FEDC Inside Track For Legislative Affairs: 2010 Economic Development Legislation Summary

Above:  House Speaker Larry Cretul, R-Ocala, left, passes a historic handmade gavel, embossed with both the House and Senate seals, to Senate President Jeff Atwater, R-North Palm Beach, in the Capitol rotunda during the closing hours of the Legislature Friday, April 30. 2010.  (House photo by Daryl Jarmon–FL Senate)

 

Facing the daunting task of creating a balanced state budget with a revenue shortfall of more than $3 billion, the Florida Legislature arrived in Tallahassee this year already at a tremendous disadvantage.

During an election year in which raising taxes was not an option for Republican legislative leaders, lawmakers’ focus turned to cutting existing state programs, finalizing an Indian gaming compact that is expected to generate a minimum of $400 million in the first year and over $1.5 billion in the next three to five years, utilizing leftover federal stimulus funds and provisional spending of the Federal Medicaid Assistance Percentage (“FMAP”).

Notwithstanding the limited funds available, in an attempt to prevent drastic future economic downturns similar to what is currently being experienced, Florida’s 2010 Legislature planted the seeds to make economic development a priority through funding of initiatives that are expected to help rebound and diversify the State’s economy.

 

SB 1752 Relating to Economic Development  (also known as “Jobs for Florida”)

During the 2010 Regular Session, the Legislature focused a majority of its efforts on SB 1752, an omnibus package that created new economic development programs and incentives, as well as modified existing ones.  In ironing out the proposal details, lead negotiators State Representative Ellyn Bogdanoff and Senator Don Gaetz spent weeks working on the provisions within the bill, which ultimately passed by a unanimous vote in both chambers.  

Some of the SB 1752 highlights are listed below:

Economic Gardening

SB 1752 allocates $1 million in non-recurring general revenue and $1 million in FMAP funding (if received) to continue Florida’s economic gardening technical assistance program. While the Legislature expects to see additional information based on a full year’s worth of data, it opted to grant additional funding for the next year to prevent the program from ending.

Qualified Target Industry Incentive Program (“QTI”)

SB 1752 revises several sections of Florida law to modify the definition of “jobs” to include leased employees.  It also reinstates and amends the QTI program to:

• Allow “call centers” to access the QTI program under specific conditions;
• Create a $1,000-per-job bump for businesses in counties that provide a 50-50 State match;
• Create a $2,000-per-job bump for High Impact Performance Incentive Grant industries;
• Create a $2,000-per-job bump for businesses that increase the value or tonnage of their exports by 10 percent through Florida’s 14 seaports;
• Direct QTI applicants to include an estimate of how much they plan to spend on manufacturing, machinery and equipment (“MME”) purchased out-of-state; and
• Allow a local governing board to choose whether the local or statewide average wage will serve as the baseline for determining the 115 percent wage amount provided in the bill.

Quick Action Closing Fund (“QAC”)

SB 1752 revises the QAC program to:

• Allow the Governor’s Office of Tourism, Trade and Economic Development (“OTTED”) the flexibility to renegotiate QAC contracts in certain circumstances for fiscal year 2010-2011 ONLY;
• Speed up the QAC approval process by allowing QAC project awards of less than $2 million to be approved by the Legislature’s presiding officers, rather than the full Legislative Budget Commission (“LBC”). However, if either the Senate President or the House Speaker objects to the QAC project, no funds will be released to that project until the LBC or the Legislature addresses the issue.

Florida‘s Film Incentive Program

SB 1752, which revises the Florida Film Incentive Program by replacing the current cash refund incentive with a corporate income tax and sales and use tax (“SUT”) credit program, is substantively very similar to the stand-alone CS/SB 1430.  The credits can be taken against sales and use tax, as well as corporate income tax.  The major difference between the bills was the amount of the tax credits.  SB 1752 provides these credits:

• Fiscal year 2010-2011: $53.5 million
• Fiscal year 2011-2012: $74.5 million
• Fiscal year 2012-2013: 2013-2014 and, in 2014-2015: $38 million

The tax credits may be claimed by a certified production company against its Florida tax liabilities; transferred by the certified production company to a Florida taxpayer; or relinquished by the certified production company to the state for 90 percent of the face value.

