The Flagler County Commission on Monday approved a potential $680,000 subsidy for a new company that would build a light manufacturing plant off U.S. 1 at the south end of Flagler County, and add 50 jobs. It is by far the largest subsidy or economic incentive package the commission has approved, dwarfing all previous incentives combined.
The unanimous vote capped a brief presentation followed by a nearly hour-long stream of public support and commissioners’ applause, though most elements of the package remain hidden, and, enthusiasm aside, many of the statements were speculative, exaggerated or inaccurate.
Commissioners and Helga van Eckert, the county’s director of economic development, did not disclose the name of the new company, nor what its actual location would be, though it is expected to be located at the south end of the county (where the county was having difficulties securing a water connection for the eventual plant). State law allows for the secrecy for a period, as companies and governments negotiate such arrangements. The company will assemble and distribute furniture from what van Eckert said would be a 250,000 square foot plant, the largest building in the county if built at that size. It would start operations by August 2021. The company has been in business over 20 years.
The subsidy would be paid directly out of the county’s general-fund reserves. It would be paid over 10 years, and would be proportional to the expected county property taxes the new company would pay. The county is estimating that the new plant will have an assessed value of $13 million, generating $113,400 in county taxes once the plant is in operation, presumably in 2021. For the first two years of the incentive package, the company will be reimbursed that annual county tax bill. The following two years, it will be reimbursed 80 percent of the tax bill, then 60 percent for the two years after that, and so on, until the subsidies zero out by the end of the decade.
“We’re in a due diligence period right now, where they’re doing their evaluations,” van Eckert said. The company would invest $20 million to buy the land and build its plant, she said, providing numbers economic development departments typically provide regarding “economic output” and indirect jobs, but those figures are more speculative and unsupported by solid evidence.
Van Eckert said the average wage for the 50 jobs would be $50,000. Average wages in companies are misleading, as they average out executives’ pay with that of line workers, whose pay is considerably less. Van Eckert was asked previously to provide the median wage, a more accurate reflection of actual wages at the company. She did not do so. But furniture-assembly workers are generally paid between $9 and $18 an hour, according to payscale.com, with average pay at $12 an hour, or $25,000 a year.
The contract with the company does not make the subsidy dependent on the 50 jobs. And those jobs may not necessarily go to Flagler County residents: the contract calls for employees to live within 50 miles of the plant. The land the company is exploring is near the Volusia County line, suggesting that most jobs would go to Volusia County residents.
The assessment-tied incentive does not include the land value on which the building will rise, only the building’s value.
“There was some misinformation out there with regard to the dollar amount being connected to an assessed value or not,” van Eckert said. “The amount of the incentive would fluctuate with the assessed value of the property. These numbers are based on the property being assessed at $13 million. If it is assessed for less, of course the incentive amount would be less as well, and would work in scale with that. But once those numbers are set, we’ll go from there.” The “misinformation” had been van Eckert’s own, in an interview with FlaglerLive, in June, when she said the incentive would not fluctuate.
Commission Chairman Don O’Brien was opposed to such an approach, and said he wouldn’t approve it if the incentive wasn’t capped or lowered in case assessments came in lower than the scheduled incentive. Van Eckert complied. “Per the direction of the Chair of the County Commission,” the back-up material for the package read by Monday, “the funding schedule will be reduced pro rata by the percentage reduction in the investment of the company.” But neither the back-up material nor the contract specify what would happen if the assessments came in at greater the expected value, leaving open the door for larger incentives: there is no cap in the wording of the contract.
County commissioners were all supportive. “This would be equivalent to me turning around right now and giving everybody in the room $100 and say, give me $20 back,” Commissioner Joe Mullins said. “This is the beginning of what we’ve been working for, it’s bringing the high-paying jobs–50 jobs, doesn’t seem like a lot, but it is, especially in a town that for the last four years has seen a decrease in job market, when we lost sea ray.”
In fact, the job market in Flagler has grown significantly in the last four years, regardless of the losses at Sea Ray: the number of Flagler residents with jobs has grown from 40,093 in June 2015 to 46,600 in May 2019, a record–and an increase of 6,500 jobs, or 16 percent, with which the county’s economic development department or the county’s incentives had very little to do.
“The state of Georgia is doing it in the movie industry,” Mullins, a Georgia transplant, continued as he explained his support for incentives. “They’re turning around, giving 40 percent back to every dollar that’s spent, they give you 40 cents back, so if you spend $100 million you get $40 million back. It’s a multi-billion dollar industry that has changed their economy. So these things are very normal.” Mullins was overstating the case: The tax credit is actually 20 percent and applies only on production costs using Georgia vendors, and kicks in only when a production exceeds half a million dollars. If the production agrees to incorporate a promotional element about the state, the incentive rises to 30 percent. But film crews and actors’ costs are not part of the package. And the benefit is not a cash rebate, but a tax credit that applies only to a company’s Georgia liabilities. But Mullins is right about the spending the credit has generated: in 2017 alone, Georgia drew $2.7 billion in spending from film productions, according to the Atlanta Journal Constitution, a ten-fold increase in 10 years.
Mullins said he met with company officials.
Numerous people spoke in support of the project, including the chamber of commerce president, a member of the county’s economic development board, a Bunnell city administration official and others. Only one critic spoke against the project.