Strategic Plan for Economic Development Diversifying Florida s Economy

Strategic Plan for Economic Development, 2004-09 Diversifying Florida’s Economy The goal of the strategic plan is to develop, with broad grassroots and stakeholder participation, a road map of key priorities to diversify Florida’s economy for global competitiveness. Diversifying Florida’s economy is one of Governor Jeb Bush’s top three priorities, in addition to families and reading. Vision Florida is a global leader in knowledge-based jobs, leading-edge technology and competitive enterprises in the 21st century. Goals Globally competitive businesses Well paying jobs for Floridians High quality of life throughout Florida Strategic Plan Leadership Team: ! The Governor’s designated co-chairs: o Darrell Kelley, President and CEO, Enterprise Florida o Susan Pareigis, Director of the Agency for Workforce Innovation o Glenda E. Hood, Secretary of the Department of State Lt. Governor Toni Jennings and Dr. Pam Dana, Director the Governor’s Office of Tourism, Trade and Economic Development The Enterprise Florida Board of Directors, which is statutorily mandated by legislation to approve and submit the plan annually by January 1. ! ! 1 Economic Diversification for Global Competitiveness Florida’s economy has been especially robust, as evidenced by job growth, even in the midst of an economic recession. While there is wide consensus that the key to diversifying Florida’s economy for global competitiveness lies in raising the quality of job growth, it is also clear that progress has been made on that front in the recent past. Diversifying Florida’s economy is important for two key reasons: The lesson of 9/11 demonstrates the importance of having multiple engines of growth as a buffer to cyclical impacts. While Florida has been successful in job creation, the “quality” of that growth should be strengthened with increases in high wage/high skill job creation. Florida’s global competitiveness Diversifying Florida’s economy is central to Florida’s global competitiveness. A competitiveness analysis, which benchmarks Florida against regional and national competitors, indicates the importance of diversifying Florida’s economy: In terms of macroeconomic benchmarks, Florida has done well in terms of quantitative measures of growth such as job creation, but needs to strengthen its showing in qualitative measures such as earned income and productivity. Diversification means raising the “quality” of economic growth. Florida’s knowledge economy, measured in terms of innovation capacity and technology growth, has a mixed record. Florida fares well for high tech employment growth, but less so for innovation indicators. Diversification means achieving multiple engines of growth in high wage, high productivity (value-added) clusters. Florida’s global economy has traditionally been an area of strength, although there have been recent declines in trade, tourism and investment and there is considerable room for expansion. Diversification means strengthening existing international markets and expanding into new emerging global markets. The key challenge for Florida’s future is in accelerating quality economic growth. While there are several indicators that can be used, this plan recommends the use of earnings by place of work as the best single indicator to monitor success. (See Appendix: Florida’s Competitiveness for a fuller analysis). 2 Florida began the decade of the nineties with earnings at 91.3% of the US average. Early in the decade, Florida slipped in this measure but started to rebound and regained ground in 2001. It currently stands at 87.9% of the US average. Florida’s economy is moving in the right direction, both in terms of job growth and wages. For long-term global competitiveness, Florida should sustain and accelerate this recent positive trend. The target goal set for this 5-year strategic plan is to regain the loss of the last decade (from 88% of the US average to 92% of the US average) and to strive towards parity with the US average. Roadmap to Florida’s economic future The priorities outlined in this Roadmap to Florida’s Future achieve this goal by: Focusing on quality of economic growth with value-added job growth, innovation and globalization. Ensuring strength in multiple industry clusters and world markets for economic immunity to business cycles and off-shoring trends. Integrating education, workforce, infrastructure, qualify of life and smart growth as integral elements to diversify Florida’s economy. The successful diversification of Florida’s economy will help ensure Florida’s destiny to be the global leader of the 21st century, the goal of this 2004-09 Strategic Plan for Economic Development. Goal for Roadmap to Florida’s Future: Diversify Florida’s Economy for Global Competitiveness Benchmark for 5-year plan: By 2009, raise Florida’s earnings from 88% to at least 92% of the US average NOTE: Assessing Florida’s economic competitiveness is by definition data intensive and complex. However, one measure – earnings by place of work – can be used to benchmark Florida’s progress in improving the quality of growth and diversifying its economy. Appendix 1: Florida’s Competitiveness provides a more complete analysis of Florida’s economy in relation to diversification and global competitiveness. 3 Strategic Planning Process: Grassroots driven with broad stakeholder participation To ensure broad grassroots and stakeholder participation, the planning process was built on nine regional meetings to capture the diversity of Florida’s regions. Two of the regional meetings focused on rural areas and the ninth meeting in Miami focused on global issues and on the special needs of urban core areas. These nine meetings included participation from over 1000 stakeholders from diverse constituencies, including business, legislative and government leaders, economic development practitioners, workforce providers, education, transportation, historical and cultural arts, rural and urban core advocates, and diverse business sectors (including, but not limited to tourism, manufacturing, information technology, aerospace, biotechnology, film and entertainment, retirement and agriculture). Finally, government and business organizations were also invited to provide input for the development of the plan. These submissions are included in Appendix 2. 4 Top 10 Recurring Themes The broad range of stakeholders who participated in the regional meetings brought forth a wide variety of issues and recommended priorities. While each region has its own set of diverse issues and priorities, common themes were identified as statewide priorities: 1. Proactively facilitate value-added job creation through continuous improvement in business climate, university research, entrepreneurship development and capital development, including a seed capital fund. 2. Proactively support the defense industry, BRAC initiatives, the space industry, and other targeted industry clusters, including the film and digital entertainment cluster. 3. Proactively support international trade to increase Florida exports and secure the Permanent Secretariat of the Free Trade Area of the Americas (FTAA) in Miami. 