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Smart bet or socialism? Trump, Scott and the politics of incentives

Surrounded by Brevard County officials and reporters, Gov. Rick Scott stood in an empty field at Kennedy Space Center where a satellite factory soon will rise.

The plant, being built by OneWeb Satellites, is a project that President-elect Donald Trump touted as an exemplar of American job creation. The company has raised nearly $2 billion from investors, including a Japanese technology conglomerate.

“OneWeb, a new company, is going to be hiring 3,000 people, so that’s very exciting,” Trump told reporters at the Mar-a-Lago Club in December.

OneWeb is not the only emerging player on the Space Coast.Across the street, construction crews bustled at a massive rocket factory being built by Blue Origin, a company launched by Amazon billionaire Jeff Bezos.

Both high-tech ventures are recipients of subsidies negotiated by Enterprise Florida, the public-private partnership that serves as the state’s economic development agency — and an entity that suddenly is the subject of an intense ideological debate among Republicans in Tallahassee.

OneWeb, Blue Origin and other high-paying employers “wouldn’t be here if it weren’t for Enterprise Florida,” Scott said during Thursday’s event.

Scott, a second-term governor, has made job creation the focus of his six years in office, and he routinely lobbies the Legislature for more money for jobs subsidies. In recent years, lawmakers have pushed back, approving less for incentives than Scott requested.

Now, the Legislature is in full revolt. The state House this month voted 87-28 to abolish Enterprise Florida. Florida House Speaker Richard Corcoran has hammered jobs incentives as “corporate welfare” and “de facto socialism,” and many in the Legislature seem to agree.

“This is not where we should be spending other people’s money,” said Rep. Paul Renner, a Palm Coast Republican who sponsored the bill to kill Enterprise Florida, according to the News Service of Florida. “There are better, higher uses for that money, whether it’s public safety, whether it’s quality education, or infrastructure.”

During Scott’s appearance Thursday at Kennedy Space Center, the governor touted Florida’s robust job growth and low taxes —and he griped about lawmakers’ vote.

“I’m really frustrated with my Legislature,” Scott told reporters.

The battle between Scott and Corcoran is a rare example of opponents attacking the governor from the right. Scott was a political novice when he swept into office during the Tea Party wave of 2010, and he has hewed to conservative positions on taxes, regulation, gun control and the death penalty.

Scott also has been a strong advocate for job incentives, which he considers an investment rather than a subsidy. State taxpayers get a fivefold return on incentives, Scott said, an estimate critics say is overly optimistic.

Without subsidies, Scott said, OneWeb Satellites would be building its factory somewhere else. Brian Holz, chief executive of OneWeb Satellites, agreed with Scott’s assessment.

“We looked at seven other states besides Florida, and they were all very competitive in terms of incentives,” Holz said.

The company also entertained offers from four other countries. In the end, OneWeb took Florida’s package of $20 million in incentives in exchange for promising to hire 250 workers.

“I can tell you we didn’t choose it for the beaches,” Holz said. “Even though they’re really nice.”

Scott worries that killing Enterprise Florida would mean letting other states win economic development prizes like OneWeb. But critics of jobs incentives say they’re not swayed by the everyone-is-doing-it argument.

“It’s not in the best interests of taxpayers to take their money and give it to private companies,” said Andres Malave, spokesman for Americans for Prosperity Florida, a group that has been pressing state leaders to end incentives. “It’s a matter of my tax dollars, your tax dollars, being straight-up given to someone else.”

Paying subsidies directly to large employers grants an unfair competitive advantage for recipients, Malave said. He suggested devoting the money to schools, roads and police instead.

If lawmakers kill Enterprise Florida over Scott’s objections, the state would honor the incentive contracts in place, Malave said. But companies shopping for future tax breaks would have to turn to county and municipal governments, which typically match a percentage of state subsidies.

If state jobs incentives were to disappear, the effects could hit especially hard in Palm Beach County, which has been the state champ in landing subsidies.

The county pulled in $425 million in state incentives from 1996 to 2013, according to a Palm Beach Post analysis of state data. That’s 42 percent of all state incentives paid to a county with just 7 percent of Florida’s population.

The grand prize for Palm Beach County, of course, was a $310 million state grant to lure the Scripps Research Institute to Jupiter. But there have been other big payments, including $94.1 million to bring the renowned Max Planck Institute to Jupiter, $6.7 million to aerospace giant Pratt & Whitney, $2.7 million to struggling retailer Office Depot and $2 million to failed start-up DayJet.

By encouraging subsidies, Scott is following a precedent set by his Republican predecessors in the governor’s mansion. Jeb Bush personally wooed Scripps and spearheaded the state’s billion-dollar bet on biotech.

Bush promised the nonprofit biotech labs would create tens of thousands of private-sector spinoff jobs. That bonanza has yet to materialize, helping to set the stage for the Republican revolt against subsidies.

And Charlie Crist signed off on a $20 million incentive package for Digital Domain Media Group, the Port St. Lucie-based movie effects venture that crashed and burned. Enterprise Florida didn’t grant incentives for Digital Domain, but Corcoran has made that company’s collapse part of his pitch to kill the agency.

As for OneWeb, the company has raised $1.7 billion from a blue-chip list of investors that includes Japanese tech giant SoftBank, Qualcomm, Coca-Cola Co. and the Virgin Group.

OneWeb itself expects peak employment of 1,200 employees, many of them at its new factory at Kennedy Space Center, although Scott mentioned only the 250 jobs called for in the state’s agreement with OneWeb. Add in employment from suppliers of solar panels and other equipment, and total employment related to the satellite system could reach 3,000, OneWeb said.

Americans for Prosperity’s Malave said he wishes OneWeb well in its goal of launching hundreds of satellites, but he says it’s “ridiculous” for a private company to receive a $20 million boost from taxpayers.

“That’s not the role of government,” Malave said.

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