Will Volusia’s developer deals hurt sales tax vote?

May 12-- May 12--Like many Volusia County residents, Richard Waters knows the pothole-filled roads he travels daily need to be fixed.

But no matter how many times he's stuck in traffic, the lifelong Daytona Beach resident is not willing to vote yes on an extra sales tax that would help address the problems.

That's because he also knows how much money the county and city of Daytona Beach have doled out in recent years to already wealthy corporations in the form of economic development incentives.

"I don't think they should be doing that to the extent they are doing it," Waters said. "And then to go and ask for a half-percent sales tax from residents on top of that is an insult. They're just giving away too much money."

Ballots went out May 1 to all registered Volusia County voters on the question of a half-cent sales tax that will raise an estimated $42 million a year to be divided among the county and its 16 cities for road and water projects. Government officials have been spearheading an education campaign on the potential benefits of that windfall that they hope will win over a majority when the votes are tallied May 21.

If they fall short, it may be because of the millions paid out to projects like International Speedway Corp.'s One Daytona, the Brown & Brown headquarters on Beach Street, Tanger Outlets mall and a Trader Joe's distribution center, for which Daytona Beach and the county paid a combined $58 million to fix road and water infrastructure to secure the new development. Local governments have also granted tax breaks totaling $1.2 million to 17 companies since 2011.

While the deals were struck with the promise they'd produce a greater return on investment for the region in the form of jobs, wages, taxable revenue or tourism growth, critics have taken to social media and spoken out at public meetings against the sales tax, citing the corporate incentives as examples of poor fiscal stewardship.

As Alycia Severson, a teacher from Ormond Beach, put it, "Isn't it strange to give away millions to friends and developers with one hand and extend the other (to residents) for a handout" in the form of a sales tax?

But is it fair to link the two? Volusia is by no means the first local government to offer inducements to attract new development or encourage local businesses to stay at home and expand. The News-Journal interviewed experts in the field to get a better handle on the issue.

Good business?

When Trader Joe's officials looked to open a distribution center somewhere along Interstate 95 in Florida nearly a decade ago, Volusia County leaders did all they could to satisfy their wishes and land the 550 jobs that came with the project.

They agreed to pave a new road near the interstate, and they offered the California-based company a break on impact fees and taxes.

There's a reason why that deal -- and similar ones that came after -- had to happen.

"We've got competition," said Keith Norden, the president of the county's economic development arm Team Volusia. If Volusia doesn't wheel and deal, he added, "every county around us will."

Government officials everywhere are faced with this competition -- which requires them to make tough decisions. Orange County and Orlando have poured some $175 million of public funds into nearly a dozen renovations of the former Citrus Bowl (used only a few days a year) and the Amway Center for the Orlando Magic.

Others haven't been willing to play along. New York lost an Amazon headquarters this year after declining a request from the company for $3 billion in incentives.

Chalk it up to the competitive nature of landing -- and keeping -- companies, said James Nicholas, an expert on land-use management and regional planning with the University of Florida.

"Communities bid against each other as to which one will give the most. If a community doesn't play the game, commonly they are not considered," Nicholas said. "It is a matter of acting in accord with expectations."

Daytona Beach spokeswoman Susan Cerbone said such incentives are an important tool used to attract, recruit and retain thriving businesses.

"Growing the local economy across all industry sectors -- hospitality, manufacturing, health care, insurance, retail, etc. -- improves the overall health and well-being of a community," she said. "Low unemployment rates, a variety of job opportunities and an educated and vibrant workforce are crucial to a community's success."

To Cerbone's point, the county's unemployment rate has decreased drastically since 2011, while average wages have risen by $5,000 per year. The county also collects 40 percent more in taxable revenue today then it did nearly a decade ago, according the county's property appraiser's office.

Tanger, which opened in 2016 after receiving $4.5 million from the city and county, promised to create 1,100 jobs and generate $50 million to the county general fund and more than $30 million to the city's general fund over the next 30 years.

For One Daytona, the city and county paid $40 million to pave roads and sidewalks through the mixed-use facility on land across from the race track that's been vacant since the early 1990s. The Speedway, in turn, promised 9,368 new jobs and hotels that would draw an estimated 144,540 annual visitors to the county. Those visitors would spend an estimated $23.1 million a year on local goods, services, and events, according to the original proposal.

In the case of Brown & Brown, which promises to create 1,000 jobs, the money went toward improving and renovating the flood-prone riverfront corridor of Beach Street, which has historically struggled to thrive and could one day house a new courthouse.

Other companies in Daytona Beach that have benefited from tax breaks since 2011 include the Mori-Hosseini-led ICI Homes, a beachside Hampton Inn, restaurant Bahama Breeze, beer distributing company Daytona Beverages, and Top Build, a company that distributes construction materials.

In DeLand, discounts were given to DaVita Labs, a clinical laboratory that treats kidney patients, and Duraline, a company that distributes electrical and lighting systems. In New Smyrna Beach: Truss Aluminum Factory. In Edgewater: Northwest Linemen Center, a school that trains power line workers.

In total, the losses in revenue last year totaled $414,164 -- the most in the eight-year span The News-Journal analyzed. By comparison, in 2011, tax breaks resulted in only $32,946 in lost revenue.

Speaking to the deals to secure new development by improving infrastructure, Norden said it's wrong to call them giveaways.

"These companies are not getting a check. It's really about improving the site so the developer can build on it," he said. "If the infrastructure wasn't funded, it's likely the company wouldn't come to an undeveloped site. They'd go someplace else."

Josh Wagner, who represented Daytona Beach for eight years on the Volusia County Council from 2008 to 2016, calls the deals he was a part of "good business."

