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BioFlorida Plans to Lobby for More Biotech Subsidies as State Faces Shrinking Tax Base

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WESTON, FLA. — Florida’s life sciences industry will spend the next several months stepping up its lobbying to hold onto, if not expand, the multi-million dollar subsidies showered in recent years on biotechs and research institutes — three of which have joined the state’s main industry group in urging against any cutbacks.
 
A new Task Force for Biotech Competitiveness — to consist of appointees chosen by Gov. Charlie Crist and legislative leaders, will soon begin crafting a policy agenda that life sciences advocates will pursue next year, beginning with BioFlorida’s first-ever day devoted to member lobbying of state lawmakers in Tallahassee, to take place in February. The lobbying will be carried out by members of a new Biotech Caucus that BioFlorida will launch at the event.
 
By the spring, BioFlorida plans to release its own “State of the Industry” report intended to track industry goals and milestones.
 
“What we pursue as an industry for the future remains to be seen. I think a number of people are sort of surprised that the momentum and the incentive offerings have continued beyond those first three institutes, and we’re still looking at [funding] Max Planck and others,” BioFlorida president Russell Allen told BioRegion News. “We’re excited for that. But we also understand there’s more to do than provide the incentives to those institutes. We want to make sure that we have some tools in place for our small companies and the growth of other [research] organizations.”
 
Allen spoke minutes after addressing attendees during the closing session of BioFlorida’s 10th Annual Conference, held here last week at the Hyatt Regency Bonaventure hotel, a few miles west of Fort Lauderdale.
 
At that session, Pfizer’s top lobbyist offered statistics intended to buttress one of the industry’s main arguments for keeping the incentive spigot open.
 
Brian Agnew, Pfizer’s assistant director for economic and policy research, told conference attendees that Florida’s biotech and pharma companies contributed a total $33 million in property taxes and another $24 million in sales taxes in 2005.
 
That year, Agnew said, these companies had a combined 7,000 industry jobs and spawned another 15,000 jobs in businesses that serve the industry, such as law and accounting firms. Average annual salary for those jobs was $60,000, nearly double the state’s average salary of $36,000 for all non-governmental positions.
 
The industry’s goal of at least maintaining state financial support for biotech could prove difficult. A statewide drop in home sales, a consequence of the nation’s mortgage market meltdown, has resulted in shrinking state revenues. “Document stamp” taxes on property sales fell to $625 million in the 12 months ending this past June 30 from $1.25 billion in the 2006 fiscal year and $1.6 billion in the 2005 fiscal year.
 
And while the absence of hurricanes since 2004 is typically good news, it has had the side effect of drying up another source of state revenue — sales taxes on construction of new homes and home renovation projects.
 
“We’ve been at artificially high revenue levels because of the housing bubble, the increase in doc stamps, and also rebuilding from the hurricanes in the last few years,” Kurt Wenner, senior research analyst with Florida TaxWatch, a tax watchdog policy group, told BioRegion News.
 
Since recording a $2.5 billion gain for the 12 months ended June 30, 2006, Wenner noted, state revenues have grown, but below projections. This fiscal year, recurring revenue is projected to grow just 0.3 percent, or $70 million, to $26 billion. But over the next two years, the state has projected increases of 5.5 percent for 2008-09, and 7.2 percent for 2009-10, with an updated revenue forecast due next month.
 
State officials have scrambled to tighten spending. Over the summer, lawmakers agreed to trim $1.5 billion to address a shortfall in the state’s nearly $72 billion budget approved this past spring. Among programs that were cut:
  • Centers of Excellence, three state-funded research venues that include one in regenerative health biotechnology — Reduced from $100 million to $91.5 million, as Crist shifted the $8.5 million to the state’s universities to help offset an earlier veto of a 5 percent tuition increase.
  • State University Research and Commercialization Grant Program – Halved from $4 million to $2 million. The program is part of the state’s Capital Formation Act intended to help form early-stage companies; it was consequently reduced from $35 million to $33 million.
“These programs are under implementation and not underway, so the effect was limited to the future. There will be efforts to expand and continued funding for these programs in the 2008 session,” Jack Sullivan, president and CEO of the Florida Research Consortium, told BioRegion News via e-mail. “In an era of significant slowdown requiring large cuts, the Florida Legislature reallocated some university funding from one pot to another and only cut $2 million in total from $385 million in these hugely beneficial programs. All in all, that's pretty damned good news and indicative of strong legislative support!”
 
Spared from cutbacks so far have been economic development programs. That may not be possible next year if state revenues continue to lag, said Barney Bishop, president of the 10,000-member statewide business group Associated Industries of Florida, in an interview.
 
