Tallahassee’s economic rebound shows glimmers of growth, promise and potential — but at a slower pace than the rest of the state.
There’s modest employment growth, while larger cities like Orlando, Miami and Tampa have surging economies. State government still rules in Tallahassee, despite promises from elected and business officials forging a “new economy.”
But, economists and financial experts indicate Tallahassee’s harvest time will come. The future of Tallahassee’s economy hinges on creating a mix of government and private sector efforts and laying a foundation to allow creative minds to push entrepreneurial frontiers.
Startups are essential to the movement. But supporters say someone must take the lead to maintain momentum. They question whether that’s the role for government — startups flourish, they say, when allowed to organically grow.
And while Tallahassee’s economy is fairly healthy, some say the capital city isn’t as business friendly as officials and leaders would like to think. Observers say businesses are saddled with taxes and fees, and development can be delayed by drawn-out permitting processes and policies — a criticism government officials reject.
Unemployment claims and rate
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Leon County’s unemployment rate is 4.3 percent, the Florida Department of Economic Opportunity reported last month. The state’s unemployment rate is 5 percent.
That’s an encouraging sign, says Brett Ewing, a financial advisor and owner at First Franklin Financial Services, which assembles an outlook called the Tallahassee Economic Index. The index illustrates 15 main points of information or “inputs” to determine local economic trends.
He said context is critical when assessing the state of Tallahassee’s economy. He said Florida has had a 42-year low in the number of unemployment claims filed. Leon County has had a 15-year low.
“That’s very healthy for the job market,” Ewing said. “What that is telling us is that the local job market is excelling. More people are being hired than laid off.”
Tallahassee’s bubble effect
When other parts of the state are feeling an economic pinch or surplus, Tallahassee often lags behind. Tallahassee is insulated from the extreme highs and lows other cities experience until often a few years later when the cycle makes its way to this region.
“We don’t get as bad as the rest of the state, and we don’t get as good as the rest of the state,” said Lance Mitchell, an advisor at First Franklin Financial Services. “The reason for that is our insulation with the state government.”
That makes a difference, Florida State economics professor Randall Holcombe said.
“Tallahassee is a government town. In one sense, we have the most diversified economy in the state,” Holcombe said. “Because we’re a government town, our revenue comes from taxing everyone all over the state, from the hotels in Miami Beach, the attractions in Orlando and the agricultural industry in Central Florida.”
He said 76 percent or $20 billion of the state’s general revenues come from sales taxes.
On top of that, Holcombe said there are lower-paying wages for the state employees compared to the private sector because state employees haven’t received an across-the-board pay raise since 2006. And much of the state is based on low-wage jobs, from tourism attractions to agriculture in Central Florida.But private sectors in large cities are booming and increasing wages. More out-of-state companies find those cities attractive because there’s more workforce, more capital and, frankly, more people to choose from to hire.
“It’s true of Tallahassee,” he added. “We have a revenue state we can count on because of that. All in all, it looks like the (Tallahassee) economy is in pretty good shape.”
Population growth
Florida is a magnet for people. On average, 1,000 people per day are moving to the Sunshine State. The population growth for Tallahassee’s region is expected to average 1 percent, the Florida & Metro Forecast reported.
Mitchell said the state is bound for population growth, record tourism numbers, record surpluses within the state budget and an increase in infrastructure projects statewide. Last month, Leon County reached a tourism milestone as it surpassed $1 billion in economic impact for the first time in 2015. Still, other parts of the state are reaping monetary rewards faster than Tallahassee.
“Ultimately that money will flow back to Tallahassee,” Mitchell said.
In addition, Leon County will need more jobs — between 21,860 to 46,550 jobs — to support Tallahassee’s growing population by 2030. The Florida Chamber Foundation predicts the area’s population will swell with more senior citizens — a trend that spread across the state.
More indicators of healthy economy
Other economic indicators are noteworthy. On a local level, the Tallahassee Economic Index is showing an upward trajectory.
Experts plucked six indicators that help paint Tallahassee’s economic picture. The 12-month average shows increases that range from .64 to 26.75 percent upticks for median sales prices, new construction permits, graphic arts, printing, publishing, engraving, binding and blueprinting, lumber and other building materials dealers, advertising and home furniture, furnishings and equipment.
“Our leading indicators are telling us on a year-over-year basis and month-over-month basis things look pretty decent for the economy. That also goes in line with the entire state of Florida,” Ewing said.
