Update: We updated the link to the Fox Orlando interview of our opinion, also wrote more on this issue and were interviewed by Channel 9 two days later - look for a later July 2 article on this blog. But read this one first.
Tavares, FL - June 29, 2012
by Vance Jochim, FiscalRangers.com
I believe that the Lake County Board needs to sever relations with the Metro Orlando Economic Development Commission (MOEDC) and spend the $288,000 budget on more productive areas. I am not against Economic Development funding, but I am against a taxpayer funded regional agency that uses, for example, a marketing program that only gets 138% return based upon projected TEN year data for Lake County when the total projected (not real) returns for all four covered counties gets an average of 457% return. And, then you find Lake County is paying MORE per capita than other counties, and that the "return on investment" calculation is not based on real data. Read below and see what I mean.
But it is hard to explain something like this in 1 minute, 38 seconds on TV. So here is my take on the whole issue, and why Lake County is getting a raw deal, and why businesses, the Lake County Board of Commissioners, and taxpayers should care about it:
The Lake County Government pays $250,000-$350,000 or more every year to a regional economic development marketing group called the Metro Orlando Economic Development Commission (MOEDC). The most recent Lake County budget for MOEDC was $288,000. Their focus is to entice new employers to the Orlando region, which includes just four counties: Lake, Seminole, Orange and Osceola.
And, each year for the last four years, I have complained about the lack of measurable returns on the funds, which Lake County pays along with several other counties to MOEDC, who spends them on trips to other countries and states plus other actions to drum up contacts with companies wanting to re-locate or open branches in central Florida, including Lake County. They don't get very many recruits for Lake County.
About four years ago, this issue was the reason I ran for Lake County Commissioner (and lost to Leslie Campione), because the Lake County Board approved a contract to pay about $350,000 to MOEDC without ANY stated requirements or metrics of performance. Basically, they drank the MOEDC "Economic Development Kool Aid" and were tossing taxpayer funds into a bucket of cash and giving it to MOEDC and "Hope" for Economic Development "Change". I worked in many large corporations over the years, and they would never have committed to such contracts without some measurable performance requirements. At the very least, they should have required, for instance, that MOEDC had to provide at least 200 verified jobs for each payment of $100,000. But, there were no measurable requirements in the contract.
About two years ago, the Orlando Sentinel did stories on the MOEDC and reported they cooked the "jobs created" numbers and most participating counties were not receiving the return in "jobs" they thought. Think about it - if a Metro Orlando group is recruiting new employers, wouldn't most want to move to Orlando, and not less sophisticated Lake County? As a consequence, Volusia County dropped out of MOEDC and stopped paying them, but the Lake County Board still throws money at them.
During the last two years, the Lake County DEPARTMENT (not MOEDC) of Economic Development went through a leadership change and revamping to implement much more focused programs to entice employers to Lake County, or help build new or existing ones. At this point, I think the Lake County Economic Development Department should get the funds, not MOEDC.
They even created a new website to attract employers to Lake County.
On May 8, 2012, the Lake County Economic Development Department (not MOEDC) staff gave a presentation on what they are doing, and you can see their presentation is much more specific, describing openings of two incubators, employer retention visits, etc. Within the last month, they also provided three community sessions on what they were doing and asking attendees what else was needed to improve Lake County's economy. In otherwords, you get a clear idea they are focused on Lake County and specific tasks, and not Orlando. You can click the "backup document" link to see their presentation here:
About two weeks ago, MOEDC leadership came to the Lake County Board and gave a dog and pony show about progress in the last year. They have a new CEO with stellar background at the Research Triangle in North Carolina, and he gave the update presentation on June 12, which was 24 slides you can see at the attachment below:
You can also view the video of his presentation, but you might have to wade through other presentations first - go to this link and click the June 12 video link:
Then, earlier this week, the Daily Commercial published TWO follow up articles written by Greg Jones on the MOEDC which are HERE:
http://www.dailycommercial.com/062612EDC2 <<< This one describes three specific firms that closed.
Jones quoted MOEDC's CEO, Rick Weddle, from the earlier June 12 presentation where he talked about how much Lake County had paid MOEDC last year, which was $288,000, and how it generated a "Total Fiscal Impact" over TEN years of $398,496, or a "return" of $1.38 for each dollar paid to MOEDC by Lake County". We should explain that the earlier days of cooking data to look better are over for MOEDC. Weddle has discussed a much more accurate, consistent method to calculate the return on investment, and when watching his presentation, I think he was a little apologetic for the weak returns for Lake County, but his date is more realistic. However, he was comparing an actual expense to a fictional forecasted return. That is NOT REAL money.
That number and some other data came from this slide below.
And, that slide (open it) is the key to why I think we are NOT getting the bang for the buck with MOEDC. Notice the column saying Lake County. At the bottom, it shows the $1.38 return (which is a 10 year forecast, not ACTUAL) for each dollar spent with MOEDC. HOWEVER, look at the RIGHT column of all the MOEDC economic development "wins" and you can see the average return per MOEDC dollar for all the counties is $4.57 which is WAY more than Lake County got. Now, compare the Lake County column and the "TOTAL" columns. You can see we only got 3.9% of new capital investment but paid 17% of the MOEDC "public sector" costs. MOEDC should at least get kudos for being honest and providing these numbers.
