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Point-Counterpoint

Point-Counterpoint

Companies that are considering creating new jobs in Alachua County often apply for what are known as QTI incentives.

The Qualified Target Industry Tax Refund Program is a state initiative that requires local participation. For jobs created within a municipality, county government and the city government each are responsible for 10 percent. For jobs in the unincorporated area, the county is responsible for 20 percent.

Under QTI, qualifying companies—both ones new to the community and existing ones that are expanding—can receive a refund on various taxes of $3,000 for every job they create. The refund can be even higher under certain conditions, including for jobs in an enterprise zone or a designated brownfield, and for jobs paying 150 percent or more above the average wage in the area. Additionally, companies get a bonus if they locate in a designated brownfield area.

Most county and city commissioners generally support QTI applications, with the exception of Alachua County commissioner Mike Byerly.

Business in the Heart of Florida asked Byerly and County Commissioner Lee Pinkoson, a supporter of QTI, to discuss their views of the program.

 

What is your opinion of the QTI program?

Byerly: Well-intentioned, but inherently unfair, and likely wasteful of public resources.

Pinkoson: County government has few economic incentives it can offer companies. This is a good tool that we can use in cooperation with other segments of the community to attract jobs.

 

Why do you hold this view?

Byerly: No matter how carefully structured, there is no ethical way for government to directly subsidize private businesses. That degree of intervention in the market forces government into the role of choosing winners and losers, down to the level of individual businesses.

In addition, the direct public benefits of the kind of growth produced by this kind of economic development are questionable. The jobs typically go to people with specialized skills who are from outside the community. Economic benefits to the existing community are narrowly dispersed. All pay, but few benefit.

Pinkoson: It’s great that the incentives are based on performance. The recipients must live up to what they promise to do in creating jobs, or they won’t get any tax benefit.

We’ve been fortunate that there have been more applications lately. It reflects well on the community’s efforts to attract jobs.

While many of the new jobs have been high-end ones, some of the jobs that are coming are available to people without bachelor’s degrees. That would be case with Encell Technologies, which is considering expanding its battery plant at the Phoenix Commercial Park, just outside the City of Alachua.

 

What is the impact of such grants?

Byerly: It’s impossible to know for sure, but I’m highly skeptical that QTI is often the deciding factor for a company weighing where to locate or expand. Other factors seem substantially more important.

Of course, if a local government is willing to provide public subsidies, it makes perfect sense for companies to pit governments against one another, just to see if they can shake out more profit. It’s a competitive race to the bottom that is getting worse, and I don’t think it’s ultimately in the public interest.

Pinkoson: The new workers pay sales tax that benefits state and local government¸ and economic activity helps the entire community. People who come here buy homes and pay property taxes.

The cost of the incentives isn’t a lot of money compared to the benefit.

 

Do you think it’s important to leverage state dollars through programs such as QTI?

Byerly: There is clearly a “getting our share back” aspect to this issue for local governments, and it’s a strong supporting argument for QTI. It does still require further investment of local taxpayer money, however, and in my view doesn’t tip the scales.

Pinkoson: The incentives benefit the community in many ways. From the standpoint of county government, we end up getting 80 to 90 percent of the taxes we would have received without the incentives. Eighty or 90 percent of something we didn’t have before is a pretty good deal.

 

What role should county government play in economic development?

Byerly: The appropriate role for local government in promoting economic development is to provide a high quality network of public services and infrastructure and policies that serve the broadest public interest.

A well-run public sector promotes the kind of community that in itself becomes a strong attractor for economic investment, without requiring public giveaways to individual companies.

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Pinkoson: County government needs to be part of the community’s economic development efforts. Many people and organizations in the community are working together to create a welcoming and supporting attitude for new and existing businesses.

Those efforts include the growth of incubators, the collaboration fostered by Innovation Gainesville, the thriving innovation scene and the work of Edgar Campa-Palafox, the county’s economic development coordinator. Edgar has done a lot to help both outside companies and existing ones navigate the system.

The key to success is for everyone to having the posture of “How can we help you?”

 

QTI Impact Modest So Far, But Much Is In The Works

Alachua County Government began tracking the QTI program’s results in 2008.

Since then, the county has budgeted a total of $972,885 for tax refunds under the programs, with the bulk of that projected from now through 2018.

On the other hand, the county paid only $73,500 in QTI tax refunds through 2012, the most recent year for which complete numbers are available. This compares to the $163,250 that the county budgeted from 2008-2012.

Enterprise Rent-A-Car has been the largest beneficiary of QTI refunds, receiving $45,900 from county government.

Several reasons exist for the difference between the amount budgeted and the amount paid, said Edgar Campa-Palafox, the county’s economic development coordinator.

First, some of the companies offered incentives never come to Alachua County.

Second, none of the companies received the full amount budgeted. For example, Ignition Entertainment was budgeted for $52,500 in tax refunds, but it received $24,800.

Ignition Entertainment, a subsidiary of India-based UTV Group, closed its Gainesville video game development studio in November 2010. It came to town in 2007 after acquiring local game studio Artificial Studios.

QTI projects that are in process—with jobs being created—are ones for Bren-Tronics Energy Systems, Prime Conduit, Prioria Robotics, Mindtree, R&L Carriers, Nanotherapeutics, RegisterPatient, Mobiquity and OneSixtyOverNinety.

QTI projects that have been offered to companies that haven’t decided if they’re coming to the area or are participating in the program include ones for BioMonde, Encell Technology and Azalia Health Innovations.

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