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News Section: Opinion

Public Incentives to Businesses Need to be Carefully Considered and Evaluated

Published Sunday, December 9, 2012 12:10 am

A report published by the New York Times this week claimed that states, counties and municipalities are spending in excess of $80 billion each year to incentivize companies in the hope of creating much-needed jobs. However, the investigation found a stunning lack of oversight tracking the success of those investments, as well as questionable results when a closer look was taken. No public official wants to be seen as anti-job creation in our current economic climate, but more care must be taken to ensure that such massive taxpayer investments are sound.

There are certainly arguments for creating a climate conducive to job growth. Things like tax incentives and public/private partnerships are ways to do that, though I'm always surprised to hear so many self-proclaimed “free market” advocates supporting incentives that clearly tilt the economic playing field. Nonetheless, if a state or local government can lure a business that will create many jobs in the area, there is a multiplier effect in terms of economic activity that can boost their revenues – future corporate tax receipts from that business and its supporting industries, property tax revenue from development growth caused by migrating employees, state and local income taxes if applicable, increased corporate and sales taxes from the economic activity new employees create in the economy, etc.

But if no one is doing a thorough job of analyzing the change in revenues against the investment made, then how can we evaluate whether or not such incentives are netting a gain? One of the problems governments face is the lack of a level playing field at the bargaining table. When a county or city government – especially a smaller one – sits across the table from a multi-billion dollar international conglomerate armed with teams of attorneys and troves of supportive data, they are unlikely to be in a position to skillfully negotiate.

They also have to weigh the greater fool factor. With so many areas of the country desperate for jobs, that big corporation can count on someone else agreeing to their terms if you don't. Will constituents buy the argument that it wasn't a good deal for taxpayers if a government balks at that big company's terms? Will they care that the math didn't add up when news breaks of the jobs and economic activity being promoted in whatever other area the company goes instead?

An inherent problem is the fact that public officials are acting as an intermediary. They're doing the negotiating, but with taxpayer money, not their own. For them, the political value of being able to claim X number of jobs added will almost certainly trump concerns over whether incentives were negotiated wisely, especially if a good measurement tool doesn't exist. 

In Florida, there is plenty of evidence that we are not getting the best value on our investment. A long-term study of 15 years worth of such incentives in Florida showed that only about 1/3 of the promised jobs ultimately materialized. More recently, a three-month investigation by the Tampa Tribune this summer showed that at least 4 in every 10 companies that won grants from Florida's Quick Action Closing Fund through the end of the state’s 2011 fiscal year have failed to meet their performance obligations.

According to the New York Times report, Florida spends about $4 billion each year, or more than $200 per Floridian, on various forms of such incentives, routinely awarding packages to well-known Fortune 500 companies worth tens of millions of dollars per project. Considering the cuts to education and various healthcare programs that have occurred over the same time, it would seem wise to ensure that such investments are transparent, closely scrutinized and negotiated in a manner that considers their propensity for failure.

If that same lost money is thought of in terms of new teachers, public health workers and emergency responders versus money doled out for companies that soon go bust, or up and leave when the when the next state or city offers a sweeter deal, we might end up reconsidering our investments. After all, a healthier, safer and better-educated community creates a significant economic multiplier as well.


Dennis Maley's column appears every Thursday and Sunday in The Bradenton Times. He can be reached at Click here to visit his column archive. You can also follow Dennis on Facebook. Sign up for a free email subscription and get The Bradenton Times' Thursday Weekly Recap and Sunday Edition delivered to your email box each week at no cost. 

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Richard Thomas your first sentence covers the heart of the matter, your comment is so true throughout, but we see even more pit falls in our local Cabal, it turns into what looks like a simple money launder scam where money ends in questionable pockets, and Law enforcement say its civil not criminal, in other words they are trying to play the system while bigger government watches with a protect the Cabal eye, wonder why our Cabal has person receiving the cash and representing themselves at state level, where extortion , Fraud, and the likes are civil not criminal, well I guess it is my lack of education that makes me believe making money the way these people are doing is criminal and should be prosecutable and hold severe punishment
Posted by Frank Kirkland on December 10, 2012

Dennis this big the more you dig the more you uncover, government has lost any form of common since, Hardee County Manatees neighbor to the west, a rural county, now with a large stream of phosphate taxes and other high dollar fees to dump, operating under the quiz, of IDA/EDC and EDA, populated mostly by Ring leaders, operating similar to a Mafia, they openly flaunt their powers over the public, and local Fees supposedly given by Mosaic, For Economic Development and job creation.
The IDA and its director have dumped large amounts of the total Mosaic pie equaling 42 mil. Over 10 years plus severance taxes, bringing the IDA over 100 million to waste, at the rate, the IDA and director is dumping funds on un validated companies, with no product and no skin in the game, the Director and his puppets, will have obligated every penny well in advance of receiving the funds, with little to no return on investment. The director?s track record unbelievable while the local Cabal worships his intelligence?
Posted by Frank Kirkland on December 10, 2012

