Where company logos and Gov. Rick Scott intersect, the news is usually bright, the mutual admiration effusive.
Not Wednesday evening.
In an unusually blunt attack on Palm Coast Data and Sanford Burnham, the Orlando-based medical research company, Scott boasted in statement issued by his office that the state had “recovered more than $13.5 million of taxpayer money” from the two companies after they “failed to meet the requirements of incentive agreements signed during previous gubernatorial administrations in 2006 and 2008.”
What Scott did not say is that the amounts being recovered are significantly smaller than what the state paid out in taxpayer dollars: Palm Coast Data is repaying only $1.76 million of the $3 million it got in subsidies, and it is doing so over 10 years, with its last quarterly payment due in 2027. In effect, the length of the repayment schedule and the smaller amount due amortizes the original bill into somewhat of a write-off.
The state has recovered $12.3 million from Sanford Burnham. It had provided the company a $155 million subsidy in 2006, on the promise of creating 303 jobs over 10 years. By year 10, the company had met 87 percent of that goal, but it announced its intention to leave Florida.
Scott’s announcement is part of a broader context: his administration has been battling the Legislature over dollars Scott wants for Enterprise Florida, the economic development agency that recommends subsidies to private companies. Citing issues like Palm Coast Data, Sanford Burnham and many other lesser failures, lawmakers have criticized the economic development agency and attempted to lessen its budget, calling for more accountability. Highlighting the settlement deals with Palm Coast Data and Sanford Burnham gives the governor a stronger hand in his negotiations for Enterprise Florida dollars.
The settlement with Palm Coast Data is old news. It was first reported here last July. But the details behind the settlement and the details of the original deal are not: documents obtained by FlaglerLive, including the lawsuit the state filed in Leon County against the company in December 2016 and the contract itself (a contract the state and the company had refused for years to disclose), reveal for the first time the extent to which the state went to subsidize Palm Coast Data, the breadth of the promises the company made, including hundreds of construction jobs never before disclosed, at least one instance when the company appeared to have attempted to deceive the state by providing job and wage figures that did not match up with the reality on the ground–and a degree of deception from Palm Coast government as well.
Palm Coast government had provided $400,000 in tax incentives to the company as well as ceding its city hall on Commerce Boulevard to the company, a 70,000 square foot building, in exchange for $20,000 rent a month, and then a sale. The city had portrayed that lease and sale as part of its own incentives to the company. In fact, it was part of the state’s conditions for the $3 million contract in incentives. The city, which at the time made itself look as if it was playing a larger role than it did, in other words, had little choice but to go along with the state’s conditions.
What follows is a detailed account of the deal based on those documents, with figures and timelines not previously disclosed.
The Legislature had created the so-called Quick Action Closing Fund in 1999 to attract businesses to the state with cash incentives. Proposals were reviewed by Enterprise Florida, which made recommendations to the state’s economic development office on what companies to subsidize. The governor had final say. Before 2011, the subsidy was advanced to companies before companies met their obligations. Scott changed the approach, requiring companies to meet expected criteria first before getting their subsidy.
In 2008 Palm Coast Data employed 1,000 people in Palm Coast, or between 2 to 3 percent of the county’s labor force, working out of a facility with 186,000 square feet. At the time, local unemployment was 8 percent and rising fast. In June that year the company applied for Quick Action dollars, promising to maintain the 1,000 jobs and create 700 more, investing $27 million in the local economy, according to court papers disclosed here for the first time. The promise also included the creation of 362 temporary construction jobs.
Palm Coast Data claimed employees’ annual average wage would be $29,530, not including $10,000 in benefits. (Companies inflate what is a strictly accurate but misleading figure when they use average wages as opposed to median wages: a company can significantly inflate its average wage by including the salaries of executives in the calculation, which are typically disproportionately higher than those of rank and file workers. Median wage figures would more accurately reflect where most employees are, but government and companies collude in maintaining the deception by citing only averages, thus more effectively getting public buy-in.)
