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Quid Pro Quo?
Jacksonville continues to debate its use of economic incentives to create growth and stability.

Like nearly every community, Jacksonville has made economic incentives part of its economic development strategy. And, like those other cities, it has struggled to develop a focused strategy for when to provide tax breaks, cash, land or other perks in exchange for business activity.

Three months ago, Jacksonville Mayor John Delaney proposed incentives for one of the area's largest employers in what he called a "pre-emptive" move to stave off potential restlessness. He offered CSX Transportation (CSXT) $7 million to ensure that the railroad company stays in town and expands here. In the end, CSXT was unwilling to guarantee employment levels for 12 years and said no thanks.

Earlier in the summer, America Online, which arrived in 1995 and now employs 1,700 at its customer service center, made noises that it was restless. With three years left on its lease at an industrial park on the city's north end, AOL says it may unplug its operation and relocate.

It's jockeying for public incentives to move to the city's south side. Economic development officials indicated they'll consider breaking a declared policy of only using incentives to entice companies into the less-developed north and west sides of the city. Delaney and the Jacksonville Economic Development Commission, which makes proposals on who gets incentives, say they're willing to make an exception with AOL, arguing they shouldn't be rigid if it means losing big employers.

To Henry Thomas, those recent events are ominous. He is chairman of the University of North Florida's Political Science and Public Administration Department and led an independent study of Jacksonville's incentives policy. Thomas says public perks were to be handed out only if a company would not move to the city otherwise. The AOL case disturbs him because it indicates companies are willing to seek incentives just to stay put. AOL came to Jacksonville without any public perks, and the railroad company has been here for four decades.

Delaney remains unabashed about attempts to nail down CSXT with its 4,100 local workers, $285-million-a-year payroll and $400 million in local spending. Indeed, CSXT announced recently an internal reorganization, which could jeopardize Jacksonville jobs. (CSXT's parent company, CSX, is based in Richmond, Va.) AOL is a stickier issue, Delaney concedes, because call centers involve little capital investment aside from telephone lines and computer modems and can relocate with relative ease. Rejecting arguments that money spent on incentives could better serve to improve the business climate in general, Delaney says, "You give something to get a better return."

Pipe dream?
Thomas and fellow members of the 1998 Jacksonville Community Council Inc. study say they are not against incentives, but would like to see them distributed fairly and cautiously. Pressure from the study group prompted the Jacksonville City Council to develop a clearer policy: Priority for companies going into neglected neighborhoods, for example. The study group wants city lawmakers, who must sign off on public perks, to take a more active role, not just rubber-stamp proposals from the economic development commission. And it has called for the mayor to appoint a school board representative and neighborhood representatives to the commission to broaden its base. So far, Delaney has resisted those recommendations, saying he believes the process would become too cumbersome.
Until the city council voted in April to adopt an incentives policy, the Jacksonville Economic Development Commission had ruled the incentive roost.

"The JEDC was really driving it, though they would probably deny that," Thomas says. "It was our feeling that elected officials should be driving it." It's too early to tell if some of the incentives the city has doled out so far are working. For instance, the city approved the expenditure of $17.5 million for road improvements around a giant mall planned for the city's north side. Under the deal, from 2001 through 2015, the mall's developers will pay property taxes, but get an annual tax rebate from the city. The mall could help spur development on the northwest side and relieve congestion on the south side, but the mall project has stalled repeatedly. Meanwhile, two beneficiaries of city-backed federal HUD loans -- Vistakon and Coach Leatherware -- got bills from the city for debt payment shortfalls. Anticipated increases in property taxes that were to finance both loans never materialized. So far, the taxpayers haven't had to eat any losses. But in the end, one goal of incentives -- guaranteeing an economic future -- may be just a pipe dream. Says economist Lynn Reaser: "The economy remains volatile, technology changes; one cannot know what the economic landscape will be in two years."

In the News

Hamilton County -- Chicago-based hospital firm H.C. Healthcare bought the sole hospital here from Columbia/HCA Healthcare Corp. last spring and is scouting other purchases. Columbia continues to shed hospitals following federal fraud investigation and management changes. The new owners are resurrecting services that Columbia had shut down, such as a doctor-staffed emergency room and intensive care unit at the 42-bed facility now named Trinity Community Hospital.

