HomeMy WebLinkAboutAgenda EDAB 120805Economic Development Advisory Board
PALM BEACH GARDENS
A Signatue crly
Economic Development Advisory Board Agenda
Thursday: December 8,2005 at 8:30 a.m.
Council Chambers, City Hall
1. Call to Order Kenneth Kahn, Chair
2. Pledge of Allegiance
3. Roll Call Susan Bell, Public Information & Recording Coordinator
4. Approval of Minutes from November IO, 2005
5. Staff Report Dolores Key, Staff Liaison
a. Targeted Expedited Permitting Program - Ordinance 1, 2006
Members
i. PZAB: December 13,2005 - Tuesday @ 6:30 pm
ii. City Council: I" Reading, January 5, 2006 - Thursday @ 7:OO pm
iii. City Council: 2nd Reading, February 2, 2006 -Thursday @ 7:OO pm
b. The Anspach Companies (TEPP Project)
6. Land Development Petitions
a. Gardens Pointe
7. Old Business
a. Evaluation and Appraisal Report (EAR)
8. Establishment of Next Meeting Topic
a. Election of Officers
9. Next Meeting Date
IO. Comments from the Public
1 1. Adjourn
Charles Wu & Brad Wiseman
January 12,2006
Dolores Key, Economic Development and Marketing Director
OLICOM P CORPORATION
Economic Analysis Everyone Understands
Louis Gaeta
Gaeta Development
3555 Northlake Blvd.
Palm Beach Gardens, FL 33403
November 18,2005
Dear Lou:
Thank you for your inquiry regarding the economic impact upon municipal economies of having
a limited or insufficient supply of industrial real estate available in a community. I suspect the
question arose as a result of the tendency of some city governments in your county to change the
zoning of industrial property to either retail or residential.
Overall, the absence of improved, approved industrial real estate will stall economic growth for
an area and eventually cause its decline.
This statement surprises a large number of local government officials and communities leaders.
They have, over the years, been lead to believe a growing retail sector and new home
construction creates a strong local economy. Actually, these are typically the result of a growing
economy, not the cause of it. To better understand this concept, let me describe how a local
economy works and the importance of industrial real estate.'
A local economy, a geographic area in which people live and work, earn and spend, will grow
and decline in direct proportion to the amount of money being imported to the area. After
entering the economy, the money is mixed and churned, going firom business to business, person
to person, until it is eventually consumed and leaves the area.
Certain business activities or industries cause money to enter the economy. These are called
"primary" or "contributory" industries. A primary business is one which sells its goods or
services outside the geographic area of a local economy. Typically, by way of the wages paid to
the workers, money then enters the area and is subsequently mixed and churned until it is
consumed.
' I analyze local and state economies, determine if they are growing or declining, identify what is causing this to
happen, and offer ideas and solutions to improve the situation. Over the last ten years, I have studied the data for
more than 600 local economies, created more than 150 research studies, and have given economic presentations in
30 states.
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.
Manufacturing is the most recognizable contributory industry. While overall employment in this
industry has declined over the last twenty years, still, today, it is the most important primary
industry in eight out of ten local economies in the United States.
Manufacturing is one example of a primary industry. Corporate headquarters, research facilities,
major distribution facilities, and software development all can be contributory. Virtually any
business enterprise can contribute wealth to an area if it meets this simple test: “It sells its goods
or services outside the economy, thus importing money to the area.”
The amount of wealth created depends upon how profitable the company is. Profitability is
determined by costs. Most of the costs to a company are influenced by its geographic location.
Some of these are wage rates, insurance, utilities, transportation access for people and pwducts,
taxes, along with a host of others.
The following are some of the characteristics of primary employers:
0
0
0
0
0
Sell goods and services outside the economy, importing money to the area.
Geographic location influences operating costs, thus profitability.
Since their market is not local, they do not have to be in an area to sell their product.
They will move when it is unprofitable to be located in an area.
They will seek a community which is the most profitable location.
Consumptive industries, such as retail trade, feed upon the wealth being imported. They grow or
decline in size in direct proportion to the amount of money being imported to the area by the
primary industries. They cannot grow any greater than the amount of disposable income present
at a particular time within the economy. The consumptive industries do not add wealth to an
area; they utilize and mnsume the wealth.
Typically, 75% of all the jobs in an area are dependent upon the 25% of the workers employed
by the primary businesses and 95% of the businesses in an area exist because of the wealth
imported by the contributory businesses.
For the consumptive industries to grow, the primary industries must grow.
For a further discussion regarding how a local economy works, please refer to “The Flow of
Money and Its Impact on Local Economies.” I wrote this paper for the National Association of
Industrial and Office Properties (NAIOP).
“Economic Development” is the process which improves the standard of living for the people
who live and work in an area. This is accomplished by increasing the number of primary
industry jobs in an area which pay a wage higher than the area average wage. As a result, more
money is imported to the economy, increasing its size and causing the dependent industries to
grow, and the overall quality of the economy improves.
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As previously mentioned, the geographic location of the contributory business influences its
operating costs. When considering whether to expand in or to locate to an area, a “site seeker”
will measure a plethora of issues to determine if a community is suitable for its purposes. I have
been involved in site selection investigations for which more than 100 economic and community
issues have been considered.
However, of all the issues considered, there is one which is far more important than all the others
combined.
The most important issue relative to the site selection process is having an actual site.
Absent the availability of improved, approved real estate in the community upon which the
company can construct a facility, the area has no chance of improving its economy. -
The issue relative to the availability of industrial real estate cannot be overstated. It is absolutely
essential for economic growth. I have studied hundreds of economies throughout the United
States. I have found one of the most important characteristics of the strongest economies in the
nation is an abundance of improved, approved industrial real estate available for primary
employers.
To be considered by most site selectors, the property needs to be “approved” and “improved.”
Approved means all zoning for the intended use is in place. Improved means all horizontal
infrastructure is to the site. Companies have learned from experience they cannot depend upon
promises fi-om communities the land will be rezoned and improved in a timely manner. The
issue surrounding the current Scripps project is a textbook example of why only “building ready”
sites are considered by most companies.
The Raleigh - Durham, North Carolina economy is one of the strongest in the nation. It has
grown in size and quality at a rapid, consistent rate for more than 30 years. Some site the
presence of three research universities as the cause of the growth. However, across the United
States there are many areas which have research universities but have not had economic growth.
Gainesville, Florida (University of Florida) and College Station, Texas (Texas A & M) are two
examples. What made Raleigh different?
In the late 1960’s and early 197O’s, the leadership in the Raleigh - Durham area recognized in
order to have economic growth; they had to have land available for “primary” businesses. What
must have been an extremely controversial issue at the time, the community created the 7,000-
acre Research Triangle Industrial Park. Upon this land today, there are hundreds of companies
and thousands of people working. Absent this land, the area could not have grown economically.
The Dane County - Madison, Wisconsin economy is also very strong today. However,
throughout the 1970’s and 1980’s, the community was hstrated by the absence of economic
growth, even though the University of Wisconsin was a quality research university. In 1984, the
university and state converted 150 acres of farmland into a research industrial park.
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Assisted by the efforts of Madison Gas and Electric, which paid for the construction of a 50,000
square foot “incubator,” the 150 acres were soon consumed by enterprises being created through
university research. A second 200-acre parcel was converted from “agricultural research” and
that land has since been absorbed by quality, high wage companies. During my last visit to the
area, I was told the community is presently searching for more industrial land in order to
maintain its economic growth. The Madison economy did not grow until land was available for
contributory businesses.
In 2001, the Indian River County Chamber of Commerce, in cooperation with the County
Commission, employed me to evaluate their economy and make recommendations. The study
showed the economy had been growing rapidly as a result of population growth, principally
retirement age individuals. It also showed the quality of the economy was on rapid decline with
the average wage for the county being one of the lowest in the nation. To cure this problEm, the
community agreed it needed to recruit new, high wage primary employers to the area.
There had not been a new contributory business move to the county for many years. Through
further research, the reason became obvious. Aside fiom some scattered one-acre industrial
parcels in an old industrial area and one 25-acre parcel, the county had virtually no improved,
approved industrial real estate.
As a result, the Indian River County Commission partnered with a private landowner to create
150 acres suitable for industrial use. Within a couple months, CVS Pharmacy purchased 50
acres. It is presently constructing a 400,000 square foot distribution center, which will employ
hundreds of workers at a wage of about 140% of the area average. The Chamber has informed
me, after completion, it will become the fourth highest single tax payer in the county.
Pinellas County, Florida, fiom 1985 to 2000, created more high wage, primary industry jobs than
virtually any county in the state. They included manufacturing, research, financial and insurance
services, and corporate headquarters. Manufacturing is the biggest economic contributor to the
economy. The county has more people employed in medical equipment manufacturing than any
other Florida county.
However, the area has a problem. In 2001, Pinellas County employed me to study the following
question: Khat is the Economic Impact of Reaching Physical Build-Out upon the Pinellas
County economy?
“Build-out” related to not having available “Greenfield” industrial property which could be used
by primary industries.
The study concluded the Pinellas County economy would begin to decline in quality and size
beginning circa 2008 after the county runs out of Greenfield industrial land in 2006.
The decline will be caused by a reduction in the number of people employed by the primary
industries. Since little land will be available, existing primary employers will not be able to
expand within the county and have to move outside the county to construct new facilities. New
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companies will not be able to locate’to the area, as land will not be available to construct a
facility. A copy of this study is attached.
While my study predicted economic decline beginning in 2008, there is evidence it has started.
Companies have already begun to move out of the county, as they cannot find locations to
construct new facilities. I am personally aware of two high wage primary employers in the
county, combined, employing more than 1,000 people, which have been considering a move to
another area because they cannot find a suitable site for their expansions.
As a result of this study, Pinellas County commissioned several consultants including myself to
create an “Economic Development Re-Development Plan” which was recently completed.
The purpose of the Economic Development Re-Development Plan is to establish a fiameiiirork
which will cause the redevelopment of specific areas of the county resulting in economic growth.
One of the most important features of the plan is to create, through redevelopment, several
thousand additional acres of industrial land to provide employment centers for existing
primary employers to expand upon and new employers to locate to.
The utilization of real estate within an area will determine the condition of its economy and the
standard of living for the people. Let me provide one more example by comparing two Florida
Counties.
In 1985 each county in the state was required to create a “comprehensive plan” to comply with
the Florida’s Growth Management Act. The purpose of the plan was to manage hture
population growth. The elements of each county’s plan were created locally and reflected the
attitude of the area toward “growth.”
The leaders of Seminole County looked upon the horizon and quickly determined the county
would rapidly grow in population, as was the case for virtually every Florida County. They
asked themselves the question: Do we want to become a retirement county like Lake or a tourism
county like Osceola? They chose neither.
Knowing they were going to grow in population, they established a policy to grow as much as
possible “economically” though the growth of industry. This would provide a high standard of
living for their existing and future residents and a sufficient volume of money for the economy to
pay for the services desired by the people. Within the land use plan, they identified more than
4,000 acres for future industrial use.
Over the last fifteen years, Seminole County has had the best growth in both size and quality of
any county in the state.
In developing its comprehensive plan, Martin County chose a different path. Looking upon the
horizon and seeing the county would grow rapidly in population, it chose to create a plan which
would hinder, stall, and as much as possible, prevent population growth. It created laborious and
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expensive development regulations designed to preserve the county‘s character and the
environment.
Very little usable industrial property was included in the plan. The reason for this was explained
to me by a former Chair of the Martin County Commission when she said: “If businesses move
here, they will cause growth. We don’t want growth, so we don’t want businesses to move
here.”
Since the Martin plan has been enacted, I am not aware of any primary business which has
located to Martin County. Additionally, virtually every high wage primary employer has either
downsized or has left the county entirely.
Virtually 20 years have passed and we are now able to see the results of these two confliEting
plans.
The following are a series of graphs which contained “factored” data. Factoring is simply
multiplying growth percentages by the same common number. By doing this, I can compare
visually, apples to apples, the relative growth of all economies.
This first graph shows the relative growth in
population for Seminole and Martin Counties
fiom 1974 through 2003. The rate of growth
for both areas is much faster than a vast
majority of the economies in the nation. Note
the lines are virtually the same.
The Seminole comprehensive plan “embraced‘,
growth while the Martin plan was designed to
stop growth. This points out a very important
issue. I have yet to find a comprehensive plan
which is designed to stop population growth
which has actually done so.
Population Factored
2400
2200
2000
1800
1600
1400
3000
2800
2600
1200
1000
74 78 82 83 00 04 08 02
3-8mmlnd- 6Yalcm
However, plans to prevent population growth are usually successful in only stopping economic
growth.
Growth in the size of an economy is measured in several ways. The following graph is one
method. It shows the inflation adjusted worker earnings for each county. Total worker earnings,
which includes all wages and salaries and the profits of proprietors, are adjusted to the value of
the 2003 dollar, the percentage increase determined, and then factored.
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Even though Martin County grew in
population at the same rate as Seminole, the
economy has not. In fact, on two occasions
the Martin County economy flat lined and
had little or no growth, after the
comprehensive plan was enacted.
CPI Earnings Factored
1974-2003 ,&* 'Ooo 6000 1 P
From 1974 to 1985, Martin County grew in
size at a brisk rate. However, beginning in
1985, the county has had very little growth.
The volume of money in the economy did
not increase after adjusting for inflation.
The volume of money in the Seminole
4000 -
3000 -
2000 -
economy has increased for virtually every year since 1974. This economy has grown in size at a
rate comparative to the strongest economies in the nation.
While the growth in size of each of these areas has been different, the growth in "quality" has
been extreme. The quality of an economy is determined by what people earn. Wages paid
determine the standard of living for the residents of an area.
The graph to the right shows the relative
growth in quality of the two counties based
upon the inflation factored average wage
for each area. Seminole County has
improved in quality since 1993, at a rate
comparative to the strongest areas in the
nation. This is the result of the formation of
thousands of high wage primary industry
jobs.
Martin County, however, has declined in
quality for virtually every year since 1986.
This is the result of the loss of high wage
1200
1150
1100
1050
1000
060
900
850
800
CPi Factored Wages
1973-2002 *4
I1
4 18 u M w 01 98 02
primary employers and the creation of a large number of low wage service and retail jobs. The
overall quality of the economy has diluted to the point the average wage in Martin County is in
the lower ten percent of the metropolitan areas in the nation. In 1986, the average wage in
Martin was 94% of the national average. But by 2003, it had fallen to 75% of the national
average wage.
Seminole and Martin are two contrasting economies. The economic growth for each is directly
related to the availability of industrial real estate and the desire for economic growth.
This now brings us back to the issue of rezoning industrial property for other uses.
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Maintaining an inventory of industrial zoned property in a community is difficult in Florida.
There is constant pressure on local government to have industrial zoned property changed to
either retail or residential use. By doing this, government officials forget there is an inverse ratio
between the economic value of real estate for the owner and the economic benefit to the
community relative to zoning.
The greatest economic benefit to the owner of property is to have it zoned either for retail use or
high density residential. Under these categories, the owner gets the highest price and a fast build
out or sale. However, these uses have little economic benefit to the community, as retail
consumes wealth and residential consumes services.
Sellout for industrial property can take many years and the price received per acre is usually
much less after development expenses and interest cany during the long “hold.” But, as%e have
learned, it is the greatest economic contributor to the economy and consumes little, if any,
services provided by government.
Owners of industrial property who desire to have it rezoned to retail typically present an
argument before local government officials the new use will provide increased economic benefit
to the area. This is rarely the case for retail trade, as new wealth is not created by this industry.
The money for the payroll for the employees and the purchases made by residents is already in
the economy and it is actually being directed out of the area by the consumptive activity of retail
sales. Creating new retail jobs do not cause an economy to grow; new retail jobs are the result of
economic growth.
One motivation by municipal government to change zoning is the potential for increased tax
revenue to fund the government. This unfortunately is short sighted.
As a result of a change to residential use, there is a flurry of new property tax money entering the
city’s coffers. However, as a result of the cap on increased valuation in Florida, after the build
out of the residential units, revenue to the city does not grow much greater than inflation. (This
cap does not apply to industrial property.) The cost of serving the new housing units however
grows every year at a rate much greater than inflation as the desire by the residents for more and
better services seems to be insatiable.
Cities are also enticed by sales tax revenue and many times favor retail use over all others,
especially industrial, as a result. History has shown this is a failed policy.
In the early 19807s, the state of California placed a cap on all property tax increases. As a result,
municipalities vigorously attempted to find other sources of revenue. Hundreds of “economic
development” offices were created at the city level. However, the directed activity of these
offices was not to recruit new primary employers, but to recruit retailers for the sole purpose of
increasing sales tax revenue to the city. Municipalities offered lucrative incentives to retailers to
locate within the corporate boundary. It was not uncommon for one city to lure an automobile
dealership “across the street’’ fiom one city into another.
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However, California’s economy has seen very little economic growth over the last seven years
and as a result, little growth in retailing. It has become excruciatingly difficult for cities to
increase the retail sector of their economies.
Beginning about five years ago, some California communities came to the startling realization
that in order to increase retail, they had to increase the size of the economy, the volume of
money. They have shifted the focus of the economic development program toward recruiting
primary employers.
But these cities have a real problem. They have little if any industrial property available upon
which the primary employers can locate. The cause of the shortage many times is the result of
rezoning in the past. -.
On November 9~ of this year, the City of Redondo Beach (just south of the Los Angeles airport)
asked me to give them a presentation on how the city can improve its economy. The city’s
ability to create new retail is severely limited as the volume of money in the economy has not
grown for several years. Most new primary employers have located in cities to the east which
still have Greenfield industrial land. The task for this city is to redevelop existing land and
designate it for employment centers for primary employers.
