We lag in economic development subsidies


  • August 24, 2014
  • /   William Rabb
  • /   government,report-pensacola-metro-2014
Manfred Laner, president and CEO of Custom Control Solutions, is among companies where small subsidies make no difference. Photo by Michael Spooneybarger

State and local officials agree that Alabama has had success in attracting big-name manufacturers in part because, unlike Florida, it can pull from an extra source of revenue — the residential income tax.

With that base, Alabama has offered handsome infrastructure spending and other subsidies. In the case of Airbus, the subsidies amounted to $158 million, or $158,000 per job, according to state data and news reports. For the AM/NS Calvert steel mill in Mobile County, local and state governments guaranteed an eye-popping $1 billion in incentives, according to some estimates. Over the past two decades, economic development subsidies in Escambia and Santa Rosa counties have amounted to a mere $33 million — about $3,650 per job created, according to data from the Florida Department of Economic Opportunity and from Good Jobs First, an advocacy group that has tracked subsidies nationwide from a range of state and local sources. Half of that incentive money has come from the state.

“Historically, Florida does not play in the big leagues with incentives,” said economist Rick Harper, director of the Office of Economic Development and Engagement at the University of West Florida. For some companies, those low amounts of subsidies just weren’t enough to make a difference. “They can keep them; I’d rather spend my time going after new customers than going after that amount of tax breaks,” said Manfred Laner, president and CEO of Custom Control Solutions, which makes sophisticated control panels for oil companies, power plants and NASA. Laner has yet to pursue the paperwork for $45,000 in incentives that were promised after his company expanded to a 100,000-square-foot facility at Ellyson Industrial Park in Pensacola. The local incentives game may be changing.

To lure ST Aerospace, one of the world’s largest aircraft maintenance and repair companies, for example, the city, county and state this spring pledged more than $30 million for a new building and other infrastructure for the 300-job operation. That’s more than $100,000 per job, a ratio that approaches some of Alabama’s megadeal incentives.  It’s unclear if that is the beginning of a trend. Less than a fourth of the money is coming from local governments. Much of it will come from the Florida Department of Transportation and funding set aside by the state’s Oil Spill Recovery Act. The ST Aerospace deal was more expensive than most, said Scott Luth, vice president for economic development at the Greater Pensacola Chamber of Commerce, because it involved building a hangar from scratch on prime airport real estate. Unlike some states’ megadeals, the City of Pensacola will keep ownership of the structure and lease it to ST for a bargain-basement price, Luth said. “That’s the incentive: the lease price,” he said. So, if Northwest Florida were to continue down the fat-wallet incentives route, or decide to go even bigger with Alabama-sized incentives, it would require hefty spending and big tax breaks by city, county and state governments. To match an Airbus-type incentives package, for example, local taxpayers would have to be willing to put up a third to half of the bill. That would amount to as much as $260 per capita in tax breaks and spending for a company — about eight times what historically has been laid out per capita in Escambia County, according to Florida incentives data.

“It’s very difficult to provide incentives on that scale,” said Jerry Maygarden, president of the Pensacola Chamber. Maygarden has seen his fair share of incentive packages as a former Pensacola mayor and state legislator. But it’s not unheard of in other parts of Florida. Most of the state has historically shied away from offering huge incentives packages: With beautiful beaches, warm weather, no personal income tax and robust population growth, Florida felt it didn’t need to offer further bait, Harper said. But in a few of the most-populated counties, mostly in South Florida, the story is far different. In the last 20 years, state and local coffers there have offered almost $2.5 billion in economic development incentives in just 10 counties, databases show. That’s the vast majority of Florida’s total subsidies over the last two decades and is almost exactly what the entire state of Alabama has offered in that time. About half of the incentives came from local governments, the other half from the state, records show.

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