Recession Recovery? Innovation, People, and Place Matter

A FEW KEY QUOTES: New Ways of Living and Working Will Drive Post - Crash Prosperity – with Richard Florida, Author ‘The Rise of the Creative Class’

“Economies and societies invariably remake themselves in the wake of a crisis. It’s a necessary component of rebound and recovery.”

“…place and geography has a significant impact on economic systems. With this Great Reset (The Recession of 2008-09), we will see an even greater emphasis on place – more specifically the rise of the mega region, which are new and incredibly powerful economic units. No longer will we focus on the city versus suburb but on how to increase our connection to our respective mega regions.”

“The First Reset (1870) saw power and communication grids and streetcar and subway systems spread across the country, speeding the movement of goods, people, and ideas. The Second Reset (1930) brought huge developments in media, mass-produced consumer goods, and the role of large corporations, when companies like IBM rose to prominence and when what was good for General Motors was good for the nation.” [Note: The Resets of 1870 and 1930 are references to the Panic of 1873 and the Great Depression.]

“Most importantly, cities have to recognize that in times of crisis they have to help themselves. Governments, no matter how well intentioned, can only do so much, especially when they themselves are so strapped for cash…Every city has hidden seeds of opportunity waiting to be nurtured.”

(About the Sunbelt) “The boom in housing and the influx of population generated a thriving retail and service economy, but there were no economic drivers underpinning it all. There was nothing to generate new capital, only the capital that people were bringing with them. When that bubble burst, there was nothing to fill the gap. The potential solutions in the Sunbelt aren’t much different from those in the Rust- Belt: Build on real underlying economic strengths and tap into the creative core in the existing population and its valuable human capital.”

“For the first time in human history, the basic logic of our economy dictates that further economic development requires the further development and use of human creative capabilities. The great challenge of our time is to find ways to tap into every human’s creativity”

“Places like Detroit, Cleveland, and Pittsburgh are among my favorite cities. They have great universities, clusters of innovation across a range of industries, and pools of innovative and creative talent to build on. They need to stop their penchant for megaprojects like new stadiums…and stop depending on federal bailouts. They need to understand that rebuilding takes a generation or two – it will not happen overnight – and that it has to come from building upon local strengths and capabilities organically.”

“Transportation systems that are fast and efficient and environmentally clean are going to enable the formation of these new mega-regions…We need to be able to accelerate the movement of people, goods, and services – the very movement of ideas, knowledge, and creativity – between our major population centers.”

Read Bob Morris' complete interview about The Great Reset with Richard Florida on the Wall Street Cheat Sheet http://bit.ly/thegreatresetwsj

Regional assets: Northeast Florida, success to build on

Active Market Sectors
Financial: German-based Deutsche Bank, which commenced operations in Jacksonville in 2008, hired an additional 250 employees in 2010 — another step toward meeting its commitment to create a total of 1,000 jobs for the region. In addition, Maitland-based Digital Risk has announced plans to open a service center in Jacksonville and hire a minimum of 175 employees. The company monitors and manages loan portfolios and detects loan fraud, reviewing approximately 14,000 loans per month.

Energy: InEnTec Chemical moved its corporate headquarters from Bend, Ore., to Clay County in 2010. The company's manufacturing facilities convert both hazardous and non-hazardous commercial, medical and industrial waste materials into clean, renewable energy products such as ethanol, methanol, syngas and hydrogen with minimal environmental impacts and low costs. InEnTec officials note that the Northeast region offered the perfect location to tap into the scientific expertise available at Florida's leading research universities as well as an ever-growing clean technology talent pool.

Aviation/aerospace: Aviation Systems Engineering has added 10 high-paying jobs to its Jacksonville branch office. The company specializes in aviation system development and analyses and has contracts with the U.S. Department of Defense. AvMax Group is opening a heavy maintenance and modification facility to serve the region's jet and turboprop aviation industry at Jacksonville International Airport. The facility will initially employ as many as 100 to 120 licensed aircraft mechanics.

Healthcare: Northeast Florida's already strong healthcare economic engine continues to surge forward. Hospital giant Health Care Association of America (HCA) is building a new $130-million hospital near Cecil Commerce Center, and Baptist Medical Center is adding a $200-million, 11-story tower to its existing campus.

World-renowned Mayo Clinic Jacksonville has so many international patients that it has established an office dedicated to meeting their special needs. Nine full-time staff members assist patients and families by scheduling appointments; translating medical documents; and providing concierge services for travel arrangements to and from Jacksonville and around the metropolitan area once they arrive.

International Business
Thanks to Florida's location at the center of the Western Hemisphere, trade with countries in the Caribbean and in Central and South America has become practically seamless. In recent months, Cornerstone inked a deal to promote business opportunities with Ireland and is currently working with the group Atlantic Way Region.

In addition to Saft America, other companies with foreign investment interests that are thriving in Northeast Florida include:

• Mercedes Benz USA, which has opened a 400,000-square-foot parts distribution center at Jacksonville International Tradeport. The venture represents a $26-million capital investment for Mercedes Benz.
• Hanjin Shipping Company of Seoul, Korea, which is building a 90-acre container facility at the Dames Point Marine Terminal at the Port of Jacksonville. Hanjin joins Tokyo-based Mitsui OSK Lines (MOL), which opened its TraPac Container facility at JAXPORT in 2009.

