How Hank Fishkind Would Change Florida

By Business Observer Staff
| 6:00 p.m. December 31, 2007
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economy by Matt Walsh | Editor

Florida's pre-eminent economist offers his prescriptions for Florida tax policy. Given the economy, state and local politicians may want to listen and take heed.

He is Florida's E.F. Hutton. Better than having the Good Housekeeping Seal of Approval.

Indeed, every large-scale developer in Florida knows a sure-fire way to have a project taken seriously is to turn in a feasibility study with the words "prepared by Fishkind & Associates."

And every county administrator and city manager knows a sure-fire way to sell sewer bonds or road bonds to institutional investors is to circulate a prospectus with the words "prepared by Fishkind & Associates."

Over the past 32 years, Henry "Hank" Fishkind - make that Dr. Hank Fishkind, Ph.D. - has earned the position of Florida's pre-eminent economist. His word is a "10" on the credibility scale. Since his arrival in the state in 1975, he has been economic adviser to Govs. Bob Graham and Jeb Bush; to Florida House speakers and Senate presidents; to the biggest corporate clients in Florida - A. Duda & Sons, Benderson, Disney, ITT, Arvida, Barron Collier, CSX, Florida Power & Light, Lennar, Lykes, Lakewood Ranch, St. Joe, WCI. The list is too long to print.

Put it this way: When the smartest chief executive officers in Florida need economic and fiscal advice on what they're doing in Florida, they turn to the guy who is smarter than they are - Fishkind.

Pat Neal, founder of Neal Communities, the company that has built more homes in Sarasota and Manatee counties than anyone, has sought Fishkind's advice since 1989. Says Neal: "He has so many ideas, I cross-examine him whenever he comes here. He always has at least one new idea for me."

Rex Jensen, CEO of the 26,000-acre Schroeder-Manatee Ranch in Manatee County, has used Fishkind's services for 20 years. When his company decided in the late 1980s to develop 10,000 acres over 20 years into what is now Lakewood Ranch, Schroeder-Manatee turned to Fishkind.

"When you do a project like this," Jensen says, "we knew we would face economic cycles. How do you survive the bad times? Hank was someone on the team who understands the trends."

Syd Kitson, developer of 18,000 acres of Babcock Ranch in Charlotte County, marvels at Fishkind's understanding of the entire state's economy - at the macro and micro levels, down to the economics of lot sales. And he marvels at Fishkind's ability to translate data in a way that anybody can understand. "He actually makes these things entertaining," Kitson says.

That's what everyone knows about Fishkind. He's no ivory-tower, academic egghead. When he delivers one of his 30-plus economic forecasts each year all over the state, Fishkind makes discussion of the U.S. money supply and "structural changes" in the economy interesting.

These events are important to him. "They keep me sharp," Fishkind says. "I work hard to provide the latest data because I take very seriously the investment people make in giving me their time."

Attendees of Fishkind's forecasts also know that while he is entertaining and thorough in his presentations, he rarely voices his opinions on what public policymakers should do. He may make a quick, sarcastic comment or joke about public-policy decisions made in Tallahassee - to the point you understand he agrees or disagrees with decisions (i.e. he disagreed with the details of the recent property-tax and insurance reforms), but Fishkind never expounds at his forecasts on what should be done. "That's not what they hired me for," he says.

To be sure, though, Fishkind has some definitive ideas on what policy makers should do to make Florida's economy stronger. Here are Fishkind's views on Florida's tax policies. Consider it this way: What Alan Greenspan and Ben Bernanke's comments are to the U.S. economy, Hank Fishkind's views are to Florida. When Fishkind speaks, we should listen:

• The mix is wrong

The way Fishkind sees Florida's tax structure, most of what he calls "the fundamental pieces" are right. "The mix is wrong," he says.

If he had the magic policy wand, Fishkind would change a lot of Florida's current practices. Many of the state and local policies are typical of what happens in politics - the elected officials vote in policies that benefit a few at the expense of many, or, in the case of growth management, they distort the market in ways that bring the opposite results of what is desired.

