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Capitol One ends 1,100 Tampa jobs

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The company, which had been given tax breaks to bring jobs to the area, closes its center to outsource the jobs.

By JEFF HARRINGTON, Times Staff Writer

Published July 22, 2004

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Capital One is shutting down its sprawling credit card call center in Tampa, eliminating 1,100 jobs and delivering a serious blow to a decadelong effort to upgrade the area's economic base.

The Tampa job cuts, which were announced along with smaller staff reductions in Dallas and Richmond, Va., are part of Capital One's ongoing push to outsource much of its customer relations work.

Salaries at the Tampa center range from $35,000, with bonuses, to $100,000 for some managers, employees said. They said they were told their jobs would be sent overseas, but the company would not say where the work will be done. About 350 jobs will remain in Tampa.

Workers at the call center's campus were called to an emergency meeting about 3 p.m. to hear the news, hundreds of them sitting in chairs set up in a basketball gymnasium in the company's Renaissance Center in Town 'N Country. Others simultaneously congregated in a large conference center.

Extra security, including police cars outside, underscored the gravity of the moment.

"Although this was a difficult decision, I know that it is the right decision for the U.S. Card business and for Capital One," Catherine West, president of the company's U.S. Card business, wrote in a memo circulated to employees Wednesday afternoon. "It enables us to achieve the cost efficiencies we need to win in our markets."

After a brief discussion, the two large employee groups split into smaller groups to discuss concerns and receive informational packets.

"Then they let us go for the day," said Billy Sickora, 29, an account supervisor and five-year employee. "Aren't they kind?"

Sickora said the news was a shock to most. "We were told just recently that nobody in the site knew until today, not even the site manager."

After a year in which other jobs had been outsourced to contractors and some vacant positions had gone unfilled, some employees said they were expecting a round of layoffs. But they did not anticipate a shutdown of the entire Tampa credit card operation.

The McClean, Va., company plans to sell its five-building complex in Tampa. The 71-acre site includes a jogging trail, gym, laundry service and cybercafe. It intends to lease back an undetermined amount of space to house the 350 workers who will remain to handle auto finance collections.

In a statement, Capital One said most of the jobs will be outsourced to "U.S.-based companies." Spokeswoman Tatiana Stead would not directly address whether those U.S. companies, in turn, would send the work offshore, a practice that has emerged as a major political issue.

Stead said the company began aggressively outsourcing in 2001 and now has an "extended work force" of 11,000 employees. Of those, she said, more than 80 percent are in the United States.

Yet, several soon-to-be ex-employees said Wednesday they have no doubt their jobs are headed outside the United States.

"They told us that our work is being outsourced to another country, and that is the main thing everybody is upset about," said Patricia Correa, 59, who worked as an account supervisor.

"Everybody in Tampa helped build that company. ... It was a financial decision, they told us, because they can pay people in India way less."

Several employees said Capital One established a precedent of using foreign workers within the past year when jobs in the Spanish-speaking department in Tampa were shipped to Costa Rica.

"It's unfortunate that they feel like outsourcing is the answer," said Daniela Demorais, 23, a Capital One account supervisor who lives in St. Petersburg. "I don't think they'll get the quality ... that they want."

One of the largest providers of Visa and MasterCard credit cards in the world, Capital One swept into Tampa in 1995, starting with about 150 employees. It rapidly added buildings and employees to its Town 'N Country campus near Waters Avenue and the Veterans Expressway.

Prospective employees were courted through advertising on billboards and the Yellow Pages.

Capitol One had been courted, too, at taxpayer expense. In 1996, the company was approved for a $4-million tax refund - about $1-million to come from local governments - to be paid out over time through the Qualified Target Industry Program. QTI, as it is sometimes called, is a state incentive plan that uses public money to attract companies with high-paying jobs. Capitol One had to agree to bring 1,000 jobs.

According to state records, Capital One was paid $2.7-million from the program through 2003.

"The state is obviously disappointed to lose any company, but the tide is going in our direction," said Jacob DiPietri, a spokesman for Gov. Jeb Bush. "The state has led the nation in job growth for more than two years, because of our favorable business climate, which includes programs like the QTI program."

Stead, the Capital One spokeswoman, said Wednesday that her company has received incentives only when it has met the required benchmarks.

Hillsborough County Commissioner Jan Platt, who consistently votes against incentive programs for industry, said Wednesday's announcement is the reason why.

"There's no guarantee that the companies will stay," Platt said. "Do the taxpayers get refunded? I seriously doubt it."

Commissioner Jim Norman, a supporter of corporate incentives, said one failure doesn't take away from a successful program.

Norman said studies have shown that Central Florida fared well compared to other parts of the nation after Sept.11 because it has a diverse economy created in part by such programs.

"We were one of the least-impacted communities in America because of our diverse economy and these programs," he said. "I'm proud of our investment in these jobs. I wouldn't throw the program out because of that failure.

Capital One's departure probably will not only mean a substantial loss of jobs but local sponsorships and charitable donations.

Its projects included the Capital One Leadership Grants program, which it launched in 2000 with a $400,000 investment and a commitment to share technology and volunteers; and $250,000 in contributions to area food banks from 1998 to 2001.

The credit card operation will be shuttered in phases, with affected workers receiving 90-day notices. That means some will leave as soon as October while others may stay until spring 2005.

According to an information packet given to workers, the layoff package includes one week's pay for every $10,000 in annual salary and extra pay for older workers. Total severance is capped at 12 weeks.

Capital One said it took a charge of $56-million in its second quarter to account for layoff costs.

The company is not finished with layoffs. Chief financial officer Gary Perlin said Capital One expects to take additional charges of $60-million to $100-million during the second half of 2004, much of it related to outsourcing call centers.

