policy manual economic development incentives. prior actions december 2007 state audit questions...
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POLICY MANUAL
Economic Development Incentives
Prior Actions
December 2007 State Audit questions City actions regarding
development incentives City responds to audit with commitment to adopt policy
regarding use of economic development incentives
May 27 & 28, 2009 City Council receives briefing on draft Interim
Economic Development Financing Policy Manual
Summer 2010 Market Street Services, Inc. provides Incentives
Analysis to Springfield Business Development Corporation
February 15, 2011
Economic Development Goals
Create and retain quality jobsIncrease private investment in the communityIncrease the property tax and sales tax basePay for public infrastructureRemove blight from the communityImprove the quality of life for all citizens
February 15, 2011
Government’s Role in Economic Development
February 15, 2011
“Now the true engine of job creation in this country will always be America’s businesses. But government can create the conditions necessary for businesses to expand and hire more workers.”
President Barack Obama
State of the Union Address
January 25, 2011
Economic Incentives
February 15, 2011
Special Taxing Districts Community Improvement District Transportation Development District Neighborhood Improvement District Special Business District
Tax Abatement / Exemption Land Clearance for Redevelopment Authority (Chapter
99) Industrial Development Bonds (Chapter 100) Urban Redevelopment Corporation (Chapter 353) Enhanced Enterprise Zone
Economic Incentives
February 15, 2011
Increment Financing Access and Infrastructure / Developer Agreement Tax Increment Financing
Loan Programs Small Business Development Loans Façade Loans Microenterprise / Business Incentive Loans Business Incentive for Home-Based Businesses Loan
Brownfields Assistance Brownfields Assessment Program Brownfields Revolving Loan Fund Program
Economic Development Incentives
February 15, 2011
Considerations in Developing Policies
February 15, 2011
Statutory requirementsProject management experienceBest practices from other Missouri
communitiesMarket Street Services, Inc. Incentives
Analysis
Sample Policies
February 15, 2011
ClaytonColumbia / Boone
CountyCrestwoodGrandviewIndependenceKansas CityLiberty
Osage BeachSt. LouisSmithvilleOlathe, KansasTopeka, KansasWichita, Kansas
Incentives Analysis
February 15, 2011
“Many respondents in the stakeholder input process expressed that the competitiveness of state and local incentives was limiting the success of the Metro Springfield business climate. Input participants identified stronger advocacy at the state level and better leveraging of existing incentives as necessary means to encourage the growth of new and expanding businesses that contribute to the economic prosperity of Metro Springfield and Missouri. Some respondents felt that local incentives were focused more on center city and blighted area redevelopment than strategically attracting and growing targeted firms.”
– Market Street Services, Inc.
IBM Technology Service Center – Columbia, MO
February 15, 2011
800 jobs at average annual wage of $55,000
“The tools used by Columbia, Missouri to successfully recruit IBM are available to the City of Springfield to attract prospects to the community. While Springfield did not make IBM’s short list, the City could have theoretically matched Columbia’s offer if the opportunity presented itself. However, Springfield Area public input participants said that, while there is a way to more effectively incentivize companies, there is often not the will to do so by local government.”
– Market Street Services, Inc.
Incentives Analysis Key Conclusions
February 15, 2011
Many other cities and states have more flexibility and capacity to offer a broader range of incentives
The City needs to be both more creative and more aggressive in the incentivization of firms. Creative – leverage partners including colleges, banks, and local
companies Aggressive – maximize the capacity of the incentive tools at the
City’s disposalCaveat - “There is even a growing sense among
certain states and regions that, rather than showering incentives on prospects, the business of corporate attraction largely entails providing a competitive business, labor and quality of life environment.”
Incentives Analysis Key Conclusions
February 15, 2011
Consider the following initiatives to make the city and the state more competitive: Passage of the “Grow Me State” initiative More flexibility in the use of TIF outside center city Flexibility to abate more than 50% of a prospect’s real
property taxes Flexibility to abate 50% or more of a prospect’s
personal property taxes Creation of a rate rider to lower commercial power
costs for the highest-volume users Creation of a “deal closing” fund to offer customized
incentives to high-value prospects
GENERAL POLICIESINCENTIVE-SPECIFIC POLICIES
February 15, 2011
Economic Development Incentives Policy
General Policies (Policy Manual page 2)
February 1, 2011
15
Judicious use of incentives
Developers are encouraged to discuss projects with staff prior to applying
Developers are encouraged to meet with taxing jurisdictions
All discretionary incentives will be subject to a “but for” test.
Discretionary incentives will be granted only at the level necessary to make the project financially feasible
Sustainable development will be encouraged through incentive bonuses
City will consider additional incentives for projects that create or retain quality jobs
General Policies - continued
February 1, 2011
16
City’s “annual appropriation”, or General Fund, guarantee will not be pledged
Taxes will not be reduced below the base year
City will not waive City permit, development, or incentive fees.
Projects must be consistent with the City’s Comprehensive Plan and comply with zoning and building codes.
Since each project is unique, every proposal will be evaluated under the City’s Policies on its individual merit and overall contribution to the local economy and the City’s goals.