• Growth management

"The idea of concurrency and comprehensive planning are sensible and useful," Fishkind says. "The capital improvements budgets are a great thing. But the lack of funding is the big problem.

"The state hasn't given the cities and counties enough tools to fund concurrency. Why can't counties have an unlimited gas tax or a five cents sales tax? Most counties don't have the revenues to fund their comprehensive plans," he says.

Here's the fallacy: Road concurrency laws require that new development cannot occur unless local roads are adequate to serve it at a desired "level of service" or unless the roads will be built at nearly the same time as the proposed development.

This typically requires more road funding than there is money to fund the roads. So development comes to a standstill, with politicians and developers often at odds over road-building costs and levels of service.

Fishkind says the "level of service" issue is particularly bollixed.

"Many growth plans would like to produce more compact settlement patterns," he says. "Then they ought to create incentives to develop that way. But these plans fail to work with economics.

"If we want compact growth, then have lower impact fees where you want higher growth and higher fees where you don't want it," he says.

You can't have it both ways, Fishkind says. Local politicians need to have the courage to accept lower levels of service in downtown cores. At the same time, he says, cities and counties need more funding options from the Legislature to be able to keep up with growth. To the latter, he recommends the gas tax being indexed to inflation and continuing to give counties the option to impose sales taxes on gas.

• Tollways

Fishkind is a big proponent of congestion pricing and toll roads.

To help reduce traffic backups on local roads, Fishkind advocates that Florida counties and cities do what is done in London: impose time-of-day congestion pricing on major local roads. The technology exists to charge motorists electronically. What's more, Fishkind says, time-of-day pricing would go a long way toward reducing traffic at peak times.

"With all due respect," he says, "do our retirees really need to be driving at rush hour?"

Fishkind also recommends toll roads to fund highway construction. Orange County, for instance, has the state's best beltway highway system. It was funded through tolls - thanks to the advice of Fishkind, who is a member of that region's transportation authority board.

How it works: Build one toll road. The traffic that uses it pays the debt service. That toll revenue can then be used to secure bond financing for the next leg of the toll road. And so on.

Fishkind opposes another highway trend sweeping the states: selling or leasing turnpikes and other tollways to private enterprises.

"An abysmally bad idea," he says.

He says toll revenues are used to amortize the bond debt on the highway construction and pay for repairs. Because governments and taxing authorities typically get lower interest rates than private ventures - say, 5% verses 15% for a private venture that borrows - it makes more sense to keep turnpikes under the aegis of a government or taxing authority. The cost of capital is less. Because of the lower interest rates on its borrowing, a taxing authority will have more capital available for maintenance and expansion than would a private enterprise.

• School taxes

For instance, Fishkind says Florida should fund all of its K-12 public education operations with the state sales tax. Eliminate local school property taxes, he says.

To do this, Fishkind knows the state sales tax would need to be broadened - not increased, broadened. Tax services, he says - lawyers, accountants, architects, engineers, advertising agencies, newspapers. Eliminate a lot of the special-interest exemptions that, over the years, were granted as political favors.

Fishkind recommended this once before, except the idea came to the Legislature under the aegis of former Senate President John McKay of Bradenton. McKay is pushing the idea again as a member of the Florida Tax and Budget Reform Commission.

Tax services? Former Republican Gov. Bob Martinez tried this in the late 1980s and was nearly run out of Florida. At the time, lawyers and other professionals squealed that taxing their services not only would hurt their businesses but it would hurt Florida's economy more than help. They argued consumers would go to out-of-state professionals for those services. Says Fishkind: "We're not taxing the lawyers; we're taxing the service. It's on the service whether it's provided by me or anyone from New York or anywhere else.

"It's just important to examine the trade-offs," Fishkind adds. "To eliminate the property tax on schools - that's a pretty good trade-off."

Fishkind argues that public schools are a state responsibility and therefore should be funded by the state, not the counties. If the local school property taxes were eliminated, he says, local economies would experience a big boost in economic growth. All of those local taxes going to schools would be freed up to be invested and spent elsewhere.

