Gov's tax break may be in limbo but there may be no takers on a legal challenge

Did Florida legislators pull a fast one on Gov. Rick Scott when they passed a manufacturing tax break late Wednesday but left it in legal limbo?

The proposal, HB-7007, which gives every manufacturer a sales tax exemption on all industrial machines and equipment purchases for three years, was one of only two priorities of the governor. Estimated to save manufacturers about $121 million a year, it passed the House and minutes later the governor responded by signing into law two of the legislature’s top two priorities: an ethics bill and another to revise the state’s campaign finance laws.

But Democrats say the well-choreographed trade-off didn’t get the required two-thirds vote to be constitutional. If the governor signs it as expected, it could draw a lawsuit and be thrown out. It passed on a 68-48 vote, 12 votes short of two-thirds in the 120-member chamber.

“It looks like it’ll be challenged with all due speed,’’ said Rep. Perry Thurston, D-Plantation, the House Democratic leader.

The Florida Constitution requires that any bill that limits the ability of local governments to raise revenues must pass by two-thirds vote of both the House and Senate unless the revenue impact is “insignificant.”

The manufacturing tax break would cost local municipalities between $20 million and $30 million a year, according to House estimates.

But counties and cities can levy billions in tax revenues each year, so one question is whether $30 million is “insignificant.”

The constitution does not define “insignificant” and the courts have left it an open question.

House Speaker Will Weatherford and Scott’s legal staff are confident they are on safe ground.

“We looked into that very closely,’’ said Weatherford, R-Wesley Chapel, after the House passed the measure following three minutes of debate. “We spoke with our attorneys and our staff. We do not believe it requires two-thirds vote.”

The question may be a moot point. The governor would not comment but his staff, as well as several local government officials, told the Herald/Times that they don’t anticipate a legal challenge.

“This Legislation cuts taxes on Florida job creators, which helps all Florida communities,’’ said Melissa Sellers, the governor’s spokeswoman.

Given the fact that counties and cities can levy billions each year in tax revenues, $30 million in that context is insignificant, the lawyers argue. But, the constitution does not define “insignificant” and the courts have left it an open question.

House lawyers also point to the fact that the two-thirds mandate took effect on Feb. 1, 1989 when only two counties – Miami Dade and Duval – had local option sales taxes in place. Only those counties could even have a legitimate claim, they said.

“We disagree with that,’’ said Sarah Bleakley, attorney and lobbyist for the Florida Association of Counties. The two-third mandate applies to all counties at the time the law was passed, she said.

On the other hand, the association has not taken a position on the manufacturing tax and “is not planning to challenge it at this point,’’ Bleakley said. 

Neither does Miami Dade County, one of the counties House lawyers say could even have a claim.

County officials have not taken a position on the manufacturing tax credit but, in the past “have supported these types of incentives to attract businesses to the county,’’ said Miami Dade lobbyist Jess McCarty. “We view it as tool to attract businesses.”

Bleakley said this would not be the first time the legislature has passed a measure affecting the revenue of local governments without the required two-thirds vote. Last year, lawmakers revised the formula for reimbursing counties for Medicaid services without the two-thirds vote.

But, rather than sue the state over it, the counties asked the governor and lawmakers to rewrite it this year, she said. The compromise is expected to be voted on by legislators Friday, the last day of session.

The proposal passed just minutes before the governor signed two of the legislature’s top two prioirites – an ethics bill and another to revise the state’s campaign finance laws.

The Senate passed the measure 37 to 3, but four Republicans joined 44 Democrats to oppose the measure which included dozens of complex economic development provisions.

In addition to the tax break, the bill creates a Small Business Development Center Network, which will be governed by an advisory group of business representatives and work with the state university system. It steers tax revenues to economic development programs, creates a loan guarantee program and carves out an exemption fro companies that receive loan guarantees prior to July 1, 2013, imposes steep hurdles for employees to collect unemployment compensation and makes it a misdemeanor for an employee to .

The bill also includes a project close to Senate President Don Gaetz, the creation of a non-profit company known as Gulf Triumph Inc. that will create an endowment from any proceeds from the lawsuit in the Gulf oil spill case. 

The Florida Constitution requires that any bill that limits the ability of local governments to raise revenues must pass by two-thirds vote of both the House and Senate unless the revenue impact is “insignificant.”

The manufacturing tax break would cost local municipalities between $20 million and $30 million a year, according to House estimates.

But counties and cities can levy billions in tax revenues each year, so one question is whether $30 million is “insignificant.”

The constitution does not define “insignificant” and the courts have left it an open question.

House Speaker Will Weatherford and Scott’s legal staff are confident they are on safe ground.

“We looked into that very closely,’’ said Weatherford, R-Wesley Chapel, after the House passed the measure following three minutes of debate. “We spoke with our attorneys and our staff. We do not believe it requires two-thirds vote.”

The question may be a moot point. The governor would not comment but his staff, as well as several local government officials, told the Herald/Times that they don’t anticipate a legal challenge.

“This Legislation cuts taxes on Florida job creators, which helps all Florida communities,’’ said Melissa Sellers, the governor’s spokeswoman.

Given the fact that counties and cities can levy billions each year in tax revenues, $30 million in that context is insignificant, the lawyers argue. But, the constitution does not define “insignificant” and the courts have left it an open question.

House lawyers also point to the fact that the two-thirds mandate took effect on Feb. 1, 1989 when only two counties – Miami Dade and Duval – had local option sales taxes in place. Only those counties could even have a legitimate claim, they said.

“We disagree with that,’’ said Sarah Bleakley, attorney and lobbyist for the Florida Association of Counties. The two-third mandate applies to all counties at the time the law was passed, she said.

On the other hand, the association has not taken a position on the manufacturing tax and “is not planning to challenge it at this point,’’ Bleakley said. 

Neither does Miami Dade County, one of the counties House lawyers say could even have a claim.

County officials have not taken a position on the manufacturing tax credit but, in the past “have supported these types of incentives to attract businesses to the county,’’ said Miami Dade lobbyist Jess McCarty. “We view it as tool to attract businesses.”

Bleakley said this would not be the first time the legislature has passed a measure affecting the revenue of local governments without the required two-thirds vote. Last year, lawmakers revised the formula for reimbursing counties for Medicaid services without the two-thirds vote.

But, rather than sue the state over it, the counties asked the governor and lawmakers to rewrite it this year, she said. The compromise is expected to be voted on by legislators Friday, the last day of session.

The proposal passed just minutes before the governor signed two of the legislature’s top two prioirites – an ethics bill and another to revise the state’s campaign finance laws.

The Senate passed the measure 37 to 3, but four Republicans joined 44 Democrats to oppose the measure which included dozens of complex economic development provisions.

In addition to the tax break, the bill creates a Small Business Development Center Network, which will be governed by an advisory group of business representatives and work with the state university system. It steers tax revenues to economic development programs, creates a loan guarantee program and carves out an exemption fro companies that receive loan guarantees prior to July 1, 2013, imposes steep hurdles for employees to collect unemployment compensation and makes it a misdemeanor for an employee to .

The bill also includes a project close to Senate President Don Gaetz, the creation of a non-profit company known as Gulf Triumph Inc. that will create an endowment from any proceeds from the lawsuit in the Gulf oil spill case.