Firm helps write laws, then profits from them
Records: Principals aid drafting of incentive bill pending in state Senate
On a Thursday afternoon in the middle of last year’s legislative session, Sen. Bill Montford appeared before a Florida Senate committee to present a $25 million plan that supporters said would help rural and hurricane-stricken areas around the state.
Though Montford, D-Tallahassee, never mentioned it by name, one company was orchestrating from behind the scenes: Advantage Capital, a financial firm that has helped persuade state legislatures around the country to pass complex tax incentive programs that it says help struggling communities — but that critics say enrich firms like Advantage.
Records show Montford’s legislation, which had been dubbed the “Florida Rural Jobs and Business Recovery Act,” was written in part by two principals at Advantage. The talking points for Montford’s presentation were prepared by a lobbyist for Advantage. And an advocate who testified on behalf of the bill — identifying himself as a member of a group called the “Rural Jobs Coalition” — was an Advantage employee.
As Montford walked out of the committee room after the vote, an Advantage lobbyist, who had been sitting a few rows back, looked up at Montford and smiled. “Thank you,” he whispered.
The legislation didn’t pass last year. But the rural jobs act has been filed again ahead of the 2020 legislative session, which begins Tuesday and it has already attracted bipartisan support.
Under the concept, Florida would give tax breaks to insurance companies that invest money into funds — that are managed by firms like Advantage — that then lend money to businesses operating in rural parts of the state. The proposal is modeled after an older incentive program that Advantage also lobbied for but which state economists later determined produced a very low return on investment for Florida taxpayers.
Advantage executives say the new rural program would feature stronger protections for taxpayers. And they argue it is a way to
attract investment capital to forgotten parts of Florida that aren’t benefiting from existing commercial or government lending.
“You’re truly using the expertise of the private sector to come in and fill a gap that banking’s not doing and private lending and investing is not doing,” said Tony Toups, a principal at Advantage.
But opponents call it a thinly repackaged version of a tax system that ultimately subsidizes Advantage.
“That’s really how they make their money — selling the legislatures on these programs,” said Julia Sass Rubin, a professor of planning and public policy at Rutgers University. “They’ll structure it to be whatever will sell. Because they understand that once the legislation is enacted, once the program is created, the money is there. It’s all about selling the bill.”
A longtime player in the Florida Capitol
Based in New Orleans, Advantage Capital has been lobbying in state capitols around the country for more than two decades. In the late 1990s, according to a report in the Palm Beach Post, lobbyists for the company helped write the law for an incentive program in which insurance companies would get tax credits from the state if they invested in entities — managed by firms like Advantage — that then invested into new or expanding businesses around the state. That program eventually ended after opponents, including former Florida Gov. Jeb Bush, grew skeptical that the incentives were effective.
A decade later, Advantage helped set up a new system — dubbed the “New Markets Development Program” — under which companies could get tax credits from the state if they
invested in entities — managed by firms such as Advantage — that then invested into businesses in low-income communities. The company helped persuade other states to set up New Markets programs, too.
The new program had a powerful booster in Florida: Former House Speaker Will Weatherford, a Republican from Pasco County. Weatherford sponsored the state’s initial New Markets legislation in 2009 and then supported efforts to pump more money into the program as he rose through leadership.
Initially capped at $97.5 million worth of tax credits, lawmakers raised the ceiling to $216.3 million while Weatherford was speaker.
Nobody took greater advantage than Advantage, which managed more of those tax credits than any other investment firm. Though 18 firms oversaw investments through Florida’s New Markets program, Advantage alone used more than a quarter of all the tax credits awarded, according to state analysts.
Advantage’s New Markets investments included a $10 million loan to Summit Broadband, an Orlando cable and Internet provider serving hotels and apartments.
The firm also used New Markets tax credits to help finance Halifax Media’s 2010 acquisition of the Daytona Beach News-Journal newspaper for about $20 million, along with the purchases of other, small papers, such as the Daily Commercial in Leesburg. Halifax was later bought by the parent company of GateHouse Media, which then merged with Gannett to create the largest newspaper company in the nation.