4. Focus on education quality, including workforce development, as an economic competitive issue. 5. Streamline workforce initiatives and incentives. 6. Find innovative ways to appropriately fund our economic infrastructure, including transportation, the Strategic Intermodal System, and telecommunications infrastructure. 7. Transition from growth management to integrated comprehensive planning incorporating land stewardship, density, schools, affordable/workforce housing, land use, environment, water (water quality and water management), historic preservation, and arts and culture with an outcome driven rather than process driven approach that is incentive based rather than penalty based. 8. Integrate creative community assets including arts, culture, historic preservation, museums, libraries, human services, film and entertainment as elements in economic diversification efforts. 9. Assure initiatives and funding to balance the needs for Rural, Emerging, and Urban areas, and develop a plan to help Rural Florida become more competitive. 10. Establish a consistent and dependable source of funding for economic diversification at a competitive level for Enterprise Florida, key business incentive programs, and a pro-active and effective branding and marketing campaign. NOTE: Appendix 2: Stakeholder Perspectives provides a more detailed summary of the findings of the nine regional meetings (including the special meeting on global business held in Miami) and of priority submissions by key stakeholder organizations. 5 Key Building Blocks for Florida’s Future Based on the analysis of Florida’s competitiveness and input from stakeholders, the primary building blocks for the Roadmap to Florida’s Future are: # Business climate for global competitiveness in the 21st century # Vitality of Florida’s existing base in tourism, trade, agriculture, retirement, manufacturing, space and defense # Diversification of Florida’s economy with high value-added cluster development, innovation and globalization for all of Florida # Solid foundations in education, workforce, infrastructure, historic preservation, arts and culture with seamless alignment to economic development # Public and private sector investments in economic development Goal: Diversify Florida’s Economy for Global Competitiveness Benchmark: By 2009, raise Florida’s earnings from 88% to 92% of the US average 1 Diversification Quality of economic growth High value-added clusters Innovation Globalization Foundations Pre-K-20 Education University Centers of Excellence Workforce Multi-modal infrastructure Arts and culture Existing Base Tourism Agriculture Retirement Defense Manufacturing Trade Business Climate for Global Competitiveness Investments in Economic Development 1 Indicator used is “earnings by place of work per non-farm worker”. See Appendix 1: Florida’ s Competitiveness for a more detailed analysis and explanation. 6 Priority Recommendations Guiding Principles: ♦ Partnerships: Broadening of economic development with stronger linkages Economic development is dynamic. To enhance Florida’s competitiveness, linkages between education, workforce, infrastructure, cultural foundations and diverse engines of economic development must be seamless. ♦ The importance of regionalism Florida should celebrate statewide unity as well as regional diversity without the inefficiencies of local fragmentation through a unified regional approach. Florida’s regions are defined in various ways, according to legacy and function. As Florida looks ahead, an effort should be made to align the various definitions of regions for maximum coordination and effectiveness. Priority Recommendations The strategic planning process unearthed a wealth of “bright ideas” and best practices. A select few are highlighted as priority recommendations for the Roadmap – based on the imperative to accelerate high, value-added economic growth and guided by the need for action-oriented implementation. 1. Ensure Florida’s global business leadership with the successful recruitment of the FTAA Permanent Secretariat and the expansion of global markets for tourism, trade, investments and cultural diplomacy. 2. Establish Florida as a leading state for entrepreneurship, innovation and venture capital with a continued commitment to University Centers of Excellence and strategies for seed and venture capital. 3. Ensure excellence in education and workforce for Florida’s global competitiveness. 4. Ensure the competitiveness of Florida’s business climate with targeted incentives. 5. Design and implement a market-driven stimulus strategy for Rural Areas of Critical Economic Concern. 6. Retain and strengthen Florida’s base in threatened industries. 7. Transition growth management to a more flexible and comprehensive planning mindset for “smart growth”. 8. Invest in economic development at a competitive level and with innovative strategies. 7 Priority: Ensure Florida’s Leadership for Global Commerce Attract the Permanent Secretariat of the FTAA for Miami, Florida. Improve Florida’s business climate for global business, especially as it relates to new threats that are the unintended consequences of homeland security. Expand and diversify Florida’s market share for global tourism, trade, investment and cultural exchange. Business Case Florida is a leading international state. Florida ranks first in international tourism, 3rd in high tech exports and 7th in foreign direct investment. At the same time, Florida’s market share in international commerce can be expanded and, in the past year, there has been some slippage due to the impacts of 9/11 and world market conditions. Diversifying Florida’s economy must include expanding international commerce and tourism in traditional and new markets. States are increasingly turning to arts and cultural exchanges to help establish, accelerate and reinforce trade relationships. For maximum impact, Florida’s international strategy should also leverage international tourism, trade, investment, education and cultural exchange in high impact initiatives such as the Governor’s Team Florida international missions. A major immediate opportunity for global leadership exists in the effort to secure the FTAA Permanent Secretariat for Florida. For the long term, Florida’s global leadership will also depend on diversifying our international commerce beyond the Americas to Europe and Asia, as well as the emerging markets of China and Africa. To ensure that these opportunities can be leveraged, Florida must address the unintended but potentially negative impact of new Homeland Security regulations such as: ! Visa policies that impact the ability of foreign investors, trade representatives and tourists to enter the US. Countries affected include the entire Western Hemisphere except for Canada. ! New homeland security measures have had an adverse impact on international in-transit passengers. These are particularly significant for airlines that have hub operations in Florida, such as American Airlines and Iberia. Because these procedures could affect the profitability of hub airlines, Florida’s global air connectivity could be harmed. ! The Bio-Terrorism Act of 2004 will be implemented in December 2003 and could hamper international commerce in food products. This could particularly impact Florida’s large import and distribution industry. 