Florida Trend | Florida's Business Authority

Universal Studios' high-crime zone incentive money grab

More than 15 million visitors pass through the gates at Universal Orlando each year. Most of them probably don’t know that they’re in a high-crime area.

Seventeen years ago, the state Legislature created the “Urban High-Crime Area Job Tax Credit Program” to entice businesses to move to or expand in crime-plagued areas. The program allowed local governments to define “high-crime” zones as large as 20 square miles; businesses within the zones can apply for tax credits based on the number of jobs they create.

The city of Orlando drew its zone all the way from downtown to the tourist district nine miles to the south, including Universal.And since 1999, the first year the state issued tax credits through the program, Universal and its hotel joint venture with Loews Hotels & Resorts have applied for tax credits 10 times.

So far, Universal/Loews has claimed $9.9 million — about 40% of all the tax credits the program has awarded. That includes $1.7 million of the roughly $2.1 million that the state has handed out this year. Universal and its hotel affiliate have received five times as much tax credit money under the anti-crime program as any other business in Florida. Walmart ranks second on the list, at $2 million.

Universal’s use of the program has upset some lawmakers who helped create it.They say it was never meant to become a continuing public subsidy for a resort that generates more than $1 billion a year in revenue.

“It was intended not to aid large enterprises. It was intended to help develop enterprises within those urban high-crime areas so the residents could build an economy,” says former state Sen. Jim Hargrett Jr. (D-Tampa), who co-sponsored the original legislation.

“This disappoints me considerably,” adds former state Rep. Alzo Reddick (D-Orlando).

Universal defends its use of the program.“Like any company, incentives help us make business decisions about where and how we grow our business,” spokesman Tom Schroder says. “We have brought more than 3,000 jobs to our community and the local economy this year and now have more than 20,000 team members in central Florida. We believe we have more than made good on this program’s investment.”

The high-crime tax credit program originated in the 1997 legislative session. The idea was conceived and championed predominantly by African-American legislators such as Hargrett, Reddick and Betty Holzendorf (D-Jacksonville), who represented poorer, urban areas around the state that struggled to attract investment from businesses.

Hargrett remembers likening his district in Tampa to “the hole in the doughnut” when urging his fellow senators to vote in favor of the program. “My area looked like it had in the 1950s, while all the other areas were prosperous and modern,” he says.

The approach they devised was to allow city and county governments to define a zone that “chronically exhibits extreme and unacceptable levels of poverty, unemployment, physical deterioration and economic disinvestment.” The state would then offer tax credits of up to $1,500 for every person hired by a business in the zone.

“We were looking at trying to get businesses to move into urban areas and provide jobs so that the young people wouldn’t get involved in crime,” Holzendorf says. “We wanted businesses to move into those areas, and we wanted to help the mom-and-pop places.”

One of the flaws in the legislation was allowing local governments to draw their high-crime zones as large as 20 square miles. Another: The legislation did not provide a way for the high-crime zones to be redrawn over time as areas revitalized. That has allowed businesses to claim high-crime tax credits after moving into once-dangerous areas that have since become desirable.

Examples dot the state. Publix Super Markets received $79,000 last year to open a grocery store in Miami’s trendy “Omni” neighborhood, while EverBank Financial got $690,000 for moving jobs into a 32-story skyscraper in downtown Jacksonville. This year’s recipients include New York commercial developer GDC Properties, which received $40,500 after opening an Aloft hotel in downtown Orlando, a block from City Hall.

Those awards are fractions of the amounts given to Universal. All six of the largest credit awards made through the program — including four worth at least $1 million — have gone to Universal or its hotel affiliate.

Universal’s claims have typically followed soon after major expansions that have involved hiring new workers, such as the 1999 opening of Universal’s Islands of Adventure, the second of its two theme parks, or the 2010 debut of its Wizarding World of Harry Potter. The resort’s application for $1.7 million more credits this year came less than two months after it opened a second Potter attraction.

Orlando Mayor Buddy Dyer says he supports Universal’s decision to claim the tax credits. “Universal is the biggest employer in the city of Orlando and has probably created 3,000 jobs in the last couple of years and has really impacted our economy with Harry Potter, additions to the parks, new hotels. So it’s a pretty big bang for the buck,” says Dyer.

Schroder, the Universal spokesman, wouldn’t answer when asked whether the resort would have built the Harry Potter attractions if the high-crime tax credits weren’t available. But Universal had plenty of incentive to do the projects without a public subsidy. In the four years since the Wizarding World of Harry Potter opened, Universal’s gross receipts have risen from $775 million to nearly $1.5 billion.

Executives at Universal’s parent company, Comcast, say their theme park business has seen recurring cash flow triple over the same period to more than $1 billion. Universal Orlando accounts for well over half of Comcast’s total theme park business.

Some say the urban high-crime program underscores a broader problem in Florida: State lawmakers add tax cuts, sales-tax exemptions and other incentives to the tax code every year but rarely repeal older ones — even those not working as intended.

Bills were filed in the 2014 legislative session that would have reformed the high-crime tax credit program or repealed it. But none received a single public hearing amid opposition from Universal, which lobbied to preserve the program as is.