Florida Braces for Storm's Economic Blow

By ALEX ROTH and DAN FITZPATRICK in Atlanta and PAULO PRADA in Tampa, Fla.

Tropical Storm Fay, which is bearing down on Florida, could be another economic blow for a state already straining to cope with the housing crisis and broader financial downturn.

Florida officials Monday insisted they are much better prepared for the storm than in 2004, when a series of hurricanes shattered much of the state.

Florida lost 106,100 jobs in the 12-months ending in June 2008 and a total of 82,200 construction jobs, according to the Bureau of Labor Statistics. That was the worst performance among U.S. states. The Sarasota-Bradenton area, one of the regions where Fay could have the biggest impact, lost 10,700 jobs in those 12 months. Florida sales taxes have been hit especially hard, causing the state's general revenue fund to drop to a projected $24 billion for the current fiscal year from a high of $26 billion in 2006.

The state's system for insuring against hurricane damage is fragile too. Florida was battered by seven major hurricanes in 2004 and 2005. The last of the storms, Wilma, in 2005, caused more than $20 billion in damage. In the wake of those storms, the cost of catastrophe insurance shot up, and many property insurers, after paying out billions in claims, moved to limit their exposure by dropping customers or refusing to issue new policies.

The void was filled by Florida's state-created insurance company, Citizens Property Insurance Corp., which covers people who can't buy insurance in the private market. It is now Florida's largest home insurer, but if it can't meet all its claims after a major hurricane, policyholders around the state could be on the hook for billions of dollars in losses.

There is also concern that even a small hurricane could weaken banks already battered by the fallout from overbuilding, the mortgage crisis, credit problems and foreclosures. Start-up banks flocked to this area in the early part of the decade while chasing the residential building boom. Now several are struggling to survive the worst U.S. banking crisis in a generation. Last month, First Priority Bank of Bradenton, Fla., failed, and observers predict more will follow this year.

"It could make bad problems worse, there is no doubt about it," said Kenneth Thomas, a Miami economist and banking analyst. "This is the last thing we need."

Scores of Gulf Coast homes are delinquent on loans or could soon be served with a foreclosure. Even if Fay, as forecast, hits the western coast of Florida as a relatively weak Category 1 hurricane, wind and rain damage could lower the value of homes even further if they "have not been properly prepared" -- meaning windows boarded over, or damaged roofs quickly repaired -- Mr. Thomas said.

"Ride around some of these areas down here and it's pretty evident no one is stepping up and dealing with it," said Thomas Ferraro, who runs a construction-management services company in Sarasota. "If there is a piece of property that has grass and weeds up over your waist, I don't think anybody is going to be trying to put up hurricane shutters on it."

There were 1,534 new, never-lived-in homes in storm-threatened Sarasota, Manatee and Charlotte counties in the second quarter of 2008, according to housing research firm Metrostudy. One in every 82 households in an area surrounding Sarasota, Bradenton and Venice received a foreclosure filing during the second quarter, according to RealtyTrac. That was 14th highest in the country.

St. Louis-based First Banks Inc. is installing hurricane shutters on any vacant or half-built properties under its control in key areas, according to the company's Chief Executive Terrance McCarthy. Real-estate companies in southwest Florida are offering similar services to smaller banks overwhelmed by troubled properties. "Many of these banks don't have the platform to manage this property," said Ann Stickel, a vice president for Sarasota-based Michael Saunders & Co., which helps manage such properties.

State officials and private companies say big steps have been taken to ensure essential goods and services. Power companies spent millions of dollars trimming vegetation near power lines, replacing wooden transmission poles with concrete and steel and taking other steps to protect power lines from wind-related damage.

"It's been a work in progress but they're much better prepared than they have been in the past," Cindy Muir, spokesman for the Florida Public Service Commission.

Many stores operated by Publix Super Markets Inc., the Lakeland, Fla.-based supermarket chain, have installed back-up generators so they can continue to operate when the power is out, thereby ensuring a ready supply of water, ice and other essentials.

Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association, said a quarter of the state's gas stations now have generators, the result of a state law passed after the 2004 storms.

But many stations along key evacuation routes will still shut down if power goes out. "If we lose power, there's no gas," said Charlotte Davis, a clerk at a Circle K convenience store. "I just lock up and ride it out."

--Liam Pleven contributed to this article.

 

 

Article Source