8 Recommended Action 1. Immediate opportunity: Secure the FTAA Secretariat for Miami Florida FTAA, in coordination with Enterprise Florida, should develop a comprehensive action plan to secure the FTAA Permanent Secretariat for Florida. This action plan should include a country-by-country implementation plan and should leverage targeted trade and advocacy missions to Latin America and the Caribbean. The Florida Legislature should support funding for the effort to attract the FTAA Permanent Secretariat to Florida with state and federal funds. Florida’s multi-modal (sea and air) infrastructure must be ready to meet the likely increase in trade activity. The State Department of Transportation and the Florida Ports Council should develop a cost-effective “FTAA-ready” capital improvement program to enhance trade-related infrastructure. Florida must be ready to capitalize on the potential anticipated benefits of securing the FTAA Permanent Secretariat, especially as it relates to the “brand value” opportunities of the Secretariat. Enterprise Florida should develop an aggressive and proactive international business development strategy for trade, inward investment, and global corporate headquarters. 2. Near-term threat: Address homeland security issues for global commerce The Enterprise Florida International Business Council should be tasked to evaluate these barriers to international growth, recommend solutions and coordinate advocacy efforts as needed to address these business climate issues. 3. Long-term leadership: Expand international markets for trade and investment Enterprise Florida should develop market expansion strategies for trade and investment for existing and new markets such as Mexico, China, Africa and Asia. For an integrated international strategy, the Governor’s Team Florida International Missions should include international trade, investment, tourism, education and cultural exchange programs to help establish, accelerate and reinforce international relationships. Success Measures Indicator Share of total US exports of goods (MISER) Share of total US Foreign direct investment (BEA) Recent Data 3.4% (2002) 3% (2001) Target Goal 5% (2007) 4% (2006) 9 Priority: Establish Florida as a Leading State for Innovation, Entrepreneurship and Venture Capital Establish a Florida Innovation Investment and Challenge Fund to leverage private sector capital for increased entrepreneurial deal-flow and venture capital. Update Florida’s Securities laws to facilitate private placements (equity capital) for start-up companies. Invest in University Centers of Excellence. Ensure the long-term success of Scripps Florida to develop entrepreneurial and innovation clusters. Business Case A key driver for diversifying Florida’s economy is to boost the competitiveness of Florida’s knowledge economy. Not only will this significantly raise the quality of economic growth with high wage, high value-added jobs, but it will also ensure that Florida participates in innovation and the creation of new companies and growth industries of the future. The recent announcement of Scripps Florida will help jump-start Florida’s innovation economy. Not only will it increase R&D, but it will also, in the long run, stimulate business creation with spin-offs and enterprise formation. The promise of this landmark event should be planned for with a focused and aggressive marketing, business development, workforce and higher education strategy. There is strong entrepreneurial vitality in Florida’s economy, and Florida ranks 15th nationally in R&D expenditures and 10th in total number of patents issued. At the same time, Florida’s share of total national R&D is less than 2% and its share of total US patents recently dropped from 3.4% to 3%. Competitiveness analysis indicates that Florida faces two key challenges for growing its innovation economy: expanding R&D in universities, labs and the private sector; and increasing entrepreneurial deal-flow. ♦ The R&D challenge The Technology Development Act was a strong first step in helping to boost innovation capacity in Florida’s universities. Scripps Florida will also significantly increase Florida’s R&D base in biotechnology. Expanding Florida’s commitment to increased funding for centers of excellence will ensure a robust intellectual infrastructure and innovation for technology transfer. 10 ♦ The deal-flow challenge – early stage seed capital To leverage innovation into business and job creation, talent and investment capital are key. To attract venture capital, “investment ready deals” are critical. This cycle often breaks down in one key respect: most start-up, innovation-based companies face the equity capital “valley of death” --- the lack of very early stage seed equity capital for proof-of-concept and early stage business creation. This is the high-risk stage of entrepreneurship, when venture capital tends to be scarce. Florida faces two challenges. First, although Florida has a significant number of high worth individuals who could be potential sources of equity capital for young highgrowth companies, the Florida Securities and Investor Protection Act makes it difficult to do so. In essence, Florida’s securities laws have not taken advantage of updates made in federal securities laws that facilitate the raising of capital through private placements. This is a business climate issue that should be reviewed. Second, there exists a capital gap for early stage seed capital (pre venture capital). Specifically, a team of venture capital and other professionals assembled by Governor Bush, and subsequently led by Enterprise Florida, came to the following conclusions: ! There is a lack of professionally managed venture capital for first-round early stage companies. Florida’s share of national venture capital has dropped from 3% to under 2% in the past 3 years. ! The lack of formally organized private investment capital for early stage companies, even though Florida has a large number of high worth individuals who qualify as ‘accredited investors’ under state securities laws. ! 100 Florida companies received Small Business Innovation Research (SBIR) grants in 2002, which represents about 2.2% of the total number of grants. Accelerating this process could increase the formation of high-wage, high growth potential new companies. To address this challenge, the capital group assembled by the Governor recommends a shared risk-reward program – the Florida Innovation Investment and Challenge Fund – to stimulate private sector equity investments in early stage companies. This would be an investment in ensuring that Florida’s other investments in Centers of Excellence and in Scripps Florida can be maximized over the long run. The Florida Innovation Investment and Challenge Fund would consist of three components: Angel Co-Investment Fund ! Pool of $10 million ! 