North American Reports

The Business Development Board of Palm Beach County spent over a year and some $57.6 million to get this site ready for Scripps.

Scripps will build it in Florida. But will they come, and how many will come?

        Those issues still stubbornly persist after Scripps Research Institute’s decision to bring a new research center to Palm Beach County, Fla. Persistent issues do pop up when a US$510-million incentive package is part of the project equation.

        “Scripps is the brand name in biomedical research, and its decision to build a sister research facility in Florida is a seminal moment in our state’s history,” Gov. Jeb Bush (R) said in announcing the agreement.

        Bush brought that moment to Florida, independently brokering the deal and promising $310 million in state incentives. Palm Beach County is ponying up $200 million more, using a bond issue to bankroll Scripps’ land and facility. But the state’s incentives, Bush emphasized, are part of 2003’s $948-million federal stimulus package for Florida. Scripps’ funding, the governor stressed, is one-time seed money.

        But how big will Scripps’ seeds grow? That all depends on a frequently inflated figure: spin-off jobs.

        Florida officials see Scripps setting off a doozy of a 15-year spin-off: 6,500 jobs, 40,000 more jobs from industry clustering and a $3.2 billion boost in the state’s gross domestic product.

Huge numbers, particularly with the state’s 20-year incentives contract only requiring 545 Scripps jobs after seven years of operations.

        Spin-off jobs, however, are ingrained in Scripps’ genetic code.

        “One only need look to Southern California,” Bush noted, “to understand the impact this facility will have on attracting academia, federal research grants, biotech startups, pharmaceutical companies, venture capitalists and other investments.”

        Scripps has flexed stunning attraction muscle at its San Diego-metro headquarters in La Jolla, Calif., where it has 2,900 employees in a 1-million-sq.-ft. (90,000-sq.-m.) complex.

        Near Scripps, though, is where the jaw-dropping job-creation is. The institute is credited with attracting 499 biomedical and pharmaceutical firms to San Diego; 80 percent, in fact, are located within a three-mile (4.8-km.) radius of Scripps. That 499-company cluster employs 35,000 workers with average salaries of $54,000.

But will history repeat itself on the 1,920-acre (768-hectare) site that the Business Development Board (BDB) of Palm Beach County purchased for $57.6 million? (The BDB was poised for the project, having worked since August 2002 to create a local research institute and park.)

        Scripps will take 100 acres (40 hectares) to build what President Richard Lerner calls “a signature structure,” with construction starting as soon as summer 2004. And the county will dedicate another 400 acres (160 hectares) for a biotech campus, anchored by Scripps’ 364,000-sq.-ft. (32,760-sq.-m.) facility. In addition, the BDB has a two-year option on 4,700 acres (1,880 hectares) next door.

        How many jobs, though, will come?

        Not nearly as many as predicted, Bush’s opponents contend. Democratic state Rep. Dan Gelber even commissioned his own study to counter Bush’s analysis by Coral Gables-based Washington Economics Group. Scripps’ impact, Gelber’s study concluded, was “wildly inflated” and would only create 16,000 jobs after 15 years.

        Even some biotech analysts question some of the Bush study’s projections. One that’s particularly drawn skepticism is that Scripps’ 14th year of Florida operations will see 173 firms arriving or starting up – virtually one every two days.

Much of the Scripps jobs debate revives the old chicken-vs.-egg conundrum.

        The biotech industry certainly does cluster. A 2002 Brookings Institution study found that five cities – Boston; Raleigh-Durham; San Francisco; San Diego and Seattle – accounted for a whopping 56 percent of new U.S. biotech firms in the 1990s. In the 1980s, those cities accounted for only 25 percent of biotech startups. (For more on biotech, see the Industry Review from January 2004.)

        Florida, however, isn’t dominant in one key clustering category: venture capital, which gives spin-offs wings. It was only the 12th-ranked state in attracting venture capital in third-quarter 2003; and it has no state-based venture capitalists.

        But they will come, Bush says. ”The beauty of Scripps Florida is that it will attract significant venture capital to the state and … those same venture capitalists will find it most advantageous to establish a physical presence in Florida,” the governor said in a letter to state legislators.

        Palm Beach also lacks the high-prestige educational institutions that earmark biotech centers. On the other hand, Scripps started in San Diego in 1955 with only a University of California campus. And the Bush administration is already working with the U.S. Food and Drug Administration to speed Scripps-related discoveries to market.

        In addition, the renowned institute has one weapon in Florida it lacked in California: those $510 million in incentives. Instead, Scripps first blossomed in La Jolla using charitable contributions. (And it could also generate those in bulk in Palm Beach, a county where average homes sell for $3 million-plus.)

        At this point, only one thing seems clear. Florida in a single fell swoop has made itself a very large dot on the biotech map. What many will now watch – some enviously – is just how big that dot becomes.

