Florida Economic Development Gone Awry

Mar 28, 2013 by

As lawmakers begin in earnest to craft the state’s budget, they are considering how much to put in the spending plan for economic development incentives. The governor, who has based his job creation efforts on offering businesses a variety of cash incentives and tax breaks, has asked for $278 million, a steep increase over this year’s pot of $111 million.

In crafting our $70 billion-plus budget, legislators need to prioritize the many needs of Florida citizens. Where on this spectrum of needs and wants do incentives/subsidies for corporate citizens rank? Is this a legitimate use of taxpayer dollars? Are the politically influential getting special treatment? Is government picking the winners and losers? And most importantly, is the investment of our tax dollars producing the desired results?

Let’s take a look at four such deals that have been in the news.

Vision Airlines – Lots of fanfare, false promises and failure

One of Gov. Rick Scott’s first big job announcements was the promise of 4,200 direct and indirect jobs by Vision Airlines, which wanted to bring a hub to Panama City in the Florida Panhandle.

At a high-profile 2011 press conference, Scott said, “This is going to be fun. This is our chance. We are going to win.”

Vision Airlines abandoned its flights along with its contractual obligations, leaving Okaloosa County stiffed with $150,000 in unpaid airline fees. The county sued and the state attorney charged Vision Airlines with grand theft.

Less than two years after that joyful press conference, Okaloosa County officials don’t appear to be having fun and Florida taxpayers certainly did not win.

Digital Domain — Friends in high places

A recently released Inspector General report unveiled an impressive cast of political players who were involved in circumventing the established process in awarding cash incentives to the CEO of Digital Domain. Those involved included a former governor, Senate president, House speaker and three representatives, some of whom have gone on to higher office.

In 2009, the company was able to garner enough support from these Tallahassee power players to obtain $20 million in taxpayer grants despite objections from the organization responsible for vetting these awards. Enterprise Florida thought the financials were extremely weak, but nonetheless recommended a cash grant of just over $6 million.

The Legislature bypassed Enterprise Florida and granted the full $20 million. The IG report found that several lawmakers were complicit in the questionable deal but found that no laws were broken.

In 2012 Digital Domain went bust in a high-profile bankruptcy. It could have been worse — the original request was $100 million.

Northrop Grumman Corp. — Incentives after the fact

Northrop Grumman Corp. received a shout-out from Gov. Scott during his 2013 State of the State address. The governor boasted of the company’s intention to add 920 jobs to an existing operation in Brevard County.

So it came as a surprise to many to learn that the giant military contractor is in discussions with the state for a multimillion-dollar tax break for an expansion that is already happening.

Why is a taxpayer-funded incentive needed if the jobs were coming anyway? What are taxpayers getting for this expenditure of their limited tax revenue?

Dan Krassner, executive director of Integrity Florida, aptly described this arrangement as “taxpayer-funded icing on top of a cake that was already baked.”

State officials claim the company made the decision to expand based on a promise by the state to negotiate state and local incentives. It’s difficult to follow the deal-making timeline, as state law requires agreements to remain confidential for 180 days after they are signed.

CSX — Double dipping

Leaders called for a special session of the Legislature after two failed attempts to grant the railroad giant more than $600 million in Florida taxpayer dollars in a complex arrangement tied to a commuter rail project.

In December 2009, the Sun Rail legislation passed under intense political pressure — awarding CSX a total of $641 million: including $198 million for S-line improvements and $52 million for Jacksonville area track improvements.

Then in 2011 the Legislature passed a law known as the “single sales factor” that supporters said would help lure major new capital investment to Florida. It allows companies that invest at least $250 million in Florida over a two-year period to use a new formula when calculating their corporate income taxes.

Legislators are beginning to question the policy itself, wondering what Florida is getting in exchange for this tax break. One answer: A whole bunch of construction that would have happened anyway.

According to the Orlando Sentinel, the most eyebrow-raising example was CSX, which said it planned to meet the capital-spending requirement on the basis of ongoing rail maintenance plus improvements to its “S line.” And who paid for those S-line improvements? The taxpayers, not CSX.

That’s right; CSX is getting a tax break for spending our tax dollars to improve its tracks!

The best estimate from state reports and newspaper accounts is that the state has spent $1 billion of your tax dollars since 1996 for these incentives and tax breaks. The result: To date less than half of the estimated 177,000 jobs promised have been confirmed by the state.

One can only hope the Legislature will not grant the governor’s request for an additional $278 million for deals that have not proven to be in the taxpayers’ best interest.

Instead, let’s invest that money in providing an educated workforce necessary to attract new businesses to Florida. That would be a good return on our investment.

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