It's big money. In Lee County, for instance, school property taxes suck $450 million a year out of taxpayers. In Hillsborough County, the amount is $662 million. At the same time, though, Fishkind also favors giving counties the option to vote in local-option sales taxes for schools.

• University funding

The state should continue to fund the universities as it does. Fishkind also thinks tuition increases are appropriate. He is a big advocate of Florida's "Bright Futures" scholarships, which pay for high school seniors' tuition at state schools if they rank among the top 20% of their classes.

"It's one of the best things we have going - investing in our human capital," Fishkind says.

• Property-tax reform

"I hate it," Fishkind says of the tax-reform package that came out of the Legislature. "It's giving tax breaks to the wrong people. It's politically attractive but economically detrimental."

Fishkind opposes the portability measure in the proposed constitutional amendment to be voted on Jan. 29. He says homesteaded property owners who sell their homes would get a double tax benefit: One, they no longer pay a federal capital-gains tax on their homes and the benefit of portability on their property taxes.

If the amendment is approved, Fishkind says, it will merely embed a lousy property-tax system even more. It will grant even more benefits to homesteaded property owners. "That will just prevent us from real property-tax reform," he says. "It would make it harder to get rid of the school property tax."

If it's a choice between the proposed amendment or keeping the lopsided system we have now - one that protects homesteaded property owners and punishes non-homesteaded owners - Fishkind favors the latter.

What he'd really prefer to see is a property-tax system that scraps the school-property tax. Save Our Homes, he says, is a political reality that will stay. "As a social policy, it does protect retirees," he says.

As for the disparity that exists between homesteaded and non-homesteaded property owners, Fishkind doesn't advocate extending Save Our Homes to the non-homesteaded property owners. Instead, he would prefer caps on government spending. With no school property tax and spending caps, the disparity between homesteaded and non-homesteaded property taxes would go away.

• Caps on government spending

While Fishkind supports caps on state and local government spending, coming up with the right formula is a challenge he hasn't worked out. Colorado, for instance, had a taxpayer bill of rights that limited growth to such standards as combined inflation and population growth.

"The trick is to get the right inflation index," Fishkind says. It wouldn't be correct, Fishkind says, to tie government inflation, say, to food. "There is a way. We need something like that," he says. "I've come to the conclusion we need (caps)."

• Privatize

Fishkind advocates state and local governments ending their involvement in some services - perhaps in parks, libraries and fire departments. Contract fire service to the private sector, he says. Fishkind is especially in favor of this after learning recently that - thanks to state mandates for health insurance and pension benefits - firefighters in rural Nassau County are earning $85,000 a year with overtime.

If not privatize those services, Fishkind advocates the creation of more taxing districts that assess fees, similar to the lighting districts that exist in many counties.

"You have modest amounts of property taxes that assess fees for specific services," Fishkind says. "You see where the fee goes. That general fund stuff makes people very nervous. It allows for all sorts of funny stuff."

• Health care

Perhaps surprising, Fishkind likes the Massachusetts health care plan, which requires every citizen to purchase health insurance and thereby reduces the free-rider problem of the uninsured overutilizing hospital emergency rooms - a cost left to taxpayers and those with insurance.

"We're just really doing it wrong," Fishkind says of Florida's health care system. "We don't have a public system, and we don't have a private system."

• State mandates

The Legislature constantly sins when it imposes unfunded mandates on cities and counties, Fishkind says. High on the list: pension and fringe benefits that local governments must pay. Prima facie evidence: the $85,000-a-year firefighters in Nassau County.

Another example: "The state says, 'Reduce property taxes, and yet the state increased the local property tax required for schools by $700 million in the last session."

• Insurance reform

Fishkind is enamored with Gov. Charlie Crist and the Legislature's property-insurance reforms. Citizens Property Insurance should not be competing with the private sector, he says. And while he supports the establishment of a catastrophe fund, he doesn't support the way it is financed now - by taxpayers. Insurance premiums should be market- and risk-based, he says.

"We need coastal and high-hazard pricing," Fishkind says. "What we did (with insurance reform) was give a reduction to every beach house in Florida."

