Flagler County: Fastest-growing, hardest hit, looks to future

Posted Sep 17, 2016 at 9:30 PM

By Aaron London

In 2005, Flagler County sat at the top of the heap as the fastest-growing county in the nation, according to the U.S. Census Bureau. Riding a wave of residential construction, Flagler County and Palm Coast garnered national attention and appeared poised for bigger and better things.

But that wave crashed as the housing market collapsed, putting Flagler at the top of another list: highest unemployment rate in the Sunshine State. Flagler County and Palm Coast quickly became a poster child for the Great Recession.

The county posted double-digit unemployment for nearly four years, topping out at 15.2 percent in December 2009. Property values tumbled, construction activity dwindled and the plunge sapped tax collections, putting local governments in a budgetary bind.

The collapse of the housing industry threw thousands out of work and forced many families to move out of their homes as loan payments became too much to handle. Some moved on to different careers in other communities; others struck out on their own or started a new business.

From 2008 to 2009, population growth in the former fastest-growing U.S. county by percentage slowed to a relative crawl. Fewer than 1,000 people moved to Flagler County that year.

When County Administrator Craig Coffey arrived in December 2007, the pace of development in the county had already begun to slow, but not everybody understood the boom days were over.

“A lot of folks were in denial as far as the happy days going on forever,” Coffey said. “We were starting to go into uncharted territory in modern times.”

The financial situation was complicated by several major projects the county had undertaken, including construction of the Government Services Building — an expansive new home for county and school district operations — and Kim C. Hammond Justice Center on State Road 100.

“We had to start making decisions quickly,” Coffey said, reflecting a fundamental change in the county’s economic underpinnings.

“During the boom, the county’s major industry was growth,” he said. When the growth disappeared, there was nothing to replace it.

“There was no silver bullet for anyone out there,” Coffey said. “Our goal was to try and pursue every avenue of turnaround we could to sustain our community.”

Meanwhile, with local governments facing falling property tax revenues, finding the money to pursue an economic development agenda was nearly impossible.

“In our time of greatest economic need, we were funding it less and less because we were all being constrained,” Coffey said. “We needed to be more aggressive and we were being less aggressive and using older models.”

AN ECONOMY OF ‘CAREERS’

In early 2011, a series of economic development summits were held, bringing elected officials, business and community leaders and residents together to search for solutions and find ways to work cooperatively.

For Garry Lubi, senior vice president at CenterState Bank and a member of the board of directors of the Flagler County Chamber of Commerce, the summit meetings were exactly what the county needed.

“I think the economic summits were incredibly important for our county on a number of fronts,” he said. “We were obviously feeling the effects of the downturn even more severely than other counties in Florida and the United States. Much was due to our over-reliance on the construction industry.”

One of the most important ideas to emerge from the summits was the absolute necessity for economic development even when money was tight.

“We were changing the conversation from ‘if we do economic development’ to ‘how we do economic development,’” Lubi said. “We also really developed a foundation from a strategic plan standpoint.”

In March 2012, Helga van Eckert joined the county’s economic development effort as executive director of the Flagler County Department of Economic Opportunity and found a community eager to get focused on revival.

“I came into that environment, an environment that was welcoming of a change because they recognized that what they had been doing wasn’t working,” van Eckert said.

Beginning with a series of strategic planning sessions, the county economic development office began to focus on how to change the approach to economic development.

“Recognizing the need for change and creating change are two very different things,” van Eckert said.

Out of the planning sessions came an identification of targeted industries that county officials would focus on to attract new business development and create jobs.

“Everything we are doing is an effort to respond to what the community wants, what the community needs and have Flagler County grow in a sustainable fashion so we maintain our amazing quality of life,” van Eckert said. “But supplement it with businesses that provide careers as opposed to just jobs.”

That strategy has paid dividends as high-tech companies have begun to discover Flagler County. One of the biggest success stories for the county’s economic development effort was the arrival of Coastal Cloud, a cloud-based technology solutions business that located its headquarters in Flagler County in 2013 with much fanfare, including a visit from Gov. Rick Scott.

The company initially promised to create 100 jobs in the county but has surpassed that goal and now plans on adding another 150 to 200 jobs over the next three years.

NEIGHBORHOODS TAKE PRIORITY

The bursting of the housing bubble hit the city of Palm Coast especially hard, turning it from a scene of bustling activity to a rush of foreclosures.

In early 2011, Palm Coast officials realized the downturn was worsening and the city’s economic foundation was cracking. That led to the development of an economic development program called “Prosperity 2021,” said Beau Falgout, administrative services and economic development director for the city.

“We developed that document and it helped us focus on what we could do to deal with the recession and the issues the city was facing,” he said.

The plan focused on three areas: neighborhoods, existing businesses and attracting investment.

