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HomeMy WebLinkAboutItem 7.4 Sales Tax Reimb Reviseor 19 82 /ii � 111 DATE: TO: FROM: STAFF REPORT CITY COUNCIL July 17, 2012 Honorable Mayor and City Councilmembers Joni Pattillo City Manager""' CITY CLERK File #470 -50 SUBJECT: Revisions to the Sales Tax Reimbursement Program and Extension of the Program's Termination Date Prepared by Linda Smith, Economic Development Director and Public Information Officer EXECUTIVE SUMMARY: Staff is proposing modifications to the existing Sales Tax Reimbursement Program to change the project qualifications to meet the current economic development needs for the City. Additionally, Staff is recommending that the Program be extended for an additional two year period, from January 9, 2013 to January 9, 2015. FINANCIAL IMPACT: There is no immediate financial impact associated with the changes proposed to the program or to the time extension. Any future agreements will provide specific financial impacts to the City. RECOMMENDATION: It is recommended that the City Council adopt a Resolution revising and restating the General Provisions of the Sales Tax Reimbursement Program and extending the Termination Date of the Sales Tax Reimbursement Program until January 9, 2015. Submitted By Economic Development Director/ Public Information Office DESCRIPTION: �?14 Reviewed By Assistant City Manager Since 2009, the City has offered a Sales Tax Reimbursement Program. This Program was created by Resolution 09 -09 (Attachment 1) and amended by Resolution 149 -09 (Attachment 2) to help stimulate economic activity and to assist in filling vacancies that resulted from the economic downturn. Since the Program's adoption, two agreements have been executed that have resulted in a positive economic impact to the City - Graybar Electric at the 580 Executive Center and 6450 Motors, LLC (Hyundai) on Scarlett Court. Page 1 of 3 ITEM NO. 7.4 The Program assists developers, property owners and /or business owners to help offset costs associated with improvements to the property. For businesses generating $100,000 or more in new sales tax revenue to the City annually, the existing Program allows a reimbursement for the improvement costs of up to 50 percent of that annual revenue. This amount is payable for up to five years but for no more than the amount of the eligible improvement costs. For a business generating $500,000 in new sales tax revenue to the City annually, the Program allows reimbursement for the improvement costs of up to 50 percent of that annual revenue for a period of 10 years. Table 1 provides an example of the Program's financial structure. Table 1 Tenant A Expected Annual Sales Tax Generation $100,000 Eligible Improvement Costs $250,000 Expected Reimbursements (50% for 5 years - $50,000 /year x 5 years = $250,000) — not to exceed Eligible Improvement Costs $250,000 Tenant B Expected Annual Sales Tax Generation $500,000 Eligible Improvement Costs $1,000,000 Expected Reimbursements (50% for 10 years - $250,000 x 5= $1,250,000) — not to exceed Eligible Improvement Costs $1,000,000 Up to this point, and as adopted by the City Council, the Program has been aimed towards funding improvements made to existing buildings and structures. Since the Program's adoption, the City has seen many of the large retail vacancies filled and two other shopping centers have been constructed during that period, including Grafton Station and Fallon Gateway. However, these newer shopping centers are facing challenges with tenancies due to a variety of development costs and market factors, including the current mix of tenants, lack of a daily needs user, and competition with existing retail centers in the Tri- Valley with a lower cost basis, just to name a few. Further, the City anticipates the development of future shopping centers will experience similar challenges to those that are partially constructed today. In order to ensure that the City has successful, revenue producing centers and users that produce new sales tax revenue, Staff is recommending modifications to the existing Sales Tax Reimbursement Program. These modifications include the addition of a new section that will provide Staff with the flexibility to consider extending some form of sales tax reimbursement relief for improvements relating to construction of new buildings and structures, thus allowing the City to address specific business /development needs. The tailored participation would be in addition to the standard thresholds established for proposed improvements to existing structures under the current Program. All other Program criteria would remain in place. All agreements resulting from this Program will be brought back to the City Council for consideration and approval. Additionally, Staff is recommending that the termination date be extended from January 9, 2013 to January 9, 2015 as interest and need for this Program remains high. The suggested changes are included in the proposed resolution (Attachment 3). NOTICING REQUIREMENTS /PUBLIC OUTREACH: Page 2 of 3 Not applicable ATTACHMENTS: 1. Resolution No. 09 -09 2. Resolution No. 149 -09 3. Proposed Resolution Page 3 of 3 RESOLUTION NO. 9- 09 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN APPROVING THE SALES TAX REIMBURSEMENT PROGRAM WHEREAS, the current worldwide economic slowdown has impacted the City of Dublin's revenues; and WHEREAS, for