“There’s going to be a tremendous challenge. There’s going to be a desire to cut back and not spend it on economic development,” Bishop said — negating Florida’s effort to match in biotech the big-money subsidy packages lavished on manufacturers by nearby states like Alabama, South Carolina, and Mississippi.
 
Bishop said he supports Florida’s biotech subsidy policy: “You’ve got to spend money to make money.”
 
Indeed last week, as BioFlorida met in Weston, state lawmakers were in a special session in Tallahassee trying to place on the Nov. 6 Election Day ballot a tax-cutting plan aimed at protecting senior citizens and winter residents or “snowbirds” from huge property tax hikes. An earlier tax-cut referendum was squelched last month by a state judge, who said the wording of the proposed amendment was too vague.
 
More cutting would signal a retreat from the big-money biotech strategy Florida began pursuing with former governor Jeb Bush, a Republican, and continued earlier this year under his successor Crist, a Democrat. Last spring, Crist signed into law his first budget, which increased the state’s Innovation Incentive Fund to subsidize tech-based projects creating 100 or more jobs by $50 million, to $250 million. The state also created the capital formation act, intended to boost the amount of VC investment in the state’s early-stage companies.
 
Arguing for Incentives
 
Richard Lerner, president and CEO of the Scripps Research Institute, said Florida’s state and local governments must retain the economic incentives that have swayed his institute and three others to develop new facilities and hire hundreds of researchers in the Sunshine State, with two other institutes negotiating subsidy agreements with state and local officials to do likewise.
 
“The change is starting to happen. We are near the tipping point,” Lerner said, speaking at the conference’s opening session. “We cannot rest at this point. We have to capture the momentum. If we stop now, it’s great, but not as great as it can be if everybody [attending the conference] marches to the momentum.”
 
The larger the cluster, he said, the likelier venture capitalists will be drawn to the state to invest in startups: “If we offer innovation, the money will follow. If we do not offer innovation, the money will go elsewhere.”
 
Answering a BioRegion News question during a session with reporters minutes later, Lerner acknowledged the possibility of future state budget cuts aimed at biotech: “In every state budget, there are lot of different mouths to feed. There’s always concern. But in the grand scheme of things, this is not all that expensive. I suppose that’s easy for me to say. Then again, I’m a Florida taxpayer too.”
 
Yet Lerner also sought to downplay any worry he may have about the state retaining its incentives: “I’d only be concerned if it does not happen.” He also agreed that the state should consider crediting local governments that have joined Tallahassee in shelling out millions for economic incentives; current law requires a 50-50 state-local match.
 
“I actually believe the people who’ve stepped up to the plate should be given some kind of credit. There should be match relief,” Lerner said. “Local governments don’t have infinite amounts of money, and pretty soon they’re not going to be able to [match the state].”
 
Palm Beach County and the state teamed up on the $510 million in incentives that persuaded Scripps to reach Florida’s first deal for an anchor research institute in the state. Scripps is now building a 364,000-square-foot permanent campus — three buildings with laboratory and administrative space — within a 100-acre portion of Florida Atlantic University’s campus in Jupiter. The facility is set to open in the first quarter of 2009. In the meantime, about 250 professionals work in 74,000 square feet of temporary lab space in two buildings at the university.
 
‘Just Another Year or Two’
 
Lerner’s defense of the state’s big-money incentive program was seconded by the heads of two other research institutes that followed Scripps in agreeing to expand from California into Florida.
 
“If one, two, three, four, five more companies, nonprofits and what-not come, and if Florida can manage to do the innovation fund one more year, it’s going to change the state of Florida,” said Richard Houghten, president of the Torrey Pines Institute for Molecular Studies. “If Florida can hold onto [its] vision just for another year or two, I think we’ll be at the tipping point.”
 
Torrey Pines is constructing a new $80 million, 100,000-square-foot campus on 20 acres within the Florida Center for Innovation at the mixed-use, master-planned Tradition community in Port St. Lucie. The facility is set to open in December 2008 — just 28 months after Houghten first visited Port St. Lucie.
 
Torrey Pines captured a total $71.5 million in subsidies, including $40 million from Port St. Lucie toward infrastructure improvements at FCI, in return for guaranteeing at least 189 jobs over the next decade. “We expect to have close to 250, but we’ll see,” Houghten said.
 
John Reed, president of the Burnham Institute for Medical Research said, “Some of the key things that we’ve got to deal with are to continue to attract great talent here in Florida making this a state where there’s a true research culture, where some of the world’s greatest minds will be compelled to come here and tackle great problems, and to continue to build a culture of research and a place where technologies converge and great things happen.”
 
