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incentives

We paid for jobs, then they left

For years, the company now called JPMorgan Chase & Co. has received millions in public money to help create jobs in Tampa. But many of those jobs are gone.

By SYDNEY P. FREEDBERG and JEFF HARRINGTON
Published January 23, 2005


TAMPA - State and local governments have paid or promised more than $21-million of benefits plus a tax break worth up to $74.5-million to help a financial corporate titan create jobs in Tampa - the same company that will lay off 1,900 employees this year.

Time and again, the company now called JPMorgan Chase & Co. promised Tampa and the state that it was bringing more high-wage jobs to Tampa - even as it was shedding other jobs here.

And time after time, the city, the county and the state rewarded the company with financial incentives to stay here and grow. Several times, in fact, government bent the rules or changed the law to help the company.

About $13.3-million already has been paid or fronted by state and local governments, according to an analysis by the St. Petersburg Times.

There was $1.2-million for help in training workers, $4.3-million for road improvements and right-of-way acquisitions, state tax refunds of at least $6.5-million and $1.3-million to help the company pay governmental fees for its developments.

That tally doesn't include an additional $6.8-million in tax refunds promised to the company over the next five years if it meets job goals from remaining Tampa operations after its credit card call center closes. It doesn't include $1.4-million in pending road improvements and $2.6-million more that the government paid or promised JPMorgan for its mortgage operation in Jacksonville.

It also doesn't include potentially the biggest bonanza for JPMorgan. In 2000, it became the first company in Florida to qualify for a little-known tax credit that could dramatically reduce the company's state corporate income tax bill. The tax credit is worth as much as $3.725-million a year, or $74.5-million over 20 years.

All together, JPMorgan Chase, a multinational powerhouse that said last week it made $4.5-billion in profits in 2004, has been paid or promised nearly $100-million through government incentives in Florida.

When the company announced on Jan. 12 that it was closing its credit card call center, government officials stressed the positives.

"We always take very seriously and are always disappointed any time jobs leave the state of Florida," said Scott Openshaw of the governor's Office of Tourism, Trade and Economic Development. "However, JPMorgan Chase has for a long time contributed greatly to Florida's economy via job growth and substantial capital investment - and they continue to do so."

The company said it would continue to employ more than 3,000 in the Tampa area.

Government and business leaders noted that JPMorgan and its predecessor companies have spent more than $511-million in payroll in the bay area since 1997. The financial giant gives generously to area causes and paid at least $1.9-million in Hillsborough County property taxes last year.

The entire community benefits from aid such as road grants, Openshaw said, calling Florida's use of incentives "conservative." Companies get paid only for promises they keep, he added.

Still, during a wave of mergers, downsizing and outsourcing, the JPMorgan & Chase case raises a fundamental question:

Over the long haul, is it worth it to invest millions in public money to help a company that might suddenly change its plans?

* * *

JPMorgan's predecessor, Chase Manhattan Corp. of New York, pushed into the bay area market in 1986, when it took over the failed Park Bank of St. Petersburg, becoming Chase Bank of Florida.

In 1988, Chase moved the local headquarters of its bank from St. Petersburg to Tampa.

That same year, Chase relocated the national headquarters of two units here: home mortgage sales and student loan operations.

The operations came together at what would eventually become a 66-acre, five-building complex called Fountain Square west of Tampa International Airport.

The incentives began back then. From 1988 through 1990, Chase received $258,122 to help train new employees. The Hillsborough County school system chipped in, providing 44,647 hours of training, as well as the use of computers and telex equipment, with financial support from Chase.

A key player emerged in the incentives deals: the Greater Tampa Chamber of Commerce's Committee of One Hundred, which gets about $680,000 a year from local governments to recruit industry.

By 1990, Chase's bay area payroll had swelled to 1,550. Its credit card operation grew by 250 jobs that year. But, in what would become a familiar pattern, Chase was cutting elsewhere even as it was growing. Chase Bank of Florida, the company's initial foothold in Florida, trimmed 40 of its 200 jobs. Some of those cut wound up filling the new jobs at the credit card call center.

