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Annual business survey

The road ahead

Good talent, wages and higher property insurance rates are driving costs higher.

By JAMES THORNER
Published January 22, 2007

ADVERTISEMENT [AP Photo] Property insurance is a top-of-mind topic heading into a slowing-but-growing 2007 economy.

It was almost lost amid the anxiety over high insurance rates and housing costs, but Tampa Bay area business executives actually dribbled out some good news: They plan to pay their employees more this year and load them with fewer health insurance costs.

If wages and benefits haven't stagnated, you can probably thank record-low unemployment in the Tampa Bay area. In the St. Petersburg Times annual business survey on the 2007 outlook, executives cited "finding skilled workers" as the single biggest drag on their companies' financial performance.

"If you really want to know what's going on in the economy, try to hire somebody," said Neil Savage, chairman of Synovus Bank of Tampa Bay. "With such low unemployment, the remaining people available are under-educated, unmotivated and in some cases undisciplined."

Of course, what's a drag for executives isn't always bad for rank and file.

Of 131 area executives interviewed in the survey earlier this month, 85 percent said wages and salaries would rise faster than inflation this year. Only 5 percent predicted wages would lag inflation.

It's a vast improvement over 2006, when 44 percent of executives predicted pay increases would rise above inflation and 22 percent predicted they would stay below. One caveat: Inflation was lower this year than last, thanks to falling oil prices.

Benefits have also benefited. Executives surveyed said they expect employee health insurance premiums in 2007 to increase by a median (half said they are increasing less; half more) of 4 percent, the slowest rise in at least five years.

High-tech industries, especially those without a deep local talent pool to draw on, are feeling some of the greatest pressure to boost compensation.

"I'm telling you it's not been easy. We have to pay the West Coast salaries to get them to move to Florida, even if the cost of living is lower here," said Prashanth Rajendran, co-founder of Pilgrim Software, which employs about 90 in Tampa.

Premiums = potholes

You couldn't miss another big change on this year's survey: Property insurance hikes replaced gasoline prices as a bigger perceived threat to Tampa Bay's economy.

According to the Times annual business survey, business property insurance premiums increased a median 17 percent, mostly a hangover from the 2004-2005 hurricanes and the rise in property values.

The Legislature began meeting in special session last week to discuss limiting rate increases, but most talk was focused on homeowner, not business, rates.

"People in business are getting 200, 300, 400 and 700 percent increases in their insurance," Savage said.

Indeed, 8 percent of those surveyed who knew their rate of increase said their business property premiums rose 300 percent or more in 2006.

The property insurance squeeze hurts Bright House Networks indirectly, said Kevin Hyman, president of the company's Tampa Bay division.

By raising the cost of living and discouraging migration to Florida, insurance problems wallop Bright House when fewer homes need to be wired for cable, phone and Internet.

"In what we call our greenfield areas, building permits are down. We're definitely seeing some impact," Hyman said.

In the 2007 survey, conducted in early January, fewer area business leaders thought the economy would improve its performance.

But don't read too much into it: A full 55 percent agreed the economy would continue its current moderate growth into 2007.

More than two-thirds of area respondents expected their firms to do better in 2007, slightly down from the 2006 survey.

More than half plan to hire more workers this year.

But executives expect one mainstay of the local economy, housing construction, to drift through the doldrums of the first half of 2007.

Seventy-eight percent predicted a turnaround would have to wait until late 2007 or 2008.

Jerry Shaw of Opus South Corp. seems to have weathered the housing slump better than other developers.

At least Opus got its projects off the ground before demand dried up, including such St. Petersburg condo towers as 400 Beach Drive.

"I would say more of the same for the economy, with probably a few more clouds out there in terms of exposure to world events," Shaw said.

James Thorner can be reached at thorner@sptimes.com or (813) 226-3313.

Tampa Bay's frontrunner 

Looks like the 2008 presidential race is shaping up with a few early favorites from the Tampa Bay area business community. Here are responses from the Times annual business survey to the question: "Who would you like to see run for U.S. President in 2008?"

Rudy Giuliani: 23 percent

John McCain: 22 percent

Barack Obama: 14 percent

Mitt Romney: 10 percent

John Edwards: 8 percent

Newt Gingrich: 8 percent

Hillary Clinton: 6 percent

Bill Richardson: 2 percent

Tom Vilsack: 1 percent

Greatest concerns 

What recent news concerns you as you consider business prospects in 2007?

Property insurance: 45%

Housing costs: 31%

War abroad: 24%

Terrorism: 19%

Increased health insurance costs: 19%

Energy prices: 15% 

Challenges ahead 

Which one of these factors do you expect to have the most drag on your business' financial performance?

Finding employees with right skills: 22%

Property insurance: 18%

Economy: 15%

Government regulations: 10%

Health care costs: 8% 

Housing market

When do you think the Tampa Bay housing market will start to turn around?

Not until 2008: 44%

Second half of 2007: 34%

First half of 2007: 11%

Some other time: 7%

Not sure: 4%

Health care 

What's the median percentage your company's health care costs will rise this year?

2003: 17%

2004: 15%

2005: 15%

2006: 11%

2007: 4% 

Cutting costs

Which of these steps did your business take to cut costs last year?

Reduce health plan benefits or increase co-pays: 34%

Reduce staff travel: 19%

Cut back or freeze new hiring: 18%

Cut back on insurance coverage: 14%

Lay off employees: 14%

Freeze or reduce pay: 7%

Rising payrolls 

By what percentage will your company's wages increase?

Above the rate of inflation: 85%

At the rate of inflation: 2%

Below the rate of inflation: 1%

Freeze pay: 4%

Not sure/no opinion: 8% 

Note: At the time of this study, rate of inflation was 2 percent.

[Last modified January 21, 2007, 09:20:17]