A new report from the Reason Foundation titled “Crony Capitalism and Community Development Subsidies” raises the questions “Do community development subsidies actually result in community development? Or have they been captured by vested interests?”
Report authors Anthony Randazzo and Victor Nava reached the conclusion that Enterprise Florida “operates in a crony capitalist manner”.
According to the Reason Foundation:
“Enterprise Florida is tasked with providing grants, loans, tax incentives and subsidies to businesses it believes will spur economic development in the state of Florida. Seventy-six percent of Enterprise Florida’s budget comes from either state or federal funds, which are then allocated to the specific businesses and projects seeking the funds, but not before 35% of its funds are used on administrative and marketing costs. On its website Enterprise Florida defines economic development as follows: “In a nutshell, economic development focuses limited resources on securing business investment and employment that are either at risk or would not otherwise occur. It works to expand targeted business sectors as the primary means of sustaining a high quality of life while also maintaining a favorable tax environment. Where possible, it targets businesses that are able to pay their employees higher wages, while still maintaining competitive costs for doing business.” It’s this curious definition of economic development that makes the agency susceptible to charges of crony capitalism.
Integrity Florida, a nonprofit watchdog group, has recently leveled charges of crony capitalism against Enterprise Florida. In a recent paper the watchdog group claims that Enterprise Florida not only failed to meet its job creation objective and obtain the required level of private sector support, but it also has the appearance of pay-to-play, apparent conflicts of interest, and displays clear favoritism toward certain companies and industries. According to the documents obtained by Integrity Florida, Enterprise Florida provided contracts to corporations with ties to Enterprise Florida’s board of directors. Half of Enterprise Florida’s board of directors have also “invested” an average of $50,000 each into Enterprise Florida. Another potential conflict of interest revealed in the report is the fact that the board has control over staff bonuses, of which nearly $500,000 worth were given out by the board in 2012 ($70,000 alone to the president/CEO). While it is unclear whether or not these board member investments or staff bonuses factor into deciding which companies receive funding, all the elements for a pay-to-play scheme are certainly there.
Even if a pay-to-play scheme were not the case, Enterprise Florida (like the CRA/LA) still operates in a crony capitalist manner. Its entire operating strategy of “promoting targeted industries” is—in and of itself—crony capitalism, as it has a government-funded organization using taxpayer money to pick winners and losers by favoring certain businesses over others.
In 2012 Enterprise Florida even made deals with eight companies listed as “confidential” in the documents provided to Integrity Florida. It is disconcerting that Enterprise Florida is not only picking winners and losers with taxpayer money, but also doing so without revealing who the winners even are.”