Submitted by: MARKET STREET SERVICES, INC. www.marketstreetservices.com

Submitted by: MARKET STREET SERVICES, INC. www.marketstreetservices.com

LIVE GROW WORK Market Street brings original insights and clarity to the evaluation and revitalization of the places where people live, grow and work. Market Street inspires trust in all community stakeholders citizens, educators, leadership and industry because our holistic, proactive process takes into account all the aspects that shape community life. Through honest and informed assessments, Market Street can equip you with the tools to create meaningful change. Our solutions successfully merge our unique vision with your economic and social realities.

TABLE OF CONTENTS Introduction... 3 Methodology... 5 Executive Summary...8 Demographics... 10 Economics... 12 Greater Waco Region...15 Key Findings... 16 Demographics...17 Population Growth...17 Population Growth Index... 18 Migration Patterns... 19 Components of Population Change... 19 County-By-County Migration Patterns... 20 Age Distribution...24 Race and Ethnic Composition...28 Socioeconomics...30 Educational Attainment...30 School Enrollment...35 Poverty Rates...36 Teenage Pregnancy...39 Economy... 41 Employment... 41 Job Growth Index... 41 Unemployment Rates...42 Labor Force Participation Rates... 43 Commuters... 45 Work Outside County of Residence... 45 Travel Time to Work... 46 1

Income...48 Per Capita Income...48 Average Annual Wage... 49 Distribution of Income...50 Economic Structure... 54 Top Employers... 54 Employment Distribution by Sector...55 Location Quotients... 60 Average Weekly Wages...63 Employment Distribution by Sub-Sector... 66 Entrepreneurial Activity... 73 Establishments by Number of Employees... 73 Non-Farm Proprietors... 75 Non-Employers by Sector... 77 Greater Waco Region... 81 Key Findings...87 2

INTRODUCTION This Demographic and Economic is the first stage in Market Street Services work with the Greater Waco Chamber of Commerce to develop a Strategic Economic Development Plan to help the community achieve short- and long-term economic success. This is a multi-step process which must begin with an understanding of the basic character of Greater Waco, 1 as determined by recent trends and current realities of key demographic and economic indicators of the area. This document outlines the findings of that analysis, as well as the identification of boundaries for a possible region, or labor market, for Greater Waco to consider itself a part of moving forward. The following is a brief description of the stages that will follow this Demographic and Economic in the effort to develop an implementable strategic plan that will enable Greater Waco to achieve its goals. 1. Competitive Assessment: This four-part document will analyze how Greater Waco compares to three benchmark communities to determine the area s competitiveness as a place of business for existing, expanding, and relocating companies. The four areas of analysis are: education and workforce development, infrastructure, business costs, and quality of life. 2. Community Input Process: Market Street will conduct a series of interviews and focus groups to identify key issues related to Greater Waco s competitive position as perceived by the community s leaders and key stakeholders. An online survey will also be conducted to allow the full spectrum of stakeholders to provide input on Greater Waco s competitive position. 3. Target Business Analysis: Target business sectors will be selected that have the highest probability of sustained success for the future of Greater Waco s economy. The choices will be based on the key findings of the previous quantitative and qualitative analyses of the area, as well as national economic trends and emerging, unrealized, and new opportunities in the Greater Waco region. 4. Strategic Economic Development Plan: The final strategic plan will bring together all previous parts of the process in order to provide a blueprint for the community s future actions. The plan will be comprised of a general future statement of Greater Waco s aspirations, an outline of key strategic goals, and the action steps needed to achieve them. 5. Implementation Plan: The final document in the process is an implementation plan that will prioritize action steps, assign roles and responsibilities, develop a timeline for implementation, and review funding 1 In this report, Greater Waco is defined as the Waco Metropolitan Statistical Area (MSA), which is comprised entirely of McLennan County 3

priorities. This document will allow Greater Waco to effectively begin the implementation of the strategy, the most critical work of this economic development strategy process. At the end of this process, the Greater Waco Chamber of Commerce will have a strategy focused on the community s most pressing needs and opportunities, and the action steps and implementation guidelines necessary to achieve success. This strategy, once effectively implemented, will allow Greater Waco to achieve both shortand long-term economic prosperity. 4

METHODOLOGY For this Demographic and Economic, Market Street used the most recent data available from reliable state and national data sources, including the U.S. Census Bureau, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, Internal Revenue Service, Texas Kids Count, and Texas Workforce Commission. When possible, the data for the Greater Waco Metropolitan Statistical Area (MSA, henceforth Greater Waco comprised solely of McLennan County) are compared to the State of Texas and the United States to measure the area against state and national averages. In several instances, the data for Greater Waco are also compared to the City of Waco to ascertain any differences to be resolved or otherwise given appropriate attention. Other key components of this analysis are the comparisons made between Greater Waco and three benchmark metropolitan areas, when comparable data are available. Often data (particularly the most recent) is only available at the county level. While the analysis of Greater Waco is possible in these instances because its boundaries are the same as McLennan County, it was not possible to compare Greater Waco to the three benchmarks because each benchmark is comprised of more than one county. The three chosen benchmark metropolitan areas for this analysis are the following: Abilene, Texas MSA (henceforth Abilene ), comprised of Callahan, Jones, and Taylor Counties. Columbia, Missouri MSA (henceforth Columbia ), comprised of Boone and Howard Counties. Lexington-Fayette, Kentucky MSA (henceforth Lexington-Fayette ), comprised of Bourbon, Clark, Fayette, Jessamine, Scott, and Woodford Counties. The following are maps of Greater Waco and each of the three benchmark metropolitan areas (based on the current U.S. Census Bureau metropolitan area definitions): 5

Greater Waco, Texas MSA Abilene, Texas MSA Columbia, Missouri MSA 6

Lexington-Fayette, Kentucky MSA The three benchmarks were selected based on their population size, existence of a large university (or group of universities, in the case of Abilene), per capita income, employment distribution, and proximity and accessibility to a larger metropolitan area. These criteria were chosen as the primary indicators because each of these is an important, defining characteristic of Greater Waco. Therefore, it is important to have these as consistent as possible among Greater Waco and the benchmarks to have a reliable baseline of similarities. Otherwise, significant differences in Greater Waco and a benchmark could be attributed to one of these basic characteristics, and weaken the usefulness of the comparison. 7

