Univer­sal seeks $350M tax break

Com­pany plan­ning for de­sign di­vi­sion’s new HQ

Orlando Sentinel - - FRONT PAGE - By Ja­son Gar­cia

Univer­sal Or­lando is in line for nearly $350 mil­lion worth of state tax breaks to build a new head­quar­ters for the di­vi­sion that de­signs its theme parks, rides and ho­tels, ac­cord­ing to records ob­tained by the Or­lando Sentinel.

Univer­sal plans to build its Univer­sal Creative head­quar­ters on the same 750-acre prop­erty upon which it is also build­ing “Epic Uni­verse,” which will be­come the gi­ant re­sort’s third Cen­tral Florida theme park when it opens in 2023.

The $348 mil­lion in state in­come tax breaks, which would be spread over as many as 30 years, is in ad­di­tion to $125 mil­lion in lo­cal money that Orange County plans to give Univer­sal to help pay for a new road through Univer­sal’s prop­erty. It is also on top of a $16 mil­lion state eco­nomic de­vel­op­ment grant that Orange County ob­tained on Univer­sal’s be­half to help pay for the same road.

Al­to­gether, that adds up to nearly half a bil­lion dol­lars from state and lo­cal tax­pay­ers. Univer­sal would not say whether it is pur­su­ing ad­di­tional pub­lic in­cen­tives.

In a writ­ten state­ment, John Sprouls, the CEO of Univer­sal Or­lando and the chief ad­min­is­tra­tive of­fi­cer for Univer­sal Parks & Re

sorts, sug­gested that the state in­cen­tives helped per­suade the com­pany to base the Univer­sal Creative head­quar­ters in Cen­tral Florida and said the en­tire com­mu­nity would ben­e­fit from the pro­ject.

“Cur­rently, our Univer­sal Creative op­er­a­tion is spread around the world, as are the ma­jor ride and show ven­dors in our in­dus­try,” Sprouls said. “Our pro­posed new fa­cil­ity would al­low us to unite the creative team and the many ven­dors who bring our award-win­ning ex­pe­ri­ences to life in one creative cam­pus, which will in­clude sig­nif­i­cant R&D [re­search and de­vel­op­ment] op­er­a­tions. One can eas­ily un­der­stand why we would se­ri­ously con­sider where such a cam­pus should be lo­cated, con­sid­er­ing travel, busi­ness sup­port, avail­abil­ity of tal­ent, etc.”

Univer­sal is owned by Com­cast Corp., the ca­ble and me­dia gi­ant that turned a profit of more than $11.7 bil­lion last year. The com­pany’s theme-park di­vi­sion has been a big growth en­gine; Com­cast’s theme-park prof­its have more than dou­bled in the past six years, from about $1 bil­lion to nearly $2.5 bil­lion.

In a writ­ten state­ment, Orange County Mayor Jerry Dem­ings — whose ad­min­is­tra­tion has worked closely with Univer­sal on the Epic Uni­verse de­vel­op­ment — praised the plans for the new Univer­sal Creative cam­pus.

“Adding a world­wide head­quar­ters for Univer­sal Creative with hun­dreds of high­wage jobs is a won­der­ful prob­lem to have,” Dem­ings said. “We are hon­ored that Epic Uni­verse is choos­ing to lo­cate in Orange County over other com­mu­ni­ties.”

But not ev­ery­one is happy that the com­pany is seek­ing as­sis­tance from tax­pay­ers.

“We should be en­cour­ag­ing busi­nesses to ex­pand that need the help,” said Orange County Com­mis­sioner Emily Bonilla. “Univer­sal Stu­dios doesn’t need the help.”

Cut­ting Univer­sal’s tax bill

Univer­sal is pur­su­ing the state tax breaks through an in­cen­tive pro­gram that the Florida Leg­is­la­ture cre­ated 20 years ago to at­tract big-ticket cap­i­tal-in­vest­ment projects in de­sir­able in­dus­tries; the pro­gram was orig­i­nally con­ceived as a way to at­tract a Lock­heed Martin launch op­er­a­tion to the Space Coast. Univer­sal qual­i­fied, ac­cord­ing to the Florida Depart­ment of Eco­nomic Op­por­tu­nity, as a busi­ness in soft­ware-pub­lish­ing, which the state con­sid­ers a “tar­geted” in­dus­try.

