by Mike Sharkey
Staff Writer
Last July, City Council president Matt Carlucci hit the wall. He said there needed to be a check and balance system for the Jacksonville Economic Development Commission and what it was doing with taxpayer money being used to attract new and keep old businesses. So, he created the Special Committee on Economic Development Incentives.
The idea was generated by a parking garage on the Southbank.
Aetna, along with its landlord Ocwen Financial Corporation, received $2.5 million in incentives from the City to build a 1,000-1,300 space garage on the Southbank. The contention was the City should provide the money or Aetna was going to move its offices to Southpoint.
Although the project was packaged by the Downtown Development Authority and the JEDC, ultimately the 19-member City Council approved the deal 13-4, with two excused absences.
(For the record, Council members Jim Overton, Ginger Soud, Faye Rustin and Lad Daniels all voted against the garage while Warren Alvarez and Lake Ray missed the meeting.)
However, there was one interesting aspect of the deal: it created more controversy than perhaps any other incentive deal in the five-year history of the JEDC.
Despite the fact that the garage was approved, it was done so begrudgingly. Council members openly questioned the true financial needs of both Ocwen and Aetna. The nature of the discussion led Carlucci to create the special committee, which met for the first time last October and is chaired by Council member Alberta Hipps.
The committee met Thursday for the first time this year and spent two hours dissecting JEDC executive director Kirk Wendland’s annual status report for the JEDC for 2000.
The report covered the 42 businesses that were operational and on the tax roll from the time the JEDC started in 1996. It included everything from the first business — the Hampton Inn — to Blount Island Command, which was approved in April 2000. Since then, many other projects have been approved and are even open for business. But, because of the parameters of the report, only 42 businesses qualified to be on the 2000 report.
The numbers are interesting and some aren’t good. Of the 8,905 jobs the 42 businesses were supposed to create, only 6,690 have actually been filled. Wendland explained the 2,215 shortfall.
“That doesn’t necessarily mean they are short, they just haven’t gotten to them yet,” said Wendland, adding that many companies have years to meet their employment projections. “You have to be careful when you read these reports and look at a project.”
Wendland said it was wrong to assume that a company like Wellspring Resources — which vowed to create 605 new jobs yet had only filled 235 by the end of 2000 — wasn’t upholding its end of the bargain. Many companies still show unrealized employment projections, but still have plenty of time to make good.
“They may have a 10-year claw back in their contract,” said Wendland.
What’s also interesting about a company like Wellspring is the incentive package it received. In November 1997, the company was awarded an overall package that maxed out at $2,286,750 in what is called Quality Targeted Industry (QTI) money. Of that, only $453,750 was to come from the City’s coffers; the rest is state money. As of Dec. 31, 2000, Wellspring had only received $55,735 from the City and $232,875 from the state. According to Wendland, the only way a company in this situation will eventually get the rest of the money is to continue hiring people until they have met their contractual obligation.
Council member Warren Alvarez said he wished it was as easy as Wendland explained.
“We give claw backs, then we don’t go back and get them,” said Alvarez. “We [the City Council] set the policy for the JEDC and nothing happens.”
Alvarez said his constituents are tired of reading about big businesses getting money they may not necessarily need.
“The taxpayers out there are up in arms about this,” he said. “If it was put on the ballot tomorrow, they would vote to abolish the JEDC.”
Wendland assured Alvarez that the claw backs were being enforced.
“Almost everything since the first few have claw backs,” said Wendland. “Sometimes they are tied to jobs. Sometimes they are tied to capital investment. We monitor claw backs on every case.”
City Auditor Bob Johnson said some companies will look for any excuse to get out of their claw back obligation.
“In some cases, they look for ways out,” said Johnson. “We didn’t build them a road, so that’s our fault. They pack up and move to Malaysia instead of staying in Jacksonville. If you look down the line, clearly there are problem areas. If the project is on target, everything is fine and dandy.”
To make sure everything is fine, the committee is requesting a comprehensive report on every business that has received incentives since the JEDC’s inception and the City auditor’s department will conduct an audit of the JEDC over the next couple of months in an effort to determine exactly where every dollar has gone the last five and a half years.
Hipps said she would like to have the audit back long before June 30, the deadline for the special committee’s final report on the status of the JEDC and its economic incentive program.
“It won’t take us more than a month or so to do the field work and complete a report,” said Johnson. “So, we’ll get right on it.”
The report also included a look at exactly how much in incentives has been awarded since the middle of 1996. In that time span, 42 companies have been granted $38,890,426 in total, maximum incentives. Of that, $22,577,566 is potentially available from the City, the rest is being provided by the state. (Remember, the report only covers up to 2000, so deals like the $860 million Shipyards project with $75 million in City incentives aren’t included.) So far, the City has only given out $12,281,767. The $10,295,799 difference is due to enforced claw backs, unreachable hiring projections and taxes.
“A lot of that is us waiting for those companies to pay taxes,” said Wendland.
The next meeting of the incentives committee is set for Jan. 17. Hipps said she will try to focus on one aspect of incentives at each meeting in the future in order to cover everything by June 30. Council member Elaine Brown, a member of the incentives committee, said it may be time for the JEDC to start spreading the wealth. Currently, one of Delaney’s charges concerning the JEDC is that two-thirds of the incentives go to businesses north and west of the St. Johns River.
“There are other areas of town that need and require incentives,” said Brown, who lives in Neptune Beach. “There are failed shopping centers all over and places like Metro Square on Phillips Highway. I want to make sure we include these areas. I want to keep these in mind as we move forward and make our recommendations.”