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Oil Spill Threatens Florida Tourism

Florida stands to lose most in oil spill disaster

Michael Connor  May 06, 2010

MIAMI - Florida, with 2,276 miles of beaches and tidal shoreline, is the U.S. state most economically vulnerable to the massive oil slick in the Gulf of Mexico.

At risk is Florida's tourist sector which last year accounted for a hefty $65 billion of state economic activity.

Florida's local and state governments rely heavily on sales and real estate taxes. That income would be depressed by any downturn in vacationers and the value of second homes.

"This could stain Florida's reputation for having beautiful beaches," said senior economist Mark Vitner at Wells Fargo in Charlotte, North Carolina. "It may scare off some people from committing to conventions and vacations. Florida is clearly the biggest potential loser."

The state's lightly populated northwestern region known as the Panhandle is the area of Florida closest to the giant slick. Coastal Alabama, Louisiana and Mississippi are also threatened. The three shoreline areas extending west from the Panhandle do $8.5 billion of tourist business each year.

Florida's leisure and hospitality sectors make up nearly six percent of the state's economy.

"If fears or closures drive tourists away from Gulf Shores, Mobile, Gulfport or Biloxi, the restaurants, grocery stores and retailers along the coast will suffer during the season when they traditionally collect the bulk of their annual revenues," University of Alabama professor Bob Robicheaux said.

Experts were reluctant to guess at potential damages at such an early stage, citing too many unknowns like how effective containment would be, or how far currents could pull the growing oil spill.

Although Florida now has only a small energy-related sector, unlike other Gulf states such as Louisiana, it will likely miss out on or have to wait many more years for economic and tax gains expected to flow from proposed offshore drilling projects that now look shaky.

"Offshore oil exploration was going to be a source of significant growth but looks less likely now," Vitner said.

Florida, which is a rare American state with no personal income taxes, is seeing tentative post-recession upticks in sales taxes that account for 75 percent of the state government's general fund revenue.

"We'll watch sales taxes along the coast for signs of impact on tourism, such as restaurants, hotels and amusement venues," said Amy Baker, the Florida legislature's chief economist. "In the long term, there might be effects on property. You may see sales of property decline, as well as property taxes."

Like Florida, Mississippi, Louisiana and Alabama have substantial commercial fishing sectors already being stung by fishing prohibitions imposed after the oil disaster that began last month. On Wednesday, authorities were on alert for the first major landfall of the slick, estimated to be at least 130 miles by 70 miles in size.

"The two sectors that may be most affected are tourism and fishing," said Michael Chriszt, an assistant vice president and economist at the Federal Reserve Bank of Atlanta.

Fishing and forestry, which government statisticians track as one sector, added up to $2.1 billion in Florida, $715 million in Alabama, $613 million in Louisiana and $600 million in Mississippi during 2007, according to Chriszt.

In Louisiana, state revenue should not feel any immediate drag from the oil disaster, according to Louisiana State University Economics Professor Jim Richardson.

But bigger effects in Louisiana could be on the oil and gas industry, which accounts for about 50,000 jobs in the state, according to Richardson. Calls to shut down offshore drilling or impose more regulations could hurt those jobs, he said.

The region's ports that serve cargo ships have so far not felt any negative effects from the slick, Chriszt said.

Officials at Alabama's Port of Mobile, the ninth busiest U.S. harbor, reported that ships carrying coal, petroleum, forest products, steel and grain are coming and going at the normal rate of 100 to 120 ships per month.

Florida stands to lose most in oil spill disaster
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