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Business Observer Friday, May 9, 2014 4 years ago

Escape from New York

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Rick Heine says moving his business from New York to Florida was like going to business heaven. He says there are thousands of entrepreneurs just like him ready to move out of high-tax states.
by: Jean Gruss Contributing Writer

For Rick Heine, a new line on his New York tax bill was the last straw.

The president and CEO of Flightdocs, then based in Long Island, N.Y., got hit with yet another tax — this one from the New York Metropolitan Transit Authority in 2008. The company, which was based near the Islip airport, manages the maintenance records for more than 3,600 corporate aircraft.

The new tax wasn't a significant amount of money, but for Heine it was the feather that tipped the tax pile. He remembers going home after that night and deciding to move his family and his business to Florida.

In 2009, Flightdocs and about 20 employees moved to Fort Myers. “It's like dying and going to business heaven,” Heine laughs.

Heine says he had no problems enticing employees to leave Long Island. “A lot of them wanted to go,” he says, noting that for one of them the cost of a mortgage on a house in Fort Myers equaled his New York State income taxes.

Heine says he's not the only one considering making a move out of high-tax states such as New York. “There are thousands of others like me who want to just do business,” he says.

Heine remembers getting his property tax bill in Fort Myers and marveling at how it dropped from one year to the next. He thought it was a mistake, until he was told that taxes drop commensurately with declining property values.

The absence of a state income tax in Florida made Fort Myers extremely attractive. “It's proof you don't need it,” he says.

Like many northerners, Heine had vacationed in Southwest Florida. He enjoyed attending Yankees baseball spring training in Tampa and fishing in Marco Island. Some research revealed the Fort Myers area offered the key for moving his technology firm: “They have fiber-optic lines everywhere,” he says.

So in 2009, the native Long Islander made his move to Southwest Florida. Flightdocs is now based in the Gateway area of Fort Myers, just east of the new Boston Red Sox spring training stadium near Southwest Florida International Airport.

Heine explains the move this way: “I just want to be left alone to be a capitalist.” He didn't seek any special treatment or incentives from local government to relocate and expand his business. “I'm a pure market capitalist,” he says. “We don't take money from anybody.”

Heine, 49, acknowledges he could be a poster for Lee County's economic development efforts. Compared with New York, Heine says dealing with government employees in Fort Myers has been a breeze.
“Government works like business,” he says.

Growing the business
Since he moved the company to Fort Myers in 2009, Flightdocs more than doubled staff to 45 people and revenues have been growing at 10% to 20% clip to more than $10 million a year (Heine declines to share specific revenue figures.)

Heine acquired Flightdocs in 2003 after he built and sold a successful financial-statement processing company called RTI. At the time, Flightdocs was based in Santa Fe, N.M., and managed the maintenance records for only a dozen aircraft.

Today, Flightdocs manages the maintenance records of 3,600 private aircraft. “Our customer is anyone with a private jet,” Heine says.

Heine acquired Flightdocs after realizing that many aircraft owners were unhappy with their current record-keeping provider and were eager to embrace a system that was Internet-based. “Cable modems were hitting the airports and we were all Internet-based,” Heine says. “It was a big hit.”

Managing all this data for inspection by Federal Aviation Administration overseers takes a big investment in technology. Last year, Flightdocs invested $2.5 million in technology and Heine says that figure will rise to $3 million this year. “You have to constantly renew yourself,” he says. “We want to blow our customers' minds.”

Pilots and maintenance crews can access their encrypted records remotely at any time, even by mobile phone or iPad. “We maintain our own private cloud,” says Heine, citing security concerns among other reasons for maintaining its own computer servers. “The cloud is awesome and it is dangerous,” Heine says.

Heine declines to name his customers for privacy reasons, but they include Fortune 500 companies, individual owners and operators with fleets of 20 to 30 jets. Flightdocs charges $4,000 to $12,000 per aircraft to handle maintenance records depending on the size of the plane.

About 20% of Flightdocs' business is international, but Heine says much of the growth will come from the U.S. The company plans to add 600 aircraft a year to its roster of clients.

Heine, who owns the company solely, says he's reinvested cash from operations back into Flightdocs to grow the business. He gives his cell phone number freely to customers, urging them to call him anytime. “It can be 3 a.m., I don't care,” he says. “They need to get to the top guy.”

The phones at Flightdocs don't ring more than twice and a person always answers. “That more than anything else is the key to our success,” Heine says.

Econ 101: Lower taxes = higher growth
One of the best ways to attract corporate relocations to Florida is by keeping taxes low, as Rick Heine of Flightdocs will attest.

Heine's anecdotal experience confirms research conducted by Dean Stansel, an economics professor at Florida Gulf Coast University and an expert on how high taxes and regulations crimp growth.
“It's textbook economics: People respond to incentives,” Stansel says.

In a research paper published last year in The Journal of Regional Analysis and Policy, Stansel found that areas with higher taxation had less economic freedom. While this may sound intuitively correct for investors, economists have struggled to prove this point because they're working with outdated and bulky government data.

Stansel has been developing an economic freedom index for metropolitan economies in the U.S., which includes taxation. For example, he found that the Long Island area was one of the least economically free areas of the country, ranked 341st out of 384 areas. By contrast, the Cape Coral-Fort Myers area ranked among the highest at 41st in the country.

In a paper published by the Cato Institute in 2011, Stansel reported finding that metro areas of similar size with higher taxation have less prosperous economies. Stansel's conclusion: “If high-tax, low-growth metro areas like Detroit, Milwaukee, Buffalo, and Syracuse want to be more like high-growth areas such as Dallas, Tampa, San Antonio, and Austin, they should lower their onerous burden of taxation and bring spending under control.”

That's called Econ 101.

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