News
Fill out this form to email this article to a friend
Long line forming for tax breaks
With the state legislative session about to end, lobbyists work for concessions that could add up to $245-million a year.
By SYDNEY P. FREEDBERG, JEFF HARRINGTON and CONNIE HUMBURG
Published May 2, 2005
The lobbyist wanted a tailor-made tax break for a company on his client roster: Cox Target Media, the business behind the familiar blue Valpak coupon mailings sent to millions of American homes.
So last Wednesday, lobbyist David Rancourt sent Sen. Dennis Jones, R-Treasure Island, a one-page synopsis for an amendment worth millions in tax savings to Valpak as it builds a massive new printing plant in northern St. Petersburg.
Jones was ready. He created a "talking points" memo based on the outline from Rancourt, a former deputy chief of staff for Gov. Jeb Bush. The next morning, the senator tacked the amendment onto a bill on the Senate floor without debate.
The bill quickly passed 36-0 that morning, skipping the often lengthy passage through committees. Now a similar bill awaits action in the House.
It's become an annual ritual of spring in Tallahassee: A number of big businesses, many of them already profiting from state and local tax breaks, are trying to convince the Legislature to grant them even more.
Companies from Lockheed Martin Corp. to Boeing Co., from the nation's No.2 automaker to one of the world's largest mining companies, from a billionaire racing family to a global snackmaker - all are seeking new tax breaks. All in the name of economic development and jobs.
In addition, there is a proposal to renew and expand the state's "enterprise zone" program, which began 23 years ago as an effort to use tax incentives to lure businesses into a few poor neighborhoods. Now it has mushroomed into a patchwork of zones across the state.
It's unclear how many of the proposals will prevail as the Legislature concludes its annual session this week amid a flurry of eleventh-hour deals.
But in the unlikely event all are approved, the measures could cost the state as much as $245-million a year in potential revenue, according to a St. Petersburg Times analysis. Florida already gives up an estimated $800-million a year in tax incentives to attract new business and help current businesses grow.
Many business and political leaders say the concessions are necessary to compete with other states and countries in the race to keep and create jobs.
"I know that doing this will unleash the investment that creates jobs," Bush said last December in announcing his support for bills that would slash the sales tax on business equipment.
But critics contend it is folly to give away the store. No amount of incentives can guarantee long-term jobs, they say, and tax breaks take away revenue that would be better spent on schools and other priorities.
"Is this really going to make a difference for economic development? The answer is no," said Michael Mazerov, a state tax analyst at the Center on Budget and Policy Priorities in Washington, which examines programs that affect people of low and moderate income."Florida should be focusing on educating its workers, not corporate tax giveaways."
Here are just a few examples of the tax proposals under discussion.
It's no secret
At issue in the Valpak case is a proposed expansion of Florida's program to grant corporate income tax credits.
Under current law, a business may qualify for a credit for up to 20 years if it creates at least 100 new jobs in Florida, invests a minimum of $25-million and is a "high-impact" business.
The Governor's Office has publicly identified only nine businesses that have qualified for the credits since 1998, when the Legislature created the program.
The bill, supported strongly by the governor, eliminates the requirement that a company be in a "high-impact" industry as long as it invests at least $100-million in a project and creates or retains 1,000 jobs. At least 100 of the jobs must be new.
As is typical in the Legislature, the amendment does not mention Valpak by name. But it's no secret who the beneficiary is.
In announcing plans for its new St. Petersburg plant, Valpak promised to invest nearly $200-million in the new facility and retain more than 1,000 employees in the Tampa Bay region. The company also said Pinellas County would gain about 100 new jobs.
Revenue analysts believe the credit could cost the state between $600,000 and $4.4-million a year, depending on how many companies take advantage of it.
To get the law changed, Cox/Valpak hired Rancourt, whose clients have included Disney, the Devil Rays and Mosaic Co., one of the world's largest fertilizer companies.
Rancourt did not return calls for comment last week. But Jones said he had discussed possible incentives for months and based his amendment on Wednesday's memo from Rancourt and fellow lobbyist Chris Dudley.
Valpak, which also is in line for road improvements and other incentives to stay in Pinellas County, views the income tax credit as the biggest piece of Florida's retention package.
In July, the company announced its commitment to St. Petersburg, acting on faith the Legislature would back the tax change when the time came.
"We were told we had the support (but) there's no sure thing," company spokeswoman Meg Forehand said.
