economic & community development incentives · 2017-01-17 · state regional councils •...
TRANSCRIPT
Economic & Community Development Incentives
Nuts & Bolts
Presented November 6, 2014, Clanton, Alabama
Roadmap
What tools are available to small and medium sized cities in Alabama?• Industrial recruitment• Downtown redevelopment• Financing tools
Presented November 6, 2014, Clanton, Alabama
Industrial Recruitment
Presented November 6, 2014, Clanton, Alabama
Toolkit
• Local– Local economic developers– Tax Abatements– Amendment 772
• State– Capital Credit– Department of Commerce support– AIDT– ADECA
• Other resources – NMTC– State Regional Councils– Regional Federal Agencies– Electric Utility Support
Presented November 6, 2014, Clanton, Alabama
Example Project
• Location: City of Montevallo• Type of Business: Manufacturing• Capital Investment: $10 million
– $1,000,000 in land acquisition costs– $9,000,000 in construction (50% towards
materials)• New Jobs Created: 25 jobs• Wages: $16.20/hour
Presented November 6, 2014, Clanton, Alabama
Example Taxes
Sales taxes: 9.0%• State: 4.0% • County: 1.0%
– Educational: 0.5%– Noneducational: 0.5%
• City: 4.0%– Educational: 0.0%– Noneducational: 4.0%
• Machinery: 6.6%– Educational: 0.1875%
Property taxes: 51.0 mills• State: 6.5 mills
– Educational: 3.0 mills– Noneducational: 3.5 mills
• County: 37.5 mills– Educational: 30.0 mills– Noneducational: 7.5 mills
• City: 7.0 mills– Educational: 0.0 mills– Noneducational: 7.0 mills
Presented November 6, 2014, Clanton, Alabama
Local Incentives
• Local economic developers• Tax abatements• Amendment 772
Presented November 6, 2014, Clanton, Alabama
Local Economic Developers
• Key allies in recruiting industry• Skilled liason between you and industry• Know the rules and can help connect
you to resources
Presented November 6, 2014, Clanton, Alabama
Contacts & More
EDAA• Jim Searcy
– Executive Director• Phone: (334) 242-1184• Email: [email protected]
• www.edaa.org
Presented November 6, 2014, Clanton, Alabama
Tax Abatements
• What qualifies?
• What taxes can be abated?
Presented November 6, 2014, Clanton, Alabama
Eligible Industries
• Manufacturing• Merchant wholesalers• Warehousing• Publishing (except internet)• Space research & technology• Coal mining• Scientific research &
development• Computer systems design• Data processing and hosting• Logging• Petroleum pipelines• Cotton ginning• Wired telecommunications• Testing laboratories• Inbound call centers
• Processing or treatment facilities
• Headquarters facilities• Data processing centers• Renewable energy facilities• Research & development
facilities• Tourism destination
attractions• Utility-owned alternative
energy and hydroelectric facilities
• Certain affiliates of the Alabama State Port Authority
• Underground natural gas storage in the Gulf Opportunity Zone
Presented November 6, 2014, Clanton, Alabama
New Project Eligibility
New Jobs:Generally
no threshold
Wages:Generally
no threshold
Capital Investment:Generally
no threshold
Presented November 6, 2014, Clanton, Alabama
Expansions Eligibility
New Jobs:Generally
no threshold
Wages:Generally
no threshold
Capital Investment:30% of original costs or $2M
Presented November 6, 2014, Clanton, Alabama
Sales Tax Abatements
• What does it cover? Materials purchased in constructing and equipping a project
• How long does it last? Until project placed in service
• Montevallo: – Before: 9% general / 6.6% machinery– After: 0.5% general / 0.1875% machinery
Presented November 6, 2014, Clanton, Alabama
Example Project
Presented November 6, 2014, Clanton, Alabama
Property Tax Abatements
• What does it cover? Real and personal property incorporated into a project
• How long does it last? Up to 10 years• Montevallo:
– Before: 51.0 mills– After: 33.0 mills
Presented November 6, 2014, Clanton, Alabama
Example Project
Presented November 6, 2014, Clanton, Alabama
How to Finalize Abatement
