UPDATE: Startup watchdog group accuses Enterprise Florida of shadowy, insider dealsby Dara Kam | April 25th, 2012
UPDATE: Florida Secretary of Commerce Gray Swoope issued a strongly-worded rebuttal to Integrity Florida’s report, condemning the group’s findings and accusing Integrity Florida executive director Dan Krassner of “misleading Florida’s citizens by disseminating misinformation and misrepresentations of our organization, our mission and our work each day.”
Swoope said he met with Krassner before the report was released but Krassner’s analysis failed to reflect Swoope’s clarifications. Instead, Swoope accused Krassner of “releasing half-truths to inflame emotions. Read Swoope’s full statement after the jump.
Do Enterprise Florida’s corporate board members have a conflict of interest in awarding themselves tax breaks or other economic development aid? And should one of the recipients of Enterprise Florida grants be trusted with figuring out whether the agency is getting a good return on its investments?
Those are some of the questions Integrity Florida, a new government watchdog organization, raised in a report released Wednesday that found, among other things, that millions of dollars in grants went to corporations who paid to be on the public-private partnership’s board of directors.
Board members Publix, Embraer Aircraft and Lockheed Martin board all received tax breaks or incentive awards ranging from $150,000 to $570,000 over the past two years, the report found.
Ernst & Young found that the public-private partnership’s investments were good for Florida’s economy, generating $2.66 for every economic development dollar. But the accounting firm also received a $96,000 incentives grant last year, according to the report.
“Should a recipient of Enterprise Florida incentives also be responsible for calculating return on investment
benefits of incentives?” the report, written by Integrity Florida executive director Dan Krassner and research director Ben Wilcox, the former head of Common Cause of Florida.
The report also found Enterprise Florida did not give publicly notice all of its meetings and did not make the meeting materials easily available to the public.
Last year, one of Gov. Rick Scott’s former agency heads – Doug Darling – revealed that Florida had id tens of millions of dollars to lure companies to the state for jobs that were never created. Darling, the former head of the Department of Economic Opportunity, quickly backed away from his critique of the jobs return on the tax breaks, saying the situation wasn’t as bad as it first appeared.
But Integrity Florida also questioned whether the state is doing a good enough job keeping track of the number, duration and types of jobs the tax breaks create or whether it should change its analysis “to help ensure high wage criteria is being reached in an appropriate manner rather than by a few larger salaries skewing averages.”
Florida Department of Commerce Secretary Gray Swoope issued a lengthy rebuttal to Integrity Florida’s report, including a point-by-point clarification of the highlighted issues. Read it after the jump.
Department of Commerce Secretary Gray Swoope’s statement:
“My chief marketing officer, Melissa Medley, and I readily accepted a request from Mr. Krassner to meet and discuss the concerns he has been promoting regarding Enterprise Florida. We feel it is our obligation to do so with any concerned citizen. The meeting concluded with our clarifying, explaining and correcting Mr. Krassner’s points about whether Enterprise Florida has been transparent in its business practices. In a time where there is fierce competition for jobs, we made it clear to him and his research director, Ben Wilcox, that we do not agree with Mr. Krassner’s approach of releasing half-truths to inflame emotions. He is misleading Florida’s citizens by disseminating misinformation and misrepresentations of our organization, our mission and our work each day.
I expect and require our organization to follow the law and make sure there is a fiduciary responsibility to the Florida taxpayer. The position piece he presented this morning fails to reflect the outcome of our discussion and the specific points that we clarified and to which he appeared to understand and agree. As a result, we now look forward to clarifying, once again, Enterprise Florida’s business practices, transparent approach and the state’s economic development process. And, at the same time our EFI team will continue to work every day with the passion and dedication to foster job creation for our citizens.”
And here’s the rest of Swoope’s response:
_ Enterprise Florida’s most recent legislative agenda prioritized confidentiality measures.
In the 2012 EFI Legislative agenda there were 12 specific policy and funding items that EFI advocated for passage. Only two pertained to confidentiality.
While renewing the confidentiality statutes was crucial for continued job creation in Florida, it was not ever ranked as the #1 priority of Enterprise Florida.
_ Corporate seats on the Enterprise Florida Board of Directors are offered for $50,000.
