This post is part of an occasional series examining state and local reports evaluating economic development incentive programs. Here we look at the January 2014 report, “Florida Economic Development Program Evaluations – Year 1,” from the Office of Program Policy Analysis and Government Accountability & Office of Economic and Demographic Research in the Office of the Florida Legislature.
Here are some takeaways on 4 themes that caught my attention.
1. A good monitoring program does not come cheap – or easy. Administration of the 7 incentive programs reviewed in this report involved 4 different departments (Enterprise Florida, Department of Economic Opportunity, Department of Revenue, and Department of Financial Services) and cost approximately $6.2 million over 3 years.
The Department of Economic Opportunity accounted for $4.4 million of the total because it conducts a formal due diligence process for incentive applicants; reviews and approves applications; develops the performance contracts; and reviews and validates documentation from companies on compliance with contract terms.
2. Performance varies by incentive program. 192 projects across 7 incentive programs over the three-year review period received a total of $668.9 million (including money received in prior years). These projects generated 40,274 new jobs (also including jobs created in prior years), exceeding the total number of jobs required under the performance contracts.
However, results varied by incentive. For example, the Qualified Target Industry tax refund program exceeded the number of jobs required, while the Quick Action Closing grant fund and Innovation Incentive grant program have lagged. However, many projects are still active (and may be “active” for years) and may meet requirements in the future.
3. Business surveys don’t answer the question of how important incentives are to location decisions. A survey of businesses receiving incentives that was conducted as part of this analysis yielded confusing responses on how important incentives were to their investment decisions:
- 55% of the businesses cited state economic development incentives as one of the top three factors affecting their decision
- 74% said incentives were just one among many factors affecting their decision
- Yet 64% said they would have proceeded with the project in Florida without the state incentive
- And 58% of projects were not new to Florida at all, but were either an expansion or retention of an existing business
Note: We see this a lot. Businesses cite a variety of factors, including incentives, when explaining a location decision. The exact role the incentive plays, and whether it did in fact tip the decision, is nearly impossible to determine. Asking businesses does not seem to help answer this question
4. Legislatures are prone to expand incentive program eligibility. Incentive programs are not static. Even over a three year period, the legislature introduced dozens of modifications to Florida’s incentive programs, often expanding eligibility and usability well beyond the original intent – quite possibly without understanding the fiscal implications of their actions.
This is a good report on Florida’s incentive program outcomes and processes, and I’ve just touched on a few topics here. The full report, which you can access here, offers more detail on each of the individual incentive programs and issues several recommendations to improve Florida’s monitoring and evaluation processes.
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