The gubernatorial recall election may have vacuumed up the headlines, but the water agreement signed near Hoover Dam in October 2003 between California, other Western states and the U.S. Dept. of the Interior may have stronger economic implications for the U.S. Southwest than any elected official could ever muster.

Overlooking Hoover Dam, U.S. Secretary of the Interior Gale Norton and a bevy of pre-recall Western state governors sign the Colorado River Water Delivery Agreement. PHOTO: Tami A. Heilemann, Dept. of the Interior

        Ratified at the same spot where the original Colorado River Compact was signed in 1922, the new Colorado River Water Delivery Agreement diverts much of the water heretofore going to the produce capital of Imperial Valley toward rapidly growing San Diego County. There, the water district will pay market prices for water the farmers got for a delivery fee.

        “With this agreement, conflict on the river is stilled,” said Secretary of the Interior Gale Norton.

        Having withdrawn more than its allotted annual share of water for some time, California was declared in official violation of the 1922 pact in late 2002, and the spigot to the Imperial Valley and the Metropolitan Water District was turned off. Under the agreement, the Golden State has until 2017 to gradually reduce its dependence on the overdraft.

        Though known for its water wars over the past century, the West is not the only region in the midst of a battle. Negotiations on water rights between the governors of Florida, Alabama and Georgia reached an abrupt impasse earlier in the fall, with no resolution in sight. That breach – over water rights in the Apalachicola-Chattahoochee-Flint River Basin – could eventually be bridged by the U.S. Supreme Court.

        But back out West, the agreement now in place allows farming communities in Southern California to strengthen their economies through water efficiency projects, canal modernization, conservation, and water marketing. That could be good news for the International Center for Water Technology (ICWT), based in the San Joaquin Valley. The ICWT is preparing to break ground in spring 2004 on its own $40-million, 70,000-sq.-ft. (6,503-sq.-m.) facility for the study of water and fluid technologies on the campus of Fresno State University. Research partnerships between industry, governments and the university will focus on such areas as industrial water, sewage effluent re-use and the desalinization of brackish water.

        “The process has been stuck on reverse osmosis for the last 30 years,” says Dan Clawson, ICWT program manager, who sees exploring new frontiers as part of the university’s mandate. “I look at the economic development of water technology as a real Cadillac to drive the continued growth of the Western United States.” – Adam Bruns

In late October, Lexington, Ky.-based Tempur World announced its selection of a 50-acre (20.2-hectare) site in Albuquerque, N.M., for a $56-million, 530,000-sq.-ft. (49,237-sq.-m.) mattress and pillow manufacturing plant expected to open in 2005 and employ 300 within three years. The pick followed a search that began with more than 50 cities, in order to serve an expanding Western customer base. The company opened a 300,000-sq.-ft. (27,870-sq.-m.) plant in Duffield, Va., in 2002, and in June 2003 it announced a $1.3-million, 19,000-sq.-ft. (1,765-sq.-m.) expansion of its headquarters in Lexington, Ky., which will add 70 jobs to that complex’s payroll of 170.

        Within weeks of the New Mexico announcement, Eastman House chose to move its operations from Iowa to Sweet Springs, Mo. And Atlanta-based Simmons Co. announced it would build a $12-million plant on 42.5 acres (17.2 hectares) in the 1,200-acre (486-hectare) Waycross-Ware County Industrial Park in Waycross, Ga. The 225-job, 215,000-sq.-ft. (19,974-sq.-m.) Georgia plant will replace the Beautyrest plant in Jacksonville, Fla., where Simmons was unable to come to lease terms with landlord Jacksonville Associates after a 50-year stint. Simmons is also constructing two other new plants, in Hazleton, Pa., and Sumner, Wash.

        Why the bounce in mattress plants? Housing starts for one, compounded by (don’t laugh) quicker mattress turnover (every 10 years instead of every 14 years) and, yes, pent-up demand for sleep, says Dick Doyle, president of the 350-member International Sleep Products Association. Consumers are “focusing on health, the role that sleep plays in contributing towards health, and the role that mattresses play as part of the overall sleep environment,” he says. Then there’s transport cost, in an industry that saw U.S. shipments of 38.9 million mattresses and foundations in 2002.

        “A major part of the cost of mattresses is transportation,” says Doyle, affirming a truth known by anyone who’s ever tried to move one. “Mattress manufacturers will have a number of different licensees, which stay within about 200 miles (322 km.) of the population they’re servicing.”

        And as traditional beds make inroads into the sleeping quarters of other countries, they’re also getting bigger.

        “Not only are people continuing to replace their mattresses,” says Doyle, “but they’re leaning towards higher-end beds.”

        Presumably, they’re in for a soft landing, on a product whose market is anything but.
– Adam Bruns