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BARNETT ECONOMIST ESTIMATES HURRICANE DAMAGE WILL SURGE OVER $20 BILLION

BARNETT ECONOMIST ESTIMATES HURRICANE DAMAGE WILL SURGE OVER $20 BILLION
 JACKSONVILLE, Fla., Sept. 4 /PRNewswire/ -- Hurricane Andrew, the most physically destructive natural disaster in the nation's history, has caused at least $17-$20 billion in property losses," estimated John Godfrey, chief economist for Barnett Bank, Inc.
 In an economic analysis to be published Monday in Barnett Economic Week, Godfrey noted other estimates range from as low as $10 billion to as high as $30 billion.
 "When lost incomes and sales and emergency expenses are included, damages will surge well beyond $20 billion," he noted.
 "Rebuilding will take several years, but South Dade County will never fully recover from the human and physical destruction that Andrew wrought," he predicted.
 The hurricane left more than 90,000 homes destroyed or damaged and an estimated 250,000 people homeless.
 Heaviest damage was in South Dade from Cutler Ridge to Florida City. Communities of Kendall, Palmetto Estates and Perrine also incurred heavy damage. Tourist attractions, resort hotels, Homestead Air Force Base and Dade County's tropical plants and vegetable crops were all severely damaged or destroyed.
 "We estimate total monetary destruction to both public and private property will be at least $17 billion, of which only about half will be reimbursed by private insurance. Federal assistance should help reduce the remaining out-of-pocket costs," noted Godfrey.
 Highlights of Godfrey's analysis:
 -- Hurricane Hugo, which hit Charleston, S.C. in September 1989, provides a benchmark for assessing Andrew's impact. Property damage totaled $6.3 billion, of which only $3.3 billion was reimbursed by insurance and federal assistance. Wealth was destroyed which was not recovered. Like Andrew, the heaviest damage was inflicted upon residences. A University of South Carolina study shows that homeowners and renters recovered only 45 percent of their losses. Commercial businesses did much better, recovering 80 percent.
 -- The recovery from Hurricane Hugo provided a boom to construction and lifted spending for building materials and home furnishings. The rebound lasted approximately a year and a half, after which activity slumped. Part of the construction and spending boom simply borrowed from the future.
 -- Hugo also made it clear that the property losses overwhelm any temporary benefit from the subsequent reconstruction. Construction does experience a short-term boost but the community overall suffers a loss in wealth. Businesses, as well as households, face an interruption in incomes and added expenses to cover short-term emergency arrangements. Savings are utilized for living expenses and to rebuild. Whatever apparent gains occur from the influx of insurance settlements and public assistance do not compensate for the property losses, wealth reduction or personal anguish.
 -- Damage from Andrew appears to be roughly three times that of Hugo. The devastation to Dade County residential properties will total about $7.5 billion, with only about one-half of that being reimbursed by insurance. Expanded federal help will help offset some of the uninsured losses but not all. Over 7,500 single-family homes were demolished and another 30,000 were extensively damaged. An additional 31,000 homes suffered significant damage. Apartments and condominiums were also hard hit.
 -- Nearly 3,500 units were destroyed and an equivalent number were seriously damaged. Nearly 9,000 apartments and condos suffered significant damage. Finally, practically all the 6,000 mobile homes south of Cutler Ridge were either destroyed or extremely damaged.
 -- Commercial properties also suffered enormous losses -- total damage in southern Dade County of $2.5 billion. Business disruptions will add to the total. Several office complexes were heavily damaged in the Cutler Ridge area, including the headquarters of Burger King and American Bankers Insurance Corporation. In addition, the Cutler Ridge Mall and at least five large shopping centers were severely damaged. Retailers and service firms along US1 suffered extensive damage and retailers in Homestead and surrounding communities were totally devastated.
 -- At the current time, there is a shortage of almost everything in the hardest hit areas and a scramble to relocate business operations and obtain housing throughout the Gold Coast. Businesses have aggressively sought out office and storage space to get operations up and running. In one morning South Florida changed from having a surplus of office, retail and industrial warehouses to shortages.