Periodic reporting required that demonstrates compliance with program requirements and measuring economic benefit
ENHANCED ENTERPRISE ZONEINDUSTRIAL DEVELOPMENT BONDS
TAX INCREMENT FINANCING
February 15, 2011
Significantly Changed Policies
Enhanced Enterprise Zone
Substantial increase in eligible area since 2009
Primary incentive for new and expanding businesses
50% abatement on improvements for 10 years
25% bonus abatement for LEED Silver or higher
February 15, 2011
PurposePurpose ProcessProcess
February 15, 2011
To encourage private investment through real and personal property tax exemption and sales tax exemption on purchases
May be used to finance land, building, fixtures and machinery for warehouse and distribution facilities, research and development facilities, office industries, service industries engaged in interstate commerce, industrial plants, and certain types of commercial development
City Council issues bonds Company transfers ownership of
development site and/or equipment to City
Company buys the bonds and repays them
After repayment, City conveys title back to the company
Council may issue bonds after notice to taxing jurisdictions and public hearing
Could provide for 100% real and/or personal property tax exemption for 25 years unless a payment in lieu of taxes (PILOT) is required
Industrial Development Bonds (Chapter 100)
Relationship of Chapter 100 Incentive to Missouri Quality Jobs Program
February 15, 2011
Missouri Quality Jobs Program (MQJ)provides state tax credits to companies which create at least 100 jobs with an average wage equal or greater than the county average wage
Greene County average wage = $33,924MQJ “local incentive bonus”
Local community must provide a local incentive equal to 50% of the total tax benefit for 10 years
Chapter 100 can be used to grant real and personal property tax incentive, thus triggering the MQJ local incentive bonus
Chapter 100 Policy Highlights
February 15, 2011
Real Property Tax Exemption Existing business - $5 million investment AND create or retain
100 jobs with average wage equal or greater than Greene County average wage
New business - $5 million investment OR create 100 jobs with average wage equal or greater than Greene County average wage
Prior policy - $20 million investment AND 100 jobsPersonal Property Tax Exemption
Existing business - $5 million investment AND create or retain 100 jobs with average wage equal or greater than Greene County average wage
New business - $5 million investment OR create 100 jobs with average wage equal or greater than Greene County average wage
Prior policy - $25 million investment AND 100 jobs
Chapter 100 Policy Highlights
February 15, 2011
Sales Tax Exemption Council must find extraordinary public benefit or
savingsGeneral Policies
Abatement will typically mirror Enhanced Enterprise Zone (50% for 10 years)
City may consider an increased exemption level where the jobs created or retained pay 150% or more of the Greene County average wage
Annual employment reporting required Tax exemption will be terminated if company reduces
labor force by more than 25% from preceding year or by more than 50% from the first year of exemption
Purpose and BenefitPurpose and Benefit Eligible ActivitiesEligible Activities
February 15, 2011
To fund project-related costs, infrastructure and capital improvements through the redirection of the incremental increase in sales and property taxes
TIF captures 100% of the incremental increase in property taxes (PILOTS) and 50% of the incremental increase in sales taxes (EATS – economic activity taxes)
TIF can last up to 23 years
Plans and specifications Land acquisition and site
preparation Public improvements Private improvements can be
funded only if TIF District is declared blighted
Tax Increment Financing
TIF Process
February 15, 2011
City Council establishes TIF Commission 2 members appointed by County Commission 2 members appointed by School District 1 member appointed by “other taxing districts” 6 members appointed by Mayor and confirmed by City
Council – 1 a representative of Springfield – Greene County Library and 1 a member of City Council
TIF Commission recommends approval of TIF Redevelopment Plan to City Council
TIF Commission solicits requests for proposals consistent with the Redevelopment Plan
City Council conducts public hearing and establishes TIF District and approves developer selection after notices to property owners and taxing jurisdictions
TIF Policy Highlights
February 15, 2011
Must demonstrate that alternative financing methods have been thoroughly explored
Must demonstrate substantial and significant public benefit by constructing public improvements in support of development that will create new jobs and retain existing employment, eliminate blight and/or strengthen the employment and economic base of the City
Most favorable consideration to projects that propose no more than 20% of total project costs will be reimbursed with TIF revenues
Minimum 15% developer cash equity investment in project. Projects with equity contributions in excess of 25% will be viewed more favorably
TIF Policy Highlights
February 15, 2011
Retail projects must demonstrate the project will encourage inflow of customers from outside Springfield or will provide services or fill retail markets currently unavailable or in short supply. Additional consideration will be given to projects in excess of $15 million or the development of vacant property in areas where the project will be the initial development or will serve as a catalyst for further quality development
TIF projects that propose a reasonable and certain end date for construction and occupancy and demonstrate how goals will be achieved will be viewed positively. Projects with tenant commitments will be viewed with greater favor.
TIF Policy Highlights
February 15, 2011
TIF term will be the minimum necessary
Most favorable consideration will be given to projects that provide immediate benefit to the taxing jurisdictions.
Notwithstanding the foregoing, TIF applications which do not meet the above criteria will be viewed favorably if the application clearly demonstrates that the project is of vital interest to the City and will significantly assist the City in the elimination of blight, financing desirable public improvements, strengthening the employment and economic base of the City, increasing property values, reducing poverty, creating economic stability, upgrading older neighborhoods, and/or facilitating economic self-sufficiency.
Questions?
February 15, 2011
It is the policy of the City of Springfield to consider the judicious use of incentives for projects which demonstrate a substantial and significant public benefit by constructing public improvements in support of developments that will, by creating new jobs and retaining existing employment; eliminate blight, strengthen the employment and economic base of the City, increase property values and tax revenues, reduce poverty, create economic stability, upgrade older neighborhoods, facilitate self-sufficiency, and implement the City’s Comprehensive Plan and economic development strategy.