Manatee County’s $10.4M business incentives create jobs, doubts

A cash incentive program that rewards businesses for building new facilities and hiring more people in Manatee County is either a job stimulator or a costly system of needless handouts, depending on whom you ask.

Local economic development proponents say that incentivizing businesses to add jobs and build new factories and offices is a requirement. Most Florida counties offer cash in exchange for business growth, so going without would put Manatee County at a competitive disadvantage when it comes to retaining growing companies and attracting new ones.

Critics of the incentive system say businesses don't need encouragement to locate and grow in Florida, because the state has one of the best business tax climates in the nation. Handouts of government money to private industry may also strike an anti-competitive note, giving incentive-qualified companies a financial advantage over those that are not.

Since 2009, 67 local companies have contracted with Manatee County and the state to receive more than $10.4 million in cash incentives. To get the money, these companies had to either relocate to or expand inside the county, promise to add employees to their payroll, invest in research and development or make capital investments. Projected job growth tied to these incentives total nearly 4,200.

Cities and local community redevelopment agencies have offered their own incentives in addition to those awarded by the county. Most are relatively small. For example, community redevelopment agencies in Bradenton have given out about $70,000 in matching grants since 2008.

The jobs equation

Economic development officials tout incentives paid out to private businesses from public tax revenues as being critical in bringing high-paying, full-time jobs to the county and Florida as a whole.

In Manatee County, incentives have brought commitments from local companies to add 4,194 jobs in the county and retain another 334 jobs since 2009. To qualify for those incentives, new jobs must pay 115 percent of the average wage of the industry sector to which they are being applied.

Those companies also project making capital investments in their businesses of over $638 million.

It Works!, a health and weight-loss multilevel marketing company that moved from Michigan to the Bradenton area in 2011, took note of the incentives when it relocated. It received multiple incentives for 90 promised new jobs and renovating a former Palmetto shopping mall into its world headquarters in 2014.

The company qualified for $180,00 in county incentive money that is tied to hiring. It also received another $718,000 from the county and the city of Palmetto for the headquarters construction.

Mark Pentecost, CEO of It Works!, said the money was important early on. When It Works! outgrew its first local corporate headquarters, it stayed in Manatee County because Pentecost believed county government was fostering a pro-business atmosphere through its incentive program.

“When It Works! received incentives, it made the transition to Manatee easy," he said. "With a shared pro-business mindset, we felt like we were partnering for success.”

It Works! has succeeded. It claimed earnings of $538 million in 2014.

Manatee County got into the incentive game late, after more than half of Florida's other counties had established their own incentive programs. Ed Hunzeker, the county's administrator, said the county offered incentive money to capture the attention of businesses looking to expand, relocate or start up.

"If you say 'no,' you go on the pile that's not going to get further review," he said.

The local program is, in Hunzeker's words, "not very lucrative" for employers, but enough to show that the county is serious about attracting new business. It is scheduled to pay out an average of $2,017 per job that is expected to be created. By comparison, neighboring Sarasota County is paying $2,229.

Sarasota County has been somewhat less active in committing to incentives. According to data provided by its economic development department, it has contracted with 34 private employers for $5.7 million since 2010.

No guarantee of employment

Despite their claimed successes in Manatee County and elsewhere, business incentives have taken a beating in Florida. Early this year, a $250 million incentives package proposed by Gov. Rick Scott was rejected by the state Legislature. Even before that, organizations including the Florida chapter of Americans for Prosperity and Tallahassee watchdog group Integrity Florida have investigated incentives on the state level, finding evidence that favoritism and a big-business bias may be at work in doling out the money.

Brian Wilcox, the research director for Integrity Florida, said his organization may research local incentives in the future, including those given out by counties and community redevelopment agencies.

In their pursuit of new jobs, Wilcox said local governments and government agencies that pay incentives are giving a leg up to businesses that seem to promise the best impact on employment. It is a move that can influence free-market competition.

"A lot of people don't like government picking winners and losers in the marketplace," he said.

About $4 million of Manatee County incentives have gone to the five most heavily incentivized employers on the list.

The economic promise that comes with incentive awards can ring false. If a business wins incentives for adding employment, the money doesn't guarantee jobs will materialize. Even the best business plan can fall victim to industry conditions.

