Eliminate incentives, expert suggests

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  • | 12:00 p.m. January 18, 2002
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by Mike Sharkey

Staff Writer

Imagine Jacksonville without economic incentives. No Berkman Plaza. No Adam’s Mark. No Shipyards project.


If those millions of dollars in taxpayer incentives had been funneled into other areas of Jacksonville — education, litter control, road rebuilding and resurfacing — the quality of life locally may have been so high that those companies and projects would have happened anyway.

On its merits alone, Jacksonville would continually outclass such cities as Tampa, Atlanta, Nashville and Charlotte. Companies would come to Jacksonville, look around, like what they see and move here — without needing millions of dollars in assistance.

Imagine this scenario being the case all over the country. The playing field even. Fair competition.

This type of world doesn’t exist right now and may not ever. Cities compete for new companies the way grocery stores vie for business. Sales, discounts, two-for-ones. However, according to Dr. Henry Thomas, the chairman of the Department of Political Science and Public Administration at the University of North Florida, it’s exactly what should happen.

At Thursday’s meeting of the Special Committee on Economic Development Incentives (which was created by City Council president Matt Carlucci and chaired by Council member Alberta Hipps), Thomas told the committee that City Council should push Congress to eliminate economic incentive policies nationwide. The basis for Thomas’ argument stems from a Jacksonville Community Council Inc. study on incentives that he chaired.

The study focused on five issues and Thomas came back with several recommendations, including the total abolishment of incentives as a means of luring businesses to town.

“We recommended that the Jacksonville City Council approve a resolution calling on the U.S. Congress to eliminate the competitive spiral that results from the use of incentives by state and local governments,” said Thomas. “It was our sense that in a world without incentives, Jacksonville would be advantaged because of our economic, cultural, climatic, logistical and other assets. In our view such a world would be more efficient, more effective and perhaps even more equitable than the current incentive regime. We would be better off and firms would be better off.”

Thomas was quick to add that if such a policy was adopted nationwide, if one city deviated, the flood gates would open and incentives would once again become the bait of choice.

No Council members at the meeting commented publicly on Thomas’ radical suggestion, but Hipps indicated the subject would be broached at a future meeting.

The Jacksonville Economic Development Commission was created by Mayor John Delaney and implemented in 1996 for the purpose of redeveloping downtown and other areas west and north of the St. Johns River, as well as attracting new industries to Jacksonville. Its incentive policy was drawn up in early 1998 and adopted late that year. Since then, the JEDC has helped create thousands of jobs and attracted several new companies to Jacksonville. Some have opened branch offices while others have relocated their headquarters here.

JEDC executive director Kirk Wendland said Thomas’ report will be taken into consideration, but he doesn’t see the day when economic incentives become a thing of the past.

“We’ve had about 10 meetings with JCCI to go over some of these points and our position on them,” said Wendland. “We will incorporate a majority of their suggestions into our incentive policy. Ultimately, when City Council approved our incentive policy, JCCI was in compliance with the policy.”

Wendland concurred with City Auditor Bob Johnson, whose office is currently auditing the JEDC, when Johnson said if more money was spent on improving the quality of life in Jacksonville, incentives wouldn’t be as necessary. The area’s natural amenities — the beach, golf courses, work force — would be enough.

“I absolutely agree that quality of life is the No. 1 issue,” said Wendland. “To make the short list, you may have to give them land, give them the building, give them money. But, if you have a poor quality of life, they are not coming.”

After the meeting, Wendland spent a few minutes discussing Thomas’ suggestions, the current incentive policy and how it all figures into the future of Jacksonville.

Question: Would eliminating economic incentives nationwide level the playing field and put all cities and companies in the same boat? Would that create a scenario where cities would present themselves on their own merits as opposed to how much it can give? It is a good idea and is it something that could happen?

Answer: I have to tell you, my feeling is that it would be something that would be awfully hard to implement. It’s almost like how the tax code works and you’ve got all these exemptions. People are creative. First of all, my gut feeling is you are never going to see Congress implement or pass something like that. Secondly, say they pass it and they say you can’t do any incentives. Well, there are creative people and they will find creative ways of getting around that. Look at some of the other communities. Sometimes it’s not the city that gives the incentives. For instance, as I understand it, a lot of times in Georgia it’s the power companies that give the incentives. It could be a situation where the city is exempted from doing it, but the electric authority isn’t. In the long run I think it’s a noble goal, don’t get me wrong, but I think there would be so many games and ways to get around it that ultimately it wouldn’t really have the affect that was intended.

