The discussion, which took place at the University of South Florida, Sarasota/Manatee campus, was also sponsored by USF’s Institute for Public Policy and Leadership and our sister publication, Biz941 Magazine.

The panelists included State Sen. Mike Bennett; Bill Earl, an environmental and land-use attorney and board member of Sarasota Citizens for Sensible Growth; Brad Edmondson, a consultant from Ithaca, N.Y., who recently completed a demographic study of our region; Jack McCabe, of Deerfield Beach’s McCabe Research and Consulting, who has discussed the Florida real estate market on national TV and in numerous publications; and former state Sen. Pat Neal, now one of the area’s most successful developers. The panel was moderated by David Klement, director of the Institute of Public Policy and Leadership, and Sarasota Magazine editorial director Pam Daniel. This is an edited version of the discussion; for the full transcript, click here. 

DAVID KLEMENT: Mr. Edmondson, could you give us a demographic snapshot of the next five years?

BRAD EDMONDSON: It’s easy to forget when there are so many homes in foreclosure and the economy seems to be in freefall that the fundamental economic supply for this area, which is retirees, is about to grow explosively. By 2025, there will be about 25 million more people aged 60 to 74 than there are now.

PAM DANIEL: How many of those boomers can we expect to come to Sarasota-Manatee?

EDMONDSON: The vast majority of them will not. It’s a demographic chestnut that people in their 60s don't tend to move when they retire. Usually, only the most affluent people move across state lines when they retire. Over the last 50 years, only about one household out of 20 in their 60s has moved across state lines. But there are 78 million baby boomers. One out of 20 means about 1.25 million a year will be moving to new states for the next 20 years. And in the 2000 census, about 19 percent of the households that did move across state lines in their 60s moved to Florida.

KLEMENT: How many people is that?

EDMONDSON: Over the last 20 years, there's been a net gain of about 6,000 to 8,000 taxpayers a year to Sarasota-Bradenton. Every year this flood of retirement wealth washes over the economy and makes everybody happy. And when the flood doesn't come, like maybe it's not coming this year, everybody gets a little panicky.

KLEMENT: Should we be panicked?

EDMONDSON: I think the chances are pretty good that Sarasota-Bradenton, once this correction is over, will hit its stride again and continue to attract people. And retirees are not everybody who moves to Sarasota. People come down here to take the jobs that are created in construction, retail, restaurants, health care, services. Those sectors are about two-thirds of jobs in Sarasota-Bradenton, a much higher proportion than they are in a normal metropolitan area.

DANIEL: Any other demographic changes?

EDMONDSON: Over the next five years, you're going to see very rapid racial and ethnic diversification of your workers. Already, 37 percent of the children in the Sarasota school district are black, Hispanic or Asian. And 97 percent of the people over the age of 65 in that district are white Anglos. The people who fuel the retirement economy will be served by people who are from, increasingly, a different racial and ethnic background than they are.

DANIEL: Mr. McCabe, could you give us a snapshot of the real estate market?

JACK McCABE: You’ve seen restaurant closings, bankruptcies of lenders and furniture makers, and departure of marine firms to the Carolinas. Foreclosures have more than doubled in Sarasota and Manatee, and they've increased 379 percent in North Port. Inventories have ballooned to historic highs. Lenders, builders, subcontractors, appraisers and building permit departments have been making extreme job cuts. Illegal alien laborers, a big part of our economy, have been leaving for work in other states and countries, and this has strongly affected many local businesses and tax revenues. Condo and single-home preconstruction buyers, approximately 70 to 80 percent of who were short-term flippers, are beginning litigation to get out of contracts and get their deposits back. Many condo projects have been postponed or shelved. For the first time in their history, more households of furniture are moving out of Florida than coming in. And lenders are still unrealistic about the haircuts RITE?KAYthat are necessary for them to move the inventory. In the correction cycle, we are not in the top of the ninth inning; we're in the bottom of the third.

DANIEL: When will we close out the last inning?

McCABE: The next two or three years are going to be pretty ugly. I think we're going to see prices on real estate drop in Sarasota another 10 to 15 percent this year and again in 2009. I don't think we're even going to see a flattening of the market until 2010.

PAT NEAL: If the prices go up 60 percent in three years and then go down 25 percent, that's still up.

McCABE: A normal appreciating real estate market is six to eight percent a year. And what you had here in Sarasota was 47 percent in one year, which led the nation.

NEAL: Hallelujah.

McCABE: A lot of people whose homes are being foreclosed on and are losing their jobs aren't saying hallelujah.

NEAL: The market is the market is the market.

DANIEL: Are there any investors left in this market?

McCABE: The Europeans, the Canadians and the vulture buyers. The Europeans and the Canadians because the favorable exchange rate gives them a 30 to 40 percent advantage walking in the door. The vulture buyers because they know the prices are going to come down. They're looking at a very worst case scenario in Florida right now; and if you're not, you should be. In a healthy market, your rental rates cover 80 to 100 percent of your ownership costs. Right now you can rent for about 50 percent of ownership costs. Why would anybody in their right mind buy a house when it's going down in value and you can rent for half of what owning it costs? It makes more sense to wait for a year or two when prices go down and then buy.

