2001 incentives for economic development implementation report

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JACKSONVILLE COMMUNITY COUNCIL INC.2434 Atlantic Boulevard, Suite 100Jacksonville, Florida 32207(904) 396-3052 Fax (904) 398-1469e-mail Lashun@lccLorg

INCENTIVES FOR ECONOMIC DEVELOMPMENT STUDIMPLEMENTATION TASK FORCE

FINAL IMPLEMENTATION REPORTto theJCCI B oard of D irectors

January 191 2001


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2434 Atlantic Boulevard, Suite 100Jacksonville, FL 32207(904) 396-3052 Fax (904) 398-1469E-mail ben@jccLorg

JACKSONVILLE COMMUNITY COUNCIL INC.

INCENTIVES FOR ECONOMIC DEVELOPMENT STUDYFINAL IMPLEMENTATION REPORTJanuary 19, 2001

JCCI released its study on Incentives for Economic Development at a luncheon on June 22, 1998.In September 1998, an implementation task force was formed with Henry Thomas as its chair. Henryserved as the chair of the study committee.Implementation effortsStudy implementation got off to a fast start. The Jacksonville Economic Development Commission(JEDC) submitted a policy statement to the City Council in March 1998, attached to a resolution thatrequested that the City Council approve the policies as adopted by the JEDC. It was agreed by the CityCouncil, with Jim Overton as president, that a determination on that resolution would be withheld until theJCCI study was released, at the end of June 1998. With the reshuffling of Council assignments at theend of June, Denise Lee stepped in as the new Finance chair. She sent a letter to JCCI, stating that theywould be considering the JEDC resolution in committee, and asking for input Henry Thomas presentedJCCI's recommendations to the committee, indicating that while the policies as presented by the JEDCare generally consistent with the JCCI study recommendations, therearr::!~~r::!:ifJWhigh_Jh~_t!dgy_-----recommendations-gofurtherthanthepolicles-suggestetfbYJEDC:-- -----After the presentation by JCCI, Denise Lee formed a SUbcommittee to look at the JEDC policies in greaterdetail, chaired by Dick Kravitz. The subcommittee brought together the City Council, JEDC, JCCI, andthe Council Auditor's Office to examine the policy in detail. As a result of those efforts, a revised incentivepolicy was presented to the City Council and adopted on April 8, 1999. This policy addresses JCCI'srecommendations, and at t imes included the exact language from the study recommendat ions.In addition, the JEDC and the Mayor's office reviewed all of the recommendations, and took action onmany of them. Of the 18 recommendat ions in the study, 14 were fully implemented, 2 were partiallyimplemented (one of which was referred to another implementation task force), and 2 were notimplemented.Recommendation 1:TheMayor of Jecksonville should immediately develop and recommend andthe Jacksonville City Council should review and approve a comprehensive, long-term vision andstrategic plan for economic development in the economic region centered on Jacksonville. Thestrategic plan should include policies to guide the use of incentives in JacksonviIJe, consistentwith the vision, as well as information on the competitive strengths and weaknesses of theregion's economy, which is needed to guide decision making on incentives.The Mayor and the JEDC have adopted a strategic plan to guide economic development in Jacksonville.The plan includes policy statements regarding incentives, as well as targets and measurable outcomesfor determining progress toward that vision.

Implemented

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Recommendation 2: The Duval Delegation should take the lead in obtaining Florida legislativeapproval to create a regional economic-development commission, which should begin operationsby 2000. This new entity should provide a col/aborative structure for region-wide economic-development planning and marketing, including the coordinated use of incentives. It shoulddefine the region broadly.In 2000, JCCI released a new study, Improving Regional Cooperation in Northeast Florida. This studyalso called for the creation of a regional economic-development commission. Cornerstone regionalmarketing efforts have been joined by St. Johns County, creating a strong regional entity for collaborativeeconomic-development marketing; however, coordinat ion of economic-incentive policies has not yet beenvested in a formal body. Informally, Clay County's recent use of economic incentives was supported bythe JEDC, which provided assistance and support in Clay County's efforts.The JEDC also has a Town-Gown grass roots regionalism study in progress.The Improving Regional Cooperation Implementation Task Force will continue to work with thisrecommendation.