It will be very difficult for them to do. Changing residential, retail, or commercial property to
industrial usage is usually vigorously fought by residents in the community.
This brings up the next problem regarding changing industrial zoning. Once industrial property
is gone, it rarely comes back.
A community begins with a land use plan which provides for industrial zoning. Over time, this
acreage is chipped away. When a community discovers they have to have the wealth producers,
they have no land for them to use. Any attempt to create new industrial zoning is fought by
every residential and environment organization in the area. As a result, no changes are made.
The task for community leaders is to resist as much as possible the change fiom wealth creating
zoning to wealth consuming zoning. For, once a community does not have sufficient land for
primary employers, its economy will decline.
Finally, this brings us to the issue of a “municipal economy.” All of the previous discussion
regarding a local economy refers to geographic area in which people live and work, earn and
spend. Money flows into the area via the primary industries, is mixed and churned, and then is
consumed. The economic activity is for the most part “contained” within the area.
Typically, the geographic boundaries of a city are not large enough to have containment. Money
and people crisscross the limits of a city. Typically, a city is part of a contained economy.
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’ ..
Some government leaders advocate their city should be the place in which people live and spend,
having them work in another location. This policy goes to the concept people spend the money
they earn mainly where they live. For the most part, this is correct. Unfortunately, this places
the city dependent upon other areas for their economy and the economic benefit to the city is
diminished.
A contained economy is typically a geographic area within a sixty-minute commute or drive time
fiom the location of a primary employer. The geographic location of the primary employer is the
entry point of the wealth. The money is subsequently dispersed throughout the economy via
commuting patterns.
However, the distribution of the wealth is not spread evenly throughout the economy.
Approximately 65% of all the wealth remains within a twenty-minute drive of the point of entry.
A full 85% of the imported money remains within a thirty-minute drive of the point of entry.
This is regardless of where the people live. The further people commute, the greater the
tendency to spend where they work, not where they live. There is a “bread trail” of spending
between the point of entry of wealth and the place of residence. The closer the residence is to the
point of entry, the greater the economic benefit to a community.
As a result, cities which have the primary employers located within their corporate boundaries
have the best chance for quality economic growth. By being the point of entry, the community is
not dependent upon another area for its wealth and can capture the greatest amount of spending.
Cities which choose to be “bedroom” economies are typically left with the “crumbs” and have a
difficult time supporting municipal services.
I hope this extended narrative provides you with the information you need.
If you have any questions, please call.
Sincerely,
William H. Fruth
President
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National Association of
Industrial and Okce Properties -- --
’ The Forum for Commercial Rea/ Estate
In a continuing effort to develop new resources that office and industrial
development professionals can use to shape the business landscape of the new
millennium, NAIOP offers this publication on the primary influences to productive
community growth.
William H. Fruth impressed participants at the NAIOP Chapter Leadership &
Legislative Retreat with his cogent analysis of local economies. In this publication,
he shows that not all jobs stimulate the local economy and not all population growth
leads to prosperity. Fruth defines the kind of industry a community must attract in
order to increase both the quantity and quality of money that flows into the local
economy.
I
One of the goals of Smart Growth should be to have a thriving community in which
all citizens benefit. We hope that this fresh outlook on growth will be a valuable tool
for not only NAIOP Chapters and members, but also for interested businesses,
government bodies and citizens who want to live and work in vibrant and financially
secure communities.
For additional information on Smart Growth, check the NAIOP home page at
www.naiop.org under Government Affairs: Smart Growth Resources.
James M. “Marty” Irving
Chairman of the Board
Thomas J. Bisacquino
President
The Flow of Money and
Its Impact on Local Economies
c
Prepared for the
National Association of Industrial
and Office Properties
William H. Fruth
President
POLICOM Corporation
3
Summary
ommunity and government leaders across C the nation have come to realize their
actions can change, alter and direct the
condition of their local economy. The economic
quality of life of the residents and the success of
businesses many times are directly affected by
the policies and leadership of those who have
the influence and power to create a climate
conducive to economic growth.
A local economy is a geographic area where
people live and work, earn and spend. Local
economies can be measured for their
consistency, growth in size and growth in
quality. All of these are influenced by the
"quantity and quality" of the money flowing into
the area by the activity of the "primary" or
contributory industries in the area.
The primary industries are those that import
money into the local economy. Typically, they
are the businesses that sell goods or services
outside the local economy. This imports money
to the local area. After the money is imported, it
enters the area's "bucket of wealth" where it is
churned and mixed, going from person to
person, business to business, after which it is
consumed and leaves the local economy.
A vast majority of the businesses and a
preponderance of all jobs in an area are
dependent upon the success and growth of a
small number of businesses that contribute or
import the wealth to the local economy.
Communities that desire to improve their local
economies have created economic development
organizations. The economic development
organizations implement three basic programs:
1) existing industry program designed to retain
and cause the expansion of existing primary
employers in the area, 2) recruitment program
to attract new companies to the area and 3)
start-up program which encourages the
formation of new contributory businesses from
within the area.
While there are certain minimum location
requirements for each company, whether
expanding or relocating, in today's competitive
world market, the most important criteria for
choosing a community is profitability.
In choosing a location a company considers
three important things which affect profitability:
1) costs (initial setup and long term operating),
2) the time necessary to establish the operation
and 3) community attitude.
I
For a community to be competitive in economic
development, either causing existing companies
to expand or recruiting new companies to the
area, the following are the most important
elements:
A Existing buildings.
A Approved and improved industrial property
A Tax structure that recognizes the importance
for either office or manufacturing use.
of contributory businesses and does not
disproportionately place the burden of
revenue generation on the productive sector.
A A history of cooperative attitude within the
community, which fosters cost maintenance
or cost reduction for the company.
It is a characteristic of strong economies to grow
in population, but not all areas that grow in
population have strong economies. The weakest
economies usually decline in population.
Typically efforts to force a reduction in
population growth will cause a decline in the
local economy.
4
*-
Introduction
ommunity and government leaders across C the nation have come to realize their
actions can change, alter and direct the
condition of their local economy. The economic
quality of life of the residents and the success of
businesses many times are directly affected by
the policies and leadership of those who have
the influence and power to create a climate
conducive to economic growth.
In areas with strong economies, local
governments do not struggle to provide
essential services and are usually able to
provide expanded programs benefiting all that
reside in the area. In such areas, schools are
strong, streets safe and clean, park and
recreation programs are abundant and the need
to provide social-welfare programs for
impoverished citizens is reduced.
Citizens living in an area with a strong economy
enjoy consistent employment, regular wage
gains, opportunities for personal advancement
and are able to reliably save and invest in their
future.
Businesses are able to plan for consistent
expansion, hire full-time employees for the long
term and are willing to risk significant capital,
investing in their operations.
Communities grow closer, tight-knit, as young
men and women, after completing high school
or college, remain in the area as growing
employment opportunities in their “hometown”
capture their interest.
Unfortunately, in areas with weak or declining
economies, the opposite occurs. Local
governments struggle to fund essential
programs with budgets under growing pressure
to assist the impoverished. Residents have
uncertain futures, personal anxieties, limited
employment opportunities and subsistence level
5
jobs. Businesses employ part-time workers and
are unwilling to risk significant capital because
of an uncertain future. Young men and women
must move from the area to seek employment,
which is not available in their hometown.
Even though local community leaders cannot
control the actions or policies of the federal or
state government, they can establish policies
and create local programs that assist and foster
economic growth.
Nationally, there are more than 6,000 economic
development organizations, chambers of
commerce, and local, regional and state
government offices working in some fashion to
improve the economy of their respective areas.
Never in history has there been such an effort.
Some organizations have large budgets, better
community cooperation and a stronger
commitment from local government than others
do. These areas have the best chance to either
maintain or improve the economic quality of life
for their citizens.
Some areas, however, provide just “casual
attention” to economic development programs.
They do not fully understand the need to have a
constant, aggressive economic development
program just to maintain the existing condition.
In these areas, typically, the local economy is in
decline.
To assist community leaders in the decision-
making process regarding actions that affect
their local economy, the following study
discusses how a local economy works, what
causes its growth or decline, and some of the
characteristics of strong and weak economies.
What is a local
economy?
or a discussion regarding the condition and F influences on a local economy, it is
important to understand what, indeed, is a
“local economy.”
For the purposes of this paper, a local economy
is the geographic area in which a
preponderance of the people both lives and
works. This area would also be the place in
which the people both earn and spend, thus
measuring the trail of the flow of money. This is
the principal test of the Office of Management
and Budget in defining “metropolitan areas” in
the United States.
There are 316 defined metropolitan areas in the
United States. They include approximately 80
percent of the nation’s population. In order to
become a metropolitan area, the area needs to
have certain levels of population and economic
activity to be considered. However, the actual
geographic definition is based upon commuting
patterns, which identify where people live and
work, earn and spend.
A metropolitan area cannot be less than one
county. Oftentimes, a metropolitan area is
composed of multiple counties, sometimes lying
in more than one state. When a metropolitan
area is composed of more than one county, the
Office of Management and Budget has
determined that the counties are linked
economically as a result of commuting patterns.
In multiple county metropolitan areas, one
county might serve as the place of employment
while others (suburbia) are the location of
residence. Typically, people spend where they
live. To measure the economy, the data of all
counties must be considered.
Additionally, it is important to understand from
what perspective the condition of a local
economy is viewed. For various business
enterprises, the criteria vary for measuring the
condition of a specific area of the nation. A
major financial institution, when evaluating
future markets, might only consider population
growth (more people, more depositors). A major
healthcare provider might look for areas with a
high aging population. A company that sells its
products to people in lower income levels would
look to areas that create low-wage jobs. For
each of these, the economic opportunity is
determined by different criteria.
POLICOM measures the “economic strength or
condition of a local economy from the
perspective of how the economy affects the
people living and working in the arga. It
measures the “economic quality of life” and how
it has improved or declined.
POLICOM Corporation annually measures and
ranks the “Economic Strength” of the 3 16
metropolitan areas for the purpose of studying
the characteristics of strong and weak
economies. Economic strength is a combination
of the rate of growth, the quality of growth and
the consistency of the growth.
To determine the economic strength for the
metropolitan areas, 25 years of data are
examined. The average annual growth rate and
the average annual deviation are calculated for
18 different categories in the economy €or two
different time periods. The categories and
industrial sectors used in the analysis reflect
how an economy is behaving, not what is
causing it to behave.
The 1999 economic strength ranking includes
two time periods: the 15-year term from 1973
through 1987 and the 10-year term from 1988
through 1997 (the most current data available
at this time). The data for the last 10 years are
counted twice to give double emphasis to the
most recent activity while still considering the
historical trend in each of the economies.
The following are the 10 strongest and 10
weakest metropolitan area economies:
6
POLICOM Corporation has created rankings for
the metropolitan areas for each of the last five
years based upon the previous 25 years of data.
The rankings for all years for all 316
metropolitan areas, along with the geographic
definitions for the metropolitan areas, state
maps, and explanations of the methodology
used are posted on its web site:
www.policom.com.
How a local economy works
local economy is the geographic location A where people live and work, earn and
spend. Money flows into the area, is circulated
and leaves the area.
To understand the dynamics which occur,
imagine that all of the wealth of an area is
contained in a bucket. It swirls around and
around, like being churned with a mixer. It goes
from person to person, business to business,
person to business, and is constantly moving.
One person purchases a house and the realtor
makes a deposit at the bank. The banker
makes a loan to another who buys an
automobile. The car salesperson buys a new
shirt. The storeowner pays a Life insurance
premium. The insurance agent pays school
taxes. The teacher pays the water bill. The
money moves on and on and on. Money is like
a hive of bees following the path of a three-
dimensional spider web, moving around and
around as it circulates throughout the
economy.
But, there is a hole in the bucket and all the
wealth of the community is leaking out.
Every time someone purchases an automobile, a
good share of the purchase price is returned to
Detroit, or Nashville, or Tokyo, wherever the car
was made. Every time someone purchases a
shirt, buys a pair of shoes, makes their life
insurance payment, goes on vacation, pays their
income taxes, money leaves the community and
goes to the area in which the product was made
or the service performed.
Money is continuously leaving the community
through the hole in the bucket. The outward
flow is constant, pervasive, and ongoing. There
is nothing that can be done to stop it, no matter
how small the hole. Like a bucket with a hole in
the bottom filled with water, all the water will
eventually drain out, leaving the bucket empty,
or the local economy drained of its wealth.
So what can be done? A community needs to
add money to the bucket, replenishing its
supply. A faucet at the top of the bucket needs
to be turned on, filling the bucket with fresh,
rejuvenating wealth, which enables the
churning process to continue. Since money is
continuously being drained or exported from the
local area, it also needs to be imported for the
economy to continue.
Money4s imported to an area principally by the
business activity of the “primary” or
contributory industries located within the
7
economy. A primary industry is one that sells
its goods or services outside the geography of
the local economy, importing money to the local
area.
When an automobile is purchased in one area,
the community where the car was assembled
imports money from the purchasing
community. In turn, the communities that
manufactured the tires, fenders, headlights,
seat cushions and all of the other components
of the automobile import a portion of the
purchase price to their respective areas,
replenishing their supply of money, filling their
bucket.
When a local manufacturer sells its product to a
buyer in another community or state, money
flows into the home community. When a farmer
sells grain, money flows into the home
community. When an engineer designs a bridge
for another city, money flows into the home
community. When the primary industry is paid
for its goods or services, the workers it employs
are paid, and the wealth enters the local
economy, which is then mixed and churned,
and eventually consumed. The imported money
also enters the bucket of wealth when it is used
to pay local suppliers, rent, utilities and other
expenses of the primary business.
The churning process of the wealth in the
bucket generates most of the jobs for the
residents within a community as goods and
services are consumed. For the most part, a
business enterprise either contributes or
consumes. If the business is not dependent
upon the local marketplace, it likely is “primary”
in nature. If it is dependent upon the local
market, it is consumptive and can only exist if
money flows into the local area. Some
businesses are a combination of both: some of
their market is local, some outside. The
amount of the sales outside the economy is the
contributory portion of the business.
To have a clearer understanding of what
happens in the bucket, do what “Deep Throat”
told reporter Bob Woodward during the
Watergate era: “Follow the money.” Goods are
sold or services performed outside the area, the
employees received their paycheck, they pay
their bills and purchase goods, the businesses
which received the payments or sell the goods
pay their workers, who then pay their bills and
buy goods, so on and so.... until the money
leaves the area.
The economic quality of life for individuals living
in an area is dependent upon the amount and
rate of money flowing into the community’s
bucket of wealth. Areas which are sble to
replenish the wealth as fast as it is leaking out
will have a stable economy. The people living
there will have a consistent economic quality of
life. Communities that replenish the money
faster than it is leaking out the bottom of the
bucket will enjoy economic growth. The
residents will, in turn, enjoy an improved
economic quality of life. Unfortunately, areas
that are not able to import as much wealth as
they are exporting will decline economically.
Over a period of years, the community and its
residents will gradually grow poorer and poorer.
Which industries contribute, which consume?
nce again, a primary industry or business 0 is one that sells its goods or services
outside the local economy. Based upon the
Bureau of Labor industrial classification
system, many of these industries can be
identified. Based upon traditional
measurements, farming, mining,
manufacturing, transportation and wholesaling
are the main primary industries in a
community.
Unless the crops are sold locally, virtually all of
the components of the farming industry are
contributory. The extraction of materials
(metals, coal, petroleum) from beneath the
earth’s surface and selling the materials outside
the economy imports wealth. In nine out of 10
8
local economies, manufacturing is still the most
important contributory industry. The
transportation, trucking and distribution
industry adds value to these products and
imports money to the local area. Wholesaling,
when not serving the local market, additionally
is part of the wealth generating process.
The Finance, Insurance and Real Estate (FIRE)
sector is one of the principal mixers in the
economy as it moves money around. It is a
dependent industry but does not consume as
much wealth as other industries.
For the most part, federal and state governments
are consumptive industries as they extract more
money by way of taxation than they return.
However, in communities with a high number of
federal or state workers, this industry becomes
contributory. State capitals import state tax
money which is paid to state workers locally,
contributing to the local economy. Areas that
have federal government facilities, such as an IRS
processing center, a Department of Energy
research laboratory or a military base, import
much more money than they export.
For the most part, retail, services and
construction are consumptive industries and
represent the biggest “hole in the bucket.” Each
of these is almost solely dependent upon
existing money and the flow of new money into
the local economy.
Retail is the most consumptive. That is why
when we purchase something we are called
“consumers.” There is nothing wrong with
having retail in the economy. We work hard so
we can purchase things. But the act of
purchasing drains wealth from the area. Retail
is absolutely dependent upon the condition of
the local economy. It cannot grow any greater
than the amount of disposable income within
the economy. It will decline if the flow of money
into an area is reduced. It does not create
wealth but absorbs wealth. A vibrant, dynamic
retail sector is not the cause of a strong local
economy, but the result of it.
The service industry also is dependent upon the
condition of the local economy. The market for
most service-related businesses, whether they
do accounting, landscape maintenance,
computer repair or shopkeeping, is inherently
local. As each service is performed, some of the
wealth leaves the economy. Services, however,
are not as consumptive as retail since the
principal cost of a service is labor and not a
product .
Construction is, on a local basis, a dependent,
consumptive industry. There is residual value
with construction, but since local economies are
based upon cash flow, this industry causes
money to flow from the area. Let us follow the
money to see how this occurs.
Suppose an individual wants to build a new
house and has $100,000 in the bank pay for it.
We start with local money. If this money is not
present in the economy, the house is not built.
Only between 25 percent and 35 percent of the
cost of a new home is labor that is paid to local
workers. The balance of the cost is for
materials such as lumber, nails, carpet, tile,
lighting fuctures, toilets, sinks, draperies and
more. When these materials are purchased, the
money flows from the local economy and is sent
to the area in which the materials were
manufactured. After the home is built, only
about $35,000 (labor portion) remain in the
local area and $65,000 are consumed.
