By Marcia Heroux Pounds, July 17, 2015
The cost of attracting jobs to our region is rising. Broward and Palm Beach counties have awarded millions of taxpayer dollars for company relocations or expansions in recent months, including two major deals completed in just the past two weeks.
More companies are making moves as the economy improves, and they're winning fatter incentive packages — tax refunds, cash and grants — from communities and states seeking the jobs, development officials say. Hot competition from other states, especially Texas, is driving up the amount of those incentives, they say. The volume of projects in Broward County this year has already eclipsed the total from 2014, said Steve Tinsley of Broward's economic and small business development office. The Broward County Commission in April approved a $7.86 million package for "Project Osprey," an undisclosed Pompano Beach manufacturer looking to expand. On Friday, the Greater Fort Lauderdale Alliance revealed the company to be Hoerbiger Corp. of America, which plans to create 420 jobs in Coral Springs. The incentives package was three times the size of last year's biggest deal: $2.6 million for Ultimate Software, which plans to expand its campus in Weston, adding 400 jobs. In Palm Beach County, commissioners in March approved the $10.56 million incentive package for United Technologies Corp. That dwarfed last year's biggest deal of $5 million of state and local incentives to keep Office Depot in Boca Raton after merging with Illinois-based OfficeMax. Palm Beach County committed to $500,000, on top of previous contracts with the office-supply retailer, according to county records. Critics contend that the amount of money spent to lure employers is out of line. A 2013 report by the Institute on Taxation and Economic Policy, a nonprofit research institute, said states spend roughly $50 billion on tax incentives every year. But "evidence suggests that tax incentives are of little benefit to the states and localities that offer them, and that they are actually a drag on national economic growth," the report said. Economic development leaders, on the other hand, argue that incentives are the price we pay to build the local economy. The days are gone when a CEO would move his company to South Florida simply so he could live near the beach, said Kelly Smallridge, president of Palm Beach County's Business Development Board. "The economy is robust. Companies are looking at the cost of doing business and where they're going to attract a skilled workforce," Smallridge said. "This has become a very objective decision." Shannon LaRocque, assistant county administrator for Palm Beach County, said incentives are recommended based on a project's economic impact. "You can't just look at the salaries. We look at industry type, capital investment, the number of jobs," she said. "Economic impact captures all of that. The higher the impact, the higher the incentive." Smallridge said the Palm Beach County Commission is careful to give tax rebates first. Cash is offered only when there is stiff competition with other states or counties for a project, she said. The incentives offered to United Technologies Corp. are an example. UTC plans to build its Center for Intelligent Buildings in Palm Beach Gardens, showcasing technologies ranging from security systems to escalators. The company's jet-engine developer, Pratt & Whitney, and helicopter maker, Sikorsky, already share a campus in northwestern Palm Beach County. The incentives include local financial support of up to $3 million over 10 years, $2.66 million in state tax refunds and $4.9 million from the Quick Action Closing Fund, the governor's discretionary incentive fund. North Carolina and Georgia were trying to land UTC as well, according to county documents that recommended approving the incentives. Local incentives are tied to the creation of 380 jobs. Per job, the county's $3 million incentive is $7,895. The governor's money will be given only after the business has made a substantial part of its promised $115 million capital investment in Palm Beach County. Palm Beach County estimates that the UTC center will be worth $662.4 million to the local economy over five years. Beyond the economic impact, however, county leaders were enticed that UTC would bring different types of positions – product development, engineering and information technology — than the Connecticut company already has in the county. Smallridge said the incentives are warranted because UTC is building a 250,000-square-foot building in Palm Beach Gardens. "If the county exempts taxes for seven to 10 years, that building is still going to be paying taxes from year 10 to forever," she said. At least two other megaprojects are close to completion in Palm Beach County, Smallridge said. The companies' identities will remain confidential until the deals are signed. "Project Osprey" is a regional distribution center for a company in unincorporated Palm Beach County that would bring 500 jobs at an average salary of $48,800. The county estimates a five-year economic impact of $248 million. State and local officials have approved $1.68 million in incentives, with $750,000 coming from the county in tax rebates. The second project, "Project Bruin," would create 178 jobs at an average annual wage of $83,000. The company would make a $1.9 million investment in renovations and equipment in Palm Beach Gardens. State and local governments have approved a $1.6 million incentives package for Project Bruin, described as a national headquarters currently based in California. Gov. Rick Scott has offered $1 million from his discretionary fund, with the county and city agreeing to local matches of $250,000 and $350,000, respectively. Besides creating jobs, the incentives require retention of 473 existing jobs, according to county documents. Palm Beach County estimates the five-year economic impact from Project Bruin at $772 million. Swindell said the incentives for Broward's largest project so far this year, Hoerbirger's expansion in Coral Springs, are high because Florida was competing with Texas for the company. The $7.86 million incentive package includes $852,000 in tax refunds and cash from the City of Coral Springs and Broward County. The state has offered job creation incentives, tax credits and grants totaling $5.5 million, plus Scott is dipping into his discretionary fund for $1.5 million. Texas is known for its high incentives, especially during former Gov. Rick Perry's tenure. Greg LeRoy, executive director of Good Jobs First, a national center for accountability in government incentives, said Perry and Scott "have made job piracy a partisan sport," launching campaigns in other states to persuade companies to move. The cost of incentives is spiking because large companies "have the ability to create a substantial number of jobs, or threaten to move jobs across state lines. They're in the cat bird's seat," LeRoy said. Companies have been trained to create an appearance that they're considering multiple locations for new plants or offices, he said. They do that "to maximize the tax breaks they get in the place they want to go." Some public officials misrepresent the ripple effects of a proposed project, and job creation often exaggerated, he said. Unlike past years in Florida, incentives now are paid only after the state confirms that a company has invested the money and created the jobs that it promised. Florida's legislature cut business incentive spending in last state budget, approving only $43 million for incentives compared with $71 million in fiscal 2014. Swindell, who chairs the Florida Economic Development Council's executive committee, said some legislators were concerned that incentive money would be tied up — obligated for later payment — when some company relocations or expansions didn't happen as expected.