Using Tax Tools for Downtown Development

Transcription

1 Using Tax Tools for Downtown Development Presented August 10, 2011 by Joe Lauber Missouri Main Street Connection Annual Revitalization Conference Serving those who serve the public

2 Overview of Topics Connection with the Main Street Four- Point Approach Local Economic Development Sales Taxes in Missouri Missouri Downtown Economic Stimulus Act MODESA Missouri Downtown Revitalization Preservation Program MODESA-Lite

3 Connection with the Main Street Four-Point Approach Organization Promotion Design Economic Restructuring

4 Local Economic Development Sales Taxes in Missouri Local Option Economic Development Sales Tax ( , RSMo) Local Economic Development Sales Tax ( , RSMo) Economic Development Sales Tax ( , RSMo)

5 Local Option Economic Development Sales Tax , RSMo May be imposed by any city, town, village, or county Maximum tax rate = ½% Imposed by ordinance or order of the taxing jurisdiction s governing body Limits on imposition Can t impose if other economic development taxes are in effect Voter approval

6 Local Option Economic Development Sales Tax , RSMo Limitations on Revenue Use Not for retail development Except for redevelopment of downtown area or historic district 25% max on administration 20% must be spent on longterm development preparation Land acquisition Infrastructure Matching funds Not subject to TIF capture

7 Local Option Economic Development Sales Tax , RSMo Economic Development Tax Board Establishment required Membership 5 members if tax imposed by city, town, or village 7 members if tax imposed by county Duties Hold public hearings on economic development plans Recommend use of tax revenues outside of jurisdiction Present annual report to governing body

8 Local Economic Development Sales Tax , RSMo Only authorized in 33 counties and the cities, towns, or villages in those counties Maximum tax rate 1% for cities, towns, and villages ½% for counties Imposed by ordinance or order of the taxing jurisdiction s governing body Limits on imposition Voter approval

9 Local Economic Development Sales Tax , RSMo Limitations on Revenue Use Must be deposited into special trust fund Can only be used for economic development purposes Operation of economic or community development office (includes salaries) Training for job creation or retention Infrastructure and sites for industrial development Public infrastructure Refurbishing existing structures any property related to community development

10 Economic Development Sales Tax , RSMo Only authorized in: 2 counties Butler & Buchanan 3 specific cities St. Joseph, Springfield, and Joplin Plus, any cities, towns, or villages in Jasper or Butler Counties Maximum tax rate = ½% Imposed by ordinance or order of the taxing jurisdiction s governing body Limits on imposition Voter approval

11 Economic Development Sales Tax , RSMo Limitations on Revenue Use Tax can only be in effect for 5 years Cannot use for retail development 20% must be spent on long-term development preparation Land acquisition Infrastructure Matching funds Marketing Providing grants and loans to companies for: Job training Equipment acquisition Site development and infrastructure 25% maximum for administrative purposes (includes staff and facility)

12 Missouri Downtown Economic Stimulus Act MODESA Sections to , RSMo An alternative financing mechanism to state and local tax increment financing Allows cities to use revenues from incremental state sales and income taxes and local sales and property taxes generated from new developments to pay for infrastructure improvements Similar to state and local tax increment financing (TIF) with some changes and greater flexibility, including but not limited to, changes regarding state appropriation and the state tax increments that may be utilized.

13 MODESA Development Area Requirements Must be classified as a blighted or conservation area It includes only those parcels of real property directly and substantially benefited by the proposed development plan It is located in the central business district It has generally suffered from declining population or property taxes for the past twenty-years OR 50% or more of the structures in the area are 35 years old or more

14 MODESA Development Area Requirements It is contiguous May include up to three noncontiguous areas selected for development projects, if each noncontiguous area meets the development area requirements Cannot exceed ten percent of the entire area of the municipality Cannot include any property that is located within the FEMA 100 year flood plain

15 MODESA Permitted Development Project Costs Costs of studies, appraisals, surveys, plans, and specifications Professional service costs Property assembly costs Costs of construction of public works or improvements Financing costs All or a portion of a taxing district's capital costs resulting from any development project Payments to taxing districts on a pro rata basis to partially reimburse taxes diverted by approval of a development project State government costs

16 MODESA Project Must be a Major Initiative Must qualify as a major initiative that promotes tourism, cultural activities, arts, entertainment, education, research, arenas, multipurpose facilities, libraries, or promotes business location or expansion. Project types: community enhancement or job creation Sliding scale measurement Population of Municipality Estimated Project Cost New Jobs Created 300,000 or more $10,000,000 at least ,000 to 299,999 $5,000,000 at least 50 50,001 to 99,999 $1,000,000 at least 10 50,000 or less $500,000 at least 5

