Incentives: dissected

By: 
Jan. 23, 2015

Pasco County
Pasco County has an identity problem in the race to hand out government incentives to growing or relocating businesses.

“No one outside of Tampa really knows where Pasco County is,” says Pasco County Economic Development Council President and CEO John Hagen.

Hagen hopes to address that challenge this year with a renewed sense of urgency. His source: Penny for Pasco, a one-cent sales tax with proceeds directed to schools and economic development. The tax was initially approved in 2004, and voters countywide approved it again in 2012 for another decade.

The latest approval, with money starting to come in Jan. 1, will give the Pasco EDC $4.5 million a year for a decade. A large portion of that, says Hagen, will go toward incentives.

A pot of money like that is a major increase in available funds for incentives. In the last fiscal year, for example, the county invested $117,00 in 12 companies, says Pasco County Senior Planner for Economic Development Melanie Kendrick. Those companies, says Kendrick, added 180 jobs in return for the incentives.

Hagen plans to use some of the funds to work with developers on building so-called “pad-ready” sites. A pad-ready site is a location that's already gone through the zoning and pre-infrastructure process. With a site like that ready, says Hagen, the only thing left to do is get a company to utilize it. That's partially how Hagen hopes to land the next Amazon or some other supersized facility.

“We have land available to do a project like that,” says Hagen. “But we don't have the whole project ready to go. We want to correct that problem.”

— Mark Gordon

Hillsborough County
Tampa Hillsborough Economic Development Corp. executive Rick Homans takes a power point presentation titled “Think Big, We Do” to just about any conference where promoting Tampa is on the agenda.

And when Homans says big, he means it.

So big that Homans' top priority for the next three years is to persuade one, or even two, brand name corporate headquarters to relocate to Tampa. “The impact of that will be great,” says Homans, named president and CEO of the EDC in 2012 after a stint running the New Mexico Spaceport Authority in Las Cruces, N.M. “It will trigger many positive economic consequences.”

Homans says a multitude of factors go into the hunt for a corporate headquarters. The amount of incentives a government entity can offer is on the list, he says, but it's not at the top and many times it's not in the middle. Factors more important to a CEO at the helm of a Fortune 1,000 company, says Homans, include workforce availability in the new city, air transportation to other major cities, and whether senior executives support the move.

“When you are talking about a corporate headquarters,” he says, “you are at the top of the pyramid.”

Homans concedes incentives are part of nearly every corporate headquarters relocation process. Incentives, for example, were in play when car rental giant Hertz relocated to Lee County from New Jersey last year. Hertz can receive up to $4 million in performance-based incentives from Lee County and more than $14 million from the state if it meets new jobs requirements.

Incentives aside, Homans is excited to hone in on a corporate headquarters target. He says the process starts at companies in the Fortune 1,000, with a concentration on the Northeast. Next the EDC will look at the boards of those companies, to see if there are people with connections to Tampa, be it family or school. Officials will also look for companies that have had a fundamental change in business, through a sale or some other event.

Homans says he's prepared to wait it out for the right fit. “We will collect all the data and approach this like a rifle shot,” says Homans. “We know this will take some time. We will kiss a lot of frogs before we find a prince.”

— Mark Gordon

Pinellas County
Pinellas County might share a border with Pasco County, but its economic development philosophy, and use of incentives to lure companies, is fairly different from its neighbor.

The focus in Pasco is to rely on large swaths of available land to woo businesses to open large facilities, like warehouses and distribution centers. Pinellas County has few undeveloped land sites, so its strategy, according to Economic Development Director Mike Meidel, is to go small, but with volume. Pinellas County targets deals for space that can be 100,000 square feet, not 1 million square feet like in Pasco County.

“We are looking at smaller deals with long-term impact,” Meidel says. “It might not make a big splash, but it helps us build our base.”

Pinellas County's governance of incentives is also different from Pasco — and most other Gulf Coast counties. For one, the Pinellas County EDC is an office within county government. In most other counties, including Hillsborough, Lee, Manatee and Sarasota, the EDCs are separate organizations.

Those EDCs don't control what companies get incentives and how much, but the organizations do handle marketing and networking of relocation and expansion opportunities. Pinellas County incentives, says Meidel, with a few exceptions, follow Enterprise Florida, the state's economic development arm. So Pinellas County will sometimes match the performance-based incentives the state offers companies, but even then it's not typically at high-dollar amounts. Pinellas County doesn't have a multimillion-dollar incentive specific fund set aside for projects.

Meidel, who has run the county's economic development office since 2004, says the approach works because incentives are many times an overrated aspect of economic development. “We want to stay in the running and make sure people take us seriously,” Meidel says. “But (incentives) won't make a bad deal good. We are not going to buy a deal.”

Looking ahead, Pinellas County will have one more incentive it can use to assist a relocating or expanding company: a 10-year property tax exemption in exchange for a new jobs commitment. Voters countywide approved the measure, sometimes called an ad valorem tax exemption, in August. Similar incentives are already available in more than 35 counties and 20 cities in Florida, including Hillsborough and Sarasota counties and Tampa and St. Petersburg.

“It gives us another tool to work with,” says Meidel. “It won't work for everybody. But for the right project it could be a very good incentive.”

— Mark Gordon

Manatee County
Manatee County has had an incentives program for economic development since 2009. Here are some examples of companies that have received funds and the outcomes.