Advantage and other management firms that oversee these tax-credit-subsidized investment funds can make money in a variety of ways. Some charge transaction and asset-management fees. Others, including Advantage, co-invest in the funds alongside the other
“That’s really how they make their money — selling the legislatures on these programs. They’ll structure it to be whatever will sell. Because they understand that once the legislation is enacted, once the program is created, the money is there. It’s all about selling the bill.”
Julia Sass Rubin, a professor of planning and public policy at Rutgers University
investors they attract with the tax credits, allowing them to make money on the loans those funds end up making to businesses.
Earnings add up. Though Florida did not track how much the management firms made through its New Markets program, state auditors in Maine estimated that six firms — one of which was Advantage — together made at least $16 million using $76 million worth of tax credits issued through that state’s New Market’s program.
Florida’s program eventually dried up, because lawmakers chose not to add any more money to the program after Weatherford had to leave the Legislature in late 2014 because of term limits. The fate of the program may have been sealed in early 2017, when state economists concluded that the program was generating a return for Florida taxpayers of just 18 cents for every $1 spent. That’s where the current legislation, the Florida Rural Jobs and Business Recovery Act, comes in.
First filed in 2018, the legislation would work very similarly to the New Markets program, by using tax credits to get insurance companies to invest in funds managed by firms like Advantage. But these funds would target business in rural areas. The funds would be asked to prioritize investments in businesses in the Panhandle communities still recovering from Hurricane Michael, which hit in 2018. Variations of the rural jobs act been introduced in around a dozen states around the country and enacted in at least three.
The Florida version of the legislation would set an initial cap of $25 million worth of tax credits to be spread over at least five years.
Advantage says the rural jobs act includes a number of improvements over the New Markets program. For instance, the firms that apply to manage the investment funds must include a business plan with their applications projecting that the investments will produce more tax money — whether by generating new revenue through job creation or reducing state spending on things like social programs — than the state spends through tax credits.
“The idea is to make sure that the state comes out better than it started off,” Toups said.
Neither of the lawmakers sponsoring the rural jobs act — Montford, the Democratic senator from Tallahassee, nor Rep. Jason Shoaf, a Republican from the Panhandle community of Port. St. Joe — responded to requests for comment.
A lawmaker becomes an investor
Meanwhile, the former lawmaker who worked with Advantage on Florida’s New Markets program — former House Speaker Will Weatherford — has since become a joint investor with Advantage.
In early 2016 — a little over a year after
Weatherford left the Legislature — Advantage brought a new investment firm set up by Weatherford and his two brothers into a $4.5 million deal with a startup tech company called PayIt, which designs consumer apps for government agencies. Advantage had previously invested in PayIt using tax credits issued through a state New Markets incentive program in Missouri.
The Weatherford brothers’ firm, Weatherford Capital, invested $1 million in PayIt as part of the 2016 deal, which Advantage arranged and led. Weatherford and Advantage later participated in a second round of investments in PayIt, as well.
Both Will Weatherford and Advantage Capital say the Weatherford brothers invested on the same terms as other investors. And they say the PayIt investment was by no means a sure thing at the time.
It appears to have been very successful, though. PayIt has grown from half a dozen employees to more than 85 today, and it has won contracts with cities, counties and states around the country — including with the Florida Department of Highway Safety and Motor Vehicles. Earlier this year, PayIt landed a more than $100 million investment from a New York venture capital firm.
The Weatherford brothers have since invested even more in PayIt, and Will Weatherford sits on the company’s board of directors. He woudn’t say how big a stake Weatherford Capital has in PayIt.
Advantage wouldn’t say how big a stake it holds, either. And PayIt itself declined to say how much of the company either of them owns. Both Weatherford and Advantage Capital say Advantage did not bring Weatherford into the deal as a way to help the former House speaker after he had helped the company while he was in the Florida Legislature.