decades, state and local government have used Economic development incentives to attract or retain jobs and/or improve a local tax base; and WHEREAS, the Government Finance Officers Association (GFOA) has recommended that any proposed incentive program has specific goals and criteria that serve to define the economic benefit to both the government and the entities receiving the incentives expect to gain from the incentives, the conditions under which the incentives are to be granted, and the actions to be taken should the actual benefits differ from the planned benefits; and WHEREAS, in an attempt to attract new businesses that will provide additional jobs and generate additional tax revenues for the City, Staff is requesting City Council consideration of a program to stimulate reinvestment in the community through a Sales Tax Reimbursement Program; and WHEREAS, the objective of the proposed Sales Tax Reimbursement program would be to: (1) improve the aesthetic nature and physical appearance of existing buildings and promote site improvements to commercial properties in the existing commercial /office /industrial areas of Dublin and (2) target existing buildings throughout the community with the goal of improving the existing building stock and also lowering long -term vacancy rates in the community; and WHEREAS, the program would use the concept of reimbursement through sales tax revenues to assist and encourage property owners /tenants to reinvest in, reconstruct, rehabilitate and renovate their properties; and WHEREAS, the proposed program would allow property owners and/or tenants, through a written agreement with the City, to recover over time a portion of the cost of improvements (internal and external) made to the property. The reimbursement would be limited to the actual costs incurred by the owner /tenant for improvements to structures and the property site. Eligible costs would include exterior improvements (painting, fagade repair, replacement signage), interior improvements (tenant improvements), and site improvements (parking lots, driveways, landscaping, etc.). Reimbursement for demolition of existing buildings and replacement with new buildings may be considered on a case -by -case basis. Land acquisition costs would be excluded from eligible expenses; and WHEREAS, the program would be made available to businesses that would generate over $100,000 in new sales tax each year (this requires annual taxable sales of $10 million). Businesses would need to certify, by providing copies of sales tax returns to the State Board of Equalization (SBOE) that based on previous operations that this threshold has been met; and WHEREAS, the program would be made available to new, not existing businesses. An exception would be considered on a case -by -case basis for existing Dublin businesses that might relocate /expand within Page 1 of 2 RESOLUTION NO. 149 - 09 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN REVISING AND RESTATING THE GENERAL PROVISIONS OF THE CITY'S SALES TAX REIMBURSEMENT PROGRAM WHEREAS, one of the City Council's Fiscal Year 2009 -2010 High Priority Goals and Objectives is to develop an Economic Incentive Program; and WHEREAS, in January 2009, the City Council adopted Resolution No. 9 -09, establishing the Sales Tax Reimbursement Program ( "Program ") to stimulate economic development activities in the City; and WHEREAS, the adopted Program permits certain companies who have satisfied the City's requirements for participation in the program to receive reimbursement over a five (5) year reimbursement period for pre- approved exterior improvements (painting, facade repair, replacement signage), interior improvements (tenant improvements), and site improvements (parking lots, driveways, landscaping, etc.) provided that the Program participants generate $100,000 in new sales tax revenue to the City each year, in order to receive reimbursement for that year; and WHEREAS, this Resolution would revise the Program to give the option of a ten (10) year reimbursement period for participants that generate $500,000 in sales tax revenue for the City each year; and WHEREAS, this revision will provide additional, targeted assistance to the City's economic development efforts to backfill large vacancies in the Downtown and attract users in other areas within the City that allow for regional or general commercial development; and WHEREAS, the City Council of the City of Dublin wishes to revise the Sales Tax Reimbursement Program as described above, and to restate the provisions of the Program as a whole. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby revise and restate the general guidelines of the City's Sales Tax Reimbursement Program as follows. 