1:1 match with pooled investments by established angel clubs (accredited investors) registered with the Department of State Division of Corporations ! Investment of $150,000-350,000 to a Florida-based start-up company ! Professional and private fund management 11 Growth Capital Co-investment Fund ! Pool of $40 million to be invested in Florida-based professional venture capital funds ! 1:1 match with private sector investments ! Professional fund management and investment in high growth Florida companies (expected revenues of $50 million in five years) Grant Accelerator Program ! Pool of $10 million for Florida start-up companies ! 1:1 matching grant program for federal (SBIR bridge and Phase II grants) or private sector grants, with an average grant of $100,000 ! Administered by Enterprise Florida under the authority and guidelines of the Technology Investment Act Recommended Action 1. Enterprise Florida should develop an aggressive marketing and business development strategy to capitalize on the potential of Scripps Florida to build a life sciences cluster in Florida. 2. Establish and fund the Florida Innovation Investment and Challenge Fund with a one-time start-up appropriation of $60 million. 3. A Governor’s blue-ribbon committee of legislators, entrepreneurs, venture capitalists and security attorneys should be assembled to review and update Florida’s Securities and Investor Protection Act. 4. Fund the Technology Development Act for Centers of Excellence at $100 million as originally proposed. Success Measures Indicator R&D as % of Florida GSP (National Science Foundation, BEA) Florida’s share of total US R&D (NSF) Florida’s share of total # US patents (NSF) Share of total US venture capital invested (PriceWaterhouseCoopers MoneyTree) Recent Data 1% (2000) 1.9% (2000) 3% (2001) 1.7% (2002) Target Goal 1.5% (2005) 2.5% (2005) 3.5% (2006) 3% (2007) 12 Priority: Raise the Bar for Excellence in Education and Workforce Design a statewide system of regionally concentrated and industry-driven Workforce Education Cluster Centers. Streamline Florida's workforce delivery system through closer coordination with economic development. Pursue the streamlining of state and federal workforce funding. Encourage business involvement in pre-K-20 education with innovative strategies and incentives. Implement an effective Florida "On-Line" Institute to upgrade workforce skills. Business Case ► Education is an economic development competitiveness issue A key foundation for Florida's future is the pre-K-20 education system. Florida is the only state with a seamless pre-K-20 educational governance structure. Education is a competitiveness issue for Florida to provide the talent base needed for economic diversification. Moreover, education is itself a key economic engine for the knowledge economy. Governor Bush's A+ program, the Governor's Mentoring and Reading Initiatives are linked to the future success of diversifying Florida's economy. Providing the future workforce with the skills to continue to increase and upgrade skill-sets is critical for longterm economic success. The changes made in Florida’s educational system are the first steps and are working. As reported by the National Assessment of Educational Progress (NAEP), Florida was the only state to show significant improvement in fourth grade reading. Florida should continue to move its education system at all levels (pre-K-20) into the top quartile in education quality, student rankings and graduation rates based on national standards. The goals of the State Board of Education's Strategic Plan include fostering high student achievement, aligning workforce education with the skill requirements of the new economy and achieving world-class, nationally recognized institutions of higher education. The Florida Board of Governors is now drafting its long-range plan for the State University System. Enhancing the leadership role that universities play in the 21st century economy will be a priority of the Board of Governor’s plan. 13 Technical education and workforce development should be more closely aligned with Florida’s regional economic development goals. Such alignment can be driven by the development of a Workforce Education Cluster Center system. The key for workforce competitiveness in the short term is the ability to provide workers with specific technical skills, particularly as technology continues to dramatically change skill needs for business. Fully 65% of the jobs of the 21st century will require a two-year or advanced degree. To meet the needs of the marketplace, Florida must focus training resources on critical skills relevant to business clusters that are vital for economic diversification and job growth in each region of the state, This need is recognized in the Florida Board of Education Strategic Imperative #6 that mandates workforce education be aligned with the needs of the New Economy. Likewise, the Florida Legislature has mandated the community college system to work closely with Enterprise Florida to serve the economic development needs of the state (Section 1004.65(6)(d), Florida Statutes). To achieve this objective, Florida should reorganize and, where appropriate, establish regional, industry-driven K-20 consortia—Workforce Education Cluster Centers—to grow and expand the educational and workforce talent needed for the high, valued added industries necessary to diversify Florida’s economy. The centers would provide, but would not be limited to, coordination of resources, curriculum development and research agendas. The development of these clusters will require the direct participation of business. To strengthen this important partnership, appropriate inducements should be created. Tax credits for those companies that bring resources to the table and partner to provide the market place “nexus” would be the first step in creating a truly demand-driven system. Florida should consider the following strategies: ●A statewide system of Workforce Education Cluster Centers organized around targeted growth industries—such as, but not limited to, Information Technology, Life Sciences, Aviation/Aerospace, Homeland Security/Defense, Financial and Professional Services, Distribution and Logistics — must be identified and empowered. ●Using competitive processes, educational institutions, business associations, workforce boards, and local economic development organizations must be identified to form industry Cluster Centers. ●Each Cluster Center must be tied to the needs of the regional economy with the partnership of local businesses and industry to ensure market needs are met. ●To maximize the use of resources, each selected center would provide industryspecific guidance to the workforce delivery system in other parts of the state. A designated center would be responsible for plan development, partnering and implementation for an industry, with all centers having access to the products of the system. ●Florida should take advantage of its pre-K-20 organizational structure to encourage workforce educational elements throughout the entire educational experience. Career development should start well before high school ends. ► 14 ► Florida’s workforce education delivery system should be streamlined and demonstrate greater responsiveness to business needs. Finding the appropriate workforce skills continue to be the