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Economic Incentives 101

Economic Incentives 101. Marty Wilson, Vice President, Competitive Programs and Policies, Enterprise Florida Molly Weller, Incentives Manager, Enterprise Florida . 6/22/2011. 1. Incentives 101. June 23, 2011. Incentives 101. Overview of Florida’s incentive process

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Economic Incentives 101

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  1. Economic Incentives 101 Marty Wilson, Vice President, Competitive Programs and Policies, Enterprise Florida Molly Weller, Incentives Manager, Enterprise Florida  6/22/2011 1

  2. Incentives 101 June 23, 2011

  3. Incentives 101 • Overview of Florida’s incentive process • Basic program information • Compliance process • Sales tax exemptions • Incentives for distressed areas • New legislation and FY 2011/12 budget for incentives

  4. Role of Incentives in the Economic Development Process • Understanding the project’s needs is critical to developing a compelling incentive package • Instead of: • What do I have to offer this company? • Think of: • What are the critical decision factors and how can we address them?

  5. Enterprise Florida and the Department of Economic Opportunity • Enterprise Florida • Works with businesses to understand needs • Conducts competitive analysis • Negotiates and recommends incentives • Department of Economic Opportunity, Division of Strategic Business Development • Maintains approval authority • Contracts with businesses and communities • Additional responsibilities are still being determined as the new department takes shape

  6. What is a Target Industry? • Statutory criteria: • Future growth • Stability • High wage • Market and resource independent (exception for clean energy projects) • Industrial base diversification and strengthening • Economic benefits with added emphasis on global trade and logistics • Cannot be companies with NAICS codes 5611 or 5641 except under certain circumstances • List updated every three years

  7. Current List Developed by EFI and partners in January 2011

  8. Qualified Target Industry (QTI) Tax Refund • Tax refund based on net new to Florida jobs • Average wage at least 115% of state or local wage ($45,834 minimum for the state) • Requires 20% match from local community • Must be a clear inducement • Special considerations for Rural areas, Enterprise Zones, Brownfield areas, and Manufacturing companies paying 100% or greater of the average county wage • Performance based • Lifetime cap of $7 million per company

  9. QTI Refund Amounts • QTI award is based on the number of net new to Florida jobs created, the average wage and location of the jobs, and other factors • Base award is $3,000 per job ($6,000 per job in a Rural county or Enterprise Zone) • $2,500 per job if project is located in a designated Brownfield area (Brownfield Bonus) • 150% of wage add $1,000 per job OR 200% of average wage add $2,000 per job • $1,000/job if local financial support is equal to the base QTI award • $2,000/job if project is in a designated high impact sector OR • $2,000/job for businesses increasing tonnage or volume through Florida’s ports or airports by at least 10% per year

  10. New QTI Bonuses • Local Financial Support Bonus • Local Financial Support must be equal to the state’s portion of total award • Example: Total Award is $100,000. The State’s portion of 80% is $80,000. LFS must be equal to $80,000 to be eligible for the extra $1,000 per job. • The additional $1,000 per job bonus is then calculated and split 80/20 with the local community. • Additional LFS must come in the form of cash paid to the Economic Development Trust Fund • Increased Tonnage Bonus • For existing Florida companies • Company will be audited yearly to ensure eligibility for bonus

  11. QTI Resolutions • Three required components: • Recommend the project for QTI • Identify local financial support ($ value) • Average wage paid will be $X, which is 115% of the [state, county or MSA] average wage • This notification can come in the form of a statement in the resolution or in a separate letter from the county or CITY providing the local financial support for the project. • Inclusion of other information can cause confusion and require additional clarification and / or a new resolution • Use project code name to maintain confidentiality

  12. Disproportionately Affected Areas • 8 Counties affected by the Gulf Oil Spill • Bay, Escambia, Franklin, Gulf, Okaloosa, Santa Rosa, Wakulla, and Walton • Allows for the waiver of job and wage requirements for certain incentive awards up to $5 million • For awards between $5 million but less than $10 million, waivers may be granted after consultation with Governor and legislative leadership • Waivers in effect July 1, 2011 – June 30, 2014 • Reduction in Local financial support by one-half • Gadsden, Jefferson and Leon Counties

