Are government tax incentives for businesses worth the investment? | News
JACKSONVILLE, Fla. -- City leaders in Jacksonville have been offering incentives with your tax dollars for years. It's a common practice in cities all over the country.
But do these breaks really benefit taxpayers in the long run? A new report shows some companies may not be keeping their end of the deal.
More than $100 million. That's the amount in tax, loan and construction incentives the City of Jacksonville has offered companies to move to the area in the past ten years.
Which means the City invested more than $7,000 per job. In exchange, according to the City's calculations, that investment has created nearly 15,000 private sector jobs, and nearly $2 billion in private capital investment to the City. It's a delicate and sometimes risky give and take of money that ultimately belongs to taxpayers.
Jacksonville City Council President Bill Bishop said in certain situations, giving up a portion of future tax revenue to create new jobs and stimulate the economy is worth the risk for the potential long-term gain.
"Should we do every one that comes along? Not necessarily. Should we do some? Yes, I think we have to," he said. "The economic spin-offs of the multiplier effect of what they bring to the economy more than makes up for that if we do it right, so yes, it does have value."
But not everyone sees the real benefit in giving away tax money by offering tax reductions to businesses considering a move. University of North Florida Economics Chair Dr. Andres Gallo said it's usually the businesses that benefit, not the taxpayer. Gallo believes unless a city is developing a new sector, say a technology industry, it's tough to measure the true long-term benefit of incentives.
"So you have a competition of which city would offer more benefits to this company. And the companies know that, so they play a game between different cities to see which one can give the best package. So actually the winner is actually the loser," he said.
A recent report from the Jacksonville City Council auditor found some companies that have benefited from tax incentives, have not followed through on their promises of job creation, type and quality of jobs they are offering.
The report, "... identified numerous problems and resulted in the subsequent recovery of hundreds of thousands of dollars by the City."
"If we are giving a big tax discount to a company to bring these jobs," Gallo said, "why don't we give that to the companies already in town that maybe are going to hire more people in the next ten years with those breaks."
One of several examples this report cites is Dupuy Storage & Forwarding Company. According to the report, the company, "... continuously failed to comply with the job creation requirements set in the incentive agreement."
From 2007 through 2011, the company reported anywhere from 37 to 39 full-time employees, while the agreement required 46 jobs.
The report calculates that's a loss of more than $82,000 for the City -- your tax dollars. Money the incentive agreement did not allow the City to recover.
Now that this report exposed the non-compliance, the City is taking actions to make sure the companies don't get tax breaks if they didn't create the jobs.
The report highlights specific examples of the City recalling portions of incentives and increasing loan amounts that were reduced in exchange for the promise of job creation.
"Then it is documented, did you meet those targets and if you did you get the rebate," Bishop said. "If you did not, then you don't, or you don't get the whole rebate, sometimes it's a pro rated amount."
First Coast News called Dupuy Storage for a comment, and has not heard back. In a statement on the benefit of incentives, Mayor Alvin Brown's spokesman e-mailed First Coast News, "Mayor Brown is committed to accountability in the use of city resources to help create jobs and encourage economic investment."