most important factor influencing business recruitment, retention, and expansion. The labor force must be skilled and must reflect changes in the industry. Technology often renders entire skill sets obsolete. Unfortunately, funding of the education workforce delivery systems continue to be tied to the old economy. Restrictions attached to funding hampers needed flexibility and, ultimately, effectiveness. Likewise, training is often provided on academic schedules (semester or quarter) that often have no bearing to real world, real-time workforce needs. Strategies are needed to address these issues, including: ●For greater effectiveness, workforce training delivery should take advantage of all nontraditional delivery systems and should organize on-line and distance learning technologies into an On-Line Florida Institute to enhance access to those existing resources. ●Florida should continue to lead efforts to simplify federal funding initiatives and to redesign federal programs to allow workforce education and development programs to be customized to each state’s needs. ●Regional workforce board structures should be reexamined with consideration given to convergence with other regional systems (education, planning, etc) and should provide transparent and consistent services from region to region. ●Workforce preparation must become better aligned to business and economic development needs. Business participation in the education and training process must be “up front” to ensure a demand driven, “just-in-time” workforce preparation system. ●Workforce incentive programs (Quick Response Training, Incumbent Worker Training, Employed Worker Training, One-Stop System) should provide greater access to businesses and workers and should be more flexible to meet changing market conditions. Recommended Actions 1. The Department of Education, Workforce Florida, the Agency for Workforce Innovation and Enterprise Florida should develop a proposal for regionally concentrated and industry-driven Workforce Education Cluster Centers to grow and expand the educational and workforce talent needed for high wage, knowledge based job growth. 2. Workforce Florida should develop a proposal for a "Florida On-Line Institute" to upgrade workforce skills though the creative use of technologies and innovative education/business partnerships. 3. Workforce Florida and the Agency for Workforce Innovation should participate in a national effort to simplify state and federal funding regulations. 4. Workforce Florida and the Agency for Workforce Innovation should evaluate the streamlining of the regional workforce delivery system to include increased coordination with economic development. 15 5. Workforce Florida and the Agency for Workforce Florida should develop a proposal for a tax credit for businesses that provides educational resources and support to workforce training initiatives. Success Measures (Education and Talent Base) Target goals to be established by Department of Education 5-year plan Indicator High School graduation rate ( Florida Dept. of Education) Associate Degrees awarded per 100,000 Floridians (National Center for Education Statistics) BA degrees awarded per 100,000 Floridians (National Center for Education Statistics) Science and engineering degrees Awarded per 100,000 Floridians (National Science Foundation) Doctoral scientists & engineers per 1,000 Florida workers (NSF, BLS) Recent Data 69% (2002-03) 305.2 (2001) 320.5 (2001) 4.6% (2002) 2.7 (2001) Success Measures (Workforce) Indicator % of businesses using workforce services (Workforce Florida) % of job seekers using workforce services (Workforce Florida) Recent Data 23% (2001) 13% (2001) Target Goal 35% (2007) 30% (2007) 16 Priority: Enhance Florida’s Global Competitiveness with Business Incentives Preserve and fund current business incentives for high-skill/high-wage job creation and investment. Fund the Quick Action Closing Fund to capitalize on major “rainmaker” projects for value-added cluster development Establish new incentives to stimulate Research and Development (R&D) Business Case Maintaining Florida’s competitiveness Florida competes globally for significant economic development projects and faces stiff competition from other states. Key to maintaining Florida’s competitiveness are business incentives and Florida’s overall business climate. Florida is one of the highest workers’ compensation cost states in the nation. Only California has higher costs than Florida. In the last legislative session, Florida passed workers’ compensation reform legislation that should help ameliorate Florida’s business climate in this area. Incentives are also key to Florida’s competitiveness. In particular, the continuation of the Qualified Target Industry (QTI) and Qualified Defense Contractor Tax Refund programs are essential. Both programs are scheduled to sunset on June 30, 2004. Since inception, these job-based tax refund programs have led to the creation of more than 74,000 jobs and $6 billion in capital investments by the private sector. Without them, Florida communities would be at a severe disadvantage when competing for economic development projects. Maintaining competitiveness also requires ensuring reliable funding for existing incentives. Funding for The Economic Development Transportation Fund was cut by half to $10 million in fiscal year 2004, compromising the state’s ability to address infrastructure needs for businesses locating or expanding in Florida. When businesses making site selection decisions perceive that appropriated funds might be exhausted before the end of the fiscal year, they discount the value of the incentive or rule out Florida sites altogether due to transportation impediments. As a result, Florida risks losing projects to states that are able to guarantee incentives. 17 Film and digital entertainment is an important part of Florida’s diversification. Incentives for this industry are critical and House Bill 1149, which was enacted last year, should be funded. Increasing competitiveness Increasing Florida’s competitive posture is in order if the state is to be a true contender for projects that serve as key drivers for the region’s or state’s economic future. There are certain projects for which the competition is so stiff that, without a closing fund, Florida is at a distinct disadvantage. Such projects respond favorably to business deals where the state serves as a general partner, sharing in the risk and return of specific projects. Other states have the ability to provide significant and flexible incentives through various structures including Georgia’s $80 million bond package for a commercial land bank and $500 million in industrial bonds earmarked by Kansas to close critical deals. Key competitor states, like North Carolina, are winning deals by returning employees’ personal income tax withholdings to targeted companies. Oklahoma approved spending up to $350 million from a dedicated sales tax; and the Texas’ Enterprise Fund provides $295 million. Flexibility is vital. Florida’s existing incentives generally provide refunds and credits of taxes paid by the business well after the project is operational or, in the case of