The above generalizes the industrial function of
each industry as to whether it consumes or
contributes. There are exceptions in each
industry. A farmer who grows vegetables just
for the farmer’s roadside stand is a dependent
business. A manufacturer who makes a
product that is sold only in the local market is a
dependent business. The local rock quarry
that sells its stone for local construction is a
dependent business.
The headquarters of a regional bank that
processes loans and payments for a multi-
county or statewide area is a contributory
9
business. An engineering firm that designs
bridges across the nation, while classified as a
service industry, is a primary business. When
someone moves to the area and brings with
them $100,000 for the construction of a house,
the construction industry is the first recipient of
the new money added to the economy.
(Construction is still dependent and did not
cause the wealth to be generated in this case. It
is the beneficiary of the in-migration.)
So once again, to determine if a certain
business contributes or consumes, determine
from where the money comes to pay the workers
at the business. If it comes from the sale of
goods or services outside the area, it
contributes.
A local economy can have sources of money
other than the business activity of the primary
industries. In some local economies, these
sources exceed business activity in their
contribution.
The first is “government transfers.” Also known
as government entitlement programs,
government transfers include direct payments
to individuals or vendors for the various
government programs. These principally
include Social Security and government
retirement, medical transfers for the Medicare
and Medicaid programs. income maintenance
(welfare), veterans’ benefits and unemployment
compensation.
In a vast majority of the local economies in the
United States, there is more money extracted by
way of taxation than returned to the local area
via transfers. However, in areas with a high
percentage of the population in retirement
(Social Security and Medicare) or in extremely
distressed areas (Medicaid and welfare),
government transfers can be the most
important contributor in the economy.
The second additional source is the passive
income or private retirement programs for the
people living in the area. In addition to Social
Security, most retirees have some type of
pension or savings on which they draw for their
living expenses. Most private pension money is
imported to the local area and enters the bucket
of wealth. Local savings are “existing” wealth
and are not additive to the local economy.
These savings are likely loaned by the bank and
already in circulation. When they are withdrawn
by the retiree, the amount of available loaned
capital is reduced. Additionally, individuals who
have private investments, either in stocks,
rentals or savings, earn income. If the invest-
ments are located outside the local area, the
money (rents, dividends, interest) are imported
to the local economy. The impact of this passive
income depends on the amount that is spent or
circulated locally. If it is reinvested outside the
local area, it has no impact.
Aside from retirement-based economies and
distressed areas, the activity of the primary
businesses is the most important contributor
for a vast majority of the local economies.
The actual number of business enterprises that
contribute is usually a small percentage of the
total in an area. A community can have five
large contributory businesses (factories,
corporate headquarters or other businesses)
which employ a total of 5,000 people. These
jobs can easily be responsible for the formation
of 12,500 other jobs in the economy.
Most dependent industry businesses are small
employers. Aside from government and the
utility companies in the area, the typical
business employs fewer than 10 people and
many are sole proprietors. The 12.500 workers
could easily be employed or self-employed by as
many as 500 separate business enterprises.
Just scan through the yellow pages of your
telephone book and you can see just how many
there are in your community. Looking at the
yellow pages, a local marketing tool, will also
give you an idea of the number and type of
dependent industries in your area.
10
Consistency, quantity
and quality. . .of the
flow of money
he economic strength and economic quality T of life for the residents of a local area
depend on the consistency, quantity and quality
of the money flowing into the local bucket of
wealth.
Consistency of growth
“Consistency” is the dependability and
regularity of the money entering the economy.
If you ever irrigated crops in the field using a
gasoline powered pump drawing water from a
pond, you understand consistency of flow.
Sometimes air will enter the pump causing it to
lose its prime momentarily. The flow of water
will become erratic. It will gush, stop, and gush
again until the pump is properly primed. It
might take some time before the pump is
causing a smooth flow of water. Sometimes, it
will never adjust properly, causing a repeated,
ongoing gushing and stopping of water.
Eventually, the volume of water reaches the
desired level, but the means by which it was
achieved is undesirable.
The rate of the flow of money into a community is
similar. If the money is flowing smoothly as a
result of constant pressure, the churning activity
is smooth and consistent. Businesses and
residents can count on certain things happenlng
and, therefore, can plan their kancial future in a
better manner. When the flow is disrupted,
slowed or stopped for a while, there is an
immediate change in the churning process. With
less money available for circulation, some
businesses have to lay off workers and some
families postpone purchases, until the next gush
of money enters the economy.
Areas with unstable, boom and bust economies
are difficult places to conduct business. A
merchant may lease extra floor space and
increase inventory following three or four great
years of activity only to bankrupt after a sudden
collapse in the local economy. Residents are
subject to economic uncertainty. A person
might make significant long- term financial
commitments based upon rapid increases in
earnings or employment in the area, only to lose
everything as a result of a downturn which
causes massive layoffs.
Communities that are dependent upon seasonal
tourism suffer from the erratic flow of money
into their area. During the tourist season,
money gushes into the area in large amounts.
Everyone is busy working as hard as they can.
When the tourists leave, the moneyflow stops,
people are laid off and they have to survive the
balance of the year on what they collected
during the boom.
When reviewing economic growth percentages
for local economies, the data can be misleading
as to the consistency or stability of the
economy.
To better understand the nature of economic
stability, we will examine the consistency of the
annual growth of an industry for three area
economies.
The first graph shown depicts a Mythical Area,
which had an Average Annual Increase in
Construction Employment of 4.1 percent from
1987 through 1996.
11
This Area had a 4.1 percent increase from 1986
to 1987. From 1987 to 1988, it again had a 4.1
percent increase. Each and every year, the area
had exactly a 4.1 percent increase. This means
construction employers, each and every year,
increased the number of people they employed
by 4.1 percent.
As a result, by averaging the 10-year history,
the Mythical Area, obviously, had a 4.1 percent
average annual increase. Most importantly, the
area had perfect stability as depicted by the
straight horizontal line on the graph. The flow
of money into the area, which supports this
industry, grew in an absolutely consistent
manner. This is a perfect situation. However,
this is myth, not reality.
Reality is different. The rate of the money
entering a community fluctuates. In some
communities, the fluctuation is not severe. In
others, it can be quite disruptive.
Let us examine the economic stability of the
Akron, Ohio, metropolitan area for the same
economic element. Akron, during the same 10
years, had an average annual increase in
construction employment of 4.1 percent. As
represented in the graph, you can see the rate
of growth is not absolutely stable. While over
the 10 years it averages 4.1 percent, there are
obvious fluctuations year by year. From 1986
to 1987, there was a 7.3 percent increase.
The next year, a 6.4 percent increase. The next
year showed a 2.7 percent increase, so on and
so forth.
For the 10 years, the average of the annual
increases is 4.1 percent. However, the rate of
growth is not nearly as stable as the Mythical
Area. The growth line is not straight but goes
up and down.
While the rate of growth of construction
employment for Akron is not absolutely stable,
it is considerably more stable than the
Bismarck, North Dakota, metropolitan area. As
with Akron and the Mythical Area, Bismarck
had an average annual increase of 4.1 percent
over the 10 years. As you can see in the graph,
the rate of growth is extremely volaille.
From 1986 to 1987, Bismarck lost 2.4 percent
of its construction workers, the next year it lost
8 percent, then it increased construction
employment by 4.2 percent, then 17 percent.
Once again, the average for the 10 years is 4.1
percent, but the type and quality of growth in
this industry is considerably different than that
of Akron.
Obviously, simply relying upon economic
growth percentages is not sufficient in order to
determine the character of a local economy.
Economic stability must be considered.
--.' -1 n I
It is a characteristic of a strong economy to
have consistent growth as a result of having
multiple primary industries in the economy.
With several, unrelated industries importing
money into the area, if one industry falters, the
entire economy does not fail.
12
It is a characteristic of unstable, inconsistent
economies to be dependent upon one or two
industries, which, by their nature, are
undependable and fluctuate year by year,
sometimes with extreme shifts either in growth
or decline,
The first graph (below) shows the employment
history for the eight largest sectors for the
Raleigh-Durham-Chapel Hill, North Carolina,
metropolitan area, which is one of the strongest
economies in the nation. Note the smooth,
consistent growth lines. This area has multiple
industries within its economy. The manufact-
uring sector is the most important contributory
industry in the economy. However, within
manufacturing, there are numerous sub-sectors
from electronics to bio-medical to chemicals to
industrial machinery. Within these sub-sectors,
the activity varies from production to product
research to administrative headquarters. State
government is also a major contributor, not only
because it is a state capital, but also because
three large state-supported universities are
located in the area along with state research
laboratories.
Over the last 25 years, all of these industries
did not grow consistently and each had periods
of decline. However, when one industry
declined in the area, another grew to take its
place, counterbalancing or compensating for the
loss of the earnings and employment. As a
result, the volume of money flowing into this
economy over an extended period of years grew
in a consistent manner.
The second graph (above) is the employment
history for the Yuma, Arizona, metmpolitan
area. Yuma is dependent upon two industries,
farming and military. Both of these industries
and their related employment in a community
have had a long history of inconsistency. Note
the repeated ups and downs of employment on
the Yuma graph, demonstrating an extremely
inconsistent economy. Whether the lines are
going up or down, they are repeatedly choppy
and unpredictable.
Quantity of growth
The quantity or volume of the money flowing
into an area determines the size of the economy
or the bucket of wealth. Since POLICOM’s
perspective in analyzing a local economy is how
it affects the people living and working in an
area, the growth in size of the economy is
measured by the growth in the total earnings
and the number of jobs.
The dollar volume of sales by the businesses in
the area is not a direct reflection of the impact
upon the people. A yacht broker who sells
expensive boats scattered around the country
could have $100,000,000 in sales in one year.
But the only impact upon the local economy is
the amount of commissions earned by the
broker. A corporate headquarters based in an
area might have worldwide sales of $100 billion.
but the impact of the headquarters upon the
local economy is limited to the amount of the
$100 billion, typically the wages paid to the
administrative workers, which actually enters
the local area.
13
Therefore, the growth in the size of the economy
is measured by the direct result of the activity of
the businesses, jobs and earnings that affect
the people.
The growth in the size of the economy is directly
related to the growth in the amount of money
flowing into the bucket of wealth. As the
primary industries grow, the overall economy
grows. When they decline, the size of the
economy becomes smaller.
The strongest economies in the nation have had
a significant increase in the number of jobs, as
well as the total earnings generated by these
jobs, as a result of the growth of their primary
industries. The weakest economies have had
little growth in employment and some have
fewer people working in the area than 10 years
ago. For some, after adjusting for inflation, they
actually have fewer dollars in the economy than
they did 25 years ago.
POLICOM has evaluated the growth rates for
employment and earnings for the 10 strongest
and 10 weakest local economies from 1969 to
1997.
To determine the actual value of the growth in
earnings over this period of time, the earnings
totals for each area were adjusted for inflation,
bringing each year to the value of 1997. Using
the National Aeronautics and Space
Administration’s (NASA) formulas for
calculating the value of the dollar for previous
years, annual adjustments are made to the total
earnings for an area. As an example, if an area
had a total of $1,000,000 of earnings in 1969, it
would be equivalent to $4,373,000 in 1997.
The annual increase is then calculated.
To visually compare the growth of each
economy the data is “factored.” This simply
means the data for all the areas is statistically
brought to a common denominator for direct
comparison. The mathematics is rather simple.
First, the annual percentage increase from the
previous year is calculated for each year.
Second, the annual percentage increase is
multiplied by the same number or factor for
each area. It does not matter what number it
is, as long as it is the same number for all
areas. POLICOM chooses 1000 as the factor
beginning.
The year 1969 serves as the basis year. All
areas begin at 1000 at this point. Where they
wind up is determined by their respective
percentage increase. This process is similar to
the start of a track race. Every runner begins at
the same spot. By factoring the data, direct,
visual comparisons can be made. -
The flrst graph (below) shows the average
factored growth in total inflation adjusted
earnings of all workers for the ten strongest and
ten weakest economies.
The second graph (below) shows the comparative
growth in the number of jobs in each. Note how
the strongest areas have had rapid increases in
both, while the weakest areas are at a level barely
above their condition in 1969.
14
The difference in the growth in volume between
the strongest and weakest economies is
significant. The total size of the strongest
economies has grown more than 2OOpercent
since 1969 while in the weakest areas there has
been little actual growth since 1985.
Quality of growth
The quality of the economy reflects the level of
the economic quality of life for the people living
and working in an area. It is the amount of
money earned annually by the people living and
working in the area.
Earl Nightingale, the famous writer and
philosopher, was fond of saying, “there is
nothing more important than money ... for those
things money is intended.”
For a vast majority of people, the amount of
money earned each year determines their
lifestyle. The size of their home, type of
automobile, the food they eat, the type of
recreation they can enjoy and their savings are
all determined by annual earnings. Therefore,
the annual earnings per worker in a local
economy are a reflection of the quality of the
economy.
The type of primary industry jobs located in an
area determines the level or quality of the
economy. The average area wage will seek the
level (and cannot exceed) of the wages paid in
the primary industries. If a local economy is
dependent upon industries that traditionally
employ high-wage workers, the overall level of
the economy (dependent industries) will rise
toward those wages. If the area is dependent
upon consumer industries that pay low-wages,
the overall level will also be low.
As a community improves the quality of the
primary industry jobs, the bottom rung of the
economic ladder rises. As the economy grows
stronger, part-time low paying retail and service
jobs fold into full time jobs at higher wage levels
and with fringe benefits. As a result of the
strength of the economy, employers in these
sectors want a more reliable worker and are
willing to pay more to have them.
The quality of the economy will continue to rise
if the new primary jobs created in the area pay
a wage higher than the local average. However,
the quality could regress or dilute if these jobs
pay less. The axiom that “Any new job will help
the economy” is not always true.
The number or growth of low paying jobs in an
economy can significantly affect the economic
quality of life for the area residents. The
composition of the workforce needkto lean as
much as possible toward the higher paying
positions, as the growth of low paying jobs
disproportionate to the higher paying jobs can
actually cause the economy to decline.
As an example, suppose an economy is
composed of 1,000 workers and has average
earnings per worker of $30,000. In this
economy, 300 workers earn $40,000 per year
and 700 workers earn $25,714, causing the
average to be $30,000. The workforce
composition is 30 percent high-wage earners
and 70 percent low-wage earners.
If 100 new low-wage jobs are created during the
course of a year, kd no new high-wage jobs are
generated, the average earnings per worker for
the area will fall to $29,610. The percentage of
high-wage jobs in the workforce drops to 27
percent and the percentage of low-wage jobs
grows to 73 percent. If this economy does not
increase the percentage of high-wage jobs, then
the overall economic quality of life for the
residents in the area will continue to decline in
the area if this job generation ratio becomes a
long-term pattern.
The process of adding a greater percentage of
low-wage jobs than high-wage jobs to an
economy causes “dilution” in the economy.
Over the last 25 years, virtually every economy
in the country suffered dilution as a result of
the rapid creation of low paying service and
retail jobs. The economies that were best at
15
creating new high paying jobs relative to the
increase in low paying jobs over this period of
time have the strongest economies today.
For the 25 strongest economies in POLICOM's
study, over the last 10 years, between 30
percent and 40 percent of the new jobs created
in these economies pay a wage higher than the
local average wage.
In the weakest 25 areas that have, nevertheless,
increased their workforce over the past 10
years, only about 8 percent of the new jobs
created pay a wage higher than their local
average.
To compare the growth of the quality of the local
economies, the annual earnings per worker in
an area is determined for a series of years.
These earnings are adjusted for inflation and
brought to the value of the 1997 dollar. As an
example, earning $5,000 in 1969 would have
been equivalent to earning $21,865 in 1997. By
adjusting for inflation, the true increase in the
value of the earnings can be compared to
previous years.
The growth rates, after adjusting for inflation,
were calculated, factored, and averaged for the
10 strongest and weakest economies. The
graph shows the relative growth in the quality of
these economies since 1969.
All areas of the nation suffered a loss in the
quality of their economies during the high
inflationary period from 1978 to 1982.
However, note how in the strongest areas the
quality of the economies has increased
significantly. All of these areas have an
inflation-adjusted level much higher than it had
in 1969.
But look at the weakest economies. For almost
20 years, they have had a decline in the overall
level of the quality of their economies.
It is a characteristic of strong economies to
create or maintain primary industry jobs that
pay a wage higher than their local average wage
and improve the quality of the economy. It is a
characteristic of weak economies to either lose
high-wage jobs or create a plethora of low-wage
jobs, which dilutes the quality of the economy.
POLICOM has evaluated the various industries
for their impact of consistency, quantity and
quality upon a local economy. The following is
a list, in the order of the greatest to the least
impact, of the contributory businesses that will
help communities the most in improving their
local economies.
A Manufacturing of high value, high bulk
products: High wages, large capital
investment and a large number of support
industries. Examples include automobile
assembly, commercial aircraft and rockets.
High wages, large capital investment, and
some support industries. Examples include
satellites, sophisticated electronic devices
and power generation facilities.
A Transportation of products: High wages,
large capital investment. Examples include
major trucking, rail, air and port facilities
dedicated to the transport of products.
A Research and Development: High wages
and oftentimes high capital investment.
Examples include the development and
design of expensive products (small and
large), software development and
sophisticated research (nuclear, bio-medical,
and electronic).
A Manufacturing of high value products:
16
A Federal Government: Highest average wages
of any major industrial division in the United
States. Typically a consistent employer with
annual wage increases greater than the rate of
inflation. Examples include a regional
headquarters for the IRS, major postal
distribution facility and research facilities.
