Amid a national debate over the effectiveness of economic development incentives, two Tampa-St. Petersburg area firms are expanding and adding jobs after qualifying for tax refunds from the state.
Minimise USA, an energy management and conservation service firm, chose Hillsborough County for its headquarters in large part because of the state’s Qualified Target Industry tax refund program. The company said it would hire 115 people when it signed a QTI agreement. If it does that, it would get up to $575,00 in state and local QTI tax refunds.
Marketopia, a fast-growing Pinellas Park company that provides business services for technology firms, is ahead of schedule on its plan to hire 60 workers. If it creates all the jobs it has promised, Marketopia is in line for up to $180,000 in QTI refunds.
The companies are among at least seven Tampa-St. Petersburg-Clearwater metro area businesses that signed QTI deals in 2019. QTI is a state program that encourages the creation of high-skill jobs and the growth of corporate headquarters and other target industries. The names of QTI “prospects” generally are not disclosed when a deal is being considered, but become public when they are posted to a Florida Department of Economic Opportunity website.
As a group the seven local companies agreed to create 461 new jobs, at an average annual wage of $56,847. Collectively, they could get up to $1.9 million in tax refunds, provided they create the promised jobs.
Some economic development incentives are “a waste of money,” a Jan. 7 report from Axios said. Axios cited new research from Princeton and Columbia Business School that found no evidence that business tax incentives given to individual companies increased broader economic growth at the state and local level.
In Florida, there were 229 projects that received tax credit, tax refund and cash grant incentives from at least one of eight separate programs between Oct. 1, 2015 and Sept. 30, 2018. Those projects received a total of $167.2 million in state incentive funds during that three-year fiscal period. They created 26,004 jobs and $1.5 billion in capital investment, a December review by the Office of Program Policy Analysis and Government Accountability said.
While the incentives are creating jobs, they’re generally not bringing new businesses to Florida, OPPAGA said.
“Many businesses that received incentive payments were large and had previously existed in Florida,” the OPPAGA report said. More than two-thirds of the projects, 67 percent of them, were expansions of existing businesses rather than companies new to the state. Nearly half the payments, 48 percent, went to companies with more than 1,000 employees, while 17 percent of payments went to companies with fewer than 50 workers.
Minimise USA, which promotes a range of technologies to reduce energy consumption, is one of the smaller and newer companies that qualified for QTI incentives in 2019. Daniel Badran, chairman and CEO, targeted Hillsborough County Public Schools for his first customer in Florida, but Minimise didn’t have a local office and the staff of eight was working out of a hotel. When Badran was in town, he used an office at VoltAir, a minority owned mechanical, electrical and plumbing engineering firm.
That’s where Larry Pasetti, who is chief operating officer of Minimise, met Badran. Pasetti was working at VoltAir at the time and introduced Minimise to the Tampa Bay Economic Development Corp. and Jonathan Wolf, the EDC’s business development manager.
“He quickly proved to Daniel that Hillsborough County was positioned as a global center for commerce and that the EDC could assist Minimise recruit, train, and retain employees needed for Mr. Badran’s 10-year plan. Part of the indicative in luring Minimise to relocate its headquarters to Tampa was the State’s QTI incentive program,” Pasetti said. “Hire 40 employees with the average wage above $58,000 and submit the cost of your property tax, sales tax, and other overhead expenses for reimbursement according to the QTI Agreement. What business would not like a deal like that one?”
The Hillsborough County Board of County Commissioners approved the deal in February 2019. As is generally the practice when local governments are considering incentive agreements, the name of the company was not disclosed at the time, but Hillsborough County economic development officials said “the prospect” was expected to create 115 new higher-wage quality jobs with average wages of at least $58,383 and to generate up to $29.1 million in capital investment over the next three years. “The Prospect has alternative sites available in other states and has made receipt of tax refunds a condition for further consideration of locating its project at a Hillsborough County site,” the QTI application said.
Today, Minimise occupies more than 120,000 square feet in two buildings at 6001 Benjamin Rd and 6005 Benjamin Rd. The employee count hit 43 and the average wage is above $63,000, Pasetti said.
The business model has changed slightly. “We now try to empower small and minority owned business to do the bulk of our installations and designs, while helping them grow,” Pasetti said.
The next phase of the company’s growth is manufacturing. Minimise has an option to purchase the 6005 Benjamin Rd. property, which is classified as a free-trade zone, Pasetti said.
A building purchase was the catalyst for Marketopia’s successful QTI application.
Serial entrepreneur and CEO Terry Hedden founded the marketing and lead generation agency for technology companies in 2014, a couple of years after selling managed services provider Infinity Technology Solutions.
In 2018, Marketopia hit $5.4 million in sales with 81 employees, and its 486 percent growth over three years propelled it to No. 875 on the 2019 Inc. 5000 list.
That rapid growth meant the company needed a bigger home.
“It started off when I was looking for a new building for us to buy. We ended up buying the one in Pinellas Park. That introduced us to the economic development guys and they brought us this program and it seemed like a great fit for us,” said Hedden, who had not previously tapped public incentives in his earlier businesses.
Marketopia said it would create 60 new jobs at an average annual salary of $53,300 by the end of 2021.
“We’re probably ahead of schedule on the hiring front,” Hedden said. The company just hired its 100th worker, but that includes employees who already were on the payroll before the QTI agreement.
Making employment projections can be a daunting task, Hedden said. “You have to project well into the future.”
Still, he would advise other companies to look into the incentive programs.
“Every independent community in Tampa Bay is pro-business. Everyone is looking to bring in high-growth companies and jobs that are valuable, like tech jobs and creative jobs,” Hedden said. “They’re looking for great companies and smart companies take advantage of that and leverage that to help give them the growth capital they need. It’s kind of a no-brainer. Everyone should take advantage of everything that’s out there for them.”
Companies that qualify for QTI and other Florida incentives have to make annual reports to the state showing if they are on target with their projected employment goals. Marketopia’s first report is due at the end of January, and Hedden said he would have a better handle by then on the paperwork and administrative time devoted to QTI. He estimated the application was about a 20-hour process, and the annual reporting would be five hours or less.
Hedden said Marketopia is a “ministry” for him. Through a partnership with Goodwill, the company hires people who have made mistakes in the past, including former prisoners who have committed nonviolent crimes. “A lot of our employees have taken advantage of that and grown professionally and personally,” Hedden said. “We can give opportunities to people that a lot of other firms wouldn’t.”