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Oil Spill's Economic Fallout for Florida Easing Up
New Estimates on Economic Impact Reduced by 80%;
Down from $11 billion to $2 billion

By Douglas Hanks, The Miami HeraldMcClatchy-Tribune Regional News

Aug. 06, 2010--In June, Sean Snaith ran the numbers and concluded the Gulf oil crisis might cost Florida's economy $11 billion. This week, the University of Central Florida economist dialed back that nightmare scenario and says the damage will probably be about 80 percent less.

"Now that the well appears to be capped, so has the economic impact," Snaith said by e-mail Thursday that put the new worst-case financial damage closer to $2 billion for the Sunshine State.

Snaith's revised math may be an academic exercise. But it also reflects a hope across the Gulf Coast that the coming weeks will bring a brighter outlook for a battered economy.

On Thursday, BP announced that 14 weeks after its underwater well ruptured on the Gulf floor, workers finally sealed the gusher with cement. While completion of a second relief well would mark the official end to the operation, the announcement was hailed as a milestone in the worst oil crisis in the country's history.

But the sealing comes three weeks after BP said it dramatically cut the flow of oil into the Gulf with a temporary cap installed July 15. Some businesses said that established a turning point in the crisis, with travelers and customers less spooked by the oil threat.

"Now that it has been capped, we're seeing buyers creep back into the market," said Mary Anne Windes, a real estate broker in Destin who also helps run her family's charter fishing business. But there's still a "perception that this place has been ruined forever."

Oily tar balls first washed up on Florida shores during the start of the Panhandle's summer vacation season the first week of June. While cleanup workers bolstered hotel bookings, they did not boost the rental vacation homes that form the backbone of the tourism industry in Pensacola Beach, Destin and other Panhandle destinations.

Both Escambia County, home to Pensacola Beach, and Okaloosa County, home to Destin, saw lodging or "bed tax" revenue plunge 17 percent in June, county officials said Thursday. Both counties also saw their unemployment rates rise slightly in June, but not more than the statewide average, according to the Florida Agency for Workforce Innovation.

The best measure of economic damage will come later this month when Florida releases sales tax data for June. But calling an economic bottom to the oil crisis could take months, though there have been encouraging hints since the well was mostly sealed by BP weeks ago.

Florida and Louisiana reopened coastal waters to fishing, and Alabama last week lifted swimming advisories from its beaches. And at Joe Patti's Seafood in Pensacola, customers seem to be less squeamish about fresh fish.

"In this last week, I've seen new faces come into Joe Patti's," said owner Frank Patti. "I'm not down 50 percent this month. I'd say I'm down 25 or 30 percent. So there has been an improvement. I can survive with that."

George Crozier runs the Dauphin Island Sea Lab, a state marine lab in Alabama. He said he does not expect major damage to Gulf fisheries from the oil crisis, but can't be so confident about public perceptions.

"There have been virtually no fish kills that I'm aware of," he said. "It's still going to be a long-haul to recreate the image of Gulf seafood."

Fears of Oil Armageddon prompted the the U.S. Travel Association to warn that the spill could cost Florida and the Gulf nearly $23 billion in tourism spending. The study released July 22, days after BP said the well was mostly capped, factored in oil coming to Miami and other destinations on Florida's East Coast.

Adam Sacks, the study's author, said the projection was still solid since oil left in the Gulf could still get sucked into a current and make its way to Miami. But even if that possibility gets eliminated -- the head of the federal oil response, Thad Allen, said last week it would " go to zero" once the well was capped -- travelers may not be convinced.

"People have misperceptions," said Sacks, managing director of Oxford Economics USA. His study looked at past catastrophes, including the Exxon Valdez, that scared off tourists. "What we found is the reaction always far exceeded what you would expect from the disaster itself," he said.

Added Roger Dow, the trade group's president: "It doesn't matter. People just think there's oil."

St. Joe Co., a real estate developer with resorts and communities throughout the Panhandle and other areas in Florida, filed suit this week, claiming long-term damage to its holdings. The suit against Halliburton Co., which helped build the underwater well, describes a company that bet big on growth in the Panhandle only to see the region's economic fundamentals scrambled by the oil crisis.

Since the April 20 rig explosion, St. Joe says the value of its properties has declined substantially. Its stock has lost 23 percent since the April 20 incident; at one point it had dropped 40 percent. At its worst point, the company lost about $1.4 billion in stock market value.

Even if tourists return to the Gulf Coast as the oil crisis subsides, home buyers could prove a bigger challenge for the region's economy.

"It's one thing for me to take a trip and spend some time on a beach," said Christopher McCarty, director of the Bureau of Economic and Business Research at the University of Florida. "It's another thing for me to invest money on a coastal property where I don't know what the lingering effects might be -- and I don't want to invest the money to find out."

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To see more of The Miami Herald or to subscribe to the newspaper, go to http://www.herald.com.

Copyright (c) 2010, The Miami Herald

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