Another, larger round of job cuts came five years later. Chase and Chemical Bank announced a merger, yielding windfall gains for stockholders but pain for employees. In boom times, the "new Chase" announced it would slash 12,000 positions companywide over three years.

The Tampa chamber called on newly elected Mayor Dick Greco to help persuade Chase to stay and grow in Tampa.

"Everybody wanted companies with big names and jobs," Greco says now, adding that Tampa was hungry for jobs and he would do "anything within reason" to get them. "They (the Committee of One Hundred) would come in and tell me, "We need so and so,' and I'd hop on a plane and go do it."

By April 1996, Chase had decided to move 600 mortgage servicing jobs from Tampa to Ohio. At the same time, its executives came to town to discuss the right package of incentives that would induce the bank to resurrect some of the 600 lost jobs in a possible expansion of the credit card center.

In a series of private meetings, Chase executives Cesar Chekijian and Gordon Lorig presented a list of requirements to bring more jobs to Tampa. Topping the list: tax relief.

Chamber leaders and elected officials scrambled to change the tax code for Chase, which in the past decade has spent more than $3.5-million on national political campaigns and $167,000 on Florida campaigns, records show.

Then-Lt. Gov. Buddy MacKay agreed to study the company's tax-trimming desires, notably the sales tax Chase paid on leases between its subsidiaries.

Ultimately, the Legislature rewrote the tax code so that Chase could save $210,000 in documentary stamp taxes. It removed a spending limit on a key tax incentive program that Mayor Greco said put Chase's expansion "at risk." In time, legislators would slash the tax on intangible property, such as stocks and bonds, aiding numerous companies, including Chase.

In 1997, the company also received utility concessions, expedited permits for its Fountain Square development and eligibility for a $5-million tax refund over six years under the state's new Qualified Target Industry program, or QTI. In return, Chase promised to add 1,114 jobs in Tampa by December 1999.

The QTI program was designed to provide Floridians with high-wage jobs. Companies in industries subject to layoffs are not supposed to be eligible.

Chase hardly seemed the ideal candidate. It had just cut 600 jobs, and a vast majority of the new jobs were "staff" positions in the call center. At about that time, average annual salaries for customer service clerks in the Tampa Bay area ranged from $16,952 to $26,333.

Less than a year later, Chase announced 2,200 cutbacks nationwide, including unspecified reductions in Tampa. The company couldn't meet the terms of its new Florida incentives agreement.

The company said it had created 630 jobs at the call center but because of "extenuating circumstances beyond its control," it would fall at least 277 jobs short of the original pledge of 1,114 jobs.

Under the QTI program, companies that meet their job goals are eligible for tax refunds in yearly installments. Companies that don't create promised jobs could lose their eligibility for refunds.

But Chase persuaded the state to amend the agreement so it could remain eligible.

The company hired a top industry consulting firm, now called Stadtmauer Bailkin Biggins LLC, which specializes in brokering complex incentive deals for large companies.

Jay Biggins, the firm's managing director, wouldn't comment on his fees. But an article in Crain's New York Business in 1996 said Biggins' partner, Michael Bailkin, and his team made up to $415 an hour. The publication dubbed Bailkin "Mr. Incentive."

Biggins was not registered as a lobbyist, records indicate. "Our understanding of the Florida lobbying law is that it was not intended to include this kind of work," he wrote in an e-mail to the Times last week.

In discussions with the governor's office, Biggins offered advice on how the agreement could be amended so Chase could still get its refunds.

The governor's office obliged. It gave Chase two more years to meet its original job target. In return, Chase upped its pledge of new jobs by 216, agreeing to create a total of 1,330 by December 2003.

But Biggins still had work to do. He had to prove Chase already had created 630 jobs as it had claimed. And he had to show the company paid enough taxes to deserve a $463,386 refund.

The governor's office signed off on the refund, "verifying" the jobs based on limited data, according to a note in state files.

The Times could not confirm the state's conclusions. Last year when the newspaper asked for the state's files on Chase projects, many of the jobs numbers were whited out. By law, the governor's office cannot disclose anything about Chase's wages or state tax payments.