1. The objective of this Sales Tax Reimbursement Program ( "Program ") is to: (a) improve the aesthetic nature and physical appearance of existing buildings and promote site improvements to commercial properties in the existing commercial /office /industrial areas of Dublin; (b) target existing buildings throughout the community with the goal of improving the existing building stock and also lowering long -term vacancy rates in the community; (c) generate additional sales tax revenue for the City by encouraging businesses to establish a presence in the City; and (d) attract new jobs to the City. The provisions of this Resolution are intended to provide general guidelines for the Program, and are not intended to describe all of the requirements that may be imposed in an agreement entered into pursuant to the Program. Page 1 of 3 2. The Program is primarily intended to be made available to proposed new businesses considering locating in the City. An exception may be considered, on a case -by -case basis, for existing Dublin businesses that might relocate or expand within the City, provided that they can show that such a move or expansion is expected to result in additional sales tax revenues above the amount they have historically paid in an amount that meets the minimum sales tax revenue targets required for the applicable agreement category, as described in Section 5. 3. Agreements entered into pursuant to the Program shall limit the eligible reimbursement amount to the actual cost of eligible improvements paid by the business owner for improvements to structures and the property site. The eligible reimbursement amount shall be certified by the provision of documentation showing the amount actually paid for the eligible improvements. Eligible improvements are: a) Exterior improvements (including painting, fagade repair, replacement signage) b) Interior improvements to the building c) Site improvements (including parking lots, driveways, landscaping, etc.). d) Reimbursement for demolition of existing buildings and replacement with new buildings may, at the City's discretion, be considered on a case -by -case basis. 4. Business owners may apply for consideration as participants in the Program. If approved for consideration by City Staff, the business owner and City Staff shall negotiate a written agreement for the recovery of the costs of certain improvements made to the property at which their business is proposed to be located. Any such agreement is subject to all applicable state and federal laws and must be approved by the City Council before being executed by the City. 5. There will be two general categories of agreements under the Program: Five Year Agreements, and Ten Year Agreements. Under both categories, payments by the City to the business owner will be made no more than once each year, and the amount of the payment in any one year will be no more than fifty percent (50 %) of the sales tax revenue attributable to the business in the preceding year. Furthermore, in no event shall the total amount paid by the City over the entire repayment term exceed the eligible reimbursement amount. a) Five Year Agreements shall provide a maximum repayment term of five years. A Five Year Agreement would be made available to businesses that expect to generate at least $100,000 in sales tax revenue each year (this requires annual taxable sales of $10 million). In order to receive any payment in a given year, participants will be required to certify, by providing copies of sales tax returns, that the business generated at least $100,000 in sales tax revenue for the City in the preceding year. b) Ten Year Agreements shall provide for a maximum repayment term of ten years. A Ten Year Agreement would be made available to businesses that expect to generate at least $500,000 in sales tax revenue each year (this requires annual taxable sales of $50 million). In order to receive any payment in a given year, participants will be required to certify, by providing copies of sales tax returns, that the business generated at least $500,000 in sales tax revenue for the City in the preceding year. Page 2 of 3 6. The Program shall terminate on January 5, 2011, absent further action by the City Council modifying the termination date. vote PASSED, APPROVED AND ADOPTED this 6th day of October, 2009 by the following AYES: Councilmembers Biddle, Hart, Hildenbrand, Scholz, and Mayor Sbranti NOES: None ABSENT: None ABSTAIN: None Mayor ATTE City Clerk Reso No. 149 -09, Adopted 10 -6 -09, Item 8.2 Page 3 of 3 RESOLUTION NO. XX- 12 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN REVISING AND RESTATING THE GENERAL PROVISIONS OF THE CITY'S SALES TAX REIMBURSEMENT PROGRAM WHEREAS, one of the City Council's Fiscal Year 2009 -2010 High Priority Goals and Objectives was to develop an Economic Incentive Program; and WHEREAS, beginning in January 2009, the City Council adopted various Resolutions establishing and modifying a Sales Tax Reimbursement Program ( "Program ") to stimulate economic development activities in the City by establishing a reimbursement mechanism to fund certain eligible improvements made to existing buildings and structures; and WHEREAS, the City Council of the City of Dublin wishes to extend the time period of the Program, to revise other provisions relating to eligible projects and to restate the provisions of the Program as a whole. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby revise and restate the general guidelines of the City's Sales Tax Reimbursement Program as follows. 1. The primary objective of this Sales Tax Reimbursement Program ( "Program ") is to: (a) improve the aesthetic nature and physical appearance of existing buildings and to promote site improvements to commercial properties in the existing commercial /office /industrial areas of Dublin; (b) target existing buildings throughout the community with the goal of improving the existing building stock and also lowering long -term vacancy rates in the community; (c) generate additional sales tax revenue for the City by encouraging businesses to establish a presence in the City; and (d) attract new jobs to the City. The provisions of this Resolution are intended to provide general guidelines for the Program, and are not intended to describe all of the requirements that may be imposed in an agreement entered into pursuant to the Program. 