Not described here is that MOEDC also gets 70% of their total funding from private firms, besides just "public sector" (or government entities).
Additionally, although not in the slide show, Lake County is being charged a higher per capita fee than other counties, which makes the "return" even worse. Weddle did say they are looking at reducing the Lake County rate to be comparable with other counties.
Another factor is "Regionalism" - this is the concept used by organizations to create regional groups like MOEDC with appointees from various interest groups where the voters have no direct control over their activities. Examples are the Lake Sumter Metropolitan Planning Office (MPO) and the St. John's River Water Management District where Lake County doesn't even have a representative. Remember the regional workforce agency where Governor Scott had to clean house, including the firing of the CEO and all the board members, including three from Lake County? My observation is that elected officials get appointed to these regional boards and love the contacts and meetings, but nothing gets done, and there is NO oversight of the staff activities. Or, spending and actions take place that favor "public private partnerships" and not the taxpayers. These regional groups operate out of most media coverage and make many decisions against taxpayer interests, or their performance is not measured like corporations would do. My view is most of them need much stricter oversight, or they should be shut down. Let the staffs of the affected counties develop recommendations, and not a dedicated staff out of the control of the voters.
Our elected officials need to be more accountable for these regional groups.
Lake County is NOT getting a decent return on investment from MOEDC. Here is my summary why we should either be much more assertive in performance requirements, or move the money to the internal Economic Development Department in the County.
- According to the MOEDC slideshow, Lake County is getting a paltry $1.38 back for each $1.00 spent with MOEDC, compared to the total average of $4.57. MOEDC's Rick Weddle said he "would take that return on his 401k". HOWEVER, THAT $1.38 IS NOT REAL MONEY - IT IS A TEN YEAR FORECAST (or promise). That is like believing a stock salesman who tell you that Solyndra is poised to provide a 13% return every year for 10 years. Thus we would not know if Lake County actually received the promised return because, as the Daily Commercial articles said, a number of prior firms closed down within 5 years, losing hundreds of "promised" jobs. Additionally, Weddle only talked about jobs created, and did not discuss the history of promised jobs that never were retained, which should be factored into any 10 year forecasts. For instance, if 60% of new jobs were lost in the first five years, is that factored into new forecasts? (If they DID include that factor, it was not disclosed).
- Lake County paid $288,000 or 17% of the total public sector contributions, but only got a 3.9% return on Capital investment (i.e. new commercial building construction generated by new firms locating in Lake County).
- Lake County only grew by 40,000 sq feet of industrial or commercial space (I assume), which was only 7.6% of the four county total of 524,583 sq. ft. Again, we paid 17% of total public sector costs.
- Lake County only got 230 jobs, or 5.7% while paying 17% of the public sector contributions.
- The average wage of jobs produced (the slide is not clear) appears to be $26,000, or only 60.7% of the four county average of $43,330. Thus we are getting the call center jobs and higher paid jobs are going to the other counties.
- There were only two Lake County projects this last year, compared to 19 economic development projects in all four counties. And, one reason could be the private funding which is driving the MOEDC to attract jobs to the areas providing the PRIVATE funding - it clearly isn't Lake County.
- Another slide talked about film and TV production days - I know one small film was done in Lake County, but it appears we had so few days, MOEDC didn't want to show the data.
- Half the presentation was stroking the County efforts and Commission, indicating they figure if they build their egos, we will continue to fund them, even with these weak performance figures.
Thanks to Greg Jones at the Daily Commercial and Tracy Jacim at Fox Orlando 35 for exposing this story.
My mantra is that Lake County and other government agencies should be as businesslike in their performance expectations of groups like MOEDC as a corporation would demand of a "marketing cooperative agreement". That is not happening.
The Lake County Board AND the County Manager need to start analyzing MOEDC performance like the above, and making stronger decisions to improve returns. They should know the difference between comparing $1 of actual costs to a projected 10 year forecast of $1.38. They need to run ACTUAL, 10 year numbers vs MOEDC's promised "10 year return" of $1.38 payback for each ACTUAL dollar spent. Where is the data to explain how accurate their forecast is, when the Daily Commercial found that in the last five years, 597 "new jobs" out of 974 "new or retained" jobs were lost, dramatically dropping any performance claims for the $1.2-million given to MOEDC in the last five years.
The Board needs to face the results of prior efforts that most MOEDC contacts will lead to firms wanting to move to the Orlando area, not Lake County.
The Lake County Board needs to assign a more active oversight role to the Lake County Manager to ensure some decent performance returns are received, otherwise, drop out of MOEDC.
- Either demand more specific performance measurables in the contract for the funds given to MOEDC, or cut the payments to MOEDC and give it to the internal Economic Development Dept.
- Voters and Taxpayers should demand better analysis from the County Staff and the Board on issues like this. By not doing so, we are getting a lower level of governance than expected in major corporations.