• Abatements may be granted by:– County– City – Industrial Development Board
• Notify ADOR– Form CO: CAA– Form ST-EX2– Copy of action of granting authority– Copy of abatement agreement– Proof of E-Verify enrollment
Presented November 6, 2014, Clanton, Alabama
Contacts & More
Alabama Department of Revenue• Kelly Graham
– Office of the Commissioner of Revenue• Phone: (334) 242-1175• Email: [email protected]
• Ashley Moon– Office of the Commissioner of Revenue
• Phone: (334) 242-1184• Email: [email protected]
• http://revenue.alabama.gov/taxincentives/
Presented November 6, 2014, Clanton, Alabama
Class 6 Municipalities
• Class 6 municipalities have extra powers– 15-year property tax exemption for city
non-educational property taxes only– May also exempt municipal educational
taxes over 20 mills if no decrease in revenue
– Exemption from occupational license fees
Presented November 6, 2014, Clanton, Alabama
Amendment 772
• What’s it worth? Discretionary• How to claim? Offered by the county
and/or municipal government• Limitations? Few; Alabama
Constitution
Presented November 6, 2014, Clanton, Alabama
772 Procedure
• Provide notice and hearing– Publish in local paper– Public hearing
• Governing body adopts resolution approving package
• Generally, Amendment 772 actions require court validation
Presented November 6, 2014, Clanton, Alabama
Other Local Amendments
• Other areas have their own local constitutional amendment that may be used– 17 counties: Amendment 429– 18 counties: Amendment 759
• Madison: Amendment 191
Presented November 6, 2014, Clanton, Alabama
The Decision
• Will the industry:– Provide quality jobs?– Generate long-term tax base?– Occur without incentives?
• Fit your workforce• Draw workers from other communities
– Provide retail benefits
Presented November 6, 2014, Clanton, Alabama
Other Considerations
• Upfront vs. performance-based• Caps on incentives
– Duration– Amount
• Incentive agreement– Recapture provisions (“clawbacks”)
Presented November 6, 2014, Clanton, Alabama
State Incentives
• Capital credit• Department of Commerce support• AIDT• ADECA
Presented November 6, 2014, Clanton, Alabama
Capital Credit
• What’s it worth? Income tax credit equal to 5% of the capital costs of the project taken over 20 years
• How do you claim? All projects which meet statutory requirements qualify
• When does it begin? When any part of the project is placed in service
Presented November 6, 2014, Clanton, Alabama
Eligible Industries
• Basically the same as abatements– Always be sure to confirm project
eligibility
Presented November 6, 2014, Clanton, Alabama
Criteria for Eligibility
New Jobs:20
Wages:Lesser of
$16.20/hour or county average
Capital Investment:
$2mm
Presented November 6, 2014, Clanton, Alabama
Example Project
Presented November 6, 2014, Clanton, Alabama
How to Qualify/Contact
• Locality must notify Commerce– Online portal:
http://notification.madeinalabama.com• Project files Form INT with Revenue
– Prior to time project placed in service• Contact
• Kelly Graham at ADOR• Phone: (334) 242-1175• Email: [email protected]
• http://revenue.alabama.gov/taxincentives/
Presented November 6, 2014, Clanton, Alabama
Total Statutory Incentives
Presented November 6, 2014, Clanton, Alabama
Commerce Support
• State project manager• State discretionary dollars• SIDA site preparation grants
– Department of Finance– Maximum grant $150,000
• Industrial Access Road and Bridge– ALDOT/Department of Finance– $11mm/year fund
Presented November 6, 2014, Clanton, Alabama
Contacts & More
Department of Commerce• Bob Smith
– Acting Director of Business Development– Phone: (334) 242-0464– Email: [email protected]
• www.madeinalabama.com/advantages
SIDA Site Preparation Grants• Sandi Taylor
– Department of Finance – Debt Management– Phone: (334) 353-1199– Email: [email protected]
Presented November 6, 2014, Clanton, Alabama
Contacts & More (cont.)
