July 01--First of two parts
If you're looking for a job in Florida, you need to prove to the state that you're really trying or you could lose your unemployment check -- up to $275 per week.
But if you're a company and you've won a grant from Florida's fastest-growing jobs incentive fund, you can collect millions of dollars in public money up front, often before you make the first hire.
You also can claim later that your firm is having problems creating the jobs and buy time to fulfill your end of the bargain by renegotiating your contract.
And in the end, odds are almost even that you won't deliver on your promises anyway.
Companies such as MetLife in Tampa, Piper Aircraft in Vero Beach and Redpine Healthcare Technologies in the Panhandle have even missed their job-creation marks and made no moves to return the grants they've received.
The recession hurt companies' ability to create jobs, but the economy's swift decline also shows the perils of gambling public money on the riskiest of incentive programs, known as the Quick Action Closing Fund.
A three-month investigation by The Tampa Tribune shows at least 4 in every 10 companies that won grants from the fund through the end of the state's 2011 fiscal year have failed to meet their obligations -- some slightly, others by wide margins.
You won't find these numbers in the official state report to lawmakers.
Enterprise Florida, the state's chief economic development agency, paints a rosier picture, concluding Florida is exceeding its job-creation goals. But the Tribune also discovered that the agency's report didn't count any of its failures.
Government payouts indeed have helped create private jobs in Florida -- 8,400 of them, by one measure. And some backers insist the public money is an investment in the state's economy, helping make sure companies stay in Florida.
But Ed Smith knows the consequences of failure when companies receive money in advance -- rather than after they've created the jobs, the most common form of incentive.
Smith, the county manager in Bay County, watched Redpine collect $750,000 up-front from the state and county last year then shut down within months.
"We had never done that before," Smith said, "and I would venture we won't do it again."
The state of Florida, on the other hand, is jumping in with both feet.
The grants in question come through the Quick Action Closing Fund, one of 13 job-creating incentive programs that Florida offers and the program that has awarded the most money in the last five years -- more than $200 million.
Gov. Rick Scott, who pledged to create 700,000 jobs during his campaign, has been aggressive in using the closing fund to make grants to companies.
He has tapped the fund 41 times during his year and a half in office to pledge $45 million to companies, according to a database obtained by the government watchdog group Integrity Florida. It had been used just 40 times in the three years before Scott.
One recent recipient is St. Petersburg-based brokerage firm Raymond James Financial, which won $4.5 million last year in conjunction with a new office in Pasco County.
At the same time, Scott has made it harder for those in the unemployment line. Florida reduced the number of weeks people can draw unemployment benefits and made it easier for employers to disqualify them for misconduct.
Governments have awarded incentives to companies for years to encourage them to hire, but historically, they demanded the companies create jobs and invest corporate dollars before getting a tax refund or credit.
This gave taxpayers some protection.
But the timing is changing. Competition for jobs is so fierce that state and local governments nationwide are choosing to turn over cash in advance.
At least 20 states have launched pools of discretionary cash -- "closing funds" -- that can be awarded up front or in stages as the company hits its job goals, said Kathy Mussio, a consultant with Atlas Insight in New Jersey who helps corporations with relocation.
Florida tends to pay companies after they hit some initial milestone, such as signing a lease and investing significant capital, but well before they've created their required jobs. Some other states are more restrictive and make companies wait longer.
Florida created its Quick Action Closing Fund in 1999. But recently, the state has been giving out more and bigger awards. Florida awarded companies a combined $28 million in these up-front grants from 2000 to 2006. That jumped to a combined $199 million between 2007 and 2011, Enterprise Florida data show.
The state doesn't actually hand out all that cash because some companies win the grant money but later choose to locate outside Florida and don't collect it.
Enterprise Florida chief Gray Swoope argues that up-front incentives work. Companies need money at the beginning of an expansion more than they do later on, he said -- to buy land and equipment and train their workforce.
"It's becoming more of an effective tool as states move toward more closing funds than any other program," Swoope said in an interview.
It hasn't worked in Bay County, though, where the government is in court trying to get its money back.
Panama City and Bay County were hit hard by the 2010 BP oil spill and were looking for help in turning the economy around. Leaders were ecstatic when a tiny Spokane, Wash., firm came looking for somewhere to build a new headquarters in spring 2011.