  13. QTI Claim Process Business commits to create 50 new jobs by December 31, 2011: • November 2011 – Sharpton, Brunson & Co. (SBC) sends claim form • November 2011 – SBC sends notice of local financial support (a “bill”) to the community • December 2011 – 50 net new jobs should have been created • January 31, 2012 – QTI claim due to SBC (extensions available) • February 2012 to June 2012 – SBC validates QTI claim and confirms employment and wage commitments were met • February 2012 to June 2012 – SBC confirms local financial support has been received • July 2012 – Business receives QTI refund claim (80% State and 20% Local) • November 2012 – Process starts again for the second claim year

  14. Economic Recovery Extension (ERE) • Allows for business affected by the economic downturn to request a 1 or 2 year exemption • Eligible businesses are those with claims due between January 1, 2009 and July 1, 2012 • Business must demonstrate a downturn in their respective industry and how this downturn has specifically affected the Florida operations of the QTI business

  15. Qualified Defense and Space Contractor (QDSC) Tax Refund • Similar to QTI Program including lifetime cap limit except • Program allows company to count retained jobs • Does not allow for the Brownfield Bonus • Designed for Department of Defense, Department of Homeland Security, and Space Flight Business contractors • Available for job creation and retention for businesses: • Securing new contracts • Consolidating existing contracts • Converting defense technology to commercial production • Reuse of a defense related facility • All jobs must be tied to specific contracts

  16. Economic Development Transportation Fund (EDTF) or Road Fund • Grant to local government to alleviate a transportation impediment • Eligibility requirements similar to QTI • Must be an inducement for retention, expansion, or location • Funding for FY 2011/12 is $10M (up from $3.7M in FY 2010/11) • Project examples: • Turn lanes • Access roads • Traffic signals

  17. Current High Impact Sectors • Clean Energy • Corporate Headquarters • Financial Services • Life Sciences • Information Technology* • Semiconductors • Transportation Equipment Manufacturing *Not currently eligible for the High Impact Performance Incentive

  18. High Impact Performance Incentive (HIPI) • Negotiable cash grant paid to business • Eligible projects operate in designated portions of high-impact sectors • Creation of at least 50 new jobs (25 for R&D) and $50M capital investment ($25M for R&D) • Paid in two installments, based on “commencement of operations” and “commencement of full operations”

  19. Capital Investment Tax Credit (CITC) • Tax credit for designated portions of high-impact sectors • Information Technology is considered a High Impact Sector for CITC • Creation of at least 100 new jobs and $25M capital investment • Total amount of credit varies depending on capital investment threshold • Credit taken at 5% per year for 20 years, business investing at least $100M with unused tax credits due to insufficient tax liability may have an additional 10 years to claim the credits beginning in year 21

  20. Governor’s Quick Action Closing Fund • Deal closing tool used at the Governor’s discretion • Addresses a competitive gap vis-à-vis other states • Awards under $2M can be approved by the Governor • Awards between $2-$5 million require notification of House and Senate leadership • Awards of more than $5 million must be approved by the Legislative Budget Commission • $42 M appropriated for FY 2011/12

  21. Sales Tax Exemptions • R&D equipment (predominant use) • Semiconductor, defense, and space technology production equipment • Manufacturing machinery and equipment and subsequent labor, parts, and materials used to repair equipment • Refund of up to $50,000 available for equipment purchased in FY 2010-11 or FY 2011-12 • Electricity used in the manufacturing process • Certain aircraft and spacecraft expenditures • Film, television, and other production activities

  22. Other Incentives • The Jobs for the Unemployed Tax Credit • Encourages the hiring of qualified employees who were previously unemployed. The business will receive a tax credit for qualified full time employees hired after July 1, 2010, and remain employed for 12 months • The Local Government Distressed Area Matching Grant Program • Stimulates investment in the state’s economy by providing grants to match demonstrated business assistance by local governments to attract and retain business in the state

