Government subsidies, aka taxpayer funds, for economic development are bad business. Bad business for elected officials to practice. Typically a losing proposition for taxpayers with respect to ROI — return on investment.
Latest case in point: Florida Gov. Rick Scott and the $40 million rowing complex at Nathan Benderson Park.
To be sure, an internationally acclaimed rowing complex for this region should and will be an extraordinary asset. Give Randy Benderson, CEO of Benderson Development, credit for having a vision to turn that old borrow pit into someting magnificent. We’re all hoping it will be the economic engine its backers say it will.
That hope is especially so because of the $30 million in taxpayer money going into the park’s construction.
The breakdown: $19.5 million from Sarasota County; $1.5 million from Manatee County; and $10 million from the state. The latter comes with a catch: If the park falls short of producing the state sales tax revenue promoters project, Sarasota County taxpayers must refund the state’s money.
All totaled, Sarasota County taxpayers have $29.5 million at risk. So far.
If the site wins the bid to host the 2017 World Rowing Championships, taxpayer contributions will increase even more. One figure reported so far: At least $6 million more will be required to put on the event, with some portions of that split between taxpayers and the private sector.
That is a lot of tax money at risk. But the center’s backers and developers appear confident the bet will pay off. Back in 2010, they were projecting an annual economic impact of $25 million just from rowing activities and about $1.5 million in annual tax revenue to the county.
But Gov. Scott complicated the politics of this venture last week when he visited here to herald the site’s developers and the state’s $10 million to help fund the center.
A few media — those that are no fans of the governor — rightly pointed out that Scott’s backing of the center runs contrary to his position two years ago when he vetoed $5 million earmarked for the park.
As the Tampa Bay Times reported, Scott changed his mind after the project’s boosters convinced him of its statewide impact.
“They showed me the economics of it, and it just makes a lot of sense that we’re going to get all those tourists here,” the governor said last week. “And I’m very comfortable that on top of getting all those tourists here, they’re going to spend money, and some of them are going to move their business here and buy some homes here.”
And then came the Times’ gotcha. It reported: Benderson Development, owners of the park land, contributed $25,000 last year and another $100,000 in March to Scott’s “Let’s Get to Work” campaign. And: former Sen. Pat Neal’s Neal Communities contributed $35,000 to Scott’s campaign in 2012 and $50,000 this year.
The Times also said Benderson Development and Neal Communities’ business ventures are adjacent to and near the rowing center and would benefit from it.
(Editor’s note: Our search of state records shows Neal Communities contributed $33,828 this year to Scott’s “Let’s Get Work” and that Benderson CEO Randy Benderson, not the company, contributed $100,000 to “Let’s Get to Work”; the company contributed $25,000 to the Republican Party.)
To a great extent, people who follow state politics and business would not be at all surprised by Benderson Development and Neal Communities’ contributions to Gov. Scott’s re-election campaign. You would not expect either of them to support a Democratic gubernatorial candidate. And if you believe in radio commentator Hugh Hewitt’s philosophy on politics — to put your money where your mouth is; that is, financially support the candidates for whom you will vote — you shouldn’t fault Benderson or Neal. They did nothing wrong.
But by accepting their contributions and approving the state funds for the rowing center, Scott created a perception that is a volatile ordinance for his political opponents. No matter how much Scott honestly says his financial analysis shows the state’s investment in the rowing park makes business and economic sense, Scott’s decision creates the appearance of a quid pro quo.
This is one reason why economic development subsidies for business ventures are bad business. They always mean government is picking winners and losers, favoring one over another.
Now contrast the development and funding of the rowing center with that of Schroeder-Manatee Ranch’s Premier Sports Campus in Lakewood Ranch.
To date, SMR has invested about $2.5 million of its own capital to construct the sports complex. It hasn’t relied on one cent of taxpayer funding.
And since 2011, through its own efforts, it has drawn more than 36,000 athletes, 32,080 of them coming from outside Manatee and Sarasota counties, or more than 12,000 athletes a year. Spectators from outside the two-county area have totaled 203,620, or close to 68,000 a year.
And, as the table above also shows, SMR’s Premier Sports Campus has been generating more than the estimates for the rowing center in terms of annual economic impact.
To its credit, SMR is demonstrating that sports can be addressed successfully as a private-sector business venture, without requiring government subsidies.
Benderson Development, meanwhile, did not become one of the nation’s most successful commercial real estate developers and property managers by making bad decisions. Our hope is it disproves what taxpayers have seen far too often: Governments are lousy investors. Taxpayers should never subsidize business ventures. That’s not the role of government.
Click here to see a breakdown of how a private tourism venture boosts the economy.