Jacksonville -- Zurich Insurance Services, which specializes in insurance for construction and small businesses, plans to grow from 150 employees to 250 this year and is moving into larger offices in the Koger Center at Deerwood next month. Tom Petway, part owner of the NFL Jacksonville Jaguars, is chairman of Zurich.

Two local financial firms have merged. Investment management company Intrepid Capital Corp. (Nasdaq-ICAP) acquired investment banking firm Allen C. Ewing Financial Services. Intrepid officials estimate combined client assets of $400 million. Broker-dealer Ewing will retain its name and operate as a subsidiary.

The Mayo Clinic in Jacksonville is adding another major program: a $22-million cancer research center to open in 2001. Initially, it will employ about 100 leading cancer researchers and other staff and will grow to 300 in the next decade. Mayo opened a clinic here in 1986 with 35 doctors and it now has 273. A new women's center will be completed next fall.

Timber and wood products giant Rayonier is expected to decide this month whether to move its Connecticut headquarters to Jacksonville or Savannah, Ga. It was evaluating competing public incentive offers.

Jacksonville Beach -- The nearly 1,000-foot crooked-planked pier that has served as a fishing spot for regulars and tourists for nearly four decades likely will become a public park. Jacksonville Beach and the city of Jacksonville were negotiating to buy the privately held landmark, which would undergo major repair work.

Marion County -- Brigadoon Industries, a company that collects industrial landfill plastic and reworks it into corner boards for stabilizing large shipments of produce, merged with U.S. Plastic Lumber of Boca Raton. The Ocala operation is now adding production lines and moving from a 30,000-sq.-ft. site to 150,000 square feet.

Historic Bonnie Heath Farm is moving its operation this fall to Charter Thoroughbreds on County Road 475. The Heath family, one of the first to bring thoroughbred operations to Florida, had agreed to sell its 440-acre property to The Siemens Group, which plans a large-scale residential development on State Road 200. The deal with Siemens was still awaiting city approval, with some snags on roadwork and drainage concerns.

Micanopy -- City commissioners expected to vote this fall whether to change the comprehensive land-use plan and allow development of an 18-home subdivision on a 9.3-acre site at the east end of town. The proposal drew the ire of preservationists who want further study of former Indian settlements in the area. The state of Florida designated a local Indian burial ground a historic site in July, and property owners agreed to protect it from development. Some residents of Micanopy (pop. 644) are frosty about any growth in their town, a popular stop for tourists.

Putnam County -- A 60-unit gated apartment community should be complete next summer near the airport in Palatka. An official with the developer, Riverside Builders, says the project is in response to greater housing demands from new young workers moving into the county.

St. Johns County -- Earlier this summer, aerospace manufacturer Northrop Grumman's St. Augustine plant got a lift: a $1.3-billion federal contract. Now, the same facility is taking a big hit. With other contracts slowing down, 350 of the 1,700 workers will lose their jobs by next March. The cutbacks at the county's largest industrial employer are expected to drag down other areas of the local economy.

Suwannee County -- Six small companies are moving into Suwannee County Industrial Park, each constructing a new facility and nearly filling out the site. A second industrial park is under way. Two of the companies are new to the area.

Competition among Jacksonville's hospitals is about to heat up. Shands HealthCare, the respected not-for-profit teaching hospital affiliated with the University of Florida College of Medicine, is finalizing its takeover of Methodist Medical Center and University Medical Center and merging them into Shands Jacksonville. Shands CEO Dr. J. Richard Gaintner says he's counting on the aggressive push into Jacksonville to provide new sources of revenue at a time of declining Medicare reimbursements, increases in charity care and growing bad debt. Emphasizing the importance of Shands Jacksonville to the overall financial well-being of Shands HealthCare, Gaintner says the healthcare organization probably will operate dual corporate headquarters in Gainesville and Jacksonville. Patients also can expect Shands Jacksonville to invest in some of the latest medical technology, including a state-of-the-art cancer-eradication machine called a proton beam.