Economic Outlook 2010
Jeff Charlotte, chairman, Gulf Coast Builders Exchange, and president and CEO, J.E. Charlotte Construction Corporation.
What are the biggest challenges ahead for 2010? We’re got to create more diversity in our workforce. We had become one-dimensional in housing and private commercial development. The key is to sell this place we’re living in and stop resting on our laurels. Create economic incentives to get businesses here. We’ve got to get behind SCOPE’s [proposed] Institute for the Ages and SCOPE’s mission.
The capital markets in our country are frozen because there are no risk protections for the banks to loan money. Before you get to that step, you have to get industry back here to create jobs.
Do you expect a recovery in commercial construction soon? We started experiencing the commercial downturn in 2007 and 2008, and 2009 was a bottoming out. In 2010, I think we’ll start recovering.
What, if any, work is out there for commercial builders? I’m sinking my teeth into medical work. One of my clients, the Center for Sight, continues to grow. There is government work because of the ARRA money (American Recovery and Investment Act). Most of it is road resurfacing and infrastructure. We have a lot of shell structures that aren’t occupied right now because people weren’t leasing; tenant improvements will be a driver. The Sarasota Memorial Hospital expansion, the new tower, will be a big economic engine. Overall, we’ll still be bouncing along. I do think a full recovery will come in 2011.
Allen Carlson, President and CEO,Sun Hydraulics Corporation
What’s the manufacturing outlook for 2010? Cautiously optimistic. Costs for healthcare coverage, insurance, fuel are either the same or higher. There’s an expectation that because of the economy the costs would be going down, but that’s not the case.
Going forward, there’s concern about what’s going to happen with some of the initiatives taking place in Washington, D.C. How much spending is going to take place, and how is it going to be taxed, on the personal side or the business side? Business and the markets don’t respond well to uncertainty.
Are state and county incentives giving Florida’s manufacturers a boost? There’s a view at the state level that any incentive needs to be tied to job creation. Our objective is to create wealth, not jobs. If you create wealth, you create jobs. We should be making investments in equipment and capital—including automation robotics—ways you can lower your costs to compete in a world market. Fifty-five percent of our output at Sun is exported on a worldwide basis. I can’t employ a $15-an-hour laborer and compete with somebody who is employing a $3-an-hour laborer. A lot of people don’t get it. We do create jobs, but they are higher-level jobs, not people who are manually putting parts together.
How big an obstacle is the region’s lack of a skilled manufacturing workforce or lack of affordable industrial land? I’m probably the lone wolf, but I don’t think those are issues. If you think there are not enough skilled workers, put in a training program. Our approach is to look for people who are eager to work and capable of learning. If they’ve got the right attitude, they’ll get where they need to be quickly. There’s plenty of land available, although it’s a little expensive.
Bob Meade, CEO, Doctors Hospital of Sarasota
Healthcare is one of the few growth industries in Sarasota. How is the hospital faring? We’re more up in the air now due to the 45 million people who don’t have insurance. Another dramatic impact is the downturn in construction and the increase in the unemployment rate. At Doctors we’ve seen a 30 percent increase in bad debt and charity from 2006 to 2008, and a 10 percent increase this year over last year.
Are Florida’s hospitals profitable? Most facilities are losing on their cash flow. The key to us is building more [patient] volume; we’re at an occupancy level of 50 percent [the average for the area]. Hospital occupancy rates have been on the decline due to significant advances in medicine, which allow for many procedures that were historically done as inpatient to be performed in an outpatient setting.
Additionally, due to advances in care, we have seen the length of stay of patients decrease markedly.
What’s most concerning for hospitals in Florida is we have so many Medicare patients compared to other states. Seventy-five percent of our patients are Medicare, and Medicare pays 60 percent of what a commercial carrier pays today.
Everyone agrees that we’ve got to get more people covered. At this point hospitals have agreed to accept significant cuts in Medicare. It’s a bit of a tradeoff because Medicare rates are low, but globally we feel it makes more sense.