Affordability
Florida's Northeast region remains one of the state's most affordable places to live. According to research data compiled by the National Association of Realtors for the first quarter of 2010, the median sale price for existing single-family homes in the Jacksonville Metropolitan Statistical Area was $144,900. The median sale price during the same period for condominiums and cooperatives was $79,700.

Jacksonville Electric Authority (JEA), one of the nation's largest municipal utilities and the largest community-owned utility in Florida, is this region's primary provider of electricity, water and wastewater service. Serving most of Duval County as well as portions of Nassau, St. Johns and Clay counties, JEA boasts some of the lowest rates in Florida.

Source: Business Florida 2011 - The Regions. Northeast - Connecting to the World. Northeast Florida offers international companies the right mix of amenities and global connections. http://www.floridatrend.com/biz_fl_article.asp?page=1&aID=53633

Northeast Florida's regional assets: Saft America Inc.

Peter Denoncourt says there wasn't one particular thing that stood out about Northeast Florida when Saft America Inc. went looking for a new location to build a manufacturing plant for its lithium-ion batteries; it was a combination of factors that made this seven-county region attractive.

Two-thirds of the 50 million people living in the southeastern United States are within 600 miles of this region, which is home to more than 80 corporate, regional and divisional business headquarters; a combination of quiet neighborhoods and bustling urban centers; miles of pristine Atlantic coastline; and a wealth of cultural and recreational opportunities, not to mention America's oldest city — St. Augustine. And with three interstate highways, three major rail lines, two deepwater ports and four marine terminals, Northeast Florida offers some of the best transportation options available.

Since Saft America plans on using its new factory as a "showcase" to both domestic and international clients interested in alternative energy sources, convenience played heavily into the site decision. Jacksonville International Airport, with 200 arrivals and departures daily, provides easy access to the factory, which is located at nearby Cecil Commerce Center North.

Saft America Inc. already has five manufacturing plants in the southeastern U.S., mostly in rural areas. However, for this new 235,000-square-foot factory for the production of lithium-ion batteries, the company required a more sophisticated site and Jacksonville seemed the perfect fit, says Denoncourt. "This city has more of an international feel."

"We expect to do a lot of work,'' Denoncourt says, noting that at full capacity, the Jacksonville facility will produce an estimated $300 million worth of batteries annually. To meet demand, Saft is expected to hire as many as 280 workers at salaries that are approximately 15% above the average statewide wage. Many of the hires, Denoncourt adds, will likely be drawn from the region's plentiful pool of former military employees.

More Regional Assets
Universities/Colleges: Edward Waters College, Flagler College, Florida State College at Jacksonville, Jacksonville State University, St. Johns River Community College, and the University of North Florida
Airports: Jacksonville International Airport and Northeast Florida Regional Airport at St. Augustine
Seaports: Port of Fernandina and Port of Jacksonville
Spaceport: Cecil Field Spaceport

Source: Business Florida 2011 - The Regions. Northeast-Connecting to the World. Northeast Florida offers international companies the right mix of amenities and global connections. http://www.floridatrend.com/biz_fl_article.asp?page=1&aID=53633   

Economist speaks to JCCI about recession recovery in Northeast Florida

Below is an excerpt from Karen Brune Mathis' interveiw with Dr. Sean Snaith, Director of the Institute for Economic Competitiveness within the College of Business Administration at the University of Central Florida. Dr. Snaith spoke at JCCI's Annual Meeting on 9-29-2010. Check out the full story at the Financial News and Daily Record online http://www.jaxdailyrecord.com/showstory.php?Story_id=531975

What is your message to JCCI as it embarks on a new study about the recovery and how Jacksonville should position itself? We are in a recovery following a deep and prolonged recession, so we need to temper our expectations. The damage that was done, particularly to consumers’ wealth via the housing market and the stock market, has unfortunately put consumers in a bit of a retrenchment mode to save and try to build those nest eggs back up. When consumers are saving more, they are spending less. Consumer spending is 70 percent of our national economy, so we will have that chunk of the economy growing, but not at a robust pace.

Will Jacksonville’s economy recover more quickly, slowly or at the same pace as Florida recovers? Jacksonville did not suffer to the same extent in the housing cycle. It was not as pronounced as other parts of the state…the damage is less severe than in other parts of the state. I think it will recover at the pace of the Florida recovery, if not a little faster. I think the lower cost of living in Jacksonville relative to some areas will be beneficial. Going forward, in terms of attracting retirees, that element of Florida’s economy and the influx of retirees have really been damaged by the housing market and what happened in the stock market. It will change many retirees’ plans in terms of timing and what type of retirement they will be able to afford.

