Area's UF ties offer economic pros, cons

Published: Wednesday, August 1, 2007 at 11:39 a.m.
Last Modified: Wednesday, August 1, 2007 at 12:00 a.m.

The good news is that Gainesville's economy is largely dependent on the University of Florida.

The bad news is that Gainesville's economy is largely dependent on the University of Florida.

Such contradictions abound in an economic outlook report by Moody's, a financial research firm. The report was commissioned by The New York Times, which owns The Gainesville Sun.

Moody's reports that Gainesville's economy continues to grow at a strong, steady pace, but warns that the reliance on UF leaves the economy vulnerable to state budget cuts.

State budget woes this year have led UF to freeze hiring while the number of undergraduate admissions has maxed out.

However, the area has made progress in diversifying its economy with growth in private industries.

That's where the contradictions begin.

Much of the private industry growth - and the sector with the most potential - is in the biotechnology field. However, many of the biotech businesses are built by licensing inventions of UF researchers.

Growth in consumer-related industries such as retail and leisure/hospitality show a diversification away from state jobs and a growing payroll. However, UF students make up the growing customer base driving that diversity.

The unemployment rate, at 2.5 percent, is among the lowest in the nation, which Moody's says is typical for a university town.

But that tends to hamper business growth by driving up payroll costs as employers compete for workers or locate in areas with a larger available workforce.

Personal income is low compared to national rates - also typical of a university town - but that is partially offset by a highly educated workforce in high-skill, high-wage jobs, if those jobs are available locally.

Moody's also says retirees are reluctant to move to areas with a college-town atmosphere, which contradicts separate reports that active adults like the cultural amenities that universities bring to smaller towns.

Such contradictions are why economics is called "the dismal science," according to Erik Bredfeldt, director of the Gainesville Economic Development Department.

He said expanding and diversifying Gainesville's economy is exactly dependent on private businesses spinning out of UF research.

"We are tied at the hip and I think it's always going to be that way, but at the margins we're trying to diversify by getting a better return on investment from the university," Bredfeldt said. "The question is to what degree that's accelerated."

Start-up businesses create a need and provide an opportunity for office space, investors and professional services such as accountants and attorneys, he said.

"We're depending on them, but we're also complementing each other," said David Ramsey, research and marketing manager for the Council for Economic Outreach.

Research-based businesses are staffed by workers trained by Santa Fe Community College and located in incubators formed by local governments and private industry, he said.

Despite the state's budget woes, university research will remain strong with grants and contracts from federal funds and large industries from all over the world, according to Win Phillips, UF vice president for research.

He said faculty hiring freezes are limited to jobs dependent on state funding, not research grants.

And while undergraduate growth may be limited, he said the university will continue to add graduate students, who often bring families and therefore an economic impact two or three times that of undergraduates.

Phillips pointed out that students support consumer and service businesses, so their economic impact is less than university efforts that lead to technical businesses with high-paying jobs.

He also referred to the economic impact 500,000 square feet of research facilities now being built has on the construction industry.

"I would argue that right now the impact of this institution is as great as any institution in the United States," he said.

Ramsey pointed out several growing industries that are not dependent on the university, such as distribution and logistics businesses in the northern part of Alachua County with the new Wal-Mart Distribution Center.

Moody's reported that after 10 years of consistent expansion, the health care field should continue to help drive the economy.

UF cancer and genetics facilities are naturally going to draw more related businesses that cluster around them, Bredfeldt said.

<i>Anthony Clark can be reached at 352-374-5094 or</i>

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