VIERA, Florida -- By a vote of 3 to 1, the Brevard County Commission approved a 100% property tax exemption over 10 years to Xun Energy, Inc. County Commissioners Robin Fisher, Mary Bolin, and Chuck Nelson voted in favor of the exemption. Commissioner Trudie Infantini voted against approval. Commissioner Andy Anderson abstained from voting and left the Commission room due to a conflict of interest, saying that he is an active real estate agent for HomeLife Coastal Properties which is representing Xun Energy in the possible purchase of the commercial property located at 425 North Drive in Melbourne, Florida, which is the subject property of the tax exemption.
The proposed tax exemption for Xun Energy generated a public outcry after Brevard Times reported on August 15 that the publicly traded company on the OTC Market (under stock symbol XNRG) had lost over 80% of its value from April to August 2013.
Xun Energy President and CEO, Jerry G. Mikolajczyk, appeared at the meeting to answer questions raised about his company. Infantini asked Mikolajczyk how he found out about the Economic Development Commission of Florida's Space Coast (EDC) and Brevard County's tax abatement program. Mikolajczyk said that he had been following the County Commission meetings, the newspapers, and that he looked up who the County Commissioner was in the Melbourne area and it was Commissioner Anderson.
Mikolajczyk said that he made an appointment with Anderson "and basically offered my services to the County free of charge as a CFO." Mikolajczyk said that Anderson asked him about different plans and what his company was doing, and that Anderson then suggested that Mikolajczyk talk to the EDC.
Brevard Times asked Commissioner Anderson after the meeting if he recommended Mikolajczyk to HomeLife Coastal Properties for Xun's real estate agency and also asked when Anderson stopped speaking with Xun Energy personnel and the EDC about the project. Anderson replied in an email that, "I only suggested he speak with the EDC. I made no recommendations. I have not spoken to him since he indicated he was seeking tax abatements."
When asked by Infantini how he found the building that was selected by Xun Energy in Melbourne, Mikolajczyk said, "I actually happened to be driving by it for a lunch meeting next door and saw it and fell in love with it." Mikolajczyk also said that he selected Brevard because he used to own and live in a condo in Cocoa Beach, Florida.
Mikolajczyk exlpained that Xun Energy is in the development stage with an equity line of credit for the amount of $15 million. "We don't dare compare ourselves to Exxon, Chevron, or BP," Mikolajczyk said. "We are a young, emerging company. We have a five-year plan."
Fisher dismissed the notion that the Commission should deny exemptions just because the company is a penny stock. "I got on the internet here, and I looked at 10 penny stocks that paid off big," said Fisher "And its funny, about every one of the examples the company was in bankruptcy. If you looked at their... What is that? Bloomington report? ..or their filing here, SEC... they might not look very well. At the end of the day though, we are not making that investment until they create the jobs."
Infantini expressed concern that the Commission's approval might sway potential investors. "I'm concerned we are creating victims using Brevard County's good name," Infantini said. "We could go to the pump and dump list that's on the internet and pick any number of companies that is a penny stock that is not doing well. My money is not on it and neither is my vote."
Commissioner Fisher also argued in support of the EDC recommending Xun Energy to the Board. "Personally, I don't want EDC deciding what every company's future should be. I think they ought to get the facts," Fisher said. "There's a state statute that allow people to apply for these things. If that company comes and applies for that, under the state statute, and the rules that we give it. I don't think they ought to be vetting whether they ought to bring that to us, or not to us, to be honest with you. I think that is something we ought to consider as a Board."
"You're never going to get to a point where you pick a 100% of the winners because that is not what we do," Commissioner Chuck Nelson said. "I think Commissioner Fisher said it well. We are not suppose to try to pick winners and losers and I don't think its the EDC's responsibility, certainly, to do that for us."
"I just don't understand why there is the sudden dislike of trying to support businesses, because that is what it comes down to," Nelson complained. "Somehow we have lost our nerve to support businesses when we have no risk. And I would be interested to know how that occurred."
"We are picking winners and losers when one business can go into business and pays zero general fund tax dollar and the business next door pays 100% of the tax dollars due," Infantini said. "I disagree with Commissioners Nelson and Fisher, we are picking the winners and losers every time we give tax abatements."
"We are 60 out of 67 counties with the lowest tax structure," Fisher countered. "So we've got a pretty good tax structure in Brevard County already."
EDC Business Development Director Greg Weiner compared the EDC's support of businesses to that of former President Ronald Reagan's policies. "He wanted to reduce regulation. EDC has done that with the S.N.A.P. program," Weiner said. "He wanted to do something about accelerating depreciation schedules. The EDC worked with [former Brevard County Property Appraiser] Jim Ford to do some of that (not as much as we wanted)."
"He understood that the tax code could, and was willing to support it be used to support young businesses," Weiner added. "This is not out of the ordinary."
XUN's stock price fell from .0008 cents a share to .0007 cents a share during the Board's discussion. Then jumped to .0009 cents a share just minutes after the Board announced its approval. Xun closed up 12.50% from its open for the day.