Industrial Access Road and Bridge• Ed Austin
– Innovative Programs Bureau Chief– Phone: (334) 242-6751– Email: [email protected]
• www.dot.state.al.us/adweb/Industrial%20Access.htm
Presented November 6, 2014, Clanton, Alabama
AIDT
• Workforce development– Businesses– Job seekers
• www.aidt.edu/jobs
• Regional and mobile training centers• Robotics Technology Park• Also specialized centers for aviation,
forest products, maritimePresented November 6, 2014,
Clanton, Alabama
Contacts & More
Alabama Industrial Development Training• Best way to connect with AIDT is
through Commerce or your local economic developer
• www.aidt.edu
Presented November 6, 2014, Clanton, Alabama
ADECA Programs
• CDBG Economic Development– Applications scored based upon the
number of jobs and benefit to low and moderate-income persons
– SIC codes 20-39 (manufacturing) or provide “significant economic benefit”
– 20% local match is required– Grant must be awarded prior to project
startPresented November 6, 2014,
Clanton, Alabama
ADECA Programs (cont.)
• Float loans – Up to $10mm– Repaid in no more than 2 years
• Economic development grants– Up to $200k
Presented November 6, 2014, Clanton, Alabama
ADECA Programs (cont.)
• State Small Business Credit Initiative – Private loan guarantee program– 50% of loan wrapped up to $5mm– “Small business” has up to 500 employees– Plenty of capacity under program
Presented November 6, 2014, Clanton, Alabama
Contacts & More
Alabama Department of Economic and Community Affairs• Shabbir Olia
– CED Programs Manager• Phone: (334) 242-5468• Email: [email protected]
– http://adeca.alabama.gov/Divisions/ced/cdp/Pages/CDBG.aspx
• Howard Wills– SSBCI Coordinator
• Phone: (334) 353-5353• Email: [email protected]
– http://adeca.alabama.gov/Divisions/ced/cdp/Pages/SSBCI.aspx
Presented November 6, 2014, Clanton, Alabama
Other Resources
• NMTC• State Regional Councils• Regional Federal Agencies• Electric Utility Support
Presented November 6, 2014, Clanton, Alabama
New Markets Tax Credits
• New markets tax credits are federal and state programs to incentivize private investment in low-income communities
• Flexible regarding eligible projects
Presented November 6, 2014, Clanton, Alabama
NTMC (cont.)
• What’s it worth? Credit against federal income taxes equal to 39% of the investment in a project– Credit against state income tax of 50%
• How to claim? Apply to CDE with allocation
• Availability? Must locate in a low-income community
Presented November 6, 2014, Clanton, Alabama
NMTC (cont.)