'LITTLE JEWISH BOY'

DOMINATES A NICHE

After his grandfather and father lost their Boston business, Hank Fishkind cleaned houses at age 12. The experience drove him to succeed.

Hank Fishkind often refers to himself with self-deprecating humor - "just a poor, little Jewish boy from Boston."

At one time he was.

But since he took his first job at the University of Florida in 1975 after earning his Ph.D. in economics, Fishkind has cultivated a business niche that puts him at the top of a short list of economists in Florida. It's safe to say his firm is the only one that specializes in economic forecasting and bond financing for local governments.

Since Fishkind formed Orlando-based Fishkind & Associates in November 1986, his company has raised more than $3.5 billion in public infrastructure financing for its clients, not to mention advised a Who's Who of corporate and governmental clients throughout the state on economic issues and delivered more than 900 economic forecasts to Florida business people.

It's not exaggerating to say in Florida business circles - particularly among those whose businesses are Florida-centric - Fishkind's name is to Florida's economy what Tim Tebow's is to Florida football. When it comes to assessing Florida's economy, no one is quoted more than Fishkind. (Just do the Google search.)

But here's an oddity: In spite of Fishkind's name recognition, reputation and the media's reliance on him over the past 32 years, it's remarkable that someone so prominent has remained so unknown. Asked prior to an interview for a copy of any stories that profiled him, Fishkind said: "There aren't any."

As he'll tell you, he's not the story.

But he is.

The Fishkind life story explains the in-depth details of Fishkind's public presentations. It explains the cowboy boots that, for many years, were part of Fishkind's signature look. And it explains what his clients describe as an intense passion and indefatigable energy for what he does - even after doing it for 32 years.

'Spoiled Jewish kid'

Fishkind's elementary school years were mostly years of privilege. He was the oldest of three children. His grandfather (who fled Jewish persecution in Russia in the early 1900s), father and uncle owned six men's clothing stores in Boston.

"I was a spoiled Jewish kid," Fishkind says. The family had two cars and a maid. His father bought a new car every year. Fishkind says he thought then that was the way everyone lived.

But in the 1960s, privilege went to poverty. The Massachusetts and Boston governments decided to build a government center in downtown Boston on the site of three of the six Fishkind stores. While the state and city governments paid the landlords for taking their properties, the leaseholders - which included the Fishkind stores - got nothing.

The clothing stores went out of business.

At age 12, he had to go work. So did his mother. They cleaned houses. On weekends, the two of them delivered advertising materials door-to-door. And at age 14, Fishkind took a job as a McDonald's fry cook. He worked at McDonald's until he went to college.

As high school graduation neared, Fishkind had one ambition. "My parents were hopeful I'd be a nice Jewish lawyer, doctor or accountant," he jokes. "But I just wanted to be able to go to college."

His parents couldn't afford college tuition. "I knew I needed to succeed academically because that was my exit from menial jobs," Fishkind says.

While working at McDonald's, captain of the high school soccer team, running track and doing gymnastics, Fishkind earned an academic scholarship to Syracuse University. The scholarship covered his tuition and books. He paid for his room and board by serving four years as the head cook and steward at the Phi Epsilon Pi fraternity.

That meant he managed the house's food budget, worked with vendors and prepared 20 meals a week each for 50 men. But to manage that and keep up his grades, Fishkind hired a woman to run the kitchen during the day.

How he landed at UF

Economics caught his attention. But he also liked computer science, enough to start a consulting business as a sophomore. He did Fortran key punching for business-school professors.

Fishkind graduated summa cum laude in 1971 with a degree in economics. Then, with his new bride, the two headed to Bloomington, Ind., where Fishkind enrolled in the Ph.D. program for economics. Three of his professors were members of President Nixon's Council of Economic Advisers.

And then the idea for his future came to him. After he saw the national economic models his professors created, Fishkind thought of applying the same theories and practices to smaller markets.

"Why are prices in New York so different from Florida?" he says. He wrote his doctorate thesis on a topic that would sit on the shelves of most B-school libraries - "The differential effects of monetary policy on the U.S. economy" - but it was the basis for what Fishkind has done for the past 30 years.

