Economic outlook.

• Author: Maley, Frank
• Position: Interview with Stephanie McGarrah and Gene Byrd - Interview

Despite some winter rain, North Carolina is still mighty dry. In mid-January, more than half the population was subject to mandatory water restrictions. An additional 25% was under voluntary restrictions. How has the drought affected the state economy? We asked Stephanie McGarrah, assistant secretary for policy, research and strategic planning at the North Carolina Department of Commerce, and Gene Byrd, the department's director of business retention and development.

BNC: What sectors of the economy have been hurt so far?

McGarrah: Farmers have already seen some of the impacts. The Green Industry Council, which represents landscapers, Christmas-tree growers, sod growers, those kinds of folks, put out an estimate of $1.5 billion.

What about construction?

McGarrah: We've heard the drought is not as bad for some parts of the construction sector because fewer workdays are rained out.

Byrd: It may have a negative effect on residential construction because some cities and towns are not going to make the water and sewer connections to these developments. There is a certain amount of backflushing and cleaning out of lines that has to occur, and there are cities and towns around the state that are saying, 'We're not going to do that until we get some more rain.'

How has it affected manufacturing and other heavy water users?

Byrd: We are hearing from large water users, such as poultry processors, large pharmaceutical companies and electronics manufacturers that use lots of processed water. They are very interested in doing everything they can to curtail their water use. They've got to have a certain amount of very high-quality processed water to stay open so they don't have to lay off people. They are very receptive to the idea of saving water. They are very open to the idea of recycling water within their own operations. They are interested in using gray water--treated water that isn't drinkable--in their processes.

In December and again in January, Gov. Easley called for conservation pricing--rates that penalize excessive water use.

Byrd: There's been a lot of discussion about that, but I'm not aware of any water systems that have actually done it. Most of them are run by local municipalities, and it would involve their public staffs coming up with recommendations, taking it to council and going through the process.

McGarrah: This is our worst drought on record. This is the first time some of these water systems have faced these kinds of...