Vincent Safuto’s Weblog

Notes and observations

Another economic development scam falls apart

When times are tough and you have millions in grant money sitting around for economic development, it’s easy to fall for the lure of the economic development con man.

He rolls into town and promises everything to everybody.

Want jobs? You’ll have them.

Need a tenant? I’ll sign a long-term lease.

Got cash to give to me? I’ll take a check.

I don’t seem to have enough cash to get started? Fear not, I have investors in Minnesota, oh, I mean, investors in Singapore, or maybe it’s Albania?, whose identity I can’t disclose who’ll lend me $20 million.

You insist that I meet your requirements before you disburse the money? Oh, if you want to be “that way” about it, I’ll still do the deal.

I think the word is getting out about the Bradenton Area Economic Development Corporation, and it’s that they’re the biggest bunch of suckers since that lollipop truck overturned on I-75.

Sharon Hillstrom, CEO of the EDC, gushed like mad over the wonders that Major League Football would bring to the area. As I mentioned before, and before, and before, this bankrupt pseudo-football league is run by people who are adept at making economic development jumps to different parts of the country, making wild and vague promises, and then walking away, leaving vendors and lenders in a pinch and seeking legal relief.

It was hardly a surprise when the league, after holding tryouts, canceled its inaugural season and then announced that it was all part of the big strategy, and then this past week it was revealed that the league has been living “on the arm” at Lakewood Ranch, and the landlord decided to make a move and file eviction papers.

(You can follow the story at the newspaper where I work, the Bradenton Herald.)

The Bradenton EDC managed to avoid being taken in the Sanborn Studios scam, but remember that they fell for the Gulf Coast Swords hockey team deal, the rowing competition and now Major League Football.

What’s next? Cat racing?

June 25, 2016 Posted by | Living in the modern age, The business of sports | , , , , | Leave a comment

Airport and sports games enthrall municipalities

It was hardly a surprise when the news came that Major League Football, the bankrupt entity that has not produced one single down of professional football in several years of operation, has found a new home in Lakewood Ranch.

The rumors that it would settle here made several economic development officials in Manatee County nearly wet in the pants, as sports is a big deal to them and is a good way to spread excess government money in the name of creating jobs that somehow never get created.

The league is promised more than $200,000 if it creates a certain number of jobs that pay a certain salary. Given the track record of its personnel, we can bet that money might never get paid because most of what I read in the excellent articles in the Bradenton Herald and Sarasota Herald-Tribune was basically corporate jawbone. There was a lot of talk about talks about deals with various entities, but all – according to the mouthpiece for the league – are in varying stages.

Quite often, organizations that are financially bereft will try to buffalo the media with this kind of chatter in an effort to conjure up “discussions.” These discussions rarely go anywhere and usually there is a point where the entity closes up shop and leaves town, often leaving rent and salaries unpaid.

The brass talk of “moving in a new direction,” which means finding new municipal suckers to promise them money to relocate their headquarters. And the cycle begins anew.

I will note that the EDC in Manatee County isn’t totally oblivious. As I mentioned in my last post, Sarasota County’s Economic Development Corporation got lit up in the Sanborn Studios disaster because it handed over money upfront. If you at least force a company to do what it promises to do before it gets the government money, well, you’ve accomplished something.

Manatee learned what Palm Beach County learned years ago about funding companies that move to your area: make them wait to see if they’re viable before you start handing out the cash.

Come fly with me
A few months ago, Lakeland was all agog at the possibility of airline service at the airport.

Like many Florida cities, Lakeland has a municipal airport with plenty of private airplanes and businesses, some of them aviation-related, and a terminal but no commercial airline service, though it can handle some pretty big airplanes.

The trouble is that airline service to these mid-size cities is just not a profitable proposition. In addition to the higher cost, there is the lack of direct flights to anyplace like Washington, D.C., New York City, Chicago or Los Angeles – which you can get at a major airport – and the airline might have the name of a major like Delta or American but the flight might be operated by a hidden subsidiary.

Lakeland was like a lot of cities that fell for Falcon Air’s pitch. As usual, when the initial announcement was made there was a lot of talk about “talks” that still had to take place, and the city of course had to pony up some cash, but even though Falcon Air had a reputation that stank to the high heavens it looked like a done deal.

The trouble is that while these airlines might fly some leased jets of the MD-83 class instead of twin turboprops, they also are using underpaid flight crews and the maintenance might not be up to snuff. Bear in mind, too, that Florida is especially susceptible in the afternoons of summer to some pretty frightening weather, and that can affect arrival times.

Customers often complain when these airlines come to town, and many folks simply factor in the fact that they’ll have to drive to Tampa International or Miami International to get the flights they want.

Falcon Air came with a lot of baggage. One of its planes was repossessed at the Lakeland airport, and there were stories about unpaid wages, sexual harassment and corporate executives with criminal records.

It was hardly a shock to me on a recent night when the news came in that its deal with Lakeland was off. I’ve seen cities like Gainesville and Ocala go to unbelievable lengths to get and keep airline service, so I know it’s not easy.

Often, such service is accompanied by threats that if enough people don’t fly on the route, the service will end. Sometimes, people have found themselves stranded as an airline goes out of business in the middle of their trip. Believe me, it’s happened to Gainesville.

Deals with marginal entities might make a county or city economic development group look like it’s doing big things, but the hit to their reputation is massive when things fail. I wish our elected officials and the EDC officials could see that.

June 10, 2015 Posted by | Living in the modern age, The business of sports | , , , , , | Leave a comment

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.

September 8, 2012 Posted by | Life lessons, Living in the modern age | , , , , , , , | Leave a comment