Greater Fort Lauderdale Alliance Analysis on Economic Development Incentive Programs and Strategies
May 24, 2011
The Greater Fort Lauderdale Alliance CEO Council issued the following news release today, May 24, 2011:
Greater Fort Lauderdale Alliance Releases Analysis on Economic Development Incentive Programs and Strategies: A third in a series of studies conducted on behalf of Greater Fort Lauderdale CEO Council
FORT LAUDERDALE, FL. (May 24, 2011) — The Greater Fort Lauderdale Alliance CEO Council has released a study evaluating the area’s economic development incentive programs and strategies, and how they compare with competing and market-leading approaches being employed by other jurisdictions, both within and outside the State of Florida. This study is the third in a series of studies aimed at understanding how to most effectively attract corporate headquarters facilities and other high-quality employers.
The first study, conducted by Moran, Stahl & Boyer, used demographic and other secondary research to evaluate the needs of headquarters operations and the assets Greater Fort Lauderdale/Broward County offers to those businesses. A second study conducted by Boyette Strategic Advisors provided specific recommendations around how to better prepare Greater Fort Lauderdale/Broward County for this recruitment effort.
This follow up analysis, conducted by Biggins Lacy Shapiro & Company (BLS), provides Broward County policy makers with specific strategies and tactics on how to retool their economic development incentives and enable the County to be more competitive in attracting and retaining jobs and investment.
The BLS report found that, given existing market conditions and budget deficits confronted by jurisdictions at all levels, an increasing number of counties are “upgrading” their economic development toolbox. This type of analysis is all the more pertinent and focused in locations, such as Broward, where important project opportunities have been lost to other locations, at least in part because Broward County is widely regarded as having under-powered incentives programs.
Current economic challenges create the context for the consideration of alternative economic development strategies. Additionally, market dynamics can further complicate the challenges facing economic development professionals, causing existing incentives programs to fall out-of-step with competitive conditions.
Jay Biggins, Executive Managing Director of BLS, said “Our analysis found that the county’s current incentive ordinance requires a minimum of 100 jobs for eligibility, whereas the State of Florida and many competitor counties require only 10 jobs. In addition, the ordinance’s return on investment formula focuses on direct ad valorem property and sales taxes generated, disallowing the inclusion of other significant indirect impacts that a relocation or expansion project would bring to the area. Expanding the scope of analysis to include a more comprehensive and thorough perspective on actual economic and fiscal impacts will bring Broward County more into the emerging mainstream of economic development practices, better inform the public dialogue on the costs and benefits of incentives as economic development tools, and equip the County to compete more effectively in a challenging market. Our report observed that, while a new ordinance being considered in Broward is a step in the right direction, it may not go far enough to take fullest advantage of some of the innovations employed by states and localities around the US, and may fall short in resolving Broward County’s most critical issues. Ultimately, the Board of County Commissioners has final approval or rejection of a proposed incentive package based upon the County Commission’s priorities and objectives. In addition, all incentive projects are performance-based and the company must meet all terms and conditions to receive the incentives.”
“Today’s highly competitive economic development environment requires that Greater For Lauderdale and Broward County have an enhanced incentives toolkit that recognizes both the direct and indirect impacts that a potential corporate headquarters expansion or relocation project provides to the entire community,” said Ray Ferrero, Jr., Chairman of the Alliance’s CEO Council. “The BLS report lays out an excellent roadmap for our municipal leaders to follow in terms of both minimum job creation numbers for incentives eligibility and return on investment analysis that, if adopted, can ensure that we are not eliminated early on but remain in the hunt as long as possible.”
The recommendations are guided by these basic priorities.
• Job Minimum: Reduce the new job minimum from 100 to 10 to be consistent with the state programs and competitive with other FL counties.
• Fiscal Impact Model: The most vital first step is for the county to either contract an independent university-based economist or utilize IMPLAN model in calculating project impact.
• Focus on Jobs: Incentives limited to the amount of ad valorem tax revenues fail to appreciate the revenue impact of jobs, including local stimulus and reduced vacancies, which enhance other revenues, accelerate new construction and promote environment of improved economic well-being.
• Incremental Revenues: Allow incentives to be based on “retained” revenues to defend against revenue deterioration during times of high vacancy and declining property valuations.
• Extend Term: Enable a longer term to achieve ROI on incentives (at least through end of lease term or term of job retention commitment).
• Project Capital Investment Requirements: Reduce minimum capital investment to facilitate diverse projects.
• Sustainable Funding Source: Promote adoption of a dedicated sales tax increment to assure long-term financial capacity to be competitive.
• Up-front Grants: Sound contractual protections can enable the County to use up-front grants to be more competitive.
• Flexible Workforce: Update definition of a “job” to include contract employees and FTEs in order to stay relevant and competitive with current workforce trends and competing jurisdictions.
• Flexibility in Incentives Criteria and Structures: Competitive market conditions and the diverse needs of companies seeking new locations require flexibility and creativity in customizing solutions around to the requirements of each project. To the extent possible, arbitrary parameters and restrictions in the ordinance should be minimized in favor of tasking experienced economic development professionals to get deals done within broad priorities and goals.
“In 2010, the current return on investment analysis would not support providing sufficient incentives to attract a confidential headquarters relocation project of 100,000 square feet and 400 employees with average annual salaries of $93,000 plus benefits that was seeking to lease existing office space given the large inventory of available properties in the market. When this issue came to the CEO Council’s attention, we met with Jay and his team to develop a more comprehensive report that could offer new alternatives for the county’s consideration in modifying its incentive ordinance and avoid future such occurrences,” said Ferrero. “BLS’ understanding of the Florida state and local incentives market from such previous client projects as JPMorgan Chase, MetLife, Depository Trust & Clearing Corporation, Moffitt Cancer Center/Merck/M2Gen – along with their recent negotiations on behalf of Panasonic Corporation of North America’s new headquarters in Newark, NJ – brings an unmatched base of knowledge and experience to the table.”
Jay Biggins presented an overview of the report’s findings and recommendations to the Broward County Board of County Commissioners at their meeting on Tuesday, May 24th.
Biggins Lacy Shapiro & Company (www.blsstrategies.com) provides professional expertise and creativity in the field of Location Economics: the mix of specialized disciplines that enables companies and communities to plan and execute successful location strategies. BLS serves clients from a diverse range of industries, including Financial Services, Pharmaceutical/Biotech, Retail, Food & Beverages, Education, Media & Communications, and others. BLS has developed specialized capabilities in a range of projects including headquarters, data centers, research and development, shared services, among others. BLS assists clients with projects nationwide, with recent transactions in 40+ states throughout the US. BLS has coordinated numerous corporate incentives in Florida for many projects across multiple industries.
The Greater Fort Lauderdale Alliance (www.gflalliance.org) is Broward County’s official public/private partnership for economic development. Its mission is to lead Broward County in building a stronger and more diverse economy by stimulating the creation of new jobs and capital investment while facilitating the growth and retention of businesses in Broward County. Services offered by the Alliance include assistance with business relocation or expansion and site selection; incentive programs and information; market research; small, minority- and women-owned business assistance; and serving as a liaison for workforce development between educational institutions and the business community.
The Alliance’s CEO Council is currently comprised of 20 of the most prestigious private sector leaders in Greater Fort Lauderdale/Broward County. The primary objectives of the CEO Council are to market and promote Greater Fort Lauderdale/Broward County as a premier location for corporate headquarters and international/regional headquarters on a national and international basis, and to monitor Greater Fort Lauderdale/Broward County’s national external rankings and perceptions compared to its primary competitors to ensure continued favorability as a business location.