Jobs are top of mind during the 2012 election cycle. Elected officials from President Obama on down are touting their pro-economic growth records and job creation skills. Sarasota County is no exception. It is appropriate to review their on going efforts to “create jobs” in Sarasota County, FL.
In April 2009 Sarasota County released its Five-Year Economic Development Strategic Plan. The Five-Year Plan states, “Community and business leaders have made it clear that a shotgun approach will no longer work. This proposed plan is based on five guiding principles: Promote the growth/health of existing businesses; Create an environment that promotes homegrown businesses and innovation; Diversify the economy through platforms that build on our unique assets; Make strategic plays in emerging markets; Leverage resources and investments to grow capacity to pursue economic opportunities.”
The plan may be characterized as the County Commission’s “jobs bill”. The strategic plan, now in its third year, recognized that the recession had hit Sarasota.
Based upon the strategic plan, the Sarasota Board of County Commissioners on September 15, 2010 passed Resolution 2010-199. It created a goal to “promote economic activity in the County by providing economic incentives that will encourage diverse new businesses to relocate to Sarasota County and current businesses to expand.” One of the things created was an “economic development fund” and an incentives or awards program. One of the purposes is to attract new or help expanding companies that “provide an above-average wage to its employees”.
The resolution goes into great detail to lay out a series of “Economic Development Factors” that “shall be applied when the Board makes its determination on ad valorem tax exemptions to a requesting business”. But what about guidelines for the “economic development fund”? This question is germane as the fund has already given out $4,482,303 with an additional $5,527,797 in awards remaining to be paid. The $10 million for this “fund” came from the sale of foreclosed properties and collection of unpaid County property taxes. Click here to view the 2012 Economic Development report to the County (slides 65-68).
Jeff Maultsby, Manager of Business and Economic Development, Steve Botelho and Lisa Damschroder from the Office of Financial Planning and Joan McGill, Vice President of Business Development at the Economic Development Corporation, said there is no system in place to select the best candidates to meet the goals established by the County Commission. As of now there is no way to accurately determine any return on investment to the County from these awards (staff indicated the purchase of a software program may to help address this).
Here is an analysis of the County economic development efforts to date:
Of the $4.48 million awarded, PGT received $600,00 and Tervis Tumbler $450,00 (two awards) given since 2010, for a combined total payout of $1,050,000 (23% of all awards to date). These two companies actually added the following: PGT – 432 jobs, Tervis Tumbler – 413 jobs. PGT and Tervis Tumbler added 845 or 80.6% of 1,048 jobs created to date under this awards program.
This would seem like a big win for the County until one drills down a little deeper.
As Resolution 2010-199 states the County Commission wants to attract and expand businesses with an “above-average wage”. The average wage for all industries in Sarasota County according to the Florida Office of Economic and Demographic Research is $38,660.
According to County staff the actual average wages are: PGT $24,335 (initially projected average wage of $29,500), Tervis Tumbler $26,572 (initially projected average wage of $31,500). Both companies fell well short of the existing County average wage of $38,660: PGT 38% lower and Tervis Tumbler 31% lower. If the County wanted above-average wages they did not get them with these two companies. Even the “projected average wages” for each company were below the County average wage.
If the goal is above-average wages then why give money to any company projecting below-average wages?
Would these jobs have been created without the County awards? According to PGT President Rodney Hershberger the company was planning to close its plant in North Carolina in the 2006-2007 time frame due to the housing slump. The greatest concern was a lack of land and buildings. In the middle of 2010 PGT began looking at options to move the equipment and employees to Florida, with Sarasota, Jacksonville and Miami as possible sites. PGT primarily serves customers in Florida with impact (hurricane) windows and the North Carolina plant was half impact and half non-impact windows. The plant would be closed and operations moved closer to its Florida market. The intent was to move employees to Florida. However, due to deep family roots at the NC plant only 30 employees actually relocated to Sarasota County. Sarasota was always the top choice because this is where PGT was founded and its the central home location, which best serves its impact windows market. Rodney said of the newly hired employees about 70% live in Sarasota, 10% in Manatee County and 20% in Charlotte County. According to Tim Graham, VP of Human Resources for Tervis Tumbler, “Through the assistance provided to Tervis by the EDC grant we were able to substantially increase our production capacity and employment at Tervis.” PGT used its award to off set the cost of moving equipment. Tervis used its two awards to off set impact fees.
Why did Sarasota County taxpayers invest over $1 million in two well established local companies?
Let’s take a look at the remaining 203 jobs “created” to date. Forty-one had an average wage below the County average. The remaining 162 jobs had an average wage of $52,496 or 36% higher than the County average. This average wage increase was offset by the 886 below-average wage jobs.
There remain award commitments of over $5.5 million for the creation of a “projected” 1260 jobs. Will these create more above-average wage jobs? According to the County spreadsheet the companies yet to produce jobs have a “projected average wage” of $50,232. The “actual average wage” of jobs created by these companies to date is $43,368 or 14% lower than the currently projected wages. Another issue is most of the money given to date was given up front before any jobs were created. The current contracts give companies anywhere from 1 to 6 years to actually create the jobs. It should be noted that only recently do the contracts with the County state that the awards will not be made until after the jobs are created. I believed they learned a harsh lesson from $650,000 awarded to Sandborn Studios on September 2, 2010 with no jobs created to date.
Finally, there are nine awards listed on the Economic Development Incentives spreadsheet to either other governments (e.g. City of North Port Economic Development Study, City of Sarasota Newtown Business Assistance Program) or non-profit agencies (e.g. SCOPE – Institute for the Ages, Rev 3 Triathlon). How does a triathlon attract companies offering above-average jobs you may ask? The monies allocated to these governmental and non-profit entities total $3.84 million or 70% of all remaining awards. This allocation of funding is interesting for two reasons 1) there is no system to measure jobs created by inter-governmental transfers and 2) there is already in place a competitive system to allocate funds to non-profit organizations run by the same office that runs this business incentive awards program. This system has been totally bypassed using these “business” awards to non-profits. The awards may violate the intent if not the verbiage of the County Resolution 2010-199 “to relocate and expand existing businesses”. I did not know the County wanted more non-profits who don’t pay taxes to the County!
The Sarasota County Commission took money owed to taxpayers and redistributed it to a stimulus program that: lacked strict/measurable criteria for awarding the money, created jobs that by enlarge offer below-average wages and has no accurate way to measure any return on the taxpayers investment to the County.
The Sarasota County Commission on Tuesday, June 26, 2012 voted unanimously to repeal and replace Resoluton 2010-199 related to economic incentives provided for businesses that relocate to the county.
David E. Merrill, Sarasota business owner and former Mayor of the City of Sarasota, in a September 8, 2012 email to the County Commissioners stated, “So that you don’t look as foolish as Charlie Christ and the city and county commissioners in St. Lucie, I urge you to stop giving ‘corporate welfare’ checks to companies in the name of economic development, and, instead, focus on building a really great community through wise urban design and a focus on aesthetics and quality-of-life issues. Let the bankers and investors fund private businesses, not our governments.”
Government does not create jobs, profits do. The more products produced the more profit generated. As demand rises, profits rise and more workers are needed to provide the product or service offered. Without profit there can be no job growth. Government must take profits from one company and redistribute it to another to meet government’s goals.