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Monday, April 25, 2011

Is Corporate Welfare in Florida working? Nobody seems to know, yet we still keep giving money away

From the Orlando Sentinel

by Aaron Deslatte

TALLAHASSEE — As the 60-day lawmaking session winds to a close next month, Gov. Rick Scott is relentlessly promoting his "jobs" agenda and exuding confidence that he'll get a massive infusion of tax dollars to reel in new employers.

But behind the scenes, Scott's office and lawmakers are jockeying over who should control hundreds of millions in tax breaks that Florida has been doling out to biotech companies, retailers such as Wal-Mart Stores and Walgreens, and television producers.

Leery of appearing to support "corporate welfare" while cutting nearly $4 billion from education, health-care and social-service spending, Republican budget writers have been pushing the Governor's Office to prove the effort will produce a bigger bang for the buck.

Scott's office is pushing back that Florida already moves too slowly in the high-stakes game of enticing corporations shopping for the best state tax deals.

"We ought to be able to make a deal for job creation quickly," said Gray Swoope, the former Mississippi economic-development director whom Scott hired in February to lead Florida's job-creation arm, Enterprise Florida. He's pressing for more money — and less legislative oversight.

"North Carolina, Texas, those are states that can move a lot quicker than we can," Swoope said.

Although neither chamber has embraced Scott's call for cutting Florida's corporate-income-tax rate, they are trying to offer him something. The House has passed a proposal that would create his economic-development superagency and fund it with $427 million, but not until 2012.

"It's going to give us more money to do the right things," Scott said recently about the House plan.

But critics say there is mixed evidence that the millions in tax breaks Florida has already doled out actually created jobs.

"It doesn't seem wise to us to let tens of millions of dollars more a year go uncollected for the benefit of a few select corporations or industries," said Alan Stonecipher, with the liberal Florida Center for Fiscal and Economic Policy research group.

"There's little evidence that these so-called economic-development incentives actually produce new jobs."

Millions doled out

During the past decade, Florida invested billions of dollars in tax breaks to get employers to relocate to Florida or build in blighted neighborhoods.

But when the economy stalled, so did the spending spree.

In 2007, Florida sank $458 million into a host of tax-incentive programs. By last year, the total had shriveled to $220 million.

And this year, Senate and House budget writers are poised to approve $171 million to $210 million — far less than the $300 million Scott requested.

"The more money we trim out of [economic development], the more dollars available for education and health care," said House economic-development budget ChairmanMike Horner, R-Kissimmee.

One of the biggest differences between the two chambers is how much cash to give the governor in a fund designed to pledge tax breaks to coveted companies willing to relocate, called the Quick Action Closing Fund. The Senate puts $45.8 million in it; the House $14.7 million.

House and Senate leaders are going along with Scott's request to construct a giant new economic-development agency that would combine space, tourism, sports, minority-business and other job-creation agencies.

But the Senate's version would require Scott's office to develop better measurements of the programs' "performance and competitive value to the state."

"If we're going to go forward with economic incentives, we need to know which ones work, why they work and under what conditions they work," said economic-development budget chief Don Gaetz, a Niceville Republican slated to be Senate president in 2012.

"You can't be a prophet. But what is the general return on investments that we ought to have here? If we're investing in Florida Inc., that's what we're asking the governor to do."

Gaetz asked Scott's office in February for a "business plan" to justify therequest for $300 million and says he was given "a fairly uneven report."

Scott's inner advisers recommended against agreeing to any "return-on-investment" requirements.

"I think that locking ourselves into statutory ROI measurements or even a business plan at this point would be difficult," Scott's chief lobbyist, Jon Costello, wrote in a Feb. 28 email.

Swoope said last week that Enterprise Florida already does a good job.

"There are some good measurements in place. Do they need better aligning? Absolutely," he said. "We will build that trust with our legislators, that they'll have confidence in what we're saying."

Lawmakers' skepticism has been building for years, driven in part by the fact that some of the highest-profile projects have been slow to produce results.

Lawmakers doled out $449 million through one "innovation incentive" fund to seven biotechnology-research institutes — including Torrey Pines Institute for Molecular Studiesin Port St. Lucie and Sanford-Burnham Medical Research Institute at Lake Nona — but it may take decades to deliver the technology clusters lawmakers were promised.

The latest update in December said that, although the biotech industry was growing faster in Florida than nationally, the seven projects had created 644 jobs — fewer than half of the 1,488 positions they ultimately will be mandated to add.

Tax breaks for TV

Other tax breaks appear to be suffering from their own success.

Last year's "Jobs for Florida" bill devoted $242 million during five years to tax credits for film studios and digital-production companies. The bill included other components — tax credits for hiring the unemployed, selling yachts and other activities — that can't be measured for results yet, according to the Department of Revenue.

But by spring, $227 million of the film breaks already had been committed, 60 percent to "high impact" television shows such as USA's "Burn Notice," A&E's "The Glades" and MTV's recently announced remake of the British comedy "The Inbetweeners," to be shot in Central Florida.

But House finance and tax Chairman Steve Precourt, R-Orlando, is miffed that so many of the credits have been committed to television shows that might spread their impact over five seasons, as opposed to one-time movie productions.

"Those are credits that could be used by film productions or digital media to do work today," Precourt said.

Earlier this month, the House approved $30 million more in tax credits but effectively capped what can go to television shows. Critics said the cap would also have the effect of steering more tax credits to film-production studios owned by Universal Orlando, in Precourt's home county.

Florida Film Commissioner Lucia Fishburne said Florida's tax package for television production has been the envy of the country, and other states have tried to duplicate it.

If Precourt's changes pass, "we would never be able to sell our state. That eliminates all the certainty for productions," she said.

Tax refunds for jobs

Another popular program is the 17-year-old "Qualified Target Industry Tax Refund," which gives a $3,000-minimum tax refund to companies for every "high-wage" job they create.

In the past four years, Florida has directed more than $57 million to the likes of Coca-Cola, JetBlue, video-game maker Electronic Arts Inc. and Ruth's Chris Steak House.

Although the law specifically excludes "retail," Wal-Mart Stores got $1.1 million in 2007 for opening distribution centers in DeSoto County and the North Florida town of Macclenny.

Chico's, the clothing chain headquartered in Lee County, got $600,000.

Enterprise Florida spokesman Stuart Jacob said every company has to demonstrate it has created the jobs promised. The problem is, many of the companies might have created jobs without the incentives.

In 2003, Senate staff surveyed businesses getting the break. Of those that responded, 20 of the 38 said they "probably" or "definitely" would have relocated to or expanded in Florida even without the incentive.

Horner defended the program, saying it had helped land needed jobs in less-affluent communities.

"Those are good jobs. They're high-paying jobs," he said, although companies are only required to pay "relatively high wages compared to statewide or area averages."

Last year, lawmakers tweaked the program to exclude telemarketing call centers and ordered Enterprise Florida to develop better measurements for whether the law was working. This year, the program would get $18 million to $23 million in the competing budget plans.

"In a lot of ways, these dollars are the required ante in order to get into these high-stakes economic-development games," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. But, he acknowledged: "There's no guarantee that success is going to come quickly." or 850-222-5564. Follow him on Twitter at @adeslatte.,0,6854914,full.story

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