Even with these added costs, Capital One beat analysts' earnings expectations for the second quarter. The company said it earned $1.65 per share, up from $1.23 the prior year and above forecasts of $1.50 per share.

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Its kind of sickening to see our companies sell out the country and its citizens to make a profit by underpaying people in third world countries. Unfortunately that's life.

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Tax breaks sometimes end with heartbreak

Capital One got millions of dollars in tax breaks under a state program that critics say lures companies but doesn't require them to stay.

By JEFF HARRINGTON, Times Staff Writer

Published July 23, 2004

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A month before announcing that its credit card call center in Tampa would close and put 1,100 people out of work, Capital One got some good news from the state.

A tax refund of $300,000 had been approved for creating the same high-paying jobs the company is now eliminating.

That latest refund meant the state and Hillsborough County had awarded the financial services giant $3.85-million in tax breaks since it arrived in the area nine years ago. That's just shy of the $4-million total the company was eligible for under a state program that has drawn criticism for luring companies to Florida but not requiring them to stay.

Capital One has been reimbursed through the state's Qualified Target Industry Program for corporate income taxes the company paid. QTI, as the program is sometimes called, was created in 1995 by the Florida Legislature to lure companies with high-paying jobs through the use of tax incentives.

Now that the McLean, Va., company is shutting down its credit card operation, taxpayers are left to grapple with a multimillion-dollar question: Were the incentives worth it?

For Bruce Register, Hillsborough County's corporate development manager, the answer is an unqualified yes. He said Capital One helped elevate Tampa's labor pool, and it leaves behind a beautiful, marketable campus.

"They far exceeded the number of jobs and the wages they were required to do," he said. "They didn't just meet the bare requirements."

Moreover, county and state officials point out, companies such as Capital One are reimbursed only for tax dollars they have already paid. And under the "performance-based" system, jobs have to be in place at least four years before the company is fully reimbursed.

"It's payment after they fulfill their commitment. If they don't fulfill the commitment, they don't get the money. Period," said Pam Dana, director of the state Office of Tourism, Trade and Economic Development.

Not all, however, are enamored with the program.

State Sen. Ron Klein, D-Delray Beach, who closely follows business incentive programs, believes the state should include a "recapture provision" that forces companies to repay financial incentives with interest if they pull up stakes within 10 years.

"Where these programs fall short is there is not a long-term commitment being asked for in exchange for these dollars," Klein said.

"What ends up happening a lot of times is that companies have been here two, three, four, five years and say, "You can't make us stay here.' Of course we can't. But they should also know if they are going to take money from state taxpayers, they should be obligated to repay that money back with interest if they leave."

The Capital One case, he said, is a clear example of what happens without what some call a "clawback" clause in QTI contracts.

State Sen. Les Miller, D-Tampa, echoed the view in a statement issued Thursday.

"It's time we saw a commitment to this community as strong as this community has committed to the company," he said.

After coming to Tampa in 1995, Capital One was among the first group of companies to seek tax breaks under the state's fledgling QTI program.

In 1996, Capital One promised to bring 1,000 jobs to Tampa eventually in return for up to a $4-million tax refund, with $1-million of the total coming from local governments.

The program involved several phases of job growth with payments tied to reaching job goals in each year. Far exceeding both the number of jobs and required salaries, Capital One has incrementally received nearly the entire refund through the years.

When it pulls out in early 2005, it will leave only a final, $150,000 payment on the table.

As it grew its Tampa quarters in the past five years, Capital One filed for more QTI reimbursements beyond the $4-million. One application was made in 2001, when the company was considering adding more jobs to the credit card center, and the other was for a separate business unit in Tampa, auto financing, where it proposed adding 600 jobs. Capital One has not sought reimbursement under either of those applications.

In pulling its credit card operation out of Tampa, Capital One is leaving its auto finance operation and the 350 people employed there. Whether that job base will grow to 600 and become eligible for additional tax refunds remains to be seen.

Capital One spokeswoman Tatiana Stead declined to discuss specifics on both the future of the auto finance unit and the tax-refund program.

"In some cases, we met the requirements and received funding; in others, we have not met the requirements and therefore have not received funding," she said.

For now, leading state and local economic development executives see no reason to retool a tax-rebate system that has become a cornerstone of job creation under Gov. Jeb Bush's administration.

Gene Gray, director of economic development for Hillsborough County, called QTI "the most effective tool we have in the state of Florida for recruiting companies and jobs to the state."

He said it's the only program that makes Florida competitive with other states offering even more lucrative corporate lures.

Kim Prunty of Enterprise Florida, a public-private partnership that leads economic development efforts statewide, said QTI has been used on more than 300 active projects since its inception.

For those projects that have received rebate payments, about 30,000 jobs have been created since 1995, according to Dana's office.

"The fact of the matter is businesses come and go regardless of whether there's an incentive package or not," said Register, Hillsborough County's corporate development manager. "There's always unrequited expectations."

Register said the county hopes the incentives stimulate long-term commitments, but a setback such as the Capital One situation doesn't mean that economic development officials should stop using them, he said.

Edwin "Red" Harris, a 77-year-old retired merchant seaman living in St. Petersburg, isn't so sure.

He didn't work for Capital One, but after hearing about the Tampa layoffs, he was fuming Thursday.

"They got a lot of tax breaks. When do the taxpayers get our refund?" he said. "Tell the company to pay us back what they owe us."

Shy of that, Harris offered a separate, more direct solution.

"I have a Capital One credit card, my wife has one, my daughter has one and my son has one," he said. "They're laying in front of me right now. I cut them in half this morning with my scissors, and I won't be doing any more business with Capital One. ... If you don't need us, we don't need you."

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