A Corporate headquarters: High to low wages,
depending on the activity at the
headquarters. Some headquarters house all
the top, highly paid executives, with a
minimal number of low paid support
positions. Others, however, have few high
paid positions (these are scattered through
the region or country at the facilities they
manage) and a large number of low-wage
support workers. The number of high wage
jobs determines the impact.
Middle-wage jobs, sometimes a large capital
investment and sometimes support industries
are needed. Examples include computer
assembly, semi-conductors, household
appliances and building materials.
A State Government: Middle-wage jobs but
typically higher than the local average. Most
state government employment centers are
typically located in the state capital.
However, some states have distributed the
employment centers throughout the state to
provide benefit to more than one area.
munication centers: Middle- to low-wage
jobs, average to low capital investment, and
few support industries. Examples include
subscription fulfillment, telemarketing
centers, and the processing and collating of
information for a host of industries such as
banking and insurance.
A Manufacturing of low value products: Low
wages and average capital investment.
Examples include food processing, plastics
and apparel.
A Military: Typically low wages (unless an
aircraft or officer base) and inconsistent
employment (number of soldiers can vary
year to year). Large capital investment but
not taxable by the local authority.
A Manufacturing of mid-value products:
A Information processing and telecom-
A
A
Retirement industry: Low wages, little
capital investment except by the healthcare
industry. This industry typically
promulgates the formation of low wage, low
skill service and retail jobs. It is very
consistent, but growth of the economy is
dependent upon the in-migration of more
retirees. Typically economies based upon
retirement are lethargic and the quality of
the economy is low.
Tourism industry: Low wages and little
capital investment except by hotels. This
industry typically promulgates the formation
of low skill service and retail jobs and is very
inconsistent as a result of seasonal
employment. Economies solely dependent
upon tourism lack dependability and are
generally low in quality.
Within each of the above categories are
exceptions as to their impact upon a local
economy based upon the wage level paid and
the consistency of the employment of each
business enterprise. However, overall, the list is
in the order of priority according to which will
improve the strength of a local economy.
Local economies are dependent upon the
importing of money to the area, which is
principally caused by the business activity of
the primary industries. The consistency of the
economy is dependent upon the consistency of
these businesses. The growth or decline in the
size of the economy is in direct proportion to the
amount of money flowing into the local
economy. The quality of the economy seeks the
level of the wages paid by the employers of the
contributory businesses.
17
Economic
development
conomic development is the activity that is E directed toward improving the overall
economic strength of a community and the
economic quality of life for all the residents in
the area. Economic development lifts the entire
ship, bringing with it all its passengers and
crew.
Economic development differs from community
development. Community development, while
also an important activity for an area, is
designed to relieve or cure a specific
socioeconomic problem within the community.
It is targeted to assist a specific geographic
section or economically distressed class of
residents. Programs to eliminate urban blight,
revitalize crime-ridden neighborhood and
housing assistance to the poor are community
development activities. However, they are not
economic development activities.
There are three basic economic development
programs that are focused directly at creating
primary industry jobs: 1) existing industry
program, 2) attraction/recruitment program
and 3) start-up program.
The Existing Industry Program is designed to
foster the retention and cause the expansion of
the existing primary-contributory businesses in
the community. It is the most important yet
least expensive of the three programs. Many
communities have fallen into economic distress
simply because their existing primary industries
have reduced employment or left the area
entirely. The focus of an existing industry
program is to reduce the local costs to business
as much as possible related to being located in
the community, solve local problems and
attempt to expand the markets for the
contributory businesses located in the area.
Some areas have been so successful in causing
their local companies to expand that they do not
focus a great deal on a Recruitment Program.
18
The Recruitment Program encourages new
contributory companies to locate in the area.
The program is designed to increase the
quantity and quality of money flowing into the
area and to make the economy more consistent
through diversifying the types of contributory
businesses. A recruitment program is time
consuming and expensive, yet absolutely
necessary for a community to survive,
especially if the community’s existing industries
are on decline.
The Start-up Program involves establishing
programs, venture funds, and buildings
(incubators) that assist in the creation of new
contributory companies, which have a chance to
grow and develop s years pass. The visible and
financial rewards to the community of such a
program are in the future, and patience is
required. Some areas of the nation have very
dynamic economies as a result of nurturing
start-up companies, which have grown to
become major employers. Typically areas with
major research universities have active start-up
programs, but the presence of a university is
not absolutely necessary. The most important
needs are 1) a building (incubator), 2) venture
capital, and 3) community encouragement.
The criteria used by businesses to determine in
which community they will establish a facility
varies from company to company. The
geographic / economic needs are different for
each industrial sector. One group might have to
be located close to a major seaport, another in
close proximately to its raw material supply:
still another might have to be associated with
the computer science research department of a
major university. Some business organizations
whose principle product is processing
information can be located literally anywhere in
the world as long as sufficient
telecommunications equipment is available.
While there are certain minimum location
requirements for each company, in today’s
competitive world market, the most important
criteria for choosing a community is profitability.
A professional site seeking consultant can easily
create a “checklist” of information with more
than 100 items measuring the competitiveness
of a community regarding profitability for a
company. However, this checklist is directly
related to the following three criteria.
Costs.. . Time.. . Community
Attitude
Costs are considered in two ways: 1) initial
start-up costs and 2) long-term operating costs.
Initial start-up costs include, but are not limited
to, the land, construction of a building and
employee training. These costs can vary greatly
state to state and even between adjoining
counties. Local regulations in one county can
add 10 to 20 percent to the cost of a facility over
a neighboring county.
Long-term costs consider local wage rates, state
and local taxes and fees, proximity to the
market and ancillary transportation costs, and
the costs related to complying with annual
regulations promulgated by both the state and
local government.
Time relates directly to the number of weeks,
months or years necessary to bring the facility
to operational level. Time has become one of
the most important criterion in the site selection
process. Due to global competition, rapidly
changing technology and the fervent pace of
new invention, the companies which can
produce products or provide services “faster,
cheaper, better” will be the most successful.
After a company’s research department designs
a new process or invents a marketable product,
the company wants to begin production in
months, not years. As a result, the need for
companies to become operational as fast as
possible has never been more important.
If the company is purchasing an existing
facility, it can shorten the time to production
significantly and the company knows exactly
what the land/building costs will be. This is
19
why communities that have existing structures
available hold a competitive advantage over
other areas.
If the company must construct a building, the
time necessary to design, attain government
approvals and permits, and build the structure
becomes one of the most important elements in
the community selection process. Each step -
zoning approval, site plan approval, building
design, building permit and the time to build
relative to inspections - is affected by local and
state government.
The amount of time necessary to complete the
steps varies significantly among communities.
Some areas have expedited the process to such
a degree that it might take only a couple of
months to receive a building permit. However,
some areas have a labyrinth of rules and steps
that delay the necessary permits for more than
a year. The first community has a significant
competitive advantage over the second
community in attracting the company to its
area. Sometimes a company will pay a higher
start-up cost if the “time” necessary to become
operational is significantly reduced.
I
The third most important element considered by
a company is the attitude of the community
toward the company. The question before the
company is whether it is truly wanted by the
community. Since the most important criterion
for community selection is profitability, the
attitude of a community is measured by its
tendency to add operational costs to similar
business enterprises and the willingness to
work to solve the company’s local problems.
An active existing industry program will provide
evidence that the community wants to solve
problems for the employers. Some areas have
community teams established for this purpose.
However, some areas do not and the
relationship between the local government and
the productive sector can be adversarial.
The company most likely will meet with local
employers to discuss the community attitude. Of
principal concern to the company is the history of
the community or state regarding adding
operational costs to the business community.
Some communities have a history of placing a
disproportionate share of the revenue burden
on the business community. If a local
government needs more money to support its
water system, some have levied water
surcharges upon manufacturers or commercial
establishments instead of raising rates upon the
residents. Similar charges are sometimes levied
for solid waste and sanitary sewage disposal.
Other areas have levied special taxes specific to
the corporate community (the City of Detroit
has a municipal corporate income tax).
These activities project an “attitude” by the
community toward contributory businesses.
Companies will seek those areas that truly want
the company to locate in the area as shown by
its historical treatment of the existing
companies in the area.
For a community to be competitive in economic
development, either causing existing companies
to expand or recruiting new companies to the
area, the following are the most important
elements:
A Existing buildings.
A Approved (zoning) and improved (horizontal
infrastructure) industrial property for either
office or manufacturing use.
A Tax structure that recognizes the importance
of contributory businesses and does not
disproportionately place the burden of
revenue generation on the productive sector.
A A history of cooperative attitude within the
community, which fosters cost maintenance
or cost reduction for the company.
Communities that are the most profitable
locations for companies will be the most
successful.
Population
paradox *
ne of the reasons communities have 0 promulgated regulations which increase
costs to contributory employers is to control or
manage population growth.
The nation and most local economies have
grown in population over the last 10 years.
Population growth causes “change” in
communities and people inherently resist
change. Change represents the unknown and
causes uncertainly among some people.
Population growth causes new home
development, converting former open space to
tract housing. It increases traffic on the
highways, the number of students in the
schools and it increases the service area for
local government.
Because of change due to population growth
and at the spurring of some residents, some
communities have enacted complicated “growth
management” regulations. As a result of land
set-asides, significant fees and lengthening the
approval process, significant costs are added to
new development. Unfortunately, this activity
can cause degeneration in the strength of a
local economy.
It is a characteristic of the strongest local
economies to grow ik population, but not all
economies that grow in population are strong.
Communities grow in population for three basic
20
reasons: 1) in-migration to the area for
employment, 2) in-migration to the area by the
retirement community, 3) immigration from a
foreign country.
POLICOM has examined the population growth
rates for all the 3 16 metropolitan areas from 1988
through 1997. During this period of time, the
United States grew at the average annual rate of
1.0 percent per year. Among the 25 strongest
metropolitan areas, all grew in population at a
rate faster than the national average.
The following chart lists the 25 strongest areas
ranked in order of their economic strength. The
average annual increase in population growth
from 1988 through 1997 is shown along with
the rank among the 316 metropolitan areas.
While all of the strongest economies have grown
in population, only seven of the top 25 were also
ranked in the highest 25 areas for population
growth rate.
There is an assumption by some that an area
that is growing rapidly in population must have
a strong economy. This is simply not the case.
The chart on the following page shows the fastest
25 metropolitan areas ranked for population
growth rate. While some of the areas have grown
as a result of a strong economy, most have grown
for the other two reasons, immigration and in-
migration of retirees.
21
For the Florida areas, the population growth is
directly attributed to retiree relocation. In fact,
the Punta Gorda MSA (Charlotte County) has
more than 30 percent of the population over the
age of 65 (national average is 13 percent). The
economy is based upon the retirement industry,
which is growing in quantity as a result of the
in-migration of more retirees.
The areas located next to the border with
Mexico have grown rapidly due to immigration.
Note the economic strength rank for the
economies that have grown due to retirement or
immigration. Most are not strong economies.
Of the 50 fastest growing metropolitan areas in
the United States from 1988 to 1997, only 16
rank in the top 50 in economic strength. In
fact, 16 of the fastest growing areas are ranked
in the lower half of the 3 16 metropolitan areas
in economic strength.
While it is a characteristic of strong economies
to grow in population, it is a characteristic of
the weakest local economies not to grow and
even decline in population.
The chart on the following page shows the 25
weakest local economies in the United States,
their population growth rate, and their
population rank among the 316 areas. The
Yuma, Arizona, area is the only one that has
had brisk population growth. This is due to
rapid immigration from Mexico to supply labor
for the farm industry.
22
Of the 50 weakest economies, only eight had a
population growth rate greater than the
national average and 20 areas lost population.
To control or stop population growth, some
communities have adopted the philosophy that
if you make new development more expensive,
fewer people will move to the area.
Unfortunately, extremes in this practice can
lead directly to the decline of the economy. By
increasing rules, requiring land set-asides, and
extending the time period for approvals, the first
two site selection criteria are immediately
affected - costs and time - which makes the
area less appealing for existing companies,
causing them to leave, and eliminates
consideration by new companies.
For communities that are growing as a result of
foreign immigration, the United States
government must change immigration policy to
stop the growth. For areas that are growing as
result of the in-migration of retirees, the area
must make it less desirable for people to move
there. For areas that are growing as result of a
strong economy, they must work to cause
economic decline
Aside from immigration policy, the steps
necessary to stop or contain population growth
are undesirable. Therefore communities should
embrace an increase in their population and
enjoy the benefits of having a desirable place to
live and a strong economy.
23
About the author
William H. Fruth is the president of POLICOM Corporation, an
independent economics research firm located in Jupiter,
Florida, which specializes in studying the dynamics of local
economies.
He has personally evaluated more than 400 local economies in
the United States and provides presentations and workshops
for state associations and local communities on the condition
of their respective economies. During the last two years, he
has given more than 70 presentations to communities and
state associations in 21 states on the condition of their
respective economies. Through his analysis, he determines if
the economy is growing or declining, what is causing this to
happen, and what can be done to improve the situation.
He is the author of the book, WHERE THE MONEY IS.. . .
America ’s Strongest Local Economies, which provides insight as
to why local economies grow or decline, and has written
numerous articles for newspapers and trade magazines
regarding the economy.
He is a nationally recognized leader in the field of geographic
economics and has extensive experience in economic
development. From 1988 to 1995, Fruth served as vice
president of a major industrial land development company,
directing the development and marketing of a 500-acre
corporate park in the West Palm Beach, Florida, area.
Prior to that, he was president of the Business Development
Board of Palm Beach County and during that tenure was
named Florida’s Economic Development Professional of the
Year in 1987.
From 1980 to 1984, Fruth served in a full time capacity of
mayor of Tiffin, Ohio, located in northwest portion of the state.
During this time, he was named one of the “Five Outstanding
Young Men in Ohio” and was heavily involved in economic and
community development, both locally and statewide.
4
1114
1-11
September - 2001
Economic Impact Upon
Pinellas County, Florida
Of Reaching Physical
Build-Out
Prepared for the
Office of Economic Development
Pinellas County
September - 2001
POLICOM Corporation
Jupiter, FL 33477
Phone (561) 744-8187
Fax (561) 743-4048
www.policom.com
4300 S US HWY 1 STE 203-301
Summary: Economic Impact Upon Pinellas County of Reaching Physical
Build- Ou t
Pinellas County Economy - Pinellas County, Florida is one of four component counties of the Tampa-
St. Petersburg-Clearwater, FL metropolitan area. The metropolitan area is ranked 70th among the 3 18
metropolitan areas for “economic strength” by POLICOM in its 2001 study. The county’s economy is
extremely well diversified and has been growing in size and quality for many years.
Size of the Economy - Employment and earnings growth for the county, since 1980, has been faster
than a vast majority of the metropolitan areas. Growth in the size of the economy has been comparable
to the ten strongest metropolitan areas in the United States since 1970.
Quality of the Economy - The quality of the county’s economy has improved significantly over the
years. Growth of the average annual earnings per worker (AEPW) has exceeded inflation each year
since 1991. The percentage the county’s AEPW is of the state of Florida’s AEPW has increased each of
the last eleven years. Growth in the inflation factored AEPW follows a path similar to the ten strongest
local economies. From 1997 to 1999, however, the percentage Pinellas County’s AEPW is of the
national AEPW declined.
Components of the Economy - The “retirement” industry is the largest economic contributor (primary
industry) of any single industry in the county as Government Transfers for retirement age individuals
account for approximately 30% of the “imported” money to the area. However, the county has
numerous economic contributors, most of which include high- wage employers. Manufacturing is the
second biggest contributory and includes instruments, electronic equipment, publishing, and industrial
machinery. The finance and insurance sector, wholesale trade, and computer software development and
programming are all important to the economy.
Unique Economy - Approximately 23% of the population of Pinellas County is over the age of 65. The
national average is approximately 12%. Economies, which are heavily dominated by the “retirement”
industry, typically grow only if there is in-migration of more people and typically have a gradual decline
in the quality of the economy.
Charlotte County, Florida is a prototype retirement based economy. Having no other significant
contributory industry aside from retirement, it has grown rapidly in size as a result of an increase in
population. The quality of the economy has been on decline for many years and the AEPW for the
county is the 2nd lowest among the 3 18 metropolitan areas in the nation. Pinellas County has a very
large industrial sector coexisting with a large retirement age population. This is a unique situation. One
of the benefits is the residential sector in Pinellas County pays a significantly lower share of locally
levied property taxes than the residents of Charlotte County, which does not have an industrial sector.
Future Economy - Economic projections, based upon the history of the county’s economic growth and
the nature of the area’s industry, have been created. They show the county should, under normal
circumstances, have continued, rapid growth in both the size and the quality of the economy. However,
the projections cannot come to reality as the Pinellas County is approaching and will soon reach physical
Build-Out. This is the condition when, for practical purposes, there is no more Greenfield land upon
which new companies can locate or existing companies expand.
Affect of Build-Out on Local Economies - When a city or a county reaches Build-Out, new companies
cannot locate in the area. As a result, economic growth begins to slow. Existing companies, which need
to expand, have no place to build in the area and are forced to leave. As a result, the economy begins to
decline. As time goes by, existing industrial facilities begin to deteriorate, finally reaching a point when
they are abandoned, causing more companies to leave the area, accelerating economic decline.
Economies In Which Build-Out Has Occurred- Most cities and many counties in the oldest parts of
our country have reached a Build-Out situation. Build-Out occurs first in areas, which are small
geographically, have had rapid growth, and are the oldest. Pinellas County will likely become the first
county in Florida to reach Build-Out. Typically, areas, which reach Build-Out, suffer gradual economic
decline.
