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Calm weather ahead?

Tampa Bay area business leaders sure hope so. Thrilled that 2001 and its economic doldrums are over, most area leaders remain optimistic about the recession ending sometime this year - and sooner rather than later.

By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times
published January 20, 2002


Once you hit bottom, Tampa Bay area business leaders figure, things have to start looking up.

Seventy percent said they expect the economy to do better in 2002 than it did last year -- the most optimistic showing in the St. Petersburg Times' annual Business Outlook survey since 1994. Only 6 percent expect things to get worse.

Of course, it won't take a lot to improve on 2001.

"You won't find many companies that are unhappy that 2001 is over," said Mark Bozek, president of Home Shopping Network in St. Petersburg, and one of 203 participants in the Times' 14th annual survey.

As the recession took hold, Home Shopping fired 120 of its 4,000 employees and pared travel expenses even though it was in the midst of expanding in Europe and Asia. But Bozek said this year is already off to a strong start and Home Shopping employees are back on the road.

"Now we're back to full speed and more," he said last week, just before leaving on a business trip to China and Japan. "Our merchants are in Italy now at a big jewelry show. We had a whole group in Chicago at a housewares show, and we just broadcast live from the consumer electronics show in Las Vegas."

Last year, cost cutting was the rule rather than the exception. Only 19 percent of the Tampa Bay are business leaders said their companies did nothing to trim expenses as the economy slumped. Half cut back or froze new hiring, 42 percent cut travel, 30 percent fired workers and 24 percent froze or reduced pay.

Gray Gordon, vice president of Cargill Fertilizer in Tampa, said a worldwide drop in demand for fertilizer prompted his company to eliminate the jobs of 50 of its 400 Tampa Bay area workers, put off capital improvements and cancel employee social functions, including the traditional holiday party.

"We're happy to see 2002 get here and we're looking ahead," he said. Gordon said he sees hope for a party this year. Fertilizer sales are starting to pick up, although they are still below levels in 1999 and early 2000.

Gordon counts himself among the majority of business leaders who expect the recession to end in the second half of the year. Forty-two percent anticipate a third-quarter pickup, while 9 percent say it's more likely to be the fourth quarter. Another 41 percent were more optimistic, expecting a first-half recovery. Just 7 percent see the recession lingering until 2003.

The business leaders cited numerous reasons for their optimism, including a rebound in consumer confidence, economic data and the comments of experts and the media. But some of the most convincing evidence comes from their own experiences.

"We deal with a broad range of companies across North America, and what we are seeing in those companies is renewed optimism," said James Jarvis, president of Ceridian Benefit Services in St. Petersburg, which handles employee benefits for companies. Last year was a big year for new signups under COBRA, the federal law that allows employees to continue health-care benefits after leaving their jobs.

"The number of elections under COBRA is moderating," Jarvis said. "It's not a big change, but it's starting to trend down."

At the same time, he said there has been an uptick in the number of new employees enrolling in other benefit programs Ceridian administers. That's a sign the companies are hiring again, he said.

As a group, Tampa Bay area business leaders are more optimistic about their own companies' prospects than they were a year ago. Sixty-nine percent said they expect their companies to do better this year and only 5 percent expect them to do worse. They are not as confident about their competitors.

Backing up their optimism, many of the business leaders are planning to expand or make new investments. About half plan to invest more in technology than they did last year. Part of that may be their still-growing interest in the Internet. Fifty-three percent said the Internet is more important to their businesses than it was a year ago. At Home Shopping Network, Bozek said the company's Web site now accounts for 10 percent of its sales.

Forty-two percent said they plan to expand geographically.

The Bealls department store chain will be opening 80 stores this year, chairman and chief executive Robert Beall II said.

"Stores are opening every week, and they're generally performing well," he said. "We feel reasonably good about the spending power of our customers in the lower- to middle-income level."

The department store chain was one of many businesses hurt by September's terrorist attacks. As people canceled vacations, hotels, restaurants and a wide variety of retailers suffered, especially in areas dependent on tourists arriving by air.

The Tampa Bay area, where more tourists arrive by car, has fared better than South Florida and Orlando. For Bealls, the most noticeable impact was in Broward County. However, 25 percent of the Tampa Bay area business leaders said they considered the decline in air travel and tourism the single most pressing problem facing the Tampa Bay area business community, more than any other issue cited.

