Tempered optimism
Business leaders expect a robust 2005, but worries over national trends and global events linger.
By ROBERT TRIGAUX
Published January 24, 2005
Business expectations in the Tampa Bay area for 2005 are so positive, so gung-ho, they might even make a market bull blush.
Yet some familiar worries persist, especially about the war in Iraq and the unsettling threat of terrorism. Now some new economic concerns are emerging about the falling U.S. dollar and rising interest rates. And by the way, don't look for much of a raise this year just because the momentum is back in business.
These are some of the key conclusions gleaned from the St. Petersburg Times annual business leaders outlook survey. It was conducted by telephone interviews from Jan. 3 to 14 by Times market researchers. A total of 180 area business executives responded, representing companies with fewer than 10 employees to more than 2,500 workers in Florida. They were asked 26 questions about their expectations this year for their business and industry, the Tampa Bay business market and the general economy.
Bottom line? The survey shows the Tampa Bay area stands delicately poised for the strongest business year since the late 1990s. If the fragile global scene does not splinter. If the Bush administration and Congress can regain control over a sickly U.S. currency and a soaring deficit. And if - in an unexpected and humble bow to Mother Nature - 2005 can unfurl without tsunamis and Florida hurricanes.
Four striking themes can be sifted from the business survey.
First and foremost, more than four out of five of those surveyed expect their business will do better in 2005 than in 2004 - not bad, since last year enjoyed high expectations. That's a powerful endorsement of an economic rebound.
Second, for the first time in the six Times' annual surveys conducted since 2000, a clear majority (62 percent) of business managers said they have seen a "significant" turnaround.
Among the cross section of optimists surveyed are senior bankers like Bank of Tampa's Jerry Divers and Wachovia's Roy McCraw Jr.; area resort managers like Sheraton Sand Key's Jack Guy and Westin Innisbrook Golf Resort's Jim McGlashan; corporate CEOs like Walter Industries' Don DeFosset and Beall's Robert Beall II, and construction/real estate execs like JMC Communities' J. Michael Cheezem and Collier Arnold's Lee Arnold. They and dozens more cited greater demand for their services, an improving stock market, rising consumer confidence and ultra-low area unemployment for their favorable 2005 forecasts.
Third, in assessing recent news events, business execs expressed the most concern over the war in Iraq and the threat of terrorist attacks. The third most cited concerns were the health of the declining U.S. dollar and the continuing rise in interest rates, followed by the large federal deficit, health care costs and - mentioned for the first time - "natural disasters."
Fourth, the sorry state of Florida's public education once again emerged as the single most pressing problem confronting Tampa Bay's business community. Public education has topped the problem list of area businesses cited in Times' surveys in 2004, 2003 and 2001.
The education hurdle bugs businesses in two ways. Area companies must struggle to recruit top employees with families from out of state because Florida's school system has such a poor reputation in the corporate world. Also, area economic developers know that public schools must start producing better educated graduates to help feed a growing metrowide demand for employees with good basic or specialized skills.
Education concerns slipped to No. 2 in 2002 in the aftermath of the Sept. 11 attacks. That's when the sharp downturn elevated concern over "air travel and tourism" to the No. 1 spot. In 2000, in what now seems an age of innocence before the 9/11 attacks, "recruiting new employees" was viewed as the area's most pressing problem, while education was No. 2.
"Fix the public schools" has become a popular cry in Tampa Bay's business community. Literally dozens of corporate campaigns, thousands of volunteer hours and fundraising projects take place each year. They all help, but they remain modest contributors to a severe challenge.
As of 2002, Florida's adjusted spending per student was $6,492 a year, according to a report issued by Education Week, a national education newspaper. That's about $1,200 less than the national average of $7,734.
The result? Florida ranked 47th in the nation in 2002 in per-student spending for public schools. Schools are improving, but no amount of volunteer tutoring by Tampa Bay workers can overcome that kind of funding deficit. Until more substantive resources are committed to the cause, "public education" will likely remain atop the Times business outlook as this area's No. 1 problem.
After education, the survey found "growth management" was the business community's top concern. The issue is multisided. As the Tampa Bay area sprawls further across Pasco, Hernando, Polk and Manatee counties, some businesses are questioning the sustainability of relentless growth.
On the flip side, the business community warns that the pace of Tampa Bay's growth is overwhelming its infrastructure - especially roads and water - and might start to limit the metro area's quest to become a larger but still attractive place to work and live.
In March, the Florida Legislature is expected to address some growth management issues by reducing state-level regulation of development and adding more resources to regional planning councils.
The third most pressing area problem in the latest Times survey was "attracting and developing technology businesses." The topic is not a front-burner matter. But consider this: Nobody in the Times survey in 2000 picked tech recruitment and development as a concern. Also tied at No. 3 was "recruiting new employees."
When asked what factor will have the most drag on business in 2005, 26 percent of those surveyed picked "health care costs." Right behind, at 22 percent, was "government regulations" - a surprising pick, it would seem, with Republican-controlled federal and state governments. Recent laws such as the Sarbanes-Oxley Act, which tightens financial reporting accountability, and other measures that toughen homeland security rules are likely reasons for rising complaints by the business community.
No business survey would be complete without asking area business managers what kind of raises they expect to give in 2005. The median raise will be pretty much in line with what you would expect these days: about 4 percent. The bad news is that inflation is creeping up and might reach 4 percent this year. If that happens, it means the typical raise will only manage to match the rising costs of basic goods and services. In financial lingo, that's called "treading water."
Combined, many of the survey findings are encouraging.
For example, 70 percent of managers said they expect to increase their number of employees this year. That's the highest percentage planning to hire in at least six years. Another 62 percent of managers said they expect their companies' capital expenditures to increase in 2005. Nearly as many managers (60 percent) said they plan to invest more in technology this year over 2004, while 70 percent said they will "improve technology" as the best way to improve productivity.
In another sign of economic strength, 34 percent said they cut costs by reducing health benefits. But that's down from 47 percent who did so in last year's survey.
The 2005 survey also found that 39 percent of managers took no extra steps to cut costs last year. In the 2004 survey, only 23 percent took no cost-cutting action.
So how does the Times survey jive with the reality of this month, when JPMorgan Chase said it will close its Tampa call center and cut 1,900 jobs? That's hardly an auspicious start for a go-go year.
Truth is, one large layoff will not determine the business tone of 2005. Positive signals abound, including Donald Trump's announced plan to add his name to a Tampa high-rise condo that will be the tallest residential building on Florida's Gulf Coast. Or the University of South Florida's decision to create a new campus along Interstate 4 near Lakeland. Or the arrival of high-quality jobs with the relocation of part of New York's Depository Trust & Clearing Corp.
As the Times survey shows, Tampa Bay's business community finally looks ready to rock 'n' roll.
Robert Trigaux can be reached at 727 893-8405 or trigaux@sptimes.com