For an example of how well they work over time, Wagner points to the half-mile Dunn Avenue extension that was built as part of the arrangement with Trader Joe's. Officials hoped back then it would one day become a hot spot for opportunity, given its proximity to I-95. Now it's set to welcome a distribution center for the world's largest company, Amazon.

"The money we put in turned a field that had cows on it into a property tax entity," Wagner said. "People say, 'You gave this money to this private development,' but at the end of the day, government gets more money in return."

Corporate welfare?

State economists The News-Journal interviewed for this story are divided over how much corporate incentives actually pay off in a community.

Mark Soskin, an economist and former professor at the University of Central Florida who used to live in Volusia, said he encouraged county officials decades ago to take a page out of Disney World's book and amp up the dining, shopping and hotel options around one of its biggest attractions, the Speedway. Without these amenities, tourists are more inclined to take their full wallets elsewhere. If that happens, the economy suffers.

"Disney makes its profits from its on-property hotels, restaurants, concessions, and shops, not its admission ticket. That's why Lake Buena Vista is so huge but the park itself is even smaller than Disneyland," Soskin said, adding that the county can expect to get back way more than $40 million from One Daytona in the next several years. "We have to keep visitors here to spend."

Randall Holcombe, a professor of economics at Florida State University, takes a dim view of development incentives, calling them "counterproductive."

"When (local governments) give one group or company a tax break or subsidy, everyone else is paying the cost. Why should some be asked to foot the bill for benefits that go to others?" he asked. "The best way to promote economic development is to have a business-friendly climate that makes businesses want to come without having to be bribed by targeted government incentives."

Holcombe was particularly critical of the county's deal with the Speedway for One Daytona. It's one thing to use incentives to entice corporations to come to the area, like the county did with Trader Joe's. It's harder to defend giving money to a billion dollar entity that's already in town, he said.

"The Speedway is not a new business, it is not going anywhere, and there is no economic reason to give it preferential treatment," he said.

"There is no reason for the taxpayers of Volusia County to pay for a project that will provide greater profits to the already-profitable Speedway and other nearby businesses," he said. "When they give one group or company a tax break or subsidy, everyone else is paying the cost," he said. "Why should some be asked to foot the bill for benefits that go to others?"

Nicholas, with the University of Florida, sees the deals as more "political" than economic.

"The literature would indicate that there is little economic reason to subsidize private development of most types," he said. "There are numerous political reasons to subsidize development."

But the politics of such incentives aren't always good, especially if taxpayers come to view the deals as "corporate welfare," said Edwin Benton, a professor at the University of South Florida who specializes in public policy, local government and economics.

What's worse in the eyes of the public, he added, is when these big incentives go to companies that are led by big campaign donors. If that happens, it looks like an "I pat your back, you pat mine" arrangement, Benton said.

Local officials may get the new development they seek through incentives, Benton said, "but then they've pissed off a sizable number of voters."

Trust issues

William Sell of DeBary is one of those voters. In April, he came to a sales tax meeting in DeBary to confront County Chair Ed Kelley and Councilman Ben Johnson about all the taxpayer money that had been given to companies on the east side of the county. But it's more than just that. He noticed that some of the same people who have benefited from these public/private pacts are the ones who have thrown money into a political action committee to fund advertising supporting the tax.

John Albright, the CEO of Consolidated-Tomoka who helped broker the county deals with Trader Joe's and Tanger, has given to the PAC. Hyatt Brown, the chairman of Brown & Brown Insurance, and Jim France, the CEO of NASCAR, have contributed the most.

A News-Journal analysis conducted last year ahead of the August primary election found that $1 of every $5 in campaign contributions to county council candidates came from people whose livelihood depends on growth. Albright, Brown and International Speeedway Corp.'s Lesa France Kennedy appeared on that list too.

That analysis came after the county council took heat for not raising impact fees for 15 years, and after The News-Journal reported on a taxpayer funded study from 2015 that suggested quadrupling impact fees but was never discussed at a public meeting. As some criticized the county's level of transparency, others, like Sheriff Mike Chitwood, questioned how much influence developers have on county leaders, accusing them of being "corrupt" participants of "pay-to-play politics."

Councilwoman Barb Girtman, who was elected last year, hopes residents focus on the future instead of dwelling on past mistakes by former elected leaders.

"Don't tie our hands," she said in a meeting last week. "We need to move Volusia forward."

Johnson agreed, saying it's "shortsighted" for anyone to view these economic development agreements as anything other than positive. He pointed out that the land where One Daytona sits now had been vacant for years, ever since General Electric moved out in the mid 1990s. Now tourists and locals have a new place to shop, eat or catch a movie where cattle once grazed.

"You're investing the money into the future that's going to be paid back years from now," Johnson said. "I wasn't there when (that deal) was done but I support it, it was the right thing to do for this county."

And while the jobs at One Daytona aren't high-paying, that's OK too, he said. The same can be said for Tanger.

"You cannot say that we can't look at the lower-income jobs. We'd better," Johnson said recently. "Because you have people out here who need jobs and they aren't qualified for anything else. We have to have them jobs, too. We don't want to forget those in the mix. They still have to eat and still have to be able to have jobs."

Kelley said International Speedway Corp. has given so much to the county throughout the years in terms of tourism, bed tax revenue and more, it would have been wrong for the county to not feed into their ambitious vision for across the street.

"This benefits everyone," Kelley said of all the agreements. "We add roads that improve traffic flow. They are giving us jobs and creating employment opportunities for our residents. See the whole perspective. Do you want employment or do you want unemployment? Do you want better jobs or not?"

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