As he puts it: "What most businesses want to know is what level is the tide going to be in my bay?"

In the fall of 1975, Fishkind drove to Gainesville for a job that he thought was the perfect match - to teach economics part-time at the University of Florida's business school and to head up a new forecasting program at the school's Bureau of Economic and Business Research. Fishkind hired Stan Smith, who is still at BEBR, and together they created the models BEBR has used the past three decades to forecast Florida's economy and population growth.

As the two made presentations around the state, Smith saw that Fishkind had another calling. "He was a dynamic speaker," Smith says. "I think it gave him the confidence to go out on his own." It also helped him build up a consulting business while at UF.

On his own

In 1984, Fishkind left BEBR and the university and joined a municipal bond financing firm, M.G. Lewis Econometrics. It was another match of skills and great timing. This was the period when institutional investors began trading municipal bond futures and the start of a new investment instrument called collateralized mortgages - what today has become the source of the sub-prime meltdown.

Fishkind's Florida forecasting skills came into play because investors wanted to know which pools of collateralized mortgages carried the most and least risk. If you knew how to measure a regional economy, you could score the risk of mortgage pools.

The relationship with M.G. Lewis worked well for two years, until Fishkind decided to go out on his own. He took with him a stable of development and corporate clients who wanted his economic forecasting skills and a stable of bond clients for whom he arranged bond financing - sellers and buyers.

And so began Fishkind & Associates - with Fishkind and two employees.

In the firm's 21 years, Fishkind has done a lot of ground-breaking work. As adviser to ITT - which held most of the real estate that makes up Flagler County - Fishkind helped the firm figure out how to unlock the value of a long stretch of scrub and oak that straddled the Atlantic Ocean and the mainland. Fishkind advised ITT to build a toll bridge over the Intracoastal. Its value was obvious. It would be the only bridge for miles.

State officials said a private corporation couldn't own a bridge. This led to legislation that permitted the creation of what is now known as community development districts - and the development of ITT's Hammock Dunes, today one of the fastest-growing luxury resort communities in Florida.

When former Senate President John McKay in 2002 wanted to reform Florida's tax system, he called on Fishkind to do a study: What would happen if certain sales-tax exemptions were 'sunsetted'? Could the state collect the same revenues it needs and be able to lower the sales tax? Fishkind's models showed the sales tax rate could be cut from 6% to 3% and be revenue neutral.

McKay took Fishkind around the state to generate support. The Senate backed the idea, but the House killed it. Today, as a member of the Tax and Budget Reform Commission, McKay is pushing a similar idea - one that has Fishkind's seal of approval: eliminating many of the sales-tax exemptions and wiping out most of the local school-property taxes.

What's next

Fishkind's firm, which occupies an abandoned defense contractor's flight-simulator plant near the University of Central Florida, has expanded to 32 employees. He's finishing an unused wing of the 20,000-square-foot office building with plans to add at least five more employees.

The firm, whose revenues Fishkind declines to disclose, also has opened offices in St. Lucie West and Collier County to be closer to key clients. In addition to continuing to provide his state forecasts, advisory services to developers and arranging bond financing, Fishkind's firm now manages 60 community development districts, handling bookkeeping, regulatory and tax requirements.

Lately, his firm has started expanding outside of Florida into Georgia and North and South Carolina. In January, he says, Fishkind & Associates will start posting his fiscal models for counties and municipalities online for free as he does his regional forecasts.

At 58, Fishkind, married a second time and with no children, is still as driven today as he was as a teen working to get out of poverty. His wife says she doesn't know what he would do if he quit. He goes about his work with the same discipline he does his daily exercise routine - "an hour every day from the time I was 16."

And the cowboy boots? Fishkind is known for his natty attire, what you might expect from the son of a haberdasher. "If you're going to dress up, make a statement," he says. And what would the statement be of those alligator cowboy boots?

Fishkind laughs. "When you grow up as nice Jewish boy, you can't have cowboy boots," he says. "Like every kid, I always wanted to wear them."