Florida Gives Hertz $85 Million in Incentives for $60 Million Headquarters
If you’re a large business and you want to relocate near the beach, then boy does Florida Gov. Rick Scott (R) have a deal for you.
In the latest example of northern flight to a Sun Belt state, Hertz Corp., best known as a rental car company, announced in late May it’s packing up its corporate bags and moving its headquarters from New Jersey to the tiny Florida town of Estero.
Florida’s “jobs” governor and the Lee County Economic Development Office are celebrating the Fortune 300 company’s decision to move south from New Jersey and touting the potential economic gains.
To many, the move comes as a surprise. Not just because the state and Lee County governments were exempt from disclosing Hertz as the company on the verge of receiving millions in taxpayer stimulus, but because the firm known previously as “Company A” has been rooted in the New York City metro area for the past 25 years.
Hertz acquired the Tulsa, Okla., car rental giant Dollar Thrifty last year and is looking to consolidate the corporate offices.
Why Estero? Neil Abrams, an auto industry analyst with Abrams Consulting in Purchase, N.Y., told the Tulsa World newspaper after the announcement, “The bottom line is that they [Hertz] probably got very good incentives to go down there.”
It’s true. Besides being a state with no personal income tax, one of the lowest corporate tax rates in the country, and a huge tourism and car rental market, Scott and Lee County officials greased the slide with about $85 million in taxpayer incentives. At face value that exceeds the company’s own investment in the move, leaving questions about whether the amount was necessary.
In exchange for the public incentives, Hertz will deliver 700 jobs and spend $60 million toward construction of a new building.
Direct Payments, Credits, More
The company initially will receive $14.4 million directly from the state and another $4 million from Lee County. The remaining amount reportedly will be tax credits, tax refunds, and workforce training reimbursement grants.
The Florida Power and Light utility company also will provide electricity at a discounted rate for at least the next four years, and Hertz will have the option to buy the 34 acres of prime real estate for the project.
With reports of 550 employees relocating from New Jersey, 120 coming from Tulsa, and the possibility of others arriving from as far away as Dublin, Ireland, the 700 jobs figure begins to look less compelling.
Richard Broome, executive vice president for corporate affairs and communications for Hertz, wrote in an email, “We have committed that all of our New Jersey employees may retain their positions in Florida, and the same for the Tulsa based employees who will be staying with the company.”
When asked whether the tax incentives were necessary, Broome said yes. “The incentives made our relocation possible because it is necessary to offset our costs to make this work over the long term.”
Lower Costs Without Incentives
Broome did not mention the tax savings and lower costs of business that already exist in the Sunshine State. Hertz’s corporate campus is in Park Ridge, N.J., where the state income tax rate is nearly 9 percent, the corporate tax rate is twice Florida’s and sales tax is a full percentage point higher.
On the morning of the relocation announcement, Scott defended the taxpayer package in an interview on CNBC’s morning business program Squawk Box.
“I’ve done over 300 [similar] projects since I’ve been governor,” Scott said. “You’ve got to get a five-times return [on the taxpayer investment] over the next five years.”
The move is a high-profile event for Scott’s jobs agenda, and the relocation could inspire other businesses looking for a similar deal.
“I believe it will be clear that the incentives will be far more than offset by the economic stimulus Hertz will provide to Lee County and the state of Florida over many years,” Broome said.
Estero is located in Lee County and 25 miles from Naples, where the governor and Hertz Chief Executive Officer Mark Frissora both have homes.
William Patrick (firstname.lastname@example.org) writes for FloridaWatchdog.org, where an earlier version of this article appeared. Used with permission.