If more businesses are advertising and using materials to get information out to the public, that shows more economic confidence in the organization’s health. More home sales show residents are more optimistic about their individual incomes and job security.
Marathon, not a sprint
Tallahassee can’t depend on state government as its main source of income if it wants to compete in a global economy.
Jerry Parrish, chief economist with the Florida Chamber of Commerce, said Tallahassee must make a “long-term investment play.”
He thinks Tallahassee “has a really good start on that process” and stressed it takes longer to build a different kind of economy. Don’t expect instant economic gratification.
In recent years, local startups are shaking up the private sector. Domi Station, Tallahassee’s sole community incubator, has had rapid success. Several startups netted award money for innovations. HWind Scientific LLC grew from a one-man operation within Domi. It’s been acquired by Risk Management Solutions, a global catastrophe risk management firm with offices in London and Singapore and now Tallahassee.
Another huge leap — the first chapter of the Angel Nexus Network outside of the original chapter in Orlando — was launched last year in Tallahassee. This will match investors and business mentors with inventors and entrepreneurs in need of capital to get their businesses off the ground.
“The community that’s going to win the economic development game is the community that’s going to match these two people,” Parrish said.
The newly announced Jim Moran Institute for Entrepreneurship may be the largest change agent in shaping Tallahassee’s startup future. Aside from tech, entrepreneurs in nearly every industry can come to the new center and cultivate ideas into potentially marketable services and products.
“We already have good things going on here,” Parrish said, “but that’s really going to change the game here.”
Room to be more business friendly
FSU economist Holcombe said businesses are treated as “cash cows.” He points to the city’s increase of 13 percent to its property tax rate (it was initially proposed as a 27 percent increase) last year and Leon County’s sales tax rate of 7.5 percent, the highest in Florida. In addition, more fees pile on to increasing expenses. He said fees are just another form of taxing.
“It’s not hard to see,” he said, adding a proposed mobility fee puts more responsibility on developers to pay for expenses related to infrastructure, such as roads. “I know this is still under study so we’ll see what happens. But the motivation of it is they want to direct the way development takes place and it poses a cost on developers.”
Leon County Administrator Vince Long swatted down the notion of Tallahassee being unfriendly to business interests, saying “I think that’s a really dumb argument from a very smart person.”
Several years ago, Long said the county nixed its occupational tax on businesses. Last year, he and several members of his team met with every CEO in Tallahassee. Long said they asked CEOs how government officials could help them retain employees.
“We went into it not knowing what we would get from that,” Long said, adding that most CEOs indicated “taxes and fees were fair.”
Most of the feedback, according to Long, centered around the need and appreciation of amenities and local attractions, such as Cascades Park and quality of life. Those CEOs use them as recruiting tools.
Glimpse of what businesses pay:
Did you know?
Tallahassee’s Metropolitan Statistical Area’s economy has an economy nearly equivalent to Jamaica and a quarter of Cuba’s economy.
This is based on Tallahassee’s gross metro product — $15 billion — which refers to the value added to that community through employee compensation, property income but doesn’t include intermediate sales.
Leon County’s population estimate is 281,845 residents of July 1, 2013, according to the U.S. Census.
Top area employers:
State of Florida – 24,599
Florida State University – 6,119
Leon County Schools – 4,550
Tallahassee Memorial HealthCare – 3,190.
City of Tallahassee – 2,736
Publix Supermarket – 2,102
Florida A&M University – 1,923
Leon County – 1,919
Walmart Stores Inc. – 1,300
Tallahassee Community College – 1,144
Source: Florida & Metro Forecast – March 2016 using data from the Economic Development Council of Tallahassee/Leon County and Florida State University Center for Economic Forecasting and Analysis.
Local industries with the most average growth of new establishments:
Professional and technical services — 52 new ones.
Accommodations and food services — 14 new ones.
Administrative and waste services — 13 new ones.
Local industries with the greatest growth in average employment:
Accommodations and food services — 793 new jobs.
Construction — 389 new jobs.
Healthcare and social assistance — 371 new jobs.
Professional and technical services — 326 new jobs
Retail trade — 304 new jobs.
Local industries with the greatest growth in average weekly wages:
Wholesale trade increased by $188.
Management of companies and enterprises by $104.
Utilities by $94
Construction by $54.
Source: FSU Center for Economic Forecasting and Analysis.