Inside the secret process that gives growing St. Pete companies tax refunds

The St. Petersburg City Council and the Pinellas County Board of County Commissioners will each vote in the next few days on offering a tax refund to an unnamed company that is proposing to expand in St. Pete and create 85 local jobs.

The company, identified only as Project B9053053005, is a multi-state business that’s considering expanding its national corporate headquarters in St. Petersburg, but also is looking at sites outside the state, as well as in Clearwater and Tampa, according to agendas for the upcoming local government meetings. The new jobs would pay at  least $61,909 annually and the company is seeking a tax refund of $6,000 per job under the Qualified Target Industry tax refund program.

While the name of the company is being kept under wraps, the votes put a focus on the state’s QTI program, one of several economic development tools available to businesses in Florida. The QTI incentives are for businesses that create jobs with higher than average wages in industries that are expected to have a positive economic impact. The refunds are paid after they hit their performance targets.

In fiscal year 2017-2018, the QTI programs provided nearly $18.1 million in tax refunds statewide, just over half of the total for all state incentive programs. The companies receiving the refunds created 7,239 jobs, or 135 percent of the jobs they had said they would create when they qualified for the awards, according to the 2018 Incentives Report from Enterprise Florida and the Florida Department of Economic Opportunity.

Two of the most recent recipients are Power Design Inc., an electrical contractor in St. Petersburg, and FreightCenter Inc., a logistics company in Palm Harbor. They each qualified for QTI awards last fall, but their names only recently were disclosed.

Confidentiality

Although public tax funding is involved, the early stages of the process almost always are shrouded in secrecy.

Mike Meidel, director, Pinellas County Economic Development

Companies may be simply considering future options and not yet ready to pull the trigger on an expansion, Pinellas County Economic Development Director Mike Meidel wrote in a 2012 memo to the Pinellas County Board of County Commissioners.

Other reasons for confidentiality include fears about real estate prices. Knowledge that a company is looking at property in a certain area can drive up sales prices and lease rates in that area. Rumors and speculation can cause shareholders or investors to get nervous, affecting stock prices or financing costs, and employees might quit in the face of uncertainty over the company’s future, Meidel said.

Less than half the companies that ask for QTI incentives actually receive them, Meidel said. The companies can get a partial tax refund if they hit 85 percent of their job creation goal, but they don’t get any refunds if they fall short of that.

Power Design said it would create 70 new jobs, paying an average of $69,519 a year, in the QTI application approved by the St. Pete City Council and the Pinellas Board of County Commissioners last fall. In return, the company is in line for tax refunds from the state, county and city government totaling $6,000 per job, or a total of $420,000 in tax refunds, spread over five years. The company’s name wasn’t on the QTI application, but it became public 180 days after the deal was signed, as is the case with almost all businesses seeking incentives.

It’s the fourth QTI since 2014 for Power Design, said Heather Ford, chief financial officer. The rapidly growing company has been adding a mix of field staff, technical workers, management and support as it rebounds from the recession 10 years ago.

Heather Ford, CFO, Power Design

Power Design serves the growing construction industry, operating from its corporate headquarters at 11600 9th St. N. The headquarters site has expanded along with the workforce.

“A year ago, we could have decided to expand to regional offices, since we’re all over the country. But going for that centralized model was our preference. All the resources are under one roof. Bringing everyone together is so much easier. It helps keep corporate culture alive when everyone is together. It’s very hard to duplicate culture across multiple regional locations, so our preference has always been to work out of one central location,” Ford said.

Over the course of the four active QTIs, Power Design has committed to add 260 jobs. The state has confirmed that the company added 266 jobs just from the first two QTI awards alone. The company has received $345,000 in tax refunds, state records show.

Spreading the word

The QTI awards have been a show of support from the state and local governments, Ford said.

That support, combined with incentives and location, made it “a no-brainer” to expand in St. Petersburg, she said last week at Enterprise Florida’s EFI Snapshot, an event to highlight high-tech and manufacturing industries in Pinellas County. It was held at SPC Epicenter Collaborative Labs.

Earlier this year, the Florida House unsuccessfully tried to eliminate all funding for Enterprise Florida, a partnership between the state’s businesses and government leaders. The EFI snapshot was a chance for Enterprise Florida to spread the word about what they do for business, said Mike Meidel, director of Pinellas County Economic Development.

“The idea is to reach out to each major region of the state and let everybody know what Enterprise Florida does,” Meidel said. “The audience was elected officials and the business community and the economic development community, and they brought  everybody together to see how they all related. Our partners in workforce development and universities and public schools and so on were all there as well. It’s how that economic development ecosystem works.”

Speakers and panelists at the EFI Snapshot included Enterprise Florida CEO Jamal Sowell (far right).

Each EFI Snapshot around the state likely will highlight different sectors.

“Here it was manufacturing and high tech,” Meidel said. “We are the second-strongest manufacturing center in Florida. Only Miami-Dade has more people in manufacturing. We’ve got over 1,300 business that make stuff, 30,000 employees. People don’t know that, that Pinellas is a manufacturing mecca.”

The state of Florida is third in the nation for high-tech businesses, with a particular strength in downtown St. Petersburg, Meidel said.

Enterprise Florida works to encourage businesses to expand or locate in Florida by marketing the value of doing business in the state. It also evaluates the competitive nature of the project in order to determine if any incentive programs for the particular project are needed, with the Department of Economic Opportunity conducting due diligence and negotiating deals. DEO also maintains an economic incentives portal online that provides access to performance measurements of every non-confidential incentive project with an executed agreement since 2000 that has received or is on schedule to receive payments from the state.