Secret Handouts

It's bad enough that Florida uses tax money to bribe

Manufacturers, particularly in the flashy high-technology field, have worked tirelessly during the past decade to catch up with greedy sports teams in the race to perfect the taxpayer shakedown.

Economic backwaters were most vulnerable at first. Build us a road for our new plant or abate our property taxes for 10 years, out-of-state business owners would demand. Country politicians, who consider themselves lucky when they can get a state prison built in their back yards, put up little resistance. They slowly raised both hands and emptied the community chest for the intruders.

Florida was relatively late in becoming a willing victim of this most dignified of highway robberies. Pleading we-have-to-keep-up-the-Joneses, state lawmakers devised programs in the middle of the 1990s to refund taxes paid by newly relocated or expanded enterprises that qualify as desirable "target industry businesses."

The programs generally allow such businesses to obtain a $3,000 tax refund for every job that pays above a certain percentage of the average local wage. Refunds increase to $6,000 if the job was created inside an enterprise zone or rural county. Businesses new to the state must create at least 10 full-time positions and expanding businesses have to increase employment by 10 percent. Participants may get refunds of their payments of corporate income, property or sales taxes.

Cities and counties hosting these businesses kick in right along with the state. Of course, the businesses and citizens already calling Florida home ultimately make up the tax shortfall.

The dent in the public treasury is considerable. There were 170 refund deals, as of June 30. The state's share of the cost alone was $132-million.

The public's ability to scrutinize these giveaways is quite limited. The Legislature created exemptions to our sunshine laws so, for example, county commissions can approve subsidies for a business that they don't have to identify at the time of the vote. The rationale offered for the hush-hush treatment is that company owners don't want tentative relocation sites publicized until their moving plans are firm. Taxpayers just have to hope that their elected representatives aren't voting to subsidize a toxic-waste producer. By the time the chamber of commerce gets around to identifying the lucky recipient, it's too late to complain.

Last month, seven senators decided there isn't enough secrecy surrounding this brand of corporate welfare. On Feb. 20, the Senate Commerce and Economic Opportunities Committee passed 7-0 a list of further exemptions to the public records law as it relates to these tax refunds. Senate Bill 486 would prohibit disclosure to the public of the following from tax-refund records: 1. The amount of taxes paid by a qualified-target-industry business or defense contractor; 2.The number of jobs created by the business or contractor; and 3. The wages paid by the business or contractor.

Without this information, it would be impossible for an outsider who doesn't work for the businesses or the state government to determine whether the companies fulfilled their promises and are entitled to refunds.

Tampa Republican Victor D. Crist was among the seven senators to vote for SB 486. "It was presented to us as the way we have to operate to keep Florida's competitive edge in economic development," Crist said last week.

Crist said he was unaware of a January audit of the programs, which might have given him pause about the wisdom of letting the state pull all of this tax-refund information under a blanket of confidentiality.

Florida Auditor General William O. Monroe reported that Gov. Jeb Bush's Office of Tourism, Trade and Economic Development, which administers the tax-refund programs, did an inadequate job of verifying refund applications and may have improperly returned $704,650 in tax payments to businesses in 1999 and 2000.

Fraudulent paperwork from a participating business is punishable by financial penalties of up to twice the amount of the refund sought, according to state law. But Monroe's auditors found that nobody from the state has visited a single participating business to conduct an independent review of employment and wage claims made in refund applications.

The official Bush administration response to the audit findings wasn't reassuring.

Pamella J. Dana, director of the governor's economic development office, told Monroe that state law doesn't require independent verification of refund claims. "In fact," Dana wrote, "the statute does not address ... procedures for the review of the tax refund claim at all."

Dana was cool to the idea of regularly sending inspectors into the field to double-check refund claims from qualified-target-industry businesses. Her office, Dana wrote, "feels that it is not necessary to perform an onsite review of each claim, or even each QTI business during the life of the QTI agreement."

In essence, SB 486 asks citizens to trust the state to make sure that publicly subsidized businesses aren't ripping off the taxpayer through these refund programs. Based on the performance of the governor's economic development office to date, that might be asking too much.

The manner in which the new exemptions are winding through the Legislature shouldn't inspire public confidence, either.

Barbara Peterson, executive director of the First Amendment Foundation, lobbies in Tallahassee for open government on behalf of Florida community activists and the news media. Peterson said all of the current exemptions for the refund programs are up for renewal this year. The House passed legislation to continue the current exemptions last week, she said.

The Senate companion bill, SB 486, has been a whole other animal. Peterson said Senate staffers solicited her views on every piece of legislation filed this year for renewal of public-records exemptions — except SB 486.

"It sounds awfully fishy," said Peterson, whose organization opposes exempting the tax-refund data from public disclosure. "This is not a good idea. The size of the refund depends on the accuracy of this information. How are we going to have any opportunity for oversight?"

Peterson said there was no open-government advocate to speak prior to the Senate committee votes of Crist and his colleagues. Crist said the bill was portrayed by proponents as a routine measure.

The chief proponent was Frederick A. Martin, lobbyist for the Florida Economic Development Council. The council's Web site shows it to be underwritten by groups interested in luring new businesses to Florida. Council sponsors include utility companies, publicly funded industry recruiters like Enterprise Florida and assorted business magazines, such as Florida Trend. Martin said the new exemptions merely reflect the intentions of the lawmakers who passed the original tax-refund legislation in the 1990s. Other states don't permit taxpayer advocates to snoop in corporate tax records held by government, he said, even when companies choose to be subsidized by those same taxpayers. Without the new exemptions, Martin said: "Companies wouldn't even look at Florida." Martin said the exempted records would become public after 10 years or with the expiration of a refund agreement, whichever is sooner.

Bush's economic development office also supports the new exemptions, according to a Senate analysis of SB 486.

Peterson wasn't surprised to hear who was behind SB 486. "I would applaud this bill, too, if I was in economic development and could eliminate accountability," said Peterson.

Contact Staff Writer Francis X. Gilpin at 813-248-8888, ext. 130, or [email protected].

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