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Subsidies cause more issues

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  • | 11:00 a.m. June 10, 2016
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Government subsidies in exchange for jobs — in this case there weren't nearly enough jobs — is back in the news in Sarasota.

The latest company under scrutiny is Sarasota Medical Products. The firm, which manufactures medical devices for wound care and infections, was a sought after startup in 2010.
Pinellas and Sarasota counties were among the governments that wooed the company, founded by Walter Leise III, a onetime U.S. Army attack helicopter crew chief with a Ph.D. in molecular biology and biochemistry.

The company chose Sarasota, and the county opened up the economic development incentives checkbook: It gave Sarasota Medical $360,000 in September 2010 in return for a promise to hire and maintain 61 full-time jobs by September 2015. The company, a year later, obtained an SBA loan for $1.6 million and another $1.6 million from a private equity firm.

The problem: Sarasota Medical only hired 12 people in five years, falling 49 jobs short of its promise. Now the business must pay back Sarasota County $4,016 per month for each of the hires it fell short on, says Jeff Maultsby, Sarasota County director of business and economic development. The repayments start in July, according to a memo Maultsby wrote, pending the Sarasota County Commission approving the plan.

Leise, not personally named in the memo, also agreed to provide a personal guarantee on the amended agreement. In the memo, county officials say the company reported the failure to create the jobs stems from a delay in obtaining veteran-owned business certification from the federal government. “This resulted in the company's ineligibility to compete for anticipated government contracts and ultimately the creation of only 12 of the projected 61 new jobs,” the memo states. Leise couldn't be reached for comment.

In total, Sarasota Medical could end up paying $196,784 through monthly payments, according to the memo, based on 49 missed hires. That figure could decrease if the company ends up hiring more people by 2018 in a jobs extension period, the memo adds. That clause is also subject to approval from county commissioners.

Even at nearly $200,000 in returned money, the county would have paid Sarasota Medical about $160,000 for 12 jobs — more than $13,000 per hire. The county revised its policy of paying out subsidies before jobs, soon after giving Sarasota Medical and several other firms money. Now incentives are performance-based on hires completed.

The issue of incentives came up in Sarasota last month, too, when commissioners rejected a proposal to use $720,000 to help lure a national roofing company headquarters to town. Local business owners who spoke out against the plan praised the move, while some site selection and state officials criticized commissioners.


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