Palm Coast Data at the time was already planning to consolidate operations from Colorado, Illinois and Ohio and relocate them to Palm Coast, as company reports and indications to employees in some of those locations suggested, though the way the subsidy was framed was as a means to ensure that the company moved to Palm Coast rather than go elsewhere.
On Aug. 6, 2008, then-Gov. Charlie Crist signed off on the $3 million subsidies. Locally, the Palm Coast City Council agreed to vacate a 70,000 square foot building on Commerce Boulevard that it had used as its city hall and lease it to Palm Coast Data at extremely favorable terms in view of then selling it to the company, as it did within a few years. That part of the deal, as court papers now indicate, was actually part of the state’s conditions for the subsidy. County government gave Palm Coast Data $100,000 in moving expenses. All that was predicated on the creation of the 700 jobs at the company, plus the construction jobs, as the company pledged to build up the complex with more structures.
Palm Coast Data was only required to publicly announce its intention to retain the 1,000 jobs, create just 50 new jobs by March 2009, and lease the Palm Coast government’s building in order to get the $3 million check, which it did on June 5, 2009. Subsequently, the company was to submit annual employment and wage reports certifying the increase in jobs and the maintenance of that average wage.
By February 2010, Palm Coast Data was exercising the part of the contract with the state that allowed for a one-time extension on job creation and capital investment, though by then company financial reports clearly indicated that the bottom was falling out from beneath it. The deadlines were all extended by a year. The $27.3 million capital investment was expected by the end of December 2012, and the 700 new jobs by the end of 2014,
The dates formalized in an amendment to the contract with the state, along with new job-creation benchmarks. But Palm Coast Data failed all jobs benchmarks, and didn’t even file job and wage reports between 2011 and 2013.
State pressure on Palm Coast Data to produce began with a series of letters starting in May 2012, then sanctions of $1.226 million (including interest) over the company’s failure to meet its obligations in the years when it had failed to file jobs reports. Palm Coast Data protested, sending in documentation ostensibly showing job creation, wages and capital investments–where all of that was on the ground is difficult to say: there had been limited visible investment along Commerce Boulevard, where employee parking lots were increasingly bereft of vehicles, indicating job losses, not gains–but the state, in a show of good faith, withdrew the sanctions.
Palm Coast Data had repeatedly refused to disclose precise employment numbers when asked by reporters, and was routinely referred to even then as the county’s leading employer when, in fact, it was shedding jobs and had already been overtaken by Florida Hospital Flagler as the leading employer.
“In fact,” the state’s lawsuit against Palm Coast Data in Leon County Circuit Court notes, Palm Coast Data by the end of 2012 “employed a total of only 801 [full-time equivalent] jobs. This meant [Palm Coast Data] failed not only to create 700 new FTE jobs for Florida workers, but failed to even maintain, as promised, the approximately 1,000 workers it had employed when the contract was originally signed. [Palm Coast Data] also failed to make the required investment of $27.3 million in capital. Flagler County never saw more than $9 million of capital investment from” Palm Coast Data. The nature of that investment is not specified, though the company at the time was hoping to transition to new segments of its industry in order to survive.
The sanctions were reissued in October 2013, but were not paid.
“Simply put,” the lawsuit states, “after Defendant received the $3 million award, it failed to live up to its end of the bargain–at the expense of Florida taxpayers.”
As of July 1, 2017, Palm Coast Data and its parent company combined–Amrep Corp., which also has real estate operations in new Mexico and is incorporated in Oklahoma–employed a total of 349 full-time employees and 55 part-time employees. Total revenue for the Palm Coast Data fulfillment service segment was $31 million in 2017, less than a third of revenue in 2008. Overall company revenue has improved in 2017, reversing losses.
In the end, and for all of the governor’s boasts Wednesday, taxpayers will still be left holding the bag for much of that subsidy.