* * *

Less than a year after collecting its first tax refund, Chase sought more incentives. Trade aides for Florida's new governor, Jeb Bush, partnered with the Committee of One Hundred to assist.

Biggins dangled proposals for three new Chase units that would bring up to 2,140 new jobs to Tampa. He pursued millions in additional tax refunds.

Hillsborough County commissioners and the Tampa City Council whisked through resolutions pledging additional financial support for a Chase expansion while details were still scant.

Bush's top trade aide, Tony Villamil, described the projects in a confidential memo to the governor on Oct. 4, 1999.

Two of the units would be housed in a new, tree-lined office park called Highland Oaks located east of Tampa. The company would invest $113-million in those projects, Villamil wrote.

Combined, the two units would serve multinational clients, managing the movement of more than $1-trillion around the world every day.

A third unit would be adjacent to Chase's Fountain Square complex. There, hundreds of employees would be hired to manage retirement accounts, sell auto leases and track delinquent auto loans.

Villamil said the company wanted to move "very fast" on the deals.

Bush e-mailed Wynnelle Wilson, his office's chief incentive analyst. He was concerned.

The law says a "qualified target industry business" may not receive a pledge of more than $5-million in refunds. One Chase unit already had that. Another had a $1.5-million tax-refund agreement in Jacksonville. Now three additional Chase units wanted an additional $8.4-million in refunds, plus additional tax relief, training aid and road funds for intersection improvements.

"Should we get buy-in from the legislative leadership on the Chase QTI split-up?" the governor e-mailed Wilson. "Is this so clear that it won't raise an eyebrow?"

Wilson replied that she saw no problem. "They (the three projects) are pretty well defined and will be registered as separate business units," she wrote. "This separate registration meets the statutory requirement for a QTI business."

State records indicate Chase's applications to qualify for the tax refunds was approved the day before the e-mail exchange.

* * *

In January 2000, the governor's office was busy with Chase again. It awarded the windfall tax break that could help the company dramatically reduce its state corporate income tax liability for 20 years.

The capital investment tax credit, which went into effect in 1999, was intended to help "high-impact" companies such as aerospace, silicon technology or biomedical industries that add at least 100 jobs and invest at least $25-million in Florida.

So how did a financial services company become the first eligible to claim the high-impact credits?

The answer could be found atop the list of "unique" distinctions on the Web site of Stadtmauer Bailkin Biggins, the incentive firm that represents Chase.

The Web site notes that the financial services sector was supposed to be ineligible for the credits. But the consulting firm touted that it "obtained a concession" making a financial services company eligible "if the technology content of its business was sufficiently compelling."

In this case, that meant calling Chase's new jobs a " "technology company' within a financial services firm." The consulting firm said its client was awarded a 20-year credit for $75-million in capital expenditures for its new facility in Florida, the first of eight companies to qualify for the program.

For their part, the governor's office and Chase said the center clearly qualifies as "high-impact." Globally, the company's Treasury Services unit now processes as much as $2.5-trillion in U.S. dollar wire payments a day, and much of it flows through the Tampa site.

Nine months after securing that tax break, Chase merged with JP Morgan, triggering thousands of job cuts. In Tampa, Chase slashed 235 from its mortgage telephone sales unit in 2003.

And then came yet another merger - with Bank One Corp. last year - followed by another round of layoffs. About 125 workers in Tampa assigned to debt collection and risk control were laid off late last year.

Then came this month's news that 1,900 in Tampa will lose their jobs with the closing of the credit card center.

To JPMorgan Chase officials, how the company reached the juncture of one of the biggest mass layoffs in recent Tampa history is, itself, history.

Two architects negotiating on behalf of Chase, Chekijian and Lorig, no longer work for the company. Over the past week, JPMorgan spokesman Chris Spencer said he had struggled to find insiders familiar with the company's job creation, layoff and incentive-building history in Tampa.

"I can't find anybody who's been around that long," Spencer said.

Times computer assisted reporting specialist Connie Humberg and researchers Kitty Bennett, Carolyn Edds and Cathy Wos contributed to this report.

[Last modified January 23, 2005, 00:41:01]


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