Who really benefits from the subsidy game?
By ROBERT TRIGAUX
Published June 13, 2005
Incentive - something that stimulates one to take action, work harder, etc.; stimulus; encouragement. - Webster's New World College Dictionary
Two years ago next month, Gov. Jeb Bush flew to California and dangled $310-million in government funds in front of the prestigious Scripps Research Institute to build a bioscience facility in Florida. The size of incentives ballooned to $569-million after Palm Beach County committed tax dollars to land Scripps in its east-coast piece of the Sunshine State.
Pitching Scripps as an economic force for Florida as powerful as Disney or NASA, Bush wowed the state legislature, economic development and public officials and, yes, most of the media. Scripps was to be the New New Thing, Florida's catapult into the upper ranks of the industry of the new millennium: bioscience.
Face it. We've all been gaga over Scripps because the half-billion-dollar package of incentives and the pledge of jobs created by Scripps was presented to Floridians as a done deal.
As remarkable as the Scripps deal might, and that's a big might, become, nobody asked in advance if this was the absolute best use of taxpayer money. Nobody asked what $569-million could do for Florida if such a mega-subsidy was directed to other needy purposes, or simply used to bolster Florida's existing bioscience research and business industry.
Nobody asked because nobody knew.
To some who think government should be more publicly accountable with taxpayer dollars used to lure new business, the secrecy of the Scripps deal barely passes the sniff test.
"With Scripps, you have to at least wonder what else you could have done with that money," says Greg LeRoy, the founder of Good Jobs First, a nonprofit Washington group that studies corporate incentives.
LeRoy has written a book, published by Berrett-Koehler and due out next month, called The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation.
The book does not attack all business incentives.
Just incentives that lack accountability or any guarantees of performance. Just incentives that subsidize big corporations but are never offered to small businesses. Just incentives that companies promising jobs use to spur bidding wars between states. In too many cases, corporations relocate to receive an incentive, but leave when the taxpayer subsidies run out.
LeRoy's book is full of such tales. He describes the "Great American Jobs Scam" as a system designed to let corporations "exact huge taxpayer subsidies by promising quality jobs - and then lets them fail to deliver."
The book asks two key questions for Florida, a state eager to recruit companies from afar. How much should cities and states pay to attract jobs? And what guarantee of payback (called a clawback) should cities and states demand in the event these promised jobs do not materialize or quickly disappear?
Corporate incentives cost U.S. taxpayers $50-billion a year, LeRoy estimates. An entire industry of business consultants, economic development recruiters, site selection experts and commercial and residential real estate relocation experts has grown up in the past 30 years to grab their piece of this big incentive pie.
LeRoy points to many incentive deals gone awry involving businesses familiar to the Tampa Bay area. The tale of Bank of America and its New York City incentives is told. So is the story of Raytheon threatening to move its headquarters out of Massachusetts.
Closer to home, LeRoy describes how Tampa's Sykes Enterprises repeatedly accepted subsidies to open its call centers in job-needy rural America towns - like Greeley in Colorado, Klamath Falls and Milton-Freewater in Oregon and Manhattan, Hays and Ada in Kansas - only to close most of them soon after the subsidies ran out.
Pressured by global competition, Sykes moved the bulk of its call center jobs to cheaper locations overseas. But it has often left small U.S. towns scrambling to find yet another round of incentives to attract yet another major employer.
Florida's economic development industry loves incentives, but hates talking about them.
Tax deals, upfront subsidies, you name it. Any incentive that helps make the Tampa Bay area or any other Florida location more attractive than somewhere else is a winner!
The bad news is these incentives have a way of escalating over time. If company X got $10-million to move here, then company Y wants at least $15-million or it will threaten to go somewhere else.
Florida economic developers complain they actually have fewer incentives to lure potential corporate relocations than nearby states.
Many Florida incentives given to big corporations have been examined in an ongoing series by St. Petersburg Times investigative reporter Sydney Freedberg. Her findings: Florida's track record of using incentives is spotty at best.
This year, Freedberg and fellow staff writer Jeff Harrington reported that JPMorgan Chase & Co., in exchange for tax breaks and other incentives, repeatedly promised Tampa and the state it was bringing more high-wage jobs to Tampa, even as it was shedding other jobs here.
Area economic developers have been, how shall I put this, less than pleased with these stories.
Big businesses receive the vast bulk of incentives, LeRoy said, because they know how the subsidy game is played. That leaves small businesses, often hometown businesses, as the victims of unequal economic treatment. Also hurt are businesses like hospitals and utilities, companies that cannot easily move. They are also put at a distinct disadvantage.
I asked LeRoy why small businesses have not raised a ruckus over big companies getting favorable treatment. He is not sure. He guesses that small businesses are too decentralized and busy trying to make a living to realize how much big corporations are reaping at their expense.
LeRoy, who tracks economic incentives nationwide, is amused by Florida's eagerness for more subsidies. In parts of North Dakota, he said, nobody will finance the building of a house because any home immediately becomes worth less than the cost of building it.
"There are parts of that state and others that would die for Florida's economy," he said.
In Florida, the incentives game remains well entrenched.
Last week, Bush and other Florida officials pitched Melbourne International Airport as the best site for Virginia-based EADS North America to build its high-tech engineering center. At least three other states are vying for this defense company project and its 1,200 jobs.
The size of Florida's incentive package has not been disclosed, but one estimate puts the combined state, county and city subsidy at $157-million.
Hope it's worth it.