“The neighborhoods was the most important one,” Falgout said.

With a growing list of foreclosed homes, the city faced an economic and physical drain and neighborhood stabilization became a priority.

Falgout said a community development block grant allowed the city to rehab foreclosed homes and re-sell them to home buyers, rather than investors and speculators that had led to the crash of the housing market. A key to that was keeping neighborhoods looking good.

“We didn’t stop doing beautification, even when we actually laid off some employees,” Falgout said. “The thought process was that growth was going to be part of the city’s future.”

The city began working on major projects on State Road 100 and Palm Coast Parkway to ensure that visitors would get a good first impression of the city, Falgout said.

A SPORTS TOURISM NICHE

To help existing business survive and prosper, the city looked for ways to invigorate the economy and began working to increase tourism development, specifically sports tourism.

“For existing businesses, the sports tourism is really when it took off,” Falgout said. “That definitely was a big part of our strategy. During a recession, there isn’t a whole lot of businesses relocating so we saw an opportunity with the sports tourism part.”

The tourism effort has blossomed in recent years with the addition of an active marketing effort to directly solicit sporting events to come to Flagler County. Palm Coast and Flagler County now routinely host several large-scale soccer and lacrosse tournaments that attract teams from throughout the Southeast and beyond and have hosted professional volleyball matches in Flagler Beach.

That effort helped the county surpass the $2 million mark in bed tax collections in 2015 and so far this year collections are up around 3 percent, according to Matt Dunn, executive director of the Flagler County Tourist Development Office.

As Flagler County recovers from the Great Recession and the bursting of the housing bubble, efforts to diversify the economic base and attract high-tech companies with good jobs are taking root.

The numbers bear out the county’s return from the pit of the Great Recession. The average unemployment rate in 2015 was 6.2 percent, less than half of the 14.7 percent it was in 2009. Property values have also rebounded, posting increases in three successive years beginning in 2013 after declining from 2008-2012. The construction industry has gotten healthier, with residential building permits on the rise and new commercial developments, such as the Island Walk project in Palm Coast, and increased development along the State Road 100 corridor.

While efforts to diversify the local economy with targeted industries has increased new business development, the housing industry remains an integral part of the economic mix. The biggest issue these days facing builders is a lack of skilled workers for construction projects, according to Jason DeLorenzo, government affairs director at the Flagler Home Builders Association.

“It’s something we hear from our builders all the time, that there is a labor shortage and because of it they are not able to be as productive as they’d like to be,” DeLorenzo said.

University of Central Florida economist Sean Snaith said Flagler was not alone in feeling the impact of the housing bubble hard and fast. Like communities elsewhere in Florida, as well as Nevada, Arizona and California, he said Flagler is an example of “an area that lived by the sword and died by the sword, so to speak” when the housing market collapsed.

Snaith said the effort to fashion an economic development strategy at the county level, with the cooperation of local business leaders and others, was an important outcome in response to the recession.

“I think that the lessons were learned, albeit quite painfully,” he said. “I think the response was appropriate and the recovery took a long time, but I think the next downturn — not if but when it comes — should not be as painful as the last one in Flagler.”

BOOM, BUST & BEYOND: A TIMELINE

July 2005: Flagler County named fastest-growing in the nation

July 2007: Property values peak at $12.2 billion

December 2007: Great Recession begins

June 2009: Great Recession ends

Dec. 2009: Flagler unemployment hits high of 15.2 percent

January 2011: City of Palm Coast releases Prosperity 2021 plan

February/March 2011: Economic development summits held

November 2011: Flagler County Department of Economic Opportunity created

March 2012: Department of Economic Opportunity holds first strategic planning session

May 2012: Designs for Health becomes first business relocation under county DEO

April 2013: Second strategic planning session held

March 2015: Flagler County population passes 100,000 milestone

July 2016: Flagler unemployment at 5.7 percent

RECESSION SURVIVORS

Bill Stoughton: Homebuilder downshifts, retools strategy

Bill Stoughton has seen a lot in his 46 years as a home builder. Booms and busts, hot markets and cold winters are all part of the business.

But when the housing bubble that made Flagler County the fastest growing community in the nation burst, it was something he’d never seen before.

“I didn’t look at those kind of trends. We were so damn busy,” he said. “For me, I had a sense it was starting to happen in terms of the down cycle in late 2006.”

Stoughton had been through lean times before. What was different this time was the appearance of investors and house flippers.

“The investors jumped in the 2005-06 time frame and that is what eventually put us over the top in terms of over-inventory,” he said. “They weren’t sophisticated investors. They thought they were bulletproof.”

Stoughton said after the housing market collapsed “our business become non-existent.”

Stoughton turned the business over to a young man working for him, John Lynch, who is still running the company.