"It's been a tough four months," said David Metz, executive director of St. Petersburg-Clearwater International Airport, who said traffic is down 15 to 20 percent. But he said the airport is optimistic about its marketing efforts, and said travel hassles may make smaller airports relatively more appealing.

While airline tourism remains soft, Beall said early indications are that the snowbirds are coming as usual. Those winter visitors stay several weeks to several months.

For retailers and some other businesses, the decline in tourism has been offset by continued strength in the housing market.

"Housing developers are continuing to have extremely good business in this part of Florida, which can only bode well for the future," Beall said.

Low interest rates continue to buoy the real estate market and help companies and consumers who are able to refinance mortgages and other debts.

Twenty-eight percent of the business leaders said they refinanced corporate debt to take advantage of lower rates.

"It's millions of dollars to us," said Darryl LeClair, president of Echelon Development, which restructured its debt.

Others took advantage of lower rates to borrow money to make new investments or hire more workers.

Last year, the business leaders proved prescient, with 81 percent predicting interest rates would go down in 2001. As it turned out, the Federal Reserve Board cut short-term interest rates 11 times in an effort to stimulate the economy.

Now most of the business leaders think rates will reverse course but remain relatively low.

While the business leaders as a group are expecting a rebound this year, leaders of small companies were more optimistic than those at large ones. And those in finance, insurance and real estate were more optimistic than those in service and manufacturing companies.

That may be because those in some sectors haven't had any good news for a while.

"Our industry has been in a recession for two years now," said Phillip Casey, president and chief executive of AmeriSteel Corp. in Tampa. "A third of the industry is in Chapter 11 bankruptcy. You can buy steel assets for pennies on the dollar."

AmeriSteel has done some buying, acquiring a steel mill just north of Atlanta. But Casey said even bargain purchases are a risky bet when recovery appears to be a long way off.

"There is no leading element that will trigger a rebound in the economy," he said. "There's wishful thinking, but I don't think there are any fundamental changes."

Even those who are fairly optimistic have some concerns. A third expect the slow economy to be the chief drag on their company's financial performance this year. Others put the decline in tourism and travel at the top of their worry lists, and still others focused on health care costs.

Most of the business leaders say their companies' health care costs will increase at least 10 percent this year, with 29 percent anticipating at least a 20 percent increase. The premiums employees pay for coverage also will go up, but not as dramatically because companies apparently plan to absorb a large share of the increased cost.

Some of the leaders are concerned that the terrorist attacks of September will continue to have an impact on business prospects this year. About a third of the companies said they increased security in response to the attacks, and many are still paying for those costs.

At the Port of Tampa, the tab for increased security will be more than $24-million, said George Williamson, port authority director.

"Security can get extremely costly," he said. "We've got about 30 miles of fencing going in. There will be a badging process and background checks by the FBI on everybody who works at the port. This port is becoming a restricted area like a military base, and we have to do that in a way that doesn't impact commerce."

The business leaders say they also are concerned about broader issues affecting the Tampa Bay region. Near the top of their lists: public education, the need to diversify the employment base by attracting and developing technology businesses, transportation problems and lack of leadership in the business community.

Florida's low rankings compared with other states when it comes to matters such as school spending, and high school graduation rates concerned 70 percent of the business leaders. Gov. Jeb Bush's response that such rankings don't mean much was embraced by 23 percent.

LeClair at Echelon said transportation is his biggest worry, predicting construction projects planned for Interstate 275 will create traffic jams for years to come.

"It's going to be a real mess," he said. "Talk about gridlock."

Stuart Rogel, president of the Tampa Bay Partnership, said the Tampa Bay area still has a long way to go in resolving many of its fundamental problems.

"There's a lot of work to be done to insure we have properly skilled and a substantial supply of workers to meet the needs of businesses," he said. "That's a systemic, endemic problem that might have eased up a little bit in this downturn, but it's still a fundamental issue that we need to continue to work through."

The business leaders will be sharing the wealth if the economy rebounds as they expect. More than three-fourths said they anticipate giving raises this year, most of them more generous than the rate of inflation.

-- Helen Huntley can be reached at huntley@sptimes.com or (727) 893-8230.

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