the Capital Investment Tax Credit, not until the project is profitable. Most projects require assistance in offsetting start-up costs associated with construction, equipment purchases, initial operation, moving expenses, etc. The Closing Fund can be used for site acquisition, buying down financing costs, university endowments and other dealstructuring solutions as necessary to meet the prospect’s unique needs. Ensuring long-term leadership To ensure long-term leadership, Florida must provide incentives for innovation. The state’s business climate must be conducive to entrepreneurial efforts and research and development (R&D). Keeping pace with competitor states in this regard is critical, because, while Florida has high absolute levels of R&D expenditures, R&D spending is low relative to the size of our economy. Florida’s tax structure should encourage productivity—not tax it—while generating revenue from consumption. Elimination of the sales and use tax on R&D equipment encourages innovation that, in turn, creates wealth and high-wage jobs for our communities. States rich in high-tech R&D activity such as California, Texas, Massachusetts and Virginia, offer a full tax exemption on R&D equipment. Florida should provide a credit against the state corporate income tax, patterned after the federal credit for increases in R&D spending. By providing a credit equal to eight percent of increased R&D spending, Florida can be more competitive with Georgia, North Carolina, Texas, New York and California, whose credits range from five percent to twelve percent. Providing a credit based on the incremental spending from year to 18 year rewards businesses for conducting research above and beyond the normal course of business. Recommended Action 1. Preserve existing incentives Reenact the statutory authority for the Qualified Target Industry (QTI) Tax Refund program. Reenact the statutory authority for the Qualified Defense Contractor (QDC) Tax Refund program. Restore full funding for the Economic Development Transportation Fund, from $10 million to $20 million. Fund HB 1149 for the film and entertainment industry. 2. Improve Florida’s Competitiveness: Fund the Closing Fund Provide $50 million in funding for the Quick Action Closing Fund. 3. Long-term leadership: Establish new incentives to stimulate R&D Eliminate sales and use tax otherwise payable on R&D equipment, materials and labor and leverage exempted tax dollars for increased R&D projects through enhanced business and university/community college cooperation. Create a Florida R&D corporate income tax credit, patterned after the existing federal credit, equal to 8% of the increase in a business’s R&D spending over the prior year. Success Measures Indicator High tech employment as % of US total (AeA Cyberstates) Per worker productivity as % of US total (Bureau of Economic Analysis, Bureau of Labor Statistics) Avg. manufacturing workers’ comp insurance rate as % of US average (Actuarial and Technical Solutions, Inc.) Recent Data 4.5% (2002) 87.9% (2001) Target Goal 4.8% (2007) 90% (2006) 166% (2003) 120% (2008) 19 Priority: Implement an Integrated Economic Stimulus Strategy for Areas of Rural Critical Economic Concern Establish a state-level Rural Economic Stimulus Committee to evaluate and recommend seed funding for economic stimulus proposals for Rural Areas of Critical Economic Concern. Business Case Florida has three rural regions which have been designated Rural Areas of Critical Economic Concern. While special incentives exist to spur investment and job creation in these areas, rural stakeholders voiced the need for a more aggressive and proactive approach to stimulate economic development in these areas of critical economic concern. A proactive economic stimulus strategy can be built on the following guidelines: ! Customized regional strategic planning Each of the three regional Areas of Critical Economic Concern should identify a cluster based growth strategy that is customized to the potential for that region. For example, the Heartland Region in South Florida can capitalize upon the need for global trade to become a global logistics hub. The central area could capitalize on its strategic location to serve as the distribution hub for the Florida market. Comprehensive approach for diversifying rural economies Economic diversification and wealth creation in Areas of Critical Economic Concern includes manufacturing, back office facilities, distribution centers, technology, agribusiness and R&D, nature-based tourism businesses, small business, historic preservation and the attraction of retirees. Accordingly, these and other assets must be built into a “wholistic” strategy aligned with key foundations such as education, workforce development and infrastructure. Economic development strategies should also include retention and expansion of the existing base, recruitment of new business, and the creation of homegrown small business. Focused regional approach A cost-effective strategy must be based on two related criteria: a “mega-site” approach with geographical concentration for cluster development, but as a regional, not local asset to ensure benefits to the entire Area of Critical Economic Concern. To achieve both goals, potential mega sites must be evaluated as a region and the mega-site designated as a joint regional tax asset for shared development and tax base benefits. ! ! 20 ! Market-driven strategy Based on the customized strategy, a proactive campaign is needed to identify and locate a major rainmaker project as the “anchor tenant” for the cluster-based overall strategy. This rainmaker project would serve as the catalyst for additional investment. Instead of deploying a “build it and they will come” approach, the strategy should be market driven --- “if you come, we will build it” to ensure successful implementation. “Shared risk, shared reward” partnership approach To fund and implement this regional economic development strategy for rural areas of critical economic concern, the state of Florida should provide seed funding for feasibility analysis and infrastructure needs. However, this seed funding should be leveraged with regional and local commitments, private sector partnerships and governmental programs in transportation, education, and workforce development in a joint venture/partnership structure. Shared commitment should be the hallmark of this strategy. Collaborative implementation For effective implementation, flexible and responsive collaboration within a targeted mission will be key. o Department of Transportation: Strategic Intermodal System (SIS) ! Transportation infrastructure and connectivity is key to rural areas. The Strategic Intermodal System should include economic development as a priority criterion. Areas of Critical Economic Concern should be given special consideration for the use of multimedia infrastructure as a proactive economic development tool. Regions that develop a stimulus strategy with a potential rainmaker project should be fast-tracked and given strategic priority. o Workforce Florida ! Workforce development should be customized to the unique needs of rural areas with the establishment of a rural working group for workforce. This working group should be closely aligned with the Rural Working Group of the Enterprise Florida Partner Council. o Visit Florida ! Tourism marketing assistance to rural areas should be continued. In addition, Visit Florida should develop, in partnership with the Small Business Development Center, a small business creation strategy for nature and heritage based tourism for areas of critical economic concern. o Destination Florida ! Florida’s quality of life is a key asset for the attraction of retirees. Retirees can help rural areas in several respects: diversifying rural economies with economic impacts in housing, retail and professional services and by providing human talent in volunteer and professional services. Destination Florida should focus on a targeted strategy for rural Florida as part of a rural diversification and stimulus strategy. ! ! 