EXECUTIVE SUMMARY This Demographic and Economic reviews the primary indicators of demographics and the economy for Greater Waco, as the metro compares to the City of Waco, State of Texas, United States and three benchmark metropolitan areas. The following chart reviews some of the key indicators of Greater Waco and the benchmarks to provide a basic comparison of the four metropolitan areas. Greater Waco and Benchmarks Key Data Metropolitan Area Waco, TX Abilene, TX Columbia, MO Lexington- Fayette, KY Population Age Distribution Nearest Cities 2 96 miles to Dallas; 208 miles to Houston 190 miles to Dallas; 260 miles to San Antonio 125 miles to Kansas City; 126 miles to St. Louis 76 miles to Louisville; 82 miles to Cincinnati 2004 222,439 158,515 151,307 424,661 Growth '85 to '04 21.4% 3.3% 32.1% 28.5% % 14 and Under '03 % 65 and Over '03 21.8% 21.3% 18.7% 19.4% 12.5% 13.2% 9.2% 10.3% % White '03 63.1% 72.2% 84.4% 82.6% Race Composition 3 % Black '03 14.8% 6.3% 8.5% 10.5% % Other '03 2.4% 2.7% 5.3% 3.4% Ethnic Composition % Hispanic '03 19.8% 18.7% 1.8% 3.4% Educational Attainment % With No H.S. Diploma or Equivalent '00 23.4% 18.8% 10.8% 17.9% School Enrollment Largest University % in College or University '00 Name Baylor U. 11.1% 8.9% 19.0% 10.7% Abilene Christian U., Hardin- Simmons U., & McMurry U. U. of Missouri- Columbia U. of Kentucky 2 Distances based on most direct driving routes developed by Microsoft Map Point software. 3 Data are for non-hispanics only. 8

Greater Waco and Benchmarks Key Data Metropolitan Area Waco, TX Abilene, TX Columbia, MO Lexington- Fayette, KY Enrollment (Fall 2004) 13,799 8,578 4 27,003 26,545 Poverty Rate 2000 17.6% 14.5% 14.5% 12.6% Total Employment 2004 102,200 62,900 86,600 243,500 Growth '90 to '04 24.8% 17.4% 40.4% 25.0% Unemployment Rate March 2005 4.9% 4.6% 3.9% 4.5% Labor Force Participation 2003 69.7% 71.3% 82.8% 71.1% Rate Per Capita Income 2003 $24,007 $24,781 $27,680 $32,118 % Manufacturing 16.7% 6.6% 7.9% 16.6% Employment % Trade, Distribution Transportation, 22.0% 25.7% 21.1% 21.0% Third Quarter & Utilities 2004 5 % Education and Health Services 18.7% 25.5% 30.6% 18.0% Sources: U.S. Census Bureau; U.S. Bureau of Labor Statistics; U.S. Bureau of Economic Analysis; and the following university websites accessed 9 March 2005: http://www3.baylor.edu/irt/vol04_05/enrollment_report_fall2004.pdf; http://www.acu.edu/aboutacu/enrollment.html; http://www.hsutx.edu/admin/inst_research/cds2004-2005.pdf; http://www.mcm.edu/visitors/visitors.html; http://www.missouri.edu/mufacts.htm; and http://www.uky.edu/ir/quick.shtml. 4 The enrollment estimate for McMurry University (1,400) was for an unspecified time period. 5 Only private sector data was available for the benchmarks from the national data source. Because the University of Missouri and the University of Kentucky have a significant impact on the education employment data for Columbia and Lexington-Fayette, employment estimates for those institutions were obtained from their websites and incorporated into the data. Sources: MU Facts. Accessed 19 May 2005. http://www.missouri.edu/mufacts.htm; University of Kentucky 2004 Consolidated Financial Statements. Accessed 19 May 2005. http://www.uky.edu/home/annualreport/2004.pdf. 9

DEMOGRAPHICS This section of the Demographic and Economic reviews data pertaining to population growth, migration patterns, age distribution, race and ethnic composition, and socioeconomics of Greater Waco as it compares to its central city, state, nation, and the benchmarks. Population Growth From 1985 to 2004, Greater Waco grew by 21.4 percent from a population estimate of 183,163 to 222,439. This pace was greater than Abilene, but less than all other areas studied. Migration Patterns Each of the benchmarks had negative net domestic migration from 2000 to 2004, compared to Greater Waco, which could attribute 4.7 percent of its population growth during that time period to domestic migration. That percentage, however, was less than Texas 9.6 percent. From 2001 to 2003, Greater Waco had the most net migration gain from the following Texas counties: Falls (non-metro), Bell (Killeen-Temple-Fort Hood metro), and Midland (Midland metro). From 2001 to 2003, Greater Waco had the most net migration losses to the following Texas counties: Tarrant and Dallas (Dallas-Fort Worth-Arlington metro), and Bexar (San Antonio metro). Age Distribution As of 2003, Greater Waco has a large 14 and under population (21.8%), with Texas having a greater percentage (23.6%) and the following having a smaller percentage: Abilene (21.3%), U.S. (20.9%), Lexington-Fayette (19.4%), and Columbia (18.7%). Only Abilene has a larger retirement age population (13.2% 65 and over) than Greater Waco (12.5%). However, the national average is very similar (12.4%), followed by Lexington-Fayette (10.3%), Texas (9.9%), and Columbia (9.2%). Greater Waco s comparatively large youth and retired populations can potentially strain both the availability of labor and resources for the mostdependent populations in the area. The youngest portion of the workforce and primary child-bearing age population (between the ages of 25 and 44) represents only 26.2 percent in Greater Waco in 2003, compared to 26.8 percent in Abilene, 29.0 percent in the U.S., 29.9 percent in Texas, 31.1 percent in Columbia, and 32.2 percent in Lexington-Fayette. 10

