A Relatively Tiny Industry is Seriously Threatening Florida’s Prosperity

Some people claim that Florida’s sugar industry is a big deal. It does account for more than half of the entire nation’s cane sugar production, generate more than $500 million in annual receipts and sustain 12,500 full and part time jobs. But in reality that is barely a fly speck (less than one tenth of one percent) in a state with a trillion dollars a year in economic output.

Further, much of that $500 million is really just corporate welfare. U.S. government manipulation of domestic sugar prices artificially boosts the cash paid to these growers, often accounting for more than half of those receipts. If the industry actually had to sell their product at world sugar prices there is little question that they would disappear in a matter of months. Without major governmental intervention there would be no U.S. sugar industry.

How does sugar compare with other Florida industries such as tourism, retirement and real estate? According to VisitFlorida, out of state visitor spending reached $112 billion in 2016, more than 180 times the receipts from sugar sales. Related to tourism is the in-migration of seniors and the state’s “retirement industry” which has long been a driving force in state economic expansion. Personal spending by seniors has been estimated at more than $135 billion annually.  Seniors account for 50% of all Florida new home construction and more than half of the revenues for Florida’s $160 billion a year health care industry.

Real estate construction, sales, finance, advertising and maintenance are even bigger. The Florida Department of Revenue estimates that real property in the state is now valued at more than $2.5 trillion. Annual receipts from sugar equal two one hundreds of one percent of the value of Florida real estate. But that 0.02% appears to be having a devastating affect on real estate, tourism and the entire state economy.

But Sugar producers are inflicting serious damage to the things that draw tourists and retirees to the state and provide the foundation for industries like, tourism, retirement and real estate, the state’s pristine beaches, crystal clear water and abundant wild life and fisheries. Through their well cultivated political connections, sugar producers have significantly altered the state’s hydrology. The actual shape of the state entire southern watershed has been redrawn.

Rainfall in Orlando no longer flow down the Kissimmee River through Lake Okeechobee into the Shark River destined to Florida Bay off the southern edge of the state’s mainland. The Everglades no longer absorbs and cleans those waters as they meander toward the ocean. Instead they are dammed in Okeechobee where they are held for irrigation for their sugar fields if needed or diverted into canals and rivers to flow either east to Port Saint Lucie or West to Fort Meyers.

Massive dikes protect the sugar fields and when there is too much water in the fields it gets pumped back into the lack along with the fertilizers, insecticides and herbicides used in sugar production. If water flowing into the lake from its natural tributaries or the sugar field back-pumping gets too high and threatens the dikes, it is released into the canals and rivers going to Port St. Lucie and Fort Meyers.

The highly polluted waters from Okeechobee produce algae blooms, major fish fills and even the death of pets and wildlife along both rivers. Scientists and physicians have also expressed concerns about human health for those living in proximity of the two rivers.

But in recent years another concern has emerged about the policies put in place to assist the sugar growers. A type of salt water algae known by the scientific name of Karenia Brevis but popularly referred to as “Red Tide” has become increasing problematic for coastal communities along the Gulf Coast. While the algae has been in the Gulf since before Europeans came to the area, records indicate that Red Tide  outbreaks along the Florida Gulf Coast have become more numerous and more severe. Scientists have identified 10 different nutrients that feed the growth of Karenia Brevis and two are among the more prominent effluents flowing out of Okeechobee, phosphorus and iron and reaching the Gulf at Ft Meyers.

At this point, scientists have not established a direct cause and effect between the large amount of phosphorus and iron being injected into the Atlantic and the Gulf from Okeechobee to the Red Tide outbreaks but there is little question that the algae is getting more nutrient from some place no one has come forward with a more probable candidate than the effluents being pumped from Okeechobee to protect the sugar farms that lay in the lakes normal drainage path.

What is no longer a matter of speculation is the potential for serious financial damage to the state of Florida from Red Tide outbreaks.  Recently, WINK Television in Fort Myers reported on a survey by the Sanibel and Captiva Islands Chamber of Commerce 16,791 renters of vacation properties on nearby Sanibel Island cancelled their reservations this summer or left properties they had rented early during the Red Tide outbreak this summer.  The station sighted other numbers indicating the cancelations, “impacted everything from restaurants to real estate.”

An official of the Royal Palm Coast Realtor Association told WINK that a number that high was remarkable. “To hear it was just Sanibel, that’s just crazy. That’s a lot of people to cancel.” He also said that the cancelations were already impacting real estate valuations.

“A dozen buyers backed out of purchasing homes (recently) and dozens more listed their properties for sale…If the negative stigma of the red tide doesn’t subside then I don’t think the buyers will be coming to buy…In the last 120 days, we’ve seen 75 new listings come on the market on Sanibel. That brings a total of 192.” But, the official stated that most of the listings are waterfront properties, and no one is buying

Sanibel, an island in the gulf located just offshore from Ft Meyers and at the mouth of the Caloosahatchee River contains a large portion of the most valuable real estate in Lee County, Florida where total real estate valuations had only this year recovered from the market crash of 2008. State Department of Revenue statistics indicate that the total real estate valuation for Lee County as of July of this year is $104.9 billion about 6 percent higher than last year.

If the Red Tide problem in the Gulf resulted only in a stagnation in Lee County valuations rather than another year of 6 percent growth, home owners and other real estate investors would lose $6 billion or more than 10 years’ worth of Florida Sugar industry sales—and that is only one Gulf Coast county. Nearby Collier country where Naples is located has valuations slightly greater than Lee County. If you add the other Gulf Coast counties up to St Petersburg, you have nearly half a trillion dollars in real estate with a potential loss of tens of billions of dollars in equity growth if Red Tide does nothing more than stop the recent appreciation in real estate values for a single year.

Of course, it is easy to examine the Sanibel Chamber of Commerce data and conclude that the impact would be far worse. Further, Red Tide is no longer just a Gulf Coast problem in Florida. The Miami Herald reported on October 3rd that “Dozens of dead fish littered a Palm Beach County beach Wednesday as a toxic red tide appeared to spread along Florida’s Atlantic coast…low to moderate amounts of the algae that cause red tide have now turned up off three counties along the state’s more densely populated east coast. Blooms were confirmed in Palm Beach, Martin and St. Lucie counties marking the first appearance of red tide along Atlantic shores in more than a decade.

It should be noted that St. Lucie county is where the St. Lucie River empties the effluents from Okeechobee into the Atlantic and that Martin and Palm Beach Counties are just below.

How could an industry so small persuade government officials to implement policies so damaging to the biggest sectors of the state economy? That is a good question for Floridians to ponder as they go to the polls on Tuesday morning.

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Scott Lilly has been writing about public policy for more than four decades. He is widely viewed as one of the leading experts on the federal budget process and the impact of changes in federal spending policy on local communities, national security and the economy. For 31 years, he worked as a Congressional staffer during which time he directed the staffs of the Joint Economic Committee, the Democratic Study Group and the House Appropriations Committee. He has traveled widely probing the effectiveness of government programs across the U.S. and overseas. He is a Senior Fellow at the Center for American Progress and an Adjunct Professor of Public Policy at the LBJ School of Public Policy, University of Texas. He has testified before numerous Congressional committees and has been a guest on CBS, CNN, Fox News, MSNBC and various other television and radio networks. He has been frequently quoted in the Washington Post, the New York Times, the Los Angeles Times, the Chicago Tribune and other major newspapers.