Oregon sales plummet three years after record high

By ABBY HAIGHT

Associated Press

PORTLAND, Ore. (AP) -- Like his father, grandfather and great-grandfather, David Niklas feels the quickening of spring as the season ramps up at his wholesale nursery in a farming community south of Portland. Niklas and his workers busily package plants for shipment.

These days, his flowers and vegetable seedlings have fewer places to go, as the housing bubble burst and the state and national economies flatlined.

Just three years after reaching a record high of almost $1 billion in sales, Oregon's nursery industry has plummeted into an historic slump. Nurseries are laying off employees, cutting costs and foregoing new buildings and equipment.

A few, like Niklas' Clackamas Greenhouses, have gone bankrupt.

Across the country, the nursery and landscaping trades are also facing tough times.

"You have to eat, but you don't have to plant ornamentals," said Terry McElroy, a spokesman at the Florida Department of Agriculture.

Florida, which produces 80 percent of the house plants grown in the United States, had about $844 million in sales of nursery stock in 2007 -- the last year figures were available. California, the largest producer, reported $1.6 billion in nursery stock sales in 2007.

Both states did not have more recent figures, but officials said they had seen a decline in business. They expect the industry to slowly recover -- but they also expect the belt-tightening will remain, with fewer purchases, less expansion and fewer employees.

In Oregon, the downturn was swift and stunning. The rich soil and mild climate of Oregon's Willamette Valley is ideal for growing plants. And for 18 years, starting in 1990, the nursery industry steadily grew, reaching $988 million in sales in 2007. The nursery commodity outpaced cattle, then ranked second, by as much as $500 million that year.

Then the industry slammed into a swarm of trouble: the halt of home and business construction, high transportation costs, financial lending woes and a depressed national economy. Sales plunged 17 percent, to $820 million, in 2008. State leaders expect a similar drop for 2009.

Back in the heady days, Niklas could count on $4 million in annual sales at his nursery in Aurora. Bankruptcy knocked him down and, just as the nursery began to recover under Chapter 12 restructuring, the nation's economic downturn landed a sucker punch.

Niklas' annual sales plummeted to under $2 million. He hasn't found a commercial lender to help him refinance. He and other nursery owners worry that two tax measures passed by Oregon voters earlier this year -- raising the state income tax on upper income individuals, and hiking the corporate minimum tax and taxes on corporate net income greater than $10 million -- will push them closer to the financial edge.

Not all is gloom. Nurseries that specialized in edibles -- vegetables, fruit trees and berries -- didn't fall as far thanks to the interest in grow-your-own food. Nurseries that produce native and drought-tolerant plants for restoration work also have fared better.

J. Frank Schmidt & Son, which sells about 1.2 million trees yearly, saw its sales fall about 10 percent. It has laid off workers and cut back production. But the company's cooler warehouse in Boring is full of trees bundled for shipment. Crews are busy grafting, trimming roots and branches, caring for cuttings.

"We're down to the bare bones," said Nancy Buley, a spokeswoman for the company. "But we're excited for the recovery -- it's going to come.

"Nothing happens very quickly in the tree business. It will probably take us longer to recover. But we've seen some bright spots already."

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