Race and Ethnic Composition As of 2003, Greater Waco had the largest African American population of any of the comparison areas (14.8%), compared to Abilene (6.3%), Columbia (8.5%), Lexington-Fayette (10.5%), Texas (11.1%), and the United States (12.2%). In 2000, 79.4 percent of Greater Waco s African Americans lived in the City of Waco. 6 In 2003, about 1 in 3 persons in Texas was Hispanic (34.2%), while Greater Waco had 19.8% and Abilene had 18.7%. Those are higher than the national average (13.7%) and significantly higher than the two remaining benchmarks (Columbia had 1.8% and Lexington-Fayette had 3.4%). In 2000, 70.3 percent of Greater Waco s Hispanics lived in the City of Waco. Socioeconomics Greater Waco has a high percentage of its population without a high school diploma 23.4 percent in 2000 compared to the following more favorable percentages: United States 19.6 percent, Abilene s 18.8 percent, Lexington- Fayette s 17.9 percent, and Columbia s 10.8 percent. The same data split by race and ethnicity suggest the issue is particularly problematic for Greater Waco s Hispanics (a high 61.7 percent did not have a high school diploma, or equivalent, as of 2000). Texas overall percentage is 24.3 percent. As will be discussed further in the Competitive Assessment described in this report s Introduction, Baylor University has a strong presence in Greater Waco 11.1 percent of Greater Waco s population was enrolled in an undergraduate, graduate, or professional program in 2000, compared to 6.0 percent in Texas and 6.5 percent in the United States. In 2002, Greater Waco had a poverty rate of 17.1 percent, which is higher than all the benchmark central counties, Texas, and the nation. 7 In 2003, 19.1 percent of live births in Greater Waco were to teenagers ages 13 to 19 years, compared to 18.8 percent in Abilene s Taylor County and 13.8 percent in Texas. Of the race and ethnic groups in Greater Waco, African Americans had the highest teenage pregnancy rate (27.4%). 6 Hispanic is considered an ethnicity, not a race, and therefore the percentages of Other Races, White, and Black in the race and ethnicity data refer only to non-hispanics. Other Races includes American Indian and Alaska Native; Asian; Native Hawaiian and Other Pacific Islander; and two or more races combined. 7 The poverty estimates were only reported at the county-level; therefore, Taylor County served to represent the Abilene metro area, Boone to represent Columbia, and Fayette to represent Lexington- Fayette. 11

ECONOMICS This section of the Demographic and Economic reviewed data pertaining to employment, commuters, income, economic structure, and entrepreneurial activity of Greater Waco as it compares to its central city, state, nation, and the benchmarks. Employment Total jobs in Greater Waco grew by 24.8 percent from 82,000 in 1990 to 102,000 in 2004. During this time period, Greater Waco s job growth surpassed Abilene (17.4%) and the United States (20.1%), but fell behind Columbia (40.4%), Texas (33.6%), and Lexington-Fayette (25.0%). As of March 2005, Greater Waco s unemployment rate of 4.9 percent was less than Texas 5.5 percent and the nation s 5.4 percent, but greater than Columbia s 3.9 percent, Lexington-Fayette s 4.5 percent, and Abilene s 4.6 percent. In 2003, Greater Waco had the lowest labor force participation rate (69.7%). The rates for the other areas were 71.1 percent in Lexington-Fayette, 71.2 percent in Texas, 71.3 percent in Abilene, 71.9 percent in the United States, and 82.8 percent in Columbia. Commuters In Greater Waco, in 2000, 6.8 percent of the employed population worked outside their county of residence, compared to 6.5 percent in Abilene, 9.2 percent in Columbia, and 26.4 percent of Lexington-Fayette (the benchmark with the most counties in its metropolitan area). The percentage for Texas was 21.4 percent and for the U.S. was 26.7 percent. Workers in Greater Waco and the benchmarks have shorter commute times than state and national averages 3.7 percent of Greater Waco s workers traveled 60 minutes or more in 2000, compared to 7.0 percent in Texas and 7.7 percent in the United States. The figures were 2.4 percent in Columbia, 2.9 percent in Abilene, and 3.7 percent in Lexington-Fayette. Income In 2003, Lexington-Fayette s per capita income was $32,118, followed by the U.S. $31,472, Texas $29,074, Columbia s $27,680, Abilene s $24,781, and finally Greater Waco s $24,007, the lowest of the comparables. In 2003, Greater Waco s average annual wage ($29,322) was greater than Abilene ($27,022) and Columbia ($27,648), but less than Texas ($33,336), Lexington-Fayette ($33,602), and the U.S. ($37,130). 12

A high 19.0 percent of Abilene s income in 2003 was derived from transfer payments, 8 followed closely by Greater Waco (17.7%), and more distantly by the United States (14.6%), Columbia (13.8%), Texas (12.8%), and Lexington- Fayette (11.8%). In 2003, 14.9 percent of income in Greater Waco was derived from dividends, interest, and rent, which was greater than the 13.0 percent in Texas. However, the remainder of the areas studied had higher percentages, ranging from the 16.1 percent of both Columbia and the United States, to the 16.8 percent of Lexington-Fayette. Economic Structure As of third quarter 2004, Greater Waco s largest sectors are Health Care and Social Assistance (16.1%), Manufacturing (13.7%), Educational Services (11.4%), and Retail Trade (11.4%). Comparatively, Texas top three are Health Care and Social Assistance (12.0%), Retail Trade (11.7%), and Educational Services (9.9%). The United States top three are Health Care and Social Assistance (12.2%), Retail Trade (11.6%), and Manufacturing (11.1%). To compare to the benchmarks, the largest employment divisions in Greater Waco as of third quarter 2004 are Trade, Transportation, and Utilities (22.0%), Education and Health Services (18.7%), and Manufacturing (16.7%). Lexington-Fayette has the same top three (22.2%, 18.0%, and 16.6%, respectively). Trade, Transportation and Utilities is 25.7% in Abilene and 21.1% in Columbia, and Education and Health Services is 25.5% in Abilene and 30.6% in Columbia. Leisure and Hospitality, not Manufacturing, is the third largest sector in Abilene and Columbia. 9 As of the third quarter 2004, the three sectors in Greater Waco with the highest location quotients are Utilities (1.76), Educational Services (1.48), and Health Care and Social Assistance (1.32). 10 The data for the third quarter 2004 illustrates that the following had the highest location quotients for Greater Waco: Manufacturing (1.28) and Education and Health Services (1.28). For the benchmarks, those employment sectors with the highest location quotients are Education and 8 Transfer payments are obtained from government assistance programs such as Social Security, federal retirement, Medicare, and Temporary Assistance for Needy Families. 9 Based on the limitations of the availability data, only the private sector is available for recent benchmark metro area comparisons. Because the University of Missouri and the University of Kentucky have a significant impact on the education employment data for Columbia and Lexington-Fayette, employment estimates for those institutions were obtained from their websites and incorporated into the employment distribution data. 10 Location quotients are a ratio representing the strength of a particular local business sector in relation to the national average. 13

