Report On Economic Incentives Shows Poor Return on Investments In Some Cases

State officials release a report about Florida's economic incentives program. (Photo via Tax Credits/Creative Commons)

State officials release a report about Florida’s economic incentives program. (Photo via Tax Credits/Creative Commons)

By Ashley Lopez
Florida Center for Investigative Reporting

A state agency released a report this week showing the results of the Florida’s investment in private companies. So far, state records show the program—which is supposed to create private sector jobs—has had mixed results.

Florida’s economic incentives program has been used more than ever before under Gov. Rick Scott’s administration. The incentives usually come in the form of tax breaks and even direct subsidies to private companies in the state. It has cost Florida taxpayers millions.

Over the years that the program has been in place, however, there has been no record or reporting of how effective the incentives have been. Most incentives are doled out with the hopes of creating a certain number of jobs in the state—until now we didn’t know whether those jobs have actually been created.

According to The Florida Current, the recent Office of Economic and Demographic Research report “shows Florida taxpayers did not get a hefty return on investment for many economic incentive programs over a three-year period, with some programs even costing the state money.” However, some incentives paid off immensely for the state.

The Current reported:

Florida’s Enterprise Zones program, for example, costs the state more money than it creates in revenue generated by economic activity it creates. More than $115.2 million in tax rebates was given to businesses operating in areas designated as economically distressed areas for the 2010-2012 fiscal years.

The report notes the Enterprise Zone program was designed to improve run-down areas, not boost state revenue, but “to the extent the state funds supporting the incentive could have been more productively spent elsewhere and the business activity would have occurred anyway, the state actually foregoes revenues beyond the direct cost of the incentives.”

On the positive side of the incentives ledger, the Qualified Target Industry program provided the most bang for the taxpayer’s buck. According to the report, the QTI program generates $6.80 for every dollar invested over the period.

Overall, the report shows that the incentives are mostly a gamble. The state’s large investments in private businesses do not always pay off and create jobs.

According to the Current:

The report does include a healthy dose of skepticism about the effectiveness of taxpayer incentives. It notes academic studies are “far from settled on the matter, and in any case are inconclusive about whether businesses wouldn’t choose to locate in a given area were it not for the incentives offered.”

The effectiveness of handing out taxpayer money to private businesses has also been a mixed bag on a local level, as well.

Some counties in Florida have had a lot of luck with their programs. However, some county investments have not paid off.

In the Fort Myers area, county officials are actually asking a company to hand back taxpayer money.

According to the Fort Myers News-Press:

Lee County finally threw down the gauntlet in its long-simmering dispute with VR Laboratories — giving the health drink start-up 45 days to pay back $4.7 million of a jobs stimulus grant that’s produced only four jobs.

“If the county does not receive payment we will take legal action to recover those funds,” Assistant County Attorney Andrea Fraser said in an email Wednesday.

The county commission awarded VR a $5 million grant in February 2011 under an agreement in which the company was to create 208 full-time jobs in Lee County over five years with average salaries of $66,850 plus benefits.

Forty of those jobs were to be created by Dec. 31, 2012, although VR exercised a one-time, one-year extension option pushing back that deadline to Dec. 31, 2013.

But the jobs haven’t been created despite county inquiries on the issue for more than a year.

Last year, a law was passed that created more transparency in the state’s economic incentives program. For years Democrats had unsuccessfully tried to get the state to keep record of whether these economic incentives were working. Even though there is now some record of how the program has been working in the past three years, experts have said some other changes still need to be made.

Integrity Florida and the state’s Office of Inspector General have offered many other ideas on how to improve Enterprise Florida and the state’s economic incentives program, but they have not become law.

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