October 26, 2014

Around the State- Northeast- July 2000

Jane Tanner | 7/1/2000
Take It or Leave It
Sykes Enterprises commands a premium from communities desperate for its $19,000-a-year jobs.

By Jane Tanner

Sykes Enterprises has mastered a straightforward, cookie-cutter formula to setting up call centers: Identify small, rural communities without significant computer-related employers, then provide the community with a list of requirements -- cash grants, free land, site preparation and tax breaks. In total, towns hoping to land a 400-plus-employee facility must ante up around $4 million in incentives. Once a community meets its requirements, Sykes quickly erects one of its help-desk centers and begins training employees to provide customer service for Sykes clients such as Microsoft, Compaq, Gateway and Adobe.

New call centers in Jackson and Putnam counties in north Florida will mark a milestone -- the first such operations that Tampa-based Sykes has in Florida.

Sykes' rural strategy has other benefits aside from cashing in on the incentives eagerly provided by job-hungry small communities. The jobs are just attractive enough -- and there are so few other job options -- that employees tend to stay put, cutting down on the rampant, costly turnover that plagues most call centers. "There are less technology companies to go work for in Palatka than Tampa," says John Mahoney, a Raymond James analyst who follows the company.

Also, rural wages are lower. Sykes pays an average of $19,000, according to one county official. That's not bad for some communities. "Here people generally start out at minimum wage and don't see too much change from that," says Rick Pettis, community development director for Jackson County. An agricultural community that depends largely on peanuts and cotton, Jackson has lost about 1,400 jobs in the last few years.

Thrilled at the prospect of a big influx of jobs, small communities rally hard to come up with the 22 free acres, site preparation and $3 million in cash incentives and tax breaks that Sykes mandates. Not all can deliver: Columbia County tried for one of three new support centers Sykes plans to build but couldn't come up with about $250,000 needed to run fiber-optic cables to Sykes' proposed site.

Even so, community officials say they didn't have any problems with Sykes' requirements. They say it's better than dealing with some companies that leverage one community's incentives against another's. "Sykes says, 'Here are the terms,' " says Wes Larson, president of the Putnam Chamber of Commerce. "Otherwise we're pitted against someone else, and every time you turn around the ante keeps going up." The downside, however, is that existing businesses in Putnam are now asking for incentives spurred by the generous outlay to Sykes.

Sykes moved to Tampa from Charlotte, N.C., in 1993 and quickly boomed as a hardware and software support outsourcing firm. When it came to Tampa, it had 688 employees. It now has more than 14,000.

The company has developed a strong reputation with its clients. But Sykes' stock (Nasdaq-SYKE) took a big hit, dropping from $51 a share at the beginning of the year to $13.37 after accounting irregularities forced the company to restate its second- and third-quarter results, reducing revenues by $30 million. Shares have rebounded slightly to about $21. With the precipitous drop, Sykes was hit with predictable class-action lawsuits by investors. However, analysts such as T. Brett Manderfeld at U.S. Bancorp Piper Jaffray say Sykes should continue to grow. The company's rural prototype is a "highly evolved and very profitable model," Manderfeld says.

In the News

Gainesville -- Ever hopeful that it will be able to attract major airlines and boost decreasing passenger traffic, the Gainesville-Alachua County Regional Airport Authority approved about $1.4 million for upgrades to the general aviation terminal and parking lots.

Jacksonville -- Mayor John Delaney is proposing a $2.2-billion fix-up for the city. Most of it, $1.5 billion, would go toward road-related infrastructure ("Roadwork", April 2000). The remainder will be used to replace aging facilities such as the downtown library, an indoor sports arena, courthouse and minor league baseball stadium. One funding plan relies on a half-cent sales tax increase that would raise about $50 million a year. Without it, Delaney says he'll still push on, but more slowly. Voters will see the tax referendum on the September primary ballot.

Cruise ships of Delta Queen Coastal Voyages will make Jacksonville a port of call starting next spring, sending some 226 passengers out for day trips to St. Augustine, Amelia Island and other places.

Armor Holdings (NYSE-AH) has made a slew of acquisitions. The security products and services company bought Network Audit Systems, a scanning system that assesses security risks in computer networks; Break-Free, a manufacturer of lubricants for firearms and cleaning equipment for tanks and artillery; and Special Clearance Services, a land-mine removal operation.

Jacksonville economic development officials and two private companies have started a process they hope will give the city a leg up in attracting a semiconductor manufacturer. The Genesis Group, a planning and engineering firm, and Trinity Partners, a developer, are eyeing a 600-acre site near the Jacksonville International Airport as a possible site for a chipmaker and have begun the initial permitting and groundwork that chipmakers want to see before they'll even consider locating in a city.

The economic impact of the military in northeast Florida and south Georgia rose about $200 million to $6.1 billion last year despite the closure of Cecil Field Naval Air Station and drops in personnel. An annual report produced by the Navy says its spending in northeast Florida on goods and services was $568 million and its payroll, $1.52 billion. Personnel, active duty, reserve and civilian employment totals 48,469, down 14% from a high of 56,433 in 1997.

Dow Chemical purchased about 50% of Buildscape, an e-commerce arm of The Riverside Group (OTCBB-RSGI) that offers home-building products and services, linking contractors with suppliers and manufacturers. Riverside retains a 36% stake in Buildscape.

The Suddath Cos. sold its data storage and records management business unit to Boston-based Iron Mountain for $54 million in cash as that industry undergoes consolidation. Suddath officials say they'll use the proceeds to boost the company's relocation-related services.

Idea Integration, an e-business services unit of Modis Inc. (NYSE-MPS), is gobbling up web design and related companies around the U.S. with six recent purchases, including one of Jacksonville's largest web design companies, Ramworks. Modis, which is boosting its talent pool at Idea in anticipation of issuing stock in the subsidiary this summer, is undergoing an overall restructuring. Its professional services division (outsourcing of lawyers, accountants and the like) will be renamed Prolianz, and the remaining IT services segment will be spun off.

Jacksonville Beach -- Los Angeles-based Lowe Enterprises sold Grand Haven, an upscale residential community, to Jacksonville-based LandMar Group. Grand Haven opened in 1997 and has about 450 homes. Meanwhile, LandMar plans an 11-story luxury oceanfront condominium building with 43 units in Jacksonville Beach ranging from $430,000 to $1.6 million. LandMar's merger last year with Duke Energy subsidiary Crescent Resources has given it the financial resources to expand its development and holdings in the Southeast.

Lawtey and Waldo -- Motorists should continue to apply the breaks in rural Lawtey and Waldo after legislative measures to restrain ticket-writing in the notorious speed traps along U.S. 301 between Jacksonville and Gainesville failed. Two unsuccessful bills would have limited towns from generating more than 25% of annual revenues from traffic tickets. Lawtey relies on traffic violations for more than half its annual revenue. Waldo gets 32%. Traffic ticket proceeds don't rise above 10% of annual budgets in any other Florida towns.

Palm Coast -- Local lawmakers of the newly incorporated city planned to vote on whether to impose a three-month hold on new development while the city hires a planning consultant and puts a new vetting system into place. The Flagler County/Palm Coast Chamber of Commerce had opposed the 90-day moratorium, but city officials say they want to ensure "good" development.

Federal Pay Day
The federal government spends more on salaries and wages in Duval County than in any other Florida county. Duval snagged more than 18% of the $7.83 billion spent in the state on federal salaries and wages -- an amount equivalent to what all of Connecticut receives. Statewide, salaries and wages make up 9% of all federal expenditures. In Duval, that category makes up 29% of total federal expenditures for the county.

Tags: Northeast

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