Tropical paradise was bankrupt in the 1930’s

BY PRU SOWERS

KONK LIFE STAFF WRITER

With a record-breaking tourism season last winter, new businesses opening and soaring real estate prices, it’s difficult to think there was a time when Key West was literally bankrupt.

In 1934, when the nation as a whole was in the midst of the Great Depression, the unemployment rate in Key West was over 50 percent, with some estimates putting that figure as high as 70 percent. The cigar industry had relocated to North Carolina and was suffering its own problems because people were switching to cigarettes. The Depression forced the federal government to severely reduce the size of its military presence in Key West, including closing the Navy base completely in 1930/31, resulting in a tremendous loss of jobs.

And the bad news wouldn’t stop. The Florida Overseas Railroad was a big employer in Key West, but when the federal government imposed new tariffs on imported goods, causing those countries to retaliate with their own tariffs on U.S. exports, the resulting drop in freight shipping forced more layoffs in Key West.

“On top of it, the [Monroe County] Clerk of the Courts absconded with all the money from the treasury. And the Key West Treasurer absconded with all the city’s money. So there were a lot of factors that led to Key West being bankrupt,” recalled Tom Hambright, Monroe County Historian. “There were a lot of cities in Florida that were in trouble. Key West was probably the worst one because all the industries failed.”

Not knowing what to do, city officials declared bankruptcy in the summer of 1934 and turned control of Key West over first to the state, then the federal government. At that point, approximately 80 percent of the city’s 14,000 residents were receiving federal welfare relief and the city was drowning under $5 million in debt. With municipal services practically non-existent, garbage and refuse piled up for 18 months, creating a stinking mess and health hazard. The combination of problems became so bad that federal officials were thinking about closing Key West completely, relocating the remaining residents to other parts of the state and turning the entire area into a public park. It was the depth of ignominy for a city that in 1889 was America’s richest city per capita thanks for the sponge and wrecking industries. In 1934, Key West tottered on the brink of extinction.

Enter Julius Stone, Jr., a controversial lawyer, according to author Jani Scandura in her 2008 book, “Down in the Dumps: Place, Modernity, American Depression.”

“A Roosevelt protégé, Stone understood the importance of symbolic gesture… Stone sought to revise the American population’s view of the island-city – and, more important, to bring it into its consciousness in the first place,” Scandura wrote.

Proclaiming he was going to turn Key West into the Bermuda of the North, Stone – who took to wearing the traditional Bermuda shorts around town – was assigned the task of revitalizing the city under the auspices of the Federal Emergency Relief Organization (FERA), one of Roosevelt’s New Deal programs to bring the country out of the Depression. Key West was selected to showcase to the rest of the country what federal help could do, and Stone arrived with $1 million in federal funds and a lot of ideas.

First, he hired locals to clean up the garbage by dumping it into the ocean, paying them a low wage but a wage nonetheless. He also required the newly-hired workers, as well as other residents, to volunteer unpaid hours to clean and paint local buildings. Declaring that Key West would become a major tourist destination, Stone provided training for locals to become efficient waiters, housekeeping staff and other jobs aimed at serving tourists. He improved the local infrastructure, building a municipal sewer system, and renovated the Casa Marina Hotel, which itself had fallen into bankruptcy. Coconut palms were planted around the island to enhance a tropical feel.

“But even he didn’t think it would work,” Hambright said of Stone, pointing out that air conditioning hadn’t been invented yet. “The tourism season was only three months. Nobody came to Florida after April 1st. And in those days, tourism was for the rich, the one percenters.”

Still, one year Stone came to Key West, things had greatly changed for the better.

“By the first anniversary of the FERA takeover, Key West had hosted 38,000 visitors, the best tourist season on record. That number constituted a 46 percent increase in the number of tourists, an 86 percent increase in hotel registrations, and a 150 percent increase in rooming house guests,” Scandura said in her book. And a year after that, control of Key West was handed back to local officials.

Still, there are some questions whether or not Stone was the savoir of Key West. Hambright gave a flat, “no,” when asked that question.

“Economists say it was the war that brought the country out of the Depression. Stone was a great self-promoter,” he said, adding that while Key West did declare bankruptcy, its residents had it better than the rest of the country. “It wasn’t that bad here because they [residents] were eating fish and it wasn’t cold in the wintertime.”

But there is no question it was a difficult time, both for Key West and for the country. As to whether it could happen again, the current City Manager, Jim Scholl, points out that it doesn’t take a lot to create a fiscal crisis; “bad short-term thinking and not understanding the long-term impacts” of a lack of cost control. But Scholl isn’t worried, saying that the annual audit reports are solid.

“We’re in good shape. As long as I’m here, I’m keeping it that way,” he said.

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