In this week’s Economic Report, Dr. Rick Harper looks at the Florida Legislature’s attempt to eliminate Visit Florida and Enterprise Florida.
A battle is brewing in Tallahassee as state lawmakers look to dismantle both Visit Florida, which supports tourism efforts in the state, and Enterprise Florida, which offers economic incentives to businesses in Florida. In a hearing this week, the committee responsible voted in a split decision to move forward with a bill to eliminate much of the state’s economic incentives.
“This is really the brainchild of House Speaker Richard Corcoran. Speaker Corcoran is an advocate of the kind of Koch brothers philosophy that says that economic development incentives really constitute corporate welfare,” Harper said. “The bill was introduced and argued very well in terms of portraying these incentive programs as unfair to the businesses that don’t receive incentives.”
Those business owners who did receive incentives were allowed to speak at the hearings and were very clear about important those incentives are, Harper said.
“People spoke about their businesses and how they wouldn’t be there today – how many people they employ – if they hadn’t been able to get that little push from an Enterprise Florida incentive,” Harper said. “Really, as we look at what these programs do, I think the governor is in the right here. It was just a couple of years ago when I was serving as policy adviser to the Florida Senate that we required by statute that all of the economic development incentives be evaluated. We put them on a three-year rotation so that every incentive was looked at.”
Harper said the programs were carefully evaluated by both the legislature and the government accountability office so expectations for return on investment were clear and measured consistently across programs.
“This bill is a very blunt instrument. It’s unilateral disarmament,” Harper said. “We’re going to give up all of our industrial and economic development incentives at the same time as the other states are keeping theirs. Speaker Corcoran is essentially inviting Florida to bring a knife to a gun fight.”
Harper believes the bill is unlikely to go very far in the Senate.
“The Senate, clearly, is going to have objections to this,” Harper said. “You can’t just unilaterally disarm. It will be a happy day when the U.S. Supreme Court hears a case saying that economic development incentives generally violate the Commerce Clause, and, therefore, all states have to cease and desist. But it makes no sense to be the one state that ceases and desists.”
There are examples of how these incentive programs have benefited the state with little risk, Harper said.
“If you look at the Governor’s Quick Action Closing Fund for example, administered and negotiated by Enterprise Florida and then monitored by the Department of Economic Opportunity once it’s signed, these are generally performance-based contracts,” Harper said. “If the companies that are recruited to move here don’t create the jobs, then they don’t get to claim the financial benefit against their state tax liabilities. And so it’s really a no-risk proposition for the state.”
Other states are actively engaged in attracting businesses, and Florida could be left behind without these incentives, Harper said.
“Every state has an economic development strategy, and it’s to steal jobs from other states,” he said. “Everybody else out there from Texas to Georgia to Mississippi is going to be offering big relocation incentives to corporate headquarters, and those companies know they are worth something to most states.”
Once these companies figure out which states offer the best options for relocation, such as a positive tax structure, skilled labor and access to markets, that’s when they begin negotiating for incentives with two or three states, Harper said.
“If you’re not able to provide something, then you’re out of the chase,” Harper said. “Florida, instead of coming in first or second or third on big deals, is going to start coming in fourth or fifth or sixth because they don’t have that little sweetener at the end of the process.”
Incentives have helped bring companies to Florida and, specifically, to our local area, Harper said.
“If you look at the incentive program that the University of West Florida administered – the oil spill recovery program – Navy Federal Credit Union received incentives when we were over a barrel about the 4-H property. 4-H wanted more than the appraised value, and the Navy Federal board of directors didn’t seem to want to pay more than appraised value,” Harper said.
“Incentives were able to close the gap, and we got great value for our money as state taxpayers with Navy Federal.”
Across the region and the state, big companies take relocation very seriously, and incentives play strongly into their decisions of where to move.
“If they can add a couple of million bucks added to their bottom line, then they want to do it” Harper said. “It’s true that these deals are not generally available to everyone. In that sense, the Supreme Court of the United States might want to take a look at them, but that’s the game we’re in. And as long as the music is playing, you have to keep dancing.”
Visit Florida, which markets the state around the world, is also in the speaker’s crosshairs. Harper said defunding Visit Florida, the state’s official tourism marketing organization, would be short-sighted.
“There’s nobody out there – whether it’s Disney or Universal – the biggest players in the entertainment industry and the visitor industry in Florida – not one of them is big enough on their own to do the optimal level of worldwide advertising of the Florida brand,” Harper said. “Instead, that’s why we collect taxes across a broad range of businesses. Locally, it’s the tourist development tax. It would not make sense to rely on the collective of private businesses marketing the state. That just doesn’t work.”
Harper said a more reasonable approach would be to take a small amount off the top in taxes and use that to market the state. But if Visit Florida isn’t perfect, it is still worth maintaining.
“There were mistakes made at Visit Florida. The notion that the CEO of Visit Florida could negotiate a deal with a particular entity – whether it be Emeril for cooking shows or whether it’s Pitbull for music videos about Florida’s sexy beaches – the notion that those don’t have to be in the sunshine is just a non-starter,” Harper said. “But in getting rid of Visit Florida, we’re throwing out the baby with the bath water.”
Dr. Rick Harper is an economist at the University of West Florida. He can be reached at email@example.com. CREO staff writer Mike Ensley contributed to this report. He can be reached at firstname.lastname@example.org.
This article is part of a collaboration between WUWF and the UWF Center for Research and Economic Opportunity.