For Stoughton, the timing wasn’t perfect but he said he was ready to retire. But like so many others affected by the economic downturn, his plans changed.

“It devastated my retirement,” he said. “The little bit of cash we had went into maintaining some of the property we had. “

That includes a 5,000-square foot office in Bunnell. With an appraised value of $690,000 in 2006, Stoughton put it on the market.

“It always had somebody interested in it and the market kept tailing off and they’d lose interest,” he said. “I converted it into a boarding house to pay the mortgage.”

Today the property has an appraised value of $170,000, Stoughton said.

Stoughton said when the bubble burst, it left a lot of people holding the bag, including his business, Stoughton Homes Inc.

“It became real easy to make a decision to build a house,” he said. “That was the prevailing attitude and for a while it worked. It was a bit like musical chairs and a lot of them didn’t have a chair to sit in.”

Stoughton’s retirement was short-lived and after a couple of years, he partnered with a young builder, George Duran. These days the company primarily does remodeling work and a couple of new construction projects.

“I don’t have any models out there and that’s what it takes to market effectively,” Stoughton said. “There’s a lot of pressure on labor. We’re having a hard time servicing the market right now because of a lack of labor. It’s impacted our remodeling.”

Mark Gerling: From selling lifestyle to selling dreams

For Mark Gerling, owner of Gerling Worldwide Travel, the reality of the economic downturn meant the loss of his job.

Working at the Hammock Beach Resort as a regional sales manager, Gerling transferred to the sports and entertainment business owner Bobby Ginn created during the housing boom.

“I became sales manager for the golf tournaments we were running out of Hammock Beach,” Gerling said. “Then 2008 came and the real estate market collapsed. The golf tournaments were canceled, which means we lost our jobs.”

At that point, Gerling and his wife made a decision that many others made during the height of the Great Recession: Start their own business.

“In April of 2008 when the recession was at its peak, we opened our business,” he said.

While his wife was already working in the travel industry, Gerling said the couple bought a building in Flagler Beach for the business. But the plan was for Gerling to keep his job, at least for the time being.

“Literally shortly after that, in May, was when I was given my walking papers,” he said. “It was definitely a plan and just a matter of time when I would jump ship and go into business. That decision was made for me.”

Gerling said he had always wanted to run his own travel agency, focusing on the Africa market. Even though he had planned to strike out on his own, it was still a scary experience.

“You go from giving up a guaranteed above-average salary in our county to zero,” he said. “I literally went from making a good amount of money to getting a two months severance package, so that part was a little scary.”

Since opening the agency in 2008, Gerling said the business has grown and prospered.

“We did a couple of marketing pieces and slowly built the business,” he said. “I planted a seed and poured some water on it and it started growing and is still growing today.”

Ky Ekinci: A startup to help other startups

Flagler County was not alone in feeling the sting of the Great Recession. The bursting of the housing bubble and near-collapse of the financial system sent shock waves through the economy.

As businesses struggled to adapt to the new economic landscape, an entrepreneurial culture emerged, fueled by financial necessity and a lot of imagination.

For Ky Ekinci and his wife, Lisa, that meant new opportunities.

The couple founded Office Divvy, a business accelerator, in Palm Coast with another partner, Sim Taing, in late 2007, before the full impact of the recession had arrived.

“Clearly everyone was being punched, but nobody felt it yet,” Ekinci said. “Everybody thought it was temporary.”

After buying a house in Palm Coast in 2004, Ekinci and his wife spent 2005 in Atlanta as she did some work with a medical website and he worked at home.

Settling in Palm Coast in 2006, the couple met Taing and the idea for Office Divvy took off.

“Our original idea was can we create a destination, a third place of some kind for people like us,” Ekinci said.

Saying a traditional office is the first place and a home office the second, Ekinci described Office Divvy’s services of shared expenses and other office amenities the third place for business.

At the same time, entrepreneurship and startup businesses were popping up across the country.

Ekinci said Office Divvy offered would-be entrepreneurs displaced by the economic downturn a place to grow their new businesses.

“That proved to be an advantage, because it helped people to think differently,” he said. “Our business here is all about thinking differently. There was a rise of folks going into consulting and freelancing.”

Ekinci said another legacy of the Great Recession and a hallmark of the startup culture, is a tolerance for risk.

“When tolerance for risk is higher, clearly more people will go into entrepreneurship,” he said. “When your options in terms of finding the security of a paycheck are limited because of the recession, you start thinking creatively.”

As for the future of Flagler County’s startup culture, Ekinci said the key is the next generation.

“The myth of the lone entrepreneur is a myth because those ecosystems are created by enterprises that invest in the future generation of entrepreneurship,” he said. “I think it is organically going to happen and it is going to happen with the younger generation, coming back and participating in the creation of that culture.”