Partially implementedRecommendation 3: The City Council should fulfill its role aspolicy maker for Jacksonville'seconomic development efforts and use of incentives. With recommendations from the Mayor andthe jacksonville Economic Development Commission (JEDC), and with broadly based publicinput, the Council should develop and enact a strong set of palicies that will clearly guide theJEDC's review and recommendation process, as welJas the Council's own decision makingprocess.The City Council adopted an economic incentive policy on April 8, 1999. This incentive policy wasadopted by resolution, and not by ordinance, meaning that the policy does not take on the force of law.Economic incentive packages that violate the policy would still require approval by the City Council, as alleconomic incentives do.

ImplementedRecommendation 4: TheMayor should recommend and City Council should adopt and abide byspecific policies that target the use of incentives in ways that:

support and enhance the implementation of sound growth-management practices andpolicies;

do not negatively affect funding available for public education in Duval County, eitherdirectly or indirectly;

minimize unfair competitive disadvantage for similar local companies not receivingincentives; and

produce significant and tangible benefits for the local community. Specifically, policiesshould give a high priority to projects that: generate a large economic return in terms of high-paying jobs and new capital

investment. such as those proposed by the targeted industries listed in the recentChamber of Commerce/Jacksonville Electrical Authority study; bring to the region high-profile companies with national name recognition that will

enhance the area's image, while also generating specific economic benefits; emphasize hiring and training of aI/ or most employees from the local labor force; include significant commitments of community service, such as apprenticeship

programs or partnerships with local schools; expand existing, local companies that have already invested in the local economy;

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target new development and redevelopment in specific low-income neighborhoods(rather than broad geographic areas such as the Northside or Westside) that havestagnated from lack of economic development; and/or

provide significant new public infrastructure that offers widespread and lastingbenefits to the surrounding community.

Recommendation #4 was agreed to and the targets included in the policy adopted Aprrr 1999. The JEDCgenerally targets broad areas on the Northside, Westside, and downtown, but has also begun to targetspecific neighborhoods. For example, the Small Business Facade Renovation Grant Program wasdevelo~ed in March 2000. This program directly targets two neighborhoods, specifically Main Street from1st to 8 h Street and the zs" and Chase area.

Implemented

Recommendation 5:As the Jacksonville Chamber of Commerce and other entities undertake theirlocal economic-development marketing efforts, they should take care not to pre-empt thesubsequent public decision-making process of the JEDCand the City Council by initiating offersof or negotiating about possible incentives to specific companies.The Jacksonville Chamber of Commerce and the Cornerstone regional economic-development marketingefforts have specif ic policies in place which clarify the respective roles of economic-developmentmarketing and the public decision-making process of economic incent ives.

ImplementedRecommendation 6: The JEDCshould minimize secrecy in its decision-making process by makingpublic, as early as possible, information about proposed incentive packages. This is important toreduce the possibility of companies playing Jecksonvilte off against other communities and toensure public awareness and understanding.JEDC agreed to the importance of complying with "sunshine" laws and giving ample opportunity forcommunity input. The expanded business section of the Florida Times-Union has provided additionalcoverage of proposed incentive projects. Public awareness of economic incentives has increased in thecommunity.

ImplementedRecommendation 7: TheJEDCshould set priorities, based on the City's policies for targeting, andformally weight its evaluations of incentive packages according to these priorities. Periodically,the JEDC should update its priority and weighting process, based on the City's changing policiesand on the success of the process in reflecting these policies in practice.The JEDC has formally outlined its priorit ies for economic incentives in the Incent ives Policy document.Incentive projects are evaluated in light of these priorities; in some cases (such as projects south andeast of the river) if a project does not fit with the JEDC's priorities, they are ineligible for city incentives. Inaddit ion, the JEDC has out lined internal priorit ies and outcome measurements, and self-evaluates itsannual progress according to these outcome measurements.

ImplementedRecommendation 8: Florida Community Col/ege at Jacksonville (FCCJ) should continue andexpand its services, as an incentive for economic development, to provide workforce training forthe employees of companies expanding 10caJlyor moving to the region.

