Property Tax Reduction Programs DUSTIN POWERS JANUARY 8, 2019

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1 Property Tax Reduction Programs DUSTIN POWERS JANUARY 8, 2019

2 Reduced Property Taxation Authority granted to the city pursuant to SDCL City has adopted three programs: Industrial ( ) Downtown ( ) Neighborhood ( )

3 Reduced Property Taxation Any person desiring to claim reduced taxation on new construction shall make application to the Planning and Development Services Department on or before October 1 in the year in which the project is completed and shall first appear on the tax rolls as a completed or modified structure. The application shall be submitted on a form prescribed by the city. Upon Planning and Development Services' approval of the application, the staff shall notify the applicant within 30 days stating whether the facility is eligible to receive reduced taxation. In January, the year following completion of the project, Planning and Development Services will certify those improvements which qualify for reduced taxation to the director of equalization in the county in which the real property is taxed.

4 Reduced Property Taxation All programs have the same formula for savings: Year 1 following construction, no portion of the taxable value shall be used for taxation purposes; Year 2 following construction, 20% of the taxable value shall be used for taxation purposes; Year 3 following construction, 40% of the taxable value shall be used for taxation purposes; Year 4 following construction, 60% of the taxable value shall be used for taxation purposes; and Year 5 following construction, 80% of the taxable value shall be used for taxation purposes. Year 6 and all subsequent tax years following construction, the structures or additions shall be taxed in the same manner as all other similar industrial property within the city.

5 Industrial Program The term INDUSTRIAL STRUCTURES OR ADDITIONS THERETO as used in this subchapter shall include, but not be limited to, the following uses: Apparel and textile manufacturing; Wood, furniture and manufacturing; Lumber wholesaling; Printing and publishing plants; Warehousing and distribution (no retail uses); Electronics assembly and manufacturing; Scientific research and development, including incubation of start-up technology businesses; Other light pollution-free manufacturing facilities; Food, agricultural processing, stockyards, rendering and milk processing plants; Paper, pulp and wood processing and manufacturing; Chemical, petroleum and rubber manufacturing and distribution;

6 Industrial Program Uses continued: Stone, glass, clay, brick and cement manufacturing; Primary metal and smelting; Metal fabricating and manufacturing; Distillation and purification plants; Manufacture and storage of electrical transformers; Data processing, hosting and related services including payroll services and financial transactions processing; and Insurance underwriting, premium processing and policyholder service facilities operated by domestic or foreign insurers or by other entities (other than licensed agents) who provide these services to insurers. All new qualifying structures, or additions or renovation or reconstruction of existing qualifying structures, which have a full and true value of $300,000 or more, added to real property

WinChill Example Program Year Valuation Taxes Paid Savings Year 1 $ - $ - $ 491,027.00 Year 2 $ 4,910,277.00 $ 98,205.00 $ 392,822.00 Year 3 $ 9,820,554.00 $ 196,411.00 $ 294,616.

7 WinChill Example Program Year Valuation Taxes Paid Savings Year 1 $ - $ - $ 491, Year 2 $ 4,910, $ 98, $ 392, Year 3 $ 9,820, $ 196, $ 294, Year 4 $ 14,730, $ 294, $ 196, Year 5 $ 19,641, $ 392, $ 98, Year 6 $ 24,551, $ 491, $ - Total Added Valuation: $24,551,386 Total Savings: $1,473,081

Downtown Program All new industrial or commercial structures, or additions to existing structures, or renovation or reconstruction of existing structures, which new structures or additions or

8 Downtown Program All new industrial or commercial structures, or additions to existing structures, or renovation or reconstruction of existing structures, which new structures or additions or renovation or reconstruction have a full and true value of $50,000 or more, added to the real property and located within the city downtown center designated urban renewal area, as defined by SDCL

9 Jones 421 Example Program Year Valuation Taxes Paid Savings Year 1 $ - $ - $ 16,692 Year 2 $ 166,922 $ 3,338 $ 13,354 Year 3 $ 333,844 $ 6,677 $ 10,015 Year 4 $ 500,766 $ 10,015 $ 6,677 Year 5 $ 667,688 $ 13,354 $ 3,338 Year 6 $ 834,610 $ 16,692 $ - Total Added Valuation: $834,610 Total Savings: $50,076

10 Neighborhood Program The term COMMERCIAL STRUCTURE as used in this subchapter shall include: Retail services and trade establishments as defined by with a total floor area as defined by with building footprint not exceeding 10,000 square feet on the premises, excluding the following uses: Adult use, as defined by ; Off-sale alcoholic beverage establishment, as defined by ; and On-sale alcoholic beverage establishment when it is the principal use as defined by Personal service establishments as defined by ; Day care center as defined by ; Boarding house as defined by ; and Office building as defined by with a total floor area as defined by with a building footprint not exceeding 10,000 square feet on the premises. The term COMMERCIAL RESIDENTIAL STRUCTURE as used in this subchapter is a residential structure containing four or more dwelling units, excluding group homes, as defined by

11 Neighborhood Program Applies only to: New commercial residential structures thereto, or additions, renovations, or reconstruction to existing structures located within the city's designated area as set forth in Exhibit A New commercial structures or additions, renovations, or reconstruction to existing structures located within the city's Folsom's Addition as set forth in Exhibit B All new commercial structures or new commercial residential structures thereto, or additions, renovations, or reconstruction to existing structures, which new structures or additions or renovation or reconstruction have a full and true value of $30,000 or more, added to the real property and located within the city's designated area as set forth in Exhibit A of Ord , adopted May 7, 2007.

14 S. Menlo Program Year Valuation Taxes Paid Savings Year 1 $ - $ - $ 8,249 Year 2 $ 82,495 $ 1,650 $ 6,600 Year 3 $ 164,989 $ 3,300 $ 4,950 Year 4 $ 247,483 $ 4,950 $ 3,300 Year 5 $ 329,978 $ 6,600 $ 1,650 Year 6 $ 412,473 $ 8,249 $ - Total Added Valuation: $412,473 Total Savings: $24,749

15 Property Tax Reductions Industrial Program 51 properties $157,710,693 added valuation to tax base $9,462,643 cumulative property tax savings Downtown Program 14 properties $45,903,823 added valuation to tax base $2,754,229 cumulative property tax savings Neighborhood Program 3 properties $1,842,282 added valuation to tax base $110,536 cumulative property tax savings

16 Proposing Revisions Meet with stakeholders to understand the needs within these programs: Targeted industries Targeted uses Targeted areas Review the requirements for projects to receive incentive: Job creation Types of jobs Increase in Tax base Review the process for administering programs Application process Review process

17 Questions

Montana Manufacturing & Forest Products:

Montana Manufacturing & Forest Products: 2009 Outlook Todd A. Morgan, CF Montana Manufacturing Industry 2008 Relatively good 1 st half of year. Few firms curtailed production. Few firms had worker shortages.