Un­der the pro­gram, a com­pany can re­cover all of its cap­i­tal in­vest­ment in a new fa­cil­ity through state tax cred­its that can be used to re­duce or elim­i­nate its an­nual cor­po­rate in­come tax pay­ments. The com­pany gets tax cred­its equal to 5 per­cent of its to­tal cap­i­tal spend­ing each year for 20 years.

Univer­sal has told state of­fi­cials that it plans to spend $348 mil­lion on the Univer­sal Creative head­quar­ters. That would put the com­pany in line to cut its tax bill by $17.4 mil­lion a year.

That’s enough money to pay more than 350 new teach­ers.

Some other com­pa­nies that have qual­i­fied for the same in­cen­tive pro­gram — in­clud­ing Or­lando-based Dar­den Res­tau­rants, which was ap­proved in 2007 for cor­po­rate tax breaks worth more than $7 mil­lion an­nu­ally — have some­times found that they don’t ac­tu­ally pay enough in cor­po­rate in­come taxes each year to take full ad­van­tage. That’s partly be­cause Florida’s cor­po­rate in­come tax is so low and easy for com­pa­nies to avoid.

So a few years ago, in re­sponse to lob­by­ing from Dar­den, the Florida Leg­is­la­ture changed the pro­gram to let com­pa­nies ex­tend their tax cred­its over 30 years, in­stead of 20.

Sprouls said Univer­sal’s tax breaks would likely be spread out over 30 years, too.

“The tax in­cen­tives we have ap­plied for may nom­i­nally equate to $348 mil­lion, but those in­cen­tives will likely not be re­al­ized for up to 30 years — if ever,” Sprouls said.

Ac­cord­ing to a sum­mary of the pro­ject pre­pared by the Or­lando Eco­nomic Part­ner­ship, Univer­sal has pledged to cre­ate 150 new jobs at an an­nual av­er­age salary of $95,000 as part of the Univer­sal Creative pro­ject. The eco­nomic de­vel­op­ment agency said Univer­sal would also re­tain an­other 300 ex­ist­ing jobs — which the eco­nomic part­ner­ship sug­gested were at risk of be­ing re­lo­cated with­out the in­cen­tives.

It’s not clear why the agency might think Univer­sal would move ex­ist­ing jobs away from Cen­tral Florida. Rep­re­sen­ta­tives for the eco­nomic part­ner­ship did not re­spond to re­quests for com­ment.

“We have not threat­ened any­thing,” Sprouls said. “We’ve had se­ri­ous con­ver­sa­tions, both in­ter­nally and ex­ter­nally, about the con­cept of the world head­quar­ters, the spe­cific re­quire­ments, and where it makes the most sense to lo­cate it. With the help of the state, we be­lieve that lo­ca­tion is here in Cen­tral Florida.”

Sprouls also said Univer­sal ex­pects to add “sig­nif­i­cantly more” new “high-wage, creative” jobs than the amount de­tailed in its in­cen­tive ap­pli­ca­tion.

Re­vealed by records re­quest

No pub­lic vote is re­quired be­fore Univer­sal can start re­ceiv­ing the state tax breaks. The agency in charge of ad­min­is­ter­ing Florida’s in­cen­tive pro­grams has al­ready ap­proved Univer­sal’s ap­pli­ca­tion, ac­cord­ing to an agency spokes­woman. Univer­sal must also agree to a con­tract with the state’s rev­enue depart­ment; that agency said it could not say whether that con­tract has been signed.

The Sentinel learned of the in­cen­tive deal be­cause it was men­tioned in one of more than 3,000 emails be­tween Univer­sal and Orange County that the news­pa­per ob­tained through a pub­lic-records re­quest.

Specif­i­cally, the Sentinel on Sept. 19 re­quested emails and other cor­re­spon­dence be­tween four lawyers and lob­by­ists for Univer­sal Or­lando and 13 cur­rent and for­mer Orange County of­fi­cials. Orange County pro­vided the records for 10 of those county of­fi­cials — roughly 3,300 emails and text mes­sages — 11 weeks later, on Dec. 5.

The county pro­vided the re­main­ing records — for Dem­ings, his chief of staff and the chief of staff to for­mer Orange County Mayor Teresa Ja­cobs — on Thurs­day morn­ing, one day af­ter this story was pub­lished on­line.

Dem­ings and Orange County com­mis­sion­ers are ex­pected to vote on the county’s sep­a­rate in­cen­tive deal with Univer­sal — in which the county would pro­vide $125 mil­lion for the ex­ten­sion of a road through Univer­sal’s prop­erty — on Dec. 17.

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