2. The Program is primarily intended to be made available to proposed new businesses considering locating in the City. An exception may be considered, on a case -by -case basis, for existing Dublin businesses that might relocate or expand within the City, provided that they can show that such a move or expansion is expected to result in additional sales tax revenues above the amount they have historically paid in an amount that meets the minimum sales tax revenue targets required for the applicable agreement category, as described in Section 5. 3. The following provisions apply to businesses that wish to utilize the Program to fund improvements to existing structures and developed property sites: a) Agreements entered into pursuant to this portion of the Program shall limit the eligible reimbursement amount to the actual cost of eligible improvements paid by the business owner for improvements to structures and to property sites. The eligible reimbursement amount shall be certified by the provision of documentation showing the amount actually paid for the eligible improvements. Eligible improvements are: i) Exterior improvements (including painting, fagade repair, replacement signage) ii) Interior improvements to the building iii) Site improvements (including parking lots, driveways, landscaping, etc.). iv) Reimbursement for demolition of existing buildings and replacement with new buildings may, at the City's discretion, be considered on a case -by -case basis. b) Business owners may apply for consideration as participants in the Program. If approved for consideration by City Staff, the business owner and City Staff shall negotiate a written agreement for the recovery of the costs of certain improvements made to the property at which their business is proposed to be located. Any such agreement is subject to all applicable state and federal laws and must be approved by the City Council before being executed by the City. C) There will be two general categories of agreements under this portion of the Program: Five Year Agreements, and Ten Year Agreements. Under both categories, payments by the City to the business owner will be made no more than once each year, and the amount of the payment in any one year will be no more than fifty percent (50 %) of the sales tax revenue attributable to the business in the preceding year. Furthermore, in no event shall the total amount paid by the City over the entire repayment term exceed the eligible reimbursement amount. i) Five Year Agreements shall provide a maximum repayment term of five years. A Five Year Agreement would be made available to businesses that expect to generate at least $100,000 in sales tax revenue each year (this requires annual taxable sales of $10 million). In order to receive any payment in a given year, participants will be required to certify, by providing copies of sales tax returns, that the business generated at least $100,000 in sales tax revenue for the City in the preceding year. ii) Ten Year Agreements shall provide for a maximum repayment term of ten years. A Ten Year Agreement would be made available to businesses that expect to generate at least $500,000 in sales tax revenue each year (this requires annual taxable sales of $50 million). In order to receive any payment in a given year, participants will be required to certify, by providing copies of sales tax returns, that the business generated at least $500,000 in sales tax revenue for the City in the preceding year. 4. In addition to the above provisions relating to reimbursement for improvements made to existing structures, the City will consider requests for reimbursement of certain improvement costs made by businesses that are constructing new structures on undeveloped property sites or that may be tenants in such new structures. The eligibility of such projects for participation in the Program shall be determined on a case by case basis. Factors that the City will consider in making an eligibility determination include, but are not limited to: a) The public benefit that will be derived from providing Program assistance b) Evidence that, absent the availability of the Program, it will be economically infeasible for a business or businesses to establish a presence in the City. c) The scope and nature of improvements for which reimbursement will be sought. d) The amount of sales tax revenue that is expected to be generated by the participant or its tenant(s). If deemed eligible by City Staff, the business owner and City Staff shall negotiate a written agreement for the recovery of the costs of certain improvements made to the property at which their business is proposed to be located. Any such agreement is subject to all applicable state and federal laws and must be approved by the City Council before being executed by the City. 5. Absent further action by the City Council modifying the termination date, the Program shall terminate on January 5, 2015. PASSED, APPROVED AND ADOPTED this 17th day of July, 2012 by the following vote: AYES: NOES: ABSENT: ABSTAIN: ATTEST: City Clerk 1930065.1 Mayor