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Business Observer Friday, Feb. 24, 2017 1 year ago

The Governor v. The Speaker

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Don't let the dispute over Enterprise Florida devolve to the level of Washington politics. Be statesmen.
by: Matt Walsh Editor

Gentlemen, gentlemen. Honorable Gov. Scott and Speaker Richard Corcoran, it doesn't have to be this way. Nor should it be.

And, frankly, to one extent, Floridians are surprised that it is this way. You are smart men. Plus, you are on the same team and have the same goal: what's best for Floridians.

You both want to see more jobs created here, and you both want less government.

To another extent, though, because we all are so cynical these days about politicians — thank you, Washington — Floridians are not so surprised by the rift between you over Enterprise Florida and Visit Florida. Politics has a way of making otherwise smart people do things they otherwise would not.

So before this situation reaches the point of no return — needless ugliness, unproductive stalemates and lost respect, trust and friendships, as has occurred in D.C. — if you could indulge me as your personal adviser on this matter, here's what I would dispense:

Cut it out, guys.

Don't make yourselves look like Washington politicians. Americans, and Floridians, are sick to their stomachs over this stuff.

In fact, your positions on Enterprise Florida and Visit Florida remind us the advice we frequently receive from our company's leadership coach: Stay in your adult.

Be statesmen.

Indeed, before this goes any further, get on the phone together and hash this out. This is not an all-or-nothing gambit. You're politicians. You know as well as anyone that the legislative process is all about incrementalism and compromises to get to the ultimate goal.

You can disagree on your positions. But surely there is common ground on which the two of you can agree that can result in Florida doing things better than they are being done now at Enterprise Florida and Visit Florida.

Let's see if we have this right:

Mr. Governor, your position is Florida needs to continue to have a tool box of financial incentives — a panoply of tax breaks and actual taxpayer cash paid to “qualifying” businesses — to help Florida have the type of business climate that will retain and attract companies. We know your position: You're all about jobs; you want to keep the Florida job machine going. And you've been great at it.

Likewise, you've recognized as a governor that you're competing against 49 other states whose governors also want what you want. And they all offer similar types of tax breaks — some much more lavish than Florida because their states are desperate economic basket cases. So, in spite of your free-market, limited-government philosophy, you have accepted that tax subsidies for businesses are an unfortunate and unavoidable reality.

We hear it all the time from the state's economic development recruiters: “You have to have the subsidies if you want to compete.”

We should note, too, however, that unlike many of your counterparts in other states, Mr. Governor, to your credit you have reformed and instituted tougher measurements and requirements to ensure Floridians receive at least a 10% return on their subsidies.

In the same vein, you know from your business experience, that if a company is going to sell more widgets, it needs to market those widgets. That's the way you see Visit Florida: It sells Florida to attract more customers (tourists). After all, tourism/hospitality is Florida's biggest industry. It employs and feeds millions of Floridians. We should sell as much as we can.

And this makes sense: Florida should use some of the sales-tax revenue it generates from tourists to keep the tourism wheel turning — just the way businesses allocate portions of their revenue for sales and marketing.

We get it: You see Enterprise Florida and Visit Florida crucial to Florida's economic vibrancy and growth.

Mr. Speaker, on the other hand, we know you take the view that tax dollars should not be used at all to subsidize private enterprise. If you had your way, you would abolish Enterprise Florida and Visit Florida.

Your view is government should not be deciding winners and losers. It should not be deciding which indutries are “qualified targeted industries” eligible for subsidies. And furthermore, you cite audits showing what Floridians already know: Often times, the recipients of incentives don't live up to expectations. And that makes Floridians feel scammed.

At the same time, Mr. Speaker, you believe state government has an obligation to be transparent with how tax dollars are spent — and that includes sharing with the public how the staffs and boards of Enterprise Florida and Visit Florida spend their tax dollars.

We often hear how it is necessary to keep the negotiations with prospective corporations confidential because they often include competitive trade secrets. But Floridians would welcome Enterprise Florida and Visit Florida operating far more in the sunshine. They at least should be providing quarterly or annual reports similarly transparent to what is required of public companies — financial statements and executive compensation.

As an aside here, gentlemen, and just so you know, I must offer full disclosure as your adviser: I side with Speaker Corcoran on Enterprise Florida, tax subsidies and corporate incentives.