Burnham broke ground Oct. 3 on an $80 million, 175,000-square-foot facility within the Orlando, Fla., master-planned community of Lake Nona, set to open in spring 2009. The project has received $350 million in state and local subsidies. Reed said after Burnham announced its plan, it was approached by recruiters from Arizona, Mississippi, West Virginia, and Michigan, yet the institute remained sold on Florida.
 
“To try to convince people to live in those states was going to be a challenge, whereas we thought Florida had a lot going for it. There’s a tremendous affinity that many people, particularly in the Northeast, the Midwest, even Canada and Europe feel over this state. So we felt that there was some panache that we could tap into or take advantage of,” Reed said.
 
Burnham, Torrey Pines, and Scripps will be joined over the next several months by SRI International, which has announced plans for a 200-person marine research and technology facility in St. Petersburg. SRI will receive $20 million from the state innovation fund, and $5 million each from the state and Pinellas County toward design and construction. In addition, St. Petersburg provided the project site and will build a facility for 100 employees at the Port of St. Petersburg, which the city will lease directly to SRI.
 
The four could soon be joined by at least one other research institute and an entrepreneur-philanthropist. Germany’s Max Planck Society is in talks with officials from Palm Beach County and Enterprise Florida, the state’s public-private economic development agency, to secure $190 million of incentives from Palm Beach County and the state. The county has offered $86.9 million, while Max Planck is reportedly seeking at least $94 million from the state. Also, Alfred Mann has entered into a contract to purchase 22 acres from Core Properties at its mixed-use, master-planned community Tradition, within Port St. Lucie; Mann plans to build there a research campus akin to its Mann Biomedical Park in Valencia, Calif. [BioRegion News, Oct. 8].
 
All three research institute heads singled out as among Florida’s most valuable incentives:
  • The Innovation Incentive Fund, available for tech-based employers with at least 100 jobs. Despite the increase in funds over last year, there are more companies seeking funds than there is available funding, said Brenda Workman, director of business retention for the life science and manufacturing sectors with Enterprise Florida.
  • The state’s Eminent Scholars grant program, which matches university recruiting expenses in hiring top academics from other states.
  • The state’s web of worker training programs and local public-private workforce development boards.
However, in panel talks and interviews, speakers and attendees at BioFlorida’s conference agreed that Florida must improve its worker training and placement efforts if the state is to parlay its growing collection of research institutes and academic programs into a life sciences powerhouse capable of generating large numbers of jobs for the state.
 
Ray Johnson, CFO of Cytonics, a proteomics company based in Jupiter, told BioRegion News he stopped using state programs two years ago after finding them “a little slow to react, and a little cumbersome” compared with recruiters, who are eager to find job candidates quickly in order to receive incentives like a 25-percent commission per job.
 
“What I’d like them to say is, ‘We’re going to grant you $10,000, say, to go out and hire a recruiter,” Johnson said.
 
But Johnson said he will give state workforce programs another try as he searches for the local people he prefers to hire for the “20 to 25” jobs that Cytonics will create over the next year. The company now has five staffers. “We need clinicians and technicians. We need researchers and [principal investigators],” he said.
 

“If we offer innovation, the money will follow. If we do not offer innovation, the money will go elsewhere.”

“There are two types of workforce issues. The large organizations like Scripps need to train and hire a large number of people. But then there are the startups, and they have a special need. They can’t really worry about hiring people and training them. We need to really get people who have experience and have done it before; they have the knowledge; they’ve made the mistakes,” Johnson said in an interview. “We’ll pay a premium. We’ll offer compensation packages that include stock options that will allow them to share in the benefits that they’re bringing.”
 
Johnson attended “What’s in Your Petri Dish?,” a panel focused on the state’s workforce training effort. Another attendee — Candace Walker, vice president of the economic Development Council of St. Lucie County — said her office is seeking trained technicians ready to work at Scripps when it opens: “Scripps is ramping up. These buildings are going to be ready in about a year and we have to figure out some way, I believe, to put ads in papers somewhere else to bring people here because we don’t have the workforce to fill those needs.
 
In response, panel moderator Doug Sanez, a biotech job developer/work readiness trainer with Workforce Alliance, a job development nonprofit in West Palm Beach, said his group will connect Scripps and other Florida employers with labor departments in states where pharma companies have laid off workers interested in relocating.
 
Linda Nichols, chair of sciences for health programs and co-director for biotechnology at Santa Fe Community College in Gainesville, Fla., said in an interview that schools seeking to place students in biotech jobs encounter another hurdle that drives away potential job candidates — low wages. While acknowledging that some students accept low wages at startups in return for broader responsibility, Nichols said most respond by moving away or leaving the field entirely.
 
