TALLAHASSEE - On July 18, 2014, Senator Chris Smith sent a letter to Governor Rick Scott regarding Florida's economic development incentives. On July 22, 2014, Department of Economic Opportunity Executive Director Jesse Panuccio responded. The full response is below.
 

July 22, 2014

The Honorable Chris Smith
The Florida Senate
2151 NW Sistrunk Boulevard
Fort Lauderdale, Florida 33311

Dear Leader Smith,

I write in response to your July 18 letter to Governor Scott regarding economic incentives.  We appreciate your support for the Department of Economic Opportunity (DEO) and our mission of promoting economic development in Florida.  As you know, the Department works hard to ensure that state monies devoted to economic development are administered in a transparent, accountable, and efficient manner.  Your letter notes some concerns based on misleading newspaper articles, but the facts show that Florida’s economic development system is working. 

Florida’s business-friendly policies have resulted in an increase of competitive jobs projects established, private-sector jobs created, and capital investment.

• Number of Projects – 161 for fiscal year 2013-14, a 30% increase over 124 projects in 2010.
• Capital Investment – $2.785 billion in capital investment for fiscal year 2013-14, a 209% increase over $900 million in capital investment in 2010.
• New Jobs – 23,864 new jobs contracted in fiscal year 2013-14, a 109% increase over 11,398 new jobs contracted in 2010.
• Retained Jobs – 12,343 jobs were retained in fiscal year 2013-14, a 134% increase over 5,272 retained jobs in 2010.

Just last week, Governor Scott announced that Florida created 36,900 private-sector jobs in June 2014. This is the single highest month of private-sector job creation since Governor Scott took office, and there is more good news:

• The statewide unemployment rate for June 2014 is 6.2 percent, down 0.1 percentage points from the May 2014 rate and 1.2 percentage points from the June 2013 rate of 7.4 percent.
• All industries gained jobs over the year in June 2014.
• Florida’s annual job growth rate has exceeded the nation’s since April 2012.
• There were 263,855 job postings in June 2014 according to Help Wanted OnLine.

As for regulatory compliance, DEO has increased transparency and put in place enhanced due diligence and clawback procedures that serve to protect taxpayer funds.  We closely follow the law so that ill-advised projects like Digital Domain do not gain approval. 

DEO’s Economic Incentive Portal provides unprecedented access to the performance measurements required in economic development incentive contracts and each company’s progress toward reaching their required job creation goals.  A core principle of the state’s economic development incentive program is that businesses are paid based on verified performance, meaning no tax dollars are paid until job creation or capital investment numbers are audited and confirmed to protect taxpayer investment. Incentive agreements have sanction and clawback provisions to help protect the state’s investment. While performance requirements are typically phased and met over multiple years, performance is measured and confirmed annually. To be clear, the “four percent compliance” rate mentioned in your letter is inaccurate as it appears to assume all jobs contracted are due in the first year. That is not the case as all projects have a multi-year job schedule ranging from four to 10 years in duration. You can read more about the program and its successes in our 2013 Annual Report that is submitted to the Governor and Legislature at the end of each year.

As for the specific concerns in your letter, first, please allow me to address the forthcoming lawsuit against those associated with the Digital Domain Media Group. In 2009, the Office of Tourism, Trade, & Economic Development (“OTTED”) – predecessor agency to the Department of Economic Opportunity (“DEO”) – distributed tens of millions of taxpayer funds to Digital Domain. As noted in the 2013 Inspector General Report (Report Number 2013-11), the usual state regulatory processes governing the award of such funds were circumvented. In 2012, Digital Domain filed bankruptcy and laid off all of its employees – thereby breaching the grant fund agreement. DEO has filed a notice of claim against Digital Domain in the bankruptcy proceeding. DEO has also hired outside counsel to identify any and all legal action available against the principals of Digital Domain and any other individuals or entities involved in wrongdoing related to this deal. DEO is committed to recouping all monies owed to the state, including approximately $20 million in incentive funding.

Second, please note the following facts about the specific incentive deals mentioned in your letter.

• For its corporate headquarters project, Darden was approved for the Qualified Target Industry (QTI) and Capital Investment Tax Credit (CITC) programs. In its first performance year for the QTI (CY 2011), Darden created 195 jobs and was paid $238,750 after that job performance was verified. Darden acknowledged that it would not fully meet future performance requirements in the QTI agreement, and the agreement was terminated with no further payments made. Darden has met and exceeded its performance requirements for the CITC program through CY 2012. At a minimum, Darden was to create 100 new jobs. Through 2012, it created 188. CY 2013 performance is under review.
• BiLo has withdrawn from its incentive agreement. The company is proceeding with the project, but acknowledged it would not meet the performance conditions required in the agreement. No funds were paid to the company, and thus taxpayer money has been protected.
• In 2011, Redpine received approximately $400,000 in economic development funding. Bay County Florida also provided a matching award of approximately $350,000. Redpine only operated for a brief period in Florida after receiving these funds and ultimately notified the State and Bay County that it was ceasing all operations in Florida. At the time of this notification, Redpine failed to meet any of the economic development performance goals. Upon such notification, DEO and Bay County combined efforts to seek the recovery of funds provided to Redpine by filing a suit as co-plaintiffs in Leon County Circuit Court.Redpine’s former President, Shad Wheeler, was added individually as a defendant to the case filed against Redpine. Subsequently, Mr. Wheeler filed for bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Washington, thus staying the civil court proceedings. DEO and Bay County have continued seeking the recovery of funds, once again as co-plaintiffs, by filing a complaint challenging the dischargeability of the debt owed by Redpine or any other individuals or entities involved in wrongdoing related to this deal.

In response to your data request, please see the attached document.

In short, Florida’s economic development system is working better today than at anytime in the past - an opinion shared by economic-development professionals across the state and nation.  We follow the law, we protect taxpayer money, and we get results.  Florida’s economy has turned around thanks to Governor Scott’s leadership.  We appreciate your support of our efforts. 

Sincerely,
       Jesse Panuccio

/JP

 Attachment

About DEO

The Florida Department of Economic Opportunity combines the state’s economic, workforce, and community development efforts. This new approach helps expedite economic development projects to fuel job creation in competitive communities.  For more information, including valuable resources for employers and job seekers, please visit www.floridajobs.org.

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