17 MODESA Revenues Provides for the capture of up to 50% of state income tax generated within the development project area Allows the capture of up to 50% of the incremental increase in state sales tax revenue collected in the development project area New net revenue from real property taxes may be captured for up to 25 years Permits capture of 50% of net new economic activity taxes for 25 years Local matching funds are required Minimum of 50% of new local sales tax revenues Minimum of 100% of new property tax revenues Project will not receive funds until it generates increment The entire program is limited in any given year to the amount appropriated by the General Assembly Maximum amount is $108 million

18 MODESA Application Process Municipality submits application to the Missouri Department of Economic Development ( DED ) DED forwards application to the Missouri Development Finance Board ( MDFB ) DED and MDFB staff members consult with each other throughout consideration of the application DED presents analysis and recommendation to MDFB MDFB makes final funding decision

19 Downtown Revitalization Preservation Program MODESA-Lite Sections to , RSMo Similar to MODESA, but more streamlined approval process and reduced sources of funding Allows cities to use incremental state and local sales generated from new developments to pay for infrastructure improvements Limited to municipalities with population of less than 200,000

20 MODESA Lite Development Area Requirements Must be classified as a blighted or conservation area Can be renovated through one or more redevelopment projects It is located in the central business district Median household income is $62,000 or less 50% or more of the structures in the area are over 35 years old

21 MODESA Lite Development Area Requirements Cannot exceed ten percent of the entire area of the municipality Area has not been subject to growth and redevelopment through investment by private enterprise, OR Would not reasonably be anticipated to develop without MODESA Lite financing

22 MODESA Lite Permitted Development Project Costs Costs of studies, appraisals, surveys, plans, and specifications Professional service costs Property assembly costs Costs of construction of public works or improvements Financing costs All or a portion of a taxing district's capital costs resulting from any development project Payments to taxing districts on a pro rata basis to partially reimburse taxes diverted by approval of a development project State government costs

23 MODESA Lite Project Must be a Major Initiative Must qualify as a major initiative that promotes tourism, cultural activities, arts, entertainment, education, research, arenas, multipurpose facilities, libraries, ports, mass transit, museums, economic development, or conventions Project type: community enhancement Sliding scale measurement Population of Municipality Estimated Project Cost 100,000 to 199,999 $5,000,000 50,000 to 99,999 $1,000,000 10,000 to 49,999 $500,000 1 to 9,999 $250,000

24 MODESA Lite Revenues Allows the capture of up to 50% of the incremental increase in state sales tax revenue collected in the development project area Permits capture of 50% of net new economic activity taxes for 25 years No property tax revenues No state income tax revenues Local matching funds are required Minimum of 50% of new local sales tax revenues Project will not receive funds until it generates increment The entire program is limited in any given year to the amount appropriated by the General Assembly Maximum amount is $15 million

25 MODESA Lite Application Process Municipality submits application to the Missouri Department of Economic Development ( DED ) DED makes final funding decision Must be prior to the commencement of the project Construction OR Bond financing

26 Using Tax Tools for Downtown Development Contact Information: Joe Lauber Lauber Municipal Law, LLC 1300 SW Hook Road Lee s Summit, Missouri (816) jlauber@laubermunicipal.com Serving those who serve the public

27 About the Firm I established Lauber Municipal Law, LLC, for the purpose of serving local governmental entities of all types and sizes. I have dedicated my entire career to the representation of municipal clients from my big firm experience as an attorney in the public law practice group while at Stinson Morrison Hecker LLP, to my focused practice of economic development law at Gilmore & Bell, P.C., to my general municipal experience at Williams & Campo, P.C. I can serve your community as its general counsel (City Attorney) or as special counsel for technical issues like economic development incentive approvals, annexation, elections, impeachments, and appellate work. My goal through Lauber Municipal Law, LLC, is to meld my previous experience together to provide a high-quality big firm work product, while providing the flexibility, personal responsiveness, and cost effectiveness of a small firm. I completely understand public entities needs to obtain the most effective representation possible while considering the fact that these services are compensated from a budget made up of public funds. As the motto for Lauber Municipal Law, LLC, states: I am proud to serve those who serve others and my sincere desire is to make that job easier and less stressful for the elected officials and administrative staffs of these entities. The choice of a lawyer is an important decision and should not be based solely on advertisements. This disclosure is required by rule of the Missouri Supreme Court.