Regarding Private Donations for Enterprise Florida: s. 288.904, F.S. specifically requires the collection of private dollars to support EFI functions and allows for board member contributions:
(2)(a) The Legislature finds that it is a priority to maximize private sector support in operating Enterprise Florida, Inc., and its divisions, as an endorsement of its value and as an enhancement of its efforts. Thus, the state appropriations must be matched with private sector support equal to at least 100 percent of the state operational funding.
(b) Private sector support in operating Enterprise Florida, Inc., and its divisions includes:
1. Cash given directly to Enterprise Florida, Inc., for its operations, including contributions from at-large members of the board of directors;
2. Cash donations from organizations assisted by the divisions;
3. Cash jointly raised by Enterprise Florida, Inc., and a private local economic development organization, a group of such organizations, or a statewide private business organization that supports collaborative projects;
4. Cash generated by fees charged for products or services of Enterprise Florida, Inc., and its divisions by sponsorship of events, missions, programs, and publications; and
5. Copayments, stock, warrants, royalties, or other private resources dedicated to Enterprise Florida, Inc., or its divisions.
The collection of funds is a common practice for most private/public partnership board memberships, including on the local level. nationally, there are 10 P3’s and 5 quasi-P3’s (Public –Private Partnerships).
_ Enterprise Florida Board member companies receive tax incentives.
Enterprise Florida’s board consists of leading corporate citizens statewide, which are multinational companies that drive Florida’s economy and employ thousands here. Occasionally, these businesses have competitive economic development projects of their own, requiring strategic incentives in order to make the business case work to create jobs in Florida.
Enterprise Florida Board members or officers have no input on individual projects.
Enterprise Florida does not have any role in approving incentives for businesses. Incentives are evaluated and negotiated by Enterprise Florida staff, then presented to the Department of Economic Opportunity for review, approval, and contract management.
To adopt a policy restricting companies represented on the Enterprise Florida board from receiving state incentives, which are approved by a separate state agency, would preclude the state from competing for significant job creation opportunities presented by many of the largest job creators in the nation.
_ Enterprise Florida board member companies serve as Enterprise Florida vendors.
Contracts with Board members are governed by statute F.S. 112.3143 (3)(a)
“No county, municipal, or other local public officer shall vote in an official capacity upon any measure which would inure to his or her special private gain or loss; which he or she knows would inure to the special private gain or loss of any principal by whom he or she is retained or to the parent organization or subsidiary of a corporate principal by which he or she is retained, other than an agency as defined in s. 112.312(2); or which he or she knows would inure to the special private gain or loss of a relative or business associate of the public officer. Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of the officer’s interest in the matter from which he or she is abstaining from voting and, within 15 days after the vote occurs, disclose the nature of his or her interest as a public record in a memorandum filed with the person responsible for recording the minutes of the meeting, who shall incorporate the memorandum in the minutes.”
EFI contracts with some organizations that are represented on the Board for service they provide in the general public as a part of their business services. This includes but may not be limited to phone and cable services, banking services, legal services and insurance services.
If the total anticipated purchase is expected to be greater than $25,000 with a single vendor or contractor within the same fiscal year, competitive bids or quotes must be obtained. For assistance with this, staff must contact Contracts Compliance.
1) For all initial purchases of $25,000 or above, Enterprise Florida shall obtain at least two written bid/quotes, unless it is exempt from bid requirements as defined in Policy C-1, Contracts. A summary of bid/quotes or cost comparisons must be kept in a file and available for audits, per Contract Compliance guidelines.
2) At the point at which purchases from a single vendor exceed $25,000 in a single fiscal year, competitive bids, quotes, or documented cost comparisons must be obtained and the low cost provider must be selected for the same products.
_ Enterprise Florida does not publicly notice all board meetings.
Enterprise Florida DOES publicly notice all its board meetings in accordance with Florida’s Sunshine Law.
Notifications are also placed in the press boxes at the Capitol.
Media advisories are issued before each meeting and posted on Enterprise Florida’s web site.
_ Enterprise Florida does not provide board and committee meeting materials online.
A final agenda and associated information are usually complete a short time before the meeting and are available by request once available to the Board members.
We will continue to make such materials available upon request and to targeted constituents including the news media.