Lucas County, Ohio - The major component county of the Toledo, OH metropolitan area (ranked 16gfh
for economic strength), Lucas County reached Build-Out at least 25 years ago. During the las? 20 years,
the county lost approximately 22,500 manufacturing jobs and had no net gain in wholesale-distribution,
as a result of not having Greenfield parcels available. Additionally, the county lost population during
this period. However, the counties, which surround Lucas County, increased in population and gained
11,000 manufacturing jobs and 29,000 wholesale-distribution jobs. Greenfield parcels were available in
these counties. Today, there are hundreds of thousands of square feet of abandoned manufacturing
space in Lucas County.
Denver County, Colorado - The central component county for the Denver metropolitan area (ranked
2”d in economic strength), Denver County reached Build-Out at least 20 years ago. During the last 20
years, the county lost population and had a mild increase in the number of new jobs. The quality of the
economy improved significantly, as most of the new jobs created were high-wage positions. There has
been significant economic growth in the “Greenfield” counties, which surround Denver County.
Problems relating to the deterioration or abandonment of aged structures are pervasive in Denver
County. To help cure this problem, the county has identified almost 25,000 acres as an enterprise zone.
Impact Upon Pinellas County of Reaching Build-Out - Pinellas County will likely reach practical
Build-Out within six years. The impact of presently aging facilities in the oldest parts of the county
combined with the affects of Build-Out will cause growth in the size of the economy to stall by 2015
and the quality of the economy to begin to decline the same year.
What Can Pinellas County Do to Prevent a Reduction in the Quality of the Economy? - Leaders in
Pinellas County have the advantage they can see the historical impact upon an economy when Build-Out
occurs. As a result, they can begin programs now, which can forestall or even prevent some of the
negative aspects of Build-Out.
Economic Development Program - The area should implement an aggressive, well financed Existing
Industry Program which will help retain and cause the expansion of existing, high-wage contributory
employers.
Prevent Facility Deterioration and Abandonment - The County should create financial incentive
packages for contributory employers which will encourage them to rehabilitate existing facilities or
construct new facilities in Brownfield locations.
About POLICOM - POLICOM Corporation is an independent economic research company, which
specializes in analyzing local and state economies.
Table of Contents
Page
Introduction .............................................................................................................. 2
Pinellas County Economy ........................................................................................ 3
Size of the Economy ............................................................................................. 3
Quality of the Economy ...................................................................................... 10
Components of the Economy .............................................................................. 14
Unique Economy .................................................................................................... 16
Charlotte County. Florida ................................................................................... 17
Future Economy ..................................................................................................... 22
Affect of Build-Out on Local Economies .............................................................. 27
Economies In Which Build-Out Has Occurred ..................................................... 32
Lucas County. Ohio ............................................................................................ 33
Denver County. Colorado ................................................................................... 36
Impact Upon Pinellas County of Reaching Build-Out ......................................... 42
What Can Pinellas County Do to Prevent a Reduction
in the Quality of the Economy .............................................................................. 49
Economic Development Pro gram ....................................................................... 50
Prevent Facility Deterioration and Abandonment .............................................. 51
..
About POLICO M.. ................................................................................................. 55
Page 1
Introduction
An individual or business is most affected by the economic condition in closest proximity to where the
individual lives or the business is located. The economic growth of the local economy typically
determines the quality of life for the individual or the success of the business.
A local economy will grow and expand, shrink and decline, in direct proportion to the amount of money
which is flowing into the area as a result of the “primary or contributory industries.” Primary industries
are those which cause money to enter a local economy. Consumptive industries are those which utilize
this money and cause the wealth to leave the local economy. L
There are many things, which affect the success of the primary industries on a statewide or county level.
Some of these are taxation, regulatory climate, demographic composition of the populace, the skill level
of the labor market, and many more.
One of the most important issues, which influence the primary industries, is the availability of land
and/or buildings, which are utilized to perform their function.
Pinellas County, Florida is a relatively small county geographically. For the last 40 years it has enjoyed
rapid growth not only in population but also in the size and quality of its economy. However, the county
is approaching a condition when there will be, for practical purposes, little land available for new
development, The county will be, for practical purposes, “built out.”
The purpose of this study is to examine the economic impact of such a condition upon the Pinellas
County economy.
The study will include reviewing the historic and present day condition of the economy, determining
how it compares to the rest of the nation, what is driving it, and where it is heading. Communities,
which have reached a built out condition, will be examined to determine the economic affect of such a
state. The economic implications for Pinellas County will be discussed and projections will be made as
to the future condition of the economy.
In order to complete this study, POLICOM prepared a Historical, Comparative Economic Analysis for
Pinellas Cow@. Reference is made throughout this study to data, which is contained in that analysis,
Page 2
Pinellas County Economy
Pinellas County, Florida is one of four component counties of the Tampa-St. PetersburgCleanvater, FL
metropolitan area. The metropolitan area is ranked 70fh among the 3 18 metropolitan areas for
“economic strength” by POLICOM in its 2001 study.
Annually POLICOM evaluates all 3 18 metropolitan areas2, measuring the growth and stability of
eighteen economic factors over the most recent 25- year period. The rankings are a measure of how
consistent the economy grew in size and quality over an extended period of time.
I
Hillsborough, Pasco, and Hernando Counties comprise the balance of the metropolitan area.
Employment and earnings data is based upon the geographic location of the job. Individuals might live
in one county in the metropolitan area but work in another.
The Pinellas County economy is extremely well diversified and has been growing in both size ad
quality for many years, especially the five-year period from 1995 to 1999. Many people who work in
Pinellas County however live in other counties.
Size of the Economy
Two measures of how a local economy grows in size are total Earnings and total Employment. Earnings
are all the wages and salaries paid and the profits of proprietors located within the county. Employment
is the number of wage and salaried workers and the number of proprietors in the county. The growth of
each is an indication of the increase in the overall volume of the economy.
To measure the growth in size, the average annual percentage increase (AAI) for both Earnings and
Employment was calculated for Pinellas County over three time periods: 1) the last five years (1995-
1999), 2) the last ten years (1990-1999) and the previous ten years (1980-1989). The AAI for each time
period was ranked against the 3 18 metropolitan areas for comparison purposes.
’ Annually POLICOM ranks all metropolitan areas for “economic strength.” A complete list of all the areas can be found in
Section 4 of the Historical, Comparative Economic Analysis for Pinellas County or by going to www.policom.com. ’ As of June 2001, there are 3 18 metropolitan areas in the United States. The Office of Management and Budget defines
metropolitan areas, which are basically determined by commuting patterns. For comparative growth rates, POLICOM will
compare Pinellas County’s data to the 3 18 metropolitan areas as if it were, itself, a defined area.
Page 3
~~
The following chart shows the result^.^
Earnings-All
Workers
1999-1995
USA
Pinellas County
1999-1990
USA
Pinellas County
1989-1980
USA
Pinellas County
Employment-All
Workers
1999-1995
USA
Pinellas County
1999-1990
USA
Pinellas County
1989-1980
USA
Pinellas County
5.98%
7.24% 35
5.49%
6.30% 74
7.58%
9.30% 54
2.38%
3.58% 35
891 Rank
1.79%
2.30% 119
1.95%
3.86% 37
.I
Note the county had growth rates easily exceeding the nation for each of the time periods. Also note the
variance in both the growth rate and the overall ranking between the last five years and the last ten years.
From 1990 to 1994 the area suffered as a result of the national recession. However, it quickly responded
when the recession ended.4
Unless otherwise noted, the economic data used in this study is published by the Bureau of Economic Analysis, U.S.
Department of Commerce. Known as Region Economic Information Systems (REIS) data, it is the most comprehensive and
authoritative database in the United States.
Historical, Comparative Economic Analysis for Pinellas County.
Growth data for 11 8 economic elements for three time periods and their comparative ranking appear in Section 3 of the
Page 4
The growth in the size of the economy is visually shown by the following graphs. To visually compare
areas graphically, the annual percentage increase was calculated and then multiplied by a common factor
(in this case 1000). The “factoring” enables direct visual comparisons among areas.5
The first graph shows the annual factored growth of Employment, from 1970 to 1999, for Pinellas
County, the State of Florida, and the nation.
Employment Factored
:+..IIII
-m111
lSUU
won
15uu
irnn
Note the growth rate of total employment for Pinellas virtually mirrors that of Florida and has been
considerably more brisk than the nation as a whole. Note also the significant dips in employment
growth for both Pinellas and Florida during the recessions of 1973-75 and 1989-92. The area withstood
the national recession between 1 98 1 - 83.
Since Pinellas is a “local” economy, not a state or nation, it is appropriate to compare its growth to other
local economies. The following graph compares the factored growth in Employment to the ten strongest
and ten weakest metropolitan area economies in the nation. These economies were identified by
POLICOM in its national ranking for economy strength. The data for each was calculated, factored, and
then averaged to create the following graph.
For a more detailed discussion regarding Factoring data, please see Section 2 - Page 1 of the Historical, Comparative
Economic Analysis for Pinellas County.
Page 5
The ten strongest areas have had rapid, consistent growth in the size and quality of their economies for
an extended period of time. The weakest economies have been extremely inconsistent and or have been
on volatile decline for an extended period of time.
The ten strongest and weakest areas include the following metropolitan areas:
Ten Strongest Ten Weake st
1
2
3
4
5
6
7
8
9
10
Austin, TX
Denver, CO
Atlanta, GA
Seattle, WA
Salt Lake City, UT
Raleigh-Durham, NC
Dallas, TX
Fort Collins, CO
San Antonio, TX
Madison, WI
3 18 Odessa-Midland, TX
3 17 Casper, WY
316 Yuma,AZ
315 Pine Bluff, AR
3 14 Steubenville OH
313 Houma, LA
312 Enid,OK
3 1 1 Cumberland, MD-W V
3 10 Wichita Falls, TX
309 Beaumont, TX
The following graph compares the factored growth in employment.
Employment Factored
71 73 75 77 79 81 K\ 8s 81 89 91 93 99 97 99
Note how Pinellas County grew in size relative to employment at a rate faster than the ten strongest
areas until 1990 when the area lost employment due to the recession. After the recession, job growth
Page 6
resumed at a rate almost as fast as the ten strongest areas. Notice the lack of relative job growth in the
ten weakest economies. In some of them, there are fewer people working today than in 1980.
The following graphs compare the growth in the size of the economy based upon total earnings. Prior to
factoring, the total earnings for each area were adjusted for inflation. The value of the earnings for each
year was "brought to" the value of the 1999-dollar to provide a more relevant comparison. After
adjusting for inflation, the percentage increases were factored for direct comparison.
CPI Earnings Factored
4~llll
I 0 Pincliis 4.. Florida USA I
While employment growth for Pinellas County was mildly slower than Florida for the last ten years, its
growth in inflation adjusted earnings exceeded the state.
Page 7
The county's growth was very comparable to the ten strongest areas. Note the size of the economy for
the ten weakest areas, after adjusting for inflation, is smaller than in 1980.
CPI Earnings Factored
J 1p' P b
71 73 75 77 79 81 83 8.5 07 R9 91 93 95 97 99
Pinclias 4.. Strongest Wcekcst
Page 8
While the size of the economy has grown extremely fast, the overall population growth, when compared
to the rest of the nation, has been relatively slow. From 1990 to 1999, the population in Pinellas County
grew at an average annual rate of .44% which ranked 228’h among the 3 18 metropolitan areas and less
than half the rate for the nation of 1 .OO%.
The graph below shows the factored relationship between population growth and the growth of earnings
and employment. The economy has grown as a result of the creation of new jobs and not the result of
the in-migration of people.
.-
Pi nellas
Nlllll
u)lllI
wuu
ulnn
I*UU
nl I
71 73 75 71 79 81 83 85 81 M 91 93 95 97 99
e Population Ma*, Earnings Employmcnt
Overall, when measured by the growth in total employment and earnings, the Pinellas County economy
has grown at a rate comparable to the strongest economies in the United States, even though it has had
very slow growth in it population. I
Page 9
Quality of the Economy
One of the best means to measure the ‘Quality” of a local economy is to examine the growth in the
Annual Earnings Per Worker (AEPW). The annual earnings by people in an area, and respective
growth, establishes the level of their economic “quality of life.” How much money they earn each year
determines the quality of their of housing, the food they eat, the amount of taxes they can pay, and the
size of their savings or retirement account.
Earl Nightingale, the famous writer and philosopher, was fond of saying, “there is nothing mole
important than money.. . for those things for which money is intended.”
Since the amount of money people are paid each year, for the vast majority of the people, determines
their lifestyle, the annual earnings per worker will be examined thoroughly for the area to measure the
quality of the economy.
The growth in AEPW will be examined three ways: 1) the actual growth pattern which is adjusted for
inflation fiom 1970 to 1999,2) the percentage the actual AEPW is of the state and nation, and 3) how
the growth pattern compares to the strongest and weakest economies in the nation.
The first graph shows the actual AEPW for Pinellas County along with an inflation adjusted AEPW.
The AEPW for each year was adjusted to the value of the 1999-dollar.
The actual AEPW grew steadily since 1970. Most importantly, after adjusting for inflation, the inflation
adjusted AEPW has grown at a rate fastest than inflation for most years since 1980. This is not the case
in a vast majority of the local economies in the United States. In most local economies and the nation as
a whole, wage increases did not keep pace with inflation for a most of the last twenty years.
Relative to inflation, the quality of the Pinellas County economy has improved.
Page 10
Pi ne1 las
11111111 I
.-
I u11m
n
71 73 75 77 79 81 83 85 87 I19 91 93 95 97 99
e AEPW 4.. CPI-AEPW
Another means to measure relative improvement in the AEPW is to determine if the actual AEPW has
gained or lost relative to the nation or state. This is done by calculating the percentage the Pinellas
County actual AEPW is of the state and the USA. For each year, the AEPW was divided by the AEPW
for the state and the nation.
As an example, if the area’s AEPW for 1999 was $25,000 and the state’s AEPW was $26,000, the
percentage the area’s AEPW of the state’s AEPW would be 96%.
By doing this calculation for all of the years, a pattern or trend can be determined. The question is:
“Has the quality of the economy gained or lost versus the state or nation.
If, in one year, the area’s AEPW was 90% of the state’s AEPW, and the next year it was 92%, the area
gained relative to the state. However, if the following year the area’s AEPW was 88% of the state, then
it did not improve as much as the state. The following graph shows the percentage the Pinellas County
AEPW was of Florida and the USA since 1970.
Page 11
Pi ne I las
.I.
As you can see, the Pinellas AEPW gained against the state of Florida for twelve of the last thirteen
years. In 1988, the Pinellas AEPW was 92% of the state average and by 1999 climbed to 99%. The
county also gained against the national average until 1998 when it declined for two straight years.
Overall, the quality of the economy improved better than the state or the nation over the last ten years.
The next visual measure of the growth of the quality of the economy is the CPI-Factored-AEPW. The
AEPW has been adjusted to the value ofthe 1999 and the percentage increase for each year is then
multiplied by a common factor.
This exercise measures how the quality of the economy has improved relative to the economy itself If
the line goes up, the quality of the economy improved fiom the previous year.
The following graph compares the CPI-Factored-AEPW for Pinellas County to the Ten Strongest and
Ten Weakest local economies.
Page 12
CPI Factored AEPW
121111
111111
JOUU
9uu
snn
***
** ** **
~~
71 73 75 71 I9 PI 83 8.5 87 89 91 93 95 97 99 I Pincllas Strongcst Wcakcst I
.L
From the above graph you can see the quality of the Pinellas County economy has improve significantly
over its level in 1970. The rate of improvement from 1987 to 1997 was as good as the Ten Strongest
local economies. Note how the level of the quality of the economies of the Ten Weakest areas is far
below that in 1970.
Overall, the growth in the quality of the Pinellas County economy has been extremely good and has
been comparable to some of the strongest local economies in the United States.6
For a more complete review to the comparative growth in the size and the quality of the economy, please refer to Section 2
of the Historical, Comparative Economic Analysis for Pinellas County.
Page 13
Components of the Economy
A local economy will grow or decline in size and quality in direct proportion to the success of it
“Primary Industries.”
Primary or contributory industries are those which import money to a local economy. This imported
money circulates and flows fkom person to person, business to business, until it is filly consumed and
leaves the local ecommy. The success of most service and retail business and a vast majority of the jobs
in a local area are dependent upon this flow. Nationally, the most important primary industry
majority of the local economies is manufacturing.
a
The size of a local economy will grow in direct proportion to the amount of money entering the area
year after year. The reactive-consumptive businesses will grow, or decline, based upon this flow.
The quality of a local economy is dependent upon the wage level paid within or as a result of the
primary industries. The “level” of a local economy (average area wage) will approach but cannot
exceed the wages paid within the primary industries.
POLICOM has developed formulas, which estimate the source and the amount of primary or
contributory earnings by workers in each industry and other major sources of money flowing into an
economy.
The formulas consider certain norms in each industry and are designed to provide a reasonable estimate
as to the contributory impact each has on the local economy. These estimates do not consider ancillary
spending by a company, such as office supplies, printing, and taxes, but only its payroll.
For a more detailed discussion on Primary Industries, please see Section 1 of the Historical, Comparative Economic
Analysis for Pinellas County.
I
Page 14
The following graph shows the sources of the initial flow of money into Pinellas County from 1970 to
1999 by industry.
Pin ellas
Primary Earnings (000)
From the graph above you can see Pinellas County has multiple contributory industries. This is a
characteristic of a strong economy. Weak economies are typically dependent upon one or two primary
industries.
Net imported wages in “manufacturing” is the single largest source of imported money. However, the
“retirement industry” is the most dominant economic contributor to economy (approximate 30% of the
imported money).
The retirement industry adds money to the economy by way of private pension programs (not able to
provide estimate due to lack of data) and government transfers or entitlement programs. Government
transfers for retirement “Ret Tran” (social security) and healthcare “Med Tran” (Medicare) accounted
for more than $2 billion of contributory money in 1999. However, the total net gain of government
transfers has been declining. (The contributory amount of government transfers is based upon the net
gain of money sent to the area for the programs and the money extracted by way of payroll taxes.)