  23. Brownfield Redevelopment Bonus • Up to $2,500 in tax refunds per new Florida job created • Two ways to qualify: • Be a qualified target industry business under the QTI Program OR • “Stand-alone Brownfield” - demonstrate a fixed capital investment of at least $500,000 in mixed-use business activities ($2 million if the site requires remediation) and create at least 10 new jobs with benefits • Other Brownfield incentives: • Voluntary clean-up tax credit • Loan guarantee program

  24. Rural and Urban Incentives • Rural Job Tax Credit • $1,000 per job created within specific industries in a rural county • Rural Infrastructure Fund • Grant for assistance with infrastructure development and feasibility studies • Rural Community Development Revolving Loan Program • Loan to local government for a specific economic development related project • Urban Job Tax Credit • $500 to $1,500 per job created within specific industries in a designated Urban area

  25. Enterprise Zone Incentives • Enterprise Zone Jobs Tax Credit • Credit based on wages paid to employees that are EZ residents • Sales Tax Refund for Building Materials • Refund of sales tax paid on building materials, up to $5,000 or $10,000 • Sales Tax Refund for Business Machinery and Equipment • Refund for sales tax paid on the purchase of certain business property, up to $5,000 or $10,000 • Property Tax Credit • Credit equal to 96% of ad valorem taxes paid on new or improved property, up to $50,000 annually for up to five years

  26. Quick Response Training • Quick Response Training (QRT) is an employer-driven training program administered by Workforce Florida • The company may use in-house training, outside vendor training programs or the local educational entity to provide training. Reimbursable training expenses include: • instructors'/trainers' wages; • curriculum development; and • textbooks/manuals. • Businesses approved for QRT funding are limited to one grant award per site every two years.

  27. Incumbent Worker Training • Incumbent Worker Training (IWT) is administered by Workforce Florida and provides training to currently employed workers • The program is available to all Florida businesses that have been in operation for at least one year prior to application • $50,000 maximum per business • Priority is given to businesses in targeted industries, Enterprise Zones, HUB Zones, Inner City Distressed areas, Rural Counties and areas, and Brownfield areas.

  28. Incentives Budget

  29. Research and Development Tax Credit • Annual Corporate Income Tax credit for qualifying research and development expenses in Florida • Credit will be equal to 10 percent of the current year’s expenses that exceed the average expenses over the past four years (base amount) • Amount of credits capped at $9 million • Applications filed through the Florida Department of Revenue • Due in March • Credits awarded on a first come, first served basis

  30. Tax Credit for Spaceflight Projects • Credit equal to 50% of the business’s Corporate Income Tax liability in a given year OR • Business may also convert net operating losses into transferable Corporate Income Tax credits • A business must • Demonstrate that it is engaged in spaceflight projects • Create 35 new jobs and • Invested $15 million dollars in the three years prior to being certified for the credits • Amount of credits capped at $10 million

  31. Contacts – Business Retention and Recruitment Crystal Sircy, Senior Vice President of Business Retention and Recruitment 850.298.6628 csircy@eflorida.com Rob Sitterley, Vice President of Business Development 407.956.5653 rsitterley@eflorida.com Casey Barnes, Director of Business Development 407.956.5609 cbarnes@eflorida.com Joel Gunter, Director of Business Development 407.956.5621 jgunter@eflorida.com Todd Holt, Business Development Manager 407.956.5620 tholt@eflorida.com Tim Johns, Business Development Manager 407.956.5611 tjohns@eflorida.com Matt Lowell, Business Development Manager 407.956.5659 mlowell@eflorida.com

  32. Contacts – Business Retention and Recruitment Brandon Carson, Business Development Manager 850.298.6622 bcarson@eflorida.com Marty Wilson, Vice President, Competitiveness Programs & Policies 407.956.5633 mwilson@eflorida.com Joseph Bell, Program Manager 407.956.5622 jbell@eflorida.com Molly Weller, Incentives Manager 850.298.6634 mweller@eflorida.com Heather Squires, Incentives Manager 407.956.5696 hsquires@eflorida.com Bridget Merrill, Vice President, Targeted Opportunities 850.298.6626 bmerrill@eflorida.com Adam Henry, Business Development Coordinator 850.298.6624 ahenry@eflorida.com

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