KLEMENT: You say prices are going to drop another 10 to 15 percent this year and then again in 2009. Why?

MC CABE: Because of the historically high amount of foreclosures. When those get resold, they're going to be sold at substantially lower prices to investors. That’s going to become the gold standard appraisers have to use, and that's going to drive prices down. You're also going to have vulture buyers buying many of those condo units and the homes that are sitting empty. Most will be bought from the lenders at significantly lower prices. That will also hit the assessor's record. And out at Lakewood Ranch and other markets, they're giving away all types of buyers' incentives that have not been showing up in the sales contracts. They've been done by separate addendum and take place after the closing. Those inflate the value because the seller is getting far less than the sales value by giving these concessions. Appraisers are now under the microscope because of all the shenanigans in the last five years, and they're going to have to start considering these things, and that is also going to lower price values. On top of everything else, in this marketplace, you take an asking price and offer 30 percent less and start from there. These factors are all going to have an effect on pushing prices down.

KLEMENT: Sen. Bennett, what role do high taxes and insurance costs have in this economic slowdown?

SEN. MIKE BENNETT: Our property tax policy is out of whack. I do believe that fairness in property taxes would cause the market to come back. When we tried to pass legislation last year on insurance, we were told by the major insurance carriers that if we would increase that cap by $12 million, they would be able to bring down their insurance policies by an average of 24 percent. Remember, increasing the cap fund means we put you at risk. Every policy holder of every type of insurance in the state of Florida would be assessed if we have major hurricanes. And it comes back on the taxpayers, anyhow. No matter what we do in Tallahassee, it's all your money. So sooner or later we got to pay the piper. So we rolled the dice and did that.

KLEMENT: Did it work?

BENNETT: Roughly 30 percent of the insurance companies lowered their rates, most by an average of 20 to 28 percent. But the major players, like State Farm, Allstate and Hartford, opted for an increase, some for a substantial increase. That was why we decided to bring them in for public hearings and see if they could explain to us what happened to the promise they made when we took the risk of increasing the cap. So we are going back and looking at insurance rates. We’re also going to try to get down payment assistance for homeowners to get some of the inventory off the market.

DANIEL: Mr. Earl, with growth at a virtual standstill, have you achieved the goals of CONA and Citizens for Sensible Growth?

BILL. EARL: We have to ask ourselves, why are Florida and Sarasota in the situation Mr. McCabe described? The best answer I've seen to that was by a prominent banker who's also on the Sarasota County Planning Commission. He said in a Sarasota-Herald Tribune article, “All of us in the food chain, bankers, builders, developers, mortgage lenders, we all got a little bit intoxicated with the market.” And all of us are now suffering the hangover that came with that intoxication. But state and local government also need to bear some of the burden.

DANIEL: How so?

EARL: In North Port, they started annexing tens of thousands of acres, saying to developers, we will take you out of the more stringent county regulations, and giving comprehensive plan approvals for tens of thousands of homes. Now there are about 2,000 homes for sale down there and hundreds of abandoned foreclosed homes. North Port is also the center of a federal investigation. They were, in essence, selling homes to out-of-state snowbirds as investments. Buy it, it's going to go up, then you can sell it, you won't be tied up here. And that in part was because it was so easy to get development approvals.

DANIEL: How else did local government contribute to the irrational real estate exuberance?

EARL: Sarasota County spent over a million dollars on the 2050 Plan, which governed regulation in the rural lands in the east. Then they allowed the use of overlay districts to circumvent that process, and they've now got requests for thousands of homes pending. The secretary of the state agency that regulates housing and planning said that the state legislature has made it so easy to amend local governments’ comprehensive plans that the plans are almost meaningless, and people have lost faith in that process. It's as if you have a business plan and the board of directors agrees on it, you implement it, and then every employee is allowed to make his own little change to that business plan.

KLEMENT: Mr. Neal, as a developer, how do you see the market changing over the next five years, and how you plan to adapt to that market?

NEAL: I’ve got new homes under $200,000, real affordable housing—this is the time that the market can provide affordable housing. But looking ahead, Florida's going to grow, and it's up to us to paint our vision of what state we're going to live in. Bill Earl's picture might be one of a pristine, exclusive neighborhood. North Port might have a different vision.

DANIEL: Many are saying that by putting all our eggs into the growth and real estate basket, we’ve made ourselves vulnerable to such downturns.

BENNETT: We've set all our policies to attract high-skill, high-paying jobs. And consequently, we have lost our marine industry, we've lost our manufacturing industry. We will spend millions of dollars to attract a few hundred jobs, but we won't spend $10 to keep an industry here that's employing thousands. Not everybody's going to be a rocket scientist or a marine biologist or a biotech engineer. And we have to have our service industry. We should be asking how we can change our policies to take care of the jobs that are here, to provide more vocational education.