Manufacturing and Spaceport Investment Program

SB 1752 creates the “Manufacturing and Spaceport Investment Program.”  This program:

• Allows eligible businesses to apply for a tax credit (which is really a refund) of SUT paid on eligible MME purchased during fiscal year 2010-2011, as well as during fiscal year 2011-2012;
• Bases the credit on the difference in the costs of equipment purchases made in the base year of 2008, and in the two outer years of the program;
• Establishes a total “refund” of $50,000 per business;
• Provides for $19 million in available refunds in fiscal year 2010-2011. $24 million is available for refunds in fiscal year 2011-2012 and is awarded on a first-come, first-served basis.
• Provides that, if more applications for refunds are submitted in fiscal year 2010-2011 than funds allocated, the excess applicants will be considered first for the fiscal year 2011-2012 refunds; and
• Is repealed on July 1, 2013.

Research Commercialization Matching Grant Program

SB 1752 also creates the Florida Research Commercialization Matching Grant Program (“Program”), under which state grants would be available to small, entrepreneurial companies trying to commercialize their discoveries.   As amended, the bill gives the Institute for the Commercialization of Public Research specific responsibility for the Program.  SB 1752 also appropriates $3 million from non-recurring general revenue (“NRGR”) to the Program for fiscal year 2010-2011.  Up to $750,000 of this appropriation may be used for the Program’s Phase I grants, with the rest being reserved for its Phase II grants.

SB 1752 provides for the following appropriations:

• $1 million in NRGR for Economic Gardening Technical Assistance
• $10 million in NRGR to address aerospace industry financing, business development and infrastructure needs
• $3.2 million in NRGR for retraining of space workers
• $3 million in NRGR for Space business recruitment
• $2 million in NRGR for the Local Government Distressed Area Matching Grant Program
• $2 million in NRGR for the Defense Infrastructure Grant Program
• $98,000 for a full-time OTTED employee
• $2.9 million for the Florida Export Finance Corporation
• $2 million in NRGR for the State University Research

Subject to availability of FMAP monies, the following additional appropriations will be made:

• $1 million to the Economic Gardening Technical Assistance Program
• $2 million for the Defense Infrastructure Grant Program
• $15 million for QAC

Government Transparency/Accountability

• Requires counties and municipalities to report data on their economic development incentives in excess of $25,000
• Requires any economic development entity that receives funds from a county or municipality for economic development activities to submit an annual report to the county, beginning January 15, 2011, that details how the public funds were spent and the results of the expenditures on economic development within the county
• Directs OTTED and its partners to review the State’s Targeted Industry List and High Impact Industry List every three years to determine if they should be modified, and to submit a report to the Governor and legislative leadership with findings. The first reports are due in 2011.
• Amends s. 288.1258, F.S. to modify a currently required Office of Film and Entertainment report related to film-related sales and use tax exemptions to include return on investment calculations on the new film and entertainment tax credits
• Requires the Office of Film and Entertainment to update its Statewide Master Plan every five years
• Amends s. 373.441, F.S. to create a process for the Governor and Cabinet to review local-government permitting decisions by the Florida Department of Environmental Protection
• Directs the Office of Program Policy and Government Accountability to review the Florida Enterprise Zone Program and the new Florida Research Commercialization Grant Program, with reports due next year.

“Jobs for Florida” was submitted to Governor Crist on May 17, 2010.  He must act on it by June 1, 2010, or it will become law on July 1, 2010 without his signature.