21 o o Department of Community Affairs ! Growth management regulations should be reviewed to remove barriers for rural economic development while simultaneously providing stewardship of natural assets and Florida’s environmental quality of life. Department of State, Cultural and Historical Programs ! The arts and historic preservation should be an important part of rural quality of life and diversification strategies. Recommended Action 1. Enterprise Florida should spearhead the development of regional customized economic stimulus proposals for Rural Areas of Critical Economic Concern. These proposals should be developed in partnership with a diverse team to include: o Agency for Workforce Innovation o Department of Agriculture o Department of Community Affairs o Department of State, Cultural and Historical Programs o Department of Transportation o Destination Florida o Regional utilities, public-private authorities, private sector businesses and leaders o Visit Florida o Workforce Florida 2. A state-level Rural Economic Stimulus Committee should be established to evaluate and recommend seed funding of worthy regional proposals. Success Measure Indicator Florida non-metro per capita personal income as % of statewide average (BEA) Recent Data 75.9% (2001) Target Goal 80% (2006) 22 Priority: Retain and Strengthen Sectors Threatened by External Trends Protect Florida’s $44 billion defense industry from the U.S. Department of Defense’s 2005 round of base realignment and closures. Strengthen Florida’s base in manufacturing. Business Case Two areas of Florida’s value-added economy face external threats: defense and manufacturing. Both are key to the diversification of Florida’s economy since both contribute to the quality of value-added job growth and increased industry productivity. The need to protect Florida’s military bases and defense industry from the potential threat posed by the 2005 Base Realignment and Closure (BRAC) Governor Jeb Bush established the BRAC Advisory Council to develop a proactive strategy to protect Florida’s military bases from being targeted for closure. Several initiatives will be key in support of the Council’s work. ! Increased Defense Infrastructure Grants to solve infrastructure needs at military bases so as to ensure their continued viability and effectiveness for military purposes. ! Protection of military bases from land-use encroachments. ! Support to local defense-related communities to help analyze and develop strategies to diversify local economies. ! Re-enactment of the Qualified Defense Contractor incentive scheduled to sunset in June 2004 to boost defense contracts and increase Florida’s market share of a growing $40 billion Homeland Security budget. (Also see business climate priority) The need to strengthen Florida’s manufacturing base Manufacturing has been experiencing a decline nationally. Florida’s manufacturing base, while a smaller share of the Florida employment and output base, is nonetheless an important sector because of its role as a primary industry for wealth creation. In Florida, this sector has recently experienced extensive losses in jobs: Since early 2001, almost 60,000 manufacturing jobs have been lost, a decline of 12.6% of Florida’s total manufacturing employment. While this decline has been less severe than the national manufacturing decline of 14.9%, preserving and strengthening Florida’s manufacturing base is critical to the diversification of Florida’s economy. 23 Recommended Action 1. Support $14 million in funding for Defense Infrastructure and Community Grants. 2. The Enterprise Florida Manufacturing Advisory Council should develop strategies to maintain and strengthen the manufacturing sector in Florida. Success Measures Indicator Florida’s share of US total “Federal Military” component of Gross Domestic Product (BEA) Recent Data 5.7% (2001) Target Goal To be determined in consultation with Governor’s BRAC Advisory Council To be determined in consultation with EFI Manufacturing Advisory Council above 2% (2006) Manufacturing as % of total Florida GSP (BEA) 5.9% (2001) Florida’s share of US total manufacturing GDP (BEA) 2% (2001) 24 Priority: Establish a Comprehensive Smart Growth Policy for Sustainable Economic Development, Diversification and Quality of Life Update and modify Florida’s growth management system to encourage the best use of integrated planning for land, environmental protection, infrastructure, water supply, water quality, historical preservation, libraries, cultural arts and other quality of life factors. Educate Floridians on the integral link between historic preservation, cultural arts, land use and the environment, tourism and economic development. Business Case Florida is renowned for its natural assets and quality of life. That quality of life is central to economic diversification in the 21st knowledge economy. Florida’s communities must be smart to ensure that growth is economically sound, environmentally responsible and supportive of community livability. “Smart growth”, which balances quality of life, environmental stewardship, value-added economic growth and flexible government, has never been more critical for Florida’s future. A key concern of the regional meetings was the view that Florida’s current growth management system hinders smart growth. The net conclusion was the plea to shift from a growth management mindset to a smart growth mindset that integrates: ! A regulatory shift to integrated comprehensive planning that is more closely linked to both environmental and economic development issues. ! A process that is broader to include the nurturing of creative communities with attention to historic preservation, libraries, cultural arts and other key quality of life issues. ! A process that is based on customized solutions, not on inflexible rules. ! A process that is comprehensive and integrated to include land use, regional water policies and progressive redevelopment. ! A process that is implemented through incentives, not penalties. ! Regional planning that is closely linked to economic development strategic planning regions. To implement this shift, state growth management policy should be re-visited and a broader vision with state and regional guiding principles should be designed. This effort should build upon the efforts of the Governor’s Growth Management Task Force and other initiatives. Another recurring theme was the importance of preserving and enhancing Florida’s quality of life issues and creating viable and livable communities. Studies document that 25 vibrant historical and cultural arts communities are key to tourism as well as business. They positively impact Florida’s tourism industry by creating jobs and help to revitalize downtown areas and rural communities. Recommended Action 1. The Secretary of State and the Secretary of Community Affairs, in collaboration with state agencies, should work with public and private smart growth initiatives toward the development of a Florida Smart Growth Policy. 