When pleasure and military boat manufacturer Hann Powerboats moved to Manatee County in 2010, it was approved for a $118,000 incentive package based on a projection of 70 created jobs. In the first year of the incentive contract, the company hired 11 people and received $10,000 in incentives. But an unstable boating market soon saw the company laying employees off.

Since then, the company has gone through several hiring and layoff cycles. Russell Hann, the company's president, has not pursued any more payouts from the incentive package because he can't be certain they will last the five years required by the county and state.

"It's up and down with government contracts, we haven't been able to reap the benefits," he said.

Occasionally, a company that receives incentive cash fails to maintain its job growth promises. Pierce Manufacturing, a maker of emergency vehicles that operates a manufacturing plant in Manatee County, qualified for over $2.4 million in state money starting in 2007, as well as $325,000 from Manatee County. It expanded workforce by 66 employees. But it laid off 129 workers two years later when demand dropped for its products. Incentive payments stopped in 2012. Pierce was required to pay back some of the funds it received. The company still operates in Manatee County.

Instances such as these, Wilcox said, illustrate how public funding is no guarantor of long-term employment expansion.

"All you're really creating are promises for jobs," he said. "Those jobs aren't real until they are."

The widest critical perspective on business incentives comes from the Tax Foundation, a non-partisan, Washington, D.C. tax research group. Lyman Stone, a researcher with the organization, said the Tax Foundation has found incentives do not necessarily go to companies that produce the biggest economic impact. They may also be unnecessary "sweeteners" that economic development officials portray as making the difference in gaining businesses and jobs.

In Florida's case, skepticism around the benefits of incentives should be high, Stone said. The foundation ranks the state as the fourth-most business friendly in the nation, largely because of its low rate of taxation.

"I just don't believe there is a company so burdened with taxes that they need a sweetener," Stone said.

Incentives draw manufacturers, headquarters

When Manatee County started its incentive program, it focused on certain business areas economic development officials believed would bring high-paying, full-time positions. Manufacturing has been the top industry attracted since 2011, constituting just under half of the businesses to be considered for funds. About a quarter of the businesses have applied for funding for the move or development of a headquarters facility. Other significant industries on the list include information technology, life sciences and sports performance.

For all these industries, the county is offering incentive cash in exchange for a measurable effect on the local economy, and particularly employment. Those funds are approved at the county level and state level. State incentive money coming through Florida’s Qualified Target Industry program is matched by the county at a 20 percent rate.

Created jobs must be maintained for five years. If not, the county can request that a company that has received the funds return some or all of them.

"There will always be some companies that do not perform," said Karen Stewart, the county's economic development program manager

Other funding available includes economic development and transportation impact fee incentives. Those incentives are paid out of the county's general fund.

The county pays out only after promised jobs are created. That, said Stewart, is insurance against instances in which an employer fails to perform up to its promise.

"Because it's on the sheet doesn't mean they will get the money," Stewart said.

Businesses seeking incentive money must apply for the funds. The application requires they verify the subsidy money will make a difference in a decision to locate or expand in Manatee County.

Some incentive deals don't work out. Nearly 20 businesses that approached the county for incentives have either backed out or have inactive applications.

Under wraps

The incentive awarding process is something kept largely out of sight until the deal to award the money is done. Even the people who approve the money are excluded from deal details.

Businesses that contact the county looking for cash incentives don't deal directly with county officials. They are referred to a private non-profit, the Bradenton Area Economic Development Corp., which evaluates candidates for incentives. To determine whether a business is a good bet, the EDC looks over an applicant's finances and business plans. Those details, plus any discussions and communications with the applicant, are kept out of the public record.

The county receives only information about the company's industry sector, the number of jobs it expects to create and the average wage it plans to pay. Based on those details, the county's board of commissioners must vote whether to fund an incentives package.

Commissioners do not learn the identity of the company until after a "yes" vote.

The EDC is partially funded through public money. This year, the EDC will receive $290,000 from Manatee County.

According to Sharon Hillstrom, the EDC's CEO, the organization has attracted or assisted the expansion of 62 Manatee County businesses since 2009.

In addition to businesses that have already contracted for incentives, a dozen more are on the list to be approved for about $1.9 million. The identities of those employers are not yet public.

This story was originally published May 17, 2016 at 5:37 PM with the headline "Manatee County’s $10.4M business incentives create jobs, doubts."