fayette County's jobless rate tipped into double-digit territory long before Elkhart's 18 percent grabbed headlines and drew a presidential visit.
Visteon Corp. closed its cooling-systems factory in this east-central Indiana city in December 2007, putting 890 people out of work. More than half those workers are taking advantage of a federal program to train for new jobs, but the broader recession is frustrating efforts to get lives back on track.
Unemployment in Fayette County rose from an average 7.2 percent to 10.7 percent in 2008. In February, the jobless rate reached 14.7 percent.
With economists predicting the statewide average will reach 10 percent this year, the experience of a hard-hit city like Connersville offers a glimpse of what lies ahead for other manufacturing-reliant Hoosier communities.
"As you move higher and higher into double digits, that is absolutely when you start seeing more spinoff effects," said Carol Rogers, deputy director of the Indiana Business Research Center.
The side effects show up in the kind of tobacco Herbert's customers buy, for example, and in the line that forms outside a free health clinic downtown.
"When people talk, they talk about survival," said Dan Valentine, a 55-year-old former Visteon employee. He stopped at the cigarette store before heading to work at a manufacturer in nearby Rush County, where he makes $10 an hour as a temporary employee. "In the old days, they talked about vacations."
Fayette County, population 25,000, has ranked among Indiana's top three counties in terms of unemployment since 2001, and it had the highest annual average in 2006, 2007 and 2008.
To be sure, this city's root problem is dependence on the automotive sector, and that industry's long-term employment decline. Connersville, the county seat with a population of 14,000, was nicknamed "Little Detroit."
One of the top employers was Ford Motor Co.'s cooling-systems subsidiary, spun off as Visteon in 2000. The number of workers at the air-conditioning component plant on the city's west side peaked at 3,500 early this decade.
Although the work force shrank drastically by February 2007, when Visteon announced it would close the plant, it still represented one-third of the manufacturing jobs in the county.
"Because the manufacturing sector was so important to that county," Rogers said, "any changes in manufacturing would show up there."
Endangered middle class
Manufacturing jobs like those at Visteon created a middle class, which is disappearing from towns throughout the Midwest, said Kyle Anderson, a visiting economics professor at IU's Kelley School of Business. "A lot of these jobs pay extremely well for the education level and skill set."
Visteon jobs were the highest-paying in Connersville. Represented by IUE-CWA, assembly workers could earn $22.75 an hour, and those in skilled trades pocketed even more. Health insurance and paid time off pushed the value of the jobs up to $48 per hour, former union officer Dale Bloom said.
Bloom is one of 573 former Visteon workers who are taking advantage of a federal retraining program. He's working on an associate's degree in computer technology, and hopes to find a job designing parts.
"If I can get out and get a job at $15 an hour, I'd be fortunate," the 44-year-old father of four said.
Lower wages will have as much impact on the local economy as unemployment, Anderson said.
"You're going to see it in every sector because these are people who have been driving relatively nice cars," he said.
Limping along
Visteon employees began bracing themselves for layoffs in the early 2000s.
"The biggest thing you would notice, when it first started going down, was the number of homes for sale," said Gary Frank, a Visteon maintenance supervisor who transferred to the Ford steering-systems plant in Indianapolis. "Then they'd rent a place, so they wouldn't get stuck."
Frank, 50, considers himself lucky to have sold his house in the countryside soon after Visteon notified him that his work in Connersville would end in November 2007.
His former co-workers are stuck. Most of those who've found new jobs commute long distances. One drives to Muncie, 45 miles to the north, to work at Wal-Mart.
Others are still looking.
"Used to, you could drive to Richmond and get a job, or you could drive to Cincinnati and get a job," Frank said. "There's not too many of 'em out there."
Discount shopping
Connersville's persistent unemployment isn't obvious at first glance. Restaurants, including Mousie's, an old Visteon watering hole, are still open. But the newer retailers in town, Family Dollar and the grocery chain Save-A-Lot, are deep discounters.
At Miller's Discount Tobacco, Herbert noticed about three months after Visteon's closing that more of his customers started rolling their own cigarettes. Loose tobacco was cheap-just $5.89 before the federal excise tax increase.
Any item he marks down flies off the shelves.
"People are just trying to make their dollar go farther," Herbert said.
Every other Thursday evening, a line forms outside First United Methodist Church downtown, as people wait for one of 20 slots at a free health clinic.
Joanne Guttman, a family physician who owns a rural health clinic in adjacent Franklin County, started the clinic with a group of volunteer doctors and nurses 3-1/2 years ago.