Health Services in Abilene (1.70), Construction in Columbia (1.25), and Natural Resources and Mining in Lexington-Fayette (1.38). 11 As of the third quarter 2004, only Health Care and Social Assistance had a greater average weekly wage in Greater Waco than Texas ($679 and $675, respectively). As of that quarter, Greater Waco had an average less than a majority of sectors in Lexington-Fayette, and an average above most Abilene and Columbia sectors. Manufacturing sub-sector data of employment, location quotients, and average weekly wages, and recent growth trends for these indicators, suggest the following are particularly strong in Greater Waco: Transportation Equipment (1,930 employees and $1,184 average wage as of third quarter 2004), Electrical Equipment and Appliances (339 employees and $763 average wage), and Computer and Electronic Products (280 employees and $913 average wage). Overall, both the sectors of Health Care and Education are strong in Greater Waco, in terms of employment, location quotients, and wages, and recent growth trends in these indicators. The Hospital sub-sector is particularly strong (6,511 employees and $868 average wage as of third quarter 2004). Entrepreneurial Activity In 2002, Greater Waco had a slightly larger share of its establishments with 100 or more employers 3.2 percent compared to 2.7 percent in Lexington- Fayette, 2.4 percent in Texas, 2.2 percent in the U.S., 2.1 percent in Abilene, and 2.0 percent in Columbia. Greater Waco also had a slightly larger share with 19 or fewer employees (83.6%) compared to the U.S. (82.8%) and Texas (81.9%), but a slightly smaller share compared to the benchmarks (87.0% in Columbia, 85.9% in Abilene, and 83.8% in Lexington-Fayette). For 2003, Greater Waco fell in the middle of the comparison areas in terms of the percentage of total employment that non-farm proprietors represented: 19.6 percent of Abilene, 18.0 percent of Texas, 16.5 percent of the U.S., 15.2 percent of Greater Waco, 14.4 percent of Columbia, and 13.1 percent of Lexington-Fayette. The average annual wages of non-farm proprietors in Greater Waco were less than all comparison areas except Columbia in 2003: $38,440 in Texas, $29,371 in the U.S., $28,347 in Lexington-Fayette, $19,939 in Abilene, $18,720 in Greater Waco, and $16,978 in Columbia. Those sectors that, as of 2002, had a high percentage of non-employers in Greater Waco were Mining (though a very small part of the Greater Waco 11 Data only include private sector employees. 14

economy); Retail Trade; Transportation and Warehousing; Professional, Scientific, and Technical Services; and Arts, Entertainment, and Recreation. 12 GREATER WACO REGION The final section of this report focuses on identifying a potential labor market region for Greater Waco. Analyzing commuter data focused on a 50-mile radius around the City of Waco, the following are the key findings of this analysis. Greater Waco s resident out-commuters top places of work as of 2000 were the Texas counties of Bell of the Killeen-Temple-Fort Hood metro area (1,909), the non-metro county of Falls (572), and Dallas of the Dallas-Fort Worth-Arlington metro area (493). Greater Waco s in-commuting employees top places of residence as of 2000 were the Texas counties of non-metro Falls (1,528), Bell of the Killeen- Temple-Fort Hood metro area (1,504), and non-metro Hill (1,410). The top counties of net commuters to Greater Waco as of 2000 were the Texas non-metro counties of Falls (956), Hill (953), and Bosque (923). The top counties of net commuters from Greater Waco as of 2000 were the Texas counties of Bell of the Killeen-Temple-Fort Hood metro area (-405), Dallas of the Dallas-Fort Worth-Arlington metro area (-296), and Travis of the Austin-Round Rock metro area (-270). Due to the large number of commuters from Bell, Bosque, Hills, Falls, Coryell, Navarro, and Limestone counties (all of which have at least a portion of their land area within a 50-mile radius of the City of Waco), these counties could serve as a potential eight-county labor market for Greater Waco (the eighth county being McLennan). As of 2004, the eight counties had a combined population of 689,767, with Greater Waco representing 32.2 percent of that total. 12 Non-employers are businesses that are subject to federal income taxes but have no paid employees (i.e., self-employed individuals). 15

KEY FINDINGS The following are the five key conclusions derived from the analysis in this Demographic and Economic. 1. Greater Waco s strong population growth may be difficult to maintain if the community continues to depend heavily on net domestic migration and its primary workforce/child-bearing age population remains a comparatively small portion of the total. There is also a potential strain on the resources available to the youngest and oldest portions of the workforce, as each represents a larger than average share in Greater Waco. 2. Employment growth is strong, unemployment rates are low, and labor force participation rates are near-average in Greater Waco. Combined with the relatively low per capita income and average wages of Greater Waco, the greatest economic challenge facing the community may be to raise the average wages of the employment opportunities available to the workforce. 3. Educational attainment levels in Greater Waco must be improved for the community to remain competitive in today s economy, and attract and create the jobs that will provide higher wages for its workforce. 4. The City of Waco appears to be worse off economically than other areas of Greater Waco. Additionally, certain populations face greater challenges than others in the community, primarily Hispanics and African Americans. 5. Greater Waco will need to think more regionally to remain competitive with the many neighboring metropolitan areas also vying for additional economic opportunities. 16

