In what stands to be the largest jobs incentive failure in state history, Digital Domain Media Group announced Friday that it would close its Port St. Lucie animation studio, a $20 million black eye for the state.
The mastermind who lined up more than $130 million in government incentives, West Palm Beach native John Textor, is no longer chief executive of the company he fashioned from a California special effects studio into a jobs-promising, Florida grant magnet.
For Port St. Lucie, it’s the loss of hundreds of high-paying jobs and a huge new expense to repay a $40 million bond issue that brought Digital Domain to the sprawling Tradition development on the city’s western edge.
In West Palm Beach, Textor’s dream of a for-profit animation studio linked to Florida State University’s film school stays alive for now, but city officials are wary and could be out $2 million they have paid Digital Domain.
On Tuesday, Textor reassured West Palm Beach commissioners after Digital Domain announced that it had defaulted on $35 million in loans and, with interest, owed $51 million to private investors. Textor, a born salesman with a history of business flops, remained unruffled, assuring commissioners that the company would survive.
“We are ready, we are keeping our promises, and we will continue to do so in our community,” he said then. “We’ve kept our promise. We’ve created over 300 jobs.”
But on Friday, Digital Domain’s board accepted Textor’s resignation and closed the Port St. Lucie facility, stopping work on an animated feature film and locking about 280 workers out of their jobs. A company statement said 20 workers would remain to close down operations.
Erinn Alberts, driving to her new, $46,000-a-year Digital Domain job with her husband and three children from New Hampshire, heard the news Friday. “We’d been driving 30 hours,” Alberts said. “Five minutes outside of Port St. Lucie, our relocation specialist called to let us know the company was no more, and everybody had been fired. We uprooted our whole lives.”
Gov. Rick Scott’s office cautioned that decisions involving the state’s $20 million grant to Digital Domain took place under Charlie Crist in 2009. But the failure will not dim the governor’s enthusiasm for future job-incentive grants, spokesman Lane Wright said.
The incentive money came without the usual state review process, after Enterprise Florida, the agency then charged with signing off on job incentive grants, refused to back the deal. Then-state Rep. Kevin Ambler, R-Tampa, drew up an amendment to award $42 million in nine state grants without Enterprise Florida’s OK.
Ambler argued at the time that an investigation of Textor’s project would take too long and risk losing the company. Ambler, who lost reelection in 2010, accepted campaign help from Textor and now serves on Digital Domain’s board, for which he is paid $20,000 a year plus $2,000 for every board meeting he attends. He could not be reached Friday for comment.
The state holds out the hope of getting some of its money back. “In cases where companies fail to meet their obligations, we have provisions in the contract that allow us to recoup our investments,” Wright said.
The contract called for Digital Domain to employ 148 people in Port St. Lucie by the end of this year and 500 by the end of 2014. It allows the state to demand repayment of some or all of the grant money, with interest, if those terms aren’t met. At its closing, the Port St. Lucie facility had 300 employees.
Textor’s pay included a salary of $791,372 and, a bonus of $407,000. He also cashed in stock options last year for a gain of $5.6 million. He took the company public last year at $8.50 per share. The stock closed Friday at 60 cents per share. Textor’s 10.5 million shares have lost more than $90 million since May.
In a widely circulated resignation letter posted on various websites, Textor reportedly wrote of “profound disagreement with the decision to close our animation and visual effects studio in the wonderful community of Port St. Lucie, Florida.”
Textor clearly butted heads with the board of directors, once considered his loyalists. On Friday, Digital Domain Media Group issued a formal statement with the Securities and Exchange Commission that comments made Tuesday by Textor to a Florida TV station didn’t represent the board’s own assessment of its dire financial situation.
The SEC filing stops short of identifying the TV station, but in a television interview earlier this week on WPTV-Channel 5, Textor downplayed the amount owed to creditors, stating, “In my opinion, this is a very small amount of money” relative to the value of the company. “There’s been no missed payment or default. This is about a contractual dispute,” he said.
The company, though, painted a grimmer picture, stating that it was in default and that a bankruptcy filing might yet be in the cards. “Mr. Textor’s remarks do not reflect the views of the company, its board of directors or the special committee of the board,” the company’s statement said.
With Textor’s resignation, the CEO’s job is open, a spokeswoman said. Company officials and board members would not comment.
The board’s decision will hit hardest in Port St. Lucie, where Digital Domain jobs promised to anchor growth in a region hard hit by the housing crash. In 2009, city officials hailed their $51 million deal with Digital Domain as a win-win because, they said, taxpayers never would have to pay a dime. But the city guaranteed the bond issue to pay for construction of Digital Domain’s 115,000-square-foot studio building, meaning it’s on the hook for annual debt payments of $3.7 million.
Currently, Digital Domain makes those payments through its lease with the city. The company is due to make its next payment in January, and a payment to bondholders is due in March.
That gives the city some breathing time, but it’s already out some money.
Of a $10 million enterprise fund, about $7.7 million has been paid to Digital Domain. The company didn’t get the entire $10 million because it had not yet hit the agreed-upon employment threshold of 500 workers.
“More like 300,” City Manager Gregory Oravec said. While it’s too soon to make sweeping decisions, he said, “We are looking at the grant agreement to see if there is any way to recoup that money.”
Former state Rep. Carl Domino, R-Jupiter, a financial manager who once lost money in a deal with Textor and fought the state’s grant to his company, said Friday that a backer of the deal once accused him of grandstanding. He said he warned the supporter the deal would never work. “I told him you’re going to have an empty building,” Domino said. “This was very predictable.”