If we can see more people covered at a reasonable rate and minimal impact to Medicare, it would be the best option for all hospitals and certainly hospitals in Florida.
Other than healthcare reform, what challenges do you face in 2010? Healthcare worker shortages continue. The average nurse is just under 50. The good news is we have local schools providing significant help in filling those positions. We need more primary care physicians in the U.S and locally as well. If I’m in medical school and I’m going to incur significant debt load, I’m more likely to become a specialist. There has to be a way to address that.
Larry Thompson, president, Ringling College of Art and Design
What are the outlook and challenges for higher education in 2010? Right now all the colleges in our area have increased their enrollment. Higher education tends to be countercyclical. As the economy dives, more people tend to go back to school. It doesn’t happen as readily at private colleges like Ringling because we’re more expensive and it’s more of a challenge.
There’s greater demand with fewer resources, especially from the state. The biggest challenge is probably the students who are suffering from the lack of financial aid. Even though there have been some increases, Bright Futures has diminished or been capped off, and the Florida Resident Access Grant that helps private college students has been reduced. The student loan market is in a real state of flux. There’s a proposal for government to take over and do direct lending instead of the banks.
How are you approaching career training for your students in the downturn? At Ringling, we have not seen much of a decrease in any of our recruiters coming. We’ve seen a very slight decrease in job opportunities, but visual arts are still very much in demand. In other fields like business, I would imagine it’s not as robust.
Education to me is all about an investment in the future. There’s a little too much emphasis at times on specific career training. It’s about being able to have the skills to be adaptable as the economy and the job market change.
In many ways, education in the end is about learning how to learn for the rest of your life. College grads today will have eight different careers—not jobs, but careers.
Are local colleges suffering from decreases in their endowments? Most of the colleges here have small endowments. Ours was $20 million at best. One of the advantages of having a small endowment is we were not reliant on endowment income to keep us running. For this year, we hired 16 new faculty and 15 new staff. We’re one of the few places in Sarasota that’s been hiring.
Richard Bradshaw, chairman of the board of directors, Sarasota Convention and Visitors Bureau; and owner/franchisee, Comfort Inn and Days Inn on Clark Road in Sarasota
What’s the outlook for hotel stays in 2010? We’re feeling quietly confident. I don’t speak for the luxury or upscale hotels, but in the mid-market brands, we don’t think 2010 is going to be any worse than 2009.
Three new hotels are opening by the airport, but the airport is showing reduced lift [fewer passengers]. With extra product in the marketplace, the people who are coming to town will just be spread out. Everybody suffers a little bit. When your profit margins are tight, a few rooms can make a difference. [Still] I’m excited there are new hotels because it’s new product replacing the older hotels.
What might impact tourism this next season? If we start drilling for oil off the coast of Sarasota that would frighten people. We haven’t been hit by any hurricanes. We’re not continuing to go into more of a recession, and the town is not becoming derelict. It’s still a very attractive destination. There’s still a tax base to keep up the beaches. We still have Mote and the state parks and cultural attractions, which keeps the town top of mind for certain kinds of travelers.
We’re being very forward looking in producing new demand generators; spring training with the Orioles will be a great draw. The Nathan Benderson Park rowing center will be another. The Institute for the Ages, when the plan is developed, could be a great reason to bring people here.
How are hoteliers getting creative during the downturn? We’ve done more online marketing and packaging.
Third-party travel agents like Travelocity are becoming more important. You need to spend more time working with those companies to make sure you get a reasonable placing. Usually that’s in the form of a discount to the travel agency.
Some people believe that if you reduce room rates, you’ll keep occupancy. Others believe as we do that you need to add value to your hotel room—add breakfast or tickets to a local museum or restaurant. Packaging with attractions is what we do. If you cut your room rates off the bat, you’re not enticing anyone to come to town.