Breaks for space
Not every company needs to add jobs to get special treatment in Tallahassee.
For years, aerospace and defense giants Lockheed Martin and Boeing have received handsome federal and state incentives for creating jobs even though they also have eliminated some jobs.
Boeing's employment in Florida has slipped to 2,772 from 3,309 five years ago. Lockheed, which employs 7,300 in Central Florida alone, announced 425 job cuts at Cape Canaveral just 10 weeks ago.
Last week, the Senate followed the House's lead in renewing a tax-incentive program supported by Lockheed and Boeing. The program, which started after the Cold War, was designed to keep defense jobs in the state. It was set to close on June 30 but now would run through 2010.
Bush is expected to sign the measure.
Supporters of Boeing and Lockheed are also telling lawmakers the space and defense industry needs about $8.7-million in new tax breaks and loan guarantees for Florida to remain competitive with other states and countries and capture work related to NASA's new space exploration programs.
One bill would help a key Lockheed and Boeing supplier, Spacehab and its Astrotech subsidiary. The bill would save that company an estimated $100,000 a year in Brevard County property taxes and expand the tax break to other space companies.
Another proposal could reduce corporate income taxes for some space businesses. Among the beneficiaries: United Space Alliance, the Lockheed/Boeing partnership that manages the space shuttle. That proposal does not have a sponsor.
New jobs?
Like aerospace, Florida's billion-dollar phosphate industry is dominated by a few players and one in particular, Mosaic Co.
The company, created by last year's merger of IMC Global Inc. and Cargill Crop Nutrition, stands to benefit from a proposal that would get rid of the sales tax on equipment that manufacturers use to increase their production.
Currently, Florida has a partial tax exemption for equipment purchased by some expanding manufacturers.
The new proposal would broaden the machinery exemption, saving more companies between $30-million and $36-million in sales tax a year.
Supporters say the proposal would treat all businesses equally, spur new jobs and help Florida compete with other states that have total sales tax exemptions on new equipment.
Many of the total-exemption states, however, don't rely as heavily on the sales tax as a source of state revenue because they have a personal income tax. Moreover, some economists say it is unlikely the proposal would lead to many long-term jobs.
The mining industry has different tax rules than most manufacturers. Phosphate mining companies like Mosaic are taxed for extracting natural resources. Currently, they can get a credit when they buy equipment, but only if they prove they have created jobs in Florida.
The new proposal would give them the tax break without needing to add any jobs.
"This was by no means done for Mosaic" alone, company lobbyist Gray Gordon said.
Environmental activist Honey Rand wonders why the state would give tax breaks to phosphate mining, which has scarred millions of acres, destroyed wildlife habitats and befouled wetlands and rivers. "They've already cost Florida taxpayers millions of dollars," Rand said.
A real champion
After Hurricane Frances pounded the Vero Beach plant of New Piper Aircraft last fall, damaging several hundred thousand square feet of aircraft assembly and manufacturing space, Bush toured the site and asked how he could help.
How about $1.4-million in state grants to train current and new workers? the company asked . Done. What about turning the area into a low-tax enterprise zone? Shouldn't be a problem.
The governor visited the general aircraft maker again two weeks ago to reiterate his support.
"He's been a real champion of this enterprise zone" for Vero Beach and other parts of Indian River County, said New Piper spokesman Mark Miller.
Enterprise zones long ago exploded beyond their original goal of bringing new companies into a small cluster of economically depressed neighborhoods.
There are 53 zones in the state now, including eight new ones and a dozen more that were expanded in the past two years alone.
In Florida's 2003-04 fiscal year, state and local governments spent nearly $42-million in enterprise zone incentives, up 82 percent from $23-million the year before. In an annual report released in March, the governor's trade office credited enterprise zones with helping create nearly 30,000 jobs since 1999.
But Peter Fisher, a University of Iowa regional planning professor who studies enterprise zones, said it's a mistake to assume that incentives generated all the new jobs. He contends zones and other incentives made a difference in a jobs investment decision about 10 percent of the time, not 100 percent.
This year, in addition to Indian River County, Sumter County and the cities of Tampa, Lakeland and Jacksonville are among those seeking zones or zone expansions.
The mission of enterprise zones may widen as well. Legislators are considering a far-reaching bill to extend the enterprise zone program until 2015.