EDMONDSON: In a lot of places in the United States the economy is based on one industry. Those places tend to have boom and bust economic cycles. The whole states of Colorado and Wyoming basically stopped as soon as the price of oil fell because their economy was based on oil. The economy here is based on real estate. And so we freak out and have symposiums like this when real estate becomes unhealthy. I think the key to stopping the volatility is to start planning 15 to 20 years ahead, to protect the jobs that Senator Bennett was talking about, and to develop sources of growth that are other than real estate. It has been done in other communities. And it can be done here. But it requires thinking more about the long-term and less about the current cycle.

NEAL: I wish, Brad, that you could find a way to change that for our future. But right now our industry is growth and real estate. And I just don't think we have the infrastructure that more diversified areas do. We are a retirement state and we need to see our future within the parameters of what we’ve got.

KLEMENT: I keep reading that we have to accept that we're becoming a high-cost state. It’s no longer going to be the retired auto worker from Michigan coming down, getting a mobile home and living the good life.

EDMONDSON: Desirable resources that were once competed over by people in the United States are now being competed over by everybody in the world. When there's a very limited supply of something and there's global demand for it, the value of that resource goes up. And that's what's happening on Siesta Key.

McCABE: We're at a turning point. The two things that Florida always had that drove population growth here were sunshine and affordability. You could come down as an auto worker from Detroit. Now real estate speculation has pushed prices up so high the vast majority of our citizens cannot afford it, and young families and senior citizens are leaving.

DANIEL: Our region’s prosperity has come from being a beautiful place that people want to come to live in. But we're also a very expensive place now. Given that, how realistic is it to think we can really diversify beyond growth and real estate? Are we fated to become an exclusive enclave, like Santa Barbara or Naples?

BENNETT: We can diversify. Look at what's happening over on Florida’s east coast since they brought in the biotech industry. I'm pushing hard to make the west coast of Florida, specifically Sarasota, a center for new companies and people in renewable energy research.

KLEMENT: But if young families are leaving because they can't afford to live here, then doesn't that mean only that the wealthy can?

BENNETT: I think that's a bubble with the market. I invested in real estate and I'm losing a lot of money right now, most of it on paper, thank God, but the market will come back if we create an environment that people want to continue to move to.

EDMONDSON: Bill made a good point. What drives the retirement economy that's the basis of economic activity in Sarasota-Bradenton is the quality of the land, the quality of the sky, the quality of the light. If you want to see the end game of relatively uncontrolled growth process, just fly to L.A. I moved away from Sarasota in 1976. Every time I come down here now I see a little bit less Sarasota and a little bit more L.A.

BENNETT: I'm not real nuts about what Bill and his group [Sarasota Citizens for Sensible Growth] want to do because I believe that's like filleting fish with a chain saw. It will just escalate the problem of affordable housing for the work force when we shut down growth completely.

NEAL: If Mr. Earl has what he wants and he makes our property more valuable, he just changes the way our state will look.

DANIEL: You mean more like a Santa Barbara?

EDMONDSON: I don't think that growth control necessarily turns a place into Santa Barbara. What it does is force more decisions into the civic arena and demand public participation in those decisions. And that's a good thing. It’s a good thing to make it a public question as to whether or not thousands of acres of wetland should be platted out and sold. If that resource is the basis of your economy, then it needs to be part of the civic conversation.

NEAL: But should such decisions be made by people with staffs who understand the demographics of our community and elected public officials and stakeholders, or do we need to submit everything to a vote of the people, regardless of whether that's consistent with the Constitution and where we want to end up in our state?

EDMONDSON: I don't think every planning decision should be decided by a referendum, but I think that planning should be a public process.

KLEMENT: Mr. Earl, do you think we can keep our quality of life at its current level with the no-growth situation that we have?

EARL: The no-growth situation that we have now isn’t the fault of citizens like me. It's the fault of overexuberance and speculation in the market. We want sustainable, sensible growth that provides jobs, construction jobs included, over the long-term, and to put policies in place that accomplish that. We can maintain the kind of values that we want in the community. Some of those are economic. You can kill the golden goose of high-end tourism, for example, very quickly by destroying the very things that people come to Sarasota and Manatee for. Go up to Pinellas County with its concrete canyons and see how attractive that is.

DANIEL: Can anyone point us to communities that have managed to maintain a healthy growth rate without killing the golden goose?

EDMONDSON: Boulder, Colorado.

NEAL: Boulder has a major university and high-tech center and is 45 miles from downtown Denver. It's not comparable at all.

 EDMONDSON: We’re pretty close to Tampa and we have a university that's a lot bigger than it used to be. We're sitting in it. We demographers have a way of thinking 10, 15, 20 years into the future. In the late 1960s, before growth really hit Boulder, the citizens voted to tax themselves to buy a lot of open space and created a ring around their city and it now safeguards the quality of life in that city and has created a wonderful place to live. It's also possible to get around from one place to any other place in Boulder without taking a car

NEAL: Boulder is a great town with a river running through it, a beautiful bikeway, but it's an enclave. Yes, we can have enclaves—if it's our decision to be so undemocratic to have population enclaves for rich people. But I think we have a duty not only to the people who came here to retire, but the 55 percent of the population that work here and are raising their families, too. We have to balance their needs with the needs of our retirement population who like what they came here for.

DANIEL: If the market is the market is the market, should the government play a role in housing bubbles and busts?