DEMOGRAPHICS Greater Waco s workforce demographics are an important starting point for an analysis of its economy, as these are the key indicators of the character and well-being of the area s current and future workforce. This section begins with an analysis of population growth and migration patterns in recent years, followed by a look at the age distribution and racial and ethnic composition of Greater Waco s population. Finally, key data pertaining to the socioeconomics of the population educational attainment, poverty levels, and teenage pregnancy rates are analyzed to measure the economic well-being and future employment prospects of the population. Population Growth As of 2004, Greater Waco (comprised solely of McLennan County) had 222,439 people. In 2003, the most recent estimate available, the City of Waco had 116,887 people, about 53 percent of the County s total that year. 17

POPULATION GROWTH INDEX Over the past 20 years, Greater Waco has grown by 21.4 percent, from the 1985 estimate of 183,163 to the 2004 estimate of 222,439. That rate is just below the nation, which grew by 23.4 percent from 1985 to 2004. Greater Waco is not the fastest growing area of the State, with Texas rate of growth over the 20-year time period of 38.2 percent. Two of the three benchmark metropolitan areas had rates of growth that were greater than Waco s: the Columbia MSA grew by 32.1 percent and the Lexington-Fayette area grew by 28.5 percent. However, the third benchmark, the Abilene MSA, has a negligible growth of only 3.3 percent. The following chart graphically illustrates these growth rates as a baseline index beginning at 100 in 1985. 160 Twenty-Year Population Growth Index, 1985 to 2004: Greater Waco, Benchmarks, Texas, and United States 140 120 100 80 60 40 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Waco, TX (MSA) Abilene, TX (MSA) Columbia, MO (MSA) Lexington-Fayette, KY (MSA) Texas United States Source: U.S. Census Bureau 18

Migration Patterns Migration data are important to analyze to determine where the population is moving to and from. Patterns that arise can illustrate trends that can help Greater Waco identify ways to maintain a healthy population growth balance. COMPONENTS OF POPULATION CHANGE Population growth is not due to in-migration alone, but also natural change in the population due to births minus deaths. The following chart breaks down the population change in Greater Waco, the benchmarks, Texas, and the U.S. in terms of natural change and the two components of migration domestic migration (net migration from within the U.S.) and international migration (net migration from outside the U.S.). With natural change representing 64.5 percent of the population change in Greater Waco from 2000 to 2004, the metro is more dependent on this component than any of the comparable areas. Whether or not Greater Waco can sustain population growth with this relatively high percentage of growth due to more births than deaths will depend on the findings of the age distribution analysis later in this report. Components of Population Change, 2000 to 2004: Greater Waco, Benchmarks, Texas, and United States 100% 80% 60% 4.7% 30.8% 32.0% 39.1% 9.6% 33.9% 0.0% 43.6% 40% 20% 0% -20% -40% 64.5% 7.2% 34.2% -58.6% 63.2% 59.9% 56.5% 56.4% -4.9% -1.0% -60% Waco, TX MSA Abilene, TX MSA Columbia, MO MSA Lexington- Fayette, KY MSA Texas United States Natural Change Net International Migration Net Domestic Migration Source: U.S. Census Bureau Population Estimates Greater Waco was the only metropolitan area studied to have a positive net domestic migration component of population change from 2000 to 2004. In both the metro areas of Columbia and Lexington-Fayette, the population did grow, but despite losses to net migration. Abilene s significant net domestic migration loss helps to explain 19

the metro area s slow population growth in recent years. This is a positive comparative point for Greater Waco. COUNTY-BY-COUNTY MIGRATION PATTERNS In order to have a more complete understanding of where these domestic migrants are coming from, the following charts and maps illustrate the origins and destinations of those moving to and from Greater Waco, based on Internal Revenue Service (IRS) data from 2001 to 2003. 13 Greater Waco is gaining the most residents (measured in terms of in-migration minus out-migration) from smaller metro areas and non-metro areas in relative close proximity to Waco. The top ranking counties Falls and Bell are on McLennan (Greater Waco) s southeastern border. Top Ten Counties of Net Migration Gains to Greater Waco, 2001-2003 County Metropolitan Area Total Falls, TX (non-metro) 215 Bell, TX Killeen-Temple-Fort Hood 96 Midland, TX Midland 67 Milam, TX (non-metro) 61 Ector, TX Odessa 53 Brown, TX Brownwood (micro area) 51 Navarro, TX Corsicana (micro area) 46 Taylor, TX Abilene 46 Lubbock, TX Lubbock 43 Tom Green, TX San Angelo 43 Source: Internal Revenue Service 13 The data were released by the Internal Revenue Service based on the number of exemptions claimed on tax returns filed that year. Therefore, the data are an estimate because by definition they exclude people who did not file tax returns or were not claimed as exemptions on the returns that were filed. 20

Greater Waco is losing the most residents to the largest metropolitan areas of Texas: Dallas-Fort Worth-Arlington, San Antonio, Austin-Round Rock, and Houston-Sugar Land-Baytown. Nevada s Las Vegas-Paradise and Greater Waco s neighboring MSA of Killeen-Temple-Fort Hood also have counties that fall within the top ten counties to which Waco is losing the most residents. Top Ten Counties of Net Migration Losses for Greater Waco, 2001-2003 County Metropolitan Area Total Tarrant, TX Dallas-Fort Worth-Arlington -361 Dallas, TX Dallas-Fort Worth-Arlington -152 Bexar, TX San Antonio -91 Williamson, TX Austin-Round Rock -85 Johnson, TX Dallas-Fort Worth-Arlington -61 Harris, TX Houston-Sugar Land-Baytown -60 Clark, NV Las Vegas-Paradise -59 Coryell, TX Killeen-Temple-Fort Hood -53 Collin, TX Dallas-Fort Worth-Arlington -52 Denton, TX Dallas-Fort Worth-Arlington -51 Source: Internal Revenue Service 21