• Grey areas do notqualify
• Green and blue areas do– Blue areas most
severe distress
Presented November 6, 2014, Clanton, Alabama
NMTC for Montevallo
• Block by block analysis
Presented November 6, 2014, Clanton, Alabama
NMTC Problems
• Last year of authorization• Complexity• Limited availability of credits• Minimum deal size
– $5mm for nonprofit– $7mm for-profit
• Public entities cannot take direct advantage of program
Presented November 6, 2014, Clanton, Alabama
Contacts & More
Experienced NMTC counsel• Thomas Longino
– Balch & Bingham LLP• Phone: (205) 226-8713• Email: [email protected]
• Online mapping tool– www.bakertilly.com/landing/nmtc-lihtc-
mapping-tool• CDFI Fund
– www.cdfifund.gov/what_we_do/programs_id.asp?programID=5
Presented November 6, 2014, Clanton, Alabama
State Regional Councils
• Economic Development– Infrastructure related grants including site
preparation, industrial access, and other economic development grants
• Revolving Loan Funds– Provides gap financing to small local businesses and
industries in their start-up and expansion activities that is not available from commercial lenders, including working capital
– Up to 1/3 of the total project cost
• Geographic Information Systems
Presented November 6, 2014, Clanton, Alabama
Contacts & More
Alabama Association of Regional Councils
• Phone: (334) 277-2221
• www.alarc.org/the-councils/
Presented November 6, 2014, Clanton, Alabama
Regional Federal Agencies
Delta Regional AuthorityAppalachian
Regional Commission
Presented November 6, 2014, Clanton, Alabama
Contacts & More
ADECA – DRA & ARC• Jimmy Lester
– ARC Program Manager (also DRA)• Phone: (334) 353-4490• Email: [email protected]
• Also contact your local Regional Council
Delta Regional Authority• www.adeca.alabama.gov/Divisions/ced/
Pages/DRA.aspx• www.dra.gov
Appalachian Regional Commission• www.adeca.alabama.gov/divisions/ced/
pages/appalachian-regional-commission.aspx• www.arc.gov
Presented November 6, 2014, Clanton, Alabama
Electric Utility Support
• Electric utilities in the state are extremely active in economic development– Project assistance– Speculative building programs
• Contact via local economic developer
Presented November 6, 2014, Clanton, Alabama
Downtown Redevelopment
Presented November 6, 2014, Clanton, Alabama
Challenges
• How to redevelop disused downtown properties– Alabama municipalities have limited
powers• No home rule
– Limited resources• Retail under siege
Presented November 6, 2014, Clanton, Alabama
Toolkit
• Retail tax incentives• Alabama public corporations
– Redevelopment authorities– Cooperative districts
• Tax increment financings• Historic preservation tax credits
Presented November 6, 2014, Clanton, Alabama
The Decision
• Will the development:– Increase quality of life?– Generate long-term tax base?– Occur without incentives?
• Cost/benefit analysis– Cannibalize existing retail?– Other uses of the site (HBU)?
• Developer’s financial commitment?Presented November 6, 2014,
Clanton, Alabama
Other Considerations
• Upfront vs. Performance Based• Caps on Incentives
– Duration– Amount
• Incentive Agreement– Recapture Provisions (“clawbacks”)
Presented November 6, 2014, Clanton, Alabama
Retail Incentives
• All incentives handled on local level– Sales tax rebates– Amendment 772– Tax increment financings
Presented November 6, 2014, Clanton, Alabama
Sales Tax Rebates
• Incentive payment to project based upon performance (rebate)
• Project uses funds to:– Offset costs (improve feasibility of project)– Improve infrastructure– Lure anchor tenants
Presented November 6, 2014, Clanton, Alabama
Structuring Sales Tax Rebate
• 30% of municipal sales taxes generated by project for x years– County participation?
• Use Amendment 772?
Presented November 6, 2014, Clanton, Alabama
Public Corporations
• Publically-owned and controlled entities which have additional powers– Redevelopment Authorities– Capital Improvement Cooperative
Districts
Presented November 6, 2014, Clanton, Alabama
Redevelopment Authority
Project“Interests in land, buildings, structures,
facilities, or other improvements located or to be located within the development
area . . . all for the essential public purpose of the development of trade, commerce, industry, and employment
opportunities in the development area.”
Presented November 6, 2014, Clanton, Alabama
RAs (cont.)
• Development area– Any business district of the city which is not more
than three miles from the central business district and shall include areas used predominantly for business and commercial purposes
• Powers– Acquire, construct, lease, sell or donate projects– Borrow money and make loans to private
enterprises– Accept gifts or tax revenues from a public or
private entity– Foreclose on projects
Presented November 6, 2014, Clanton, Alabama
RAs (cont.)
• Caveats– Not exempt from competitive bid laws– Authority must hold public hearing prior to
expending tax revenues made available to it
– Only one authority per municipality
Presented November 6, 2014, Clanton, Alabama
Cooperative Districts
Project“Any capital improvement, facility,
structure, building, property, or appurtenances thereto of any nature,
type, or description which any member is authorized by any law of the state to
own, acquire, construct or finance.”
