Times/Herald: Economic Incentives Program Still Troubled

The state’s taxpayer-funded economic incentives program is still not meeting its job creation goals. (Photo via 401(K) 2013/Creative Commons)

By Ashley Lopez
Florida Center for Investigative Reporting

A state program that shells out big bucks to private companies in the hopes they will create jobs in Florida is under scrutiny, again. The Tampa Bay Times/Miami Herald reports the program isn’t getting the return on investment taxpayers were promised.

Florida’s economic incentives program—which is carried out by the state’s Department of Economic Opportunity—has been controversial.

In the past, there has been limited transparency. When the state wrote a check with the understanding the recipient would create a certain number of jobs, there was no way to check if those jobs were created.

Under Gov. Rick Scott, economic incentives have been used at an all-time high. Critics worried the state might be spending unprecedented amounts of money on a program whose outcomes couldn’t be measured.

Following years of criticism, in 2013 Scott signed a law aimed at shedding more light on the program.

Now that there is more information, the program is still raising eyebrows.

The Times/Herald reported this week:

Since Scott took office in 2011, of the 47,746 new jobs that the state has promised through tax breaks, job training grants and other programs to nearly 400 companies, only a small fraction exist as of August 2014, according to the job tracking site maintained by the state Department of Economic Opportunity.

That’s even the case for promises made early in Scott’s term. During 2011, the administration made deals on 87 projects that promised 9,290 jobs, but three years later, as of August, the number of jobs created was 1,223, or 13 percent of the total.

DEO executive director Jesse Panuccio said most of the projects under the Scott administration are on track, with 85 percent of the jobs having been created by their due date.

“It’s really important to distinguish between the time frames that we’re talking about,” he said.

He added it takes more than a year after jobs are created to fully verify them in the state’s compliance review process.

“To do this work accurately, we have to go in and audit books and make sure we’re accurate and careful. That takes time,” Panuccio said.

State officials argue the economic incentives program is not the only tool they have for job creation. However, Scott and the DEO have a lot of control over this program because the legislature is not required to oversee each payment.

For years, Democrats in the state legislature have been trying to reform the program. They’ve been looking to make it either more transparent and/or impose more oversight. Mostly, they are worried the program is shelling out big money to private companies, with little evidence the jobs promised will actually be created.

According to the Times/Herald:

Senate Democratic Leader Chris Smith of Fort Lauderdale wrote a letter to Scott this summer calling the results of the incentive deals “paltry.”

“Thus far … the state has shelled out $22,028,680 for a grand total of 1,939 jobs, or $11,361 for each job created — an alarming 4 percent compliance rate,” Smith wrote.

Panuccio noted that for various reasons some companies’ hiring prospects falter, forcing the state to put their deals in the “terminated” category.

Projects on the terminated list in recent months include a Walmart supercenter in Miami-Dade, a candy factory specializing in pralines in Pensacola, and Environmental Services Sales and Marketing, which planned a Tampa call center. None of the 407 jobs promised in those projects have been created.

Some projects were terminated even though jobs were created, including incentives tied to Sam’s Club in St. Petersburg. Although the company created 104 of the 120 jobs promised, it did not meet capital investment, documentation and wage requirements, losing out on $300,000 in state incentives.

Perhaps one of the most controversial economic incentive deals was signed off by Scott’s predecessor-turned-Democratic opponent Charlie Crist.

During his time in office, Crist approved money for Digital Domain, a movie graphics company that promised high tech jobs for the Port St. Lucie area. In 2012, Digital Domain, laid off about 300 people, then went under, taking $20 million in taxpayer money with it.

Earlier this year, Digital Risk—a company that engineers mortgage risk, compliance and transaction management software– announced it would lay off 744 workers in Florida this year, after receiving millions in state incentive dollars.

Last year, the state’s inspector general warned that similar scenarios could occur because the system for granting money and incentives hasn’t changed significantly since Digital Domain’s demise.