Speaking of Florida, is it out of the recession? Will it recover more slowly, quickly or at the same rate as the nation? In Florida, there is no official group to declare this. My contention is that Florida came out of the recession in the first quarter this year. That being said, I’ve referred to the labor market for some time as the scar that’s left over from the financial and economic trauma. That scar is a pretty ugly one and it is not going to fade quickly. We are going to be dealing with the aftermath with respect to the labor market for many years. We think unemployment will be in double digits until the second half of 2012 and payrolls will not recover to their pre-recession levels until 2014. We are looking at a very pronounced and prolonged cycle and a long period of recovery, unfortunately. Job growth has not resumed very strongly in the private sector. We are likely to see the unemployment rate drift up a few tenths of a percent before its long and gradual decline.

Is there or will there be a double dip recession? Last year our second quarter forecast said the recession is over but the recovery is shaped like a gravy boat where you see the handle, you plunge deep down and the recovery would be the gradual tapered spout, slow and protracted. There was a pseudo-V at the end of last year and the first three months of this year. It was directed by inventory cycles and over the course of the recession, businesses were slashing, inventories. No one was buying. They stopped slashing and (that) gave us a big boost of 5 percent of Gross Domestic Product growth in the fourth quarter and 3.7 percent growth (in the first). Inventory cycles are transitory and they are not the stuff that sustains strong recoveries and that is what we are seeing, (the results of) that inventory boost rather than the emergence of a double dip. It is the recovery displaying its true nature. With the housing and stock market, the damage is not going to be undone overnight. The extent of the damage is severe. When you go through that kind of trauma, the recovery is not rapid. It is slow, it is protracted and there’s therapy involved.

What specifically should Jacksonville and Northeast Florida do, or anticipate, as it positions itself for creating jobs in the future? What are the strengths? I think the transportation and warehousing sectors are one of the region’s real strengths. As the Panama Canal widening becomes complete and we get those ships coming through, there is real opportunity for Jacksonville, and Florida in general, to take a large step forward in terms of growing international trade. That means we need to invest in our ports, in our rails, in our highways. That kind of government spending provides returns over time.

Need capital? Florida has angels!

In April 2008, Craig Reilly was ready to take the next step. Reilly and his two partners had gotten the company that far with their own money but had begun looking for investors to fund more growth.

Reilly turned to a group called the Winter Park Angels — an organization comprised of affluent local residents who had come together to fund local startups and emerging companies.

Five months later, 19 members of the angel group had invested a total of $750,000. Reilly was able to expand even as the financial markets crashed and financing options evaporated. Reilly’s company, Plus-One Solutions has met its growth targets and is about to undergo another financing round to fund more expansion.

The Winter Park investment group is just one of at least nine local angel bands that have emerged in the past several years, meeting formally or informally to pool money and invest in local startups. Two new angel funds formed in Florida in the last year with more than $1 million each to spend on both initial funding and later-stage expansion.

Angel investors, either as individuals or groups, typically look for entrepreneurs who want to build a company then sell it. For their investment, the angels get a share of ownership, looking for a return of as much as 30 times their initial investment within seven years.

Meanwhile, for Florida businesses, angel groups help to mitigate the traditional lack of capital for promising new businesses in the state. "For entrepreneurs, it's the smartest money you can get," says Rhys Williams, president and co-founder of New World Angels, a Boca Raton group. "You could be getting 40 investors committed to your success who use their networks to grow the company and who will help you find the next round of capital."

In Florida, the oldest angel investment fund is in Jacksonville. Springboard Capital has invested in 12 startup companies over the last decade. The group began informally, a cadre of friends talking deals over sandwiches, and later organized as a fund when 45 members put up at least $50,000 each. The group formed a second fund a few years later.

For the most part, angels like to invest in companies whose business they know something about. In Orlando, for example, Catapult Capital has tapped into breakthrough technologies and entrepreneurial deals vetted by the University of Central Florida venture lab and Rollins College.

A new fund in southwest Florida, Tamiami Angel Fund, has members with varied backgrounds and wants early-stage, pre-revenue companies with evidence of customer demand or businesses looking to expand.

At least two of the angel groups in Florida seek women-owned business. Go Beyond Network in Naples and Women Angels in Miami, both founded by women, see opportunity in this fast-growing sector. Barbara Boxer, founder of Women Angels, says the economic downturn has proved to be a great time for angel groups with cash to spend.

Others funds prefer to invest in one industry. A group of Miami angels led by healthcare entrepreneur Mike Fernandez formed the $20-million MBF Healthcare Fund aimed at investing in healthcare startups in Florida.

Sean Christiansen of Catapult Capital in Orlando says his angel group wants to raise awareness that the groups are a viable, local financing source: "Historically, Florida has lost companies because they went to venture capital firms who prefer local businesses, and most of those firms were not in Florida."

These days, startups most attractive to angels tend to be in information technology, web 2.0 and social media, life sciences, medical devices and medical-related software. Williams, of New World Angels, says the most important factor for angels is not the industry sector but the presence of smart managers with experience building a business.

Read the entire article, “Bands of Angels: Local groups of investors are forming all over Florida, providing funding to capital-starved emerging companies” (10.1.10) by Cindy Krischer Goodman at Florida Trend online http://www.floridatrend.com/article.asp?aID=53691&parentID=53781