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FCCJ has continued to provide workforce training, and has expanded its programs to include theAdvanced Technology Center along with its other training programs and the Urban Resource Center. TheAdvanced Technology Center will provide programs in aviation and aerospace; medical equipment andtechnologies; motor vehicle parts and accessories: pharmaceuticals and biotechnology; and electronicsand semiconductors. The number of vocational-training certificates awarded by FCCJ rose by 38 percentbetween 1997 and 1999.Implemented

Recommendation 9: The JEDCshould expand the group of ex-oiticlo members it invites toparticipate regularly in its meetings, to ensure coordinated decision making and broadlybased input. Specifically, the JEDCshould immediately add the fol/owing: . a representative from the Duval County Public Schools to ensure input about concernsrelated to public education; a representative from each of the City's six Citizens Planning AdviSOryCommittees(CPACs). The CPAC representatives should keep the JEDC informed of neighborhoodw

based issues in their planning districts. Theyshould also keep their CPACs informedabout the economic-development projects and incentive packages being considered bythe JEDC; and

representatives from local governments in surrounding counties, to ensure regional input.The JEDC feels that with a representative from the Duval County Public Schools on the technicaladvisory board and the inclusion of the Planning Department, both the school system and theneighborhoods were represented.

Not implementedRecommendation 10: The JEDCstaff should conduct a detai/ed analysis of the potential benefitsand costs of aI/ proposed incentive packages before submitting them for JEDCconsideration.TheJEDCshould require that each enelysts be conducted using a sophisticated, dynamiceconomic-enetysls model for the region, supplemented by modules that measure indirect benefitsand costs, including secondary publlc-service-delivery costs and environmental and social, aswell as economic factors.The JEDC uses the REMI computer model for analysis of incentive projects. In addition, the neweconomic incentive pollcy states: "An analysis of how the project meets community economicdevelopment goals wilJ be conducted prior to any award of incentives. Indirect benefits and costs,including secondary public-servlce-dellvery costs and environmental and social factors, wiU beconsidered."

ImplementedRecommendation 11: The JEDCshould fully implement, as soon as pOSSible,a more effectiveprocess of ongoing performance monitoring for all local projects receiving incentives, including,wherepossible and legally allowed, incentives funded by federal and state governments. TheJEDC's monitoring should continue to compare direct company performance with provisions indevelopment agreements requiring newjobs, new capital investment, and community serviceactivities. It should be expanded to cover indirect costs and benefits, as identified in the analysesdone before incentives are approved.The JEDC agreed that more intensive monitoring was needed. The new economic incentive policystates: uMONITORING: Companies receiving incent ives will agree to aggressive monitoring of all

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company obligations relating to the incent ive award, including: verification of number of jobs and averagesalary, verif ication of capital investment "" [and] verification of all other commitments agreed uponbetween the City of Jacksonville and the company,"Implemented

Recommendation 12: The City Council should approve incentive packages that promise new jobsand capital investment only if incentive payments are made available after JEDC monitoring hasverified required performance. It should approve incentive packages with up-front benefits only ifthey include "clewbeck" provisions that ensure repayment to the City if projects do not achievetheir performance goals.This recommendation was agreed to, and is being enforced, as evidenced by Coach Leather paying thecity $163,000 in February 1999 as a "clawback" for faifing to meet promises in its incentive agreement.The new economic incent ive policy states: "CLAWBACKS: Clawback (payback) provisions are utlllzedwhen a company receiving incentives does not meet certain contractual performance standards outlinedin the redevelopment agreement. The clawback may result In a full or partial return of previously awardedfunding or a reduction of future funding. All of the major incentives provided by the City should have anassociated Clawback provision which is tied to a measurable performance standard, such as jobs and/orcapital investment. Clawback provlslons, as out lined In the redevelopment agreement, shaJJbe closelymonitored by the JEDC and strictly enforced."

ImplementedRecommendation 13: The Mayor of Jacksonville should take the initiative to streamline permittingand regulatory procedures related to economic development, without jeopardizing effectiveenforcement of legal requirements and standards. This initiative is desirable to be able to offer anonfinancial incentive for all local economic development, as well as to relieve pressures foroffering financial incentives to counteract the negative effects of slow and complex procedures.In his initiative, the Mayor should make efforts both:

+ to ensure that City agencies develop and implement streamlined procedures for allpermitting; and

to establish andmaintain a close coordinating relationship between City and Stateagencies designed to develop and implement streamlined procedures seamlessly betweenthe two levels of government. .

