Del Boyette, of Boyette Stategic Advisors, quipped, "People love to use the term, 'they gave the store away.' They don't give them anything."
Site seeing: Location consultants eye Florida's incentives policy
The debate in Florida over incentives to help induce companies to locate operations here has drawn the attention of a crucial national audience: Site selectors, the consultants paid by corporations for their expertise in locating operations and dealing with local and state governments on approvals and incentive deals.
Dropping incentives, says, Del Boyette, of Boyette Strategic Advisors, an Arkansas firm that works in Florida, “sends a message you’re not open for business anymore. You don’t want to compete. It’s not true, but it’s what people think.”
“It’s not helpful,” agrees another such consultant, Mark Sweeney. His firm, McCallum Sweeney Consulting in Greenville, S.C., consulted for companies on three of the highest profile corporate recruitments in Florida in recent years: Hertz’s move to Estero from New Jersey, Northrop Grumman’s decision to put 400 jobs in St. Augustine and 1,800 jobs at an aircraft design center in Melbourne. The projects received millions of dollars in incentives.
The role of site selectors is often invisible when companies and state and local governments announce a new factory, office or relocation.
Typically, companies give consultants parameters for what they want — considerations like rail or port access, direct flights to key markets, qualified workforce — and the consultants then find sites.
The consultants model how long it will take a site to get up and running and analyze dozens of costs, covering everything from land prices to electricity to taxes. Incentives always are factored in.
Historically, Florida and other states have offered a variety of incentives: Workforce training programs, road improvements, tax abatements and, most controversial in the Legislature, cash from the governor’s Quick Action Closing Fund. Gov. Rick Scott asked the 2016 Legislature for $250 million for the fund; the Legislature gave him nothing. This year, he wants $85 million but faces a fight with legislators who view the incentives as corporate welfare.
Consultants say they’re accustomed to such debates. “The issue of incentives has been hotly debated my entire career, and it always will be,” says Phil Schneider, who heads a Milwaukee-based consultancy and also chairs an industry group, the Site Selectors Guild.
Often the debate rests on faulty assumptions, consultants say. For one, incentives aren’t giveaways, they say, and go only to offset costs incurred by companies that invest and hire, Boyette says. “People love to use the term ‘they gave the store away.’ They don’t give them anything,” Boyette says.
The consultants also say no company locates exclusively based on incentives. Rather, “that may be the issue that gets that one over the goal line in state one versus state two,” Schneider says. Usually, a consultant and client company will find several sites, all equally serviceable. At that point, incentives become decisive. Cash is always king because it changes a site’s bottom line.
Incentives are a fact of life in corporate location decisions globally, and Florida needs them to compete, consultants say. Otherwise, a Florida site will lose out to a comparable site in another state with incentives.
“You don’t think Alabama and Georgia and South Carolina and Mississippi and North Carolina are licking their chops?” Schneider says. “It’s very hard to ask governors or states to compete in this with one hand or both hands behind their backs.”
Sweeney says Florida has become more competitive in relocation decisions under Scott because of incentives and also because Scott has smoothed the process between the state’s sales arm — Enterprise Florida — and the part of government that actually awards incentives.
“I don’t think we were the only ones who found Florida more competitive,” Sweeney says. But “if Florida doesn’t restore some of the incentives, especially the closing fund, they’re going to find themselves where they were before. If Florida doesn’t have any tool in the toolbox, they’re going to find themselves bridesmaid more than brides.”
Some question whether consultants steer companies toward states and communities with bigger incentives because the consultants themselves get a slice of the incentive deal. One developer complained to Florida Trend that site selectors may now bypass Florida because the lack of incentives will hurt the consultants financially.
Consultants say that’s not how it works. They say they generally get paid a flat fee or an hourly rate, though some get a success fee for negotiating for a site or for finding one that can be operational faster than anticipated or cost less than anticipated, which can be influenced by incentives.
Craig Richard, CEO of the Tampa Hillsborough Economic Development Corp., says a lack of incentives hampers the state among site selectors because it makes sites less economically competitive. “What the name ought to be is site elimination. The reality is they’re eliminating sites,” Richard says. “You get eliminated for not having incentives. If you don’t have a check in the incentives column, you immediately go to the bottom of the list. That’s why it is important. It keeps us in the game.”
Crystal Sircy, executive vice president of the Orlando Economic Development Commission, says consultants have brought up the incentives issue with her. She says she reminds them there’s a debate nationally about incentives and focuses on Orlando’s long-term assets and strengths. “I tell them be patient with the debate and don’t count Florida out,” she says.
Ranking the States
In the January issue of Site Selection magazine — its annual “State of the States,” a “compendium of data that matter to corporate location decision-makers” — Florida tied for fourth with Texas, and behind North Carolina, Washington and Tennessee in an index of the magazine’s six indicators: Business tax climate, higher ed R&D spending, per capita career readiness certificates earned, percentage of adults holding at least a two-year college degree, electric power costs and fiscal condition. Florida, which has the fourth-highest gross state product in the nation, did best in business tax climate, finishing fourth nationally, sixth in fiscal condition and ninth in R&D spending.
The Hertz Deal
Hertz announced it was moving its headquarters to Estero in 2013. Its building was finished and occupied in 2015. The company promised to create about 700 jobs and to invest $68.75 million. The firm expects its annual payroll in the area to reach about $71.4 million.
Among the incentives the company received in making the move:
» $3.4 million a year, for up to 20 years, through the Capital Investment Tax Credit. This basically equals the value of the new building the company had constructed in Estero.
» $945,000, Quick Response Training program, reimbursed for training
» $7 million, Quick Action Closing fund
» $3 million, Qualified Target Industry Tax Refund
» $4 million, Lee County incentives
» $125,000 a year for four years through an economic development rate reduction from Florida Power & Light
“People love to use the term ‘they gave the store away.’ They don’t give them anything.”
— Del Boyette, Boyette Strategic Advisors, Arkansas
“If Florida doesn’t restore some of the incentives, especially the closing fund, they’re going to find themselves where they were before.”
— Mark Sweeney, McCallum Sweeney Consulting, Greenville, S.C.
“You get eliminated for not having incentives.”
— Craig Richard, CEO of the Tampa Hillsborough Economic Development Corp.