The bill would allow current zones to seek recertification instead of expiring and allow the governor's economic office to approve expansion of zone boundaries. One proposed clause would let businesses qualify for tax credits without having to create any new jobs, a measure benefiting companies that already happen to be in a zone, such as New Piper.
At 920 employees, New Piper is nearly back up to its prehurricane strength of 1,000 employees. Miller said his company wouldn't pull out without the enterprise zone, but that it would certainly help it recover financially from a tough year.
Lakeland, likewise, is largely responding to the wishes of a single business in its push for a zone. Though local leaders say the designation would help attract new companies, only one business has expressed an interest in applying and it's already there: Pepperidge Farm.
"They've been asking for (a zone for) years but we had serious discussions about it in the late fall," said Steve Scruggs, executive director of the Lakeland Economic Development Council.
Part of the Campbell Soup Co., Pepperidge Farm employs 267 at its Lakeland plant, where it makes Goldfish snacks and its brand-name flat crackers popular during the winter holiday season.
Hot new business
When U.S. microchip plants were in vogue 10 years ago, lawmakers passed new incentives for manufacturers to create jobs. Then biotech was all the rage, and they rushed to arrange special deals.
This year, the hot new business in the global market is hydrogen. The result: taxpayers may soon invest millions in companies developing hydrogen technologies. Exhibit A: Ford Motor Co.
The cars are still decades away for the average family, but the House last week approved the Florida Hydrogen Energy Technologies Act, giving a boost to companies like Ford that are pouring money into hydrogen technologies.
The bill, which awaits action in the Senate, would give tax breaks and grants to companies that purchase hydrogen-powered equipment or develop hydrogen products.
The Bush administration wants $15-million in tax breaks and grants, calling hydrogen good for the environment and the economy because it reduces the state's dependence on foreign oil.
The state already has ordered 21 of Ford's gasoline-electric Escape SUVs and eight of its hydrogen-powered shuttle buses, which are expected to hit the road next year. Plans also call for a hydrogen fueling station in Orlando.
At least 142 new hydrogen-related jobs will be created this year, according to a report prepared for the state Department of Environmental Protection.
Many of those initial jobs, however, will be in construction, not on the factory floor.
Ford has closed five American factories in the past three years and cut production for the past 11 quarters. It announced last month that it would abandon a goal to reach $7-billion in pretax annual profit by 2006.
A museum for NASCAR
If hydrogen cars are the wave of the future, stock-car racing is zooming now.
Riding its explosive popularity, NASCAR solicited bids from a few states to build a hall of fame.
Daytona Beach responded with corporate cash and public land worth $30-million, but that wasn't enough to outbid other states.
So NASCAR's boosters are asking lawmakers for $1.2-million a year for 25 years. The House approved a funding bill for the museum last week, but its prospects in the Senate are uncertain because it is tied to spending for other sports stadiums.
Daytona Beach says its NASCAR proposal is different than those from other other sports teams because the money would be repaid through the sale of a proposed specialty license plate for NASCAR.
NASCAR is among the state's largest privately owned companies, with about $3.2-billion in revenues, according to Florida Trend magazine. It is essentially ruled by one billionaire family.
The company uses a tax break created for small businesses to cut its state and federal income tax. In addition, Congress interceded for NASCAR last year after the IRS raised questions about deductions the track owners had taken.
'Things happen'
FCCI Insurance Co. may not be a household name in Florida. But this year it has 20 registered lobbyists - two more than the Florida Home Builders Association and four more than the Florida Education Association.
Among the many proposals the Sarasota company are tracking is one that doesn't bear FCCI's name, even though the insurer is by far the biggest and perhaps sole beneficiary.
The measure, called "Salary Tax Credit for Mutual Insurance Holding Companies," is tailor-made for FCCI. It would change the way the company calculates its insurance premium taxes and apparently allow FCCI and two subsidiaries of the firm to save about $2-million next year, according to one of its lobbyists.
The bill, despite the lobbying battalion, still lacks a sponsor. That doesn't bother company lobbyist Paul Sanford. The amendment may get attached to any number of bills at the last minute.
"The last two weeks (of the session), all kinds of things happen," he said.
[Last modified May 2, 2005, 09:51:14]
Share your thoughts on this story
News
Fifty years ago, they were screwed-up kids sent to the Florida School for Boys to be straightened out. But now they are screwed-up men, scarred by the whippings they endured. Read the story and see a video and portrait gallery.
Print
Email story
Comment
Letter to the editor