In September 1998, the City Council passed an ordinance for "expedited permitting" for companies that fitcertain criteria (creation of a large number of new Jobs, high infusion of capital, or otherwise meetingJEDC or State requirements.) This is designed to serve as a nonfinancial incentive for economicdevelopment; for example, AOL received expedited permitting assistance in March 2000 to develop anew call center, but did not receive financial incentives for the project. The Mayor of JacksonvUJe hasincreased efforts to streamline permitting, and in discussions with the Mayor's staff the JCCI task forcewas told that the problems reported in the study were largely corrected with a complete revamping of theBuilding and Zoning division in Spring 1998. In addition, the Mayor set up a process to hire as-neededassistance for the BulJding and Zoning division on a more flexible basis, consolidated the physicallocatlon of the city's permitting act ivities, and placed permit ting information and tracking on the city'sweb page to simplify and streamline the process. Permits can now be puffed over the Internet; the city'sgoal is to issue ten percent of all permits over the Internet by the end of 2000, and by March 2000 fivepercent of aJipermits were being issued on-line. In March 2000 the State of Florida followed suit with awebsite designed to streamline the permitt ing process for state permits.

Implemented

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Recommendation 14: The JEDC should more extensively utilize the research capabilities of localcolleges and universities as a means of strengthening their analyses of the potential benefits andcosts of proposed economic-development projects and incentive packages.The JEDC has agreed in principle to more extensively utilize the research capacities of local colleges anduniversities. While the JEDC has implemented the Town Gown program for general research projects,they feel that using the universities for individual projects would not be effective due to the timing,consistency of analysis and confidentiality requirement of projects. University students would be bettersuited for research projects (e.g. flex time study) than individual projects.

Partially ImplementedRecommendation 15:The Council Auditor's Office should conduct periodic interim andpostaudits on all uses of incentives approved by the City Council to evaluate their actual benefits andcosts, as compared to those projected. Toensure public accountability, the Council Auditorshould regularly report the results of these audits to the City Council.The Council Auditor's Office worked with the City Council, JEDC, and JCCI on this recommendation.They agreed to take a stronger role in monitoring incentives, and will work with the JEDC on itsmonitoring and clawback efforts (see recommendations 11 and 12.)

ImplementedRecommendation 16: TheMayor should release an annual "report card" to citizens on the City'suse of incentives during the previous year, in order to increase public awareness andunderstanding. The report should compare projected benefits and costs with those actuallyproduced for both ongoing projects and those completed during the year. It should also identifythe City's administrative costs for the negotiation, analysis, approval, and monitoring of incentivepackages.The JEDC has created an annual "report card" document entitled "JEDC: An Investment In Our Future."The current report card lists all projects since 1996, their costs, projected benefits, and actual benefits asof December 31, 1999.

ImplementedRecommendation 17:The JEDC should takesteps to inform the public more effectively about itsrole in economic development and about Jacksonville's use of incentives. Specifically, the JEDCshould:

+ more clearly summarize and more widely disseminate information about the projects it isconsidering, the proposed incentives included in these projects, the recommendations itmakes to the City Council, and the rationale for these recommendations; and

develop and implement public-information strategies designed to increase publicawareness and understanding about the uses of incentives and their potential costs andbenefits. Thesestrategies might include activities such as a speakers bureau designed toreach out to community and grassroots organizations and periodic economic summits.

The JEDC has published a booklet caIJed "A Guide to Understanding Economic Incentives" designed tohelp citizens and community groups understand the use of incentives and how citizens can have a voicein the process. This booklet was distributed widely, is available at the JEDC offices, and is available on-line at the JEDC website. Information about proposed economic incentive projects is published in theTimes-Union business section, and the projects are usually discussed in detail on those pages.Information about economic incentives in general and specific projects in particular is now being widely

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disseminated to the public, and the JEDC has public-information strategies in place to continue to providegreater public awareness about the use of economic incentives in Jacksonville.Implemented

Recommendation 18: The Jacksonville City Council should approve a resolution calling on theU.S. Congress to eliminate the competitive spiral that results from the use of incentives by stateand local governments. 'This recommendation was not implemented. Currently, the competitive spiral is also being driven byeconomic regions outside of the United States, which also provide economic incentives to companies.National discussion about the negative effects of economic incentives, led by a series of TIME magazineart icles, failed to provide a nat ional consensus on this issue.

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2001 incentives for economic development implementation report

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