_ Despite being the fourth largest state, Florida ranked just 12th in the U.S. for new facilities and expansions in 2011.
· This ranking is based upon a survey emailed to economic development agencies by Conway Data for Site Selection magazine.
· This single survey, nor any one of numerous surveys conducted throughout the year, should determine whether Florida is successful in its economic development efforts. Success should be measured ultimately in job creation. Economic development projects in Florida take place outside Enterprise Florida, coordinated by local economic development organizations, for example. Enterprise Florida does not maintain a comprehensive database of all such project but only those that we facilitate.
· The survey outlined qualifying criteria that may put some states at an advantage over others. For example, one qualifying criterion is that construction must have taken place in 2011. This will put states that announced more projects in the beginning of the year at an advantage over those that announced more at the end of the year since those companies will likely not have begun construction
· Often, this information about whether construction has commenced cannot be obtained during the time frame in which the survey is conducted, or perhaps confidentiality requirements are still in place.
_ A company that received Enterprise Florida tax incentives is responsible for calculating the return on investment (ROI) of the incentives for Enterprise Florida.
In 1998, Enterprise Florida issued a Request for Proposal to select a vendor for calculating the ROI for the state’s overall investment in economic development (includes incentives as well as the appropriation for EFI operations). Since that time, E&Y’s Quantitative Economics and Statistics Practice (QUEST) has retained the contract as a sole source provider in the interest of assuring consistency in methodology.
The methodology used by E&Y (which was approved by OPPAGA) is separate and distinct from the model used to evaluate incentives offered to businesses for new job creation which was reviewed and endorsed by the State’s Office of Economic and Demographic Research in 2011.
In 2010-2011, a different division of Ernst & Young, its Financial Planner Line, evaluated three locations for expansion: Secaucus, NY; San Diego, CA; and Tampa, FL. E&Y’s existing Secaucus, N.J. office was attractive as a site for the expansion as it already housed the majority of EYFPL associates, including the EYFPL National Director who supervised all EYFPL associates. E&Y looked at competing states when considering where to expand and pursued business incentives for all three location options. Ultimately, the company made a decision to expand in Tampa.
_ Enterprise Florida awarded contracts worth nearly $6 million in 2011 to confidential companies.
· Enterprise Florida analyzes and negotiates competitive job creation projects under the provisions of Florida law which provide for protection of information regarding confidential business decisions for a limited time. The Florida Legislature recognizes that public disclosure while the job creation/investment project is still active would constitute a major competitive disadvantage for Florida.
· Public disclosure before land and other transactions are complete could compromise the company’s position and the state’s ability to compete in those deals. For example:
o Purchase prices on land or buildings could be artificially inflated.
o Company’s stock value (or other valuation) may be impacted.
o Company employees may choose to leave based on premature news.
o The value of incentives offered by Florida will be publicly available –even to other states competing for the project—allowing the competitor state to one-up Florida’s proposed deal.
Full disclosure of the incentives provided is made in accordance with Florida Statutes upon public announcement of the new job creation project or within 180 days of executing the incentives provided.
Incentives paid are listed by company name in the Annual Incentive Report published by Enterprise Florida which is also posted online at the eflorida.com website.
Additionally, Enterprise Florida and the Department of Economic Opportunity have announced their collaborative development of a webpage providing incentive award information, which is to be updated regularly. This webpage is targeted to be online in July and represents the two agencies commitment to providing transparency of economic development incentives.
_ Enterprise Florida awarded new agreements totaling $780,000 to Wal-Mart in 2011 despite Enterprise Florida considering the company “not in a target industry.”
As stated in the 2011 Incentives Report, the referenced Wal-Mart projects were approved for the Brownfield Redevelopment Bonus Tax Refund. These projects are locating within two of Florida’s Brownfield areas, which are community designated distressed areas.
The Florida Legislature recognizes the need for redevelopment of Brownfield areas, reflected in the statutorily authorized Brownfield Bonus incentive (§288.107, F.S.).
The purpose is not to incent a company to come to a certain community – it is to incent them to build on a particular piece of land that has been identified as a community designated distressed area or that is considered contaminated.
Because this incentive is meant to drive redevelopment, job creation and new investment in contaminated or blighted areas, it is not restricted to the State’s target industries.