Incentive Poker

Winslow LifeRaft is a great company with a nifty product, commitment to craftsmanship and—despite the recent layoff of 40 of its 100 employees—good growth prospects. The company says it will boost its payroll to 175 employees within five years. Winslow has a long history in the region. Company president Gerard Pickhardt lives in Sarasota, and he sounds like a really nice guy. Winslow is a perfect fit for Sarasota’s urgent interest in diversifying its real estate and retail-heavy economy.

And Winslow is also Exhibit A in the case of how taxpayer-funded corporate incentives should not be used.

Even before an Aug. 24 public referendum about whether to offer property tax abatements to companies that create jobs, Sarasota was aggressively using incentives to convince companies to relocate or expand, resulting in two companies hopping county lines for cash. Yes, Sarasota and Manatee counties are discussing how to jointly prevent company abuse of job growth incentives. But if this ballot initiative passes, we’d better keep track of its effects. As the case of Winslow shows, all counties within commuting range should establish agreements that they won’t poach from one another.

When I first heard the news of Sarasota County luring Winslow back with $650,000 in cash, I immediately remembered the unsolicited rant I got from Winslow CEO Fred Shoaff in 1998. Shoaff was upset about $125,000 in impact fees Sarasota County would have charged for a new manufacturing plant, while fining the fast-growing company for code violations in its cramped quarters. He had a case. The county couldn’t care less about a small manufacturer back then.

The company’s repeated dipping into taxpayer subsidies since 1998 discredits the case, though. A few months after our conversation, Shoaff and his partner, Gerard Pickhardt, moved their manufacturing business from Osprey to DeSoto County. In addition to a waiver on impact fees, the company got five years of zero property taxes, subsidies for employee training and exemptions on building regulations.

Neither DeSoto officials nor Pickhardt could remember whether Winslow got any cash incentives in 1998.

Now, a decade later, Winslow is offering to move back to Sarasota, into an existing building at Lakewood Ranch. Here’s the deal: Sarasota pays the company $650,000 in cash, half payable after 30 days of closing on the building, the other half a year later, tied to maintaining the 60 jobs the company brings and adding 115 jobs within five years. If the company doesn’t reach the 175-employee mark, it must pay back the pro-rated amount for the number of employees below the target. That’s big subsidies for a small company.

But my bigger concern is the sorry show of recession-stricken counties tripping over each other, throwing around taxpayer dollars to land a company from another county in the region. Pickhardt’s jaw dropped when he saw the kind of offers his relocation consultant brought back.

Hardee County, among the poorest in Florida, tried to lure Winslow not only with free land; it even offered to construct a building. Charlotte and Sarasota were not far behind. When DeSoto County Coordinator Mandy Hines first learned about Winslow’s move in a letter from the Winslow consultant in June, she immediately got the county commissioners to approve a package that included

a cash incentive bigger than Sarasota’s $650,000.

At that point, Pickhardt was ready to bite into the sour apple of building a plant in DeSoto despite all the distraction, messiness and cost it would entail. Then the Lakewood Ranch building popped up, and Pickhardt jumped to Sarasota.

DeSoto’s Hines puts a happy face on the sad story, expressing relief that Winslow is staying in the region, and that the company’s 10 or 11 employees from DeSoto will be able to commute to their jobs. However, what kind of message does Sarasota’s signup bonus of $650,000 send to other businesses in the region? I predict that the Winslow incentive will speed up the merry-go-round of local companies hopping from neighboring county to neighboring county, trying to reap cash incentives each time they expand.

Pickhardt, by the way, expects to lose up to 80 percent of his production workers as a consequence of a move, because the commute is too far for them.

It seems we’ve swung from one extreme to the other—from bullying a small manufacturer to showering it with tax rebates and cash. What if Sarasota hadn’t waved the cash incentives and tax breaks in front of a company from a neighboring county? Most likely, Winslow would have stayed put and built a smaller facility in DeSoto, learning to work intelligently and efficiently within the constraints, staying lean, keeping its existing workers, growing incrementally, and building trust and commitment along the way.

What’s so bad about that?

We should focus on not letting them go in the first place. That’s where incentives make most sense. If counties continue to use incentives aggressively against neighbors, we should think about taking economic development functions away from counties and pool them in a larger region.