Page 15
_____~_____ ~
Manufacturing is growing as an industry and is well diversified. It includes instruments, electronic
equipment, publishing, and industrial machinery. Additionally, the finance and insurance sector is a
strong contributor along with wholesale trade. These industrial sectors account for thousands of high-
wage jobs and hundreds of millions of imported dollars.
One of the most important and fastest growing contributors is “Business Services.” Typically this sector
is a reactive, dependent industry including office maintenance, advertising agencies, and temporary
worker services. However, “buried” in the data for this sector is “computer programming and software
development (SIC 737). This sector has been growing rapidly in the county and is contributory - in
nature. In 1999 there were more than 4,000 people employed in SIC 737 earning on average $52,500
per year.
The health care industry has a large presence in the county, principally as a result of the high presence of
retirement age individuals. Medicare is one of the main sources of funding for this service. However, in
addition to general health care, which is a dependent industry, there is a large presence of medical
research and laboratory testing, which is contributory.
Overall, as a result of having multiple primary industries, the Pinellas County economy is less
susceptive to periodic national recessions.
Unique Economy
As previously mentioned, the “retirement industry” is the single largest contributory industry in Pinellas
County. According to the 2000 census, approximately 23% of the county’s population are over the age
of 65. This is greater than the Florida average of 18% and almost twice the national average of 12%.
The fact the county has such a strong, growing economy with such a high percentage of retirement age
individuals living in the area is extremely unusual and unique. To demonstrate the importance of this
unique situation, it is important to first examine the nature of the “retirement” indmtry.
The concept of economies being based upon the “retirement” industry is relatively new when looking at
the economic history of our nation. It was only after the interstate highway system was constructed,
airports expanded, and southern states with warm climates were able to generate sufficient electric
Page 16 l?asw
power to support “air conditioning systems” that the older population began to leave their northern
homes to spend their golden years in states like Florida and Arizona.
Over the last ten to fifteen years, as a result of large retirement hnds and expanded social security and
Medicare programs, virtually all individuals who desire to locate in another state for their retirement
years can afford to do so. As a result, entire local economies have been created as a result of this in-
migration.
POLICOM has examined the economic impact upon a local economy of “retirement” as an industry .L and,
for the purposes of this paper, will address two general characteristics. Local economies, which are
dependent upon the “retirement” industry, 1) grow as a result of the in-migration of more people and 2)
have a “quality” which is lackluster or even poor.
The discussion which follows regarding the retirement industry in no manner suggests anything
derogatory toward the senior citizens who live in our country, as they are today and have been in the
past a valuable contributor and resource for our socieq. The examination, which follows, is directed
toward the measurable economic impact of the retirement sector as an economic industry.
Typically the retirement industry promulgates the creation of low- wage retail and services jobs and there
is rarely a major industrial component within the economy.
Charlotte County, Florida
One of the economic laboratories used by POLICOM to study the retirement industry is Charlotte
County, Florida. Also known as the Punta Gorda metropolitan area., Charlotte County has the highest
percentage of its population (35%) over the age of 65 of any metropolitan area, and possibly any county,
in the United States. Additionally, there is a si&icant absence of any other primary industry as 85% of
the contributory money is attributed to retirement transfers.
The Charlotte County economy has grown very rapidly in size over the last twenty years. Its rate of job
growth has been one of the fastest in the nation. From 1980 to 1989, employment grew at the annual
Page 17
rate of 7.3%, the 2"d fastest rate among the metropolitan areas. From 1990 to 1999, jobs grew 3.8% per
year, the 15th fastest rate. Growth rates in total earnings were comparable. 8
7~~1111
#Ill1
However, the size of the economy grew as a result of the in-migration of people and not an internal
expansion. From 1980 to 1989, the population of the county grew 6.5% per year, the fastest rate in the
country and from 1990 to 1999, it grew 2.8% per year, the 14th fastest rate.
4
4
4-
The following graph shows the factored comparisons among population, employment, and inflation
adjusted earnings growth. Note how the growth in the size of the economy parallels the growth .I in
population.
.si1111
40*1
wuu
annn
71 73 75 71 79 01 83 8S 81 I19 91 9.3 95 97 99
[ 0 Population a= Earnings + Employment
While the size of the economy has grown, the quality of the economy has not. From 1980 to 1989,
annual earnings per worker (AEPW) grew at the annual rate of 5.1 %, below the national average and
ranking 152nd. However, between 1990 and 1999, AEPW grew at the dismal rate of 2.3%, ranking 29gth
among the 3 18 metropolitan areas. In 1999, the annual earnings per worker for Charlotte County was
$22,592, the second lowest among the metropolitan areas.
* Charlotte County comparative growth data for 1 18 items is included in Section 3 of the Historical, Comparative Economic
Analysis of Pinellas County.
Page 18
The low AEPW for the can be attributed to the absence of high- wage industries in the economy. In
1999, the high-wage manufacturing sector (3rd highest wages
workforce, the third lowest percentage among the metropolitan areas. Additionally, the transportation
and public utilities sector (2nd highest wages in the nation) made up 2.7% of the workforce (ranked
287*) and wholesale trade (4th highest in wages) composed 1.8% of the Charlotte County workforce, the
eight lowest percentage.
the nation) comprised only 2.6% of the
The workforce is overwhelmingly dominated by the service and retail trade industries as a result of the
spending of the retirement community. In 1999, retail trade composed 23% of the workforce, the 6th
highest percentage among the 3 18 metropolitan areas. Nationally, wages paid in the retail sector are
54% of the national average wage.
.-
Services comprised 3 8% of the workforce in 1999, the 20th highest percentage. Nationally, wages paid
in this industry are 91% of the national average. The services industry is dominated by the health
services sector, which comprise 5 1 % of all services earnings, the 2 1 st highest percentage.
Over the last twenty years, a preponderance of the jobs created in the Charlotte County economy have
been in the low-wage service and retail sectors. The affect upon the “quality” of the economy can be
visually seen by the graphs for percentage of state and national AEPW and the CPI-Factored- AEPW.
Charlotte
I
71 73 75 77 79 81 83 85 87 fN 91 33 3s 97 93
Page 19
Note how for almost twenty years the percentage the Charlotte County AEPW is of Florida and the
nation has been on steady decline. In 1970, the Charlotte County AEPW was 95% of the state and 85%
of the nation. By 1999, it had fallen to 75% and 66% respectively.
Remember the lines for Pinellas County went “up” instead of down.
The following graph compares the CPI-Factored-AEPW for Charlotte County to the ten strongest and
.- ten weakest local economies.
ltSll
I zuu
1150
I1 1111
1Mfl
1411111
93U
9lW
SSII
snn
CPI Factored AEPW
71 73 75 77 79 $1 %:I 8s 87 89 91 9-3 95 97 99
10. Charlotte Strongest + Wcakcst
Note how the decline in quality and the overall level of the economy is comparable to the ten weakest
economies, even though the county’s growth in size has been faster than the ten strongest areas.
The discussion regarding “retirement” as an industry is provided since the issue is paramount to
understanding the dynamics of the Pinellas County economy.
POLICOM has examined hundreds of local economies in the United States and has not found another
local economy, which has such a high percentage of retirement age individuals and such a large
industrial component as Pinellas County.
Page 20
The coexistence of such a dynamic industrial sector and the retirement community is unique. Typically
areas with a high retirement age population were settled for that purpose and an industrial component
has yet to be created.
The benefits to the Pinellas County community of having a growing industrial sector, which employs
high-wage earners, is significant for the following reasons:
. The economy will be more stable, not as susceptible to periodic national recessions.
With a large number of corporations in the area, contributions to civic and social programs are
greater.
The best and the brightest young people, who grow up in the county, will have quality career
opportunities to return to after college.
The quality of the housing stock will be high.
The tax burden upon the residential sector needed to support local government is less. .
The last benefit listed should not be underestimated. POLICOM reviewed the taxable valuation of real
property for Pinellas County and Charlotte County.
For 2001, in Charlotte County, improved residential real estate accounted for 72% of all real property
taxes collected. This includes all single family homes, apartments, condominiums, mobile homes, and
nursing homes. The balance of the property taxes was generated fi-om the industrial-commercia1
property, agricultural lands, and undeve loped residential and commercial land.
In Pinellas County, however, improved residential real estate accounted for only 54% of all real property
taxes paid. lo With the large industridcommercial component in the county, the residents living in
Pinellas County pay a significantly smaller portion of the costs of local government and schools than
those in Charlotte County, which has virtually no industrial sector.
Data supplied by the Charlotte County Property Appraiser.
lo Data supplied by the Pinellas County Property Appraiser.
Page 2 1
Future Ecorzonzy
POLICOM has created economic projections for Pinellas County beginning with the year 2001 to 2021.
These projections are based upon national and state trends and the historical growth pattern for the
county.
When projecting an economy, the researcher typically takes into consideration the industrial
composition of the local economy. As an example, if the economy is based solely upon an industry,
which has been declining, such as textiles, then the economy is projected to decline. If the ecmomy is
diversified and composed of industries, which are growing, the research will project the economy based
upon the expected growth of these industries.
As previously mentioned, the Pinellas County economy is multl. faceted and in composed of several
industries which appear to have long- term growth potential.
The following charts show tk results of the projections for each industry for employment, earnings, and
annual earnings per worker. The average annual increase for two projected times periods is provided
along with the average annual increase fiom 199 1 through 2000. l1
Employment Growth Project Project
Annual Increase 1991-2000 2001-201 1 2012-2021
All Workers 2.5% 2.8% 1.4%
Farm
Ag Services
Mining
Construction
Manufacturing
Trans, Comm
Wholesale
Retail
FIRE
Services
Federal Civilian
Military
State
Local
0.0% 0.0% 0.0%
2.4% 1.3% 0.5%
0.0% 0.0% 0.0%
0.9% 1 .O% 0.5%
0.4% 0.8% 0.3%
4.2% 3.3% 1.3%
4.0% 2.9% 1.3%
0.0% 0.5% 0.3%
3.1% 3.3% 1.5%
4.7% 4.4% 2.0%
-0.4% 0.2% 0.0%
-1.9% -0.1% 0.0%
1.3% 0.9% 0.5%
1.1% 1.0% 0.5%
'' Data for Farm and Mining is not included in the projections as these industries have an insignificant portion of the
economy and data for each is unreliable as a result.
Page 22
Earnings Growth Project Project
Annual Increase 1991-2000 2001-201 1 2012-2021
All Workers 6.3% 6.9% 5.0%
FXIll
Ag Services
Mining
Construction
Manufacturing
Trans, Corn
Wholesale
Retail
FIRE
Services
Federal Civilian
Military
State
Local
0.0%
4.5%
0.0%
3.1%
3.0%
7.7%
9.3%
4.0%
8.9%
8.3%
4.5%
2.9%
5.8%
5.2%
0.0%
3.9%
0.0%
3.8%
4.7%
7.2%
6.8%
4.1%
8.3%
8.8%
3.7%
2.1%
3.2%
4.0%
0.0%
3.0%
0.0%
2.6%
3.0%
5.3%
4.5%
3.0%
6.8%
5.6%
3.0%
1.5%
2.3%
3.0%
Earnings Per Worker
Annual Increase 199 1 -2000 200 1-20 1 1 20 1 2-202 1
All Workers 3.8% 4.0% 3.5%
Farm
Ag Services
Mining
Construction
Manufacturing
Trans, Comm
Wholesale
Retail
FIRE
Services
Federal Civilian
Military
State
Local
0.0% 0.0%
1.4% 2.6%
0.0% 0.0%
3.1% 2.8%
2.9% 3.9%
3.9% 3.8%
5.2% 3.8%
4.2% 3.6%
6.6% 4.9%
3.4% 4.2%
3.7% 3.5%
4.7% 2.2%
3.9% 2.3%
3.5% 3.0%
0.0%
2.5%
0.0%
2.1%
2.7%
4.0%
3.2%
2.7%
5.2%
3.6%
3.0%
1.5%
1.7%
2.5%
Page 23
~ ~~ ~
Based upon these projections, the following graphs show the future factored employment growth,
inflationadjusted earnings, and CPI- Adjusted- AEPW. Data, which appeared in the previous graphs
(1 970- 1999), is included to show the historical trend.
The previous graphs which used inflation adjusted data were based upon the actual inflation for each
year. Beginning with 2000 and through 2021, inflation is estimated to be an average annual rate of
2.5%. The “future” value of earnings and AEPW is based upon this rate.
The projected lines do not include interruptions for periodic recessions. However, typically after -. a
recession there is a rapid recovery period.
Employment Factored
70 74 78 82 86 90 94 98 2 6 1) 14 18 21
e 1870-2000 am Projcctions 1
Page 24
Earnings CPI Factored c #1ll11
.wuu
wuu
1~1nll
n
70 74 7% 82 $6 90 94 98 2 6 10 14 18 21
.I
I 1970-2000 +*&? Projcctions I
CPI Factored AEPW
l~d111 I
llUU
1VUU
I ‘l111l
,.....
70 74 1% 82 $6 90 94 98 2 6 10 14 18 21
I 101 1910-2000 Projcctions I
Page 25
~ ~~
The projections provide for a continuation of the rapid economic growth, which has been prevalent in
the county for almost twenty years. There are several economies in the United States, which have had
long term economic growth similar to these projections.
However, Pinellas County cannot sustain these projections since it does not have sufficient vacant,
undeveloped land within the boundaries of the county to accommodate the physical structures
necessary to house the projected workforce. Pinellas County is rapidly approaching “physical
Build-Out” and the result could cause a decline in the economy.
The following chart shows the actual number of workers in the economy for the projections and the gain
fiom each time period.
year: Johs
2021 885,276 113,829
201 1 771,447 203,843
2000 567,604 123,661
1990 443,943 126,114
1980 317,829
From 1980 to 2000, the area gained 249,775 new jobs. The projections provide for the creation of
3 17,672 more jobs fiom 2000 to 2021, a 56% increase over the 2000 level. This job increase will cause
a significant demand for more facility space.
Based upon 325 square feet of space per worker (low space requirement), it appears there will be a need
for approximately 103,000,000 square feet of additional industrial, commercial, government,
institutional, and retail space to accommodate the workforce. With a ratio of floor area to land of 30%
(high for some uses, low for others), the new buildings will require at least 7,800 acres of usable land
(excluding roadways, retention lakes, wetlands or green space set-asides).
A simpler way to look at the space needs, for every two square feet of existing nonresidential floor
space in the county, there will be a need for an additional one square foot by 202 1.
The land necessary for the construction of the additional facilities to meet the projections does not exist
in Pinellas County. Presently it is estimated there is only 1,500 acres of undeveloped industrial,
commercial property, some of which will be lost to roadways and set-asides during development.
Page 26 Iw&w
Based upon current absorption rates, there appears to be a four to six year supply of improved industrial
property remaining.
Forecasting the Pinellas County economy must take into consideration the fact the area will not have
sufficient land available for the projected economic growth Therefore, the preceding projections will
not occur.
Affect of “Build-Out ” on Local Economies. .I
Build-Out for a community is the state where there is, for practical purposes, no undeveloped land
available for construction.
For the purpose of this paper, the undeveloped land shall be called a “Greenfield.” While there may be
scattered in-fill parcels located in the area, practical Build-Out will be when there is not at least 100
contiguous acres of improved Greenfield land properly zoned for industrial use. Also, for the purpose of
this paper, a “Brownfield” shall be considered improved land, which formerly was utilized for an
industrial purpose and might be subject to pollution or contamination.
The economy is affected when there is no longer nonresidential Greenfields available. At Build-Out,
there is no longer a location for a new company to locate or an existing company to expand, stopping the
growth of the area’s primary industries.
Build-Out of a political subdivision occurs in direct proportion to the age of the political subdivision and
the geographic size of the area.
Municipalities Build-Out first as they are geographically restricted the most. The Build-Out of a
municipality should concern the city leaders, but rarely is a concern of county government and
community leaders as the economic growth flows over the city boundary into the unincorporated portion
of the counfy. The Build-Out of a county does not concern state government leaders, as the economic
growth spreads to other counties and the state still benefits.
Page 27
~-
Build-Out occurs first in areas, which have the longest history, least land, and fastest growth. The
northeastern portion of the United States was settled in the late 1600’s and has had 300 years to grow
and expand. Virtually all municipalities is this part of the country have built-out as have many of the
small counties.
The mid-west portion of the nation (Northwest Territory) was settled in the late 1700’s and has had 200
years of population and economic growth. Many municipalities and some counties in this part of the
country have reached Build-Out. California began rapid population ad economic growth in the mid-
- 1800’s and many cities and some counties are built-out today.
The condition of Build-Out, even in the northeast, is a relatively new condition when looking at the 300-
year history of North America. The nation’s industrial expansion did not begin until the early 1900’s.
During World War I1 and immediately thereafter in the 1950’s, the United States had its most rapid
expansion in manufacturing, transportation, and population in its history. It was during the late 1940’s
and through the early 1960’s that thousands of manufacturing plants were constructed in the industrial
Northeast and Midwest.
Florida, as with many southern states, is relatively young regarding population and economic growth.
Most southern states were agrarian in nature until the late 1950’s and early 1960’s when the nation’s
transportation network (interstate highway system and airports) and electric generating capacity (air
conditioning) and were expanded, opening the southern part of the country to economic and population
growth. Rapid economic growth did not begin until the late 1960’s in most southern states.
Pinellas County will be the first Florida county to reach Build-Out. Due to its rapid population and
economic growth for the last 40 years and its relatively small size, Greenfield availability will be
severely limited within the next five years.
This will have a significant negative impact upon the county’s economy for the following reasons.