Redpine Healthcare Technologies was in a promising industry developing software for chiropractic offices. Better yet, it offered to create 410 jobs paying about $49,000 each.
Redpine's profile spooked some Bay County leaders at first: At 5 years old, the company still wasn't making a profit. But the promise of a growing high-tech business encouraged the state to award Redpine $400,000 and Bay County to grant another $350,000.
To hedge the governments' risk, Redpine offered rights to its software program, which it claimed was worth more than $4 million, as collateral in case the deal went bad. The state also wanted to put the cash grant into an escrow account until the company created some of the jobs and invested some of the capital it promised.
Redpine played hardball, though. Without an up-front check, it would have to locate its 410 jobs in another state, said Dana Olson, a consultant who negotiated on Redpine's behalf.
"The company said, 'That won't work for us. We'll have to go somewhere else,' " Olson said.
Enterprise Florida eventually dropped the escrow requirement, and the state cut a check for Redpine.
By December, just six months after it had negotiated its incentives package, Redpine announced that its financing had fallen through and it would shut down.
Redpine couldn't come up with the $750,000 to repay the state and county, and its collateral, the chiropractic software, isn't commanding anywhere near $4 million. In the wake of its shutdown, one competitor offered just $115,000 for it.
Redpine was an extreme example, but the Quick Action Closing Fund appears to be riddled with corporations failing to hit their targets.
In Northeast Florida, for example, a magazine subscription firm called Palm Coast Data collected $3 million in 2008 on its pledge to create 700 new jobs by December 2011.
State documents suggest it only has created 150 jobs. Palm Coast Data did not respond to repeated requests from the Tribune for comment.
Locally, insurance giant MetLife won $1 million in 2006 on its promise to create 180 jobs in New Tampa, part of its relocation from Tampa'sWest Shore area to a new office near Bruce B. Downs Boulevard.
A company spokeswoman said MetLife initially created the jobs but couldn't keep all of them when the economy faltered. It expects to come into compliance by hiring at least 60 people this summer, the spokeswoman said.
Maureen Hilderbrand, laid off from MetLife after 33 years, questions whether the company's move to outsource jobs to India in 2009 helps explain why it couldn't hang onto the new positions.
"If you're hiring people on one hand, and you're outsourcing people on the other hand, it would be hard to stay even, let alone get ahead," said Hilderbrand, who nevertheless credits MetLife with giving her a generous severance.
Today, the state Department of Economic Opportunity and Bay County are suing Redpine in circuit court in Leon County.
"Redpine was bad for everyone," Olson said. "I feel bad for the administration and I feel bad for Panama City."
Tracking the performance of Florida's incentive awards is difficult because of record-keeping by the state that is incomplete, inconsistent, and in at least one case, misleading.
The Florida Senate took the state Department of Economic Opportunity to task last fall for losing track of how many jobs incentives have created.
The agency, which monitors incentive programs, is doing a new accounting and promises to put the results online for public viewing.
One question is whether it will measure its failures as well its successes.
A 2011 report by Enterprise Florida suggests the Quick Action Closing Fund has been a success, saying 69 companies have created 8,363 jobs since the program's inception in 1999. The state's goals only required 7,472 jobs, the report shows.
But the report only included projects labeled "active" and "complete." It left out "inactive" and "terminated" projects -- those that failed to ever get started or had fallen short of their requirements or deadlines.
Asked why the agency listed only select projects, Enterprise Florida Vice President Marty Wilson said these were the ones that "seemed prime right now." She said she couldn't answer how the failures would affect the closing fund's results.
For its own review, the Tribune considered 10 companies the state had terminated or deemed inactive. The newspaper also contacted about 40 companies for an accounting of their job creation and capital investment and compared it to their contracts' requirements.
The findings: Companies receiving Quick Action Closing Fund grants actually created more jobs than the state's report indicated -- at least 10,176 of them through June 30, 2011, the end of the fiscal year. But these companies were supposed to create 17,059 jobs.
Also, at least 36 of 82 corporate expansion projects in Enterprise Florida's database -- 44 percent -- failed to create the promised number of jobs, spend the capital they agreed to or hit their timetables in some way.