“We’ve proven we are turning out top quality folks who can work anywhere in the country. And now we don’t want them to be treated like they are a high school graduate with two years of experience. We’re giving [employers] biotechnicians, and they need to be treated with that kind of respect,” Nichols told BRN. “Our students when they graduate here in our area, maybe they get offered $25,000, $28,000. It’s a joke. If they were to leave the state and go, say, to Austin, [Texas], they’d make $35,000 to $40,000 a year with the same background.”
 
Yet Florida colleges and universities continue to add life science programs. One example: Heather Belmont, chairperson of the biology/health and wellness department at Miami Dade College-North campus, said at the conference that her school this fall launched a bioscience program in close consultation with industry leaders and two academic partners, Florida Gulf Coast University in Fort Myers and Barry University in Miami Shores. The bioscience program includes research, bioinformatics, and chemical technology certificate programs, with an agricultural science certificate program set to launch next fall.
 
To address workforce needs, Belmont said, her school is working with Workforce Alliance and Florida Atlantic University to create a centralized employment pool.
 
Bio Database Launched
 
Another roadblock to life sciences job development is a dearth of places for entrepreneurs, VCs, and tech transfer professionals to learn about the employers and academic programs that comprise Florida’s life sciences cluster, panelists at another discussion agreed.
 
University of Florida’s Sid Martin Biotechnology Incubator says it has gone a long way to addressing that issue through the new database it launched earlier this month, and made public at the BioFlorida conference.
 
A year in development, the new Florida BioDatabase lists all 134 known biotech and medical device companies doing business in Florida, with short descriptions of their research focus, technologies, and any publicly disclosed investment rounds, as well as links to their websites. Companies seeking to be listed must be reviewed by Sid Martin through a consultant before they can appear on the database, which will be updated quarterly.
 
“We’re interested in companies from very early stage to public, in tracking their presence here and some basic profile information about each one of them,” said Patti Breedlove, the incubator’s assistant director  “From the sales reps who want to market services, or the law firms . . . we all need this, whether we’re selling pipettes or evaluating venture capital or whatever.
 
“It’s important that we capture this [information] now so that we can measure our future growth,” Breedlove added.
 
The database also includes a list of all VC firms known to have invested in Florida companies; separate lists of public and private companies; a pie chart conveying the share of each sector comprising the state’s biocluster; a region-by-region bar chart showing where Florida’s life science companies are based; and another bar graph detailing the workforce sizes of businesses. Of the state’s 134 bio and med device companies, 58 have up to 20 employees. The database was an outgrowth of data collection carried out by Breedlove and other members of a selection committee that chose promising Florida companies to attend Southeast BIO’s annual investor forum.
 
“Florida’s problem is that it doesn’t know itself very well, except for some aggregate numbers that Enterprise Florida has pulled over the years,” Breedlove said. “This tells the world what’s in Florida in bio, where it is, who they are, what they’re like.”
 
As the state’s bio cluster becomes better known, she added, “The perception of Florida has shifted dramatically for the rest of the country. As a result, we’re benefiting even up North. People don’t laugh when they hear biotech and Florida in the same sentence any more.”
 
Selling Hope, Going Virtual
 
Keeping life science workers in Florida will get even harder over the next few years, even if the state’s biotech cluster grows and worker training programs improve as planned, cautioned Stephen Burrill, CEO of Burrill & Co.
 
During a luncheon plenary address at the conference, Burrill said Florida must position itself as a place that nurtures employers intent on curing disease, much as California did in its successful advocacy for its $3 billion stem-cell initiative, dubbed Proposition 71 and approved by voters in 2004.
 
“The opportunity for you in Florida is to become acolytes for selling hope,” Burrill told conferees. “If we sell hope and we understand hope, that’s what our industry is all about. And hope and passion and expectations for 30 or 40 years have helped propel this industry to what it is today. And you become important message carriers of that hope.
 
“Everyplace has said biotechnology is a cornerstone of our future. The state of Florida has said that. But so have all these other people. That’s an opportunity for you and a challenge. Everybody’s trying to do the same thing you’re doing,”
 
In his address and minutes later an interview, Burrill cautioned that Florida, like other bio clusters, faces two challenges — today’s competition from other states and countries; and a future in which he said clusters will develop virtually, grouped around topics of research, with talent and resources shared across geographic boundaries.
 
Florida can take advantage of talent and facilities elsewhere as it builds its own cluster, he said.
 
“The flipside of that is, everybody wants what you’ve got here. That’s a challenge,” Burrill told BioRegion News. “You’ve got [to practice] some defense to not only get what you’re trying to build, but to hold onto all these things. And researchers are portable. They’re going to go where you have the best environment, the best funding, and [Florida] is doing a fabulous job at the level of trying to pull that in. But it’s challenging.”

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