The following map illustrates the net migration to and from Greater Waco in its immediate vicinity. The greatest gains are from those counties immediately adjacent to Greater Waco, while the greatest losses are to the counties of the Cities of Dallas and Fort Worth. Net Migration to/from Greater Waco, 2001 to 2003: 100-Mile Radius Source: Internal Revenue Service Legend 22

The following map illustrates that people are also moving to and from Greater Waco from throughout the United States. The most notable gains are from the Phoenix area of Arizona, the Los Angeles area of California, the Wichita area of Kansas, and the Chicago area of Illinois; and the most notable losses are to the Las Vegas area of Nevada, south of the Phoenix area of Arizona, the Seattle area of Washington, the Jacksonville area of Florida, and the Oklahoma City area of Oklahoma. Net Migration to/from Greater Waco, 2001 to 2003: United States Map Source: Internal Revenue Service Legend 23

Age Distribution The age distribution of Greater Waco is important to analyze in order to ascertain possible future workforce growth patterns, as well as any impending strains on resources for the most in-need portions of the population: children and elderly. In 1990, Greater Waco had a smaller percentage of the population than Texas or the United States in the age categories that comprise the central core of the workforce: 25 to 34; 35 to 44; and 45 to 54. This can be considered a comparative weakness of the area s workforce as of that time. Compared to the State and nation, Greater Waco did stand out for large numbers in the two age categories between 15 and 24 years old, likely due to the Baylor University student population. Greater Waco also had larger percentages in the three age categories over 65, suggesting a larger than average retirement-age population. Age Distribution, 1990: City of Waco, Greater Waco, Texas, and United States 30% 25% 20% 15% 10% 5% 0% 14 and Under 15 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 to 84 85 and Over City of Waco Greater Waco Texas United States Source: U.S. Census Bureau 24

In 1990, compared to the three benchmark metropolitan areas, Greater Waco had a low percentage in the two younger components of the core workforce: 25 to 34 and 35 to 44. Greater Waco s 14 and under population was less than Abilene as a percent of the total, and it had the most of any benchmark in each of the age categories 55 and over. 25% Age Distribution, 1990: Greater Waco and Benchmarks 20% 15% 10% 5% 0% 14 and Under 15 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 to 84 85 and Over Waco, TX (MSA) Abilene, TX (MSA) Columbia, MO (MSA) Lexington-Fayette, KY (MSA) Source: U.S. Census Bureau From 1990 to 2003, Greater Waco, the benchmarks, Texas, and the U.S. all increased in the share of the population in the two age categories of 45 to 54 and 55 to 64 (the core of the Baby Boom generation). For the retirement age population (65 years and older), Greater Waco lost the greatest amount (-7.4%), but still it represented a large share of the total in 2003 (12.5%). That percentage was about the same for the United States (12.4%). Of the benchmarks, only Abilene had a larger figure than Greater Waco (13.2%). The aging issue is particularly acute in the City of Waco, whose percentage of the population that was 85 years and over grew by 20.9 percent from 1990 to 2000, compared to 18.7 percent in Greater Waco. 14 Compared to the other areas, the change from 1990 to 2003 of the 14 and under percentage was slight in Greater Waco. However, it still represented a high 21.8 percent in 2003 (compared to the U.S. 20.9%, Abilene s 21.3%, Lexington-Fayette s 19.4%, and Columbia s 18.7%). As of 2000, the youth population is slightly smaller 14 2003 estimates were not available for the City of Waco. 25

in the City than the MSA overall, with a 21.3 percent estimate for the City of Waco and 21.9 percent for Greater Waco. It is disadvantageous that the youngest portion of the workforce and primary childbearing age population (between the ages of 25 and 44) represents only 26.2 percent in Greater Waco in 2003, compared to 26.8 percent in Abilene, 29.0 percent in the U.S., 29.9 percent in Texas, 31.1 percent in Columbia, and 32.2 percent in Lexington- Fayette. 25% Age Distribution, 2003: Greater Waco, Texas, and United States 20% 15% 10% 5% 0% 14 and Under 15 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 to 84 85 and Over Greater Waco Texas United States Source: U.S. Census Bureau 26

25% Age Distribution, 2003: Greater Waco and Benchmarks 20% 15% 10% 5% 0% 14 and Under 15 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 to 84 85 and Over Waco, TX MSA Abilene, TX MSA Columbia, MO MSA Lexington-Fayette, KY MSA Source: U.S. Census Bureau 27

Race and Ethnic Composition The race and ethnic composition of Greater Waco helps enhance the understanding of the general character of the area s population. Hispanic is considered an ethnicity, not a race, and therefore the percentages of Other Races, White, and Black in the following charts refer only to non-hispanics. 15 In 1990, none of the four metropolitan areas or Texas closely approximated the United States in terms of racial mix. Greater Waco is unique in that it has the largest African American population of the areas studied 15.4 percent as of 1990. The City of Waco has an even greater percentage (22.7%), suggesting a high concentration of the area s African Americans lived in the City at the time (indeed, while 54.8 percent of Greater Waco s population lived in the City, the percentage of African Americans that lived in the City was 81.1%). 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Race and Ethnic Composition, 1990: City of Waco, Greater Waco, Benchmarks, Texas, and United States 16.3% 22.7% 59.7% City of Waco 1.2% 12.5% 15.4% 71.1% Waco, TX MSA 1.0% 14.6% 6.1% 77.7% Abilene, TX MSA 1.5% 1.1% 0.9% 7.4% 10.6% 88.3% 3.2% Columbia, MO MSA 87.1% Lexington- Fayette, KY MSA 1.4% Other Races White Black Hispanic 25.5% 11.6% 60.6% Texas 2.2% 9.0% 11.7% 75.6% 3.6% United States Source: U.S. Census Bureau 15 Other Races includes American Indian and Alaska Native; Asian; Native Hawaiian and Other Pacific Islander; and for the 2003 data, two or more races combined. 28