It would be nice to see Hardee County deal with "multi-billion dollar international conglomerate" companies instead of the pipedream start-up companies they are pumping millions into right now. I don't think governments should give public money to private companies without strong contracts that insure the money will be paid back. Wait a minute, isn't that what banks are for.
Posted by Robert Cole on December 10, 2012

Dennis this is big the more you dig the more you uncover, one thing I can say is at least the big corporations have something to take back if contracts were properly written, (LOL) My point is in Hardee county which borders Manatees east side, where You and Mr. Rehil delve in to some skeleton issues where very questionable high dollar deals were slid around the county?s book keeping establishment (Clerk of Court) sadly as bad as that unclosed situation is, it turns out several of the players in those issues have gone on to bigger dollar money laundry in my opinion.
Higher dollar scams in the arena of economic development, and supposed Job creation, The story is long as to how these local Cabal members came about, being appointed to filter the money out in one after another, Startups who are developing the next answer to the world?s problems, these corporations are incorporated very near the time they apply for millions of free money from Hardees, Famous man of the hour Bill Lambert director of IDA/EDC which has free money in the 100s of millions flowing in now and over the next few years.
Mr. Lamberts track record is unbelievable, one failure after another with no end in sight, he and Cabal members which cover Hardees government close to 100% , are saying the money is theirs to hand out at will, several board members state that if they hit on 1 out of 10 hand outs they would be happy. This is amazing since one of these scams, in the 2nd stage of 3 stage plan, and as the 2nd stage ends in October 2013, the giveaway will be at the 10 million dollar mark.
This company failed to keep its end of the bargain the 1st stage, so some real slippery negotiations were done switching owners and some walked with the first 2.6 mill, and the IDA signed them as a new company with a different owner who purchased the failed company with some stock in the new company, mean while they are handed the 2nd stage, 3 million plus, considering the other benefits the 10 million mile stone will be reached by the end of the 2nd stage of 3.
The IDA, stating after handing out millions, the public has no right to see financial records because the magic software that is not yet developed is propriety, can someone please tell me what stewardship records of where did the money go, have to do with the development of a propriety product, is it customary to keep drawings of special projects, mixed in the financial ledgers?
Our county has no applicants that have ever developed or sold a product to my Knowledge, our IDA director successfully manipulates his, pump and dump team, to spread the robin hood wealth with new corporations, formed by people who appear to be career internet scammers, who have a long list of corporations they have hatched and left to rot moving own to the next promising money give away, this leaves Hardee County to be a top contender in the waste money world of scams for fools. Along with the fools they can find on the market that will be sucked into investing in these advertised marvels?.
Posted by Frank Kirkland on December 10, 2012

Dennis, you are really on to something here. Public revenues should advance public causes directly. Giving citizen's tax money to private corperations - that isn't captitalism! They use tax money to make a profit - and only, and often by luck, do the citizens see any profit - a return on that investment. Yes, each such "public-private" incentive must be thoroughly investigated from all angles to see what the citizens truely gain by their investment.
Posted by Sandra J. Gander on December 9, 2012

This is another example of Florida's preferential treatment of corporate america over the little guys (middle class)especially during this administration.Oh well two more years & Governor "one term" will out of office. I can see helping to persuade a successful company move here for the goal of creating jobs ,but they have to be more than short term jobs.They have plenty of scrutiny over the measly unemployment benefits they give workers but have a very relaxed attitude over the millions they give corporations.
Posted by William E.Moore on December 9, 2012

What many fail to recognize is that a well-educated community that provides above average education to its population reaps the advantage of increased demand for the location and as a result higher, and more stable property values.
Posted by Ann Huhn on December 9, 2012

Excellent article indeed. Hardee County is wasting millions on pipe dreams like the $2,657,813 they sent to LifeSync Technologies of Tampa partially owned by three Florida House of Representatives. Wasted and unaccounted for. Smells like dead meat.
Posted by Henry Kuhlman on December 9, 2012

These "incentives" are nothing more than a give-away of tax revenue that should be put to public use. We cut back on library hours, median mowing, public transportation, et cetera, and somehow magically have plenty of revenue to essentially throw out the window. These "job creators" should pay us (the people) for the privilege of exploiting our community's resources and infrastructure to turn a profit. If they can't perform, they don't belong in business. It is patently not fair to their uncentivized competitors who manage to pay taxes and make a profit. We need a national industrial policy. This practice of pitting one community or one state against the other is bound to fail. Abe Lincoln and the original Republican Party figured that out real fast. If you don't believe me, watch the movie! A good investment for our nation right now, I'm talking today, is solar, wind, hydro, and geothermal power and public transportation. Got to quit pumping carbon into the air and the sea, lowland-dwelling local consumers, because if you don't reverse the trend soon, the sea will rise up out of its bed and consume you and your habitat.
Posted by Richard C. Thomas on December 9, 2012

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