Q: Is it analogous to the NFL’s salary cap restrictions where teams go to great lengths to get around the cap?

A: I’m not sure. I don’t know that I’ve studied the cap all that well or good enough to comment. My opinion is that there would be creative people that would find creative ways to get around that.

Q: If more money was spent on improving the quality of life in Jacksonville, would incentives become less necessary and what would be the JEDC’s role? Would the JEDC get involved in improving individual neighborhoods and schools to the point Jacksonville would sell itself and companies would be inclined to accept a smaller incentive package in lieu of being in Jacksonville?

A: I don’t know if JEDC is the lead on that. To some extent you’ve seen the administration do a lot of those things. The Preservation Project, the Better Jacksonville Plan, those are things done to enhance the quality of life. Now, whether or not that’s specifically been done to reduce the incentives we are required to give, I’m not sure that’s the whole game plan. But, the reality is we do now target certain areas and pockets of town. I think that’s what you are seeing. As a whole, yes, we are trying to make Jacksonville better, but understanding that still there are issues and special issues in certain areas that we need to address. What we are trying to do, as I see it, is attack that issue on both fronts. One, make Jacksonville a better place to live for people who want to come here and don’t need that assistance and, two there are still situations that need assistance and work with those.

Q: How much of Dr. Thomas’ findings will the JEDC take to heart and implement?

A: I think we went through that exercise [in the meeting] and tried to do a lot of that. We spent a lot of time getting their input originally as we set the policy up. Certainly, I think some of the comments were right. I believe it’s the JEDC’s role to be the ones who continually update and look at the incentive policy. I believe that’s what that board is in place to do. I believe that’s part of our strategic plan and you’ll see us doing that. I think, certainly, as we have those meetings periodically and go through those things, we welcome their input and wouldn’t hesitate to listen to any comments they would have on a particular issue at that particular time.

Q: The JEDC is five years old. What overall grade would you give it and why?

A: I think we’ve done a lot of what we intended to do. I do think we are entering into a new period of our existence. At first, we benefited from being an organization that had to grow and had to try and consolidate a lot of different things. We started off doing a lot of projects and now we are taking a bit of a step back to evaluate how we’ve done and what we’ve done and how we want to go about doing it. I think that’s part of why we are starting to have workshops. We are going to have more workshops and get input from our commission. I’m going to back off giving an exact grade other than to say I think it’s been an effective organization. Certainly, we are looking for ways to improve ourselves, but I think we’ve been effective and I think, overall, we’ve done what we were created to do.

Q: You mentioned backing off, have we seen maybe the last of the huge incentive packages? Are huge incentive packages a thing of the past and can we look for the JEDC to start focusing on different industries that don’t need that kind of money?

A: I don’t know that I’d say that. I think for the right package, for instance, if we were to be in a position to land a major project at Cecil, if we were in a position to land a major project on the Northside. I think that right now, if we had a major residential project for downtown, today, we might say ‘Well, let’s see how Berkman does. Let’s see how Vestcor does and see how the Shipyards and Strand are doing.’ That doesn’t mean that down the road if those are successful —we’ve made the comment that 2,000 units, which is about where we’re going to be when you get the Strand in — starts to get us to that critical mass we want to be at where you can start to see the restaurants and the activities coming downtown. But 2,000 units isn’t where we ultimately want downtown to be. I think we’d like to see 10,000 units downtown. Now, do we have to help with those and do we have to help as much? That’s yet to be determined. The numbers are big [with the major downtown housing projects] because their numbers are big. If they are going to produce big taxes, it gives us the opportunity to have a bigger number there. I would hesitate to say we would never be in front of another large residential project downtown that may have big dollars in front of it if they are investing big dollars.

Q: Will market prices and the demand to live downtown dictate how companies and developers receive future incentives? The better the market value and the more demand to live downtown will mean less incentives needed?

A: That’s the hope, that’s exactly what we are striving for. Market demand, that’s what we are anxiously waiting to see. We sure hope it’s there and we believe it’s there or we wouldn’t have been involved in those projects. I’d be less than honest to say that because we haven’t seen it and the projects haven’t been built.



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