From 1990 to 2003, the percentage of the population that was White declined in all areas studied. Both the percentages of Other Races and Hispanics grew considerably as the national population diversified during this time period. Lexington-Fayette had the most significant change in both categories. In 2003, Greater Waco stood out for its large percentage of African Americans (14.8%). While both Greater Waco and Abilene had high percentages of Hispanics compared to the other areas, they were still far behind the state average of about one in three persons of Hispanic origin (34.2%). The fast growth of the Hispanic population in the United States is a significant demographic change, and, as that translates into political and cultural change, it could have even more significant effects in places like Greater Waco that have a greater than average percentage of Hispanics. In 2000, 23.6 percent of the City of Waco was Hispanic, compared to 17.9 percent in Greater Waco. As of that year, 70.3 percent of the MSA s Hispanics lived in the City, only a slight change from 1990. 16 Race and Ethnic Composition, 2003: Greater Waco, Benchmarks, Texas, and United States 100% 90% 80% 70% 19.8% 18.7% 14.8% 6.3% 1.8% 3.4% 8.5% 10.5% 34.2% 13.7% 12.2% 60% 11.1% 50% 40% 30% 63.1% 72.2% 84.4% 82.6% 50.5% 67.9% 20% 10% 0% Waco, TX MSA 2.4% 2.7% 5.3% 3.4% 4.2% 6.2% Abilene, TX MSA Columbia, MO MSA Lexington- Fayette, KY MSA Texas United States Other Races White Black Hispanic Source: U.S. Census Bureau 16 2003 estimates were not available for the City of Waco. 29

Socioeconomics Educational attainment, poverty, and teenage pregnancy are key indicators of the general health, well-being, and future prospects of the population. Each will be analyzed in turn to assess how Greater Waco compares to state and national averages, as well as the benchmarks. EDUCATIONAL ATTAINMENT Educational attainment levels are indicators of the skill-levels of the workforce, as well as its future employment prospects and socio-economic well-being, as higher education levels often correlate with higher earnings potential. In 1990, Greater Waco had a higher percentage of the population without a high school diploma (28.4%) than Texas (27.9%) and the United States (24.8%). The percentage was even higher in the City of Waco (31.6%). Greater Waco did, however, have a comparably high percentage of persons with an Associate s degree: 6.7 percent compared to the State s 5.2 percent and the nation s 6.2 percent. 35% Educational Attainment Levels for the Population Over 25 Years Old, 1990: City of Waco, Greater Waco, Texas, and United States 30% 25% 20% 15% 10% 5% 0% No High School Diploma High School Diploma/Equivalent Some College Associate's Degree Bachelor's Degree Grad. or Prof. Degree City of Waco Greater Waco Texas United States Source: U.S. Census Bureau 30

Compared to the benchmarks, Greater Waco was not competitive in 1990. Its figure of 28.4 percent of the population without a high school diploma was higher than Columbia (15.2%), Lexington-Fayette (24.1%), and Abilene (24.6%). The Waco area did have the highest percent with an Associate s degree, 6.7 percent, compared to Abilene s 4.7 percent, Columbia s 5.3 percent, and Lexington-Fayette s 5.2 percent. 30% Educational Attainment Levels for the Population Over 25 Years Old, 1990: Greater Waco and Benchmarks 25% 20% 15% 10% 5% 0% No High School Diploma High School Diploma/Equivalent Some College Associate's Degree Bachelor's Degree Grad. or Prof. Degree Waco, TX (MSA) Abilene, TX (MSA) Columbia, MO (MSA) Lexington-Fayette, KY (MSA) Source: U.S. Census Bureau 31

By 2000, the high school diploma percentages improved in all areas. In fact, the Greater Waco s percentage of the population without a high school diploma dropped below Texas by 2000, such that Greater Waco s was 23.4 percent and Texas was 24.3 percent (the nation s was still a comparatively lower 19.6%). However, the City of Waco still was not very competitive with 28.4 percent of the population without a high school diploma. While Greater Waco still had a high percentage with an Associate s degree, it had a lower percentage with a Bachelor s, graduate, or professional degree as their highest level of attainment (19.1 percent compared to Texas 23.2 percent and the nation s 24.4%). 35% Educational Attainment Levels for the Population Over 25 Years Old, 2000: City of Waco, Greater Waco, Texas, and United States 30% 25% 20% 15% 10% 5% 0% No High School Diploma High School Diploma/Equivalent Some College Associate's Degree Bachelor's Degree Grad. or Prof. Degree City of Waco Greater Waco Texas United States Source: U.S. Census Bureau 32

Compared to the benchmarks, Waco s percentage without a high school diploma did not improve as much. The gap between Greater Waco and the others widened, with Greater Waco s 23.4 percent, Abilene s 18.8 percent, Lexington-Fayette s 17.9 percent, and Columbia s 10.8 percent, as of 2000. Columbia is comparatively very welleducated, with 41.7 percent of the population with a Bachelor s degree or higher as their highest level of attainment, compared to 28.7 percent in Lexington-Fayette, 22.5 percent in Abilene, and 19.1 percent in Greater Waco. Greater Waco still maintained the highest percentage with an Associate Degree as their highest level of attainment. 30% Educational Attainment Levels for the Population Over 25 Years Old, 2000: Greater Waco and Benchmarks 25% 20% 15% 10% 5% 0% No High School Diploma High School Diploma/Equivalent Some College Associate's Degree Bachelor's Degree Grad. or Prof. Degree Waco, TX (MSA) Abilene, TX (MSA) Columbia, MO (MSA) Lexington-Fayette, KY (MSA) Source: U.S. Census Bureau With more and more employers requiring a high school diploma, and even a two-year or four-year degree, for employment in today s economy, Greater Waco will need to dramatically improve its educational attainment levels to remain competitive. It will also help to strengthen the economic potential of its population, as pursuit of a twoyear or four-year degree often corresponds to greater wealth opportunities. 33

