by Mike Sharkey
Staff Writer
When the Downtown Development Authority and the Jacksonville Economic Development Commission analyze potential incentivized projects, many factors are taken into consideration. Capital outlay, number and quality of jobs expected and the amount and type of incentive the company is seeking are all factors.
Often, the job element is classified as a clawback. For example, if ABC Corp. is seeking $10 million to move to Jacksonville and promises to create 200 new jobs by the end of their second year, the clawback in the incentive agreement may be that ABC agrees to pay $500 per job under 200 not created. If, after two years, ABC has only created 150 jobs, the JEDC would essentially fine ABC $25,000.
Seldom is the clawback clause ever contested because the JEDC rarely ever has to enforce the clause. But it does happen, and the latest test isn’t with a mom-and-pop business or a corporate conglomerate. At Thursday’s JEDC meeting, the developers and property manager of the Gateway Shopping Center went before the JEDC to protest a $90,790 clawback shortfall being levied against them by the JEDC. Developers Carleton Jones and John Lewis of Gateway Economic Development Partnership joined property manager and former City Council member Terry Wood in asking the JEDC to waive the clawback sum.
Rather than vote on the issue, Commissioner Tom Petway asked JEDC chairman Fred Newbill for more time to consider the request and its possible ramifications. Newbill asked Petway and Commissioner Susan Hartley to get with JEDC staff and come back next month with a report the Commission can hear and possibly vote on.
Based on what both sides have said so far, Petway and Hartley have a lot to consider in a short time.
At issue is an 80-job shortfall that’s a result of Publix and Hollywood Video failing to create and maintain 150 full-time jobs by March 31 — a clawback within the original Gateway project contract which was started in 1993, approved several years later and amended in 1999.
“I was a big supporter of this project when I was on the JEDC before,”said Petway. “But I don’t feel comfortable supporting this clawback change. I need more information before forgiving over $90,000.”
The developers claim the City never made good on the entire $5 million in assistance promised when the project was in its infancy. Lewis said the City asked him to only take $4.5 million so they could use the other $500,000 to demolish the Holiday Inn on Golfair Boulevard. The City didn’t use all of that money and Lewis contends they also didn’t give Gateway what remained. He also maintains the entire shopping center, with Publix serving as the impetus, has created far more than 150 jobs and the clawback should be rescinded.
“There have been a number of leases that would not have come without Publix,” said Lewis. “We regret there have been any problems, but we feel we have done a good job. When we took over only 23 percent of the center was leased to about 40 stores. Now, it’s 85 percent leased to 105 tenants. I think we’ve lived up to everything you wanted us to do.”
Kirk Wendland, executive director of the JEDC, said he sees Gateway’s point, but the contract doesn’t address the rest of the shopping center.
“In the contract, it’s [the clawback] more of a performance requirement. If they don’t make it, then we have to enforce the clawback,” said Wendland. “In this case, it’s 150 jobs. Gateway feels there are more jobs than that out there.”
Should the JEDC elect to waive the clawback, both Wendland and Hartley believe the decision could set a dangerous precedent for the future. They both fear, to some extent, that every business that fails to meet a performance requirement will be able to point at this case — especially when it’s just a few jobs and a minimal dollar amount.
“No question we’ve had a lot of discussion internally about that,” said Wendland. “No question we have given it a lot of thought.”
Wendland said he hopes the JEDC understands that the clawback should only be waived if Gateway can prove unique circumstances made creating 150 new jobs difficult to impossible.
Hartley said she has two concerns. One, too many companies aren’t reporting their progress to the JEDC and, two, because Jones is involved and the center is good for the surrounding area, the decision will be difficult.
“My concern goes back to when we presented our annual review, nearly two-thirds of the companies did not respond,” said Hartley. “The concern is that many are not being regulated as they should. I wonder, did they really take the validity of the project requirements seriously? The organization [the JEDC] is so young, we are just getting to the point where projects are maturing.
“My other problem is, I need to remove the names Gateway Mall and Carleton Jones from the picture and just look at the issue. Carleton Jones is an outstanding business leader in our community and there has been a big impact by Gateway on the community. It’s hard to not take that into consideration. There is pressure to reconsider it.”