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Casting Lures: The Vision Driving Business Incentives - SRQ Magazine

01 Sep 2016 6:26 PM | Anonymous

Casting Lures

SEPTEMBER 2016 BY JACOB OGLES 

It was just 2010 when Sarasota County voters, deep in the throes of a recession, voted to tax themselves to fund a business incentive program in hopes of luring employers to the region. While incentives have always been somewhat controversial, a measure backed by area business organizations passed with 67 percent of the vote. Gathered at the Sarasota Ale House on Bee Ridge Road, leaders from area chambers and the Economic Development Corporation of Sarasota County celebrated the election returns and dreamt of a diverse economy, one where not everyone’s livelihood depended upon dramatic cycles in housing and tourism.

“Incentives can make a difference of invest,emt in jobs coming your way or somewhere else,” says Steve Queior, president of the Greater Sarasota Chamber of Commerce. Voters, he says, understood then that a cut in property taxes for a firm that would physically expand its presence on the Gulf Coast likely meant a return worth far more down the line thanks to sales tax revenue and positive growth in jobs and property value. And of course, discretion would be used to make sure the companies benefitting added dimension to the local economy, boosting underrepresented industry sectors like light manufacturing and high-tech.

But jump six eventful years later to the present day to hear an entirely different conversation about incentives consuming discourse at a Sarasota County Commission meeting. An incentives package designed to lure North American Roofing into the region, a plan that already had the support of state leaders and of the same business groups who successfully lobbied for the expansion of incentives programs here, was labeled corporate welfare. The controversy prompted Sarasota County Commissioners to take the unusual and unprecedented step of denying an incentives package negotiated by economic development officials. In the wake of this debate, the use of public incentives, once widely popular if not absent any dissent, suddenly seems a question resolved too early. Does the public still support the use of tax breaks of any sort to create jobs in the region? When should such a tool be employed? Economic development leaders maintain that if no incentives were available at all, Sarasota and the Gulf Coast couldn’t even earn shots at attracting good employers to the region and might even be challenged to keep successful companies founded in the region.

Mark Huey, president of the Economic Development Corporation of Sarasota County, says few companies considering relocation to Southwest Florida start the conversation by demanding a tax offer. The top two questions posed to economic development officials, he says, have to do with the existing workforce already living here or with the availability of the right kind of real estate. Incentives don’t become a major conversation until a company puts Sarasota on its “short list” and prepares to make a final decision where to move. It serves, if you will, as a tie-breaker. But that doesn’t mean the topic only comes up during eleventh-hour negotiations. Companies usually confirm programs exist before they take a serious look at moving. “At the very beginning they will verify we have competitive incentives,” Huey says. “If the answer is that you don’t have any, then you don’t even get in the game.” To be clear, Sarasota has several different types of incentives to offer, not all of which get funded exclusively with local taxes.

“The reality in America currently is that incentives don’t put you on the selection list for an expansion or relocation that creates jobs,” says Queior. “Other things put you on the list. But think of a sequential tree.” Workforce quality, proper markets, transportation access and cost of living will all play into a company decision more prominently than incentives. But at the end of the day, a community with no incentives programs won’t be competitive in attracting jobs.

But should that be how the game is played? Some critics have lamented incentives for years. Land-use attorney Dan Lobeck consistently criticizes incentives as problematic giveaways to companies that cost long-time residents and favor certain private sector players above others. Even success stories like the Tervis Tumbler and PGT Industries expansions, both for companies that have operated in Sarasota for years and have bounced back from the recession strong thanks to expansion strategies, seem to Lobeck like creating new jobs that would have come anyway. “Incentives are not what made the final decision,” he says.

And it’s not just anti-growth voices that question the use of the tool. Kerry Kirschner, the recently retired executive director of the Argus Foundation, always becomes skeptical when incentives are considered. As the broader community considered incentives for a Jackson Labs project five years ago, Kirschner’s organization was opposed. “The whole philosophy is flawed in a community like ours,” Kirschner says. “What we have to offer is environment and the arts, we don’t have to give away things.” The Jackson Labs deal fell through when the state opted not to offer any incentives.

But despite community offerings in the region that draw immense wealth into town, conditions for workers in Sarasota still lag behind many parts of the nation. Median earnings for Sarasota residents in 2014 were $28,473, below the national average of $30,845. And the average private sector salary of $39,900 that year was below both the state average ($43,600) and national average ($50,300).

The top argument in favor of incentives, in Florida at least, usually boils down to a lack of diversification in the economy. Sarasota for the past 30 years has seen the bulk of local jobs created within a few industries—tourism, construction, government—but those fields tend to go through economic cycles concurrently, leaving the region’s commerce subject to exaggerated ebbs and flows. Over the past five years, economic development officials frequently boasted success in diversification efforts. Manufacturing jobs in the county went up 62 percent between 2010 and 2015, and professional and business services jumped 48 percent. Staple industries grew as well, with hospitality up 21 percent and construction up 37 percent, and the state-measured Industry Diversity Index still shows Sarasota with a slightly less diverse economy than the state as a whole (0.86 compared to 0.87).

The question of what constitutes diversity, though, seems to be what recently thrust the region into newfound uncertainty about the merits of incentives. Mary Dougherty, executive director of the Gulf Coast Builders Exchange, began to ponder the entire practice of incentives when the economic development officials tried to lure North American Roofing to the region. A negotiated deal would have required Sarasota County to contribute $216,000 toward a $1.08-million Qualified Targeted Industry (QTI) tax refund incentive offered by the state as well as a $504,000 economic development incentive grant to assist in relocation expenses. “This industry is already experiencing work shortages,” she says. “To bring a company to compete with an already strained workforce doesn’t make sense.”

But the state considers any sort of national headquarters to be a solid move toward diversification. Sean Helton, Enterprise Florida vice president of communications, says incentives typically get directed toward industries like aerospace or light manufacturing, but can be offered for any type of company considering locating its headquarters here. “Corporate headquarters typically have very well-paying jobs,” Helton says. “It helps to diversify the economy, and it also sends a good message to other businesses around the country.”

Consultants hired by North American to negotiate a deal stressed that it was only corporate functions considering a move to the region. “I cannot reiterate enough that this is a potential headquarters relocation project and not a roofing installation group looking to compete for roofing,” says Rob Sitterley, principal at Merit Advisors and one of the consultants who negotiated the North American Roofing package. Additionally, the company committed it would not compete for local employees or roofing jobs. But an outcry from roofing companies founded in the region—without incentives—ultimately led Sarasota County Commissioners to vote against offering a deal.

A greater long-term issue than whether or not that company comes here may be that many business leaders now question if incentives have become too dicey an issue, and whether any should be offered at all. “In my organization, honestly that is where the conversation is going,” says Dougherty.

Local leaders point out the biggest factor in the North American package was the state QTI standards. Rather than just targeted industries like manufacturing or biotech, the state views every corporate headquarters as a chance to boost the state economy. Helton, for example, says the state would never consider incentives to open a Ramada or Hyatt location in a state rich with resorts—unless the company was talking about relocating its corporate headquarters.

County Incentives

Sarasota County maintains an incentive fund that can pay a company up to $5,000 per new job during relocations or expansions of existing businesses. The property tax incentives approved in 2010 can be offered on up to 10 years of taxes on real and tangible property. A Qualified Target Industry tax offered statewide through Enterprise Florida can refund up to $5 million in taxes for companies creating high-paying jobs (provided a local jurisdiction approves a local match as well). Additionally, Sarasota County has programs for rapid permitting and workforce training offered as incentives to companies considering a move or expansion.

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