One company never mentioned in Enterprise Florida's report was a defunct Palm Beach County jet service called DayJet. The state awarded the company $2 million in 2006, but Florida lost the money when DayJet filed for bankruptcy two years later.
The Quick Action Closing Fund has chalked up some notable successes, where companies actually created more jobs and spent more capital than required.
Navy Federal Credit Union met its obligation to create 650 new jobs and invest $42 million in Pensacola in return for its $2 million grant. The credit union now plans to create 800 more jobs in return for a new $1 million grant from Florida.
In New Tampa, the financial services firm Depository Trust & Clearing Corp. landed $4.4 million from the state and more than fulfilled its pledge to create 500 high-paying jobs here.
Gov. Scott's use of the closing fund 41 times suggests he has seized on cash grants as a way to fulfill his campaign pledge to create jobs. Most projects approved under his administration can't be judged yet, because they're new and haven't had to meet job-creation or investment deadlines yet.
Swoope, the Enterprise Florida chief executive, insists Scott's team is handling its cash grants carefully, scrutinizing companies more and demanding collateral.
"We're very good at saying no," Swoope said.
One critic of corporate incentives said American governors are using these up-front grants more often because they want to be linked with jobs, especially after a recession. Meanwhile, they expose taxpayers to more risk, said Greg LeRoy, executive director of Good Jobs First, a corporate and government watchdog group.
"Sometimes we call them photo opportunity funds, because they're often given to deals that would've happened anyway," LeRoy said.
When a company fails to deliver on the incentive money it receives, the state can try to recover it through sanctions known as "clawbacks."
In fact, most incentive contracts demand companies repay 20 percent of their grant plus interest for every year they fail to create and retain the jobs they promised.
But state documents show the Florida Department of Economic Opportunity hasn't enforced all these contracts. Piper Aircraft provides a multimillion-dollar example.
The Vero Beach maker of small prop planes tested the waters four years ago to gauge interest in its 900-plus manufacturing jobs. New Mexico and Oklahoma offered rich incentive packages, but Piper also considered an offer from its home state.
Florida came up with an incentive package with $20 million from the closing fund, $6.6 million up front and the other $13.4 million over time. Indian River County kicked in money, too.
Piper, in turn, agreed to keep 900 existing jobs in Florida, create 454 new jobs here and invest $45 million in new capital expenses.
Shortly after, the general aviation industry nosedived with the economy, and Piper wound up cutting more than 200 jobs from its existing workforce.
Still, the company has more than met its requirement to invest $45 million, marketing director Jackie Carlon said. And Piper today argues that it should be able to keep the $6.6 million state grant because of its five decades in Florida.
A strong Piper ally is former state Rep. Ralph Poppell, a Vero Beach Republican. He lobbied state officials to let the aircraft maker keep the money, saying that demanding a refund would signal the state doesn't value Piper.
"If, in fact, you were to hold me as a business owner to this, you know what happens once I pay that?" Poppell told the Tribune. "You and I have no more ties."
State documents show the Department of Economic Opportunity is considering letting Piper keep the initial payment, because it doesn't want to hurt Piper financially, but canceling the future payments of $13.4 million.
The state also recently chose not to demand refunds from at least two other Florida companies that failed to create a few hundred jobs -- WellDyneRx of Lakeland and Mustang Vacuum Systems of Sarasota.
The state is letting the companies keep their awards of $500,000 and $540,000 and only charging them an interest penalty.
All told, during the dozen years of the Quick Action Closing Fund, 10 companies have returned about $10.5 million to Florida for failure to perform, documents show. In most cases, the companies never moved forward with their plans and refunded the money on their own. No enforcement action was required by the state.
Vero Beach-area leaders are contemplating how hard to crack down on Piper Aircraft -- even if the state appears willing to give it a pass.
Indian River County gave $4 million to Piper, and county commissioners there are split about whether to demand it back. A key question: Can governments hold companies accountable with penalties when doing so might jeopardize the jobs?
Gary Wheeler, the county commission's chairman, is pushing for a refund. Piper Aircraft knew the risks it was assuming when it took millions from the state and county to create jobs.
"We had a contract that said you would hire so many people for so long, and I think we should follow the contract," Wheeler said.
It's like when he plays the stock market, Wheeler said.
"But I do it with my eyes wide open."
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