- March 18, 2011
Joe Swaja has some advice for decision makers in Sarasota who are now considering millions of dollars in charitable gifts and taxpayer subsidies for The Jackson Laboratory.
“I would go and get a group of individuals who are involved in this industry, understand this business and have nothing to do with Tampa or Sarasota to give unbiased advice,” says Swaja.
Swaja, who retired to Marco Island after serving as vice president of worldwide customer service for production systems at Xerox Corp., was one of eight financially skilled volunteers who examined the Jackson Laboratory project in Collier County last summer. He was part of a little-known group called the Productivity Committee, volunteers appointed by the county commission to review county operations and suggest improvements.
Swaja is blunt about Maine-based Jackson Laboratory's efforts last year to establish a Florida research facility in eastern Collier County, 40 miles east of Naples. “If that was a business plan coming across my desk, I wouldn't have approved it,” he says. “It's kind of hard to swallow in today's world.”
In its quest to boost the local economy, Collier County economic development officials recruited Bar Harbor, Maine-based Jackson Laboratory with the promise of $260 million of taxpayer money, half of which would have come from the state and the other half from the county. In addition, the nonprofit genetics research institute planned to raise another $120 million from private donors and millions more from government grants. Jackson Laboratory would directly employ 244 people, with the promise of thousands more from related operations that would move nearby.
The Jackson Laboratory project in Collier began to unravel when the Productivity Committee questioned Jackson's business plan and growth assumptions in a report to the county commission in July. “The return wasn't there for the risk involved,” concludes Stephen Harrison, chairman of the committee and a corporate accountant.
The Collier County effort eventually failed because Naples resident Gov. Rick Scott and successful Naples entrepreneurs such as Reinhold Schmieding, founder of global Naples-based medical device manufacturer Arthrex, didn't support the venture as it was proposed.
Three of the eight members of the Productivity Committee who examined Jackson Laboratory's plan for Collier County agreed to speak to the Review about the questions Sarasota decision makers should now be asking. (Others could not be reached or declined to speak publicly.)
Focus on the returns
When Jackson Laboratory announced plans to locate in Collier County last year, much of the discussion focused on creating an institute for personalized medicine. Using genetic research, scientists hope to tailor medical remedies based on a person's genetic makeup. It's an exciting field that promises cures one day for complex diseases.
But members of the Productivity Committee say many people were distracted by the promise of groundbreaking genetic research instead of measuring the return on a $260 million taxpayer investment. “It's not about genetics,” Harrison says. “It's about return on investment.”
Members of the Productivity Committee say they couldn't validate the promise of more than 11,000 jobs and $10 billion in economic impact over a 20-year period. “It required a willing suspension of disbelief,” says Swaja.
“One of the problems we had down here is that people got excited about the medical possibilities of Jackson Lab, when the real issue is, if you're going to spend [taxpayer money], it has to be to create an economic engine and really bring jobs here,” says Janet Vasey, a member of the committee and former financial analyst with the Department of the Army. Vasey wrote the report on Jackson Laboratory to the Collier County commission on behalf of the committee.
Besides job creation, the committee noted that Jackson Laboratory's business plan didn't include other milestones such as grants, donations, patents and licensing agreements.
In addition, the committee challenged the assumptions made by project's consultants, the Washington Economics Group, which measured the potential return on the county's $130 million at 2.6% by 2032, based on net sales tax and net operating revenues. “I'm happy to consider the multipliers, but if it's not really going to give you the payback, then it's not worth doing,” says Vasey.
What's the net benefit?
Sarasota should consider the lost opportunity cost of funding the Jackson Laboratory, members of the Collier committee suggest.
Spending millions of taxpayer dollars on Jackson Laboratory means that money wouldn't be available for other equally beneficial purposes. For example, Swaja suggests the taxpayer subsidies might have been better spent helping existing entrepreneurs in Naples grow their businesses.
And the nonprofit fundraising by Jackson Laboratory might take away money from other worthy nonprofit organizations in the community. “There's only a finite amount of money that's going to be donated in the county,” Swaja says.
In the end, taxpayers might be better off keeping the money and spending it in the community themselves. That would create a different but significant economic impact too, committee members wrote.
“Get at what the net benefit would be,” says Vasey.
Follow the dollars
“Who is going to benefit from Jackson Lab?” Swaja asks.
For example, Swaja wondered why Jackson Laboratory needed millions of dollars for new buildings. In the early days at Xerox, scientists worked out of existing buildings with reasonable rents. “We worked in labs above toy shops, old houses,” Swaja says. “We didn't have all this fancy stuff to get started.”
Swaja described Jackson Laboratory's proposed buildings at Ave Maria in eastern Collier as palatial. “Why can't we use all the empty buildings?” he wondered. “I saw the architectural plans for Ave Maria, and I was taken aback.”
Vasey says landowners and others who benefit should have contributed more money to the project. For example, Barron Collier Companies contributed the land for Jackson Laboratory, but the value of the land wasn't deducted from the county's contribution. “In Sarasota, who else is contributing?” she asks.
Committee members wondered how Jackson Laboratory would invest taxpayer money before putting it to use, noting that the nonprofit's endowment had lost money in the recession.
Although legislators had approved funding the Jackson Laboratory project with $130 million, it was conditioned upon federal funding that was eventually trimmed.
What's more, the Legislature only promised to fund the first $50 million of the project with no guarantees for the rest of the money. And negotiations with state economic development agencies were shrouded in secrecy and complicated by the uncertainty of Scott's election.
“What happens if no more money comes from the state?” Vasey says. “Nobody ever knew anything, and it was hard to plan.”
If only part of the money for the project came through, committee members worried that local taxpayers would be on the hook for more than $130 million. “We're a small community, and we were being asked to come up with $130 million. That's a lot of money,” Vasey says.
Where's the support?
Committee members wondered why Jackson Laboratory had selected eastern Collier County for its new location.
Apart from the new Catholic University of Ave Maria, Swaja and others wondered why Jackson Laboratory wasn't locating instead near a research university or teaching hospital. While the University of South Florida had expressed interest in partnering with Jackson Laboratory, it wasn't certain that USF could fund such an effort.
“We didn't have the homegrown things to make it successful,” Vasey says.
What's more, it wasn't clear to committee members how Jackson Laboratory was going to attract genetic scientists to eastern Collier County. “There are a lot of powerhouses ahead of Jackson Labs in that field,” Swaja says. “There's a lot of competition for this kind of work today. What's their competence in this area? Who are they going to hire? Where are they going to get these people?”
In their report, members concluded the Jackson Laboratory effort was fraught with risk because of unanswered questions. “There were lots of things missing,” says Swaja.
Click here to read the full text of the Collier County Productivity Committee's "Economic Viability of Jax-Florida" report.