Charlie Brown, CEO, Insignia Bank, and 2009 appointee to the FDIC Advisory Board on Community Banking
What has the advisory board recently recommended to the FDIC? We provide the most up-to-date information from Main Street. Federal regulators may raise capital requirements, and we responded that banks might reach that goal by curtailing credit. As a result of hearing from banking, they do not want to see credit curtailed.
When will small businesses be able to get loans again? It ties back to the capital of the individual institution. We are one of the few banks still lending in this environment. We have double digit capital ratios as a percentage of assets, so we’re well above the “well capitalized” limits of federal regulators. Many banks are not, and so they tend to pull back on their lending. Businesses seeking loans can look at their margin management and control over fixed expenses since sales growth may not be available.
What’s the banking outlook for 2010? I expect there will be some contraction for banking in general, which will make the banks that have a well-capitalized structure even stronger. We’re in for at least a year of continued stabilization in the real estate market. It appears that some pricing is starting to stabilize. I’ve spoken to a builder and a commercial realtor who either posted substantial profits or who took paychecks again for the first time in six months. Banks tend to be lagging indicators in the market. Once you see a turnaround in bank profitability, you’ll know we are back on track.
Dr. Sarah Pappas, president, William G. and Marie Selby Foundation
What are the challenges for Sarasota-Manatee’s nonprofits? Donations and funding are still down from government, from corporations and from individuals. Adding to that, if a nonprofit does have a little reserve, it has invested in some kind of account and even [those investments] decreased. The average foundation lost 25 percent in its endowment; some lost a lot more. It did force some groups to examine their core missions. If they were in need of hiring a new CEO or staff, the talent pool is just incredible.
How are the most innovative nonprofits responding? Many groups are looking at an ASO, an administrative service organization, where an entity offers IT or HR services at a discount if 10 nonprofits will sign up for those services. It’s a new concept in this area, but it’s becoming more popular nationwide.
Many people are renegotiating office leases, audits from accounting firms, insurance, phone bills and so on. Some are toning down on lavish galas. A lot of them are using social networks to communicate better with their donors. That’s definitely a trend. Some nonprofits are asking donors to replenish their endowments.
A lot are soliciting smaller donations from many more people. People are sometimes able to write that check of $25 or $50. They’re using more volunteers, and everyone is reducing their staff, giving no raises or cutting benefits. Some nonprofits that are very small are considering merging with another nonprofit that has a similar mission. Some are able to qualify for federal stimulus dollars; that’s another way they’re looking at nontraditional funding sources.
When do you foresee a recovery? In my anecdotal talking with groups, a lot feel there will be a turnaround in late 2010 and early 2011. The ones that will be the quickest to come back are those that don’t bury their heads in the sand and are quick to adapt and use new technology and new communications.
Jim Shirley, executive director, Sarasota County Arts Council
What are the biggest challenges ahead in 2010 for arts organizations? To continue to identify ways to provide sustainable funding and ensure our programs are delivered. People want to find places for art and culture in their lives. They find it adds value and a semblance of order in a chaotic world. They’re going to find ways to add that if they can.
We’ve heard that some performing arts groups have seen increases in ticket sales during the downturn. It’s a mixed bag. A few organizations that have said ticket sales are up tend to offer a ticket that most people can afford. A lot are focusing hard on their core audiences; people who really like ballet or opera or circus will find a way to go.
How are arts organizations getting creative with their marketing and fund raising? At the Arts Council we’ve developed a task force to look at what other communities have done, such as small surcharges on tickets that could fund programs, grants and district overlays.
Groups are identifying their audiences so the dollars they spend are targeted to the people most apt to support them.
The Arts Council helps to place the tourist tax grants to promote cultural programs throughout the region, and we found that in the 2009 granting period, the organization reported that more than 876,000 participants attended those events. We’re not saying that the tourist tax had all that effect—it was cumulative—but the county is definitely getting return for their investment with those dollars. ■