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Problems plague Enterprise Florida

Published Oct. 1, 2005

The issue before board members of Enterprise Florida Inc. and others at the state's recent Economic Summit meeting seemed like an easy one.

Should they send a simple resolution to lawmakers telling them that increased school funding is vital to economic development?

Two hours later, after several speeches, some dry discussion and a short slide show, a few of the directors of Enterprise Florida came to a conclusion: Why were they wasting so much time?

"I believe Enterprise Florida already has a lot (of other issues) on its plate . . . to worry about," board member and Secretary of State Sandra Mortham finally said, exasperated.

Indeed. Nearly a year after the Legislature agreed to shut down the Department of Commerce and turn the state's economic development duties _ and more than $94-million in public money _ over to Enterprise Florida, the group's leaders today are spending more time figuring out how to take care of their own business than they are attracting new businesses to the state.

As a public-private partnership _ the first of its kind in the nation _ Enterprise Florida was supposed to be a model for economic development agencies. Surely, proponents said, business and government leaders working together would be more responsive, efficient and effective than the old Commerce Department.

But Enterprise Florida is still fraught with problems. Its bureaucratic ways, such as the monotonous discussion on the simple education resolution, are a throwback to its government roots.

Its layers of management and complex structure can make a government agency look lean. Some local economic development officials aren't impressed with the agency's track record of attracting new businesses to the state.

And now, it faces its biggest problem: Lawmakers, some who couldn't even get Enterprise Florida managers to return their phone calls, are threatening to yank the agency's funding. After months of prodding the group for financial documents, legislators have scheduled a special meeting Wednesday when Enterprise Florida officials will be asked for the last time to provide some answers as to what it does with its money.

One new Enterprise Florida expense that lawmakers may hear about: $44,000 for a consultant to help the group learn how to meet state standards for accountability.

It's something that's needed.

"All I want to know is how much money they got, where they spent it and what benefits did the people of Florida get," said Rep. Sharon Merchant, R-North Palm Beach, who chairs a committee that helps determine Enterprise Florida's future funding. "Right now there's no money in the budget for them . . . and if we don't get some answers, there won't be."

Enterprise Florida's budget is no small sum of money. This year, it got $27.3-million in direct state funding, and managed another $47.9-million in other state programs for economic development. Over the next year, the budget requests for the group include $25.8-million in direct funding and another $68.6-million in indirect funding _ a total of $94.4-million.

For their part, Enterprise Florida officials say they've done a good job at economic development, and can account for everything they've spent. But they admit they haven't been as responsive to the Legislature as they should have been.

At Wednesday's meeting of the Senate Ways and Means Committee, Enterprise Florida president John Anderson is expected to present a report that shows the group directly created some 9,200 new jobs last year and that its programs helped train tens of thousands more workers. He also is expected to detail exactly how much private funding the group has raised, and where it spends its money.

"I think we've done a reasonably good job doing what business and legislative leaders want us to do in terms of economic development," Anderson said. "But we have not been nearly effective enough in communicating with our primary shareholder _ the Florida Legislature _ as to what we've done."

While communicating better with the Legislature may solve some problems for Enterprise Florida, others run much deeper.


+ Enterprise Florida was supposed to cut down on bureaucracy when it replaced the Commerce Department, but the group's complex organizational structure doesn't help much. As required by the Legislature, its board of directors has 27 members who are busy businesspeople and government leaders spread throughout the state. Reporting to that board are four other boards of directors, ranging in size from 12 members to 29 members, that oversee different programs. Getting that many people to agree on anything is tough, although Enterprise Florida leaders say their system works. At the same time, however, some of Enterprise Florida's top officials can't explain all that the agency does with its three offices, 136 employees and more than 60 partnerships with other economic development organizations.

+ One of Enterprise Florida's primary jobs is to funnel business relocation and expansion leads to local economic developers. But confusion over who gets what leads has been rampant. For instance, some leads that should have gone to the St. Petersburg/Clearwater Economic Development Council were directed to other organizations, according to Bill Castoro, executive director of the council. Other local economic developers around the state have lodged similar complaints. Enterprise Florida officials say they have solved some of the problems, including the one with Pinellas County, and are working to solve others.

+ Because they are businesspeople, many of Enterprise Florida's leaders aren't used to dealing with legislators. The results have been frustrating for all involved. A cryptic strategic plan the group was required to submit to the Legislature last month was shot down by lawmakers as inadequate, unintelligible and generally worthless. Enterprise Florida's decision to keep some of its records on capital investment programs secret left some lawmakers fuming. Meanwhile, legislators who hold the group's purse strings have complained that their phone calls to the agency haven't been returned. Many taxpayers, who finance the group, have no idea what it does.