The quality of a local economy and its growth is dependent upon the flow of money into the area, which
is generated by the business activity of its primary industries. The size of the economy is based
principally upon the total volume of wages paid and the wage level determines the quality of the
Page 28
economy. The consistency of a local economy is dependent upon having a variety of primary industries
in the area.
The Pinellas County economy has grown in both size and quality as a result of having a large number of
high wage contributory businesses expand in and/or locate to the area.
Economic development is the activity of encouraging contributory, primary businesses to expand in or
locate in a community. During the community selection process by a company, which is considering a
location for a new facility or the expansion of an existing facility, many factors relating to the costs of
operation in an area are considered. These include local taxes, wage rates, utility costs, and many more.
However, the ultimate act of the economic development, site selection process is a real estate
transaction.
.-
A local economy will begin to decline when it reaches Build-Out 1) as a result of not having land upon
which to construct new facilities and 2) as a result of the physical or technological economic
deterioration of existing facilities utilized by the contributory businesses.
The result of the first affect of Build-Out is obvious. If there is no land upon which to build a new
facility and a suitable, vacant existing facility is not available, a company looking to locate to the area or
an existing company looking to expand has no option other than seeking an existing building or a
Greenfield site outside the county. Without new companies moving to the area, the economy will not
grow. Existing companies leaving the area will cause a decline.
The second affect is subtler than the first but over the long term will cause an almost unavoidable,
gradual decline in the economy.
For the purpose of this discussion, a “facility” is considered a building of some nature. It can be a
warehouse, office structure, or factory. A “business” is one, which is “primary” in nature, that it imports
money to the area by selling its products or services outside the economy.
Each business, in order to produce its product or provide its service, must operate from a facility. The
facility is the location in which the workers perform their tasks.
Page 29
~ ~~
A facility has a fite number of years of functional use. The ability of the business to conduct its affairs
is dependent upon the hction and the condition of the facility. When the condition of the facility no
longer meets the needs of the business, the business must 1) raze the exiting structure and build a new
facility, 2) occupy another facility or 3) build a new facility in a Greenfield.
There are two scenarios when a facility no long functions to meet the needs of a business.
The first relates to the physical deterioration of the building. The hctional life of a building travels in
stages, all related to the costhenefit of repairing and maintaining a building. Typically, but not always,
the stages follow this pattern:
-
9 1 - 10 years of life - A building is constructed for a business (for the sake of this discussion, a high-
wage employer) and for the first ten years requires little maintenance and repair. . 1 1-20 years of life - During the ensuing ten years, repair costs increase and become a greater portion
of the company’s budget. At the end of the 20th year, the business begins to question if it should
continue operation in the present facility, anticipating growing maintenance and repair over the next
ten years.
At this point, some businesses elect to move to another location. The facility is sold or leased to
another business, which can operate in a facility in need of repair. This business typically has a less
sophisticated operation and will pay its workers less money. . 21-30 years of life - Significant repairs are needed at the end of the 30th year. Major roof problems
now exist, electrical wiring is fiayed, floors are cracked, the exterior is weathered, and the structure
has difficulty meeting existing fire codes. The business occupying the structure, in order to continue
operation, must 1) expend massive amounts of money to rebuild the structure, 2) raze the structure
and build a new facility, or 3) locate to another facility or build in a Greenfield.
If the high wage employ still occupies the facility, it might invest in the structure due to it unique
location. However, razing and constructing a new facility is rarely an option as it is typically more
cost affective to construct in a Greenfield.
If the low wage employer occupies the building, it will rarely invest in the building, as by the nature
of the business it needs a low cost location. It will likely move to another location.
Typically, one of two things will happen to the building. One, it will be sold or leased to an
employer who can operate in a facility in disrepair. This employer, who is extremely cost
conscience, will likely pay a wage at the lowest end of the scale. The second future for the building
is to become abandoned.
30-40 years of life - At the end of the 4Ofh year, typically the structure is in such structural disrepair
it is abandoned.
Page 30
~ ~--
There are certainly exceptions to this scenario as an owner might continuously reinvest in the facility,
not allowing it to reach to point of abandonment. However, all buildings have a limited life and some
day will have no usefulness.
Through the stages of the life of the facility, as the structure got older, the business, which occupied it,
pays lower wages. This causes a reduction in the size of the economy and a reduction in the quality of
the economy. Upon abandonment, there is no money following into the economy as a result of activity
in the structure.
+
The second scenario relates to the technological obsolescence of the facility.
For some businesses, the facility itself is the major tool for the production of its product or service. As
an example, for a chemical manufacturer, the facility is constructed in such a manner that it produces a
product and the facility cannot be used for another purpose. The manufacturing process is integrated
into the building.
Specialty buildings are not uncommon. Today’s modem semi-conductor plant and even a facility where
“software” is created have structural components included in the building design.
Specialty buildings many times, however, have a shorter economic life span than a normal facility. Due
to rapidly changing technology, the methodology used to create a product or service by a business is
continuously being altered.
In order to be competitive in the world marketplace, businesses have had to learn to do things “faster,
cheaper, and better.” Businesses have therefore embraced technology and have incorporated it into their
manufacturing processes and the production of their services.
A modern manufacturing plant producing microprocessors built today has little resemblance to a facility
constructed 20 years ago. A recently constructed automobile manufacturing plant employs more robots
than it does people. New steal plants have 10 percent of the workers producing twice as much steal.
Even a new multi-use office building includes telecommunication systems, climate controls, and
elevator systems which, technologically, did not exist ten years ago.
Page 3 1
A business, which is dependent upon a specialty building, will continue operation until the point the
building reaches a state of technological obsolescence, at which time, the cost of producing their product
or service is no longer competitive in the marketplace. The life span of some specialty buildings, as a
result of today’s accelerated pace of technological change, can be as short as ten years.
When the facility reaches technological obsolescence, the business will either raze and reconstruct the
facility at the same location or construct a new facility in a Greenfield. It is rare an existing, vacant,
modern specialty building exists for purchase by the company. Tearing down the existing facility is also
usually not a suitable option. The business will loose production for likely at least a year during the
tearing down, construction process.
c
The fbture of a specialty building, which has reached economic obsolescence, is usually bleak. Unless it
can be cost effectively gutted and adapted for another use, many of these structures become abandoned
and eventually torn down. If the building is torn down, a potential building site is created but these are
usually considered “Brownfield” sites, possibly subject to pollution, and typically avoided.
Therefore, as a result of reaching Build-Out, the economy of the area will likely begin to decline due to
the gradual exodus of high- wage, contributory businesses.
Economies in Which Build-Out Has Occurred
To study the economic impact of reaching Build-Out and implications for Pinellas County, POLICOM
has examined two county economies in which Build-Out has occurred.
To provide a valid comparison to Pinellas County, the counties examined need to meet the following
criteria:
fl Be geographically in similar size to Pinellas County.
Be the central or most populated county of a multi-county metropolitan area.
fl Have reached a point of practical Build-Out.
Page 32
POLICOM chose to examine Lucas County, Ohio and Denver County, Colorado as each meets the
criteria. They also have contrasting economies.
Pinellas Lucas Denver
Population 921,482 455,054 554,636
Land Area - Sq. Miles 280 340 153
PersonsISq. Mile 3,291 1,338 3,625
Lucas County, Ohio
c
Lucas County is located in northwest Ohio along the Michigan border. It is one of three component
counties of the Toledo, OH metropolitan area. Wood and Fulton Counties comprise the balance of the
MSA. There is economic linkage with Monroe County, Michigan to the north. The metropolitan area is
ranked 1 69‘h by POLICOM for economic strength.
The City of Toledo includes approximately 70% of the county’s population and serves as the seat of
government.
Lucas County has had a long history of serving as the headquarters location of several Fortune 500
companies and has been supported by the manufacturing of automobiles, metal fabrication, and the glass
industry.
Lucas County reached practical Build-Out approximately 25 years ago.
Economic growth in the county has been extremely slow for the last twenty years. The rate of growth in
jobs, earnings, and annual earnings per worker was less than half the national average. l2 From 1979 to
1999, the county lost more than 22,500 manufacturing jobs. The size of the county’ s economy, based
upon CPI Factored Earnings, is approximately what it was in 1979. Additionally, there are fewer people
living in the county than in 1979.
While many communities in Midwestern states (rust-belt area) suffered economic decline during the last
twenty years, the overall Toledo metropolitan area had economic growth.
l2 Growth rate comparisons for Lucas County for 118 items are included in Section 3 of the Historical, Comparative
Economic Analysis for Pinellas County.
Page 33
Wood County, to the south of Lucas County, for the last ten years had an annual job growth rate of
2.5%, the 94‘h fastest rate among the metropolitan areas. Manufacturing employment in Wood County
additionally grew during the same period at the 28‘h fastest rate with an average annual increase of 2.7%.
From 1979 to 1999, the county had a net gain of approximately 4,000 manufacturing jobs.
Fulton County, to the west of Lucas County, increased in population, had job growth rates better than
the national average, and increased manufacturing employment at the annual rate of 3.3%, the 17th
fastest rate in the nation. The county, fiom 1979 to 1999 had a net gain of approximately 3,000
manufacturing jobs.
.-
Monroe County, Michigan, to the north of Lucas County, also had job growth rates much better than the
national average for the last ten years and increased manufacturing employment 2.6% per year. From
1979 to 1999 the county gained approximately 4,000 new manufacturing jobs.
During the time Lucas County lost 22,500 manufacturing jobs, the counties, which surround Lucas,
gained 1 1,000 manufacturing jobs. Additionally, in 1999, Lucas County had the same number of jobs in
the wholesale trade - distribution sector as it did in 1979. However, &om 1979 to 1999, the surrounding
counties grew 29,000 jobs in this industry.
While the general area was subject to national economic forces relating to being in a “rust-belt” area,
one of the principle reasons for the decline of the Lucas County economy was Build-Out.
As previously mentioned, the county had a long history of manufacturing. This industry began in the
1800’s, grew in the early 19OO’s, and rapidly grew during World War I1 and in tk 1950’s and 1960’s.
The county reached practical Build-Out in approximately 1970.
The stages of facility deterioration began in the 1960’s and accelerated in the 1970’s. Wood, Fulton,
and Monroe Counties, during this time and still presently, offered Greenfields for industrial expansion.
Page 34
~ ~~
Economic development officials representing Lucas County and the City of Toledo advised POLICOM
that:
. . There is presently no Greenfield industrial land available in the county.
There are hundreds of thousands of square feet of abandoned manufacturing space in the county.
The affect of reaching Build-Out upon Lucas County has been significant. While economic growth has
been slower than most areas in the nation for the metropolitan area as a whole, virtually all of the
economic growth and population growth has occurred in the Greenfield counties, which border Lucas.
C.
Reacting to the growing number of abandoned buildings, both industrial and residential, the City of
Toledo, approximately four years ago, embarked on a program to cause their demolition.
Approximately 300 structures per year, 20-30 of them commercial and industrial, have been razed since,
creating scattered Brownfield sites in the community. Even so, there presently are no large locations for
industrial users to locate which are not Brownfield in nature. However, large Brownfield locations can
be utilized.
Lucas County has been the home of the Willys-Jeep Corporation since prior to World War I1 and
various models of the Jeep vehicle have been manufactured in the county ever since. In 1997, Chrysler-
Jeep announced it was looking for a site for a new manufacturing facility. To prevent the loss of another
manufacturer, Lucas County and the City of Toledo created an incentive program for Chrysler-Jeep of
approximately $80 million in value.
Included in the package was a 100-acre Brownfield site, which was a former landfill. The available
acreage at the landfill was insufficient and the City and County acquired aged, yet occupied, commercial
buildings, which were tom down to, provide sufficient land for the facility. The facility is now
constructed and the new Jeep Liberty is now being manufactured at this facility.
The process of reclaiming industrial locations through demolition came very late after the county
reached Build-Out. As a result, the county did not have lands available for industrial expansion. Should
the area maintain its pace of creating Brownfield locations and if the “stigma” relating to building at a
Brownfield location can be overcome, the county will have opportunity in the future to begin to grow
economically.
Page 35
Denver County, Colorado
Denver County is located in northcentral portion of Colorado. It is one of five component counties of
the Denver, CO metropolitan area. Adams, Arapahoe, Douglas, and Jefferson Counties comprise the
balance of the MSA. The metropolitan area is one of the strongest economies in the nation and is ranked
2nd by POLICOM among the 3 18 metropolitan areas for economic strength.
The City of Denver includes 100% of the area and population of Denver County. Denver Coujty was
settled in the mid- 1800's and reached practical Build-Out at least 25 years ago.
The Denver metropolitan area is one of the most dynamic, fastest growing economies in the nation.
Over the last ten years, the population of the metropolitan area grew at twice the national rate (ranked
44*). Annual job growth increased 3.2% per year, the 35fh fastest rate in the country. I3 Annual earnings
per worker (AEPW) increased at the annual rate of 4.8%, the lofh best among the metropolitan areas.
The economy has been driven by the growth of the communications, insurance and finance,
manufacturing, and transportation industries.
However, while the Denver metropolitan area has grown rapidly, Denver County has not relative to
population and total employment.
As a result of Build-Out, the population of Denver County has actually declined since 1970. Job growth
increased between 1990 and 1999 at the annual rate of 1.6%, slower than the national average and
ranking 191~ among the metropolitan areas.
While the size of the Denver County economy has grown little over the last 20 years as measured by job
growth, it has grown in volume as measured by total earnings. As a result, the quality of the economy
has improved significantly over the last ten years.
l3 Growth rate comparisons for Denver County for 118 items are included in Section 3 of the Historical, Comparative
Economic Analysis for Pinellas County.
Page 36 EHsw
The total amount of earnings by those who work in the county increased at the annual rate of 6.7% from
1990 to 1999, much faster than the national average and the 44th fastest rate in the nation. From 1990 to
1999, annual earnings per worker increased 5% per year, the 7‘h best rate in the country.
Since there was slow growth in the number ofjobs but rapid growth in earnings, a “shift” in the type of
employment occurred during this period of time. Lower paying jobs were replaced by higher paying
jobs.
Job growth did not stall in Denver County as it did in Lucas County. Many of the facilities, which
presently house the new workers, are “vertical” in nature, as several large employers presently operate in
high-rise office structures which have been constructed over the last ten years. Growth in vertical
industries such as software development, telecommunications, finance, and insurance has improved the
quality of the economy.
A
However, the problem of facility obsolescence, both industrial and residential, is very present in Denver
County. To cope with the problems of aging industrial and residential areas, Denver County, created a
large “enterprise zone” in 1986. The enterprise zone encompasses approximately 25,000 acres,
which is about ?4 of the entire county.
Aged industrial areas, which are near interstate exits, are being targeted for industrial reuse. Aged
industrial, commercial and/or residential areas not located near interstate exits and do not have the
necessary services for industrial reuse are being targeted for residential and mixed resident-commercial
reuse.
Two large tracts of land are presently being redeveloped which will provide the county a future
opportunity for industrial expansion. These include the 3,000-acre former Lowery Air Force Base and
the former Stapleton Airport (4,700 acres). Each of these areas need significant “cleanup” and are
considered Brownfields at this time.
The county now offers loans, grants, and nine different tax credits to companies, which locate in the
enterprise zone. One of the tax credits highlights the problem of facility obsolescence, as a company
can receive a tax credit for “25% of the cost of rehabilitating a facility which is at least 20 years old
and has been abandoned for at least two years.”
Page 3 7
Economic development representatives told POLICOM that while they are encouraged by the
participation in the enterprise zone programs, it is very difficult to compete with the Greenfield
opportunities offered in neighboring counties. The cost of rehabilitating existing industrial areas is very
high, and while they have been successful, admit it would have been very difficult if the overall size of
the area’s economy had not been growing at such a rapid rate and the demand for industrial space was
not so high.
To visually see the impact of reaching Build-Out by Lucas and Denver Counties, the factored growth in
population, employment, total earnings, and AEPW was calculated in the same manner as it was for
Pinellas County.
The first graph shows the population factors for the three counties along with the ten strongest local
economies.
Population Facto red
UllW L
mn -
20811 - V
ltllll
J6UU
14uu
1 xuu
The population growth line for Lucas and Denver Counties are virtually atop each other as neither has
grown in population since 1970. The population growth rate for the ten strongest areas has increased
steadily since 1970. Note the growth in population in Pinellas County stalled around 1990, which is the
first indication the county is reaching Build-Out.
Page 38
The following chart shows the factored growth in total jobs.
Em playmen t Factored
:~551111 1
SlUU I
llllll
111111
As previously mentioned, due to limitations in available land and facilities, neither Lucas nor Denver
County grew in total employment when compared to the ten strongest economies. Pinellas County grew
rapidly in total employment as, during this period of time, it still had Greenfields available for industrial
growth.
Page 39
~~ ~~
The following chart shows the inflation factored total earnings for each area.
u11111
.u;on
JZLll
Bllll
L
X
X
4 -- *,
x*
A - K+
24uu
UlUU
16UU
111111
1
I
71 73 75 71 79 81 83 #S 87 89 91 93 95 97 93
Lucas County has shown little if any growth in earnings. During the last ten years, as a result of shifting
to higher wage jobs, the volume of earnings increased significantly in Denver County. However, the
growth in earnings occurs in just the last ten of the preceding 30 years shown on the chart. Once again,
Pinellas County is growing at the same rate as the ten strongest economies.
Page 40
~ ~~
The following graph shows the growth in quality as measured by the inflation adjusted - factored annual
earnings per worker.
CPI Factored AEPW
1.41111
llbll
llUU
WUU
9nn
The quality of the Lucas County economy has declined over the last 30 years and is at a level below that
of 1970. Note how, even though overall growth has been slow, Denver County improved significantly
in quality. Also note how the growth in quality in Pinellas County is beginning to slow.