Charlotte County
Count Tom Patton among the large group of people in economic development on the Gulf Coast who believe the media often over-scrutinize the ability of incentives to land a deal.

But Patton, director of economic development for Charlotte County, mostly wants to keep his opinions to himself.

“It's a zero sum game that I can't win, so why would I talk to a reporter?” asks Patton. “I've seen my colleagues (in other counties) get beat to death over incentives and they were trying to do the right thing. And I've seen Enterprise Florida get beat to death and they were trying to do the right thing.”

Adds Patton: “There are a lot of great incentives that really work out. Some don't work out.”

Patton declined to discuss Charlotte County's strategy with incentives or any other aspect of the county's approach in that area. “Incentives,” says Patton, “are really only a solution to a problem.”

Incentives have mostly been used sparingly in Charlotte County. A recent example is Aviation Partners Group, which builds, repairs and services airplanes and helicopters out of a hangar at the Punta Gorda Airport. The airport is in a state-designated Enterprise Zone, so the firm can receive up to $7,000 in tax credits per job under the agreement. The state covers 80% of that and Charlotte County pays the rest. APG has 35 employees, up from around 25 a year ago. “The investment is well worth it because it provides key foundational support for Charlotte County's emerging aerospace cluster,” Patton says in a November 2013 press release from Florida Gov. Rick Scott's office.

One of the biggest incentive packages in Charlotte County, not a strict money-for-jobs scenario, is with food distribution firm Cheney Brothers. The Riviera Beach-based company is building a $40 million regional warehouse and distribution center near the Punta Gorda Airport. The firm broke ground on the facility in March and is projected to eventually hire 380 people there.

Incentives for Cheney Brothers come from both the state and Charlotte County. State incentives include a transportation grant and a Brownfield Redevelopment tax refund. Charlotte County will provide a 10-year exemption on property taxes. That's an incentive worth at least $1 million.

— Mark Gordon

Lee County
Some Gulf Coast counties, like Manatee and Sarasota, aim for high volume on incentives, so subsidies are spread to dozens of companies far and wide.

The strategy in Lee County, at least with one major funding initiative, trades volume for big scores from a small group of companies. That program, Financial Incentives for Recruiting Strategic Targets (FIRST), has handed out $16.7 million to six companies since 2008, Lee County officials say. Those companies, in turn, have created 528 jobs through November. That's around $31,600 per job.

The six Lee County firms that received funds from FIRST are required to hire 2,898 people, says Lee County Economic Development Office Executive Director Glen Salyer. At that point, if all the job guarantees are met, the total amount of incentives doled out will be $22 million, or $7,591 per job. Salyer, in an email response to questions about the program, says some of those firms are “projected to hire more jobs than originally anticipated,” which could lower the per-job figures.

Some prominent Lee County businesses have been successful job creators under the FIRST program. The list includes Fort Myers-based women's retailer Chico's FAS; Fort Myers-based Algenol Biofuels, which, aims to commercialize the production of ethanol from algae; and Stamford, Conn.-based information technology consulting firm Gartner, which has a large corporate campus in Fort Myers.

Other companies in the program lag behind.

Bonita Springs-based Source Interlink, for example, received $250,000 for what was eventually 51 jobs, according to a 2013 audit on Lee County economic development from Lee County Clerk of the Courts Linda Doggett. That was far less than the initial plan to hire 350 people with $1 million in incentives. Even worse: Source Interlink, a magazine distribution firm, shuttered operations in early June and laid off thousands of employees, including 240 in Lee County.

Another company that's struggled to meet the job requirements, according to the audit and Lee County officials, is Fort Myers-based botanical extract and herbal drink company VR Laboratories. Former Florida Lt. Gov. Jeff Kottkamp was CEO at VR Labs from October 2011 through early 2013.

The company has long been on the cusp of major breakthroughs, but that promise hasn't translated to jobs: VR Labs, which received $4,694,548 from Dec. 6, 2011 through June 26, 2012, had created a total of eight jobs through 2012, the Doggett audit reports.

Lee County filed a lawsuit in the 20th Judicial Circuit Court in Fort Myers earlier this year to recoup its investment. “Lee County is making every effort through the court system to recover the approximately $4.9 million of incentive funds,” Lee County Attorney Richard Wesch says in a statement emailed to the Business Observer.

VR Labs executives didn't return calls seeking comment.

— Mark Gordon

Collier County
Unlike neighboring Lee County, Collier County doesn't have a $25 million pot of cash to hand out to choice companies.

While Collier can provide incentives upon special request from a targeted industry, it hasn't really needed to make big corporate handouts. To be sure, the Naples area suffered during the recession, but it has recovered more quickly than its neighbors.

Indeed, state employment figures show the Naples-Marco Island area consistently outpaced its neighbors in job growth on an annual percentage growth basis in recent years. The real estate and hospitality industries have led the rebound in business, boosting ancillary services.

“There hasn't been any need because there's been such incredible growth, primarily stimulated by construction and development,” says Michael Reagen, who retired last year as the president and CEO of the Greater Naples Chamber of Commerce who helped found a new economic development organization called the Partnership for Collier's Future Economy.

Historically, Collier County's economy has long been a service-based one that didn't chase corporate expansions or relocations. Because of its focus on residential growth, Collier has been more focused on issues such as congestion and street beautification than economic diversification.

That could change, however, as Collier seeks to diversify its economy. It recently agreed to join a partnership with Lee County and Florida Gulf Coast University to promote the region.

— Jean Gruss