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Business Outlook 2006

Biggest concerns hit closer to home

Issues foremost on local businesses leaders' minds in 2006 are not global. They're squarely in front of them and threatening their bottom line.

By KRIS HUNDLEY
Published January 23, 2006

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In 2006, concerns of Tampa Bay area business leaders shifted dramatically from global to local, from the political to the pocketbook.

According to the St. Petersburg Times annual survey conducted this month, the biggest issues for the coming year are energy prices, housing costs, interest rates and insurance.

That's a considerable change from a year ago, when local executives cited the war in Iraq and terrorism as top concerns and only a handful even mentioned the price of oil. As global uncertainty becomes the new normalcy, businesses' new priorities should come as no surprise, said Gary Keller, executive vice president of BBF Printing Solutions Inc.

"Energy prices stare you in the face wherever you go," said Keller, whose Largo company's utility bills rose 30 percent last year. "You pay more at the pump, then you come to work and face it as well."

In addition to focusing on more immediate concerns, the nearly 200 area executives surveyed by the Times are a bit less bullish than they were a year ago. While just more than half expect the economy to get better, that figure is down nearly 20 points from a year ago.

Far from predicting a downturn, however, more businesses are predicting the economy will simply match its strong performance in 2005. They expect the same, if not better, from their operations in 2006.

"Fortunately, we're in our fourth year of (revenue) increases," said Bob Conigliaro, vice president of Caspers Group in Tampa, which owns 77 McDonald's restaurants in Florida. "The future looks very bright."

The biggest obstacles to keeping the momentum going, businesses say, are out-of-control energy and housing costs. At BBF Printing, the electric bill keeps rising for label-making machines that run round the clock. Meanwhile, the spike in gas prices led shippers of inbound raw materials and outbound finished products to tack on fuel surcharges of 5 to 6 percent late last year. Though gas prices have come down from their peak in the fall, the surcharges have not been eliminated, Keller said.

"And given growing world demands for oil from China and India, I don't see oil prices coming back down much," he said.

Keller said his company plans to offer bonuses to workers if they reduce waste and improve productivity on the manufacturing line.

"We're hesitant to raise our prices," he said. "But if the pressure is not up by midyear, we may have to look at modest increases."

Pressure of another sort is coming from local housing costs, with the median home sales price in the Tampa Bay area escalating more than 30 percent in 2005. At Transitions Optical in Largo, president Rick Elias said he had two potential management hires turn down offers to move last year after they looked into the local housing market.

"When we started here in 1990, housing prices used to be very reasonable," said Elias, whose company has about 450 employees in mid Pinellas County. "Now it's starting to get prohibitive."

One new hire who accepted Elias' offer - and is having second thoughts - is Nicole McCoy, who was promoted to Transitions' human resource manager six months ago from an affiliate in Huntsville, Ala.

To make the move affordable, McCoy and her family of three downsized from a 3,100-square-foot home in Huntsville to a 1,700-square foot townhome worth about the same amount - $200,000 - in Palm Harbor.

"I couldn't afford anything closer to the plant," said McCoy, who has an hour commute to work. "The bad part is, we had to get rid of our two dogs. My 10-year-old daughter is really mad at me."

Elias said the company may offer relocation or housing allowances to entice managers to the area. Meanwhile, he's glad Transitions' hourly work force has little turnover because Elias doubts factory workers making $15 to $20 an hour could afford a home in Pinellas County.

"If I were coming down here now to build a manufacturing facility with 500 people, I don't know if I could do it," he said. "And that's an issue."

As higher housing costs push workers out of the market, growth management issues stymie the ones who remain.

George Pollack, chief financial officer of Switch and Data in Tampa, is familiar with densely developed metro areas. His company runs Internet co-location facilities in Manhattan, Los Angeles and Boston. Still, the lifelong area resident simmers when he's stuck behind the wheel during the daily commute to his WestShore office from Lithia, southeast of Brandon, a 26-mile trip that can take more than an hour.

"I call it my triple-play to work," he said of the trip, which takes him past reclaimed water line work through the Crosstown Expressway construction and onto packed Interstate 275, which he calls "a disaster."

"The infrastructure has to get ahead of the growth curve," Pollack said. "If not, businesses in the area will be constrained."

One constraint being felt by employers is a shortage of skilled workers in a state with record low unemployment.

The scarcity is felt by Nielsen Media Research's 1,400-person call center in Dunedin and GCA Technology Service, a 14-person tech consulting business in Tampa. As demand for technology workers has rebounded in recent years, James Quasius, GCA's president, said he's turned to new sources like the University of South Florida to lure graduates.

He finds it even harder to recruit talented sales people. "We're looking for local candidates," Quasius said. "And we really struggle."

-- Kris Hundley can be reached at hundley@sptimes.com or 727 892-2996.

More highlights of the Times' Annual Business Outlook:

- Education, identified as Tampa Bay area's most pressing problem last year, fell to fourth place, topped by concerns over growth management, housing costs and recruiting employees.

- Chances of retaining a job or finding a new one are strong, with 98 percent of area businesses saying they will add employees or keep the same size work force.

- Most popular cost-cutting step among local companies remains paring back health plan benefits or increasing co-pays.

- 42 percent of area executives predict increased hurricanes will worsen Florida's insurance crisis.

- 90 percent of area businesses say the property insurance crisis will jeopardize the state's economy.

[Last modified January 23, 2006, 11:42:38]