EconSouth (Second Quarter 2006)
Space Coast: Where Economics Is More Than Rocket Science
Don’t expect the name to change soon, but central Florida’s Space Coast is becoming less dependent on its signature industry: space exploration.
Business is expanding in the coastal area, mainly Brevard County, beyond its traditional economic linchpin, Kennedy Space Center. In recent years, the area has formed a varied economic foundation including a cadre of flourishing defense contractors, a real estate boom (albeit one that has cooled of late), an influx of retirees, and tourism.
It’s not just a company town any more.
As the Space Coast flourishes beyond its boundaries, the Space Center will soon undergo dramatic change. The space shuttle program based at Kennedy will end in 2010. In its place, NASA wants a new spacecraft, the Crew Exploration Vehicle, ready for launch from Kennedy by 2014. That shift means Brevard County’s economic mainstay of 44 years might shrink. Most of the Space Center’s nearly 15,000 employees work on the space shuttle program, so when the shuttle is retired, those workers will face uncertainty.
Nevertheless, the retirement of the shuttle fleet hardly portends doom for the Space Coast economy, said Michael Slotkin, an economist and associate professor in the College of Business at the Florida Institute of Technology in Melbourne, one of Brevard’s two biggest cities.
“With everything that changes there’s opportunity,” Slotkin said. “In Florida, as long as we don’t get [severe] hurricanes every year, and as long as nothing really happens to the defense-aerospace backbone, this is always going to be a place people want to move to and live.”
Not everything expands indefinitely
Concern still exists, however. In 2004, Kennedy Space Center accounted for 27,300 jobs, $2.5 billion in output, and $1.3 billion in income in Brevard County, according to the Center’s 2004 annual report, the most recent one available at press time. The Space Center itself employs more than 14,800 people, most of whom—around 11,000—are contractors and not civil servants. Most work on the space shuttle program.
There is hand wringing over the prospect of losing space industry jobs. The major Brevard County newspaper, Florida Today, has editorialized that the Space Coast risks falling behind in its namesake industry without increased incentives from state officials.
“The coming end of the shuttle program at Kennedy Space Center will bring large workforce cuts, and other states are out-hustling Florida for new space business,” the newspaper said in a Jan. 1 editorial.
The paper notably mentions New Mexico, which plans to build a facility to help launch commercial ships into space. That plan helped lure the world headquarters of Richard Branson’s commercial space venture, Virgin Galactic. And New Mexico’s legislature earlier this year approved $100 million in state funding for that spaceport over three years and also passed a separate law that allows local governments to impose a local-option tax to provide money for the spaceport.
But Florida is not sitting still. In early May, the state’s legislature passed a law that consolidates various state agencies charged with cultivating space-related economic development under the state’s privatized economic development agency, Enterprise Florida. That legislation allocates $43 million in state funding, including $35 million to rework launch facilities for a new spacecraft. Another attempt at fortifying the state’s aerospace industry came when Rep. Bob Allen, a Republican from the Space Coast, unsuccessfully championed a $500 million, public-private investment fund to lure and cultivate space-based companies.
A new strategy for the Space Coast
For almost 50 years, Kennedy Space Center has been an economic and cultural staple in Brevard County. It’s why people know about the area, and traditionally a big reason why they visit.
In recent years, however, as shuttle launches became almost routine and then temporarily stopped following the February 2003 shuttle Columbia explosion, space-related tourism declined from as much as 15 percent to less than 5 percent of the Space Coast’s $1 billion tourism industry, according to Rob Varley, executive director of the Space Coast Office of Tourism, in a Miami Herald interview from late 2005. While some tourism expenditures shifted to other sources, overall tourism dollars declined with the launch hiatus.
From 1989 until the Columbia explosion, a space shuttle had launched from Kennedy every other month, on average, according to NASA. But the shuttle was grounded for two and a half years after the Columbia accident.
Space Coast tourism officials then shifted tactics. Rather than rocket launches, they touted beaches, nature tourism, and cruise ships.
But the shuttle returned to flight in July 2005, filling all of the area’s 8,300 hotel rooms for the launch, according to the Miami Herald. Space Coast tourism officials thus staged a launch of their own in the fall of 2005, hatching a new marketing campaign featuring an astronaut.
Growth despite tragedy
Given its history, any change at Kennedy Space Center radiates through the area, Slotkin said. In his view, the Space Coast is a boom—or at least boomlet—area.
While it has not grown as rapidly as Orlando or Tampa, Brevard County added more than 10,000 people a year from 1998 to 2005. During that period, the county’s population grew by 72,257 people, to 531,250, according to the Economic Development Commission of Florida’s Space Coast, which uses figures from the U.S. Census Bureau.
Brevard’s economy has grown alongside the population. The Palm Bay-Melbourne-Titusville metropolitan statistical area, the Space Coast’s major metro area, added 20,600 jobs from April 2001 to April 2006 after adding 22,100 jobs in the previous five years, according to figures from the Bureau of Labor Statistics. Nonagricultural employment totaled 214,400 as of April 2006.
In February, the Milken Institute, a Los Angeles-based economic think tank, ranked Palm Bay-Melbourne-Titusville number one in its Best Performing Cities Index, which rates 379 U.S. metropolitan areas on job creation and retention. The Space Coast boasts “a diversified economy, with many aerospace and defense-related industries, as well as space-related tourism and a growing number of retirees,” the institute reported.
Cruise ships come and go, a lot
On the Space Coast, space ships aren’t the only ships. Brevard’s Port Canaveral consistently ranks among the world’s three busiest cruise ship ports, according to the International Council of Cruise Lines. In 2005, 4.4 million revenue passengers came through the port, according to statistics maintained by the Canaveral Port Authority, which operates the facility.
The Canaveral Port Authority wants those cruising tourists to stick around. In December, the Port Authority chose Cocoa Beach-based Ron Jon Surf Shop to build a $147 million hotel and resort complex on 26 acres next to the port. Ron Jon operates a dozen stores and plans to enter the tourism business this year with the Canaveral resort and a planned surf park in Orlando that will allow surfers to ride machine-generated waves in large pools.
That sort of growth has created economic momentum and helped spur soaring real estate values. It has also left the county, like many fast-growing areas, struggling to keep up with infrastructure needs. Brevard faces more than $360 million in unfunded road needs, according to Florida Today, and constant pressure for more schools and public services.
Environmental protections in place
As the area—long perceived as more laid-back and cheaper than Miami, Tampa, and Orlando—rapidly develops, Brevard County has a land preservation program in place that residents view as a significant quality of life amenity and growth management tool. Since 1990, Brevard’s taxpayer-funded Environmentally Endangered Lands (EEL) Program has acquired about 19,000 acres of ecologically sensitive forests and wetlands, said Mike Knight, the program manager.
The acquisitions have not always been easy. In many cases, EEL’s legally mandated 60 days between appraising a tract and buying it has proved enough time for a property’s price to jump above the two-month-old appraised value, Knight explained.
In such a market, some owners of land that EEL wants to preserve would rather take more lucrative offers. Knight figures the EEL program will do well to acquire a fourth of the remaining 55,000 acres it has targeted.
Even with the importance of the space program to the region, residents place value on keeping their terrestrial affairs in order. Space may be the final frontier, but it’s not the only one.
This article was written by Charles Davidson, a staff writer in the Atlanta Fed’s public affairs department.