Vincent Safuto’s Weblog

Notes and observations

In Florida, economic development schemes leave lives in tatters

It used to be that the Sunshine State was the home of land and real estate schemes designed to separate the gullible from their money.

“Florida swampland” was pitched to northern investors as a can’t-miss proposition, and there have been numerous booms and busts in the state’s real estate markets through the decades, starting in the 1920s and continuing into the 2000s.

At various times, various regions were said to be the new boomtowns, including Immokalee, where it was rumored in the 1920s that Henry Ford was going to build a new city with a production plant. Actually, according to a fascinating book, “Fordlandia,” the city ended up in a remote part of Brazil, but now it is mostly abandoned.

Other areas of Florida where land deals proliferated included the city of North Port, which was laid out in the 1970s and pitched to mostly northeastern folk as being near Port Charlotte and Sarasota, while actually a long distance away. Only recently has North Port come into its own, though its growth was shattered by the Great Recession, leaving the city and its citizens in financial ruin.

Some boomtowns have had staying power. Orlando has ridden the Disney boom up and down, and it shows no signs of going away as the attractions business is popular. The Villages has proven to be a retirement community that probably won’t disappear anytime soon, either.

But it’s in the effort to create good-paying jobs that Florida has really gone through some wrenching boom and bust cycles. Different areas have latched onto different schemes, to the detriment of working people in Florida and the benefit of local elected officials.

I suppose my mind was directed this way because of the news today (Friday, Sept. 7, 2012) that Digital Domain’s facility in Port St. Lucie is closing down and its 300 employees, many hired within the past year and even the past few weeks, are going to lose their jobs.

According to The Palm Beach Post:

“State, Port St. Lucie and West Palm Beach officials hoped Digital Domain would spark a new animation industry in Florida. They promised the company $135 million in cash, financing, land and tax credits. West Palm Beach has promised Digital Domain $10 million in cash, downtown land valued at $9.8 million and a bond issue worth $15 million. But the city has paid none of those incentives so far.”

In addition, the state kicked in $20 million upfront, bypassing Enterprise Florida, which found problems with the plans for the company.

Ahhhh, there’s no business like show business like no business I know.

Virtually every city council, city commission or county commission in Florida has imagined that their area is the perfect location for something related to making movies or TV shows, and quite a few have fallen for the glitz and glamour of Hollywood, and have been conned by a smooth-talking operator into committing public money to some sort of economic development scheme involving movies.

In fact, it amazes me that local elected officials are oblivious of the failures of such schemes elsewhere in the state. That’s not to say that people go from region to region pitching doomed schemes, but that a similar scheme may pop up in one area, and then another, and then another.

Sanborn suckers
As I said, movie and TV schemes are a regular component of the Florida economic development environment. In Sarasota County, the Sanborn Studios experience should be a case study of how an economic development scheme can go awry. In this case, a local person who had hit it very big financially pitched the idea of building a film studio in Lakewood Ranch, which is on the border of Sarasota and Manatee counties.

The Bradenton Herald covered this story spectacularly.

Founder Ken Sanborn claimed that he had a can’t-miss TV series called “Miami 24/7,” about competing TV news helicopters, in which Sarasota would stand in for Miami. The series would not be on U.S. television but would be sold to overseas TV.

Of course, no economic development scheme can happen without government money, so Sanborn managed to gull the Sarasota County Commission into paying $650,000 upfront with the promise of more than 100 jobs paying around $70,000 a year. Needless to say, he would need people trained in the film arts, so Sanborn swung deals to have local educational institutions offer compatible training at a high cost and fueled by student loans.

As the dates for the start of production of “Miami 24/7” slipped, excuses flowed out of Sanborn Studios. An excellent story about the backgrounds of some of the people involved appeared in the Bradenton Herald.

In another story, the paper noted that the company had requested from Sarasota County more money, $500,000, for “post-production” equipment, and that the county was re-evaluating the company.

Soon after, the “Behind the scenes” story in the Bradenton Herald (mentioned above) revealed that not much was going on at Sanborn Studios. On a regular working day, the parking lot was nearly deserted, and the reporter learned that of 21 people employed, several had been laid off. Of course, company executives tried to spin just about everything from the failure to hire enough people to justify the incentives to the failure to start production on “Miami 24/7” to the recent layoffs to changing “Miami 24/7” from an episodic TV series to a movie – to land some state movie making incentives – as a sign of the strength of the company.

After that, Sanborn Studios canceled plans to buy land for a new facility, left its leased space by the Sarasota-Bradenton International Airport and news of the company stopped.

Maybe it’s a good thing that before Sanborn Studios died early in the process. The county is out the $650,000, and the state lost some money, too, but not as much as was lost with Digital Domain.

The danger of giving money upfront to businesses that make grand promises has been shown countless times. Back in the 1990s, when Palm Beach County was trying to attract businesses, it handed out money on a wing and a prayer to companies, and the results were catastrophic.

After several well-publicized failures, officials became more skeptical and questioning of companies that got incentives. Palm Beach County officials turned down most incentives for Digital Domain, though apparently the city of West Palm Beach took a small hit. But the person in charge of Digital Domain (until Friday, at least) John Textor, simply took his dog-and-pony show to recession-battered Port St. Lucie, and it looks like that city is on the hook for interest on the bonds it floated to build the company’s soon-to-be-closed headquarters.

The lesson here is that business development is not a slam-dunk, and government incentives are not a reliable indicator of the future success of a business.

It’s a pity that even with all the examples we’ve seen, local elected officials in Florida have yet to learn that lesson.

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September 8, 2012 - Posted by | Life lessons, Living in the modern age | , , , , , , ,

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