Majority declines to modify stipulations to include more stringent suggestions offered by Commissioner Moran
On a split vote this week, the Sarasota County Commission approved a plan to try to recover $201,000 over 24 months from Enzymedica because the Venice firm created only five of the 72 jobs it promised when it received a financial incentive from the county in January 2012.
Commissioners Michael Moran and Alan Maio were in the minority. Moran repeatedly has questioned economic incentives since he was elected to the commission in 2016. At his urging, the board members will hold a May 24 workshop on the county’s policy regarding such assistance.
Additionally — although no vote was taken — the commissioners on May 9 authorized County Attorney Stephen DeMarsh to instigate litigation against Enzymedica if it defaults on the repayment plan.
The agreement calls for the company to reimburse the county a minimum of $8,375 per month, beginning June 1. If the company misses a payment, it will be charged 1% interest over the prime rate “being charged by the County’s primary depository bank,” according to a staff memo provided to the board in advance of the meeting.
Moran called for several changes in the agreement, including a stipulation that the funds be paid back in a year.
However, Commissioner Nancy Detert told her colleagues, “I think this is probably the most practical way to move forward without us sitting at a board table, rewriting a contract.”
The staff memo explains that on Jan. 24, 2012, the commission entered into the agreement to provide Enzymedica an economic development incentive grant of $216,000 “to assist the company with expenses related to relocation and renovation of its business.” That contract called for the firm to create and retain 72 new full-time jobs between Oct. 26, 2011 and Oct. 25, 2016.
On an annual basis from 2012 through 2016, the memo continues, Enzymedica submitted job creation reports. In April 2016, the memo explains, county staff met with representatives of the firm, because it was struggling to meet its goals. Staff members pointed out that Enzymedica would be required to reimburse the county $3,000 for each of the 72 jobs it did not create, the memo adds.
Then in January, Enzymedica submitted its final semi-annual report, indicating it had produced only five new jobs. “As a result,” the memo says, “staff notified Enzymedica that it owned the county $201,000.00 for the 67 jobs not created.”
Following negotiations, the county staff memo points out, the firm agreed to repay the county the full balance it owed.
Moran asked Jeff Maultsby, the county’s director of business and economic development, whether Maultsby had been able to ascertain why the firm failed to hire the number of people it had promised in the contract.
Maultsby replied that the president of Enzymedica “cited challenges in hiring quality employees for the specific jobs that he needed at his facility in our community.”
The company and its hiring issues
According to its website, Enzymedica was founded in Florida in 1998 “with the purpose of offering [its] customers the highest-potency enzyme products possible. … Our goal of educating people about the importance of enzymes in overall health is what motivates Enzymedica every day.”
In a January profile, Bloomberg wrote that the company “offers enzymes that provide support for digestive discomforts, food intolerances, cardiovascular health, proper immune function, and healthy inflammatory responses. It offers its products through stores and distributors in Barbados, Canada, Croatia, Dubai, Finland, Greece, the Netherlands, New Zealand, and the United Kingdom.”
The Jan. 25 report from Enzymedica to county staff says the firm “has grown consistently and outperformed our marketplace. Last year as an example our growth was 12% above the previous year.”
However, the report continues, even though it had paid tens of thousands of dollars to three recruiting firms the previous two years, “[it] had tremendous difficulty in recruiting and hiring employees.”
The report adds, “At an executive level the challenges with candidates is that they are concerned that the area doesn’t have enough of a job base in the event a position didn’t work out for them to risk relocating their families.” It also notes that spouses of those potential executive hires were concerned about finding positions in Sarasota comparable to their current jobs.
A specific example the firm cited regarded its efforts to recruit an executive vice president of marketing. The report says that in May 2016, the company selected a candidate who lives in Utah, offering him a base salary of $225,000 per year plus a 25% bonus and equity in the company. He accepted that, the report continues, with the contingency that he would have six months to relocate to Sarasota. “We agreed and we paid for all his travel expenses to go back and forth on a weekly basis,” the report adds. That cost Enzymedica more than $30,000, the report notes. Yet, at the end of the six months, the person informed the company that he had decided he did not want to move.
The report was signed by Scott Sensenbrenner, the president and CEO of Enzymedica.
Questions and suggestions
During the May 9 County Commission discussion, Moran objected to the fact that the proposed agreement for the county to recover most of its money did not include any interest or penalties — except for the provision regarding late payments.
Maultsby explained that it was no different from those the board had approved in the past. “It has demonstrated itself to be successful.”
Moran then asked whether the firm had tried to get a line of credit at its bank to pay the county in a lump sum.
Staff made that suggestion, Maultsby responded, but it did not get a response from Enzymedica on that point.
Based on his math, Moran continued, if the county charged interest of 1% over prime, that would end up costing the firm only $34.90 for a missed payment. “What, to the maximum, can we do [to] make it as punitive as possible [if Enzymedica fails to make a monthly payment]?”
County Attorney DeMarsh referred Moran to language in the agreement, which says that if a monthly payment is more than 30 days late, the county “reserves the right” to ask the firm for all of the remaining money.
Another option, DeMarsh said, is to charge a penalty of 12% or 18%, instead of 1% over prime, if a payment is late.
Moran stressed several times that “this is taxpayer money,” so he wants to ensure the county gets the full amount it is due. “My stance on this is extremely simple,” he continued: “If we were a private company … we wouldn’t agree to these terms, ever.”
He suggested the board give Enzymedica “a very short time period to see if they can make arrangements with their bank” for the full repayment.
“The interest rate probably isn’t the problem,” Detert responded. Even at 20%, she pointed out, that would be only about $100. The company already is in default, she continued. “Our problem here is let’s get our money back. … We have to stop short of bankrupting the company, or we will get zero back.”
Commissioner Maio pointed out that the board changed its economic incentive policy several years ago to ensure that it no longer would provide money upfront. No company gets funds, he added, unless it has created a job and kept that job in place for a designated period of time.
“What troubles me about this,” he continued, is that the original 2012 agreement called for Thomas Bohager, the chair of Enzymedica, guaranteed the firm’s financial obligations to the county. The repayment agreement shifts that responsibility to Sensenbrenner, he pointed out.
The firm has changed ownership, Maultsby earlier explained. When Moran asked whether Sensenbrenner would be able to cover the new obligation to the county, Maultsby replied, “We have researched the public information that is available, sir, and that indicated to us that we would be able to collect, if necessary.”
Commissioner Charles Hines then asked about the process that would occur if the company defaulted. Would DeMarsh need board authorization to file suit against Enzymedica?
“Typically, I come to the commission and ask for permission to file suit,” DeMarsh explained. However, the board could provide such authorization that day, DeMarsh said.
Only four months before the Jan. 25 Enzymedica letter arrived, Sanborn Studios filed a Confession of Judgment in the 12th Judicial Circuit Court in August 2016, acknowledging its debt of $350,064 to Sarasota County for its failure to create 117 jobs under terms of an economic incentive contract it signed with the county in 2010. The county had filed suit against it in July 2014, arguing that the firm had breached that agreement.
In an Aug. 9, 2016 order approved by Judge Rochelle T. Curley, the county accepted the Confession of Judgment and stated that it would seek to recover the money from Sanborn.
In response to a Sarasota News Leader question, county spokesman Jason Bartolone wrote in a May 9 email, “We are still proceeding forward with our efforts to collect on the judgment we received against Sanborn Studios but have not recovered any money as of yet.”
On May 9, Detert made the motion to approve the agreement with Enzymedica; Hines seconded it.
Chair Paul Caragiulo supported it, too, but he said after the vote, “I would agree that we have many things to discuss in that [May 24] workshop.”