"A lot of people would come to our office and had no insurance, no way of paying," she said. "We're only there twice a month, so it makes a small dent."
Guttman said the rise in uninsured patients has tracked the area's overall decline in factory employment. The free clinic is treating people who work, but without health insurance can't manage chronic injuries or disease, like diabetes or asthma.
Volunteer Ava Moore said Visteon's closing is just starting to have a noticeable impact on the clinic. With a limited number of doctors, she can admit only 20 or 25 people a night.
"It's sad. It's really sad," she said. "You get to the end of the line and you see 20 more people, and you know they've been standing in line for an hour."
Delayed effect
Extended unemployment pay and free education have cushioned the blow to the regional economy.
Visteon shipped the Connersville jobs to Mexico and Portugal, so its employees qualified for Trade Adjustment Assistance. The U.S. Department of Labor program provides at least 52 weeks of unemployment pay for workers who enroll in an approved retraining program. The benefits can extend another year if a worker is pursuing a two-year degree, which is the maximum amount of education the program covers.
The unemployment pay is equivalent to what one would receive under their state's program. In Indiana, the maximum payout is $390 per week, or 54 percent of a $37,000 salary.
"The most positive thing I'm going to get out of this is an education," said Mona Rowland, a 46-year-old who's making straight A's at Indiana University East in Richmond.
Rowland intends to stay in school after her benefits run out and get a bachelor's degree in social work. Many of the women she knew from Visteon are retraining to work in health care, while many of the men opted for the quickest route back to the job market-truck driving or operating heavy equipment.
With the whole region sunk in recession, even those newly minted, retrained workers struggle to find work.
Rowland worries about what will happen to Connersville if state legislators fail to fix the bankrupt unemployment insurance fund.
"They need to come and see these little communities that are surviving mainly on unemployment," she said.
Shrinking tax base
The worst may be yet to come for local government.
The 1.8-million-square-foot factory, which workers called "the blue zoo," provided $3.6 million in tax revenue to Fayette County in 2008. The bulk of Visteon's tax bill, $3.2 million, was attributable to equipment, which was auctioned off early in 2008.
City and county government will begin bearing the brunt of the eroding tax base when property tax bills are paid later this year.
"It's just going to significantly impact Fayette County-cripple us," County Treasurer Debbie Kidd said. "They are by far our biggest taxpayer."
Connersville's share of the loss is $1.7 million, Mayor Leonard Urban said. So far, City Hall has avoided layoffs. But the municipal water utility, to which Visteon provided $850,000 in revenue, has cut six employees.
Urban, a funeral home owner and former city councilman who was elected mayor in 2007, plays down the effect on city services.
"We saw this coming, and we were prepared," he said. "We're facing it, and we're surviving."
He's been saving money by not replacing retiring police and firefighters. He boasts about pinching pennies on contracts and equipment.
"I'm a cheapskate," he said.
But to keep the city's $13 million budget in balance, he will try to trim $500,000 this year.
At the same time, Urban is throwing every incentive he can find at Carbon Motors, an Atlanta-based startup that's considering using the former Visteon plant as a factory to build a police super-car.
What's next?
Speculating about what might be next for the vacant, sprawling factory is the pastime du jour at Mousie's. The darkened restaurant and bar was the factory watering hole for 55 years, and its new owners are three ex-Visteon employees.
Co-owner Rick Kurz, 52, always had planned to buy a restaurant in his retirement years. Visteon's closing forced him to make the decision seven years early-and without the safety net of a full pension.
His leap of faith has worked out so far. He chalks up the restaurant's success to a menu that suits Connersville budgets ($1 drafts, Monday through Thursday), and keeping the same friendly servers.
"People just come here," Rick Kurz said. "All we had to do was just go in, and not mess it up."
Because Kurz took over Mousie's three months after the Visteon plant closed, he knew he couldn't rely on his former coworkers as customers. He said he'd found that Visteon people occupied only about 10 percent of the seats on a given day, anyway.
"Even with the economy the way it is, it's been better than we could hope for," he said.
But life has not been easy for the restaurant owners or their customers. Kurz's wife, another former Visteon worker, is one of the many who are back in school with Trade Act Assistance.
They're adjusting to life with minimal health insurance. Kurz said his former coworkers seem to be finding work at small factories in the region, Honda in Greensburg, or in retail in Harrison, Ohio.
"I've got one friend that drives to Dayton," Kurz said. "That's where he got a job. He couldn't sell his house, so he commutes every day."
Kurz finds encouragement in the community's ability to make ends meet.
"Everybody thought losing Visteon would be pretty much the death of our little town," he said. "People have proven to be pretty resilient so far."