Sun Sentinel Palm Beach Edition
Bill turns spotlight on incentives
Site selectors maintain incentives are necessary
Business incentives, or money given to multimillion dollar corporations to establish offices and jobs around the state, have come under frequent attack in Florida over the years. Now there’s state legislation that would do away with them.
Critics call them “corporate welfare,” saying too often business incentives are given to companies that would have elected to relocate in Florida anyway.
But economic development leaders and site selectors maintain that incentives are necessary to compete with other states that offer them, especially for prized headquarter relocations that bring the most jobs and revenue to the state.
John Boyd, a long-time location consultant in Princeton, N.J., who has worked on deals in Florida, said the state has enjoyed a “hugely successful run” in attracting company relocations in all major metropolitan areas. The prime example was Florida’s landing of Hertz to Southwest Florida in 2013 with $85 million in incentives.
“The reality is that all these projects could have gone elsewhere if it wasn’t for the hard work of the state’s economic development foot soldiers, Florida’s positive business climate and robust incentive program,” Boyd said.
As for incentives, they are now the norm — not the exception — in the corporate site selection process, he said.
Jim Kane, a Chicago site selection consultant who also works on corporate deals in states including Florida, said 85 percent of relocations occur without any incentives. But headquarters relocations often have “challenges” that must be overcome. That’s when incentives are a valuable tool for state or local government.
If Florida ends its incentives program, “a number of projects are not going to happen
“Businesses want certainty if they’re going to invest in Florida.” Kelly Smallridge, president of Palm Beach County’s Business Development Board
in Florida. There are other places with nice weather,” he said.
He noted that Arizona did away with most incentives. As a result, Arizona recently lost a 300-job relocation to Texas because it had nothing to offer the company, Kane said. North Carolina removed its incentives but has since brought them back, and even Illinois, which is beset by protracted financial troubles, recently voted to extend its expiring incentive program.
The Republican governor and Democrat-led Legislature of Illinois “know full well we can’t go without an incentive program,” Kane said of his home state.
In Florida, Gov. Rick Scott has been holding “Fighting for Florida Jobs” events across the state, including Sunrise last week, to lobby to retain Enterprise Florida and the state’s economic incentives, as well as Visit Florida, the state tourism promotion agency. A House bill would eliminate the two agencies and specialized incentives, but faces hurdles in upcoming weeks.
Kelly Smallridge, president of Palm Beach County’s Business Development Board, recently testified before House and Senate committees that the county’s economic development agency has not received a single call from a site consultant scouting for relocating companies since October. She said that’s highly unusual and attributes the lack of calls to the “rhetoric” coming out of Tallahassee.
“Businesses want certainty if they’re going to invest in Florida. They do not want to move into an uncertain environment,” she said.
Smallridge said the state’s Quick Action Closing Fund has been the “tipping point” to closing mega deals, including United Technologies Corp.’s Center for Intelligence Buildings, now being constructed in Palm Beach Gardens. State and local governments awarded a nearly $11 million package to UTC for the promise of 380 jobs and a $115 million capital investment. The package included $4.9 million from the Quick Action Closing Fund.
In a study of Florida’s incentives programs since 2013, the Qualified Targeted Industry program — mostly used by local governments — makes money for the state.
What doesn’t break even for the state is the Quick Action Closing Fund, a discretionary fund for the governor to close competitive deals such as the relocation of corporate headquarters. Negatively affecting the return for the state was the use of escrow, said Amy Baker, the state economist who wrote the report and presented it to the Legislature.
Quick Action Closing Fund incentives awarded by the governor are kept in escrow, which means they’re “locked” from other uses for up to five years or until the company fulfills its investment and job requirements under its contract.
Though some say using escrow helps minimize risk to taxpayers, Baker said the state would benefit from a “pay-as-you-go” system in which companies get paid incentives as they meet certain milestones. Then state revenue would keep cycling through the economy instead of being tied up in escrow.
Bob Swindell, president of Broward’s economic development agency, the Greater Fort Lauderdale Alliance, said the escrow provision has been just one of the issues with the incentive program that rile some lawmakers.
“When legislators see big amounts of money in escrow, they get frustrated,” Swindell said. But “if the company doesn’t perform, the money goes back into the general fund.”
Swindell argued that killing the incentives, along with Enterprise Florida and Visit Florida, isn’t the answer. That would “tarnish the Florida brand. This impacts our reputation as a state,” he said.
Business incentives take many forms including cash awards to close deals, tax refunds, workforce training grants and infrastructure improvements.
Greg LeRoy, executive director of Good Jobs First, an organization that tracks corporate subsidies, credits Florida for becoming more transparent about incentives. Florida also tweaked its incentives programs so employers don’t get tax rebates or other benefits until they reach the required number of jobs or capital investment.
Though state and local governments have the ability to “claw back” incentives if companies break their promises, LeRoy said that doesn’t mean the incentives should be given in the first place.