City Council Study Session Agenda and Packet 2012 02 13

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PAGE TWO SUBJECT: DISCUSSION — BUSINESS ASSISTANCE PROGRAM DATE: FEBRUARY 13, 2012 not occur and the resulting revenue gain and jobs would not come to the City (or existing retail and /or jobs might leave Louisville). The City's program deals with three basic types of incentives, all of which are rebates of fees and taxes paid: sales tax, building permit fees, and consumer use tax. Sales Tax Rebate New or expanding sales tax producers may apply for an incentive when they are in the decision - making phase for where to locate the new outlet or expansion. Once a lease has been signed, that signals to the City that a decision is made and an incentive is no longer necessary. The program protects the base sales tax, i.e. that amount of sales tax produced by the property in the last 12 months. The rebated percentage is only applied to the incremental increase in sales tax revenue. There is also a "claw back" provision, so that if the business does not remain for a specified period of time, then any rebated taxes are to be re -paid to the City. The number of years for which a sales tax rebate is offered is usually related to the amount of investment (or risk) of the applicant. The portion of sales tax for historic preservation and open space purposes is excluded. This type of incentive was approved for several restaurants in downtown until it became obvious that incentives were no longer necessary to draw such activity. Downtown had become such a successful, restaurant venue that the City no longer needed to provide monetary incentives in order to draw new restaurants. Now, in order to diversify the downtown, we still may offer incentives to stores that sell other types of retail goods and perhaps restaurants in other areas of the city. Building Permit Fees This incentive is most generally used for primary job producers, or speculative construction. It is performance based, meaning the building permit fees are paid in accordance with the usual timeline, and once a Certificate of Occupancy is issued and the business occupies the building, then the rebate is paid. There is also a "claw back" provision, so that if the business does not remain for a specified period of time, then any rebated fees are to be re -paid to the City. Louisville has generally offered rebates of 50% the cost of these fees. The portion of permit fees collected for historic preservation and open space purposes is excluded. Consumer Use Tax When the City started to collect a consumer use tax (on tangible goods), it was able to offer rebates of these fees to incentivize certain high wage /high investment companies to locate in Louisville. The portion of consumer use tax collected for historic preservation and open space purposes is excluded. It is subject to a "claw back" provision. The rebate sometimes is applied only to the initial furniture, fixtures, and equipment purchased to complete or furnish the new building, or sometimes it includes purchases made over several years. We use the following language in our agreement to define what purchases qualify for rebate: 18