+ The high salaries paid to Enterprise Florida's top managers have raised more than a few eyebrows. John Anderson, the group's president, makes $190,000 a year _ about $82,000 more than Gov. Lawton Chiles and nearly twice as much as Charles Dusseau, the former chief executive of the Department of Commerce. (SEE CHART.) Enterprise Florida officials point out that Anderson's salary and all or portions of other top-paid executives are paid with private funds, and that they need to be high to compete with private companies for the best talent.

+ Along with the high salaries, some legislators are worried that Enterprise Florida isn't raising the private funding it is supposed to raise. When the concept behind Enterprise Florida was introduced by Chiles and Lt. Gov. Buddy MacKay in 1992, the idea was that private business would match state funding dollar-for-dollar. But under the legislation that ultimately created Enterprise Florida as it is today, it doesn't have to match dollar-for-dollar until the year 2001. This year, it only has to raise $1 for every $10 in money it gets from the state's general revenue fund. Officials with the group said they've already raised about $960,000 and will exceed the $1.5-million it is required to raise by June 30, the end of this fiscal year. But when prodded by legislators to produce records, they haven't.

"We have consistently asked for a balance sheet accounting for the (public) dollars they have received as well as the private dollars they have received and how they've spent it," said Sen. Katherine Harris, R-Sarasota. "But up until last week we had not received any figures at all from them."

Even when the Senate Commerce & Economic Opportunities Committee that Harris chairs did receive some numbers from Enterprise Florida last week, they weren't complete. Harris said she expects a full accounting at this week's meeting.

As with virtually anything involving Tallahassee, politics play a part with Enterprise Florida. Some proponents of the agency have charged that Republicans are quick to criticize the group because they want to see the agency fail, which would hurt MacKay's planned run for governor.

But criticism and concern about Enterprise Florida crosses party lines.

"Business and economic development is not Republican or Democrat," said Sen. Ron Klein, D-Boca Raton, who also has been critical of the agency. "People are just anxious. We're putting a lot of money into this and we want to see some results."

Perhaps what surprises some lawmakers the most about Enterprise Florida's lack of accountability and results is the fact that it is run by business and government leaders who are supposed to know what they're doing.

Gov. Chiles is the group's chairman. Richard Nunis, head of Walt Disney World Attractions, is vice-chairman. Anderson is the well-respected former leader of the Miami economic development group, Beacon Council. Other board members include the presidents of the state's biggest banks, development companies and manufacturers.

"The board of Enterprise Florida could be the envy of any Fortune 500 company," said Rep. Carlos Valdes, R-Miami, who oversees Enterprise Florida as a member of the House Transportation & Economic Development Committee. "The talent is there .


. but we just haven't seen the results."

Martha Larson is vice president for administration for Enterprise Florida and former assistant secretary of the Department of Commerce. She said Enterprise Florida hasn't been able to produce financial statements and other documents exactly like legislators and others want them because the group no longer uses the same antiquated accounting and management procedures that the state uses.

"We can get answers to their questions, but they might not be exactly the way they're used to seeing it," Larson said. "The language is the same, but the dialect is different."

Anderson said as he and other Enterprise Florida officials learn more about what legislators expect from them, they'll be quicker and more responsive to their questions.

"We're learning this day by day," he said. "What's being done with Enterprise Florida has never been done in any part of the country before.

"There are no books or instructions for us to follow."



+ Florida offices: Orlando (headquarters), Tallahassee, Miami

+ Employees: 136

+ Proposed budget (fiscal 1997-98): $94.3 million. Includes: direct _ $25.8-million; indirect (state grants and other funds for economic development that are administered by Enterprise Florida) _ $68.6-million

How it stacks up

Because Enterprise Florida's duties are more far-reaching than the old Department of Commerce, its operations can't be directly compared to the agency it took over last year. But a comparison of just the economic and trade duties of the two agencies shows that Enterprise Florida has less expenses and fewer people:



$8-million Operating costs $9.8-million

$3.2-million Payroll $5.7-million

$580,900 Annual rent for domestic offices $615,000

Enterprise executives get higher pay

While the state has saved money on payroll costs since it transferred economic development duties to Enterprise Florida, the group's managers get paid a lot more than they would have under the Department of Commerce.



$190,000 Chief executive $98,196

Vice president &

$120,000 chief operating officer $75,000

$120,000 VP-corporate development No such job

$100,000 VP-international trade $110,012+

VP-marketing &

$100,000 strategic development $72,413

$93,600 VP-business expansion & retention $74,328

$93,100 VP-administration $54,070

$70,000 Chief financial officer $55,000

+ Includes salaries for what had been two separate positions

NOTE: Under Enterprise Florida, chief executive and VP- corporate development positions are funded entirely with private dollars. No position pays more than $100,000 in state funding; anything above $100,000 is paid with private dollars.