That stems from a conversation many years ago with the late Nobel economist Milton Friedman. We interviewed him on Alabama offering Mercedes-Benz $350 million in subsidies to build a plant near Tuscaloosa. Friedman retorted: “Go ask the fixed-income widow down in Mobile whether she thinks it's fair to take her money to help Mercedes-Benz.”

Or it's economist Arthur Laffer's Rule of One. To measure the effectiveness or fairness of any government program, Laffer applies it to one person. Say you're a retail business owner in Fort Myers, and you have built your company over the past 20, 30, 40 years without a nickel of government subsidies, and you faithfully paid your taxes. Now comes along Amazon's Jeff Bezos, and he knocks on your door and asks you to help pay his taxes so he can build and operate a distribution plant up the road. You'd shut the door on him.

Yes, it would be a much better country if states did not try to steal each other's employers with taxpayer subsidies. It would be a better country if politician-lawmakers understood that tax subsidies always help one at the expense of another. Friedman again: “What you give to one you must take away from another.”

And it would be a better country if the CEOs and business owners who accept these subsidies would recognize, in the end, they ultimately are in the wrong. When they accept a subsidy, they are making the immoral choice of taking, by force, someone else's money to help themselves. They should take the moral position of saying: “No, we'll make it on our own.”

So let's be realistic, Mr. Governor and Mr. Speaker. Both of you know you're not going to get all that you want. Governor, you know the Legislature is not going to appropriate $250 million for Enterprise Florida. Likewise, Mr. Speaker, you know, even if you were able to win your House colleagues' support, the Senate and governor's veto pen will not abolish Enterprise Florida and Visit Florida.

But there are steps that can bring the two of you closer together for the good of Floridians.

The first: Work to improve transparency and accountability. Mr. Governor, you ran in 2010 on bringing more accountability to state government. It's working. Show on the Enterprise Florida website easy-to-understand reports of what companies received subsidies; what they contracted to perform; and grade them on outcomes, just as we do public schools.

Second: more transparency. The compensation and spending of Enterprise Florida and Visit Florida should be as transparent as it is for all government employees and public companies. Their respective websites should make it easy for Floridians to find and see income and expenses and line-item budgets as detailed as those required at every government level.

Then stand together at a press conference and share with Floridians what steps you are taking together to improve the way Enterprise Florida and Visit Florida operate. It would be comforting and reassuring to Floridians to see two of the top three state elected officeholders standing side by side, smiling, acknowledging their differences and perspectives, but also saying you have agreed and compromised on measures that will make these two organizations more accountable and transparent.

And it would be comforting and reassuring to Floridians to hear the two of you continue your commitments to making Florida the most attractive state in the nation for business on the basis of the fundamentals and principles you hold dear: low taxes, low regulation, good infrastructure, good schools and safe streets. Let individual Floridians, not government, decide how best to spend their money.


Meeting expectations?
The following is a sampling from the January report of the Office of Program and Policy Analysis & Government Accountability. It evaluated Florida's eight incentive programs for the 2012-2015 period, covering 232 projects that received incentive payments.

Recipients have added 76.5% of the “contracted new jobs requirement.”

The number of “confirmed jobs” was less than the number of “committed jobs” for every incentive program.

Capital Investment Tax Credit recipients and Qualified Target Industry recipients achieved 92.1% and 91.4%, respectively, of job goals.

Cumulatively, companies receiving incentives have made $3.32 billion in capital investments versus $1.05 billion required.

“Most Innovation Incentive program recipients have not met job requirements.” These are intended to be “catalysts for the growth of existing or emerging technology clusters. See box below. According to state officials, “only Embraer and Max Planck are meeting their performance requirements.”

INNOVATION INCENTIVE RECIPIENTS
Jobs Jobs
Year Committed Confirmed $ Received
Sanford Burnham Institute 2006 303 240 $153.7 million
Torrey Pines Institute 2006 189 124 $27.7 million
SRI International 2006 200 65 $19.8 million
Hussman Institute 2008 296 139 $59.2 million
Max Planck 2008 135 133 $94 million
Vaccine Gene Institute 2008 200 120 $60 million
Charles Stark Draper 2008 165 61 $14 million
IRX Therapeutics 2011 283 0 $0.6 million
Embraer Engineering 2013 200 45 $6 million

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