Presented November 6, 2014, Clanton, Alabama
Cooperative Dist. (cont.)
Intent“. . . to encourage and facilitate
cooperative efforts by public entities to provide projects for their own use and for the use and benefit of their citizens
and users.”
Presented November 6, 2014, Clanton, Alabama
Cooperative Dist. (cont.)
• Who can cooperate?– Municipalities– Counties– IDBs or IDAs– Redevelopment authorities– Any other public corporation
Presented November 6, 2014, Clanton, Alabama
Cooperative Dist. (cont.)
• District– Flexible; not clearly defined
• Powers– Acquire, construct, lease, sell a project– May only donate projects to public
entities– Borrow money– Accept tax revenues from a public entity– Charge rentals for use of projects
Presented November 6, 2014, Clanton, Alabama
Cooperative Dist. (cont.)
• Compare to RAs– Exempt from competitive bid laws– Has eminent domain power– Multiple districts allowed
Presented November 6, 2014, Clanton, Alabama
How to Establish
• Generally, statutory authorities follow this general procedure:– Members of public apply to form authority– City council adopts resolution
• Approves articles of incorporation• Approves board members
– File articles with local judge of probate
Presented November 6, 2014, Clanton, Alabama
Funding
• In general, cities and counties have the authority to transfer funds to a public corporation
Presented November 6, 2014, Clanton, Alabama
Tax Increment Financings
• Designate a TIF district:– Blighted/economically distressed areas– Certain military areas
• Issue bonds to fund infrastructure improvements/project development
• Use incremental increase in tax revenue to service debt
Presented November 6, 2014, Clanton, Alabama
TIF Problems
• Vehicle that captures increased property tax revenues to finance improvements to an area
• Doesn’t work well in Alabama due to low property tax rates
Presented November 6, 2014, Clanton, Alabama
Historic Tax Credits
• Historic preservation tax credits are federal and state programs to incentivize rehabilitation of historic structures
• Detailed rules relating to what renovations may be undertaken
• May be stacked with NMTC
Presented November 6, 2014, Clanton, Alabama
Problems
• Minimum deal size similar to NMTC• Alabama program limited to $20mm
per year– 21 applicants for 10 spots– All 10 projects were in Anniston,
Birmingham, Mobile, Montgomery or Tuscaloosa
Presented November 6, 2014, Clanton, Alabama
Contacts & More
• Alabama Historical Commission– Jennifer Bailey
• Coordinator, Alabama Historic Preservation Tax Credit Program
– Phone: (334) 230-2643– Email: [email protected]
• State– www.preserveala.org/taxcredits.aspx?sm=i_b
• Federal– www.nps.gov/tps/tax-incentives.htm
Presented November 6, 2014, Clanton, Alabama
Financing Tools
Presented November 6, 2014, Clanton, Alabama
Challenge
• How to pay for improvements with limited budget
Presented November 6, 2014, Clanton, Alabama
Toolkit
• Pay as you go• Public infrastructure may be financed
with tax-exempt warrants– Amendment 772 does not change result
• Public corporations may issue bonds
Presented November 6, 2014, Clanton, Alabama
Problems
• No home rule• Constitutional debt limitation
– Amendment 772 helps• Practical considerations
– Low taxes– Voter disapproval of tax hikes– Educational needs
Presented November 6, 2014, Clanton, Alabama
Conclusion
Presented November 6, 2014, Clanton, Alabama
Summary
• There are many resources available to you
• State and its allies care about economic development
• Retail and downtown redevelopment remains a challenge in cities large and small
Presented November 6, 2014, Clanton, Alabama
Questions?
Presented November 6, 2014, Clanton, Alabama
THANK YOU
FOR MORE INFORMATION
J. THOMAS LONGINO
Phone: (205) 226-8713Email: [email protected]
Presented November 6, 2014, Clanton, Alabama