 -- The many small businesses that dotted Miami's economic landscape were hard hit. Over half of the Dade County establishments employ fewer than five persons and barely one in ten has a payroll larger than 50. Trade and services account for two thirds of all jobs. These firms typically do not carry enough insurance to reimburse for property losses and business interruptions. Many lack the support and resources that many larger firms have to get the recovery process quickly underway and offer even limited service.
 -- Homestead Air Force Base was another major blow. The base is critical to Homestead's economy and without it southern Dade County would face a bleak future. The base directly employs one of every six area residents and ties a third or more of the residents to the area. 6,600 troops are stationed at Homestead and the facility employs nearly 2,200 civilians. The annual payroll exceeds $145 million and the total economic impact on Dade County is estimated to be over $400 million.
 -- Supply contracts to local firms total over $20 million annually, with half the business going to small and minority firms. Military pay accounts for 15 percent of personal income and supports the bulk of retail spending in Homestead. The Inter-American Air Forces Academy also attracts officers from throughout Latin America. More than 20,000 military retirees residing in the area utilize the base hospital, dental clinic and base exchange.
 -- President Bush has pledged to rebuild Homestead AFB. The tab could be close to $750 million and would require congressional approval. In the mean time Homestead AFB's major functions have been temporarily reassigned to bases in Georgia, South Carolina and Texas.
 -- Recovery from Hurricane Andrew will take several years. The rebuilding task is almost overwhelming and may require many more resources than South Florida will be able to muster. The logistics of concentrating so much building activity into the southern part of Florida and compressing it into south Dade County, will be staggering. Marshaling and managing the required materials and workers through the bottlenecks will determine how quickly the damage is repaired.
 -- Of course not all the housing stock and businesses will be replaced. Kendall and Cutler Ridge are closely linked to the Miami economy and have been growing rapidly. Here, where the median home cost is $150,000 to $200,000 and apartments generally rent for $500 a month, the prospects are good. Rebuilding also seems certain further south in Perrine, Cutler Ridge and Princeton, where more affordable housing has been developed.
 -- Reconstruction in Florida City is more problematic. Despite ties to Homestead, agriculture plays a major role. Farming may only partially recover and many of the very low value houses, migrant camps and trailers will not be replaced.
 -- To substantially complete the task in two years would require lifting Florida construction activity into the range of $23 billion, a record. This would require another 125,000 construction workers. In addition, thousands of workers will be hired in supporting industries ranging from building material manufacturers and distributors to architects, engineers, bankers and decorators.
 -- The response will tax the construction industry. At the height of the 1980s' building cycle, commercial, residential and public construction in Dade just barely topped $2 billion and was less than $7 billion in all of South Florida. To rebuild the estimated $17 billion in damaged property will be a Herculean task even if all efforts are efficiently concentrated on the task for the next two years. Florida's best construction year produced just $21 billion in activity.
 -- The federal government will provide more assistance than current programs authorize. The president has pledged to pick up the tab for rebuilding most public schools, hospitals, highways, bridges and Homestead Air Force Base. The federal government will reimburse uninsured losses to homeowners that rebuild for up to $11,500. This commitment requires congressional approval and at least $2 billion in assistance seems certain to be approved quickly.
 -- Even with massive insurance reimbursements, bank loans, and public financial assistance, the task is daunting. 85,000 new homes is more than four times the number ever constructed in one year in Dade County and a third more than ever built in a 12-month period in Dade, Broward and Palm Beach combined. Fortunately, there is slack in the building trade all across Florida and that will help. Construction activity is off by a quarter over the past three years and Florida has nearly 100,000 laid off construction workers, 30,000 who formerly worked in South Florida.
 -0- 9/4/92
 /CONTACT: Bob Stickler, 305-825-6998 or Russ Hoadley, 904-791-5013, both of Barnett Banks, Inc./
 (BBI) CO: Barnett Banks, Inc. ST: Florida IN: FIN SU: ECO


JB-JJ-AW -- FL014 -- 7007 09/04/92 14:56 EDT
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Date:Sep 4, 1992
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