2. Qualify of life issues such as environmental protection, infrastructure, historic preservation, libraries, and cultural arts should be integrated into a smart growth policy for economic diversification. 26 Priority: Invest in Economic Development Fund economic development and Enterprise Florida at a competitive level. Develop innovative new funding strategies for economic development. Business Case While funding was a top-level recurring theme in the regional meetings, funding for economic development as a priority was consistently emphasized. A key message was that diversifying Florida’s economy requires a long-term view with sustained funding, even in tight budget times. In particular, ! Enterprise Florida should be strengthened as a statewide economic development organization with consistent funding at a competitive level. ! Key incentive programs that make Florida competitive for value-added growth should be adequately funded. ! Florida should be branded and funded as a business destination as effectively as it is as a tourism destination. ! Innovative strategies should be considered to fund and support economic development. Florida led the nation in developing an innovative and state-of-the-art concept of a public-private partnership to lead Florida’s economic development. Both government and private sector support is critical for this partnership. To encourage private sector funding for economic development --- a “public good” --- creative new strategies should be considered to augment consistent and reliable state funding. Florida’s innovative public-private approach to economic development can be taken to the next level through new portfolio-based approaches to funding. Enterprise Florida should establish a long-term funding plan that is based on the combination of three key strategies: Base funding at a competitive level from state appropriations that is consistent and reliable. Increased private sector investments for economic development to supplement state funding. One proposal is a tax credit as a stimulus for private sector investment in economic development. Revenue generation by establishing economic development “profit centers” through lines of business related to economic development. Examples include: ! Preferred limited partner for the proposed Florida Innovation Investment and Challenge Fund, with potential long-term revenues that result from the state’s investment in the fund to be re-capitalized for economic development programs; ! Joint venture business partnerships with shared risk-reward in areas such as ecommerce. 27 Recommended Action 1. Competitively fund economic development, including Enterprise Florida, as a long-term investment in diversifying Florida’s economy. 2. Establish a tax credit for economic development as a supplemental private sector driven strategy for economic development funding. Success Measures Indicator EFI funding portfolio by source (EFI) State appropriations Private sector contributions Revenue generation Current (2003-04) Target Goal (2008-09) 78% 12% 10% 60% 25% 15% 28 Summary of Priority Recommendations Global Leadership Secure the FTAA Permanent Secretariat for Miami, Florida Address barriers to international commerce resulting from homeland security Expand and diversify international markets in trade, tourism, investment, education, culture Innovation Leadership Build upon Scripps Florida Establish and provide seed funding for a Florida Innovation Investment and Challenge Fund Establish a blue-ribbon committee to update Florida’s Securities and Investor Protection Act Provide continued funding for University Centers of Excellence Education and workforce Design a statewide system of cluster-driven workforce education centers Streamline Florida’s workforce development delivery system Pursue the streamlining of state and federal workforce funding. Encourage business involvement in education with innovative strategies and incentives. Implement a Florida “On-Line” Institute to upgrade workforce skills. Business Competitiveness Incentives Preserve and fund existing incentives ! Re-enact the statutory authority for the Qualified Target Industry Tax Refund and the Qualified Defense Contractor Tax Refund Programs ! Restore full funding for the Economic Development Transportation Fund ! Fund HB 1149 to provide incentives for the film and entertainment industry Fund the Quick Action Closing Fund Provide new incentives to stimulate Research and Development (R&D) ! Eliminate sales tax on R&D equipment ! Create a Florida R&D tax credit Rural Florida Establish a Rural Economic Stimulus Committee to evaluate and recommend funding for rural regional business development proposals Retention Fund grant programs for defense communities Develop strategies to retain manufacturing through the Manufacturing Advisory Council Smart Growth Review, coordinate and develop a Florida Smart Growth Policy Integrate broad based quality of life issues into smart growth Investment in Economic Development Fund economic development, including Enterprise Florida, at a competitive level Implement a tax credit for economic development as a supplemental private sector driven strategy for economic development funding 29 Special Thanks Regional Meeting Sponsors Beacon Council Broward Alliance Business Development Board of Martin County Collier County Economic Development Commission Columbia County Industrial Development Authority Enterprise Charlotte Florida Community College of Jacksonville Florida High Tech Corridor Council Highlands County Economic Development Commission Jacksonville Regional Chamber of Commerce Lake City-Columbia County Chamber of Commerce Lake City Community College Lee County Economic Development Office Metro Orlando Economic Development Commission Progress Energy Sebring Airport Authority Tampa Bay Partnership Gulf Power Participants Over 1000 stakeholders who attended meetings and participated in the on-line survey on eflorida.com Regional Meeting Panel Leaders (Listed in regional meeting agendas) Partner Submissions Destination Florida Enterprise Florida Partner’s Council Rural Working Group Enterprise Florida Partner’s Council Urban Working Group Florida Aviation / Aerospace Alliance Florida Chamber of Commerce Florida Department of Transportation Florida Research Consortium Florida Space Research Institute Governor’s Office of Film and Entertainment IT Florida Independent Colleges and Universities of Florida Visit Florida 30 eflorida.com/strategicplan