 

HB 7109 Relating to the Tax Refund Program for QTI

Sponsored by State Representative Jennifer Carroll and Senator Rudy Garcia and passed unanimously by both Chambers, HB 7109 re-enacts the QTI Tax Refund Program, which was scheduled to sunset on June 30, 2010.  It also modifies the QTI Program (“Program”) in the following ways:

• Extends the Program until June 30, 2020
• Directs the OTTED to begin doing post-award evaluations of QTI recipients for agreements signed after July 1, 2010
• Directs the OTTED and Enterprise Florida, Inc., (“EFI”) to review and revise the targeted industry list, with assistance from academics and stakeholders, every three years to make sure it remains relevant to Florida’s economic recruitment needs. It also provides for the submission of the revised list to the Governor and legislative leadership.
• Creates a definition of “return on investment” (“ROI”) for QTI projects, to mean “the gain in state revenues as a percentage of the state’s investment. The state’s investment includes state grants, tax exemptions, tax refunds, tax credits, and other state incentives”
• Directs the Legislature’s Office of Economic and Demographic Research (“EDR”) to evaluate EFI’s computer model, which is used to calculate a proposed QTI project’s ROI to ensure its accuracy and effective incorporation of Florida-centric information. This evaluation must occur every three years.
• Specifically makes renewable energy economic development projects eligible for the QTI incentive
• Gives the OTTED discretion to lower the minimum wage threshold from 115 percent to 100 percent of the local or statewide average wage for manufacturing companies
• Allows leased employees to be included in the calculation for the number of jobs created by a QTI business
• Renames the “economic stimulus exemption” to the more accurate term “economic recovery extension,” because the bill allows OTTED to suspend tax refunds to a QTI business that is unable to uphold its commitments under the QTI agreement because of economic reasons

HB 7109 was submitted to Governor Crist on May 17, 2010.  He must act on it by June 1, 2010, or it will become law on July 1, 2010 without his signature.

 

Budget

The final budget allocations for Fiscal Year 2010-2011 are as follows:

Transportation Road Fund–$20,000,000
Quick Action Closing Fund–$1,000,000
Economic development tools–$16,567,473
     (Incentive programs such as QTI & QDC)
Innovation Incentive Program–$0
Enterprise Florida operational funding–$11,100,000
Military base protection–$150,000
Rural community development–$1,300,000
Defense infrastructure–$850,000
Space Florida–$3,839,943
Commission on Tourism–$26,647,961                       
Space Defense and Rural Infrastructure–$2,100,000
Brownfields–$2,780,000                          
Small Business Development Center–$0
Quick Response Training–$3,300,000

Total expenditure on economic development projects:  $95,610,377

 

This year saw an unprecedented number of earmarks within the Transportation Road Fund.   Space Florida received the largest portion of these earmarked projects, leaving only $3.7 million available for OTTED to utilize during the upcoming fiscal year for the original intent of this incentive. 

Funding for QAC was traded in the final hours of budget conference negotiations to replace the elimination of funding to Florida libraries.  Should the State receive the FMAP funding, $15 million of that has been  appropriated to QAC by SB 1752.

 

Workforce Florida Operational Funding and Quick Response Training Grants Funding

As Florida’s revenues have continued to decline, the Florida Legislature had the monumental task of trying to craft a budget for almost 19 million Floridians.  Workforce Florida, Inc. (“WFI”) staff worked diligently to ensure that, despite having less money to appropriate, the House and Senate understood the importance of continued funding for Workforce Florida and workforce tools such as the Quick Response Training Grant Program. 

With assistance from WFI’s Legislative Ambassadors Program and WFI partners, Workforce Florida’s operations will be fully funded for Fiscal Year 2010-2011.  Further, Florida’s workforce tool, Quick Response Training Grants, will be funded at Governor Crist’s recommended level of $3.3 million.  

This segment was provided by Workforce Florida.

 

 

 

Should you have any questions or comments, please contact Tracy Mayernick (tmayernick@cftlaw.com) at Colodny Fass.

 

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