Page 4 1
~~~
Impact Upon Pinellas County of Reaching Build-Out
As previously mentioned, there are approximately 1,500 acres of useable industriahommercial
Greenfield land available in Pinellas County. Among these acres, only about 900 could be used by a
large company (100-acre parcel). At the present rate of absorption, the county should reach practical
Build-Out by the year 2006.
By 2006, there will still be land available, as several scattered green parcels will still exist. The impact
of Build-Out will begin. (The exact year in which Build-Out will occur is very difficult to predict.
However, it will occur. Therefore, the following economic projections will essentially begin when
Build-Out actually occurs.)
Additionally, there are industrial and commercial areas in the county which have reached an “age”
where the stages of physical obsolescence are present. The transition from high- wage employer to low
wage employer to lowest-wage employer to abandonment is occurring. These areas are those which
were developed earliest in the history of the county.
The economy will not come to a grinding halt as a result of reaching Build-Out. The affect of Build-Out
will be gradual. POLICOM anticipates the economic growth scenario for the county to follow this path,
subject to national recessions.
2001-2006 - Existing Greenfields will continue to be developed by quality companies. A transition to
lower wage workers and abandonment will continue in the oldest areas in the county, causing a mild
dilution in the quality of the economy. The overall taxable value of industriakommercial property will
increase.
2007-201 1 - Reaching practical Build-Out, few new companies will be moving to the area.
Employment growth rates will be significantly reduced. The oldest areas will be in significant disrepair.
Facilities constructed in 1990 are beginning the stage when the quality of their economic impact is
declining (lower wage users). Some specialty buildings are no longer being used for their original
purpose. The rate of growth of total earnings is slowing rapidly as high- wage employers are being
gradually replaced by lower wage employers, causing a gradual decline in the quality of the economy.
The overall taxable value of industriahmme rcial property will not increase.
Page 42 l!aaw
L
2012-2016 - The oldest areas have significant abandonment or are occupied by the lowest wage
workers. Most scattered green parcels have been utilized. Employment and earnings growth is very
slow. The quality of the economy is not improving. Facilities built in 1990 are entering the last stages
of economic life. Several specialty buildings are no longer utilized. The overall taxable value of
industriakcommercial property has reached a summit or is begining to decline. The burden of taxation
to support local government is shifting to the residential sector.
2017-2021 - The oldest areas lay in disrepair or have been converted to Brownfield sites. Facilities
constructed in 1990 are approaching their final stages of useful life. Facilities constructed in 2000 are
beginning the transition fiom high- wage to lower wage users. Some specialty buildings, constructed as
early as 2005, are no longer used. Employment growth has stalled. Inflation adjusted earnings are on
decline. The quality of the economy is on decline. The overall taxable value of industriakcommercial
property is on decline. There is a significant shift of the burden of taxation to support local government
to the residential sector.
I
To visually see the impact upon the Pinellas County economy of the preceding scenario, POLICOM has
calculated the growth rates, by industry, for the 20-year period fiom 2002 to 2021. The following
graphs compare the original Projections, provided previously, to projections based upon a gradual
Build-Out scenario.
Page 43
The first graph compares the employment growth.
Em p lay me n t Factored
.Ylllll I
ulni
IOUU
The rate of the growth in total employment will be significantly reduced beginning 2017.
Page 44
~ -~
The following graph shows the growth of total earnings. Remember total earnings have been adjusted
for anticipated inflation and brought to the value of the 1999-dollar to demonstrate “absolute” growth in
the size of the economy.
Earnings CPI Factored
M1llIl I
mnn
6Ocu
n
70 74 78 92 $6 90 94 96 2 6 10 14 16 21
101 1970-2000 Projections + Buildout 1
The size of the economy stops growing beginning in 2017.
Page 45
The following graph shows the impact of Build-Out on the “quality” of the economy.
CPI Factored AEPW .......
ison
llUU
IUUU
1, ......
71) 14 721 82 86 40 44 98 2 6 1Q 14 18 21
I e 1970-2000 k-3~ Projcctions Buildout I
From 1982 to 2000, the quality of the economy has improved significantly. However, as a result of the
aging of some industrial areas, dilution in the quality of the economy has already begun. The quality
will stop improving around 2012 and will begin to decline.
The growth rates for earnings and employed were derived from a review of the growth rates for Denver
and Lucas Counties. POLICOM took into consideration the transition period prior to Build-Out.
While overall economic growth will slow, there will still be a large number of new jobs created between
2001 and 2021. The original projections provided for the creation of 3 17,672 new jobs between 2001
and 2021. The Build-Out scenario will create 201,732 new jobs.
Page 46
The following chart shows the difference between the Projections and the Build-Out.
Project Build-Out
Year Jobs an Jobs Gain
2021 885,276 113,829 769,336 58,358
201 1 771,447 203,843 710,978 143,374
2000 567,604 123,661 567,604 123,661
1990 443,943 126,114 443,943 126,114
1980 317,829 317,829
The following charts compare the growth rates for the Projections and Build-Out for emplop-ent, total
earnings, and annual earnings per worker.
Employment
Growth
Annual Increase
All Workers
FXIll
Ag Services
Mining
Construction
Manufacturing
Trans, Comm
Wholesale
Retail
FIRE
Services
Federal Civilian
Military
State
Local
Project Project Build-Out Build-Out
1991-2000 2001-201 1 2012-2021 2001-201 1 2012-2021
2.5% 2.8% 1.4% 2.1% 0.7%
0.0% 0.0% 0.0% 0.0% 0.0%
2.4% 1.3% 0.5% 1.3% 0.5%
0.0% 0.0% 0.0% 0.0% 0.0%
0.9% 1 .O% 0.5% 1 .O% 0.5%
0.4% 0.8% 0.3% 0.7% -1.4%
4.2% 3.3% 1.3% 2.3% 0.9%
4.0% 2.9% 1.3% 2.0% 0.8%
0.0% 0.5% 0.3% 0.5% 0.4%
3.1% 3.3% 1.5% 2.5% 0.5%
4.7% 4.4% 2.0% 3.1% 1.2%
-0.4% 0.2% 0.0% 0.2% 0.0%
-1.9% -0.1% 0.0% -Q.1?40 0.0%
1.3% 0.9% 0.5% 0.7% 0.5%
1.1% 1 .O% 0.5% 1 .O% 0.5%
Page 47
Earnings
Growth
Annual Increase
All Workers
Farm
Ag Services
Mining
Construction
Manufacturing
Trans, Comm
Wholesale
Retail
FIRE
Services
Federal Civilian
Military
State
Local
Project Project Build-Out Build-Out
1991-2000 2001-201 1 2012-2021 2001-201 1 2012-2021
6.3% 6.9% 5.0% 5.3% 3.1%
0.0% 0.0%
4.5% 3.9%
0.0% 0.0%
3.1% 3.8%
3.0% 4.7%
7.7% 7.2%
9.3% 6.8%
4.0% 4.1%
8.9% 8.3%
8.3% 8.8%
4.5% 3.7%
2.9% 2.1%
5.8% 3.2%
5.2% 4.0%
0.0%
3.0%
0.0%
2.6%
3.0%
5.3%
4.5%
3.0%
6.8%
5.6%
3.0%
1.5%
2.3%
3.0%
0.0%
3.4%
0.0%
3.8%
3.8%
5.4%
5.0%
3.9%
6.5%
6.5%
3.3%
2.1%
3.2%
3.6%
0.0%
2.0%
0.0%
3.0%
-1.4%
4.0%
2.3%
2.9%
2.3%
4.2%
3.0%
1.5%
2.3%
3.0%
Earnings Per Project Project Build-Out Build-Out
Annual Increase 1991-2000 2001-201 1 2012-2021 2001-201 1 2012-2021
Worker
All Workers 3.8% 4.0% 3.5% 3.2% 2.4%
FXUl
Ag Services
Mining
Construction
Manufacturing
Trans, Comm
Wholesale
Retail
FIRE
Services
Federal Civilian
Military
State
Local
0.0% 0.0%
1.4% 2.6%
0.0% 0.0%
3.1% 2.8%
2.9% 3.9%
3.9% 3.8%
5.2% 3.8%
4.2% 3.6%
6.6% 4.9%
3.4% 4.2%
3.7% 3.5%
4.7% 2.2%
3.9% 2.3%
3.5% 3.0%
0.0%
2.5%
0.0%
2.1%
2.7%
4.0%
3.2%
2.7%
5.2%
3.6%
3.0%
1.5%
1.7%
2.5%
0.0%
2.1%
0.0%
2.8%
3.0%
2.9%
2.9%
3.4%
3.9%
3.3%
3.0%
2.2%
2.5%
2.6%
0.0%
1.5%
0.0%
2.5%
0.0%
3.1%
1.5%
2.5%
1.7%
3.0%
3.0%
1.5%
1.7%
2.5%
Page 48
What can Pinellas County do toprevent a reduction in the quality of the
economy?
The negative affect upon local economies of reaching Build-Out is present throughout the United States
in cities and many small counties. The phenomenon of reaching Build-Out is relatively new, compared
to the age of our nation.
It is understandable community leaders in areas, which are suffering from Build-Out, did not anticipate
the problem, as they had no historical reference, which would have forewarned them of the pading
problem.
Community and government leaders in Pinellas County have the advantage of learning fiom the history
of other areas. They are in the enviable position of being able anticipate the negative affect of Build-Out
and to take measures to prevent a decline in the economy as a result of Build-Out.
Growth for growth sake should not necessarily be a goal for a community. Creating thousands of low-
wage jobs in many cases can hurt the overall “quality of life” and dilute the standard of living for the
existing community.
But since Pinellas County is approaching Build-Out, rapid job growth for the long-term fbture is a moot
issue anyway, as it cannot occur.
The wage level of the jobs created by the contributory industries determines the quality of the economy,
The overall level of the economy and the standard of living of the people living and working in an area
approach this level. The higher the wages, the higher the standard of living is for most residents.
Pinellas County grew in quality fiom 1985 to 2000 as a result of the creation of thousands of high-wage,
contributory jobs. Therefore, the community should concentrate its long-term efforts on maintaining and
improving the quality of the economy through retaining and adding as many high-wage Contributory
jobs as possible.
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Pinellas County will have significant competition in the immediate area for these high-wage jobs.
Hillsborough County has a large supply of Greenfield sites and as does Pasco County. Pasco County
additionally is embarking on an aggressive economic development, recruitment program.
There are two programs, which should be undertaken to help prevent the negative affects of Build-Out
in the future: 1) have an active Economic Development Program and 2) create innovative measures to
prevent facility deterioration and abandonment and encourage redevelopment.
Economic Development Program -
The economic development program for the area should place significant emphasis on the “existing
industry” program.
There are three basic elements to an economic development program:
. . .
Existing Industry - Encourages the retention and expansion of existing contributory businesses.
Marketing and Recruitment - Attracts new contributory employers to the area.
Start-up - Assists in the formation of locally grown contributory businesses.
Pinellas County has for many years had a very successful economic development program, having
recruited many quality companies to the area. However, the ability to attract will be significantly
diminished after the Greenfields have been consumed.
A “Start-up” program is rapidly being accepted as a standard “third” economic development program as
many local economies are flourishing today as a result of the expansion of locally grown industries.
Many of the companies grew from community “incubators.” A “Start-up” program should be initiated
if the community does not already have one.
However, the biggest problem relative to Build-Out is the loss of existing companies. Therefore, the
economic development activity should be structured, as much as possible, toward preserving and
expanding existing industry.
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-
POLICOM recommends the following:
1) Recruitment efforts continue, for existing Greenfield locations, but are directed toward contributory
businesses, which will pay a wage at least 125% of the area average.
2) Recruitment efforts continue to fill aged facilities (Stage 2) which will pay a wage as high as
possible given the condition of the structure.
3) Implement an aggressive, well financed, existing industry program, which is designed to reduce the
costs of operating in Pinellas County as much as possible for existing contributory businesses. The
program should include the follow steps:
-
A. Identify the existing contributory businesses in the area (large and small).
B. Develop quality, confidential communication with the companies to discover their needs and
problems relative to being located in Pinellas County.
C. Solve their problems.
As previously mentioned, when a facility reaches the beginning of Stage 2, many companies begin the
decision making process as to whether to stay in the facility or to move to another location. Many times
the decision to move is based upon geographic-economic factors, which are influenced locally.
Some of these include taxation, regulatory climate, access to labor (commuting time), local cost of
living, and “community attitude” toward the company. Others may be more facility related such as an
antiquated sanitary sewage collection system, absence of modem telecommunications lines, or an
undependable electric power supply, which is disrupted during fiequent thunderstorms.
The more a community can reduce the costs of a company, the more likely the company will stay in the
area. The existing industry program is created to detect and solve small problems, which add costs to a
business, before they become big problems, which cause the company to leave the area.
Page 5 1
Prevent Facility Deterioration and Abandonment
The most pervasive, long-term problem relative to Build-Out is the physical deterioration of the
facilities occupied by the primary industries.
Facility deterioration occurs not only in the industrial sector, but also general services, retail, and older
residential areas. Cities and counties throughout the United States are spending billions of dollars each
year for community redevelopment, attempting to revitalize the aged areas of their community as they
have fallen into physical and economic disrepair.
I
As previously mentioned, communities which presently suffer economic decline as a result of blighted,
abandoned industrial areas had little historic reference to rely upon to take action to prevent it fi-om
occurring. Even if there was notice of the situation developing, it is likely the attitude was the “situation
will cure itself.”
Pinellas County should take affirmative steps to retard or prevent the physical deterioration of its
industrial areas to hinder future economic decline. The following are some suggestions on how this can
be accomplished.
1) Identi@ the locations in which facility deterioration and abandonment is presently occurring. In
these areas, significant measures need to be taken to retard a continuation of deterioration and to
restore the area. Areas, which are located at interstate exits or are easily accessible by commuting
workers, should be targeted for redevelopment for contributory businesses. Those, which do not
presently and will not in the fbture be accessible, should be targeted for a mixed-use development,
possibly residential.
= Pass enabling legislation, which makes the areas eligible for incentive programs. These might
include creating an enterprise zone or a tax increment-financing district (TIF).
= Create a program, which modernized the horizontal infi-astructure for the areas. This includes storm
drainage, sanitary sewers, roadways, electric power, and telecommunications. Included in this
program should be an effort to improve the esthetic appearance of the areas via landscaping and
Page 52
berming if possible.
. Create a series of financial incentives, which will encourage private landowners to rehabilitate the
facilities or cause them to be torn down. Some of these incentives might include
. . corporate income tax credit . . . out-right grants
property tax abatement or credit
sales tax credits on new equipment
subsidized training programs for workers
low interest loans for both the facility and new equipment
. Pass enabling legislation which will cause abandoned, dilapidated structures to be razed, creating
Brownfield locations. If vacant facilities present a clear and present danger to the health and safety,
some communities have the authority to cause the removal these buildings. If the property owner
fails to abide by a local ordinance to remove a building, then the government authority, at its
expense, causes the building to be tom down. The cost of removal, if not immediately reimbursed
by the property owner to the government, is placed upon the property as a lien, to be paid concurrent
with the property taxes. If the property taxes are not paid, the property is sold for taxes and the lien.
Concurrent with this program, legislation should be passed which requires structures to be
maintained to “certain minimum conditions.”
. Create a Brownfield restoration program in which the government authority actually acquires, via
eminent domain, a series of buildings, which are dilapidated and contiguous, creating a large
Brownfield parcel. These areas can be marketed as new building sites. Additionally, increased
facility density should be considered in Brownfield locations to allow for vertical development.
2) Identify the locations where facility deterioration will occur within the next ten years. These will
include structures, which were constructed fiom 1980 to the present. In these locations,
abandonment has likely not yet occurred but the structures are beginning to cycle through the stages
of deterioration. Since these areas are not in such a deteriorated condition as to justify “enterprise
zone” designation, action should be taken to maintain the quality of the structures.
. The community should create TIF’s for these areas if possible. Money from the TIF should be
reinvested into the area in the following manner:
Page 53
Consistent upgrading and maintenance of the horizontal infi-astructure.
Beautification programs for the general area.
Low interest loan pool or grant program for the rehabilitation of facilities located in the area.
' Minimum maintenance requirements should be adopted.
Immediate demolition of a structure which should be razed. Blight is like cancer, if it is not quickly
removed, it will spread.
Communities around the country are practicing the suggestions above to prevent hture facility
deterioration and to deal with existing conditions. The overall issue is the facility cost to a company.
Communities, which can redme the costs of reconstruction or are successhl in having construction
occur in its Brownfield locations will be most likely able to maintain quality economic growth.
In summary, the Pinellas County economy has for many years enjoyed rapid growth in the size and
quality of its economy. However, since it will soon reach Build-Out, it must take affirmative action to
prevent a gradual decline in the economy.
Page 54
.. .
About POLICOM Corporation
POLICOM Corporation is an independent economic research firm, which specializes in analyzing local
and state economies. Its products and services evaluate the economic condition of counties,
metropolitan areas, and states, determine what is the cause of the condition, and offers suggestions and
ideas on how to improve or mamtain the economic “quality of life” for the residents.
Its President, William H. Fruth, the author of this study, has personally studied the data for more than
600 local economies in the United States and has given presentations to state, national, and community
organizations in 27 states over the last four years. 1
Some of the company’s services include:
9
9
9 .
Presentations and workshops for communities and state and national associations.
Community Economic Analysis, Goal Setting, and Target Industry Studies.
Strategic Plan of Action to improve the economy of a local area.
Customized Economic Reports for communities.
For more information, please contact:
POLICOM Corporation
JUPITER, FL 33477
4300 S US HWY 1 STE 203-301
Web Site: policom.com
E-Mail: info@policom.com
Phone: 56 1-744-8 1 87
Fax: 561-743-4048
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