The following chart illustrates the percentage of the population without a high school diploma in 2000 for the population divided by race and ethnicity for each of the areas studied. 17 In each area, the White population has a lower percentage than the total population, as does the Black population in Texas. Otherwise, the percentages for the race and ethnic categories are higher than the total in each area. This is particularly true of the Hispanic ethnicity. The Hispanic population s percentage most closely approximates the total population s percentage in the Columbia MSA, but even in that area there is a more than 10 percent difference (10.8 percent of the total population has no high school diploma, while 21.3 percent of the Hispanic population does not have one). Of all the benchmarks, Texas, and the United States, Greater Waco has the biggest difference 32.6 percent with 23.4 percent of the total population without a high school diploma and 56.0 percent of the Hispanic population without one. In the City of Waco, the issue is even more acute: 28.4 percent of the population does not have a high school diploma and 61.7 percent of the Hispanic population does not have one. Therefore, as Greater Waco addresses its comparatively low educational attainment levels, particular attention should be given to how race, and even more so ethnicity, affects an individual s opportunity to obtain an education. Percent of the Population Over 25 Years Old without a High School Diploma or Equivalent by Race and Ethnicity, 2000 Lexington- City of Abilene, Columbia, Waco, TX Fayette, Texas Waco TX MO KY United States Total 28.4% 23.4% 18.8% 10.8% 17.9% 24.3% 19.6% White 22.4% 19.1% 16.1% 9.9% 17.1% 20.5% 16.4% Black 29.8% 28.5% 24.4% 20.6% 24.9% 24.2% 27.7% Other Races 54.6% 49.1% 37.5% 12.7% 20.3% 44.1% 34.8% Hispanic 61.7% 56.0% 43.8% 21.3% 47.2% 50.7% 47.6% Source: U.S. Census Bureau 17 Unlike the race and ethnicity charts for 1990 and 2003 presented previously, in this chart the White, Black, and Other Races categories include both Hispanics and non-hispanics, and the Hispanic data includes all races. Hispanic is an ethnicity, not a race, and therefore the U.S. Census Bureau reports these data separately. No educational attainment data was reported for non-hispanic African Americans or non-hispanics of in the Other Races category. For non-hispanic Whites, the percentage of the population without a high school diploma or equivalent was 16.7% in the City of Waco, 16.0% in the Waco MSA, 13.9% in Abilene, 9.8% in Columbia, 16.8% in Lexington-Fayette, 12.8% in Texas, and 14.5% in the United States. 34

SCHOOL ENROLLMENT School enrollment data illustrate potential future educational attainment levels for the populace, where distinct differences can be identified and the likelihood is high that enrollees will remain in the community after graduation. Greater Waco stands out compared to state and national averages for the percentage of the population (over 3 years old) currently enrolled in a college or university in 2000, 11.1 percent compared to 6.0 percent in Texas and 6.5 percent of the United States. The comparatively high percentage for Greater Waco (and even higher for the city 16.4%) is mostly due to Baylor University s presence. These data were considered key for the selection of benchmarks. The percentages for the benchmarks (followed by the names of the largest universities in the economy) are as follows: Abilene 8.9 percent (Abilene Christian University, Hardin-Simmons University, and McMurry University); Columbia 19.0 percent (University of Missouri-Columbia); and Lexington-Fayette 10.7 percent (University of Kentucky). More in-depth analysis of the universities and their role in Greater Waco and the benchmark s economies will be done as part of the Competitive Assessment described in the Introduction section of this report. College and University Enrollment for the Population Over 3 Years Old, 2000: City of Waco, Greater Waco, Benchmarks, Texas, and United States 16% 14% 15.1% 15.0% 12% 10% 8% 10.1% 8.0% 8.8% 6% 4% 2% 1.3% 1.0% 1.0% 4.0% 5.1% 5.3% 2.0% 1.0% 1.2% 0% City of Waco Greater Waco Abilene, TX Columbia, MO Lexginton- Fayette, MO Texas United States Undergraduate Graduate or Professional Source: U.S. Census Bureau 35

POVERTY RATES Poverty rates illustrate the overall economic well-being of the population. The following is an illustration of the most recent poverty rates available at the City and MSA level. In 1990 and 2000, for both the total population and the 17 and under population, Greater Waco s rates are much greater than the three benchmarks, and the City of Waco s are even higher than those of Greater Waco as a whole. In 2000, the poverty rate for the total population in Greater Waco was 17.6 percent, greater than Abilene (14.5%), Columbia (14.5%), Lexington-Fayette (12.6%), as well as Texas (15.4%) and the United States (12.4%). No benchmark had a poverty rate that was less than the national average that year. Within Greater Waco, poverty appears to be at its highest within the City, with one in four (26.3%) people living below the poverty level in the City of Waco as of 2000. Less than one in three (31.3%) children lives in poverty in the City as of 2000. 40% 35% 30% 25% 20% 15% 10% 5% Poverty Rates, 1990 and 2000: City of Waco, Greater Waco, Benchmarks, Texas, and United States 0% 1990 2000 1990 2000 Total Population 17 and Under City of Waco Greater Waco Abilene MSA Columbia MSA Lexington-Fayette MSA Texas United States Source: U.S. Census Bureau There are more recent poverty rate estimates, but they are only reported at the countylevel. Therefore, the following chart illustrates the data based on the central county of Greater Waco (McLennan) and each of the benchmarks (Taylor County to represent Abilene, Boone County to represent Columbia, and Fayette County to represent Lexington-Fayette). As of 2002, Waco s McLennan County had a poverty rate of 17.1%, which is higher than all the benchmark central-counties, Texas and the nation. Taylor County, home to Abilene, is the closest to McLennan, with a rate of 15.6 percent in 2002. All but Taylor County followed a noticeable pattern of falling and then rising within the five-year period studied from 1998 to 2002. 36